A ‘balanced, forward-looking’ budget
Paul Chan proposes slew of proactive measures despite slimmer surplus
The kudos came from a wide spectrum of the Hong Kong community — it’s a “balanced and forward-looking” budget that will help foster the special administrative region’s long-term development with a focus on building a diversified economy by bolstering financial services, as well as the city’s goal to turn itself into a regional technology and innovation pivot.
Despite projected sluggish economic growth and a slimmer fiscal surplus, Financial Secretary Paul Chan Mo-po on Wednesday proposed a slew of remedial measures in the 2019-20 Budget — the second of the current-term SAR government — ranging from overcoming the city’s acute housing and talent shortages to diversifying the local economy amid global economic uncertainties and helping businesses to cash in on the opportunities offered by the Guangdong-Hong Kong-Macao Greater Bay development.
In line with the SAR government’s drive to support enterprises, safeguard jobs, stabilize the local economy and strengthen livelihoods, Chan pledged to earmark HK$150 billion to upgrade public services, back businesses, relieve the people’s financial burdens and invest in the future.
The recurrent expenditure for three key livelihood areas — education, health care and social welfare — is expected to reach HK$255.5 billion, accounting for nearly 60 percent of the total recurrent expenditure, or an increase of more than 7 per cent over last year’s revised estimates.
“The budget was prepared against the backdrop of profound changes in the global political and economic landscape, a complicated and volatile external environment and heightened uncertainties,” Chan said in the budget speech — his second since taking office.
“Hong Kong has been susceptible to economic headwinds over the past few months, as evidenced by notable slackening growth and diminishing confidence of enterprises in the future outlook,” he warned.
Hong Kong’s economy expanded 3 percent in 2018 — at the lower range projected in the 2018-19 Budget — due to slowing growth momentum in the second half of last year. The administration estimates the economy can achieve a real growth rate of 2 to 3 percent in 2019.
Amid the ongoing trade stand-off between China and the United States, coupled with a cooling local property market which has slashed land-sale revenues, the government forecast a budget surplus of HK$58.7 billion for 2018-19 financial year, or 60 percent lower than the previous fiscal year’s surplus of nearly HK$149 billion, but higher than the original estimate of HK$46.6 billion made last year.
As a result, lesser sweeteners will be handed out in response to the current global economic environment.
Chan proposed a 75 percent reduction of profits tax, salaries tax and tax under personal assessment for the 2018-19 year of assessment, subject to a ceiling of HK$20,000 in each case — down from last year’s HK$30,000. This will benefit about 1.9 million taxpayers and cost the government up to HK$17 billion in lost revenue.
For businesses, taxes on profits will also be slashed by 75 percent, subject to a ceiling of HK$20,000 — also down from last year’s HK$30,000. It will benefit some 145,000 taxpayers and cost the government about HK$1.9 billion.
Recipients of the Comprehensive Social Security Assistance, Old Age Allowance, Old Age Living Allowance, Disability Allowance, Working Family Allowance and Work Incentive Transport Subsidy will receive an additional month’s pay instead of two months as last year.
The Association of Chartered Certified Accountants lauded the government’s move to drive sustainable and diversified development while ensuring stability in the face of an economic downturn.
The government’s resolve to push ahead with the advancement of innovation and technology by sinking more funds into the sector won praise from global advisory firm Deloitte, which called the move critical in driving Hong Kong’s economic diversification and raising its competitiveness to seize the opportunities in the digital era.
Duncan Innes-Ker, Asian regional director at the Economist Intelligence Unit, also hailed the budget, calling it an investment in Hong Kong’s future.
Despite a lower-than-expected HK$58.7 billion ($7.5 billion) surplus, the special administrative region will still persevere in its efforts to turn the city into a smart, technology and innovation hub, aiming to splash an extra HK$45 billion on high-tech spending, in line with the plan spelt out in the recently unveiled GuangdongHong Kong-Macao Greater Bay Area blueprint.
In his budget speech on Wednesday, Financial Secretary Paul Chan Mo-po revealed that the additional amount will be used to fund the development of high-tech businesses and the recruitment and training of talents.
“The rapid development of innovation and technology is ushering in a new era,” he said, convinced that the I&T industry will be one of the twin key areas that will bolster the SAR’s vision to switch its focus from labor-intensive production industries or land-demanding economic activities to talent-intensive industries and high value-added activities.
The move also fits in well with the nation’s quest for new growth engines.
To lure leading overseas and Chinese mainland internet and fintech enterprises to set up offices and research units in Hong Kong, Chan proposed another HK$5.5 billion in funding to develop Cyberport and enhance its support for startups.
This follows the granting of HK$10 billion to Hong Kong Science and Technology Parks Corporation and the allocation of HK$20 billion for the first phase of its wholly-owned Hong Kong-Shenzhen Innovation and Technology Park in the Lok Ma Chau Loop in last year’s budget.
Emil Chan — chairman of the Association of Cloud and Mobile Computing Professionals — said the government is trying to create a level playing field for various major players in the local tech scene through a fairer distribution of funding resources.
Hailing the measure as “nothing short of necessary”, Stark Chan Yikhei — founder of Bull.B Technology — said Cyberport, which currently accommodates far more than 1,000 established digital giants and fledgling startups, is overly occupied, so much so there’s no bigger office for his team to move into.
A major slice of the new HK$45billion funding package dedicated to the high-tech sector is earmarked for universities, reinforcing their supporting role for the city’s tech industry and talent pool.
As highlighted in the budget, HK$16 billion will be used for universities to enhance or refurbish their campus facilities, particularly those for research and development. Up to HK$20 billion will be injected into the Research Endowment Fund of the Research Grants Council under the University Grants Committee to provide research funding.
Meanwhile, the annual funding ceiling for each university under the Technology Startup Support Scheme for Universities will be doubled to HK$8 million.
The cash injection comes along with the increase in the monthly allowance for researchers under the researcher program to attract local graduates to join the I&T sector, and the extending of the funding period under the researcher program and the Postdoctoral Hub Program.
Unlike the government spending blueprints in previous years, the 2019-20 Budget rolls out more measures to nurture tech and innovative talents, noted Leonard Chan Tik-yuen, chairman of the Hong Kong Innovative Technology Development Association.
“The next two years will be crucial to the high-tech and innovation development of Hong Kong, which has had its hands tied by a lack of I&T talents for a long time,” Chan reckons.
As the central government unveiled the long-awaited blueprint for the Bay Area last week to turn the region into a global economic powerhouse, riding high on the region’s competitive edge in the technology and innovation industries, Hong Kong cannot afford to “move half-beat slower” when the other 10 cities in the Bay Area cluster are losing no time in jumping on the high-tech bandwagon, Chan warned.
“The budget has sent a clear message to the market that innovation and technology is one of the key pillars in Hong Kong’s economic push,” said Marcos Chan, head of research at CBRE Hong Kong, Southern China and Taiwan.
“This goes well with the direction set by the outline development plan for the Bay Area — Hong Kong and other cities in the Bay Area will develop into an international innovation and technology hub.”
However, Francis Fong Po-kiu — honorary chairman of the Hong Kong Information Technology Federation — said the years-long tradition of bankrolling big efforts to beef up high-tech industries cannot tackle the problem from its roots.
Without a change of mindset, the SAR government could still hardly assume the leading role in Hong Kong’s bumpy ride on the path of high-tech development, he said.
The government is trying to create a level playing field for various major players in the local tech scene through a fairer distribution of funding resources.’’ Emil Chan, chairman of the Association of Cloud and Mobile Computing Professionals