THE DIRECTOR-GENERAL of InvestHK, Mike Rowse, has a way with words. 'Cleaner and neater' is how he describes a proposal that the government now pay for 85 per cent of a proposed exhibition centre at the airport instead of the originally suggested 50 per cent. This is an example of a form of thought known as economic flatitude, in other words a whole lot of hot air expressed at a . . . ahem . . . basic level. It should strike you, that the exhibition trade seems to have found the new centre less of an urgent necessity than we had earlier been led to believe by its boosters. A Legco panel was told on Monday that private consortia think the centre should initially occupy a smaller area and be expanded only when demand rises. So not only is the government now being asked to pay much more of the HK$2 billion construction costs but the project's size is to be scaled down by 40 per cent from the original 1.07 million square feet. This is not surprising when you remember that the original consultant's report cast doubts on its viability. What a rare phenomenon, a consultant who let the facts rule his findings. Count on it that this was the last job his firm will do for the government. And then we get Mr Rowse's reasoning that a 15 per cent equity stake in the project should still go to the private sector on the grounds that this will guarantee an efficient construction cost. Let us try a little arithmetic here. Let us say that the project costs come to $100 and we add a $20 profit for the developer who holds that 15 per cent. As an equity holder in the project, however, he also contributes 15 per cent of that $20 profit. This comes to $3 and his net take is therefore really $17. But having been told that his presence will keep costs efficient he decides to try pull a little wool over the eyes of the government committee in charge of project expenditures. 'Count on me lads, I'm in this too,' he tells the committee members. 'It's in my interests as much as yours to keep these costs down but $120 is just a little too low. Rock-bottom price is $130 and you know that I'm on your side here.' We now have the developer making a $30 profit and his 15 per cent now means he himself contributes $4.50 of that figure. That still leaves him with a net $25.50, however, which is a good deal more than the net $17 he originally expected. So yes, a 15 per cent equity stake will keep the developer honest. Oh yes, I am a believer. But what really makes the new 'cleaner and neater' arrangement a classic flatitude is Mr Rowse's argument that a larger slice of government investment could ensure competitive pricing by the centre, thus attracting more exhibitors. What he really means here, of course, is that many of the decision-makers in our government also run companies that would be users of the centre. It will thus be easy, when they put on their government hats, to jolly them into setting user fees at such low levels that the rest of us will never see a return on the $2 billion we contribute from public funds. It is the same gambit we have seen with the airport, Cyberport, Science Park and any number of public works of this kind, the sort of thing responsible for a good deal of that fiscal revenue-expenditure mismatch which afflicts us at present. Now you might say here that there are indeed times when we wish to set fees at low levels in the general interests of Hong Kong society. It is why we keep public hospital fees low, for instance. Everyone benefits from low cost medical care and we consider it better to take the benefits this way than in the form of higher public revenues by charging patients the full cost. But an exhibition centre is no hospital. It is not you who gets the benefit. It is a select range of industrialists, airlines and hoteliers who take the benefit for themselves and their shareholders. Mr Rowse can of course say to this that you still benefit because these people create employment and pay taxes. To such flatitudes, if he argues them, I can only respond in kind. Clear away, folks. Don't stand near me just now. The solution here is the obvious one. If exhibitors think that they can significantly boost their profits by holding trade fairs at the airport, then they should have no problem putting up the money to build such a centre. Developers will fall over themselves to build it for them if the fees are high enough to justify doing so. And if the exhibitors do not believe it will do much for them and are not prepared to pay market level fees then there is no reason to build this centre at all. Either way there is no reason for government to put any money into it. 'It is the same gambit . . . responsible for a good deal of the fiscal revenue-expenditure mismatch which afflicts us at present'