Hong Kong’s Paul Chan defends economic potential of land-reclamation projects

Chan said the government was very confident both projects could attract investors and pointed to a planning report that outlined measures to come up with 7,300 hectares of land between 2019 and 2048.

The supply of “disposed sites” – plots of land granted for residential development for which construction has yet to commence – will reach 3,300 hectares, more than half of which will come from the two projects.

At the same event, Secretary for Development Bernadette Linn Hon-ho addressed calls for authorities to halt the Lantau scheme amid a weak economy and property market.

Linn argued it would take at least five years for reclaimed land to become available.

“The first batch of reclaimed land will be available in 2028 in Kau Yi Chau,” she said. “If we put a halt on the project now, and when the economy recovers and when we need the land for economic development, will the world wait for us to generate land?”

Linn said the two projects would incorporate special design features, including revitalising waterways and building stormwater storage tanks, to proactively prepare for the challenges posed by extreme weather.

Regarding concerns about whether reclamation would be resilient enough against extreme weather, Linn suggested that the average ground elevation of the artificial islands should be 7.5 metres above principal datum. Mean sea level is about 1.3 metres above the datum

Meanwhile, Chan said authorities were looking at funding the megaprojects through options such as bond issuance, a build-operate-transfer model, and rail and property development.

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Liu Pak-wai, emeritus professor of economics at Chinese University, said the traditional method of financing infrastructure projects in Hong Kong with land sales might not work for the two projects in the short-run given the high costs.

He said historically, there was more than enough revenue from land sales but in the short-run – for example, in the first five years – there would be none as it took time to develop the new land.

He said the most direct way to generate short-term cash flow was by issuing bonds.

“There is a lot of room for bond issuance in Hong Kong. Right now, Hong Kong bonds stand at HK$120 billion, which is only 4 per cent of our total GDP,” Liu said, noting the equivalent figure for the United States was 130 per cent and for Japan 260 per cent.

In addition to bonds, private-public partnerships were another means to lift some of the costs off the government’s shoulders. Hong Kong Association of Banks acting chairman Stephen Chan pointed to potential issues on whether there was enough governmental support and distribution of financial risk and responsibilities.

“Hong Kong is no stranger to private-public partnership,” Chan said, citing examples of the MTR Corporation and property development, urban renewal projects in To Kwa Wan, and the construction of different tunnels.

The Development Bureau on Sunday released a public engagement report on the artificial islands plan that highlighted public concerns over the scheme’s potential strain on government coffers, despite 60 per cent of 7,800 respondents supporting the project.

Greenpeace Hong Kong had also accused authorities of “misleading the public” about prevailing attitudes surrounding the project.

The environmental group said a survey it commissioned in March found that only one-third of residents had confidence in the economic benefits of the envisioned business district.