PLC Paper No. CB(1) 54/97-98
(These minutes have been seen
by the Administration and
cleared with the Chairman)
Ref : CB1/PL/TP/1

LegCo Panel on Transport

Minutes of meeting held on Friday, 13 June 1997, at 8:30 am in Conference Room A of the Legislative Council Building

Members present :

Members absent :

Public officers attending :

Item III
Transport Branch
Mr Gordon SIU, JP: Secretary for Transport
Mr Paul LEUNG, JP: Deputy Secretary for Transport (Transport Infrastructure)
Mr Isaac CHOW: Deputy Secretary for Transport (Transport Services)
Miss Eliza LEE: Principal Assistant Secretary for Transport
Economic Services Branch
Mr K T LI: Principal Assistant Secretary for Economic Services
Ms Annette LAM: Senior Treasury Accountant
Transport Department
Mrs Dorothy CHAN, JP, Ag.: Commissioner for Transport
Ms Zina WONG: Assistant Commissioner for Transport/Bus Development
Mr Louis HUNG: Chief Transport Officer/Bus Development
Item IV
Transport Branch
Mr Paul LEUNG, JP: Deputy Secretary for Transport (Transport Infrastructure)
Mr Isaac CHOW: Deputy Secretary for Transport (Transport Services)
Miss Eliza LEE: Principal Assistant Secretary for Transport
Economic Services Branch
Mr K T LI: Principal Assistant Secretary for Economic Services
Ms Annette LAM: Senior Treasury Accountant
Transport Department
Mrs Dorothy CHAN, JP, Ag.: Commissioner for Transport
Ms Zina WONG: Assistant Commissioner for Transport/Bus Development
Mr Louis HUNG: Chief Transport Officer/Bus Development
Item V: Transport Branch
Mr Paul LEUNG, JP: Deputy Secretary for Transport (Transport Infrastructure)
Mr Isaac CHOW: Deputy Secretary for Transport (Transport Services)
Miss Eliza LEE: Principal Assistant Secretary for Transport
Economic Services Branch
Mr K T LI: Principal Assistant Secretary or Economic Services
Ms Annette LAM: Senior Treasury Accountant
Transport Department
Mrs Dorothy CHAN, JP, Ag.: Commissioner for Transport
Mrs Judy LI: Assistant Commissioner for Transport/Ferry & Paratransit
Miss LUI Ying: Chief Transport Officer/Planning (Ferry)

Clerk in attendance :

Ms Estella CHAN: Chief Assistant Secretary (1)4

Staff in attendance :

Mr Matthew LOO: Senior Assistant Secretary (1)4 (Acting)

I Confirmation of minutes and matters arising

II Information papers issued since last meeting

III Franchise renewal of China Motor Bus Co. Ltd.

IV Franchise renewal of Kowloon Motor Bus Co. Ltd

V Long term development of ferry services

VI Any other business

I Confirmation of minutes and matters arising

(LegCo Paper No. CB(1) 1802/96-97)

The minutes of meeting held on 9 May 1997 were confirmed.

II Information papers issued since last meeting

2. The Panel noted that no information paper had been issued since last meeting.

3. Mr Edward S T HO related the chairman of the Southern District Board (SDB)s comment made at the meeting with LegCo Members on 12 June 1997 about LegCo Secretariat having written to the Southern District Officer for the Boards views on China Motor Bus Co. Ltd. (CMB)s franchise renewal. Members considered it normal to approach the District Office (DO) in the first instance because the DO was also the secretariat for servicing the district board (DB). The Chairman would respond to SDB in writing.

(Post-meeting note: A letter was sent to the chairman of SDB on 16 June 1997 to convey the Panels views.)

III Franchise renewal of China Motor Bus Co. Ltd.

(Paper No. CB(1) 1801/96-97(01) provided by the Administration

Paper No. CB(1) 1801/96-97(02) -- submission from Southern District Board

LegCo Paper No. CB(1) 1848/96-97 -- submission from Eastern District Board, Wanchai District Board and Central & Western District Board)

4. The Chairman said that the Panel had invited views on CMBs services and its franchise renewal from DBs concerned. Written submissions from the DBs had been circulated to members vide LegCo Papers No. CB(1) 1801 and 1848/96-97. At their meeting with LegCo Members on 12 June 1997, SDB members held the view that the overall standard of CMBs services was still not satisfactory although some improvements had been made. A shorter franchise period for CMB, say one year, was suggested. They disagreed with any arrangement which might lead to monopolization by Citybus or any other bus company. Hon Edward S T HO, the convenor of the meeting with SDB, supplemented that SDB members were also dissatisfied with the attitude of CMB staff, especially on horse racing days. Furthermore, they complained that only approximate times were given in CMBs bus timetables.

5. At the Chairmans invitation, the Acting Commissioner for Transport (Ag. C for T) advised that the three-year franchise for CMB would expire on 31 August 1998. The Administration would take into account the interest of the travelling public when CMBs franchise was reviewed. The CMB currently operated 123 routes. New routes might still be allocated to CMB as long as it had the ability to provide the additional services. In response to members enquiry, she affirmed that CMB had not applied for franchise extension in accordance with section 6(2) of the Public Bus Services Ordinance (PBSO), Cap. 230, but the franchise could be extended under section 6(3) of PBSO provided that the Executive Council was satisfied with CMBs performance. She also advised that CMB had proposed to set up a new company focusing on franchised services but the Administration did not have full details. A new franchise might be granted rather than extending the current one to CMB if this new company was set up.

6. Members shared DBs views that CMBs services were highly unsatisfactory. Some members urged the Administration not to renew the franchise, or only grant a shorter franchise period to CMB. Similar to the renewal of commercial television broadcasting licence by the Broadcasting Authority, they suggested a franchise be granted to CMB on the condition that its performance would be improved. The Administration should monitor the operation more closely and open up more CMBs routes for tender by other companies as the public would benefit from the competition. A member opined that CMBs poor performance was a result of insufficient monitoring by the Administration, although he did not favour a short franchise period for CMB as it would hamper reasonable development of the company. 7. In response, the Secretary for Transport (S for T) advised that the Administration would handle the franchise issue in accordance with the legal provisions. There were a number of options for resolving this issue as CMB had not applied for a franchise extension within the specified timetable. The Administration had a number of options one of which was to put the franchise out to open tender. Meanwhile, a comprehensive review of CMBs performance in the past two years was under way. Assessments were made against a number of indicators such as bus availability and number of lost trips and complaints, for comparison with other bus operators. Views of the public and DBs would also be taken into account. Once the review was completed, the Administration would determine in principle whether CMB was able to provide a proper and efficient service for residents on Hong Kong Island in the next century. The Administration would decide on the way forward before August 1997 and the Panel would be informed in due course.

8. Members were concerned about whether new franchisees would have sufficient time to prepare for operation of the bus services upon expiry of CMBs franchise in August 1998. In response, S for T assured members that the franchise issue would not affect the provision of bus services on Hong Kong Island. Ag. C for T advised that from experience, it would take three to four months to complete the tendering procedures. New operators would require another nine months to gear up. In 1995, PBSO had been amended so that the Administration might temporarily take possession of the assets and equipment of the company whose franchise was revoked or had expired. Properties including depots and buses could then be rented out to new operators for not more than three years. The land where depots were currently located should only be developed after the Administration had given up possession. This arrangement would ensure the provision of a public bus service. Ag. C for T noted a members view that the new franchisee should give priority to CMB staff in staff recruitment.

9. Members were concerned that service quality of CMB might further deteriorate with knowledge that its franchise would be revoked in August 1998. S for T advised that the franchisee had the responsibility to provide quality services to the public during the franchise period. Ag. C for T and the Assistant Commissioner for Transport/Bus Development added that CMB had to submit a planned programme of operation to the Administration on an annual basis. Respective DBs would be consulted on this programme and the Administration would decide on the network of bus routes accordingly. Citybus, which operated 40% of the Islands bus routes, had already provided an alternative bus service. In addition, the Administration might introduce new bus routes if existing services provided by CMB were unacceptable.

10. Some members queried the granting of a new cross-harbour bus route for the Western Harbour Crossing to CMB despite its poor performance. In response, Ag. C for T advised that the Administration assessed submissions for new routes individually and there was no exclusivity for cross-harbour bus routes. For the new cross-harbour bus route given to CMB, the Administration was satisfied with the proposed bus timetable and the provision of air-conditioned buses for this route. Members nevertheless considered that the Administration should take into account CMBs past performance when considering its application.

11. Members noted the Director of Audit (D of A)s recent comments on the lack of monitoring for bus operators. In addition, they noted that over 40% of CMB buses had reached the maximum life-span of 17 years. In response, Ag. C for T advised that the Administration was not satisfied with the situation and agreed that it reflected poorly on the performance of CMB. Notwithstanding, CMB had already planned to buy new buses in the coming five years so as to reduce the average age of the fleet. She also advised that all buses had to pass an annual examination to make sure that they were fit for operation. She explained that the Administration could impose financial penalties if a bus operator failed to compile with requirements specified in the franchise agreement. Notices had been served to CMB regarding its poor performance but no satisfactory responses were received. The Administration had taken into account the Public Accounts Committee and D of As comments on procedural aspect of this issue and would improve the penalty system accordingly.

IV Franchise renewal of Kowloon Motor Bus Co. Ltd

(Paper No. CB(1) 1801/96-97(03) provided by the Administration)

12. At the Chairmans invitation, Ag. C for T advised that Kowloon Motor Bus Company Limited (KMB)s current franchise would expire on 31 August 1997. The Administration was satisfied with KMBs ability in maintaining a proper and efficient service and intended to recommend to the Executive Council the grant of a new 10-year franchise to KMB. Terms including abolition of the Profit Control Scheme (PCS) and removal of the exclusivity of all KMBs bus routes would be included in the new franchise. In addition, KMB was requested to increase transparency of its operation. A mid-term review to evaluate KMBs performance would also be conducted after the fourth year of the new franchise. The terms of the proposed franchise would be similar to those for Citybus Limited.

13. In response to a member, Ag. C for T explained that bus services provided by KMB was satisfactory and a 10-year franchise was therefore recommended for the company. A longer franchise period would have stabilizing effect on the long-term development of KMB and the mid-term review would enable closer monitoring of its performance. The Deputy Secretary for Transport (Transport Services) (DS for T) added that KMB had basically accepted the terms of the new franchise. The Administration and KMB were at the moment exchanging views on the draft franchise agreement.

14. Some members were concerned that no company would bid for loss-making routes following the removal of the exclusivity of KMBs routes. DS for T and Ag. C for T advised that the Administration would only tender out a network of profit-making routes and loss-making routes which was commercially viable. Large-scale companies such as KMB would sustain loss-making routes through profits gained from other routes. The profits gained could also be used for staff training and services improvement.

15. A member pointed out that the Chinese translation of "franchise" did not exactly match the new franchise arrangement under which exclusivity of routes was removed. The current version meant "monopoly" rather than "right of operation". The Principal Assistant Secretary for Transport (Transport Services) (PAS for T) advised that the Administration had consulted the Attorney Generals Chambers (AGC) on this issue. A "franchise" was defined as the right to operate a public bus service granted to a bus company on such routes as the Governor in Council specified by order. As the term "franchise" was currently in use in other legislation, it was inappropriate to adopt a different translation for PBSO only. Nevertheless, she undertook to refer members concern to AGC for consideration.

Admin

16. In response to a member, DS for T clarified that S for T had not pledged to set up an independent committee to oversee public transport, including fare setting of public transport operators in Hong Kong; he only agreed to consider this suggestion and advise members of the Administrations stance in due course. In addition, DS for T and PAS for T advised that the fare setting of buses was regulated by section 13 of PBSO, and it was specified in the KMB franchise that fare setting would accord with prevailing legislation in Hong Kong. Nevertheless, bus operators would be consulted prior to any changes in the current fare setting mechanism.

17. Ag. C for T advised that KMB would build 300 to 500 bus-stop covers annually and DBs would be consulted on the priority. Until 1996, a total of 1,600 covers had been erected for KMB bus-stops. Nevertheless, underground facilities such as cables and water-pipes might cause problems to the construction of bus-stop covers. The Administration had tried to speed up the process. The Highways Department had been reviewing the design of bus-stop covers with a view to overcoming constraints. Nevertheless, a member urged the Administration to further expedite the construction process, especially for those bus-stops in rural areas.

V Long term development of ferry services

(Paper No. CB(1) 1801/96-97(04) provided by the Administration

LegCo Paper No. CB(1) 1528/96-97 -- submission and Administrations response regarding Hongkong & Yaumati Ferry Company Limiteds services and its fare increase for 1997)

18. At the Chairmans invitation, the Assistant Commissioner for Transport/Ferry & Paratransit (AC for T) advised that ferry services in Hong Kong were mainly provided by the Hongkong & Yaumati Ferry Company Limited (HYF) and the Star Ferry Company Limited (SF). The former operated 15 routes and the latter three routes. Some ferry operators who provided such services as vehicular ferry services for dangerous goods vehicles would be granted a right to operate a ferry route in the form of a licence. With the opening of more cross-harbour tunnels, new road networks and rail links, ferry patronage of HYF and SF had declined continuously. The annual patronage of HYFs inner harbour routes dwindled from 160 million in 1970 to 9 million in 1996. SFs patronage had also fallen from 57 million to 35 million during the same period. Income from other sources such as shop rentals and advertising at piers was no longer sufficient to cover operating deficits of both companies. Against this background, the Administration has planned to take a pragmatic approach in dealing with the franchises of HYF and SF. A complete revamp of the current network would be instituted, and heavily loss-making routes would be replaced with land transport alternatives.

19. Members were concerned about long-term improvement of ferry services, especially the essential outlying island services. Some members considered introduction of competition by tendering out ferry operations an effective means to improve services. A member opined that it was important to maintain an appropriate balance between service improvements and fare levels. In response, DS for T advised that in giving approval for the terms of the Central Reclamation pier development package, ExCo had required HYF to continue to operate the outlying island services for the next ten years. In view of the serious decline in ferry patronage, the Administration would consider tendering out the non-essential inner harbour and new town ferry services in order to introduce competition. It was envisaged that when HYF ceased to operate such loss-making services, resources could be deployed to improve on essential ferry services and achieve a positive return to sustain its operations. This approach would also be applied to SF. On the details of arrangement, AC for T advised that the Administration had not decided on the routes to be cancelled at this stage. Nevertheless, she assured members that if such ferry services as those between Kowloon City and North Point were cancelled, the Administration would consider remedial measures such as introducing or strengthening cross-harbour bus routes to serve districts outside the rail network.

20. Some members were not satisfied with the proposed partial tendering-out arrangement and urged the Administration to open up the whole industry to competition with a view to improving the services. Mr Albert CHAN Wai-yip proposed a motion that the Panel requested the Administration to introduce full competition for the development of ferry services. The motion in its original language was as follows:

「本委員會要求政府就渡輪服務的發展引入全面競爭」

21. The majority of members present supported the motion.

VI Any other business

22. There being no other business, the meeting ended at 10:40 a.m.

Provisional Legislative Council Secretariat
17 July 1997

Last Updated on 22 August 1998