“This is a terrible time for Hong Kong businesses,” said Chamber Chairman Aron Harilela, speaking at the Chamber’s SME Forum at the Holiday Inn Golden Mile on 29 October.

“We all know that SMEs are the backbone of Hong Kong, and also that they are the first companies in the firing line when times are difficult.”

Amid the unprecedented disruption, the Chairman hosted two forums in October and November, at his hotel and at his family’s home complex.

“I’m a hotelier,” he told attendees. “So my business is directly affected. But we also want to hear views from across the SME community, so the Chamber can better understand the problems you are facing.”

Members at the events represented a wide variety of sectors, from manufacturing to marketing, recruitment and banking. One thing they had in common is that all have been affected by the unrest. Some attendees reported they had already seen a drop-off in business of as much as 50%. Others have continued to operate as normal, but do not expect this situation to continue as future orders have almost entirely dried up. More than one member remarked that their work pipeline is a now a “black tunnel.” 

Funds and loans

The Government has introduced and enhanced a number of schemes including loans to help SMEs, and these were among the main topics discussed. The two key hurdles reported by our members were bureaucracy and the stringent criteria involved in accessing funds.

The amount of paperwork required is extremely time-consuming, especially for companies that do not have manpower resources to spare. So applying for these loans is a cost drain in terms of staff wages and time lost from doing more productive work.

Several members remarked that the checks for the loans are too tight and not appropriate in the current climate. Examining a balance sheet that includes the past six months does not give a fair picture of a company’s credibility. 

Other issues mentioned about the Government loans were the age restrictions, that they cannot be used to pay off debts, and the high interest rate.

Far-reaching impact

From major conferences to small meetings, numerous events have been cancelled in recent months. But members expressed concern that the impression given to overseas audiences overstates the danger. Much of the violence – until early November at least – remained localized, and the events that went ahead passed without incident.

In the longer term, the perception that Hong Kong is unsafe would have a disastrous impact on our ability to attract tourists and investors.

The current climate has hit shops and restaurants in particular. Besides the huge drop in tourist arrivals, local people are less willing or able to go out to eat and shop. The closure of bank branches because of vandalism is another issue for these small businesses that often operate on a mostly cash basis. 

If they cannot deposit their takings, they may into overdraft and have to pay charges. Other methods of customer payment such as credit cards and Octopus are available, but members explained that the costs of using these are prohibitively high.

And as business decisions are being delayed, this is affecting demand for services like consultancy, training and interior design. Many services companies are looking at an empty order book as customers tighten their purse strings until the future becomes more clear.  

In a slightly grim “positive” note, demand has risen in the change management segment, as a result of companies needing to downsize.

Going forward

While the mood at the forums was sombre, the discussions were very fruitful in helping the Chamber understand the situation, and in the ideas that members contributed.

Cutting red tape and loosening the criteria for loans was the chief suggestion to enable more businesses to survive. Banks could also waive charges for customers dipping into overdrafts. 

A temporary change to tax rules would be welcome, such as allowing businesses to earn a certain amount tax-free. Some form of help for SMEs to meet their MPF requirements could also be considered.

As companies look to expand into other markets, such as ASEAN, they would appreciate more advice on visas and other legal matters to ease the process. 

On interesting suggestion was that the Government could provide an education subsidy to people who have lost their jobs or had their hours cut. 

In conclusion, members agreed that Hong Kong needs to “put out the fire first” before we can recover. A major effort will then be needed – from businesses and Government – to restore confidence in the city. On the positive side, there was also a general consensus that Hong Kong will recover quickly, once calm has been restored.

“We really appreciate the candid contributions that our members made during these SME Forums,” said Chamber CEO Shirley Yuen.

“Their insights and recommendations have been invaluable as the Chamber puts together our advice to the Government on the best way forward. We all look to a brighter future ahead, but our SMEs need more support to help them through these very difficult times.”

SME Facts and Figures

Definition: According to the Government, SMEs are businesses with fewer than 50 employees (100 for manufacturing companies)

Employment: SMEs employ 1.3 million people in Hong Kong

Sectors: Around 70% of SMEs are concentrated in four sectors: import-export trade and business; professional and business services; retail; and social and personal services.