May 09, 2007

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Collusion in Hong Kong

So what will it take to force the HK government into enacting a competition law? Perhaps yesterday's land auction. The SCMP reports:

A Sino Land-led consortium won a residential site in West Kowloon for a less-than-expected HK$4 billion yesterday after the government issued an unprecedented warning to developers over their conduct during the bidding.
Last week, the Lands Department sent a letter to the Real Estate Developers Association reminding developers they must "behave properly" during the auction - which was interpreted as a warning against colluding during the bidding process to keep down prices.

At the last major sale, in March, Sino Land acquired a Tai Po site after its chairman, Robert Ng Chee-siong, was seen during the bidding holding discussions with Nan Fung Development. The privately owned Nan Fung then dropped out of the bidding and after the auction the two companies announced they would jointly develop the site.

Sino Land and Nan Fung were the major partners in yesterday's winning consortium, which also comprised K Wah International and Chinese Estates Holdings. They secured the 86,758 sq ft site on the 29th bid of the auction for HK$6,147 per square foot yesterday, about 10 per cent less than analysts estimated.

When collusion hurts the government's coffers, you can be sure the next step will be anti-trust and competition law. It's OK if cartels keep prices high to rip-off consumers or flat buyers, but if developers are going to game the government they're in for a hell of a fight.

posted by Simon on 05.09.07 at 10:02 AM in the Hong Kong economy category.


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