HONG KONG: Funding allocated for research should represent at least 2 percent of Hong Kong's gross domestic product (GDP) if the city is to maintain its competitiveness, World Bank tertiary education coordinator Jamil Salmi said.

Scheduled to deliver a public lecture at the University of Hong Kong today, Salmi said slashing education spending is an easy, but short-sighted option during an economic downturn. The current troubled times should be taken as an opportunity to invest in human capital.

Salmi said Hong Kong research spending, representing less than 1 percent of GDP, is very low.

"It's time to increase funding," he said.

The city lags behind the top members of the Organisation for Economic Cooperation and Development. By contrast, Korea sets aside more than 2 percent of its GDP for research. In Japan research funding represented 3.2 percent of the country's GDP in 2005.

Salmi supported the government move to set aside HK$18 billion for a research endowment fund. He added that Hong Kong "may fall behind the competition" if funding remains low .

He said Hong Kong should allocate extra funding to the top three universities, while ensuring that other institutions have sufficient resources.

Universities across the world should be more conservative in their financial planning during the economic downturn, Salmi said.

The downturn may push government to cut education budgets. Philanthropists may be more hesitant about giving out money, and demand for traditional tertiary education will shift to community colleges.

The most vulnerable institutions will be universities that invested heavily in high-risk financial products such as hedge funds, in the hope of getting good return.

"Universities should be prudent and be careful of the types of investment," Salmi said.

Contingency financial planning should be done in advance so that institutions are prepared to deal with abrupt changes in the economy, especially in crises.

Alternative sources of income should be sought out and educational institutions should stop relying so heavily on government, Salmi said.

"Some think that getting money from the students and the private sector is a sin. That is a narrowed view," he said. "Few countries can solely rely on public funding."

He said Hong Kong's dollar-to-dollar matching grant scheme has achieved effective results, and countries such as United Kingdom have also adopted similar system from the city.

(HK Edition 03/24/2009 page1)