Lessons from Hunghom - 10 Dec, 2004

Government won’t have much say
Hunghom Peninsula … continuing saga

Dear Subscribers & Friends

The continuing public debate over Hunghom Peninsula (HP) together with that for the West Kowloon Cultural District may well be the crowd drawer needed to beef up numbers on the 1 January 2005 protest being planned.

These projects highlight how much the government is involved in the land market through its ownership and setting of rules in such a way as appear to be stupid and easy prey for private sector developers. Hence, people will protest because they see them as bad governance examples.


A. Hunghom Peninsula - what is allowed

1. What the Government said: On 6/12, minister Michael Suen said: “If the developers want to demolish the flats without government approval, they could only put up the buildings again according to the master layout plan”. Any “value-added” redevelopment needed to be approved and a commensurate land premium paid for. Suen is right in theory … but he held a lot back in practice.

2. What the Government knew: He also insisted the government knew “nothing” about the developers’ plan to redevelop.

3. What the Government should have known: In 2/04, the developers already had plans to redevelop to produce luxury flats either by conversion or total redevelopment because it told the media at the time.

4. We didn’t have enough time: Suen said on 6/12: “… at that time [at time of sale], we had to move quickly with lightning speed and we didn’t have time enough for consideration …”. That sounded an admission for oversight!

5. What the Government missed: In negotiating the sale of the blocks to the developer, the government deleted about 20 clauses from the land lease. This presumably took into account that in a refurbishment, the flat sizes and materials used needed to be changed etc. However, these changes would also allow the developers to redevelop as long as they maintained the same number of blocks (7) with the same GFA/plot ratio at 1.55 million sq ft. The developers have obviously done their sums by now and even this option offers a good deal in today’s market. In such a case, no additional premium is going to be paid. There will only be stamp duty.

B. Why people are mad … very mad

1. Stupid government: Some are angry because they don’t like having a stupid government. Suen may have truly missed the implication of the deal made but he cannot expect people to excuse oversight and stupidity.

2. Dishonest government: Some believe the government is dishonest and that it knew that redevelopment was always an option.

3. Post-retirement interests: The former top bureaucrat in housing and lands (Elaine Chung) is now working for one of the developers. The public questions whether officials could make impartial decisions if they are thinking about what they would do post-retirement. Indeed, many top civil servants now work for developers.

C. Conclusion … open up land decisions

1. The HP developers will do what they are allowed under the lease conditions. They will understandably focus on maximizing profits.

2. The government looks like easy prey for the developers if it cannot show that it understands the effects of its own land policy.

3. LegCo should focus on the how the land system works in Hong Kong and understand its socio-economic impact. They will see that land development rights is often used as a form of subsidy for building other facilities e.g. rail, cultural facilities, etc. There is little transparency in such a system as the deals are privately negotiated.

This eNewsletter will now take its annual holiday break till the New Year. The next issue will be on the Chief Executive’s Policy Address.

Civic Exchange has written its own alternative address, to be published on 15 December at www.civic-exchange.org

CHRISTINE LOH
Civic Exchange - HK’s independent think tank
For other publications, see www.civic-exchange.org