A senior Hong Kong official on Wednesday said the government will increase its total expenditure in the new fiscal year by 14 percent to 490 billion Hong Kong dollars (about 63 billion U.S. dollars).
The total amount includes 380 billion HK dollars for operating expenditure and 110 billion HK dollars for capital expenditure, Financial Secretary Tsang Chun-wah said while delivering the annual Budget at the Special Administrative Region (SAR) Legislative Council on Wednesday.
Running an economy deeply depending on finance and real estate, Hong Kong government's total revenue for 2016-2017 is expected to be 500 billion HK dollars, compared with 457 million HK dollars of revenue for the previous fiscal year, according to Tsang.
Due to slowing global economic growth which dragged down export performance in Asia last year, Hong Kong's exports of goods recorded the first annual decline since 2009, down by 1.7 percent in real terms. Exports of services dropped by 0.6 percent, the first annual decrease since 1998.
Hong Kong's visitor arrivals dropped by 8 percent in the fourth quarter, down by 2.5 percent for the whole year. Retail sales slackened, recording the first annual decrease since 2009.
In spite of the decline, Hong Kong witnessed an overall economic growth of 2.4 percent in 2015-16 fiscal year with an unemployment rate averaged at a low level of 3.3 percent and a headline inflation rate of 3 percent.
For operating expenditure, the SAR government will continue to increase spending in caring for Hong Kong people's livelihood.
The estimated recurrent expenditure on education, healthcare and social welfare for 2016-17 is 198 billion HK dollars, accounting for more than 60 percent of the total recurrent expenditure.
Respectively, expenditures in education, social welfare and healthcare services will be 75 billion HK dollars, 66 billion HK dollars and 57 billion HK dollars respectively, according to the Budget.
As local consumption has been a key driver for Hong Kong's economic growth in recent years, easing the burden of residents will have a stimulus effect, Tsang said.
Therefore, the government will further introduce a set of tax reduction and short-term relief measures which will cost 38.8 billion HK dollars in total, including reducing salaries tax and tax under personal assessment by 75 percent, waiving rates for each rateable property.
To help Hong Kong residents with their housing problem, Tsang said the government will continue to increase residential land supply while adopting a public housing supply target of 280,000 units for the next 10 years.
Tsang said the Hong Kong Housing Authority (HKHA) requires substantial resources to implement the 10-year public housing construction program. It is estimated that HKHA's cash and investment balance will drop to 16 billion HK dollars by the end of March 2020.
"I have set aside the investment returns of 45 billion HK dollars in 2015 as an injection into the Housing Reserve. Taking this injection together with the 2014 allocation and accumulated investment returns, the balance of the Housing Reserve now stands at 74 billion HK dollars," the financial chief said.
As for private housing, Tsang said the government estimates that private housing land supply in 2015-16 has a capacity to produce over 20,000 units.
Tsang said the 2016-17 Land Sale Program comprises 29 residential sites, including 14 new sites, capable of providing about 19,000 units.
Taking into account railway property development projects, the Urban Renewal Authority's projects, and private re-development and development projects, the government estimates that the potential land supply for private housing in 2016-17 will have a capacity to produce 29,000 units, he added.
He mentioned that he has asked Hong Kong Monetary Authority to establish an office to facilitate the financing of infrastructure projects and provide a platform for pooling the efforts of investors, banks and the financial sector to offer comprehensive financial services for various infrastructure projects.
The government will also seize the opportunity to issue the third sukuk or Islamic Bonds in a timely manner.
In addition, Hong Kong will continue to discuss with the Asian Infrastructure Investment Bank and the central government on Hong Kong's participation in AIIB as a non-sovereign territory, he said.
Talking of the cross-boundary financial services, Tsang said the government has discussed with relevant authorities of the central government the launch of the Shenzhen-Hong Kong Stock Connect and the enhancement of the Shanghai-Hong Kong Stock Connect.
To attract more multinational and mainland enterprises to establish corporate treasury centers in Hong Kong, Tsang said, the government has introduced a bill into Legislative Council to allow, under specified conditions, interest deductions under profits tax for intra-group financing business of corporations and reduce profits tax of qualifying corporate treasury centres by 50 percent.
The Hong Kong government will also further promote science and new technologies to accumulate momentum for the region's future economic and social development.
Tsang said the government can widely apply and commercialize research and development results in robotics, healthy ageing and smart city to boost economic development and enhance the quality of life.
The government will introduce and enhance various funding schemes to encourage more private enterprises to invest in R&D and applied technology, and to translate outstanding local R&D achievements into products and services with commercial value, Tsang said.
Training for professionals is another area that Hong Kong government's budget will focus on to maintain the region's long-term competitiveness.
The government has launched a subsidy scheme of 960 million HK dollars for students pursuing self-financing undergraduate programs in selected disciplines, including healthcare, architecture and others.
The financial secretary's speech on the annual Budget has received support in Hong Kong society.
Hong Kong Chief Executive Leung Chun-ying said that the Budget has provided supportive fiscal measures to his annual Policy Address to implement the government's promises in improving people's livelihood.
Y.K. Pang, chairman of Hong Kong General Chamber of Commerce, described measures presented by the Budget as pragmatic, all-rounded and forward-looking.
"The government has come out with concrete steps to support and provide relief to small and medium-sized enterprises during these very challenging times," Pang said. (1 HK dollar = 0.129 U.S. dollar)
