Back to "Speeches" Engineering a Prosperous Future - April 3 1998 ENGINEERING A PROSPEROUS FUTURE HONG KONG'S HUGE INFRASTRUCTURE INVESTMENT A speech delivered by Mr Donald Tong, Director of the Hong Kong Economic & Trade Office of the Government of the Hong Kong Special Administrative Region to the Hong Kong-Canada Business Association in Toronto on April 3, 1998 1. Ladies and gentlemen, it is with great pleasure, and with a little trepidation that I stand to speak today. The pleasure is at being asked to address such a distinguished gathering, the trepidation is at facing a group of highly qualified professionals who, I am sure, know a great deal more than I about my subject - infrastructure. 2. I am not an engineer, just a civil servant, but today I hope to do a little engineering of my own. I hope to engineer a new awareness of Hong Kong among you. It is not just a highly-successful business and service centre of Asia, but a hub of infrastructural developments of unparalleled global significance. And most importantly, what all these mean to you. New Airport 3. As you are probably aware, we will, in July, open our brand new airport, the culmination of a C$29 billion project, the biggest single construction project ever undertaken in Hong Kong. The new airport was built on an artificial island of 1238 hectares in size. Approximately 3/4 of the airport island came from reclamation and the remaining 1/4 came from excavation of two islands. But the airport, magnificent as it is, is just a part of the Airport Core Programme. This programme also includes a new town housing 250,000 people, the longest road and rail suspension bridge in the world, an expressway and a railway connecting the airport with urban centres in Kowloon and Hong Kong Island, and tunnels under Victoria Harbour to carry these road and rail links, not to mention massive reclamation projects in Central and in West Kowloon on both sides of Victoria Harbour. 4. In 1991, when we embarked on these new airport projects, some people still had grave doubts about our determination and capability. But let me show you some slides and you will actually see for yourselves how we reclaimed land from the sea and how we put a new town, highways and a rail network on it. 5. I am glad to let you know that the new airport will be opened on 6 July. So if you would like to take part in this historical moment of flying into Kai Tak and flying out of the new airport, I would urge you to book your air tickets early. By the way, I should mention that do allow yourself more than adequate time in the new airport. I mention this not because I do not have confidence in our Airport Railway system. I indeed can assure you that you can travel from Central to the new airport comfortably in 23 minutes. But I think you and your family might like to have ample time for shopping at the new airport. Yes, we are turning the new airport into a major shopping mall. A mall with 33,000 square metres of shopping area - one of the largest in Hong Kong. And we will control the prices of all the items sold in the new airport to make sure that they are comparable with downtown prices. 6. It is a magnificent undertaking, probably the world's biggest infrastructure project, but, as far as our infrastructure planners are concerned, it is all in the past. They are looking to future projects. Total Investment 7. In February, the Chief Executive of the Hong Kong Special Administrative Region, Mr. Tung Chee-Hwa announced that the Government will invest in the next four and a half years C$43.5 billion in infrastructural development to stimulate economic growth, raise the competitiveness of Hong Kong, increase land supply and provide more job opportunities. These new infrastructural projects will be of a much larger scale and will exceed the new airport projects which cost only C$29 billion. In other words, even more and better business opportunities for you. 8. Hong Kong is a phenomenal success. Just less than 1100 square kilometres in area, it is the world's seventh largest trading entity, has the world's busiest container port and the world's busiest international cargo airport and the third busiest international passenger airport. Its success has been due to minimum interference by a clean government that believes in providing a low tax base and an efficient infrastructure so that businessmen can do what they do best - run their business and make profit. By the way, you think corporate profit tax of 16.5% is low. No, we do not think so. Our Financial Secretary has just announced in February that this will be further reduced to 16% to make Hong Kong even more attractive to you. Roads 9. By far the largest portion of infrastructure spending will go to transport. Hong Kong, one of the most densely populated places on earth, has some of the most congested roads in the world with 500,000 vehicles using just 1500 kilometres of road. 10. With the completion of the new airport projects, the government now focuses on transport improvement to relieve traffic congestion and cope with rapidly increasing traffic needs. Already nearing completion are the Country Park section of Route 3 with a four-kilometre-long twin bore tunnel that will accommodate six traffic lanes and the Ting Kau Bridge that connects Tsing Yi Island with the New Territories. 11. The government will invest C$4.6 billion in the next five years to implement a number of ambitious programmes for the planning and building of a series of new road projects. These projects include the widening of the Tolo Highway and improvement to Kam Tim Road in the New Territories and widening of the Eastern Island Corridor on Hong Kong Island. The government will also build the section of Route 5 in the New Territories (between Tsuen Wan and Cheung Pei Shan) and is undertaking studies for the construction of the Sham Tseng Link which includes a second suspension bridge between Lantau Island and the New Territories; Route 9 running from Tsing Yi to Lai Chi Kok; Route 7 linking Aberdeen and Kennedy Town on Hong Kong Island. 12. With extensive planned developments to take place in Kowloon Peninsula after the closure of Kai Tak Airport, we expect the east-west traffic demand across Kowloon Peninsula to increase. The government therefore is looking at the possibility of building the Central Kowloon Route - a dual-two-tunnel linking West Kowloon and South-east Kowloon. A detailed design consultancy study and site investigation works are expected to commence in May. These road projects I just mentioned are expected to cost more than C$9 billion. 13. The government is working out a blueprint for transport infrastructure for the next decade including the Third Comprehensive Transport Study to assess overall transport needs. Railways 14. The Railway Development Study is essential because Hong Kong, with its limited space, cannot build new roads forever, that is why priority will be given to rail transport. The government policy will be to develop rail transport to the extent that it is economically viable to reduce reliance on road transport. 15. More than C$20 billion has been set aside for railway development in the next five years. The projects include the West Rail, the Tseung Kwan O extension of the Mass Transit Railway, the Ma On Shan Link, and another railway linking Hung Hom to Tsim Sha Tsui in Kowloon, with the possibility that this will be extended under the harbour to Hong Kong Island. ( i ) West Rail 16. The biggest of these projects is the 54-kilometre West Rail that will connect Kowloon with the large urban centres of Tsuen Wan, Yuen Long and Tuen Mun on the western side of the New Territories. The West Rail will continue to the border where a new crossing will be established to connect with mainland China's rail system. 17. West Rail will provide three services: a freight rail link to the container port, a cross border passenger service, and a domestic passenger service linking West Kowloon to Tuen Mun. Because of the pressing need for local transport services, the 30-kilometre rail passenger service between Kowloon and Tuen Mun, Phase 1, will be built first and is expected to be ready in 2003. The cross border passenger and freight services, Phase II, will be completed later. The expected cost of Phase I is nearly C$12 billion. The pre-qualification of many special purchase and detailed design and construction contracts are forecasted to commence in the third quarter of 1998. So, I am not talking about a project that is still several years down the road. It is a project with lucrative contracts - your business opportunities - will be available in the next few months. ( ii ) Tseung Kwan O Extension 18. Another major railway project is the 12.5-kilometre extension of the existing Mass Transit Railway system to the new town of Tseung Kwan O, also known as Junk Bay, on the Eastern New Territories. The thriving new town at Tseung Kwan O will have a population of 500,000 by the year 2011. So, there is an urgent demand for new transport links with the urban centres in Kowloon and Hong Kong Island. The MTR extension will move people rapidly and economically between these centres. It will cost about C$5.6 billion and is expected to be completed in mid-2002. 19. Hong Kong's Mass Transit Railway Corporation is wholly owned by the government but it is run as a private company and on strict business principles. It is one of the few, if not the only, mass transit systems that make a profit. ( iii ) Ma On Shan - Tai Wai Link 20. A third major rail project is a 10-kilometre rail passenger link in the New Territories between the new towns of Ma On Shan and Tai Wai where it will connect with the existing Kowloon Canton Railway and Mass Transit Railway systems This will cost C$3.1 billion. 21. Together, these three projects will increase Hong Kong's total rail mileage from 121 kilometres to 225 kilometres i.e. an increase of more than 85%. All these in the Special Administrative Region of Hong Kong which covers nearly 1100 square kilometres. 22. But it does not stop there. The Government will undertake the Second Railway Development Study to determine the next phase of railway development. Proposal to be investigated will include a fourth rail crossing under Victoria Harbour, a new Mass Transit Railway line from Central, through Wanchai to Causeway Bay, with a possible extension tunnelling through Hong Kong Island itself south to Aberdeen. Studies are also underway on a new East Kowloon line to serve the present Kai Tak airport area when it is developed into a massive housing and commercial centre, and a western extension of the MTR Island Line to Kennedy Town and other potential lines. Port 23. Of course, none of the massive infrastructure projects that Hong Kong is undertaking, neither the soon-to-be opened new airport, nor any of the huge future projects, would have seen the light of day if it were not for Hong Kong's port. 24. The phenomenal growth of Hong Kong as a manufacturing, service and financial centre has tended to overshadow the fact that Hong Kong was founded as a port for China trade and it was on this foundation that everything else was built. Without the port, there would be no Hong Kong as we know it today. Port related industrial and commercial enterprises contribute some 20% of Hong Kong's Gross Domestic Product (GDP) and provide jobs for nearly 22% of its workforce. 25. We operate the busiest container port in the world and last year it handled 14.6 million twenty-foot-equivalent units (TEUs). This was an increase of 8.2% over 1996. The government's latest Port Cargo Forecasts show that by 2016 there will be a demand for Hong Kong to handle 33 million TEUs a year. Let us put that into perspective. It means handling five twenty-foot containers every four seconds, 24 hours a day, 365 days a year. 26. To cope with this demand, Hong Kong is planning a completely new container port on Lantau Island with twice the capacity of the present port at Kwai Chung. The timing for the building of new container terminals on Lantau will be determined after the updating of Port Cargo Forecasts this year. 27. Building this new port, on a series of artificial islands stretching south-east from north Lantau, will be one of the world's biggest civil engineering projects. The new port is vital, not only for Hong Kong, but for southern China, one of the fastest industrialising areas in the world. More than 64% of the cargo passing through Hong Kong is entrepot trade with mainland China. Despite the upgrading of mainland China port facilities, Hong Kong is likely to remain the hub port for the region well into the next century. 28. As has been the case with the existing container port, all the new terminals will be built and operated by private enterprise. Hong Kong is the only major port in the world not run by a port authority. This system has worked well to make Hong Kong not only the busiest, but one of the most efficient ports in the world. For instance, last year, one single berth terminal handled over one million TEUs - more than three times the rate of most other ports in the world. 29. To meet the growing demand at the port, Container Terminal 9 (CT9) is being built at Tsing Yi Island, opposite the existing eight terminals at Kwai Chung. CT9 will consist of four deep-sea berths and two feeder berths to accommodate the interchange of containers between large, ocean-going vessels and regional carriers. CT9 is expected to come into operation by the middle of 2001 and increase the port's throughput capacity by more than two million TEUs a year. After that, there will be no more room for expansion in the Kwai Chung area and further terminals will be built on Lantau. Housing 30. But do not let me give you the impression that Hong Kong is some soulless, business machine, good only for making money. It is home to 6.63 million hard-working, ambitious people who seek a better life for themselves and their families. Our investment in infrastructure is, fundamentally, aimed at providing that better life. One of the priorities of a good life is adequate housing and Hong Kong has one of the most ambitious housing programmes in the world. Nearly half it's population lives in low-cost housing built by the Government. 31. To ensure adequate housing, the Government plans to build 85,000 housing units a year. That is a rate slighter faster than one new flat every 10 minutes. 32. This will be more than meet demand, which computer models show, will be 80,000 flats a year over the next decade. 33. The Government is responsible for building 50,000 units a year while private developers should be able, subject to market developments, to produce 35,000 flats a year from the year 2000 onwards. 34. But the government does not just want to provide housing, it wants to encourage home ownership. A key chapter of the White Paper is devoted to the government's pledge to achieve 70 per cent home ownership by the year 2007. 35. The government firmly believes that this drive for wider home ownership in the community will foster social stability and a sense of belonging, and help families to provide for their own financial security. Much of the housing will be built as a result of some of the infrastructure projects I have already mentioned. 36. The government plans to develop the Kai Tak airport and the adjacent area after the opening of the new airport. This move will make available more land in the urban area around Kai Tak available for development since there is no longer height restriction on buildings which are now standing on Kai Tak's flight path. This total area will accommodate about 285,000 people and create 110,000 jobs. There will be high rise housing and commercial developments above the stations on the airport rail line and on the other rail projects I have mentioned. 37. In the longer term, we expect Hong Kong's population will increase to 8.1 million in 2011 i.e. an additional 1.5 million on top of the current 6.6 million population. We need to develop 3,000 hectares of land in areas like Tseung Kwan O, North Lantau, S.E. Kowloon, and in the future more land in Northwest N.T., North-east New Territories and Hong Kong Island South and Lamma Island. No doubt, we will have to build more north-south and east-west high capacity expressways and rail links throughout the territory. So, I would urge you to keep a close eye on all these developments in Hong Kong. Level Playing Field 38. Let me stress one thing. All along, the Hong Kong Special Administrative Region Government puts much emphasis on level playing field in approving and awarding contracts. Take the new airport projects as an example, more than 77% by value of the C$17 billion contracts have been awarded to overseas firms. We do not care about the nationality of the bidders. Our awarding principles are easy to understand and very simple: value for money and timely delivery of quality products. We do not show favouritism towards contractors including those from Hong Kong or China nor will we discriminate against any particular economies. Hong Kong has been able to benefit from this approach. Indeed the cost of the new airport projects has been reduced by C$1.7 billion from C$30.7 billion to C$29 billion and this is partly a result of our adopting this level-playing field approach. I can assure you that Hong Kong will continue to maintain this very important approach. And do not forget, Hong Kong will continue to observe the rule of law seriously and whole-heartedly. Financing Opportunities 39. I know some of you are not contractors but bankers and financiers. You might be thinking what has all this to do with you. Well, I would like to cheer you up by saying that the government's policy is not to foot all the cost of these projects out of the public purse even though we do have the capability to do so if we so desire - don't forget we have US$96.7 billion foreign reserve and no government debt. Some of the statutory bodies responsible for these projects may raise commercial loans to partially fund these massive projects. Indeed, if you examine our new airport projects, you will find that nearly C$4.3 billion, out of the C$29 billion came from commercial loans. While many financial details on these new projects are still being hammered out at this stage, I can tell you that the Kowloon Canton Railway Corporation is going to raise commercial borrowings of C$4.6 billion to fund its nearly C$12 billion West Rail project. Conclusion 40. All of you must have read about the financial turmoil in Asia and you may be surprised that Hong Kong is undertaking such large infrastructure projects and committing itself to so much spending in such difficult times. 41. Well, we are not denying times are hard, but Hong Kong is better placed than any Asian country to weather the present downturn. In 1997/98, we had a record budget surplus of C$13 billion, more than double the surplus forecast at the beginning of 1997. When he delivered his budget in February, Financial Secretary Donald Tsang forecast a surplus of C$2 billion for the next financial year and a healthy real growth of 3.5% in 1998. 42. So, as you can see, our economy is sound and all of the projects I have mentioned are highly necessary for the future growth of Hong Kong's economy. When Hong Kong builds for the future it builds, like the wise man in the Bible, not on sand, but on the firm rock of sound finances and prudence planning. We firmly believe that the year 2000 will usher in the Pacific Century, and we are determined to take a leading part in building the prosperity of the Pacific Rim by maintaining the pace of our infrastructure and developments. u Back to "Speeches"