Speech – Promoting Hong Kong’s economic restructuring (Lo Wai-kwok)

President, Hong Kong has developed from a fishing village more than a century ago into an international metropolitan today, its great economic achievements are recognized by all. However, Hong Kong seems to have lost the direction in its future economic development. As regards the internal factors, Hong Kong’s long-standing over reliance on the financial, real estate and sales services industries has resulted in the lack of a diversified development in its economic structure and the shortcomings are increasingly prominent. Besides, because of the lack of new impetus for economic growth, it is hard to create more quality employment opportunities. As young people lack the chance of upward mobility, many social and livelihood problems have thus arisen.

From the perspective of the external environment, there are two major trends in the international economic development. The first is globalization. With increased transnational movement of goods and capital, various economies have become more inter-dependent. As a result, any small disturbance in a tiny part will affect the overall global economy. The second is the emergence of the knowledge-based economy. The Organisation for Economic Co-operation and Development has defined a knowledge-based economy as an economy which is directly based on the production, distribution and use of knowledge and information. The major economies in the world have laid great emphasis on the development of knowledge, information and high level skills as the major driving forces for the development of various trades and industries.

President, regarding the development of a knowledge-based economy, Hong Kong should have had some favourable conditions, including a sound legal system, information technology talents and free flow of capital, world-class information technology and information infrastructure, as well as the protection of intellectual property. The Globalization Index 2011 released by Ernst & Young showed that Hong Kong had the highest level of globalization among 60 largest economies in the world for two consecutive years. Hong Kong also has another unique advantage, that is, it can leverage on and participate in the development of China. Paragraph 57 of the Outline of the 12th Five-Year Plan clearly indicates that the Chinese Government on the one hand supports Hong Kong’s development of the finance, shipping, logistics, tourism, professional services, information and other high value-added service industries, and on the other hand supports Hong Kong in the development of industries with competitive edge, such as those involving the environmental protection, medical services, education services, testing and certification services, innovation and technology, as well as culture and creativity. From this we can see that the social consensus and the country’s policy both confirm that Hong Kong has to promote economic restructuring, foster economic diversification, and continue to develop the pillar industries and explore industries with competitive edge.

To promote the economic restructure in Hong Kong, one needs to consider at two major levels. First, it is the policy level. The SAR Government should change its deep-rooted idea of “big market, small government”. It should formulate a long-term industry policy and appropriately make use of various financial resources to support the development of industries. After the financial tsunami, the governments of different places in the world have actively taken financial and monetary measures to promote economic recovery and regard that as the foremost policy. The SAR Government should not hold onto this obsolete philosophy of governance and tie its own hands.

The enhancement of the capacity in innovation and technology is the key to success in the development of a knowledge-based economy. According to The Ernst & Young’s 2011 Globalization Index, Hong Kong ranked the ninth in the exchange of technology and ideas. The SAR Government must suit the remedy to its illness and promote the development of innovation and technology industry from two fronts. The first is to provide tax concessions to encourage enterprises to invest in scientific research. Even though the Government has implemented the Research and Development Cash Rebate Scheme, its application criteria are highly restrictive and enterprises have to join with local public scientific research institutes in order to apply. To encourage enterprises to actively allocate resources to research and develop, and design high value-added products and create their own brands, including the purchase or register of the intellectual property, the Government should provide two to three times of tax deduction for enterprises’ investments in these areas. The second is to provide land to support the development of high added-value industries, such as the development of data centres which will be conducive to the consolidation of Hong Kong’s status as an international financial, trading and logistic centre, and also help it to develop as a of hub cloud computing and wireless applications. The HKSAR Government should enhance the land planning scheme and provide land for special purposes and relevant complementary facilities to attract more overseas and Mainland enterprises to Hong Kong to set up regional data centres here.

President, the second level that needs to be considered is the improvement to the human capital and enhancement of the skill level of the people. Concerning the training of local talents, the SAR Government should conduct a comprehensive review and planning on the future supply of manpower resources in Hong Kong and provide diversified choices and appropriate training for various age groups. It should also review again the articulation of the new senior secondary education system with university education and other vocational training and establish a clear development ladder for talents of various industries. The authorities must inject more resources to encourage young people to join the industries that must be stationed in Hong Kong, such as construction, aircraft engineering, installation of lifts and escalations, and maintenance and repair works. Besides, if there is a lack of local talents to meet the development needs of some trades and industries, the Government should negotiate with the relevant industries to appropriately promote the movement of labour through a more flexible immigration policy.

President, to promote Hong Kong’s economic restructure, we must seek change while maintaining stability. The policies must suit the real situation of the Hong Kong society and at the same time forward-looking and flexible. We have to strengthen the pillar industries, promote the development of industries with competitive edge, and also rejuvenate the traditional industries. Moreover, we must also foster the diversification of the industries and also encourage a diversified development within the industries. Only through these can Hong Kong develop steadily into a knowledge-based economy, promote social mobility and improve the livelihood of people in various strata.

President, I so submit.