ENG-1987 — Page 17

2.

HONG KONG

BUILDING FOR THE FUTURE

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Hong Kong companies. Should the plans proceed, therefore, the chances of reaching an acceptable consensus would seem to be high. Moreover, the lead times involved in such comprehensive developments should assist Hong Kong over the threshold of the change of sovereignty in 1997 and into its new status as a Special Administrative Region.

The question that remains to be answered is whether the resources involved can be found without overstraining the economy or, in other words, whether what is needed can be afforded. It will help on considering this question to place it in context by examining how Hong Kong's development has progressed over the last 30 years in relation to the growth of the economy, and then to analyse what are the economic and physical challenges facing the territory in the latter years of the century and how the planning process is seeking to cope with them.

The Early Stages of Development

In the early years following the Second World War, Hong Kong was very poor and unable to afford grandiose development projects. Throughout the fifties it was also struggling to adapt its economy to the loss of a large part of its traditional entrepôt trade following the Korean War and the United Nations embargo on trade with China. The priority then was for the development of industry, and the creation of new industrial areas, such as Kwun Tong, absorbed a major part of the investment capacity of the territory. It was also the time when public housing of a minimal, basic, standard was initiated following the disastrous squatter area fire at Shek Kip Mei at Christmas 1953. Only when the economy began to grow again, on the back of expanding industrial exports, could anything more than the basics be afforded.

The first real post-war building boom began after the change in the Building Regulations in 1959, which permitted much greater density of development and thus the construction of higher-rise buildings. It was the time when the territory truly began to build for the future. The economy had by then reached the stage of self-sustaining growth, when increasing exports of manufactured goods created the resources for more capital investment and the investment, in turn, created the capacity for further expansion in the economy. It was also the period when, as more and more workers were absorbed into the industrial labour force, wages and the standard of living began to move up, away from the subsistence levels of earlier years.

This boom, which saw the first phase of the physical transformation of Hong Kong, petered out in the second half of the sixties. It led to an over-extension of credit by the banking system and the banking crisis of 1964-5. This was quickly followed by the destabilising 'Star Ferry' riots in 1966 and the Chinese Cultural Revolution disturbances in 1967.

In the face of these shocks, fixed investment fell quite sharply in the later sixties; but it did not cease, and development spending continued at a slower pace. At the same time, and in contrast, exports continued to increase rapidly, as did also investment by industry in plant, machinery and equipment. Despite the declining rate of capital spending, therefore, the economy continued to grow and it was only a matter of time before fixed investment picked up again. There was also another factor coming rapidly to the fore the need for greater spending on the basic infrastructure - transport systems, water supplies, sanitation, social amenities and so on, if the economy and social system were to continue expanding without running into serious bottlenecks. Because much of this investment did not generate revenue directly, a great deal of it had to be undertaken by the public sector. The age of large-scale public works had arrived.