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| FS Budget Conference: Financial Secretary John C. Tsang fields questions by the media on the 2009-10 Budget in Hong Kong on February 25. |
Hong Kong Financial Secretary John C. Tsang announced on February 25 a multi-pronged strategy to combat fallout from the global financial crisis.
The measures will tackle both immediate and longer-term challenges by creating jobs, improving the environment, fostering economic development and building a caring community.
Mr. Tsang said he was guided by three principles in preparing the 2009-10 Budget: create jobs and support employment, increase overall competitiveness and facilitate a return to economic growth.
“Being a small, open economy, Hong Kong will inevitably be hit by the turmoil, and our economy will slide into recession,” Mr. Tsang told legislators while delivering his budget. “In this budget, we have announced initiatives that will create about 62,000 jobs and internship opportunities. We will invest heavily to foster a caring society. We will introduce measures to sustain economic development and maintain our economic vibrancy.”
Mr. Tsang said Hong Kong’s economy contracted 2.5% in the fourth quarter of 2008. GDP growth for the year was 2.5%.
“I forecast a decrease in GDP by 2% to 3% for 2009, the first negative growth for a whole year since the Asian financial crisis in 1998,” he noted.
Mr. Tsang said the Hong Kong government will increase public government spending next year to more than US$38.46 billion to ease the pressure of economic contraction, boost domestic demand and increase employment opportunities.
The Financial Secretary’s measures include:
- A one-off tax reduction of 50% of salaries tax and tax under personal assessment for 2008-09, up to a maximum of US$769.23. This is expected to cost the government US$525.64 million and benefit all 1.4 million taxpayers.
- A rates waiver for the first two quarters of the fiscal year, up to a maximum of US$192.30 per quarter at a cost of approximately US$538.46 million.
- Extending the freeze on government fees and charges related to people’s livelihoods, announced last July, until March 31, 2010.
The Financial Secretary said preserving employment is a top priority. He outlined four areas for providing and supporting employment:
- US$51.28 million to provide more training and job opportunities.
- US$1.66 million to help people who have lost their jobs during the financial crisis.
- US$17.94 million to help fresh graduates entering the job market this summer through a new internship program.
- US$141.02 million to provide jobs in various sectors.
To enhance the city’s overall competitiveness, Mr. Tsang said building new infrastructure links with the Mainland will be expedited, including the Hong Kong-Zhuhai-Macao Bridge, the Guangzhou-Shenzhen-Hong Kong Express Rail Link, the Hong Kong-Shenzhen Airport Rail Link and the Liantang/Heung Yuen Wai Boundary-Control Point.
Capital works expenditures for 2009-10 is estimated to be as high as US$5.03 billion. “Our annual capital works expenditure will be at a very high level over the next few years, and may reach US$6.41 billion,” said Mr. Tsang.
The Financial Secretary also announced plans to establish a Development Opportunities Office under the Development Bureau to better coordinate projects.
Education will continue to take the lion’s share of government spending, with US$7.91 billion earmarked in 2009-10. This includes approximately USS$961.53 million to support the implementation of the new senior secondary academic structure that will be introduced in September.
To strengthen Hong Kong’s role as an international financial center, Mr. Tsang said measures will be taken to improve the supervisory framework, enhance financial cooperation with emerging markets and develop the bond market.
“To promote the further and sustainable development of our bond market, we intend to implement a program to issue government bonds,” he said.
On creating new business opportunities, Mr. Tsang said the focus will be on developing technology-based, creative and green economies. Hong Kong will do so through the provision of infrastructure, manpower training, cooperation with the Mainland and other economies and funding programs.
The Financial Secretary set aside US$38.46 million to develop creative industries with strong local characteristics through the promotion of culture and art.
To promote a green economy and a better living environment, Mr. Tsang said Hong Kong will expand areas of cooperation with the Guangdong Provincial Government under the Framework for Development and Reform Planning for PRD Region, which the Central Government announced in January.
Mr. Tsang also highlighted the potential benefits of promoting electric vehicles as both a business opportunity and an environmental initiative for the city. “The door is opening to wider use of such vehicles, which are more energy-efficient and emit no exhaust gas,” he said.
The Financial Secretary extended the exemption for First Registration Tax on electric vehicles for five years, up to March 31, 2014. Mr. Tsang said he will also lead a steering committee to study the wider use of electric cars in Hong Kong.
To improve building energy efficiency, US$57.69 million will be allocated for government buildings, and another US$57.69 million to assist owners of private buildings with carbon audits and energy efficiency-improvement projects.
For healthcare, the Financial Secretary announced that recurrent subvention for the Hospital Authority will be increased by US$111.53 million a year for the next three financial years. The annual subvention in 2011-12 will be approximately US$333.33 million higher than at present.
Mr. Tsang said that for the sake of public health, tobacco duties have been raised from approximately US$0.10 to US$0.15.
The Financial Secretary forecast a deficit of US$1.25 billion in the Operating Account and a deficit of US$5.11 billion in the Consolidated Account for 2009-10.
He expects a return to an Operating Account surplus in 2012-13.
Details of the 2009-10 Budget can be found on the Web site: [www.budget.gov.hk].
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