Consultation Paper on a Study by KPMG Management Consulting Ltd on Hong Kong's Trading Sectors

-- Comments by the Hong Kong Coalition of Service Industries
February 1996

General comments

1. The HKCSI welcomes the initiative by the HKPC in taking a more active role in promoting productivity in services. Indeed, it has been the Coalition's stated position, when it responded to an earlier consultancy study for government by KPMG on promotion of services, that

As in the case of goods, the promotion of the domestic productive capacity will be an integral part to the overall development of service industries. Singapore's example shows that such "internal promotion" in productivity growth and infrastructure is as important as exports promotion.

2. While broadly supportive of the suggestions by the consultant in respect of the direction of the HKPC in promoting services, there remains a few aspects of wider concern which the HKCSI believes should be considered.

Concerted effort needed

3. We would emphasise that the promotion of the domestic productive capacity should be an integral part - but a part nonetheless - to the overall development of service industries. A proactive strategy by the HKPC is very much welcomed but it should be part of a concerted effort to promote services. There is a need therefore to place the HKPC initiative within a wider context of the overall promotion of services, in order to maximise synergy and avoid duplication of work between different institutions.
4. The consultation paper refers to the importance of productivity with which we are in full agreement. But precisely because productivity is so important, no one organisation can be both strategist and implementer at the same time. In considering an approach based on leadership by a public body such as the HKPC, perhaps not enough emphasis has been placed on making use of the dynamism of the private sector. In our view, strategy formulation should best be achieved through a cooperative effort led by the private sector and building on all existing resources in Hong Kong, while the HKPC should take on an implementation role.

Organisation and services

5. It follows from the above that we would prefer the HKPC initiative to be more focused and industry/sector specific, with detailed proposals concerning the structure, charge rates and services to be provided. The HKPC should avoid becoming a general consultancy indistinguishable from other consultancies.
6. Establishing a Service Productivity Branch is clearly a most direct means of introducing the new services but the HKPC might not entirely be at its most productive if the new Branch were merely treated as an addition to the existing organisation. It should consider what other activities should be reduced to reflect the decline in manufacturing in Hong Kong. As manufacturing has declined and the HKPC activities (reflected by headcount and revenue) have grown, HKPC is presumably already providing for the service sector albeit in an uncoordinated way. What is required is therefore a rationalisation rather than a mere expansion of the organisation.

Specific comments on Proposed Actions by HKPC

7. Proposal (i): Disseminating a relevant productivity measurement model. Such a model should be useful provided that the leaning is not towards a theoretical/academic approach but a practical, business-oriented one.
8. Proposal (ii): Promoting productivity awareness. This sounds a good idea although we would point out the following considerations which should be taken into account before an effective campaign could be mounted.
1. Productivity is not a moral or ethical issue and its promotion calls for a different approach from, say, awareness campaigns on business ethics or "green" lifestyles. There is no indication in the consultation paper as to what specific approach will be taken in the implementation of the awareness programmes, hence it is difficult to react to the proposal except to say in a generalised sense that this is a good idea. We would emphasise, however, the need to evaluate carefully the approach to such promotion. In particular, we have reservations to the use of a "traditional" approach in promoting awareness which the headings of "Service Productivity Week/Month and Awareness Seminars" seem to convey, in that such approach risks turning out to be stating the obvious or preaching to the converted. Businesses have a self-interest in higher productivity which should be exploited. A more productive approach would thus be to devise programmes that enable businesses to relate the productivity concept to their everyday operations, rather than one-way campaigns. This implies a need for the involvement of the private sector in the leadership and planning of such programmes, rather than treating the business community as being at the receiving end of a HKPC-initiated movement.
2. Service industries are diverse and it is difficult to quantify services input, output and value-added. Better productivity may take the form of increased receipts in some sectors, reduced cost in others, or simply improved quality. Cross-sectoral comparison is not always possible and this will render a general "Productivity Award" extremely difficult to organise. While this is not an excuse to not implement such an award, the need to define the award more clearly and to relate it to other service promotional themes should be carefully considered.
3. In sum, promotion of productivity should be a cross-sectoral effort. Besides the HKPC, there should be a considerable role for government, HKCSI and other bodies involved in the promotion of the service industries.
9. Proposal (iii): A Productivity Benchmarking Centre. Benchmarking is about adopting "best of the best" of business practices and as such should be driven by the private sector. We are unsure therefore of the contributions of a Benchmarking Centre within the HKPC. If such a centre were to be established, its role must be more clearly defined. Since benchmarking is, by nature, more directly relevant to the "premium" industries, we anticipate that much of the benchmarking efforts will be undertaken by private sector service providers. To create a Benchmarking Centre "to serve as the clearinghouse in benchmarking activities" risks duplicating the efforts of private sector practitioners such as the Hong Kong Benchmarking Clearinghouse. On the other hand, there will be merit in having a Benchmarking Centre for the promotion of best practice but again this should be undertaken within the wider context of the promotion of service quality, rather than the somewhat narrower focus of productivity. It would appear more fruitful for the HKPC to focus its services to more specific productivity improvement practices such as work simplification and process-improvement techniques, rather than engage in the more generic "quality and best practice" initiatives which should, again, be more effectively driven by the private sector.
10. Proposal (iv): Promotion on use of IT. We support this proposal.
11. Proposal (v): Service Productivity and Quality Centre. The HKPC's initiatives in promoting quality is welcomed but the key is coordination of various efforts by different agencies. We are not sure it would not be outside HKPC's remit to focus on quality generally. In particular, the introduction of "world class customer service practices to Hong Kong" would appear to be a task more appropriate for the private sector through facilitating the working of the free market.
12. Proposal (vi): Studies on service sectors. We support this proposal.
13. Proposal (vii): Advisory Committees. We support this proposal.
14. Proposal (viii): Synergy between manufacturing and services. We support this proposal.
15. Proposal (ix): Productivity Index. We support this proposal. This is in line with what the HKCSI proposed in its "Second Position Paper on Services Statistics" in October 1994 and we would be happy to be involved in the process of compiling such an index.
16. Proposal (x): Service Productivity Branch. Such a branch is needed for the HKPC to better serve the service industries but its tasks should be more clearly defined and should be specifically productivity-oriented. It should not be a simple extension of HKPC's organisation but rather part of a restructured organisation which should see HKPC services more streamlined to reflect the needs of its clientele (see also para 6 above).

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