Slide presentation accompanying the paper titled: "Realizing Hong Kong's knowledge-based economy potential as part of a rising China" submitted to The Eighth Annual Conference of The Asian Study Association of Hong Kong, 8-9 March 2013
What got us here will not get us there! (Updated 30 March 2013)
THE EIGHTH ANNUAL CONFERENCE OF THE ASIAN STUDIES ASSOCIATON OF HONG KONG P001 (E) Session 9A: Business Sector in Hong Kong 16.30-18.00 , Saturday 9 March 2013 Lady Ivy Wu Lecture Theatre, The Hong Kong Institute of Education Realizing Hong Kong’sknowledge-based economy potential as part of a rising China http://www.slideshare.net/AlanLung/realising-hks-knowledgebased-economy Paper P001 (E) prepared by: Dr. Gordon McConnachie Former Technology Transfer Manager, Dow Chemical Europe Founding Chairman of Scottish Intellectual Assets Centre and Chief Technology Officer of Asia Pacific Intellectual Capital Centre Mr. Alan LungDirector & General Manager of Asia Pacific Intellectual Capital Centre
PECC Beijing Conference Zhejiang University Hangzhou About:Jinan University Guangzhou NDRC & SIPO Beijing Beijing Academy of Science & Hong Kong SAR Government Office in Beijing Technology Hong Kong Science & Technology ParkLinks to Scotland, USA & Europe EU in HK & Beijing IPR2 Beijing Office
John Tsang’s speaker luncheon titled: Hong Kong as a knowledge- based economy and its role in Chinas economic development (31 May 2010) http://www.hkdf.org/newsarticles.asp? show=newsarticles&newsarticle=272 Carrie Lam’s speaker luncheon titled: Policy priorities of this term of Government - Population Policy (4 February 2013) http://www.hkdf.org/newsarticles.asp?show=newsarticles&newsarticle=324
HKSAR Government targets economic development • “This Government places as much emphasis on economic development – both the speed and the quality of economic development – as we do on livelihood issues …” • Tell me: “If Government could do 1,2,3,4,5 for us, then the following will happen and this would be good for Hong Kong’s economy and therefore good for the Hong Kong society …” http://www.news.gov.hk/en/record/html/ 2013/03/20130313_121636.shtml?pickList=highlight Chief Executive C.Y.Leung’s remarks at The first meeting of the Economic Development Commission 13 March 2013http://www.info.gov.hk/gia/general/201301/17/P201301170324.htm
Hong Kong’s potential as aknowledge-based Economy …
In a classical economy: Factors of production: • Land • Labour • Capital ($) Intangible factors of production: • Enterprise or Entrepreneurship
In a Knowledge-based Economy: Factors of production: • Creativity • Innovation • Wealth Creation Complementary business assets: • Manufacturing facilities • Distribution capacity • Sales force
Hong Kong does not have any choice …•As a high-cost economy, HongKong must follow the examples ofOECD and EU in climbing up theeconomic ladder;•Hong Kong should try tounderstand what it takes to build aKnowledge-based Economy.
Rise of China … and finding a new role for Hong Kong • China does not want to remain a low and mid- end “assembler” of goods; • To get there, China can make good use of Hong Kong’s “soft power”: rule of law/rule-based society, general integrity and trust etc.
Driving Hong Kong tobecome a Knowledge-based Economy is notthe same as centraleconomic planning … Silicon Valley has a solid industrial base: Strong manufacturing capacity, R&D, creativity and presence of grateful entrepreneurs … Steve Jobs used US$150 million from Bill Gates to restart Apple in 1997.
Meso-economic: the political economy* and how government chooses to use public resource to drive economic development (*rules, institutions, supporting systems and regulations) • Andrew Sheng and Xiao Geng of the Fung Global Institute caught the attention of the World Economic Forum :“The new economics: Meso and Meta” http://forumblog.org/2012/10/the- new-economics-meso-and-meta/ • “ … today’s mainstream micro- and macroeconomic models are insufficient”; • “… Meso-economics studies the institutional aspects of the economy”.
Hong Kong: well placed in two-and-a-half out of theFour pillars of the knowledge economy • Economic incentive and institution support: good economic policies and institutions, efficient resource allocation that support dissemination of knowledge ; • An educated and skilled labour force: willing to continuously upgrade and adapt itself to create and use knowledge; • An effective innovation system: of firms, research centre, universities, consultants and others to keeps up with global knowledge system;Students joining dock workers’ strike in Hong Kong: • A modern information infrastructure: A key political economy lesson Hong Kong could learn that facilitates effective communication, from Korea is an on-going policy shift away from a “catch-up” mode to a “creative” mode of development. dissemenatation and processing of information Essentially, it is a shift away from very focused support of“chaebol” (large family-owned conglomerates) to a focus and knowledge. on strengthening the innovation capacities of SMEs. (Source: OECD Reviews of Innovation Policy: KOREA 2009)
Hong Kong’s Innovation Eco-system? 朴槿惠 • Finland: TEKES, The Federation of Finnish Technology Industries (Finland’s “Old Money” for new industries) • Taiwan: ITRI (工研院), Hsinchu Industrial Park, network of statutory bodies (Since 1973, Chiang Ching-Guo) 李光耀 • Singapore: Economic Development Board, A*STAR, IP Academy of Singapore (Since 1965, Lee Kuan-yew) • South Korea: KIST (Founded 1966), Ministry of Future Planning and Science (2013, Park Geun-hye’s economic liberalization and “creative” mode of development initiatives) 蔣經國 • Europe/Scotland: Lisbon Agenda (March 2000), Enterprise Europe Network, EEN-Scotland • Hong Kong: Innovation & Technology Bureau? Under Secretary CEDB? Grateful entrepreneurs?
Innovation is more than R&D … Innovation includes: organization changes, training, testing, marketing and design. • New or significantly improved product: a new process, or a new organsiation method etc. • Must contain a degree of novelty: new to the firm, new to the market, or new to the world; • Clearly broader than R&D: influenced by factors that include government policy; can occur in any sector of the economy – including government service, healthcare and education.
Investing in technology alone? • A policy of investing in technology alone without knowing how to extract economic value from it has no future. • Hong Kong must learn how to manage its Knowledge Capital. • Hong Kong must have a policy and an Eco-system that support the commercialization of technology.
Hong Kong as a bridge and gatewayGordon McConnachie, CTO of APICC and major tech-transfer units from around theworld in Beijing (ITTN 2012 International Technology Transfer Conference, 26 March 2012) Enterprise Europe Network DG Enterprise and Industry, European CommissionTsinghua (China) Association of University AUTM (USA) Technology Managers (USA)
Lessons to be learnt from the Oresund Region • 1991: the governments of Denmark and Sweden agree to build the Oresund bridge • 1999: The report ”Øresund – the creation of a region” concludes that the greatest barrier to integration in the Oresund region is lack of communication between citizens, businesses and public administration • 2000: The Oresund bridge opens and Oresunddirekt is launched
This type of economic development is often based on:Historical economic and cultural ties that happen gradually over time ... but often with some degree of government facilitation Historical relations between Denmark and SwedenHistorical relations between Guangdong and Hong Kong
•Hong Kong’s OverallRanking: 9(+2) (China:29 (-2))• HK is at “Stage 3” of economic development(i.e. innovation driven) – along with Japan,Singapore, South Korea and Taiwan• Basic Requirements: 3(-2)(institution, infrastructure, macroeconomicsenvironment, health & primary education)• Efficiency Enhancers: 3 (-1)(of which HK ranks no. 1 in the world in“Financial Market Development”)• Innovation &Sophistication Factors: 22 (+2)HK is below 0ECD’s average while China is improving steadily: (China:31 (+3))
The proposed BJ-GD-HK Knowledge CorridorMaximizes BJ-GD-HK’s External Economy of Scale and integrates “Expertise Cluster”, “Regional Cluster” & “Industry Cluster” policies BJ, GD and HK on their own do not have all the success factors needed to build a “Silicon Valley” type of economy: • Beijing: R&D is 5.5% of Beijing’s GDP (4 times the national average); 50% of China’sTech-transfer; • Guangdong: 37.7% of China’s high-tech manufacturing export; (Source: OECD Review of Innovation Policy – China, OECD 2008) • Hong Kong: built on a tradition of free market and ‘good law, well administered’; HK uses English as a business language and is seamlessly connected to the West.
The proposed BJ-GD-HK Knowledge CorridorA strategy for China to move from “SustainedDevelopment” to “Sustainable Development” A strategy that combines European expertise, China’s strengths in science and technology and high- tech manufacturing; and Hong Kong’s service capacity to facilitate economic transitions: • China’s “Sustained Development” (through investment by the State) to “Sustainable Development” (through values created from Technology Transfer and Technology Commercialization); • Hong Kong’s narrow industry base and over-reliance on the financial and property sectors.
A compelling economic reform argument and a coherentintellectual framework still missing: 產 業 政 策 Free Market Economy, rule of law, freedom of information and the need to develop high value-added industries acknowledged by CY Leung; however: •“Service Economy” or “Manufacturing”? • Current status of “Six New Industries”? •“Sector Neutral” or ”Sector Biased”?
SirJohn Sir John Cowperthwaite “Free Market”Cowperthawaite, Financial Secretary versusFinancial (1961-1971)Secretary of “Economic Planning”Hong Kong • In a free market economy,17 April 1961 – government cannot predict the30 June 1971 winning industries and where the next burst of economic growth might come from. • However, Hong Kong does not seem to fully understand John Tsang, Financial Secretary (since 1 July 2007) Cowperthawaite’s philosophy as one of the requirements of “positive non-intervention” is the “positive” part – that government must not stand still and must do as well as it possibly could to facilitate. • Indecisiveness and inaction is not equal to prudent financial management.
“ HKSAR Government is unlikely to be dogmatic on the subject of Free Market versus Economic Planning ” Prof. LAU Siu-kai • “… Government’s role in economic development has been changing since the “Laissez-faire” days of Cowperthwaite and Haddon-Cave”; • “… people are unlikely to oppose HKSAR Government’s economic development initiatives”. (Prof. Lau Siu-Kai’s closing brief to delegates of the Taiwan Study Trip on 30 June 2011) • Hong Kong has always thrived on Prof. LAU Siu-kai, former head of Central Policy Unit (CPU), HKSAR Government at the environmental friendly Beitou new way of thinking and doing – notPublic Library during CPU’s Study Trip to Taiwan, 27-30 June 2011 hanging onto past success.
Strategies of innovation: “Eureka” – discovery of new frontiers ofknowledge is not necessarily the only strategy http://www.cae-acg.ca/documents/Dpliant_Innovation_Reinvented_v4.pdf • “Battle for Architecture”, “System Breakthrough”, “New and Improved”, “Mass Customization” and “Pushing the Envelope” are some of the alternative strategies. • Assisting SMEs to acquire knowledge, knowhow and technologies and; • assisting knowledge- intensive SME start-ups will have most support from the community.
SMEs need to learn the “trade secrets” of MNEs through industry-specific Knowledge-based Economy Expert Groups (ICMGs) USA started in the early 1990s http://www.slideshare.net/AlanLung/what-is-intellectual-capital-management-apicc-whitepaper-2ICM Gathering* of the USA:(*Intellectual Capital Management Gathering) A group of ~ 30 companies, )sophisticated in the management of their intangibles. The frameworks and methods for extracting value from intangible assets were created by the companies themselves and not by academics or consultants Dr Patrick Sullivan
The proposed BJ-GD-HK Knowledge Corridor: Build “Expertise Clusters” in Technology-transfer and Technology-commercialization BTEC/ITTN in Beijing and APICC in Hong Kong will jointly apply for Enterprise Europe Network (EEN) membership as EEN-Beijing and EEN- Hong Kong in late 2013 (for approval and implementation in 2014): • EEN is the largest technology transfer network in the world; EEN is owned by the European Union; • Enables Tech-transfer and Tech- commercialization know-how to be imported from Europe; • EEN-Beijing and EEN-HK will receive coaching from EEN-Scotland, a unit of the Scottish Government.
Knowledge-based economy is a proven strategy … not a novelty in OECD Countries OECD acknowledges: • The link between Knowledge-based Economy and creation of high-wage and high-quality employment; • Productivity of developed economy is largely determined by the rate of knowledge accumulation and technical progress; • The importance of government policy and support systems. (Source: The OECD Innovation Strategy: Getting a Head Start on Tomorrow, OECD 2010)
The 1,2,3,4,5 steps of Knowledge-base economy implementation: in reality a lot of work must start in Hong Kong first Hong Kong needs to brand itself as a Knowledge City and develop an Innovation Eco-system: 1. Invest in and implement a “Fully Examined Patent System*” in co-operation with SIPO** and the world’s IP systems; (*Target implementation date according to IPD of HKSAR Government:2016/2017) (**State Intellectual Property Office of China) 2. Support the business side of innovation – including the expertise behind commercialization of technology; 3. Support all industries – not one industrial sector at the expense of other sectors (the current practice of requiring partially funded quasi-government agencies to compete against private sector service providers should stop); 4. Liberalize the economy – learn how Europe (particularly Finland) screen, incubate and support knowledge-intensive start-ups through very open and transparent systems; 5. Have a clearly stated policy and co-ordinate the fragmentedenterprise china support measures now offered through various governmentnetwork and quasi-government agencies -- even in the absence of an Innovation and Technology Bureau.
The president has spoken … it’s now up to us in Hong Kong! Bill Clinton’s widely quoted 1992 campaign slogan: “It’s the economy, stupid!” “It’s the Implementation!” Xi said Leungs policy idea, seeking change while maintaining stability, has been widely recognized by Hong Kong citizens. He urged Leung and the Hong Kong SAR government Support from the Hong Kong to fully implement the idea. (18 March 2013 in Beijing) community, from industries,consensus building, a practical policy and http://www.chinadaily.com.cn/china/2013- 03/18/content_16317997.htm promotion support from the HKSAR Government now needed. Thank you!
List of references:References1. “Hong Kong and the Knowledge-Based Economy: Developments and Prospects”, Alan Ka-lun Lung, Asian Education and Development Studies, Vol. 1 Iss: 3, Emerald Group Publishing 2012 http://www.slideshare.net/AlanLung/hong-kong-157897872. “Hong Kong’s Innovation and Technology Role in Mainland China’s 12th Five Year Plan”, APICC Whitepaper #7, March 2011 http://www.slideshare.net/AlanLung/h-ks-innotechrolein1253. “Policies and Practices for Hong Kong as a Knowledge Economy and the Proposed Innovation and Technology Bureau”, APICC Whitepaper #8, July 2011 http://www.slideshare.net/AlanLung/innovation-technology-bureau-for-hk-25720114. “Proposed: Guangzhou-Hong Kong Knowledge Corridor”, Samson Tam Wai-ho, China Daily Asia Pacific Edition, 6 July 2012 http://www.chinadailyapac.com/article/proposed-guangzhou-hong-kong-knowledge- corridor5. "Innovation Reinvented -- Six Games that Drive Growth", Miller and Cote, University of Toronto Press, 2012 http://www.cae-acg.ca/documents/Dpliant_Innovation_Reinvented_v4.pdf
About the authors:Dr. Gordon McConnachie, B.Sc., Ph.DDr Gordon McConnachie is the founding Chairman of the Scottish Intellectual Assets Centre (2003--2007) and Chief Technology Officer of Asia Pacific Intellectual Capital Centre. He is a chemical engineerby training and he spent most of his working career with Dow Chemical where he grew up together withthe innovation and technology transfer systems of the world as we know them today. At Dow ChemicalEurope (1989 - -1999), he invented the IP and Intellectual Assets Management System for the worldwidecompany together with Phil Barnett and Gordon Petrash. The system was later modified and appliedacross the global company, where Gordon transferred technologies from companies and universities intoDow Europe which brought him into intimate contact with the EU Innovation Relay Centres (nowEnterprise Europe Network). From 1999 to 2002 Gordon directed the European Intellectual AssetManagement Services of PricewaterhouseCoopers. In 2009, 2010, 2011 and 2012 Gordon was placed onthe Global IAM 250 list of leading IA Strategists, one of only a handful of experts on the list from Chinaand the ASEAN Nations. Dr Gordon McConnachie can be contacted at: firstname.lastname@example.orgMr. Alan Lung Ka-LunAlan Lung Ka-lun was born and educated in Hong Kong. He was also educated at the University ofWisconsin in the USA and Wilfrid Laurier University in Canada. He chairs the Hong Kong DemocraticFoundation (www.hkdf.org), a political and public policy think tank founded in 1989. Alan is skilled inconverting his knowledge of governments and public policies into practical steps to move forward“Knowledge Economy” initiatives. He is a member of the Innovation and Technology Advisory Committeeof the Hong Kong Trade Development Council (HKTDC) and he has been promoting innovation andtechnology practices in Hong Kong, Guangzhou and Beijing through the Asia Pacific Intellectual CapitalCentre (www.apicc.asia) (where he is Director and General Manager), since 2006. Alan Lung Ka-Lun canbe contacted at: email@example.com