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Opinion | Let healthcare industry be the engine that drives Hong Kong's recovery

By Dr. Kevin Lau Chung-hang

Healthcare stocks have become the darling of a large number of investors and it is not hard at all to see why. As people are expected to live longer nowadays, they are becoming more and more aware of the importance of health. It is normal and understandable that the general public, alongside governments, enterprises, capital markets and stock investors, are paying more and more attention to the healthcare industry.

If you claim that healthcare is a thriving industry with a promising future as well as being a good target of investment in the long term, few would be willing to start a debate to argue against you. As a matter of fact, the COVID-19 pandemic has only served to further enhance people's awareness of the matter. As far as Hong Kong is concerned, the expenditure on healthcare grew at an annual rate of 5.6% from 1990 to 2020. In 2020, healthcare-related expenditures accounted for 7.1% of China's GDP, while the global biotech industry raised as much as US$70.9 billion in the same year. There has always been a growing demand for medical services and products and that explains how huge the market potential of the healthcare industry can be.

Fortunately enough, Hong Kong is by no means lagging behind in this sector. In contrast, we do possess a strong foundation in this particular industry. Hong Kong can proudly claim to be the largest biotech IPO center in Asia and the second largest in the world. Furthermore, the city is a clinical trial base that has been recognized by the State Food and Drug Administration as well as home to 16 InnoHK joint R&D centers and 10 key national laboratories and engineering technology research centers that are in the field of life and healthcare.

Meanwhile, the HKSAR government takes this industry seriously. The government will set aside $10 billion to provide the city with more complete supporting facilities in the long run and those include hardware, scientific research personnel, clinical trials and data applications, to name just a few. The government has also been planning to set up an "InnoLife Healthtech Hub" in the Hong KongShenzhen Innovation and Technology Park. The government has assigned itself the task to pool together top-notch research teams from all over the world who will focus their efforts on R&D work as well as global research collaboration in the field of life and health sciences. Even the Hospital Authority will assist institutions in exploring how to make better use of their hospitals for conducting research and clinical trials for R&D purposes. It is obvious that the government's aim is to develop Hong Kong into a major R&D hub in life and health disciplines and few people would raise objections to it because many actually see the healthcare industry as a key engine in driving Hong Kong's economic recovery in the post-COVID-19 era.

The Hong Kong Productivity Council and Hong Kong Bio-Med Innotech Association have recently conducted a study on 273 Hong Kong and 57 Greater Bay Area companies in the healthcare industry and a research report on the development of Hong Kong's healthcare industry has been released. There is in-depth research on the business nature as well as the size of these healthcare companies and the findings are truly enlightening. Predictably, most healthcare companies in Hong Kong are small in size when it comes to business turnover and staff number. On business volume, 60% of researched Hong Kong companies have an annual turnover of $5 million or less and only 20% of them have amounts bigger than $10 million. The staff-size figures are even more revealing. For 43% of the researched Hong Kong companies, they have a manpower of 10 people or less. Only 8% of them have a staff size that ranges from 101 to 1,000.

As people know, size doesn't always matter in the business world. In fact, smaller companies often turn out to be more adaptive and their flexibility pays nice dividends to them more often than not. In fact, many Hong Kong healthcare companies should try to put more effort into exploring niche segments of the market and that approach has been supported by the findings of the Productivity Council study mentioned above. According to the study, 51% and 55% of Hong Kong healthcare enterprises are engaged in production and trading respectively, while those in the Greater Bay Area are 77% and 11% respectively. Therefore, a mutually benefitting approach of Hong Kong companies relying more on Greater Bay Area companies' production, while they count on Hong Kong companies' trading strengths, is going to benefit both parties. This will turn out to be a win-win situation for everyone involved.

The Greater Bay Area must not confine Hong Kong entrepreneurs' dreams. If they dare to dream an even bigger future, they should set their sights on a level that is even higher, which is "Belt and Road". Well, cooperating with enterprises in the Greater Bay Area is not bad at all. However, it has to be admitted at the same time that the scope, total population and market potential of the "Belt and Road" platform can be far more superior. If Hong Kong companies seize the opportunities early and start their cooperation with "Belt and Road" companies, it is very likely that they will enjoy sharper cutting edges due to the fact that they are certain to benefit from land and labor costs that are lower not only than Hong Kong, but also than the Greater Bay Area. Lower costs mean stronger competitiveness for their products in the market. That is a golden rule of economics.

Hong Kong finds itself standing at an important point of time in history. Walking out of the COVID-19 pandemic, the city needs to gather pace in its pursuit for recovery. In this process, efforts from every single industry will be appreciated and those from the healthcare sector will be crucial. Its potential is second to none and thus it should shoulder more responsibilities.

 

Dr. Kevin Lau Chung-hang is a radiologist and non-official member of the Commission on Poverty in Hong Kong.

The views do not necessarily reflect those of DotDotNews.

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