With the government on the back foot after the extradition bill disaster, there has been a positive consequence on another highly contentious issue — the Lantau land reclamation plan. We had news that Legco scrutiny of the preliminary funding request for the so-called Lantau Tomorrow Vision (LTV) project has been postponed.
Even if the LTV project is hurried into commencement, it would require at least three to five years just for preparations.
Also, given the macro uncertainties amid the Sino-US trade war, it is a big “if” as to whether the mainland economy can still hold up well by the time the project officially kicks off.
While authorities may still try to get the project up and running, the “super infrastructure dream” could end up being abandoned later on if there is a major economic crisis, or if some big enterprises suddenly go bust.
If China suffers a sudden and severe economic slowdown, it will almost certainly lead to a housing market crash in Hong Kong.
If that happens, the gigantic artificial islands built under the LTV plan, which are intended as the new real estate growth engine in Hong Kong, could become a ghost town that is unsuitable for any industry.
Another major risk factor with the LTV project is that if there is a property market crash in Hong Kong as a result of economic slowdown in the mainland, it will take a heavy toll on government revenues. We all know that authorities have become heavily dependent on land sales income over the years.
What is worrying is the prospect that the government will still inject tens of billions of dollars into the LTV initiative even if its income plunges.
There is a view among authorities that the project is a one-way ticket, where withdrawal is not an option.
It is not difficult to imagine the hugely negative implications of the drain on our public finances if the government pursues the reclamation project regardless of the macro headwinds.
The government may be sitting on more than HK$1 trillion in fiscal reserves right now, but the financial strength may not last if authorities pour huge resources into a project that could turn into a white elephant.
For now, however, let us take comfort in the fact that the funding request process for the LTV project has been delayed, thanks to the extradition bill crisis.
This article appeared in the Hong Kong Economic Journal on July 1
Translation by Alan Lee
[Chinese version 中文版]
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