To assist SMEs to secure bank loans, the Small and Medium Enterprises Financing Guarantee Scheme (the Scheme) was introduced in late May this year. However, as at April this year, only 286 applications have been received and only about 220 SMEs have benefited from the Scheme. In comparison with the Special Finance Scheme introduced in 1998, under which over 1 300 applications had been received in the first eight months of implementation, and the SME Loan Guarantee Scheme (SGS) introduced in 2001, under which over 12 000 enterprises had benefited in the first year of implementation, the performance of the present Scheme is obviously less desirable.

It is worthy to note that with the introduction of the Special Concessionary Measures under the Scheme by the Government in the end of May, the number of applications has shown a palpable increase. Since the launch of the special measures six months ago, over 4 600 cases involving a loan amount of $21.1 billion have been approved. This implies that the demand for loan guarantee service for SMEs does exist and is not declining, only that SMEs' response to the Scheme has been lukewarm.

President, unlike the loan guarantee in the past, the present Scheme was introduced by the Hong Kong Mortgage Corporation Limited (HKMC). The Scheme aims to set up market-led finance guarantee to provide steady loan support to SMEs, serving as a complementary measure to the SGS. If the Scheme can provide proper assistance to SMEs and establish a long-term and sustainable loan mechanism for SMEs in Hong Kong, this concept is definitely worthy of support. However, the function of the Scheme obviously has yet to be brought into full play so far, and thus examination and enhancement of the Scheme are necessary.

We understand that the HKMC, being a public organization, should be accountable to the public in providing finance guarantee, yet the affordability of SMEs should not be overlooked. The authorities should draw reference from the experience of the Special Concessionary Measures, examine the feasibility of adjusting the guarantee fee and the percentage of guarantee, and engage in negotiations with banks for lower interest rates charged on these loans. Moreover, it is the general aspiration of SMEs and banks that the procedures for banks to submit documents be simplified and the vetting procedures involving loan restrictions on linked companies be relaxed. All these are worthy of serious consideration.

President, in the various global financial crises or in the difficult times of local economy in the past, the Government had launched time-limited special measures to help SMEs to solve their liquidity problems, such as the Special Finance Scheme introduced in 1998 operating till 2000, and the Special Loan Guarantee Scheme launched in 2008 operating till 2010, and so on. The Special Concessionary Measures introduced under the Scheme this time around is also subject to a time limit of nine months, which will operate till February next year as scheduled.

Since this involves the spending of public money, it is reasonable that similar special measures should be withdrawn after serving their function and when the economy picks up. However, according to the Half-yearly Economic Report published by the Government some time ago, it is expected that uncertainties in the international economy will impede the future development of Hong Kong, where the growth for the whole year will slow down from 1% to 3% to 1% to 2%. The Chinese Manufacturers' Association of Hong Kong has also said that Hong Kong merchants have been facing a far more difficult business environment this year than at the time of the financial tsunami. Under this circumstance, the nine-month time limit of the Special Concessionary Measures is too short.

Actually, during the financial tsunami in 2008, the Special Loan Guarantee Scheme launched by the Government had benefited more than 20 000 enterprises and successfully preserved the jobs of over 330 000 employees. As for the Special Concessionary Measures, though they have been launched for just six months, around 82 000 employees have already benefited from it. Moreover, according to the experiences in the past, the bad debt rate of each loan guarantee scheme is declining. For the scheme in 1998, the bad debt rate was 7.55%; for the scheme launched in 2001 and operated for seven years, the rate was around 2.7%, and for the scheme in 2008, the latest rate was only 0.69%. It is evident that similar special measures have been effective. The risk borne by the Government has not increased significantly, yet the measures have brought about an important effect of preserving employment.

It is foreseeable that the business environment in Hong Kong will be less than optimistic next year, and it is unknown when the global economic crisis will be settled. As in the case of the tourism sector, where over 80% of the companies are SMEs, they have to face the challenge of increasing operating costs in spite of the increase in tourists. We hope the Government will address the aspiration of the industry squarely by adopting extraordinary measures at extraordinary times, that is, extending the application period for the Special Concessionary Measures.

President, I so submit.