January 27, 2005

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Yesterday John Tsang, Hong Kong's Collusion Commerce Secretary penned an an article in 6 HK papers defending the Government from charges of collusion over Cyberport. Let's leave the ethics of papers printing verbatim articles aside. This part of Tung Che-hwa's new found anti-collusion drive, which began with his policy address a couple of weeks back. The Tsang article is in the extended entry for those who want to read it. But the basic premise is simple. The Government deliberately rushed the job through because it knew the dot com boom wouldn't last and time was of the essence. To compensate PCCW for being lumbered with constructing a high-tech industrial park that would never attract enough tennants, the Government permitted PCCW to build a residential project at the same time. Funnily enough, the residential project, called Bel-Air on the Peak (in reality, in the Peak's shadow), is where the money has been made. David Webb took a critical look at the project back in October.

The reality is if we judge Cyberport by its original intention, it has been an unmitigated flop. Ex-post justifications for awarding the project to PCCW without tender don't wash. As was expected, the whole project is a residential property project in which the Government shares a small amount of the upside and in return granted a private, albeit well-connected*, company public land at bargain rates. Ah, I hear you say, but at least the lessons have been learnt and it won't happen again.

To which I give you the West Kowloon "Cultural District", or Cultureport.

* No pun intended.

Update: Firstly read Hemlock's Thursday entry (reproduced at the bottom of this post). The Standard's article that Hemlock refers to, headlined "We are no mouthpiece", is reproduced in full. It is a must read:

On Tuesday evening, The Standard was visited by what, in another democracy, would be considered an extraordinary request: Print, unedited and uncut, 1,800 words of the government's rationalisation for its 1998 decision to bypass the legislature and hand over 24 hectares of some of the most valuable land on Earth to the son of Hong Kong's biggest tycoon in a bid to belatedly drag the SAR into the cyber revolution.

By all accounts, except the government's, this experiment has not been a notable success for anybody but Richard Li and his company, now known as PCCW. In exchange for luring 33 companies, many of them merely from other parts of Hong Kong, to Telegraph Bay, Li was allowed to develop a major portion of Cyberport into an extremely lucrative housing scheme.

Seven years after that decision, with public irritation rising over a new scheme to hand over even more valuable land in West Kowloon to a single developer, the government has now chosen to try to defend its decision to give Cyberport to Richard Li.

The Secretary for Commerce, Industry and Technology, John Tsang, was to defend that decision on Wednesday. But before doing so, Tsang sought to prime the press and the public with the government's version of how Cyberport came about. As can be imagined, in Tsang's prose, it was a solid decision, exhaustively thought out and executed, that ``transformed disused land at Telegraph Bay into a lively modern community, enhancing the value of its neighborhood and enriching the quality of life in Hong Kong'' while turning the territory into a regional information technology powerhouse.

This is the second time in two months the government has sought to deliver its version of questionable property decisions designed to put enormously valuable land into the hands of Hong Kong's oligarchs. The first came in early December, when top-level government officials including Chief Secretary for Administration Donald Tsang and home affairs chief Patrick Ho delivered an equally extraordinary six-part series justifying the government's potential decision to grant the West Kowloon development to a single developer.

As with Tsang's article, the government laid down conditions for Hong Kong's newspapers. They were told to run that six-part series without abridgement or comment or not run a single word of it. The Standard refused to run those articles, just as it refused to run Tsang's.

The government apparently does not understand that the very foundation of a free press, which is so essential to democracy, makes it inimical to even make such a request.

In a democracy, a free press stands as an interpreter of the government's decisions, not as a conduit for their justifications. It is crucial the press stand aside from government and report what government does and how it does it.

Society's voters cannot be present at the creation of their government's laws and decisions. It is the press' responsibility to report what is actually happening in the halls of power to which the individual has no access. That is vital for the security of the community itself.

Printing wholesale government justifications of momentous decisions on land use in Hong Kong, without soliciting reasoned and fair analysis of at the same time, is an abdication of a newspaper's responsibility. Hong Kong's may be an imperfect democracy, but it is a democracy nonetheless, and its press remains free. That is why The Standard refused to print John Tsang's 1,800 words of justification for Cyberport, and it is why we will refuse to the next time as well.

The government has enormous resources to get its message across, ranging from its army of civil servants to public service announcements on government-owned RTHK. But the government is crossing a dangerous line when it tries to dictate to Hong Kong's media what and under what conditions it can print government statements - statements, we should remind John Tsang and his staff, that are written using our and our readers's tax dollars.

If we get copies of similar articles from other sources besides the government, we analyze their justifications, ask knowledgeable sources for their opinions, and print them as news for our readers to consider, on our news pages, as we do every other story.

We would be happy to consider any pieces that the government submits as op-ed pieces, subject to normal editing procedures. Or we will be happy to print them as advertisements, clearly labeled as such, and paid for by the government. But we will not print them in our news pages, lest our readers get the impression that these ideas are presented as fact.

We would also request that other newspapers, having given the matter thought, join us in boycotting the government's attempts to insert its rationalizations into their news pages while squelching public comment.

It's time to switch my paper subscription over to The Standard.

The full article by John Tsang:

If there is one project that has attracted continued attack from selected sectors of the community, it is Cyberport. Six years after the government launched the project, criticism and cynicism persist.

Critics allege the government bypassed the legislature to transfer benefits to PCCW. Some even cite Cyberport as the prime example of "collusion between government and business". Is there any truth to these outrageous allegations? I would like to set the record straight and let the people of Hong Kong make a judgment based on facts, not slogans.

The Cyberport project was conceived at the height of the dot.com boom when many of our regional neighbours had already built or were in the process of building their own infrastructure to foster and support the development of information technology (IT).

Against this background in mid-1998, the Pacific Century Group (PCG), now called PCCW, presented to government the Cyberport concept, suggesting the government should construct Cyberport as a public works project with PCG as one of the anchor tenants. Naturally, without any upfront commitment from leading IT companies that they would move into Cyberport, the government was unwilling to commit from public coffers the substantial capital cost necessary to develop the project. Also, it has always been the government's intention to have the private sector take a lead in the development of projects of this nature.

Later in 1998, PCG put forward a revised proposal that included an ancillary residential development to provide revenue to finance the project. PCG would also be responsible for constructing the Cyberport portion, which comprised offices and supporting facilities, and would hand them over to government upon completion. In other words, the government would be the sole owner of the Cyberport portion, in addition to sharing the surplus sales proceeds from the residential portion.

To ascertain the benefits of Cyberport to Hong Kong, the government engaged an international consultant - Arthur Andersen Business Consulting - to conduct a strategic assessment of the proposal. The consultant concluded that a development such as Cyberport would be an important element of Hong Kong's economic infrastructure, that it could assist IT companies by providing state-of-the-art facilities at shared cost, and that it could give Hong Kong an international marketing advantage in enhancing its image and competitiveness as an international information services centre. The government's decision to proceed with the Cyberport project was thus in line with the global trend of creating IT clusters and nurturing professional talent in strategic information infrastructure.

Further studies by the consultant confirmed that there was across-the-board support from the local IT sector for the Cyberport concept. By the end of 2001, more than 70 applications for office tenancy had been received, but the subsequent bursting of the dot.com bubble shattered many dreams. By the time the Cyberport portion was completed in mid-2004, more than one-third of the first batch of applicant companies had disappeared and others had dramatically altered their business plans.

Public criticism has all along focused on the way the government awarded PCCW the development rights at Cyberport. The government's decision to enter into partnership with PCCW to build Cyberport was made in view of the special nature, circumstances and requirements of the project, including:

(a) the need to complete Cyberport within the shortest possible timeframe to sustain Hong Kong's competitiveness in the region;

(b) the need for heavy upfront investment in Cyberport (estimated to be around $5 billion on top of the costs of providing essential infrastructure facilities); and

(c) the benefits of a public-private partnership (PPP) model that could enable the government to bring forward completion of Cyberport by a couple of years, reduce its capital contribution and transfer the public risk to the private sector partner.

At that time, other than the specific offer PCG had made to build Cyberport for the government, the real estate sector had also put forward a proposal that suggested the excision of the residential portion from the project and the open tendering of the land to provide government with the necessary funds to construct the Cyberport portion.

This was actually considered and rejected by the Legislative Council. It is interesting to note this proposal is strikingly similar to the one some developers have suggested for the handling of the West Kowloon cultural district.

The financial analyses of the two proposals were submitted by government to Legco's Planning, Land and Works (PLW) Panel in April 1999. Under the developers' proposal, it was assumed that the land for the residential portion could fetch around $8 billion if it were put out to tender. Deducting from it the $5 billion construction costs for the Cyberport portion, the government would get $3 billion upfront cash. As usual, the profits, if any, through sales of the residential units, would be reaped by the developers.

On the other hand, under the PPP model, in addition to full ownership of the Cyberport portion, the government would be able to share the surplus sales proceeds from the residential portion with PCCW, and it was estimated that government could get about $4.2 billion cash (compared with $3 billion under the other proposal) if the residential units were sold at a conservatively estimated average price of $4,000 per square foot. This was one of the scenarios set out in the panel paper. In retrospect, we note that the sale price went on a roller-coaster ride from then until the actual sale dates. But the fact remains that when we compared the two proposals, the PPP model would yield a higher return and, at the same time, result in lower risk for the government.

Based on these analyses, the government concluded the PPP model would ensure that the Cyberport portion could be completed in the shortest possible time and that government would receive a reasonable return while its risks in the project development would be minimised. This was clearly the preferred option and the logical public policy decision.

Following the announcement of the Cyberport project in the 1999-2000 Budget, we briefed the Information Technology and Broadcasting (ITB) Panel on March 8, 1999. Further consultations with the ITB Panel on the financial terms and analyses of the project and with the PLW Panel on the infrastructure works were held on April 29 and May 4, 1999, respectively.

After reaching consensus with PCCW on the project agreement for the Cyberport project in May 2000, the government briefed Legco on the main terms of the agreement and the granting of the development rights to PCCW in June 2000.

The Public Works Subcommittee and the Finance Committee were also consulted a number of times between May 1999 and December 2000 on the funding applications for a total of $1.1 billion to construct the essential infrastructure, such as roads and water supplies; and the funding applications were approved by the Finance Committee.

All in all, the government actively consulted relevant Legco committees and panels on more than 20 occasions from March 1999 to January 2005. The legislature was fully aware of the different aspects of the project as well as the responsibilities and benefits that the Cyberport project could bring to government and PCCW.

Legco members have, indeed, been vigilant in monitoring not only the progress made, but also the extent to which Cyberport has achieved its objectives. There is absolutely no truth to the allegation that Legco has been bypassed or hoodwinked.

John Tsang Chun-wah is Secretary for Commerce, Industry and Technology.

Hemlock's Thursday entry:

A little before 6.30 in the morning, and RTHK Radio 3 decides to rouse Hong Kong’s English-speaking community with a friendly public-service message. “The Chief Executive in his policy address explained how the Government is working for a vibrant economy,” says an irritatingly cheerful and enthusiastic male announcer. “And it is creating jobs! It is also working to bring about a caring community with social harmony.” I miss the next few sentences, owing to my futile but instinctive habit of hurling abuse at helpless electronic equipment conveying offensive broadcasts. “…bringing you people-based government!” gushes the sickening voice in conclusion. This comes just two days after officials asked newspapers to print a 1,800-word article by pitiful Technology and Industry Secretary John Tsang, laboriously claiming that Cyberport – Tung Chee-hwa’s gift of billions in public wealth to Li Ka-shing’s son – was not cronyism. The newspapers were required to print it unedited and without comment, orders with which the South China Morning Post droolingly complied, to the disgust of The Standard.

Delectable Administrative Officer Winky Ip squirms when I tackle her about all this over breakfast at Yuet Yuen Restaurant. What on earth, I beg her, is going on? She takes a deep breath. The situation is complex, she says, shaking pepper onto her congee. “Some people imagine this sort of thing is effective and persuasive – so it pleases them when we show them this stuff. ‘Great communication’, they think.” I nod wearily. Tofu-for-brains is the obvious example. Say something is true – and it becomes true. “Other people,” Winky continues somewhat awkwardly, “um… Well, they know this heavy-handed propaganda doesn’t work. In fact, has the opposite effect. Makes certain people look bad.” I nod some more. “And, um, that’s what they want,” she says. “So they’re happy too.” I see. So how much does a civil servant’s soul go for these days? I wonder. Winky shakes her head defensively and puts her teacup down next to the newspaper with its story marking the 60th anniversary of the liberation of Auschwitz. “We’re only implementing policy,” she asserts.

posted by Simon on 01.27.05 at 10:21 AM in the


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Publish and be damned
Excerpt: On Wednesday I was glancing through the online edition of the SCMP and came across a rather idiotic opinion piece about Cyberport and PCCW by one John Tsang, Secretary for Commerce, Industry and Technology.
Weblog: OrdinaryGweilo.com
Tracked: January 27, 2005 11:03 PM

Simon's China and East Asia Highlights: 2005-2-15
Excerpt: The following is a digest of highlights from the past month's Asia by Blog series over at simonworld.mu.nu. The round-up has four key areas of focus: China, Taiwan & Hong Kong (Politics, Economy & lifestyle, History sport & culture, Information), Korea...
Weblog: Winds of Change
Tracked: February 15, 2005 04:37 PM


I know the feeling. I remember that short period of time before iMail became a sensationalist tabloid (and then later a total rag) when I had hope for the Hong Kong press.

It's nice to know that one paper has journalistic ethics.

posted by: Johnlouis Swaine on 01.29.05 at 09:55 AM [permalink]

This sort of stuff wouldn't happen in Singapore, lah! For a start, it'd be a CyberHUB, not a Cyberport. And the usual suspect's family name is spelt Lee, not Li. According to Mr Brown, the letter D stands for Despot. (Hope you can penetrate the Singlish - it's a key article.)

Seriously though, I'm Very Impressed by The Standards' standards.


posted by: expat@large on 02.17.05 at 07:24 PM [permalink]

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