LCQ22: Measures to support small and medium enterprises
Following is a question by the Hon Jimmy Ng and a written reply by the Secretary for Commerce and Economic Development, Mr Edward Yau, in the Legislative Council today (April 11):
To help small and medium enterprises (SMEs) grasp economic opportunities and boost their competitiveness, the Government has implemented a number of funding schemes, which include: (1) the Dedicated Fund on Branding, Upgrading and Domestic Sales (BUD Fund), (2) the SME Export Marketing Fund and the SME Development Fund the expenditures of which are met by the SME Export Marketing and Development Funds, and (3) the SME Financing Guarantee Scheme (SFGS). In this connection, will the Government inform this Council:
(1) during the periods from the launch of the aforesaid funding schemes to March 31 this year, of (i) the number of applications approved, (ii) the number of enterprises benefitted, and (iii) the average amount of the subsidy/ loan approved for each application, under each scheme each year;
(2) notwithstanding the proposal in this year's Budget that the geographical scope for the subsidy of the Enterprise Support Programme (ESP) under the BUD Fund be extended to include the member countries of the Association of Southeast Asian Nations, whether the Government will further extend such geographical scope for subsidy to include all countries and regions along the Belt and Road so that Hong Kong enterprises may tap on the tremendous business opportunities brought about by the Belt and Road Initiative; if so, of the details; if not, the reasons for that;
(3) whether it will consider raising the maximum subsidy contribution percentage (i.e. 50 per cent of the total approved project cost) applicable to ESP, so as to further alleviate the burden of SMEs; if so, of the details; if not, the reasons for that;
(4) as the application period for the special concessionary measures under SFGS has been extended by the Government for six times since the launch of such measures in May 2012, whether the Government will regularise such measures to facilitate SMEs' financing arrangements;
(5) as SMEs may have urgent liquidity needs at any time, whether the Government will speed up the processing of the applications they submitted under SFGS and offer other financial support to such SMEs; if so, of the details; if not, the reasons for that; and
(6) given that quite a number of persons-in-charge of SMEs have indicated that they are required to provide voluminous and elaborate information when making applications under the aforesaid funding schemes and to answer many questions from the vetting and approving authorities during the vetting and approval process for their applications, which cost them a lot of time and effort, thereby discouraging them from making applications, whether the Government will (i) streamline the relevant application and vetting and approval procedure, and (ii) establish a pre-vetting mechanism so as to advise the applicants as early as possible of any inaccuracy or omission in the information they intend to submit, with a view to increasing the chances of success in their applications; if so, of the details; if not, the reasons for that?
(1) The implementation of the Dedicated Fund on Branding, Upgrading and Domestic Sales (BUD Fund) between its launch in June 2012 and March 2018 is as follows:
Enterprise Support Programme (ESP)
Organisation Support Programme (OSP)
The implementation of the SME Export Marketing and Development Funds between its launch in December 2001 and March 2018 is as follows:
SME Export Marketing Fund (EMF)
SME Development Fund (SDF)
The implementation of the special concessionary measures of the SME Financing Guarantee Scheme between its launch on May 31, 2012 and February 2018 is as follows:
(2) The Association of Southeast Asian Nations (ASEAN) is Hong Kong’s second largest trading partner in merchandise trade in 2016, and fourth largest in services trade in 2015. All ASEAN member states are also economies along the Belt and Road.
Hong Kong and the ASEAN signed a Free Trade Agreement (FTA) and a related Investment Agreement on November 12, 2017. The agreements will bring about legal certainty and more and better market access for trade in goods and services as well as investment protection to Hong Kong, help reduce the restrictions in doing business and create new business opportunities for Hong Kong enterprises in the ASEAN markets.
In order to help Hong Kong enterprises seize these new business opportunities, we consider it necessary to provide them with dedicated funding support. Therefore, it is proposed that the geographical scope of the ESP under the BUD Fund be extended to the ASEAN markets, so as to assist Hong Kong enterprises expand their business at ASEAN markets, and encourage them to further capitalise on the opportunities brought about by the Belt and Road initiative through the ASEAN platform.
Apart from the expansion in geographical scope, the cumulative funding ceiling per enterprise of the ESP will also be significantly increased after the enhancement (from $500,000 currently to $1,000,000 each for the Mainland market and the ASEAN markets). We would implement the enhancement measures in a prudent manner, take into account operation experience and effectiveness before considering whether to further expand the geographical scope of the ESP to other regions. We would continue to engage the trade and gauge their views in the process. SMEs can also make use of the EMF, which has no geographical limitation, to carry out export promotion activities targeting any markets outside Hong Kong, including markets along the Belt and Road. The 2018-19 Budget also proposed to increase the EMF cumulative funding ceiling per enterprise from $200,000 to $400,000, and remove the current condition of use of the last $50,000 of the grants, so as to enhance the support given to enterprises.
(3) Under the ESP, funding is provided on a matching basis (i.e. the Government will cover a maximum of 50 per cent of the total approved project cost and the enterprise has to contribute not less than 50 per cent of the total approved project cost in cash). This is to ensure that applicant enterprises possess solid intentions and plans, and are willing to devote resources to developing businesses in the Mainland market, so as to safeguard the prudent use of public money and to avoid abuse. We currently have no plan to adjust the 50 per cent funding ratio.
(4) & (5) The special concessionary measures are time-limited special measures. The original application period was nine months. To continue to help enterprises tide over their liquidity needs, and to help SMEs grasp economic opportunities and boost their competitiveness, the Government has further extended the application period of the special concessionary measures for the sixth time to the end of February 2019 to continue to assist enterprises in obtaining financing in the commercial lending market. We do not have plans to turn the measures into a regular scheme.
Since September 2014, the Hong Kong Mortgage Corporation Limited (HKMC) has streamlined the processes for guarantee applications, introducing straight-through processing and issuing the credit guarantee within three working days if all the supporting documents submitted by the participating lending institutions are complete at the time of application.
The HKMC also launched a series of refinements on application processing in 2017, including streamlining the application workflow and simplifying the document requirements for the refinancing of facilities guaranteed by the same lending institution to encourage and facilitate the utilisation of the special concessionary measures by SMEs and lending institutions. Following the rollout of the refinements, the HKMC arranged a series of training sessions for staff of the participating lending institutions to familiarise them with the refinements. The lending institutions in general recognised the effectiveness of the refinements. As at end-February 2018, for around 60 per cent of the applications, the HKMC could respond within about three working days to the lending institutions on whether their applications were approved in principle.
Separately, the Trade and Industry Department (TID) administers various funding schemes to enhance the competitiveness of enterprises. One of the schemes is the SME Loan Guarantee Scheme, which provides loan guarantee to SMEs to help them secure loans from the participating lending institutions for acquiring business installations and equipment or for general working capital. The maximum amount of guarantee for each SME is $6 million. Based on the maximum guarantee ratio at 50 per cent, the corresponding loan amount is $12 million. The guarantee period for each loan is up to a maximum of five years. If an enterprise has fully repaid the loan(s) backed up by the guarantee under the Scheme, the enterprise may use the respective guarantee amount one more time to obtain new loan(s), subject to a maximum guarantee amount of $6 million.
(6) We have been reviewing the operation and implementation of the various funding schemes on an on-going basis, and implementing enhancement measures, with a view to facilitating applications by enterprises.
For example, we launched the "ESP Easy-Simplified Application Track" under the BUD Fund’s ESP in August 2015 which adopts a set of simplified application procedures to fund enterprises in undertaking specified activities (Note 5); and introduced the "Simplified Option" under the ESP in October 2016 under which enterprises would not need to set up a separate project account and could commence projects as early as the date after submission of the application; as well as simplifying the reporting requirements for funded enterprises. TID has also recently reviewed the application requirements and vetting mechanism of the ESP with a view to providing SMEs, particularly start-ups, with more flexible and facilitating support. Proposed measures are as follows:
The secretariats of the respective funding schemes have been handling enterprises' enquiries on applications, including completion of application forms, through telephone and email enquiry services, and providing advice on how the applications could better meet the vetting requirements. The secretariats also promote the funding schemes to the trade through seminars, including explaining the tips for filing successful applications.
Note 1: OSP does not provide direct funding support to enterprises but to non-profit-distributing organisations (such as trade and industrial organisations, professional bodies or research institutes, etc.). The number of enterprises involved depends on the industries involved and the details of individual projects, and is difficult to estimate accurately.
Note 2: SDF does not provide direct funding support to enterprises but to non-profit-distributing organisations (such as trade and industrial organisations, professional bodies or research institutes, etc.). The number of enterprises involved depends on the industries involved and the details of individual projects, and is difficult to estimate accurately.
Note 3: Excluding applications withdrawn by participating lenders after approval.
Note 4: The Hong Kong Mortgage Corporation Limited has not calculated the yearly average facility amount using the approved applications in each particular year.
Note 5: Including participation in Mainland exhibitions, establishment or enhancement of websites or online shops, development or enhancement of mobile applications, placement of advertisements in the Mainland, undertaking testing and certification for products for domestic sales, design and production of publicity materials for distribution in the Mainland, and application for registration of patent, trademark, design and utility model in the Mainland.
Ends/Wednesday, April 11, 2018