New airport runway may yet mean more runaway costs

PUBLISHED : Tuesday, 31 May, 2011, 12:00am
UPDATED : Tuesday, 31 May, 2011, 12:00am

Public consultation on a controversial HK$80 billion third runway at Hong Kong International Airport is set to get under way next week.

SCMP, May 27

So here was the big question. Would they top the jaw-dropping HK$67 billion price tag for our pointless new railway across the border or would they be more modest with their first cost estimate for a new runway?

Good question. Here we are with a public balance sheet flush with cash, somewhere near HK$1.3 trillion in net savings at present. Our government has, meanwhile, made a big campaign of spending more money on infrastructure. Hands up now, let's see how many people believe that our engineers, consultants and contractors are not aware of all this.

Of course they went for the super deluxe version. Donald and Co are spraying money just like a fireboat in a holiday demonstration and the Legislative Council no longer more than squeaks at the bills for these extravagant transport projects. There is no need to keep costs down. Get in there and get some while it lasts. That's the ethos of the day.

Lest you think I'm being cynical here, let's review some figures. The land area of our airport is about 1,250 hectares. Not only is this room enough for two spacious terminals and two runways with all support services including hangars, traffic control, air cargo and air servicing, there is room left for an exhibition centre, some office blocks and even a golf course.

The space requirement for another runway, we are told, is 650 hectares. The runways at Chek Lap Kok are 3.8 kilometres long. That will make this one 1.7km wide. If the wind shear blows too strong off Lantau Peak, you will be able to land crosswise.

Then we get to the cost escalation. The original cost of land formation, airfields and terminal complexes was about HK$40 billion. Half as much land and fractionally as much construction will cost twice as much this time.

Ah yes, but inflation, let's not forget inflation. Things were much cheaper back in the 1990s.

Right then, to the chart. It shows the inflation index for public sector construction projects. I have set it to a value of 100 for the third quarter of 1995, which I calculate as about midway through the construction period of the airport. This produces a present reading of 149.

We'll do this the simple way. We shall take half the airport cost in 1995 dollars for an addition of half its size. That gives us HK$20 billion. We shall now factor in 49 per cent inflation (call it 50) and we get HK$30 billion. We still have HK$50 billion to go to get to the super deluxe version. Hmmm ...

Oh, but don't forget the greater difficulties of construction, you say. That new runway will have to go north of the existing field, which is further into the channel and therefore must be deeper water, which means a higher cost for reclamation.

Not quite, say the studies. There is one deeper trench there but then the bottom shallows out again. To get another HK$50 billion in reclamation costs we shall have to do something extra special for the pink dolphins. To get it with landfill costs alone we shall have to dump gold there.

And did I say there would be a line drawn under that HK$80 billion? Not likely. I'm reminded of the original Y-shaped design of the terminal, which had one arm chopped off halfway for cost reasons. It was ugly. It was meant to be. The budget was quickly busted to beautify it again. There are some very clever minds out there when it comes to going over budget with the public's money.

I know this battle is likely to be fought out mostly on environmental grounds. The conservationists will do the bulk of the talking and writing of submissions in the public consultation and I'm happy with that. I'd love to see the pink dolphins stop an earth-moving project.

There are so many better things we can do with our public savings - an absolute world-beating health-care plan for instance - that it's a shame to see the money squandered on overpricing of infrastructure.


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