According to a new report published this week by S&P Global, mounting construction costs and widening project scopes will likely increase the final tab to build out Hong Kong’s Northern Metropolis, with government-related entities (GRE) expected to account for nearly 40 percent of the spend.

Over the next five to six years, more than HK$360 billion (US$46 billion) could potentially be poured into the tech and education hub located adjacent to Shenzhen, exceeding the previous estimate of HK$225 billion (US$29 billion). With the project’s size taking up a third of Hong Kong’s landmass, the expenditure behind Northern Metropolis would represent twice the amount spent on the Hong Kong-Zhuhai-Macao Bridge.

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S&P expects traditionally conservative GREs to help mitigate any direct fiscal burden, acting as a credit multiplier by raising project-related debt and equity through capital markets.

Building science capabilities

The Northern Metropolis development represents Hong Kong’s largest infrastructural endeavor as it deepens its integration into the Greater Bay Area’s (GBA) high-tech value chain. While previous projects were primarily funded through the fiscal reserves, the use of GREs sets a new precedent that opens a pathway to private investments, S&P says.

The project and funding structure reflects Hong Kong’s determination to reposition the city’s economic pillars away from its traditional role as a super connector and into one that embraces a comprehensive strategy in innovation and technology, shares Lai Chong Au, group chief executive officer at Delta Asia Financial Group, in conversation with The Bay.

The Northern Metropolis is an example of how Hong Kong is scaling up within the GBA framework to establish itself as a leading financial hub and incubator for tomorrow’s competitive landscape, she added. 

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The Northern Metropolis project is anchoring itself as part of a science cluster to support collaborative developments between the SAR and the GBA, where more strategic companies will be based. According to government estimates cited in the report, the Northern Metropolis has the potential to nearly triple the area’s population and quadruple job provisions by 2040, all while doubling the housing stock.

In building a technology corridor that leverages synergies with GBA cities, Hong Kong hopes the Northern Metropolis will help narrow any innovation gaps. Hong Kong’s research and development make up just 1.1 percent of the city’s GDP, with the overall technology contribution to GDP at just 5.8 percent, a noticeable shortfall when compared to the 20 to 40 percent economic contribution seen in Shenzhen and Beijing, the credit agency highlights.