Ex­perts say SAR must get around con­straints, cre­ate fa­vor­able cli­mate

China Daily (Hong Kong) - - HK | BUSINESS - By DUAN TING in Hong Kong tingduan@chi­nadai­lyhk.com

The Hong Kong gov­ern­ment should be more proac­tive in mak­ing use of its ad­van­tages to build a reg­u­la­tory regime and fi­nan­cial tech­nol­ogy (fin­tech) in­fra­struc­ture to wel­come the new econ­omy as the world un­der­goes a ma­jor rev­o­lu­tion in tech­nol­ogy, ac­cord­ing to ex­perts.

They agree that Hong Kong, with a long tra­di­tional rep­u­ta­tion for fi­nan­cial ex­per­tise and tal­ents, con­tin­ues to wield the whip hand over many fi­nan­cial ri­vals in the re­gion, but the city mustn’t rest on its lau­rels.

With in­no­va­tion and tech­nol­ogy emerg­ing as a new en­gine to power the city’s sus­tain­able and di­ver­si­fied eco­nomic de­vel­op­ment, the SAR gov­ern­ment has been driv­ing fin­tech in re­cent years. Along with in­dus­try stake­hold­ers, the In­no­va­tion and Tech­nol­ogy Bu­reau was set up in Novem­ber 2015 to fur­ther en­hance the ecosys­tem.

In her elec­tion man­i­festo, Chief Ex­ec­u­tive Car­rie Lam Cheng Yuet-ngor said Hong Kong should strive for in­no­va­tion and de­velop a high growth and a more di­ver­si­fied econ­omy, with at least two emerg­ing ar­eas in which Hong Kong has the po­ten­tial and the up­per hand, namely in­no­va­tion and tech­nol­ogy and cre­ative in­dus­tries.

She said Hong Kong should in­crease in­vest­ment and cre­ate a fa­vor­able en­vi­ron­ment in terms of pol­icy, land and tal­ents to de­velop th­ese sec­tors in Hong Kong.

Ex­perts sur­veyed be­lieve that the de­vel­op­ment of fin­tech does of­fer big po­ten­tial, but much work re­mains to be done to pro­mote it.

Jonathan Gal­li­gan, head of Sin­ga­pore re­search at CLSA, said Hong Kong still has a com­pet­i­tive edge over Sin­ga­pore in terms of in­vest­ment, cap­i­tal and a stock ex­change that al­ready has list­ings of new econ­omy com­pa­nies, in­clud­ing some Chi­nese main­land tech­nol­ogy en­ter­prises.

How­ever, Hong Kong’s con­straints in de­vel­op­ing fin­tech, ac­cord­ing to Gal­li­gan, are the cost of start­ing and op­er­at­ing a busi­ness in Hong Kong, an in­con­sis­tent gov­ern­ment reg­u­la­tory frame­work that has not em­braced new econ­omy in­dus­tries, and lit­tle gov­ern­ment sup­port to help new econ­omy en­ter­prises get off the ground.

Gal­li­gan said the Lion City has driven growth by tak­ing a prag­matic and long-term ap­proach, hav­ing in­vested in this tran­si­tion to build a startup tech­nol­ogy in­fra­struc­ture over a decade ago.

Ac­cord­ing to KPMG, Sin­ga­pore’s cen­tral bank, the Mone­tary Au­thor­ity of Sin­ga­pore (MAS), has set up a reg­u­la­tory sand­box frame­work for fi­nan­cial in­sti­tu­tions and oth­ers to test the city state’s in­no­va­tions in a freer, safer and con­trolled en­vi­ron­ment. The MAS has pledged to fork out S$225 mil­lion ($164.87) over the next five years to at­tract fi­nan­cial in­sti­tu­tions to set up their in­no­va­tion labs in Sin­ga­pore. The Fin­tech Of­fice and events like the “Sin­ga­pore Fin­Tech Fes­ti­val” are on the cards.

“The new econ­omy is com­ing with glob­al­iza­tion and dis­rup­tion is putting in­creas­ing pres­sures on old-econ­omy in­dus­tries,” said Gal­li­gan, adding that tech­nol­ogy has en­abled com­pa­nies to com­pete glob­ally rather than lo­cally, which has changed many in­dus­tries, in­clud­ing the fi­nan­cial in­dus­try. Those that adapt and re­spond will be able to take ad­van­tage of the op­por­tu­nity and Sin­ga­pore has been the leader in Asia in driv­ing change to be­come an in­no­va­tion hub.

Ac­cord­ing to CLSA’s Red­dot. com re­port, if Sin­ga­pore suc­ceeds in driv­ing in­no­va­tion and re­struc­tur­ing its econ­omy, its GDP growth rate will dou­ble to 2 per­cent over the next decade, driven by stronger pro­duc­tiv­ity as higher-value-added tech­nol­ogy-re­lated sec­tors flour­ish, re­sult­ing in an ac­cu­mu­la­tive S$250-bil­lion gain in eco­nomic growth over the com­ing 10 years.

Sin­ga­pore granted the first Chi­nese fin­tech firm Lu­ji­azui In­ter­na­tional Fi­nan­cial As­set Ex­change (Lu­fax) — the main­land’s se­cond-largest peer-topeer lend­ing plat­form founded by Ping An Group — to launch an in­ter­na­tional wealth man­age­ment plat­form in mid-July, ac­cord­ing to lo­cal me­dia.

Al­bert Wong, chief ex­ec­u­tive of­fi­cer of Hong Kong Sci­ence and Tech­nol­ogy Parks Cor­po­ra­tion (HKSTP), said Hong Kong, as an in­ter­na­tional fi­nan­cial cen­ter and fin­tech hub, which in­cludes cybersecurity, blockchain and pay­ment, is def­i­nitely a big as­set for the city.

He noted that the HK$10bil­lion fund ded­i­cated to fin­tech in the 2017-18 Bud­get rep­re­sents un­prece­dented back­ing from the gov­ern­ment in de­vel­op­ing in­no­va­tion, adding that although the tech­nol­ogy tal­ents is­sue in Hong Kong may take years to solve, the lo­cal en­tre­pre­neur­ial at­mos­phere has been im­prov­ing in re­cent years, and Hong Kong has been ex­port­ing tal­ents an­nu­ally from its uni­ver­si­ties, five of which are among the world’s top 50 ter­tiary ed­u­ca­tional in­sti­tu­tions, plus plenty of in­vestors.

To date, Hong Kong has about 1,500 star­tups launched, with more than 630 com­pa­nies op­er­at­ing at Hong Kong Sci­ence Park, in­clud­ing more than 260 star­tups, ac­cord­ing to Wong. A mem­o­ran­dum of un­der­stand­ing was signed by the Hong Kong Mone­tar y Au­thor­ity, Hong Kong Ap­plied Sci­ence and Tech­nol­ogy Re­search In­sti­tute Com­pany Ltd, Cy­ber­port and HKSTP on fin­tech col­lab­o­ra­tion last year, lead­ing to in­no­va­tion cen­ters be­ing set up.

Tony Chan, pres­i­dent of the Hong Kong Uni­ver­sity of Sci­ence and Tech­nol­ogy, stressed that Hong Kong re­mains com­pet­i­tive in terms of hav­ing good uni­ver­si­ties and tal­ents, plus solid sup­port from the gov­ern­ment and the com­mu­nity. But, in terms of fund­ing, the SAR is at the ba­sic level, as the 0.4 per­cent of the to­tal GDP spent on re­search and de­vel­op­ment in­vest­ment is lower than any those of other de­vel­oped cities and coun­tries.

He urged the gov­ern­ment to pro­vide the nec­es­sary fa­cil­i­ties, as well as a good in­fra­struc­ture, busi­ness and ed­u­ca­tion en­vi­ron­ment to drive fin­tech de­vel­op­ment.

C h a n c i t e d S h e n z h e n’s de­vel­op­ment as an ex­am­ple, say­ing the cur­rent ad­vanced tech­no­log­i­cal de­vel­op­ment of the main­land’s “Sil­i­con Val­ley” re­lies on sound gov­ern­ment in­vest­ment and poli­cies.

“If you try and take max­i­mum ad­van­tage of what you have, and then you ad­just to a goal, you may have a good chance of suc­cess but, still there’s no guar­an­tee.”

Ac­cord­ing to Maria Lam, di­rec­tor of pub­lic­ity at Hong Kong Cy­ber­port Man­age­ment Com­pany Ltd, there are close to 900 dig­i­tal tech com­pa­nies and more than 200 fin­tech en­ter­prises at Cy­ber­port, and they’ve been or­ga­niz­ing lots of events with var­i­ous banks like Hang Seng Bank and Citibank to look into how tra­di­tional in­dus­tries, such as in­surance com­pa­nies, could im­ple­ment tech­nol­ogy.

Joe Chan, man­ag­ing part­ner of Mind­works — a ven­ture cap­i­tal firm with of­fices in Hong Kong and Lon­don and a fo­cus on South­east Asia and the Greater China re­gion — said the SAR gov­ern­ment could de­velop in­no­va­tion and tech­nol­ogy as well as cre­ative in­dus­tries by sup­port­ing cap­i­tal and tal­ent, say­ing Hong Kong could learn from Sin­ga­pore by set­ting up a match­ing fund to help vol­un­tary wel­fare or­ga­ni­za­tions and open­ing more tech train­ing and com­pul­sory cour­ses for stu­dents and those who are in­ter­ested in tech­nol­ogy, in­clud­ing pro­gram­ming and coding.

For train­ing and cour­ses, the 2017 In­noTech Expo — backed by the main­land’s Min­istry of Sci­ence and Tech­nol­ogy, the Chi­nese Academy of Sci­ences, as well as main­land and Hong Kong gov­ern­ment bod­ies — will be held from Sept 24 to Oct 2 to pro­mote un­der­stand­ing of tech­nol­ogy and Hong Kong peo­ple’s in­ter­est, es­pe­cially among youths.

The Hong Kong gov­ern­ment also plans to es­tab­lish a cen­tral­ized data­base to help fi­nan­cial in­sti­tu­tions to “know your cus­tomer” and im­prove the city’s ef­fi­ciency as an in­ter­na­tional fi­nan­cial cen­ter, ac­cord­ing to James Henry Lau Jr, newly ap­pointed sec­re­tary for fi­nan­cial ser­vices and the trea­sury.

Lau has said his work will fo­cus on such ar­eas as fin­tech and green fi­nance in the next five years. He said a “Know Your Clients” data base needs to be es­tab­lished through tech­nol­ogy to re­duce po­ten­tial deal­mak­ing costs and pro­vide con­ve­nience as fi­nan­cial in­sti­tu­tions usu­ally spend lots of time get­ting to know clients and val­u­at­ing risks.

The big­gest hur­dle to de­vel­op­ing fin­tech here is hir­ing en­gi­neer­ing tal­ents as many lo­cal grad­u­ates do not know what is hap­pen­ing in the fin­tech scene...” Ja­son Tu,

JUSTIN CHIN / BLOOMBERG

Statis­tics on dis­play in Hong Kong Sci­ence Park’s Data Stu­dio. Hong Kong Sci­ence and Tech­nol­ogy Parks Cor­po­ra­tion has joined hands with the fi­nan­cial sec­tor to ad­vance fi­nan­cial tech­nol­ogy in the city. Jonathan Gal­li­gan,

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