It does not take a miracle to turn Hong Kong

into a Knowledge-based Economy

In Israel, they say, if you do not

believe in miracles you are

not realistic.It does not take a miracle to turn

Hong Kong into a Knowledge-based Economy,

some small adjustments

will do.

(Source: Sharon Gal Or)

InnoTech

Realizing Hong Kong’s knowledge-based economy potential as part of a rising China

http://www.slideshare.net/AlanLung/realising-hks-knowledgebased-economy

Paper P001 (E) prepared by: Dr. Gordon McConnachie Former Technology Transfer Manager, Dow Chemical Europe

Founding Chairman of Scottish Intellectual Assets Centre and Chief Technology Officer of Asia

Pacific Intellectual Capital Centre Mr. Alan Lung

Director & General Manager of Asia Pacific Intellectual Capital Centre

THE EIGHTH ANNUAL CONFERENCE OF

THE ASIAN STUDIES ASSOCIATON OF HONG KONG P001 (E) Session 9A: Business Sector in Hong Kong 16.30-18.00 , Saturday 9 March 2013 Lady Ivy Wu Lecture

Theatre, The Hong Kong Institute of Education

Zhejiang University Hangzhou

Beijing Academy of Science & Technology

PECC Beijing Conference

Jinan University Guangzhou

Hong Kong SAR Government Office in Beijing

IPR2 Beijing Office

Hong Kong Science & Technology Park

NDRC & SIPO Beijing

Links to Scotland, USA & EuropeEU in HK & Beijing

About:

John Tsang’s speaker luncheon titled: Hong Kong as a knowledge-based economy and its role in China's economic development (31 May 2010)http://www.hkdf.org/newsarticles.asp?show=newsarticles&newsarticle=272

Carrie Lam’s speaker luncheon titled:

Policy priorities of this term of

Government - Population Policy (4 February 2013)

http://www.hkdf.org/newsarticles.asp?show=newsarticles&newsarticle=324

HKSAR Government targets economic development • “This Government places as much

emphasis on economic development – both the speed and the quality of economic development – as we do on livelihood issues …”

• Tell me: “If Government could do 1,2,3,4,5 for us, then the following will happen and this would be good for Hong Kong’s economy and therefore good for the Hong Kong society …”

Chief Executive C.Y.Leung’s remarks at The first meeting of the Economic

Development Commission

13 March 2013

http://www.news.gov.hk/en/record/html/ 2013/03/20130313_121636.shtml?pickList=highlight

http://www.info.gov.hk/gia/general/201301/17/P201301170324.htm

Hong Kong has always been about free trade …

THE BRITISH came ashore on Hong Kong Island in 1841 on a rising imperial tide. They worked to create a bustling business community convinced that in trade … lay the future of their world.

“The Governors of HONG KONG “ by Russell Spurr

Sir Henry Pottinger, First Governor of

Hong Kong (1841-1844) and

Chris Patten, Last Governor of Hong

Kong (1992-1997)

Hong Kong has always been about land transaction revenue too!

Tea Act of the British Parliament and the Boston Tea Party (1773) which eventually led to the American War of Independence (1775-1782) taught the British not to impose extra-territorial tax

British Hong Kong original fiscal foundation (since 1841):• Trade and free port• Opium related revenues• Land transaction revenues• Other revenues

Income tax was not introduced to Hong Kong until 1947: • Trade expanded• Opium tax faded• Land revenues remain

Source: The Foundations of the Hong Kong Revenue Regime, Civic Exchange report, Prof. Richard Cullen and Antonietta Wong,Civic

Exchange Publication, 2008

Hong Kong’s potential as a knowledge-based Economy …

In a classical economy:

Factors of production:• Land• Labour• Capital ($)

Intangible factors of production:• Enterprise or Entrepreneurship

In a Knowledge-based Economy:

Factors of production:• Creativity• Innovation• Wealth Creation

Complementary business assets:• Manufacturing facilities• Distribution capacity• Sales force

Hong Kong does not have any choice …

•As a high-cost economy, Hong Kong must follow the examples of OECD and EU in climbing up the economic ladder;

•Hong Kong should try to understand what it takes to build a Knowledge-based Economy.

Rise of China … and finding a new role for Hong Kong

• China does not want to remain a low and mid-end “assembler” of goods;

• To get there, China can make good use of Hong Kong’s “soft power”: rule of law/rule-based society, general integrity and trust etc.

Silicon Valley has a solid industrial base: Strong manufacturing capacity, R&D, creativity and presence of grateful entrepreneurs … Steve Jobs used US$150 million from Bill Gates to restart Apple in 1997.

Driving Hong Kong to become a Knowledge-based Economy is not the same as central economic planning …

Meso-economic: the political economy* and how government chooses to use public resource

to drive economic development(*rules, institutions, supporting systems and regulations)

• Andrew Sheng and Xiao Geng of the Fung Global Institute caught the attention of the World Economic Forum :“The new economics: Meso and Meta” http://forumblog.org/2012/10/the-new-economics-meso-and-meta/

• “ … today’s mainstream micro- and macroeconomic models are insufficient”;

• “… Meso-economics studies the institutional aspects of the economy”.

Political-economy lesson from South Korea From “Catch-up” to “Creative” mode of economic development

• A key political economy lesson Hong Kong could learn from South Korea is an on-going policy shift away from a “catch-up” mode to a “creative” mode of development.

• Essentially, it is a shift away from very focused support of “chaebol” (large family-owned conglomerates) to a focus on strengthening the innovation capacities of SMEs.

Top right: Korean women donating gold to support a bankrupt Korean economy in 1998. Bottom: Students joining dock workers strike in Hong Kong in 2013.

Hong Kong’s Innovation Eco-system?

• South Korea: KIST (Founded 1966), Ministry of Future Planning and Science (2013, Park Geun-hye’s economic liberalization and “creative” mode of development initiatives)

• Singapore: Economic Development Board, A*STAR, IP Academy of Singapore (Since 1965, Lee Kuan-yew)

• Taiwan: ITRI (工研院 ), Hsinchu Industrial Park, network of statutory bodies (Since 1973, Chiang Ching-Guo)

• Europe/Scotland: Lisbon Agenda (March 2000),

Enterprise Europe Network, EEN-Scotland• Finland: TEKES, The Federation of Finnish

Technology Industries (Finland’s “Old Money” for new industries)

• Hong Kong: Innovation & Technology Bureau? Under Secretary CEDB? Grateful entrepreneurs?

朴槿惠

李光耀

蔣經國

Innovation is more than R&D …Innovation includes: organization changes, training, testing, marketing and design.

• New or significantly improved product: a new process, or a new organsiation method etc.

• Must contain a degree of novelty: new to the firm, new to the market, or new to the world;

• Clearly broader than R&D: influenced by factors that include government policy; can occur in any sector of the economy – including government service, healthcare and education.

Investing in technology alone?

• A policy of investing in technology alone without knowing how to extract economic value from it has no future.

• Hong Kong must learn how to manage its Knowledge Capital.

• Hong Kong must have a policy and an Eco-system that support the commercialization of technology.

InnoTech

Hong Kong as a bridge and gateway Gordon McConnachie, CTO of APICC and major tech-transfer units from around the world in Beijing (ITTN

2012 International Technology Transfer Conference, 26 March 2012)

AUTM (USA)Tsinghua (China) Association of University

Technology Managers (USA)

Enterprise Europe Network DG Enterprise and Industry, European Commission (Marshall Hsia & Alan Lung in Beijing)

Lessons to be learnt from the Oresund Region

• 1991: the governments of Denmark and Sweden agree to build the Oresund bridge

• 1999: The report ”Øresund – the creation of a region” concludes that the greatest barrier to integration in the Oresund region is lack of communication between citizens, businesses and public administration

• 2000: The Oresund bridge opens and Oresunddirekt is launched

Historical relations between Denmark and Sweden

Historical relations between Guangdong and Hong Kong

This type of economic development is often based on:

Historical economic and cultural ties that happen gradually over time

... but often with some degree of government facilitation

Hong Kong needs to be “innovation driven” not “basic requirement” or “efficiency” driven.

• Hong Kong’s Overall Ranking: 9(+2) (China:29 (-2))

• HK is at “Stage 3” of economic development (i.e. innovation driven) – along with Japan, Singapore, South Korea and Taiwan

• Basic Requirements: 3(-2) (institution, infrastructure, macroeconomics environment, health & primary education)

• Efficiency Enhancers: 3 (-1) (of which HK ranks no. 1 in the world in “Financial Market Development”)

• Innovation & Sophistication Factors: 22 (+2) HK is below 0ECD’s average while China is improving

steadily: (China:31 (+3))

Hong Kong needs to be “Innovation” driven,

not“Basic Requirements” or

“Efficiency” driven

The proposed BJ-GD-HK Knowledge Corridor

Maximizes BJ-GD-HK’s External Economy of Scale and integrates “Expertise Cluster”, “Regional Cluster” &

“Industry Cluster” policiesBJ, GD and HK on their own do not have all the success factors needed to build a “Silicon Valley” type of economy:

• Beijing: R&D is 5.5% of Beijing’s GDP (4 times the national average); 50% of China’sTech-transfer;

• Guangdong: 37.7% of China’s high-tech manufacturing export;

(Source: OECD Review of Innovation Policy – China, OECD 2008)

• Hong Kong: built on a tradition of free market and ‘good law, well administered’; HK uses English as a business language and is seamlessly connected to the West.

The proposed BJ-GD-HK Knowledge CorridorA strategy for China to move from “Sustained Development” to “Sustainable Development”

A strategy that combines European expertise, China’s strengths in science and technology and high-tech manufacturing; and Hong Kong’s service capacity to facilitate economic transitions:

• China’s “Sustained Development” (through investment by the State) to “Sustainable Development” (through values created from Technology Transfer and Technology Commercialization);

• Hong Kong’s narrow industry base and over-reliance on the financial and property sectors.

產業政

策

A compelling economic reform argument and a coherent intellectual

framework still missing:

Free Market Economy, rule of law, freedom of information and the need to develop high value-added industries acknowledged by CY Leung; however:

• “Service Economy” or “Manufacturing”?

• Current status of “Six New Industries”?

• “Sector Neutral” or ”Sector Biased”?

Sir John Cowperthawaite, Financial Secretary of Hong Kong 17 April 1961 – 30 June 1971

John Tsang, Financial Secretary (since 1 July 2007)

Sir John Cowperthwaite Financial Secretary (1961-1971)

• In a free market economy,government cannot predict the winning industries and where the next burst of economic growth might come from.• However, Hong Kong does not

seem to fully understand Cowperthawaite’s philosophy as one of the requirements of “positive non-intervention” is the “positive” part – that government must not stand still and must do as well as it possibly could to facilitate.

• Indecisiveness and inaction is not equal to prudent financial management.

“Free Market” versus

“Economic Planning”

Prof. LAU Siu-kai, former head of Central Policy Unit (CPU), HKSAR Government at the environmental friendly Beitou

Public Library during CPU’s Study Trip to Taiwan, 27-30 June 2011

• “… Government’s role in economic development has been changing since the “Laissez-faire” days of Cowperthwaite and Haddon-Cave”;

• “… people are unlikely to oppose HKSAR Government’s economic development initiatives”. (Prof. Lau Siu-Kai’s closing brief to delegates of the Taiwan Study Trip on 30 June 2011)

• Hong Kong has always thrived on new way of thinking and doing – not hanging onto past success.

“ HKSAR Government is unlikely to be dogmatic on the subject of Free Market versus Economic Planning ” Prof. LAU Siu-kai

Strategies of innovation: “Eureka” – discovery of new frontiers of

knowledge is not necessarily the only strategy

• “Battle for Architecture”, “System Breakthrough”, “New and Improved”, “Mass Customization” and “Pushing the Envelope” are some of the alternative strategies.

• Assisting SMEs to acquire knowledge, knowhow and

technologies and; • assisting knowledge-

intensive SME start-ups will have most support from the community.

http://www.cae-acg.ca/documents/Dpliant_Innovation_Reinvented_v4.pdf

ICM Gathering* of the USA: (*Intellectual Capital Management Gathering)

A group of ~ 30 companies, )sophisticated in the management of their intangibles. The frameworks and methods for extracting value from intangible assets were created by the companies themselves and not by academics or consultants

SMEs need to learn the “trade secrets” of MNEs through industry-specific Knowledge-based

Economy Expert Groups (ICMGs)

http://www.slideshare.net/AlanLung/what-is-intellectual-capital-management-apicc-whitepaper-2

Dr Patrick Sullivan

USA started in the early 1990s

The proposed BJ-GD-HK Knowledge Corridor:

Build “Expertise Clusters” in Technology-transfer and Technology-commercialization

BTEC/ITTN in Beijing and APICC in Hong Kong will jointly apply for Enterprise Europe Network (EEN) membership as EEN-Beijing and EEN-Hong Kong in late 2013 (for approval and implementation in 2014):• EEN is the largest technology

transfer network in the world; EEN is owned by the European Union;

• Enables Tech-transfer and Tech-commercialization know-how to be imported from Europe;

• EEN-Beijing and EEN-HK will receive coaching from EEN-Scotland, a unit of the Scottish Government.

Knowledge-based economy is a proven strategy … not a novelty in OECD Countries

OECD acknowledges:

• The link between Knowledge-based Economy and creation of high-wage and high-quality employment;

• Productivity of developed economy is largely determined by the rate of knowledge accumulation and technical progress;

• The importance of government policy and support systems.

(Source: The OECD Innovation Strategy: Getting a Head Start on Tomorrow, OECD 2010)

Hong Kong: well placed in two-and-a-half of the Four pillars of the Korean knowledge economy

• Economic incentive and institution support: good economic policies and institutions, efficient resource allocation that support dissemination of knowledge ;

• An educated and skilled labour force: willing to continuously upgrade and adapt itself to create and use knowledge;

• An effective innovation system: of firms, research centre, universities, consultants and others to keeps up with global knowledge system;

• A modern information infrastructure: that facilitates effective communication, dissemenatation and processing of information and knowledge.

(Source: OECD Reviews of Innovation Policy:KOREA 2009)

Hong Kong: well placed in two-and-a-half of the Four pillars of the Israeli knowledge economy

An analysis of the innovation eco-system of Israel reveals essentially the same success factors as South Korea’s innovation eco-system:

• Economic incentives and institutional support: Hong Kong probably rates very quite well in the area of providing economic incentives.

• Availability of financial capital and an effective innovation system: Venture capital typically plays a very limited role in Early-stage Technology Development Funding (ESTD) around the world, particularly in Hong Kong.

• Supply of human capital: Hong Kong shortcoming is compensated by Hong Kong's international outlook, links to Mainland China under "One Country, Two Systems" and other skills in commerce and finance.

• Access to information and a modern information infrastructure: Hong Kong scores well in the access to information factors. Press freedom, a liberal political environment and use of English as the primary business language are important but fairly under-rated competitive advantage.

(Source: “Building an Innovation Economy, Public Policy Lessons from Israel”, Jonathan Avidor, Northwestern Law School and Kellogg School of Management, May 2011)

How’s Hong Kong doing?

How Israel and the rest of the

world are doing it

Left: Shimon Peres, former Israeli Prime Minister helping Shai Agassi of Better Place to close a deal with the

President of French automaker Renault-Nissan, Carlos Ghosn. Right: Peres with Zuckerberg of Facebook.

European SMEs are keen to use Hong Kong as a gateway to do business with China …

“SMEs make up more than 98% of all companies in Europe … more importantly, they are considered the chief source of creative ideas and technological innovation …”

South China Morning Post 8 May 2013Vincent Piket, Head of EU-HK & Macau and Simon Galpin, Head of Invest Hong Kong (Page A4, South China Morning Post, 8 May 2013)

InnoTech

The 1,2,3,4,5 steps of Knowledge-base economy implementation:

in reality a lot of work must start in Hong Kong first

Hong Kong needs to brand itself as a Knowledge City and build an Innovation Eco-system:1. Invest in and implement a “Fully Examined Patent System*”

in co-operation with SIPO** and the world’s IP systems; (*Target implementation date according to IPD of HKSAR Government:2016/2017) (**State Intellectual Property Office of China)

2. Support the business side of innovation – including the expertise behind commercialization of technology;

3. Support all industries – not one industrial sector at the expense of other sectors (the current practice of requiring partially funded quasi-government agencies to compete against private sector service providers should stop);

4. Liberalize the economy – learn how Europe (particularly Finland) screen, incubate and support knowledge-intensive start-ups through very open and transparent systems;

5. Have a clearly stated policy and co-ordinate the fragmented support measures now offered through various government and quasi-government agencies -- even in the absence of an Innovation and Technology Bureau.

enterprise china network

“Hong Kong is losing its competitive edge…” Beijing warns! Hong Kong disagrees!

“Development is the only hard truth … only when the economy continues to thrive will livelihoods improve. Everything else is empty talk. Like a boat sailing down-stream if it does not forge ahead …” Politburo Standing Committee Member

Zhang Dejiang at a meeting with the Business and Professional Alliance

in Beijing on 17 April 2013

Prof. Chan Ka-keung Secretary for the Treasury and Financial Services disagreed … the city’s advantages are in our own hands, citing the legal system and financial market.

Tom Holland of South China Morning Post also disagreed … far from losing its edge, HK is more competitive than ever ... the Chairman of NPC is talking out of his hat on Hong Kong’s competitiveness.

Who right? Who’s wrong? What do you think?

Q&A:

The president has spoken … it now up to us, but it will not be just implementation!

Support from the Hong Kong

community, from industries, consensus building, a clearly stated

policy and practical implementation support from the HKSAR Government now needed.

“It’s the Implementation!” Xi said Leung's policy idea, seeking

change while maintaining stability, has been widely recognized by Hong Kong citizens. He

urged Leung and the Hong Kong SAR government to fully implement the idea.

(18 March 2013 in Beijing)

Bill Clinton’s widely quoted

1992 campaign slogan:

“It’s the

economy

stupid!”

http://www.chinadaily.com.cn/china/2013-03/18/content_16317997.htm

InnoTech

Thank you!

List of references:

References1. “Hong Kong and the Knowledge-Based Economy: Developments and Prospects”,

Alan Ka-lun Lung, Asian Education and Development Studies, Vol. 1 Iss: 3, Emerald Group Publishing 2012 http://www.slideshare.net/AlanLung/hong-kong-15789787

2. “Hong Kong’s Innovation and Technology Role in Mainland China’s 12th Five Year Plan”, APICC Whitepaper #7, March 2011 http://www.slideshare.net/AlanLung/h-ks-innotechrolein125

3. “Policies and Practices for Hong Kong as a Knowledge Economy and the Proposed Innovation and Technology Bureau”, APICC Whitepaper #8, July 2011 http://www.slideshare.net/AlanLung/innovation-technology-bureau-for-hk-2572011

4. “Proposed: Guangzhou-Hong Kong Knowledge Corridor”, Samson Tam Wai-ho, China Daily Asia Pacific Edition, 6 July 2012 http://www.chinadailyapac.com/article/proposed-guangzhou-hong-kong-knowledge-corridor

5. "Innovation Reinvented -- Six Games that Drive Growth", Miller and Cote, University of Toronto Press, 2012 http://www.cae-acg.ca/documents/Dpliant_Innovation_Reinvented_v4.pdf

6. “The politics and specifics of knowledge-based economy implementation in Hong Kong”, by Gordon McConnachie, Alan Ka-lun Lung & Sharon Galor (unpublished APICC Whitepaper)

About the authors of“Realizing Hong Kong’s knowledge-based economy potential as part of a rising China”

Dr. Gordon McConnachie, B.Sc., Ph.DDr Gordon McConnachie is the founding Chairman of the Scottish Intellectual Assets Centre (2003 - 2007) and Chief Technology Officer of Asia Pacific Intellectual Capital Centre. He is a chemical engineer by training and he spent most of his working career with Dow Chemical where he grew up together with the innovation and technology transfer systems of the world as we know them today. At Dow Chemical Europe (1989 - 1999), he invented the IP and Intellectual Assets Management System for the worldwide company together with Phil Barnett and Gordon Petrash. The system was later modified and applied across the global company, where Gordon transferred technologies from companies and universities into Dow Europe which brought him into intimate contact with the EU Innovation Relay Centres (now Enterprise Europe Network). From 1999 to 2002 Gordon directed the European Intellectual Asset Management Services of PricewaterhouseCoopers. In 2009, 2010, 2011 and 2012 Gordon was placed on the Global IAM 250 list of leading IA Strategists, one of only a handful of experts on the list from China and the ASEAN Nations. Dr Gordon McConnachie can be contacted at: gmcconnachie@apicc.asia Mr. Alan Lung Ka-Lun Alan Lung Ka-lun was born and educated in Hong Kong. He was also educated at the University of Wisconsin in the USA and Wilfrid Laurier University in Canada. He spent the formative years of his working career with international advertising and public relations agencies, including an overseas posting at Ogilvy & Mather Singapore. He now chairs the Hong Kong Democratic Foundation (www.hkdf.org ), a political and public policy think tank founded in 1989. Alan is skilled in converting his knowledge of governments and public policies into practical steps to move forward “Knowledge Economy” initiatives. He is a member of the Innovation and Technology Advisory Committee of the Hong Kong Trade Development Council (HKTDC) and he has been promoting innovation and technology practices in Hong Kong, Guangzhou and Beijing through the Asia Pacific Intellectual Capital Centre (www.apicc.asia) (where he is Director and General Manager), since 2006. Alan Lung Ka-Lun can be contacted at: alanlung@apicc.asia