For discussion FCR(96-97)41
on 12 July 1996
ITEM FOR FINANCE COMMITTEE
HEAD 73 - INDUSTRY DEPARTMENT
New Capital Account Subhead "Services Support Fund
Members are invited to approve the creation of a capital account subhead with a commitment of $50 million for Director-General of Industry to set up a Services Support Fund.
Hong Kong is facing increasing competition from established and aspiring service centres in the Asia-Pacific region. We need to sharpen our edge in providing services in a competitive environment.
2. We propose to create a new capital account subhead with a commitment of $50 million to enable the Director-General of Industry (DG of I) to set up a Services Support Fund. DG of I will provide financial support from this Fund for projects which she, on the advice of an advisory body, considers would benefit the further development, and increase the competitiveness, of Hong Kong's service sector.
3. The economy of Hong Kong has undergone a structural transformation in the past two decades. Services have replaced manufacturing as the dominant sector of the economy, contributing to 73% of the territorys gross domestic product at the end of 1995. Hong Kong is now one of the principal service centres both globally and in the Asia-Pacific region. Our future economic success will depend to a large extent on the quality and the competitiveness of our service sector.
4. To enable Hong Kong to remain a world-class service centre, our service providers must be able to offer the right service at the right price. We consider it timely to extend government support, which we have successfully rendered to the manufacturing industry in the past, to the service sector to facilitate the growth and further development of the service industries in Hong Kong.
5. We established in August 1995 a Task Force on Services Promotion under the chairmanship of the Financial Secretary to develop initiatives to promote our service industries. The Task Force recognises the need to encourage the private sector to undertake initiatives to reinforce Hong Kongs long term competitiveness by, for instance, increasing manpower training and developing schemes to encourage innovation and improve productivity. To provide support and incentive to the private sector and to demonstrate Governments firm commitment, we propose the establishment of a Services Support Fund of $50 million.
6. We propose that the Services Support Fund should provide funding for projects which will benefit the further development, and increase the competitiveness, of Hong Kongs service sector. These projects may involve technology transfer, training or information dissemination. Examples include promoting the use of information technology among small and medium-sized service companies, the establishment of best practices database for bench-marking purposes, the compilation of service productivity indices etc. The criteria for allocation of funds are at the Enclosure.
7. Service support bodies (e.g. the Hong Kong Trade Development Council, Hong Kong Productivity Council, etc.), trade and industry associations, education and research institutions and professional bodies can apply for allocation from this Fund. Private companies can also apply but they must demonstrate that the relevant projects would be non-profit-making and would benefit the further development, and increase the competitiveness, of any service sector, clusters of service industries or the overall development of Hong Kong as a service centre.
8. DG of I will approve expenditure under the Fund upon the advice of an advisory body comprising representatives from the service sector. While funding for most projects will be in the form of grants, it is possible that a few projects, which generates revenue, may receive interest-free or interest-bearing loans. For these loan projects, the advisory body will also advise on the appropriate rate of interest as well as the repayment schedule. Beneficiary organisations will repay the interests and the principal into the General Revenue. DG of I will also monitor closely the progress and results of projects funded.
9. The allocation of $50 million to set up the Services Support Fund is one-off in nature. The administration of the fund, the processing of applications and the monitoring of the progress of the approved projects will require three additional posts of one Principal Trade Officer, one Assistant Trade Officer I and one Clerical Officer II at a total annual staff cost of $2,319,864. DG of I will meet these additional requirements through redeployment of resources within the Industry Department.
10. The proposal has no implications on fees or charges for services provided by the Industry Department.
11. The Financial Secretary announced in his Budget Speech in March 1996 that Government will establish a Services Support Fund of $50 million to provide funding support for projects which will benefit the further development, and increase the competitiveness, of Hong Kong's service sector. This suggestion has received general support from Members and the business community as a whole.
Trade and Industry Branch
Enclosure to FCR(96-97)41
1. Funding support will be provided for projects which are beneficial to the overall development of Hong Kong as a service centre or which contribute to the further development of one or more service industries, such as by enhancing international competitiveness or domestic capacity for production.
2. The benefits must accrue to one or more service industries as a whole, and not just to a single private company or a consortium of private companies.
3. Projects to be funded should be non-profit making except for the purpose of long-term self-sufficiency.
4. Funds will not be provided for the creation of civil service posts.
5. In considering a proposal, due consideration will be given to :
- the benefit that it will bring to the service sector;
- whether there is a demonstrated need for the proposed project;
- the technical and project management capability of the applicant institution/organisation;
- whether the proposed projects schedule of implementation is well-planned and the duration reasonable;
- whether the proposed budget is reasonable and realistic;
- whether the proposed project should be more appropriately funded by other sources (e.g. the Research Grants Council under the University Grants Committee);
- whether there is or likely to be a duplication of the work currently carried out by other organisations; and
- if recurrent expenditures will be incurred (e.g. manpower costs and other administrative expenses), whether the proposed project has a potential of becoming self-sufficient after a certain period of time.
Last Updated on 2 December 1998