Financing infrastructure projects

The proposed cost of HKD$15 billion for the bridge is high compared to other private sector infrastructure projects in Hong Kong.

by W C Kwan

Hong Kong has completed or planned for a large number of road and bridge projects primarily on the basis of government funding. Major public road and bridge projects in recent years include the completed Tsing Ma Bridge (HKD $7.14 billion), and proposals for Shenzhen Western Corridor (HKD $2.8 billion - Hong Kong section), Route 10 (HKD $22 billion), and Route 7 (HKD $8-10 billion).

Private sector projects in Hong Kong

Eastern Harbour Tunnel

With government budget deficits increasing, the private sector is likely to play a larger role in the future. Private businesses have undertaken a number of significant transportation projects in Hong Kong in the past. Both the Eastern and Western Harbour Tunnels, for example, have been built and financed by the private sector. So was a section of Route 3.

However, the amounts involved in these private sector projects have been relatively small compared to the projected cost of HKD $15 billioin for Gordon Wu's bridge. An infrastructure project of this scale will be a first in the local financial market.

China projects

China has also successfully financed a large number of infrastructure projects. Many of them are funded by PRC banks, often with government support or guarantee.

Gordon Wu launched the first major private sector highway project in China -- the Guangzhou-Shenzhen Expressway in 1991. The total cost of USD $1.2 billion (HKD $9.6 billion) was primarily funded by international bank loans.

Since then, a number of Hong Kong business groups have successfullly sponsored and financed infrastructure projects in China. A number of them have been completed on a Build-Operate-Transfer (BOT) basis.

Major private sector projects in Guangdong province include the Guangzhou ring roads and the Guangzhou-Zhuhai Expressway, which is currently under construction.

International bridge projects

The internationl capital markets funded bridges with similar design and scale in the past. However, many of them have been financed either directly by government funding or with government guarantees or support.

The Chesapeake Bay Bridge in US was financed by municipal Bridge and Tunnel Revenue Bonds. (The revenue bonds used to finance the original facility at a cost of USD $200 million were finally paid off and retired in the late 1990s, after some initial instances of default due to insufficient traffic.).

The Oresund Bridge connecting Sweden and Denmark at a total cost of 4.5 billion Euro (USD $4 billion) was financed by international capital market loans guaranteed by the Swedish and Danish governments.

All of the governments involved played important roles in helping to finance these projects. Whether any government support will be available for Mr. Wu's bridge will be a major factor affecting its financing.

Oresund Bridge (left) and Chesapeake Bay Bridge (right).