Hong Kong technology sector is one of the big winners in this year’s annual budget with an additional investment of HK$50 billion allotted to developing innovations in the areas of biotechnology, AI, and fintech.
In delivering the 2019 budget speech at the Legislative council yesterday, Hong Kong Financial Secretary Paul Chan said the budget was meant to “forge ahead according to the eight major directions set out by the Chief Executive” during her Policy Address last October.
“The application and omnipresence of communication technology, artificial intelligence and big data have not only spurred the birth of many new industries that operate across industries, sectors and geographical areas, as well as the emergence of the sharing economy, but also revolutionized the traditional and capital intensive business model based on tangible assets,” Chan said.
He noted new technologies facilitate business start-ups and foster new ideas, innovative products and services that generate economic benefits.
“To stay ahead of the game, we must enhance our I&T environment, attract companies from new economy sectors and research institutions to set up their presence in Hong Kong and nurture talent for a knowledge-based economy,” Chan said.
The additional HK$50 billion earmarked for the city’s technology sector is investment in Hong Kong’s long-term economic growth, and it is four times as much as the HK$10 billion allocated for ICT investment in the 2017 budget.
Specifically, the HK$50-billion budget for the technology sector is meant for the following:
- $20 billion will be used on the first phase of the Hong Kong-Shenzhen Innovation and Technology Park in the Lok Ma Chau Loop for, site formation, infrastructure, superstructure and initial operation.
- $10 billion into the Innovation and Technology Fund (ITF). The ITF's financial support for I&T development in Hong Kong has increased from about $700 million in 2013-14 to $1.5 billion in 2017-18. It is anticipated that the demand for funds will continue to increase. The ITF will continue to support applied R&D work in Hong Kong with the additional resources.
- $10 billion to support the establishment of two Technology Research Clusters on healthcare technologies and on artificial intelligence and robotics technologies, to attract the world's top scientific research institutions and technology enterprises to Hong Kong for conducting more midstream and downstream R&D projects in collaboration with local universities and scientific research institutions. Such clusters will pool and nurture more technology talent in Hong Kong.
- $10 billion is allocated to the Hong Kong Science and Technology Parks Corporation (HKSTPC) to reinforce the role of the Science Park as Hong Kong's flagship technology infrastructure. Of this, about $3 billion will be used to construct research-related infrastructure and facilities, whereas the remaining $7 billion will be used for the HKSTPC to enhance support for its tenants and incubatees, and set up a Smart Campus in the Park, etc.
- $200 million is earmarked for Cyberport to enhance the support for start-ups and promote the development of digital technology ecosystem. Cyberport is going to launch an "easy landing" programme to attract multinational companies (including overseas and Mainland leading internet enterprises and Fintech companies) to set up offices and R&D units in Hong Kong. It will also roll out a new support scheme, offering financial assistance up to $200,000 for each eligible start-up to conduct market research and promotion, as well as participate in business missions, trade fairs and exhibitions, etc. outside Hong Kong. The financial assistance offered under Cyberport’s incubation programme to individual start-ups will also increase by 50% to $500,000.
- $100 million is allocated to Cyberport to promote the development of eSports
Last December, Cyberport completed a study on the promotion of e-sports in Hong Kong and made a number of recommendations. The Cyberport Arcade will become a local e-sports and digital entertainment node providing a competition venue for e-sports. Support will also be provided for the e-sports sector in areas such as technological development and talent nurturing.
Besides these new initiatives, the government will also relax the eligibility criteria for the Technology Voucher Programme. All local enterprises, irrespective of size and duration of operation, may apply. This will enable more medium enterprises and start-ups to benefit from the Programme.
Furthermore to boost the development of the technology sector, the government is set to review regulatory and tax requirements to remove red tape and create a business-friendly environment.
In line with the Chief Executive’s Policy Address announcing the provision of additional tax deduction for domestic expenditure on R&D incurred by enterprises, Chan said enterprises will enjoy a 300% tax deduction for the first $2 million qualifying R&D expenditure, and a 200% deduction for the remainder.
Dedicated provision for the development of local FSIs and fintechs
As the government looks to develop innovations in the technology sector, it is also eyeing to help traditional sectors like the financial services.
“I have set aside a dedicated provision of $500 million for the development of the financial services industry in the coming five years, providing necessary support for bond market development, Fintech, green finance, manpower training and other aspects of financial services,” Chan said.
Chan said he had asked the Hong Kong Monetary Authority (HKMA) to make plans to set up an academy of finance in collaboration with the Financial Services Development Council, the financial sector, tertiary institutions, professional training bodies and regulators for promoting cross-sector expertise sharing and collaboration in applied research.
“We must upgrade and enrich our pool of financial talent if we are to maintain our leading edge and firmly remain the most competitive financial center in Asia,” he said.
Furthermore, Chan is advocating the development of Hong Kong into a preferred listing platform for emerging and innovative enterprises.
“The new regime should be in place in the second quarter of this year after the Stock Exchange of Hong Kong (SEHK) has consulted the market on the proposed specific arrangements and the amendments to the Listing Rules,” he said.
“It will boost Hong Kong’s competitiveness as a listing platform and attract listing applications from emerging and innovative enterprises, including large enterprises with weighted voting rights structure and pre-revenue biotechnology enterprises,” he added. “We will ensure appropriate safeguards for investors and uphold the quality of our market under the new regime”.
Meanwhile, Chan said the HKMA is prepared to launch a Faster Payment System offering 24-hour real-time payment function. This will allow banks and Stored Value Facility service providers to provide real-time, round-the-clock, cross-institution payment and fund transfer service to their business and personal customers.
“Since virtual banks are considered commercially and technically viable based on overseas experience, the HKMA is consulting the industry on reviewing and amending the relevant guidelines, and will make the best endeavor to issue licences within this year,” he said.
Nurturing IT talent
The annual budget also made several provisions to help cultivate and nurture IT talents in the city.
For one, $500 million under the ITF is being set aside for the Technology Talent, which will be implemented in the second half of the year. One of the initiatives is to establish a Postdoctoral Hub programme to provide funding support for all eligible institutions to recruit postdoctoral talent. The scheme will also provide funding to subsidize local enterprises on a matching basis for training staff on high-end technologies.
The government is also raising by 50% the subsidy ceiling of the Continuing Education Fund (CEF) from $10,000 to $20,000 per applicant. Furthermore, the upper age limit CEF applicants has been extended to 70 – lifting the restrictions on the validity period and the number of claims, and expand the scope of the CEF to include all courses in the Qualifications Register. Furthermore, the government is injecting an additional $8.5 billion into the CEF.
With the tight labor market given the latest unemployment rate of below 3%, the government expects further aggravation of the talent shortage as the population ages. In his Budget Speech, Chan advocated for increasing overseas talent working in Hong Kong.
“On the premise that local workers’ priority for employment will be safeguarded, we should consider increasing imported labor in a timely manner and on an appropriate scale to address the specific needs of individual sectors,” he said.
He added Commission for the Planning of Human Resources led by the Chief Secretary for Administration will commence operation shortly. Fostering collaboration across bureaus and various sectors, the commission will examine and co-ordinate existing policies and measures from a macro perspective.
“In parallel, the Government will continue to invest in education, training and retraining to enhance the quality and competitiveness of our workforce,” he said.
He added: “In order to cater for the development needs of various sectors and industries, we will also enhance our talent admission arrangements to attract talent from outside Hong Kong. The Labour and Welfare Bureau is finalizing the talent list, which is scheduled for completion in mid-2018.
In concluding his Budget Speech, Chan said: “The current-term government is ready to think out of the box and act proactively to open up new horizons for Hong Kong.”