Economic Forum – Financing Land Creation for Hong Kong’s Future

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Our Hong Kong Foundation Presents
Economic Forum – Financing Land Creation for Hong Kong’s Future
 

(23 August 2023, Hong Kong) Our Hong Kong Foundation (OHKF) organised an Economic Forum - Financing Land Creation for Hong Kong’s Future today with eminent speakers, including top officials, industry experts, economists, professors and business leaders who shed light on how best to finance the Kau Yi Chau Artificial Islands and Northern Metropolis projects that would deliver enormous economic and livelihood benefits to Hong Kong.

Land and housing has all along been OHKF’s research focus. We have produced numerous reports, including a report on strategically developing the San Tin Technopole published in early August; the 10-year Housing Supply Forecast 2023 released last April and an advocacy paper on transport infrastructures for the Northern New Territories announced last year. They provided insight and proposals to help inform policy formulation, to strive for public consensus, and to facilitate implementation.

OHKF invited HKSAR Development Bureau as the partner organisation and had HKSAR Government Financial Secretary the Hon Paul Chan and Secretary for Development Ms Bernadette Linn as the Guest of Honour and Keynote Speaker respectively.

In Financial Secretary’s remarks, the Hon Paul Chan said that sufficient land supply is the golden key to unlock the current constraints on development and solve the housing issues. Since assuming the office, the HKSAR Government has spared no efforts in optimising the quantity, speed, efficiency, and quality in increasing land supply and bolstering transport infrastructure at all means. These endeavours aim to strengthen Hong Kong’s high-quality development and elevate the living standards of Hong Kong people. He stated, "We have sufficient determination to expand land supply and will not be shaken by short-term market fluctuations. The Northern Metropolis and Kau Yi Chau Artificial Islands development projects are both pivotal for the future social and economic progress of Hong Kong. I hope that all segments of the society will support the HKSAR government's multipronged approach in sourcing land supply to fulfil public’s aspiration for a better living standard.”

Ms Bernadette Linn indicated that the government will undoubtedly integrate the concepts of smart, green and resilient structure and preserve areas of high ecological value and natural islands, creating sustainable communities where development and conservation coexist harmoniously. The Northern Metropolis and Kau Yi Chau Artificial Island possess favourable conditions for implementing the "sustainable planning and urban design" concept, adopting an infrastructure system integrating smart, green, and resilient structure, promoting green travel, and actively conserving the environment. The two projects can be financed through launching green investment vehicles in the market. Ms Linn stated, "Hong Kong is a globally renowned international financial centre with ample experience in promoting large-scale development projects. We have great confidence in exploring financing options with all stakeholders so to leverage Hong Kong’s market pool in an appropriate manner."

Noting that the Northern Metropolis and Kau Yi Chau projects are progressing well, OHKF President Dr Jane Lee said: “Hong Kong people look forward to seeing a vast and stable land reserve that is essential for Hong Kong’s development and sustainable growth. By gathering insights from experts and leaders, the forum seeks to address some of the public’s concerns and increase their understanding of land creation and project financing. The insight generated at the forum will help progress the two projects and instil public confidence.

The Northern Metropolis provides 3,000 hectares of land. In 5 years, it plans to kick start the land resumption process; and in 10 years, to finish 40% of the overall site formation and new housing. The Northern Metropolis will be home to diversified industries and two thematic mega projects— the “San Tin Technopole” and “Modern Services Centre”. The Northern Metropolis will facilitate economic connections and offer tremendous innovation technology and business opportunities between Hong Kong and the other cities in the Greater Bay Area (GBA).

Creating 1,000 hectares of new land, Kau Yi Chau Artificial Islands will be crowned the 3rd Hong Kong’s Central Business District. Together with the Northern Metropolis, they will complete the HKSAR Government’s “South-North Dual Engine (finance-innovation and technology)" blueprint to power Hong Kong’s economy and increase its competitiveness. In addition, the Artificial Islands will feature an assorted of “15 minutes living circles” and be covered by green mass transit system to form a desirable work cum living community.

The first session of the forum featured professors and economists discussing “How can land creation drive Hong Kong’s economic growth”. Esteemed scholars included the University of Hong Kong Provost and Deputy Vice-Chancellor & Chair of Economics Professor Richard Wong, The Hong Kong University of Science and Technology Emeritus & Adjunct Professor of Economics Professor Francis Lui, Lingnan University President & Chair Professor of Economics Professor Leonard Cheng, The Chinese University of Hong Kong Adjunct Professor of Economics Professor Yun-Wing Sung, and Our Hong Kong Foundation Vice President cum Co-Head of Research Mr Ryan Ip. The session was moderated by Colliers Hong Kong Managing Director Mr C.K. Lau.

The second panel session focused on “How to finance land creation”. Speakers including the Chinese Manufacturers’ Association of Hong Kong Permanent Honorary President Dr David Wong, The Chinese University of Hong Kong Distinguished Research Fellow of the Lau Chor Tak Institute of Global Economics and Finance; Emeritus Professor of Economics Professor Pak-Wai Liu, Hong Kong Monetary Authority Executive Director (External) Mr Kenneth Hui, The Hong Kong Association of Banks Acting Chairman and Bank of China (Hong Kong) Deputy Chief Executive Mr Stephen Chan, and Airport Authority Hong Kong Executive Director of Finance Mr Julian Lee. Our Hong Kong Foundation Vice President cum Co-Head of Research Mr Kenny Shui moderated the session.

1. Group photo of HKSAR Government Financial Secretary the Hon Paul Chan, Secretary for Development Ms Bernadette Linn, OHKF President Dr Jane Lee, speakers of the two panel sessions, OHKF Board of Governors and Research Council members, and supporting organisations representatives.

2. HKSAR Government Financial Secretary the Hon Paul Chan said that ample land supply can enhance the development momentum and provide quality employment opportunities. The Northern Metropolis will be an entry point for key enterprises, fostering a clustering effect and enabling comprehensive and synergetic development with sister cities in the Greater Bay Area. The economic activities on Kau Yi Chau Artificial Islands are projected to contribute approximately HKD 200 billion in added value annually to Hong Kong's economy, accounting for approximately 7% of the local GDP. Both projects yield substantial economic benefits and are worthy investments. There are multiple financing options for raising funds in the market. Numerous corporations and financial institutions have recognised the development potential of the projects and expressed their intentions to participate.
 

3. Secretary for Development Ms Bernadette Linn stated in her keynote speech that while land creation drives economic growth, it must also fulfil sustainable development. When promoting the housing and economic development of the Northern Metropolis and Kau Yi Chau Artificial Islands, the Government will undoubtedly integrate the concepts of smart, green and resilient structure and will preserve areas of high ecological value and natural islands, creating sustainable communities where development and conservation coexist harmoniously.

4. Our Hong Kong Foundation President Dr Jane Lee said that land is the carrier for people's livelihoods and economic endeavours. The provision of sufficient land plays an indispensable role in meeting public demands on housing, social welfare, recreations, and business. As a think tank comprising Hong Kong intellectuals, Our Hong Kong Foundation has recognised paramount importance of land on affecting the city’s well-being.
 

5. The University of Hong Kong Provost and Deputy Vice-Chancellor & Chair of Economics Prof Richard Wong stated that Kau Yi Chau Artificial Islands connects key economic hubs of Hong Kong Island and southern Kowloon, and the residential area in New Territories. It facilitates synergy among districts in Hong Kong. Though introducing Special Purpose Vehicle (SPV) into the project can add flexibility into the development.
 

6. The Hong Kong University of Science and Technology Emeritus & Adjunct Professor of Economics Professor Francis Lui stated that the benefits of Kau Yi Chau Artificial Islands and the Northern Metropolis will far exceed their costs. By converting foreign exchange reserves into land reserves will also help mitigate geopolitical risks.
 

7. University President & Chair Professor of Economics Professor Leonard Cheng stressed the substantial amount of time needed for creating and developing land. He further stated that it is important for the Government to increase its investment for the future, especially during economic downturn, so to create values and be well prepared for the next economic cycle.
 

8. The Chinese University of Hong Kong Adjunct Professor of Economics Professor Yun-Wing Sung said that the Northern Metropolis's planning will change Hong Kong's traditional mindset of focusing development on both sides of the Victoria Harbor and to create the “South-North dual engine". Kau Yi Chau Artificial Islands will optimise the transportation network of the northern innovation metropolis and the southern financial hub, and improve the connectivity between Hong Kong Island and the city’s airport.
 

9. Our Hong Kong Foundation Vice President cum Co-Head of Research Mr Ryan Ip noted that land creation and the development of new towns through sea reclamation are not unprecedented practices. The proportion of land allocated for development in Hong Kong is significantly lower than in Singapore. He concurred with the Financial Secretary's view that economic fluctuations should not impede long-term land creation planning. On the contrary, when undergoing economic downturn, it is even more necessary to undertake large-scale infrastructure development as a countercyclical and expansion measures to boost finance and create employment.
 

10. Colliers Hong Kong Managing Director Mr C.K. Lau moderated the first panel session and acknowledged the Government's determination to explore diverse approaches for land creation and development. He also highlighted the implementation of industry policies to invite different business sectors, including the innovative and technology.
 

11. The Chinese Manufacturers’ Association of Hong Kong Permanent Honorary President Dr David Wong said that Hong Kong has untapped potential in the bond market, and the Government can leverage the major investment projects planned for the next 15 to 20 years to deepen the bond market and engage the public.
 

12. The Chinese University of Hong Kong Distinguished Research Fellow of the Lau Chor Tak Institute of Global Economics and Finance; Emeritus Professor of Economics Professor Pak-Wai Liu said the Government may face fiscal deficits and cash flow shortages in the short term. Issuing bonds, specifically the retail bonds, is a viable solution to raise cash and allow public participation in the two projects. Infrastructure projects are ideal for issuing long-term bonds due to their perpetual returns.
 

13. Hong Kong Monetary Authority Executive Director (External) Mr Kenneth Hui expressed his confidence in Hong Kong's ample fiscal reserves and the highly stable currency system. As the two projects are considered investments rather than expenditures, investors and credit rating agencies should have confidence on Hong Kong's overall credit rating.
 

14. The Hong Kong Association of Banks Acting Chairman and Bank of China (Hong Kong) Deputy Chief Executive Mr Stephen Chan shared two key factors for bond issuance: First, whether the income drawn outweighs the expenditure made; second, the "time gap" of cash flow.
 

15. Airport Authority Hong Kong Executive Director of Finance Mr Julian Lee shared the experience of the Three-runway project. The project involves reclaiming 650 hectares of land, contributing 50% additional land of the current island area, relying on financing through operational surplus, user pays, and bond issuance. He added that the success of a public-private partnership should be formed through win-win.
 

16. As the moderator for the second panel session, Our Hong Kong Foundation Vice President cum Co-Head of Research Mr Kenny Shui stated the undeniable social and economic benefits that the development of Kau Yi Chau Artificial Island and the Northern Metropolis will bring to Hong Kong.