HK needs innovative plan to foster synergies and help turn GBA into a global technology hub, say experts
The Hong Kong Special Administrative Region has forged a robust entrepreneurship and innovation ecosystem over the past 25 years and President Xi Jinping is pinning high hopes on the city’s potential to become a global innovation and technology hub.
During his inspection tour of the city in July, Xi pledged the central government’s full support for Hong Kong to align itself with national development strategies, particularly, the 14th Five-Year Plan (2021-25), the Guangdong-Hong Kong-Macao Greater Bay Area, or GBA, and the Belt and Road Initiative which reinforce Hong Kong’s potential in innovation and technology.
The president visited the Hong Kong Science Park and urged Hong Kong to collaborate closely with other cities in the GBA in strengthening and creating synergies among research and academic institutions, industries and finance, and building a global highland for scientific, technological and innovation advancements in the 11-city cluster.
Business chambers, professional services bodies and global business advisory firms in Hong Kong say that integrating the city’s innovation and technology sector with the GBA will be a key catalyst for growth.
First, Hong Kong should employ a comprehensive strategy to bolster integration with other GBA cities, with a focus on harmonizing different institutional systems.
“Hong Kong should actively collaborate with the central government in implementing more preferential arrangements to strengthen the flow of people, capital, goods and information,” said Chinese Manufacturers’ Association of Hong Kong Chairman Allen Shi Lop-tak.
The business chamber would like to see the 11-city cluster become a “special commuting zone”, with some tax exemptions related to “days of presence” for Hong Kong and Macao residents who regularly live and work in the GBA’s mainland cities.
“We urge the Hong Kong authorities to coordinate with their counterparts to provide policy support and business facilitation measures, such as streamlining the approval process for Hong Kong products to be registered and sold in the Greater Bay Area, strengthening intellectual property protection of Hong Kong brands, promoting mutual recognition of testing reports in Hong Kong and on the mainland, and introducing insurance services for domestic sales,” said Shi.
Hong Kong has cemented various inno-tech infrastructures to drive the industry’s growth. The San Tin Technopole, under the Northern Metropolis Development Strategy, which is expected to pool the resources of research institutions, universities and technology companies, can be an ideal platform for synergistic research and development and knowledge spillover.
“The Northern Metropolis can be the perfect testing ground for prototyping and pilot production before proceeding to mass production in plants in adjacent cities in the Greater Bay Area,” said Chan Yiu-bong, TMT industry leader for South China at consultancy firm Deloitte.
Under the Northern Metropolis development plan, the Hong Kong-Shenzhen Innovation and Technology Park, or HSITP, and the areas around Lok Ma Chau/San Tin will be consolidated to form the San Tin Technopole, which will have an estimated 240 hectares of land for innovation and technology-related use.
The technopole, together with the Shenzhen Innovation and Technology Zone, will form the 540-hectare Shenzhen-Hong Kong Innovation and Technology Cooperation Zone. The first batch of eight buildings of the HSITP in the Lok Ma Chau Loop will be completed in phases from late 2024.
Meanwhile, Hong Kong should introduce a pro-innovation procurement policy with priority for local inno-tech products and services to set an example for private enterprises.
Chan from Deloitte China cited Singapore, which introduced the concept of dynamic contracts, allowing suppliers to offer new products and services to the government instead of waiting for their contracts to expire. Another innovative solution in Singapore is the use of spiral contracting, in which companies are contracted in stages as a project progresses, and each step is dependent on the success of the previous one.
Besides procurement, funding is another financial lifeline for technology startups.
“By expanding the eligibility of its funding programs to cover more startups, the government can stimulate more funding from private investors and share the risk by providing guarantees or co-investing in joint funds. It can also actively seek new co-investment partners to increase the number of deals, for example, by expanding the type of co-investment partners to include mature startups,” Chan said.
Hong Kong saw its number of startups almost quadruple from about 1,000 in 2014 to 3,755 last year, while venture capital investment surged from HK$1.2 billion ($153 million) to about HK$41.7 billion during the same period, according to government data.
The city has witnessed the birth and development of 18 unicorns — privately held start-up companies with a value of over $1 billion — in the technology and innovation sector, including high-end manufacturing, robotics and financial technology segments.
Hong Kong should also aim to attract, retain and sustain a pipeline of local and global talent.
Albert Wong Kwan-butt, Greater Bay Area committee member at CPA Australia, said the SAR should be aware of the range of talents and skillsets required when formulating a talent policy:
“If there is not sufficient local talent, the government should consider importing talent that is badly needed. Startup entrepreneurs want to be sure whether Hong Kong has sufficient required talent to support their operations,” said Wong.
Hong Kong is also leveraging its strength in life and health sciences to fit into the 14th Five-Year Plan (2021-25).
The SAR government has proposed setting up an InnoLife Healthtech Hub at HSITP in the Lok Ma Chau Loop, with the 16 life and health-related laboratories in the InnoHK research clusters and the eight State Key Laboratories — a major national science and technology development scheme managed by the Ministry of Science and Technology — in life and health disciplines as the basis, to focus on research and development in biomedicine, chemistry, physics, engineering and artificial intelligence.
In Wong’s view, Hong Kong should not just mull attracting talent to work in technology startups, but find ways to lure more startup entrepreneurs to start their careers in the city.
Last but not least, the importance of policy support should not be underestimated.
“Hong Kong does not have a policy to promote high-growth industries. The government should do a stocktaking to know what kind of industries Hong Kong should support. Sticking to the level-playing field may not be a good strategy in the inno-tech age,” Wong said.
The SAR government, the Hong Kong Science Park and the Cyberport should cooperate with their counterparts in the GBA to be a “technology solution architect” — sourcing different technology solutions provided by startups and integrating them to solve particular business problems.
A vibrant inno-tech startup ecosystem does not concern just the inno-tech industry. Although many Hong Kong manufacturing enterprises have relocated their production facilities to the mainland, their headquarters and support bases remain in Hong Kong, and they are important application venues for local inno-tech startups.
Federation of Hong Kong Industries Chairman Sunny Chai Ngai-chiu said: “We believe Hong Kong should strengthen its role as the region’s manufacturing coordination hub and encourage more advanced manufacturing processes to take place, in order to drive further development in technology startups and have a far-reaching impact on our economy.”
“Hong Kong can continue playing a pivotal role in the regional manufacturing value chain by engaging in research and development, R&D, and producer services, while (other cities in) the Greater Bay Area remain the commercialization and production bases for companies.”
Shi from the Chinese Manufacturers’ Association of Hong Kong believes the government should review its existing industrial policy to let Hong Kong manufacturing enterprises on the mainland benefit from subsidy schemes.
“Traditional manufacturing industries can therefore utilize government funding to realize transformation and upgrading, while inno-tech startups can have more business opportunities,” said Shi.
The business chamber suggested that the new Innovation, Technology and Industry Bureau should promote a two-track system of innovation and technology and industrial development, and formulate long-term, clear, macro industrial policies to enable the integration of manufacturing industries with industries related to innovation and technology.
A cross-border government collaboration and policy coordination system to promote cooperation among research institutes, as well as inno-tech and manufacturing sectors in Hong Kong and Guangdong province, should also be set up to form an inno-tech upstream, midstream and downstream industrial chain and turn the GBA into an international inno-tech hub, it added.
The SAR’s fifth-term administration has pledged to raise the R&D expenditure ratio to 1.5 percent of the city’s GDP between 2017 to 2022, and has invested more than HK$130 billion in the past five years to develop the inno-tech industry.
However, the ratio was only 0.99 percent in 2020 — still lower than the Organization for Economic Cooperation and Development countries’ R&D intensity ratio of 2.7 percent — according to Hong Kong’s Census and Statistics Department.
The Global Innovation Index 2021, published by the World Intellectual Property Organization, ranked Hong Kong among the top 15 of 130 economies.
