Pergamon
S0264-8377(96)00029-4
Land Use Policy, Vol. 14, No. 1, pp. 25-39, 1997
Copyright ca 1996 Elsevier Science Ltd
Printed in Great Britain. All rights reserved
0264-8377/97 $17.00 + 0.00
Economic restructuring
and land use planning
in Hong Kong
Anthony Gar-On Yeh
Since the late 1970s, economic restructuring associated with deindustrialization and increased unemployment has affected many cities in the world,
especially those in the old industrial regions (Massey and Meegan, 1978,
p. 273; Martin et al., 1986; Goe et al., 1991, p. 559). This has led to many
inner city problems (Danson et al., 1980, p. 193) and caused many local
governments to pay particular attention to economic development. Past
urban planning practices and land use policies have proved unable to cope
with the challenge of economic restructuring. New urban planning
practices and land use policies are often used to promote economic
development. These range from the provision of different types of land
and buildings, monitoring and registration of vacant properties, to relaxing
development control (Sellgren, 1991, p. 341). An employment land use
policy which deals with the quantity, quality, and promotion of land which
can generate employment has also been used (Adams et al., 1993, p. 151).
Measures have been designed to deal with the rehabilitation of derelict
industrial land caused by deindustrialization (Roberts, 1994). As local
governments are keen to lure mobile capital into their own localities,
urban planning is becoming more facilitative and subservient to the
demands of capital (McGuirk, 1994, p. 287).
Although different in form and nature, economic restructuring is also
Anthony Gar-On Yeh is with the Centre occurring in some cities in the newly industrialized economies in Asia. In
of Urban Planning and Environmental
Singapore, the shortage of labour has encouraged the economy from
Management, University of Hong Kong,
Pokfulam Road, Hong Kong [Tel: (852) low-cost labour intensive industries to high-value-added industries and
2859-2721; Fax: (852) 2559-0468].
services (Ho, 1994, p. 33). This has led to greater state intervention in
The author would like to thank the financial support of the Hong Kong Research order to maximize labour and land resources and a greater regional
Grant Council for an industrial location division of labour with its neighbouring countries, especially in the Singastudy in which this paper is based.
pore-Johor-Riau growth triangle. Rapid increases in wages, labour
disputes, currency revaluation, and high financial costs resulging from high
interest rates and a valuable financial structure has triggered industrial
restructuring in the Seoul metropolitan region (Park, 1994, p. 527). As a
result, there has been a decline in labour-intensive industries, increases in
subcontracting of production, and the relocation of labour-intensive industries to regions outside Seoul.
The problems created by economic restructuring in the cities in the
NIEs are different and not as severe as those faced by the cities in Europe
and North America. Their economies are still relatively healthy and
growing, although at a slower rate. Because of this, the inner city problems
Due to the northward migration of its
industries to China, Hong Kong has lost
its position as a major manufacturing
centre in Asia. It has undergone rapid
economic restructuring since t h e late
1980s and is transforming itself into a
financial and service centre. Economic
restructuring in Hong Kong is mainly
due to the adoption of the 'open door'
policy in China in 1978 which provided
opportunities for Hong Kong manufacturers to establish plants in China.
Not only has this had a major impact on
the development of Hong Kong, it has
also had an impact on urban planning.
Urban planning has to deal with the
decline of old urban districts, increased
demand for industrial/office building,
and changes in the IocaUonal demands
of industries. It also has to provide the
basic infrastructure to attract new types
of industries and economic activities to
face the challenge of the rapid decline
in its traditional manufacturing base.
Copyright © 1996 Elsevier Science Ltd.
25
Economic restructuring and land use planning: A Gar-On Yeh
of high unemployment and derelict land are not yet present. As a result,
urban planning and land use policy responses to economic restructuring
are different from those found in the cities in Europe and North America.
This paper attempts to examine the nature, causes, and land use impacts
of economic restructuring in Hong Kong and the effectiveness of land use
planning responses to economic restructuring.
Economic restructuring in Hong Kong
1 Labour-intensive, high value-added, and
small industries are defined by the Hong
Kong PlanningStandards and Guidelinesof
the Planning Department for the purpose
of forecasting territorial industrial floor
space
requirement.
Industries
that
employed more than the average book
value of plant, machinery and equipment
per worker are classified as capital-intensive and those less than the average are
classified as labour-intensive. Industries
that exceed the average value-added per
worker are classified as high value-added
and those below the average are classified
as low value-added. The average floor
space is used to define small and largeindustries. The average floor space in 1988
when this classification was used was 1303
m 2,
26
Economic growth in Hong Kong is mainly a post-war phenomenon. In the
early 1950s, the decline in the entrep6t trade and the influx of refugees
from China which provided cheap labour, capital, and entrepreneurship,
saw Hong Kong rapidly transformed into an industrial city between 1952
and 1956 (Szczepanik, 1958). External demand for goods also helped in
developing the export-led industries (Koo, 1968, p. 199; Lin et al., 1980).
Jhe textile and plastic industries expanded quickly at an early stage. The
eiectronics and electrical industries started to grow in the 1960s. Since the
early 1970s, manufacturing industries progressively diversified. There was a
shift from labour-intensive and simple products to more technology-intensive and sophisticated products. Although manufacturing still remained
important to its economy in the late 1970s, Hong Kong was further transformed into a major financial centre of the region (Chen, 1984, p. 1; Chen,
1990, p. 91). The most significant economic restructuring in Hong Kong
occurred in the late 1980s after the adoption of economic reform and open
door policy of China in 1978. This resulted in a marked decline in the
manufacturing sector.
Economic restructuring in Hong Kong is reflected in changes in the
employment structure between 1961 and 1991 (Figure 1). The manufacturing sector increased steadily from 43 per cent in 1961 to 47 per cent in
1971 followed by a tremendous decline from 41.2 per cent in 1981 to 28.2
per cent in 1991. There was a steady increase in the service (wholesale and
retail trade, restaurants and hotels) sector from 14.4 per cent in 1961 to
22.5 per cent in 1991 and a slight increase in the professional service
sector (community, social and personal services) from 18.3 per cent to 19.9
per cent. The marked increase in the office (financing, insurance, real
estate and business services) sector mainly occurred after 1981. It
increased from 4.8 per cent in 1981 to 10.6 per cent in 1991.
The decline in the manufacturing sector has not only occurred in
relation to its proportion of total employment, but has also been an
absolute decline. Employment in the manufacturing sector has dropped
from 0.9 million at its peak in 1981 to about 0.6 million in 1991. Its
contribution to the GDP also dropped from 26.9 per cent to 15.9 per cent.
It is anticipated that the manufacturing employment will further decrease
in the future under the prevailing economic and production environment
(the latest figure is about 9 per cent).
Apart from the decline in employment and contribution to GDP of the
manufacturing sector, the industrial structure is also changing. In
1986-1994, there was a marked decline in labour intensive, high value
added, small industries. ~ Their share in the total industrial employment
dropped from 10.3 per cent to 4.2 per cent (Table 1). Labour intensive,
low value added, small industries are also declining rapidly, with their
share in the total employment dropping from 70.2 per cent to 60.0 per
cent. Although most industries are declining, some are actually growing.
These are:
Economic restructuring and land use planning: A Gar-On Yeh
50
40
E
o
30
E
Wholesale and Retail Trade,
Restaurants and Hotels
uJ
"6
Community, Social and
Personal Services
20
-- .....
~
..,,.. " " " "
.......
..-..........." ""
,~
.......- . ~ - - - . ~
,===
..,.--
.....................
Financing, Insurance,
A
10
Figure 1. Economic restructuring in
Hong Kong 1961-1991.
Source: Census and Statistics Department, Hong Kong 1991 Population
Census, 1992.
.
..
Real Estate and
grlculture
.....
.
.
Business Services
..."
...-'
.
I
i
I
i
1961
1971
1981
1991
Table 1. Industrial restructuring In Hong Kong.
1984-1996
Employment
Industrial type
Share (%)
Difference
from total
growth
(%)
(%)
(%)
1986
1994
33082
20969
3.8
4.8
36.6
1.0
12.7
B. Capital-intensive, high
value-added, small
establishments
10721
8201
1.2
1.9
-23.5
0.6
25.8
C. Capital intensive, low
value-added, large
establishments
8187
3442
0.9
0.8
-58.0
0.2
8.6
D. Capital-intensive, low
value-added, small
establishments
94439
100489
10.9
23.0
6.4
12.0
55.8
E. Labour-intensive, high
value-added, large
establishments
8537
8705
1.0
2.0
2.0
1.0
51.3
F. Labour-intensive, high
value-added, small
establishments
88723
18517
10.3
4.2
79.1
6.0
29.8
G. Labour-intensive, low
value-added, large
establishments
7672
8209
0.9
1.9
7.0
1.0
56.4
H. Labour-intensive, low
value-added, small
establishments
606545
262600
70.2
60.0
-56.7
10.2
7.4
O. Others
t 994
Share
change
A. Capital-intensive, high
value-added, large
establishments
Total
1986
Growth
rate
6035
6419
0.7
1.5
6.4
0.8
55.7
863941
437551
100.0
100.0
-49.4
0.0
0.0
Source: Compiled from Census and Statistics Department, Employmentand Vacancies Statistics 1988,
1995, Hong Kong Government, Hong Kong.
27
Economic restructuring and land use planning: A Gar-On Yeh
(i) capital-intensive, low value-added, small industries;
(ii) labour intensive, high value-added, large industries, and
(iii) labour intensive, low value-added, large industries.
Industries in Hong Kong are becoming more capital intensive and larger.
The decline in the manufacturing sector and industrial restructuring
reflects the impact of both internal and external factors. Internally, serious
labour shortages in the 1980s boosted wages. Externally, protectionism in
foreign markets has forced local industralists to upgrade the quality of
their products and to diversify into new products. Neighbouring ASEAN
countries have gained the advantage in the production of labour-intensive
products. Thus, local manufacturing industries have to restructure in order
to maintain their competitiveness in the world market. In the context of
the New International Division of Labour (NIDL), industrialists, especially
those with large scale production, attempt to maximize their benefits
through disintegrating their production processes. They allocate production processes to countries or regions with comparative advantages with
the aim of reducing overall production costs. The subcontracting and
outward processing to China is a realization of the concept of the NIDL.
China's economic reforms since the late 1970s and 1980s has had a far
reaching effect on the economic restructuring of Hong Kong's economy.
In 1978, China adopted the 'open door' policy and set up new development areas (NDA) like the Shenzhen Special Economic Zone to
encourage foreign investments. As a result, many local industrialists began
to set up branch plants or undertake subcontracting processes in China. A
gradual 'regional division of labour' between Hong Kong and China's new
development areas, especially the Pearl River Delta Region, began to take
shape. This was quite common among the labour-intensive industries such
as garment making, toys and electronics to disintegrate their production
processes with the shifting of the labour-intensive production processes
which required unskilled labour to China through outward processing
arrangements. In order to ensure operational efficiency and control by the
management in Hong Kong, local industrialists preferred to subcontract
such production processes within the Guangdong Province.
Although economic reform and economic development in China,
especially the Pearl River Delta, have contributed to the decline in Hong
Kong's industries, it has led to the growth of the service and office sectors.
Hong Kong industries that are outward processing in the Pearl River
Delta are still using Hong Kong as a base for research, marketing and
distribution. Hong Kong is also providing a hub function to China. It is
resuming the function of an entrep6t for the rapidly growing areas in the
Pearl River Delta. Re-exports to and from China have increased sharply
since 1990. Apart from providing transhipment services by the world's
second largest and highly efficient container port in Kwai Chung, Hong
Kong also has an efficient banking system to handle letters of credit for
China. Many international firms are also using Hong Kong as a stepping
stone for doing business with China, making use of local expertise and
professional services.
China, especially areas in the Pearl River Delta, is increasingly
important to the economic development of Hong Kong (Ho, 1992). There
is a close partnership between Hong Kong and Guangdong province
(Kwok and So, 1995). Hong Kong is the major source of foreign investment in China, especially in Guangdong Province. Many provincial and
municipal entities are setting up their own companies in Hong Kong,
investing in all major economic sectors (Ho, 1992).
Despite the decrease in the manufacturing sector, Hong Kong's
28
Economic restructuring and land use planning." A Gar-On Yeh
economy is still growing, although at a slower rate, because of the counter
growth in the service and office sectors of the economy related to China
trade. High unemployment rates associated with economic restructuring in
some of the cities in Europe and North America has not yet occurred in
Hong Kong. The unemployment rate remained below 3 per cent in the
1980s and early 1990s, although b.y 1995 it had reached 3.2 per cent. But,
the overall low unemployment rate is deceptive. As other places that have
undergone economic restructuring, the unemployment rate in the
manufacturing labour is the highest. There are no official figures for
unemployment among the manufacturing labour force because these are
difficult to collect, but some labour unions claim that it could be as high as
9 per cent. Old and middle aged unskilled labours have been hit most. The
government is offering them retraining by the setting up of the Employee
Retraining Board in 1992. But how effective these programmes are has yet
to be seen.
Land use impacts of economic restructuring
As noted, one of the main triggers of economic restructuring of Hong
Kong has been economic reform and development in China, especially in
the Pearl River Delta. Because of this, it is not surprising to find that there
has been a marked increase in both cross border passenger and freight
traffic between Hong Kong and China (Yeh, 1995, p. 261). This has led to
a great increase in traffic volumes, especially freight traffic, on the
highways in the New Territories. Vehicles crossing the border have
increased from 0.7 million in 1983 to 8 million in 1994. The unanticipated
10 times increase in cross border vehicular traffic has caused many traffic
problems in Hong Kong. The Tuen Mun Highway and the Tolo Highway
that were designed in the later 1970s were not for the purpose of handling
such a large volume of cross-border traffic. As a result, traffic congestion
often occurs on these two highways that link the new towns in the New
Territories with the core urban areas.
The increase in re-exports to and from China as a result of outward
processing rapid economic growth in the Pearl River Delta has increased
the need for container storage in Hong Kong. Because of this, there is a
shortage of land for open storage. This activity has spilled over to the rural
areas in the New Territories during the 1980s in a haphazard and
disorderly manner, creating incompatible land uses, as well as environmental and traffic problems. The proliferation of open storage in the rural
areas of the New Territories was mainly due to the availability of cheap
rural land and a loop hole in the Town Planning Ordinance. For historical
reasons, the Town Planning Ordinance only covered the existing and
potential urban areas which basically included the main urban areas and
the new towns in the New Territories. Other areas were not covered by
the Ordinance and were not therefore subject to planning control.
Furthermore, land leasing conditions could not be used to control such
development in the New Territories because of the Melhado law case in
1983 which allowed agricultural land to be used for open storage and car
parks (Yeh, 1994, p. 3). To stop the environment from further rapid
deterioration, the government finally passed the Town Planning (Amendment) Bill 1990 in January 1991. It extended the jurisdiction of the
Ordinance to cover the whole of Hong Kong with new types of zoning
such as country parks, green belts, village type development and open
storage uses (Hong Kong Government, 1990).
Interim planning control through the use of development permission
29
Economic restructuring and land use planning." A Gar-On Yeh
area plans has been used to guide and control developments in the New
Territories while the Outline Zoning Plans, which are statutory plans for
development control, are under preparation. The Town Planning Board
may designate areas which require immediate planning control as
Development Permission Areas (DPAs), which are effective for three
years. All development in DPAs requires planning permission from the
Town Planning Board. To give the Town Planning Ordinance enforcement
power to control unauthorized development in DPAs enforcement notices,
reinstatement notices and stop notices, similar to those used in Britain,
were introduced. An Appeal Board was also set up to deal with appeals
related to objections and refusals of planning permission in the Development Permission Areas.
In addition to the provision of infrastructure, the Hong Kong government has been actively involved in industrial land use planning to promote
economic development, particularly in the past when the economy was
industry-oriented. Industrial land use planning has involved the zoning of
land for industrial development and the estimation of the amount of land
needed for industrial development (Yeh and Tang, 1995). To ensure that a
sufficient amount of industrial land could be made available for industrial
development, the Government set up a Special Committee on Land
Production (SCLP) in 1977 to monitor the formation and disposal of land
to the private sector (Yeh, 1992, p. 87). The committee was renamed as
the Special Committee on Land Supply (SCLS) in 1981 to reflect its
changing role of not only advising on land production but also the
optimum use of land (Hong Kong Government, 1981). It was disbanded in
1984 when the objectives of its establishment were considered to be largely
fulfilled. The monitoring of land supply together with other land uses was
taken over by the Land and Building Advisory Committee. The Planning
Department continues to produce an annual ten-year rolling assessment of
future land requirement and land supply for the Land and Building
Advisory Committee to make sure that an adequate amount of land is
provided to meet the demand. With the decline in the manufacturing
sector and the increase in the service and office sectors, there is now an
oversupply of industrial land. In 1993, there was a surplus of 62.4 ha of
industrial land and a ten year surplus of 206 ha (Planning Department,
1993).
The impacts of restructuring on different districts in Hong Kong vary.
Shift-share analysis (Danson et al., 1980, p. 193; Klosterman and Richard,
1990) which compares the growth rate of the whole of Hong Kong with
those of district board areas has been used to analyse the spatial impacts
of restructuring in the two main economic sectors of manufacturing and
offices which are locational specific between 1986 and 1994. For the whole
territory of Hong Kong, there has been a negative growth of 50 per cent in
manufacturing but a growth of 88 per cent in the office industry. Overall,
there has been a decentralization of manufacturing and office employment
from the main urban area to the outside areas (Table 2). As indicated by
the change in the share of employment in the main urban area in
1986-1994, manufacturing is decentralized faster than office industry.
Despite slight decentralization, the office industry is still highly concentrated in the main urban area with 90 per cent of the office employment
located there. Although all districts are experiencing negative growth rates
in manufacturing, the major decline is in the main urban area, especially
the older industrial districts such as Sham Shui Po and Wong Tai Sin.
Districts that have declined less are mainly located in the New Territories,
such as Yuen Long, Tai Po and Sha Tin (Table 2, Figure 2). All districts
30
Economic restructuring and land use planning." A Gar-On Yeh
Table 2. Shift share analysis of changes in spatial distribution of manufacturing and office sectors In Hong Kong, 1986-1994.
Financing, Insurance, real estate
and business services
Manufacturing
Growth
rate
Shift
share
District board
(%)
(%)
1986
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
- 56
-41
-48
49
53
61
-46
62
-53
48
41
19
32
- 7
2
18
-60
6
9
2
1
-3
-12
3
-12
3
2
9
31
18
43
47
32
10
2
1
6
3
6
12
7
10
19
24
4
2
1
2
0
2
0
50
0
100
- 54
48
- 25
5
2
25
65
24
11
Central and Western
Wanchai
Eastern
Southern
Yau Tsim Mon 0
Sham Shui Po
Kowloon City
Wong Tai Sin
Kwun Tong
Tsuen Wan/Kwai Tsing
Tuen Mun
Yuen Long
North
Tai Po
Sai Kung
Sha Tin
Islands
All areas
Main urban area (1-9)
Tsuen Wan/Kwai Tsing
Non-urban area (11 - 17)
Share
change
86-94
Growth
rate
Shift
share
1994
(%)
(%)
(%)
2
1
7
3
5
9
7
7
18
25
4
3
1
4
1
3
0
0
0
0
0
0
-3
0
-2
1
1
1
1
O
2
O
1
0
63
80
298
109
65
58
169
22
169
125
370
167
228
327
629
425
248
100
0
59
25
16
- 6
1
5
Share (%)
Share (%)
Share
change
86-94
1986
1994
(%)
- 25
-8
209
21
23
-30
81
110
81
37
282
79
140
239
541
337
160
45
19
4
1
15
4
2
2
2
4
0
1
0
0
0
1
0
39
18
8
1
13
3
3
1
3
4
1
1
0
1
0
2
0
- 6
- 1
4
0
-2
1
1
1
1
1
1
0
0
1
0
1
O
88
0
100
100
0
80
125
316
- 8
37
228
94
4
3
90
4
6
4
0
3
Source: Compiled from Census and Statistics Department, Employment and Vacancies Statistics 1988, 1995. Hong Kong Government, Hong Kong.
are experiencing the growth in office employment but districts in Tsuen
Wan and Kwai Tsing and locations outside the main urban area such as
Tuen Mun, North and Tai Po are growing much faster (Table 2, Figure 3).
The office industry is still, however, highly concentrated in the main urban
area. This area's share of total office employment has dropped from 94
per cent to 90 per cent. Within the main urban area, Eastern, Southern,
Kowloon City, and Kwun Tong have higher growth rates than the territorial growth rate.
Economic restructuring and land use planning in Hong Kong
Urban planning in Hong Kong has evolved from ameliorative planning to
deal with the sudden influx of population after 1949 and the economic
boom of the 1950s to be more forward looking. These significant improvements in urban planning were first reflected in the development of new
towns in the 1970s. A Territorial Development Strategy was formulated in
the early 1980s to coordinate land use and transport development to
provide a better living and working environment and to sustain economic
development. But the economic restructuring that has occurred since the
mid-1980s has created new challenges for urban planning in Hong Kong.
New transport strategies have to be developed to deal with the increasing
cross-border traffic. The Territorial Development Strategy has to be
reviewed and new measures have to be developed to accommodate the
changing needs of the economy.
(A ) TerritorialDevelopment Strategy
A Territorial Development Strategy (TDS) was adopted in 1984 for the
comprehensive long-term development strategy of Hong Kong in the
1990s. It was not only concerned with meeting the requirements for land,
services and facilities but also sustaining the growth of key economic
activities to achieving a wide range of socio-economic-environmental
31
Economic restructuring and land use planning: A Gar-On Yeh
Main Urban Area
1 Central and Western
2 Wanchai
3 Eastern
4 Southern
5 Yau Tsim Mong
6 Sham Shui Po
7 Kowloon City
8 Wong Tai Sin
9 Kwun Tong
Manufacturing
Growth Rate 1986-94
Above Average
Growth Rate
over 30%
15% to 30%
i__]
0% to 15%
0% to-15%
less than -15%
Below Average
Growth Rate
Figure 2. Shift-share analysis of manufacturing growth rates 1986-1994.
Source: Compiled from Census and Statistics Department, Employment and Vacancies
Statistics 1988, 1995, Hong Kong Government, Hong Kong.
Main Urban Area
1 Central and Western
2 Wanchai
3 Eastern
4 Southern
5 Yau Tsim Mong
6 Sham Shui Po
7 Kowloon City
8 Wong Tai Sin
9 Kwun Tong
Office
Growth Rate 1986-94
Above Average
Growth Rate
over 100%
m
I
50% to100%
I
0% to 50%
0% to -50%
[::::::::]
less than -50%
Below Average
Growth Rate
Figure 3. Shift-share analysis of office growth rates 1986-1994.
Source: Compiled from Census and Statistics Department, Employment and Vacancies
Statistics 1988, 1995, Hong Kong Government, Hong Kong.
32
Economic restructuring and land use planning." A Gar-On Yeh
objectives (Hong Kong Government, 1985). The decision to formulate the
Territorial Development Strategy was in part attributable to the recognition of the lack of coordination between urban development and transport
provision, especially in the case of new towns where transport was still
inadequate. The TDS took four years to prepare and was completed in
1984. It recommended further growth in the main urban areas when all
the new towns were developed. Metroplan, the subregional plan for the
metro region composed of the main urban area and the Tsuen Wan and
Kwai Tsing, was formulated in 1989 and recommended urban redevelopment in the old districts and massive land reclamation to accommodate
the need for offices and housing (Planning, Environment and Lands
Branch, 1990).
There were many uncertainties when Hong Kong was preparing its TDS
in the early 1980s (Yeh, 1985, p. 252). It was prepared at the time when
the political future of Hong Kong and economic relations with the Pearl
River Delta were most uncertain. Britain at that time was negotiating with
China on the political future of Hong Kong and China was experimenting
with the setting up of special economic zones (SEZs) to promote
economic development. It was unclear whether the SEZs would be
successful and what their impact would be on Hong Kong. Economic
relations between Hong Kong and the Pearl River Delta did not really
develop until 1984 after the TDS was prepared. Because of this, crossborder traffic and relations were not given much emphasis in the TDS.
The TDS mainly dealt with the internal transport and land use interactions
in Hong Kong.
In the TDS study, the location of the new international airport was
recognized as a significant factor affecting the future development pattern
of Hong Kong. While a number of development options concerning future
airport locations were considered, doubts were cast over the possible
relocation of the existing airport in view of the uncertain political future of
Hong Kong in 1984. As a result, two alternative long-term growth patterns
based on the existing airport location at Kai Tak were produced. Both
options saw a need for major improvements and extensions of the existing
planned highways and rail systems. Each represented an end-state plan for
the year 2001 and beyond then fundamental changes in basic assumptions
might be necessary. In view of the uncertainty of Hong Kong's political
and economic future, a common-component approach was used to identify
in the two options common projects where detailed planning and associated works could be started soon, in order to sustain the momentum of
urban development.
Since the adoption of the Territorial Development Strategy in 1984,
there has been a sharp increase in economic relations with China and, as a
result, a major increase in cross-border traffic. The government decided to
undertake a major review of the strategy in 1990 soon after it realized that
Hong Kong's economic relations with China will grow further rather than
diminish and that the territory's economic future relied on the integration
of its economy with China, particularly the Pearl River Delta. A paper,
Territorial Development Strategy Review Development Options was
published in 1993 for public consultation (Planning Department, 1993a;
1993b). The review was needed because the location of the key infrastructure of the airport and port which was not finalized in the TDS of 1984
had been determined. In 1989, the Port and Airport Development Strategy
(PADS) decided to relocate the airport from Kai Tak to Chek Lap Kok
and to expand the port facilities on North Lantau and in the Western
Harbour Area. The review was also needed because of the major increase
33
Economic restructuring and land use planning." A Gar-On Yeh
in economic interactions and cross-border traffic between Hong Kong and
the Pearl River Delta after 1984. A long term planning framework for the
provision of land and infrastructure, taking into consideration the increase
in cross border traffic was needed (Planning Department, 1993a).
The importance of the linkage with the Pearl River Delta has been fully
acknowledged in the review of the TDS. It is one of the two major
principles reflected in the formulation of the TDS. The other one is the
direction of growth within the territory which is also affected by the
linkage with the Pearl River Delta. The development scenarios are also
closely related to the interactions and development of the Pearl River
Delta. Scenario A assumes the PRD region as Hong Kong's primary
economic hinterland, while Scenario B includes both the PRD and the
inner provinces of China as the economic hinterland.
Under Scenario A, two further sub-scenarios were developed--steady
growth (AI) and high growth (AII). Both sub-scenarios assume growth in
Hong Kong and the Pearl River Delta. The difference is the degree of
reliance of the Pearl River Delta on Hong Kong. The steady growth
scenario (AI) assumes that there would be considerable growth in the
Pearl River Delta but the relationship between Hong Kong and the Pearl
River Delta would be more as equal partners. The high growth scenario
(AII) assumes that Hong Kong will be a primary centre of development in
the Pearl River Delta. It will be the key trading outlet, entrep6t and financial centre of the region.
Scenario B assumes that Hong Kong's economic ties will go beyond the
Pearl River Delta and reach the inner provinces of China, providing
entrep6t services, and acting as a major trading outlet and source of
foreign investment. This scenario is considered as the extra high growth
scenario by adding 20 per cent to the high land use and transport demand
in Scenario AII (high growth). From these scenarios, a range of land use
and infrastructure requirements are established. Cross-border transport
demands range from relatively low in the Steady Growth Scenario (AI) to
extra high in the Extra High Growth Scenario (B). The increase in crossborder traffic will not only affect the border but also internal traffic as
well. New internal transport networks and cross-border linkages are
proposed based on the updated findings of transport studies, such as the
Railway Development Study. Route Y which would link the proposed
Lantau port facilities via the Tuen Mun Road southern bypass, Tuen Mun
West to the Ma Wan area in Shenzhen is considered under the High
Growth and Extra High Growth Scenarios. Route Y was first recommended under the updating of the Second Comprehensive Transport
Study (CTS-2).
Industrial and office land uses are important components of the review
of the TDS. Comprehensive studies on industry and office needs have
been carried out in formulating options (Planning Department, 1991;
1992; 1993). A land development strategy is needed to provide a wider
range of industrial premises to accommodate the need for industrial
restructuring and diversification. An office land development strategy is
needed to enhance the role of Hong Kong as an international business and
financial centre. It recognizes that since 1987, the office sector has become
the most important economic sector and there are special land use needs
for its development. Some offices may need to be located outside the
central district, but many offices, especially financial institutions may need
a central location. Increases in China trade may lead to an increase in the
demand for locations near the border and port and airport facilities. The
office development strategy recommends the additional and timely supply
34
Economic restructuring and land use planning: A Gar-On Yeh
of office land at suitable locations so that rentals can be maintained at a
competitive level. It further recommends the development of a high
quality and vibrant office centre in the CBD; the development of strong
secondary centres to complement the CBD expansion along key transport
networks such as MTR stations; the development of selected off-centre
office nodes at accessible locations to cater for the needs of specialized
business activities that do not need to be located in the CBD; and the
development of non-Metro office centres to cater for local and special
needs outside the Metro region.
(B) Industrial land use planning
The recent acceleration of outward processing and subcontracting to
China had led to new trends in industrial land use planning. At the strategic level, the Territorial Development Strategy (TDS) which is guiding
the future land use development in Hong Kong has addressed certain
issues related to changes in the industrial structure (Planning Department,
1993a). The growth areas for manufacturing industries are mainly located
along the routes between the border and the container terminal and the
new airport (Figure 3). The location of these new growth areas is
supported by the results of the survey conducted by the Industry Department (Industry Department, 1991) on the future development of Hong
Kong in 1991. The linkages mainly involved the transfer of semi-finished
products between factories in Hong Kong and China. The zoning of industrial land near the border and along the major routes between the border
and the airport or the container terminals can therefore facilitate linkages
between the factories in Hong Kong and China.
The decline of manufacturing in Hong Kong has resulted in an
oversupply of industrial land because such land was programmed to be
formed on the basis of past high estimates of future land requirements
which were made when there was no major sign of industrial decline in the
early 1980s. To cope with the outward processing and subcontracting
phenomenon, the local planning authority has undertaken some remedial
measures. In the annual assessment of industrial land requirements, the
employment-based methodology has been replaced by a new econometric
approach which can give a more realistic estimate of the quantitative
demand of industrial land. The new assessment method has also been
adopted in the formulation of the Territorial Development Strategy (TDS)
for the long term development of the territory.
The Hong Kong Planning Standards and Guidelines (HKPSG) lay down
the detailed planning standards and guidelines to guide various types of
land development. Chapter 5 of HKPSG sets out the standards and
parameters of industrial land use development. The principles of industrial
land reservation have also been laid down. Given the recent changes in the
industrial structure, the planning authority has employed consultants to
review the standards and parameters, with a view of revising both the
principles of industrial land reservation and the planning parameters
adopted for industrial building development. It is hoped that a wider range
of industrial premises can be provided to cater for various types of industrial production as well as to improve the environment of new industrial
areas. The feasibility of introducing science parks and business park
developments to Hong Kong is also being explored.
(C) New mixed industrial~office land uses
The results of a survey conducted by the Industry Department in 1991 on
the future development of industries in Hong Kong revealed that there
35
Economic restructuring and land use planning." A Gar-On Yeh
were trends towards supporting activities complementing subcontracting
processes to China and a movement towards automation and high-value
added production (Industry Department, 1991). Hong Kong maintains
well-established business connections with the foreign markets in the rest
of the world and possesses high quality human resources. Therefore only
.those labour-intensive production processes are shifted to China.
Head office and other supporting activities related to subcontracting
production processes, such as R&D, administration, design, and quality
control are still taking place in Hong Kong. These generate demand for
ancillary office space. Such demand, due to its distinctive nature, is quite
different from that for other economic and financial activities. Such trends
are expected to continue in the future. As a result, there is a need for
introducing 'flexibility' in the use of floor space for industrial or other
ancillary office activities. In the past, because of the difference in environmental and safety requirements, industrial and office land uses were
separated from each other. With the changing industrial structure in Hong
Kong, the need for industrial related office space has led to the development of a new mixed industrial/office land use. There are two forms of
such mixed land uses--industrial/office buildings and industrial/office
zones.
Industrial~office buildings.
The concept of industrial/office (I/O) buildings
was introduced into the planning system of Hong Kong in 1989. It was
implemented through planning applications for I/O building developments
under Section 16 of the Town Planning Ordinance on sites zoned for
industrial use. The I/O buildings are dual-purpose buildings in which every
unit of the building can be used flexibly for either industrial or office
purposes.
The original guidelines for planning applications in composite I/O buildings in 'industrial' zones specified that offices to be accommodated in an
I/O building should be ancillary to industrial activities in the same industrial area. However, problems have been encountered in defining the term
'the same industrial area'. The situation has been compounded because
production lines of industrial firms have been moving out to other
locations where labour and land costs are cheaper, thus leaving non-manufacturing and headquarters functions in Hong Kong. The requirement that
the office should be ancillary to an industrial operation in the same industrial area may not be flexible enough to meet changing market needs. As a
result, the Town Planning Board agreed in 1994 to revise the guidelines
for 'Application for Composite Industrial-Office Buildings in Industrial
Zone' to the effect that the requirement for an office to be ancillary to an
industrial operation 'in the same industrial area' be deleted (Town
Planning Board, 1995). Such a modification matched well with the
escalating demand for office space and resulted in a tremendous increase
in the number of planning applications for I/O developments. As revealed
from past statistics on I/O development applications, the number has
surged drastically from 33 cases in 1993 to 133 cases in 1994, an annual
growth rate of 400 per cent.
As the nature of the office activities in I/O buildings is quite different
from other economic and financial activities, I/O office users have different
sets of locational preferences. Most of the I/O planning applications have
been concentrated in the main urban area comprising Hong Kong Island,
Kowloon, New Kowloon, and Tsuen Wan. Most were from the old industrial districts in the main urban area which are close to the city centre
(Kowloon and New Kowloon) and underground railway (MTR) stations
36
Economic restructuring and land use planning: A Gar-On Yeh
(Cheung Sha Wan, Kwun Tong and Tuen Wan). Industrial districts on
Hong Kong Island which are located far away from the city centre have
the least number of applications. This shows that accessibility may be one
of the major location criteria for this type of development. Besides accessibility, proximity to supporting facilities and efficient linkages related to
production processes and the interflow of information between production
partners are two major factors affecting locational preferences.
Industrial~office (I/0) zone. Changes in the industrial structure of Hong
Kong have led to increased demand for industrial/office buildings to
accommodate headquarters and uses related to outward processing activities. To facilitate I/O developments, in addition to I/O planning applications, a new I/O zone concept may be a feasible solution. The primary
objective of the I/O zone will be to allow mixed industrial and office uses
on such sites without planning permissions or payment of a high land
premium. An 'OU(I/O)' zone was introduced in the draft South West
Kowloon Outline Zoning Plan (OZP) with plan number S/K2I)/I in 1994.
The primary objective of this land use zone is to serve as a buffer area for
some environmental sensitive uses such as housing. Ancillary office and
other industry-related uses are permitted in this zone. All industrial uses
except heavy, obnoxious industries and offensive trades are allowed and
can also operate in the zone. This experimental zone lays the foundation
for the subsequent introduction of the new I/O zone concept which will
pass through the review and revision stages.
Conclusion
Economic relationships with China would already be important to Hong
Kong's economy, even without the return of Hong Kong to China. Such a
relationship is mainly related to the rapid economic growth in the Pearl
River Delta region after economic reform and the introduction of the
open door policy of China in 1978. Political integration with China when
Hong Kong becomes a Special Administrative Region after 1 July 1997,
and the completion of major transport infrastructure will further
strengthen the connection between China and Hong Kong, enhancing the
role of the territory as a gateway to Southern China.
Profound changes have taken place in the economy of Hong Kong over
the last decade, resulting from economic reform in China which has
opened up a great source of cheap labour and land. The sector that has
been hit the hardest has been the manufacturing sector. The industrial
structure of Hong Kong has changed from labour intensive to capitalintensive and high value-added modes of production with great increases
in subcontracting to the neighbouring Pearl River Delta region in China.
The changing industrial structure in Hong Kong has had a profound influence on industrial land use planning in the territory.
Planning in Hong Kong has been quite responsive in dealing with
changing land use requirements as a result of economic restructuring and
the new economic relationship with China. The changing demand for
industrial land and economic restructuring have led to the review of the
territorial development strategy of Hong Kong.
The development of industrial/office buildings and zones to meet the
office demand generated from outward processing to China and the
decreasing demand for industrial space in the old industrial districts is a
response to the changing industrial structure. As well as meeting the need
37
Economic restructuring and land use planning."A Gar-On Yeh
for mixed industrial/office developments in the changing industrial structure, it can also be an effective planning tool and 'catalyst' for accelerating
redevelopment of obsolete buildings in old industrial areas which otherwise lack redevelopment incentives.
Economic restructuring in Hong Kong is affected by the global economy
and the regional division of labour. Fortunately, Hong Kong does not yet
have to deal with the high unemployment and inner city problems experienced by many cities in Europe and North America. The economy is still
growing but at a slower rate. Urban planning can help to restructure the
urban space to meet the changing needs of different land uses as a result
of economic restructuring. As shown by experience in other cities, there is
a need for more government intervention to help adjust to the changing
land use, infrastructure and labour skills needed for economic restructuring (Ho, 1994, p. 33). Hong Kong needs to have an industrial policy for
manpower planning and promotion of high tech industries (Yeh and Ng,
1994, p. 449). It also needs government support to attract foreign investment and improve the skills of labour to meet the needs of high value
added service and office industries. As a start, the Trade and Industry
Branch has completed a study on the promotion of Hong Kong services in
1995, making recommendations on how to help Hong Kong to restructure
its economy towards the service and office industries in which the
economic future of Hong Kong will depend on in the 21st century.
Despite better land use planning in Hong Kong over the last two
decades, land and property prices have skyrocketted. It is now one of the
most expensive cities in the world in terms of land prices and office rents.
As a result, wages in Hong Kong have also gone up, making it less
competitive in the future. For example, the data processing work of
Cathay Pacific has moved to Perth in Australia and account processing to
Guangzhou in China. As in other cities experiencing economic restructuring, Hong Kong may need to reexamine how to use land policy to
reduce land price which is an important cost factor in production in Hong
Kong and to attract the setting up of new manufacturing, services, and
office industries.
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