The Economic Development & Labour Bureau has released a consultation document on the partial privatisation of the Airport Authority, outlining 21 preliminary proposals for public comment.

It deals with regulatory issues in five main areas, namely, the relationship between the Government and a partially privatised authority, the authority's business case and valuation, economic regulation, land use, competition and scope of business, and impact on companies and workers at the airport.

Following the recent capital restructuring, the paper said the Government's equity capital in the authority stands at about $30.7 billion. Its return on equity is low especially in the context of a commercial enterprise.

In order for the market to ascribe a value to the authority comparable to the Government's equity investment, the authority needs to demonstrate to potential investors that it will be able to achieve a commercial return within a reasonable timeframe.

The paper said this is a choice between trying to preserve taxpayers' investment by increasing airport charges in the next few years, or keeping airport charges more competitive at the risk of diminishing taxpayers' investment in the authority.

49 hectares

The body has 49 hectares of earmarked land on Chek Lap Kok that is available for airport-related uses. In addition, the authority is currently is limited in the scope of business that it can undertake outside the island and can only conduct activities that are in keeping with the objective of promoting and maintaining Hong Kong's status as a centre of international aviation.

Concerns have been expressed by some stakeholders that the authority would be privileged over other developers or other private enterprises given the land it holds and its status as the operator of Hong Kong International Airport, which may give rise to unfair competition or anticompetitive practices.

Accordingly, the following proposals are being put forward:

* to allow the new company to continue to hold and make use of the land on the airport island while maintaining existing controls over land uses; and,

* as regards activities outside the airport island, it is proposed the existing restrictions on the range of airport-related activities that the authority can conduct should be retained.

The proposals are not final and Government will formulate the legislative and regulatory framework for the privatisation taking into account feedback received.

Comments should reach the Economic Development & Labour Bureau, 2/F Main Wing, Central Government Offices, Lower Albert Road, Hong Kong by February 28. Fax 28684679 or email airportcomments@edlb.gov.hk.