Chief executive recognises limitations but calls for concentration on the areas where HK is strongest Chief Executive Tung Chee-hwa's latest policy address confirms that information technology will be the driving force behind Hong Kong's transition to a knowledge-based economy. 'A key to promoting economic restructuring is the introduction and application of new and advanced technologies to enhance Hong Kong's long-term competitiveness,' Mr Tung said last week in his annual policy address. He said the government initiatives - including Cyberport, the Science Park and the Innovation and Technology Fund - would help promote local research and development, as well as general business opportunities for local enterprises. 'Of course, technological development cannot be achieved overnight,' he said. 'Our investment in this area is relatively limited and must necessarily concentrate on developing a few areas where we have the strength.' But he said that Hong Kong had made a good start, and that the government would back the application of IT to promote the city's growth. The timing of his message followed improving expectations about IT spending in Hong Kong. Research firm International Data Corp has estimated local IT investments will post a moderate recovery after a three-year slump, reaching US$2.6 billion this year from about $2.5 billion last year. Against that scenario, Mr Tung's latest address on the IT sector echoed ideas first discussed in his 2000 policy statement. At that time, he said people could now better appreciate how essential innovation and technology were 'to enhance productivity for our sustained economic growth'. In this year's address, Mr Tung said Hong Kong 'has amassed a group of high-quality researchers' pursuing innovation in areas such as integrated circuit design, photonics, wireless communications, digital media entertainment and applied nanotechnology'. The government estimated that the number of organisations and enterprises engaged in research and development grew 38 per cent, from 887 to 1,223, between 2001 and 2002. Mr Tung said the number of research and development personnel and spending on research projects also grew. He noted that this trend continued last year. IT sector legislator Sin Chung-kai said the public discussion on the proposed 2004 Digital 21 Strategy for Hong Kong had put emphasis on building a viable local IT industry. 'Hong Kong faces critical change,' Mr Sin said. 'Our government's primary role in the next few years should be to help Hong Kong IT companies penetrate the mainland market.' Jacky Cheung Yiu-shing, president of the Chamber of Hong Kong Computer Industry, said efforts to bolster the city's transition to a knowledge-based economy reflected the move of most IT manufacturing to the mainland. 'Hong Kong companies should focus on product design, marketing and software development,' he said. Tam Chung-ding, chief executive of Hong Kong Science and Technology Parks Corp, predicted an upturn for the local electronics sector, as the government encouraged more competition in the semiconductor design industry. 'This development will have a huge economic impact for Hong Kong since we would control the core technology behind electronics products, the integrated circuit [IC],' said Mr Tam, who oversees the recently launched IC Design Centre at the science park. He said Hong Kong needed to cultivate the skills and build key infrastructure to support an IC design industry that 'would not reinvent the wheel', but 'simply adopt existing semiconductor product road maps'. That would enable Hong Kong's electronics sector to get more deeply involved in product innovation and component supply. Most of Hong Kong's electronics manufacturing has moved to low-cost production areas in the mainland, where factories - many funded by Hong Kong firms - churn out chip-filled electronics goods from computers and mobile phones to microwave ovens and toys. Mr Tung vowed that the government would make policy adjustments to enable new industrial development on the mainland through the Closer Economic Partnership Arrangement. Still, public satisfaction with Mr Tung's policy address fell below the 50 per cent pass mark for the first time, according to a University of Hong Kong poll last week. The survey, which interviewed 1,040 people immediately after Mr Tung delivered the address, found the satisfaction rating was 49.4 points. Only 12 per cent of respondents believed the address could meet public expectations for better governance.