relative file path for layout
Skip to main content  Skip to search  Skip to main menu
Trade and Industry Department The Government of the Hong Kong Special Administrative Region
Brand Hong Kong - Asia world city
MY COLOUR

Press Releases

The SME Committee submits its report to the Chief Executive
Wednesday, June 27, 2001

The following is issued on behalf of the Small and Medium Enterprises Committee:-

The Small and Medium Enterprises Committee (SMEC) today (June 27) submitted a report to the Chief Executive (CE) on recommendations to support and facilitate the long term development of the small and medium enterprises (SMEs) in Hong Kong.

Entitled "Staying Ahead: Smart, Motivated, Enterprising", the report's key recommendation is to set up four funding schemes to help SMEs enhance their overall competitiveness. The total amount of capital involved is $1.3 billion, including 300 million which the Financial Secretary has set aside in the 2001-02 Budget in March for subsidising SMEs' staff training initiatives. The Committee estimates that more than 96,000 SMEs will benefit from the four funding schemes.

Speaking at a press conference, the Chairman of SMEC, Mr Chan Wing-kee, said:" SMEs are the pillar of Hong Kong's economy. As at December 2000, there were approximately 290 000 SMEs in Hong Kong, accounting for 98% of local enterprises. In his Policy Address in October 2000, the CE reaffirmed the importance of SMEs and the Government's commitment to helping the development of SMEs. The Committee was tasked to explore new measures to support SMEs under the themes of "helping to start a new business", "helping to build a new business" and "helping to expand a business", and to come up with practical recommendations."

The Committee completed its report after careful deliberations and extensive consultation with the public, in particular SME associations.

Details of the four funding schemes are set out below:-

(1) SME Business Installations and Equipment Loan Guarantee Scheme

The Committee recommends the setting up of a $500 million SME Business Installations and Equipment Loan Guarantee Scheme to help SMEs secure loans from banks and financial institutions to acquire the necessary business installations and equipment for enhancing productivity and competitiveness. The maximum amount of guarantee that an SME can receive is 50% of the loan or $500,000 (whichever is the less). The maximum guarantee period is three years.

The Committee estimates that under normal circumstances, the overall default rate of the Scheme should not exceed 15%. In order to benefit as many SMEs as possible, the Committee suggests that the Government work on the basis of a 15% default rate. With a capital amount of $500 million, the Government will be able to commit a total of $3.3 billion as the maximum amount of guarantees for the scheme.

Under this scenario, it is estimated that the scheme will help SMEs raise at least $6.6 billion in the market, benefiting about 6 600 SMEs. Assuming that the average the size of a loan case to be, say, $0.7 million, which means that on average the Government has to provide $0.35 million as guarantee per loan case, then about 10 000 SMEs will benefit from the Scheme.

(2) SME Development Fund

The Committee recommends that the Government set up a $200 million SME Development Fund to subsidise projects to be carried out by eligible support organizations, trade and industrial organizations, professional bodies and research institutes to enhance the competitiveness of SMEs in general or SMEs in specific sectors. The maximum amount of grant for each project is $2 million. Applicants are required to contribute part of the expenses of their projects, but this requirement may be waived under special circumstances.

The Committee estimates that the Scheme can provide funding for at least 100 projects and benefit a great number of SMEs. On the assumption that a funded project would on average benefit 200 SMEs, 20,000 SMEs would benefit from the Scheme.

(3) SME Training Fund

The Committee recommends the setting up of an SME Training Fund with the $300 million set aside by the Financial Secretary in the Budget in March 2001 to subsidise, on a dollar-to-dollar matching basis, training provided by SMEs to their salaried employees, which are relevant to their business operation. In addition, the Committee recommends the Government to set aside $100 million to provide subsidy, on a dollar-to-dollar matching basis, to SME employers to attend training courses relevant to their businesses. Together they will constitute the SME Training Fund, with a total amount of $400 million. Eligible training courses include training courses provided by local training organizations; overseas training courses; and training courses commissioned by SMEs to suit their particular needs and conducted by training organizations/higher education institutions or individual instructors. The subsidies cover direct course expenses only. For employees' training, the maximum amount of subsidy that each SME can obtain, on a cumulative basis, is $10,000. For employers' training, the maximum amount of subsidy that each SME can obtain, on a cumulative basis, is $5,000. The subsidy would be reimbursed to the concerned SMEs after the relevant employers/employees have completed the approved training courses.

The Committee estimates that, through the Scheme, about $800 million will be spent on SMEs' training initiatives, and that employees of at least 30 000 SMEs and employers of at least 20 000 SMEs will benefit.

(4) SME Export Marketing Fund

The Committee recommends the setting up of a $200 million SME Export Marketing Fund to subsidise SMEs' participation in export promotion activities held locally or outside Hong Kong (including trade fairs and study missions). For each successful application, the subsidy will cover 50% of the fundable items of the approved export promotion activities, or $10,000 (whichever is the less). Subsidy would be reimbursed to the concerned SMEs after they have completed the approved export promotion activities. Each SME can only receive subsidy once under the Scheme.

The Committee estimates that, through this Scheme, about $400 million will be spent on export promotion activities, benefitting at least 20 000 SMEs.

As the funding schemes are new initiatives, the Committee recommends that the effectiveness of the funding schemes be reviewed after the first year of operation.

The proposed measures recommended by the Committee are based on the following philosophies:

(i) under the principles of market economy, the Government's role in supporting local SMEs' development is to create a favourable business environment, striking a balance between maximum support and minimum intervention;

(ii) the Committee should come up with proposals in response to difficulties and challenges which are common to the many SMEs in Hong Kong, so that the Government and various support organizations could suitably focus their attention and channel their resources. Moreover, the Government should prompt and encourage trade and industrial organizations, professional bodies and research institutes to provide support in response to the specific needs of SMEs; and

The Committee reckons that in the face of three major economic developments, namely globalisation of world economy, China's accession to the World Trade Organization (WTO) and the emergence of a knowledge-based economy, SMEs need greater support in six areas, namely business environment, financing, corporate governance and culture, human resources, technology application, and market expansion if they are to rise to new challenges and capitalise on new business opportunities.

Apart from the proposed funding schemes, the Committee has put forward a number of recommendations concerning six other major areas, viz. business environment, financing, corporate governance and culture, human resources, technology application, and market expansion. (For details ,please refer to the SMEC report which has been uploaded onto the TID website at: http://www.gov.hk/tid/support/sme_report.htm)

Summing up, Mr Chan Wing-kee said: "The Committee fully recognises the contributions of SMEs over the years in promoting the growth of Hong Kong's economy, providing job opportunities, enhancing the quality of human resources, nurturing a culture of entrepreneurship, fostering creativity, and opening up new business opportunities. The Committee firmly believes that SMEs will play an increasingly important role in the new economy. It is therefore necessary to support the healthy development of SMEs."

"With this belief in mind, the Committee recommends that the Government and other relevant support organizations devote more resources to support the development of SMEs. At the same time, the Committee does not encourage SMEs to over-rely on Government's assistance. The Committee believes that it is SMEs' own efforts, capabilities and perseverance which ultimately determine whether they can successfully start, build and expand their businesses. On this basis, the Committee recommends that in addition to enhancing SMEs' capabilities through support services, SMEs should also be encouraged to strive for continuous self-improvement and excellence."

"The Committee wishes to express its heartfelt gratitude to all parties who offered their valuable advice. Recommendations in this report are the result of extensive consultations. The Committee hopes that the recommended support measures in this report will be accepted by the Chief Executive for implementation by the Government, with the necessary support of various relevant organizations and SMEs themselves. The Committee hopes that the recommendations will become the blueprint for promoting SME development in Hong Kong. During its term of office, the Committee will do its best to assist the Government in implementing the various recommendations step by step, and in reviewing their effectiveness." he said.