Next Magazine (Second opinion A002, 2012.5.31)

As I recall after a long drive from Central, the route to the Tai Tong Lychee Valley winds down a steep path from the nearby road to a large car park. The entrance to the valley was marked by a large arch suggesting what lied beyond was a place unique.

The Valley provided open spaces, room for children to roam and run, a range of interesting semi-rural experiences and a reasonable restaurant. It was a bit run down and could have benefited from investment and promotion. However it was a refreshing example of enterprise in the New Territories.It also turns out that parts of the facility were built on government land. The offending construction has now been demolished. Where that leaves the future of a business that provided public amenity is unclear. Presumably the government land will remain fallow.The legal position does not seem ambiguous. Whilst upholding the rule of law is laudable, it is worth scrutinizing whether this is a good law and the whether the policies applied are good economics.The incident underlines core problems with the system of property rights in Hong Kong, where as a default the government owns and issues leases on all land. Changing land use is a matter of policy and negotiation with the bureaucracy, rather than people’s needs and price. This system is the colonial legacy of an administration that was uncertain of its tenure and the legal status of its territories.Under the leasehold and government ownership system, rural Hong Kong has been under developed, with too little commerce, limited employment opportunities and less accessibility. It is remarkable that a scenic coastline and once vibrant communities have so slowly developed food, leisure and tourism to replace traditional businesses like fishing and agriculture. In turn many rural villages have seen population declines. One major reason is the rigidities and ambiguities of the system of property rights.Other parts of the territories are arguably over developed as a result of the grand schemes of planners.

Too much land across Hong Kong remains under used, often for decades, pending government planning, consultation and development processes. The old Kai Tak airport site, largely unused since 1998 is one example. Sites across the Central district slated for redevelopment are another. The need for new uses of industrial land is recognized, but progress in change tortuous. These problems are replicated on a smaller scale across the villages of the New Territories.The buildup of claims for small house allotments is another growing property rights problem that needs to be confronted. The government maintains an under used land bank, but with none of the incentives of private owners to produce a return on the capital invested in that land. There is a huge opportunity cost of land mismanagement.What is the alternative? Take the Lychee Valley example. If adjoining land was privately owned, the Valley proprietors could have entered negotiations and at the right price bought the extra land or negotiated rights to use it. If there were valuable alternative uses, the price might have been high. Resolution of different development visions would likely have been swift. A business with secure title to the land it uses can afford to invest and the valley may well have become a major attraction. That in turn could help the economy of the surrounding region.If the government steps back from being the arbiter over the use of every property and all redevelopment, setting rules rather than owning land it would remove one important source of public discontent.We need to move from political determination of land use to more market driven market answers. Changes to the property system would not be politically easy. However, a new settlement is needed, that privatizes land, expansively recognizes traditional claims and in exchange ends the small house system. More private land would allow markets to regulate the supply of land for redevelopment, likely better than the forecasts of central planners. In the New Territories more private land would allow the development of local businesses, providing the much-needed jobs and a better living environment.

Bill Stacey is in his 10th year as a resident of Hong Kong and is Chairman of the Lion Rock Institute.

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