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Technology infrastructure, access to qualified talent and R&D spend are key to Hong Kong’s development as a smart city, finds KPMG survey

Keys to Hong Kong’s development as a smart city

Public and private sector support for innovation and the start-up ecosystem also seen as high priority

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29 April 2020, Hong Kong – Further enhancement of Hong Kong’s technology infrastructure is a critical factor to the city’s development as a smart city by 2030. That’s according to nearly half of the executives polled in a new KPMG survey, titled Future Hong Kong 2030.  

Published by KPMG China in cooperation with CLP, Cyberport, HKBN JOS, Smart City Consortium, Siemens, Weave Co-Living and Wilson Group, the third annual report analyses the internal and external factors shaping Hong Kong’s smart city transformation over the next ten years and looks at how effective governance, smart infrastructure and innovation can be used to address the city’s biggest urban challenges.  YouGov was commissioned to survey 430 executives, the majority of whom are senior management in corporate enterprises, small-and medium sized businesses, start-ups, government, not-for-profit and academia, across a broad range of sectors in Hong Kong.

“There are a number of long term global trends, coupled with several internal factors specific to Hong Kong that will shape the city’s smart transformation in the future,” said Julian Vella, Co-Head, China - Global Infrastructure Advisory, KPMG China. “Understanding and responding to these trends, together with an ongoing focus on technology innovation will be crucial for Hong Kong to achieve its smart city objectives over the next 10 years.”

Presented with eleven options, 47 percent of respondents identified development of technology infrastructure as critical. Forty-one percent say that they believe physical infrastructure will be adequate to keep pace with smart city development, and industry players say the situation could improve with the rollout of 5G technology.

Tapping into regional opportunities has seen organisations actively invest in research and development (R&D), while also leveraging mainland China and ASEAN countries as investment destinations and to meet their talent needs. Seventy five percent of respondents have a plan to increase R&D investment in the coming year, while 53 percent plan to make Hong Kong their priority area, rising to 60 percent among start-ups. They are also capitalising on Hong Kong’s position as a regional business hub, with mainland China and Macau SAR mentioned top targets for R&D investment in the next 12 months for corporates and SMEs, at 53 percent and 40 percent respectively.

Marcos Chow, Partner, Head of Technology Enablement, Hong Kong, KPMG China, said: “Alongside connectivity, R&D investment is a catalyst for GDP growth due to the increased productivity it creates. While the government has set a target to increase spending, a continued long term focus in this area will need to be maintained.”

Looking at their own organisations, 62 percent said that access to a qualified workforce was most critical to the goal of being a smart city in a decade. Talent was seen as being particularly important by corporates with 73 percent of these organisations citing it as their top priority. Respondents consider providing training to ensure their staff have the right skills as being just as important, if not more so, than investing in new technology itself. Three-quarters of survey respondents plan to increase specialised training in digital technologies, broadly in line with the proportion planning to increase investment in technology.  Respondents see mainland China, particularly the nine mainland China cities in the Greater Bay Area (GBA), as well as ASEAN countries as important sources to fill local talent gaps.

“For Hong Kong to realise its smart city goals, we need to pay attention to having a workforce that is fit for the future,” said Alan Yau, Partner, Head of Real Estate, Hong Kong, KPMG China. He suggests corporates and schools should collaborate to identify these skills and help develop them in students, changing the way students are taught so that they become used to leveraging technology, such as IoT, at a much earlier age. “If corporates want to help students grow and become more innovative, and ultimately develop talent with the right skills, they need to get involved a lot more at a junior level.”

According to the survey, the GBA is viewed by Hong Kong’s larger corporates as the preferred destination for outbound direct investment including R&D. Meanwhile, small and medium-sized enterprises, including start-ups, plan to prioritise trade and investment with ASEAN countries. Continued development of Hong Kong’s trade and investment links with these markets will be fundamental, acting as drivers for growth and the creation of future employment opportunities for Hong Kong citizens.

Co-creation and cooperation between the public and private sector also play an important role in smart city development. Sixty-two percent of respondents said that willingness on the part of government departments and agencies to consider partnerships with the private sector is an important factor to enable smart city initiatives to achieve their objectives. They expressed a strong willingness to partner with the government on projects in this area, however, only a minority of organisations surveyed are currently working with the government on smart city initiatives, with most saying there are insufficient opportunities for partnerships.

Sustainability plays an important role in smart city development, and technology can be used to help conserve resources and reduce Hong Kong’s impact on the environment. Organisations recognise this and are focused on improving their own sustainability, with more than a third (36 percent) of respondents investing in technology to reduce their energy usage, carbon footprint or waste levels, rising to 43 percent among corporate respondents. Integrating environmental, social and governance (ESG) into their overall digital transformation strategy is also a top consideration for a similar proportion of respondents (34 percent).

The ability to reduce costs is the key motivation among organisations for implementing ESG practices, followed by a desire to stay competitive with other leading brands, the survey found. Demand from customers is also a key factor driving the adoption of ESG.

The report also analysed the next steps to optimise Hong Kong’s development as a smart city. These include greater connectivity between individual government departments, best practices for effective governance, improving community participation, as well as increased collaboration between the public and private sectors. Corporates should also expand their partnerships with universities, start-ups and other companies, while focusing on sustainability and talent development. Start-ups and SMEs need to make full use of the resources available to them and proactively seek out opportunities to collaborate with both larger businesses and universities.

 

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About KPMG China

KPMG member firms and its affiliates operating in mainland China, Hong Kong and Macau are collectively referred to as “KPMG China”. KPMG China is based in 24 offices across 22 cities with around 12,000 partners and staff in Beijing, Changsha, Chengdu, Chongqing, Foshan, Fuzhou, Guangzhou, Haikou, Hangzhou, Nanjing, Ningbo, Qingdao, Shanghai, Shenyang, Shenzhen, Tianjin, Wuhan, Xiamen, Xi’an, Zhengzhou, Hong Kong SAR and Macau SAR. Working collaboratively across all these offices, KPMG China can deploy experienced professionals efficiently, wherever our client is located.

KPMG is a global network of professional services firms providing Audit, Tax and Advisory services. We operate in 147 countries and territories and have more than 219,000 people working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such. In 1992, KPMG became the first international accounting network to be granted a joint venture licence in mainland China. KPMG was also the first among the Big Four in mainland China to convert from a joint venture to a special general partnership, as of 1 August 2012. Additionally, the Hong Kong firm can trace its origins to 1945. This early commitment to this market, together with an unwavering focus on quality, has been the foundation for accumulated industry experience, and is reflected in KPMG’s appointment for multi-disciplinary services (including audit, tax and advisory) by some of China’s most prestigious companies.

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