NEWS
Mar-24-2009 The AFP View of the 2009/2010 Hong Kong Budget
INTRODUCTION
AFP professionals have long been associated with helping clients understand the effects that Hong Kong budgets may have on their personal circumstances, their business interests and Hong Kong society in general. This budget commentary is designed to give a summary of the 2009/10 Hong Kong budget delivered on 25 February 2009 by the Financial Secretary, Mr. John Tsang Chun-wah, and its implications.
The backdrop to this year’s budget was very different to that of 2008. Last year, a record budget surplus enabled the Financial Secretary to announce popular give-aways and promises of significant public expenditure. One year on, the world is gripped in an unprecedented global recession affecting all economies, large and small.
Although concerns abound regarding Hong Kong’s future economic health, Mr. Tsang appeared confident that a positive attitude and a “can do” spirit will, once again, propel Hong Kong beyond current short-term challenges to more stable and prosperous times. He opened his speech by noting that the 2009/10 budget focused on creating jobs, boosting long-term competitiveness and creating conditions for the sustainable development of Hong Kong’s economy. Indeed, he announced initiatives, which he claimed would create about 62,000 jobs. He also confirmed his three principles of public finance management: commitment to society, sustainability and pragmatism.
Unlike many other economies, Hong Kong enjoys positive fiscal reserves with little government borrowing. This has allowed the Government to follow the Keynesian practice of boosting government spending in times of economic decline, notably during the Asian financial crisis of 1997/98 and SARS in 2003. Mr. Tsang confirmed that he expects fiscal reserves to remain robust throughout the foreseeable future, although he did predict a fall from $448.1 billion at the end of March 2010 to $391.1 billion at the end of March 2014, the year in which he expects Hong Kong to return to balanced budgets. Many commentators had predicted that the Financial Secretary would be happy to run a budget deficit in the coming years in order to implement a fiscal stimulus package, similar to those of other countries. These predictions were confirmed, however, the scale of fiscal stimulus can be considered slight.
HIGHLIGHTS
Mr Tsang delivered his second budget speech to the Legislative Council at a time of extreme financial difficulty for businesses and the population of Hong Kong. The proposals put forward by the Financial Secretary are aimed at;
- retaining jobs and creating employment;
- consolidating Hong Kong’s strengths in financial services, the promotion of tourism and the implementation of infrastructure projects;
- and providing assistance to the disadvantaged and improving the quality of life for Hong Kong people.
Creating Employment
- An increase in incentives for employers to hire middle-aged people and disabled persons.
- Additional funding to the Labour Department to assist in providing employment assistance to those made redundant.
- Provision of employment and internships for graduates leaving universities and seeking employment in Hong Kong and on the Mainland.
- Economic initiatives to develop technology and advanced scientific research centres aimed at creating technology-related employment opportunities.
- Numerous initiatives, designed to create new jobs for targeted industries ranging from tourism to the construction and maintenance industry.
