Hong Kong need not change itself to seek higher rankings
Updated: 2016-10-06 07:12
(HK Edition)
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Hong Kong's poor showing in the annual Global Competitiveness Index compiled by the Geneva-based World Economic Forum has once again caused the city's unbalanced economic structure to be criticized by the usual crowd of finger-wagging commentators and politicians.
In fact, Hong Kong hasn't done all that badly despite that it is unavoidably handicapped by the criteria used in computing the index. Although dropping two places in this year's ranking, Hong Kong has remained one of the top 10 most competitive economies in the list.
Noting that Hong Kong's scores were spoiled by its poor results in the "innovative industry" category, many commentators reiterated that there is a lot of catching-up to do. But they were only repeating an old claim which is tiresome and meaningless.
The government has created a new Innovation and Technology Bureau to address the issue. But the bureau has yet to produce a detailed and convincing plan of action.
The forum's method of computation is not open to question. Hong Kong is, indeed, lagging behind other regional economies - including Singapore which ranks second after Switzerland in the competitiveness list - in terms of innovative industrial development.
But the fault is not in the business sector or the government; it may not be a fault at all or, at least, it should not been seen as such. The fact is that Hong Kong doesn't have much industry anymore.
The unbalanced economic structure is the result of an economic system adapting to changing circumstances, most of which were beyond Hong Kong's control. When Hong Kong still had a thriving industrial sector before the wholesale exodus of manufacturing activities to the Pearl River Delta region in the 1980s, the city was the region's innovation center.
At one time Hong Kong was the second-largest exporter, after Italy, of ready-to-wear clothing. Its garment industry was known internationally for its design capability and market sense. Pressured by intensifying competition from neighboring manufacturing bases, many Hong Kong manufacturers had striven for and succeeded in rapidly moving up the value-added chain through design and innovation.
Without a manufacturing base, Hong Kong is severely handicapped in its quest for innovation. An entrepreneur with a clever idea for a product would face the insurmountable problem of finding the supporting industries to help him build a prototype for testing.
His problem would be compounded by Hong Kong's small and open market. Unlike some other regional economies, Hong Kong is dedicated to maintaining a free market with a level playing field which rules out any special favors for locally produced products and services.
Those people who have been calling for government subsidies for innovation industries are forgetting that the discipline needed to preserve a free market environment precludes the deployment of public funds to subsidize any particular industry, or industries, at the expense of others. The contrasting South Korean model of government-directed economic development has been brought into question in recent months by the collapse of Hanjin Shipping and the global recall of Samsung's top-of-the-line mobile phones.
Departing from its traditional economic policy to push for innovation could invite criticism from other sources, leading to the fall in rankings in other surveys, particularly the one on the freest economy or the best place to do business. Secretary for Financial Services and the Treasury Chan Ka-keung said of the forum's report that it, like other surveys, simply serves a useful purpose as a reference.
This is how the findings of these surveys, whether favorable or not, should be treated while Hong Kong continues to evolve and adapt as it has done so successfully in the past. Those commentators who try to dispute this should read the Aesop fable of The Man, the Boy, and the Donkey. (If you haven't read it, it's worth checking it out on the internet.)
The moral of the story is clear: Please everyone and you will ultimately harm yourself.
The author is a veteran current affairs commentator.
(HK Edition 10/06/2016 page6)