The government has pledged to help small and medium enterprises (SMEs) face challenges brought by the financial crisis.

Chief Executive Donald Tsang made the pledge Friday at a luncheon explaining his policy address to business leaders, who demanded measures to help the business sector.

"Let me express our disappointment of the lack of measures to help the SMEs, and the commercial and the industrial sector in your policy address," said commercial sector legislator Jeffrey Lam during a question-and-answer session at the luncheon.

But Tsang reiterated that the government always attempts to help SMEs and regard them as the strength and pillar of Hong Kong.

He said the decision to offer full protection to depositors will enable banks to have sufficient liquidity to provide loan support to SMEs.

He added the government is also working to relax the restriction set out in a SME credit guarantee scheme, which enables SMEs to borrow money from banks with government guarantee.

He noted that the government is looking forward to working with the business sector.

"My heart is with you but we must work together," he said. "I will not blame you but don't blame me unnecessarily. A dialogue must be started, it must be on a good footing."

Concerns on the difficulty faced by SMEs have worsened since the emergence of the financial tsunami and the closure of factories owned by listed company Smart Union Group (Holdings) Ltd.

Manufacturers have expressed concerns that banks have tightened their loan standards, resulting in cash flow problems.

Meanwhile, in a RTHK radio program Friday, Financial Secretary John Tsang said the Commerce and Economic Development Bureau will soon announce details concerning the relaxation of restrictions in the SME credit guarantee scheme.

(HK Edition 10/18/2008 page1)