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Hong Kong Infrastructure Report Q4 2011
Business Monitor International, Oct 2011, Pages: 63
Hong Kong has weathered the financial crisis particularly well and now appears to be recovering strongly after a decade of decline in its infrastructure sector. Fiscal measures launched by Hong Kong’s government to combat the global recession have led to an increase in capital expenditure on infrastructure, particularly in the transport sector. The city state aims to enhance its access to the mainland and launched 10 major infrastructure projects in 2010, with the two largest projects both transportation systems. As such, we are forecasting Hong Kong’s construction industry value to rise from US$8.1bn in 2011 to US10.4bn by 2015.
Key developments contributing to forecasts include:
- Hong Kong’s mature infrastructure market continues to present opportunities for major international players, particularly in the transport sector. In May 2011, a joint venture (JV) between UK-based Kier Construction and construction firm Laing O'Rourke had been awarded a US$307mn contract to construct the new Admiralty integrated station in Hong Kong, while a JV between Leighton Asia and John Holland won US$586mn worth of contracts for the South Island Line (East) rail project.
- In June 2011, Airport Authority Hong Kong (AAHK), which operates the Hong Kong International Airport (HKIA), has announced that it will conduct a public consultation regarding the two development options for the HKIA expansion project. The public consultation is expected to last three months and will assess the economic and environmental impact of the two development options, particularly with regard to the construction of a third runway. The study should be completed by the end of Q311.
- In August 2011 CLP Holdings reached an agreement with state-owned China Guangdong Nuclear Power to make a US$1.85bn investment in a CNY70bn (US$10.9bn) nuclear power project in the southern Chinese province of Guangdong. We believe that this purchase by CLP Holdings is due to the electricity demands of its Hong Kong-based clients, who are making significant fixed-asset investments into the Guangdong province. The 6000MW power plant, known as the Yangjiang Nuclear Power Station, is located 220km from Hong Kong and is expected to be commissioned in phases between 2013 and 2017.
We remain bullish about Hong Kong's construction industry and infrastructure sector over the mediumterm. 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 expected to moderate over the rest of our forecast period (2011-2020). The construction sector will see average growth of 4.5% per annum between 2011 and 2015, while growth between 2016 and 2020 will decline further to 3.5% per annum.
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