This undated photo shows Hong Kong Science Park in Sha Tin. (PARKER ZHENG / CHINA DAILY)

Talent shortfall is emerging as the biggest challenge for Hong Kong’s innovation and technology sector, with 63 percent of the entrepreneurs interviewed citing it as the major difficulty when founding startups, a study released on Monday revealed. 

A lack of funding and uncertainty in economic outlook are the two other challenges facing the city’s I&T sector, according to the study jointly released by Deloitte and the HKUST Business School.

Hong Kong faces a talent mismatch with job vacancies unfilled while professionals resettled in the city through various talent programs struggling to find work, indicating a need for policy review on demand by authorities, Xu Yan, associate director of the Center for Business Strategy and Innovation at the Hong Kong University of Science and Technology said.

Hong Kong faces a talent mismatch with job vacancies unfilled while professionals resettled in the city through various talent programs struggling to find work, indicating a need for policy review on demand by authorities, Xu Yan, associate director of the Center for Business Strategy and Innovation at the Hong Kong University of Science and Technology said

By the end of November, the Hong Kong government had received over 200,000 applications under talent attraction initiatives, with more than 120,000 approved, including over 47,000 under the Top Talent Pass Scheme.

In the first 11 months of 2023, over 80,000 talents had obtained visa approvals and arrived in Hong Kong. The relocation of these people has brought 68,000 family members to settle in the city as well.

ALSO READ: HK talent trawl attracted 90,000 in 2023, far exceeding govt target

Philip Law, venture capital and private equity lead partner of Hong Kong Deloitte, said the number of professionals attracted to Hong Kong by the government incentives and relaxed visa policies has soured, primarily in finance and accounting, followed by information technology and telecommunications.

According to the report, entrepreneurs are positively approaching the government’s efforts in developing the sector. The proportion of respondents that view government incentives and policies as major advantages has increased to 50 percent, from 41 percent two years ago.

Hong Kong’s investment in research and development has grown over the past five years. In 2021, R&D expenditure accounted for less than 1 percent of the city’s GDP. This figure remains lower than those of Organisation for Economic Co-operation and Development members, with Israel exceeding 5 percent, according to the report.

The city’s output in I&T falls short of expectations, due to subpar commercialization and insufficient R&D efforts. Data unveiled that private sector investment in R&D accounts for about 40 percent of Hong Kong’s total, compared to over 90 percent in Shenzhen, Guangdong province, and Israel, the report showed.

Xu suggested the government measure the effectiveness of I&T policies with an “output-oriented” approach, focusing on results and returns.

READ MORE: Guangdong, HK ink accord to promote talent flow

Relevant authorities could offer additional land and infrastructure to attract overseas and Chinese mainland companies to establish R&D centers in Hong Kong, encourage the private sector to increase R&D spending, and expand the limited market size for innovative products and services, thus enhancing the economic value generated by Hong Kong’s I&T sector, he added. 

tianyuanzhang@chinadailyhk.com