on 16 June 1999
ITEM FOR PUBLIC WORKS SUBCOMMITTEE
HEAD 703 - BUILDINGS
OF FINANCE COMMITTEE
Government Offices - Intra-governmental services
|108KA -||Purchase and fitting-out of office accommodation for the Hong Kong Economic and Trade Office in Brussels
Members are invited to recommend to Finance Committee the upgrading of 108KA to Category A at an estimated cost of $32.32 million in money-of-the-day prices for the purchase and fitting-out of office accommodation for the Hong Kong Economic and Trade Office in Brussels.
The existing premises for the Hong Kong Economic and Trade Office (HKETO) in Brussels are not adequate to meet expanding operational requirements.
2. The Secretary for Trade and Industry proposes to upgrade to Category A at an estimated cost of $32.32 million in money-of-the-day (MOD) prices (BEF 157.75 million)1 for the purchase and fitting-out of office accommodation for the HKETO in Brussels.
PROJECT SCOPE AND NATURE
3. The project comprises the purchase of a stand-alone building 2 and fitting-out of office accommodation for the HKETO in Brussels. JUSTIFICATIONS4. The HKETO in Brussels is responsible for Hong Kongs bilateral economic and trade relations with the European Union (EU) and its Member States (except the United Kingdom) as well as the promotion of Hong Kongs trade and economic interests in these Member States. In recent years, there has been an increase in its workload and scope of activities. The main reasons are -
- new developments in economic and trade relations between the EU and other economies arising from increasing European integration through common commercial and economic policies, monetary union, internal market reform, EU institutional reform and enlargement;
- more outreaching activities to increase understanding and dispel misconceptions about the status and operations of the Hong Kong Special Administration Region (HKSAR); and
- additional effort to deal with the increased interest the European media, public and private sector have in the HKSAR.
5. As a result of increased activities, the existing office premises comprising two floors with a net usable area of 543 square metres in a six-storey building are no longer adequate. This is especially so with regard to the reception area, meeting facilities and storage space. At present, the HKETO is renting 60 square metres of accommodation in separate buildings for storing documents and publicity materials. As a result of re-configuration to meet expanding operational requirements 3, there is no proper reception area in the current premises.
The existing conference room is too small to hold internal office meetings or organise video-conferences with Hong Kong. Most of the functions involving outside contacts have to take place in rented venues. This incurs additional costs.
6. A larger stand-alone building will provide much needed space and lessen the need for renting outside venues for organising meetings, receptions or other social events.
7. If the proposal does not proceed and the HKETO in Brussels is to remain at its present location, additional space will have to be found to meet current and future operational needs. With any new space likely to be available only in other buildings, the operations of the HKETO could be adversely affected.
8. We estimate the total cost of the project to be $32.32 million, made up as follows -
|1 HK$ = BEF 4.8816|
(as at 25.5.99)
|(a) Purchase of a building||120||24.58
|(b) Fitting out costs||20||4.10
|(c) Furniture and equipment||10||2.05
|(d) Solicitors Fees4|
(2% of the cost of purchasing the building)
|Total||157.75||32.32||(in money-of- the-day prices)
Advice from property agents in Brussels put the market price of the existing premises at around $9.63 million (BEF 47 million). We intend to sell the existing premises. Proceeds will be paid into the General Revenue Account.
9. We estimate the additional annually recurrent expenditure associated with the larger premises will be $0.4 million.
10. The current property market in Brussels is briefly described at Enclosure 1. Given a purchase price for the new premises of $24.58 million and annual rental payments for a similar property of $1.47 million, the payback period for the new investment will be 17 years.
11. The basis for estimating the costs of fitting-out and new furniture/equipment is set out at Enclosure 2.
12. Subject to funding approval, we intend to complete the project within two years. As inflation in Belgium is currently low, and a one-off purchase and fitting-out works (rather than construction works) are involved, we have not applied a price adjustment factor to the project cost. Any price increases can be absorbed by the contingency set out in paragraph 8 above.
13. We consider that public consultation is unnecessary as the proposed project involves replacement of the existing HKETO in Brussels with a larger building to meet expanding operational requirements.
14. The proposed project has no environmental implications for Hong Kong.
15. The proposal does not involve land acquisition in Hong Kong.
16. HKETOs are responsible for safeguarding and promoting Hong Kongs economic and trade interests overseas through monitoring developments in their host countries, making representations to their host governments and developing contacts with the governments, businesses and other relevant organisations in their host countries. Staff of the HKETOs are involved in answering enquiries, gathering information, lobbying host governments on specific economic and trade issues, and negotiating economic and trade agreements. They also look after the HKSAR Government's overseas publicity and public relations activities in order to promote Hong Kong as a premier city for doing business.
17. The responsibilities of the HKETO in Brussels cover the European Commission, European Parliament and 14 Member States of the European Union (Austria, Belgium, Denmark, Finland, France, Germany, Greece, Italy, Ireland, Luxembourg, Netherlands, Portugal, Spain and Sweden) as well as Turkey. It is also responsible for attracting foreign direct investment by promoting Hong Kong as a major manufacturing, financial and business centre.
18. On 6 November 1992, Members approved vide FCR (92-93) 72 the acquisition of the existing office premises for the HKETO in Brussels with an approved project estimate of $16.5 million. We acquired the existing office premises on 20 July 1993 at a total cost of $16.5 million (BEF 66 million) made up of $10.345 million (BEF 41.38 million) for purchasing the premises, $4.231 million (BEF 16.924 million) for fitting out, $1.752 million (BEF 7.008 million) for furniture and equipment and $0.172 million for solicitors fees (BEF 0.688 million) (Note: HK$ 1 = BEF 4 was the prevailing exchange rate at the time).
Trade and Industry Bureau
Enclosure 1 to PWSC(1999-2000)51
Property market conditions in Brussels
We propose to buy a stand-alone building in the Schuman area where the European Commission, European Parliament, most of the permanent representation of Member States and many third country missions are situated.
2. Information from property agents in Brussels indicated that property prices have been on the rise since 1998. This trend is likely to continue.
3. Offices in the Schuman area are in demand. Current average asking price is about $20,485 (BEF 100,000) per square metre, with prime properties listed at about $29,703 (BEF 145,000) per square metre.
4. We believe we should be able to secure a suitable property of 1 130 square metres for about $24.58 million (at $21,752 per square metre).
5. Regarding the rental market, we understand that the prime rate is currently $1,741 (BEF 8,500)/m2/year, and the average rate is $1,434 (BEF 7,000) to $1,536 (BEF 7,500)/m2/year.
As at end May, the exchange rate is HK$1 = BEF 4.8816.
Enclosure 2 to PWSC(1999-2000)51
Cost of Fitting-out and Purchase of Furniture/Equipment in Brussels
Estimates from interior decorators in Brussels put the cost of fitting-out the new office at some $4.1 million (BEF 20 million). The work includes re-partitioning, installation of air-conditioners and lighting fixtures, laying of carpets and repainting at an estimated cost of $3,626 (BEF 17,700) per square metre.
2. Furniture and equipment of the existing premises will be reused as far as practicable. Despite this, we will need an additional $2.05 million (BEF 10 million) for new furniture and equipment to cater mainly for a new library, a bigger conference room, a new reception and waiting area, and a new multipurpose function room.
As at end May, the exchange rate is HK$1 = BEF 4.8816.
1.Payment will be made in Belgian Francs (BEF).
2.We have identified a suitable building with a total gross floor area of 1 130 square metres and a net usable area of 868 square metres, 325 square metres larger than the net usable area of the existing premises.]
3.The establishment of the HKETO in Brussels increased from 19 officers in 1993 to 21 as at 1 April 1999.
4.Fees pertaining to the purchase, transfer of title and related legal services.