Kenneth L. Kraemer and Jason Dedrick and Sheryl Jarman [1994, The Information Society, 10(4): 223-246]
The economic success of the small city-state of Hong Kong is touted by free market champions as a triumph of laissez faire economics. The Hong Kong government has created an attractive location for investment and trade, partly through maintenance of a free port status and low tax rates, but also by investing in the creation of an advanced transportation and communications infrastructure. For the most part, Hong Kong does live up to its reputation as a free-wheeling business environment with little government interference or regulation. However, the government has been willing to abandon its hands-off economic policy when presented with major problems which market forces are unable to solve. Facing a serious housing shortage, the government built and manages thousands of rent-subsidized apartments. When Hong Kong's business community faces obstacles to doing business effectively, the government will act to remove those obstacles. Finally, when Hong Kong faces competition from other business centers sucas Singapore, the government will respond to enhance the colony's competitiveness.
Until recently, information technology (IT) policy in Hong Kong could be classified as laissez innover, defined as minimal government intervention to influence the production or use of specific technologies (King & Kraemer, 1978; Kraemer & Dedrick, 1992). While other East Asian Newly Industrializing Economies (NIEs) have promoted IT use and domestic IT production, Hong Kong has allowed market forces to determine supply and demand. The government has not tried to promote or inhibit production or use, and has limited its activities mainly to providing infrastructure, educating computer professionals and attempting to improve the efficiency of its own information systems.
Hong Kong has become a sophisticated user of IT, particularly in the financial and service sectors. Its expenditures on computer hardware and software as a percent of GDP are greater than all its East Asian neighbors except Japan and Singapore. It is also the site of a substantial amount of assembly and re-export of IT products passing to and from China. However, some serious problems have begun to develop, especially on the production side. The local IT industry consists mainly of simple assembly of personal computers and components and the colony's competitiveness is being threatened by labor shortages, wage increases and international competition. Hong Kong's entrepreneurs have responded by moving production to China, leaving Hong Kong as a center for only management and marketing activities for the IT industry. The colony lacks a strong science and technology base and has not been able to attract R&D activities, software development or high value added manufacturing. As a result, Hong Kong is falng behind Singapore, Taiwan and Korea as a center of IT production.
As 1997 approaches, there is a sense of urgency in the business community to upgrade Hong Kong's technology capabilities before unification with China. As China improves its infrastructure and managerial capabilities, Hong Kong's importance will decrease unless it can develop technological capabilities. Although business people are generally the strongest proponents of maintaining a free market environment, they do recognize the colony's weaknesses in technology and advanced manufacturing and feel the government can play a role in addressing those problems. So do at least some government officials.
The government has responded with limited steps to promote the technological upgrading of Hong Kong and to support high-technology industries. These have included creating the Industry and Technology Development Council (ITDC) to advise the government on technology issues and the Hong Kong Productivity Centre to promote the use of advanced technologies. Another step was the creation of Hong Kong University of Science and Technology (HKUST), to train professionals in engineering and other technology skills. However, the government has been preoccupied with political issues, and economic and technology policy have not received as much attention.
Hong Kong is facing the loss of its manufacturing base to China, leaving it with two possible economic futures. One is to act simply as a trading center and source of business services, including finance, management and communications, for South China. A second would be to develop into a technology and R&D center in addition to performing trade and business service functions. Becoming a technology center would provide Hong Kong with a driver of future economic growth and high wage jobs. Also, Hong Kong's role as China's link to the West will likely become less important as China gains experience in doing business with Western capitalists, making it more vital that Hong Kong develop other economic activities. High-technology manufacturing and R&D have the potential to fill that role, but developing such industries will require a concerted effort by government and business. Given the restrictions on government initiatives and political uncertainty before 1997, that is unlikely to take place until the trsition is complete. By then, it might be too late to catch up with Hong Kong's fast-moving competitors.