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Budget promotes competitiveness, braces for tough times ahead

     The Financial Secretary, Mr John C Tsang, in his annual Budget today (February 1) unveiled a raft of proposals to improve people's livelihood, enhance Hong Kong's competitiveness and support businesses amid uncertainty in the global economy.

     The Financial Secretary said Hong Kong's economy grew 5 per cent in 2011 but forecast GDP growth to slow to between 1 and 3 per cent for 2012, mainly due to sluggish European and US economies.

     "I shall introduce measures worth nearly $80 billion in this year's Budget to better prepare our people for the difficult time ahead," Mr Tsang said.

     "Besides supporting enterprises and people in meeting challenges, these measures will help ease the burden of inflation on people.

     "This is a strong package of measures and would help stimulate the economy 1.5 percentage points in 2012."

     The Financial Secretary forecast an operating surplus of $38.2 billion and a surplus of $66.7 billion in the Consolidated Account for the 2011-12 financial year, equivalent to 3.5 per cent of GDP.

     He said more land sales and better-than-expected income from tax revenues were the main reasons for the surplus.

     Relief initiatives unveiled by the Financial Secretary include:

* Reducing salaries tax and tax under personal assessment by 75 per cent up to a ceiling of $12,000 for the 2011-12 tax year, at a cost of $8.9 billion.

* Raising the basic salaries tax allowance to $120,000 and the married person's allowance to $240,000, as well as raising the child allowance to $63,000.

* Waiving rates for 2012-13 capped at $2,500 per quarter for each rateable property, at a cost of $11.7 billion.

* An electricity subsidy of $1,800 for each residential account; and

* An extra one month's allowance to recipients of Comprehensive Social Security Assistance, Old Age Allowance and Disability Allowance.
     "The headline inflation rate for 2012 is estimated at 3.5 per cent after taking account of the effects of the one-off measures," Mr Tsang said.

     To help the business sector weather the anticipated economic downturn, the Financial Secretary proposed enhancing the existing SME Financing Guarantee Scheme for small and medium sized enterprises (SMEs); introducing new policy terms under the Hong Kong Export Credit Insurance Corporation (ECIC); waiving business registration fees for 2012-13 and reducing profits tax for 2011-12 by 75 per cent up to a maximum of $12,000.

     Capital duties levied on local companies would be scrapped, and the charges for import and export declarations would be halved, at a cost of $840 million.

     He said the Hong Kong Mortgage Corporation would introduce a microfinance pilot scheme. The loan amount would be capped at $100 million and the repayment period would be as long as five years.

     Mr Tsang announced $10.5 billion worth of funding initiatives in the education sector to help Hong Kong nurture talent for the future.

     This included $5 billion to enhance the academic and research development of tertiary institutions and $2 billion to establish more scholarships and award schemes.

     To strengthen social capital, the Financial Secretary proposed injecting $200 million into the Community Investment and Inclusion Fund which promotes social capital development through community participation.

     In a boost to creative industries, the Financial Secretary earmarked $100 million to support the operation of the Hong Kong Design Centre for the coming three years and said the Government would sponsor some of the signature events for 2012, which is designated as "Hong Kong Design Year".

     To support Hong Kong's infrastructural development programme, the Financial Secretary said capital works expenditure for the next financial year would reach $62.3 billion and increase to over $70 billion in the next few years.

     He set aside $220 million for the Construction Industry Council to enhance manpower training for the construction industry.

     Mr Tsang said the Hong Kong Monetary Authority (HKMA) would issue a further iBond worth not more than HK$10 billion under the Government Bond Programme.

     "The iBond, with a maturity of three years, will target Hong Kong residents," Mr Tsang said.

     "Interest will be paid to bond holders once every six months at a rate linked to the inflation of the last half-year period.

     "In the long run, we need to leave room for developing other kinds of bonds, including conventional fixed-rate bonds, for the development of a more mature bond market in Hong Kong."

     Mr Tsang reiterated the Government's resolve to increase the supply of land and create a land reserve.

     He said sites on which over 20 000 private residential units can be built were provided in the 2011-12 financial year, meeting Government targets.

     He estimated that aggregate land supply for 2012-13 would provide some 30 000 private residential flats.

     "In the Land Sale Programme for 2012-13 to be announced tomorrow (February 2), we shall include in the Application List 47 residential sites, of which half are new sites," Mr Tsang said.

     "They will provide some 13 500 units."

     In the next financial year, the Government will increase funding support for sports associations to almost $250 million.  Another $150 million has been earmarked for the Mega Events Fund to extend its operation by five more years.

     While predicting choppy economic waters ahead, Mr Tsang said Hong Kong people would rise to the challenge.

      "We may not always see eye-to-eye with each other on how to deal with the difficulties we face, but working together we have always been able to find ways to develop Hong Kong into a better place," Mr Tsang said.

     For full details of the 2012-13 Budget please visit:

Ends/Wednesday, February 1, 2012
Issued at HKT 13:32


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