HKDF newsletter - 18 - Human Resources Development for the New Economy

Our system must be basically sound, as evidenced by Hong Kong's phenomenal achievements over the years, but it needs to be updated to ensure that it can meet the demands of the new economy for people with creativity, critical thinking, good communication skills and all-round qualities.

Importance of higher education
I wish to emphasize first and foremost that the SAR Government places great emphasis on the development of higher education, as it holds the key to Hong Kong's future as a centre of high value-added services, and a host of innovative and creative industries. Funding for universities has expanded by three fold in the past ten years. The reduction in funding for the universities in the coming triennium should be seen in the context of a public-sector wide effort to achieve productivity enhancement. The process started three years ago following an agreement between the Government and the University Grants Committee that overall university funding should be reduced by five per cent over six years, in between 1998/99 and 2003/04. Through rationalization of resources and streamlining of internal processes, our institutions have achieved higher cost effectiveness over the past three years. We have not reduced the total number of funded places, and the funding for higher education still makes up close to one-third of the entire education budget, or about seven per cent of the overall Government budget.

In the Education Commission's report on the education reform, we have envisioned a 'diversified, multi-channel, flexible and interlinked system of higher education', which will produce graduates with virtues, commitment, creativity and a global horizon. Despite the outstanding achievements and international accolades earned by some of our universities, the tertiary education sector of Hong Kong today is still a relatively closed system, heavily reliant on Government funds. There is still some way to go in order to achieve the vision of a higher education sector that offers diversity, quality and opportunity.

Diversity
To start with, all full-time university places are publicly funded, provided by the eight public universities, while the Open University and some non-local degree program providers can only compete in the continuing education segment through distance learning. The legislative framework we have at present does not allow private institutions to operate in Hong Kong. As a significant first step, we are now enabling some private institutions like Shue Yan College to run a number of degree programmes. For such institutions to upgrade into private universities, we will have to introduce new legislation which will specify the regulatory mechanism, quality assurance requirements and management structures of new private institutions. With the new legislative framework in place, it will become possible for overseas institutions to run full-time degree programmes in Hong Kong, thereby injecting an element of healthy competition and providing more choices for our students.

The legislative framework we have at present does not allow private institutions to operate in Hong Kong.

For a small number of public universities which possess the necessary conditions to wean themselves from public funding, such as adequate financial resources and the political will for such a major change, the Government would be keen to facilitate. Whilst public funding provides security for a university, it also carries with it various restrictions relating to funding and management which may hinder a university's quest for a higher level of excellence comparable to the top-notch private universities around the world. But before this can happen, we will expect long-drawn negotiations with the university on a host of complex issues such as financial arrangements, quality assurance, tuition fee policy and management structure.

Looking at the issue of diversity from another angle, we would encourage our universities to concentrate their strengths on their own missions. By design, we should have a diverse range of institutions, namely two comprehensive universities, a science and technology university modeled after the MIT, two polytechnics turned universities, one liberal arts college, and one teacher training institute. One other is a fledgling expected to become a third comprehensive university. However, in a bid to compete for the best students, there is a tendency for some institutions to offer a wider range of programs than required by their mission, thus diverting precious resources to develop programs which are better left to other institutions. For instance, do we need eight schools of business in Hong Kong? Or should we rather concentrate the best brains and resources on one or two institutions and enable them to be truly competitive on a global basis?

Quality
One of the biggest challenges our universities have to address is the perception in the community, particularly the business sector and employers, that the quality of university graduates is declining. The most common area of complaint is language and communication skills. This perception is only half true. I am convinced that the good graduates from local universities are still very good, and the best are even better than before. As Hong Kong's economy has expanded over the years and has now become the most service-intensive economy in the world, we need many more graduates with excellent English skills, the maturity and sophistication to deal with a wide range of clients, a global perspective and good work ethics. Jobs which do not emphasize these skills have almost disappeared. Our system has therefore been hard pressed to keep up with demand.

This is an area where our universities need to work much harder. I am not sure, for example, whether the exit requirements for students are being maintained as vigorously as they should be, otherwise, how can we explain the fact that almost all students, once admitted, are guaranteed to graduate in three years' time?

These are problems ingrained in the system and cannot be solved overnight, but the Government and the University Grants Committee (UGC) are determined to put things right. Since 1997, the UGC has been conducting Teaching and Learning Quality Process Reviews with all universities to help them improve the quality of teaching and learning, which is the primary mission of higher education, and to enable them to discharge their obligations to be accountable for quality. Starting from the next triennium, the UGC has set aside around $700 million for allocation to institutions according to a set of performance indicators related to their respective mission. On the students' front, the UGC is working with the universities to introduce an exit test of English for all university graduates next year. We are also identifying extra resources for universities to conduct more student exchange programs in the next triennium, as we know from experience that such programs are very effective in improving students' language skills and self-confidence and widening their global perspective.

Two policy reviews of great significance to the future of higher education in Hong Kong are now being conducted. The first is the Education Commission's study into the feasibility of lengthening the duration of university education upon the change of the academic structure for secondary schools. The UGC has also launched an overall review of higher education with particular emphasis on the overall governance and quality assurance structure for higher education, the accountability and governance mechanism of individual universities, as well as the funding methodology for higher education. The findings from these two reviews will considerably alter the future landscape of higher education in Hong Kong, and we look forward to their conclusion by the middle of next year.

We are also keenly aware of our relative deficiency in terms of education opportunities in higher education. The age participation rate in higher education in most advanced economies has already exceeded 60 per cent, whilst the percentage for Hong Kong is only 30 per cent. As shown by a recent manpower projection, there will be a shortfall of about 16 per cent in manpower supply against requirement by 2005. This translates into about 110,000 people, of whom about three-quarters are in the sub-degree and associate professional levels. We must address this deficiency, if Hong Kong is to maintain its competitive edge in the knowledge economy.

It was against this background that the Chief Executive set a target of increasing the age participation rate in higher education progressively from 30 per cent to 60 per cent within ten years, which means the provision of over 30,000 additional places. This is an ambitious target by any standards. Some members of the legislature and the community have questioned whether this target is realistic and feasible, and whether we will be able to uphold the quality of programmes as we drastically increase accessibility to higher education.

At present, most of our universities run extra-mural programmes at the sub-degree and associate professional levels on a self-financing basis, and these programmes are very popular. We shall increase the universities' capacity through a package of support measures, including interest-free start-up loans which will cover costs of programme design, faculty recruitment, equipment and other upfront capital investment. The loan may be used to rent or purchase, and renovate, school premises. We will also consider allocating government land at a nominal premium to develop purpose-built premises for providers with a good track record in offering quality programmes. In such cases, the loans will cover building costs. We will also introduce a means-tested student finance scheme so as to ensure that no one will be denied a chance to receive higher education due to a lack of means.

The Chief Executive set a target of increasing the age participation rate in higher education progressively from 30 per cent to 60 per cent within ten years. Some have questioned whether this target is realistic and feasible, and whether we will be able to uphold the quality of programmes.

Whilst we will spare no effort in achieving the 60 per cent policy target, I must emphasize that we will not sacrifice quality for quantity. In conjunction with the Hong Kong Council for Academic Accreditation, and other statutory professional bodies, we will put in place a rigorous quality assurance and accreditation mechanism for new programmes. We believe that a funding model which combines capital assistance, student financing and a rigorous quality assurance mechanism, will safeguard the viability of the programmes on the one hand, and bring market forces to bear on the other, so that both the quality and relevance of the programmes offered will be assured.

Continuing Education
Despite a relative shortage of publicly funded places in the mainstream higher education sector, we have been largely able to fulfill Hong Kong's manpower needs and fuel the rapid growth of our economy thanks to a robust continuing education sector, and the eagerness of Hong Kong people to pursue further education and to constantly upgrade themselves. According to a recent survey, a total of more than 12,000 continuing education courses were offered by various institutions in the last 12 months, with an enrollment of 550,000 students. Consistently about one-fifth of the adult population in Hong Kong take up different forms of continuing education on a self-paying basis. Distance learning is vastly popular and a growing trend, as it can cater to individual learning needs and suit the pace of a hectic working life. The highly successful Hong Kong Open University (OUHK), for instance, has an enrollment of 25,000 and produces around 1400 graduates every year on a fully self-financed basis. Learners in Hong Kong also have access to the 645 overseas courses registered in our Non-local Higher Education Courses Registry.

On the part of Government, apart from giving financial assistance of a capital nature to OUHK, we have increased the maximum amount of deduction for self-education expenses under salaries tax, from $30,000 to $40,000. The Education Commission's Working Group on Continuing Education is also working out a comprehensive qualifications framework which will set out the progression routes between various levels of education in the academic, vocational and professional streams. Such a document will enable learners at all levels and all disciplines to have a clear idea of possible progression pathways so that they can make better plans for their personal development.

Skills Upgrading
In tandem with measures to enhance the quality of higher education and to expand education opportunities at the higher end, there is a constant need to upgrade the quality of workers with a lower level of education. Manpower projections have indicated that the job market condition is expected to improve as new job opportunities will exceed the increase in labour supply by around 164,500 in 2005, but there will be a mismatch between job requirements and the qualifications of workers. The surplus manpower supply of workers at the lower secondary education level will be over 130,000. These workers with low skill and low education attainment will face employment difficulties, and they must acquire new knowledge and upgrade their skills in order to be competitive in the job market.

Skills Upgrading Courses
The Government is committed to enhancing the employability and competitiveness of our workforce by continuing to invest heavily in vocational training and retraining, as well as encouraging skills upgrading and lifelong learning amongst our workers. In order to reduce the projected mismatch between manpower demand and supply and to take full advantage of the economic opportunities that are likely to arise in the next few years, we have committed $400 million to launch a pilot scheme for skills upgrading training for workers with low education level in the next two years.

To launch this scheme, I have set up a Steering Committee on Skills Upgrading, and have devised a comprehensive framework to govern the design of training packages, and the commissioning of training providers for six identified industries (namely, printing, Chinese catering, retail, import and export, transportation and textile). Emphasis will be placed on the control and audit mechanism of training courses, industry recognition of graduates, as well as the quality assurance of programmes and trainees.

Supporting Employers in Staff Training
To fulfil our skills upgrading objective, the full participation of employers is as important as workers' own initiatives. According to a survey, only eight per cent of our companies have provided formal training for their employees, and these tend to be larger ones. In Hong Kong, there are over 300,000 small and medium enterprises (SMEs), accounting for more than 98 per cent of the local enterprises. Many of them lack the awareness and probably also the resources to upgrade their own human capital. As an incentive and encouragement to these SMEs, we have earmarked $300 million for the establishment of a training fund. SMEs are the pillar of Hong Kong's economy. We must ensure that they equip themselves well for change and build within them workforces that recognize life-long learning as a requirement for survival and as a prerequisite for advancement.

Concluding Remarks
In an increasingly globalised and knowledge-based economy, we must all embrace the culture of lifelong learning. Whilst the Government always stands ready to help those who help themselves, ours is not a welfare society. Education institutions, workers and employers alike must recognize that they need to take the initiative to upgrade themselves in order to stay ahead in the game. Everyone has to pitch in.

Many of our competitors in the region are losing no time in this race. Indeed, in a recent APEC High Level Meeting in Beijing, all 21 participating economies accord top priority to human capacity building as their development strategy. Hong Kong must work hard to catch up with the more developed economies. It will not be easy but I am confident that with shared conviction and close collaboration between Government and all sectors of the community, we will be able to maintain our competitiveness in the global economy. I look forward to your support and cooperation. Thank you.