26 February 2015

Hong Kong budget boosts commercial sector on multiple fronts

In his Budget delivered yesterday, Hong Kong's Financial Secretary John Tsang pledged to explore new ideas and strive for diversity to help Hong Kong people realise their aspirations.

"In particular, I shall make the best use of resources generated by the community's efforts, and continue to care for the disadvantaged and promote sustainable development, so that people from different sectors, as well as our next generations, can share the benefits of economic growth," the Financial Secretary said.

 Measures targeting the cultural and creative sector include:

* Injecting an additional HK$400 million into the CreateSmart Initiative to support different sectors and provide talented people with training programmes, as well as overseas exchanges and internships. "Efforts will be made to assist them to participate in and organise exhibitions and fairs, provide talented people with training programmes and subsidised overseas exchanges and internships so as to afford them opportunities to realise their potential," Tsang explained.

* Launching a HK$500 million, three-year pilot programme for Hong Kong's fashion industry. Making use of existing and new resources, the programme will promote fashion designers and brands, create an incubation programme for design startups and provide fashion design graduates with overseas internships and study opportunities;

* Initiating a HK$300 million Art Development Matching Grants Pilot Scheme, under which private donations and sponsorship secured by eligible local arts groups will be matched by government grants; and

* Adding HK$200 million to the Film Development Fund and introducing a subsidy scheme for film productions with a budget not exceeding HK$10 million, to boost the volume of local film production and nurture film talent. The production budget ceiling of the Scheme for Financing Film Production will be raised as well, from HK$15 million to HK$25 million. The Government will also relaunch the First Feature Film Initiative, with increased subsidies for production costs.

Tsang said that startups developed by the Hong Kong Science and Technology Parks Corporation (HKSTPC) and Cyberport had attracted hundreds of millions of dollars in investment.

To further promote the financing of new enterprises, Mr Tsang said that the HKSTPC would earmark HK$50 million to set up a corporate venture fund on a matching basis with private funds. The money would be invested in startups that were either located in the Science Park or had participated in one of its incubation programmes.

Tsang also earmarked HK$150 million for a new phase of the Enhancing Self-Reliance Through District Partnership Programme, covering 2016-17 to 2019-20.

He said the money would be used to encourage commercial sector participation in social enterprises and promote a greater variety of social enterprises. "Social enterprises are gaining recognition in Hong Kong. With business models that balance economic and other social values, they mark the maturing of our society.  Research showed that each dollar of public funding contributed four to seven dollars of workfare to those disadvantaged employees, reflecting the significant benefits brought about by social enterprises," he noted in his Budget speech.

"Since the launch of the Enhancing Self-Reliance Through District Partnership Programme (ESR Programme) in 2006, the Home Affairs Department has so far allocated a total of HK$180 million for the establishment of 161 social enterprises, which created 2,600 job opportunities.  Eighty percent of these social enterprises have become self-sustaining after the funding period."

Human resources development was a central aspect of the Budget. "Manpower mismatch is becoming more and more evident in Hong Kong in recent years.  This, coupled with the imminent challenge of an ageing population, has directly hindered the sustainable economic development of our city.  We must strive to overcome the constraints on our development potential and rise to the challenges together.  Otherwise, our next generations will have to bear the price of our short-sightedness.," Tsang warned in his Budget speech.

Human resources initiatives in the Budget include:

* HK$100 million for a three-year pilot scheme focused on insurance and asset and wealth-management services. In collaboration with industry, the programme will offer internships, particularly for students, to get a better understanding of career prospects in the two sectors. Government and industry will also enhance the content of continuing professional development programmes, and provide financial support to encourage practitioners to enrol in these programmes.  

"Last year, I requested the Financial Services and the Treasury Bureau (FSTB) to consult the industry on manpower training needs.  There was broad consensus that manpower shortage was particularly acute in the insurance and the asset and wealth management sectors.  They also suggested that government could help promote the industry, enhance the professional competence of practitioners and, in particular, train up more talent for middle and back offices," explained Tsang in his Budget speech.

* HK$960 million for a pilot programme allowing 1,000 students per cohort to pursue designated self-financing undergraduate programmes that reflect Hong Kong's manpower needs. In the 2015/16 academic year, the initiative will cover 13 programmes, ranging from healthcare to architecture and engineering, testing and certification, the creative industries, logistics, and tourism and hospitality;

* To expand, to 3,000, the short-term internship places provided by government departments for 2015-16. This is an increase of 30% over the last financial year.

* An additional $205 million over the next three years to allow more Hong Kong young people to take part in Mainland exchange and internship programmes;

* 250 internships for university students wishing to broaden their understanding of Association of Southeast Asian Nations (ASEAN) countries, up from 90 internships in last year's inaugural round;

* HK$23 million over the next three years to promote Hong Kong as an intellectual property (IP) trading hub in the region. The money will be used for manpower training, IP consultation and other services to small and medium enterprises;

* HK$130 million to strengthen childcare services, to help more women join the workforce;

* In addition, the Government will extend the coverage of the on-the-job training allowance under the Employment Programme for the Middle-aged to encourage the employment of older persons to take up part-time jobs, and the Employees Retraining Board will focus on providing training for older persons, among other target groups.

Improving the environment was also high on the agenda. Environmental measures include:

* Phasing out 82,000 Euro III, or earlier, diesel commercial vehicles by the end of 2019. To date, 22,000 of these vehicles have been phased out;

* Extending, to the end of March 2018, the incentive scheme that halves the port facilities and light dues charged on ocean-going vessels using low-sulphur fuel while at berth in Hong Kong;

* An additional $150 million to extend the Cleaner Production Partnership Programme by five years. The programme helps Hong Kong-owned factories in both Hong Kong and Guangdong reduce emissions and conserve energy.

Tsang also underlined the value of small and medium enterprises (SMEs) to Hong Kong's economy.

"Our external trade performance will be affected by a host of uncertainties this year.  It can hardly drive our economic growth.  As such, we shall need to rely on domestic demand for maintaining economic vibrancy and preserving employment. There are 320,000 small and medium enterprises (SMEs) in Hong Kong, accounting for 98% of the total local enterprises and employing 50% of the private sector workforce.  This underscores SMEs' role as the mainstay of our economy," he said in his Budget speech.

The government will inject HK$1.5 billion into the SME Export Marketing and Development Funds and increase the maximum amount of funding support for each project under the SME Development Fund from HK$2 million to HK$5 million.

The scope of the SME Export Marketing Fund will also be expanded, Tsang said. He announced HK$180 million in targeted, short-term measures to help sectors adversely affected by the occupy movement:

* Waiving license fees of 1,800 travel agents for six months;

* Waiving licence fees of 2,000 hotels and guesthouses for six months;

* Waiving licence fees of restaurants and hawkers, and the fees for restricted food permits, for six months to benefit 26,000 restaurants and operators; and

* Waiving vehicle examination fees for the renewal of licences once within one year for taxis, light buses, franchised and non-franchised buses, goods vehicles, trailers and special-purpose vehicles.

The Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA) continues to make progress. "Up till now we have issued 3,000 Certificates of Hong Kong Service Supplier and thousands of Hong Kong residents have set up individually-owned stores in the Mainland in accordance with the preferential treatment under CEPA," Tsang noted.

"At the end of last year, I signed a new agreement with the Ministry of Commerce to promote liberalisation of trade in services between Hong Kong and Guangdong. After the agreement comes into effect, Guangdong will open up 153 services trade sub-sectors to Hong Kong service suppliers, accounting for 95.6% of all trade sub-sectors under the WTO's classification system. I hope the Mainland will further deepen the liberalisation measures on this basis and extend them nationwide, thereby achieving basic liberalisation of trade in services between the entire Mainland and Hong Kong by the end of this year."

Hong Kong is also focused on intellectual property trading, with HK$23 million in the coming three years earmarked by the government for offering IP consultation, manpower training and other services to SMEs. "As regards tax deduction for capital expenditure incurred on the purchase of IP rights, I shall consider extending the scope to cover more types of IP rights as appropriate," he said.
Proposed tax measures included a 75% reduction of profits tax and salaries tax for the year of assessment 2014-15, subject to a ceiling of HK$20,000 per case.

"I think we need to inject some funding to help improve the business sentiment as well as the perception people have overseas about Hong Kong, because we are an externally oriented economy and what concerns international investors, what concerns overseas tourists, are big concerns to us and I think we need to remedy the situation," Tsang shared in a press conference on the Budget.

CY Leung, Chief Executive of Hong Kong cautioned that some people may have underestimated the importance of economic growth. Commenting on the Budget in a statement he said, "This calls for vigilance. Faced with an economic slowdown in the Mainland and uncertainties in economies worldwide, we should remain careful."

Leung also asked employers to "improve the pay conditions of their employees whenever possible to share the prosperity."