10 June 2016
Information Technology Services Industry in Hong Kong
- The information and communication technology (ICT) sector of Hong Kong is among the most advanced in the world. According to the annual global ICT Development Index published by ITU in November 2015, Hong Kong ranked second in Asia after Korea, and ninth in the world.
- A key factor contributing to Hong Kong's advance IT status is the top-notch telecommunications infrastructure of the city. Hong Kong leads the Asian region in terms of international call time and the penetration of telephone lines, mobile phones and fax machines. It also operates Asia's largest commercial satellite-earth station.
- According to a survey conducted by the Vocational Training Council (VTC) in April 2014, 82,973 persons were employed in principal jobs of the IT sector in Hong Kong. 33.2% of them were employed by suppliers of IT products and services, and the remaining 66.8% were employed by IT-user organisations.
- Thanks to their technical competency, flexibility, and international exposures, many Hong Kong IT service providers are able to compete internationally while delivering effective solutions at home.
Range of Services
Hong Kong has a robust ICT infrastructure and is consistently ranked among the best in the world in terms of digital readiness and internet access capabilities. According to the annual global ICT Development Index published by ITU in November 2015, Hong Kong ranked second in Asia and ninth in the world, which together with top-ranking Korea, were the only two Asian economies making into the top 10. According to the World Economic Forum's Networked Readiness Index 2015, Hong Kong ranked fourth in Asia and 14th globally in terms of readiness to participate in and benefit from IT developments. Hong Kong has a large pool of skilled ICT professionals, providing services to clients spanning a wide range of businesses:
Banking and finance
Some of the world's largest and most sophisticated computer applications can be found in Hong Kong's financial sector. The electronic off-platform trading system of the Hong Kong's stock exchange and the inter-bank real time gross settlement (RTGS) system leapfrog many of the similar systems in the world. Technological innovations have brought about not just new types of electronic money, but also new bank-customer relationship through Internet/mobile phone. Online/wireless investment, securities and banking services are gaining increasing popularity.
In line with increased online trading, Hong Kong Exchanges & Clearing Ltd. (HKEx) upgraded its trading system to AMS/3.8 in December 2011. “HKEx Orion” was launched in 2012 to improve the core trading platforms with better price information and faster trade execution. In April 2016, HKEx rolled out its Pre-Trade Risk Management (PTRM) system, helping derivatives market players enhance pre-trade control. The PTRM is expected to strengthen HKEx’s clearing house protection and facilitate new connectivity for additional mutual market access.
Shipping, freight forwarding and logistics
Many shipping and freight forwarding companies have been using electronic data interchange (EDI) and Internet-based networks to transmit information and documents among themselves and with traders. Traders are able to track the flows of their goods online. Advanced applications such as global positioning system (GPS) are used in warehousing, transportation, container management and other supply chain related activities. Radio frequency identification (RFID) is used to facilitate warehouse management and supply chain management. The Hong Kong International Airport is considered one of the biggest champions for this technology in facilitating air cargo transportation.
All import and export shipments involve government documentations. Tradelink provides an electronic platform to facilitate those transactions such as certificates of origin and trade declaration applications. In turn, these documentations could be shared between government departments and different stakeholders along the supply chains. Tradelink also offers a number of value-added transaction management facilities including message checking, matching and validation, message authentication and security, electronic billing and payments, message archiving and audit trail services. Tradelink has built and maintained a customer database of over 54,000 companies.
Founded by major transport operators in Hong Kong, Octopus Cards Limited developed and launched Octopus card in 1997 using RFID technology, making it the world’s second contactless smart cards system in the world. Besides being used in paying transportation fee, this micro transactions and clearing system is also being applied in small retail payments. According to Octopus Cards Limited, there are more than 20 million cards in circulation, about three times the population of Hong Kong.
Wholesale and retailing
Many retail shops have installed bar-coding and point-of-sale (POS) systems for inventory control and sales analysis. Some retail chains have linked up their POS systems with vendors, exchanging purchase orders and invoices. Data mining technology has been applied to analyse the vast amount of information collected by POS to support managerial and marketing decision.
Manufacturers are automating their ordering, production management, sales and distribution systems. Computer-aided design/manufacturing (CAD/CAM) is also widely used in the manufacturing sector. The collaboration with manufacturing engineering in the use of IT has improved the workflow of operation. The efficient flow of information also allows the growth of discrete manufacturing (digital manufacturing) by which manufacturing process is so flexible that customers can participate in the design, engineering, assembly and production of specific products.
Graphics and multimedia
Hong Kong possesses the best design and multimedia capabilities in the region. Computer graphics has a wide application in various Hong Kong industries. Computer generated images are becoming trends in electronic games, advertising, film production and web design.
According to the 2014 Manpower Survey Report conducted by the Vocational Training Council (VTC), 82,973 persons were employed in principal jobs of the IT sector. IT products and services suppliers were the largest category of IT users, accounting for 33.2% of total IT employment, followed by the wholesale, retail, import/export, restaurants and hotels sector (20.0%), the financing, insurance, real estate and business services sector (18.3%), and the community, social and personal services sector (11.7%).
IT services can be broadly divided into software and hardware services:
Hardware service providers
Most hardware service providers are distributors of large international computer companies, and the largest ones combine service provision with software development and consultancy.
Software service providers
Software service producers in Hong Kong can be grouped into the following categories:
- Value-added resellers
- Custom software developers / software houses
- System and network integrators
- Electronic data processing departments
- Information system consultants
- Hardware manufacturers who also design operating systems
i) Software distributors
Local dealers are growing in terms of size, scope of operations and sophistication. Many services that were once performed by computer vendors are now done by dealers. Proprietary software companies also enter overseas markets through local dealers.
ii) Software developer
Many software houses undertake software development projects for Hong Kong companies expanding overseas. They help Hong Kong companies to install the same computer systems which they used in their Hong Kong headquarters in their overseas offices. Hong Kong software firms also export services, such as designing web sites and developing "secure software" for electronic trading, to other Asian countries.
Industry Development and Market Outlook
The development of the IT industry is key to underpinning Hong Kong's position as a world centre of business and has brought innovations to many sectors. Examples include Octopus cards in public transport, the Airport Management System, the Modern Port Management System used in the container ports, the Online and Wireless Banking System in the financial sector, and the Smart ID of the public sector. In return, demand for premier financial and business services has provided a suitable environment to nurture the growth of Hong Kong IT businesses.
In terms of infrastructure, Hong Kong has provided the industry with the Cyberport, a hi-tech multimedia hub costing HK$13 billion, under the joint efforts of the public and private sectors. It provides support to the IT industry in different aspects, such as training, organising business matching events, offering financial assistance to nurture ICT companies and entrepreneurs. As of March 2015, companies in Cyberport had raised more than HK$300 million. For 2015, Cyberport helped 295 tech companies via its incubation programme.
Financially, the establishment of the Growth Enterprise Market (GEM) in 1999 has provided a fund-raising venue for Hong Kong IT-related companies. As of April 2016, GEM's total market capitalisation had reached over HK$ 267billion, with 231 companies listed. As the GEM also functions as an exit platform for venture capitalists, it continues to facilitate venture capital firms to consider financing local software startups.
The Hong Kong government's Innovation and Technology Fund (ITF) has provided an alternative source of funding for the IT industry. As of end-March 2016, the ITF had approved 5,088 funding applications on projects with a total of HK$ 11 billion.
In 2015, Hong Kong topped the Asia Pacific Information and Communications Technology Awards (APICTA) with one Winner Award and nine Merit Awards. APICTA is an international awards programme which is aimed to stimulate ICT innovation, offer opportunities for business matching between IT innovators and investors, and facilitate technology transfer and application. Participants included 14 economies in the Asia Pacific region like Australia and Singapore.
In the future, Hong Kong businesses should continue to leverage this receptiveness by using Hong Kong as a platform for commercialising and exporting technologies to the world. Some of the successful cases include:
- A subsidiary of Octopus Holdings Limited, the Octopus Knowledge Limited, has been providing consulting services in overseas countries, such as the Netherlands, the UAE and New Zealand, based on its know-how on the operation of smartcard system.
- Senior Citizen Home Safety Association, which is a Hong Kong social enterprise, has been providing consulting services to Shanghai, Guangzhou, Shenzhen and Macau based on its know-how on the 24-hour Personal Emergency Link Service for elderly and people in need.
The Mainland-Hong Kong Closer Economic Partnership (CEPA)
Under Supplement to CEPA, Hong Kong service suppliers (HKSS) in the sector of information technology are allowed to apply for computer information system integration qualification certification in accordance with the provisions of relevant Chinese laws, regulations and rules. Under Supplement III to CEPA, application for qualification of computer information system integration is assessed with the following criteria:
- there will be no assessment on the requirement in respect of professional job title, but related academic qualifications and working experience should be assessed;
- business turnover in system integration includes projects undertaken on the mainland and in Hong Kong; and
- in respect of enterprises applying for Level 3 Certification, the number of persons involved in software development and system integration should not be less than 40, of which the number of persons holding academic qualification at undergraduate or higher university degree should not be less than 80%. Under the Supplement to CEPA, Hong Kong residents are allowed to take the qualification examination on computing technology and software. Hong Kong IT professionals can render services related to systems integration after they have passed the examination.
With the approval of China’s Ministry of Human Resources and Social Security and Ministry of Industry and Information Technology, an examination centre for the National Computer and Software Technology Qualifications Examination has been set up in Hong Kong. The non-profit Beijing-Hong Kong Academic Exchange Centre is a centre for enrolment of mainland professional qualification examinations, and at the same time, it provides examination consultation services to examinees.
Hong Kong IT professionals who have obtained the required qualification can participate in large-scale IT projects, which usually require system integration services at the senior level of project management. Besides, HKSS with the Computer Information System Integration Qualification Certification are allowed to plan, design and develop computer application system for Chinese mainland companies. In short, Hong Kong IT companies and professionals are expected to benefit from the CEPA arrangements with enhanced access to the mainland market.
After ten annual Supplements to keep widening and broadening the liberalisation measures in favour of HKSS, Hong Kong and the mainland entered into a subsidiary agreement under CEPA in 2014 to achieve basic liberalisation of trade in service trade in Guangdong (“Guangdong Agreement”). This was then followed in December 2015 by the Agreement on Trade in Services (“ATIS”) to extend the coverage of the 2014 agreement from Guangdong to the rest of the mainland. Unlike the Supplements which adopted a positive-list approach to introducing liberalisation measures, the two latest CEPA agreements adopt a hybrid approach to granting preferential access to Hong Kong using both positive and negative lists.
The ATIS, which covers and consolidates commitments relating to liberalisation of trade in services provided in CEPA and its Supplements and also the Guangdong Agreement, will be implemented from June 2016. National treatment is given to HKSS in the sector of computer and related services, such as consultancy services related to the installation of computer hardware, software implementation and data processing services. Details of the preferential access concerning the IT services can be found at this website.
As of end-April 2016, 21 Hong Kong services suppliers (HKSS) of computer and IT related services were granted HKSS certificates under CEPA.
 Except network operation services and value-added network services.