Speech on industrial zones (English only)

The following is a speech delivered by the Secretary for Planning and Lands, Mr John C Tsang, at the annual dinner of the Hong Kong Institution of Engineers today (November 30):



The Quiet Industrial Revolution:

The Transformation of Industrial Zones in Hong Kong



Mr Chairman, Ladies and Gentlemen


It is my great pleasure to be here this evening to attend the Annual Dinner of the Hong Kong Institution of Engineers, Structural Division and the Institute of Structural Engineers, Hong Kong Division.





I went to a technical college in Cambridge, Massachusetts which, like your esteemed Institute, employs as mascot the same studious dam builder of mother nature. To find myself here in the midst of so many engineers is almost like going back to my alma mater for a class reunion. I have always had the greatest respect for engineers, the professionals who are responsible for the greatest wonders that we see in the world today. I actually know what you have gone through to achieve your much admired status because I, too, have burned that mid-night oil trying to make sense out of those impossible problem sets on structure, materials or whatnot. The difference is that you have made it as engineers today, practicing the honourable trade of building. I have taken the easy route and become an administrative officer, practicing the much-criticized trade of bureaucracy.


Hong Kong's engineers have made tremendous contributions to our overall economic development. You have played a key role in transforming that tiny fishing village into Asia's World City. I have no doubt that you will continue to perform your miracles in helping to improve the well being of our community. The task at hand is, indeed, a huge and difficult one. Not only are we engaged in an ambitious infrastructural building programme of $600 billion in the next 15 years, we are also beginning to redevelop our aging neighbourhoods, rejuvenating our urban landscape.


There are many difficult issues to tackle on redevelopment and we are beginning to deal with them in the context of the Urban Renewal Authority. Tonight I would like to share with you our thinking on a single aspect, the redevelopment of the many under-used industrial buildings in our community. The topic of my speech is "The Quiet Industrial Revolution: The Transformation of Industrial Zones in Hong Kong". I do not have in mind any form of armed struggle, or the reintroduction of the mechanical weaving loom to Hong Kong. I am looking to effecting a quiet change in mind set, thinking beyond the current constraints and identifying win-win solutions for all concerned.


Economic Transformation



Since the middle of the last century, Hong Kong's economy has experienced several phases of transformation. In the sixties we had predominantly labour intensive manufacturing industries in simple factories. In the seventies we moved to more sophisticated products, meeting the demand of importing markets.


In the late seventies, the Mainland began to implement the open door policy, and our labour intensive industries, applying the principle of comparative advantage, relocated their production facilities to the Pearl River Delta region where the price of land and labour is even more competitive. Hong Kong was left principally with front end and back end servicing functions.


In the last decade, we went further up-market and established ourselves as an international financial center, a trading hub and a transshipment center. As we moved into the new century, we have begun to restructure our service industries into knowledge based entities, with more back office functions being relocated to the Mainland to achieve even greater efficiency and cost savings.


Industrial Buildings



As a result of this economic transformation process, a large amount of industrial premises, which were built to meet the demands of the manufacturing boom in the past, have been made surplus and redundant. Many of these buildings have as a result become dilapidated, and many of these neighbourhoods have become derelict. It would, indeed, be a big waste of scarce resources if they were simply left idle. We must find a way to make fuller use of these resources and at the same time, bring new life to these areas.


There are at present some 1,700 private industrial buildings throughout the territory, and about 1,200 of them are in the urban area. Many of these buildings are under-utilized. The traditional wisdom is to demolish these old industrial buildings and redevelop them. This is the Hong Kong way. The question is whether this form of redevelopment is the most sustainable use of resources.


Many of our industrial buildings are still structurally safe and they do not have to be demolished simply because they are not fully productive any more in terms of their originally intended functions. These buildings can actually provide a ready source of accommodation for many of our on-going functions. Over the past few years, the Government has cut down considerably, and I think rightly, the scale of reclamation for our development projects. New land will be harder to come by in future. That is another good reason for us to make better use of these readily available resources.


The use of surplus buildings due to economic transformation is not unique to Hong Kong. Many large cities have encountered similar developments and we can learn from their experiences. In adapting these experiences to suit local circumstances, we have to take into consideration the special conditions that we face in Hong Kong. For example, in many cities overseas, it is normally the case that an entire industrial area would become redundant over time and is left abandoned. In Hong Kong, obsolete industrial buildings are often located in the midst of other industrial buildings that are still in active use. This is because the transformation process is continuing, and mixed use in the meantime creates a number of inter-face issues.


Guiding Principles



In considering how we can better manage the process of transformation of our industrial areas, I think it is important that we adhere to three guiding principles -


* First of all, we should seek to minimize disruption to the established economic activities and employment in the industrial areas. There is still a considerable amount of industrial activities going on. We must avoid disrupting active uses.


* The second principle is that the process of transformation must be market driven. The Government must not get into an arm wrestling match with the invisible hand. The free market is far more efficient in determining when, where and how the transformation should take place. It is important to bear in mind that the majority of industrial buildings in Hong Kong are privately owned, and private developers must make up their own minds according to their own priorities and circumstances.


* That does not mean that Government should just sit back, do nothing and wait for Adam Smith to drop by. Quite the contrary. The Government should take up the role of a proactive facilitator, removing the institutional barriers and creating an environment that is conducive to the transformation. That is the third principle.





In accordance with these principles, we have adopted a two-pronged approach -


(a) rezone surplus industrial land for other uses; and

(b) introduce more flexibility in the use of industrial buildings.


The Town Planning Board would have rezoned by the end of this year 165 hectares of surplus industrial land to "Other Specified Uses" annotated "Business" and 47 hectares to other non-industrial uses, such as residential development and community facilities. The "Business" zone provides much more flexibility in land use in that three economic activities i.e. clean industrial, general office and commercial uses can co-locate in the same building without the need for planning application. This is a major step forward, and the total amount of rezoned industrial land already represents about 40 per cent of the original stock.


We have also taken steps to introduce even greater flexibility in the use of existing industrial buildings. Recently, the Town Planning Board agreed in principle to permit, either as of right or by way of planning permission, the use of IT and telecommunications industries, public entertainment and educational institution in industrial buildings.


These measures should serve as powerful catalysts to bring life back to our old industrial areas. The opportunities offered by these changes are tremendous. As the Chief Secretary pointed out in a recent speech, clusters of industrial buildings could be converted into "Knowledge Precincts" where a range of community colleges, internet cafés, bookshops, libraries and IT outlets can be established.


Development of Lofts



We don't want to stop there. We want to take the concept even further. We want to venture into even more challenging territories. We want to test the possibility of developing our old industrial buildings into lofts.


It is quite common place to find in overseas cities old industrial buildings and godowns that have been converted into up-market residential uses, such as loft apartments and studio flats. "Loft living" first started in New York City in the 1950s. Poor artists, attracted by the cheap rent and the large space that was suitable for both living and working purposes, chose to move into these abandoned industrial buildings. It is interesting to note that such uses were initially regarded as illegal by the New York City authorities. However, the loft development was so successful in providing suitable living alternatives for a certain class of people and giving a face-lift to the dilapidated industrial areas that the City changed its mind, and went on to encourage such developments at a later stage.


The "loft culture" has since grown rapidly and has become an integral part of the regeneration of run-down industrial areas in many major cities. I have lived in a loft, and I can attest to the attractiveness of living in a large space without partitioning, punctuated only by shifts of lighting as the day changes.


There are many institutional barriers besides the inter-face issue that I mentioned earlier which render the development of lofts difficult to realize in Hong Kong in the near term. We need to resolve issues like difference in permissible plot ratios between domestic and non-domestic buildings, land premium, building and fire safety requirements and more. These are all important aspects that should be examined further in detail. We must find a way to manage these issues and we must not allow them to constrain our development intentions. We should let our imagination decide where our limits lie. I look forward to the establishment of Yuppie Hubs in our industrial areas with studio flats, home offices, art galleries, theme restaurants, pubs and innovative entertainment centers.





These are some of my initial thoughts on how the Government can help to take forward the process of transformation of our industrial areas. A lot of course remains to be done, and to make this dream come true we would require concerted efforts by all parties concerned. Experts like you have a key role to play, particularly in coming up with creative and innovative solutions to make the process sustainable and cost effective. I look forward to working with you on this exciting aspect of renewal.


I must make one final point. Tonight marks a very special occasion for the Furama. I would like to join the other nostalgic guests here tonight to bid farewell to a Hong Kong institution where many memories were made. I am grateful to our hosts for having the foresight for making this historic choice of venue and for helping us relive some of these fond memories.


Thank you.


End/Friday, November 30, 2001