Hong Kong is reaching an interesting phase in its post-colonial history. The departure of the Chief Executive in 2012 clearly marks the end of the post-colonial transition. A transition during which, after an initial false start, there have been considerable continuities in governmental culture and policies.
A key task for future administrations is to work out in some detail what the future of the Hong Kong economy might be. The present economy has many strengths: a high average per capita income, a sound fiscal position, a reasonably robust legal system, and a capacity to attract foreign investment into the services sector. Nonetheless, the unanswered question remains: in what spheres of economic activity will Hong Kong be able to maintain comparative advantage in the longer run – particularly in relation to the mainland? What, furthermore, are the implications of any answer for employment, income distribution, and levels of poverty and deprivation – already problems to which so far only short-term palliatives have been applied?
As recently as 2007 the Government view was that services and banking would remain the big pillars of the economy. As long as the RMB remains inconvertible, the strength of banking does indeed look secure. But Hong Kong's status as a “one stop” commercial services provider does not look sustainable in the long run. Indigenous mainland providers and foreign-invested companies will, over time, take over many of these service functions, exactly as in former decades they stripped Hong Kong of its manufacturing capacity. Indeed, in briefings, the government itself is now saying that the share of financial services in GDP is not expected to grow in future.
Considerations such as these were presumably behind the establishment of the Task Force on Economic Challenges whose thinking began to appear in 2009, unfortunately too late for this book. This thinking is producing a new scenario for Hong Kong featuring soft sectors and the “six” creative industries. This scenario and its prospects can be followed in official speeches, reports and by attendance at some highly expensive international “Road Shows.”
To evaluate these new ideas is not always easy, since fact and propaganda tend to mingle. This important collection of essays, edited by Douglas Fuller and financially supported by the Savantas Policy Institute, throws much valuable light on all these issues. There are 12 papers in all and these deal with both wider issues and more detailed case studies. Although part of the title, there are in fact no papers that are comprehensively “comparative” in their approach.
David Hart provides a foundation analysis of the human resources situation. Hong Kong's overall demographic outlook is of course poor. Fertility is low, ageing is rapid, and the present flow of mainland immigrants contribute too little to high-level manpower and too much to social costs. Hart shows that high-level manpower measured by graduates has been increasing. But although he also reports significant shortages of engineering graduates he suggests overall that lack of demand rather than supply is a key problem. An issue not fully explored here is how successful Hong Kong will be in attracting on a long-term basis the wide range of people needed for all the “six” new industries, another problem highlighted by officials looking to the future.
The paper by Chintay Shih and Shin-Horng Chen looks at the problems of reforming the public research funding system. Several interesting points emerge in this. First, the private sector now accounts for the majority of the total R&D spent in Hong Kong. Second, most of this is spent on the services industries, and third, most of this is out-sourced to researchers not resident in Hong Kong. Overall the authors sum up the work of the Innovation and Technology Commission as “short term oriented, dispersed and reactive” (p. 130). They point out that a major problem here is the unwillingness of the private sector to contribute. But the elephant in the room here is surely that industrially oriented R&D in an economy without industry is something of a non-starter. If we look at the top five R&D spenders in the world, the US and China are both special cases, but of the other three – Germany, Japan and Korea – all have manufacturing sectors that account for 20 per cent or more of their economies. In Taiwan, another locally competitive R&D spender, the share is 25 per cent. In Hong Kong, manufacturing's share in 2010 was 1.8 per cent, and one can never be entirely sure of the status of that figure. This is what makes the work of Hong Kong's Applied Science and Technology Research Institute so difficult and what makes Taiwanese and Korean institutions questionable models for Hong Kong. The price of turning factories into shopping malls is now being paid.
Hong Kong is today very much part of the Pearl River Delta, and Adam Segal has an interesting paper on what this means for science and technology. At the time of writing the situation did not appear promising. It may have improved since then in that Hong Kong has achieved greater clarification of purpose in this matter and some increased ability to share resources “across the river.” The underlying reality that will remain, however, is that the PRC side of the Pearl River Delta is probably more competitive than cooperative and will seize any advantages that are open to it.
In his foreword, Fuller sums up with the comment that, “laissez faire has crippled attempts to transform Hong Kong into a more knowledge-based economy” (p. 2). This and some of the other statements in the book seem premature and too negative to me, and carry a political rather than an analytical echo. With the exception of David Mowery, few of the authors here demonstrate either the historical or comparative depth necessary to put Hong Kong's performance into a satisfactory perspective. Nonetheless, this remains essential reading for anyone interested in the policy challenges in the next phase of Hong Kong's post-colonial history.
