Jake's View

Land exchange is not the way forward

Colonial system used to compensate landowners should not be brought back in creation of new towns, given its flaws and inherent unfairness

PUBLISHED : Thursday, 06 June, 2013, 12:00am
UPDATED : Thursday, 06 June, 2013, 4:15am

On the question of land acquisition, some developers, together with some village landowners, have suggested a return to the land exchange system which was so successful … in the 1960s, 1970s and 1980s … The exchange system had its failings. There is no need to repeat them when applied to this new town at Hung Shui Kiu.

Sir David Akers-Jones
Letters to the editor, June 5


How interesting to see that Sir David now concedes there were failings in a crucial government policy of which he was the strongest proponent as a colonial administrator.

He is still wrong about these failings, however, when he says there is no need to repeat them. If we repeat his land exchange policies, we will repeat their failings. There is no avoiding them. They are inherent in the land exchange system.

Briefly stated, the government came to the view in the 1960s that the only way to house Hong Kong's booming population was to build new towns in the New Territories, which would take the pressure off the urban centres and also accommodate industries to employ the people.

But there were problems. Money for the required land purchase was short, formal land requisition procedures were primitive, and relations with the inhabitants were delicate, as the New Territories was administered under a lease with Beijing, which had only a few decades to run.

Land exchanges, commonly referred to as Letter Bs, were the solution. The farmers were given pieces of paper exchangeable for land to be sold at future auctions. This got around the problem of lengthy negotiations for immediate resumption payments, and land acquisition was then quick.

By the end of the 1970s, there was nearly 40 million sq ft of floor area in outstanding land entitlements and few auctions at which to use them, as all the best land had already been used by the public sector. Beijing then insisted that all these obligations be retired before the 1997 handover. It was done in an accelerated auction push.

Now the failures. The worst was that rapacious fertiliser salesmen selling to farmers on credit were encouraged to drive them into bankruptcy. Security in otherwise worthless agricultural land could then be seized as valuable land entitlements.

But the big problem was that Letter Bs cannot buy food and, with their land gone, the holders had to find money to live. Deep-pocketed developers were at their doorsteps, however, to give them the money for mere bits of paper at deeply discounted prices.

This is the biggest failing of land exchange. It grossly and inevitably short-changes the original holders of the land. If Sir David now wishes to claim that some village landowners support land exchange, I must ask him if he was talking to Heung Yee Kuk thugs who participated in the rip-off.

The developers, meanwhile, also did very well at the later land auctions for Letter B holders. Just four of them held almost all the Letter Bs by that time, and they did not strenuously compete with each other, nor were induced to do so by an auctioneer under pressure to clear out Letter Bs by 1997. It may have been a slur then to call Sir David the Secretary for Developers' Profits but I think it still held an element of truth.

There were other disappointments. Manufacturing industry moved, but not to the new towns. It kept on moving, right across the border. This is why Tuen Mun, for instance, became a social security dumping ground. The jobs bypassed it. Will the even more remote Hung Shui Kiu do any better?

We are, in any case, under nowhere near the development pressures we faced back then. Population growth is much lower and consistently less than forecast in recent years, while the vast squatter settlements of the 1970s have now been cleared out and their inhabitants given public housing.

With more time to deal with these matters, we now also have far better resumption and compensation arrangements, including a formal valuation tribunal for appeals. More than that, we now have the money for direct compensation, with more than HK$1.6 trillion in free fiscal reserves.

Sir David is wrong. Land exchange is an outmoded compensation system that works against the interests of smallholders and makes wealth disparity significantly worse.