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FS unveils Budget measures to respond to new economic order

     The Financial Secretary, Mr John C Tsang, says Hong Kong should act swiftly to identify new development opportunities as a result of a new economic order being driven by breakthroughs in information technology (IT) and the increasingly influential role of emerging markets in the global economy.

     Delivering the 2016-17 Budget today (February 24), Mr Tsang said Hong Kong should build on its strengths, together with Hong Kong people's flexibility, resourcefulness and market acumen, to find its place in the new economic order.

     Mr Tsang cited robotics, healthy ageing and "smart city" as areas in which Hong Kong could apply and commercialise research and development (R&D) results.

     "With an ageing population and a shrinking workforce, the application of smart production technologies, in particular robotics, is vital," he said.

     He said the Hong Kong Science and Technology Parks Corporation (HKSTP) was considering promoting smart production and research in the Tseung Kwan O Industrial Estate using robotics and IT to drive the development of the entire value chain, from product R&D and design to production, testing, marketing and branding. The project would cost $8.2 billion, with completion expected in 2021-22.

     As for healthy ageing, Mr Tsang said many innovative technologies, including the electronic wheelchair, medical image scanning systems and medical equipment for stroke rehabilitation, had been developed by local manufacturers with support from the Science Park. Biotechnology, healthcare and medicine would
remain the Park's key R&D focuses. $500 million has been set aside for an Innovation and Technology Fund for Better Living, he said.

     Regarding "smart city", Mr Tsang said the Government would implement a Water Intelligent Network project in phases, installing sensors in water-supply networks. In addition, a new desalination plant using the latest reverse osmosis technology would be built at Tseung Kwan O. Design work for the first stage of the plant commenced in late 2015.

     Funding schemes will be introduced, or enhanced, to encourage more private enterprises to invest in R&D and applied technology, and to translate outstanding local R&D achievements into products and services with commercial value.

     They include a $2 billion Midstream Research Programme for Universities to encourage post-secondary institutions to do more midstream and applied research projects in key technology areas. The level of cash rebate under the R&D Cash Rebate Scheme will be increased to 40 per cent to encourage private enterprises, small and medium enterprises in particular, to put more resources into R&D work. The Public Sector Trial Scheme will be extended to cover the incubatees of Cyberport and the Science Park, while the scheme to fund technology transfer work of six universities will be extended to 2018-19.

     Hong Kong has emerged as one of the world's most popular start-up hubs, Mr Tsang said, adding that the Government shall continue to offer comprehensive support to start-ups in various areas, including business incubation, financing, business expansion and office space.

     Mr Tsang said the Government would set up a $2 billion Innovation and Technology Venture Fund, investing in local technology start-ups with private venture capital funds on a matching basis.

     The Science Park, he said, would expand in stages, providing an additional floor area of 70,000 square metres for start-ups and other technology companies by 2020. The estimated $4.4 billion cost would be shared by the Government and the HKSTP.

     Cyberport will earmark $200 million to invest in its start-ups, while the HKSTP will continue to support start-ups through its Corporate Venture Fund and incubation programmes.

     Fintech, the application of technology to the financial services sector, also offers long-term opportunity for Hong Kong. Mr Tsang said the Government would follow up on measures recommended by the Steering Group on Financial Technologies, which he set up last year to examine the direction of Fintech in Hong Kong.

     A dedicated team, under Invest Hong Kong, will organise international events and encourage Fintech start-ups, investors and R&D institutions to set up in Hong Kong.

     The Enterprise Support Scheme, under the Innovation and Technology Fund, will assist start-ups and financial institutions. And Cyberport will set aside a dedicated space for Fintech start-ups, and roll out a designated programme to support up to 150 Fintech start-ups over the next five years. It will also arrange for 300 university students to join Fintech training camps at overseas universities.

     Mr Tsang said creative industries are part of the new order, and that Hong Kong would continue to support their healthy growth. This includes according priority to assisting start-ups and nurturing talent through the $400 million injection into the CreateSmart Initiative.

     A variety of initiatives will also be launched, or enhanced, to promote the fashion, design and film industries.

     Mr Tsang pointed to emerging markets as the other major force in the new economic order. "In view of this trend we need to expand our trading ties with the rest of the world and develop more markets for Hong Kong enterprises," he said.

     That can be realised thanks to Hong Kong's unique advantages under "one country, two systems", he said.

     Mr Tsang said that emerging markets along China's Belt and Road routes are likely to become the new impetus for the future development of Hong Kong, and that the Government would continue to deepen understanding of these new markets among Hong Kong business. The inaugural Belt and Road Summit jointly organised with the Hong Kong Trade Development Council will be launched in May.

     The Government will continue to pursue trade and investment agreements to expand commercial and trading networks, creating more favourable conditions for Hong Kong enterprises.

     Mr Tsang noted that negotiations for a free trade agreement (FTA) between Hong Kong and the Association of Southeast Asian Nations would likely be concluded this year, and that the Government would seek to participate in the FTAs that have been, or will be, concluded between the Mainland and other countries.

     The Government will strengthen Hong Kong's commercial connectivity to maintain the city's position as an aviation and maritime centre and support the development of high value-added logistics services. The Airport Authority Hong Kong (AA) is pressing ahead with the implementation of the three-runway system. The Government shall also examine the use of tax concessions to boost aircraft leasing business and explore business opportunities in aerospace financing.

     Turning to financial services and new markets, Mr Tsang said the Government is also looking to attract more multinational and Mainland enterprises to establish corporate treasury centres in Hong Kong. To that end, the Government has introduced a bill into the Legislative Council (LegCo) that would, among other things, reduce the profits tax of qualifying corporate treasury centres by 50 per cent. The Government also submitted a bill into the LegCo to provide a legal framework for introducing an open-ended fund company structure to further diversify the fund domiciliation platform in Hong Kong.

     The Government would strengthen efforts to highlight Hong Kong's edge in developing green financial products and the AA will explore the feasibility of financing through green bonds.

     Following the success of the two sukuk issuances over the past two years, the Government plans to issue a third sukuk in a timely manner, Mr Tsang said.

     Many senior citizens are looking for investment products with steady returns. To encourage the sector to tap into the immense potential of this silver market, the Government will launch a pilot scheme to issue Silver Bond this year and next year, targeting Hong Kong residents aged 65 or above.

     In addition, another iBond issue, of up to $10 billion, would be launched in due course, following the success of five previous issuances since 2011 under the Government Bond Programme.

Ends/Wednesday, February 24, 2016
Issued at HKT 13:06


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