PSW(Ag)'s speech at the 2nd Annual Public Private Partnerships Asia Summit

Following is the speech by the Acting Permanent Secretary for Works, Mr Clement Cheung,
at the 2nd Annual Public Private Partnerships Asia Summit today (May 25):

Distinguished guests, ladies and gentlemen, friends and colleagues,

I feel deeply honoured to have the opportunity to speak at the 2nd Annual Public Private Partnerships Asia Summit, to give you a broad overview of our public works policy, and to explore the potential for Public Private Partnership, often referred to as PPP, to be adopted more widely as an alternative procurement model in the local context.

Capital Works Programme

From a macro perspective, we are committed to maintaining a steady flow of investment on infrastructure facilities essential for the long-term development of Hong Kong and have pledged to spend an average of HK$29 billion for this purpose each year.

In the 2004-05 financial year, most public works projects have progressed smoothly.  The revised estimate of total expenditure amounts to HK$32.1 billion, slightly over the actual outturn of HK$31.4 billion the year before.  Quite a number of major items including infrastructure works for the Hong Kong Disneyland, Hong Kong-Shenzhen Western Corridor and Deep Bay Link are about to be completed.  But given an accelerating pace of Pan-Pearl River Delta regional cooperation and sustained recovery of domestic economic activities in Hong Kong, we are identifying new projects for injection into the programme such as road linkages connecting with the Hong Kong-Zhuhai-Macao Bridge, Kai Tak Development, reconstruction of Tuen Mun Road as well as remaining stages of improvement, replacement and rehabilitation of water mains.

In light of rising public aspirations for greater efficiency and responsiveness, we have implemented measures to enhance the project delivery and procurement process.  Non-contractual partnering has been incorporated into selected public works projects since 2001 to improve communication and eliminate adversarial cultures, trial use of voluntary adjudication and Dispute Resolution Advisor is being pursued to speed up settlement of claims.  Finally, the Public Works Programme Information System launched in late-2004 will enable us to monitor progress of works in a timely and effective manner.

PPP for Public Works Projects

The business community in Hong Kong is renowned for its venturous and enterprising spirit.  It is therefore entirely logical that the Government should take a back seat as far as possible, leaving the market to determine an optimal way to deliver different products or services.  Previous experience has shown that capital and talent in the private sector perform at their best when allowed to harness the entire cycle of design, construction and management.  Seen in this context, PPP provides a suitable dose of incentive for new technologies and innovative ideas to enhance productivity, to facilitate transfer of knowledge and to keep up the momentum of infrastructure spending without imposing too much strain from a fiscal angle. 

To the contrary of what many are led to believe, PPP is not a novelty at all to Hong Kong.  The Build-Operate-Transfer model has been widely adopted in tunnel projects since the 1970's, while the Design-Build-Operate model has been a common choice for the provision of waste transfer stations and strategic landfills.  We think the time is right for us to reach out into other public facilities like water and sewerage treatment plants as well as recreational and cultural facilities.  With your indulgence, I would like to focus on one or two projects that fall under the policy purview of my bureau.

In-situ Reprovisioning of Sha Tin Water Treatment Works

Commissioned in 1964, the Sha Tin Water Treatment Works is the largest facility of its kind in Hong Kong, boasting a nominal capacity of over 1.2 million cubic metres of water a day catering for about 40% of total water demand in the territory.  We intend to reprovision this facility on an in-situ basis at an estimated capital cost of over HK$6 billion.

In order to explore the feasibility of PPP, we carried out a consultancy study to ascertain the business viability and possible modes of delivery for this project.  The findings made in mid-2004 concluded that use of PPP is feasible and beneficial, supported by numerous successful cases in other countries.  Furthermore, a preliminary market enquiry exercise has drawn encouraging responses from multi-national service providers with strong track record and management capabilities. 

There is understandably concern among the affected staff on their job security and career prospect.  We have been working closely with senior management of the Water Supplies Department to dispel misconceptions, stressing that there will be no forced redundancy nor repercussions on future role of the department, while reiterating that PPP is no more than an alternative procurement model.  Needless to say, we must convince the community at large and the Legislative Council that the bidding process will be transparent and competitive, and that the quality and reliability of our water supply will be carefully safeguarded.

Harbour Area Treatment Scheme

The Victoria Harbour is undeniably an icon of Hong Kong that takes up a special place in our hearts.  This is perhaps not too surprising if one looks back in time to the 19th century when 2,000 out of a tiny local population of 3,700 were fishermen whose fortune rested with the same deep and calm harbour that later transformed Hong Kong into a regional trading hub.  Tourists and local folks alike nowadays admire the Victoria Harbour for its glamour - after all, this is how the famous title "Pearl of the Orient" came about. 

However, the environmental health of Victoria Harbour has not fared as well as its international fame.  The wastewater pouring relentlessly into it each day has taken its toll and extinguished most marine life.  It is for this reason that some HK$21 billion has been spent since 1991 to bring 95% of our population under the coverage of sewerage and sewage treatment facilities (note).  But this is not enough.  

Stage 1 of the Harbour Area Treatment Scheme, or HATS in short, was fully commissioned in December 2001 at a capital cost of over HK$8.4 billion.  This project comprises an intricate network of deep underground tunnels sprawling over 23 kilometers before connecting to a treatment plant at Stonecutters Island boasting a daily processing capacity of 1.4 million cubic metres.  It gobbles up some 75% of sewage generated in areas around the Victoria Harbour, out of which it eradicates 70% of organic pollutants and 80% of suspended solids, thus reducing toxic ammonia by 25% and E.coli by 50%.  For those who are less familiar with scientific jargons, suffice to say that it helps to keep some 600 tonnes of sludge off our harbour each day.

Ironically enough, the promising outcome of HATS Stage 1 is exerting pressure upon us to do even more.  As a result, we are forging ahead with HATS Stage 2 in two separate phases costing HK$20 billion.  HATS Stage 2A involves construction of deep underground tunnels to capture the remaining 25% of sewage generated around the harbour as well as expanded processing capacity of up to 2.8 million cubic metres per day; HATS Stage 2B envisages the introduction of biological treatment intended for the long-term.

Pillar Point Sewage Treatment Plant

Apart from HATS, we must upgrade our sewage treatment plants to cope with population movements and growth.  One typical case is the Pillar Point Sewage Treatment Plant, for which HK$800 million has been earmarked to provide chemical treatment plus disinfection for over 240,000 cubic metres of sewage per day.

Subject to preliminary planning and investigation, we intend to implement HATS Stage 2 and upgrading of the Pillar Point Sewage Treatment Plant through some form of PPP.

Way forward

To conclude, there is a wealth of knowledge around the world on the practical application of PPP.  Although we should not become overwhelmed by the successful stories, it is equally important that we are not daunted by the more challenging examples.  This Summit provides an excellent platform for exchange of ideas and networking between key stakeholders, and I would like to wish everyone of you a productive and rewarding experience.

Thank you.

End/Wednesday, May 25, 2005

Note : In terms of treatment levels, 17% of our sewage received biological treatment, 53% received chemical treatment while the rest is discharged via deep outfalls after preliminary treatment.