NATIONAL
DEVELOPMENT:
INSIGHTS FROM ASIA
JUNE 2019

CONTENTS

1. EXECUTIVE SUMMARY
		Enabling Wellbeing
		 How have they done it?
		 National strategic and spatial planning
		 National development funding
		 National development delivery
National benefits
New Zealand’s Devolved Cost-Based Model
		 Reforming the New Zealand Approach

4
4
4
4
5
5
6
6
7

2. INTRODUCTION
New Zealand’s headline indicators are solid
All is not as it seems
High performing Asian economies have long since
surpassed us

10
10
10

3. DELEGATION TO SINGAPORE AND CHINA

13

4. DIFFERENT POLITICAL SYSTEMSThe Asian political systems are different
		Singapore governance		 Hong Kong governance		China governanceAre they successful because they are less democratic?

14
14
14
14
14
15

5. THE NATIONAL DEVELOPMENT MODEL
National Planning
Singapore’s planning system
		 Hong Kong’s planning system
		 China’s planning system
National Development Funding
		 National Development Funding in Singapore
		 National Development Funding in Hong Kong
		 National Development Funding in China
National Development Delivery
		 National Development Delivery in Singapore
		 National Development Delivery in Hong Kong
		 National Development Delivery in China

16
16
16
19
20
24
24
25
28
29
29
32
34

NATIONAL DEVELOPMENT: INSIGHTS FROM ASIA
JUNE 201912

6. NEW ZEALAND’S DEVOLVED COST-BASED MODEL
38
National development planning in New Zealand38
		 Spatial and land use planning
38
		Transport planning
39
National development funding and delivery in New Zealand 39
		 Transport funding and delivery40		 Land development funding and delivery
40
		 Public housing funding and delivery
40

7. INSIGHTS AND RECOMMENDATIONS		System benefits of the National Development Model
		 Reforming the New Zealand Approach

41
41
42

Endnotes

46

3

01
EXECUTIVE
SUMMARY
Enabling Wellbeing

How have they done it?

After a decade as the “Rock Star Economy”, New Zealand remains
on the same economic trajectory it has been on for three decades.
We’re not closing the gap with successful OECD economies
like Australia and we’ve been overtaken by the new, dynamic
economies of Asia.

It is easy to assume that the success of these nations is the resultof rigid political hierarchy empowering vertical decision making
over and above individual rights. However, there are many lessdemocratic systems than in Singapore, Hong Kong and China whichhave not delivered the same economic and liveability improvements.

Singapore and Hong Kong incomes have long since surpassed
New Zealand’s. China is catching up fast. It’s not just economic
performance. Singapore was recently voted the best place in theworld to raise children. Hong Kong residents have the highest life
expectancy in the world.

What distinguishes the success of Singapore, Hong Kong andChina is their single-minded approach to national outcomes.

How have these countries done what they have done? How has
China moved from a low to median income country in less than ageneration? How have Singapore and Hong Kong moved up andpassed slow growth wealthy nations like New Zealand?
In March 2019, Infrastructure New Zealand led 75 senior public andprivate sector infrastructure leaders to Singapore, Hong Kong andChina to find out how these two countries and three systems havemade possible their extraordinary rise.
We wanted to understand how each government had kept
pace with such rapid growth and what role infrastructure anddevelopment had played in improving national wellbeing.

The three governments have elevated economic, social andenvironmental wellbeing to national priorities. They have set out apath to achieve these priorities through a well-integrated national
development planning, funding and delivery system.

National strategic and spatial planning
Strategic spatial land use planning is nationalised. Central
governments identify the economic, social and environmental
priorities for national development. They translate these intangible
outcomes into physical reality through a spatial plan for thecountry. From that plan the governments identify and sequenceplanning rules and projects which can be delivered.
Each project must contribute to the plan. By this process,infrastructure and development become the platform for social andeconomic growth.

Figure 1: GDP per capita, PPP (current international $)1
ThousandSingapore

90
80
70

Hong Kong
60

Netherlands
Denmark
Australia

50
40

New Zealand

30
20
10
1990

4

1995

2000

2005

2010

2015

Singapore develops a 40-50 year Concept Plan which identifies
the city-state’s land requirements. A 10-15 year Master Plan takes
the land allocations from the Concept Plan, applies a strategic
framework and produces a detailed land use plan. Departmentsof central government deliver zoning, infrastructure and housingin accordance with the Master Plan, sequencing delivery to meetmarket needs.

National development in China is funded by the state throughtaxation. Half of taxes are levied by central government, the otherhalf by provincial and lower level authorities. All are membersof the ruling Communist Party. Two-thirds of all central revenue
is transferred to lower levels of government to deliver national
development. In the first nine months of 2018, China spent NZ$500
billion on transport, the most in the world by orders of magnitude.

Hong Kong 2030+ is a spatial plan. It sets the development vision
for the city, outlines the role of planning and proceeds through athree step strategic process to translate the city’s outcomes into atangible spatial vision. The spatial vision identifies the major new
development areas and projects required to meet national objectives.

National development delivery

China’s Five Year Plan establishes the ruling Communist Party’s
priorities for implementation throughout the country at all levels ofgovernment and across the private sector for each five year period.
National, provincial and municipal five year plans convert national
priorities to local. National, provincial and municipal spatial plans
turn priorities into land, infrastructure and housing programmes tomeet growth.

National development funding
Funding for land development, housing and infrastructure which
emerges from spatial and land use plans in the three territories isguaranteed by the state. There are no materially significant levelsof governance separate from the government. Tax, user charges
and other revenues flow to the centre, where they are consolidated
and allocated to activities in accordance with national priorities.
The Singapore government owns 80 per cent of the country’s
land. Investments which enhance land use create value which is
captured by the state. Land sales (in the form of leasing rights)
provide revenue to the government for the next tranche of capital
investment. Transport is funded from general taxes. In 2019 theSingapore transport budget is NZ$12 billion, twice what New
Zealand will spend per person across a country well under 1 percent the size.
Property acquisition in land starved Hong Kong is too hard, so
the government doesn’t do it. It focuses on what it can do instead.
Zoning changes which unlock land value carry a fee. Rail stations
are located where land is publicly owned and the government sellsthat land to its combined rail and property developer partner, MTR.
MTR integrates land use around the new station, leases the land
and funds construction. Hong Kong has the best metro systemin the world and the only one not reliant on public subsidy. Hong
Kong will spend NZ$2000 per capita on infrastructure this year,
excluding rail – 30 per cent more than New Zealand.

NATIONAL DEVELOPMENT: INSIGHTS FROM ASIA
JUNE 2019

Delivery of land, infrastructure and housing in all three systems isretained by the state. Centrally-linked agencies plan land resources
and provide infrastructure and housing. They participate in theconception of the plan and implement projects in accordancewith it. The full weight of the nation supports implementation.
Organisational priorities are subordinate to national outcomes.
Each agency plays its part in delivering the plan.
Singapore’s Urban Redevelopment Authority (URA) manages landuse. The Land Transport Authority (LTA) oversees the transportsystem. The Housing and Development Board (HDB) delivers
over 80 per cent of the nation’s homes. The URA sequences land
release to allow for growth. The LTA services land with transport
to meet its target of 8 out of 10 homes within 10 minutes’ walk ofa train station. The HDB designs and delivers liveable, sustainable,
affordable homes on URA zoned land, integrated with transport.
In contrast, Hong Kong leverages the market. Developers provide
commercial property for employment and 70 per cent of homes.
The government’s role is to ensure enough land is available, thatland is connected and that the city’s strategic positioning as a
global gateway is promoted. The publicly co-owned MTR delivers
rail. The Highways Department looks after roads and the Housing
Authority provides public housing. Where there isn’t enough land,Hong Kong creates it. Reclaimed land is serviced and sold to meetcommercial and residential demand.
Delivery in China is devolved. Provinces, municipalities and thecountry’s vast network of state owned enterprises oversee land,
infrastructure and housing provision. Implementation of the Five
Year Plan is paramount. The one-party system stitches delivery to
the plan, funding to the projects and lower levels of government
to higher. China now has the most motorway in the world, mosthigh speed rail, the longest subway, the busiest subway andhas accommodated urban growth of 500 million people in thelast four decades. Today, China’s focus has shifted to improving
environmental performance and sustainable development.

5National benefits

New Zealand’s Devolved Cost-Based Model

Through this “National Development
Model”, the Singapore, Hong Kong andChinese governments have turned thefortunes of their jurisdictions around. By
linking planning, which controls the supply
and therefore price for land, with funding
and delivery of development, authorities
have been able to capture land value
improvement. The revenue obtained has
enabled a combination of more affordable
housing (particularly in Singapore) andexpansion of transport (particularly inHong Kong and China). More affordable
housing and transport reduces upward
pressures on inflation. Faster and cheaper
movement of people and goods makes the
Asian economies more competitive.

New Zealand does not have a national development plan or framework. Instead,comprehensive powers relating to planning, funding and delivering national development
are disaggregated and devolved. Priority is given to market-led development, individual
civil liberties and property rights over national outcomes. The government sets the legal
and regulatory framework to enable a functioning market economy and keeps a tight reinon public spending.

A more competitive economy has allowed
the Asian tigers to move past other OECD
countries struggling with low, slow growth.
Economic outcomes have improved.
Residents with access to affordable
housing and transport have seen theirdiscretionary income and mobility improve,enhancing social wellbeing. Controlled
land use integrated with electrified rail
has protected sensitive land and lessenedcarbon emissions, promoting environmental
wellbeing.
“Place” has been used as a common
denominator to coordinate public services
in pursuit of integrated outcomes. Physicaldevelopment is the mechanism by whichauthorities implement economic, social andenvironmental policy.

Funding and delivery are devolved to entities independent of the government and bundled
together to minimise expenditure. National transport revenue and delivery are managed by
the New Zealand Transport Agency (NZTA). Local road revenue and ownership sits with 67
territorial local authorities. Public transport funding and operation is provided by 11 regional
councils. Land development is funded by the market. Property rates are owned by councils.
Housing New Zealand uses the income-related rent subsidy to manage public housing.
Central government receives 93 per cent of all tax, but plays a comparatively minor andindirect role in national development.
This “Devolved Cost-Based Model” has successfully contained public spending and led to
one of the lowest public net debt positions in the developed world. New Zealand’s public
institutions are the global benchmark and New Zealanders enjoy strong protections overtheir individual, community and property rights.
But institutional performance is not national performance.
The absence of a national plan means there is no mechanism to identify national priorities
and translate these priorities into tangible projects or land use rules. Implementation ispoor and integration of public services at the point of delivery is weak. Priority projects aretied to solving known problems, rather than enabling a national strategy. Planning horizons
are short term. Urban planning is bottom up with little national guidance.
Managing costs or “cutting the cloth to suit the purse” is prioritised over creating
value or lifting productive capacity. Under this approach New Zealand has seen severe
infrastructure underinvestment. New Zealand’s cities have become the most congested fortheir size in the world. Water services in many locations fail to meet acceptable health orenvironmental standards. Public housing deficiency has left thousands of New Zealanders
living on streets, in cars and in garages.
Without adequate infrastructure to unlock affordable land, a shortage has emerged. High
resulting land prices have pushed house prices beyond the reach of median incomes.
Higher mortgage and rent costs have impacted discretionary income, reducing expenditureon other goods and services. Government reactionary spending on accommodation
subsidies is crowding out other public expenditure priorities. Wage increases to meethousing costs are making New Zealand less competitive.
New Zealand is locked into low per capita income growth as congestion andinappropriately priced land for development limit the speed of the economy to the pace atwhich public services can be delivered. Economic wellbeing is impacted. Lower productivity
and higher costs are pushing up the cost of living. Social wellbeing is impacted. Urgency
to deliver housing and growth is compromising elite soils and sensitive ecosystems.
Environmental wellbeing is impacted.

6

Reforming the New Zealand Approach
There are benefits and disbenefits of both systems of government.
The Devolved Cost-Based Model provides significant advantages
for individual and local outcomes. When functioning efficiently,
resources are optimally allocated across society as each individual
chooses where best to spend their money. Growth can be strong, if
it is not held back by regulatory practices which constrain choice
and public investment policy which inhibits growth.
But the Devolved Cost-Based Model will always be challenged torealise national opportunities and overcome national challenges.
The National Development Model is designed to identify national
issues and opportunities and address them. However, individual
choice is impacted. Comprehensive land use planning is needed toensure demand for infrastructure aligns with investment decisions.
Significant power is vested in the state, requiring consistent, strong
and capable leadership.
New Zealand needs an approach which leverages the strengths ofthe existing Devolved Cost-Based model and the strengths of the
National Development model. Interests at all levels of society need
to be recognised and outcomes for New Zealand promoted.
The New Zealand Government has already initiated a major
process of reform. The New Zealand Infrastructure CommissionTe Waihanga will produce a national infrastructure pipeline andstrategy. The Housing and Urban Development Authority willtransfer urban planning powers to a centrally guided agency withfunding and delivery capability. Wider planning reform is on thehorizon. The State Sector Act Review is reorienting departmental
focus away from inputs and process to outcomes-focuseddelivery. The Provincial Growth Fund is reinvesting in the regional
Heartland. The Budget is targeting wellbeing.
However, these improvements require ongoing and additional
reform to materially move New Zealand away from a focus onprocess to one which harnesses individual enterprise and promotes
national outcomes.
Recommendation:
1.

Retaining the devolved approach will best protect individual andcommunity outcomes, promote private enterprise and prevent
overextension of national powers. But national outcomes will be
impeded without additional reforms.
Recommendations:
2. Central government shifts focus from services to outcomes.
In consultation with regions, the Government sets out
national outcomes, objectives, priorities, projections andtargets in a statutory national plan, but does not lead theimplementation of the plan.
3. Subnational economic and social zones where communities
live, work and play – regions – deliver the national plan.
4. Central government monitors and supports regional
implementation.
Fully integrated national strategic, spatial and land use planningprovides too much power to one level of government and cannot
be effected within three years. Subnational governance is needed
to balance national power and provide longer term delivery
capability. Government performance monitoring and support
provided to regions, where necessary, will facilitate implementation
through the political cycle. A top down-bottom up process will
ensure alignment of plans nationally, regionally and locally.
Recommendations:
5. Regions develop spatial plans which translate national
priorities into relevant regional outcomes and, in turn,
tangible projects and land use plans which deliver theoutcomes.
6. Regions develop minimum land use rules to align with
infrastructure capacity and investment as a prerequisite forland development.
7. Local councils develop maximum land use rules to align with
community aspirations.
8. Regional and local spatial and land use plans are signed off
by central government.

New Zealand retains but adapts the Devolved Cost-Basedapproach where subnational decisions are empowered
and central government focuses on enabling the market
economy, minimising costs and unnecessary regulation.

NATIONAL DEVELOPMENT: INSIGHTS FROM ASIA
JUNE 20197Strategic spatial planning is needed to translate intangible regionaland national outcomes into tangible land use rules and projects.
Strategic planning must incorporate the whole socio-economic
area, linking employment to homes and people to their regular
activities. Land use and infrastructure development must go handin hand. Spatial planning without land use planning will not engage
the community and will undermine implementation. Full land use
planning authority in one level of governance concentrates toomuch power. Local communities provide valuable input. They need
the opportunity to drive local economic, social and environmental
outcomes and identity. Plans must give effect to national priorities.
Recommendations:
9. Funding is devolved from central government in proportion
to increases in planning powers and responsibility.
10. Regions receive a portion of economic taxes (GST, income
and corporate tax), to incentivise and support investment innational priorities, and levy property taxes and user charges
to fund infrastructure and other spatial activities.
11. Local councils retain local property rating powers.
12. Central government allocates a portion of its revenue toregions to implement national direction. Regions allocate a
portion of their revenue to local councils to implement theregional spatial plan.
Funding from activities linked to the economy needs to come fromtaxes linked to economic performance. Projects and plans which
improve land value need to be co-funded by taxes linked to higher
property values. Linked funding aligns incentives to invest. Funding
from higher levels of government to lower encourages buy-in. Landand property taxes levied in proportion to value reflect the capitalvalue impact of public activities and reduce the need for restrictiveplanning rules. Individual and community aspirations are better
protected and national outcomes better promoted with a low levelproperty tax rather than regulation. Funding sourced from higher
levels of government helps incentivise alignment.

8

Recommendations:
13. Delivery of transport, including fuel levies and charges,
is delegated to regions. Central government provides anallocation from the consolidated account to fund economic,
social or environmental public good outcomes.
14. Delivery of water is corporatised and funded throughvolumetric charging. Water service provision sits off local,
regional and central balance sheets, enabling financing.
15. Delivery of public housing is delegated to regions andfunded from regional taxes.
16. Delivery of market housing remains private.
17. Third party delivery of growth infrastructure not included inregional plans is permitted. Funding and financing is enabledthrough long term targeted property rates and user charges.
Specialised delivery of public services is effective where funding
is not ringfenced but linked to value created. Activities providing
services to a defined area should be delivered by that area,
allowing integration into spatial plans. Central government is the
only entity capable of monitoring performance against national
outcomes and is conflicted when monitoring its own agencies.
The public housing costs of market housing failure should remain
with the authority responsible for growth planning. Individual andlocal outcomes will not always be represented by regional plans.
Local communities need development alternatives where regional
planning and investment does not meet need.
These changes to the planning, funding and delivery of public
services will promote national outcomes, whilst enabling an open
market economy, and supporting individual and local aspirations.

Singapore’s Integrated Planning and Transport System

Concept Plan

© Urban Redevelopment Authority. All rights reserved.

Multipleagencies

Master Plan

© Urban Redevelopment Authority. All rights reserved.

Planning Feasibility
Studies
1. 20-minute Towns & a 45-minute City

LTA

Road Development
Programme

Rail Lines
Implementation Plan
2. Transport for all

Bus Routes andInfrastructure
Development

Long term plans
40-50 years

Medium term plans
10-15 years

NATIONAL DEVELOPMENT: INSIGHTS FROM ASIA
JUNE 2019

Near term plans
5-10 years

3. Healthier Lives, Safer Journeys

9

02
INTRODUCTION
New Zealand’s headline
indicators are solid

All is not as it seems

The economy is growing. Average GDP growth of 2.3 per cent per
annum over the last decade is above average for the OECD andhigher that most of the countries we compare ourselves against.
Unemployment is below 5 per cent and inflation is under control.
Government finances are in order, with operational surpluses
projected as far as the eye can see. Net debt at 20 per cent of GDP
is low for a developed nation, and no change is forecast.
Figure 1: New Zealand’s headline economic performance:
Average GDP growth 2008-20171

But dig a little deeper and New Zealand’s performance across its
economy, its people and its environment is more mixed.
New Zealand’s economic performance over the last decade is only
strong when compared to countries struggling with the aftereffects of the Global Financial Crisis. High performing countries,
such as those in Asia are seeing much greater improvementsin economic performance. New Zealand’s 1 per cent per annum
per capita economic growth over the past decade is dwarfed bySingapore and Hong Kong’s 2+ per cent per capita growth, let alone
China’s 7+ per cent.4

Australia

Figure 2: GDP per capita growth: New Zealandvs Asian achievers 2008-20175

New ZealandUnited States
China
OECD members
Singapore

United Kingdom
0

0.5

1

1.5

2

2.5

3

Hong Kong
New ZealandSociety is stable. After income inequality increased from themid-1980s to the mid-1990s, there has been no substantive
movement since.2 Migrants continue to seek residency in New
Zealand, despite lower incomes than much of the rest of the OECD,
indicating our lifestyle remains highly attractive. Life expectancy is
above the OECD median, as is educational attainment.3
And in relation to the rest of the world, New Zealand’s environment
remains relatively pristine. New Zealand is famous for clear air,plentiful water and the most accessible natural environment on theplanet.

10

0

1

2

3

4

5

6

7

8

9

What income growth there has been as a result of a growing
economy has, for many people, been exceeded by increases in thecost of living. Auckland households in 2018 had almost $100 fewer
dollars per week to spend on discretionary items than they did a
decade before. Hamilton, Tauranga and Queenstown households
only saw marginal improvements. Nowhere in New Zealandwitnessed anything close to the $400 per week discretionary
spending windfall households in Perth and Brisbane experienced
over the same period, despite similar economic performance(see Figure 3).

Figure 3: Discretionary income growth across Australasian growth cities6
Australian cities

New Zealand cities

500

400

Estimated discretionary income change (NZD)

300

200

100

0

-100

-200

-300
Perth

Brisbane

Adelaide

Weekly household income

Melbourne

SydneyNon-housing expenditure

Increasing mortgage costs, most evident in Auckland (Figure
3 above), indicate that land price inflation has exceeded the
reduction in interest rates since 2008, raising questions of equity.
An average 2008 property owner has seen the value of theirproperty increase significantly, generating wealth. An average
2018 homebuyer has locked in high debt and incurred downside
risk, while tenants have seen growth in median rents exceed wage
increases.7
Poor data on wealth has concealed the extent of the trend, butavailable evidence suggests that New Zealand wealth is twice asconcentrated in the top decile as incomes.8 Wealth inequality is
not just concentrated at the top end, it is far less concentrated at
the bottom. The lowest two deciles receive 8 per cent of all New
Zealand income, but own less than 1 per cent of assets.9

NATIONAL DEVELOPMENT: INSIGHTS FROM ASIA
JUNE 2019

Wellington Christchurch

Tauranga

Mortgage payments

Queenstown

Hamilton

AucklandDiscretionary income

The overrepresentation of Maori, Pacific people and children
in lower socio-economic demographics suggests changes ininequality have disproportionately affected certain groups. There
are now a quarter of a million children living in poverty in New
Zealand, after housing costs, equivalent to one in five.10
New Zealand’s mixed record of economic and social progression is
replicated in the environment. The Ministry for the Environment’s
latest assessment of New Zealand’s environment found thatextinction risk over the past decade had improved for 26 species,
but deteriorated for 86. Net greenhouse gas emissions are high andnot declining. Other indicators, including for water quality, would
likely show significant declines in performance if adequate data
was available.1111

High performing Asian economies
have long since surpassed us
New Zealand’s mediocre economic, social and environmental performance in recent decades has seen the country overtaken by formerly
poor, uncompetitive economies which now boast higher incomes, lower costs of living and rapidly improving liveability.
Two of the highest performing such economies are Singapore and Hong Kong. The glass ceiling which appears to set a limit to how far
or fast western economies can grow relative to others does not seem to apply to Hong Kong and Singapore. Wealthy by the turn of themillennium, both have continued to grow up and past most OECD economies. The two economies are ranked by IMD as the two mostcompetitive in the world12 and rank at or near the top on indices relating to starting a business, infrastructure and other key metrics.

Current
international
dollars

Figure 4: GDP per capita (purchasing power parity) New Zealand vs Asian high achievers13

100
Singapore
90

80

70
Hong Kong
60

50
New Zealand
40

30

20
China
10

0
1990

1995

2000

2005

2010

2015

Success is not limited to the highly efficient city states. Continuing its rapid rise beyond all expectations is the economic titan of China.
Still in an earlier phase of development nationally, China’s leading cities are now as wealthy as many in the west and growing faster.
Looking beyond economic performance, Singapore, Hong Kong and China have been exceptionally successful at improving overall
liveability. The cost of living has been kept comparatively low, allowing wage increases to materialise as higher disposable income at alllevels of society.14 Hong Kong now boasts one of the highest life expectancies in the world and Singapore was recently rated the bestplace in the world to raise children.15

1203
DELEGATION TO
SINGAPORE AND CHINA
How is it that the economic systems of Singapore, Hong Kong
and China have managed to not only drag their populations outof poverty, but grow up and passed formerly wealthy developed
nations like New Zealand? Have they permanently sacrificed
non-pecuniary outcomes in a single minded pursuit of economic
growth? How do we break the cycle of mediocrity and accelerate up
and passed slow growth OECD nations, equitably and sustainably?

The purpose of the two week programme was to investigate howthese cities and the regions and nations they belong to havemanaged, supported and leveraged rapid urban, economic andsocial growth and development. We wanted to understand how the
top-down approach employed in each system works in practice,what the strengths and weaknesses are and whether successful
components of the “Asian approach” can be applied in New Zealand.

From March 17-22, 2019, Infrastructure New Zealand led adelegation of 50 senior public and private sector representatives
including Infrastructure Minister Shane Jones to Singaporeand Hong Kong. The following week, a second delegation of 50
representatives (including both existing and new delegates) visited
Beijing and Shanghai.

Briefings with key national and city development, transport andplanning leaders were requested via Infrastructure New Zealand’s
global infrastructure network. Providing extensive cooperation andsupport was the Auckland Consulate of the People’s Republic ofChina and New Zealand’s Ministry of Foreign Affairs and Trade.
The full list of briefings and site visits are included in Table 1 below.

Table 1: List of government briefings and site visits in the four city-regions
SINGAPORE

HONG KONG

BEIJINGSHANGHAILand Transport Authority

InvestHK

National Development andReform Commission

Shanghai Hongqiao BusinessDistrict Administration
Committee

Building and Construction
Authority

Highways Department

Ministry of Finance

Shanghai Municipal Planningand Natural Resource Bureau

Housing and Development
Board

Planning Department

China Academy of Urban
Planning and Design

Shanghai Municipal
Transportation Commission

Beijing MTR Construction
Administration Corporation

Shanghai West Bund
Development Group

China International Engineering
Consulting Corporation

Lingang Shanghai Economic
Development GroupUrban Redevelopment Authority West Kowloon Cultural District
Authority

Hebei Province Xiong’an New
Area Management Committee

Infrastructure New Zealand members who facilitated briefings and site visits:

NATIONAL DEVELOPMENT: INSIGHTS FROM ASIA
JUNE 201913

04
DIFFERENT POLITICALSYSTEMSThe Asian political systems are different
Each of the three Asian systems supports varying degrees of democratic decision making, but none are democratic in the western sense.
Leaders are not elected via a popular vote, but through controlled processes participated in by senior party and other officials.

Singapore governance

Hong Kong governance

China governance

The Republic of Singapore is anindependent sovereign nation fully
separate from both Britain and Malaysia
since 1965. An elected president occupies
the largely ceremonial role of head ofstate with the prime minister head ofgovernment.

Hong Kong Special Administrative Region(SAR) is a semi-independent city-stateof the People’s Republic of China. Since
governance was transferred from Britain
to China in 1997, the area has been ruled
under a “one country-two systems”
framework. The principal institutions
and laws present in Hong Kong before
1997 have been retained, leaving major
infrastructure and development decisions
in the hands of Hong Kong’s executive.

The People’s Republic of China is
an independent sovereign state
constitutionally governed by the Chinese
Communist Party. Ultimate power resides
with the General Secretary of the party(who is usually the President). The
President is the head of state and iselected by the National Peoples’ Congress(parliament). The premier is the head ofgovernment.

Parliament is composed of a mix ofelected and non-elected representatives
and the prime minister is head of thegoverning party. One party has been in
power since 1959 and there have been a
total of three prime ministers. There is noother significant level of government in
Singapore.

The city is governed by a Chief Executive,
appointed by China upon nomination
by an Executive Council, comprised ofleading members of Hong Kong businessand community. Laws in Hong Kong areenacted by the Legislative Council, whichis half democratically elected and halfindirectly elected. There is no material
lower level of government. The territory’s
18 districts and elected representatives
provide an advisory function to the Chief
Executive and Legislative Council.

Table 2: Singapore, Hong Kong, China and New Zealand in 201716
SINGAPORE

HONG KONG

CHINA

NEW ZEALAND

Population

5.6 million

7.4 million

1,386 million

4.8 million

Population
growth
2007-2017

22%

6.9%

5.2%

13.5%

Land area

722 km2

1,108 km2

9,596,961 km2

268,021 km2

Density(persons/km2)

7,756

6,678

144

18

GDP

US$324 billion

US$341 billion

US$12,240
billion

US$206 billion

GDP per capita

US$58,000

US$46,000

US$9,000

US$43,000

GDP growth

3.6%

3.8%

6.9%

3.0%

14

There are multiple levels of governancein China, each ruled by the Chinese
Communist Party. Below the national
government exist provinces, fiveautonomous regions and two special
administrative regions (SARs). SARs (HongKong and Macau) have the most autonomy,
followed by autonomous regions and finallythe provinces.
Below the provincial level of government
are prefecture-level municipalities (citycouncils with a population above 250,000)
and below prefectures are counties,
then townships then villages. While
it is important to note that individual
infrastructure and development decisions
are often made at provincial government
level, decisions flow from the centre andthe top through the party to the lowest
levels of government.

Are they successful because
they are less democratic?
In part, yes.
The absence of an open and contested electoral process
has enabled extremely consistent policy making over long
periods in each system. There have been isolated moments ofpolitical uncertainty, but otherwise policy makers have been
confident enough in their long term position to plan and invest
intergenerationally. Short term decision making at the expense oflong term public outcomes has been avoided and decision makers
have benefitted from a long career in public management.
In addition, the concentration of power in the centre of eachsystem has enabled the full force and weight of the state to commit
to policy implementation. Disagreements over policy are managed
internally before initiatives are committed, preventing disruption todelivery programmes.
Constant 2011
international$ (‘000)

The combination of long term policy consistency and singleminded delivery capability has enabled the three systems topursue an economic and social development model which mayotherwise have been impossible. This model, defined below as the
National Development Model, has successfully pulled each systemout of poverty and enabled Hong Kong and especially Singapore to
overtake almost all other countries in per capita national income.
However, if the concentration of power is the reason for theirsuccess, then all centralised systems should be growing quickly,
reducing poverty and improving public wellbeing. Figure 5 below
uses GDP per capita by purchasing power parity (PPP)17 tocompare the economic and social progress of China versus fourother centrally-led economies.

Figure 5: GDP per capita (PPP) China, Venezuela, Iran, Zimbabwe and Myanmar18

20

Iran

18
Venezuela

16

China

14
12
10
8
6
Myanmar4
Zimbabwe
2
0
1990

1995

2000

China’s rapid economic expansion over the last three decades has
separated it from the lower two performing economies and lifted
incomes to the equivalent of the two oil-producing nations. Iranand Venezuela, meanwhile, have seen very marginal improvements
in GDP, arguably all of which has been undermined by declining
wellbeing in other areas.

NATIONAL DEVELOPMENT: INSIGHTS FROM ASIA
JUNE 2019

2005

2010

2015

China, Singapore and Hong Kong are all doing something different
from other comparable governance systems to support long term
economic, social and, increasingly, environmental wellbeing.

15

05
THE NATIONAL
DEVELOPMENT MODEL
The success of Singapore, Hong Kong and China over recent
decades has been enabled by a particular approach the threesystems have taken to national development. This approach,described here as the National Development Model, sees eachgovernment proactively manage the state’s natural activities inthree essential functions to promote promote national objectives.
It has three main components:
1

National land use planning

2

National infrastructure and development funding

3

National project delivery

National Planning

Singapore’s planning system
In Singapore, where the city is the state and where land is solimited that it must be scrupulously planned, the state’s role in land
use planning has been entrenched since before independence.
The Singapore Government exercises its land use planning powers
principally through a single integrated spatial and land use plan,
the Master Plan.
First developed in 1958, the Master Plan is reviewed every five
years and has a comparatively modest planning horizon of 10-15
years. Longer term planning is provided for via another plan, theLand Use Plan 2030.
Figure 6: Singapore’s Planning System19

Concept Plan

Each of the three governments have “nationalised” spatial andmore detailed land use planning. This allows each government to
set the strategic priorities for the nation and then influence theavailability and price of land to promote policy. Rules, restrictions
and aspirations over how and when land can be used are elevatedto a national level of importance where national economic, socialand environmental objectives are prioritised.
Although each government ultimately uses planning to achieve thesame end goal, there is great diversity in the approach used.

Master Plan

Government
Land Sales

Development
ControlLand Use Plan 2030
The Concept Plan is a unique Singaporean innovation to deal withthe country’s nearly-unique land scarcity. The current iteration, theLand Use Plan 2030, sits “above” the Master Plan in a traditional
planning hierarchy, being longer term and setting the parameters
within which the Master Plan must operate. However, the Concept
Plan is practical and empirical, not strategic. It looks forward 40-50
years into the future and makes quantitative judgements about
how much land will be required to deliver the projected number ofhomes, jobs, recreational facilities and infrastructure to meet thecity’s needs.
Reviewed every 10 years, the main purpose of the Concept Plan is
to ensure that sufficient land is provided for development. Where
land designated for projected growth in homes and employment
is inadequate, the Concept Plan is able to inform decisions about
reclamation, or the conversion of defence or other land to morecritical uses.

16

Figure 7: Singapore’s Land Use Plan 203020© Urban Redevelopment Authority. All rights reserved.

The Master Plan
It is the role of the Master Plan to take theallocations for different land use activities
identified in the Concept Plan and turnthem into a single detailed structure planfor the entire city. Where the Concept
Plan says where housing, for example,
will be, the Master Plan says what the
housing typologies will be. The Master Plan
achieves this by integrating strategic andland use planning.
The Master Plan is guided by the visionof its ultimate controlling authority, theMinistry of National Development (MND).
The MND vision for Singapore is “Anendearing home and a distinctive globalcity”. It seeks to promote this vision
through three priorities:
1

The Draft Master Plan 2019, produced by the Urban Redevelopment Authority (a statutory
board of the MND) expresses these priorities spatially via five themes:
1

Liveable and inclusive communities

2

Local hubs, global gateways

3

Convenient and sustainable mobility

4

Rejuvenating familiar places

5

Sustainable and resilient city of the future

Under each theme, the Master Plan identifies a series of objectives and priorities that will
be promoted via the rules set out in the land use plan and through wider planning andgovernance decision making.
For example, a major priority of the Draft Master Plan is to deliver more housing options.
It will do this by lifting development controls in a variety of new areas. Another priority,
to ensure the efficient movement of people and goods, will be promoted throughconsolidation of logistics via the establishment of dispersion points.

Develop world class infrastructure2

Create a vibrant and sustainable living
environment

3

Build rooted and cohesive communities

NATIONAL DEVELOPMENT: INSIGHTS FROM ASIA
JUNE 2019

The Master Plan both allocates land resource to allow the implementation of these
initiatives and signals a commitment from other agencies, such as the Housing andDevelopment Board (another statutory board of the MND) and Land Transport Authority,
to implement the plan.

17

Figure 8: Singapore’s Master Plan 2014

© Urban Redevelopment Authority. All rights reserved.

Figure 9: Transport Planning System21

Land sales and development control
The final phase of the planning system in Singapore sees the land
use provisions of the Master Plan sequenced for delivery. This
often involves the state, which owns around 80 per cent of allland in Singapore, releasing land to the market when commercial
indicators, such as vacancy rates, signal need. Development control(consent to build) is issued in accordance with the Master Planvision and objectives.

Concept Plan

Multipleagencies
Master Plan

Planning Feasibility
Studies

Transport planning in Singapore
Transport planning in Singapore takes its lead from the
Master Plan. Singapore’s transport planning and delivery
agency, the Land Transport Authority, works with the URA
and other parties to agree the key corridors and upgrades
necessary to meet growth. These are cemented in the
Master Plan. The role of subsequent transport planning is
to sequence transport improvements to ensure access andmobility are maintained across the island.

LTA

Road Development
Programme

Bus Routes andInfrastructure
Development

Long term plans
40-50 years

18

Rail Lines
Implementation Plan

Medium term plans
10-15 years

Near term plans
5-10 years

Hong Kong’s planning system
Hong Kong’s planning system is very different from Singapore’s, inspite of similar geographies, economies and history. It is also very
different from China’s, of which it is a part. Hong Kong’s planningsystem is more similar to New Zealand’s. It is less prescriptive,
consistent with the traditional British-based planning model,
and an entrenched system of property rights reduces the state’s
flexibility to control land use.
What aligns the Hong Kong planning model more closely with theother Asian systems is the targeted use of planning. Operating
within the parameters of the British model, the Hong Kong
Government has focused land use and spatial planning on areas
where it has control – public and reclaimed land and infrastructure.

Hong Kong 2030+
Hong Kong anticipates and plans for long term land use via aterritorial development strategy – a spatial plan. The current
strategy is HK2030+, a 2018 revision of the 2007 document
HK2030. It looks at the period “beyond 2030” and devises a way
for the city to continue to grow and prosper.
As a strategy, HK2030+ follows a format comparable to otherspatial plans globally. It provides an agreed evidence base foropportunities, challenges and projections into the future and sets a
vision for the city:

Our vision is to become aliveable, competitive andsustainable “Asia’s World City”.

Rather than the three building blocks serving as high levelstrategic guides for each of economic, social and environmental
wellbeing, as per international convention, the building blocks
instead provide a bridge from intangible strategy to tangible
development. Building Block 1 highlights common urban goals – acompact, diverse, integrated, vibrant, healthy city.
Building Block 2 turns the focus to facilitating economic
development and, specifically, the planning system’s contribution
to economic development. It identifies pressures on land
requirements for different industries as well as the innovation,
employment and productivity opportunities of securing land for
growth into the future.
Building Block 3 takes the final planning step towards
implementation and identifies the long term (beyond 2040)
land requirements for housing, employment, recreation andinfrastructure. Its analysis found new land supply from existing
projects to equal 3600 hectares while the total required land
supply was 4800 hectares. Building Block 3 also highlights theinfrastructure, environment and other projects planned to support
wellbeing.
Finally, HK2030+ translates the building blocks into a conceptual
spatial framework. The framework identifies three major strategic
spatial priorities for the city:
1

Metropolitan business core – focused employment
development around the traditional centre of Hong Kong2

Two new strategic growth areas – a new 1000 hectare island
reclamation called the East Lantau Metropolis for up to
700,000 residents and 200,000 new jobs and a new town
in the north of the territory for up to 350,000 residents and
215,000 jobs.

3

Three axes – a Western Economic Corridor focusing on accessto the port and airport; an Eastern Knowledge and Technology
Corridor focusing on existing tertiary, knowledge and hi-techindustry; and a Northern Economic Belt focusing on thelast remaining holdings of undeveloped land for logistics,
warehousing and research.

What makes HK2030+ unique is its identification of a “planninggoal” and subsequent injection of urban planning into the strategy:

Our planning goal is tochampion sustainable
development with a view
to meeting our present andfuture social, environmental
and economic needs andaspirations.
To promote the planning goal, three building blocks are identified:1
2
3

Planning for a Liveable High-density City
Embracing New Economic Challenges and Opportunities
Creating Capacity for Sustainable Growth

NATIONAL DEVELOPMENT: INSIGHTS FROM ASIA
JUNE 2019

Lower level planning
To implement the strategic land use priorities identified in
HK2030+, planning processes familiar to New Zealand are used.
The Department of Planning of the Hong Kong Government willdevelop detailed land use plans and sign off consent for all projects
and initiatives. Transport, land use and other strategies and plans
will sequence reclamation, rezoning and infrastructure delivery.

19

Figure 10: Hong Kong 2030+ Spatial Concept

China’s planning system
China is a planned society. Land is owned by either the state ofrural collectives, not individuals. All land uses must be signed off
through the appropriate processes giving the state, or its delegatedauthorities, material influence over development. To manage therelease and use of land, the Communist Party has developed acomprehensive hierarchy of strategic and land use plans, led fromthe top, which are implemented at all levels of government.
The structure of the Chinese planning hierarchy is quite different
to that seen in Singapore and Hong Kong. At the highest level is
not a strategy, but a manifesto outlining in significant detail all thepriorities and commitments of the Communist Party. Strategic andland use planning is used to implement the manifesto.

The Thirteenth Five Year Plan 2016-2020
The Five Year Plan is the Chinese Communist Party’s leaddocument for national and social development. It is a much morecomprehensive – and directive – plan than seen in either Singapore
or Hong Kong. It is a manifesto of everything the Chinese
Communist Party will prioritise over the coming five years. It serves
as a guide to not only all subsequent levels of government but also
the private sector.

20

The current iteration, the Thirteenth Five Year Plan, identifies
national targets, directives and priorities across all areas of national
importance, not only physical and spatial activities. Responding
to climate change, addressing inequality, modernising agriculture
and tax reform are among the 80 chapters and 200 pages ofcommitments from the Party.
The physical growth and development of China, including thedelivery of transport systems, provision of housing and supply ofurban land are major components of the Thirteenth Five Year Plan.
However, as a genuinely national plan, the Five Year Plan does notheavily focus on specific locations, projects or land uses. These aredealt with at lower levels of government.
It focuses on more general objectives relevant across China.
Key planning priorities for this five year period relate to a ‘new’urbanisation to be pursued in China. Mega cities are to be
decongested, urban areas made more sustainable and liveable, city
clusters supported and spatial planning and governance rolled out
across the country.

Shanghai Master Plan 2017-35
One of the first subnational spatial plans to be delivered in China is Shanghai’s Master Plan. Consistent with conventional spatialplans, it sets a vision for the city. However, rather than articulating a strategy to achieve an identified spatial vision, its emphasis ismuch more on consolidating existing plans into a single overarching document.
Its objective is to ensure that Shanghai fulfils its nationally directed mission to be China’s leading international city. Its ultimate
vision is that Shanghai will be an excellent global city and a modern socialist international metropolis with world influence. To
assist the progression towards this vision, it adopts a three horizon framework:1

In 2020: Shanghai will establish the fundamental framework of an innovation centre of science and technology with global
influence and basically build itself into an international centre of economy, finance, trade and shipping as well as a modernsocialist international metropolis.

2

In 2035: Shanghai will basically build itself into an excellent global city, an admirable city of innovation, humanity andsustainability as well as a modern socialist international metropolis with world influence.

3

In 2050: Shanghai will complete the building of an excellent global city, an admirable city of innovation, humanity andsustainability in all respects as well as a modern socialist international metropolis with world influence.

To achieve the vision, the Master Plan prioritises three goals consistent with economic, social and environmental wellbeing:�

A more dynamic innovation city

2

A more attractive humanistic city

3

A more sustainable eco city

Each of the goals is promoted via aseries of initiatives, related toconventional urban planning objectives
such as resilience, innovation andaccessibility. In addition, it implements
key directives from the central
government, including population
growth management for mega-cities.

Credit: Shanghai Municipal Transportation
Commission

NATIONAL DEVELOPMENT: INSIGHTS FROM ASIA
JUNE 201921

Wider planning

Figure 11: China’s Spatial Planning system22

As a manifesto of action, the Five Year Plan
is neither a conventional strategic plan,setting a vision and outcomes, nor a land
use plan. These functions are performed
via other processes, building off thecommitments in the Five Year Plan.

Likewise in transport, the priorities
emerging from the Five Year Plan, which
include improvements to high speed rail,
expressways, airports and technology, arehanded to other state institutions for lower
level transport planning. This includes
other central agencies, such as the
Ministry of Transport, and provincial andcity transport bodies, such as municipaltransportation organisations.
The end result is an overall spatial planningsystem which is surprisingly simple, given
the size and complexity of the country it
serves.

22

Socioeconomic
Development Plans

National Spatial
Plans (Land Use
Plans)

Urban and Rural
Plans

Authority

National
Development andReform Commission

Ministry of Land andResources

Ministry of Housing
and Urban-Rural
Development

National
Level

The Five-Year
Plan for National
Economic and Social
Development
National Core
Function Area Plan

Areas
Level

Administrative Divisions

At both the provincial and city levels ofgovernance, five year plans are developed.
These plans translate national priorities
into local priorities and are signed off at thenational level. National, provincial and cityspatial plans are completed to physically
express the directives of the economic
and social development plans, also signed
off centrally. Land use and urban planningthen translate spatial plans into rules andregulations for infrastructure, development
and other land use activities.

Policy Area

Province
Level

TownshipLevel

National Urban
System Plan

Overall Land Use
Plan

Priorty Areas
Spatial Plan

The Five-Year
Plan for Provincial
Economic and Social
Development
Provincial Core
Function Area Plan

Prefecture
County Level

National
Spatial Plan

The Five-Year Plan
for Prefectural
Economic and Social
Development

Provincial
Spatial Plan
Provincial Land Use
Plan

Prefectural
Spatial Plan
Prefectural Land
Use PlanTownship Land
Use Plan

Provincial Urban
System Plan

Provincial Urban
and Rural Plan

Prefectural Urban
System Plan

Prefectural Urban
and Rural Plans

Township Urban
and Rural Plans

Xiong’an
Xiong’an is one of the most ambitious
urban projects in history. China
has recently pursued a strategy ofdecongesting its largest cities as
they become difficult to manage. The
Thirteenth Five-Year Plan prioritises
lowering Beijing’s population density
in main districts and to do this “noncapital” functions will be moved out of
the city and into a new “capital”.

The new area was established in 2017 and is still under planning, though government
offices and other critical infrastructure have been delivered. The new city is alreadyserved with two motorways and a rail corridor and estimates are that US$90 billion willbe spent on transport infrastructure alone by 2020 to enable development.24
Efforts are underway to turn Xiong’an into a tech hub and a liveable and sustainable
city. Authorities are targeting a higher standard of living as a means to entice residents
away from Beijing and extensive master planning is underway to ensure the city is a
success.

Xiong’an, a combination of two of thethree regions where the city will belocated, is being delivered for four
reasons:
Hebei Province

1

2

3

4

To take over the non-capitalfunctions of Beijing, as the capitalis getting crowded.

Beijing

To facilitate the economic
integration of the Beijing-HebeiTianjin region.
To explore a new model ofdevelopment and optimisation for
densely populated areas and build
a world-class, green, modern andsmart city.
To push for structural andinstitutional reforms to stimulatemarket vitality.23

NATIONAL DEVELOPMENT: INSIGHTS FROM ASIA
JUNE 2019

TianjinCounty of Rongcheng
Area: 314 km2
Population: 273,000County of Xiong
Area: 514 km2
Population: 392,000County of Anxin
Area: 728 km2
Population: 466,000

23National
Development
Funding
A consolidated and nationalised revenue
and expenditure system is the second
critical leg of the National Development
Model. The Singapore, Hong Kong
and Chinese governments commit thefull weight of national resources toinfrastructure – particularly transport – topromote the national outcomes set out inplans.
Funding to implement policy and plansacross the three systems is collected by,
and allocated from, the central government.
General taxation is used to fund major
growth decisions like metro rail or land
reclamation, not separate revenue streams.
There is limited use made of discrete
taxation tools to fund distinct activities.
For example, property and fuel taxes are
not ringfenced for parks or transport.
Taxation is instead used as a tool topromote strategy. Revenue generated is
consolidated into the central account forredistribution and allocated in promotion ofnational strategic priorities.
General taxation policy is applieddifferently across the three systems,
consistent with individual national strategic
positioning. In all cases, the strong
hierarchical structure of each system
results in a similar taxation framework.
Revenue flows from individuals andbusiness to the centre where the money
is dispersed consistent with national
priorities and direction. This systemapplies as strongly for infrastructure anddevelopment as it does for education,
defence and other public services.

National Development Funding in Singapore
Singaporean government revenues are consolidated and managed by the Minister ofFinance. Revenues from the vehicle quota system, tolling and fuel taxes are not ringfenced
for transport. Nor are land and house sales income ringfenced for land development.
These activities are simply part of the wider tax system. Transport, housing, land and otherdevelopment needs must compete with education, health and other priorities for the samepool of money.25

Tax in Singapore
Singapore is a low tax jurisdiction. The main sources of taxation revenue are corporate tax,
income tax and GST. Income tax is capped at a maximum of 22 per cent of annual income(above S$320,000 p/a), GST is levied at 7 per cent and corporate profit tax at 17 per cent.
However, corporate tax is only applied to profit earned in Singapore. The result is a very
low corporate tax burden for global corporations (and the country sometimes attracting
criticism as a tax haven).
The Singaporean government also deducts social security from wages and salaries of up
to 20 per cent which are additional to the headline income tax rate. Singapore does not
charge a capital gains tax, but the Singapore government does own around 80 per cent of
the country’s land area and monopolises land reclamation. The state is thus able to capture
the great majority of land value improvement from public activities, helping to fund major
infrastructure and development.
Figure 12: Singapore government operating revenue 201926

Corporate Income
Tax 21.9%

Statutory Boards’
Contributions 2.0%
Witholding
Tax 2.0%
Betting
Others 0.5%
Taxes 3.6% Motor Vehicle
Taxes 3.9%
Customs andExcise Tax 4.3%
Fees and Charges(Excluding Vehicle
Quota Premiums)
4.4%
Vehicle Quota
Premiums 4.4%

AssetsTaxes 6.2%

Personal Income
Tax 15.9%

Stamp
Duty 6.3%

Goods and Services
Tax 15.3%

24

Other Taxes 9.2%

National Development
Funding in Hong Kong
With Hong Kong governanceresponsibilities fully delegated by Beijing
there is no requirement to fund, or be
funded by, the People’s Republic of China.
Like Singapore, there is no notable lower
level of government with whom to sharerevenues. Government revenue flows to thecentre where it is allocated, ultimately by
the CEO.
However, Hong Kong makes much greateruse of targeted hypothecation, ringfencing
specific revenue streams to specificactivities. This has included, for example,
the use of toll-backed public-private
partnerships to fund road improvements.
But much more significant in terms ofoverall revenue generation are Hong Kong’s
value creation and capture models.
Hong Kong uses value uplift from land
rights to the greatest extent possible tofund growth. The state fully exploits its
opportunities to create value from land
reclamation, rezoning and redevelopment,
taking advantage of improved values tofund infrastructure. Most famous of thesemodels is Hong Kong’s property + railmodel, which has enabled the territory tooperate one of the most efficient masstransit systems in the world at a profit.

Property + Rail Model
Approximately 90 per cent of all trips in Hong Kong are provided by public transportand half of these are provided by rail. Demand for land, both commercial and residential,is therefore very high around rail stations. The property + rail model exploits demand tolocate near rail by capturing a portion of the value created by new station delivery.
The first key to the property + rail model is surprisingly simple. The location of stations
is selected based on the presence of publicly owned land. By owning the land, theGovernment does not need to pursue contentious compulsory acquisition to capture value.
The second key is the integrated delivery of development and rail. The Government
sells development rights to its monopoly rail provider, MTR. It is responsible for bothconstructing and operating Hong Kong’s rail network and is also the property developer.
Both property and rail considerations are managed internally as a single project.
The third key is highly successful value creation resulting from expert site master planningand development. Value which is not created cannot be captured. As a private, listedcompany (but majority owned by the Hong Kong government), MTR takes a commercial
approach which the rail + property model skilfully aligns with public outcomes. MTR’s
financial success is dependent on delivering attractive and desirable developments which
enhance property values. The end result for the Hong Kong government is that it is able toprovide rail services across its territory at a profit.

Figure 13: Property + rail funding process27

1) Ascertain rail funding gap

2) Assess amount of land rights required to bridge funding gap

3) Land premium to Government• Land premium based on ‘Greenfield Site’ (i.e. pre-railway basis)• Payable to Government at time of land development

4) Developer’s contribution• All or a portion of land premium• Construction and other development costs5) Property value increases with railway presence

6) MTR Corporation’s benefit• Share of property development profits - used to fund new railway

NATIONAL DEVELOPMENT: INSIGHTS FROM ASIA
JUNE 201925

Land premiumLand sales
The property + rail model is highly efficient for funding expansion of the rail network andoffsetting redevelopment costs of existing land. For funding services to new land, theGovernment uses land premium and land sales.
Land premium is a charge placed on rezoned or re-leased land. It is the second largest
revenue item recorded by the government, exceeded only by corporate tax. Land premium
captures the additional value rezoning or extending the lease on land provides.
Land sales are especially relevant for reclamation. The demand for strategically locatedreclaimed land in land-starved Hong Kong is extremely high. The government leverages
this demand to fund the works and infrastructure needed to create and service new land.

Land premium is a charge theHong Kong government places
on properties applying for
modification to their lease.
A developer wishing to redevelop
land at higher density or extend
their lease is subject to the charge.
The premium is calculated asa proportion of the land value
improvement and is designed torecover the infrastructure costs ofa planning change.

Hong Kong’s land sales windfall
The East Lantau vision identified in HK2030 proposes reclamation of around 1000 hectares. The cost to create this much landand service it with transport connections is estimated at a massive HK$624 billion (NZ$120 billion). However, even by committing
70 per cent of enabled housing to lower value public housing delivery, the project is expected to return between HK$1 trillion and
HK$1.15 trillion (almost NZ$200 billion) in land sales.
This money is returned to the state and can be used to pay off debt. In addition, the Government reaps the benefit of economic
activity related to the development through its general tax take, and estimates that HK$141 billion will be created annually in value
added from a third CBD.
Figure 14: Past (grey) and future (red) land reclamation in Hong Kong28

26

Tax in Hong Kong
For national development priorities
which cannot be funded throughcommercial means, the Hong Kong
government uses tax. Tax collection
and government expenditure in Hong
Kong is fully independent of China. Hong
Kong taxpayers do not contribute to any
national functions, even defence, andChinese tax payers do not fund Hong
Kong infrastructure or services. For sharedprojects, like the new Hong Kong-ZhuhaiMacau Bridge, the Hong Kong government
funds works within the Hong Kongboundary, while other cities cover the costof works within their boundaries.
The Hong Kong government has a longstanding policy to keep public spending ator below 20 per cent of GDP (New Zealandgovernment spending is around 30 per
cent of GDP), enabling more competitive
tax rates. Income tax rates are low, witha maximum level of 15 per cent. There isa modest additional deduction for social
security of 5 per cent, but there is no GST/VAT in Hong Kong.

Despite rates as low as 8.25 per cent and characteristics which suggest the city is used
as a tax haven, nearly one-third of all government revenue is obtained from corporate
taxes. While this is the largest single revenue item, in total, land and property-related taxes
generate more income. Land premium (a charge applied to all applications to modify alease or land use condition), stamp duties and rates together comprise well over a third of
all government revenue.

Figure 15: Hong Kong government revenue 201929
Land Premium*$143.0 billion (22.8%)

Other Capital
Revenue$8.2 billion (1.3%)

Investment Income
Capital Revenue$7.9 billion (1.3%)

Investment Income
Operating Revenue$40.0 billion (6.4%)

Stamp Duties$76.0 billion (12.1%)

Other Operating
Revenue$82.7 billion (13.2%)

Bets and Sweeps Tax$22.2 billion (3.6%)
General Rates$19.9 billion (3.2%)

Profits Tax$159.6 billion (25.5%)

Salaries Tax$66.6 billion (10.6%)

NATIONAL DEVELOPMENT: INSIGHTS FROM ASIA
JUNE 201927

National Development
Funding in China
China’s funding of national development isquite different to the two city states. China
is not a low-tax jurisdiction and different
levels of government possess their own
revenue streams. Nevertheless, the same
fundamental result is achieved: revenue
for national development is consolidated
by the centre and allocated nationwide inpursuit of national outcomes.
The mechanism to consolidate taxation ina multi-tiered governance arrangement is
the one-party system. Officials at all levelsof government are members of the sameorganisation – the Chinese Communist
Party. Provincial and city leaders areaccountable to the leadership of theCommunist Party, rather than their local
constituents, and success is measured
in how well officials implement national
direction.
The machinery of the one-party system
extends beyond political leaders and into
state institutions. Hypothecation is largely
notional with all tax revenue collected by
local bureaus of the centrally managed
State Administration of Taxation. The
effect of this arrangement is equivalent
to the consolidation of tax revenue by theSingapore and Hong Kong governments.

Tax in China
Tax revenue generation in China is shared in roughly equal proportions between central
and local government (provinces and their subsidiaries). However, although central
government receives half of all revenue, it allocates the majority of its share back to theprovinces. This process encourages local and central funding alignment and enhances
national influence over the prioritisation of local projects. Furthermore, tax policy is set in
Beijing, so provinces and municipalities do not necessarily have the ability to levy new or
higher taxes.
The flow of funding, prioritisation and revenue is not just from the centre outwards.
Internal Communist Party processes, most importantly the National People’s Congress,
provide frequent opportunities for provincial and other local leaders to influence wider
national policy. Once agreed through these processes, policy becomes national, and state
institutions ensure implementation.
Income tax in China can be high – as much as 45 per cent. In practice, however, income tax
only generates around a quarter as much revenue as the largest source, VAT (GST). VAT islevied at up to 16 per cent and generates over a third of all tax income. In addition, excise
taxes on tobacco, alcohol, fuel and other items generate almost as much revenue as income
tax.
Corporate taxes vary in application and collection, but are the second biggest revenue
source, generating a little over half the revenue of VAT. Land and property related taxes are
not individually significant, but collectively generate as much revenue as income tax.

Figure 16: Tax allocation in China30

%
100
90
80

48%

53%

70

53%

60
50
40
30

32%

52%

47%

20
10

15%

0
Tax Income
Central and Local

Central28

Financial Income
Central and Local

Local

Central, Local,
Transferred fromCentral to Local

From Central transferred to Local(Transferred payment and Tax Return)

National Development Delivery

National Development
Delivery in Singapore

With nationally committed spatial and land use plans signalling the location andsequencing for growth, and a national funding pool ready to support implementation, theSingapore, Hong Kong and Chinese governments can move into the third and final phaseof the National Development Model: delivery. All three systems have an exceptional record
for delivering on plans. Complex and contentious projects like road pricing, reclamationand the Hong Kong-Zhuhai-Macau Bridge have become operational despite significant
challenges.

With only one level of governance acrossa single urban area, the Singapore
government has not had a need oreven an option to separate governanceresponsibilities. The state has retained
responsibility for services delivered
elsewhere by lower levels of government,such as planning, infrastructure, parks andhousing.

Delivery under the National Development Model is retained by the state. The key agencies
involved in developing land and building infrastructure are state-owned and influenced,
usually under the direct oversight of a ministry. Delivery functions are not delegated toindependent lower levels of government or the market. This can include housing, as well astransport and the basic provision of land.
The scale, accountability, integration and imperative that state delivery provides
ensures projects reach the finish line in accordance with the plan. It also allows thestate to influence the costs of housing and movement to promote economic and social
performance.

Nor has the Singaporean government
divested key responsibilities to the private
sector. Some activities, such as mobile
phone services are privatised,31 but key
development responsibilities are not. The
state owns, operates and delivers coreland development, transport and housing
services.

Marina Bay
Marina Bay is a large 360 hectare reclamation project adjacent to Singapore’s CBD. Famous for the iconic Marina Bay Sands threelegged tower, the Marina Bay development is more impressive for the long term staged release of commercial property in the heartof Singapore.

Marina Bay(reclaimed land)

Singapore CBDLand parcels ready forstaged release when market
conditions dictate

NATIONAL DEVELOPMENT: INSIGHTS FROM ASIA
JUNE 201929

Land Management in Singapore
Through the Urban Redevelopment
Authority, the government monopolises
new land supply. The government owns
some 80 per cent of all land in Singapore
and this number is increasing, notdecreasing, as the government exercises
acquisition rights across a fixed area andreclaims land from the sea.
Land is sold (which usually involves a rightto lease for 99 years) for development
and redevelopment as and when market
forces require and the Master Planpermits. Infrastructure, land release anddevelopment must be signed off by theDevelopment Control Department of thestate, to ensure they are in accordance withthe outcomes aspired to in the Master Plan.
The URA exercises significant influence
over the type of activity undertaken on
new land, including the design of the final
product. This has allowed, among otherthings, Singapore to lead the world in green
building technology, as requirements forconstruction are tied to the land purchase.
Since the state receives the revenue fromthe sale (long term lease) of the land, there
is an imperative on the URA to ensure
its requirements are realistic and its
programme delivered. Sale price recovers
the state’s cost, allowing the next plot of
land to be prepared for development.

Singapore housing
The state’s monopoly over land is supported
by a near monopoly over housing supply.
Over 80 per cent of all housing in Singapore
is provided by the Housing and Development
Board, a sister organisation of the URA under
the Ministry of National Development.
HDB not only oversees the development,
redevelopment and construction of
public residential housing, it manages
neighbourhoods and communities. It is ableplan, design and deliver suburbs, including
recreational spaces, walkways and otherservices which support housing. In this way,
the aspirations of the Master Plan relating
to rejuvenation, sustainability and othersocial and economic outcomes can bephysically delivered by an aligned agency.

30

Housing in Singapore
Less than 20 per cent of housing in Singapore is provided by the market. The
remainder is provided by the HDB via a public-private arrangement. Throughthis model, the HDB builds homes using one of several layouts depending on
household size. Homes are then made available to Singaporean citizens at a
price heavily discounted from the market rate, but sufficient to recover a large
proportion of the HDB’s cost. Singaporeans can buy the home, with ownership
expiring after (usually) 99 years.
This model has enabled Singapore to maintain comparably affordable housing. The
median home price is just 4.8 times median income, roughly half of Auckland’s anda quarter of the much more comparable city of Hong Kong. Singapore homes arealso larger than those in Hong Kong and active HDB management ensures quality
is maintained.
The HDB model carries some social benefits and disbenefits. Waiting lists can beseveral years for an HDB home and the units are not always accessible to nontraditional family typologies. Failure to meet standards of behaviour can impact
access to housing and decisions about when homes can and should be replaced
are made centrally, impacting property rights.

Singapore transport
The Land Transport Authority (LTA) is Singapore’s fully integrated transport service
provider. It oversees all transport modes, including Singapore’s heavy and light rail, bus
operations and road network. It is also involved in each step of the transport process, fromtransport planning, to funding, construction, operation and regulation.
Although overseen by the Ministry of Transport, the LTA works closely with the Ministry of
National Development and its statutory board, the URA. The LTA has an active role in the
Master Plan process to ensure that transport corridors are adequately provided for throughlong term land use planning.
Once confirmed, the LTA operates within the scope of the Master Plan to enable movement
around Singapore. LTA oversees the procurement of all transport services, helping it not
only to evolve into a highly intelligent buyer but also to manage the transport network as asingle system.

Road pricing
Singapore already operates the world’s most advanced electronic road pricing system, but by 2020 will replace it with acomprehensive Global Navigation Satellite System. The new system will use satellite tracking to dynamically charge road use bytime of day and distance travelled. It will be more responsive to managing congestion, less reliant on large roadside infrastructure(camera gantries) and will provide more accurate information.
Figure 17: Next-Gen ERP System Key Capabilities

Real-time traffic info,
allowing motorists tobetter plan routes

Automatic charging ofoff-peak cars

Enhancing motorists’travelling experience

E-payment forcheckpoint tolls

Paperless coupon parking-$20

Credit: Land Transport Authority

The LTA’s integrated model combinedwith controlled land use has enabled
successful delivery of some of the world’s
most ambitious transport initiatives. The
LTA operates a unique vehicle quota
system, limiting car availability on theisland. It successfully rolled out the world’s
first major road pricing system, which
is now being replaced with the world’s
most advanced dynamic congestion
management system. The LTA is currently
undertaking a major extension of heavy
rail, is revising bus operations and setting
ambitious targets for active transport.

NATIONAL DEVELOPMENT: INSIGHTS FROM ASIA
JUNE 2019

Singapore’s first major transport decision
Singapore has a long history of successful delivery of complex transport projects.
The first, and arguably most ambitious, was the 1982 decision to roll out heavy
rail across the island. Long term planning had identified that, as a fast-growing
land constrained island, private vehicle use could not support transport needs.
The Government was left with a choice between an affordable bus system or amuch more expensive rail option costing a staggering 20 per cent of GDP. Buses
were a better transport option, but rail could allow open space at Marina Bay to be
redeveloped. Rail proceeded and land sales linked to rail subsequently raised S$12
billion over six years.32

31

National Development Delivery in Hong Kong

Housing in Hong Kong

Hong Kong’s economic and social progress over many decades has been a result of
successful delivery in an extremely challenging urban environment. However, in contrast to
the comprehensively managed Singaporean system, the Hong Kong government has had
to be much more targeted and investment-oriented in its approach.

Hong Kong has topped the Demographia
survey of least affordable housing every
year since inception.33 Homes are verysmall, nearly half being less than 40m2,34
yet median home prices sit at around 20
times median household income.

The Hong Kong government does not control land. It plays a lesser (though still significant)role in housing and is committed to minimal infringement on civil liberties (making a vehicle
quota system, for example, untenable). The Government’s achievement has been to makethe best of what it has, delivering results in areas like housing which are in some ways lessimpressive than Singapore, but without equivalent trade-offs in property and other rights.

Hong Kong land management
Land ownership in Hong Kong is more closely aligned to the New Zealand model thanthat of Singapore. Although the People’s Republic of China technically owns all land inHong Kong, administering it through the Hong Kong government, most land is “owned”
privately on long term lease. It is bought and sold like freehold property and property rights
are strongly protected. The government is challenged to acquire land and cannot easily
capture value improvement.
Reclaimed land and development control, however, are owned and monopolised by theHong Kong government. The Development Bureau under the Secretary for Development
is responsible for both. It is able to revise development rights to existing land, with thegovernment receiving the land premium benefit. It is also able to reclaim land to add tocommercial or residential supply, depending on demand.
The revenue benefit that the Hong Kong government receives from strategic land
management incentivises delivery. Failure to deliver sufficient land to meet growth will resultin higher housing and social costs for the government, reinforcing the imperative to act.

32

However, as in Singapore, these numbers
are misleading. Through the Housing
Authority, the Hong Kong government
directly provides around 30 per cent ofHong Kong’s housing units. Another 15 percent are publicly subsidised. This leaves
only around half the population (the higher
income half) exposed to the market.
Through the provision of public housing
and subsidies, the government is able
to provide affordable accommodation
for workers. Affordable housing
substitutes for higher wages, keeping
the economy competitive. Further, unlike
welfare payments, housing sits on thegovernment’s balance sheet as an asset.

Hong Kong Transport
Hong Kong’s transport system is among
the best in the world. All modes aresupported and land use is carefully
integrated into major investment decisions.
What is particularly remarkable is that thisperformance has been delivered by a highly
fragmented system overseen by multiple
agencies. Policy, regulation and delivery
are all performed by separate government
departments. In addition, MTR operates therail network.
The property + rail model (describedearlier), which integrates the property
development of stations with rail
construction and operation, is one major
reason for successful delivery. The
dedicated and combined provision of
public property development with major
new access increases ridership and offsets
major public capital requirements. By
avoiding what would be otherwise large
financial injections to operate the subway
network, the government is able to invest
in other parts of the network.
It is not just the rail network which iswell managed. Hong Kong’s highways,
ports, airports and other key transport
infrastructure are world leading. The key
is the Government’s strategic commitment
to excellent transport services. A central
tenet of Hong Kong’s overall economic
strategy is to position the territory as a
global gateway and logistics hub. Transport
is the lynchpin of the Government’s wider
economic strategy, reinforced in HK2030+
and other strategic documents.
The consolidation of both economic
revenue and responsibilities for transport,
as well as of transport and land use, hasenabled a fully integrated approach tomoving people and goods. Where transport
can be self-funded, it is, but where it
cannot, the government invests. And
it invests at a scale and pace which is
unrecognisable in New Zealand.

NATIONAL DEVELOPMENT: INSIGHTS FROM ASIA
JUNE 2019

Government capital investment in Hong Kong
The Hong Kong government is investment-led. The 2019 Budget estimates total
public expenditure for the coming year will be $650 billion (NZ$120 billion).
Infrastructure spending will comprise 12.3 per cent, or around $80 billion (NZ$15.5
billion), of this spending. Housing will comprise another 5.1 per cent.
In the 2019 financial year, the Hong Kong government expects to initiate works
on $90 billion (NZ$17 billion) of projects. Works include activities which in New
Zealand are delegated to local authorities, including land development and water
services, but does not include rail.
Hong Kong’s NZ$15.5 billion infrastructure spend this year is equivalent to around
NZ$2000 per person. The equivalent estimate for New Zealand infrastructure
investment this year is around $7 billion, or $1500 per person.35 In addition, New
Zealand’s population growth is around three times Hong Kong’s level.
Figure 18: Total public expenditure Hong Kong Budget 2019-2036
Community andExternal Affairs 3.5%
Economic
6.9%

Environment
and Food 5.2%

Health
13.7%

Education
19.2%

Housing
5.1%

Security
8.8%

Infrastructure
12.3%

Social Welfare
15.0%

Support10.3%

33

National Development Delivery in China

China land management

China’s delivery of homes and infrastructure in the decades since
opening up has dwarfed that of the rest of the world. Its urban
population has grown by half a billion, all requiring new homes andservices.37 China now has more kilometres of motorway than New
Zealand per person. Two-thirds of all high speed rail in the world is
now located in China. Shanghai Metro is now the world’s longest,
Beijing the busiest.38

Land in China is all publicly owned. However, while urban land isowned by the state, rural land is owned by local collectives. Thereis no individual or corporate ownership of land, but, as in Hong
Kong and Singapore, land can be leased long term and traded as if
it was owned.

The ability for the Chinese state to provide the land, infrastructureand housing to support its growth has been made possible
via state retention of delivery responsibility. The Communist
Party system has been able to acquire and rezone land, build
infrastructure and provide homes.
The ability for the Chinese state to provide the land, infrastructureand housing to support its growth has been made possible
via state retention of delivery responsibility. The Communist
Party system has been able to acquire and rezone land, build
infrastructure and provide homes.
Delivery has been largely the responsibility of sub-national
governments. Provinces and municipalities have, working to thedirection of central government, rolled out the infrastructure andservices needed to support massive urbanisation and growth.
A unique aspect of the Chinese approach is that the state has
also retained a controlling interest in normally privately owned
companies involved in the construction and operation of criticalservices.

34

In urban areas, national, provincial and municipal authorities
are able to readily acquire, rezone and activate land. This has
facilitated major urban growth and intensification, helping todrive the government’s economic agenda while delivering new orregenerated land for hundreds of millions of urban migrants.
State land control is now facilitating de-intensification in support ofsocial and environmental outcomes. Consistent with the five year
plan, China’s public authorities have recently undertaken to acquire
urban residential land and replace homes with other services or
activities. Major centres benefit from reduced congestion and air
pollution. Newer, usually larger and more modern, homes are rebuilt
in new cities on the urban fringe which are master planned tomaximise urban outcomes.
Acquiring land in rural areas is more challenging. Land must be
acquired from the relevant rural collective. This is not always
straight forward, as the land is likely to be used for both housing
and employment (i.e. farming). Land acquisition must therefore
provide sufficient payment to compensate for the loss ofcommunity and income and may include provision of a new homeor shares in the new development.

Nanhui new city and Lingang Industrial Area
Nanhui is a new city located in the Lingang area 50 km from downtown Shanghai. Planned for 800,000 people, Nanhui is auniversity town situated beside a new greenfield industrial park. The whole site has been master planned to locate employment
beside housing and ease pressure on the megapolis of Shanghai.
The area is made up of roughly one-third each of collective, state and reclaimed land. It is situated between the busiest container
port in the world and the third busiest cargo airport in the world, Pudong International Airport.
Nanhui city is planned around a major manmade lake to enhance liveability. Lingang industrial park is designed to attract hightech manufacturing pushed out of Shanghai by rising land prices, congestion and other urban challenges.
Development of both the city and the industrial park is being overseen by municipal-backed entities. Governing authorities acquire
the land, approve the plan and fund the infrastructure. Shanghai Lingang Economic Development Group, a state owned enterpriseof the Shanghai city government, master plans land use and infrastructure and attracts investment to deliver the industrial area.
Figure 19: Nanhui new city and Lingang Industrial Area39

NATIONAL DEVELOPMENT: INSIGHTS FROM ASIA
JUNE 201935

China housing
Since opening up, China has promoted home ownership as a national development priority(homes, unlike land, can be privately owned). Between 1980 and 2010 the rate of homeownership increased from 20 per cent to 70 per cent.40 It now stands at 90 per cent.41 This
rapid transition from largely state-provided to largely privately-owned housing has been
made possible via strong national leadership and direction setting.
Home ownership has been viewed as a positive driver for economic growth. Vastdevelopment and home building initiatives have provided stimulus to the economy andemployment. Compulsory savings initiatives have enabled residents to accumulate
sufficient capital to buy market homes, removing the financial and fiscal cost from publicbalance sheets. Socially, the policy has provided newer and better homes, improving
liveability. Per capita living space in China grew from 4m2 to 29m2 between 1980 and 2010 –a seven fold increase.42
Enabling such rapid construction of not just homes but cities has been China’s integrated
governance arrangement. National priorities for housing have flowed down and throughlower levels of government, ensuring land, zoning, infrastructure and other services needed
for housing are delivered at pace.
Of critical importance is China’s state owned enterprise model. Many of the major
corporates involved in the planning, design and construction of residential development
are state owned. While competing against one another, these companies also follow theguidance laid out in five year plans and other governing documents. Their financing isenabled by major banks, each of whom are partially owned by public authorities. Access tocapital is used to manage economic performance through different parts of the cycle.
However, policies put in place to facilitate home ownership have also led to pressures on
the system. China now has some of the most expensive housing in the world. Home prices
in Chinese cities are 10-20 times household income, as much as double Auckland’s. High
prices have spurred construction and speculation. There are now reportedly 50 million
homes (one-fifth of all housing stock) unoccupied across the country.43
Figure 20: Home price to income ratio in China44
25
20
15
10
5
0
2005

2006

2007

2008

2009

2010

Urban (35 cities)

2011

2012
Beijing

2013

2014

2015

2016

2017

2018

Shanghai

For the comparatively small proportion of the population unable to own their own home,
the Government assists with subsidised rent. But there are gaps in the system. Migration
around China is restricted and the country maintains a resident registration system,
helping it to manage urban growth. Unauthorised residents living outside their registeredareas can struggle to access public housing and other services.

36

China transport and infrastructure
Transport and wider infrastructure delivery is managed similarly to housing, but withgreater state influence. Infrastructure is almost all publicly owned and operated in China.
Either through large state owned enterprises, or in their own right, national, provincial andmunicipal authorities design, build, finance and operate core road, rail, electricity, water,
telecommunications and other services.
This approach has been central both to China’s ability to deliver massive infrastructure
works and manage economic, social and environmental development. Public funds andfinancing enabled through publicly owned banks have ensured sufficient capital for
visionary strategic projects. Large state owned enterprises maintain their own debt
programmes and can borrow extensively to finance priority initiatives. Publicly ownedbanks can respond to national direction and ensure capital is available for projects ofpublic significance.
Importantly, the role of infrastructure (and more general development) in the Chinesesystem goes beyond simply providing the critical services for growth. Infrastructure
finance and construction is used to moderate impacts on the wider economy, counteracting
slowing or overheating. In August and September 2018 alone, local government bondissuance spiked by some NZ$200 billion in response to a desire to stimulate the economy(Figure 21).

Figure 21: Local government special bond issuance in 201845
RMB bn
80
70
60
50
40
30
20
10
0
Jan

NATIONAL DEVELOPMENT: INSIGHTS FROM ASIA
JUNE 2019

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

37

06
NEW ZEALAND’S DEVOLVED
COST-BASED MODEL
National development
planning in New Zealand
The National Development Model
employed in Singapore, Hong Kong andChina is fundamentally different to themodel applied in New Zealand. The New
Zealand Government does not proactively
seek to achieve national outcomes throughthe state’s natural activities in land use
planning, transport and development.
Rather, it operates a permissive anddelegated system, purposely taking a “backseat” approach to economic management.
The Devolved Cost-Based Model isdesigned to enable markets to efficiently
allocate resources across society. The
Government supports development withcritical public services and provides a
net to catch individuals and communities
slipping through the market-led system.
Under this approach, the Government
focuses its activities on the inputs ofnational development, not the outcomes.
The Government delegates responsibility
for delivering public services togovernment departments and councils with
their own Budget allocations or funding
streams. This facilitates specialisationand encourages officials to manage publicresources responsibly.
The Government plays an overallsystem management role, not a national
development leadership role. The
underlying assumption is that, if theGovernment manages its costs down, taxes
and transaction costs will be lower, andbusinesses and consumers will allocate
their income optimally. The implication
for national development is that land use
planning, transport, housing and otherdevelopment-related activities are eachperformed by delegated entities outside ofthe direct control of the Government.

38

The New Zealand Government does not produce a comprehensive national plan – spatial,
strategic or otherwise. Government economic, social and environmental priorities arearticulated across multiple documents, including governing party pre-election manifestos,
Budget documents and ministerial speeches.
The Government has produced a National Infrastructure Plan. This, however, is not a
statutory plan or a “master” plan. It does not set out the current Government’s priorities
for national economic, social and environmental progress. It is a consolidated strategy for
infrastructure across New Zealand and collates, rather than informs, more detailed plans,evidence and decisions.
Other national plans are produced on a portfolio-basis and set out the priorities anddirection of the Government across a specific activity. For the key national development
activities of land use planning, transport and housing, different planning systems apply.

Spatial and land use planning
New Zealand’s planning system is governed by the Resource Management Act 1991 (RMA).
The purpose of the RMA is to promote the sustainable management of natural and physicalresources and the Act sets out a clear planning hierarchy to achieve its purpose.
The RMA does not provide a framework for identifying national economic, social andenvironmental priorities, translating these into strategic spatial plans or identifying andsequencing tangible projects. Often described as taking an “effects-based” approach,the RMA simply provides a framework for managing growth within the capacity of theenvironment.
There is no clear role for strategic national spatial planning under an effects-oriented
planning system. In fact, the RMA largely delegates planning down to the subnational level.
The Government does seek to influence local detailed land use planning via National Policy
Statements, which sit above local and regional plans in the RMA hierarchy. Again, however,these relate to specific policy areas like national development capacity and coastal
environments.
Land use planning is instead performed by regional councils, principally through Regional
Policy Statements, and territorial authorities through city and district (town) plans.
Conceptually, Regional Policy Statements provide the wider strategic framework within
which detailed district plans specify what activities can occur where. However, theeffects-based approach ensures that all plans are oriented towards managing the negativeenvironmental impacts of growth and development, not facilitating positive economic andsocial outcomes.

Transport planning
Transport and land use planning, which in the Asian systems is
combined to support growth and development, is disaggregated in
the New Zealand Devolved Cost-Based model. Transport planningis set out in the Land Transport Management Act 2003, not the
RMA. Transport plans have different statutory requirements for
publication, different planning horizons and are performed bydifferent organisations, thwarting recent efforts to integrate landuse.
National land transport planning is delegated to an independent
Crown entity, the New Zealand Transport Agency (NZTA). Every
three years it produces a National Land Transport Programme todeliver the Government’s transport objectives. The Government
publishes its priorities in a Transport Government Policy
Statement, but only at the strategic level. Decisions around theactual scoping, sequencing and prioritisation of transport solutions
is devolved to NZTA.
NZTA manages national land transport funding and state highway
operation. Other functions it shares. State owned rail provider
KiwiRail owns and operates the rail network. Local roads, whichcarry roughly half of all traffic, are owned and operated by 67 city,
district and unitary authorities. Public transport is operated by
distinct regional councils.
Regional councils must, working with territorial authorities,
produce regional transport plans. These must be consistent with
the Government Policy Statement, but are also subject to local
consultation. Regional and local councils are responsible to local
communities, not the Government. Priorities are not always aligned.
Long term investment is challenged by three-year election cycles.

National development
funding and delivery
in New Zealand
It is not only planning which is different under the Devolved
Cost-Based Model. Funding and delivery are bundled together tofacilitate cost-efficiency and enhance specialisation. Individualtransport, land development and housing services are distanced
from direct governmental oversight. Ringfenced funding is used
to manage expenditure and sustain dedicated and independentdelivery entities. Major funding sources are retained by theGovernment, not allocated to national development.

Tax allocation in New Zealand“Economic taxes” which rise and fall with growth in
the economy – GST, income and corporate tax – aremonopolised by central government. In the year to April
2019, the Government received a total of $78 billion in tax
revenue.46 Around $4 billion of this amount is ringfenced
for transport. Just over $1 billion is ringfenced for housing.
Local government, which has delegated authority to levy
property rates, raised under $6 billion in 2018.47
Figure 22: Tax revenue in New Zealand
Local
Governmnent 7%

Transport planning is statutorily separate from land use planning.
All planned transport projects must pass through the RMA
consenting process. National, regional and local priorities are
inputs into consenting decisions for major transport projects andcan be denied, creating serious impacts on long term transport
policy.

CentralGovernmnent 93%

NATIONAL DEVELOPMENT: INSIGHTS FROM ASIA
JUNE 201939

Transport funding and delivery

Land development funding and delivery

Land transport is majority funded through the National Land
Transport Fund administered by NZTA. The fund derives its
revenue from fuel levies, road user charges and vehicle licensing
fees. It currently generates around $4 billion per annum. A further$1 billion is contributed to transport by councils using property
rates. The Government over the coming three years will inject afurther $200 million per annum from the consolidated fund.48

The Government has also devolved responsibility for opening
and servicing land for residential and commercial development.
Developers are expected to cover the on-site costs of transport,
water and other services. Off-site costs, including provision ofarterial roads and trunk water, are carried by territorial authorities.

This amount is low compared to Singapore, Hong Kong andChina. Singapore will spend NZ$12 billion this financial year ontransport.49 This is equivalent to over NZ$2100 per resident.
New Zealand will spend $5.6 billion, under NZ$1200 per resident.
China spent NZ$500 billion in the first nine months of 2018 alone
on transport.50 This is a modest NZ$450 per capita (annualised)but, when considered alongside China’s flat population growth, isequivalent to NZ$100,000 per additional resident, roughly double
New Zealand’s spending.
Lack of funding under the Devolved Cost-Based Model is not the
only issue. Funding is ringfenced to certain activities to facilitatea focus on cost-efficiency. NZTA must manage its expenditure
within the limits of the national fund. There is only a small margin
to borrow outside the $4 billion hypothecated revenue stream.
Major projects with high capital demands must be delivered within
the limits of the fund. Where capital requirements exceed fundreserves, projects may be delayed or repackaged into smaller, moreeasily fundable components regardless of the impact on outcomes.
Local government funding is similarly affected. Council rates
operate under a cost-recovery methodology. Councils estimate
costs each year and set property rates according to need.
Transport (and water and other critical services) expenditureis managed to meet cost, not maximise benefit. Council rates
revenues are guaranteed, regardless of economic performance or
costs transferred to other parties, creating poor incentives acrossthe system.
Almost all transport investment requires coordination. NZTA cofunds public transport and local roads. Local roads are required totake traffic to and from state highways. Funding shortfalls acrosseither NZTA or the relevant council can lead to project delay or
cost cutting, regardless of the wider economic impact.

40

Councils seek to pass costs on to developers, resulting in highdevelopment charges. High charges encourage incremental
development which undermines scale. Smaller scale reduces theflexibility of land supply, pushing costs up further. Demand for
new land reduces in response to higher prices, even if residential
and commercial land supply is inadequate to meet growth. Lower
income households are disproportionately affected while wealthierhomeowners experience property value improvement, driving
inequality. Land development and construction activity contributeless to the economy.

Public housing funding and delivery
It is not just the private marketplace which carries additional costs
from poor land management. Through Housing New Zealand/
Kāinga Ora-Homes and Communities, the Government maintains
the great majority of the responsibility for housing people who
cannot afford market accommodation. Housing New Zealandreceives a ringfenced income-related rent subsidy from theGovernment on behalf of public housing tenants. In 2018, Housing
New Zealand received $813 million to maintain and operate public
housing from the Government and a further $391 million fromtenants.51
Under the Devolved Cost-Based Model, public housing has
historically been viewed as an expense, not as an investment ortool to improve wellbeing. Costs have been minimised, resulting
in poor quality homes and transferred liability to the health andeducation system. Rising public housing needs from inadequate
market supply have exceeded allocations to Housing New Zealand,
leading to stricter criteria for accommodation. Individuals andfamilies who do not meet criteria are challenged to find stable,
suitable housing.
Undersupply of public housing has increased government
operational spending on subsidised market housing. The
Government now spends around $2 billion per annum on theaccommodation supplement.52 Perversely, the supplement
reinforces high rental prices, increasing demand for subsidies andplacing upward pressure on the cost of living.

07
INSIGHTS AND
RECOMMENDATIONSThe Devolved Cost-Based Model has achieved its primaryobjective.
New Zealanders enjoy strong protections of their individual,
community and property rights. Our public institutions are theglobal benchmark for efficiency and transparency. Public spending
and national borrowing have been contained.
But institutional performance is not national performance. New
Zealand’s wider national outcomes have not been promoted.
The absence of a national plan means there is no mechanism
to identify national priorities and translate these priorities into
tangible projects or land use rules. Implementation is poor andintegration of public services at the point of delivery is weak.
Priority projects are tied to solving known problems, rather thanenabling a national strategy. Planning horizons are short term.
Urban planning is bottom up with little national guidance.
Managing costs or “cutting the cloth to suit the purse” isprioritised over creating value or lifting productive capacity.
Under this approach New Zealand has seen severe infrastructure
underinvestment. New Zealand’s cities have become the mostcongested for their size in the world. Water services in many
locations fail to meet acceptable health or environmental
standards. Public housing deficiency has left thousands of New
Zealanders living on streets, in cars and in garages.
Without adequate infrastructure to unlock affordable land, ashortage has emerged. High resulting land prices have pushed
house prices beyond the reach of median incomes. Higher
mortgage and rent costs have impacted discretionary income,reducing expenditure on other goods and services. Government
reactionary spending on accommodation subsidies is crowdingout other public expenditure priorities. Wage increases to meethousing costs are making New Zealand less competitive.

System benefits of the National
Development Model
Through the National Development Model, the Singapore, Hong
Kong and Chinese governments have turned the fortunes of
their jurisdictions around. By linking planning, which controls the
supply and therefore price for land, with funding and delivery ofdevelopment, authorities have been able to capture land value
improvement. The revenue obtained has enabled a combination of
more affordable housing (particularly in Singapore) and expansionof transport (particularly in Hong Kong and China). More affordable
housing and transport reduces upward pressures on inflation.
Faster and cheaper movement of people and goods makes the
Asian economies more competitive.
A more competitive economy has allowed the Asian tigers tomove past other OECD countries struggling with low, slow
growth. Economic outcomes have improved. Residents withaccess to affordable housing and transport have seen theirdiscretionary income and mobility improve, enhancing social
wellbeing. Controlled land use integrated with electrified rail has
protected sensitive land and lessened carbon emissions, promoting
environmental wellbeing.
“Place” has been used as a common denominator to coordinate
public services in pursuit of integrated outcomes. Physicaldevelopment is the mechanism by which authorities implement
economic, social and environmental policy.

New Zealand is locked into low per capita income growth ascongestion and inappropriately priced land for development limit
the speed of the economy to the pace at which public services canbe delivered. Economic wellbeing is impacted. Lower productivity
and higher costs are pushing up the cost of living. Social
wellbeing is impacted. Urgency to deliver housing and growth iscompromising elite soils and sensitive ecosystems. Environmental
wellbeing is impacted.

NATIONAL DEVELOPMENT: INSIGHTS FROM ASIA
JUNE 201941

Reforming the New Zealand Approach
There are benefits and disbenefits of both systems of government.
The Devolved Cost-Based Model provides significant advantages
for individual and local outcomes. When functioning efficiently,
resources are optimally allocated across society as each individual
chooses where best to spend their money. Growth can be strong, if
it is not held back by regulatory practices which constrain choice
and public investment policy which inhibits growth.
But the Devolved Cost-Based Model will always be challenged torealise national opportunities and overcome national challenges.
The National Development Model is designed to identify national
issues and opportunities and address them. However, individual
choice is impacted. Comprehensive land use planning is needed toensure demand for infrastructure aligns with investment decisions.
Significant power is vested in the state, requiring consistent, strong
and capable leadership.
New Zealand needs an approach which leverages the strengths ofthe existing Devolved Cost-Based model and the strengths of the
National Development model. Interests at all levels of society need
to be recognised and outcomes for New Zealand promoted.
The New Zealand Government has already initiated a major
process of reform. The New Zealand Infrastructure CommissionTe Waihanga will produce a national infrastructure pipeline andstrategy. The Housing and Urban Development Authority willtransfer urban planning powers to a centrally guided agency withfunding and delivery capability. Wider planning reform is on thehorizon. The State Sector Act Review is reorienting departmental
focus away from inputs and process to outcomes-focuseddelivery. The Provincial Growth Fund is reinvesting in the regional
Heartland. The Budget is targeting wellbeing.
However, these improvements require ongoing and additional
reform to materially move New Zealand away from a focus onprocess to one on outcomes.
Recommendation:
1.

42

New Zealand retains the Devolved Cost-Based approach
where subnational decisions are empowered and central
government focuses on enabling the market economy,
minimising costs and unnecessary regulation.

Retaining the devolved approach will best protect individual andcommunity outcomes, promote private enterprise and prevent
overextension of national powers. But national outcomes will be
impeded without additional reforms.
Recommendations:
2. Central government shifts focus from services to outcomes.
In consultation with regions, the Government sets out
national outcomes, objectives, priorities, projections andtargets in a statutory national plan, but does not lead theimplementation of the plan.
3. Subnational economic and social zones where communities
live, work and play – regions – deliver the national plan.
4. Central government monitors regional implementation.
Fully integrated national strategic, spatial and land use planningprovides too much power to one level of government and cannot
be effected within three years. Subnational governance is needed
to balance national power and provide longer term delivery
capability. Government performance monitoring and support
provided to regions, where necessary, will facilitate implementation
through the political cycle. A top down-bottom up process will
ensure alignment of plans nationally, regionally and locally.
Recommendations:
5. Regions develop spatial plans which translate national
priorities into relevant regional outcomes and, in turn,
tangible projects and land use plans which deliver theoutcomes.
6. Regions develop minimum land use rules to align with
infrastructure capacity and investment as a prerequisite forland development.
7. Local councils develop maximum land use rules to align with
community aspirations.
8. Regional and local spatial and land use plans are signed off
by central government.

Strategic spatial planning is needed to translate intangible regionaland national outcomes into tangible land use rules and projects.
Strategic planning must incorporate the whole socio-economic
area, linking employment to homes and people to their regular
activities. Land use and infrastructure development must go handin hand. Spatial planning without land use planning will not engage
the community and will undermine implementation. Full land use
planning authority in one level of governance concentrates toomuch power. Local communities provide valuable input. They need
the opportunity to drive local economic, social and environmental
outcomes and identity. Plans must give effect to national priorities.
Recommendations:
9. Funding is devolved from central government in proportion
to increases in planning powers and responsibility.
10. Regions receive a portion of economic taxes (GST, income
and corporate tax), to incentivise and support investment innational priorities, and levy property taxes and user charges
to fund infrastructure and other spatial activities.
11. Local councils retain local property rating powers.
12. Central government allocates a portion of its revenue toregions to implement national direction. Regions allocate a
portion of their revenue to local councils to implement theregional spatial plan.
Funding from activities linked to the economy needs to come fromtaxes linked to economic performance. Projects and plans which
improve land value need to be co-funded by taxes linked to higher
property values. Linked funding aligns incentives to invest. Funding
from higher levels of government to lower encourages buy-in. Landand property taxes levied in proportion to value reflect the capitalvalue impact of public activities and reduce the need for restrictiveplanning rules. Individual and community aspirations are better
protected and national outcomes better promoted with a low levelproperty tax rather than regulation. Funding sourced from higher
levels of government helps incentivise alignment.

NATIONAL DEVELOPMENT: INSIGHTS FROM ASIA
JUNE 2019

Recommendations:
13. Delivery of transport, including fuel levies and charges,
is delegated to regions. Central government provides anallocation from the consolidated account to fund economic,
social or environmental public good outcomes.
14. Delivery of water is corporatised and funded throughvolumetric charging. Water service provision sits off local,
regional and central balance sheets, enabling financing.
15. Delivery of public housing is delegated to regions andfunded from regional taxes.
16. Delivery of market housing remains private.
17. Third party delivery of growth infrastructure not included inregional plans is permitted. Funding and financing is enabledthrough long term targeted property rates.
Specialised delivery of public services is effective where funding
is not ringfenced but linked to value created. Activities providing
services to a defined area should be delivered by that area,
allowing integration into spatial plans. Central government is the
only entity capable of monitoring performance against national
outcomes and is conflicted when monitoring its own agencies.
The public housing costs of market housing failure should remain
with the authority responsible for growth planning. Individual andlocal outcomes will not always be represented by regional plans.
Local communities need development alternatives where regional
planning and investment does not meet need.
These changes to the planning, funding and delivery of public
services will promote national outcomes, whilst enabling an open
market economy, and supporting individual and local aspirations.

43

Scale model of Toa
Payoh Town, Singapore
as presented at theSingapore City Gallery
Singapore, Hong Kong, Beijing andShanghai all operate public city galleries.
The public are invited to the galleries tovisualise the future growth of their city.
Galleries facilitate public engagement,
provide an opportunity to explain andinform and help build understanding ofcity direction.

ENDNOTES

1
2
3
4
5
6
7
8

Infrastructure New Zealand from World Bank data.
NZ Initiative, The Inequality Paradox, 2016.
Minister of Finance Grant Robertson, Wellbeing budget Speech.
World Bank.
World Bank.
PwC, Competitive Cities: A decade of shifting fortunes, 2019.
MBIE, Briefing to Incoming Minister, 2017.
Ministry of Social Development, Household Incomes in New
Zealand: Trends and Indicators of Inequality and Hardship
1982-2016, 2017, p. 213.
9 Ibid, p. 6.
10 Child Poverty Report, 2019.
11 Ministry for the Environment, Environment Aotearoa 201912 https://www.imd.org/contentassets/6b85960f0d1b42a0a07ba5
9c49e828fb/one-year-change-vertical.pdf
13 World Bank.
14 https://www.statista.com/statistics/755874/hongkong-disposable-income-per-capita/ and https://www.
channelnewsasia.com/news/singapore/singapore-householdincome-grew-in-2018-income-inequality-11238462
15 https://www.nzherald.co.nz/index.cfm?objectid=12234792&ref=
twitter
16 Wikipedia and World Bank data
17 GDP by purchasing power parity is an estimate of the valueof national production which accounts for the cost of living ineach country, thereby providing a dual proxy for economic andsocial wellbeing.
18 World Bank.
19 Urban Redevelopment Authority.
20 Urban Redevelopment Authority.
21 LTA.
22 Ministry of Land, Infrastructure, Transport and Tourism, Japan,
An Overview of Spatial Policy in Asian and European Countries:
China.
23 FBIC Group, Xiong’an New Area: China’s 3rd Growth Engine?,
January 2018.
24 https://www.china-briefing.com/news/xiongan-new-areabeijing-tianjin-hebei/
25 Singapore does hypothecate water charges to urban water
service provision.
26 Singapore Government, Analysis of Revenue and Expenditure,
Financial Year 2019.
27 Steve Yiu.
28 Wikipedia
29 Government of Hong Kong, Budget speech 2019-20. https://www.budget.gov.hk/2019/eng/pdf/e_budget_speech_2019-20.
pdf
30 Ministry of Finance, People Republic of China.

46

31 Singtel, the largest mobile services operator is listed on the
Singapore stock exchange, however its largest shareholder
is Temasek holdings, the investment arm of the Singapore
Government.
32 Centre for Liveable Cities, Financing a City: Developing
Foundations for Sustainable Growth, 2014.
33 Demographia.
34 Professor Bo Tang, university of Hong Kong.
35 National Construction Pipeline Report 2018.
36 https://www.budget.gov.hk/2019/eng/pdf/e_budget_
speech_2019-20.pdf
37 Chan, Kam Wing and Peter Bellwood, China, Internal Migration,
2011.
38 https://en.wikipedia.org/wiki/List_of_metro_systems
39 Shanghai Lingang Economic Development Group.
40 Youquin Yang, Low Income Housing in Chinese Cities: Policies
and Practices, The China Quarterly, 2012.
41 https://www.forbes.com/sites/wadeshepard/2016/03/30/
how-people-in-china-afford-their-outrageously-expensivehomes/#31ab22e6a3ce
42 Youquin Yang, Low Income Housing in Chinese Cities: Policies
and Practices, The China Quarterly, 2012.
43 https://www.scmp.com/business/china-business/article/2172413/fifth-chinas-urban-housing-supply-lies-emptyequivalent-50
44 HSBC
45 Wind, Ministry of Finance
46 NZ Treasury, Tax Outturn Data – April 2019.
47 www.localcouncils.govt.nz
48 National Land Transport Plan.
49 All data from Singapore Government, Analysis of Revenue andExpenditure, Financial Year 2019.
50 https://www.reuters.com/article/us-china-investmenttransportation/china-spends-328-billion-on-transportinfrastructure-from-january-to-september-ministryidUSKCN1N00UL
51 Housing NZ, Annual Report 2018.
52 NZ Treasury, Vote Social Development, Budget 2019.

Infrastructure New ZealandPhone: +64 9 377 5570
Email: info@infrastructure.org.nz
PO Box 7244, Wellesley Street, Auckland 1141, New Zealand
www.infrastructure.org.nz