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The Government today (Tuesday) dismissed allegations that the Cyberport project is a deal aimed at favouring the Pacific Century Group (PCG).

Responding to media reports, a spokesman for the Information Technology and Broadcasting Bureau stressed that direct negotiations with PCG was an acceptable arrangement.

He explained that development of an attractive Cyberport would require partnership with leading-edge information technology and services companies. However, these companies do not normally enter into large scale property development, let alone a tendering process for such development. PCG is one company which is willing to take on the risks and act as the anchor tenant.

Secondly, he continued, there is the question of time. "We need

to move quickly to compete with other emerging information and telecommunication centres if we are to develop Hong Kong into a leading IT and services centre. A tendering process will cause delay and will not necessarily produce the desired results.

"Thirdly, and extremely important, PCG is able to help market the Cyberport to our target tenants by first, becoming an anchor tenant through its joint venture with Intel, and second, getting other leading IT and services companies to become anchor tenants as well. The last thing we want is for a white elephant to be built and no target tenants are interested.

"Under the present arrangement, we can be assured of a quality development, minimum Government outlay, and firm interest from the preferred information technology and services companies to move in as anchor tenants," the spokesman said.

So far, seven such companies (in addition to PCG itself through its joint venture with Intel) have, through the efforts of PCG, signed letters of intent to become anchor tenants at the Cyberport.

The spokesman also stated that the Cyberport project is a strategic infrastructure project and not a property development.

In terms of hardware, the project provides intelligent buildings, the best telecommunications and information infrastructure, shared IT facilities for tenants. In terms of software, it creates a critical mass of talents which only top IT companies can provide.

"The property development associated with the Cyberport is only a means to achieve this outcome," the spokesman said, adding that companies without a strong IT background will not be able to meet fully the Cyberport requirements.

PCG, as co-developer and anchor tenant, will design, construct and fund the development. The Government will be the sole owner of the Cyberport (including the land, the buildings and the facilities thereon) and will receive all the rental from the Cyberport.

"This means the developer will meet the full construction cost, and take on the commercial risks. Its only source of profits is from the ancillary residential development which is necessary to help finance the project," the spokesman said.

"The Cyberport will be completed by phases from end 2001/early 2002 to 2003 whereas the residential development will only be completed by phases starting in 2003.

"Before profits are shared between PCG and the Government on residential development, $200 million will be set aside for a Cyberport Development Fund. The present thinking is that the developer would act as a long term management agent for the Cyberport including marketing of the facilities to IT firms".

"Return to the developer will depend on the construction cost, the value of the land (to be determined at the time of grant of development right), sale prices of the flats and the mode of financing. Our assessment is that the return would be less than that achievable in normal property developments".

The spokesman also pointed out that there was no secrecy over the gross floor area of the Cyberport. In fact, the Secretary for Information Technology and Broadcasting had already clarified at the press conference on 5 March and the LegCo Information Technology and Broadcasting Panel meeting on 8 March that the plot ratio of the ancillary residential development was between 3 to 4. "The current figure is 3.8," he added. Details concerning gross floor area, plot ratio, layout of the development will be put to the Town Planning Board by the end of this week.

Lastly, the spokesman said the Government had not received similar proposals from the private sector before announcement of the Cyberport project. But Government would be prepared to sell its share of equity interest in the residential development to third parties who may be interested.

"Such purchase would entitle the purchaser to a corresponding share of the net profits, but not to participation in the design, construction and management of the project," he added.

END/Tuesday, March 16, 1999

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