Habitat International 34 (2010) 256e263

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Habitat International
journal homepage: www.elsevier.com/locate/habitatint

Strategic planning for the sustainable development of the construction

industry in Hong Kong
James M.W. Wong a, *, S. Thomas Ng a, Albert P.C. Chan b
a
Department of Civil Engineering, The University of Hong Kong, Pokfulam Road, Hong Kong
b
Department of Building and Real Estate, The Hong Kong Polytechnic University, Hung Hom, Hong Kong

a b s t r a c t

Keywords: Excessive fluctuations in construction volume are undesirable and a comprehensive strategic planning is
Construction industry development needed to sustain the development of the construction industry. This paper reports the findings of an
Strategic planning industry-driven research project which aims to identify the available opportunities and the way forward for
Hong Kong
developing the construction industry of Hong Kong in a sustainable manner. Based on the collective views
of experts from the industry, a set of strategic directions is proposed under a construction industry
development framework. A long-term vision dedicated to the construction industry is indispensable for any
country to position this important sector correctly. It is desirable to set up a centralized planning body to
strategically plan and coordinate the overall output of the construction sector at a macro level in future. To
ensure timely launching of major public-funded projects, an implementation framework with streamlined
legal procedures and an efficient public consultation process are essential. The government, relevant
professional institutions and trade organizations shall attract, maintain and nurture human resources to
better match the needs of the industry and improve its productivity. For industry practitioners, timely
diversification and adjustments in business model are necessary to adapt to the market transformations.
With intense competition in construction services, all practitioners should continuously strive to sharpen
their competitive edge and prioritize the identified opportunities to sustain growth. It is envisaged that the
recommendations of this study would serve as a valuable reference for policy makers, in both developing
and developed countries, to maintain a sustainable development of the construction industry.
Ó 2009 Elsevier Ltd. All rights reserved.

Introduction Hillebrandt, 2000). Therefore, strategic planning becomes an urgent

Calls for planning construction activities strategically have long
existed in both developing and developed countries (Ofori, 1990), as
construction not only plays a critical role for human settlements
(Ofori & Han, 2003; Spence & Mulligan, 1995) but also serves as
a growth engine for a country's economic development. Despite
that, the construction industry may also be influenced by the
general economy. The global financial meltdown in 2008 has put
enormous pressure on various sectors, with the construction
industry being no exception. This is particularly manifested by the
effect of credit crunch which has led to the funding shortfall for
development projects. Rapid growth and decline in construction
output may in turn trigger a ripple effect to the general economy if
no immediate and effective measures were introduced (Chan, 2001;
* Corresponding author. Tel.: þ852 2241 5348; fax: þ852 2559 5337.
E-mail addresses: jmwwong@hkucc.hku.hk (J.M.W. Wong), tstng@hkucc.hku.hk
(S. Thomas Ng), bsachan@inet.polyu.edu.hk (A.P.C. Chan).
task of governments around the world to sustain the development
of the construction industry.
Despite the importance of sustainable development for the
construction industry, strategic planning in construction is mainly
confined to the organizational level (Betts & Ofori, 1992; Flanagan,
Lu, Shen, & Jewell, 2007). Deriving strategic plans for the
construction industry at a macro level is rare. Recent examples of
industry-based strategic planning include the “Construction 2020”
in Australia (Hampson & Brandon, 2004) and “The Big Ideas” in the
United Kingdom (Soetanto et al., 2006) with the focuses channeling
to coping with the challenges ahead and identifying key issues,
drivers and trends for the sector in the next 20 years to come.
In Hong Kong, the construction volume has fluctuated severely
over the decade exhibiting an inverted U-shaped pattern (Fig. 1) as
advocated by Bon (1992). The total gross value of construction works
amounted to US$12.5 billion in 2008 accounting for around 6% of the
gross domestic product (GDP) (C&SD, 2008). However, a significant
decrease in building works is noted due to the combined effects of
a superfluous supply of residential stocks, the Asian economic

0197-3975/$ e see front matter Ó 2009 Elsevier Ltd. All rights reserved.
doi:10.1016/j.habitatint.2009.10.002
 J.M.W. Wong et al. / Habitat International 34 (2010) 256e263 257

40,000

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5,000

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Total Private sector construction sites
Public sector construction sites Construction work at locations other than sites

Fig. 1. Quarterly Gross Value of HK's Construction Work at Constant (2000) Market Prices (1985Q1e2008Q3). Source: Report on the Quarter Survey of Construction Output, C&SD, The
HKSAR Government.

turmoil in 1997 and the SARS outbreak in 2003. The volume of civil
engineering works also decreased by three-quarters (75%) between
1997 and 2007, as a result of the completion of the new airport and
its associated road and rail links and infrastructure work, collec-
tively known as the Airport Core Program (ACP). It appears,
however, that a lack of critical review, foresight, planning and
control has contributed to this highly undesirable consequence of
industrial recession. On reflection, there were lessons that the
industry could have learnt from this bitter experience.
Although a Construction Industry Review Committee (CIRC) was
set up to comprehensively review the status of the construction
industry and to recommend improvement measures, the recom-
mendations tend to be of the shopping-list type agenda. A technique
which applies a more rigorous analysis of this industry and its
operating environment will be imperative. Strategic planning
appears the most relevant for long-term growth of the construction
industry (Ng et al., 2009). Hence, the development of the construc-
tion industry in Hong Kong should be approached in a comprehen-
sive manner so that forward-looking directions can be formulated.
The above considerations initiated this study which was commis-
sioned by the Construction Industry Institute, Hong Kong (CII-HK).
The research aims to put forward a package of strategic directions
and recommended measures to reinvent the construction industry
of Hong Kong to attain a more sustainable future.
By studying construction industry development internationally,
Fox (2003) developed a six-factor generic model. Based on a grounded
theory approach, Fox identified 62 variables, 32 correlated variables,
and more importantly 6 factors closely related to the construction
industry development, namely: (i) basic resources and institutional
infrastructure; (ii) financial and human resources; (iii) techniques and
technologies supporting high production; (iv) long-term vision and
policy for the industry; (v) thinking the best and behaving the best;
(vi) a learning culture (Fig. 2). These factors are considered by Fox as
influential to the long-term development of the construction indus-
tries across both developing and developed economies. This analyt-
ical framework was therefore applied in this study to enhance the
understanding about how to achieve a sustainable construction
industry development.
The paper first exhibits the adopted research methodology. The
proposed strategies and implementation measures are then linked
to Fox's analytical framework to revitalize and develop the industry.
The paper concludes by examining the applicability of the identified
strategies. Although this study focuses on Hong Kong's construction
market, the methodology and recommended development strate-
gies can be applied to enhance the competitiveness and to sustain
the development of other sectors, and in other countries. In partic-
ular, the strategies identified in this research are corresponded to
a long-term construction industry development framework, which

Traditional Factors Cultural Factors

(1) Basic resources and (4) Long-term vision and

institutional infrastructure policy for the industry

(2) Financial and human Construction Industry (5) Thinking the best and
resources Development behaving the best

(3) Techniques and (6) A learning culture

technologies supporting
high production

Fig. 2. Generic model of the factors influencing the development of the construction industry. Source: Fox (2003).
258 J.M.W. Wong et al. / Habitat International 34 (2010) 256e263
i.
ii.
Analyses
of Secondary Data
i. Portray the development of
different sectors of the industry
ii. Predict the outlook of the
industry
could therefore serve as a valuable reference for policy makers and
practitioners in developing countries to promote their domestic
construction industry and to support their economic growth.
Research methodology
To achieve the stated research objectives, this study was under-
taken in two main phases, which include (i) reviewing the Hong Kong
construction industry and identifying future opportunities; and
(ii) formulating strategies for a sustainable development of the
industry. It combines literature review, analyses of secondary data, an
expert forum and a series of validation interviews (Fig. 3). The trian-
gulation of primary and secondary data enables an understanding of
the current state of the construction industry and contributes to the
formulation of strategic directions for its sustainable development.
Literature on construction industry development and overseas
experience in tackling excessive fluctuations in construction demand
has been extensively reviewed. The sources of reference include
books, journals, magazines, newsletters, government reports,
proceedings from conferences, workshops, seminars, websites and
other sources. Past and current performance of the local construction
industry has also been documented through the literature review and
analyses of economic data related to the construction industry. The
outcomes form a crucial basis for the development of instruments to
achieve the stipulated aim.
Based on the findings of the literature review and the identified
opportunities, a list of feasible suggestions had been drawn up
under the Fox's analytical framework before being discussed in an
expert forum. The expert forum was conducted to identify the
concerns, interests and options of various industry stakeholders
regarding the suggestions to achieve a sustainable growth of the
industry. The expert forum enables a panel of 29 senior staff
(Director/General Manager or equivalent) from the government,
developers, consultants, contractors, suppliers and academics to
Literature Review
Acquire knowledge from related literature on
construction industry development
Investigate how advanced countries coped
with structural market change
Expert Forum
Identify and confirm a list of
feasible strategies for the
construction industry to move
forward via an expert forum and a
series of semi-structured interviews
Validation Interviews
Data Analyses
Conclusions and Recommendations
Fig. 3. Research framework.
provide their professional judgment and opinions on the industry's
strategic directions. Three renowned international scholars1 in
construction management and economics were invited to share
their experience and facilitate the expert forum and interact with
various construction stakeholders.
A pre-forum discussion was arranged to allow the invited
scholars and the research team to discuss the preliminary research
findings and formulate strategies for the expert forum. A post-
forum discussion involving the invited scholars, CII-HK Research
Task Force members2 and the research team was also organized to
establish the feasibility, impact, suitability and priority of the
identified opportunities and strategic directions.
The findings of this study may bring a substantial impact to the
development of the local construction industry. Consequently, the
credibility of the results especially the applicability of the identified
opportunities and options to the peculiar situation of Hong Kong
are of paramount importance. It is, therefore, critical to conduct
a prudent validation exercise, via a spectrum of construction
experts, to confirm the relevancy and significance of the proposed
strategies. This validation was carried out by means of series of
interviews with nine construction experts and relevant govern-
ment officials who are the decision makers to implement the
proposed strategies for achieving a sustainable development for
the industry (Table 1).
1
(i) Professor of Construction Management, School of Construction Management
and Engineering, University of Reading, UK; (ii) Professor, Department of Building,
School of Design & Environment, National University of Singapore, Singapore; and
(iii) Professor, Faculty of Design, Architecture and Building, University of Tech-
nology Sydney.
2
A sixteen-member Research Task Force with strong representation from
a cross-section of the construction industry including the government, quasi-
government organizations, private developers, consultants, contractors and
suppliers were formed to oversee the study and to ensure thoroughness and
applicability of the research findings.
 J.M.W. Wong et al. / Habitat International 34 (2010) 256e263
Table 1
Details of interviewees.
ID Stakeholder Organization Position of Interviewees
1 Government Policy Bureau (Works) Chief Assistance Secretary (Works),
Assistant Secretary (Works) and
Assistant Secretary
(Professional Services)
2 Government Redevelopment agency Senior Manager
3 Developer Private property General Manager
developer
4 Developer Private property General Manager/Council Member
developer/Construction
Industry Council
5 Consultant Engineering firm Managing Director
6 Contractor Major construction Vice President/Executive Director
company
7 Contractor Major construction Vice Chairman/Chairman
company/Construction
Association
Note: Names of the interviewees are not shown for the sake of privacy.
The information acquired from the expert forum and interviews
was first audio-recorded and later transcribed in written scripts.
The scripts were returned to corresponding interviewees subse-
quently for verification. An account of information obtained from
the forum and in-depth interviews was archived for subsequent
analysis. Valid inferences and conclusions were then made based
on studying and analyzing the texts and concepts within texts in
a systematic and objective manner (Krippendorff, 2004).
Industry outlook
The long-term prospects of the Hong Kong construction industry
in different sub-sectors are first assessed so as to help formulate
effective strategies for industry's sustainable development.
The construction industry of Hong Kong may see an upturn in
anticipation of 2010 following the government's decision to
strengthen the economy by promoting infrastructure develop-
ments. A “progressive development” is being envisaged whereby
the government would push ahead the 10 large-scale infrastructure
projects in order to consolidate Hong Kong's status as a global city
as well as to enhance Hong Kong's economic integration with the
Pearl River Delta (Policy Address, 2008). Accordingly, most of the
local experts interviewed also anticipated a period of stable growth
of the local construction industry in the foreseeable future.
Although the global financial crisis and uncertain economic
outlook have hit developers and buyers' confidence in the local
property market, housing demand is expected to increase in the
long-run due to the expanding population as indicated in Fig. 4,
which is estimated to reach 8.6 million in 2036 (C&SD, 2007), as well
as aspiration for higher living standards and changes in household
formation. The land to accommodate the growing housing needs
include new development areas in the rural (Hui & Yu, 2009). In
addition, the trend of ageing local population should not be ignored
(Fig. 4). The percentage of those reaching the age of 65 or above is
projected to rise from 12% in 2006 to 26% in 2036, representing an
increase from 0.85 million in 2006 to 2.26 million of elderly pop-
ulation. Hence, the provision of public housing and community
facilities to support the ageing population is inevitable which shall
create substantial work for the local construction industry.
Despite that, demand for office and commercial properties in
coming years is expected to fluctuate with the global economic
climate, Hong Kong's role as an international financial centre and
the “gateway to China” is to be maintained. Furthermore, the local
and regional economic growth should derive a strong demand for
office and commercial properties in the long-run. The Planning
259
Department of the HKSAR Government estimated that the demand
for business floor space between 2010 and 2030 will be over
10 million m2 (PlanD, 2007).
The number of ageing buildings (over 30 years of age) in Hong
Kong will increase from 13,000 in 2006 to more than 22,000 in
2016 (Lam, 2008). With government's initiatives to enhance
building management and maintenance through various financial
supporting schemes, the repair and maintenance of Hong Kong's
ageing buildings and infrastructures shall therefore be the impor-
tant markets for local industry stakeholders. Besides, Hong Kong
has a number of monuments which need proper preservation.
There are a total of 82 monuments declared under the Antiquities
and Monuments Ordinance (A&MO, 2007). Out of about 8000 pre-
1950 buildings recorded, it is estimated that about 1200 are with
considerable historical value (PlanD, 2002). Hence, built heritage
conservation and revitalization of historical buildings would
provide valuable opportunities for the construction sector.
Outside the territory boundary, massive development in Main-
land China may provide alternative opportunities for Hong Kong
construction-related firms in a rapidly developing market. Invest-
ment in infrastructure developments is a key element of China's
Tenth and Eleventh Five Year Plan (2001e2010), with a special
focus on roads, rail systems, ports, airports and energy generation
projects. With the advantage of strategic geographic location vis-a-
vis Mainland China Infrastructure projects, housing development
and facility management in the “second-tier cities” in China will
also provide good opportunities for the Hong Kong construction-
related companies. There are openings for investing in the real
estate market and provision of architectural, engineering,
surveying and construction services especially in (i) investment
and capital acquisition; (ii) building design/inspection; (iii) devel-
opment proposals for low-cost housing projects; and (iv) property
and facilities management. Construction demand in other
emerging markets such as India and Brazil are also offering some
unique opportunities for construction personnel especially in
providing architectural, engineering, surveying and construction
management services, as well as for companies supplying quality
building materials, furniture and interior decoration products.
Strategic directions for sustainable development
of the construction industry
Based on Fox's (2003) analytical framework for construction
industry development and the opportunities identified in the
previous section, a set of strategic directions and the way forward
are proposed through collective views of local industry stake-
holders as stated in the preceding section as to how the construc-
tion industry in Hong Kong can be developed in a sustainable
manner.
Long-term vision and policy
A long-term vision for positioning the Hong Kong's construction
industry is lacking at the outset according to many of the industry
practitioners consulted. It is envisaged that such an industry-
specific vision shall be developed as the basis of government policy
for the industry's forward-planning and long-term development.
Extensive consultation with professional bodies, industry practi-
tioners, academia and other relevant non-government organiza-
tions is essential in the process of developing the vision so as to
rightly position the industry and enable a roadmap to be estab-
lished. The vision set for the Singapore's construction industry is,
for instance, “to be a world class builder in the knowledge age”
(Construction 21, 1999). Vision for the Australian construction
industry is taking the leadership in research and innovation to
260
9000.0
8000.0
7000.0
Po pu lation ('000) 6000.0
5000.0
4000.0
3000.0
2000.0
1000.0
0.0
06 08 10
20 20 20
Fig. 4. Trends of Hong Kong resident population by age group (2006e2036). Source: Hong Kong Population Projections, 2007e2036, C&SD (2007).
make the industry internationally competitive (De Valence, 1999;
Hampson & Brandon, 2004).
For the construction industry to perform efficiently and grow in
a sustainable manner, a strong and sustainable home base is
essential (Porter, 1990). Government policies and strategies are
significant when considering the amount of support to be given to
private industries and the degree of intervention necessary (ILO,
1988; Wells, 1998). Various industry review boards or committees
in developed countries including the UK (Egan, 1998; Latham,
1994), Japan (RICE, Anson, and Raftery, 2004), Singapore (Economic
Committee, 1986; Property Market Consultative Committee, 1986)
and also in developing countries like South Africa (CIDB, 2002) are
established to identify the prospects of the industry and monitor
the construction market.
Lopes (1998) proposed that a minimum proportion of 4e5% of
construction value added to GDP is required to achieve sustained
economic growth. It is, therefore, logical that government should
consider forming a centralized planning body to strategically plan
and coordinate at a macro level the overall output of the
construction sector in future. The aim shall be to maintain an
output level which enables the industry to develop its technical
capacity, preserve the skill sets of practitioners and most impor-
tantly retain trained workers, while preventing severe boom and
bust cycles. While a better coordination is necessary to prevent the
generation of another wave of bubbles and to direct scarce
resources to a profitable sector, the construction industry can play
a more proactive role in formulating long-term policies and provide
directions guide its development. Ofori, Hindle, and Hugo (1996)
argued that the merits of such central administrative bodies are
‘‘proven’’, citing in particular the cases of Singapore and Japan.
At the implementation level, the government must serve as
a regulator to sustain the construction output for a steady growth of
a healthy industry. In Singapore, a “build-to-order” mechanism for
the construction of public housing was implemented to ease the
mismatch between the demand and supply of public housing.
Public housing construction would be put on a halt if less than 70%
of the completed apartments are occupied (BCA & Hui, 2004). The
Korean government invested immense efforts to regulate the
property market. After the collapse of the housing market, real
estate loans were made available by financial institutions to boost
the housing sector (Ng et al., 2009). To keep the government and
companies better informed, the industry shall therefore capture,
J.M.W. Wong et al. / Habitat International 34 (2010) 256e263
12 14 16 18 20 22 24 26 28 30 32 34 36
20 20 20 20 20 20 20 20 20 20 20 20 20
Total 0-19 20-39 40-64 ≥65
analyze and release information related to the supply and demand
of various facilities and resources required. This would not only
help policy makers and investors in identifying suitable project
opportunities, but could also ensure suitable training is provided to
those areas of expertise in needs in the foreseeable future.
Sustainability is a global trend, where the construction industry
has shifted to includes energy saving/efficiency, waste manage-
ment, sustainable construction methods, etc. The government
should be responsible to inject additional funding to preserve
heritage buildings and carry out sustainable construction projects.
As suggested by RICS HK (2007), relevant government departments
are advised to take proactive and flexible approaches in facilitating
the proposed “revitalization uses”, which may be contradicting
existing land lease conditions, town planning ordinances, or pre-
vailing building regulations. It is also essential to implement a 4-Rs
strategy (i.e. redevelopment, rehabilitation, reservation, and revi-
talization) to cover historic buildings (Cheng, 2008). Sustainability
should therefore be considered in the formulation for a long-term
plan for the construction industry.
Favorable factor conditions and resources
This strategic direction covers two traditional factors of Fox's
framework: (i) basic resources and institutional infrastructure; and
(ii) financial and human resources. Human skills have been
recognized as critical resources for construction industry devel-
opment (Fox & Skitmore, 2007). Among various resources of the
Hong Kong construction industry, construction and related engi-
neering professionals have built up a reputation outside the terri-
tory. The interviewees and the attendants of the expert forum have
a consistent view that the local professionals are the imperative
factor of the industry's competitiveness and production. Hong Kong
construction professionals have fairly wide international exposure,
superior professionalism, and above all, a “can-do” spirit.
The industry should continue to maintain professionalism and
quality of service at individual level, professional body level as well
as industry level. A comprehensive and effective strategy and
implementation plan for training human resources at all levels for
the Hong Kong construction industry is essential, particularly due
to globalization in the field. Training institutions and employers
ought to provide more training/educational opportunities for their
employees and encourage them to upgrade their knowledge and
 J.M.W. Wong et al. / Habitat International 34 (2010) 256e263
skills to match the changing demands. Multi-skilling is also
considered important in the prevailing market condition. Profes-
sional institutes are advised, on the other hand, to strengthen
professional development schemes in developing competence for
construction-related professional resources.
To be competitive in an open market, it is becoming increasingly
imperative for construction companies to provide a cost-effective
financial package for the client (Ofori, 1994; Oz, € 2001). Require-
ments from recent transition of procurement systems such as
private finance initiative (PFI) also demand a high level of financial
expertise from contractors (Winch, 2000). Through competition
among rivals in Hong Kong's financial sector, stimulated by
dynamic demand conditions from rapidly growing enterprises and
global business environment, a world class financial cluster has
emerged. Majority of the consulted local experts opined that the
strong financial sector in Hong Kong offers and sustains an
advantage in resources organization and utilization for construc-
tion projects. Thus, this important key capability should be
exploited for the sustainable development of the industry.
In terms of construction investment, the government is encour-
aged, particularly during economic austerity to invest on the essential
infrastructure development, community facilities, urban regenera-
tion projects and housing programmes for the expanding but also
ageing population, in order to meet the needs of the society (Hui & Yu,
2009). The Government should also take the lead to generate
employment opportunities, and more importantly, preserve the skill
sets and knowledge of the Hong Kong construction industry. An
implementation framework with streamlined legal procedures and
an efficient public consultation process which is accepted by major
political parties, statutory bodies, and other interest groups is
essential for the timely launching of major capital work projects.
Moreover, incentive schemes were recommended to attract
investment in construction and boost construction demand from
the private sector (Hillebrandt and Lansley, 1995). In the late 1990s,
the Japanese government implemented various strategies to stim-
ulate the housing demand, including an exceptionally low base
interest rate; a relaxation of credit requirements; a tax reduction on
new home loans; and an extension of the application period for
housing loans (RICE et al., 2004). On the other hand, the Australian
government allowed companies which had invested into research
and technology to apply for tax reduction on such investment
during economic recession (Ng et al., 2009).
On top of a sustained home demand, the government is
encouraged to develop a comprehensive export strategy based on
indigenous capability and resources (Low, 1993). This should be
persisted by improving the platform for cooperation with industry
stakeholders in overseas countries and offering export credit or
export credit insurance. Export promotion services can be rein-
forced through launching trade missions, conferences and exhibi-
tions to explore the emerging overseas market and invite potential
developers for establishing business networks and visiting large
projects, so as to promote the achievements and capacity of the
construction industry. The Singapore government has established
technical and financial assistance schemes which offer firms grants
to set up and tender for projects overseas (Ofori, 1994).
Market intelligence was recognized important for the local
industry stakeholders to explore overseas markets. In Hong Kong,
the Commerce and Economic Development Bureau (CEDB) and
Trade Development Council (TDC) have been providing construction
project information in China and insightful analysis on policies,
opportunities and developments in emerging markets on their
website. It is recommended to extend the information coverage to
the indigenous practice, tax system, trade laws, contact details of
potential clients and networking in the emerging markets and also
include medium and small scale projects especially in second and
261
third-tier cities in China and other emerging markets by offering an
one-stop online service. Setting up trade development branch
offices in these cities would definitely assist Hong Kong companies
further. Moreover, organizations responsible for market intelligence
should focus more on small to medium enterprises and serve as
a bridge to facilitate the business by providing matching service and
referring the related business contact points and requirements.
Professional institutions and trade associations could be more
proactive in lobbying for the removal of institutional market
barriers in host countries, upgrading professional skills and
promoting services. These include a whole range of key activities
such as pursuing mutual recognition of professional qualifications
with the Mainland and other countries; strengthening research,
analysis and dissemination of valuable overseas markets informa-
tion; lobbying government bureaux and trade commissions to
organize promotional events; supporting and steering reforms of
local construction education and continued professional develop-
ment/training; and organizing forums or seminars to share expe-
riences in overseas markets amongst industry stakeholders.
A best practice culture
With intense competition in construction services, various
industry stakeholders should continuously strive to sharpen their
competitive edges, so as to stay ahead of their competitors locally
and internationally. Specialty and niche expertise in certain unique
areas are crucial if they are to be competitive (Ofori et al., 1996).
Competitiveness enhancement especially on technological and
managerial aspects was commented to be essential. However,
contractors in Hong Kong are reluctant to purchase sporadically
used plant since it is difficult to amortize the investment (Fung &
Rowlinson, 2006). As a major client and regulator of the construc-
tion industry, the government plays a pivotal role in influencing the
extent of mechanization, design and technological innovation, and
promoting the best practices in terms of time, cost, quality as well
as environmental performances (Chiang & Tang, 2003; Egan, 1998).
Understanding the critical role of construction in development,
China's central and provincial governments have also been
enhancing the capacity and capability of their construction indus-
tries (Ofori & Han, 2003).
Timely diversification and appropriate adjustments in business
model are crucial to manage transformations and changing busi-
ness environment of the construction industry. For instance, the
bulk of base workload in Hong Kong has changed from capital
investment to repair, maintenance, alteration and addition works;
urban renewal; environmental improvement; and heritage
construction. There is also an increasing demand for sustainable
construction using green materials and environmentally-friendly
technology and geriatric facilities for the ageing population. For the
overseas markets, clients tend to require contractors to be capable
of managing various dimensions of construction projects, including
project financing, a high level of technology, advanced experience,
knowledge and management skill (Han, Kim, Jang, and Choi, 2010;
Mahalingam & Levitt, 2005). To capture these new demands,
corporate decision makers should restructure themselves, adopt
a new corporate orientation and follow developments in other
sectors and assess their suitability to help them thrive in the new
environment.
Advanced technical competency
Through developing large-scale infrastructures, technical capa-
bilities of local construction companies can be substantially
promoted and they should take advantage of the added knowledge
and experience to develop an appropriate platform for technology
262 J.M.W. Wong et al. / Habitat International 34 (2010) 256e263
transfer. A comprehensive study is required on this subject. In
addition, multi-directional alliancing in the form of joint venture/
partnership/merger and acquisition/consortia throughout the
entire supply chain is highly desirable in order to enhance compa-
nies' market capacity and competitiveness. This alliancing business
model could also be adopted by SMEs to alliance with large
companies to seize business opportunities elsewhere (Ofori, 2003).
As mentioned earlier, a sustainable future for the construction
industry shall also be built upon the opportunities of exporting
construction expertise as for globalization. Both developing coun-
tries and developed countries are playing important parts in the
global market as portrayed in Fig. 5. Developing towards the high-
end market through acquisition of technology know-how and
teaming up with local partners are considered critical (Chiang &
Tang, 2003). The industry would need to develop specialties (e.g.
super high-rise building construction, pre-fabrication technology,
advanced management skill, etc.) and capitalize on these core
competences and build up their networks to expand their business
in the overseas market. Hence, efforts should be made to develop
construction-related firms' export capability.
Research and development (R&D) is also critical for productivity
breakthroughs and competitiveness enhancement for the indus-
try's sustainable development. R&D helps develop new knowledge,
introduce better materials, more cost-effective design and
construction techniques, and labor-saving equipment. However,
there is negligible expenditure on R&D related to the industry in
Hong Kong (AsiaConstruct Team, 2003; CIRC, 2001). Industry
experts representing professional bodies commented that there is
very limited applied scientific research in the industry. Hong Kong's
total spending on research and development is a mere 0.79% of GDP
(Heron, 2009). Investment in construction R&D in Japan, in sharp
contrast, has been impressive (Raftery, Pasadilla, Chiang, & Hui,
1998). The Japanese contractors were encouraged by their
government to spend about 3% of their gross receipts on R&D, the
highest level of R&D spending in the construction sector (OECD,
1992). This significantly contributed the success of Japanese
construction industry.
Hong Kong government should thus not only allocate more
resources to training but also in R&D to engender a climate
conducive to the industry development. To move forward,
a number of research areas were recommended by local industry
practitioners for industry development:
 evaluating the competitiveness for different construction
professional disciplines;
 examining the factors influencing the supply and demand of
residential, commercial and other infrastructure facilities in
Hong Kong in order to explore their relationships;
Developing
countries
Undeveloped Developed
countries countries
Fig. 5. Pattern of international trade in construction services. Source: Bon (1992).
 developing a series of predictive models to forecast the future
demand for various facilities, tender price and building cost
movement and manpower requirements;
 establishing relevant key performance indicators and best
practices framework to improve the productivity of construc-
tion stakeholders and the industry as a whole;
 identifying detailed local practices, constraints, and success
factors for exploring the emerging overseas markets.
Conclusions and implications
The construction industry in Hong Kong has underdone radical
changes over the past decade. At the crossroads, the development
of a long-term strategy with due consideration of the market cycle
and future demand of various facilities would be beneficial to the
long-term stability of the construction industry (Hillebrandt, 2000).
There is an economic revolution underway which requires both
industry stakeholders and government to constantly adapt to
change. This study, based on a qualitative research approach, has
identified a list of possible opportunities and strategic directions for
government and industry stakeholders' consideration in view of
the future development.
Four key strategic directions have been formulated: (i) formu-
lating an industry-specific long-term vision and policy; (ii) devel-
oping favorable factor conditions and resources; (iii) fostering
a best practice culture; and (iv) enhancing technical competency.
Although this study focuses on the construction industry in Hong
Kong, experiences and lessons learnt may help policy makers and
company executives in other countries to map out viable and
appropriate policies and strategies at the governmental, industrial
and corporate levels, especially at times of construction recession
or economic austerity. For instance, efforts should be directed to
reduce the cyclical fluctuations in construction activities which
have undesirable implications for the industry. It is also necessary
to take appropriate measures to upgrade construction companies'
operations and enhance their competitiveness to meet the market
requirements and their sustainable growth.
It is envisaged that the identified strategies and recommenda-
tions may also serve as a source of references for both developed
countries and developing countries to promote a sustainable
development of the construction industry. While successfully
strategies may not be applicable or transferable to another country,
the feasibility of any strategies for a specific industry shall be
assessed independently. The research methodology adopted in this
study can be replicated in other sectors, and in other countries to
ensure equally useful measures would be formulated.
With the announcement of the ten large-scale infrastructure
projects in Hong Kong and various economic stimulus packages, the
construction industry should be given a sign of recovery subse-
quently. But considering the prevailing financial crisis and volatile
demand in the private sector, the problems which will confront the
Hong Kong construction industry will be more complex and can
only be effectively addressed with a long-term strategy for
improving its performance. The next subject the construction
industry shall focus on is formulating measures at both government
and industry level to cope with the volatile global economic climate
as well as to grasp the opportunities in Mainland China and other
emerging economies.
Acknowledgement
The authors would like to express their sincere thanks to a group
of prominent industry practitioners who have kindly participated
in the expert forum and the interview survey in Hong Kong by
providing their valuable opinions and necessary information to
 J.M.W. Wong et al. / Habitat International 34 (2010) 256e263
facilitate this research study. Advice from the CII-HK Research Task
Force is also gratefully acknowledged. The authors also wish to
thank The Construction Industry Institute, Hong Kong, The
University of Hong Kong and The Hong Kong Polytechnic University
for providing financial support to this research endeavour.
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