Can Hong Kong afford its planned artificial island construction project?

Screenshot from Kau Yi Chau Artificial Islands’ public consultation website.

Hong Kong government is set to launch a large-scale land reclamation project, namely the Kau Yi Chau Artificial Islands, to boost the city’s land supply and address the unaffordable housing crisis.

In their ambitious proposal, Hong Kong plans to construct several artificial islands among the natural islands between Lantau and Hong Kong Island to pave the way for more developmental projects in Lantau. Many environmental groups voiced their opposition to the mega-project when Carrie Lam, the city's former Chief Executive, submitted the project's research budget to the Legislative Council in 2019.

Irreversible environmental damage

One major concern is the irreversible damage of land reclamation to marine life and Hong Kong's coastal sea bed. Moreover, together with the Northern Metropolis development project, the government will have to spend at least HKD 1,500 billion (USD 192 billion) for the grand developmental project in the coming decade, and critics warn that the plan may drain the city's cash reserves.

The Artificial Island project was first introduced by former chief executive Leung Chun-Ying in 2014, rebranded by his successor Carrie Lam as “Lantau Tomorrow Vision” in her policy address in 2018. The project is intended to create land for housing and turn Lantau into a transportation nexus by connecting Hong Kong commercial centers to the Guangdong-Macau-Hong Kong Greater Bay Area, China's strategic economic and tech hub. 

But environmental activists are not sold. In a submission to the Legislative Council in 2020, Green Earth, a local environmental group, pointed out that the large-scale land reclamation would destroy natural habitat and marine life, including the Chinese white dolphin, a Grade 1 national key protected animal that lives off the coast of Hong Kong and in the Pearl River. Moreover, the construction will require a huge supply of marine sand which can only be attained through sand mining, which will destroy river and sea beds in the mining areas. 

Population projection debate

Screenshot from Kau Yi Chau Artificial Islands’ public consultation website.

Despite criticisms, the current administration under John Lee insisted on pushing through with the project, stressing that the city would need an extra 1 million apartment units to meet the needs of the 8.1 million population by 2041. Critics, on the other hand, argue that another development project, the Northern Metropolis developmental project is set to produce 900,000 residential units to meet housing needs in the coming decade. The blueprint of the Kau Yi Chau Artificial Islands was announced on March 2, 2023.

Under the plan, the three artificial islands will cover around 1,000 hectares of land that can provide around 200,000 residential units for 550,000 people. In addition, it has the infrastructure of a core central business district (CBD) with 270,000 job opportunities. The project will debut near the end of 2025.

However, Hong Kong has undergone radical changes in the past few years. A large number of middle-class families and professionals have emigrated out of the city since the enactment of the National Security Law in 2020 as they foresaw the erosion of freedom in the city. 

While the economy started to recover after the city lifted COVID-19 control measures earlier this year, its economic growth thus far has been driven by local consumption. The competitiveness of the city has fallen to seventh place in the “World Competitiveness Yearbook 2023,” falling by two places from the preceding year and currently one place behind Taiwan.  

Amid economic uncertainty, finance blogger @winbigwok questioned the necessity of building the third CBD within the city as many promises of the newly developed second CBD in east Knowloon are unfulfilled, and its future growth looks unlikely

Many have also questioned the government's population projection. As pointed out by Liber-research, a grassroots think tank, the city’s population dropped from 7.41 million in 2021 to 7.29 million in 2022, and the emigration trend will continue for at least the next two to three years. Yet, the government still projects that the city’s population will reach 7.7 million by 2023. The difference between reality and projection is about 400,000 people — almost the residential capacity of the artificial island project.

Money concern

However, the biggest concern is money. Since the price tag of land reclamation alone is already marked at HKD 580 billion (USD 74 billion), Jason Poon, a veteran engineer, estimated that the project would cost HKD 900 billion (USD 115 billion) together with the construction of other infrastructure. Even if the government managed to sell the reclaimed lands to private developers, it would only generate around HKD 400 billion (USD 51 billion) in revenue. The deficit will be about HKD 500 billion, Poon estimated.

Economist Andy Kwan Cheuk-chiu also pointed out that Hong Kong is facing multiple economic crises due to an aging population and an exodus of elite white-collar workers. The city’s fiscal reserves may be drained in a decade or so if the government pushes through with the mega project.

In response, the city’s finance chief suggested public-private partnerships and issuing bonds to fund the land reclamation.

As the government seems intent on continuing with the project, the next question is — what if the mega developmental project fails?

Social, political and economic risks

In a joint research report published in February 2023, Libre-research and Greenpeace examined 52 artificial island construction projects worldwide. They found that 46 percent of the projects were incomplete, delayed, (partially) abandoned, or left vacant. Among 13 mega-land reclamation projects that involved 1,000 hectares of land, the incomplete rate was up to 77 percent, and only one has been fully completed. 

Citing experiences from other countries, the report also pointed out that mega-construction would generate uncertainties and stress and hence more likely to trigger social and governance crises. Below is an infographic in the research report that sums up potential problems in artificial island construction projects around the world:

Screenshot from Greenpeace and Libre-research's joint report.

Former director of Hong Kong Observatory Lam Chui Ying added weight to the debate by slamming the Hong Kong government for violating the principle of “ecological civilization” upheld by Chinese President Xi Jinping in his consultation submission. He also argued that the construction of artificial islands amid the worsening climate crisis would generate environmental security risks, including rising sea levels and flooding during mega typhoons.

Since early 2018, China has introduced the toughest regulation on land reclamation along the country’s coastline. But the Development Bureau stated that the mainland practice does not apply to the city under the two-systems policy. 

The government claimed that among 7,800 submissions from the initial public consultation, 60 percent supported the project. But the majority of the public was unaware of the consultation, according to a survey conducted by Hong Kong Public Opinion Research Institute. Meanwhile, more than 185,000 Hong Kong residents have joined the Greenpeace signature campaign against the mega artificial islands plan.

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