This year’s Policy Address deserves support for its better coverage and foci than the previous two. But its emphasis on housing, land use and livelihood measures still outweighs economic development. The policy blueprint has not struck a balance on the overall development of Hong Kong: it is not strong enough to boost the economy and lacks new ways of thinking. The government is supposed to do more in diversifying the economy. Efforts should be made to promote the development of the innovation and technology industries - this is a matter concerning Hong Kong’s long-term competitiveness and a key for its industry diversification.

Government Should Invest More

Hong Kong has been encouraging industries to invest in technological research and a number of funding schemes have been rolled out. Still, the industries’ contribution in R&D investment is lower than that of the government, with a ratio of 2:8 between the two. Hong Kong’s overall expense on technological research has always been on the low side too. Over the past five years, it only took up 0.7% of the GDP, a much lower percentage than those in Taiwan and Singapore, whose governments invest more than 2% of their GDPs in technological research. South Korea and Israel investing about 4% of their GDPs in technological research even put Hong Kong to shame.

Israel has been doing extraordinarily well in recent years, with a hi-tech sector now contributing 17% of the country’s GDP. Despite a lack of land and natural resources, the Israeli government has provided support and tech-friendly measures. It not only contributes 70% of the country’s R&D investment but successfully attracts foreign capitals. The Israeli experience is indeed a good reference for Hong Kong.

According to the OECD Science, Technology and Industry Outlook 2014, nearly 60% of the interviewed local Hong Kong enterprises look forward to the government launching new funding initiatives as a means to prompt businesses’ R&D pursuits. Tax incentives and venture capital funding, for example, are seen as something that can encourage private companies to invest more in technological R&D. Yet, Hong Kong has long been conservative. Local companies are shy to pursue or invest in the technological research as they are reluctant to bear the risks. Instead, they would rather put money into real estates for more stable returns. To create a favorable environment for innovation and technological research, the government should break away from its conventional mindset and share the risks and responsibilities with private companies.

Diversified Support Needed

While the Policy Address’s proposal to inject another HK$5 billion into the Innovation and Technology Fund is a good idea, the amount seems to be on the petty side. The first HK$5 billion was allocated to the Fund at its inception in 2000, and now an injection of same amount is made after 15 years. Taking inflation into account, the funding has actually shrunk. The authorities should diversify the forms of its funding and introduce financing and tax incentives to encourage collaboration between the government, industry, academia and research sector. Meanwhile, the Legislative Council is urged to give green light to the establishment of the Innovation and Technology Bureau. All these can boost Hong Kong’s competitiveness and bring more job and start-up opportunities for the youth.

As quoted in the Policy Address, the Global Innovation Index for 2014 ranked Hong Kong among the 10 most innovative economies. It is indeed self-deceiving to use this ranking to boast about Hong Kong’s efforts on innovation and technology. Equally inconceivable is the ranking for new technology product markets showing that Israel, Korea and Japan had overtaken traditional frontrunners. The more creditable Global Competitive Index 2014 indicated that Hong Kong’s performance innovation was just average. Instead of giving a pretty false picture, the government might just as well take more real and effective steps to upgrade the hardware and software for innovation and technology.

Learning from Singapore and Korea

The convention and exhibition sector has been complaining about the shortage of venues for years. The Policy Address proposed to construct a new convention center above the Exhibition Station of the Shatin to Central Link in 2020, and to explore a pilot scheme on developing Kowloon East into a Smart City. These proposals are, however, only a drop in the bucket. Singapore has invested billions of US dollars in building Smart Nation, in which thousands of sensors will be installed across the country to collect data on air quality, traffic flow and others. Besides, the household Internet of Things will be launched and breakthroughs made on wearable devices and home appliance systems. The country is also testing its HetNet, a heterogeneous network, to enable mobile devices to automatically switch between mobile and WiFi networks. In short, Singapore has laid out a clear blueprint and policy picture for its technological development.

“K-pop” has been taking all Asia by storm in recent years. The culture is not merely about entertainment. It brings economic gains to peripheral businesses like tourism, restaurants, and fashion and cosmetics retailing, but also enhances the Korean brands. All these did not happen by accident but through the South Korean government’s multi-billion investment on various dedicated funds.

By contrast, once standing proud in Southeast Asia, Hong Kong’s show biz has failed to shine again in recent years. Of the HK$300 million in the Film Development Fund established by the government about seven years ago, only less than HK$100 million have been used to fund 30 local films. In other words, only four movies were funded per year on average, representing just 6% of the 60 local productions last year.

Reviving Local Film Industry

The Policy Address suggested reserving land for construction of cinemas to encourage movie-going among students and the youth. As a means to enhance hardware and expand the audience base, that is quite an innovative idea. But whether it can help revive the long-stagnated movie sector is doubtful. To pose the local movie industry for another take-off, it is fundamental to enhance the quality of local productions. To this end, more film-making courses should be organized to nurture new blood. Support should be provided for local filmmakers to seek financing as well as hardware facilities like support for upgrading post-production. Only by eliminating perverting inferior productions can local films break the box office domination by their Hollywood counterparts.

Attracting Talents

Hong Kong has always been a laggard when it comes to attracting talents. The government has to revise its manpower policies. Due to high thresholds, both the Quality Migrant Admission Scheme and the Admission Scheme for Mainland Talents and Professionals are far from effective. Besides lowering the entry requirements of these schemes, the authorities should review the manpower supply and demand of different sectors to prevent talent mismatch. Vocational education and training should also be stepped up to enhance the youth’s upward mobility.

The Policy Address has put forward new policy initiatives to draw the second generation of emigrants back from overseas and to draw up a talent list for attracting high-quality talents. In fact, similar policies are already in place in popular emigration destinations such as Australia, New Zealand and Canada. However, overseas talents hesitate to come to Hong Kong, because of the city’s more and more politicized social environment, worsening air quality, shortage of international school seats, high rents and expensive living costs. It is pressing for Hong Kong to improve its living environment and revamp its overall policies on attracting overseas talents. Hong Kong can sharpen its edge only when it makes itself a confluence for critical mass.