Hong Kong business community was modestly optimistic about the prospects for the local economy in 2008, a survey by the Hong Kong General Chamber of Commerce (HKGCC) showed yesterday.

Respondents, in general, think Hong Kong's economy has been enjoying high growth and the growth will continue in the coming years.

Over half of the companies expect the economy to be "stronger" or "much stronger" next year, while only 14 percent predict the economy will worsen.

"Our members are very confident that the buoyant economic growth will continue through 2008 and beyond, so much so that 45 percent of the respondents in our survey are planning to hire extra staff to sustain their growth in 2008," said Lily Chiang, chairwoman of HKGCC.

The chamber has conducted annual Business Prospect Survey since 1998. The study this year has been conducted during middle October to November, containing 50 questions covering a broad range of topics of concern to the local business communities.

The survey also highlights two big operational cost drivers which arouse concerns among companies in Hong Kong - increasing pay rolls and rentals.

An overwhelming 80.8 percent of respondents identified pay rises as inevitable pressure for their business. Around half, 50.8 percent, said they would increase wages up to 5 percent in the coming year, while a further 26.6 percent said compensation would rise between 5 percent and 10 percent.

Rent increases cited as another key challenge that companies are facing. Nearly 40 percent of respondents expect a double-digit increase in rental expenditure next year, of which 13.6 percent expect the hike will exceed 20 percent. A total of 63.2 percent cited rising rental costs is another burden for doing business in Hong Kong.

Almost 83 percent of respondents said they had difficulties in hiring appropriate candidates to fill vacancies.

Many employers also expressed disappointment over job-seekers' language skills, including English and Putonghua, as well as a poor work attitude and global perspective.

Competitiveness intact

Despite the rising worries, HKGCC said the Hong Kong's business strengths remain unchanged. Nearly all successfully interviewed companies said geographical location is the most significant forte for Hong Kong.

Physical infrastructure, legal system and tax regimes are also cited as absolute advantages the city enjoys.

"Our advanced financial system and strong professional talent base are second to none. But we also need to expand our areas of expertise," said Chiang.

Speaking at a business summit yesterday, Alex Fong, chief executive officer of HKGCC, called for government action to improve Hong Kong's competitive edge.

"The government's plan to reduce the profits tax rate to 16.5 percent is encouraging, but we believe that more can be done. Tax rates are important, but other measures such as implementing a policy of group loss relief are also necessary, and are needed quickly," Fong added.  (By Lillian Liu)