16 October 2019
Hong Kong manufacturers want to step up their R&D spending, but are concerned about the availability of suitable manpower, according to a FHKI survey. Photo: HKEJ
Hong Kong manufacturers want to step up their R&D spending, but are concerned about the availability of suitable manpower, according to a FHKI survey. Photo: HKEJ

Four in five HK manufacturers plan to boost R&D spending: survey

A survey has shown that around 80 percent of Hong Kong manufacturing enterprises plan to increase their research and development (R&D) expenditure over the next three years, with the average targeted hike in such spending at 18 percent.

However, the firms expressed concern over availability of R&D personnel, with more than 30 percent of the respondents saying they were short of researchers, according to the survey conducted by the Federation of Hong Kong Industries (FHKI).

The FHKI conducted the survey among its members in September and October, aiming to gather insights on manufacturing industry’s R&D spending, research activities and related needs.

The survey, which saw a total of 82 valid responses, revealed that more than 60 percent of Hong Kong manufacturers increased their R&D expenditure by an average of 20 percent year on year. 

About 30 percent maintained their previous spending levels.None of the responding enterprises suggested that there were cutbacks in their R&D spending.

In the past year, around 70 percent of the enterprises invested more than HK$1 million for R&D purposes and the median was HK$3.1 million. Some of the respondents invested heavily in such activities, with three firms devoting more than HK$100 million for R&D activities, according to FHKI.

Hong Kong’s Chief Executive Carrie Lam Cheng Yuet-ngor, in her first policy speech in October, pledged to boost spending on R&D, targeting to raise such expenditure to 1.5 percent of GDP in five years from the current 0.7 percent level. 

“While the survey was conducted before the announcement of Policy Address in October, we expect to see a greater catalytic effect on R&D investment when related initiatives are implemented, including the triple tax deduction for R&D expenses and profits tax cut,” said Jimmy Kwok, FHKI chairman.

“We urge the government to work out the practical arrangement expeditiously so that the companies can make full use of the measures.”

Regarding personnel, the number of R&D staff employed by Hong Kong manufacturers makes up about 5 percent of their total employees on average. Thirty-four percent of the responding enterprises operate a research team of ten or below, while 32 percent boast a team of 50 or above.

However, the findings also indicate that more than 30 percent of the responding enterprises are short of researchers, which represents an average shortfall of seven researchers per company, accounting for 28 percent of the total R&D personnel needed.

Among the R&D personnel, 83 percent were employed in Mainland China, approximately 12 percent in other overseas locations and five percent in Hong Kong. About 40 percent of the enterprises perform in-house R&D activities in both Hong Kong and Mainland China, whereas 32 percent do so solely in the mainland.

The responding enterprises were mainly focused on product development, followed by process innovations, key production support and new material applications.

Approximately 90 percent of the firms outlined the need to introduce Internet of Things (IoT) and automation technologies in production processes.

The survey also revealed that more than 90 percent of the responding enterprises finance their R&D projects themselves.

The manufacturers hope to see government assistance for R&D activities, including the provision of tax concessions (91 percent), financial subsidies (79 percent), a reduction of R&D capital expenditure interest (56 percent) and exemption of patent and copyright income tax (49 percent).

This article appeared in the Hong Kong Economic Journal on Dec 6

Translation by Ben Ng

[Chinese version 中文版]

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