Following is the background information on Hong Kong Disneyland:
Hong Kong Disneyland: Economic Benefits
* Hong Kong Disneyland will attract millions of tourists a year, create thousands of jobs, enrich the quality of life, and enhance Hong Kong's international image.
* The world-class theme park has the potential to provide Hong Kong with a net economic benefit of up to $148 billion over 40 years.
* It is estimated that attendance in the park's first year of operation will be over 5 million. This figure will gradually rise to around 10 million a year after 15 years.
* About 18 400 new jobs are expected to be created directly and indirectly on opening, rising to 35 800 over a 20 year period.
* Around 6 000 jobs are expected to be created during the construction of facilities for Phase I of Hong Kong Disneyland. In addition, some 10 000 jobs are expected to be created by the land reclamation and other infrastructural works funded by the Government.
The 'base case' scenario developed by Disney for Phase I of the theme park and evaluated by the Government puts the net economic benefit (in terms of additional value added or income over cost) at $148 billion over 40 years.
The base case is based on several assumptions, including:
* The park opens in 2005
* The park's attendance in its first year of operation is estimated at 5.2 million
* The park gradually reaches full annual capacity of 10 million after 15 years
Other more conservative scenarios (e.g. less visitors, less spending by tourists, lower usage by local residents) put the net economic benefit in a range of between $80 billion and $128 billion. Any upside scenario would, of course, make the net benefits greater.
The 'base case' estimates that 18 400 jobs will be created directly or indirectly at opening, rising to 35 800 over 20 years. More conservative scenarios put jobs created in the range of 11 400 to 17 600 in Year 1, rising to 18 100 to 28 700 in Year 20.
The number of jobs (in man-years) created during the construction phase of the theme park is around 6 000. The number of jobs (in man-years) created during the initial construction period for the land reclamation and infrastructural works funded by the Government is some 10 000.
Nearly all employees at Hong Kong Disney will be Hong Kong people. Management of the park will initially be undertaken by about 40 Disney employees from around the world. But eventually about 35 local employees will be trained to take up these management duties.
Staff training for key personnel will take place in Hong Kong and the United States. In the USA, trainees will receive hands-on experience at existing Disney theme parks.
In Hong Kong, the company will develop suitable training packages for a wide spectrum of Hong Kong Disneyland employees. A 'Disney University' will be established as part of this process.
It is estimated that Hong Kong Disney will attract 3.4 million incoming tourists in Year 1, rising to 7.3 million after 15 years.
Of those, 1.4 million (Year 1) will be 'new' or 'additional' tourists induced to visit Hong Kong because of the Disney theme park. This figure will rise to 2.9 million in Year 15.
It is estimated that additional spending by tourists will amount to $8.3 billion in Year 1, rising to $16.8 billion per annum in Year 20 and beyond.
Corresponding figures for more conservative scenarios range from $5.5 to $7.8 billion in Year 1, to $8.7 to $12.9 billion in Year 20.
The Disney theme park and resort will cost an estimated $14.1 billion to build, which represents a new injection of capital expenditure into the local economy. The resulting generation of income and employment will also benefit the economy.
Hong Kong Disneyland : Financing and Development Costs
Park Developer and Operator
Hong Kong Disneyland will be built and operated by a new joint-venture company - Hong Kong International Theme Parks Ltd (HKITP) - to be formed by the Hong Kong Special Administrative Region Government (the Government) and The Walt Disney Company (Disney).
The Government will own 57% of the shares in the company initially, while Disney will own 43% of the shares.
Total equity of the company will be $5.7 billion, of which the Government will inject $3.25 billion (3.25 billion shares @ $1 a share) and Disney will inject $2.45 billion.
It is envisaged that third party investors may be interested in investing in HKITP in the future. This will allow the Government and Disney to sell down their shares.
However, Disney will be required to hold a minimum of 1.9 billion shares in the project.
The Government will not be subject to a minimum holding requirement after the park's opening.
Dividends will be paid to shareholders pro rata from operating profits when business results permit.
The estimated cost of building Hong Kong Disneyland is $14.1 billion.
This will comprise $8.4 billion in debt (including capitalised interest) and $5.7 billion in equity for an optimal debt-to-equity ratio of 60:40.
The debt component will comprise a $5.6 billion government loan#, repayable with interest over 25 years, and $2.3 billion in commercial loans.
# denotes: including capitalised interest of $0.5
billion, total Government debt will amount
to $6.1 billion
The Government loan will be repaid with interest over 25 years. To help the project in its early years, the government loan will be offered at a sliding scale:
During construction and for the first 8 years after opening: Prime less 1.75% (i.e. 6.75%)
For the next eight years: Prime less 0.875%
For the next nine years: Prime
The reason for raising only a quarter of the debt component in the open market is because projected cash flows in the early years of operation can only prudently cover that amount.
Supporting Infrastructure Costs
The Government will spend $13.6 billion on major infrastructure works including roads from North Lantau to Penny's Bay, two public ferry piers, transport interchanges, police posts, a fire and ambulance station, drainage and sewage works and the formation of the 280 hectare site. A special feature of the area will be a water recreation centre including a large lake which will also serve as an irrigation reservoir.
Much of the infrastructure would have formed part of the Government's capital works programme to prepare the site for tourism and recreation development even if a Disney theme park and resort were not being built.
Hong Kong Disneyland and associated Disney themed hotel, retail, dining and entertainment developments will occupy about 126-hectares of the site for Phase I. This can be expanded to 180 hectares at a future date.
Extensive landscaping will be carried out to eliminate visual intrusion into the theme park. Existing facilities such as the CLP Power Station and service areas will be screened by a combination of artificial embankments (called berms) and trees.
The land premium for Hong Kong Disneyland Phase I is $4 billion, the estimated pro rata cost of reclamation and land formation.
HKITP will settle the premium by issuing $4 billion worth of subordinated equity shares to the Government. The shares attract no dividend, initially, but are convertible to ordinary shares in the company at a progressive rate depending on operating performance.
Conversion of the shares can begin only after five years of operation of the park. The conversion ceiling will rise by 5% per annum, with maximum conversion in any one year capped at 10% to avoid undue equity dilution for other shareholders.
Full conversion of the subordinated shares can, therefore, take place 25 years after Hong Kong Disneyland has opened.
The land lease will run for 50 years, with right of renewal for a further 50 years.
There is an option, valid for 20 years after opening (and subject to extension in certain circumstances) to buy the Phase II site for $2.8 billion (1999 price to be escalated in accordance with inflation).
A New Era in Hong Kong Tourism
The building of Hong Kong Disneyland will herald a new era for Hong Kong's tourism industry, a mainstay of the economy. In 1998, tourism contributed 4% to GDP.
The $14.1 billion project is a key component of a renewed and reinvigorated push to strengthen and consolidate Hong Kong's position as Asia's most popular international destination. Hong Kong Disneyland will be the 'jewel in the crown' of a new 280-hectare tourism, recreation and entertainment district to be developed at Penny's Bay on Lantau Island.
The Government, in consultation with the Hong Kong Tourist Association (HKTA) and the tourism trade, has adopted a three-pronged strategy to rejuvenate the tourism sector:
* Promote Hong Kong as a key tourist destination
* Enhance the attractiveness of Hong Kong
* Facilitate entry of visitors
Important decisions have been taken to achieve this goal. Among them :
* The appointment in May 1999 of a Tourism Commissioner to provide a clearer focus for, and greater co-ordination of, tourism policy, projects and initiatives.
* A $100 million loan to the Hong Kong Tourist Association to support the staging of a variety of international events in Hong Kong over a five-year period.
* Streamlined entry requirements for visitors from the Mainland, Taiwan and Russia.
A number of other projects are being taken forward or are under consideration to enhance Hong Kong's attractiveness as a destination and to broaden the range of facilities and tourism experiences available in Hong Kong.
* An international wetland park at Mai Po Marshes in northwestern New Territories
* A new world-class performing arts venue in Kowloon
* A cable car system on Lantau Island, linking Tung Chung to the Big Buddha
* A $500 million 'Adventure Bay' attraction at Ocean Park on Hong Kong Island
* Development of a "Fisherman's Wharf" in Aberdeen
* New waterfront promenades on both sides of the harbour
* Improvements to tourist attractions in Central and Western
Greater emphasis is also being placed on attracting convention and exhibition business to Hong Kong, which boasts some of the best facilities in the world for such events. This type of visitor tends to stay twice as long and spends three times as much as a leisure visitor. The HKTA is also trying to develop the cruise market to attract high-yield visitors.
Arrivals and receipts
In 1998, tourism receipts totalled $55 billion. Taking into account the business generated directly and indirectly for different sectors of the economy, this contributed 4% to GDP. Tourism receipts in the first half of the year amounted to $25.2 billion.
Tourism arrivals have been growing healthily in the past year, following a significant drop in 1997 and 1998 due to the Asian financial turmoil.
For the first nine months of 1999 there were 7.7 million visitor arrivals, an increase of 11 per cent over the same period in 1998. The HKTA estimates there will be 10.4 million visitor arrivals this year. The majority of visitors come from the mainland of China (27%), Taiwan (19%), Japan (10%), South and Southeast Asia (12%) and the USA (8%).
End/Tuesday, November 2, 1999