NISID HAJARIHong Kong goes crazy for cute. This is the city where mobs fight not over politics or religion, but over the Snoopy dolls handed out at McDonald's. Young toughs cruise around town in pastel sports cars festooned with stickers, while the surliest of cab drivers peer over dashboards populated by rows of tiny, bobbing, powder-blue Smurfs. Don't even ask about the Hello Kitty Cafe.So it's no wonder that much of Hong Kong virtually squealed for joy last week over the chance that Disneyland--the very Shangri-La of Cute--might come to town. During the week of anticipation the local bourse rose 7.5%; the stock of one property company that owns land on Lantau Island, the site of the proposed new theme park, shot up 28%. Even Donald Tsang, Hong Kong's starchy, bowtied Financial Secretary, seemed on the verge of glee when he announced last Wednesday in his annual budget speech that officials hoped to ink a deal with Disney by June 30. Both Shanghai and Manila quickly squeaked that they remained in the running, but most Hong Kongers seemed convinced that they had won the race--and a reprieve of sorts. One columnist described the plan as the only substantial good news since Hong Kong returned to China in 1997. That, however, may be too good to be true.

The exuberance of Disney boosters--some 90% of the population, according to one poll--has much to do with the city's otherwise black mood. Unemployment runs at a record-high 5.8%. In his budget address Tsang also announced that GDP fell 5.1% in 1998, while retail sales volume dropped 16.7%; tourism receipts declined 14% last year. The past two years have witnessed bizarre health crises--avian flu, flesh-eating bacteria in local waters--and an embarrassingly clumsy opening for the city's overhyped new airport. In a place that's been battered with so much negative news, it's very important to have some sense that things are turning around, says Peter Hills, director of the Center of Urban Planning and Environmental Management at the University of Hong Kong.

A Disney theme park could bestow much more than a psychological lift. Analysts estimate that reclaiming the land for the complex would generate some $774 million in spending. Building the facilities themselves could add another $645 million, while a surrounding network of hotels, restaurants and shops could drum up $1.3 billion. Credit Suisse First Boston predicts that during an estimated five years of construction the project could contribute 0.3% annually to the territory's GDP growth--and 0.2% after the park opens. Close to 100,000 low-skill jobs could be created, and according to a February report from DBS Securities, a local Disneyland could draw more than 6 million visitors a year. (By comparison, Disney parks in Tokyo and Paris--the only other locations outside the U.S.--drew 17 million and 12 million visitors last year, respectively.) Those customers, says Credit Suisse First Boston, could spend more than $900 million on mouse ears and Mulan dolls--equal to 4% of Hong Kong's total retail sales.

But such visions of a magically rejuvenated kingdom remain little more than fantasy at this point. After a four-day meeting in Orlando, Florida last month, Hong Kong officials only convinced Disney to begin negotiations; relations are still so fragile that authorities--who speak of the American conglomerate as a lover whose dowry they are deciding--have imposed a gag order on the talks. Analysts warn, too, that even a successful deal does not guarantee instant riches for the territory. Property giants Cheung Kong Holdings, HKR International and Sun Hung Kai Properties--who all own land around the Lantau site, a small cove named Penny's Bay--would likely enter into joint-venture agreements with Disney and see revenue only after the facility opens. The government, which reportedly owns most of the land intended for the facility itself, may well offer the parcel to Disney for free as an incentive.

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Firms that ferry tourists from the mainland to Hong Kong--airlines like Dragonair, China Eastern and China Southern, as well as Guangshen Railway and Kowloon Motor Bus--should see increased business. But analysts admit that predictions of a tourism boom are still speculative: Americans, Europeans and Japanese already have their own Disney parks. Wealthy Southeast Asians may still prefer those even if one opens closer to home. That leaves Hong Kong Disneyland mainly for Chinese tourists, many of whom cannot afford Disney prices, notes DBS Securities research analyst Peter Milliken. The mainland already boasts more than 1,000 unoriginal and sparsely visited theme parks: at one complex in Shanghai, some 3,000 employees cater to just 150 customers a day. In Hong Kong, the new visitors could require an additional 12,200 hotel rooms per night. But the city's current 65% occupancy rate may not improve much, as developers will likely throw up dozens of new hotels near the site itself.

Given past practice, Disney will no doubt have a hand in that cookie jar as well. After watching outside developers profit from its mammoth complex in Orlando, the company filled its Paris Disneyland with on-site hotels and restaurants. That debacle--the European project is saddled with $2.5 billion in debt, and in 1998 eked out a profit of $40 million--reminded the company to limit its exposure in such mega-projects. In Tokyo, Disney only licenses its name and characters and acts as a consultant to the Oriental Land Company, which built the 80-hectare park in 1983 for $1.4 billion. As in Europe, the Americans take a cut of the park's revenues. They'll do the same when a new aquatic theme park--Tokyo DisneySea, currently being built by Oriental Land for $2.9 billion--is completed in 2001.

Some local leaders wonder just how much Disney will squeeze from a park in Hong Kong. Disney wouldn't have decided to locate in Hong Kong unless the government made them an offer they couldn't refuse, warns one legislator. The Americans, of course, have courted Beijing assiduously: only after Disney's movie division agreed last fall to buy the U.S. distribution rights to two mainland films--one a heavy-handed tearjerker rife with Communist propaganda--did authorities agree to release the animated blockbuster Mulan in China. But Disney chairman Michael Eisner has simultaneously played coy, insisting as recently as last October that the company had no plans to establish another park anywhere in Asia. That same month Australia reportedly rejected a plan to build a Disneyland in Queensland because the company had demanded too many concessions. Hong Kong may not have the same luxury. If Disney had come to Hong Kong three or four years ago and asked for 170 hectares of free land, they would have been met with a pretty frosty reception from the government, says Milliken. But now, the government can't afford but to negotiate.

That weakness has struck perhaps the most sour note amid the huzzahs that greeted Tsang's announcement. Although government negotiators insist they will strike a fair deal, legislators fear they may sign away hundreds of millions of dollars worth of land and infrastructure. Activists complain that the project could erode the territory's already frayed environment, destroying marine habitats off the coast of Lantau and increasing noise and pollution levels on the island. Disney may be environmentally conscious in the U.S., but Tokyo Disneyland still uses styrofoam boxes, says Plato Yip, assistant director of Hong Kong's Friends of the Earth.

Such fears may be as premature as the wild hopes shared by many Hong Kongers. Given the territory's recent experience with high-profile projects, like the airport, which were expected to solve all the city's problems overnight, a note of caution may also be welcome. Disney is important, says the University of Hong Kong's Hills. But you can't have an economy that pins all its hopes on one big project. However cute, even Mickey Mouse can't revive Hong Kong all by himself.

Reported by Hannah Beech and Isabella Ng/Hong Kong, Tim Larimer/Tokyo and Mia Turner/Beijing

Top 10 Reasons Why Disneyland Won't Save Hong Kong

10. Donald is still upset over 1997 massacre of local fowl.
9. Two words: typhoon season
8. Local officials are likely to intervene in Pirates of the Currency Market ride.
7. New mobile phones are too small for those Mickey ears.
6. Just wait until the Little Mermaid gets a whiff of the Fragrant Harbor.
5. The Swiss Family Robinson can't afford to pay the rent on their treehouse.
4. One Country, Seven Dwarfs?
3. Jealous local cartoon character Excreman is likely to raise a, er, stink.
2. After the past couple of years, the last thing anyone in Southeast Asia wants is another rollercoaster.

And the No. 1 reason:

1. Let's see how that mouse fares against Hello Kitty.

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