Legislators raised concern about the financial sustainability of the West Kowloon Cultural District (WKCD) project at a Legislative Council (LegCo) panel meeting yesterday.

The LegCo called for more information on the project's financial arrangement before granting its approval of a one-off upfront endowment of HK$21.6 billion.

The government's assumption of a two percent growth in the project's construction cost is too conservative as over the past 30 years, construction cost has risen six percent, said K C Wong, who heads the consulting team hired by the LegCo to review the project's financial viability.

As the investment return is low, he questioned whether the WKCD can stay self-sufficient for the assumed period of 50 years.

He noted that the government should have a business plan for catering and retail facilities in the district as their rent is expected to make up for the loss of the arts and cultural facilities.

Government economist Kwok Kwok-chuen replied that construction cost fluctuates and legislators should not look at the data from the past two years only.

On the contrary, the tender price index shows a five percent drop in construction cost over the past 10 years, he said.

Fiona Waters, director of the government's financial advisor, GHK Hong Kong Ltd, said their assumed construction cost is prudent and reasonable.

Esther Leung, Deputy Permanent Secretary for Home Affairs (WKCD) said the business plan of catering and retail facilities is not included in the government's financial analysis at this stage.

She promised that the government will give a written reply to the legislators on information that they demanded before another subcommittee meeting on Friday.

(HK Edition 05/27/2008 page1)