Hong Kong Competitiveness: A Multi-Dimensional Approach

26 Sep

Press release

Competitiveness has emerged as a pre-eminent issue in many major economies around the world. The ability of a nation or region to succeed in international markets, to achieve high levels of productivity, to create an attractive business environment, and ultimately to provide a high standard of living to its residents has long been a focus of analysis and policy. Work on competitiveness over the last two decades has shown the importance of a systemic approach that encompasses overall economic conditions, government policies, links between industries, industrial economics, and the effectiveness of firms in understanding the forces that stimulate economic growth and development. 

In order to better understand Hong Kong’s competitiveness, the Bauhinia Foundation has commissioned Enright, Scott & Associates Limited to undertake a four part project. The first part of the project focuses on international views of Hong Kong’s competitiveness. The second focuses on competitiveness within specific Hong Kong industries. The third focuses on Hong Kong’s competitiveness in different types of business activities. The fourth focuses on issues that cut across the economy as a whole, a synthesis of the results of the previous stages, and recommendations that come out of the research. The idea is that a multidimensional approach will provide greater insight into Hong Kong’s competitiveness, and potential strategies and programs to improve this competitiveness, than a one-dimensional approach. 

The present report relates the results of the first part of the project on international views of Hong Kong’s competitiveness. Much of the discussion of Hong Kong’s competitiveness takes place in the absence of detailed data or analysis. There is a tendency to focus on individual pieces of data or single sources of information without attempts to integrate the various pieces of information that exist into a coherent picture. Some pieces of information are reported, used for particular purposes, and then forgotten, while other pieces of information go unreported or ignored. The result is a set of discussions that often devolve into opinion and prejudice rather than reasoned debate.

The goal of the present report is to compile information related to Hong Kong’s competitiveness from a variety of international sources, provide a limited analysis of what this information indicates for Hong Kong, and to provide at least initial indications about what areas appear to require further investigation and consideration in the Hong Kong context. The report aims to show how the rest of the world, or at least how international sources of rankings and ratings related to competitiveness, view Hong Kong, and to explain at least in basic terms how they reach their conclusions and what their views might indicate for the Hong Kong SAR. 

The proliferation of works on competitiveness and comparisons of economies around the world means that some selection is required. For purposes of this report, we have compiled assessments from leading international sources on international competitiveness, business environment and ease of doing business, economic freedom, prices and costs, human development and quality of life, and corruption and corporate governance. Reviews of works on competitiveness indicate a high level of consensus that these areas are critical in determining the ability of a nation or region to foster economic growth and development. While some analysts might include other sources that are not covered in the present report, we believe that the present coverage is appropriate given the focus and the scope of the present project. 

In each area, we have identified leading sources of assessments, briefly introduced their methodologies, summarized major findings with respect to Hong Kong, and provided some conclusions about the implications for Hong Kong and about the sources themselves. We then pull together the outlines of an overall picture of Hong Kong that emerges from an analysis of the results of the various sources. The purpose here is not to provide the complete data from any single source, or to provide information that allows the reader to “reverse engineer” the various indices reported. Instead, the purpose is to compile information from multiple sources, introduce the sources, explain what they say about Hong Kong, provide caveats about interpretation of results drawn from the sources, and indicate what the information indicates about Hong Kong. In addition, the purpose of this document is not to provide suggestions about programs or policies that Hong Kong should follow to improve its competitiveness, but rather to raise issues that come out of the international sources for further investigation in subsequent parts of the overall project. Our recommendations and suggestions will be part of the final project document that takes into account all four phases of the project.

Although all of the international sources that we have investigated do their best to compare economies on an objective basis, the variables that they use and the variables are combined into indices, are matters of choice involving implicit or explicit models of what makes economies work. Different sources apply different levels of rigor in developing these models. In addition, many of the international assessments of competitiveness and related areas have been designed to compare national economies, rather than city economies. Hong Kong is included in these assessments due to the fact that it is an independent customs zone, though in an administrative sense it is a Special Administrative Region of China and not an independent country, and in an economic sense Hong Kong is a city economy rather than a national economy. Hong Kong’s rankings can be affected either positively or negatively depending on how idiosyncratic features of the economy are captured or not captured. Thus care must be exercised in interpreting the assessments of the different sources and how the way in which they put together their indices might influence the rankings of an economy like Hong Kong’s. 

In order to deal with some of these issues, we also have included a number of sources that assess competitiveness, or areas related to competitiveness, for cities. International comparisons of city competitiveness are relatively recent and are likely to become increasingly important (and in Hong Kong’s case relevant) tools for analysis. 

We hope that this report will add to the discussions of Hong Kong’s competitiveness by providing background data on how international organizations and sources view Hong Kong’s competitiveness and what lies behind those views. We believe that a clear understanding of this information is important to raise the discussions of Hong Kong’s competitiveness to a higher level and to provide a firmer basis for subsequent research and analysis.