Hong Kong will invest nearly $20 billion into human capital, boosting job opportunities, education and the workforce.

Delivering the 2008-09 Budget today Financial Secretary John Tsang outlined three major initiatives to enhance the city's workforce and education.

Youth employment

A provision of $1 billion will be made over the next three years to create 3,000 three-year jobs for young people. Following up on the Chief Secretary's Policy Address pledge to provide 3,000 three-year jobs for people aged 15 to 29, Mr Tsang said he has made a provision of $1 billion over the next three years to create these jobs in collaboration with non-government organisations.

"Young people are the driving force for the future development of the community. I hope unemployed youths can obtain work experience and enhance their job-related skills to provide a solid foundation for future development," Mr Tsang said, adding further money has been allocated for other education upgrades pledged in the Policy Address, such as free senior secondary education from the 2008-09 school year. The move will see free education extended from nine to 12 years, requiring expenditure of an additional $1.2 billion annually.

"The Policy Address also announced small-class teaching will be implemented in primary schools in phases from the 2009-10 school year. We will provide adequate resources in future Budgets to support this policy."

Research, development

Mr Tsang proposed two measures to provide more diversified research and development (R&D) activities to sustain economic growth and enhance competitiveness.

The first is to provide 800 additional publicly-funded places for postgraduate research programmes in phases from the 2009-10 school year, which will incur additional expenditure of nearly $300 million annually.

Second, Mr Tsang intends to provide a one-off grant of $18 billion to establish a Research Endowment Fund. The fund and its investment earnings will replace the annual funding granted by the Government to the Research Grant Council of the University Grants Committee. Part of the funds will be used to finance research projects on specific themes.

"The fund will not only affirm the Government's continued support to R&D activities, but also provide steady, additional resources through its investment earnings for the institutions to conduct such activities," he said.

"Diversified research and development (R&D) activities are essential to sustain economic growth and enhance competitiveness. Research stimulates new ideas, and research-based innovation can promote high value-added economic activities. The basic and applied research conducted by tertiary institutions helps other research institutes and the business community to master and apply new knowledge. This is crucial to the sustained growth of our knowledge-based economy. Therefore, our investment in this area is of great importance to Hong Kong."

The University Grants Committee welcomed the support. Chairman Laura Cha said it shows the Government's commitment to promoting research. It is also timely as colleges are about to hire 1,000 more academics to prepare for new '3+3+4' academic system.

She said the committee and the Government will discuss the detailed arrangements of the transition from the current funding model to the new research endowment fund's deployment. It will also consider the way forward for allocating the additional research postgraduate places.

Importing talent

Mr Tsang said as the ageing population will impose limitations on production capacity, Hong Kong must woo more talented people from the Mainland and overseas to nourish the economy and improve the population structure.

With the recent relaxation of the age limit and requirements on language proficiency and work experience for the Quality Migrant Admission Scheme and the arrangements for non-local students to work in Hong Kong after graduation, Mr Tsang pledged to make better use of the Hong Kong Economic & Trade Offices around the world to enhance the external promotion of talent-admission schemes and the arrangements for non-local students to work in Hong Kong.

"Enhancing the skills and competitiveness of people of all ages through continuous efforts to raise their education level and encourage lifelong learning will help increase our per capita productivity, thereby alleviating the problems caused by our shrinking workforce," Mr Tsang said.

"The Government has been investing heavily to develop human capital, the most important resource in a knowledge-based economy. Expenditure on education exceeds $50 billion a year, accounting for about one quarter of total government recurrent expenditure. Education is the policy area that takes up the largest share of government resources. As the resources we put into education are long-term investments that enhance the quality and productivity of our population, we will maintain our commitment in this area."