New World defends Convention Centre deal

NEW World Development has rejected claims that a contractual guarantee for it to get the management contract for the $4.8 billion extension of the Hong Kong Convention and Exhibition Centre (HKCEC) was at the expense of taxpayers' interests.

In a strong defence of its position yesterday, the company's general manager, Paul Tong, said New World, under the management contract, had actually guaranteed revenues for the Trade Development Council (TDC).

He expected the extension to lower the average usage of the whole facility, and the new wing to lose money for at least three years after opening.

If the existing and the extended portions were managed by two different companies, it would make it more difficult for the centre to be profitable, he said.

Some argue that New World should not have been given priority to manage the extended portion of the centre, but that the management contract should have been open to public tender.

Under an agreement between New World and TDC, they cannot participate in the development of other exhibition facilities in Hong Kong.

Mr Tong said the agreement meant the TDC could not hire other companies for management and New World could not manage other exhibition centres in Hong Kong.

He said it was an agreement for the benefit and protection of both New World and TDC.

New World chairman Cheng Yu-tung said the public should not be under the illusion that the extension and the management contract were in favour of New World.

He said it was natural for the extension to be managed by New World.

New World was granted a 40-year management contract for the present centre and undertook to return five per cent of the centre's gross operating costs to the TDC as annual income.

New World and TDC are discussing improvements in the terms of the management contract for the extension.

Mr Tong said it was proposed to return six per cent of the extension's operating costs to TDC at first. The rate of return would increase to a maximum of 11 per cent.

He said the management period was the subject of negotiations.

New World employs about 650 staff for the centre. When the extension is fully used, it said it would need to increase the workforce by about 70 per cent.