The Policy Address recently published has put forward measures in eight major areas to boost innovation and technology development in Hong Kong. Such measures include an increase in resources for research and development (R&D), the development of the Lok Ma Chau Loop into the Hong Kong-Shenzhen Innovation and Technology Park, and the development of an international innovation and technology hub in the Guangdong-Hong Kong-Macao Bay Area through the development of the Bay Area and collaboration between Hong Kong and Shenzhen. Furthermore, the Government will establish a high-level inter-departmental Steering Committee on Innovation and Technology, which will be personally led by the Chief Executive, to examine and steer the implementation of such measures. In this connection, will the Government inform this Council:
(1) as the Government will increase R&D resources, and has set a target of doubling the percentage of Gross Domestic Expenditure on R&D to the Gross Domestic Product (GDP) from 0.73 per cent to 1.5 per cent within five years, whether the Government has set specific short-term and medium-term target percentages, as well as a timetable for the implementation and review of the various measures; whether it has considered setting a longer-term target, e.g. to increase such percentage to 2.5 per cent within the coming decade; if so, of the details; if not, the reasons for that;
(2) regarding the implementation of the measures to develop the Hong Kong-Shenzhen Innovation and Technology Park as well as to develop an international innovation and technology hub in the Bay Area, whether the Government has drawn up specific work plans and timetables (including plans on how to enhance the collaboration on innovation and technology between Hong Kong and the Mainland places in the Bay Area), so that the industrial and commercial sectors as well as the innovation and technology sectors of Hong Kong may fully grasp the opportunities to be brought by the development of the Bay Area; if so, of the details; if not, the reasons for that; and
(3) in respect of the Steering Committee on Innovation and Technology as well as the related advisory bodies to be established, whether their memberships will include world-class technology experts and entrepreneurs, and whether their terms of reference will include listening to and responding to the aspirations of the members of Hong Kong's innovation and technology sector, mapping out a longer-term and more comprehensive strategy on innovation and technology development, and formulating key performance indicators for the relevant work; if so, of the details; if not, the reasons for that?
In the Policy Address delivered last month, the Chief Executive announced that the Government would step up its efforts to develop innovation and technology (I&T) in eight major areas, including: (a) increasing resources for research and development; (b) pooling together technology talent; (c) providing investment funding; (d) providing technological research infrastructure; (e) reviewing existing legislations and regulations; (f) opening up government data; (g) Government leading changes to procurement arrangements; and (h) strengthening popular science education. The Government firmly believes that I&T can become the new economic growth point of Hong Kong. We will implement various new initiatives and strengthen the on-going initiatives, in order to diversify our economy and enhance Hong Kong's competitiveness.
Having consulted the relevant policy bureaux, our reply to the three parts of the question is as follows:
(1) The Government is committed to increasing resources for R&D. At present, R&D expenditure in Hong Kong accounts for about 0.73 per cent of the Gross Domestic Product, with public investment dominating at about 55 per cent, which is different from the situation in other advanced areas. Our goal is to increase the total R&D expenditure by local public and private sectors to about $45 billion, representing 1.5 per cent of the GDP by 2022. At the same time, we hope to progressively reverse the ratio of public sector versus private sector expenditure on R&D from government-led to public-private participation with investment from the private sector dominating, i.e. at a ratio of about 45 per cent to 55 per cent, which will make R&D funding more sustainable. To achieve this goal, we will gradually increase public R&D investment, at the same time encouraging private enterprises to conduct more R&D activities.
On public R&D investment, the various schemes under the Innovation and Technology Fund (ITF) finance projects that can contribute to I&T upgrading and development of industries in Hong Kong, encourage private enterprises to invest in R&D and applied technology, and commercialise outstanding local R&D achievements. The ITF has doubled its financial support for I&T from $730 million in 2013-14 to over $1.5 billion in this financial year. We will arrange injection to the ITF as appropriate with a view to supporting more R&D activities. On the other hand, the grants from the University Grants Committee (UGC) constitute the majority of research expenditure for universities. In 2015/16, the reported aggregate expenditure on research of the UGC-funded universities amounted to $9.55 billion, representing an increase of more than 10 per cent as compared with the previous year. To further promote R&D activities in universities, the Chief Executive announced in the Policy Address that no less than $10 billion has been set aside for university research.
As regards private sector, to encourage private enterprises to conduct more R&D projects, it was announced in the Policy Address that enhanced tax deduction for local R&D expenditure will be introduced. The first $2 million of qualified R&D expenditure will be eligible for a 300 per cent tax deduction, and a 200 per cent tax deduction will be provided for the remaining balance. We have already started the relevant law drafting work. Should the proposal be supported by the Legislative Council (LegCo), the initiative is expected to be implemented in Q3 2018.
We will strive to achieve the five-year goal set. In fact, if the share of R&D in the private sector can grow steadily, our target to increase the percentage of R&D expenditure to the GDP to 1.5 per cent, if not higher, is not out of reach.
(2) We attach great importance to I&T co-operation between the Mainland and Hong Kong. Combining Mainland's rich resources and production capability, as well as Hong Kong's strengths and experience in internationalisation and applied research, the competitiveness of the industries in both places can be enhanced, thereby achieving win-win.
The Hong Kong-Shenzhen Innovation and Technology Park (the Park) in the Lok Ma Chau Loop will be the largest-ever I&T platform in Hong Kong, while the development plan for a city cluster in the Guangdong-Hong Kong-Macao Bay Area is an important national development strategy, both of which will bring significant opportunities for Hong Kong's economic development.
We are working on the development of the Park at full steam. The Hong Kong Science and Technology Parks Corporation established a wholly-owned subsidiary company named Hong Kong-Shenzhen Innovation and Technology Park Limited, which is vested with the responsibilities to build, operate, maintain and manage the Park, on October 6 this year. In addition, the Planning Department is consolidating the representations and comments made by the public and relevant organisations on the draft Lok Ma Chau Loop Outline Zoning Plan and will submit them to the Town Planning Board for consideration on 17th this month. Statutory procedures of the road work for the Advance Works have been completed, and preparation work for the Main Works Package 1 is underway. Upon completion of the detailed design of the Advance Works, we will seek funding from the LegCo for the construction of the Advance Works and the detailed design of the Main Works Package 1 in the first half of 2018. Should the project funding be approved by the LegCo, the Advance Works could be commenced thereafter. We will strive to provide the first developable land to Hong Kong and Shenzhen Innovation and Technology Park Limited by 2021 to commence building works.
The Innovation and Technology Bureau is actively participating in the study work on developing an international innovation and technology hub in the Bay Area under the development plan for a city cluster in the Guangdong-Hong Kong-Macao Bay Area. We wish to connect the upstream, midstream and downstream sectors of I&T industries through the development of the Guangdong-Hong Kong-Macao Bay Area and collaboration between Hong Kong and Shenzhen, thereby developing an international innovation and technology hub in the Bay Area. We will continue to maintain close communication with relevant government departments in the Mainland and actively co-operate with the Mainland in the planning work to further promote I&T co-operation with the Mainland.
(3) The development of I&T involves different areas, requiring co-operation and co-ordination across bureaux. The Chief Executive announced in the Policy Address to set up and personally lead the Steering Committee on Innovation and Technology to examine and steer measures under the eight areas of I&T development as well as smart city projects. The Steering Committee is a high-level, inter-departmental Government internal committee with membership comprising the majority of the Government Secretaries as well as the relevant department heads to steer, co-ordinate and take forward I&T development in Hong Kong in a more expeditious and efficient manner. We have devised the terms of reference of the Steering Committee and will convene the first meeting as soon as possible.
The Government will, through other existing advisory bodies including the Committee on Innovation, Technology and Re-industrialisation chaired by the Financial Secretary, continue to listen to views from different sectors in society including technology experts and entrepreneurs on taking forward I&T development and re-industrialisation.