LCQ7: Enhancing Hong Kong's competitiveness
Following is a question by the Hon Martin Liao and a written reply by the Secretary for Commerce and Economic Development, Mr Gregory So, in the Legislative Council today (January 20):
It has been reported that a number of reports published recently by authoritative organisations have pointed out that alarm has been sounded for Hong Kong's competitiveness. For instance, the Global Competitiveness Report 2015-2016 published by the World Economic Forum (the Forum Report) has showed that, among the 140 economies covered by this Report, although Hong Kong’s overall ranking in 2015-2016 in the Global Competitiveness Index has maintained its 7th place attained in the previous year, her ranking in innovation is only 27th, which is clearly on the low side and shows a downward trend. Meanwhile, Hong Kong's ranking in financial market development has dropped from the first to the third place. The World Bank Group's "Doing Business 2016" report has also indicated that Hong Kong's ranking in ease of doing business has dropped from the third to the fifth place. On the other hand, the Blue Book of Urban Competitiveness: Annual Report on China's Urban Competitiveness No.13 published by the Chinese Academy of Social Sciences (the Academy Report) has pointed out that, among the 294 cities in China, Hong Kong's latest ranking in overall economic competitiveness has dropped, for the first time in 12 years, from the first to the second place, being surpassed by Shenzhen. Also, in respect of several competitiveness indices, Hong Kong has been caught up by a number of mainland cities. In this connection, will the Government inform this Council:
(1) as the Forum Report has indicated that Hong Kong's ranking is lower than those of the Four Asian Tigers in three indices, namely (i) capacity for innovation, (ii) availability of scientists and engineers, and (iii) university-industry collaboration in research and development, whether the authorities will introduce targeted measures, such as provision of tax concessions, to boost Hong Kong's competitiveness in the aforesaid three areas; if they will, of the details; if not, the reasons for that;
(2) as some members of the financial sector have pointed out that the main reason for the drop of Hong Kong's ranking of competitiveness in financial market development, as indicated in the Forum Report, is the insufficient innovation in Hong Kong's financial industry, in particular it is still at an early stage of development in respect of innovative online financial services, whereas Internet shopping and payment, micro-credit, peer-to-peer lending, crowd funding, online banking services, etc. are developing quickly on the Mainland, of the new measures the Government has put in place to strengthen the competitiveness of Hong Kong’s financial industry; and
(3) as the Academy Report has pointed out that since Hong Kong has put too much emphasis on five major industries, namely trading, finance, shipping, tourism and professional services, but paid insufficient attention to quite a number of small-scale emerging industries which have immense potential, resulting in a lack of new industries to support long-term economic development, and coupled with the narrowed gap between Hong Kong and mainland cities, Hong Kong is facing the risk of being marginalised, whether the authorities will formulate more new measures to promote diversification of the economy and ease of doing business in Hong Kong, so as to enhance Hong Kong's overall competitiveness; if they will, of the details; if not, the reasons for that?
The Government puts great emphasis on the enhancement of Hong Kong's competitiveness, in order to secure the healthy development of Hong Kong's economy in the long term. Having consulted the Innovation and Technology Bureau and the Financial Services and Treasury Bureau, my reply to the three parts of the question is as follows:
(1) To promote sustained and diversified economic and social development, the Government is determined to develop the local innovation and technology industries, in order to drive the upgrading and transformation of our overall economic structure, thereby enhancing Hong Kong's competitiveness.
With its robust information and communications technology infrastructure, sound legal system and intellectual property protection regime, Hong Kong is well-positioned to develop high value-added and high-tech innovation and technology industries. In fact, Hong Kong’s innovative capabilities, potential and room for development are already recognised by advanced institutions worldwide. For example, the Karolinska Institutet of Sweden will set up in Hong Kong its first overseas research facility, while the Massachusetts Institute of Technology of the United States will also establish its first overseas Innovation Node in Hong Kong.
Talents are the most important factor of success for developing innovation and technology. Hong Kong has quality talents for scientific research. For instance, at the 2015 State Science and Technology Awards, five of the winning projects were led or participated by Hong Kong scientific researchers. The Academy of Sciences of Hong Kong, which was established last year, could also facilitate the convergence of top-notch scientific research talents. The Innovation and Technology Bureau will continue to actively introduce measures to attract scientific research talents and experts to Hong Kong, so as to lead local young people to join the force in innovation and technology to fulfill their potentials, thereby enhancing Hong Kong's competitiveness.
The 2016 Policy Address introduces a number of new measures for the local innovation and technology development. They include the establishment of a $2 billion Midstream Research Fund, which supports universities in carrying out more midstream and translational research in key technology areas. The Government also proposes to set up a $2 billion Innovation and Technology Venture Fund for co-investing with private venture capital funds on local innovation and technology start-ups on a matching basis. In addition, Cyberport will allocate $200 million to set up a Cyberport Macro Fund for investment in its information and communication technology start-ups. The above measures can promote research and development and strengthen support for technology start-ups, giving new impetus to the development of innovation and technology in Hong Kong.
(2) 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.
Financial technologies (Fintech) can enhance operational efficiency of the financial services industry, and has the potential of transforming traditional products and processes. 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. The Government and our financial regulators will provide a conducive environment for Fintech development. Using payment service as an example, the regulatory regime for stored value facilities and retail payment systems, which commenced operation in November last year, helps ensure that these facilities and systems can operate within a stable and safe environment. The new regulatory regime will strengthen the public’s confidence in using these products and services, and foster the development and innovation of the payment industry. Also, with the Government's support, the local banking sector launched the e-Cheque service at the end of last year. The e-Cheque service offers an environmentally-friendly, safe and sound solution to enterprises and the public for handling payments.
The Financial Services and the Treasury Bureau established the Steering Group on Fintech in April last year to examine, in collaboration with the representatives from the industry, research and development institutions as well as regulatory authorities, opportunities brought about by the development of Fintech and measures to promote Hong Kong as a Fintech hub. Development of Fintech involves Government policy, regulatory infrastructure, talent development, as well as behavioural and cultural adaptation by traditional financial services providers, start-ups and consumers. We will continue to engage stakeholders to take stock of the experience of Fintech development in other places, and look into measures to foster the development of Fintech in Hong Kong.
(3) The Government attaches great importance to the diversified development of industries, with a view to maintaining the overall competitiveness of Hong Kong. Specifically, apart from continuing to expand and strengthen the four pillar industries (namely trading and logistics, tourism, financial services, and business and professional services) where Hong Kong enjoys an advantage, the Government will actively identify emerging industries with potential in order to promote the diversified development of our economy, so that Hong Kong can better respond to the world's ever-changing economic environment, and further enhance our competitiveness.
The Government supports the further development of creative industries through Create Hong Kong (CreateHK) as well as the CreateSmart Initiative (CSI) and the Film Development Fund (FDF) administered by CreateHK. The Government will inject an additional $400 million into the CSI and will in the coming years accord priority, where appropriate, to those programmes which nurture start-ups and talents, promote Hong Kong designers and brands, etc. The Government will also expand the scale of the Design Incubation Programme (DIP) so as to increase the average annual intake of the DIP from 20 at present to 30 in the coming three financial years from 2016-17 to 2018-19. The overall target is to admit 90 additional incubatees within three years. In addition, to promote the development of the fashion industry, the Government will roll out pilot measures over three years to boost promotion of local fashion design and brands, provide technical training and support for the trade and launch the Fashion Incubation Programme.
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. We further injected $200 million into the FDF last year, having implemented measures to enhance the Film Production Financing Scheme to support the small-to-medium-budget film productions and launched a new Film Production Grant Scheme to provide low-budget film productions with cash subsidies. The Government will also continue to implement the First Feature Film Initiative to nurture talent for the film industry.
In addition to giving impetus to economic growth, innovation and technology also underpin the development of other economic sectors. The Innovation and Technology Bureau will actively promote "re-industrialisation", encouraging the development of high value-added industries and manufacturing processes, promoting smart production and bringing the industrial development in Hong Kong to a new level.
Since its establishment in 2013, the Economic Development Commission (EDC), led personally 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. Over the past two years, 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 (MICWG), 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. Taking the MICWG as an example, the recommendations submitted include: offering overseas internship opportunities to more young design talents; enhancing support for the post-production sector of the film industry; refining the Innovation and Technology Fund; and promoting the development of the fashion industry. The Government is progressively implementing the recommendations and expects EDC to submit further specific recommendations.
Ends/Wednesday, January 20, 2016