Revised Estimates for 2017-18
 
58. The 2017-18 revised estimate on government revenue is $612.4 billion, 20.6 per cent or $104.7 billion higher than the original estimate.  This is due mainly to much higher-than-expected revenues from land premium and stamp duties.
 
59. The revenue arising from the sale of several residential and commercial sites in the urban area and a sharp increase in the number of land exchange agreements concluded with developers, land premium increases by $62.6 billion to $163.6 billion or 62 per cent higher than the original estimate.  As a result of heated trading in both the property and stock markets last year, the revenue arising from stamp duties would be $39.7 billion or 75 per cent higher than estimated, reaching $92.7 billion.
 
60. As for government expenditure, I forecast a revised estimate of $474.4 billion, 3.5 per cent or $17 billion lower than the original estimate.  This is mainly because the expenditure on certain initiatives, such as the Old Age Living Allowance (OALA) and the Low-income Working Family Allowance (LIFA), were lower than the original estimate.
 
61. For 2017-18, I forecast a surplus of $138 billion.  Fiscal reserves are expected to reach $1,092 billion by 31 March 2018 while the Housing Reserve will reach $78.8 billion.
 
Budget Measures for 2018-19
 
Diversified Economy
 
62. Economic development increases income and enables us to improve people's livelihood and drive for society progress.
Innovation and Technology
 
63. I&T is undoubtedly an economic driver in the new era.
 
64. To shine in the fierce I&T race amidst keen competition, Hong Kong must optimise its resources by focusing on developing its areas of strength, namely biotechnology, artificial intelligence, smart city and financial technologies (Fintech), and forge ahead according to the eight major directions set out by the Chief Executive.  In order to achieve results, our targeted efforts must be underpinned by adequate resources.  In last year’s Budget, I reserved $10 billion for supporting I&T development.  This year, I will set aside an additional $50 billion. 
 
Lok Ma Chau Loop
 
65. Of this, $20 billion will be used on the first phase of the Hong Kong-Shenzhen Innovation and Technology Park in the Lok Ma Chau Loop for, inter alia, site formation, infrastructure, superstructure and initial operation.  Given the scale of the development, it is estimated that the whole project will eventually cost far more than $20 billion.  When the relevant planning studies are finished, we will make reference to the findings and provide additional resources in a timely manner so that the Park can come into operation as early as possible.
 
Innovation and Technology Fund
 
66. Besides, we will inject $10 billion into the Innovation and Technology Fund (ITF).  The ITF's financial support for I&T development in Hong Kong has increased from about $700 million in 2013-14 to $1.5 billion in 2017-18.  It is anticipated that the demand for funds will continue to increase.  As our fiscal position is strong this year, I believe that a funding injection is opportune.  The ITF will continue to support applied R&D work in Hong Kong with the additional resources.
 
Establishing Technology Research Clusters
 
67. I will also earmark $10 billion to support the establishment of two research clusters on healthcare technologies and on artificial intelligence and robotics technologies, to attract the world's top scientific research institutions and technology enterprises to Hong Kong for conducting more midstream and downstream R&D projects in collaboration with local universities and scientific research institutions.  Such clusters will pool and nurture more technology talent in Hong Kong.  I will provide financial support for non-profit-making scientific research institutions that will establish their presence in these two clusters.
 
Science Park
 
68. To reinforce the role of the Science Park as Hong Kong's flagship technology infrastructure, I will allocate $10 billion to the Hong Kong Science and Technology Parks Corporation (HKSTPC).  Of this, about $3 billion will be used to construct research-related infrastructure and facilities, whereas the remaining $7 billion will be used for the HKSTPC to enhance support for its tenants and incubatees, and set up a Smart Campus in the Park, etc..
 
Cyberport
 
69. Moreover, I will allocate $200 million to Cyberport to enhance the support for start-ups and promote the development of digital technology ecosystem.  Cyberport is going to launch an "easy landing" programme to attract multinational companies (including overseas and Mainland leading internet enterprises and Fintech companies) to set up offices and R&D units in Hong Kong.  It will also roll out a new support scheme, offering financial assistance up to $200,000 for each eligible start-up to conduct market research and promotion, as well as participate in business missions, trade fairs and exhibitions, etc. outside Hong Kong.  The financial assistance offered under Cyberport’s incubation programme to individual start-ups will also increase by 50 per cent to $500,000.
 
E-sports
 
70. In recent years, e-sports have been developing rapidly with tremendous potential.  Last December, Cyberport completed a study on the promotion of e-sports in Hong Kong and made a number of recommendations.  To promote the development of e-sports, I will allocate $100 million to Cyberport. The Cyberport Arcade will become a local e-sports and digital entertainment node providing a competition venue for e-sports.  Support will also be provided for the e-sports sector in areas such as technological development and talent nurturing.
 
Encouraging Research and Development
 
71. To encourage R&D, the Chief Executive announced in her Policy Address the provision of additional tax deduction for domestic expenditure on R&D incurred by enterprises.  Enterprises will enjoy a 300 per cent tax deduction for the first $2 million qualifying R&D expenditure, and a 200 per cent deduction for the remainder.  Drafting of the legislation and consultation have already commenced.
 
Promoting "Re-industrialisation"
 
72. I set up the Committee on Innovation, Technology and Re-industrialisation last April to promote re-industrialisation.  The Data Technology Hub and the Advanced Manufacturing Centre under construction are expected to be completed in 2020 and 2022 respectively.  We are also expanding the Science Park, which is expected to provide extra space for start-ups and other technology companies in two years.  Moreover, the Hong Kong Productivity Council established an Inno Space last October to provide working space and technical support for start-ups, students and graduates to help them develop their innovative ideas into industrial design, which may subsequently be translated into products through prototyping.
Technology Voucher Programme
 
73. In addition to the above new initiatives, the Government will also relax the eligibility criteria for the Technology Voucher Programme.  All local enterprises, irrespective of size and duration of operation, may apply.  This will enable more medium enterprises and start-ups to benefit from the Programme.

Innovation and Technology Talent
 
74. We will earmark $500 million under the ITF to implement, in the second half of the year, the Technology Talent Scheme as announced in the Policy Address.  One of the initiatives is to establish a Postdoctoral Hub programme to provide funding support for all eligible institutions to recruit postdoctoral talent.  The Scheme will also provide funding to subsidise local enterprises on a matching basis for training staff on high-end technologies.
 
75. While we foster the development of new industries, we should also strengthen the traditional industries where we enjoy clear advantages.

(To be continued.)

Ends/Wednesday, February 28, 2018
Issued at HKT 11:40

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