One belt, one road’s digital initiative is full of potential, but Hong Kong firms need to be wary of pitfalls

City’s expertise in tax, financial, legal and infrastructure system design makes it well-equipped to bridge mainland China and other belt and road countries

PUBLISHED : Tuesday, 01 November, 2016, 11:11am
UPDATED : Tuesday, 01 November, 2016, 5:37pm

Does the one belt, one road initiative offer opportunities for Hong Kong’s IT, start-ups and digital industries? As pundits discuss “potential”, many Hongkongers have yet to understand the strategy and how it will boost the city’s tech sector.

“The initiative will be the ‘Digital Silk Road’ connecting businesses between China and the countries along the road,” says Steve Lo, EY’s managing partner, technology, media and telecommunications.

Lo outlines potential beneficiaries, which include digital marketing professionals familiar with China digital platforms Alibaba, Tencent and Baidu, and global digital platforms Facebook, Google, WhatsApp – organisations that can deploy business applications for cloud solutions.

For Lo, critical to the process are Hong Kong’s advantages in tax, financial, legal and infrastructure system design that can bridge mainland China and other belt and road countries. This expertise, along with Hong Kong’s place as a cultural and linguistic bridge, should serve it well should business arise.

“Hong Kong IT practitioners can facilitate Chinese technology enterprises ‘going out’ by managing large-scale IT projects, including design, development, operation and go-live support,” Lo says.

Areas that could develop include smart-city applications, such as home automation, smart-grid, building information modelling and green-energy optimisation; transport and logistics solutions, including fixed and wireless communications, remote Wi-fi networks, fibre optics and sensors; and

financial technology applications, including mobile payment, money transfers and credit scoring.

For many start-ups, this will start by identifying a credible and committed local partner to help open the necessary commercial doors. This is an acute risk and challenge
Will Ross, partner and head of innovation at tech accelerator Nest

Will Ross, partner and head of innovation at tech accelerator Nest, sees potential in belt and road initiatives. The Fintech sector is already working within Chinese tourism, helping with booking, itinerary shaping and the payment of goods and services using WeChat and AliPay. The belt and road initiative “helps to broaden the target geography for start-ups, while providing for the opportunity to guide travellers in the opposite direction to seek services in addition to experiences, in the way that Thailand has captured both leisure as well as health tourism”, Ross says. “This is a clearer source of near-term opportunity, with the support for enterprises solutions and trade finance following in the medium term.”

When combined with finance opportunities along belt and road countries, this may contribute to the development of nascent industries in Hong Kong, including linkages with Islamic finance. “Hong Kong might be able to leverage its advantage in financial services to attract more of the growing market in Islamic investment and banking,” says Robert Bianchi, from Shanghai International Studies University’s Middle East Studies Institute.

Lo sees obstacles in sourcing local talent in belt and road countries, which may be alleviated by technological solutions. “Leveraging a cloud computing model with remote support from Hong Kong or other countries will make it more effective to start doing business with customers in

these countries,” Lo says.

The EY partner still sees language, culture, and legal environments in belt and road countries as necessitating local partnerships. “There are more than 60 countries in the belt and road countries, so it is important for IT practitioners to select certain countries they are interested to target,” Lo says.

Ross says that practically fitting products into local markets will be a major challenge. “For many start-ups this will start by identifying a credible and committed local partner to help open the necessary commercial doors. This is an acute risk and challenge as even the largest of companies have fallen prey to poor partner selection in developing markets.”

There is scepticism that Hong Kong’s business environment is suited to such a raw market, Bianchi says. “The main impediment is probably the indifference of Hong Kong’s business leaders to these possibilities. They don’t like going into unknown territory.”