Ventures Dialogue

Without exception, the global economic crisis is hurting every economy.  Our Financial Secretary Mr. John Tsang announced in his Budget yesterday his strategies to revitalize HK’s economy.  I am pleased to highlight some of the measures that may be of interest to you and/or may generate opportunities for your companies.

Budget Highlights
HK Economic Performance and Outlook – Affected by the global downturn, HK’s GDP grew by 2.5% in 2008 and unemployment rate has risen to 4.6%.  

A two to three per cent decrease in GDP is expected for 2009.  For the medium term, the average growth rate is estimated at 3.5% in real terms for the period 2010-13. 

Despite the downturn, HK’s economic fundamentals remain strong.  We have a sizeable current account surplus that amounts to 13% of GDP, a strong net external international investment position, a sharp increase in productivity in the past few years, etc. – which are all clear indicators of the underlying strength of HK. 

Objectives of the Budget are to:
- preserve and create jobs
- stimulate and further develop the economy
- sustain the development of a caring community and a city of quality
- maintain a fine balance between pragmatic and prudent financial management to counter the financial crisis and enhance the long-term competitiveness of HK.

Sustainable economic development

In adopting many counter-cyclical measures, HK Government will spend over $300 billion (approx. C$50 billion) in the coming year.  There will be measures to create jobs, as well as increase internship opportunities in both HK and the Mainland.  We will continue to invest heavily in infrastructure.  With the start of many mega projects, the annual capital works expenditure will be about $40 billion (C$6.7 billion) in 2009-10 and may reach $50 billion (C$8.3 billion) over the next few years.   HK’s fiscal reserve will stand at $448 billion (C$75 billion) at the end of March 2010. 

Consolidating HK’s position as an international financial centre
(i)    Promoting Further Development of the Bond Market

HK will work on providing more diversified investment products and avenues for financing for institutional and individual investors, which will attract more overseas and Mainland capital to HK and further enhance the stability of HK’s financial system.  Plans are underway to implement a programme to issue government bonds.

(ii)   Increasing Cooperation with Emerging Markets 
We will put in place particular measures to create a level playing field for Islamic financial products vis-a-vis conventional ones.

(iii)  Avoidance of Double Taxation
The business and professional community in HK was consulted last year and there is general agreement that HK should align its arrangements for the exchange of tax information with international standards so that HK can enter into avoidance of double taxation with more economies.  This will help reduce tax burdens on individuals and enterprises and eliminate uncertainties over tax liabilities.   Relevant legislative proposals will be put forth by the middle of the year.

HK as an Asian Wine & Gourmet Centre – Since the removal of wine duties last year, the total value of wine imported into HK reached HK$2.6 billion (C$0.4 billion), an increase of 82% over 2007.  HK has signed cooperation agreements with a number of winegrowing trading partners.  We will organize a “World of Food and Wine” Festival in October 2009, and will continue to hold wine fairs and trade shows through the year. 

Developing HK into a Technology-based Economy and Cooperation with Shenzhen & Guangdong – Under the framework of the “Shenzhen-Hong Kong Innovation Circle”, the HK and Shenzhen governments will formulate an action plan for the next three years for co-operative research projects.   As well, HK will cooperate with the Guangdong Provincial Government to enhance the overall research capacity of the Pearl River Delta (PRD) region and facilitate the upgrading and restructuring of HK enterprises there.

Cooperating with Guangdong in Environmental Protection – HK will further develop regional high-tech recycling industries, and encourage enterprises to adopt advanced technologies for cleaner production, energy saving and emission reduction. 

Facilitating cooperation with foreign partners on Green Building Developments – A “Hong Kong Green Building Council” will soon be established to help raise public awareness of green buildings and facilitate exchange and technological co-operation between HK and the rest of the world. 

Reducing Taxpayers’ burdens
As with last year, all HK taxpayers will receive a one-off tax reduction.  It will be 50% of personal tax, subject to a ceiling of $6,000 (C$1,000).   There will also be waiver/reduction of rates (a municipal service tax) and freezing of government fees and charges.

I have highlighted the above measures as I believe they should be of interest to you.  Notwithstanding the challenges ahead, HK will continue to play its multiple roles as a major city in China, as Asia’s world city, and as an international financial centre.  We will continue to strengthen our close ties with Canada and explore opportunities for further cooperation on various fronts.  I hope that in expanding their international presence – especially in Asia, more Canadian companies will make use of HK as a platform to expand their business in Mainland China and the neighboring region.

Please let me know if HKETO can be of assistance in any way. 

Maureen Siu
Director