In the not too distant future, a global power shift will see today’s leading economic countries drop from having 80 percent of the world’s income to 35 percent and a new dawn not too far on the horizon where China and India will contribute 50 percent of the global GDP. [Jump to video]

I was invited to a luncheon hosted by the San Francisco office of Hong Kong Economic and Trade Office. The speaker was chairman of Hong Kong Science and Technology Parks Corporation, Nicholas Brooke. (www.hkstp.org)

I briefly talked with Mr. Brooke before and after his presentation.

What follows is a good portion of the information he kindly provided directly from his presentation speech, combined with various links and other informative content VentureOutsource.com feels is equally helpful based on discussions in our OEM community and industry, plus our knowledge of interests from some of our visitors in our greater Website readership.

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Hong Kong’s desire is to strengthen its competitiveness as an international hub and become a premier gateway to markets in mainland China and Asia.

Given that by the year 2030 more than one-third of the world’s middle class (read: consumers) will reside in Asia, this global redistribution of ‘consumer spend’ is significant and Hong Kong seems to be approaching this opportunity with intent and carefully planned execution. For more on the world’s re-distribution of wealth and the role Asia will play, see video below.

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[VIDEO] James Wolfensohn, former president of The World Bank and CEO of Wolfensohn and Co., addressed Stanford Graduate School of Business students with details about his work at the World Bank during its transition years and how the equation between developed and developing countries is changing. In his talk that took place January 11, 2010, Wolfensohn states that in the next 40 years, a global power shift will see today’s leading economic countries drop from having 80% of the world’s income to 35% and a new dawn not too far on the horizon where China and India will contribute 50 percent of the global GDP. Hence, the rise of Asia.

Meanwhile, Hong Kong Science and Technology Parks’ focus in particular, is in developments in the field of innovation and technology. (Request list of contract electronics service providers in Silicon Valley / Bay Area)

But becoming a regional gateway or point of FDI and business interests on the world stage, even with a concerted effort backed by government initiatives and funding is not easy for any region, in any sector. India tried years ago to become a global destination for electronics systems design and manufacturing (ESDM) or contract electronics manufacturing services (EMS) and failed.

Yet, despite India’s software industry’s ability to successfully get both public and private sector leaders, industry organizations plus other governing bodies and universities working together to achieve world-renowned accomplishments placing India’s software skills squarely on the global map, native influential Indian players from similar stripes and walks of life have achieved little to date in terms of solidifying any semblance of unity in India’s electronics industry. Now under new executive leadership, today India is in the midst of her second attempt to become a global destination for ESDM. (See: Website of Department of Electronics & Information Technology, Ministry of Communications & Information Technology, government of India)

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Economic pulse

Hong Kong wants to become the primary gateway to China, and the greater Asia region. Mr. Brooke informed the luncheon group Hong Kong’s Financial Secretary, John Tsang, released figures announcing the Hong Kong economy grew by 2.9 percent in 2013, nearly double the 1.5 percent the economy expanded in 2012. Hong Kong’s GDP is forecasted to grow between three to four percent in 2014.

Meanwhile, similar to the US economic stimulus, or QE, engineered to life support the US economy until the patient can breath on its own, Mr. Brooke informed attendees Hong Kong’s HK$33 billion package of counter-cyclical measures introduced last year have stabilized the economy and preserved employment. Add to this, a surplus of HK$12 billion for the current fiscal year is part of the forecast.

Hong Kong unemployment is at 3.3% and in some areas like construction and healthcare, Hong Kong is facing a shortage of labor. But more on construction in a moment.

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Tourism remains a major component of the economy with over 50 million arrivals in 2013, an 11.7 percent increase over 2012. Tourism contributes 4.7 percent of annual GDP.

Hong Kong inflation is forecast to average 4.6 percent, slightly higher than in 2013.

The one cloud in the Hong Kong sky, with speculators still unable to determine whether it will bring rain or not, is the real estate and construction development market. Low interest rates and abundant liquidity fueled by Hong Kong brokers feeding the region’s shadow banking market with loans to Chinese business men required government intervention to slow down a growing bubble. (External reading here and here)

Concerted effort with laser focus

Hong Kong appears to be taking few chances in its drive to becoming Asia’s premier gateway. Addressing issues head on, and gaining momentum as The Park gains more recognition worldwide, the focus of Financial Secretary Tsang’s most recent budget was a series of initiatives to strengthen Hong Kong’s competitiveness, designed to hopefully enable The Park to serve its true purpose as an international hub to markets in mainland China and Asia.

By way of examples, Mr. Brooke informed the audience of three major projects with the first being the development of an East Lantau metropolis which is intended to be a new core business district to provide much needed additional commercial space to that available in Central and, in due course, Kowloon East

This metropolis is to be built on an artificial island in waters between Hong Kong and Lantau and potentially it could accommodate a population of several hundred thousand people. Aerial view of Hong Kong Science and Technology Park, below.

Another large scale project under planning is the expansion of the Hong Kong International Airport by provision of a third runway. The project is estimated to cost over HK$100 billion and would foster long term economic development and enhance competitiveness.

To enhance the city’s capacity and appeal as a visitor destination government also plans to create a world class leisure and entertainment center along the old Kai Tak Airport runway – the Kai Tak Fantasie – and this is now the subject of an international competition.

Further initiatives include expansion and improvement of public healthcare facilities and hospitals, increases in hotel room supply at Ocean Park and Hong Kong Disneyland as well as at other locations and a series of measures to strengthen and support small and medium size enterprises and the creative industries.

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That cloud

Regarding the property sector and the intervention by Government to calm the market mentioned above. The Stamp Duty measures that were introduced to discourage speculation and to give priority to Hong Kong residents, particularly first-time buyers, have had an impact, Mr. Brooke stated.

And there has been some softening in prices. However, many would-be purchasers still cannot afford to buy and sales volumes are down to just over 3,000 units per month that compares with an average in previous years of 9,000 to 10,000 units per month.

He tells us there is no quick fix to the situation and it is a matter of providing more supply and a wider range of choice to potential buyers which Hong Kong’s Chief Executive, CY Leung, sought to resolve in his January Policy Address.

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In the Address, Leung announced plans to rezone some 36 sites for residential use, to increase the permitted density of residential developments by 20 percent, to expand the existing new towns and build two new ones, to consider reclamation outside the harbor and to increase significantly the amount of development on the old Kai Tak Airport site.

Mr. Brooke informed us these measures are intended to increase average production per annum by the private sector from 10,000 to 20,000 units and the overall target is to increase housing supply by a total of 470,000 units in the coming 10 years, of which public housing will account for 60 percent.

Surrounding areas amid innovation and technology

As chairman of Hong Kong Science and Technology Parks Corporation, Mr. Brooke admitted he was delighted to see in the Policy Address plans to re-initiate the setting up of an Innovation & Technology Bureau.

The government has committed to making Hong Kong a smart, livable city by continuing to invest in environmental infrastructure to ensure cleaner air, cleaner sea water, and better treatment of solid waste, all key components to making Hong Kong an attractive place for local residents, visitors as well as talent from abroad. He then shared a few examples.

The first is one Mr. Brooke is close to, as chairman of the Harborfront Commission, and is a plan to collect sewage from both sides of Victoria Harbor for centralized treatment and then transfer the sludge to a facility that will turn it into energy, while at the same time alleviating the burden on landfills.

Vehicles are one of the three primary producers of emissions in Hong Kong, the other two being marine vessels and power plants with the fuel mix of the latter still comprising 40 percent fossil fuels.

An incentive / regulatory approach to phase out 82,000 diesel commercial vehicles by 2020 is being pursued as well as a program to upgrade the bus fleets to Euro IV and better. In addition, incentives are being offered to promote the use of electric vehicles.

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As for solid waste management, HK$30 billion (about US$3.8 billion) is being invested in waste recycling and treatment facilities. We were also informed Hong Kong is moving ahead with providing organic waste treatment facilities, community green stations, and waste electrical and electronic equipment processing facilities as well as looking at ways to support the long-term and sustainable development of the recycling industry.

On a surprising note to many attending, 70 to 80 percent of Hong Kong’s fresh water comes from Dongjiang, China via a pipeline. Given the rising demand for fresh water in Guangdong Province and challenges of drought on the mainland, Hong Kong is looking at ways to increase the supply of fresh water from local sources with the Hong Kong government recently reserving a site for a desalination plant.

All of the clean initiatives mentioned no doubt need innovation and technology, not only to facilitate their development, but also to raise productivity and indeed represent business opportunities for companies and entrepreneurs from the West.

Mr. Brooke revealed to us that, prior to his presentation this day, he had just spent two days at Cleantech San Francisco engaging with companies that could bring the relevant skill sets to Hong Kong.

He says Hong Kong is committed to providing an enabling environment and financial support. Emphasizing this support can be accessed not only by Hong Kong companies, but also companies from mainland China and abroad.

The Park

In December 2013, Karsten Strauss, a Forbes journalist focusing on entrepreneurs, technology and business published: ‘The World’s Top 4 Tech Capitals To Watch (after Silicon Valley and New York)‘. Strauss names Hong Kong as the number one tech city followed by Washington D.C., Tel Aviv and London. Honorable mentions were Boston and Austin.

Therefore, it’s no surprise, given the measures to boost R&D investments and commercialization activities among private companies in Hong Kong and internationally, that start-ups in Hong Kong have mushroomed over the last few years.

The Hong Kong Science & Technology Parks Corporation was established eleven years ago and today comprises a community of some 440 companies and over 9,500 engineers, scientists and support staff. The Park was set up to provide a campus with the necessary infrastructure, including shared laboratories, incubation programs and support services, to help companies grow and take advantage of the vast opportunities the region of the world offers. (View list of companies currently residing in Hong Kong Science & Technology Park)

The Park has five focus areas:

• ICT
• Electronics
• Precision engineering
• Bio-technology
• Green technology

Mr. Brooke also emphasized Hong Kong has the necessary platform not only for companies to land and flourish, but to also go public with IPO. (See: Hardware tech startup outsourcing strategy)

Taking the spotlight off The Park for a moment, Mr. Brooke emphasized Hong Kong is part of a larger region – first ( and then Asia Pacific. He admits collaboration is critical to their success and, that Hong Kong finds itself at the center of this very important region.

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Within a five hour radius, today this greater region covers one-half of the world’s population. If you have every flown in or out of the Hong Kong airport, you know how easy it is to navigate. In addition, Hong Kong’s airport authority has a goal to become the greenest airport in the world.

Hong Kong regional and international collaboration

In 2012, the governments of China’s Guangdong Province, Hong Kong and Macau (collectively referred to as the Pearl River Delta region), jointly released a plan for long-term cooperation in the areas of environment and ecology, low-carbon development, culture and social living, spatial planning and green transportation systems.

This Fair Winds Charter, now extended to the end of 2014, is a wonderful example of a successful global collaboration model aimed at reducing one of Hong Kong’s most significant air pollutants – marine emissions.

Even if Hong Kong’s own marine vessels are as clean as possible, if ships from other countries entering Hong Kong’s port are not clean, Hong Kong suffers along with the world.

Today, 17 major freight lines have signed the Fair Winds Charter, committing to switch to cleaner fuel (from high-sulphur bunker oil to 0.5% sulphur diesel) when berthing in Hong Kong.

The Charter is the first initiative of its kind in Asia and not only helps reduce air pollution, but also demonstrates to the public the shipping industry is doing its part to reduce the environmental impact generated by their operations.

The extension of the Charter dovetails with the Hong Kong government’s recently announced intention to introduce regulations to mandate fuel switching at berth in 2015.

So what does this mean?

Whether you are an investor, a technology company, a city that is also striving for a better environment, a service provider, or someone interested in improving the world, Hong Kong would like to work with you.

In addition to its highly friendly business environment and ready supply of professional expertise Hong Kong offers a trustworthy and robust IP regime for US and other companies wishing to access opportunities in Hong Kong and Mainland China and needing to bring their IP with them.

As Mr. Brooke was ending his presentation, he spoke to Hong Kong’s uniqueness in its central location, its internationality, its can do spirit, its belief in opportunity, its desire to become one of the smartest, most livable cities in the world and its collaborative spirit.

Moments later, Q&A opened and the first question from one attendee targeted Mr. Brooke’s closing comment about intellectual property protection and IP risk in Hong Kong. Surely, many in the room had read about IP war stories working with companies in China, or experienced infringements first-hand.

“Hong Kong upholds the Rule of Law”, he answered.

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