The government will establish a HK$1 billion fund to support Hong Kong enterprises, 98 percent of them small and medium sized. The intent of the fund will be to help local businesses to tap into the mainland market, Chief Executive Donald Tsang pledged in his policy address on Wednesday.

Meanwhile, the government will strive to sign Supplement VIII, an addendum to the CEPA (Closer Economic Partnership Arrangement) by the end of this year. Supplement VIII aims to provide greater access to mainland markets for Hong Kong service providers.

"The policy is the right direction in terms of encouraging us to move up the value chain and build brands by leveraging Hong Kong's strengths in design," said Kwok Chun-pong, chairman of Hong Kong Small and Medium Enterprises Association, adding "we are eager to learn more details on how the fund will work".

Kwok also commented that CEPA Supplement VIII will accelerate mutual recognition of professional qualifications, a vital element required before Hong Kong service providers are able to really start doing business.

A government source says, the HK$1 billion fund will have a lifespan of five years, and is dedicated to support Hong Kong enterprises to sell their products on the mainland.

"CEPA helps to open doors, we hope this fund will give more push after that," said the source.

According to the source, the fund will have two classes of recipients, non-profit business associations and individual firms. For the first type, the funding quota probably will go beyond the current cap of HK$2 million over two years. For individual firms, the top line hasn't been decided but the government and particular company will split financing half and half once the project is approved, said the source.

The source also said discussions with the business community on details will start soon and it is hoped that the Finance Committee of the Legislative Council will give the green light around mid 2012.

In response to challenges posed by volatile conditions externally, Tsang said the sovereign debt crisis in Europe may have a sharp impact on the global financial system and trigger another recession.

"Our economy will face greater downside risks next year," said Tsang, "we will pay particular attention to the difficulties of SMEs and introduce necessary measures to tide them over." Tsang didn't propose detailed measures, such as the Special Loan Guarantee Scheme rolled out during the 2008 financial crisis.

Liberal Party chairwoman Miriam Lau Kin-yee, commented that the Policy Address failed to respond to difficulties faced by SMEs, such as rising costs of raw materials and rentals.

Meanwhile, standard working hours, paternity leave for employees and competition bills which were promoted in the Policy Address likely will add to the difficulties affecting the operating environment of SMEs, Lau warned.

joyli@chinadailyhk.com

China Daily

(HK Edition 10/13/2011 page2)