Financial Secretary Unveils Budget Measures to Boost Recovery

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February 24, 2010 - The Financial Secretary, John C. Tsang, today announced in his annual budget a series of measures to build on Hong Kong’s economic recovery from the global financial crisis.

Mr. Tsang also unveiled initiatives to stabilize the property market and develop six priority industries.

The Financial Secretary highlighted Hong Kong’s strong rebound from the financial crisis. After four straight quarters of negative growth, Mr. Tsang reported that Hong Kong’s gross domestic product (GDP) expanded by 2.6 percent in the fourth quarter of 2009. He forecast GDP growth of 4 percent to 5 percent for 2010.

Mr. Tsang remarked that while Hong Kong had come through the most difficult period of the crisis, the external environment remained fraught with uncertainties and the foundations of the recovery were not yet firm.

In response, Mr. Tsang announced a nearly US$2.6 billion relief package that included tax rebates, rates concessions and public housing rental waivers to provide financial assistance to the community during the economic recovery.

In addition, a proposed salaries tax reduction of 75 percent for 2009-10, capped at US$770, would benefit Hong Kong’s 1.4 million taxpayers.

Mr. Tsang said the government had been closely monitoring the property market situation. The budget includes a series of measures to prevent volatility in the property market, such as raising stamp duty on property sales of above US$2.6 million and steps to curb excessive expansion of mortgage lending.

On infrastructure development, the Financial Secretary estimated that capital works expenditure would increase to US$6.4 billion in 2010-2011.

Major projects expected to start this financial year include the Kai Tak Cruise Terminal Building and the Hong Kong-Zhuhai-Macao Bridge boundary crossing facilities.

The Financial Secretary also announced measures to support the development of six industries identified as priority areas to broaden the city’s economic base in the wake of the financial crisis. The industries are medical services, education services, environmental industries, testing and certification, innovation and technology and cultural and creative industries.

To optimize land resources for these industries, Mr. Tsang said the Lands Department would set up a dedicated team to handle applications to redevelop or convert industrial buildings.

Mr. Tsang emphasized that the role of the government was to provide a conducive environment for the development of these industries under the principle of “market leads, government facilitates.”

The budget also allocated US$5.3 million to support the work of the Hong Kong Council for Testing and Certification and the Hong Kong Accreditation Service.

Mr. Tsang said the government would implement the Hong Kong Science Park Phase 3 development for completion in phases between 2013 and 2016. This would promote innovation and technology and create some 5,000 jobs during construction and 4,000 research and development-related jobs on completion of the project.

To encourage the transport sector to test green and low-carbon transport technology, Mr. Tsang announced the establishment of a US$38 million Pilot Green Transport Fund.

“I hope that this fund will encourage the industry to introduce more innovative green technologies, such as the use of buses, public light buses, taxis, and ferries that employ green technologies and help nurture the budding of green technology in Hong Kong,” he said.

Mr. Tsang also set aside US$69 million for subsidies to replace Euro II diesel commercial vehicles.

To foster regional cooperation, Mr. Tsang said the government would set up a Hong Kong-Taiwan Economic and Cultural Cooperation and Promotion Council to enhance cross-Strait ties.

The Financial Secretary forecast a larger than expected surplus of US$1.8 billion for 2009-10.

He forecast a deficit of US$3.2 billion for 2010-2011 and expected a return to fiscal balance by 2013-14. He forecast that the underlying inflation rate for 2010 as a whole would average 1.5 percent while the average rate of headline inflation would be 2.3 percent.

2010-11 Budget: http://www.budget.gov.hk/eindex.html