HONG KONG - In her maiden policy speech Hong Kong's Chief Executive Carrie Lam on Wednesday (Oct 11) warned the city faced "grave" challenges and must develop a diversified and high value economy, unveiling a mix of housing and tax relief policies to raise competitiveness.
Hong Kong, now among the world's most costly cities, has battled rising income inequality, the slow implementation of marquee public projects, political tensions with mainland China, and a slide in regional competitiveness, reported Reuters.
"In the face of competition from other economies as well as the rise of protectionism in recent years, Hong Kong is facing increasingly grave challenges. We must develop a high value-added and diversified economy," Mrs Lam said in her speech which was televised live.
Mrs Lam said she would bolster support for small and medium enterprises in the Asian financial hub by cutting company profits tax to 8.25 per cent from 16.5 per cent for the first HK$2 million (S$350,000) of earnings.
Earnings after that would be taxed at the current 16.5 per cent.
There will be rules to limit big corporations so only one of their subsidiaries could benefit from the new measure.
In a wide-ranging speech in which she laid out some of her priorities for the next five years, she also pledged to boost spending on research and development (R&D).
Hong Kong will increase R&D spending from the current 0.7 per cent of GDP to 1.5 per cent, said the city's first female leader who also announced on Wednesday she would lead a new steering committee on IT and innovation.
A 300-per-cent tax deduction will be given for the first HK$2 million spent on R&D, with a 200-per-cent deduction applied to any further spending, reported broadcaster rthk.
She also said she will make better use of the over HK$1 trillion in fiscal reserves to invest in the future, according to local media.
Some HK$700 million will be invested in several projects to develop Hong Kong into a Smart City. The government will set up a HK$500 million "Technology Talent Scheme" to encourage young people to engage in R&D development in innovation and technology.
She says the government will try to lure in top talent from overseas scientific research institutions to the city.
During her trip to Singapore in August, her first overseas trip since taking office on July 1, Mrs Lam visited GovTech Hive, an innovation lab for digital services.
She said during that trip that if Hong Kong wants to continue to stay competitive and to become a smart city, it has to explore wider application of technologies.
She added that she looked forward to more exchanges and collaboration between Hong Kong and Singapore in this field.
Apart from economic issues, Mrs Lam also announced several "people-oriented initiatives" in housing, education and governance during her 40-minute speech delivered in local dialect Cantonese.