Hong Kong’s Cash Cows and White Elephants

Lowu-Shenzhen Border (Photo by Derrick Chang)

Hong Kong’s urban planners may be on their way to a new adventure, signaled by an August 9 report by a government-linked think tank proposing that Hong Kong and Shenzhen join hands to create “China’s world-class metropolis.” Four days after the release, Government Secretary Henry Tang, in a speech to the Hong Kong-Shenzhen Co-operation Forum, proclaimed that “the long-term objective of our co-operation is to jointly develop a world-class metropolis comparable with New York and London.”

The report’s authors, from the Bauhinia Foundation Research Center, advocate creating a “joint-administrative zone” at the border between the two cities, a high-speed rail line linking the two cities’ airports, and increased legal “flexibility”–among other ideas – for Hong Kong and Shenzhen.

But the broad-brush effects of the report and its intricacies are wholly representative of the way endemic mismanagement, poor planning and cowering before powerful interest groups is pulling Hong Kong further from the “one country, two systems” principle under which the territory is supposedly governed.

An opinion piece by the Bauhinia report’s authors in the South China Morning Post calls for integration in order to “break out of the straitjacket imposed by ‘one country, two systems.”’ Yet for all the concrete it wants to pour, the report’s proposals have a poor foundation.

The airport link (whose cost, not included in the report, would doubtless be in the tens of billions), they say, is needed in the event of a “natural disaster” befalling the complex of bridges that link mainland Kowloon to the Hong Kong airport on Lantau Island. A 1-sq km “Hetao Development Management Authority” is also called for as an initial “model area for a Hong Kong-Shenzhen Metropolis,” that would operate under joint management but with Hong Kong laws and “special convenience measures for business people.”

The stitched together metropolis, the planners say, would be the world’s third-ranking city economy by net GDP – they fail to mention the more balanced per-capita effects of such a merger (the per capita difference between the two cities is US$29,000). These forecasts and rankings are themselves based upon econometrically questionable use of the same average growth rate figure over the past five years, to cumulatively determine those rates for the next 15.

Neither of the big construction suggestions seems economically viable. There are already four vehicular and two rail crossings over the border, as well as a US$3.7 billion bridge in the works that will join Hong Kong to Macau and Zhuhai. The bridge, which would itself link Hong Kong to the airports of the two cities in question, is the 20-year brainchild of local tycoon Gordon Wu, many of whose business interests lie in Zhuhai.

The Hetao (or Lok Ma Chau Loop) area is currently filled with toxic mud that would cost billions just to clean up, not to mention the expense of building “a special region within regions,” or administering an area that would have far more lax immigration controls than Hong Kong.

That Bauhinia’s findings might provide the basis for government policy is worrying. Indeed, a spokeswoman from the Hong Kong Transport and Housing Bureau has said, ‘We already plan to suggest building the Tuen Mun western bypass and another link of Tuen Mun and Chek Lap Kok . . . to shorten the journey between the two airports.’

It isn’t that Hong Kong doesn’t require greater links with Shenzhen, or that big-money projects are a waste of time. Hong Kong needs, and would benefit, from better infrastructure. However, these projects are often created outside a fair, competitive market and without proper public representation or strategic foresight of what is actually needed – the Bauhinia report consulted 100 Shenzhen residents and none from Hong Kong.

This is out of tune with the free-market fundamentals on which Hong Kong is supposedly based – where competition induces innovation, productivity and growth, and supply should correspond to demand – and risks turning such projects into white elephants for the government, and cash cows for developers.

Examples of this abound. The Lok Ma Chau Spur Line (a new railway link to Shenzhen), and the Shenzhen Western Corridor road and bridge project are two recently opened construction giants that have consistently failed to meet the projected capacity loads that might justify or recoup their cost – HK$10 billion and HK$2.3 billion dollars respectively.

Poor planning plays a part. The Western Corridor ends up in west Shenzhen, a disincentive for freight trucks trying to get to Futian, the commercial heart of the city. On the other side of the border, Lok Ma Chau villagers complain about the inadequate planning that has saturated their crucial bus facilities since the opening of the spur line.

Stonecutters Bridge, currently a 2.8 billion-dollar construction site earmarked for a 2008 opening, is set to link Cheung Sha Wan in Kowloon (of which Stonecutters Island is now geographically a part), to Tsing Yi on Lantau Island. The idea is ostensibly to cater to the increasing number of people who will live in new developments on the island, as well as road freight coming from Kwai Chung Port Terminal at the start of the bridge.

But Hong Kong’s population growth is low and falling, and immigration laws are strict. Its status as the region’s supreme logistics hub – while strong – is unlikely to rapidly accelerate, as the import-export business increasingly moves to cheaper and more direct ports on the mainland. Paul Zimmerman, convenor of ‘Designing Hong Kong Harbour District’ has said of the Highways Department’s public works industry: “they’re almost inventing excuses right now to build.”

Meanwhile, Cyberport – Hong Kong’s “IT flagship” and Hong Kong Disneyland have been disappointing. The former has little in the way of innovation and exists essentially as another property development rent spinner, not a real IT hub. The latter has not met attendance projections and the city’s HK$22.5 billion Disney investment is looking less rosy all the time. Indeed, Ocean Park, the city’s venerable amusement park and Disney rival is under new management, has been given a face life and is seeing its attendance growing.

A city that is battling with pollution, over-urbanization, high car taxes and a woefully high Gini ratio –a standard measure of income inequality, for which Hong Kong is ranked far below oligarchic Russia –should put more of its infrastructural eggs into the average man’s basket, by expanding fast, clean, cheap and efficient public transport like the MTR, instead of providing underused roads for expensive cars and developer’s wallets.