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    Following is a question by the Hon Frederick Fung and a written reply by the Secretary for Economic Development and Labour, Mr Stephen Ip (in the absence of Secretary for Commerce, Industry and Technology), in the Legislative Council today (March 2):

Question:

    It has been reported that the Government estimates that the economic growth in the current financial year would reach the target of 7.5%, and has pointed out that the acquisition of additional machinery and equipment for manufacturing production in the third quarter of that year grew by 33%, registering growth for three quarters in a row.  In this connection, will the Government inform this Council:

(a) of the sectors of the manufacturing industry contributing to the above rate of growth in the acquisition of production machinery and equipment, the categories of the machinery and equipment involved, as well as the respective contributions as a percentage from the creative industry, the environmental industry and traditional industries such as textiles and watches and clocks;

(b) whether it has assessed the effects of the above growth on the local labour market, including whether this growth has helped low-skilled workers in obtaining employment, and whether the contribution of the manufacturing industry as a percentage of Gross Domestic Product will rebound; if assessment has been made, of the results;

(c) whether incentive measures will be adopted to facilitate the development of the manufacturing industry in Hong Kong and progressively attract relocated industries to return to Hong Kong, so as to facilitate diversified development of the local economy and avoid an economic policy with too much emphasis on the financial services sector and the service industries; and

(d) whether the authorities will, apart from currently providing land under short-term tenancies, offer other concessions in areas such as taxation and land leases or set up loan funds to foster the development of the environmental and recycling industries in Hong Kong?

Reply:

Madam President,

    My reply to the various parts of the question is set out below:

(a) From the first to the third quarters of 2004, retained imports of machinery for manufacturing use grew by 18%, 12% and 33% respectively in real terms over the corresponding periods in 2003.

    The surge in the third quarter of 2004 mainly involved such equipment as electric generating sets with internal combustion piston engines; other electrical apparatus for switching or protecting electrical circuits, or for making connections to or in electrical circuits; printed circuits; static converters; metalworking machinery and parts thereof; knitting machines and stitch-bonding machines; injection or compression types of moulds for rubber or plastics; and discharge lamps, etc.

    As the relevant statistics were classified by commodity groups rather than industries, it is not possible to estimate the percentage contribution of the creative industry, environmental industry, textile industry, or watches and clocks industry in the increase of retained imports of machinery for manufacturing use.

(b) The effect of acquisition of additional manufacturing equipment on the labour market, particularly on employment of low-skilled workers, hinges on the nature and use of the equipment concerned.  For instance, it depends on whether the additional machinery is used to replace manual labour in the production process, or to produce new products or semi-manufactures, or to raise productivity, etc.  As the Government has not conducted any statistical survey on this aspect, it is difficult to assess the effect of the increase in manufacturing equipment on the local labour market and on the percentage share of the manufacturing sector in the Gross Domestic Product.   Notwithstanding this, it is observed that along with the upturn of the overall economy, the unemployment rate in the manufacturing sector improved in tandem in 2004.

(c) The Government has been supporting diversification of the local economy.  Under the free market principle, the Government does not specifically protect or directly subsidise particular industries.  However, we are committed to providing support to and creating favourable business environment for the industrial sector.  We will also strive to, in conjunction with the industries, enhance the competitiveness of the industries in response to market trends.

    The second phase of the Closer Economic Partnership Arrangement came into full effect starting from January 1, 2005. As a result, over 1,000 Hong Kong products under Mainland tariff codes can be imported tariff free to the Mainland.  The zero-tariff concession is unprecedented for local industries, and is believed to be able to encourage and attract local and overseas investors to actively consider engaging in Hong Kong industrial production with higher skills, value adding and intellectual property content.

    Since the competitive edge of our manufacturing industries has shifted from low-skill, labour-intensive modes of production to high value-added and knowledge-based activities, the Government is committed to promoting the application of innovation and technology, upgrading the quality of the labour force, as well as ensuring free flow of information in order to maintain the competitiveness of our industries in the international market.  The specific measures include:

1. providing one-stop infrastructure support services to technology-based companies through the Hong Kong Science and Technology Parks Corporation, including the provision of developed land at near cost for production purposes;

2. encouraging the development of innovative, technology-based and high value-added industries by setting up various technology funding schemes (for example the Innovation and Technology Fund);

3. implementing the DesignSmart Initiative to strengthen our support to design and innovation;

4. providing manpower training and promoting technological enhancement through the eight University Grants Committee-funded institutions, Vocational Training Council, Clothing Industry Training Authority and Employees Retraining Scheme;

5. facilitating technology transfer through the services provided by the Hong Kong Applied Science and Technology Research Institute Company Limited and Hong Kong Science and Technology Parks Corporation;

6. providing industry support services in the areas of manufacturing, management, information technology and environmental technology by the Hong Kong Productivity Council;

7. providing accreditation services and product standards information through the Innovation and Technology Commission; and

8. providing information and support to Small and Medium enterprises (SMEs) through the Support and Consultation Centre for SMEs under the Trade and Industry Department, SME funding schemes and various subvented organisations.

(d) The Government will continue to lease land under short-term tenancies to recyclers.  At present, 29 sites with a total area of about 5.6 hectares have been let under this arrangement, helping recyclers who cannot afford or who do not choose to purchase private land to start up business.  This measure has been well-received by the industry. The Government will continue to identify more sites suitable for this purpose. The Government is now making plans for the establishment of the EcoPark at Tuen Mun Area 38 to provide long-term land for environmental and recycling operations and promote the long-term development of and investment in the recycling industry.  The 20-hectare EcoPark will be developed in two phases, with the first phase expected to be commissioned in 2006. The establishment of the EcoPark will give momentum to the development of the environmental and recycling industries and create employment opportunities.

    The Government injected $100 million in the Environment and Conservation Fund (ECF) in 2002 to provide funding support for community groups and green groups to implement recycling projects at the community level. The ECF also provides funding for research and development projects on waste reduction and recycling technologies, such as the use of recycled aggregate, the development of a plastic bottle shredder and the production of cement from recycled glass. Moreover, people who wish to develop innovative ideas or upgrade the technological level of their companies can apply for funding from the Innovation and Technology Fund. Recyclers can also seek assistance from the SME funding schemes under the Trade and Industry Department for business development.

Ends/Wednesday, March 2, 2005

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