As an international financial center, Hong Kong's economy is often criticized for "detaching from the real into the virtual". In fact, as early as 2015, the HKSAR government established the Innovation and Technology Bureau to shout out the goal of "Hong Kong's 're-industrialization'". Why is a world-renowned international financial, shipping and trade center, a free economy with a service industry accounting for more than 90% of the local GDP and is absolutely dominant, playing the banner of "re-industrialization" after it has long been "de-industrialized"? Does Hong Kong's manufacturing industry, which has been dormant for many years, really have a future? Hong Kong Legislator Chow Ho-ting has been committed to promoting the work of "Hong Kong Industry 4.0", and earlier on behalf of the DAB in the Legislative Council to introduce a motion passed, this bill has also been encouraged and appreciated by cross-party MPs. Observer Network interviewed Zhou Haoding to interpret the new way out of Hong Kong's economy from another perspective.
One
Observer Network: The "re-industrialization" advocated by the HKSAR Government is to take advantage of Hong Kong's consolidated position in scientific research, design and intellectual property protection to simplify the process and develop high-value-added industries and industrial chains in the local area through innovative technologies such as the Internet of Things, artificial intelligence, new materials and "Industry 4.0" intelligent production processes. What is the current industrial situation in Hong Kong, and can you tell us about the background? (Industrial distribution, output value, employment population, etc.)
Chow Ho-ting: According to the Statistics Department of the HKSAR Government, the total income of the manufacturing industry (including sales and other income) in 2019 was MOP226.1 billion, down 2.6% from 2018, and in 2019, there were about 7,300 institutional units engaged in manufacturing in Hong Kong, employing about 88,000 people, with an average of 12.1 employees per institutional unit.
Within the manufacturing sector, the four major sectors with the largest value added by sector in 2019 were (1) food, beverage and tobacco products; (2) metal products, machinery and equipment; (3) chemical, rubber, plastic and non-metallic mineral products; and (4) reproduction of paper products, printed and recorded information media. Together, they account for 86.3% of the added value of the manufacturing sector.
Hong Kong's economic structure is relatively simple, with the service sector accounting for more than 90% of GDP. We do gravitate towards financial real estate, which, according to the government's current statistics, accounts for only one percent of our GDP. If you compare the successful examples of some industrial regions, such as Israel, Austria and Singapore, their populations are similar to Hong Kong's, hovering between eight or nine million, but the manufacturing industry accounts for more than 20% of their GDP.
Rapid decline in Hong Kong's manufacturing sector (see watermark for image source)
Observer Network: As a light industry center in the 1970s and 1980s, its watches, toys, electronics and other "Made in Hong Kong" products swept the world, with industrial output exceeding 30% of GDP at its peak, and nearly half of the employed population was engaged in manufacturing; even in 2008, the number of workers employed by Hong Kong industrial enterprises in the Pearl River Delta region reached 10 million. In recent years, why has Hong Kong manufacturing, which was once all the rage, gone downhill?
Chow: In fact, there has never been a shortage of talents in Hong Kong. The problem is that our mainstream ethos is too much emphasis on speculation. In the past, because of various real estate financial speculation activities, many people can get rich quickly, and finally lead to investors sitting on funds, who are willing to engage in financial real estate speculation, so as to quickly obtain returns. Industry 4.0 may not be able to attract investors at all, and gradually even young people with ambitions and abilities are hoping to engage in the financial real estate industry. Industrial work is no longer in demand. When you look at the university courses in Hong Kong, it is often the department of finance and economics, which is popular and fiercely competitive, which can be seen.
Observer Network: Is this the main reason why you proposed industry 4.0 re-industrialization? Can you tell us about the original intention of this bill? In the context of the financialization of the global economy, why go against the grain?
Zhou Haoding: The real economy is of considerable importance, in fact, under the ravages of the new crown pneumonia epidemic today, the importance of industry to the world has been highlighted. We see that some countries and regions that are overly focused on the service sector and abandon industry, such as the United Kingdom, will have a hard time supporting the economy when the epidemic comes. On the contrary, because our country has always attached importance to industrial development, as a major industrial country in the world, due to sufficient industrial facilities, the epidemic situation is properly controlled. Let industry resume production and restore the economy as soon as possible. As a result, our motherland can be described as thriving on the road of world economic recovery, which makes it even more important for the economy of a region to be more important.
In addition, in the past, due to too much emphasis on financial real estate, it was overly skewed. Young people want to find an economic way out, and there are not many options for employment. In order to truly let young people show their full strengths and have opportunities for upward mobility, we should expand more channels and diversify the economy, so that young people can have a way out. If we look at vocational education in Germany, Germany is a successful country with a strong emphasis on industry, and he is quite successful in the vocational education system, training very focused, very skilled industrial technicians, who are also respected in society. Hong Kong still does not seem to be able to perform in this regard. This is more or less related to Hong Kong's education system, Hong Kong is not taking the German vocational education route, on the contrary, the curriculum of university degrees will not focus on supply to drive demand, on the contrary, everything develops according to the market, the government does not want to dominate the industry, there is no input, everything is according to market demand, it is more difficult to cultivate industrial development.
Secondly, after I finished my studies in the UK, my first job in Hong Kong was to work in an institution that set up a factory in the mainland, at that time I had seen that the factory was unique in scale, and it was orderly, the industrial professionals were trained, it was very focused, orderly, the employees were focused on doing their jobs well, completing their own duties, doing the attitude of industry, different from the speculative atmosphere of rushing for quick success, in fact, it is also helpful in the overall social culture.
Observer.com: In your opinion, where is the direction of Hong Kong's future re-industrialization? Does it mean moving from the unreal to the real?
Chow Ho-ting: I believe that in the future, the re-industrialization of Hong Kong's Industry 4.0 can be developed in two major directions with short-term, medium-term and long-term results, respectively: that is, to promote the intellectualization of traditional industries in the short and medium term, and to promote the development and production of high-tech products in the long term.
As far as the traditional industrial intelligence is concerned, Hong Kong should focus on the development of automatic intelligent light industry with high value-added products, rather than labor-intensive and low-value-added products, so we are by no means going back to the labor-intensive industry of the 60s and 70s. In terms of high-tech development, Hong Kong should strive to achieve universal access to all kinds of rivers and rivers, and vigorously strive for high-quality talents from the mainland and overseas to work and live in Hong Kong. At the same time, the work of commercializing the results of science and technology should be strengthened, and the division of labor with other cities in the Greater Bay Area should be strengthened.
Observer Network: Hong Kong's traditional strong industry in the financial real estate industry, how to deal with the relationship between the real economy and the financial industry in "re-industrialization"?
Zhou Haoding: If the enterprise is successful in industry, it should also allow them to get financing opportunities. I believe that Hong Kong, as a financial centre, will be able to support successful re-industrialized enterprises in various financial fund-raising listings.
On the contrary, I learned that the problem is that some start-up enterprises, among them enterprises engaged in scientific research, are difficult to find a match for venture capital funds in Hong Kong, and in this regard, the mainland has done a relatively good job, and the SAR government has the need to catch up with each other in a hurry, strengthen matching, and let capable enterprises find appropriate financial support as soon as possible. It is worth mentioning that the mainland government itself has invested more money to support incubators than Hong Kong.
Hong Kong Financial District (Source: REUTERS)
Two
Observer Network: According to your opinion, in the short and medium term, how to promote the "re-industrialization" of Hong Kong by promoting the intellectualization of traditional industries? What are the recommendations and concrete measures?
Chow Ho-ting: First of all, I suggest that the government set an indicator percentage for the local manufacturing industry as a percentage of GDP, which can effectively evaluate the performance of policies and spur the government; second, provide more industrial land, taking into account the New Territories Tuen Mun, Sant Tin Lok Ma Chau and Man Kam Tuk Tuk Ferry Logistics Corridor, etc., and at the same time equipped with facilities such as sewage and logistics facilities to form a favorable development of industrial clusters; third, provide more tax incentives for traditional industries to adopt smart production lines; fourth, strengthen joint publicity with the Vocational Training Council. To change the public's stereotype of industry, so as to attract young talents to join the Industry 4.0 skilled industries, and fifth, to increase efforts to open up the mainland and ASEAN markets for Hong Kong products.
Specific measures in these areas can be carried out like this:
First, set a benchmark indicator for the development of the manufacturing industry as a proportion of the total economic value
I suggest that the Government set an indicator of the proportion of local manufacturing to GDP, which can effectively measure policy performance and spur the Government. In this way, it will effectively increase the investment of relevant resources to promote re-industrialization policy measures, and increase the proportion of manufacturing, which currently accounts for only about 1% of GDP. Having the target percentage makes it easy to measure the effectiveness of policies and help drive progress, which will enhance public confidence in Hong Kong's re-industrialization.
We compare the manufacturing sectors in different regions to gdp and find that the more successful manufacturing regions include Israel, Austria, and Singapore, which have a population comparable to Hong Kong's, while the overall manufacturing sector accounts for more than 20% of gdp (according to 2017 data, Israel 26.5%, Austria 28.4%, Singapore 24.8%). Hong Kong's value in this area is less than 1%, which shows that Hong Kong still has room to catch up in this regard.
The latest developments here are worth adding, and the Hong Kong Federation of Industries has recently issued a new round of proposals for Hong Kong's re-industrialization. This includes a new concept of linking manufacturing processes to economic data to quantify their economic outcomes.
Since the products are manufactured, designed, tested to marketed, the processes involved have also driven a lot of employment and economic effects. However, it is not reflected in the current economic data. Take a look at the quote from the following industry federation report:
"Hong Kong's industrial production activities have expanded overseas and built cross-regional, large and highly competitive production bases, while the headquarters of manufacturing enterprises in Hong Kong have also been engaged in high-value-added research and development, design, market expansion and logistics chain mastery related manufacturing-related service activities in the industrial chain, which are not clearly distinguished in local economic data and are not summarized as industry-related output values."
The GENERAL SYNUM mainly proposed that the "productive service industry" is separated from the service industry data and included in the statistics of the manufacturing industry after statistics. I think this approach is very desirable, at least to quantify the economic effects of different parts of Hong Kong's entire process of re-industrialization, and it is also a move to keep pace with the times.
Second, increase industrial land to form industrial clusters
The Government needs to increase industrial land, with the exception of the advanced manufacturing centres expected to be completed in 2022, other possible locations include Tuen Mun in the New Territories, or the Northern New Territories Development Area. In line with the latest recommendations, the Development Bureau has identified 57 hectares of land in lok Ma Chau District, North New Territories for commercial and innovation and technology purposes, which can provide land for high-end manufacturing and ancillary facilities, which will have synergies with the Hong Kong-Shenzhen Innovation and Technology Park in the Lok Ma Chau Loop, as well as for the upgrading of traditional industries and the transformation of smart production plants. As for Tuen Mun, the inland river terminal occupies more than 60 hectares of land, and there has been some research that the use rate of the place is low, and it can be explored that the future use of the place to develop new industrial land can be explored.
It is therefore recommended that the authorities give positive consideration to the establishment of a new industrial zone in this zone. In addition, locations such as the Wenjindu Logistics Corridor are also feasible locations. Relevant land should be equipped with industrial zone land specially designed for specific industries with water systems, sewage facilities, frozen warehouses, storage, logistics and distribution centers and other supporting measures, so that relevant types of manufacturers can achieve a cluster effect and improve production efficiency.
It is particularly noteworthy that Hong Kong's food processing industry has certain potential prospects, and The Hong Kong food processing industry has certain development advantages in improving food safety in the Greater Bay Area and entering the mainland market, so it has always occupied a certain market sales volume in the mainland. According to HKTDC data, the food processing industry accounted for HK$53.8 billion of Hong Kong's total trade in 2019, of which 47% of exports were exported to the Mainland, indicating that the Mainland has confidence in Hong Kong's food safety. If we can upgrade and improve product quality through Industry 4.0 intelligent production lines, we will be able to further meet the needs of the Greater Bay Area, and also meet the requirements of the Guangdong-Hong Kong-Macao Greater Bay Area in the 14th Five-Year Plan to focus on food safety improvement, which can form a win-win situation.
Third, cooperate with the Vocational Training Council for publicity
The impression of industry in Hong Kong is generally still in the 60s and 70s, with prejudice against labor-intensive industries, and the perception of poor treatment of workers, and lack of correct understanding of the new intelligent production of Industry 4.0. Authorities should work with institutions such as the Vocational Training Council to conduct new publicity campaigns to get parents to change their inherently negative perceptions of their children's involvement in manufacturing and encourage them to engage in manufacturing in the new era of re-industrialisation and nurture talent. In this regard, the experience of countries such as Austria and Germany can be taken into account, and the treatment and social recognition of industrial and technical personnel are good, which also helps to consolidate the development of advanced manufacturing.
Fourth, to assist Hong Kong products in exploring the Mainland and ASEAN markets
In view of the continued pressure of the United States on China, including the Hong Kong Special Administrative Region, and the expectation that Hong Kong's trade exports will continue to be affected, I believe that the SAR Government must step up its efforts to explore other markets, especially to assist Hong Kong's re-industrialized manufacturing companies to expand the Mainland's Greater Bay Area and ASEAN markets. With the increasing economic and trade exchanges between countries and ASEAN, the recent formation of RCEP between China and ASEAN countries and some countries in the region is an example, backed by the motherland, and ASEAN must be a potential market for expansion in the future.
Leaders and trade ministers of 15 countries sign the Regional Comprehensive Economic Partnership Agreement remotely online (Source: VIETNAM NEWS AGENCY)
Fifth, global outreach activities
In view of the lack of sufficient channels to publicize Hong Kong's ability to develop smart production lines and automation and produce high-end products, the authorities should strengthen some successful products/enterprises for the re-industrial development of Hong Kong's Industry 4.0. For example, a company from Italy chose to come to Hong Kong to set up an intelligent production line factory in Yuen Long to manufacture security products. Such examples can increase publicity to change public perceptions of Hong Kong's excessive dependence on finance and real estate, and to inform young people about new upward mobility opportunities.
Observer Network: So in the long run, how can the government promote the "re-industrialization" of Hong Kong through the development of high-tech technology? What are the recommendations and concrete measures?
Chow: Since the HKSAR Government has set up the Hong Kong-Shenzhen Innovation and Technology Park in the Hetao District, we should make better use of this area. One of the things is that for Hong Kong to succeed in the I&T industry, it must be inclusive. Win first-class professionals from the mainland and even overseas to settle in Hong Kong.
In the early years of Singapore, under lee kuan yew's administration, in order to attract overseas Western institutions to set up headquarters in Singapore to drive the local economy, Lee first started with the Singapore environment, hoping to attract professionals from various industries of international institutions to live in Singapore with their families. In fact, from the bottom up, from employees and professionals to take the initiative to promote international institutions to do business in Singapore in Asia. The convergence of talents and the willingness of institutions to settle down will ultimately drive the economy and strengthen Singapore's international position.
Also in Hong Kong, today we want to provide a good environment, especially for professionals who will come to Hong Kong for science and technology research and development, enjoy life in Hong Kong, one of the suggestions is to provide them with apartments for scientific and technological talents in the New Territories, while providing appropriate support for their children's schooling. At the very least, they and their families should feel comfortable living in Hong Kong, so that they are willing to work in Hong Kong and continue to do a good job in the project, so that they can make a great contribution to the Hong Kong economy.
Hong Kong is in fact well placed to conduct basic research on innovation and technology, but many experts have said that Hong Kong often lacks follow-up work on the commercialization of scientific and technological achievements, and some even eventually move to other cities in the Greater Bay Area. To make up for this deficiency, Hong Kong could strengthen the commercialisation of the results of the science and technology sector.
Observer Network: You have participated in many surveys, according to the survey, what specific cases can you share?
Zhou Haoding: Regarding the intellectualization of traditional industries, it is worth referring to Israel here: In addition to the military industry and high-tech industry, Israel has actually supported the technological upgrading of traditional manufacturing industries, and there are also quite successful examples. According to the Legislative Council's study on Israel's re-industrialization, in 2015, there were 10,754 institutions engaged in traditional manufacturing in Israel, but these are all traditional manufacturing industries with low-tech and low-tech operations.
According to the Legislative Council, as of 2016, the Israeli government has invested ILS 1 billion (HK$2.1 billion) for related funding schemes, and has issued subsidies to more than 560 institutions to support more than 1,380 R&D projects, mainly to improve manufacturing processes in traditional manufacturing industries.
Wages in Israel's manufacturing sector (Source: TRADING ECONOMICS)
It can be seen from this that the traditional industrial intelligence aimed at increasing the production capacity of high-tech production lines is still promising, and the key is whether the decision-making authorities in the region are determined.
In terms of commercialization of scientific research results, we can also refer to the proposal of the 2022 Foundation led by Dr. Feng Guojing, which specifically mentions that the experience of the Tokyo Bay Area can be used: tokyo itself can become a testing ground for new scientific and technological products, and as a so-called "mother factory" for small-scale custom chemical plants, in which new products can be continuously tested and adjusted according to market reactions. Large-scale mass production of so-called "sub-factories" are located outside the Tokyo Bay Area, such as Gunma Prefecture for production. Whether the above model can be applied to Hong Kong deserves in-depth investigation and discussion – that is, Hong Kong is responsible for product testing, the results are commercialized, and mass production is placed in other cities in the Pearl River Delta in the Greater Bay Area. In this way, we can have a perfect division of labor. Hong Kong can also have a clear role for the I&T industry.
In general, to promote the re-industrialization of Hong Kong's industry 4.0, we need to promote the whole society together, let us all work together.
This article is the exclusive manuscript of the observer network, the content of the article is purely the author's personal views, does not represent the platform views, unauthorized, may not be reproduced, otherwise will be investigated for legal responsibility. Pay attention to the observer network WeChat guanchacn, read interesting articles every day.