With political protests catapulting Hong Kong into the news in recent months, its government is having to work hard to undo the damage that this negative coverage has done to the city-state's investment attractiveness. In the annual policy address on January 14, C Y Leung, Hong Kong's chief executive, made assurances that the government would take steps to seek common ground with the protesting factions, while also accommodating differences.
Mr Leung outlined numerous policy changes in areas including housing and the economy, a number of which are likely to have a significant impact on FDI, such as the decision to launch a pilot study investigating the possibility of developing the constituency of Kowloon East into a smart city.
Fresh capital was also allocated to existing programmes, such as the Innovation and Technology Fund (ITF), which has been awarded HK$5bn ($645m). Without this capital injection, ITF, which was set up to assist local businesses in upgrading their technology, was set to run out of funding by mid-2015, according to a spokesman for Hong Kong's Commerce and Economic Development Bureau (CEDB).
As part of its remit, ITF will itself fund an enterprise support scheme (ESS), established to replace the existing small entrepreneur research assistance programme. “The ESS will provide funding support for companies registered in Hong Kong, regardless of their size,” says a CEDB spokesperson. The funding ceiling for each ESS project has been set at HK$10m.
It is not just existing businesses that are set to benefit from newly announced government funds. “We have also set up a new technology start-up support scheme for universities to provide an annual funding of up to HK$24m to six local universities, initially for three years, to encourage their students and professors to start technology businesses and commercialise R&D outcomes,” says the spokesman.
Hong Kong is also looking to boost its economy by strengthening its ties with mainland China. Mr Leung announced plans to create a free-trade zone encompassing Hong Kong, Macau and parts of Guangdong, a province in mainland China. The proposals have already received backing from the Chinese government, a sign that the country is committed to deepening its economic reforms and further opening up its economy. If it is given the go ahead by Hong Kong officials, the zone has the potential to create new business opportunities for enterprises in the city-state.
Mr Leung has already indicated that the government intends to continue its efforts to liberalise trade with mainland China. This follows the signing of a trade liberalisation agreement between Hong Kong and Guangdong.
Showing its best side
As well as looking at new avenues of economic growth, Hong Kong officials are also keen to encourage existing sectors, such as the city-state's maritime services industry. The Transport and Housing Bureau sees this as important, given that high-value maritime services accounts for a significant proportion of Hong Kong’s GDP.
As part of these efforts, Mr Leung has pledged to continue working towards the creation of a new maritime body to promote the industry, and has set out intentions to hold events overseas and in mainland China to boost Hong Kong's status in this sector on the world stage. “It could also create further development, both as a springboard for mainland maritime companies to go global and for international maritime companies to tap the mainland market,” a spokesperson for the bureau says.
On the back of significant growth in Hong Kong's aviation industry, the government is also studying the development of its aerospace financing industry, and is looking for ways that it can help strengthen its status as an international aviation and financing centre. Mr Leung has proposed changes to taxation that would favour the development of an aviation lending industry in the city-state. Such a move would be a boost to Hong Kong's financial services industry.
"To further enhance the competitiveness of its financial markets, Hong Kong has to diversify the financial services industry," says a spokesman from the Financial Services and the Treasury Bureau. If the government follows through on the plans and proposals suggested by Mr Leung in the annual policy address, the city-state's whole economy could be given a diversification push.