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Speech by SCED at Hong Kong Institute of Directors (English only)

     Following is a speech by the Secretary for Commerce and Economic Development, Mrs Rita Lau, at the luncheon of the Hong Kong Institute of Directors today (November 7) (English only):

Mr (Peter) Wong, distinguished guests, ladies and gentlemen,

     Good afternoon. I am honoured to be here today to share with you all my views on enhancing competitiveness through innovation.

     Let me first start by stating what is by now crystal clear to us all. The financial tsunami we now face is a global crisis. It is much stronger and more widespread than the Asian financial turmoil we experienced in 1997. The impact will be stronger, the recovery will take longer, and the process will be more difficult. Unfortunately, as if that is not enough, we are also facing intense competition on all fronts with developments taking place at an unprecedented speed, scale and scope in this era of globalisation. To further add to our challenges are the rapid changes in policy that are taking place on the Mainland. These will lead to a transformation of the Pearl River Delta region, which will have a huge impact on our manufacturing industries based there.  

     The Chief Executive has used the phrase "turning crisis into opportunity". I prefer that old saying, "When the going gets tough, the tough get going," because I have seen Hong Kong people face up to challenges as great and overcome them with their hard work and determination. This indomitable spirit of the Hong Kong people has been the real secret to our success in past years. It is something we need to find in ourselves again today.

     I must admit to being rather intimidated to have to stand here before you today. As Members of the Institute of Directors, it is you who must face the worst of the challenges and overcome them. Of course, the Government is doing its best to help, but let me be frank, it is your leadership, your entrepreneurial spirit, your creative talent and your ethic of hard work that will determine whether Hong Kong rises above the challenges and in what state we emerge on the other side.

     The British Prime Minister Gordon Brown recently said about the need to build on innovation for the future of the UK, "Innovation is so important because we are now in a global economy where the countries and the enterprises that develop the skills and the creativity of the people will be most successful in this global age.  Countries like ours will only succeed, not because we have the raw materials or the capital, but because we have the creative ideas. And that is why innovation is absolutely critical to the future of our economy..." I cannot agree more with his view.  

     Again to point out the obvious: We in Hong Kong have no raw materials, a shortage of useful land, and we must import everything we need. The only assets we do possess are our human resources and their creativity. We must look to these resources and their ability to innovate, to invent and to create if we are to move ahead. Innovation offers us a way forward. It is the key to enhance our overall competitiveness and, I believe, if we get it right we have an opportunity to come out of this tsunami in better shape than we have gone into it. It is by looking to our own strengths that we may truly benefit from the support that others have to offer and may even offer some support to them in turn.

     The interesting thing is that we are clearly not alone in this thinking. I have already cited Britain. Let me bring us closer to home. The national 11th Five Year Plan also places strong emphasis on innovation and the upgrading of the capability and technology level of enterprises. I believe that Hong Kong enterprises have a key and active role to play in supporting our nation's technological development. If we do so effectively, I am also sure that we will be able to capitalise on the business opportunities that will inevitably emerge through this process.

     I am delighted to say that in my short time in this job, I have seen for myself that Hong Kong is by no means short of innovation and creativity. A case in point: the development of the Octopus Card. Adopting RFID technology, the Octopus Card has grown from a fare collection system for mass transportation back in 1997 when it was first launched, to an extensive and diversified platform for both payment transactions and non-payment transactions, including access control and gathering of management information. It has become one of the world's most successful electronic cash systems, with over 17 million cards in circulation, more than twice the population of Hong Kong, and 10 million transactions per day, providing services to over 2,000 vendors. It has become so successful that it has inspired the development of the Oyster card in the UK and has become the model for setting up similar payment systems in the Netherlands and Dubai. The application of smart card technology has not only benefited our city life but is a classic example of homegrown technology now being exported. This is indeed an innovation that Hong Kong should be proud of. For this reason, we are going to use smart card applications as one of the themes for our participation in the 2010 Shanghai Expo. Our pavilion "Smart Card, Smart City, Smart Life " will use this technology to showcase our innovative and creative talent to the international community.

     Research in the fields of science and technology are vital. To support innovation and creativity in this area, the Government must accept that it has an important role to play, especially to encourage enterprises to take part in and strengthen their R&D activities. The $5 billion Innovation and Technology Fund (ITF), originally set up in 1999, is a key component of our support programme to drive innovation and technological upgrading in Hong Kong's manufacturing and service industries. In the nearly 10 years of its existence, the ITF has supported over 1,200 R&D projects carried out by research institutes and industry, and has provided support funding of $3.7 billion in a variety of different technology areas. The ITF has been instrumental in building research capabilities and industry upgrading in Hong Kong, providing a basis for innovation and opportunities to groom new talent and develop new ideas.

     With small and medium-sized enterprises (SMEs) as the backbone of our economy, constituting 98% of the business establishments in Hong Kong, we set up the Small Entrepreneur Research Assistance Programme, or SERAP, under the ITF to assist technology start-ups. The SERAP provides pre-venture capital funding on a matching basis up to $2 million to technology entrepreneurs and small technology-based companies to undertake innovative projects with a reasonable chance of success. So far we have allocated more than $280 million for 276 applications. To encourage more enterprises to engage in applied R&D activities, since April this year, we opened up the scheme to enterprises with less than 100 employees, as compared to the previous limit of enterprises with less than 20 employees. Under the relaxed criteria, over 99% of local enterprises are now eligible to apply under the SERAP for funding assistance. I can cite one enterprise that has benefited from the SERAP funding. They successfully developed biometric face recognition technology, which was adopted by the Beijing Olympics Organising Committee for security and access control purposes during the recent Olympic and Paralympics Games. They and others like them are our future.

     Another area in which the Government is taking positive steps is in respect of high level R&D. In 2000, we set up the Hong Kong Applied Science and Technology Research Institute, or ASTRI, to perform high quality R&D. The institute's remit requires it to transfer to industry the results of its research to encourage commercial exploitation of these results. Over the years, the ASTRI, together with many top-notch research groups in local universities, has had some notable successes that have been transferred to industry for commercial application. For instance, the ASTRI has developed a smart Wi-Fi antenna that is able to broaden the Wi-Fi area coverage to 10 times that of other similar products in the market. This technology has already been adopted in Wi-Fi base station products overseas. Another example of the commercial application of R&D undertaken by ASTRI is a Hong Kong-based electronics enterprise that has won a contract to be the specified outsource set-top box manufacturer of the Shanghai Network TV Station, the pioneer in launching Internet TV services on the Mainland. These are only two of the many successful cases whereby Government support for innovation has turned into real business opportunities.

     Here I want to digress a little. Commercialisation of products emerging from R&D facilities is not a simple process. One of the most important practical issues that must be addressed in the process of working out how to adapt a good idea into a good commercial product is summed up in one word: Design. The Apple iPod shows us exactly what this means. There were many different MP3 players already in the market when Apple released the iPod. Indeed there still are but you almost never hear about them. Two things made the iPod the iconic product that it is: a well designed interface and well designed packaging. Design is at the heart of all of Apple products for the simple reason that good design sells. We in Hong Kong must not lose sight of this in our own products and services.

     The $250 million DesignSmart Initiative established in 2004 is an important measure to enable the wider use of design in Hong Kong. Under this Initiative, a Design Support Programme has been set up to support research and education on design, and to facilitate industry collaboration and branding promotion. The InnoCentre established in Kowloon Tong in late 2006 plays an important role in providing a one-stop service to industry by linking designers and potential clients together. It offers various support services including incubation programmes for design start-ups, office accommodation for design companies, a design resources centre and it organises design-related seminars and training. So far, 43 design companies have become incubatees in the InnoCentre. In recognition of the growing importance of design, and to further support the promotional efforts undertaken by the Hong Kong Design Centre, we earmarked an additional $100 million to support the Centre's operation for five years starting from 2007. Through these efforts, we seek to drive design to become an integral part of our businesses, and innovative design and good quality as a key competitive advantage for Hong Kong services and products.

     In recent years, Hong Kong has sought to strengthen technological collaboration with the Mainland across the border. Our local universities have established five key state laboratories with the approval of the Ministry of Science and Technology. The Guangdong-Hong Kong Technology Co-operation Funding Scheme has sought to encourage R&D institutes in the two places to jointly carry out applied R&D work. Under the framework of the Shenzhen-Hong Kong Innovation Circle, we have succeeded in attracting DuPont from the United States to locate its global business headquarters and Solar Energy Thin Film Photovoltaic R&D Centre here in Hong Kong Science Park. Meanwhile, its manufacturing facilities will be located in Shenzhen. This represents an initiative to capitalise on the strongest attributes of Hong Kong and Shenzhen respectively and will be taken as the model for further collaboration on hi-tech development in the Pearl River Delta Region. An example of what I was talking about earlier: how Hong Kong has a role to play in China's development.

     Let me return to where I started. Quality R&D requires quality people. Without adequate human talent as the foundation, innovation, technology and creativity development will not be possible. The Government actively supports universities and R&D institutes in nurturing R&D talent. A major initiative in this area is the Internship Programme under the ITF. The Chief Executive has announced in the recent Policy Address that this will be enhanced to attract promising science and engineering graduates to take part in R&D activities. In order to build up a rich pool of young talent who are committed to innovation and technology, we have also set up the Youth Innovation Club. This will provide a sustainable and interactive platform to further support and nurture our young talent. Many activities, including visits to research institutes and meetings with prominent scientists, have been arranged for its members to further develop their interest and knowledge in innovation and technology. It is our goal to further develop Hong Kong's strengths in R&D through investing in the new generation.

     Another area in which innovation is essential is in respect of our creative economy. To further drive the development of the creative economy in Hong Kong, the Chief Executive also announced in this year's Policy Address the setting up of a dedicated office within the Commerce and Economic Development Bureau to provide better support and one-stop service to the creative industries. The office will become the inter-departmental co-ordinator to pool together existing Government resources devoted to supporting creative industries to better meet the needs and aspirations of the industries.

     At present, there are various schemes and funds for creative industries, which are managed by different parties within the Government. All these will be put under one roof with the establishment of the dedicated office for better synergy and efficiency. The funds include the $300 million Film Development Fund, the $250 million DesignSmart Initiative, as well as the different incubation programmes designed for the creative industries. Through integration and realignment of these resources, the dedicated office will further enhance and strengthen support for the creative industries. We will also seek to strengthen and expand existing incubation programmes to provide stronger support to infant creative industry establishments. As a first step, we will soon seek the Legislative Council's approval to extend and expand the incubation scheme for digital entertainment under the Cyberport.

     I have attempted to demonstrate that Government is actively promoting innovation and creativity in Hong Kong through a comprehensive package of measures. While Government can foster innovation, only a community-wide effort will truly foster the right environment in which this can thrive. So we must work hand in hand with our enterprises to encourage innovation at all levels of the community, from individuals to enterprises to the community as a whole. You, the directors of our enterprises, have a major role to play in this process. I encourage you all to do your part and help us to overcome the challenges we now face.

     Finally, let me conclude by sharing with you what Winston Churchill once said, " Those who build the present in the image of the past will miss out entirely on the challenges of the future." Indeed, we cannot afford to live in our past or rest on our laurels. There is no more room for complacency. We must move ahead. We must take up the challenge. And I truly believe that innovation is the best means to enhance our competitiveness. Thank you.

Ends/Friday, November 7, 2008
Issued at HKT 16:31


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