The global manufacturing landscape has undergone a paradigm shift in recent years. Even the US industrial sector, which has set up OEMs overseas since the 1980s, is returning home gradually. Meanwhile, production costs in the Mainland are ballooning, wage disparity between the Mainland and neighbouring regions is narrowing, and product similarity implies fierce competition. These, coupled with the escalating environmental restrictions on industrial production in the Mainland, are eroding the low-wage and low-cost advantages of the “Made in China” manufacturing. The “world factory” dividend is fading.
Hong Kong’s manufacturers who have set up factories in the Mainland to tap into the opportunities have already felt the pressing need to find an alternative. Many of them have relocated their production lines to inner regions in the Mainland, or even Southeast Asia, the Middle East and Africa. In recent years, many friends in the industrial sector are weighting the pro and cons of relocating back to Hong Kong.
Given the current competitive edges of Hong Kong and the supportive measures provided by the Government, I would like to put forth a vision: is it really enormously advantageous for manufacturing operations returning to Hong Kong? Is such a swerve fit the reality?
Let’s take a look back at how Hong Kong’s the economic development has flourished and shaped. In the 1980s, Hong Kong’s manufacturing industry excelled among the Four Asian Dragons. Since the mid-1990s, however, the city has gradually transformed into a service-oriented economy. Data of the Federation of Hong Kong Industries indicated that during the period from 1979 to 1996, 60% of the foreign direct investment in the Mainland came from Hong Kong, and the number of Hong Kong-invested manufacturing enterprises in the PRD region peaked at more than 400,000. Nowadays, there are only about 70,000 Hong Kong-invested enterprises in the region.
Traditional Industries Already Transformed
Traditional landscape in Hong Kong industries has changed. With the old generation of industrialists retiring, many middle-level managers have switched to other trades, while many lower-tier workers have joined the retail and catering sectors. Hong Kong has shifted from the low-end, labour-intensive and export-processing production modes. The labour-intensive era has already gone.
Not only the façade but also the content of Hong Kong’s traditional industries has gone through a big revamp. Currently, in some traditional industries such as textiles and garments, timepieces, toys and electronics, Hong Kong still prevails and is ranked the best manufacturers as a result of most of them having relocated their production lines for lower production costs. On the other hand, local industrialists and manufacturers strive for excellence on product quality control, R&D and design, capital raising, marketing strategy and new market exploration at their Hong Kong headquarters, which forms an important part of the Hong Kong economy.
Undeniably, global economic integration is irreversible. From a business perspective, “Made in Hong Kong” products are bound to face up challenges of the new era. Our industrialists and enterprises should keep abreast with times in order to strengthen and boost the competitiveness of Hong Kong industries.
From my point of view, the “return-to-Hong-Kong” strategy does not work and cannot be a cure to all industries.
Exploring Industrial Land
Land and labour constraints are always two major factors impeding the industrial sector’s return to Hong Kong, as it has to scramble for land and labour against other sectors. It is by no means easy for local manufacturers to return and find land to set up factories in Hong Kong.
A number of industrial areas or industrial buildings have been converted for other uses, while some have even been vacated for years. Many industrial buildings have become product showrooms, design houses, business offices, or even been converted for other non-industrial uses like wine cellars, mini warehouses, band rehearsal and, recording studios, youth training centres and illegal subdivided industrial building units.
It is incumbent upon the Government to remove the constraints on land and labour. To spur industrial development, the Government should devise clear, long-term industrial policies and supportive measures to encourage promote upgrading and restructuring of traditional industries. More lands should also be explored for industrial purpose.
With the three existing industrial estates in Hong Kong., it is time for the Government to expedite the study on the construction of the fourth industrial estate. Meanwhile, it should make good use of the closed border area and develop land on Lantau Island reasonably. By these initiatives, the transport and logistics centre of Hong Kong can connect with the manufacturing bases in the PRD region, thus building a more effective industrial hub.
Addressing Manpower Shortage in Many Sectors
As indicated by the Government’s consultation document on population policy and a number of studies by civil organisations, Hong Kong is facing an acute shortage of labour. Manpower shortage is not confined to certain sectors but prevalent in construction, healthcare, retail and catering, which are sectors suffering most.
Furthermore, the Government should adopt a multi-pronged approach to make more manpower available. More practical vocational training courses should be designed to attract more young people to join these trades. To cater emerging high value-added industries’ need for R&D and production sites, the Administration should bring together and attract more overseas high-end enterprises and experts to Hong Kong.
Pursuing High-end Development
To win in competition, it is of paramount importance for the local industrial sector to know well of their own strength and to seek high-end development by leveraging on Hong Kong edges in intellectual property right protection, production quality, safety certification and brand development. Industry players should equip themselves with more innovative and technological power by pursuing automation and stepping up efforts in R&D, design innovation, quality control, safety assurance, product featuring, and particularly brand building and enhancement. These efforts, coupled with a good use of Hong Kong’s established advantages in international business network and marketing and sales, can promote business upgrading and transformation, which in turn adds value to industrial products. With higher value, these products will be well-received in Chinese markets and give Mainland consumers quality assurance. Furthermore, they will have better potentials to go beyond Hong Kong and the Mainland and reach out to overseas markets.
Apart from effective assistance on the fronts of land and labour, the industrial sector has been urging for years that the Government should offer tremendous hardware and software support, such as tax incentives and infrastructural support. I think the Government should discuss with the trade how to reinvigorate the local industry and attract more high value-added and hi-tech enterprises to Hong Kong. Only by promoting the development in industrial innovative technology can Hong Kong overcome excessive uniformity of economic structure and move onto a high-end, diversified development path.
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