Abstract
In November 2008, Hong Kong became the second Asian economy behind Singapore
to officially enter
recession, after GDP contracted by a seasonally
adjusted 0.5% quarter-on-quarter (q-o-q) in Q308. BMI
has further lowered
forecast for GDP growth in 2009 to -3.6% and anticipate a mild recovery in
2010.
New data that have become available from the national accounts has
prompted a replacement of our
historic data and forecasts for the
construction industry value of Hong Kong. Our new data are of the
nominal
added value of the industry. Therefore, minus the intermediary products that
are no longer being
taken into account, we see the industry nominal value
at HKD40.7bn (US$5.2bn) for 2009. Preliminary
data for the first three
quarters of 2008 show that the sector possibly escaped contraction in 2008,
but we
believe that real industry value growth will be -3.9% in 2009 and
-0.3% in 2010.
Plunging into recession again within a decade has been a
key thrust behind the government’s decision to
accelerate the
project, which will see the former Kai Tak airport transformed into a new
section of the
city. The project has been on the drawing board for at
least a decade until the Kai Tak project master plan
was announced in
January 2009. Construction will take twelve years and the total estimated
cost, which
will be wholly government funded, is HKD100bn. The project
alone is capable of boosting the entire
region’s construction
industry value at much higher levels that we forecast. However, because it
has
encountered delays before, we shall not take any steps to change our
forecasts upwards until construction
on the first phase begins.
Hong
Kong achieves a score of 60.8 in our Business Environment Ranking. It is
boosted by having the
highest score in the region for financial
infrastructure and legal framework. With minimal barriers to
entry, Hong
Kong’s construction market is renowned for being extremely competitive.
Low tax rates, a
stable political environment and its strategic location
make Hong Kong an attractive investment
destination. The Hong Kong Special
Administration Region (SAR) is also known for its relatively low
levels of
corruption. Despite its impressive country structure, it only manages seventh
place in our BR
Ranking because of its little spending on construction so
far.
We have also introduced our new Project Finance ratings on the Asia
Pacific region in an effort to
provide a globally-comparative, numerically
based assessment of the breadth and depth of risks facing
major
infrastructure projects, which will in turn affect the source, availability
and cost of finance. Hong
Kong’s superior legal and institutional
foundations, as well as a highly favourable investment climate and
minimal
government intervention in private sector activities not only give it the
highest score in the Asia
Pacific region, but also globally.
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