2022/03/21

Four recommendations for the budget on IT development - EJ Insight

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Four recommendations for the budget on IT development

On the eve of the announcement of this year's Budget, due to the severe situation of the epidemic, it is understandable that the Budget continues to introduce counter-cyclical measures to support people and enterprises. However, the long-term economic and I&T development are also crucial for our future competitiveness. I have following four questions in mind and would like to discuss with readers:

1) Where is the promised R&D expenditure?

In the 2017 policy address, the Chief Executive proposed to double the spending on research and development (R&D) from 0.73% of the gross domestic product (GDP) to 1.5% or about HK$45 billion a year within her five-year term of office. However, according to the latest figures from the Census and Statistics Department, the ratio of R&D expenditure to GDP was only 0.99% in 2020, from 0.8% in 2017, the progress is far from satisfactory.

On the contrary, Shenzhen's R&D expenditure increases year by year, its R&D investment in 2020 accounted for 5.46% of GDP. Meanwhile, the overall R&D investment of mainland China reached 2.44% of GDP last year, up slightly from 2.41% in 2020.

Even if Hong Kong achieves the goal that it set five years ago, Hong Kong still lags behind the mainland. Therefore, it is surprising that in this year's Budget, there is no mention of the issue. I earnestly hope that the Government will announce a catch-up timetable as soon as possible, as it is the key to Hong Kong's long-term competitiveness.

2) Is there a target for the Hong Kong Growth Portfolio under the Future Fund with HK$10 billion allocated?

We can refer to two funds of similar size aimed at supporting startups, namely Innovation Norway's contribution of a total of NOK 12.5 billion (over HK$10 billion) to development and innovation in the business sector in 2020; and the venture capital fund for early startups in Shenzhen which is operated in a fully market-oriented approach with a total scale of RMB10 billion (about HK$12.3 billion).

For Innovation Norway, one krone from the public money in the form of capital or advice is matched by 1.5 kroner in self-financing or other sources of funding for development projects and investments. For enterprises less than three years old receiving funding from the government, they recorded an increase in sales revenue of 15% in 2020 compared to enterprises without such support. On the other hand, the Shenzhen fund is reported to have nurtured 56 "prospective unicorns" (with a value of over US$100 million) and one unicorn (with a valuation of over US$1 billion), promoting the development of its new economy.

Could we be inspired by these two funds and establish key performance indicators (KPI) for our Future Fund? It is certainly challenging to agree on a payback period and mechanism, however, these measures are not only essential to enable citizens to monitor the effectiveness of the funding allocation, they are also important for us to export smart city services in the future.

3) Among the four major areas of innovation and technology, why the focus seems to be on one area only now?

The continuous fluctuating severity of the COVID-19 epidemic has grossly boosted the importance of life science technology, so I am glad to see the HK$10 billion earmarked for the development in this area. But what about the other three areas, ie. artificial intelligence (AI), smart city and financial technology (FinTech), apart from biotechnology, which were proposed as key development focuses in the Budget three years ago? In this year's Budget, the importance of these three has taken a sharp turn: AI forms only part of the development of biotechnology; while only HK$10 million is allocated to FinTech to support Proof-of-Concept projects on financial services and products. As for "smart city", it is totally absent.

I could recall that in the 2020 Budget, there was an emphasis on smart city with an allocation of HK$100 million to develop a digital platform for data integration and information exchange in order to strengthen project supervision. I am not sure about the progress. However, many construction projects in Hong Kong still need to be improved in terms of data integration and information exchange. For example, in the two major new development projects: the Northern Metropolis and the Kau Yi Chau Artificial Islands, which will affect the development of Hong Kong in the next few decades, the government often adheres to old methods in information integration, even evaluation and planning, and seldom uses advanced technology such as geographic information system (GIS) that has been proved effective in many governments around the world. Even if the government has purchased the software, it is often shelved, wasting resources and hindering effectiveness.

4) To increase the transparency of public finance, apart from reporting investment return in the operating account, can the government take measures that are more user-friendly and convenient to the public?

For example, the Financial Secretary proposed to earmark HK$5 billion from Future Fund to establish a new fund called Greater Bay Area Investment Fund that focuses on investment opportunities in the Greater Bay Area. What sectors would it focus on? Does the investment portfolio create any synergy? I suggest the authority to adopt an interactive map dashboard, just like the government's dashboard on the COVID-19 epidemic, to disclose key information, such as the investment sectors, regions, amount and return, so that the public can have a clear picture of whether public funds are being used properly. This is more in line with the aspiration of governance in the digital age.

 

 

 

Dr. Winnie Tang
Adjunct Professor, Department of Computer Science, Faculty of Engineering; Department of Geography, Faculty of Social Sciences; and Faculty of Architecture, The University of Hong Kong