Crisis means mainland banks set to fund bridge
The financing of the long-awaited Hong Kong-Macau-Zhuhai bridge will be dominated by mainland banks amid the global financial meltdown, local and mainland experts have warned.
A joint working group formed by Hong Kong, Macau and Guangdong yesterday invited banks in the three jurisdictions to express their interest in providing some 17 billion yuan (HK$19.3 billion) of loans for the bridge project.
Yi Xianrong , a professor at the Chinese Academy of Social Sciences, said: 'Mainland banks are more isolated from the global financial crisis, their liquidities are better and also they are more likely to lend to state projects which overseas banks do not consider commercially viable.'
Zheng Tianxiang, a professor of economics at Zhongshan University's Pearl River Research Centre, said Hong Kong banks would not be keen to lend because of the crisis.
Asia Pacific Loan Market Association vice-chairman Wilson Wan Siu-wah said banks were likely to charge higher interest rates if they provided loans for the project.
'Normally, a government infrastructure project is a safe investment to banks and the interest rate should only be around Libor [London's benchmark interbank lending rate] plus 1 per cent, but in such a bad economy banks would want more assurances and it is likely to be Libor plus 2 per cent.'
Such a minor difference could mean payment of an extra HK$150 million a year on a HK$19 billion loan.
However, if the bridge's traffic flow and income were better than expected, the government could always settle with the old consortium and seek refinancing with a better interest rate after a few years.
Mr Wan, an expert in corporate finance whose association includes all Hong Kong's major banks, said mainland banks might dominate the bridge consortium because they were less affected by the global credit crunch and had traditionally backed projects led by Beijing.
Guangzhou's Yangcheng Evening News quoted sources yesterday as saying private cars were likely to pay 150 yuan to cross the bridge.
Three toll models were proposed, it said, with two options charging private cars 150 yuan and coaches 450 yuan.
The newspaper said no quota would be imposed on trucks, and coaches would be given priority. The report also said vehicles would be able to use the bridge free of charge once the three governments repaid all the loans.
The project will cost an estimated 70 billion yuan, with about 32.7 billion yuan needed to build the bridge itself. Construction would be able to begin by 2010 after the central government agreed to inject funds to make sure the project did not suffer any more delays.
The latest funding arrangement will see the cost of building the bridge split between the three regional governments, with Guangdong - after receiving subsidies from the central government - responsible for 44.5 per cent. Hong Kong will shoulder 42.9 per cent of the upfront payments and Macau 12.5 per cent.
The joint working group - the Hong Kong-Zhuhai-Macau bridge advance work co-ordination group project office - met on Saturday in Zhuhai to hammer out details of the expressions of interest, which will close on November 10.
