• Risk Allocation. As with most private road projects in Hong Kong, the Government provided unencumbered land at no cost to concessionaires and developed road links to provide access to Route 3. Interestingly, the project traverses the massive land holdings of Sun Hung Kai, the lead investor in the project. To make the package more financially attractive, the Government also financed the Tin Kau Bridge that connects Route 3 to the West Kowloon Expressway.
The consortium accepted construction risks which were then transferred to the reputable construction companies, Nishimatsu and Dragages.
• Role of Competition in Consortium Selection. The high level of interest expressed by different consortia provided the Government of Hong Kong a strong position from which to negotiate on toll road charges and bid prices. Increased participation from the private sector is likely to have been derived from three Harbor Crossing Tunnel projects in Hong Kong, all of which have been highly profitable for their operators.
• Non-Compete Restrictions. The long duration of PPP arrangements when accompanied by no-compete clauses often inhibits the ability of the Government to build additional capacity in the corridor of the project for a considerable period of time. Proponents of the Country Park Motorway have opposed the development of Route 10, which would have competed for traffic. However, the availability of longer parallel toll-free routes has reduced the profitability of Route 3.
• Public Sector Financial Involvement. The use of PPPs as a tool to finance new road projects does not completely absolve Government from making contributions. Where the scale and risk of the project is higher, Government contributions are more likely to be required. In this case, the Government contribution occurred through the donation of right-of-way to the facility and the Government-funded development of the Tin Kau Bridge and connecting roads.