A view of Hong Kong by Ryan McManimie/Unsplash

Perspectives

Letter from Hong Kong: Our much-needed $64.5bn boost

18 December 2020 | By Anel Idriz MCIOB | 0 Comments

Prior to the Covid-19 outbreak Hong Kong’s construction industry was already in a difficult situation, with output contracting by 9.3% in 2019 due to the deteriorating situation as a result of protests leading to a general slowdown in residential construction, and a large drop in transport infrastructure works.

Reflecting back on a turbulent 2020 with mixed emotions we ask ourselves what the industry landscape will look like in 2021 and what efforts have been made to stimulate economic growth in Hong Kong’s construction Industry.

According to the Census and Statistics Department (C&SD), the country’s construction industry continued to decline in the first quarter of 2020, dropping by 9% year-on-year in real value add terms.

This marks the sixth consecutive quarterly decline since the fourth quarter of 2018.

It is predicted that the construction industry will contract by 9.2% in 2020 due to the pandemic and renewed political tensions as a result of the US government’s trade war with China. The removal of Hong Kong’s special status is expected to decrease investment in the construction industry.

However, this trend is set to be reversed in 2021 following a major announcement from the leaders of Hong Kong with a planned acceleration of HK$500bn (US$64.5bn) investment in public works the much-needed life blood for the struggling construction sector to pull Hong Kong out of recession and revive the economy.

According to Chief Executive of Hong Kong, Carrie Lam Cheng Yuet-Ngor: “The construction sector is an example of our approach to revive the economy, and we are going to apply the same mentality to other sectors.”

This plan will see large projects in new rail lines, roads, hospital expansions, housing and proposed facilities within universities.

Under the plan, there will be an annual investment of HK$100 billion (US$12.9 billion) over the coming five years with tenders for new projects being launched simultaneously.

For larger housing, rail and road projects these will be divided up so that smaller contractors would be eligible for tender.

In addition to the planned spend there are still large infrastructure projects ongoing, for example the Capital Works and Third Runway projects at Hong Kong International Airport.

There is also the Central Kowloon Route, a highway project under construction that, when completed in 2025, will form the section of the planned Route 6 which runs through the Kowloon peninsula, largely underground.

Whilst 2021 should present major opportunities, the challenges remain the same, with a resurgence of Covid in waves and lockdowns being imposed, local protests anticipated post Covid and renewed political tensions as a result of the US government’s trade war with China.

  • Anel Idriz is regional director, Asia Pacific, of DGA Group

Image: A view of Hong Kong by Ryan McManimie/Unsplash