Speech by SDEV at CIOB Members’ Forum Conference "Constructing the Future - A Global Perspective" (English only)

Following is the speech by the Secretary for Development, Mr Paul Chan, at the Chartered Institute of Building (CIOB) Members' Forum Conference "Constructing the Future - A Global Perspective" today (July 14):
President Nash (CIOB President, Mr Paul Nash), Hong Kong President Mung (CIOB (HK) President, Mr Charles Mung), Panel Chair Soffe (CIOB Vice President, Mr Chris Soffe), distinguished guests, ladies and gentlemen,
Good morning.
It is my great pleasure to join you all at the CIOB Members' Forum Conference. May I first extend my warmest welcome to our eminent construction professionals from all over the world.
Since its foundation in 1834 in London, the CIOB has reaffirmed itself as the leading pioneer in the building sector. In the face of a shrinking global workforce, the Institute's latest report, "Productivity in Construction", has invigorated timely debates on the benefits of buildable designs, offsite prefabrications and technological innovations. The CIOB also attracts fresh talent to the building industry through its annual Global Student Challenge competition. This year, our Hong Kong Polytechnic University finalists (note 1) certainly relish the chance to compete against over 50 teams from other places in the world.
Constructing the Future - A Global Perspective
The theme of today's Conference is "Constructing the Future - A Global Perspective". Currently, our traditional bloc of developed nations is in search of another gear in economic growth. The US (United States) economy only managed to record a modest 0.5 per cent expansion in the first quarter of 2016, the slowest growth in two years. Furthermore, Japan's economy has contracted since 2012 (note 2) despite the fiscal stimulus and reforms under Abenomics (note 3). For Europe, the UK (United Kingdom)'s recent decision to leave the European Union (EU) will certainly place further downward pressure on the already modest 1.8 per cent EU growth forecast in 2016. The repercussions of Brexit on Europe and the world economy are yet to be seen.
Amidst the above uncertainties and challenges, the East Asia and Pacific Region shines through with a projected 6.3 per cent growth in 2016 according to the World Bank. Among those, Mainland China leads the wagon with a targeted growth rate of about 6.5 per cent to 7 per cent, and the country stands poised to overtake the US as the world's largest economy in 10 to 15 years' time. India continues to impress with 7.9 per cent growth in the first quarter of 2016, which is duly supported by a 41 per cent population under the age of 20. Indeed, India extends the tale of the BRIC countries as it continues to draw in foreign investment to bolster its infrastructure. Also at the heart of Asia's growth is the ASEAN bloc, which continues to expand by 4.6 per cent in 2016.
Constructing the future: the construction industry in Hong Kong
From a more local perspective, Hong Kong's economy has thrived with a 2.4 per cent growth in 2015. In respect of our construction sector, we have been experiencing a high level of construction in the past few years. In 2008, this Government launched the 10 mega infrastructure projects which included a number of new railway, cross-boundary and development projects. With our infrastructure plans in full motion, Hong Kong's construction expenditure has rebounded from the recent low of about $140 billion in 2009 to over $200 billion in 2015.
Looking ahead, Hong Kong will press ahead with our development initiatives. We target to supply 460 000 housing units in the coming 10 years and are actively preparing new development areas, or extensions thereof, in the New Territories and Lantau. Mega infrastructure projects in the pipeline include the Three-Runway System project, strategic highways including the Central Kowloon Route and the Lam Tin - Tseung Kwan O road tunnel, and also the extension of seven railway lines planned in our Railway Development Strategy of 2014. We have also set aside HK$200 billion for hospital development in the next 10 years to cater for our ageing population. With private and public development initiatives, we forecast that the construction expenditure will remain over $200 billion a year in the next decade or so. Furthermore, we are conducting a forward-looking "Hong Kong 2030+" study, the findings of which will form the basis for our long term territory-wide spatial planning.
Our challenges
But I must say the above plans are not all in smooth sailing. Construction costs have escalated by more than 50 per cent in the past five years. International reports have ranked Hong Kong the third most expensive in the world to build. High construction costs will strain our public finances and undermine our capacity to invest in infrastructure.
To tackle this, we have just established a multi-disciplinary Project Cost Management Office under the Development Bureau to devise and promote cost-control initiatives on public works projects. We will adopt a three-pronged approach to bring down our construction costs. First, we will conduct a comprehensive review of our works policies and requirements with a view to identifying cost-saving proposals without compromising safety and works quality. We will advocate and promote a number of initiatives which will be conducive to better cost management. Second, we are scrutinising some 300 public works projects to unleash their cost-saving and design optimisation potential. Third, we will provide training to enhance the cost-management skills of our in-house professionals. With the building sector making up half of Hong Kong’s annual construction expenditure (note 4), I am looking forward to learning your insights and expertise relating to cost control.
Another challenge is the prevalent manpower shortage in the construction industry. With 40 per cent of our registered workers currently above the age of 55, the construction industry is among the first to feel the pain of Hong Kong's dwindling labour force that will peak in 2018. While we are collaborating with industry stakeholders to step up measures in attracting more young entrants and enhancing the skills of our construction workers, the foreseeable manpower shortage calls for more innovation in the construction industry to ensure efficient delivery of our various development initiatives.
In recent years, the Building Information Modelling (BIM) technique has had its share of success in scheduling project conflicts, minimising construction waste and improving productivity. To this end, we are seeking to accelerate the adoption of BIM in our public works projects, with the Construction Industry Council (CIC) opening the BIM Centre this April to train 6,000 intakes on the use of BIM each year. As a further step to promote innovation, the CIC Innovation Award last year encouraged the pervasive application of technology. Among the winning entries, the Z-panel lightweight prefabrication system and new mechanised concrete construction methods could cut down construction procedures and reduce manpower requirements. However, all these technologies will come to nothing without your support. I appeal to all CIOB HK members and industry stakeholders here to embrace the fruits of innovation and take practical and swift action to implement them in your construction projects.
Constructing the future: the Belt and Road Initiative
Ladies and gentlemen, Hong Kong is Asia's world city. For us, constructing the future bears a significant regional and international dimension which is now further reinforced by the Belt and Road Initiative advocated by our motherland.
Following the Belt and Road Initiative, there will be a strong paradigm shift in global dynamics. About two millennia ago, the ancient Silk Road was where East meets West through the extensive trading of silk, porcelain, bronze ornaments and more. Nowadays, the Belt and Road Initiative refers to the Silk Road Economic Belt and the 21st Century Maritime Silk Road, a significant development strategy intended for promoting economic co-operation among countries along the two routes. This grand strategy spans over some 60 countries that represent 63 per cent of the world’s population in Asia, Europe and Africa. The combined gross domestic product of these countries amounts to US$23 trillion, accounting for about 30 per cent of the world's total GDP. You must have heard of the five areas of connectivity under the Belt and Road Initiative, i.e. policy co-ordination, facility connectivity, unimpeded trade, financial integration, and people-to-people bonding. And among these five areas, infrastructure facilities will certainly go first because they will naturally facilitate the connectivity of the other four areas. This increased infrastructure investment will certainly give immense opportunity for professionals in the field.
While Mainland China's construction enterprises are fully equipped with the necessary capital and manpower to take forth infrastructure projects, Hong Kong construction professionals do have an edge in terms of international exposure, risk management skills, dispute avoidance and dispute resolution expertise. Our international edge and professionalism could compliment the Mainland enterprises in delivering foreign infrastructure projects. Indeed, through the Development Bureau's collaboration with the State's Ministry of Commerce, Hong Kong architects and surveyors are already taking part in two foreign aid projects in Nepal and Cambodia.
As for the financing of construction projects, Hong Kong has a unique role to play. As the world's financial centre in Asia, Hong Kong already boasts a wide range of financing options, such as loan syndication, private equity funds and Islamic bonds, just to name a few. Furthermore, the Hong Kong Monetary Authority has just launched the Infrastructure Financing Facilitation Office which will serve as a platform to bring together key stakeholders, including fund providers, project developers and the Belt and Road countries. This is an unprecedented development opportunity. May I appeal to all of you to join hands in supporting the Belt and Road Initiative for the benefit of mankind.
Ladies and gentlemen, I would like to conclude with a quote from the American actress Lily Tomlin, "The road to success is always under construction". I am sure all building experts here will stay ahead of the development frontier, construct a better future for our younger generations, and lead the world to even greater heights. I look forward to a fruitful sharing of insights and new ideas at this Conference.
Thank you very much.
1. The finals will be held in Hong Kong from July 9 to 15. The finalists are invited to attend the Conference.
2. www.focus-economics.com/countries/japan
3. The three arrows of Abenomics include fiscal stimulus, monetary easing and structural reforms.
4. According to the Construction Industry Council, building and RMAA works made up 57.6 per cent of total construction expenditure in 2015.
Ends/Thursday, July 14, 2016
Issued at HKT 14:31