A vendor (left) waits for customers in his printing shop as a pedestrian walks past in Hong Kong on Jan 15, 2021. (ANTHONY WALLACE / AFP)
Increasing investments in research and development, alleviating the shortage of talent, and re-industrializing the economic structure are the three main strategies that are so crucial for Hong Kong’s third economic transformation.
HK’s economic and productivity growth have been slowing in recent years against the backdrop of an overreliance on the four pillar industries, the China-US trade spat and the COVID-19-induced economic recession
Hong Kong needs a third economic transformation, following the first in the 1960s (from primary to manufacturing) and the second in the 1990s (from manufacturing to services). Hong Kong’s economic and productivity growth have been slowing in recent years against the backdrop of an overreliance on the four pillar industries, the China-United States trade spat and the COVID-19-induced economic recession.
“Along with those long unaddressed problems related to Hong Kong’s economic policies, it is no longer efficient to rely on a laissez-faire approach in a rapidly changing economic environment. It is time for the government to take bold steps and initiate innovative policy reform in order to seek a way out of the current economic dilemma,” said Richard Wong Yue-chim, provost and deputy vice-chancellor at the University of Hong Kong and HIEBS director.
Regarding significantly increasing R&D expenditure, the report suggests the government can rely more on the city’s experts in venture and angel funds to invest in scientific research and startup businesses, thus attracting more investors and talent in science and technology more willing to consider Hong Kong as a base.
Enhancing the supply of mid-level skilled science and technology talent is also important in fostering R&D commercialization in the S&T sector, the report said. The government is urged to provide economic incentives to attract overseas and mainland new-economy companies to set up affiliates in the city, thus solving the talent shortage by providing job opportunities to those trained S&T professionals.
Thirdly, Hong Kong should leverage its competitive advantage in finance and medical-related fields to transform itself into a manufacturing and design hub for high-tech products in medical, biotech, pharmaceutical and financial sectors, in a bid to re-industrialize the economy that can foster inclusive economic growth by providing upward social mobility with diverse job opportunities and on-the-job training for young people.
“There should be more collective wisdom to think about how the Hong Kong economy should be better diversified away from finance and finance-related industries. I am not saying we should diminish the importance of finance, but we should think (about) the importance of other industries,” said Tang Heiwai, economic professor at HKU Business School and associate director at HIEBS.
The trajectory toward a knowledge-based and innovation-driven economy also requires the administration to double human-capital investment within five years, the report said. Measures including raising the GDP share of public expenditure on education to 5 percent, increasing the number of University Grants Committee-funded places, boosting the GDP share of public expenditure on R&D to 2 percent, setting up a “senior research talent scheme” and “education loan scheme”, as well as issuing educational bonds as a long-term funding source.
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