Submission to Financial Secretary
The Government of the Hong Kong Special Administrative Region on
ICT Industry Recommendation to The Fiscal Budget in 2011 -2012
Internet Professional Association
ICT Industry Recommendation to The Fiscal Budget in 2011-2012
Introduction
The global financial crisis happened two years ago seems to be a distant memory, Hong Kong has been recovering in a very fast pace. Nowadays, the markets of real estate, retail and investment are all doing well with record numbers of transactions and revenue. Furthermore, a lot of Hong Kong people are enjoying the fruit of prosperity with salary raise and better offers in job market.
However, there are still some concerns over the future of Hong Kong. The issue of inflation begins to haunt the daily lives of local people, and our economy remains relying on few industries and is very vulnerable to the external changes in world economy.
As noted in our previous budget addresses, to enhance the competiveness of Hong Kong, the city needs to implement structural changes in the economy. The promise that the Chief Executive has made to promote six major industries, namely education services, medical services, testing and certification, environmental industries, innovation and technology, and cultural and creative industries, is heading in right direction but coordinated efforts for reinforcement is yet to be seen.
iProA is pleased to put forward our recommendation on the Fiscal Budget of 2011-12. We believe Information and Communication Technology (ICT) is the foundation of modern economy and its advancement can fuel the development of other industries. We also believe the future success of Hong Kong ICT industry relies on the collaboration with Mainland China. Based on these beliefs, our recommendations will focus on the following four areas:
1. Bridging of Digital Divide across Inter-generation Gap 2. Empower ICT Workforce
3. Increased Incentive to Business R&D and User-driven Innovation
1. Bridging of Digital Divide across Inter-generation Gap
Hong Kong has successfully transformed into a knowledge-based, highly networked society. Efforts to bridge the digital divide has advanced a great step in the last decade through tripartite partnership among the Government, industries, and the community. As many day-to-day consumer based services such as banking, government services, healthcare and learning facilities nowadays are made available through online access, senior citizens and baby boomers are yet to adjust to the digital age that Gen X and Yers are born into. We urge our government to extend support and increase funding resources to digital inclusion efforts addressing the inter-generation gap through the following methods:
1.1 ICT Skill Transfer to the Elderly through Community-wide Effort
IT training programmes such as the Elder Academies jointly launched by the Labour and Welfare Bureau and the Elderly Commission and Eva Li Wong IT Center For The Elderly, the first IT education Center for citizens in Hong Kong, have been running successfully to serve the elderly community. The programmes have provided a well-intentioned platform helping the elderly learn new technology and promote inter-generation harmony. However, the training programmes may not be adequate to equip the elderly users with Internet usage skills to get on with the online services which require more practical use of internet skills and information literacy.
Unlike training offered to youth and young adults, the training offered to the elderly often require extra attention, such as small-group or personal tutoring, and specialized software. The success of the effort to promote ICT literacy among the elderly requires the collaboration of NGOs, the ICT sector, and citizens at large. The community-wide effort requires consistent support from the government. We hope our government may continue to allocate funding support to IT training services for the elderly and encourage innovative steps to make the resources keep up with the social trends. The ultimate goal is to enable the elderly users to apply the practical use of services as part of daily living experience and benefit from the online services and information shared in this digital age.
1.2 Incentive Schemes for Businesses and NGOs to Support Web Content Accessibility
Many companies also enabled their websites to meet the W3C requirements to make it barrier-free to users with disabilities. The webcare campaign has made a successful case in our territory-wide effort to bridge the digital divide over the last decade. Nevertheless, we recognize there is still an accessibility gap among users of special needs as the W3C standards cannot cover all areas of the fast growing digital trend. The D21 strategy had
already renewed the attention to web assess gap in 2008. We hope our government may step up effort to update the overall standards for Web Content Accessibility and initiate stronger incentives for private sectors to participate in the effort and comply with the new standards.
We hope no one is missing out in this digitally inclusive society, with people with disabilities and the elderly citizens also riding along the digital trend with us. We recognize the Internet has provided a level-playing field for all netizens to benefit from the free flow of information and services. As such, the enabling barrier-free websites and assistive technologies for the needy ones and the elderly will be an impetus to optimize the ability of our workforce, to promote continuous learning, encourage the users with special needs to widen their social networks, maintain physical and mental well-being and foster sense of worthiness while acquiring knowledge.
2. Empower ICT Workforce
2.1 Strong Demand for ICT Experts
ICT has become a key enabler of the economy, many services are have increasing focused on innovations as a means to move up the value chain. The demand for ICT experts with high level of sophistication has also increased accordingly. For instance, IT crimes, data privacy issues in banking industry and hospitals have increased the demand for IT forensic and IT security professionals, IT professionals in finance industry has become a precious asset nowadays. Nevertheless, there is a shortage of ICT professionals to meet the strong demand. There are only 300 certified IT forensic professionals in Hong Kong.
For ICT industry practitioners, there are many ICT certification programmes organized by universities and private institutions. We recommend the government to set up IT education fund to support ICT industry practitioners to upgrade their skills and develop expertise in special areas. The Continuing Education Fund (CEF) set up in 2002 has helped many eligible applicants benefit from training programmes aimed to help them resolve industry-specific problems and enhance their professional skills. However, ICT subjects are not among the curriculum covered by the CEF scheme. Since the inception of CEF 8 years ago, the demand for ICT experts has increased substantially in the market. The ICT education fund would create an incentive for ICT practitioners to upgrade their skills and pursue lifelong learning, meeting the need for professional ICT talents in the market.
2.2 Capacity Building Programmes to Bridge the Employment Gap
information literacy are at risk of unemployment or underemployment. Many seasoned ICT members of iProA also find it hard to hire IT talents with the right skills; at the same time, we sometimes learn from our young members about the difficulty of finding jobs in the IT industry which apply what they learned from school.
It draws our attention to the situation where IT graduates are not be able to find the jobs in IT industry due to a mis-match of skills, i.e. employers may not prefer to hire fresh IT graduates and / or IT fresh graduates may not be able to offer the skills required by most employers. At the other end of the IT talent pool, middle-aged IT professionals often face the challenge of losing their jobs to the younger IT managers due to the demand for new skills in this industry. Special retraining schemes should be organized to equip these groups with IT skills to bridge the employment gap, while job-specific trainings should be offered to a large number of baby boomers in order to help improve their mobility in the job market. Unlike the existing Employee Retraining Scheme, which is more vocational focused, the ICT retraining scheme is designed to help IT fresh graduates and IT professionals from previous generations align their skillsets to the current job market and the positions they may fit.
3. Increased Incentive to Business R&D and User-driven Innovation
There has been increasing Government support for local R&D through various kinds of funding schemes such as the Innovation Technology Fund, Government CIO funding, and the Cyberport’s investment of 100 million in ICT in the next three years. Innovation is important for growth of the industry, but we must not overlook the linkage between innovation and commercialization. We would like to make the following recommendations to enable innovation funding directly benefit the ICT industry.
3.1 Expanded Funding to support application oriented, user-driven innovations Many IT entrepreneurs find it difficult to meet the application requirements for the existing funding schemes, which primarily focus on the innovation elements. Therefore, they l feel crippled by the stringent requirements of the innovation funding programmes which only align with the market needs to limited extent. In fact, Hong Kong IT talents have been well known for application design for years and IT business services and solutions occupy a large share of the IT the industry in Hong Kong. We advocate expanding the funding schemes to include application oriented, user-driven innovations to reward technology developers whose product creates direct business values and impact on quality of life. As an incentive scheme for SMEs, Government may also introduce tax credits for companies with demonstrated progress in research and development.
3.2 Rent allowance for ICT Companies
Land costs comprise a large portion of investment for business in Hong Kong. For ICT industry, Science Park and Cyberport are designed to be the innovative hub for ICT companies, however, the rental costs are above the affordability of most SMEs and start-ups. Although Science Park incubatees are offered a 2-year rental allowance period, they are often forced to move out because of the sharp increase in rental charges after the two years of residence. We recommend the government to expand the rent incentive scheme to encourage the entry of ICT SMEs, which help serve the dual objectives of easing the cost burdens of SMEs and creating an atomosphere of innovation in the premises. We also recommend rental allowance and/ or discounted rental charges for start-up business setting up offices in government and quasi-government premises for a limited period in order to facilitate start-ups maintain stable cashflows during their formative years.
3.3 Pilot Scheme for locally developed Technology
We acknowledge that Hong Kong market is too small to provide a favorable environment for the technology market to grow and sustain since Hong Kong market only accommodates mature technology with many customer references and strong market appeal. The intrinsic factor is discouraging the growth of local R&D.
Many local experts with international standards on R&D either choose to work overseas or land in non-R&D related jobs in Hong Kong. We continue to advocate for our Government’s role in facilitating an environment for pilot users of new products to create market reference for subsequent product launch. HKSAR government departments can act as pioneer users of pilot projects overseen by OGCIO. The pilot projects are subjected to further improvements upon the feedback provided by pioneer users. Governments of many developed economies have acted as the pioneer users of their countries’ pilot projects on local technology in compliance with WTO. If Hong Kong Government can serve as a reference for local industries, there will be a strong incentive for development on the ICT side and adoption on the industry side. Successful commercialization of the pilot projects can also increase the chance of export to mainland and overseas market, raising the GDP of Hong Kong. Users can also benefit from the lower costs of the pilot projects and the potentially favorable return on investment from the successful projects in the long term.
4. Create an Environment to Facilitate Mainland-Hong Kong Collaboration in ICT Industry
With 1.3 billion population and similar culture background, mainland China is the ideal market for those Hong Kong companies working on innovation and technology to explore and grow. In fact, Hong Kong ICT companies have world-class expertise, they can bring new ideas and business models to mainland, complementing the strengths of Mainland companies to compete in the global marekt. In recent years, the culture and lifestyle of Hong Kong and Mainland people is getting closer and closer, which providing further business opportunities for Hong Kong companies to explore.
4.1 Establish a New Trade Organization to Help HK ICT Companies Develop Business in Mainland
Through CEPA and its subsequent supplements and amendments, Hong Kong ICT companies have already entered several sectors of Mainland ICT market. However, most of the Hong Kong companies still find it very difficult to apply licenses and observe all regulations for running businesses because they are not familiar with the structure and responsibilities of the various mainland government departments.
Although the Hong Kong Trade Development Council and Hong Kong Productivity Council can offer some help, their primary roles remain on providing trade information and technology research and development assistance. Hong Kong companies may co-operate with mainland companies or seek the advice of consultants, but the quality of those partners is often in doubt.
We recommend the HKSAR government to set up a dedicated trade agency in the Mainland to help HK ICT companies apply licenses and establish offices there. In fact, many foreign countries have already set up trading organizations with similar functions to help their companies.
Through this trade organization, it would be much simpler for Hong Kong ICT companies to focus on their core business, and leverage on the expertise and network of the trade office to handle administrative arrangements required by mainland authorities. The organization should have offices in major cities like Beijing, Shanghai and Guangzhou to provide regular services to HK companies.
4.2 Set up Testing spot for Hong Kong – Mainland Innovation Exchange
There are still a number of regulatory restrictions that constrain the development of Hong Kong ICT companies in Mainland. For example, Hong Kong ICT companies running digital content business in Mainland are required to form joint venture with Mainland companies and the Hong Kong company cannot own more than 50% share of the joint
venture. iProA is urging mainland authorities to remove those restrictions so that Hong Kong and Mainland companies can deepen their collaborations, which will be beneficial to both sides.
One of our proposed ideas is to set up innovation and technology facilities in certain regions of Mainland like Guangdong province. The facilities will serve as pilot testing spots for Hong Kong IT companies to enter Mainland market in the form of wholly-owned companies or owning more than 49% of joint-ventures. Movies, digital content services, value-added telecom services are some of the businesses that can be run in the facilities. It will either help Hong Kong startup companies either to enter Mainland market or enable the mature ones to consolidate their strengths in the Mainland market and make use of their transferable assets to compete in the global market.
The facilities will also serve as a place for Hong Kong and Mainland companies to exchange skills and knowledge.
4.3 Pull Hong Kong and Mainland Social Life Closer
As a result of the closer ties between Hong Kong and Mainland businesses and the numerous business activities being carried out between the two regions, more Hong Kong people have home or let some of their family members living in Mainland, especially Pearl River Delta.
To couple with the wave of convergence between Hong Kong and Mainland, we recommend Hong Kong Government to allow Hong Kong citizens with their children living in mainland can still enjoy the tax allowance for children, and their elderly parents living in the Mainland for more than 180 days a year can still have the Old Age Allowance.
The measures will ease some of the burden of Hong Kong people and encourage people to extend their social life circles outside of Hong Kong. We believe that will bring long term benefit to the development of Greater Pearl River Delta.
Conclusion
We trust that our recommendations will help steer the development of HKSAR towards building an innovation oriented economy and strengthen our position as a major global financial centre. We urge the Government to give serious considerations to our recommendations.
Innovation and Technology Industry, including policies, infrastructures and facilities, and quality of workforce. Through Bridging of Digital Divide across Inter-generation Gap, we can ensure quality of life of all people in the society. We also hope that Government lend support to Empower ICT Workforce in order to provide adequate human resources to the ICT industry. Through Increased Incentive to Business R&D and User-driven Innovation, there will be more innovative products and services coming out from local talents and give an edge to our ICT industry. Last but not least, our government should Create an Environment to Facilitate Mainland-Hong Kong Collaboration in ICT industry in order to cope with the “Twelfth Five-year Plan” of Mainland, facilitate sustainable economic development of Hong Kong, and increase the global competitiveness of China ICT industry.
If there is any aspect of this submission requires elaboration or clarification, we would be happy to do so.
Policy Committee
Internet Professional Association
17 February 2011
About iProA (Internet Professional Association)
iProA is a non-profit making professional organization founded in December 1999. It represents over 2,500 professionals from Internet related industries, including CEOs and senior executives from leading information technology enterprises. Our members have made contributions in areas like innovative design, sales, marketing, infrastructure, e-commerce, consultancy, investment and other Internet related professional services, aiming to further develop the Internet industry in Hong Kong. We share the common goal of promoting the proper application of Internet technology and enhancing competitiveness of the IT industry. We work towards improving professionalism of information technology practitioners, encouraging IT professionals to share social responsibilities, as well as striving to bridge the digital divide in Hong Kong. Please visit website www.iproa.org for further information.
