Knowledge-based economy cannot be empty talk

 In Economic Development & Economy
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In the Chief Executive Donald Tsang’s policy address last year, he proposed Hong Kong should move towards a high value-added knowledge-based economy. He also pointed out that “innovation” and “knowledge-based industries” are not limited to the Six New Pillar Industries (Testing and Certification, Medical Services, Innovation and technology, Culture and Creative Industries, Environmental Industry and Education Services), the Four Traditional Pillar Industries (Trade & Logistics, Financial Services, Professional Services & Other producers Services, Tourism) are also included. The problem is, vertical industry-based development model tends to be fragmented; only horizontal industry support structure that captures the synergistic effect between the industry is a true Knowledge-based Economy development strategy.

 

Mainland’s “Going Out” Strategy is a double-edged sword for Hong Kong
In his Budget Speech this year, Financial Secretary John Tsang further proposed that Hong Kong could support the national development strategy by moving towards a knowledge-based and high value-added economy. Mainland’s “Reform and Opening Policy of thirty years now encourages companies to adopt a “Going Out” strategy (internationalise). However, this national policy of many years has not yet been successful because mainland’s industrialisation that is based on a “World Factory” production strategy; and a significant proportion of the locally originated high value-added products often failed to meet international intellectual property standards, which are complex in their nature. Hong Kong, with its developed legal system, international networks and business experience, is in an ideal position to help the mainland in solving this complex problem. There ought to be plenty of room for Hong Kong to move towards this development direction. However, the real situation is moving towards the opposite direction. In recent years, mainland companies are gradually reducing the dependence on Hong Kong, the number of mainland regional headquarters and regional offices have declined, from 267 in June 2005 to 223 in June 2009, a decline of more than 16 percent.

 

Excellent business environment has always been one of the sustainable development strategies of Hong Kong’s economic development. Hong Kong’s excellent “First-level Business Conditions” alone (e.g. a sound legal system, open social environment, comprehensive and developed administrative system) cannot overcome Hong Kong limitations of its traditional “middleman” role. As the Mainland gains more frequent and direct contacts with international companies and the outside world, Hong Kong must create new competitive advantages for itself or risks the fate being marginalised.

 

Knowledge-based economy ─ the only way for sustainable economic development
To this end, Hong Kong needs to further improve the “Second-level Business Conditions”, including the development of quality human resources, improve the diversity of producer services, creating a favorable environment for innovation through supportive public policies and so on. So that the cumulative research capability and high value-added, high knowledge content and other intangible inputs could create added values. Public policies could then further encourage businesses to use these “soft technology support” to create economic value and gradually expand the scales and depth of a Knowledge-based Economy in Hong Kong. On the other hand, the lack of a mature legal environment in the Mainland, a short tradition of the rule of law, as well as mainland enterprises finding it difficult to establish international brands and “Self-initiated Intellectual Property” on their own ought to be seen as an opportunity for Hong Kong. Hong Kong has a free and open environment conducive to the development of knowledge-based economy. Hong Kong will also be able to find an important role to play in the development of the Knowledge-based Economy of Mainland China.

 

A sound intellectual property system is important for knowledge-based economy development. Intellectual Property Department (IPD) of the HKSAR Government ought to be able to have an important supporting role in the development of Hong Kong’s Knowledge-based Economy. The problem is IPD is required to concentrate on “Intellectual Property Protection” and not to venture out into areas not understood by higher levels of Government. At the most IPD could help Hong Kong companies to do an audit to “… identify knowledge capital and use these sources in formulating marketing plans.” The HKSAR Government could have gone a few steps further. Singapore, Scotland and Finland are good sources of reference. The high-level coordinating unit within the Singapore Government is the Economic Development Board (EDB), an agency that charted Singapore’s economic development since the 1960s. Specific support measures include establishing the research council called A-Star (Agency for Science, Technology and Research) that coordinates cross disciplined researches in universities and overseas investments.

 

HKSAR Government should consider the Knowledge-based Economy as an economic development strategy. The successful experience in Ship Registration Services could be seen as a useful reference. In 1999 the HKSAR Government implemented innovative survey and the quality management system of ships. This has led to a significant increase the total tonnage of ships registered in Hong Kong; from November 5.5 million tons in 1997 to a historical high of 52 million tons in July 2010. This arrangement also brought the ship sale and purchase, financing and insurance services business to Hong Kong. Compared with the Ship Registration Service, Knowledge-based Economy involves a much broader range of services, such as testing and certification, branding and packaging, IP registration, technology transfer, IP commercialisation and other areas which Hong Kong could assist and complement the Mainland on.

 

HKSAR Government also needs to adjust the definition of Knowledge-based Economy. The Census and Statistics Department published the “Hong Kong as a Knowledge-based Economy ─ A Statistical Perspective”. However, the report focuses on narrowly defined indicator from the ICT industries (Information and Technology) and has ignored human resource development and introduction of innovative systems. These generic indicators have completely forgotten Hong Kong’s characteristics as a service-based economy, the relations between the “Four Pillar Industries” and the “Six New Pillar Industries” and the “Knowledge-based Economy”. To develop the Knowledge-based Economy, HKSAR Government not only needs to allocate more resources targeted at training talents, but also to monitor the knowledge content of industries, human resources from a more useful set of data collection and statistics.

 

Development of knowledge-based economy also needs to be upgraded to a strategic level, for example, the Financial Secretary should consider establishing a “Knowledge-based Economy Coordination Unit” to co-ordinate the policy development output of the Commerce and Economic Development Bureau and other government departments, and manage other related knowledge-based economy policy and issues in a timely manner.

 

 

Alan Lung Ka Lun (龍家麟)
Chairman, Hong Kong Democratic Foundation (香港民主促進會主席)

3 September 2010

 

 

A Chinese version of this article entitled “知識型經濟非空談” was published in Hong Kong Economic Journal on 3 September 2010.

 

 

 

 

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