HONG KONG: The Protection of Wages on Insolvency Fund Board expects many more applications from people in financial straits this year due to the economic recession.

The Insolvency Fund is designed for the protection of workers who lose wages, salaries or severance packages when their employers become insolvent. Workers who are denied payment to which they are entitled may apply for ex gratia payment through the fund.

The board's chairman predicted Friday that while numbers of applicants are expected to increase, applications are unlikely to approach the number for 2003 during the SARS outbreak. He said, people today still are going to public places and shopping, unlike 2003 when people made every effort to avoid crowded spaces.

Speaking to the media Friday, chairman Clement Chan revealed that the board received about 6,450 applications last year, the first increase in the number since 2003. Chan estimated the figure would nearly double in 2009.

Chan recalled that the board appropriated HK$96 million for troubled workers involved in 818 companies in 2008.

"There were over 2,000 applications in November and December, which pushed up the yearly figure. The surge was due to the closure of companies such as U-right, Tailin and Oasis Hong Kong Airlines," he said.

Employees from retail, catering, construction, aviation and import-and-export trades topped the list of applicants. .

Chan forecast a tough time in 2009, predicting the number of applications could skyrocket to 9,500, costing the fund in excess of HK$200 million. The board has reserved HK$50 million in funds, to ensure that displaced workers will receive help if bankruptcy occurs on a much larger scale.

The board voiced confidence that it would be able to address all applications for assistance. The fund's reserve for 2008 was almost HK$1.5 billion.

Chan said the fund will be supported by a levy on business registration certificates expected to bring in HK$400 million.

The fund would maintain a surplus though to a lesser extent than last year, he added.

Chan believed the worsening picture in 2009 still will not be as severe as the experience of 2003. That year the board received 22,350 applications, the highest number in history.

"Unlike the SARS outbreak which mostly affected local retail and catering services, manufacturing and finance industries are the worst hit by the global financial turmoil," he explained.

Financial institutions, he noted, carried out staff cutbacks, but stayed in business.

Billy Mak, finance and decision sciences associate professor at Hong Kong Baptist University, agreed with Chan.

"Owing to health concerns,people of Hongkong chose to stay at home during SARS so retail outlets had no business at all. That resulted in the incredibly high number of bankruptcies," he said, adding people still go out but avoid going to high-end restaurants and extravagant shops now.

(HK Edition 01/17/2009 page4)