Northern Metropolis. Photo courtesy of SCMP.

July/August 2025 Issue

By Ryan Ip

Hong Kong’s Northern Metropolis is the subject of intense planning with the resumption of land on a huge scale to build effectively a new central business district adjacent to mega-city Shenzhen. Ryan Ip explains that there are still gaps in coordination and financing to take the Northern Metropolis from blueprint to reality.

Born out of Hong Kong’s chronic land constraints, the Northern Metropolis marks a deliberate, northbound shift of the city’s development focus, in a bid to reduce reliance on the traditional Central-centric mode of development. But beyond this, Northern Metropolis has an even greater mission: to secure Hong Kong’s future as the Greater Bay Area’s technology and talent gateway. Spanning a third of Hong Kong’s territory, the Northern Metropolis will accommodate 2.5 million residents and generate 650,000 jobs, while bridging southern Hong Kong’s financial strength with the north’s burgeoning innovation hub. 

Yet, the project’s execution faces two major headwinds. Firstly, a lack of a centralized governance structure in the form of a development authority has contributed to fractured development planning across various bureaus and departments. Secondly, financing channels will have to be redesigned to be future-proof and support the long-term requirements of such an undertaking. The government’s post-Covid budget deficit highlights the need to efficiently allocate public resources. Without smarter resource allocation, ambition risks outpacing capacity. What fundamental changes are needed to turn strategic plans into tangible outcomes?

What is the Northern Metropolis?

Before delving into the challenges, it is essential to understand Northern Metropolis’ planning and current progress. Northern Metropolis consists of four major zones from west to east – the High-end Professional Services and Logistics Hub centered around Hung Shui Kiu promoting economic integration with the mainland; the Innovation and Technology Zone centering San Tin Technopole and the Northern Metropolis University Town in Ngau Tam Mei, both with missions to strengthen Hong Kong’s role as a world-class talent hub; the Boundary Commerce and Industry Zone consisting of areas like Lo Wu and Man Kam To for amplifying cross-border economic activity; and the Blue and Green Recreation, Tourism and Conservation Circle with Sha Tau Kok and Robin’s Nest that aim to capitalize on ecological and cultural tourism. Together, these zones position Hong Kong for more diversified development. 

Critical to the success of the Northern Metropolis are the transport links needed to support the anticipated influx of working professionals and residents. Key transport projects include the completion of the Northern Link by 2034, which will connect San Tin Technopole and neighbouring new towns. According to the latest agreement between the MTR Corporation and the government, the link will include stops at San Tin, Ngau Tam Mei and a spur line connection to the newly redeveloped Huanggang Port. For road traffic, the Northern Metropolis Highway (San Tin segment by 2036) and Route 11 (Yuen Long to North Lantau by 2033-36) will streamline cross-district access. Together, these form the foundational traffic infrastructure backbone for the metropolis’ phased population and economic growth. 

Disconnects

Unfortunately, disjointed coordination proves to be a critical challenge. Without a unified authority steering the Northern Metropolis, the lack of synchronization between bureaus and departments has resulted in inconsistent execution timelines. Responsibilities are widely dispersed – housing construction, transport infrastructure and Innovation and Technology (I&T) development all fall under separate bureaus. 

This disconnect has resulted in a development gap, where housing completions outpace infrastructure development, leaving new residents without adequate transport connections. The first batch of residents is expected to move into San Tin in 2031, preceding the critical Northern Link railway connection by three years. This mismatch undermines both functionality and long-term planning, undermining the strategic coherence of the projects.

The solution to these coordination gaps may lie in creating a single empowered authority tasked with the alignment of planning, funding and execution of development projects while maintaining government oversight. Similar top-down management models are deployed widely in major global developments and typically are categorized into one of three models.

The first is government direct management, where a government-led committee retains full control of policy and daily operations. An example is the Shenzhen High-Tech Industrial Park, where a mayor-chaired committee oversees a management committee responsible for daily operations. Owing to the centralized decision-making that made strategic resource allocation possible, the park has attracted over 7,000 technology companies, producing an economic output of over RMB 1.6 trillion annually.

The second model is government-entrusted management that delegates implementation to private consortia under strict bureaucratic oversight. Shanghai’s Lingang area exemplifies this approach, where, under the management of the Lingang Group, the area has attracted high-profile projects, including the Tesla Megafactory. This model combines government incentives with private sector operational expertise.

The last model is known as the statutory body approach, which establishes an independent entity enshrined in law, blending government-appointed leadership with operational autonomy. Singapore’s Jurong Town Corporation (JTC) showcases how statutory governance can optimise urban development through holistically integrated planning. 

By combining infrastructure with private-sector innovation, JTC developed the One-north R&D and high technology cluster, which has become a thriving ecosystem where serviced apartments, transit hubs, and mixed-use complexes create seamless work-live-play-learn environments. The proximity to universities such as the National University of Singapore has led to plentiful opportunities for academic-industry collaboration and an abundant supply of graduates for talent acquisition. Such coordination attracted global firms like Pfizer, Google, and P&G, which cited the dense clustering of research institutes and knowledge-sharing networks as decisive factors. 

Establishing a comparably empowered governing body would enable Hong Kong to unify planning and implementation under a single authority. Success will depend on comprehensive coordination between infrastructure and community development, for example, the strategic integration of the San Tin Technopole with the adjacent Ngau Tam Mei university town. This approach would cultivate a vibrant knowledge ecosystem, positioning the Northern Metropolis as a global talent destination and unlocking its full economic potential. 

Financing gaps

Yet, even with comprehensive governance structures in place, the Northern Metropolis faces another critical challenge. Its current financing model lacks the long-term resilience needed to sustain a project of this scale and duration. Hong Kong’s current toolbox for financing megaprojects relies principally on two streams – debt and property development.

Debt financing is characterized by short tenors that are a poor match for the Northern Metropolis’ multi-decade development horizon. Meanwhile, the “Rail-plus-Property” model, exemplified by the MTR’s development strategy, generates revenue through property development around rail networks and stations. However, this also remains fundamentally exposed to real estate market cycles. 

Owing to uncertainty in the real estate market and future fiscal positions of the government, these mechanisms may be ill-equipped for the long development horizon and capital requirements of the Northern Metropolis, potentially creating a critical funding gap. A more resilient, multi-faceted financing framework is essential to withstand economic volatility.

To bridge the structural funding gap, Hong Kong could turn to establishing public-private partnerships (PPPs), which could reduce the government burden by introducing private investment. Hong Kong has a history of experimenting with various PPP models, each with unique advantages. Under Hong Kong’s Build-Own-Operate (BOO) model, the government outsources projects to the MTR Corporation, which finances, builds, and retains ownership of railways. Costs are recovered through fare revenue and surrounding property development. 

In addition, the Build-Operate-Transfer (BOT) model, used for the Western Harbor Crossing, involves temporary private operation (in the case of the Western Harbor Crossing, 30 years) before handing over the asset to the government. While BOT reduces initial capital expenditure, BOO aligns private incentives with sustained maintenance and upgrades. Appropriate public-private partnerships should be leveraged to unlock public capital for concurrent megaprojects. 

As one possible solution, in tandem with other approaches, Hong Kong could explore innovative financing instruments such as project finance and infrastructure Real Estate Investment Trusts (REITs), which are specifically designed to align private investment with the Northern Metropolis’s extended development horizon. 

On the debt side, project finance is typically structured to be repaid through the project’s future cash flows. This can limit government liabilities by separating the project’s assets and liabilities from the government’s balance sheet. Through sovereign guarantees and revenue stabilisation mechanisms, bond issues based on future cash flows could achieve higher credit ratings and attract multilateral lenders and cornerstone investors. 

The Hong Kong government might also adopt a more dynamic role in actively enhancing the bankability of the Northern Metropolis (the ability to attract financing) of the projects at every phase. By screening projects for investor appeal and assembling a list of the projects in the pipeline with viable business cases, it could serve the purpose of enhancing credibility and attracting demand for occupancy, which would allay developer fears of an inability to profit. 

Moreover, Hong Kong could leverage its portfolio of mature, income-generating assets by bundling them into an infrastructure REIT. Following the model of Link REIT, Asia’s largest REIT with a HK$241 billion portfolio, asset monetization would allow for capital recycling to help fund other developments in the pipeline. Combined with the project finance, a dual-track approach could secure the long-term capital that infrastructure development demands. 

Realizing the vision

The Northern Metropolis embodies Hong Kong’s innovative spirit – a dynamic fusion of global research, next-generation industries and techno-entrepreneurial talent that will propel our competitiveness and economic prosperity for the coming decades. All that remains is to turn vision into reality through coordinated planning and innovations in financing, transforming the blueprint of the Northern Metropolis into Hong Kong’s next economic powerhouse. 

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