Unquestionably, the Mainland market offers great potential, and because many companies want to profit from its development, competition in the country has intensified. I believe that, like me, the local sector is anxious to learn how Hong Kong companies can boost their competitiveness and seize possible business opportunities in China.

Now that Beijing will host the 2008 Olympic Games, I urge the government to go ahead with the study, which is vital to SMEs, because they lack resources to identify ways in which to penetrate the China market. Though SMEs are the economic pillars of Hong Kong, they usually lack knowledge of the Mainland market and the resources to enhance productivity and competitive power.

In addition to suggesting a series of support measures, the report also recommends allocating HK$1.3 billion to set up four funding schemes, namely: SME Business Installations and Equipment Loan Guarantee Scheme, SME Development Fund, SME Training Fund and SME Export Marketing Fund.

For the SME Business Installations and Equipment Loan Guarantee Scheme, the committee recommended allocating HK$0.5 billion to help SMEs secure bank loans so that they can refit or upgrade their businesses to enhance their competitiveness. Each SME will be able to obtain a guarantee equivalent to 50 per cent of the approved loan, with the maximum amount set at HK$500,000. However, I think the maximum loan amount of HK$1 million from banks is not enough to purchase advanced equipment. Besides, only about 6,600 SMEs are able to benefit from the scheme, which is just a small proportion of the 290,000 SMEs in Hong Kong. The government must therefore consider allocating more resources to raise the guarantee ceiling to increase the number of beneficiaries.

After consulting committee members in the banking field, I learned that interest rates for the loan will be P+3 or higher. If true, this is obviously too high and will put SMEs off applying for a loan. In my opinion, since the government has promised to offer a loan guarantee and banks only need to bear limited risk, the interest rate should be lowered. The government must discuss this with the banks to maintain a reasonable interest rate of P+1.

I also doubt the effectiveness of the training fund. The committee recommended a maximum subsidy for each successful application of HK$10,000 for employees and HK$5,000 for an employer. Such a low sum means that possibly not all employees in the firm will be able to apply for training. Moreover, the employer may be unwilling to give employees time off for training.