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[Wei on Economy] Learn from the reform experience of the three small countries to improve the reindustrialization industrial policy

2022-04-18T14:07:18.349Z


Following the discussion with readers in this column earlier on three industries that can be developed in Hong Kong in the future, including third-generation semiconductors, biotechnology and food technology, the author will share with you my views on three small open economies - Israel


Following the discussion with readers in this column earlier on three industries that can be developed in Hong Kong in the future, including third-generation semiconductors, biotechnology and food technology, the author will share with you my views on three small open economies - Israel, Singapore and Economic Policy Research in Switzerland.

The experiences of these three countries were chosen to be discussed because their population, labor costs and economic development are similar to those of Hong Kong, but the performance of advanced manufacturing is far from that of Hong Kong.


First, the manufacturing share of Israel, Singapore, and Switzerland is 11%, 18%, and 20% of their GDP, in stark contrast to Hong Kong’s 1% share of manufacturing production GDP, and confirms high labor, land or production costs It is not the main reason for the decline of a local manufacturing industry - to compare business operations and labor costs, I believe that Switzerland or Singapore is higher than Hong Kong.

The following will analyze the distinctive industrial development achievements and policies of the three countries, and discuss their policies that can be used as a reference for Hong Kong.


Israel: Military-led innovation ecosystem and 'revolving door' careers

Like Hong Kong, Israel lacks natural resources and also relies on foreign investment and high value-added industries.

According to the 2020 World Investment Report of the United Nations Conference on Trade and Development (UNCTD), foreign investment in Israel exceeded US$18.2 billion in 2019, mainly in the three sectors of manufacturing, ICT and technology, rather than focusing on financial and professional Serve.

The Israeli government established an independent public agency, the Israel Innovation Authority, in 2016 to promote the development of Israel's innovative technology industry, including the establishment of an incubator for local S&T start-ups, entrepreneurs and talents.

The bureau also supports the development of various types of enterprises (including start-up or large enterprises, domestic and foreign enterprises) and attracts foreign direct investment through various tax and financial incentives.

For example, the Israeli government launched the Bilateral R&D Incentive Program in 2021 to encourage local and foreign companies to jointly carry out R&D projects through direct funding or tax relief. Assist them in finding overseas technology partners.

Such bilateral programs are designed to encourage foreign companies to commercialize in the local market and promote technology-intensive product manufacturing and technological upgrading.

More importantly, the Israeli government often takes the lead in creating demand for new technologies and products, especially in the early stages of product and technology research and development, bringing valuable business references to companies.

Various government departments work closely with various organizations to jointly formulate various policies to promote industrial and technological development.

The mature venture capital and private equity ecosystem is an important part of Israel's innovation and development, and its government also actively supports venture capital. Yozma is a good example of a pioneer in venture capital.

It must be admitted that one of the important factors for the success of Israel's scientific research is its military strength, which has little reference value for Hong Kong.

Israel's compulsory military service system trains young people to become more well-rounded entrepreneurial and R&D talents.

At the same time, like the United States during the Cold War, technologies developed by the Israeli military generally have extensive commercial and scientific value.

In addition, people trained in cyber and intelligence agencies gain first-hand experience and, after leaving those agencies, can advance related industries in the industry.

All in all, these talents trained in the military-related sectors have grown the talent pool in both the public and private industries.

Manufacturing will contribute about 21% of Singapore's GDP in 2020 and provide 12% of employment opportunities.

(File photo/Associated Press)

Singapore: Implementing "Manufacturing 2030" Manufacturing accounts for 20% of GDP

As a small city-state, Singapore needs to adapt to a long-changing world order.

As businesses and investors around the world grapple with increasing uncertainty amid the ongoing Sino-US rivalry and the post-COVID-19 era, the Singaporean government has positioned the country as a hub for innovation and R&D, and actively supports local businesses to achieve this goal.

Manufacturing will contribute about 21% of Singapore's GDP in 2020 and provide 12% of employment opportunities.

Under the global epidemic, Singapore's manufacturing industry has taken advantage of the momentum and has maintained growth for six consecutive months since July 2020, with an annual growth rate of 7.3%.

Driving the steady development of Singapore's manufacturing sector despite the pandemic include biomedical manufacturing, electronics and precision engineering industries, semiconductors, measurement equipment, optical instruments and metal precision components.

The Singapore government is committed to R&D and maintaining a diverse partnership with the private sector, and has pledged to spend about 1% of GDP annually on research, innovation and entrepreneurship from 2021 to 2025.

In addition to financial support, the government provides startups, accelerators and venture capitalists with high-quality work and event venues, such as startup parks Block 71, 73 and 79, located close to public-private research institutes to foster collaboration between academia and industry.

The Singapore government strongly supports local manufacturing enterprises. Through the National Enterprise Singapore (Enterprise Singapore), the “Scale-up SG” program is launched for a period of 12 to 18 months to help selected enterprises with high growth potential to expand effectively and cultivate talents in various fields. Leaders, creating future world champions.

In 2021, the Singapore government announced the ten-year "Manufacturing 2030" vision plan, which aims to promote the growth of Singapore's manufacturing industry by 50% and maintain a 20% share of GDP.

The Singapore government is also actively promoting the Southeast Asian Manufacturing Alliance to be established in 2021 to provide a "Singapore +1" strategy for international and Singaporean manufacturing industries that intend to expand and establish a network of industrial parks in Southeast Asia, and to promote the development of a global diversified supply chain.

Many multinational corporations have looked to Singapore as a springboard to countries in Asia and beyond.

The success of Singapore's tech economy is based on its strategic attraction of foreign investment and cooperation with overseas companies. Its government not only provides incentives, but has been actively creating a business environment for foreign companies, targeting investment from high-tech and knowledge-intensive multinational companies, focusing on Promote technology transfer from corporate parent companies to local subsidiaries, and provide financial support for corporate industrial upgrading and manpower training.

Through its sovereign fund, Temasek Holdings, the government also invests in sectors ranging from life sciences to interactive digital media, promoting strategic, economic and research-driven activities.

Finally, the Singapore government establishes globally competitive universities and public research institutions, including promoting the National University of Singapore to become a world-leading university, and through partnerships with world-leading universities such as the Massachusetts Institute of Technology and the Swiss Federal Institute of Technology. Smart Nation" project.

The Swiss luxury watch brand Rolex is famous all over the world.

(file picture)

Switzerland: "Swiss Made" brand effect with intelligent production talent pool

About a quarter of Switzerland's GDP comes from manufacturing, with world-class financial and manufacturing companies.

The country's technology is exquisite, and its industries are concentrated in refined, low-polluting and branded manufacturing industries, such as biotechnology and pharmaceuticals, precision machinery and watch industries. The manufacturing of high-value-added luxury goods and high-end products is enough to support the country's high wages.

Switzerland spends nearly 3% of its GDP on research and development, at more than $20.6 billion, with more than three-quarters of that funding coming from the private sector.

Over the past decades, Switzerland has developed a highly industrialized and high-quality technological advantage, creating high-performance production facilities and ideal environments for local and multinational companies.

Switzerland also has a strong high-tech talent pool for intelligent production, and its vocational training system is labor-market-oriented, striving for a balance between theory and practice.

At the same time, Switzerland has a production cluster with high innovation potential consisting of manufacturers, service providers, suppliers, potential customers and R&D institutes.

The country also has an efficient knowledge and technology transfer center, and its stable political and economic environment has always been popular with investors and manufacturers.

Finally, Swiss products often carry the impression of being "Swiss made, high-end and premium". Products are often perceived as high-quality, reliable, durable, and technologically advanced, and customers are willing to pay more for "Swiss-made" products.

In view of this, the Swiss government has strict regulations and standards for the "Swiss Made" label. If a company wants to use the "Swiss Made" label on its products, its products need to create at least 60% of the added value in Switzerland. Production.

Switzerland's success reflects that a financial center can also have a strong manufacturing industry.

Despite high income levels in Switzerland, productivity and wage growth have slowed since the 2008 global financial crisis.

In order to promote economic transformation, the Swiss government regards Industry 4.0, digitalization and various new technologies as new engines for the country's growth. Using digital technology to improve the availability of data, on the one hand, enhances the efficiency of government governance, on the other hand, improves the productivity of enterprises and workers.

Hong Kong must undergo economic transformation, enrich the middle industry and re-materialize the economy.

(file picture)

Let "Made in Hong Kong" travel around the world again

The Hong Kong SAR government also understands that it needs to re-industrialize and invest in emerging industries, but it has been implementing short-sighted and piecemeal economic and industrial policies in policy and planning, neglecting to create an environment for innovation, and has not implemented systematic industrial policies, let alone formulating long-term economic transformation. Target.

In recent years, the Hong Kong government has mainly invested in different industries and subsidized start-ups and small and medium-sized enterprises through the Innovation and Technology Bureau.

Hong Kong's industry once flourished and dominated the world, but it has been shrinking in the past 25 years, allowing other regions to catch up.

The Hong Kong government should strengthen its leading role in cultivating industries and talents, provide Hong Kong with a set of systematic industrial strategies, and establish a local high-tech manufacturing industry.

From the industrial achievements of three small open economies, Israel, Singapore and Switzerland, we have reason to believe that Hong Kong's reindustrialization is not a dream, but the premise is to summarize their policies and experience, and tailor a system for Hong Kong to be compatible with other countries in the Greater Bay Area. A coordinated reindustrialization program for cities.

In general, according to the analysis of the three countries of Israel, New Zealand and Switzerland, the policy direction of reindustrialization should include:

(1) Improve the scientific research ecosystem of "official, production, learning and research";

(2) Strategically introduce domestic and foreign investment;

(3) The government should take the lead in purchasing locally produced and developed technology products and services;

(4) Government funds such as the Future Fund should increase their weight and invest more strategically in the local technology industry;

(5) Create a "revolving door" for talents to make career plans in the scientific research ecosystem;

(6) To build an education system that is dominated by the labor market and can balance theory and practice, it is necessary to re-examine various current vocational training programs;

(7) Strengthen the premium effect of the “Made in Hong Kong” brand in domestic and foreign markets.

Hong Kong does not have much to bite on, and now is the best time to deepen the new industrial policy.

Deng Xiwei


Professor of Economics, School of Economics and Management, The University of Hong Kong, Deputy Director of Asia Global Institute


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Source: hk1

All news articles on 2022-04-18

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