Speech by SDEV at Construction Industry Council Conference 2012 (English only)

Following is the speech delivered by the Secretary for Development, Mr Paul Chan, today (September 28) at the Construction Industry Council (CIC) Conference 2012 "Manpower Sustainability of Construction Industry cum Zero Carbon Building Development in Hong Kong":

S S (Chairman of the CIC Mr Lee Shing-see), distinguished guests, ladies and gentlemen,

This is an important conference and also a very good opportunity for old friends and partners to meet again. For myself, I am both honoured and humbled to be going back to my roots, as the old adage goes. I say this because, as some of you may be aware of, about three decades ago I started off my career as the Chief Accountant and Secretary to the Council at the Construction Industry Training Authority (CITA).

I am most delighted to see that, since then, the industry has made tremendous progress. What was once a fragmented, unregulated industry is now an integrated whole that strives for excellence.

Let me briefly recap. The CIC was established in 2007 to become the construction industry co-ordinating body. Encompassing all sectors of the construction industry, the CIC has a strategic mission to spearhead reforms and sustain momentum to achieve continuous improvements across the construction industry. A year later, the CITA amalgamated with the CIC, putting training and trade-testing under its purview. In June this year, we passed a bill at the Legislative Council that paved the way for the amalgamation of the Construction Workers Registration Authority with the CIC. I am glad to learn from S S that the logistics work for the amalgamation is well under way. May I take the opportunity here to sincerely make an appeal: the CIC is a collaborative industry-wide platform established for us all. We should all make full use of the CIC to propagate improvements across the entire industry.

Back to the conference, the two subjects discussed today are pivotal to the future of the industry. I understand that you had a fruitful discussion this morning on manpower, which is the cogwheel that drives forward the industry. Zero-carbon buildings, about which we will hear extensively from experts after the lunch, will play an increasingly important role in future projects.

The Government will champion policies and initiatives in this direction, but we certainly need the support from industry stakeholders. For future development, we will adopt a dual-pronged strategy - on the one hand we will strive to enhance land supply, and on the other we will continue to invest in infrastructure. I believe this is conducive not only to the sustainability of the construction industry, but also to the long-term competitiveness of Hong Kong.

On enhancing land supply, let me start off with a wake-up call. We definitely need more land to underpin Hong Kong's development in the coming years. Land is a scarce resource. We are already facing a housing shortage. Our local population is expected to increase to 8.47 million by 2041. No doubt, this will inevitably drive up the demand for housing, health care, education and employment opportunities. At the same time, we will need to maintain a quality living environment. Hence, an important element of our development strategy is to enhance land supply as a backbone to sustain our development.

We have been working hard developing a land reserve to ensure a stable supply of land without being affected by economic fluctuations and societal changes. Even during times when demand for land declines, potential sites will continue to be identified, formed and reserved in advance. The land on reserve can be released for development to meet housing, social and economic needs and unexpected opportunities within a short time, thereby enhancing our flexibility to respond to changes.
Reclamation was once the main solution to the land shortage problem in Hong Kong. Over 6,800 hectares of land in Hong Kong, that is 6 per cent of our land, were created from reclamation. Reclamation within Victoria Harbour to create new land is now legally constrained under the Protection of the Harbour Ordinance. We therefore need to explore possible alternatives to expand land resources, while staying prudent in pursuing reclamation on a limited scale.
Our strategy is to adopt a flexible mix of land supply options, including measures to generate new land, as well as measures to optimise the use of existing developed land. This broadly boils down to four "R"s - rock cavern development, reclamation outside Victoria Harbour, rezoning of under-utilised land and releasing industrial land for other uses. I will spend more time on the first two "R"s today, as they both involve capital works and are therefore more relevant to the construction industry.

Our first "R" is rock cavern development, which many consider a novel concept. Sixty-four per cent of the land area in Hong Kong is particularly well-suited for rock cavern development. In fact, we have developed rock caverns before to accommodate public utility facilities, such as the Island West Refuse Transfer Station, the Stanley Sewage Treatment Works and the Western Salt Water Service Reservoir. More recently, we have relocated the Western Salt Water Service Reservoir into a cavern and its original piece of land has been developed into the University of Hong Kong's Centennial Campus. But these projects have only been done on a project-by-project basis without a long-term strategy.

To fully utilise the potential of cavern development, we have embarked on a feasibility study this year to map out a long-term strategy for cavern development and to devise a cavern master plan for the territory. We will evaluate tangible economic costs and benefits as well as the intangible social and environmental costs and benefits of the development proposals in the feasibility study.

Reclamation is our second "R". While we will not contemplate reclamation within Victoria Harbour, reclamation at suitable locations outside the harbour on a controlled, appropriate scale should be considered.

When pursuing reclamation, one major concern is its potential impact on the physical environment, marine ecology and the fisheries industry. We will advocate the deployment of cutting-edge technologies and the use of suitable environmental mitigation measures during the construction stage. With the support of industry stakeholders in developing and adopting clean technologies, negative impact on the environment will be minimised.

Reclamation can, in fact, be considered a suitable option of land supply. The large amount of public fill generated from redevelopment and infrastructure projects, as well as contaminated mud dredged from fairways, can be used in local reclamation. Using public fill in local reclamation is a cheaper and more environmentally friendly alternative than the delivery of the fill to Taishan in the Mainland for reclamation.

Reclamation and rock cavern developments are indeed two of the measures of the Government's six-pronged approach to increase land supply as announced in the 2011-12 Policy Address. We have also been stepping up efforts to build up a sustainable land reserve through the release of industrial land for non-industrial uses; looking into the use of green belt areas that are devegetated, deserted or formed; examining Government, Institution or Community (GIC) sites; and exploring the possibility of converting some degraded rural areas in North District and Yuen Long into housing sites.

Remarkable progress has been made in identifying land. For example, from our latest round of review on industrial land, about 30 hectares of industrial land in Tsuen Wan, Yuen Long, Tuen Mun and elsewhere have been recommended for residential use. Thirty-six GIC sites and government sites have been identified as suitable for residential development, providing a total of about 11,900 private and public housing units. The Planning Department is now actively following up on these sites and will consult the community on the required rezoning. The Government is also pursuing studies on degraded rural areas in North District and Yuen Long. These innovative measures will help expand Hong Kong's land resources to help us respond to the future opportunities and challenges.

I have spent some time covering our measures to sustain land supply. While they will provide the basic ingredient for development, we also need to invest in infrastructure to enhance connectivity and to keep up our overall competitiveness. The annual expenditure on capital works has undergone a threefold increase from $20.5 billion in 2007-08 to an estimated $62.3 billion this year. We are also anticipating annual expenditure of over $70 billion in the next few years. This is the result of the implementation of the strategy of promoting economic growth through infrastructure development.

Each year the World Economic Forum publishes a Global Competitiveness Report. The report ranks the competitiveness of economic entities around the world by assessing a number of indicators including the infrastructure index. As Asia's world city, Hong Kong has consistently been one of the forerunners in the ranking. In the latest report released earlier this month, Hong Kong was ranked ninth among 144 economies and achieved the best score in the world on the infrastructure index. This is the best ranking for our city since the establishment of the index. The high level of competitiveness of Hong Kong will certainly help attract businesses and foreign investment.

These commercial activities will need to be sustained and supported by the construction of prime office towers, hotels and conference venues. In the coming years, one of our main objectives is to ensure a steady and adequate office supply. To this end, we are dedicated to creating a new central business district in Kowloon East to support Hong Kong's economic development. The supply of office space will be increased by 4 million square metres. This includes 1.1 million square metres at the Kai Tak Development and 2.9 million square metres in Kwun Tong and Kowloon Bay. Taking into account the existing stock of 1.4 million square metres of office space in this district, Kowloon East has the potential to supply a total of 5.4 million square metres of office space. This would be twice as large as the existing office space in Central.

We will also improve the connectivity of Hong Kong with other economies. For land routes, the Hong Kong and the Shenzhen authorities are building a seventh land-based boundary control point at Liantang/Heung Yuen Wai, which will be the first boundary control point directly accessible by both pedestrians and private vehicles. This is a major project under the 12th National Five-Year Plan, and is scheduled for commissioning in 2018. For air routes, to cope with air traffic demand up to 2020, the Airport Authority is taking forward a midfield expansion project at the Hong Kong International Airport to provide a new concourse, additional aircraft stands and apron facilities. These measures, when completed in 2015, will increase the annual handling capacity of the airport to 70 million passengers and 6 million tonnes of cargo. Environmental impact assessment for the third runway is under way and is expected to complete by the end of 2014.

Infrastructure projects will also create jobs and sustain the healthy development of the construction industry. Benefiting from a number of capital works, the unemployment rate in the construction industry dropped by nearly 9 percentage points from a post-financial tsunami peak of 12.8 per cent to the current low level of about 4 per cent.

In order to sustain a robust and skilled workforce to deliver infrastructure projects in a timely manner for the economic growth of Hong Kong, we strive to nurture quality and sufficient local construction manpower. To this end, we have secured a total of $320 million to support the CIC for attracting new blood and further enhancing training for the construction industry. With the support of and collaboration with the construction industry stakeholders, the efforts have started to deliver encouraging results. The total number of registered construction workers has increased from about 271,000 in April 2010 to over 294,000 in September 2012, an increase of about 8 per cent in just two years. Among recently recruited trainees under the CIC's enhanced training programme, about 60 per cent are aged under 35 and most of them are new entrants to the industry. We envisage that the demand for construction manpower can largely be met by the local workforce. There may be cases of labour shortage occasionally on novel construction methods or due to short-term exceptionally high demand for a particular trade. We will not consider importation of labour lightly.

We all know that sustainable development is not simply about having sustained economic growth. We will continue to attach importance to our heritage, our quality of life and our environment. Partnerships are continuously forged in conservation of heritage and revitalisation of historic buildings. Walls and facades of many of our skyscrapers are now decorated with shades of green through adoption of skyrise greening technologies. Construction projects are gearing towards a more eco-friendly, low-carbon regime by devising innovative and creative solutions. I understand that the Permanent Secretary for Development (Works), Mr C S Wai, briefed you this morning on the Government's low-carbon initiatives and I will not repeat them here.

Ladies and gentlemen, it is beyond dispute that stable and adequate investment in terms of land and manpower resources is fundamental in sustaining the healthy and long-term development of the industry. On stability, the local construction industry has experienced booms and busts over the years. This cyclical pattern is also common in other advanced economies including Australia and Singapore. During high tide, there are more projects than the industry could take up, but this could transition quickly into a low tide when there are too few projects. It is understandable that we have heard calls from the industry for evening out construction workload. However, before this can even be contemplated, we must aim to have a complete picture of the total planned construction output of the entire industry. Statistics indicate that the public sector to private sector ratio of construction workload has been about 4 to 6 over the years. While the Government can manage our share of public works as far as the public sector is concerned, we alone cannot turn the tide. We need collaborative efforts from the private sector for better sharing of information on future workload, such that the entire industry can work hand in hand to capitalise on this golden age of construction.

On adequacy of resources, I have outlined the Government's measures to sustain the future development of the construction industry and Hong Kong at large. From a wider policy perspective, I have been asking myself this question: Are we doing enough? The construction sector contributes 3.5 per cent to Hong Kong's gross domestic product and employs about 8 per cent of our workforce. This achievement is the result of massive investment of public resources over the past few years. However, when compared to countries such as Australia, Japan and Singapore, Hong Kong's construction expenditure only takes up a modest share of our GDP. In the Hong Kong context, we can ask ourselves how many resources should be put into the construction industry in the future, bearing in mind changing economic and social circumstances and other priorities. This is not an easy question. I do not have an answer. I do not want a ready answer now. I certainly will welcome views and suggestions from you and engage in dialogue for the better future of the industry.

Last but not least, I wish you all a fruitful discussion this afternoon. For our overseas visitors, do enjoy Hong Kong. Shop until you drop. And for everyone, good health.

Thank you.

Ends/Friday, September 28, 2012
Issued at HKT 20:03