Transforming Hong Kong into a smart city: The economic opportunity of digital technologies and skills, and Google’s contribution

Hong Kong is a global leader in technology and innovation, and the government plans to continue strengthening this edge. Ranked second out of 64 economies in the IMD World Digital Competitiveness Rankings in 2021, Hong Kong is home to one of the world’s leading technological ecosystems. This can be seen by the strong growth of its Information and Communications Technology (ICT) sector, which grew by 12 percent between 2013 and 2019 in terms of economic value-add. The government has also given strong support in furthering this development, introducing initiatives such as the Smart City Blueprint for Hong Kong 2.0 in 2020, which puts forward over 130 initiatives to develop and promote the use of digital technologies.

However, Hong Kong faces several barriers to digital transformation and the COVID-19 pandemic has amplified the importance of digital transformation in boosting long-term economic resilience. For example, the adoption of digital technologies appears to be limited and uneven – a 2019 government survey found that 33 percent of small firms had a web presence, as opposed to 88 percent of large firms. Underserved segments of the population also have limited access to digital tools, with only 53 percent of persons with disabilities owning a smartphone in 2015 and 68 percent among the elderly in 2020, far below the territory-wide figure of 92 percent as of 2020. Finally, a recent report revealed that Hong Kong could face a shortage of 746,000 workers by 2030 due to skill gaps, out of which 8.4 percent could be in its technology industry. Addressing these barriers has become an imperative in light of the recent pandemic. A study has found that, globally, the pandemic has effectively pushed forward the digital revolution by five years. This provides an opportunity for Hong Kong to ride the next digital wave. Digital transformation will be important to boost its economic recovery efforts and enhance the long-term resilience of its economy in the post-pandemic future.

AlphaBeta has conducted a study (commissioned by Google) to examine the economic significance of digital technologies and skills in Hong Kong. This study finds that, if leveraged fully, digital technologies could create an annual economic value of HKD387 billion (USD50 billion) by 2030. In addition, if it were to accelerate the pace of its digital skilling efforts over the next decade, workers with digital skills can contribute up to a fifth (21 percent) of Hong Kong’s gross domestic product (GDP) in 2030.

Key messages from the research include:

  • There is a significant economic prize attached to accelerating digital transformation in Hong Kong. If fully leveraged by 2030, digital technologies could create an annual economic value of HKD387 billion (USD50 billion) by 2030. To put this in perspective, this is equivalent to two-thirds of the annual economic value-add of the city’s financial services industry today – a significant figure given its status as one of the world’s busiest financial services hubs. In addition, beyond the economic benefits that technologies can bring, it is also important to consider the economic value that digitally skilled people can contribute. While Hong Kong already has a large tech-savvy workforce today, if it were to accelerate the pace of its digital skilling efforts over the next decade, workers with digital skills can contribute up to a fifth (21 percent) of Hong Kong’s gross domestic product (GDP) in 2030. 
  • There are three areas of action required for Hong Kong to fully capture its digital opportunity: (i) digitally upskill the population; (ii) facilitate the adoption of emerging technologies such as AI and cloud, and (iii) nurture the local technology and innovation ecosystem. While Hong Kong is already making significant progress in some of these areas, there is scope for the city to push further on three key policy areas. To ensure that the current digital skill base of workers is constantly upgraded to adapt to new technologies, it is necessary to continually expand the availability of skilling programmes that address these skill needs. Hong Kong could also consider developing more targeted programmes, for its underserved segments, that promote digital skills (e.g., Singapore’s Enable IT Programme which targets persons with disabilities). There is also room to further advance digitalisation efforts as traditional, non-technology sectors lag in digital adoption and businesses continue to face barriers in adopting advanced technologies (e.g., one example is New Zealand’s Industry Transformation Plan). Finally, to grow the local technology ecosystem, there is space to foster greater regional collaboration efforts and leverage the core competitive advantages of the cities within a regional cluster.
  • Through its programmes and products, Google has been instrumental in advancing Hong Kong’s digital transformation through the three key pillars and also supports benefits to businesses, consumers and the broader society. Google has launched digital skilling programmes such as Grow with Google and entrepreneurship programme in Hong Kong; while finding new ways to encourage creativity on YouTube and promote adoption of technologies such as the HO JENG AR (which means “awesome”) campaign – a mobile application to showcase how creative technologies can do good for individuals, businesses, and for the community. Google has been nurturing the local technology and innovation ecosystem by embarking on the Smarter Digital City research project annually since 2017 to provide guidance for policymakers, businesses and other stakeholders in seizing the opportunities in the growing digital economy. Finally, Google’s products support broader economic impact for businesses, consumers and the wider society. Businesses and consumers in the city were estimated to have derived total annual economic benefits from Google’s products worth HKD28.4 billion (USD3.7 billion) and HKD16.6 billion (USD2.1 billion), respectively. By enabling businesses to unlock new revenue streams and expand their businesses through the use of Google Ads, AdSense, and YouTube, Google indirectly supports over 14,000 jobs in Hong Kong.
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