Jeffrey Lam is the Chamber's Legco Representative
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In his first Budget speech under the current administration, Financial Secretary Paul Chan said the weakening global economy was expected to cause severe headwinds this year for Hong Kong’s exports. However, with the Mainland’s economy regaining steam, coupled with the lifting of restrictions on cross-boundary truck movements, there might be some reprieve for Hong Kong’s economic recovery later in the year.
This is good news as we begin to return to normalcy, but many businesses are still struggling to recover amid severe cash flow challenges. By extending the application period of all guarantee products under the SME Financing Guarantee Scheme to March 2024, the Budget demonstrated the Government’s commitment to supporting business through this challenging time.
Faced with a fiscal deficit, the Government cannot but adopt a more prudent approach towards public spending. However, amid the sluggish external economic environment, Hong Kong’s export and manufacturing sectors will have to cope with weak demand for some time. In addition, previous and forecast interest rate hikes are also making it more difficult for SMEs to repay their loans.
Other sectors, such as aviation, tourism, catering and retail, are also struggling to get back on their feet as manpower shortages hamper their recovery. This is because people who switched to other industries during the pandemic might be apprehensive about returning to their former industry, or have embarked on a new career path.
In addition to continuing to provide guarantees to enterprises to ensure that they have enough capital to sustain their operations, the Government should further consider reducing the profits tax rate. It should also offer low-interest loans to SMEs for five to 10 years to increase their cash flow and confidence in expanding their business. These measures should ease pressure on local businesses and help them ride out these difficult times.
The Budget also announced the introduction of a new Capital Investment Entrant Scheme to attract more capital and talent to Hong Kong. The scheme will help to also enhance investors’ confidence and strengthen Hong Kong’s competitiveness amid the intense global rivalry for investment and talent.
The revival of the Mainland’s economy will give a boost to Hong Kong, as will the increase in visitors now that our borders are fully open. Against this backdrop, businesses are keen to grasp opportunities from the Mainland’s “internal circulation” strategy, which aims to reduce dependence on external markets. I am aware that foreign investors have also expressed strong interest in capitalizing on the opportunities that the GBA presents. As such, I hope that the Government will formulate more plans to help businesses expand into the region.