Warm, fuzzy TDC feeling burns holes in our wallets
'The operator of the Hong Kong Convention and Exhibition Centre might charge up to 8 per cent more for renting its Wan Chai venue as it seeks to capitalise on the thriving trade-show sector and economic upturn.'
SCMP, November 12
And then again perhaps it may not charge more. Our report also quoted a spokesman for the Trade Development Council as denying there are any plans to raise rents in the near future. These people are playing coy, almost as if they have something to hide.
And they do. The embarrassing fact is that TDC itself did not and does not pay anything for its big show palace in either price or rent. It was you and I, dear reader, who paid and pay for it all. The TDC gets it free.
And these facilities did not and do not come cheap. That big winged thing sticking out into the harbour cost HK$4.8 billion in 1997 including reclamation costs. That boring bit behind it that looks like a second-rate Kowloon hotel (because the developer was New World) cost HK$1.6 billion in 1988 without taking account of land costs.
I see no reason to ignore land costs. Let's put the whole complex at a cost value, land included, of HK$8 billion. If we offered it all for demolition and resale today, we would have developers lining up to pay twice as much, but for our purposes, we'll keep it at HK$8 billion for the moment.
Now, what sort of rental income could we expect on a property investment of that kind? To keep it simple, I shall use the average yield for retail and office properties in Central and Wan Chai, which is about 6 per cent. On HK$8 billion, this should produce annual rental income to the public purse of HK$480 million.
But do we get anything of the sort? No, of course not. Don't be silly. Instead of getting a return on this big property investment, the public purse winds up paying out more, HK$341 million a year more at present to cover the TDC's ongoing losses.
Even with its very expensive facilities granted to it free, with a monopoly on trade shows until very recently and with a lock-hold on related trade publications (if you get in a TDC show you buy a TDC advertisement), this government white elephant has never been able to cover its costs and has had to come begging to the public purse for more money every year.
But I hear your objection. We didn't set up the TDC to make money, you say. We set it up to promote Hong Kong exports and that's how we are paid back. When our exporters sell their products abroad with the TDC's help, the whole economy benefits. The subsidies to the TDC are well worthwhile when you take this into consideration.
Well, yes, but I have two difficulties here. The first is that I can never quite take it into consideration because this would be a commercial consideration and the commercial part is missing. I have numbers for what we are asked to spend but I have no numbers for what we get in return. All I seem to get instead is warm feelings of goodness.
It's a general problem with government ventures - hard cash out and so many thrills of appreciation or karmas of good vibrations in return. Will someone for once please quantify the returns? I have yet to see any good evidence that we are really spending our money effectively on the TDC.
In fact, I know we are not and this is the second difficulty. As the chart shows, we have gone through a revolution in exports. Twenty years ago our domestic goods exports were twice as great as our service exports. They are now only 20 per cent of service exports.
And the problem for the TDC, much as it would like us to believe otherwise, is that it cannot do much for our service exports. It cannot teach bankers to bank, insurers to insure or shippers to ship.
So instead it resorts to promoting mainland exports on the grounds that a proportion of these come from companies founded by people born in Hong Kong or that we are performing a service for the nation. When this does not suffice, it spends its time trying to undercut InvestHK in promoting foreign investment in Hong Kong.
But this is not what the TDC was set up to do and we certainly would not set up a new government agency to that sort of thing now. It's ridiculous even to think of it.
I have said often enough in this column that the TDC has passed its sell-by date and should be closed and I hold to that view.
But until we come to our senses and shut it down, let's at least take advantage of any rent increases it gets in Wan Chai to reduce our subsidy to it.