Private role in public works requires rethink

PUBLISHED : Thursday, 02 October, 2008, 12:00am
UPDATED : Thursday, 02 October, 2008, 12:00am

The government had little choice but to take up the building of the Kai Tak cruise terminal itself to avoid further delay. The original plan was to develop the much-needed tourist facility as a public-private partnership. But rising construction costs and the global financial crisis mean few private developers are willing to make the commitment. Those brave enough to do so would likely demand profit margins and guarantees the government could not make without being accused of colluding with big business. This was the case when the government rejected bids from two consortiums. Both went beyond bidding conditions it had imposed.

The cruise terminal is but the latest large-scale project in which the government has abandoned the public-private development model. Officials need to rethink how they can better pursue such partnerships to make them attractive to business but also acceptable to the public.

A new cruise terminal is important to the city's economy. We could ill afford to wait for another bidding round, which would have delayed the project even further. After all, there is no guarantee that new bidders would meet requirements. It is more likely they would not, given the tough economic conditions at the moment, which are sure to worsen in the months ahead. As it is, the government can now at least guarantee a firm timetable, even though it will still be more than a year behind the original scheduled opening in February 2012.

Singapore is opening a new terminal capable of accommodating the largest ocean liners in two years. Shanghai and Shenzhen may follow suit. Our city cannot afford to be too far behind. So far, the local economy has been shielded from the worst of the global financial crisis emanating from the United States, but there is bound to be fallout from it. Construction of the terminal and 10 other major infrastructure projects being funded by the government will provide work for tens of thousands of people, create thousands of permanent jobs and provide an economic stimulus at this difficult time.

However, the government must now rethink its stance on inviting the private sector to join it in building and operating significant public facilities. Recent examples of the failure to implement this model include the West Kowloon arts hub. Often such projects lead to prolonged debate and controversy; in the current political climate, any significant development involving the public-private model, even if fair and reasonable, is likely to be criticised for collusion between the government and the private sector. This is unfortunate.

The model makes economic sense by allowing private firms to pay for, develop and operate public facilities. They earn a profit but also take on the risk. Done right, they are a way of saving taxpayers money. The three cross-harbour tunnels are examples of the model that have worked reasonably well. Unfortunately, there have been few other successful instances besides some public co-operative projects involving non-government groups. Officials need to learn how to structure deals under the public-private model to make them acceptable to all parties; sometimes this requires creative thinking. Above all, such projects must be carefully chosen and there must be transparency and accountability for them to win public trust, which is the most essential ingredient.