My Take

Rethink needed over innovation funding

The Hong Kong Government is spending big on promoting innovation and information technology. But our bureaucrats have to overcome the mindset that prefers big, established and/or international consultants and contractors.

PUBLISHED : Saturday, 07 January, 2017, 1:22am
UPDATED : Saturday, 07 January, 2017, 1:22am

What do FedEx, Symantec, Qualcomm and Amgen have in common? Actually not much, except when they were all start-ups, they got a big break from the US government under the same federal programme that offered seed money for small but innovative companies.

Our next government can learn something from the American experience.

Of course, most governments, including Hong Kong’s, spend lots of money every year promoting innovation and information technology. Whether they get a good bang for the buck is an entirely different question.

Just from the current budget, our government has earmarked HK$2 billion for an Innovation and Technology Venture Fund, aimed at co-investing with private venture capital to finance start-ups; HK$500 million for a “better living” fund to finance hi-tech projects to improve daily life; and another HK$100 million a year to support science research.

There is a new pilot technology voucher programme, budgeted at HK$500 million, for small and medium enterprises as well as new rebates and subsidies for companies that hire interns in the IT industry or for research and development.

Hong Kong chief executive announces HK$2 billion fund to boost investment in innovation and technology

But what bureaucrats love to do is to set themselves up – or hire outside consultants, usually academics - as judge and jury about who is worthy of the government largesse. Unfortunately, not everyone has confidence in their judgment and acumen to pick winners.

What is different about the funding model of the US “seed fund” – which dates back to the early 1980s and has been copied by some OECD countries – is that, in a sense, it’s the companies that choose the most suitable contracts offered by a government department, for a specific job. Of course, an official panel still has to decide who to award the contract.

According to the current model, a government is a big customer with deep pockets who faces lots of complex challenges and problems that need innovative solutions. Dozens of government departments and units may be mandated to use a percentage of their budgets to contract small or medium-sized local companies that may offer a solution.

This is to make government procurement a promoter of innovation. Of course, our bureaucrats, who think they know it all, have to overcome the mindset that prefers big, established and/or international consultants and contractors. This has been a long-standing industry complaint in Hong Kong. And it may be the bigger challenge to overcome.