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Kai Tak Sports Park

Are Hongkongers getting the best deal out of Kai Tak Sports Park?

  • Albert Cheng says the generous terms in the contract awarded to a New World subsidiary to design, build and run the Kai Tak Sports Park raises questions about whether the Hong Kong public could have got a better deal
PUBLISHED : Thursday, 10 January, 2019, 8:04pm
UPDATED : Thursday, 10 January, 2019, 8:04pm

Before the end of 2018, the Hong Kong government announced that a subsidiary of local property developer New World Development has won the 25-year contract to design, build and run the 28-hectare Kai Tak Sports Park.

According to the terms of the contract, the government will give HK$30 billion (US$3.8 billion) for the construction of the park. Kai Tak Sports Park Limited, a subsidiary of New World Development and NWS Holdings, will cover the operating expenses. It also gets to keep the revenues, but must pay the government 3 per cent of gross income and an additional HK$1.72 billion over the 25 years of the contract.

This kind of “design, build and operate” project is not without precedent. And New World itself is currently running other facilities and venues, including the Hong Kong Convention and Exhibition Centre in Wan Chai, Youth Square in Chai Wan, and the Avenue of Stars in Tsim Sha Tsui. According to Home Affairs Bureau figures, the operating expenses of Youth Square largely exceed its income. It recorded an annual loss of between HK$30 million and HK$40 million from 2014 to 2017.

The “design, build and operate” model appears to have overtaken the old “build, operate and transfer” model, under which administration of the property is returned to the government after a certain period, such as 20 or 30 years. The “build, operate and transfer” model is commonly used in projects around the world. The purpose is to employ private capital, knowledge and skills for public use.

In another common type of public-private partnership, the government retains ownership of the property, while the private company is granted a contract to operate the facilities. In this model, the operator earns 5-10 per cent of the revenues, with the remaining going to the government. Some of Hong Kong’s public car parks and road tunnels are run this way.

In the case of the Kai Tak project, the contract allows New World to only pay the operating expenses, HK$1.72 billion, and 3 per cent of gross income. The park will have about 646,000 sq ft of retail and dining areas, in addition to bowling and health and wellness centres. This will generate considerable profits for the New World group.

Why would anyone want to win Kai Tak bid in sport-starved Hong Kong?

The biggest piece in the cake is definitely not the park, but the housing, transport and recreation network formed within the area. NWS Holdings, a subsidiary of the New World group, owns New World First Bus, which operates bus routes in Kai Tak. Recently, New World was part of a consortium that won the auction of the first residential plot on the old runway in Kai Tak. Obviously, the group is dedicated to creating synergy in the Kai Tak area, which could add value to its future residential projects.

Meanwhile, the government has proposed downsizing Hong Kong Stadium, converting it into a 9,000-seat sports ground, since the main stadium in Kai Tak would soon be ready to take over the hosting of major sporting events.

Is the government paving the way for the demolition of Wan Chai Sports Ground in order to expand the Convention and Exhibition Centre? Critics fear this is the real reason it wants to turn Hong Kong Stadium into a smaller sports ground – to replace the Wan Chai Sports Ground.

District council rejects government plan to redevelop Hong Kong stadium

Although the contract requires most of Kai Tak Sports Park to be used for sports activities, the operator can still make a huge profit through hosting concerts and other entertainment events. The ultimate beneficiary is no doubt New World.

Corporate benefits aside, we should also note that former secretary for development Eric Ma Siu-cheung was appointed chief operating officer of NWS Holdings after he stepped down from office. Though his employment was cleared by government advisers, it still raises eyebrows.

It is vital that the government clears up any clouds over the Kai Tak Sports Park.

Albert Cheng King-hon is a political commentator. [email protected]