Hong Kong's top financial official on Wednesday unveiled much-awaited budget proposals for the upcoming fiscal year, aiming to revive the economy by boosting employment and infrastructural projects, among others.
Economists and analysts said the measures proposed by Financial Secretary John Tsang of the Hong Kong Special Administrative Region (HKSAR) government were generally welcome, although some said the tax waivers fell short of their expectations.
Mona Mak, tax partner at Deloitte Touche Tohmatsu, said she gave the budget a mark of 70 points for the short-term measures and 80 points for the long-term ones.
Undertaking a task that is widely considered challenging given the impacts of the global economic downturn on the highly open economy of Hong Kong, Secretary Tsang said creating jobs was the top priority as he outlined the measures to boost the economy.
"In a financial crisis, having a secure job is like an anchor that provides stability to a ship in rough seas," Tsang told members of the Legislative Council.
"And the best way to preserve jobs is to improve our economy."
Unemployment rate in Hong Kong rose from a decade-low of 3.2 percent in the middle of last year to the latest 4.6 percent, as economic growth slowed sharply from 7.3 percent in the first quarter of 2008 to a negative 2.5 percent in the fourth quarter.
Tsang said he expected the Hong Kong economy to contract 2 to 3 percent this year, with employment pressure expected to mount further in the coming months.
Counter-cyclical measures were expected to drive government expenditure to exceed 300 billion HK dollars (38.5 billion U.S. dollars) in the upcoming fiscal year.
Tsang said the HKSAR government will introduce targeted measures to create jobs, including employment subsidies, assistance and graduate internship programs.
An estimated 62,000 jobs will be created this year, said Sherman Chan, an economist with Moody's Economy.com, a subsidiary of Moody's Investors Service.
"The Hong Kong government is right in targeting employment issues. Although this will be insufficient to absorb the rise in unemployment, it is a positive sign for the economy that started contracting since the June quarter," she said.
In terms of the long-term proposals, Tsang said it was necessary for Hong Kong to promote regional economic development and further economic integration with the Chinese mainland, particularly the neighboring Guangdong province, and the Macao SAR.
Guangdong and Hong Kong have recently agreed to focus on areas such as finance, the service industries, infrastructure and town planning, and innovation and technology.
The mainland market could enhance the competitiveness of Hong Kong in the long run, said Priscilla Lau, a professor at the School of Polytechnic University.
Tsang also outlined a series of measures to tap into opportunities such as the new technology-based industries, creative industries and the green economy.
To provide for future strength, Tsang outlined measures to consolidate Hong Kong's role as a financial, business support and professional services, logistics and tourism hub.
Mak, of Deloitte Touche Tohmatsu, said she was impressed by the HKSAR government's intention to issue government bonds as one of the moves to foster a bond market.
But expectations were not met for corporate and individual tax cuts, which could help relieve pressures on the small and medium enterprises, she said.
Chan said the budget lacks measures that could produce immediate stimulus, which had been undoubtedly difficult given that nobody knows when the economy will recover.
The measures also fell short of expectations for cash coupons previously voiced by some, but Mo Pak-hung, associate professor of economics at the Baptist University, said Tsang avoided a potentially bad decision.
Cash coupons would not have helped the senior citizens or the disabled as they could be diverted for other uses. Neither will it help those who were able to work, he said.
"I think the budget, as a whole, will have public approval," he said.
Mo even put forward a proposal for the establishment of a big award to encourage inventions, which he said will benefit the youngsters and the entrepreneurs.
(Xinhua News Agency February 26, 2009)