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Hong Kong’s vision to be a global tech leader takes root
In late October 2019, Hong Kong’s leader Carrie Lam announced that the territory had entered a technical recession, defined as two consecutive months of negative growth
Hong Kong’s vision to be a global leader in the innovation and technology sector has taken root and is already producing good fruit. In a cluster with Shenzhen, this sector has been ranked the world’s second largest based on the Global Innovation Index 2019. It also ranked fourth in tech infrastructure out of the 129 surveyed economies in the same Index.
The government set up an Innovation & Technology Fund with an initial HK$5 billion (US$637.8 million) capital injection. It founded the Hong Kong Applied Science & Technology Research Institute and established the Hong Kong Science Park, Cyberport and five R&D centres. Today, the Science Park is home to more than 700 technology companies and some 13,000 technology talents. Out at Cyberport, a creative digital workspace, more than 1,300 digital tech companies call it home.
It is no surprise therefore that Hong Kong’s start-up ecosystem is thriving. In 2018, the number of start-ups in Hong Kong increased by 18% to 2,625 with the total employment expanded by 51% to over 9,500 employees.
Most of the start-ups are centred around the information & communications technology (ICT), Software as a Service (SaaS), Internet of Things (IoT), data analytics, biotechnology, artificial intelligence, robotics, augmented reality (AR), and virtual reality.
Innovation and technology companies are perennially the key drivers of the IPO market across exchanges in Hong Kong and Mainland China, no doubt encouraged by listing reforms that have made it easier for new companies to list.
Friends in high places
Despite recent upheavals in the Hong Kong market, the future remains encouraging for the sector. In the recent 2019-2020 Budget, some key measures were announced. Among them, HK$5.5 billion is earmarked for Cyberport to expand its campus to provide additional space for technology companies and start-ups; HK$500million to implement the IT Innovation Lab in Secondary Schools Programme to provide funding support at secondary schools; HK$20 billion to be injected into the Research Endowment Fund of the Research Grants Council; some HK$800 million will be provided over five years for Technology Transfer Offices of designated universities, the Technology Start-up Support Scheme for Universities, State Key Laboratories and Hong Kong branches of the Chinese National Engineering Research Centre to support more R&D work and the realisation of R&D results.
Opportunities brought by the Guangdong-Hong Kong-Macao Bay Area development will look to capitalise on Hong Kong’s R&D capabilities, its robust technology infrastructure, legal system and intellectual property protection.
The government is clearly not resting on its laurels, no doubt aware of the stiff competition in the region to attract the best talent and ideas in this sector. Under its Technology Startup Support Scheme for Universities (TSSSU), which was launched in 2014, it will continue to provide an annual funding of HK$8 million to each of the six local universities “to encourage tech start-ups”.
According to InvestHK, a government unit, some HK$20 billion is being set aside for the first phase of the Hong Kong-Shenzhen Innovation and Technology Park in the Lok Ma Chau Loop. Another HK$10 billion will be injected into the Innovation and Technology Fund to support applied research and development.
Companies looking for a home base are also being incentivised through tax breaks. Private enterprises are offered a 300% tax reduction on the first HK$2 million of qualified R&D expenditure. The remaining qualified R&D expenditure will enjoy a 200% tax deduction. Its Technology Talent Admission Scheme is also a dangling carrot, providing a fast track arrangement for admission of overseas and mainland research and development talent to Hong Kong for eligible technology companies and institutes.
Hong Kong Trade Development Council Research department anticipates that “with rising corporate engagement in incubation and accelerator programmes, new initiatives to promote start-ups springing from universities, Cyberport and Hong Kong Science Park, and a string of notable funds rounds for start-ups, particularly the emergence of start-ups with unicorn status”, Hong Kong’s technology sector “may soon reach a tipping point and be propelled into much faster growth”.
With more than 40 years of experience and 140 offices globally, PageGroup has one of the most comprehensive networks of employers and candidates in the technology industry. This article is part of our Market Movers series, which attempts to highlight various industry segments across specific markets.
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