Slide presentation accompanying the paper titled: "Realizing Hong Kong's knowledge-based economy potential as part of a rising China" submitted to The Eighth Annual Conference of The Asian Study Association of Hong Kong, 8-9 March 2013

1. THE EIGHTH ANNUAL CONFERENCE OF
THE ASIAN STUDIES ASSOCIATON OF HONG KONG
P001 (E) Session 9A: Business Sector in Hong Kong
16.30-18.00 , Saturday 9 March 2013
Lady Ivy Wu Lecture Theatre, The Hong Kong Institute of Education
Realizing Hong Kong’s
knowledge-based economy
potential as part of
a rising China
http://www.slideshare.net/AlanLung/realising-hks-knowledgebased-economy
Paper P001 (E) prepared by:
Dr. Gordon McConnachie
Former Technology Transfer Manager, Dow Chemical Europe
Founding Chairman of Scottish Intellectual Assets Centre and
Chief Technology Officer of Asia Pacific Intellectual Capital Centre
Mr. Alan Lung
Director & General Manager of Asia Pacific Intellectual Capital Centre

2. PECC Beijing Conference
Zhejiang
University
Hangzhou
About:
Jinan University Guangzhou
NDRC & SIPO Beijing
Beijing Academy of Science &
Hong Kong SAR Government Office in Beijing Technology
Hong Kong Science &
Technology Park
Links to Scotland, USA & Europe
EU in HK & Beijing IPR2 Beijing Office

3. John Tsang’s speaker
luncheon titled:
Hong Kong as a knowledge-
based economy and its role
in China's economic
development
(31 May 2010)
http://www.hkdf.org/newsarticles.asp?
show=newsarticles&newsarticle=272
Carrie Lam’s
speaker luncheon titled:
Policy priorities of this term of
Government - Population Policy
(4 February 2013)
http://www.hkdf.org/newsarticl
es.asp?show=newsarticles&newsarticle=324

4. HKSAR Government
targets economic
development
• “This Government places as much
emphasis on economic development –
both the speed and the quality of
economic development – as we do on
livelihood issues …”
• Tell me: “If Government could do
1,2,3,4,5 for us, then the following
will happen and this would be good
for Hong Kong’s economy and
therefore good for the Hong Kong
society …” http://www.news.gov.hk/en/record/html/
2013/03/20130313_121636.shtml?pickList=highlight
Chief Executive C.Y.Leung’s remarks at
The first meeting of the Economic
Development Commission
13 March 2013
http://www.info.gov.hk/gia/general/201301/17/P201301170324.htm

5. Hong Kong’s potential as a
knowledge-based Economy …

6. In a classical economy:
Factors of production:
• Land
• Labour
• Capital ($)
Intangible factors of production:
• Enterprise or Entrepreneurship

7. In a Knowledge-based Economy:
Factors of production:
• Creativity
• Innovation
• Wealth Creation
Complementary business assets:
• Manufacturing facilities
• Distribution capacity
• Sales force

8. Hong Kong does not
have any choice …
•As a high-cost economy, Hong
Kong must follow the examples of
OECD and EU in climbing up the
economic ladder;
•Hong Kong should try to
understand what it takes to build a
Knowledge-based Economy.

9. Rise of China … and finding
a new role for Hong Kong
• China does not want to
remain a low and mid-
end “assembler” of
goods;
• To get there, China can
make good use of Hong
Kong’s “soft power”:
rule of law/rule-based
society, general integrity
and trust etc.

10. Driving Hong Kong to
become a Knowledge-
based Economy is not
the same as central
economic planning …
Silicon Valley has a solid
industrial base: Strong manufacturing
capacity, R&D, creativity and presence of grateful
entrepreneurs … Steve Jobs used US$150 million
from Bill Gates to restart Apple in 1997.

11. Meso-economic: the political economy* and
how government chooses to use public resource
to drive economic development
(*rules, institutions, supporting systems and regulations)
• Andrew Sheng and Xiao Geng of
the Fung Global Institute caught the
attention of the World Economic
Forum :“The new economics: Meso
and Meta” http://forumblog.org/2012/10/the-
new-economics-meso-and-meta/
• “ … today’s mainstream micro-
and macroeconomic models are
insufficient”;
• “… Meso-economics studies the
institutional aspects of the
economy”.

12. Hong Kong: well placed in two-and-a-half out of the
Four pillars of the knowledge economy
• Economic incentive and institution
support: good economic policies and
institutions, efficient resource allocation that
support dissemination of knowledge ;
• An educated and skilled labour force:
willing to continuously upgrade and adapt itself
to create and use knowledge;
• An effective innovation system: of
firms, research centre, universities, consultants
and others to keeps up with global knowledge
system;
Students joining dock workers’ strike in Hong Kong:
• A modern information infrastructure:
A key political economy lesson Hong Kong could learn that facilitates effective communication,
from Korea is an on-going policy shift away from a
“catch-up” mode to a “creative” mode of development. dissemenatation and processing of information
Essentially, it is a shift away from very focused support of
“chaebol” (large family-owned conglomerates) to a focus and knowledge.
on strengthening the innovation capacities of SMEs. (Source: OECD Reviews of Innovation Policy: KOREA 2009)

13. Hong Kong’s Innovation Eco-system?
朴槿惠
• Finland: TEKES, The Federation of Finnish
Technology Industries (Finland’s “Old Money” for new industries)
• Taiwan: ITRI (工研院), Hsinchu Industrial Park,
network of statutory bodies (Since 1973, Chiang Ching-Guo)
李光耀 • Singapore: Economic Development Board, A*STAR,
IP Academy of Singapore (Since 1965, Lee Kuan-yew)
• South Korea: KIST (Founded 1966), Ministry of Future
Planning and Science (2013, Park Geun-hye’s economic
liberalization and “creative” mode of development initiatives)
蔣經國 • Europe/Scotland: Lisbon Agenda (March 2000),
Enterprise Europe Network, EEN-Scotland
• Hong Kong: Innovation & Technology Bureau?
Under Secretary CEDB? Grateful entrepreneurs?

14. Innovation is more than R&D …
Innovation includes: organization
changes, training, testing, marketing and
design.
• New or significantly improved product: a
new process, or a new organsiation
method etc.
• Must contain a degree of novelty: new
to the firm, new to the market, or new to
the world;
• Clearly broader than R&D: influenced by
factors that include government policy;
can occur in any sector of the economy –
including government service, healthcare
and education.

15. Investing in technology alone?
• A policy of investing in technology
alone without knowing how to
extract economic value from it has
no future.
• Hong Kong must learn how to
manage its Knowledge Capital.
• Hong Kong must have a policy and
an Eco-system that support the
commercialization of technology.

16. Hong Kong as a bridge and gateway
Gordon McConnachie, CTO of APICC and major tech-transfer units from around the
world in Beijing (ITTN 2012 International Technology Transfer Conference, 26 March 2012)
Enterprise Europe Network
DG Enterprise and Industry, European
Commission
Tsinghua (China) Association of University
AUTM (USA) Technology Managers (USA)

17. Lessons to be learnt from the
Oresund Region
• 1991: the governments of
Denmark and Sweden agree to
build the Oresund bridge
• 1999: The report ”Øresund –
the creation of a region”
concludes that the greatest
barrier to integration in the
Oresund region is lack of
communication between
citizens, businesses and public
administration
• 2000: The Oresund bridge
opens and Oresunddirekt is
launched

18. This type of economic development is often based on:
Historical economic and cultural ties
that happen gradually over time
... but often with some degree of government facilitation
Historical relations between Denmark and Sweden
Historical relations between Guangdong and Hong Kong

19. •Hong Kong’s Overall
Ranking: 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, macroeconomics
environment, 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))

20. The proposed BJ-GD-HK Knowledge Corridor
Maximizes BJ-GD-HK’s External Economy of Scale
and integrates “Expertise Cluster”, “Regional
Cluster” & “Industry Cluster” policies
BJ, GD and HK on their own do not have
all the success factors needed to build a
“Silicon Valley” type of economy:
• Beijing: R&D is 5.5% of Beijing’s GDP
(4 times the national average);
50% of China’sTech-transfer;
• Guangdong: 37.7% of China’s high-tech
manufacturing export;
(Source: OECD Review of Innovation Policy – China, OECD 2008)
• Hong Kong: built on a tradition of free
market and ‘good law, well administered’;
HK uses English as a business language and
is seamlessly connected to
the West.

21. The proposed BJ-GD-HK Knowledge Corridor
A strategy for China to move from “Sustained
Development” to “Sustainable Development”
A strategy that combines European
expertise, China’s strengths in
science and technology and high-
tech manufacturing; and Hong
Kong’s service capacity to facilitate
economic transitions:
• China’s “Sustained Development”
(through investment by the State) to
“Sustainable Development” (through
values created from Technology
Transfer and Technology
Commercialization);
• Hong Kong’s narrow industry base
and over-reliance on the financial
and property sectors.

22. A compelling economic reform
argument and a coherent
intellectual framework still missing:
產
業
政
策
Free Market Economy, rule of law,
freedom of information and the need to
develop high value-added industries
acknowledged by CY Leung; however:
•“Service Economy” or “Manufacturing”?
• Current status of “Six New Industries”?
•“Sector Neutral” or
”Sector Biased”?

23. SirJohn
Sir John
Cowperthwaite
“Free Market”
Cowperthawaite,
Financial Secretary versus
Financial
(1961-1971)
Secretary of “Economic Planning”
Hong Kong • In a free market economy,
17 April 1961 – government cannot predict the
30 June 1971 winning industries and where the
next burst of economic growth
might come from.
• However, Hong Kong does not
seem to fully understand
John Tsang, Financial Secretary
(since 1 July 2007)
Cowperthawaite’s philosophy as
one of the requirements of
“positive non-intervention” is
the “positive” part – that
government must not stand still
and must do as well as it possibly
could to facilitate.
• Indecisiveness and inaction is not
equal to prudent financial
management.

24. “ HKSAR Government is
unlikely to be dogmatic
on the subject of Free
Market versus Economic
Planning ” Prof. LAU Siu-kai
• “… Government’s role in economic
development has been changing since
the “Laissez-faire” days of
Cowperthwaite and Haddon-Cave”;
• “… people are unlikely to oppose
HKSAR Government’s economic
development initiatives”.
(Prof. Lau Siu-Kai’s closing brief to delegates of the
Taiwan Study Trip on 30 June 2011)
• Hong Kong has always thrived on
Prof. LAU Siu-kai, former head of Central Policy Unit
(CPU), HKSAR Government at the environmental friendly Beitou
new way of thinking and doing – not
Public Library during CPU’s Study Trip to Taiwan, 27-30 June 2011 hanging onto past success.

25. Strategies of innovation:
“Eureka” – discovery of new frontiers of
knowledge is not necessarily the only strategy
http://www.cae-acg.ca/documents/Dpliant_Innovation_Reinvented_v4.pdf
• “Battle for Architecture”,
“System Breakthrough”, “New and
Improved”, “Mass Customization”
and “Pushing the Envelope” are
some of the alternative strategies.
• Assisting SMEs to acquire
knowledge, knowhow and
technologies and;
• assisting knowledge-
intensive SME start-ups will
have most support from the
community.

26. SMEs need to learn the “trade secrets” of MNEs
through industry-specific Knowledge-based
Economy Expert Groups (ICMGs)
USA started in the early 1990s
http://www.slideshare.net/AlanLung/what-is-intellectual-capital-management-apicc-whitepaper-2
ICM Gathering* of the USA:
(*Intellectual Capital Management Gathering)
A group of ~ 30 companies, )sophisticated in the management of their intangibles. The
frameworks and methods for extracting value from intangible assets were created by the
companies themselves and not by academics or consultants
Dr Patrick
Sullivan

27. The proposed BJ-GD-HK Knowledge Corridor:
Build “Expertise Clusters” in Technology-
transfer and Technology-commercialization
BTEC/ITTN in Beijing and APICC in
Hong Kong will jointly apply for
Enterprise Europe Network (EEN)
membership as EEN-Beijing and EEN-
Hong Kong in late 2013 (for approval
and implementation in 2014):
• EEN is the largest technology
transfer network in the world; EEN is
owned by the European Union;
• Enables Tech-transfer and Tech-
commercialization know-how to be
imported from Europe;
• EEN-Beijing and EEN-HK will receive
coaching from EEN-Scotland, a unit of
the Scottish Government.

28. Knowledge-based economy is a proven strategy …
not a novelty in OECD Countries
OECD acknowledges:
• The link between Knowledge-based
Economy and creation of high-wage and
high-quality employment;
• Productivity of developed economy is
largely determined by the rate of knowledge
accumulation and technical progress;
• The importance of government policy and
support systems.
(Source: The OECD Innovation Strategy: Getting a Head Start on Tomorrow,
OECD 2010)

29. The 1,2,3,4,5 steps of
Knowledge-base economy implementation:
in reality a lot of work must start in Hong Kong first
Hong Kong needs to brand itself as a Knowledge City and develop
an Innovation Eco-system:
1. Invest in and implement a “Fully Examined Patent System*”
in co-operation with SIPO** and the world’s IP systems;
(*Target implementation date according to IPD of HKSAR Government:2016/2017)
(**State Intellectual Property Office of China)
2. Support the business side of innovation – including the
expertise behind commercialization of technology;
3. Support all industries – not one industrial sector at the
expense of other sectors (the current practice of requiring
partially funded quasi-government agencies to compete
against private sector service providers should stop);
4. Liberalize the economy – learn how Europe (particularly
Finland) screen, incubate and support knowledge-intensive
start-ups through very open and transparent systems;
5. Have a clearly stated policy and co-ordinate the fragmented
enterprise china support measures now offered through various government
network and quasi-government agencies -- even in the absence of an
Innovation and Technology Bureau.

30. The president has spoken …
it’s now up to us in Hong Kong!
Bill Clinton’s
widely quoted
1992 campaign
slogan:
“It’s the
economy,
stupid!”
“It’s the Implementation!”
Xi said Leung's policy idea, seeking change
while maintaining stability, has been widely
recognized by Hong Kong citizens. He urged
Leung and the Hong Kong SAR government
Support from the Hong Kong to fully implement the idea.
(18 March 2013 in Beijing)
community, from industries,
consensus building, a practical policy and http://www.chinadaily.com.cn/china/2013-
03/18/content_16317997.htm
promotion support from the HKSAR
Government now needed.
Thank you!

31. List of references:
References
1. “Hong Kong and the Knowledge-Based Economy: Developments and Prospects”,
Alan Ka-lun Lung, Asian Education and Development Studies, Vol. 1 Iss: 3,
Emerald Group Publishing 2012
http://www.slideshare.net/AlanLung/hong-kong-15789787
2. “Hong Kong’s Innovation and Technology Role in Mainland China’s 12th Five Year
Plan”, APICC Whitepaper #7, March 2011
http://www.slideshare.net/AlanLung/h-ks-innotechrolein125
3. “Policies and Practices for Hong Kong as a Knowledge Economy and the Proposed
Innovation and Technology Bureau”, APICC Whitepaper #8, July 2011
http://www.slideshare.net/AlanLung/innovation-technology-bureau-for-hk-2572011
4. “Proposed: Guangzhou-Hong Kong Knowledge Corridor”, Samson Tam Wai-ho,
China Daily Asia Pacific Edition, 6 July 2012
http://www.chinadailyapac.com/article/proposed-guangzhou-hong-kong-knowledge-
corridor
5. "Innovation Reinvented -- Six Games that Drive Growth", Miller and Cote,
University of Toronto Press, 2012
http://www.cae-acg.ca/documents/Dpliant_Innovation_Reinvented_v4.pdf

32. About the authors:
Dr. Gordon McConnachie, B.Sc., Ph.D
Dr 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 engineer
by training and he spent most of his working career with Dow Chemical where he grew up together with
the innovation and technology transfer systems of the world as we know them today. At Dow Chemical
Europe (1989 - -1999), he invented the IP and Intellectual Assets Management System for the worldwide
company together with Phil Barnett and Gordon Petrash. The system was later modified and applied
across the global company, where Gordon transferred technologies from companies and universities into
Dow Europe which brought him into intimate contact with the EU Innovation Relay Centres (now
Enterprise Europe Network). From 1999 to 2002 Gordon directed the European Intellectual Asset
Management Services of PricewaterhouseCoopers. In 2009, 2010, 2011 and 2012 Gordon was placed on
the Global IAM 250 list of leading IA Strategists, one of only a handful of experts on the list from China
and the ASEAN Nations. Dr Gordon McConnachie can be contacted at: gmcconnachie@apicc.asia
Mr. Alan Lung Ka-Lun
Alan Lung Ka-lun was born and educated in Hong Kong. He was also educated at the University of
Wisconsin in the USA and Wilfrid Laurier University in Canada. He chairs the Hong Kong Democratic
Foundation (www.hkdf.org), a political and public policy think tank founded in 1989. Alan is skilled in
converting his knowledge of governments and public policies into practical steps to move forward
“Knowledge Economy” initiatives. He is a member of the Innovation and Technology Advisory Committee
of the Hong Kong Trade Development Council (HKTDC) and he has been promoting innovation and
technology practices 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
be contacted at: alanlung@apicc.asia