COVID-19: Hong Kong Government Announces HK$137.5 Billion Economic Relief Package.
Legal News & Analysis - Asia Pacific - Hong Kong - Regulatory & Compliance
9 April, 2020
An overview of the relief measures to support businesses over financial difficulties during COVID-19
The Hong Kong government announced on 8 April 2020 a HK$137.5 billion package of relief measures to help businesses stay afloat, keep workers in employment and relieve financial burdens of individuals and businesses as the city's economy is hit by COVID-19.
The measures are a response further to the relief package in the 2020-21 Budget and the first round of the Anti-epidemic Fund, which involved HK$30 billion to strengthen anti-epidemic work and provide relief to affected industries. The total amount of relief has now reached HK$290 billion, which is equivalent to 9.5% of Hong Kong's Gross Domestic Product - a scale on par with the economic stimulus programs offered in other major developed economies.
This article provides an overview of the relief measures and comments on the implications on employment and the aviation, construction and insurance sectors.
Overview of the relief package
The major components of the relief package involve:
- Job retention, creation and advancement;
- Sector-specific relief;
- Government rental concessions, fee waivers, provisions of loans and loan repayment deferrals in limited circumstances to reduce financial burdens; and
- Other relief through government facilitation.
Implications on employment
A key aspect of the relief package is the Employment Support Scheme, with HK$80 billion being allocated to provide wage subsidies to employers for the purpose of retaining employees.
For a period of six months, the government will fund 50% of wages that eligible employers are contractually required to pay, capped at HK$9,000 per employee per month, in return for employers undertaking not to implement redundancy, no-pay leave arrangements or reductions of wages. Employers who have been making Mandatory Provident Fund (MPF) contributions for employees are eligible, except those on the exclusion list (employees of the Hong Kong government, statutory bodies or government subvented organisations). The first round of applications can be made in early June and payment to employers will be made in two tranches, with the first payout no later than June 2020.
Further support will also be provided to employers in the catering, construction and transport sectors which are not completely covered by the MPF scheme and a one-off grant will be given to self-employed persons who make MPF contributions.
Similar wage schemes have been adopted in other countries, such as in the UK where the government also pays a proportion (i.e. 80%) of employees' wages, subject to a cap of £2,500 pounds per month and in Australia, which offers a flat rate of AU$1,500 per worker per fortnight.
Implications for the aviation sector
To support the hard-hit aviation sector due to the shutdown of international traffic, the government will provide a one-off subsidy of HK$1 million per large aircraft and HK$200,000 per small aircraft registered in Hong Kong. For aviation support services and cargo facilities operators, a one-off subsidy of up to HK$1 million or HK$3 million will be provided to each operator with less than 100 employees or 100 employees or above respectively.
On 8th April, the Airport Authority announced a new round of relief worth up to HK$2 billion, providing further support to airlines and aviation support services operators through helping to ease their liquidity pressure. Two measures have been announced. First, the Airport Authority will offer to purchase around 500,000 air tickets in advance from the four home-based airlines. The purchase will serve the purpose of injecting liquidity into the airlines upfront, while the tickets will be given away to global visitors and Hong Kong residents in the future market recovery campaign to be launched when the pandemic is over. Second, the Airport Authority has offered to buy ground services equipment from ground support services (ramp handling, maintenance, catering and into-plane fuel).
In addition, such operators will also enjoy a rent free period for using the equipment after the sales.
In the same announcement, the Airport Authority announced that it will go to the financial markets in the next two months to raise the necessary funds, in order to maintain its own liquidity for funding the airport operation and the committed capital projects (third runway, terminal bridge etc). The loan will also be used to finance the new relief package
These measures follow three other packages of relief measures announced in September 2019, 21stFebruary and 23rd March 2020.
In September last year, the Airport Authority introduced rent concessions and other relief measures in view of the impact on businesses brought by the social unrest.
On the 21st February the Airport Authority Hong Kong (Airport Authority) introduced relief measures, covering rental concessions at premises/facilities and a reduction or waiver of fees.
On 23rd March, the Airport Authority announced a HK$1 billion package of relief measures. The relief package in full comprises a government waiver of HK$670 million in Air Traffic Control Charges to the Airport Authority for the year 2019/20, which will be passed on to the airport community, plus a sum of HK$330 million from the airport company to partners, including rent relief of HK$320 million to airport shops and restaurants paying a fixed rent and airlines receiving a full waiver for five months on parking and airbridge fees for idle passenger aircraft, and 40% reduction of passenger aircraft landing charges for four months. The effective period of these measures was from February to June.
Implications for the construction sector
To support the construction sector, the government will provide a subsidy of HK$7,500 to each eligible Registered Construction Worker, a subsidy of HK$20,000 to each eligible contractor, specialist contractor and supplier, and company member of major construction-related trade associations, and a subsidy of HK$10,000 to each eligible Registered Minor Works Contractor, Registered Electrical Contractor, Registered Gas Contractor, Registered Lift / Escalator Contractor, Registered Contractor under Builders’ Lifts and Tower Working Platforms (Safety) Ordinance, Registered Fire Service Installation Contractor and each eligible supplier of construction-related machineries and equipment rental.
The latest round of relief measures place an emphasis on developing new skills and helping enterprises to apply technology in specific sectors, including the construction sector. The Training Subsidies for the Construction Sector have been set up to provide training subsidies to some 600 consulting firms through the Construction Industry Council. The subsidy for each company will be HK$50,000.
Other relief through Government facilitation
About 1 000 contractors, consultants and land lessees will benefit from relevant departments extending the deadline for project completion in accordance with contract mechanism and/or relax the payment schedules of Government works and non-works contracts, as well as extend the Building Covenant (BC) period for development projects by up to six months in land leases. For non-works contracts, the Government will encourage procuring departments to provide more frequent payments to contractors, break up milestones in payment schedules into more deliverables to enable more frequent payments, and provide larger sums for upfront/milestone payments.
Implications for the insurance sector
The government has announced that the Insurance Authority will provide assistance to insurers. Since February, the Insurance Authority has been collaborating with the industry to provide essential relief measures for the insuring public. All major insurance companies have proactively offered grace period of premium payment up to 30 to 180 days for holders of individual life, critical illness and medical policies. Other relief measures include expanding medical coverage, relaxing hospital restrictions, simplifying and expediting claim procedures, as well as hospital cash benefit, death benefit and other concessionary benefits.
It is anticipated that the new round of relief measures will alleviate some of the financial pressure on businesses.
For further information, please contact
Simon McConnell, Partner, Clyde & Co