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Following is the speech by the Financial Secretary, Mr John C Tsang, at the Joint Business Community Budget Speech Luncheon today (March 16):
Thank you, Daniel (Chairman of the Federation of Hong Kong Industries, Professor Daniel Cheng). Distinguished guests, ladies and gentlemen,
Good afternoon.
It is indeed my great pleasure to be addressing you all, the business community of Hong Kong, at this annual gathering today. First of all, I would like to express my gratitude to all of you, the chambers and associations, for your continuing support.
The 2016-17 Budget, by the way, is my ninth, as Daniel has just noted. They say practice makes perfect. Well, judging from the commentaries in the newspapers and the feedback that I've got so far, it seems that more practice is still needed. And I should probably start planning my next Budget really soon. Probably before the passage of this one, which no doubt will suffer the pain of filibustering for some time.
Many people complained, well, sort of, that the Budget only features the usual old list of giveaways that they cannot benefit, and that it hardly created any surprises. Some even remarked that the most noticeable change was the colour of the Budget booklet.
So I therefore think that I should take this welcome opportunity today to share with you the many new surprises, at least to me, in my latest Budget. The new trend, the new ideas, the new challenges, as well as the new opportunities ahead for Hong Kong.
The New Normal
Let us first take a look at the global economy, which is displaying what we call the new normal. I believe - and I'm sure many of you will share my sentiment - that the volatile financial markets that we have been experiencing will continue, and the economies around the world will continue to show only unsteady and uneven growth.
And that global scene will continue to have an impact on Hong Kong's economy. The exports as well as visitors' arrivals have been declining since mid-2015, and the falling trend is likely to be more severe this year.
Local consumption and investor sentiment may also suffer. And the pressure could spill over into the job market and the business sector in general. I forecast Gross Domestic Product growth in real terms of 1 to 2 per cent this year, and that's a drop from last year's 2.4 per cent and the 3.4 per cent that we enjoyed over the past decade.
New Economic Order
While the general outlook is gloomy, Hong Kong's future needn't be, amid the new economic order. Since the 2008 financial tsunami, the resulting economic shift eastward, and new breakthroughs in IT development offer us a new direction. And that brings with it new opportunities for both traditional industries as well as emerging industries.
No society can afford to ignore this new economic order. Certainly, the Hong Kong Government will be doing our part in nurturing innovation as well as promoting and commercialising the application of R&D results.
Our extensive trade network, our open market operating under the rule of law and total transparency, together with the resilience and resourcefulness of our people, provide the necessary conditions to flourish in this new economic order.
Nurturing Innovation
Innovation lies at the heart of economic progress in our time. Steve Jobs once said that innovation, and I quote, "is the ability to see change as an opportunity - not a threat". Unquote. In short, the opportunity in front of us is ours to seize.
Application of R&D Results
Indeed, given our ageing population and shrinking workforce, the application of smart production technologies, particularly robotics, is vital for our future. And that is why it is important for us to continue to promote smart production, encourage R&D, and commercialise their outcomes.
In my Budget Speech last month, I announced that $8.2 billion would be set aside for a smart production and research centre at Tseung Kwan O Industrial Estate. $500 million would go into an Innovation and Technology Fund for Better Living. And another $2 billion would be earmarked for the Midstream Research Programme for Universities. And that's in addition to an improved R&D Cash Rebate Scheme, the expansion of the Public Sector Trial Scheme, and the extension of the scheme that funds the technology transfer work of six universities.
A $500 million Pilot Technology Voucher Programme will soon be launched. This will promote the use of technology by small and medium-sized companies, to improve their productivity and upgrade their business processes.
Fintech
And then there is the application of technology in the financial services sector, or what we call Fintech. Some studies have predicted that global investment in Fintech will surge from US$12 billion in 2014 to more than US$46 billion in 2020. So the potential of the development of Fintech in Hong Kong is enormous.
And you will agree that we have what it takes to make Fintech successful here, and the Government is totally committed to this objective. A dedicated team will be set up, under Invest Hong Kong, to help start-ups, investors and R&D institutions establish a presence here in Hong Kong. The Hong Kong Monetary Authority, the Securities and Futures Commission as well as the Office of the Commissioner of Insurance will be establishing dedicated platforms respectively to enhance communication between regulators and the Fintech community.
Cyberport will also roll out measures to support Fintech start-ups, including setting aside a dedicated space of 3,000 square metres, supporting 150 start-ups over the next five years and arranging 300 university students to join Fintech training camps at overseas universities.
Start-ups
And there is the new wave of entrepreneurship, the new companies, the start-ups. Hong Kong has been one of the fastest growing start-up hubs in the world. We now have more than 1,600 of them in our city, which is up 50 per cent since 2014, and we shall continue to make Hong Kong an attractive centre for these start-ups. Among other things, we are setting up a $2 billion Innovation and Technology Venture Fund, through which we shall be investing in local technology start-ups together with private venture-capital funds.
Cyberport is putting $200 million together in its start-ups as well, while the Science Park will continue to support start-ups through the Corporate Venture Fund and the incubation programmes. Science Park is also expanding to meet the increasing demand for office space for start-ups and other technology companies. The $4.4 billion expansion project will provide additional floor space of some 70,000 square metres.
Creative Industries
To sustain Hong Kong's competitiveness and provide more diversified opportunities for our new generation of entrepreneurs, we have been promoting the development of creative industries as a new driver of economic growth.
In my Budget last year, I injected $400 million into the CreateSmart Initiative, for organising projects to support creative industries, including design, fashion as well as film production and digital entertainment.
For fashion industry, the resources will be used to follow up on the proposals made by the Advisory Group on Implementation of Fashion Initiatives, including, among others, the support for local designers staging shows in key fashion capitals, such as Paris and New York.
As for the film industry, I announced in this year's Budget that we shall be injecting an additional $20 million into the Film Development Fund to subsidise the distribution and publicity of locally produced Cantonese films. The Guangdong Province, as you know, has a population of over 100 million people with box office receipts exceeding RMB4 billion in 2014, offering an extensive market for our locally produced Cantonese films for the Cantonese-speaking population in Guangdong.
Finding New Markets
Emerging markets is the other big driver of the new economic order. And we need to find new markets and to expand our trading ties, if we are to keep the wheels of Hong Kong turning.
Belt and Road
In particular, emerging markets along the Belt and Road are likely to provide new impetus for our longer-term development. This grand and visionary initiative will engender stronger economic and trade activities in the entire region, as well as soaring investment in infrastructure, such as railways, highways, ports and power plants. With a deep pool of talented professionals in the fields of engineering management, architecture, surveying, as well as in financial, legal and accounting services, Hong Kong can contribute to, and benefit from, the demand of professional expertise and services in consultancies, construction as well as management and operation of infrastructure projects.
To deepen our understanding of this promising market, the Government and the TDC (Hong Kong Trade Development Council) will organise a Belt and Road Summit in May this year. I shall also lead a Belt-Road business mission in the fall to Central Asia, following last year's Belt and Road trip to Hungary, Poland and Germany. And I invite our chambers and businesses to join me to gain first-hand knowledge of the new markets and to explore business opportunities that these new markets can offer.
The Monetary Authority will establish an office to offer a premier financial services platform involving all the stakeholders to facilitate the funding and servicing of Belt and Road projects. And the Hong Kong Government's third sukuk will be issued, at an appropriate time, to meet the financing needs of the Islamic markets. There are, to be sure, a good many of those along the Belt-Road.
Following the announcement on the commencement of operation of the Asian Infrastructure Investment Bank in January this year, we shall continue our discussions with the relevant authorities on Hong Kong's participation in the Bank. We shall also seek to employ our strengths to service the Bank, particularly in capital-market financing, in asset management as well as dispute resolution.
Expanding our commercial and trade network is also a priority for us, and, to that end, we shall continue to pursue new trade and investment agreements with other economies. Negotiations towards a free trade agreement between Hong Kong and the ASEAN (Association of Southeast Asian Nations) bloc will be concluded this year. The resulting liberalisation measures will help expand prospects of Hong Kong businesses in ASEAN, which is our second largest trading partner with a population of over 600 million people, while enabling Hong Kong-based services opportunities among Belt-Road economies.
Logistics and commerce will continue to be the backbone of our economy. In line with international practice, we shall be implementing a single window for the lodging of trade documents and submissions to further facilitate trade in goods. The single window will connect with other governments' systems as well as trade information platforms run by the private sector.
And the financial services sector is another key strength of Hong Kong. Together with the Mainland authorities, we shall continue to explore ways to open up new channels for the two-way, cross-boundary flow of Renminbi funds, in order to tap the massive opportunities arising from the internationalisation of the Renminbi.
The asset-management business in Hong Kong is burgeoning, too. By the end of 2014, the combined fund-management business amounted to $18 trillion, a year-on-year growth of 10.5 per cent.
We want more multinational and Mainland enterprises to establish their corporate treasury centres here in Hong Kong. And to that end, we have introduced new legislation to reduce the profits tax of qualifying corporate treasury centres by 50 per cent. We shall also introduce an open-ended fund company structure to make Hong Kong that much more attractive to the corporate world.
On to more taxing matters: the scope of tax deduction for capital expenditure incurred in the purchase of intellectual property rights will be expanded, and this will assist in our evolution as a knowledge-based economy.
And the silver market - and I'm not talking commodities - continues to grow, continues to create opportunities for business and finance. And with that in mind, we shall issue a first-of-its-kind Silver Bond this year and next, targeting Hong Kong residents 65 and over.
Concluding Remarks
So, ladies and gentlemen, while these spring plans take root, we shall not lose sight of the winter months approaching.
In putting together the 2016-17 Budget, I reminded myself constantly that the contents should be so packaged to lighten the burden of the community, so shaped to fulfil a future of wide-ranging opportunities, and so crafted to realise the promises of an inclusive society.
I have in the Budget allocated nearly $39 billion in tax and short-term relief measures. These short-term measures, together with other spending initiatives in the Budget, will help stimulate the economy, support local business, in particular our small and medium-size companies, as well as safeguard employment, and are expected to bring about a stimulus effect of 1.1 per cent of GDP growth.
As I have mentioned before, as the Government, we are not engaged in the business of building utopia. But we are definitely doing our utmost to maintain the free and open market of Hong Kong, which provides a dynamic platform for our companies, local and overseas, as well as for the many multinationals to compete on a level, business-friendly playing field.
And for Hong Kong to continue to flourish and to take advantage of the new economic order, we must maintain our home as the haven of progress, promise and harmony, a community shaped by social stability, decency as well as rationality.
And this can only be realised through dialogue, co-operation and understanding. And this can only be accomplished if we were to hold on to openness, diversity, freedom as well as the rule of law, the core values that are dear to our heart.
So finally I wish you all the best of business, good health and much happiness in 2016.
Thank you very much.
Ends/Wednesday, March 16, 2016
Issued at HKT 15:47
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