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LCQ16: Six priority industries

     Following is a question by the Hon Lam Tai-fai and a written reply by the Financial Secretary, Mr John C Tsang, in the Legislative Council today (March 2):


     In his policy address delivered in 2009, the Chief Executive ("CE") announced the development of six industries where Hong Kong enjoys clear advantages, including testing and certification, medical services, innovation and technology, cultural and creative industries, environmental industries and education services.  CE considered that those industries were crucial to the development of Hong Kong's economy and would propel Hong Kong towards a knowledge-based economy.  In this connection, will the Government inform this Council:

(a) whether it has completed the survey on the statistics on the six industries for 2009, and when the statistics will be released;

(b) whether the Government has assessed if the one-year lag in the statistics to be released behind the market development will adversely affect the planning for the future development of the various industries; if it has assessed, of the details; and whether it will revise the timeframe for releasing the statistics; if it will not revise, of the reasons for that;

(c) whether the Government has roughly estimated the total amount of the overall direct contribution made by private enterprises in the six priority industries to the Gross Domestic Product as at the end of 2010, and whether there was any growth as compared with that of the same period in 2009, with a breakdown by industry;

(d) of the number of persons currently employed in each of the priority industries; the respective percentages of such numbers in the total workforce; among such employees, the respective proportions of those working in the public sector and those in private enterprises;

(e) of the total amount of capital injected in each industry by the Government since its announcement of the development of the six priority industries, with a table listing the total amount, purposes and time of capital injection, whether foreign investments have been attracted, if so, of the details and, if not, the reasons for that;

(f) given that the Government has reserved four sites for the development of private hospitals to tie in with the development of medical services, of the total number of Expressions of Interest ("EOIs") received so far; the nature of the applicant organisations (whether they are property developers or purely healthcare institutions); among such organisations, how many of them will provide Chinese medicine service; and the timetable for granting the sites;

(g) given that the Government has reserved five sites for the construction of private universities to tie in with the development of education services, and the Government's original plan was to invite interested organisations to submit EOIs for the site at the former Queen Hill's Camp in Fanling by the end of last year, of the reasons for the delay of the plan, and when the remaining four sites will be released;

(h) of the details of the Government's study on allowing senior secondary students from the Mainland to take courses in Hong Kong, e.g. short-term courses offered by degree-awarding higher education institutions and senior secondary classes of non-public schools in Hong Kong, etc.;

(i) given that to tie in with the development of testing and certification, the mainland government allows eligible testing laboratories in Hong Kong to undertake testing of products for the China Compulsory Certification System on a pilot basis for selected products processed in Hong Kong through Supplement VII to the Mainland and Hong Kong Closer Economic Partnership Arrangement signed in May last year, of the details of the implementation of such arrangement to date and the progress made by the Government in seeking mutual recognition between the Mainland and Hong Kong of qualifications in testing and certification;

(j) whether the Government has examined the provision of more tax incentives to small and medium enterprises engaged in innovation and technology and cultural and creative industries as a means to provide greater incentives to enterprises taking part in the development of these industries; if it has, of the details; if not, the reasons for that;

(k) whether it has assessed the local job opportunities created by the various industries; whether overseas talents have been attracted to work in Hong Kong; if so, of the details; if not, the reasons for that; and

(l) of the respective numbers of legislative amendments relating to the six priority industries proposed by the Government last year as well as those relating to the finance and real estate services; whether it has assessed if the Government places too much emphasis on the development of finance and real estate services and neglects diversified development of different industries; if it has assessed, of the details; if not, the reasons for that?



     The following is a consolidated reply based on inputs from the relevant policy bureaux:

(a) The statistics on the economic contribution and employment situation of the Six Industries in 2009 were released through a press release issued on February 23, 2011.

(b) The development of the Six Industries is a long-term plan.  To formulate the development plan, the Government will take into consideration various factors, such as the views of the industries and whether the opportunities for co-operation with the Mainland and the Pearl River Delta region can be capitalised.  Statistical data serve only as reference.

(c) The Government does not produce any crude estimates on the direct contribution of the Six Industries to the Gross Domestic Product for 2010, and we do not have detailed information provided by the relevant business establishments.

(d) The relevant statistics on the employment of each of the Six Industries in the private sector and their percentage shares to total employment in 2009 are set out at Annex.  We have not kept data related to the employment of the Six Industries in the public sector.

(e) The funding provided and other measures put forward by Government in support of development of the Six Industries are summarised as follows:

Cultural and creative industries

     Regarding the promotion of the cultural industry, in 2010-11, government spending in the arts and culture is estimated to be more than $2.8 billion (excluding expenditure on capital works).  To promote the local cultural industry, and to complement the development of the West Kowloon Cultural District, we have earmarked an additional recurrent expenditure of $486 million from 2010-11 to 2014-15 for strengthening our cultural software.

     Besides, we injected $1.5 billion into the arts portion of the Arts and Sport Development Fund in July 2010.  We plan to invite applications and will use the annual investment returns to support the long-term development of the arts in Hong Kong.

     For creative industries, we set up the CreateHK dedicated office and established the $300 million CreateSmart Initiative (CSI) in 2009 to provide support to the creative industries.  CSI aims at providing financial support to projects conducive to the development of creative industries in Hong Kong, with a view to promoting and speeding up the development of local creative industries so as to build Hong Kong into Asia's creative capital.  In 2010-11, a total of more than $40 million has been granted under CSI.  

     CreateHK is also responsible for administering the DesignSmart Initiative (DSI) and the Film Development Fund (FDF) which have been established to support the design and film sectors respectively.  In 2010-11, projects funded by the DSI include conferences, seminars, workshops, exhibitions, design competitions and awards, training courses, design research and design-business collaboration projects.  In 2010-11, $19 million has been granted under the DSI.

     As regards FDF, we have granted more than $41 million in 2010-11 to projects and activities which contribute towards the development of the Hong Kong film industry, including financing in part small-to-medium budget film productions.

Medical services

     We facilitate the development of medical industry through enhancing the support for hardware and software. On hardware, we have reserved four sites (in Wong Chuk Hang, Tseung Kwan O, Tai Po and Lantau) for private hospital development.  As for software, we will continue to enhance the training and development of local healthcare professionals, and encourage exchange between local and overseas healthcare professionals with a view to further raising the service standards of our healthcare sector.  

Testing and Certification Industry

     In 2010-11, the Government's expenditure on promoting testing and certification is about $72.9 million, mainly to provide the industry with accreditation service, calibration service and information on international standards, as well as to provide secretariat support for the Hong Kong Council for Testing and Certification (HKCTC).

     To promote the development of the testing and certification industry, the Government allocated in 2010-11 and 2011-12 a total of $20 million to support the work of the HKCTC in implementing its three-year development plan for the industry.  The Government also allocated in 2010-11 and 2011-12 an additional funding of $21 million to the Hong Kong Accreditation Service for hiring additional staff to enhance the provision of services to the industry.

Innovation and Technology

     In 2010-11, the Government's expenditure on promoting innovation and technology is about $1.1 billion, which is mainly for supporting the operation of R&D centres, providing funding support to applied R&D projects under the Innovation and Technology Fund (ITF) and organising activities to promote and publicise Hong Kong's innovation and technology development.  

     The Government launched the R&D Cash Rebate Scheme in April 2010 to encourage further collaboration between enterprises and public R&D institutions.  Under this Scheme, enterprises conducting applied R&D projects may enjoy a cash rebate equivalent to 10% of their R&D investments.  The Government has also decided to take forward the construction of the Science Park Phase 3, which will cost $4.9 billion.  It is expected that the project will be completed in phases between 2013 and 2016.

Environmental industries

     We have been promoting the development of environmental industries and a green economy through multi-pronged policies and initiatives.  They include enhancing building energy efficiency and promoting the use of energy-saving household appliances by legislation, setting up the Pilot Green Transport Fund, making more use of electric vehicles, and taking forward other measures such as expanding the list of products with green specifications for government procurement, piloting the use of new green materials in public works, encouraging scientific research on environmental protection and building environmental infrastructure. Total capital expenditure for environmental protection, conservation, etc. in 2010-11 is estimated at about $4.7 billion.  

     To encourage the transport sector to test out green and low-carbon transport technology, the Government is setting up a $300 million Pilot Green Transport Fund in March 2011.  To encourage the public to take concrete actions for enhancing building energy efficiency, $450 million has been allocated from the Environment and Conservation Fund to subsidise private building owners to carry out energy-cum-carbon audits and energy efficiency projects on a matching basis.  We have allocated over $93 million for a five-year Cleaner Production Partnership Programme to facilitate Hong Kong-owned factories in the PRD region to adopt cleaner production technologies and practices, as well as facilitate the exchange of information on environmental technology and the promotion of environmental technology and services.

Education services

     To promote the internationalisation and diversification of our education services, we have allocated four greenfield sites for the building of international schools.  As regards the self-financing post-secondary education, we have granted in total eight sites at the end of last year for the development of self-financing post-secondary programmes.  We have also reserved a site at the former Queen Hill's Camp in the New Territories and invited expressions of interest from relevant organisations.  Currently, the Start-up Loan Scheme has a total commitment of $7 billion.  We will consider increasing the commitment of the Start-up Loan Scheme to help institutions meet the costs of purpose-built accommodation when needed.  We also have the $100 million Quality Enhancement Grant Scheme to fund projects or measures that could enhance the quality of self-financing post-secondary education.  In the 2010 Policy Address, the Chief Executive proposed to establish a Self-financing Post-secondary Education Fund with a total commitment of $2.5 billion for the development of self-financing post-secondary education. We plan to set up the Fund in the second half of this year.

(f) The Government has reserved four sites for private hospital development.  We invited the market to express their interest in developing the sites from late 2009 to March 2010.  A total of 30 submissions have been received.  Among them, 21 are from local parties, seven are from overseas parties and the remaining two are from joint partnership of local and overseas parties.  Most of the submissions contain a hospital development plan and the proposed service scope in some of the submissions includes Chinese Medicine among other services.

     We are considering the feedback from the market with a view to formulating suitable arrangements to dispose of the sites in phases from late 2011 or 2012.

(g) At the end of last year, we invited expression of interest from relevant organisations for the site at the former Queen Hill's Camp as planned.  We will take into account the responses received with a view to formulating the development plan, and invite eligible organisations to submit detailed education development proposal.  In addition, we awarded two sites at the end of last year for the development of self-financing degree programmes.  We plan to launch the site at Tseung Kwan O in 2011, and subject to the need of the post-secondary education sector, the site at Tai Wai as and when appropriate.

(h) As regards the proposal of allowing senior secondary students from the Mainland to pursue studies in Hong Kong, including short-term courses offered by degree-awarding higher education institutions and senior secondary education at non-public schools in Hong Kong, the Education Bureau is now discussing with the relevant Mainland authorities the feasibility of the proposal.

(i) Under Supplement VII to the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA) signed in May 2010, testing organisations in Hong Kong are allowed to undertake testing of products for the China Compulsory Certification (CCC) System on a pilot basis.  Implementation details were announced in January 2011.  Four types of products processed in Hong Kong are covered, namely toys, circuit installations, information technology equipment and lighting apparatus.  It is hoped that the scope can be extended in future to provide our testing organisations with more opportunities to undertake testing in the Mainland and to facilitate trade between the two places.

(j) Under the existing tax regime, all business operating expenses are now fully deductible for taxation purposes.  Besides, we have provided tax incentives in specific areas to support the sustainable development of enterprises.  For example, 100% tax deduction has been provided for capital expenditure incurred on research and development, purchase of "patent rights" and "rights to any know-how", purchase of eligible environmental protection facilities and environment-friendly vehicles.  To promote wider application of intellectual property rights by enterprises, to encourage innovation and upgrading and to facilitate development of creative industries, we will introduce an amendment bill into the Legislative Council on March 9, 2011 to effect the proposal to allow tax deduction for capital expenditure incurred on the purchase of "copyrights", "registered designs" and "registered trade marks".

     Hong Kong has all along maintained a simple tax regime with low tax rates and upheld the taxation principles of fairness and neutrality.  Providing tax concessions to the small and medium enterprises (SMEs) of specific sectors or industries would violate the fairness principle of Hong Kong tax system.

     Because of the low tax rate and generous tax concessions, only 80,000 corporations, accounting for 13% of registered corporations, paid profits tax in the year of assessment 2008-09.  The majority of the SMEs either pay very small amount of tax or need not pay any tax.

(k) The data for compiling the persons engaged in the Six Industries are mainly sourced from surveys with establishments as the target respondents.  Taking account of the data reporting burden of the establishments, we have not asked the establishments to provide detailed breakdown in local or overseas employed persons in the relevant surveys.  

     The Government is committed to maintaining Hong Kong's competitive edge through continuous investment in new infrastructure, improving working procedures and reducing compliance costs, in order to create a more favourable business environment to attract investments from foreign enterprises to Hong Kong.  The Government will continue to improve quality of life, in order to strengthen the attractiveness to foreign talents of working in Hong Kong.

(l) Developing high value-added service industries is our long-term strategy.  Our competitive advantage lies with our sound market system and Hong Kong people's wealth of knowledge in various areas.  The Government will continue to assume the important role of market facilitation, and enhance the competitiveness of the four pillar industries, and to promote the development of the six industries where we enjoy clear advantages to facilitate diversification of our economy.  The Government will continue to strengthen co-operation with Guangdong Province, Macao, Taiwan and other regions in various aspects to sharpen our competitive edge in the global market.  The Government will also continue to invest in human capital, implement infrastructure projects, uphold the rule of law, and to further enhance the business environment.

     Where necessary, we will introduce legislative amendments to facilitate the development of the economy and specific industries.  In 2010, there was one legislative exercise each related to real estate industry, environmental industry and innovation and technology respectively; as well as five legislative exercises related to financial services.  There was no legislative exercise related to the other priority industries.

Ends/Wednesday, March 2, 2011
Issued at HKT 13:35


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