Accountability in Establishing Public Private Partnership:

A Case Study of

West Kowloon Cultural District, Hong Kong

2006

Chapter 4

Chapter 5

Chapter 6

3.6 Reasons for Using Public Private Partnerships 3.6.1 Political Motives 3.6.2 Financial Motives 3.6.3 Managerial Motives

3.7 Potential Benefits and Problems of Adopting Public Private Partnerships 3.7.1 Potential Benefits 3.7.2 Potential Problems

3.8 Examination of the Benefits of Service Delivery Using Public Private Partnerships

3.9 The Concept of Accountability 3.10 Summary

Conceptual Framework

38 38 39 40 42 42 44 46

49 53

4.1 4.2 4.3 4.4 4.5

Introduction 54 Will Accountability be Enhanced or Diminished in PPPs? 54 Accountability in PPPs 56 Public Accountability 62 Conceptual Framework for Studying Accountability III the West Kowloon 65 Cultural District PPPs

4.6 Maintaining Effective Accountability Relationships 4.7 Summary

67 72

5.1 5.2 5.3 5.4

5.5

5.6

6.1 6.2

6.3

6.4

6.5

Development of Private Sector Involvement in Hong Kong Introduction 73 Role of Government in Public Service Delivery in Hong Kong 73 Private Sector Involvement in Hong Kong 76 Development of Build-Operate-Transfer typed Public Private Partnerships Project 80 in Hong Kong Accountability Aspect relating to the Start Up of Public Private Partnerships in Hong Kong Summary

Accountability Secured Before the Invitation of Proposal Introduction Policy-Making Process 6.2.1 Role of the Executive Council 6.2.2 Role of the Legislative Council Public Private Partnerships Establishment 6.3.1 Assessing Cultural Needs in Hong Kong 6.3.1.1 Reflecting the Cultural Needs? Views of the Arts and Cultural Groups 6.3.2 Market Testing and PPP Feasibility Study 6.3.3 Assessing Value for Money 6.3.4 Managing Community Expectations Concluding Discussion: Accountability Secured in the Pre-Invitation for Proposal period 6.4.1 Communal Accountability 6.4.2 Managerial Accountability 6.4.3 Public Accountability Summary

81

86

87 87 90 92 94 95 98 101 102 109 113

113 114 115 115

Chapter 7 Accountability Secured in the Post-Invitation for Proposal Period under

Chapter 8

Tung's leadership 7.1 Introduction 117 7.2 Development of the West Kowloon Cultural District 117 7.3 Invitation for Proposal 118

7.3.1 Output Specifications in the Invitation for Proposal 119 7.4 Stakeholders' Involvement 121

7.4.1 Role and Major Concerns of the Arts and Cultural Groups 121 7.4.2 Role and Major Concerns of different Pressure Groups 128 7.4.3 Role of the Legislative Council 133

7.5 Involvement and Role of the Proponents 140 7.6 Government Approach in Handling the Project and Integrating Different Views in 143

the Community 7.6.1 Stand Taken by the Government 144 7.6.2 Public Consultation 146 7.6.3 Information Disclosure 149

7.7 Concluding Discussion: Accountability Secured After the Invitation for Proposal 153 period in Tung's Era 7.7.1 Contractual Accountability 153 7.7.2 Managerial Accountability 154 7.7.3 Public Accountability 155

7.8 Summary 158

8.1 8.2 8.3

8.4

8.5

8.6

Accountability secured in Tsang's Era Introduction Development of the West Kowloon Cultural District Policy Change: Revised Proposal in October 2005 8.3.1 Interaction of competing advocacy coalitions within a policy subsystem 8.3.2 Impact of the stable parameters on constraints and resources of subsystem actors 8.3.3 External Changes towards the Subsystem 8.3.4 Advocacy Coalition Framework Explanation on Revised Proposal in October 2005 Revised Proposal: Accountable to the Public? Stakeholders' Views 8.4.1 Arts and Cultural Groups 8.4.2 Other Pressure Groups 8.4.3 Legislative Council 8.4.4 Proponents Concluding Discussion: Accountability Secured in October 2005 8.5.1 Contractual Accountability 8.5.2 Managerial Accountability 8.5.3 Public Accountability Policy Change: the February 2006 Decision to 'Delay' the Project 8.6.1 Interaction of competing advocacy coalitions 8.6.2 Impact of the stable parameters on constraints and resources of subsystem actors 8.6.3 External Changes towards the Subsystem 8.6.4 Advocacy Coalition Framework Explanation on the February 2006

159 159 161 162 164

166 168

170 170 173 175 178 179 179 181 182 185 186 190

191 193

Chapter 1

Background and Purpose of the Study

1.1 Introduction

Since the 1980s, an international trend in new public management (NPM) reforms

has been the increasing implementation of private sector ideas in the management of

public agencies and in the delivery of public services (Lane, 2000). In particular,

outsourcing has emerged as a key NPM strategy for enhancing private sector involvement.

Recently, new approaches to outsourcing have led to increased blurring in what were

traditionally regarded as public and private sector responsibilities and to greater

inter-sectoral linkages (Ferlie and Steane, 2002). Thus, for example, as private and third

sector involvement in public service delivery is being enhanced, a new framework for

government-business relationships, frequently termed as 'Public Private Partnership

(PPP), has arisen. Under such arrangements, private and third sector parties, as partners

with the government agencies concerned, are given responsibilities and a say in the

planning as well as in the operational stages of service development and delivery.

Faced with budgetary pressures and increased demands for better services, countries

worldwide have shown their interest in PPPs. In particular, Australia, Canada and the

United Kingdom are the three main pioneers (Public-Private Partnerships Office, 2001;

Public Private Partnerships Programme, 2003; Department of Parliament, Australia, 2003)

while both the United Nations and the World Bank also actively promote PPPs (United

Nations Development Programme, 2003; World Bank, 2003). In Asia, Hong Kong is fully

committed to adopting PPPs wherever feasible (Efficiency Unit, 2003) and Singapore,

India and the Philippines have also expressed increasing interest in this strategy.

Recently, the Hong Kong Special Administrative Region Government (HKSARG)

has adopted a PPP strategy as a means for the Development of the West Kowloon Cultural

District. According to the original plan of the government, this 40-hectares site would

probably be one of the largest 'build operate transfer' (BOT)-type of PPPs in Hong Kong

in which the private partner would build and operate the facility before its long-term,

eventual transfer back to the government (Housing, Planning and Lands Bureau, 2003a).

Since the announcement of the project, however, many residents have expressed concerns

about how accountability will be achieved in the PPP project.

This research will investigate the development of PPPs in the Hong Kong

government's provision of public goods and services. It will build a systematic evaluation

1

model for studying accountability for BOT-type PPP projects, that can also be tested in the

context of the West Kowloon Cultural District PPP.

1.2 Role of the Government in Providing Goods and Services

Human beings need different type of goods and services. Some of them are provided

by the government whilst others are offered by the market and the third sector. The nature

of the goods frequently determines the role of the government, the market and the third

sector in service delivery. Exclusion and consumption are two criteria that help to identify

the nature of the goods. Goods have the property of exclusion if potential users can be

denied access by the supplier. The other characteristic is consumption-related. Goods can

be categorized according to their modes of consumption (individual consumption vs joint

consumption). Based on these two criteria, four kinds of goods are generalized (see Table

1.1).

Table 1.1 The four kinds of goods in terms of intrinsic characteristics Easy to exclude Difficult to exclude

Individual Individual goods (e.g. food, clothing, Common-pool goods (e.g. fish in

consumption shelter) the sea)

Joint Toll goods (e.g. cable TV, telephone, Collective goods (e.g. national consumption electric power) defense) Source: Savas, 2000: 62

Individual and toll goods are generally best provided by the market whilst the rest

require government intervention to overcome market failures in their provision. For the

former group, the state may be responsible to provide a framework for the market to

operate. Hence, it is an arbitrator to oversee the provision of individual and toll goods.

Whilst for the common-pool goods, like fish and transport network, collective action

is needed as these goods will be consumed continually until exhaustion. In order to

preserve these resources, government intervention is required (Savas, 2000).

Collective action is also necessary for providing collective goods due to market

failure. Market failure presents in three ways. First, although the market is one of the

potential public goods providers, it fails as people have the economic incentive to be 'free

riders' and try to understate their needs or consumption on collective goods. When more

and more people choose to be free riders, the attraction for market production will

decrease and the goods will finally be underproduced. Thus, market failure takes place and

collective action is needed to ensure an appropriate supply. Second, increasing returns to

2

scale may lead to market failure. This phenomenon usually happens in the case like water

and electricity, which require large investment in developing the service and thus, a

monopoly is usually the result. The monopoly will increase the price to maximize profits

and the total public welfare will be reduced (Savas, 2000). Moreover, externality is

another form of market failure. It arises when not all the costs and benefits of the

production decisions are covered by the producers or consumer (Walsh, 1995). Take an

example, when pollution is not taken into account as a cost in producing a particular

product by the producers, over-production and over-consumption may result with social

costs (i.e. pollution) understated. Based on the above three reasons, the market fails to

provide the quality or quantity (or both) of collective goods required and hence,

government is responsible for ensuring the provision of these goods, possibly through

coerced contributions.

However, the government has its limitations on delivering some collective goods, too.

As the democratic government is mutually 'owned' by the people, government actions

usually require majority support. Hence, governments face difficulties in providing

collective goods which are not for the interest of all citizens. In response, the third sector,

including the civil society, non-governmental organizations and voluntary bodies, is often

a viable solution as it can address the needs of a smaller group of people (Salamon, 2001).

Moreover, government actor faces additional constraints (see Table 1.2) and often

Table 1.2 Sources of Constraints on Governmental Action Constraints Description Categorical Results from the necessity of governments to provide goods and services on a constraint uniform and universal basis. This constraint implies that the demands of

individuals whose preferences for public services differ from the norm will go unsatisfied. Moreover, since government must provide its services universally to all its citizens, it is limited in its ability to experiment on a small scale with new program

Maj oritarian There may be multiple conceptions of the public good and what government constraint should be doing in a diverse population. Time The relatively short tenures of government officeholders and their consequent horizon incentive to focus on short-term issues and results leave long-term societal issues

and concerns unattended Knowledge Government bureaucracies are organized in a relatively monolithic, hierarchical constraint way and, hence, cannot be expected to generate all of the relevant information,

ideas and research needed for intelligent decision-making on public issues. Size Difficult for ordinary citizens to engage government whose bureaucracies is large constraint and intimidating Based on Young, 2001: 190-191

3

criticized for being cumbersome, unresponsive, and too bureaucratic in meeting public

needs (Young, 2001). As a result, the third sector is preferred to perform some public tasks.

Since the 1980s, owing to the rise of NPM (a global reform movement characterized by

increased market orientation, managerialism and result-oriented approach), the for-profit

sector has been increasingly recognized as a potential public service provider.

As the government has its limitations in meeting the public needs and the private

sector has been increasingly accepted as a potential partner of the government in public

service delivery since the emergency of NPM, PPPs have been regarded as a feasible

means to employ private funding for public purposes. Although PPPs relieve governments

from the budgetary pressures and the criticisms of being cumbersome, unresponsive, and

too bureaucratic, they pose other challenges to governments, for instance, how to achieve

both public and managerial accountability.

1.3 Accountability in the Public Private Partnerships Context

In order to achieve accountability, the question as to who should give accounts to

whom, for what and how must be answered. Hence, in a broader sense, accountability is a

relationship with variable mechanisms by which the accountor is held accountable to the

accountees for his or her action or performance (Hayllar, 2000a, b). To be specific,

accountability mechanisms are usually adopted 'to ensure that resources are used in the

most efficient and transparent manner' (Demeke, 2002).

Accountability has long been recognized as an important public ethos because it is 'a

device as old as civilized government itself; it is indispensable to regimes of every kind. It

provides the post-mortem of action, the test of obedience and judgement, the moment of

truth' (Normanton, 1971: 312). Furthermore, it is a precondition for trust building which is

crucial for effective government. As Wolf (2000) suggests, 'trust in government is what

makes democratic government effective. Without trust no living democracy and no real

citizenship, without trust no compliance with rules and regulations and no willingness to

pay taxes, without trust no civil service of high standards and without accountability no

trust in government'. Hence, accountability plays a significant role in the formation of a

harmonious society and effective government.

Although the private sector is increasingly involved in public servIce provlSlon,

accountability should not be sacrificed in exchange for lower costs and better performance.

Public services have implications for users and citizens. However, unlike those provided

by the market, users of public services cannot sieve out the inefficient providers or

4

producers through their choices. Hence, it is legitimate for the public to expect that the

providers, including those who provide services through PPPs, are accountable for their

performance and the outcomes to the government or to the service-recipients via the

government (Kay and Reeves, 2004). On the other hand, as the state usually has to

contribute some public resources into BOT-type PPPs, proper accountability mechanisms

for the stewardship and management of public resources is required. As a result,

accountability is an important issue in PPPs and will form a central focus for this study

both in general and in relation to the West Kowloon Cultural District case study.

1.4 Background Information to the West Kowloon Cultural District Project

In order to promote Hong Kong as a world class city and an entertainment capital in

Asia, the Chief Executive announced in his 1998 Policy Address (Hong Kong Special

Administrative Region Government, 1998) that a new state-of-the-art performance venue

would be built on the West Kowloon reclamation site. The proposed 40-hectare West

Kowloon Cultural District would be located at the southern tip of West Kowloon

Reclamation. Originally, the site was planned for a variety uses: commercial (5.02 hectares),

residential (0.77 hectares), government, institution and community (1.45 hectares). Open

spaces (7.94 hectares) and regional park (13.79 hectares) would constitute a large part ofthe

site (Panel on Planning, Lands and Works and Panel on Home Affairs, 2003a).

In April 2001, The Concept Plan Competition for the Development of an Integrated

Arts, Cultural and Entertainment District at the West Kowloon Reclamation Hong Kong

was launched. Among 161 local and overseas participants, the team led by Foster and

Partners of the United Kingdom won. In October 2002, the Steering Committee for

Development of the West Kowloon Cultural District announced that the Foster and

Partners' submission would be used as the conceptual basis for the West Kowloon Cultural

District's masterplan.

The Hong Kong Special Administrative Region Government (HKSARG) launched

the invitation for proposal (IFP) for the Development of the WKCD in March 2003.

Several compulsory requirements were listed. The IFP stated clearly that core art and

cultural facilities including a theatre complex (three theatres with at least 2000, 800 and

400 seats respectively), a museum cluster with four museums, a water amphitheatre, an

exhibition center, a performance venue and at least four piazza areas and the canopy

proposed by the Foster and Partners must be constructed. Also, the chosen tenderer will be

responsible for constructing, financing and operating the developments for 30 years

5

(Housing, Planning and Lands Bureau, 2003a).

According to the IFP document, this 40-hectares site will probably be one of the

largest 'build operate transfer' (BOT)-type of PPPs not only in Hong Kong but also the

world in which the private partner will build and operate the facility before its long-term,

eventual transfer back to the government (Housing, Planning and Lands Bureau, 2003a).

Since the announcement of the project, it has been strongly criticized by different

parties on several issues, including the single-developer approach and construction of the

canopy. In response to the heated debate in the community, the government eventually

revised the mandatory requirements of the IFP by introducing an additional set of

development parameters and contract conditions. Unfortunately, it seems that the revised

proposal fails to generate sufficient public support for project. In February 2006, the

government finally announced that the project would be put 'on hold' as the bidders

indicated that they would not stay in the race for the changed project.

1.4.1 Stakeholders of the Project

In the development of the West Kowloon Cultural District PPP, all Hong Kong

citizens should be regarded as the stakeholders. In a narrow sense, the WKCD is an arts

and cultural project. Thus, arts and cultural groups are the key stakeholders. At the same

time, it is also an urban planning project and a property development project. Hence,

professionals like designers, architects, urban planners, surveyors and other related

pressure groups should also be regarded as key stakeholders. Broadly speaking, as the end

user of the WKCD is the general public, therefore, representatives of the public, i.e. the

District Council and Legislative Council, and the public itself should also be included in

the list. Finally of course, the government and its related departments are also stakeholders

too.

1.5 Aims and Objectives of the Study

This research aims to investigate the development of PPPs in the Hong Kong

government's provision of public goods and services. It seeks to build a systematic

evaluation model for studying accountability for BOT-type PPP projects and to

subsequently test this in the context of the West Kowloon Cultural District PPP. Key

objectives are as follows:

1. to identify and explore the definitions, objectives and types ofPPPs;

2. to investigate the different types of accountability associated with PPPs;

6

3. to reVIew the current approaches/ models used to evaluate different types of

accountability in each stage ofPPP projects;

4. to study the ranges of dominate forms of accountability which are used to study

accountability in each stage ofPPPs;

5. to develop a framework to study accountability for West Kowloon Cultural District;

6. to examine, within the context of the WKCD case, the extent to which the dominate

forms for achieving accountability in PPPs have been achieved and how effective the

related accountability mechanisms are;

7. to study issues affecting the relationship between accountability and the development

ofPPPs in Hong Kong;

8. to refine the evaluation model of accountability in the light of the experience gained

from its application to the WKCD case and to make recommendations for further

research and development in this field of study.

1.6 Methods

In order to develop a qualitative framework for studying accountability in BOT-type

PPPs, both primary and secondary data collection methodologies have been adopted.

A cross-national-based literature and documentary review based on the analysis of

materials including, books, journals, official documents and articles from the Internet

served as the major source of ideas for theoretical conceptualization and the development

of framework for studying accountability in PPPs. In particular, to gain a deeper

understanding of accountability in BOT-type PPPs, and to explore the applicability of the

framework being developed by this research, 15 fieldwork interviews are conducted with

key stakeholders in the West Kowloon Cultural District PPP. Key research informants

included screened-in private sector bidders (potential private partners), elected councilors,

representatives of arts and cultural groups, pressure groups and an advisory body. These

interviews were conducted from October 2005 to April 2006. Moreover, as the research

theme, accountability in establishing the WKCD, is regarded as a highly sensitive issues

by some key stakeholders, in particular, by the government. Observation is adopted as

another data collection method so as to gain a better understanding the views of the

government, the pubic and different stakeholders on the development of the WKCD.

1.7 Conceptual Framework

To aid the examination of the development and accountability of the West Kowloon

7

Cultural District PPP, two major frameworks are adopted. First, an amended version of

Sabatier's Advocacy Coalition Framework is employed to help explain the policy making

process of the West Kowloon Cultural District PPP.

According to the Advocacy Coalition Framework, in most policy arenas, there are two

to four advocacy coalitions, who coalesce around a similar set of core values and beliefs, to

compete and compromise in each of the policy subsystems. Conflict between these

coalitions is mediated by policy brokers, who aim to minimize the conflict by generating

some reasonable compromises (see Figure 3.4).

There are, however, some difficulties with the definition of advocacy coalition offered

by Sabatier (1993) as it ignores the distinction between insiders/ outsiders in regarding the

membership of coalitions and the possible occurrence of groups with the same core values

but different strategies/ organizational structure which prevent them from engaging in

long-term cooperation. Hence, in this research, the working definition of an advocacy

coalition is revised. Groups who share a particular belief system and take part in the

partnership building process will be regarded as a single advocacy coalition. Thus, while

different groups, who share the same core values and beliefs, may still be different in

accordance with their nature, organizational structure and the strategies/ approaches they

adopted, they are grouped together and titled here as 'a single advocacy coalition'. This

reflects John's (1999) concept of 'policy memes', a term which is borrowed from his

Evolutionary Theory to describe actors who' operate and compete through political interests

as if they have a need to survive in a similar way to genes in the organisms they inhabit'

(John, 1999). Thus both their needs to cooperate and to emphasize their fundamental

differences are recognized. Hence, competition occurs between coalitions and within a

coalition.

Second, in order to study accountability in PPP, and, in particular, the West Kowloon

Cultural District PPP, a conceptual framework is developed by drawing upon ideas gained

from the literature review. In general, five main dominant forms of accountability are

adopted, including communal, contractual, managerial, market and public accountability.

The implicit values and behavioral expectations of each type of accountability are listed in

Table 4.2. As a result of the specific nature of different stages of PPPs, different dominant

forms are utilized to study accountability at different stages (see Table 4.3).

Although the West Kowloon Cultural District PPP is still at the set up stage, there are

several aspects of communal, contractual, managerial and public accountability that can be

adopted for examining developments during four different periods of the WKCD

8

development, including the pre- and post- Invitation for Proposal periods, the revised

proposal formulated in October 2005 and the decision to put the project 'on hold'.

1.8 Structure of the Dissertation

There are nine chapters in this dissertation. This introductory chapter has provided

some background information to the study, including that on the role of government in

providing goods and services, accountability in the PPPs context and the case - the West

Kowloon Cultural District PPP. Moreover, the objectives, methods and conceptual

framework of this research have also been highlighted.

Chapter Two discusses the methodology that is adopted, and explains the rationale

for choosing a qualitative approach. Core concepts and related issues in PPPs and

accountability are explored through examining the international and local literature in

Chapter Three. In particular, the policy model adopted to explain the policy making

process of the WKCD is introduced. Chapter Four embarks upon the debates on the

various approaches to and impacts of PPPs on the rationales for and means of, securing

accountability are studied. After reviewing frameworks currently used in the UK. to study

accountability in PPPs, a new model is presented, and is subsequently, adopted in this

research. Chapter Five examines the developments of Public Private Partnerships in Hong

Kong.

Chapters Six to Eight present findings obtained from documentary reviews, in-depth

interviews and observation. Accountability secured in the development of the WKCD is

examined in accordance with the historical timeframe. In general, there are two main

turning points: the announcement of the IFP and the resignation of the first Chief

Executive, Tung Chee-wah. Chapter Six, therefore, examines the accountability secured in

the pre-IFP period. The following chapters, Chapter Seven and Chapter Eight, study the

issue under Tung's and Tsang's leadership respectively.

The final chapter will summarize the findings of this dissertation. Moreover, based on

the conclusion drawn from the case study, both factors that undermined or facilitated the

accountability secured and theoretical lessons on the utility of the conceptual framework

are discussed. Suggestion for further studies is also included in the concluding chapter.

9

Chapter 2

Research Methodology

2.1 Introduction

Selecting an appropriate approach and specific methodology is vital in all research. It

determines what kind of information or data, for instance, qualitative or quantitative, is

going to be collected. In this research, a qualitative approach is adopted to develop a

framework for studying accountability in PPPs. The rationale will be explained first.

Reasons for choosing the holistic, single-case study design follows. Then, the methods

adopted for data collection - documentary review, in-depth interview and observation -

will be discussed. Finally, limitations of the research will be stated.

2.2 Qualitative Research: Why and How

In the literature, quantitative and qualitative approaches are usually regarded as the

two major paradigms in research design. These paradigms are fundamentally different

from each other (See Table 2.1). Hence, they are non-comparable in the sense that they

work under different assumptions and circumstances. In choosing the research approach,

the nature of the research topic/ research questions is the determinative factor.

Table 2.1 Quantitative and Qualitative Paradigm Assumptions Assumption Quantitative Qualitative Ontological Reality is objective and singular, apart Reality is subjective and multiple as

from the researchers seen by participants in a study Epistemological Researcher is independent from that Researcher interacts with that being

being researched researched Axiological Value-free and unbiased Value-laden and biased Methodological Deductive process Inductive process

Cause and effect Mutual simultaneous shaping of factors

Static design - categories isolated Emerging design - categories before study identified during research process Context-free Context-bound Generalizations leading to prediction, Patterns, theories developed for explanation, and understanding understanding Accurate and reliable through validity Accurate and reliable through and reliability verification

Source: Based on Creswell (1994)

With the intention of providing a holistic picture of accountability in PPPs, a

qualitative approach is adopted as the main research methodology. Accountability is a

value-laden concept and context-bounded in that it is 'shaped by social norms or

aspirations' (Sinclair, 1995). Additionally, accountability is an ill-defined problem with

10

numerous stakeholders and relationships involved. Different people, including scholars,

public officials and managers, have different ways in defining and understanding

accountability. As a consequence, the focus of this research topic - accountability in the

West Kowloon Cultural District - best fits with the qualitative paradigm onto logically,

axiologically and methodologically. Furthermore, this research aims to further

understanding as to what extent accountability is being achieved in the West Kowloon

Cultural District. The storytelling characteristic of this research also makes it difficult to

apply a quantitative approach.

Four types of qualitative approaches are often used in human and social science

research, including ethnographies, grounded theory, case studies and phenomenological

studies (Creswell, 1994) (see Table 2.2 for details). In some researches, a combination of

these methods is used to gain a better understanding on research questions.

In this research into accountability in the West Kowloon Cultural District, case study

is the most appropriate method. Hence, only a single entity or phenomenon within a

real-life context is included. Moreover, as the research questions are not aiming to derive a

theory and do not involve an 'intact cultural group in a natural setting' (Creswell, 1994),

other qualitative methods are of limited value in this research. Consequently, this research

adopts the case study method.

Table 2.2 Four types of Qualitative Approach Types Description Ethnographies The researcher studies an intact cultural group in a natural setting during a

prolonged period of time by collecting, primarily, observational data. Grounded theory The researcher attempts to derive a theory by using multiple stages of data

collection and the refinement and interrelationship of categories of information.

Case studies The research explores a single entity or phenomenon ('the case') bounded by time and activity (a program, event, process, institution, or social group) and collects detailed information by using a variety of data collection procedures during a sustained period of time

Phenomenological The researcher 'brackets' his or her own experiences in order to understand studies those of the informants. Thus, in phenomenological studies, human

experiences are examined through the detailed descriptions of the people being studied. As a method the procedure involves studying a small number of subjects through extensive and prolonged engagement to develop patterns and relationships of meaning.

Source: Based on Creswell (1994)

2.3 Case Study

Case study IS an ideal strategy for research in which holistic and in-depth

investigation is required (Feagin et aI., 1991). In the literature, several typologies are

11

offered to classify different types of case study. Among these, Yin's (2003) classification

which identifies four major types of case study designs based on a 2 X 2 matrix is usually

adopted (see Figure 2.1).

Figure 2.1 Basic Types of Designs for Case Studies

Holistic

(single unit of analysis)

Embedded

1m ultiple units of analysisl

Single-case designs

Source: Yin, 2003: 40

2.3.1 Single-Case and Multiple-Case Designs

Multipl~ase designs

Case studies can be in single-case or multiple-case designs, and each type can either

be holistic or embedded (Yin, 2003). Hence, understanding the rationale for single-case

and multiple-case designs is of critical importance in choosing the appropriate design for

the research.

According to Yin (2003), a single-case approach should be adopted when the case

either typifies a critical test of existing theory or a rare or unique circumstance, or it is a

typical case. A single-case study is also ideal for a revelatory or longitudinal case. While

for the multiple-case design, a replication, instead of a sampling, logic must be followed.

Therefore, cases should be chosen with care in that cases should be predicted to show

either analogous results (for literal replication) or dissimilar results (for theoretical

replication) precisely at the beginning ofthe research (p. 39-53).

Single-case design is an ideal approach in this study as the case - West Kowloon

Cultural District PPP - is unique in nature. The principle of adopting PPP in this case is to

finance the construction and operation of a large scale cultural site via commercial and

residential development profits. In traditional public administration, culture is regarded as

12

a collective good in which government intervention to overcome market failures is

required. Hence, the idea of using profits generated from commercial and residential

developments to subsidize the construction and operation of a non-pro fit-making

component - cultural facility - for a long period of time (i.e. 30 years) is exploratory.

Hence, from this perspective, no other case is comparable to the West Kowloon Cultural

District PPP. Consequently, a single-case design is adopted.

2.3.2 Holistic and Embedded Case Studies

Another perspective to classify case study in Yin's model is the number of units of

analysis. Holistic case study refers to investigation with a single unit of analysis. While for

those with multiple units of analysis, irrespective of the total number of unit selected, is

regarded as the embedded design.

Both variants of single-case studies have their own strengths and weaknesses.

Holistic approach is of great value when no logical subunits can be distinguished or when

the theory that is being tested in the research is holistic in nature. However, the approach

has its shortcomings, too. First, via adopting a global and holistic approach, investigators

may 'avoid examining any specific phenomenon in operational detail' (Yin, 2003: 45).

Hence, the research may be deficient in any clear measures or data. Furthermore, using a

holistic case study may lead to slippage of research question. Although the initial

interview questions may aim at reflecting a particular orientation, a different orientation

may emerge during the course of the study. Embedded study can fill this gap as a set of

subunits can increase the sensitivity of the researchers to such slippage (Yin, 2003).

Although an embedded case study can prevent slippage of research questions during

the course of study, it also has pitfall. The major one is the possibility of neglecting the

larger unit of analysis as the researcher's focus becomes too concentrated on the subunit

(Yin, 2003). Consequently, the nature of the case study may change.

Owing to the specific nature and development of the WKCD case, the holistic

approach is chosen as no logical subunits can be identified at this moment. As a result, this

research will adopt a holistic, single-case design in conducting the case study on the West

Kowloon Cultural District PPP.

2.4 Data Collection Method

In order to develop a qualitative framework for studying accountability in BOT-type

PPPs, both primary and secondary data collection methodology are adopted, including

13

interviews, observation, cross-national-based literature and documentary review.

2.4.1 Documentary Review

In general, documentary review is relevant to every case study topic. Materials can be

drawn from different sources, including books, journals, newspaper articles, articles from

the internet and official documents. Through documentary review, researchers can gain a

better understanding towards the background of the research area and topic. Further, this

most convenient and least costly data collection method usually provides corroborating

and augmentative evidence from other sources (Yin, 1989).

In this research, a cross-national-based literature and documentary review, based on

the analysis of materials including, books, journals, official documents and articles from

the Internet serves is carried out. The review serves as the major source of ideas for

theoretical conceptualization and for the development of a framework for studying

accountability in PPPs, which is then used to examine the extent to which the dominant

forms for attaining accountability in PPPs have been achieved.

Through reviewing materials drawn from newspaper articles, articles from the

Internet, official documents like the papers, minutes and reports of the Legislative Council

and District Council, and press releases of the government, the writer has gained a better

understanding on the background of the West Kowloon Cultural District PPP, the opinions

and positions of the government, different stakeholders and the public on the issue. This

knowledge has provided a foundation for the examination of the accountability secured in

theWKCD.

2.4.2 In-depth Interviews

In-depth interviews are one of the essential sources of information collection in a

case study. Primarily, this face-to-face interaction between interviewers and interviewees

is usually used to gather fact and opinion. During interview, interviewees can express their

attitudes and emotions in detail. Hence, the truthfulness of interviewees' response can be

testified through their gestures or facial expressions. Further, by asking follow up

questions, interviewers can explore thoroughly the interviewee's insight on areas that the

former deem important (Babbie, 1998; Berg, 1998).

In order to gain a deeper understanding of accountability in BOT-type PPPs, and to

explore the applicability of the framework developed by this research, fieldwork

interviews were conducted with key stakeholders in the West Kowloon Cultural District

14

PPP. In carrying out in-depth interviews, a semi-structured approach has adopted. This

approach ensured that fundamental questions were answered and the flexibility for asking

follow up questions was retained (Berg, 1998).

In this research, 15 interviews were conducted by using purposive sampling. Such

non-probability sampling selects samples 'on the basis of [the researcher's] own

knowledge of the population, its elements, and the nature of [the] research aims' (Babbie,

1998: 195). As it is difficult to define and identify all stakeholders in the WKCD for

probability sampling, and different groups possess different perspectives on the degree of

accountability secured in the development of the project, studying a sample of

stakeholders from different categories can provide sufficient data for analysis. With the

adoption of semi-structured, open-ended questions, 15 interviews were conducted (see

Table 2.3 for the distribution of key informants)! from October 2005 to April 2006.

Table 2.3 Distribution of Key Informants Category Number Screened-in Proponents/ Potential Private Partners 2 Arts and Cultural Groups 5 Pressure Groups 5 Advisory Groups (on Public Private Partnerships) 1 Elected Councilors 2

Moreover, it is worth noting that the researcher was not able to conduct a face-to-face

interview with government officials who are in charge of the project. This might be related

to the highly sensitive nature of the project at that time. To bridge this gap, the researcher

attended some meetings of the Legislative Council to gain a better understanding on the

role and stand taken by the government.

2.4.3 Observation

Observation is another data collection method that is adopted in this research. As the

research theme, accountability in establishing the WKCD, is regarded as a highly sensitive

issues by some key stakeholders, in particular, by the government, observation of

decision-making meetings was not really possible. However, the researcher has able to

attend some meetings of the Legislative Council to gain a better understanding of the roles

and stands taken by and the accountability relationships between the government and

1 As the topic is sensitive to some interviewees, in particular, the screened-in proponents, all information of the interviewees, including their personal particulars, have been kept confidential.

15

legislators. The researcher also attended the exhibition and 6 public forums2 organized by

the government. As all government-organized forums were held from December 2004 to

January 2005, the researcher later attended three other public forums that were organized

by the community at the later stage. These were of particular importance as the

government had revised its proposal in October 2005 and through attending these forums

or seminars, the researcher gained a better understanding on the views of the government,

the public and different stakeholders on the development of the WKCD. Data collected

through both direct and participant-observation has provided a foundation for the

examination ofthe accountability secured in the WKCD.

2.5 Limitations of the Research

This research, like all other researches, contains several limitations. First, the result

of this research cannot be generalized. By nature, case study usually involves a detailed

investigation of a particular case. Hence, to some extent, case studies 'trade detail for

generalizability' (Jensen and Rodgers, 2001). Although the research findings are not

generalizable, rich details of the case are of great value to the meta-analysis of case studies.

With appropriate modifications, findings of this research can contribute to developing a

more complete database and meta-analysis can then be applied (Jensen and Rodgers,

2001).

Additionally, the data collection methods have their inherent weaknesses which affect

the reliability and validity of findings. Although there are six sources of evidence,

including documentation, interviews, direct observations, participant-observation, archival

records and physical artifacts for case study (Yin, 1989: 79), only the first four sources of

evidence are used. Owing to the nature and the development of the case, no archival

records and physical artifacts can be examined. The selection affects the reliability and

validity of findings adversely.

2.6 Summary

This qualitative research aims to develop a framework for studying accountability in

PPPs. It seeks to examine the extent to which the criteria for effective accountability in

PPPs have been achieved through the use of cross-national-based documentary reviews,

2 The government had organized 8 public forums altogether. The researcher attended six of these. Two were designated for the arts and cultural groups, two for the professionals whilst the rest were designated for the general public.

16

in-depth interviews and observations with the stakeholders of the case - West Kowloon

Cultural District PPP project. 15 in-depth interviews were conducted with different key

informants, including screened-in proponents, elected councilors, representatives of arts

and cultural groups, pressure groups and an advisory body.

17

Chapter 3

Conceptualizing Public Private Partnership and Accountability

3.1 Introduction

Understanding of PPPs and related concepts is crucial in assessing accountability in

PPPs. This chapter explores first the core concepts and related issues in PPPs through

examining the international and local literature. It is organized into two major sections.

First is the conceptual discourse on PPPs. In this section, the nature of the public and

private sector and the tenn PPPs are defined, while typology and partnership building

process are elaborated. The focus then shifts more specifically to the application of PPPs.

Issues like the drives for governments to adopt PPPs, and its potential benefits and risks

are discussed. Lastly, the concept of accountability is examined.

3.2 Public and Private Sector

Society is generally divided into three well-institutionalized sectors, namely the

public, private and the third sector. The state and public sector are interchangeable in the

sense that they both refer to legitimate institutions which exercise authority over

populations (Osborne, 2000). Therefore, government institutions at various levels (such as

national, provincial and local levels) are included in the public sector.

Institutions outside the public sector are private. They can be classified as either

being for-profit or not-for-profit. Commercial enterprises and business comprise the

profit-oriented private sector. Non-profit organizations, non-governmental organizations,

voluntary and religious groups, and households belong to the third sector.

Generally speaking, the third sector locates between the private (for-profit) and the

public sector (Anheier and Seibel, 1990). Some academics use the tenn 'nonprofit' or

'voluntary' or 'non-governmental' to describe this sphere. According to Etzioni (1973), the

third sector is developed to match and balance the role of the market and the state through

'combining "the best of both worlds" - efficiency and expertise from the business world

with public interest, accountability, and broader planning from government' (Etzioni, 1973:

315). Salamon (2001) identifies six key features of this sector, namely fonnal, private,

non-pro fit-distributing, self-governing, voluntary and of public benefits (see Table 3.1).

Organizations with these features belong to the third sector.

18

Table 3 1 Key Characteristics of the Third Sector Key Characteristics Description

Formal Institutionalized; with a formal charter of incorporation

Private Institutionally separate from government; although the third sector

organizations may receive government support, they must be

fundamentally private institutions in basic structure

Non-profit-distributing Although the organizations may accumulate profits in a given year, the

profits must not distributed to the organizations' 'owners' or governing

board

Self-governing Equipped to control their own activities with internal procedures for

governance and are not controlled by outside entities

Voluntary Involving some meaningful degree of voluntary participation, either in

the actual conduct of the agency's activities or in the management of its

affairs

Of Public Benefits Serving some public purpose and contributing to the public goods Based on Salamon (2001)

The major distinction between the public and private sector is that the market seeks

efficiency and offers competition whilst the state plays a major or even monopoly role in

most public service delivery. Hence, civil servants usually lack market driven incentives to

work efficiently and effectively. On the accountability issue, the for-profit organizations

are generally accountable only to their stockholders or owner. Conversely, as the

legitimacy of government comes from the consent of the people, in order to be responsive

and accountable to all interests in the society, decision-making in public sector is usually

slow and may be subject to intense public scrutiny (Schaeffer and Loveridge, 2002). Other

key differences between the public and private sector are listed in Table 3.2.

Table 3.2 Differences between public and private sector organizations Key distinguishing Private Public features

Principal .. Equity holders .. Local community

stakeholders .. City institutions .. Direct service users/ clients

.. City analysts .. Elected representatives

.. Parliament

Key outcomes .. Shareholder value .. Economic, social and environmental .. Profit well being of the community .. Market share .. Honest and impartial advice to the .. Share prices elected representatives

Scope (range of .. Determined by business .. Determined by statutory products/ services, imperatives requirements and! or social sectors, geographic .. Managers exercise high considerations spread) levels of discretion .. Managers exercise low levels of

discretion

19

Key distinguishing Private Public features

Scale (range of * Determined by business * Partially dictated externally vertically linked imperatives * Managers exercise low/ medium activities) * Managers exercise high levels of discretion

levels of discretion

Time horizons * Short-term * Long-term Re-invention * High * Low frequency

Entry/ exit * Flexible * Inflexible opportunities * Managers exerCIse a high * Managers exercise low levels of

level of discretion discretion

* Decisions based on tangible * Decisions based on intangible social economic considerations consideration

* Ease of exit! entry * Exit! entry inflexibility, social encourage taking risk on responsibility and fiduciary duty new ventures discourages taking risk on new

ventures

Targets * Determined at the discretion * Predominately established externally of managers by politicians

Opportunity for * High * Low/ medium aligning the interest

of principal/ agent

Customer focus * Highl moderate * Moderate/ low Pursuit of quality * Yes if it makes commercial * Yes if it makes social sense

sense and no if it does not

External! internal * External m the case of * Internal in most cases focus progressive organizations * Supply driven

* Demand driven Working practices * Flexible * Dominated by job description!

* Subject to management tradition discretion or local * Often subject national bargaining/ bargaining medium level of management

discretion

Main cultural traits * Competitiveness * Fairness * Efficiency * Loyalty * Entrepreneurialism * Respecting traditions * Encouragement of initiative * Respecting hierarchy * Achieving agreement * Reliability

* Honesty * Honesty

* Offer goods/ service it * Offer services at all costs makes economic sense

Sources: Ghobadian et aI., 2004: 297-298

Clearly, the public and private sector differ fundamentally. However, in light of the

20

inherent weaknesses of the public sector in public servIce delivery, for instance, the

bureaucratic 'red tape' and also the international trend in New Public Management,

collaboration between the sectors, in particular, Public Private Partnerships, has emerged

as a key strategy in service delivery.

3.3 Public Private Partnership

In order to define PPP, it is important to know first the meaning of partnerships.

Unfortunately, in the existing literature, the concept of partnership is ambiguous. Although

definitions of partnership vary, several underlying assumptions are usually adopted in

defining the term in relation to public and private sector joint action. First, partnership is in

a form of synergy through which 'the sum is greater than the parts' (Brinkerhoff, 1999).

Second, partnership requires involvement of the participants in both service development

and delivery stages, although the participants may not necessarily be equally involved in all

stages.

These shared assumptions, however, fail to construct a formal definition for

partnerships. Some academics define partnership in a broad sense with the meaning of

partnership varying from 'simple coordination and coalition to more participatory terms

such as mutual collaboration, common goal and shared responsibility' (Haque, 2004: 272).

In response, Cigler (1999) develops a continuum of partnerships which include

networking, cooperative, coordinative and collaborative ventures depending on the

examination of complexity of purposes, intensity of linkages and the formality of

agreement reached.

Academics attempt to define partnership in terms of an ideal. For Brinkerhoff (2002),

'partnership is a dynamic relationship among diverse actors, based on mutually agreed

objectives, pursued through a shared understanding of the most rational division oflabour

based on the respective comparative advantages of each partner. Partnership encompasses

mutual influence, with a careful balance between synergy and respective autonomy, which

incorporates mutual respect, equal participation in decision making, mutual accountability

and transparency' (p. 21). However, as this type of definition may fail to reflect the

partnership in practice and may not be universally applicable, this is not a good way to

define partnership.

Instead of developing a formal definition for the term, several features of partnerships,

which are commonly found in the literature, will be used to describe 'partnership'. Peters

(1998) identifies four general characteristics of a partnership: 1. it involves two or more

21

actors; 2. each participant in partnership is a principal; 3. there is an enduring relationship

among the actors involved in a partnership, with some continuing interactions; 4. a

partnership implies some shared responsibility for outcomes oftheir joint activities.

In the literature, two other characteristics are usually used to describe partnerships.

First, a partnership is usually cooperative in nature, with the objective to bring the strengths

of the participants together and with weaknesses minimized. Carroll and Steane (2000)

define partnerships as 'cooperative ventures that rely upon agreement between actors in

return for somt? positive outcome for each participant, which could be some economic or

social goal or potential for synergy' (p. 37).

Mutuality is another fundamental feature of partnerships. There are multiple meanings

of mutuality. First, mutuality means mutual dependence and entails the rights and

responsibilities of each actor (Brinkerhoff, 2002). Organizations which are regarded as

'embedded in mutuality' have a strong mutual commitment to the shared goals and

objectives. Moreover, when partners involved are able to benefit equally from partnership,

the relationship tends to be more enduring and high performing (Austin, 2000; Kanter,

1994). To be specific, interdependence is a core value in mutuality. In partnership, a greater

degree of process integration and frequent interaction and communication are usually

observed. Whilst for the decision-making power, it is equally shared among the parties.

Thus, both of them have the chance to influence their shared objectives.

As PPPs can include a range of contractual relationships and structures for different

purposes, the concept of PPPs is somewhat ambiguous. In particular, the view on whether

privatization should be regarded as a type of PPPs varies. Privatization, broadly defined, is

using the private sector to meet partially or wholly public needs which originally were the

responsibility of the state. The term embraces a wide range of activities, ranging from

selling government-owned enterprise to contracting out public services (Savas, 2000; Klijn

and Teisman, 2000; Linder and Rosenau, 2000; US General Accounting Office, 1998; The

Ontario Secondary School Teachers' Federation, 2000). Therefore, some governments and

academics define privatization as a category of PPPs by placing it at one end of a

spectrum with conventional procurement at the other (Leighton Holdings, 2004; Hagger,

2004; Ghobadian et aI., 2004). Moreover, some scholars argue that PPP 'is just

privatization (a process with pejorative connotations in some places) "by the back door'"

(Harris, accessed in 2004).

In contrast, several scholars propose that privatization is fundamentally different

from PPPs which they seek to define more narrowly. Middleton (2000) suggests that PPPs

22

are the successor of privatization (as cited in Li and Akintoye, 2003). On the other hand,

as institutional setting may be altered by PPPs, some claim that PPPs are completely

different from privatization (Faulkner, 1997; Collin, 1998) (as cited in Li and Akintoye,

2003). If taking a practitioner, rather than an academic, view, privatization and PPPs are

distinctive in fields such as responsibility, ownership, service nature, service level and

quality, risk and reward, and service monitoring. Table 3.3 illustrates how such differences

are perceived by the Singapore Government. Hence, in this dissertation, privatization is

regarded as being fundamentally different from PPPs.

Table 3.3 A Comparison between privatization arrangements and Public Private Partnerships

Privatization Public Private Partnerships

Responsibility The private sector is responsible for Responsibility for services remains with the delivery and funding of the the public sector, which then delegates services. Consumers generally buy the service delivery to the private sector. these services using their own The public sector remains in control of resources and the individual service the quality and amount of services providers are responsible for making purchased

Ownership

resource allocation decisions

Ownership rights or interests In Legal ownership of any assets can be public sector assets are sold to retained by the public sector private sector investors and the benefits and responsibilities associated with asset ownership are vested in private shareholders

Service nature The nature and scope of service The nature and scope of sefV1ce provided by a privatized enterprise is provided by the private sector IS

determined largely by that enterprise determined by the public sector as client itself and the public sector retains a on the basis of contractually specified purely regulatory role outputs

Service Level The level and quality of service The level and quality of servIce and Quality delivered is shaped by the degree of delivered is shaped by the contract and

competition In the market, with market forces dictating prices, volumes and quality

output specification. Service pricing, volumes and quality are specified in detail and the public sector client then holds the private sector contractor responsible for the delivery of these specified outputs over the term of arrangement

23

Privatization Public Private Partnerships

Risk and The private sector accepts all the Risks are shared between the public and

Reward risks inherent III a business and private sectors, with individual risks

shareholders are exposed to the being allocated to the party best able to

profits and losses arising from that manage them. Rewards and benefits are

business shared between the public and private sectors.

Service The ability of the public sector III The public sector retains the ability

Monitoring monitoring and influencing the through the contract to monitor and

nature and quality of service delivery influence service delivery over time.

over time is limited. Sources: The Office of the First Minister and Deputy First Minister, 2002

According to a broad definition, contracting out, which describes the phenomenon

that an organization (principal) delegates its responsibility for service delivery or the

provision of goods to another organization (agent) through contracts, is another type of

privatization (Ascher, 1987). Again, some fundamental differences exist between the terms

and make them different from one another. Details of their differences are listed in Table

3.4.

Table 3.4 A Comparison between contracting-out arrangements and partnerships Contracting out Partnership

Government and company (or consortium) Government and company (consortium) are involved

are involved in principal-agent relationship in joint decision making and production

Government defines the problem, specifies Both parties are involved in joint processes early on in

the solution and selects a private company order to develop joint products that contribute to both

that can produce results in a cost-efficient their interests

way

Benefits of contracting out arrangements Benefits of partnership arrangements especially especially concern efficiency (quicker and concern increasing effectiveness (synergy and cheaper) enrichment of output)

Keys to success are unambiguous definitions Keys to success are an interweaving of goal, of goals, projects, rules of tendering, rules of establishing rules for ongoing interaction, developing

selection and rules of delivery rules and tailor-made assignments concerning joint effort and production commitments

Based on the principles of project Based on the principles of process management management because there IS a clear because the joint goals, the art of financing, principle, clear goals and well-defined realization and utilization remain subject to joint project specifications decision making

Contractual transparency regarding rules of Mutual trust is crucial for lasting relationships tendering, selection and delivery and rules of between partners who maintain their own interest, inspection are crucial for a good relationship ways of working, accountability and financing

principles .. Source: KhJn and Telsman, 2000: 86

24

There is no formally agreed definition ofPPP in the existing literature. Thus, different

organizations and countries define PPPs differently. For example, the United Nations

defined PPPs as 'an effective means of establishing cooperation between public and

private actors and to bundle financial resources, know-how and expertise to address ...

needs. PPPs offer alternatives to full privatization, combining the advantages of both the

public and the private sector' (United Nations, 2002).

Similarly, 'a co-operative venture between the public and private sectors, built on the

expertise of each partner, that best meets clearly defined public needs through the

appropriate allocation of resources, risks and rewards' is embraced as the definition ofPPP

by the Canadian Council for Public Private Partnerships (2004).

Furthermore, the National Council for Public-Private Partnerships (2004) of the

United States stated a PPP to be 'a contractual agreement between a public agency (federal,

state or local) and a for-profit corporation. Through this agreement, the skills and assets of

each sector (public and private) are shared in delivering a service or facility for the use of

the general public. In addition to the sharing of resources, each party shares in the risks

and rewards potential in the delivery of the service and/or facility'.

As the 'heart of the government's attempts to revive Britain's public services' (BBC

News, 2003), PPP is defined as bringing the 'public and private sectors together in long

term partnerships for mutual benefit. The PPP label covers a wide range of different types

of partnerships ... ' in Britain (HM Treasury, 2000).

In Hong Kong, PPPs have been defined as the 'approach where the public and the

private sectors both bring their complimentary skills to a project, with varying levels of

involvement and responsibility' (Efficiency Unit, 2003).

Of the definitions cited above, several elements are commonly found. First, a PPP is a

co-operative venture between the public and the private sector. According to Carroll and

Steane (2000), PPPs, in a broad term, are 'agreed, co-operative ventures that involve at least

one public and one private-sector institution as partners'. Partnerships of two different

actors would bring the strengths of actors together and their respective weaknesses would be

minimized in a synergetic fashion. Nowadays, most governments are faced with budgetary

pressures, social and technological changes, and increased demand for better services.

However, bureaucracy, which is usually criticized as inefficient, rigid and bulky, could

hardly meet these growing demands. Instead, with the profit-making and market-oriented

nature, the private institutions of society function more efficiently and effectively, with

more innovation and flexibility. Thus, the co-operative nature of PPPs would finally

25

enhance the efficiency and effectiveness of public service delivery with public interest

safeguarded.

Secondly, there is an endurable and stable relationship between actors, with continuing

interactions. Large investment from the private sector is usually experienced in PPP. In

order to provide an attractive and reasonable return, medium to long-term tenders are

usually issued. Hence, in defining what is PPP, Hanss (2001) states that it is 'a form of

project specific or long-term cooperation between public institutions and private service

providers'. With the long-term relations, continuing interactions, like bargaining and

negotiation are common in daily management of the project. Participants in PPP are not in

principal-agent relation. Instead, both of them are the principal with some share of authority.

Trust, flow of information and cultural compatibility are crucial in developing a close

relationship between partners (Ghobadian et aI., 2004).

Moreover, each actor should contribute something, for instance, resources and

expertise, to the project with an agreed degree of involvement. The Ontario government

highlights the importance of contribution by defining PPPs as '[gJovernment provides

services with another party where each contributes resources and shares the risks and

rewards' (Whorley, 2001). In the PPP agreement, clear role and contribution of each partner

are usually stated. Each actor would bring some resources to the project. Clear transfers of

material resources, like capital and land, are usually found in the project too. Whilst

transfers of immaterial resources, including authority and experience, are less obvious

(Peters, 1998).

Furthermore, shared responsibility is another common element. In identifying the

basic requirements ofPPPs, Grant (1996) lists four elements including shared authority and

responsibility. As the relationship between the public and private sector is as partners in

PPPs, decisions should be made through negotiation and both actors should have a say in the

process. Therefore, shared responsibility and risks are the products of negotiated decisions

(Peters, 1998).

Overall, PPPs can thus be seen as medium to long-term arrangements which aim to

bring the public and private sector together on an equal basis - albeit with different levels of

involvement and responsibility - but in a way that will enable the PPP project to deliver

benefits from the complimentary skills, expertise and finance of both partners.

3.4 Types of Public Private Partnership

In order to gain a better understanding on the relationship between the public and

26

private sector in a particular PPP project, it is necessary to know what combination of

functions the project has undertaken. Allan (2001) suggests there are 10 key functions:

Design; Build; Finance; Operate; Maintain; Own; Transfer; Lease; Develop; and Buy

(Allan, 2001). The following types ofPPPs reflect different mixes ofthese 10 functions and

the terms are explained below (Legislative Council Secretariat, 2004).

(a) Build-Develop-Operate (BDO)

Under a BDO-type partnership contract, the private sector renovates, modernizes, or

expands the existing facility which they are obligated to lease or buy from the

government.

(b) Build-Operate-Transfer (BOT)

The contractor is responsible for building, financing (or part of the financing),

maintaining and operating a facility for a period of time, before finally transferring

its ownership back to the public sector. The private counterpart will collect user fees

to cover the cost of the project and make a reasonable return.

(c) Build-Own-Operate (BOO)

The private party constructs, owns and operates a public facility. Ownership of the

facility will not be transferred back to the government.

(d) Buy-Build-Operate (BBO)

For those existing public-owned facilities which need rehabilitation or expansion, the

BBO-type PPP may apply. The private sector will buy the asset from the government

and run the facility more cost-effectively. Several agreed specifications over pricing,

safety, and quality, for example, can be listed in the franchise agreement.

(e) Design-Build (DB)

The private counterpart is responsible for designing and constructing the facilities

while the responsibilities for the operation and maintenance are in the hand of the

public sector.

(f) Design-Build-Finance-Operate (DBFO)

Projects will be designed, constructed, financed and operated by the private sector.

The state will pay specific payments to compensate the operator.

(g) Design-Build-Maintain (DBM)

The responsibilities allocation of DBM is similar to that of DB, except that the

responsibility of maintaining of the facilities is sent to the private sector.

27

(h) Design-Build-Operate (DBO)

Although the legal ownership remams on the public agency, the single private

tender-awarder will be responsible for designing, constructing and operating the

public facility.

(i) Developer Finance

Through financing the construction or expansion of a public facility, the private

partner is granted permission for building residential, commercial stores, and! or

industrial facilities at the site. The developer may even operate the facility under the

supervision of the state and earn money through charging the users.

G) Operations, Maintenance and Management Services Contract

Although the Operations, Maintenance and Management Services Contract is similar

to the service contract, the private partner of the former is solely responsible for

operating and maintaining a public facility and making day-to-day decisions.

(k) Tax-exempt Lease

Through providing loan to the public sector, the private party acquires title to the

asset, but has to transfer it to the state at the beginning or end of the lease term. The

payment towards interest paying is tax exempt.

(1) Turnkey Transaction

The contract of turnkey transaction states clearly that the private sector entity has to

design and build a facility in line with the agreed and specified performance

standards for a fixed price. Either the public or the private sector is the financer and

the owner ofthe facility (Legislative Council Secretariat, 2004).

Although the relationship between the public and private sector varies in accordance

with the types of PPP, all PPP projects undergo largely similar processes of partnership

building.

3.5 Partnership Building Processes

Conceptualizing the dynamic process of partnership building is essential for

understanding PPPs. In the existing literature, there are several ways to describe and

conceptualize this process. Among them, most are in sequential stages. Sullivan and

Ske1cher (2002) put forward a life-cycle paradigm. Development of partnership is

described as a series of sequential stages: pre-conception, initiation, formalization,

operation and termination (see Table 3.5).

28

Table 3.5 Life-Cycle Paradigm

Stage Description

Pre-conception where the various parties become aware of the advantages of or requirement for co-operation

Initiation III which discussions and negotiations build a commitment for co-operative activity

Formalization where a governance structure is agreed and the collaboration establishes an identity

Operation the undertaking of whatever activities are within the remit of the collaborative venture

Termination the closure, transfer or transformation of the collaboration Sources: Sullivan and Skelcher, 2002: 119

Through observing micro-level social interactions of partnerships, Ring and Van de

Ven (1994) generate the social process paradigm to conceptualize the dynamic of its

development. This cyclical framework contains three stages: negotiating expectations,

making commitments, and executing plans. Assessments on efficiency and equity are

made at each stage to determine the continuity of partnership (see Figure 3.1).

Figure 3.1 Social Process Paradigm

NEGOTIATIONS

of joint expectations risk 8< tms! through

COMMITMENTS

lor future action througb

01 commitment. through

c: role interactions )

personal interactions

Source: Ring and Van de Ven, 1994: 97

In practice, partnerships building process is usually more complicated. In the United

Kingdom, the HM Treasury identifies fourteen steps in the Private Finance Initiative (PFI)

procurement process3 (Demirag et aI., 2004b) (see Table 3.6).

3 In the United Kingdom, BOT-typed PPPs is named as Private Finance Initiative (PFI).

29

Table 3.6 The PFI procurement process identified by the HM Treasury, the United Kingdom Steps Description

1. Establish business needs Procurement proceeds only after a rigorous examination of business

objectives, needs and constraints including that of affordability.

2. Appraise options The cost and benefits of the various options including do nothing, do

minimum, traditional procurement and PFr are examined.

3. Prepare an outline An OBC, supporting the case for investment and for the PFr approach,

business case (OBC) and a based on the options appraisal, is prepared. It specifies the output

reference project specification rather than 'how' the service is to be delivered. A reference

project, usually a public sector comparator (PSC), is prepared for

benchmarking purposes.

4. Create a project team A procurement team, led by a full-time project manager, and a project

and proj ect board steering board to which it reports and which can take decisions, are

appointed. The project team needs to include people with the relevant

skills required in the PFr negotiation process and users.

5. Decide tactics This involves deciding how much information to request at the

pre-qualification, when to seek fully costed proposals and when to select a

preferred bidder.

6. Invite expreSSIOns of Advertisement includes explanation of project, indication of the

interest; publish Official information required for any assessment of the potential supplier's

Journal of European economic and financial standing and technical capacity, and the criteria

Community (OJEC) notice for award.

7. Pre-qualify bidders The general competence of the interested suppliers is assessed. Proposals

for the particular project are not covered.

8. Shortlist bidders Bidders are short-listed based on specific competence (e.g. risks

management). Bidders not taken forward are informed and debriefed

quickly on why they were not selected.

9. Refine the appraisal The OBC and any PSC are further refined in the light of new information.

The affordability and funding arrangements are reaffirmed.

10. Invitation to negotiate The rTN specifies the services required in output terms; the constraints on

(ITN) the project scope; the proposed contractual terms (lengths and payment

mechanism); the criteria for evaluation of bids and the scope for variant

bids (such as variations on proposed contracts duration, risk allocation)

11. Receipt and evaluation Bids received are evaluated in accordance with the principles and criteria

of bids set out in the !TN document. From the best and final offers received, the

preferred bidder is then chosen.

12. Selection of the The preferred bidder is selected and the PFI proposition is retested against

preferred bidder and the the key VFM and affordability criteria. Risks transferred to the private

final evaluation sector under PFr are costed and added to the PSC. The expected

accounting treatment of the contract is reconfirmed with the client's

auditors.

13. Contract award and Once the contract is signed and a contract award notice placed in the

financial close OJEC, the contract is implemented.

14. Contract management New processes, systems and management systems are put in place. Based: Demlrag et aI., 2004b

30

As the advocate ofPPPs in Hong Kong, the Efficiency Unit of the Hong Kong Special

Administrative Region also details eight main steps (see Table 3.7) in the procurement

process in its introductory guide to PPPs.

Table 3.7 The PPPs establishment procedures identified by the Efficiency Unit of the Hong Kong Special Administrative Region

Step

1. Mobilisation and

Development of a Business

Case

2. Funding

Actions involved

» Conduct needs analysis, market testing and PPP feasibility study

» Establish an Intelligent Client Team (lCT) comprising civil

servants as well as outside expertise if required

» Establish whether a site is available, if a physical site is required » Establish what services/ facilities are required

» Prepare a draft Statement of Requirements » Consider whether to accept proposals for enhanced or other

commercial 'non-core' facilities/ services on the site » Assess risks

» Prepare Public Sector Comparator (PSC) with the assistance of other government departments, e.g. a works department, and seek

policy endorsement (this step can be skipped if qualitative or policy predominate, or the project is financially free-standing)

» Submit a bid via the policy bureau for funds through the Resource Allocation Exercise process

3. Consultation and Land » Conduct consultations Requirements » Seek necessary authorities' agreement on land use

4. Expression of Interest » Initiate an Expression of Interest exercise

Exercise

5. Policy and Financial » Consult and seek approvals of Public Works Subcommittee and

Approvals Finance Committee of the Legislative Council

» Determine detailed commercial arrangements » Seek draft land grant conditions

6. Procurement and Selection » Instruct Department of Justice on drafting of Request for Proposal

7. Service Commencement

document! contract

» Finalise Request for Proposal documents and seek approval from the relevant bid evaluation committee to be approved by

Secretary for Financial Services and the Treasury

» Establish bid evaluation committee including the necessary departmental/ technical/ financial experts

» Issue Request for Proposal » Evaluate proposals » Negotiate with bidder(s)

» Award contract

» Commence construction, if construction is required » Commissioning of facility and commence service delivery

31

Step Actions involved

8. Payment and Contract ~ Make payment for the facilities/ services provided

Management ~ Defer or reduce payment, if performance is unsatisfactory

~ Institute investigations and issue warning, if there is continuous

serious non-performance

~ Terminate contract, if the bidder fail to perform

~ Conduct joint inspection towards the end of the contract

~ Hand over facilities (at the end of the contract) Based: EffiCIency Umt, 2003

These frameworks are different in certain aspects so as to fit their local context. For

instance, in the United Kingdom, an Official J oumal of European Community notice should

be published to invite expressions of interest towards the proposed PFI project. Whilst in the

introductory guide published by the Efficiency Unit of Hong Kong, the role of the

Legislative Council is highlighted, for example, Public Works Subcommittee and Finance

Committee should be consulted and the project should be approved by these committees

before the procurement and selection process begin.

However, they are also similar in the sense that four main stages are identified:

1. Initiation (The Public Private Partnership Decision)

The feasibility study, project team establishment and the preparation of project

documents, like project brief, pre-qualification and tender documents are included in

this stage.

2. Set up (Award of Tender)

This is the stage for selecting the qualified contract bidder. Thus, pre-qualification and

shortlisting, tender evaluation, negotiations and award are the main elements of this

stage.

3. Design and construction

This stage includes optimization of inputs, design and work checks.

4. Operations and services

Other than service delivery, possible performance-based payments, penalties for low

standards and dealing with long-term changes are the major components here.

As defined previously, the contractor of BOT-type PPPs is responsible for building,

financing (or part ofthe financing), maintaining and operating a facility for a period of time,

before finally transferring its ownership back to the public sector. In order to develop a

detailed and holistic support framework for PPP's development and implementation, the

32

final stage ofPPP - transfer and post-transfer management - is included below.

5. Transfer and post-transfer management

This is the final stage ofthe project which includes the smooth transfer of properties and

personnel and the selection of a new operator, if applicable (Zhang and Kumaraswamy,

2001).

This five-staged framework is adopted in the study so as to structure the analysis of key

phases of the PPP's development and implementation.

3.5.1 Policy Making Model

As utilizing PPPs is a policy, a policy making model can be adopted also to help

illustrate the process. Through the adoption of the policy making model, the political

process for formulating a PPP policy will be visualized. In the literature, there are six

commonly agreed-on stages in policy making. For example, Theodoulou (1995) suggests

stages that include 1. Problem Recognition and Issue Identification; 2. Agenda Setting; 3.

Policy Formulation; 4. Policy Adoption; 5. Policy Implementation; and 6. Policy Analysis

and Evaluation (see Table 3.8).

Table 3.8 Six commonly agreed-on stages of policy making

Stages Description

1. Problem Recognition This stage draws the attention of policy makers to a problem that might

and Issue Identification require governmental action; problems, if legitimate, then become

issues.

2. Agenda Setting The issue is given the status of a serious matter.

3. Policy Formulation Proposals are developed for dealing with issues

4. Policy Adoption Efforts are made to obtain enough support for a proposal to make it to

the government's stated policy.

5. Policy Implementation The policy mandate is aimed at through public programs and the federal

bureaucracy, often with citizen, state, and local government cooperation.

6. Policy Analysis and This involves examining the consequences of policy actions, including

Evaluation whether the policy has worked. Source: Theodoulou, 1995: 86

From the many models available for studying the policy process, the policy lenses

proposed by Easton's black box model, Kingdon's Streams Model and Sabatier's Advocacy

Coalition Framework, will be introduced one by one in the following section. Among them,

33

Sabatier's Advocacy Coalition Framework appears to be the best fit for helping to analyze a

PPP's development.

3.5.1.1 Easton's Black Box Model

David Easton's Black Box Model is of particular importance in the development of

more sophisticated policy-making models. By systemically analyzing the public policy

making process, Easton (1979) suggests a 4-staged cyclical model: input (demands and

support), the political system (the black box), the output (decisions and actions), and a

feedback loop. As public policy is the product of a system, he further proposes that the

process is influenced by the structural, social, economic and political environments in

which it operates. In this framework, the complex political phenomenon of public

policy-making is conceptualized into a simple model which includes all potential

institutional factors (for instance, the structure of the government and the division oflabour

between the federal and state government are regarded as part ofthe structural environment)

and practical issues (such as the demands or pressure from interest groups) which may arise

in the process. The simplified version ofthe Model is shown in Figure 3.2.

Figure 3.2 Easton's Black Box Model

Inputs: Electi()n results Public opinion Communications to elected officials Medin coverage of issues Personal experiences of decision makers

Source: Birkland, 2001: 196

THE POLITICAL SYSTEM or "THE BLACK BOX"

The political system, translates inputs into outputs. The structural, social,

political, and economic environments influence political and policy making

activhies.

Outputs: Laws Regulations

I----~... Decisions

Feedback influences the pOlitical system and the nature of the demands that continue

the cycle.

3.5.1.2 Kingdon's Streams Metaphor

Instead of analyzing the agenda-setting process in a linear manner, John Kingdon

(1995) views the public policy-making process as consisting of moving and merging

34

streams (see Figure 3.3). He proposes that in order to place a particular issue on the

government agenda, the three streams in his model should come together to create a 'policy

window'. The three streams are the politics stream (politics and public opinion), the policy

stream (existence of potential solutions to a problem), and the problem stream (the attributes

of a problem) (Birkland, 2001). When these streams join together, the 'policy windows',

which are defined as 'opportunity[ ies] for advocates of proposals to push their pet solutions,

or to push attention to their special problems' (Kingdon, 1995: 165), will be opened. Policy

entrepreneurs who are willing to devote their 'time, energy, reputation, money - to promote

a position for anticipated future gain in the form of material, purposive or solidary benefits'

(Kingdon, 1995: 179) then have to seize the opportunity offered to initiate action as

otherwise they will have to wait for another opportunity once this is lost.

Figure 3.3 Kingdon's Streams Metaphor

Problem Stream

Po liey Stream

Politics Stream Time

Source: Birkland, 2001: 225

3.5.1.3 Advocacy Coalition Framework

Window of Opportunity

Sabatier's Advocacy Coalition Framework aims to explain policy change through the

integration of individual interests and values, organizational rules and procedures,

socio-economic factors and policy subsystems (Sabatier, 1993). Originally, the model was

intended to search for an alternative to the stages heuristic. It integrated the best features of

the top-down and bottom-up approaches to policy implementation, and generated technical

information to enhance our understanding of the policy process (Sabatier and Jenkins-Smith,

1999: 117). According to Sabatier, policy change is the product of interactions between

advocacy coalitions, which are defined as 'people from a variety of positions (elected and

agency officials, interest group leaders, researches, etc) who share a particular belief

35

system - that is, a set of basic values, causal assumptions, and problem perceptions - and

who show a nontrivial degree of coordinated activity over time' (Sabatier, 1993: 25). In each

of the policy subsystems of the Advocacy Coalition Framework, there are two to four

advocacy coalitions, who coalesce around a similar set of core values and beliefs, to

compete and compromise. Conflict between these coalitions is mediated by policy brokers,

whose aim to minimize the conflict by generating some reasonable compromises (see

Figure 3.4).

Figure 3.4 Advocacy Coalition Framework

RELATIVELY STABLE PARAMETERS

1. Basic attributes of the problem area (good) 2 •. Basic distribution of natural resources 3. Fundamental sociocuttural values and social structure 4 Basic constHutiooal structure (rules)

EXTERNAL (SYSTEM) EVENTS

1. Changes in socioeconomic condHions 2. Changes in public opinion 3. Changes in systemic governing coalHion 4. Policy decisions and impacts from other subsystems

+

Degree of consensus needed for majorpoJicy

change

" Constraints

and

Resources

of

Subsystem

Actors

Source: Birkland, 2001 :226

..

POLICY SUBSYSTEM

CoalHionA

a; Policy Beliefs b. Resources

Policy Brokers

CoalHion B

a. Policy Beliefs b. Resources

Strategy Al Strategy Bl re guidance re guidance instruments instruments

"-. De~SiOnSbY / Govemmental Authorities

! -+- Institutional Rules, Resource

... __ A_'_J ... ~_en_tS_-I~ P'TP.' Policy Impacts

Among three policy-making models as reviewed above, the Advocacy Coalition

Framework is the best for enhancing an understanding of the partnerships building process,

especially the political process as included in formulating the PPP policy. Since Easton

fails to 'open up' the black box, the political processes entailed in formulating policy, the

model is of limited value in enhancing our understanding toward the partnerships building

process in full. On the other hand, although Kingdon's Streams Metaphor is a

36

sophisticated and useful model in analyzing agenda setting and the processes to open up

the 'policy window', it does not structure another essential aspect in partnership building­

namely the process of negotiation and policy implementation after the policy entrepreneurs

seize the chance, i.e. the opened policy window, to initiate action. Owing to the long-term

contract and the specific nature of PPPs, especially the business mode of providing public

services, various actors and stakeholders are involved at different times in the process of

making and implementing PPP policy. Hence, long term integration of individual interests

and values, organizational rules and procedures is vital in the process. Relatively speaking,

the Advocacy Coalition Framework provides the best framework in analyzing the

partnership building process in full. However, the Framework has its own inadequacies too.

As the Framework is adapted in this research to help explain partnership building

processes, two relevant criticisms will be mentioned. First, the model is strongly criticized

for the problematic definition of 'coalition'. In the Advocacy Coalition Framework, an

advocacy coalition is defined as 'people from a variety of positions (elected and agency

officials, interest group leaders, researchers) who (1) share a particular belief system - i. e., a

set of basic values, causal assumptions, and problem perceptions - and who (2) show a

nontrivial degree of coordinated activity over time' (Sabatier and Jenkins-Smith, 1999).

Some academics, such as Caimey (1997), criticize Sabatier for ignoring the distinction

between insiders/ outsiders in regarding the membership of coalitions. Furthermore, long

term coordination within coalitions is doubtful. In response, Sabatier and Jenkins-Smith

(1999) claim that although fluid and amorphous coalitions are found in the initial stage, they

tum to be stable once the policy subsystem becomes mature. Second, the proposed absolute

division between coalitions is problematic (Caimey, 1997). It may be difficult to

differentiate coalitions just according to core values or beliefs. For instance, although the

core values of Friends of the Earth and Greenpeace may be the same, their different

strategies or approaches to deal with the government may prevent them from long term

cooperation (i.e. to form a coalition). Hence, modification on the definition of advocacy

coalitions is needed.

In this research, groups who share a particular belief system and take part in the

partnership building process will be regarded as a single advocacy coalition. As previously

mentioned, even though some groups of people share the same core values and beliefs, they

may be different in accordance to their nature, organizational structure and strategies/

approaches adopted. Although these different sub-groups (such as interest groups, pressure

37

groups, journalists and academics) are grouped together and are titled as 'a single advocacy

coalition', they are regarded as 'policy memes'. This term, which is borrowed from John's

Evolutionary Theory to describe actors who' operate and compete through political interests

as if they have a need to survive in a similar way to genes in the organisms they inhabit'

(John, 1999), is used so as to emphasize their fundamental differences. Hence, competition

occurs both between coalitions and within a coalition. This revised Framework is adapted

and modified to provide a new outline for analyzing partnership building processes.

3.6 Reasons for Using Public Private Partnerships

In the contemporary review of partnerships between the public and the private sector,

the concept was first developed in the United States in the 1970s. Since the ideology of

President Ronald Reagan - 'reduce big government' and 'reinvent government' - was in

line with the idea, pUblic/private collaboration was further heightened (Moulton and

Anheier, 2001; Colman, 1989). In the United Kingdom, the practice of using the private

funding for public purposes has long been established also. In 1981, Sir William Ryrie of

the Treasury Committee announced a set of rules to govern private funding. And the

Private Finance Initiative, which further encouraged the collaboration between the public

and the private sector, was formally introduced in 1992 (Allan, 2001). Globally, PPP

spread to other countries, including Australia, Canada, Germany, Korea and the

Philippines, at various rates (Osborne, 2000).

Different countries have different reasons for adopting PPP. In some countries, a

mixed rationale is found. In general, there are three main drivers for the growing interest

inPPPs.

3.6.1. Political Motives

~ Investment in Infrastructure

There is a causal relationship between economic growth and infrastructure

development or its enhancement. Furthermore, as some countries have limited government

budgets yet face growth demands for new infrastructure like roads, hospitals and prisons

(Office of the First Minister and Deputy First Minister, 2002), infrastructure building is an

area where PPP is increasingly adopted worldwide.

~ Emergence ofneo-liberalism

The advent of neo-liberalism IS usually claimed to be a factor leading to the

38

increasing private involvement in public service delivery. Since the late 1970s and early

1980s, the public sector was strongly criticized for its monopolistic and bureaucratic

inefficiencies (Linder and Rosenau, 2000). Neo-liberalism, which is driven by the beliefs

that the free market is the 'best regulator and engine of economic growth' (Jauch, 2002)

and that the state 'should play only a minimal role in society' (Smith and Lipsky, 1992),

then became the dominant ideology at that time. This ideological stance brought Margaret

Thatcher, the former Prime Minister of the United Kingdom, and Ronald Reagan, the

former President of the United States, to seek to reduce big government by involving the

private sector in public service delivery.

~ Globalization

The growth of transworld governance mechanisms, which is brought about by

globalization (Scholte, 2000), has led some national governments to adopt PPPs as a

means to deliver public services. In order to be a member of some suprastate bodies,

national governments have to give up part of their autonomy and are compelled to

implement policies or directives of the suprastate bodies. For instance, member states of

the European Union (EU), an advocate of PPPs (European Union, 1999), are obligated to

promote PPPs in their national policies.

3.6.2. Financial Motives

~ Leveraging of Public Funds

With the adoption of PPPs, available private sector capital would be injected into the

construction and provision of public goods and services. Therefore, projects would not be

so directly affected by the financial condition of governments and they would not

aggravate the burden of the public sector when the government is facing budgetary

pressures (Allan, 2001). At the same time, PPPs add value to the financial flexibility of the

administration. Therefore, PPPs are usually placed high on the agenda when there is a

budget deficit.

~ Alternative revenue sources

With the capital injection from the private sector, tolerance to the introduction of

some pricing initiatives, such as toll or user-pay systems, may be increased. Hence,

revenues can be drawn from third parties and the PPP arrangement may allow government

to access the proceeds of some projects which would otherwise be impossible (Allan,

2001). Expensive, but valuable services can also be made available more quickly or more

39

widely under PPP.

~ A Business Opportunity for the private sector

In a PPP, the private sector can take part in public service delivery (including design,

construct, operate and maintenance) which is traditionally the responsibility of the

government. This creates new business opportunities for the private sector.

3.6.3 Managerial Motives

~ Better incentives to perform

When compared to public-sector procurement, the profit-making nature of the

private partner will act as an incentive for performing more cost-effectively. Some

additional incentives, for example, payment will only be made conditionally upon

achieving desired service quality, can be provided in the PPP contract (Allan, 2001).

~ Optimal Responsibilities Sharing

Under PPP, there can be optimal sharing of responsibilities so that each partner in the

PPP can work according to their expertise and add value to the provision of the public

good. The government usually has expertise in recognizing the public needs and

formulating public policies with clear objectives. Therefore, the public sector would be

responsible for defining objectives and desired outcomes without sacrificing the public

interest. Whilst for the market-oriented private sector, it is better equipped with the

management disciplines and functions needed to operate more efficiently and effectively,

and with more innovation and flexibility. Hence, it would be responsible for the

construction and daily management of the services. With the optimal responsibilities

sharing pushed for in PPPs, sectors will bring their strengths (such as skills, knowledge and

expertise) together while weaknesses are minimized (Ministry of Finance in Singapore,

2004).

~ Optimal Risk Management

Optimal risk management is expected to be achieved in a PPP project. In order to

secure value for money, even risk is usually allocated to the party who, through its actions,

could best manage and minimizing it (De Bettignies and Ross, 2004). Therefore, under a

PPP contract, government is usually freed from asset-based risks, for instance, design,

construction and operation risk, and 'becomes the purchaser of a product that is risk-free

in the sense that government does not pay if the service is not delivered or not delivered to

the specific standards' (Lewis, 2002). However, it is worth noting that some risks, for

40

example, project default risk and political risk, cannot be completely transferred to the

private sector. Owing to the fact that the private partner can quit the PPP project whenever

it is not profitable, project default risk cannot be completely shifted to the business (De

Bettignies and Ross, 2004). For the private sector there is also often a question of political

risk shouldered by the public sector when the government changes its strategy, policies or

in ways that impinge upon the PPP, including the cancellation of a project.

Different countries and governments have their own rationale for developing PPPs.

For instance, the rationale for adopting PPP in the water supply and sanitations sector of

Yemen, a water-scarce country, is purely managerial. The centralized national water

delivery agency was criticised for its 'very slack implementation of projects, inadequate

coverage by services, inability of branches to operate and maintain facilities, extreme

wastage of financial, human and water resources and a widespread frustration and low

morale among employees and customers' (Sahooly, 1999:10, as cited in Sahooly, 2003). In

response to the poor management of the agency, the government of Yemen introduced

PPPs in the water supply and sanitations sector. Whilst for the Irish government, PPP is

used to cope with the infrastructure deficit arising under the fiscal constraints (which were

imposed by its membership of the single European currency) (Reeves, 2003). Hence, the

approach to Irish PPPs is underpinned by both financial and political rationales.

In the United Kingdom, a shift of rationale in adopting PPP is observed. As

mentioned previously, the practice of using private funding for public purposes has a long

history. With the ideology of 'reducing big government' and 'reinventing government',

this concept was first introduced by the Thatcher Government in the early 1980s through

the Market Testing Initiative - a process to examine which, the state or the private sector,

is the most appropriate agent in delivering a particular public service. The Major

Government then expanded the program and renamed it as Competing for Quality in 1991.

Under this program, the public and private sector has to compete to offer service and

government-owned-contractor-operated arrangements might be resulted (Pint, Bondanella,

Cave et aI, 2001). Later, in response to the growing demands for upgrading the pubic

infrastructure and services under fiscal constraints (Pollitt, 2002), another market-oriented

programme called Private Finance Initiative was launched. This differed from the previous

two approaches in that private partners are involved in financing, managing and operating

the assets under long-term contracts (Kee and Forrer, 2002).

In 1997, the Labour Party won the General Election. According to the ideology of the

41

left, the market should not be allowed to enter the public domain as social cohesion

aspects will be weakened and public services will finally be turned into consumer

commodities (Corry, 2004). However, in reality, the Private Finance Initiative was further

expanded and renamed as Public Private Partnerships by Tony Blair. To explain the

phenomenon, Corry (2004) suggests that the Labour Government needed money for the

infrastructural developments it had pushed for. Furthermore, the Labour Party had

undergone its ideological transformation. With the influences of the New Public

Management, 'literature on public sector failure' and 'fresh understanding of the power of

incentives and organization in promoting change and innovation', the ideology of the New

Labour was characterized as 'embracing the market and getting closer to 'what works"

(Corry, 2004: 25). By involving the private sector in public service delivery, the New

Labour government can show its transformation to the electorate.

A shift of rationale was thus found to have taken place in the United Kingdom.

Originally, the Private Finance Initiative (renamed later as PPPs) was introduced by the

Conservative Government on financial grounds - upgrading public infrastructure and

service under fiscal constraints. Whilst for the Labour Government, PPPs were led by both

the financial and political reasons.

3.7 Potential Benefits and Problems of Adopting Public Private Partnerships

Supporters of PPPs usually focus on the benefits they may bring, whilst the

opponents identify the potential risks and criticize the for-profit sector as being unable to

deliver public goods. This section, therefore, will discuss the issue in depth, by first,

introducing the potential benefits and problems associated with PPPs; and then examining

the benefits of service delivery via PPPs in relation to the criticisms ofPPP.

3.7.1 Potential Benefits

In the literature, several impressive benefits are claimed to accrue from PPP.

1. Increased Innovation

Usually, government will only list out the service it needs and its output

specifications in a PPP contract. Therefore, room for innovation will be provided 'in

terms of funding packages, delivery of services and construction of the asset' (Ball,

Heafey and King, 2000: 101) In order to save costs, most private partners may make

good use of their innovative capacity and thus innovation may be enhanced.

42

2. Access to new resources

With the adoption of PPPs, the scale of available resources will be increased. The

then Chancellor Kenneth Clarke (1995) of the United Kingdom stated that 'The PFI

is unlocking new resources and will increasingly replace old-style public sector

capital spending, delivering far more on the ground than what went before it' (Clarke,

1995:4). Different types of new resources, including information, expertise and new

technologies (which are usually unavailable in public agency), may be brought by the

joint venture (Osborne, 2000).

3. Improved Efficiency and Effectiveness

Efficiency and effectiveness will be improved through the creation of synergy

between the sectors. Participation of the private sector will enable projects to break

from the bureaucratic 'red tape' and political intervention model (Allan, 2001). Also,

risk, a real project cost, will be borne by both partners (Allan, 2001). For instance,

Arthur Andersen and Enterprise LSE (2000) (commissioned by Treasury Task Force)

found out that 60% of the total cost saving for 17 PFI projects examined comes from

risk transfer. On the other hand, through reviewing 11 PFI school projects, the Audit

Commission (2003) learned that the economic feasibility of most examined schemes

is dependent on the risk transfer as the risk transfer percentage is greater than that of

the value for money. Additionally, having a broader base of expertise and knowledge

will add value to the service delivery. Therefore, greater output might be achieved

with less cost.

4. Better Management and Allocation of Risk

Risks are usually structurally managed (such as formally identified, quantified and

allocated) from the early stages of a PPP project. Also, with the optimal sharing of

responsibilities and costs (each partner will work on areas in which he works best),

some risks will be transferred to the private sector. Thus, costs related to risk

management may be minimised (Allan, 2001). Risk management is a key issue in

Canada. For example, on the Confederation Bridge PPP project, in order to attractive

private sector investment, the Canadian government has guaranteed 'a revenue

stream equivalent to the revenues of the then existing ferry system which the Bridge

replaced' (Pearson, 2001). The government guarantee has not only reduced financial

pressure on both the private partner and the government, but has also ensured that

operating and maintenance risks could be transferred to the private partner.

43

5. Improved standards of service delivery

As mentioned previously, involving the private sector in public service delivery may

enhance innovation and introduce new technologies. The new technologies and

economics of scale often improve the standard and the quality of services (Ministry

of Community, Aboriginal & Women's Services, British Colombia, 1999).

6. Better Asset Utilisation

Operators will be allowed to generate income by sharing public assets with the third

party for commercial use (The Office of the First Minister and Deputy First Minister,

2002). Potentially, sharing government facilities can raise the revenue. With the

expertise (in terms of management) of the private sector, optimal sharing and

utilizing public asset will be achieved with the gain of economic and social benefits

(The Ministry of Finance in Singapore, 2004).

3.7.2 Potential Problems

Like the two faces of a coin, in addition to the benefits identified above, PPPs have

their own problems. Although different forms of PPP are associated with different

problems, loss of control, increased cost, increased political risks, inadequate

accountability and limited competition are those most usually found in literature.

1. Loss of Control

The contractual rights in a PPP arrangement usually entitle the private sector to take

part in decision-making. They may even be involved in making decisions concerning

how services are delivered and priced. Hence, government, to a certain extent, loses

control.

2. Increased Cost

In PPP arrangements, transaction costs can be much higher than that of the

conventional public service delivery. These costs are usually related to the bidding

process, including the costs to seek financial, legal and technical advice, and the costs

of complex negotiations (Ball, Heafey and King, 2000). Some academics even

estimate that the bidding costs spent by the private sector under PPP are seven times

higher than that under conventional tendering (Steward and Butler, 1996). The total

transaction costs incurred in both sectors can outweigh the money saved. As a result,

the true costs of service provision may increase.

3. Increased Political Risks

As PPP is a relatively new concept in public administration, few states have extensive

44

experience. Hence, the state, stakeholders and the community are unfamiliar with

PPPs. Political risks may be raised (Minister of Community, Aboriginal and Women's

Services, 1999). On the other hand, PPPs can also impose more political risks to the

elected officials. As public services have implications for citizens, it is legitimate for

the public to expect that the providers, including PPPs, are accountable to their

performance and the outcomes (Kay and Reeves, 2004). Therefore, elected officials

may be asked to explain in what way the PPP can generate clear benefits that are

unavailable from the traditional methods of service delivery and they may also need to

explain the behavior of their counterparts in the PPP (who are not under their direct

control) (Ministry of Municipal Affairs and Industry Canada, 2003).

4. Inadequate Accountability

PPPs, by nature, are a joint venture of the public and the private sector which involve

sharing responsibilities, risks and decision-making power. As the state is no longer the

sole player in public service delivery, boundaries between and among sectors became

blurred. Hence, the lines of accountability for the service provision are less clear and

the responsiveness to public demands may become lower than that under the

conventional delivery.

5. Limited Competition

Competition is an important element in PPPs. With competition, efficiency, innovation

and cost saving can be achieved (Minister of Community, Aboriginal and Women's

Services, British Colombia, 1999). However, if there are only a few potential private

partners with expertise and ability to bid for the contract, limited competition will

result. As a consequence, the government and the community, as a whole, may be

unable to benefit from the PPP and a 'private monopoly' (The Government of Nova

Scotia, 2001) might arise. For instance, limited competition occurred in a United

Kingdom's PPP project that provides radio services to the police forces. Although the

project was initially well received with more than 70 companies' preceding an

expression of interest, only three bidding consortia submitted their proposals. Later,

two of these merged but then finally dropped out. Hence, only one real bidder was left.

With no doubt, the competitive tension was largely reduced in this project. However,

given that the radio system in use at that time could not meet the required operational

standards, early implementation of the project was preferred. Thus the authority

decided to continue the tender awarding process even without competition. Several

measures, including supplementing the Value for Money exercise by a 'should-cost'

45

model and a fallback option, were adopted so as to safeguard the public interest in

light of the absence of competition (National Audit Office, the United Kingdom,

2002).

3.8 Examination of the Benefits of Service Delivery Using Public Private Partnerships

The potential benefits of PPPs are usually used by the governments to justify their

involving the private sector in public service delivery. For instance, the Chief Secretary to

the UK Treasury claims that ' ... the search for new opportunities to develop profitable

business provides the private sector with an incentive to innovate and try out new ideas -

this in tum can lead to better value services, delivered more flexibly and to a higher

standard' (HM Treasury Private Finance Taskforce, 1999). Hence, the performance of

PPPs, i.e. whether the potential benefits can be materialized with potential problems

minimized, is of significant concern.

In the United Kingdom, most government reports for assessing the performance of

PPPs are positive. The report by the consultant firm Arthur Anderson and Enterprise

(2000), which was commissioned by the government, found that the 29 Private Finance

Initiative projects it examined had achieved monetary gain with, on average, 17% cost

savings over the traditional model (Arthur Andersen and Enterprise LSE, 2000). Hence,

value for money is secured.

Furthermore, in assessing the performance of PPPs in terms of potential delivery

benefits in completed procurements, HM Treasury (2003) concluded the performance of

the 61 operational Private Finance Initiatives projects of varied service areas are, In

general, good as:

* 88% ofprojects were delivered on time or early; * all Private Finance Initiatives projects were delivered within public sector budgets; * no Private Finance Initiatives project was found where the unitary charge had changed following contract signature - other than where user requirements changed; * 77% of public sector managers stated that their project was meeting their initial expectations; * there is scope to reduce procurement times, although there is evidence that new initiatives to tackle this problem are having an impact. * over 75% of clients reported that the Private Finance Initiatives projects have met their expectation.

As the watchdog of government spending, the National Audit Office was largely

involved in the assessment exercise. Although the office has been critical of several

46

Private Finance Initiatives projects, most reports remain positive (Ghobadian et aI., 2004).

On the other hand, several reports are cautious about the use of PPPs. Some even

argue that the potential benefits cannot be materialized (Gaffney and Pollock, 2001;

UNISON, 2002; Robinson et aI., 2000) and thus the label PPP as a 'deal with the devil'. In

the United Kingdom, the opposition even regard PPPs as 'yet again screwing the taxpayer

as public fraud and false accounting, and a sham ... commissioned and directed by the

Treasury with private sponsors being evil bandits running away with all the loot and sons

of Fat Cat' (Hodge, 2004). Whilst in Canada, PPP has been renamed as 'Problem,

Problem, Problem' (Bowman, 2000).

PPPs are suspected of being of dubious value on several grounds. First, they receive

criticism from the 'traditional public administration'. From this perspective, there are fears

that political control over policy-making and service management will be diluted by PPPs

(Bovaird, 2004a). In the 'traditional public administration' model, it is mainly politicians

who are involved in policy-making process and ministers intervene and supervise service

management through day-to-day administration (Mulgan, 1997). However, in PPPs, the

roles of politicians and ministers are reduced in that the decision-making power is shared

with the private company and ministers can no longer supervise the daily operation of

service delivery.

Although the concept of private sector involvement roots in New Public Management,

PPPs receive criticisms from the field too. According to the New Public Management,

resources will be allocated most efficiently through the market as competition will lead to

a lower cost for improved services. Hence, consumers/ end-users will benefit from this

practice. Put it simple, 'competition provides the path to true enlightenment' (Bovaid,

2004). However, PPPs themselves and the long-term service delivery contract pose a

threat to competition. If PPPs are the means for the public sector to maximize its revenues

through the granting of the business as a monopoly, competition among potential private

service providers may be harmed. Furthermore, the statement that end-users will be

benefited from the long-term partnerships with monopolists because the private sector

bears the long-term risks is questionable (Parker and Hartley, 1997).

Third, there are some fears that the public service ethos will be eroded in PPPs. Some

antagonists claim that as 'public sector is the unique repository of the virtues of

selflessness, service and caring' (The United Kingdom Parliament, 2002), it is the only

actor who can deliver public service properly (Corry, 2004; UNISON, 2004). However,

this claim was under strong attack as public organizations failed to meet the public needs

47

and its management was often poor. Thus, some people concluded that public sector may

not be the only sector who can deliver public service effectively. The report titled 'The

Public Service Ethos', published by the United Kingdom Parliament, shares this view by

claiming that 'the profit motive [of the private sector in PPP] may put it [public sector

ethos] under strain' (The United Kingdom Parliament, 2002). Hence, good supervision and

recognition of the need for secure accountability relationships and means is necessary. If

not, the private sector will be the master in public service delivery, but not a servant.

Another common criticism is that public finance is actually nearly always cheaper in

the sense that PPP is a government practice of 'mortgaging the future' (BBC News, 2003).

According to the Department of Finance and Administration, Australia (2001), 'it is

generally more expensive for the private sector to raise capital through private capital

markets, than for the Commonwealth to do so directly'. In practice, the private sector

usually has higher borrowing costs and set up costs when compared with their public

counterparts (UNISON, 2002). These 'extra' costs may finally lead to a large cost of the

PPP project. The first New Labour PFI's hospital in Britain - new £87 million Cumberland

Royal Infirmary in Carlisle - is one example. In total, the for-profit partners will receive

£900 million (£30 million per year for 30 years) for its obligation to operate the hospital

for 35 years4, whilst the cost for public finances would be £180 million. Although £900

million include all related costs, like the availability and service costs, it is still hard to

defend the large figure (UNISON, 2002).

Value for money is one of the major incentives to develop PPPs, especially for

governments which are facing fiscal problems. However, opponents discredit this. The

National Audit Office of the United Kingdom has concluded that the value for money

mechanism - the theoretical public sector comparator - in Private Finance Initiatives!

Public Private Partnerships are 'pseudo-scientific mumbo jumbo where the financial

modelling takes over from thinking and it becomes so complicated that no one, not even

the experts, really understands what is going on' (The Union for Growth, 2003:2). The

discount rate and the value of risk are two main components of the theoretical public

sector comparator, which are used to determine the potential monetary cost or gain. The

discount rate adopted by the government, which is crucial in accessing whether a better

value will be achieved in Private Finance Initiatives when compared to conventional

procurement, is 6% (figure in 2002), which is criticized for being too high by the

4 The contract originally lasts for 30 years. However, it has been extended to 35 years (UNISON, 2002).

48

antagonists (UNISON, 2002; Pearce, 1995). They also claim that there will be a totally

different view on value for money once the discount rates change. Although the discount

rate adopted by the United Kingdom's government was lowered to 3.5% in 2003

(Davidson, 2003), high discount rates are still adopted in other countries, for instance, the

discount rate adopted by the Partnerships British Columbia of Canada, the corporation that

promotes Public Private Partnerships, is up to 8% (Dobbin, 2005). According to the

request for proposals of the Britannia Mine water treatment project, the adopted discount

rate was even higher - 8.12% (partnerships British Columbia, 2004). Similarly, Australia

adopts a high discount rate, 8.65%, in public sector comparator evaluation (Hodge, 2004).

The other indicator for accessing the overall value in Private Finance Initiatives and the

traditional mode of public service delivery is risk transfer. The value for money test

usually supports the private sector involvement once the price on risk transfer is placed.

However, in reality, the value of risk transferred may not necessarily be in favour of PPPs.

Pollock, Shaoul and Vickers (2002) found that 'the value of risk transferred is remarkably

close to the amount needed to close the gap between the public sector comparator and the

PFI [Private Finance Initiatives]'. To conclude, although the government has implemented

a system to estimate the value for money, it fails to calculate the potential value for money

accurately due to the notional nature of the mechanism.

3.9 The Concept of Accountability

Accountability has been regarded as an important attribute in both the public and

private sector. Generally, the private sector adopts accountability mechanisms 'to ensure

that resources are used in the most efficient and transparent manner' (Demeke, 2002).

Whilst for the public sector, accountability is of great value as it serves to achieve a wider

range of objectives. Particularly:

* Control of abuse, corruption and misuse of public power; * Assurance of well-performing public institutions and that public resources are being used in accordance with publicly stated aims and that public service values (impartiality, equality and fairness in citizen treatment) are being adhered to; * Improvement of the efficiency and effectiveness of public policies; * The enhancement ofthe legitimacy of government (Rahman, 2005).

Accountability has long been recognized as an important public ethos because it is 'a

device as old as civilized government itself; it is indispensable to regimes of every kind. It

provides the post-mortem of action, the test of obedience and judgement, the moment of

truth' (Normanton, 1971: 312). Furthermore, it is a precondition for trust building which is

49

crucial for effective government. As Wolf (2000) suggests, 'trust in government is what

makes democratic government effective. Without trust no living democracy and no real

citizenship, without trust no compliance with rules and regulations and no willingness to

pay taxes, without trust no civil service of high standards and without accountability no

trust in government'. Hence, accountability plays a significant role in the formation of a

harmonious society and effective government.

Although accountability is regarded as an important attribute of good governance and

effective government, the concept of accountability is multifaceted in the existing

literature (Sinclair, 1995; Robinson, 2002). Accountability, in a broad sense, is a

relationship in which the accountor must render an account to the accountees for his or her

action or performance (Hayllar, 2000a; Hayllar, 2000b). The Governmental Accounting

Standards Board of America shares this view. It defines accountability as 'being obliged to

explain one's actions, to justify what has been done' (Governmental Accounting Standards

Board, 1987: 21). Hence, accountability is associated with 'the right to receive

information and the duty to supply it' (Gray, 1992: 413). Accountors are usually required

to provide information and owe a duty of explanation to the accountees.

On the other hand, as accountability is usually considered to be achieved through

mechanisms, some scholars define the term by listing the formal requirements and

conditions that establish such mechanisms. Kogan (1986) lists two formal requirements

for the operation of accountability mechanisms: institutional authority and institutional

sanctions. In an accountability relation, accountees should be empowered to hold the

accountors accountable and impose institutional sanctions, such as 'pay, promotion,

continued employment or professional membership' (Kogan, 1986: 26).

To highlight these two dimensions of accountability, some scholars have categorized

them into ex-ante and ex-post accountability (Moncrieffe, 2001). Ex-ante accountability

'allows for a continual check on policies; it also aims to enhance the responsiveness of

agents to those whom they are expected to serve and, by these mechanisms, improve the

quality of representation' (Moncrief fe, 2001:27). Put simply, the emphasis of ex-ante

accountability is on the answerability of the agent. Relatively, ex-post accountability is

straight forward in that public officials are liable to sanction for their malperformance.

Hence, effective appraisal and sanctioning institutional systems are necessary in upholding

the ex-post accountability. In democratic countries, election is the ultimate means to

sanction the executive branch for wrong-doing. No further punishment would be posed on

50

the officials unless they are found guilty of criminal offences5 (Elster, 1999).

In understanding an accountability relationship, three basic questions have to be

answered first: Accountability to whom? For what? How? Owing to manifold sources of

legitimate authority and competing expectations for performance that the accountors face,

the answer to these questions are not simple. In order to answer the question of

Accountability to whom, recognizing the legitimate authorities for whom the accountors

work for or report to is necessary. Whilst the second question urges for a clear

specification of performance expectations, the third question, seems to identify the means

for enacting existing reporting relationships so that the accountors can be held accountable

to the accountees for their actions or performance (Romzek, 2000a).

Like a chameleon, accountability emerges in various forms, including political,

public, legal, parliamentary, managerial, professional, bureaucratic and personal (Romzek

and Dubnick, 1987; Sinclair, 1995; Johnston and Romzek, 1999; Hayllar, 2000b; Demirag

et aI., 2004a). In understanding accountability, the typology offered by Romzek and

Ingraham (2000) is usually adopted. This approach segregates different types of

accountability according to the internal or external source of control and the degree of

autonomy, possessed by the accountors (see Table 3.9).

Table 3.9 Types of Accountability Relationships Source of Expectations and! or Control Internal External

Degree of Low Hierarchical Legal Autonomy High Professional Political L-____________ -L ____________ ~

Source: Romzek and Ingraham, 2000: 242

For each type of accountability, it is associated with different values and behavioral

expectations (see Table 3.10).

Table 3.10 Values and Behavioral Expectations of Different Accountability Types Accountability

Hierarchical Legal

Value Emphasis

Efficiency Rule of Law

Behavioral Expectation

Obedience to organizational directives Compliance with external mandates

Professional Expertise Deference to individual judgment and expertise Political Responsiveness Responsive to key external stakeholders Source: Romzek and Ingraham, 2000: 242

5 However, this would then be the responsibility of the court for punishing the relevant officials.

51

Hierarchical Accountability

Hierarchical accountability refers to the accountability relationships between

supervisors and subordinates. This type of accountability usually entails close supervision

from a higher authority through internal audit, stated regulations and organizational

directives (Romzek, 2000b). Hence, it has long been regarded as a feature of

bureaucracies.

Legal Accountability

For legal accountability, comprehensive external oversight of performance, which is

compatible with legislative and constitutional structures, is usually desired. Typically,

oversight of performance is usually carried out by external reviewers who are outside the

chain of command. Although these reviewers cannot necessarily impose any sanction,

their reports can trigger disciplinary action.

Professional Accountability

Professionals are accountable to their professional or licensing body. Hence, they are

usually guided by the codes of practice and norms. In case of violations of professional

conduct, professional or licensing bodies may impose sanctions according to their

disciplinary mechanisms. Professionals who are working in the public sector may need to

exercise their discretion in order to strike a balance between the demands in accordance

with their professional and public interest, especially if these are competing against one

another (Romzek and Ingraham, 2000).

Political Accountability

Through being responsive to concerns of key stakeholders, administrators are

accountable to them politically. Key stakeholders here broadly include elected officials,

clientele groups and the general public (Romzek, 2000b). Under political accountability,

the public officials, the accountors, 'anticipates and responds to someone else's agenda or

expectation - ones that are beyond the scope of supervisor-subordinate obligations or

professional expertise' (Romzek, 2000b: 27). In democratic countries, the executive

branch is usually held accountable to the legislature. To be specific, ministers are held to

account regularly to the parliament for their performance. Hence, ministerial

responsibility, parliamentary questions, votes of no confidence, budget appropriations and

customers' satisfaction surveys, or even some unwritten regulations to call for the

52

resignations of the ministers are regarded as the instruments of political accountability to

control and pose sanctions on the accountors.

3.10 Summary

This chapter has introduced key concepts and issues of PPPs, for instance, the

definition and typology of PPPs, the partnership building process, the rationale of

adopting PPPs, and their potential benefits and risks, which serves a foundation for

understanding accountability in PPPs. Further, the concept of accountability has also been

studied. In the next chapter, related issues of accountability in PPPs will be introduced. In

developing a framework to study accountability in the West Kowloon Cultural District, a

BOT -typed PPP, these concepts and models are of great value. Other than introducing the

key issues of accountability in PPPs and developing the framework, the next chapter will

also examine the impacts on accountability in PPPs.

53

4.1 Introduction

Chapter 4

Conceptual Framework

Accountability has long been recognized as an important public ethos because it

'provides the post-mortem of action, the test of obedience and judgement, the moment of

truth' (Normanton, 1971: 312). Moreover, it is a precondition for trust building which is

crucial for effective government. As accountability should not be sacrificed in exchange

for lower cost and better performance, studying accountability in PPPs is vital. In this

chapter, a literature review on whether accountability will be enhanced in PPPs or not will

first be mentioned. Then, the amended framework used to study accountability in PPPs in

this research will be presented.

4.2 Will Accountability be Enhanced or Diminished in PPPs?

Although differences lie between PPPs and the traditional notion of public service

delivery, accountability, as it always is, is a core issue. As public services have

implications for users and citizens, it IS legitimate for the public to expect that the

providers, including those involved in PPPs, will be held accountable for their

performance and the outcomes (Kay and Reeves, 2004). The Commission on PPPs in the

United Kingdom (Institute of Public Policy Research, 2001) further argues that 'public

accountability is the pre-condition for the legitimate use of public authority. It is the basis

on which citizens are willing to delegate power to others to act on their behalf ... Without

proper accountability mechanisms organizations delivering services are not subject to

democratic oversight and control, the rights of citizens are uncertain, and services are

unlikely to reflect the needs of service users' (Institute of Public Policy Research, 2001:

231). Hence, a proper accountability system can ensure the fulfillment of public needs and

legitimatization of the use of public authority. Accountability is, as a result, 'an ends as

well as a means' (Institute of Public Policy Research, 2001: 231). In this view, public

accountability is not just an essential issue in PPP at the final stage, but at all stages.

However, it is less straight forward than is usually envisaged in the traditional notion (i.e.

top-down authority held responsible to the public through elected officials (Ketti, 1997)).

On this issue, some academics attempt to argue that PPPs may actually increase

accountability. In a democratic society, political authority lies with the citizens. In order to

be re-elected, politicians often have short-term horizons with little consideration on the

54

accountability of their decisions in the long run. Hence, low-cost bidding, which may

ignore the best life-cycle cost, is often found in outsourcing practices. Under such

arrangements, as the facilities are often under-maintained and the possibility of change

arises, sometimes as the result of political pressures, costs may finally rise above original

estimates as problems have to be dealt with (Kee and Forrer, 2002). PPPs solve this

problem by defining the level of acceptable service and penalties for low standards at the

early stage when formulating the PPP policy. Bidders will need to give a high priority to

long-run, other than to just short-term performance. Thus, from this aspect, the project

itself (PPP) will be prevented from falling into one of the 'public accountability gaps',

which is created by the short-sighted politicians.

In the traditional mode of service delivery, government usually relies on 'continuing

supervision and adjustment to achieve successful results' (Mulgan, 1997: 111). However,

as the government has to work with other organizations in PPPs, an effective controlling

mechanism with well-defined objectives, tasks and expected standards of output is needed.

Accountability will be enhanced with the establishment of the new standards of

performance monitoring and with clarified short, intermediate and long term objectives.

In practice, PPPs usually open up new channels for public participation and

mobilization (Mohr, 2004). The public, in particular, the stakeholders, are usually involved

and actively participate in the policy-making process of PPPs. As a consequence, Pierre

and Peters (2000) suggest that in the context of PPPs, the original hierarchical approach to

public service delivery is now replaced by the policy of negotiation and cooperation.

Undoubtedly, the enhanced public participation in PPPs promotes transparency, openness

and accountability.

Although the adoption of PPPs may enhance accountability, some writers dispute this.

Hughes (2003) argues that ministerial accountability, an effective means to enforce

compliance, may be diminished by the PPP practice. Ministers are responsible for both the

political performance and commercial performance of a PPP program. Even though these

performances may not be in conflict, it is difficult to strike a balance between them.

Moreover, as supervising principals (i.e. ministers or the government) are restricted to

enforce the terms of PPP contracts, they can no longer supervise and intervene into

day-to-day administration, which is the practice in the traditional mode of service delivery

(Mulgan, 1997). Furthermore, the long period of contract in PPP (i.e. 30 years contract for

WKCD) may also reduce the capacity of elected officials or representatives of the public

(e.g. members of the Legislative Council in Hong Kong) to affect the policy direction

55

(Mohr, 2004). Once the contract is signed, elected officials would have only a limited say

in this 'contract-based policy'. Hence, it is suspected that there will be less legislative

scrutiny and ministerial supervision and finally reduced accountability will result (Haque,

2000).

Other than that, certain characteristics of BOT-type PPPs pose more challenges for

accountability. Although there are shared goals in a PPP project in the first place, the

different sectors and different professionals involved have different underlying

orientations and organizational cultures. This may lead to a great variation of underlying

values, operating goals and accountabilities. Eventually, difficulties and challenges can be

created 'in the process of determining the means and ends of the accountability system'

(Acar and Robertson, 2004).

Moreover, asymmetrical power allocation among partners can make accountability

difficult. In PPPs, partners usually hold· different types and amount of power (Acar and

Robertson, 2004). Hence, it may be difficult for some participants, who are less influential,

to take part in the decision-making processes on various policies (including

accountability-related matters).

To conclude, the existing literature has not yet reached the conclusion on the impacts

of PPPs on accountability. However, as accountability is vital in public service delivery,

accountability should not be sacrificed in exchange for lower costs and better performance.

Hence, studying accountability in PPPs is of particular value as this is a means to protect

the public interest.

4.3 Accountability in PPPs

Although differences lie between PPPs and the traditional notion of public service

delivery, accountability, remains, as always, a core issue. In examining accountability in

the United Kingdom's PFI projects, Demirag et al. (2004a) propose to use four dominant

forms of accountability - communal, contractual, managerial and parliamentary

accountability (see Figure 4.1).

Communal Accountability6

Communal accountability alms to seek legitimacy and consensus through

6 In this dissertation, communitarian and communal accountability are interchangeable as both terms aims to seek legitimacy and consensus through consultation and involving the stakeholders in the policy-making process ofPPPs, as defmed in Demirag et al. (2004a) and Demirag et al. (2004b) respectively.

56

VI -....l

Figure 4.1 Accountability Processes from the Public Sector Perspective

Types of Accountabilitv Processes •

General aim of the acc'Ountability process

Specific objecfu--e 'Of the accountability process

Definition 'Of pel"f'Ormance in the proc-fss

Parties invol\'ed in the pr'Ocess

Mechanisms! activities linking acc'Ountability and ped'Ormance

1. Communitarian acc'Ountability

Reaching consensus among stakeholders

Determining general perf'Ormance standards by consulting all relevant interest groups

ResP'Onding t'O the expectations and needs 'Of stakeholders

Project Board Pr'Oject Team User Assurance Group I public

Consultati'On Preparing Outline Business Case, Public Sector Comparator, Selection 'Of Bidders --

Source: Demirag et aI., 2004a

2. Contradua accountability

Fulfilment 'OfPFI 'Objectives by incOIporating them in cootracts

Translating general standards into more specific and binding legal standards

level and quality 'Of seMce Unita!}' Payments and pena1ty clauses Change 'Oroer and flexibility built

Project Team (mostly) C'Ontractors Consultants

Final Business Case Writing Contractual

--dba

3. Manageriaf 4.Padiamentary acc,()untability acc'Ountability

Efficiency and Achievement ofp'Olicy effectiveness in service goals provisi'On

Implementing and Reporting to Parliament evaluating achievement of en the 1egitima1e use 'Of outcome against standards public funds.

Service quality: Economy - Respensiveness Efficiency -Inn'Ovation Outc'Ome

Pr'Oject Monitoring Team Public sector auditors (Private and Public sector) Ministers (representing

public)

Internal reporting: External reporting t'O - M'Onthly review meetings Parliament and. public - Quarterly review meetings

~~ ---. -

consultation and involving the stakeholders in the policy-making process of PPPs.

Through the dialogue with stakeholders, the government can understand and respond to

their needs (Demirag et aI., 2004a).

Contractual Accountability

Contractual accountability processes require the parties involved to 'enter into a

legally binding agreement over standards of performance by laying them down in writing

and in specific enforceable terms' (Demirag et aI., 2004a). In short, PPP participants are

accountable for their performance according to liabilities and obligations which are listed

in the contract.

Managerial Accountability

Managerial accountability is usually found in hierarchical relationships within an

organization and is the procedure to make 'those with delegated authority answerable for

producing outputs or the use of resources to achieve certain ends' (Sinclair, 1995:222). To

be specific, mangers have to ensure that efficiency and effectiveness can be achieved in

service delivery through certain means, for instance, internal structures on implementation,

performance monitoring and evaluation (Sinclair, 1995).

Parliamentary Accountability

Parliamentary accountability is common in liberal democratic countries where government

officials are held responsible for policies under their respective areas. This is an external

means to ensure that the PPP project is on the right track. Parliamentary institutions, such

as the legislature and Audit Commission, examine the performance of projects III

accordance with the agreed terms in contracts and report them to the members of

parliament.

Although these accountabilities can be found at all stages of a PPP project, Demirag,

et ai. (2004b) have clearly indicated the dominated forms of accountability at different

stages of Private Finance Initiative in the United Kingdom (see Table 4.1).

58

Table 4.1 Accountability and the Private Finance Initiatives (PFI) Process PFI stage Description of the stage Forms of

Accountability 1. Initiation • Procurement proceeds only after a rigorous examination Communal

of business objectives, needs and constraints including that of affordability

• The costs and benefits of the various options are examined

• An outline business case based on the options appraisal is prepared. It specifies the output specification rather than 'how' the service is to be delivered. A reference project, usually a public sector comparator, is prepared for benchmarking purposes.

2. Set-up • Create a project team and project board and decide Contractual tactics.

• Then advertisement which invites expressions of interest is posed.

• Interested business parties will be pre-qualified and shortlisted.

• In the light of new information, the outline business case and public sector comparator are further refined. The affordability and funding arrangements are reaffirmed.

• Invitation to negotiate takes place • Receipt and evaluation of bids * Selection of the preferred bidder and the final evaluation * Contract awarded

3.Implementation * New processes, systems and management systems of the Managerial contract are put in place

4. Internal • Progress of PFI contracts is monitored through Managerial monitoring operational review meetings with public-sector project

managers, private sector facilities managers and users of the service

5. External * PFI contracts are assessed for value for money by the Parliamentary monitoring Audit Commission and findings are reported to

parliament, representing public interest Based: Demlrag et aI, 2004b

The framework presents a preliminary effort in understanding the accountability at

different stages of PPPs. Through reviewing the literature, it is evident that communal,

contractual, managerial and parliamentary accountability play a dominant role in PPP

projects.

The ideas of Demirag et aI's PPP accountability framework have been more or less

used to examine accountability in PPP projects in various studies. Kay and Reeves (2004)

criticize that the lack of consultation with stakeholders has undermined the legitimacy

and in turn hindered the degree of accountability secured in Ireland's PPP projects. Other

than communal accountability, Mayston (1999) argues that poor managerial

accountability has also undermined the potential advantages of adopting the PFI in the

59

National Health Service (NHS) of the United Kingdom. He finds that users' need is not

clearly identified and hence future financial commitments on the NHS are not 'properly

planned for or accounted for' (Mayston, 1999). Further, secrecy and the lack of

accountability, high tender costs are other weaknesses of the NHS PFI project, which in

turn pose challenges to efficiency and accountability.

Bovaird (2004b) identifies reduced parliamentary accountability as a potential

problem of PPP in international perspective and argues that this occurs as a consequence

of the increased complexity of the PPP configuration. Similarly, after examining the PPP

projects in New Zealand, Australia and the United Kingdom respectively, Newberry and

Pallot (2003), English and Guthrie (2003) and Mayston (1999) share the view that less

parliamentary scrutiny is found in PPP projects.

In the Melbourne's City Link road infrastructure project, one of the largest PPP

projects in Australia, there is a lack of parliamentary and communal accountability. After

reviewing the project independently, Russell et al. (2000) recommend that 'such projects

should in future be subject to stronger Parliamentary scrutiny, public consultation and

disclosure prior to implementation' (as cited in Hodge and Bowman, 2004: 210).

Experience of the United Kingdom in developing PPPs has also highlighted the

importance of managerial accountability. In establishing a PPP project, the HM Treasury

of the United Kingdom (2006) recommends that managerial accountability should better

be secured via improving the monitoring mechanism so as to shorten the procurement

timescales and costs. Establishing a clear monitoring and progress report mechanism is

also regarded as a recommendation in Arthur Andersen and Enterprise LSE's report

(Arthur Andersen and Enterprise LSE, 2000). Further, in Managing the Relationship to

Secure a Successful Partnership in PFI Projects, published by National Audit Office, the

United Kingdom (2001), it states that positive changes were brought through the adoption

of performance review processes - a mechanism to secure managerial accountability - at

the operational stage.

Contractual accountability also plays an important role in PPP projects. Maintaining

good contractual relationships with contractors is usually regarded as a key to success. The

National Audit Office of the United Kingdom (2001) has made it clear that ensuring value

for money 'requires careful project management and a close attention to managing the

relationship with contractors ... development of a successful relationship ... will be assisted

by the right contractual framework which will include allocating risks correctly and

clearly defined areas of service quality' . Similar finding is found in Ministry of Defence

60

and Central IT Unit, the United Kingdom (1996) and PricewaterhouseCoopers (2001).

On the controversy, the inadequacy of these forms of accountability has led to the

failure of the project or non-materialization of the potential benefits of PPP. Hence, they

could also be regarded as factors leading to the success of a PPP project. For instance, the

independent review of the Berwick Hospital project in Australia found that 'a sound level

of community consultation has been undertaken. Various rights are recognized in a public

interest test and protected through provisions of the contract' (Grimsey and Lewis, 2004:

122). The well secured communal and contractual accountability, to a certain extent, lead

to the success of the project.

However, not enough attention has been paid to the importance of public voice in

PPPs in Demirag et aI's framework. As PPPs usually involve pubic service delivery, which

may affect the interests of the public, public voice either direct through e.g. public

consultation or indirect through representation should be incorporated in the whole

process in PPPs, both before and after the tender is awarded. Although parliamentary

accountability is adopted in Demirag et aI's framework, the public-private partners are

held accountable to the public indirectly and it is not for individual remedy. Further,

though the public is usually regarded as stakeholder in PPPs, and communal

accountability aims to seek legitimacy and consensus through consultation and involving

the stakeholders in the decision-making process, public voice which is why public

representation in governance bodies has became an important issue may only be assured in

the stage of PPPs initiation. In order to bridge the gap and to fit the Hong Kong context -

the legislature in Hong Kong is not as powerful as its counterpart in other democratic

countries in that it lacks institutional power to invoke sanctions where deemed appropriate,

the element of public accountability is adopted as a dominant in studying accountability in

PPPs in this research (see 4.4 for details).

Moreover, Demirag et aI's model as developed lacks due attention to market

accountability that emphases the fact that the market itself can reward or punish market

actors. Market accountability 'includes the responsiveness of service providers to a body

of 'sovereign' consumers. This requires a choice of suppliers as well as a choice of quality

and quantity of service with the ability for the consUmer to opt out of the purchase'

(Hodge, 2005). With the emphasis of the accountability relation between entrepreneurs

and customers, user satisfaction is regarded as one of the means to secure market

accountability (Cooper, 1995). Under PPP arrangements, public services are usually

61

provided by the private sector, as partners with the government, and operated on the basis

of market principle. It would seem that market accountability could be particularly

important in studying accountability at the operations and services stages. This view is

shared by Hodge (2005), Papadopoulos (2005), National Audit Office, the United

Kingdom (2001), Harvard Law Review (2002) and Savas (2000). As a consequence,

market accountability should be regarded as one of the dominant forms of accountability

at the operations and services stages of a PPP project.

4.4 Public Accountability

According to Mulgan (2002), public accountability of government is 'understood as

the capacity of citizens to call their governments to account, to demand explanations and

remedies, and to impose sanctions and new directions'. The public can hold the

government accountable in two ways - seeking for explanation or redress regarding a

particular action or case and entails various ways of questioning the general direction of

policy. Parliament, the Audit Commission, the Ombudsman and formal complaint

mechanisms are the main watchdogs to secure public accountability in the sense that,

depending on the sanctions available to them, they can establish a powerful platform to

hold government to account for its actions. Moreover, the media also plays an important

role as it can exert pressure on the government officials or the ministers.

Due to the fundamental differences that lie between the public and the private sector,

the private sector can be said to be owned by its shareholders rather than by the general

pUblic. Although both sectors try to keep as much information confidential as possible, the

private sector usually is more reluctant to provide information under the name of

'commercial confidentiality'. In this case, the public accountability of the private sector is

focused on the rights of shareholders. Shareholders have rights to access information

obtained from the annual general meetings, directors' report, directors' certification of

accounts and auditors' report (Ffrench, 1994: 202-5). They can also ask questions at

meetings. They even possess legal rights for access company information through the

Courts.

Although parliamentary accountability shares many aspects in common with public

accountability, the coverage of public accountability is greater than that of parliamentary

accountability in that parliamentary accountability only refers to the specific channels of

questioning the general direction of policy via parliamentary institutions whilst the latter

62

includes other informal actors like the media.

Furthermore, with regards to the West Kowloon Cultural District case study, there is

no parliament in Hong Kong. Although the Legislative Council carries some similar

functions as parliaments in democratic countries, such as enacting laws; examining and

approving budgets, taxation and public expenditure; and monitoring the work of the

Government (Legislative Council, 2005c), they are different fundamentally and this is

especially so with regards to accountability roles and the sanctions that the Legislative

Council can exercise over on the government as it seeks to hold the latter accountable. In

the Westminster countries like the United Kingdom, the government is accountable to the

House of Commons (a chamber in the legislature) in that the Prime Minister is the person

who receives majority support from the House of Commons. The Prime Minister is

obliged to resign or seek the dissolution of Parliament once the government loses the

confidence of the House of Commons (The United Kingdom Parliament, 2005). While in

the United States, the Congress (the legislature in the United States) has a crucial role in

the process of impeachment and its powers of sanctions include the removal of the

president. Additionally, when no candidate can gain a majority votes in a presidential

election, the Congress is granted the power of choosing the president and vice-president.

Further, Congress is influential towards the executive in that presidential nominations of

cabinet members, ambassadors and federal judges are subjected to the approval of the

Senate (a house of the bicameral legislature) (Grolier Multimedia Encyclopedia, 2005).

Relatively speaking, most legislatures in other democratic countries are much more

powerful than that of Hong Kong. Since the colonial days, Hong Kong has practiced its

executive-led political system. The Basic Law, the mini-constitution of Hong Kong, has

preserved this and hence constitutionally, the role of the Legislative Council has been

limited. Although legislators can control the awarding of funds to government through the

Finance Committee, this body can only reject, approve or reduce the proposed government

expenditure, but cannot propose or increase it. Moreover, since proposals for discussion on

government finance in the Legislative Council is limited to the government expenditure,

proposals by legislators for raising revenue should not be placed on the agenda (Ma, 2002).

Equally, the policy influence of the Legislative Council is weak. Private bills have been

found as a most effective way for the legislators to propose alternative choice to the

government in the pre-1997 period (Choy and Lau, 1996). However, the power of this

weapon is greatly 'diminished' by Article 74 of the Basic Law that prohibits legislators

from introducing bills that 'relate to public expenditure or political structure or operation

63

of the government'. Further, 'written consent of the Chief Executive shall be required

before bills relating to government policies are introduced', Although under the Power and

Privileges Bill, the Legislative Council is given the power to summon government

officials and set up investigation committees to study serious scandals, the powers of the

Legislative Council in scrutinizing the government are very limited too. This is because

the motion debates, asking of questions and votes of no-confidence have no binding force

on the government. Hence, even though no-confidence motions have been moved against

three senior officials before, including the Secretary of Justice Elsie Leung on 10 March

2000, the Housing Authority Chair Rosanna Wong and the Director of Housing Tony

Miller on 26 June 2000 (Ma, 2002), all of them were not forced to step down7, From this

perspective, parliamentary accountability may not work in the same way in Hong Kong as

it does in democratic countries.

Although the Legislative Council of Hong Kong is not as powerful as its counterparts

elsewhere, its role in PPP policy-making and its development should not be neglected. For

projects which involve public money, the approval of the Finance Committee of the

Legislative Council is required. Moreover, various panels of the Legislative Council act as

the monitor towards government's policies in designated areas through asking questions,

committee works and motion debates. Members can voice out the public or their own

opinions on a particular issue or can ask questions in areas with which they are concerned

and can urge the government for reply. First, questions can be raised in the Council

meetings. Additionally, for issues of public concerns, the Legislative Council House

Committee can even hold special meetings for discussion. Select Committees or

Subcommittees can also be established to examine such issues in depth (Hong Kong

Special Administrative Region Government, 2003b).

Although the West Kowloon Cultural District PPP is financially free-standing and

thus government has tried to implement it while bypassing the Legislative Council, the

Council has been nonetheless participating actively in its development. For instance, the

government has briefed the Legislative Council members on the project on different

occasions (including Panel meetings, Subcommittee meetings and written replies) and at

different time (both before and after the launch of the Invitation for Purpose)

(Subcommittee on West Kowloon Cultural District Development, Legislative Council,

7 Among the three above named officials, only Rosanna Wong had resigned after the passage of the no-confidence vote. Her resignation is led by the public pressures that created, but not the constitutional power of the Legislative Council to remove officials.

64

2005a). Moreover, a subcommittee on West Kowloon Cultural District Development was

established. Hence, in order to stress the role played both by the Legislative Council and

all other relevant informal parties in scrutinizing the development of the proj ect, in this

dissertation, parliamentary accountability is replaced by the broader notion of public

accountability as a criterion in studying accountability in PPPs.

4.5 Conceptual Framework for Studying Accountability in the West Kowloon Cultural District PPPs

In this research, five types of accountability are examined. These include communal,

contractual, managerial, market and public accountability. The laden values and behavioral

expectations of each type of accountability are listed in Table 4.2.

Table 4.2 Laden Values and Behavioral Expectations of Accountability Accountability Laden Values Behavioral Expectations

Communal Responsive to key » Responding to the expectations and needs of stakeholders In the stakeholders in the stage of PPP initiation stage of PPP initiation » Reaching consensus among stakeholders

Contractual Rule of Law » Fulfilling the PPP objectives by incorporating them in contracts

» Translating general standards into more specific and binding legal standards

» Establishing a bond of trust between partners »PPP participants are accountable for their

performance according to liabilities and obligations which are listed in the contract

Managerial Efficiency » Implementing and evaluating achievement of Effectiveness outcome against standards

» Ensuring efficiency and effectiveness can be achieved in service delivery

» Conforming with requirements or directives of appropriate organizational hierarchy.

Market Responsiveness to » Responsive to consumers of service providers to consumers/ consumers. suppliers/ » The market can reward and punish market co-producers actors

Public Responsiveness to » Citizens can call their governments to account, citizens to demand explanations and remedies, and to Individual Redress impose sanctions and new directions Probity » Through auditing, probity of the related parties can

be examined

Based: Demirag et aI., 2004a, Mulgan, 2000, Raghavan, 2002, Hodge, 2005

65

Furthermore, owing to the specific nature of different stages of PPPs, different types

of accountability are adopted in accordance with the extent of relevance and dominance at

different stages of a PPP project (please refer to section 3.5 for the description of different

stages ofPPP and see Table 4.3 for details, which is amended based on Table 4.1).

At the initiation stage, PPP objectives have to be established through conducting

needs analysis, market testing and feasibility test. After the objectives are established, a

business case should be developed in consultation with the stakeholders (Efficiency Unit,

2003). Therefore, communal accountability, which emphasis on holding the government

accountable to the stakeholders through responding to their needs or expectations, plays a

dominant role.

Pre-qualification, shortlisting, tender evaluation, negotiations and tender awarding

are included at the set up stage. Clearly, the contract itself is the most important element in

this stage. The government is accountable to the public contractually for incorporating the

PPP objectives and performance standards into a legal binding agreement.

As argued by Demirag et al. (2004b), managerial accountability is the dominant

form of accountability in the implementation (design and construction; operations and

services) of the project. In order to secure managerial accountability, it is expected that the

delegated authority would be accountable to his superior for his decision in terms of

outputs produced and the use of resources (Sinclair, 1995). To be specific, managers have

to ensure that the services are provided effectively and efficiently with reference to the

terms as listed in the contract. Clearly, other than managerial accountability, market

accountability could be particularly important in studying accountability at this stage.

Under PPP arrangement, public services are usually provided by the private sector partner

and operated on the basis of market principle. As the market itself can reward or punish

market actors through its invisible hand, service providers have to be responsive to users'

needs and the demands in the market too. Put simply, accountability relationship of market

accountability refers to that between the private sector partners (service providers) and

users.

The final stage of the project - transfer and post-transfer management includes the

smooth transfer of properties and personnel and the selection of a new operator, if

applicable. As a new operator would be selected and a new tender would be formulated,

contractual accountability deemed to be important at this stage.

66

Moreover, it is worth noting that both internal and external monitoring have dominant

roles in all stages especially since PPPs usually involve public service delivery. Hence,

managerial and public accountability are regarded as dominant forms for studying

accountability in all stages of PPPs. For the internal monitoring process, accountability

relationship is mostly managerial in which the subordinate is held accountable to the

superior for his decision through the internal reporting mechanism. Public accountability

is regarded as the dominant form of accountability in the external monitoring process. It is

well secured if the public can call the government to account, to demand explanations and

remedies, and to impose sanctions and new directions through both the formal and

informal channels. As the government should retain the steering role in the PPP project

through becoming the purchaser and regulator of the service (Osborne and Gaebler, 1992),

government should still be held accountable to the public so as to secure public

accountability.

Table 4.3 Dominant forms of Accountability in different PPP stages PPP stage Forms of Accountability 1. Initiation Communal

2. Setup Contractual

3. Design and Construction Managerial

4. Operations and Services Managerial

Market

5. Transfer and Post-Transfer Management Contractual

Internal Monitoring Managerial

External Monitoring Public

In the West Kowloon Cultural District PPP project, as the tender has not yet been

awarded, communal, contractual, managerial and public accountability are adopted as the

dominant forms in examining the accountability ofthe project.

4.6 Maintaining Effective Accountability Relationships

Studying the effectiveness of accountability relationships is as important as studying

the mechanism itself. Although there are several types of accountability relationships in

PPPs, each of which is different in nature, ways to secure effective accountability are

similar. The Canadian Policy Research Networks (2004) states four issues which are

usually listed as the requirements for effective accountability in the literature, including

the clarity of purpose; clarity of responsibilities; appropriate resources; and evaluation and

67

feedback (see Table 4.4).

Table 4.4 Requirements for Effective Accountability Clarity of purpose: agreement on a desired outcome - the purpose of the exercise -increase the likelihood of effective accountability. Without a common view of the overall purpose compliance will be less likely. Clarity of responsibilities: it is crucial that responsibilities are explicit and mutually agreed upon. Experts suggest wherever possible, specific objectives or performance targets be delineated to give further clarity to the allocation of responsibilities. Appropriate resources: organizations can only be accountable for meeting their responsibilities if they are equipped with the necessary resources to do so. Resource capacity is broadly defined here to include funding, the autonomy to make decisions, an information base, skills and experience. Evaluation and Feedback: some assessment must be made as to whether goals are being achieved and feedback provided to the appropriate parties. Source: Canadian Policy Research Networks, 2004

On the other hand, Hayllar (2000a) has listed the aspects and attributes of effective

accountability relationships (see Figure 4.2). In this research, these are used as the

essential ideas in studying each type of accountability.

68

Figure 4.2 Aspects and Attributes of Effective Accountability Relationships

The Actors LJ Accountees and accountors are identified clearly; LJ Accountees are truly representative of the stakeholders concerned; LJ Actors are not over-burdened with too many accountability relationships; LJ The distribution and balance of power between multiple accountees is appropriate.

Values LJ LJ

Accountors and accountees share the same vision and common values; Each party is committed to and believes in the value of being accountable.

Rights and Responsibilities LJ Each actor's rights and responsibilities are defined clearly and understood; LJ The accountor's responsibilities, autonomy, and capacities are balanced; LJ The accountee sets specific goals and targets for the accountor to achieve as needed; LJ Expectations of performance are linked to agreed standards and criteria for evaluation; LJ The accountee controls the scalability of the accountability processes and attributes; LJ Accountees have the ultimate right to control and set the agenda for the relationship.

Rendering and Appraising the Account LJ Resource use, achievements and failures are reported timely, intelligibly, honestly and

credibly; LJ Accountors are appropriately responsive to each of their accountees' needs for an account; LJ Accountees have the capacity and commitment to actively appraise the accounts they

receive; LJ Accountees provide accountors with relevant feedback; LJ Costs of rendering accounts do not outweigh the benefits derived.

Making and Enforcing a Judgement LJ The monitoring system enables accountees to judge results fairly; LJ Accountees have the capacity, power and authority to ensure the accountor's compliance

with their prescriptions; LJ Accountees possess incentives, including rewards and sanctions, for motivating or holding

accountors accountable for a particular performance standard; LJ Mechanisms exist whereby accountees can secure redress or reparation if appropriate; LJ Accountors can appeal if judged or sanctioned unfairly.

The Accountability Relationship LJ The functions and rationale for each accountability relationship are clearly understood and

justifiable; LJ Accountability relationships are built on mutual trust and a sense of fairness; LJ Good communication exists between accountors and accountees; LJ Accountees mentor, and not just monitor, accountors; LJ There is a two-way transparency of decision-making and relationships; LJ Prioritising by accountors between multiple accountees is considered fair by all concerned.

Source: Hayllar, 2000a

69

In order to gain a better understanding of the role that accountees play in holding the

accountors accountable and the effectiveness of the accountability relationship, a classical

model in understanding citizen participation - Arnstein's Ladder of Citizen Participation is

also adopted.

According to Arnstein's Ladder of Citizen Participation, a typology of eight rungs of

citizen involvement is developed. Rungs are arranged in the descending order in

accordance with the extent of citizen power in detennining decisions (Arnstein, 1969) (see

Figure 4.3). Hence, it is expected that a larger degree of citizen participation and in turn,

accountability, would be achieved when moving up the ladder.

Figure 4.3 Arnstein's Model of 'Ladder of Citizen Participation'

- -8 Citizen Control

7 Delegated Power Citizen Power

6 Partnership

5 Placation

4 Consultation Tokenism

3 Informing

Therapy

Manipulation

2

1

} Nonparticipalion

- -

Rung at the two lowest levels - Manipulation and Therapy are classified as

non-participation. Instead of allowing 'real' participation in the decision-making process,

citizens are educated and cured by the powerholders. To be specific, 'Manipulation' refers

to the kind of citizen participation that occurs through placing people in some rubberstamp

advisory bodies. This type of citizen involvement 'signifies the distortion of participation

into a public relations vehicle by powerholders' (Arnstein, 1969). Citizen engagement

70

undertaken with the objective to 'cur[e] them of their "pathology" rather than changing the

racism and victimization that create their "pathologies'" (Arnstein, 1969), it is regarded as

the rung of 'Therapy' in the Arnstein's ladder. 'Non-participation' in the accountability

relationships refers to the phenomenon that information delivered to the accountees is at

the discretion of the accountors and the accountees lack any real rights or control over the

accountors.

'Informing', 'Consultation' and 'Placation' are rungs under 'Tokenism'. Under

'Tokenism', citizens are allowed to hear and to be heard although the powerholders retain

the ultimate right to decide on what views would be taken into account. One-way

communication between the authority and the people is placed on the rung of 'Informing'.

Usually, there is no room for negotiation or a feedback channel. It should also be noted

that 'when information is provided at a late stage in planning, people have little

opportunity to influence the program designed "for their benefit'" (Arnstein, 1969) and

when the authority provides 'superficial information, discouraging questions, or giving

irrelevant answers' (Arnstein, 1969) in meetings, the level of citizen participation achieved

is also regarded as 'Informing'. At the stage of 'Consultation', although citizens' views are

invited during the decision-making process, there is no mechanism to ensure that their

views will be taken into account. In 'Consultation', people 'participated in participation' in

that they are regarded as 'statistical abstractions and participation is measured by how

many come to meetings, take brochures home, or answer a questionnaire' (Arnstein, 1969).

'Placation' is placed at the highest level through Tokenism. Apparently, citizens have some

degree of influence as a few citizens are placed on public bodies or committees8 (Arnstein,

1969). Hence, people have a formal channel to express their views. However, the authority

preserves the right to decide what pieces of advice would be taken into account in the

policy-making process and it may also exercise the right to select and appoint the

'representatives' itself. Therefore, citizens would find it difficult to hold the accountors

accountable under 'Tokenism' as opinions raised by the accountees may not be taken into

account.

The top three rungs - 'Partnership', 'Delegated Power' and 'Citizen Control' - are

grouped as 'Citizen Power' because citizen power can be exercised in full. At the rung of

'Partnership', planning and decision-making powers are usually shared by citizens and the

authority. Negotiation is not rare at this rung of citizen participation. Whilst for 'Delegated

8 These people are minority in the public bodies or committees.

71

Power', citizens usually play a dominant decision-making role. Hence, they are

empowered to make some key decisions. With Citizen Control, people are in full control

of governing and managing a program or an institution (Arnstein, 1969). More importantly,

officials are held accountable fully by the citizens.

Together with the amended model of PPP policy making (see section 3.5), the

development and accountability of the West Kowloon Cultural District PPP is examined

also with reference to the ladder of participation.

4.7 Summary

This chapter has introduced key concepts and frameworks that are relevant to the

analysis of accountability in PPPs. Although the existing literature cannot reach the

conclusion on the impacts of PPPs on accountability, studying accountability in PPPs is

vital in that this is a means to protect the public interest. Before studying the WKCD PPP

project with the use of these models and concepts, the next chapter provides a more

detailed understanding of the development of Private Sector Involvement in Hong Kong.

72

Chapter 5

Development of Private Sector Involvement in Hong Kong

5.1 Introduction

Since the launch of Public Sector Reform in 1989, enhancing private sector

involvement in public services delivery is placed high on the government agenda. This

chapter explores first the traditional role of government in public service delivery and then

investigates the history of private sector involvement (PSI) in Hong Kong. As the use of

PPPs is a key strategy in expanding private sector participation, the development of the

Bui1d-Operate-Transfer type PPPs project in Hong Kong is studied. The final section of

this chapter discusses accountability aspects relating to the start up of PPP projects in

Hong Kong.

5.2 Role of Government in Public Service Delivery in Hong Kong

To understand the role played by the HKSAR government in public services delivery,

it is crucial to examine its underlying ideology. Since the early colonial days, the

government of Hong Kong, driven by the ideology of laissez-faire capitalism that later

transformed into positive non-interventionism, practiced the minimal state approach. This

approach, which emphasis on minimum government intervention, is also upheld by the

HKSARG.

The laissez-faire ideology is imprinted from the earliest days of colonial history when

Hong Kong-based British merchants were influential in policy making. This is because the

decision to colonize Hong Kong was, to a great extent, a response to the urging of

merchants for providing a safe place that allowed the conduct of free trade in the South

China coast (Scott, 1989). As influential actors in policy making, the merchants exerted

pressure on the colonial government to keep its intervention minimal, especially in the

regards to policies that could not contribute to economic development and those that

involved 'non-essential' expenditure. Sometimes, they would also raise their concerns to

the colonial mandarin directly. Since the Colony received no financial support from the

British government since 1855 (Lee, 1999), maintaining a balanced budget was the first

priority of the government. Hence, the government was constrained in implementing any

social policy in the early colonial days. Further, Chinese cultural values on poverty,

natural disasters and education also contributed to the adoption of laissez-faire capitalism

as local people (most of them traditional Chinese) considered the above mentioned issues

73

as personal matters that should be taken care of by individuals or his family (Scott, 1989)

rather than by the state. These factors, together, gave rise to the laissez-faire ideology -

minimum government intervention in all spheres and, in particular, in the society and

market. The ideological stand of the colonial mandate - non-interventionism; the features

of 'utilitarianistic familism' and a 'minimally integrated socio-political system' identified

by Lau (1982); unsteady government revenue in the post-war era (Cheung, 2000); the

sentiment of 'borrowed place, borrowed time' by the transient population (Wilding, 1996),

further consolidated the laissez-faire approach in the post-war years. As a result, the

government played a limited role in social services provision (Jones, 1990; Lee, 2005).

The 1967 riots9, however, became a milestone in the development of social welfare

provision in Hong Kong. In response to the riots, there was a big expansion in social

policy (Chow, 1989; Castells et aI., 1990)10. The state then started to assume a greater role

in social services provision, for instance, in the areas of social welfare, public housing and

education. However, the government had also taken up the role as the producer on one

hand, and financer on the other by relying on subventing partners in the non-government

sector for some basic social service deliveries (Central Policy Unit, 2004; Pearson, 1997).

The expansion in social services provision has accompanied by a shift in the underlying

ideology of the government from laissez-faire capitalism to 'positive

non-interventionism' which emphasizes that the government would intervene under the

circumstance that 'industries with social obligations ran into trouble and when an

institution needed regulation to prevent inequitable practice' (Haddon-Cave, 1984). Owing

to these ideologies, a small public sector was maintained. Public expenditure to GDP ratio

of Hong Kong was kept to less than 20% before 1998. As the figure further rose to around

22% in 200211, the government committed itself to bringing it down to less than 20%

again so as to uphold the principle of 'big market, small government' (Hong Kong Special

Administrative Region Government, 2003a) (see Figure 5.1). It is expected that the ratio

will drop to 18% in fiscal year 2006-2007.

9 The 1967 riots were staged by pro-communist leftists in Hong Kong, and lasted from May to the end of 1967. As the police arrested the leaders of the massive demonstrations and strikes, riots turned into more violent as some leftists planted fake and bombs in the city. At the height of this struggle, 500,000 industrial workers were on strike. The riots also led to 51 deaths and hundreds of injuries (Lam, 2005). IO The government regards social services provision as a means to soak up some dissatisfaction of the local people that is highlighted by the riots (Scott, 1989). 11 The increase of the public expenditure to GDP ratio is closely related to the impacts of the Asian Financial Crisis. Hong Kong, as the small and open economy of the region, was hit by the crisis. The GDP growth rate turned into negative in the fIrst two quarters of 1998 and with the rising unemployment rate (Law and Yeung, 1998), the income of the government had been greatly reduced. Hence, there was a substantial growth in the public expenditure to GDP ratio.

74

Figure 5.1 Public Expenditure as a Percentage of GDP

%

24 ~--------------------------------

22

20 ~----------~~--------------~--

18

16

14 ~--------------------------------

12 ~--------------------------------

o 94-95 96-97 98-99 00-01 02-03 04-05 06-07 08-09 10-11

Sources: Hong Kong Special Administrative Region Government, 2006

Compared with other developed countries, the public expenditure to GDP ratio is

very low in the sense that the average ratio of the OECD countries is usually double that

of Hong Kong (see Table 5.1).

Owing to the principle of 'big market, small government', Hong Kong government

owns few enterprises that provide public utilities and transport. Public enterprises are only

found in the field of water provision, postal services and railways. Whilst for other public

utilities and transport, various levels of private sector involvement are observed. For

instance, the private sector has long been invited to work as partner in tunnel building (see

5.4 for details). The for-profit sector is also involved in the provision of the electricity, bus

and ferry services through franchising (Miners, 1991). Instead of being the direct producer

of these public services, the government is responsible for regulating and monitoring the

performance of the for-profit sector and for ensuring that public interest would not be

harmed owing to the monopolistic nature of these companies. In some areas like natural

gas provision and port-related facilities, the enterprises are totally owned by the for-profit

sector with no direct government intervention other than in the form of regulatory control.

Hence, traditionally, the private sector has played a crucial role in public services

provision.

75

Table 5.1 Total outlays (excluding consumption of fixed capital) of government as a percentage of GDP

1970 1974 1989 1990 1993 1996 1999 United States 30.3 30.7 34.3 35.3 35.9 34.3 --Germany 38.1 44.0 44.8 45.0 46.2 47.3 46.2 France 37.6 38.1 47.0 47.5 51.8 51.6 49.6 Italy 33.9 37.6 51.4 53.0 55.5 51.4 46.8 United Kingdom 38.0 43.4 38.1 40.1 43.9 41.3 37.5 Canada 34.4 36.1 44.0 46.8 50.1 44.4 --Australia 24.5 30.2 32.7 33.9 36.1 34.4 32.5 Austria 38.5 41.2 49.3 48.8 53.3 52.0 49.5 Belgium 40.3 43.0 51.6 51.5 54.1 51.2 48.5 Denmark 39.6 42.5 54.3 53.6 58.1 56.3 52.5 Finland 29.8 31.2 40.9 44.4 59.2 54.1 47.2 Greece 22.4 25.0 44.2 48.8 49.6 52.4 52.1 Iceland 29.8 35.6 42.0 39.0 40.4 38.6 38.9 Ireland 38.9 42.2 40.5 39.9 41.3 36.4 31.9 Netherlands 43.2 47.2 56.8 56.7 57.6 45.6 43.3 Norway 40.3 43.8 49.2 49.7 51.0 45.4 45.7 Portugal 21.6 24.6 37.6 40.6 45.3 41.3 40.5 Spain 21.8 22.7 40.9 42.0 47.6 41.2 38.2 Sweden 42.2 46.9 58.1 58.8 67.5 59.9 54.8 Switzerland 21.3 25.5 30.2 30.6 35.2 35.3 34.1

Total DEeD 31.3 33.6 38.6 39.5 40.7 39.0 40.1 Hong Kong 10.9 14.3 15.6 16.3 17.3 18.2 21.7 Souces: OrgamzatIOn for EconomIC Co-operatIOn and Development (2001); Lee (2005)

Owing to the underlying ideology of laissez-faire capitalism and positive

non-interventionism, the government has made good use of the non-government sector,

including the third and the for-profit sector, to produce or even deliver some public

services, thus enabling it to maintain a small government. It has substantial experience in

being the financer, producer and regulator in public services delivery. Hence,

non-government sector involvement in public services delivery cannot be regarded as rare.

Nevertheless, with the introduction of the public sector reform, private sector involvement

has further been encouraged since the late 1980s.

5.3 Private Sector Involvement in Hong Kong

Since the 1980s, there has been an international trend in public administration - New

Public Management (NPM) that brings private sector ideas into the management of public

agencies and into public services delivery (Lane, 2000). Several characteristics are

76

identified by Hood (1991) include

* Leaving managers 'free to manage'; * Using performance standards and measurement; * Implementing output controls; * Discipline and parsimony in resource use * Breaking up public sector entities into 'corporatized' units; * Adoption of private sector management style; and * Encouraging competition through term contracts and public tendering (Hood, 1991).

Therefore, reflecting NPM developments elsewhere, extending private sector participation

through outsourcing is one of the key strategies in the Hong Kong's public sector reform

(Efficiency Unit, 1989). There has been also a rapid expansion of outsourcing in the 1990s

(Hayllar, 2005). According to the studies conducted by the Efficiency Unit in 2000,

outsourcing has been adopted as a means to deliver services by approximately two-thirds

of the eighty-six government bureaux and departments (Hayllar, 2005). There were 'nearly

four and a half thousand outsourcing contracts with the private sector, totaling more than

HK$31 Bn [billion] annual expenditure' (Efficiency Unit, 2001). As shown in Table 5.2,

however, outsourcing was not being adopted extensively. Total expenditure on capital

works and construction represents nearly 70% of the total expenditure spent in all

outsourcing projects at that time. Moreover, '84% of all contracts were for annual

expenditure averaging only $1.5 million' (Efficiency Unit, 2001).

Table 5.2 Annual Expenditure on current contracts in 86 bureaux/ departments Category No. of contracts % Total Total annual Average annual

contracts expenditure expenditure HK HK$Bn $Mn

Waste 19 <1 1.5 75.9 Management Capital Works 529 12 21.9 41.4 & Construction Infrastructure 81 2 1.9 23.9 Maintenance Transport 65 2 0.8 12.8 Services All Other 3,676 84 5.5 1.5 Categories Total 4,370 100 31.6 7.2 Source: EffiCIency Umt, 2001: 2

In 2001, the Efficiency Unit established a team to oversee outsourcing and to assist

the government to enhance the private sector involvement through providing services on

77

• Feasibility and business case studies; • Re-engineeringl performance improvement studies; • Project planning, scoping studies, and implementation planning; • Development of procurement documents including contracts, service specifications

and tender evaluation criteria; • Due diligence checks; • Establishment of contract administration and relationship management regimes; • A range of guides; • Training courses, seminars and experience sharing sessions; and • Help desk services (Civil Service Bureau, 2005).

Further, the government published a document titled 'Serving the Community By Using

the Private Sector' which outlined a more developed policy initiative that has been

strengthened further by 'Serving the Community By Using the Private Sector - A General

Guide to Outsourcing' .

From the findings of the Outsourcing Surveys that conducted by the Efficiency Unit

in 2000, 2002, 2004 (see Table 5.3 and Figure 5.2), generally, the scope and the scale of

outsourcing have been enhanced and the potential economies of scale that outsourcing

offers are being better tapped. According to the Efficiency Unit, the drop in the total

number of contracts, total contract value and annual outsourcing expenditure between

2002 and 2004 was 'largely attributed to the volume of public works projects changing

over the two year period between surveys' (Efficiency Unit, 2005)

Table 5.3 Findings of the Outsourcing Surveys conducted by the Efficiency Unit Year of Survey 2000 2002 2004 Total number of contracts 4389 4853 4512 Total contract value -- $238 billion $214 billion Annual outsourcing expenditure $32 billion Note $66 billion $46 billion Average annual expenditure per $2.1 million $3.6 million $3.9 million non-works contract Average savings compared with the -- 23% 25% in-house modes of delivery Percentage of outsourcing objectives 38% 58% 59% being fully met Note Some of the works departments that outsource work dId not respond to the survey. Source: Efficiency Unit, 2005

Comparing the findings of2000 and 2004 in Figure 5.2, it is evident that a relatively wider

spectrum of services is now being outsourced.

78

Figure 5.2 Annual Outsourcing Expenditure by Service Category

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Other than outsourcing, PPP is another strategy identified by the government in

expanding private sector involvement. In August 2003, the Efficiency Unit published An

Introductory Guide to Public Private Partnerships so as to provide guidance and enhance

the understanding of government bureaux and departments on the approach. Political

commitment was also observed.

"'PPP" - "Public-Private Partnership" in various forms: PFIs, BOTs, PSPs, all kinds of acronyms, are really ways for the private sector to participate in various kinds of infrastructure and other public projects. I am a great believer in these initiatives ... We are all trying to find ways to promote PPP, to increase PFIs and so on and so forth', said Antony Leung, the former Financial Secretary (Information Services Department, Jan 23,2003).

'To implement the "Market Leads, Government Facilitates" principle, we will consider delivering more public services through Public-Private-Partnerships,' said Donald Tsang (Information Services Department, Oct 12, 2005).

'We will continue to explore opportunities for public private partnerships, and in the process, we will take care to select our partners in a transparent way in open competition,' said Donald Tsang (Information Services Department, Dec 21, 2005).

On different occasions, therefore both the Chief Executive and Financial Secretary have

reiterated the commitment of the HKSARG to adopt PPPs wherever feasible.

79

5.4 Development of Build-Operate-Transfer type Public Private Partnerships Project in Hong Kong

Hong Kong is at a relatively early stage of adopting PPPs as a means to deliver

public services. It has, however, considerable experience in developing transport

infrastructure by using the Build-Operate-Transfer (BOT) approach (Efficiency Unit,

2004). Since the late 1960s, Hong Kong has experienced an expansion in its large-scale

public works construction. In order to construct large-scale transport infrastructural

projects while under budgetary pressures, the government has, at different times, invited

the private sector to participate in the projects.

In highway development, the BOT model IS usually adopted. In 1969, the

government decided to construct the Cross Harbour Tunnel by using the BOT approach.

The success of the Cross Harbour Tunnel enhanced government's determination to adopt

the BOT approach in other highway developments wherever feasible. Table 5.4 lists five

BOT tunnel and highway projects in Hong Kong.

Table 5.4 Information on BOT-type infrastructural projects in Hong Kong Construction Commence Operation Commencement Date

Cross Harbour Tunnel Sept 1969 Aug 1972 Eastern Harbour Crossing Aug 1986 Sept 1989 Tate's Chairn Tunnel Jul1988 Jun 1991 Western Harbour Crossing Aug 1993 Apr 1997 Route 3 Country Park Section May 1995 May 1998

Source: Mak and Mo, 2005

In the past few years, senior officials, including the Chief Executive and Financial

Secretaries, have reiterated the government's determination to return to 'small

government' (Tung, 1997; Leung, 2003). One of the strategies is to enhance the role of

private sector in public service delivery. Hence, the government has committed to adopt

PPPs wherever feasible (Efficiency Unit, 2003). Recently, the BOT-type PPP is

increasingly implemented in other infrastructural and service delivery projects. Examples

include the Asia-World Expo, Cyberport, Disneyland (see Appendix 1 for details) and the

West Kowloon Cultural District (see Section 1.4 for background information of the West

Kowloon Cultural District PPP).

80

5.5 Accountability Aspects relating to the Start Up of Public Private Partnerships in Hong Kong

Although accountability is an important issue in PPPs (see 1.3), there are variations

in terms of the degree of accountability present among the projects - Asia-World Expo,

Cyberport and Disneyland.

Since the projects were initiated, Cyberport and Disneyland have been widely

criticized for the lack of equity, transparency and accountability (South China Morning

Post, Mar 27, 1999; South China Morning Post, Nov 3, 1999; South China Morning Post,

Dec 21, 2002). These projects are alike in certain aspects and were being criticized on

similar grounds. First, the proponent was awarded the tender for constructing and

operating the facilities without any competitive bidding. For instance, the Cyberport

project was initiated and mobilized by the Pacific Century Group (PCG). In order to

persuade the government, PCG commissioned a consultancy study on the issue and

proposed several options for the Cyberport. The government and the PCG finally signed a

Letter of Intent after several rounds of negotiation. This, however, occurred before the

project was first made public by the Financial Secretary in his 1999-2000 Budget Speech

(Tsang, 1999). Hence, neither an Expression of Interest Exercise nor a Request for

Proposal was held. More importantly, no prior consultation with the public or its

representatives - the Legislative Council - was found. The public and the Legislative

Council lacked knowledge on the government's intention to construct a Cyberport in Hong

Kong. Indeed the Letter of Intent had already been signed before the project was first

announced. Further, it took only two months from announcing the project to receiving

financial approval from the Legislative Council. The degree of 'consultation' conducted is

hence doubtful. Whilst for Disneyland, the government first announced its commitment

'to develop a multi-media theme park such as Disneyland' in the 1998 Policy Address

(Information Services Department, 1998). This, however, was only after the Walt Disney

Company (WDC) had identified Hong Kong and Zhuhai as the potential sites for its

second Asian Disney theme park (South China Morning Post, Oct 12, 1998). In the

following year, Hong Kong and Zhuhai were negotiating with WDC respectively. In late

1999, the Hong Kong government and WDC reached an agreement on constructing Hong

Kong Disneyland. Owing to the specific nature of Disneyland, no Expression of Interest or

Request for Proposal was held. Also, similar to Cyberport, the government and the

respective private sector reached an agreement before the projects were announced.

However, it is worth noting that compared with the Cyberport, the involvement of the

81

Legislative Council was relatively higher in that legislators had seized a chance to discuss

the issue through a motion debate in November 1998 and before the final deal was made a

year later.

Second, most of the public perceive that there is a lack of transparency in the

formulation of the projects or on the deals entailed (SynergyNet, 2005; Oriental Daily,

May 19, 2004; Wen Wei Po Jan 28, 2005; Hong Kong Economic Journal, Feb 7, 2005).

Owing to the lack of transparency, the government was suspected of colluding with the

businesses involved and of transferring benefits in the Cyberport development to a

favoured company. Typical comments on this by legislators included:

'[B]efore that [the announcement of the Cyberport], there was no public consultation ... the whole saga lasted for only two-odd months from the beginning to the end ... Within two-odd months ... the procedure of the Government's so-called consultation and the Legislative Council's approval of the funding for the infrastructural project was also completed ... The Government only hand picked a consortium ... Not only was this opposed by the Legislative Council, political parties and a lot of members of the public, but at least 10 developers personally reflected their views of discontent to a number of democratic parties. This non-tendering approach has at least given us an impression that the Government has very strong policy inclination towards certain developers and real estate developers,' said Lee Wing-tat, legislator (Legislative Council, 2005a).

'The crux [of the problem] did lie in the fact that TUNG Chee-hwa had awarded the right of development to LI family's PCCW without having conducted any open tender. As a result, LI family's PCCW can enjoy exclusively the enormous land development right there, where they actually concentrate on reaping profits from the property development under the pretence of cyber development. It is a naked transfer of benefits,' said Cheung Man-kwong, legislator (Legislative Council, 2005a).

'The approach adopted by the Government in handling the Cyberport was actually injecting a so-called property project into a so-called technology project. However, the supposed beneficiary, such as those working in the technology sector, do[es] not have any feeling about the Government's injection of $2 billion or several billion dollars. They could not feel that the Government had spent so much money on helping them,' said Sin Chung-kai, legislator (Legislative Council, 2005b)

In the mean time, Executive Councillor Henry Tang admitted that the degree of

transparency in the deal of Cyberport 'was not high enough' (South China Morning Post,

Mar 27, 1999). Whilst for the Disneyland, although the public, in general, welcomed the

decision for constructing Disneyland in Hong Kong, the agreement reached between the

Hong Kong government and the WCD was strongly criticized by some legislators and

82

citizens. For example, the Democratic Party questioned the basis for not charging the land

premium for the site in Lantau Island (South China Morning Post, Nov 3, 1999).

Moreover, according to a survey conducted by the Hong Kong Polytechnic University,

Hong Kong people feel that there is a lack of transparency on the deal between the

government and WDC:

• 75% of respondents stated there was a lack of transparency on the deal. • About 65 per cent of respondents indicated that Disney and the government should

share losses equally with the Hong Kong government, which is paying 90% of the cost of the Penny's Bay development.

• About 43% of respondents said the $13.6 billion deal which provided land formation and infrastructure works to attract Disney was unfair (South China Morning Post, Dec 21, 2002).

Further, the public and key stakeholders were not properly consulted in both projects

(Loh, 2005). Without proper consultation with the public and key stakeholders in the

Cyberport development, the government faced opposition from both the Legislative

Council and the property developers. According to Sin Chung-kai, the legislator who

represents the information technology sector, the concern of the opposition property

developers was 'not the profit but a change in game rules ... They [the property developers]

don't know whether they have to build up personal relations with Tung Chee-hwa [the

then Chief Executive], Anson Chan [the then Chief Secretary for Administration] or

Donald Tsang [the Financial Secretary of the date] if they want to develop new projects'

(South China Morning Post, May 13, 1999). In response, government officials and

pro-government legislators admitted that the government should have a proper

consultation with key stakeholders, in particular, the property developers (South China

Morning Post, May 13, 1999). Moreover, although the Arthur Andersen Business

Consulting, which is commissioned by the Hong Kong government to conduct a strategic

assessment on the concept of a Cyberport in Hong Kong, have consulted companies in the

Information Technology (IT) industry (Legislative Council, 1999), the IT community

complains that, in general, there is a lack of two-way communication between the

government and the community (South China Morning Post, Apr 6, 1999). Furthermore,

when the project was first tabled in the Legislative Council on 8 March 1999 (the project

was first announced by the Financial Secretary in his Budget Speech on 3 March 1999), it

was clearly framed to indicate that the government had decided to award the tender to the

PCG without any open and competitive tending. Also, the government and the PCG had

already agreed on the contributions of each partner. Hence, it can be argued that the

83

government was infonning, instead of consulting, the Legislative Council on the project

(Panel on Infonnation Technology and Broadcasting, Legislative Council, 1999). Similarly,

the government has been criticized for bypassing public consultation in the Disneyland

development. Residents of the Discovery Bay, which is located two kilometers from the

site of the theme park, have expressed their disappointments towards the lack of

consultation on the physical site of Disneyland through the Islands District Council

(Islands District Council, 2005).

Relatively speaking, the degree of accountability present in the start up stage of the

Asia-World Expo is greater than that in both the Cyberport and Disneyland. This was

because, in order to meet the growing demand for additional exhibition spaces and to

further promote Hong Kong as the regional 'trade fair capital', the government had started

to examine the need for building additional convention centre since 1997. In early 1998,

the consultant commissioned by the Economic Services Bureau concluded that provision

of additional exhibition facilities is necessary (Legislative Council, 2001a). The

consultancy report, which suggests that Chek Lap Kok (near the Hong Kong International

Airport) is a potential site for the new exhibition centre, was later referred to the Airport

Authority for follow-up actions. Before the Airport Authority submitted a paper on the

proposed international exhibition centre at Hong Kong International Airport, the

government had tabled the importance of constructing additional convention and

exhibition facilities in Hong Kong on the agenda of the Legislative Council. Since then,

the government has regularly consulted and sought policy approval from the Legislative

Council on the issue. For instance, the decision to launch the Expression of Interest

Exercise in July 2002 was agreed by the Legislative Council.

Moreover, the government had consulted the key stakeholders of the proposed

exhibition centre on different occasions. Before the launch of the Expression of Interest

Exercise, in order to understand their needs and to collect opinions from the exhibition

community, the government conducted an international road show to enable stakeholders

to meet international key exhibition centre operators in 2002, these included those from

Gennany, the United Kingdom, France, Italy, Switzerland, the Netherlands, Belgium,

Canada and the United States (Commerce, Industry & Technology Bureau! Invest Hong

Kong, 2002). Additionally, when drafting the tender which was awarded in accordance to

an open procurement and selection process, the government and the Airport Authority did

consider the views of the consultants, legislators and those received from the market in the

Expression of Interest Exercise. Furthennore, one of the key stakeholders - the Hong

84

Kong Exhibition and Convention Organisers' and Suppliers' Association - had actively

participated in the start up stage of the Asia-World Expo. The Association had submitted

its position paper and proposals for improvement and modifications to the initial design of

the new exhibition centre directly to the Airport Authority (Hong Kong Exhibition and

Convention Organisers' and Suppliers' Association, 2001; Rowse, 2002).

More importantly, in the development of the Asia-World Expo, when the government

has launched the Expression of Interest Exercise in mid 2002, it received 10 submissions

from the private sector (Legislative Council Secretariat, 2004), and has able to invite

tenders for the project in early 2003. The Evaluation Board has comprised of

representatives from the government and the Airport Authority. An exhibition consultant,

as a third party, was also included in the Board to provide independent opinion and expert

advice on the assessment of the submissions (Commerce, Industry & Technology Bureau!

Invest Hong Kong, 2002). After the careful evaluation on the submissions, the Board

short-listed four consortia for the tender stage and 'recommended the broad parameters'

for the projects. Further, the evaluation criteria for the tender were stated. Later, the tender

was awarded on the recommendation of the Tender Evaluation Committee (Commerce,

Industry & Technology Bureau! Invest Hong Kong, 2003).

From these cases, it is observed that the government did not have a set of consistent

procedures in developing BOT-type PPPs in Hong Kong. However, it seems that the

government has learnt a lesson and has been becoming more accountable to the public in

handling BOT-type PPPs as time passes. In the development of the Cyberport and

Disneyland, the government had no intention of launching an Expression of Interest

exercise or a Request for Proposals. Further, tenders were awarded without any open

competitive bidding. Additionally, the public and key stakeholders were not properly

consulted at the start up stage of the projects. Learning from its previous experience (in

developing Cyberport and Disneyland), the government adopted a more accountable and

transparent approach in developing Asia-World Expo. Hence, the Legislative Council has

consulted regularly and its policy approval has sought at the initial stage of the

policy-making process. Furthermore, relatively, the government has keen to consult the

stakeholders, in particular, the exhibition centre operators. Opinions obtained were then

considered by the government and Airport Authority. Additionally, the tender of the

Asia-World Expo is awarded on a competitive basis.

Owing to the previous experience, it would seem reasonable to assume that

accountability presented in the WKCD development would be greater than that of the

85

previous three. However, since the announcement of the WKCD project, many residents,

professionals and politicians have expressed concerns about how accountability will be

achieved. In the remainder of this dissertation, the WKCD is adopted as the case study and

is used for testing the evaluation model for studying accountability for BOT-type PPP

projects.

5.6 Summary

This chapter has introduced the development of private sector involvement, in

particular, the Build-Operate-Transfer type PPPs in Hong Kong. Moreover, accountability

aspects relating to the start up ofPPP projects in Hong Kong is discussed. After capturing

some background information on PPPs and accountability relating to the start up of other

PPP projects in Hong Kong, the next chapter will examines the accountability issue in the

initiation ofthe WKCD, before the IFP was issued.

86

Chapter 6

Accountability Secured Before the Invitation for Proposals

6.1 Introduction

The development of the West Kowloon Cultural District dates back to 1998. From

1998 to February 2006, the project experienced several major changes. With the adoption

of a Public Private Partnership as a means to develop the project, many residents and

politicians have expressed concerns about how accountability will be secured. To provide

a holistic and clear picture, this chapter studies how accountability has been secured as the

project has developed. The chapter begins by discussing the policy-making process and

the establishment of the WKCD public private partnership and then examines how

accountability has been secured in the pre-Invitation for Proposals period (i.e. initiation of

the project).

6.2 Policy-Making Process

In this section, the chronology of decision-making for the WKCD is discussed first.

This is then followed by a discussion of the roles of the Executive Council and Legislative

Council respectively.

As one of the Airport Core Programme projects, 334 hectares of new land between

Yau Ma Tei and Lai Chi Kok (i.e. West Kowloon Reclamation, WKR) was reclaimed to

accommodate the transport infrastructure for the new airport at Chek Lap Kok and to

provide land for various purposes. Originally, the southern tip of the WKR where the

proposed WKCD locates was planned for housing, government, commercial facilities and

recreation areas. Among all of these, the recreation area - a regional park and open

spaces - represented more than 75% of the total area of the site.

Relevant development projects of the southern portion of the WKR started from 1998.

On 16 October 1998, $914 million was allocated through the Finance Committee of the

Legislative Council (Legislative Council, 2006) for constructing the road network and

drainage sewerage works. After the 3-year construction period, the works were completed

in December 2001.

In October 1998, the then Chief Executive, Tung Chee-hwa, announced that the

government was planning to build a new, state-of-the-art performance venue on the West

Kowloon Reclamation (WKR) which locates along the seaside (Information Services

Department, 1998). However, at that time, this did not have any impact on the above

87

mentioned works. In the 1999 Policy Address, the Chief Executive stated his plans to

provide arts, recreational and entertainment facilities, including open plazas, shops and

cafes, along the waterfront of the Victoria Harbour. It is worth noting that in the 1999

Policy Address, the government still planned to 'develop a major performance venue in

the West Kowloon Reclamation' (Information Services Department, 1999: 45). In

November 1999, reflecting the recommendation of the consultancy study commissioned

by the Hong Kong Tourist Association, titled 'Study on the Feasibility of a New

Performance Venue for Hong Kong', it was stated that an integrated arts, cultural and

entertainment district should be built so as to achieve a clustering effect. In the study, 5.5

hectares on WKR were identified as the site for an integrated arts and cultural district with

a new international performance venue which would be comprised of a 1,500 to 2,200

seat-theatre and a semi-open amphitheatre with up to 8,000 seats (Hong Kong Tourist

Association, 1999). In the mean time, the Planning Department published its report

which aimed to 'assess the requirements for cultural facilities up to year 2011 to enable

better planning to meet the needs of the community' (Planning Department, 1999: 2). This

concluded that a new, world-class performance venue should be built. Also, deficiencies in

medium scale performing venues, privately-operated performance studio venue, 'art

space' and community level facilities were identified (Planning Department, 1999).

Furthermore, in the Policy Addresses of 1998 and 1999, based on the advice of the

Executive Council, the Chief Executive ordered the replanning of the WKR. The decision

was later reported to the Legislative Council and the Panel on Home Affairs was consulted

about building a new performance venue on the 40-hectares WKR site with reference to

the study conducted by the Hong Kong Tourism Association (Panel on Home Affairs,

Legislative Council, 1999a: 8). Owing to the replanning of the area, $24 million works,

which had been completed already, had to be aborted.

Later in 2000, the government endorsed a new proposal regarding the development of

the WKCD when it announced that a Concept Plan Competition (CPC) would be held for

the project. In its competition brief, several core and optional facilities were included:

Core Facilities: * A world-class performance venue with seating capacity of 1,800 to 2,200 as

focus of the whole area * A large versatile multi-purpose open plaza with service facilities to accommodate

about 6,000 to 8,000 people * A number of theatres and studios of various seating capacity * A museum complex comprising facilities such as a museum of moving image, a

museum of contemporary art and a children's museum

88

* An arts village containing workshops, studio spaces and exhibition! sales area, training and practicing ground for artists and designers

Optional Facilities (following are examples only) * A multi-purpose venue with seating capacity of about 35,000 to 60,000 for

holding large-scale mass activities * An arts market * Themed entertainment development, such as retail and dining facilities, skating

rink, games centres, a cinema complex and! or an IMAX cinema * Hotels/ service apartments/ residential development * Grade A offices * A cruise pier for waterfront leisure activities * Ahelipad * Other uses that are complementary to arts, cultural and entertainment Source: Planning, Lands and Works Panel, Legislative Council, 2000: 5

In the CPC, the government made it clear that '[p ]ackages within the Scheme Area

suitable for private sector development will be decided by public tender, which will be

open to all' (Housing, Planning and Lands Bureau, 2001). Hence, in accordance with the

CPC, multi-packages would be adopted in developing the project.

The Competition received 161 worldwide submissions. In selecting the winner based

on the criteria listed in the CPC, a Jury that comprised by ten local and international

professionals was established. The Jury was advised by a Technical Panel that was chaired

by a senior civil servant, the Director of Planning, with the Director of Architectural

Services and Director of Leisure and Cultural Services or their representatives, plus seven

non-official experts on technical concerns and feasibility of the designs acting as members

(Housing, Planning and Lands Bureau, 2005b). The submission by Foster and Partners,

whose design featured a large-scale canopy, was chosen as the winner of the Competition

in February 2002.

Although multi-packages approach was adopted in the CPC, the approach for the

development of the WKCD experienced a fundamental change in 2003, when the

government announced the launch of its invitation for proposal (IFP). The IFP specifies

that the tender would be awarded to one proponent12 only and the canopy is a mandatory

requirement for the project. Core arts and cultural facilities are other mandatory

requirements. These include:

* Three theatres with at least 2,000,800 and 400 seats respectively; * A performance venue with at least 10,000 seats; * A cluster of four museums at least 75,000 square metres in size;

12 Consortium is treated as a single proponent.

89

* An art exhibition centre at least 10,000 square metres in size; * A water amphitheatre; * At least four piazzas; and * A canopy covering at least 55% of the development area (Housing, Planning

and Lands Bureau, 2003a).

From the above description, it is found that the project has undergone several

major changes from the pre-IFP period. First, the 40-hectares site was originally planned

for housing, government, commercial facilities and recreation areas (regional park and

open spaces). In 1998, the Chief Executive altered the planning of the site and stated that

'a new, state-of-the art performance venue' would be built. Whilst in 1999, the Hong Kong

Tourism Association identified 5.5 hectares of the WKR as the site for the new

international performance venue with a theatre and a semi-open amphitheatre. The scope

was further enlarged to the whole site (40 hectares) with a cultural district, instead of a

single performance venue, to be built. Another major change is the mode of development.

In the Concept Plan Competition, the government states that a multi-developers approach

would be adopted. However, the decision was changed and the single package approach

was later adopted as outlined in the IFP document. The inclusion of the canopy as the

mandatory requirement is another decision that was criticized by a skeptical pUblic. The

role of the Executive and Legislative Councils in the decision-making processes will be

examined in tum. Particular attention will be paid to their respective roles in making or in

holding government accountable for these major changes.

6.2.1 Role of the Executive Council

According to the Basic Law, the Executive Council is the organ which assists the

Chief Executive in policy-making. The Council should be consulted on important

decisions by the administration in advance. The involvement of the Executive Council in

the policy making of the WKCD is summarized in Table 6.1.

Table 6.1 Involvement of the Executive Council in the Policy Making process Date Involvement of the Executive Council November 1999 The Executive Council endorsed the decision to replan the West

Kowloon Reclamation into a world-class integrated arts, cultural and entertainment district

May 2003 The administration briefed the Executive Council on the plan to issue the Invitation for Proposal

Source: Housing, Planning and Lands Bureau, 2005a.

Generally speaking, the government has given high priority to the development of the

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WKCD since the initiation of the project. In the 1998 Policy Address, the objective of

constructing a new perfonnance venue on WKR is to 'cultivate Hong Kong's image as the

Asian centre of arts and culture, and of entertainment. .. events' (Infonnation Services

Department, 1998). Whilst in 2001, a similar objective is listed in the CPC document that

states that the government aims to 'enhance Hong Kong's position as Asia's premiere

centre of arts, culture and entertainment and create a new look for Victoria Harbour'

(Housing, Planning and Lands Bureau, 2001) The decision to develop the 40-hectares

seaside land into a cultural district with the involvement of a private partner should not,

however, be regarded as day-to-day decision. This is because of the size of the project

developing such a large scale cultural district through BOT-typed PPP with land grant is

not a common practice, whether in Hong Kong or elsewhere in the world. Hence, it is

expected that there should be substantial involvement of the Executive Council in the

policy-making process ofthe WKCD.

However, as shown in Table 6.1, the participation of the Executive Council was low

in the pre-IFP period. Other than endorsing the proposal for replanning the WKR into an

integrated arts, culture and entertainment district, the Executive Council was not updated

on the progress of the project until May 2003, only four months before the official launch

of the IFP. As the IFP was about to begin, it is expected that all decisions, including the

inclusion of the canopy as the mandatory requirement, 50-year land grant and

single-developer approach, would have been made by the Steering Committee chaired by

the Chief Secretary for Administration in advance. Further, the government 'at first told

the Subcommittee [of the Legislative Council] that it had 'briefed' the Executive Council

on its plan to issue IFP, but subsequently said it had 'consulted' the Executive Council on

IFP before it was published' (Subcommittee on West Kowloon Cultural District

Development, Legislative Council, 2005a: 18). Even though the government has

'consulted', instead of 'briefed' the Executive Council in May 2003, consultation with the

Executive Council on the single-developer approach with land grant should have taken

place at the earlier stage, i.e. before the decision was made, so that the scope within which

the views of the Executive Council could be heeded in the decision-making process could

have been enhanced.

Limited involvement of the Executive Council placed a question on the degree of

managerial accountability achieved. This is because the Executive Council is an advisory

body constitutionally. Hence, the government should consult the Executive Council

important decisions are made. More importantly, although the Executive Council is an

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advisory body, as the highest level policy body, it acts as the cabinet of the HKSARG in

reality. Therefore, the limited participation of the Executive Council, to a certain extent,

suggests that managerial accountability may not have been well-secured at the initiation of

the project.

6.2.2 Role of the Legislative Council

Constitutionally, the Legislative Council is empowered to legislate and to scrutinize

the operations of the government. Public expenditure is scrutinized by the Legislative

Council in that HKSARG has to obtain in advance the Legislative Council's financial

approval for projects that require public money. The Legislative Council also acts as the

monitor in the policy-making process. Theoretically, as the representatives of the citizens,

the Council should be briefed, involved and consulted on the project from the initial

stages.

Consultation with the Legislative Council on the WKCD-related issues did occur in

the pre-IFP era. The Legislative Council was briefed, consulted and involved in the

development of the WKCD regularly (see Table 6.2 for details). However, it is worth

noting that although the then Chief Executive, Mr. Tung, had announced his intention to

construct a new, state-of-the-art performance venue on the WKR in his 1998 Policy

Address, the idea of building additional cultural facilities on the WKR was not placed on

the agenda of the Legislative Council until late 1999. When the Legislative Council was

first briefed on the intention, the government had already made the decision to develop a

world-class integrated arts, cultural and entertainment district on the WKR. The

government was thus only seeking approval from the Legislative Council for the decision

of replanning the site as this would incur a financial loss of $24 million from the

construction of road network and drainage sewerage that was in progress and would now

have to be abandoned. The skeleton of the WKCD was further outlined by the

government at the meeting of the Panel on Home Affairs of the Legislative Council on 13

December 1999. In the meeting, the Principal Assistant Secretary for Planning,

Environment and Lands stated that the WKR would be developed in an integrated

approach in which 'the development should not comprise only residential buildings, hotels

or commercial activities ... the commercial development in the area was only to support

the arts and cultural activities' (Panel on Home Affairs, Legislative Council,1999b). Also,

an open competition for designing the site would be held. In the meeting, several

legislators raised their concerns towards the relationship between the long-term arts and

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cultural needs of Hong Kong and the WKR development. Further, wide consultations with

key stakeholders and clear policy objectives and guidelines were urged. In March 2000,

members were updated on the progress of the project, in particular, the open competition

on the development of the WKCD. At that time, core arts and cultural facilities were first

made public for discussion. However, discussion was mainly focused on the arrangements

of the open competition, such as the linkage between the winning design and development

rights. The outcome of the open competition and the government's intention for launching

the IFP were reported to the Council in 2002 and 2003 respectively.

Table 6.2 Consultation with Legislative Council in the Pre-Invitation for Proposal Era Date Consultation with Legislative Council 5 September 1998 HKTA submitted to Home Affairs (HA) Panel that additional

performance venues were urgently required 16 October 1998 The Finance Committee (FC) approved the recommendation of the

Public Works Subcommittee (PWSC) to upgrade WKR works 18 November 1999 Panel on Planning, Lands & Works (PLW) was briefed on the need

to review the land use ofWKR December 1999 The Administration informed the Finance Committee of its decision

to review the land uses of the southern portion of WKR and to delete part of the WKR works. $24 million of works which had been completed were abandoned as a result of the replannning

HA Panel was briefed on the planning of a performance venue on WKR and Government's stance on a clustering effect in planning new facilities

9 March 2000 PLW Panel was briefed on the open competition for concept plans for a range of core cultural facilities, including themed museums for contemporary art and moving image, as well as commercial developments

May 2002 The Administration informed the PLW Panel of the outcome of the Concept Plan Competition

4 July 2003 PLW Panel was briefed on Government's intention to issue an IFP forWKCD

Source: SubcommIttee on West Kowloon Cultural Development, LegIslatIve CouncIl, 2005: 89-92

As shown above, the government has regularly informed the Legislative Council on

the development of the project in the pre-IFP period. However, it is worth noting that no

information regarding the development approach (BOT-typed PPP and single-developer

approach) and the mode of financing (free-standing nature of the project) or its possibility

has been provided by the administration until July 2003, two months before the official

launch of the IFP. Hence, the writer shares the view of the Legislative Council that 'the

way the Administration chose the timing and the mode of the consultation, and the extent

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of infonnation released to Members meant the Legislative Council was never put in the

position of being able to properly appreciate or scrutinize the financing of the project until

at a very late stage' (Subcommittee on West Kowloon Cultural Development, Legislative

Council, 2005: 60-61). Hence, the Legislative Council, to a great extent, could not

function effectively as an accountability, check and balance mechanism towards the

executive branch. From this perspective, the Legislative Council plays a limited role and

its view, to a certain extent, cannot be fully taken into account because those decisions

have been made in advance.

6.3 Public Private Partnerships Establishment

Through the adoption of a PPP strategy, the public sector delegates the responsibility

of direct service delivery to its private partner. The government, however, still plays a

crucial role, from the early deVelopment to the end of the project. In general, state

intervention can be classified into three main categories: provider, purchaser and regulator

(Corry et aI., 1997). With the international trend of increased involvement of the

non-profit and business sectors in public service delivery, governments have undergone

transfonnation from being direct service providers, to becoming purchasers and regulators.

In other words, governments now steer instead ofrow (Osborne and Gaebler, 1992).

Unlike privatization, under the PPP framework, government and business work as

partners, instead of principals and agents. Hence, steering a PPP project effectively can be

regarded as a way to transfonn both the public and private sectors to become better and

more effective partners. According to the HM Treasury (2000), the government should

look for securing long tenn value of the project for the taxpayer. Hence, identifying value

for money and using a public sector comparator are, to a certain extent, compulsory

exercises so as to ensure that taxpayers will benefit from the PPP arrangement in the long

tenn. Further, so as to achieve communal accountability, stakeholders' interests should be

taken into account in designing a PPP project as 'the prospects for a successful PPP are

best if all the main stakeholders are committed to the partnership's objectives' (HM

Treasury, 2000: 30). In particular, the government is accountable for several aspects or

roles, including:

• defining the business and the servIces required, and the public sector resources available to pay for them;

• specifying the priorities, targets and outputs; • executing a carefully planned procurement process;

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* determining the performance regime by setting and monitoring safety, quality and performance standards for those services;

* governing the contract by enforcing those standards, taking action if they are not delivered;

* managing community expectations; * providing the enabling environment; and * reacting, in cooperation with the private sector, to changes in the project environment

while remaining focused on pre-defined objectives (Grimsey and Lewis, 2004).

6.3.1 Assessing Cultural Needs in Hong Kong

During the pre-IFP period, the government assumed several of the above roles

including defining the business and range or scope of services required. As previously

mentioned, the government decided to construct an arts and cultural district in the WKR

on the basis of the recommendations of various studies, including those either

commissioned or conducted by the Hong Kong Tourism Association (HKTA study) and

Planning Department (PD study) 13. In general, both studies concluded that Hong Kong

needs new cultural facilities14 and they should be developed in an integrated approach, i.e.

in the form of cultural district, so as to achieve a clustering effect. For the location of the

proposed cultural district, WKR is preferred in the HKTA study. However, it is worth

noting that other than the WKR, the PD study also recommends Wanchai to Central

Waterfront, Lan Kwai Fong and Yau Ma Tei as potential locations for the cultural district.

The suggested core facilities listed in the IFP of the WKCD development are, generally

\3 Although the government has conducted several relevant studies, only those conducted or commissioned by the Hong Kong Tourism Association and Planning Department are regarded as government studies which examined the needs for new cultural facilities. This is because all other studies were conducted after the government has decided to develop the WKR into a cultural district in late 1999 and had briefed the Legislative Council on the open competition for concept plans for a range of core cultural facilities in WKR in March 2000. 14 New cultural facilities that are identified by the HKTA study include (1) a formal 1,500 to 2,200 seat theatre; (2) a large semi-outdoor weather protected flexible open venue space for the staging of a wide variety of performing events, arts and cultural activities including visual! environmental art display and exhibitions. When used as an outdoor performing event venue, it should accommodate up to approximately 8,000 seats; (3) adjacent waterfront park directly linked to the semi-outdoor open venue space; (4) a wider range of supplementary performance rehearsal facilities and informal activity spaces within the venue; (5) a harbour viewing tower with observation deck; (6) a commercial area for retail, gift and souvenir, gallery, studio, office, cafe, bars with live music, and dinning activities focused on themes related to performing arts, entertainment, media, art and culture; (7) supporting facilities such as parking, loading and unloading; and (8) a direct all weather automated pedestrian walkway connection linking the venue to the MTR Station (Hong Kong Tourism Association, 1999). Whilst in the PD study, after considering the demands and current and planned supply of facilities, the study concluded that (1) although there is a lack of suitable venues for world class performances in Hong Kong, the proposed development of a new performance venue which has been advocated strongly by the HKTA has filled the gap; (2) the need for more informal or 'alternative' space, and flexible 'art space' for installation arts and contemporary arts; (3) there is generally an insufficient provision of supporting facilities proposed. The principal gaps are restaurants, car parking and loading! unloading facilities, bookshops, souvenir shops, box offices, information kiosks, etc. which are important for the creation of a better cultural experience; and (4) lastly, existing and proposed provision of community level facilities such as venues for classes, rehearsals and practices, workshops, small scale performances and exhibitions falls short of the arts community expectations (Planning Department, 1999).

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speaking, in line with the recommendations of the two studies. Although the government

has taken the view of the PD study that the development of new cultural facilities should

be based on a supply-led approach, which is consistent with the WKCD development,

there is no evidence that the government has conducted any individual project feasibility

and viability studies 'which should be prepared for all major public investments' (Planning

Department, 1999) as stated in the PD study. Instead, under the IFP, the responsibility has

been 'delegated' to the proponents, who are responsible for formulating plans towards the

design, build and operation of the facilities. Hence, the decision to develop the WKR into

a cultural district does not appear to be formulated in a transparent and accountable way.

After the decision to construct an arts and cultural district in WKR was made, three

more relevant reports were published from late 2002 to 2003. These include (1)

consultancy study on the provision of regional! district cultural and performance facilities

in Hong Kong by Horne Affairs Bureau and Leisure and Cultural Services Department

(HAB Report); (2) policy recommendation report of the Culture and Heritage Commission,

which was established in April 2000 (CHC Report); (3) consultancy study on the mode of

governance of Hong Kong's public museums and the Hong Kong Film Archive by the

Leisure and Cultural Services Department (LCSD Report).

In late 2001, a consultancy study on the provision of regional! district cultural and

performance facilities in Hong Kong was conducted. In light of assessing the cultural

needs and recommending ways to bridge the gap, the consultancy study concluded that

additional cultural facilities should be built so as to meet the needs of the community. It

recommended: that the planning, funding and management of the new facilities should be

rationalized by more stakeholder involvement; a changed government role (from sole

provider to include roles as partner and facilitator); achieving cost effectiveness and

pursuing the international best practices in planning, funding and operating cultural

facilities (Horne Affairs Bureau and Leisure and Cultural Services Department, 2002). In

particular, it stated clearly that in developing an arts district, it 'should be subject to the

feasibility study process ... before implementation' (Horne Affairs Bureau and Leisure and

Cultural Services Department, 2002: 25). The feasibility study should also be carried out

for any individual facility in that 'the development of cultural facilities takes place within

the framework of broader policies and strategic for cultural policy, the planning of an

individual facility is usually unique to the facility and is carried out through specific

project feasibility studies' (Horne Affairs Bureau and Leisure and Cultural Services

Department,2002: 11).

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The Culture and Heritage Commission (CHC) was established in April 2000 so as to

review cultural development in Hong Kong and to advise the government on its long-term

cultural policies and funding priorities. The CHC put forward a hundred recommendations

and suggests that the development of culture in Hong Kong should be people-oriented and

based on a community-driven approach. The WKR development is regarded as an issue in

the report. The CHC supports the concept of developing the WKR into an integrated arts,

cultural and environment district. Nevertheless, it points out that the government should

'thoroughly consider the "software" or cultural contents before planning the "hardware'"

(Culture and Heritage Commission, 2003: 48). It recommends that the government should

assume the role as a facilitator so as to facilitate partnerships between the for-profit and

the cultural sector. In particular, the cultural sector should be given the opportunities to

participate in both the planning and operation of the facilities in the cultural district.

In 2002, the Leisure and Cultural Services Department commissioned a study on the

mode of governance of Hong Kong's public museums and the Hong Kong Film Archive.

The report, published in 2003, made ten recommendations which aimed to transform the

public museums to become more community-centred with the ability to generate revenues.

Among these ten recommendations, two are relevant to the WKCD. First, the consultancy

suggests developing a ten-year master plan, which 'based upon sound planning principles,

including a full in-depth financial implications analysis and assessment, will provide a

framework by which new museum opportunities can be identified, and proposals can be

assessed' (Leisure and Cultural Services Department, 2003: 15). Also, an on-going

Museum Accountability and Evaluation Program should be included in the governance

system.

To a certain extent, the above studies can be regarded as those which serve to

'reinforce' the 'legitimacy' of developing an arts and cultural district in Hong Kong.

However, the government has paid no attention to several of the recommendations in the

reports which are relevant to the development of the WKCD. For example, although both

the HAB Report and the CHC Report have emphasized the importance of conducting

feasibility studies on individual facilities, the government has discounted this in the

WKCD development. Further, although the government was urged by the CHC to consider

the 'software' before planning the 'hardware' and the government has accepted this

recommendation in principle (Home Affairs Bureau, 2004: 28), the approach in the

development of the WKCD is the other way round which is, however, consistent with the

recommendation of the PD study. Nevertheless, the government failed to provide the

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rationale for adopting the PD's recommendation instead of the CHC's, despite the fact that

the report of the latter is regarded by the government as the primary blueprint for cultural

development in Hong Kong.

6.3.1.1 Reflecting Cultural Needs? Views of the Arts and Cultural Groups

Although the government has established the needs for more cultural facilities

through conducting the above mentioned studies, some interviewees challenged the

quality of these studies. One interviewee, from the arts and cultural groups, claimed that

no qualified research on cultural policy or cultural development in Hong Kong has been

conducted. Another challenged the methodology of these 'researches', i.e. through

comparing the statistics between Hong Kong and other international metropolises, and

thus doubts the reliability of the cultural needs identified and the decision of developing

the WKR in an integrated approach. To a great extent, the claim of the interviewee is valid

in that the CHC has established the needs of additional museums in Hong Kong it did so

by doing international statistical comparison and concluding that Hong Kong needs more

museums as there are only twenty whilst other international metropolises have, on average,

more than a hundred museums (Culture and Heritage Commission, 2003). However, this is

not necessarily a good way of determining cultural needs as it ignores all other relevant

factors and has not examined the needs in the Hong Kong context.

'I worked in the Home Affairs Bureau as the senior research officer before. 1 have also worked with the Culture and Heritage Commission... 1 was a senior researcher in conducting these studies. Some basic principles in these researches are ridiculous. For instance, some researches have calculated the ratio of population to the number of museum in different cities, including London and New York, and come to the conclusion that how many museums we should have in Hong Kong. This way of calculation is totally relied on statistics ... The data are not proposed by a critical cultural analysis and cannot highlight our cultural needs.' (Interviewee, Arts and Cultural Groups)

'I was one of the members in the Culture and Heritage Commission. That is not research. [The number of research conduced by the government on cultural development in Hong Kong] is zero.' (Interviewee, Arts and Cultural Groups)

Though the cultural needs established by the government through conducting several

studies are doubtful, it is undeniable that some studies, in particular, those of the HKTA

and PD studies, have concluded that Hong Kong needs some additional cultural facilities.

However, both studies (the HKTA and PD studies) only conclude that there is a lack of an

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international standard performance venue in Hong Kong without establishing the real

needs for constructing any new museums in Hong Kong15. In March 2000, according to

the paper provided by the Administration for the Panel on Planning, Lands and Works

meeting, the government clearly stated that there is a need for a museum cluster

'comprising facilities such as a museum of moving image, a museum of contemporary art

and a children's museum' (Planning, Lands and Works Panel, Legislative Council, 2000),

together with a world-class performance venue, a large versatile open plaza, an arts village

and theatres/ studios as the core arts and cultural facilities (Planning, Lands and Works

Panel, Legislative Council, 2000). Later in the Invitation for Proposal, other than stating

the uses and scales of cultural facilities, the administration has also recommended the

preferred themes for the four museums in the museum complex 1 6, namely Museum of

Moving Image, Museum of Modem Arts, Museum of Ink and Museum of Design.

Unfortunately, there is no relevant government document or study which aims at

identifying and establishing the needs of building four new museums in Hong Kong17.

Hence, the basis for the decision to include four museums in the museum complex, instead

of two, three, five or six, is doubtful. The lack of established evidence as to the need for

four such new museums in Hong Kong has, to a certain extent, led to some criticisms.

'The project is just about allocating hardware in West Kowloon. There were no serious studies backing the assumption of, say, how many museums we should have. It doesn't consider Hong Kong's characteristics and what Hong Kong needs', said Mr. Albert Lai Kwong-tak, chairman of the Conservancy Association's centre for heritage (South China Morning Post, Dec 31, 2005).

'Have you ever thought of the reason why we need four new museums, three additional theaters in Hong Kong? Are they really corresponded to our needs? Further, I don't think the government has conducted any research on this issue. Who said Hong Kong needs four more museums, not five, six or seven, or two or three?' (Interviewee, Arts and Cultural Group)

'Hong Kong has already got so many theatres, so many museums, but Hong Kong still isn't a cultural city. So, how many more cultural facilities should

15 In the PD study, Museum of Contemporary Art is regarded as one of the committed and potential cultural facilities developments in Hong Kong. 16 Although there are preferred themes of the museums, proponents are given the flexibility to propose alternative themes if the themes are supported by justifications. 17 It is worth noting that the Culture and Heritage Commission has established a Working Group on Museums. Compared with other international metropolises, the number of museums in Hong Kong is far less than her counterparts. Hence, CHC recommends that new museums with various themes would be needed. Also, flagship museum, like Museum of Modem Art, Museum of Ink Painting should be established in the WKCD (Culture and Heritage Commission, 1999:25). Although the CHC has, to a certain extent, established the need for constructing additional museums in Hong Kong, it does not state the exact number and identify the themes of Moving Image and Design.

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we build so as to be a cultural city?' (Interviewee, Arts and Cultural Group)

'Be frank, I have been very critical on why we should construct four more museums, but not twenty small museums. That makes a lot of difference. That means the government has packed the stuffs together without thinking the reason behind.' (Interviewee, Arts and Cultural Group)

Without examining how many additional museums we need in Hong Kong, the

decision of choosing Moving Image, Modem Arts, Ink and Design as the preferred themes

of the museums in the WKCD is, again, questionable. According to the PD report, it was

prepared to build the Museum of Contemporary Art in Hong Kong before 2000. However,

as some applied arts, such as photography and design, have been praised highly

internationally, the Home Affairs Bureau has proposed the construction of Museum of

Modem Arts which includes both applied arts and contemporary arts. Together with the

Museum of Ink Painting (the term is interchangeable with the Ink Museum), the CHC has

recommended these as the flagship museums in the WKCD. However, for the themes of

Moving Image and Design, there is a lack of supporting studies that identify the needs for

such museums in the WKCD, even though some pressure groups and the connected

industry, including Hong Kong Federation of Designers and the Bruce Lee Union, have

urged the government to adopt these as the preferred themes for the museums in the

WKCD (Hong Kong Special Administrative Region Government, 2005). More

importantly, Design has never been regarded as a single theme of new museum in Hong

Kongl8. It is understandable that the government might has been pressurized by the

above-named pressure groups or professional organizations. However, the government has

failed to explain clearly the rationale for choosing these two as the preferred museum

themes, other than claiming that the film industry and design in Hong Kong has been

highly regarded in the international arena. Further, other than design and film, Hong Kong

is also well-known for some other fields like food culture, pop music. Even though the

government has tried to justify the needs for constructing the Museum of Moving Images

in Hong Kong by claiming that it has been proposed since 2001, why Design, but not

other themes proposed by the Leisure and Cultural Services Department in 2001 19, is now

regarded as the preferred theme is still unexplained. Further, in accordance to the museum

18 According to a paper prepared by the Leisure and Cultural Services Department, the Museum of Moving Images and Museum of Modem Art and Design have proposed as the new cultural facilities in Hong Kong. 19 The Leisure and Cultural Services Department has proposed several new museums in Hong Kong, including Ink Museums, Museum of Hong Kong Modem Art and Design, Museum of Food Culture, Hong Kong Film Museum, Canto-pop Music Museum, Transport Museum, Museum of Natural History and Sports Museum (Home Affairs Bureau, 2005a).

100

development plan prepared by the Leisure and Cultural Services Department, the Film

Museum, i.e. the Museum of Moving Images (to a certain extent, they are interrelated),

should be located next to the Canto-pop Music Museum so as to 'add tremendously to the

appeal of the [Film Museum]' (Home Affairs Bureau, 2005a). However, as only the

Museum of Moving Images is going to be built in the WKCD, does it imply that the

government has dropped the proposal on Canto-pop music? For the location of the Ink

Museum, the Leisure and Cultural Services Department states that the best location is in

Sai Kung as 'it is destined to become a world-class museum if housed in fine architecture

blended with nature, exclusively on a small island, say in Sai Kung - a Shangri-la setting

similar to the Miho Museum in Japan' and the WKR is identified as a 'far less attractive

site' (Home Affairs Bureau, 2005a). With no open records of the CHC meetings, it is

impossible to trace CHC's consideration of the priority and preferred locations of the

proposed new museums, even though the Commission has concluded that the 'flagship'

Ink Museum and Museum of Modem Art should be established and built in WKCD. From

this perspective, it is doubtful that the government has performed well in establishing

community needs on museums, a prerequisite for achieving communal accountability.

6.3.2 Market Testing and PPP Feasibility Study

According to Table 3.7, other than conducting needs analysis, the Efficiency Unit

recommends that market testing and PPP feasibility studies are carried out in the early

stages of PPP development (Efficiency Unit, 2003). The government, in response to the

urge of the legislators' questions, prepared a document which compares the Introductory

Guide to Public Private Partnerships and the procedures adopted for developing the

WKCD. The government states that the above named studies, including the HKTA study,

the PD study, the HAB report, the CHC report and LCSD report are 'survey/ studies [that]

have been taken into account by the Government in the development of the WKCD'.

Further, in justifying the adoption of BOT model in the development of the WKCD, the

government reiterates that 'as referred to in the Foreword of the PPP guide, enhancing

radically the use of the private sector in delivering government services will help address

demands for more and better public services. One of the stated arts and cultural objectives

of the WKCD development is to encourage private sector participation in the rendering of

cultural services in Hong Kong. The arts and cultural facilities in WKCD can and should

be run with greater commercial expertise than the Government is able to provide'.

(Subcommittee on West Kowloon Cultural District Development, Legislative Council,

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2005a).

The studies named by the government, however, can only been regarded as studies

which analyze the cultural needs in Hong Kong as they are not examining whether a PPP

model should be used in developing the cultural district in Hong Kong. The only study

which confirms the adoption of partnership as a means is the CHC report that regards

partnership among the government, the for-profit sector and cultural sector as one of the

principles in planning and developing the WKCD. In particular, the government should act

as the facilitator to foster the partnerships between the cultural sector and the private

partner in the planning and operation of the cultural facilities (Culture and Heritage

Commission, 2003). As highlighted by the government, these recommendations of the

CHC were considered in deciding the means of developing the WKR, i.e. adopting PPP.

However, this should not be regarded as a formal market testing and PPP feasibility study

as the CHC is only an advisory body which recommends the government to adopt a PPP in

principle. Although the government has generally accepted the recommendations of the

CHC, this does not mean that it can take such a suggestion for granted without

undertaking any feasibility study of the project itself. To be specific, and as PPP is an

ambiguous concept (see Chapter 3 for details), the recommendation of the CHC cannot be

regarded as a sufficient base for the government's decision to adopt a BOT-typed PPP for

the project. Hence, this appearance is definitely inconsistent with the best practices of

market testing and feasibility study elsewhere and may lead to failure of the project. More

importantly, when the government is being held accountable for the decision to adopt PPP

as a means to develop the WKCD, it is difficult for it to justify its position as no 'formal'

market testing and feasibility study have been carried out.

6.3.3 Assessing Value for Money

According to the best practices elsewhere and the Introductory Guide to Public

Private Partnerships prepared by the Efficiency Unit, one of the major benefits of using

PPPs is as a means to achieve value for money (VFM). Hence, whether VFM can be

achieved through adopting PPPs should be one of the determining factors. In order to

achieve VFM, an assessment should be based on three main criteria. First, the projects

should be awarded in a competitive environment. Second, sufficient risk transfer and

reallocation should occur so as to maximize the expected value for money. Moreover, a

fair, realistic and comprehensive comparison between the net benefits brought by adopting

PPPs as a means and traditional conventional procurement should be done. In order to

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meet the last requirement, it is advised to establish the public sector comparator (PSC)20

as the benchmarking reference. In accordance with best practices elsewhere and the advice

of the Efficiency Unit, an initial PSC should be constructed as early as possible. However,

in the development of the WKCD, the government did not construct any PSC. In

explaining this decision, the government states that as the WKCD is a financially

free-standing project, it is not necessary to construct a PSC in advance. This is, in general,

in line with the Introductory Guide to Public Private Partnerships that states that 'where no

public money is involved because the project is financially free-standing (i.e. the private

partner recovers all costs through charges to the ultimate consumers), or where a firm

decision has been made that the PPP approach is to be followed for policy or qualitative

reasons, a PSC need not be constructed' (Efficiency Unit, 2003: 32). Further, in order to

maximize the flexibility in the IFP process, the government argued that the PSC is

irrelevant and is impossible to construct at the beginning of the IFP. Instead, the

government has conducted several feasibility studies based on data gathered from different

government departments 'before preparing IFP and for assessing the cost and revenue

assumptions adopted by the proposals' (Housing, Planning and Lands Bureau and Home

Affairs Bureau, 2005:4-5). Data adopted in the feasibility studies 'will be revised and

refined in the next stage of IFP' (Housing, Planning and Lands Bureau and Home Affairs

Bureau, 2005: 5). The Subcommittee on the West Kowloon Cultural District Development

of the Legislative Council has strongly opposed this approach by claiming that the 40

hectares of land which will be granted to the private partner in reference to the IFP should

be regarded as a public resource of significant value and thus the project is not financially

free-standing in reality (Subcommittee on the West Kowloon Cultural District, Legislative

Council: 2005b). It should be noted also that the Introductory Guideline to Public Private

Partnerships has stated clearly that 'client departments will still wish to establish value for

money, especially if public land has been provided at less than full market value'

(Efficiency Unit, 2003:32). Hence, it is not convincing that the PSC is totally irrelevant in

the context ofthe WKCD development.

'I have criticized the government for not constructing a PSc. You are going to grant the private sector 40 hectares of the most valuable harbour side land in Hong Kong. We don't have much left ... Well, just assume that the land worth one-third of the price that Mr. Stanley Ho estimated, the amount is 10 billion. That is the public money. Whether it is allocated correctly, will you be interested? If I want to know whether this 10 billion, I am sure the amount

20 It should be noted that the PSC is regarded as the mechanism linking communal accountability and performance in Figure 4.1.

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is less than what it should be, have been allocated correctly or not, do I have any basis ... It [the government] does not have any figure. There is no PSC constructed. So, how can I know whether the proj ect should be developed by PPPs or traditional conventional procurement?' (Interviewee, Legislator)

Given that the government did not construct any PSC at the initial stage of the

WKCD project, plus the single-developer and development mode of the project, as well as

the fact that there were some previous suspicious precedents, including the Cyberport and

also the Hunghom Peninsula project21, the public, and in particular some legislators, have

challenged the basis for adopting PPPs as a means to develop the WKCD. They have even

suspected that PPPs are a means to secure a 'transfer of benefits' and

'government-business collusion'.

'The first TUNG Chee-hwa had awarded the Cyberport project without inviting any tenders; changed the contract in order to sell the Hunghom Peninsula development at pitiable prices; proposed to award the West Kowloon Cultural District (WKCD) project by way of a single development approach so as to convert precious land resources of Hong Kong into the benefits of a certain consortium,' said Cheung Man-kwong, legislator (Legislative Council, 2005a).

'However, should the Government have carried out this assessment exercise [the PSC] at the early stage of the project, the Government should be able to justify that the PPP approach would offer value for money and that there should be no "transfer of interest" as alleged by the public. More fundamentally, the best value assessment cannot be run in parallel or at the end of the procurement stage; otherwise, there is no agenda for questioning the basis of the PPP project' (Views forwarded to the Subcommittee of the WKCD Development by the Hong Kong Institute of Surveyors) (The Hong Kong Institute of Surveyors, 2005a: 9) ..

'Don't you find that the public has already put an equal sign between the private sector involvement project and "government-business collusion"? ... There are some previous suspicious precedents like the Cyberport and Hunghom Peninsula project. That's why the general public has such a feeling. ' (Interviewee, Pressure Group)

Ensuring there is a competitive environment is another criterion for assessing the

VFM of a proposed PPP project. Competition has long been regarded as an essential

21 In 2002, in order to stabilize the property market, the government ceased the sale of subsidized flats. As a new housing development under the Housing Authority's Home Ownership Scheme, the sale of Hunghom Peninsula had been put 'on hold'. However, as the completed estate is constructed under the Private Sector Participation Scheme, the Housing Authority is obligated to purchase the flats at the guaranteed purchase price. A deal was fmally made between the government and the private partners and the Hunghom Peninsula was sold below the market price.

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element in the tendering process of a PPP project in that competition can 'create an

environment that encourages bidders to be innovative in their design solution and efficient

in service delivery' (Grimsey and Lewis, 2004: 135). The degree of competition in the

development of the WKCD is closely related to the single-developer approach. In

explaining the rationale for adopting the single tender, the government states that it is

undesirable to develop an integrated arts, cultural, entertainment and commercial facilities

by using mUltiple packages. A multiple-tender development approach would require the

government to draw up a master layout plan in the first place. The government faces

difficulties in drawing up the plan as the plan has to be based on some 'uncertain

assumptions of what would be commercially viable (Information Services Department,

May 12, 2004). Further, the government would have to be responsible for drawing up

'multiple sets of complex interlocking land leases which may lead us into costly litigation

in future' (Information Services Department, May 12, 2004). It would also have to be

responsible for the design of some infrastructures, such as, the canopl2, which serve the

whole development. This may create another problem in ensuring that the design can

interface properly with other developments in the cultural district. Last, but not least, it

is expected that through adopting the multiple-package approach, arts and cultural

facilities will be tied with different requirements, 'thereby losing the opportunity for

integrated and complementary design of these facilities' (Information Services Department,

May 12, 2004). An urban designer shares the views of the government by stating that the

single-developer approach allows 'a single coherent design. The controversial canopy will

ensure there will be no obstructive high-rises that create a canyon effect on either side of

Victoria Harbour, which many people want to preserve. Also, the canopy and integrated

urban places could become an attractive international landmark... Furthermore, the

winning developer would be expected to provide the internal financing, cross subsidies

and deVelopment phasing to create the necessary critical mass and to bear the risks.'

(South China Morning Post, Jan 26, 2005).

Again, there was a public outcry against this single-developer approach which was

seen as potentially harming the competitive tension in the bidding process as small

developers might not be involved for two reasons. First, as required by the IFP's

mandatory requirements towards the qualification of the proponents, only those who

'possess experience in developing at least one mixed-use development with a total

22 The canopy was one of the mandatory requirements in the IFP.

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construction cost of not less than $3 billion in managing, marketing and leasing of large

developments, within the last 15 years' (Housing, Planning and Lands Bureau and Home

Affairs Bureau, 2003) can bid. Second, small developers have their economic concerns in

forming a long-term joint venture. As cited in the South China Morning Post (Jun 18,

2004), a small developer stated that 'it is easy for us to just bid, build and sell, but forming

a joint venture for 15 to 20 years is very difficult, especially when the economic cycle

goes down'. This would, to a certain extent, restrict the number of potential proponents

and undesirable tender prices may result. The government has implied that the degree of

competitive tension would not be harmed as it received eleven written indications

expressing interest in taking part in the project23 (Housing, Planning and Lands Bureau

and Home Affairs Bureau, 2003), in reality, however, the government received five actual

proposals, including one which was prepared by an individual. For this latter proposal, the

screening team, headed by Project Mangerl Kowloon, of the Civil Engineering and

Development Department, and senior officials from different relevant bureaux and

departments, concluded that it 'does not meet any of the project-related mandatory

requirements and fails to demonstrate the proponent's capability for undertaking the

project' (Housing, Planning and Lands Bureau, 2004: 3). From this perspective, it is

reasonable to conclude that only four developers, of which two are consortia, have

submitted a proposal in reality.

One interviewed proponent has argued that the single-developer approach may not be

problematic and may not harm the competitive tension in the WKCD. Instead, helshe

argues that the competitive tension is harmed by the detailed input specifications which

are clearly listed in the IFP (for details, please go to 6.3.4).

'As far as I know, there are 11 indications which expressed their interest in the WKCD. All of them are local property developers. Well, as oversea groups are allowed to take part too, definitely, there should be more than 11 proponents. However, if you take a look of the IFP, the government provides input specifications instead of output specifications. With these strict requirements, only 4 large property developers have submitted their proposal.' (Interviewee, Proponent)

It is difficult to assess the extent to which competitive tension existed in the bidding

process as no financial information has been provided and despite there being eleven

23 It should be noted that the government did not examine the background of the 11 potential proponents (who have submitted an indication to express their interest in undertaking the project) as 'we must assume that they [those who sent government an indication of their interest towards the WKCD] consider that they meet the experience requirement and intend to submit a proposal in due course' (Housing, Planning and Lands Bureau and Home Affairs Bureau, 2003: 4-5).

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potential proponents, only three were left after the screening process24• Although some

legislators have commented that the government might have been in a less favorable

position than expected as, in the negotiation stage there were only three screened-in

proponents left (Panel on Planning, Lands and Works, Legislative Council, 2004), it is

worth noting that the optimal number of screened-in proponent is from three to five. This

is because 'bidders are most comfortable with odds of one in three or less. Commonly, up

to one in five can be made to work, but more than this will find bidders dropping out, and

may leave you in a much worse position with only one or two left in. And, in doing this

you have no control over who stays in the bidding process, and you may find the right

partner disappears in the process' (Foster, 2004). Hence, the existed competition may not

actually have been greatly reduced.

Risk allocation is another essential criterion in assessing the VFM of a PPP project.

Nine main risks are usually involved in infrastructure building:

* technical risk; * construction risk; * operational risk; * revenue risk; * financial risks arising from inadequate hedging of revenue streams and hazards; * force majeure risk (e.g. war); * regulatory/ political risks, resulting from planning changes, legal changes and

unsupportive government policies; * environmental risks; * project default, as a consequence of failure of the project from a combination of any of

the above (Chapman and Ward, 1997; Smith and Walter, 1990; Thobani, 1998; Grimsey and Lewis, 2004).

In accordance with the requirements in the IFP, risks and accountability for them have

been allocated to the proponent in respect of financial risks, construction risks, operational

risks, revenue risk and technical risk. In the aspect of technical risk, it is evident that the

government has allocated this risk because that although the mandatory canopy was

regarded as problematic the Technical Panel which assisted the Jury for selecting the

winner of the West Kowloon Reclamation Conceptual Plan Competition 'observed that

some of the conceptual proposals could be difficult to implement in practice. For example

several submissions proposed large canopies covering all or substantial parts of the

Scheme Area, the construction of such structures and of buildings within them might be

feasible, but the ownership, management and maintenance of the canopy could well

present problems' (Hong Kong Special Administrative Region Government, 2002). In the

24 This is because Swire Properties fails to fulfill the mandatory requirements as listed in the IFP.

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Foster's plan, winner of the competition, a large canopy is included and was subsequently

listed as a mandatory requirement. Instead of conducting a detailed feasibility study on the

canopy, the government has sought advice from departments and 'assurance from Foster

and Partners on the feasibility of the canopy and potential solutions to relevant technical

issues ... [and finally concluded that] the technical challenges presented by the Foster's

Scheme were not insurmountable and that most could be addressed in later design stage'

(Housing, Planning and Lands Bureau, 2005b: 5). The technical risk in terms of the design

and construction of the canopy was thus later passed to the proponent with the IFP listing

out some requirements on this issue, including 'the proponents are required to conduct

engineering studies, including wind engineering study to address the structural safety of

the canopy, especially under extreme weather conditions; the canopy must comply with all

applicable statutory requirements; the canopy should be designed with appropriate built-in

redundancy to prevent progressive collapse of the canopy in case of damage to part of the

structure due to exceptional hazards; and computerized modeling should be used to

demonstrate heat and smoke dissipation as well as the micro-climate environment under

the canopy' (Housing, Planning and Lands Bureau, 2005b: 7). Further, in the IFP

document, it requires the proponents to submit a preliminary masterplan that 'must be

supported by Conceptual Design and Broad Technical Assessment and Solutions to

ascertain its feasibility for implementation' (Housing, Planning and Lands Bureau, 2003a:

29). Proponents also have to make up their business plan which is to be supported by 'a

financial appraisal and technical studies (including a preliminary traffic study and a

preliminary environmental study) based on its preferred development schemes to

demonstrate its financial viability and technical feasibility' (Housing, Planning and Lands

Bureau, 2003a: 31). From this perspective, the government, in general, has distributed the

risks that the private sector is in a better position than the public sector to bear with.

However, it should be noted that as payment mechanisms are not intended to be

involved in the project, only two risk allocation strategies, namely 'specified service

obligations' and 'express contractual provisions adjusting the risk allocation implicit in the

basic structure', can be utilized (Grimsey and Lewis, 2004: 177). Because the project has

not yet come to the negotiation and tender awarding stage, it is not possible yet to

understand fully the actual risk allocation in the project.

After examining the VFM with reference to the three mam criteria, namely

competition tension, risk transfer and the construction of PSC, it is evident that the VFM

exercise might not be well appraised. Clearly, when the government is being held

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accountable for its decision to adopt PPP as a means to develop the WKCD, it is difficult

for it to justify and accounting for its position.

6.3.4 Managing Community Expectations

Identifying and managing community expectations are another fundamental role of

the government in the PPP project. In managing community expectations, having a better

understanding of community needs and demands is a pre-requisite and thus consultation

with key stakeholders plays a vital role.

The government has conducted several studies assessing the cultural needs of Hong

Kong. Among the five studies mentioned previously, the CHC report, HAB report and

LCSD report25 assessed the cultural needs in Hong Kong from an arts and cultural

perspective. Rounds of consultation with the public, the arts and cultural groups, were

undertaken during the research period of the above named studies. For instance, in

preparing the CHC report, which is regarded as the blueprint for the development of arts

and cultural policy in Hong Kong, the CHC conducted two series of public consultations

in early 2001 and late 2002 and published two consultation papers, namely 'Gathering of

Talents for Continual Innovation' and 'Diversity with Identity, Evolution through

Innovation'. The CHC received more than six hundred written submissions. Public

consultation sessions, media forums and meeting with the Legislative Council, District

Councils and advisory or statutory bodies were carried out too (Culture and Heritage

Commission, 2003). For the HAB report, consultations with different stakeholders,

including arts companies, hirers and representative groups, managers and operators of the

performance venue, and the District Council members were conducted (Home Affairs

Bureau and Leisure and Cultural Services Department, 2002). Similarly, consultations

with key stakeholders were undertaken in the LCSD report. Such consultations, however,

even with the arts and cultural groups, had their own focus and were not conducted to

consult the public on the particular decision of developing the WKR into an integrated arts,

culture and entertainment district26. To improve on its accountability to the community, the

government held six consultation forums with cultural sector in 2002. These forums were

particularly for the WKCD project (Information Services Department, Nov 24, 2004) and

a nearly a hundred arts and cultural groups or individuals were invited to opine on the

25 The remaining two studies assess the cultural needs in Hong Kong from the perspective of tourism (the HKTA report) and planning (the PD report). 26 However, it should be noted that the WKCD is listed as one of the items for consultation in the second consultation paper of the CHC.

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project.

Unfortunately, from the interviews and documentary review, it is evident that some

arts and cultural groups are not satisfied with these consultations. Some interviewees

criticize the consultations for being too superficial and without focusing on the cultural

policy in Hong Kong. Whilst others comment that they have not be consulted on the IFP,

the development approach and the mode of financing. Further, although a consultation

forum is usually adopted as a means for consultation, many arts and cultural groups are

not satisfied with this mode of consultation. Some even challenge whether real

'consultation' were conducted, and as one interviewee suggested 'consultation' is

conducted so that the government can justify or legitimatize its decision that without

taking his views into account. Hence, from their perspective, there was insufficient 'real'

consultation in the pre-IFP period (Hong Kong Economic Times, Nov 17,2003).

'Consultations can be dated back from 2001... Hong Kong Arts Development Council is a statutory advisory body. Although the Council was being consulted, I, as the Arts Advisor at that time, was not invited to opine on the issue. The coverage and the depth of the consultations are not adequate ... Consultations conducted in 2001 are superficial. They are not for the development of the cultural policy in Hong Kong.' (Interviewee, Arts and Cultural Group)

'[The government] consulted the public by either doing some SUSpICIOUS studies or conducting some consultation forums that no body attends. After all the meaningless consultations, the government can state that it has consulted the public on the issue.' (Interviewee, Arts and Cultural Group)

'Whether a consultation is "successful" or not. .. depends on the content, the timing and the way it [the consultation] carries out. I think the government should consult before the decision is made.' (Interviewee, Arts and Cultural Group)

Mr. Mathias WOO of Zuni said that the arts and cultural sector had not been consulted on the canopy design or other details of the Foster scheme (Panel on Planning, Lands and Works and Panel on Home Affairs, 2003b).

In September 2003, Mr. Danny Yung criticized that although he had expressed his opinion on the WKCD through the Hong Kong Arts Development Council, raised a professional agenda for follow-up action, and suggested the Home Affairs Bureau to organize a group for undertaking some follow-up actions. Unfortunately, he does not receive any positive reply from the government (Hong Kong Economic Times, Nov 17,2003).

It is worth noting that it was not only the arts and cultural groups that were dissatisfied

with the consultation exercise owing to the lack of concrete information about the cultural

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district. An interviewed proponent shares this view too.

'Although the government has conducted consultation with the arts and cultural groups in 2000 and 2001, the exercise should be regarded as unsuccessful, if that were regarded as consultation for the development of WKCD. This is because at that time, the government has not yet made up her mind on constructing a cultural district in such a large scale - on a 40-hectare site. That's why the arts and cultural groups were of no knowledge of building a large scale of cultural district and developing it through public private partnerships when they were being consulted. ' (Interviewee, Proponent)

As this is a PPP project, the private sector clearly plays a vital role. Hence, the

industry of property development should be regarded as one of the key stakeholders which

the government has to consult in advance. As commented by an interviewed proponent,

the industry was not sufficiently consulted in that the government has only taken into

account the selected views of one or two large property developers in Hong Kong.

Although the proponent is another large property developer in Hong Kong27, his group had

not been consulted.

'In the development of the WKCD, relatively speaking, I don't think the government has consulted the private sector, to be specific, the property developers. Instead, what the government did is consulting one or two property developers for policy direction.' (Interviewee, Proponent)

While the government had no intention of omitting the arts and cultural groups'

interests from the development of the arts and cultural policy and the WKCD, the degree

of their engagement is uncertain. To a certain extent, the cultural needs in Hong Kong

have been established and the industry generally welcomes and looks forward to the

establishment of a cultural district in Hong Kong (Subcommittee on West Kowloon

Cultural District Development, Legislative Council, 2006). Generally speaking, the

government has managed the community's expectations. However, the arts and cultural

groups have not been sufficiently consulted about the details of cultural district, such as its

location, the arts and cultural components in the district, development approach and mode

of financing. Hence, the project is not well-received by the industry nowadays.

As the end users of the WKCD, all Hong Kong citizens should be regarded as the

stakeholders. However, public involvement in the pre-IFP period is limited. Moreover, as

the project is located in the WKR, it is reasonable also to expect that residents nearby

should be consulted on the decision of the WKCD. Hence the Yau Tsim Mong District

27 Owing to the strict regulations in qualifying the proponent of the WKCD, it is obvious that all screened-in proponents are large property developers in Hong Kong (See 6.3.3 for details).

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Council is expected to have a certain degree of involvement in the pre-IFP period28.

However, according to the minutes and papers of the Yau Tsim Mong District Council, its

involvement in the decision making process of the WKCD is questionable. In the pre-IFP

period, it is clear that the Yau Tsim Mong District Council has been actively briefed and

consulted on the progress of the drainage and highways-related development by the

Territory Development Department on WKR. The District Council was consulted also on

the development of additional arts and cultural facilities when the relevant department or

research institute were preparing for the HAB and LCSD reports (Home Affairs Bureau

and Leisure and Cultural Services Department, 2002). However, it is worth noting that the

decision of constructing a cultural district in the WKR was made in advance of any

consultation with the Council. More importantly, the idea of constructing an arts and

cultural hub in the WKR was first placed on the agenda of the District Council in 2002. As

the competition document had already contained the concrete details of the WKCD and

the District Council was not being consulted on the competition document, but only being

briefed on the result.

'It is clear that in the planning stage of the WKCD, no large-scale public consultation was held. The government did not even inform the general public or its representative - the District Council - about the plan, even the residents nearby. '(Interviewee, Arts and Cultural Group)

'I think the involvement of the District Council is limited. Yes, the government has sent us some documents and the related issues of the WKCD have been placed on the agenda of the District Council. However, the "consultation" is not conducted in a systematic or concrete way. ' (Interviewee, District Councilor)

According to the Arnstin's ladder of citizen participation, the participation of the District

28 Institutionally, the District Council is the advisory body advises the government on matters related to a particular district. As stated in Article 97 of the Basic Law, "[ d]istrict organizations which are not organs of political power may be established in the Hong Kong Special Administrative Region, to be consulted by the government of the Region on district administration and other affairs, or to be responsible for providing services in such fields as culture, recreation and environmental sanitation" (Article 97, Basic Law). Moreover, according to the District Councils Ordinance, functions of the District Council includes "(a) to advise the Government-

(i) on matters affecting the well-being of the people in the District; (ii) on the provision and use of public facilities and services within the District; (iii) on the adequacy and priorities of Government programmes for the District; and (iv) on the use of public funds allocated to the District for local public works and community activities;

(b) where funds are made available for the purpose, to undertake -(i) environmental improvements within the District; (ii) the promotion of recreational and cultural activities within the District; and (iii) community activities within the District" (District Council Review Secretariat, 2006).

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Council is at the third rung as only one-way communication and infonnation are provided

at the late stage so that the views of the Yau Tsim Mong District Council could not be fully

taken into account before the relevant decision was made.

From the analysis alone, it is clear that both arts and cultural groups and the District

Council, representatives of the public, were not consulted on either the decision to

construct an arts and cultural hub in the WKR or subsequent decisions on the details of the

WKCD. Whilst for the private sector, there was clearly a lack of relevant consultation too.

All in all, in managing community expectations, the government has failed to meet key

stakeholders expectations as to adequately accountable decision making.

6.4 Concluding Discussion: Accountability Secured in the Pre-Invitation for Proposal period

With reference to the conceptual framework developed in Chapter 4, the concepts of

communal, managerial and public accountability have been used to examine the

accountability at the initiation of PPPs. In general, accountability has not been well

secured in the pre-IFP period in that some existing accountability mechanisms either failed

to function properly and effectively or were bypassed.

6.4.1 Communal Accountability

Responding to the expectations and needs of stakeholders during PPP initiation and

reaching consensus among stakeholders are both crucial elements for communal

accountability.

As stated in 6.3.5, arts and cultural groups were not sufficiently consulted about

either the details of the cultural district, such as its location, the arts and cultural

components in the district, development approach or mode of financing. Hence, while the

government loosely identified cultural needs through conducting several studies and the

industry, generally, welcomes the idea of establishing a cultural district in Hong Kong, at

this stage, the government can not be regarded as 'responding to the expectations and

needs of stakeholders' successfully.

Further, consensus has not been reached among the arts and cultural groups. In the

post-IFP period, the groups continued to hold mixed views towards several issues,

including the relationship between the hardware and software development in Hong Kong

and the development approach.

Participation of the local community's representatives in the District Council, III

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particular, the Yau Tsim Mong District Council, is likewise found to be limited. Instead of

being consulted before the relevant decisions of the WKCD were made, it was briefed

afterwards. This definitely limited the scope within which the public views could be

heeded in the decision-making process. Hence, communal accountability does not appear

to have been well secured in the pre-IFP period.

6.4.2 Managerial Accountability

Managerial accountability is an accountability mechanism for internal monitoring.

Usually, it refers to internal reporting mechanisms like implementing and evaluating the

achievement of outcomes against standards or the holding of monthly review meetings

which aim to ensure that efficiency and effectiveness can be achieved in service delivery.

In the Hong Kong context, the Executive Council is regarded as an important internal

monitoring mechanism. Constitutionally, the Executive Council is the advisory body

which assists the Chief Executive in policy-making. However, as the Council should be

consulted by the administration on important decisions in advance, to a certain extent, the

Executive Council can be regarded as the watchdog which scrutinizes the government

internally.

In Section 6.2.1, the role of the Executive Council in policy-making for the project

was studied. It was concluded that, similar to the case of the Legislative Council, the

Executive Council played a limited role in securing accountability in the pre-IFP period

and it seems that in the early stage of this 'landmark development', it was sometimes

bypassed. Hence, managerial accountability to the Executive Council was not well secured

in the pre-IFP era.

Further, managerial accountability processes can also be defined to include

'monitoring whether [PPP] projects are achieving the objectives identified in the business

case and the contract itself. This process involves monitoring of services, usually, by users

of [PPP] services, private sector facilities manager and contract manager from the public

sector' (Demirag et aI., 2005). Therefore, it is vital to examine the extent that the

objectives of the project are clearly defined. From the previous discussion, it is apparent

that the government does not have clearly defined objectives for the WKCD. Since the

concept of the WKCD29 was first proposed in 1998, the government reiterated several

times that the construction of the WKCD would 'enhance Hong Kong's position as Asia's

29 It should be noted that the original concept is not constructing a cultural district. Instead, it aims at building a new performance venue at the WKR.

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premiere centre of arts, culture and entertainment and create a new look for Victoria

Harbour' (Housing, Planning and Lands Bureau, 2001). Later, when the IFP was launched,

the government further stated clearly that 'the West Kowloon Cultural District (WKCD)

will be a landmark development that enhances Hong Kong's position as a world city of

culture' (Housing, Planning and Lands Bureau, 2006a). However, 'enhancing Hong

Kong's position as a world city of culture' is a relatively vague objective. Moreover, as

previously discussed, the government did not conduct a business case for the project.

Potentially, lack of clear objectives and targets would potentially harm the degree of

managerial accountability that can be secured at the implementation stage.

6.4.3 Public Accountability

The Legislative Council, Audit Commission, Ombudsman, media are the mam

watchdogs to secure public accountability. In the pre-IFP period, the roles of the Audit

Commission and the Ombudsman were very limited or even non-existent. Whilst for the

role of the media, it is found that their reporting on project-related issues was only

occasional. With limited information provided by the government and media reports, a low

level of public awareness towards the project resulted. In this context, the Legislative

Council, which represents the public, is regarded as the only channel able to secure some

degree of public accountability.

As described in 6.2.2, the role of the Legislative Council, however, is limited.

Relatively, although it was regularly informed by the government on the progress of the

project, the Council was not given sufficient opportunities to explore and discuss the

development approach and the mode of financing. Information regarding these two key

areas was not provided by the administration until July 2003, two months before the

official launch of the IFP. The views of the Legislative Council therefore could not be

fully taken into account as these important decisions had already been made in advance.

From this perspective, although the Legislative Council was given several chances to

question the general direction of the project, public accountability should not be regarded

as being well secured.

6.5 Summary

This chapter which has examined the policy making processes entailed in

establishing the WKCD has shown that accountability has not been well secured in

pre-IFP period. Several existing accountability mechanisms such as consultation with key

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stakeholders failed to function properly and effectively or were being bypassed. This was

particularly noticed with the Executive Council's role in securing managerial

accountability. Once the IFP had been issued new aspects of accountability became

important. However, the resignation of the then Chief Executive, Tung Chee-wah, marked

a turning point and so the next chapter examines how accountability was being secured in

the post-IFP period under Mr. Tung's leadership. This will then be followed by Chapter 8,

which will examine accountability issues in the project after the change of Chief

Executive.

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Chapter 7

Accountability Secured in the Post-Invitation for Proposal Period under Tung's

leadership

7.1 Introduction

The last chapter discussed the development of the WKCD and how accountability

was secured in the pre-IFP period. In the post-IFP period, 'how to secure accountability in

the development of the WKCD' has remained a key issue among the residents, key

stakeholders and politicians. The resignation of the former Chief Executive, Mr. Tung

Chee-wah, on March 7, 2005, marked a turning point for the project because the

government has changed its stand and attitude since then. This chapter, however, studies

the accountability secured in the post-IFP period under Tung's leadership. It begins by

introducing the development of the WKCD, and the details of the Invitation for Proposal

document. It also discusses the roles and major concerns of the different parties, including

the arts and cultural groups, different pressure groups, the Legislative Council and the

proponents, as well as the government's approach in handling the project and in

integrating the different views of the community.

7.2 Development of the West Kowloon Cultural District

An IFP for the WKCD with a March 2004 deadline was issued in September 2003. In

the IFP document, the government clearly prescribed the BOT-type PPP and

single-developer approach. The private partner would be required to plan, design, finance,

and construct the district and to operate the core arts and cultural facilities for 30 years.

Following the official launch of the IFP, different stakeholders, for instance, the

Legislative Council and the Real Estate Developers' Association, expressed their

disappointment and objections towards the IFP. In November 2003, in response to the

urging of the Legislative Council, the deadline for submission of proposals was extended

to June 2004 so that the government could conduct further consultation with stakeholders

whilst potential proponents could also have more time to prepare their bids.

At the end of the IFP period, the government received five proposals. After the initial

screening of bids against the mandatory requirements, three proposals were deemed to be

qualified. In order to enhance public involvement as to demonstrate government's aim to

be more accountable, the qualified proposals were put up for 15-week exhibition and

several public forums were organized. In response to the request of the Legislative

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Council in mid-March, the exhibition was further extended to the end of June 2005 (three

months longer than the original plan) (see Chapter 8 for details).

In the public consultation period, many citizens and different stakeholders expressed

their concerns towards several issues. These included the driven policy of the WKCD,

relations between hardware and software development, technical feasibility and

maintenance of the canopy, single-package approach, financial feasibility of the project,

governance and the establishment of a statutory body to oversee the project and role of the

Legislative Council on the development ofthe WKCD.

Thus, before the resignation of Mr. Tung on 7 March 2005, the government took a

relatively strong stand as only two, relatively speaking, concessions were made in

response to the public outcry.

7.3 Invitation for Proposal

Before examining the stakeholders' involvement and the accountability secured in the

post-IFP period under Tung's leadership, details of the IFP document is introduced. The

IFP document can be regarded as the preliminary contract as it outlines the respective

roles, responsibility and liability of parties involved. In order to enhance flexibility and

innovation, the following are listed as the mandatory requirements:

* Three theatres with at least 2,000,800 and 400 seats respectively; * A performance venue with at least 10,000 seats; * A cluster of four museums at least 75,000 square metres in size; * An art exhibition centre at least 10,000 square metres in size; * A water amphitheatre; * At least four piazzas; and * A canopy covering at least 55% of the development area (Housing, Planning

and Lands Bureau, 2003a).

Other than that, the winner is obligated to provide or re-provide several Government,

Institution and Community (GIC) and Utility Facilities in the WKCD. The listed facilities

are as follow:

* Tsim Sha Tsui Fire Station Complex; * Kowloon South No.2 Salt Water Pumping Station * Police Post * Electricity Substation Building; * Public Toilets; * Refuse Collection Point; and * Contingency Space (Housing, Planning and Lands Bureau, 2003a).

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7.3.1 Output Specifications in the Invitation for Proposal

Specifying outputs are indeed very important for a PPP project. One of the main

differences between the traditional conventional procurement and PPPs is that the

output-based performance specifications of the latter usually give rise to improved

efficiency and effectiveness as most private partners may make good use of their

innovation capacity to save costs as they are only subjected to the output-based

requirements. Hence, it is important to provide clear output specifications from the early

beginnings of the development of a PPP project. This view is shared by Dr. Sarah Liao,

Secretary for Environment, Transport & Works. In her opening address to a conference on

PPP, she mentioned that 'the Government is mindful of the key issues which have to be

properly addressed before implementing a project through PPP... The output

specifications and performance requirements for the project should be clearly set out and

agreed with the private sector partner at the outset' (The Hong Kong Institute of Surveyors,

2004a). Theoretically, these should be provided clearly in the IFP. Hence, in this section,

output specifications listed in the IFP will be examined.

In the IFP document for the development of the WKCD, the government has listed

out the mandatory requirements for the project. However, it should be noted that flexibility

was given to the private sector so as to enhance innovation and at that same time, the

output specified in the response to the IFP may not be fully conforming. In the Important

Note for the IFP, the government articulates that 'all words and expressions in this

Invitation for Proposals .... which convey, or may convey, an obligation on the part of

Proponents in respect of the preparation and submission of their Proposals, are indicative

only of Government's Baseline and the obligations are open to the Proponents and are

subject to negotiations. Any failure on the part of a Proponent to submit a Proposal in

accordance with Government's Baseline will NOT render the Proposal non-conforming'

(Housing, Planning and Lands Bureau, 2003a: 3). For instance, in the IFP, 1.81 plot ratio

is adopted by the government in the project. However, plot ratios of all three screened-in

proponents are higher than the government's one.

Instead of providing only output specifications so as to enhance innovation,

flexibility in the manner of performance and improve the effectiveness and efficiency of a

PPP project, the government has included several input-based specifications. Take the

Museum of Ink as an example3o, in the IFP document, several input specifications are

30 Similar input-based specifications have been provided for all core arts and cultural facilities, the fire station complex and all Government! Institution! Community facilities.

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observed, including:

• the floor of all galleries should be covered by synthetic tiles laid with carpet tiles made of looped and fire-rated fibres. All floor surfaces should be load bearing and can withstand wear and tear;

• an insulation layer should be installed between the perimeter walls and the gallery panels. The walls should be lined with load bearing gallery panels mounted with heavy fabrics for displaying paintings and flat exhibits. The fabrics can be removed and replaced. Materials like Hessian or other equally open weave fabric is preferable. Provision of a picture rail hanging system on these panels is necessary;

• for security reasons, the ticket offices should have double doors. Provision for a strong room is required;

• the Catering Facility should be adjacent to the entrance hall to provide convenient access. An outside entrance/ exit should be provided so that it could operate independently even ifthe museum is closed;

• for the 200-square metres design office/ studio in the Museum, a storeroom for design material is required. Provision of natural light is preferred. Artificial lighting should be a up-light system to provide reflective lighting. Suggested special equipment includes machintosh computer network, scanner, A4 and A3 printer, 36"-48" designjet printe, Xerox machine, fax machine, light box, spray booth and projection screen (Housing, Planning and Lands Bureau, 2003a: 275-300).

For the Painting Laboratory proposed in the Museum of Ink, detailed input specifications

are listed in the IFP (see Appendix 2 for details). Other than that, instead of asking the

private partner to provide brief information on its financial models and annual financial

assessment, it requires the private counterpart to state clearly 'all assumptions adopted ...

with basis and source of assumptions elaborated' (Housing, Planning and Lands Bureau,

2003a: 60). Also, the private counterpart has to provide not only the estimated revenue for

each facility in the WKCD, but also the estimated revenue item by item. For example,

break down of the revenue for the core arts and cultural facilities should include the

following items: '(1) entrance feel turnstile revenue/ ticketing; (2) venue rental income; (3)

concessions with detailed breakdown of components; and (4) other income (including, for

example, any funds to be set up or means for channeling revenue from commercial

developments in the Project towards the operation of the Core Arts and Cultural Facilities

provided that it is consistent with [the IFP], (Housing, Planning and Lands Bureau, 2003a:

61-62).

In the broad sense, it seems that the government has successfully provided only

output specifications in the IFP document. However, this is not the fact. Some

interviewees share this view:

'If you take a look of the Invitation for Proposal, you will find that it is very ridiculous. It clearly states everything [in the museums], even the material of the light bulb. But you can't write down such details. Different ceiling height

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requires different type of lighting or light bulbs. Differences even exist between light bulbs made in Europe and those made in Asia. Lighting or light bulbs used depends also on the type of exhibits. So, how can you write down what kind of lighting or light bulbs should be used in the Invitation for Proposal?' (Interviewee, Arts and Cultural Group)

'Have you taken a look of the Invitation for Proposal? Actually, the government has been very detail-minded in the sense that it even articulates the number of washroom should be constructed in each core facility. Hence, we are just given the flexibility in designing the outlook of the building. Other than the outlook, I am sure the spacing or details are the same among we three [proponents].' (Interviewee, Proponent)

Therefore, instead of providing output specifications with limited essential input items, the

government has gone too far by providing details of the spacing and materials used in the

design and construction of the core arts and cultural facilities. As output specification is

crucial in establishing a business case, and a well established business case is one of the

activities to achieve contractual accountability at the set-up stage of a PPP project

(Demirag et aI., 2004a). Hence, detailed input specifications that found in the IFP

document, to a certain extent, has limited the degree to which contractual accountability

could be secured.

7.4 Stakeholders' Involvement

As stated in Chapter 6, one of the main tasks of the government in establishing a PPP

policy is to manage community expectations. To secure accountability and public interest,

public voice should be incorporated in the whole process in PPPs, both before and after

the tender is awarded. Taking a broad definition, all Hong Kong citizens are regarded as

stakeholders of the project. Hence, in this section, involvement, i.e. role and major

concerns, of the citizens involved in arts and cultural groups, different pressure groups, the

District Council and the Legislative Council are studied respectively.

7.4.1 Role and Major Concerns of the Arts and Cultural Groups

Arts and cultural groups must be regarded as key stakeholders in the development of

the cultural district. Theoretically, they should playa substantial role in the project, with

their major concerns being highlighted and addressed. In the last chapter, however, it was

found that although the government had consulted the groups in the pre-IFP period, arts

and cultural sector members felt that they had not been sufficiently consulted about the

details of cultural district such as its location, the arts and cultural components,

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development approach and mode of financing. Hence, communal accountability does not

appear to have been well secured.

In the post-IFP period, after the screening process, a large-scale, six-month public

consultation took place3!. During this period, two discussion forums were designated for

the arts and cultural groups. However, the arts and cultural sectors actively voiced out

their concerns and opinions in public, through the media and by attending forums or

seminars organized by different organizations, instead of just using the official discussion

forums. In general, there were two schools of thought. From the interviews conducted, it is

evident that the 'supporting' camp believes that the project serves as a golden opportunity

to foster Hong Kong's arts and cultural development. Moreover, a supply-led approach in

developing new cultural facilities is acceptable as the 'cultural sense' of the community

and new arts and cultural programmes would be developed with the provision of

additional facilities. Some 'supporters' who signed mutual agreements with proponents or

those who are regarded as the strategic partners of proponents did stand up and speak very

loudly in the public, for instance, Clifton Ko Chi-Sun, a producer of drama and Chief

Executive of Spring-Time Productions. Because of this, some members of this camp have

been labeled as 'beneficiaries' by the public. They have even been criticized by legislators

as cultural hatchet men (South China Morning Post, Feb 1,2005).

'There is no problem regarding the supply-led approach. The provision of additional facilities will lead to the development of the cultural sense of the community and in consequence, interest for the arts and cultural programmes will be generated. Further, it is nonsense to say that the software in Hong Kong has not yet been ready as the government has spent so much money to nurture local arts talent every year.' (Interviewee, Arts and Cultural Group)

'May be because I worked in the government before, some of my views are similar to that of the government. But I have traced the arts and cultural development in Hong Kong for a long time. Hong Kong's arts and culture [facilities] develop from very few ... At first, there is only one City Hall in Hong Kong, right now, we have several. Also, there are various arts and cultural programmes. And there are lots of artists. At the time when the City Hall first came to operation, no one can imagine that Hong Kong's arts and culture can develop to the current scale and status.' (Interviewee, Arts and Cultural Group)

'The reason that I support the development is that this is a golden opportunity to develop and help promoting arts and culture in Hong Kong. Although the Ink Museum is one of the preferred themes as listed by the government, this does not mean that all proponents must follow. It is evident that one of the

31 Originally, the consultation exercise was scheduled to last for 15 weeks. The period was later extended by the government in response to the urge of the public and the Legislative Council.

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proponents proposes to build the Children's Interactive Museum instead of the Ink Museum. Nevertheless, I am still in support for the West Kowloon Cultural District. So, this is not a matter of interest allocation and I am not supporting the project because I am one of the beneficiaries.' (Interviewee, Arts and Cultural Group)

'I attended a Legislative Council's hearing on the West Kowloon Cultural District. Lots of arts and cultural groups attended that meeting too. We have expressed our opinion. At that time, a legislator said that 'in order to secure our benefit, you all came to the Legislative Council to support the West Kowloon Cultural District'. I felt so bad immediately ... If I can generate my response immediately, I will say to that legislator that as all of us (representatives of the arts and cultural groups) are no longer young, if we are coming for our benefit, we will suggest the construction of additional elderly facilities. This may fit our needs better. [Supporting the development of the project] has nothing to deal with the benefit. For a 'real' artists or someone who work in this field, the West Kowloon Cultural District just like a hope or a dream. To be realistic, Hong Kong is small with very little available land. Right now, we have a place... no matter what the driven motives of the government are, it is good that she wants to include several arts and cultural facilities on this piece of land.' (Interviewee, Arts and Cultural Group)

In the mean time, the opposition camp raises its voice against the development of

the WKCD. In their opinion, without a clearly designated cultural policy and the conduct

of relevant research (see Chapter 6 for details), the WKCD would not be successful as the

content may mismatch with the actual needs. Hence, they believe that software should

come before the hardware. Further, from their point of view, although it is difficult to book

a venue for arts and cultural activities, there is no urgent need of additional cultural

facilities as the problem can be solved through reviewing the current rental policy.

'We have the Hong Kong Academy for Performing Arts and Hong Kong Cultural Centre right now. Why the cultural sense of the community fails to be fully developed? This definitely contradicts with the rationale of adopting a supply-led policy: the cultural sense of the community would be developed with the provision of additional facilities? Are you saying that we have zero hardware in Hong Kong? ... Devil in the detail. Have you study the rental policy of the Leisure and Cultural Department? Do you know how bureaucratic they are? ... The reason you can't reserve a place in the Hong Kong Cultural Centre is that the government has reserved for its own use which may not be cultural-related. Why land sale must take place at the Hong Kong Cultural Centre? Why can't the government reserve a conference room or rent a room in the Hong Kong Convention and Exhibition Centre for land sale? Why you have to use our cultural facilities for land sale? Why congregation of primary schools have the priority in renting the cultural facilities? ... This kind of artificial factor can be eliminated easily. You don't have to wait for 10 years.' (Interviewee, Arts and Cultural Group)

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'Hardware and software cannot be separated. Those who support this (supply-led policy) have no knowledge of venue management. Usually, they are the artists. Having venue for performance is the number one priority for them ... Actually, operating a cultural facility is not easy. Even as simple as constructing a museum, the vision of your museum should be reflected in its design. For instance, if your target group is the general public, your museum should have lots of facilities, including nursery room for babies, play room and children room. The design will reflect the vision of your museum.' (Interviewee, Arts and Cultural Group)

'We are facing this issue (wrong design of the cultural facilities) continuously. People always claim that we don't have enough exhibition halls in Hong Kong. In reality, we are not having zero exhibition halls. You can take a look of the exhibition halls in Sai Wan Ho Civic Centre and the Hong Kong Cultural Centre. No one use the exhibition-related facilities there. Why? This is because although we have the hardware there, the design can't match with the actual needs of the users. ' (Interviewee, Arts and Cultural Group)

Apparently, the development of the WKCD is of potential benefit to the arts and

cultural groups and, it, in general, regardless of their diversified interests, the sector

welcomes the development of a cultural district in Hong Kong. Hence, to a certain extent,

the current scenario is strange that instead of urging for the early implementation of the

project, some arts and cultural groups advise the authority to slow down. However, it is

worth noting that the lack of rehearsal places, identified by studies conducted or

commissioned by the Hong Kong Tourism Association and Planning Department

respectively, and the difficulties to rent a performance venue for arts and cultural activities

are undeniable problems that the sector is facing. In this sense, one of the quick solutions

is building additional facilities. Although building new facilities does not guarantee a

'great leap forward' in the arts and cultural development, this will definitely facilitate its

growth in a long run. Hence, it is understandable that some arts and cultural groups

support and urge for the early implementation. Their deep sincerity towards the idea that

the WKCD can provide a better environment that fosters the arts and cultural development

in Hong Kong should not be discredited. Therefore, the writer argues that the WKCD can

really benefit the overall arts and cultural development in Hong Kong, not only the alleged

'self-interests' of the supporting camp among the arts and cultural groups.

However, some other arts and cultural groups' strong reservations and opposition

towards the project are not incomprehensiveable either. Their claim is that a 'quick

solution does not equal to good solution'. Indeed, finding a good solution should be the

first priority. Hence, they argue that some researches or additional rounds of consultation

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with the arts and cultural sector should be conducted so as to assess the cultural needs and

developing an overall arts and cultural policy. Although this view was raised in the pre-IFP

period, the government did not response to such expectations and needs. To a certain

extent, the opponents in this field are blaming the government for its lack of communal

accountability.

Further, since the announcement of the three screened-in proposals in November

2004, proportion of 'arts and cultural' facilities in the WKCD has been greatly challenged

by the public. Because all screened-in proponents have proposed a higher than expected

plot ratio, ranging from 2.5 to 4.232 (Hong Kong Economic Times, Nov 11, 2004), there

was a fear that the arts and cultural component in the WKCD would be given second place

to property development. Arts and cultural development in Hong Kong thus might not

benefit as much as possible from the WKCD. Clearly, this fear is shared by different

stakeholders, especially the arts and cultural groups.

'This [the Cultural District] is a property development project. The WKCD is not for arts and cultural development of Hong Kong ... The intention of the government is very clear. They want to use the most 'attractive reason' to develop the site into a large-scale property-related project. This would not only provide a legitimate basis for the property developers, but also the government itself ... Therefore, there will be canopy, several large-scale arts and cultural facilities, together with bundles of residential and commercial buildings.' (Interviewee, Arts and Cultural Group)

'Definitely, this is a property development project. It is evident that the policy formulation and decision-making are in the hands of the Housing, Planning and Lands Bureau, but not the Home Affairs Bureau ... Although the government has introduced a set of new development parameters and conditions for the WKCD project (see Chapter 8 for details), it has nothing to deal with the arts and cultural elements. Obviously, this is a property development project.' (Interviewee, Arts and Cultural Group)

'This is a property development... This is Cyberport the second. What do you remember about Cyberport right now? You remember the residential there. Can you find the high-technological component there? Other than stating that the 3D animation of the file 'Kung Fu' is produced in the laboratory located in the Cyberport, what else can you think of? Is this the vision and mission of the Cyberport when Mr. Tung (the former Chief Executive of Hong Kong) was first presented with the idea? I am sure that Mr. Tung would not believe that also.' (Interviewee, Legislator)

As this fear of the project being primarily favoured towards property development is shared

by different stakeholders, especially the opposition camp of the arts and cultural sector, the

32 The plot ratio of three proposals are higher than the Government's baseline, i.e. 1.81

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government has reiterated its stand on this issue on different occasions.

'Unfortunately, this arrangement [BOT-typed PPP] has been criticized as 'a property project in disguise'. But this criticism, if viewed objectively, does not hold water for a number of reasons. First, the developer selected will be required to build the specified arts and cultural facilities and operate them for 30 years. Second, we have set a plot ratio parameter for the WKCD site and any departure from this parameter must be justified... Third, the draft development plan of the WKCD project will be gazetted for public comment. .. The Government has, from the outset, prudently handled the WKCD because it is such a huge and long-term investment project. Stringent monitoring procedures have been put in place on top of extensive consultation and a high degree of transparency' (Tsang, Nov 20,2004).

'We will study whether the commercial/residential element is over-weight, and consider whether an adequate proportion of the revenue generated therefrom will go to the development and operation of the cultural facilities to ensure their sustainability. We wi11listen carefully to the views expressed by the public during the consultation period on this point. If members of the public have strong views against high-density development and the proponents fail to justify their proposed development density, then the Administration will not accept their development proposals' (Tsang, Nov 24, 2004).

'The presence of certain commercial elements in a cultural development is in itself not a bad thing. They give lifeblood to the development .. .I want to stress, at this point, that a number of mechanisms will be put in place to ensure that cultural significance and objectives of the West Kowloon project are met and maintained' (Tsang, Dec 6, 2004).

The proponents have also joined hand in convincing the public that this is not a property

project in disguise by claiming that

'This is not a property project. The property developments in West Kowloon are to support arts and cultural activities ... Paris in the past few hundred years has successfully attracted the best arts talent. I envisage [that] Hong Kong can do it with West Kowloon... We would like to see the cultural district live a very long life. It would be irresponsible if, 30 years later when we return the project to Hong Kong, it is losing money. Not every arts and cultural facility will lose money', said Sun Hung Kai Properties executive director Alfred So Chung-keung33 (South China Morning Post, Nov 11, 2004).

'Henderson Land vice-chairman Colin Lam Ko-yin said the company's proposed World City Culture Park was also not a property project and was only intended to make "very little profit" while protecting its shareholders' interests. Sino Land's executive director Yu Wai-wai said the company's plan

33 Sun Hung Kai and Cheung Kong Holdings were bidding for the project under a joint venture, Dynamic Star International.

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would raise cultural and economic standards34, (South China Morning Post,

Nov 11,2004).

'The project will not be in failure and it is clear that we all [the proponents] have committed to this cultural project, as a cultural project, not just a property project. We will not bet on our reputation. Definitely, this is not a property project.' (Interviewee, Proponent)

Unfortunately, both government and the developers have failed to convince the public,

especially the arts and cultural sector that the WKCD will not be too commericalized. To a

great extent, worries of the sector are justified as there is no cultural policy that serves as

the backbone for the development of the WKCD. Critics thus argue that without a clear

government cultural policy in place before proceeding to the development of the WKCD,

the government has totally relied on the private partner to 'steer' arts and cultural

developments of the WKCD as the latter is responsible for formulating not only business

plans, but also deciding the themes of the museums35 and writing up the mission and

vision of the core arts and cultural facilities. Further, the governance structure of the core

arts and cultural facilities, are likewise proposed by the proponents (Housing, Planning

and Lands Bureau and Home Affairs Bureau, 2003). It is clear, therefore, that government

has aimed to leave to the private counterpart the roles of both steering and rowing from the

outset. More importantly, the Court shares the view by stating that the project has been

'sold to the public as a cultural endeavor but legally the West Kowloon Cultural District

project is principally a commercial and residential scheme' as 'less then 30 percent is

reserved for what is described as core arts and cultural facilities' (The Standard, Apr 26,

2005)36. Hence, worries that the WKCD may be transformed into a commercial district do

appear to be justified.

Although the sector, in general, welcomes the ends, there are contrary views on the

details of the project. Hence, it is difficult for the government to demonstrate communal

accountability through reaching consensus among varies arts and cultural groups.

However, another way to achieve communal accountability is to be responsive to them.

34 Sino Land has formed Sunny Development with Wharf (Holdings) and Chinese Estates Holdings to bid for the project. 35 As previously mentioned, although the government has listed the preferred themes of the museums, proponents are given the flexibility to propose alternative themes if the themes are supported by justifications. 36 The High Court ruled that the WKCD is principally a commercial and residential scheme in dismissing the judicial review application of the Association of Chinese Authors and Publishers in Hong Kong and Macau. The Association sought for a review of the membership of the Proposal Evaluation Committee as members of the Hong Kong Arts Development Council is being excluded, which it claimed to be inconsistent with the Basic Law (The Standard, Apr 26,2005; Brewer and Hayllar, 2005).

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The government tried to convince the arts and cultural groups that the project would

not turn into a commercial development under the 'label' of 'arts, cultural and

entertainment district' on the other. Whilst for other concerns of the sector, like the

organization and mode of operation of the core arts and cultural facilities, the authority has

reiterated several times that 'the Government maintains an open mind on the issue'

(Information Services Department, Jan 6, 2005). Relatively speaking, the government is

not responsive to the arts and cultural groups in Tung's era. On these issues, however, the

sector obviously has no power for negotiation. Hence, arts and cultural groups were being

consulted and thus should be regarded as 'participated in participation' in accordance with

Arnstin's ladder of citizen participation.

On the other hand, it is worth noting that the government remains silent to some

fundamental questions like the relation between the WKCD and cultural policy (hardware

vs software) and the rationale for developing new cultural facilities (supply-led vs

demand-oriented) even though the sector has voiced out these concerns in the pUblic. On

these issues, similar to the relevant findings in the last chapter, non-participation, to be

specific, manipulation of the Arnstein's framework, was resulted. The government was not

only non-responsive towards the issues, but also with no intention of consulting the arts

and cultural groups both before and after the decisions were made.

7.4.2 Role and Major Concerns of different Pressure Groups

WKCD is a cultural project. At the same time, it is also an urban planning project and

a property development project. Hence, key stakeholders should not be limited to the arts

and cultural groups. In practice, different pressure groups with diverse interests and

concerns have joined the debate. Their role in the development ofthe project should not be

overlooked and should be regarded as one of the indicators in assessing how

accountability in the development of the WKCD has been achieved. In this section, the

roles and major concerns of different pressure groups are examined.

In the post-IFP period, several pressure groups participated actively in the

WKCD-related debates. Generally, regardless of their diversified interest they touched

upon, there are some common issues and topics. For example, the necessity for and

maintenance of the canopy, the single package arrangement, and the assessment and

selection criteria. These groups, again, made good use of different channels to voice out

their opinions, including attending discussion forums organized by different organizations,

the media and the Legislative Council. Their views and concerns are summarized in

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Appendix 3.

For some pressure groups, other than pressurizing the government, they provide

professional or technical advice in accordance with their expertise. These include the

Hong Kong Institution of Engineers, the Hong Kong Institute of Planners, the Hong Kong

Institute of Architects, the Hong Kong Institute of Surveyors and Association of

Engineering Professionals in Society. For instance, the Hong Kong Institute of Surveyors

has been very critical towards the procedures adopted by the government in developing

the WKCD. It strongly criticizes the government for not preparing a sound 'business case'

which includes the construction of a PSC at the initial stage which is inconsistent with best

practices elsewhere37 (The Hong Kong Institute of Surveyors, 2005b). Moreover, the

Hong Kong Institute of Architects gave its professional advice on the canopy by

suggesting that 'technically it is entirely feasible and appropriate to implement Foster's

Sky-Canopy and conceptual design phase by phase. WKCDDB [the suggested

development board to oversee the project] should handle technical coordination with

reference to a set of established Control Drawings' (The Hong Kong Institute of Architects,

2003). The Association of Engineering Professionals in Society shares this view. However,

as the costs are outweighed by the benefits, the Association concluded that it would be

best to drop the canopy as a mandatory requirement:

'whilst the professional engineers in Hong Kong are capable of producing an elegant technical solution so that the signature design feature could be put in place, there are still many other issues related to the canopy structure in need of detailed address. These may include terrorism attacks (e.g. aeroplane strike and bomb threat) and natural disasters (e.g. typhoon, tsunami and earthquake) ... Taking into account of the above considerations, the AES [Association of Engineering Professionals in Society] has the view that landmark is not necessarily restricted to the canopy option' (Association of Engineering Professionals in Society, 2005).

As these professional groups should also be regarded as key stakeholders of the

project, it is necessary to examine the extent that these groups had been consulted formally

by the government. According to the interviews conducted, these groups are not convinced

that they were being 'consulted' although numerous consultation forums had been

organized.

'I don't know what kind of 'interactive mechanism' we have in the development of the WKCD. According to the government, there were numerous consultation forums which aim for consulting the public and relevant stakeholders. However, interaction doesn't mean ... does attending

37 Constructing a PSC is regarded as a best practice of other countries. For details, please refer to 6.3.3.

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meeting [consultation forums] a means to foster interaction between the public and the government? Attending meeting [consultation forums] doesn't equal to two-way communication. Right now, what is happening ... is that. .. we have meetings [consultation forums] but not interaction or two-way communication.' (Interviewee, Professional Group)

Other than these professional groups, some pressure groups, especially the Real

Estate Developers Association of Hong Kong and the People's Panel on West Kowloon

have, played a vital role in the development of the project. The former is chaired by Dr.

Stanley Ho Hung-sun. At first sight, as the project is to be developed through

pUblic-private partnerships with heavy involvement of the business sector, in particular,

real estate developers, it would seem that the for-profit sector should welcome and be

supportive to the project. However, in reality, the Real Estate Developers Association

strongly opposed the project and, in particular, the single package approach. Other than

that, it also urged the government to answer three fundamental questions regarding the

project:

* Are the various arts and cultural facilities prescribed by the Government in its Invitation for Proposal document the ones we need?

* Do we need a separate cultural district to house all such facilities? * Given the current fiscal situation, can we afford them, in terms of both capital

expenditure and operating costs? (The Real Estate Developers Association of Hong Kong, 2003)

Other than submitting position papers to the relevant panel of the Legislative Council, the

Association also makes good use of the press. Dr. Stanley Ho expressed his

disappointment and queries towards the single developer approach through the media. He

also proposed an alternative scheme which he assured the government would bring the

administration $210 billion in profit based on a multiple package approach and a plot ratio

of 12 times and that would leave the core arts and cultural facilities to the government

(South China Morning Post, Jan 21, 2005). He further stated that '[the single developer

approach] equals to sending the real estate developers a big gift by the 7 million citizens in

Hong Kong. How can that be fair? He [ the developer] is so fat that cannot wear the socks

himself (Sing Pao, Jan 8, 2005)'. Also, all members of the Real Estate Developers

Association, except the three screened-in proponents strongly oppose the single developer

approach and support the idea of splitting the 40-hectares land into several pieces for

tendering (Ming Pao, Jan 12, 2005).

It is difficult to assess the actual influence of the Real Estate Developers

Association on the project. However, the views of Dr. Stanley Ho have, definitely,

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strengthened the request for dropping the single developer approach. When James Tien,

the legislator and chairman of the Liberal Party, commented on the development of the

WKCD in January 2005, he predicted that the government would re-evaluate its approach

as it has strongly opposed by the Real Estate Developers Association and the Legislative

Council. The latter had just passed a motion that urged the government not to adopt the

single package approach (Wen Wei Po, Jan 8, 2005). Moreover, in July 2005, the Chief

Secretary for Administration, the person-in-charge of the WKCD development, agreed at

the lunch appointment with Dr. Stanley Ho that more developers should be involved in the

project in principle. In response to the press enquiries, the Chief Secretary for

Administrations Office confirmed the lunch appointment with Dr. Ho and did not deny the

statement that 'the government agreed that more developers should be involved in the

project in principle' (Sing Tao Daily, Jul 21, 2005). Later in October, the Chief Secretary

for Administration put forward a revised proposal which introduced additional

development parameters and conditions that, to a certain extent, abandoned the single

package development approach (see Chapter 8 for details). From this perspective, the role

of the Real Estate Developers Association and its influence on the project should not be

underestimated in that its strong opposition has been partially taken into account by the

government in the decision-making process. As the government has been, albeit in rather

limited fashion, responsive to the Association and, in turn, the industry, a certain degree of

accountability towards the real estate industry has been achieved.

Another pressure group that has played a vital role in the development of the WKCD

is the People's Panel on West Kowloon (PPWK). Generally speaking, this group was

formed in November 2004 by an alliance of nine organizations from civil society and

cultural sectors, solely to monitor the development of the West Kowloon Cultural District.

Other than calling for the extension of the original 5-week consultation period, the PPWK

aims at 'organizing [a] group of 800 to form a rational and knowledge base advocacy

platform to re-examining the IFP: 1. with emphasis on legality, governance and financial

issues; 2. re-examination of cultural and urban development policies; and 3. public

consultation process' (People's Panel on West Kowloon, 2005). In order to better equip

citizens with relevant knowledge on the WKCD, it organized several docent tours to the

exhibition held by the government. After gauging the public opinion on the issues through

several self-organized consultation forums, conferences and questionnaires, it proposed an

alternative to the government titled 'Re-defining West Kowloon'. This proposal urged the

government to 'suspend the "choose one from three" process, and to re-plan WKCD

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swiftly through broad-based public consultation by establishing metropolitan cultural

think tank' (People's Panel on West Kowloon, 2005). Again, its actual influence is difficult

to assess. However, it should be noted that forums organized by the Panel found

'attractive' to the government officials, in the sense that they had attended the forums,

(South China Morning Post, Jan 18,2005) and were well-received in the community. Also,

members of the Panel have frequently commented on the development of the WKCD in

the press. Furthermore, the government has formally responded to the position paper of

the People's Panel on West Kowloon (Home Affairs Bureau, 2005b). To a certain extent,

the government is held accountable communally by the Panel. In April 2006, according to

the membership list of the consultative committee of the WKCD development and the

three advisory groups38, three core members, including the convener of the People's Panel

on West Kowloon, have been appointed to the consultative committee and two advisory

groups respectively. To a certain extent, the group has heated up the debate and aroused

the attention of the government. Hence, other than providing alternatives, the People's

Panel on West Kowloon may have facilitated political communication between the

authority and the public, articulated interests and acts as an external means to monitor the

government and to hold the government accountable.

From the above analysis, it seems that pressure groups have played a vital role in the

development of the WKCD. It is worth noting that not all pressure groups achieve the

same degree of success. Some pressure groups may encounter some difficulties in

generating their views or in formulating their position on the project.

'I explained several times to different people, including the Legislative Council and government officials that the canopy [canopies proposed by all proponents] is different from the Foster's one in the sense that it is not glass-made and non-transparent. .. 1 have sent the Legislative Council a written submission on the issue. But up till now, legislators still believe that we are going to have the transparent canopy ... I also wrote to the government officials and proponents, but still haven't received any positive response from them ... other than getting the reply saying that thank you for your opinion or something like that.' (Interviewee, Pressure Group)

'Very little [consultation by the government has been conducted]. 1 think our group [professional group] has not been well-consulted. However, on the other hand, we should take a certain degree of responsibility too. Our group has our difficulties. Within our profession, we have 16 disciplines. Our members include both big and small companies. Some of them has already

38 In February 2006, as bidders indicated that they were no longer willing to proceed under new terms, the government announced that the project will be 'delayed' and in the mean time, a consultative committee, with three advisory groups will be formed to re-examine the context of the WKCD.

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participated and worked for the project. .. Then, who should we consult? Whose opinion should we take into account when we are generating our views?' (Interviewee, Pressure Group)

However, most pressure groups share something in common in the development of

the project, i.e. the government regarded them as part of the wider public and, before the

decision-making process of the project, did not formally consult them as the groups which

share similar views and membership characteristics (Lam, 1994).

'As far as I know, the industry [real estate industry] was not consulted by the government in advance. Instead, the government has consulted one to two big real estate companies in Hong Kong to assure that they are interested in the project.' (Interviewee, Proponent)

It is uncertain whether the Real Estate Developers Association has been consulted by the

government in advance or not. However, in view of the fact that the Association sent the

government a letter concerning their strong opposition towards the single developer

approach after the launch of the IFP (Sing Pao, Oct 8, 2003) and meeting was conducted

by the Association on October 10, 2003 so as to consult its members on the development

approach of the WKCD (Ming Pao, Oct 17, 2003), together with the observation of the

interviewed proponent, it is plausible that the Association may not be properly consulted

in advance.

To conclude, although not all pressure groups have been as successful as the Real

Estate Developers Association or possibly the People's Panel on West Kowloon in holding

the government accountable for its decisions, the role of pressure groups in the

development of the WKCD should not be overlooked, even though they do not have a

structured or institutional role in the development of the WKCD. Generally, they all

facilitate political communication between the authority and the public, heat up the debate

on the issue, articulate interests and demands of the community they represent and act as

an external means to monitor the government and hold the government accountable in the

post IFP-period under Tung's leadership. Although they have actively taken these roles,

most of them appear to have been informed, instead of consulted, by the government on

the project in that there was only one-way communication. Whilst for the Real Estate

Developers Association and the People's Panel on West Kowloon, two-way

communication is observed and they have exerted some pressure on the government, in

terms of the ladder of citizen participation, they should be placed on the rung of placation.

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7.4.3 Role of the Legislative Council

In the last chapter, it was found that involvement of the Legislative Council on the

WKCD-related issues in the pre-IFP period should not be regarded as rare. However, its

role is limited and its view, to a certain extent, cannot be fully taken into account in that

decisions have been made in advance. In the post-IFP period under Tung's leadership,

generally speaking, there is not much improvement regarding Legislative Council's

involvement. Instead, shortly after the official launch of the IFP, the public, including

legislators, considered the Legislative Council to have been bypassed. Since then, the

Council has participated more actively in scrutinizing the development of the WKCD. The

establishment of a subcommittee to oversee the project is an example of the active

involvement of the Legislative Council. In this section, the role of the Legislative Council

is studied so as to examine the degree of public accountability achieved.

Consultation and involvement of the Legislative Council are listed in Table 7.1 (for

the details of the motions passed, please see Appendix 4). In general, the Legislative

Council meetings, meetings of Panel on Planning, Lands and Works and Panel on Home

Affairs were used as the platform for the exchange of views and information on the project

between the government and legislators before 2005. Since January 2005, the

Subcommittee on the West Kowloon Cultural District Development under the House

Committee of the Legislative Council was set up so as to scrutinize the project in more

depth. Hence, the involvement of the Legislative Council should not be regarded as rare

although its level of participation is uncertain. Owing to the fact that the IFP process has

already been launched, and the initial screening of the bids against the mandatory

requirements as purely technical, the Legislative Council was kept informed about the

progress ofthe project instead of being consulted in the post-IFP period.

Table 7.1 Consultation and Involvement of the Legislative Council in the Post-Invitation for Proposal period under Tung's era Date Consultation and Involvement of the Legislative Council 18 November - Panel of Planning, Lands and Works (PLW) and the Panel on 2003 Home Affairs (HA) met deputations to receive views on WKCD.

- The Panels discussed further information provided by the Administration on issues highlighted in the public response to the launch of the IFP for Development ofthe WKCD.

25 November PLW and HA continued to meet deputations to receive views on 2003 WKCD. 26 November A motion moved by Wong Sing-chi as amended by Ma 2003 Fung-kwok on the WKCD Project was passed.

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Date Consultation and Involvement of the Legislative Council

27 April 2004 - PLW discussed the progress of the Development of WKCD since the Motion Debate on 26 November 2003, and the planned arrangements for enhanced involvement of the public in the Invitation for Proposals exercise. - The Panel also discussed the report by Legal Services Division on whether the Government had circumvented the normal procedure of seeking approval for expenditure in public works, and whether the Government had breached its usual accounting practice. - A motion was moved and passed opposing the land and financial arrangements proposed by the Administration for the WKCD.

14 July 2004 - PLW discussed the outcome of the Invitation for Proposals for development ofWKCD. - The Panel circulated to members an Administration's paper providing information on the arrangements for assessment of the proposals received for the development of WKCD, the public consultation to be conducted and the tentative time table for the whole process.

30 November - The Panel discussed the progress of the development of the 2004 WKCD project and was informed of the detailed arrangements for

public consultation on the screened-in Proposals. - Three motions were moved and passed.

16 December PLW discussed Legislative Council's Brief on 'Development of 2004 the West Kowloon Cultural District: Screening Result of

Proposals'. The Panel was briefed on the three screened-in proposals by the proponents and received public views on the subject.

5 January 2005 Amotion moved by Alan Leong Kah-kit as amended by James To on the Development ofWKCD was passed.

21 January 2005 Following the passage of motion at the meeting of 5 January 2005, the House Committee decided to set up a subcommittee to study issues relating to the development ofWKCD.

4 February 2005 The first meeting of the Subcommittee. The Terms of Reference was drawn up: 'To study and follow up issues relating to the development of West Kowloon Cultural District including its interface with arts and cultural development, land use and planning, environmental considerations, financing implications and arrangements, and other related matters. '

18 February The Terms of Reference of the Subcommittee were noted by the 2005 House Committee (HC). HC also circulated to members several

updated information on the West Kowloon Cultural District development.

21 February The Subcommittee discussed the land use and planning issues in 2005 relation to the development ofWKCD. Sources: Legislative Council (2006); Subcommittee on West Kowloon Cultural District Development, Legislative Council (2005b).

Other than placing the development of the West Kowloon Cultural District on the agenda of

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the relevant panels, subcommittee and the Legislative Council meetings, question raising is

another means to secure accountability. Legislators have also made good use of latter

means in the post-IFP period under Tung's leadership (see Table 7.2 for details).

Table 7.2 Questions raised by the legislators which are related with the West Kowloon Cultural District development in the post-IFP period under Tung's leadership Date Questions 12 November 2003 James Tien raised a question on the single-developer approach,

arrangement of another round of public consultation and monitoring measures ofthe WKCD.

19 November 2003 Albert Ho raised a question on amendments to Draft South West Kowloon Outline Zoning Plan.

3 March 2004 Ma Fung-kwok raised a question on the recommendations of the Culture and Heritage Commission and the development plan oftheWKCD.

12 May 2004 Lau Ping-cheung raised a question on the professional jobs created by the WKCD development project.

19 May 2004 Wong Sing-chi raised a question on the canopy and single-developer approach ofWKCD.

23 June 2004 Abraham Shek raised a question on submitted proposals on development ofWKCD.

24 November 2004 James To raised a question on establishing cultural needs, preventive measures to ensure that arts and cultural elements would not be seconded to the real estate development and the possibility of establishing a statutory body to monitor the WKCD project.

15 December 2004 Lee Wing-tat raised a question on the mandatory provision of a canopy for WKCD.

26 January 2005 Again, Lee Wing-tat raised a question on the mandatory provision of a canopy for WKCD.

Source: Legislative Council (2006).

From this perspective, in the development of the WKCD, it seems that the authority

has been accountable to the public through the Legislative Council as the Council has been

regularly involved in monitoring the development of the project. However, most citizens

and politicians disagree with this statement and claim that the Legislative Council was

being bypassed. As the WKCD is a PPP project in which the government do not have to

spend a single penny except granting the winning bidder the 40-hectares land, the

government regards it as 'facilities to be used by the public' instead of public works and

hence no approval from the Legislative Council is required (South China Morning Post,

Nov 17,2003). The Subcommittee on the West Kowloon Cultural District Development of

the Legislative Council, established in January 2005, strongly opposes this by arguing that

the 40 hectares of land which will be granted to the private partner in reference to the IFP

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should be regarded as public resource and thus the project is not financially free-standing

in reality (Subcommittee on the West Kowloon Cultural District, Legislative Council:

2005b). Even though the arrangement (no approval from the Legislative Council is needed)

is proved to be legitimate and consistent with the relevant Ordinances, from the

perspective of the legislators, this aims at bypassing the Legislative Council and deprives

it of its right to scrutinize the project. This also could set a precedent for other PPP

projects, especially as the government has committed to adopting PPPs whenever feasible

(Efficiency Unit, 2003), and suggests that the Legislative Council may no longer be able

to exercise fully its constitutional role to monitor the government. Although some people

may argue that impacts have been exaggerated and the arrangements had been justified by

the Introductory Guideline to Public Private Partnerships39, it is clear that consultation

with the Legislative Council has been rare in that the it was being briefed and informed,

instead of being consulted on the project-related issues since the early beginnings of the

project (see 6.2.2 for details). Views of the Legislative Council, thus, have never been

fully taken into account in that decisions have generally been made in advance of

discussion with the Legislative Council.

Instead of acting passively and waiting to be briefed and informed by the government

on the updated progress of the project, the Legislative Council had participated much more

actively since November 2003, two months after the IFP was launched and after the

project was classified as 'facilities to be used by the public'. Since then, the Legislative

Council has actively met deputations to receive views on WKCD, and passed motions that

urge the government to take certain actions. From September 2003 to February 20054°, six

motions have been passed (see Appendix 4 for details). Obviously, motions passed by the

Legislative Council can exert varying degrees of pressure to the government. For instance,

on 26 November 2003, the Chief Secretary for Administration announced that the deadline

for submitting proposals has extended from 19 March 2004 to 19 June 2004 so that the

government could conduct further consultation with the stakeholders whilst the

proponents could have more time to prepare their bids. The announcement was made

during the Legislative Council's meeting to debate a motion that originally urged the

39 The Introductory Guideline to Public Private Partnerships states clearly that 'it is possible that a financially free-standing project would require no formal legislative or fmancial approvals form the Legislative Council. However, it should be borne in mind that most PPP contracts are likely to be lengthy and of relatively high value. Client departments are advised to seek Legislative Council support (e.g. by consulting the appropriate Legislative Council Panel) in line with policies on accountability and transparency ... A project where the government intends to grant land for less than the paid-up market value would normally require consultation with the Legislative Council (Efficiency Unit, 2003: 10)'. 40 The then Chief Executive, Mr. Tung, resigned in early March.

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government to 'comprehensively reVIew the project and extend the deadline for

submission of development proposals' (Tsang, Nov 26, 2003). There were two

amendments to the motion: one, by Ma Fung-kwok that calls on the government to review

the project comprehensively and thoroughly consult all stakeholders with the deadline for

submitting the proposals extended passed finally (see Appendix 4 for details); the other by

Albert Ho Chun-yan, 'urged the Government to openly consult all sectors in the society

afresh and temporarily shelve the whole project' (Tsang, Nov 26, 2003). To a certain

extent, the move by the government to extend the deadline for submitting proposal,

successfully convinced the legislators for against the Albert Ho's tough amendment. The

motion was finally defeated by two votes (Legislative Council, 2003b). Moreover, in his

speech, Chief Secretary for Administration stated clearly that

'but if Members passed the amended motion by the Hon HO Chun-yan ... Invitations that were sent all over the world will also be withdrawn by tomorrow, 27 November 2003. The relevant policy bureau would then reconsider afresh the whole project. .. This is because I know deeply that if Hon Members now vote for shelving the project, the Legislative Council will continue to criticize every aspect of the project even that we have stated clearly our intention to consult Members on the successful proponent's proposal and to extend the consultation time with various sectors. The Government's efforts would never be endorsed by this Council' (Tsang, Nov 26,2003).

It seems that the government was well aware of and did not underestimate the potential

impacts of the motion for urging to shelve the project. Although this may be the

technique used in persuading the Legislative Council not to urge for the shelving the

project, it is clear that the Legislative Council has exerted some degree of pressure to the

government.

It seems, further, that the Legislative Council has been successful in scrutinizing the

project once it played a more active role in demanding government's accountability for

the project. In reality, government officials, including the Chief Secretary for

Administration and relevant Secretaries41, did frequently attend the meetings of the

Legislative Council to explain the project. However, the government took a strong stand

towards inquiries or criticisms of the legislators.

'The Legislative Council would not be that heartless, it would not defeat their

41 Before the establishment of the Subcommittee on the West Kowloon Cultural District development in January 2005, principle officials, including the Chief Secretary for Administration, Secretary for Home Affairs and Secretary of Housing, Planning and Lands usually attend the meeting of the Legislative Council. Civil servants were officials who explain the project to panel members of the Legislative Council.

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decisions that they have endorsed (support the development of the West Kowloon Cultural District) a year ago after the launch of the worldwide tendering process. And the government would not be unjust and shove the proj ect off by halting it.', said the Chief Secretary for Administration (South China Morning Post, Nov 25, 2004).

'Right now, if we are asked to exclude the single package approach or the canopy from the mandatory requirement, and halt the public consultation conducted under the existing development blueprint of the West Kowloon Cultural District, it is difficult for the government to follow', said the Chief Secretary for Administration in response to the motion moved by Alan Leong in January 2005 (Ta Kung Pao, Jan 7, 2005).

Furthermore, legislators also urged strongly for disclosing the financial information of the

project. As it may weaken the bargaining power of the government at the negotiation stage,

the authority refused, arguing it could leave it with no room for negotiation. However,

legislators were dissatisfied with the given justifications. In order to hold the government

accountable, three major political parties of the Legislative Council, including the

Democratic Party, the Democratic Alliance for the Betterment of Hong Kong and Liberal

Party, discussed the possibility to 'force' the government to release the relevant information

by using the Legislative Council (Powers and Privileges) Ordinance (The Sun, Jan 15,

2005). Although the Council has been united and actively participated through scrutinizing

the project, especially on this issue, its opinions failed to be taken into account by the

government in that the government has taken a very strong stand on upholding its own

stated position. It is evident that the Legislative Council has tried to strengthen its role in

the project but in reality, its role remained very limited in Tung's era. This, to a large extent,

confirms a lack of institutional power in policy making of a PPP project and in holding the

government accountable.

Probably, the main reason accounting for the limited participation of the Legislative

Council in the development of the WKCD is that only levels of tokenism (in Arstein's

ladder of citizen participation) has been achieved. As stated in Chapter 6, although the

Legislative Council has its institutional role in scrutinizing the government, it was

constantly informed by the government about the progress instead of being involved in

the decision-making process. It is evident that this practice is maintained in the post-IFP

period by categorizing the project as 'facilities to be used by the public' so that the

institutional role of the Council and its involvement would be reduced. Since then, the

Council has actively scrutinized the project by passing motions and raising questions.

Obviously, these exert a certain degree of pressure on the authority and in response to the

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urging of the Council and the public outcry, two concessions were made - extending the

deadline for the IFP exercise and launching a public consultation exercise after screening

the bids. Although two-way communication was fostered in some sense, the level of

Legislative Council's participation is at the stage of placation as the authority has the

final say in the development of the WKCD and the role played by the Legislative Council

in this period was no different from the advisory body.

7.5 Involvement and Role of Proponents

In the development of a PPP project, private sector involvement is essential. Since

the launch of the IFP, potential bidders have been actively involved and playa crucial

role in the project. Their active involvement does not end after the submission of

proposals. Instead, screened-in proponents have to promote their proposals to the public

during the public consultation period. In this section, their role and involvement after the

launch ofIFP in Tung's era are highlighted.

As previously mentioned, the government has relied on the private sector to fill in

several gaps. For instance, the IFP document requires the bidders to write up the business

plan, which includes details like the mode of governance, mission statement, business

strategy and operation plans, for each of the core arts and cultural facilities. Other than

the 'software' gap, proponents have to conduct the feasibility study on the canopy that is

listed as a mandatory requirement of the IFP. From the information pamphlets provided

by the screened-in proponents, it is clear that all of them have consulted and involved

professionals of the relevant fields, such as urban design, architecture, arts and culture

and engineering, when filling in these 'hardware' gaps and preparing their submissions.

In order to fill in the 'software' gap, the proponents consulted arts and cultural

groups. Some of them even reached the partnership agreements with some groups.

According to the interviewed proponents, they have tried their very best to conduct an

extensive consultation exercise with the arts and cultural sector so as to suit the actual

needs of the sector. Opinions of the groups were taken into account when proponents

were drawing up their proposals. Some interviewees from the arts and cultural sector also

confirmed that they had been consulted by the proponents. From this perspective,

proponents have tried to achieve communal accountability at the very early stage of the

project, when they were preparing their proposals.

'In our scheme, we had consulted more than 300 local arts and cultural groups and amended our design to accommodate some of these views.'

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(Interviewee, Proponent)

'Our group has consulted most key stakeholders, like the arts and cultural groups, before working on our design. Owing to the urge of the arts and cultural groups and some key stakeholder, we have included some other non-mandatory arts and cultural facilities in our schemes, like the education centres and concert hall ... I have tried my best to consult the arts and cultural groups. It's true that I first approached the big and flagship groups. Through their introduction, several small groups have been consulted too. It should be noted that with the limited time, it is reasonable for adopting such approach and we did try our very best. During our first interview with the arts and cultural groups, we have already sent them questionnaire to identify their needs. We spent a month to figure these out before working on any design.' (Interviewee, Proponent)

Moreover, from the point of view of proponents, adopting PPPs for developing the

WKCD is beneficial to all parties, especially the arts and cultural groups in that they can

make use of the network of the private sector to promote their programme42•

An interviewed proponent stated a problem that encountered by his group when

trying to be accountable to the public was the insufficient chances to explain his proposal

clearly to the public, even though it seems that his group is given many opportunities like

participating at the public discussion forums. The 'misunderstanding' or 'lack of

knowledge towards the proposals', to a certain extent, gave rise to the heated debate on

the project in the sense that some issues raised have already been addressed in the

proposal. For example, the arts and cultural groups have strongly urged for having a

statutory board to govern the core arts and cultural facilities. However, this opinion has

already been taken into account and hence a similar governing board had been proposed

by the interviewee's own group. Furthermore, some people worried about the potential

financial problems that might arise owing to the long 'leasing' period. Nevertheless, this

has been addressed by one of the government's additional requirements and hence every

proponent had to provide a performance bond. With this, there will be enough money to

operate the facilities for 30 years. Hence, the interviewed proponent is of the view that

there is a lack of opportunities for him to address some public concerns in a clear manner

and being responsive to the pUblic. Therefore, proponents were demanding the public, in

particular, the arts and cultural groups, to listen to their views and explanation so as to

42 This is because all screened-in proponents are large real estate developers who own many residential, shopping malls and commercial buildings in Hong Kong. The interviewed proponent claims that the arts and cultural groups can make good use of this 'network' in promoting their cultural programmes. For instance, posters which promote the cultural programmes would be posted in all shopping malls that owned by the bidder without charging for a single dollar, other than the printing cost.

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facilitate a two-way communication which is essential in achieving public and communal

accountability.

'We and the government have not been given opportunities to explain the project or our proposal to the public in full and in a clear manner. It takes at least half an hour to brief the public about our proposal, but the fact is, we are usually given several minutes to do so at the discussion forums. But I understand that this is one of the constraints ... Therefore, although some public concerns may have already been addressed in our proposal, the public fail to recognize it.' (Interviewee, Proponent)

'One of the advantages of adopting PPPs is that the arts and cultural groups can use our 'network'. What I mean is we can act as the facilitator and reduce their cost of promotion. Instead of spending a huge amount of money on promoting the arts and cultural activities, we can help by posting their posters or leaflet or any promotion materials in our shopping malls and hotels. What they have to pay is just the printing cost. This will definitely reduce their financial burden. At the same time, this would not have much financial implication on us in the sense that what we may have to do ... is asking our security guards to put on the posters. It should be noted that mutual benefits would be achieved in the sense that promotion may bring more audience to the arts and cultural activities. At the same time, it brings people to the WKCD, too. They will spend their money there. So, this is the win-win situation.' (Interviewee, Proponent)

'The project has become too politicized ... Arts and cultural groups always urge us [the proponent] to listen to their views. But they have to listen to ours too. Communication should be two-way', said Dynamic Star, a proponent of the WKCD (Ming Pao, Nov 24, 2004).

In response to the demands, the opposition camp of the arts and cultural sector

doubts the sincerity of the businessmen in fostering the long term development of the arts

and culture in Hong Kong. Hence, the camp insist that core arts and cultural facilities

should not be operated by the private sector as the profit-oriented mindset of the

businessmen would, to a certain extent, harm the long term development of Hong Kong

arts and culture.

'I doubt the sincerity of the proponent in fostering the long-term development of the arts and culture in Hong Kong .... Ask them to do that [helping the arts and cultural sector in terms of cash subsidy and non-cash subsidy like posting the posters that promote the arts and cultural programmes for free] right now. Ask them not to support the arts and cultural development just because they are now bidding for this project. I think the 'sincerity' is fake. If you are really supportive to the arts and cultural development, you should not only post it for 3 months. Last year, all Park'n Shops has put up the poster of the Hong Kong Sinfonietta, but it only lasts for three months ... Why those who do not bid for the WKCD do not show their support to the arts and cultural

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sector? Then why the proponents are so supportive to the industry right now? ... In order to strive for the benefits that will be generated from the WKCD, they [the proponents] have to pretend to be supportive to the sector. But they are just acting. This is just part of the public relations.' (Interviewee, Arts and Cultural Group) 'The involvement of the for-profit sector in the operation ofthe core arts and cultural facilities will have negative impact on the long term arts and cultural development of Hong Kong. This is because they are not the professionals in these areas. If you ask Lee Ka-shing to discuss the contemporary arts with me, I am sure that he even has no knowledge ofthe name of the artists. Then, how can he know how to develop the modem arts? They are expert in real estate development; so, just ask them to work on real estate.' (Interviewee, Arts and Cultural Group)

From the above analysis, it is evident that there is a lack of trust on the BOT-typed PPP

arrangement in that the arts and cultural groups are not convinced that the private sector

can perform satisfactory in either identifying needs appropriately or in operating the

facilities. With their non-confidence vote towards the PPP arrangement, it is clear that the

institution, i.e. the arrangement, itself cannot generate any trust. Without trust, it is

understandable that efforts of the proponents in securing public and communal

accountability would not be highly appreciated and well-received in the community.

With limited confidence towards the institution itself and to the government, the

project has been strongly criticized by the public who have been different stakeholders and

urging the government for the implementation of certain accountability mechanisms (e.g.

a statutory governing body which oversees the project and a statutory governing board for

each core arts and cultural facilities) so as to secure accountability and public interest

throughout the tendering period.

7.6 Government Approach in Handling the Project and Integrating Different Views in the Community

The government plays an essential role which can be regarded as the most important

actor in the initial stage of a PPP project. Clearly, after the launch of the IFP of the WKCD

in Tung's era, the government still dominates the whole decision-making process even

though there was a strong opposition from different stakeholders, the public and the

Legislative Council. In handling the project and integrating different opinion in the society,

as previously mentioned, the government took a relatively strong stand in that it refused to

make any concessions after the decision of launching a public consultation after screening

the bids was made.

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In September 2002, a Steering Committee for Development of the West Kowloon

Cultural District, chaired by the Chief Secretary for Administration, was established. After

the decision of adopting the Foster plan as the masterplan for the project was made in

October 2002 and the launch of the IFP in September 2003, originally, the government

planned to award the tender in late 2004 or early 2005 and thus construction would be

commenced by April 2006. Core arts and cultural facilities should then be completed

earliest by late 2009 (Housing, Planning and Lands Bureau, 2003b).

Since the launch of the IFP, there was a heated public debate on WKCD. Different

stakeholders raised their concerns and urged the government to take their views into

account in the decision-making process of the project43. In response to the urgings of the

public, other than extending the deadline for the proposal submission, the only concession

is launching a public consultation exercise after screening the bids.

7.6.1 Stand Taken by the Government

Since the launch of IFP, there has been heated debate especially on the issue of

single-developer approach and the inclusion of the canopy as the mandatory requirement.

As the public watchdog, the Legislative Council has also been actively scrutinizing the

development. However, the government took a strong stand towards some inquiries or

criticisms of the legislators. For instance, in response to the questions concerning the

development of the WKCD on 12 November 2003, the Chief Secretary for Administration

reiterated his strong stand towards the project, stating

'The site of the WKCD has been used for lawn maintenance for nine years ... We think that no matter how we will be blamed, how we will be pushed, even though some legislators may comment that 'we deserve the failure', we believe that as this is for the public interest, we must carryon anyway.' (Legislative Council, 2003a)

A softened stand of the government is noted in the debate on the motion of shelving

the project in November 2003. Other than announcing the extension of the deadline for

submitting the development proposals, the government has stressed the importance of

public opinion and views of the Legislative Council in the project.

'The government is ready to listen to the public views on these issues, particularly those of the cultural and arts sectors. There are plenty of flexibly in these issues and no decision is yet taken at this stage ... But if Members passed the amended motion by the Hon HO Chun-yan without taking into account all the research and consultation conducted by the Government and

43 In the previous sections of this chapter, the writer has analyzed concerns of different groups.

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other organizations over the years, without taking into account your endorsement on the project in the past, without taking into account the project is for public good, without taking into account the economic benefits and job opportunities to be brought along, then I cannot ignore the decision by the Hon Members but to humbly shelve the project as per your decision' (Tsang, Nov 26, 2003).

However, at the same time, the Chief Secretary for Administration has also reiterated his

desire of the early implementation of the project and, confirmed that the single-developer

approach would be adopted anyway, even there is a public outcry urging the government

for dropping the single package approach.

'We have already explained the demerits of developing the West Kowloon Cultural District as a cluster of split projects in this Council a fortnight ago ... So far, a total of twelve consortia have indicated their interest, including three overseas ones. Therefore, the allegation that only one or two consortia are capable of making a bid is groundless ... I wish Hon Members would bear in mind that since the year 1996, the Government has already spent seven years for research, planning and consultation on the West Kowloon Cultural District development project.. .Up till now, the site has been laid idle for ten years. I wish you all scrupulously consider whether we should waste this site for seven more years and stall the people of Hong Kong for another seven years, simply because of the hazy suggestions by the Hon HO Chun-yan's amended motion' (Tsang, Nov 26,2003).

The debate has not been cooled down by the relatively softened stand of the

government. It is obvious that there were mixed views on the project. On one hand, some

arts and cultural groups urge the government for early implementation of the WKCD so

that their immediate need would be suited. On the other hand, as some arts and cultural

groups, pressure groups and legislators disagree with the proposed approach and context

of the district, they call on the government for slowing down the process so as to extend

the consultation time with different sectors. In response, the government announced that

public consultation would be launched after the screening process of the IFP in March

2004, claiming that:

'The feedback collected so far ... has shown that there is a strong opinion that instead of being presented with the selected proposal, the public should be given the opportunity to view the various proposals received, so that they can offer their comments ... After careful consideration, we agree that, without undermining the integrity of the assessment exercise, there is scope for involving the public further so that their views can also be taken into account in the selection of a preferred proposal', said Donald Tsang (Information Services Department, Mar 19, 2004).

This large scale public consultation can be regarded as a means in integrating public views

on the development ofthe WKCD. Its effectiveness is analyzed in Section 7.6.2.

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Other than these two extensions, under Tung's leadership, the government

maintained its stand especially on issues like insisting on the single-developer approach

and construction of the Foster canopy. For instance, the government stated clearly that

there would be no change in the mandatory requirements of the IFP in April 2004

'There is also no question of the government changing the single package approach in taking forward this very important project for the benefit of the community. Indeed, apart from extending the deadline for submission by three months to June 19, 2004, there has been no significant changes to the fundamental requirements in the IFP since its launch in September, 2003 ... As stated in the Important Note of the IFP, proposals which fail to comply with any of the mandatory requirements will be treated as non-conforming proposals and will not be considered further' (Information Services Department, Apr 28, 2004).

Further, on May 19, 2004, in response to a canopy-related question raised by legislator

Wong Sing-chi, Michael Suen, Secretary for Housing, Planning and Lands, reiterated the

stand of the government by claiming that

'I would like to reaffirm here that the canopy design is a distinctive and major feature of the integrated design of the West Kowloon Cultural District development. The Government does not consider that the design of the canopy and its financial aspects will affect the viability of the project. Proponents must include the canopy design in their proposals, otherwise they will not be considered by the Government' (Information Services Department, May 19, 2004).

As the 'extra' round of public consultation exerCIse was launched after the screening

process of the IFP, bidders whose designs are inconsistent with mandatory requirements

had already been screened-out and hence, obviously, the previously mentioned issues

which concerned the public most were not on the agenda for consultation. There was thus

no room for consultation or negotiation on these 'fundamental' issues.

7.6.2 Public Consultation

The public consultation consists of three main parts: (1) discussion forums44; (2)

main exhibition; and (3) comment cards (see Appendix 5) which collect written comments

from the pUblic. At first, the government had no intention of launching another round of

public consultation after the issue of IFP. Hence, to a certain extent, the extension of the

deadline of IFP and the 'additional' round of public consultation can be regarded as

44 There were 8 discussion forums. Each discussion forum targets at different groups, including the stakeholders. For instance, 2 discussion forums target at collecting opinion from the arts and cultural groups, 2 of them with the target population of professionals.

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concessions that the government made in response to the public and the Legislative Council.

However, at the same time, the concessions themselves reflect that the public are not

satisfied with the consultation done in the pre-IFP stage. In the development ofthe WKCD,

however, launching an 'additional' round of public consultation is, somehow, meaningless

as the public was dissatisfied with the 'skeleton' of the project, i.e. mandatory requirements.

They were opining on issues like whether a canopy should be built, whether a single

developer approach should be adopted and how many additional arts and cultural facilities

should be included in the WKCD. As all screened-in bids must comply with those

mandatory requirements, the public consultation launched after the screening process could

not be greatly successful as the public regarded these as the fundamental problems and the

scope of aspects on which they could be consulted is limited by the IFP. This is the main

reason why the design of the comment cards has been strongly criticized45•

'I prefer the government not to consult the public in that it has made the decision already. Just like your mother has already cooked and the food are ready. Then, she comes to you and asks you whether you want to have dinner or not, but not asking you what do you want for dinner ... what kind of consultation this is!' (Interviewee, Arts and Cultural Group)

Definitely, the exercise itself shows the sincerity of the government in wanting to

show it was consulting the public as 'such a large scale of public consultation on a

particular public work is rare in foreign countries. And this is the first time in Hong Kong'

(Ming Pao, Nov 11, 2004). In order to solicit public views in a systematic and holistic way,

the government further commissioned the Public Policy Research Institute of the Hong

Kong Polytechnic University to analyze the views received during the public consultation

period through various channels, including the forums, comment cards, other written

submissions, telephone polls and opinion presented in the meetings of statutory and

advisory bodies (Information Services Department, Jan 11, 2005). Through involving an

independent research institute in soliciting the public view, credibility of the public

consultation exerCIse itself is enhanced. However, as the government has preset a

framework for the public consultation exercise46, the content to which the public are being

45 The government targets at consulting the public on the three screened-in proposals. Thus, comment cards are design to suit this need. However, as the public urge the government for rethinking the scope and mandatory requirements of the WKCD, some of them criticize the government for 'leading' the public in that they are only allowed to compare and then choose among the three proposals. Although there is a part at the end which address the possibility of that all proposals should not be taken forward by the government, the layout of the comment cards has, to a certain extent, limited its credibility. 46 The content of the public consultation exercise is preset by the IFP, i.e. mandatory requirements and single-developer approach.

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consulted is limited, so is the scope of public participation in the project. This weakened

the credibility of the exercise. It was further weakened by the design of instrument,

including the structure and layout of the comment cards and polls.

'I don't think the government is really consulting the public on the development of the WKCD, instead, she is just informing the public. In order to 'generate' public support, a series of public consultation exercise takes place. But you can see that result of the exercise can be easily manipulated by the government. Reliability of the result and credibility of the exercise are hence doubtful.' (Interviewee, Proponent)

In the telephone polls, some questions were regarded as leading questions47• Furthermore,

the various channels in collecting the comment cards, i.e. collected in the main exhibition

venues where all visitors are given the comment card at that entrance of the venue, through

Internet, by fax and by mail, posed several limitations to the study in the sense that citizen,

could submit more than one comment card without any preventive measure. In justifying

the credibility of the exercise, the government has clearly stated that

'the Comment Card was designed to facilitate members of the public in expressing their views after visiting the exhibition. As such, the questions in the Comment Card focused mainly on various aspects of the screened-in Proposals .... Respondents were free to express views on aspects other than the Proposals... Government collected public views through different channels to gauge and triangulate views from various sources ... In this consultation exercise, one of the channels for collecting views was through random telephone polls. This was done through a scientific sampling method and in an unbiased manner' (Housing, Planning and Lands Bureau, 2005c).

Nevertheless, this opens a gap for some parties to 'manipulate' the results generated from

the consultation. For instance, it is found that staff of one proponent had been driven to

attend the exhibition on weekdays under the arrangement of their company (Hong Kong

Economic Times, Jan 18, 2005). Further, citizens who are willing to fill in a 4-page

questionnaire conducted by the marketing institute that is owned by a proponent after

attending the exhibition were given a $20 coupon (Hong Kong Economic Times, Jan 12,

2005). With these incidents, credibility of the study had been weakened and challenged by

different parties, including the proponents. More importantly, 4,176 out of 33,416 comment

cards collected that contained similar responses were mailed with identical mailing label or

envelope (South China Morning post, Oct 8, 2005c). An interviewed proponent is critical

towards the exercise itself.

47 For example, questions number 9, 10,22,23,24,25,26 and 28 of the third round of telephone poll are regarded as leading questions by Dr. Ma Ngok (Ma, 2005).

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'Do you know what is going on right now? According to the current assessment, proponent A will probably lose. In order to ensure that he [proponent A] will be involved in the project, his group is now generating some kind of public views through different channels, including the Legislative Council and the media. And of course, the public consultation exercise, to be specific, the comment cards, is the means for them to echo views that is favorable to him. Proponent A has forced its staff to fill in the comment cards and submit that to the government. Well, we have informed the government and Polytechnics University [the research institute] about the phenomenon. However, Polytechnics University said that this has little impact towards the overall result! That's ridiculous. That's why I am being critical towards the credibility of the exercise ... It should also be noted that the Polytechnics University is the strategic partner of one of the screened-in proponents.' (Interviewee, Proponent)

Clearly, although the objective of conducting a large scale of public consultation is,

somehow, to legitimatize the project, the government failed to achieve that as the public,

even the proponent, strongly challenged its credibility. Even though the government has

implemented several measures to enhance credibility at the beginning, like the open tender

for inviting an independent research institute to carry out the analysis of the public views, it

seems that someone has made good use of the lacuna in the public consultation exercise

(there is no mechanism to prohibit individuals or groups from filling in and SUbmitting

several comment cards with similar answer) to manipulate the result generated from the

exerCIse.

7.6.3 Information Disclosure

Furthermore, although the government has put up the proposal for public consultation

through holding an exhibition, limited information has been provided. Therefore, some

citizens found that they have no ground in selecting the best proponent. They even

criticized the public consultation exercise as a beauty contest. The Legislative Council has

pushed the government for disclosing the information contained in the proposals, especially

financial information (see 7.4.3 also). However, arguing that the disclosure would affect the

current assessment and might harm the bargaining power of the government at the

negotiation stage, the government refused, then, but promised to release such information

'before a provisional agreement with the selected proponent is signed and after obtaining

the agreement of the proponents' (Information Services Department, Jan 6, 2005). From the

interviews conducted, there are mixed views. Some interviewees regard the disclosure of

information, especially financial information, is essential in selecting the proponent. Thus,

relevant information should be made pUblic. One of the interviewed proponents also shares

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this view. Some interviewees from the arts and cultural groups also comment that without

releasing information related to the operation of the core arts and cultural facilities, such as

its mission, vision, and related plans, it is difficult for them to carry out their assessment

towards the proposals.

'We, as the artists, want to know more than just the financial information. We want to know the plans for each of the core arts and cultural facilities which are stated in the proposals. We want to know what kind of programmes or software will be offered after 20 years. But now, we have no knowledge in these areas. We can't see the direction for development ... not even the mission and vision of a museum. In this case, how can we comment on these screened-in proposals? ... Just looking at the outlook of the WKCD and then asking for comment is meaningless. You can't generate any concrete comments at all. The government provides us limited information on the proposaL The proposal of Henderson comprised by piles of books. Two bookcases are used to place that 'proposal'. But now, you see, information we get can be put together in a thin booklet. .. We are given insufficient information. We can't assess these proposals.' (Interviewee, Arts and Cultural Group)

'I don't believe that [the disclosure of financial information will harm the bargaining power of the government in the negotiation stage]. We have been to Bibao. Not only the figures were made public, but also the feasibility study. What is so confidential?' (Interviewee, Legislator)

'The Government has not been forth coming in disclosure of information regarding the development of WKCD, including the technical and financial one. We do not understand why this is the case: It is of public interest to release the results of the marking of the submissions made by the proponents on 19 June 2004.' (Interviewee, Proponent)

On the other hand, some interviewees feel that the government has provided sufficient

information. Some information disclosed may be too technical so that the general public

may fail to comment owing to the lack of knowledge.

'You should go and take a look of the IFP. It is comprised by 20 books. There is lots of information there. How can you ask people with no knowledge to understand all of them? How can you blame the government for not releasing or disclosing sufficient information?' (Interviewee, Arts and Cultural Group)

'Just like the issue of plot ratio. Actually, the figure is meaningless in that there is no big difference between 1.81 and 2.81 ... Unless you are working in this industry, if not, you can't understand it.' (Interviewee, Professional Group)

'I think the government has provided sufficient information for the public to assess the proposals. ' (Interviewee, Proponent)

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'You can put more and more information and people still find that it is not sufficient. How much is enough is a difficult question. You have to do to say look, that is enough for the debate to be engaged. Definitely, there is more than enough as the debate has been going on. You know, you can actually be overwhelmed by information. And that's part of the problem. The people there are most interested in the issues: the arts and cultural groups and the Legislative Council, have the certain level of understanding. People who really matter in the public properly have a lower level of understanding ... I think the government" has put out as much information as it can. Probably more information than necessary.' (Interviewee, Advisory Group)

It is worth noting that view of an interviewee from the professional group on this issue is

mixed. On one hand, he feels that the government is, somehow, obliged to disclose the

financial information. He understands the difficulties that the authority encounters on the

other.

'I think the [financial] information should not be disclosed right now. But the government should disclose that. That's why this is a dilemma. This is because right now, the project is still at the tendering stage. The tender has not yet been awarded. So how can you disclose the financial information of the proponents? ... But you [the government] should disclose that. If not, how can the Legislative Council perform its role as the public watchdog? ... [Do you think the explanation of the government reasonable?] The question is... the government is now urging the public to trust her. Alright, even though the government discloses such information after the tender is awarded, what if the Legislative Council disagrees with the decision of the government? Is there any clause stating that if the tender will be cancelled if the Legislative Council 'disapprove' that? That's impossible... That's why information should be disclosed in advance.' (Interviewee, Professional Group)

The dilemma is closely related to the low-trust political environment. Public trust

was very weak during the period of examination owing to weak governance of the

HKSARG and bad experience on holding the government accountable for other

private-sector participated public projects. As stated in Chapter 5 and 6, the government

has been accused of 'transferring benefits to the business' through PSI projects.

Suspicious precedents include Cyberport (a PPP project) and Hunghom Peninsula (a PSI

project). Moreover, previous PPP projects, including Cyberport and Disneyland, have

long been criticized for their lack of equity, transparency and accountability. The

Legislative Council has encountered also many difficulties in holding the government

accountable. Together with the idea that 'the Legislative Council is bypassed in the

WKCD', public trust was further weakened. The interviewed legislator who sits in the

subcommittee shared this view.

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'Why I have to trust you [the government]? Do you think she [the government] can be trusted? ... This is a matter of trust. The trust rests with no foundation. Seeing is believing. I see no reason to trust the government unless I have those documents in hand. I can't trust you just because you are the executive branch, just because you are government officials!' (Interviewee, Legislator)

At the same time, several interviewees identified trust and strong governance as crucial in

the development of the WKCD.

'The project itself is a good thing in the sense that the arts and cultural sector will be benefited from it, especially as public resource is limited. Obviously, private sector has to generate profit. That's the norm ... Right now, it is impossible for us to know whether the WKCD can really foster the arts and cultural development in Hong Kong or not and will the proponent 'leave the arts and cultural elements alone' after getting the bids. We don't know yet. What you can do is to trust them: trust the government and trust the proponent. I think we should have this kind of faith.' (Interviewee, Arts and Cultural Group)

'All of us [the proponents] are big companies in Hong Kong. We will not bet on our reputation. The WKCD will definitely be successful. Why don't you have kind of faith and believe us? ... Sometimes, I think the government should be decisive and have to be strong when facing criticisms. ' (Interviewee, Proponent)

'Government officials asked me to trust the government. .. But how can I trust you? There is no mechanism there. Also, the government refuses to release relevant information. It is difficult to ask people to trust you. You can see that, in response to the questions of the legislators, Michael Suen usually refused to answer by claiming that this is not the right time or the information can't be made pUblic... As I know very little, I can't trust you at all.' (Interviewee, Pressure Group)

'The government should not be like this. Strong governance is needed. If we have strong governance, this shouldn't be the case [the WKCD is 'on hold' and would start over again as bidders indicate that they would not stay in the race in February 2006]. Just wasting our time, wasting our energy.' (Interviewee, Arts and Cultural Group)

The low-trust environment, together with the lack of transparency in the sense

that the government refused to release information upon request, means accountability is

not well-secured. More importantly, the weak accountability secured; and the response

and strong stand of the government further weakened the weak public trust in the

community.

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7.7 Concluding Discussion: Accountability Secured After the Invitation for Proposal period in Tung's Era

In this chapter, contractual, managerial and public accountability, are the forms for

evaluating the extent of accountability that has been secured in the set-up stage of the

WKCD. From September 2003 to March 2005, i.e. after the IFP was issued and before

the resignation of the former Chief Executive Tung Chee-wah, these accountabilities, in

general, have not been well secured as, once again, the accountability mechanisms

adopted fail to function effectively.

7.7.1 Contractual Accountability

To achieve contractual accountability, PPP objectives have to be incorporated in the

contract and general standards have to be translated into more specific and binding legal

standards. Therefore, it is vital to examine the extent that the objectives of the project are

clearly defined. In Section 6.4.2, it is evident that the government did not produce a set of

clear objectives for the WKCD. It could be argued that this was intentional so as to

encourage and benefit from the private sector's capacity for innovation. However, this,

together with the fact that no business case is established in advance, limited the degree

to which contractual accountability could be secured. Hence, these arrangements should

be regarded as an inherent threat to contractual accountability.

During the period under examination, no contract has been drafted. However, the

IFP should be regarded as the preliminary contract in that it provides the blueprint on the

respective roles, responsibilities and liabilities of the parties involved. As stated in Figure

4.1, establishing a business case is one of the accountability mechanisms in this area.

Establishing a business case involves several actions. For example, both the guidelines

published by the Efficiency Unit of Hong Kong and the HM Treasury of the United

Kingdom, suggest that needs analysis, market testing and PPP feasibility studies are

essential. Also, both organizations recommend that a public sector comparator should be

prepared for benchmarking purposes48• In particular, the HM Treasury has highlighted

that in a business case, the output specification should be given instead of "'how" the

service is to be delivered' (Demirag et aI., 2004b).

As analyzed in Chapters 6 and 7, it is evident that the government has not performed

satisfactorily in establishing the business case for the WKCD. Although the cultural needs,

48 Although the Efficiency Unit of Hong Kong has highlighted the importance of the public sector comparator in developing a business case, it has stated clearly that 'this step can be skipped if qualitative or policy predominate, or the project is fmancially free-standing' (Efficiency Unit, 2003).

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to a certain extent, have been examined, identified and established through several studies,

no market testing or PPP feasibility studies had been conducted. In particular, the public

sector comparator is missing throughout the pre-IFP period and this is without any sound

foundation or argument for the omission.

Although the government has provided a large degree of flexibility in that proposals

fulfilling mandatory requirements are regarded as qualified bids, even though they fail to

conform to the Government's Baseline, it is clear that the given 'flexibility' is still rather

limited. For example, instead of providing output specifications so as to enhance

flexibility, detailed input requirements for the mandatory hardware are found in the IFP,

although the former has long been regarded as a crucial factor for achieving the potential

benefits ofPPPs.

To conclude, in the stage before awarding the tender, establishing a business case is

essential and is partiCUlarly important for facilitating contractual accountability.

Unfortunately, the government failed to provide a complete business case for the WKCD.

Further, in the IFP, the emphasis has been placed on extensive input, rather than output

specifications. From this perspective, the prospects for ensuring contractual

accountability for achieving required outputs in the pre-IFP period had not been well

secured.

Moreover, during September 2003 to March 2005, even though the government was

facing strong public pressure to rethink the mandatory requirements, it refused to change

these, claiming that the IFP (the preliminary contract) should be honored. Hence,

comparing with the usual expectations of .public accountability, it can be argued the

government has high regard for contractual accountability.

7.7.2 Managerial Accountability

Managerial accountability entails procedures to make 'those with delegated

authority answerable for producing outputs or the use of resources to achieve certain

ends' (Sinclair, 1995: 222). In particular the managerial accountability process 'involves

monitoring whether [PPP] projects are achieving the objectives identified in the business

case and the contract itself. This process involves monitoring of services, usually, by

users of [PPP] services, private sector facilities manager and contract manager from the

public sector' (Demirag et aI., 2005).

Theoretically, the Chief Secretary for Administration is accountable to the Chief

Executive for the decisions made, such as the preset framework outlined in the IFP.

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Clearly, it is difficult to gain inside information necessary for assessing the degree of

managerial accountability achieved between the Chief Secretary for Administration and

the Chief Executive. However, it should be noted that there was a widespread rumor in

the community that suggested that other than being the landmark development in Hong

Kong, the WKCD was also designed to represent a lasting achievement under Mr. Tung's

governance (Ming Pao, Dec 24, 2004). Hence, some people, including an interviewee,

criticized that the WKCD was a project born to reflect the superior's will, i.e. the Chief

Executive's and that, being accountable managerially to the Chief Executive, the Chief

Secretary for Administration had to ensure that work on this progressed. There is no way

to check the reliability of the rumor. However, if it is one of the reasons that contributed

to the decision to construct a cultural district in Hong Kong, the tough stand taken by

Donald Tsang can be regarded as a way to demonstrate his managerial accountability to

the Chief Executive49.

From the above analysis, the insistence of Donald Tsang on the preset framework

could be regarded as a way to secure managerial accountability to the Chief Executive if

the rumor is reliable. Hence, to a certain extent, the managerial accountability of the

Chief Secretary for Administration to the Chief Executive appears to have been secured.

7.7.3 Public Accountability

Public accountability, as defined in Chapter 4, refers to the channels for the public to

hold the government to account, to demand explanations and remedies, and to impose

sanctions and new directions, and include the Legislative Council, Audit Commission,

Ombudsman and media. Similar to the pre-IFP period, the role of the Audit Commission

and Ombudsman were limited or even non-existent in the post-IFP period. To examine

the extent to which public accountability has been achieved, public involvement and

participation as well as the role of the Legislative Council and the press need to be

studied.

From the above analysis, it can be seen that the arts and cultural sector could not

reach a consensus on the project, although the sector, in general, welcomes the idea of

establishing a cultural district in Hong Kong. The sector was divided mainly on several

issues. Primary concerns included the relation between the WKCD and arts and cultural

49 It is expected that if Mr. Tung regards the WKCD as an icon for his achievement, he might want to materialize it as soon as possible. If this is the case, the insistence of Donald Tsang for early implementation and for maintaining the canopy and single-developer approach as essential elements can be understandable as a means to be accountable to the Chief Executive managerially.

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policy and the number of facilities that should be included. On these fundamental issues,

it appears that 'manipulation', as defined in Arnstein's framework, has occured as from

the start, the government had no firm intention to consult the arts and cultural groups in

ways that would affect any decision made. However, this does not mean that a totally

'non-participative' and unaccountable approach was adopted. On other issues, such as the

organization and mode of operation of the core arts and cultural facilities, two-way

communication between the power holder and the sector was observed and achieved

through means that included the public consultation exercise. Nevertheless, as the sector

lacked any power for negotiation, the form of accountability secured was little more than

'consultation', as described in accordance with Arnstein's ladder of citizen participation.

The roles and major concerns of different pressure groups were analyzed in Section

7.4.2. In terms of their involvement in the development of the WKCD, most of them were

found to have been informed, instead of consulted, by the government and in that sense

there was only one-way communication. For the Real Estate Developers Association and

the People's Panel on West Kowloon, however, some two-way communication was

observed and they were able to exert some degree of influence on the government,

achieving for example a move away from the single-developer approach. Perhaps the

rung of placation (a rung within tokenism) would best describe this aspect.

Both proponents and the government tried to secure public accountability in the

post-IFP period in that the former have consulted within the sector when they were

preparing their bids and have been responsive to some of the concerns of key

stakeholders. Meanwhile, the government has conducted another round of public

consultation with four discussion forums, an official platform for exchanging views,

being organized particularly for the arts and cultural groups, and also for other pressure

groups (professional groups). However, with the uncertain involvement of such groups in

the project during the period under examination, together with the fact that the concerns

of both groups have not been well addressed or even not addressed at all, their

participation is regarded as non-participation or tokenism in accordance with Arnstein's

framework.

Moreover, as concluded in Section 7.4.3, the Legislative Council was found in the

post-IFP period under Tung's leadership to have only limited participation as the

government was informing, instead of actually involving the Council in formulating the

project. More importantly, the institutional role of the Council was further reduced by the

government when it categorized the WKCD as 'facilities to be used by the public' so that

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it could argue that no approval by the Legislative Council was required to proceed with

the project. Since then, the Council has been actively trying to assert its right to hold the

government accountable by scrutinizing the project and by passing motions and raising

questions. Obviously, these put pressure on the relevant authorities and, in response to the

urgings of the Council and the public outcry, two major concessions were made -

extending the deadline for the IFP exercise and launching a public consultation exercise

after the screening of the bids. Through the launching of the Legislative Council's

meetings to discuss matters relating to the WKCD and its establishment of a

Subcommittee to oversee the project, more two-way communication was fostered.

However, the level of the Legislative Council's participation was barely beyond the stage

of placation as the government had still the final say in the development of the WKCD

whilst the views of the Council were seen by the government as not binding and as advice

only.

In the post-IFP period, the press played a major role in enhancing the public

awareness of the project. There are numerous reports on the updated development of the

WKCD. Also, different stakeholders, including the arts and cultural sector, pressure

groups and even legislators have actively expressed their views and even questioned or

criticized the government through the media. To a large extent, the media can be regarded

as the major platform for the exchange of public views. Without a doubt, public

awareness was enhanced by the media and constant media attention forced government to

reveal more about its plans and decisions.

Although, under the press of the Legislative Council and the public, the government

made two major concessions so as to enhance the level of public participation in the

project, the level achieved is still in the category of tokenism. This is because despite an

increase in some two-way communication, there has been no real power redistribution

achieved through negotiation between the authority and the public or its representatives -

the Legislative Council. From this perspective, although the public has questioned the

general direction of the project and demanded for explanation through different channels,

including the Legislative Council and the media, public accountability was not well

secured so that, other than pressurizing the power holders, the public can not 'ensure that

the PPP project is on the right track' owing to their lack of an empowered institutional or

structural role.

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7.8 Summary

This chapter has studied the accountability achieved in the post-IFP period under

Tung's leadership through examining roles and concerns of different groups, including

key stakeholders and the proponents and the government's approach in handling the

project and integrating different views in the community. It is concluded that during this

period of time, contractual, managerial and public accountability could not be regarded as

well secured.

As previously mentioned, the resignation of the former Chief Executive, Mr. Tung

Chee-wah, on March 7, 2005, marks a turning point of the project in that the government

has since changed its stand on the project. Accountability secured after March 7, 2005

will now be discussed in the next chapter.

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8.1 Introduction

Chapter 8

Accountability Secured in Tsang's Era

In Chapter 7, accountability secured in the post-IFP period under Tung's leadership

was studied. Since the resignation of Tung in March 2005, two major changes have been

made on the WKCD - the introduction of the additional parameters and conditions in

October 2005 and the subsequent decision to 'repackage' the project. This chapter

investigates the accountability secured in these two policy changes and tries to explain the

changes by using the amended version of Sabatier's Advocacy Coalition Framework.

8.2 Development of the West Kowloon Cultural District

On the resignation of Tung on March 7, 2005, Donald Tsang, the former Chief

Secretary for Administration who had chaired Steering Committee for Development of the

West Kowloon Cultural District, was appointed as the acting Chief Executive. In June

2003, he formally succeeded Tung through winning the by-election (The Standard, Jun 17,

2005). Rafael Hui was then appointed as the Chief Secretary for Administration on

Tsang's recommendation and since then has chaired the Steering Committee. The above

changes in key personnel at the decision-making level thus took place at the late stage of

the public consultation exercise which ended in June 2005.

In July 2005, the Subcommittee on the West Kowloon Cultural District Development

of the Legislative Council submitted its first report regarding the deficiencies found in

planning the cultural district. As the public consultation period was just over at that time,

other than reiterating its stand and appreciates the efforts of the Legislative Council, the

government did not response positively to the recommendations listed in the report (see

Appendix 6 for details of the recommendations) (Information Services Department, Jul 6,

2005). With the personnel changes at the highest level of decision-making of the WKCD,

press reports started to appear stating that concessions, for instance, abolishing on the

single-developer approach and establishing a statutory body to oversee the development,

would be made so as to meet public aspirations.

At the special House Committee of the Legislative Council meeting, held on October

7,2005, the Chief Secretary for Administration, Rafael Hui, briefed the legislators on the

findings of the public consultation report and the amended policy direction of the

development. In response to public opinion, additional development parameters and

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contract conditions were introduced (see Appendix 7). These included, for instance,

maximizing the plot ratio at 1.81, capping the residential development at no more than

20% of the total gross floor area, requiring at least 50% of the commercial and residential

gross floor area to be carved out for open bidding and establishing a $30 billion trust fund

to ensure that there are sufficient funds for the sustainable operation of the WKCD

(Information Services Department, Oct 7, 2005). As these changes were regarded only as

amendments to the September 2003 IFP, the project remained open to the three shortlisted

proponents alone. Proponents were given nearly four months to revise their proposals so

as to meet these additional parameters and conditions. If two of them decided to drop out

by the end of January 2006 (the deadline for responses), then the project would have to

start over again.

In the mean time, proponents and different stakeholders opined on the project and

requested the government to clarify some issues. In early January 2006, the Subcommittee

on the West Kowloon Cultural District Development published its second report studying

'primarily the mode of planning, implementing, management and financing for WKCD

with reference to overseas projects of a comparable scale' (Subcommittee on West

Kowloon Cultural District Development, Legislative Council, 2006: 5). In this report, the

Legislative Council recommended that instead of adopting a PPP approach, the

government should separate the cultural and non-cultural components and fund the

cultural facilities through land sales. Core cultural facilities would then be constructed,

operated and overseen by a statutory body (Subcommittee on West Kowloon Cultural

District Development, Legislative Council, 2006) (see Appendix 8 for other

recommendations). The government, however, did share this view as it would have to bear

all financial risks with the adoption of this 'outdated and unfeasible' mode of development

(South China Morning Post, Jan 7, 2006). Additionally, the advantages that could be

gained by adopting a PPP approach would not be achieved. The government further

reiterated that 'the new development parameters and conditions proposed in October last

year had, in substance, responded to the concerns of the public' (Information Services

Department, Jan 6, 2006).

Although all proponents had declared their interest in proceeding with the project as

amended by the additional parameters and conditions in late January 2006, they raised

several major questions towards the additional requirements for clarification (Ta Kung Pao,

Jan 28, 2006). Issues included 'arrangements for the carving out of commercial and

residential portions, use of sale proceeds from the carved-out portions, contributions

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towards the $30 billion fund, etc' (Information Services Department, Jan 27,2006).

After the Phase II Report was published in early January, the Legislative Council

demanded the Chief Secretary for Administration to attend its meeting and to discuss the

various issues raised. However, the administration refused, with Rafael Hui stating that he

'does not see the need for him or the administration to meet with the subcommittee at this

stage' (South China Morning Post, Jan 28, 2006). The strong stand taken by the

government reinforced the conflict and weak accountability between the executive and

legislature. Hence, the chairman of the subcommittee intended to hold the Chief Secretary

for Administration accountable, by forcing him to attend the meeting through using the

Legislative Council (Powers and Privileges) Ordinance5o (South China Morning Post, Jan

28,2006).

In early February, Rafael Hui informed the Subcommittee that he would attend a

meeting after consulting the Executive Council on what the next steps in developing the

WKCD should be. On February 21, 2006, Mr. Hui attended the WKCD Subcommittee

meeting and the government announced that the project would be put 'on hold' as the

bidders had indicated that they would not stay in the race. The proj ect would start over

again and hence consultation committees were established. It is worth noting that although

the Legislative Council are not of the view that PPP is the appropriate means in

developing the WKCD, the government insisted that PPP would still be the preferred

strategy (Hui, Feb 21, 2006a). The details and accountability related activities and

relationships entailed in the developments are discussed further below.

8.3 Policy Change: Revised Proposal in October 2005

In October 2005, the government revised its proposal by introducing an additional set

of development parameters and contract conditions. In this section, the policy changes and

related impacts on accountability experienced are explained with reference to amended

version of the Advocacy Coalition Framework. In examining the policy change, the

50 According to the Legislative Council (Powers and Privileges) Ordinance, the Councilor its standing committees 'may order any person, including a public officer, to attend before the Councilor a standing committee to give evidence or to produce any paper, book, record or document. Other committees of the Council, including the House Committee, a Panel, a Bills Committee or a select committee may also exercise this power, if they are specifically authorized by a resolution of the Council (Legislative Council Secretariat, 2006). The summoned person may be prosecuted if he refuses to attend the meetings or provide relevant information without reasonable excuse. Furthermore, 'any witness who intentionally gives a false answer or presents a false document commits a criminal offence and may be prosecuted' (Lau and Ho, 2001). Although the Ordinance is a powerful tool that enhances both the investigation power of the Legislative Council against maladministration or other public issues and answerability of government officials, the Council lacks institutional sanctioning power to punish the officials with malperformance.

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following processes are analyzed:

1. Interaction of competing advocacy coalitions within a policy subsystem;

2. Impact of the stable parameters on constraints and resources of subsystem actors;

3. External Changes towards the subsystem.

8.3.1 Interaction of competing advocacy coalitions within a policy subsystem

In the development of the WKCD, several advocacy coalitions were formed. With the

reference to the revised Framework as proposed in 3.5.3, there are two advocacy coalitions:

adherent and antagonist. In each coalition, several policy memes such as political parties,

different pressure groups, arts and cultural groups and concerned individuals are included.

For adherents, they share a particular belief that WKCD is beneficial to Hong Kong and

should be implemented as soon as possible. Whilst for the antagonists, they strongly urge

the authority to slow the project down. It should be noted that although members of a

single advocacy coalition all share some common beliefs, they are fundamentally different

from each others in term of their nature, organizational structure and strategies. Hence,

competition may also occur within a coalition. For instance, the Chinese Artists

Association of Hong Kong is in the supporting camp as it urges the government for the

early implementation ofWKCD. It is worth noting, however, that its hidden objective is to

strive for a permanent performance venue for itself in the WKCD. The industry of Chinese

Opera and Drama also has an immediate need of a permanent performance venue as the

contract of the Sunbeam Theatre can only be renewed for four years and will soon be

expired (Ta Kung Pao, Oct 8, 2005; Sing Tao Daily, May 6, 2006). Bruce Lee followers,

again, have urged the government and the proponents actively to construct and fund a

permanent exhibition hall for Lee (South China Morning Post, Dec 2, 2004). Similarly,

arts and cultural groups like Hong Kong Sinfonietta and Hong Kong Ballet obviously

want to have a permanent 'home,Sl. Hence, potential competition between these groups

results.

For the period between March and October 2005, the two coalitions became

relatively stable after being fluid and amorphous at the early stage. Clearly, members of

the opposition camp had raised their concerns loudly in the pUblic. The Legislative

Council, to a great extent, should be regarded as a member of the antagonist group (see

51 'Home' means having a relatively permanent rehearsal and performance venue. Hong Kong Sinfonietta and Hong Kong Ballet want to have a home and hence became the strategic partner of Dynamic Star International as the latter agreed to provide them a home once it wins the bid.

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7.4.3 for details). The Phase I Report of its Subcommittee was critical towards the

government's approach and strongly recommended that the government should abandon

the single-package; establish an authority to oversee the project etc. These views are in

line with the urgings of the antagonists. Although its powers to enforce accountability over

the government are weak, ability of the Legislative Council to pressurize the government

should not be overlooked. Other than examples listed in Section 7.4.3, another issue is

related to the extension of the public consultation period. On 30 November 2004, the

Legislative Council has passed a motion on the public consultation period of the WKCD:

'That this Panel urges the Government to extend the consultation period for the proposals

for the development of the West Kowloon Cultural District from three months to six

months, and to re-consult the public on the West Kowloon Cultural District Project'

(Legislative Council, 2006). Later in mid-March 2005, the government demonstrated

some accountability to the Legislative Council and the public when it announced the

extension of the consultation period 'in response to the request of the Legislative Council

and having reviewed the progress made in the public consultation exercise' (Information

Services Department, Mar 16, 2005). Moreover, other members of this antagonist camp,

for instance, People's Panel on West Kowloon and the Real Estate Developers Association

of Hong Kong, have also expressed their disappointments and have criticized the

government loudly in public (see Chapter 7 for details). The strong press of the Legislative

Council and other parties in the antagonist group has definitely exerted a certain degree of

pressure on the government, however, neither the Legislative Council nor the public have

the powers and authority to enforce their requirements in government and the extent to

which they are able to hold government accountable to them in this matter is determined

by he government itself.

Although the supporting and antagonist coalitions are competing theoretically, the

voice of the supporting camp is not as apparent as its counterpart. Supporters only

gathered together to voice out their concerns loudly in the meeting of the Legislative

Council at early 2005. During that time, several arts and cultural groups attended the

meeting in person so as to send their overwhelming support to the project. These groups

include the Hong Kong Chinese Orchestra, Hong Kong Repertory Theatre, Hong Kong

Dance Company, Spring-Time Productions, the Hong Kong Academy for Performing Arts

and the Hong Kong Arts Administrators Association (South China Morning Post, Feb 1,

2005). Clifton Ko Chi-Sun, a producer of drama and Chief Executive of Spring-Time

Productions, is the 'spokesman' of the adherents as other supporters seldom speak up in

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the public since the beginning of the public consultation period. Interaction between

coalitions is not rare. However, as most supporters seldom speak up in public, views from

opposition camp have dominated discussion in the community. Meanwhile the supporting

camp usually reasserts that WKCD is a golden opportunity that should not be missed and

claims that the debate has been 'too politicized' 52 (South China Morning Post, Feb 1,

2005). In response to the critics that arts and cultural activities would become too

commercialized with private sector involvement in managing core arts and cultural

facilities in WKCD, Clifton Ko states that

'It may not necessarily be a bad thing to fund arts and cultural activities through money generated from property development once it can achieve the objective ... whether it is a white cat or black cat, it is a good cat as long as it can catch mouse. Property developers have been stigmatized as those who cannot foster the development of arts and culture' (Sing Tao Daily, Nov 13, 2004).

Other interactions between the coalitions are discussed in Section 704.

It can be noted that the government has its own position in the project and is a

member of the supporting camp in Tung's era. It is evident that the government has tried

to convince the public that the project would not be 'a property project in disguise' (see

Section 704 for details). Hence, within the policy subsystem under Tung's leadership,

there are no policy brokers owing to the strong stands taken by the government and the

Legislative Council.

8.3.2 Impact of the stable parameters on constraints and resources of subsystem actors

In the Advocacy Coalition Framework, attributes of the problem area; basic

distribution of natural resources; fundamental socio-cultural values and social structure;

and basic constitutional structure are regarded as the relatively stable parameters (see

Figure 304). These affect the partnership building process indirectly through posmg

constraints and limitations on the resources of subsystem actors.

In developing WKCD, the political system of the HKSARG, m particular the

executive-led government structure, has constrained the subsystem actors. The political

system in Hong Kong has been regarded as executive-led since the colonial days. The

Basic Law, the mini-constitution of Hong Kong, has preserved this and hence

constitutionally, the role of the Legislative Council has been limited by an unequal

52 According to the interviews conducted and documentary analysis, most supporting arts and cultural groups and a interviewed proponent share this view.

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distribution of power. Major features are summarized by Lau (2000) and Li (2001):

* The SAR Chief Executive and the bureau secretaries control most of the policy-making power. Most government policies do not need the approval of the legislature unless they entail changing of laws and appropriations;

* The Chief Executive has a superior constitutional status to other branches of the government. The Chief Executive is elected by an Election Committee, thus elected independent ofthe Legislative Council;

* The executive holds the initiative to legislations. Government bills have a priority to get onto the Legislative Council agenda (Article 72(2)). All bills passed by the Legislative Council need the signature and promulgation of the Chief Executive to become effective laws;

* The Chief Executive has a wide range of appointment powers. He can appoint and remove major government officials and almost all other public office holders. Approval from the legislature or the courts is not required;

* If the Chief Executive considers a bill passed by the Legislative Council 'not compatible with the overall interests of Hong Kong, he can return it to the Legislative Council for reconsideration. The Chief Executive can dissolve the Legislative Council ifhe does not want to sign a bill passed the second time by the Legislative Council, or if the Legislative Council refuses to pass the annual budget or any important government bills (Article 50) (as cited in Ma, 2002).

Other than that, Article 74 further restricts legislators from introducing bills that 'relate to

public expenditure or political structure or operation of the government'. Moreover,

'written consent of the Chief Executive shall be required before bills relating to

government policies are introduced'. Hence, checks and balances are, to a certain extent,

non-existing in accordance with the constitution.

The executive-led political system has also marginalized party politics. In colonial

Hong Kong, the British government did not tolerate any political activities and hence

party politics was non-existent until 1970s. From the 1970s, there was a rise in the

numbers of 'pressure groups' that sought to influence the government on various social

policies. The emergence of political parties is accompanied by the introduction of the

direct election of the Legislative Council in 1991 (Cheung, 2002). Although direct

elections have provided parties living space, party politics is relatively impossible under

the executive-led system. In accordance with Article 4 of the Procedure for Selecting the

Candidates for the First Chief Executive for the Hong Kong Special Administration

Region of the People's Republic of China and the Chief Executive Election Ordinance, it

is clear that the Chief Executive must not have any party affiliation (Cheung, 2002).

Hence, the role played by political parties in Hong Kong is not comparable to their

counterparts in democratic countries. This is another constraint that is posed by the

relatively stable parameters.

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8.3.3 External Changes towards the subsystem

In the Advocacy Coalition Framework, external events like changes in

socioeconomic conditions, changes in public opinion, changes in systemic governing

coalition and policy decisions and impacts from other subsystems also influence to the

partnership building process. Obviously, there was little change in the socioeconomic

conditions and public opinion before the revised proposal took place. However, it is worth

noting that the Legislative Council has 'echoed' the urgings of the opposition camp

through publishing the Phase I Report of the Subcommittee on West Kowloon Cultural

District Development. Although the Legislative Council is not as influential as its

counterpart in other democratic countries, it has definitely exerted some pressure on the

executive branch (see 7.4.3).

As previously mentioned, the govermng coalition has undergone major changes.

When the first Chief Executive, Tung, resigned in March 2005, Donald Tsang, the former

Chief Secretary for Administration who chaired Steering Committee for Development of

the West Kowloon Cultural District, became his successor. Under the recommendation of

Tsang, the Chinese Central Government appointed Rafael Hui as the new Chief Secretary

for Administration. Hui then became the person-in-charge of the project. The governing

coalition, however, has undergone changes not only in the personnel level, but also in the

style of governance. Under Tung's leadership, HKSARG had long been regarded as a

weak government. Several scholars who observe Hong Kong Politics share this view.

Commenting on the post-handover political system, Scott (2000) notes that

[T]he relationships between the executive, the legislature and the bureaucracy today are uncoordinated, poorly developed, fractious and sometimes dysfunctionaL.. [W]ith a system which is neither parliamentary fish nor presidential fowl, the executive, the bureaucracy and the legislature (which is divided within itself) each pursue their own agendas, punctuated by occasional skirmishes on the boundaries of their domains and by subterranean campaigns to extend their jurisdictions (p. 29).

Moreover, Cheung (2002) shares this view and further states that it IS a system of

'disabled' governance.

[T]he present SAR government is constrained in power in terms of getting things done and policies made ... What is worse is that ... none of the major institutional actors feels that it is performing... and what the final picture constitutes in real terms is a political system which is essentially "disabled" -one where there is no winner and everybody is a loser (p.S7).

Loh and Cullen (2005) likewise view the problem of Tung's ineffective leadership as

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leading to the weak government.

The Chief Executive's inability to articulate coherent, consistent and convincing policies and his failure to build the necessary consensus both within the civil service and with the public contributed to the problems of his First Term of Office (p. 156).

Although the Principal Officials Accountability System53 was introduced in 2002,

Tung's government remained weak. The July 1 protest in 2003 posed another crisis of

governance. More than half a million people demonstrated so as to urge the government

not to rush into the new national security legislation in accordance with Article 23 of the

Basic Law. The non-conforming action of the James Tien, chairman of the Liberal Party,

betrayed the government at the last minute and further weakened governance.

Therefore, since his election as Chief Executive, Tsang has committed to 'rebuild and

lead a strong government' (South China Morning Post, Jun 5, 2005). Moreover, he has

pledged to work closely with the Legislative Council and listen more to the views of the

public (South China Morning Post, Jul 8, 2005). The personnel change at the highest

decision-making level and the public commitments of Tsang have definitely posed some

constraints on other subsystem actors, in particular, Hui, the new person-in-charge of the

project (see below for explanation).

Other external events identified by Sabatier as being of critical importance are policy

decisions and impacts from other subsystems. As previously mentioned, some PSI projects

have been accused of 'transferring benefits to the business'. Suspicious precedents include

Cyberport (a PPP project) and Hunghom Peninsula (a PSI project). Moreover, previous

PPP projects, including Cyberport and Disneyland, have long been criticized as lacking

equity, transparency and accountability (see 5.5). On the other hand, the Legislative

Council has encountered many difficulties in holding the government accountable in these

cases. This may be one of the reasons why the Legislative Council and the public have

been critical of the government and strongly pushed the government to be accountable in

the WKCD project. The former has achieved this through passing motions, setting up a

subcommittee to oversee the project and publishing relevant reports. Whilst for the public,

they have participated actively through organizing several discussion forums to voice out

their views and by proposing some alternatives.

53 Other than appointing non civil servants to in charge of key portfolios, Tung co-opted leaders of pro-government parties, including Liberal Party and Democratic Alliance for the Betterment and Progress of Hong Kong, into the Executive Council so as to ensure the smooth passage of government bills and finance requests in the Legislative Council (Cheung, 2005).

167

Other than previous PSI projects, it should be noted that the Article 23 controversy

has, to a certain extent, also played a role in the project. In the Article 23 controversy, the

government took a very strong stand and aggressive approach in pushing the unpopular

new security legislation regardless of the public outcry against it. After the protest of half a

million people on July 1, 2003 and the subsequent resignation of the chairman of the

Liberal Party from the Executive Council, the government first postponed the resumption

of a second reading of the bill and withdraw it finally in September 2003 (Cheung, 2005).

This controversy has definitely harmed the legitimacy of the government and the mutual

trust between government and the people and was regarded as a crisis of governance. As

the new governing coalition is committed to rebuilding a strong government under the

pre-requisite of 'better communication with the public and the Legislative Council', the

Article 23 controversy sheds light on the WKCD PPP in that both projects are

controversial in the community. More simply, the Article 23 controversy reminded the

government that the WKCD must be handled with care and skillfully as the dissension it

causes can potentially pose a fresh challenge to the governance of the new governing

coalition.

8.3.4 Advocacy Coalition Framework Explanation on Revised Proposal in October 2005

The government announced a revised proposal in October 2005, stressing its public

accountability by reiterating that the main reason accounting for the policy change was to

meet public aspirations. In this section, the decision-making process of the revised

proposal is analyzed using the amended version of the Advocacy Coalition Framework.

The relatively stable parameters and external events have posed several constraints

on the subsystem actors in the WKCD, who include different stakeholders (such as arts

and cultural groups, pressure groups and the Legislative Council), the community, the

government and proponents. With the new governing coalition which aims to rebuild a

stronger, more accountable government by working closely with the legislature and by

listening more to the public, and given the precedent, i.e. Article 23 Controversy, which

reminds the government that if the controversial project is ill-handled, it could be a crisis

of governance, Hui is now acting as the policy broker (in accordance with the framework)

and aims to minimize the conflict by generating some reasonable compromises. It should

be noted that under Tung's leadership, Tsang (the then Chief Secretary for Administration

who chaired the Steering Committee for the WKCD Development) took a strong stand,

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especially on defending issues relating to the mandatory requirements like the

single-developer approach and the canopy as these were regarded as the preset framework

of the WKCD (see Chapter 7 for details). Hence, Tsang had not really taken the role of a

policy broker as there was no room for negotiation in the preset framework even though

the government made some concessions - conducting a public consultation exercise after

screening the proposals against the mandatory requirements as listed in the IFP.

From the previous analysis, it is evident that there are two coalitions in the subsystem.

One strongly strives for early implementation of the project whilst the other one urges the

government on several frontiers, including the abandonment of the single-developer

approach, to scrap the canopy, conduct relevant researches and studies, establish an

overseeing statutory body, etc. The public, in general, shares the views of the latter. As the

policy broker, Hui amended the policy direction of the development by introducing

additional development parameters and contract conditions so as to 'generate' support

from the latter and the public. The additional set of parameters and conditions is a

concession by nature. For example, in the revised proposal, the single-developer approach

is abolished in that at least 50% of the commercial and residential gross floor area will be

carved out for open bidding. However, this is later strongly criticized as it still allows a

single developer to dominate the WKCD. Apparently, withdrawing the IFP and breaking

the project into multiple pieces for open bidding may not be a feasible choice for the

policy broker as this would largely harm the interests of the screened-in proponents and

this may damage the confidence of business in PPP projects and diminish further the

previously long-established trust between the business and the government. Although

HKSARG has been committed to adopt PPPs wherever feasible, Hong Kong is still at the

very early stage of adopting this strategy. Hence, it is important to uphold the confidence

of the business community on the strategy. This might be a reason accounting for the

unwillingness of the government to abolishing the single-developer approach in full.

Moreover, technical concerns that may arise have been stressed by Tsang as reasons for

not adopting a multiple-package approach and thus is also a matter that Hui had to

consider (see 7.6.1 for details). Facing these constraints and the public outcry for the

abandonment of the approach, this was perhaps the most reasonable compromise that Hui

could make so as to speed up the set-up process and then lead to the early implementation

of the project.

However, on some issues, the government is not compromising its principle. Also,

the parameters and conditions are tailored in accordance with the results of the public

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consultation exerCIse without harming much the interests or major concerns of the

supporting coalition, in particular, the government itself. For instance, according to the

findings of public consultation exercise, there is no overwhelming positive or negative

view on the canopy. Hence, the canopy is kept in the revised proposal. Since the

announcement of the mandatory requirements of the WKCD, it had appeared as if the

government was the only supporter for the canopy by claiming that it could be a new

landmark of Hong Kong. Whilst for the community and key stakeholders, some have

objected to it as the maintenance costs would be very high and may not be technically

feasible. The rest do not oppose the construction of the canopy, but not often do strongly

support it either (see Appendix 3). It should be noted public sentiments may also be

closely related to some constraints posed by the development itself. The canopy has been

regarded as a mandatory requirement since the launch of the IFP. More importantly, the

government has screened out two proposals as they do not comply with the mandatory

requirements. One of them was screened out previously because no canopy was included

in the proposal. Hence, if the government drops the canopy in the revised proposal, this

could not be regarded as the continuation of the previous IFP exercise. Instead, in order to

be fair, the government might have to conduct another round of IFP. As this would

probably cause further delays, it is possible that the government refused to compromise in

this area so as to ensure the early implementation of the project. From this perspective,

although an additional set of parameters and conditions are introduced, the government

may not necessarily be compromising its principles.

8.4 Revised Proposal: Accountable to the Public? Stakeholders' Views

From the government's point of view, it has generated some reasonable compromises

so as to minimize the conflict between the coalitions in order to gain for the early

implementation of the project. However, the public and different stakeholders may not

share its views. In this section, stakeholders' views on the extent to which they think the

revised proposal is accountable to the public or responsive to their concerns, are

summarized and analyzed.

8.4.1 Arts and Cultural Groups

In the previous chapters, arts and cultural groups were simply classified as being

either 'supportive' or 'antagonist'. For the supporting camp, it presses for early

implementation. The opposition camp of the arts and cultural sector, however, strongly

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urges the government to formulate a clear cultural policy and to conduct relevant

researches. Also, they question the rationale for adopting a supply-led, instead of

demand-oriented approach in the development of the WKCD. Other than these

fundamental questions, arts and cultural groups have also doubted whether the project is in

reality a property project in disguise and they have urged the government to establish a

statutory body to oversee the project. With the establishment of a statutory body,

representatives of the sector may be appointed and thus the sector would have a say in

steering and maintaining the development. From their viewpoint, this mechanism allows

them to check and balance the power of the private sector and ensure that the WKCD will

not be too commercialized. Moreover, this is a means to secure accountability as their

views can be fully reflected and taken into account in the decision-making process on the

WKCD54•

Generally speaking, the concerns of the two camps have remained unchanged since

the pre-IFP period. Responsiveness of the government can be simplified into two main

types. On fundamental issues like relations between cultural policy and WKCD; and

supply-led and demand-oriented approach, the government has not taken any action and

appears to have been unresponsive to these issues. Whilst for all other issues, the

government has suggested it is more open-minded by claiming that public views would be

incorporated in the decision-making process as the government had not yet formulated its

view on the issues (Tsang, Nov 26, 2003).

Although the government claims that the additional parameters and conditions were

introduced so as to be responsive to the public, the views of the sector remain mixed. The

supporting camp regarded this as kind of concession that the government made in

response to the public outcry.

'To a certain extent, the revised proposal is responsive to the public ... There are mixed views in the community. Like me, some people urge for early implementation. But at the same time, some people want to slow down so as to have more time to 'think' before 'act' ... obviously, the government is being strongly criticized and now under pressure ... Instead of shelving the project, the government is now trying to strike a balance and making everyone happy ... Alright, you said developers will gain lots of profit through selling flats. So right now, developers have to give up a large portion of land ... Well, some people claims that developers cannot operate arts and cultural facilities well. Alright, we now established a body to oversee the project.' (Interviewee, Arts and Cultural Group)

54 From their viewpoints, the statutory body should be established as soon as possible and 'replace' the government to steer the development of the WKCD.

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Miss Chan Kim Sing, chairman of The Chinese Artists Association of Hong Kong, states that she is not familiar with the technical problems like single-developer approach and the canopy plan and hence it is difficult for her to comment on these issues. However, she reiterates that the WKCD should be build as soon as possible. Contract of the Sunbeam Theatre can only be renewed for four years and will soon be expired. The industry of Chinese Opera and Drama need a permanent performance venue (Ta Kung Pao, Oct 8, 2005).

In the opinion of Art Development Council Chairman Ma Fung-kwok, the government has made big concessions in the wake of public opinion. 'It is a good thing to separate the roles of the (winning) developer as a builder and an operator. It has also addressed public concern if a property developer knows how to operate a cultural project. .. It is also a good thing to adhere to the 1.81 plot ratio so that more space will be allotted for cultural facilities,' said Ma, who is also convener of New Century Forum (China Daily Hong Kong Edition, Oct 10, 2005).

Although it seems that the revised was aimed at appeasing the public anger, and especially

that of the arts and cultural groups, the opposition camp has not been satisfied with the

'response' as fundamental issues are left untouched.

'What we are urging is a cultural policy and an exercise to review what we need ... We can only decide the content of the core arts and cultural facilities based on the findings of the exercise ... The revised proposaL .. well, that is not a matter of being responsive or not. What we are urging are things that the government should do. Well, as there is a tendering procedure, of course, tendering should be opened to everyone, both large and small. The canopy ... the government has left the canopy untouched and insisted that we are going to build it anyway, even half of the respondents of the public consultation exercise object it. .. why not the government go and consult the public again on the issue before coming to the conclusion? ... For the statutory body, obviously, even if we do not strongly push for that, the government should establish one to oversee such a large scale project.' (Interviewee, Arts and Cultural Group)

'The issues facing this Administration regarding WKCD are not only about which developer should be awarded the contract, what percentage of land, plot ratio, administrative authority, financing etc., but what kind of a society do we envision for the future. Of what significance is culture and arts to Hong Kong? How can we build and sustain culture? How do we transform a society which has been traditionally financial-based into a multi-faceted society? What changes in our consciousness and value system does that require? Do we need to change the way we teach creativity, artistic expression and artistic endeavour to out young? Do we need to strengthen our commitment to arts education in schools so as to build up wider participation and nurture artistic talent for the future (bottom-up), or do we construct great facilities in hopes of encouraging the arts through them (top-down)? Are we prepared to dig into the public purse to finance the arts or are we trying to forge a partnership between the private sector and the arts?

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How do we encourage more public support and participation from the private sector?' (The Zonta Club of Hong Kong, 2005)

'What the government had revised [the introduction of additional parameters and conditions] is on details only. And the revision aims to redistribute the benefits among developers. Well, I am not sure whether it really "aims at", but at least, this is what I perceived. The government did not do anything on cultural issues. But of course, right now, we will have a statutory body to oversee the project. But that's the normal practice. Whenever the government fails to solve a particular problem, it will set up a committee or body ... So, the government did not solve the problem. What it tries to be responsive ... is to the developers ... To a certain extent, you may claim that the government is being responsive to our needs. But there is nothing changes in the mandatory requirements, so the only changes lie on details.' (Interviewee, Arts and Cultural Group)

Other than claiming that the government did not reVIse the fundamental issues, an

interviewee of the opposition camp believed that there is no difference between the

original plan and the revised proposal.

'The revised proposal is the same as the original IFP, there is no differences at all ... I don't think it is responsive to the public ... Originally, we are asked to choose among combo A, Band C. Now, it is still combo A, B and C. Although content of A, B and C were changed a little bit, you are still being forced to eat and choose among A, B, C.' (Interviewee, Arts and Cultural Group)

8.4.2 Other Pressure Groups

Unlike the arts and cultural sector, each pressure group has its own agenda with

diversified interest. Other than commenting on the overall development of the WKCD,

they actively urged the government in accordance with their own interest. Commenting on

the revised proposal, most pressure groups were not satisfied with the additional

parameters and conditions as, in their view, the project remained a property project in

disguise. This is because they are not convinced by the abandonment of the

single-developer approach and the lack of cultural policy. They consider the revised

proposal as a 'mini-single tender approach' in that the site for single tender is smaller than

the original plan.

'The revised package does not ease the fear of the single tender approach, which is still there, and the government will still choose one out of the three short-listed bidders ... As the operating authority is not yet in existence, it will be for the winning property developer to build whatever cultural facilities [are needed] ... It will be a big problem if the operating authority has to bear the brunt of keeping some unsuitable facilities that were built before it was set up ... It gives the chance for more property developers and they will

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shut their mouths,' said Vincent Ng, Vice President of the Hong Kong Institute of Architects (China Daily Hong Kong Edition, Oct 8, 2005; South China Morning post, Oct 8, 2005a). He further states that although it seems that the government has abandoned the single-developer approach, in reality, it is a single package for two-third of the site. More importantly, the winning developer would not take any risk once $30 billion is paid (Hong Kong Economic Times, Oct 8, 2005).

President of the Hong Kong Institute of Architects reiterates that according to the survey done by the Institute, more than 60% of their members against the construction of the canopy. He urges the government to listen to their professional opinion (Apple Daily, Oct 8, 2005a).

On the other hand, keeping the canopy and the late establishment of the statutory body to

oversee the project disappoints the pressure groups, too. More importantly, some feel that

their professional advice has not been taken into account when the government was

formulating the revised proposal.

'I don't know why the government provides a chance for the private sector to quit from the operating the core arts and cultural facilities for 30 years ... That's the non-profit making component in the project! Moreover, I don't think the statutory body can form a partnership with the private sector to achieve what I expected the WKCD PPP can achieve at first [the private sector would be responsible for operating the facilities for 30 years].' (Interviewee, Pressure Group)

The new proposals add nothing to the public's expressed wish that the Administration should have well defined cultural policy objectives and a coherent cultural policy in spite of the Government's acceptance that the public consultation pointed out the need for further public discussion on these issues ... The new proposal goes some way to addressing public concerns in this respect although the "hybrid" nature of the proposal could lead to unlooked for difficulties. The devil will be in the detail (Professional Property Services Limited, 2005).

The People's Panel on West Kowloon expressed bitter disappointment towards yesterday'S announcement for four reasons. The project, in their view, remains a real estate project. Besides, the single tender approach and the canopy are still there, and cultural policy is still lacking. 'In the absence of a cultural policy, any cultural project is no more than a skeleton that has no soul. .. An operating authority should be set up now to discuss the cultural policy and the content of the project with the government. Otherwise, it is nothing more than a housekeeper and has to bear the brunt of running a white elephant in future,' said Ada Wong, the convener of the People's Panel on West Kowloon (China Daily Hong Kong Edition, Oct 8, 2005).

Albert Lai Kwong-tak, chairman of the Hong Kong People's Council for Sustainable Development, said the planned statutory body would face a risky situation because it had not played a role in designing the West Kowloon

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facilities. The statutory body is just there to oversee the maintenance of cultural facilities, Mr Lai said. It seems that the whole West Kowloon project is like a human with no brain. There is no one setting a culture policy for it. There is a vacuum in it (South China Morning Post, Oct 8, 2005a).

Some pressure groups share the views that the revised package needs second thoughts in

that the revised package may pose more challenges to the parties involved and the

government should clarify or make public some fresh issues that have arisen from the

revised proposal.

T. T. Cheung, President of the Hong Kong Institute of Surveyors, guesses that the winning developer would still generate $10 billion profit in property sale. He is disappointed by the decision of allowing the developers to step out the operation of the core arts and cultural facilities without announcing the development mode for the facilities (Apple Daily, Oct 8, 2005b).

Greg Wong, President of the Hong Kong Institute of Engineers, worries that the abandon of the single-developer approach might raise fresh questions on canopy. This is because the land may be owned by several property developers, or even several thousands flat owners. Fresh problems like who have to pay the maintenance fee and the liability may arise (Hong Kong Economic Times, Oct 8, 2005).

8.4.3 Legislative Council

As a key member of the opposition camp, the Legislative Council has strongly urged

the government to rethink the development approach of the WKCD (see key findings and

recommendations of the Phase I Report of the Subcommittee on West Kowloon Cultural

District Development of the Legislative Council in Appendix 6). Although the revised

proposal aims to meet public aspirations, apparently, the Legislative Council is not

satisfied with the compromise that has been proposed by Hui, the policy broker.

Legislators criticize and doubt the feasibility of the revised proposal on several fronts.

First, they doubt whether the $30 billion could able to finance the operation of the core

arts and cultural facilities and the maintenance cost of the canopy and the Automated

People Mover (a train that links up various parts of the WKCD) for 30 years. Second,

although the single-developer approach is 'dropped', it is still a single tender in disguise as

a single developer would dominate the project. That developer would also have a big say

in which pieces of land would be carved out for open bidding and when the land would be

tendered.

'Did the revised proposal responsive to the Phase I report of the Subcommittee? Definitely no .... the winner of the tendering process would have 65% of land. Although 35% of land will be tendered through open

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bidding, but which part ofthe land would be carved out and when would it be tendered are decided by the winning developer alone. The winning developer may keep the best plots, like the waterfront one, for himself. So, what's the different between this and the single-developer approach? A single developer dominates the whole project. He has the power to decide the location and the timing for carving up the plots for open tender.' (Interviewee, Legislator)

'On the WKCD, what concern the Liberal Party most is the single tender approach. Hence, I'm very happy to hear that the single tender approach has been abandoned in the revised proposal. But what I want to know more is that in the paragraph 10 and 11 of the document [that provided by the government]. It states that the winning developer will be responsible to carve up the site for land sales. I hope I have misunderstood that. This is because we suggest the government to carve up part of the site to the winning developer ... In paragraph 11, it states that the winning developer should take up the role of coordinator. Do I have to worry that when you award the tender to the winning developer, the winner will pick the best plot for himself. Whilst for the land next to Canton Road, will it be carve up after 10 years? ... Can you state clearly in the document that both the best plots and the less favorable plots, and the seaside plots will be carved up? And they will all be developed at the same time? We can't let the winning developer to get all the best plots. Can you work on this way?' said James Tien, legislator (Special House Committee, Legislative Council, 2005).

'The Chief Secretary for Administration and the Deputy Secretary for Housing, Planning & Lands reiterate that they respect the Council. However, the administration has only come to the Council three months after the Phase I report of the Subcommittee on West Kowloon Cultural District Development was published ... I think the government has not worked on any of the six recommendations as listed in the report. But right now I just have time to ask him an issue, that is the one related to the abandon of the single-developer approach. According to what the Chief Secretary for Administration say today, 65% of the site will be coordinated and constructed by a single developer. That is, it is not 100%, but two-third of the site will adopt the single tender approach ... Do you understand why we recommend the abandon of single tender approach? This is because we want to encourage competition ... I want to ask the Chief Secretary for Administration, does the government consider the recommendation that is related to the single developer approach listed in our report when you are formulating the revised proposal?' said Alan Leong, legislator (Special House Committee, Legislative Council, 2005).

Moreover, legislators strongly urged the government to clarify the details of the statutory

body, like when it will operate and who would be involved. Apparently, legislators believe

that the statutory body should be operated as soon as possible so as to ensure the public

voice would be heard by the authority in the planning stage. Furthermore, some legislators

also raise the importance of the driven cultural policy and the relationship between the

policy and the project. Lastly, they are angry towards the 'keeping' of the canopy.

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'According to the government document given to us [legislators], I found that "on the issue of the canopy, the result of the public consultation exercise shows that there is mixed views on the construction of canopy". But it follows by a sentence "the canopy receives a substantial public support and hence there is no reason for amending this mandatory requirement". On one hand, you state that there is no conclusion ... but from the document that the government sent us, it is obvious that there is a conclusion on the canopy. Further, that mandatory requirement has not been amended or altered by the government. . . I know the research report that commissioned by the government found that 51 % of the respondents support the construction of the canopy. But according to the comment cards that filled in by people who went to the exhibition, more than 30,000 people are against the canopy. If they know that the maintenance cost is shared by the citizens ... that is no longer be managed and maintained by the proponent. I believe that people will against the construction of canopy overwhelmingly ... I hope the Chief Secretary for Administration will not act like the magician, i.e. not to change the fact', said Yeung Sum, legislator (Special House Committee, Legislative Council, 2005).

'Actually, [what is suggested by the government] is that the winning developer will get a large plot. Then carve out some to the other developers. And finally, the West Kowloon Authority will be held accountable politically. In case if the maintenance cost of the canopy represents a large proportion of the expense, that means money spending on arts and cultural will be a small proportion of the expense. Then people in the West Kowloon Authority will have to accountable for this politically', said James To, legislator (Special House Committee, Legislative Council, 2005).

With their concerns and criticisms raised, legislators are not fully satisfied with the

revised proposal. In early October, both Liberal Party and the Democratic Alliance for the

Betterment and Progress of Hong Kong stated that they welcomed and supported the

revised proposal in principle55 (Hong Kong Economic Journal, Oct 8, 2005). Whilst for

the democratic camp, they remained critical. For instance, James To, Democratic Party

legislator, worried that the winning developer would be given too much power in that he is

allocated with the responsibility of carving out and auctioning the plots (South China

Morning Post, Oct 8, 2005b). Moreover, Alan Leong, chairman of the Subcommittee on

West Kowloon Cultural District Development and member of the Article 45 Concern

Group, shares To's views and further asserts that the revised proposal was 'even worse

than the original package' (South China Morning Post, Oct 8, 2005b) as the winning

55 Although both parties support and welcome the revised proposal in principle, they still worry on some issues. For instance, the Liberal Party believes that it would be inappropriate for the government not to take the responsibility of auctioning the plots. Whilst the Democratic Alliance for the Betterment and Progress of Hong Kong worries about the maintenance cost of the canopy and the role of the statutory body (Hong Kong Economic Journal, Oct 8, 2005).

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developer is not obligated to operate the core arts and cultural facilities for 30 years.

Furthermore, Mr. Hui's decision of not to attend any Subcommittee's meeting on the

Phase II Study disappointed some legislators. Although Michael Suen and Patrick Ho,

Secretary of Housing, Planning and Lands and Home Affairs respectively, attended the

meeting, legislators were dissatisfied with Mr. Hui's decision. The Chairman of the

Subcommittee, Mr. Leong, claimed that the act of ignoring Legislative Council's request

for attendance implied that the general direction of the revised proposal could not be

amended (Sing Pao, Oct 16, 2005). From the above analysis, apparently, democratic

legislators are less satisfied with the revised proposal whilst the pro-government parties

feel that the government has been, somehow, accountable to the public.

8.4.4 Proponents

In response to the revised proposal, all screened-in proponents have reacted

cautiously by stating that they respected the government's decision and would have to

conduct a detailed feasibility study before coming to a conclusion (China Daily Hong

Kong Edition, Oct 8, 2005).

In the view of Lee Shao-kee, chairman of Henderson Development Group who solely owns one of the shortlisted consortia, the profit margin would be very low as a result of the reduced plot ratio and new conditions. The company will have to study the revised package very carefully to find out if they could manage a breakeven. Yet since the company has already input financial resources in the preliminary study, they would still invest in the proj ect as long as this is good for Hong Kong, he added. In a statement, Dynamic Star International Limited said that they supported the government proposal in principle, but the company needed to conduct a detailed study on its content and feasibility. A spokesman for Sunny Development Ltd said they respected the government's decision and would do their best to fulfill the plan (China Daily Hong Kong Edition, Oct 8, 2005).

According to the interviews conducted, the two interviewed proponents have

different opinions on the issue. One believed that although the revised proposal seemed to

be accountable to the public, the main objective of proposing the amended framework for

developing the WKCD is to reduce the liability of the government instead of to reach

some reasonable compromises. This is because the new development parameters and

contract conditions are harsh and hence the profit margin would be very low. Hence,

screened-in proponents may not be able to stay in the race as they are still for-profit

enterprises. If this is the case, it provides the government with a legitimate reason for

withdrawing the IFP and replanning the site. He is thus not agreeing that public

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accountability was the main reason accounting for the revised proposal.

The other interviewed proponent reacted more cautiously on the issue. Although he

has convinced that the government was trying to be responsive and accountable to the

public in making such policy change, he admitted that the revised proposal posed a great

challenge to the proponents as profit margins would be very low. From his point of view,

opposition in the community should be viewed as a form of urging for a reallocation of the

recognition and influence of particular interest. The longer the set up stage of the WKCD

takes, the stronger the criticisms are. Therefore, although the revised proposal has posed a

greater challenge to the screened-in proponents, this is still the kind of compromise that

may make for the early implementation of the project.

It is worth noting that both interviewees have implied that the revised proposal may

not be responsive to the market and hence they might not be able to stay in the race owing

to its for-profit nature.

8.5 Concluding Discussion: Accountability Secured in October 2005

In examining the accountability secured in the revised proposal, the dissertation has

examined three key aspects, namely contractual, managerial and public accountability.

Although it seems that public accountability had been partially secured as the revised

proposal was tailored in accordance with some public concerns, it may not be very well

secured in reality. For contractual accountability, it is clear that the revised proposal has

violated the legitimate expectations of the screened-in proponents. Hence, it is not well

secured. With regards to accountability found within the hierarchy, managerial

accountability, Rafael Hui is accountable to the Chief Executive managerially and his

actions did seem to be consistent with what is known of his brief from the Chief

Executive.

8.5.1 Contractual Accountability

Incorporating the PPP obj ectives in the contract and translating the general standards

into more specific and binding legal standards are crucial in contractual accountability.

With the introduction of an additional set of development parameters and contract

conditions, the preliminary contract, IFP, has undergone some degree of amendment. In

the IFP, it is apparent that the proponents were given a relatively large degree of flexibility.

For example, proposals fulfilling mandatory requirements were regarded as qualified bids,

even though they failed to conform to the Government's Baseline. The additional

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parameters and conditions have restricted this flexibility. The proponents were now asked

to accept the new and relatively strict parameters and conditions including: that at least

50% of the commercial and residential gross floor area at the WKCD site would now be

carved out for open bidding; setting the maximum plot ratio at 1.81; capping the

residential development at no more than 20% of the total gross floor area; specifying a

minimum net operating floor area for core arts and cultural facilities of 185,000 square

metres; requiring the successful proponent to pay $30 billion for the establishment of a

trust fund (Information Services Department, Oct 7, 2005). The revised proposal has thus

introduced more clear, specific and binding standards. In Section 7.7.1, the author finds

that contractual accountability is not well secured in the IFP and lists several deficiencies.

The additional parameters and conditions, however, are not responsive to these

deficiencies. From this perspective, although contractual accountability, in terms of

translating general standards into more specific and binding legal standards, was enhanced

by the introduction, it still does not appear to have been well secured.

On the other hand, without a doubt, the introduction of additional parameters and

conditions has harmed contractual accountability. This is because the legitimate

expectation was that the government would choose final partner from among the

screened-in proponents and with reference to the criteria and requirements as listed in the

IFP. Clearly, the revised proposal is not formulated after negotiation with the screened-in

proponents and the new terms have violated this legitimate expectation. Hence, the

government could be accused of breaking the implicit 'contractual relationship' and has

thus not been fully contractually accountable to the screened-in proponents.

In order to 'compensate' the proponents, the government kept its requirement for the

canopy. As stated in Section 8.3.4, although there has a public outcry against the canopy, it

was kept in the revised proposal as it had been regarded as a mandatory requirement in the

IFP. Other than the reasons stated in Section 8.3.4, contractual accountability might also

be a reason accounting for this decision as one of the proposals had been screened out as

no canopy was included in its bid. Therefore, once the canopy is dropped, the preliminary

contract, IFP, might have to regard as officially scrapped. In order to be accountable

contractually to potential proponents, and in particular to the screened-out proponents,

another round of IFP must be launched. However, this contradicts with the goal of the

government, namely to achieve the early implementation of the WKCD and the official

scrapping of the IFP would formally demolish the contractual relationship and in turn, the

contractual accountability.

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It should further be noted that while the government is prepared to amend and is

unwilling to break the 'contractual relationship' with the screened-in proponents, in theory,

there is no contractual relationship between the parties as the IFP is a non-legal binding

invitation document. However, in reality, Hong Kong is new to the PPP approach and trust

between partners is an important determinative factor towards the success of PPPs. This

view is shared Hofmeister and Borchert (2004) who state that 'the success of PPPs

depended both on a thorough understanding of the operational environment on each side

and a bond of trust as partners in PPPs' (as cited in Teicher, Alam and Van Gramberg,

2006). Hence, to maintain the contractual relationship and to be contractually accountable

to the proponents, it is clear that instead of terminating the IFP directly, the government

could only 'amend' the mandatory requirements and the 'revised project' thus could be

kept open to the three screened-in proponents alone. It would seem, therefore, that the

government has tried to be contractually accountable to the proponents, but without

translating general standards into a more specific and binding legal standards, or at least it

has tried to maintain its implicit contractual obligation to the screened-in proponents.

Although the government has tried to avoid harming the trust, nonetheless community and

private sector trust in the government's ability to fulfill its contracts might be weakened.

Overall, contractual accountability does not appear to have been well secured as at this

stage legitimate expectations had been violated by the government through the

introduction of additional parameters and conditions. Nonetheless, it had tried to do this in

a manner that enabled it to demonstrate also that it was still trying to fulfill its communal

and public accountability responsibilities at the same time.

8.5.2 Managerial Accountability

As defined in Chapter 4, managerial accountability entails making 'those with

delegated authority answerable for producing outputs or the use of resources to achieve

certain ends' (Sinclair, 1995: 222). In the period under examination, there was a personnel

change at the highest decision-making level. The original person-in-charge of the project,

Donald Tsang, was promoted to be the Chief Executive and Rafael Hui, who succeeded

him as the Chief Secretary for Administration, then steered the development of the

WKCD.

As argued in Section 8.3.4, the revised proposal was made under several constraints

that included being answerable to some of the new Chief Executive's concerns. For

instance, Donald Tsang is committed to building strong governance and had taken a strong

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stand on the key aspects of WKCD, such as the single-developer approach and the

construction of the canopy. It is clear that in the fonnation of the revised proposal, these

issues were still expected to be taken into account. Instead of pushing the project through

by adopting an aggressive approach, Rafael Hui tailored the mandatory requirements in

accordance with both the Chief Executive's and the public's views. Therefore, it was

hoped, the WKCD would not pose a challenge to Hong Kong's governance. In particular,

as Tsang had insisted on keeping several unchanged aspects of the WKCD when he was

the Chief Secretary for Administration, it is clear that Rafael Hui after examining the

revised proposal in depth did not abolish either the canopy or the single-developer

approach. Also important, early implementation of the project was still expected to be

achieved if 'public aspirations were met'. This, while Rafael Hui is accountable to the

Chief Executive managerially, from the previous analysis, it is clear that during this period

there was more of attempt to achieve a better balance between managerial accountability

and communal accountability to the public, but still keeping within the decision-making

boundaries set for him by the Chief Executive.

8.5.3 Public Accountability

In the period under examination, the roles of Audit Commission and the Ombudsman

were again very limited or even non-existent. In this section, therefore, it is the

participation of the Legislative Council and the media and the extent to which public

accountability was secured that are examined.

When the revised proposal was first announced, it seemed that the additional

development parameters and contract conditions could meet public aspirations, especially

as some of these were targeted at the criticisms of the single tender approach and of the

WKCD as being a 'property project in disguise'. However, most legislators and residents

did not share this optimistic view of the changes. Some even stated that the revised

proposal was much worse than the original one. Even though the Liberal Party believed

that the revisions were acceptable56, it raised several fresh issues that it saw as being

generated from the revised proposal.

Similar to the findings in Chapter 7, the media played a significant role as a platfonn

for exchanging views in this second post-IFP period. Government officials, legislators, the

proponents and the public also now made good use of the media to express their views,

56 It is a political party that supports the revised proposal in principle.

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especially on the fresh issues arising from the revised proposal. For instance, proponents

once stated to the press that they would stay in the race even if the profit is marginal.

Moreover, they have urged the government through the media to clarify the additional

parameters and conditions.

One of the behavioral expectations of public accountability is that the public can call

the government to account, to demand explanations and remedies, and to impose sanctions

and new directions. Responsiveness is one of its laden values. Doubtlessly, some of the

public concerns raised during the post-IFP period under Tung's leadership were responded

to in the revised proposal (see Chapter 7 for details). For instance, there had been criticism

towards the flexibility given to the proponents. As proposals from bidding which did not

conform to the government's baseline were still regarded as qualified bids, some people

had criticized that there were no fair grounds for selecting the final bids as each of the

three screened-in proposals differed fundamentally. The revised proposal posed strict

requirements on plot ratio, gross floor area for residential development and net floor area

for core arts and cultural facilities (Information Services Department, Oct 7, 2005). Hence,

some public concerns had been responded to and addressed.

Moreover, the WKCD has long been challenged as 'a property project in disguise'

and for some critics there is the appearance of government-business collusion in the

project. To a certain extent, the introduction of the additional parameters and conditions

respond to these concerns also. Capping the residential development to 20% of the total

gross area at most and specifying the minimum net operating floor area for core arts and

cultural facilities have helped to reduce or 'eliminate' these worries. Requesting the

winning developer to establish a $30 billion trust fund and keeping the plot ratio to a

maximum of 1.81 further marginalized the profits of the private partner. Although, despite

these changes, some people may still regard the revised proposal as 'a property project in

disguise' or 'government-business collusion', other critics continue to highlight the lack of

cultural policy. Therefore, public accountability is secured only as far as the government

has been responsive to some, but not to all of the public's concerns.

One example relates to the existence or lack of a cultural policy that serves as the

backbone of the WKCD. According to the relevant authority, the arts and cultural policy of

Hong Kong is:

'to create an environment which is conducive to the freedom of expression and artistic creation and which encourages participation in such activities. The policy is based on several principles, which are as follows: (1) we encourage pluralism and diversity; (2) we respect freedom of expression; (3)

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we are a facilitator/ catalyst; (4) we provide various kinds of support, including financial support, as and when appropriate. As a facilitator, we aim to support the development of arts and cultural in certain aspects ... Our blueprint of cultural policy is based on the Culture and Heritage Commission Policy Recommendation Report' (Home Affairs Bureau, 2005c).

The Subcommittee of the Legislative Council clearly believes that it is necessary to have a

much stronger underlying cultural policy to serve as a foundation for the WKCD.

However, it does not share the view that the current policy mentioned above is either clear

or effective (Subcommittee on West Kowloon Cultural District Development, Legislative

Council, 2005b; Subcommittee on West Kowloon Cultural District Development,

Legislative Council, 2006) (also see below for explanation).

Moreover, in accordance with the Public Consultation Report commissioned by the

government, it is evident that most citizens believe in the necessity to formulate a sound

cultural policy before proceeding to the WKCD. From the analysis of public views, the

public do not have a clear mindset on either the broader cultural blueprint for Hong Kong,

or, in particular, on the WKCD.

'Comments from Comment Cards and written submissions call for providing more opportunities to local arts and cultural groups. The majority want emphasis to be given to Chinese and local culture, while some want more emphasis on western culture and multi-culturalism, reflecting Hong Kong's "east meets west" position. Concerns are raised on inadequacies in the proposals regarding the promotion of arts and cultural awareness among the general population. Many also advocate that more effort should be given to the training and development of local artists, including the establishment of funds for such purposes. The lack of a cultural blueprint for Hong Kong, and the danger that cultural software might lag behind the hardware development are also concerns. These concerns are shared by the Legislative Council, which is of the view that the need for the development of arts and cultural facilities in Hong Kong has not been properly identified. The Telephone Polls show that 74.5% of the respondents indicate that there should be more discussion on Hong Kong's cultural policy before proceeding with the development of the WKCD' (The Public Policy Research Institute, 2005).

The public has clearly urged the government to review the cultural policy so that the

cultural software does not lag behind the hardware development. However, the

government has not addressed these concerns adequately, either before or after the revised

proposal was made public. The public and relevant stakeholders thus strongly urged the

government to review or formulate its 'for culture and arts education' and 'focus on the

development of a coherent, continuous and diversified curriculum, the provision of quality

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support, and the promotion of partnership and community involvement before preceding

the WKCD' (Subcommittee on West Kowloon Cultural District Development, Legislative

Council, 2006: 14). However, other than reiterating the existing arts and cultural policy,

which is basically 'commitments to the operation, maintenance and management of

various arts and cultural facilities' (Subcommittee on West Kowloon Cultural District

Development, Legislative Council, 2006: 14), the government has not made any further

attempt to address or respond further to such public concerns.

'This is not a surprise because the Administration, in its response to the Subcommittee on the need to develop cultural software, reiterates that its efforts in promoting cultural software are represented by its commitments to the operation, maintenance and management of various arts and cultural facilities in WKCD. This understanding of what cultural software means is apparently very different from that advocated by CHC, which states in its report that "a policy for culture and arts education should focus on the development of a coherent, continuous and diversified curriculum, the provision of quality support, and the promotion of partnership and community involvement" ... The Bilbao experience of the delegation of the Subcommittee has reinforced the Subcommittee's belief that a cultural policy is crucial for a government when it tries to decide what objectives a cultural policy should achieve, which direction it should take and how it can be delivered' (Subcommittee on West Kowloon Cultural District Development, Legislative Council, 2006: 14-15).

As the government and the public have such different perceptions as to what a cultural

policy is, the response of the former has failed to address the concerns of the latter. Hence,

the public are dissatisfied with the responsiveness of the authority in this area.

Additionally, even though the single-developer approach was officially abandoned

under the revised proposal, the public do not share the view that this is enough change.

They claim that under the revised proposal, most of the land is still allocated to a single

developer under a single-package approach albeit in a reduced scale (see 8.4 for details).

Hence, public satisfaction remains low, the public feel that their concerns have still not

been fully taken into account and public accountability does not appear to have been very

well secured in the period under examination.

8.6 Policy Change: the February 2006 Decision to 'Delay'the Project

In February 2006, the government announced that the project is officially 'on hold'

and will start over again as all the bidders had indicated that they would not stay in the

race. For the way forward, consultation committees are established. Similar to the

approach in Section 8.3, analysis of the policy change will be formulated by using the

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amended version of the Advocacy Coalition Framework to structure detailed analyses of

the interaction between competing coalitions, the impact of the stable parameters on

constraints and on the resources of subsystem actors, as well as external changes.

8.6.1 Interactions of Competing Advocacy Coalitions

As previously stated, two loosely formed advocacy coalitions were observed before

the revised proposal was announced in October 2005. Generally speaking, this situation

has remained unchanged and both coalitions have called on the government to clarify

some issues relating to the additional parameters and conditions. For example, the

opposition camp strongly urged the government to state the arrangements in carving out

the land, role and responsibilities of the proposed West Kowloon Statutory Body that will

now oversee the project, etc (see 8.4.3). Whilst for the proponents, their concerns mainly

focused on financial matters, like when the $30 billion trust fund will have to be paid, the

'arrangement for the carving out of commercial and residential portions, use of sale

proceeds from the carved-out portions, contributions towards the $30 billion trust fund,

etc' (Information Services Department, Jan 27,2006) (see Appendix 8 for other issues that

arose from the revised proposal)

However, the competing coalitions have also undergone some changes after the Phase

II Report of the Subcommittee on West Kowloon Cultural District Development was

published in early January 2006. The report aimed to investigate 'primarily the mode of

planning, implementing, management and financing for WKCD with reference to overseas

projects of a comparable scale' (Subcommittee on West Kowloon Cultural District

Development, Legislative Council, 2006: 5). Recommendations are listed in Appendix 9.

It should be noted, however, that one of the recommendations is that the government

should separate the cultural and non-cultural components and fund the core arts and

cultural facilities through land sales (Subcommittee on West Kowloon Cultural District

Development, Legislative Council, 2006). Hence, it implies that PPP is not recommended

to be adopted in the development of the WKCD. This recommendation has, apparently,

split the opposition camp. Although similar divisions may appear in the supporting

coalition, the split is not as obvious as the antithetical coalition. The opposition coalition

has now split on the issue as to whether the WKCD should be developed by PPP or not.

Under the revised framework, the WKCD is no longer a BOT-typed PPP in that the private

counterpart is not responsible for operating the core arts and cultural facilities. Instead, it

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is a Developer Finance ProjectS7• Several concerned individuals and parties disagree with

this new decision.

'I don't understand why a $30 billion trust fund should be set up. Why we have to get $30 billion from the private sector? ... We [the HKSARG] are not facing financial pressure ... Through providing a $30 billion trust fund, the private sector can get rid of the responsibility of operating the core arts and cultural facilities for 30 years. 1 really can't understand that ... Through adopting PPP, you [the government] can make good use of their [the private sector's] expertise, reputation, international networking etc in managing and operating the facilities. This is what you [the government] can't achieve without bringing in the private sector.' (Interviewee, Pressure Group)

'The new proposal asks that the successful developer to develop (design and construct) the cultural and arts facilities but it is not clear whether the developer will have the obligation to operate and maintain such facilities for 30 years, as required in the IFP. An up front payment of HK$30 billion to establish an independent trust fund is required from the developer instead. In the event when the developer are not charged with an obligation to operate and maintain the CACF [core arts and cultural facilities], the canopy and the communal facilities, there will naturally be a high tendency that the developer will aim to minimize the development cost of the CACF to ensure highest possible profit generated from the development of its portion in WKCD. The control of the quality will then largely rely on the specification written by the Government. Whether the then completed CACF, the Canopy and the communal facilities will still be "world-class" as envisaged will remain in serious doubt' (The Hong Kong Institute of Architects, 2005).

The recommendation of the Legislative Council further suggests that the whole PPP

concept should be overthrown and hence business would no longer have a say in the

development. The suggestion has, to a certain extent, upset some of its counterparts in the

opposition coalition.

'PPP should be operated on commercial principle. However, in the Phase II report, the Legislative Council suggests that it should not be operated on commercial principle and traditional development mode should be adopted, i.e. land sales. It also claims that if you like, the strategy [partnership] would be adopted in some areas like construction of the core arts and cultural facilities. No one is interested in such deal, it is not attractive at alL That's [the suggestion of the Legislative Council] too ideaL' (Interviewee, Pressure Group)

'For the development of cultural facilities within the WKCD, it is noted that various previous studies has consistently recommended partnerships with the private sector. For instance, the "Study on the Feasibility of a New Performance Venue for Hong Kong (1999)" recommended that the

57 In the Developer Finance project, through financing the construction or expansion of a public facility, the private partner is granted for building residential, commercial stores, and! or industrial facilities at the site (see 3.4 for details).

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performance venue should be operated on commercial principles. The Planning Department Study (1999) also recommended greater private sector participation for the development of the new cultural facilities. The "Consultancy Study on the Provision of Regional! District Cultural and Performance Facilities in Hong Kong (2002)" similarly stated that the participation of the private sector through joint initiatives such as public private partnerships should be encouraged. The "Culture and Heritage Commission Policy Recommendation Report (2003)" also clearly recommended that the Government should facilitate partnerships between developers and the cultural sector in the development and operation of the cultural facilities. As stated by the former Chief Secretary for Administration, "in the past, the Government constructed a lot of cultural facilities. However, without a business mindset, these facilities are somehow inadequate in themselves." "The objective of the WKCD project is to foster a long-term relationship between the Government and the private sector in the development of world-class arts and cultural facilities ... by bringing in the private sector's financial strength and commercial knowledge and expertise". As stated in our previous submissions, HKlS also supports the Government's plan to engage the private sector in the development of the WKCD. Therefore, the PPP approach should be adopted unless the Government has good reasons to change at this stage,58 (The Hong Kong Institute of Surveyor, 2005c).

These members or 'memes' within the opposition coalition could no longer be regarded as

a single coalition in that there is now a clear division between their belief systems. Hence,

from this time onwards, there are three competing coalitions. One generally supports the

WKCD and urges for its early implementation and for adopting PPP as a means for the

development. The other two are split from the opposition camp, with one in support of the

PPP, if its conditions are met, whilst the other one is against the PPP adoption in principle.

Competition between these coalitions is, again, not that obvious in the civil society.

Although the Chief Secretary for Administration, acting for the government, has taken up

the role of 'policy broker' in formulating the revised proposal, this does not mean that he

has become an arbitrator who does not take sides. The government, ostensibly, remains

strongly in the supporting team. Perhaps the most noticeable interaction between

coalitions is that of the Legislative Council and the government's representation. On the

date that the Phase II Report was released, the government issued a press release to

comment on the report. The authority stated clearly that the recommendations were seen

by the government as being conservative and as deviating from the original plan of

58 Although the above paragraph is extracted from the submission of the Hong Kong Institute of Surveyors in 2005, the strong stand of the Institute on adopting PPP in the development of the WKCD is clear. Hence, to a certain extent, the Phase II report of the Subcommittee on West Kowloon Cultural District Development might bring a division of the opposition camp on the issue of whether PPP should be adopted in the WKCD, or not.

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adopting a PPP for the development (Information Services Department, Jan 6, 2006). As

the response was delivered through a press release, legislators were disappointed with the

way in which government response was not given directly to them, but through the media

(House Committee, Legislative Council, 2006). Alan Leong, chairman of the

Subcommittee, further stated that he was disappointed with the initial response of the

authority. Despite being invited to attend the Subcommittee meeting on 3 February 2006

so as to explain the way forward for the project, the Chief Secretary for Administration

refused actually to attend, stating:

'In particular, we have provided detailed views to the Subcommittee and cooperated fully with the Subcommittee in preparing its Phase I and Phase II Study Reports. We are aware of the Subcommittee's views on the WKCD project, and wrote to the Subcommittee on 6 January providing our response to the Phase II Report. The Chief Secretary for Administration therefore does not see the need for him or the Administration to meet with the Subcommittee at this stage ... As indicated in our letter of 10 October 2005 to you, after formulating more detailed proposals on the establishment of an independent statutory body to take forward the WKCD development, the Chief Secretary for Administration will be pleased to meet with the Subcommittee' (Housing, Planning and Lands Bureau, 2006b).

This strongly independent stand of the government sets up a conflict between the

executive and legislature. Mr. Leong then announced his intention to hold the Chief

Secretary for Administration accountable, by forcing him to attend the meeting through

using the Legislative Council (Powers and Privileges) Ordinance. Thus, in his committee's

reply to th~ Chief Secretary for Administration, Leong states that

'At the meeting of the Subcommittee held yesterday, members have asked me to write to you on their behalf to express their deep disappointment at the refusal of the Administration to attend the meeting ... [The reports] reached remarkable consensus. Strong concerns are expressed and pressing issues are identified, in consequence of which recommendations are put forward. All of them would command the careful response of any accountable government. .. We are astonished that the Administration could have taken an attitude of evasion and avoidance under a language of disengagement and unconcern, and moreover evinced the intention to proceed with the government's set plans as if the reports have never corne into existence ... The absence of the Administration cannot assist public confidence in the SAR Government as a whole. We are also concerned that if the same attitude is maintained in the forthcoming debate, the community will be justifiably scandalized ... [M]embers are confronted with the unprecedented situation in which the Chief Secretary, by long practice the bridge between the Legislature and the Executive, has become itself subject of dispute. There is the suggestion that we may have to resort to reminding the Chief Executive of his responsibility under Article 48(2) to implement the Basic Law which includes the proper

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functioning of the constitutional framework as a whole; or resort to our power to compel the appearance of witnesses and production of documents under the Legislative Council (Powers and Privileges) Ordinance; or to the collective expression of disapprobation of the Council as a whole' (Leong, 2006).

More importantly, from the list of issues that the Subcommittee sent to the Chief Secretary

for Administration for clarification, it is clear that there is considerable distrust between

the executive and legislature (see Appendix 10). For instance, points 2 and 3 suggest that

there may be 'a sleight of hand' . Definitely, this perception comes from the lack oftrust on

the executive branch. Point 7 has further highlighted the distrust and tense

executive-legislature relationship as the Subcommittee asserts clearly that '[t]he mode of

development under the IFP is regarded as an attempt of the Administration to circumvent

the powers and functions of the Legislative Council under the guise of a public-private

partnership (PPP) project' (Leong, 2006). Questions raised have highlighted the inability

of the Legislative Council to hold the government accountable even when legitimately

scrutinizing the project. It seems that the Council is now taking the advisory role and is

trying to press for a stronger role to play in the accountability process.

8.6.2 Impact of the Stable Parameters on Constraints and Resources of Subsystem Actors

As suggested by the Advocacy Coalition Framework, stable parameters could affect

the partnership building process indirectly through posing constraints and through the

limited resources of subsystem actors. The findings in Section 8.3.2 are applicable in this

Section too as there has been no significant change in the stable parameters since October

2005. It is worth noting that Sabatier considers 'basic attributes of the problem area' as a

stable parameter. In the pre-October 2005 context, the problem area was closely related to

the handling approach of the government, such as the way in which the authority

consulted the public and adopted a single-developer approach. There was a little

discussion as to whether a PPP should be adopted or as to what role the private or even

third sectors should play in the project59• However, it seems that the Subcommittee has

altered its perception on the problem area, from being a technical one to more of a one of

59 The Subcommittee of the Legislative Council has been critical on the justifications for adopting the PPP approach. Hence, it strongly urges the government to 're-examine the extent of private partnership for WKCD based on objective value-for-money analysis and fmancial viability studies (like public sector comparator) (Subcommittee on West Kowloon Cultural District Development, Legislative Council, 2005b). However, the Subcommittee shows no objection of developing the site through a PPP approach at that time.

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principle. From the Phase II Report, it appears that the Subcommittee now regards

adopting the PPP approach to develop the site as a whole is the problem area, even though

the Subcommittee has made it clear that it is not against PPP in principle:

'The Subcommittee must reiterate that it is not in principle against the adoption of PPP approach for developing any infrastructure. The decision of the most appropriate approach for developing the cultural facilities in WKCD should be left to the statutory body, and it is important that a pragmatic approach be adopted' (Subcommittee on West Kowloon Cultural District Development, Legislative Council, 2006: 90).

8.6.3 External Changes towards the Subsystem

In the period under examination, there were limited changes in the socioeconomic

conditions and systemic governing coalition. However, external changes in the field of

public opinion and policy decisions and impacts from other subsystems are investigated in

this Section.

After the revised proposal was made public in October 2005, there was a discussion

as to the extent to which the revised proposal differed from the original one. Views of

different groups have already been analyzed in Section 8.4. Apparently, both camps 'insist'

on their viewpoints and hence no breakthrough is observed. It should be noted that some

groups have posed their objection towards the revised proposal on the issue related to the

operation of core arts and cultural facilities. Originally, the private enterprise was to be

obligated to operate the core arts and cultural facilities for 30 years and to maintain the

WKCD before transferring it back to the government. However, this obligation was

dropped as the plan now is for the statutory body that oversees the project might take over

the responsibility. Instead, the winning developer is required to establish a $30 billion fund

for accountability (see 8.6.1 for details).

As mentioned in Section 8.6.1, after the publication of the Phase II Report, further

division in public opinion was observed. The public is divided not only on whether the

process of tender selection should be continued, but also on whether any PPP approach

should be adopted in developing the WKCD. On the latter issue, again, there are mixed

views in the community. Some groups think that PPP should be adopted so as to achieve

the benefits of PPPs - including bringing in creativity, flexibility, capital and the expertise

of the private sector. Others, however, do not see the need for involving the private sector

as they consider its for-profit nature is harmful to the development of arts and culture in

Hong Kong. Therefore, it has been suggested that the government should adopt the

recommendation of the Subcommittee of the Legislative Council - separating the cultural

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and non-cultural components and adopting the traditional way, i.e. land sale, to fund the

cultural component.

Another identified external change is related to the policy decisions and impacts from

other subsystems. The impacts and policy decisions of the Fifth Report on Constitutional

Development has had some implications for governance in Hong Kong, and hence on the

WKCD indirectly6o. This Report which proposed revised methods for selecting the Chief

Executive and the Legislative Council in 2007 and 2008 respectively, was published on 19

October 2005. As no timetable for the dual elections of the Chief Executive and

Legislative Council by universal suffrage thus given, the pro-democratic camp of the

Legislative Council was dissatisfied with the report. They also held very strong views on

the role of appointed District Council members in the election of the Chief Executive

(Tsang, Oct 19,2005). As to pass the constitutional reform proposal required support from

two-third of the legislators, the Chief Secretary for Administration adopted several

different means to generate public support. For instance, he met with different District

Councilors. However, it seems that his efforts were not highly appreciated. On December

4, 2005, there was a protest by more than 80,000 people calling for the introduction of

universal suffrage (South China Morning Post, Dec 5, 2005). The strong stand taken by

the government was then softened slightly in that the Chief Executive indicated that

'limited changes may be possible to the government's reform package' (South China

Morning Post, Dec 5, 2005). Later, on 19 December 2005, two days before the relevant

debate in the Legislative Council, Rafael Hui, the Chief Secretary for Administration made

a concession by announcing the plan to phase out appointed District Council seats by 2016

at the earliest (Information Services Department, Dec 19,2005). Although the concession

is limited in scope, it is regarded as a positive step towards the democratic development by

some parties. Unfortunately, as the scope of the late-coming concession is limited, it failed

to secure sufficient votes from the democratic camp in reality. The constitutional reform

proposal was thus finally defeated on 21 December 2005 when it failed to secure a

two-third majority in the Legislative Council (South China Morning Post, Dec 22, 2005).

The constitutional reform has had some implications for Hong Kong governance in

general and which in tum affects the WKCD development. The voting down of the reform

has highlighted the looming legitimacy crisis that the HKSARG is facing. It has further

weakened the government's already weak policy and administrative capacities and hence

60 This is because the development of the WKCD is closely related to the governance and legitimacy of the HKSARG.

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governance of Hong Kong. Similar to the implications that were brought by the Article 23

controversy, the defeat of the constitutional reform proposal reminds the government that

the WKCD must be handled with care or it might pose a further challenge to the

governance, public trust and legitimacy. In this way, the weakened governance, to a

certain extent, has made it difficult for the government to push for the WKCD in the face

of continued strong opposition from the legislature and the pUblic61.

8.6.4 Advocacy Coalition Framework Explanation on the February 2006 Decision

In response to decisions by the bidders to withdraw, the government announced that

the project will be put 'on hold' and will start over again. The decision-making process is

investigated further using the amended version of the Advocacy Coalition Framework.

According to the Framework, external events and relatively stable parameters pose

constraints on subsystem actors. It is noted that since the announcement of the revised

proposal in October 2005, the government has long been attacked and challenged,

especially by the legislature for conducting under-table transactions with the proponents. It

is evident that there is a lack of trust between the executive and legislature and that

between the government and the public. The working relationship between the executive

and the legislature was getting tenser during the period under examination, especially after

the defeat of the constitutional reform package in December 2005. Moreover, the defeat of

the package also pinpointed the fact that the honey-moon period between the new

governing coalition and the legislature has already passed. Hence, the governing coalition,

which aims to build a strong government, has had to handle the WKCD with care so as not

to pose any further challenge to the legitimacy of the HKSARG and its governance.

Further, in January 2006, the Subcommittee of the Legislative Council published its Phase

II Report which called on the government to overthrow the whole PPP concept. Although

there are mixed views in the community, even within the opposition coalition, this call

from the Legislative Council generates another round of public discussion and the spot

light is then 'returned' to the project.

As the public and the opposition camp, do not perceive the revised proposal as a

reasonable compromise. With the shift in perceptions as to the problem area: from

technical concerns to the PPP adoption (see 8.4 for details), together with the tense

61 It should be noted that some interviewees argue that the WKCD development has been politicized and hence the government has to be decisive. Decisive here refers to the idea that to push the WKCD even though the Legislative Council and the public strongly oppose it.

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executive-legislature relationship and the low-trust political environment, it is expected

that the project will remain heavily criticized if the project carries on. Unchanged doubts

on under-table transactions or government-business collusion remain, even though the

government has already cut the profits ofthe winning developer to the margin62•

The low-trust environment and doubts of the public, and in particular, of the

Legislative Council, has contributed to the decision to put a 'hold on' the project.

Although the apparent reason for 'delaying' the project is the unwillingness of the

proponents to stay in the race, this is not the only reason. In the statement made by the

Chief Secretary for Administration at the meeting of the Subcommittee on the West

Kowloon Cultural District Development of the Legislative Council on 21 February 2006,

he stated that

'The three screened-in Proponents responded to the Government in late January 2006, indicating that they were still interested in pursuing the WKCD project. They have also raised some specific questions about the proposed development parameters and conditions ... We believe that we should not conduct any negotiation with the screened-in Proponents at this stage. To do so would be against public views ... Therefore we have sought from the Proponents an unequivocal expression of positive commitment to accept all conditions and continue to participate in the WKCD project under the current development framework as modified by the October Package of last year. All three Proponents reverted yesterday and did not give a positive response ... We have to accept that there is a significant gap between public demands and market reality. Therefore the Government will not pursue the WKCD under the Invitation for Proposals (IFP) process' (Hui, Feb 21, 2006a).

From Hui's speech, it is clear that the main reason for no longer pursuing the WKCD

under the IFP process is that the government's response to 'some specific questions about

the proposed development parameters and conditions' did not satisfy the proponents.

Hence, though the proponents were originally interested in staying in the race, they gave

up finally as they felt unable to give 'an unequivocal expression of positive commitment

to accept all conditions and continue to participate in the WKCD project under the current

development framework as modified by the October Package of last year' (Hui, Feb 21,

2006a). The government took a very strong stand and refused to negotiate or generate any

further compromise on the additional parameters and conditions so this stance would not

62 Under the revised proposal, it is expected that the winning developer would only earn marginal profits. However, doubts on the 'government-business collusion' or 'under-table transaction' remains. Hence, it is believe that the doubts would not be eliminated and the project would still be heavily criticized on this aspect if it continues.

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go against the public VIew. To a certain extent, the government stressed its public

accountability by refusing to be accountable to the market. In the decision-making process

to 'delay' the project, Hui no longer acted as a policy broker seeking to minimize the

conflict through making reasonable compromises, he now reverted instead to his role as

prime decision maker answerable for maintaining the government's formal and final

position

Although there are mixed VIews on the project in the community, both many

members of the public in general, and several stakeholders have welcomed the decision to

construct an arts hub in Hong Kong. The government cannot ignore their demands and

abolish the idea of building a cultural district on the West Kowloon Reclamation

completely. Clearly, abolishing the arts hub would also be potentially damaging to the

legitimacy of the HKSARG. Hence, the idea of 'delaying' the arts hub seems to be the best

the way forward - establishing consultation committee so that greater public involvement

is achieved on one hand, and the public would not perceive government as now having

decided to abolish the cultural district.

8.7 Decision to 'Delay' the Project: Accountable to the Public? Stakeholders'Views

In February 2006, WKCD was officially put 'on hold' as no bidders had stayed in the

race after the introduction of the additional development parameters and contract

conditions. The original plan towards the project, together with the controversial canopy,

would be scrapped or renewed and started again once the consultation committee was

established. How did the stakeholders and the public react to the decision?

First, the opposition camp welcomes the decision and believes that, III general,

through conducting another round of public consultation, a need-based cultural hardware

could be developed. This then might lead to the construction of a 'real' 'cultural district'.

More importantly, the 'delay' implies that public opinion might be incorporated in the new

plan once the consultative committee and advisory groups, which are comprised by

different stakeholders and representatives of the public, are established.

'It is still a good opportunity to go back and actually consider what the public want from the development. We still don't think this is the best way to go about reviewing the development. .. Cultural facilities should not be looked at from a tourist angle. We have to be realistic about why tourists come to Hong Kong, and it is not to visit a cultural development... This is really for the people of Hong Kong, a city of 7 million residents, that desperately needs a proper cultural facility,' said Ada Wong, a member of People's Panel on West Kowloon (South China Morning Post, Feb 22, 2006).

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'I support the decision of the government. I hope I can be involved in the planning of the "new WKCD",' said Timothy Calnin, Chief Executive of the Hong Kong Philharmonic who had criticized that the proposed performance venue at the WKCD is not the world-class one. He further adds that the 'delay' provides him an opportunity to strive for a world-class performance venue (Hong Kong Economic Times, Feb 22, 2006).

'We have an opportunity now to build a holistic cultural plan for this city,' said Paul Zimmerman, convenor of the civic group Designing Hong Kong Harbour District (South China Morning Post, Feb 22, 2006).

It is worth noting that however, although the opposition camp, including the

legislators, welcomed the decision to 'delay' the project, they nonetheless believed that the

project would go ahead.

'It was a wise decision. Since the government has listened to all views from the public, developers and the cultural sector, it should roll out its new plan as soon as possible,' said Stewart Leung, vice-president of the Real Estate Developers' Association (The Standard, Feb 22, 2006a).

'We welcome the decision of the government. Restarting the project is the only choice of the authority. I hope the government would listen to the Legislative Council and establish the statutory body that oversees the development of the WKCD as soon as possible. Further, it is hoped that through establishing a transparent trust fund, the WKCD project would be able to operate in a long-term [and uphold the self-financing principle],' said Ho Chun-yan, vice president of the Democratic Party (The Standard, Feb 22, 2006b).

Article 45 's Alan Leong, chairman of Legislative Council's subcommittee on West Kowloon Cultural District, 'welcomed' the announcement, saying it 'addresses many of the concerns' of lawmakers set out in two reports. Still, he said, there is room for improvement. 'The most obvious thing that has not been adopted is our recommendation that there should be an immediate consultation of the cultural and arts sector,' Leong said. 'Secondly, we still recommend that there should be a West Kowloon Cultural District Authority set up. There hasn't found itself into the announcement' (The Standard, Feb 22,2006b).

Whilst for the supporting camp, there is not much media reporting on its response.

However, from the interviews conducted, some members of the supporting camp clearly

are not satisfied with the decision. From their point of view, the decision is no different

from 'dropping' the project. Even though Rafael Hui has given assurances that the WKCD

will not be scrapped and will 'eventually go forward at full speed, once [the] high-level

advisory body chaired by him studies what facilities are needed at the West Kowloon site

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(The Standard, Feb 22, 2006b), the interviewee did not share his view.

'I am very angry about the decision [the project would start again]. When are we going to have the WKCD? When are we going to have the new cultural infrastructure? Unknown. No one knows. We have been long-awaited for the WKCD. We have put lots of effort into it. But now, we have to wait again. I don't know how long it will take.' (Interviewee, Arts and Cultural Group)

Furthermore, some professionals have also expressed their disappointment towards the

decision.

Joseph Ho, managing director at LCH (Asia-Pacific) Surveyors, said the government's plan was workable but 'unfortunately became politicalized'. A plan for providing cultural facilities required a subsidy to work but it was difficult to meet the interests of developers, Ho said. 'Only those with heavy financing will be able to do it.' Any new plan that allowed more developers to take part would still need the government to run the facilities, he said. 'As to whether the government has the ability to handle such a big thing and how it intends to run it is quite an interesting point,' Ho said (The Standard, Feb 22,2006a).

8.8 Concluding Discussion: Accountability Secured in February 2006

This chapter has focused mainly on three aspects, namely contractual, managerial and

public accountability. It is evident that in this period contractual accountability to the

proponents has not been well secured. Public accountability has improved, however, as the

'new plan' and the abandonment of the original one, generally, meet the public aspirations.

Similarly, Rafael Hui's decisions might be regarded as reflecting his managerial

accountability to the Chief Executive as the main reasons for 'delaying' the project are to

achieve the policy objective of still materializing the WKCD and better utilize the

resources whilst simultaneously conceding some points to meet the public outcry and not

harming the popularity of the Chief Executive.

8.8.1 Contractual Accountability

In examining the accountability secured in February 2006, aspects relating to

contractual accountability need comment. In abolishing the IFP and in deciding to

'repackage' the project, the existing contractual accountability relationships are effectively

ended. This is because the main reason contributing to the decision to start the project over

again is that no bidder is willing to stay in the race under the revised terms and hence the

implicit contract between the three proponents and government is now ended. In order to

still be able to materialize the project, the government needs to restart or delay it and

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launch another round of IFP, if necessary. Put simply, neither the private sector nor the

government feel able to remain accountable to each other under the changed

circumstances. Contractual accountability thus has not been secured effectively. As

discussed in Section 8.5.1, the introduction of additional development parameters and

contract conditions has violated the legitimate expectations of the screened-in proponents

and hence, contractual accountability was harmed even though the government claimed to

have maintained its implicit contractual obligation and feel able to remain accountable to

each other under the changed circumstances by not opening the race to other developers.

For the screened-in proponents, their decisions to drop out of the race were based on the

fact that it has the government that first 'violates the "contract" (IFP), and that changes the

terms of the initial offerings too much to be acceptable. As a consequence, contractual

accountability does not appear to have been well secured although the HKSARG is not the

one who terminates the 'contractual relationship' officially. However, whilst the decision

effectively ended one set of contractual accountability relationships, it opened the door for

the late establishment of new and more clearly defined contractual and accountability

arrangements. In this sense, in the long term once the project has restarted, effective

contractual accountability might be secured.

8.8.2 Managerial Accountability

Managerial accountability is secured when the delegated authority is answerable for

the outputs or the use of resources (Sinclair, 1995). Without doubt, the public, in general,

welcomes the decision to delay the project (see 8.7 for details). Since then, the concern has

shifted to the question of how best to materialize the project. In response to this concern,

Rafael Hui has reassured the public, the Chief Executive, Executive and Legislative

Councils that the WKCD will not be scrapped and hence the consultative committee has

been established. Although approval of this approach is not shared by all parties,

materializing the project under the constraints listed in Section 8.6.2 and 8.6.3 is now the

policy objective. As the official delegated with prime decision making responsibilities, Mr.

Hui has to ensure that this objective would be met and, the most feasible option is to

restart the project in a way that will be somewhat more responsive than before. Therefore,

the Chief Secretary for Administration has tried to be accountable both to the public

politically and to the highest levels of government managerially.

Moreover, as discussed in Section 8.5.3, Mr. Hui's 'decision making power' on the

project is limited by the boundaries set for him by the Chief Executive. Hence, he had

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tried to strive a balance between managerial and public accountability within these

boundaries so as to fulfill the 'main concerns of different parties in the community' (Hui,

Oct 7, 2006). From his point of view, the revised proposal was the most effective and

efficient way to carry out the project without an official termination of the IFP. However,

it soon became clear that the framework had failed to secure support from either the public

or the proponents. It is expected that if the IFP had continued, more resources would have

had to be spent on the project. On one hand, the negotiation stage would take a long time

as, from the press report, it is clear that the attractiveness of the contract had been reduced

significantly by the revised proposal and so potential private partners would require

considerable reassurance as to the continued commercial viability of the project.

Additionally, more efforts would have had to be made so as to secure public support and

to convince the public that the project is being negotiated fairly and would be carried out

in a transparent and accountable way. As Mr. Hui stated:

'First of all, the project is far from on its knees. The project, in fact, is up and running. The reason is very simple - only the IFP process cannot be continued ... in reality, there is going to be any delay because had we continued with the IFP process by further negotiating with the three proponents, that, I think will inevitably take a lot of time. Now that this process has drawn to an end, in fact it gives the Government a greater degree of flexibility and scope to determine not only the core facilities but also, more important, a wider choice of financing options, and therefore at the end of the day you may find the entire so-called timetable is shorter than the original IFP. Now, by September, I don't think there is any difficulty in confirming the core facilities and then, thereafter, we are into the process of making preparations for the setting up of the statutory body. In fact, this is shorter than the original intended timetable that we had under IFP,' said Hui (Information Services Department, Feb 21, 2006).

Therefore, the February 2006 decision can be regarded as a managerial decision which

aimed at better utilizing the resources on one hand, while not harming the public

accountability on the other.

Again, owing to the lack of information and evidence, it is unclear, however, to what

extent or how Rafael Hui is held accountable to the Chief Executive managerially.

However, it is worth noting that some people suggest that the main reason for 'delaying'

the project is to ensure that this would not harm the popularity of the Chief Executive

(South China Morning Post, Mar 1, 2006). Although additional parameters and conditions

were introduced in October 2005, much of the public remain dissatisfied with these. If

Rafael Hui had pushed the project any harder by adopting a more aggressive approach,

this would definitely have harmed the popularity of the Chief Executive who will need to

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seek reappointment within one and a half year.

From the previous analysis, managerial accountability to the public can be

regarded as secured in that Rafael Hui might be regarded as accountable to the Chief

Executive managerially if the main reason for 'delaying' the project is not to harm the

popularity of the Chief Executive.

8.8.3 Public Accountability

When public accountability is well secured, the public can demand explanations and

remedies, and urge the government for imposing sanctions and new directions. Hence, the

Legislative Council, Audit Commission, Ombudsman and the media are the main

watchdogs to secure public accountability. In the period under examination, again, the

roles of Audit Commission and the Ombudsman are very limited or even non-existent.

Regardless of the real intention of the government to withdraw the IFP of the WKCD,

it is clear that the general direction of policy has been altered and the 'new direction' is in

line with the public aspirations (see 8.7). The most obvious example is the canopy. The

government had reiterated several times that the canopy was mandatory and could not be

scrapped. Under the revised proposal, the canopy was kept and the government was

strongly criticized for this. Public views were thus perceived as being ignored in

formulating the revised proposal.

'According to the government document given to us [legislators], I found that "on the issue of the canopy, the result of the public consultation exercise shows that there is mixed views on the construction of canopy". But it follows by a sentence "the canopy receives a substantial public support and hence there is no reason for amending this mandatory requirement". On one hand, you state that there is no conclusion ... but from the document that the government sent us, it is obvious that there is a conclusion on the canopy. Further, that mandatory requirement has not been amended or altered by the government... I know the research report that commissioned by the government found that 51 % of the respondents support the construction of the canopy. But according to the comment cards that filled in by people who went to the exhibition, more than 30,000 people are against the canopy. If they know that the maintenance cost is shared by the citizens ... that is no longer be managed and maintained by the proponent. I believe that people will against the construction of canopy overwhelmingly ... I hope the Chief Secretary for Administration will not act like the magician, i.e. not to change the fact', said Yeung Sum, legislator (Special House Committee, Legislative Council,2005).

A public opinion poll by Hong Kong University found 77 percent of respondents strongly objected to the canopy. Although the survey told respondents the canopy would cost HK$40 billion to build, instead of the

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HK$4 billion to HK$7 billion estimated by industry experts, subcommittee chainnan Alan Leong said the different figure was insignificant. "The Legislative Council has always taken the view that it should not be a mandatory requirement of the project. It is too costly to build and maintain," he said (The Standard, Feb 22, 2006c).

However, in the later decision to substantially 'repackage' the project, Hui made it clear

that it could now be possible for canopy to be scrapped, which is in line with the public

view (The Standard, Feb 22, 2006c). Therefore, some people, particularly in the

opposition camp, regard this potential change of policy direction as the victory for the

people in that it appears that the sanction of public opinion has influenced the

government's decision.

Further, the announcement to reassess the project through establishing a consultative

committee and advisory groups demonstrates the strengthening of accountability and is

responsive to the expectations and needs of stakeholders. Meanwhile, many members of

the public, including the arts and cultural groups, have urged the government to conduct

another round of consultation and to work on relevant studies before proceeding to the

WKCD so that it can eventually better meet the real cultural needs of Hong Kong. In

particular, they have urged the government to rethink the proj ect and to tenninate the IFP

so that 'real' consultation could be conducted, and without being constrained within a

finnly preset framework. When reviewing the objectives and memberships of the

consultative committee and advisory groups, it does seem that there is now a greater

likelihood that public expectations and cultural needs will be met as cultural needs would

be re-examine and reconfinn, and public views would better be incorporated through

appointing different concerned individual and representatives of the arts and cultural

groups into the Consultative Committee and Advisory Groups (see Appendix 11 for

details).

Somewhat surprisingly, when the decision to 'repackage' the project was announced,

the Chief Secretary for Administration reiterated most strongly that this would not delay

the project.

'First of all, the project is far from on its knees. The project, in fact, is up and running. The reason is very simple - only the IFP process cannot be continued. The development of West Kowloon into a world class cultural, entertainment and tourist regional centre, is very much alive. That is the reason why we are continuing with confinning the core arts facilities. We are also in the process of preparing for the stage where a statutory body will take over from the Government in developing that particular part of Hong Kong. So it is in fact not on its knees, delayed. I don't think, in reality, there is going

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to be any delay because had we continued with the IFP process by further negotiating with the three proponents, that, I think will inevitably take a lot of time. Now that this process has drawn to an end, in fact it gives the Government a greater degree of flexibility and scope to determine not only the core facilities but also, more important, a wider choice of financing options, and therefore at the end of the day you may find the entire so-called timetable is shorter than the original IFP. Now, by September, I don't think there is any difficulty in confirming the core facilities and then, thereafter, we are into the process of making preparations for the setting up of the statutory body. In fact, this is shorter than the original intended timetable that we had under IFP' (Hui, Feb 21, 2006b).

Even though Mr. Hui's speech failed to fully convince the public, as many public worries

on the materialization of the project (see 8.7 for details) had been extensive, to a certain

extent, the new approach is responsive to their concerns.

From this perspective, in this period public accountability is being better secured as

the public was able to question and even alter the policy direction through the influence

brought for bear by the institutional and non-institutional channels like the Legislative

Council and the media.

8.9 Summary

The two policy changes and their implications on accountability have been studied in

this chapter respectively. It is evident that although the revised proposal made public in

October 2005 was aimed at meeting public aspirations, contractual, managerial and public

accountability were not being very well secured in reality. Whilst for the latest decision to

'repackage' the project, it is evident that contractual accountability between the

government and the proponents does not appear to have been fulfilled. Public

accountability, in the said period, however, has improved as the 'new plan' for proceeding

with the project, in general, meets the public aspirations. Similarly, Rafael Hui might be

regarded as accountable to the Chief Executive managerially as main reasons for

'delaying' the project are facilitates to achieving the policy objective of materializing the

WKCD whilst not harming the popularity of the Chief Executive.

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Chapter 9

Conclusion and Recommendations

9.1 Introduction

The findings of this dissertation show accountability for the WKCD project was not

well secured until early 2006. In addition to summarizing the findings from the previous

chapters, this chapter highlights the lessons drawn from the case study and concludes by

identifying critical factors that facilitated or undermined the accountability secured. It also

draws some theoretical lessons on the value of the conceptual frameworks used. Finally,

positive directions for further studies are recommended.

9.2 Accountability Secured in Establishing the WKCD

A framework that focused attention on key aspects of communal, contractual,

managerial and public accountability was adopted to help examine the accountability

secured at different stages of the establishment of the WKCD63. From the analysis it is

evident that accountability was not well secured until early 2006. This was so even though

the project had experienced several phases including the launch of IFP in 2003 and the

introduction of additional parameters and conditions in October 2005.

Before the IFP was officially launched in 2003, the government did not carry out the

business case and feasibility studies normally expected. In particular, it failed to construct

the PSc. More importantly, perhaps, the cultural needs of Hong Kong had not been

examined properly and there is no clear policy direction with regards to arts and cultural

developments. Although the government later tried to claim that the decision to construct

the WKCD was based on the cultural needs identified by several studies, in fact these

studies were mostly published only after the decision was made. The government's

approach in the pre-IFP period appears to have been inconsistent with the best practices

elsewhere as well as with its own internal guidelines.

In order to secure communal accountability, key stakeholders should be sufficiently

consulted. Through the documentary analysis and interviews, it is evident that most arts

and cultural groups did not believe they had been sufficiently consulted about needs for

63 According to the conceptual framework proposed in Chapter 4, communal, managerial and public accountability - the dominant forms of accountability - are adopted as aspects to examine the accountability secured at the initiation stage of the WKCD, i.e. before the Invitation for Proposal is launched. Whilst contractual, managerial and public accountability are used to study the accountability secured at the set up stage, i.e. after the Invitation for Proposal is launched.

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and the details of cultural district, such as its location, the nature of and balance between

the arts and cultural components in the district, the development approach and mode of

financing. Equally, the direct participation of the District Council, in particular, the Yau

Tsim Mong District Council 64 , was minimal, only being briefed after the relevant

decisions of the WKCD are made, rather than being consulted before. Hence, one-way

communication was observed. This has definitely limited the scope within which both the

views of the public and their representatives, as well as the views of the arts and cultural

groups, could be heeded in the decision-making process. Hence, without appropriate

means to ensure such views were heard and adequately considered, communal

accountability does not appear to have been well secured in the pre-IFP period.

Given the limited roles of the Executive and Legislative Councils, in either the

internal or external monitoring mechanisms, or in the decision-making process of the

WKCD in the pre-IFP period, plus the limited press reporting on the early stages of the

project, both public and managerial accountability are not well secured. More importantly,

as the business case was not formulated clearly at the initiation stage of the project, and

given the very vague objectives of the WKCD, the degree of contractual and public

accountability that could be secured at the later stages have been undermined. Each of the

above factors has acted as a barrier to securing accountability for this PPP project.

For example, the IFP, by nature, is a preliminary contract that provides a blueprint on

the respective roles, responsibilities and liabilities of the parties involved. Hence, the IFP

is referred to when examining the degree of contractual accountability that has been

achieved. With no clear policy objectives for the WKCD, and with an established business

case, market testing, PPP feasibility study, output specifications and the PSC lacking,

contractual accountability does not appear to have been well secured in the IFP and its

related documentation.

After the IFP was launched, 'how to secure accountability in the development of the

WKCD' has remained as a key issue among the residents, key stakeholders and politicians.

Before the resignation of the former Chief Executive, Mr. Tung Chee-wah, on March 7,

2005, the government held a strong stand towards the development of the WKCD, in

particular on the mandatory requirements that listed in the IFP document. Although the

government had extended the deadline for submission of proposals and an 'extra' round of

64 The proposed WKCD is located in the district of Yau Tsim Mong. Thus, residents nearby are expected to be consulted on the project in advance.

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public consultation was launched after their initial screening65, the heated debate in the

community did not cool down and no 'real' public participation, including that of the arts

and cultural groups, had been observed66. With reference to the role played by the

Legislative Council, it is evident the Council did at times actively scrutinize the project by

passing motions, raising questions and establishing a Subcommittee to oversee the

development. However, its participation was barely beyond the stage of placation as the

government had the final say on the project and views of the Council are seen as advice

only. Owing to the lack of institutional or structural role for the key stakeholders, public

and its representative67 - the Legislative Council - in the development of the WKCD,

public accountability does not appear to have been well secured. However, compared with

the degree of achieved public accountability in pre-IFP period, some slight improvements

were observed as time went by. This is because later on there was some two-way

communication be~een the powerholders and the public in the post-IFP period under

Tung's leadership.

Despite the increasing two-way communication that was observed, this does not

necessarily mean that accountability to the public has been secured more effectively. It is

worth noting that at times different accountabilities needed to be balanced against each

other. For example in the early stage there was a rumor that Mr. Tung was the one who

was pushing the project through and thus the insistence of Donald Tsang at that time on

maintaining the preset framework could be regarded as reflecting a greater emphasis on

managerial accountability to the Chief Executive rather than on communal accountability

to the pUblic.

The resignation of Mr. Tung in March 2005 served as the turning point of the project.

With new actors in the highest decision-making level of the WKCD68, two major changes

were made. These included the introduction in October 2005 of the additional

development parameters and contract conditions, for instance, maximizing the plot ratio at

65 No further public consultation would be conducted in the original plan of the government. 66 Although the government has tried to secure public accountability through the launch of the public consultation exercise and conduction of several discussion forums, key stakeholders' involvement remains uncertain. Together with the fact that concerns of key stakeholders have not been well-addressed or even have not been addressed at all, their participation is regarded as non-participation or tokenism in accordance with Arnstein's framework. 67 According to the government, the role of the Legislative Council in the development of the WKCD is limited. This is because the project is classified as 'facilities to be used by the public' and hence no approval from the Legislative Council is required. 68 Originally, Donald Tsang was the person-in-charge of the project. Since he succeeded Tung as the Chief Executive, Rafael Hui took Tsang's original position as the Chief Secretary for Administration and the chairman of the Steering Committee.

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1.81, capping the residential development at no more than 20% ofthe total gross floor area

and requiring at least 50% of the commercial and residential gross floor area to be carved

out for open bidding, as well as the subsequent decision in February 2006 to 'repackage'

the project.

The additional parameters and conditions significantly amended the IFP and

inevitably impacted on the extent to which contractual accountability was being secured.

The newly adopted terms and conditions however did not arise in response to any

deficiencies found in the IFP. Instead they reflected increasing public demands for

evidence of greater responsiveness to public views and for enhanced communal and public

accountability. Despite the reasons for the changes, compared with the pre-IFP era, there

were certain improvements in terms of providing more clear, specific and legal binding

standards in the IFP. Although there is no formal 'contractual relationship' between the

screened-in proponents and the government, the latter was still trying to be accountable to

the former contractually by at least keeping the canopy in the revised proposal. In this way

it remained fair to keep the race open only to the screened-in proponents69. However, it

can be argued that all bidders had a legitimate expectation that the government would

follow normal tendering procedures by choosing from only those of the screened-in

proponents whose bids conformed to the criteria and requirements listed in the IFP. Hence,

the government's unilateral changes to the IFP's terms and requirements has damaged this

legitimate expectation and violated the implicit 'contract' of the IFP. From this perspective,

contractual accountability has not been well secured.

Although the government claimed that the revised proposal was formulated to meet

public aspirations and demands for greater communal accountability, most legislators and

residents do not share this view. Some have even stated that the revised proposal is much

worse than the original one. From their perspective, the WKCD remains as 'a property

project in disguise' as there is a lack of a clear, underlying cultural policy. Moreover, the

single-developer approach 70 has not been abolished in reality and some fresh issues have

also emerged from the revised proposal. Such critics argue that their views have not been

responded to or taken into account appropriately in the decision-making processes of the

69 This is because the canopy was regarded as a mandatory requirement in the IFP and a proponent was screened-out in the initial screening process as no canopy is included in his proposal. Once the canopy is dropped, the IFP would be considered as officially scrapped and another round of IFP must be launched so as to uphold the principle of fairness. 70 In the revised proposal, the winning proponent has to carve out part of the site for open bidding in the market. However, as the winning proponent has the ultimate power to decide which part would be carved out and when the carved-out portions would be tendered, the development mode of project is regarded as a 'mini' single package approach in this dissertation.

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revised proposal. Thus, with continuing low public satisfaction, public accountability does

not seen to have been well secured.

Managerially, it is clear that Rafael Hui has been answerable to the Chief Executive

for the revised proposal. To a great extent, the original strong stand on the canopy and

single developer approach that was taken by the Chief Executive when he was still the

Chief Secretary for Administration and was chairing the Steering Committee, have preset

the framework under which Mr. Hui can operate. Thus, given Rafael Hui's managerial

accountability to maintain Donald Tsang's stand on the canopy and single package

approach, this meant that neither were abolished when announcing the revised project

even though there was a significant public outcry on these issues.

In February 2006, the government officially announced that the project was to be put

'on hold' as the three screened-in bidders had indicated that they would not stay in the race

under the revised terms and conditions. This decision effectively ended the contractual

accountability relationships on one hand, but secured better public and managerial

accountability on the other.

Although the IFP and related contractual accountability relationships were officially

scrapped by the decision to start the project over again, whether it was the government­

with its unilateral violation of the original IFP's terms and conditions or the screened-in

proponents' decisions to withdraw that were primarily to blame is debatable. However,

whilst the decision effectively ended one set of contractual accountability relationships, it

opened the door for the late establishment of new and more clearly defined contractual and

accountability arrangements. In this sense, in the long term once the project has restarted,

more effective contractual accountability might be secured.

As previously mentioned, members of the opposition camp had been critical in many

aspects and did not appear to be satisfied with the revised proposal. They argued that as

'fundamental issues', for instance, the single developer approach, the canopy- and

software-related issues, had not been touched or responded to properly by the government.

Clearly, since the launch of the IFP, they urged the government to rethink the project and

to terminate the IFP so that 'real' consultation could be conducted, and without being

constrained within a firmly preset framework. Apparently, the decision to start the project

over again through establishing the Consultation Committee did better meet the

expectations of the opposition camp 71. At the same time, the establishment of the

71 It is worth noting that members of the opposition camp include key stakeholders, legislators, concerned individuals and the public who are against the construction of the WKCD on different grounds.

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consultation committee, to a certain extent, highlighted the government's political

commitment to materializing the project whilst also meeting the needs of those who are in

support for the WKCD. Therefore, public accountability does appear to be better secured

at this late stage.

Moreover, it IS believed that the decision to 'delay' the project also reflects

managerial accountability to the Chief Executive. This is because materializing the project,

rather than sticking to a preset framework, has now become the key policy objective. As

the prime decision maker, Mr. Hui has to be accountable managerially for achieving this

policy objective. Facing the response of the community on the revised proposal and

constraints as listed in Section 8.6.2 and 8.6.3, it is clear that starting the project over

again is the most feasible way to materialize the project without posing further challenges

to the Hong Kong's governance. Some critics have suggested that the main reason for

'delaying' the project is to ensure that the controversy surrounding the project would not

harm the popularity of the Chief Executive, who must seek reappointment within one and

a half years. Clearly, once the revised proposal failed to receive public support even

though it was formulated 'to meet public aspirations', and given the decision-making

boundaries set by Mr. Tsang, Rafael Hui had to adopt a different strategy so as to be able

to carryon the project. Trying to do so too aggressively would definitely harm the

popularity of the Chief Executive. From this perspective, therefore the Chief Secretary for

Administration has been trying to balance the needs both for managerial accountability to

the Chief Executive as well as the government's accountability to the public.

To sum up, it is clear that in response to the public outcry and the subsequent

personnel changes at the highest decision-making levels of the WKCD, accountability has

better been secured as time has passed. Although it seems that the revised proposal and

subsequent decision to 'delay' the project have, in general, now met the public

aspirations72 better, the government's original intention may not have been to 'please' the

public. This perception is generated as Rafael Hui seldom spoke up before the revised

proposal and the subsequent decision to 'delay' the project were announced. In particular,

for a while he even refused to attend the meetings of the Legislative Council whose

legislators wished to be updated on the progress of the WKCD. Further, under Mr. Tung's

earlier leadership, managerial accountability to the Chief Executive appeared to be the

72 The revised proposal is claimed to be fonnulated so as to meet the public aspirations, even though it fails to gain public support. The decision to 'delay' the project, in general, is in line with the public aspirations and is well-received in the community.

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most significant accountability that had been secured. As a consequence, the researcher is

of the view that, together, contractual and managerial accountability to the Chief

Executive dominated over communal and public accountability in the establishment of the

WKCD to such a degree that the integrity of the project itself was harmed and became

unsustainable in its IFP formulation.

9.3 Lessons drawn from the WKCD

9.3.1 Factors That Facilitated the Accountability Secured

As previously analyzed, accountability, in general, cannot be regarded as well

secured until early 2006.

Since the handover, Hong Kong has transferred from a British colony to a Special

Administrative Region of China. According to the Basic Law, Hong Kong enjoys a high

degree of autonomy and hence a mentality of 'Hong Kong people ruling Hong Kong' has

developed. With the 'encouragement' of greater democracy by the colonial Hong Kong

Government shortly before the handover73, greater political awareness and participation of

the Hong Kong citizens had begun to develop. This awareness and participation were

further enhanced by the 'success' of the July 1 protest in 200374• On one hand, the July 1

demonstration weakened the governance capacity and legitimacy of the HKSARG. On the

other, it showed the public that they could hold the government accountable through

public action and outcry. Since then, more Hong Kong citizens, especially the middle class,

have been motivated to take part in the political sphere75. Without a doubt, this new

'political climate' and mentality have been determinative in securing greater

accountability in the WKCD development. The intensive and continuous public outcry and

the active participation of the Legislative Council 76 and its subcommittee have

significantly facilitated the accountability secured.

73 In the 1995 Legislative Council election, the directly elected seats from geographical constituencies increased from 18 to 20 and 9 additional functional constituency-seats were established to enlarge the bases of representation, as well as the expanded size of eligible voters (Lam, 2000), political awareness and participation was thus enhanced. 74 After the protest of half a million people on July 1, 2003 and the subsequent resignation of the chairman of the Liberal Party from the Executive Council, the government fIrst postponed the resumption of a second reading of the National Security (Legislative Provisions) Bill and withdraw it fInally in September 2003 (Cheung, 2005). 75 The newly establishment of the Civic Party whose core members are Hong Kong-born middle class, for instance, Audrey Eu, Ronny Tong and Alan Leong, have shown that Hong Kong people are becoming more willing to take part in the political sphere through participating in the elections and political parties. 76 To a certain extent, it can be argued that the political climate has led to the united and active participation of the Legislative Council on the project. This is because since the July 1 demonstration and subsequent District Council elections, pro-government political parties 'realize' that on some controversial issues, they would not simply support the government because they are pro-government in nature.

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As discussed in Chapter 6, the government did not consult the key stakeholders,

including the arts and cultural groups and the local community's representatives - the

District Council, on the development of the WKCD in the pre-IFP period. However, since

the launch of the IFP, the public outcry in the community and the opposition by some

members of the Legislative Council led to much more active scrutiny of the project. Hence,

the government felt obliged to conduct an 'extra' round of public consultation so as to

demonstrate its willingness to uphold public accountability. Put differently, if the political

awareness of the public had not been aroused, the degree to which the public views needed

to be heeded in the decision-making process would have been limited ever further. In tum,

the public accountability secured under Tung's leadership would have been even further

restricted.

To a large extent, the revised proposal and the February 2006 decision were

formulated so as to meet public aspirations. These decisions can thus be regarded as the

'fruits' or achievements of the heated debate in the community and of the active

participation of the Legislative Council in holding the government accountable.

9.3.2 Factors That Undermined the Accountability Secured

In examining accountability in the establishment of the WKCD, it is found that

accountability secured has been undermined by inconsistencies in the HKSARG's policies,

by its non-conformance with best practices elsewhere, together with the low-trust

environment that exists between the HKSARG and its people, have undermined the

accountability secured.

As stated in Chapter 6, the government's approach in developing the WKCD has not

conformed to best practices elsewhere. The adoption of PPP as a means to develop the

WKCD was greatly challenged by different parties, in particular, the Legislative Council.

This was partly because the government had not carried out a proper business case and

feasibility study. In particular, the failure to construct the PSC in advance, which is

regarded as an essential best practice elsewhere, created considerate misgivings and

suspicions as to the appropriateness of the approach. Without such studies as a reference,

whether value for money would be delivered in this PPP project was questionable. Further,

the cultural needs of Hong Kong and how the WKCD answers these were not examined

properly either. Although the government claimed that the decision to construct the

WKCD was based on the cultural needs identified by several studies, the fact remains that

most of these studies were mostly published after the decision was made. Without clearly

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establishing what the cultural needs in Hong Kong are, it is very difficult for the

government to meet the expectations and needs of the key stakeholders, and in particular,

those of the arts and cultural groups. As a result, of such failures, communal accountability

could not be well secured. Moreover, it is evident that no clear and specific policy

objectives were established for the WKCD. Hence, this also undermined the extent to

which either public or contractual accountability could be achieved. Without doubt, these

deficiencies generated from the non-conformance with best practices elsewhere have

undermined the extent to which accountability, in general, could be secured in establishing

theWKCD.

Policy inconsistencies by the HKSARG likewise undermined accountability too.

Particularly detrimental were the inconsistencies found in the government's handling of

several previous PPP projects, including the Cyberport, the Disneyland and the

Asia-World Expo. In developing these projects, different approaches were adopted. For

instance, neither an Expression of Interest Exercise nor a Request for Proposal was held

for either the Cyberport or Disneyland. Hence, there is a public perception that procedures

in developing a PPP project could be tailored in accordance with the will of the

government and without referring to normal purchasing procedures and requirements.

More importantly, as analyzed in Chapter 5, accountability and transparency were not well

secured in the Cyberport and Disneyland. Additionally, the development of the former has

long been suspected both of being based on government's collusion with the businesses

involved and of transferring benefits. Thus, in many of the public's and legislator's minds,

policy inconsistencies and collusion between the government and favoured businesses,

and the transfer of benefits have become associated with PPP projects. With such skeptical

mindsets, and the fact that the Legislative Council does not have an institutional role to

play in approving the WKCD, the public no longer felt able to trust the government and

this, in tum, undermined the extent to which accountability would be secured. This is

because, as Wolf (2000) suggests, 'trust in government is what makes democratic

government effective. Without trust no living democracy and no real citizenship, without

trust no compliance with rules and regulations and no willingness to pay taxes, without

trust no civil service of high standards and without accountability no trust in government'.

Last, but not least, the generally low-trust environment that exists between the

HKSARG and its people and particularly during the Tung administration, has undermined

the accountability secured. As discussed in Chapter 7 and 8, however, although there were

many deficiencies in accountability, nonetheless the government and the screened-in

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proponents had at times attempted to secure public and communal accountability more

effectively. For instance, interviewed proponents had consulted with various arts and

cultural groups before formulating their proposals and the government had also reassured

the public that financial information arguably kept secret so as not to harm the bargaining

power of the government, would be disclosed once the tender is awarded. Furthermore, to

a certain extent, the revised proposal might have diminished the 'potential' collusion with

the business involved or the likelihood of a transfer of benefits as the potential for

generating profits was cut to the margin. However, owing to the low-trust environment,

policy inconsistencies, previous bad experiences on holding the government accountable

on other PSI projects, these efforts in securing public and communal accountability were

neither highly appreciated nor well-received in the community.

9.3.3 Theoretical Lessons on the Conceptual Framework

In light of the experience gained from the application of the conceptual framework to

the WKCD case, several theoretical lessons can be drawn. First, in addition to ensuring

clear objectives and outputs or performance criteria are incorporated in the contracts,

various means are needed for helping government in 'preserving' the 'contractual

relationship' and contractual accountability with the screened-in proponents before the

tender is awarded in the set up stage. For example, the IFP is regarded as the preliminary

contract or means for establishing contractual accountability relationships as it outlines the

respective roles, responsibilities and liabilities of the parties involved.

Moreover, it should be noted that in the model a loose form of public accountability,

instead of political accountability, was adopted so as to better fit Hong Kong's context.

This is because as discussed in Chapter 4, the legislature in Hong Kong lacks the rights

and powers normally found in other democratic countries. Indeed, it often appears as if the

government has tried to avoid its public accountability in the project. For example, as the

WKCD is classified as 'facilities to be used by the public' instead of public works, the

government argued that no prior approval from the Legislative Council was required.

Hence, the institutional role played by the Legislative Council has diminished.

Furthermore, it is clear that the Legislative Council, institutionally, lacks any real ability to

hold the officials accountable politically, both before and after the implementation of Mr.

Tung's Accountability System in 2002 (see Chapter 4 for details). Although the Legislative

Council is given the power to summon government officials and to set up investigation

committees to study serious scandals it can also move no-confidence motions against

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officials. However, any such no-confidence motions passed have no binding force on the

government. For example, before the implementation of the Accountability System for

Principal Officials, even though no-confidence motions had been moved against three

senior officials, including the Secretary of Justice Elsie Leung on 10 March 2000, the

Housing Authority Chair Rosanna Wong and the Director of Housing Tony Miller on 26

June 2000 (Ma, 2002), none of them were forced to step down so as to uphold their

political accountability. It seems, therefore, that although the Accountability System for

Principal Officials has been in place since July 2002, the principal officials are

fundamentally accountable both managerially and politically to the Chief Executive, but

not to the public (South China Morning Post, Jul 8, 2004). Thus, whether public

accountability or political accountability should be adopted in studying the accountability

achieved in PPPs is mainly dependent on the local context.

Last, but not least, within the WKCD case, it seems that market accountability

became increasingly important as a factor leading to the February 2006 decision. As stated

by the Rafael Hui (Feb 21, 2006a), 'although the development parameters for the WKCD

have been modified to meet public aspirations, the current situation is that the additional

parameters and conditions could not secure a positive response from the market. We have

to accept that there is a significant gap between public demands and market reality (Hui,

Feb 21, 2006a)'. Therefore, in studying accountability in a PPP project, market

accountability may be more important than was recognized by the original model. As a

consequence, market accountability should be also regarded as one of the dominant forms

of accountability at the set up stage of a PPP project.

9.4 Recommendations

In examining the accountability secured in the WKCD, several deficiencies of the

government's approach are identified. First, the government had not carried out a proper

business case, feasibility study and public sector comparator. Therefore, the decision to

adopt a PPP - a relatively new approach in Hong Kong - as a means to develop the

WKCD is without any firm foundation. As the government has reiterated that a PPP

structure is still the preferred development mode of the WKCD, it is strongly

recommended that proper business case and feasibility study should be carried out once

the Consultation Committee has established the cultural needs of Hong Kong.

Second, the very vague objectives of the WKCD and the lack of an established

business case are inherent threats to the degree to which contractual and public

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accountability could be secured. This is because without a clear mindset on what have to

be achieved in the WKCD, it is difficult to ensure that the objectives could be sufficiently

incorporated in contracts and hence contractual accountability is undermined. Further, the

government may not be able to justify its action when being held accountable to the public.

Therefore, other than conducting a proper business case, developing a set of clear

objectives is recommended.

Given that accountability and transparency had not been well secured in previous

PPP or PSI projects, the public feared there might be a transfer of benefits or government

collusion with the business involved. As the project will now start over again, it is of

particular importance to enhance the role played by the Executive and Legislative

Councils. Clearly, the fact that the Legislative Council does not have an institutional role

to play in approving the WKCD has disappointed and angered the legislators and the

public on one hand, and undermined the degree of public and communal accountability on

the other. As a consequence, prior consultation with the Councils should be conducted.

Additionally, their greater involvement in the decision-making process is strongly

recommended. Although the previous mistakes may not be easily forgotten by the public,

the adoption of a more accountable and transparent decision-making process of the

WKCD would help in generate greater trust in the PPP arrangement.

9.5 Conclusion and Suggestions for Further Studies

Based on the research findings, it is clear that no form of accountability was well

secured in the establishment of the WKCD until early 2006. Both public and managerial

accountability may be better secured by the decision to start the project over again.

Although it could seem that the revised proposal and subsequent decision to 'delay' the

project have, in general, met the public aspirations77, these decisions may have been aimed

less at meeting public aspirations and public accountability and more at ultimately

securing enhanced contractual accountability and managerial accountability to the Chief

Executive. Overall, contractual and managerial accountability to the Chief Executive do

seem to have dominated the accountabilities given prominence in the establishment of the

WKCD. It is also concluded that policy inconsistencies by the HKSARG, as well as both

its non-conformance with best practices elsewhere, and the low-trust environment that

77 The revised proposal is claimed to be formulated so as to meet the public aspirations, even though it fails to gain public support. The decision to 'delay' the project, in general, is in line with the public aspirations and is well-received in the community.

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exists between the HKSARG and its people, have undennined the contractual

accountability secured.

As the WKCD is now starting over again, accountability is expected to be better

secured in the 'redevelopment' of the project. In order to achieve this, it is recommended

that a set of clear objectives should be developed, a proper business case, feasibility study

and public sector comparator should be carried out so as to enhance the degree to which

accountability can be secured. Greater involvement of the Executive and Legislative

Council in the decision-making process is also suggested.

Given that PPPs have been increasingly implemented in different countries and

accountability is an important public ethos that should not be sacrificed in exchange for

lower cost and better perfonnance, studying how accountability can be secured effectively

in a PPP is vital. This study has generated practical insights into accountability issues at

the early stages of a PPP development and the findings are valuable for policy learning

and development for governments, in particular, the HKSARG. However, as this

dissertation focuses mainly on the initial and set-up stage of a PPP project, further study

will be necessary by examining accountability at other stages.

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