Generation 40s – 四十世代

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Why big data must be shared to realise Hong Kong’s smart city vision

CommentInsight & Opinion
2018-01-24

Christine Loh says data transparency across government departments and access to information from private companies providing public services are needed to create a smart, sustainable city

Experts have warned that Hong Kong could slip behind in the use of big data. The challenge requires data sharing across government departments, so they can compare information and assess correlations for Hong Kong to function better across the board. Being a smart, sustainable city is all about maximising efficiency by saving as well as sharing resources.

Managing a city in the age of the internet of things requires governments to have the relevant data in the first place. In some cases, authorities have the data because essential services, such as electricity, water and transport, are provided by the public sector.

There are cases where all or some of those services are in private hands. Unless there are arrangements whereby private operators are required to provide the data to the authorities, accessing it is not easy.

In Hong Kong, electricity data belongs to private companies as power generation and supply are in private hands. While the electricity companies provide excellent services at a reasonable cost to users, they are not obliged to share all their data with the government. Now that energy saving has become a major part of the city’s climate-change efforts and creating a smart city is another policy objective, not having the data is an obvious hindrance.

The new schemes of control reached last year for the two electricity companies are more data transparent than before but there is room for improvement. Data for individual buildings would enable the government to draft sharper policies and help occupants be more energy efficient.

This contrasts with freshwater supply, which is provided by the Water Supplies Department, where the government has the full range of data to consider what it can do to save water. While it uses technology to identify leaks and get public water pipes fixed quickly, the department only stepped up dealing with private water pipe leaks after a highly critical Ombudsman report in 2015.

Another problem is the inability to raise water tariffs. The government is fully aware Hong Kong’s cheap water encourages wastage but fears legislators will object to any increase. So, the challenge in this case has not been the lack of data for analysis but the lack of will to deal with problems.

Mobility data presents other challenges. While the government is the largest shareholder of the MTR Corporation and can presumably access the data it needs, this is not the case for all other trips. Buses, minibuses, taxis and ferries are all operated by private companies. Small providers, such as minibus owners, may only collect minimal data.

Private companies providing public services say they can’t share data because of privacy issues or because it is commercially privileged information. In the case of water supplies, no one has complained about the government knowing how much water users consume or indeed waste. It is hard for the energy companies to make a case on privacy grounds. As regards whether releasing the data would lead to unfair competition between the two electricity providers, there could be arrangements whereby the full data could be given to the government on a confidential basis, which the government could then release publicly in a form that avoids unfair competition.

Transport data is mostly anonymous, although new services such as Uber don’t want anyone to access their personal ride histories. Even here, the companies can provide data without showing details about riders.

Data is king and it is a major policy issue for the government to work out with the private sector.

Christine Loh is chief development strategist and adjunct professor at the Hong Kong University of Science and Technology’s Division of Environment and Sustainability

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From Uber to e-payments and drones, can Hong Kong laws keep up with changing technology?

CommentInsight & Opinion
2018-01-19
Bernard Chan says Hong Kong’s legal framework is lagging behind its smart city aspirations. The challenge will be crafting laws that protect the public while encouraging innovation

Technology is now changing so rapidly that Hong Kong’s laws are unable to keep up. This threatens to hinder the development of new business models and services and the vision of a smart city. The best known example in Hong Kong is ride-hailing apps like Uber, which connect people who want a ride with car drivers willing to offer one.

Behind the technology, we are basically talking about car owners moonlighting as unlicensed taxi drivers. This has always been illegal, as some operators do not have hire-car permits and proper insurance. Needless to say, the licensed taxi industry opposes competition and wants the authorities to clamp down.

Yet the public wants more choice and better quality hire-car services. The technology makes such services easy to offer – and it is difficult to ban in practice. At some stage, the government needs to accommodate ride hailing within a legal framework.

Another example of disruptive use of technology is Airbnb, which enables people to rent out rooms to travellers. Like ride hailing, it is in theory about sharing but, in practice, it is mainly used by commercial landlords to compete with hotels and guest houses without complying with permits or paying taxes. While popular with tourists, it can harm residential neighbourhoods. In some cities, it is reducing the supply of long-term rental housing. And, in Hong Kong, more residents are complaining about strangers in their buildings and privacy concerns. The government is looking into this. How does it balance different interests while having laws that are enforceable?

Many commentators claim Hong Kong is lagging behind in e-payment systems, especially compared with the mainland where cash transactions are becoming old-fashioned. People are also complaining that Hong Kong officials appear to be uncertain about policy on electric vehicles and have been unprepared for bicycle-sharing services. The government is also being very cautious about self-driving vehicles, which are already being tested on the streets in some cities.

Further ahead, policymakers face big long-term changes. Urban transport will be revolutionised by shared self-driving electric vehicles (taking e-payments, of course). The distinction between cars, taxis and even minibuses might disappear, offering the possibility of far cleaner and more space-efficient transport.

The government also needs to keep up with new transport technology in the air. Within a few years, drones have gone from small remote-controlled toys to professional-quality flying cameras. Online videos show hobbyists in Hong Kong using drones to deliver chocolate bars and cans of beer, and the news media have found drones useful in news gathering. The technology raises concerns to do with privacy and safety. But it offers significant possible commercial and other applications like filmmaking, surveying and security, and transport. Manufacturers are already developing unmanned aircraft that could move large quantities of goods around urban environments.

Hong Kong does not currently have specific regulations for this sort of unmanned aircraft. However, the Civil Aviation Department is carrying out a consultancy study. The number-one issue is safety. The other priorities are to avoid inconvenience for people who fly small drones for fun, but to ensure sensible regulation of commercial drone operations.

A public engagement exercise is due to take place in the coming months. One issue is basic regulation of how drones can be used – for example, how high and how close to buildings they can fly. Then there is registration of drones. Many stakeholders favour a system where small recreational drones do not need to be registered. Bigger models and commercial users would be subject to more regulation – possibly including insurance and training requirements. While many people will see this from the hobbyists’ point of view, the real challenge is whether we can establish a framework that enables and encourages commercial applications for this new technology.

Drones are perhaps a test case. With our unique urban environment, we could be at the cutting edge of some new technological applications. The question is – can our laws make Hong Kong friendly to innovation and tech start-ups?

Bernard Chan is convenor of Hong Kong’s Executive Council


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How China is leading the ‘new retail’ revolution

CommentInsight & Opinion
2017-12-28

Edward Tse and Jackie Wang say market moves by Chinese firms like Alibaba, Tencent and JD.com show how key players are experimenting with various forms of tech-driven ‘new retail’ in the O2O world, making the industry more dynamic than ever

While the past two years may have been brutal for brick-and-mortar stores worldwide, China’s online and offline retailers have witnessed a “new retail” revolution, driving an increasingly stronger national consumption.

Since China launched economic reforms in 1978, the country’s retail industry has undergone multiple stages of development.

With foreign retailers flooding in after China joined the World Trade Organisation in 2001, the scene was diversified. Offline retail started to be challenged by Taobao, Alibaba’s online shopping platform, which was founded in 2003 and grew ­exponentially in the following decade. The transaction amount for Alibaba’s “Singles’ Day” 24-hour online sales each November 11 has grown from 50 million yuan (HK$59 million) in 2009 to 168 billion yuan this year.

With e-commerce booming, businesses have been adopting an “online to offline” (O2O) model, using online channels to attract offline traffic. In the past few years, this phenomenon has evolved into the notion of “new retail”.

New retail represents a trend of online merging seamlessly with offline, resulting from the prevalence of digital technology, like mobile payment, wireless internet, sensors and artificial intelligence (AI).

In this model, online is no longer just a sales channel, but provides ubiquitous touchpoints to interact with consumers and their social groups. By contrast, offline retailers are trying hard to keep consumers in their brick-and-mortar stores for longer, offering better customer experiences by leveraging digital technologies.

From sales and marketing to ­logistics and inventory management, the new retail revolution is transforming the industry. For example, Amazon Go, the pioneer in new retail in the US, tracks purchasing behaviour with sensors placed on supermarket shelves. After consumers choose their products, they can just walk out of the store, with the amount payable automatically deducted from their mobile payment account.

Some aspects of the retail operation are also becoming less human-led. In China, logistics firm Cainiao is incorporating hi-tech-enabled hardware and software to improve efficiency. In its logistics park, ­Cainiao deploys drones to monitor the security of the venue. Within the warehouse, several robots called “Geek+” work with staff to sort packages. It also uses computer vision to identify, monitor and ­arrange different orders.

Improved logistics efficiency is contributing to the consumer experience as well. Consumers will not only receive their packages faster, but also with fewer errors and get fresher goods.

Whereas in America, Amazon is at the forefront of the new retail revolution, China’s speed and intensity have gone into orbit. Players big and small are experimenting with various forms of new retail, making the industry more dynamic than ever.

Driven by the huge market ­opportunities and abundant venture capital, start-ups in China are actively participating in this revolution. For example, Xingbianli, a convenience store and vending machine start-up, offers many popular Korean and Japanese products that could mostly only be bought via daigou (individuals who shop overseas and resell to Chinese consumers). More importantly, it is testing the area of unmanned retail.

Products have their own bar code, which can be scanned by consumers when they choose their shopping and then check out on the Xingbianli app. There is also a mini-library and a ­café within the convenience store, aimed at making consumers linger.

Traditional local retailers are also incubating their own new retail formats, such as Super Species, a subsidiary of China’s largest supermarket chain, Yonghui Superstores.

Super Species specialises in selling fresh produce, such as vegetables and seafood, and combines the traditional market with restaurants, ­cafés, florists, and so on. It has also introduced a Yonghui Partnership Plan, allowing staff to present more innovative retail ideas and pilot them within the stores. Super Species itself is becoming an incubator for those innovative ideas, and new retail here is no longer just about changing the store format, but also the mindsets of all staff.

Tech giants like Alibaba, Tencent and JD.com are heavily investing and competing head to head in the offline battleground. Alibaba ­invested US$2.9 billion in one of China’s largest supermarket chains, Sun Art Retail Group, in November. It aims to transform Sun Art’s offline business of over 400 ­Auchan and RT-Mart branded ­hypermarkets and provides technology to enhance customer data and inventory management.

In 2015, JD.com invested US$700 million in Yonghui Superstores. This month, Tencent, a close ally of JD.com, acquired a 5 per cent share in Super Species, and made capital injection for a 15 per cent stake in Yonghui Yunchuang Technology, Yonghui’s supply chain and logistics subsidiary.

To further compete with Alibaba online and enrich their own ecosystems, Tencent and JD.com are ­investing in VIP.com, a Chinese e-commerce platform specialising in discounted products for women.

They will together own 12.5 per cent of VIP.com and, as they further monetise their traffic, the new retail battle with Alibaba will ­get fiercer.

Foreign companies are also ­actively piloting their new retail strategy in China. Earlier this month, the world’s largest Starbucks ­Reserve Roastery opened in Shanghai, leveraging Alibaba’s technology to give consumers a more immersed Starbucks journey.

This is also the first mass offline application of augmented reality (AR) technology. Consumers can use the Taobao app to unlock the AR features in the store, such as learning about the details of the Starbucks coffee brewing process.

Technologies are enabling these companies to create new business approaches, while intense competition is driving all players to ­become better. They can’t afford to slow down. China’s scale also allows companies to use the market as a business laboratory and to experiment with business models.

Through fast launch and adaptation, players can fine-tune their business model at a rapid pace.

Beyond retail, the future consumption landscape will be much more complicated and sophisticated. Digital technologies, especially AI, 5G network and the internet of things, are already blurring the boundaries of industries.

Eventually, retail will be merely one layer of the consumer lifestyle, albeit a high-frequency one. The internet of things will create a new ecosystem that is ubiquitous and interconnected. Also, 5G network development will facilitate this process in the near future and bring about disruption in the retail world.

Assisted by machine learning and big data, consumers will ­increasingly be viewed as a “segment of one” and receive more personalised solutions, not just in ­retail, but in every facet of their life.

To that end, China will be at the global forefront of innovation and experimentation.

Edward Tse is founder & CEO of Gao Feng Advisory Company, a global strategy and management consulting firm with roots in Greater China. Jackie Wang is a senior consultant of the firm


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Artificial intelligence will change the job market and Hong Kong isn’t ready

CommentInsight & Opinion
2017-12-21
Janet Pau writes that Hong Kong is behind its Asian neighbours in how well it is preparing for artificial intelligence, as well as how flexibly its job market will respond to automation

In a crowded competitive field for artificial intelligence around Asia, Hong Kong is lagging behind other major economies.

AI technologies using machines increasingly able to perform human tasks more quickly and accurately, generating results or insights when given access to large amounts of data, can make manufacturing and services more efficient and make people’s lives more convenient. AI can help Hong Kong diversify its economy and provide opportunities for the city’s young educated people to develop innovative ideas, gain employment and build wealth.

But Hong Kong fares poorly in the Asia Business Council’s Asian Index of Artificial Intelligence, which uses 11 data indicators to analyse eight Asian economies’ preparedness for and resilience to an AI-led future. China topped the overall ranking with a big lead. Singapore and India followed. Japan, Taiwan and South Korea ranked in the middle, with Hong Kong ahead of only Indonesia.

An economy’s AI preparedness is reflected in the ability of companies and talent to capitalise on opportunities brought about by AI. The weak link between research and industry is shown in Hong Kong’s low overall start-up activity and AI start-up equity funding. China leads other Asian economies in total equity funding for start-ups focused on AI, according to the online database Crunchbase.

A relatively small share of students in Hong Kong’s top universities study science, technology, engineering and maths. Such students are needed to form a pipeline of future tech workers and entrepreneurs. A larger share of students choose STEM subjects in top Chinese universities, and the Chinese comprise an outsized share of international students in the United States earning advanced degrees in these subjects.

Hong Kong’s strength is in the quality of its AI publications, with higher education institutions making significant contributions to AI research based on the amount of citable documents about AI in Scopus, the world’s largest database of peer-reviewed scientific publications. China has more citable documents, but Hong Kong has far higher citation impact, an oft-used measure of publication quality.

AI resilience is economies’ ability to adapt to and withstand broader structural changes brought about by AI. Hong Kong’s secretary for innovation and technology announced plans this year to offer financial and tax incentives to attract technology enterprises, especially those specialising in big data, internet of things and AI, though details remain sparse. Current policies are much less proactive than in Singapore, Japan and mainland China.

Hong Kong’s employment structure is dominated by sectors such as retail, food service, logistics, finance and insurance, with job types ripe for disruption by AI. AI can in several seconds interpret commercial loan agreements that take lawyers and loan officers more than 300,000 hours of work each year. This technology is a threat to jobs traditionally considered high-skill.

Acting on several key priorities can help. Workers must be trained to work alongside machines, ideally by businesses needing such skills. Thoughtful economic and social policies can encourage AI design to be beneficial to humans and ease the transition for workers whose jobs may be eliminated by AI. Education and vocational training institutes need to prepare those at different skill levels to perform work functions computers cannot do, solve unpredictable problems and learn to understand and interpret more complex data. Education reform in Hong Kong is also urgent, starting with equipping teachers and developing relevant curricula to provide future generations with the complex skills and flexible thinking required in the 21st-century economy.

Finally, Hong Kong lacks large companies investing in developing AI, which means it needs a better ecosystem of funding and partnerships with larger markets like China or the Association of Southeast Asian Nations to increase opportunities for homegrown and overseas AI talent. Doing so would better position Hong Kong to tap into this new source of growth, productivity and prosperity.

Janet Pau is programme director of the Asia Business Council