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Speech by SCED at Conference of Hong Kong Innovation Project (English only)

     Following is the speech by the Secretary for Commerce and Economic Development, Mrs Rita Lau, at the Conference of Hong Kong Innovation Project today (January 9):

Mrs Ip, Mr Tam, distinguished scholars, ladies and gentlemen,

     Good morning.  It gives me great pleasure to join today・s conference co-organised by the Savantas Policy Institute and the Central Policy Unit.  

     The purpose of the :Hong Kong Innovation Project; is to take stock of where we are in terms of our efforts to promote innovation and technology, about 10 years after Hong Kong started to position itself as an innovation centre for the region, and to identify areas where we can do better in the future.   

     I fully support this move. Successful innovation and technological development requires strenuous efforts from both government and the private sector.  Innovation and technology thrive in free economies where private enterprises invest in their future through research and development, either through engaging academic institutions, or in-house research laboratories, or both, and where Government encourages this through ensuring that there is a robust legal framework to protect intellectual property and a supportive economic environment that allows the private sector to benefit from their investment.

     There is no doubt that the Government has an important role to play to ensure that there is a stable and conducive environment for businesses to operate and to reinvest their resources into their future.  Beyond simply ensuring that the legal system is supportive of innovation including putting in place robust intellectual property rights and commercial law regimes, Government must also ensure that there is a free flow of information, expertise and capital; free trade; a stable and preferably low and simple tax system; and the provision of sufficient, suitably trained homegrown talent.  Like others, the Hong Kong SAR Government does much more than this, including the provision of funding and infrastructural support, as well as focusing particularly on key technologies or industries, e.g., to support particular industry policies; establishing positive tax and other incentives.

     While an economy・s yearly expenditure on R&D as a percentage of GDP has often been quoted as a major indicator of that economy・s achievements in innovation and technology, such statistics must be viewed with caution, as they do input factors only. Economic literature thus far has been sketchy on what output or performance indicator should be adopted.  Some people use the number of patents applied for or registered, the number of people employed in R&D, the value added of goods that are defined, however arbitrarily, as :high technology; ones, as output indicators.  The economic literature describing, let alone explaining, the relationship between the input and output of an innovation system is even harder to find, and is still subject to much debate.

     Having said that, we of course all live in the real world, and policy making in the real world often does not have the luxury of a fully settled theoretical grounding.  Policy makers have to formulate policies by trying to maximise the chances of success, within the constraints of the competing demands on resources.

     So in the Hong Kong context, what are our policy objectives for innovation and technology? What are the constraints? What can we do to maximise our ability to achieve our objectives and perhaps even to convert the constraints into opportunities?

     In 1998 to 1999, the late Professor Tien Chang-lin of UC Berkeley, chaired a commission that produced a very interesting report on Innovation and Technology in Hong Kong. This envisaged that Hong Kong should be an innovation-led, technology-intensive economy in the 21st century, serving the region not only as a business and financial centre, but also as a centre for the development and commercialisation of innovative ideas and technology.  The commission recommended that instead of developing state-of-the-art high-end technologies that are not compatible with Hong Kong・s competitive advantages, we should stimulate all economic sectors to pursue innovation and technology upgrading.  The focus should be on encouraging the private sector to introduce improved technology and better methods of doing things, penetrating into new market segments, and entering into activities of higher value.  

     The commission・s recommendations have since been implemented in earnest.  First, the Innovation and Technology Fund (ITF), was set up in 1999 with a $5 billion injection, under the management of the Innovation and Technology Commission.  The ITF has supported a number of very interesting programmes since its establishment. These programmes all contribute to the development of innovation and technology through encouraging a higher degree of university-industry collaboration, supporting small enterprises to pursue technopreneurship, nurturing university graduates to pursue R&D careers and protecting innovative ideas under the IPR regime.
     To date, the ITF has supported more than 1,250 applied R&D projects carried out by universities, research institutes and industry, with a total approved funding of $3.7 billion in different technology areas.  These include more than $280 million for some 280 applications under the Small Entrepreneur Research Assistance Programme (SERAP), a specific programme under the ITF intended to assist smaller firms to achieve technological advancement.  A further $195 million has been provided for more than 170 projects under the University-Industry Collaboration Programme (UICP), another specific programme to encourage private companies to leverage on universities・ knowledge and resources through collaborations in undertaking commercial R&D projects.  

     In parallel we have taken steps to establish a technological infrastructure to support the development of technology in Hong Kong.  Our infrastructural support comprises two main areas.  The first is to set up research institutions.  They include the Hong Kong Applied Science and Technology Research Institute (ASTRI) established in 2001, which now specialises in ICT R&D, four other R&D Centres established in 2006 for four other technology and industry clusters, and the Jockey Club Institute of Chinese Medicine.  These bodies receive government recurrent funding as well as ITF project funding support, and act as a bridge between academia and industry.  These institutions, which are governed by their respective governing boards, set their own technology roadmaps, taking into account industry needs as well as local and overseas research capabilities.

     The second part of our infrastructure support is the establishment of purpose-built premises suitable for innovation and technology projects.  These include most notably the Hong Kong Science Park and the Cyberport.  These facilities aim to provide affordable office and research space and communal laboratory and support facilities, with a view to helping start-ups overcome the high-cost entry barriers into specific technology fields such as IC design and digital content development.  These facilities also provide incubation programmes for technology start-ups to nurture their business skills, grow their markets and attract investors.  There are now more than 150 overseas and local technology companies in the Science Park and about 60 IT companies in Cyberport. Indeed, one of the most successful aspects of these facilities has been the clustering effect that has allowed companies located there to develop relationships both within and across technology sectors.  

     As part of our efforts to position Hong Kong as an innovation centre for the region, we have also established a very close working relationship in R&D co-operation with the Mainland and other economies.  The economic development of Hong Kong undoubtedly is closely related to the economic development of our Motherland.  After 30 years of labour- and resource-intensive industrial development, our country is now moving towards :autonomous innovation;, and has ambitions in a wide range of technological advancements, ranging from environment and energy, to agriculture and aviation.

     Over the last 30 years, Hong Kong has been a major catalyst for industrial development on the Mainland, particularly in the Pearl River Delta region.  We firmly believe that Hong Kong will also have a significant role to play in the Mainland・s technological development in the years to come.  Apart from arranging finance for Mainland technology and industrial enterprises, Hong Kong is a window for Mainland enterprises to tap into market and technology information from the rest of the world, a test bed for domestic technologies; for example, Hong Kong has adopted the Mainland developed system for our new Digital Television Transmissions, ahead of the Mainland itself.  We are also a base for making use of facilities that cannot for one reason or another be accessed on the Mainland, and a natural partner for attracting high-tech companies to invest on the Mainland. A good example of the latter is the case of DuPont setting up its Global Thin Film Photovoltaic Business and R&D Centre in Hong Kong with production facilities in Shenzhen.

     In the modern technological world in which we now live, companies are willing to share their innovative ideas with potential collaborating partners, with a view to developing a product that can bring benefits to both by capitalising on the strengths of each.  This is in stark contrast to the old model where enterprises kept all their ideas close to themselves by trying to do everything in-house.  One of the tasks of our R&D Centres is to provide a platform for collaboration among local, international, overseas and Mainland academic and commercial R&D institutes, professional and industry organisations, to maximise the opportunities that can be exploited to support technology development in Hong Kong while bringing benefits to all partners as well.  
     The question that we must now ask ourselves is how well have we achieved our objective of setting Hong Kong as an innovation centre for the region, after 10 years working to implement Professor Tien・s recommendations.  With the concerted effort of the Government, industry and academia, I am confident to say that we have moved forward in many ways to strengthen our research capabilities.  More and more R&D activities are being carried out in Hong Kong, by both academic and the business sectors.  From 1998 to 2007, the annual R&D expenditure by the business sector in Hong Kong has increased by nearly four times from $1.6 billion to $6.1 billion.  The number of R&D personnel in the business sector has also increased 4.6 times during this period from 2,750 to 12,700.  The total R&D expenditure of Hong Kong has also increased from 0.43% of the GDP in 1998 to 0.81% of the GDP in 2006, with business sector・s share rising from 29% in 1998 to 53% in 2006.  The latter demonstrated that we were able to help nurture the R&D culture among the business sector, which is in my view one of the most significant achievements we have made so far.

     Looking back over the last 10 years, I think we can, hand on heart, claim that some positive impact on innovation and technology has been generated.  We have gradually built up the foundation for innovation activities, and more and more people in the community recognise the importance of innovation and technology to the long-term economic and social development in Hong Kong.

     But clearly, there is no room for complacency.  Our R&D expenditure as a ratio to GDP is still low when compared to those of our neighboring economies such as Korea, Taiwan, Singapore and the Mainland.  The portion of R&D expenditure invested by the business sector, i.e. 53% of the total R&D expenditure in 2006, is still lower than our neighboring economies in which their business sector generally accounted for more than 60% of the total R&D expenditure.  Indeed, the latest turmoil not only in the financial markets but also in the manufacturing and trading markets, is demonstrating clearly the importance of innovation and technology to a company・s competitiveness and long-term survival and thus to our overall economic wellbeing.

     To conclude, let there be no doubt that the Hong Kong SAR Government is firmly committed to promote innovation and technology in Hong Kong.  Looking into the future, we must constantly review our existing policies and their implementation to ensure that they continue to be relevant to the rapidly changing circumstances and that they remain effective in coping with the vast challenges brought about by globalisation. I am delighted to see that today・s conference has brought together many experts in their respective areas.  I hope you will enjoy the conference and have a fruitful exchange.

     Last but not least, I would like to wish you all a happy new year of 2009, and soon a prosperous Year of the Ox as well.  Thank you.

Ends/Friday, January 9, 2009
Issued at HKT 11:59


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