To grow, Hong Kong must branch out from a mainly service economy
Jeffrey Lam says our economy's great reliance on the service sector must end to better meet local needs and counter external competition
Hong Kong needs to diversify. Its narrow economic base threatens not only its economic progress but also social stability. The city's weakening competitive edge, revealed in recent reports, has become a hot topic among businesses and policymakers.
The latest blow is in the world competitiveness report by Switzerland's IMD, which lowered Hong Kong's ranking from first place last year to third.
Competitiveness is not an end in itself, but a means to address problems. Secretary for Financial Services and the Treasury Chan Ka-keung attributed the city's declining competitiveness to weak growth in major advanced markets. The government should examine why our economy is so vulnerable to these external factors.
The service industry contributed about 90 per cent to Hong Kong's gross domestic product last year, with financial services, real estate, professional and business services having the largest share.
By contrast, only about 2 per cent of GDP came from manufacturing. Given that the service industry's customers are mostly from overseas, that makes Hong Kong vulnerable to outside market and economic volatility.
A service-based economy has several consequences, given the limited number of high-paid jobs in the sector. Most service jobs are low-skilled or unskilled positions, for which workers receive low pay. They have little chance to move upwards, resulting in a widening income gap.
