The nature of Kwun Tong as an industrial community: an analysis of economic organizations

Author

Mok, Victor

TitleThe nature of Kwun Tong as an industrial community: an analysis of economic organizations
PublisherSocial Research Center, the Chinese University of Hong Kong
Publication Date1972
Pages:87
Keywords:

Industries

Abstract/ Concluding Remarks:In this report, we have dealt with various aspects of the factories in Kwun tong. The concluding remarks of each section summarize our findings in connection with these aspects. This overall summary will draw on such findings and present a general picture of the nature of Kwun Tong as an industrial community. In so doing, we shall also try to answer some of the questions which we originally raised.

1. The Nature of Kwun Tong Factories

Even though Kwun Tong is said to be an industrial zone, we should not be deceived by that term. The economic development of Kwun Tong (and Hong Kong) has not come to the stage where there are many large factories. By our modest standard, which classifies factories having 200 employees or more as large, only about 7% of the factories can be considered as such. On the contrary, more than 70% of them are small, each having less than 50 employees. When other size indicators are used, we get similar results. Therefore, there is no doubt that in number the factories in Kwun Tong are dominated by small ones. Only in a few industries, namely the Textiles, Apparel, Machinery and Others, there are relatively more medium-and large-sized factories. To a lesser extent, so is the Fab. Metal industry. We refer to these as the large scale industries.

Regardless of size, export orientation is a major characteristic of the factories in Kwun Tong, except those in the Food, Paper, and of course Services industries. There seems to be indicators that the large factories (and industries) tend to be even more export-orientated. The Textiles, Apparel, Rubber, Plastic, Fab. Metal and Others industries are most export-oriented. They export from well over 50% to 75% of their products. Since these are generally the large scale industries and together they employ approximately 80% of the work force, their pattern is representative of the overall export orientation of the Kwun Tong factories.

Even though their overseas markets are rather diversified (with the U.S. as the leading market) and most industries are involved heavily in export trade, the product lines of individual factories are surprisingly narrow. Most factories limit themselves to the production of one or two kinds of output. This further reflects their dependence on export trade, as their outputs are mainly produced according to the specification of their foreign buyers. This practice of filling orders, instead of trying out new and diversified products, necessitates the specialization in their production.

As most factories in Kwun Tong are manufacturing final products for export markets, perhaps it is not surprising at all to find that they actually depend very little on one another as sources of their inputs and outlets for their outputs. However, in the simultaneous development of industries in this area, considerations on such market relations should still have a certain role to pay if the market mechanism of supply and demand works at tall. Conceivably, there should be close interrelations between the Textiles and Apparel industries, and among the metal-working industries, etc. These linkages seem to exist, but only to a very limited extent. Even in those industries which tend to market higher proportions of their products in Kwun Tong, the rest of Hong Kong is still a much more important market for their products. This suggests that these factories are as much part of Hong Kong as part of Kwun Tong itself.

The other side of the coin is the source of their machinery and equipment and other material inputs. There is little machinery and equipment and other material inputs. There is little doubt that the heavy machinery and equipment are purchased from abroad, and it is the large factories (and the large scale industries in general) which depend mostly on this source of supply. With respect to raw materials and intermediate products, all industries (except Services) report that they depend overwhelmingly on foreign supplies. Of the small part which they purchase from the local market, again the share of Kwun Tong is much less than that of the rest of Hong Kong. In other words, the choice of location of the factories in Kwun Tong has little to do with the local supply of these inputs.

The same is true for labour input. Even though there is a vast source of labour supply in Kwun Tong with its 450,000 people, only half of the factory employees are from Kwun Tong. On the other hand, about half of the Kwun Tong residents who are factory workers are employed elsewhere. This is entirely irrational from the economic point of view if we just think about the time and money consumed in this heavy, daily cross-traffic, not to speak of the resulting traffic conjection which is a typical case of external diseconomy. Theoretically, with the help of the invisible hand of the market mechanism, all will end up well in the long run, and the workers will adjust their place of residence to where they work or the other way around. In reality, this is not happening at all. One explanation is found in the mature of the Kwun Tong factories. Since they depend heavily on exports markets, their demand for labour will fluctuate with the seasonal and cyclical variations of foreign demand. As a result, a considerable proportion of the labour force in Kwun Tong (as well as in Hong Kong) tend to have high mobility and flow from one industry to another depending on job opportunities. We have evidence for the high turnover of regular production workers. Some industries also depend heavily on seasonal workers. This frequent change of jobs makes the adjustment we have mentioned all the more difficult. For the average factory worker, he simply cannot afford to change his place of residence every time he changes his job. He might also be expecting that his next job would be closer to his present address, which may not materialize at all/ This partially explains why the Kwun Tong labour market cannot be considered an entity of its own; its demand for and supply of manpower are inseparable from those of Hong Kong at large.

Thus, another major characteristic of the Kwun Tong factories is the lack of interdependence. Not only are they lacking in input-output relations among themselves, but also they are not closely tied to the local work force. It seems that what they have is only a common ground, literally speaking. Beyond that, their relations are not much different from those among all factories in Hong Kong. The input land is thus the deciding factor. There is little doubt that these factories, newly established or moved in, are located in Kwun Tong because of the availability of industrial land. In fact it was due to the shortage of land (industrial, commercial, as well as residential) that Kwun Tong was planned and developed, and it is from this very same factor we shall seek explanation for the problems that face Kwun Tong today. To this we shall shortly return in our discussion on the nature of Kwun Tong as an industrial community.

2. Employment
In our discussion on the factories and industries in Kwun Tong, we have already mentioned the contrast in their scale. When it comes to their employment the contrast in much more remarkable. There is a very high concentration of the work force in a few industries. The four large scale industries combined (namely Textiles, Apparel, Machinery and Others) employ close to 70% of the factory workers in Kwun Tong, and in the Textiles industry alone it is more than 25%. If we consider the six most export-oriented industries, namely Textiles, Apparel, Rubber, Plastic, Fab. Metal and others, they provide employment for close to 80% of the work force. As these industries are all subject to seasonal and cyclical fluctuations as a result of changing foreign demand, the high mobility of labour only reflects the adjustment of the labour market to these changing conditions. Needless to say, the production workers are those most vulnerable to changing demand conditions and they have to adjust their employment accordingly. We find indeed that the turnover of the production workers is highest among various categories of factory employees. This high turnover also reflects the ability and willingness of these workers to adjust. These are important qualities for the workers themselves as well as for the factories. For, in an economy like Kwun Tong (and also Hong Kong in general) which is highly susceptible to fluctuations generated abroad, the lack of such flexibility could easily lead to structural unemployment.

In 1970, which was a good year for Hong Kong’s export trade, there were growing signs of a labour shortage. Compared to other categories of employees, the general consensus was that additional production workers were most difficult to recruit. This phenomenon, together with high labour turnover, are all symptoms of a tight labour market in which the production workers are all taking advantage of their sellers’ position.

Our analysis of wages also leads to the same conclusion. In recent years the general impression in Hong Kong is that the blue-collar workers are faring better than the white-collar workers. This is indeed the case, as our estimates show that the average wage of the production workers is higher than the average salary of the clerical workers. Not only that. In order to attract the cream of the production workers, the large factories tend to offer higher wages and other welfare benefits. All these are signs of rapid growing industries in confrontation with a growing labour shortage.

But the case for the clerical workers is entirely different. They earn lower salaries and their turnover is also low. The general consensus is that there is little difficulty to recruit such workers, and there is little difference in their salaries between small and large factories. Unlike the demand for production workers, the demand for clerical workers is not rigidly geared to the level of production; and for factories, their major manpower requirements are not in this particular category. On the supply side, the massive influx of high school graduates into this segment of the labour market annually guarantees that there is no shortage in supply. In all, it is a buyer’s market.

At the present stage of industrial development of Kwun Tong (and Hong Kong), there is still not much difference in the technical requirements for production and clerical workers. With some additional training and proper inducement the barrier can easily be surmounted. Theoretically the market mechanism can facilitate the transfer from one group to another; but in fact it seems to be painfully slow. Technical education is of course very important to foster this transfer; what is more basic is psychological preparedness and acceptance. For it is a general phenomenon in the developing economies that society looks better at white-collar workers even though they are lowly paid, whereas industrialists are hard put and yearning for manpower. In our case of the factories in Kwun Tong, perhaps this contradiction is not as acute as in some other countries. Hong Kong does have a large commercial and financial sector which also has its vast potential opportunities, and the current wage differential may not be sufficient to warrant such transfers even if the workers have no psychological barriers to cross. All we suggest here is that we do see some emerging signs of this interesting phenomenon in our analysis of the employment situation in the Kwun Tong factories. And, with the further development of the factories in Kwun Tong (and Hong Kong), this problem can become very real.

3. The Overall Nature of Kwun Tong as an Industrial Community
The original question as raised at the beginning of this report is whether Kwun Tong is a self-contained community, or just part of Kowloon. We raised this question because the development of Kwun Tong was “planned”; at least it was half-planned. After fifteen years Kwun Tong is now well-developed. We can pause to review the elements of inadequate planning, which can be measured by the problems facing Kwun Tong today, and those factors that prevent Kwun Tong from becoming a self-contained community.

In our analysis all indications show that Kwun tong is hardly a self-contained community, even though it was planned with the simultaneous development of industrial, commercial and residential areas. The development of an industrial community depends on a number of factors, such as the availability of industrial land, the proximity to output markets, the supply of labour, the accessibility to other input markets, the supply of labour, the accessibility to other input markets, and the sufficient provision of the economic infra-structure. It is the configuration of all these factors that ultimately determine the location of economic activities. Let us consider these factors for the case of Kwun Tong.

First, we have already pointed out the locational choice of the factories in Kwun Tong has very little to do with the proximity to their output markets. Overwhelming proportions of their outputs are marketed abroad or in the rest of Hong Kong. In this respect, it would not make such difference if these factories are located somewhere else in Hong Kong.

Second, even though Kwun Tong is well supplied with man-power, there is no evidence that the factories there depend mainly on the local supply of labour. The heavy cross-traffic of workers between Kwun Tong and the rest of Hong Kong indicated that there is only one labour market. The geographic proximity of Kwun Tong to many areas in Hong Kong is of course a major factor. In fact, a trip from some of these areas to Kwun Tong Town may not take much more time than from some outlying districts of greater Kwun Tong. The willingness of the workers to absorb the time and money consumed in travelling is another factor. In any event, these factories might as well be located elsewhere.

Third, in the case of markets for other inputs it is not different, since the factories in Kwun Tong purchase such inputs mostly from foreign countries or the rest of Hong Kong anyway.Fourth, except road network the provision of the economic infrastructure in Kwun Tong is generally adequate. But this is not something unique. The supply of power and water, the communication system and other services are also adequate in many developed areas of Hong Kong. On the other hand, inadequate road network has generally become a cause of external diseconomy and could be a stiffing factor for the further development of Kwun Tong.

This leads us to the final factor, the availability of land, which we believe to be the deciding factor for Kwun Tong to become an industrial community. It was because of the industrial land shortage that Kwun Tong was developed, and most factories readily admit that land is its major attraction. Factories are located there not because of other reasons but to satisfy their hunger for more land. Thus Kwun Tong has become a major point of manufacture. All other factors are adjusted to it making it impossible to become a self-contained community. The convergence of so much industrial activities in Kwun Tong and its frequent and yet unavoidable relations with the rest of Hong Kong has put tremendous pressure upon the existing supply of road network. This problem is further compounded by the mobility of people between Kwun Tong and the rest of Hong Kong. We have already dwelt on some of its causes; however, we submit here that land shortage is also a major cause for this high mobility of labour.

The provision of resettlement and low-cost housing facilities in Kwun Tong was presumably aimed at providing the factories there with sufficient supply of local work force. As it turned out it was not quite successful. Those who obtain housing allotments there very often do not work in Kwun Tong art all. The general housing shortage in Hong Kong is so that once people obtain such housing they can hardly be expected to move, even if it is a long way from their work location. Compared to the cost of transportation, the cost of moving is much higher, because comparable housing accommodations are far more expensive at market rates. The same is true for better-class housing. The majority of the occupants in such housing are owners, and they consider their purchase as a hedge against rising housing cost. They would rather travel to work than move as housing costs are rising everywhere. The lack of first class housing further increases the flow of traffic. On top of these, there is also the large number of children travelling to school in other areas everyday as school facilities are by far insufficient in Kwun Tong.

Putting all pieces together it is understandable why Kwun Tong is very much an integral part of Hong Kong. The heavy cross-traffic of good s and people was quite unexpected in the original “plan”, because it only provided one road leading to Kwun Tong which unfortunately had to pass through San Po Kong, another industrial area. The bottleneck is at Choi Hung and Ping Shek, the point of entry to Kwun Tong, where traffic has come to the point of saturation many hours during the day.

At present there are two road plans both attempting to ease the traffic congestion by bypassing San Po Kong. One is the expansion of Lung Cheung Road in the north which connects Kwun Tong with industrial areas and port facilities on the west side of the Airport leading to Kwun Tong from Kowloon. When finished, these roads will no doubt help alleviate the traffic congestion. The necessity for these remedial measures reflects the realization of the fact that Kwun Tong is hardly a self-contained community because of its very nature.

The provision of more road attacks the problem from one angle. It seeks to facilitate the present volume of traffic within the land space currently in use. But there is an easy limit to this – the volume of traffic continues to increase while road construction also has a claim on land. A rational solution in the longer run should be in attempts to spread out the volume of traffic into wider areas and if possible reduce the volume of traffic itself. This is why in Hong Kong the development of more satellite towns is a necessity. Because of the nature of the Hong Kong economy, there will still be cross-traffics of goods. But the big difference is that it will be more widely spread. On the other hand, the decentralization of population will reduce the traffic of people. However, it still depends on the provision of much more low-cost housing facilities in many areas. The easing of the general housing shortage will reduce the cost differential between public and private housing, so that more people will become willing and able to adjust their place of residence to where they work. Only this can help reduce the cross traffic of people.Almost twenty years ago, Mr. U. Tat chee, then President of the Hong Kong Manufacturers’ Union, wrote, “Hong Kong has the facilities and enjoys many advantages for success in her efforts to promote her industries. There is a good and efficient Government, a stable currency, good shipping and banking facilities, a cooperative and contented labour force, and above all there are adventurous industrialists. There is plenty of readily available capital in this Colony and more funds are pouring into HK …… There is a large supply of skilled labour force …… There is however one big obstacle: the building land problem. Cheap land for factories does not exist”. In many ways this is still true. Our analysis of the nature of Kwun Tong as an industrial community indicates that the provision of residential housing facilities is also of great importance. Not only that it is a social problem of its own, over-crowdedness pf people can also have adverse effects on the further development of industries in form of external diseconomies.
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