Reuters Announcement

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Updated 12:39 AM ET November 1, 1999 By Stephen Weeks

HONG KONG (Reuters) - Hong Kong looks set to land its dream deal with The Walt Disney Company to build a multi- billion-dollar theme park and tourist complex in this special administrative region of China.

Analysts said the Disney park, which will take five years to complete, would give Hong Kong a psychological boost rather than provide a quick fix for its struggling economy.

"It may be good for hotels and tourism and it may have some spillover effect," said ABN Amro economist Eddie Wong. It would also give a "feel-good" sentiment to the Hong Kong stock market. Hong Kong government spokesman Stephen Lam said Monday that talks with Disney had been completed and an announcement would be made later in the day.

He gave no details on the outcome of the negotiations, begun in March, but he said a series of briefings would be held this week, indicating a deal had been done. It would be the second Disney theme park in Asia, with the other in Tokyo.

"We have completed our negotiations...Tomorrow there will be a series of briefings at Government House," he told reporters. At the Tuesday meetings, negotiators are expected to brief Chief Executive Tung Chee-hwa and the media on the Disney deal, which is likely to include two theme parks at Penny's Bay on Lantau Island.

The site, minutes from Hong Kong's new international airport, is expected to boast several hotels and restaurants, and a nightlife entertainment area similar to "Downtown Disney" at the flagship Florida resort complex.

HONG KONG NEEDS DISNEY MAGIC

Unconfirmed newspaper reports said Disney would invest US$200 million to US$250 million in the theme park-resort and the Hong Kong government would invest about US$2.5 billion in the project.

Hong Kong, struggling to emerge from two years of economic hardship, could use some Disney magic. Its economy has been battered by the Asian financial crisis, contracting 5.1 percent in 1998 and expected to growth only a modest 0.5 percent in 1999.

Unemployment, at 6.1 percent, is near record levels.

"It will boost Hong Kong's GDP but I think the question is whether it's a good investment," Wong said. "It really depends on what the costs are. How much the Hong Kong government will pay," he added.

Newspaper reports have said the project will cost about HK$22 billion (US$2.83 billion), or about 1.7 percent of GDP in 1998. Spread over four years, the Disney project's contribution to GDP will be 0.4 percent a year, analysts estimated.

FIRMS LIKELY TO BENEFIT

Looking for local winners if the deal is done, analysts have often mentioned construction firms Cheung Kong and sister company Hutchison Whampoa .

Kwoong Chung Bus Holdings Ltd, a bus operator on Lantau, and HKR International Ltd, the major property developer of Discovery Bay on Lantau were likely to benefit, said Adrian Ngan, head of Hong Kong research at BNP-Prime Peregrine Securities.

"HKR International has a land bank in Discovery Bay which could supply accommodation to Disney staff and it could also build hotel facilities to supplement the theme park," Ngan said.

But he cautioned that those companies which participate in the project would take a long time to see a real contribution.

"A Disney theme park will take several years to build and it will not see any profit in the first few years," he added.

(US$1 - HK$7.77)