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Speech by the Secretary for Housing, Planning and Lands, Mr Michael Suen, in a motion debate on review of land policy

Following is the speech by the Secretary for Housing, Planning and Lands, Mr Michael Suen, in a motion debate on review of land policy moved by the Hon Abraham Shek at the Legislative Council today (June 16):

President and Members,

The Hon Abraham Shek's motion today, in brief, urges the Government to review its policy of using land resources to subsidize commercially operated infrastructural projects. It also demands the Government to supply land through market mechanism and the principle of fair competition. The amended motion by the Hon Ip Kwok-him requires the Government to, apart from reserving sufficient land for public housing development, reserve land for other developments compatible with the public interest. Hon Wong Sing-chi's amended motion proposes that commercially operated infrastructural projects involving land grants should be subject to LegCo's approval. Today's debate involves topics that are rather technical and complex, including Government's normal land grant policy and the arrangements for financing infrastructural projects by means of land. I wish to take this opportunity to explain and clarify the issue.

Land Policy

First of all, I wish to explain the source of authority and legal basis of Government's land policy. Article 7 of the Basic Law provides that "The land and natural resources within the Hong Kong Special Administrative Region (the SAR) shall be State property. The Government of the SAR shall be responsible for their management, use and development and for their lease or grant to individuals, legal persons or organizations for use or development. The revenues derived therefrom shall be exclusively at the disposal of the government of the Region." The Chief Executive and officials authorized by him discharge the duties stated in Article 7 of the Basic Law, including leasing land in Hong Kong, on behalf of the Hong Kong SAR Government. It could thus be seen that it is legitimate for the SAR Government to exercise the authority to grant land. This is in accordance with the Basic Law and should not be construed as Government's mere administrative act.

As to considerations relating to land grant, given the scarcity of land in Hong Kong and in order to fully utilize such precious natural resources, land use planning is determined in accordance with society's development needs. Government will then develop the planned uses having regard to the resources available and development priorities, or will lease the land to individuals, legal persons or organizations for their use or development. The above aims to optimize land uses and promote economic development with a view to enhancing the living environment for the Hong Kong citizens. It could thus be seen that land grant arrangements often need to be in line with the development of Government's other policies in order to maximize the benefits to the community. I believe it is more meaningful to make clear the essence of land grant arrangements before looking at the motions by Members.

It is the view of some commentators that Government fails to follow fully the principle of fairness in the grant of land in certain areas. I need to emphasize that such a comment is unfair to the Government. Nor does it tally with the facts. The Government's land allocation policy has always been based on the principle of fairness and transparency. We have been granting land mainly through open bidding (such as land auction and tender) for commercial, residential and other private developments. The land goes to the highest bidder. The price at which the land is sold reflects the prevailing market value of the land concerned. It is Government's policy that we will not sell land at a pathetic price.

Apart from open bidding, the Government also grants land by way of private treaty to non-government or private organizations under certain circumstances. This method of granting land has been in use for a long time for the purpose of meeting social needs. It is mainly adopted for land devoted to community use or for public utility purposes. Examples include non-profit making community uses such as schools, welfare and charitable organizations, as well as land for essential public utility services like power station. The arrangement of direct land grant to these service providers for the related purposes is appropriate and in the public interest. Level of land premium charged on such direct land grants depends on the uses of the land. For example, nominal or concessionary premium will normally be charged for community uses because of their non-profit making nature. For commercial land uses (like power station), full market premium will still be charged. Criteria for direct land grant are set according to relevant polices approved by the Executive Council. Department responsible for land allocation cannot act according to its own wishes. Instead, relevant criteria and policies must be followed to ensure the land grant arrangement is in line with Government's relevant policy objectives. This practice has a long history and has won public recognition. It is also simple, transparent and fair.

The above spells out the general land disposal arrangement and land policy. If an organization proposes to Government a development project involving land grant for which there is no precedent or which falls outside any type of land grants mentioned above, the relevant policy bureau needs to consider each and every such proposal carefully. In general, consideration will be given based on certain basic principles, such as whether the proposal complies with approved government policies or will assist to meet pre-determined policy objectives; the assessed economic and other benefits, the strategic importance or otherwise of the proposal; whether it is the right timing, and the ability of the applicant in implementing the proposal, etc. If the relevant policy bureau considers that the proposal meets these principles and there are sufficient policy grounds to justify the development plan, including the land grant arrangement involved, it will need to submit each and every relevant proposal to the Executive Council for approval before the plan can be implemented.

It can be seen from the above arrangements that Government will definitely not allow disorderly development of land. All land grant arrangements have policy justifications and objectives. Land supply has followed an established strict mechanism to ensure that all infrastructure and developments undertaken comply with the public interest. In this regard, we have already met the land disposal principles put forward in the Hon Abraham Shek's original motion and in the Hon Ip Kwok-him's amended motion.

Financing Arrangements for Infrastructural Projects

I now turn to the original motion in which Government is asked to review the policy of giving subsidy in the form of land to commercially operated infrastructural projects, and the request made in the Hon Wong Sing-chi's amended motion that commercially operated infrastructural projects, including certain land grant items, be subject to LegCo's approval. Both of them consider the proposals made could achieve the principle of fair competition, maximize financial gains for the community and maintain market stability.

As the original and amended motions involve a number of topics, I think we must not mix them up. First, it is inappropriate for the Hon Wong Sing-chi to mix up land grant arrangements and infrastructural projects. Land grant is just one of the steps in carrying out infrastructural development. Moreover, as I said in the beginning, the authority to grant land is conferred on the Chief Executive by the State through the Basic Law. The Chief Executive and the relevant officials need to discharge the duties stipulated in the Basic Law and fulfill the responsibility of granting land. It is not the function of the LegCo.

Regarding the request put forward by the Hon Wong Sing-chi, we consider it unnecessary for commercially operated infrastructural projects to be subject to LegCo's approval. At present, all infrastructural projects financed by public funds are subject to scrutiny by LegCo through such mechanisms as that for approving the Budget as well as via the Finance Committee. The LegCo thus has an active role to play in this respect. As regards infrastructural projects operated purely on a commercial basis, there is indeed no ground for them to be subject to LegCo's approval.

Some Members view the financing arrangements for infrastructural projects involving land grant as comprising an element of Government subsidy and take it as part of the "land disposal policy". I find it arguable to discuss this issue in such a manner. A limited number of infrastructural projects by public corporations involve the grant of land by the Government for property development. This is part of the financing arrangement of the projects concerned. The policy referred to in the Hon Wong Sing-chi's amendment is not a land grant policy, but a financing arrangement between the government and the public corporations concerned (e.g. the two railway corporations).

Railway Projects

I wish to point out that both the two railway corporations operate in accordance with prudent commercial principles and do not need any government subsidies for their operation. However, in considering the financing arrangement for new railway projects, the Government will consider whether financial assistance should be provided having regard to the circumstances of individual cases, so as to ensure that maximum benefits for the public will be achieved from railway development. Only when the concerned capital works are of substantial benefits to the public (e.g. alleviating traffic congestion problems) will the Government consider to provide subsidies. The Environment, Transport and Works Bureau is responsible for studying and ascertaining the traffic needs and transport efficiency. In the light of such study, the Financial Services and the Treasury Bureau will decide whether, and if so, in what form, subsidies should be provided to allow the railway projects to comply with the principles of commercial operations.

The planning for railway projects and that for related property developments are often proceeded in parallel, mainly for the reason that property developments will bring about a stable source of patronage for the railway service. Planning railway projects together with the related property developments will bring about a major synergic effect, making the railway projects more cost-effective.

In considering the proposed merger of the two railway corporations, Government will study the financing arrangements for future railway projects at the same time. In this regard, the Government will certainly study and review these issues in detail and make appropriate arrangements.

West Kowloon Cultural District

It is mentioned in the Hon Abraham Shek's motion that the West Kowloon Cultural District (WKCD) Development Project involves substantial subsidy in the form of land. I must clarify this matter. As we have clarified time and again publicly, Government's policy is to develop world-class arts, cultural and entertainment facilities on this piece of land in West Kowloon and, at the same time, promote Hong Kong's status as a cosmopolitan city. However, the experience of other countries is that the development and operation of arts and cultural facilities may not be profitable. The Government is required not only to provide the funding for the development of these facilities, but also take the risk of sustaining on-going losses. In view of the above, the Government has decided to adopt an integrated approach for the development of WKCD by including commercial facilities in the project. It is hoped that the private sector, with their business know-how and experience, can develop and operate the whole District in a self-financing mode.

In fact, this is not the first time that the Government has joined hands with the private sector in pursuing large-scale projects. For instance, a similar approach was adopted in 1984 when a site in the Wanchai Reclamation Area was granted to the Trade Development Council for the development of the Hong Kong Convention and Exhibition Centre, and the adjoining hotel, commercial and residential facilities. More recently, in order to enhance the convention and exhibition facilities in Hong Kong, a joint-venture agreement was signed between the Government, the Airport Authority and a private consortium in August 2003 to construct an international exhibition centre at Chek Lap Kok.

I wish to point out here that Government makes no promise in the Invitation for Proposals (IFP) for the Development of the WKCD that land will be granted unconditionally for the project. On the contrary, it is clearly stated in the IFP that details on the form and projected amount of payment concerning various fees and charges including land premium, shall be included in the proposals. Proponents need to take into account the impact that such payments to the Government will have on the returns generated from the project. Thus, the land within the development zone of the WKCD shall in no way be seen as a kind of Government subsidy for the project.

Conclusion

The Government has all along adhered to the principles of free market and fair competition, with policies formulated according to those principles. The existing land disposal policy has been in use for years. Under this policy, we put up sites for open bidding and grant them to the highest bidders. This is a fair and reasonable arrangement.

Where the granting of land is to facilitate certain government policies in order to maximize social benefits, each land grant arrangement will be given careful consideration by the relevant policy bureau and departments. "Disorderly development of land" would not occur. Government's land policy is very clear and is in line with Members' demand. It follows the free market principle fully and is operated in an open and fair manner.

Thank you, President.

Ends/Wednesday, June 16, 2004

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