The flood has now slowed to a trickle, but the angry e-mails are still dribbling in a week after Monitor dared question the Hong Kong government's wisdom in proposing to spend HK$66.9 billion on a 26-kilometre length of high speed railway. Some readers simply resorted to insults. Others asserted that if the government fails to spend this truly humungous sum of money on a railway that will take 48 minutes to whisk passengers to a station 45 minutes from downtown Guangzhou, then Hong Kong's economy will somehow get left behind. A few readers offered more reasoned arguments. Typically these were along the lines of: 'This is a long-term investment, and infrastructure always pays off in the long run.' This age-old claim is trotted out every time a government wants to push through a big infrastructure project for political reasons. The problem is, it is simply untrue. Consider the example of Britain's Humber bridge. Originally priced at GBP28 million, it actually cost GBP98 million to build. By the time it opened in 1981, interest charges had bumped the project's debts up to GBP151 million. Despite a 1998 restructuring, by 2006 the bridge's debts had doubled to more than GBP300 billion. With traffic volumes falling consistently short of the initial estimates, there is now little hope that the project will ever break even. Any number of big infrastructure projects in Japan - the famous bridges to nowhere, built with public money to support the ailing but politically powerful construction industry - have proved similarly wasteful. Still, the Hong Kong government is confident its high speed railway will be no gold-plated white elephant. According to the Transport and Housing Bureau's projections, in the line's first year of operation in 2016 some 84,000 passengers will use it to travel to and from Shenzhen and Guangzhou, with another 15,000 using it for longer journeys. The government forecasts that passengers will save 42 million hours every year by taking the new train. As a result, over 50 years of operation, the railway will yield economic benefits of HK$87 billion at today's prices; an economic rate of return of 6 per cent. That sounds impressive. The problem is that the official forecasts for big projects are notoriously inaccurate. Take the HK$35 billion Airport Express, which was supposed to be whisking 75,000 passengers daily to and from the airport by 2011. Last year it managed just 29,000 a day. Similarly, the Ma On Shan railway line and the Lok Ma Chau spur line are carrying about half the originally projected numbers. And then of course there is Hong Kong Disneyland. Back in 1999 when the government undertook to invest HK$22.45 billion of public money in the project, officials came up with a set of forecasts just as impressive as those for the high speed rail link. From 5.6 million in the first year, visitor numbers would climb to 6.49 million in 2009, the fourth year of operation, contributing HK$7.57 billion of value added to Hong Kong's economy. Meanwhile, the park would directly create nearly 11,000 new jobs, and thousands more indirectly. As we know now, those forecasts were wildly over-optimistic. Last week the government released figures showing visitor numbers last year reached just 4.6 million, 29 per cent fewer than originally forecast. The value added to the economy was estimated at HK$4.4 billion, 42 per cent less than projected, while only 4,400 full time jobs had been created, 60 per cent fewer than predicted for the first year of operation (see the charts below). Not surprisingly, the park lost more than HK$1 billion last year. Let's hope the government's forecasts for the high speed rail link don't prove similarly inaccurate. If they do, instead of 99,000 passengers a day using the new service in its early years, we can expect just 79,000. And instead of saving passengers 42 million hours a year, it will save them fewer than 30 million. And instead of 6 per cent, the economic rate of return will be a lot closer to the 4 per cent level considered the threshold of viability on government projects. And that, of course, assumes the project is completed on time and within budget. Any over-runs, and given the government's past forecasting record, we can be fairly sure the new railway line will prove an even greater embarrassment than Disneyland is already.
