A new report by The Boston Consulting Group (BCG), the first in Asia of a global series, reveals that the Internet has had a material impact to Hong Kong and has become an indispensable part of the territory’s economy. The report, titled “The Connected Harbour: How the Internet is Transforming Hong Kong’s Economy,” estimates that the Internet contributed HK$96 billion (US$12 billion) in 2009, representing 5.9 percent of Hong Kong’s GDP. This share is likely to grow by 7 percent annually -- contributing 7.2 percent of GDP in 2015 -- faster than the forecasted GDP growth of 4 percent, reaching HK$146 billion by 2015.
The report offers an inside look at the Internet’s profound impact on Hong Kong’s core industries, such as trade and financial services. The Internet has rewired businesses in these sectors, allowing them to change the way they interact with customer as well as to streamline and grow their operations around the world. The Internet has also empowered Hong Kong’s millions of small and medium enterprises, which account for 50 percent of the economy, to grow beyond Hong Kong’s borders and market their products and services to global customers.
The report is the first in Hong Kong and in Asia to identify the size and growth of the Internet economy. It was commissioned by Google Hong Kong but was researched and written independently by BCG. The aim of the report is to understand how the Internet helps power Hong Kong’s economy and society.
“With over 4.8 million Internet users and 82% household broadband penetration in Hong Kong, the Internet is improving Hong Kongers’ quality of life and generating huge potential for businesses. Looking ahead, I encourage closer collaboration among all stakeholders; including government, industry and academia, to create a nurturing environment for the Internet economy to develop, thus ensuring a leading role for Hong Kong in Asia’s digital future,” says Samson Tam Wai Ho, JP., member of Hong Kong’s Legislative Council for Information Technology.
According to David Dean, global leader – technology, media and telecommunication practice, The Boston Consulting Group, people think of Hong Kong as a trade and financial center and not necessarily as a leader in e-commerce. "Yet it’s clear from our research that the Internet is an integral part of Hong Kong success as a global trading hub. Hong Kong is now truly a “connected” harbour and the Internet will be crucial to its future economic success.”
For Daniel Alegre, president of Google in Asia-Pacific, Hong Kong’s bet on the Internet has clearly paid off -- not just in terms of broadband speed and accessibility but in real economic benefits to core industries like trade and finance as well as millions of small and medium enterprises. "It’s clear from this report that an investment in the Internet is an investment in the broader economy.”
Internet Transforms Trade
Hong Kong has long been known as one of the busiest international trading hubs in the world. The report finds that the Internet is now indispensable to Hong Kong’s trading companies. These companies act as bridges between manufacturers in Asia-Pacific and retailers in the United States and Europe. They rely on the Internet to streamline and grow their operations and connect seamlessly with thousands of partners around the globe.
The Internet has also impacted other core sectors of Hong Kong’s economy. Financial services has been a leader in Internet adoption in the Hong Kong, and companies in this industry have used the Internet to expand their customer base, become more efficient, and improve information-sharing. Similarly, the report finds that travel and retail businesses in Hong Kong have embraced the Internet as a way to promote and improve tourism to the territory.
Small Business Grows Online
As part of its research, BCG surveyed over 500 small and medium enterprises. These companies account for 50 percent of Hong Kong’s economy. The survey reveals that three-quarters of SMEs in the trade, transport and logistics, and technology sectors actively use the Internet. About four in five of these businesses who actively use the Internet report higher sales and three in four report lower costs as a result of the Internet.
Internet Key to Future Growth
The Internet will be a significant driver of Hong Kong’s future economic growth. BCG’s research indicates that the growth rate of the Internet economy at 7 percent per year is considerably faster than Hong Kong’s forecasted GDP growth rate of 4 percent. This growth will come from increased online shopping, as more Hong Kong consumers turn online to research and purchase, and increased mobile penetration. Continued growth in exports and in private and government investments in Internet hardware, software, and infrastructure will also be key to future growth.
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