Knowledge-based Economy from Commerce and Economic Development Bureau's (CEDB) Perspective, May 2010


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An early whitepaper on what the Commerce and Economic Bureau ought to be doing on developing the Knowledge-based economy in Hong Kong

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Knowledge-based Economy from Commerce and Economic Development Bureau's (CEDB) Perspective, May 2010

  1. 1. The Knowledge-based Economy from the perspectives of the Commerce and Economic Bureau of the HKSAR Government 1    The Knowledge-based Economy from the perspectives of the Commerce and Economic Development Bureau The Government of the Hong Kong Special Administrative Region May 2010 By: Dr. Gordon McConnachie Founding Chairman Scottish Intellectual Assets Centre & Chief Technology Officer Asia Pacific Intellectual Capital Centre Alan Lung Director & General Manager Asia Pacific Intellectual Capital Centre Waltraut Ritter Director, Knowledge Networks and Innovation Asia Pacific Intellectual Capital Centre
  2. 2. The Knowledge-based Economy from the perspectives of the Commerce and Economic Bureau of the HKSAR Government 2    About Asia Pacific Intellectual Capital Centre (APICC)   APICC is a not‐for‐profit company registered in Hong Kong.   The team behind APICC has been promoting the “Knowledge‐ based Economy” concepts and practices in Hong Kong and  Mainland China since 2006. Introductory seminar on the  subject was presented to Academy for Macroeconomic  Research of National Development and Reform Commission  (AMR‐NDRC) and State Intellectual Property Office (SIPO) in  May 2006.     With the help of strong lobbying by Mr. Stephen Selby of the  Intellectual Property Department (IPD), an agreement that  allows APICC to use European experience and contents on a  free‐of‐charge basis in Hong Kong and mainland China was  signed with the Scottish Intellectual Assets Centre (a company  owned by the Scottish Government) in August 2008.     A symposium on China‐ASEAN cooperation on the subject was  hosted by the China National Committee for Pacific Economic  Cooperation (PECC‐China) in Beijing on 8‐9 December 2008.  Further meetings were held with the Beijing Academy of  Science and Technology (BJAST), IPR2 (joint venture between  EU and Ministry of Commerce of China) and Academic  Commission of NDRC in Beijing in 2009.      Looking ahead, we believe that China is focused on becoming  one of the largest Knowledge‐based Economies in the world.      The “Knowledge‐based Economy” was featured prominently  by the Chief Executive in his Policy Speech and promoted  strongly in his 17 October 2009 “Letter to Hong Kong” on RTHK.  In view of the CE’s initiative, we believe we are at an  opportune time to assist mainland China in developing their  “Knowledge‐based Economy” and reap very substantial  economic benefit for ourselves by positioning Hong Kong as  the Centre of Excellence for Technology Commercialisation  for the whole of China. At the same time, Hong Kong can  transform itself from a traditional “Trading Hub” to a  “Knowledge‐based Economy Hub” for the Asia Pacific Region  in the context of the post financial crisis world economy order. 
  3. 3. The Knowledge-based Economy from the perspectives of the Commerce and Economic Bureau of the HKSAR Government 3    Table of Contents   1. Introduction and background of this paper  1.1.Chief Executive’s Policy Speech  1.2.Proposal to InvestHK and further development of the CE’s initiative  1.3.Key concepts of this paper    2. Economic transformation strategy according to the Financial Secretary  2.1.The China Advantage    3. Government and business perspectives on Hong Kong’s competitiveness and  cooperation with the Mainland  3.1. Hong Kong’s competitiveness  3.2. Service Sector Knowledge‐transfer and submission on the 12th  Five Year Plan  3.3. Recognition issues ‐‐ IPR issues restrict “Going Out” opportunities    4. Current perspectives and initiative of the Commerce & Economic Development  Bureau(CEDB)   4.1. Current initiatives of the CEDB  4.2. The Framework Agreement on Hong Kong/Guangdong Co‐operation  4.3. Breaching the official “Lines‐to‐take” through “Intangible”?     5. Other Bureau’s perspectives – handling the “Six New Economic Pillars”   5.1. Financial Secretary’s Office (FSO) ‐‐ Hong Kong style EDB?  5.2. “Six New Economic Pillars” originated from the Central Policy Unit (CPU)   5.3. Policy coordination that need to make on the “Six New Economic Pillars”   5.4. Horizontal versus vertical “sector‐by‐sector” industry support     6. A Social Perspective    6.1. A critical view – Hong Kong Stands Still as Other Leapfrog   6.2. Community consensus – sticking to tradition “Lines” may not be an alternative    7. Defining the Knowledge‐based Economy  7.1. “Knowledge‐based Economy” is not just about high‐technology and R&D  7.2. A “product” to be developed for Hong Kong as a society    8. Specific measure to turn “Knowledge‐based Economy” into a tangible product  8.1. Branding Hong Kong  8.2. Hong Kong’s position as one of the  “Knowledge Cities” of China  8.3. Government as a creator of “virtuous ecology” to facilitate economic growth  8.4. Specific support measures for the Knowledge‐based Economy  8.5. Branding Hong Kong as a “Knowledge‐based Economy”    9. Next steps   9.1. Critical success factors and the way forward   
  4. 4. The Knowledge-based Economy from the perspectives of the Commerce and Economic Bureau of the HKSAR Government 4    Executive Summary     1. The Chief Executive (CE) highlighted the “Knowledge‐based Economy” in his latest Policy  Speech.  This high‐level policy initiative was followed up by the Financial Secretary (FS) in  his 2010‐2011 Budget Speech:  • Hong Kong’s “China Advantage” and international outlook;  • The opportunity offered by the forthcoming National 12th  Five‐year Plan;    • Hong Kong’s Role as Knowledge‐based Economy to support the development  strategy of Mainland China was clearly positioned by the FS as one of Hong  Kong’s economic development strategies.    2. The FS’s strategy coincides with an earlier proposal APICC made to InvestHK:  • Hong Kong already has all the “Soft Power” required to build a Knowledge‐based  Economy;   • It is in the best position amongst all cities in China to attract inbound investments  for “Knowledge‐based” industries and reap very substantial economic benefit by  participating in China’s economic transformation;   • The strategy proposed to InvestHK was to turn Hong Kong’s positioning from:      A) A traditional “Trading Hub” to becoming                                                                    B) The ”Knowledge‐based Economy Hub” of China and of Asia.   However, the subject of “Knowledge‐based Economy” is wider than the portfolio of any  existing HKSAR Government policy bureau. Therefore, the key thoughts are:  • The FS’s strategy still needs to be turned into a more tangible Product Concept.  Specific policy measures, coordination and support at the Financial Secretary’s  Office (FSO) and Commerce and Economic Development Bureau (CEDB) level are  still needed to make things happen;  • This paper is such an attempt of turning a high‐level “Knowledge‐based  Economy” concept into actions on the ground.    3. The FS’s very specific proposal to make use of the “Knowledge‐based Economy” theme  for social and economic development could provides the answer to a macro‐economic  level view that:   • While Hong Kong is very good at the “Basics” – the “First Order” business  conditions (e.g. legal, openness, regulatory framework);  • It has been ignoring the “Second Order” business conditions (e.g. human  resources, innovative environment) now needed by Hong Kong for its own  economic transformation.   The lack of understanding and failure to recognise:  • The need for Hong Kong to further strengthen its “soft infrastructure” (also  known as “soft technology” in the mainland);   • Hong Kong’s role and value to China’s economic development and the National‐ level 12th  Five Plan and; 
  5. 5. The Knowledge-based Economy from the perspectives of the Commerce and Economic Bureau of the HKSAR Government 5    • Wishes from mainland enterprises to make best use Hong Kong’s separate  economic, legal and administrative systems to assist their “Going Out”  (internationalisation) process could have caused the disconnection.   As a result, Hong Kong could risk becoming totally irrelevant to China’s economic  development, and therefore to the rest of the world as China is determined to move  forward with or without Hong Kong’s participation and help.     4. There were many cooperation agreements with the Mainland, including CEPA (Closer  Economic Partnership Agreement) and the latest “Framework Agreement on Hong  Kong/Guangdong Cooperation”. The latest trend is that Guangdong would be allowed to  make more and more decisions on its own with much less scrutiny from various  ministries at the Central Government level. However, breaching the many “lines‐to‐ take” of the policy bureaus of the HKSAR Government through the “Intangible” concepts  of the Knowledge‐based economy has proven difficult.     5. Traditionally, Hong Kong does not believe in central economic planning as it was built on  a “free economy” philosophy. There is still an on‐going argument within the community  on whether Hong Kong should continue to adhere to the “laissez faire” practice invented  by two former FSs who served in the 60’s and 70’s or move towards the more directed  economic development strategy favoured by Mainland China and Singapore.  As a result,  the “Six New Pillars” or “Sector‐by‐sector” approach to economic development has  raised eyebrows amongst some business chambers. The international business  community and many in Hong Kong would still like to see Hong Kong adhere to the “free  economy” philosophy. The Central Government does not seem to want Hong Kong to  become a centrally planned economy either. An inclusive and “horizontal” approach to  economic support – such as a “Knowledge‐based Economy” approach to economic  support‐‐ includes the current “4+6 Sectors” economic strategy and could provide the  answer to this philosophical and macro‐economic level debate.        6. As an inclusive economic development strategy, Knowledge‐based Economy could also  provide an opportunity to solve the lack of social and economic mobility problem faced  by the agitated “Post 80s” (the more educated younger generation in their 20s and 30s)  who feel they have been left out.      7. The “Knowledge‐based Economy” is not just about high technology, even though the  early pioneers of the Intellectual Capital Management (ICM) concept were primarily US  multi‐nationals. The European Union set out the “Lisbon Agenda” in March 2000 for the  development of the Knowledge‐based Economy in Europe; and to counter US  dominance in this field.  For Hong Kong to move forward:   • There needs to be a better understanding of the business side of Intellectual  Property Rights(IPR) – how to “make use of” and not just “protection” alone ‐‐ as  invented and prescribed by the US companies;  • Without such enabling knowledge, “Innovation” and high‐value added  “Knowledge‐based Economy” could remain a “buzzword” in Hong Kong for many  years to come. 
  6. 6. The Knowledge-based Economy from the perspectives of the Commerce and Economic Bureau of the HKSAR Government 6    • The process of building “Social Capital” through a Knowledge‐based consensus  building processes, such as the “Future Centres for Public Sectors” proposed in  this paper could also help to bring the vision of President Hu Jiantao’s  “Harmonious Society” (“和諧社會”) into a reality in Hong Kong.    8.  At the practical implementation level, this paper suggests that building a “Knowledge‐ based Economy” brand for Hong Kong need to be based on reality which is already there,  for example:   • A clear “Product Positioning” that highlights Hong Kong’s strongest “DNAs” –  Chinese and international at the same time, liberal and diverse yet very stable,  adaptive, flexible and extremely good at networking etc.    • While governments cannot be expected to know every aspect of businesses and  industries, many governments do provide a “virtuous ecology” to facilitate  growth. The presence of tangible, solid and coordinated economic support  measures that facilitate growth of a Knowledge‐based Economy are the  “Supporting Reasons” to the claim or “Promise” of a Knowledge‐based Economy.    • The most important measure recommended by this paper is a “Knowledge‐based  Economy Coordination Unit” at the FSO and CEDB level.   •  Other specific policy initiatives proposed are listed in Section 8.4 include:  i. A study on the strategy and implementation measures of the  “Knowledge‐based Economy”;  ii. Consider adapting UK’s DCMS (Department for Culture, Media and Sport)  and Singapore’s Media 21 Strategy to Hong Kong;  iii. Enhancing the successful role played by Cyberport in spurring start‐ups;  iv. ITC (Innovation and Technology Commission) to consider adapting  NESTA’s (UK’s National Endowment for Science, Technology and the Arts)  investment‐gap bridging approach to innovation and technology support  etc.     9. The concluding remarks:  •  The Knowledge‐based Economy initiatives undertaken by governments and  nations around the world will sort out winners and losers of the future;  • While we welcome the CE’s Knowledge‐based Economy initiatives and the very  specific strategy as set out by the FS in his 2010‐2011 Budget Speech, political  leadership still needs to be translated into policy implementation and  coordinated action on the ground;  • This is the next step and the way forward we hope Hong Kong could move  forward to. 
  7. 7. The Knowledge-based Economy from the perspectives of the Commerce and Economic Bureau of the HKSAR Government 7    1. Introduction and background of this paper 1.1 Chief Executive’s Policy Speech The Chief Executive (CE) mentioned this strategy at the beginning of the economic development section of his latest (2009-2010) Policy Speech: “As a mature and open capitalist market economy, Hong Kong must constantly enhance its competitiveness and continue to evolve into a high value added, knowledge-based economy to maintain its leading edge over global competitors and create more quality jobs ...” This initiative coincides with Mainland China’s wish to upgrade its industry and economic structure as expressed in the “11th Five Year Plan (2006-2010)” and “15- Year Plan for Science and Technology” (2006-2020) as the first steps towards the goal of becoming a world leader in science and technology by 2050. 1.2 Proposal to InvestHK and further development of the CE’s initiative In support of the CE’s initiative, the Asia Pacific Intellectual Capital Centre (APICC) sent a short paper to InvestHK that proposes positioning the Knowledge-based Economy as an inbound investment strategy for Hong Kong. The key concept of APICC’s proposal to InvestHK was: Hong Kong already has all of the “Soft Power” required to build a Knowledge-based Economy. It is in the best position amongst all cities in China to lead this very important economic transformation. At the same time, Hong Kong can reap very substantial economic benefit by participating in this from A) to B) transformation strategy – turning Hong Kong from A) traditional “Trading Hub” to becoming B) ”Knowledge-based Economy Hub” of China and of the Asia Pacific Region. In connection to the CE’s initiative, paragraph 43-49 of the Financial Secretary's (FS) 2010-2011 Budget Speech covers the high-level strategy for the "Knowledge-based Economy". While this is an important recognition and a major progress, the subject of “Knowledge-based Economy” is probably wider than the portfolio of any existing policy bureau. Some government officials have also expressed to us that InvestHK is a department that has a narrowly defined role and may not be in a position to develop the “Knowledge-based Economy” as a product for Hong Kong; therefore a further proposal on specific implementation measures may be required to help make the “Knowledge-based Economy” happen.
  8. 8. The Knowledge-based Economy from the perspectives of the Commerce and Economic Bureau of the HKSAR Government 8    1.3 Key concepts of this paper This paper supports the political leadership of the CE and the high-level strategy expressed in paragraph 43-49 of the FS's Budget Speech. It also recognises the need for further policy development and coordination on the subject. The paper will: • First of all, examine the Knowledge-based Economy from the perspectives of the Commerce & Economic Development Bureau, other HKSAR Government Policy Bureaus and the business community. • It will go on to examine the practical policy support measures required to further develop an intangible concept into a specific and more tangible “product” Hong Kong could focus on; for example: i. Specific proposal that would support and help align the “Six New Industries”, existing “Four Pillar Industries” and any new industry initiatives not classified under the current framework to enable Hong Kong to compete in the globalised Knowledge-based Economy; ii. Specific measures to support ALL businesses and industries, including innovative start ups to move up the value chain; iii. Specific support structure to enable start-ups and existing industries to capture more and more of the economic value of industrial and service outputs. • This paper can be seen as a further proposal1 to the HKSAR Government to initiate a more comprehensive study on the subject of Knowledge-based Economy from the perspective of an economic development strategy that links: i. National economic development strategy that supports Hong Kong and Hong Kong’s unique administrative system that is separate from Mainland China which bring to Hong Kong the “China Advantage”; ii. Hong Kong’s own job creation and economic development needs, with particularly focus on the younger generation that may feel disadvantaged and disenfranchised because of perceived public policy bias against them; iii. Estimate the potential economic value Hong Kong could gain from this strategic economic transformation. iv. The proposed “Knowledge-based Economy Study” should also cover the qualitative and quantitative economic benefits Hong Kong stands to gain, should Hong Kong sees the merit of using Hong Kong’s substantial “Soft Power”, “Network Power”, “Cultural and Language Power” to assist China’s economic transformation by moving Hong                                                              1  A proposal to initiate a study on “Knowledge‐based Economy Collaboration between China, Hong Kong and  Europe” was made to the  of CEDB following visits made by APICC to the Academic Committee of NDRC, GTZ’s  Beijing office (an economic development unit of Germany) and China Technology Exchange in Beijing in  October 2009. 
  9. 9. The Knowledge-based Economy from the perspectives of the Commerce and Economic Bureau of the HKSAR Government 9    Kong toward the direction of becoming one of the most important and indispensible “Soft Technology” (Soft Infrastructure) components that drives the developing “Knowledge-based Economy” of China. 2. Economic transformation strategy according to the Financial Secretary 2.1 The China Advantage In his third Budget Speech (2010-2011 Budget), the Financial Secretary (FS) expressed an uncertain prospect for Hong Kong’s economic recovery and the need to consolidate an economic recovery in a sustainable manner. He further expressed HKSAR Government’s role in regional economic cooperation with China and the need to make best use of Hong Kong’s modernisation and internationalisation, and capitalise on Hong Kong’s “China advantage”: 46. Specifically, we can support the development strategy of the Mainland by further developing Hong Kong into a knowledge-based and high value-added economy … 47. Hong Kong can assist by attracting foreign investment, facilitating international exchanges and providing quality services that are essential to the restructuring and upgrading of Mainland’s economy. This will help promote quality growth of the Mainland’s economy. It will also increase the demand for Hong Kong services, thereby addressing the problem of our small local market. 49. We will take full advantage of the platform being provided under the National 12th Five-Year Plan … All of the above high-level strategy as defined by the FS, including the inclusion of cooperation with Guangdong and Taiwan mentioned in Paragraph 50 to 54 of the Budget Speech, are important recognitions of the “Knowledge-based Economy” as an economic development strategy. The FS’s advocacy coincides with and will give stronger strategic-level policy support to APICC’s objective in trying to move Hong Kong towards becoming a Knowledge-based Economy. The task ahead for APICC is to try to turn this strategy-level recognition into implementation-level policy support for the Knowledge-based Economy.
  10. 10. The Knowledge-based Economy from the perspectives of the Commerce and Economic Bureau of the HKSAR Government 10    3. Government and business perspectives on Hong Kong’s competitiveness and cooperation with the Mainland 3.1 Hong Kong’s competitiveness In a briefing made by the Financial Services and the Treasury to the Hong Kong General Chamber of Commerce (HKGCC) following the FS’s Budget Speech2, the HKSAR Government expressed the need to upgrade human capital for Hong Kong as well as the need to invest in social and economic development to stay competitive. The established policy of strengthening regional co-operation, investing in infrastructure (i.e. hardware) and developing “Four Pillar industries” and “Six New Industries”3 were repeated in the briefing to the HKGCC. It seems that the HKGCC and the HKSAR Government share a common concern for Hong Kong’s long-term competitiveness as they are keenly aware of the ratings given to Hong Kong by international agencies, such as World Economic Forum, IMD, EIU Business Environment Index and Heritage Foundation. A presentation made to the HKGCC (“Hong Kong’s Competitiveness: A Multidimensional Approach Report”4) concluded that even though Hong Kong is doing extremely well in the “Basic” – the so called “First Order” business conditions such as: • Legal environment, • Openness, • Regulatory framework, etc. According to the Report, Hong Kong is behind the best in the world in the “Second Order” business conditions: • Human resources, • Quality of producer’s services, • Innovation environment. The conclusion made was,”… “Second Order” business conditions are often denied as problems, or something Hong Kong does not want to touch and achieving these conditions ought to be the clear target for further investment and development at a conceptual level”. We tend to agree with this observation but a comment made to us by a department head of an HKSAR Government department might offer a less conspiracy-sounding explanation as to why Hong Kong is not tackling these “Second Order” business                                                              2  Briefing made by Mr. Clement Leung, Financial Services Bureau and Mr. Andrew Au of Financial Secretary’s  Office to the HKGCC on “2010‐2011 Budget” on 26 February 2010.   3  “Six New Industries” and “Four Pillar Industries” are: 1) Education Services, 2) Cultural and Creative Industries,  3) Inspection and Certification, 4) Medical Services, 5) Environmental Protection Industry, 6) Innovative  Science and Technology; and 1) Financial Services, 2) Trade and Logistics, 3) Tourism 4) Professional Services.   4  Source: a briefing made by Enright, Scott & Associates to HKGCC titled: “Hong Kong’s Competitiveness: A  Multidimensional Approach”. The study was sponsored by the Bauhinia Foundation. 
  11. 11. The Knowledge-based Economy from the perspectives of the Commerce and Economic Bureau of the HKSAR Government 11    conditions. We suggested to a senior civil servant that one should perhaps look at the activities and policy measures advocated by APICC as “Soft Infrastructure” building, somewhat like building a road that takes traffic from A) to B). The response we got was: “… it is not so easy to see where the “Knowledge-based Economy Road” leads to.” The intangible connection between “Soft Infrastructure” building and further economic development in Hong Kong is not as straight- forward to government officials as it seems to people we talked to in Mainland China and around the world. 3.2 Service Sector Knowledge-transfer and submission on the 12th Five Year Plan Many in the business sector saw and support the idea of making best use of Hong Kong’s “China Advantage” as advocated by the FS. Alex Fong, Chief Executive of the HKGCC who is a former civil servant familiar with Hong Kong’s trade and industrial relations advocated Hong Kong to become a “service sector knowledge- transfer centre” for China and rest of the world5 in the South China Morning Post. In line with what APICC advocates, the newspaper article also highlighted Hong Kong as both a “Chinese City” and an “International City”. To China’s 11th Five Year Plan (2006-2010)6, HKGCC recommended that Hong Kong should contribute to China’s development in the Service Sector, integration with the Pearl River Delta, and regional cooperation in trade and the financial industry. To the 12th Five Year Plan, HKGCC expressed and recommended: • Hong Kong’s shifting role as China wishes to move on to developing higher value-added economic activities; • The need for Hong Kong to assist Chinese enterprises to “Going Out -- Zǒu Chūqù” ( 走出去); • Implementation of CEPA (Closer Economic Partnership Arrangement) and further integration with the Pearl River Delta; • Financial service sector and financial markets co-operations, including cooperation with the Shenzhen Stock Exchange and the “Shangkong” (Shanghai-HK) market concept were discussed in great detail; • Concerns were also expressed in bi-lateral agreements (e.g. the China-ASEAN Free Trade Agreement) signed by China that does not include Hong Kong. HKGCC’s submission to NDRC on the 12th Five Year Plan completely supports the FS’s strategy in assisting China’s “Going Out -- Zǒu Chūqù” (走出去) strategy. With regard to the “Six New Industries”, it should be noted that it is not the normal nature for leading chambers of commerce in Hong Kong to oppose an HKSAR Government initiative publicly. The HKGCC, however, had come out opposing the                                                              5  “Should Hong Kong regard itself as an international city or Chinese? It is both and must remain so”, by Alex  Fong, Insight page of South China Morning Post, Saturday 6 March 2010.  6   Source: HKGCC’S submission to NDRC on the “12th  Five Year Plan”.  
  12. 12. The Knowledge-based Economy from the perspectives of the Commerce and Economic Bureau of the HKSAR Government 12    result of a research sponsored by the Central Policy Unit (CPU) of the HKSAR Government in South China Morning Post7. 3.3 Recognition issues -- IPR issues restrict “Going Out” opportunities Even though many in the business community and in the HKSAR Government saw that Hong Kong -- a developed economy -- may have reached the limit for further growth unless it finds a relevant role in Mainland China’s economic growth, few have conclusively defined what that role might be; for example, transforming itself from a traditional trader in commodities to a trader and broker of content -- services and practices of the Knowledge-based Economy’s approach to economic development. In reality, mainland enterprises cannot practice “Going Out-- Zǒu Chū qù” (走出去) because the Intellectual Property Rights (IPR) of products produced by Mainland Enterprises often fail to meet international standards and as a result, China’s industrial outputs cannot be sold to the rest of the world and high-end industrial outputs are often restricted to the domestic market. Mainland governments and enterprises will appreciate help from Hong Kong to solve those practical problems they cannot resolve on their own experience and resource. Mainland government units and enterprises APICC came into contact with saw Hong Kong’s unique role clearly. They perceived those issues as indeed “tough” problems to crack and have expressed to APICC that Hong Kong should make best use of its separate legal system, international network and business experience to help Mainland China to solve the problems. While there are recognition and broad consensus of Hong Kong’s “China Advantage”, such issues at the practical level are still not clearly understood and defined. These problems may eventually sort themselves out over time if left to market forces alone. However, China as a nation is in a hurry to catch up with the rest of the world and will solve those problems with or without Hong Kong’s help. Some coordinated support measures from Hong Kong will probably be appreciated and would certainly help to speed up the transformation process. 4. Current perspectives and initiative of the Commerce and Economic Development Bureau (CEDB) 4.1 Current initiatives of the CEDB According to a recent speech made by Secretary Commerce and Economic Development (SCED) to the Finance Committee of Legco and briefings made by the                                                              7  David O'Rear’s (Chief Economist of HKGCC) response to the CE's proposal to name “Six New Industries” for  future growth in South China Morning Post on 4 April 2009:"... the government should facilitate business  rather than determining what businesses to support". 
  13. 13. The Knowledge-based Economy from the perspectives of the Commerce and Economic Bureau of the HKSAR Government 13    two branches of the Commerce & Economic Development Bureau (CEDB) to Legco8 , CEDB is focusing on the following economic development initiatives: • CreateHK and Film Development Council – establishment of the CreateHK office and a HK$300 million funding scheme, showcasing Hong Kong’s creative industries in the 2010 Shanghai Expo and supporting the establishment of the Film Academy in Hong Kong Baptist University. An executive from the film industry was recruited to head “CreateHK”, a unit positioned to be the driving force of all Creative Industries in Hong Kong. • Digital 21 Strategy – a continuous strategy developed and implemented by OGCIO. A significant new initiative was to facilitate “Digital Inclusion” by providing direct subsidy to students from low-income families. • Testing and Certification – one of the “Six New Industries” which was allocated HK$41 million over the next two years. • Infrastructure for Innovation and Technology – positioned as the construction of Phase Three of Science Park. • Promoting Innovation and Technology – delivered as a specific measure of increasing the grant ceiling of funding support to Hong Kong companies in their first patent application from HK$100,000 to HK$150,000. • Continue to protect Hong Kong’s trade interest and position as trading centre -- through WTO and APEC and to encourage companies in Russia, India, Middle East, Mainland China and Taiwan to invest and set up offices in Hong Kong. • CEPA (Closer Economic Partnership Agreement) and promoting “Brand Hong Kong” – continue to promote Hong Kong’s financial industries and traditional trade interests in Mainland China and overseas markets through Hong Kong’s Overseas Economic and Trade Offices, InvestHK, the Hong Kong Trade Development Council (HKTDC) and the Hong Kong Tourism Board (HKTB). • Continue to support the SME manufacturers in Mainland China – through various funding schemes administered by the Trade & Industry Department (TID) and to try to slowdown the negative impact of policies initiated by the                                                              8  Briefings to Legco, including: i) Special meeting of the House Committee on “HK Guangdong Economic  Cooperation” made by the Constitutional & Mainland Affairs Bureau in January 2010, ii) Policy Agenda of  Commerce, Industry and Tourism Branch and Innovation and Technology Commission of CEDB, October 2009,  iii) Policy Initiatives of Communication and Technology Branch of CEDB, October 2009 and iv) Brief on  Development of Creative Economy in Hong Kong, February 2009.   
  14. 14. The Knowledge-based Economy from the perspectives of the Commerce and Economic Bureau of the HKSAR Government 14    Guangdong Government which might take away the thin margins and adversely affect the survival of the Hong Kong SME manufactures through the “Task Force to Support the Processing Trade” and “HK/Guangdong Expert Group on the Restructuring and Upgrading of the Processing Trade”. • Promote convention and exhibition infrastructure – providing additional trade exhibition space through Hong Kong Convention and Exhibition Centre expansion etc. • Continue to promote consumer protection. • Continue to promote wine distribution and wine auctioning in Hong Kong. • Competition Policy – preparing a “Competition Policy Bill” for introduction into the 2009-2010 Legco sessions. • Tourism Promotion and upgrading of aviation equipment for Hong Kong Airport – honest tourism and upgrading of tourism facilities (e.g. Lei Yu Mun and Bruce Lee’s former residence), Noah’s Ark, Disneyland Expansion plan through Hong Kong Tourism Board (HKTB) and technical weather forecasting capacity of Hong Kong Observatory at Hong Kong International Airport. • Innovation and Technology Commission (ITC) – Initiatives spearheaded by the ITC include: R&D Cash Rebate, Hong Kong Council for Testing and Certification, Shenzhen-Hong Kong Innovation Circle and to continue to fund R&D Centres of Hong Kong. • Continue with Copyright Protection – including proposal for strengthening copyright protection in the digital environment and copyright compliance in Hong Kong through the Intellectual Property Department (IPD). The Intellectual Capital Management (“ICM Light”) programme launched by the Intellectual Property Department (IPD) was listed under this “Protection” policy initiative heading. • Other initiatives undertaken by OGCIO and InvestHK -- OGCIO is looking into the subjects of “Public Sector Information Reuse”(PSI) and “IP & Technology Transfer and Trading”. InvestHK is continuing to promote inbound investment into Hong Kong along the line of the “Six New Industries”. An “Aftercare” programme directed at Mainland companies was launched by InvestHK to better understand their needs so as to provide better service to them.
  15. 15. The Knowledge-based Economy from the perspectives of the Commerce and Economic Bureau of the HKSAR Government 15    4.2 The Framework Agreement on Hong Kong/Guangdong Co-operation On 7 April, 2010, on behalf of Hong Kong, the CE signed the Framework Agreement on Hong Kong/Guangdong Co-operation Agreement” with Mr Huang Huahua, Governor of Guangdong in Beijing. The signing ceremony was witnessed by Vice President Xi Jinping, State Councillor Ms Liu Yandong and Hong Kong & Macau Affairs Office Director Mr Liao Hui. In a briefing made to Legco’s House Committee on 7 January, 2010, the Secretary Constitutional and Mainland Affairs (SCMA) highlighted: • Hong Kong’s role as an inbound and outbound gateway for China – a Mainland-originated term -- “Bringing in and Going Out” (引進來, 走出去 Yinjìn Lái, Zou Chūqù ) through Hong Kong and particularly Hong Kong/Guangdong Province economic cooperation -- became the new centre piece of Hong Kong/Mainland cooperation policy. • Cross-border Transport Link, Four Traditional Pillars and Six New Industries (including new CEPA arrangement for the Financial Industries), Tourism Cooperation, Development of the Lok Ma Chau Loop – there was no mentioning of the “Knowledge-based Economy” content except in the narrowly defined RFID (Radio-frequency ID) technology and development of Qianhai district of Shenzhen into a high-end service centre. 4.3 Breaching the official “Lines-to-take” through “Intangibles”? From the long and yet still incomplete listing of the specific policy tasks undertaken by the two branches of CEDB and the new initiative relating to the need to meet the demands of China’s 12th Five Year Plan, it is perhaps easy to see why the “Knowledge-based Economy” which deals with “Intangibles” of economic growth did not catch the attention of the CEDB. Compared to the traditional industries that deal with “tangibles”, it might be difficult to see how the Knowledge-based Economy fit into the current “lines-to-take” and HKSAR Government initiatives. Take the example of PSI Reuse initiative driven by OGCIO. It is one of the important “Second Order” business conditions which make use of information generated by public sector organisation for the purpose of social and economic development. Yet this policy initiative is partly hindered by the lack of a legal basis for free access to and free flow of information from Government. HKSAR Government departments still operate under the “Access to Information Code” and not a “Freedom of Information Laws” commonly found in the OECD countries. Probably because of political sensitivity, the CMAB (Constitutional & Mainland Affairs Bureau) -- not CEDB -- holds the policy brief to whether Hong Kong should depart from a voluntary “Code” and move toward implementation of “Laws”. Other “lines-to-take” -- official policy positions handed down from above or from earlier generations of Bureau chiefs -- are also difficult to breach, for example:
  16. 16. The Knowledge-based Economy from the perspectives of the Commerce and Economic Bureau of the HKSAR Government 16    • InvestHK launched the “Aftercare Programme” to better understand the business needs of Mainland companies that might invest in Hong Kong. However, as a department -- not a Policy Bureau, InvestHK may not be in a position to break out of the current “Line-to-take”, to operate out of the “Six New Industries” mode and launch a substantial “Soft Technology” support” programme which Mainland companies are looking for -- i.e. InvestHK is not in a position to implement “Second Order” business conditions needed by Mainland companies in their effort of “Going Out” through setting up offices in Hong Kong. • A reasonable department to launch the “Soft Technology Support” for the Knowledge-based Economy could have been the IPD, except for the long- standing policy brief that IPD should be focusing on “Protection” of IP -- not “Use” of IP for the purpose of economic development. Intellectual Capital Management (ICM) an international Knowledge-based Economy practice that “exploits” IP for business had to be “reinterpreted” as one that “protects” IP to suit the “line-to-take”. • Technical-level initiatives relating to the “Knowledge-based Economy” initiatives could almost fit the “Mainland-Hong Kong Technology Cooperation Programme” of the Innovation & Technology Commission (ITC). However, in the absence of high-level strategy coordinated from Hong Kong’s overall economic development viewpoint, it is often difficult for HKSAR Government units to breach established policy lines regarding supporting “Soft Technology” -- i.e. business systems or “Second Order” business conditions that do not fit into the narrowly defined “technology” framework of the ITC. • There has also been suggestion that the Hong Kong Productivity Council (HKPC), might take over the ICM Light Programme initiated by the IPD. The HKPC has access to funding and the traditional “Line-to-take” as understood by many government officials is that HKPC is the execution arm of the ITC, therefore it is logical move. Unlike the Science Park and Cyberport, the HKPC, an organisation set up in 1961 to service the OEM manufactures, has no track record of supporting “start ups” that create breakthroughs. Coupled with HKPC’s long history of competing with, rather than supporting private sector service initiatives – experience and commercial strengths that could have been part of the foundation for Hong Kong’s “Second Order” business conditions9 -- the implications and net negative economic value generated by this “Line-to-take” is at least worth questioning.                                                                9  Source: “Legco Panel on Commerce and Industry Review of HKPC”, April 2002 and “Final Report, Consultancy  study to review the role, management and operation of the HKPC”, April 2002. 
  17. 17. The Knowledge-based Economy from the perspectives of the Commerce and Economic Bureau of the HKSAR Government 17    One could safely conclude that both business community and the HKSAR Government recognise the need to upgrade Hong Kong’s own competitiveness through cooperation with Mainland China. However, until traditional policy “lines” are breached and the need to make better use of Hong Kong efficient and effective economic infrastructures -- Hong Kong’s comprehensive “First Order” business conditions to create “Second Order” business conditions for further economic development – is recognised, it might be difficult for Hong Kong to transform itself into an indispensible component for China’s developing Knowledge-based Economy. 5. Other Bureau’s perspectives – handling the “Six New Economic Pillars” 5.1 Financial Secretary’s Office (FSO) -- Hong Kong style EDB10 ? HKSAR Government officials whom APICC came into contact with often compare their work to that of Singapore’s Economic Development Board (EDB). They often mention the lack of such of high-level coordination unit in Hong Kong. In fact, the Hong Kong General Chamber of Commerce has been lobbying for the establishment of a similar high-level statutory agency in Hong Kong for nearly twenty years. It should be noted that the Singapore IP Academy, established on 28 January 2003 (the equivalent of Scottish Intellectual Assets Centre which APICC has a formal agreement to transfer knowledge from) was started as an EDB sponsored initiative11. In the absence of an EDB in Hong Kong, the Financial Secretary’s Office (FSO) has the primary responsibility of overseeing policy formulation and implementation in financial, monetary, economic, trade and employment matters. It is the closest to what Singapore has got. However, unlike the EDB which as a statutory board has “tentacles” to the world through it very international Board Members and a separate International Advisory Council, the FSO is a relatively small government unit which supervises lower-level Policy Bureaus, evaluate their inputs, coordinate them and sometime promote those input on their behalf. 5.2 “Six New Economic Pillars” originated from the Central Policy Unit (CPU) The “Six New Economic Pillars” is an example where the FSO took on the theme of a research paper sponsored by the CPU12. This research paper was turned into the                                                              10  EDB ‐‐ Economic Development Board of Singapore is the lead government agency responsible for planning  and executing strategies to enhance Singapore’s position as a global business centre and grow the Singapore  economy.  It is the top‐level economic development agency that has been charting the Singapore economic  miracle since 1961.   11  Source: Singapore IP Academy Presentations.  12  In theory, the CPU works exclusively for the Chief Executive, the Chief Secretary and the Financial Secretary.   However, there is no evidence that the research paper titled “A Further Study on the Future Development of  the Hong Kong Economy, Consolidation and Enhancement of Existing Core Industries and Development of  Economic Areas with High Potential in Hong Kong” was initiated by the FSO. The paper was published by the  CPU on 8 June 2009 but was published as a discussion paper for Legco by the FSO under the TFEC (Task Force  on Economic Challenges) at an earlier date of 3 April 2009. 
  18. 18. The Knowledge-based Economy from the perspectives of the Commerce and Economic Bureau of the HKSAR Government 18    centre-piece strategy for Hong Kong’s future economic development when the “Task Force on Economic Challenges” (TFEC) 13 adopted the research paper in early April, two months before the CPU released the paper to the public. Hong Kong’s economic development strategy is now defined as: • Four Existing Pillar Industries – i) Finance Services, ii) Trade and Logistics, iii) Tourism and iv) Professional Services. • Six New Economic Pillars – i) Medical Services, ii) Education Services, iii) Cultural & Creative Industry, iv) Environmental Protection Industry, v) Innovation Science and Technology, vi) Inspection and Certification. In a similar way as for the National Development and Reform Commission (NDRC) that used to be called the “Planning Commission”, it was probably difficult for the Mainland-trained academics behind the CPU sponsored research to think of economic development strategy as anything other than central economic planning. APICC does not oppose any of the specific industry sectors proposed as they are all part of the high-value added Knowledge-based Economy. However, this idea is against the grains of the traditional “free economy” and “laissez faire” approach to economic development still embraced by many captains of industries and the international business community. The core idea of central economic planning has raised some eyebrows. The FSO of the HKSAR Government is now faced with the task of – not just finding resources and formulating effective implementation measures to support each of the “Six New Economic Pillars” – but also reconciliation at the philosophical and practical implementation levels and justifying the risks of naming “winners” that may eventually fail. APICC agrees that Sir John Cowperthwaite’s (FS from 1961-1971) and Sir Philip Haddon-Cave’s (FS from 1971-1981) thinking may no longer be relevant to Hong Kong today. We also agree with the concluding remarks made by Mrs Regina Ip in one of her earlier policy papers 14, “…the Knowledge-based economy is here to stay and Hong Kong needs to be on top of the challenge or risk being marginalized”. 5.3 Policy coordination that need to make on the “Six New Economic Pillars” In a similar way as the “Knowledge-based Economy”, the “Six New Economic Pillars” does not necessarily fit into the existing structure of the HKSAR Government. Neither the CPU nor the CEDB are the equivalent of NDRC – a powerful Central Government Ministry that has decision power on nearly all aspects                                                              13  The Task Force on Economic Challenges (TFEC) was established by the CE in late 2008 as a response to the  Financial Tsunami of 2008. TFEC held its last meeting in June 2009   14  The ills of “lasses faire: and “positive non‐intervention” in Hong Kong were discussed in great detail in one of  Mrs Regina Ip earlier policy paper “A New Economic Strategy For Hong Kong”, published by Savantas Policy  Institute, 14 June 2006.  
  19. 19. The Knowledge-based Economy from the perspectives of the Commerce and Economic Bureau of the HKSAR Government 19    of economic development and people’s livelihood in Mainland China. The FSO may have the mandate, but not the staff support to drive all the supporting measures for six completely “new” industries. In any case, a few more HKSAR Government bureaus that do not traditionally have economic development as part of the core mission are now landed with the need to reconcile their policy lines with the “Six New Economic Pillars”: 1. Medical Services -- the CPU Report recommended measures such as encouraging Hong Kong physicians to set up clinics in the Mainland, medical tourism, conferences, cooperation in Chinese medicine etc. Many of these recommendations are on-going projects already. The centre piece of this recommendation is “private-public cooperation in medical services” (i.e. mainly in-hospital services, not primary healthcare) which will involve: The Health & Food Bureau in matching such proposal to the many rounds of Healthcare Reform Proposal that has been going since the year 2000; The Development Bureau (DB) in finding lands and justifying the price level of those new land grants to new private-sector hospital operators. 2. Educational Services – the recommended measures were positioning Hong Kong as a regional centre for higher education, international professional certificate training and examination, promoting and implement professional training services, supporting non-local students to study in Hong Kong, expanding the physical space for local universities (e.g. using the Lok Ma Chau Loop) within Hong Kong, establishing a Guangdong-Hong Kong University and expanding vocational training and pre-school education etc. Not all the recommendations made were new: From the Education Bureau (EB) viewpoint, the idea of turning Hong Kong into a higher-education hub and the idea of accepting more overseas students when Hong Kong is still not providing enough post- secondary education opportunities to local students will present some challenges. The primary mission of the EB is not economic development and the ideas proposed will need to be reconciled with the on-going discussion and implementation of education reform that has been going on for more than ten years. Development Bureau -- Hong Kong is short of land and at least three of the seven fully UGC funded universities in Hong Kong occupy a relatively tiny campus; so giving priority land grants to building spacious campuses for private universities will not be an easy task. 3. Cultural and Creative Industry – Key recommendation of the report include establishment of a Commission for Cultural and Creative Industry, hardware and software construction, including speeding up the West Kowloon Cultural Zone (WKCZ) project, talents training, tax breaks and financial
  20. 20. The Knowledge-based Economy from the perspectives of the Commerce and Economic Bureau of the HKSAR Government 20    support for social enterprise start-ups and strengthen cooperation with Shenzhen. 1. The Commerce & Economic Development Bureau’s (CEDB) answer to this recommendation was CreateHK which is not a high-level commission, but a government department that focuses on the Film, Design, Digital Entertainment and other creative industries. 2. The WKCZ, a project that reports to West Kowloon Cultural District Authority (WCKDA) has just appointed Graham Sheffield, the Artistic Director of London’s Barbican Centre as Chief Executive. 3. The Hollywood Road Police Married Quarter project is also an original and on-going project spearheaded by CEDB and Development Bureau. 4. Environmental Protection Industry – The report suggested setting up a new Commission on Environmental Protection Industry, hold environmental protection trade shows in Hong Kong, special attention to environmental protection policies in the Pearl River Delta and providing technology and consultancy advice to Hong Kong enterprise in the Mainland. The Environment Bureau’s (ENB) current initiatives are already totally in line with the recommendations. The support to Hong Kong enterprises operating in the Mainland is provided by Cleaner Operation Partnership Programme operated by the Environmental Protection Department (EPD) and the Hong Kong Productivity Council (HKPC). 5. Innovative Science and Technology – The main recommendations are setting up Post-doctoral stations at the Science Park (HKSTP), building a Guangzhou-Shenzhen-Hong Kong Innovation Axis and cooperative research mechanism with universities and research institutes in Guangdong and Mainland China. Some of these are on-going projects already undertaken by the CEDB. The Innovation and Technology Commission (ITC) has already funded the specific projects such as HKSTP15, ASTRI and other Research Centres. The CEDB and ITC will have to work with those organisations to implement the recommendations. 6. Inspection and Certification – Again the recommendations made by the Report seems to be on-going projects funded by the ITC. The proposals to move towards public-private partnership and to open up the Mainland market through CEPA all seem reasonable and logical.                                                                15  Specific Projects funded by the Innovation and Technology Commission (ITC) include: Hong Kong Science and  Technology Park, Cyberport, Hong Kong Productivity Centre, Hong Kong Design Centre/InnoCentre, ASTRI (for  the ICT industry) and five other research centres covering:  i) Chinese Medicine, ii) Automotive Parts and  Accessory, iii) Logistics and Supply Chain, iv) Nano Technology & Advanced Material and v) Textile and Clothing.  
  21. 21. The Knowledge-based Economy from the perspectives of the Commerce and Economic Bureau of the HKSAR Government 21    The Hong Kong Accreditation Service is now a unit set up inside the ITC and has partnership relationships with industrial bodies in the private sector. 5.4 Horizontal versus vertical “sector-by-sector” industry support On closer examination, all the “Six New Pillar Industries” are potentially high-value added components of the Knowledge-based Economy. The recommendation to set up a new commission to oversee each “new pillar” has the hallmark of central economic planning but many of the Report’s recommendation are on-going projects of the HKSAR Government already. Why the HKSAR Government decided to position on-going initiative as “new” is not known. At least one government official expressed that he had missed the point that supporting favoured industries could also mean ignoring other industries when faced with objection to “Six New Economic Pillars” by the HKGCC, “…without government facilitation, those business sectors will not be able to move forward”. As discussed earlier many of the “Six High Potential Industries” are on-going initiatives which are likely to continue. Most of them are indeed Knowledge-based industries well worth supporting. However a “Sector-by-sector” industry support approach has perception risks – not just to the HKGCC and other opinion leader in business, but also to the international business community that does not wish to see Hong Kong depart from the “Free Market” philosophy. As an alternative, a broader “Horizontal” industry support approach, such as supporting a Knowledge-base Economy along with the “4+6 Pillars” should be considered as an alternative. 6. A Social Perspective 6.1 A critical view – Hong Kong Stands Still as Other Leapfrog While the business community and HKSAR Government officials ponder the merits and the downside risk of moving forward with the “Six New Pillar Industries”, Regina Ip, a directly elected legislator who spent nearly thirty years in the civil service offered a critical view. In a recent article published in the HK Journal hosted by a US think tank16, Regina Ip pointed out that: “… 13 years after its return to China … the HKSAR of China has failed to re- structure the economy, with the result that few jobs in the new industries have been created to fill gaps left by the migration of manufacturing industries to the nearby Pearl River Delta. The neighbouring province of Guangdong, rightly seized of a great sense of urgency to upgrade its economy, is charging full steam ahead to develop high-                                                              16  “Hong Kong after 1997 – Agony and Ecstasy”, by Regina Ip April 2010, The Hong Kong Journal, online  publication hosted by the Carnegie Endowment for International Peace of Washington, DC. 
  22. 22. The Knowledge-based Economy from the perspectives of the Commerce and Economic Bureau of the HKSAR Government 22    end professional services, a strategy bound to present new challenges to Hong Kong’s services-oriented economy.” Regina Ip went on to highlight that even though Hong Kong’s per capita GDP increased, the number of people employed in lower income jobs was higher in 2008 than in 1998 and lack of upward social mobility of the “Post ‘80s” have caused angry protests that threaten to derail Hong Kong’s infrastructure development, including Hong Kong Express Rail Link to the national express rail grids. As one of the strongest critics of the so called “positive non-intervention”, Regina Ip noted Sir Murray MacLehose’s (Governor of Hong Kong 1971-1982) contribution to Hong Kong economic growth and social changes and also noted that the Hong Kong workforce falls behind Asian countries such as Singapore, South Korea and Japan in higher education attainment. The risk-adverse nature of Hong Kong’s decision making process has also caused Hong Kong to miss the innovation and technology ladder as an engine of growth. 6.2 Community consensus - sticking to tradition “Lines” may not be an alternative Frustration of the Post 80s and lack of progress made in Hong Kong were confirmed by academics and others in the community. The Hong Kong Transition Project has been tracking political and social development of Hong Kong since 1982. A special report on the “Post-1980 Generation in Hong Kong”17 released in February 2010 confirms that the “… seeds of discords” -- inequality in social and economic opportunities -- are clearly sprouting, particularly between business people and youth under age 30, which expressed more dissatisfaction with life in Hong Kong and with the HKSAR Government than those in older age groups. Sentiments expressed by Regina Ip and the Hong Kong Transition project about the wealth gap, lack of opportunities and frustration felt by the Post ‘80s were echoed by many public figures, including David Aker-Jones and Anson Chan, two former Chief Secretaries of Hong Kong in private and in public. The plight of the lower income group and lack of upward social mobility was also highlighted frequently by CY Leung, Convenor of the Non-official Members of the Executive Council of the HKSAR in public and in newspaper articles he published. There is now a community consensus that something needs to be done. Hong Kong must ask if we should be doing nothing or seizing the opportunity to move forward. The downside risk of doing nothing is to lose all the competitive advantages we still enjoys and miss the economic development windows provided by the “China Advantage”, the opportunity to be part of the global Knowledge-based Economy that makes Hong Kong relevant to Mainland China and the rest of the world.                                                              17  “Protest and Post‐80s Youth, A Special Report on the Post‐1980 General in Hong Kong” published by the  Hong Kong Transition Project, February 2010.  
  23. 23. The Knowledge-based Economy from the perspectives of the Commerce and Economic Bureau of the HKSAR Government 23    7. Defining the Knowledge-based Economy 7.1 “Knowledge-based Economy” is not just about high-technology and R&D The “Knowledge-based Economy” is not just about high-technology, heavy investment in R&D, multi-million dollars deals-making and merger and acquisition of the financial world. It is not just about “Learning” and “Knowledge-sharing IT Programs” promoted by some “Knowledge Management” practitioners or a management methodology either. Instead, the Knowledge-based Economy is complex and interdisciplinary, involving economists, scientists, lawyers, engineers, sociologists, gourmet chefs, artists, singers, cartoonist, IT experts, businessmen and venture capitalists. Adam Smith’s partitioning of wealth in society into land, labour, and capital was appropriate until the end of the industrial age. One of the origins of Knowledge- based Economy can be traced back to the days when accountants still considered the assets of a company to be only physical assets – machinery, buildings, cash and investments. In the mid-1980s, there was an attempt to account for the value of a company’s intangible costs. Early pioneers of “Intangible Accounting” methods such as Peter Turney of the University of Oregon and Kaplan & Cooper of the Harvard University18 defined that the true cost incurred by companies largely made up of “Intangibles” -- R&D, design, HR etc. The key suggestion was that companies should not rely on “Financial Measures” alone to create future economic value. This line of thinking has since been applied at the level of national economies. About exactly ten years ago in Europe, the European Council in March 2000 set out the Lisbon Agenda to create in Europe “the most dynamic and competitive knowledge-based economy in the world”. The key objectives were to drive economic growth, social cohesion and job creation; but it was also an agenda set out and to counter American dominance in this field. The early pioneers of the “Knowledge-based Economy” (European and US companies that include Dow Chemical, DuPont, Hewlett-Packard, Hughes Space and Communication, Hoffman LaRoche and Skandia) got together in January 1995                                                              18  Peter Turney, a professor at the University of Oregon who wrote “Common Cents” in 1991, was probably the  first pioneers of accounting of intangibles. But it was Robert Kaplan and Robin Cooper of the Harvard  University who wrote “Cost & Effect” (Harvard Business School Press, 1998) that authoritatively defined  Activity Based Costing as an open management accounting standard and provided a solution to calculate  “intangible” costs. Prof. Kaplan later teamed up with David Norton to write “The Balanced Scorecard” – a well  known performance management theory practiced in Hong Kong and around the world.  The Balanced Score  Card theory influence many governments to measure their output and practice “what we measure affect what  we do”. The more advanced practice of valuating the “Intangible Assets” of companies however, is still at an  early knowledge‐discovery stage. “IAS‐38, Accounting of Intangibles” of  the International Accounting  Standards Board is still at an early stage of development and does not provide a comprehensive or  authoritative enough standard for Mainland Chinese Companies to calculate the “true value” of overseas  assets they might wish to acquire in the process of “Going Out”.   
  24. 24. The Knowledge-based Economy from the perspectives of the Commerce and Economic Bureau of the HKSAR Government 24    to exchange notes and formed the first Intellectual Capital Management (ICM) Gathering in Berkeley, California, USA. “Intellectual Capital”, “Intellectual Assets” and “Intellectual Property” were defined: “Knowledge‐based Economy” and “Intellectual Capital Management” is about the evolution of a  workforce that is trained to harness extract and apply new knowledge to the growth of every sector  of the economy. Hong Kong need to understand and apply the above relations from a business  viewpoint before it can talk about “Innovation” and becoming a high‐value added “Knowledge‐based  Economy”.   • “Intangible Capital” includes all tacit (unrecorded) and recorded “Intellectual Assets” held within each employee and the employees as a group and “Intellectual Property”, a small part of the “Intellectual Assets” that is protected by law. • Apart from recognising that these are “Intangible Capital” and “Intangible Assets”, it is now realised that they are becoming the dominant driving force of the global “Knowledge-based Economy. It is these “Knowledge Capital” that drive innovation and new technologies and which also create new ideas which improve the efficiency and effectiveness of new products and services. • The trend, throughout the world, is cumulative. The belief that a process has been successful in the past does not mean that it will be successful in the future. There will always be a better way to do it and these are sometime referred to as “disruptive technologies” derived by a will to expand knowledge in order to innovate. 7.2 A “product” to be developed for Hong Kong as a society There has not been sufficient awareness in Hong Kong and there is an urgent need to implement specific measures, so that the “Knowledge Assets”, both recorded and hidden in the minds of people can be identified and brought into action to derive
  25. 25. The Knowledge-based Economy from the perspectives of the Commerce and Economic Bureau of the HKSAR Government 25    economic and social value for Hong Kong. Hong Kong’s economic development initiatives must produce economic values and jobs. At the same time, the economic benefits and jobs created must be made relevant to all stakeholders – including potential investors, businesses and professionals, the Post ’80s and the “Creative Class” who might not have scientific degrees and the lower income groups who may be less educated. The “Knowledge-based Economy” is, by definition, an inclusive economy -- the “Intellectual Capital” of nations and territories includes the knowledge and skills of individuals as well as collective knowledge, competence, experience, and memory contained in our community and institutions. The knowledge-based economy approach goes beyond traditional economic models that largely focus on GDP as measurement for economic growth and well being. In many developed economies, governments are looking at new measures for economic performance and social progress, taking into account the limitations of GDP, which ignore non-market outputs, inequality in society as well as externalities such as environmental deterioration. The disconnection between GPD growth and how citizens feel about economic progress is increasing in many developed countries including Hong Kong and new “measures” (i.e. indices) reflecting non-financial aspects of economic growth such as “Gross National Happiness” (sustainability, cultural values, environment, and governance) are beginning to appear. The challenge in measuring “Inputs” and their relations with “Outputs/Outcomes” from the knowledge economy is therefore a reality -- GDP growth alone will not deliver all the benefits that society desires. There are a growing number of governments, particularly in OECD countries, which are exploring more sustainable models of measuring economic progress, motivated by the idea that “what we measure affects what we do”. This new concept of how economic wealth are created along side with “social capital” 19 will probably be one of the major contributions of the Knowledge-based Economy to building up of social consensus in Hong Kong -- the vision of “Harmonious Society” 20 (“和諧社會”Héxié Shèhuì) and social and economic advancement opportunities for those who may feel being ignored.                                                              19  The Dutch Government started five “Future Centres for the Public Sector” as units under various ministries  to engage the public on water management, tax, housing, economic affairs, agriculture, social affairs etc. Also  see “Future Centres” as a policy measures suggestion under “Development Bureau” of point 8.4 of this paper.  20  The construction of a “Harmonious Society” (“和諧社會” héxié shèhuì) is the end results and part and  partial of the socio‐economic vision of President Hu Jintao's “Scientific Development Concept” (“科學發展觀”  Kēxué Fāzhǎn Guān). 
  26. 26. The Knowledge-based Economy from the perspectives of the Commerce and Economic Bureau of the HKSAR Government 26    8. Specific measure to turn “Knowledge-based Economy” into a tangible product 8.1 Branding Hong Kong The new BrandHK graphic identity was a project commissioned by the Information Services Department (ISD) of the HKSAR Government in early 2009. A series of focus groups were held from February to April of 2009 to look into the content behind the graphic identity. The Faculty of Social Science of the University of Hong Kong (HKU) and the ISD gathered representatives from the businesses and professionals who contributed their opinions on characteristics of “Hong Kong -- Asia’s World City” along five core themes: 1. Creative and Knowledge Economy, 2. International Connectivity, 3. Quality of Life, 4. Talent, 5. Public Service Delivery. Response to the launch of the new logo by John Tsang, Financial Secretary (FS) in early April 2010 was mixed. A Letter to Editor of the South China Morning Post21 pointed out that after one year since the project was first announce, “… little more than the evolved dragon logo” was produced. It was pointed out that the Hong Kong brand should be much more than feel-good propaganda for domestic consumption; instead, it should communicate what Hong Kong is about to travellers,                                                              21  “HK’s brand should be more than feel‐good propaganda”, Dick Groves, Wanchai, SCMP 10 April 2010.   Brand Hong Kong was launched in 2001 at         the Fortune Global Forum held in Hong Kong.   Probably because of criticism on the weak  graphics of the original logo design (left), a new  corporate identity (above right) was launched to  compliment the launch of the Hong Kong  Pavilion (above left) at Shanghai Expo 2010.   
  27. 27. The Knowledge-based Economy from the perspectives of the Commerce and Economic Bureau of the HKSAR Government 27    businesses, artists and students from outside Hong Kong who could come and contribute to Hong Kong’s economy and society. The author of the letter concluded with a caution that “BrandHK” will only succeed if it is based on reality. Perhaps by coincidence, the FS leaped to the defence of the project in a long article published in the same newspaper two days later22, pointing out that “… Hong Kong’s recent branding exercise has highlighted the evolving values of our community”. Some of the content of what was discussed at the HKU/ISD focus groups was eventually added to the website, thus justifying the FS’s plea to “… see beyond the refreshed logo and consider the deeper meaning of the brand revitalisation exercise”. However, many who sat through the focus groups conducted by ISD and HKU between late February and early April 2009 were baffled by what the organisers were trying to achieve. At the “Creative and knowledge economy” discussion group, participants were wondering if the definition include scientific and technology R&D, or if the “Creative Economy” meant the narrower “DCMS” (UK’s Department for Culture, Media and Sport) definition the CEDB used when seeking funding approval to set up CreateHK at around the same time. Others who sat through the other focus group themes also reported that they were general discussion about complex problems faced by Hong Kong. Marketing professionals invited frankly pointed out that anyone can attach any meaning to the BrandHK logo design and it would be extremely difficult to communicate the extremely intangible qualities of Hong Kong through a logo and a “Graphic Design Manual”. They were wondering why the HKU and ISD did not decide on what the “Product” is before moving on how to redesign a logo. It seems that “Graphic Design” as one of the tools of “Promotion” in the “4Ps”23 framework of marketing was stretched beyond its limitation. 8.2 Hong Kong as one of the leading “Knowledge Cities” of China Positioning themselves as a “Knowledge City” for their region was indeed what some cities did or are in the process of doing when trying to become a more tangible “Product” and a major bidder in the global Knowledge-based Economy: • Manchester, UK: Knowledge Capital Manchester: Knowledge Capital was established in 2002 as a partnership of Greater Manchester’s universities, local authorities, public agencies and businesses. It was designed to creating positive change by increasing                                                              22  “A Multifaceted City”, by John Tsang, SCMP, 12 April 2010.  23  “4Ps” refers to “Product”, “Price”, “Promotion” and “Place” (distribution) framework used in marketing  campaigns. It is necessary to know what the “product” is before moving on to the other three “Ps”. 
  28. 28. The Knowledge-based Economy from the perspectives of the Commerce and Economic Bureau of the HKSAR Government 28    innovation across the city-region and creating a sustainable and prosperous city from which everyone can benefit. • Melbourne, Australia: Office of Knowledge Capital & Future Melbourne Same as in Manchester, the Office of Knowledge Capital (OKC) of the City of Melbourne is a partnership between governments and universities in and around Melbourne. The primary role of this coordination unit include: promotion of Melbourne’s knowledge capabilities, brokering of collaborative knowledge initiatives and management of Melbourne’s knowledge information. • Monterrey, Mexico: International City of Knowledge Programme As a major industrial city of Mexico, Monterrey is launching a plan and a general strategy “… jointly adopted by society and the government to building an economy based on the development of knowledge”. • Shenzhen, China: Outstanding Developing Knowledge City The municipal government of Shenzhen funded and hosted a “Knowledge City Summit” in November 2009. A Shenzhen official expressed
  29. 29. The Knowledge-based Economy from the perspectives of the Commerce and Economic Bureau of the HKSAR Government 29    disappointment on the lack of interest from HKSAR Government in his speech. • Guangzhou, China: Sino-Singapore Knowledge City R281E8V2SFJH/content/content.jsp?contentId=665051&catId=5802 This is partnership between Singapore’s Keppel Corporation (a State-owned Enterprise of Singapore) and Municipal Government of Guangzhou to jointly develop a site near Guangzhou’s Baiyun International Airport and Guangzhou Science Park into Guangzhou’s Knowledge City. The project was proposed in 2008 and the MOU between Guangzhou and Keppel Corporation was signed on 29 March 2009. The project is in the process of being implemented following exchanges and a visit to Singapore by Guangdong Party Secretary Wang Yang and exchanges between him and Senior Minister (former prime minister) Goh Chok Tong of Singapore. Keppel Corporation also had a leading roles in developing the Suzhou Industrial Park and Sino- Singapore Tianjin Eco-City. Except for Melbourne, many of these cities are probably far less endowed and less equipped than Hong Kong in delivering “Knowledge City” as a “product” (i.e. a “brand” or promotion platform) to attract those who might be interested. The very specific and tangible activities undertaken by these cities indicate that “Knowledge- based Economy” can be a “tangible” product and economic development strategy, especially when compared to the “Core Value”, “Accountability”, “Creative Milieu” and “Fairness” discussed at the BrandHK focus groups. Hong Kong must also take note of the “Sino-Singapore Knowledge City” as a serious bid for Guangzhou to harness knowledge for the purpose of social and economic development. Guangzhou would probably welcome help from Hong Kong if it is forthcoming, but Guangzhou also seems determined to move ahead without help from Hong Kong. 8.3 Government as a creator of “virtuous ecology” to facilitate economic growth The “Knowledge-based Economy” is much broader than the “Creative Economy” proposed earlier. Indeed, Duncan Pescod, out-going permanent secretary of CEDB’s Communication and Technology Branch discussed the subject of whether Hong Kong should “… focus on selected creative industries or should aim to put creativity into all sectors of our economy”24, suggesting that “… creativity can take root across all parts of Hong Kong’s economy”. This line of thinking has clear merits even though it will be a more difficult task to achieve because of the complex and uncharted nature of the “Creative & Knowledge Economy” from the HKSAR Government’s viewpoint.                                                              24  “Creativity can take root across all parts of HK’s economy”, SCMP Letter to Editor 15 May 2009. 
  30. 30. The Knowledge-based Economy from the perspectives of the Commerce and Economic Bureau of the HKSAR Government 30    Offering “Sector-by-sector” support versus offering support to all sectors of the economy through a “Creative & Knowledge-based Economy” strategy is an economic philosophy discussion, a subject still looking for a community consensus. Clearly, governments cannot be expected to know every aspect of industries and to drive growth; but governments could be expected to drive economic and social development by delivering the infrastructure, including the “Soft Infrastructure”: awareness building, education, training and networking capacity demanded by the “Knowledge-based Economy” which developed economies such as Hong Kong need to move on to for sustainable growth. 8.4 Specific support measures for the Knowledge-based Economy Considering the HKSAR Government’s long-standing “Market Leads, Government Facilitates” and “Big Market, Small Government” principles, HKSAR Government normally does not like starting high-level commissions to drive “big ideas” which may come and go. This line of thinking could have been the source of HKSAR Government’s “risk adverse” image and this approach of “… not supporting anything that is not already there” approach to problem-solving could not be completely wrong. Hong Kong did avoid many false investments and failures of The idea of “Virtuous Ecology” has a Buddhist origin ‐‐ an “Indra’s Net”,  often pictured as a “spider web” with jewels of water droplets attached,   “… formless and qualities depend on the wisdom of the observer.”  The  metaphor is that government’s role is to build the “spider web” – a flexible  facilitation framework with the right conditions, where self‐organising and  shinning “jewels” of economic development results can be formed. Creating a “Virtuous Ecology” for the Creative & Knowledge Economy in Hong Kong Knowledge Management (Sector-by-Sector) Sustainable Use of Knowledge (Sector-by-Sector) Economic Value Creation FSO & CEDB to provide the “virtuous ecology” for individual sectors to access skills, share knowledge and help develop policy measures CEDB & relevant policy bureaus to evaluate and justify policy measures proposed and assist individual sectors in accessing the value creation process Facilitation not restricted to the “4+6 Pillars” Creative & Knowledge Economy Sectors failing to understand the key issues and access knowledge and policy support measures to climb the value chain  
  31. 31. The Knowledge-based Economy from the perspectives of the Commerce and Economic Bureau of the HKSAR Government 31    many centrally planned economies, including those made by the Singapore Government as in the case such as “Suzhou”25. Hong Kong probably does not want to be positioned as part of the “12th Five Year Plan” or government-driven planned economy – the Central Government does not seem to wish to see this happening in Hong Kong ether. But at the same time, Hong Kong probably does not want to miss out on any economic development opportunities opened up by China’s centrally planned economic development policies either. After 20 years, it will probably be difficult to expect an “EDB”26 to happen in Hong Kong soon, but the need to avoid failures also needs to be balanced against the opportunities of success, national goals and social and economic well-being of Hong Kong’s own population. Therefore, it is probably a practical middle ground for the Financial Secretary’s Office (FSO) to establish a “Knowledge-based Economy Coordination Unit” in collaboration with the Commerce and Economic Development Bureau (CEDB) and other government units. In the absence of an “EDB”, a high- level coordination unit is necessary and in line with the HKSAR Government’s practice of helping overcome directional and reconciliation issues at the practical implementation level. Such an advisory unit can act as the coordinator of the practical implementation policies and measures, such as: Support measures from the FSO and CEDB(Proposed) • Financial Secretary’s Office (FSO): i) Feasibility study on starting a HKSAR Government’s “Knowledge- based Economy Coordination Unit” (Hong Kong’s “EDB” to be built on existing government and non-government institutions and coordination frameworks); ii) A major study on the strategy and implementation measures of the “Knowledge-based Economy” (a strategy paper commissioned or sponsored by the FSO, including reconciliation of existing policy measures relating to “Four + Six Pillars” and the potential measures of the Knowledge- based Economy);                                                              25  The Suzhou Industrial Park was Singapore first joint‐venture with the Central Government of China, launched  on 26 February, 1994 when Chinese Vice‐Premier Li Lanqing and Singapore Senior Minister Lee Kuan Yew  signed a joint venture agreement. The project lost over US90 million in the first five years of operation as a  competing Suzhou New District (SND) industrial park was built by the Suzhou City Government right next to it.  The other major weakness of the Souzhou project, as later discovered some multinational companies that  invested in the project is the lack of proximity to major universities and their R&D capacities (e.g. in Shanghai  and Hangzhou). This might also be a relative weak point for the Guangzhou Knowledge City project and why  Hong Kong can still find a major role to play in this Guangdong‐Singapore joint venture project.   26  Apart from EBD, which in effect has policy making power, there are other examples of high‐level advisory  bodies to support the development of Knowledge‐based Economies, such as the National Knowledge  Commission in India and the Future Commission in Finland. The Ministry of Knowledge Economy in Korea and  METI of Japan (Ministry of Economy, Trade and Industry) are also key drivers of their respective Knowledge‐ based Economies.  
  32. 32. The Knowledge-based Economy from the perspectives of the Commerce and Economic Bureau of the HKSAR Government 32    iii) Investigate the feasibility of offering Industry-by-industry support framework where the private-sector companies of the same industry gather and teach each other the best practices of the “Knowledge-based Economy” (a government-owned corporation such as the Cyberport or HKSTP will probably in a better position than the FSO to execute this role); iv) Economic impact study on Hong Kong’s development into a “Knowledge-based Economy” and establish performance measures that point Hong Kong towards a sustainable, high-value added economic transformation into a Knowledge-based Economy (by the Economic Analysis and Business Facilitation Unit of the FSO); v) Promote awareness of the “Knowledge-based Economy” (e.g. sponsoring the industry-by-industry support unit to launch international conferences and lectures on the subject). • Constitution & Mainland Affairs Bureau (CMAB): i) Coordination with China’s 12th Five Year Plan and with provincial and municipal governments of Mainland China (on-going project by CMAB, HK’s Trade Office in the Mainland and CEDB). • CEDB – Tourism & Commerce Branch: i) InvestHK – continue to work with the Science Park and in attracting high-value added inbound investment projects (on-going InvestHK project) and to consider adopt “Knowledge-based Economy” as an inbound investment promotion strategy (an alternative product positioning proposed to InvestHK by APICC); ii) HKDTC and Overseas Trade Offices – define roles, including the specific roles of the newly established “Innovation and Technology Advisory Committee” of the HKTDC in helping to promote the “Knowledge-based Economy” (proposal by APICC); iii) Intellectual Property Department (IPD) – coordination with WIPO (World Intellectual Property Office of the UN) and SIPO (State Intellectual Property Office of China) on international regulation and practices relating to the “Knowledge-based Economy such as the “ICM Light “ (on-going projects undertaken by the IPD). • CEDB -- Communication & Technology Branch: i) Implement and support the Hollywood Road Police Married Quarter project (on-going project driven by Development Bureau and CEDB/CreateHK); ii) Consider the feasibility of adopting the UK’s DCMS(Department for Culture, Media and Sport) facilitation model where “media” and “sport” are integrated with the Creative Industries (proposal by APICC); iii) TELA (Televison and Entertainment Licensing Authority) and OFTA (Office of the Telecommunications Authority) to investigate the
  33. 33. The Knowledge-based Economy from the perspectives of the Commerce and Economic Bureau of the HKSAR Government 33    technical and licensing policy measures required to turn Hong Kong into an international media centre27 (e.g. for CCTV-9, Discovery Channels and Google as a direct measure to support the “Creative Industries” and to make best use of Hong Kong’s liberal environment and free press); iv) Investigate how to extend and enhance the successful role played by Cyberport (e.g. extending Cyberport’s knowhow in spurring start-ups in the digital entertainment industry to other Knowledge-based Industries, supporting the venture capital industry and hosting a industry-by-industry “Knowledge-based Economy Supported Unit” sponsored by the FSO or CEDB); v) Innovation & Technology Commission (ITC) to consider policy measures, such as converting part of ITF (Innovation & Technology Fund) into a “Trading Funding” operation. This will allow some of ITF’s resources to approach funding project as if they are longer-term investments that will have investment returns -- not expense items that require tight control and scrutiny from government (e.g. following UK’s NESTA (National Endowment for Science, Technology and the Arts) business model); vi) CreateHK (on-going project at implementation stage). • Office of Chief Information Government Officer (OGCIO): i) Digital 21 Strategy (an OGCIO’s project, probably one of the most important on-going “First Order” business condition project for HK’s Knowledge-based Economy). ii) Facilitation of Public Sector Information (PSI) Reuse (on-going project at research stage). iii)Facilitation of IP Trading and Technology Transfer (project at a feasibility study stage by HKTDC and OGCIO; this project may involve coordinating with CEDB on CEPA, IP trading withholding tax agreements with EU countries and USA and with the Legal Department on settling IPR disputes that involve Mainland companies through arbitration in Hong Kong). Support measures from other HKSAR Government units (Proposed) • Chief Secretary’s Office i) Efficiency Unit (EU) and Government Records Office to investigate “Record Management”28 and “Intellectual Capital Management” as                                                              27  Singapore’s Media 21 Strategy “… envisions Singapore as a Global Media City”. Hong Kong, with probably the  freest media environment in Asia and proximity to Mainland China is in an equally good position to make use  of a similar strategy to support the “Creative Industries”, create jobs, inbound investments and to support  Mainland’s media, such as Phoenix TV, CCTV‐9 to connect with the rest of the world.   28  “Managing Public Records for Good Governance and Preservation of Collective Memory: The Case for  Archival Legislation” by the Civic Exchange promoted the introduction of an archive laws in Hong Kong.  “Record Management” professionals pointed out that in other jurisdictions, the practice were built before  introducing legislation. A more reasonable approach is to build up the knowhow and capacity within HKSAR  Government departments before introducing archive laws in Hong Kong.  
  34. 34. The Knowledge-based Economy from the perspectives of the Commerce and Economic Bureau of the HKSAR Government 34    Knowledge-based Economy” tools to retain the experience of an “aging” civil service (on-going EU project at a feasibility study stage) ii) West Kowloon Cultural Zone (an on-going West Kowloon Cultural District Authority (WCKDA) project) • Information Services Department i) Develop a well crafted BrandHK strategy for the “Knowledge-based Economy” (proposal by APICC) • Development Bureau i) Help build “Social Capital” -- facilitate consensus building and informed discussion of controversial public issues in Hong Kong society by turning some Heritage Sites into “Public Space” to engage the public, for example by hosting a “Future Centre for Development”, a “Future Centre for Transport and Housing” , a “Future Centre for the Environment” etc. as tools to engage the public (proposal by APICC) • Health & Welfare Bureau i) Sponsor an industry-specific support unit to facilitate the awareness of “Knowledge-based Economy” practices, such as commercialisation opportunities from medical innovations, patents on cancer treatment drugs and new medical procedures (proposal by APICC). • Home Affairs Bureau i) Coordinate with CEDB on feasibility of turning “sports” (e.g. Football) into “Creative Industries” using the UK’s DCMS (Department for Culture, Media and Sport) facilitation model. • Education Bureau i) Encourage universities to take up research or host research centres through the “Theme-based Research Scheme” of the RGC (Research Grant Committee) on industry standards or market development frameworks that have potential to bring substantial economic values to Hong Kong. Example of such researches include: RMB & HK$ Bond Market Development and Securities Credit Rating (e.g. researches undertaken by the Finance Department of the HKUST Business School; WICI, research project on “Intellectual Capital Accounting project” (accounting of “Intangible Assets”) now being conducted by METI (Ministry of Economy, Trade and Industry) of Japan and universities in Japan and Europe (a project that has important implication in to valuations of “Intangible Assets” of companies enterprises in Mainland China may wish to acquire in the process of “Going-out”) ).
  35. 35. The Knowledge-based Economy from the perspectives of the Commerce and Economic Bureau of the HKSAR Government 35    8.4 Branding Hong Kong as a “Knowledge-based Economy” A branding exercise can be seen as a route-map to get from the current position -- Point A) to the ideal outcome -- Point B). Without such a route map, the supporting players of this economic transformation strategy, including the speech writers, graphic designers, overseas trade offices and government officials involved in promoting such a strategy will wander aimlessly in an infuriating and pointless journey. A branding strategy could also be seen as the “What” of the communication campaign. While the graphic design, the brochures and the websites are the “How” of the campaign. Unlike the Social Science Department of HKU that looked into the social, human and political aspects of Hong Kong, the “Knowledge-based Economy” branding campaign would probably look at elements that are of interest to trade commissions, potential investors, and from professionals, artists and others who might be interested in Hong Kong’s new “Product Positioning”. A strong branding strategy29 must be based on a strong product. To get there, we probably need to go back to the strongest “DNAs” of Hong Kong as a “Product”. For example: • Being part of China and international at the same time, • HK’s diversity and stable qualities at the same time – a diverse talent base, an inclusive society, social tolerance, rule of law, liberalism, openness, impartial public service delivery, safe and predictable environment etc. • Adaptive, flexible, strong networking and co-operation with the technology R&D capacity of others -- the thinking behind the creation of “iPod” etc. Other elements of the Branding Strategy will probably include: • Marketing Aims – for example, to attract inbound investment to spur economic growth through high-value added “Knowledge-based” industries, to create jobs and to assist China’s economic develop; • Competitive Frame – the economic environment, competitive “Knowledge Cities” in the region, etc. • Positioning – a clear description of the transformation journey from the current position A) to the ideal position B); • The Promise -- including the “ … feel good factor” which must be supported by facts -- Hong Kong’s liberal environment, the “China Advantages”, past records, the ideal “First Order” business conditions Hong Kong now has and solid policy implement measure of “Second Order” business conditions favourable to growth of knowledge-based industries in Hong Kong.                                                              29  Nearly all Advertising & Communication Strategies used by major international advertising agencies have its  origin in a 50 –year old document titled “Unilever Guide to Good Advertising”.