'Dear Stakeholders,' Victor Fung Kwok-king From the chairman's statement, HK International Airport annual report Imagine picking up the accounts of a company in which you held stock and finding that the chairman considers himself responsible to the customers, the employees and the suppliers, but not to you, a shareholder who put up the money for the enterprise. How long would it take you to put in a Sell order on that stock? You may say, of course, that our airport is a public sector corporation and the government's objective is not primarily to make money on it but to serve Hong Kong's wider social needs. Hence it is only proper that the chairman addresses himself to a wider audience. We shall ignore that he is actually obligated in that case to answer to a narrower rather than a wider audience, in fact, one person alone - the financial secretary. Has it ever struck you, however, that these stakeholder people to whom Dr Fung addresses himself all clamour incessantly for a say in how the airport should be run but all run for cover when asked to put up the money to run it that way? I'd love to see things the other way round one day. We, the taxpayers, will tell the airlines and all those greedy tourism lobbies that we want money from them and, in return, will reward them with warm feelings of appreciation. Let us pay them out in the same coin they pay us. Why is it that when tourism boosters talk about the importance of tourism to the economy of Hong Kong it always seems to precede a demand for our money? If it's important to the economy then at some point the economy must also benefit. I'd like to find that point some day. We always seem to put up money. Do we ever finally collect? When the new airport was first mooted it was recognised that there should be a target return on the investment by the public purse. This was set after much argument with the users at a 5 per cent annual return on equity, which is too low, but could possibly be tolerated. It has never been reached, however. I say this knowing full well that the airport people will now jump up and say, 'Oh yes, it has. Last year we had a 6.5 per cent ROE.' What we actually had, however, was a sleight of hand in airport accounting. Most of the revenue now comes not from landing and other charges related to air travel but from retail licensing, property rentals and other unrelated sources. The airlines will, of course, say that these are actually air travel related as it air passengers who go through the shops and they, the airlines, bring the passengers there. Thus, say the airlines, it should all be counted toward the airport ROE. This is sophistry. The Airport Express brings passengers to the airport, too. Should we therefore assign some airport revenues to the Airport Express? Should we tell shopkeepers in Tsim Sha Tsui that they owe the bus companies money for bringing bus passengers to Tsim Sha Tsui? It was the taxpayer who paid for those airport shop premises and it is the taxpayer alone who should get the benefit. Revenue from them should never be included in the airport's ROE. If the airlines think otherwise, they should have become airport shareholders. I shall now pose the question - What would that ROE be without the unrelated revenues? Your rough answer is in the blue line on the chart. I don't make it a definitive answer. There are many points of interpretation in working out what should be included and what not. My calculations are based on the airport's own income statement and assume that 30 per cent of the depreciation and of the interest charges are related to shops and rentals, which I think is a high figure. Even being that generous, the results tell me the airport has barely reached a 1 per cent ROE, still far from the target 5 per cent. And this matters because traffic at the airport has boomed so enormously since it was built that we will soon need a third runway or very high speed transport links to other regional airports, either of which will be hugely expensive. The taxpayer should not have to be asked for the required money again. The airport should have enough from its own earnings and from borrowings that it can undertake on the basis of its own financial footing. But unless it gets its returns up to a proper level we'll undoubtedly be stung once more. Your duty, Mr Fung is not to your supposed 'stakeholders'. It is to me and my fellow taxpayers as represented by the financial secretary.