What are the significant takeaways for SMEs from 2019 Hong Kong Budget?
- The Budget focuses on building a diversified economy and backing SME growth as city braces for a volatile year ahead
- SMEs will need to look to ASEAN and Greater Bay Area for more opportunities if they are to remain competitive
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In his Budget speech, Financial Secretary Paul Chan emphasised that the budget was bracing Hong Kong for a volatile year ahead.
The 2019 Hong Kong Budget stands at HK$58.7 billion (US$7.47 billion) – a reduction from last year’s more sizeable HK$148.9 billion.
Given the reduced amount, this year’s budget was characterised by fewer one-off measures and an absence of any cash handout scheme for the public.
However, it also focused on developing a more diversified economy, enabling technological innovation in the public and private sectors and supporting the growth of small and medium-sized enterprises (SMEs).
So what aspects of the 2019 Hong Kong Budget were most significant to SMEs?
Fintech support to drive banking innovations
One clear takeaway from Chan’s budget was that the Hong Kong government is continuing to push for regulatory support in the area of fintech to drive banking innovation.
Through the FPS, the government aims to make it more convenient to pay bills such as taxes, fines and water charges by providing digital payment channels. FPS also enables fast, free and round-the-clock, small-value fund transfers.
The Transport Department, Immigration Department and Leisure and Cultural Services Department are also studying the feasibility of accepting FPS payments at shroff counters, with pilot tests currently underway. If successful, this would pave the way for more SMEs to accept digital payments from their customers.
“Small business owners often look at mitigating the risks of payments and establishing how they can have access to a bigger customer base.”
“The introduction of virtual banks in Hong Kong is a key pillar supporting Hong Kong’s entry into the Smart Banking Era,” Norman Chan, chief executive of the HKMA, said.
“I believe that virtual banks will not only help drive fintech and innovation, but also bring about brand new customer experiences and further promote financial inclusion in Hong Kong.”
“I expect more from virtual banking roll out as loans will be easier to access given that various financial numbers are already in the system, making it possible for loans to be approved instantly anywhere, anytime,” Andy Lau, founder of Suitcase.hk, said at the Xero Budget Panel event.
Focus still on innovation and technology
To support more research and development (R&D) work, funding will be doubled for the Technology Transfer Offices of select universities, the Technology Start-up Support Scheme for Universities, and the State Key Laboratories and Hong Kong branches of the Chinese National Engineering Research Centre.
This translates to additional funds of not less than HK$800 million, which will be provided over five years, starting from 2019/20.
The 2019 Hong Kong budget also provides HK$5.5 billion for the development of Cyberport 5 in a bid to attract more quality technology companies to set up their offices within the hub.
In a related move, the budget also provides HK$150 million for further development and initial operation of the LawTech platform. The platform aims to enable secure, cross-boundary online arbitration and mediation, as well as facilitate smart contracts and other services.
Local micro-enterprises and SMEs will benefit from its development as it is being positioned as an efficient and cost-effective solution with the use of blockchain.
Enhanced SME support
The 2019 Hong Kong Budget involves a number of measures to help SMEs. For starters, business registration fees are being waived for 2019 to 2020. This represents cost savings for around 1.4 million businesses.
Launched in 2016, the TVP subsidises SMEs in using technological solutions to raise productivity, and upgrade or transform existing business processes.
The funding ceiling for the TVP will now be doubled from HK$200,000 to HK$400,000 for each SME applicant.
Ongoing Smart City initiative
The budget also allocates more than HK$900 million for Smart City infrastructure projects, including the development of a big data analytics platform and improvement of government cloud services.
A related budget item is the development of digital infrastructure for the use of geospatial data, for which HK$300 million has been set aside.
With the development of a smart city, SMEs can leverage improved cloud and data analytics capabilities even without raising large amounts of funds to do so.
Greater Bay Area and ASEAN opportunities
Kevin Fitzgerald, Xero’s regional director for Asia, said that government programmes such as the SME Financing Guarantee Scheme and speciality tax incentives would play a key role in driving business sustainability by attracting more SMEs to Hong Kong, the Greater Bay Area (GBA) and the Association of Southeast Asian Nations (ASEAN) region.
Comprising Hong Kong, Macau, Shenzhen and eight cities within the Guangdong province, the Greater Bay Area will feature four core hubs earmarked to promote the growth of various industries, with Hong Kong consolidating its position as a leading international finance centre.
Despite the key ingredients for success, there is a pertinent need to address obstacles pertaining to different administrative jurisdictions, with Hong Kong and Macau being Special Administrative Regions run by largely autonomous governments.
With a focus on innovation and business support, the 2019 Hong Kong Budget provides plenty of opportunities for SMEs to survive and even thrive amid an uncertain economic climate.
Both local and international economic challenges must spur SMEs to innovate and leverage technological solutions in order to stay competitive.
Learn more on the Xero website