Transcript Document

Reform of Hong Kong’s Public
Research Funding System
Chintay Shih and Shin-Horng Chen
College of Technology Management, Tsing Hua University, Hsinchu, Taiwan
and
Chung-Hua Institution for Economic Research, Taipei, Taiwan
Outline

Introduction

A Snapshot of R&D in Hong Kong
Hong Kong Public R&D Funding


Innovation Governance of Hong Kong Public
R&D Funding


Policy Recommendations
Conclusions
1
1. Introduction

Central theme: Public R&D


What to be done in order to improve the innovation
governance of HK public R&D; the sound “soft
infrastructure” required for the promotion of R&D and
innovation in general, public R&D in particular
The way in which the HK government, the ITC in particular
administrates the R&D funding schemes

Innovation and Technology Support Programme (ITSP) under
Innovation and Technology Fund (ITF)


Accounting for 53.75% of the approved projects and 83.5% of
the approved amount respectively
The way in which the research institutes interact with the
funding agencies
2
Structure of the Funding Schemes
Administrated by the ITC
ITC
(Innovation and Technology Commission)
Innovation & Technology Fund (ITF)
Innovation and Technology Support
Programme (ITSP)
 R&D Centres Programme
 Guangdong-Hong Kong Technology
Cooperation Funding Scheme (TCFS)
 Forward-looking and innovative applied
R&D projects
University-Industry Collaboration Programme
(UICP)
Teaching Company Scheme
Matching Grant for Joint Research
Industrial Research Chair Scheme
Applied Research
Fund (ARF)
Patent Application
Grant (PAG)
New Technology
Training Scheme
DesignSmart
Initiative
The amount approved under the ITSP
amounted to 83% of the whole ITF from its
initiation to May 2008.
The investment period of the Applied Research
Fund has expired in end March 2005 and the
Fund has ceased making new investments.
General Support Programme (GSP)
Small Entrepreneur Research Assistance
Programme (SERAP)
3
2. A Snapshot of R&D in Hong Kong (1/3)

R&D expenditures in 2006: HK$ 11.95 billion (US$
1.54 billion); accounting for 0.81% of GDP


A positive trend: Growing momentum of the private
(business) sector in R&D investment


Relatively low by international standards, lower than
Taiwan (2.58%) and China (1.42%), and even much lower
than a few other economies of similar size
53% of the total R&D expenditure in 2006
R&D expenditure invested by the HK government
either fluctuated over time or at most grew at a modest
rate.

Since 2004, growing at a rate of less than 8% annually
4
2. A Snapshot of R&D in Hong Kong (2/3)

Predominant role played by the service sector in
business R&D



An extra part of R&D for manufacturing hidden in the
wholesale, retail and import and export trades,
restaurants and hotels sector



The wholesale, retail and import and export trades,
restaurants and hotels sector: 58%
The financing, insurance, real estate and business services
sector: 24%
Trading firms with sub-contract processing arrangements
De-linking of R&D and manufacturing in terms of location
R&D activities undertaken by the financing, insurance,
real estate and business services sector related mainly
to information technology
5
R&D Expenditure in the Business Sector by
Industry Sector, 2002-2006
Industry sector
R&D expenditure (HK$ million)
2002
2003
2004
2005
2006
481.9
406.1
587.1
471.3
369.0
<19%> <11%> <13%>
<8%>
<6%>
Manufacturing
Wholesale, retail and import and export
trades, restaurants and hotels
Financing, insurance,
business services
Others
Total
real
estate
and
936.3
1,255.6
2,310.8
2,541.9
3,676.1
<37%>
<35%>
<50%>
<45%>
<58%>
552.8
1,493.7
1,299.2
2,184.4
1,528.5
<22%>
534.8
<21%>
2,505.8
<42%>
389.7
<11%>
3,545.1
<28%>
393.1
<9%>
4,590.3
<39%>
424.0
<8%>
5,621.6
<24%>
713.8
<11%>
6,287.4
<100%> <100%> <100%> <100%> <100%>
Notes: Figures in < > represent the percentages to total. The percentages in a year may not add up to 100
due to rounding.
Source: Adapted from HKCSD (2008a).
6
2. A Snapshot of R&D in Hong Kong (3/3)

A mismatch between public R&D and private R&D, esp. in
terms of the strategic areas selected by the ITC for the R&D
Centre Programme



R&D expenditure in the business sector mainly on information
technology (42.5%) and electrical & electronic engineering
technology (33.6%)
R&D for Chinese medicine and nanotechnology by the private
sector negligible
The business sector in HK engaged substantially in R&D
outsourcing


Its size more than half the total business R&D
Intra-corporate cross-border network, esp. within the PRD
Economic Zone, as the dominant type of R&D outsourcing
adopted by the HK-based firms or establishments
7
Total Expenditure for in-House R&D activities in
2007 by Technology Area by Industry Sector
(HK$ million)
Technology area
Information technology
Information system
and technology
By
industry
sector
Manufacturing
Wholesale, retail
and import and
export
trades,
restaurants
and
hotels
Financing,
insurance,
real
estate and business
services
Others
Total
Electrical &
Computer
Computer
ComManuelectronics
BioChinese
Nanohardware
software munication Subtotal
facturing
engineering
technology medicine technology
technology technology technology
technology
technology @
Advanced
materials
technology
Others
Total (1)
25.7
47.6
27.0
8.1
108.3
201.0
220.2
4.3
3.8
3.9
49.9
0.1
591.5
<4.3%>
<8.0%>
<4.6%>
<1.4%>
<18.3%>
<34.0%>
<37.2%>
<0.7%>
<0.7%>
<0.7%>
<8.4%>
<#>
<100.0%>
60.0
126.1
189.4
273.2
648.8
1,410.8
448.9
31.6
0.0
45.1
156.3
0.0
2,741.4
<2.2%>
<4.6%>
<6.9%>
<51.5%>
<16.4%>
<1.2%>
<0.0%>
<1.6%>
<5.7%>
<0.0%>
<100.0%>
616.5
189.6
610.2
399.3
32.9
65.5
1.4
14.8
92.9
2.2
2,172.3
<28.4%>
68.5
<12.5%>
770.7
<12.7%>
<8.7%>
25.3
<4.6%>
388.6
<6.4%>
<28.1%>
76.9
<14.0%>
903.5
<14.9%>
<18.4%>
26.1
<4.8%>
2,037.2
<33.6%>
<1.5%>
10.4
<1.9%>
712.5
<11.8%>
<3.0%>
238.5
<43.4%>
339.9
<5.6%>
<0.1%>
0.5
<0.1%>
5.8
<0.1%>
<0.7%>
0.1
<#>
63.9
<1.1%>
<4.3%>
0.9
<0.2%>
299.9
<5.0%>
<0.1%>
21.1
<3.8%>
23.4
<0.4%>
<100.0%>
549.4
<100.0%>
6,054.6
<100.0%>
<10.0%> <23.7%>
146.9
1,563.2
<6.8%> <72.0%>
80.9
251.7
<14.7%> <45.8%>
509.2
2,572.0
<8.4%> <42.5%>
Note: (1) Figure include expenditure for in-house R&D activities conducted by a local party for itself and / or for other organisation.
# Figure less than 0.05%.
@ Electrical and electronics engineering technology associated with (a) computer hardware (such as integrated circuits) was
included in the area of computer hardware technology; (b) communication technology was included in the area of communication
technology.
Source: Adapted from HKCSD(2008b).
8
3. Hong Kong Public R&D Funding (1/2)

Innovation and Technology Support Programme
(ITSP) under the Innovation and Technology Fund
(ITF)



The lion’s share of the research institutes’ funding from
ITSP
The amount approved under ITSP: 83% of the whole ITF
A new three-tier structure in funding proposals under
the ITSP since 2005

Tier 1: R&D centres in six areas






Automotive parts & accessory systems
Logistics & supply chain management enabling technologies
Textile & clothing
Nanotechnology & advanced materials
Information & communications
Chinese medicine
9
3. Hong Kong Public R&D Funding (2/2)

The designated functions for these centres







To conduct industry-oriented research
To facilitate IP commercialisation
To provide technology and market intelligence
To provide a platform for exchange of IT/technology
To promote technology development, transfer and knowledge
dissemination
Some of them like project offices, with limited in-house
R&D capacity and a limited number of staff members
ASTRI established in 2000 to conduct industry-oriented
applied R&D

Photonics technologies, internet
communications and IC design
applications,
wireless
10
4. Innovation Governance of
Hong Kong Public R&D Funding
11
Public R&D Investment and Portfolio (1/3)

Insufficient level of R&D intensity: 0.81%

China’s R&D : 1.42% in 2006 and to reach 2% by 2010



Beijing, Shanghai and Guangdong in 2005: 5.5%, 2.3% and 1.1%
respectively
Taiwan and Singapore: Both setting a goal to raise R&D intensity
to the 3% level around 2010
The resource allocation of public R&D in HK intrinsically
short-termism

R&D initiatives funded by ITC by and large short-term-oriented,
dispersed and reactive type, at most individual programmespecific or technology policy by nature


Short of long-term, integrated type of R&D and innovation
initiatives, or “innovation policy” in a broad sense
ASTRI: Mainly doing development work, not genuinely forwardlooking research

Because of the short time spans of the projects
12
Public R&D Investment and Portfolio (2/3)

Lessons learned in OECD

Budgetary practices often promote short-term thinking and
in some cases undermine strategic, long-term policy making


To reduce fragmentation and create critical mass and
excellence in the public research sector
Finland: Strategic Centre for Science, Technology and
Innovation (SHOKs)


A new way of coordinating dispersed research resources to
meet targets important for Finnish business and society
Companies, universities and research institutes working
together to formulate a jointly-agreed research plan to meet
the application needs for practical application by member
companies within a 5-10-year period
13
Public R&D Investment and Portfolio (3/3)

Recommendation: HK to have a more balanced
R&D portfolio

Public R&D investment in long-term strategic topics


A more flexible governance relationship between the
funding agencies and the research institutes needed
Public R&D expenditure in service innovation,
systemic service innovation in particular

Controversies around the factor of de-linking of R&D
and manufacturing in terms of location


“Enclave” vs. leverage on the mainland
To build strength on strength and serve as a “testbed” for
brand new service innovation


Demanding needs to trigger service innovation
The success of “Octopus Card”

Digital TV services?
14
TECHNOLOGICAL
OPTIONS
(DIMENSION 4)
NEW CLIENT
INTERFACE
(DIMENSION 2)
characteristics of actual
and potential clients
marketing & distribution
capabilities
cap HRM
ab
ilit
ies
NEW SERVICE
CONCEPT
(DIMENSION 1)
nal
tio
isa es
an iliti
org apab
c
characteristics of existing
and competing services
A Four Dimensional Model of Service
Innovation
NEW SERVICE
DELIVERY SYSTEM
(DIMENSION 3)
capabilities, skills & attitude of existing
and competing service workers
© Dialogic
Source: den Hertog (2001, p.4).
 When promoting systemic service innovations, the government needs to adopt a
holistic and flexible approach, which will be different from that to the promotion of
manufacturing-centric R&D or technology-centric initiatives.
15
The Funding Mechanism and Institutional
Arrangements (1/6)

The research institutes in HK deficient in their R&D
portfolio & short of capital for making strategic investment



The funding schemes by ITC: Short term-oriented, dispersed and
reactive type
ASTRI: constrained to pursuing development work and/or metoo projects
Compounded by ITC’s requirement of 10 % of industrial
contribution basically for each project


The business sector in HK: A strong preference for short-term
profitability
DoIT’s funding schemes in Taiwan for research institutes:
Different types of research and/or strategic investment


Ranging from pioneering technology research, the building-up of
infrastructure required, to large-scale R&D facilities
The assessment procedures varying across different types of the
funding schemes
16
The Types of Funding Schemes for Research
Institutes, Administrated by the DoIT in Taiwan
(Unofficial Translation)
1. Pioneering Technology Research Program (獨立性創新前瞻計畫)
2.Key Technology Base Program (關鍵性計畫)
(1)Forward-Looking R&D Program (創新前瞻類)
(2)Key Technology/Product Program (關鍵技術/產品類)
(3)Infrastructure-Building Program (環境建構類)
3.Large-scale R&D Facilities Program (獨立型環境建構計畫)

ITRI, with financial support from the DoIT, can propose and conduct longterm R&D projects, say up to four or five years.


Annual reviews for checking progress still needed
The assessment procedure for the Pioneering Technology Research
Program is conducted by ITRI itself in order to provide appropriate room
and flexibility for the formation of more creative projects.

External and overseas reviewers with international reputation called upon to the
assessment committee.
17
The Funding Mechanism and Institutional
Arrangements (2/6)

10 % of industrial contribution to ensure industryorientation



Our views: Not so unreasonable as it looks


Some local professionals: This requirement troublesome and
rigid
ASTRI: Some flexibility shown by ITC, allowing ASTRI to get
an average of 10% from a number of projects rather than a full
10% for each project
The problem: ITC’s R&D funding schemes for research institutes
not so diversified as the case of the DoIT in Taiwan
Recommendation: ITC to provide a wider variety of R&D
schemes for the research institutes

Some of the schemes still demand industrial sponsorship, while
others allows the research institutes to involve strategic R&D
even without industrial participation right from the beginning.
18
The Funding Mechanism and Institutional
Arrangements (3/6)

Some unease with the regulation that approval from the
Finance Committee of the Legislative Council required for
project requesting more than HK$15 million each from ITF


For such projects to kick off, the research proposals have to
go through five panels.


From October 2008, the financial ceiling is increased from
HK$15 million to HK$21 million
internal review, industrial review, technology review, ITC review
and board of directors, plus the Legislative Council
Recommendation: As funding practices in many countries,
the technology review committee given authority to make
decisions, before reporting to ITC for final approval
19
The Funding Mechanism and Institutional
Arrangements (4/6)

Project management on the part of ITC criticized



DoIT in Taiwan: Tolerate failures in some cases, while
evaluates the performance of the research institutes from a
long-term perspective


Not to tolerate any changes in the projects
Outputs from the R&D projects specified beforehand
Esp. regarding forward-looking and risky programme, as the
Pioneering Technology Research Program
Recommendation:
micromanagement

ITC
to
reduce
administrative
Changes in projects up to certain extent allowed and endorsed
mainly by the review committee rather than all the way by the
ITC, except for major changes
20
The Funding Mechanism and Institutional
Arrangements (5/6)

The R&D centres not truly engaged in R&D activities



Some of them: serving simply as a project office, creating an additional
layer of bureaucracy between ITC and the other innovation actors
The projects funded by the R&D centres not that different from
those funded by some other major schemes by ITC
Recommendation: Upon completion of their project time span, ITC
to conduct an intensive evaluation on the performance of the
individual R&D centres


To review the R&D centers’ business plan, to be formulated by the
centers and their major stakeholders, which should be in line with ITC’s
long-term strategy, if any.
ITC to make a critical decision for the consolidation of the Programme
in the near future

A mismatch between public R&D and private R&D
21
The Funding Mechanism and Institutional
Arrangements (6/6)

Shortage of dedicated professional (technology manager) for the
promotion of technology transfer on the part of the research
institutions and universities


Taiwan: Research institutes have dedicated units for technology
transfer and/or technology management


ASTRI’s R&D personnel to shoulder the work of R&D and the
promotion of technology transfer at the same time
DoIT providing the research institutes with resources required through
the Infrastructure-Building Program.
Recommendation: ITC to step up its efforts in this regard

HK to take advantage of the training and supporting system built by the
Association of University Technology Manager (AUTM) in the US
and/or the Association of University Technology Managers (AURIL) in
the UK to train and recruit the technology managers required
22
5. Conclusions

If HK’s R&D investment keeps move at the same pace or cannot
manage to catch up with its neighboring economies for years to
come, it will be unrealistic for HK to become an “innovation hub” in
the region

If the funding mechanism and institutional arrangements continue to
work based on administrative mindset, HK’s innovation governance
will be undermined.

Recommendation: To solve the above problems from a long-term
perspective, the HK government as a whole to follow the example
set by its neighboring economies to promulgate a HK version of
“Science and Technology Basic Law” that can facilitate the
speeding-up of public R&D investment with “additionality” and the
sound development of innovation governance
23
Thank you for your Attention
Comments More Than Welcome
24
R&D Expenditure by Performing Sector,
2002-2006
Sector
R&D expenditure (HK$ million)
2002
Business
Higher education
Government
Total
2003
2004
2005
2006
2,505.8
3,545.1
4,590.3
5,621.6
6,287.4
<33%>
<41%>
<48%>
<51%>
<53%>
[0.20%]
[0.29%]
[0.36%]
[0.41%]
[0.43%] @
4,800.7
4,796.2
4,707.3
5,085.0
5,410.9
<64%>
<56%>
<50%>
<47%>
<45%>
[0.38%]
[0.39%]
[0.36%]
[0.37%]
[0.37%] @
237.1
207.5
207.6
215.2
248.6
<3%>
<2%>
<2%>
<2%>
<2%>
[0.02%]
[0.02%]
[0.02%]
[0.02%]
[0.02%] @
7,543.6
8,548.8
9,505.2
10,921.8
11,946.9
<100%>
<100%>
<100%>
<100%>
<100%>
[0.59%]
[0.69%]
[0.74%]
[0.79%]
[0.81%] @
Notes: Figures in < > represent the percentages to total. The percentages in a year may not add up to 100 due to rounding.
Figures in square brackets represent the ratios to GDP. The GDP estimates are based on the data on expenditure-based GDP
estimates at current prices released on 27 February 2008.
@ Figures are subject to revision later on.
Source: Adapted from HKCSD (2008a).
25
Innovation and Technology Fund:
Distribution of Approved Projects among Different Industrial
Sectors (as at 30/9/2008)
Innovation and
Technology Support
Programme
Industrial Sector
77
Biotechnology
Electrical
Electronics
No
and
$mn
236.3
225 1,120.3
Programme
University-Industry Small Entrepreneur
General Support
Collaboration
Research Assistance
Programme
Programme
Programme
No
5
$mn
2.8
3
No
37
$mn
62.9
2.8
37
No
23
$mn
22.6
31.6
74
76.1
Total
No
142
$mn
324.4
339 1,230.9
19
44.2
1
1
8
19.6
12
12.5
40
77.3
Information
Technology
139
709
8
9.6
42
49.1
139
144.2
328
912.1
Foundation
Industries
135
667.4
4
3.2
46
27.9
13
12.6
198
711.0
55
223.5
1
0.4
5
3.3
4
3.2
65
230.4
3
37.7
84
92.9
-
-
1
0.9
88
131.5
6
659
20.9
3059.3
10
116
17.0
129.7
175
194.3
10
276
8.3
280.4
26
1226
46.1
3663.7
Environmental
Textiles/Clothing/
Footwear
General
(Cross
Sectors)
Others
Total
Note: There may be a slight discrepancy between the sum of individual items and the total as shown in the tables
owing to rounding.
Source:http://www.itf.gov.hk/eng/statistics/StatTable104View.asp?StatTypeId=104&StatId=517&StatCaption=Distri
bution+of+Approved+Projects+among+Different+Industrial+Sectors.
26
Funding Indicators of the Major Funding Schemes under
the Auspices of the ITC, 2006-2008 (1/2)
ITSPΨ
Applications received and processed
Projects funded and being monitored
TCFS
Applications received and processed
Projects funded and being monitored
R&D centres’ projects φ
Automotive Parts and Accessory Systems R&D Centre
New projects
Projects funded and being monitored
Hong Kong R&D Centre for Information and
Communications Technologies
New projects
Projects funded and being monitored
Hong Kong R&D Centre for Logistics and Supply
Chain Management Enabling Technologies
New projects
Projects funded and being monitored
Nano and Advanced Materials Institute
New projects
Projects funded and being monitored
Hong Kong Research Institute of Textiles and Apparel
New projects
Projects funded and being monitored
2006
(Actual)
2007
(Actual)
2008
(Estimate)
126
117
137
116
137
144
62
58
51
90
60
103
---
9
9
39
48
16
16
35
51
43
93
---
8
8
13
21
---
5
5
48
53
---
13
13
2733
20
Funding Indicators of the Major Funding Schemes under
the Auspices of the ITC, 2006-2008 (2/2)
ASTRI projects@
New projects
Projects funded and being monitored
2006
(Actual)
2007
(Actual)
2008
(Estimate)
8
32
-25
-11
Notes:ΨThe figures do not include applications submitted by or projects undertaken by the five R&D
centres and the ASTRI, which are reported under the indicators “R&D centres’ projects” and
“ASTRI projects”.
φAll projects (including TCFS projects and feasibility studies) undertaken and/or monitored by
R&D centres are included. For the Hong Kong R&D Centre for Information and Communications
Technologies (ICT R&D Centre), the actual figures for 2006 have been updated to include
feasibility studies.
@The figures do not include projects undertaken by the ICT R&D Centre hosted by the ASTRI,
which are now reported under the new indicator “R&D centres’ projects”. Separately, the actual
figures for 2006 have been updated to include feasibility studies undertaken by the ASTRI.
Source: Adapt from ITC, Controlling Officer’s Report (2008).
28