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Behind Mickey's Mask

Beneath Mickey Mouse's innocent, happy masked face lines the very serious business of investing billions of dollars of our taxpayers' hard-earned savings. The announcement of the Disneyland project has brought with it almost instant jubilation for the Hong Kong people. Everyone seems eager to find a dream at the end of a long dark tunnel of economic depression.

The Disneyland project provides just the right ingredients: hope, colour and fun, all of which offer an attractive way to escape from our harsh and gloomy reality. The timing is also good; after much teasing and wooing, the Hong Kong public must be close to accepting almost any kind of deal, and all that seems to be required is a hard sales job to wet public appetite, followed by the ceremonial squeezing of money out of LegCo.

A huge project with an expensive price tag of HK$22.45 billion would normally deserve the most careful and thorough vetting. Such a project has a significant impact on the whole economy, i.e. Hong Kong's financial position, tourism, the environment, immigration control, infrastructure and even our cultural heritage. But in the name of efficiency and the need to clinch a 'quick' deal, LegCo and the Hong Kong public were given only less than a month to say yes or no - an almost impossible task given LegCo's constitutional obligation and composition.

First of all, the project is a huge one to consider and one that puts us under significant pressure given that our every word on the matter is being scrutinised by the press. As a result, all of us politicians have suddenly become instant experts on the Disney project and questions are being fired sporadically in all directions. However, since each legislator has to take turns to ask the Administration questions, there needs to be better co-ordination to ensure the line of questioning is more focused. The resulting situation is that questions are being easily evaded by officials who are still keeping sensitive commercial information close to their hearts.

Also, as the queue for questioning is so long, each legislator may only get a couple of chances to question officials before having to arrive at a conclusion. What all this boils down to is that legislators will only get the chance to scratch the surface of the Disney issue.

When considering the project, legislators also need to look at the numbers. However, and not surprisingly, most of the financial data is regarded as being 'commercially sensitive' by the Administration, which of course provides a useful shield with which they can fend off really tough questions. This explains why so little financial information has been made public even at the time of writing (mind-November) and even though substantial funds will have to be voted though in the near future.

When the announcement was made on 2 November 999, all we were initially told was that the estimated net economic benefit would be HK$148 billion which represents an economic rate of return of 25%. We were also given a brief summary of the project costs and of how they would be financed. The rest was the hard sales pitch to sell us the 'magical' concept behind the whole thing.

I was so dissatisfied that I instantly pressed for more detailed financial information, as well as details concerning the service contracts, the royalty arrangements and the intellectual property rights awarded to Disney. I also asked for information on the terms of the Administration's loans and the interest rates.

Furthermore, the next day I demanded the detailed basis of assumptions adopted by the Administration in projecting economic benefits and income for the joint venture. In particular, I said that the Disneyland project must not be masked by a happy face and that no 'magic' tricks should be employed when calculating the figures and preparing the financial analysis. The Administration promised to give LegCo an additional report subject to the 'secret' provisions included in the agreement with Walt Disney.

On 7 November 1999, I indicated my initial support for the project, but urged the Administration not to confuse the public on the financial implications of the project with various other economic projections which will benefit the whole economy. As a result, the Administration clearly distinguished the project's economic implications from the financial analysis presented by the joint venture company and its shareholders.

As you can see, it look me nearly a week and three separate occasions to get this simple message across: The project may be economically worthwhile for the whole economy, but there is still a significant risk of an operating loss, which will have to be borne by the public purse, on top of the funds will need to be used to build up the necessary infrastructure.

Another point is that although I accept the Administration's claim that it needed to intervene quickly in order to clinch this deal, I think the Administration should step back as soon as the project has got off the ground. This could be done by privatising its shares in the joint venture company through a tender to strategic investors and a public offering.

Preferably, all this could be done before the theme park opens to minimise the risks of an operating loss and to ensure the Administration is free from having to run a commercial business which may well compete directly with other theme parks which we may build in the future.

I have no doubt, that the Disneyland project is right for Hong Kong and we should be happy that we are the chosen destination. However, it is also an expensive venture and one that Hong Kong can ill-afford to rush into. 'More haste, less speed' should be our motto and our Administration must take responsibility for a high level of transparency and systematic explanation, especially as LegCo is fragmented and ill-equipped to deal with serious financial analysis.

It would be extremely embarrassing for the Hong Kong Government if Walt Disney tells its shareholders about the benefits and provides transparent information which tells a different story to that of the Hong Kong Administration.

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