on 27 November 1998
ITEM FOR FINANCE COMMITTEE
HEAD 180 - TELEVISION AND ENTERTAINMENT LICENSING AUTHORITY
New Capital Account Commitment "Film Development Fund"
Members are invited to approve the creation of a new Capital Account commitment of $100 million for the setting up of a Film Development Fund and to note that -
- the Commissioner for Television and Entertainment Licensing will only approve individual projects under this commitment costing up to $10 million each; and
- the Commissioner for Television and Entertainment Licensing will refer projects under this commitment costing more than $10 million each to Finance Committee for individual approval.
The global film business is highly competitive. There is a need to increase the competitiveness of the Hong Kong film industry by upgrading itself and keeping pace with new technology and skills.
2. We propose to create a new Capital Account commitment of $100 million to enable the Commissioner for Television and Entertainment Licensing (CTEL) to set up a Film Development Fund (the Fund). Financial support from this Fund will be provided for projects which would benefit the long-term and healthy development of the Hong Kong film industry.
3. We intend that the Fund will be used for financing projects in five years, from 1999-2000 to 2003-2004. However, the cashflow in each year will be dependent on the volume of projects approved.
4. We also intend that CTEL will only approve projects under this commitment costing up to $10 million each. CTEL will refer projects under this commitment costing more than $10 million each to Finance Committee for individual approval. CTEL will seek the advice of the Projects Vetting Committee under the Film Services Advisory Committee (FSAC) on whether individual projects applications are worthy of funding support.
Challenges and opportunities for the local film industry
5. Hong Kong is one of the world's leading film producers and we pride ourselves as "Hollywood of the East". The global film entertainment business is highly competitive. And the local industry has been facing challenges in recent years. These include, among others, intense competition from high quality mega movies from Hollywood, the more sophisticated taste of audiences and keen competition from high quality videos, laser discs and other home entertainment options. Box office receipts of local films reached an all-time low of $540 million in 1997, less than half of its peak of $1,240 million in 1992. For the first time in the history of the Hong Kong film industry, the market share of foreign films (at 53%) had surpassed that of local films in 1997; the figure further increased to 58% during January to September 1998. By way of comparison, at its peak in 1992 local films captured 80% of the market.
6. The trend in film production is that there is increasing application of advanced technologies and special skills in film production. Hollywood mega movies featuring computerised visual and audio effects have been extremely successful in the global market. This has underlined the importance of applying advanced computerised technology in film production.
7. The Asian market, which has considerable potential, will be the focal point for attention in the global film entertainment business. There are therefore opportunities for further growth in our film industry. The earlier successes of the local film industry have shown that Hong Kong film makers should be capable of tapping the lucrative Asian market. But we need to produce high quality films to capture a larger share of the market.
8. To maintain the competitiveness of the local film industry, the industry needs to upgrade itself in terms of technological, script writing, shooting, production and other professional capabilities, as well as special skills. To this end, we propose to set up a Film Development Fund to enhance the local film industry's capabilities in pre-production, production and post-production, encourage more creative productions and stimulate investment in the local industry.
9. The Government is committed to providing a favourable environment conducive to the long-term development of the Hong Kong film industry. The film industry was identified in 1996 by the Task Force on Services Promotion as one of the 14 service industries for further support. A series of initiatives have then been undertaken to facilitate film production. To further Government's support to the film industry, a Film Services Office (FSO) in the Television and Entertainment Licensing Authority (TELA) was established in April 1998 to co-ordinate and facilitate the film industry in film productions, especially with regard to location shooting. To facilitate the effective delivery of Government support services to the film industry, the FSAC was established in May 1998 to provide a conduit for dialogue between the Government and the film industry. We have also provided in August 1998 a site in Tseung Kwan O Area 106 for the construction of a state-of-the-art film studio with advanced post-production facilities.
10. To increase the competitiveness of the local film industry and provide further support to the development of the local film industry, we propose to set up a $100 million Film Development Fund to provide financial support to projects which are beneficial to the healthy and long-term development of the local film industry. The Fund will provide funding support to projects which can achieve the following goals -
- to enhance the professional and technological capabilities of the local film industry;
- to improve the professional skills of the industry's workforce;
- to encourage the production of more creative and diversified films;
- to facilitate the industry in the mastering and application of advanced technology so as to enhance the audio and visual effects of films;
- to stimulate further improvement in the quality of local film production and services; and
- to improve the production and operating environment of the industry.
11. We propose a commitment of $100 million. While we intend that the commitment will be spent in five years, from 1999-2000 to 2003-2004, the actual provision for each year will depend on the number of applications received and the actual expenditure incurred by the approved projects. Staffing requirements for the administration of the Fund (including processing applications and monitoring the progress of the approved projects) will be met through redeployment of resources within TELA.
12. The proposal has no implications on fees or charges for services provided by TELA.
13. Subject to Members' approval of the proposal, we will include the necessary provision in the 1999-2000 draft Estimates.
Administration of the Fund
14. The Fund would be administered by the FSO of TELA. We intend that the Fund will be operated over a period of five years. A Projects Vetting Committee (the Committee), chaired by the Secretary for Information Technology and Broadcasting, will be set up under the FSAC to assess applications and prescribe the terms and conditions of funding. Projects under application should primarily be non-profit making by nature and must benefit the entire film industry. The proposed criteria for allocation of funds are at the Enclosure. Except as provided for in paragraph 16 below, CTEL would decide whether to approve the applications and disburse funds based on the Committee's recommendations. CTEL would closely monitor the progress and results of the funded projects.
15. In general, approved funds can only be used for non-recurrent expenditure. Projects involving recurrent expenditure (such as salaries and other administrative expenses) would be considered only if the applicant organisation is able to demonstrate that the expenses are directly incurred by the project under application and would only be required within a specified finite duration, or the project would be self-financing after a certain period of time.
16. For better management of the Fund, we propose that CTEL should only approve projects costing up to $10 million each under the Fund. This expenditure limit is the same as that delegated by Finance Committee to the Financial Secretary or the Secretary for the Treasury for the creation of a new non-recurrent commitment. CTEL will refer any project application worthy of support but costing more than $10 million each to Members for approval.
17. The FSAC and the Legislative Council Panel on Information Technology and Broadcasting were consulted on 16 October 1998 and 9 November 1998 respectively. They supported the establishment of the Fund and accepted the proposed scope and operation of the Fund.
18. The Chief Executive announced in his Policy Address in October 1998 that the Government will set up a $100 million Fund to help our film industry keep pace with new technology and skills. This Fund will promote innovation by supporting projects aimed at enhancing the industry's capabilities, stimulating the growth of creative productions, facilitating the use of advanced special effects techniques and improving the skills of the workforce.
Information Technology and Broadcasting Bureau
Enclosure to FCR(98-99)47
Proposed Funding Criteria for the Film Development Fund
- An applicant should normally be a locally registered institution/organisation engaged in film business or a related body. The Film Services Office can also apply for funding.
- Projects under application must be beneficial to the overall development of the local film industry, such as enhancing the competitiveness of the local film industry.
- Benefits accrued from the projects must serve the interests of the entire film industry, and not just an individual private company or a consortium of private companies.
- Projects should mainly be non-profit making by nature. Special consideration could be given for projects that can ultimately be self-financing.
- Funds approved cannot be used to create any civil service posts.
- In examining an application, the following must be taken into consideration -
- the benefits that a project may bring to the local film industry;
- the need for such a project;
- the technical and project management capabilities of the applicant institution/organisation;
- whether the implementation schedule of the proposed project is well planned and whether the time required for implementation is reasonable;
- whether the proposed budget is reasonable and realistic;
- whether there is/will be any duplication in terms of the work carried out by other institutions; and
- for a project involving recurrent expenditure (such as salaries and other administrative expenses), the period required for such expenditure and whether the project can be self-financing after a certain period of time.