Hong Kong Towards a Leading Global FinTech Hub

92 93 Part II: Key Observations, Policy Implications and Recommended Actions for Hong Kong The Hong Kong government reserves large amounts of public funding to promote I&T development. As at February 2021, there were 19,832 projects approved under the Innovation and Technology Fund (ITF), with a total value of US$29mn. Applicants under schemes such as Research Talent Hub, Innovation and Technology Support Programme, Patent Application Grant, and Reindustrialisation and Technology Training Programme received most of the ITF. 308 However, nearly all of the lead ITF applicants are from the academic sector and research institutes. 309 Among the 308 approved projects under ITF, only 1.3% were related to fintech and the financial service sector. 310 According to a Legislative Council paper, as of April 2020, the Innovation and Technology Venture Fund (ITVF) has funded only two fintech companies, while the Enterprise Support Scheme (ESS) has funded another six fintech-related projects. 311 The Technology Voucher Programme (TVP) is another funding source under the ITF. It has approved 49 applications from banking, insurance and other financial services, with a total funding of HK$8m. 312 Opportunity 5 Observation: The Hong Kong government reserves large amounts of public funding to promote I&T development. However, businesses in the financial sector such as banks, other financial service providers, and SMEs generally do not benefit from government funding. This implies that government funding is not being allocated to generate financial support to the fintech industry as a whole. Objective: To distribute resources to the stakeholders of each stage of innovation and to set clear performance indicators and conduct internal audits to review and evaluate the effectiveness of the funding program, improving the innovation process in Hong Kong. Recommended action: Improve the effectiveness and impact of public funding on different stages of innovation. 308. Innovation and Technology Fund. | Statistics of Approved Projects (as at 28/02/2021). | https://www.itf.gov.hk/en/ itf-statistics/index-1.html 309. According to the approved ITF projects in 2019, seven universities and other research centers like Hong Kong Institute of Biotechnology Limited, Automotive Platforms and Application Systems R&D Centre, Logistics and Supply Chain MultiTech R&D Centre Limited etc., were the main lead applicants which have received funding from ITF. For details, please visit DATA.GOV.HK . | Approved Projects of Innovation and Technology Fund (2019). | https://data.gov.hk/en-data/dataset/hk-itc-team1-annual-itf-approved-projects-list 310. In 2019, there were four out of 308 approved projects (about 1.3%) related to fintech and financial service development. For details, please visit DATA.GOV.HK . | Approved Projects of Innovation and Technology Fund (2019). | https://data.gov.hk/en-data/dataset/hk-itc-team1-annual-itf-approved-projects-list 311. Legislative Council Panel on Financial Affairs. | Development of Financial Technologies (Jun 2020). | https:// www.legco.gov.hk/yr19-20/english/panels/fa/papers/fa20200601cb1-674-4-e.pdf 312. Ibid. Financial sectors such as banks, other financial service providers, and SMEs are not always the main stakeholders that benefit from government funding. This implies that the government fund is not being allocated to generate financial support that reaches the whole fintech industry, in particular to entrepreneurs performing commercialization of technology products and solutions, i.e. the last stage of innovation. While it is unfair to evaluate the success of the funding programs based only on the size of the approved amount and successful projects, government departments should capitalize the government fund to achieve the policy and fund objectives to the greatest degree. Suggested actions for improving the effectiveness of public funding for innovation are: 1. Disseminate information about the government fund to all stakeholders including academia, entrepreneurs, and general society; 313 2. Increase the distribution of resources to the stakeholders not only from the R&D sector and academia, but also to applicants from the sectors of applied technologies and hard and soft infrastructure; 3. Distribute resources to the stakeholders of each stage of innovation; 314 4. Set clear key performance indicators and internal audits to review and evaluate the effectiveness of the funding program; 5. Assess the commercial value of the fintech products and services developed from government-funded R&D projects. 313. The main actors in the innovation process are academia, entrepreneurs, government and society. Government funding may help private sector to overcome innovation process barriers which are mainly caused by lacking of financial resources to initiate and sustain innovation project. This would help uplift the effectiveness of the innovation process of the country or city. For more information, please visit Stanka Setnikar Cankar and Slovenia Veronika Petkovšek. | Private and Public Sector Innovation and the Importance of Cross-Sector Collaboration (Dec 2013). | https://clutejournals.com/index.php/JABR/article/viewFile/8197/8236 and Jevgenijs Leontjevs and Liena Ādamsone Riga. | Interaction of Main Stakeholders in the Innovation Process (2013). | https://ortus.rtu.lv/science/lv/publications/16719/fulltext 314. Concerning the development of innovation, one of the models have differentiated innovation stages including R&D, demonstration, pre commercial (large scale demonstration), supported commercial (under generic support schemes) and commercial stages. Each stage should be supported by government policy intervention to facilitate the availability of investment and the development of technological inputs. At the same time, the analysis of market needs are also essential for innovation development. For more details, please visit Tim Foxon, Zen Makuch, Macarena Mata and Peter Pearson (2004). Innovation Systems and Policy-Making Processes for the Transition to Sustainability, pp.99-100. | http://userpage.fu-berlin.de/ffu/akumwelt/bc2003/ proceedings/096%20-%20112%20foxon.pdf