Miracles not needed, some small adjustments will do! -- 13 May 2013


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Miracles not needed, some small adjustments will do! -- 13 May 2013

  1. 1. It does not take a miracleto turn Hong Kong into a Knowledge-based EconomyIn Israel, they say,if you do notbelieve inmiracles you arenot realistic.It does not takea miracle to turn Hong Konginto a Knowledge-basedEconomy, somesmall adjustmentswill do.(Source: Sharon Gal Or)InnoTech
  2. 2. Realizing Hong Kong’sknowledge-based economypotential as part ofa rising Chinahttp://www.slideshare.net/AlanLung/realising-hks-knowledgebased-economyPaper P001 (E) prepared by:Dr. Gordon McConnachieFormer Technology Transfer Manager, Dow Chemical EuropeFounding Chairman of Scottish Intellectual Assets Centre andChief Technology Officer of Asia Pacific Intellectual Capital CentreMr. Alan LungDirector & General Manager of Asia Pacific Intellectual Capital CentreTHE EIGHTH ANNUAL CONFERENCE OFTHE ASIAN STUDIES ASSOCIATON OF HONG KONGP001 (E) Session 9A: Business Sector in Hong Kong16.30-18.00 , Saturday 9 March 2013Lady Ivy Wu Lecture Theatre, The Hong Kong Institute of Education
  3. 3. ZhejiangUniversityHangzhouBeijing Academy of Science &TechnologyPECC Beijing ConferenceJinan University GuangzhouHong Kong SAR Government Office in BeijingIPR2 Beijing OfficeHong Kong Science &Technology ParkNDRC & SIPO BeijingLinks to Scotland, USA & EuropeEU in HK & BeijingAbout:
  4. 4. John Tsang’s speakerluncheon titled:Hong Kong as a knowledge-based economy and its rolein Chinas economicdevelopment(31 May 2010)http://www.hkdf.org/newsarticles.asp?show=newsarticles&newsarticle=272Carrie Lam’sspeaker luncheon titled:Policy priorities of this term ofGovernment - Population Policy(4 February 2013)http://www.hkdf.org/newsarticles.asp?show=newsarticles&newsarticle=324
  5. 5. HKSAR Governmenttargets economicdevelopment• “This Government places as muchemphasis on economic development –both the speed and the quality ofeconomic development – as we do onlivelihood issues …”• Tell me: “If Government could do1,2,3,4,5 for us, then the followingwill happen and this would be goodfor Hong Kong’s economy andtherefore good for the Hong Kongsociety …”Chief Executive C.Y.Leung’s remarks atThe first meeting of the EconomicDevelopment Commission13 March 2013http://www.news.gov.hk/en/record/html/2013/03/20130313_121636.shtml?pickList=highlighthttp://www.info.gov.hk/gia/general/201301/17/P201301170324.htm
  6. 6. Hong Kong has always beenabout free trade …THE BRITISH came ashore on Hong Kong Island in 1841 on a rising imperial tide. They workedto create a bustling business community convinced that in trade … lay the future of their world.“The Governors of HONG KONG “ by Russell SpurrSir Henry Pottinger,First Governor ofHong Kong(1841-1844) andChris Patten, LastGovernor of HongKong (1992-1997)
  7. 7. Hong Kong has always been aboutland transaction revenue too!Tea Act of the British Parliament andthe Boston Tea Party (1773) whicheventually led to the American War ofIndependence (1775-1782) taught theBritish not to impose extra-territorial taxBritish Hong Kong original fiscalfoundation (since 1841):•Trade and free port•Opium related revenues•Land transaction revenues•Other revenuesIncome tax was not introduced toHong Kong until 1947:•Trade expanded•Opium tax faded•Land revenues remainSource: The Foundations of the Hong Kong Revenue Regime, Civic Exchange report,Prof. Richard Cullen and Antonietta Wong,Civic Exchange Publication, 2008
  8. 8. Hong Kong’s potential as aknowledge-based Economy …
  9. 9. In a classical economy:Factors of production:• Land• Labour• Capital ($)Intangible factors of production:• Enterprise or Entrepreneurship
  10. 10. In a Knowledge-based Economy:Factors of production:• Creativity• Innovation• Wealth CreationComplementary business assets:• Manufacturing facilities• Distribution capacity• Sales force
  11. 11. Hong Kong does nothave 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.
  12. 12. Rise of China … and findinga new role for Hong Kong• China does not want toremain a low and mid-end “assembler” ofgoods;• To get there, China canmake good use of HongKong’s “soft power”:rule of law/rule-basedsociety, general integrityand trust etc.
  13. 13. Silicon Valley has a solidindustrial base:Strong manufacturingcapacity, R&D, creativity and presence of gratefulentrepreneurs … Steve Jobs used US$150 millionfrom Bill Gates to restart Apple in 1997.Driving Hong Kong tobecome a Knowledge-based Economy is notthe same as centraleconomic planning …
  14. 14. Meso-economic: the political economy* andhow government chooses to use public resourceto drive economic development(*rules, institutions, supporting systems and regulations)• Andrew Sheng and Xiao Geng ofthe Fung Global Institute caught theattention of the World EconomicForum :“The new economics: Mesoand Meta” http://forumblog.org/2012/10/the-new-economics-meso-and-meta/• “ … today’s mainstream micro-and macroeconomic models areinsufficient”;• “… Meso-economics studies theinstitutional aspects of theeconomy”.
  15. 15. Political-economy lesson from South KoreaFrom “Catch-up” to “Creative”mode of economic development• A key political economy lessonHong Kong could learn from SouthKorea is an on-going policy shiftaway from a “catch-up” mode to a“creative” mode of development.• Essentially, it is a shift away fromvery focused support of “chaebol”(large family-ownedconglomerates) to a focus onstrengthening the innovationcapacities of SMEs.Top right: Korean women donatinggold to support a bankrupt Koreaneconomy in 1998.Bottom: Students joining dockworkers strike in Hong Kong in2013.
  16. 16. Hong Kong’s Innovation Eco-system?• South Korea: KIST (Founded 1966), Ministry of FuturePlanning and Science (2013, Park Geun-hye’s economicliberalization and “creative” mode of development initiatives)• Singapore: Economic Development Board, A*STAR,IP Academy of Singapore (Since 1965, Lee Kuan-yew)• Taiwan: ITRI (工研院), Hsinchu Industrial Park,network of statutory bodies (Since 1973, Chiang Ching-Guo)• Europe/Scotland: Lisbon Agenda (March 2000),Enterprise Europe Network, EEN-Scotland• Finland: TEKES, The Federation of FinnishTechnology Industries (Finland’s “Old Money” for new industries)• Hong Kong: Innovation & Technology Bureau?Under Secretary CEDB? Grateful entrepreneurs?朴槿惠李光耀蔣經國
  17. 17. Innovation is more than R&D …Innovation includes: organizationchanges, training, testing, marketing anddesign.• New or significantly improved product: anew process, or a new organsiationmethod etc.• Must contain a degree of novelty: newto the firm, new to the market, or new tothe world;• Clearly broader than R&D: influenced byfactors that include government policy;can occur in any sector of the economy –including government service, healthcareand education.
  18. 18. Investing in technology alone?• A policy of investing in technologyalone without knowing how toextract economic value from it hasno future.• Hong Kong must learn how tomanage its Knowledge Capital.• Hong Kong must have a policy andan Eco-system that support thecommercialization of technology.InnoTech
  19. 19. 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)AUTM (USA)Tsinghua (China) Association of UniversityTechnology Managers (USA)Enterprise Europe NetworkDG Enterprise and Industry, EuropeanCommission (Marshall Hsia & Alan Lung in Beijing)
  20. 20. Lessons to be learnt from theOresund Region• 1991: the governments ofDenmark and Sweden agree tobuild the Oresund bridge• 1999: The report ”Øresund –the creation of a region”concludes that the greatestbarrier to integration in theOresund region is lack ofcommunication betweencitizens, businesses and publicadministration• 2000: The Oresund bridgeopens and Oresunddirekt islaunched
  21. 21. Historical relations between Denmark and SwedenHistorical relations between Guangdong and Hong KongThis type of economic development is often based on:Historical economic and cultural tiesthat happen gradually over time... but often with some degree of government facilitation
  22. 22. Hong Kong needs to be“innovation driven”not“basic requirement”or “efficiency” driven.•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))Hong Kong needs to be“Innovation” driven,not“Basic Requirements” or“Efficiency” driven
  23. 23. The proposed BJ-GD-HK Knowledge CorridorMaximizes BJ-GD-HK’s External Economy of Scaleand integrates “Expertise Cluster”, “RegionalCluster” & “Industry Cluster” policiesBJ, GD and HK on their own do not haveall 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-techmanufacturing export;(Source: OECD Review of Innovation Policy – China, OECD 2008)• Hong Kong: built on a tradition of freemarket and ‘good law, well administered’;HK uses English as a business language andis seamlessly connected tothe West.
  24. 24. The proposed BJ-GD-HK Knowledge CorridorA strategy for China to move from “SustainedDevelopment” to “Sustainable Development”A strategy that combines Europeanexpertise, China’s strengths inscience and technology and high-tech manufacturing; and HongKong’s service capacity to facilitateeconomic transitions:• China’s “Sustained Development”(through investment by the State) to“Sustainable Development” (throughvalues created from TechnologyTransfer and TechnologyCommercialization);• Hong Kong’s narrow industry baseand over-reliance on the financialand property sectors.
  25. 25. 產業政策A compelling economic reformargument and a coherentintellectual framework still missing:Free Market Economy, rule of law,freedom of information and the need todevelop high value-added industriesacknowledged by CY Leung; however:•“Service Economy” or “Manufacturing”?• Current status of “Six New Industries”?•“Sector Neutral” or”Sector Biased”?
  26. 26. Sir JohnCowperthawaite,FinancialSecretary ofHong Kong17 April 1961 –30 June 1971John Tsang, Financial Secretary(since 1 July 2007)Sir JohnCowperthwaiteFinancial Secretary(1961-1971)• In a free market economy,government cannot predict thewinning industries and where thenext burst of economic growthmight come from.• However, Hong Kong does notseem to fully understandCowperthawaite’s philosophy asone of the requirements of“positive non-intervention” isthe “positive” part – thatgovernment must not stand stilland must do as well as it possiblycould to facilitate.• Indecisiveness and inaction is notequal to prudent financialmanagement.“Free Market”versus“Economic Planning”
  27. 27. Prof. LAU Siu-kai, former head of Central Policy Unit(CPU), HKSAR Government at the environmental friendly BeitouPublic Library during CPU’s Study Trip to Taiwan, 27-30 June 2011• “… Government’s role in economicdevelopment has been changing sincethe “Laissez-faire” days ofCowperthwaite and Haddon-Cave”;• “… people are unlikely to opposeHKSAR Government’s economicdevelopment initiatives”.(Prof. Lau Siu-Kai’s closing brief to delegates of theTaiwan Study Trip on 30 June 2011)• Hong Kong has always thrived onnew way of thinking and doing – nothanging onto past success.“ HKSAR Government isunlikely to be dogmaticon the subject of FreeMarket versus EconomicPlanning ” Prof. LAU Siu-kai
  28. 28. Strategies of innovation:“Eureka” – discovery of new frontiers ofknowledge is not necessarily the only strategy• “Battle for Architecture”,“System Breakthrough”, “New andImproved”, “Mass Customization”and “Pushing the Envelope” aresome of the alternative strategies.• Assisting SMEs to acquireknowledge, knowhow andtechnologies and;• assisting knowledge-intensive SME start-ups willhave most support from thecommunity.http://www.cae-acg.ca/documents/Dpliant_Innovation_Reinvented_v4.pdf
  29. 29. ICM Gathering* of the USA:(*Intellectual Capital Management Gathering)A group of ~ 30 companies, )sophisticated in the management of their intangibles. Theframeworks and methods for extracting value from intangible assets were created by thecompanies themselves and not by academics or consultantsSMEs need to learn the “trade secrets” of MNEsthrough industry-specific Knowledge-basedEconomy Expert Groups (ICMGs)http://www.slideshare.net/AlanLung/what-is-intellectual-capital-management-apicc-whitepaper-2Dr PatrickSullivanUSA started in the early 1990s
  30. 30. The proposed BJ-GD-HK Knowledge Corridor:Build “Expertise Clusters” in Technology-transfer and Technology-commercializationBTEC/ITTN in Beijing and APICC inHong Kong will jointly apply forEnterprise Europe Network (EEN)membership as EEN-Beijing and EEN-Hong Kong in late 2013 (for approvaland implementation in 2014):• EEN is the largest technologytransfer network in the world; EEN isowned by the European Union;• Enables Tech-transfer and Tech-commercialization know-how to beimported from Europe;• EEN-Beijing and EEN-HK will receivecoaching from EEN-Scotland, a unit ofthe Scottish Government.
  31. 31. Knowledge-based economy is a proven strategy …not a novelty in OECD CountriesOECD acknowledges:• The link between Knowledge-basedEconomy and creation of high-wage andhigh-quality employment;• Productivity of developed economy islargely determined by the rate of knowledgeaccumulation and technical progress;• The importance of government policy andsupport systems.(Source: The OECD Innovation Strategy: Getting a Head Start on Tomorrow,OECD 2010)
  32. 32. Hong Kong: well placed in two-and-a-half of theFour pillars of the Korean knowledge economy• Economic incentive and institutionsupport: good economic policies andinstitutions, efficient resource allocation thatsupport dissemination of knowledge ;• An educated and skilled labour force:willing to continuously upgrade and adapt itselfto create and use knowledge;• An effective innovation system: offirms, research centre, universities, consultantsand others to keeps up with global knowledgesystem;• A modern information infrastructure:that facilitates effective communication,dissemenatation and processing of informationand knowledge.(Source: OECD Reviews of Innovation Policy:KOREA 2009)
  33. 33. Hong Kong: well placed in two-and-a-half of theFour pillars of the Israeli knowledge economyAn analysis of the innovation eco-system of Israelreveals essentially the same success factors as SouthKorea’s innovation eco-system:• Economic incentives and institutional support:Hong Kong probably rates very quite well in the area of providingeconomic incentives.• Availability of financial capital and an effectiveinnovation system: Venture capital typically plays a verylimited role in Early-stage Technology Development Funding (ESTD)around the world, particularly in Hong Kong.• Supply of human capital: Hong Kong shortcoming iscompensated by Hong Kongs international outlook, links to MainlandChina under "One Country, Two Systems" and other skills incommerce and finance.• Access to information and a moderninformation infrastructure: Hong Kong scores well in theaccess to information factors. Press freedom, a liberal politicalenvironment and use of English as the primary business language areimportant but fairly under-rated competitive advantage.(Source: “Building an Innovation Economy, Public Policy Lessons from Israel”, Jonathan Avidor,Northwestern Law School and Kellogg School of Management, May 2011)
  34. 34. How’s Hong Kong doing?How Israel and the restof the world are doing itLeft: Shimon Peres, former Israeli Prime Minister helping Shai Agassi of Better Place to close a deal with thePresident of French automaker Renault-Nissan, Carlos Ghosn. Right: Peres with Zuckerberg of Facebook.
  35. 35. European SMEs are keen to use Hong Kongas a gateway to do business with China …“SMEs make up morethan 98% of allcompanies in Europe …more importantly, theyare considered thechief source ofcreative ideas andtechnologicalinnovation …”South China Morning Post 8 May 2013Vincent Piket, Head of EU-HK & Macau and Simon Galpin, Head ofInvest Hong Kong (Page A4, South China Morning Post, 8 May 2013)InnoTech
  36. 36. The 1,2,3,4,5 steps ofKnowledge-base economy implementation:in reality a lot of work must start in Hong Kong firstHong Kong needs to brand itself as a KnowledgeCity and build an Innovation Eco-system:1. Invest in and implement a “Fully Examined Patent System*”in co-operation with SIPO** and the world’s IP systems;(*Target implementation date according to IPD of HKSAR Government:2016/2017)(**State Intellectual Property Office of China)2. Support the business side of innovation – including theexpertise behind commercialization of technology;3. Support all industries – not one industrial sector at theexpense of other sectors (the current practice of requiringpartially funded quasi-government agencies to competeagainst private sector service providers should stop);4. Liberalize the economy – learn how Europe (particularlyFinland) screen, incubate and support knowledge-intensivestart-ups through very open and transparent systems;5. Have a clearly stated policy and co-ordinate the fragmentedsupport measures now offered through various governmentand quasi-government agencies -- even in the absence of anInnovation and Technology Bureau.enterprisechinanetwork
  37. 37. “Hong Kong is losing its competitive edge…”Beijing warns! Hong Kong disagrees!“Development is the onlyhard truth … only when the economycontinues to thrive will livelihoods improve.Everything else is empty talk. Like a boatsailing down-stream if it does not forgeahead …” Politburo Standing Committee MemberZhang Dejiang at a meeting with theBusiness and Professional Alliancein Beijing on 17 April 2013Prof. Chan Ka-keungSecretary for the Treasuryand Financial Servicesdisagreed … the city’sadvantages are in our own hands,citing the legal system andfinancial market.Tom Holland of South ChinaMorning Post alsodisagreed … far from losing itsedge, HK is more competitive thanever ... the Chairman of NPC istalking out of his hat on HongKong’s competitiveness.Who right? Who’s wrong?What do you think?Q&A:
  38. 38. The president has spoken … it now up to us,but it will not be just implementation!Support fromthe Hong Kongcommunity,from industries, consensus building, a clearly statedpolicy and practical implementation support fromthe HKSAR Government now needed.“It’s the Implementation!”Xi said Leungs policy idea, seeking changewhile maintaining stability, has been widelyrecognized by Hong Kong citizens. He urgedLeung and the Hong Kong SAR governmentto fully implement the idea.(18 March 2013 in Beijing)Bill Clinton’swidely quoted1992 campaignslogan:“It’s theeconomystupid!”http://www.chinadaily.com.cn/china/2013-03/18/content_16317997.htmInnoTechThank you!
  39. 39. 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 2012http://www.slideshare.net/AlanLung/hong-kong-157897872. “Hong Kong’s Innovation and Technology Role in Mainland China’s 12th Five YearPlan”, APICC Whitepaper #7, March 2011http://www.slideshare.net/AlanLung/h-ks-innotechrolein1253. “Policies and Practices for Hong Kong as a Knowledge Economy and the ProposedInnovation and Technology Bureau”, APICC Whitepaper #8, July 2011http://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 2012http://www.chinadailyapac.com/article/proposed-guangzhou-hong-kong-knowledge-corridor5. "Innovation Reinvented -- Six Games that Drive Growth", Miller and Cote,University of Toronto Press, 2012http://www.cae-acg.ca/documents/Dpliant_Innovation_Reinvented_v4.pdf6. “The politics and specifics of knowledge-based economy implementationin Hong Kong”, by Gordon McConnachie, Alan Ka-lun Lung & Sharon Galor(unpublished APICC Whitepaper)
  40. 40. About the authors of“Realizing Hong Kong’s knowledge-based economy potential as part of a rising China”Dr. Gordon McConnachie, B.Sc., Ph.DDr Gordon McConnachie is the founding Chairman of the Scottish Intellectual Assets Centre (2003--2007) and Chief Technology Officer of Asia Pacific Intellectual Capital Centre. He is a chemical 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: gmcconnachie@apicc.asiaMr. 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 spent the formative years of hisworking career with international advertising and public relations agencies, including an overseasposting at Ogilvy & Mather Singapore. He now chairs the Hong Kong Democratic Foundation(www.hkdf.org ), a political and public policy think tank founded in 1989. Alan is skilled in converting hisknowledge of governments and public policies into practical steps to move forward “KnowledgeEconomy” initiatives. He is a member of the Innovation and Technology Advisory Committee of the HongKong Trade Development Council (HKTDC) and he has been promoting innovation and technologypractices in Hong Kong, Guangzhou and Beijing through the Asia Pacific Intellectual Capital Centre(www.apicc.asia) (where he is Director and General Manager), since 2006. Alan Lung Ka-Lun can becontacted at: alanlung@apicc.asia