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N. Ramakrishnan

Dr Cheng Hon-Kwan, chairman, Transport Advisory Committee, Hong Kong, and chairman, Hong Kong Housing Authority, is convinced that infrastructure development will help a country grow faster. It expedites all-round development and facilitates economic growth, he says. Recently in Chennai to deliver a lecture at the Anna University, Dr Cheng spoke to Business Line about the infrastructure development in China and Hong Kong, and the public housing programme in Hong Kong. Excerpts from the interview:

Could you throw some light about China's economy and the planning for infrastructure?

China's economy is in real good shape since the open-door policy and reform started in 1978. During the last five years, the overall size of the economy has swelled to $1.2 trillion, and the economy is growing at an annual average rate of 7.8 per cent. The growth in 2001 was 7.3 per cent. The targeted growth for the 10th Five Year Plan, from 2001 to 2005, is 7 per cent, reaching a total of $ 1.5 trillion by the end of this period.

The growth of the country's economy will come from rising domestic demand, accession to the WTO, western China development and Beijing Olympics in 2008. Even in a global economic downturn, China is doing well.

One of China's strengths is its investment in infrastructure well ahead of demand. Is this true?

Yes, definitely. The investment is made because of the needs of the country and the economic growth. Take, for example, the Three Gorges project. The cost of this project amounts to $75 billion and it is the biggest hydro-electric project. It is being carried out in three phases and is expected to be completed by 2009. The project will generate 85 billion units a year (with an installed capacity of 18,200 MW).

Besides, massive investments are being made in such other areas as extension of railway lines and construction of airports. Ten modern airports are being constructed and 3000 km of railway lines will be added. The total investment for the 2008 Beijing Olympics alone will be $34 billion.

The government has announced a policy on western China development. At the moment, the eastern coast cities have been pretty well developed. This is the time to narrow the gap and develop the west.

What about infrastructure development in Hong Kong?

As far as Hong Kong is concerned, it has closer ties with the Poe River delta region as this is important. Hong Kong should liaise closely with various cities in its vicinity. We should not look at Hong Kong alone for growth. Some years ago, industries moved their factories to the Poe River delta area in which the Hong Kong businesses employ close to five million people. We are now considering building a bridge connecting Hong Kong with the western side of the Poe river region.

We have developed infrastructure all these years and we must keep on adding to it because we cannot be complacent. We are taking railway transportation as our priority and adding new lines every year. We are enhancing cross-border transportation by both rail and road as it has become congested. We have 300,000 passenger trips of people crossing the border every day.

Up to 2016, we will have completed 12 railway lines within the region and the total length will be 250 km against 160 km now. Almost 90 per cent of Hong Kong's population uses public transport, of which the railways' share is 30 per cent and we are targeting to increase this to 45 per cent by 2010. In the next 10 years, railway development alone would account for $ 24 billion.

This emphasis on infrastructure development, is there a lesson in this for other developing countries like India?

From our experience, investing in infrastructure is important. Fifteen years ago the standard of roads in China was not good. But, now, China has extremely good expressways. All this transportation facilities help economic growth because accessibility — transportation of cargo and people — is enhanced. Infrastructure development will help a country grow faster. Once you have the road linkage, land prices will go up, building development along the road will increase, and people can also be moved around. All this will expedite other development. Some of the investment in infrastructure is by the private sector. There have been some BOT projects that have been successfully handed over to the government. There have been some failures too. This is mainly because of over-estimation in traffic flow and the prevailing economic situation. It is quite normal to collect tolls for road projects as the investor will get a return on investment.

What is the role of the Honk Kong Housing Authority?

Its role is to provide affordable housing with government subsidy for the people in real need. There are two kinds of public housing, one is home ownership scheme and the other is rental housing. Next year, we are going to celebrate the 50th anniversary of Hong Kong's public housing and till now we have constructed one million units, of which two-thirds are rental and the rest for sale.

The Government recently decided to change the role of the authority. From being a provider the authority will become a facilitator. That is, we will provide interest-free loans for those who cannot afford to go in for private housing.

The waiting time will be three years as there are nearly 90,000 families waiting for rental accommodation. This is because we have a quota of allowing 150 people to come in everyday to Hong Kong from the mainland, and almost all of them apply for public housing.

We involve the private sector also in the public housing programme. We have a scheme under which the private sector constructs the buildings and they are guaranteed a profit. We have not been successful in mixed development or joint development of property. We build about 50,000 dwelling units a year. This is against a peak two years ago of 90,000 units.

In future, we will build houses for rental accommodation and not for the home ownership scheme and that will be 20,000 units a year.

What is the government expenditure on public housing? And, how do you fund your building activity?

The expenditure is about HK$40-50 billion a year. The Hong Kong Housing Authority is financially autonomous. When the authority was formed some time back, it got a loan from the government. It sold units for the home ownership scheme at a surplus. We do not call it a profit.

Then we got money to build rental accommodation. The Authority developed commercial plots, which were rented out. All these give the authority an income with which it builds more houses. The rental is quite low. All these years, we have accumulated surplus and we do not have to ask the government for money.

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