On April 9th, 2020, the Hong Kong government announced its latest round of enhancements to the Branding, Upgrading and Domestic Sales (BUD) Fund, including increased levels of funding (up to HK$4 million) available to companies and much broader eligibility of businesses and projects. Any non-listed Hong Kong company pursuing commercial projects in any FTA jurisdiction will be able to leverage the new, expanded BUD Fund.
The Branding, Upgrading and Domestic Sales Fund was originally launched in June 2012, in order to coordinate local resources for Hong Kong companies to take advantage of business opportunities created by the PRC’s 12th Five Year Plan, which laid the framework for ESG investments in Asia’s largest economy.
In 2018, the BUD funding program expanded to cover ASEAN projects in anticipation of the Hong Kong-ASEAN Free Trade Agreement, and in 2019 the government increased the program’s funding and extended the fund’s coverage to include business projects in any jurisdiction with which Hong Kong has signed a Free Trade Agreement. In January 2020, the government launched the Enhanced Mainland Program and FTA Program.
Which Program to Apply for?
The Enhanced Mainland Program funds projects in new PRC markets, including the Greater Bay Area, while helping Hong Kong companies increase their domestic sales in the Mainland China market. The FTA program, building on the success of Hong Kong companies entering the ASEAN market, expands funding opportunities to include projects in Australia, New Zealand, Chile, Norway, Iceland, Liechtenstein, Switzerland, Georgia and Macao.
Both programs grant a maximum of HK$ 1 million per project, and each applicant can receive a maximum of HK$ 4 million to be invested between a maximum of 20 projects. Applications are open throughout the year.
Funds are provided on a matching basis. Applicants have to demonstrate their commitment to provide at least 50% of project costs.
What are the terms and conditions, once approved?
Funded projects are subject to periodic monitoring and evaluations. Progress will be evaluated according to the goals and estimates specified in the applicant’s original proposal. In some cases, there will be on-site inspections to evaluate the effectiveness of business operations. Funding recipients will also be required to submit reports to the Program Management Committee.
For projects with a duration of 18 months of below, only a final report, along with final audited accounts will be required, no later than 2 months after the project is completed. Projects that carry on for more than 18 months, in addition to the final report and audited accounts, will also require the submission of a progress report at the 12th month, while audited accounts will be required for the initial 12-month period, to be submitted one month after the end of the 12 months.
How does the Application Process work?
Applications should be submitted along with complete documentation. Applications are then vetted by the Project Management Committee, which is led by a government official and staffed by personnel with experience working in professional services, industry and commerce and the government. Once approved, the project begins, along with the monitoring process and requirement to submit progress reports. Once completed, the company should submit final reports and audited accounts.
The Project Management Committee looks for indications that the venture will generate short-term or long-term business development in the specific region and sector. Project proposals should also indicate that the enterprise will considerably develop its competitive advantage by attaining all the objectives laid out in the business plan. Mainland China projects should include substantial measures to develop business in the PRC. Budgets should be clearly laid out with reasonable projections and a detailed breakdown of expenses.
Projects that indicate a likelihood immediate success and prospects for creating further opportunities for other Hong Kong companies will receive favorable consideration, although these factors are not required for approval.
How are the funds disbursed?
Applicants may choose whether or not to receive an initial payment. The initial payment, if opted for, amounts to 75% of the total approved funding. Projects with a duration of 18 months or less receive the entirety of their approved funds as a final payment on project expenses, if the applicant does not opt for an initial payment. Projects with a duration of over 18 months may receive 50% of the approved funding as a mid-term payment, and the balance as the final payment.
The Hong Kong Productivity Council permits applicants to work with service providers on the development of a holistic business plan for the purposes of the application. Fung, Yu and Co. CPA Ltd meets all of the requirements set out by the government in order to consult on BUD Fund applications.
Planning for Success
The likelihood of receiving project approval is contingent on the quality and granular detail reflected in the company’s accounts and financial statements, as well as the coherence of the business plan, including projected costs and revenues. Upon receiving the funds, audited accounts become an integral, necessary part of the process. In addition to assisting with your effective business plan, we can commit to delivering clear and cohesive audited accounts for the duration of your project.
Looking Towards Tomorrow
As Hong Kong begins to emerge from its darkest winter, the new leaves of spring hold the potential for rejuvenation over the years to come, even if it takes longer than expected given the current phase of retrenchment and recession. Asia’s return to its original position at the center of the world’s economy will continue to sow seeds of growth over the long term, and applications for BUD funding remain open throughout the year.
Whether you plan on strengthening your position in the short term or intend to pursue new ventures next year and beyond, the support of the Hong Kong Productivity Council’s BUD fund, as well as the Hong Kong Mortgage Corporation Limited’s SME Financing Guarantee Scheme is well worth considering. Companies should make use of all available resources to strengthen their position during this period, and look to leverage their adaptation to the current circumstances to develop competitive advantage over the long term.
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