Financial Secretary Paul Chan is set to officially announce the new Budget on Feb. 26. The issue of a substantial deficit has long been a focus of public concern and debate, and Chan has previously stated that the approach will primarily focus on "cutting expenditures," with "increasing revenue" as a supplementary strategy.

How will revenue be increased? Where to cut expenses? Recent reports have explored various aspects, including the feasibility of adjusting the HK$2 public transport subsidy, civil servant salary adjustments, increasing taxes, and raising public service fees, inviting discussions from legislators.

The newly revealed budget cover features a lake blue color, which Chan described as representing an ocean of opportunities in the tide of future development, symbolizing a strong foundation for high-quality economic growth. The question arises: where can we find this economic development "ocean"? Reports have attempted to identify new growth points for Hong Kong's economy through the exploration of new industries and business models.

Introduction of sports betting: Balancing gambling control and revenue generation

Hong Kong has a legal gambling history spanning over a century. According to the Hong Kong Jockey Club, total betting for the 2023/24 fiscal year reached HK$304.9 billion, contributing HK$40.1 billion back to society. The well-established regulatory system and operational experience within Hong Kong's gambling industry provide a solid foundation for further development.

During the consultation phase for the Budget, several LegCo Members and groups supported the establishment of new sports betting projects. In addition to widely discussed basketball betting, proposals also included tennis, esports, and racing.

Legislator Johnny Ng stated that expanding sports betting would have the dual effect of increasing revenue while also addressing gambling control. He pointed out that many illegal gambling activities currently exist in Hong Kong, which not only violate the law but could also lead young people into a cycle of debt and excessive gambling. Therefore, regulating these illegal activities under formal institutions like the Hong Kong Jockey Club is essential.

As for the potential revenue from developing sports betting, Ng stated that while exact figures are not available, some preliminary research suggests that the illegal betting market could be worth billions, possibly reaching HK$10 to HK$20 billion in tax revenue if these activities were brought into regulated channels.

Ng also mentioned that the inclusion of betting elements would attract more attention to sports events, enhancing their influence. This increased interest could drive the development of related industries, such as sports services and peripheral products, further promoting the overall prosperity of Hong Kong's sports industry.

I&T and SMEs: Long-term drivers of development

The recent success of DeepSeek has showcased the immense potential of innovation and technology development. As the mainland has launched numerous policies supporting the growth of the private economy, private SMEs are seen as a vital force in driving innovation. Legislator Sunny Tan believes that amidst ongoing global economic uncertainty, Hong Kong should leverage its unique advantages to promote the development of the innovation and technology sector.

Specifically, Chan suggested optimizing the New Industrialization Funding Scheme and related measures to simplify processing and approval for SMEs, attracting cash flow and enabling smaller enterprises to establish smart production lines through funding. He also emphasized better utilization of the "Made in Hong Kong" brand to encourage traditional industries to engage in high-value small-batch and customized production.

Moreover, promoting the commercialization of research outcomes is a crucial step in advancing the innovation and technology sector. Chan recommended that the government reform its procurement system to prioritize the trial and application of products and services developed by local research teams, urging more departments, public institutions, and statutory bodies to adopt this approach.

In terms of specific sectors, given Hong Kong's longstanding issue of a singular industrial structure, Legislator Wendy Hong suggested that long-term investments in innovation and technology, new industries, and cultural and creative sectors could help identify new economic engines for the future.

Web3 industry: Real economy's supporter

The Consensus Hong Kong 2025 on cryptocurrency assets was recently held in Hong Kong, attracting at least 8,000 attendees, over 75% of whom were overseas visitors. Many local high-end restaurants and hotels were fully booked, benefiting local tourism and dining industries.

The development potential of the Web3 industry warrants attention. Johnny Ng pointed out that further promoting the Web3 industry could enhance GDP, innovate digital economic models, and improve the quality of digital economic development.

As for specific support measures, Ng suggested researching regulatory frameworks for Decentralized Autonomous Organizations (DAOs) to facilitate the entry of more digital assets and attract investment and talent, which could also increase tax revenue and help alleviate the budget deficit.

Securitization of infrastructure projects: Taking from the source for sustainable use

Earlier, Paul Chan indicated in a blog post that bond issuance would be used to accelerate the development of the Northern Metropolis, ensuring that project progress would not be hindered by public financial conditions.

As a financing center for infrastructure and a preferred overseas financing platform for the Belt and Road Initiative, Hong Kong Mortgage Corporation has already issued its first batch of infrastructure loan-backed securities in 2023. Legislator Robert Lee also proposed ideas regarding the securitization of infrastructure projects, noting that different projects would yield varying revenue from securitization. For example, if the government could consolidate cash flow from three cross-harbor tunnels along with the Tsing Ma Control Area tunnel, it could significantly alleviate financial pressure through bond issuance.

Lee further pointed out that the annual revenue from the three cross-harbor tunnels is about HK$3.7 billion, while the proposed new toll for the Tsing Ma Control Area tunnel is expected to generate HK$720 million annually. Combined, these four tunnels would generate approximately HK$4.4 billion. Referring to previous experiences with five tunnels and a bridge, which issued around HK$60 billion in bonds based on HK$1.5 billion in revenue, a similar model could theoretically allow for the issuance of bonds amounting to around HK$17.6 billion based on the combined revenue of the four tunnels.

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