Transcript of remarks by FS at Budget press conference (with photo/video)

     Following is a transcript of remarks by the Financial Secretary, Mr John C Tsang, at the press conference on the 2012-13 Budget at Central Government Offices, Tamar, today (February 1):

     Good afternoon.

     I delivered the fifth Budget Speech of the current-term Government in the Legislative Council this morning. I do not intend to repeat all the details, but I would like to explain some of the guiding principles in drafting this Budget.

     In his Policy Address last October, the Chief Executive announced measures to relieve people's hardship, improve quality of life and promote social and economic development. In the Budget, I have provided the necessary financial resources for implementing these measures and related arrangements.

     Many citizens and members of the Legislative Council have given me their views during the Budget consultation period. Having given careful thought to their views and taking into account the current economic conditions and forecasts, I have proposed a basket of measures that will benefit our community. As you can see from the backdrop, the theme of the Budget is "Stabilising the Economy, Safeguarding People's Livelihood and Investing in the Future". I am certain that these measures will help support this overall theme.

     Last year was something of a roller-coaster ride for Hong Kong's economy. At first, we welcomed a full recovery from the financial tsunami. But that was soon overtaken by concerns over a downgrade of the US' sovereign credit rating and a worsening European debt crisis. Hong Kong's economy was also affected. Not only did our goods exports plunge, many enterprises, especially small and medium enterprises (SMEs), were hit by a substantial drop in orders and a liquidity crunch.

     As a committed and accountable government, we shall introduce measures that will tackle the problems and issues facing our community as a whole.

     With due regard to the principle of prudent financial management, these measures are worth close to $80 billion. In all my five Budgets, I have adhered to my firm belief that we should not hesitate to spend money, where justified. In the past five years, government expenditure increased by 70 per cent while our nominal GDP growth was 21 per cent. Meanwhile, our recurrent expenditure has increased by almost 33 per cent.

     In this Budget, expenditure in livelihood-related items has increased by a respectable rate. Expenditure in education would grow by 7 per cent, medical and health services by 8 per cent and social welfare by 9 per cent.

     An emphasis in the Budget is to stabilise the economy. Last year, we implemented various measures to help SMEs tide over a difficult period. One such measure is the SME Financing Guarantee Scheme, which offers financing guarantee services for SMEs. Since its introduction, the Scheme has been well received by SME entrepreneurs. I also know that SME owners remain concerned about possible cash flow problems resulting from a credit crunch.

     Taking into consideration the views expressed by the Hong Kong Mortgage Corporation Limited, SMEs and the banking sector, I have decided to enhance the existing Scheme by increasing the loan guarantee ratio from 70 per cent to 80 per cent while significantly reducing the guarantee fee. The Government will provide a guarantee commitment of $100 billion. I believe that these and other measures will help reduce the pain faced by SMEs.

     Besides providing support to enterprises and preserving jobs, we have kept in focus the needs of our working class. Although the current unemployment rate is at a full employment level, we should be prepared to readily take measures to counter any upward pressure on the unemployment rate. There is also a chronic manpower shortage in some sectors, such as the construction industry. In this Budget, I have proposed additional funding to support the industry in enhancing manpower training. This can bring new entrants into the industry to ease the problem of an ageing workforce and provide necessary manpower for future infrastructure projects.

     When it comes to people's livelihood, the Government will not withhold resources even in the face of an economic downturn. We shall continue to allocate resources to enhance essential community services while stimulating the economy to help those in need. Having said that, every dollar of public money should be well spent and used, where appropriate.

     Education, medical and health services and social welfare are closely related to people's livelihood. The Government devotes the largest share of resources to these policy areas, irrespective of economic circumstances. Expenditure on these three areas, amounting to some 60 per cent of overall expenditure, has increased by some 30 to 40 per cent when compared with the 2007-08 fiscal year.

     Although inflation is expected to slow down in the coming year, I fully understand the pressure on the community brought by price hikes last year. With this in mind, I have proposed various relief measures and tax concessions in this year's Budget to ease the burden of people in need. These targeted measures are set to benefit people from every sector of our community.

     Next, I would like to say something about investing in our future. Apart from strengthening our existing pillar industries, the Budget also identifies ways to nurture the six industries where Hong Kong enjoys competitive advantages. In 2010, the output of these six industries accounted for about 8.4 per cent of GDP and employed nearly 410 000 people. The Budget has proposed various measures to support the development of the six industries, which we hope will become the new economic pillars of Hong Kong and further diversify our economy in the future.

     The many large-scale infrastructure projects, already under way or soon to be implemented, will not only benefit our labour market, they will, upon completion, enhance our city's competitiveness as well as our quality of life.

     During the Budget consultation period, we received many suggestions about how the Government should increase public expenditure. All along, we have maintained the share of public expenditure at around 20 per cent of GDP. This helps to prevent overspending by Government and stifling the development of the private sector. This percentage provides useful guidance but we are not bound by this rule. We can go beyond this target level, if need be. In four of the past 10 years, public expenditure exceeded 20 per cent of GDP. This is also the case for the estimated public expenditure for the budget this year.

     We stood the test of the financial tsunami in 2008 and the effects of the debt crisis in Europe as well as the US last year. The performance of our economy remained robust in the past five years, with a cumulative nominal growth of 21 per cent and an all-time high per capita GDP of US$34,000. This is attributed to our sound economic system and strong competitiveness.

     I firmly believe that, when preparing the Budget, we should adhere strictly to the guiding principle of fiscal prudence. The needs of all trades, industries and sectors of society should take priority. This way we can help maintain Hong Kong's social stability and equip the city for the challenges ahead.

     Thank you, and I am happy now to take some questions.

Reporter: What do you say to the people who feel you haven't been generous enough with all the money that the Government has in surplus? You warn about deficits and being prudent every year, and yet the government coffers are flush with cash year after year.

Financial Secretary: Our overall package of additional measures this year amounts to $80 billion - not a small sum. Our total expenditure is close to $400 billion. If we compare that to 2007, when we started this term, this is an increase of 70 per cent in terms of expenditure. In terms of recurrent expenditure alone, that's an increase of 33 per cent. And you can compare that with the growth in GDP over the same period, which amounts to 21 per cent. So I think we have been quite generous in a way in helping the community out.

     But this year in particular is a very special period. We are deeply concerned about the situation in Europe. We are deeply concerned how the situation, the debt crisis in Europe, could become a problematic issue for the rest of the world. That's why, this year, in this particular Budget, we are preparing ourselves in all fronts.

     So I started off this Budget with measures to help the enterprises in our society because that would help ensure that our low unemployment rate would remain for some time to come. And we have been preparing for the worst, and so we are pushing all the different measures out to get ourselves ready when the difficulty comes about. And that is because we have the resources to do so. Without the adequate resources that we have, we would not be able to push out the measures that we have set out in this Budget today.

(Please also refer to the Chinese portion of the transcript.)

Ends/Wednesday, February 1, 2012
Issued at HKT 18:25