Commission on Strategic Development. Innovation and Technology Key Issues for Discussion

Transcription

1 For Meeting on 16 March 2015 Paper Ref: CSD/1/2015 Commission on Strategic Development Innovation and Technology Key Issues for Discussion Introduction With reference to the paper on Promotion of Innovation and Technology Development in Hong Kong prepared by the Innovation and Technology Commission (ITC) (Annex I) and the CPU research report on 創 新 及 科 技 產 業 發 展 研 究 報 告 (Summary at Annex II), this paper highlights some of the key issues concerning innovation and technology development in Hong Kong, with focus on the challenges we face and the proposed enhancements for Members discussion. Hong Kong s strengths in innovation and technology development 2. Innovation and technology can diversify the economy, provide wider employment opportunities in research and development (R&D), enhance the competitiveness and growth of related industries and improve working and living conditions. Hong Kong has many strengths and advantages which provide a favourable strategic environment for innovation and technology development. Hong Kong has a unique role as a super-connector between the Mainland and the rest of the world. Hong Kong also possesses the right infrastructure of a sound legal system, open economy, market friendly regulatory regime, simple tax system, and respect for intellectual property rights. Hong Kong also has internationally acclaimed universities with world-class basic research capabilities. 3. The Government has put in a lot of efforts to support innovation and technology development through five core strategies. They include providing world-class technology infrastructure for enterprises, research institutions and universities; offering financial support to stakeholders in the industry, academia - 1 -

2 and research sector to commercialise their R&D deliverables; nurturing talent; strengthening collaboration with the Mainland and other economies in science and technology; and fostering a vibrant culture of innovation. Challenges faced by Hong Kong in innovation and technology development and proposed enhancements 4. Although many measures have been launched to promote innovation and technology development, Hong Kong still faces many challenges and there are many areas that can be enhanced. Some proposed enhancements are as follows: (a) Developing better policies 5. The Government should step up efforts to formulate a macro and comprehensive strategy for the promotion of innovation and technology in Hong Kong, and set clear objectives for the development of the related industries. The coordination of inter-bureau policy efforts in innovation and technology development should be enhanced. In fact, the proposed new Innovation and Technology Bureau was supposed to take up such tasks as developing policies to strengthen the support for the innovation and technology sector, strengthening the linkages among stakeholders, encouraging private sector participation, motivating the commercialisation of R&D results, co-ordinating inter-bureau policy efforts, identifying measures to strengthen policy research and collaboration with different places, spearheading the development of strategies to take forward initiatives enshrined in the Digital 21 Strategy, and developing forward looking measures to nurture talents, while engaging our future work force with the government policies. (b) Leveraging Hong Kong s advantage as a super-connector between the Mainland and the rest of the world 6. Hong Kong should further its efforts to leverage its advantage as a super-connector between the Mainland and the rest of the world. We should explore opportunities for establishing cooperation ventures and forming - 2 -

3 partnerships among R&D institutions and industries of the Mainland, Hong Kong and other regions/countries. For example, with Hong Kong s strength of having internationally acclaimed universities with world-class basic research capabilities, we should form a complementary relationship with the Pearl River Delta (PRD) Region, particularly Shenzhen, which has significant complementary resources to Hong Kong s. This would help Hong Kong better enhance and support its innovation and technology development efforts. (c) Enhancing financial support by the Government 7. Some have commented that the existing funding arrangements under the Government s Innovation and Technology Fund (ITF) are too restrictive in confining its scope to collaborative projects with universities and the R&D Centres, and that the project vetting requirements are too complex and cumbersome and the vetting takes too long to facilitate worthy projects to be undertaken quickly. It should be explored whether the ITF regime can be made more flexible, and whether more support can be given to enterprises, especially start-ups, to support the commercialization of their R&D results. When considering applications under the ITF, the Government should be more willing to take risks so as to encourage more innovative projects with long-term potential. Such risks should be linked to and justified by specific Key Performance Indicators (KPIs). 8. ITC s Public Sector Trial Scheme provides funding support for the production of prototypes/samples and conducting of trial schemes in the public sector to facilitate and promote the realization and commercialization of R&D results under ITF projects. It is proposed that consideration can be given to extending the scope of the Public Sector Trial Scheme beyond ITF projects to cover other R&D projects of local SMEs. (d) Developing the market Commercialization of R&D results 9. Some perceive that one of the main obstacles in innovation and - 3 -

4 technology development in Hong Kong stems from the difficulties in the collaboration among stakeholders, i.e. Government, industry, academic and research sectors. To facilitate the commercialization of R&D results and technology transfer, efforts should be stepped up to strengthen the linkages among these stakeholders. Consideration should be given to providing incentives to encourage academics to recognize and to put in more efforts on the commercialization of R&D results. Recognition of knowledge transfer has a lower priority than academic research paper publishing. This has created a gap between academically generated intellectual property rights and full commercialization. Lowering of business costs 10. The Government should explore provision of tax/land/infrastructure incentives for the innovation and technology industry, so as to address the problem of high business costs (for example high rental and salary costs) in Hong Kong. 11. Provision of tax/land/infrastructure incentives are no longer the primary attraction elements. Competition will always drive better offers. Hong Kong should build upon its current strengths and leverage them in attracting innovative talents and technology bases to Hong Kong, for example a global consumer technology product/service launch pad with Hong Kong s 2.6 mobile phones per capita and 60m+ shoppers/visitors per year. Clustering effect 12. Hong Kong should strive to develop an edge in a few innovation and technology industries so as to produce a clustering effect and attract more R&D enterprises to invest in Hong Kong. Leveraging on neighbouring markets 13. It is difficult for innovation and technology products to rely only on the small Hong Kong market. Local enterprises may target at the markets of - 4 -

5 the Mainland, Taiwan, Hong Kong and Macao in developing innovation and technology products. Government procurement policy 14. The Government should consider introducing flexibility in fulfilling WTO requirements and adjusting Government procurement policies so as to encourage the use of R&D products or services of local enterprises. Intellectual property rights protection 15. Respect for intellectual property rights is one of the strengths of Hong Kong. Building on this strength, the Government should enhance the formulation of relevant policies and provide more resources for the training of professionals for the field. Further improving intellectual property rights protection in Hong Kong would facilitate the commercialization of R&D results. Making Hong Kong a global trading platform of intellectual property rights can be an ultimate goal. (e) Encouraging investment of private sector 16. Hong Kong s gross domestic expenditure on R&D as a ratio to Gross Domestic Product is relatively low compared with other economies in the region. 1 The Government should explore policies to encourage private enterprises to invest in R&D, especially in start-up innovation and technology enterprises. Investment by overseas venture capital funds in start-ups should be encouraged. (f) Nurturing and attracting talent 17. Currently, not many young people choose to pursue a career in R&D in Hong Kong due to the lack of job opportunities. Through the Government s 1 According to the website of World Bank, Hong Kong s gross domestic expenditure on R&D as a ratio of GDP in 2010 is 0.75; the corresponding figure for China in 2012 is 1.98; the corresponding figure for Singapore in 2012 is 2.10; and the corresponding figure for South Korea in 2011 is

6 efforts in supporting local innovation and technology enterprises as well as attracting international enterprises to set up innovation or technology bases in Hong Kong, it is hoped that more job opportunities can be created for university graduates with science and technology background. This would encourage more top local students to pursue a career in innovation and technology in Hong Kong. 18. The Government should formulate a policy for nurturing talent in innovation and technology throughout primary, secondary and tertiary education. Scholarships can be awarded to students with outstanding achievements in science and technology subjects. More emphasis on the nurturing of talent would also help foster an innovation and technology culture in society. 19. Talent in the innovation and technology field are mobile internationally. The Government should review its talent admission strategy and explore ways to attract more talent of the innovation and technology sector from Mainland and overseas to come to work in Hong Kong. The admission of talent would help stimulate the growth of innovation and technology in Hong Kong. This is where Hong Kong s advantage in one country, two systems, as well as the super-connector can make a difference. Advice sought 20. Members are invited to advise on challenges faced by Hong Kong in innovation and technology development and on possible measures to overcome such challenges. Secretariat to the Commission on Strategic Development March

7 Annex I Commission on Strategic Development Promotion of Innovation and Technology Development in Hong Kong Innovation and Technology Commission March 2015

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9 CONTENT Chapter 1 Policy Statement and Strategies Pages 2 to 3 Chapter 2 Providing Technology Infrastructure Pages 4 to 6 Chapter 3 Offering Financial and Related Support Pages 7 to 13 Chapter 4 Collaboration With the Mainland and Other Places Pages 14 to 17 Chapter 5 Nurturing Talent and Fostering a Vibrant Culture Pages 18 to 20 Chapter 6 Appendices Analysis of Strengths and Weaknesses and the Proposed Way Forward Pages 21 to 25 Appendix A Appendix B Diagrammatic Representation of the Extension of Funding Scope of the Innovation and Technology Fund Diagrammatic Representation of the Creation of an Innovation and Technology Ecological Environment

10 CHAPTER 1 POLICY STATEMENT AND STRATEGIES 1.1 Innovation and technology (I&T) are key drivers for social and economic developments. They help improve our productivity and competitiveness, contribute to sustainable growth of the economy and provide a greater variety of job opportunities for our talented young people. There is a need for Government to intensify effort to promote I&T development, lest we would risk losing our competitiveness on the global stage. Policy Statement 1.2 To leverage our strengths and overcome our shortcomings in I&T development, we have formulated the following policy statement to guide our work The Government firmly believes that innovation and technology is a key driver for economic development. We are committed to developing Hong Kong into a knowledge-based economy that thrives as an innovation hub in the region. In meeting such commitment, we will enhance collaboration among the Government, industry, academia and research sectors to promote research and development as well as technology transfer. A multi-pronged approach will be adopted, comprising provision of infrastructural and financial support, human resource development, collaboration with economies outside Hong Kong and fostering an innovation culture in the community. Strategies and Measures 1.3 Our approach is to support the I&T sector to compete in quality, focus on its niches and move up the value chain by producing high value-added products/services with innovative technology content. The Government provides a strategic environment for I&T development through the following strategies (A) Providing the necessary technology infrastructure for enterprises, research institutions and universities; (B) Offering financial and related support to stakeholders in the industry, academia and research sectors; (C) Strengthening collaboration with the Mainland and other places in science and technology; and (D) Nurturing talent and fostering a vibrant culture

11 1.4 Details of these strategies are set out in the ensuing chapters

12 CHAPTER 2 PROVIDING TECHNOLOGY INFRASTRUCTURE Hong Kong Science Park and Industrial Estates 2.1 The Hong Kong Science Park (HKSP) is our flagship technology infrastructure which provides facilities, services and a dynamic environment that enable companies to nurture ideas, innovate and develop. At present, Phases 1 and 2 of HKSP provide 20 buildings, offering square metres of research and development (R&D) office space. Construction of the $4.9 billion HKSP Phase 3 is progressing on schedule. Its first three buildings were officially opened in September 2014, while the remaining two buildings will be completed in When fully completed, the gross floor area of the HKSP will increase by around 50% to square metres, accommodating over 600 partner companies and providing job opportunities. 2.2 Under the existing Industrial Estate (IE) Programme, three IEs in Tai Po, Yuen Long and Tseung Kwan O provide land for industries that cannot operate in multi-storey industrial buildings. So far, about 96% of the existing IE sites have been granted. 2.3 In 2014, we have, in conjunction with the Hong Kong Science and Technology Parks Corporation (HKSTPC), completed a review on the utilisation and long-term development direction of the Science Park and IEs. HKSTPC will take a more proactive role in promoting the development of I&T in addition to the provision of infrastructure, facilities and support services. The HKSTPC will also strengthen its connection with innovators, government agencies, investors and the industry, while fostering collaboration with international and local universities and research institutions across different technological disciplines. It will continue to promote innovative development by creating an inspiring and vibrant ecology and offering customised services to I&T companies at different stages of R&D. 2.4 In addition, in order to increase the supply of R&D facilities, the review report recommended HKSTPC to consider suitably raising the development density of the HKSP to optimise its land use in the light of the severe shortage of land resources in Hong Kong. As regards the IEs, HKSTPC will also update the IE policy to enhance the value chain of the I&T industries, taking into account changes in the economic structure of and shortage of land supply in Hong Kong

13 R&D Centres 2.5 In 2006, the Government set up five R&D Centres to drive and coordinate applied R&D in their respective technology areas and promote commercialisation (a) Hong Kong Automotive Parts and Accessory Systems R&D Centre (APAS); (b) R&D Centre for Information and Communications Technologies under the Hong Kong Applied Science and Technology Research Institute (ASTRI); (c) Hong Kong Research Institute of Textiles and Apparel (HKRITA); (d) Hong Kong R&D Centre for Logistics and Supply Chain Management Enabling Technologies (LSCM); and (e) Nano and Advanced Materials Institute (NAMI). 2.6 So far, the Legislative Council (LegCo) Finance Committee (FC) has approved a total of $1,019 million out of the Innovation and Technology Fund (ITF) to support the Centres operation for 11 years from April 2006 to March As at end-december 2014, the five R&D Centres have conducted over 700 projects (accounting for about 30% of the total number of R&D projects supported by the ITF) involving a funding amount of about $3,400 million (accounting for about 40% of the approved funding for all R&D projects supported by the ITF). Among the above projects, about 110 are collaborative projects (or about 85% of all collaborative projects supported by the ITSP), involving a funding amount of about $330 million (or about 95% of the total approved funding for all collaborative projects supported by the ITSP). 2.8 We are delighted that after some eight years of operation, the R&D Centres have gradually made a name as the trusted R&D partner in their respective sectors. For example, LSCM has been appointed as an institutional member of the Hong Kong Logistics Development Council in recognition of its knowledge and expertise in the logistics industry, and HKRITA has collaborated with various stakeholders on a number of successful projects, supporting various Government departments and non-government organisations, such as the Fire Services Department, Hong Kong Sports Institute, etc. 2.9 Since the establishment of the R&D Centres, the Innovation and Technology Commission (ITC) has been submitting annual reports of the - 5 -

14 operation and performance of the R&D Centres to the LegCo Panel on Commerce and Industry (C&I Panel). We will conduct another review of the R&D Centres in mid-2015 by that time, they will have operated for nearly 10 years and we will be able to assess more comprehensively their performance and put forward our recommendations to the Panel with regard to their future operation. Cyberport 2.10 Under our sister department, the Office of the Government Chief Information Officer (OGCIO), there is also the Cyberport which is Hong Kong s information and communications technology (ICT) flagship with a cluster of over 300 technology and digital tenants. Located in Pokfulam, Cyberport is committed to supporting and promoting ICT in Hong Kong through the creation of a cluster of ICT companies and professionals, as well as implementation of programmes to foster industry development and nurture ICT start-ups. Equipped with an array of state-of-the-art ICT facilities, Cyberport currently offers square metres of office space

15 CHAPTER 3 OFFERING FINANCIAL AND RELATED SUPPORT 3.1 Over the years, the Government have been striving to build a vibrant I&T ecosystem through provision of financial support and other related support. The $5 billion-itf was set up in 1999 to fund applied R&D projects that facilitate technology upgrading in manufacturing and service industries and promote innovation. It is one of the most important tools of the Government in promoting I&T. As at end-december 2014, the ITF has supported over projects involving a total funding of about $8.9 billion. Key Funding Programmes 3.2 There are three funding programmes under the ITF that support R&D activities (a) the Innovation and Technology Support Programme (ITSP) is the largest funding programme under the ITF which supports mid-stream/downstream applied R&D projects mainly undertaken by the five R&D Centres set up by the Government, local universities and other designated local public research institutions. There are broadly two categories of projects under the ITSP, namely (i) (ii) platform projects which are intended for the benefit of the industry as a whole. These projects require industry contribution of at least 10% of the project cost from one company. The industry sponsor(s) will not be entitled to own the project intellectual property (IP); and collaborative projects which are intended to provide support to the industry or a company in conducting R&D, realising/commercialising the IP and taking the R&D outcome to the market. These projects require higher levels of industry contribution of at least 30% of the project cost for projects conducted by R&D Centres or at least 50% for projects conducted by other research institutions. The industry partner will be entitled to exclusive right to utilise the project IP for a defined period or own the project IP. Furthermore, there is a special funding arrangement for exploratory and forward looking R&D projects which aim to provide the foundation for future applied R&D projects. The current maximum funding amount is $2.8 million for each of these projects conducted by R&D Centres (Seed projects) and $1.4 million each one - 7 -

16 conducted by universities and other research institutions (Tier 3 projects). Industry contribution is not mandatory; (b) the University-Industry Collaboration Programme (UICP) which supports collaborative projects undertaken by private companies in collaboration with local universities in the form of matching grant; and (c) the Small Entrepreneur Research Assistance Programme (SERAP) which provides dollar-for-dollar matching fund for small technology based enterprises to undertake in-house R&D projects that have innovative technological content and have a reasonable chance of successful development of a new product, process or service. The SERAP will however be eventually replaced by a new scheme called the Enterprise Support Scheme (ESS). The ESS will provide better terms than SERAP because it will have no limit on the size of company, no repayment requirement, and the funding ceiling will be raised. The ESS will be launched in March/April Apart from the above three programmes, there is also the General Support Programme (GSP) which supports non-r&d projects for the upgrading and development of the local industries as well as the promotion of an I&T culture in Hong Kong. Under the GSP, there are two sub-programmes, namely (i) the Patent Application Grant (PAG) that provides funding support for patent applications; and (ii) the Internship Programme that supports organisations undertaking ITF projects to recruit graduates from local universities as interns. 3.4 In addition, the Public Sector Trial Scheme (PSTS) provides additional funding of up to 100% of the original R&D cost to completed R&D projects funded by the ITF under the ITSP, UICP and SERAP for the production of tools/prototypes/samples and the conducting of trials in the public sector. 3.5 Apart from the ITF, the Government launched the R&D Cash Rebate Scheme in April 2010 with a funding commitment of $200 million. It seeks to provide cash rebate to private companies on their investment in R&D projects funded by the ITF or conducted in partnership with designated local public research institutions. Initially, the level of cash rebate was 10%. This - 8 -

17 was subsequently increased to 30% in February 2012 to increase the attraction of the Scheme. Selected Examples of ITF Projects 3.6 As at end-december 2014, the ITF has supported over projects with a total funding of some $8.9 billion. Some selected examples of R&D projects supported by the ITF are set out below: (a) the Chinese University of Hong Kong successfully developed a revolutionary non-invasive prenatal diagnostic approach for Down syndrome by directly analysing fetal DNA collected from the mother's blood sample. Conventional methods for detection of fetal chromosomal genetic abnormalities are invasive and carry a higher risk to the mother and unborn baby. Not only is the new diagnostic method a phenomenal commercial success worldwide benefitting hundreds of thousands of pregnant women, it also represents one of the most rapidly developing areas of molecular testing. Arising from this technology, a sensitive analysis of fetal DNA for Down syndrome has been introduced as a clinical service in Hong Kong and the United States since the end of 2011; (b) the Hong Kong Polytechnic University (PolyU)) has developed an interactive robotic system for more effective upper-limb rehabilitation training that is controlled in part by the user s intention, through the detection of muscle activity in the affected limb. Patents for this technology have been granted in the Mainland and the United States. Trials of this system have also been successfully carried out in several elderly care centres, with products based on the licensed technologies now manufactured and sold/ordered by a number of hospitals/rehabilitation centres, including those in Hong Kong, the Mainland, Europe and - 9 -

18 Singapore; (c) HKRITA has been proactively commercialising the Finer Nu-Torque Cotton Yarn Production technology internationally. Nu-Torque technology is one of the most significant advancements in spinning of single ring yarns. So far, this technology has gone through five generations of R&D and has been put into production. The current licensee could produce yarns in the Mainland, Thailand, Malaysia and India; (d) LSCM has collaborated with the Customs and Excise Department to apply the E-Lock-Based Enabling Technology at boundary control points. This technology has helped reduce the number of repeated customs inspection for cargos at control points, enhance couriers efficiency and reliability, and facilitate logistics flow between Hong Kong and the Mainland; and (e) HKRITA, LSCM and ASTRI have jointly developed a system on Wearable Electronics for Better Quality Community Care for the Elderly which involves an outerwear made of a Nu-Torque fabric embedded with the RFID system. Trial of this system has been conducted in two elderly centres under the Tung Wah Group of Hospitals to improve monitoring of the elderly, particularly those who might be more susceptible to losing their way due to Alzheimer s disease

19 Evolvement of the ITF over the Years 3.7 The ITF has played a key role in promoting I&T upgrading and development in Hong Kong. Over the years, the ITF has been evolving continuously with changes in the prevailing circumstances. During the early years from its establishment in 1999 to 2006, the focus of the ITF was more on supporting projects conducted by universities, ASTRI and the Hong Kong Productivity Council. Following a large-scale consultation exercise, the Government set up five R&D Centres in 2006 to drive and co-ordinate applied R&D in selected areas which had potentials for further development in Hong Kong. After the financial tsunami in 2008, the Government further upheld the importance of I&T by designating it as one of the six new industries that enjoyed clear advantages. Since then, much effort has been made to drive realisation and commercialisation of R&D outcomes. 3.8 In order to evaluate the operation of the ITF after some 15 years of operation and identify areas of improvement, the Government conducted a comprehensive review on the ITF (the ITF Review) in mid-2013 and submitted the Final Report of the ITF Review to the LegCo C&I Panel in late A summary is as follows (a) Funding Programmes In general, we consider that they have been operating smoothly and satisfactorily, and have helped build up the capabilities of local research talents and gained increasing recognition from the industry, especially with the enhancements of the funding mechanism and improvement measures introduced in the past few years such as extending the funding scope to more downstream R&D activities (a diagrammatic representation is at Appendix A), relaxing the requirements for industry sponsorship, and application of R&D outcomes in the public sector. To further promote I&T investment in the private sector and address some existing limitations of the SERAP under the ITF, we will replace the SERAP by a new Enterprise Support Scheme (ESS) in March/April 2015; (b) R&D Centres After some eight years of operation, the R&D Centres have gradually become more mature and have played a significant role as the focal points for technology collaborations among the Government, industry, academia and research sectors. Recently, they have stepped up efforts in realisation and commercialisation of R&D outcomes and have obtained increasing support from the industry as reflected by the increase in the level of industry

20 contribution over the years; (c) Realisation and Commercialisation of R&D Outcomes With the various efforts and initiatives introduced since 2011, we have witnessed a significant increase in the number of cases of realising R&D outcomes in the public sector. As at end-december 2014, we have approved over 70 projects under the PSTS which cover many different sectors including logistics, construction and community care sectors, and involved different public sector organisations, such as the Construction Industry Council and the Tung Wah Group of Hospitals. This will pave the way for commercialisation in due course; (d) Creation of an I&T Ecological Environment and Fostering Collaboration Over the years, through the financial support of the ITF as well as our active liaison and collaboration with key stakeholders, we have gradually built up an eco-system on both software and hardware fronts, widened the network/exposure of our researchers, and created synergy amongst them. This is conducive to the development of I&T in Hong Kong; and (e) Other Improvement Measures We are implementing a number of improvement measures, including relaxing the sponsorship requirements for the ITSP; increasing the time frame for the UICP projects from two to three years; increasing the funding ceiling of the PAG from $150,000 to $250,000 (and correspondingly the patent application budget in all ITF-funded projects), etc. in stages starting from December Members of the LegCo C&I Panel affirmed the role of the ITF in promoting the development of I&T in Hong Kong and welcomed Government s new initiatives and improvement measures to enhance the application and commercialisation of R&D results. Some Members also pointed out that given that the promotion of I&T required long-term effort, projects should also be assessed on the basis of their social and economic contributions to the broader community

21 Injection into the ITF 3.10 As at end-december 2014, the uncommitted balance of the ITF was about $0.2 billion and the cash balance was about $1.2 billion. According to our forecast, the uncommitted balance would be fully committed in mid-2015 and the cash balance will be exhausted in early In order to provide sustained and comprehensive support for I&T development, the Chief Executive has announced in the 2015 Policy Address the proposal to inject $5 billion into the ITF and subsume the R&D Cash Rebate Scheme under the ITF. The relevant proposal was approved by the Legislative Council Finance Committee on 27 February

22 CHAPTER 4 COLLABORATION WITH THE MAINLAND AND OTHER PLACES 4.1 Cooperation with key players in the innovation ecosystem enables ITF support to reach out to a wider population of innovators and technology users in the public and private sectors. It encourages a thriving and stimulating environment for R&D activities. 4.2 For Hong Kong with a population of some 7 million people, it is important to collaborate with the Mainland and international partners for bringing many potential benefits, including an increased scale and scope of R&D activities, cost and risk sharing, an improved ability to deal with complex R&D topics, etc. 4.3 The ITC has been actively promoting R&D collaboration with other economies and will continue to do so. At present, the ITF funding guidelines allow up to 50% of the R&D work of a funded project to be conducted outside Hong Kong. 4.4 Some examples of Mainland and international collaboration are highlighted below. Mainland Collaboration 4.5 We have been working with stakeholders to enhance collaboration with the Mainland on science and technology in order to capitalise the opportunities presented by the National 12th Five-Year Plan. We are most encouraged that the National 12th Five-Year Plan has set out clearly the Central Government s support on I&T development in Hong Kong. 4.6 Through the Mainland-Hong Kong Science and Technology Cooperation Committee, co-chaired by the Vice Minister of Science and Technology and the Secretary for Commerce and Economic Development, we have implemented initiatives to dovetail with the National 12th Five-Year Plan on Science and Technology Development to enhance Hong Kong s participation in the national roadmap of technology development. Initiatives include (a) Establishment of the Partner State Key Laboratories (PSKLs) in Hong Kong These laboratories serve as a base for high level research and development, assembling and nurturing outstanding researchers, as well as scholarly exchanges for the country. Since , the ITF has provided 5-year financial assistance to each PSKL. A new

23 round of application exercise for PSKL was completed in July 2013, in which the Ministry of Science and Technology (MOST) approved four applications from local universities. The total number of PSKLs established in Hong Kong was increased from 12 to 16. To further recognise their achievements, strengthen their R&D capabilities and promote their joint efforts with their Mainland counterparts, funding support to the PSKLs in Hong Kong has been enhanced. From to , the annual funding ceiling for each PSKL has been increased from $2 million to $5 million. At the ninth meeting of the Mainland-Hong Kong Science and Technology Co-operation Committee held in September 2014, the schedule of the first round of reassessment of the PSKLs to be conducted in 2016 was endorsed. Amongst the 16 PSKLs in Hong Kong, the 12 ones established in 2010 or before will be subject to reassessment to ensure that their leading positions in respective scientific research areas are maintained; (b) Establishment of the Hong Kong Branch of Chinese National Engineering Research Centre(s) (CNERC(s)) in Hong Kong ASTRI, as a pilot case, has been approved by MOST in June 2012 to establish the National Application-Specific Integrated Circuit System Engineering Research Centre Branch Office in Hong Kong in collaboration with Southeast University in Nanjing. Starting from , funding up to $5 million is provided to each Hong Kong Branch of CNERC(s) each year to enhance their R&D capabilities and collaboration with the Mainland. Such funding is provided on an annual basis for an initial period of three years. As endorsed by the Mainland-Hong Kong Science and Technology Co-operation Committee, the first round application for Hong Kong Branches of Chinese National Engineering Research Centres started in March A total of 28 applications were received from universities and R&D Centres in Hong Kong and the assessment work is being conducted. A list of recommended applications is expected to be ready in mid-2015 for submission to MOST for consideration;

24 (c) Establishment of the National High-tech Industrial Bases in Hong Kong MOST designated the Hong Kong Science Park as Hong Kong National High-tech (Partner) Industrialisation Base for Green Technology in mid-november 2011, Hong Kong National Modern Services Industrialisation (Partner) Base in November 2013, and Hong Kong National High-tech Industrialisation (Partner) Base for Integrated Circuits in August 2014; and (d) Promoting Hong Kong s Participation in National Science and Technology Programmes We encourage research institutions to undertake projects under the National 973 Programme and successfully nominate 56 Hong Kong experts to enter the National Science and Technology Programmes Expert Database. International Collaboration 4.7 Our efforts in supporting international collaboration include (a) PolyU Aviation Services Research Centre The ITF has recently funded two clusters of projects on developing new or improved aviation services technologies, both of which are led by the PolyU in association with the Aviation Services Research Centre, which is an industry-led non-profit making organisation established by the PolyU in collaboration with Boeing Corporation. These projects have also secured sponsorship from leading local companies specialised in aviation maintenance services; (b) Soft-landing Programme for Technology and Innovation Collaboration With the funding support of the GSP under the ITF, the HKSTPC has been carrying out a project titled Soft-landing Programme for Technology and Innovation Collaboration. The Programme aims to attract Technology Transfer Offices (TTOs) of renowned overseas universities/research institutions to set up strategic outposts in Hong Kong, with a view to exploring collaboration with local partners on R&D and commercialisation activities for tapping into the Mainland. During the first year of the project, four TTOs joined the Programme including Isis Innovation Ltd (a wholly-owned company of the University of Oxford) and Imperial Innovations (a technology commercialisation company investing in opportunities arising from

25 IPs associated with the University of Cambridge, the University of Oxford and the University College London, and the Imperial College London); (c) Bilateral Cooperation with Israel In February 2014, the Government signed a Memorandum of Understanding (MOU) with the MATIMOP, the executive agency of the Office of the Chief Scientist under the Ministry of Economy of Israel on promoting bilateral cooperation in industrial R&D. To take forward the MOU, the ITC led a delegation including representatives from a number of R&D Centres to visit Israel in May 2014; and (d) Cooperation with Karolinska Institutet (KI) Since 2010, the Government and HKSTPC have been in liaison with KI with a view to fostering closer collaboration relationship between this institution and the R&D sector in Hong Kong. Following the Chief Executive s duty visit to Sweden in May 2014, a bilateral taskforce was set up to explore more and closer collaboration opportunities with KI. Recently, the University of Hong Kong and KI have jointly established the Dr Li Dak-Sum Research Centre on Regenerative Medicine. The KI has also established the Ming Wai Lau Center for Regenerative Medicine in early (e) Cooperation with Massachusetts Institute of Technology (MIT) With the funding support of the GSP under ITF, the Hong Kong University of Science and Technology (HKUST) and MIT set up a Research Alliance Consortium involving local universities, MIT, and multinational companies to work on industry-driven pre-competitive research in the field of intelligent living technology. So far, three ITSP projects with a total funding of $27 million had been approved under ITF for the Consortium to commence R&D work in Hong Kong

26 CHAPTER 5 NURTURING TALENTS AND FOSTERING A VIBRANT CULTURE 5.1 The success of a knowledge-intensive I&T sector hinges on the availability of talents. Over the years, we have placed increasing emphasis on talent development, attracting the young generation to consider pursuing I&T as a career, and providing exposure and incentives to them at different stages of their academic and intellectual development through various channels. Examples of such measures include Promotion of Start-ups 5.2 Start-up has been increasingly popular in recent years. According to a survey conducted by InvestHK, as at November 2014, there were start-ups in Hong Kong, representing a 30% increase from Much effort have been made by InvestHK, ITC, OGCIO, HKSTPC and Cyberport to support this sector. 5.3 In September 2014, ITC set up a new Technology Start-up Support Scheme for Universities under the ITF to provide an annual funding of up to $24 million to six local universities, initially for three years, to encourage their students and faculty members to start technology businesses and commercialise their R&D outcomes. We hope that the Scheme can bring R&D results from the campus to the real world by encouraging more technopreneurial activities and facilitating commercialisation of university intellectual properties. The Scheme will provide incentive to encourage science, technology and engineering graduates to pursue their career in the I&T sector, adding fresh impetus to the innovation ecosystem. The GSP under the ITF 5.4 The GSP is a funding programme under the ITF which provides funding support to non-r&d projects that contribute to fostering an I&T culture in Hong Kong. Examples of GSP projects include conferences, exhibitions, seminars, workshops, studies and surveys, competitions, scholarships and youth activities. 5.5 For example, the GSP has been supporting the Hong Kong Federation of Youth Groups to organise the Innovation and Technology Scholarship Award Scheme since The Scheme, with funding support from the Hongkong and Shanghai Banking Corporation Limited, aims to provide young science talents an opportunity to strengthen their exposure outside Hong Kong and gain industry experience, with a view to encouraging the youths to pursue I&T as their lifelong career. Each year about 25 university students are awarded the Scholarship to join a programme

27 comprising elements of overseas/mainland attachment; mentorship; community service; and local internship. Throughout the years, the Scheme has established itself as one of the most recognised schemes of its kind in Hong Kong, and has received strong support and positive feedback. 5.6 The Internship Programme under the GSP also supports organisations undertaking R&D projects under the ITF (i.e. those funded by the ITSP, UICP and SERAP) to recruit graduates from local universities as interns. At present, each ITF project can engage up to two interns at one time. The maximum period of internship is 24 months, and the monthly allowance for an intern is $12,000 for a graduate with Bachelor s degree and $14,000 for a graduate with a Master s or higher degree. According to a recent survey, over 60% of interns under this Programme in the last 3 years either found a job or indicated interest in a future employment in the R&D field. Since its establishment in 2004, the internship programme has already funded intern positions to provide training and employment opportunities for local graduates. ICT Manpower Development 5.7 ICT is embedded in practically all spheres of economic activities and there is an increasing demand for ICT talents in different domains. OGCIO will introduce a two-pronged Enriched IT Programme in Secondary Schools to groom IT talents. Up to eight secondary schools will be selected as partner schools to run enriched IT classes for students who are willing to put in extra hours for more vigorous and advanced training in IT. In addition, other interested schools will also be invited to organise some 50 IT activities in the school community each year. A Steering Committee comprising representatives from the Government, tertiary institutions, industry bodies and IT teacher associations has been set up to develop the curriculum framework for the programme. Meanwhile, OGCIO is inviting secondary schools to submit proposals to be partner schools. The programme will commence in the school year. Promotional Activities 5.8 ITC has organised a wide range of promotional activities to enhance public awareness of I&T, including the anchor event InnoTech Month (ITM), which was held from late October to early December 2014 and had attracted over visits. We also supported students and enterprises to participate in science and technology competitions or invention exhibitions. In 2015, we will continue to organise the ITM and support the organisation of various science and technology competitions and promotional activities to nurture a culture of I&T in the community

28 Creation of Ecology Conducive to I&T Development 5.9 With the financial support provided by the Government through the University Grants Committee/Research Grants Council and the ITF as well as private sector investment, etc., we are gradually building up an eco-system on I&T. For example, Hong Kong s Gross Domestic Expenditure on R&D (GERD) has risen from $7.1 billion in 2001 to $15.6 billion in 2013, representing an average annual growth of around 7%. The number of R&D personnel has also more than doubled during the same period, from around to While the increase in R&D personnel and GERD is not entirely attributable to the ITF, the ITF is certainly a key player in fostering the I&T ecology The Government is committed to promoting I&T development in Hong Kong. We strive to create a vibrant ecosystem with excellent software and hardware support for the key players to collaborate on research, development and innovation activities. As seen in the last three years, we have been continuously introducing enhancements to the ITF for creating a favourable ecology for the realisation and commercialisation of R&D results. A diagrammatic illustration is at Appendix B. Such efforts will continue in order to sustain the momentum and positive impacts that the ITF has created

29 CHAPTER 6 ANALYSIS OF STRENGTHS AND WEAKNESSES AND THE PROPOSED WAY FORWARD Overall Situation 6.1 In recent years, Hong Kong s GERD as a ratio to GDP is generally around 0.73%. In 2013, the total expenditure on R&D in the private sector amounted to around 45% of GERD whereas the public sector was responsible for the remaining 55%. This contrasts significantly with the international ratio of which the share of private to public R&D expenditure is usually about 70:30, with the private sector making the majority contribution. 6.2 This is due to key reasons such as Hong Kong being a service-led economy, with almost no manufacturing sector or a defence industry. However, being located in the heart of Asia as well as at the doorstep of the Mainland, we possess unique strengths which are unmatched by other places. This chapter analyses our strengths and weaknesses and explores the roadmap for further development. STRENGTHS 6.3 Hong Kong s strengths can be broadly classified into three areas - international connectivity, international compatibility and international credibility. Each of these will be analysed in the following paragraphs. International Connectivity 6.4 Located in the southern tip of the Mainland and being the transportation hub of the region, Hong Kong is closely connected with the rest of the world (a) Heart of Asia At the geographic centre of Asia, Hong Kong is within five hours flying time to half the world s population; and (b) Doorstep of Mainland China For example, with the construction of the Guangzhou-Shenzhen-Hong Kong Express Rail Link, one can travel from Hong Kong to Shenzhen in 14 minutes and Guangzhou in 48 minutes. We have the advantage of being an important link and a super-connector between the Mainland and the rest of the world, creating enormous opportunities in I&T development which require extensive collaboration and partnership

30 International Compatibility 6.5 Hong Kong is closely integrated with the international community in terms of legal system, financial system, taxation system and lifestyle. Some of the salient features include (a) A Sound Legal System - while Hong Kong is an integral part of China, the one country, two systems allows Hong Kong-based companies to operate under an international business environment with a freely convertible currency, international accounting practices, and a level playing field fully protected by a mature and trusted independent legal system based on common law; (b) Strong capital raising and management capability - Hong Kong is the global leader in initial public offerings (IPO) equity funding. In 2013, total equity funds raised through IPOs in Hong Kong amounted to US$22 billion. Furthermore, Hong Kong s position as an offshore Renminbi centre is a strong advantage; (c) Simple and low taxation system - Hong Kong s tax regime is renowned for its simplicity and low rates. Corporate tax is 16.5% and personal income tax is capped at 15%; and (d) International lifestyle and full of choices - Hong Kong offers a stimulating, dynamic and cosmopolitan lifestyle. International Credibility 6.6 With a long proven track record of international trade and investment, Hong Kong is a credible place for I&T investment and establishment of start-ups. Some selected indicators are highlighted below (a) World s Freest Economy since Index of Economic Freedom, Heritage Foundation; (b) World s 4th Most Competitive Economy World Competitiveness Yearbook 2014, IMD; and (c) Most competitive city in China Chinese Academy of Social Sciences 6.7 Furthermore, Hong Kong is renowned internationally for the following qualities (a) A clean government Hong Kong is one of the most corruption-free economies in the world. This is achieved through a

31 transparent and predictable public administration system and stringent law enforcement; (b) IP protection IP is the lifeblood of a technology company and its most valuable asset. In Hong Kong, we are firmly committed to upholding an effective IP protection system with a view to creating a favourable business environment and encouraging innovation; (c) Skilled workforce Hong Kong s local workforce is well-educated, versatile and multi-lingual, and possesses good global outlook as well as a good understanding of the business practices in the Mainland; and (d) World class higher education sector The universities in Hong Kong count amongst the very best in the Asia-Pacific region in their teaching and research achievements. According to the Quacquarelli Symonds (QS) World University Ranking 2014, three of the eight universities funded by the University Grants Committee ranked within top 50 in the world. WEAKNESSES 6.8 Despite the above, the development of I&T in Hong Kong is hindered by the following factors (a) Decreasing manufacturing activities our economy is driven by the service sector which accounted for about 93% of GDP in The manufacturing sector, which drives innovation and R&D activities, has been shrinking and is reported to contribute a meagre 1.4% GDP growth reported for the same period; (b) Non-existence of defence activities Hong Kong does not have any defence spending which is a major driver of R&D activities in other developed economies, e.g. United States and Israel; (c) Business culture not favourable to R&D R&D investment is seen as less attractive and hence not worthwhile to undertake. The favorite choices are finance, real estate, tourism, etc.; and (d) Relatively short history of promoting I&T I&T development requires long-term investment and collaboration among the Government, industry, academia and research sectors. In the United States, the birth of the Silicon Valley could be traced back to over four decades ago. In Taiwan, the Industrial Technology Research Institute and the Hsinchu Science Park were established in the 1970s and 1980s respectively