Opening Statement at Asia-Pacific Business Forum 2018
Delivered at Cyberport in Hong Kong, China
Welcome to the 14th session of the Asia-Pacific Business Forum jointly organized by ESCAP and Cyberport, with the support from the Innovation and Technology Bureau of the Government of the Hong Kong Special Administrative Region.
Businesses hold the key to sustainability as the private sector drives the bulk of regional output, jobs, and innovation, and impacts on the environment.
Role of Private Sector in Sustainable Development
The UN counts on your leadership to support the 2030 Agenda for Sustainable Development, and the climate and financing for development agreements. New dimensions of this sustainable development architecture are worth elaborating. It calls for businesses to support the core value of poverty eradication to “Leave No one Behind”. To generate shareholder value for your corporations this agenda requires going beyond an eye on profits to transforming your businesses to integrate economic, social and environmental dimensions into production and value chains. The private sector has a key role to play in catalysing all goals, but most of all to harness SDG 17 focused on finance, science, technology and innovation, and trade and investment critical for catalyzing all SDGs. Investment in innovation lies at the heart of SDG 9 on industry, innovation and infrastructure, and is recognised as a crucial driver of economic growth and development. As Asia-Pacific urbanises rapidly, mass transport and renewable energy, and information, communication and technologies are just some of the areas where Hong Kong’s industry serves as a role model.
Industry must achieve a quantum leap as the fourth industrial revolution unfolds to leverage integrated sustainable solutions, while seeking efficient, intelligent approaches, and the management of trade-offs between the economic, social and environmental aspects of development. Gripping the world today are many challenges, but added to these are how the ongoing transformative frontier technologies, such as artificial intelligence, robots and the internet of things, can help underpin sustainability but with due regard for social and environmental considerations in the wake of unstoppable disruptions and dislocations these technologies cause.
Asia’s Technological Pathways
Today, Asia, with Japan, Korea, India, Singapore Russia and China – very much including Hong Kong - are investing in R&D and emerging as global leaders to further technological advancements to enhance the region’s competitive edge through efficiency and productivity gains. The surfacing of start-ups in Hong Kong focused on artificial intelligence (AI) technology, online brokerage platforms, online lending platforms, e-commerce platforms, wearable mobile technology, travel booking platforms and innovations in finance and insurance are encouraging. Added to this are the emerging "unicorn" companies in Hong Kong supported by market capitalisation more than US$1bn focused on a business-to-business delivery and logistics-on-demand platforms, facial recognition and identity-verification systems. New technology and processes are expected to significantly increase the efficiency of businesses. Artificial intelligence, among others, is helping rapid analysis of large datasets and are a solutuin SDG on healthcare, education, energy, and agriculture – all of which are crucial to sustainable growth and to improving the standard of living in developing countries.1
Fintech is now delivering financial services to remote clients at a lower cost and providing access to a large number financially excluded people. These companies range from Mobile Money & Payments companies such as AliPay in China to Micro Lending & Credit Scoring companies such as Lenddo’s in Singapore. Such companies can increase SMEs and individuals’ access to finance and improve the information for borrowers and lenders, support growth and jobs and empower the people. But the rapidly developing Fintech industry lacks structure, policy and regulations supported by well calibrated regulatory oversight and business transparency requirements, to guard against systemic risk.
Risks Associated with Technological Advancements
Yet these same efficiencies and innovations carry the risk of leaving certain people behind, creating what is sometimes called a ‘frontier technology divide’, causing inequalities to increase. It is also clear automation can trigger job losses. The World Bank estimates that up to two-thirds of all jobs are susceptible to automation in the developing world; a much higher rate than in economic blocs such as the EU or the United States. So, automation needs to be accompanied by policies to move economies up the value chain, reskill workers and improve education and lifelong learning. The private sector has its part to play in this process.
Pervasive inequality prevails across Asia and Pacific irrespective of countries level of development. The level of inequality has grown since 2000. Strong economic growth without sustainability has exacerbated the rural-urban divide. Ending gender inequality and systemic discrimination in Asia has the potential to raise per capita income by 70 per cent over sixty years. Widening the digital and ICT divide is of concern: 18 ESCAP countries have less than 2% fixed-broadband subscription, compared to say the Republic of Korea with speedy broadband, 40% coverage and declining costs.
The private sector has capacity to deal with challenges if technology, innovation and financing can be deployed intelligently to deliver sustainable solutions to mitigate the consequences of growing inequalities, economic excesses and efficiencies. This is critical as ESCAP research finds technological progress supports not only increased production and wealth, but impacts on income distribution – as technology companies, states and individuals worsen income concentration.
Promoting Sustainable Solutions of Technologies
First, more research and innovation to adapt technologies for sustainable solutions will facilitate the closure of SDG gaps. So, companies need to deploy technology to underpin social innovation to ensure its proceeds are more equitably shared.
Second, technology can support solutions to reducing the overexploitation of natural resources and resulting environmental degradation. Asia is the most resource intensive region. On average, developing Asia-Pacific economies use twice as many resources per dollar of GDP as the rest of the world. Environmental degradation and carbon emissions, not captured in GDP, undermine the sustainability of economies. The increase in wealth and the rate of urbanization has brought with it severe pollution. Welfare losses from exposure to ambient and household air pollution are estimated to have cost South and South-East Asia and the Pacific the equivalent of 7.5 per cent of regional gross domestic product. Water shortages and droughts have become a major concern.
Third, equally, critical is to evolve solutions to enhance climate adaptability and mitigation and tackle Asia-Pacific’s disasters. The frequency and severity of disasters, particularly in small island developing States, and land loss and degradation due to climate change, disproportionately affect the poorest and most vulnerable leading to intergenerational poverty, perpetuating inequality. Economic costs are estimated at US$5 billion per year and since 2000 account for 362,000 deaths and 259 million people affected.
Partnerships between the public and private sector
Strong partnerships between the private and public sectors have the potential to overcome these challenges – especially if innovation, technology and financing can be targeted to meet development aspirations.
First, the private sector must be supported in its efforts to develop more socially and environmentally-friendly sustainable technologies and processes. As this forum will consider, there are many examples of these types of technology and innovation ranging from solar power and off grid solutions to enhance energy access to risk management systems through early warning from space technology, and big data for disaster risk reduction; or technological solutions supporting sustainable urban transportation and intelligent systems to support transport safety. We need a supportive policy and regulatory environment for more such solutions.
Second, businesses can have an impact on sustainable development by adopting and implementing sustainability principles throughout their core operations, including their supply chains and their investments. Company operations can impact on millions of people: consumers, suppliers and workers. Companies must be incentivized to scale up responsible and sustainable companies by integrating economic, environment and social considerations. This requires, moving beyond the concept of corporate social responsibility and placing shareholder and stakeholder value across the three dimensions of sustainable development at the core of business strategies. A regulatory and taxation framework which makes this commercially viable is critical.
Indeed, being sustainable requires going beyond donating money to charity or going through ISO14001 certification. It means being a fair and equal opportunities employer; minimizing the environmental footprint of the company’s products and services; acting responsibly and transparently in relation to the community; and respecting staff and communities. A number of instruments exist to help guide companies how to assess and ensure they are responsible in all these areas, including the UN Global Compact and the UN Guiding Principles on business and human rights, which we encourage all companies to apply in their operations.
Third, while the private sector continues to pursue technologies, processes and tools, an adequate policy environment is essential to maximize synergies and minimize trade-offs between the objectives of economic growth, inclusive social progress and environmental protection.
Finally, ESCAP has played its part to support improvements in governments’ capacity to structure public private partnerships and develop climate friendly and resilient infrastructure. Digital technology is a means of overcoming geographic boundaries, facilitating trade and allowing companies - very much including SMEs - to sell into bigger markets. ESCAP has worked to support this through its Framework Agreement on Paperless Trade in Asia and the Pacific. The deployment of technologies and the digitization of the Belt and Road corridor development -- the digital silk road --provide yet more opportunities.
Hong Kong’s Positioning
In our region we take pride in Hong Kong: its entrepreneurial spirit and successes lend us hope. The country has strived to achieve financial and trade integration and has an outward facing economy. Its potential is still untapped given its strategic location and now steady economic integration with mainland China. Managed intelligently, it is set to further enhance its standing as the key Asian financial and innovation centre. Hong Kong has attracted significant capital inflows over the past decade and integrated it into global value chain. In 2016, the value of Hong Kong's total merchandise trade reached US$978.7 billion. You need to lift your ranking of in global benchmark of innovation by investing in research and development. But what is encouraging is that Hong Kong policy makers have announced a fourfold increase in fiscal allocations to innovation raising it to $50 billion to boost investment in biotechnology, AI, and fintech. The technology startup ecosystem is gaining momentum and will benefit venture capital supported by Innovation and Technology Venture Fund and strong and innovative financial industry base with strong presence of international banks, and Asia’s third largest stock market by market capitalization. Cyberport’s potential and can be boosted by the right incentives to boost its competitiveness edge. Partnerships such as the Hong Kong-Shenzhen Innovation and Technology Park established in January 2017, and efforts to spur the Belt and Road Initiative and the Greater Bay Area initiative are impressive. They have the potential to attract Giant Tech Firms to enhance and diversify Hong Kong’s innovation potential, supported by a more conducive sustainable development policy framework, the development of patents and capabilities through higher flows to higher education will lift Hong Kong’s ranking in the innovation game.
1ESCAP (2017). Artificial Intelligence in Asia and the Pacific.