It’s time to reboot the Hong Kong tech conversation
Every so (increasingly) often, some commentator or other will issue Cassandra-like warnings that Hong Kong is being left in the dust by its regional tech rivals, and that someone should do something about it: shower companies with below-market investment funds or somehow change whatever is considered wrong in Hong Kong’s “mindset”.
I find these discussions muddled and frustrating. Hong Kong’s strength is supposed to stem from its adherence to market forces; if the market isn’t producing optimal results, there must be a market failure, an externality of some sort — which is left unidentified.
These discussions are also marked by a tendency to conflate technology development with technology application. Making Hong Kong a smarter city may be a worthy goal and create economic efficiencies, but implementing technology won’t contribute much to the development of a tech industry per se. Nor do many “tech” startups actually have much tech content: Adding a smartphone interface to a low-tech business isn’t the same thing as actual research and development.
There would be worse fates for Hong Kong than to become the regional center for the application of technology rather than its development. By all means, require all vehicles in the urban centers to be “green”. Encourage mobile payments, whether Octopus or Alipay or something else, as long as there is competition. Implement real-time translation as soon as it’s available so as to ensure that all government communications (and movies) are multilingual. Wire the museums so they can display high-resolution life-size images of items overseas to complement exhibition of physical objects. And teach every student to code, at least a little, not as career-training but as an exercise in logical thinking. These are things Hong Kong could do first, and perfect, to the benefit of the domestic economy and to build skills that can be exported.
Some ostensible opportunities, as some overseas tech giants spare no effort in telling us, are constrained by regulations. Some regulations do little but protect vested interests and could profitably be changed. But other regulations should not be. Data-mining operations are relatively less likely to prove attractive here: Hong Kong’s privacy restrictions hopefully result in there being less data to mine. And while vested interests shouldn’t be taken for sacred cows, that doesn’t imply that the market should just be handed to foreign multinationals: Alternatively, local cooperative solutions can be developed that charge minimal commission, ensure local safety and labor regulations are adhered to and which don’t generate offshore taxable revenues. There might be some real tech in those apps: And the apps — the code and expertise — can be exported to other cities and countries that wish to improve local services and maximize local benefit. Let Hong Kong become a leader in society-first, rather than profit- or marketfirst, apps.
A domestic tech development strategy should, in other words, identify industries which, first, are ripe for disruption; second, in which Hong Kong has both enough domestic market to anchor the service and in which Hong Kong has some particular expertise or competitive advantage; and third, which have regional or international potential.
Legal services, most of which are more or less template-driven, might be one. Rote work, even research, is ready to be replaced by automation and is already starting to be. Throw in some AI, and probably a considerable amount of customization can be handled as well. While this threatens to drive down costs on precisely those more or less standardized services which make up the bulk of most firms’ business, the automation of legal services might allow Hong Kong to offer its respected legal jurisdiction seamlessly to parties elsewhere in the region.
Finance, or fintech as it has come to be known in an attempt to add some multiples to valuations, is another area where Hong Kong has a relative head start. Since finance in Hong Kong is, and probably should be, highly regulated, developments are likely to be incremental. Digital payments are presumably coming, but probably from large established players rather than startups. Low-cost, index-linked investment products with online AI-driven interfaces will benefit many retail investors, but won’t be a sea-change. What would be is a digital currency linked to the Hong Kong dollar, allowing US dollar pegged transactions without requiring access to the US banking system. Hong Kong would receive one actual dollar for each digital dollar as seigniorage. This idea is not original: It has been discussed by the Hong Kong Monetary Authority.
A Hong Kong-domiciled “cloud” under the SAR’s strict privacy and data protection — or, indeed, an even stricter regime specifically for this purpose — might prove appealing to consumers and hence to companies in an industry where there is an increasing concern.
Projects in these areas play to Hong Kong’s strengths and skirt some of its weaknesses, for example, a relatively small domestic market and high rents. Some changes to laws and regulations will probably be necessary, but it would be better to be proactive and analytical about this rather than letting such changes be driven ad hoc by lobbyists.
Making Hong Kong a smarter city may be a worthy goal and create economic efficiencies, but implementing technology won’t contribute much to the development of a tech industry per se. Nor do many “tech” startups actually have much tech content...