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LCQ14: Relief measures amid economic downturn
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     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 (June 3):

Question:

     When compared to the same period last year, the Gross Domestic Product and total exports of goods in the first quarter of this year decreased by 7.8% and 22.7% respectively, while the seasonally-adjusted unemployment rate of the latest quarter rose to 5.3%, indicating that Hong Kong's economy is still hard hit by the financial tsunami.  In this connection, will the Government inform this Council:

(a) whether it will expand the following relief measure which had been implemented before: expanding the territorial coverage and increasing the subsidy amount of the pilot Transport Support Scheme; whether it will implement new measures, including extending repayment period of various loan schemes for tertiary students and partially waiving the interest on such loans, as well as holding over the collection of provisional salaries taxes;

(b) whether it has projected afresh the monthly unemployment rate and underemployment rate between June and December this year; if it has, of the details; if not, the reasons for that;

(c) of the respective numbers of graduates from universities and other tertiary institutions this year and, among them, the predicted numbers of those who will still be unemployed at the end of this year; and

(d) as the applications approved up to 18 May this year under SLGS involved only some $10 billion of loan guarantee (accounting for only 10% of the total guarantee commitment of $100 billion), why the Government does not extend the scope of the Scheme to the commercial loans to Hong Kong factories located in the Pearl River Delta Region (the number of which exceeds 50 000 at present), so as to make proper use of the total guarantee commitment and assist such factories in financing?

Reply:

President,

(a) The Transport Support Scheme is intended to encourage residents of four remote districts to "go out" to seek employment.  This time-limited scheme provides targeted assistance for the residents in those districts where employment opportunities are comparatively few and transport costs are high.  Expanding the scheme to cover the whole territory will depart from its policy intent of providing short-term assistance to kick-start employment and turn the assistance into an income subsidy.  This proposal must therefore be critically examined.  The Labour and Welfare Bureau has undertaken to conduct a comprehensive and objective review in July this year i.e. one year after the implementation of the relaxation measures of the scheme.

     The proposed extension of the repayment period of various loan schemes for tertiary students and partial waiver of the interest on such loans are included in the additional relief measures recently announced by the Government on May 26 to help relieve the financial pressure on graduates (including tertiary graduates and continuing education participants) in repaying student loans.  The measures include the proposal to relax the arrangement for deferred repayment for two years.  This arrangement is applicable to successful applicants for deferment of repayment on grounds of financial hardship, further studies or serious illness.  They will be granted a maximum interest-free deferment period of two years.

     Regarding the proposal to suspend the collection of provisional salaries taxes, taxpayers who are in need can apply for holding over under the existing provisional tax system.  Moreover, in our latest round of relief measures, we have also proposed to increase the concession for the salaries tax and tax under personal assessment for 2008-09 from 50%, subject to a ceiling of $6,000, to 100%, subject to a ceiling of $8,000.

(b) It is not an established practice of the Government to publish forecasts on unemployment and underemployment rates.  In fact, very few economies release official forecasts about unemployment rate.

     Unemployment rate is a lagging indicator.  Despite signs showing that the increase in unemployment rate has slowed recently, the short-term outlook for the labour market remains challenging.  The job market is expected to face new pressures in the middle of the year when fresh graduates enter the market.

     We of course do not wish to see the unemployment rate rise further, but the reality is that we are facing the worst global recession in 60 years.  Our economy will inevitably be affected.  Since last year, the Government has introduced several rounds of relief and job-preserving measures to create favourable conditions for steadying our economy.  This, together with the signs of downward trends in the external environment moderating, suggest that the rate of contraction of our economy is likely to slow in the second half of this year, which will help slow down the rise in unemployment.

(c) According to the data provided by the universities and tertiary institutions, the estimated number of graduates of full-time degree programmes in the 2008/09 academic year is about 20 100.  The institutions usually conduct graduate employment surveys after their students' graduation.  At present, we do not have the employment figures for graduates in the 2008/09 academic year.

(d) The Special Loan Guarantee Scheme aims to assist local enterprises in securing loans from participating lending institutions to tide over their liquidity problem during the global financial crisis.  All enterprises registered and with substantive business in Hong Kong (except listed companies), and have at least one year of operation before implementation of the scheme are eligible to apply for loans under the scheme to meet their general business needs.  Hong Kong-funded factories located in the Pearl River Delta Region can also apply if they meet the above conditions.

     As at June 1, 2009, we had approved over 9 000 applications under the scheme, involving a total loan amount of over $17 billion.  Over 30% of the successful applications came from the manufacturing sector.  We believe that many Hong Kong-funded factories have already benefited from the scheme.

Ends/Wednesday, June 3, 2009
Issued at HKT 12:46

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