Hong Kong | Gov’t says it would cost USD9.8b to cancel rail project

Cathy Kit Ching Chan

Hong Kong will face a HK$75.6 billion (USD9.8 billion) bill if an express railway linking the city to mainland China is abandoned, the Transport and Housing Bureau said in a document to lawmakers on Friday.
The government will need to complete the remainder of the delayed project, including the terminus and surrounding roads, if construction stops due to pressure from some lawmakers, according to the report.
The paper was submitted to the city’s legislators after a cost blowout led to inquiries and calls from some lawmakers to scrap the project, which connects the southern Chinese cities of Guangzhou and Shenzhen. If builders’ contracts lapsed, the cost of a new tender process to restart the project would likely to cost an additional HK$33 billion, according to the paper.
If the city’s legislators don’t approve a new funding request by February, contractor MTR Corp. may issue a suspension notice and the delay will cost HK$233 million a month, the government estimates. A contract lapse after six months of suspension would cost a total of HK$4.8 billion, the document said.
The rail project’s economic return is forecast at 4 percent, down from a 6 percent estimate in 2009, the government paper said. The government cited higher construction costs and slower economic and population growth in the Pearl River Delta region as reasons for the decline. Bloomberg