[ Disney Vacation Planner
HONG KONG, Nov 2 (Reuters) - Hong Kong and The Walt
Disney Company announced a multi-billion-dollar deal on Tuesday
to build a theme park and resort complex in this special administrative
region of China, the third Disneyland outside the United States.
Hong Kong leader Tung Chee-hwa, flanked by Mickey
and Minnie Mouse, said the new theme park and resort would add
some magic to the city's image and boost its economy after two
years of hardship.
"This world class development will mark the beginning
of a new era for Hong Kong," he told reporters.
But analysts questioned whether Tung had paid too
much, with the government investing HK$22.45 billion (US$2.9 billion)
in the Disney park and accompanying infrastructure.
Disney, by contrast, will invest HK$2.45 billion,
or a tenth of the government layout. Their new joint venture company,
Hong Kong International Theme Parks Ltd, will raise an additional
HK$2.3 billion in commercial loans for the project.
The deal drew criticism that the government, instead
of private investors, was taking a lead role in the economy. Hong
Kong officials said the government could sell part of its holding
from a year after the park opens in 2005.
TUNG PUTS FOCUS ON POSITIVE
But with Mickey and Minnie waving happily at his
side, Tung brushed asided hostile questions and focused on what
it meant for Hong Kong, which saw its economy contract by 5.1
percent in 1998.
"Hong Kong Disneyland will be a key strategic infrastructure
component in the renewed and reinvigorated push to strengthen
and consolidate Hong Kong's position as a must-see tourism destination,"
With Hong Kong's 6.1 percent unemployment rate near
record levels, Tung stressed the job creation that would come
with the mega-project at Penny's Bay on Lantau Island, minutes
from the new international airport.
The park would create 6,000 jobs during construction,
18,000 at the opening and 35,000 over a 20-year period. A further
10,000 jobs are expected to be created by land reclamation projects
and associated works funded by the government, he said.
ANALYSTS QUESTION COST TO HONG KONG
Hong Kong will invest HK$3.25 billion in the joint
venture company for a 57 percent equity share, but Disney will
have management control over the theme park.
"If you look at a 20-year horizon, it's probably
not a bad deal assuming the government's equity stake can be sold
off at a reasonable price," said David O'Rear, regional economist,
the Economist Conferences.
"What concerns me is that the project could not be
done on a strictly private basis," he said, with some government
incentives such as concessionary land prices, tax breaks or infrastructure.
"Actually to have to take an equity stake in the
project suggests there was not sufficient private enterprise support
for it to go ahead," he added.
Other analysts said the government was enchanted
by the idea of the magical Disney name to boost Hong Kong's image.
"This project is not a cheap project, but the thing
we need to consider is that we are buying a brand name product
to help Hong Kong to strengthen our tourist status in the Asia
Pacific region," said Shamus Mok, chief economist with Bank of
"You have to look at the spillover effect," he said.
"From that point of view it is a social investment. It will strengthen
us as a tourist centre."
Several analysts said it was a question of short
term versus long term, and of a good deal for Hong Kong versus
a very good deal for Disney.
"Disney is potentially getting a very good deal.
They're only putting in a fraction of the cost and they can claim
a lot of that back in licence fees and royalties," Howard Gorges,
director of South China Securities, said.
DISNEY SAYS IT LEARNED FROM OTHER PROJECTS
Hong Kong will be Disney's third park outside the
United States, after Tokyo and Paris. It has parks in California
Disney officials said they had learned from bumpy
starts in France and Japan, and would apply these lessons to Hong
Kong, especially to open smaller and then grow as demand rises.
"We have very conservatively targeted the attendance
in the five-million range (a year) and planned for, with the government,
the ability to add attractions and capacity in the years ahead,"
said Judson Green, chairman of Walt Disney Attractions.
Green told reporters depending on performance, the
Hong Kong Disneyland's capacity could grow to 10 million or more
(US$1 = HK$7.77)