Hong Kong needs a strategy to develop into a knowledge-based economy and innovation hub
The finance and property sectors continue to dominate the economy and there is a noticeable lack of investment in research and development
Hong Kong has excellent infrastructure and institutions and a sophisticated market and business environment. Yet when it comes to innovation, technology and research and development, we lag behind our neighbours. With the economy having a narrow base and the service sector dominating, that is perhaps understandable. But with a fast-ageing society and so much regional competition, there is every need for diversification to guarantee growth.
The government has long sought such a shift and has established numerous funds and schemes to foster innovation and encourage technology firms. Its setting up of the Innovation and Technology Bureau to direct policy showed its determination to develop Hong Kong into a knowledge-based economy and an innovation hub. But the finance and property sectors continue to dominate and there is a noticeable lack of investment in research and development (R&D) compared to elsewhere. Spending on R&D last year was 0.73 per cent of GDP, compared to 2.0 for Singapore, 2.1 for the mainland, 3.58 for Japan, 3.0 for Taiwan, 4.0 for Shenzhen and 4.29 for South Korea.
Noted economist Professor Lawrence Lau Juen-yee, a former vice-chancellor of the Chinese University of Hong Kong and the lead author of a report on the city’s positioning in future development, told a recent forum that R&D investment should be increased to match the level of Shenzhen. He said the private sector needed to play a bigger role and pointed out that our educational institutions were not turning out the types of graduates needed by R&D firms. There was a need for a rethink of government subsidies and incentives.
Catching up will be challenging. The science and technology sectors are well developed elsewhere in the region and high property costs and a lack of skilled labour put Hong Kong at a particular disadvantage. Yet having some of the world’s best universities, a vast pool of financial resources and a sound legal system that protects intellectual property also gives an edge.
Hong Kong needs a strategic vision with research and development at its core. Government policies should focus on particular areas to attract companies and direct educational institutions; financial technology, or fintech, is one obvious area that could be further strengthened. Taxpayer funds are involved, so authorities have to ensure spending is justified. But there also has to be community support; training researchers and scientists and encouraging innovation requires changing present ways.