*****************************************

The Government will review the $2.5 billion Special Finance Scheme for small and medium-sized enterprises (SMEs) early in 1999 to decide whether and how improvements need to be made.

The Chief Executive, Mr Tung Chee Hwa, said this in his Policy Address today (Wednesday), after saying that as at the end of September, 92 companies had obtained loans amounting to $176 million under the scheme.

He noted that there had been suggestions the scheme's terms and conditions should be more flexible, and said the Government was monitoring feedback from SMEs, lending institutions and other interested parties.

The scheme, in operation for six weeks, helped SMEs secure loans from financial institutions, with the Government providing guarantees for loans.

Mr Tung said SMEs, which employed some two-thirds of the workforce and were the basic building blocks of our economy. With their relatively low start-up costs and flexibility in a changing business environment, they were a significant force in a renascent economy and create a large number of employment opportunities.

They often needed help in certain key areas if they were to grow. These areas included: obtaining working capital, sourcing market information, finding good quality staff and controlling costs.

Mr Tung said: "We already have a comprehensive range of programmes to support SMEs, which are provided through the Industry Department and other institutions.

"For example, the Hong Kong Trade Development Council focuses on opening up overseas markets; the Vocational Training Council is geared towards human resources training and development; the Hong Kong Productivity Council works on productivity enhancement; and the Hong Kong Industrial Technology Centre helps nurture business ventures in technology.

"To strengthen the co-ordination and development of these and other available services and to help ensure that SMEs can make the best use of these services, we will set up a Small and Medium Enterprises Office within the Industry Department.

"We will also continue to fund projects which contribute to the development and competitiveness of our SMEs, such as those which relate to Year 2000, ISO 9000 application, manufacturing resource planning and technical assistance on environmental compliance, through the Industrial Support Fund."

On the manufacturing sector, Mr Tung said that although the 1980s saw a major move of labour-intensive production facilities across the boundary to the towns and cities of the Pearl River Delta, and indeed to other parts of the globe, Hong Kong remained an active centre for the whole process of sourcing, distribution and other manufacturing related services.

"Our flexibility and market knowledge help put us in the forefront of global production. This economic activity has also made Hong Kong the primary logistic hub for obtaining banking, insurance and transportation services, and has led to us becoming the home of the world's largest container port.

"The quick response time and sophisticated workmanship of our manufacturers ensure that the manufacturing sector maintains an important position in the local economy. Our traditionally important textile and clothing industry is still at the heart of this sector.

"Continued development of the manufacturing sector must be a matter of priority for our community as well as Government. Our push towards greater use of innovation and technology will help industries in this sector to expand and improve their production capabilities and ability to develop new products," Mr Tung said.

End/Wednesday, October 7,1998

NNNN