Hong Kong Fights for Its Future

APART from quandaries over the return of sovereignty to China in 1997, Hong Kong is grappling with the future of its economy. Right now the territory is prosperous, boasting an $8,000-per-capita gross domestic product and $100 billion in overseas trade. But questions of competitiveness are remarkably similar to those faced elsewhere. The strategy that worked effectively during boom years of the 1960s, '70s, and '80s will probably undergo a major test in the decade ahead.

Although the territory may be ``vulnerable'' should ``surpluses occur in items exported,'' A. Gary Shilling, a longtime analyst of East Asia based in New York, is generally bullish. Moving ahead in research and development is important for Hong Kong, he says. ``They should be looking at niche products and taking other steps instead of relying solely on foreign investment.''

The slow start on the territory's Silicon Harbor project may indicate that Mr. Shilling is correct, say some observers. It was hoped that a true center for indigenous research and design might take root. The harbor was to emerge as a bastion of sophisticated electronics - not simply rote, labor-intensive assembly work - and foster economic development. It represented a subtle departure from noninterventionist policies by the government.

But Silicon Harbor currently consists of a Motorola plant. To date, the quest for such innovations as microchips customized for specific applications has been elusive.

In neighboring newly industrialized countries (NICs) in East Asia, science-and-technology policies are integrated into long-range planning.

The Hong Kong Productivity Council is one organization that serves as a bridge between new technologies and small business operations. It is embarking on a plan, largely funded by the government, to make business aware of improved techniques and automation. Its efforts are geared toward three cornerstones of the economy: textiles, electronics, and plastics.

Other moves represent a new policy shift. They're clearly patterned after United States technology-based economic development that has flourished through help from government, business, and academia.

A university of science and technology is to open its doors in two years. An industrial park next to the campus is on the drawing boards. H.C. Lee, managing director of Tek Devices, thinks that ``bringing companies together with students'' will ``mean a lot.'' Nourishing a home-grown high-tech culture could neutralize the drain on intellectual and managerial talent of 25,000 or more people a year from Hong Kong.

Electronics are important to the economic equation, as a recent report by the American Chamber of Commerce in Hong Kong demonstrates. In 1987, some $5.7 billion worth of products were exported. More than 100,000 manufacturing jobs were directly linked to fortunes of this single sector. The chamber concludes that the city-state of 5.6 million is ``a vast electronics supermarket,'' with a potent multiplier effect ``on the buying preferences of other Chinese communities in Asia.''

The territory has made headway in computers and peripherals. Exports more than doubled, to $970 million, from 1985 to 1987. And the government has launched a program involving surface-mount technologies for semiconductors.

But private-sector efforts so far have not been enough to aid the quest for ``sunrise'' industry. Venture-capital mechanisms have disappointed analysts.

Nearly 1.1 million Chinese are employed in factories owned by Hong Kong companies that have invested $1 billion across the mainland. But while Hong Kong's status as the gateway to China has contributed to prosperity, some wonder whether the focus on China by both foreign and native investors has not sometimes been at the expense of Hong Kong. This, some scientists insist, is why biotechnology flounders.

And competitiveness in toys, a major pillar of the economy, is clearly threatened by manufacturing across the border. Some data show that China, with a projected $2.3 billion worth of toy exports in 1989, will overtake the territory in this field.

One traditional ingredient may ensure momentum, however: the penchant of Hong Kong businesses for flexibility. In a new era of manufacturing and distribution, ``scheduling and meeting deliveries is critical,'' says John Odell, an associate professor at the University of Southern California. ``The guy who moves fastest with small-scale manufacturing can do well in new products and processes.''