The Innovative Economy

1. The Innovative Economy Presentation by Mrs. Regina Ip, Legislative Councilor at Business and Professionals Federation of HK dinner discussion on 11 May 2009

2. Per capita GDP (nominal) figures Gini Coefficient

3. Classic Economic Growth Formula Yt = At F( Nt , Kt ) Yt = Output in year t At = Index of overallproductivity in year t Nt = labour in year t Kt = capital in year t

4. Technological advances have led to a continual increase in total factor productivity(At) • a continual rise in national income for each unit of input • MIT Professor Robert Solow estimated in 1956 that technological progress has accounted for 80% of the long-term rise in US per capita income

5. A useful metaphor for production in an economy comes from cooking -- “If economic growth could be achieved only by doing more and more of the same kind of cooking, we would eventually run out of raw materials and suffer from unacceptable levels of pollution and nuisance. Human history teaches us, however, that economic growth springs from better recipes, not just from more cooking.” Paul Romer, Senior Fellow , Hoover Institution, Stanford University

6. Investments in R & D leading to basic scientific discoveries are Birth of New Ideas • Indivisible • Inappropriate • Uncertain

7. Many applied ideas have to be developed before any basic scientific discovery yields any commercial value • For this reason, most economists support government funding for basic scientific research

8. Innovation can be in the form of • Product or process engineering • Development of new business model • Creation of new markets • Policy innovation

9. In Hong Kong, we need a new economic model which privileges the importance of ideas, knowledge and innovation as the key drivers of economic growth

10. Current Economic Strategy Infrastructure -The South Island Line

11. Current Economic Strategy Infrastructure -LMC Loop

12. Current Economic Strategy Infrastructure -Hong Kong – Zhuhai – Macao Bridge

13. Current Economic Strategy Tourism -Pearl River Delta One Hour Circle -珠三角一小時生活圈

14. Current Economic Strategy Financial Sector -Under severe stress from global Financial Meltdown

15. Current Economic Strategy Infrastructure Tourism More of the Same Financial Services New-found emphasis on CreativeIndustries reveals the same age-old adherence to a sectoral approach, and failure to grasp the importance of new ideas

16. Creative Industries embrace all those activities/enterprises which rely on innovation, creativity and cultural content to create value. They may or may not involve the use of technology

17. Fashion Design Digital Entertainment Ceramics from Foshan

18. Two ways to create value in the era of digital, globalized economy What is Value? Value = Price - Cost • Use of technology (such as digital tools) • Branding and design, leading to the creation of an identity for a product or set of products Value = Technology + Design

19. New Opportunities for Developing New Industries • Knowledge-intensive, technology-driven enterprises • Creative Industries

20. Thanks to New Land Becoming Available at- • Lok Ma Chau Loop • North East New Territories(Ping Che/Ta Kwu Ling) Source: Planning Department

21. Common Characteristics • Locational advantage – proximity to Shenzhen • Cross-boundary production • Leveraging the competitive advantages of Mainland(especially Shenzhen) and Hong Kong Source: Planning Department

22. Possible of LMC Loop Higher Education

23. Possible of LMC Loop Convention and Exhibition

24. Possible of LMC Loop Technology-based enterprises

25. Thank you!