Hi-tech industry, not real estate, is Shenzhen's preferred solution to developing the Lok Ma Chau Loop, the city's mayor says. Post, July 22 Back in 1997, when Hong Kong was just returned to China, the State Council made what can only be described as a strange decision. As if implementing the mind-boggling policy of 'one country, two systems' was not complicated enough, it decided that Hong Kong would administer a small part of Shenzhen. The so-called Lok Ma Chau Loop, a piece of muddy land on the Shenzhen River, which demarcates Hong Kong's boundary with the mainland, was formed as a result of work to straighten the river to improve its flow. Somehow the powers that be felt that while the area is clearly Shenzhen territory, it would make more sense for Hong Kong to run it. Or would it? Despite the State Council's decision, there has been no lack of speculation as to who really owns that site and who will have the final say on how it should be used. Interestingly, the latest proposals on how to develop the site have come from the Bauhinia Foundation, the think-tank that is widely acknowledged as Chief Executive Donald Tsang Yam-kuen's think-tank. No one would be surprised if it had consulted with Shenzhen before coming up with the proposal last year to establish a Lok Ma Chau Loop development management authority. Still more interesting is to see the Shenzhen mayor, Xu Zongheng, becoming visibly agitated on Monday when he was asked how he felt about suggestions from some voices in Hong Kong that instead of developing the site, the whole border area should be preserved and turned into a park for the enjoyment of people from both Shenzhen and Hong Kong. He was keen to point out that Hong Kong developers were the first to raise the idea of building houses there, not the Shenzhen side. Anyhow, Shenzhen would support whatever the Hong Kong side wanted. But he also made it clear that if Shenzhen had its way, it would prefer to earmark the area for hi-tech industries. But let us be clear straight right away that a hi-tech paradise in the Lok Ma Chau Loop is not the way forward. We already have two such hi-tech paradises and they are flops. Cyberport is so deserted that going there qualifies you for the Wilderness Explorers' Hall of Fame and the only science in Science Park is thinking up corporate names which sound scientific enough to qualify for tenancy. I think we can also safely begin to add AsiaWorld-Expo, the airport exhibition centre, to this list of flops. It was designed to be a technology display centre for heavy equipment but it has become little more than a concert hall for heavy rock bands. There is no good reason to encourage a fourth such flop. Hong Kong is not a technology centre and what little tech we have is not encouraged by spreading, rather than concentrating, the effort. You may say, of course, that this decision should actually be left to the owners of the Lok Ma Chau Loop. If they want to try hi-tech and it works, well, that's their good fortune, and if it fails, well, that's their tough luck. But there are two good reasons why things are not quite that simple. In the first place, leaving aside the question of cleaning up a million cubic metres of contaminated mud, we will still be expected to pay for all the roadways, power, water, sewerage and other infrastructure connections to this new hi-tech location. These costs will be extraordinarily high as the Lok Ma Chau Loop is one of the most remote sites in Hong Kong and has no infrastructure connections at all. I very much doubt that the mysterious owners will stump up the billions of dollars required. Count on it that their plans are entirely based on you and me paying for this. And then there is the vexed question of the premium. Anyone else who applies to convert a greenfield New Territories site into a dense commercial development would have to stump up an enormous lease-conversion premium for the project, by law the entire difference in value between the land in its existing state and the new use proposed. I imagine the mysterious owners will say that there are no lease limits on development of the Lok Ma Chau Loop, as the land was previously under Shenzhen administration and therefore no lease-conversion premium is due. It would certainly give them a huge advantage over any similar development in Hong Kong, but we can't let them get away with it. If they want that land as part of Hong Kong, then it should be treated as Hong Kong land and charged the equivalent of what a normal lease conversion would be on such a site. Just imagine the screams of rage in Shenzhen, however, if we proposed it. We would stand between the mysterious owners and the huge profits that they thought were guaranteed. The contaminated mud is not what stinks the worst here.