Invest in innovation to stay competitive
Hong Kong must target areas such as financial technology if it is to regain its past glory as one of the world’s most competitive cities
The shift in emphasis to innovation, technology and internet-based business to drive economic growth has shaken up rankings of competitiveness. Partly as a result, Hong Kong is no longer assured of top-tier ranking, despite being one of the world’s most digitally connected places. Indeed, the latest survey has it in decline. Hong Kong has slipped out of the top 10 cities for competitiveness, from sixth to 12th, with Shenzhen soaring into the top 10 to take the city’s former sixth position. Five of the 10 most competitive cities were to be found in the United States, led by New York. This is according to a survey of more than 1,000 cities conducted by the United Nations and the Chinese Academy of Social Sciences.
Technology development now strongly influences competitiveness. The survey uses a broader measure than conventional business competitiveness studies, including technological innovation, housing costs – which also hurt Hong Kong – global connectivity and productivity relative to population size. Competitiveness is at the heart of every economic vision advanced for Hong Kong. Testament to its importance is the 9 per cent economic growth posted last year by Shenzhen, China’s foremost technology hub. Ni Pengfei, director for City and Competitiveness at the Chinese academy, says Hong Kong can arrest its slide by focusing more on the development of technology and innovation. In that respect, Chief Executive Carrie Lam Cheng Yuet-ngor has taken steps in the right direction towards diversifying the economy and attracting more risk investment with tax breaks including much bigger deductions for research.
Lam’s aim to double expenditure on R&D to 1.5 per cent of GDP over the next five years pales in comparison with Shenzhen’s current spend equal to 4.7 per cent of similar output. Targeting is therefore crucial. Investment in financial technology and innovation may be more fruitful than in areas where the city does not already excel. Much depends on how tightly the government defines R&D for cash-strapped small businesses, and how serious Lam is, as head of an interdepartmental steering committee, about getting rid of outdated red tape that hinders innovation.