Hong Kong's two campus-style science parks were conceived in the white-hot heat of the late 1990s bull market but they are kicking off in an era of much diminished expectations. Billions of dollars in public funds were spent chasing the dream of making Hong Kong a regional hi-tech centre. In financial markets, at least, technology has become a dirty word as the work-out of over-investment and hopelessly excessive growth forecasts unravels. High-profile bankruptcies, such as United States undersea cable operator Global Crossing, point to unfinished business while survivors scale back expansion and focus on old-fashioned profits. Into this harsh environment Hong Kong's Government-run technology flagship projects will launch. The Cyber-Port in Pokfulam will see 250,000 square feet of a planned 1.1 million sq ft office development hit the market by April. In Tai Po, the Hong Kong Science Park is offering one million sq ft of gadget-rich facilities for occupation by the mid-year. As technology firms retrench, charges of 'white elephant' are being levelled at both projects. In Cyber-Port's case, a veil of secrecy has been wrapped around the tenant list. Anchor clients announced with much fanfare two years ago are understood to have pulled out, deferred entry and, in the case of a number of formerly big-name overseas Internet firms, are fighting for corporate survival. Despite having less than half of its first phase let, the science park is seemingly more transparent, proudly trumpeting each addition to its 11 firm roll-call which will be anchored by cordless-telephone maker VTech Holdings, whose chairman Allan Wong Chi-yun is Chief Executive Tung Chee-hwa's technology policy guru. Project chief executive Peter Lo Yat-fai admitted disappointment but said: 'We would like to have been higher than 46 per cent full, but given the global situation, the September 11 terrorist attacks and technology sector problems that's about as good as we could expect.' Rival commercial landlords are not impressed and complain both projects are targeting private-sector tenants. Cyber-Port, it is claimed, is soliciting firms to break leases and move to the project. In December, Secretary for Information Technology and Broadcasting Carrie Yau Tsang Ka-lau told legislators 72 firms had expressed interest in taking space but refused to give more details. That compared with August 2000 when the 50:50 Government and Pacific Century CyberWorks' joint venture claimed 155 firms had expressed interest, including Cisco Systems, Hewlett-Packard, IBM, Legend Holdings, Microsoft, Yahoo! and Oracle Systems. Information Technology and Broadcasting Bureau Deputy Secretary Annie Tam Kam-lan, who oversees Cyber-Port letting, admitted the project's first phase might not be fully occupied as tenants had specific demands for individual floors and could pull out depending on which phase of the project they were offered. She said the concept of anchor tenants had been dropped and Cyber-Port faced 'complicated problems' of staggering entry for would-be tenants through the project's different phases. Rival developers who opposed Cyber-Port when the project was announced in 1998 are reluctant to criticise the project publicly but say the technology stock bust and recession conditions mean its target market has evaporated despite effective monthly rents less than HK$10 a square foot. A senior executive at a large SAR developer, who believed the Government and CyberWorks should come clean on the issues, said: 'The longer they perpetuate the myth of success the harder it's going to be to extricate themselves from the situation without huge embarrassment.' That could be hard to achieve. Prospective tenants are put off by the site's awkward location, without easy train links. The project will remain a building site for another three years while falling commercial rents mean high-quality office space is available for as low as HK$20 per square foot in decentralised areas such as Quarry Bay and Tsim Sha Tsui. Declining rents make the relative cost of fitting out and moving to the new premises higher, eroding Cyber-Port's absolute advantage of cheap rent. The market would seem not to have found a clearing level. The process has been complicated as tenants must win approval from a committee manned by officials and special advisers. Ms Tam said that many had been rejected as 'unsuitable'. Prices in Hong Kong's office market can move remarkably fast, as shown by the 1999-2000 rebound, but on present downward trends the prospect of charging near peppercorn rents to draw technology-correct applicants or dramatically widening the eligibility criteria to simply fill the project promises controversy. Cyber-Port is essentially an office development targeting technology-service firms and application providers. By contrast, the science park is intended as an applied research and testing centre linked to hi-tech development. Both projects were modelled on the United States west coast experience, which is characterised by 'clusters' of complementary firms working in proximity. Mr Tung visited Silicon Valley in 1999 and was enthused about its success. Laying the intellectual groundwork for Hong Kong's newly found interventionist stance, he quoted American philosopher Eric Hoffer to an assembled group of Valley entrepreneurs: 'The only way to predict the future is to have the power to shape it.' Research into copy-cat efforts to duplicate Silicon Valley's development model increasingly casts doubt on that approach. A study by Stanford University researchers of technology cluster developments in Taiwan, India, Israel, Britain, Scandinavia and North Virginia concluded that the government was a poor instigator of change. 'Our case studies clearly show the foolishness of directive public policy efforts to jump-start clusters or make top-down or directive efforts to organise them. Clusters of innovative activity do not respond well to being directed, organised or jump-started,' it said. SAR officials insist projects such as Cyber-Port and the science park facilitate rather than instigate clustering. If so, the weak letting demand does not provide a ringing endorsement. Looking forward, Mr Lo is hopeful that a free-trade agreement between Hong Kong and China will 'put the SAR at the centre of the region's technology development'. It was not necessary to chase manufacturing projects such as the proposed 'Silicon Harbour' wafer-fabrication plant that was eventually located in Shanghai as the SAR's advantage was a well-regulated intellectual property rights regime that gave firms confidence to develop products without fear of designs being stolen by staff, as was common in China. That may be a necessary condition, but whether it is sufficient will be tested as more than three million sq ft of 'clean room' research and development space hits the market. The science park is welcoming firms engaged in activities as broad as marketing, legal services, fund management, recruiting and accounting. Mr Lo insists only technology firms remain liable for its 'subsidised' rents as low as HK$6 per square foot and increasingly touchy commercial landlords will be watching to see that is adhered to. As for Cyber-Port, scepticism about Hong Kong's most controversial property project is growing. One developer executive asks whether the lack of commercial interest means the Government should seriously consider scrapping the venture and instead use the undoubtedly excellent facility as a university site or vocational training centre. Such notions are likely to be heresy to Mr Tung but the market is not telling a pretty story about the efforts to forge a home-grown hi-tech sector.