NCPA - National Center for Policy Analysis

Hong Kong Plans Massive Privatization

October 17, 2003

Hong Kong faces a record budget deficit. But rather than turn to new tax revenues the government plans a massive privatization program that would put the city at the forefront of privatization efforts globally and put many city services in private hands for the first time.

According to the Wall Street Journal:

  • In the current fiscal year, the projected deficit of $13 billion will equal about 6 percent of the city's gross domestic product.
  • The privatization program could raise anywhere from $14 billion to $40 billion in coming years.

The plan is to list shares of the privatized airport authority on the Hong Kong Stock Exchange through an initial public offering, to privatize the Housing Authority using real estate investment trusts, and securitize five toll tunnels and a toll bridge through bond issues.

The plan represents a policy shift for the government, which despite its claim as the "world's freest economy" maintains vast holdings in real estate.

The Hong Kong government's largest privatization to date occurred in October 2000, when it raised $165 million by listing 10 percent of the city's subway system on the Hong Kong Stock Exchange.

Government officials say they plan to sell 49 percent stakes in most assets and retain 51 percent for 20 years, after which more of each asset could be sold.

Source: Joel Baglole, "Hong Kong Plans Another Handover," Wall Street Journal, October 17, 2003.

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