Hong Kong SME Tech Grants Issues

THE PROBLEM WITH SME TECHNOLOGY GRANTS IN HONG KONG

 

There are many governments grants available in Hong Kong and SME.  In fact, the government has over 40 grant schemes available.  I am not sure exactly how much money has been put into these grants but it runs into the 10’s billions Hong Kong dollars and there is a large percentage of the grant still available.  This means that the average SME should be applying for 3 or 4 of these grants to maximise what is available to them.

The problem is that it is extremely hard to get your hands on the money.  The main reasons for this are two fold:-

SME’s do not know what is available or what they need.   Entrepreneurs are normally running their business and trying to pay salaries at the end of the month.  Any small business owner who has time to sift through the 40 or so grants, work out what is available to them, go through the process of application, get approval, complete the project and claim the money is NOT doing what they are supposed to be doing which is running the business.  Technology grants especially are tough since your average entrepreneur does not know technology inside out and therefore it is difficult to understand how a grant would benefit them.

In many cases technology advancements for small business’s are driven by the technology provider who is the one to alert their client that a grant may be possible.   This is where the real problems occur in that the way all the grants are run is that you have to get competitive quotes for you application and then normally you have to select the cheapest quote.  Whilst it is the client who is supposed to make the application technology providers are often asked by their client to get or introduce another company or two for the 2nd or 3rd quotes.  As the current Technology Provider, the risk here is that you are introducing competition and you risk losing the client.

As a Technology Provider if you receive a comprehensive scoping for a project from a company who are not your client you know you are being used as the 2nd or 3rd quote and therefore have very little chance of winning as you are not the incumbent technology provider to the client.  Currently it is extremely hard to get 2nd or 3rd quotes and, in some cases, has proven impossible.

Getting approval also has its problems.  Submissions go into a black hole where you never really know the status.  Some schemes constantly come back asking for more questions and information without any knowledge of when approval will or will not be given.  The issue here is that small business’s cannot wait.  A business who waits and waits for approval before starting a project runs the risk of damaging their business.  Small business’s need to be quick and act and therefore often they cannot wait for approval and projects start which is against the rules.

Then in some schemes you get approval but only for 10-20% of the project costs.  You are then asked to reduce your scope and resubmit for approval.  A small business that applies for HK$100K for a grant to do a project and only gets HK$10-20K approval will not use their own money to top up the funding to complete the project.  Therefore the approval rate of the schemes look excellent but the companies never actually do the project so they don’t get the money.

There are also requirements to submit non-collusion guarantees for the quotes.  Imagine are getting quotes from companies like Bloomberg some other large multi national firm there is zero chance of getting them to sign a non-collusion form.

The above issues are just the tip of the iceberg when it comes to grant applications in Hong Kong.  In order to resolve the issues the Government probably needs to revamp the entire strategy and hopefully incorporate some of the following: –

  1. Reduce the number of Grants to 10 to make it easier to understand the grant market. Broaden the scope of many of the grants so they can be merged.
  2. A disproportionately large number of the existing grants are for R&D. A review of where money is needed should be conducted so the grants can be distributed more evenly.
  3. All Grants should come under one department or bureau so that the grant market is not so segmented.
  4. Grant application should not be run like normal government procurement. The government should work with business to see exactly how small business’s work in terms of grants and technology.
  5. Eliminate the competitive quote scenario by using existing information to determine whether a vendor quote is a reasonable price.
  6. Add more grants for pre revenue businesses to help them get started. To much focus is on “substantive business” before you can apply.

Hong Kong is falling behind other countries such as Singapore, Australia, UK etc in terms of the grants available for start-up and small business.  A major overhaul of the grant system could put Hong Kong back as the front runner for small business destinations.

If you run a small business and do not have a technology provider but would like to know what is available to you from the HK Government please feel free to contact us as f8.sales@functioneight.com

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