LCQ11: Measures to support local enterprises and safeguard employment
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Question:
Recently, the global economy has been plagued with quite a number of negative news. For example, the result of the referendum in the United Kingdom was in favour of leaving the European Union, the debt levels in Eurozone remain high, the United States has entered an interest rate up-cycle, the growth of the Mainland's economy has continued to slow down, etc. There are comments that in the face of such unfavourable external factors, it is difficult for Hong Kong, being an open and externally oriented economy, to be spared of those crises. The local economy has already shown signs of a downward trend, thus pointing to an unpromising employment outlook. In delivering the Budget speech this year, the Financial Secretary has pointed out that as the local economy is laden with considerable risks in the year ahead, the authorities "need to take timely and appropriate measures to stimulate the economy, support local enterprises and safeguard employment". In this connection, will the Government inform this Council:
- of the industries the unemployment rates of which over the past four quarters were higher than the overall unemployment rate; the measures taken last year by the authorities targeting such industries to offer them relief and stabilise their employment rates;
- of the data the authorities have mainly made reference to in assessing the downward risks of the local economy; the circumstances under which the authorities will decide to take measures to stimulate the economy, as well as the details of such measures; and
- whether, in the face of the current uncertain economic outlook, the authorities will shortly introduce new measures to help local enterprises tide over the financial difficulties and safeguard employment?
Reply:
President,
Having consulted the Financial Services and Treasury Bureau, the Economic Analysis and Business Facilitation Unit as well as the Labour Department, our consolidated reply to the three parts of the question is as follows:
The Government has always kept a close watch over the global economic situation and latest developments, and their possible impact on the Hong Kong economy. When assessing the outlook for the Hong Kong economy and the downside risks, the Government will consider all relevant factors, including the economic performance of major economies and their monetary policy directions, global financial conditions, Asia's economic and trade developments and geopolitical situations. The Government also studies the analyses made by such organisations as the International Monetary Fund and the World Bank. Moreover, the Government monitors the performance of Hong Kong's GDP, trade, retail sales, inbound tourism, labour market and other segments, so as to produce a comprehensive assessment.
With the deterioration in the external environment, Hong Kong's economic growth slowed to 0.8 per cent in the first quarter of 2016. On entering the second quarter, the year-on-year decline in Hong Kong's merchandise exports narrowed. Meanwhile, although retail sales and tourist arrivals remained weak, they fell at slower paces in April and May combined when compared with the first quarter. 　The labour market in overall terms has stayed broadly stable so far. The unemployment rates by sector for the past four quarters and the latest period (March to May 2016) are tabulated in the Annex. In March to May 2016, the seasonally adjusted unemployment rate was 3.4 per cent. The unemployment rates of the retail, accommodation and food services, manufacturing, and construction sectors were relatively higher. On a year-on-year comparison to net out seasonal influences, the unemployment rates of the retail, and accommodation and food services sectors rose by 1.0 and 0.2 percentage point respectively, reflecting the drag from sustained weakness in inbound tourism and a slackened local consumption market. The unemployment rate of the manufacturing sector also rose, by 1.3 percentage points from a year ago, while that of the construction sector remained unchanged.
The near-term employment outlook remains clouded by the challenging external and internal economic environment. The Government will stay vigilant and monitor the employment situation closely. The Labour Department (LD) will continue to provide free and comprehensive employment services for job-seekers, and implement various employment programmes for job-seekers who may have special needs or employment difficulties such as the youth, the middle-aged, mature persons and persons with disabilities. LD will also continue to canvass various vacancies for job-seekers, and organise large-scale, district-based and thematic job fairs regularly in collaboration with employers from different sectors and through the recruitment centres for the retail, catering and construction industries. The Government will also continue to closely monitor the situation of the retail industry, and press ahead with measures for developing retail manpower, namely the Earn and Learn Pilot Scheme for the Retail Industry, the Retail Technology Adoption Assistance Scheme for Manpower Demand Management, and the retail industry promotion campaign, so as to promote the healthy development of the industry.
In face of a challenging macroeconomic environment, the 2016-17 Budget proposed a series of measures to stimulate the economy, support local enterprise, and protect employment, for example reducing profits tax for 2015-16 by 75 per cent, subject to a ceiling of $20,000; waiving business registration fees for 2016-17; waiving one-year licence fees for 1 800 travel agents, 2 000 hotels and guesthouses, as well as around 27 000 restaurants and business operators etc. These measures would ease the burden on enterprises. In addition, to help small and medium enterprises (SMEs) secure loans in the commercial lending market and lower their loan cost, the 2016-17 Budget also announced that the Government would extend the application period of the special concessionary measures under the SME Financing Guarantee Scheme to February 28, 2017, reduce the annual guarantee fee rate for loan guarantee applications approved under the measures by 10 per cent, and remove the requirement of a minimum guarantee fee rate of 0.5 per cent for loan guarantee applications.
The Government will continue to implement various SME Funding Schemes to assist SMEs in obtaining financing, opening up markets and enhancing competitiveness. Among them, the SME Export Marketing Fund (EMF) provides financial support to SMEs in participating in export promotion activities; while the SME Development Fund (SDF) provides financial support to non-profit-distributing organisations to carry out projects which enhance the competitiveness of SMEs in general or in specific sectors in Hong Kong. The Government injected $1.5 billion into the above-mentioned Funds in 2015-16 and implemented enhancement measures, including increasing the maximum amount of funding support for each project under SDF from $2 million to $5 million and expanding the funding scope of EMF, so as to enhance the support of the two Funds to SMEs. Besides, through the $1 billion Dedicated Fund on Branding, Upgrading and Domestic Sales (BUD Fund), the Government provides support for enterprises in branding, upgrading and domestic sales to facilitate their business development in the Mainland. BUD Fund effectively assists enterprises in enhancing their competitiveness and developing in the Mainland market. As for the Enterprise Support Scheme, our survey results showed that, around 97 per cent of the enterprises which received funding to complete their projects considered that BUD Fund facilitated the development of enterprises; and generally helped to increase brand awareness, improve product quality, develop new products, establish domestic sales networks and enhance the overall competitiveness of the enterprise etc. To provide more appropriate support to enterprises, especially SMEs, the Government launched the "ESP Easy - Simplified Application Track" (ESP Easy) under the Enterprise Support Programme of the BUD Fund in late August 2015. ESP Easy adopts a set of simplified application procedures to assist enterprises in implementing specified measures. ESP Easy received enthusiastic response from the industry, 293 applications were received as at the end of June 2016.
On the other hand, the Government will continue to implement policies and measures to fortify and expand the economic base of Hong Kong, with a view to sustaining our long-term development. Specifically, apart from continuing to expand and strengthen the four pillar industries (namely trading and logistics, tourism, financial services, and business and professional services) where Hong Kong enjoys an advantage, the Government will actively identify emerging industries with potential in order to promote diversified development of our economy, so that Hong Kong can better respond to the world's ever-changing economic environment. The Economic Development Commission (EDC), led personally by the Chief Executive, and the four working groups set up thereunder (namely the Working Group on Transportation; the Working Group on Convention and Exhibition Industries and Tourism; the Working Group on Manufacturing Industries, Innovative Technology, and Cultural and Creative Industries; and the Working Group on Professional Services) have submitted a number of specific recommendations on promoting the development of the relevant industries, which were accepted by the Government. Examples include refining the Innovation and Technology Fund, developing diversified and high value-added tourism, enhancing support for the post-production sector of the film industry, and promoting the development of the fashion industry. The Government is progressively implementing the recommendations. EDC and its four working groups will continue to identify industries which present opportunities for Hong Kong's further economic growth, with a view to recommending policies and other support measures to facilitate the sustained development of the industries concerned.
Looking ahead, the global economy continues to face considerable challenges, with increased uncertainty following UK's vote in favour of leaving the EU. Asian economies will likewise be affected by the subdued external environment. Amidst the uncertainties, the Government will continue to closely monitor future developments.
Ends/Wednesday, July 13, 2016
Issued at HKT 14:30
Issued at HKT 14:30
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