HONG KONG: More than 10 companies granted loans under a government scheme to help firms weather the financial crisis have laid off workers, a survey has found.

The Special Loan Guarantee Scheme, launched December 15 last year, aims to help enterprises secure loans through participating lending institutions, while the government serves as guarantor.

In a poll of 338 firms under the scheme, 14 companies said they had downsized manpower after receiving the loans. Most attributed those staff losses to normal turnover.

Nearly 90 per cent of respondents reported no change in the number of employees, the survey carried out by the Trade and Industry Department found.

Meanwhile, it found that over 90 percent of respondents were satisfied with the operation of the scheme and considered it helpful for business.

At a meeting of the Legislative Council panel on commerce and industry, lawmaker Emily Lau was critical of the fact that the program did not assure the jobs of workers.

"It said 'only a very small percentage of respondents have cut staff'. But (in our original plan,) we wanted to secure employment. We provide guarantee for them to borrow money but they cut their manpower. I think this has violated the (original) will of the Legislative Council," she said.

Secretary for Commerce and Economic Development Rita Lau Ng Wai-lan expressed concern about the situation but she said it was not feasible to ban firms from cutting manpower.

"The scheme cannot require firms not to lay off any worker after they receive loans," she said.

Lau said it would interfere with the operation of the companies if the government were to ban loan recipients from laying off employees.

Under the HK$16.8 billion relief package unveiled by the government last week, authorities plan to extend the Special Loan Guarantee Scheme for six months until the end of this year and raise the loan guarantee ratio from 70 percent of the principal to 80 percent.

The government also proposed to cap the loan amount at HK$12 million for each firm, instead of the current HK$6 million.

Plans also call for an extension of the maximum guarantee period from 36 months to 60 months.

Government figures showed that the Trade and Industry Department approved 8,503 loan applications from December 15 last year to May 24 this year, which involved about HK$16.05 billion.

(HK Edition 06/02/2009 page1)