Special Report on Hong Kong: Airport plan buffeted in the storm: Philip Bowring examines how innumerable delays are endangering prospects to complete the project before power is handed over

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Indy Lifestyle Online
HONG KONG'S urgent need for a new airport is self-evident. But it is touch and go whether it will get the one that has been promised, on the largely man-made Chek Lap Kok island on the territory's south-west extremity, before 1997. The new airport construction has now, however, acquired a momentum that can only be stopped by the direst of circumstances.

The project has been subject to innumerable delays, due mainly to the political situation, but partly to doubts about its cost. It is almost two years since John Major journeyed to Peking to try to clear the way forward by signing a Memorandum of Understanding with China which theoretically commits it to support what are called the Airport Core Projects (ACP). But as a tactic in opposing political development, and otherwise asserting its rights to a say in events straddling 1997, China continues to quibble over financing.

This is not so much a problem for the government-financed parts of the scheme. If it needs, it can fund these with equity injections out of its own huge reserves into the capital of the Airport Authority, which is set to be corporatised. But private sector participation which is sought for key elements such as aircraft maintenance, baggage handling, fuel supply and in-flight catering cannot proceed if the potential private operators, who would be expected to invest some dollars 1.3bn in total, cannot get China's blessing.

At present, work on the airport itself is proceeding apace. A HKdollars 9bn contract awarded to a consortium of Japanese, British, US, Dutch, Belgian and Chinese companies of blasting, muck shifting and dredging needed to create the new airport platform is well underway. The major design work for the airport terminal, being done by a mostly British consortium of Mott Connell, Norman Foster and the BAA, is well advanced - and employing many otherwise out-of-work British architects and engineers. Contracts for the terminal should start to be awarded next year. However, unless the impasse with China is broken within six months or a decision is made to use public money to finance the private sector concessions, the opening of the airport is likely to be delayed beyond the scheduled date of early 1997 - no matter how well construction goes otherwise.

Meanwhile, the parts of the ACP directly funded by the government are going smoothly, with tenders mostly well within budget estimates. However, the total cost of the ACP - HKdollars 112bn at 1991 prices and thus some HKdollars 150bn by 1997 - continues to awe the public and raise queries from legislators.

In fact, the ACP is a misnomer. Back in 1989 when Hong Kong was thought to need some confidence building in the wake of Tiananmen, a series of tangentially related projects were bundled together into this mega-scheme of roads, railways, port facilities, bridges, reclamations and buildings now known as the ACP. In practice it is impossible to say what percentage of the ACP infrastucture relates to the airport. The roads and railways link to new ports and a new town as well as serving existing urban areas. On the other hand all, with the possible exception of the railway, are necessary to serve an airport in a hitherto remote location.

Out of the ACP total cost of HKdollars 112bn, excluding capitalised interest, the airport itself accounts for only HKdollars 43bn, of which private facility operators are expected to provide HKdollars 9.5bn. (These figures are in 1991 prices. Estimates in current costs or 'money of the day' are some 40 per cent higher.)

Other hefty items include: a new railway with both high-speed direct airport link and an additional line for the existing urban underground network priced at HKdollars 22bn; two bridges will cost HKdollars 18bn; a huge land reclamation scheme in West Kowloon will cost HKdollars 10bn; and a new tunnel under the harbour HKdollars 5bn.

The airport's finances are promising. The Airport Authority expects - thanks in part to a large hike in landing fees from current levels to what will be near the top of the international league tables - that it will be highly profitable from its first full year of operation. Repayment of debt, estimated to peak in 1997 at HKdollars 37bn, is projected by 2005. An earlier payback is on the cards if the government increases its equity from a currently projected HKdollars 16.6bn to mollify China.

(Photograph omitted)

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