The government will provide further support to small and medium sized enterprises (SMEs) by lifting the upper limit of the SME Loan Guarantee Scheme to HK$30 billion from the current level of HK$20 billion, Financial Secretary John Tsang said Wednesday.

Meanwhile, the promotion of Hong Kong brands is also high on the government's agenda, the financial chief said in his budget speech.

The SME Loan Guarantee Scheme of the Trade and Industry Department, launched in 2001, used HK$15 billion - or 75 percent of its quota - as of the end of January, Tsang noted. The government scheme, which guarantees up to 50 percent of any loan up to a maximum of HK$6 million, has been involved in a total HK$33 billion worth of loans to more than 12,000 SMEs during the same period.

"We will review and increase the quota before it runs dry, as we think now is the time to lift the quota and reinforce the government's support to SMEs," an anonymous government official told China Daily.

Meanwhile, as the mainland enters its 12th Five-year Plan aimed at encouraging domestic consumption, there are opportunities from the freshly unleashed demand for Hong Kong brands and products, according to the financial secretary.

Government officials said that relevant bodies such as the Hong Kong Trade Development Council will stage more branding conferences and seminars, holding exhibitions and trade fairs for Hong Kong brands in mainland provinces and organizing delegations for business matching and promotion.

An extra HK$1 billion will also be committed to the SME Development Fund and the SME Export Marketing Fund, as promised by Chief Executive Donald Tsang in his Policy Address last October. The fund will focus on supporting projects related to brand development and the opening up of the mainland market and other emerging markets in 2011, the financial chief said.

However, industry groups believe that the government should adopt a far-sighted mentality and help local SMEs to enhance their competitiveness in the long run.

Cliff Sun, chairman of the Federation of Hong Kong Industries (FHKI), told China Daily that "the budget is basically repeating what has already been said and lacks detailed measures."

"We think the government should turn away from 'lip service' and come up with more targeted measures to help enhance the competitiveness of Hong Kong SMEs in the long run, especially when they explore the mainland market," said Sun.

The FHKI recommended that the government set up a HK$2.5 billion fund to specifically support Hong Kong companies in selling their products on the mainland.

Sun also emphasized that the government should seriously consider using tax incentives to encourage research & development activities, which are vital in the long run.

The government launched a HK$200 million Research and Development Cash Rebate Scheme last April. Under the scheme, eligible companies can apply for a 10 percent cash rebate on their research and development expenditure. However, its stringent requirements of eligibility and project disclosure only brought about a lukewarm response, with only a fraction of the fund, or HK$2.5 million, being approved in the six months after it kicked off, according to Sun.

Ho Chan-shan, chairman of the Hong Kong Small and Medium Enterprises General Association, said that Hong Kong manufacturers operating in the Pearl River Delta are faced with increasing costs of raw material and labor, as well as higher environmental standards instituted by local governments, which is forcing them to adapt and move up the value chain.

"We urge the government to facilitate this transformation process that cannot be avoided. Hong Kong brands should not stagnate with low-margin products such as moon cakes, but embrace more added-value industrial brands," said Ho.

According to government figures, as of September 2010, there were about 290,000 SMEs in Hong Kong, accounting for 98 percent of total business units and 48 percent of total employment.

China Daily

(HK Edition 02/24/2011 page3)