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Hong Kong Infrastructure Report Q1 2011
Business Monitor International, Feb 2011, Pages: 88
The Hong Kong Infrastructure Report provides industry professionals and strategists, corporate analysts, infrastructure associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Hong Kong's infrastructure industry.
Hong Kong has weathered the financial crisis particularly well and now appears to be recovering strongly after what has been a decade of decline in the infrastructure sector. Fiscal measures launched by the Hong Kong government to combat the global recession have led to an increase in capital expenditure for infrastructure, particularly in the transport sector. The city state aims to enhance its access to the mainland and has launched 10 major infrastructure projects in 2010, with the two largest projects transportation systems. As such, we are forecasting Hong Kong’s construction industry value to rise from US$6.97bn in 2010 to US8.99bn by 2014.
Key developments contributing to forecasts included:
- New data for Hong Kong's construction industry indicate that the country's construction industry value in 2008 was higher than initially estimated, achieving a growth rate of 8.7% year-on-year (y-o-y) to reach HKD47.92bn (US$6.15bn). As a result, recovery for the construction industry occurred earlier than expected.
- Inflation is becoming an issue for the construction industry. In October 2010, Hong Kong's subway operator Mass Transit Railway (MTR) announced that the South Island Line (East) medium-capacity rail line in Wong Chuk Hang, could cost 55% more than first estimated in 2006. The construction of the 7km line could now cost HKD10bn (US$1.28bn), up from the original estimate of HKD7bn (US$902mn). MTR cited soaring prices for construction materials as a major reason for the increase in cost.
- In December 2010, two Hong Kong metro extension projects received official approval and are due to open in 2015, reported Railway Gazette. The first project, worth HKD12.6bn (US$1.62bn), involves the construction of the new 7km South Island Line. The second project is for a 2.6km extension to the existing Kwun Tong line at a cost of HKD5.6bn (US$720.9mn). Work on both projects will begin in mid-2011. BMI believes that both projects highlight that opportunities still exist for major international players in Hong Kong's mature infrastructure market.
BMI remains bullish for the Hong Kong's construction industry and infrastructure sector over the medium term. At present, stimulus plans continue to be a key driver of growth; however, once the effects of the stimulus wane and projects enter the construction phase, growth is still expected to remain sustainable for the rest of our forecast period (2011-2014). The construction sector will reach an average growth of 4.2% y-o-y between 2011 and 2014, while growth for the infrastructure sector will slow to 6.5% y-o-y over the same period.
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