Speech – Encouraging the return of the industrial sector for development to make Hong Kong’s industries more diversified (Andrew Leung)

President, first of all, I am very grateful to Mr CHUNG Kwok-pan for proposing this motion, which gives Members a chance to discuss the industrial development of Hong Kong. I have proposed an amendment to Mr CHUNG’s motion mainly because it has not stressed the development of high value-added industries. I have therefore amended the relevant wordings, hoping that the Administration would introduce more policies and measures to attract high value-added industries to return and take root in Hong Kong. As I said when I spoke on the Policy Address in February, although the Policy Address this year has pointed out that government policies are in place to support the development of the industrial and commercial sectors and maintain Hong Kong’s competitive edge, there is not much mention on the concrete measures. To attract the return of the industrial sector, I believe there must be a comprehensive industrial policy to support the enterprises, which includes the supply of land, the promotion of innovation, the stepping up of the training of talents and the support for high value-added industries. Only by doing so can industries in Hong Kong flourish. In this connection, I will put forward some relevant proposals for serious consideration by the Government.

According to the Global Competitiveness Report 2013-2014 published by the World Economic Forum last September, with the exception of Hong Kong, all the top 10 countries have placed special emphasis on industrial development because industry is the gravity of the economy. Instead of solely counting on the financial or tourism sectors, Hong Kong should redevelop a high value-added local industrial sector to make our economy more diversified, thereby expanding the scale of the economy and creating more job and business start-up opportunities for different strata of the community. I therefore hope that the authorities will enhance its support for the industrial sector, so that Hong Kong’s economy will not only lean towards any particular side.

Friends engaging in high value-added, high technology industries and operating factories in the Mainland told me that the escalation of operating costs has made the operating environment difficult. Therefore, these manufacturers wish to return to Hong Kong for development through upgrading. Also, I have urged the Government time and again to expeditiously introduce a holistic and comprehensive industrial policy and identify land to build suitable modern factories, so as to attract them to relocate their factories back to Hong Kong. In so doing, processes from product design, product development to the entire production line will be relocated to Hong Kong, thereby achieving a clustering effect and attracting more manufacturers to return to Hong Kong, with a view to giving the greatest impact and revitalizing Hong Kong’s industrial development.

However, sufficient industrial land must be made available before these manufacturers can take root in Hong Kong again. Regrettably, the shortage of land has all along been the major stumbling block for industrial development in Hong Kong. Not only are the industrial estates fully occupied at all times, the vacant industrial buildings in the urban areas have failed to meet the requirements of high value-added or green industries. Thus, the Government should expeditiously plan and develop the fourth industrial estate, and review the existing restrictions on the land grant for industrial estates so that land resources can be fully utilized.

Meanwhile, we hope that when the Government formulates land supply strategies for Hong Kong, it will not only focus on the planning of housing development, but will also take into consideration our industrial development. When exploring new sites for industrial use, the authorities should consider optimizing the frontier closed areas for the development of high value-added industries, thereby attracting Mainland talents to research on and develop new innovative technological products in Hong Kong, and subsequently capitalizing on our proximity with the Pearl River Delta Region to build Hong Kong as a transport and logistics centre.

In January 2014, the Bloomberg Businessweek published the rankings of innovative countries. Korea ranked top with Japan, Singapore and Taiwan among the top 10. Hong Kong, however, ranked the 27th, and was two places behind China. In view of this, it is necessary for the authorities to proactively develop innovation and technology, and capitalize on Hong Kong’s status as an international financial, investment and business centre as well as our sophisticated intellectual property protection regime and established laws, so as to consolidate our status as a technology and innovation centre in the region.

President, I support, in principle, Mr CHUNG’s proposal in the motion to enhance the brand effect of “Made in Hong Kong” ― which has all along been referred by the Federation of Hong Kong Industries (FHKI) as “Made by Hong Kong” after we published a book entitled “Made by Hong Kong” jointly with the Massachusetts Institute of Technology in 1997. Our production chain can then be expanded for there is no need for certain procedures to be carried out in Hong Kong. All we need is to finish the high value-added part in Hong Kong. In order not to create difficulties for the translation of the Legislative Council Secretariat, I have simply deleted the phrase “Made in Hong Kong” and replaced it with “assist enterprises in promoting Hong Kong brand names”.

Nowadays, to many people, the brand name “Made by Hong Kong” is synonymous with “good quality, confidence in use and high reliability”. Many tourists scramble for brands flaunting the “Made by Hong Kong” label. Food products, fashion, watches, jewellery, pharmaceuticals and electronic products and high-end printing can best display the value of the brand of “Made by Hong Kong”. So long as a product is somewhat related to Hong Kong, it can be sold at a higher price than similar Mainland products. However, the high wages and costs have made labour-intensive and low-skilled industries no longer suitable for Hong Kong. We should therefore focus on the high-end parts, such as product development and design, technology research and development and patent registration, and make good use of the production base in the Pearl River Delta for production and manufacturing, as well as introduce innovative technology and design into traditional industries, with a view to further promoting “Made by Hong Kong” products. Therefore, the Government should introduce incentive policies to attract enterprises to return, and one way is to induce enterprises to increase their investment in technology research.

At the meeting of the Panel on Commerce and Industry held on 18 February, we discussed the latest development of the Research and Development Cash Rebate Scheme. As at the end of December 2013, the highest amount of cash rebate disbursed was $1.8 million. In other words, if a project incurs a cost of $6 million, $4.2 million is irrecoverable. While this is negligible to large-scale enterprises, it is an unbearable sum for small to medium enterprises. As members of the sector have reflected, given the stringent eligibility criteria of the Scheme and a rate of return of only 30%, many of them are not interested at all. I therefore hope that the authorities would seriously consider adopting the proposal of providing triple tax deduction concession, which the FHKI has put forward time and again on various occasions, so as to attract enterprises to invest in research and development and include high value-added design elements in their products.

In order to support the development of local high value-added industries, adjustments should be made to the relevant procurement policies. The Government should take the initiative to purchase products of local enterprises as the taking of practical actions to support is undoubtedly a booster to local business starters.

President, it is essential for Hong Kong to develop an appropriate high value-added industrial sector which it has a competitive edge. Coupled with the fact that the industrial sectors in the Asia-Pacific Region are moving up the value chain, thus Hong Kong should no longer adopt an inward-looking mentality but take this opportunity to step up the training of talents, thereby enabling Hong Kong’s economy to escalate to a higher level.

Vocational education is the best way to train up the necessary talents because not only is it relevant to the needs of the sector and economic development, but it also ensures that the students can apply what they have learnt. In that case, fresh graduates will not become unemployed because of a failure to find suitable jobs on the one hand, they will provide sufficient manpower supply for the sector on the other. Another advantage of vocational education is the general acceptance of the Qualifications Framework. And yet, there is a need for the authorities to expand the scope of the Qualifications Framework and formulate descriptors to encourage more sectors to provide the relevant training, with a view to comprehensively enhancing the ability of employees across the board.

President, in an earlier interview, Mr LI Ka-shing mentioned that the competitiveness of Hong Kong enterprises was no longer as strong as before both in the Mainland and international arena. Given that Hong Kong is a business society with intense competition, the authorities should give the right prescription to resolve the economic problems. The crux lies in how we can enhance our long-term competitiveness and “make a bigger pie” to provide more opportunities.

Hong Kong has a robust intellectual property protection regime, and has established a good reputation for our product quality and safety in the international market. Thus, it is suitable for Hong Kong to develop a high value-added and non-labour intensive emerging industrial sector. But due to a lack of government support for high technology industries and insufficient manpower training, there is a succession gap in professional technical personnel. Coupled with the high land price policy and high wages, operating costs have been forced to surge, causing the local industrial sector to shrink day after day. I hope that the Government will stress the development of the local industrial sector, introduce policies favourable to the development of the local industrial sector and implement initiatives, for example, tax concessions to encourage enterprises to upgrade and move up the value chain. Only this would attract manufacturers to return and build up the brand of “Made by Hong Kong”, thereby expanding the scale of Hong Kong’s economy and enabling Hong Kong to enjoy steady development.

The Business and Professionals Alliance for Hong Kong supports today’s original motion and all the amendments.

Thank you, President.