Reindustrialization is viable for Hong Kong if efforts are well-targeted and play to the city’s strengths.
Hong Kong is often compared to Singapore, where there is a wide industrial base despite it being physically smaller than Hong Kong with a smaller population and equally devoid of natural resources.
By focusing on certain high value-added, less land-intensive manufacturing sectors, and by nurturing them with a coordinated plan via partnership with companies and universities, Hong Kong can reemerge as the “go to” place for R&D, prototyping and small-scale manufacturing for rapid market testing
InvestHK reported that as of 2019, Hong Kong had over 3,184 startups employing over 12,478 people. Hong Kong is proud of its technology unicorns, such as online logistics group GoGoVan, travel booking platform Klook, and fintech company WeLab.
Yet Hong Kong is far behind Singapore, which has over 4,000 startups employing over 22,000 people. There are many reasons why Hong Kong is behind Singapore, including land supply, higher cost for space and more regulatory red tape.
Hence the Hong Kong authorities are trying to address some of the problems by developing space and offering subsidies to reindustrialize, hopefully to recapture Hong Kong’s glory days of low-cost manufacturing that catapulted it to becoming one of “Four Asian Tigers (Dragons)”, along with Singapore, Taiwan, and South Korea from the early 1960s to the 1990s when they all underwent rapid industrialization and maintained an exceptionally high growth of more than 7 percent a year.
For example, in July, Hong Kong’s Innovation and Technology Fund started the Reindustrialization Funding Scheme, which offers a 50 percent matching funds plan to qualifying companies. To be eligible, the company needs to set up new “smart production lines” in Hong Kong using “smart” technologies such as the internet of things, big data, artificial intelligence, advanced robotics, etc., in the production process.
In addition to the RFS, there is a Reindustrialization and Technology Training Program that provides matching funds for firms to train their staff in these advanced technologies.
Besides government subsidies, the Hong Kong Science and Technology Park Corp developed the Hong Kong Science Park in Sha Tin, and is developing the new Advanced Manufacturing Center in Tseung Kwan O Industrial Estate along with the Lok Ma Chau Loop Innovation and Technology Park.
The policy intention of these multibillion-dollar projects is to grow Hong Kong’s economy beyond its service sectors (finance, real estate, trading and logistics, tourism, and professional and producer services), which accounted for 93.1 percent of Hong Kong’s GDP in 2018.
It is encouraging that the authorities are willing to spend money. It would be even better if the resources could be specifically directed for Hong Kong to play to its strengths, which are different from Singapore’s.
Thus, the authorities might want to examine “a chosen few” that have the greatest potential to be competitive in new manufacturing. In other words, they can deliver production that is going to be in demand tomorrow, which is not only “circular” — that is using fewer resources in the whole production process — but also smart, quick, mass or bespoke, and innovative.
The fact is Hong Kong has winners, even though the government’s mantra is it doesn’t want to pick winners, on the basis that winners should be determined by market forces. However, to reindustrialize, it helps to see where one’s industrial capabilities lie because they can be built upon, expanded and upgraded.
First, the authorities should identify those manufacturing sectors in Hong Kong that are highly capable of conducting research and development, prototyping, and small-scale manufacturing for rapid market testing. Mass production can be done on the mainland side of the Guangdong-Hong Kong-Macao Great Bay Area.
Consider the textiles and garment manufacturing that fueled Hong Kong’s economy until the 1980s, when production started to relocate across the boundary. Yet, even today, Hong Kong has preserved significant domain knowledge in the development of textiles and clothing, something the world continues to need.
The government has already invested heavily in the Institute of Textiles and Clothing at Hong Kong Polytechnic University, which offers education and research programs in fashion, textiles and design; and together with industry, investments made in the Hong Kong Research Institute of Textiles and Apparel have enabled this sector to move up to high value-added manufacturing and servicing activities using technology.
This special knowledge and capability helped HKRITA to develop the six-layer washable CuMask that offers high protection against infectious diseases — perfectly suited against the ravages of COVID-19 — although its technology can be used beyond facemasks. Esquel, a local company, is producing millions of the three-layer DET30 washable cotton masks for daily use, which Singapore’s Temasek Foundation distributed free to all Singapore residents in June. In both cases, the mass production process took place on the mainland and in Vietnam, respectively.
Second, for each chosen manufacturing sector, the Hong Kong government should establish a coordinated plan to develop the corresponding industrial commons (i.e., capabilities in R&D, advanced process development and engineering, and small-scale local manufacturing).
For instance, the Hong Kong government should establish a public-private partnership between research institutes, universities, and companies to create a coordinated plan for developing the corresponding requisite capabilities.
Consider the Fraunhofer Institute for Material Flow and Logistics located next to the Technical University of Dortmund, Germany. By using the financial support provided by the German government and companies such as BMW (Bayerische Motoren Werke AG), researchers and students can engage in smart manufacturing of spare parts using 3D printing and smart logistics projects using drones, advanced robotics, and blockchain that are intended to sustain Germany’s excellence in manufacturing and logistics.
Similarly, a well-coordinated public-private partnership can enable Hong Kong to develop the requisite capabilities to support the chosen manufacturing sector.
The Hong Kong government has planted the seed to reindustrialize Hong Kong. By focusing on certain high value-added, less land-intensive manufacturing sectors, and by nurturing them with a coordinated plan via partnerships with companies and universities, Hong Kong can reemerge as the “go to” place for R&D, prototyping and small-scale manufacturing for rapid market testing, which is what brands want to do more than anything.
Edwin Keh is the CEO of the Hong Kong Research Institute of Textiles and Apparel, a lecturer at the Wharton School and a visiting professor at Hong Kong University of Science and Technology. Christopher S. Tang is a university distinguished professor and Edward W. Carter chair in business administration at the UCLA Anderson School of Management.
The views do not necessarily reflect those of China Daily.
HONG KONG NEWS