Hong Kong needs to diversify. Its narrow economic base threatens not only its economic progress but also social stability. The city's weakening competitive edge, revealed in recent reports, has become a hot topic among businesses and policymakers.
The latest blow is in the world competitiveness report by Switzerland's IMD, which lowered Hong Kong's ranking from first place last year to third.
Competitiveness is not an end in itself, but a means to address problems. Secretary for Financial Services and the Treasury Chan Ka-keung attributed the city's declining competitiveness to weak growth in major advanced markets. The government should examine why our economy is so vulnerable to these external factors.
The service industry contributed about 90 per cent to Hong Kong's gross domestic product last year, with financial services, real estate, professional and business services having the largest share.
By contrast, only about 2 per cent of GDP came from manufacturing. Given that the service industry's customers are mostly from overseas, that makes Hong Kong vulnerable to outside market and economic volatility.
A service-based economy has several consequences, given the limited number of high-paid jobs in the sector. Most service jobs are low-skilled or unskilled positions, for which workers receive low pay. They have little chance to move upwards, resulting in a widening income gap.
With mainland China now stepping up its efforts to develop a modern service industry in finance, shipping, hi-tech innovation and tourism, its economic relationship with Hong Kong is complementary, but also competing.
In view of this, the Hong Kong government needs to redirect more resources to manufacturing. It's not about churning out low-value products; today, the focus should be on high value-added and advanced technology industries or processes, which can sustain our economic growth because they offer skilled jobs that come with higher pay and continuous career development, ensuring upward mobility and helping to narrow the income gap.
Furthermore, with its unique advantages, including free flow of information, strong role in intellectual property protection and good reputation for quality control, Hong Kong can be a centre for intellectual property protection, catering to creative and hi-tech sectors such as design, biotechnology, telecoms and precision engineering.
Never forget that our "Made in Hong Kong" brand has impressed people around the world with its quality. It would be timely and appropriate if the HK$1 billion special fund established to help small and medium-sized enterprises develop and promote their brand on the mainland could be extended to cover emerging overseas markets as well.
Besides, hi-tech, culture and new manufacturing industries require talent more than anything. It's time for officials to address the skills mismatch in education and employment that has plagued the city for years. In the meantime, the government could look at a liberal immigration policy to attract highly skilled talent, while ensuring locals still get priority.
Jeffrey Lam Kin-fung is a legislative councillor in the commercial (first) functional constituencyTopics: Hong Kong Economy