A conversation I had with the late David Akers-Jones, who served as chief secretary before 1997, spotlights how much the government’s economic policymaking has changed from its old market-driven, freewheeling days.
That was around 2016. Musing over Hong Kong’s growth possibilities and looking westward towards Hong Kong’s outlying islands from his West Kowloon flat, Akers-Jones quipped that the next chief executive would have many ribbons to cut at opening ceremonies of major infrastructure projects, and many islands to develop if the city needed more land. Akers-Jones spoke from experience. When British administrators needed to intervene in the markets to boost growth, infrastructure-led development did the trick.
In the early 1990s, the Hong Kong government began working on the Airport Core Programme, also known as the Rose Garden project – a new airport with related railways and road links. It had an initial budget of HK$200 billion (US$256.2 million), but ended up costing HK$160 billion. This and other capacity-building projects fuelled demand. These investments, coupled with the steady rise of China’s economy, ushered in a prolonged spell of prosperity.
However, times have changed. Inflation, development critics and a not-in-my-backyard mentality have made infrastructure projects incredibly expensive and cause delays that result in the projects taking longer than expected to complete. A classic example is the T4 trunk road in Sha Tin which was approved by lawmakers in May after the government agreed to trim costs by 5 per cent.
The short trunk road, spanning 2.3km (1.4 miles), is intended to improve traffic flow from Sha Tin to Tsuen Wan. Some legislators were stunned by the high cost of HK$6.8 billion for such a short road. Sha Tin District Council was discussing the project as far back as 2005. Costs kept rising in response to residents’ demands for better road links with Sha Tin’s town centre, construction of an underpass and a viaduct to mitigate noise pollution. Repeated rounds of consultation and changes to the project design led to soaring costs.
As Hong Kong became increasingly developed and the wealth gap worsened, infrastructure projects were held up by judicial review applications on environmental grounds and anti-development protests.
On September 21, 2014, northeast New Territories residents march in Wan Chai to protest against the government’s request to fund a development project. Photo: K. Y. Cheng
The northeast New Territories development project sparked protests at the Legislative Council in 2014, when the Finance Committee was discussing the funding request for engineering works in Fanling and Kwu Tung. The initial stages of the project were not approved until 2019 with an estimated cost of nearly HK$18 billion.
Many in government see capacity building and large-scale infrastructural projects as the locomotive of growth. But with high costs and long timelines, such projects are far from certain to yield positive returns. Moreover, mainland China’s fast pace of development, along with post-Covid lifestyles and work patterns, are changing what services are demanded in Hong Kong.
Tourism is a good example. Hong Kong can no longer expect to reap easy profits from eager mainland tourists ready to snap up merchandise, ranging from daily necessities to flashy brand products.
Cognisant of the need to embrace a new economic model, the government has shifted from minimum intervention to proactively developing new clusters of tech-based industries such as quantum computing, microelectronics, artificial intelligence and health sciences. The government has also realised it must put in place the necessary money, talent and equipment to successfully enable its tech aspirations.
Chief Executive John Lee Ka-chiu delivers a video message during the opening of the strategic partnership signing ceremony of Hong Kong Investment Corporation and artificial intelligence firm Smartmore at the Ritz-Carlton Hotel in West Kowloon on June 12. Photo: Sun Yeung
The government pins high hopes on the innovation and technology parks in the San Tin Technopole and Lok Ma Chau Loop as the cradle for nurturing tech industries. Costs are high, and construction work in both technology parks will not start until the end of this year at the earliest.
In the case of the San Tin Technopole, the largest tech park ever to be constructed by Hong Kong, more obstacles could be thrown in the works if concerns about wetlands destruction prompt a judicial review application.
If an embattled Hong Kong is to break out of the current thicket of challenges, it must discard its old template of development, fraught with uncertainty caused by high costs, long delays and legal entanglements.
It must work out a new model of development that allows the city to move fast enough to keep pace with development in mainland China. Technology is advancing so rapidly that speed is of the essence.
The new model of development must enable Hong Kong to move much faster, at much lower costs and capitalise on the resources available in other parts of the Greater Bay Area development zone such as land, talent and technological know-how.
The government has made some small progress in taking advantage of those resources to take better care of its elderly. It needs to work out more imaginative ways to make greater use of the mainland’s abundant resources to produce win-win solutions.
The old Hong Kong, relying on property and mass tourism to produce outsize demand, is no longer viable. Financial services remain a key pillar, but diversification into new areas of growth and new channels of capital formation is necessary to sustain its growth.
More than two decades after then chief executive Tung Chee-hwa embraced the Cyberport project, the government is finally getting a handle on tech development. But it still needs a smarter and faster-moving strategy if it does not want to miss the boat.
Regina Ip Lau Suk-yee is convenor of the Executive Council, a lawmaker and chairwoman of the New People’s Party
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