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Mr. Governor, Ladies and Gentlemen,
First a warm welcome to you all and my congratulations to the organizers of IBEX '98. IBEX has been an important feature of the construction calendar for 15 years. The organizers of this seminar, the HKCA, the HKIE and the HKIB have a collective experience of 130 years between them. And, with the imminent completion of the largest set of integrated infrastructure projects which this community has ever embarked on, it is entirely appropriate that the organizers of this seminar have chosen as their theme, Construction in Hong Kong - The Challenges Ahead. But then, like the community it serves, this industry has never been comfortable sitting on its laurels. Most of what I want to say today has to do with challenges on the quality, safety and environmental front. We all know that we can meet just about any challenge when it comes to numbers and volume. Even so, since numbers are topical, I will make a short digression about industry prospects in general and the housing programme in particular.
Industry Prospects - New Infrastructural Investment
There is a tendency in some quarters to think that once the airport opens things will slow down. After a quarter century in Hong Kong my response to that is: "Chance would be a fine thing!" For those of you who require some more carefully measured response, I commend you to the supporting documentation of the budget speeches for the same period. With patience and a pocket calculator you can establish for yourself that the Government's record of re-investment in essential infrastructure has been remarkably consistent. Leaving aside the public housing programme for a moment, what do we have on the immediate horizon: West Rail, extensions to the MTR in Tseung Kwan O and Quarry Bay; then there is continuing development work on the North shore of Lantau, Kowloon Bay reclamation and development, improvements to almost all major highways, Central and Wanchai reclamation and so on and so on. All of these mean contracts for you and jobs for a very large number of people from highly skilled professionals through site supervisory staff to the humblest construction labourer. Not to mention all that supporting crew of suppliers of equipment and materials, quantity surveyors, accountants, lawyers, bankers, traders and transportation companies. The estimate of new jobs created by public works and infrastructure projects over the next twelve months is nearly 60,000 not including housing. The public housing programme has in recent years employed around 12,000 skilled and semi-skilled workers full-time. We will shortly enter a period of three years of still more intense activity which will result in the creation of an additional 3000 such jobs on site. To which must be added the jobs created for the design and management of this truly massive programme. So at a time when other parts of the economy may be running slack, take heart that your own industry is set to continue to run at full capacity for several years to come.
The Challenge of Housing the Needy
The Housing Authority's mandate is simple but challenging; it is to help provide homes for those in need. Half our population live in Public Housing: 230,000 families in flats built for subsidized sale under the HOS/PSPS, and more than twice that number in Public Rental Housing. And yet we have 148,000 families on the waiting list for public rental housing and it takes an average of six-and-a-half years to get in. So when you hear people say that 50,000 units of publicly built housing a year is too many, bear in mind that it is a gross figure, then net out the 15,000 flats needed each year for families affected by redevelopment of the old estates, then deduct another for 5,000 families cleared from squatter huts and THAs in development clearances, and then finally spare a thought for those families on the waiting list who in recent years have only managed to secure only 10% of flats each year. A steady average production of 50,000 units will enable us to bring these six-and-a-half year average waiting time down to three years, but not until 2005! Thus it is vitally important that we stay focused on housing those that are in genuine need. It is vitally important that in casting our Public Housing net we catch and help those whose need is most urgent, and that we do this as quickly as possible.
Housing Production
The good news is that, in the public sector, we are well on track to meeting our targets and evening out supply:
we have secured sufficient land to meet our needs through to 2005 and will ensure that supporting infrastructure is in place;
we have streamlined our planning and delivery process cutting it from 62 to 47 months;
we have let 46 construction contracts valued in total at $26.5 billion since the announcement of the targets in June last year;
we will complete over 30,000 flats in 1998/99, pass the 50,000 mark next year and peak at around 90,000 in 2000/01 before settling back to 50,000 thereafter;
we will let another 48 building contracts valued in total just over $30 billion over t next 12 months.
Taken together all of this means that we will have over 200,000 flats under construction at any one time for the next 3 years. It also means that, after the alarming dip in production of the last three or four years, we are on track for securing steady, sustained production. That will give both you, and us, and the families on the waiting list some badly needed certainty. So now let us turn to the real challenges: quality, safety, environmentally friendly practices and efficiency.
Quality
Turning first from quantity to quality. There is no doubt in my mind that we need to build fast, but we need to build well. In the recent past, each time we have gone through a production peak, for example the late 1980's, there have been problems with quality. This is not only our experience, but also that of neighbours such as Singapore. It is a fact that the quality of our buildings has been steadily improving over the years, but so too have the sophistication and the expectations of our tenants and owners. It is of little comfort to a first time buyer that his or her flat has been produced in 21 months if the drainage system leaks and the tiles fall off the walls. The Housing Authority is now taking quality very seriously indeed. We will not tolerate shoddy construction, poor workmanship or substandard materials. We are building for the future and, quite apart from satisfying our customers, we want both our and your successors to be able to look back at our work with admiration and pride. That demands a partnership with a commitment to quality. That partnership and that commitment must embrace all parties, not just the HA as client and the contractor, but also consultants, developers, surveyors and suppliers. Quality cannot depend on the HA swamping each project with site supervision. It must start with a sincere commitment coupled with professionalism, accountability and a clear understanding of expectations. So let me set out clearly what the Housing Authority expects from its partners. We want compliance with contract no more no less. We want the product we are paying for. We want the standards which we set to be the norm you achieve, not something you shoot for. My staff will be focusing on the sharp end and they will have very clear instructions. Failure to 'get it right first time' will result in a firm requirement to rebuild. And anyone who thinks that the 31st March is a magic date for project completions would be well advised to consider the overall volume of production. I will let a project slip rather than it condone acceptance of shoddy work. So be assured, we will be stepping up site vigilance and contractors and others who are not on the quality train will pay a heavy price. We will decouple them from the train and dissolve our partnership with them.
While I expect the product to be up to scratch, I am not insensitive to some of the underlying problems confronting the industry. So let me set out clearly what you can expect from us:
from 2001/02 onward, our annual output will be steady which should facilitate retention of a stable and well-trained labour force;
we have formed a PASS Control Unit to ensure our standards are consistent;
our PASS system rewards good performers with better tendering opportunities, and the Housing Authority Building Committee is now taking a serious look at how performance can also be taken into account when awarding contracts;
we will be revisiting the concept of linking milestone payments to contract compliance i.e. incentives to complete early rather than just penalties for failure; and
we will place increasing emphasis on a skilled labour force.
In 1993, the Hong Kong Construction Association asked the Housing Authority to make Trade Testing a mandatory requirement of our contracts. Surveys at that time indicated only 5% of our labour force who were classed as tradesmen, had any form of formal training. Our contracts now require 35% of tradesmen to be qualified in most trades. The ultimate target is 100%. There have been suggestions that this requirement be waived, I cannot understand why. In 1993, the HKCA was right, there is a need for a well-trained labour force. The CITA has the capacity to trade test; we will not be lowering our standards.
Safety
Since 1990 accidents on Housing Authority sites have fallen by 75%, and our accident rate is about one third of the industry as a whole. This is a remarkable achievement, but it is not enough! Unless we reduce the accident rate substantially, we can expect an increase in the number of accidents on Housing Authority sites due to the expansion of our construction programme. This is why we are determined to develop safety management systems that can be compared to the best practice worldwide. The focus will be on sound safety management. In 1997, we introduced a contract requirement for Safety Plans and independent Safety Auditing. By 1999, all our construction sites will be included under this umbrella of safety.
We have spent some $10 million in the training of workers through the Green and Silver Card Schemes. We have funded, and will continue to fund research into site safety. We must now reach down together and:
involve subcontractors and their workers;
ensure all supervisors share our commitment to safety; and
create a site safety culture.
In this context, it would be remiss of me not to say a word about our system of sub-contracting. On the plus side, it has stood us in good stead over the years. It has provided flexibility in meeting fluctuations in workload. It is an efficient way of using scarce skilled labor. But it does have its downside. As we move towards a more stable level of housing production in the next decade, sub-contracting works against good site accountability and communication. It works against improving the skills of our workers, and the development of a safety culture. I recognize that this is a complex dichotomy. It is a challenge; that is why I raise it. What is important for the future is that we attract the right calibre of person into the industry, and retain them. Construction sites are often seen as remote, dirty and dangerous. The challenge is to change the whole image of the industry.
Environment
Last year the Housing Authority engaged consultants to undertake an environmental audit of a number of Housing Authority sites. There is much room for improvement. As a consequence we have strengthened a number of aspects of PASS. The Authority has taken a lead in a number or areas including:
reducing the use of tropical hardwoods;
improving the thermal efficiency of our buildings;
developing single aspect buildings to act as sound barriers.
There is a tendency in the construction industry to react grudgingly to environmental legislation. It is refreshing therefore to see that REDA has taken the lead in developing a Hong Kong environmental rating system for buildings called BEAM. A rating system for offices has been completed, and one is now being developed for residential buildings. The Housing Department is placing its full support behind this initiative.
Efficiency
One of the keys to producing more affordable quality homes quickly and in a more environmentally friendly way has been the readiness of the industry to innovate. The Housing Authority has encouraged such innovations and the improvements to efficiency which have flowed from them. Examples from the past two decades include: large panel formwork; dimensional coordination; modular design; precast facades and staircases; drywall partitioning and the like. As a result, the typical floor cycle has reduced from ten-day cycles to four-day cycles, while increasing quality at the same time. Much of this innovation has come from our contractors. Buildability is the key to improvement in efficiency and quality. We need to build on the experience of the past, but not be afraid to make a quantum leap into the future. We need to take full advantages in the changes to the building codes when designing for the future. One of my colleagues will be speaking to this topic later, so I will say no more here except to stress our belief that research is the backbone of innovation. We look forward to working with the academic institutions across the spectrum from materials, technology, management and behavior through to information technology. In the latter context we welcome the collaborative partnership provided by Construct IT. [Note: Construct IT includes HKU, HKPU, consultants, contractors, HD, WB, developers, IT suppliers and aims at developing the use of information technology in the construction industry.]
The Challenge of Urban Renewal
Before closing I would like to mention one other challenge and that is the challenge of urban renewal. Some 30% of private residential property is well past its 30th birthday and rapidly deteriorating. Public housing stock is considerably younger on average thanks to the vigour with which the Housing Authority has pursued its Comprehensive Redevelopment Programme. This aging of private housing stock coincides with the once in a lifetime opportunities presented by the removal of the airport from Kowloon City to Lantau. In the past the Housing Authority's approach to redevelopment has been a self-contained one. This need not always be so. Now that the process of privatising public housing has begun, I think it would be timely for us to re-visit the way we do such redevelopments. In particular, I can see considerable advantage in encouraging a greater private sector involvement in the process from planning and design through construction to sale. In a non-interventionist economy, housing stands out as the grand exception to the rule, and there were good reasons for this intervention, as there were good reasons for the HA doing the first generation of redevelopments itself. But we have neither a need nor a desire to follow the Singaporean model to market domination. With 50% of the population now owning their own homes, we can contemplate rolling the boundaries of government intervention gradually back, facilitating increased private sector provision of public needs rather than doing it all ourselves. There are several places where the sites which we occupy, properly handled, could both meet the HA's needs and provide the key for unlocking a process of private sector redevelopment of the surrounding areas. It would, be foolish to squander such opportunities, complex though the problems may be in each case. This deserves careful study, but I firmly believe that there is much to be gained by private/public sector collaboration in this field.
Conclusion
Ladies and gentlemen, I titled my speech in Public Housing : Certainty and Challenge. The certainty refers to a steady level of production over time. While fluctuations are no good for us or the industry and sour the investment climate, I am confident that, with land supply clearly identified for 10 years ahead, we now have that certainty. As for challenges, I have focused on a few of most concern to myself. I do not pretend the list is comprehensive, for there can be few moments in our history when the challenges have been greater. However, there can be few moments in our history when we have had a construction industry better able to face the challenges of change. Thank you.