Hong Kong special administrative region: The Hong Kong experience with public procurement for innovation

The key principles of Hong Kong Special Administrative Region Government guidelines on procurement adhere to the general spirit of the World Trade Organization Agreement on Government Procurement. Moreover, the government has not been particularly keen to promote innovation, and it has only been during the last decade that explicit, but limited, innovation policies have come into existence. Nevertheless, some public organizations have found a need to use innovation to improve services and operational efficiency, and thus have launched projects that required innovation in both technology and management, and in which a strong hand in demand management was necessary for successful implementation. This chapter discusses the case of the Octopus Card project initiated in 1994 by the public Mass Transit Railway Corporation against a backdrop of procurement and innovation-policy history in Hong Kong. The chapter describes how successful public procurement of an innovative RFID smart-card system for transportation fees led to a widespread diffusion and diversification of business activity related to RFID cards. The conclusion is that public procurement to support innovation can be successful in Hong Kong, and the effects of the current lack of active policies to encourage demand for innovation represents lost opportunities to enhance the competitiveness of the economy.