Hong Kong – Western Harbour Crossing Preliminary Findings from HLR Interviews Frederik Pretorius, Rachel Ng, Billy Kwan The University of Hong Kong April 2009 Hong Kong: WHC – A Reminder • Proposed early 1990s, in the last few years of colonial government in HK pending return to PRC sovereignty in 1997. • Originally proposed as a stand-alone project, later identified as one of the 10 infrastructure project in the Airport Core Program (ACP) • 2 km dual three-lane immersed tube road tunnel, developed as a privatised tolled tunnel (BOT), controlled by Citic Pacific (also controls Eastern Harbour Tunnel, with Cross-Harbour Tunnel controlled by the HKSAR Government) • Part of HK’s “Strategic Road Network” (see next slide). Hong Kong: WHC – A Reminder • Hong Kong has an “executive-led government” (before and after 1997), tempered in an important way by the (partly representative) Legislative Council – FINANCING. • As a standalone BOT, WHC’s rights are contained in law, with its own Ordinance, containing a generous “toll adjustment mechanism”, ensuring beneficial toll adjustment flexibility. • WHC has underperformed since its opening, carrying around half its capacity and only turning an operating profit ten years after opening (1997). • Very important external shocks: Asian Financial Crisis (1997-1999) and SARS crisis (2003). HKSAR Government’s budgetary crisis, 1999-2004,5. WHC: Major Road Network in HK HK Western Harbour Crossing Connects western part of HK Island with West Kowloon Aerial View of WHC Overarching Questions - Q1: Project Success • Depends on definition of ‘success’ • Generic Criteria: - Meet objectives - Beneficial to & acceptable by the public - Clear “demand/necessity” for the MUTP - Affordable to & Accessible by the public - Accountability - Economically sustainable (“financial”) • WHC is successful in terms of: - Meeting its main objectives (strategic link: airport and network) - Congestion: alternative is/was the ‘do-nothing’ scenario, traffic congestion would be worse • WHC is not successful in terms of: - Financial feasibility (BOT), toll levels, competition between tunnels - Its potential to facilitate urban development is/was not (fully?) utilised - Reducing traffic congestion Overarching Questions - Q2: Project Appraisal and Evaluation The Most Important Appraisal and Evaluation WHC Criteria for a MUTP: Meeting objectives ü “Correct” traffic forecasts û Difference between having & not having the MUTP ü Environmental & social impacts ? Engineering/technical feasibility ü Financial viability û Sustainable development concerns ? Operational mechanisms (BOT & TAM) û Overarching Questions - Q3: Main ‘Sustainability’ Considerations • Sustainability important? YES! Sustainability considerations should play a major role in MUTPs • The term ‘sustainability’ was not used at the planning stage of WHC, but the principle was not ignored • The government did consider environmental, social and economic impacts of WHC, but not within today’s context of more comprehensive impact assessment • Public participation/involvement was absent Overarching Questions - Q4: Project Decision-making Process: Important Actors and Factors THE CRITICAL IMPORTANCE OF 1997: THE POLITICAL DIMENSION • Actors: - Government (both British Colonial & Chinese) - Legislators - The community - The operator of the MUTP • Factors: - The need for the MUTP – airport rail link and traffic congestion (public interest) - Power of the executive-led government - Public engagement - Competition – or lack of it Overarching Questions - Q5: Sources of Project Risk, Uncertainty & Complexity • Risk: - Traffic forecast (and all sorts of projections) - Financial risk - Political risk • Uncertainty: - Everything had an element of uncertainty about the future: e.g. the overall economy, the company’s profile, traffic flow, progress of other associated projects • Complexity: - Competition among the 3 cross-harbour tunnels - Integration with other infrastructure Overarching Questions - Q6: Important/influential aspects of Project Context • Generically important: political context and public participation/acceptance of process • For WHC: political context of HK - the use of public funds - obtaining consensus about the necessity for a MUTP - change of policy following transitional period was certainly not adequately considered • Influence of the Mega-event: transfer of sovereignty over HK back to PRC in 1997 drove everything Hypothesis 1: Privatisation at all costs • The economic rationale for WHC was driven by a narrow adherence to "New Public Sector Management" principles, with private sector provision of public infrastructure (with supporting planning, appraisal and financing mechanisms in government). Hypothesis 1: Findings • Nothing wrong with BOT because: - Fair: ‘users-pay’s’ principle - Functions to minimise the government’s financial burden - HK’s government encourages competition and market- driven development • Economic/financial risk transferred to private sector – and political development since then? (See Hypothesis 3). - Private Sector took the risk, and has to bear it; but some considered the risk to have been transferred in the opposite direction (expectation of a “buy-back”). • ∴ Projects should be privatised if possible but not at all cost Hypothesis 2: WHC A product of a compartmentalised government • WHC is not successful because the Government failed to plan and develop transport infrastructure and land uses strategically and in an integrated fashion; nor did the Government consider sustainability issues in planning this infrastructure investment. Hypothesis 2: Findings • Values of the society & the environment of HK changed over time - There was comprehensive planning of the strategic transportation network, but social and political values changed when it came to the implementation stage (see Hypothesis 3). • Sustainable development concerns and urban regeneration could have been, but were not considered a priority at the WHC planning stage Hypothesis 3: WHC - “Victim” of a politicizing society & challenges to government-led planning & development • The WHC project outcomes can be best explained by the social, economic, political and institutional forces and influences that were at work in HK pre-1997 at the time of planning and developing WHC, and how that context rapidly changed (and continues to change) to a set of circumstances reflecting more active community engagement in developmental issues and which is mounting significant challenges to the institution of “executive-led governance”. Hypothesis 3: Findings Pre-1997 era Post-1997 era Public Economic prosperity SD, political/civil rights, concerns cultural, conservation Decision- Same procedures, same decision-making making actors, same set of powers process Shorter period Longer period Public Less More involvement Impact More detailed and in Less detailed assessment wider perspective NOTE: This does not necessarily suggest the pre-1997 era government worked less effectively than the post-1997 era government The Four Tests – Test 1 Analysis of achievements of project against objectives • Objectives of WHC: – Alleviate traffic congestion – Divert traffic from the other 2 tunnels – Direct link to the airport • Project Time • Project Budget • Forecasts (finance + traffic flow) The Four Tests – Test 2 Analysis of achievements of project against identified visions, challenges & issues of sustainable development • Any contributions to SD in terms of: - economic - environmental - social - institutional The Four Tests – Test 3 Analysis of achievements of project against successful treatment of risk, uncertainty, complexity & context in decision-making • Identify RUC and Context of WHC • Treatment of RUC in WHC? • Are lessons learned in WHC generic or context- specific? The Four Tests – Test 4 Synthesis of findings of analysis of tests 1-3 • Extract decision-making lessons & guidelines for future MUTPs and for retrofitting existing MUTPs Hong Kong – Western Harbour Crossing Preliminary Findings from HLR Interviews Frederik Pretorius, Rachel Ng, Billy Kwan The University of Hong Kong April 2009 .