Financial Secretary Unveils Budget Measures to Create Jobs,
Tackle Financial Crisis

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February 25, 2009 - Hong Kong Financial Secretary, Mr. John Tsang, today announced in the annual Budget a multi-pronged strategy to combat the fallout of 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 had been guided by three principles in preparing this year’s 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.”

The Financial Secretary said Hong Kong’s economy contracted by 2.5% in the fourth quarter of 2008, with GDP growing by 2.5% for the year as a whole.

“I forecast a decrease in GDP by two to three per cent for 2009, the first negative growth for a whole year since the Asian financial crisis in 1998,” he said.

Mr. Tsang said the Government would increase public government spending next year to more than HK$300 billion (US$38.46 billion). This would help ease the pressure of economic contraction, boost domestic demand and increase employment opportunities.

The Financial Secretary unveiled measures to ease the financial burden on the public. These include:
* A one-off tax reduction of 50% of salaries tax and tax under personal assessment for 2008-09, up to a maximum of HK$6,000 (US$769.23). This is expected to cost the government HK$4.1 billion (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 HK$1,500 (US$192.3) per quarter at a cost of about HK$4.2 billion (US$538.46 million).
* Extending the freeze on Government fees and charges related to people’s livelihood, announced last July, until March 31, 2010.

The Financial Secretary said preserving employment was a top priority in this year’s Budget and outlined four areas for providing and supporting employment.

These comprise a HK$400 million (US$51.28 million) package for the Labour Department to provide more training and job opportunities, and HK$13 million (US$1.66 million) in additional funding for the department to help people who have lost their jobs during the financial crisis.

In addition, HK$140 million (US$17.94 million) has been earmarked to help fresh graduates entering the job market this summer through a new internship program, and HK$1.1 billion (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 would be hastened, 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.

“We estimate that capital works expenditure for 2009-10 will be as high as H$39.3 billion (US$5.03 billion),” he said. “Our annual capital works expenditure will be at a very high level over the next few years, and may reach HK$50 billion (US$6.41 billion).”

Mr. Tsang also announced plans to set up a Development Opportunities Office under the Development Bureau to better co-ordinate projects.

Education will continue to be the Government’s largest spending area, with HK$61.7 billion (US$7.91 billion) to be spent on education in 2009-10. This includes about HK$7.5 billion (USS$961.53 million) to support the implementation of the new senior secondary academic structure to be introduced in September.

To strengthen Hong Kong’s role as an international financial center, Mr. Tsang said measures would be taken to improve the supervisory framework, enhance financial co-operation 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 would be on developing technology-based, creative and green economies. He said Hong Kong will promote the development of new technologies to enhance the competitiveness of the city through the provision of infrastructure, manpower training, co-operation with the Mainland and other economies and funding schemes.

The Financial Secretary set aside HK$300 million (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 would expand areas of co-operation with the Guangdong Provincial Government under the “Framework for Development and Reform Planning for PRD Region” announced by the Central Government 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 would also lead a steering committee to study the wider use of electric cars in Hong Kong.

To improve energy efficiency in buildings, HK$450 million (US$57.69 million) will be allocated for works on government buildings, with another HK$450 million (US$57.69 million) to assist owners of private buildings with carbon audits and energy efficiency improvement projects.

On health care, the Financial Secretary announced that recurrent subvention for the Hospital Authority would be increased by HK$870 million (US$111.53 million) a year for the next three financial years. The annual subvention in 2011-12 will be approximately HK$2.6 billion (US$333.33 million) higher than at present.

Mr. Tsang said that for the sake of public health, tobacco duties would be increased from around HK$0.80 (US$0.10) to HK$1.2 (US$0.15) with immediate effect.

The Financial Secretary forecast a deficit of HK$9.8 billion (US$1.25 billion) in the Operating Account and a deficit of HK$39.9 billion (US$5.11 billion) in the Consolidated Account for 2009-10.

He predicted a return to surplus in the Operating Account for 2012-13.

Details of the 2009-10 Budget can be found on the Web site: [www.budget.gov.hk].