Budget revives global links
After the COVID-19 pandemic disrupted Hong Kong’s uniquely outward-facing economy, authorities are reworking links with the world at large.
25 February 2021
The COVID-19 pandemic played havoc with supply chains, shut down economic activity across much of the globe and isolated outward-facing Hong Kong from most of the world.
In its 2021/22 Budget, the Hong Kong Special Administrative Region (HKSAR) Government seeks to revive and rework Hong Kong’s global links to suit a post-pandemic world. HKSAR Financial Secretary Paul Chan announced the Budget on Wednesday.
The Hong Kong Trade Development Council (HKTDC) has welcomed the budget, including additional funding to the Council, which will help revive the economy and support small and medium-sized enterprises (SMEs) in tackling the challenges brought by the pandemic and economic downturn.
“We welcome the economic recovery measures announced in the Budget, including fee waivers, tax reduction and optimising the ‘SME Financing Guarantee Scheme’ which would help relief the pressure on cash flow for SMEs,” said HKTDC Chairman Dr Peter K N Lam.
“The Government’s injection of new capital into the ‘Dedicated Fund on Branding, Upgrading and Domestic Sales’ (BUD Fund) and expansion of geographical coverage will also help Hong Kong companies tap into more promising markets.”
Dr Lam said many international trade fairs and conferences are expected to continue to be held virtually as the world is still fighting the pandemic. Even when the pandemic subsides, a physical-virtual hybrid model will likely be the new norm, he added.
“It is therefore of utmost importance to help enterprises accelerate their digital transformation. We will build a robust virtual platform supported by the latest technology to offer a seamless online-to-offline experience for buyers and sellers, helping local and global companies capture opportunities with greater ease and precision,” he said.
“To help Hong Kong companies ride on the opportunities from Mainland China’s ‘dual circulation’ policy and the Guangdong-Hong Kong-Macao Greater Bay Area development, we will ramp up our business promotion and matching activities,” he noted. The “dual circulation” model focuses on using domestic demand as the main growth driver while capitalising on external demand and resources as well.
“At the same time, we will leverage the growing focus on healthcare to develop Hong Kong into the leading international hub for medical and healthcare investment in the region,” said Dr Lam.
“We will redouble our efforts to create new opportunities for our industries, enabling them to diversify business and find new impetus for growth in the post-pandemic new normal,” he added.
Delivering the Budget, Mr Chan said that overcoming COVID-19 in the city would be the government’s top priority in the 2021-22 financial year.
He said the government would spend more than HK$8.4 billion (US$1.08 billion) to buy and administer COVID‑19 vaccines. “Our target is to have the majority of the population vaccinated for free within 2021,” he said.
Mr Chan said that as the pandemic further subsides, the government will launch a large-scale publicity and promotional campaign at home and abroad, showcasing to the world the image of Hong Kong as a highly open international city in the Greater Bay Area from various perspectives such as finance, innovation & technology, culture and creativity and tourism.
Noting rapid adoption of digital business during the pandemic, the government earlier launched the Distance Business Programme under the Anti-epidemic Fund (AEF) to support adoption of information technology solutions.
“The programme has received an overwhelming response since its launch in mid-2020, and a total funding of nearly HK$800 million has been granted. We have subsequently allocated an additional funding of HK$1 billion for the continuation of the programme and further enhancement,” said the financial secretary.
Challenges posed by the pandemic have also catalysed innovation and technology development in Hong Kong. Good examples included electronic wristbands to monitor people under quarantine and touchless lift buttons.
Businesses in Hong Kong have had to fundamentally change the way they interact with their clients throughout the world amid the pandemic.
“I will allocate a total of HK$375 million to the Hong Kong Trade Development Council (HKTDC) in three years starting from 2021/22 for developing virtual platforms to enhance its capability to organise online activities and to proceed with digitalisation,” he said.
The HKTDC will also promote the city’s strength in developing the Greater Bay Area and in healthcare products and services, Mr Chan added.
“It will also explore the use of its physical and online business-to-consumer platforms to assist young business starters in promoting their original products and gauging the preference of consumers,” he said.
Research and development
Since permission was granted for the remittance of research and development (R&D) funding from Mainland China to Hong Kong, the State Ministry of Science and Technology, Guangdong Provincial Government and Shenzhen Municipal Government in the past two years have approved more than Rmb340 million (US$52.6 million) for universities and research institutes in Hong Kong to conduct R&D or set up laboratories.
“The ‘InnoHK Research Clusters’ is our flagship project,” Mr Chan said. “It comprises Health@InnoHK on healthcare technologies and AIR@InnoHK on artificial intelligence and robotics technologies, and has attracted many top-notch universities and research institutions in the world. The first batch of about 20 R&D laboratories will commence operation progressively in the first quarter of this year. This will further consolidate Hong Kong's position as a global research collaboration hub.”
Funding under the Innovation and Technology Fund (ITF) increased more than seven times in the past seven years and the government will inject HK$4.75 billion per year to the ITF two years in a row to sustain its 17 funding schemes as well as the work of over 50 R&D laboratories in the next three years.
The pandemic led authorities to speed up the roll-out of its e-Government initiative by providing more electronic services to make it easier for enterprises and individuals to submit applications, make payments, obtain licences and use government services. By mid-2022, nearly all government forms and licence applications should be possible to submit electronically. E‑payment options (including the Faster Payment System) will be available for making payments in respect of most government bills and licences starting from the middle of next year.
The “iAM Smart” one-stop personalised digital service platform was launched at the end of last year. The Hong Kong Monetary Authority (HKMA) is currently working with the Office of the Government Chief Information Officer (OGCIO) to develop the business version of the “iAM Smart” digital authentication platform. It can be used to authenticate the identity of enterprises through an electronic channel.
With the wide adoption of “iAM Smart” in various electronic government services, members of the public can choose to obtain their data kept by individual government departments via electronic means, and submit such data electronically when applying for services from financial institutions.
In addition, the HKMA earlier announced the development of “Commercial Data Interchange”, which will allow commercial services operators to submit customers’ data to financial institutions under the instruction and consent of their corporate customers so as to assist them in the application for services.
“To promote the LawTech development, I set aside funding in the 2019-20 Budget to support the development of an online dispute resolution and deal making platform by a non-governmental organisation (NGO),” Mr Chan said.
“With an allocation of HK$100 million to the project, starting from this year, the platform will roll out negotiation, arbitration, mediation and online training services progressively and develop other services such as e-translation and smart contract in phases.
“This year, the Government will actively explore the development of the Hong Kong Legal Cloud, in order to sharpen Hong Kong's edge and raise our status in the provision of professional legal services.”
An innovative city needs appropriate infrastructure. Mr Chan said the supply of R&D and working spaces in the Hong Kong Science Park and Cyberport fell short of demand. In the past two Budgets, resources were set aside for the Science Park expansion and Cyberport 5 development, which will respectively provide about 28,000 and 63,000 square metres of floor area mainly for R&D or operation of innovation & technology enterprises.
“We are also pressing ahead with the development of the Hong Kong-Shenzhen Innovation and Technology Park (the Park) in the Lok Ma Chau Loop. A provision of about HK$32.5 billion has been approved for the project. Works have already commenced. The first batch of facilities is expected to be completed in phases from 2024 to 2027, the economic contribution to Hong Kong of which is expected to reach HK$5.5 billion per annum, with about 4,800 jobs to be created.
“Upon full development, the Park will be the largest ever innovation and technology platform in Hong Kong, providing a gross floor area of 1.2 million square metres, which is approximately three times that of the [Hong Kong] Science Park. Its economic contribution to Hong Kong is expected to reach HK$52 billion per annum, with about 52,000 jobs to be created.
With broad digital infrastructure, the coverage of 5G network in Hong Kong is now more than 90%. The subsidy scheme for expanding fibre-based network to villages in remote areas will be completed in phases from this year onwards. The government will continue to support the development of 5G networks and applications and release more 5G spectrum in different frequency bands.
In the face of rising unilateralism, Mr Chan said it is all the more important for the city to actively promote multilateralism, dismantle various barriers and strength Hong Kong's links with the international community.
“We should further expand Hong Kong's trade, investment and tax agreement networks. The Free Trade Agreement and the Investment Agreement between Hong Kong and the Association of Southeast Asian Nations (ASEAN) have recently come into full effect.
“In November last year, our country signed the Regional Comprehensive Economic Partnership (RCEP) Agreement with 14 economies. We are actively seeking to be among the first batch of economies joining the RCEP after it comes into effect, so as to help Hong Kong businesses and investors open up markets, thereby fostering the long-term economic development of Hong Kong,” he added.
Building on its status as a link between the mainland and the rest of the world, Hong Kong can use its advantages under the “One Country, Two Systems”, principle governing its relations with the mainland, playing its unique role as a gateway and an intermediary, Mr Chan noted.
The city should integrate into the new overall development of our country, actively participating in the national “dual circulation” development strategy and seize opportunities brought by the development of the Greater Bay Area and Belt and Road Initiative.
Boost for SMEs
To help SMEs reach clients throughout the world, the government will inject HK$1.5 billion into the Dedicated Fund on Branding, Upgrading and Domestic Sales (BUD Fund), and substantially extend in phases its geographical coverage from 20 to 37 economies to include all those with which Hong Kong has entered into Investment Promotion and Protection Agreements (IPPAs). The funding ceiling for each enterprise will be increased from HK$4 million to HK$6 million, so as to support enterprises in exploring more diversified markets by fully utilising the better protection offered by the IPPAs.
Support measures for individuals include reductions in income taxes and property rates, HK$5,000 electronic vouchers for residents to boost consumption in the city and loan guarantees of up to HK$80,000 at interest rates of just 1% for the unemployed.
Seeking to achieve carbon neutrality before 2050, the government will continue to promote the development of green and sustainable finance, encourage institutions to conduct relevant investment, financing and certification activities and attract top-notch institutions and talent to Hong Kong to provide the relevant services,” he said.
In January, Hong Kong successfully offered the second batch of government green bonds totalling US$2.5 billion, among which the 30-year tranche is the longest-tenor bond issued by the government and the longest-tenor US dollar-denominated government bond in Asia to date.
“We plan to issue green bonds regularly and expand the scale of the Government Green Bond Programme. We propose to double the borrowing ceiling of the Programme to HK$200 billion to allow for further issuance of green bonds totalling HK$175.5 billion within the next five years, having regard to the market situation.”
The government has been promoting the replacement of conventional fuel-propelled private cars with electric vehicles (EVs) and last year one out of eight new cars sold was an EV. Over the past 10 years, the number of EVs increased from 184 to more than 18,500. A “One-for-One Replacement” Scheme proposed in the Budget provides a higher first registration tax concession for owners who buy a new electric car and scrap their eligible old model, subject to a cap of HK$250,000.
Under the HK$2 billion EV-charging at Home Subsidy Scheme launched by the government in October last year, about 60,000 parking spaces in existing private residential buildings are expected to have EV charging-enabling infrastructure in three years. Since the introduction of the scheme, applications involving more than 50 000 parking spaces have been received.
“In addition to the resources earmarked in previous Budgets, I will set aside an extra HK$1 billion for more than 80 projects to install additional small-scale renewable energy systems at government buildings and infrastructure,” Mr Chan said.
- Association & Government
- Hong Kong