For discussion
FCR(97-98)61
on 21 November 1997


ITEM FOR FINANCE COMMITTEE

HEAD 73 - INDUSTRY DEPARTMENT
Subhead 700 General other non-recurrent
Item 542 Services Support Fund


Members are invited to approve an increase in commitment of $50 million for the Services Support Fund.

PROBLEM

There are inadequate funds under the Services Support Fund (SSF) to support more service promotion projects.

PROPOSAL

2.The Director-General of Industry (DG of I) proposes to increase the approved commitment of the SSF by $50 million.

JUSTIFICATION

3.Hong Kong's economy has been undergoing significant restructuring in the past two decades and the service sector is playing an increasingly important role. The service industries contributed some 84% of our gross domestic product in 1995 and employed some 76% of our workforce in 1996. Hong Kong was the ninth largest exporter of services in the world in 1996.

4.To support the growth of service industries and to enhance their competitiveness, the Industry Department set up the SSF in July 1996 with an approved commitment of $50 million. Eligible organisations may apply for financial support from the SSF for projects which will contribute to the overall development of Hong Kong's service sector and enhance its competitiveness. The detailed funding criteria are at Enclosure 1.

5.Since the setting up of the SSF, the Industry Department has received 204 applications with project costs totalling $540 million. On the advice of the SSF Vetting Committee, DG of I has so far approved 27 projects with a total value of $49.5 million. The approved projects cover a wide spectrum of sectors, including information technology, wholesale and retail, import and export trade, tourism, transportation, catering and professional services. A complete list of the approved projects is at Enclosure 2.

6.The projects approved under the SSF are at various stages of implementation. However, there are already good indications that the projects funded are bringing tangible benefits to the further development of Hong Kong as a service centre. For example, one of the projects funded and recently completed is to compile a Directory on Services and Facilities Available to Small and Medium Enterprises in Hong Kong. This Directory, the first of its kind, was published in September 1997. It provides comprehensive information to small and medium enterprises, which make up the bulk of the service sector. We will continue to monitor progress of the projects and ensure that the benefits they bring about are shared by the relevant service industry or the service sector as a whole.

7.Judging from the enthusiastic response as reflected by the number of applications received, there is a strong demand for additional funding for the SSF, if the Scheme is not to lose momentum. We propose, therefore, to provide an additional $50 million to the Fund to enable us to continue to provide financial support to new and worthwhile projects. This will help further develop the service sector in Hong Kong at a time when our economy is facing new challenges.

FINANCIAL IMPLICATIONS

8.The cashflow requirement of the increased commitment will depend largely on the number of applications received, the number of projects worthy of support, the amount of funding requested and their implementation programme. Subject to Members' approval, we shall include sufficient provision in the 1998-99 draft Estimates. DG of I will continue to administer the SSF and meet the additional workload with his existing resources.

BACKGROUND INFORMATION

9.We announced in the Policy Programmes underpinning the 1997 Policy Address that we would provide an additional $50 million to the SSF to finance more projects which will help improve the competitiveness and innovation of the service sector. This initiative is welcomed by the business community.

10.Under the SSF, service support bodies, trade and industry associations, education and research institutions and professional bodies can apply for financial support for undertaking projects which would benefit the further development, and increase the competitiveness, of any service industry or the overall development of Hong Kong as a service centre. Private companies can also apply but they must demonstrate that the relevant projects would be non-profit-making and would meet the funding criteria for the Fund.

11.DG of I considers and approves funding applications on the advice of the SSF Vetting Committee, which comprises professionals and experts from the service sector and tertiary institutions. As noted by Members in approving the original commitment, funding for projects may take the form of grants or loans. Loans are considered and made available for projects which generate revenue. In the latter cases, the Vetting Committee will advise DG of I on the appropriate rate of interest for the loan as well as the repayment schedule. The projects approved so far are in the form of grants.


Trade and Industry Bureau
November 1997


Enclosure 1 to FCR(97-98)61

services Support Fund
Funding Criteria

  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 -

    1. the benefit that it will bring to the service sector;

    2. whether there is a demonstrated need for the proposed project;

    3. the technical and project management capability of the applicant institution/organisation;

    4. whether the proposed project's schedule of implementation is well-planned and the duration reasonable;

    5. whether the proposed budget is reasonable and realistic;

    6. whether there is or likely to be a duplication of the work currently carried out by other organisations; and

    7. 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.

Enclosure 2 to FCR(97-98)61

List of Approved Projects under the Services Support Fund

No.Applicant Organisation(s) Project Title (Cost)
First Tranche
1. Information Technology Committee of Industry Technology Development Council Consultancy Study on Formulation of Strategies for Promoting the Use of IT in Hong Kong ($4,000,000)
2. Hong Kong Productivity Council To Upgrade the Quality Practices of Small Trading Firms to International Standards through Developing a Localised Sector-specific Quality System Manual ($678,000)
3. Hong Kong Food Council/Hong Kong Productivity Council Development and Compilation of a Manual of Food Safety and Handling Practice for the Food Trading and Retailing ($2,160,000)
4. Hong Kong Franchise Association Franchise Development Programme ($2,345,000)
5. Hong Kong Tourist Association Study on the Promotion of Tourism Related Service Sectors ($3,615,000)
6. Hong Kong University of Science and Technology Decision Support Infrastructure for the Container Transportation Management in Hong Kong ($2,809,000)
7. Hong Kong Polytechnic University/Hong Kong University of Science and Technology Keeping Hong Kong's Hotel Industry Competitive into the 21st Century: Environmental Management for Hotels ($1,544,998)
8. Hong Kong Coalition of Service Industries The Hong Kong Awards for Services (1997 Scheme) ($2,500,000)
9. Hong Kong Coalition of Service Industries " Hong Kong - The Servicing Economy " - Newsletter on Service Industries ($550,000)
10. Hong Kong Article Numbering Association Hong Kong's Roadmap for Efficiency in Business Communication and Enhanced Competitiveness in International Trade ($3,162,000)
11. Hong Kong Retail Management Association " Mystery Shoppers' Programme ($1,000,000)
12. Hong Kong Retail Management Association 'service and Courtesy " Awards ($600,000)
13. Chartered Institute of Arbitrators (Hong Kong Branch)

Commercial Arbitration Video ($390,000)
14. Small and Medium Enterprises Committee Directory on Services and Facilities Available to Small and Medium Enterprises ($269,000)
14 Projects

 Total Funding = $25,622,998
Second Tranche
15. The Chinese Manufacturers' Association of Hong Kong

 Development of a Servicing Internet-based Information Network for Small and Medium Enterprises, SME-Net ($3,280,000)
16. Hong Kong Export Credit Insurance Corporation The Relationship Between Credit Management and Business Performance in Hong Kong Export Sector ($400,000)
17. The Travel and Tourism Education Programme (HK) Ltd. Tourism Education in Hong Kong - Sufficiency and Compatibility with Tourism Growth ($1,104,000)
18. University of Hong Kong Psychometric Assessment of Customer-Service Staff ($710,000)
19. Hong Kong Coalition of Service Industries Promotion of Management Consultancy Sector in Hong Kong ($1,500,000)
20. Centre of Environmental Technology Limited A Trade Effluent, Waste Minimisation and Hygiene Support Programme for the Restaurant Sector ($716,000)
21. Hong Kong Tourist Association Development of an Environmentally Sustainable Development Strategy for the Travel and Tourism Industry in Hong Kong ($995,000)
22. Hong Kong Association of Registered Tour Co-ordinators An Evaluation of the Need to Upgrade the Service Professionalism of Hong Kong's Tour Co-ordinators ($1,000,000)
23. Hong Kong Productivity Council Establishment of a HKPC SME Centre to Enable SMEs to Understand and Achieve Good Practices in Productivity and Applied Business Management ($4,577,000)
24. Hong Kong Productivity Council Promotion of Electronic Commerce for Hong Kong Services Industry ($1,300,000)
25. City Facility Management Consultancy Limited The " Best Management Practice " for the Estates Management Industry in Hong Kong ($2,570,000)
26. Hong Kong Exporters' Association Strategic Study on the Implication of Compliance Issues to Hong Kong's Exporting Industries ($2,700,000)
27. Hong Kong Article Numbering Association Improving Supply Chain Management to Boost Services Quality for the Retail and Distribution Industry ($3,000,000)
13 Projects Total Funding = $23,852,000