Consider public interest when going private

PUBLISHED : Tuesday, 17 May, 2005, 12:00am
UPDATED : Tuesday, 17 May, 2005, 12:00am

Hong Kong has a long history of engaging the private sector to undertake public projects. Beginning with the construction of the first cross-harbour tunnel in the late 1960s, for example, the 'build, operate, transfer' model has been applied to building many tunnels.

In recent years, the scope of private sector involvement has been extended to service provision. While government departments are still responsible for the provision of various services, actual delivery is outsourced to private firms, as in the cleansing of public streets and toilets.

The arguments for public-private partnerships are compelling. For big infrastructure projects, BOT arrangements have the advantage of using idle private capital and tapping private sector expertise to build and operate them efficiently. As for outsourcing, its benefits are not limited to cost savings; it also sets useful benchmarks for services that have to be performed by civil servants for various reasons.

But such partnerships have not been immune to controversy. The West Kowloon Cultural District is a case in point. The government has insisted that the massive project be awarded to just one winning bidder, who will have to use profits generated from property developments on a prime waterfront site to build and operate a cluster of cultural venues that will boost Hong Kong's aim to be a cultural hub for the region.

Instead of winning applause for tapping the ingenuity of the private sector to achieve such a vision, the government has been accused of using the BOT arrangement to bypass the legislature, so it could channel what should have been proceeds from 'land sales' to a public project without getting legislative approval.

The recent row over the Eastern Harbour Tunnel's decision to raise tolls against public opposition has highlighted other pitfalls with BOT deals. The contracts for our three harbour tunnels were concluded at different times, with different parties and on different terms. Even though they are close alternatives to one another, there was no attempt to put them under umbrella provisions that could ensure they operate in harmony. As a result of this omission, the government now lacks the ability to regulate traffic flows through the three tunnels by imposing a co-ordinated toll scale.

Now that the government wants the private sector to get involved in the provision of more public facilities, it is critical that it thinks through the underlying issues more thoroughly. Presumably, the private sector could be engaged to build hospitals, schools, homes and prisons under agreements for long-term lease-back and eventual recovery of titles by the government. This would mean the construction of much-needed public facilities would be less constrained by the government's short-term financial difficulties. But the long-term impact of such arrangements on recurrent expenditure must be carefully assessed.

Even greater care will need to be applied to the outsourcing of services whose delivery involves exercising the government's lawful powers. A prime example is the prisons. In the light of opposition to the construction of a 'super-prison' to enable more efficient use of penal resources, the idea of hiring private security guards at lower costs to man the prisons sounds appealing. But empowering non-civil servants, who do not owe their primary loyalty to the civil service, with the authority to lock people up is a risky undertaking. The potential for abuse and corruption is high. It should be considered only after painstaking consideration and with adequate safeguards.

The administration has rightly adopted 'big market, small government' as its guiding principle. However, any moves to engage the private sector to provide more facilities and deliver more services should be preceded not just by a cost and benefit analysis, but also by a discussion of the proper roles of government. Where legislation is required, it should be drafted.