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Connection and modernisation: Hong Kong outlines policy response to infrastructure challenges

07 November 2023

The latest policy address places talent, the property market, and productivity at the centre of infrastructure-related initiatives.

Connection and modernisation: Hong Kong outlines policy response to infrastructure challenges
The chief executive reaffirmed Hong Kong’s commitment to developing the Guangdong, Hong Kong, and Macao Greater Bay Area. Image credit: Shutterstock

On Wednesday 25 October, Hong Kong chief executive John Lee delivered his 2023 policy address – the second of his administration.

The address came amid a slow post-pandemic recovery, a sluggish property market, and talent shortages, compounded by the city’s low birth rates and rapidly ageing workforce.

In response, it emphasised:

  • talent retention and attraction
  • revitalisation of the property market – a key source of government income
  • digitisation in all sectors
  • establishing Hong Kong as an innovation and R&D hub, with a focus on frontier technologies, including AI supercomputing and microelectronics

An array of infrastructure-related initiatives was also at the centre of the address.

These targeted industry-specific challenges such as housing demand, the lag in construction productivity and digitisation, and the delivery of mega projects such as the Northern Metropolis.

There are three main takeaways for infrastructure:

1. Commitment to mega projects enhancing connectivity to the Greater Bay Area

The chief executive reaffirmed Hong Kong’s commitment to developing the Northern Metropolis and Kau Yi Chau Artificial Islands.

These strategic mega districts combined will advance technology, promote cross-border commerce, and provide a physical bridge between Hong Kong and the Greater Bay Area.

Two newly announced railways and one major road will support the growth of these developments.

2. Emphasis on digitising and industrialising construction

The Hong Kong government remains resolute in its drive to address productivity and demographic challenges through digitising and industrialising the construction process.

Adopting building information modelling (BIM) fully will streamline the preparation and approval of building plans for private development projects – a part of the industry that lags in digitisation.

The government will also emphasise continued improvement of the modular integrated construction (MiC) approach.

3. Support for the property market

As widely anticipated, the policy address partially lifted several property ‘cooling’ measures, such as special stamp duties, to counter low market confidence and high interest rates.

Both factors, it claims, have led to fewer transactions and falling prices.

The government is also introducing a new pilot ‘subsidised sale flat’ scheme to bridge the public and private housing markets and help eligible residents onto the property ladder.

An appropriate response to current challenges

The measures announced last month are an appropriate response to Hong Kong’s current financial climate – particularly considering a poor recent showing in the property market, declining fiscal reserves, and another projected deficit this year.

Despite these issues, the policy address does well to recognise the need to act on pressing social issues such as demographic pressures, productivity challenges, and the demand for quality housing.

Risks to implementation

Broadly, industry leaders and commentators have praised the large array of initiatives.

Some concerns relate to a perceived lack of focus in the address. The government may face challenges in effectively executing multiple simultaneous measures.

To address these concerns, it will be important to prioritise goals, maintain clear communication, and allocate resources efficiently.

Moreover, the continued drive for productivity enhancement through digitisation and industrialisation is a move in the right direction.

It may, however, prove difficult to outpace the ageing population and labour shortages in infrastructure.

From this perspective, the success of the government’s talent attraction schemes will play a crucial role in delivering Hong Kong’s infrastructure ambitions successfully and on time.

Finally, global geopolitical tensions continue to pose a risk to most economies, and Hong Kong is no exception.

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  • Alex Katsanos, Managing Principal at Aurecon