Hong Kong’s Misplaced Infrastructure Ambitions

There is no better illustration of Hong Kong’s diminishing autonomy than the fate of its airport.

This is not an overtly political issue about democracy or the rule of law. It is a growing impediment to the commercial autonomy without which Hong Kong is simply a more scenic version of Shenzhen or Xiamen. It is also one to which its leaderless government chooses to ignore as pushes ahead with a plan to build a third runway at Chek Lap Kok airport at a cost which even now is estimated at HK$141 billion (US$18 billion) and is sure to rise by at least 25 percent by 2019 when it is supposed to be in service.

Forget for a moment environmental issues, which get no more official attention in Hong Kong than they do on the mainland – indeed probably less. Destruction of the habitat for the Pearl river estuary’s unique white dolphins is seen of scant consequence if Hong Kong and its neighborhood are to become more prosperous, even if only temporarily. Too bad for the dolphins.

But for reasons of both national and domestic politics, a government with an embarrassment of funds at its disposal and the interests of the construction industry to consider is determined to go ahead with the territory’s most expensive infrastructure project even while the existing airport is under-used. The reason has nothing to do with runways but with Hong Kong’s subordinate position not just vis-a-vis Beijing but also its immediate Chinese neighbors. Singapore may feel hemmed in by Malaysian and Indonesian airspace but its geography is less restrictive and anyway it can negotiate as a sovereign state.

Hong Kong’s maximum traffic under current circumstances is around 66 flights an hour, but could be a lot more if there were not such tight airspace restrictions which result in delays and long holding periods which add to airline costs. The Airport Authority (AA), the government entity which runs it, has probably made matters worse by encouraging the development of flights to secondary mainland cities and, say some, under-pricing fees for the smaller regional jets compared with longer haul destinations using bigger aircraft.

As an international city of renown, and favorable geographical position, Hong Kong feels it should be able to compete with the likes of Singapore, Seoul or Bangkok and use to a the full an airport which already has very good support infrastructure – not least a fast rail and road links to the city. But for a long time already its air traffic has been limited and/or delayed by limits on its airspace. These are attributable in the first instance to the demand s of the Chinese military which has a habit of making life difficult for all airlines operating in China but is especially problematic for Hong Kong. Second, Hong Kong lies very close to three other airports: Macau which cannot accommodate the larger planes but is busy with mainland and some regional traffic; Shenzhen, which is only 30 km away, and is heavily used for domestic traffic; Zhuhai, next to Macau, which has very little traffic so far but wants more. Not so very far away is Guangzhou’s airport, which has extensive long haul international flights as well as domestic and regional ones. Guangzhou’s airport has similar passenger numbers to Hong Kong but most is domestic. Shenzhen gets about 60 percent of Hong Kong’s traffic, Macau 10 percent and Zhuhai currently only 4 percent.

Hong Kong used to worry that international air traffic rights were a sovereign issue and thus its interests would be sacrificed, earlier by Britain, then China. But that has largely changed because of global deregulation and the demise of national flag carriers. Now Hong Kong has a worse problem: how to compete for airspace not just with the PLA but with three or four nearby airports.

Hong Kong’s officials talk forever about cross-border cooperation and have spent billions on infrastructure in pursuit of it. But the neighbors are more interested in competing with richer, more prestigious Hong Kong, not allowing it to sustain its “top dog” position without a fight, or at least expanding at its expense.

Hong Kong has even played into the hands of its neighbors, providing much of the estimated US$10 billion cost of a 50 km road bridge and tunnel linking it to Macau and Zhuhai. This will make it very quick for passengers from Hong Kong to use these other airports rather than pay the US$23 extra fee which the Hong Kong government proposes charge to departing passengers to use the existing airport. This charge is to pay for part of the new runway.

The charge is it itself a bizarre proposal. If the new runway generates extra traffic it should be paid for out of future receipts from those uses, the capital cost being provided by equity or debt raised by the Airport Authority, the government agency which controls Chek Lap Kok. But it devised this as a way of avoiding having to go to the territory’s Legislative Council for the budget approval needed for the government itself to inject new funds into the AA, or for the AA borrowing the money needed which would require a government guarantee.

Critics argue that before starting to spend such a huge sum on a relatively modest increase in capacity, the government should first resolve the air traffic issues. Hoping that Beijing will somehow in the future lay down a airspace plan which will benefit Hong Kong, likely at the expense of the PLA and the other airports, may be wishful thinking.

Others argue that because Hong Kong does not have space for its own second airport, as New York has La Guardia and Newark, Tokyo has Haneda and Narita, Bangkok Don Muang as well as Suvarnabhumi and London three secondary airports, it should simply accept the situation and focus on international traffic and let the neighbors take up domestic, short haul traffic. Hong Kong’s mostly hilly terrain – in contrast to Singapore – is not airport-friendly. As it is, Hong Kong is spending another US$10 billion or more on just 26 km of high speed rail line which connects to the mainland system and is expected to absorb some of the short haul air traffic. Much delayed and vastly over budget, the rail link is now due to be operational in 2017.

The Hong Kong government shows every sign of having decided to go ahead with the third runway regardless of commercial justification, partly to please vested business interests. It may also be a lever for acceding to business demands for Hong Kong to import large numbers of workers as shortages are already one reason for the delay in projects such as the railway and Macau bridge.

The Airport Authority was supposed to be corporatized but this has not happened because officials do not want it to be subject to the more commercial discipline that would result. It has however launched a barrage of propaganda in favor of the third runway. One story repeatedly retailed to the media is that being farther from the hills of Lantau, the island on which the airport sits, it would be less prone to the wind-shear problems that sometimes affect operations. While true, wind-shear only occasionally causes disruptions and the new runway would provide only partial alleviation.

Despite the propaganda that Hong Kong will somehow lose status if the runway is not built, there is widespread public skepticism given the huge waste of public money on

grandiose but economically and environmentally dubious projects. The Macau bridge does not include a rail link. The high speed rail is so expensive because vested business interests wanted it to go to the heart of Kowloon’s shopping district rather than a suburban destination like its counterparts in Beijing, and Guangzhou. Another boondoggle is a 4 km six lane road on Hong Kong island costing about US$5 billion. Most is for a 2.3 km road tunnel under the Wanchai and Central districts, probably making it the world’s most expensive tunnel per kilometer. It will encourage car usage and increase the already high level of air pollution in one of the world’s densest cities It is also massively increasing the cost of another genuinely needed railway now being built, the Shatin-Central commuter link, because the two tunnels must cross each other under Hong Kong harbor. The road tunnel’s return to the economy will be negative. But such issues do not concern a government overloaded with cash and with a bureaucracy which likes such mega projects almost as much as the contractors.