Speeches and Presentations

LCQ7: Promoting development of innovation and technology

Following is a written reply by the Acting Secretary for Financial Services and the Treasury, Ms Julia Leung, (in the absence of the Secretary for Commerce and Economic Development) to a question by the Hon Samson Tam in the Legislative Council today (May 16):


Some members of the industry have pointed out that the existing procurement policy of the Government does not provide support for local innovative technology products, resulting in local enterprises lacking the experience in using such products which may serve as references, which has not only caused an outflow of technology but has also led to a drain of technology talents of the new generation. In order to change the present business environment in Hong Kong, will the Government inform this Council:

(a) whether it has conducted any study on the provision of incentives to encourage government departments and the commerce and industry sectors to accord priority to using the results of local scientific researches; if it has, of the details; if not, the reasons for that;

(b) whether the authorities have any proactive measure in place to boost the confidence of the domestic market and users in local innovative technology, and whether they will consider setting up a certification scheme similar to that of "Created by Hong Kong", so as to improve the situation of local innovative technology being neglected in Hong Kong; if such measures are in place, of the details; and

(c) apart from providing funds to support the operation of the Research and Development Centres set up under the Innovative and Technology Fund, what specific measures the authorities have put in place at present to assist in the commercialisation of research and development results of enterprises so as to promote the development of local innovative technology?



The SAR Government has been attaching great importance to the development of innovation and technology, and it was designated in 2009 as one of the six industries where Hong Kong enjoys clear advantages.

It is a long-term investment to develop innovation and technology. Over the past decade, Hong Kong's research and development (R&D) expenditure has been increasing at an average annual growth rate of about 7%. The R&D expenditure by the public sector (including Government and higher education sectors) has increased at an average annual growth rate of 4.7%, from HK$5 billion in 2001 to HK$7.5 billion in 2010, accounting for 57% of the gross R&D expenditure.

My reply to the three parts of the question is as follows:

(a) As an international business centre, the SAR Government ought to follow an open and fair procurement policy which complies with the tender procedures as clearly set out by the World Trade Organisation. We treat all tenderers equally and will not accord any favourable treatment to products on the basis of their country of origin.

Nonetheless, we understand that there is a keen expectation from the research sector for the SAR Government to promote innovation and technology on various fronts, in particular on the trial use of local R&D outcome in the public sector. Such trials would bring social benefits by facilitating real world application of the research deliverables. We have been pro-actively seeking flexible measures over the past two years through consultation with various stakeholders (including the Legislative Council), with the objective of nurturing indigenous innovation and technology.

Following the principles of fairness and openness outlined above, the prevailing Government procurement system puts emphasis on both the price and quality of products, including their usage track record. New products tend to cost more due to various reasons, for example when mass production may not yet be feasible to reduce unit cost. In relation to the usage track record, they do not usually fair well. For these reasons it is difficult for new local R&D products to win in an open tender. In order to promote the use of local R&D products in the public sector, we should explore means to help new products to meet the level of requirements through the Innovation and Technology Fund (ITF), instead of varying the procurement system.

Before early 2011, the ITF would only provide financial support for the completion of the R&D work cumulating in the submission of a report; and any follow-up would not be funded. However, it is very difficult to convince users to adopt such R&D outcomes with confidence simply based on a report. Most of them would like to study the prototypes or samples in more detail, or to compare them with existing products before they feel more confident about the new offers. It would be even more desirable to observe the products in a real world application to enable an accurate assessment of their merits (e.g. speed, reaction time, failure rates etc.).

To this end, we have extended the scope of ITF funding in early 2011 to cover, in addition to R&D work, the production of tools/prototypes/samples and the conduct of trial schemes in the public sector. The public sector includes government departments, public bodies and trade associations, etc. The funding ceiling for these additional work is capped at 30% of the original R&D project cost. Moreover, the Commissioner for Innovation and Technology may exercise discretion for additional spending under exceptional circumstances (e.g. the product developed would bring great benefits to the community).

The above new arrangements are beneficial to various parties:

(1) For the public sector such as government departments, they can conduct trial use of new technologies at no cost to improve their operations. They also have the benefit of sharing the knowledge and experience of the research experts;

(2)For technology developers such as university professors, they can witness real world applications of their R&D outcomes;

(3)For companies that have funded the R&D projects, they can collect user feedback in the process of product design and fine-tune research outcomes so that their products can better meet market needs. They can also obtain references for their products from the public sector through the trial, and that the references will be useful for future marketing efforts; and

(4)For the general public, they can also benefit from the enhanced service quality and efficiency of the public sector following the adoption of innovative technologies.

Since the launch of the new arrangements in 2011, a large number of projects have been conducted. Some examples include:

(1)The Hong Kong R&D Centre for Logistics and Supply Chain Management Enabling Technologies has developed an E-lock-enabled tracking platform for the Customs and Excise Department to monitor the movement of the vehicles and ensure cargo security. Trial runs have been conducted at various control points;

(2)The Hong Kong Polytechnic University and the Hong Kong Applied Science and Technology Research Institute (ASTRI) have recently conducted R&D on various intelligent home systems and equipment and set up a demonstration centre in Yau Ma Tei with the Hong Kong Housing Society, providing information to enhance the quality of life for the elderly;

(3)The Highways Department has been conducting trial use of ASTRI's LED lighting facilities; and

(4)The Nano and Advanced Materials Institute has installed a 10kW thin-film silicon solar cell unit on the rooftop of the Tseung Kwan O Hospital as a supplementary source of power.

(b) and (c) I strongly share the view expressed by a number of Members at different meetings that commercialisation of R&D results is vital to technology development. This is also regarded as a priority area in our efforts in promoting innovation and technology development. Apart from the above-mentioned arrangements on extending the scope of ITF funding to cover the production of tools/prototypes/samples and the conduct of trial schemes in the public sector, other initiatives include:

(1) Encouraging the R&D Centres to set up dedicated teams on the commercialisation of research outcomes;

(2) The Innovation and Technology Commission organising various networking events to bring together representatives from the Government, industry, academic and research sectors to discuss their need in relations to R&D and commercialisation activities under different technology areas, so as to identify and devise R&D projects for collaboration;

(3) In order to support the R&D activities of technology-based small and medium enterprises (SMEs), the Administration has launched the Small Entrepreneur Research Assistance Programme (SERAP) to provide SMEs with funding in the form of a matching grant to encourage them to undertake R&D and promote commercialisation of deliverables. To enhance the effectiveness of SERAP, we have since April increased the funding ceiling for each project from $4 million to $6 million and expanded the funding scope to facilitate commercialisation, including industrial designs, testing and certification of prototypes, pre-clinical trials, etc.; and

(4) The Hong Kong Science Park also provides technology start-ups with a comprehensive incubation programme comprising consultancy services in training, business, legal and fund-raising, etc. to facilitate technopreneurship development.

Wednesday, May 16, 2012

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