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The focus of the 2019 Hong Kong Budget on February 27 was on “supporting enterprises, safeguarding jobs, stabilising the economy and strengthening livelihoods”. 
In his Budget speech, Financial Secretary Paul Chan emphasised that the budget was bracing Hong Kong for a volatile year ahead. 
The wider economy has been – and will continue to be – impacted by uncertainties in global politics and rising Sino-US trade tensions. 
The 2019 Hong Kong Budget stands at HK$58.7 billion (US$7.47 billion) – a reduction from last year’s more sizeable HK$148.9 billion. 
Hong Kong faced strong headwinds in H2 2018, culminating in a decline in production and trade activity at the year-end. The economy saw almost zero growth in exports (a mere 0.2 per cent) in Q4 2018, along with weaker local business sentiment.
Given the reduced amount, this year’s budget was characterised by fewer one-off measures and an absence of any cash handout scheme for the public. 
However, it also focused on developing a more diversified economy, enabling technological innovation in the public and private sectors and supporting the growth of small and medium-sized enterprises (SMEs).
So what aspects of the 2019 Hong Kong Budget were most significant to SMEs?
Fintech support to drive banking innovations
One clear takeaway from Chan’s budget was that the Hong Kong government is continuing to push for regulatory support in the area of fintech to drive banking innovation. 
In November 2018, the Securities and Futures Commission (SFC) announced a new regulatory model for virtual assets. This was underpinned by a desire to encourage fintech innovation while providing sufficient protection to investors.
The Hong Kong Monetary Authority (HKMA) and the SFC are also using the Global Financial Innovation Network to interact with regulators in different countries and explore ideas on fintech application and supervision. 
Last year saw significant progress in fintech application, with HKMA launching the Faster Payment System (FPS) and the Common QR Code Standard for Retail Payments in September 2018. 
Through the FPS, the government aims to make it more convenient to pay bills such as taxes, fines and water charges by providing digital payment channels. FPS also enables fast, free and round-the-clock, small-value fund transfers.
The Transport Department, Immigration Department and Leisure and Cultural Services Department are also studying the feasibility of accepting FPS payments at shroff counters, with pilot tests currently underway. If successful, this would pave the way for more SMEs to accept digital payments from their customers.
“The introduction of FPS and the Open API framework in Hong Kong provides a more open and friendly environment for SMEs and entrepreneurs as it pushes the market to become more efficient,”  Philip Kung, head of Business and Professional Service at InvestHK, said at a Budget Panel event hosted by Xero on March 22.
“Small business owners often look at mitigating the risks of payments and establishing how they can have access to a bigger customer base.” 
Virtual banking is also receiving increased support from the authorities. Out of 33 applicants for virtual banking licences, the HKMA has issued the first three to Livi VB, SC Digital Solutions and Zhong An Virtual Finance, allowing them to offer services such as digital savings and loans. 
“The introduction of virtual banks in Hong Kong is a key pillar supporting Hong Kong’s entry into the Smart Banking Era,” Norman Chan, chief executive of the HKMA, said. 
“I believe that virtual banks will not only help drive fintech and innovation, but also bring about brand new customer experiences and further promote financial inclusion in Hong Kong.”
Likewise, SMEs can now benefit from cheaper insurtech solutions that use technology to provide personalised packages and streamline application processes. The Insurance Authority (IA) approved the first authorisation of virtual insurers last December. 
Hong Kong banks are also implementing the Open Application Programming Interface (Open API). This will enable faster and easier integration with third-party solution providers and for small businesses to interface their accounting software directly with banks, making for easier processing of payroll, loan repayments and other financial activities. 
“I expect more from virtual banking roll out as loans will be easier to access given that various financial numbers are already in the system, making it possible for loans to be approved instantly anywhere, anytime,” Andy Lau, founder of Suitcase.hk, said at the Xero Budget Panel event.
Focus still on innovation and technology
To support more research and development (R&D) work, funding will be doubled for the Technology Transfer Offices of select universities, the Technology Start-up Support Scheme for Universities, and the State Key Laboratories and Hong Kong branches of the Chinese National Engineering Research Centre.
This translates to additional funds of not less than HK$800 million, which will be provided over five years, starting from 2019/20. 
The 2019 Hong Kong budget also provides HK$5.5 billion for the development of Cyberport 5 in a bid to attract more quality technology companies to set up their offices within the hub. 
Cyberport focuses on companies in the fintech, e-commerce, Internet of Things and Big Data/Artificial Intelligence spaces to support the goal of making Hong Kong a “smart city”. It is currently home to more than 1,200 companies and start-ups.
In a related move, the budget also provides HK$150 million for further development and initial operation of the LawTech platform. The platform aims to enable secure, cross-boundary online arbitration and mediation, as well as facilitate smart contracts and other services.
Local micro-enterprises and SMEs will benefit from its development as it is being positioned as an efficient and cost-effective solution with the use of blockchain.
Enhanced SME support
The 2019 Hong Kong Budget involves a number of measures to help SMEs. For starters, business registration fees are being waived for 2019 to 2020. This represents cost savings for around 1.4 million businesses.
Secondly, the budget provides for the regularisation and enhancement of the Technology Voucher Programme (TVP), which will now be part of the Innovation & Technology Venture Fund that is used for co-investing in local innovation and technology ( I&T) start-ups with venture capital funds. 
Launched in 2016, the TVP subsidises SMEs in using technological solutions to raise productivity, and upgrade or transform existing business processes. 
The funding ceiling for the TVP will now be doubled from HK$200,000 to HK$400,000 for each SME applicant.
Lastly, fee rates for guaranteeing SMEs loans under the SME Financing Guarantee Scheme have been reduced by half. The maximum quantum for insured loans has also been raised to HK$15 million, while the maximum loan guarantee period has been increased to seven years. This move is aimed at lowering the barrier for SMEs facing liquidity problems to obtain a loan.
Ongoing Smart City initiative
A Smart Government Innovation Lab will be set up in April for IT development in the provision of government services. Through the lab, SMEs and start-ups will be invited to propose IT solutions for public services. 
The budget also allocates more than HK$900 million for Smart City infrastructure projects, including the development of a big data analytics platform and improvement of government cloud services.
 A related budget item is the development of digital infrastructure for the use of geospatial data, for which HK$300 million has been set aside.
With the development of a smart city, SMEs can leverage improved cloud and data analytics capabilities even without raising large amounts of funds to do so. 
Cloud-based solutions are scalable, allowing SMEs to choose lower-cost options and upgrade to more features once they are ready to grow. Data analytics, on the other hand, will help business owners in making informed decisions, analysing their cash flow and market trends, and identifying opportunities for international growth.
Greater Bay Area and ASEAN opportunities
Kevin Fitzgerald, Xero’s regional director for Asia, said that government programmes such as the SME Financing Guarantee Scheme and speciality tax incentives would play a key role in driving business sustainability by attracting more SMEs to Hong Kong, the Greater Bay Area (GBA) and the Association of Southeast Asian Nations (ASEAN) region. 
Comprising Hong Kong, Macau, Shenzhen and eight cities within the Guangdong province, the Greater Bay Area will feature four core hubs earmarked to promote the growth of various industries, with Hong Kong consolidating its position as a leading international finance centre. 
Despite the key ingredients for success, there is a pertinent need to address obstacles pertaining to different administrative jurisdictions, with Hong Kong and Macau being Special Administrative Regions run by largely autonomous governments. 
With a focus on innovation and business support, the 2019 Hong Kong Budget provides plenty of opportunities for SMEs to survive and even thrive amid an uncertain economic climate.
Both local and international economic challenges must spur SMEs to innovate and leverage technological solutions in order to stay competitive.
Learn more on the Xero website


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What are the significant takeaways for SMEs from 2019 Hong Kong Budget?

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The Budget focuses on building a diversified economy and backing SME growth as city braces for a volatile year ahead
SMEs will need to look to ASEAN and Greater Bay Area for more opportunities if they are to remain competitive



[Paid Post] The focus of the 2019 Hong Kong Budget on February 27 was on “supporting enterprises, safeguarding jobs, stabilising the economy and strengthening livelihoods”. 


On a cloud: Grow your business

What are the significant takeaways for SMEs from 2019 Hong Kong Budget?

The Budget focuses on building a diversified economy and backing SME growth as city braces for a volatile year ahead SMEs will need to look to ASEAN and Greater Bay Area for more opportunities if they are to remain competitive

The Budget focuses on building a diversified economy and backing SME growth as city braces for a volatile year ahead

SMEs will need to look to ASEAN and Greater Bay Area for more opportunities if they are to remain competitive