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Budget Speech by the Financial Secretary (7)

Business and Professional Services

120. The third pillar industry is business and professional services.  The National 12th Five-Year Plan emphasises domestic demand expansion, as well as upgrading and restructuring.  Vice-Premier Li Keqiang also stressed last August during his visit to Hong Kong that the Central Government supported the stable growth, upgrading and restructuring of Hong Kong enterprises engaging in processing trade in the Mainland.  The policy initiatives include maintaining a stable policy on processing trade, establishing a sound mechanism to facilitate the domestic sales of processing trade, and encouraging Hong Kong enterprises engaging in processing trade to upgrade and restructure.  To assist Hong Kong enterprises in capturing the opportunities arising from the National 12th Five-Year Plan in a more focused manner, the Chief Executive proposed in his Policy Address the setting up of a dedicated fund of $1 billion.  The fund aims to help Hong Kong enterprises tap the Mainland market by restructuring and upgrading their operations, developing their brands and expanding domestic sales in the Mainland.  We shall seek funding approval from this Council in the first half of this year.

121. The National 12th Five-Year Plan proposes lifting the share of the value added of the service sector in the Mainland's GDP by four percentage points in five years, equivalent to Hong Kong's GDP in one year.  This will provide development opportunity of massive value for Hong Kong, being a service-oriented economy, and in particular service industry operators who wish to tap the Mainland market.

122. In this regard, the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA) provides a suitable platform for Hong Kong enterprises and professionals to gain preferential market access to the Mainland.  Under the framework of CEPA, the Government will maintain close liaison with the Mainland and the industries, and continue to encourage mutual recognition of professional qualifications and facilitate Hong Kong professionals' practice and business start-ups in the Mainland, etc.  All these efforts will serve to help meet the target of basically achieving liberalisation of trade in services between the Mainland and Hong Kong towards the end of the National 12th Five-Year Plan period.

123. Mainland enterprises can enhance their strength in tapping overseas markets by taking advantage of Hong Kong's mature service industry and rich international business experiences.  Likewise, overseas companies can also invest in the Mainland market by making use of the business and professional services Hong Kong provides.  We shall continue to work closely with the Mainland and actively complement the accelerated implementation of the policy of encouraging Mainland enterprises to go global, bringing into full play Hong Kong's strengths in various services sectors, including financial services, trading, legal services, accounting, logistics and advisory services.

124. Meanwhile, the Hong Kong Trade Development Council (HKTDC) will step up its efforts to go global jointly with both Mainland and Hong Kong enterprises.  Together they will search for merger and acquisition and investment opportunities overseas, providing a win-win situation for all.  To this end, the HKTDC plans to organise investment study tours and tours for co-operation on branding, and hold its "Lifestyle Expo" in various overseas cities.  In addition, Invest Hong Kong will strengthen its publicity and promotional efforts in a number of Mainland cities to brief more Mainland enterprises on Hong Kong's business edge, and highlight the territory's role as a platform for Mainland companies to grow their business internationally.


125. Fourth, tourism.  Tourism is an important pillar of our economy and employs a workforce of nearly 220 000.  In 2011, our tourism industry again put up a robust performance.  The number of visitors reached a new high of 42 million during the year, an increase of almost 50 per cent over 2007.  Total spending associated with inbound tourism also saw an increase of nearly 70 per cent over 2007, exceeding $250 billion.

126. In recent years, Hong Kong has been investing heavily in tourism infrastructure.  The redevelopment of Ocean Park at a cost of $5.5 billion will be completed within this year.  The Ocean Park is working on a plan to construct an all-weather waterpark.  We shall give it our full support to bring this project to fruition.  On the development of hotels in Ocean Park, we shall put in place flexible arrangements, so that Ocean Park can revise the tender conditions for re-tendering the projects.  We hope that these projects will help enhance the attractiveness of Ocean Park, making it ready for another success after an increase of 22 per cent in attendance last year.

127. Turning to Disneyland.  Its attendance was close to six million last year, with merchandise, food and beverage sales as well as hotel room occupancy registering impressive growth.  Its latest themed area "Toy Story Land" was newly opened at the end of 2011 with another two, "Grizzly Gulch" and "Mystic Point", scheduled for completion in 2012 and 2013 respectively.  We hope that the new themed areas will take Disneyland's performance in the coming year to new heights.  Another phase of expansion in the existing park site is under planning.  We shall carefully consider the proposals to be submitted to us.

128. Meanwhile, the development of the Kai Tak new cruise terminal is making good progress, with the terminal building and the first berth expected to start operation in mid-2013.  We shall also update the hardware infrastructure of the border crossings to provide speedier and more convenient clearance services for tourists.

129. To make Hong Kong a more attractive place, the Mega Events Fund was established in 2009 for a period of three years.  The Fund has sponsored a variety of events staged by many local non-profit-making organisations, such as the Hong Kong Dragon Boat Carnival and the Hong Kong Open Championship (golf tournament).  I propose to allocate $150 million to the Mega Events Fund and extend its operation for five years.  We have also invited the Mega Events Fund Assessment Committee to study ways of giving the Fund more flexibility to facilitate its effective operation.

130. Currently, there are nearly 190 hotels in Hong Kong, supplying more than 62 000 rooms.  The Government has been making various efforts to increase the supply of hotel rooms.  Firstly, we have put "hotel only" sites on our Land Sale Programme.  Three out of five "hotel only" sites included in the Land Sale Programme for 2011-12 have been sold.  It is estimated that they will provide more than 1 500 hotel rooms.  Another site sold was also designated for mixed development comprising hotels.  In addition, as at the end of last year, five applications for redevelopment or wholesale conversion of industrial buildings into hotels were approved by the Lands Department.  It is estimated that more than 1 500 hotel rooms will be provided.  Three other applications are being processed.  We estimate that the total number of hotels will increase by nearly 50 to close to 240 in 2016, supplying over 71 000 rooms, an increase of 9 000 rooms.

The Six Industries

131. Cultural and creative industries, medical services, education services, innovation and technology, environmental industries, and testing and certification services are the six industries where Hong Kong enjoys advantages for further advancement.  The private-sector part of these industries accounted for 8.4 per cent of GDP in 2010 and contributed over $140 billion value added to our economy, an increase of more than 15 per cent over the previous year.  The number of employees engaged in these industries was close to 410 000.  I shall now give an account of the recent major development of each of these industries.

Cultural and Creative Industries

132. Design is an integral part of the creative industries.  I have earmarked $100 million to support the operation of the Hong Kong Design Centre (HKDC) for the coming three years, and to finance two anchor events, namely Business of Design Week and Hong Kong Design Centre Awards.  Besides, we shall allocate new resources for a new round of the "Design Incubation Programme" launched by the HKDC.  The programme offers management, marketing, financial, facility and other professional support services to design start-ups during their two-year incubation period.

133. Designated as Hong Kong Design Year, 2012 will feature a number of large-scale design activities for the promotion of Hong Kong design.  We shall collaborate with the design sector, sponsor some of the signature events through the CreateSmart Initiative, and encourage the sector to showcase their excellence.

Medical Services

134. Renowned for its high standards and professionalism as well as its up-to-date medical technology and equipment, Hong Kong's health care sector is able to provide the public with quality medical services, and has potential for further advancement.

135. The Government has reserved four sites at Wong Chuk Hang, Tseung Kwan O, Tai Po and Lantau for the development of private hospitals.  We are formulating the land disposal arrangements for these sites, and plan to tender out the two sites at Wong Chuk Hang and Tai Po in the first quarter of 2012.  To ensure that services offered by new hospitals meet the needs of the public, future private hospitals will be subject to relevant development parameters covering the scope of services such as the types of specialty.  The standard of services, such as the number of beds, hospital accreditation and pricing transparency, will also be specified.

Education Services

136. Our efforts to establish Hong Kong as a regional education hub have started to bear fruit.  In recent years, our tertiary institutions have been recognised as leading institutions in various international rankings, and our business administration programmes are among the best in the world.  In the 2010/11 academic year, 18 000 non-local students from more than 70 countries or regions came to Hong Kong for post-secondary studies.  Relaxing the restrictions on non-local students to stay in or return to Hong Kong will help attract more non-local students to come here to study.  Since the implementation of this initiative in May 2008, more than 15 000 applications have been approved.  To further promote the internationalisation of our higher education, the Education Bureau will explore long-term goals and strategies in this respect and implement relevant measures to foster collaboration among institutions.

137. We shall continue to facilitate the development of the international school sector to provide school places to meet the demand from families coming to Hong Kong for work or investment.  5 000 additional international school places are expected to be available in the next few years with four international schools on greenfield sites coming on stream.  We will continue to support in-situ expansion of individual international schools or allocate suitable vacant school premises to them for short-term use.  We will carry on monitoring closely the provision of school places in the international school sector and maintaining dialogue with the schools as appropriate.

138. On diversification, the number of self-financing degree-awarding tertiary institutions in Hong Kong has increased to six, providing a total of over 13 000 places.  We launched two sites in 2010, and another two in 2011, for the development of self-financing degree programmes.  We shall consider launching more sites as appropriate having regard to the development of the sector.

Innovation and Technology

139. In recent years, we have sought to create an environment that facilitates the development of innovation and technology.  We shall strengthen our efforts in four areas in the coming year.

140. Firstly, for providing world-class research infrastructure, Hong Kong Science Park Phase 3 development, costing $4.9 billion, has commenced.  The expansion will increase the floor area of Hong Kong Science Park by 50 per cent to 330 000 square metres and create 4 000 scientific research-related jobs.  The first batch of new buildings is scheduled for completion in early 2014.

141. The Hong Kong Science and Technology Parks Corporation (HKSTPC) will continue to revitalise the three industrial estates.  We shall also invite the HKSTPC to explore the feasibility of expanding the Yuen Long Industrial Estate by about 16 hectares.  To meet the needs for long-term development of the high-tech industry, we shall continue to identify sites for the sustainable development of Hong Kong Science Park and industrial estates.

142. Last year's Budget highlighted the importance of data centres to Hong Kong.  The Policy Address announced that two hectares of land in Tseung Kwan O had been reserved for the development of data centres, and that consideration would be given to the use of industrial buildings for data centres.  To ensure early provision of land for more data centres to be set up in Hong Kong, we shall implement two time-limited measures in 2012-13.  First, we shall exempt the waiver fees for using certain floors of eligible industrial buildings as data centres.  In addition, where lease modification is required for the development of an industrial lot into a high-tier data centre, the Government will assess the premium based on the use of the site as a high-tier data centre.  We shall announce the implementation details in due course.

143. Secondly, for promoting collaboration with the Mainland, we shall encourage more local research and development (R&D) institutions and research personnel to take part in national science and technology programmes, and nominate Hong Kong experts for the National Science and Technology Programmes Expert Database.  We shall also start a new round of application exercise for Partner State Key Laboratories.

144. Thirdly, we launched the R&D Cash Rebate Scheme in April 2010 to provide financial assistance to applied R&D projects and encourage co-operation between enterprises and local R&D institutions.  By the end of last year, the Scheme had benefited nearly 270 enterprises.  To enhance the effectiveness of the Scheme, we propose a threefold increase in the level of cash rebate under the Scheme for enterprises' qualified R&D projects, from 10 per cent to 30 per cent.

145. To support the R&D activities of SMEs, we propose to enhance the Small Entrepreneur Research Assistance Programme (SERAP) under the Innovation and Technology Fund by increasing the funding ceiling for each project under the SERAP from $4 million to $6 million.  We shall also refine the operational details of the Programme and expand its scope of funding.

146. Fourthly, to nurture a culture of innovation, the Internship Programme under the Innovation and Technology Fund encourages universities, enterprises and R&D centres to employ local university graduates to participate in R&D.  In the past three years, over 800 internships were provided under the Programme.  To inspire more young people to engage in R&D, we shall increase the monthly allowance for each intern by nearly 20 per cent.

Environmental Industries

147. The current Government has introduced a number of green policies and has spent over $30 billion on environment-friendly facilities and funded projects.  The impetus provided by these facilities and projects has helped promote the environmental industries by creating numerous opportunities for the environmental engineering sector, thereby driving the demand for related skills, talent and services.

148. These facilities and projects include the Harbour Area Treatment Scheme currently underway and Sludge Treatment Facilities under construction.  We have planned other public works such as the construction of Integrated Waste Management Facilities and Organic Waste Treatment Facilities.  With our measures to promote waste reduction and recycling, the recycling industry in Hong Kong has been taking shape.  To help enhance recycling technologies, we have earmarked land in EcoPark for the construction of facilities to break down waste electrical and electronic equipment into recyclable materials.

149. Our green policies benefit not only the industrial sector but also professional services.  The Buildings Energy Efficiency Ordinance enacted in 2010 specifies the energy efficiency design standards for four types of building services installations, and requires certain buildings to conduct energy audits.  With the full implementation of the new legislation in September 2012, there will be more business opportunities for related professional services.  In collaboration with the industry, the Government has been promoting green building standards and assessment, bringing new opportunities for the green building sector.

150. We shall also capitalise on Hong Kong's advantages to open up business opportunities in the Mainland for our environmental industries.  The Government will support the industry's participation in such activities as environmental exhibitions and trade missions to help build local environmental brands, and facilitate collaboration with local and overseas enterprises.

Testing and Certification Services

151. We have been working closely with the Hong Kong Council for Testing and Certification (HKCTC) to vigorously implement a three-year development plan for the testing and certification industry with a view to enhancing the industry's competitiveness.  We shall also step up the promotion of our testing and certification services outside Hong Kong.  In particular, our efforts are targeted at promoting testing and certification and developing new services in four selected trades, namely Chinese medicine, construction materials, food and jewellery.

152. In the field of Chinese medicine, we are assisting laboratories in raising the testing standard of Chinese herbal medicine.  As for construction materials, we shall make greater efforts to publicise the merits of product certification to the construction industry, and promote the product certification schemes for construction materials introduced in recent years.  In respect of the food trade, we have been providing funding support for the industry to develop a new certification scheme on food hygiene management for meeting the operational needs of the local catering industry.  This will create business opportunities for certification services.  For the jewellery trade, we have worked out standard testing methods for jadeite jade, and shall introduce standard testing methods for the other two types of jade next year.  In addition, the HKCTC will set up two new panels this year to explore with the industry new business opportunities in environmental protection and information and communications technology sectors.

153. With regard to access to the Mainland market, testing laboratories in Hong Kong have been allowed to perform testing of four types of products (i.e. toys, circuit installation, information technology equipment and lighting apparatus) processed in Hong Kong for the China Compulsory Certification (CCC) System since last year.  Under Supplement VIII to CEPA, the coverage of this pilot scheme will be extended this year to all 23 types of products under CCC.  This offers testing laboratories in Hong Kong new opportunities to undertake testing work in the Mainland.


154. The four pillar industries and the six industries are the major driving forces of our economy, accounting for over 60 per cent of GDP and employing a workforce of over 2 million.  The four pillar industries are well developed and have achieved significant growth over the years.  Flourishing in recent years, the six industries also have good potential for development.  Apart from creating many related jobs, these industries have also indirectly contributed to new employment opportunities in other sectors.  For example, the creation of every 100 jobs in financial services will in turn bring about some 60 jobs in related industries.  Similarly, in tourism and in import and export trade, every 100 jobs will indirectly bring about some 56 and 40 jobs respectively in related industries.  We shall keep working with relevant sectors to further enhance the competitiveness of these industries so that they will continue to contribute to our economic development.

(To be continued)

Ends/Wednesday, February 1, 2012
Issued at HKT 12:39


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