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LCQ13: Measures to improve competitiveness of Hong Kong

     Following is a question by the Hon Abraham Shek and a written reply by the Secretary for Commerce and Economic Development, Mr Gregory So, at the Legislative Council meeting today (October 17):


     According to the Global Competitiveness Report 2012-2013 of the World Economic Forum (the Report), Hong Kong's position (ranked 9th) in the overall rankings of the Global Competitiveness Index among 144 countries/economies was up two places from last year. Yet, Hong Kong is still the second placed Asian economy behind Singapore which ranks No. 2 worldwide. In the Report, it is recommended that Hong Kong should continue to improve in two important areas, namely higher education and innovation in order to maintain its competitiveness. In this connection, will the Government inform this Council:

(a) given that Hong Kong's participation rate in education remains below levels found in other advanced economies, whether the Government will further increase the number of publicly funded undergraduate places in University Grants Committee-funded institutions, and make reference to Singapore's experience in providing favourable remuneration packages and other incentives to attract renowned academics to stay and work in Hong Kong;

(b) given that the Report has pointed out that Hong Kong's innovative capacity remains constrained by the limited availability of scientists and engineers, whether the Government will consider continuing the measures already introduced and introducing new measures to foster talents, particularly in the areas of science and engineering; and

(c) as the Report has revealed that the five most problematic factors for doing business in Hong Kong are inflation, insufficient capacity to innovate, inefficient government bureaucracy, inadequately educated workforce and access to financing, whether the Government has introduced or will introduce targeted measures to address these problems; if it has introduced or will introduce measures, of the details; if not, the reasons for that?



     My reply to the three parts of the question is as follows:

(a) Education, in particular post-secondary education, is key to enhancing the quality and competitiveness of our population as well as promoting social mobility. At present, our annual recurrent expenditure on education is around $60 billion or more than one-fifth of the total recurrent expenditure of the Government, and about a quarter of the recurrent education expenditure is allocated to post-secondary education.

     We invest heavily in the publicly-funded post-secondary education. We have recently increased the number of first-year-first-degree places funded by the University Grants Committee (UGC) to 15 000 per annum. We are also doubling the number of senior year undergraduate intake places to 4 000 per annum during the 2012/13 to 2014/15 triennium. By the 2014/15 academic year, the annual recurrent grants for UGC-funded institutions will increase by $3 billion to about $14 billion. Coupled with the parallel development of the self-financing post-secondary education sector, it is estimated that by 2015, over one-third of the relevant age cohort will have the opportunity to pursue degree-level education. Including sub-degree places, over two-thirds of our young people in the relevant age group will have access to post-secondary education.

     On attracting non-local academics, since the deregulation in 2003, UGC-funded institutions are free to decide the remuneration packages of their own staff, including non-local staff, to facilitate their competition for global talents. Many of our institutions have achieved excellent rankings in the indicator "International Faculty" under the Quacquarelli Symonds (QS) World University Rankings 2012/13.

(b) The Government spares no efforts in nurturing local technology and engineering talent. We have six local universities engaging themselves actively in scientific R&D activities, and three of which were ranked within top 50 in the aforementioned global ranking. In the 2011/12 academic year, around 27 000 students were enrolled in UGC-funded programmes in science, engineering and technology disciplines, representing about 36% of total enrolment and the corresponding supply of new blood to serve the industry needs.

     The Government has also implemented a wide range of measures to encourage more university graduates to pursue a career in the science and technology field and attracting talents from outside Hong Kong. The measures include:

(i) Hong Kong PhD Fellowship Scheme

     In 2009, the Research Grants Council (RGC) launched the Hong Kong PhD Fellowship Scheme to attract the best and brightest students from around the world to pursue PhD studies in Hong Kong. A total of 4 253 applications from 117 countries/regions were received for the 2012/13 academic year, and 165 elite candidates from 32 countries/regions were eventually offered PhD fellowships in Hong Kong.

(ii) Innovation and Technology Scholarship Award Scheme

     In 2011, the Innovation and Technology Commission (ITC) launched the Innovation and Technology Scholarship Award Scheme. It provides scholarship to local high-achieving science and technology university students for their participation in overseas attachment, internship and mentorship programmes to gain wider exposure to science and technology. The Scheme will continue this year.

(iii) Internship Programme

     The Internship Programme (introduced since 2004) provides funding support for science and technology graduates to work on R&D projects funded by the Innovation and Technology Fund (ITF) of ITC. Young graduates would thus gain a head start in acquiring the relevant experience for building a career in science and technology. Over 1 100 internship positions were provided since the inception of the Programme.

(iv) Early Career Scheme

     The RGC has recently introduced the Early Career Scheme to attract, support and nurture new junior faculty members. The Scheme supports qualified researchers to undertake independent research work and develop educational activities.

(v) Incubation Programme by Hong Kong Science Park

     The Incubation Programme of the Hong Kong Science Park (HKSP) provides a spawning ground for young technopreneurs by offering affordable accommodation, shared-use facilities and equipment as well as business related assistance to support their innovation activities. So far, over 360 companies have benefited from the Programme.

(vi) Instilling a Vibrant Innovation Culture

     ITC organises and supports various activities on a regular basis to promote public interest in science and technology, in particular for the younger generation. These include support for participation in local and overseas student science and technology competitions, exhibitions of inventions by local students and enterprises, etc. To cultivate a stronger innovation and technology culture in the society, we have since 2010 expanded our annual Innovation Festival into InnoTech Month, a month-long program encompassing a wide array of activities including InnoCarnival, roadshows, advertorials, etc. The number of participants to this flagship event increased steadily and reaching a record high of over 200 000 visits last year.

(vii) Attracting Talents to Hong Kong

     We have in place various existing talent admission schemes, including the General Employment Policy, Admission Scheme for Mainland Talents and Professionals, Quality Migrant Admission Scheme and Immigration Arrangements for Non-local Graduates, to attract professionals and talents (including those in science and engineering) from around the world to come to Hong Kong.

     Between 2001 and 2010, the number of R&D personnel in Hong Kong has grown from 11 041 to 24 100 (measured in full-time equivalent), representing an annual average growth rate of around 9%.

(c) While we always welcome suggestions about the future development of Hong Kong and will continue to improve in the key factors that determine global competitiveness, we would like to offer the following observations/explanations to the problems mentioned in the Global Competitiveness Report 2012-13 of the World Economic Forum (the Report).


     The acceleration in inflation rate during most of 2011 was not unique to Hong Kong but was witnessed in many Asian economies with vibrant activity growth. Moreover, consumer price inflation has receded visibly upon entering 2012. In August 2012, underlying inflation eased notably to 3.7%, from the peak of 6.4% in the fourth quarter of 2011.

     Being a small and open economy, Hong Kong has limited control over inflation. Yet, we have adopted a multi-pronged approach to reduce inflation risks and mitigate the impact of inflation on people's livelihood. In the short term, the Government has been striving to ease the domestically generated price pressure by forestalling property market exuberance, preventing excessive credit growth, pursuing a prudent fiscal policy, while providing one-off, well-targeted relief measures to help the lower-income groups. In the medium to long term, the Government will continue to invest heavily in infrastructure, thus increasing the capacity and efficiency of our overall economy, as well as alleviating inflationary pressures arising from the supply side.

Capacity to innovate

     Our capacity to innovate is supported by our core strengths such as excellent connectivity with the Mainland and the rest of the world, world-class universities, robust IP protection, etc. With a clear direction for R&D development in the coming years as provided under the National 12th Five-Year Plan, Hong Kong is provided with good opportunities to further develop our innovation and R&D capabilities. We do however recognise there may be challenges. For instance, Hong Kong is a service-driven economy, and its manufacturing sector contributed to less than 2% of the gross domestic product (GDP) in 2010. Furthermore, Hong Kong does not have national defence expenditure which stimulates R&D activity as in many other economies.

     To make good use of our strengths as well as to address our challenges, the Government has made continued efforts through various new measures to promote the development of innovation and technology. On the hardware side, the development of Phase 3 of HKSP has commenced in full gear for phased completion between 2014 and 2016 for accommodating 150 additional technology companies and creating 4 000 R&D jobs. On the software side, the ITF has been enhanced to support various realisation/commercialisation activities for local R&D results including prototype production and the conduct of trials by the public sector. The cash rebate to be provided to investors of R&D projects under our Cash Rebate Scheme has been increased from 10% to 30% to provide greater incentives for conducting R&D. To seize the opportunities brought about by a rapidly growing market in the Mainland, we have been closely liaising with the Mainland authorities and building more collaborative platforms, e.g. Partner State Key Laboratories in Hong Kong; the National High-tech (Partner) Industrialisation Base for Green Technology in HKSP; the Hong Kong branch of Chinese National Engineering Research Centre in the Applied Science and Technology Research Institute; etc.

Government Bureaucracy

     Hong Kong has been recognised by the World Bank's global ranking in 2011 as the second best place for our ease of doing business and our ranking has been up three places from that five years ago (2006). Since 2006, the Government has implemented various business facilitation measures on the advice of the Business Facilitation Advisory Committee and its Task Forces and will continue to do so under programmes such as the "Be the Smart Regulator" Programme with a view to further enhancing Hong Kong's overall business environment and long-term competitiveness. The ITC has also been regularly reviewing the scope, modus operandi, etc. of the ITF to ensure it meets present day needs (e.g. need for closer collaboration with the Mainland, need to facilitate realisation/commercialisation, etc.).

Educated workforce

     We note in the Report that the gross tertiary education enrolment rate is included as an indicator. As a result, economies with a four-year normative undergraduate curriculum are measured more favourably than those with a three-year one. With the implementation of the new academic structure and extension of the normative length of our undergraduate curriculum from three to four years starting from the 2012/13 academic year, we expect that our performance in this indicator will improve considerably.

Access to financing

     The business sector in Hong Kong has convenient access to financing such as by getting credit from banks, or by issuing corporate debts or bonds. Various guaranteed financing schemes are also available to meet the needs of small-and-medium-sized enterprises (SME). These include, for example, the SME Loan Guarantee Scheme operated by the Trade and Industry Department, as well as SME Financing Guarantee Scheme and the Microfinance Scheme by the Hong Kong Mortgage Corporation. In addition, the Hong Kong Monetary Authority and the banking industry are working to improve access to credit by borrowers by enabling the development of a comprehensive database for commercial credit data via the Commercial Credit Reference Agency.

Ends/Wednesday, October 17, 2012
Issued at HKT 15:15


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