HONG KONG'S only factory for blind workers is threatened with closure because of competition for government contracts from Hong Kong jail prisoners and mainland labour. In the last budget year, the Hong Kong Factory for the Blind in Hunghom, which makes a variety of goods from mail and laundry bags to pillow cases, had a deficit of $1.26 million. The previous year it lost $820,000. ''We're facing a hard task,'' said Grace Chan Leung Yuet-ming, director of the Hong Kong Society for the Blind, which runs the operation. She said the movement by local factories to the mainland where labour costs were less was a severe blow. ''Another big competitor is prisoners,'' she said. ''The Government only pays them a few dollars a month.'' The situation also worsened when the Government moved from single to open tenders for contracts to make Government supplies. Man Lai-wah, 37, who has worked at the factory for six years, said: ''On average, we could earn $3,500 [a month] in the past, sometimes up to $4,000. Now we can earn $3,100 maximum.'' There are 15,000 blind people in the territory. ''Most work as paging operators, some work in massage lounges, and for some with very good qualifications, they can be interpreters,'' said Ms Man. The Society for the Blind is calling for an increase in government orders to save the factory, but officials say they have already tried to help. Cheng Shing-tai, Controller of Government Supplies, said: ''We gave them contracts. Actually, the price they gave out was already higher than the other bidders offered, but we just wanted to keep the blind people employed.''