Saturday, 24 October 2015

HK in keen pursuit of innovation

Chief Executive CY Leung

We now live in the innovation age. Innovations in the past 10 to 20 years have particularly profound impact on our lives. Smart phones, social media, 3D printing, drones, big data, web 2.0, the Internet of things, and so on, transformed our lives.

 

We have different working patterns now - many of you probably have a home office; different shopping patterns - instead of going to the malls and boutiques, many people shop online; and even sleeping patterns - many devices can help us monitor our health, including how deep and how long we sleep.

 

Innovation - all that it promises, and all that it markets - has captured the global imagination for good reason, of course. For me, innovation enhances quality of peoples' lives, and supercharges our economic engine. And that's certainly something worthy of our pursuit.

 

Indeed, innovation was high on my agenda this past May, on my first official visit to Boston. There, I spent a good part of a day at MIT and Harvard. I was fortunate to visit the university's Stem Cell Institute, where I learned about its research in regenerative medicine and other areas.  With me were some 20 students from Hong Kong, in Boston to learn more about innovation and technology, to help build links between our educational institutions, to expand our opportunities for co-operation.

 

So I must say it's reassuring to see so many of you here today, to know that the Harvard Club of Hong Kong is so active in the local community.

 

Learning from others’ experience

Other than Boston, I also led a delegation of some 30 members from the Government, academia, research and industry sectors to visit Israel just last week, mainly to learn from the experience of the world famous "start-up nation". I am sure you know that Israel was ranked No. 1 in the world for innovative capacity by the IMD Global Competitiveness Yearbook 2014.

 

We wanted to explore how Hong Kong and Israel could work together to drive further developments in the important area of innovation and technology. And we know we can learn from the successful experience of Israel , particularly in the area of technology transfer.

 

The Hong Kong Government has a firm belief in the power of innovation. I'll focus my thoughts on innovation and technology as a key driver for economic development. We are committed to developing Hong Kong into a knowledge-based economy, one that thrives as the region's innovation hub.

 

The essential ingredients for nurturing technology development and innovation have long been in place. They include our legal infrastructure and intellectual property protection regime, which safeguard the interests of inventors and innovators. They include, too, our world-class infrastructure and international connectivity, which enable the free flow of talent, information, ideas and knowledge.

 

Freest economy

Hong Kong is consistently rated the world's freest economy, which attracts a world of business to Hong Kong. Our education system produces creative- and technology-savvy graduates. We have a thriving research sector. We are close to the production base in Shenzhen and other neighbouring municipalities. And our financial-services sector is one of the most resourceful in the world for raising capital and providing sophisticated financial services.

 

As for innovation and technology, we put concerted effort, and considerable resources, into it - into ensuring its fast-track development. The numbers make the point. Hong Kong's gross domestic expenditure on R&D rose from $7.1 billion in 2001 to $15.6 billion in 2013, an average annual increase of 7%. During that same period, the number of R&D personnel in Hong Kong has more than doubled, from 11,000 to 26,000.

 

And it's not just the government. We have a healthy ecosystem for spurring innovations, and nurturing start-ups to turn research into results. They include the academic, research and industry sectors.

 

For instance, the Hong Kong Science & Technology Parks Corporation offers one-stop infrastructural support services to technology companies and activities. Phases 1 and 2 of the Park are about 90% occupied. Construction of the $4.9 billion Phase 3 is on schedule. With the completion of Phase 3, the Science Park will be able to accommodate about 600 partner companies and provide 15,000 jobs.

 

Investment magnet

The Science Park has earmarked $50 million for the new Corporate Venture Fund, which was launched in July.  It was created to attract more angel and venture capitalists to invest in local technology start-ups, spurring more private funding in innovation and technology.  On a matching basis with private funds, investment will be made in start-ups that are either located in the Science Park or that have participated in its incubation programmes. Maximum investment size is $8 million per deal.

 

Outside the Science Park, other institutions, namely the Cyberport, Hong Kong Productivity Council and the Hong Kong Applied Science & Technology Research Institute, et cetera, all are doing their parts to foster innovation and technology in Hong Kong.  All are important partners of the Government in the ecosystem of innovation.

 

But no doubt the Government is playing a central role in this area, and indeed for a while already.  The Government set up the Innovation & Technology Fund back in 1999, with an initial injection of $5 billion. A further $5 billion was made in February. The fund provides financial support for applied R&D projects that help upgrade technology and promote innovation in our manufacturing and service industries.

 

At the end of July, the fund had supported more than 4,600 projects, with an approved funding of nearly $10 billion.

 

Commercialisation goal

In addition, the Government continues to enhance the Fund to better support the realisation and commercialisation of R&D results.  For example, in April we launched the Enterprise Support Scheme.  It provides funding support, on a dollar-for-dollar matching basis, helping companies of all sizes conduct R&D projects. The funding ceiling for each project is $10 million, with no requirement for repayment.

 

The industry has expressed keen interest in the scheme. In the long run, we hope it will help create a "rainforest" of technology companies. Unlike its predecessor, the Enterprise Support Scheme supports larger companies. We want to encourage sizable companies to undertake more applied R&D projects in Hong Kong. This would, in turn, encourage more private sector investment in R&D.  And that should translate into more job opportunities for our young science and engineering graduates.

 

In the past, the rather high demands entailed in starting a technology venture - I'm thinking of financial requirements and personal determination - may well have deterred some from starting a career in the innovation and technology field.

 

Support scheme for start-ups

We set up the Technology Start-up Support Scheme for Universities last September to encourage local universities to start technology companies, bringing R&D results from the campus to the real world. An annual funding of up to $4 million has been provided, initially for three years. Since its inception, more than 90 technology start-ups have received confirmation of Support Scheme funding, amounting to $41 million.

 

And let's not forget the bigger picture. Hong Kong has unique advantages of "One country, two systems". As the super-connector between the Mainland of China and the rest of the world, Hong Kong provides the best tripartite platform for Hong Kong, the Mainland of China and foreign countries also for the development of innovation and technology. Any association with Hong Kong is an association with China.

 

But we are not just any city of China. We offer the benefits of "the other system", with which most foreign countries are familiar. We offer also the common use of Chinese and English, both being our official languages. To Mainland Chinese and Taiwanese talents who want to return to this part of the world after a long absence, we are the best half-way house. We are also, to them, closer to home and parents.

 

Hong Kong has already established useful technology co-operation with the Mainland, and at all levels. Through the Mainland/Hong Kong Science & Technology Cooperation Committee with the State Ministry of Science & Technology, we implement initiatives to dovetail with the National 12th Five-Year Plan on Science & Technology Development. The goal is to enhance Hong Kong's participation in the nation's technology development. International technology companies are also welcome to use our network to gain access to the Mainland market and its R&D initiatives.

 

Great demand for new bureau

We have made a lot of efforts, to be sure. But in this hyper competitive economic environment, we need to do more. To be specific, we need an overall guiding policy and entity to further upgrade our innovation ecosystem, by inducing closer collaboration among the government, research, academia and industry sectors. 

 

That's why we need a dedicated, high-powered policy bureau to provide leadership in this important area. That's why the Government has been relentless in its efforts to set up an Innovation and Technology Bureau, despite the three-year long filibustering by the pan-democrats in the Legislative Council.

 

The Legislative Council already passed a resolution in June, so that is like at the end of the tunnel, transferring statutory functions for the bureau's establishment. The funding and staffing proposals, however, have yet to be put to vote. I hope, and I believe our community shares my aspiration, that the Finance Committee of LegCo will approve the proposals as soon as possible.

 

The bureau's proposed establishment responds to calls from a variety of business sectors.  And I hope all of you will lend your support to this initiative.

 

Committee taps specialists’ advice

In the meantime, I set up the Advisory Committee on Innovation & Technology in April to tap the expertise of specialists in this sector. The committee is chaired by Nicholas Yang, my innovation and technology advisor.

 

The advisory committee keeps the Government abreast of strategic and developmental advances in innovation and technology in Hong Kong.  It focuses on making the best use of the advantages of "One country" and "two systems", strengthening co-ordination among the government, industry, academic and research sectors.

 

Among the topics already on the advisory committee's agenda are strategic social and economic goals; co-ordination among stakeholders; innovation and technology collaboration with the Mainland and other economies; means of attracting investment; and talent-pool development.

 

The work of the committee is, to be sure, complementary to the solid foundation we have already laid for innovation and technology's development.

 

I have great confidence on the development of innovation and technology in Hong Kong. My confidence is reassured by the enthusiastic participation and productive discussion in the conference this morning. I look forward to your support and collaboration with Hong Kong.

 

Chief Executive CY Leung gave this address at the Harvard Inaugural Annual Conference Luncheon hosted by the Harvard Club of Hong Kong.

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