LegCo Paper No. CB(1) 253/96-97
(These minutes have been seen
by the Administration)
Ref : CB1/PL/TP/1

LegCo Panel on Transport

Minutes of the Meeting on Thursday, 13 June 1996 at 8:30 a.m. in the Chamber of the Legislative Council Building

Members present :

Members absent :

Members attending :
For Item V only

For Item VII only

Public officers attending : For Item III

Mr Paul LEUNG, JP: Acting Secretary for Transport
Mr Isaac CHOW: Deputy Secretary for Transport
Mr Augustine CHENG: Principal Assistant Secretary for Transport
Ms Linda SO: Assistant Secretary for Transport
Mrs Dorothy CHAN, JP: Acting Commissioner for Transport
Transport Department
Mr CHING Kam-cheong: Acting Assistant Commissioner for Transport
Transport Department
Mr R H Lloyd: Project Manager/Airport & Port Access
Highways Department

For Item IV

Mr Paul LEUNG, JP: Acting Secretary for Transport
Mr Augustine CHENG: Principal Assistant Secretary for Transport
Mrs Dorothy CHAN, JP: Acting Commissioner for Transport
Transport Department
Mr S C LEE: Assistant Commissioner for Transport
Transport Department
Mr Brian Grogan: Chief Engineer (Transport & Traffic Surveys)
Transport Department
Mr E Crowter: Acting Chief Superintendent (Traffic)
Royal Hong Kong Police Force
Mr Jon Kilburn: Superintendent (Traffic Management Bureau)
Royal Hong Kong Police Force

Item V

Mr Isaac CHOW: Deputy Secretary for Transport
Miss Eliza LEE: Principal Assistant Secretary for Transport
Mrs Dorothy CHAN, JP: Acting Commissioner for Transport
Transport Department
Mr Daniel AU: Assistant Commissioner for Transport
Transport Department

Item VI

Mr Paul LEUNG, JP: Acting Secretary for Transport
Mr Augustine CHENG: Principal Assistant Secretary for Transport
Mrs Dorothy CHAN, JP: Acting Commissioner for Transport
Transport Department
Mr Alan LUI: Assistant Commissioner for Transport
Transport Department
Mr Alan KAM: Assistant Director
Highways Department
Mr E Crowter: Acting Chief Superintendent (Traffic)
Royal Hong Kong Police Force

Item VII

Mr Paul LEUNG, JP: Acting Secretary for Transport
Mrs Jenny Wallis: Principal Assistant Secretary for Transport
Mr L N Parker: Government Engineer/Railway Development
Highways Department
Mr C K MAK: Chief Engineer/Railways
Highways Department

Attendance by invitation : For Item V
City University of Hong Kong

Dr Geoffrey TSO: Associate Professor
Department of Applied Statistics & Operational Research
Mr FUNG Wai-ying, Arnold: Research Assistant
Kowloon Motor Bus Co. (1933) Ltd.(KMB)
Mr Mark LEUNG: Marketing, Planning & Development Manager
China Motor Bus Co., Ltd.(CMB)
Mr Richard Davies: Planning Manager
Mr MAK Ping-kuen, Arthur: Chief Accountant
New Lantao Bus Co (1973) Ltd (NLB)
Mr Peter LEE: Company Secretary
Mass Transit Railway Corporation (MTRC)
Mr Eddie SO: Transport Planning Manager
Kowloon-Canton Railway Corporation (KCRC)
Mr Y T LI: Head of Operations
Hongkong & Yaumati Ferry Co Ltd (HKYF)
Mr Rayman YUEN: Assistant General Manager
Star Ferry Co Ltd and Hongkong Tramways Ltd
(SF and HKT)
Mr Wegan CHIANG: Administration Manager

For Item VII
Kowloon-Canton Railway Corporation

Mr Kevin Hyde: Chairman
Mr Samuel LAI: Director

Clerk in attendance :

Mrs Vivian KAM: Chief Assistant Secretary (1)2

Staff in attendance :

Miss Eva LIU: Head, Research & Library Services Division
Mr Jackie WU: Research Officer 1
Mr Joseph LEE: Research Officer 5
Mr Billy TAM: Senior Assistant Secretary (1)4

I. Confirmation of Minutes of Previous Meeting and Matters Arising

Report on Monitoring of Mass Transit Systems

II. Date of Next Meeting and Items for Discussion

III. Approach Roads to the Western Harbour Crossing

IV Parking Demand Study Interim Report

V Concessionary Fares for the Elderly

Presentation of survey results

Discussion

Financial impact on public transport operators

The Administration's stand

VI Interdepartmental Co-ordination on Road Closures

VII Any Other Business - Western Corridor Railway Project

General Views and Motions Passed

Consultancy Studies

Future operator of the WCR

Fare structure of the WCR

Legality of KCRC's Activities

Assessment by the Administration

Rate of Return

Transportation Planning

Contingency and Project Reserve

Cost Comparisons

Use of Local Expertise

I. Confirmation of Minutes of Previous Meeting and Matters Arising

(LegCo Papers No. CB(1) 1429, 1473, 1520, 1604, 1561 and 1562/95-96)

(Appendix I to LegCo Paper No. CB(1) 1603/95-96 - Report on Monitoring of Mass Transit Systems)

The minutes of the meetings held on 18 January, 28 February, 1 March, 6 March, 11 April and 16 April 1996 were confirmed.

2. The Chairman reported on the following:

five members joined the visit on 11 June 1996 to see the operation of the New Lantao Bus Co Ltd and to travel on the Tung Chung Road;
at the Panel meeting on 11 April 1996 when the subject of Public Transport for Tung Chung Residents was discussed, members expressed interest in the Administration's policy on the allocation of public housing in Tung Chung. The Administration had confirmed that there was a special registration exercise for prospective applicants and that priority would be given to airport employees who either fulfilled normal eligibility criteria or were sitting tenants; and
a meeting would be scheduled with a delegation of the Standing Committee on Transport and Communications of the Swedish Parliament who would be visiting Hong Kong from 28 to 31 August 1996.

(Post-meeting note: The meeting had been scheduled for 30 August 1996 at 3:00 pm.)

3. As regards the complaint case concerning the Safety Provisions of School Transport referred by Duty Roster Members, members decided that the Panel would not discuss the case further and that this be referred to the Administration for follow-up.

Report on Monitoring of Mass Transit Systems

4. At the invitation of the Chairman, Miss Eva LIU, Mr Jackie WU and Mr Joseph LEE of the Research & Library Services Division of the LegCo Secretariat gave a brief introduction on the research report on Monitoring of Mass Transit Systems by referring to the photocopies of transparencies tabled at the meeting. Members agreed to allocate another time slot for discussion of the research report.

(Post-meeting note: The set of photocopies of transparencies was circulated to absent members after the meeting vide LegCo Paper No. CB(1) 1629/95-96 dated 13 June 1996.)

II. Date of Next Meeting and Items for Discussion

(Appendix II to LegCo Paper No. CB(1) 1560/95-96)

5. The next meeting would be held on Thursday, 11 July 1996, at 8:30 am to discuss:

Research Report on Monitoring of Mass Transit Systems;
Freight Transport; and
Progress of the Airport Railway Project.

III. Approach Roads to the Western Harbour Crossing

(Appendix III to LegCo Paper No. CB(1) 1560/95-96 and Appendix IV to LegCo Paper No. CB(1) 1603/95-96)

6. The Chairman reported that the item had been included on the agenda as members were concerned about the adequacy of road networks to tie in with the opening of the Western Harbour Crossing (WHC) in 1997. A Concern Group for Western Harbour Crossing whose submission was at Appendix III to LegCo Paper No. CB(1) 1560/95-96, had also expressed views on the subject.

7. In response to the Chairman, Mr Paul LEUNG advised that a number of main approach roads would have been completed prior to the opening of WHC in March 1997. Mr R H Lloyd then briefed members on the details. The elevated dual carriageway Route 7 would be open in late 1996 or early 1997. Subject to a traffic impact assessment on the Jordan Road Corridor, part of West Kowloon Expressway and Kwai Chung Viaduct would be open at about the same time. The remaining sections of the roads to the Tung Chung New Town via the Lantau Fixed Crossing should be open by May 1997. He added that the Kennedy Town gyratory scheme had been implemented on 1 June 1996. The target completion dates for the Smithfield Extension and the Victoria Road Improvement Stage II project were June 1997 and end of 1997 respectively.

8. As regards noise impact assessment based on estimated traffic figures in the year 2006, Mr Lloyd informed that double-glazed glasses and air-conditioners would be installed for slightly under 2,500 dwellings along Connaught Road West Corridor. The installation of air-conditioners would be funded by the WHC franchisee on a reimbursement basis. The works would also entail the installation of air-conditioner water collection pipes and the raising of the electricity loading of the buildings concerned. Similar noise mitigation measures were to be carried out for the Rock Hill Street project and two projects in West Kowloon.

9. On the assessment of traffic volumes along the approach roads, Mr K C CHING advised that based on past experience with the Eastern Harbour Crossing, the traffic volume of a new tunnel would take about six months to build up. Traffic volume both ways at the Island portal of the WHC was expected to be 3,100 - 3,700 vehicles per hour during rush hours, with higher traffic flow in the evening. With the diversification of certain cross-harbour traffic away from the Cross Harbour Tunnel (CHT) in Causeway Bay, traffic flow to the Central District along Connaught Road Central should reduce. Overall, the road systems should be able to cope with the traffic after the opening of WHC.

10. Members expressed concern about possible traffic jams at Kennedy Town Praya, along Victoria Road to the Southern District and in the Central District with vehicles coming from Wan Chai and the Mid-levels. Mr CHING responded as follows:

the Kennedy Road Praya was not an essential access road as traffic to and from WHC should use Belcher Bay Link instead of this road;
the majority of road works along Victoria Road would be completed by March 1997. The remaining works were for the construction of the pedestrian pavements only. Since traffic volume would take about six months to increase to a stable level, gradually increasing traffic flow should not create too much pressure on the newly completed road networks in that area; and
drivers' choice of particular cross-harbour tunnels would depend on their destinations, travel time and the tunnel tolls. With the choice of the two existing cross-harbour tunnels, drivers would not intentionally head for the WHC unless they were heading for the western part of the territory. Furthermore, as traffic only increased gradually over time, traffic condition in the Central District should not be aggravated.

11. Mr CHING supplemented that an overall traffic study would be conducted in late 1997 or early 1998 to collect information on the impact on traffic condition in the Central District, the Mid-levels and the western part of Kowloon. The Administration held frequent meetings with the Traffic and Transport Committee of the Central and Western District Board (CWDB) to draw up estimates on traffic flow in the area, and the traffic estimate data would be finalized in late August 1996. He undertook to provide the Panel with the relevant data once available.

12. Members recalled that when the Eastern Harbour Crossing (EHC) was open, traffic flow in its vicinity was quite smooth but this soon deteriorated. They emphasized the need for the Administration to learn from such an experience and improve the road design to facilitate traffic flow near the WHC tunnel area. Mr CHING was of the view that the deteriorating traffic condition near EHC was a result of the ever-increasing tunnel patronage. He advised that in the vicinity of WHC, the section of Route 7 connecting the existing Rumsey Street Flyover and the proposed Belcher Bay Link would provide a separate elevated road to Central bypassing the WHC.

13. In response to a member on new roads leading to eastern Kowloon, Mr CHING advised that the present road network was sufficient to cope with the expected traffic flow. No new roads were planned to connect western Kowloon and eastern Kowloon but separate exits to various locations were provided along the West Kowloon Expressway. Mr CHING added that a plan to build a new expressway traversing mid-Kowloon would be considered in the context of the Third Comprehensive Transport Study.

IV Parking Demand Study Interim Report

(Appendix V to LegCo Paper No. CB(1) 1560/95-96)

14. The Chairman informed that this was a follow-up to the meeting on 28 February 1996 and invited Mr Paul LEUNG to brief members on the Interim Report and how recommendations in the Parking Demand Study would be taken forward.

15. Mr LEUNG highlighted the main points in the information paper circulated to members. He informed that the inter-departmental Working Group on Parking (WG) had held nine meetings so far and had studied carefully recommendations in the Parking Demand Study. Follow-up actions had been taken and a final report was expected by September 1996.

16. On the 39 sites which might be suitable for the construction of multi-storey facilities for goods vehicles and private cars, Mr LEUNG advised that the Administration intended to invite the private sector to submit tenders to build and operate such multi-storey facilities. In response to a suggestion for the Government to be responsible for the construction and management of such carparks, Mr LEUNG explained that Government's policy was to encourage private sector investment in the construction and operation of carparks. To assist in making the carpark viable, the Administration would identify suitable commercial/industrial uses to be included in a joint development at each site. A member called for early consultation with relevant District Boards once potential sites for construction of multi-storey carparks were identified. Mr S C LEE undertook to follow up accordingly.

17. A member urged the Administration to make better use of parking spaces in office buildings after office hours. He also asked if there would be legal provisions in future to stipulate the construction of carparks in the basements of new buildings and whether the parking space requirements in public housing estates and home ownership scheme estates would be revised. In response, Mr LEUNG said that the Administration was seriously considering these proposals. The parking standards stipulated in the Hong Kong Planning standards and Guidelines were being revised to ensure that adequate spaces were provided in all new developments.

18. In response to some members' suggestion that overnight on-street parking in factory areas be actively pursued, Mr LEUNG emphasized that the WG had been trying to locate such sites. As soon as such sites were identified and due consultation made with District Boards, the sites would be put into use immediately. For short term tenancy sites, he acknowledged that sites were required in western New Territories to cater for the demand from container vehicles.

19. A member considered that the plan to build underground carparks should be expedited. Mr LEUNG explained that an assessment of the road traffic capacity in the vicinity would be required. There might also be a need to relocate existing amenity facilities if Urban Council or Regional Council premises were involved. As regards a proposal for limiting the duration of a vehicle's stay in metered car-parking spaces as practised in London and Los Angeles, Mr LEUNG agreed to consider this view but added that additional manpower would be involved. Mr Augustine CHENG supplemented that this would also require advanced technological equipment. He pointed out that existing legislation already prohibited a car from staying in a metered carparking space for more than 24 hours. The Chairman requested the Administration to consider this proposal in its final report.

20. A member expressed his dissatisfaction with the slow progress in implementing the Parking Demand Study and with the absence of a definite implementation timetable. He also criticised the lack of co-ordination amongst Government departments, particularly in according priority in dealing with the car-parking problem. Another member was disappointed at the meagre allocation of parking area in the West Kowloon Reclamation (WKR). In reply, Mr LEUNG explained that the Administration had been trying its best to address the problem. He emphasized that the timing of the availability of land and the need for other uses of land were both prime concerns of the Administration. In the case of WKR, most land had been earmarked for specific purposes.

21. To sum up, the Chairman urged the Administration to come up with concrete recommendations and a target timetable in the final report expected to be available by September 1996.

V Concessionary Fares for the Elderly

(Appendix VI to LegCo Paper No. CB(1) 1560/95-96)

22. The Chairman reported that at the Panel meeting on 8 June 1995, the Administration undertook to request public transport operators to conduct surveys for collating statistics to assess the financial impact of reducing the eligibility for concessionary fare schemes from age 65 to 60. Dr Geoffrey TSO from the Department of Applied Statistics and Operational Research of the City University of Hong Kong had been commissioned to conduct a survey on the subject. Representatives from the public transport companies had also been invited to the meeting.

Presentation of survey results

23. At the invitation of the Chairman, Dr Geoffrey TSO presented his survey findings. He had been commissioned by eight local public transportation operators to conduct a research into the effect of providing concessionary fare to the elderly aged 60 to 64. He elaborated on the methodology and the results of the survey outlined in the LegCo paper already circulated to members. The conclusion drawn from the survey was that the availability of concessionary fare would only attract 3.8% additional patronage in the age group 60 to 64 and this would result in a net loss of 43.8% revenue for the operators from this group of passengers.

Discussion

24. A member expressed worries about the representativeness of the survey as it only covered routes operated by Citybus; this might have ignored the needs of elderly living in the New Territories. He also asked for the reason for having 70% of the sample coming from elderly aged 65 instead of concentrating on those aged 60 to 64; and for Dr TSO's view on the small sample size of 1,035.

25. In response, Dr TSO explained that as concessionary fares to the elderly were already being offered on 14 routes covered, the survey results should be more reliable from a statistical point of view than that conducted on hypothetical situations. As for the sample size, Dr TSO explained that the survey was also aimed at testing if the increase in patronage would result solely from the availability of concessionary fares. If patronage increased in the group of elderly aged 65 or above who already enjoyed concessionary fares, one might conclude that such an increase in patronage was the result of factors other than the availability of concessionary fares. He further clarified that the researchers had screened all passengers according to their age and that only 1,035 passengers were above the age of 60. The survey sample basically covered almost all passengers in the relevant age group riding the sample bus trips.

Financial impact on public transport operators

26. Members asked for public transport operators' assessments of the financial impact of the proposal, and their views on whether further surveys by the operators were warranted. The operators responded as follows:

Mr Mark LEUNG of KMB informed that the company had provided an assessment on the effect of the proposal to the Transport Branch;
Mr Richard Davies of CMB considered Dr TSO's survey very independent and comprehensive. As such, a separate survey by CMB was deemed unnecessary. The financial loss as a result of the proposal might render the business of the company unviable. CMB was therefore not in support of the proposal to extend the schemes to those aged under 65. Relevant data had also been submitted to the Transport Branch;
Mr Peter LEE of NLB informed that NLB had conducted a similar survey on its own. The survey indicated that on the basis of 1995 figures, additional subsidies amounting to $1.5 million would be incurred if the age for concessionary fares was reduced from 65 to 60. This figure was 44% higher than the subsidy in 1995 of $1.04 million for the elderly aged 65 and above;
Mr Eddie SO of MTRC estimated that the lowering of eligibility would result in a loss of $60 million in revenue for MTRC per annum based on 1995 price level;
Mr T Y LI of KCRC reckoned that Dr TSO's survey was very scientifically based. He advised that the loss in revenue for the company under the existing scheme was $30 million based on the 1996 fare structure. If the eligible age was reduced to 60, there would be a further loss of $18 million;
Mr Rayman YUEN of HYF indicated that the loss in revenue in 1995 exceeded $5 million. If the eligible age was lowered to 60, an additional loss of $8 million in revenue was envisaged based on the 1995 price level, although the loss would be offset partly by government's exemption of licence fees and rental reimbursement totalling $1.9 million ; and
Mr Wegan CHIANG of SF and HKT reported that SF and HKT had not conducted similar surveys. However, patronage from the elderly aged over 65 for the two companies under the existing concessionary fare schemes had only increased by 3%. The two companies had also submitted financial data to the Transport Branch.

The Administration's stand

27. In response to the Chairman on the Administration's stand, Mr Isaac CHOW advised that concessionary fare schemes were voluntary ones and the Administration had not laid down any prescribed rules on how the schemes were to be implemented. He held the view that Dr TSO's survey had been conducted using real-life data and should be quite representative. The total loss of revenue for public transport operators amounted to $313 million in 1995. If the eligibility age was lowered to 60, the loss would be in the region of $535 million. With a view to encouraging the implementation of the schemes, the Administration had been exempting certain categories of licence fees and reimbursing selected rentals for these operators. These amounted to $80 million in 1995.

28. In response to an enquiry on whether concessionary fares should be a welfare item, Mr CHOW said that the Administration's policy was for public transport services to be provided by the private sector. As such, concessionary fare was not regarded as a welfare item. At the request of the Chairman, Mr CHOW undertook to provide for members' reference the financial data submitted by the operators.

(Post-meeting note: The relevant data were circulated to members vide LegCo paper No. CB(1) 1866/95-96 dated 19 July 1996.)

VI Interdepartmental Co-ordination on Road Closures

(Appendix VII to LegCo Paper No. CB(1) 1560/95-96)

29. The Chairman reported that at the meeting on 11 April 1996, members expressed dissatisfaction at the unsatisfactory road closure measures on Tuen Mun Road on 7 April 1996. The Administration undertook to revert to the Panel with improvement plans for road closures in the future.

30. At the invitation of the Chairman, Mr Paul LEUNG and Mrs Dorothy CHAN introduced the proposed improvement measures as contained in the information paper already circulated. In response to a member on the time required for emergency situations to be reported to the control room in the Transport Department, Mrs CHAN advised that it normally took one hour but this could be shorter if the emergency occurred during office hours.

31. While members were generally supportive of the proposed measures, they noted that these were aimed mainly at pre-scheduled road closures. They asked for arrangements for unexpected road closures. Mr LEUNG advised that there were contingency measures for coping with different situations. The need for sudden road closures were normally handled on the spot by the Police.

32. Members considered that the Police should devise different contingency plans to address traffic problems lasting for different durations. They specifically asked for the considerations for opening up the central dividers of roads to release trapped traffic. In reply, Mr E Crowter advised that the decision to open the central dividers would lie with senior frontline Police officers on site as they were in the best position to judge the situation. He emphasized that the deployment of resources and commuters' safety were the main concerns. The decision was a major one as this would entail the use of equipment to remove bolted central dividers, the forewarning of drivers on the opposite carriageway, and the deployment of sufficient officers on site to direct traffic and to erect signposts. In response to a member on the meaning of the phrase "prolonged congestion" in paragraph 6(f) of the information paper, Mr Crowter advised that the duration must be over an hour.

33. Members were of the view that front line Police officers tended not to open up the central dividers as maintenance of the status quo would be easiest to handle. They urged the Police to spell out the specific conditions which had to be satisfied in order for central dividers to be open up. They also considered it necessary for the Police to list in a manual for easy reference the decision-making process including factors that had would have to be considered and resources required if the central dividers were to be removed. Mr Crowter undertook to issue written guidelines to regional Traffic officers on opening of central barriers.

VII Any Other Business - Western Corridor Railway Project

(Appendix VIII to LegCo Paper No. CB(1) 1560/95-96 and Appendix IX to LegCo Paper No. CB(1) 1603/95-96)

34. The Chairman reported that the subject was last discussed at the meeting on 11 January 1996 when the Administration undertook to report progress to the Panel in three months. As no report had been forthcoming and in view of recent reports by the media on the subject, she had suggested discussion of this item at the current meeting.

35. At the invitation of the Chairman, Mr Paul LEUNG briefed members on the proposal submitted by the Kowloon-Canton Railway Corporation (KCRC) in relation to the construction of the Western Corridor Railway (WCR). He advised that the Administration was commissioning its own consultants to study KCRC's proposal and had yet to come up with a firm decision. Mr LEUNG added that two sets of KCRC's proposals had been delivered to the LegCo Secretariat. Except for some commercially sensitive information, the document contained the KCRC's full proposal to the Administration. The Chairman instructed that one set of the full report be kept by the Panel clerk and the other set in the LegCo Library for members' reference.

36. Mr Kevin Hyde of the KCRC referred members to the booklet "West Rail Fact Sheets" tabled at the meeting and advised that these covered some of the issues raised recently. He highlighted the fact that KCRC's proposals would generate a rate of return of 12% and meet the transport needs defined in the Railway Development Strategy.

General Views and Motions Passed

37. Members expressed dissatisfaction at the short time available for them to go through the information papers. As regards the disclosure of the full proposal to other parties, Mr LEUNG affirmed that the full report was forwarded to LegCo Members and the Chinese side of the Joint Liaison Group simultaneously on 13 June 1996.

38. Members considered that the WCR should be built as early as possible, that the Administration should expedite its initial assessment, and that the issue should not be politicized. They were of the view that the Transport Branch, instead of KCRC, should be responsible for reporting all stages of development to the Panel to enable monitoring by LegCo. Furthermore, the Administration and the KCRC should be as transparent as possible in handling the WCR project. Some members remarked that the Administration itself should have conducted the feasibility studies and invited interested parties to take up projects. This would have saved time and costs as there would not be duplication of efforts by the potential operator and the Administration.

39. All members present agreed that a Subcommittee of the Panel should be formed to monitor the Western Corridor Railway project and that the Administration should decide on the implementation of the project as soon as possible and report every stage of progress to the Subcommittee. The clerk would follow up on the arrangement for the first Subcommittee meeting. Members also passed a motion requesting the KCRC to, with immediate effect, withhold contracts for the technical studies estimated to cost $750 million.

(Post-meeting note: The Subcommittee's first meeting was held on 21 June 1996 at 8:30 am.)

Consultancy Studies

40. In response to members on the amount of $434 million already spent on the development of WCR, Mr Hyde advised that these were for works which had to be carried out to facilitate the feasibility study, while consultants fees and staff costs of KCRC personnel had also been included. At members' request, Mr Hyde undertook to provide details of the work and studies undertaken, a breakdown of the costs involved, the number of contracts awarded and the names of the contractors, the tendering procedures involved, the reasons why such works and studies were necessary and how these would facilitate the project in the future. Mr Hyde emphasized that the contracts were publicly and competitively tendered and the tendering procedures used by the KCRC had been vetted by the Independent Commission Against Corruption.

41. As regards the additional amount of $750 million to be spent on feasibility studies, a member enquired about the criteria to be adopted by the Administration in deciding on whether the sum spent was justifiable. In reply, Mr LEUNG considered this to be an internal matter of the KCRC and the additional studies were required by the KCRC to collate information for the Administration to formulate a final decision on the project. Members requested the Administration to advise if it was in order procedurally for the KCRC to spend a total of $1.2 billion for feasibility and technical studies prior to final decisions being made by the Administration.

Future operator of the WCR

42. On whether the Administration had considered the option of inviting other organizations to undertake the WCR project, Mr LEUNG said that as KCRC was experienced in providing railway services and had frequent contacts with their Chinese counterparts, KCRC might be the appropriate organization for taking up the project. However, this did not imply that all future railway projects would be taken up by the two existing railway corporations. He quoted as an example that the Administration might look for the operator of the rail link between Ma On Shan and Tai Wai through public tender.

Fare structure of the WCR

43. In response to members on the fare structure of WCR, Mr Hyde informed that a proposed fare model had been set out in the full proposal. He pointed out that the fare structure could only be finalized closer to the commencement date of operation of the rail services. In response to a suggestion that KCRC might not need a fare increase in the near future if the huge sum of consultancy expenses had not been spent, Mr Hyde explained that the current year fare increase was definitely required to provide funds for various capital projects of KCRC.

Legality of KCRC's Activities

44. A non-Panel Member enquired about the legal basis for KCRC to undertake the studies prior to the effective date of the KCRC (Permitted Activities) (Consolidation) Order on 17 February 1996. He noted that the fees for the studies, which amounted to $1.2 billion, constituted a substantial proportion of the KCRC's total asset of $8 billion; and that KCRC's annual profits were in the region of $0.9 billion to $1 billion. He was of the view that the fees should be classified as notifiable transactions of a company and that it was a statutory requirement of a listed company to notify its shareholders and the public of such notifiable transactions. He asked for the rationale for not having disclosed such information publicly and pressed for more stringent control on the KCRC by the Administration.

45. In response, Mr LEUNG advised that after the Executive Council's decision in late 1994, the Administration had written in January 1995 to invite the KCRC to submit a proposal on the WCR project. The KCRC (Permitted Activities) (Consolidation) Order had been enacted at the request of the KCRC to strengthen the Administration's assurance to the KCRC about the invitation. Mr Hyde supplemented that KCRC had sought specific legal advice on the issue and it had been confirmed that the KCRC had sufficient power under the prevailing legislation to undertake work for general research, and feasibility and conceptual studies. Legislation would be required if the project became a specific one. As regards the disclosure of information about the studies, Mr Hyde said that the KCRC had operated within the powers provided by the relevant ordinance. It had forwarded to LegCo annual reports which contained information about the studies and had submitted other information to LegCo voluntarily or as requested. Mr LEUNG added that as KCRC was running on prudent commercial principles and it was not using public money to conduct the studies, there might not be a need for the KCRC to report to the LegCo on how its money was spent. The Administration's position was that information collected from the studies would be useful to the Administration in making its decision and as such the studies were worth pursuing.

46. At the request of the Chairman, Mr LEUNG undertook to provide details of the legal advice obtained by the Administration and KCRC. Mr Hyde also agreed to highlight relevant parts in KCRC's annual reports where the $434 million had been reflected.

Assessment by the Administration

47. In response to the Chairman on whether the initial assessment by the Administration could be expedited, Mr LEUNG explained that the WCR project was a major one, the total length of the WCR being one-and-a-half times that of the Airport Railway. Hence, careful consideration would have to be given before a final decision could be made. He added that the Chinese Government would also have to be consulted as the project straddled 1997. As regards the timetable for consulting the Joint Liaison Group, Mr LEUNG confirmed that this would be arranged after a firm decision on the project had been made by the Administration.

Rate of Return

48. A member requested further information on how the 12% rate of internal return was derived. Mr Hyde advised that the investment return would be from domestic passengers service, cross-border passenger service and freight transport. Profits from property development, which was not included in the calculation of the 12% figure, would be used to pay off debts. He undertook to provide the basis and details of the computation of the figure of 12%, with a breakdown of the return from each category of business, including property development.

Transportation Planning

49. Addressing a member's request for clarification on whether the provision of land by the Administration and the non-withdrawal of the Administration's share of KCRC profits were taken as the Administration's capital injection into the project, Mr LEUNG undertook to provide a written response.

50. A member was worried about the forecast being too optimistic and the impact this would have on the fares to be charged. Another member recalled that a shortfall in the passengers forecast for the Light Rail Transit (LRT) had resulted in significant losses. He cautioned that the same should not be repeated. Members expressed the concern that there were many factors affecting freight services and that freight operation could not be controlled solely by railway operators in Hong Kong. They considered a need for reviewing the forecast on freight services to ensure its accuracy. The Chairman agreed that the Subcommittee should follow-up on the basis used by KCRC for estimating the number of potential passengers for both domestic and cross-border services.

Contingency and Project Reserve

51. In response to a member on whether the level of contingency and project reserve was comparable to those for other projects, and the intended use of the reserve, Mr Hyde advised that the contingency was to cover changes in pricing and quantities in the course of the project and the percentages adopted were standard ones. The project reserve was to cater for possible changes in scope and this amount might or might not be spent. The Chairman also advised that this would be further pursued by the Subcommittee.

Cost Comparisons

52. A member was of the view that the cost comparisons with underground railway projects in the "West Rail Fact Sheet" booklet were inappropriate as the cost for an underground system was three to four times of that for a railway project on the ground. The Chairman requested the KCRC to provide a written response to facilitate discussion by the Subcommittee.

Use of Local Expertise

53. In response to a non-Panel member on the need for inviting overseas tenders when local expertise was available , Mr C K MAK advised that some projects were limited by time constraints, and the hiring of consultants might be a more feasible option.

54. There being no further business, the meeting ended at 12:30 p.m.

Legislative Council Secretariat

20 November 1996

Last Updated on 21 Aug. 1998