Topic 6: Hong Kong Construction Industry

References:
1.
http://www.econ.cuhk.edu.hk/~discusspaper/00011.pdf: C.K. Leung and K.S.
Wong, The Construction and Related Industries in a Changing SocioEconomic Environment: The case of Hong Kong, May 2005,
2.
http://www.tdctrade.com/main/china.htm.
3.
T. Cheng, E. Wong and G. Soo, Construction Law and Practice in Hong Kong,
Sweet & Maxwell, 2004.
1.0

Building and construction industry in Hong Kong (latest dated July 2011)

1.

The following are extracted from http://www.hktdc.com of the HKTDC at

http://www.hktdc.com/info/mi/a/hkip/en/1X003UNV/1/Hong-Kong-IndustryProfiles/Building-And-Construction-Industry-In-Hong-Kong.htm

2.

Hong Kong's construction industry performed well in the first quarter of 2011,
with the gross value of construction work performed by main contractors in
real terms amounted to HK$26.3 billion (US$3.4 billion), gaining 17%
year-on-year (YoY). The ten major infrastructure projects announced in 2007
are being rolled out in phases as scheduled, boosting Hong Kongs
construction market. Chinas twelfth Five-Year-Plan, which was released in
March 2011, shows the countrys intention of further increasing investment on
the infrastructure development, offering great opportunity for Hong Kong
contractors.

3.

Industry Data from Quarterly Report of Employment and Vacancies at

Construction Sites, Census and Statistics Department is as follows:
Mar-2010

Mar-2011

YoY %

1,006

1,053

+4.7

Public

396

466

+17.7

Private

610

587

-3.8

53,913

58,807

+9.1

Public

23,849

30,962

+29.8

Private

30,064

27,845

-7.4

Number of Construction Sites

Employment

4.

The overall gross value of construction work performed by main contractors in

1

Hong Kong (in real terms) has been rising since 2009. A strong growth of
61.1% in the value of public sector sites drove up the construction activity by
7% to HK$111 billion in 2010. As the ten major infrastructure projects are
being rolled out in phases as scheduled, the demand for construction services
in Hong Kong, particularly demand from the public sector, will remain high.
Sector (in HK$ million)

5.

2010

2010
YoY %

2011
Jan-Mar

2011
YoY %

Private sector sites

26,924

-12.3

6,183

9.3

Public sector sites

27,470

61.6

8,165

40.4

Location other than sites

45,883

-0.1

11,966

8.6

All group

100,278

7.0

26,313

17.0

Hong Kong's construction industry is characterised by a small number of large

local contractors, a high level of subcontracting, the presence of many
overseas contractors, and a substantial number of companies being both
developers and contractors.

6.

Most of Hong Kong's construction companies are small in size, those with less
than HK$10 million (US$1.3 million) in annual gross value of construction
work account for as high as 97% of the construction industry. The majority of
the small ones act as subcontractors to the large companies, which tend to be
main contractors. There are quite a number of very big construction companies
that are capable of handling projects requiring sophisticated technology and
strong financial background and are expanding their business across the
region.

7.

Many services professionals are involved in the building and construction

industry, notably architects, surveyors and engineers.

8.

Apart from the ten major infrastructure projects, the HKSAR government has
also forged ahead with other works, such as Operation Building Bright and
Revitalising Historic Building. In addition, the further development of Hong
Kong International Airport, including the construction of the proposed third
runway, is under discussion, according to the HKIAs Master Plan. As a result
of these projects, the employment condition in the construction industry has
improved significantly, with the unemployment rate in the industry down to
recent 4.5% from the post-tsunami peak of 12.8%.
2

9.

In the Budget 2011/12, the Hong Kong government estimated total public
spending on infrastructure to go up by 45% YoY to HK$58 billion (US$7
billion) for the fiscal year ending 31 March 2012.

10.

Many Asian countries need to upgrade their basic infrastructure such as road
networks, port facilities, and housing. The rise of Asian consumerism has also
led to rising investment in modernising their retail distribution channels.
Shopping malls are springing up in many Asian countries, typically India,
Indonesia, the Philippines, Thailand, Malaysia and Vietnam. Hong Kong
construction companies are actively seeking opportunities in these markets.
Luks Group, for example, engages in cement production and property
development in Vietnam.

11.

The Middle East is another market which has attracted some Hong Kong
companies, with many projects won in many Middle East countries. Hip Hing
Construction has won contracts in Abu Dhabis (the capital city of the UAE)
carbon-free city Masdar, as well as contracts in Dubai to construct a 72-storey
residential building called HHHR Tower together with Al Ahmadiah
Contracting & Trading. Paul Y, was awarded the contract worth US$77
million to build the 54-storey Arraya Office Tower in Kuwait. Another Hong
Kong construction company, Chun Wo Development, with initial investments
in two residential projects in Abu Dhabi, also entered the Middle East market.

12.

Rapid urbanisation drives up Chinas demand of infrastructure development.

According to Chinas 12th Five-Year-Plan, urbanisation is targeted to go up
by 4%, reaching 51% in 2015 from 47% in 2010. With the help of the RMB4
trillion stimulus package introduced in the wake of the international financial
crisis in late 2008, infrastructure development on the Chinese mainland gained
growth momentum. According to the United Nations, Chinas urbanisation
rate is projected to reach 53.2% in 2020, and 72.9% in 2050. Infrastructure
demand is likely to remain robust in the foreseeable future.

13.

China devoted around 9% of its GDP to public building and improvement

projects during 2005-2010, compared with the respective ratios of 2.4% and
5% in the US and Europe, according to a report released by the U.S. Treasury
Department and the Council of Economic Advisors. More importantly, China

will continue the trend of increasing spending on infrastructure as per the

countrys 12th Five-Year-Plan.
2.0

Statistics of the Industry

14.

Data on building works can be obtained from the Buildings Departments

website: http://www.bd.gov.hk/english/documents/index_statistics.html.

15.

Data of the public sector construction project can be obtained from the
Environment, Transport and Works Bureaus website http://www.etwb.gov.hk
under Publication and Press Release.
a.
b.
c.
d.

Average Daily Wages of Workers

Gross Value of Construction Work performed by Main Contractors
Number of Manual Workers engaged at Construction Sites
Overall Accident Rates for Public Works Contractors

16.

Building Works Tender Price Index can be found from the Architectural
Services Departments website: www.archsd.gov.hk under Reports.

17.

Construction Output is summarized under Hong Kong Statistics of Census

and Statistics Department www.censtatd.gov.hk.

3.0

Structures of the Construction Industry

18.

Buildings, roads, and bridges are only some of the products of the construction
industry. The industry activities include the building of new structures as well
as alteration and addition to existing ones. The industry also includes
maintenance, repair, and improvements on these structures.

19.

The construction industry may be divided into three major segments. We have
the general contractors mainly for superstructure constructions. Specialized
contractors perform specialized activities, e.g. foundation works and
demolition works. There are also civil engineering construction contractors for
sewers, roads, highways, bridges, tunnels, and other projects.

20.

Pursuant to the Buildings Ordinance, there are registers of contractors and

professionals.
4

a.
b.

c.
d.
e.
f.
g.

Registered General Building Contractors, s8A

Registered Specialist Contractors, s8A: including Demolition Works;
Foundation Works; Site Formation Works; Ventilation Works; and
Ground Investigation Field Works
Registered Minor Works Contractors, s8A
Authorized Persons, s3(2): including List of Architects; List of
Engineers; and List of Surveyors
Registered Structural Engineers, s3(3)
Registered Geotechnical Engineers, s3(3A)
Registered Inspectors, s3(3B)

21.

Pursuant to the Engineers Registration Ordinance, there is a registration of

Registered Professional Engineers under the various disciplines of the HKIE
(e.g. civil, structural, geotechnical, mechanical, environmental, etc.).

22.

Building constructions are usually carried out or coordinated by Registered

General Building Contractors, s9(1) Buildings Ordinance. They take full
responsibility, except for specified portions of the work that may be omitted
from the contract for Registered Specialized Contractors, s9(2) Buildings
Ordinance.

23.

The main contractors subcontract most of the works to other sub-contractors

who in turn further sub-sub-contracts part or all of the sub-contract works to
other sub-sub-contractors.

Main contractor

Sub-contractor

Sub-sub-contractor

Nominated sub-contractor

Sub-sub-contractor

Sub-contractor

Sub-sub-sub-contractor

24.

Depending on the nature and terms of a sub-contract, a sub-contractor in the

carrying out of the sub-contract works may provide equipments, materials,
5

labour, etc., or labour only (especially for sub-sub-sub-contractors).

25.

There are also other sub-contractors for painting, carpentry, electrical works,
plumbing, heating, etc. They obtain orders for their works from general
contractors, architects, or property owners. For instance, repair works is
mostly directly ordered from owners, occupants, architects, or rental agents.

4.0

Different Types of Construction and Employment

26.

Construction processes are very complex and stretch from the concept of
development to the operation and disposal of the completed works.

Phase

Details of works

Key consideration

Formulation

Owners requirements examined

Scope, budget and schedule

Planning

Carry out studies

Cost benefit analysis, feasibility studies

Design

Detailed design

Plans, specifications, contract

Construction

To drawings and specifications

Cost, schedule

Maintenance

Management and maintenance

Sustainable structures

Disposal

Replacement of the building

Demolition

Formulation

Planning

Disposal

Design

Maintenance

27.

Construction

Local construction activities can be broadly divided into three areas. One is
represented by public housing projects undertaken by the Housing Authority.
There were at one time major backbones to the whole construction industry
during the 90s. However, with the HKSAR governments change in the public
housing policy, construction activities in this area are now diminished. The
6

second area is represented by the public sector works. Last are the private
sector construction projects undertaken by the developers and account for
about 50% of the gross value of construction works.
28.

It is because of the sub-contracting nature of the construction industry,

significant portion of the work force is employed on the basis of day-workers
or outworkers. Such employment is very fragile and the workers are exposed
to non-payment of wages. They are now well protected under s43C of the
Employment Ordinance:(1) if any wages become due to an employee who is employed by a
sub-contractor on any work which the sub-contractor has contracted to
perform, and such wages are not paid such wages shall be payable to the
employee (a) where the sub-contractor has contracted with the principal contractor, by
the principal contractor; and
(b) where the sub-contractor has contracted with a superior sub-contractor, by
the principal contractor and every superior sub-contractor to the sub-contractor,
jointly and severally

29.

Any claim in respect of the wages payable under s43C(1) above can be
applied most of the time to the Labour Tribunal and sometimes to the Minor
Employment Claims Adjudication Board.

5.0

Government and Construction Industry

30.

The Environment, Transport and Works Bureau is responsible for formulating,

coordinating and monitoring the implementation of public works projects. The
Bureau is also responsible for policy matters on water supply, slope safety and
flood prevention. These are all essential for improving our quality of life, and
meeting the immediate needs and the long-term development of Hong Kong.
Besides, the Bureau is the lead agency within the Government for coordinating
construction-related issues and implementation of the recommendations made
by the Construction Industry Review Committee (CIRC). The Bureau oversees
the implementation of such works policies by the Works Departments and is
responsible for the overall coordination of Works Departments functions for
the Public Works Programme (PWP). The PWP comprises public works on
port development, government building projects, drainage projects, civil
7

engineering projects (e.g. reclamation and landslip preventive measures).

31.

The Buildings Department facilitates and promotes the construction and

maintenance of quality buildings under the ambit of the Buildings Ordinance
and its related regulations. It strives to make the built environment safe and
healthy for the community. For new building development, it controls the
approval and consent process ensuring building safety and health. For existing
buildings, it takes rigorous enforcement action against dangerous and newly
erected unauthorized building works, dangerous buildings and slopes,
defective drains and signboards. It also promotes timely maintenance of
buildings and administers a building safety loan scheme to help those in need.

6.0

China Market: differences in law

32.

(
)
)

33.

[]

34.

[]

[]

35.

[] ,
, ,
,
()
()
()
()
()
()
()
()

7.0

New green initiatives

36.

The Government has implemented initiatives to foster quality and sustainable

built environment and to promote wholesale conversion of industrial
buildings.

37.

The Chief Executives policy address in October 2010 has announced a

package of measures, covering the following major elements, to promote a
quality and sustainable built environment.

(a)
(b)
(c)
38.

39.

40.

Compliance with the sustainable building design guidelines on

building separation, building set back and site coverage of greenery,
Control of gross floor area concessions, and
Enhanced energy efficiency of buildings.

These measures will be applicable to all new building plans or major revision
of building plans submitted to the government for approval on or after 1st April
2011.
The Government has implemented an initiative to encourage the revitalisation
of existing industrial buildings through wholesale conversion of vacant or
under-utilised industrial buildings (see Practice Note Issue No.1/2010 issued
by the Lands Administration Office of the Lands Department). The measures
are only valid for three years from 1st April 2010, and the conversion works
related to revitalisation are to be completed within three years after issue of
the waivers by the Lands Department.
Compared with building redevelopment, wholesale conversion of vacant or
under-utilised industrial buildings is considered to be a more sustainable way
to reduce waste and conserve natural resources.

Ir Dr Lam Siu Shu Eddie

MSc, PhD, PgD(Law), PCLL, CEng, FIStructE, MIMechE, FHKIE, RPE,
RSE, Class-1 RSE PRC,
Barrister-at-Law
Dated: 18th August 2012

10