LCQ9: Competitiveness of Hong Kong
Following is a question by the Hon Chan Chun-ying and a written reply by the Secretary for Commerce and Economic Development, Mr Gregory So, in the Legislative Council today (November 9):
Regarding the competitiveness of Hong Kong, will the Government inform this Council:
(1) given that three authoritative international research institutions (i.e. the World Economic Forum (WEF), the Z/Yen Group and the International Institute for Management Development in Lausanne, Switzerland (IMD)) published this year their global competitiveness reports one after another, and Hong Kong's ratings as well as rankings in such reports varied from the first to the ninth place, whether it has explored why Hong Kong's rankings vary quite significantly among such reports; whether it has reviewed and targetted the items on which Hong Kong has obtained relatively lower ratings in the reports and introduced new policies to enhance Hong Kong's competitiveness in respect of such items; if it has not, of the reasons for that;
(2) given that as indicated in the Global Competitiveness Report 2016-2017 published by WEF on September 29 this year, Hong Kong's overall ranking in 2016-2017 in the Global Competitiveness Index has dropped to the ninth place, and Hong Kong's rankings in the aspect of innovation in the past three years were all lower than the 25th place, whether the Government has, in light of the report, studied ways to enhance Hong Kong's capacity for innovation; if it has not, of the reasons for that; and
(3) given that albeit IMD's ranking Hong Kong as the world's most competitive economy in the World Competitiveness Yearbook 2016 published in May this year, the Yearbook mentions at the same time that except Hong Kong and Singapore, the rankings of other Asian economies have all dropped as compared with those in the year before, whether the Government has studied the overall economic outlook of the economies in Asia and reviewed if such an outlook would affect the long-term economic development of Hong Kong; if it has studied and the outcome is in the affirmative, of the new corresponding measures the Government has in place; if it has not studied, the reasons for that?
The Government attaches great importance to the enhancement of Hong Kong's competitiveness, in order to adapt to the world's ever-changing economic environment and secure the healthy development of Hong Kong's economy in the long term.
Having consulted the Economic Analysis and Business Facilitation Unit, the Financial Services and the Treasury Bureau, and the Innovation and Technology Bureau, my consolidated reply to the three parts of the question is as follows:
Study reports on competitiveness
The research foci of the three reports mentioned in the question vary considerably.
The World Economic Forum's Global Competitiveness Report (GCR) and the International Institute for Management Development's World Competitiveness Yearbook (WCY) focus primarily on assessing the overall competitiveness of economies. The former puts a greater emphasis on innovation when measuring the competitiveness of developed economies; while the latter assigns a balanced weighting scheme to its four competitiveness factors, namely "economic performance", "government efficiency", "business efficiency" and "infrastructure". Given Hong Kong's long-standing comparative advantages in robust institutional framework and facilitative business environment, our performance in the WCY is relatively better in general. Meanwhile, the Government stays committed to enhancing Hong Kong's competitiveness in innovation and technology (I&T), details to be set out in ensuing paragraphs.
As for the Global Financial Centre Index compiled by the Z/Yen Group, the primary focus lies in assessing the competitiveness of the financial sector in various cities. According to that Index, Hong Kong as well as London, New York and Singapore continue to be world leading financial centres. The focus of the index is significantly different from those of the two other competitiveness reports, and it is therefore hard to draw direct comparison between them.
Economic trends in the Asian region and the impact on long-term development of Hong Kong’s economy
Economic ties between Hong Kong and other regions of Asia are close, and the Government has continuously monitored the economic trends in Asia and their impacts on the Hong Kong economy.
Regarding the performance of Asian economies in WCY 2016, certain economies saw a visible drop in their rankings, while others showed some improvement.
Competitiveness rankings of economies are determined by an array of factors and indicators, with some indicators more prone to cyclical fluctuations. Therefore, the short-term changes in competitiveness rankings should be interpreted with these considerations in mind.
Different economies in Asia are at different stages of economic development, with diverse performances each year. Yet, in overall terms, the emerging market economies in Asia are buttressed by sound fundamentals and relatively resilient domestic demand. The paces of economic growth in recent years, though somewhat slower when compared to preceding periods, were still much faster than those of advanced economies and their peers in other regions. Add to that the large size of population, Asia possesses promising market potential. Meanwhile, the differences across economies provide opportunities for economies to complement each other, and the competitiveness of the region as a whole could be lifted through closer economic integration.
Hong Kong is well-positioned to leverage on Asia's economic strength in moving towards a high value-added, knowledge-based economy.
Measures to strengthen Hong Kong's competitiveness
The Government adopts various measures to strengthen the overall competitiveness of Hong Kong. Apart from continuing to expand and strengthen the four pillar industries where Hong Kong enjoys an advantage, we are also determined to develop the local I&T and creative industries, etc., in order to drive the upgrading and transformation of our overall economic structure, and encourage the diversified development of Hong Kong's economy.
Innovation and Technology
Following the establishment of the Innovation and Technology Bureau in November last year, the Government has invested over $18 billion to formulate a series of initiatives with a view to fostering I&T development in Hong Kong in multiple aspects, including increasing basic infrastructure for research and development (R&D); funding universities in conducting midstream research and commercialising R&D results; promoting "re-industrialisation"; subsidising the industry's adoption of technology to upgrade and transform; supporting start-up developments; nurturing R&D talents; and funding projects that make use of I&T in improving the people's daily living.
Among the initiatives, the $2 billion Midstream Research Programme for Universities and the $500 million Technology Voucher Programme will be introduced within this year. Besides, the $2 billion Innovation and Technology Venture Fund and $500 million Innovation and Technology Fund for Better Living are expected to be rolled out in the first half of next year. The implementation of these measures should help to enhance Hong Kong's competitiveness in I&T.
Hong Kong is an open and vibrant international financial centre with a wide range of products and expertise as well as a sound financial infrastructure and regulatory framework. The Government has been implementing measures to enhance Hong Kong's competitiveness as an international financial centre, including broadening our legal framework and improving the tax environment, strengthening our asset management platform and corporate treasury services, enhancing mutual market access, as well as deepening our offshore Renminbi business.
Application of financial technologies (Fintech) can enhance operational efficiency of the financial services industry, and has the potential of transforming traditional products and processes to further strengthen the competitiveness of Hong Kong's financial industry. As an international financial centre with a highly developed information and communication technology sector, Hong Kong is an ideal place for both financial institutions and start-ups to develop Fintech business.
To support Fintech development, the Financial Secretary announced in his 2016-17 Budget a range of relevant measures. The Government, our financial regulators and stakeholders are also collaborating closely to implement measures to promote Fintech development in Hong Kong, including:
● The Hong Kong Monetary Authority (HKMA), the Securities and Futures Commission and the Office of the Commissioner of Insurance have established their respective dedicated Fintech liaison platforms to enhance communication with the industry.The platforms are tasked to handle enquiries from the Fintech sector and provide information on related regulatory requirements to companies engaging in financial innovation to enhance the industry's understanding of the regulatory environment in Hong Kong;
● The HKMA introduced the "Cybersecurity Fortification Initiative" and "Fintech Supervisory Sandbox" to enhance the cyber resilience of the banking sector and facilitate the pilot trials of Fintech and other technology initiatives of authorised institutions before they are launched on a fuller scale;
● The HKMA will set up a Fintech Innovation Hub with the Hong Kong Applied Science and Technology Research Institute to provide a neutral ground for market participants such as banks and payment service providers for exploratory and experimentation stage Fintech research and development work so that industry-wide Fintech solutions can be developed more timely and efficiently;
● Cyberport launched, in April, the first phase of its dedicated Fintech space in its Smart-Space co-working space, and its designated incubation programme will offer support to 150 Fintech start-ups over the next five years; and
● Invest Hong Kong has set up a dedicated Fintech team to attract and assist Fintech start-ups, investors and R&D institutions to establish in Hong Kong, as well as organise international Fintech events including the first Hong Kong FinTech Week on November 7 to 11.
The Government supports the further development of creative industries. The Government injected an additional $400 million into the CreateSmart Initiative in May 2016 and will accord priority, where appropriate, to those programmes which nurture start-ups and talents, as well as promote Hong Kong designers and brands, etc. The Government will also expand the scale of the Design Incubation Programme to admit 90 incubatees within three years from 2016-17 to help new and emerging designers develop. In addition, the Government is gradually rolling out fashion-related pilot measures. These measures include boosting promotion of local fashion design and brands, providing technical training and support for the trade, and launching the Fashion Incubation Programme which is expected to incubate 15 fashion design companies within three years from 2016-17.
The Government will continue to foster the development of the film industry, including encouraging more local film production, nurturing new talents, expanding audiences and promoting the Hong Kong film brand. The Government has further injected an additional $200 million into the Film Development Fund (FDF) last year, implemented measures to enhance the Film Production Financing Scheme to support the small-to-medium-budget film productions, and launched the Film Production Grant Scheme to provide low-budget film productions with cash subsidies. The Government also continues to implement the First Feature Film Initiative to nurture talent for the film industry. Furthermore, the Government further injected an additional $20 million to the FDF in June 2016 to enhance support for Hong Kong-produced Cantonese films to tap into the Mainland market.
The Economic Development Commission
The Economic Development Commission (EDC), established in 2013 and led by the Chief Executive, has been studying how to make the best use of Hong Kong's prevailing advantages and opportunities, conducting in-depth discussions on the visionary direction of the overall strategy and policy to broaden our economic base and enhance our long-term development, and identifying industries which present opportunities for Hong Kong's further economic growth, with a view to recommending policies and other support measures for facilitating the sustained development of the industries concerned.
The four Working Groups under the EDC (namely the Working Group on Transportation, the Working Group on Convention and Exhibition Industries and Tourism, the Working Group on Manufacturing Industries, Innovative Technology, and Cultural and Creative Industries, and the Working Group on Professional Services) have submitted to the EDC specific recommendations on promoting the sustained development of the relevant industries, which were endorsed by the EDC and accepted by the Government.
The Government is progressively implementing the recommendations and expects EDC to submit further specific recommendations.
Ends/Wednesday, November 9, 2016