October 20, 2005

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Hong Kong's white mouse

Commonly in business and just like waistlines, you expand when things are going well and contract when they are not. Except in Hong Kong. Forbes reports on the government's latest attempt to throw more bad money after bad at Hong Kong Disneyland:

The government may be asked for funds to finance the proposed expansion of Hong Kong Disneyland if revenues from the theme park's operations and alternative funding sources are insufficient to meet the capital outlay, said Secretary for Economic Development and Labor Stephen Ip.

In a written reply today to a question from Legislative Council (LegCo) member Fred Li, Ip said theme park operator Hongkong International Theme Parks Ltd (HKITP), a joint venture between the government and Walt Disney Co, will generate earnings for use in further developing the park.

'If HKITP cannot finance the park expansion from the operational receipts or other funding sources and requires government equity injection or loans, this will be put to the finance committee of the council for consideration,' he said...Ip said the government and Walt Disney have agreed 'to keep up the momentum to develop the theme park and expand the number of rides and attractions to attract visitors to the theme park.'

The park can't pay for itself, so the government will continue to add funds. If only other businesses could tap into such largesse.
He said that a new attraction, Autopia, will be completed in 2006.
To be followed by the new White Elephant ride, taking in West Kowloon, Tamar and other outstanding examples and ending back at the White Mouse HQ.
'Other attractions will continue to be built, having regard to market demand,' he said. Ip did not say how much is required for the Disneyland expansion projects. He said the government will ensure that the HKITP's resources are properly used through government officials who sit on the joint venture's board.
Even better, the government could publicly release all the documentation related to HKITP so the actual owners of the park, Hong Kong's taxpayers, can see what the government has done on their behalf. Oh, wait, look, there's a flying elephant with floppy ears.
Ip said the development and operation of Disneyland cost some HK$14.1 bln which came from equity contributions from both the government and Walt Disney, as well as loans from the government and various financial institutions.

Of the total HK$14.1 bln development costs of Disneyland, the government injected HK$3.25 bln, while Walt Disney put in HK$2.45 bln. The rest of the funds used for the project came in the form of borrowings of HK$8.4 bln by the joint venture company HKITP, which is held 57 pct by the government, with the rest held by Walt Disney Co. Of the HK$8.4 bln loans, HK$6.1 bln was provided by the government, while the balance came in the form of commercial loans obtained by HKITP.

I've been through the maths of HK Disneyland's financing before. But it's still staggering that the government provided both equity and a large part of the debt to finance the park, not to mention the huge amount spent on reclamation, infrastructure and remedial work.

No wonder Mickey smiles so much.

posted by Simon on 10.20.05 at 10:49 AM in the Hong Kong Disneyland category.


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If I remember correctly, Disneyland also does not have to pay taxes till about the same time that disneyland on the mainland is built, as I reported before.

posted by: d on 10.20.05 at 11:05 AM [permalink]

Well they're effectively just paying money back to their JV partner, so there's no rush.

posted by: Simon on 10.20.05 at 11:13 AM [permalink]

That's one big mouse! Or a giant elephant with Mickey ears.

Disney must have calculated that even if the park were too small to begin with, after HK had spent their money and realized their new project was too small to be viable, that the government would pony up the rest regardless of the implications to the HK taxpayer.

That's why Hong Kong needs democracy - otherwise there's no way to punish idiots with the ballot box!!

By the way, I hope your trip went well. Mine was great except for the return flight which I go into more detail on my own blog...:)

posted by: HK Dave on 10.20.05 at 05:55 PM [permalink]

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