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Tuesday, 9 December 2008

Crisis in HK as bad as '98?

HONG KONG - HONG Kong's chief executive Donald Tsang said on Monday the city's economic slowdown in 2009 could be as bad as the Asian financial crisis in 1998.

'Negative growth for Hong Kong in 2009 now seems inevitable. Everyone should be psychologically prepared,' he said at a press conference.

Over the next 12 months, the impact of the global financial crisis on the domestic economy 'will be no less than the Asian financial crisis in 1998,' he said.

But he insisted that Hong Kong maintained a sound financial system and would be among the first to rebound when the external environment improved.

Mr Tsang unveiled further government measures to boost the economy on Monday, including the allocation of almost a quarter of its reserves, or 100 billion Hong Kong dollars (S$21 billion), to a special loan scheme for small and medium-sized firms.

The injection aims to prevent further job losses as an increasing number of companies have downsized or gone bust in recent months.

'Banks are now too careful (in approving loans), which is understandable.

But I am confident that the banks will look at the matter differently with our injection of 100 billion dollars,' he said.

Mr Tsang said the injection would also raise the maximum loan amount for each enterprise from HK$1 million to HK$6 million. The loan will be open to any firm except those which are listed, he said.

He added that another HK$40 billion would be spent on infrastructure projects to create 55,000 jobs next year, while the government would also hire 7,700 civil servants and open 4,400 temporary posts to boost employment.

Government departments have been told to expedite their screening and approval of private-sector projects, he said.

The measures are expected to be introduced before Christimas after the government secures the approval of the Legislative Council, Mr Tsang said.

The chief executive said that the government was also working closely with the Chinese authorities on measures to support Hong Kong-owned entreprises operating in the Pearl River Delta, expand the scope of mainland Chinese businesses operating in Hong Kong, and boost the number of mainland travellers to town.

Mr Tsang said he would present economy-boosting proposals to China's state leaders during a trip later this month to report his work.

Hong Kong slipped into recession in the third quarter as the global economic slowdown took its toll on the financial hub, government figures showed this month. -- AFP

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