ECONOMIC SPOTLIGHT - HONG KONG'S MORE ACTIVE ROLE
Hong Kong's government has long kept
intervention in the economy to a minimum in the belief that
when it comes to business, businessmen generally know best.
    But the government is slowly being forced to take a more
active economic role, partly to face the challenge from fast
growing economies like South Korea and Taiwan and economic
powerhouse Japan, businessmen said.
    The government announced this month it will spend six mln
H.K. Dlrs over the next two years to encourage electronics
firms to send engineers for training overseas.
    The engineers will learn design of application specific
integrated circuits (ASIC) used in products ranging from
personal computers to high-technology toys that talk.
    The government has funded vocational training before but
this will be its first such program aimed at bringing back
advanced technology from overseas.
    Government officials told Reuters that other areas in the
electronics sector are being considered for similar treatment.
    Hong Kong's key electronics industry last year accounted
for exports of 61 billion H.K. Dlrs, though the total includes
sales of electrical machinery and other items.
    Officials said that this key sector, second only to
textiles in terms of exports, needs high technologies already
available in neighbouring economies if it is to compete.
    "Belatedly, we realize there are some technologies which
can't be taught here," said K.Y. Yeung, Director of Industry.
    A study by U.S. Research firm Dataquest Inc last year
showed that Hong Kong's share of U.S. Consumer electronic
imports had fallen to 3.5 pct in 1985 from 6.4 pct in 1983.
    South Korea, Taiwan and Japan all take a more active role
in guiding economic development and policy makers are worried
that perhaps some assistance -- albeit limited -- is needed.
    "This is perceived to be an area of development for Hong
Kong," said Lawrence Mills, director-general of the Federation
of Hong Kong Industries. "Many industrialists think government
should be more actively concerned with this area."
    Hong Kong likes to call its policy "positive
non-intervention," meaning that it helps industry mainly by
maintaining economic stability and ensuring that needed roads
and harbour facilities are in place.
    It offers no special tax incentives for foreign investors,
believing that its low corporate profits tax of 18 pct and
personal income tax of 16.5 pct are sufficient.
    But the government has been forced to gradually take a more
active role in the economy. In the last three years it has
stepped in to aid seven problem banks, taking over three of
them, to protect depositors whose funds were not insured.
    It has also expanded the powers of its banking and
securities commissions to police these key economic sectors.
    Industry officials said manufacturers need help acquiring
expensive new technology, especially when returns on investment
are years away. "This is only a small start but it will help
make this technology more readily available," said an engineer
with a major U.S. Electronics firm in Hong Kong.
    Texas Instruments Inc <TXN> and Motorola Inc <MOT> of the
U.S. And Japan's Toshiba Corp <TSBA.T> already conduct ASIC
design work in Hong Kong, while a handful of firms have
committed funds for capital-intensive production.
    Under the industry department program, companies would be
funded to train engineers overseas but those employees would be
required to apply their new skills locally for an as yet
unspecified period.
    "We want to promote ASIC design and eventually production in
Hong Kong," said Yeung of the Industry Department.
    Some industrialists said it will take more than a training
program to keep electronics manufacturers competitive in the
years ahead. Government officials said most manufacturers in
the industry are small scale, employing fewer than 100 people.
    These firms will not be able to afford expensive technology
development programs, industry officials said.
    The program has raised concerns that government may one day
veer too far from its policy of minimal intervention. "They've
reached the right decision," said Mills of the Federation of
Industries. "But the fear (among some firms) is it might be a
slippery slope towards interference."
 REUTER
