For discussion PWSC(97-98)9
on 23 April 1997

ITEM FOR PUBLIC WORKS SUBCOMMITTEE
OF FINANCE COMMITTEE

HEAD 703 - BUILDINGS
Food Supply - Abattoirs, wholesale markets and other territory-wide food supply facilities
37FS - Cheung Sha Wan wholesale market complex - phase 2

Members are invited to recommend to Finance Committee the upgrading of 37FS to Category A at an estimated cost of $1,981.2 million in money-of-the-day prices for the provision of wholesale marketing facilities at Cheung Sha Wan.

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PROBLEM
PROPOSAL
PROJECT SCOPE AND NATURE
JUSTIFICATION
FINANCIAL IMPLICATIONS
PUBLIC CONSULTATION
ENVIRONMENTAL IMPLICATIONS
LAND ACQUISITION
Background INFORMATION
Reprovisioning of Yau Ma Tei Fruit Market and Cheung Sha Wan Temporary Wholesale Poultry Market in Cheung Sha Wan Wholesale Market Complex Phase 2 Summary of Consultation with Market Traders

Traders consulted
Views expressed
Reprovisioning of Yau Ma Tei Fruit Market and Cheung Sha Wan Temporary Wholesale Poultry Market in Cheung Sha Wan Wholesale Market Complex Phase 2 Further Information on Market Management and Other Matters

Market management
Crime prevention
Project timetable

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PROBLEM

The existing wholesale marketing facilities for fruit and poultry at Yau Ma Tei Fruit Market and Cheung Sha Wan Temporary Wholesale Poultry Market are unable to cope with the current volume of trade and are causing serious environmental nuisance in their vicinity.

PROPOSAL

2. The Director of Architectural Services (D Arch S), with the support of the Secretary for Economic Services, proposes to upgrade 37FS to Category A at an estimated cost of $1,981.2 million in money-of-the-day (MOD) prices for the provision of wholesale marketing facilities at Cheung Sha Wan.

PROJECT SCOPE AND NATURE

3. This project will form part of the second phase of the Cheung Sha Wan Wholesale Market Complex and upon completion, will provide wholesale marketing facilities handling local and imported produce, serving primarily Kowloon and the New Territories. The facilities include -

1. a wholesale fruit market providing 332 stalls on the first floor; and
2. a wholesale poultry market providing 95 stalls on the second floor for trading of both live and chilled poultry.

We plan to include the project as part of a private development on the site to be disposed of through open tendering. We will require the developer to construct two floors¹of wholesale markets under phase 2 of Cheung Sha Wan Wholesale Market Complex in accordance with the requirements specified by the Government and to make necessary modifications to the already completed markets under phase 1² of the Complex so as to ensure that the phase 2 wholesale market facilities can function effectively.

4. The modification works to phase 1 (which have to be completed before commissioning of phase 2) include installing pumps, laying signal and electricity cables and installing control room equipment. We will know the details of the modifications when the construction plan for phase 2 has been submitted. We will require tenderers to submit an interfacing programme showing in detail how they intend to minimise any disruption to the operation of the phase 1 markets.

JUSTIFICATION

5. Consumption of fresh fruit and poultry has increased significantly over the past decade, as indicated by the following data -

Demand for fresh fruit is high and is likely to increase in line with growing population and income. Demand for poultry products may also be expected to grow in line with population. Demand for chilled poultry products is expected to continue gradually to replace the demand for live poultry. New and expanded market facilities will therefore be necessary to meet the anticipated growth in demand.

6. The noise, traffic congestion and environmental hygiene problems generated by Yau Ma Tei Fruit Market and Cheung Sha Wan Temporary Wholesale Poultry Market have been the source of complaints from nearby residents. To address these problems, the Government plans to relocate both markets to the site reserved for phase 2 of the Cheung Sha Wan Wholesale Market Complex. Relocation of the markets will significantly improve the living environment for the residents concerned. The new markets will be able to cope with the increased volume of trade and enable better management and efficiency of operation.

7. The Government’s original intention was to build the two markets as a stand-alone public works project. However, in order to maximise the site on which the markets are to be located, we have adopted a proposal from the Port Development Board to develop the phase 2 site to accommodate mid-stream container-handling facilities in addition to the two wholesale markets. In April 1994, we invited expressions of interest from the private sector in building a combined-user development. We received four detailed expressions of interest. After careful assessment, we have decided to tender out the phase 2 site for private development, comprising mid-stream container handling facilities, wholesale markets for fruit and poultry and industrial-office accommodation, with the Government paying the developer for the cost of the wholesale market component. The Government will also be responsible for the furniture and equipment required to fit out the markets. The developer will be responsible for the costs of the detailed design and construction and, upon completion, the management of all components of the complex, other than the two wholesale markets.

FINANCIAL IMPLICATIONS

8. We estimate the cost of the wholesale market component of the combined-user development to be similar to the estimated capital cost of a stand-alone wholesale market designed and constructed by Government, which is $1,981.2 million in MOD prices, made up as follows -

9. We will require tenderers to submit one sum for the land premium and a separate figure, with supporting cost data, for the construction cost of the phase 2 markets. We will then evaluate the tenders received having regard to the merits of the development proposals and the net revenue to the Government - that is, the land premium for the phase 2 site less the construction cost of the markets. This arrangement will ensure that the developer has an incentive to quote a realistic and competitive figure for the cost of constructing the markets and that the Government pays a fair price for the construction of the markets. Given the high value of the works and taking into account concerns expressed by Members on similar entrustment proposals on earlier occasions, we think that the arrangement now proposed is more appropriate than the alternative approach under which we entrust the government works to a private developer at a pre-determined project cost.

10. Having regard to the large sum involved, we will pay the successful tenderer in stages upon completion of specified construction "milestones"³ of the project. Taking this into account, we expect to phase the expenditure as follows -

11. We estimate the additional annually recurrent expenditure for the project to be $23.5 million.

PUBLIC CONSULTATION

12. We consulted the Sham Shui Po and Yau Tsim Mong District Boards on the combined-user development proposal in October 1995. The Sham Shui Po District Board supported the proposal in principle. The Yau Tsim Mong District Board also supported the proposal and urged early completion of the project so as to allow earlier relocation of the Yau Ma Tei Fruit Market. We also consulted wholesale market users and the Marketing Sub-committee of the Advisory Committee on Agriculture and Fisheries on the proposal in November 1995 and January 1996 respectively. They raised no objection to the proposal, but expressed concern that potential problems arising from the elevated market design and disruption to the markets in phase 1 from modification works should be adequately addressed. We issued an information paper on the proposed development to the Legislative Council Economic Services Panel in February 1996. We have not received any comment from Panel Members.

ENVIRONMENTAL IMPLICATIONS

13. Consultants engaged by the Director of Territory Development have conducted an Environmental Impact Assessment for various developments in the West Kowloon Reclamation under the "West Kowloon Reclamation, Comprehensive Traffic Analysis Review and Environmental Impact Assessment Study" which included the proposed combined-user development. The findings indicated that noise, odour and liquid waste disposal would be the major environmental concerns arising from the development.

14. The Director of Lands will include in the Technical Schedule of the Tender Document all the environmental mitigation measures recommended by the Consultant hired by the Territory Development Department. We will ensure that the successful tenderer will implement all these measures to comply with relevant regulations, standards and guidelines. The developer is also bound by the lease to comply with existing pollution control ordinances. As regards short term impacts during construction, we will ensure that the developer will control noise, dust and site run-off nuisances to comply with the established standards and guidelines through the implementation of appropriate mitigation measures in the relevant contracts.

LAND ACQUISITION

15. The project does not require land acquisition. A site next to the existing Cheung Sha Wan Wholesale Market phase 1 has been reserved for this purpose.

Background INFORMATION

16. We upgraded 37FS to Category B in August 1991. On 22 November 1991, Finance Committee approved upgrading part of 37FS to Category A, re-titled 38FS "Cheung Sha Wan Wholesale Market Complex - phase 1", at an estimated cost of $969 million as an Airport Core Programme⁴ .

17. We completed the construction of 38FS in September 1993. It provides wholesale market facilities for vegetables, fresh water fish and eggs as well as a market for the Fish Marketing Organization.

18. The Public Accounts Committee, in paragraph 8.92 of PAC Report No. 27 dated January 1997, urged the Administration to expedite the development of phase 2 of Cheung Sha Wan Wholesale Food Market and, in particular, the reprovisioning of the Yau Ma Tei Fruit Market.

19. We submitted a paper to the Public Works Subcommittee on 5 March 1997 proposing upgrading of 37FS to Category A. The paper was negatived. In the course of discussion, Members expressed concern on the future management and security aspects of the markets in phase 2. They also sought further information on consultation with the police; consultation with the traders concerned and the programme schedule. We provide at Enclosure 1 and Enclosure 2 additional information to address Members’ concern.

20. Early relocation of the Yau Ma Tei Fruit Market is in line with the recommendation of the Public Accounts Committee as mentioned above and will meet the wish of the Yau Tsim Mong District Board and the local community. Subject to Members’ approval, we intend to invite private developers in mid 1997 to tender for the construction and implementation of the whole development for phase 2. We expect the successful bidder to start the construction works in late 1998 with the wholesale market component of the project being completed by the end of 2000.

Economic Services Branch
April 1997
(DD1099)

1 -- The total area of these two floors will be about 121 400 square meters. based on the estimated total project cost of $1,981 million, the unit cost per square metre is about $16,320.
2 -- Please see paragraphs 16 and 17 for details of phase 1.
3 -- Milestones are points at which an agreed amount of work has been satisfactorily completed.
4 -- We redued the approved project estimate of 38FS from $969 million to $559 million with 17 other public works projects under the Airport Core Programme in April 1994. We issued an information note (PWSC(I)1994/1) in April 1994 to inform Members of this change.

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Enclosure 1 to PWSC(97-98)9

Reprovisioning of Yau Ma Tei Fruit Market and Cheung Sha Wan Temporary Wholesale Poultry Market in Cheung Sha Wan Wholesale Market Complex Phase 2 Summary of Consultation with Market Traders

Traders consulted

The Agriculture and Fisheries Department consulted traders at the Yau Ma Tei Fruit Market and Cheung Sha Wan Temporary Wholesale Poultry Market on the proposal to include the new fruit and poultry markets in the combined-user Cheung Sha Wan Wholesale Market Complex phase 2 development. The consultation took place through meetings with the following trade associations -

Kowloon Fruit and Vegetable Wholesalers Association
Kowloon Poultry Laan Merchants Association
New Territories Chicken Breeders Association
New Territories Poultry Wholesalers Association.

2. Market traders also expressed their views on the proposal, either directly or indirectly through their representatives, in the following forums -

the Advisory Committee on Agriculture and Fisheries and its Marketing Sub-committee
the Yau Tsim Mong and Sham Shui Po District Boards.

Views expressed

3. The traders expressed many diverse views on various issues relating to operation of the new fruit and poultry markets as part of the combined-user phase 2 development.

4. Relevant records of the discussion at the many meetings with or attended by the traders have been deposited with the Clerk to the Public Works Subcommittee for Members’ reference.

5. In summary, the traders did not raise objections in principle to the proposal, but wanted the Government to address potential technical problems that they considered could arise from the fruit and poultry markets being elevated, particularly concerning ingress, egress, use of ramps, emergency arrangements, delivery of produce arriving by sea, and public transport links. They also commented on the design of the market stalls and ventilation, cold storage and drainage facilities. They also expressed the view that future market rentals should be affordable. The traders’ views have been taken into account where appropriate in drawing up the reference design of the phase 2 market complex.

6. A further round of consultation will be conducted when market designs submitted by the tenderers are to hand and before the tender is awarded.

(DD1099)

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Enclosure 2 to PWSC(97-98)9

Reprovisioning of Yau Ma Tei Fruit Market and Cheung Sha Wan Temporary Wholesale Poultry Market in Cheung Sha Wan Wholesale Market Complex Phase 2 Further Information on Market Management and Other Matters

This Enclosure provides information on future management of the proposed fruit and poultry markets in Cheung Sha Wan Wholesale Market Complex phase 2 and the other information sought by Members at the PWSC meeting held on 5 March 1997.

Market management

2. While it has been assumed for planning purposes that the Agriculture and Fisheries Department will manage the proposed fruit and poultry markets, the Administration agrees in principle that the private sector could manage the markets and is prepared to consider the matter further in the context of a study on arrangements for supporting the development of agriculture in Hong Kong to be commissioned in mid-1997. The scope of the study will also include the future management of other markets for agricultural produce that are currently managed by the Agriculture and Fisheries Department.

3. The study will evaluate the pros and cons of the existing institutional framework and resource allocation system for supporting agricultural development (including the management of wholesale markets), examine possible alternatives and devise the optimal strategy to enable the industry to maximise its contribution to the economy. Consultation with the industry will be an integral part of the study.

4. Five firms have submitted detailed proposals for the study, which are currently being assessed. The study is expected to start in July and be finished by the end of 1997.

Crime prevention

5. The Police have been, and will continue to be, consulted at the appropriate stages during the planning and design of the proposed fruit and poultry markets on physical security measures, deployment of security personnel, security procedures and prevention of criminal activities generally. The Agriculture and Fisheries Department is currently in close liaison with the Police over measures to be taken to prevent establishment of a criminal presence in the proposed fruit and poultry markets once they are operational.

Project timetable

6. Members asked for an implementation programme showing the timing of different stages of the project. This is attached at the Appendix.

(DD1099)

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