• Tue
  • Sep 16, 2014
  • Updated: 7:44pm
Lai See
PUBLISHED : Wednesday, 01 May, 2013, 12:00am
UPDATED : Wednesday, 01 May, 2013, 3:46am

Is the aviation hub key to Hong Kong's economic prosperity?


Howard Winn has been with the South China Morning Post for two and half years after previous stints as business editor and deputy editor of The Standard, and business editor of Asia Times. His writing has also been published in the Far Eastern Economic Review, the Wall Street Journal, and the International Herald Tribune. He writes the Lai See column which focuses on the lighter side of business.

Opposition to the third runway essentially centres on concerns about increased emissions and air quality and the effect that construction will have on the habitat of the pink dolphin.

There are those who say that the airport is big enough and if further capacity is required, then it should be built on the mainland. However, this would come at a considerable cost to Hong Kong's economy, some say. The real damage would be to erode Hong Kong's position, unique in the region, as a hub for regional and global multinational headquarters.

Hong Kong's appeal, the argument goes, lies in the ease with which high value-adding professionals are able to move around the region and the world, using Hong Kong as a base. In a recent presentation to the British Chamber of Commerce, public policy consultant David Dodwell said: "As of the end of 2012, Hong Kong was home to 1,367 regional headquarters of multinational companies - by far the largest clustering in Asia." These, he says, directly employ about 140,000 people. About 70 per cent of them say that Hong Kong's transport infrastructure is a significant factor in choosing it as a headquarters. Over half of them engage in trade, wholesale and retail businesses, while a quarter are involved in professional, business and education services, and financing and banking.

"Clustering of these high value-adding industries in Hong Kong in turn further strengthens it as a business hub, attracting the world's leading legal and accounting firms and many other professional services providers," Dodwell says.

Hong Kong, he says, is one of three cities in the world that have significant business clusters of this kind, along with London and New York. Even if the third runway is completed on schedule in 2018, he thinks the airport will have reached capacity by 2025, five years ahead of projections. Current levels of demand at the airport were forecast for 2025 back in 1998, when it was opened. Dodwell argues that if the capacity is not expanded, then this will affect Hong Kong's appeal as a regional hub, multinationals will begin to look elsewhere and its business clusters will begin to unwind.

People are already talking about a fourth runway, but there are estimates that this would cost more than the original airport together with the rail infrastructure.

What are the options? In 1997, it was widely (and incorrectly) predicted that the handover would spell the end of Hong Kong as a business centre. If we accept the argument that an efficient aviation hub is vital to maintaining business clusters in Hong Kong, does it mean that the end is now looming with the inability to increase the capacity of the airport?


Dream on

Most people see Macau as primarily a gambling centre with a few other attractions. However, Jeffrey Katzenburg, the chief executive of DreamWorks Animation, sees it differently. DreamWorks is to allow Sands Macao to host animation characters including Po and Shrek in its Cotai properties.

Explaining why he chose Macau as the first DreamWorks Experience outside North America, Katzenburg said it was because Sands had built incredible resorts for families. "What they've built here are for families. Yes, there are casinos but they are completely separate. No children are allowed in it. I mean, they've really done a fabulous job here of building a great world-class resort that happens to have gambling attached to it."


JP Morgan on top

JP Morgan was the biggest payer among investment banks last year. It paid its senior bankers about one-fifth more than Goldman Sachs, Bloomberg reports, quoting a report by Emolument, a company that provides data on salaries. Managing directors were paid an average of US$1.7 million in total compensation last year.

Morgan Stanley was the second-highest payer, with average payments of US$1.4 million, followed by Goldman at US$1.35 million. Pay at European firms was considerably lower with the average at HSBC, Societe Generale and BNP Paribas at less than US$806,000. HSBC was the worst payer among those surveyed, with average payments of US$732,000, while Citi was the lowest-paying US firm, with average total pay amounting to US$951,000.


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This article is now closed to comments

The idea that the government needs to do this and that to maintain Hong Kong as a hub for mulitnational headquarters seems like old-speak.Fewer multinationals now need to maintain much in the way of a headquarters structure and they can de-aggregate most functions to where they are needed. Let the airport pay for itself if they think a new runway is justified, and don't expect the Hong Kong taxpayers to pay for this. The only strategic part of this "investment" is the benefits to Hong Kong goverment workers and their civil servant cronies.
I am sure that waiting hours at the finger in Hong Kong while CX wait for a plane load of delayed mainland tour group passengers to arrive is a dis-incentive to business locating here. I certainly try not to fly CX our of Hong Kong now. And if we want to get serious can our China fawning airport set up express security and immigration lanes for premium passengers. They have to wait in line behind 50 at a time mainland tour groups at the moment. Put up landing fees for short haul small load planes and make them use our USD 10 billion express rail link.
What a load of b...

Last time I checked, there is only about 24 business class seats on the average airplane. If the frequent flyer professionals that are so important according to Mr Dodwell need more seats, I am sure Cathay can solve that in no-time. No need for new runways to serve those needs.

The airport handles over 60m passengers in a year. How many of those are just transit passengers that contribute almost zero to the HK economy? How many are tourists that stay for 1-2 nights in a cheap Jordan hotel, do some shopping and contribute thus very little? How many are actually here for business? How many are HK residents? Surely Mr Dodwell, as a 'public policy consultant' is aware of such vital numbers?

Good infrastructure is important, sure. But good is about quality, not quantity. And there is a balance between cost and benefit to be struck here too. The demand for mobility is endless, but that does not mean we need to keep building airports, railways, roads and bridges no matter what. This is a city of 7m people. I'd like to see a whole lot more convincing figures before we can conclude we don't just need a great airport, but also a bigger one. Until then, let's not spend billions of taxpayer money.
Never trust govt estimates / projections.
@"Is the aviation hub key to Hong Kong's economic prosperity?"
Not at all! Wait for the high speed railway We don't even need three runways.
If Hong Kong's ATC were more efficient, operated a reduced separation for landing aircraft ( as per Heathrow) and discouraged old, noisy, small capacity and short-haul aircraft from taking slots from larger and more efficient aircraft, there is already enough capacity at CLK for the next 30 years. We also do not need 'private aviation'. People who fly in small personal jets and take business trips in helicopters are selfish environment contaminators who don't give a damx about climate change.
South Beijing is building a 9 runway airport. Guangzhou will total 5 runways. Shenzhen has two and is building a third. What happened to the fast rail tunnel from Chep Lap Kok to Shenzhen airport which has many more Mainland destinations than HKG? Zhuhai airport has no international destinations and HKAA controls 55% of that airport, hence the 'need' for the HK-Zhuhai bridge monstrosity for Zhuhai exports. The ARUP report on CLK expansion clearly states the projected NOx emissions from a 3rd runway will exceed even the current intended AQO's. Mainland airports are CLK's competitors. PRD airspace is controlled by the PLA airforce as is any request to increase landing slots. To date there was no commitment to increase HKG slots. More Guangdong runways means more flights passing through PRD airspace and altitude / separation restrictions. Main former users of CLK aircargo like Apple and Dell's Foxconn have moved out of expensive PRD and are closer to Mainland airports hence local aircargo is down. Chongqing besides adding another runway,is building a rail connection to Europe. Whilst DHL chose CLK as asian hub its main competitors chose Shenzhen + Guangzhou as their hubs. There is a finite number of air movements that can pass through PRD airspace and the PLA airforce will pander to Mainland airports first. Meanwhile our ENB wants to build a polluting incinerator when available peer reviewed reports show increases in child deaths and cancers downwind of such. Trust HKG Govt?
If the airport is not expanded by adding a 3rd runway, airlines will simple change the equipment they use to larger aircraft. It's just another construction industry subsidy.


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