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LCQ1: Measures to enhance competitiveness of Hong Kong

     Following is a question by the Hon Martin Liao and a written reply by the Secretary for Commerce and Economic Development, Mr Gregory So, in the Legislative Council today (February 25):


     It has been reported that the competitiveness reports published last year by quite a number of authoritative organisations coincidentally pointed out that alarm had been sounded for Hong Kong's competitiveness. For instance, as indicated by the Global Competitiveness Report 2013-2014 published by the World Economic Forum (the Forum Report), Hong Kong was the seventh in the overall rankings of the Global Competitiveness Index that covered 144 countries/economies. Although that ranking is the same as that in the previous year, Hong Kong's ratings in the two areas of higher education and innovation were significantly on the low side, standing respectively at the 22nd and the 26th positions and showing a downward trend. Besides, as indicated by the World Competiveness Report 2014 published by the International Institute for Management Development in Lausanne, Switzerland, Hong Kong's competitiveness ranking has dropped below the first three positions for the first time since 2005. Apart from the drop in international rankings, as pointed out in the Blue Book of Urban Competitiveness: Report on China's Urban Competitiveness published by the Chinese Academy of Social Sciences (the Academy Report), the rankings of Hong Kong in several competitiveness indexes have been surpassed by a number of mainland cities, and in the Overall Incremental Competitiveness Index, Hong Kong was even ranked 18th only, a drastic drop by 10 positions from its ranking in the previous year. In this connection, will the Government inform this Council:

(1) as the various aforesaid reports have pointed out that Hong Kong should improve on the two areas of higher education and innovation, of the authorities' new plans and measures to enhance Hong Kong's overall competitiveness in these two areas, apart from the proposals put forth in this year's Policy Address;

(2) as the Forum Report has pointed out that Hong Kong should note that the quality of its research organisations is declining and that scientists and engineering talents are lacking, of the targeted measures the authorities will implement to resolve these two problems; as the Forum Report has also pointed out that Hong Kong's rankings regarding company spending on research and development as well as university-industry collaboration in research and development were below the 25th position, whether the authorities will implement new measures or provide other incentives (such as tax concessions), apart from the measures currently implemented by the Innovation and Technology Commission, to encourage and induce enterprises and universities to deploy resources for research and development of innovation and technology; if they will, of the details; if not, the reasons for that; and

(3) as the Academy Report has reportedly pointed out that although Hong Kong has remained the most competitive city in the country for 12 consecutive years, its economic edges have gradually weakened and its economy lacks stable growth areas due to the over-reliance of its economy on a few industries such as the finance and real estate industries as well as the impact of competitors from within and outside the country, whether the Government will formulate more new measures to promote economic diversification, so as to enhance Hong Kong's competitiveness?



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

(1) The Government attaches great importance to the development of post-secondary education and strives to provide the younger generation with flexible and diversified articulation pathways with multiple entry and exit points. We promote the parallel development of the publicly-funded and self-financing sectors through various support measures. Currently, 38.4 per cent of our young people in the relevant cohort have access to degree-level education. With the sub-degree programmes, the rate of youth pursuing post-secondary courses is nearly 70 per cent, forming a pool of talent for the future development of Hong Kong. In his 2014 Policy Address, the Chief Executive announced a series of initiatives to broaden the opportunities for local students to receive higher education and provide school leavers with broader and more diversified articulation pathways. On full implementation of these measures, and given the declining student population, we envisage that there will be sufficient publicly-funded and self-financing first-year first-degree places for all secondary school leavers meeting minimum entrance requirements for university admission by the 2016-17 academic year, assuming the performance of secondary school leavers is maintained at a comparable level.

     Innovation and technology (I&T) are important economic drivers. They also underpin the development of other economic sectors. To fully capture the opportunities provided by advancements in technology and the commercial potential they offer, the Government is committed to promoting the development of I&T in Hong Kong, and has proposed to set up the Innovation and Technology Bureau to provide focused and high-level leadership and stronger policy co-ordination. In his latest Policy Address, the Chief Executive also proposed to inject $5 billion into the Innovation and Technology Fund (ITF) and include the Research and Development (R&D) Cash Rebate Scheme under the ITF.  

     Furthermore, the Government will continue to provide sustained and comprehensive support for Hong Kong's I&T development through different measures. There are five strategic directions, namely the provision of world-class technology infrastructure for enterprises, research institutions and universities; financial support for stakeholders in the industry, academia and research sectors to develop and commercialise their R&D results; nurturing talent; strengthening science and technology collaboration with the Mainland and other economies; and fostering a vibrant culture of innovation. Recent examples include -

(a) focusing on the promotion of private sector investment in R&D and realising/commercialising R&D results, such as -

(i) extending the funding scope of the ITF to render stronger support to downstream R&D and commercialisation activities;

(ii) waiving the industry sponsorship requirement for R&D projects under the ITF initiated by Government bureaux/departments and statutory bodies, and increasing the funding ceiling of the Public Sector Trial Scheme under the ITF to a maximum of 100 per cent of the actual cost of the original R&D project;

(iii) launching a new Technology Start-up Support Scheme for Universities (TSSSU) to provide an annual funding of up to $24 million to six local universities, initially for three years, to encourage their students and faculty members to start technology businesses and commercialise their R&D results; and

(iv) launching a new Enterprise Support Scheme (ESS) around March 2015.  ESS will replace the Small Entrepreneur Research Assistance Scheme to provide funding support for companies of all sizes to conduct in-house R&D projects. The funding ceiling for each project will be $10 million, with no requirement for recoupment of Government's contribution;

(b) development of the $4.9 billion Hong Kong Science Park (Science Park) Phase 3 with a strong focus on green technology; and

(c) implementation of the recommendations of a review of the Science Park and industrial estates (IEs), including the strengthening of the Science Park's role in developing the I&T ecosystem; suitably raising the development density of the park to optimise land use therein for the development of new R&D facilities; and proceeding with the formulation of a new IE policy to enhance the value chain of the I&T industries in Hong Kong and further revitalise the IEs.

(2) The Government has always emphasised the quality of research institutions.  On the higher education front, the reported aggregate expenditure on research of the University Grants Committee (UGC)-funded institutions amounted to $7,576 million in the 2012-13 academic year, with three of the UGC-funded institutions being ranked among the top 50 in the Quacquarelli Symonds (QS) World University Rankings 2014. Furthermore, according to the results of the Research Assessment Exercise (RAE) 2014 as announced by the UGC upon its latest assessment of the UGC-funded institutions, 12 per cent of the research submissions made by the eight funded institutions in respect of the RAE 2014 were judged by international experts as of world leading standard, while 34 per cent attained international excellence and the remainder overwhelmingly attained international standing or regional standing. This reflects the high quality of academic research done by local universities.

     On the applied R&D front, the Government set up five R&D Centres in 2006 to drive and co-ordinate R&D work in five selected technology areas. Over the years, the Centres have undertaken over 700 R&D projects, with a total funding amount of over $3.9 billion from the ITF.  The five R&D Centres have demonstrated satisfactory performance in meeting industry contribution targets, undertaking more R&D projects and realising/commercialising R&D results. Examples include the "Finer Nu-Torque Cotton Yarn Production" technology jointly developed by the Hong Kong Research Institute of Textiles and Apparel (HKRITA) and The Hong Kong Polytechnic University; the "E-Lock-Based Enabling Technology" developed by the Hong Kong R&D Centre for Logistics and Supply Chain Management Enabling Technologies (LSCM) in collaboration with the Customs and Excise Department for facilitating logistics flow between Hong Kong and the Mainland; and a tracking system jointly developed by the HKRITA, the LSCM and the Applied Science and Technology Research Institute for keeping track of the whereabouts of institutionalised elderly people.

     On nurturing science and engineering talents, in the 2013-14 academic year, around 34 000 students were enrolled in UGC-funded programmes in science discipline and engineering and technology discipline, representing about 35 per cent of total enrolment. They are the new blood to serve industry needs.

     Other than the newly launched TSSSU mentioned in part (1) of this reply, the Government has also implemented a series of measures to encourage university graduates to pursue a career in the I&T sector. Such measures include -

(a) Innovation and Technology Scholarship Award Scheme supported by the Innovation and Technology Commission (ITC)

     The Innovation and Technology Scholarship Award Scheme provides financial support for outstanding science, technology and engineering students of local universities to participate in overseas attachment, internship and mentorship programmes;

(b) Hong Kong PhD Fellowship Scheme by the Research Grants Council (RGC)   

     The Scheme was launched in 2009 to attract the best and brightest students from around the world to pursue doctoral studies in Hong Kong. A total of 4 785 applications from 106 countries/regions were received for the 2013-14 academic year, and 185 elite candidates from 33 countries/regions have accepted offers for the fellowship;

(c) Internship Programme by the ITC

     The Internship Programme under the ITF provides funding support for science, technology and engineering graduates to work on R&D projects funded by the ITF.  Over 1 700 internship positions have been provided since the inception of the programme;

(d) Early Career Scheme by the RGC  

     The Scheme was introduced to attract, support and nurture new junior faculty members. The Scheme supports qualified researchers to undertake independent research work and develop educational activities;

(e) Incubation Programmes at Science Park and Cyberport

     The Incubation Programmes at Science Park and Cyberport provide 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. Over 510 and 260 companies have already benefited from the programmes run by Science Park and Cyberport respectively; and

(f) Instilling a vibrant vulture on innovation

     ITC will continue to organise and support various activities, such as the annual InnoTech Month, to promote public interest in science and technology.  

     To encourage and induce enterprises to deploy resources for R&D, the R&D Cash Rebate Scheme launched by ITC in April 2010 provides cash rebate on the investment by enterprises in conducting R&D projects either funded by the ITF or in partnership with designated local public research institutions. To enhance the effectiveness of the Scheme, ITC increased the level of cash rebate from 10 per cent to 30 per cent with effect from February 1, 2012. Besides, under the current tax system, we already allow full deduction on expenditure incurred by a business enterprise for carrying out R&D related to its trade, profession or business, including capital expenditure (such as for the purchase of plant or machinery).

(3) The Government attaches great importance to diversifying the industries so as to enhance the overall competitiveness of Hong Kong. Since its establishment in 2013, the Economic Development Commission (EDC), led personally by the Chief Executive, has been studying how to make use of Hong Kong's prevailing advantages and opportunities. The EDC has also been exploring the overall strategy and policy to broaden our economic base and enhance our long-term development, and identifying industries which present opportunities for Hong Kong's further economic growth.  

     Regarding the development of industries, the working groups underpinning the EDC (namely Working Group on Transportation; Working Group on Convention and Exhibition Industries and Tourism; Working Group on Manufacturing Industries, Innovative Technology, and Cultural and Creative Industries; and Working Group on Professional Services) have submitted specific recommendations on relevant industries in the past two years. Such recommendations have been approved by the EDC.  The Government will consider whether to accept these recommendations and the means in implementing them. The Government looks forward to further recommendations on the development of industries from the EDC and its working groups.

Ends/Wednesday, February 25, 2015
Issued at HKT 14:53


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