WORLD TRADE  
ORGANIZATION  G/SCM/Q2/HKG/7 
20 December 2006 
 
 (06-6109) 
Committee on Subsidies 
and Countervailing Measures Original:   English 
 
 
 
SUBSIDIES 
 
Replies to Questions from the UNITED STATES1 
Regarding the New and Full Notification of HONG KONG, CHINA2 
 
  The following communication, dated 14 December 2006, is being circulated at the request of 
the Delegation of Hong Kong, China.  
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Fisheries Development Loan Fund 
 
1. Please explain specifically how loans under th is programme assist fishermen in shifting 
to "sustainable fishing operations" and describe  any regulations or steps that the government 
takes to ensure that all support provided under this programme is used only for sustainable 
fishing operations. 
 
Reply
 
 
 The loan is provided for fishermen to switch to sustainable fisheries or related operations, 
which are conducive to reducing fishing efforts an d conserving fisheries resources in local waters. 
Applicants are required to submit detailed loan pr oposal including the information on their proposed 
operations.  Only those loan proposals which would result in reduction of fishing efforts (e.g. switching from trawling to non- trawling operations or from fishing to non-fishing operations 
such as aquaculture) would be considered.  Successf ul loan borrowers will be required to stop 
trawling or other unsustainable operations in local  waters.  Monitoring procedures are in place to 
ensure that the loan issued w ould be used by the applicant for the approved purpose in the loan 
application.  2. How do concerns about overcapacity and overf ishing factor into the administration of 
this programme? 
 
Reply
 
 
 Since one of the objectives of the loan fund is to help address the overfishing problem and 
conserve fisheries resources, only those loan proposals which would result in reduction of fishing efforts in local waters would be considered.  
                                                     
 
1 G/SCM/Q2/HKG/6 
2 G/SCM/N/123/HKG G/SCM/Q2/HKG/7 
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  Fish Marketing Organization Loan Fund 
 
1. From the title of this programme, it appears that these loans have some relationship to 
the marketing of fishery products.  However, this is not clear in the statement of policy objective 
and/or purpose.  Please explain. 
 
Reply
 
  The Fish Marketing Organization Loan Fund (FMOLF) is set up by the Fish Marketing Organization (FMO), which is a statutory organi zation established to provide wholesale marketing 
facilities for fishermen and fish traders.  While  the FMO is a non-profit making and self-financed 
organization, its surplus earnings are ploughed back  into the fishing industry, including through 
provision of loans under the FMOLF to fishermen.   
2. The description indicates that this progr amme provides "loans to fishermen for meeting 
their production and sustainable developmen t needs, including repair and replacement of 
fishing vessels, gear and equipment."  Please describe any regulations or steps that the government takes to ensure that all support pr ovided under this programme is used only for 
sustainable fishing operations. 
 
Reply
 
 
 While FMOLF provides loans for existing fishermen to meet their immediate operational need such as repair and replacement of fishing vessel s, gear and equipment, the bulk of the loan fund 
is made available to help fishermen tide over fisheries management measures such as fishing 
moratorium implemented in their operation area and switch to other sustainable fisheries or related 
operations.  Moreover, loans will not be issued fo r construction of new fishing vessels which employ 
unsustainable fishing methods.   
3. How do concerns about overcapacity and overf ishing factor into the administration of 
this programme? 
 Reply
 
  As mentioned above, the majority of loans under the FMOLF are granted to help fishermen 
tide over the fisheries management measures such as fishing moratorium implemented in their operation area and switch to other sustainable fisher ies or related operations, which will help address 
the overfishing problem and conserve fisheries res ources.  The remaining loans are mainly small, 
short-term loans to help fishermen to repair their vessels and gears, which should have minimal effect 
in respect of overcapacity and overfishing issues.  
Fish Marketing Organization Loan Fund 
 
1. With regard to the special loans for deve lopment of offshore fishing, please provide 
additional information regarding the "No Gain No Loss" principle mentioned in the notification.  What is the policy rationale behind this principle?  2. Other than "the best lending rates of the note-issuing banks in Hong Kong", what other 
factors are taken into account in setting a "No Gain No Loss" rate?  How do the authorities 
decide which and to what extent these factors are taken into account? 
  G/SCM/Q2/HKG/7 
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  Reply  
 The "no gain, no loss" (NGNL) interest rate has be en set on the principle that the Government should 
not seek to make a profit out of the loans concerned, nor incur a loss.  The interest rate is determined 
by reference to the market, at a fixed percentage  ("X") below the average of the best lending rates 
(BLR) of the note-issuing banks in Hong Kong.  As  the BLR has incorporated a profit element for the 
banks, the BLR is discounted by "X" to conform with the "no gain, no loss" principle.   The value of "X" has been set based on the average differential between the BLR and the Hong Kong 
Dollar Inter-Bank Offered Rates (HIBOR) over a 10-year  period.  It is reviewed biennially and the 
last review was conducted in 2005.  
 The NGNL interest rate is reviewed monthly and will  be adjusted in accordan ce with any changes in 
the BLR during the month.  Other Programmes   Certain publicly available information indicates that Hong Kong, China maintains subsidy programmes that may meet the requirements for notification under Article 25.  Please explain why the programmes listed below have no t been notified.  If they do qualify as 
programmes that should be notified, and to the ex tent they have not yet been notified, please 
provide the information required under Article 25.3 of the SCM Agreement and other 
programme-specific information as requested below.  Innovation and Technology Fund  
 According to public information, the Innovation and Technology Fund (ITF) is 
administered by Hong Kong's Innovation a nd Technology Commission.  The programme aims 
to increase the added value, productivity a nd competitiveness of Hong Kong's economic 
activities.  It appears that a large portion (approximately 62 per cent) of funds under this 
programme is provided to electronics and inform ation technology.  In addition, biotechnology 
and nanotechnology projects appear to also receive large support under this programme.  
(See
, http://www.itf.gov.hk/eng/statistics.) 
 
Reply  
  The Innovation and Technology Fund (ITF) is not  specific to an enterprise or industry or 
group of enterprises or industries. All sectors of Hong Kong industry are eligible for funding support 
through the different funding programmes under th e ITF.  There are also objective criteria and 
conditions governing the eligibility.  These criteria and conditions are set out clearly in the relevant 
guides to the ITF and are available to any interested parties/prospective applicants. 
 
Integrated Circuits Development Centre 
 
According to publicly available information, Ho ng Kong has recently created the Integrated 
Circuits Design/Development Centre at the Hong Kong Science & Technology Parks Corporation.  The Centre will support integrated  circuits (IC) companies throughout the entire 
IC product development cycle from init ial design to production release.  
(See
, http://www.hkstp.org/english/hksp_tech/hksp_tech_inn.html.)  
 G/SCM/Q2/HKG/7 
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  Reply
 
  The Integrated Circuits Design & Development Centre (ICDDC) is part of the technological 
infrastructure for applied research and devel opment under the Hong Kong Science and Technology 
Parks Corporation (HKSTPC) which is a statutor y corporation running on prudent commercial 
principles.  In respect of ICDDC, HKSTPC has succes sfully applied to ITF (see the answer to the 
previous question for details of ITF) for funding support.  
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