Hong Kong small and medium enterprises (SMEs), which comprise more than 98 percent of local businesses and account for half of local employment, have urged the government to provide more relief and support measures in the Policy Address next week. They especially hope to see improvements made in terms of finding a way to lower local operating costs and reach out to mainland consumers.

"We hope the government can take steps to enhance the city's competitiveness, as we face fierce competition from regional rivals," said Caroline Mak, chairman of the Hong Kong Retail Management Association (HKRMA). "Local businesses are facing challenges from various taxes and regulations, which push up operating costs."

Irons Sze, vice president of the Chinese Manufacturers' Association of Hong Kong (CMA), meanwhile said at the group's annual member meeting in late September that SMEs are facing a tougher environment compared with 2008 when the financial crisis first unfolded.

The CMA is the organizer of the 46th Hong Kong Brands and Products Expo in December with a total of 480 booths. However, Sze noted that there are some exhibitors who are having a difficult time right now in making ends meet and are very likely to pull out of the event.

"We hope that the chief executive can roll out more support to help SMEs get through the crisis, such as tax relief," Sze said. "On the other hand, on issues that are currently being debated such as the competition bill and standard working hours, we hope to have more breathing time and expect no radical changes."

In its recent policy address consultation paper, the Federation of Hong Kong Industries (FHKI) also urged the government to help local businesses weather the possibility of another round of global economic turmoil.

With Singapore relentlessly reducing its tax rate to 17 percent, Hong Kong's competitiveness in attracting businesses has been eroded, according to the FHKI.

The federation has suggested that the corporate tax rate be reduced to a level at least the same as 2003, which was 16 percent - currently it is at 16.5 percent. By doing so, businesses will have more cash at hand to grapple with a downturn in economic conditions, the FHKI argued.

Meanwhile, as the world economy is uncertain due to the European debt crisis and US economic slowdown, Hong Kong traders and manufacturers have begun to feel the chilling effects of a slowdown in orders from the West.

The HKRMA's Mak said re-exports via Hong Kong airport have shown signs of decline recently, which means demand in Western markets ahead of the Christmas holiday season - traditionally the busiest and most lucrative time of year for retailers, manufacturers and exporters - is worrisome.

Amid bleak recovery prospects in Europe and the US, Hong Kong companies need to actively "look inward", tapping the potential of domestic consumption highlighted in China's 12th five-year economic plan, said CMA's Sze.

However, selling to the mainland requires input in building up sales networks and market brands. In this regard, SMEs need support from the government.

FHKI suggested that the government start a HK$2 billion branding fund, dedicated to local firms who explore the mainland market. The use of the fund should adopt a phase-by-phase approach, from promoting existing brands to cultivating newcomers.

The federation also expects the government to facilitate a "Hong Kong corner" in major mainland cities, clustering Hong Kong brands together in a bid to impress mainland consumers.

joyli@chinadailyhk.com

China Daily

(HK Edition 10/07/2011 page2)