Policy Statement & Submission


Industry and Technology - A Constructive Role for the Chamber

The perspective

In representing over 4,000 company members and 70% of the GDP of Hong Kong, the Chamber has a vital interest in policies that impact the future of Hong Kong. The Chamber has previously submitted papers during the establishment of the commission and shortly after the first report. This third paper provides more specific recommendations that reflect the diverse concerns of its members.

The policy debate: integration rather than division
1.One contribution of the Commission's first report lies in its definition of "industry" and "technology."

3.One misunderstanding about industrial policy is that it is pictured as a one-sided promotion of "high technology." However, as pointed out in the Commission's report, "improved technology is important not only to the 'high tech' segments of the economy… but to all sectors" (para 3.6). The Chamber believes that this is right. The right approach for Hong Kong industries should be that of technological upgrading and application, not high technology per se. This applies to both manufacturing and services.

4. Another misunderstanding about industrial policy is that it advocates manufacturing in opposition to the service sectors. The division between manufacturing and services tends to overlook the fact that many services are related to manufacturing. In fact, one of the main features of the Commission's report is precisely to highlight the relationship between the manufacturing and the associated service industries (for example, para 3.9).

5. In the Chamber's view, it will be more productive to focus on integration. One area of particular relevance, which the Commission's report alludes to, is electronic commerce (para 3.18) where technology, industry and services overlap. Another area would be to focus upon enhancing the application of the information infrastructure in Hong Kong. For example, "virtual" research centers that integrate individuals from government, industry, and academia online.

· The report lacks a concrete industrial policy. It is hoped that the report would provide a clear vision and effective policies for Hong Kong that would mobilize industry and academia to achieve the vision. Without policy towards achieving the vision (as partially outlined in para 3.2), any efforts would be ad-hoc and piece-meal.

Cooperation between industry and academics
· The Chamber strongly agrees that, with reference to innovation, "the Government needs to adapt its education and manpower policies to address the challenges arising out of this rapid job creation and destruction process" (para 3.5). Education and innovation are intertwined. While the Commission's report largely focuses upon the benefits of bringing university research into industry, it has stated that it would not address the changes required in the education system to produce the human capital to drive innovation (para 9.3). Our view, however, is that our education system, from primary to tertiary education, must be thoroughly reviewed as the education system has profound implications for innovation and technology. We feel that this should be evaluated urgently as it forms a fundamental platform for true reform.

· The Commission's report comments that Hong Kong has a robust research culture but with little industry linkage (para 4.6 and 4.7). It proposes that a forum to bring together industrialists and researchers should be created (para 8.22), and an "industry wish list" should be drawn up. While the Chamber supports these proposals, they do not sufficiently address the problems that plague the current (primarily academia-driven) mechanisms for collaboration between industry and academia. The Chamber strongly feels that applied research projects supported by the government to enhance the usage of high technology in industry should be industry driven with an emphasis on those projects that are capable of being commercialised.

· At the same time, the enhancement of our research capabilities will call for more competition among tertiary institutions, not only within Hong Kong but also between Hong Kong and elsewhere (including the mainland).

· While the Chamber believes that University staff are an integral part of technology transfer, incentives should focus upon creating opportunities for fresh Hong Kong graduates rather than creating entrepreneurial opportunities for University staff (para 8.15). Universities should play a more proactive role in educating local industry on developments around the world and identifying opportunities for Hong Kong industry. University staff salaries already rank near the top in the world.
Cooperation with the mainland

· The Commission's report proposes the establishment of mechanisms for liaison with the mainland (para 7.10). We support this proposal. As a major private sector body involved in industry support, the Chamber would also like to be involved as a party from the Hong Kong side in this network. We believe the newly established office of the Hong Kong government in Beijing should also play a facilitating role.
Rationalization of support structure

· New support organizations are proposed such as the new Innovation and Technology Fund and an Applied Science and Technology Research Institute. It follows that the existing institutional structure for industry support needs to be reviewed in order to ensure that they provide the most effective and value-for-money support for industry.

· The current structure encompasses a wide range of statutory bodies, public sector corporations, and funding, but in a rather uncoordinated and haphazard manner, for example:
- Industry Department
- The Hong Kong Productivity Council
- The Vocational Council
- The Industrial Support Fund
- The Services Support Fund
- Applied Research and Development Fund
- Industry and Technology Development Council
- Industrial Technology Center Corporation
- Science Park
- Industrial Estates

While in the past, these agencies have served Hong Kong well, it is the Chamber's view that in order to help facilitate the adaptation of new technologies in industry a re-evaluation of the mission for each of the institutions is necessary. The role of agencies such as the Industry Department may need to be redefined, with the result that some of its industry support functions may be farmed out to the private sector. Chapter 6 of the Commission's report also implies this. Greater cooperation between the institutions is essential and currently not enforced. The overall principle should be that the private sector should play the leading role in development of the industry-support function, with government providing the resources and the support infrastructure.

· The coordination among various government and private sector agencies in promoting industry and technology is a complicated task. Government should re-examine, perhaps after the Commission's final report, how this function can best be carried out, either within the current government structure or through appropriate re-organization.

· The Commission's report acknowledges the role of bodies such as the Chamber in assisting industry through promotion and networking activities. This is a role, which the Chamber has been performing, and will be pleased to continue to play. The possibility of government funding to enhance this function has been alluded to in the Commission's report (para 7.9), a proposal which the Chamber welcomes. Already, the Chamber is co-hosting a high technology "mixer" in conjunction with the Multimedia Innovation Center at PolyU with sponsorship from other agencies such as HKITC and industry.
New initiatives proposed by the Commission

· A number of new initiatives were proposed in the first report of the Commission, and it would appear that further ideas would be forthcoming in the second and final report. In line with the Chamber's longstanding position, we would suggest that government give priority and commitment to the effort in promoting industry and technology, but not necessarily give subsidies or intervene directly in industry's efforts on innovation and technology. This appears to also have been the direction envisaged by the Commission, as in the proposals for the Innovation and Technology Fund and the Applied Science and Technology Research Institute.

· On the proposed $5B HKD Innovation and Technology Fund, the Chamber strongly believes funded efforts should be industry-led. Towards this, the Chamber has a constructive role, which could facilitate the working of the new fund. There are three parts to the role which the chamber can play:
- First, the chamber can help promote this fund.
- Secondly, the Chamber can help administer the fund, such as through providing experienced members to take part in the vetting process.
- Thirdly, the Chamber can be a user of the fund, especially in collaboration with other bodies such as academic institutions or private companies, or in some of the projects of an educational and promotional nature.

· The Chamber supports the proposed Applied Science and Technology Research Institute. To ensure the success of this Institute, it should have the full backing of the private sector. Furthermore, clear metrics performance evaluation must be established. Research Institutes such as Taiwan's ITRI are currently undergoing a reevaluation of their effectiveness. The Chamber should play a constructive role such as providing members to serve on its board and advisory committees.


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