That’s one fantasy that probably won’t come true. A June 30 target for reaching a deal with Disney, written into Hong Kong’s budget in March, passed last week without an announcement–except that negotiations will continue for at least an additional four months. What happened? Apparently the same thing that is threatening to scuttle other deals involving Westerners who want to buy on the cheap around Asia. As the region starts to regain its economic confidence, Asians are sitting taller around the bargaining table. South Korea and Thailand, for example, are no longer so eager to sell rickety banks to foreign investors at fire-sale prices. Two expected deals–one involving Korea First Bank and the other Thailand’s Nakornthon Bank–have proved tough to close because the governments now anticipate greater competition among bidders. “Originally, these deals were about creating a perception that investors would come back,” says Morgan Stanley economist Andy Xie. “But Asian governments now feel confident that the panic is over.”
One area where Hong Kong is feeling an upswing is tourism, up 10 percent this year. Property prices are also recovering. Who needs Mickey Mouse when the price of the land needed for the theme park has risen 30 percent since last year? The rebound has given confidence to diehard opponents of the theme park, who argue that it would harm Hong Kong’s Chinese character and set a bad example for the rest of China, already under cultural assault. “Are we sending the right message? Do we want to define ourselves as an amusement park?” says David Tang, the cultural critic and creator of the Shanghai Tang stores.
Outright opposition to the park, say legislators, could be used by the government to strengthen its bargaining position. So could some second thoughts about just how much money will really spill out of the park and into the rest of Hong Kong. Besides the 6.7 million Hong Kong people who are expected to saturate the park during its first year, most of the other visitors would be relatively impecunious mainlanders. (Until recently, many top hotels in the city discouraged mainland Chinese from booking rooms, worried they couldn’t afford the bill.) The government also gets a bit of leverage from its lack of accountability. No matter how popular the park plan may be, negotiators might feel free to bargain to the brink. “If the deal doesn’t work out well,” says legislator Loh, “no one has to step down.”
But realists concede that Disney still has the upper hand. Hints of an economic turnaround do not constitute an actual recovery: GDP growth this year will at best reach 0.5 percent, and the theme park promises an alleged 100,000 new jobs at a time of high unemployment. Tourism analysts expect the park to draw more than 6 million annual visitors–most of them, after the first few years, from abroad. Even if they do come mainly from China, the most pessimistic forecasts predict the tourists will generate hundreds of millions of dollars of annual revenue. Moreover, building the park and surrounding facilities (on reclaimed land next to Lantau Island) will cost billions, perhaps adding a percentage point to Hong Kong’s GDP. “Hong Kong does need Disney for its future,” says an investment-bank analyst. “And since the market has been talking about the theme park for so long, if the talks don’t turn out positive, stock prices are going to go way down.”
Still, Hong Kong is acting tough. “We are not talking about sentiment anymore,” said Economic Services Secretary Stephen Ip, announcing the extension of the deadline. “We’re talking about hard cash.” But that’s a topic dear to the heart of the entertainment giant, and one Disney official, speaking on condition that he wouldn’t be named, expressed exasperation with the government’s changing position. Disney and Hong Kong are still talking about a range of “technical and financial issues,” says chief government negotiator Mike Rowse. Cost of land is rumored to be a major sticking point. “It’s definitely not a done deal,” says the Disney official. Stay tuned.
