HONG KONG: The government has pledged assistance to help the business sector weather the stormy times brought on by the financial crisis and the onset of human swine flu.

Financial Secretary John Tsang said the government commitment to the Small and Medium Enterprises Loan Guarantee Scheme is to be fattened up with an additional HK$7.4 billion.

The application period for the Special Loan Guarantee will be extended until the end of 2009. The level of the government's guarantee will be increased from 70 percent to 80 percent. That measure is intended to provide further incentive for banks to extend loans to small businesses. The guarantee period will be extended from three years to five.

The maximum loan for each enterprise will be raised from HK$6 million to HK$12 million, of which half will become a revolving loan.

Some 880,000 businesses stand to benefit from the waiver on business registration fees for the year. That measure will cost the government HK$17 billion in lost revenue.

Businesses directly hit by the financial crisis and human swine flu, such as tourism, catering, entertainment, and transport, will be exempted from license fees for one year. Some 200,000 licenses will benefit from the measure that will cost the government HK$67 million.

The government will inject HK$10 billion into SME Export Marketing Fund, and HK$18 million in enhancing community building activities.

Tsang said he expected the new measures could help businesses prepare for economic recovery.

Federation of Hong Kong Industries chairman Clement Chen welcomed the measures, saying they will help more SMEs to survive the difficult times.

"The banks will be more confident to provide credit to enterprises which are capable of continuing operation but face cash-flow problem," he said.

Chen urged the government to communicate with the banks, suggesting shortened loan approval procedures and a concessionary interest rate for SMEs.

Hong Kong manufacturers in Pearl River Delta region have seen improvement in the business environment recently, but are still struggling hard to survive, the federation said.

The federation conducted a survey of 100 manufacturers in the region this month. Some 50 of the manufacturers said orders have started increasing.

"The condition has improved. There may be some individual manufacturers deciding to close their business, but the situation is not going to be significant," said the federation deputy chairman Stanley Lau.

However, the volume of orders is lower than orders received in peak season, indicating that buyers are still wary about the future.

"The buyers are not certain about what will happen in the coming four to five months. Therefore, they only place orders when most of their stocks are gone and only give us a short period of time to produce the goods," he said.

The current human swine flu outbreak also affected business environment, Lau said.

A survey conducted by the federation in March found that 28 percent of the 146 manufacturers interviewed expected business condition will continue to deteriorate.

More than 90 percent of the manufacturers said they received fewer orders. On average, a drop of 36 percent in orders was recorded.

Profits also dropped by an average of 31 percent for 73 percent of the respondents.

(HK Edition 05/27/2009 page1)