Budget Speech by the Financial Secretary (3)

Developing Our Economy

30. My key mission as Financial Secretary is to maintain a favourable business environment, promote sustainable economic development, and make available diverse and quality jobs to enable citizens to lead better and more fulfilling lives.  I must also ensure that Government has adequate resources to enhance social services and improve people's livelihood.

31. Technologies have brought economic globalisation into a new phase.  Competition between economies has never been so fierce as potential customers became more accessible to enterprises all over the world.  Only the fittest will survive, a reality that local enterprises have to face.

32. This new norm enables enterprises to adopt modern modes of production led by global supply chains and choose the most competitive partners from around the world.  With Hong Kong's established position as an international financial, trading and logistics hub, our commercial sector is accustomed to utilising supply chain management.  This gives them the opportunity to benefit from the ample room for development brought about by the close connections between regions.

33. In the face of such challenges and opportunities, we should seek to lay a solid foundation for long-term development in a pragmatic manner, and enhance our overall strengths step by step through adding value to traditional industries and developing diversified new industries.

34. Manpower mismatch is becoming more and more evident in Hong Kong in recent years.  This, coupled with the imminent challenge of an ageing population, has directly hindered the sustainable economic development of our city.  We must strive to overcome the constraints on our development potential and rise to the challenges together.  Otherwise, our next generations will have to bear the price of our short-sightedness.

Diversified Development

35. Hong Kong has long been a cradle for entrepreneurs.  The city is renowned for its favourable business environment, with a fair and transparent market system, a liberal and open investment climate, and a simple and low tax regime.  Legends of rags to riches live on for generations.  Many entrepreneurs started their business without much experience, technology or capital.  But their flexibility and market acumen have opened up new opportunities in different trades and markets.

36. Social enterprises are gaining recognition in Hong Kong.  With business models that balance economic and other social values, they mark the maturing of our society.  Research showed that each dollar of public funding contributed four to seven dollars of workfare to those disadvantaged employees, reflecting the significant benefits brought about by social enterprises.

37. Diversified and dynamic, Hong Kong boasts a melting pot of cultures with a blooming talent pool in the cultural and creative sectors.  I shall take the fashion industry, the film industry and the arts and culture sector as examples to unveil Government's initiatives in promoting these industries.


38. A new wave of entrepreneurship, in the form of start-ups, is emerging around the world.  Many start-ups boldly apply new technologies, information technology in particular, disrupting the traditional mode of operation.  They translate state-of-the-art technologies into competitive products and services that change consumption patterns and open up new markets.

39. Last few years saw a notable burgeoning of start-ups in Hong Kong.  They managed to build up a wider clientele base by conducting in-depth market studies, over and above their clearly-defined positioning and inspiring marketing strategies.  I have seen an enterprise developing wireless chargers for electronic devices, and another designing a mobile application for pre-ordering coffee.

40. Hong Kong is among the most advanced information and communication technology hubs in the world.  Our well-established business support services and sound system to protect intellectual property (IP) rights provide favourable conditions for the growth of start-ups.  Many public and private organisations offer support, including provision of co-working space, incubation programmes, business advisory services, and assistance in building partner networks.  The number of such organisations has increased by tenfold over the past three years, and they include world-renowned organisations such as Nest and Accenture.

41. InvestHK launched a large promotion campaign known as "StartmeupHK" two years ago to promote our advantages as a leading global hub for start-ups.  The campaign has attracted innovative start-ups with potential to our city, and brought Hong Kong-based enterprises to the attention of many international angel and venture capital investors.

42. We have witnessed a growing interest amongst investors in Hong Kong start-ups.  International IT giants such as Microsoft have set up offices here to look for new businesses that are worth investing in.  Start-ups nurtured by the Hong Kong Science and Technology Parks Corporation (HKSTPC) and the Cyberport have also attracted hundreds of millions of dollars of investment.

43. Financing needs increase as start-ups grow.  To further encourage financing of new enterprises, HKSTPC will earmark $50 million to set up a corporate venture fund for co-investment, on a matching basis with private funds, in start-ups which are located in the Science Park or have participated in its incubation programmes.  I shall also ask the Hong Kong Mortgage Corporation Limited (HKMC) to expand and enhance the Microfinance Scheme.

44. In addition, the proposed injection of $5 billion to the Innovation and Technology Fund will help strengthen support for relevant enterprises.

45. We strive to provide start-ups with enhanced hardware and software support.  HKSTPC will extend the Leading Enterprises Acceleration Programme to help more companies with potential to consolidate their businesses, raise capital and improve corporate management.

46. From this year onwards, free online government information will be released in digital formats to encourage development of more applications by start-ups.  Many start-ups have developed a wide range of mobile applications by exploiting such public sector information, including information on real-time traffic and weather conditions.
47. Financial technologies are also an investment target of many venture capitalists or crowd funding efforts.  Financial technologies that help facilitate functions such as payment, clearing and settlement systems, big data analytics, cloud computing, information and risk management and network security can enhance operational efficiency and help open new modes of development for the financial sector.  Being an international financial centre with years of experience in technology, Hong Kong is an ideal place for developing financial technologies.  I have asked the Secretary for Financial Services and the Treasury to set up a steering group to study how to develop Hong Kong into a financial technology hub together with industries, research and development institutions as well as regulatory authorities.

48. I hope to improve the ecosystem for local start-ups and technological enterprises to tie in with the general direction of moving our economy up the value chain and enabling local industries to diversify.

Social Enterprises

49. With the relentless and concerted efforts of Government and various sectors over the years, local social enterprises have attained solid growth.  Their scope of services and target clients have become more diversified, earning wider recognition from the community.  Apart from creating job opportunities, social enterprises also engage people from different sectors to serve the community.  For instance, there are social enterprises renting domestic units to single-parent families with imminent housing need as co-tenants at below-market rates, offering barrier-free taxi services to wheelchair users, and operating restaurants to create jobs for women living in the same district.
50. Since the launch of the Enhancing Self-Reliance Through District Partnership Programme (ESR Programme) in 2006, the Home Affairs Department has so far allocated a total of $180 million for the establishment of 161 social enterprises, which created 2 600 job opportunities.  Eighty per cent of these social enterprises have become self-sustaining after the funding period.

51. I shall earmark $150 million to roll out a new phase of the ESR Programme from 2016-17 to 2019-20, under which enhancement measures will be implemented to benefit more types of social enterprises and encourage greater participation of the commercial sector in the development of social enterprises.

Cultural and Creative Industries

52. Government has been working closely with the cultural and creative industries to promote their development, with a view to creating an atmosphere that inspires creativity, and expanding the local market as well as exploring outside markets.

53. I shall inject an additional $400 million into the CreateSmart Initiative to support different sectors of the creative industries.  Efforts will be made to assist them to participate in and organise exhibitions and fairs, provide talented people with training programmes and subsidised overseas exchanges and internships so as to afford them opportunities to realise their potential.

Fashion Industry

54. Hong Kong's textiles and clothing industry has a solid foundation.  Many famous fashion designers have had spectacular success in creating their own brands.  The trade has been dedicated to grooming and nurturing talent.  An organisation offers co-working space in an industrial building for promising fashion designers and introduces their designs to international markets.  A long-established spinning mill plans to revitalise its old factory into an incubation centre for fashion designers and other related facilities.  Promoting collaboration between fashion design and the clothing industry to move them up the value ladder will enable them to generate greater economic benefits.

55. I agree with the recommendations of the Economic Development Commission on promoting the development of the fashion industry.  I shall consolidate the existing resources and invest new resources, totalling $500 million, to launch a series of measures on a pilot basis in the next three years.  These include promoting Hong Kong's fashion designers and brands through improving local fashion events and participating in those held overseas, rolling out an incubation programme for up-and-coming fashion design start-ups, providing fashion design graduates with overseas internships and study opportunities, and subsidising participation in international competitions and exhibitions.  We shall also set up an advisory body for the trade to advise on and co-ordinate the implementation of these measures.
Film Industry

56. The film industry has long been a key element of Hong Kong's creative industries.  The vast Mainland market presents local filmmakers with unprecedented opportunities and big challenges.  In recent years, Government has been supporting production of small-to-medium budget films through the Film Development Fund (FDF).  Many of these films, such as "Echoes of the Rainbow", "The Way We Dance" and "The Midnight After", are critically-acclaimed box office hits with Hong Kong characteristics.

57. I shall make a further injection of $200 million into FDF, enhance its funding arrangements and introduce a subsidy scheme for film productions with a budget not exceeding $10 million, subject to a subsidy ceiling of $2 million, to boost the volume of local film production and nurture film talent.  I shall raise the production budget ceiling of the Scheme for Financing Film Production from $15 million to $25 million.  To identify new talent for the film industry, Government will relaunch the First Feature Film Initiative with increased subsidies on production costs.

Art and Culture

58. We have seen a blossoming of local arts groups in recent years.  Quite a number are emerging ones widely acclaimed for their high artistic attainments.  This has not only enriched Hong Kong's cultural landscape by presenting the general public with more high quality performances and exhibitions, but also created more development opportunities for local artists and young people aspiring to pursue careers in the arts field.

59. I shall launch a $300 million Art Development Matching Grants Pilot Scheme, under which the amount of private donation and sponsorship secured by eligible local arts groups will be matched by grants.  It will encourage different sectors of the community to sponsor local art and cultural activities, and help sustain the development of the cultural industry, jazzing up the cultural aura of the city.

60. These measures will offer a platform for Hong Kong people, the younger generation in particular, to actualise themselves and unleash their creativity.  We should combine all these efforts to take our economy towards even greater diversity.

(To be continued.)

Ends/Wednesday, February 25, 2015
Issued at HKT 11:29