Can Hong Kong build a ‘Silicon Harbour’? Nah, probably not

hong kong skylineI might be back in London now but I’m still keeping one eye on the East. My latest for IDG Connect is a piece on whether Hong Kong can really lay claim to the title “Silicon Harbour”, given its dubious track record of under-investment and the increasing strength of rival Asian cities including Tokyo, Shenzhen, Shanghai and Singapore.

Well, as always, the jury’s still out. There are a lot of good things going on in Hong Kong, as this upbeat infographic shows. It’s politically stable, safe from most natural disaster and you can use the internet freely (unlike in mainland China). It’s also well connected internet-wise and relatively cheap, as Frost & Sullivan analyst Danni Xu told me: “enterprises in Hong Kong using 100 Mbps Ethernet Point-to-Point (P2P) per month are paying only one third the price of a similar set up in Singapore”.

“However, despite these advantages/benefits, Singapore remains popular in certain cases over Hong Kong when it comes to selecting a destination to set up a data centre,” she added. “Google was a prime example of this when its plan to establish a data centre in Hong Kong did not materialise. The cost and difficulty of acquiring suitable land were cited as the key reasons for this.”

It also seems like HK’s key strengths, its value as a financial centre and proximity to China, are also its biggest drawbacks.  This means Singapore and other cities are usually preferred as regional hubs while HK is the choice as a base for firms looking to expand into China. It also means investors can be reluctant to plough their money into untried or tested tech start-ups as the culture is mainly about finance and property.

Forrester analyst Clement Teo had this:

“There are some structural factors may constrain ICT development in HK e.g. its relatively small domestic market and shrinking manufacturing and industrial sector do not provide sufficient incentives to spur technological developments. Moreover, HK needs to divvy up scarce resources – like land, office space and investment funding and talent – among established economic pillars such as financial services, real estates and retail.”

The HK government this year released an ambitious Digital 21 Strategy – the latest in a long line of such policy documents from the SAR – and certainly talks a good game. But I’m still hugely sceptical whether the political will is there to help smaller tech firms – the start-ups and similar which could genuinely turn the city state into a ‘Silicon Harbour’.

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China ready to lift the Great Firewall. Maybe. In part of Shanghai

chinese flagReports emerged from China today that at first sight seem almost unbelievable: the Communist Party about to lift the Great Firewall and unblock access to Facebook, Twitter and a host of other banned sites.

Then the small print. If the anonymous government sources are speaking the truth, it will be only be relevant to Shanghai Free Trade Zone, a 28 sq km pilot project designed to encourage greater foreign investment in China and open its economy up to the international markets.

“In order to welcome foreign companies to invest and to let foreigners live and work happily in the free-trade zone, we must think about how we can make them feel like at home,” one government source told the South China Morning Post.

“If they can’t get onto Facebook or read The New York Times, they may naturally wonder how special the free-trade zone is compared with the rest of China.”

Now while that seems fair enough, the Communist Party isn’t known for its love of unfettered access to the internet – after all the free flow of information online is precisely the sort of thing which it knows will lead to its demise.

So what’s this all about? Well, a few things sprung to mind:

  • China is in the middle of one of the worst crack downs on online freedom anyone can remember, so don’t expect this localised liberalisation to spread anywhere else in the Middle Kingdom. The party is very much still for the suppression of any discussion it deems “harmful”.
  • Even if the Great Firewall is lifted in the Shanghai zone, doing so from a technical standpoint will take time, according to Forrester analyst Bryan Wang.

“The network within the free trade zone will exist something like an intranet, which is connected to the international backbone without going through the Great Wall firewall,” he told me. “Current infrastructure will not be enough to support the future development. China Telecom or Unicom will need to lay out new fibre in the free trade zone.”

  • The Party giveth and it taketh away. Nothing is confirmed yet, and until state-run media reprint the story, we can probably take it as just a rumour, possibly one designed to increase international publicity for the zone, which is a pet project of new premier Li Keqiang.

    The whole free trade zone itself is only a pilot, so we can expect Beijing to bring the Great Firewall crashing back down on the region if its censorship-free internet policy backfires.

On a side note, how will Hong Kong react to the free trade zone?

If the Shanghai pilot is successful, more of them could spring up across China, effectively stealing its thunder as the only truly outward facing, economically liberalised, online censorship-free region in the Middle Kingdom.

Although a free and unfettered internet may soon no longer be a differentiator for Honkers, however, it’s likely that its superior IP protection regime, rule of law and business friendly visa system will still tip the balance in its favour for most MNCs.