Dateline: Hong Kong: Superman's son asked for a miracle
Wednesday 31 March 1999
Mr Li senior was a master of low tech. He made his first fortune in the Fifties by producing plastic flowers. But he soon discovered there was more money to be had in redeveloping the factories that make them.
As a property tycoon, Mr Li senior has few equals: local investors call him "superman". When times were bad, as they were in the Seventies, he showed how adversity could be turned to profit by embarking on a property- buying spree and emerging with buckets full of cash.
Times are bad again in Hong Kong so it is perhaps not entirely surprising that the government has turned to his youngest son for another miracle.
Like the rest of the world, the bureaucrats who run Hong Kong have finally caught up with the idea that high technology is the key to high levels of economic growth. They have come to this realisation rather late in the day but treat it as a truly original thought.
Looking wistfully at Silicon Valley in the US and, more recently, at hi-tech developments in Israel, the bureaucrats have decided that they want a share of the action and, this being Hong Kong, they want it now.
Mr Li junior has been brought in to develop something called a cyberport, a 858,000 sq ft prime site, described as a port because it nestles close to the shoreline. Wired up with all the latest electronic hardware, the site is planned to house 130 companies, ranging from very large organisations, such as IBM, to small, two-men-and-a-desktop type of companies which are supposed to thrust Hong Kong into the information age. It will take quite a bit of thrusting because Hong Kong is notoriously deficient when it comes to developing new technology. In 1996-97 local companies invested a mere pounds 250m on research and development, equivalent to 0.27 per cent of gross domestic product. Japanese companies at this time spent the equivalent of 0.6 per cent.
A survey conducted in 1994 found that a third of Hong Kong companies spent nothing at all on research and development, even this figure might not reflect the whole picture because very small companies were not included in the survey. Surveys do not appear to have been conducted since then, presumably the last exercise was too depressing.
Moreover, Hong Kong has a severe shortage of people with high-technology skills, probably no more than 37,000 who qualify in some way, and has an immigration policy which makes it hard for qualified foreigners to join the workforce.
However, Sir Donald Tsang, Hong Kong's ever-optimistic Financial Secretary, is confident that the cyberport "will provide quality products to upgrade our current economic activities and enable us to reach out to the limitless cyber market".
Some pounds 1bn is to be invested in the project and it is expected to create 16,000 jobs with the help of companies such Hewlett-Packard and the internet- surfing group Yahoo.
But there are aspects of this development which make some people in Hong Kong question whether any of this will really happen. For a start, there is some unease about the government dropping its traditional laissez- faire stance when it comes to the development of new industry. Hong Kong used to pride itself on the government keeping its nose out of business and letting the market decide which way the economy should go.
Now the government has decreed that high technology is the direction to take and backed its faith with an unprecedented gift of this large piece of property to Mr Li junior's Century Pacific Group.
Land is one of Hong Kong's most precious commodities. The government is the sole owner of land and usually releases it by a process of tender or auction. In this instance there was no tender and no auction.
Only Pacific Century was invited to develop the site and it will have to pay only once it starts getting payments from its tenants.
One third of the cyberport project will, in fact, be devoted to a residential property development. The idea being that property rentals will subsidise the other hi-tech occupants.
According to the government, it gave the property to Mr Li junior because his company was the only one with the resources and the sophisticated technical knowhow to get the project off the ground.
This claim is being greeted with a degree of scepticism because the part of the Century Pacific Group which has been given the land is a private company whose assets are hidden from the public domain. Its listed arm is in Singapore and contains a hotch-potch of property and insurance company holdings.
The company has no money-making operations which involve information technology but it has signed a deal with Intel, the US-based semiconductor maker. As matters stand, the signature on the contract is the most substantial part of the deal. Nevertheless, Mr Li junior talks a lot about new technology and when he set up Pacific Century in 1993, at the age of 26, he declared that it would be a holding company for high-technology investments. The only hi-tech project it actually got off the ground was an esoteric operation employing very small aperture terminal technology used to provide telecommunications links for companies in areas where telecom facilities were poor. After a couple of years, in which not a penny was earned, this company was sold off to the publicly listed Hutchison Whampoa, controlled by Mr Li senior.
Mr Li junior's company is still talking about a number of hi-tech projects: it remains to be seen whether any of them will fly. What is sure is that Pacific Century will use the cyberport to build an office block or two and a large number of flats.
No one in Hong Kong seems to remember how Mr Li senior laid the basis for his fortune. He went around persuading owners of undeveloped properties to allow him to develop for them and paid them back once he had built gleaming new edifices. Mr Li junior looks as though he is doing exactly the same, although he claims to be doing something quite different and the government is investing an awful lot of faith in him.
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