The local and global financial and monetary markets have been in a state of turmoil since the turn of 2016. The global economic outlook has become more uncertain while Hong Kong’s economic and monetary stability has also drawn some concern. While infrastructure investment can serve as a counter-cyclical measure to support economic growth in this macro environment, we must be more prudent to maintain the financial sustainability of public works investments and ensure that public money is well spent.
In recent years, there has been a huge and continuous demand for construction services in the community so as to, for instance, increase the land and housing supply, build internal and external transport networks, provide cultural and recreational facilities, and to implement the $200 billion hospital development plan, etc. Meanwhile, construction costs in Hong Kong have been escalating due to a number of factors such as surging wages and material prices, not to mention that the community have raised their expectations of construction standards, environmental protection, and occupational safety and health. An international survey shows that the construction costs of buildings in Hong Kong have been among the highest three around the world, comparable to those of London and New York. High construction costs will put pressure on our public finance and affect property prices in the long run.
Ranked top in infrastructure by the World Economic Forum for the sixth consecutive year, Hong Kong has been universally known for its outstanding infrastructure quality. However, as a well-known commercial goes, “Time will rust the sharpest sword”, it is time for us to review and fine-tune our established public works systems and the relevant requirements and standards in view of the soaring construction costs in public works projects nowadays, so as to embrace challenges of the new era.
The Chief Executive proposed in the Policy Address a series of new measures to strengthen cost control in public works projects, and setting up a dedicated office under the Development Bureau to take forward construction cost control. The work covers public works policies, as well as the design and planning of individual projects, including adopting the guiding principle of “design for buildability”, reducing unnecessary design and requirements, putting in place an indicative cost system for new building projects (e.g. schools, offices and staff quarters), enhancing the standardisation of project design, promoting mechanisation and construction by prefabrication, and refining the tendering of projects etc. The goal of these new measures is to ensure that persons in-charge of the projects realise the importance of cost effectiveness and cost control in nowadays project management without compromising construction safety and quality. Currently, the annual expenditure on public works projects exceeds $70 billion, while the value of projects pending approval stands at hundreds of billions dollars in total. Every percentage point of the expenditure saved amounts to billions of public funds that can be allocated to other services the community need. It is thus worth our effort to exercise stringent cost control. In addition to bringing the construction costs of public works back to a reasonable level, we also hope to promote good practices in construction cost control to the private sector by working closely with the Construction Industry Council and the industry, so as to benefit the construction industry as a whole.
As the Secretary for Development, I firmly believe that we will fall behind if we do not make any progress. Today’s high construction costs are affecting our living standards and competitiveness. We must take the challenges head-on, be innovative and make improvements. In this connection, our work definitely needs the support of the general public and Legislative Councillors. In the current legislative session, the Government has planned to submit 72 works proposals, amounting to $67.5 billion, to the Public Works Subcommittee (PWSC) of the Legislative Council (LegCo) for approval, but only five have been discussed by the PWSC so far. As for the Finance Committee, only two funding proposals amounting to only around $5.6 billion have been approved, which include the much discussed proposal of increase in allocation for the Hong Kong-Zhuhai-Macao Bridge Hong Kong Boundary Crossing Facilities Project that was finally approved yesterday.
The “congestion” in LegCo will disrupt the orderly launching of public works projects and the implementation timetables. Unfortunately, the construction industry will have to face again the situation of “dying from overeating one moment and dying from starvation the next”. In particular, given the uncertainty of the economic outlook, grassroots construction workers, young professionals and students in construction-related professions will all suffer. The ripple effect of the subdued performance of construction industry will have impacts on the consumption and other sectors, with grave consequences. Besides, many projects that are beneficial to people’s livelihood, such as hospitals, youth hostels, stadiums, cultural facilities and roads, cannot be completed at an early date. The Government will, therefore, strive to control construction costs in a responsible manner. I also hope that the Legislative Councillors would set aside their political differences and examine the Government’s public works proposals in a pragmatic and objective manner, so that Hong Kong can continue to move forward.
31 January, 2016
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