HK-Macau bridge planners go for
costly option By Henry C K Liu
On Thursday, February 28, after more than
six years of deliberation, the governments of Hong
Kong, Guangdong province, and Macau endorsed in
principle a financial scheme for a sea bridge
linking the three sub-regions. The project will
accelerate the economic integration of the Pearl
River Delta to bring further economic growth and
prosperity to all in a region that now houses
close to 50 million people, about the size of New
York and California combined.
The Hong
Kong-Zhuhai-Macau Bridge at the mouth of the Pearl
River will be 36 kilometers long, with six traffic
lanes designed for a speed of 100 kilometers per
hour, including a 6.7-kilometer seabed tunnel at
40 meters under the South China Sea to facilitate
unobstructed ocean shipping lanes.
Two
artificial islands measuring one kilometer each
will be built to
house
the two ends of the tunnel to join the bridge
segments. The destination landing points of the
bridge will be in the reclaimed land of Macau’s
north-eastern district known as "The Pearl", Shek
San Shek Wan in Hong Kong’s Lantau Island, and
Zhuhai’s Gongbei. At completion, travel from Hong
Kong to Macau or Zhuhai, which is immediately to
the north of Macau, will be accomplished in 30
minutes.
Under the agreement, Hong Kong
will assume slightly over half the project’s
estimated total cost of up to US$5 billion, at
50.2%, with Guangdong province assuming 35.1% and
Macau 14.7%, proportional to anticipated
macroeconomic benefits to each participating
entity, such as reduction in transport costs and
time, less the costs to each in building separate
connecting roads to the main bridge.
A
plan for financing the Hong Kong-Zhuhai-Macau
Bridge has been proposed by the Transport Planning
and Research Institute of Ministry of
Communications of the Central Government of the
People’s Republic of China and delivered to the
local governments. According to press reports, all
three local governments have agreed to undertake
construction within their separate jurisdictions
to link up to the main bridge.
It is
reported that investors will be selected by public
bidding. Domestic investors from state-owned
companies will be selected through conditional
build-operate-transfer (BOT) bidding with a
50-year operation period to collect tolls to pay
off the investment with adequate returns. The
successful bidders are expected to form joint
ventures with foreign companies.
The
investment funds will be raised by those joint
ventured partnerships and by the three local
governments. The final cost of the undertaking
will be known when the bidding process has been
completed. Preliminary estimates on the projects
total cost come to about US$5 billion.
A proposal for a 15 billion yuan
(US$1.83 billion) bridge linking Hong Kong,
Macau and the mainland Chinese city of Zhuhai,
which neighbors Macau, has sparked bickering
among Hong Kong tycoons over their special
interests ...
Hong Kong tirelessly
promotes itself as the New York of Asia. In New
York, the Port Authority of New York and New
Jersey, established in 1921, operates
transportation facilities serving both states.
It is a financially self-supporting public
agency that receives no tax revenue from any
state or local jurisdiction and has no power to
tax. It relies almost entirely on revenue
generated by its facilities' users - tolls,
fees, and rents - to finance revenue bonds.
The governor of each state appoints six
members to the Port Authority's board of
commissioners, subject to state senate approval.
Board members serve as public officials without
pay for overlapping six-year terms. The
governors retain the right to veto the actions
of commissioners from that governor's own state.
Board meetings are public. The board of
commissioners appoints an executive director to
carry out the agency's policies and manage
day-to-day operations …
It seems natural
that the governor of Guangdong province and the
chief executive of the Hong Kong Special
Administrative Region should put their heads
together and create a Port Authority of
Guangdong and Hong Kong to plan, finance and
operate the proposed Zhuhai-Macau-Hong Kong
bridge as expediently as possible and to
undertake other regional plans and coordination,
such as a regional air-traffic and airports plan
and a regional water-transportation, rail and
highway plan.
Such an important regional
project should not be left to the bickering of
local special interests. There is no need to
rely on the private sector to develop and
finance public infrastructure. Privatization of
public monopolies would only permit unnecessary
private profit to keep users fees high and sap
the region's cost-competitiveness.
The
reported BOT scheme (Buy, Operate and Transfer) by
private tender is only appropriate for
underdeveloped economies suffering from capital
shortage. BOT is generally a more costly way to
finance infrastructure and only used by desperate
governments which do not possess sufficient credit
ratings to access international capital markets on
their own. The Pearl River Delta, Hong Kong and
Macau regional economies, being part of the larger
Chinese economy, are not faced with such problems.
China is now the biggest creditor nation
in the world. It is a puzzle why this important
and much needed regional infrastructure project,
that will yield economic benefits many times over
its cost, needs to be financed with costly private
sector BOT arrangements, with 50 years to collect
lucrative high tolls, which will act as a drag on
the regional economies.
Details of the
final terms from private investors on development
rights of related real estate have not yet been
made public at this time, but it is reasonable to
expect the public interest will be better served
via the path of public authority financing.
Henry C K Liu is chairman of a
New York-based private investment group. His
website is at http://www.henryckliu.com.
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