Hong Kong Unveils Stimulus Package
HONG KONG, Feb. 27 – John Tsang, Hong Kong’s financial secretary, issued the territory’s budget for 2009-10 on Wednesday, introducing a raft of measures aimed at protecting Hong Kong from the worst of the economic downturn.
The government earmarked HK$1.6 billion for the creation of 62,000 jobs, while taxpayers in Hong Kong will receive a one-off rebate of HK$6,000. Other measures include the waiving of rates for two quarters, a cut in the cost of renting property from the government of 20 percent, an increase in expenditure of medical services of HK$840 million, and a raise in tax on tobacco of 50 percent.
The city deficit was expected to reach HK$39.9 billion by 2010 as the economy shrinks, with expectations of a contraction of 2-3 percent for 2009, compared with growth of 2.4 percent last year. Reaction to the budget from business groups and chambers of commerce has largely been positive. Further measures to protect Hong Kong’s economy are to be expected, probably in October during the Chief Executives policy address.
A statement on the budget and opportunities in Hong Kong has been issued by Invest Hong Kong, the city’s department for foreign direct investment. We reproduce it below.
Budget Provides More Reasons for Businesses to Ride Out the Downturn in Hong Kong and Turn Crisis into Opportunity
In The Financial Secretary, John Tsang’s budget speech 2009 he announced that the Hong Kong SAR Government plans to adopt counter-cyclical measures and government expenditure will exceed HK$300 billion (US$39 billion). This policy is intended to help ease the pressure of economic contraction, boost domestic demand and increase employment opportunities. This is in addition to the HK$57 billion (US$7.4 billion) fiscal stimulus package deployed last year to stabilise the financial system, provide immediate support to businesses and preserve jobs.
The 2009 budget will provide immediate measures to help Hong Kong citizens and businesses ride out the downturn, as well as build upon Hong Kong’s enduring business advantages to further strengthen the city’s position as Asia’s regional business hub and leading city for international business. As well as investing HK$1.6 billion (US$206 million) to create 62,000 jobs and internship opportunities in the next three years, the budget focused on generating opportunities in the medium and long-term to help build long- term sustainable businesses and strengthen Hong Kong’s economy.
New Business Opportunities
Investment in Infrastructure
Fast-tracking cross-boundary infrastructure projects to enhance global access to Mainland markets through Hong Kong generating enormous future business and economic opportunities.
The Government is launching 10 major infrastructure projects in 2010. Global participation is welcomed to ensure the best value for taxpayers’ money. In the last ten years foreign contractors have secured some 75% of the total contract values of infrastructure projects amounting to around HK$60.5 billion (US$7.8 billion).
Key infrastructure projects include: the 29 km Hong Kong-Zhuhai-Macau Bridge connecting Hong Kong and the western part of the Pearl River Delta (PRD) which will reduce the current four-hour trip from Zhuhai to Hong Kong International Airport to less than 30 minutes, making the whole of western PRD within a three-hour commuting radius from Hong Kong; and the Guangzhou-Shenzhen-Hong Kong Express Rail Link running from West Kowloon in Hong Kong to Guangzhou, more than halving the 2 hours journey to less than 50 minutes. This rail link also provides the opportunity for major Mainland cities to run direct rail services with Hong Kong, connecting Hong Kong to major cities across Mainland China.
12 Year Plan to Transform the Pearl River Delta
In December the Central Government unveiled an ambitious 12-year plan to turn the Pearl River Delta into a ‘globally competitive’ region, moving up the value-chain to focus on innovation, comprising high-end manufacturing and high-technology industries. To achieve this plan the Pearl River Delta region will forge even closer links and co-operation with Hong Kong and Macau.
Avoidance of Double Taxation Agreements
To further extend Hong Kong’s network of agreements for avoidance of double taxation Hong Kong plans to align its arrangements for the exchange of tax information with international standards.
Promoting Green Technologies
A number of initiatives to promote green industries and energy conservation were announced to enhance Hong Kong’s overall competitiveness and make it a ore livable city. These included promoting more energy efficient buildings, beautifying Hong Kong’s iconic harbour front and introducing electric vehicles to Hong Kong. Promoting investment and economic activities that protect the environment and save energy will put the overall Hong Kong economy on a more sustainable path.
Research & Development
Last year, the SAR Government and the Shenzhen Municipal Government and DuPont started working together to set up DuPont’s Solar Energy Thin Film Photovoltaic Research and Industrial Platform in The Hong Kong Science Park and its manufacturing facilities in Shenzhen. This was the first major technology project under the framework of the “Shenzhen-Hong Kong Innovation Circle”. Hong Kong will continue to work with Shenzhen to promote the scheme and develop a three-year action plan to attract more overseas enterprises to conduct scientific research in Hong Kong.
Two purpose-built laboratory buildings in The Hong Kong Science Park have been reserved to support biotechnology research. A number of world renowned biotechnology companies have been conducting technological research in Hong Kong. In addition to the key development areas of electronics, precision engineering and information technology, biotechnology will become a new cluster in the Science Park.
To continue on the path of Hong Kong becoming a high value-added and knowledge-based economy, the number of calls for Innovation and Technology Fund applications will be increased each year and the funded technology areas expanded. The grant ceiling for each project funded under the Small Entrepreneur Research Assistance Programme has been raised to HK$4 million (US$513,000).
Hong Kong has further improved its strict intellectual copyright laws that it actively enforces.
Asia’s Regional Financial Centre
Hong Kong has a clearly defined role as the leading global financial centre in Asia and China’s premier international financial centre. Central government has encouraged Mainland financial institutions to use Hong Kong as a platform to develop international financial services and recommended that more Mainland firms list on the Hong Kong’s stock market. Hong Kong is exploring new opportunities for its financial services sector given the Renminbi’s growing prominence in the international financial system and the Mainland’s announced plan to use Renminbi for international trade settlement. To improve Hong Kong’s regime as a platform for Islamic finance, plans will be submitted to create a level playing field for Islamic financial products vis-à-vis conventional ones.
Fostering Creative Industries
To support creative industries in Hong Kong, HK$300 million (US$39 million) will be earmarked in the coming three years, as well as running and attending events to nurture and promote Hong Kong’s talent including the World Expo in Shanghai in 2010.
A Secure Base
Hong Kong’s enduring business advantages that have been tested and fortified by earlier crises provide a secure base for businesses in the current economic turmoil. Under the system “One country, two systems” Hong Kong’s economic freedoms continue. It has an independent judiciary and transparent legal system based on the English rule of law, with free movement of capital, talents, goods and information. The government is committed to open markets and free trade under the guiding principle “Small government, big market”. It maintains a stable, low and simple tax system with the third lowest tax misery in the world. Hong Kong has no death duty, sales tax or capital gains tax and only 16.5% profit tax and 15% salaries tax. For 15 consecutive years Hong Kong has been judged by the Heritage Foundation and the Wall Street Journal to have the world’s freest economy. The city also boasts world-class infrastructure and telecommunications. It has the world’s best international airport, world’s busiest international cargo airport and one of the world’s busiest container ports.
Invest Hong Kong, the Department for Foreign Direct Investment
With sound fundamentals and flexible market institutions, Hong Kong should be able to recover swiftly once the global economic environment improves. It has sufficient fiscal and foreign reserves, an expanded bank capital volume and overall stable financial system. Hong Kong’s longer term prospects remain bright, as the strategy of leveraging on its fast-growing hinterland pays off and as productivity grows in the restructuring process towards a more knowledge-based economy.
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