Special Feature
Helping SMEs Expand into Emerging Markets
Helping SMEs Expand into Emerging Markets協助中小企開拓新興市場

Helping SMEs Expand into Emerging Markets協助中小企開拓新興市場

Helping SMEs Expand into Emerging Markets協助中小企開拓新興市場

Small and medium-sized enterprises (SMEs) are crucial pillars for Hong Kong’s prosperous economic development. Today, there are about 340,000 SMEs in Hong Kong, accounting for over 98% of the total business units and representing nearly half of the employment in the private sector.

In view of their significance, SMEs are encouraged to upgrade and optimise their production processes to tackle operational difficulties, particularly against the backdrop of the current global economic uncertainty. Tapping the unparalleled market opportunities in the Greater Bay Area (GBA) and ASEAN will also diversify the risk of investment. 

To help Hong Kong companies make the most of these opportunities, the BUD Fund, a Government funding scheme, is a timely measure that enables SMEs to get a foothold to enter the Mainland China and ASEAN markets.


Opportunities abound in Mainland and ASEAN 

The BUD Fund is a dedicated fund that helps SMEs surf the wave of economic upheavals, and also ties in with the Government’s advocacy of local enterprises “Going Global.” 

The Mainland Programme of the BUD Fund scheme was enhanced in August last year, and the ASEAN Programme was added. The number of approved projects for each programme was also extended to ten. Enterprises can receive up to HK$1 million for Mainland China and ASEAN projects, respectively. Such moves aim to encourage enterprises to capture the unparalleled business opportunities in Mainland China – the GBA in particular – as well as reach the ASEAN markets.

However, before filing an application, enterprises are advised to make holistic considerations. They should also have a full grasp of the varied business environments of these places – in terms of infrastructure, manpower, systems, production and operation conditions – in order to make the right decision.    


Grasp market trends to make the right choice   

Hong Kong SMEs that wish to explore the Mainland markets should be aware of a number of considerations. Generally speaking, the GBA has three currencies, taxation and legal systems, and different development paces and directions. This creates a pressing question on how to coordinate and integrate the GBA cities. 

Expert advisors on Mainland Chinese tax and business issues suggested companies take every factor into account when deciding where to go. For example, geographic factor, transportation and logistics, procedures and duration of opening companies, taxation and labour-related issues. What’s more, the companies need to assess whether their business fits in with the local core business activities and resources.

ASEAN, with 10 strongly bonded member states, is a dynamic economy. However, each member has unique economic status, business environment and taxation system. In terms of per capita GDP, Singapore is the most affluent, followed by Brunei and Malaysia. 

Although in Singapore it takes just a few days to set up a company, the cost and resources may be a concern. The Philippines, in stark contrast, is rich in labour with lower pay, but establishing a company is more complicated. In respect of taxation, companies might bear a lower burden in those jurisdictions that have signed a double taxation relief agreement with Hong Kong – Vietnam, Indonesia, Brunei, Singapore and Malaysia.

The Hong Kong Productivity Council regularly organizes seminars and study missions to explore business opportunities arising from Mainland China and ASEAN member states. These efforts not only help enterprises increase their understanding of the emerging markets, but also enable them to devise appropriate investment and operational strategies.


BUD Fund success stories    

Launched in June 2012, the BUD Fund has approved more than 1,800 applications, granted over HK$700 million and benefited above 1,500 enterprises as of March 2019. Successful cases prove that the scheme is conducive to driving business growth.

One of the success stories is a jewellery company that has filed four applications for BUD Fund support since 2015, and received a total of HK$770,000 to expand in the Mainland China market. The company has established online sales channels, and performed product tests and certifications that helped grab numerous business opportunities.

Another case is a manufacturer of precision engineered metal components that first received HK$440,000 to upgrade its Mainland China plant with advanced equipment, invest in advertising, optimise the company’s website and train its staff. With another subsidy of HK$500,000, it has also registered trademarks, participated in various exhibitions in ASEAN countries, employed domestic workers, purchased upgraded devices and launched product promotions in the Mainland.  


Planned projects in Free Trade areas

The 2019/20 Government Budget announced that the BUD Fund would extend coverage to all markets that have signed Free Trade Agreements (FTA) with Hong Kong. It also plans to increase the ceiling of funding support for each enterprise to HK$3 million, of which HK$1 million is for the Mainland Programme and HK$2 million for the ASEAN Programme, plus other FTA markets. 

The Government will seek funding approval from the Finance Committee of the Legislative Council in the hope that the enhancement measures can be implemented in the fourth quarter of 2019. Hong Kong enterprises will then be able to harness the FTA opportunities to further expand their markets and boost sales.

For more details on the BUD Fund, please visit www.bud.hkpc.org