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LCQ18: Support for innovation and technology industry

Following is a question by Dr Hon Elizabeth Quat and a written reply by the Secretary for Commerce and Economic Development, Mr Gregory So, at the Legislative Council meeting today (January 23):


Nowadays, while the world has entered an era of digital economy and the Government has also pledged support for the innovation and technology industry, some members of the industry have pointed out that the small and medium enterprises in the industry are facing numerous problems (including shortage of capital and difficulties in obtaining various types of licences, hiring staff, setting up offices and identifying targets of investment, etc.) in their endeavours to expand the local, mainland or overseas markets. They have further pointed out that the role of the Government in encouraging and supporting the industry has to be enhanced. For example, while the Government has established the Innovation and Technology Fund (ITF), which is tasked mainly to provide financial support for the development of applied research and development (R&D) projects which contribute to exploitation of creative ideas as well as upgrading of technology levels by industries in Hong Kong, it has not taken the lead in using the technology products developed locally and therefore fails to set an example for the private enterprises to follow. Moreover, no comprehensive policies have been formulated by the Government to promote green technology, and the support provided by the authorities to the industry is inadequate, resulting in unsatisfactory development of such technology. In this connection, will the Government inform this Council:

(a) whether the Government has currently put in place policies or guidelines requesting government departments to give priority to using local technology products, in particular the achievements of government-funded technological R&D projects, for example, whether it has introduced local technology products for use inside the Government as a pilot scheme and then promoted them among private enterprises; if it has not, of the reasons for that; if it has, whether it will extend the scheme to more government departments and fields;

(b) as some members of the industry have pointed out that all the local technology-based enterprises funded by ITF have been assessed and screened by experts, and are recognised as having potential for development before being allocated with public funds in support of their development, of the reasons for the Government's lack of enthusiasm in using the research achievements of these enterprises; as well as the plans to ameliorate this situation;

(c) of the existing measures and plans of the Government to provide support to local technology-based enterprises and help them develop the mainland market; and

(d) whether the Government has studied ways to further encourage the R&D, application and promotion of green technology, for example, whether the Government has explored ways to adopt green technology in the development of data centres; if it has, of the specific policies and support measures; if not, the reasons for that?



The Government attaches great importance to the development of innovation and technology in Hong Kong. The Chief Executive (CE) has indicated in his 2013 Policy Address that the Government will focus on the development of the highly competitive sectors of the innovation and technology industries in light of Hong Kong's strengths. We will provide software and hardware support; foster co-operation amongst the Government, industry, academia and research sectors; forge closer collaboration with the Mainland; and inject additional resources when necessary. All these will be conducive to the commercialisation of research and development (R&D) results, which will in turn give impetus to the development of the industries. The Government has also been attaching great importance to the development of enterprises, especially small and medium enterprises (SMEs), and has implemented various measures to assist enterprises in different industries, including technology enterprises, in exploring the local, Mainland and overseas markets.

My reply to the four parts of Dr Hon Elizabeth Quat's question is as follows:

(a) & (b) Government procurement is guided by the principles of open and fair competition, value for money, transparency and public accountability to obtain conforming services and goods which best serve the public interest at the best value for money in support of the Government's programmes and activities. These procurement principles are consistent with the spirit and objectives of the World Trade Organisation Agreement on Government Procurement. As such, we treat all tenderers equally and will not accord any favourable treatment to products on the basis of their country origin. Nonetheless, the existing Government procurement system affords sufficient flexibility for bureaux/departments to make corresponding procurement arrangements for achieving their policy objectives. In general, subject to the above procurement principles, bureaux/departments could decide to procure any products after taking into account relevant factors such as operational needs, resource constraints, market conditions, associated risks and cost-effectiveness, etc.

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 fare well. For these reasons, it is difficult for new local R&D products to win in an open tender. Nevertheless, we understand that there is a keen expectation from the R&D community for the SAR Government to promote innovation and technology on various fronts, particularly in taking the lead in the trial use of local R&D outcomes in the public sector. Such trials would bring social benefits by facilitating the application of research deliverables. In this regard, we have been pro-actively seeking to implement flexible measures after consultation with various stakeholders (including the Legislative Council), with the objective of nurturing indigenous innovation and technology.

In early 2011, with the support of the Legislative Council Panel on Commerce and Industry, we extended the scope of ITF funding 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 could effectively foster collaboration amongst the Government, industry, academia and research sectors, and 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 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, over 40 public sector trial projects have commenced, among them 15 projects have already completed. Some successful examples are set out at the Annex. We will continue to monitor the effectiveness of these arrangements and introduce other enhancement measures as necessary.

(c) The CE has highlighted in his 2013 Policy Address that the development of innovation and technology is elevated to a very important strategic level in the National 12th Five-Year Plan, with explicit support given for Hong Kong to develop emerging industries. We will seize the opportunity to build more platforms for enhanced scientific research collaboration between the Mainland and Hong Kong.

To assist Hong Kong enterprises in capturing the opportunities arising from the policies of expanding domestic demand and encouraging upgrading and restructuring of enterprises in the National 12th Five-Year Plan, we launched a dedicated fund of $1 billion in end-June 2012, with an aim to assist enterprises in developing brands, upgrading and restructuring operations, and promoting domestic sales in the Mainland so as to enhance their competitiveness and further their business development in the Mainland. In addition, the SME Export Marketing Fund operated by the Trade and Industry Department supports individual SMEs with a maximum funding of $150,000 to take part in promotional activities to develop export markets (including the Mainland market), such as participating in exhibitions and trade missions, and placing advertisements on trade publications targeting export markets and eligible trade websites.

Organisations such as the Hong Kong Trade Development Council (HKTDC) and Hong Kong Productivity Council also provide Hong Kong enterprises with different kinds of support services, which include providing market information, and organising promotional activities and trade missions to the Mainland from time to time to enhance the trade's understanding of the policies and market development of the Mainland. For example, HKTDC will be organising a series of seminars and trade missions on Mainland market exploration with the theme of 'HK ICT PLUS' in 2013.

(d) The Government has been encouraging R&D and application of green technology through the ITF. As at end-2012, ITF has supported some 180 projects relating to environmental protection with a total funding of $390 million. The R&D Centres set up by the Government have also been conducting key R&D projects relating to environmental protection. For example, the Automotive Parts and Accessory Systems R&D Centre focuses on the development of key component technologies for electric vehicles (EV), including the development of a 20kW EV intelligent fast charging station. Not only does the fast charging station support various agreed EV charging standards in different parts of the world, it is also equipped with the intelligent e-payment system commonly used in Hong Kong. Another R&D Centre, the Nano and Advanced Materials Institute (NAMI), is actively developing core technologies in nano-technology and advanced materials with a view to saving resources and energy and reducing waste. Among NAMI's key projects includes the installation of a 10kW thin-film silicon solar cell unit on the rooftop of the Tseung Kwan O Hospital as a supplementary power source in the end of 2011. Upon completion of testing, the system has been in service since March 2012.

Green technology is also one of the five focused technology clusters of the Hong Kong Science Park (Science Park). The Science Park is committed to attracting different green technology companies to move in, so as to strengthen Hong Kong's technological advantages in this sector. To recognise the continuous effort of the Science Park in fostering and promoting green technology, the Ministry of Science and Technology formally designated the Science Park as the National High-tech Industrialisation (Partner) Base for Green Technology in November 2011. Since then, the number of Science Park tenants engaging in green technology has increased by 16%.

The construction of Science Park Phase Three will be completed in stages from 2014 to 2016. The Hong Kong Science and Technology Parks Corporation plans to promote in Phase Three the further growth of biotechnology and green technology on top of the existing successful clusters of electronics, information technology and telecommunications and precision engineering. This will provide more development opportunities for green companies.

Regarding data centres, the Government has been encouraging data centres to achieve energy conservation and enhance energy efficiency, and promoting the adoption of best practices to reduce electricity consumption and carbon emission. The Government promulgated the basic practices and core indicators on green data centre management in 2012, which set out sample specifications for green procurement and disposal of information technology equipment and data centre facilities.

We are also pleased to see that the data centre industry has also been actively implementing various energy-saving schemes. For instance, data centres which are recently upgraded or new ones which will be completed soon have adopted green and energy-saving measures in construction and operation, optimisation of air flow / ventilation and chiller systems as well as virtualisation of computer servers.

Wednesday, January 23, 2013

Annex PDF