Earlier today, Financial Secretary Paul Chan outlined his budget for 2019. Citing uncertainties surrounding the current global economic landscape, Mr Chan admitted that Hong Kong has been experiencing slackened growth and reduced confidence of enterprises regarding the future outlook.
Acknowledging these concerns, he set out this year’s Budget as one that which is aimed at “supporting enterprises, safeguarding jobs, stabilising the economy, strengthening livelihoods”.
Our key highlights:
The economy in numbers
Economic Performance in 2018
GDP growth: 3%
Unemployment: 2.8% - the lowest in 20 years
Economic Forecast for 2019
GDP growth: 2-3%
Revised estimates for 2018-19:
Government expenditure: HK$537.7 billion, 5.6% or HK$31.9 billion lower than the original estimate
Government revenue: HK$596.4 billion, 1.3% or HK$8.1 billion lower than the original estimate
Projections for 2019-20
Total Government Revenue of HK$626.1 billion
Total Government Expenditure of HK$607.8 billion
Surplus of HK$16.8 billion
Innovation and Technology
A major focus for the Government, HK$100 billion has already been spent on boosting the I&T sector which the Financial Secretary predicts will “bring huge economic benefits to Hong Kong” as part of its efforts to diversify the economy. Four areas in particular are targeted: biotechnology, artificial intelligence, smart city and FinTech.
More than HK$44b (US$5.6b) in new spending initiatives, including:
- HK$5.5b for Cyberport 5 to house more tech companies and startups
- HK$20b extra for Research Endowment Fund for more research projects
- HK$16b for university refurbishments, especially R&D facilities
- HK$800m to support utilisation of R&D work by universities, key state laboratories
- HK$2b for a Re-industrialisation Funding Scheme
- HK$200m to expand the Corporate Venture Fund of Science Park
- Two innovation clusters at Science Park on AI/Robotics and Healthcare technologies
- HK$500m for the IT Innovation Lab in Secondary Schools
The Financial Secretary noted that despite Hong Kong being the third largest financial centre in the world, the city must cope with increasing competition. He pointed in particular to the city’s need to strengthen its role as a bridge linking the mainland with the international market, as well as to seize the opportunities offered by the Greater Bay Area and the Belt and Road Initiative.
- First batch of green bonds to be issued
- Planning for the use of the FPS to provide the public with greater convenience in paying taxes, rates and water charges
- HKMA will shortly issue virtual banking licences
- Tax concessions for Marine Insurance and underwriting of specialty risks
- 50% profits tax concession on Marine Insurance businesses
- Consider limited partnership regime/tax arrangements to attract private equity funds to HK
- HK$400m seed capital for Financial Reporting Council
- Establish Academy of Finance for financial leadership development
SMEs and salary earners
A range of relief measures were outlined to help local enterprises deal with the fallout and uncertainty of the global economic and trade environment. Likewise, the Financial Secretary rolled out tax cuts for salary earners to “relieve the long-term tax burden of citizens through a structural approach and increase taxpayers' disposable income”.
- Reduce profits tax by 75% for 2018-19 assessment year, up to maximum of HK$20,000
- Reduce salaries tax by 75% for 2018-19 assessment year, up to maximum of HK$20,000
- Waive rates for the 4 quarters of 2019-20, up to $1,500 per property, per quarter
- Waive business registration fees for 2019-20
- Expand network of FTAs, CADTs and IPPAs as well as network of overseas offices (Note: New Bangkok ETO opening on February 28)
- Regularising the Technology Voucher Programme and doubling the funding ceiling for each enterprise from HK$200,000 to HK$400,000
Housing and Land
The Financial Secretary insisted that the Government has appropriate resources to finance the Lantau Tomorrow Vision which was unveiled in last year’s Policy Address. Meanwhile, Chan confirmed that new towns in Kwu Tung North, Fanling North, Yuen Long South and Tung Chung will be pushed through to provide 210,000 flats starting from 2023.
- Public housing supply of 100,400 units estimated for next 5 years
- Private housing supply of 93,000 units estimated in next 3-4 years
- 2019-20 Land Sale programme includes 7 commercial/hotel sites capable of producing 814,600 sq m of floor space
- HK$2b to help NGOs construct transitional housing
Hong Kong’s chronic staffing shortages in the public healthcare sector were once again a feature of this year’s Budget with a range of cash injections announced to help the Hospital Authority cope. Government expenditure on public healthcare services will increase by 10.9 per cent to $80.6 billion in 2019-20, accounting for 18.3 per cent of the total recurrent expenditure.
- HK$10b for a Public Healthcare Stabilisation Fund to ensure stable funding for public healthcare services
- HK$5b to hasten upgrade and purchase of medical equipment
- HK$1.2b to establish the Hong Kong Genome Institute
- HK$400m to expand scope of drug formulary
- HK$700m recurrent boost for Hospital Authority to boost staff morale, retain talent
- Land will be available in 2021 for the first-phase construction of Hong Kong-Shenzhen Innovation and Technology Park
As part of its “caring society” measures, the Financial Secretary announced a host of allocations across welfare, elderly support, rehabilitation services, child and youth services and social enterprises.
- HK$20b to purchase 60 properties to provide over 130 welfare facilities
- HK$200m for wi-fi services at social welfare premises
- HK$1.36b for residential day-care and subsidized day care places for the elderly
- HK$290m to boost rehab services
- HK$1.298b to boost services for children, youth
- HK$200m to expand apprenticeship schemes for construction industry
Liveable City and Smart City
Green-focused measures are an increasing presence in the Budget with expanded electric vehicle charging stations a notable inclusion. The city’s iconic harbourfront development received an expected boost as the government looks to create a more accessible promenade along Victoria Harbour. The plan outlined by the Financial Secretary looks to extend the length of the harbourfront promenades from the current 20-odd kilometres to 34 kilometres in about 10 years, and provide 35 hectares of open space on both sides of the Victoria Harbour.
- HK$6 billion for enhancement of waterfront
- HK$600m to refurbish 240 public toilets
- HK$200m to support Urban Forestry Support Fund
- HK$300m for geospatial data sharing platform
- HK$120m to expand public charging network for electric vehicles
- HK$1b for renewable energy facilities in government departments
- Preparations ongoing for for three smart city infrastructure projects: electronic identity for all Hong Kong residents, installing multi-functional smart lampposts, enhancing the government cloud services and building a big data analytics platform.
Tourism, arts & culture
The Financial Secretary noted renewed growth in the tourism sector after several years of consolidation. Chan also noted the aims for the tourism sector will be to “promote our diverse culture with Hong Kong characteristics, with a view to drawing more high-spending overnight visitors from different source markets”.
- HK$353m for HKTB to continue implementing tourism development blueprint
- HK$1b for Film Development Fund
- HK$176m to host large-scale world-class arts and culture programmes
- Enhancing Ngong Ping Nature Centre to help visitor experience, improve facilities of trails and commission a consultancy study for enhancing the facilities of the Hong Kong Wetland Park
Download our higlights here.
Find out more on the official Budget website.