SCMP Friday, August 24, 2001

End flats scheme: Li Ka-shing


Tycoon Li Ka-shing warned yesterday that more middle-to-high-income earners could expect to lose their jobs in the next year.
And he called on the Government to tackle the "urgent problem" of negative equity and help families by cutting and then scrapping construction of subsidised Home Ownership Scheme (HOS) flats to boost the property market and economy.
Mr Li, speaking as he announced a big drop in profits of his flagship companies, said: "HOS housing should be cut. It's doubtful there is enough demand for this kind of housing."
Asked when this should start, he said: "The sooner the better.
"There are so many negative-equity families [in Hong Kong]. The SAR Government has to face this problem. The problem is so urgent. If the property market performed better, people would have more confidence [in the economy] and other industries would follow [to perform better]."
"Frankly speaking, property only forms a part of our income, but this is one of the most important factors affecting Hong Kong's economy.
"So if the Government can make a speedy and clear decision on HOS, it will be of great help to the property market and the economy."
Under the scheme, the Government builds and sells HOS flats to some lower-income households at discounted prices. But developers claim this kind of public housing is provided in direct competition with private-sector housing, which has experienced a sharp decline in prices.
Mr Li, chairman of Cheung Kong (Holdings) and Hutchison Whampoa, said the administration should continue to provide preferential housing loans to the sandwich class - middle-income households without enough money to buy private-sector housing.
He did not expect further falls in property prices but predicted that local economic conditions would deteriorate.
"In the coming six months to one year, the unemployment problem will become more severe. This time, more middle-to-high income people will be affected and spending power will be affected heavily. That is not a secret. The whole world is in an economic slowdown. Hong Kong is affected by other countries in the world. I don't see how our economy can recover in the short term."
Mr Li's comments were endorsed by Lee Shau-kee, chairman of Henderson Land, who said the property market was struggling to compete with the HOS and property sales across the border.
Mr Li's remarks came after the announcement of steep declines in profits of Hutchison Whampoa and Cheung Kong (Holdings).
Hutchison Whampoa made provisions of $28.1 billion for the fall in value of its shares in the Vodafone Group and Deutsche Telekom in the six months to June. Its interim profit was dragged down 76.89 per cent to $7.19 billion, from $31.12 billion a year ago. Cheung Kong, which owns 49.9 per cent of Hutchison, saw interim profit tumble 75.78 per cent to $4.21 billion.
Unemployment rose to 4.7 per cent for May-July and next week the Government is expected to downgrade its forecast for economic growth this year.
Mr Li said his companies had "not yet" formed any lay-off plans and that he hoped he would not have to do so. He said the number of employees in his group had increased 15 per cent in the past two years.
Regarding Cheung Kong's role in the sale of a $1.09 billion commercial lot in Hunghom to Sino China Enterprises last week, deputy chairman Victor Li Tzar-kuoi again hinted at the company's involvement. "We can say we have some involvement with Sino China. But we cannot disclose the details because there are other conversations and complications at the moment and we will clarify everything when we disclose it."