Your correspondent has not always been the greatest fan of the Singapore way of doing things but it is time to give credit where credit is due.
Not only has the rah-rah-Singapura chorus regularly orchestrated by the Singapore authorities become more muted recently (let us be grateful for small mercies) but twice in succession now the Singapore Government has given a lesson to Hong Kong in how to make markets work properly.
The first was the privatisation last month of SMRT, the Singapore metro system. It was priced attractively and Singapore spurned the lock, stock and barrel approach we are considering for our own Mass Transit Railway by bringing only the operating arm of the railway to the market. Investors get the prospect of decent returns this way.
The second was a reform measure that does probably even more to establish a path for us. The Singapore authorities reconsidered their land use policies and decided it was time to change their own lease conversion premium system.
Let's go over this one again as it applies to us. All land in Hong Kong bar St John's Cathedral is on leasehold with lease terms that specify permitted uses. Owners can get more lucrative uses but the rule is that they must first pay up the difference in value between the existing lease terms and the new ones.
It is an understandable policy. The leases were priced according to their permitted uses at the time. Why should the owners get improvements in lease conditions for free? There are problems with this however. In the first place the lease premiums must be paid up front before any redevelopment work begins and few people have the money for this, with the result that our development industry is concentrated in a few hands alone.
These developers also have a timing advantage. They, rather than the Government, choose when they want conversions, which means when they think the property market has bottomed and their premiums will be low. Vast tracts of prime land have thus remained unused for years while developers waited for opportune times.
