Generation 40s – 四十世代

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Risks carefully weighed in airport expansion plan that’s vital for Hong Kong

South China Morning Post
Comment›Insight & Opinion
2015-03-20

Anthony Cheung

Anthony Cheung outlines the detailed consideration of the financial, environmental and logistical aspects behind the Airport Authority’s plan for a third runway, which is essential for Hong Kong’s competitiveness

Over the past decade, passenger numbers and cargo tonnage at Hong Kong International Airport have risen by 8 per cent and 5 per cent respectively on average per year. The number of flight movements has gone up 65 per cent, to 391,000 last year.

Each day, about 1,100 planes fly to and from some 180 destinations worldwide, including mainland cities, making Hong Kong a global aviation hub and contributing immensely to our trade, logistics and tourism industries.

However, the current two-runway system can only allow for a practical maximum capacity of 68 flights per hour. If the present air traffic growth trend continues, the airport will reach saturation in the coming two years.

If it is not to give up its hard-earned hub status, amid fierce competition from other international airports in the region, notably Singapore, Seoul and Shanghai, as well as Guangzhou and Shenzhen in the Pearl River Delta area, which are all expanding, there is no alternative but to build a third runway without delay.

The question is therefore not “whether” or “when”, but “how” to take the project forward.

Under the Airport Authority’s plan, a three-runway system can handle around 100 million passengers and cargo throughput of some 9 million tonnes by 2030.

The authority has already completed a rigorous statutory environmental impact assessment covering 12 aspects, including aircraft noise, air quality, marine ecology and impact on human health. A total of 250 mitigation and enhancement measures, including setting up the city’s largest-ever, 2,400-hectare marine park, were committed in the report to address public opinion and the views of the Advisory Council on the Environment.

The director of environmental protection granted the environmental permit for the project last November, with conditions. The Airport Authority has taken these conditions fully on board and aims to achieve “development alongside environmental conservation” under its vision to be one of the world’s greenest airports.

The authority has put up a self-financing plan based on the “joint contribution” principle for this mega infrastructure, estimated to cost HK$141.5 billion in money-of-the-day prices. It comprises raising market borrowings, given the authority’s triple-A credit rating; restoring present airport charges for airlines to pre-2000 levels, with subsequent adjustments in line with inflation; and introducing an airport construction fee per departing passenger, excepting those in transit. The authority also plans to retain all profits earned without dividend payment for 10 years.

The government supports this joint-contribution approach. Through borrowings, the market will exercise financial prudence in scrutinising the business viability of the project. Charging an airport construction fee to help finance expansion is not uncommon overseas.

However, the government is of the view that the Airport Authority should maximise borrowings and lower the construction fee so as to reduce the burden on passengers. It should also design airline charges so as to facilitate and encourage the most efficient use of the airport, and encourage the use of more wide-body planes.

Airspace and its management naturally determine how much air traffic an airport can accommodate within international safety limits. The airspace over Hong Kong and the surrounding delta area has seen tremendous growth since the 2000s.

In 2004, recognising the need to optimise the use and management of delta airspace, a tripartite working group was formed among the Civil Aviation Administration of China, Hong Kong’s Civil Aviation Department and the Civil Aviation Authority of Macau to enhance cooperation, coordination and standardisation of procedures and measurements.

The result was the delta airspace management plan in 2007 aimed at implementing various improvement measures in phases before 2020. The airport authority’s target runway capacity of 102 flights per hour (or 620,000 flights per year) under the three-runway system was premised on such a plan, which also envisaged five runways for Guangzhou and three for Shenzhen.

The Civil Aviation Department has been engaging mainland authorities to take forward the 2007 plan, and some measures have been rolled out in recent years.

The central authorities, including the Civil Aviation Administration, are supportive of the three-runway system so as to maintain Hong Kong’s global aviation hub position. We will continue to work closely with the administration on technical solutions to optimise the use of delta airspace and meet the operational needs of all sides.

The Airport Authority will take into consideration the government’s feedback and review its proposals, making adjustments to ensure the financing arrangements are fair and reasonable, and that the capital investment is well justified. It will also develop appropriate planning contingencies and cost-control measures.

Some critics of the third runway have suggested that the airport could expand the existing 68 flights per hour limit to 86 flights even with two runways, citing a 1992 report prepared for the then Provisional Airport Authority. Such a suggestion is based on a wrong understanding.

That report actually pointed to a maximum capacity of between 52 and 86 flights per hour for dual runways, depending on various conditions and constraints. Due to the surrounding terrain, notably Lantau’s high mountains, it would be impractical and unsafe under international standards to achieve the higher targets.

The Civil Aviation Department’s commissioned consultancy in 1994 confirmed a two-runway maximum capacity of 63 movements per hour. Subsequently, the UK-based NATS reviewed this capacity in 2008 and concluded that, using the latest air traffic control technology, it could be raised to 68 flights per hour, subject to various enhancement measures.

We know for sure that maintaining the status quo would mean no growth for Hong Kong aviation, losing our business and hub advantage to neighbouring international airports, and reducing our economic competitiveness. Just enhancing terminal and cargo facilities with only two runways will not remove the ultimate runway capacity bottleneck.

Professor Anthony Cheung Bing-leung is secretary for transport and housing


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Why Hong Kong housing affordability has little to do with supply

South China Morning Post
Comment›Insight & Opinion
2015-03-18

Ian Brownlee

Ian Brownlee says increasing the housing supply in Hong Kong won’t necessarily lead to more people owning a home, as the policies and financing controls in place now effectively keep prices high

Hong Kong’s housing has been unaffordable for many local people for around 30 years. It is ironic that when worldwide interest rates are low, it is almost impossible for middle-income people in Hong Kong to buy a flat.

Financial obstacles put in place by the government and the Monetary Authority protect the banking system and keep the property market high. They prevent people with a reasonable income and little accumulated wealth from buying a flat, trapping them in the unaffordable private rental market.

Recent history shows housing only became affordable with the exceptional impact of the Asian financial crisis in 1998 and the severe acute respiratory syndrome outbreak in 2003. Under the existing financial structure, affordable levels are only likely to occur if similar exceptional events occur, or if a major review is made of financing the housing market.

Studies indicate that affordability in Hong Kong’s housing market is not determined by supply. They show that, over the past 20 years, there has been no correlation between the number of units provided and the price of housing. Price is consistently high regardless of supply.

The government’s focus on increasing housing supply is unlikely to improve affordability, as other factors are more significant in determining prices and who can buy. A commitment to sustainable development requires us to change institutional mechanisms to find solutions, before we permanently damage our physical and social environment by rezoning sites for housing that are reserved for community facilities, open space and green belts.

The property market has other unusual characteristics. A high proportion (almost half) of all private housing is owned without a mortgage. This means there is sufficient wealth in the community to enable property to be purchased without bank financing. There is also almost no mortgage loan delinquency in Hong Kong, meaning borrowers meet their commitments. There is little risk for banks or the banking system.

Demand-side controls have no effect on reducing market prices, as property still remains affordable for those with sufficient accumulated wealth. This can be seen in the present market.

I discussed affordability with a group of young professionals who are directly affected. Public housing is not an option for them. Their main concern is that they are forced into sharing housing with other generations of their family, often to an extent of overcrowding, even as they marry and start their own family. Having insufficient funds to provide the cash portion of the purchase is the main obstacle.

The Monetary Authority’s controls have the most impact on affordability for this group. The recently introduced controls of capping at 60 per cent the loan-to-value ratio for properties worth less than HK$7 million is exceptionally high in comparison with other places. This is the biggest obstacle to them buying. They cannot accumulate enough cash as they are paying high rents; they do not have sufficient income to meet the 60 per cent restriction.

Controls also limit what banks can lend on buildings that are more than 30 years old. This unnecessarily excludes old buildings from affordable financing. Banks should determine the risk and value of a mortgage in old buildings, rather than following a dictate related purely to age.

When housing prices dropped to affordable levels around the Sars outbreak, some owners were at risk of being in negative equity, with the mortgage higher than the reducing value of their property. Measures were introduced which effectively ensured that prices rose back to the mortgage levels. This means property levels will never be allowed to drop to affordable levels.

One reason for high housing costs is the land premium which the government charges for the development of new housing, usually between 50 and 60 per cent of the total cost of a flat. Others have proposed that the government could restructure this “community charge” on development, with higher rates on the property over the life of the government lease instead. This would remove the enormous upfront built-in cost on housing.

If the historical trends remain unchanged, it will probably be necessary to accept that the Hong Kong housing market is a high-cost commodity market, and that households will have to budget around 40-50 per cent of their income for housing. While this is affordable for many, it will not address the problems for those stuck in the “rental rut”.

Increased supply is unlikely to solve affordability, but the following may help:

  • Reduce the premium from land sales and charge higher rates over the length of the government lease;
  • The government provides one-off cash grants and/or relaxes controls on lending for first-time purchasers;
  • Allow a lower percentage of the cash portion of the sale price generally, so that lower-income groups can afford to buy;
  • Provide a rent subsidy for low-income groups;
  • Remove restrictions on old buildings;
  • And, accept that for property to become affordable, prices must drop, and negative equity for some owners will be part of that process, allowing banks to adjust mortgages as flat values decrease.

There is a definite need to ensure an orderly supply of new housing in properly planned new development areas. But there is an even greater need to reduce the financial constraints on the private housing market that make it so unaffordable for so many.

Ian Brownlee is director of Masterplan Limited, planning and development advisers


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Under the Hong Kong dome: A cry for action on pollution

South China Morning Post
Comment›Insight & Opinion
2015-03-18

Kelly Yang

Kelly Yang says without real commitment from our leaders, Hong Kong will have no success cleaning up its perpetual smog

Dear Secretary for the Environment Wong Kam-sing and Undersecretary for the Environment Christine Loh:

I lie awake at night listening to the sound of my children coughing. I cannot sleep. I can hardly breathe. Every day, my eyes are glued to the air pollution app on my phone. Every hour, it seems, that number climbs: 100, 150, 170… It steals from me that which I can never get back: the lost opportunities of long walks with my children, bike rides around the park, jogs on the beach. On those days, every minute my children are outside in the choking air, my heart races. Every breath is a worry; every laugh a fear.

I watched Chai Jing’s heart-breaking documentary Under the Dome, on air pollution in China. I want to think, “Thank God, that’s not here”. Instead, I think, “My God, it’s here too”. I no longer look forward to weekends. I don’t even want to look out of the window, scared of what I might see. My children jump up and down – “Mummy, mummy, let’s go out!” – while the phone in my hand screams, “Danger! Far exceeds World Health Organisation Safe Levels”.

Is it China, I wonder? Is it all the private cars? Or is it the marine emissions that are polluting our air? According to the Clean Air Network, levels of sulphur dioxide exceeded the WHO annual guideline at all monitoring stations last year, except Tai Po. We need mandatory switches of fuels for shipping companies, not just voluntary schemes, and we needed it yesterday. We need to limit private cars, and we need to say to Guangdong, “Enough already – let’s curb emissions together”.

Recently, I was talking to a guy at dinner about the air pollution problem. He turned to me and hissed, “Don’t be such a pussy.” My mind boggled at his choice of words. I looked him in the eye and said, “Wake up and smell the CO2!” His response? “Yeah, well, what can you really do about it? It is what it is.”

But it doesn’t have to be.

Christine, years ago, I met you at an event. It was before you became undersecretary for the environment. You were speaking to a roomful of secondary students about the importance of environmental protection and how one person can make a difference. I was very moved by your speech. Afterwards, I asked you whether you really meant it, whether you think serious change really is possible. You said absolutely. With the right leadership, we can clean up the air pollution like that. And then you snapped your fingers.

Well, Christine, now you are the leadership. You and Mr Wong and all your colleagues. It’s time to start snapping fingers. When the air is so bad, we can’t even see Kowloon from Hong Kong Island. Every night, I have to get up in the middle of the night to administer the nebulizer for my son because that’s the only way he can get through the night. We need results.

And so I beg you: please snap your fingers. Let us breathe again. Let us walk outside with our minds at ease, so we can enjoy the city we so dearly love.

Kelly Yang teaches writing at The Kelly Yang Project, an after-school centre for writing and debate in Hong Kong. She is a graduate of UC Berkeley and Harvard Law School.