In examining the development options for the North West New Territories, Government's consultants have reached the conclusion that, from a long term development point of view, the preferred strategy is a linear SE-NW axis of development stretching from Yuen Long to Deep Bay, together with reclamation down the coast towards Nim Wan, as against a SW-NE axis proposed by the developers for Tin Shui Wai (see plan at Annex G). Nevertheless, in all the options considered by the Government consultants, the developer's current land holding of 488 hectares at Tin Shui Wai would be at the core of the preferred axis. This area falls within phases 1 and 2 of the developer's proposals. Phase 3 extends the development to the north-east and is thus undesirable on planning grounds, as well as requiring modification for flood control reasons as noted in paragraph 48 above. For these reasons alone it is seen that the project would need to be extensively replanned if it is to go ahead,
The Respective Roles of Government and the Private Sector
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New town development in the initial phases is seldom a profitable undertaking as :
(a)
(b)
during the initial development period of up to 10 years, heavy front-end investment is required in land acquisition and clearance, land formation and the provision of major infrastructure;
cost escalation, market trends, general economic fluctuations, labour conditions, resource availability, etc., cannot be predicted with any degree of certainty on a long term basis and, for these reasons, the realisation of a positive cash flow may be frustrated by unavoidable interruptions to development programmes.
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For these reasons, the usual and preferred practice is for Government to undertake basic new town works and to spread the risks of investment by splitting development into packages so that at any point of time works can be suspended or deferred in the light of prevailing economic circumstances and other priorities. Within each package, formed or unformed sites provided with basic infrastructure can be made available to the private sector for development within a limited time period, thus minimising investment risks.
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T
In the case of Tin Shui Wai, however, the roles of the Government and the private sector would be virtually reversed, with the developer taking most of the heavy early financial risks and with no fall-back position except to seek support from public revenues should progress be delayed. To achieve the necessary financial backing for the scheme it is essential for the developer to guarantee a break even position in 10 years and a 15% rate of return within 18 years. This, in turn, requires uninterrupted development which, under "normal" Hong Kong conditions, seems to be a doubtful assumption unless Government were to underwrite the scheme, even to the detriment of other priorities.