Economic Benefit Assessment of Government Investment: Expansion Program

Hong Kong Science Park (HKSP) is a government-sponsored project that aims to transform Hong Kong into an international innovation and technology hub. The Park comprises three phases built over a 22-hectare site, offering R&D facilities for key clusters: electronics, information technology/telecommunication, biotechnology, precision engineering, and more recently, environmental technology. Land, infrastructure, and buildings are funded primarily by the government, with leasing rates subsidized to incubate and support the industry, attract companies and talent, and promote diversified economic development.

The study was conducted immediately following the 2008 global financial crisis - a period of high economic uncertainty and volatility affecting Hong Kong’s traditional economic pillars (finance, trade, tourism). The third phase was then being considered and the government needed a study to determine whether the expense was justifiable and whether the timing was right. At the time, there was a pressing need for Hong Kong to diversify its economy, lessen reliance on services, and develop innovation-driven sectors to stay competitive and weather future economic shocks.

This project was conducted by EDAW prior to its acquisition by AECOM. Brian Jennett was a Senior Economist/Urban Planner at EDAW | AECOM and part of the team conducting study.

Scope

The team analyzed and quantified the economic benefits of the science park, especially the planned Phase 3, considering the altered economic climate post-crisis. The work involved economic modeling & research, which included:

• Interviews with government officials, university leaders, and tenant companies to gauge market conditions, investor sentiment, and labor market implications

• Forecasting of demand, costs, and benefits of R&D space and activities for all phases, but primarily Phase 3.

• Direct, indirect, and induced impact calculations for GDP and employment (including explicit multipliers based on Hong Kong data and international best practices, e.g. indirect and induced multipliers).

• Use of historical and international benchmarks for value-added per employee and sector multipliers.

• Assessment of both tangible (GDP contribution, job creation) and intangible (diversification, reputation, collaboration) impacts.

• Sensitivity analyses adjusting for GDP growth rate, R&D expenditure as a ratio to GDP, estimated capture rates by Science Park, and incremental economic benefit ratios; accounting for heightened economic risk during the financial crisis.

Policy Analysis & Recommendation

• Compared Hong Kong’s approach and outcomes with those of Singapore and Taiwan, which had previously emerged robustly from financial crises due to aggressive investment in R&D and innovation.

• Among the conclusions: The science park helps diversify the Hong Kong economy, reducing dependency on financial services and trade sectors. It supports creation of employment opportunities for local graduates, especially in science and engineering fields, helping to retain talent within Hong Kong. It enhances Hong Kong’s reputation as a hub of innovation and high-tech activity, attracting talent and investment. It encourages collaboration between academia, industry, and regional partners, including the Pearl River Delta and Mainland China. The planned inclusion of environmental technology as part of the third phase is strategic, as this sector is growing globally and attracting significant venture capital.

• Among others, these reasons led to the recommendation for continued and even increased government support for infrastructure and R&D, particularly in adverse economic conditions, citing historical precedents and long-term economic theory. 

Result | Quantitative Outcomes

• Phase 1 & 2 Impact: ~HK$3.9 billion annual GDP contribution and >8,000 jobs created.

• Phase 3 (Projected): ~HK$1.9 billion annual GDP contribution and ~4,000 jobs created from 2020 onwards.

• Total Impact (All Phases): ~HK$5.8 billion annual GDP contribution and ~12,000 jobs when fully operational.

• A benefit-to-cost ratio estimated at 2.9 over 20 years in the baseline scenario (and still positive even in pessimistic scenarios, indicating economic viability despite the global financial downturn).

• The intangible results included economic diversification, strengthened high-tech reputation, enhanced collaboration with Mainland China, development of green-tech sectors, and increased employment opportunities for graduates.

Conclusion

The study concluded that even under conservative projections and potential cost overruns, the tangible economic benefits would substantially outweigh the costs, and intangible benefits would further secure Hong Kong’s economic future. Delaying or canceling the planned expansion would entail significant opportunity costs, including lost jobs, GDP, competitive standing, and innovation potential. The timing for the expansion was deemed ideal: launching during an economic downturn to attract strong tenants and position Hong Kong for rapid recovery and long-term growth.

The study provided justification for public investment, which the government subsequently approved. The third phase is now built and operational, and China's reputation in R&D and commercialization of green technologies is widely recognized and growing.