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Following is a speech by the Financial Secretary, Mr Donald Tsang, at the opening ceremony of Senior Official-level Meeting of the Third Ministers' Forum this (Wednesday) morning:
Delegates, Consuls General, Distinguished Guests, Ladies and Gentlemen,
It gives me great pleasure and honour to speak with you today. I am sure that the meetings over these two days will pave the way for a very successful Third Ministers' Forum to be held in Hong Kong in May.
Since the inaugural meeting in Japan in 1995, and the second meeting in Chile in 1997, the Forum has done much to promote the sharing of ideas and experience on infrastructure development within the Asia-Pacific Region. I believe there is much we can achieve and learn through ongoing co-operation and exchanges such as these.
Infrastructure and the economy
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Efficient and reliable infrastructure will always be a key factor in the success of any economy. Facilities provided through infrastructure also play a pivotal role in determining the quality of life for any community. In the Asia-Pacific Region, one factor that has facilitated rapid economic and physical transformation has been growing investment in large-scale infrastructure projects. But compared with potential needs there is still quite a long way to go towards fully meeting demand.
In the past, decisions about infrastructure tended to be demand-driven or in response to immediate or pressing needs. Today, rapid growth is outstripping the capacity of existing facilities. At the same time, we face other dynamics - adapting to a change in economic conditions and satisfying the growing need of international connections. So we need to plan ahead if we are to maintain economic growth, improve living standards and continue to play a meaningful - and fruitful - role in the global economy.
Infrastructure development for sustained growth
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The financial turmoil which has plagued Asia over the past 18 months has been a wake-up call for many of us in the region. In Hong Kong's case, it resulted in the bursting of an asset price bubble and highlighted the dangers of economic growth too dependent on certain sectors. It has also provided an opportunity to make the necessary adjustments to restore our competitive edge and to prepare our economy for future, sustainable growth which is the essence of modern day life. It has shown us that a new generation of infrastructure is required to attract new industries and to stimulate new investment. With continued globalisation, infrastructure development will have to be geared towards international economic activities. Such projects will need to be developed in anticipation of long-term demand to provide the necessary support for sustained growth, as well as the tremendous technological change we expect in the new millennium.
Modern infrastructure development encompasses many areas - ports, highways, railways, power plants, water treatment. The development of container terminals and international airports has assumed an importance as never before. All of these facilities now require support of 'Advanced Infrastructure' - a range of transportation and communication systems enhanced through the use of information technology. Modern ports and terminals are equipped with intelligent warehouse facilities, and are linked to extensive global operations through computerised systems. Shippers, freight forwarders and cargo agents are linked by electronic information networks. The availability of a well-developed information technology infrastructure is becoming one of the most important considerations for multi-national firms making expansion plans or deciding on the location for a regional base or headquarters.
The development of a city to modern standards poses other challenges, the most important of which is the onerous obligation of a community to protect the natural environment and conserve natural resources. These objectives cannot be successfully met by introducing isolated, local mitigation measures alone. For example, protecting the urban environment requires comprehensive planning locally and externally in such areas as sewage treatment and solid waste disposal. Water conservation may call for river training or flood control schemes that may involve cross-boundary co-operation. Substantial investment in large scale infrastructure projects is required to attain these goals.
Infrastructure development and the Asia Pacific region
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The Asia-Pacific Region is the most rapidly developing region in the world. According to one forecast, by 2000 a third of the world's mega-cities will be located in Pacific Asia. These cities - cities like Hong Kong - are strategically located transport hubs and financial centres. And because they have special roles to play in the regional and global economies, they are regarded as global or world cities. Most of them will employ more advanced and diversified infrastructure to sustain a wider spectrum of intensive economic activities and to support the ever-growing need for modern technology.
Given continued and rapid growth into the 21st Century, the demand for infrastructure development in the region in the next decade is expected to be huge. Infrastructure needs are especially obvious in cities that have experienced rapid and continued urbanisation over the past decade.
Economic growth and infrastructure development reinforce each other. That is why over the past few years Hong Kong has taken unprecedented steps to invest heavily in infrastructure. In fact, I recently heard it said that Hong Kong is a great city, but will be even greater once we finish building it! Our new airport, and the integrated transport network serving it, is the most obvious example of our commitment to the future. Most of you who have visited us before may miss the hair-raising approach to the old Kai Tak airport but thrill-seeking aside, I am sure you all noticed just how spacious, clean and efficient our new airport is. Over the Christmas holidays, on December 27, the new airport comfortably dealt with more than 100,000 passengers in one day. There were none of the crowds, none of the queues, none of the delays, traffic jams or crowd control problems we would have had at Kai Tak with such large numbers of passengers. Immigration processing, baggage collection, customs clearance all went smoothly. And I was very happy to see that, despite some early teething problems, our new airport was recently voted the critic's choice by Travel and Leisure Magazine which said, quote: "Hong Kong now has one of the world's premiere airports." What a difference good infrastructure makes.
Hand-in-hand with the new airport we have also created additional land for residential and commercial developments to help maintain our competitive edge and ensure economic activity. But we cannot afford to stand still. That is why we are now pushing ahead with a new phase of infrastructure development over the next five years. We will spend US$30 billion on major road, rail, land formation, housing and port development projects, as well as numerous other smaller projects. The price tag is 50 per cent more than the US$20 billion spent on the new airport and the nine supporting bridge and highway projects. It is a lot of money but that is the sort of commitment we in Hong Kong need to keep us firmly on the world stage and to improve standards of living.
Infrastructure financing
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In the past, financing infrastructure relied mainly on government self-funding through such avenues as revenue surpluses or domestically-raised loans. However, the need for capital is ever growing and almost insatiable. Nowadays, public-sector funding alone is too rigid and limits the planning, development horizons and scope of projects. So we must seek new ways to attract private sector funding and maximise the aggregate resources available in the community. For example, private sector participation in urban infrastructure and services is essential if sustainable and efficient urban development is to be attained. It means, of course, the projects themselves must be financially viable.
Private sector participation can come in many forms and includes contracting, concessions, franchises, BOT and open competition. Hong Kong has had quite a lot of experience in mixed financing. As I just mentioned, the 10 projects in our Airport Core Programme cost us about US$20 billion in money-of-the-day prices. Two-thirds of this was met by the government in the form of direct equity injections into the Airport Authority and the Mass Transit Railway Corporation. The remaining one-third came from private-sector participation in the form of commercial loans for the airport and Airport Railway, franchises at the airport for air cargo handling, aviation fuel supply, aircraft catering and aircraft maintenance, and a franchise for the Western Harbour Crossing.
Hong Kong's open policy
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In line with Hong Kong's policy to maintain a free and open market, we welcome international participation in infrastructure development. We apply a 'level playing field' approach in procurement procedures. A significant number of international companies have been awarded construction or consultancy contracts in Hong Kong. It is simply part and parcel of infrastructure development in Hong Kong. For example, with our Airport Core Programme, we awarded 183 major contracts worth US$12.3 billion to companies from 18 countries, some of which are represented here today. We abide by the principles of transparent processes, stable rules, open competition and non-discrimination. We treasure the efficiency brought about by the 'level playing field' approach. We strongly believe that this approach is the best way to achieve value for money - and to attract the best possible talent from around the world to bring on line our infrastructure projects on time and within budget.
Experience sharing
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Heavy capital investment and keen competition for international financing means that this Forum, in particular, provides an excellent opportunity to discuss and encourage complementary development in the Asia-Pacific context. Developing an effective framework for planning, financing and implementing infrastructure projects will almost always be an evolutionary process. But systematic sharing of information within the region at all stages of development will hasten this process. It may also enable 'late starters' to skip the experimental phase, thus shortening their learning period. This will save time and money in the long run, and it is, at the end of the day, to the economic good of the world.
In dealing with the challenges before us, circumstances change rapidly -sometimes daily - and issues are becoming more complex. At the same time, a rich body of experience can develop quickly if we can all pull together. No one option or solution is universal, yet discussions among governments or between the public and the private sectors can lead to common principles and strategies that may shorten the learning curve or develop more effective ways to tackle common problems.
I am very pleased to note that, as a result of discussions at the First Ministers' Forum, the Japanese government has taken the lead as the host country of an Infrastructure Database Secretariat. This database comprises nine categories, which include economic affairs, infrastructure facilities, private sector participation and research institutions. I understand there are plans to expand the database. This can only be a good thing and is a remarkable example of what members of this Forum can do to promote information sharing.
Over the years we have all accumulated a tremendous amount of knowledge and technological expertise in the planning, design, construction and management of major infrastructure projects. In Hong Kong, we have successfully involved local and overseas participation. We stand ready to share our experiences with neighbouring Asia-Pacific economies, to discuss problems, analyse issues and explore options in forums like this. We will strive to promote co-operation with member economies through mutual visits, regular discussions, joint research projects and the exchange of technological information and findings.
Conclusion
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Over these two days, we have a very full agenda covering a wide range of topics and issues. We have an excellent opportunity to update each other on our respective development since the last meeting. And, I hope, we will all leave this meeting having learnt something. I wish you all success in your meetings and an enjoyable visit to Hong Kong in the excellent weather we have now.
Thank you very much.
End/Wednesday, January 6, 1999
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