LCQ19: Measures to promote Hong Kong's textile and apparel industry
Following is a written reply by the Secretary for Commerce and Economic Development, Mr Gregory So, to a question by the Hon Lam Tai-fai in the Legislative Council today (April 18):
Some members of the local textile and apparel industry have relayed to me that the industry, after several decades of robust development, has established a sound foundation in various aspects such as experience, technologies, talents, international insights and fashion sense, etc., and Hong Kong can make good use of these advantages to develop itself into an Asian or even a global fashion centre. In this connection, will the Government inform this Council:
(a) of the existing numbers of enterprises and employees engaged in the local textile and apparel industry and in relevant trades, as well as the industry's contribution to Hong Kong's economy;
(b) of the trade volume and the value of imports, re-exports and exports of goods of the textile and apparel industry in Hong Kong in each of the past five years, together with a breakdown by major markets, as well as the percentage of these figures in the relevant global total trade figures;
(c) whether it knows the respective numbers of factories established by the industry in the Pearl River Delta Region and other Asian regions (eg Cambodia, Thailand and the Philippines, etc.) at present;
(d) whether there is any policy at present to facilitate the industry's development; if there is, of the details; if not, the reasons for that;
(e) of the measures in place to nurture talents for the industry;
(f) whether measures are in place to facilitate the career development of young fashion designers in Hong Kong; if so, of the details; if not, the reasons for that;
(g) whether measures had been put in place in the past 10 years to encourage the industry to invest in the areas of research and development and innovation; if so, of the effectiveness of such measures;
(h) whether it has assessed the impact of section 39E of the existing Inland Revenue Ordinance (Cap. 112) and the 50:50 basis of tax apportionment on the upgrading, restructuring and sustainable development of the industry; if it has, of the details; if not, the reasons for that;
(i) given that the Ministry of Industry and Information Technology of the Mainland issued the "Development Plan for the Textile Industry under the 12th Five-year Plan" in January this year, which specifies, inter alia, the objective of raising the export share of brand name products to 25%, whether the authorities will consider, by making reference to the relevant practices, establishing an objective for the export share of Hong Kong brand name products and launching measures to facilitate the industry to build the Hong Kong brand;
(j) whether it has assessed the existing role of the local textile and apparel industry in the global supply chain of the fashion industry and the room for future development; if it has, of the details; if not, whether it will plan to make such an assessment; and
(k) whether it has assessed the potential of the local textile and apparel industry in developing into an Asian or global fashion centre; if it has, of the details; if not, the reasons for that?
Our replies to question (a) to (k) are set out below:
(a) According to the information provided by the Census and Statistics Department (C&SD), as at end December 2011, the textiles and clothing (T&C) industry had 1 800 manufacturing establishments in Hong Kong and employed a total of 17 162 workers. Regarding other businesses related to manufacturing such as import and export trade and retailing, C&SD does not have information on the number of establishments and employees.
The T&C industry has been, and remains, one of the pillars of Hong Kong's economy. In 2011, Hong Kong's total exports of T&C products to the world amounted to HK$ 278.4 billion (comprising domestic exports and re-exports amounting to HK$ 4.4 billion and HK$ 274 billion respectively), accounting for 8.3% of our total merchandise exports.
(b) The relevant statistics of the import and export of Hong Kong's T&C products from 2007 to 2011 are at Annex.
(c) We understand that in recent years, some manufacturers have gradually relocated their production facilities to the Mainland as well as other places in Asia due to production cost and other commercial considerations. However, C&SD does not have the figures on these relocated factories.
(d) The Government's policies are formulated, within the framework of a free market, to promote industrial development by creating a business-friendly environment through the provision of support services. Over the past few decades, Hong Kong's industries have shifted from the low-cost and labour-intensive mode of production to knowledge-based and high-value added production activities. In view of this trend, the Government and the supporting organisations have implemented various measures and services to facilitate the development of high value-added and technology-based industries. They also encourage industries to strengthen research and development (R&D) capacity and improve the design and quality of products.
Measures introduced by the Government to support the industry include:
(i) The Trade and Industry Department (TID) as well as the Economic and Trade Offices outside Hong Kong closely monitor the latest global development of the textiles trade and disseminate updated information with a view to assisting the trade to draw up suitable commercial strategies and plans;
(ii) The TID administers the SME Loan Guarantee Scheme (SGS), SME Export Marketing Fund (EMF) and SME Development Fund (SDF) to support industries (including the textile and apparel industry) to secure loans from lending institutions; encourage them to participate in export promotion activities to expand their overseas markets; and enhance their overall competitiveness;
(iii) The "DesignSmart Initiative" of Create Hong Kong (CreateHK) and the "Innovation and Technology Fund" (ITF) of the Innovation and Technology Commission (ITC) also provide support for the textile and apparel industry in design and technological upgrade; and
(iv) Under the "Mainland and Hong Kong Closer Economic Partnership Arrangement" (CEPA), the textile and apparel industry has been able to enjoy zero tariff preference in exporting "Hong Kong-made" wearing apparels to the Mainland since 2004. The zero tariff preference not only enhances the market appeal of "Hong Kong-made" wearing apparels, but also helps the industry develop Hong Kong brands and high value-added products in order to enter into the medium to high-end market of the Mainland. As at March 31, 2012, over HK$4.53 billion worth of T&C products have benefited from the zero tariff preference.
(e) A number of institutions are offering a wide array of programmes to nurture talent for the textile and apparel industry to equip them to join the industry and to enhance the professionalism, knowledge and skills of in-service personnel through promoting lifelong learning. Such institutions include the Hong Kong Polytechnic University, Vocational Training Council (VTC), Clothing Industry Training Authority (CITA), Caritas Bianchi College of Careers, School of Continuing and Professional Studies of the Chinese University of Hong Kong, Li Ka Shing Institute of Professional and Continuing Education of the Open University of Hong Kong, and HKU SPACE Po Leung Kuk Community College. These programmes cover different areas of the industry including fashion and textile design and technology, fashion marketing, merchandising and retail, fashion material analysis and technology, brand planning and product development.
The Textile and Clothing Training Board under the VTC provides advice on the training needs of the industry and develop relevant skill standards. The Training Board conducts manpower surveys of the industry every two years and publishes a manpower survey report as a reference for the industry as well as the education and training providers.
The CITA offers a wide array of full-time programmes on, inter alia, textiles, fashion, design and merchandising, which range from diploma to bachelor degree, for senior secondary school leavers and diploma graduates. It also provides part-time courses, seminars and workshops for in-service workers with a view to upgrading their skills.
As the Government's major partner in promoting design, the Hong Kong Design Centre (HKDC) has organised various overseas master classes for local practising designers so that they can learn from the leading international designers. For example, a master class on fashion accessories was organised in 2009 for local designers. The participants had a chance to experiment with innovative design methodologies in the Domus Academy in Italy.
The "Business of Design Week" and the "Knowledge of Design Week" organised by the HKDC have included conferences and workshops focused on fashion design with industry players as speakers, thereby facilitating exchanges among local design talents.
(f) The Government has provided funding support to the Hong Kong Science and Technology Parks Corporation since 2006 for running the Design Incubation Programme (DIP), which aims at nurturing design start-ups, including fashion design companies, and building up a design talent pool and design entrepreneurship in Hong Kong. The DIP offers funding and other support services to the incubatees, with a view to helping them meet the challenges during the early and critical stages of development. Each incubatee can receive funding support of a maximum of HK$500,000 on a reimbursement basis over the two-year incubation period to cover expenses incurred for office rental, general operation, promotion and development, management and training courses, technical and management assistance, etc.. The incubatees also have opportunities to network with other industrial organisations, academic institutes, professional bodies and potential business partners. As at March 31, 2012, 104 incubatees have been admitted to the programme and about 20% of them are fashion design start-ups. The Government will provide funding support to the HKDC to launch another phase of the DIP to recruit about 60 additional design start-ups in a three year period commencing May 1, 2012.
In addition, the DesignSmart Initiative and CreateSmart Initiative under the purview of CreateHK of the Commerce and Economic Development Bureau provide funding support to those initiatives which are conducive to the development of local creative industries including the fashion design sector. Through the initiatives supported by the funding schemes, local young fashion designers are provided with ample exposure opportunities. Such initiatives include the "Fashion World Talent Awards" held in 2009, the "Fashion Visionaries Exhibition" held from 2011 to 2012, and the "EcoChic Design Award Hong Kong" held in 2011 and 2012.
CreateHK has also collaborated with the Hong Kong Trade Development Council to organise the "Hong Kong Design and Branding Seminar Series" in the Pearl River Delta region, Zhejiang Province and Fujian Province since 2009 to promote Hong Kong's design and branding services to the Mainland enterprises through seminars, mini-exhibitions, business matching activities, etc.. The Series have attracted the participation of many fashion designers and fashion enterprises, helping local fashion designers tap the Mainland market.
(g) In 1999, the Government set up the ITF to provide funding support for projects that contribute to innovation and technology upgrading in manufacturing and service industries. As at March 31, 2012, ITF has supported over 1 700 R&D projects, including some 110 projects in T&C related technology areas at a total funding of HK$400 million.
In 2006, the Government set up R&D Centres in five selected focus areas to drive and coordinate applied R&D and to promote commercialisation, including the Hong Kong Research Institute of Textiles and Apparel (HKRITA). Over the past 6 years, the HKRITA has undertaken 65 R&D projects, of which 41 have been completed. The HKRITA is also actively promoting commercialisation of its R&D deliverables, eg finer Nu-Torque cotton yarn production, quick testing sensors of formaldehyde in textiles products, etc..
In April 2010, the Government launched the R&D Cash Rebate Scheme to reinforce the research culture among companies and encourage them to establish stronger partnership with local research institutions. To encourage more companies to apply under the Scheme, we have raised the level of cash rebate from 10% to 30% starting from February 2012.
(h) The Secretary for Financial Services and the Treasury has explained to Members of the Legislative Council on a number of occasions that the Inland Revenue Department (IRD) follows the "territorial source" and "tax symmetry" principles in assessing the profits tax of Hong Kong enterprises which engage in processing trade in the Mainland, and the same is equally applicable to other Hong Kong enterprises. The requirement of section 39E of the Inland Revenue Ordinance and the 50:50 basis of tax apportionment are also based on the above taxation principles. The mode of business operation adopted for the purposes of upgrading and restructuring as well as for sustainable development is the commercial decision of individual enterprises. IRD assesses taxes based on facts and in accordance with the law.
(i) The Government has in place various measures, including funding schemes, eg SDF, EMF, ITF and R&D Cash Rebate Scheme, to help Hong Kong enterprises develop and promote Hong Kong brands.
To give further support to Hong Kong enterprises (including those in the textile and apparel industry), the Chief Executive announced in the 2011-12 Policy Address a proposal to set up a dedicated fund of HK$1 billion to encourage them to move up the value chain and explore and develop the Mainland market through developing brands, restructuring and upgrading their operations and promoting domestic sales in the Mainland.
The dedicated fund will comprise two parts including providing funding support to individual Hong Kong companies to undertake projects to develop brands, upgrade and restructure their business operations and promote sales in the Mainland market; and to non-profit-distributing organisations to undertake large-scale projects in the relevant areas to assist Hong Kong enterprises in general or in specific sectors.
We have consulted the trade and the Commerce and Industry Panel on the operational details of the fund. We plan to seek funding approval from the Finance Committee in May 2012 with a view to launching the fund in the first half of the year.
(j) and (k) The geographical advantage and business facilitating environment of Hong Kong, together with the experience and purchase networks established by the industry, have enabled the industry to respond efficiently to the demand for just-in-time and different production requirements of the customers, and allowed the industry to enjoy advantage in overall production coordination. These positive factors have also attracted many international brands to set up their procurement centre in Hong Kong. In the longer term, the industry will continue to perform its function as a supply management centre for textile products and strengthen the role of Hong Kong as a purchasing hub for overseas buyers.
In addition, the industry has evolved itself from labour-intensive and low-cost manufacturing to quality production through novel design and quality output. So long as the industry continues in the direction of innovation and high-value added production, or production under its own brand name in the longer term, it can maintain its competitiveness and enhance the potential to develop further.
Wednesday, April 18, 2012