Colonial deal built 'City of Sadness''

Vivian Kwok
Dec 6, 2010
To the poor people of Tin Shui Wai, more shops, markets and commercial developments would have meant more jobs close to home.

This could have been the difference between survival and desperation in the "City of Sadness", a place with a long history of family tragedies and abuse.

But a secret deal between the colonial government and a consortium - dubbed "unimaginable by today's standards" by one academic - has, in effect, limited the number of such outlets to this day to ensure that businesses in government buildings did not pose too much competition to those in the district's sole private estate, Kingswood Villas.

Though officials said the agreement was cancelled in 2002, the limits on proper zoning and town planning had been imposed. The undisclosed deal also raises questions whether there might be other secret agreements being kept from the public over the years that might have an impact on today's city planning.

The town of 273,800 residents has more than 9 per cent unemployment, the highest in Hong Kong. They face long and expensive trips to work elsewhere, if they can find jobs.

Under a private memorandum signed between the pre-handover government and developer Mightycity Company, now owned by Li Ka-shing's Cheung Kong (Holdings) and China Resources, commercial developments in the government buildings are not allowed to compete with the private shops in any way that would damage their viability.


This has meant that while public and subsidised housing estates occupy the bulk of the town, they have mainly small local-style businesses, shops and markets.

The memorandum even put paid to plans for a permanent market in the public part of the troubled town.

It was part of a deal - never publicly disclosed in full - under which the government bought almost 500 hectares of former fish ponds and farms back from developers 28 years ago at an above-market price then agreed to develop them as a joint venture.

This arrangement, which turned on its head the principle that developers wanting to develop agricultural land have to pay a premium, is also raising eyebrows. "The government's decision to purchase back the land at a premium from developers and the private memorandum are unimaginable by today's standards," said Dr Law Chi-kwong, associate professor in the department of social work and social administration at the University of Hong Kong.

Law, one of the very few people outside the government to have seen the agreement, said he understood only a handful of senior officials had access to it.

The story goes back to 1977 when the Special Committee on Land Production recommended a study on developing Tin Shui Wai.

Sensing an opportunity Mightycity, then owned 51 per cent by China Resources, 12.5 per cent by Li's Cheung Kong and 36.5 per cent by Wheelock Marden, Trafalgar Housing and others, began buying land in 1979, amassing 488 hectares.

Mightycity then approached the government with a proposal to build a new town to house more than half a million people. Its original business plan was to surrender land for public housing in exchange for the government building all the infrastructure.

The proposal was rejected in 1982 but the consortium accepted a better counter offer. On July 29, 1982, Nicky Chan Nai-keong, secretary for lands and works, said the government would pay Mightycity HK$2.258 billion for all the land and grant it almost 40 hectares for HK$800 million.

The government paid HK$46 a square foot, much higher than the valuation calculated from a land auction held by a court in 1980 to determine the value of an unresolved 7 per cent stake in Mightycity.

"The price of the land at HK$46 a sq ft was not low compared with the 1980 auction price at about HK$11.50 a sq ft. Moreover 1980 was a period of property boom while 1982 was a declining year," Lee Chi Ming wrote in an unpublished dissertation in 1987 at the University of Hong Kong.

Under the joint venture deal, inked on July 29, 1982, 169 hectares was designated a development zone, of which 38.8 hectares was granted to Mightycity for a private residential estate and 130 hectares was for public and subsidised housing. The government kept the rest as a land bank.

Cheung Kong and its chairman Li Ka-shing raised their stakes in Mightycity to 48.25 per cent and 0.75 per cent, respectively, in 1988 when the multibillion-dollar project went ahead. Cheung Kong was appointed project manager in the same year.

Mightycity built Kingswood Villas, the only private estate in Tin Shui Wai with 15,880 flats, in phases from 1992 to 1999. It included 75,000 square metres of commercial areas comprising the Kingswood Ginza mall and the 1,102-room Harbour Plaza Resort City.

At the same time the government was restrained from developing a self-sustaining new town by the memorandum stating that it could only develop commercial space as neighbourhood shops in the public housing estates and that "only to such extent as is calculated not to render the commercial accommodation to be provided by [Tin Shui Wai Development Ltd, a wholly owned subsidiary of Mightycity] on the 38.8 hectares not commercially viable".

The effects of this were felt in 1988 when the government proposed to build a permanent market in Tin Shui Wai Area 33, which is now a bus terminus and the Central Park Towers. After the developer objected, the plan was changed to a temporary market.

In the Tin Shui Wai Outline Development Plan dated March 1989, the Territory Development Department wrote: "A permanent market was planned on the site ... to cater for the needs of the private residential development. [Mightycity] however objected to it on the grounds that the market may compete with the commercial facility within their private developments."

The department removed the project from its 1993 programme and the market had never been built, a University of Hong Kong study said.

The then Lands and Works Branch has never released the entire joint venture document in 28 years.

But Law said he had seen the document in 2006 when he was a member of the Commission on Poverty.

"I met some housing department officers to find out why the department was unable to build more markets and shopping centres in Tin Shui Wai to stimulate the local economy," he said.

"They leaked to me that they were constrained in developing commercial properties as a result of a private memorandum between the government and Mightycity."

Law then asked a "very senior government official", whom he refused to name, to show him the secret paper, and he understood the Housing Authority had kept one copy.

Replying to inquiries, the Housing Authority did not deny or confirm whether it had a copy, saying only: "The HA is not a party to the `memorandum' mentioned in the question and is not the authority in land administration."

It took the Development Bureau more than two weeks to dig out the document and digest it after being approached by the Post. A spokeswoman said the 1982 agreement was cancelled in 2002, as "there were no outstanding obligations remaining to be fulfilled by any of the parties".

By then, a master development plan for the 318 hectare reserve zone in Tin Shui Wai North had been endorsed in 1995 and the latest outline zoning plan for Tin Shui Wai had been approved in 1998. These plans assigned most of the land for residential purposes, in which 75 per cent was for public housing and the rest for private housing.

The unusual planning strategy left little space for commercial activities and what does exist, comprising 61,000 square metres of floor area, was sold to The Link in 2005.


Cheung Kong did not respond to repeated requests for comment.


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