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Businesses Upbeat

HKGCC's Business Prospects Survey reveals surging optimism in 2005-06

Hong Kong's business community is becoming more upbeat about the prospects of the local economy over the next two years, but are growing increasingly dissatisfied with the environment, according to the findings of HKGCC's annual Business Prospects Survey, released on November 24.

"2004 has been a good year for most businesses in Hong Kong, and many people can actually feel the benefits in one way or the other," HKGCC CEO Dr Eden Woon said. "Our survey shows that the majority of the local business community is becoming more optimistic, and this is a very encouraging sign."

For 2005, 30.9 percent of survey respondents expect overall business conditions to be "good" or "very good," up from 19.2 percent a year earlier. Looking ahead to 2006, conditions are expected to be "good" or "very good" in the opinion of 41.2 percent of the responding companies, and "poor" or "very poor" in just 7.1 percent of those polled.

The optimism within the local business community has also been reflected in their corporate wage review plans for 2005. Some 19.6 percent of the respondents said that there would be a general wage rise, compared with 7.3 percent a year ago. A total of 61.2 percent of the respondents said wage adjustments would be based on performance, up from 42.6 percent a year earlier.

While most respondents are clearly optimistic about the local economy, they are equally clear about their dissatisfaction with the current pollution, 81.2 percent, compared to 68 percent a year earlier.

"Mounting air pollution is definitely a problem faced by everyone living in the territory. There is no doubt that the situation is getting worse and we sincerely hope the SAR Government will take this urgent environment problem seriously and intensify its dialogue with our PRD neighbours on this problem," Dr Woon said.

Following the signing of the Closer and Economic Partnership Arrangement (CEPA) between the Mainland and Hong Kong, over 39 percent of the respondents are already taking advantage of CEPA opportunities in various ways. Most have benefited through easier access to investment in services and zero tariff on made-in-Hong-Kong goods.

"CEPA has been beneficial to Hong Kong, but we should look beyond the statistics to see that CEPA has given Hong Kong "a new story to tell" when promoting its positioning to overseas and Mainland audiences. The Chamber has found receptive listeners when we talk about CEPA in several places we visited -- Indonesia, Japan, the U.S., and most recently South America -- where we just con-cluded a Chamber visit," Dr Woon noted.

Meanwhile, about 67 percent of respondents believe GDP will rise between 3 and 7 percent in real terms in 2005. At the other end of the scale, just 1.4 percent think a contraction is likely and 3.6 percent envisage growth faster than 7 percent.

On the government front, the survey examined a number of issues.

"The survey revealed continued and extremely strong support for reducing spending, through trimming the size of the civil service and other measures," Dr Woon said.

A total of 69 percent of respondents support reducing the size of the civil service while 65.5 percent favour a cut in civil service pay and/or benefits.

"Civil servants' pay is significantly higher than that for similar jobs in the private sector. The Chamber has long called for a comprehensive and coherent plan to reduce government spending. A balanced budget will be essential for Hong Kong's overall competitiveness," Dr Woon said.

The majority of the respondents, about 37 percent, said they will support a broad-based consumption tax such as a Goods and Services Tax (GST) or Value Added Tax (VAT) if these are in conjunction with reduced government operating expenditure.

Overall, 37 percent of respondents were satisfied with the SAR Government's performance compared with 21.8 percent from a year ago. Some 60.9 percent said they were dissatisfied compared with 76.6 percent from a year earlier.

The Chamber's annual Business Prospects Survey was conducted from mid-October to mid-November this year. It contained 43 questions covering a broad range of topics of concern to the local business community. Among these are the outlook for economic and business conditions, Hong Kong's competitiveness, the SAR Government's role, Hong Kong's situation, Mainland economic relations, and background information on the respondents. There were 281 valid responses received for a 9.3 percent response rate. The survey has been conducted every year since 1998.

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