Path to a digital world

Hong Kong is trying to add another jewel to its crown - that of a global data hub. Experts say the city needs a dedicated government unit to oversee growth of the digital economy, beefing up data sharing, and supervising data crossing. Oswald Chan reports from Hong Kong.

With the help of digital technologies, all business, economic, social and cultural activities are going online, which provides fresh business opportunities in a digital economy - one that operates predominantly by using digital technology, and which has emerged as the new driver for economic growth worldwide.

To live up to Hong Kong's vision to transform itself into a digital economy, the special administrative region has built up various digital infrastructure facilities, such as the Public Sector Information portal, iAM Smart, the Next Generation Government Cloud Infrastructure, the Big Data Analytics Platform and the Shared Blockchain Platform.

The SAR government is also developing the Consented Data Exchange Gateway, which would be conducive to promoting an interchange of government data. A feasibility study on establishing an artificial intelligence supercomputing center is expected to be completed by the end of this year, at the earliest.

Despite the development of hard infrastructures, there is still a lack of government coordination and facilitation in data collaboration as, currently, there is no centralized government podium to deal with data. Many government departments release data to meet their requirements without considering data's real applications. The disseminated data simply feature scattered documents with a poor interface and without industry specific standards or considerations.

A recent report by the Federation of Hong Kong Industries and Hong Kong Science and Technology Parks Corp points out that the SAR's digital economy is trailing behind those of other major economies, and government policies could help to rectify that shortcoming.
The FHKI and HKSTP have commissioned PricewaterhouseCoopers Advisory Services to conduct a four-month consultancy study involving 30 industry stakeholders, such as telecommunication companies, international data center firms, and cloud service providers.

The report urged the SAR government to formulate development plans and road maps for funding sources, operational models, supportive policies and promotions, as well as project delivery in integrating hard and soft infrastructures.

Industry stakeholders agree, saying a lot more needs to be done to promote the city's digital economy, based on six major directions.
Their proposals include creating a dedicated government agency to deal with data flow in the digital economy.

"A dedicated unit to centralize and connect all the data would allow the private sector to develop various business applications based on those data," says FHKI Deputy Chairman Peter Shum Kin-wai. "When there are business applications, a business value chain and an ecosystem related to the digital economy would emerge."

A dedicated government unit should be led by secretary or deputy-secretary level officials to oversee all matters relating to the construction of hard and soft infrastructure for the digital economy, says Shum.

Gary Yeung Man-yui, president of Smart City Consortium, suggests the administration appoint a chief data officer to coordinate all related policies. At the same time, the Census and Statistics Department should be upgraded, he says.
"A dedicated department can help in the integration, supervision and promotion of all government data, helping to promote more application scenarios of digital infrastructure," says Yeung, adding that such a unit could formulate a long-term strategy to support more local professional organizations in promoting more application scenarios for digital infrastructure, or constantly examine whether there are any conflicts between current legislation and application of new technologies.

Data-sharing ecosystem
The government should also promote data-sharing vigorously. Currently, government departments in Hong Kong possess their own data that are not interchangeable. Enterprises and research institutions should be encouraged to share data.
Loretta Fong Wan-huen, government and public sector leader at PwC in Hong Kong and Macao, and PwC Hong Kong Public Sector Consulting Partner Roy Chan kwok-fai, agree that the government's priority is to increase the promotion and utilization of the two sharing platforms - the Public Sector Information portal and the Common Spatial Data Infrastructure, and expand the types of data available on these platforms.

They say the government should actively foster a culture of data-sharing by establishing universal protocols and standards in selected industries to enable private practitioners to participate more actively in data-sharing, hence extracting greater value for Hong Kong's digital economy.

Yeung notes that many public utility companies in Hong Kong collect a lot of data when conducting businesses licensed by the government. "In deciding whether to extend the operation rights of these companies, the government should require them to provide certain business data."

He stresses that the lack of data-sharing will impede the growth of smart city solutions and the artificial intelligence industry, as there is inadequate data for technology companies to scale up their operations.

Legislative improvements
Legislation is also essential for promoting the digital economy. Yeung suggests that all government departments should examine the impact of new technologies on their operations, and consider if legislative changes are needed to foster digitalization of government services. The administration is updating iAM Smart to provide various one-stop government services online by 2025.
Revamping legislation is also important in promoting hard infrastructure, such as a data center. "As the Building Ordinance was passed a long time ago, it must be updated to ensure there is sufficient space to cater to the construction of a data center and a supercomputing center," says Shum.

Another aspect of the legislation concerns cybersecurity. At present, Hong Kong does not have specific legal requirements for cybersecurity regarding critical infrastructures. The government is drafting a legislative framework and conducting consultations, with a view to defining the obligations of operators of critical infrastructures concerning cybersecurity.

"Cybersecurity legislation would make data suppliers and processors confident by creating a safe digital environment; attracting international and mainland businesses and operators to settle in Hong Kong; and would pave the way for using cross-border data from the mainland to help Hong Kong become a global data hub," Our Hong Kong Foundation Researcher Pascal Siu Yat-kui envisages.
"When the government initiates legislation to enhance cybersecurity, people would have the confidence to engage in online economic activities, and enterprises will also be more willing to invest in the digital transformation of their businesses. More cyber-related industries can also emerge to satisfy market demand and provide more business and employment opportunities," FHKI's Shum adds.
Establishing data-sharing protocols for data protection is also essential for spurring the digital economy. Yeung of Smart City Consortium says Hong Kong can help link up standards and practices on the Chinese mainland and in overseas regions regarding digital infrastructure. "The city even has the capability to formulate new standards that can be applied to both the mainland and overseas."
Yeung says the administration can consider funding research institutions in bridging mainland and international standards in digital infrastructure.

Shum says Hong Kong should have rules to regulate data-sharing activities, thus creating a transparent and fair platform for the practice.

Safe, orderly flow
The experts also support the concept of data crossing between the SAR and the mainland, saying it is essential for developing a digital economy in Hong Kong and fulfilling the city's aspiration to be a global data center.

Hong Kong's Innovation, Technology and Industry Bureau and the Cyberspace Administration of China signed a memorandum of understanding in June, pledging to seek applicable rules and administrative measures under the national management framework on safeguarding the security of cross-border data, with an aim of fostering safe and orderly data flow between Hong Kong and other cities in the Guangdong-Hong Kong-Macao Greater Bay Area.

Effective September 2022, the Cyberspace Administration of China's new cross-border data transfer regulation requires companies to submit documents to the national internet watchdog for a review before exporting data overseas.

"With Hong Kong's relatively open cross-border data flow regime, the data flow from the mainland would turn Hong Kong into a global data hub, while ensuring the process of data crossing is desensitized by using the techniques of anonymization, pseudonymization, masking and data wrapping or shuffling," says Siu.

The OHKF researcher suggests that cross-border data flow should be accomplished in an incremental manner with a whitelist of lower risks, based on the mainland's current data classification framework.

Shum concurs, adding the whitelist data can include anonymized business or research information that reveal patterns of consumption activities and life habits only. "Developing Hong Kong's digital economy rests on the centralization and connection of all livelihood issues' data, not just cross-border financial market data held by the government," he says.

The FHKI report suggests that Hong Kong should build a data transmission center that would further propel cross-border data crossing. Such a center could be set up in the Northern Metropolis, says Shum.

Siu said he believes that data transmission should fulfill three criteria - it should be owned and managed by the SAR; mainland data should be confined to and should not be transported out of a designated area such as the Hong Kong-Shenzhen Innovation and Technology Park (Lok Ma Chau Loop) in Hong Kong; and Hong Kong should revise its data security regulatory framework to make it acceptable to the Cyberspace Administration of China, otherwise, special provisions should be made specifically for data from the mainland.

Specialized statistics
Promoting a digital economy also requires quantification. At present, the Census and Statistics Department does not compile comprehensive official statistics on the gross value-added and employment contributions arising from the digital economy sector. The FHKI and HKSTP report advises the government to provide statistics on the revenue generated by enterprises from e-commerce sales, expenditure on electronic products and services, and the proportion of full-time employees engaged in digital technology-related work.

"A notable challenge is Hong Kong's current difficulty in quantifying the specific economic contributions of its digital industries. This data limitation makes the task of tracking the city's progress and benchmarking it against other digitally advanced economies somewhat challenging," Fong and Chan reckon.

"Hong Kong needs standardized data so that the government and the manufacturing sector can have the quantified base to access the status of the city's digital economy," says Shum. "When the development pace can be assessed, then the administration can formulate policies and standards for industry development. Without such data, the impact could be serious."

Contact the writer at
oswald@chinadailyhk.com