OFFICIAL RECORD OF PROCEEDINGS
Wednesday, 23 July 1997
The Council met at half past Two o'clock

MEMBERS PRESENT:

THE PRESIDENT

THE HONOURABLE MRS RITA FAN, J.P.

THE HONOURABLE WONG SIU-YEE

THE HONOURABLE DAVID CHU YU-LIN

THE HONOURABLE HO SAI-CHU, J.P.

THE HONOURABLE EDWARD HO SING-TIN, J.P.

DR THE HONOURABLE RAYMOND HO CHUNG-TAI, J.P.

THE HONOURABLE NG LEUNG-SING

PROF THE HONOURABLE NG CHING-FAI

THE HONOURABLE ERIC LI KA-CHEUNG, J.P.

DR THE HONOURABLE DAVID LI KWOK-PO, J.P.

THE HONOURABLE LEE KAI-MING

THE HONOURABLE MRS ELSIE TU, G.B.M.

THE HONOURABLE MRS SELINA CHOW, J.P.

THE HONOURABLE MRS PEGGY LAM, J.P.

THE HONOURABLE HENRY WU

THE HONOURABLE NGAI SHIU-KIT, J.P.

THE HONOURABLE RONALD ARCULLI, J.P.

THE HONOURABLE YUEN MO

THE HONOURABLE MA FUNG-KWOK

THE HONOURABLE CHEUNG HON-CHUNG

DR THE HONOURABLE MRS TSO WONG MAN-YIN

THE HONOURABLE LEUNG CHUN-YING, J.P.

DR THE HONOURABLE LEONG CHE-HUNG, J.P.

THE HONOURABLE MRS SOPHIE LEUNG LAU YAU-FAN, J.P.

THE HONOURABLE HUI YIN-FAT, J.P.

THE HONOURABLE CHAN CHOI-HI

THE HONOURABLE CHAN YUEN-HAN

THE HONOURABLE CHAN WING-CHAN

THE HONOURABLE CHAN KAM-LAM

THE HONOURABLE TSANG YOK-SING

THE HONOURABLE CHENG KAI-NAM

THE HONOURABLE FREDERICK FUNG KIN-KEE

THE HONOURABLE ANDREW WONG WANG-FAT, J.P.

DR THE HONOURABLE PHILIP WONG YU-HONG

THE HONOURABLE KENNEDY WONG YING-HO

THE HONOURABLE HOWARD YOUNG, J.P.

DR THE HONOURABLE CHARLES YEUNG CHUN-KAM

THE HONOURABLE YEUNG YIU-CHUNG

THE HONOURABLE IP KWOK-HIM

THE HONOURABLE CHIM PUI-CHUNG

THE HONOURABLE LAU KONG-WAH

THE HONOURABLE LAU WONG-FAT, J.P.

THE HONOURABLE MRS MIRIAM LAU KIN-YEE, J.P.

THE HONOURABLE AMBROSE LAU HON-CHUEN, J.P.

THE HONOURABLE CHOY KAN-PUI, J.P.

THE HONOURABLE CHENG YIU-TONG

DR THE HONOURABLE TANG SIU-TONG, J.P.

THE HONOURABLE TIMOTHY FOK TSUN-TING

THE HONOURABLE KAN FOOK-YEE

THE HONOURABLE NGAN KAM-CHUEN

THE HONOURABLE LO SUK-CHING

DR THE HONOURABLE LAW CHEUNG-KWOK

THE HONOURABLE TAM YIU-CHUNG, J.P.

THE HONOURABLE CHOY SO-YUK

MEMBERS ABSENT:

THE HONOURABLE JAMES TIEN PEI-CHUN, J.P.

THE HONOURABLE ALLEN LEE, J.P.

THE HONOURABLE HENRY TANG YING-YEN, J.P.

THE HONOURABLE MOK YING-FAN

THE HONOURABLE BRUCE LIU SING-LEE

THE HONOURABLE PAUL CHENG MING-FUN, J.P.

PUBLIC OFFICERS ATTENDING:

THE HONOURABLE MRS ANSON CHAN, J.P.

CHIEF SECRETARY FOR ADMINISTRATION

THE HONOURABLE DONALD TSANG YAM-KUEN, J.P.

THE FINANCIAL SECRETARY

THE HONOURABLE ELSIE LEUNG OI-SIE, J.P.

SECRETARY FOR JUSTICE

MR NICHOLAS NG WING-FUI, J.P.

SECRETARY FOR TRANSPORT

MRS KATHERINE FOK LO SHIU-CHING, J.P.

SECRETARY FOR HEALTH AND WELFARE

MR JOSEPH WONG WING-PING, J.P.

SECRETARY FOR EDUCATION AND MANPOWER

MR BOWEN LEUNG PO-WING, J.P.

SECRETARY FOR PLANNING, ENVIRONMENT AND LANDS

MR KWONG KI-CHI, J.P.

SECRETARY FOR THE TREASURY

MR LAM WOON-KWONG, J.P.

SECRETARY FOR THE CIVIL SERVICE

MR BENEDICT KWONG HON-SANG, J.P.

SECRETARY FOR WORKS

MRS CARRIE YAU TSANG KA-LAI, J.P.

SECRETARY FOR SECURITY

CLERKS IN ATTENDANCE:

MR RICKY FUNG CHOI-CHEUNG, J.P., SECRETARY GENERAL

MR LAW KAM-SANG, J.P., DEPUTY SECRETARY GENERAL

MRS JUSTINA LAM CHENG BO-LING, ASSISTANT SECRETARY GENERAL

MR RAY CHAN YUM-MOU, ASSISTANT SECRETARY GENERAL

PAPERS

The following papers were laid on the table pursuant to Rules of Procedure 21(2):

Subject

Subsidiary Legislation L.N. No.

Schedule of Routes (Kowloon Motor Bus Company) (No. 2) Order 1997	394/97
Banking Ordinance (Declaration under Section 2(14)(d)) (No. 2) Notice 1997	395/97
Merchant Shipping (Liability and Compensation for Oil Pollution) (Amendment) Ordinance 1997 (46 of 1997) (Commencement) Notice 1997	396/97

Sessional Papers

No. 1	─	Clothing Industry Training Authority Annual Report 1996
No. 2	─	Construction Industry Training Authority Annual Report 1996

REPORT

Report of the Bills Committee on the Hong Kong Special Administrative Region Passports Bill

ADDRESS

PRESIDENT (in Cantonese): We will start the meeting with an address. Mr Howard YOUNG will address the Council on the Report of the Bills Committee on the Hong Kong Special Administrative Region Passports Bill.

In accordance with Rule 21(5) of the Rules of Procedure, no debate may arise on the address, but I may allow short questions seeking elucidation on the matter raised in the address.

MR HOWARD YOUNG (in Cantonese): Madam President, as the Chairman of the Bills Committee on the Hong Kong Special Administrative Region Passports Bill, I now submit a report on behalf of the Committee. This report has listed major findings of the Bills Committee and I will only highlight a few items of special concern to the Committee.

The Bills Committee is cautions about the retrospective effect of the Bill. It has questioned the Director of Immigration (Director), who has been issuing Hong Kong Special Administrative Region (SAR) passports since 3 July 1997, on the legal basis on which the Director issued passports prior to the enactment of the Bill, and whether, in the absence of the retrospective clause, the validity of such SAR passports issued would be affected.

The Administration has explained that Article 154 of the Basic Law which came into force on 1 July 1997 provides for authorization of the SAR Government to issue, in accordance with law, passports of the SAR. The Bill seeks to provide for the detailed arrangements for the implementation of the respective provision. There is no question about the validity of passports issued prior to the enactment of the Bill.

The Committee has obtained legal advice on issuing passports "in accordance with law". Some members still have doubts about the interpretation of the expression "in accordance with law", but the Committee has finally accepted the Administration's advice that the Bill shall be deemed to take effect from 1 July 1997 to tie in with the authorization granted in the Basic Law, to avoid legal arguments about the validity of passports already issued before the enactment of the Bill, and to provide for uniformity of implementation details, including the procedures of appeal, before and after the enactment of the Bill.

The Bills Committee has expressed concern for the absence of provision for an appeals mechanism in the Bill. After much deliberation, the Administration has agreed to move Committee stage amendments to provide for an appeals mechanism against the Director's decisions. Detailed arrangements of the appeals mechanism will be made in the form of subsidiary legislation. I believe that the Secretary for Security will mention the timetable for the introduction of the related subsidiary legislation at the resumption of the Second Reading debate.

Moreover, in regard to the absence of a penalty provision for obtaining a passport by means of false representation, the Administration has explained that such a provision is not included in the Bill as section 42 of the Immigration Ordinance has already provided for the penalty for making false statements or representations when applying for a passport.

The Administration has also accepted a number of suggestions from the Committee and will make the related amendments.

I ask Members to accept the Report of the Bills Committee.

Thank you, Madam President.

PRESIDENT (in Cantonese): Questions. Honourable Members, the supplementaries, especially the introductory remarks, should be as concise as possible in order that more supplementaries may be asked by Members. If the supplementaries are too lengthy, I will regard them as argumentative statements made in the form of questions, hence not complying with the Rules of Procedure.

ORAL ANSWERS TO QUESTIONS

PRESIDENT (in Cantonese): First question. Mrs Elsie TU.

Bilingual Legal Documents

1. MRS ELSIE TU: Madam President, although Hong Kong has long been a bilingual community, there are still many documents which state that the English version shall prevail wherever there is a discrepancy between the Chinese and English versions. In this connection, will the Government inform this Council of the measures being taken to ensure that all documents, especially legally binding documents, are written in both Chinese and English and that both versions have equal status in law, so as not to disadvantage those who speak or understand only one of the languages?

PRESIDENT (in Cantonese): Secretary for Justice.

SECRETARY FOR JUSTICE: Madam President, it may be helpful if I briefly summarize the current position in respect of two important types of legal documents.

Firstly, all the laws of the Hong Kong Special Administrative Region, including all statutory notices and court forms, are bilingual. The two texts of the laws are equally authentic.

Secondly, in relation to criminal proceedings, all summonses issued by the magistracies, all charge sheets and all indictments are bilingual. Where a trial is conducted in Chinese in the District Court, other pre-trial documents, including summaries of facts and notices to admit facts, are prepared in bilingual form. In High Court criminal trials in which the defendant is Chinese, all witness statements and documentary exhibits are bilingual. These documents do not provide that one language is to prevail over the other.

I turn now to the steps that are being taken to extend the range of documents that are produced bilingually.

Subject to resources being made available, I propose to set up a team within my department to prepare a Chinese text of tender documents for government contracts, and to translate court documents for civil proceedings involving the Administration that are conducted wholly or partly in Chinese.

Turning to the private sector, in 1996, the Law Society established a working party to promote and implement bilingualism in the legal profession. Its terms of reference include arranging for translations of documents commonly used by the profession. Initially, the working party has in mind translating a sample agreement for sale and purchase, an assignment and a tenancy agreement.

Within the private sector, it is a matter for contracting parties, and for organizations that prepare standard forms of agreement, to decide whether to produce bilingual documents. The situations involved vary tremendously. At one extreme, there are contracts negotiated at arms length between multinational corporations. At the other extreme, there are standard form agreements prepared in bulk by a local organization for use by any member of the community who applies for certain goods or services. Given this wide range of situations, it is not considered appropriate to require that every document, even every legally binding document, to be written in both languages. Such an approach would not benefit those parties who are perfectly content to deal with each other in one language, but would interfere with the efficiency of their arrangements and increase costs unnecessarily. And a provision in a bilingual document stating that, if a discrepancy exists, one language is to prevail over the other, may be a genuine reflection of the intention of the parties. It would not, therefore, be sensible to prohibit such provisions.

I accept that, in some situations, it would be helpful if private organizations produced legal documents bilingually, and gave equal status to the two texts. Market forces already encourage this, since consumers may well prefer to deal with an organization that provides bilingual documentation, rather than documentation that is in only one language.

Madam President, the question refers to the disadvantage that individuals may be under if they cannot understand a legal document expressed in one language. In this respect, I would draw your attention to two ordinances that may assist such individuals. The Unconscionable Contracts Ordinance empowers a court to give relief in respect of a consumer contract if the court finds the contract, or any part of it, to have been unconscionable. In deciding whether this was the case, the court may have regard to whether the consumer was able to understand any relevant documents. The Control of Exemption Clauses Ordinance empowers the courts to strike down unreasonable exemption clauses in consumer contracts. In deciding whether an exemption clause is unreasonable, the courts must have regard to whether the language in which the clause is expressed is a language understood by the party who is subject to the clause.

PRESIDENT: The Honourable Mrs Elsie TU.

MRS ELSIE TU: Madam President, I am glad that the improvements have already been made and also the promise of a dedicated team to make further improvements. But because resources often cause delay for such action, can we have a deadline when this will be brought into action and when the full weight of the law would be equal in both languages? I would also like to ask the Secretary if it is possible to have legislation to make it imperative that when important legal documents are issued between contracting parties in the private sector, for example, in the sale of flats where very often there are complaints, the two languages should be equalized? I would like to see some improvements on all these.

PRESIDENT: Secretary for Justice.

SECRETARY FOR JUSTICE: Madam President, as I said, there is no law at the moment which requires any document to be expressed in both languages. For example, if a local person agrees to sell his car to his neighbour, both he and the purchaser may be contented to use only Chinese. It would be unfair to require them to go to the expenses and trouble of having an English version of the contract. In fact, Article 9 of the Basic Law permits the use of either English or Chinese. It does not require documents to be expressed in both languages. Insofar as the Administration is concerned, particularly in regard to the Judiciary, as I said, most of the important documents or legal documents are already bilingual. Having regard to the principle that in Hong Kong we still adopt the policy of laissez-faire, it would be unreasonable to require all the documents, particularly contracts, to be expressed in both languages.

PRESIDENT (in Cantonese): Mrs Selina CHOW.

MRS SELINA CHOW (in Cantonese): Madam President, the Secretary mentioned in her reply that subject to resources being available, she proposes to set up a dedicated team within her department. It seems that such a team is essential as we are now talking about the tender documents for government contracts. When would this team be set up and when the resources be made available? Besides, in the light of the Government's goal, what is the earliest date for the setting up of this team?

PRESIDENT (in Cantonese): Secretary for Justice.

SECRETARY FOR JUSTICE (in Cantonese): Regarding the question raised by the Honourable Mrs Selina CHOW, this has already been included in our next resource allocation exercise. The matters concerning tender for contracts are mainly dealt with by our civil prosecution section. In our next application for resources allocation, we have planned to include such work but the fixing of an implementation date for the relevant work is dependent on whether the Government or the Council approves of our request.

PRESIDENT (in Cantonese): Mrs Selina CHOW.

MRS SELINA CHOW (in Cantonese): Would the Secretary answer if she has a timetable in mind? It is because I believe all Members will agree that this work is essential and pressing, and if the Secretary tells us that it takes months to complete this work, and specifies when it can be completed, I trust Members will support it.

PRESIDENT (in Cantonese): Secretary for Justice.

SECRETARY FOR JUSTICE (in Cantonese): In respect of bilingualism, we have actually started making preparations before the resources are allocated. As far as government contracts are concerned, especially engineering contracts, we will find that it will take some time before these contracts can be prepared in bilingual form. I am sorry that, in the meantime, it is impossible for me to specify a definite date as to when all these documents can be prepared in bilingual form, but I can tell Mrs Selina CHOW that we have already carried out some work on a trial basis.

PRESIDENT (in Cantonese): Next question. Dr LEONG Che-hung.

Posts for Graduate Medical Practitioners

2. DR LEONG CHE-HUNG: Madam President, it is reported that the new batch of graduate medical practitioners who have just finished their housemanship in Hong Kong this summer are facing problems in seeking employment with the Hospital Authority (HA) and the Department of Health. Will the Government inform this Council whether it knows:

(a) of the numbers of such medical practitioners who have been or will be employed by the Department of Health and the HA respectively within this year;

(b) among those who have been or will be employed by the HA within this year, of the numbers of those who have been or will be offered permanent terms and contract terms respectively;

(c) of the amount of funds required for employing these graduates on contract terms and the source of such funding;

(d) of the details of the training programmes, if any, for these graduates employed on contract terms; and

(e) whether the offer of contract terms to this batch of graduates is an one-off exercise for this year; if not, of the details of similar arrangements planned for the future in terms of the number of posts and the amount of funds required?

Thank you, Madam President.

PRESIDENT: Secretary for Health and Welfare.

SECRETARY FOR HEALTH AND WELFARE (in Cantonese): Madam President, the Department of Health and the Hospital Authority (HA) have respectively employed 49 and 201 of the 258 graduating interns who completed housemanship in June this year. The others have either decided not to apply or declined the offers.

Of the 201 graduating interns employed by the HA, 88 are appointed on fixed-term contracts. The remaining 113 are appointed on permanent terms.

The renumeration cost for employing these 88 contract-term appointees amounts to about $48.6 million in 1997-98, which will be financed from the existing allocation from the Government to the HA.

All these new appointees, no matter on contract or permanent terms, will be offered similar training opportunities as in previous years. Of the 88 appointees on contract terms, 21 will receive training on family medicine, while the others will be offered training in various hospital specialty streams. Their training programmes will follow the requirements stipulated by different Specialty Colleges of the Academy of Medicine.

The proposal of offering contracts for the employment of doctors has been developed to ensure a sufficient supply of doctors with specialist training in family medicine and other hospital specialty streams. I understand that the HA is deliberating to offer contract terms in future, taking into account its operational needs and training requirements for specialists.

Thank you, Madam President.

PRESIDENT (in Cantonese): Dr LEONG Che-hung.

DR LEONG CHI-HUNG: Thank you, Madam President. According to the Secretary's reply, some 88 of the 200 doctors employed in public health service are employed on contract terms instead of permanent terms after a lot of, if I could use this word, administrative difficulties. Does this imply a trend of over-supply of doctors now and in the future? If so, what are the Government's plans and will the Government consider decreasing student intake of the two medical schools?

Thank you, Madam President.

PRESIDENT (in Cantonese): Secretary for Health and Welfare.

SECRETARY FOR HEALTH AND WELFARE (in Cantonese): Madam President, on the question whether the number of doctors are adequate or excessive, we have recently discussed this in detail. At a meeting of the Health Committee, we have also made very detailed analysis. According to our analysis, as calculated on the basis of the number of places offered by the two medical schools, there will be around 13 000 doctors in Hong Kong by 2010, far more than the number of doctors we now need. However, how are we going to tackle this situation? We have not yet reached a consensus in our discussion but we will hold detailed discussions in this Council to ensure that there will be adequate posts offered to our doctors in training and that these doctors can provide the community with the services needed. This is a very important task.

PRESIDENT (in Cantonese): Honourable Members, five Members have already raised their hands to indicate that they would like to ask supplementary questions, but owing to the time constraint, and the fact that we have a total of six questions, I will only invite these five Members to ask their questions.

MR ERIC LI (in Cantonese): Madam President, the answer given by the Government just now involves how more posts can be created for medical students. If it becomes increasingly more difficult for medical students to find a job, ordinary members of the public would easily think that they are not applying what they have learnt, putting the taxpayers' investments to waste. Can the Government tell us clearly how much subsidy does the Government has to give to each medical student to help him obtain his degree?

PRESIDENT (in Cantonese): Secretary for Health and Welfare.

SECRETARY FOR HEALTH AND WELFARE (in Cantonese): Madam President, regarding how much money is needed for the medical school to train a doctor, I do not have the detailed information on hand today. However, I can say for sure that training a doctor takes a long time and is rather costly. We understand that human resources in Hong Kong are very valuable, therefore, we hope that we can try our best to give all professionally trained graduates, especially those of universities adequate job opportunities, and that students can take up other subjects if they do not take up medicine. This is a pressing question we have to consider now.

PRESIDENT (in Cantonese): You may follow up.

MR ERIC LI (in Cantonese): I will be very brief, Madam President. As the Secretary has failed to give me exact figures, would she give me a written reply later?

SECRETARY FOR HEALTH AND WELFARE (in Cantonese): Certainly, Madam President. (Annex I)

PRESIDENT (in Cantonese): Mrs Peggy LAM.

MRS PEGGY LAM (in Cantonese): Madam President, would the Government make additional funding for the HA to that already made in this year's Budget, to meet the expenses required for employing the graduating interns on contract terms? If not, do the relevant expenses have to be met by cutting the expenses on the other HA services? If so, would this lead to a drop in the quality or quantity of services to the public?

PRESIDENT (in Cantonese): Secretary for Health and Welfare.

SECRETARY FOR HEALTH AND WELFARE (in Cantonese): Madam President, this arrangement will not affect the quality and quantity of the services of the HA as the annual funding of the HA amounts to more than $20 billion and this appropriation will not have material influence on its overall operation. We also know that the bedspaces in many new hospitals are gradually made available to the public. From this, we know that the expenditure on this aspect would not affect the routine services of the HA.

PRESIDENT (in Cantonese): Mr Howard YOUNG.

MR HOWARD YOUNG: Madam President, can the Government explain the rationale behind the appointment of over 40% of people on contract terms as mentioned in paragraph (d), and whether this is in line with past practice, in particular whether this reflects the Government's anticipation that it might not be able to carry so many staff in this profession in the long run?

PRESIDENT (in Cantonese): Secretary for Health and Welfare.

SECRETARY FOR HEALTH AND WELFARE (in Cantonese): Madam President, according to the information provided by the HA, employing the graduating interns on contract terms is aimed at meeting the needs of training, especially when doctors on training in family medicine are required to receive two years' training at hospitals before receiving the rest of their training at Department of Health or other private clinics. Therefore, they need to work in hospitals for a certain period of time. As for other specialities, it takes six years to train a fellow. The offer of contract terms is mainly made in the light of the training requirements and the requirements of different speciality streams in hospitals, and we find that this form of employment is flexible and operationally adaptive.

PRESIDENT (in Cantonese): Dr TANG Siu-tong.

DR TANG SIU-TONG (in Cantonese): Thank you, Madam President. in paragraph (d) of the Secretary's reply, the Government pointed out that of the 88 appointees on contract terms, 21 will receive training on family medicine while the others will be offered training in various hospital speciality streams. Could the Government inform us how long the relevant contract term is in general? Besides, as specialists generally have to receive many years of comprehensive specialist training, would a short contract term cause them to give up halfway? Moreover, has the Government planned to provide continuous training for these appointees on contract terms?

PRESIDENT (in Cantonese): Secretary for Health and Welfare.

SECRETARY FOR HEALTH AND WELFARE (in Cantonese): Madam President, except for the training contracts of specialists in family medicine which cover a period of two years, all the other contracts are three-year contracts. Specialist training generally takes six years, and after three years, interns have to sit for an examination. If the interns concerned pass the examination and are considered suitable, they can be offered further contracts for a period of three years.

PRESIDENT (in Cantonese): Mr HUI Yin-fat.

DR TANG SIU-TONG (in Cantonese): Can I ask a follow-up question?

PRESIDENT (in Cantonese): Sorry, Mr HUI Yin-fat, will you give way to Dr TANG as he wants to ask a follow-up question.

PRESIDENT (in Cantonese): Dr TANG Siu-tong.

DR TANG SIU-TONG (in Cantonese): I would like to know whether specialists would surely be offered further contracts upon the expiry of the three-year term of their contracts and passing the examination?

PRESIDENT (in Cantonese): Secretary for Health and Welfare.

SECRETARY FOR HEALTH AND WELFARE (in Cantonese): Madam President, as we have spent so much time and effort training a specialist, we certainly do not wish that his training would become a waste. Therefore, if we consider that it is suitable for a doctor concerned to continue to receive training, we will try our best to offer him another contract.

PRESIDENT (in Cantonese): Mr HUI Yin-fat.

MR HUI YIN-FAT (in Cantonese): Thank you, Madam President. The Secretary just told us that the Government anticipates that there will be an over-supply of doctors in the future. In view of this, we may have to look into the student intake of the medical schools in order to solve this problem. How many excessive places will there be in such schools? Can the Government discuss the matter with the two medical schools now to determine when the schools should start reducing their student intake?

PRESIDENT (in Cantonese): Secretary for Health and Welfare.

SECRETARY FOR HEALTH AND WELFARE (in Cantonese): Madam President, this is exactly what we have to do. The two medical schools will produce around 250 to 270 graduates each year, and besides local graduates, there are many graduates from medical schools overseas. Most of these graduates have taken up medical studies abroad as arranged by their parents in Hong Kong. Some of these overseas graduates will return to Hong Kong and provide services to local people. Therefore, taking these overseas graduates into account, we find that 10 or about 12 years later, but not now, the number of doctors in Hong Kong would far exceed our demand. Therefore, we are going to discuss the matter with the two universities and determine their future student intake.

PRESIDENT (in Cantonese): Third question. Mr IP Kwok-him.

Emergency Co-ordination Centre

3. MR IP KWOK-HIM (in Cantonese): Madam President, the recent torrential rains have caused over a hundred landslip incidents, and the landslide at the Ten Thousand Buddhas Monastery even resulted in casualties. Landslips in other areas also resulted in road closures and serious traffic congestion, causing severe disruptions to the daily life of the community. In this connection, will the Government inform this Council of:

(a) the reasons for not activating the Emergency Co-ordination Centre so as to carry out rescue and remedial work more efficiently, despite the occurrence of a number of serious landslip incidents; and the circumstances under which the Centre will become operational; and

(b) the number of times the Centre was brought into operation since its establishment; the mechanism for activating the Centre, and whether a review has been conducted on the effectiveness of such a mechanism?

PRESIDENT (in Cantonese): Secretary for Security.

SECRETARY FOR SECURITY (in Cantonese): Madam President,

(a) during the recent rainstorms, other than the normal operation of the round-the-clock command centres of the plice and the Fire Services Department, a number of departmental emergency co-ordinating centres were activated. These included the Home Affairs Department, Social Welfare Department, Transport Department, Drainage Services Department, Highways Department and Geotechnical Engineering Office of the Civil Engineering Department. In respect of the closure of the Tuen Mun Highway and the Castle Peak Road as a result of the damage to the road surface and landslip, the Secretary for Transport and Secretary for Works together with four Heads of Department maintained urgent and close liaison in the incident from midnight to dawn on 3 July to co-ordinate emergency plans. At the Government Secretariat level, the Emergency Monitoring and Support Centre (EMSC), (previously known as Government Secretariat Emergency Co-ordinating Centre (GSECC)) was also in operation to monitor the situation and to provide support to the emergency services and supporting agencies if the situation so warrants.

In general, the EMSC will be activated in emergency situations of a territory-wide nature, for example, when black rainstorm warning and typhoon signal No. 8 is issued; or in extremely serious situation where the scale of response may be in excess of that which can be dealt with by the emergency services under their normal operating condition, for example, in case of a plane crash.

(b) The Security Bureau has an Emergency Support Unit with officers on call on a 24-hour basis to monitor any incidents that may warrant the activation of the EMSC. Our emergency response system is kept under regular review. The last major review was conducted in early 1996. As a result, the former GSECC was renamed as EMSC to make clear that the mechanism set up at the Government Secretariat is mainly for monitoring and support purposes. Since its establishment in 1996, the EMSC has been activated once in 1996 and twice this year. For rescue and remedial works to be conducted efficiently, swift response is essential under a simple chain of command. In general, departments have well-established procedures and adequate resources to cope with most if not all emergency situations.

PRESIDENT (in Cantonese): Mr IP Kwok-him.

MR IP KWOK-HIM (in Cantonese): Madam President, just now I heard the Secretary mention that the GSECC has now been renamed as the EMSC. Who is at the helm of this Centre? Can the Secretary enlighten us on the organizational structure of this Centre? Given that this Centre has been activated twice this year, under what circumstances was it made operational? And, in the process, what instructions has it given? Was the mechanism effective?

PRESIDENT (in Cantonese): Secretary for Security.

SECRETARY FOR SECURITY (in Cantonese): Madam President, the original GSECC used to give people a wrong impression that the then Policy Branch was, and the Policy Bureau now, is responsible for co-ordinating the rescue and remedial efforts. But that is actually not the case. As I have just explained, certain departments are responsible for the formal rescue and remedial work as well as emergency repairs, therefore, we have renamed the Centre as the EMSC, to reflect the work of the Centre more precisely.

The Centre is certainly led by the Security Bureau. When in full operation, the Centre will be manned by 16 staff but we will only determine the manpower arrangement on the basis of the seriousness of the incidents to see whether all the 16 staff members have to be engaged. This is because the Centre operates round-the-clock and very often it will operate as usual at night.

I would like to reiterate that monitoring and support are our major work. In respect of monitoring, when the relevant department or the Policy Bureau is in charge, we have to ensure that we have generally sound operation and no delays. In respect of support, in general, all departments actually have sufficient resources but as I have just said, in extremely serious situations or in case of very serious incidents when there really are support problems, we will look for solutions.

PRESIDENT (in Cantonese): Mr IP Kwok-him.

MR IP KWOK-HIM (in Cantonese): The Secretary has still not answered the two questions I asked, that is, under what circumstances was the Centre activated twice this year? What instructions has the Centre given?

PRESIDENT (in Cantonese): Secretary for Security.

SECRETARY FOR SECURITY (in Cantonese): The first case is certainly the Handover Ceremony. As many activities were held all over Hong Kong, our staff had to be on duty to ensure that everything was fine.

Another case is the period during which the black rainstorm warning was issued. I have also mentioned in the main reply that the Secretary for Transport and Secretary for Works together with four Heads of Department maintained close liaison from midnight to dawn on 3 July. Our staff had also taken part and started working even earlier than they did, for our emergency support team had already started working on 2 July.

PRESIDENT (in Cantonese): Fourth question. Mr LAU Kong-wah.

Dangerous Slopes along the Kowloon-Canton Railway

4. MR LAU KONG-WAH (in Cantonese): The torrential rains on 2 July this year triggered off a number of landslips at different locations along the Kowloon-Canton Railway, resulting in the rail service being disrupted for hours. In this connection, will the Government inform this Council:

(a) of the number of dangerous slopes located along the Kowloon-Canton Railway;

(b) whether the Geotechnical Engineering Office has carried out regular inspections on the slopes mentioned in the answer to (a) above; and

(c) how the Government ensures that similar incidents will not recur?

PRESIDENT (in Cantonese): Secretary for Works.

SECRETARY FOR WORKS (in Cantonese): Madam President,

(a) Slopes along the Kowloon-Canton Railway within the railway property boundary are the responsibility of the Kowloon-Canton Railway Corporation (KCRC). In 1987, the KCRC engaged specialist consultants to carry out a detailed study of slopes along the railway, including soil testing and stability analysis as required. As recommended in the study report, the KCRC carried out slope improvement works at 14 locations, and subsequently completed further works at another nine locations of lower priority. Based on the report, with the improvement works implemented as required, followed by the regular inspections and routine maintenance works since then, along the entire length of the railway, neither the Government nor the KCRC are aware of the existence of any dangerous slopes located along the Kowloon-Canton Railway.

(b) The Geotechnical Engineering Office (GEO) does not carry out inspections of the KCRC slopes. Instead, the KCRC has an on-going programme of slope inspections. All slopes along the railway are inspected at least once every year, and every slope is inspected in detail at least once every four years. In addition, the normal railway patrols have standing instructions to report any signs of slope problems, including obstruction of drainage features, fallen trees, and so on. These patrols cover the full length of the railway, six times every week. A senior professional staff member in the Corporation is responsible for overseeing the entire inspection and initiating follow-up actions should problems emerge.

(c) The GEO and the KCRC are collaborating to determine the exact cause of the recent slope failure incidents. More specific measures may be introduced in due course in the light of the findings to prevent future recurrence. Meanwhile, repairs to the slopes are in progress and they pose no immediate threat to the railway. The Government and the KCRC are also engaged in discussion to agree a means of enhancing the level and the coverage of the present inspection regime to monitor any area outside the railway boundary that may present a potential risk to the railway.

For any new and upgraded KCRC slopes to be constructed in the future, the GEO will continue to check their designs to ensure that they are up to current safety standards.

Thank you, Madam President.

PRESIDENT (in Cantonese): Mr LAU Kong-wah.

MR LAU KONG-WAH (in Cantonese): Madam President, I am puzzled by the the Government's conclusion in part (a) of the main reply that it is not aware of the existence of any dangerous slopes located along the Kowloon-Canton Railway. It is because the 2 July case has let us see clearly that soil from the two slopes had fallen onto the railway to cause the rail service to be disrupted for hours. What else can be regarded as a dangerous slope if even this slope is not regarded as one? Secondly, according to a past study, slope improvement works were carried out at 23 dangerous slopes, and 171 slopes have actually been inspected. Unfortunately, the two slopes involved in the incident on that day were not only outside the scope of the said 23 slopes but also that of the 171 slopes mentioned above. In other words, the two slopes were not known as dangerous slopes at all. Is this saying that if the Government does not know of the existence of danger, then there is no danger?

PRESIDENT (in Cantonese): Secretary for Works.

SECRETARY FOR WORKS (in Cantonese): Madam President, we define any slope as "dangerous slopes" when it fails to meet our set safety standards in respect of design and repair.

Certainly, when there are problems with a slope, we will take follow-up actions to find out the causes. As far as I know, most problems with slopes are not found in the slopes within the scope of the Kowloon-Canton Railway but when there are slight landslips at places higher up, the falling soil will cause landslips on some slopes near the railway. In fact, from the engineering perspective, the scope of the landslips was not too large but the heavy rain at that time caused the soil to fall onto the railway track which led to the suspension of the rail service for safety reasons. All the relevant repair works are now in progress and will soon be completed.

PRESIDENT (in Cantonese): Mr CHOY Kan-pui.

MR CHOY KAN-PUI (in Cantonese): Madam President, can the Government inform us of the number of landslips along the Kowloon-Canton Railway which disrupted the rail service during the past three years? After these incidents, did the Administration take any measures to prevent the recurrence of such incidents?

PRESIDENT (in Cantonese): Secretary for Works.

SECRETARY FOR WORKS (in Cantonese): According to the information at hand, from 1983 to 1993, there were five landslips near the railway tracks. We do not have the latest information but the incidents which had taken place in the past were actually minor incidents. Certainly, we will take corresponding measures in the light of the effects of the incidents such as their effects on the safety of rail service. As far as I can recall, in general, the rail service was resumed very quickly.

If the Honourable CHOY Kan-pui would like to obtain the latest information, I can give a written reply after I have obtained it from the KCRC. (Annex II)

PRESIDENT (in Cantonese): Fifth question. Mr NGAN Kam-chuen.

Bursting of Marine Sewer at Pillar Point

5. MR NGAN KAM-CHUEN (in Cantonese): Madam President, regarding the recent incident in which the bursting of the marine sewer situated at Pillar Point of Tuen Mun has resulted in water pollution in that area, it has been reported that the Drainage Services Department (DSD) knew of the bursting of the marine sewer concerned on 8 July but the DSD did not inform the Environment Protection Department (EPD) of the incident until 11 July. Will the Government inform this Council:

(a) of the reasons for the DSD not informing the EPD and the Provisional Regional Council of the incident immediately, and whether the Government will carry out a review to ascertain if the co-ordination among the relevant departments is adequate;

(b) of the reasons leading to the bursting of the marine sewer and the measures that the Government will adopt to prevent the recurrence of similar incidents;

(c) whether the EPD will, pursuant to the Water Pollution Control Ordinance, prosecute the person(s) or the legal persons who caused the incident; if not, why not; and

(d) whether the EPD will increase the frequency of random checks on the water quality of beaches; and whether it will expedite the process of water quality tests, so as to safeguard the health of the general public?

PRESIDENT (in Cantonese): Secretary for Works.

SECRETARY FOR WORKS (in Cantonese): Madam President, concerning part (a) of the question, the incident occurred at around 4 am on 8 July. By 9.30 am the DSD staff had isolated the incident by closing off the penstock valve leading to the damaged submarine outfall pipe, diverting the sewage flow into the undamaged one. Knowing that the sewage flow had been quite low in the early morning hours, the staff had assumed at that time that the environmental impact would be rather little and did not immediately inform the EPD and the Provisional Regional Council.

The EPD and the DSD were in fact already in the process of reviewing co-ordination between the two Departments. Draft new procedures had been circulated in late June for comment.

Concerning part (b) of the question, the existing submarine outfall comprises two 1.5 m diameter concrete pipes embedded in a rubble mound of 2.4 m thick which is in general capable of withstanding the anchoring impact of marine traffic. The dredging work of the contractor, Zen Pacific - Dredging International Joint Venture, employed by River Trade Terminal Company Limited (RTT) accidentally removed part of the rubble mound and damaged one of the concrete pipes at about 4 am on Tuesday, 8 July 1997.

Measures to prevent the recurrence of similar incidents include requiring RTT and its consultants to tighten up their supervision of the contractor's works and the clear delineation of a strip of non-working area above the existing outfall by means of marker buoys to facilitate monitoring by clearly indicating whether the contractor's work is outside the restricted area. Dredging and reclamation works within the restricted area will only be allowed after the new replacement outfalls have been built and in operation.

Concerning part (c) of the question, the EPD is collecting information and gathering evidence and will consider taking prosecution against the parties responsible for the incident, after the EPD has completed all the relevant work and depending on the findings of the investigation.

Concerning part (d) of the question, at present, the EPD takes water samples for analysis from 41 gazetted beaches and nine non-gazetted beaches three times a month during the bathing season from March to October. The current frequency is considered adequate for general monitoring of the beach water quality in order to use such information to check for compliance with the water quality objectives. This actual information also allows the EPD to advise the public on the latest beach water quality through the biweekly press releases during the bathing season. If pollution at beaches is suspected or detected during the regular monitoring programme, a more frequent monitoring programme is adopted for the beaches concerned.

The current laboratory analytical method for determining E. Coli in beach water samples takes about three days before results can be verified. The EPD is currently developing a new analytical method which might provide quicker results. The Department hopes to introduce the new testing regime in the near future if it has proved reliable.

Thank you, Madam President.

PRESIDENT (in Cantonese): Mr NGAN Kam-chuen.

MR NGAN KAM-CHUEN (in Cantonese): Madam President, at the end of part (a) of the Government's reply, it is mentioned that the EPD and the DSD were already reviewing the co-ordination between the two departments in late June, did the Government already "foresee" in late June that there were problems? If so, it is indeed gratifying.

On the other hand, the Government also says that the recent repeated recurrence of treatment problems with sewers or sewage treatment works which will affect the water quality of beaches and that the situation is worrying. After these incidents, will the Government publish the result of its report or review to keep the public in the know, so as to allay their worries?

PRESIDENT (in Cantonese): Secretary for Works.

SECRETARY FOR WORKS (in Cantonese): Madam President, the relevant departments will certainly review the shortcomings of their work after these incidents, especially the ways in which we can better and rapidly inform the relevant departments and the public of unexpected incidents which have happened, to safeguard the safe use of beaches by the public. Thank you, Madam President.

PRESIDENT (in Cantonese): Members, nine Members have put up their hands to indicate their wish to ask supplementaries. I just noted that Mr NGAN Kam-chuen still wish to follow up, probably because he is not satisfied with the answer just given, therefore, I would let him follow up first.

MR NGAN KAM-CHUEN (in Cantonese): I would like to ask a question about late June, as it is mentioned in the Secretary's reply that the draft new procedures had been circulated in late June ......

PRESIDENT (in Cantonese): I will limit the number of Members who will ask questions to nine. It seems that the Secretary has not answered the question just raised by Mr NGAN concerning June, would the Secretary please continue?

SECRETARY FOR WORKS (in Cantonese): Madam President, in fact we did not have the "foresight" to foresee in advance that these incidents would take place but usually we will review the general procedures of co-ordination between departments during the rainy seasons when we expect more emergencies. However, it so happened that there was a time coincidence and we had actually started working on this in late June. Thank you, Madam President.

PRESIDENT (in Cantonese): Mr LO Suk-ching.

MR LO SUK-CHING (in Cantonese): Madam President, it is mentioned in part (d) of the reply that there will be biweekly press releases. The question is in case of emergencies, the public will have already been greatly affected before the biweekly press releases are published. How can the procedures be simplified for press releases to be published immediately after the emergencies, to avoid the impacts of pollution on the public?

PRESIDENT (in Cantonese): Secretary for Works.

SECRETARY FOR WORKS (in Cantonese): Madam President, the publication of biweekly press releases is just our routine work. Certainly, when there are emergencies, we will not wait for two weeks before publishing press releases on the emergencies.

We know that after these two incidents, the general public has been critical of the fact that a relatively long time, three days, is taken to carry out laboratory analysis. The existing method which takes three days conforms to an internationally recognized standard. First, water sample is collected for the culture of bacteria, then the final result is obtained after the bacteria has been classified. I have just said that the Director of Environmental Protection is now looking for a newer method to shorten the time by 50% in order that the result can be obtained and the appropriate measures adopted as soon as possible. Thank you, Madam President.

PRESIDENT (in Cantonese): Dr TANG Siu-tong.

DR TANG SIU-TONG (in Cantonese): Madam President, as far as I know, the sewage treatment works at Pillar Point in Tuen Mun is just a simple filtering facility. If this sewage treatment works was more sophisticated and better, the damage done might not be so great. I would like to ask the Government when this sewage treatment works will be upgraded to one which is more elaborate, sound or better-equipped?

PRESIDENT (in Cantonese): Secretary for Works.

SECRETARY FOR WORKS (in Cantonese): Madam President, according to the water quality model tests carried out in the past, the treated water discharged by the sewage treatment works with the existing arrangements will not have impact on all the nearby beaches as the location of the outfall is fairly far away from the shore.

This is a fairly special incident but in any case, we are now constructing a new discharge pipe which we hope will be completed in May next year. The outfall of the new discharge pipe is located even farther by 600 m, therefore, we hope that the impact on the water quality of nearby beaches will be alleviated in the future.

Certainly, after this incident, we will again carry out a review. Even though we are now constructing the new discharge pipe, we will still look into what areas need improvement. We will surely follow up the matter. Thank you, Madam President.

PRESIDENT (in Cantonese): Mr CHAN Wing-chan.

MR CHAN WING-CHAN (in Cantonese): Madam President, after the incident in which the bursting of the marine sewer has resulted in water pollution, the DSD and the EPD mutually shirked their responsibilities. Why did this happen? In order to safeguard the health of the public and beach goers, how are the DSD and the EPD going to co-ordinate their respective roles and what are the specific ways in which they will do so? Moreover, will the bursting of the sewer lead to a rise in the costs of the Sewage Services Trading Fund which will then be borne by the public?

PRESIDENT (in Cantonese): Secretary for Works.

SECRETARY FOR WORKS (in Cantonese): Madam President, firstly, perhaps I can take this opportunity to clarify that I believe the departments have not mutually shirked their responsibilities. I can only say that the persons concerned were then busy figuring out how the damaged pipe could be expeditely repaired, and they had neglected the fact that this incident might have more wide-ranging effects, therefore, they had not notified the EPD in time. In fact, at the press conference after the incident, we had already given a detailed explanation about the incident.

I have just said that we will review the recent incident and we hope that the communication between the two departments, or even that among other people concerned, can best be enhanced. We will also find out how we can more expeditely and better release information and let the people concerned be informed.

I believe there will not be any impact on the sewage charges. In respect of this incident, we certainly hope that we can claim damages from the people concerned but even though we have not done so, I believe the costs involved would be minimal. In fact, the repair works have already been carried out by Zen Pacific, therefore, I think that there will not be any impact on the sewage charges.

PRESIDENT (in Cantonese): Mr LAU Kong-wah.

MR LAU KONG-WAH (in Cantonese): Madam President, the whole incident is now very clear that the DSD initially considered the incident as minor in nature and it had therefore not notified other people, however, the incident has now become significant. I would like to know how many incidents in the past were considered by the DSD as minor and were therefore not made known to other departments?

On the other hand, how many similar sewers which are vulnerable to bursting are there in the areas adjacent to the 41 beaches mentioned in the Secretary's reply? Has the Secretary ever kept account of that? What is now being done about them?

PRESIDENT (in Cantonese): Secretary for Works.

SECRETARY FOR WORKS (in Cantonese): Madam President, first, I do not have any information at hand regarding the number mentioned by Mr LAU but I will try to look up the exact number.

I have just said that such damages are rare and I believe that, on our record, such an incident has never happened before. It is because the sewers will not be damaged unless, as in the case in this incident, the sewers fail to withstand the anchoring impact of marine traffic which loosens the rubble mound on top of the pipes. Even though we have not yet checked our records, I believe such cases are really very rare. In any case, we will check this information to see how many sewers are in similar situations. We will carry out a review to prevent the recurrence of such incidents.

PRESIDENT (in Cantonese): Secretary, can you give us a written answer after your investigation? (Annex III) Mr CHENG Kai-nam.

MR CHENG KAI-NAM (in Cantonese): Madam President, the Secretary has just mentioned the Tuen Mun incident for which there are certainly special reasons and causes but there are also special reasons causing water pollution at the beaches in Stanley. It is mentioned in the Secretary's reply that water samples for analysis are taken three times a month, I wonder whether the frequency is rather low as it is the bathing season now? I would also like to say that even though samples are taken thrice a day, it will not get rid of the problem as samples for analysis are only taken from the sewer outfalls and this cannot solve the pollution problem. Did the Government carry out a thorough check on the relevant sewers and the facilities of the relevant departments before this bathing season, with a view to minimizing the possibility of incidents?

PRESIDENT (in Cantonese): Secretary for Works.

SECRETARY FOR WORKS (in Cantonese): Madam President, we already have an improvement plan for all sewage systems, especially the older ones, but such improvements will certainly take time. For example, at Stanley, we already have a comprehensive plan to improve all problematic systems by mid-1998 when the existing systems will no longer be used.

Certainly, in respect of the regular analysis of beach water, we carry out such analysis not only because we are concerned about the discharge of sewage into the sea but also because of other sources of water pollution. Therefore, it is necessary for us to carry out regular checks of the water quality.

I think that this incident has happened because the staff concerned were not sufficiently alert and they had failed to treat this incident as an emergency. In fact, we are now earnestly enhancing communication. If similar incidents happen, as Mr CHENG has said, there may be different causes, and we hope that communication can be enhanced to see how the cases should be tackled and dealt with, so that all the persons concerned can vigilantly tackle the problem promptly and in a more appropriate way.

PRESIDENT (in Cantonese): Dr TSO WONG Man-yin.

DR TSO WONG MAN-YIN (in Cantonese): Madam President, I heard the Secretary say that the EPD is now looking for a newer water quality analysis method as the previous method for determining E.Coli in beach water samples takes about three days. But as I also learnt the new method will probably only take one and a half days. How long does it take to prove the reliability of this new method? Are there other methods which take even less time than one and a half days? It is because reducing the time from three days to one and half days may not be sufficient to meet the changing needs.

PRESIDENT (in Cantonese): Secretary for Works.

SECRETARY FOR WORKS (in Cantonese): Madam President, I believe that if the time is further shortened, there will be technical problems as it takes time to culture bacteria.

In regard to the whole incident, I have said time and again that we will conduct a review to see how we should deal with unexpected incidents. I believe that we will have to adopt more flexible methods in the future and we should not defer our decision until we have the result of the checks. We also have to consider other reasons or look at the incidents from other perspectives before deciding the course of action. I think this is a more realistic approach. Certainly, we have to check the water quality again to see if there are changes.

PRESIDENT (in Cantonese): Dr TSO WONG Man-yin, do you wish to follow up or elucidate?

DR TSO WONG MAN-YIN (in Cantonese): Yes, a very simple question I have just asked. How long does it take to prove the reliability of the new testing method?

PRESIDENT (in Cantonese): Secretary for Works.

SECRETARY FOR WORKS (in Cantonese): Madam President, I know that the EPD is now studying this method but it does not have a definite schedule yet. But we will take this as an urgent case demanding prompt action.

PRESIDENT (in Cantonese): Mr IP Kwok-him.

MR IP KWOK-HIM (in Cantonese): Madam President, the bursting of the sewer in Tuen Mun has resulted in water pollution at nearby beaches. As shown by the available information, the result of the check carried out by the EPD a week later still showed that the E. Coli contents in the water of the nearby beaches were still two times higher than standard. It is mentioned in the Secretary's reply that the persons concerned then thought that the environmental impact of this incident was insignificant and it was unnecessary to notify the EPD and the Provisional Regional Council. But in view of the fact that many people swan there despite the poor water quality, I would like to ask, if it is really found that there were other factors and the pollution might not be directly caused by the bursting of the sewer, or if it was proved that other factors did not exist, and the existing pollution was caused by the bursting of the sewer, is any government department being held responsible and will internal disciplinary actions be taken because of this incident?

PRESIDENT (in Cantonese): Secretary for Works.

SECRETARY FOR WORKS (in Cantonese): Madam President, I believe that when all the persons concerned make decisions, they will use their professional knowledge to appraise the case. As far as I know, at that time, the persons concerned made a decision after having considered various factors such as the direction of water flow, and whether the problem of effluent dumping into the sea was serious.

Now, after such a long time, the water quality has been improved but only insignificantly, for many reasons other than the seriousness of pollution, such as rain, the nearby water current and tidal flows. We can surely criticize the decision made by the persons concerned then as it seems to us when we reflect on the case that the decision was not exactly right. However, I think that all the persons concerned had made a decision which was considered the most appropriate then on the basis of their experience and professional knowledge.

PRESIDENT (in Cantonese): Dr Raymond HO.

DR RAYMOND HO (in Cantonese): Madam President, after the Tuen Mun incident, the departments concerned have repaired the marine sewer as soon as possible, and I think that in view of the rather wide-ranging impact, the EPD and the DSD have actively identified or reviewed the co-ordination problems. However, I would like to ask a minor technical question which has not been asked by Members just now. It is mentioned in the main reply that the existing submarine outfall is embedded in a rubble mound of 2.4 m thick which should be very adequate. In fact, our cross harbour tunnels are also protected by similar rubble mounds, and there is a certain distance between this pipe and the working area. Certainly, we may not be able to clearly identify the location of the submarine pipes but people who really have engineering experience would know where the pipes are located. If a rubble mound of 2.4 m thick is dredged, the sewers will be damaged very easily. I think that using some marker buoys ......

PRESIDENT (in Cantonese): Dr Raymond HO, can you come to your question as time is running short.

DR RAYMOND HO (in Cantonese): Sorry, Madam President, the use of marker buoys is really good but when works are carried out near sewers under similar circumstances in the future, will marker buoys be specially used to indicate clearly the location of such sewers, and will divers be sent underwater when necessary to inspect the rubble mounds to ensure that they have not been dredged?

PRESIDENT (in Cantonese): Secretary for Works.

SECRETARY FOR WORKS (in Cantonese): Madam President, we will carry out a review on the current incident and I believe we will take into consideration the opinion just expressed by Dr HO. But in fact when we granted the contract for the inland pier, we had set out very clearly in the agreement a clause reminding the inland pier company that such a sewer existed nearby and the company had also undertaken to construct a new sewer, therefore, the company knew at that time that there was such a sewer nearby.

PRESIDENT (in Cantonese): Mr LAU Wong-fat.

MR LAU WONG-FAT (in Cantonese): Madam President, I believe most Members have already raised the questions I would like to ask, but I would like to ask the Government again whether it has formulated any guidelines for heads of departments to specify that, when incidents happen with impact on the public within their brief, the officers in charge should notify other relevant departments within a certain period of time so that the departments can jointly deal with the incidents? If not, will the Government actively consider formulating appropriate guidelines for co-ordinating the work procedures of various departments when they deal with such incidents?

PRESIDENT (in Cantonese): Secretary for Works.

SECRETARY FOR WORKS (in Cantonese): Madam President, very clear guidelines have now been given to departments on how they should co-operate when certain incidents happen. However, in respect of this incident which was deemed as rather sudden, urgent and unexpected, I believe some staff were fairly inexperienced in handling such cases. Therefore, I have just said that our first priority is to conduct a review to find out how we can better react should similar urgent and unexpected incidents happen in the future. We will carry out a review and formulate more appropriate guidelines.

PRESIDENT (in Cantonese): Members, some more Members actually still wish to follow up this issue but I suggest that if Members are interested, they can include such discussion on the agenda of the relevant Panel so that they can continue to follow up the issue.

PRESIDENT (in Cantonese): Last question seeking an oral reply. Mr LO Suk-ching.

Vietnamese Boat People/Migrants Stranded in Hong Kong

6. MR LO SUK-CHING (in Cantonese): Thank you, Madam President, will the Government inform this Council whether:

(a) it has asked the British Government to take up the responsibility for solving the problem of the Vietnamese boat people and Vietnamese refugees currently stranded in Hong Kong; if so, through what channels such a request has been made and what the up-to-date progress is; and

(b) it has asked the British Government to make a request to the United Nations High Commissioner for Refugees (UNHCR) on behalf of the Hong Kong Special Administrative Region Government, or directly approached the UNHCR, for the repayment of the debt owed the Hong Kong Government in respect of the expenses on the care and maintenance of the Vietnamese boat people and Vietnamese refugees stranded in Hong Kong; if so, through what channels such a request has been made and what the up-to-date progress is?

PRESIDENT (in Cantonese): Secretary for Security.

SECRETARY FOR SECURITY (in Cantonese): Madam President,

(a) In resolving the problem of Vietnamese refugees (VRs) and Vietnamese migrants (VMs), the Hong Kong Government has liaised closely with the British Government through the Foreign and Commonwealth Office in London and also through the British Embassy in Hanoi. The British Government has campaigned for international assistance in resettling VRs and in implementing the Comprehensive Plan of Action. British Ministers, including successive Prime Ministers and Foreign Secretaries, have intervened personally to promote greater international co-operation and resolve particular problems. Britain has also resettled about 15 500 VRs from Hong Kong, and contributed a total of $1.13 billion towards the VM programme since 1989. The Special Administration Region (SAR) Government is appealing through the UNHCR to the international community, including the former sovereign power, Britain, to resettle the remaining VRs from Hong Kong. The SAR Government continues to make its best efforts, in co-operation with the UNHCR and the Vietnamese Government, to resolve the residual VM problem in Hong Kong by repatriating the remaining few VMs to Vietnam.

Hong Kong has received over 200 000 VRs and VMs since 1975. The residual VR and VM population standing at 1 300 and 800 respectively is only about 1% of the total number of arrivals.

The 900 Vietnamese illegal immigrants who have come to Hong Kong mainly to seek illegal employment will continue to be repatriated to Vietnam in accordance with bilateral arrangements with Vietnam.

(b) The UNHCR's commitment on the care and maintenance of VMs in Hong Kong is provided for in the Statement of Understanding (SOU) reached with the Hong Kong Government in 1988. We have always maintained direct lines of communication with the UNHCR local mission, and has pressed the UNHCR continually for reimbursement of the advances made. The UNHCR has indicated to us on many occasions that its commitments under the SOU remain valid after the reversion of sovereignty. As a Special Administrative Region of China with a high degree of autonomy, it does not seem appropriate, or useful, to ask the former sovereign power to intervene on behalf of the SAR on a debt which arises from Hong Kong's bilateral arrangement with the UNHCR. The latter has repeatedly assured us of its commitment to raise funds from the international community for this purpose. However, confronted with massive refugee problems around the world, particularly in the Great Lakes of Africa, the UNHCR has not been able to raise sufficient funds for its programmes in all parts of the world. Hitherto, the UNHCR has repaid a total sum of $162 million, and the cumulative outstanding amount stands at $1.17 billion. We will continue to press the UNHCR for the reimbursement of the outstanding balance.

The Administration has made no advance payment in respect of VRs. The UNHCR pays the full costs direct.

PRESIDENT (in Cantonese): Mr LO Suk-ching.

MR LO SUK-CHING (in Cantonese): The British Government has now left, leaving behind the burden for the SAR Government. I would like to ask the SAR Government, has it asked the Central Government to assist in requesting the Vietnamese Government to continue to repatriate the VMs, requesting other countries to continue to resettle the VRs, or recovering the outstanding balance, or if the problem cannot be eventually solved, will it look into the possibility of resettling the VRs stranded in Hong Kong in other places in China, without occupying the land in Hong Kong?

PRESIDENT (in Cantonese): Secretary for Security.

SECRETARY FOR SECURITY (in Cantonese): Madam President, we already have a mechanism for solving the problem of VRs and VMs.

The VRs eventually have to be resettled in a third country. The UNHCR is responsible for appealing to the international community to resettle these VRs. As regards VMs, we have agreed with the Vietnamese Government that those whose VM status have been determined have to be repatriated to Vietnam. We understand the concern of our sovereign power about this but as we already have a mechanism for reception and repatriation, therefore, we have not made a direct request again, even if we are going to make any further requests to the sovereign power, we would be seeking assistance in repatriation but the fact is repatriation is already in progress.

Certainly, we do not rule out the possibility that we may have to discuss the matter with the Central Government in the future, but in the light of the current situation, it seems that we still have to continue to implement the Comprehensive Plan of Action according to the international agreement, and we hope that this problem can be satisfactorily solved soon.

PRESIDENT (in Cantonese): Dr LAW Cheung-kwok.

DR LAW CHEUNG-KWOK (in Cantonese): Thank you, Madam President. It is stated in part (a) of the Secretary's reply that Britain has contributed a total of $1.13 billion towards the VM programme since 1989. However, at the end of part (b), she said that the UNHCR has only repaid a total amount of $162 million, and the cumulative outstanding amount stands at $1.17 billion. In other words, only a small portion of the total contribution of Britain or perhaps not a cent has been indirectly transferred back to Hong Kong.

Throughout the years, has the Hong Kong Government ever asked Britain to allocate more out of its contribution to the VM repatriation scheme to Hong Kong, as reimbursement for our expenses in this regard? If yes, why was Britain or the UNHCR unwilling to do so?

Thank you, Madam President.

PRESIDENT (in Cantonese): Secretary for Security.

SECRETARY FOR SECURITY (in Cantonese): Madam President, the amounts Britain paid or contributed are certainly not used solely to cover the expenses incurred by the VMs in Hong Kong through the UN but also the expenses on the repatriation action. These are areas where the British subsidies went.

I believe Members will remember that the UNHCR is also in charge of the Voluntary Repatriation Programme. The performance of Hong Kong in the voluntary repatriation initiative can be described as second to none. For instance, around 60 000 VMs have returned to their countries of origin through the Voluntary Repatriation Programme.

PRESIDENT (in Cantonese): Dr LAW Cheung-kwok.

DR LAW CHEUNG-KWOK (in Cantonese): Thank you, Madam President. The Government has not directly answered my question, perhaps I can briefly put my question again. For many years, has the Hong Kong Government directly requested the British Government to allocate more out of its contribution to the VM repatriation scheme to Hong Kong, as reimbursement for our expenses? Has the Government ever done this?

Thank you, Madam President.

PRESIDENT (in Cantonese): Secretary for Security.

SECRETARY FOR SECURITY (in Cantonese): We have made such a request.

PRESIDENT (in Cantonese): Mr CHIM Pui-chung.

MR CHIM PUI-CHUNG (in Cantonese): Madam President, in part (a) of the Secretary's reply, he stresses that there are now 1 300 VRs and 800 VMs stranded in Hong Kong, accounting for merely 1% of the total number.

However, does the Secretary know that the majority of these 2 000-odd people are drug addicts, or have gone into exile as they have records of criminal offences or civil offences such as indebtedness in Vietnam? Has the Secretary requested other international bodies such as the UNHCR to make special arrangements to specify the estimated time when the problem of these 2 000-odd people of special background who are stranded in Hong Kong will be solved?

PRESIDENT (in Cantonese): Secretary for Security.

SECRETARY FOR SECURITY (in Cantonese): Madam President, as far as we know, among the 1 300 refugees just referred to by the Honourable CHIM Pui-chung, as he just said, many really have records of minor offences, but I do not agree to his view that the majority of these 1 300 VRs and 800 VMs have criminal records. If he knows the source of such information, I hope that he can provide us with the information so that we can carry out a further study.

However, I believe the essence of his question concerns whether the Government has requested the UNHCR to assist us in expeditely solving the problem of the VMs stranded in Hong Kong. We have surely done that.

PRESIDENT (in Cantonese): Mr Henry WU.

MR HENRY WU (in Cantonese): Thank you, Madam President. The UNHCR is responsible for taking care of the living expenses of the VMs stranded in Hong Kong but it has obviously requested Hong Kong to pay a lot. How much money was involved? Is it possible for us to request the British Government who has been very generous to repay Hong Kong such sums?

Thank you.

PRESIDENT (in Cantonese): Secretary for Security.

SECRETARY FOR SECURITY (in Cantonese): Madam President, the daily expenses of the VMs stranded in Hong Kong on food and other things, including medical expenses, power and water, should be borne by the UNHCR. But we have actually advanced the amount while the UNHCR will eventually reimburse the amount to the Hong Kong Government.

The SAR Government is or the then Hong Kong Government was responsible for the expenses on building refugee centres, boat people centres and manpower. As regards whether it will request the British Government to reimburse the amount, as the British Government is a member of the international community, and an object of the appeal made by the UNHCR to the international community for contribution, therefore, the reimbursement will be directly co-ordinated by the UNHCR.

PRESIDENT (in Cantonese): Mr Henry WU.

MR HENRY WU (in Cantonese): Madam President, the Government has still not answered my question on the exact total amounts spent. Earlier today at the meeting of the Finance Committee, the Government has disclosed that the amount totals $8.4 billion. Since 1975, a total of $8.4 billion has been spent, 6.5 times the living expenses of the VMs stranded in Hong Kong. I hope that this figure can be confirmed.

PRESIDENT (in Cantonese): Secretary for Security.

SECRETARY FOR SECURITY (in Cantonese): I has not attended the meeting this morning but if this figure was given by our colleague, I believe it should be very accurate.

PRESIDENT (in Cantonese): Mr Kennedy WONG.

MR KENNEDY WONG (in Cantonese): Thank you, Madam President. At present, the UNHCR owes the SAR Government $1.17 billion. Would the Government please inform this Council if this outstanding balance includes interests? Besides, as this amount has been outstanding for quite some time, would the Government regularly, say every two to three months, inform the public of the progress, negating the need for Members to ask the question time and again at our meetings?

Thank you, Madam President.

PRESIDENT (in Cantonese): Secretary for Security.

SECRETARY FOR SECURITY (in Cantonese): Madam President, as regards whether it is necessary to make the outstanding balance known every two to three months, as not too many people are involved, I think I can give an answer now. We estimate that the outstanding balance in 1997 is $1.13 billion and the accumulated amount thereafter will be $20 million a year. But the amount will change on the basis of the number of VMs stranded here.

As to the first part of the question, would Mr WONG repeat it please?

PRESIDENT (in Cantonese): Mr WONG.

MR KENNEDY WONG (in Cantonese): Madam President, I just asked, are interests calculated on the outstanding balance? Besides, will the Government regularly inform the public of the progress of the recovery of the sum?

Thank you, Madam President.

PRESIDENT (in Cantonese): Secretary for Security.

SECRETARY FOR SECURITY (in Cantonese): Madam President, I think I have to look up some information on interests. As far as I know, there should not be any interests but I can give a written answer on the specific details.

As far as regular provision of information is concerned, we have frequent work contacts with the UNHCR. We are in the process of recovering this amount and we have been receiving many enquiries from the media and Members.

PRESIDENT (in Cantonese): I believe Mr WONG would like you to answer whether you would regularly inform the public of the progress of the recovery of this outstanding balance. Secretary.

SECRETARY FOR SECURITY (in Cantonese): Are we talking about "informing the public" or the "recovery"? Mr WONG told me when I answered the first part of the question that he was not talking about the amounts outstanding but the "recovery".

PRESIDENT (in Cantonese): Mr Kennedy WONG.

MR KENNEDY WONG (in Cantonese): Would the Government regularly inform Hong Kong people (the public) of the progress of the recovery of this amount?

PRESIDENT (in Cantonese): Secretary for Security.

SECRETARY FOR SECURITY (in Cantonese): Madam President, we have promised that we will keep on recovering this amount from the UNHCR. If they have made any repayment, we will surely inform the public.

PRESIDENT (in Cantonese): Last two supplementary questions. Mr Eric LI.

MR ERIC LI (in Cantonese): Concerning the outstanding amount, the Public Accounts Committee of the then Legislative Council has been pressuring the Government to recover the amounts for many years and they have not let off the Government. Therefore, I can tell Mr WONG for sure that now that the outstanding amount has not been recovered, and as we have checked all the books, we can say that there is definitely no interest.

However, I am worried about the fact that besides learning that the outstanding amounts have not been recovered today, I have also learnt that the Government is still advancing amounts for use on the VMs. It is mentioned in the Government's reply that it has stopped handing out money to be used on the VRs but the fact is that it is still advancing the expenses on the VMs. We all know clearly that the money so lent cannot be recovered. Therefore, even if the Government invokes section 20 of the Public Finance Ordinance, the Government, especially the Financial Secretary should ensure that advances would only be made if the amounts can definitely be recovered. Would the Government inform this Council how it is going to assure the public that the amounts advanced now will surely be recovered? A particularly important point is whether a different arrangement can be made for the amounts given out after 1 July? No country in the world has made arrangements for recovery to be made long after the amounts have been given out. Any place in the world that accepts VMs would ask for immediate payment. After 1 July, would we consider using a different method and making a new arrangement with the UNHCR? Thank you, Madam President.

PRESIDENT (in Cantonese): Secretary for Security.

SECRETARY FOR SECURITY (in Cantonese): Madam President, as shown by the records kept by the UNHCR to date, they will reimburse certain amounts to the Hong Kong Government when they receive contributions. They have even promised that after the reunification of Hong Kong with China, once they receive contributions, they will continue to reimburse money to the SAR Government.

Certainly, nobody can ensure that they will repay all the amounts, therefore, I can only say that there are really records of their reimbursements.

PRESIDENT (in Cantonese): Mr Eric LI.

MR ERIC LI (in Cantonese): Madam President, I would like to remind the Secretary that if the Financial Secretary would like to invoke section 20 of the Public Finance Ordinance, he can only make advances if he is clearly advised that the amounts can be recovered.

This is not my demand but that of the legislation. I hope that the Secretary can explain this explicitly. Moreover, I would like to point out that the sovereign power of the SAR Government is different from that of the Hong Kong Government before 1 July, why do we still have to be subject to the agreement made then? Today, we are going to give out several hundred thousand dollars, though not a large sum, why can we not follow the example of other places in the world and state clearly that the amounts lent shall exactly equal the amounts spent, but continue to accept such an unreasonable arrangement instead?

PRESIDENT (in Cantonese): Secretary for Security.

SECRETARY FOR SECURITY (in Cantonese): The last part of the question touches upon the resumption of negotiation with the UNHCR for new arrangements. I believe we need time for deliberation before answering Mr LI's question.

As to the first part of the question, I think the Financial Secretary is very familiar with the provisions of our laws and we will also seek legal advice as appropriate.

PRESIDENT (in Cantonese): Mr CHAN Kam-lam.

MR CHAN KAM-LAM (in Cantonese): Madam President, can the Government inform the Council whether VMs have arrived in Hong Kong in recent months? If so, how many? After the establishment of the SAR Government, has our Government continue to enforce the policy of the port of first asylum? Thank you, Madam President.

PRESIDENT (in Cantonese): Secretary for Security.

SECRETARY FOR SECURITY (in Cantonese): Madam President, as the border of Hong Kong is connected to that of China, we cannot rule out the possibility that illegal immigrants may sneak into Hong Kong either by land or by sea.

Therefore, my answer is that Vietnamese illegal immigrants have continue to arrive at Hong Kong in the past few days. However, I have to clarify that they are no longer the so-called VMs subject to screening pursuant to the internationally recognized Comprehensive Plan of Action. We will consider and deal with these VMs as illegal immigrants.

PRESIDENT (in Cantonese): Mr CHAN Kam-lam.

MR CHAN KAM-LAM (in Cantonese): My question is that after the establishment of the SAR Government, will we continue to adopt the policy of the port of first asylum? The Secretary has not given me an answer.

PRESIDENT (in Cantonese): Secretary for Security.

SECRETARY FOR SECURITY (in Cantonese): I have actually given an indirect answer. When they enter Hong Kong again, we will not regard them as VMs subject to the screening procedures but as illegal immigrants. Therefore, I believe that the "port of first asylum" has ceased to exist except in name.

WRITTEN ANSWERS TO QUESTIONS

Illegal Immigrants from the Mainland

7. MR LAU KONG-WAH (in Chinese): Will the Government inform this Council of the numbers of illegal immigrants (including children) who had entered Hong Kong illegally from the Mainland for one time only and for more than one time respectively in the past five years; and whether the Government knows how the mainland Government deals with those persons who have entered Hong Kong illegally for more than one time?

SECRETARY FOR SECURITY (in Chinese): Madam President, a breakdown of the number of illegal immigrants including children who had entered Hong Kong illegally from the Mainland for one time or more in the past five years is as follows:

		Number of illegal immigrants
Year	One entry	More than one entry	Total
1992	25 294	15 061	40 355
1993	22 626	20 403	43 029
1994	15 888	17 372	33 260
1995	13 765	14 057	27 822
1996	10 228	10 960	21 188
1997 (up to June)	4 094	3 598	7 692

Under the existing policy, all illegal immigrants are repatriated immediately. What will happen to them after returning to the Mainland is a matter for the mainland authorities. We do not have information from the mainland authorities as to how they deal with those persons who have entered Hong Kong illegally for more than one time.

Management of Slopes within Confines of Rail Transport Systems

8. MR NGAN KAM-CHUEN (in Chinese): In early July this year, landslips occurred in many parts of the territory due to heavy rains. Several slopes located along the Kowloon-Canton Railway collapsed and the rail service had to be temporarily suspended. In this connection, will the Government inform this Council whether:

(a) the responsibility for slope maintenance in respect of slopes located within the confines of the various rail transport systems falls on the Government or the operators concerned; and

(b) the geotechnical investigations on slopes located within the confines of various transport systems currently undertaken by the Government include slopes below 5 m in height; if not, what the reasons are, and whether consideration will be given to allocating additional resources for carrying out such investigations?

SECRETARY FOR WORKS (in Chinese): Madam President,

(a) The maintenance responsibility for slopes located within the property boundaries of the various rail transport systems rests with the operators concerned.

(b) The slopes located within the confines of the various transport systems are not included in the Government's Landslip Preventive Measures Programme. Geotechnical investigations on these slopes are therefore not undertaken by the Government but by the operators. They have their own inspection, maintenance and upgrading programmes for all their slopes with a view to maintaining a safe and uninterrupted railway service to the public.

Policy on Future Economic Development in Hong Kong

9. DR LAW CHEUNG-KWOK (in Chinese): With regard to the policy on the future economic development in Hong Kong, will the Government inform this Council whether it will, in addition to vigorously developing the financial and service sector, also formulate long-term policy on industrial and technological development, as well as provide support for small and medium businesses and emerging high-tech industries; if so, of the specific details of the policy concerned, the resources required and the timetable for implementation; if not, why not?

SECRETARY FOR TRADE AND INDUSTRY (in Chinese): Madam President, consistent with our overall economic policy, the Government's approach to Hong Kong's industrial and technological development is one of "minimum intervention, maximum support". It is the Government's firm belief that business decisions should be left to the private sector, but it does recognize the need to create and maintain a favourable environment within which industry and technology can develop efficiently on a market driven basis. Thus the Government has a proactive industry support policy of providing a physical, human and technological infrastructure to sustain and promote the productivity and international competitiveness of our manufacturing industries.

As part of the general economic framework of Hong Kong, the Government has provided a simple and consistent taxation system, a low level of taxation, generous concessions in the form of high depreciation allowances for machinery and equipment, a world class physical infrastructure development programme, and a wide range of education and training programmes, of which technical education and training offered by our tertiary education institutes and the Vocational Training Council is part.

In the field of industry and technology development, a number of organizations are operating a wide range of support services for our manufacturing industries, including the Hong Kong Productivity Council, which provides various productivity, value-added enhancement and technological upgrading support services to the manufacturing industries; the Hong Kong Industrial Estates Corporation, which provides formed and serviced land in its three industrial estates to industrial operations that cannot be accommodated in a multi-storey setting; the inward industrial investment promotion programme of the Industry Department, which seeks to encourage the transfer of advanced technology from overseas companies; the Hong Kong Industrial Technology Centre Corporation, which helps to foster technological entrepreneurship and promote technology innovation, upgrading and transfer through a technology start-up incubation programme with an extensive range of support services and accommodation of technology companies. Other institutions which provide technical assistance to industry include the Hong Kong Plastics Technology Centre Limited, the Clothing Technology Demonstration Centre Company Limited, the Telecommunications Technology Centre Limited, the Design Innovation (Hong Kong) Limited, the Hong Kong Institute of Biotechnology, and so on.

To complement these services and facilities, the Industrial Support Fund (ISF) was set up under the Industry Department in 1994 to fund projects which help to upgrade the technological skills of, and facilitates technology transfer to, the manufacturing industry. To date, over $900 million has been committed under this Fund. In addition to the ISF, the Government has also set up an Applied Research Council which is now operating two funding schemes totalling $250 million. Both schemes offer direct financial assistance in the form of preferential interest loans or equity investment to locally-registered companies undertaking applied R and D based commercial ventures. As such the Government through the Applied Research Council is effectively providing venture capital funds for technology based industries.

As part of its continuing effort to improve the industrial and technological infrastructure of Hong Kong, the Government is committed to the development of a science park, a second industrial technology centre and a fourth industrial estate for Hong Kong. The planning and preparatory work is being carried out by the Industry Department and the relevant industry support organizations concerned. Proposals will be submitted to this Council in due course for funding approval.

To the extent that small and medium enterprises (SMEs) account for more than 95% of the firms of local industry, the support services mentioned in the preceding paragraphs are intended to benefit them. The Government established a Small and Medium Enterprises Committee in July last year to look into the specific concerns of SMEs and to facilitate their continued development. With the assistance of the Committee, we will publish a Directory on Services and Facilities Available to SMEs in September 1997 to assist them in gaining access to various support available to them in Hong Kong. The Hong Kong Export Credit Insurance Corporation has tailor-made a Small and Medium Enterprises Policy to meet their specific needs. In addition, we will set up a Business Licence Information Centre in September 1997 to provide a centralized source of information on business licence requirements in Hong Kong. The Centre will advise enquirers of the number and types of licences required for individual businesses and provide them with relevant information and application forms.

Private Sector Staff Working in the Chief Executive's Office

10. MR FREDERICK FUNG (in Chinese): In connection with the appointment of private sector staff to work in the Chief Executive's Office, will the Government inform this Council:

(a) whether all the staff currently working in the Chief Executive's Office have completed the recruitment formalities according to the civil service appointment procedures; if not, of the capacity in which they work in the Chief Executive's Office and the reasons why such a situation is allowed to occur under the current civil service appointment system;

(b) whether the personal driver previously employed by the Chief Executive has directly joined the Civil Service from the private sector and started work in the Chief Executive's Office pending the completion of recruitment formalities; and

(c) as the Secretary for the Civil Service has been reported as saying that the incident mentioned in (b) above has not resulted in anyone being deprived of his job or required to resign, whether this means that the number of Senior Personal Chauffeur in the Chief Executive's Office has been increased; if so, whether the additional post has been included in the budget for the current financial year?

SECRETARY FOR THE CIVIL SERVICE (in Chinese): Madam President, the Chief Executive's Office was set up in December last year. It has been integrated into the Government since July upon the establishment of the Hong Kong Special Administrative Region. The staffing requirements of the Office have been adjusted to cope with the changing needs over the last few months. The staffing needs for the permanent Chief Executive's Office is now under active review. A submission will be made to the Finance Committee of this Council in due course.

Turning to the specific questions raised:

(a) When the Chief Executive's Office was established in December last year, a number of civil servants were seconded to the Office. Given the circumstances prevailing at that time, the Chief Executive also brought several staff from his previous office to work with him. These staff were employed on a temporary basis as non-civil servants. As such, they were not recruited as civil servants.

(b) The personal driver previously employed by the Chief Executive is still working in the Chief Executive's Office as a non-civil servant.

(c) I can confirm that no civil servant has been deprived of his job or required to resign consequent to the establishment of the Chief Executive's Office. If additional funding is required to increase the establishment of the Chief Executive's Office, we will seek approval from the Finance Committee of this Council in accordance with normal procedures.

Legal Aid Department Expenditure

11. MR WONG SIU-YEE (in Chinese): In less than a week after the passage of the Immigration (Amendment) (No. 3) Ordinance 1997, the Legal Aid Department (the Department) has approved more than 20 applications for legal aid in relation to the Ordinance. In this regard, will the Government inform this Council:

(a) whether the Department has verified the relationship between the applicants and their children before approving the above-mentioned applications; if so, how the Department verifies such relationship;

(b) of the amount of public money expected to be spent on these cases; and whether the Department's budget for the current financial year is adequate to meet the expenses arising from these cases, without having to apply to this Council for supplementary provisions; and

(c) of the reasons why the Department does not wait for the court's ruling on the first lawsuit of this nature before processing other cases; and whether the present arrangement will increase the workload of the court?

CHIEF SECRETARY FOR ADMINISTRATION (in Chinese): Madam President, our reply to parts (a) to (c) of the Honourable WONG Siu-yee's question is as follows:

(a) The proof of parent and child relationship is essential in each application. The Legal Aid Department (the Department) requires a proper birth certificate issued by the appropriate authority to verify the relationship. In the absence of any documentary proof of identity and status of the persons concerned, the Department will refuse an application for legal aid.

(b) So far, 73 cases have been granted legal aid. However, with the agreement of the courts and both sides, a few cases will be selected as test cases to obtain rulings from the courts on points of law. It is therefore unnecessary to initiate separate proceedings for each and every legally aided person. It is difficult to estimate the costs of litigation at this stage as it depends on the number of selected cases, their complexity and whether there will be any appeals arising from such cases. The Department will closely monitor expenditure in these cases.

(c) All applications for legal aid must be processed expeditiously in accordance with the Legal Aid Ordinance (Cap. 91). Delay in processing an application may jeopardize the interests of eligible applicants. It is expected that the few test cases would not overburden the court.

Pirated Video Compact Discs

12. MR MA FUNG-KWOK (in Chinese): Will the Government inform this Council of:

(a) the current number of video compact disc (VCD) production lines operating in Hong Kong and the number of those which are involved in copyright piracy activities; and

(b) the current number of pirated VCDs being brought into and out of Hong Kong through various border control points each day, according to the estimation of the Customs and Excise Department?

SECRETARY FOR TRADE AND INDUSTRY (in Chinese): Madam President,

(a) There is at present no requirement for video compact disc (VCD) production lines to be registered or licensed. Hence, the Government of the Hong Kong Special Administrative Region does not have official records of the number of VCD production lines in Hong Kong.

There is no evidence to suggest that local CD production lines are involved in the manufacture of infringing articles. Given our commitment to combat copyright piracy at all levels, we are nevertheless considering the feasibility of introducing licensing requirements for the import and export of CD manufacturing machinery and for CD factories. These would enable Customs to better monitor and combat piracy. We meet with the copyright trade regularly to review the piracy situation, and will continue to work on new measures to prevent and fight piracy.

(b) Hong Kong Customs do not have projections of the number of pirated VCDs being brought into and out of Hong Kong through the various border control points each day. However, the following table summarizes the number of pirated CD products, including VCDs, seized at various border control points in 1996. It illustrates the ground situation of the flow of pirated CDs into Hong Kong.

[Table] Figures on seizures of CD products (including VCDs) at various border control points in 1996.
Control Point	No. of cases	Persons arrested	CDs seized	Value of seizures
China/Macau Ferry Pier	1	1	122	$6,100
Lo Ma Chau	3	3	11 510	$614,000
Lo Wu	68	68	4 763	$175,385
Macau Ferry Terminal	4	4	857	$59,380
Man Kam Road	4	4	22 838	$1,317,700
Sha Tau Kok	4	3	75 220	$4,092,300
Total	84	83	115 310	$6,264,865

Contracting AIDS Virus through Blood Transfusion

13. MR HUI YIN-FAT (in Chinese): It is reported that a child patient in the Prince of Wales Hospital suffering from thalassaemia is suspected to have contracted AIDS virus through blood transfusion. In this connection, will the Government inform this Council:

(a) of the current procedure for examining blood products to find out whether they have been contaminated by AIDS virus; whether the occurrence of the above incident indicates that there are loopholes in the procedure concerned;

(b) whether, before giving blood transfusion to the patients, the public hospitals in Hong Kong conduct AIDS virus and antibody tests on the blood samples which will be used for transfusion, if not, why not;

(c) notwithstanding that the victim of the above incident may claim compensation from the AIDS Trust Fund, whether the relevant authority will bear the expenses incurred by the victim concerned in undergoing long-term treatment for AIDS in future; if not, why not; and

(d) of the remedial actions that will be taken to avoid the recurrence of similar incidents in future?

SECRETARY FOR HEALTH AND WELFARE (in Chinese): Madam President,

(a) Since 1985, all donated blood units collected by the Hong Kong Red Cross Blood Transfusion Service (BTS) are tested for HIV (Human Immunodeficiency Virus) antibodies by using the test called Enzyme Immunoassays. This test is widely adopted in other developed countries, including Britain and Australia, for screening out HIV-infected blood units. Only those blood units which pass these HIV tests are accepted for transfusion purpose. Regrettably, as the HIV antibodies take time to develop after a person is HIV infected, the blood units taken from the infected person during the three weeks period (known as the "window period") immediately after the infection, though already contaminated, would not react "positive" to these tests for antibodies and the infected blood units would escape being detected. Such occurrence, according to both overseas and local experience, is however extremely rare.

(b) Since the BTS has tested all donated blood units before they are distributed to the public hospitals, the latter do not conduct further tests on them prior to use for transfusion as such duplicate tests will not produce any different results. The reliability of the test outcome is affected by the timing of the blood donation, not the timing of the tests.

(c) The Hospital Authority will continue to provide the patient with the necessary medical treatment and support services and will liaise with the Administration for the provision of any further assistance, as the requirements arise.

(d) As part of BTS's ongoing quality improvement process, BTS will continue to keep abreast of the latest HIV-screening technology to ensure that any new technology which is reliable and cost-effective will be introduced when it is available to further minimize the risk of HIV infection through blood transfusion. On the other hand, the Administration will continue to educate the public on the risk and channels of HIV infection and remind persons with at-risk behaviours that they should refrain from donating blood, and in particular, not to use blood donation as a means of testing whether they are infected or not. The Department of Health offers free HIV testing service and counselling, where strict confidentiality is observed.

Film Commission

14. MR MA FUNG-KWOK (in Chinese): Will the Government inform this Council:

(a) whether any measures are in place to promote the development of the local film industry; if so, of the resources required for the implementation of such measures and the progress made in this regard; if not, why not; and

(b) of the reasons for the rejection by the former Broadcasting, Culture and Sport Branch of the proposal to set up a Film Commission?

SECRETARY FOR BROADCASTING, CULTURE AND SPORT (in Chinese): Madam President,

(a) The Task Force on Services Promotion, established for promoting Hong Kong's service sector, announced in March 1996 its service support strategies. Action agendas for 14 leading service industries were drawn up, one of which covered the film industry. Substantial progress has been made in implementing the agenda for the film industry. The progress is summarized as follows:

(i) On streamlining the procedures and regulations for location shooting of films, the Regional Services Department, Water Supplies Department, Housing Department, Marine Department and Civil Aviation Department have reviewed the application procedures for location shooting in premises under their respective purview. The Broadcasting, Culture and Sport Bureau (BCSB) will continue to follow up with relevant government departments on this front.

(ii) The Information Services Department will in the next few months publish an updated version of "Guide to Filming in Hong Kong" and establish a database on rules and regulations on location shooting thus providing more comprehensive information to the film industry.

(iii) The Hong Kong Trade Development Council and the Movie Producers and Distributors Association of Hong Kong jointly organized the first Hong Kong International Film Market (Filmart) in June 1997. Some 75 exhibitors and over 500 buyers participated in the event. The second Filmart will be held in June 1998. To strengthen Hong Kong's status as the centre for the trading of films and film-related products in Asia, the Government will continue to maintain close liaison with the organizers and provide them with appropriate assistance.

(iv) Through the assistance of the BCSB, the Hong Kong Academy for Performing Arts has agreed in principle to provide training on digital technology for the film industry. This will certainly play a positive role in raising the standard of local film production.

(v) The Government is now reviewing the Film Censorship Ordinance with a view to improving the film censorship regime to cater for the flexible operation of the film industry.

The implementation of these initiatives forms part of the normal duties of the BCSB and other relevant government departments. It is therefore not practical to specify the resources devoted to each initiative.

(b) The film industry has in the past repeatedly urged the Government to set up a film commission. The Government however considered that the functions of the proposed commission have largely been carried out as part of the supporting services rendered to the film industry (including location shooting and overseas promotion) by various departments and public bodies such as the Hong Kong Trade Development Council, Hong Kong Arts Development Council and Hong Kong Tourist Association. The Government therefore could not support using public funds to establish a film commission on top of the existing structure. The BCSB will continue to closely monitor development of the film industry and will review, where practicable and necessary, the existing supporting services provided for the industry with a view to improving them.

Hong Kong Residents Stranded in Cambodia Lacking Assistance

15. MR HUI YIN-FAT (in Chinese): It is learnt that during the recent political turmoil in Cambodia, several hundred Hong Kong residents approached the Chinese Embassy (the Embassy) in Phnom Penh for assistance. However, the Embassy only advised them to find a safe route to leave Cambodia by themselves without rendering them any assistance. In this connection, will the Government inform this Council:

(a) whether it knows if the Embassy offered assistance to these Hong Kong residents; if it did not, the reasons for not offering assistance;

(b) whether it has requested the Central Government or the Embassy to provide assistance to these Hong Kong residents; if not, why not;

(c) whether it knows of the kinds of assistance or service the Chinese organizations stationed in foreign countries will provide to Hong Kong residents in case of political turmoil or warfare in these countries; and whether such organizations will take the initiative to evacuate Hong Kong residents from the war zone and if not, why not; and

(d) of the specific measures in place to safeguard the personal safety of Hong Kong residents who are caught in the midst of a war in a foreign country?

SECRETARY FOR SECURITY (in Chinese): Madam President,

(a) We have been advised that during the military conflict in Cambodia, the Chinese Embassy (the Embassy) at Phnom Penh had taken various measures to assist the Hong Kong residents there. These included representations made to the Cambodian authorities asking them to adopt measures to protect all Chinese citizens who are Hong Kong residents; setting up of a hotline at the Embassy; issuing notices to those citizens inviting them to register with the Embassy so that they could monitor their well-being; assisting in transporting some Hong Kong residents to safety area from the war zone; and helping some others to leave the country upon their request. The Embassy has also urged the Cambodian authorities to resume flight arrangement between Hong Kong and Cambodia as soon as Cambodia's situation returned to normal.

(b) Since the military conflict broke out in Phnom Penh on 5 July 1997, the Government had kept in touch with the Chinese Ministry of Foreign Affairs on the assistance being offered to Hong Kong residents in Cambodia. The Ministry has assured us that Hong Kong residents who are Chinese nationals or British National (Overseas) passport holders can seek consular assistance from the Chinese embassy.

(c) The Chinese Ministry of Foreign Affairs has advised us that in case of political turmoil in a foreign country, the Chinese embassy would take all necessary measures to protect Hong Kong residents there. If the situation requires, evacuation will be arranged.

(d) Consular protections are offered by Chinese embassies. In such connection, we have the assurance from the Ministry of Foreign Affairs that all Chinese embassies stand ready to protect the interests of Hong Kong residents abroad. In time of war in a foreign country, the Chinese embassy there would take all necessary measures to protect Hong Kong residents.

Comprehensive Human Resources Strategy

16. DR RAYMOND HO (in Chinese): In order to solve the housing problem in Hong Kong, the Chief Executive has recently announced the Government's plan to achieve the goal of having 70% of the people in Hong Kong becoming home owners within the next 10 years. Apart from housing production, the related infrastructural and complementary development works will definitely be on the increase too. In this connection, will the Government inform this Council:

(a) whether the Government has formulated a comprehensive human resources strategy to train more local professional and technical staff, so as to reduce the dependence on foreign experts; and

(b) if the answer to (a) above is in the affirmative, whether, in inviting tenders for the projects concerned, the Government will adopt the practice in some countries of setting a ceiling on the percentage of foreign professionals to be employed, or request the companies concerned to specify the types of work requiring the service of foreign experts, so as to ensure that local professionals are given the chance to participate in these projects?

SECRETARY FOR EDUCATION AND MANPOWER (in Chinese): Madam President,

(a) As far as housing production and other related infrastructural and complementary development works are concerned, such as site formation and construction of road network, we have a large pool of local professional and technical staff to meet the requirements of the industry. Although there may be individual projects which are highly specialized and require the technical input of foreign experts, we do not consider that there is any unhealthy dependence on foreign experts.

For example, over the last few years, none of the consultant firms commissioned by the Housing Authority (HA) to carry out public housing projects were overseas companies. Experience also indicates that the vast majority of staff of such consultants working on HA projects are either locally or overseas qualified professionals permanently residing in Hong Kong. On the other hand, in respect of private sector housing projects, it is a requirement under the Buildings Ordinance that all building works must be co-ordinated and supervised by Authorized Persons (AP) and Registered Structural Engineers (RSE) who are locally established and registered under the Ordinance. Although from time to time overseas consultants are engaged in some special projects, they are usually involved only in designing work and must still come under the supervision of local APs and RSEs.

It should also be pointed out that under our policy on entry of overseas professionals for employment in Hong Kong, only those overseas personnel, including those of particular relevance to the construction industry, who possess a special skill, knowledge and experience of value to and not readily available in Hong Kong, and are in a position to make a substantial contribution to our economy will be allowed to come to work in Hong Kong.

The Government's human resources strategy is to ensure that adequate and suitably trained personnel are available to meet the development and needs of the industry. At the level of craftsman to technician, the Government will meet the demand arising from the expected increase in housing production mainly by providing vocational training and retraining through the Construction Industry Training Authority (CITA), the technical institutes of the Vocational Training Council (VTC), and the Employees Retraining Board (ERB). In 1996-97, the three training bodies provided training to more than 20 000 workers of various disciplines. There are also plans to increase the training provision in the light of the expected increase in housing production, details of which are set out in my reply to an oral question asked by the Honourable CHENG Yiu-tong on 16 July 1997.

As regards the higher technician to professional level, training for the building and construction as well as other relevant fields are provided by a number of tertiary institutions funded by the Government through the University Grants Committee (UGC) and the two technical colleges under the VTC. In 1996-97, the total numbers of intakes were 1 220, 878 and 552 respectively for the various courses at sub-degree, undergraduate and post-graduate levels. The courses cover architectural studies, building and building services engineering, building/quantity/land surveying, building technology and management, civil engineering, construction/ property development management, and other relevant disciplines.

On the basis of information provided by the Government and feedback gathered by themselves, the relevant UGC-funded institutions will continue to seek to provide enough training to meet the changing requirements of our economy. The VTC, in keeping with the recently announced recommendations of its strategic and organizational review, will also aim to adjust its training capacity to meet the manpower needs of the construction industry of Hong Kong.

(b) As far as public works are concerned, we do not have, nor do we intend to set, any ceiling or other restrictions on the numbers and types of foreign construction related professionals who may come to work in Hong Kong. Our procurement policy is to obtain goods and services at the best value for money in support of the Government's programmes and activities through open, fair and non-discriminatory procedures. We provide equal opportunities for domestic and foreign suppliers and service providers in participating or competing in government procurement.

These principles are also in line with our obligation as a signatory to the World Trade Organization Government Procurement Agreement as well as our commitment to free trade.

As pointed out in part (a) of my reply, we do not consider that there is any unhealthy dependence on foreign experts, and in fact, in both the public and the private sectors, experience indicates that local professionals have been participating and playing a major role in housing and other related projects. Together with our policy on entry of overseas professionals, under which only those experts whose skills and knowledge are not readily available in Hong Kong will be allowed to come to Hong Kong, we do not see the need for any restrictions as suggested in the question.

Old Cars Scrapping Incentive Scheme

17. MRS MIRIAM LAU (in Chinese): The Government implemented the Old Cars Scrapping Incentive Scheme in June last year by offering concession on motor vehicle first registration tax so as to encourage the owners of private cars of 10 or more years old to scrap their old cars. In this connection, will the Government inform this Council:

(a) of the number of private cars which were 10 or more years old in Hong Kong when the Scheme was introduced, as well as the current number of such private cars;

(b) of the total number of old cars scrapped under the Scheme and the total amount of tax concession offered since the implementation of the Scheme;

(c) of the average number of years for which the car owners enjoying such a tax concession had owned the scrapped old cars since the implementation of the Scheme; and

(d) how it will assess the effectiveness of the Scheme?

SECRETARY FOR THE TREASURY (in Chinese): Madam President,

(a) When the Old Cars Scrapping Incentive Scheme was first introduced on 3 June 1996, there were over 43 000 private cars which were 10 or more years old in Hong Kong. The current number of such private cars is 56 000 (over 17 500 cars turned 10 years old after the implementation of the Scheme).

(b) Up to 30 June 1997, a total of 2 404 old private cars were scrapped under the Scheme. First registration tax concession was granted in respect of 1 613 cases with the registration of replacement cars (the entitlement for the tax concession under the Scheme is valid for six months from the date the old car is scrapped). The total tax concession granted amounts to $23,505,000 (on average, $14,600 per car).

(c) On average, car owners who had received tax concession under the Scheme had owned the scrapped cars for seven years.

(d) Over 2 400 private cars of 10 years old or more have been scrapped since the implementation of the Scheme 13 months ago (over 180 per month on average). These cars might not have been scrapped and replaced if there had not been such a scheme. We consider that the Scheme has, to a certain extent, helped to improve air quality on the road by encouraging car owners to scrap and replace their old private cars. No abuse has so far been detected. We will continue to monitor the implementation of the Scheme and assess its effectiveness in the coming year.

Guideline on Hoisting the National Flag in Schools

18. MR YEUNG YIU-CHUNG (in Chinese): I have received many inquiries from schools about the hoisting of the national flag in schools. In this connection, will the Government inform this Council whether it will formulate any plan to provide suitable facilities and relevant reference materials to facilitate the hoisting of the national flag in schools in the correct manner?

SECRETARY FOR EDUCATION AND MANPOWER (in Chinese): Madam President, at present, there is no legislation nor administrative order which requires schools to hoist the national flag or the regional flag. For matters regarding the hoisting of the national flag or the regional flag, schools may refer to the National Flag and National Emblem Ordinance, the Regional Flag and Regional Emblem Ordinance and the Stipulations for the Display and Use of the National Flag and National Emblem and the Regional Flag and Regional Emblem, or they can approach the Education Department (ED) for information.

The Educational Television Unit of the ED is planning to produce a special television programme to help primary and secondary students know more about the background and content of our national flag, national emblem, national anthem, regional flag and regional emblem. The programme, scheduled to broadcast in the first term of the 1997-98 school year, will cover matters such as the points to note when hoisting the national flag and the proper manner and rituals to be adopted. The ED will also distribute the resource materials of the programme to schools.

In case aided schools need to purchase or upgrade equipment for hoisting the national flag or the regional flag, they may apply to the Education Department. The ED will render as much assistance as possible in the provision of resources and in other areas.

MOTIONS

Hong Kong Court of Final Appeal Ordinance

PRESIDENT (in Cantonese): Motion under the Hong Kong Court of Final Appeal Ordinance. Secretary for Justice.

SECRETARY FOR JUSTICE (in Cantonese): Madam President, I move the resolution standing in my name on the Agenda. The resolution is to the effect that this Council endorses the appointment of:

Sir Denys Tudor Emil ROBERTS

Sir Alan Armstrong HUGGINS

Mr Art Michael MCMULLIN

Sir Derek CONS

Mr William James SILKE

Mr Kutlu Tekin FUAD

Mr Philip Gerard CLOUGH

Mr Neil MACDOUGALL

The Honourable Mr Justice POWER

The Honourable Mr Justice NAZARETH

The Honourable Mr Justice MORTIMER

as non-permanent Hong Kong judges of the Hong Kong Court of Final Appeal (CFA); and

The Honourable Sir Anthony MASON

The Rt Honourable the Lord COOKE of Thorndon

The Rt Honourable Sir Edward SOMERS

The Honourable Sir Daryl DAWSON

as judges of the CFA from other common law jurisdictions.

The Hong Kong Court of Final Appeal Ordinance provides for a list of non-permanent Hong Kong judges and a list of judges from other common law jurisdictions. The total maximum number of judges from both lists is 30. The term of appointment of such judges is three years. When hearing appeals, the Court will have five judges consisting of the Chief Justice, three permanent judges and one non-permanent Hong Kong judge or one judge from another common law jurisdiction selected by the Chief Justice and invited by the Court. Furthermore, where a sufficient number of permanent judges are not available for any cause to hear an appeal, the Chief Justice shall nominate a non-permanent Hong Kong judge to sit in place of a permanent judge.

In accordance with the Basic Law, the Court of Final Appeal Ordinance provides that the judges of the CFA including the non-permanent Hong Kong judges and judges from other common law jurisdictions, shall be appointed by the Chief Executive acting in accordance with the recommendation of an independent commission, namely, the Judicial Officers Recommendation Commission (JORC). In the case of the appointment or removal of judges of the CFA, the Chief Executive is further obligated to obtain the endorsement of the Legislative Council.

On 1 July 1997, Members endorsed the appointment of the Chief Justice and the three permanent judges. Since then, the JORC has made recommendations in respect of the appointment of the non-permanent judges of the CFA. The Chief Executive has now received and accepted the Commission's recommendation on these appointments and today I seek Members' endorsement of such appointments as required by the Basic Law and the Hong Kong Court of Final Appeal Ordinance.

Non-Permanent Hong Kong Judges

Section 12 of the Ordinance sets out the qualifications required of the judges of the CFA. A person is eligible for appointment as a non-permanent Hong Kong judge if he is a retired Chief Justice or permanent judge of the CFA, a retired Chief Judge of the High Court (or a retired Chief Justice of the previous Supreme Court), a serving or retired Justice of Appeal, or a barrister who has practised as a barrister or solicitor in Hong Kong for at least 10 years. The Ordinance specifically prohibits any private practitioner appointed as a permanent or non-permanent judge of the CFA from returning to private practice as a barrister or solicitor in Hong Kong. Therefore, Members can see that there are no barrister or solicitor among those recommended and this is one of the reasons why.

After careful consideration, the Commission has unanimously recommended 11 persons for appointment as non-permanent Hong Kong judges. In so doing, the JORC has taken account of the following factors:

(a) the candidate's judicial or professional track record while serving in Hong Kong or in other jurisdictions;

(b) whether the candidate is still judicially active;

(c) whether the candidate is holding any public office in the other branches of the Government;

(d) whether the candidate is in politics or had adopted such a public political position as to render him or her inappropriate for appointment.

Of the 11 recommended candidates, Sir Denys ROBERTS is a retired Chief Justice of Hong Kong. Seven, namely, Sir Alan HUGGINS, Mr Art MCMULLIN, Sir Derek CONS, Mr William SILKE, Mr Kutlu FUAD, Mr Philip CLOUGH and Mr Neil MACDOUGALL, are retired Judges of the Court of Appeal. The other three, namely, Mr Justice POWER, Mr Justice NAZARETH and Mr Justice MORTIMER, are serving Vice-Presidents of the Court of Appeal. Their curricular vitae are laid before Members. As regards the retired judges, the Commission has noted in particular that Sir Denys ROBERTS, Sir Alan HUGGINS, Mr Art MCMULLIN, Sir Derek CONS and Mr Kutlu FUAD are serving on the Court of Appeal in Brunei and some in Bermuda as well.

Judges from Other Common Law Jurisdictions

A person is eligible for appointment as a judge from another common law jurisdiction if he is a serving or retired judge of a court of unlimited jurisdiction in either civil or criminal matters in another common law jurisdiction, is ordinarily resident outside Hong Kong, and has never been a Judge of the High Court, a District Judge or a permanent Magistrate in Hong Kong.

While the appointment exercise in respect of the non-permanent Hong Kong judges is for the moment complete, the present recommendations on the appointment of the judges of other common law jurisdiction represent only part of that particular exercise.

At this initial stage of the exercise, the Commission concentrated on retired judges only. As far as serving judges in other common law jurisdictions are concerned, the Chief Justice will have to discuss with overseas judiciaries to try to secure their agreement for their serving judges to sit on Hong Kong's CFA. This process will take time. To ensure that the CFA will be in a position to function as soon as possible, the JORC has accepted the Chief Justice's recommendation that the list of judges from other common law jurisdictions should start with retired overseas judges first.

The Commission has so far focused on retired judges from England, Australia and New Zealand, being the three countries which have close affinity with Hong Kong in terms of their laws, legal tradition and procedure, including appellate procedures.

The Commission considered a number of names from these three jurisdictions and recommended that four be appointed as judges from other common law jurisdictions. They are the Honourable Sir Anthony MASON, the Rt Honourable Lord COOKE of Thorndon, the Rt Honourable Sir Edward SOMERS and the Honourable Sir Daryl DAWSON.

Sir Anthony MASON was Chief Justice of the High Court of Australia from 1987 to 1995. Lord COOKE was President of the Court of Appeal in New Zealand and now sits in the House of Lords in England. Sir Edward SOMERS was a judge of the New Zealand Court of Appeal. Sir Daryl DAWSON is a judge of the High Court of Australia. His appointment will only take effect on 1 September 1997, after he has retired from the Australian bench. Their curricular vitae are laid before Members.

No retired judges from England are recommended on this occasion because the two retired judges sounded out were unable to accept appointment due to their personal plans in retirement.

In considering candidates for the list of judges from other common law jurisdictions, the JORC took account of the candidate's stature and achievements in the common law world, whether he served on a court which has comparable status as the CFA, and the affinity between Hong Kong and the jurisdiction from which he comes. It is the intention of both the Chief Justice and the Commission that this list will be expanded in due time.

The four persons recommended had been prominent judges in their respective jurisdictions, each with a distinguished record of service. Their appointment will bring to the Hong Kong CFA a wealth of invaluable experience. Furthermore, they will provide an important conduit between the Hong Kong Special Administrative Region and other common law jurisdictions.

Concluding Remarks

Members' endorsement of these 15 appointments will place the CFA in a fully functional position, ready to hear appeals. I believe that these appointments will be warmly received by the legal profession and will set a tone to the Commission's deliberations on other appointments to be made in the future. With these comments, I seek Members' endorsement of the appointment of

Sir Denys Tudor Emil ROBERTS

Sir Alan Armstrong MUGGINS

Mr Art Michael MCMULLIN

Sir Derek CONS

Mr William James SILKE

Mr Kutlu Tekin FUAD

Mr Philip Gerard CLOUGH

Mr Neil MACDOUGALL

The Honourable Mr Justice POWER

The Honourable Mr Justice NAZARETH

The Honourable Mr Justice MORTIMER

as non-permanent Hong Kong judges of the CFA; and

The Honourable Sir Anthony MASON

The Rt Honourable the Lord COOKE of Thorndon

The Rt Honourable Sir Edward SOMERS

The Honourable Sir Daryl DAWSON

as judges of the CFA from other common law jurisdictions. Subject to Members' endorsement and the completion of other formalities, these appointments (other than that of Sir Daryl DAWSON) will take effect from the Monday following the date of the Council's endorsement. Sir Daryl DAWSON can only accept appointment after his retirement from the High Court of Australia and his appointment will only take effect on 1 September 1997.

I recommend the motion to Members. Thank you, Madam President.

PRESIDENT (in Cantonese): I now propose the question to you and that is: That the motion moved by the Secretary for Justice under section 7A of the Hong Kong Court of Final Ordinance as set out in Appendix I to the Agenda, be approved.

Does any Member wish to speak? Dr LEONG Che-hung.

Appendix I

HONG KONG COURT OF FINAL APPEAL ORDINANCE

-------------------

RESOLUTION

(Under section 7A of the Hong Kong Court of

Final Appeal Ordinance (Cap. 484)

------------------

RESOLVED that -

1. the appointment of -

(a) Sir Denys Tudor Emil ROBERTS;

(b) Sir Alan Armstrong HUGGINS;

(c) Mr Art Michael MCMULLIN;

(d) Sir Derek CONS;

(e) Mr William James SILKE;

(f) Mr Kutlu Tekin FUAD;

(g) Mr Philip Gerard CLOUGH;

(h) Mr Neil MACDOUGALL;

(i) the Honourable Mr Justice POWER;

(j) the Honourable Mr Justice NAZARETH; and

(k) the Honourable Mr Justice MORTIMER,

as non-permanent Hong Kong judges of the Hong Kong Court of Final Appeal persuant to section 8 of the Hong Kong Court of Final Appeal Ordinance be endorsed;

2. the appointment of -

(a) the Honourable Sir Anthony MASON;

(b) the Right Honourable the Lord COOKE of Thorndon;

(c) the Right Honourable Sir Edward SOMERS; and

(d) the Honourable Sir Daryl DAWSON,

as judges of the Hong Kong Court of Final Appeal from other common law jurisdictions pursuant to section 9 of the Hong Kong Court of Final Appeal Ordinance be endorsed.

DR LEONG CHE-HUNG: Madam President, I have asked to speak on this motion with no intention of speaking on the content, that is, the details of these very distinguished gentlemen. Nor am I objecting to the contents simply because I do not have enough knowledge of them, namely, the names of the potential Court of Final Appeal Judges whom we are asked to endorse today. I could also say that the same applies to many Members of this Council. And it is exactly because I do not know enough that I would be speaking and casting my discontent on how the Government has handled this public issue, that is, Members again also have to approve an issue with some less than 24 hours' notice.

Madam President, this is the third meeting this Council has convened since the establishment of the Special Administrative Region. In each of these sessions, Members have been asked to endorse important issues in haste without being given the chance to properly digest the details. In the first session, it was the passing of the Immigration (Amendment) (No. 5) Bill through all three readings in one session. Members of this Council considered the Bill, realizing the urgency and difficulty that the Administration would have to face. On the second occasion, Members were asked to deal with the infamous suspension Bill, a week before the Government intended to pressurize this Council to adopt the same whirlwind procedure. Members resisted and the Government withdrew the proposal forcing the passage of the Bill in one session but still resumed Second Reading debate one week after this introduction. Members, it is hard to do our best to co-operate with the Administration.

Madam President, all these are now "water under the bridge". Today we are again asked to approve a list of Court of Final Appeal Judges with less than 24 hours of notice. It may be argued that a Court of Final Appeal may need to be established urgently and that this Council will not be convening for some three weeks after today. Yet the timetable of this Council is well known to the Administration all the way when we had our meeting in Shenzhen.

Madam President, Article 90 of the Basic Law makes provision for the legislature to endorse the appointment of the Judges of the Court of Final Appeal by reference and this Council could also refute some or all of them. Yet how could Members be asked to do this with less than 24 hours' notice when a lot of the names are not even familiar to most of us? Let me repeat what I said last week, and I can express this sentiment perhaps together with many Members of this Council, that is, while this Council realizes that as a new Government there are many areas that need to be urgently dealt with, the role of this Council and its Members should not be ignored. It is the duty of this Council and its Members to scrutinize all Bills and motions not only to our own satisfaction, but to see to it that it is acceptable to the public and in the best interests of the public. The role of this body should never be compromised, nor should we ever be made to act nor seem to act as a rubber stamp.

Madam President, I look forward to the Administration working in better co-operation with this Council and to the Secretary for Justice explaining to this Council the background for introducing this motion without giving adequate consideration for Members to digest. Thank you, Madam President.

PRESIDENT (in Cantonese): Mr TSANG Yok-sing.

MR TSANG YOK-SING (in Cantonese): Madam President, we are very pleased to see that the Commission can speedily identify a group of well-experienced judges, for appointment as non-permanent judges of the CFA and as CFA judges from other common law jurisdictions. We believe, on the basis of the information at hand, that the Commission has made careful choices and we are pleased that the judges are willing to take up the job. Thus, I support the motion.

However, we have noted at the same time that a gap exists between the recommended list and the maximum number stated in the Hong Kong Court of Final Appeal Ordinance. The Secretary for Justice has just mentioned that the recommendation of non-permanent Hong Kong judges has completed at this stage. Besides the recommendation of these 11 judges, there are currently no other plans to recommend other judges. There are only four overseas judges, among whom one cannot come into office immediately. Were there many difficulties in the course of the selection of judges which made it impossible to find more suitable candidates? Will the number of judges on the list have any effect on the operation of the CFA? Is the current number of judges from other common law jurisdictions sufficient to guarantee that our CFA will commence normal operation quickly? We wish to know more about this point. Thank you, Madam President.

PRESIDENT (in Cantonese): Secretary for Justice, your reply.

SECRETARY FOR JUSTICE: Madam President, first of all, may I respond to Dr the Honourable LEONG Chi-hung. I must tender an apology to this Council for the lateness of the motion, however, I hope that Members would understand the situation. The Judicial Officers Recommendations Ordinance prescribed a particular majority quorum for the passing of resolution; there is not a simple majority, but it requires a majority of two to seven. Therefore, in convening a meeting of the Judicial Officers Recommendations Commission, we had difficulty in finding a date to ensure that there would be sufficient members present. Therefore the recommendation of the Commission was only made to the Chief Executive on 17 this month and there were procedures necessary to ensure that the Chief Executive will have sufficient information to make his appointment.

Secondly, there is urgency for the matter because I understand the Council will be going into recess after this meeting. Members are aware that there is pending before the Court of Appeal an important constitutional issue that is relating to the transition of law and the validity of the Provisional Legislative Council. If either party is not satisfied with the decision of the Court of Appeal, probably the matter would have to be taken further to the Court of Final Appeal. At the moment, the Court of Final Appeal has four judges, namely, the Chief Justice of the Court of Final Appeal and three other Justices. In order to make it function, we need a panel of five, that is, we must have the non-permanent Judge, that is one of the members who are now placed before this Council. The material or the information necessary to enable Members to make a decision on the matter is relatively simple. I believe Members have before you the most important information relating to these Judges, their age, their education, their professional qualification and their career. So Members need time to consider this, probably the matter could be stood down for say 10 or 15 minutes if necessary. However, the information necessary to enable Members to endorse the decision of the Judicial Officers Recommendation Commission are all there, so I hope that this would enable Members to make their decision.

As I said in my previous speech, the duty of this Council is to endorse the appointment made by the Judicial Officers Recommendation Commission through thorough debate and consideration. So unless the material before this Honourable Council is so obvious that the candidates are not suitable, or unfit persons, otherwise I recommend that this Council would endorse the recommendation.

Regarding the question raised by the Honourable TSANG Yok-sing, the composition of the Court of Final Appeal is for five judges, and we need to have one non-permanent Judge in order to make the Court of Final Appeal function. So, the present list of non-permanent Judges would have enough members for the time being to enable the Court of Final Appeal to sit and conduct appeal. Of course, it would be most desirable for the list of 30 to be completed. However, if Honourable Members will consider that it is necessary for the Chief Justice to correspond with the Judges in Australia, New Zealand, England and other common law jurisdiction to brief them of the proposed appointment, the duties of the Court of Final Appeal and so on, it is not possible within three weeks of the establishment of the Hong Kong SAR to have all the 30 Judges appointed at this stage. However, endorsement by this Council will make the Court of Final Appeal functionable as from next week. So on this I recommend that this Council will accept the recommendation. Thank you, Madam President.

PRESIDENT (in Cantonese): I now put the question to you as stated.

Will those in favour please say "aye"?

(Members responded)

PRESIDENT (in Cantonese): Those against please say "no".

(No Member responded)

PRESIDENT (in Cantonese): I think the "ayes" have it. The "ayes" have it.

Public Finance Ordinance

PRESIDENT (in Cantonese): Motion. Motion under the Public Finance Ordinance. Secretary for the Treasury.

SECRETARY FOR THE TREASURY (in Cantonese): Madam President, I move the motion under my name on the Agenda.

The Hong Kong Special Administrative Region Government Land Fund with assets totalling $170 billion was handed over in full to the Hong Kong Special Administrative Region (SAR) Government on 1 July 1997, the date of its establishment. The assets have become a part of the General Revenue of the SAR Government in accordance with the Pubic Finance Ordinance while the fiscal reserves of the SAR Government has accordingly been increased to $350 billion.

The Chief Executive has appointed the Financial Secretary as the public officer responsible for receiving these assets, and the investment of the assets is now independent of the investment portfolio of the Exchange Fund and is managed by the Hong Kong Monetary Authority under the guidance of the Financial Secretary. Before the SAR Government decides on the long-term uses of such assets, in order to facilitate management, the Government suggests that the Council shall propose a motion to establish a fund under section 29 of the Public Finance Ordinance, for receiving and holding the assets and making investments. This arrangement allows us to clearly tell from and show in the government accounts the accumulated value and investment performance of the assets, to facilitate a review of our investment strategy.

Moreover, this arrangement also allows us to meet the relevant expenses on the management and investment of such assets. We believe that the said arrangement can increase the transparency of the management of the assets, with no effects on the decisions to be made by the SAR Government on the long-term uses of the assets. Other government funds such as the Capital Works Reserve Fund, the Capital Investment Fund and so on are established under section 29 of the Public Finance Ordinance. To maintain continuity, the Government suggests that the fund established on the said ground shall be known as the Land Fund including the following major clauses to be submitted to and resolved by the Council:

(A) The Fund shall be administered and managed by the Financial Secretary who may delegate his power of administration and management to other public officers;

(B) all sums earned from the investment or disposal of the fund assets, after the deduction of the relevant expenses, shall be credited to the Fund;

(C) all expenses relating to the administration and management of fund assets shall be met at the expense of the Fund;

(D) the Fund shall assume all the liabilities of the Trustees of the Hong Kong Special Administrative Region Government Land Fund Trust, and all the obligations of the Financial Secretary to indemnify the Trustees in respect of the Trust; and

(E) the Financial Secretary may authorize and direct the investment of any assets of the Fund.

On the basis of the said clauses, the Land Fund proposed to be established can only be used for investment and not for the provision of government services. There is no provision in the resolution allowing for the transfer of the amounts in the Fund to the General Revenue Account or other government funds.

The above restriction can only be cancelled or changed by a motion in this Council according to section 29 of the Public Finance Ordinance. We also suggest that the establishment of the Land Fund and the clauses of the motion shall be deemed as have become effective since 1 July 1997 to match the handing over of the Hong Kong Special Administrative Region Government Land Fund to the SAR Government upon its establishment on 1 July.

Just like other government funds established in accordance with section 29 of the Public Finance Ordinance, each year the Director of Accounting Services must work out and submit to the Director of Audit in accordance with the Audit Ordinance the balance sheets and expenditure statements of the Land Fund, and the Director of Audit will submit a report to the legislature after auditing the accounts. The Land Fund accounts will also be published for the public's information.

Madam President, I have to thank the Honourable CHAN Kam-lam, Chairman of the Subcommittee for the scrutiny of this motion and other members of the Subcommittee for supporting the Government's suggestion, and completing the scrutiny of the motion in one single meeting. The Honourable NGAN Kam-chuen has proposed an amendment to the motion to deduct the interest or dividends earned from the investment of the Land Fund assets from the sums to be credited to the Land Fund. As the amendment has not been discussed at the meeting of the Subcommittee, some Members probably do not fully understand the actual results and effects of the amendment. I would like to take this opportunity to explain briefly to Members why the Government opposed the amendment. The actual result of the amendment proposed by Mr NGAN Kam-chuen is that the interests earned by the investment of the Land Fund will not be credited to the Land Fund but to the General Revenue Account. In so doing, we cannot show clearly all the assets of the Land Fund and this will reduce the transparency of the management of such assets. The amendment will actually also lead to complex problems. Let me take the investment in shares as an example to illustrate this. The investment in shares can have various forms of positive or negative returns, including dividends, bonus shares, preferentially issued new shares, and the rise and fall in share prices. The performance of investment in shares is determined by the overall return, and it would be illogical if we rigidly separate dividends and other items of return in accounting. Let me give a simple example of dividend. Although there is a fall in the price of a share, there may still be profits on the whole as dividends can still be earned. On the basis of the proposed amendment, the dividends shall be credited to the General Revenue Account but the capital losses incurred by a fall in share prices will be borne by the Land Fund. In other words, although this investment is profitable on the whole, when we make a separate count of the returns of the Land Fund, a loss will be incurred by the investment. This would unfairly distort the investment performance of the Land Fund. Therefore, revenues like dividends and interests credited to the Government Revenue Account will bring about other revenues which will also be credited to the Government Revenue Account on the basis of the amendment. Pursuant to the accounting arrangement under the proposed amendment, after some time, it will not be possible for us to comprehensively track and calculate the values of all the Land Fund assets.

The said complex problems will give rise to many additional administrative work in respect of the management of the Land Fund assets.

Madam President, some people think that making additional injection into the General Revenue Account can induce the Government to spend more. I must state clearly that they have totally misunderstood the matter. The expenditure level of the Government is determined on the basis of the golden rules for the compilation of the Budget, that is, within a certain period, the increase in government expenditure should not exceed the forecast rate of economic growth, and we cannot increase the expenditure of the Government merely because there are additional revenues. I can assure Members that the Government has ample General Revenue, therefore, we will not fail to meet the needs of the plans for our present or future expenditure just because the additional interests or dividends earned by the investment of the Land Fund Assets are credited to the General Revenue Account.

Finally, I would like to point out clearly that the SAR Government has still not decided upon the long-term uses of the Land Fund assets, and if the Government has actually made a suggestion, we will apply to the Council for approval by another motion under section 29 of the Public Finance Ordinance.

Madam President, in a word, we need not propose amending the so-called flexible arrangement mentioned in the proposed amendment as it will only reduce the transparency of the Land Fund which runs contrary to our original intent of establishing the Land Fund, therefore, it will not be supported by the Government and I urge Members to oppose the amendment.

Madam President, I so move.

PRESIDENT (in Cantonese): I now propose the question to you and that is: That the motion moved by the Secretary for the Treasury under the Public Finance Ordinance as set out in Appendix II to the Agenda, be approved.

Appendix II

PUBLIC FINANCE ORDINANCE

_________________

RESOLUTION

(Under section 29 of the Public Finance Ordinance (Cap. 2))

__________________

LAND FUND

RESOLVED that with effect from the establishment of the Government of the Hong Kong Special Administrative Region on 1 July 1997 -

1. there shall be established a fund called the Land Fund;

2. the Land Fund shall receive and hold all of the assets, including all accounts receivable, net of expenses, transferred, upon the establishment of the Government of the Hong Kong Special Administrative Region, from the Hong Kong Special Administrative Region Government Land Fund established by a Declaration of Trust of the Hong Kong Special Administrative Region Government Land Fund Trust made on 13 August 1986 to the Government of the Hong Kong Special Administrative Region and which have become part of the general revenue in accordance with section 3 of the Ordinance and the provisions of the Declaration of Trust of the Hong Kong Special Administrative Region Government Land Fund Trust;

3. the Land Fund shall be administered and managed by the Financial Secretary who may delegate his power of administration and management to other public officers;

4. there shall be credited to the Land Fund -

(a) all sums earned by way of interest, dividends or other investment revenue relating to the investment of the Hong Kong Special Administrative Region Government Land Fund and all sums earned from the sale or other disposal of all or part of any assets of the Hong Kong Special Administrative Region Government Land Fund, after the deduction of all of the expenses relating to the administration and management of the Hong Kong Special Administrative Government Land Fund; and

(b) all accounts receivable and all sums earned by way of interest, dividends or other investment revenue relating to the investment of the Land Fund and all sums earned from the sale or other disposal of all or part of any assets of the Land Fund, after the deduction of all of the expenses relating to the administration and management of the Land Fund;

5. all expenses relating to the administration and management of the Land Fund, including expenses for meeting the management staff costs, and the costs incurred by the Trustees of the Hong Kong Special Administrative Region Government Land Fund Trust in the dissolution of the Trust in accordance with clause 29 of the Declaration of Trust of the Hong Kong Special Administrative Region Government Land Fund Trust, and any accounts payable in respect of the Hong Kong Special Administrative Region Government Land Fund after 30 June 1997, shall be met at the expense of the Land Fund;

6. the Land Fund shall assume -

(a) all the liabilities of the Trustees of the Hong Kong Special Administrative Region Government Land Fund Trust incurred before and outstanding upon the dissolution of the Trust, in accordance with clause 29 of the Declaration of Trust of the Hong Kong Special Administrative Region Government Land Fund Trust; and

(b) all the obligations of the Financial Secretary to indemnify the Trustees and each of them and each of their personal representatives and estates from and against all actions, proceedings, claims and demands and all costs and expenses in respect of or arising out of the administration of the Hong Kong Special Administrative Region Government Land Fund Trust, in accordance with the covenant clause 9 of a Vesting Deed executed on 1 July 1997;

7. the Financial Secretary may, in his discretion, authorize and direct the investment of any assets of the Land Fund which are not immediately required to meet expenses in respect of the Land Fund at any time in such manner as he may determine.

PRESIDENT (in Cantonese): Mr NGAN Kam-chuen has given notice to move an amendment to this motion. His amendment has been set out on the Agenda and circularized to Members. I propose that the motion and the amendment be debated together in a joint debate.

Council shall debate the motion and the amendment together in a joint debate. I now call on Mr NGAN Kam-chuen to speak and to move his amendment. After I have proposed the question on the amendment, Members may express their views on the motion and the amendment. Mr NGAN Kam-chuen.

MR NGAN KAM-CHUEN (in Cantonese): Madam President, I move that the Secretary for the Treasury's motion be amended as set out on the Agenda.

The Secretary for the Treasury has proposed a resolution to establish a Land Fund to receive and hold the assets of the "Hong Kong Special Administrative Region (SAR) Government Land Fund", and to make investments.

According to the clauses of the resolution, the Land Fund is established for investment purposes only, but not for providing government services. All sums earned by way of investment or disposal of assets of the Fund shall be credited to the account of the Fund, after the deduction of expenses relating to its management.

I believe that the management of Hong Kong's fiscal reserves has all along been restricted by the Public Finance Ordinance (Cap. 2). In relation to the establishment of the funds, section 29(2) provides that, "Unless an Ordinance or a resolution made under subsection (1) otherwise provides, the earnings from interest or dividends on investments of the funds established under this section shall not be retained for the purposes of funds, but shall form part of the general revenue." However, the Government has not explained why, in the proposed resolution, all the revenues of the Fund (including interests and dividends) are credited to the Fund. When compared with other funds, like the Capital Works Reserve Fund, in respect of the "reserve accounts", section 3(f) of the Capital Works Reserve Fund Resolution states that, "all interests or dividends earned or received from the reserve accounts will become part of the general revenue." Hence, it is not common for the resolution on the Land Fund to credit interests and dividends earned by the Fund to the Fund.

In this regard, I propose an amendment to exclude "all interests or dividends earned relating to the investments of the Land Fund" from the credit items of the Fund. The sum will be automatically credited to the Government General Revenue Account under section 29 (2) of the Public Finance Ordinance.

I believe that the amendment has the following advantages:

1. The amendment complies fully with the Public Finance Ordinance and will not affect the Government's usual accounting practices.

2. The amendment does not interfere with the current management and investment strategies of the SAR Government Land Fund or the fiscal reserves kept in the Exchange Fund.

3. Only the interests or dividends earned by the future Land Fund are concerned, but not the amounts earned by "the SAR Government Land Fund" before 1 July, therefore, there will not be any change in the Fund assets.

4. The Fund principal, $170 billion received as at 1 July, will not be spent. There is also around $25 billion accounts receivable. The number of staff currently responsible for managing the Fund does not have to be reduced and the staff morale will not be affected.

5. The Fund will still be transparent because any transfers will still be audited by the Director of Audit, and the investment performance of the Fund can still be clearly analyzed.

6. No reduction in the Government's power to decide how the public funds will be used because the amendment involves only the transfer of amounts between accounts and does not restrict the specific uses of the amounts.

Should Honourable colleagues support and pass the amendment, a large sum of revenue will immediately be added to "the General Revenue Account." According to the Secretary for the Treasury, the newly established "Land Fund" will continue to use the past investment strategies, and it will seek a change only after 1999. Over the past 10 years (1987-1996), the average rate of return of the SAR Government Land Fund was 7.38%. With this rate of return as a base for reference, the interests and dividends earned by the investment of the Land Fund can be over $10 billion per annum. Thus, the funds available to the SAR Government on recurrent cash expenditure will be increased tremendously.

Therefore, Honourable colleagues will have stronger grounds for urging the Government to increase its recurrent expenditure on improving elderly welfare, assisting in industrial development, enhancing human resources training and so on.

Despite that Members are restricted (by the Rules of Procedure) to specify the actual use of certain public funds, and that the amendment fails to specify the interests and dividends earned by the investment of the Land Fund, after being added to the General Revenue Account, should be used for the above purposes. I hope that Honourable colleagues can again send the Government a clear message, through this amendment, and urge the Government to give a positive response at an early date to the requests of Members for an increase in recurrent expenditure to achieve the various policy objectives.

I emphasize again that the amendment complies fully with the restrictions of the Public Finance Ordinance and is not a new policy or introducing a new account management method. I hope that Honourable Members can support the amendment.

Madam President, some Members have remarked that it is meaningless for me to propose the amendment as it will place a large sum of capital in the Treasury without restricting how it will be used by the Government despite the fact that the Government Treasury is presently flooded with money.

I would like to take this opportunity to explain that, although the Government Treasury on the whole is "flooded with money", the Treasury is subdivided into large, medium and small rooms, and the money in each of these rooms can only be used for specified purposes. When we ask, on ordinary occasions, the Government to increase its recurrent cash expenditure on improving elderly welfare, enhancing human resources training and assisting in industrial development, the cash can only be taken from the medium room for "General Revenue Account" in accordance with the "fiscal discipline" stressed by the Government.

Is the medium room for "General Revenue Account" flooded with money? It may not be the case. This year's Budget shows that the account has a profit of $18 billion, but this account is not only used for meeting the recurrent expenditure, but also for allocating money to other small rooms, for example, to the Capital Works Reserve Fund for meeting the expenses on projects. In the next two years, the pressure on the "General Revenue Account" of the Treasury will be even greater. The Government is even saying that the resources in our society cannot match the demand of the 60 000 children born to Hong Kong people in the Mainland, and therefore they have to queue up slowly to enter Hong Kong. In addition, there are the returned emigrants, and the population growth inaccurately estimated by the Audit Department. All these require the Hong Kong Government to rapidly put in more resources. From 1998 onwards, the Government also has to inject resources into the railway development strategies. This being the case, the Government still intends to withdraw around $200 billion from the "SAR Government Land Fund" grouped under the "General Revenue Account" on 1 July to establish another account which can be used in these two years for investment purposes only. What would be the result of establishing another account? The General Revenue Account will be penurious while the Land Fund will be very relaxed.

The second question is: Can we specify that the Government should use certain sums for certain purposes? I believe Honourable colleagues in the Subcommittee will remember that the Secretary for the Treasury has said and stated categorically at the meeting that day that if the Land Fund is intended to be used for other purposes, the Government has to propose another resolution just as he has mentioned earlier.

The Democratic Alliance for Betterment of Hong Kong has all along been asking that $15 billion be withdrawn from the Land Fund for establishing an "elderly quality of life" fund to improve the welfare of the elderly. We undoubtedly find this arrangement of the Government disappointing. In response to the Chief Executive Office's announcement on the arrangement for the management of the Land Fund, Mr Eric LI pointed out in May that "the Land Fund is a huge sum and it will not be appropriate to use it for investment only." (A news clipping from the Express on 15 May). I share this view. The Land Fund should appropriately and effectively be used on the people's livelihood or the promotion of economic transformation and development. In introducing the Budget of the year, the Financial Secretary disregarded the public appeal for an increase in the Comprehensive Social Security Assistance payment on the grounds of "balancing revenue and expenditure" and has only made an adjustment on the basis of inflation. It is totally not supported by the public.

I hope that my amendment can be passed. This is the only thing Members can do, in a legally effective way, to stop the Government using the excuse of balancing revenue and expenditure so that it will really allocate more resources to improving the people's livelihood.

Madam President, I so submit.

Mr NGAN Kam-chuen moved the following amendment:

"That the motion to be moved by the Secretary for the Treasury under section 29 of the Public Finance Ordinance (Cap. 2) at the Provisional Legislative Council meeting on 23 July 1997 be amended by deleting paragraph 4(b) and substituting -

"(b) after the deduction of all of the expenses relating to the administration and management of the Land Fund, all accounts receivable and all sums earned by way of investment revenue (excluding all sums earned by way of interest or dividends) relating to the investment of the Land Fund and all sums earned from the sale or other disposal of all or part of any assets of the Land Fund;"."

PRESIDENT (in Cantonese): I now propose the question to you and that is: That the amendment moved by Mr NGAN Kam-chuen be made to the Secretary for the Treasury's motion.

Council will now proceed to a debate. I will invite Mr CHAN Kam-lam who has studied the Ordinance to speak first.

MR CHAN KAM-LAM (in Cantonese): Madam President, the House Committee form a Subcommittee on 11 July to study the resolution to be submitted by the Secretary for the Treasury under section 29 of the Public Finance Ordinance. As the Chairman of the Subcommittee, I am now going to report on our discussions.

The SAR Government Land Fund assets, amounting to around $170 billion, has been transferred to the SAR Government since 1 July 1997, and become part of its General Revenue under section 3 of the Public Finance Ordinance. The Administration has moved a resolution under section 29 of the Public Finance Ordinance to establish a fund called the Land Fund on 1 July 1997 to receive and hold the assets, as well as for investment purpose.

The Subcommittee has held a meeting with the Administration to scrutinize the resolution. The government representatives have clarified and explained issues of concern to members of the Subcommittee during the meeting.

The members of the Subcommittee are concerned with the management and investment policies of the Fund in the short term as they are aware that the Administration has not decided on the long-term uses of the transferred SAR Government Land Fund assets. According to the Administration, the Fund will be invested on the basis of the opinions of the Land Fund Advisory Board appointed by the Financial Secretary. Before the Land Fund Advisory Board reviews the related investment strategies in the year 1998-99, the Administration will continue to use the strategies prior to 1 July 1997 for investing the assets. Besides, any changes in the policies for the use of the Fund which must only take effect after resolutions have been made by the Provisional Legislative Council, the Administration will also consider the advice of the Provisional Legislative Council on the management of the Fund and notify the Council of any changes to the related investment strategies. The assets are currently managed by the Hong Kong Monetary Authority in an investment porfolio independent of the Exchange Fund, and such an arrangement will allow the Fund to be more transparent and enable the Administration to clearly distinguish these assets from other assets and independently evaluate its investment performance.

With regard to the composition of the Land Fund Advisory Board, the Subcommittee holds that it is better to appoint people with experience and expertise in investment than the representatives of major banks merely for the sake of fairness. The Administration thinks that the Land Fund Advisory Board members should be appointed in their personal capacity, and they should possess multifarious expertise, including being good at making investments in Hong Kong and around the world.

The Subcommittee is also aware that the staff of the former SAR Government Land Fund Secretariat have been transferred to the Hong Kong Monetary Authority to continue to manage the Fund, in order to maintain continuity in the managment of the investment portfolio of the Fund assets. Members of the Subcommittee are also concerned about the proper arrangements for such staff if the Fund has to undergo significant changes, the Adminstration has to make. According to the Administration, the related staff are appointed on contract terms for two and a half years because the long-term investment strategies or methods of using the Fund are still unknown.

As requested by the Subcommittee, the Administration has submitted in writing information on the amounts of the accounts receivable of the Fund. A large portion of the accounts receivable comes from the Crown premium received from land transactions by the former British Hong Kong Government from 1 April to 30 June 1997, after the deduction of half the average cost of land development.

When the Subcommittee studied the clauses of the resolution, it had made several suggestions in regard to the technical problems of drafting so as to make these clauses clearer and consistent. The Administration has agreed to consider those suggestions.

Madam President, the above are the main points of the Subcommittee's discussions. Thank you.

PRESIDENT (in Cantonese): Mr Howard YOUNG.

MR HOWARD YOUNG (in Cantonese): Madam President, I am speaking in support of the original motion of the Government but in opposition to the amendment proposed by the Honourable NGAN Kam-chuen. I think that the concept of the amendment is confusing, illogical and runs contrary to the principles and original intention of the operation of the Land Fund, while failing to achieve the so-called effects, such as flexibility. The report submitted by the Subcommittee scrutinizing the motion has not covered the amendment. I had mind of some Members asking for amendments when I attended the House Committee meeting last week and Mr NGAN Kam-chuen also attempted to explain his amendment. I remember that the first thing Mr NGAN Kam-chuen said then was that the Democratic Alliance for Betterment of Hong Kong had all along been caring about the elderly. This is surely indisputable and normal. However, he then seemed to suggest that a certain sum of money should be set aside for the elderly. But he said later on that only the interests would be allocated, not the Land Fund. Therefore, many Members, including me, were at a loss and we did not understand how his suggestion was related to a political party's concern for a certain issue. Mr NGAN admitted just now that Members have no right to set aside a certain sum and specify how the Government should use it. He then took the second best and suggested that the Land Fund be included under General Revenue.

Madam President, I believe that we should first look at the nature of the Land Fund. It is half of the revenue from years of land sales in Hong Kong. If we specify that the revenue of the Fund, despite with good knowledge of the nature of the Fund, should be used for other purposes, the Fund will only shrink gradually, losing its real value, or possibly disappear because the Fund relies on the interests of investment for growth. However, nobody can guarantee that the Fund will not have negative growth. Once there is negative growth, the Government will not be able to make up the difference by allocating money from the General Revenue Account to the Fund. Hence, when the investment return in a certain year is under zero, the Fund will shrink. On the other hand, if we do not use the Fund, there will be no question of negative growth, but the Fund will be frozen at the level of an absolute number and swallowed up by inflation. If we are really going to do so, the Fund will eventually disappear one day.

About flexibility, I do not see how flexible it is to allocate the Fund to the General Revenue Account. The Administration will not spend more as it has more money because the Government's annual expenditure is based on the fiscal budget, subject to discussion and approval by the Legislative Council. The Administration will not spend more as it has more money for its spending is based on our economic growth. The Secretary for the Treasury has just mentioned the golden rule, therefore, I think that this has nothing to do with flexibility. Conversely, if the whole Fund with interests and principal is allocated to the General Revenue Account, I think it will make more sense because the Administration will then have a lot of money and it can use it as it wishes, for example, for reducing taxes or any other uses. But that is not the case now for the task is only partly done, therefore, I really cannot tell how flexible it will be. As I have just heard Mr NGAN explain about the amendment, I begin to understand that he originally hoped that the money will be reserved for a certain purpose, but as it is not allowed by the existing mechanism, he took the second best and made the present suggestion. Madam President, I am really worried. If it is done, the interest earnings will become a ...... frankly speaking, it will not be an elderly welfare fund, but a fund all political parties will be competing to use. It will be really dangerous. I reckon that, in the Legislative Council, it is natural for various groups or political parties to fight for government expenditure to meet various needs of society. However, Members should follow normal procedures and submit our list on the basis of the annual fiscal budget, or to carry out prior consultation with the Administration. We should not ask for the allocation of another sum of money and then compete with one another for its use for individual interests or the interests of people in different strata. I think it is not right, Madam President. I thought that, with the establishment of the SAR and our abundant surplus in the past year, we will no longer think of spending money extravagently. Heavens knows this Council still sticks to the same mentality. I think that we should let the Administration manage Hong Kong's finances as it has been doing in the past years under the proven mechanism. We should, on the basis of the Basic Law requirement for balancing revenue and expenditure, implement a low taxation system and keep expenditures within the limits of revenue in the light of our economic growth. We should not come up with this idea, which I am not sure if it can be described as an innovation, when we discuss about the Land Fund.

PRESIDENT (in Cantonese): Mr NG Leung-sing

MR NG LEUNG-SING (in Cantonese): Thank you, Madam President. I am a member of the Subcommittee on the motion, and I have voluntarily assisted in the management of the Land Fund in the past nine years before the Hong Kong Special Administrative Region (SAR) Government is established. I am grateful for the trust and support we got from people from all walks of life in the past. We, the Trustee, have basically completed the related administrative work of the Land Fund on 30 June with their support. The settling of the final accounts is now in progress. I must point out that, after the establishment of the SAR Government, I welcome the expeditious legislation by the Administration and the submission of the same to the Legislative Council for scrutiny in the form of a resolution. I shall offer my opinions in the debate today based on my past experience in the management of the Land Fund. I will certainly not be prejudiced in making a judgment on the scrutiny of the document because I have been the Trustee of the Land Fund. Now, let me discuss the details of the document and Mr NGAN's amendment. In Mr NGAN's speech, it has clearly put foward to Members an important point that the fiscal arrangement mentioned in the resolution is obviously "extraordinary". (This is Mr NGAN's wording). As I understand it and in accordance with clause 2 of the resolution, the provisions of the Declaration of Trust made in 1986 clearly stated that the Fund, net of expenses, shall be transferred to the SAR Government and become part of the General Revenue. This clause is very clear and the resolution only seeks to comply with the said provisions, therefore, the proposed fiscal arrangement should be ordinary and not "extraordinary".

Secondly, Mr NGAN has mentioned the arrangement of "credited" to the Fund. As regards the word "credited", I have looked up the English version, which reads "there shall be credited to the Land Fund". The English version clearly shows that it is only a jargon about credits and debits under a general accounting system. Hence, I find that it has not been credited to a special account, it is not confusing and it is not going to make people feel that it is a special arrangement.

Thirdly, I noted in Mr NGAN's speech that the Land Fund's average rate of return in the past 10 years was 7.38%. In this connection, I find that all of the dates of entry of the principal ( net income from land sales, net of the related costs, development costs and even costs of other modified uses) of the Land Fund over the last 10 years into the account have not been rigidly fixed of publicized. In the related trust document about the Central Government's appointment of three Trustees, arrangement has only been made for an annual publication of the whole account, without prescribing a specific presentation of individual data. Therefore, we only see the cost price and cannot definitely see the real value of the so-called foreign exchange assets or monetary assets. It appears therefore it is generally difficult to estimate the accuracy of a rate of return, I am not sure whether it is 7.8% or whether it is the rate of return recognized by the public. But we may simply say that it is probably an underestimation.

Fourthly, according to the Secretary for the Treasury ─ and Mr NGAN has also mentioned it, the newly established Land Fund will continue to use the investment strategies adopted in the past. However, I see from clause 7 of the resolution (if it is not amended by Mr NGAN) that the investment will be made as directed by the Financial Secretary. That is to say, the future investment strategies may not be the same as those in the past, as a result, the future return may not reach the figure just mentioned, or it may be higher, or even have negative growth, as Mr YOUNG has said, and that may bring about a change in the original absolute value. In view of this, I know that many people who care about our society and people's livelihood including the Democratic Alliance for Betterment of Hong Kong really hope that more studies can be made on how the SAR Government can manage and use the Fund at a time when our fiscal reserves is relatively abundant. However, I also expect that the concerned parties can jointly study and work out a good method to use the Fund in order that it can benefit all Hong Kong people and achieve the purpose stated in Appendix III to the Joint Declaration of the creation of a land fund to bring about the long-term prosperity and stability of Hong Kong.

With these remarks, Madam President, I support the original motion of the SAR Government.

PRESIDENT (in Cantonese): Mr Andrew WONG.

MR ANDREW WONG (in Cantonese): Madam President, I fully sympathize with Mr NGAN Kam-chuen's amendment but the crux of the problem lies not in whether the interests and profits of the Land Fund should be put to the General Revenue Account but in how the Land Fund should be handled. We have to face the reality, that is, how the related political problem can be solved. The Land Fund was established in 1986 fearing that the former Hong Kong Government will spend all its revenues from land sales, leaving the future Hong Kong Special Administrative Region (SAR) Government with no reserve. Thus, another fund is established with a new group of people recruited to manage it. On 1 July 1997, the total sum of the Land Fund was put to the General Revenue Account as originally arranged and it would not exist any more. However, how about the management personnel of the Fund? Someone came up with an idea of preserving the Fund. Thus, $200 billion is now, technically and basically speaking, allocated from the General Revenue Account to establish another fund, by way of a resolution of the Provisional Legislative Council. One of the provisions of the Fund states that any interest earned by the Fund will not be put to the General Revenue Account and two years later, a method will be put on trial to see how the sum will be handled. The crux of the problem is that now that the former Land Fund has become part of the General Revenue Account, should we withdraw money from the General Revenue Account and re-establish a land fund? The problem is here. If we do not establish a new land fund, the sum will become the surplus of the Government's General Revenue Account and be accounted under our reserves while all the interests earned by keeping the reserves in the Exchange Fund will become revenue in the General Revenue Account. We have to be very clear about this. Say for example, subhead 040 under Head 7 of the Budget is "interests" but it does not mention whether the interests earned by the reserves will be put to the account. However, if the reserves is principally part of the revenue account, the interests earned will have to be listed under subhead 040. This subhead also includes another case which Mr NGAN Kam-chuen has just mentioned, that is, it is not true that all funds will certainly not put all the interest earnings to the General Revenue Account. For example, the Capital Works Reserve Fund basically has three types of accounts. The first is a works account, another is a suspense account for provisional revenues. Money which has to be used in a certain year is put to the works account. Besides, should there be surplus, it will be called a reserve account. The interests earned by the reserve account will be put to the General Revenue Account. I sympathize with Mr NGAN's amendment, but I believe that basically we are not pinpointing the crux of the problem. If Members agree, we should first tackle the political problem. We must remember that the money is earned by the SAR Government through the former Hong Kong Government's Land Fund. It makes up our total surplus of as much as over $300 billion. Is it a large sum of money? Not really. According to the provisions of the Basic Law, we still have to keep our expenditures within the limits of our revenues. At present, our fiscal system requires that the growth rate of our expenditure cannot exceed that of the GDP. Probably there are deficits in certain years but the average annual growth within a certain period cannot make up an overall deficit. These are our present budgeting criteria. Under these circumstances, once we establish a fund to distribute money to other people, it will lead to a great increase in our expenditure in the respective year. I hope that the Secretary for the Treasury can give us a clear reply later.

I will support Mr Ngan's amendment, although I may lose. However, if I have to support the resolution, I wish that Members can support Mr NGAN Kam-chuen's amendment. We need not worry that the accounts cannot be calculated because we just have to record the interests earned in a year and we may know how much can be earned from the original sum of the Land Fund. Although it has been listed under the General Revenue Account, we can still be clear about the related accounts.

I hope everyone of us can support Mr NGAN. I also hope that the Government can clearly declares that it will consider in the next year or so the best way to handle this sum of money, such as whether it should be placed in the General Revenue Account as reserves. If there is really too much money, we should first think of a method of putting it to the best use without breaching the budgeting criteria under the Basic Law. This is a way of facing the problem squarely. I hope that Members will not turn our debate into political parties competing for political capital though it is natural and normal. However, we still have to take into consideration the criteria for prudent fiscal management adopted by both the former and present governments. Our prosperity and stability can only be sustained this way.

Here I urge Members to support Mr NGAN's amendment. If it is approved, I then urge Members to support the resolution. Thank you, Madam President.

PRESIDENT (in Cantonese): Does any other Member wish to speak? Miss CHAN Yuen-han.

MISS CHAN YUEN-HAN (in Cantonese): Thank you, Madam President. I was supposed to speak before my Honourable colleague, the Honourable Andrew WONG whose ideas are very similar to mine. Therefore, I have considered if I should still speak after he has spoken but finally, I decided to speak. It is not because he is my colleague nor because Mr NGAN Kam-chuen and I belong to the Democratic Alliance for Betterment of Hong Kong. I just want to explain what I think about Mr NGAN's amendment from the grassroots' perspectives.

In fact, I do not object to the viewpoints expressed by the Honourable Howard YOUNG and the Honourable NG Leung-sing because I find that they do have a point. However, they have not answered the main point raised by Mr Andrew WONG, that is, how we should treat the Land Fund. In fact, in regard to the government reserves, there have been voices in the community saying that our Government is very rich but the general public, especially the elderly, are very poor. We have mentioned time and again in the former Legislative Council that we have to look at how we can make the elderly live in dignity in this wealthy society. This has always been the concern of the whole society and we have discussed this topic for many times in the former Legislative Council.

About the reserve fund or Land Fund, we always hold both in public and in the former Legislative Council that we must spend money on helping the elderly, but the problem is how we can help. Maybe we can do so through increasing the Comprehensive Social Security Assistance payments, by making a lump sum payment, or even other methods. Today, when the Government has to handle the Land Fund, I believe that the key is on how we can use the sum of money to help the elderly. If the Government wants to put it in the General Revenue Account, I think this is correct. Some Members have just mentioned that using the accrued interests may possibly lead to many problems and it seems to be correct, too. However, the problem is that there are voices from our society and this Council that our society and the Government are too rich, nonetheless, many people are still in a sad plight. Among them, the elderly are the most in need of help from the Government. In the Provisional Legislative Council or even the former Legislative Council, I have repeatedly told the Financial Secretary and the government officials concerned that they have to think of ways to help the elderly. However, whenever I express my views to the Government on the budget, the Financial Secretary says that I have not observed the rules of the game and that money cannot be allocated in the budget. What can be done now? Now that there is a sum of money, an independent account, why do we not think of a way out? Mr Howard YOUNG has just mentioned that Mr NGAN Kam-chuen has confused ideas and logic and I am really puzzled. In fact, Mr YOUNG has in mind unnecessary worries. He is worried about the fact that after the interests of the sum have been used up, the fund will be finished. I would like to tell Mr YOUNG, if the return is satisfactory, there will be $10 billion interests on $100 billion, and the interests can be accumulated. There will be no problems at all as long as we work as planned. The Land Fund gets good return in terms of interests. Thus, I think that Mr YOUNG has no grounds to say that Mr NGAN's ideas and concepts are confused because even the Liberal Party has been pressing the Government to spend money on helping the elderly. That being the case, I think all of us should support Mr NGAN today, unless we reverse our usual stance. On the technical side, Mr NG Leung-sing has just said that there will not necessarily be a 7.8% rate of return but I do not think this matters. What matters is how we should use the money. Therefore, I would like to call upon my Honourable colleagues in the former Legislative Council and my new Honourable colleagues that we have repeatedly discussed the problem of the poor in public and in the Council, and we believe that the Government should help them. We now have a chance, a good chance to make a decision to establish another fund to help people in need by vote. Why do we not do so? Therefore, like Mr Andrew WONG did just now, I urge Members to support Mr NGAN Kam-chuen.

Thank you.

PRESIDENT (in Cantonese): Mr Edward HO.

MR EDWARD HO (in Cantonese): Madam President, I do not know whether the Honourable Miss CHAN Yuen-han is discussing today's motion or not. She is asking us to support Mr NGAN Kam-chuen, but in addition, she seems to be saying that to support Mr NGAN Kam-chuen's amendment is equivalent to supporting helping the elderly. Moreover, she adds that the Liberal Party has mentioned that help should be given to the elderly. However, our motion today is not about helping the elderly. All of us wish to help the elderly but I think today's topic is the Land Fund. All of a sudden we have such a large sum of money, what we are going to do with it? If the Government says, "All right, we have an abundance of money and we can suddenly multiply our expenditures by many times and give most of the money to the elderly." If that is the case, the focus of our debate will be this topic. The Government, however, is only saying that as it does not have any plan on how to use the $170 billion, so it will keep the money in the form of a fund. We have to be aware that keeping the money in the fund does not mean that the money cannot be used. If the Government wants to use it, it can propose in the Legislative Council another motion on the use of the money. I think this is the most essential focus of our discussion. On the Government's side, the Secretary for the Treasury, Mr KWONG, has mentioned the so-called golden rule for government expenditures. Article 107 of the Basic Law has stated that "the Hong Kong Special Administrative Region shall follow the principle of keeping expenditure within the limits of revenues in drawing up its budget, and strive to achieve a fiscal balance, avoid deficits and keep the budget commensurate with the growth rate of its gross domestic product." The Honourable Eric LI has also mentioned this point at the last meeting of the House Committee. Mr Eric LI is not here today but Mr NGAN Kam-chuen has just made comments on him. I am saying that Mr NGAN commented on his views but not his absence. I find that the Government has always observed this golden rule and it now has to follow the Basic Law, that is, to base its expenditure on its gross domestic product. I think our duty as Members is to see to it that the Government realistically handles the many problems about the livelihood of Hong Kong people, including the elderly. We, the Liberal Party, also feel that now that we have so much money, or so-called too much money, the Government should not be too mean, and should solve the elderly problem in Hong Kong practically. However, we are not discussing about the elderly problem today and we can express our opinions on next year's budget to the Financial Secretary on other occasions.

Thank you.

PRESIDENT (in Cantonese): Mr IP Kwok-him.

MR IP KWOK-HIM (in Cantonese): Thank you, Madam President. I have heard many Members comment on the arrangement for the Land Fund. At the same time, I have great respect for those who have managed the Fund because their operation of the Fund has brought rich revenue to the Hong Kong Special Administrative Region (SAR) Government. Certainly, the money is commonly owned by Hong Kong people, but more importantly, how can we make best use of the Fund? As Mr Andrew WONG has said a moment ago, we should make proper use of the Fund. Should we use the whole sum for investment again so that the amount of money will continue to snowball and bring us richer fiscal reserves? Or should we put this sum of money aside, without really catering for the needs of many Hong Kong people, in particular, supporting the poor at the grassroots level? In fact, this is a problem of how the money should be used. Miss CHAN Yuen-han has just explained this from different perspectives. Hence, I would like to express my doubts about and give my response to several questions raised by Mr Howard YOUNG.

Mr Howard YOUNG said that the purpose of Mr NGAN Kam-chuen's amendment is to establish a fund that can enhance the reputation of political parties. I beg to disagree. Although we care about the elderly, and ask for enhancement in the existing social welfare, the Democratic Alliance for Betterment of Hong Kong has never wished to spend extravagently. That is not our way. While we do not advocate spending extravagently, we still need to care about the grassroots, especially the elderly. I remember that several months ago, the political parties in the former Legislative Council agreed that Comprehensive Social Security Assistance (CSSA) payments for the elderly should be increased. All of us agree to this. Therefore, we have to find a way out from the present golden rule of fiscal management to give assistance to the elderly by increasing CSSA. This should be our common aim. It does not matter whether this party or that proposes this plan. This is the wealth commonly owned by the community and it should be shared by everyone.

If the plan works, everyone of us should support it and we should not say that certain party is trying to gain political capital.

There is one thing which I do not understand. Will the plan proposed by Mr NGAN Kam-chuen make the Fund shrink as a result of inflation? I do not understand this as even when the compound interests of the Fund are used, it will only reveal that interests earned during the operation of the Fund and only part of the interests are used in a suitable way. This is totally workable. Certainly, we can establish an elderly fund directly but it can hardly be done in practice. This has just been explained by some Members. I hope that a fund can be established after Mr NGAN's plan has been carried out in order to make use of such a sum of money. I believe that it is the main reason why Mr NGAN proposed his amendment.

I wish all Honourable colleagues can consider the arguments of Mr NGAN and other Honourable colleagues, and support Mr NGAN's amendment in order to benefit the elderly.

Thank you, Madam President.

PRESIDENT (in Cantonese): Members, the topic for our discussion now is Mr NGAN Kam-chuen's amendment to the original motion of the Secretary for the Treasury. We are not discussing the welfare of the elderly. Will Members please speak to the question. Mrs Elsie TU.

MRS ELSIE TU: Madam President, just a few words, I was very much attracted to the idea of the amendment for using the money for the elderly and so on. But putting it personally, if I had money in the bank, I would be very foolish if I spent it bit by bit helping other people until there was nothing left and those people I was helping would then be left with nothing. I think it is much more sensible to use our income to help people, a regular income rather than using up our capital and I see this motion moved by the Government as being a case of saving up capital and keeping the capital. I think we should then be considering ways of increasing our annual revenue with which to help the needy for recurrent expenditure. Thank you.

PRESIDENT (in Cantonese): Mrs Selina CHOW.

MRS SELINA CHOW (in Cantonese): Madam President, I am glad that the President has just given us a clue. Her clue, in fact, tells us exactly that we are not debating a fund for the elderly, but the Land Fund management. I think we should distinguish these two issues. In view of this, we should object to Mr NGAN Kam-chuen's amendment as he has mixed up the two issues. We are now debating the best way to manage our Land Fund. If we think we need to expand the welfare provision for the elderly or to improve care for the elderly, we can absolutely make such a request freely in the budget......

PRESIDENT (in Cantonese): Mr NGAN, are you seeking to ask questions or to clarify?

MR NGAN KAM-CHUEN (in Cantonese): She has misunderstood my speech. My speech does not mention this aspect only.

PRESIDENT (in Cantonese): You may explain your standpoint after Mrs Selina CHOW's speech. Mrs Selina CHOW, please continue.

MRS SELINA CHOW (in Cantonese): If I have misunderstood, I think this is only reasonable because even Mr IP Kwok-him has not denied it and kept on saying how we can take care of the elderly. However, we should be clear that we are now discussing the Land Fund management. If we think the elderly or other aspects of welfare needs to be taken care of, we can handle it separately. It is not necessary to make any changes to the Land Fund management method proposed by the Government. If we find that the Government's suggestion is reasonable, we should support it. In fact, if Mr NGAN Kam-chuen's amendment is put into practice, a phenomenon may happen: if the Government continues to be well-off, the pressure to spend our reserves on welfare expenditure will continue to increase. Certainly, every political party can decide freely on its action. Frankly speaking, it will not be honest to say that a political party does not take political capital into account before doing anything. But this is only natural. However, I feel that we should handle it separately, therefore, I object to Mr NGAN Kam-chuen's amendment.

PRESIDENT (in Cantonese): Mr NGAN Kam-chuen, you think that Mrs Selina CHOW has misunderstood what you have said. You may elucidate but please be brief.

MR NGAN KAM-CHUEN (in Cantonese): In my speech, I just said that we could use the sum of money. As Honourable Members had made quite a number of requests in the past, they should make their requests to the Financial Secretary in respect of the budget. Otherwise how do they have a chance? Should this matter be brought up for consideration two years later? I just want to state this briefly.

Thank you, Madam President.

PRESIDENT (in Cantonese): Mr HO Sai-chu.

MR HO SAI-CHU (in Cantonese): Madam President, I will be very brief.

Maybe we have to understand how the Fund comes about. As far as I know, it is half of the land sales revenue which has now accumulated to a large sum. I also know that, if my memory is correct, the Government generally allocates the land sales revenue to works on our infrastructure. Under these circumstances, I believe I tend to agree to continue using the entire Fund for investment for the time being to earn more money. We really have to consider how the sum of money should be used two years later. I personally think that it is the best way. As Mr NGAN Kam-chuen's suggestion is contrary to my opinion, I do not favour the amendment.

Thank you, Madam President.

PRESIDENT (in Cantonese): Mr TSANG Yok-sing.

MR TSANG YOK-SING (in Cantonese): Madam President, the Secretary for the Treasury has just reminded Members of the principle of fiscal management, that is, the growth in public expenditures cannot exceed economic growth within a certain period. However, there is another principle under the Basic Law, that is, to keep expenditures within the limits of income and to balance revenue and expenditure. In other words, our public expenditures will be limited not only by the golden rule put forward by the Secretary for the Treasury but also by the income of the Government.

We now say that the Government has enormous surpluses and revenue. What does "revenue" refer to? On the one hand, it comes from taxes paid by the general public, while on the other, the Land Fund is the assets of the SAR and the income of the Land Fund will also be a source of government revenue. I think the idea is very simple. If we need to maintain a certain level of "revenue" to balance our "expenditure", we have to consider the source of our "revenue", for example, if other income sources are reduced, the taxpayers will have to pay more. On the contrary, if the income of the Land Fund has become part of government revenue, we are able to relieve the pressure on ordinary citizens.

At the same time, let us not forget that while we always say that the public expenditure is restricted, Mr TUNG, the Chief Executive, has made many promises in respect of education, housing and the elderly welfare both during the election period and after the establishment of the SAR. Public resources are needed to put the promises into practice. Where do they come from? I do not see how we can produce resources as if by magic to honour the promises made by Mr TUNG after we have fixed the limits of our expenditures.

Mr NGAN Kam-chuen's amendment in fact opens up another source of government revenue which can directly relieve the financial pressure on Hong Kong taxpayers.

Thank you, Madam President.

PRESIDENT (in Cantonese): Mr Kennedy WONG.

MR KENNEDY WONG (in Cantonese): Madam President, I want to tell Honourable colleagues a fable from Aesop's Fables. A long time ago, there was a very rich man who had great passion for gold, so he sold all his wealth for gold and buried it in the backyard of his home. He dug it out every day, admired it, and then buried it in the ground again. At last, when he dug into the hole one day, he found that all his gold had gone. He was in great sorrow. His neighbour consoled him and said, "as you are not going to use your gold after all, you may well bury a stone in the ground in the same way and dig it out and admire it every day."

I tell this fable from Aesop's Fables to let the Government know that we hope that the Government can decide how the Land Fund should be used as soon as possible. It is because the Fund has been handed over to the Financial Secretary for management since 1 July, therefore, the Government must expeditiously decide how such a large sum of capital can be used to help people in need, including the elderly.

I so submit.

PRESIDENT (in Cantonese): Secretary for the Treasury, do you wish to speak on Mr NGAN Kam-chuen's amendment?

SECRETARY FOR THE TREASURY (in Cantonese): Madam President, I believe what you said earlier is very clear and I am grateful to you for your explanation that our debate today is related not to the use but management of the Land Fund.

Certainly, in respect of issues such as which services should be allocated with more resources by the Government, Members have many views but I can tell Members clearly that Mr NGAN Kam-chuen's amendment cannot achieve this aim. Moreover, several Members have talked about the issue of balancing revenues and expenditures, and large, medium and small rooms but they have misunderstandings towards the fiscal management of the Government. Balancing revenues and expenditures means more than balancing the revenues and expenditures of the General Revenue Account and individual accounts, but also the overall revenue and expenditure of the Government, including the expenditure and revenue of the various funds.

The last point I would like to raise is fairly technical. Mr NGAN Kam-chuen said that the proposal of keeping the interests and dividends of the Land Fund within the Fund is exceptionally extraordinary and very special. If Members care to look back up the contents of the 1997-98 Budget, they will find a number of funds established under section 29 of the Public Finance Ordinance, namely, the Capital Investment Fund, Loan Fund, Civil Service Pensions Reserve Fund, Relief Fund and Capital Works Reserve Fund. Among these funds, except for the Capital Works Reserve Fund which credits the interests and dividends of one of the three reserve accounts to the General Reserve Account, the revenues, including interests and dividends, of all the remaining funds and the other two reserve accounts of the Capital Works Reserve Fund are retained in the Fund. Therefore, our proposal is ordinary and not special at all, and I hope that Members can return to the original topic of our debate, that is, the most effective way to manage the Land Fund in order to achieve a high degree of transparency in their deliberation before making a decision. I hope that Members will support my motion having considered this point.

Thank you, Madam President.

PRESIDENT (in Cantonese): I now put the question to you and that is: That the motion moved by the Secretary for the Treasury be amended by Mr NGAN Kam-chuen's amendment.

Will those in favour please say "aye"?

(Members responded)

PRESIDENT (in Cantonese): Those against please say "no".

(Members responded)

Miss CHAN Yuen-han rose to claim a division.

PRESIDENT (in Cantonese): Miss CHAN Yuen-han has claimed a division. The division bell will ring for three minutes.

PRESIDENT (in Cantonese): Members, the question now put is: That the motion moved by the Secretary for the Treasury be amended by Mr NGAN Kam-chuen's amendment. Will Members please proceed to vote.

PRESIDENT (in Cantonese): Before I declare the result, are there any queries? The result will now be displayed.

Mr MA Fung-kwok, Mr HUI Yin-fat, Mr CHAN Choi-hi, Miss CHAN Yuen-han, Mr CHAN Wing-chan, Mr CHAN Kam-lam, Mr TSANG Yok-sing, Mr CHENG Kai-lam, Mr Andrew WONG, Mr YEUNG Yiu-chung, Mr IP Kwok-him, Mr LAU Kong-wah, Mr CHENG Yiu-tong, Mr NGAN Kam-chuen and Mr TAM Yiu-chung voted for the amendment.

Mr WONG Siu-yee, Mr David CHU, Mr HO Sai-chu, Mr Edward HO, Dr Raymond HO, Mr NG Leung-sing, Mr Eric LI, Mr LEE Kai-ming, Mrs Elsie TU, Mrs Selina CHOW, Mrs Peggy LAM, Mr Henry WU, Mr NGAI Siu-kit, Mr Ronald ARCULLI, Dr TSO WONG Man-yin, Mr LEUNG Chun-ying, Dr LEONG Che-hung, Mrs Sophie LEUNG, Mr Frederick FUNG, Dr Philip WONG, Mr Howard YOUNG, Mr LAU Wong-fat, Mrs Miriam LAU, Mr Ambrose LAU, Mr CHOY Kan-pui, Dr TANG Siu-tong, Mr KAN Fook-yee, Dr LAW Cheung-kwok and Miss CHOY So-yuk voted against the amendment.

Prof NG Ching-fai, Mr YUEN Mo and Mr Kennedy WONG abstained.

THE PRESIDENT announced that there were 15 Members in favour of the amendment, 29 against and three abstaining. She therefore declared that the amendment was negatived.

PRESIDENT (in Cantonese): Secretary for the Treasury, do you wish to reply?

(Secretary for the Treasury indicated that he did not wish to reply.)

PRESIDENT (in Cantonese): I now put the question to you and that is: That the motion moved by the Secretary for the Treasury be approved.

Will those in favour please say "aye"?

(Members responded)

PRESIDENT (in Cantonese): Those against please say "no".

(No Member responded)

PRESIDENT (in Cantonese): I think the "ayes" have it. The "ayes" have it.

BILLS

First Reading of Bills

PRESIDENT (in Cantonese): Bills: First Reading.

ELECTORAL AFFAIRS COMMISSION BILL

INLAND REVENUE (AMENDMENT) (NO. 3) BILL 1997

DUTIABLE COMMODITIES (AMENDMENT) (NO. 2) BILL 1997

CLERK (in Cantonese): Electoral Affairs Commission Bill

Inland Revenue (Amendment) (No. 3) Bill 1997

Dutiable Commodities (Amendment) (No. 2) Bill 1997

Bills read the First time and ordered to be set down for Second Reading pursuant to Rule 53(3) of the Rules of Procedure.

Second Reading of Bills

PRESIDENT (in Cantonese): Bills: Second Reading. Secretary for Constitutional Affairs.

ELECTORAL AFFAIRS COMMISSION BILL

SECRETARY FOR CONSTITUTIONAL AFFAIRS (in Cantonese): Madam President, I move the Second Reading of the Electoral Affairs Commission Bill.

In 1993, after making reference to the experience of countries abroad and considering the request of the community, the Government set up an independent commission responsible for making proposals on the delineation of geographical constituencies and monitoring the election of the three-tier councils. The establishment of the Commission not only makes it possible for the elections to be conducted in an open and fair manner, but also reveals to the public that this will really be the case. The Commission has all along received wide support and is highly regarded by people from various political groups.

The community earnestly expects that after the Hong Kong Special Administrative Region has been established, the Government can set up a similar commission to ensure that the elections of the future three-tier councils can be conducted in an open, fair and honest manner. The Government's decision to establish the Electoral Affairs Commission is precisely in response to the public's request. We must formulate new legislation to specify the various provisions for the establishment of this Commission.

It is proposed in the Bill that the Commission shall comprise three members to be appointed by the Chief Executive and among whom the Chairman shall be a High Court Judge nominated by the Chief Justice of the Court of Final Appeal. In order to ensure that the Commission can operate in a fair and impartial manner, all members shall meet the stringent requirements specified in the Bill which include that they cannot be members of the three-tier councils during the period of their appointment as members of the Commission. Those who have been candidates for the three-tier council elections in the past four years cannot become members of the Commission.

An important duty of the Commission is to make recommendations on the delineation of constituencies of district elections. In this respect, the Commission must comply with the various criteria of delineation under the Bill, including giving consideration to the population, existing delineation of districts and uniqueness of the community in the constituencies. The Commission must also seek and consider the views of the public before submitting a report to the Chief Executive. As the first term of the Legislative Council will begin in the second quarter of next year, the Commission must submit a proposal on the delineation of constituencies to the Chief Executive before 31 October this year. As to the subsequent elections of the Legislative Council, with reference to the relevant arrangements for the elections in the past, the Commission shall make a proposal 12 months before the elections. As a result of a clerical error, the provision in clause 18(3)(b) of the Bill concerning the election for the second term of the Legislative Council does not tally with this proposal. We will propose appropriate amendments at the Committee stage. In other words, we will make an amendment to the effect that the Commission shall make a proposal on the delineation of constituencies 12 months before the election for the second term of the Legislative Council.

Another important task of the Commission is making various practical arrangements for the election of the Legislative Council, such as voter registration, candidate nomination, voting and vote counting procedures and so on, and working out detailed criteria and guidelines to ensure the smooth conduct of the elections. The Commission will also be responsible for monitoring the establishment of an Election Committee comprising 800 members.

In addition to the Legislative Council elections, the future tasks of the Commission include those relating to the elections of the two Municipal Councils and the district boards. When we later enact the electoral legislation for the two Municipal Councils and the district boards, we will also make corresponding amendments to the Bill to further specify the powers and responsibilities of the Commission in respect of these elections.

I believe all Members know that the elections of the first term of the Legislative Council will take place in the second quarter of next year, less than a year from now. For the Commission to submit recommendations on the delineation of constituencies by the end of October, it must expeditely launch the relevant preparations, for instance, collecting information on the population of the various districts and planning for the procedures of public consultation. In so doing, the Commission will then be able to rapidly work out and make a proposal on the delineation of constituencies after the enactment of the relevant electoral legislation. Furthermore, the Commission needs to speedily make detailed arrangements for the preparations for the registration of voters, in order that registration can be made as soon as the relevant electoral legislation has been enacted. Therefore, I earnestly hope that Members can scrutinize and pass this Bill as soon as possible to enable the prompt establishment of the Commission.

With these remarks, Madam President, I commend the Bill to the Council.

PRESIDENT (in Cantonese): I now propose the question to you and that is: That the Electoral Affairs Commission Bill be read the Second time.

In accordance with Rule 54(4) of the Rules of Procedure, the debate is now adjourned and the Bill referred to the House Committee.

PRESIDENT (in Cantonese): Secretary for the Treasury.

INLAND REVENUE (AMENDMENT) (NO. 3) BILL 1997

SECRETARY FOR THE TREASURY (in Cantonese): Madam President, I move that the Inland Revenue (Amendment) (No. 3) Bill 1997 be read the Second time.

The Executive Council has decided on the basis of the recommendations of the Independent Commission appointed to examine the remuneration package for the Chief Executive that the Chief Executive shall pay salaries tax on his emoluments.

Section 8(2)(a) of the Inland Revenue Ordinance provides that the official emoluments received by the Governor of Hong Kong are exempt from salaries tax. With the enactment of the Hong Kong Reunification Ordinance on 1 July 1997, the reference to "the Governor" in the section is construed on or after 1 July 1997 as a reference to the "Chief Executive of the Hong Kong Special Administrative Region". Therefore, the Chief Executive is exempt from salaries tax as from 1 July 1997 by virtue of the Hong Kong Reunification Ordinance. In order to implement the decision of the Executive Council, we have to amend the Inland Revenue Ordinance.

The proposed Bill seeks to delete section 8(2)(a) of the Inland Revenue Ordinance with effect from 1 July 1997.

With these remarks, Madam President, I commend the Bill to Members.

PRESIDENT (in Cantonese): I now propose the question to you and that is: that the Inland Revenue (Amendment) (No. 3) Bill 1997 be read a Second time.

Pursuant to Rule 54(4) of the Rules of Procedure, the debate is now adjourned and the Bill is referred to the House Committee.

PRESIDENT (in Cantonese): Secretary for the Treasury.

DUTIABLE COMMODITIES (AMENDMENT) (NO. 2) BILL 1997

SECRETARY FOR THE TREASURY (in Cantonese): Madam President, I move that the Dutiable Commodities (Amendment) (No. 2) Bill 1997 be read the Second time.

The Executive Council has decided on the basis of the recommendations of the Independent Commission appointed to examine the remuneration package for the Chief Executive that the Chief Executive shall pay excise duty.

Section 3(4) of the Dutiable Commodities Ordinance provides, inter alia, that the Governor of Hong Kong is exempt from excise duty. With the enactment of the Hong Kong Reunification Ordinance on 1 July 1997, the reference to "the Governor" in the section is construed on or after 1 July 1997 as a reference to the "Chief Executive of the Hong Kong Special Administrative Region". Therefore, the Chief Executive is exempt from excise duty as from 1 July 1997 by virtue of the Hong Kong Reunification Ordinance. In order to implement the decision of the Executive Council, we have to amend the Dutiable Commodities Ordinance.

The proposed Bill seeks to amend section 3(4) of the Dutiable Commodities Ordinance to repeal the reference to "the Governor" with effect from 1 July 1997.

With these remarks, Madam President, I commend the Bill to Members.

PRESIDENT (in Cantonese): I now propose the question to you and that is: That the Dutiable Commodities (Amendment) (No. 2) Bill 1997 be read the Second time.

Pursuant to Rule 54(4) of the Rules of Procedure, the debate on the motion is adjourned and the Bill is referred to the House Committee.

Resumption of Second Reading Debate

HONG KONG SPECIAL ADMINISTRATIVE REGION PASSPORTS BILL

Resumption of debate on Second Reading which was moved on 9 July 1997

PRESIDENT (in Cantonese): We will now resume the Second Reading debate on two bills. The first of these is the Hong Kong Special Administrative Region Passports Bill. Does any Member wish to speak?

Secretary for Security, do you wish to reply?

SECRETARY FOR SECURITY(in Cantonese): Madam President, let me first extend my thanks to members of the Bills Committee scrutinizing this Bill, especially the Chairman, Mr Howard YOUNG. I am very grateful to the Bills Committee for carrying out a detailed scrutiny of the entire Bill within such a short time and giving much valuable advice which has perfected this Bill.

When this Bill was introduced for Second Reading in this Council on 9 July, Members already knew that the purpose of the Bill is to provide for the issue, amendment and cancellation of the Hong Kong Special Administrative Region Passport and other connected matters. As I have already explained the background and essence of the Bill, I will not reiterate them here.

Members of the Bills Committee have thoroughly considered each and every clause of the Bill and made some suggestions. After in-depth discussions, the Government has reached a consensus with the Committee and decided to adopt most of the Committee's suggestions. I will move a series of amendments at the Committee stage but I hope to take this opportunity to point out once again the reasons why the Bill should be given retrospective effect from 1 July.

PRESIDENT (in Cantonese): Sorry, Secretary for Security, Mrs Miriam LAU has indicated that she wishes to speak. Following our usual procedure, I will only invite you to give a reply to the points raised by all Members after they have finished speaking.

PRESIDENT (in Cantonese): Mrs Miriam LAU.

MRS MIRIAM LAU (in Cantonese): Madam President, the Government has submitted the Hong Kong Special Administrative Region Passports Bill, once again requesting the Council to pass an Ordinance with retrospective effect. In our debate on the Immigration (Amendment) (No. 5) Bill the week before, the Liberal Party had made it clear that an Ordinance should basically not be given retrospective effect, unless under very special circumstances. Therefore, we must be extremely prudent in handling any Ordinance with retrospective effect.

The Government cannot evade its responsibility for the situation today. Before the handover, the Government should already know that it is necessary for it to start issuing the Hong Kong Special Administrative Region (SAR) passports after 1 July. The relevant laws should be passed not later than 1 July in order to implement the Ordinance on that day. However, the Government had not done so. The Chief Executive's Office had asked Members to pass a number of Ordinances before 1 July and confirmed them by way of the Hong Kong Reunification Ordinance. The aim was to avoid a legal vacuum. At the same time, it had completely overlooked the laws related to the SAR passports and created at least a partial legal vacuum. The Government also admitted that with no ordinance, the fees charged for issuing passports since 3 July are void of any legal base.

The validity of passports issued in the absence of a governing law may possibly be open to question. The Government explained that in accordance with Article 154 of the Basic Law, the Central People's Government shall authorize the SAR Government to issue, in accordance with law, SAR passports to all Chinese citizens who hold permanent identity cards of the SAR. Thus, the SAR Government has the right to issue passports even if it does not enact any new legislation. Should the Government have interpreted this correctly, the only reason why the HKSAR Passport Ordinance should have retrospective effect will be to recover the fees for passports issued since 3 July. If the Ordinance is given retrospective effect only for recovering a certain sum of money, the Liberal Party thinks that it is not worthwhile or it should not be done. However, the Liberal Party will consider other factors.

The Liberal Party thinks that the Government's interpretation of Article 154 of the Basic Law may not be absolutely correct. It has stated clearly that the SAR Government must issue passports "in accordance with law". The Government has not enacted any local legislation in relation to the issue of passports before the Bill passes into law. However, the Government thinks that the phrase "in accordance with law" may be interpreted as in accordance with the Basic Law because Article 18 of the Basic Law provides that the Basic Law, the laws previously in force in Hong Kong, and the laws enacted by the legislature of the SAR shall be the laws in force in the SAR.

In my rough estimation, there are about 20 instances of the use of the phrase "in accordance with this law" in the Basic Law, 20 instances of the use of "in accordance with law" and "in accordance with the law" in the Basic Law, and four instances of the use of "in accordance with the laws of the Region". "In accordance with this law" refers to the Basic Law. This is very simple with absolutely no problem. The problem, however, lies in "in accordance with law", "in accordance with the law" or "in accordance with the laws of the Region". The inconsistency of these terms causes confusion and it is absolutely not clear as to what the precise meaning is when these different terms are used. Is "in accordance with law" equivalent to "in accordance with the law", or "in accordance with the laws of the Region"? Are there different interpretations when different terms are used? Which law does "in accordance with law" refer to? There is no clear interpretation on this. If the Administration thinks that the phrase "in accordance with law" can be interpreted as no need for legislation because the Basic Law can be taken as the basis, it may bring about unexpected results. For example, Article 26 of the Basic Law provides that permanent residents of the SAR shall have the right to vote "in accordance with law". If "in accordance with law" is interpreted as only in accordance with the Basic Law, the voters do not need to be registered before they can vote because the Basic Law has granted them the rights. Moreover, Article 138 of the Basic Law provides that the community organizations and individuals may provide various medical and health services "in accordance with law". If "in accordance with law" is interpreted as only in accordance with the Basic Law, does it imply that any community organizations and individuals can provide various medical and health services without the need for the enactment of any regulatory legislation because the Basic Law has already granted them the right?

The above exposition is meant to illustrate that the Government may not have a "reliable" interpretation of Article 154 of the Basic Law. No matter whether the Government's interpretation is correct or not, the Liberal Party thinks that to avoid challenge to the issued passports, it is acceptable to give retrospective effect to the HKSAR Passports Ordinance. It will only benefit the public but not do them any harm.

As the Government is willing to accept the establishment of an appeals mechanism against the powers exercised by the Director of Immigration under the Ordinance, the Liberal Party thinks that it can accept giving this Ordinance retrospective effect. The establishment of the appeals mechanism can balance the Director's power on one hand, and better protect the people's rights from unreasonable deprivation on the other hand.

As the Immigration Department has started issuing the SAR passports since 3 July, and if the Ordinance is not given retrospective effect, the applications received from 3 July until the implementation of the Ordinance will not enjoy the protection of the appeals mechanism. Under these circumstances, the Liberal Party agrees to accept that this Ordinance should be given retrospective effect to safeguard the interests of all eligible Hong Kong residents.

Madam President, I so submit.

PRESIDENT (in Cantonese): Mr Howard YOUNG.

MR HOWARD YOUNG (in Cantonese): Madam President, the Hong Kong Special Administrative Region (SAR) passport has up to now been recognized by 36 countries, being granted either visa-free access or the same treatment as that of BN(O) passports. As a person who engages in or comes from the tourist industry, and evaluating the case according to my past experience, it is quite a good start for the three-week-old SAR passport. There is surely something to do with the Government's lobbying in the past. Since it is a new passport, the behaviour of its holders overseas affect to a certain extent how other countries will treat the passport. If SAR passport holders observe the law and have civilized behaviours and attitudes, I believe that the foreign governments will give credit to the SAR passport. As the Immigration Department is fully responsible for keeping and distributing the SAR passports, it is believed that the number of countries granting visa-free access will keep on increasing in the near future.

As some countries hold a wait-and-see attitude towards the relatively new SAR passport, Hong Kong people should behave in a civilized manner when they travel abroad in order to let other countries and governments have confidence in and trust Hong Kong people who hold the SAR passports and grant them visa-free access.

In fact, Hong Kong people have always maintained an excellent track record when they travel abroad. In 1995, among more than 31.5 million Hong Kong people who travelled abroad, or over 3.5 million people excluding those from mainland China and Macau, only 125 had been repatriated back to Hong Kong, as far as I know. I am confident in commenting on the basis of this figure that Hong Kong people can keep up the past record of a low repatriation rate no matter what travel documents or passports they hold when they travel abroad.

Overseas travel has become one of the most popular activities among Hong Kong people. Article 154 of the Basic Law has clearly stated that "the Government of the Hong Kong Special Administrative Region to issue, in accordance with law, passports of the Hong Kong Special Administrative Region ...... to all Chinese citizens who hold permanent identity cards of the Region". It also states that the "passports and documents shall be valid for all states and regions and shall record the holder's right to return to the Region." The Ordinance we are going to pass today precisely signifies the implementation of Article 154 of the Basic Law which safeguards the freedom and convenience for Hong Kong people when they travel abroad.

The popularity and acceptance of passports or travel documents has affected in one way or another the choices and desires of Hong Kong people travelling abroad, excluding those travelling on business trips whose choices are rather limited. Among the 10 countries and regions (excluding China and Macau) favoured by travelling Hong Kong people, six have granted visa-free access to BN(O) and the SAR passports. Of these countries, four, namely, Taiwan, Japan, the United States and Australia exercise strict immigration control. As far as I understand it, these countries and regions basically give the SAR passports and BN(O) passports the same treatment and they require travellers from most countries in the world to have a visa for access for instance, even Australian and American passport holders need entry visas. I find it rather satisfactory to treat everyone the same. According to the data I have, visits to these 10 countries and regions account for more than 70% of the total 3.5 million person-times Hong Kong people travel abroad per year. Recently, there are cases in which countries do not reveal their attitudes towards the SAR passport. The countries have not indicated whether they will grant visa-free access or indicated they need to review for several months. Some countries like Malaysia and Indonesia which have originally granted visa-free access to BN(O) holders have now reduced the number of days a person can stay without a visa. These last two countries are not among the top 10 travel destinations. I think that if these countries do not review their policies, they will never have a chance to make it to the top 10 travel destinations of Hong Kong people. These countries should therefore give the same privilege to Hong Kong people as soon as possible for their own benefits. Although BN(O) passports can continue to be used after the handover, the Government should try its best to allocate sufficient resources to enable the Immigration Department to issue SAR passports to eligible Hong Kong people as soon as possible as in the long run, the SAR passport will become the major travel document for Hong Kong people, and even for their next generation. It may be the only travel document for Hong Kong people born in the future.

Last Wednesday, the Secretary for Security mentioned in his answer to my questions that the Immigration Department has received over 125 000 applications as at 14 July, among which only 47 000 or so have gone through initial examination. It seems that many Hong Kong people wish to travel on SAR passports which really belong to them. I call upon the Government to allocate sufficient resources to enable the Immigration Department to expeditiously issue SAR passports to all eligible Hong Kong people.

Madam President, I so submit.

PRESIDENT (in Cantonese): Dr TSO WONG Man-yin.

DR TSO WONG MAN-YIN (in Cantonese): Madam President, I believe people are most concerned about the retrospective effect of the Hong Kong Special Administrative Region Passports Bill. According to the Government, it hopes that the effective date of the Bill can be dated back to 1 July so that the date of implementation of the Ordinance can dovetail with the effective date on which the SAR Government is authorized to issue SAR passports. Whether the Bill has retrospective effect will not in any way affect the ordinary citizens, but for those who have been issued passports, the legal status of the passport can be established and the related interests protected only when the law has retrospective effect. Thus, the Hong Kong Progressive Alliance agrees to the Government's suggestion to give the Ordinance retrospective effect.

On the other hand, the Bill initially has not mentioned the issue of an appeals mechanism. We know that the Secretary for Security will propose an amendment at the Committee stage, and during the Second Reading today, he will explicitly propose that the Administration should establish an appeals mechanism to ensure that all eligible Hong Kong residents can apply for passports or travel documents according to law for overseas travel or business trips. This is warmly welcomed by the Hong Kong Progressive Alliance.

With these remarks, I support the motion.

PRESIDENT (in Cantonese): Does any other Members wish to speak? If not, Secretary for Security, please continue.

SECRETARY FOR SECURITY (in Cantonese): Madam President, I would like to take this opportunity to thank the members of the Bills Committee scrutinizing this Bill and Members who support this Bill once again. In particular, I would like to thank Mr Howard YOUNG, Chairman of the Bills Committee as he was not here when I thanked him earlier.

First of all, I would like to respond to the questions raised by Members just now. The Honourable Mrs Miriam LAU has mentioned the problem of the retrospective date. I would like to point out here the reason why the effective date of this Bill should be dated back to 1 July. Obviously, it is not just simply out of the concern for charges as understood by Members. In fact, it is also intended to comply with the provisions of the Basic Law authorizing the Government of the Hong Kong Special Administrative Region (SAR) to issue SAR passports, that is the effective date under Article 154 of the Basic Law, such that all applications processed since 1 July will be safeguarded by the same Ordinance. However, this does not mean that without giving this Ordinance retrospective effect, those SAR passports issued by the Director of Immigration since 1 July will become invalid. The legal advice we obtained is that according to the wordings of Article 150 of the Basic Law, the SAR Government can issue passports pursuant to the details of the ancillary provisions on the issue of SAR passports. However, the legal basis for the issue of passports does not depend on these local laws. We have also put forward some other provisions of the Basic Law to the Bills Committee for comparison. I would not explain them in detail again now.

The Bills Committee has showed its support to this Bill as well as the whole series of Committee stage amendments. The Bills Committee proposed to add some clauses to this Bill for setting up an appeals mechanism to ensure that those who are aggrieved by the decisions made on their applications for SAR passports by the Director of Immigration at her discretion can lodge appeals through a statutory channel. After considering such valuable advice given by the Bills Committee thoroughly, we decided to accept the proposal. At the Committee stage, we will move to add new clauses to the Bill so as to authorize the Secretary for Security to draw up subsidiary legislation for setting up an appeals mechanism and drawing up the relevant details of operation. The decision on the particulars of the appeals mechanism such as its form, operational details, terms of reference and so on should not be made rashly or too hastily. We need time to consider it thoroughly. Therefore, we propose that the subsidiary legislation should be submitted to this Council for consideration later. We can promise that the subsidiary legislation will be completed by the end of this year. This is the schedule just put forward by Mr Howard YOUNG. In the meantime, any persons aggrieved by the decisions made by the Director of Immigration at her discretion may petition public officers at a more senior level than the Director of Immigration such as the Secretary for Security, the Chief Secretary or even the Chief Executive through normal administrative arrangements. Once the subsidiary legislation is passed, such appeals can be lodged in accordance with the statutory mechanism.

I recommend this Bill and all Committee stage amendments to Members. Thank you, Madam President.

PRESIDENT (in Cantonese) : I now put the question to you and that is : That the Hong Kong Special Administrative Region Passports Bill be read the Second time. Will those in favour please say "aye"?

(Members responded)

PRESIDENT (in Cantonese) : Those against please say "no".

(No Member responded)

PRESIDENT (in Cantonese) : I think the "ayes" have it. The "ayes" have it.

CHINESE NATIONALITY (MISCELLANEOUS PROVISIONS) BILL

Resumption of debate on Second Reading which was moved on 9 July 1997

PRESIDENT (in Cantonese): Does any Member wish to speak? Mr Howard YOUNG.

MR HOWARD YOUNG (in Cantonese): Madam President, although this Bill, like the previous Bill related to passports, mainly concerns issues such as administration and charges, I note that the Bill has mentioned that as a body authorized by the National People's Congress to make nationality changes according to the Chinese Nationality Law, the Immigration Department does not have an appeals mechanism for applications for Chinese nationality. It is indeed normal because it is common practice in all countries around the world. It is extremely difficult to apply for the citizenship of other countries, and for some countries, there is even no such avenue. Nevertheless, I hope that the Immigration Department of the Hong Kong Special Administrative Region will consider the question of how it is going to deal with applications filed by the many people who have stayed in Hong Kong for a long time for Chinese nationality, after it has become the executive body implementing nationality changes according to the Ordinance.

Many people around the world has been applying for Canadian, American and British nationalities, however, few people apply for Chinese nationality. This is something new. I guess that with the gradual strengthening of the international status of China, many people whose ancesters were not Chinese may wish to apply for Chinese nationality under "one country, two systems" in Hong Kong. This is not uncommon and is welcomed by us. I figure that the Immigration Department may become very busy in the future and may collect fees under this Ordinance. Certainly, not every country will announce how they assess the applicants' score as only the score system for migration application is made public, but seldom the points system and criteria for nationality applications. I have mentioned before that the legislature has passed an Ordinance to exclude the indigenous residents of the New Territories from enjoying the rights of permanent residence in Hong Kong from generation to generation. I believe that many Hong Kong indigenous residents, after they have lost this right, will consider how their future generations can return to Hong Kong. Under the Chinese Nationality Law, those who are born overseas are the citizens of overseas countries. What would happen when they wish to return to Hong Kong? I think one way is to facilitate the applications filed by these people for Chinese nationality. I hope that the Immigration Department will consider this in the future.

I hope that many people in the world, regardless of their original races, and regardless of whether they come from American, African or other Asian countries, will wish to apply for the Chinese nationality. I find that it is something we should be proud of.

Thank you, Madam President.

PRESIDENT (in Cantonese): Secretary for Security, do you wish to reply?

SECRETARY FOR SECURITY (in Cantonese): Madam President, from 1 July onwards, the Chinese Nationality Law has already been implemented in the Hong Kong Special Administrative Region in accordance with the National Laws Promulgation 1997. This Bill sets out the practical arrangements for the implementation of the Chinese Nationality Law, such as the charges and the relevant offences. This Bill is not complicated and the House Committee has agreed that the Second Reading debate shall be resumed today.

Having discussed the matter with the legal advisers of this Council, we agreed that clause 3 of the Bill can be slightly amended to bring out the legislative intent more clearly and I will move a relevant amendment at the Committee stage.

As to the issue riased by Mr Howard YOUNG, we will carefully consider and suitably follow up the matter in future.

As at 19 July, the Immigration Department has received a total of 1 092 applications for declarations of a change in nationality, of which 861 have been approved. If the Bill is passed, the various provisions of the Bill will by retrospective effect be applicable to the applications submitted to the Immigration Department from 1 July onwards, with the exception of the clauses relating to criminal offences.

Madam President, I commend the Bill and the Committee stage amendment to Members.

Thank you, Madam President.

PRESIDENT (in Cantonese): I now put the question to you and that is: That the Chinese Nationality (Miscellaneous Provisions) Bill be read the Second time.

Will those in favour please say "aye"?

(Members responded)

PRESIDENT (in Cantonese): Those against please say "no".

(No Member responded)

PRESIDENT (in Cantonese): I think the "ayes" have it. The "ayes" have it.

Committee Stage of Bills

CHAIRMAN (in Cantonese): Bills: Committee stage. Council is now in Committee.

HONG KONG SPECIAL ADMINISTRATIVE REGION PASSPORTS BILL

CHAIRMAN (in Cantonese): I now propose the question to you and that is: That the following clauses and schedule stand part of the Bill.

CLERK (in Cantonese): Clauses 1, 3, 6, 7 and 10 to 15.

CHAIRMAN (in Cantonese): Will those in favour please say "aye"?

(Members responded)

CHAIRMAN (in Cantonese): Those against please say "no".

(No Member responded)

CHAIRMAN (in Cantonese): I think the "ayes" have it. The "ayes" have it.

CLERK (in Cantonese): Clauses 2, 4, 5, 8 and 9.

CHAIRMAN (in Cantonese): Secretary for Security.

SECRETARY FOR SECURITY (in Cantonese): Madam Chairman, I move that the clauses specified be amended as set out in the paper circularized to Members.

The amendment to clause 2 is purely technical with the aim of defining more clearly a permanent resident of the Hong Kong Special Administrative Region (SAR).

As regards clause 4(2), the original intent of its enactment is that the Director of Immigration will be empowered under special circumstances to issue passports with different validity period from that of ordinary passports. When the Bills Committee scrutinized the Bill, members were of the view that amendments can be made to improve the drafting so as to highlight the point that the Director can only exercise the said power under special circumstances. We also agreed to this. The amendment I now propose should more explicitly express our original intent.

The amendment to clause 5 is only textual in nature to make the Chinese version more fluent in presentation.

The the amendment to clause 8 seeks to make its meaning more explicit. The original draft comprises a provision for applications filed in foreign countries which requires an applicant who collects his passport in a foreign country to pay a surcharge for the dispatch of his passport. According to the amendment, regardless of whether an application is submitted in Hong Kong or in a foreign country, so long as the applicant collects the passport in a foreign country, he has to pay a surcharge. The amendment also sets out that a passport will be dispatched to a foreign country only when the applicant wishes to collect it in a place outside Hong Kong and when the Director deems it practicable.

The amendment to clause 9(1) is made in the light of the fact that Members expressed at a meeting of the Bills Committee that the Director shall only cancel an issued SAR passport when he is relatively sure that this should be done. We also agreed to this. Under the amendment I now move, the Director must, on reasonable grounds, only cancel and take over a SAR passport when she is satisfied that the conditions under this clause apply. Furthermore, the Director shall have the discretion of cancelling a passport under such circumstances, in other words, after the cases mentioned in clause 9(1) have taken place, the Director shall not necessarily cancel a passport.

The amendment to clause 9(2) only corrects a typographical error in the gazetted Chinese version.

Thank you, Madam Chairman.

Proposed amendments

Clause 2 (see Annex IV)

Clause 4 (see Annex IV)

Clause 5 (see Annex IV)

Clause 8 (see Annex IV)

Clause 9 (see Annex IV)

CHAIRMAN (in Cantonese): Does any Member wish to speak?

(No Member indicated to speak)

CHAIRMAN (in Cantonese): I now put the question to you and that is: That the amendments moved by the Secretary for Security be approved.

Will those in favour please say "aye"?

(Members responded)

CHAIRMAN (in Cantonese): Those against please say "no".

(No Member responded)

CHAIRMAN (in Cantonese): I think the "ayes" have it. The "ayes" have it.

CLERK (in Cantonese): Clauses 2, 4, 5, 8 and 9 as amended.

CHAIRMAN (in Cantonese): Will those in favour please say "aye"?

(Members responded)

CHAIRMAN (in Cantonese): Those against please say "no".

(No Member responded)

CHAIRMAN (in Cantonese): I think the "ayes" have it. The "ayes" have it.

CLERK (in Cantonese):

New clause 9A	Appeals against decisions of Director
Heading before new clause 11A	Immigration Ordinance
New clause 11A	Interpretation

CHAIRMAN (in Cantonese): Secretary for Security.

SECRETARY FOR SECURITY (in Cantonese): Madam Chairman, I move that new clause 9A and Heading before new clause 11A and new clause 11A as set out in the paper circularized to Members be read the Second time.

New clause 9A aims at adding a new clause to enable the Secretary for Security to make regulations for the setting up of an appeals mechanism. According to the Bill, any applicant who disagrees with the decision of the Director of Immigration can make an appeal. As we have not yet decided on the form of the appeals mechanism, the new clause gives the Secretary for Security a fairly wide scope and he can appoint under the future regulations any authority or person to hear cases of appeal filed in pursuance of this clause. After we have made a decision in this regard, we will make give the Security Panel a report upon the Bills Committee's request.

New clause 11 has made a consequential amendment to the definition of Special Administrative Region (SAR) Passport under the Interpretation section of the Immigration Ordinance, specifying the SAR passport under the Immigration Ordinance as passports issued under the Ordinance. This amendment is purely technical.

Thank you, Madam Chairman.

CHAIRMAN (in Cantonese): I now propose the question to you and that is: That new clause 9A and Heading before new clause 11A and new clause 11A be read the Second time.

Will those in favour please say "aye"?

(Members responded)

CHAIRMAN (in Cantonese): Those against please say "no".

(No Member responded)

CHAIRMAN (in Cantonese): I think the "ayes" have it. The "ayes" have it.

CLERK (in Cantonese): New clause 9A and Heading before new clause 11A and new clause 11A.

CHAIRMAN (in Cantonese): Secretary for Security.

SECRETARY FOR SECURITY (in Cantonese): Madam Chairman, I move that new clause 9A and Heading before new clause 11A and new clause 11A be added to the Bill.

Proposed additions

New clause 9A (see Annex IV)

New clause 11A (see Annex IV)

CHAIRMAN (in Cantonese): I now put the question to you and that is: That new clause 9A and Heading before new clause 11A and new clause 11A be added to the Bill.

I now put the question to you as stated.

Will those in favour please say "aye"?

(Members responded)

CHAIRMAN (in Cantonese): Those against please say "no".

(No Member responded)

CHAIRMAN (in Cantonese): I think the "ayes" have it. The "ayes" have it.

CLERK (in Cantonese): Schedule.

CHAIRMAN (in Cantonese): Secretary for Security.

SECRETARY FOR SECURITY (in Cantonese): Madam Chairman, I move that the schedule be amended as set out in the paper circularized to Members. This amendment is purely technical. Thank you, Madam Chairman.

Proposed amendment

Schedule (see Annex IV)

CHAIRMAN (in Cantonese): I now put the question to you and that is: That the amendment moved by the Secretary for Security be approved.

Will those in favour please say "aye"?

(Members responded)

CHAIRMAN (in Cantonese): Those against please say "no".

(No Member responded)

CHAIRMAN (in Cantonese): I think the "ayes" have it. The "ayes" have it.

CLERK (in Cantonese): Schedule as amended.

CHAIRMAN (in Cantonese): Will those in favour please say "aye"?

(Members responded)

CHAIRMAN (in Cantonese): Those against please say "no".

(No Member responded)

CHAIRMAN (in Cantonese): I think the "ayes" have it. The "ayes" have it.

CHINESE NATIONALITY (MISCELLANEOUS PROVISIONS) BILL

CHAIRMAN (in Cantonese): I now propose the question to you and that is: That the following clauses and schedule stand part of the Bill.

CLERK (in Cantonese): Clauses 1, 2 and 4 to 7.

CHAIRMAN (in Cantonese): Will those in favour please say "aye"?

(Members responded)

CHAIRMAN (in Cantonese): Those against please say "no".

(No Member responded)

CHAIRMAN (in Cantonese): I think the "ayes" have it. The "ayes" have it.

CLERK (in Cantonese): Clause 3.

CHAIRMAN (in Cantonese): Secretary for Security.

SECRETARY FOR SECURITY (in Cantonese): Madam Chairman, I move that clause 3 be amended as set out in the paper circularized to Members.

The amendment seeks to make explicit the original legislative intent. The original intent of clause 3(2) of the Bill is to specify that the applicant must pay the relevant fees and comply with any requirements of the subsidiary legislation. The original wording is: "No nationality application shall be approved unless the prescribed requirements have been complied with." This expression may give a person a wrong impression that so long as he has complied with the prescribed requirements, his application will be approved. In fact, many factors affect the decision as to whether an application shall be approved. For instance, if an applicant wishes to make a declaration for a change in nationality, but he is not of any nationality other than being a BN(O), his application will not be approved.

For the sake of clarity, we suggest that the expression "shall not be approved" be amended as "shall not be dealt with" so that the applicant will not harbour any incorrect expectation.

Thank you, Madam Chairman.

Proposed amendment

Clause 3 (see Annex V)

CHAIRMAN (in Cantonese): Does any Member wish to speak?

(No Member indicated to speak)

CHAIRMAN (in Cantonese): I now put the question to you and that is: That the amendment moved by the Secretary for Security be approved.

Will those in favour please say "aye"?

(Members responded)

CHAIRMAN (in Cantonese): Those against please say "no".

(No Member responded)

CHAIRMAN (in Cantonese): I think the "ayes" have it. The "ayes" have it.

CLERK (in Cantonese): Clause 3 as amended.

CHAIRMAN (in Cantonese): Will those in favour please say "aye"?

(Members responded)

CHAIRMAN (in Cantonese): Those against please say "no".

(No Member responded)

CHAIRMAN (in Cantonese): I think the "ayes" have it. The "ayes" have it.

CLERK (in Cantonese): Schedule.

CHAIRMAN (in Cantonese): Will those in favour please say "aye"?

(Members responded)

CHAIRMAN (in Cantonese): Those against please say "no".

(No Member responded)

CHAIRMAN (in Cantonese): I think the "ayes" have it. The "ayes" have it.

PRESIDENT (in Cantonese): Council will now resume.

Third Reading of Bills

PRESIDENT (in Cantonese): Bills: Third Reading. Secretary for Security.

SECRETARY FOR SECURITY (in Cantonese): Madam President, the

Hong Kong Special Administrative Region Passports Bill and

Chinese Nationality (Miscellaneous Provisions) Bill

have passed through Committee with amendments. I move that these two Bills be read the Third time and do pass.

PRESIDENT (in Cantonese): I now propose the question to you and that is: That the

Hong Kong Special Administrative Region Passports Bill and

Chinese Nationality (Miscellaneous Provisions) Bill

be read the Third time and do pass.

PRESIDENT (in Cantonese): I now put the question to you as stated.

Will those in favour please say "aye"?

(Members responded)

PRESIDENT (in Cantonese): Those against please say "no".

(No Member responded)

PRESIDENT (in Cantonese): I think the "ayes" have it. The "ayes" have it.

CLERK (in Cantonese): Hong Kong Special Administrative Region Passport Bill

Chinese Nationality (Miscellaneous Provisions) Bill

MEMBERS' MOTIONS

INTERPRETATION AND GENERAL CLAUSES ORDINANCE

PRESIDENT (in Cantonese): Motion under the Interpretation and General Clauses Ordinance. Dr LEONG Che-hung.

DR LEONG CHE-HUNG: Madam President, I move the motion standing in my name on the Agenda.

The Hong Kong Court of Final Appeal Rules and Hong Kong Court of Final Appeal Fees Rules, published as Legal Notices Nos. 384 and 385 of 1997 respectively were tabled at the Provisional Legislative Council meeting on 9 July 1997. The motion seeks to extend under section 34(4) of the Interpretation and General Clauses Ordinance (Cap. 1), the period for amending the subsidiary legislation to a meeting on 20 August 1997.

A subcommittee of which the Honourable Ronald ARCULLI is the chairman has been formed to study the two items of subsidiary legislation. The sub-committee met on 21 July and identified a few issues for further clarification and considerations by the Court of Final Appeals Rules Committee and the Judiciary. In order to allow more time for the subcommittee to consider further information from the Committee and the Judiciary on the issues identified, it is necessary to extend the time allowed for making amendments to the subsidiary legislation to the meeting on 20 August 1997.

Madam President, I so do move.

DR LEONG CHE-HUNG moved the following motion:

"That in relation to the Hong Kong Court of Final Appeal Rules and Hong Kong Court of Final Appeal Fees Rules, published as Legal Notices Nos. 384 and 385 of 1997 respectively and laid on the table of the Provisional Legislative Council on 9 July 1997, the period referred to in section 34(2) of the Interpretation and General Clauses Ordinance (Cap. 1) for amending subsidiary legislation be extended under section 34(4) of that Ordinance to the meeting of 20 August 1997."

PRESIDENT (in Cantonese): I now propose the question to you and that is: That in relation to the Hong Kong Court of Final Appeal Rules and Hong Kong Court of Final Appeal Fees Rules, published as Legal Notices Nos. 384 and 385 of 1997 respectively and laid on the table of the Provisional Legislative Council on 9 July 1997, the period referred to in section 34(2) of the Interpretation and General Clauses Ordinance (Cap. 1) for amending subsidiary legislation be extended under section 34(4) of that Ordinance to the meeting of 20 August 1997.

Does any Member wish to speak?

(No Member indicated to speak)

PRESIDENT (in Cantonese): I now put the question to you as stated.

Will those in favour please say "aye"?

(Members responded)

PRESIDENT (in Cantonese): Those against please say "no".

(No Member responded)

PRESIDENT (in Cantonese): I think the ayes have it. The ayes have it.

PRESIDENT (in Cantonese): Three motions with no legal effect. I have accepted the recommendations of the House Committee as to the time limits for the debate on the three motions. The movers of the motions will each have 15 minutes for their speeches including their replies, and another five minutes to speak on the proposed amendment. Other Members, including the movers of the amendments, will each have seven minutes for their speeches. Under Rule 37 of the Rules of Procedure, I am obliged to direct any Member speaking in excess of the specified time to discontinue.

PRESIDENT (in Cantonese): First motion: Reduction of rates percentage charge. Mr NGAN Kam-chuen.

REDUCTION OF RATES PERCENTAGE CHARGE

MR NGAN KAM-CHUEN (in Cantonese): Madam President, I move the motion set out on the Agenda.

Madam President, In Pleasing Rain in Spring Night, Du Fu's eight-line poem with five characters in each line, it reads, "excellent rain knows the season, and it comes in Spring", meaning the rain comes in Spring because it knows in which season people need it most. It can be used as a simile as a good tax reduction measure should be like spring rain that "creeps in with the wind at night, and moisturizes things in silence", bringing joy to people at the most appropriate time. The Democratic Alliance for Betterment of Hong Kong (DAB) thinks that as the Special Administrative Region (SAR) Government has abundant fiscal reserves, is financially stable and has a steady flow of additional income, this is a golden opportunity for it to give the community a dividend. We thus ask the SAR Government for a 40% reduction in the overall rates percentage charge to allow Hong Kong people at all levels to share the fruits of our economic prosperity. My motion is based on three notions: firstly, a reduction in rates will not affect the Hong Kong Government's financial stability; secondly, compared with other tax reduction measures, a reduction in rates can benefit more people; and lastly, a reduction in rates will not affect the services provided by the two Municipal Councils.

As we all know, rates is a kind of tax levied on real estates by the Government. The main duty of the Rating and Valuation Department is to evaluate the open market rental values of all properties in Hong Kong to arrive at the rateable values. The rates payable are calculated by multiplying the rateable values by the overall rates percentage charge. The overall rates percentage charge for the current fiscal year is 5.0%, and the budgeted total rates income is $16.6 billion. Calculating on the basis of this figure, the DAB is asking for a 40% reduction in the overall rates percentage charge, that is, from 5.0% to 3.0%, which will only reduce the Hong Kong Government's income by $6.6 billion. Will this affect the financial stability of the SAR Government? I can say for sure: definitely not!

The DAB believes that the SAR Government is now fully capable financially of reducing the overall rates percentage charge and giving the community a dividend. The fiscal reserves of the SAR Government, including the Land Fund, amounts to $370 billion as at 1 July, over 15 times the target of $25 billion fiscal reserves set out in the Memorandum of Understanding on the New Airport signed by the Chinese and British Governments in 1991. As estimated in the Budget, the surplus for the year 97-98 will be as much as $31.7 billion, hitting a new historical high.

Moreover, the SAR Government can fully make up for the decrease in its income as a result of a reduction in the overall rates percentage charge through other channels, including the income from the new government rent, or the saved expenditure for the garrison and on dealing with the Vietnamese migrants. According to the 1988 Defence Costs Agreement, the Hong Kong Government was required to pay 65% of the recurrent expenses of Britain in respect of the garrisons stationed in Hong Kong and all the infrastructural expenses on the garrisons. In the last three years, the highest figure was $1.7 billion a year. With the handover of sovereignty, all garrison expenses will be borne by the Central Government, therefore, the SAR Government is no longer required to pay this sum. Along with the gradual closing down of Vietnamese migrant detention centres, the Hong Kong Government can cut down another huge sum of expenditure. In the last three years, the annual average expenses of the Immigration Department and the Correctional Services Department in this respect was as much as $300 million. The Government can certainly balance its revenues and expenditures by saving up these two sums of money, and by levying government rent under the Basic Law which is estimated to be $4.5 billion for the year 98-99. Hence it is absolutely not necessary for it to increase income and cut down expenditure as a result of a reduction in rates.

On the other hand, since all the SAR Government's revenues from land sales will be put to the Capital Works Reserve Fund account and it is not necessary for half of the sum to be put aside as the Land Fund, it can therefore have an enormous amount of money to meet the works expenses. Take the fiscal year 97-98 as an example, the total income of the Capital Works Reserve Fund is $49.3 billion , twice as much as that in 96-97. The sum is enough for meeting this year's expenditure on works. Therefore, the Government does not have to transfer money from the General Revenue Account to the fund account, therefore, more money in the General Revenue Account can be put aside for additional expenditure items. In view of this, the Government has sufficient resources to meet additional public expenditures and a reduction in rates will not affect the implementation of other public policies.

The Secretary for the Treasury has objected to the DAB's suggestion on the grounds that the tax base will be narrowed down by the reduction in rates. However, on the basis of the DAB's proposal, the reduction in rates will only reduce the Hong Kong Government's income by $6.6 billion, which is equal to part of the current general rates revenue, that is, about 3% of the total government revenue. Moreover, as revealed by the analysis above, the introduction of government rent will become a new tax base for the Hong Kong Government. The new tax base coupled with other saved expenditures and new revenue items will allow the Government to maintain sufficient fiscal reserves. Hence, the reasons given by the Secretary for the Treasury are untenable.

A reduction in rates will directly benefit 1.5 million flat owners in Hong Kong who already have the values of their flats assessed. 700 000 flats out of the above are public housing units. At present, an average of one fifth of the rent of a public housing unit is used to pay rates, according to the Housing Authority's statistics. If the total rates percentage charge is reduced by 40%, it can save 10% of the rent of a public housing unit. As to the owners of other types of units, they can save around $100 to $800 per month. Hence, the policy of a reduction in rates can benefit Hong Kong people from all walks of life.

All sectors of the community have long reached a consensus in respect of the reduction in rates. But after the Hong Kong Government has re-valued the rateable values in 1996, the rates payable by people has risen instead of fallen. The rates payable for residential properties have increased by 10% on average. It is indeed hard for people to accept the fact that the Government is still asking for an increase in tax payment when the Treasury has an abundance of money.

The Secretary for the Treasury has stated that it is unfair to ask for a reduction in rates as a result of the imposition of government rent. It is a misleading argument because the DAB's request for a reduction in rates is not only intended to alleviate the burden of people paying government rent. We have made the request in the hope that all Hong Kong people can benefit from the huge surplus of the Hong Kong Government. Compared with other tax concessions, such as a reduction in salaries tax which only benefits the taxpayers but not those with low income who do not have to pay tax or a reduction in profits tax which will only benefit the businessmen, a reduction in the overall rates percentage charge will undoubtedly benefit more people.

At present, the two Municipal Councils provide municipal facilities and services within their jurisdictions. Their income mainly comes from their respective share of the total rates revenue.

The rates sharing ratio for the year 1997-98 is 2.6% for the Provisional Urban Council and 4.2% for the Provisional Regional Council. If the overall rates percentage charge is reduced to 3.0%, it will have no effect on the revenue of the Provisional Urban Council. Only the difference in the allocation to the Provisional Regional Council has to be dealt with. The Government has publicized that a reduction in rates will cause a reduction in the services provided by the Provisional Regional Council. If it is implying that no replacement fund will be allocated to the Provisional Regional Council to make up for the insufficient revenue, the DAB will be sorry for its irresponsible attitude.

A reduction in rates embodies the macroscopic policy of giving the public a dividend. When carrying out the macroscopic policy, the Government is obligated to adopt suitable measures to ensure the provision of the original public services, in particular when the Provisional Regional Council provides services which safeguard the environmental hygiene for the three million people in its area and also organizes cultural, recreational and sports activities. In fact, when the overall rates percentage charge was 3%, the general rates received by the Government from the Urban Council area were sufficient to meet the revenue difference of the Regional Council and it was not necessary to dip into other general revenues of the Government. Therefore, the Government has sufficient resources to enhance the continuous upgrading of the service standard of the Provisional Regional Council.

Members do not have to worry too much about the question of how to maintain the financial independence of the Provisional Regional Council. In determining the rates sharing ratio of the two Municipal Councils in the past, the Finance Branch would first decide the total rates revenues required by the two Municipal Councils in the next three years and then fix a fixed sharing ratio which would then be announced in the fiscal budget in March and passed by the Legislative Council by way of a resolution. The Council has all along been monitoring the two Municipal Councils financially.

As to how the Government is going to make specific allocations to the Provisional Regional Council while maintaining its financial independence in the future, the Government can actually deal with this in several ways, including allocating a lump sum to the Provisional Regional Council's reserves or making a subvention from the General Revenue Account.

All in all, the reduction in the overall rates percentage charge is justified, reasonable, convenient and enforcement friendly. The DAB has introduced this motion debate to urge the SAR Government once again to accept our proposal and let pleasant rain fall in Hong Kong.

With these remarks, Madam President, I beg to move.

Mr NGAN Kam-chuen moved the following motion:

"That this Council urges the Special Administrative Region Government to pay a fiscal dividend to the people of Hong Kong by expeditiously reducing by 40% the overall rates percentage charge from 5% to 3%."

PRESIDENT (in Cantonese): I now propose the question to you and that is: That this Council urges the Special Administrative Region Government to pay a fiscal dividend to the people of Hong Kong by expeditiously reducing by 40% the overall rates percentage charge from 5% to 3%.

Does any Member wish to speak? Mr WONG Siu-yee.

MR WONG SIU-YEE (in Cantonese): Madam President, I support the Honourable NGAN Kam-chuen's idea of giving the community a dividend. However, I think we need to look at the issue from several perspectives for the benefit of realizing this idea. I think some basic concepts need to be clarified before asking for a 40% reduction in the overall rates percentage charge from 5% to 3%.

Firstly, government rent and rates are completely different in nature and the two cannot be mixed up. If we think that the Government would just receive around $6 billion less by reducing the rates percentage charge by two percentage points, but at the end it would just lose $2.6 billion as it could recoup $4 billion from government rent, then we would have mixed up government rent and rates. The nature of the government rent levied under Appendix III of the Joint Declaration and Article 121 of the Basic Law is embodied in Article 7 of the Basic Law, that "The land and natural resources within the Hong Kong Special Administrative Region shall be State property. The Government of the Hong Kong Special Administrative Region shall be responsible for their management, use and development and for their lease or grant to individuals, legal persons or organizations for use or development. The revenues derived therefrom shall be exclusively at the disposal of the government of the Region." Rates are indirect taxes imposed by the Treasury on the lease or use of properties. The revenues from government rent will all be all retained by the Government while the rates revenues will be separated into two parts, the Government's General Revenue and the Urban Council (or Regional Council) revenue. For example, the rates percentage charge for the year 97-98 is 5%, in the Kowloon and Hong Kong regions, the Urban Council has a sharing ratio of 2.6% while the Government has 2.4%. In the New Territories, the Regional Council's sharing ratio is 4.2% and the Government 0.8%. Thus we can see that government rent and rates are different in nature. The Government's share in rates revenue is less than that of the two Municipal Councils. The rates revenues cannot be entirely put under the Government's account.

Madam President, if the rates percentage charge is reduced by two percentage points, it will have a serious impact on the two Municipal Councils so much so that it will greatly reduce the rates revenue of the Regional Council by 30%, thus affecting its operation. The two Municipal Councils are now financially independent and accountable for their profits and losses. They need a certain amount of reserves and stable financial sources. If the two Municipal Councils' revenues decrease immensely, it may affect the indispensable municipal services for the public such as environmental hygiene, and cultural and recreational activities, directly affecting the quality of life of the public. If a reduction in rates revenue would possibly lead to a decrease in the revenue of the two Municipal Councils by more than $4 billion, funds have to be transferred from the Treasury to the two Municipal Councils; it would not be appropriate. As rates is a stable source of indirect tax for the Government, reducing rates by two percentage points would mean a total of $6.6 billion decrease in the revenues of the Government and the two Municipal Councils. This is equivalent to giving up the Government's general rates revenue. (It also means that, if the Government needs to allocate funds to the two Municipal Councils to compensate for their decreased rates revenue every year thereafter, it will be getting rid of the Government's rates revenue forever). It means that the tax base will be narrowed down. The SAR Government has planned to actively promote the construction of public housing flats and Home Ownership Scheme flats. Besides, priority projects under the Railway Development Strategies such as the Northwest Railway, the Tseung Kwan O MTR Extension and the Ma On Shan Rail Link will soon be constructed. These will immensely increase our public expenditure. If the tax base is narrowed down, it will only result in a gradual fall in our fiscal reserves. Madam President, after all, the fleece comes from the sheep's back. Will it be beneficial to the stability and long-term development of the SAR?

At present, the overall rates percentage charge has decreased from 5.5% to 5% as proposed in the 97-98 Budget ─ a historical low. Although the total rates revenue for the year 97-98 is estimated to be $16.585 billion, there is still an increase of 5.7% as compared with that of last year. It appears that the SAR Government has very abundant fiscal surpluses, but it has to deal with a series of economic and livelihood problems left behind by the British Hong Kong Government such as housing, education, elderly welfare, transport, medical care and the promotion of high value-added industries and high technology industries. All these will increase our public expenditures, and even tap our fiscal reserves. Every move needs money indeed. Therefore, I think that in view of the overall interests of Hong Kong, it is not suitable for Hong Kong to dramatically reduce the overall rates percentage charge by 40% at the moment.

Mr NGAN Kam-chuen's idea of giving the community a dividend merits our support. As the saying goes, "As we got it from the people, we should spend it on the people." However, full consideration has to be made before determining the specific methods to be adopted. As the debate is not binding, Members of the Hong Kong Progressive Alliance do not need to reach a consensus before voting. I have decided to abstain from voting on Mr NGAN Kam-chuen's motion for while I support giving the community a dividend, I support that a more suitable method of giving the community a dividend should be found.

Madam President, I so submit.

THE PRESIDENT'S DEPUTY, DR LEONG CHE-HUNG, took the Chair.

DEPUTY PRESIDENT (in Cantonese): Mr Ronald ARCULLI.

MR RONALD ARCULLI: Mr Deputy, I think I have heard some of the most convoluted and confusing reasons on this motion. Firstly, as far as the mover the Honourable NGAN Kam-chuen is concerned, he listed out a whole series of instances where the Government no longer has to expend money, things like for defense purpose, for Vietnamese detention centres and so forth, and he included of course additional revenue of 4.5 billion dollars by way of Government land rent and the surplus for the current year 97/98 in the order of 31.7 billion dollars. I am surprised he did not bring in the surplus of 58.9 billion for the year 2000 to 2001.

But be that as it may, the Liberal Party of course has been pressing for reduction in rates and we do that consistently and constantly every year. What we find a bit difficult to digest is the massive reduction that is proposed in this motion. We agree that existing fiscal reserves is extremely healthy, we believe that the Administration must consider to keep as much money as possible in tax payers' pocket, we aware that the addition of the Government rent on the 1 July onwards has increased the burden of some rate payers who also have to pay the rent, but of course one must not confuse two things. Those that have to pay the rent pay it because their leases have expired and the Basic Law provided that to give them relief from paying a lump sum premium they pay the Government rent of 3% instead. So we must not confuse the two things.

The second thing of course is that you must not really ask the Government rent payers to subsidize the rate payers, which is what is being suggested.

The third thing of course is that I am quite surprised that the Honourable NGAN Kam-chuen has said that there is no problem with the two Municipal Councils. If DAB's position is that we de-link the revenue to the two Municipal Councils from rates, the Liberal Party can consider supporting this motion if he would do that, but that is not the case and he also tells us that the difference in rates will more than make up the shortfall to the Regional Council, well, my calculation says that there will still be 300 million dollars that the Government will have to look to general revenue taking into account the 0.4% rates that they collect from the Urban Council's portion, so to speak. So I think we better have our positions very clear on the two Municipal Councils. There is a very clear understanding between the Government and the two Municipal Councils, indeed a Memorandum of Understanding, as I understand it, signed between the two Councils and the Government and if we are now seeking to move that then let us consider it.

And lastly, in terms of the approach that is being adopted by the Honourable NGAN Kam-chuen, and that is a piece meal approach. What he is really saying is that this is a revenue measure that we can take in isolation. We do not have to consider the other aspects of revenue measures and as he well knows, revenue measures includes profits tax, salaries tax, personal allowances and a whole variety of fees and charges. If he does not wish to put it all into one basket, so to speak, he will have the opportunity of supporting my motion, which will follow immediately after this. He can bring in his 3% request and support my motion, but I suspect he is not going to because I have already been told that they are not minded to do so.

But be that as it may, the 40% reduction is neither fair nor right, and in terms of the relief to rate payers, one alternative of course is to ask the Government to continue the cap that was introduced this year to extend it for several other years. Now the impact will not be as much, and of course in addition to that, Members can also suggest as it were, a more modest reduction if we had a half percent reduction, let us say, from 5% to 4.5% plus a cap, I am quite sure that would bring some relief to the rate payers.

So in conclusion, Mr Deputy, I really say this that in terms of the motion, unfortunately, we do not think we can support it although we share the concern about the burden of rate payers, but as I said earlier that concern can be reflected in the motion that I will be moving immediately after this debate.

Thank you, Mr Deputy.

DEPUTY PRESIDENT (in Cantonese): Mr CHENG Kai-nam.

MR CHENG KAI-NAM (in Cantonese): Mr Deputy, I am glad to have heard the Honourable Ronald ARCULLI say that if there is no direct correlation between rates and the revenue of the Urban Council, he will consider supporting Mr NGAN Kam-chuen's motion. It is because the Democratic Alliance for Betterment of Hong Kong (DAB) is precisely saying that on the question of the revenue of the two Municipal Councils, the SAR Government can allocate funds direct to the two Municipal Councils on the basis of their needs. Rates are only a source of government revenue and are not different from other taxes. In the past, it was just a practice to allocate rates revenue to the two Municipal Councils ─ a practice which did not have essential significance. Therefore, Mr Ronald ARCULLI and Members of the Liberal Party may well support our motion.

In addition, I also wish to respond to the issue brought up by the Honourable WONG Siu-yee that rates and government rent are two different things. If we come in touch with the public, we would be asked the same question: What is the difference between government rent and rates? It is a pity that the Government has never told us whether the government rent have designated uses. If we say that rates have designated uses, but as I have just said, the so-called designated uses actually have no difference from other taxes, they are also drawn from the same big pond. If the Government can clearly tell us that the government rent have designated uses, we can then tell the general public that government rent is different from rates.

The Government has reduced the rates percentage charge from 5.5% to 5%. Will the Government tell us why it has done so? If it is related to the payment of government rent by the general public, are we telling people that government rent and rates indeed have no difference? To the general public, these two types of payments appear on the same demand notes from the Rating and Valuation Department. Therefore, I request the Government or any Member who objects to this motion to give us a suggestion as to how we should tell the general public that government rent is different from rates. We may then re-consider our opinions.

In our discussion of this matter with the Secretary for the Treasury, we mentioned why we did not suggest reducing government rent but rates. The answer was exactly the other way round, that is, why did we not reduce rates but government rent? The Basic Law has clearly stated the way we charge government rent. If we wish to change the rate percentage charge of government rent, we know how to do so. It is very simple for the general public, they just have to minus four and add three. It also applies to the Secretary for the Treasury who has to minus four and add three. If the Government can tell all Hong Kong people clearly that government rent has designated uses and how different government rent is from rates, we may reconsider our opinions.

Thank you, Mr Deputy.

DEPUTY PRESIDENT (in Cantonese): Dr Raymond HO.

DR RAYMOND HO (in Cantonese): Mr Deputy, with the boom of the property market in Hong Kong in the past few years, rents have gone up tremendously, and the rates payable by people have become more and more, greatly increasing the pressure of living. On the other hand, over one million private housing and Home Ownership Scheme flat owners all over Hong Kong have to pay government rent at 3% of the rateable values of their properties beginning from 1 July this year in accordance with the provisions of Appendix III of the Joint Declaration. As the government rent are calculated on the basis of 3% of the rateable values, the higher the rents, the larger the amounts of rates and government rent payable. The burden of daily living of the general public will become heavier and heavier, that is, their quality of life will decline.

In the '80s when we debated over the Basic Law, we in the Consultative Committee had suggested that government rent should be set at 3%, probably because we had not considered at that time that the base would be so big. As I have mentioned earlier, as the base increases, the real value of 3% will also rise. In recent years, the Government has a huge amount of revenues and the new government rent is expected to bring about around $3.2 billion additional income to the SAR Government in the current year. Undoubtedly, the success of Hong Kong relies on the rather conservative fiscal policies adopted by the Government in the past while the majority of the public will understand the importance of putting aside surpluses for emergency needs. However, at a time when the government surplus is growing and the lives of people are growing harder, the public may not agree to the excessively conservative fiscal philosophy of the Government and they may be discontented.

In fact, the Government should grasp the opportunity offered by the abundant fiscal reserves to reduce the current rates percentage charge from 5% to 3% in order to relieve the citizens' burden of living and to realize the ideal of giving the community a dividend. In terms of social equity, a reduction in the rates percentage charge can benefit people from all walks of life as housing is a common necessity. It is fairer than a mere reduction in salaries tax because it may not offer great help to the low income group. For the Urban Council and the Regional Council, their revenues can actually be maintained by other administrative methods .

Mr Deputy, given these reasons, I support the motion moved by Mr NGAN Kam-chuen on a reduction in the rates percentage charge. I so submit

DEPUTY PRESIDENT (in Cantonese): Miss CHAN Yuen-han.

MISS CHAN YUEN-HAN (in Cantonese): Mr Deputy, a rise in property prices is proportionate to the transaction volume in the market. When the transaction volume increases, the property prices will rise. Over the last six months, the property prices have risen by 30%, and even 50% in some areas. Not only does this exert serious financial burdens on people who have to repay their mortgage instalments, but also exert pressures of rent increases on private housing tenants. We support Mr NGAN Kam-chuen's proposal for a 40% reduction in the rates percentage charge from 5% to 3% as it will benefit those who are now repaying their mortgage loans or renting private housing.

In order to extend the land lease up to 2047, the Government has already begun levying government rent on most people living to the north of Boundary Street since the end of June, and this provision makes it necessary for around one million families to make an additional quarterly payment of several hundred to a thousand dollars as government rent. Most families are already heavily burdened by their mortgage instalments and it will undoubtedly be adding to their burdens by requiring them to pay both rates and government rent. Although the Government keeps on saying that it is just collecting government rent from the owners and it seems that this will not affect the tenants, but this is actually not the case. I believe Members would agree that owners who have to pay government rent will ask their tenants to bear the additional expenditures. Therefore, the tenants of private housing are the most badly hit, and a reduction in rates will be helpful to the tenants.

I think a reduction in rates will not have much effect on the Government. Although Mr Ronald ARCULLI has mentioned a series of implications, I do not consider them as very serious. Mr Deputy, over the last 10 years, there has been a trend for the rates imposed by the Government to go downward. Data from the Rating and Valuation Department reflect that the rates percentage charge has had been continuously reduced from 7.5% in 90-91 to the present 5%. Although the rates percentage charge has been reduced, the actual government revenues have not been reduced. Just take a look at a 400 sq ft private housing flat. As the property prices in the last ten years have kept on rising, the price of the said unit has increased by seven times, and the rent has correspondingly gone up tremendously, from an average rent of $2,500 in 1986 to over $8,000 in 1996, an increase of more than three times. Although the rate of rent increase is far behind that of property price rise, we can see that the decrease in the rates percentage charge is not accompanied by a drop in the Government's rates revenues but by a rise instead. Let us look back at the past, in the year 90-91, the rates revenue was $6.8 billion, and it reached $16.6 billion in 97-98. Therefore, we can see that it does not have any effect on the Government.

Mr Deputy, the SAR Government will have over $30 billion surpluses in the year 97-98, and it should give the community a dividend by reducing the rates percentage charge from 5% to 3%. The SAR Government will only receive $6.6 billion less after such a reduction, but it will receive an additional over $4 billion from government rent. The Government will not suffer much loss even if Mr NGAN Kam-chuen's motion is approved and implemented by the Government. As property prices have risen, the Government will actually receive more even though it has reduced the rates percentage charge.

In the long run, as long as the SAR Government continues to collect rates from residents, the pressure from rents will continue to exist. I think that the SAR Government should offer rent assistance to poor private housing tenants who have been on the waiting list for public housing for years to alleviate their pressure from rents. Why do I say so? It is because, if Mr NGAN Kam-chuen's motion is approved today, and implemented by the Government, the Government's continuous collection of government rent and rates will still have great impact on the grassroots living in private housing. They have been on the public housing waiting list for a long period, but have not been allocated flats. Therefore, I think that apart from carrying out the proposal of today's motion, the Government should also consider my motion proposing rent allowances already approved by the former Legislative Council, in particular when we are in such an outstanding financial situation now. Therefore, I would like to remind the Government that it should consider this suggestion. It has been over half a year since we made this suggestion in the former Legislative Council, but it seems that the Government has no intention to implement it. I am very sorry about that. I hope that the SAR Government will, besides being concerned about how to combat property speculation, also care about the group of private housing residents who have difficulties even in paying rents.

Mr Deputy, at present, those residents who have to pay government rent are still puzzled and confused about why they have to pay such sums. Some Honourable colleagues have just mentioned that they are not quite clear about what are rates and government rent. I think that the Government needs to do something. Some people are now refusing to pay government rent and I think that the Government should listen to their views because their burdens are very heavy. The Government is also rather confused in this respect and I hope that the Government, having listened to Honourable colleagues' opinions today, would consider how it could relieve the burdens of people who have to pay both rates and government rent, and accept Mr NGAN Kam-chuen's proposal. Moreover, the Government should publicize the concept and method of calculation of government rent, to give people a clear understanding of government rent payments.

With these remarks, Mr Deputy, the Federation of Trade Unions supports the motion.

DEPUTY PRESIDENT (in Cantonese): Mr CHOY Kan-pui.

MR CHOY KAN-PUI (in Cantonese): Mr Deputy, the rates percentage charge has been reduced from 5.5% to 5% this year, however, as the rateable values have been revalued after the sharp increase in property prices and rents in recent years, the rateable values of residential flats have actually gone up by 23% on average. Therefore, the rates percentage charge has actually increased instead of decreased. In addition, the owners of one million property units in Hong Kong have to pay government rent equal to 3% of the rateable values from July onwards in order to carry through the provisions of Appendix III of the 1984 Joint Declaration, that government rent shall replace premium payments to be made after the expiry of land leases and that the arrangement shall remain unchanged for 50 years. At that time, assessed on the basis of the rental values in 1984, the amounts of government rent as 3% of the rateable values were not large. The original intention was just to collect a nominal amount which will not affect the burdens of the owners or tenants. However, after more than 10 years, the prices of property have increased sharply and the rental values have increased by several folds, 3% government rent can be quite a large sum. If the citizens have to pay government rent and rates at the same time, the percentage charge of 8%, calculated on the present rental values, will greatly increase their burdens.

Mr Deputy, the Secretary for the Treasury has recently said that the Government would not dismiss the possibility of reducing taxes as the Treasury is now "flooded with money". The Joint Declaration signed between China and Britain has specified the rates of government rent, and it is impossible to reduce it. The most direct and effective way to relieve people's extra burdens brought about by government rent is to consider doing something with rates as the calculation of government rent is directly linked with rates. It is simple to carry out although government rent and rates are two different things. I agree to Mr NGAN Kam-chuen's proposal to reduce the rates percentage charge from 5% to 3% in the coming financial year. However, I think that such a reduction should be limited only to citizens who have to pay government rent in order to offset the extra burdens of paying government rent. I think it is fairer and more reasonable. With the abundant fiscal reserves, collecting less rates will only have a minor effect on the SAR Government's financial situation.

On the other hand, the Government has mentioned that the main source of income for the two Municipal Councils is rates, while reducing the rates revenues will affect the operation of the two councils. Mr Deputy, the SAR Government does not necessarily have to allocate funds to the two Municipal Councils. If the rates revenues allocated to the two Councils are not sufficient to meet their expenditures, the SAR Government can allocate funds from the government recurrent expenditure account. The Financial Secretary has once said that this will affect the funds allocated to other departments, but I do not agree with him as the reserves in the Treasury now are so sufficient that it is not necessary to cut down the expenditures of other departments as a result. I would like to mention in passing that as the source of income of the two Municipal Councils are linked to rates, when rates revenues increase as a result of a sharp rise in property prices and rental values, the funds available to the two Municipal Councils will also increase. Therefore, I do not see that there will be great effect on the funds of the two Municipal Councils if the rates percentage charge is reduced. I think that the Government should allocate funds to the two Municipal Councils to meet their expenditures on the basis of their actual needs and on a practical basis. "Money should be used where necessary, and saved where appropriate". Thus, I suggest that the SAR Government should seize this opportunity to review the mechanism for fund allocation to the two Municipal Councils.

Mr Deputy, the public do not know much about why they must pay government rent now and they think that they have to do so just because of the transfer of sovereignty. They also mistakenly think that only the New Territories will be affected, not knowing that government rent are also payable for some urban areas upon the expiry of the relevant land leases. The collection of government rent replaces the former measure of premium payments under the Joint Declaration signed between China and Britain. In the past, the owners do not know how much premium payment they should make when their land leases expire, but now they will know as the Joint Declaration has stated that government rent are linked to the rateable values. Mr Deputy, I propose that the Government should enhance publicity to explain to the public the origins and methods of calculating government rent to avoid any complaints or misunderstandings to the effect that government rent is a product of the SAR.

Mr Deputy, I so submit.

DEPUTY PRESIDENT (in Cantonese): Mr LO Suk-ching.

MR LO SUK-CHING (in Cantonese): Mr Deputy, in 1984, the Joint Declaration was signed between the Chinese and British Governments, solving the problem of the transition of land leases in Hong Kong. The leases granted by the British Government with expiry dates before 30 June 1997 can be renewed up to 30 June 2047 without paying premiums, but subject to annual payment of government rent at 3% of the rateable values. From 1 July onwards, one million affected owners of private housing and Home Ownership Scheme flats must pay government rent in place of premiums. The average rental values and premiums in 1984 were far lower than those at present, therefore, 3% of the rateable values is relatively low, and it is only a nominal charge in place of premiums. In fact, if it was then decided that leases would be renewed by means of premium payments, I believe that many people would have objected because premiums are one-off payments and the amounts of premiums payable are often not predictable, so the general public would consider it too expensive. Therefore, the public opinion at the time was generally in support of the payment of government rent.

However, the rapid development of the property market in Hong Kong in the last 10-odd years has resulted in a sharp increase in the average rents which is out of our expectation. The grassroots carry a heavier hurden than before as they have to pay government rent in addition to rates. However, as the Sino-British Joint Declaration has stated that the collection of government rent shall remain unchanged for 50 years, the payment of government rent has become an irrevocable fact. Therefore, a reduction in rates payment is the simplest and most direct way to relieve the burdens of the government rent payers. Although there is no direct relationship between rates and government rent, since government rent is calculated on the basis of the rateable values, a reduction in rates is a relatively more practical method.

Mr Deputy, as to how the criterion for a reduction in rates should be worked out, I suggest that, for the sake of fairness, there should be an 2% reduction in rates for government rent payers instead of a blanket reduction in rates for all. It means that the payers of both government rent and rates are only required to pay around 1% more than the rates payers in pursuance of the spirit of nominal premium payment.

Moreover, as many people still have misunderstandings about the collection of government rent by the Government, mistaking this as the special authority of the SAR Government, I hope that the Administration can step up publicity on the causes and consequences of the collection of government rent so that the public can understand this decision.

Mr Deputy, I so submit.

DEPUTY PRESIDENT (in Cantonese): Mr TSANG Yok-sing.

MR TSANG YOK-SING (in Cantonese): Mr Deputy, I am very pleased to hear the arguments just put forward by the Honourable WONG Siu-yee. I believe what Mr WONG has just given may be the reasons for the objection by the Government and the Secretary of the Treasury to the proposals of Mr NGAN Kam-chuen. I hope that Mr WONG has not omitted any points so that we can now respond to these arguments.

Firstly, Mr WONG has commented that we have mixed up rates and government rent. We know it very well that rates and government rent are two different things but even though we do not intend to mislead people, regardless of whether government rent or rates are collected, and on whatever basis, the Government can make use of $1 rates or $1 government rent it collected. This also applies to the people for no matter whether they are paying $1 as government rent or rates, they are paying out of their pockets. The citizens who originally paid $1,000 rates are now required to pay $1,600. The Honourable CHENG Kai-nam just said he hope that the Government can clearly explain the difference between the two. I would also like to add that even if the Government has clearly explained that of the $1,600 now paid, $1,000 comes under rates and $600 government rent, people are still minded clearly that they only paid $1,000 in the past but $1,600 now. If the Government reduces rates by $400, no matter whether they are government rent or rates, can relieve the pressure on the citizens. Therefore, we think that the so-called confusion is meaningless both in terms of people's expenditures or government revenues.

Moreover, I would like to spend some time on a really complicated issue which has been discussed by several Honourable colleagues. It is the link between rates and the expenditures or funding of the two Municipal Councils. Mr Ronald ARCULLI said that if the position of the Democratic Alliance for Betterment of Hong Kong (DAB) is to de-link the two, he will support Mr NGAN Kam-chuen's motion. We think that Mr WONG Siu-yee's opinion about narrowing down the tax base is unfounded. It is said that after partly reducing rates, the funds allocated to the Regional Council cannot be supported by rates revenues alone. In other words, the Government's general rates revenue will become zero. I think it is just a game of figures. By reducing the rates percentage charge to 3%, people living on the Hong Kong Island, in Kowloon and the New Territories still have to pay 3%, the Government's rates revenue will not become zero after such a reduction. Rates revenues are by all means revenues, 3% means 3%. There is no question of narrowing the tax base. The rates percentage charge is not based on a golden rule and it is not fixed at 5%, 5.5% or any other rate. If the Government could adjust the rates percentage from 5.5% to 5% in the past, why can it not adjust the rate from 5% to 3% now? Why is the tax base not considered narrowed when the rate is reduced from 5.5% to 5% but so when it is reduced from 5% to 3%?

Similarly, the funding of the two Municipal Councils does not follow any golden rule and it has not been specified that it must be a certain percentage of rates. The said percentage also has to be revised from time to time. I cannot see why the two Municipal Councils' expenditures must be a certain percentage of rates. Why must this be done? I think that some of the Government's arguments in this aspect are confusing. Not long ago, the Secretary for the Treasury said that balancing revenues and expenditures referred to the total revenues and expenditures, and this method of calculation is still adopted by the Government now. He said that the rates percentage charge was 5%, but he was not saying that the revenue was 5%. The government share of the rates revenue is the amount that remains after deducting the two Municipal Councils' expenditures. The two Municipal Councils' expenditures do not feature in government expenditure as their expenditures have already been deducted from rates revenue. Therefore, if Mr NGAN Kam-chuen's motion is carried, the two Municipal Councils will receive less rates revenues, but their expenditures will neither decrease nor increase. The Government is saying that the shortfalls in the expenditures of the two Municipal Councils will have to be made up from government expenditures, so government expenditures will increase and thus affecting other expenditures. Why would the two Municipal Councils' expenditures increase? Their expenditures are still the same. Therefore, it seems that suddenly, the amounts which should be regarded as revenues are no longer counted as revenues and those amounts which should be counted as expenditures are not counted as expenditures.

If this can be justified, it does not really matters. As the Government has not collected government rent yet, the amounts have not been counted as government revenues. We can specify that a certain percentage, such as 90%, of government rent should be allocated to the two Municipal Councils. As these amounts have not been counted as revenues and as the Government has abundant revenues, it does not matter even if some revenues are reduced. In any case, it is increasing, and not narrowing down the tax base. At the same time, the problem will be solved as the two Municipal Councils have not increased government expenditures. Therefore, if this logic is followed, there will be no problem. The Government will only need to specify that a certain percentage of government rent or even a certain percentage of any other government revenues be allocated to the two Municipal Councils. The problem will then be solved. I do not know why rates should be treated so differently.

I would like to respond to the issue of unfairness raised by some Honourable Members. Mr Ronald ARCULLI said that it would be unfair as the government rent payers would be subsidizing the rates payers. This is why we do not agree to the views of the Honourable CHOY Kan-pui and the Honourable LO Suk-ching as well. If only the government rent payers can enjoy reduced rates commitment, while others cannot, it is really unfair. Our present proposal to reduce the rates percentage charge is the fairest and I do not see any unfairness. At present, half of the households in Hong Kong need to pay government rent, and the SAR Government has also decided that 3% government rent is also payable in respect of new land leases to be granted in the future, therefore, more and more people will be affected.

Thank you, Mr Deputy.

DEPUTY PRESIDENT (in Cantonese): Dr TANG Siu-tong.

DR TANG SIU-TONG (in Cantonese): Mr Deputy, rates are a source of government revenue which the Government charges the public for all kinds of services and facilities provided, and rates are paid by the public willingly. However, as the Government's surplus has amounted to several tens of billions, whether the percentage charge should remain unchanged is open to question.

Recently, the sharp rise in property prices and rents has pushed the rateable values to an excessive level, increasing the burden on the public. As housing is a necessity for everybody, there is no way to dodge the impact. Therefore, the economic pressure is bound to become increasingly heavier. In 1984, the Central Government and the British Hong Kong Government resolved by way of the Joint Declaration that 3% of the rateable values will be charged as government rent on some land, in particular, land to the north of Boundary Street and newly granted land with lease term extending beyond 1 July 1997, an even heavier burden came to bear on the public.

To the residents in the New Territories, it is a heavy burden indeed to pay government rent. Mr CHOY Kan-pui said earlier that there should be concessions for government rent payers because the land in the New Territories was originally "red lease" land of free hold. However, when the British Government conquered the New Territories, the "red leases" were withdrawn and replaced by a block Crown lease until 30 June 1997. Our land was originally of permanent ownership but suddenly a lease term was imposed on it, leading to the problem of government rent now.

Therefore, I agree to a reduction in the rates percentage charge in order to relieve the financial burden on the citizens, especially those who have to pay government rent. Let us do a simple calculation. For instance, if the monthly rates are 5%, the rates for a 700 sq ft residential flat will be around $360, when 3% government rent is added, the amount payable will become $576. The rate of increase is considerable. If the rates percentage charge is reduced to 3%, the total amount payable, including government rent, will be roughly $432 , only a small difference from $360. The citizens can barely afford it.

Mr Deputy, it is true that if the rates are reduced by 2%, the Treasury's revenues will be decreased by $6.64 billion and those of the two Municipal Councils possibly by $4.1 billion, making up a total of $10.74 billion. However, there is a revenue of $4.0 billion from government rent. As it is estimated that the surplus of the Government for the year 97-98 will be $29.0 billion, it is still a huge surplus if it is reduced to $23.0 billion. Hong Kong is still financially robust and we still have a very secured fiscal budget.

Mr Deputy, since a reduction in rates will not have any great effect on the overall fiscal budget, I think that the Government should give the community a dividend by reducing rates in order to benefit every citizen.

I support the motion despite the fact that Members from the Hong Kong Progressive Alliance failed to reach a final conclusion at our meeting because we find that the rates issue is very complicated and its effects are far reaching. Therefore, Members from the Hong Kong Progressive Alliance will vote at their own will.

I so submit. Thank you, Mr Deputy.

DEPUTY PRESIDENT (in Cantonese): Dr LAW Cheung-kwok.

DR LAW CHEUNG-KWOK (in Cantonese): Mr Deputy, the Hong Kong Association for Democracy and People's Livelihood (HKADPL) supports Mr NGAN Kam-chuen's proposal for an 40% reduction in rates.

The Government has now a surplus of over $300 billion which exceeds the recurrent expenditures of the Government in two years. It is indeed necessary to immediately introduce a suitable plan for "giving the community a dividend". I put forward a plan for "distributing money" two years ago. Although there were only five votes in support of the plan, the rationale and objectives of giving the community a dividend had moved many Members. I agree to the analysis made by Mr NGAN Kam-chuen. His proposal will benefit nearly every citizen, regardless of whether they live in private housing, public housing, Home Ownership Scheme flats or even bedspaces, and regardless of whether they run big businesses or carry out small dealings, for they all have to pay rates.

Relatively speaking, for salaries tax, Hong Kong has a workforce of around three million people, while over one million "workers" are not eligible for paying salaries taxes as their salaries are too low. If the salaries tax is to be reduced, the number of people who would be benefitted would be limited. For profits tax, the case will be even more obvious. Those who can benefit most are the big enterprises, but not the three million "workers" who can only hold in envy.

I also agree to Mr Ronald ARCULLI's comment that merely reducing rates is a rather piecemeal fiscal policy. When he moves another motion debate later on, I will put forward the HKADPL's proposal for a comprehensive reform of our tax system.

The HKADPL will fully support Mr NGAN Kam-chuen's motion for directly giving the community a dividend.

I so submit. Thank you, Mr Deputy.

DEPUTY PRESIDENT (in Cantonese): Mr CHIM Pui-chung.

MR CHIM PUI-CHUNG (in Cantonese): Mr Deputy, we are now going through a motion debate, so the Secretary for the Treasury is very relaxed. If we are now debating a Bill, he possibly has to make preparations for next year's budget or make arrangements in various aspects. We are merely discussing, will he accept our opinions subsequently? We should not naively think that he would definitely listen to our opinions.

Mr Deputy, Members have just mentioned that, in principle, other taxes in Hong Kong are not absolutely fair and equal as there is no fairness in the Hong Kong society or in the whole world. It mainly depends on who has the power.

Rates apply generally as the majority of people have to pay rates, except for those who receive assistance or those who do not have to pay for other reasons. For instance, the disabled can be exempted while the general public have to pay. As the Secretary for the Treasury or various sectors of the Government have expressed that the SAR Government has a lot of surpluses, it should give the community a dividend for now that it is so well-off, and now that it has to distribute money. And in this, reducing rates is the most direct, fair and meritorious approach, unless the Government does not wish to do so. If it does not wish to do so, it should not say repeatedly that it wishes to give the community a dividend and that it has so much money. If it wishes to hand out money, this approach is after all better than Dr LAW Cheung-kwok's proposal of "distributing money". In fact, a rates reduction can match up the reality.

Mr Deputy, we understand that the Hong Kong Government has been pursuing a high land price policy. We often say that the Government has a lot of reserves, but apart from the foreign exchange reserve, the $300 billion or so were generated from land sales in the past. The Land Fund amounted to over $100 billion in the past, and it is believed that it will amount to around $181 billion by the end of June. If we multiply this figure by two, it will become more than $360 billion. Therefore, the Hong Kong Government's performance was not that outstanding in the past, for such revenues were returned by land sales under the high land price policy.

Now that the Government thinks it should give out money, I strongly recommend that it should do so. This brings us back to what I said at the beginning of my speech that I hope that the Government should not only listen but act.

I so submit.

DEPUTY PRESIDENT (in Cantonese): Mr IP Kwok-him.

MR IP KWOK-HIM (in Cantonese): Mr Deputy, the actual situation of people at the middle and lower levels are reflected in the latest government statistics. The wage index of these workers has only increased by 0.3% in real terms when compared with that of the same period last year. The small rate of increase cannot set off the rate of drop last year, and the rate of wage increase for workers with low skills providing personal services is the lowest. The low wage level is actually one of the factors which lead to the emergence of a very unusual in phenomenon which some people elect to go into unemployment in order to qualify for application for public assistance. At present, with the abundant fiscal reserves, in fact, the government officials concerned should use their head. The Secretary for the Treasury is a mathematics genius and I believe that after he has used his head, he can certainly come up with some effective policies to give the community a dividend or to store wealth among the people.

The Democratic Alliance for Betterment of Hong Kong (DAB) has suggested a 40% reduction in the rates percentage charge from the existing 5% to 3%. It is one of the feasible and direct measures for assisting the citizens in improving their quality of life. Certainly, some Members may query whether it will affect the present revenues of the two Municipal Councils. In fact, this problem can be solved by adaptive means. I do not think that this problem is insurmountable. The most important thing is to relieve the citizens' burden.

The Hong Kong Government has presently accumulated an abundance of surpluses. The fiscal reserves, including the land fund, have now accumulated to over $300 billion. In addition, the SAR Government will have more than $30 billion budgeted surpluses for the year 97-98. Hong Kong is now financially strong with its abundant reserves reaching a new historical high.

With a meagre rate of wage increase and ever increasing expenditures, the general public has found it difficult to make ends meet. Following the establishment of the SAR Government on 1 July, nearly half of the households living in private housing in Hong Kong have to pay government rent in accordance with the Basic Law. Take a medium-sized new flat of over 800 sq ft in Tseung Kwan O as an example, the rates payable is more than $1,300 and the government rent over $800, the quarterly expenses in these respects alone are as much as $2,000. The burden on the citizens are really heavy.

Besides, major public transport and the frequently-used telephone services are requesting for fare increases one after another. All these will add to the burden on the general public in Hong Kong. As the Government has abundant fiscal reserves, there is no reason why it should not consider reducing some taxes. We will have another motion debate later today to discuss how taxes can be reduced to really give the community a dividend. As the Honourable CHIM Pui-chung has said, our suggestion to reduce rates to relieve the citizens' burden of living is a very feasible and direct method.

Mr Deputy, the Government has expressed that if rates are reduced by 40% as suggested by the DAB, the rates revenue will decrease by $6.6 billion, which is a large sum of money. However, as many Honourable colleagues have said, the $6.6 billion can be made up for by savings in our expenditures or additional revenues so that the Government can balance its revenues and expenditures. This includes the garrison expenses mentioned by Members and the management expenses so saved as a result of the upcoming solution of the problem of Vietnamese migrants stranded in Hong Kong. In addition, government rent will bring over $40 billion revenues to the SAR Government. Calculating this way, there will not be much difference.

Mr Deputy, the approach of reducing rates for the purpose of giving the community a dividend can benefit more Hong Kong people than merely cutting taxes because the latter can benefit taxpayers only, and the low income group who do not have to pay tax will not be benefitted. It is very obvious as they do not need to pay tax at all. At the same time, if the Government reduces taxes dramatically, it will certainly narrow the tax base ─ a result that will have far reaching effect on the long-term development of Hong Kong. Therefore, a reduction in rates is a feasible and direct measure. I therefore call upon Honourable colleagues to support Mr NGAN Kam-chuen's motion.

With these remarks, I support Mr NGAN Kam-chuen's motion. Thank you, Mr Deputy.

DEPUTY PRESIDENT (in Cantonese): Does any other Member wish to speak? Secretary for the Treasury.

SECRETARY FOR THE TREASURY (in Cantonese): Mr Deputy, the motion we are discussing today seeks to reduce the overall rates percentage charge from 5% to 3%. I have listened attentively to the views expressed by Honourable Members and I will make an analysis in my reply in respect of four areas, including the rates commitments, government rent, fiscal policies and the influence on municipal services.

I will first discuss the rates commitment. In the 1997-98 Budget, we reduce the overall rates percentage charge from 5.5% to 5%. Some Members just said that the overall rates percentage charge before the '80s was even higher, at 17% to 18%. Therefore, the existing percentage charge of 5% is a historic low. In addition to reducing the overall rates percentage charge, we have imposed a 20% cap on increases in rates for 1997-98 and for 1998-99.

After the general revaluation of rateable values and implementation of the concessions, 28% of ratepayers will pay the same or lower rates in 1997-98 while the remaining ratepayers will face an increase of 20% or less.

What are the actual effects of the said measures on ratepayers? We can look at some figures. At present, the average increase in rates for a small private flat of less than 70 sq m is only $29 per month, an increase of 8.8%. The average rates for an office and industrial premises has dropped by $130 and $229 respectively, a cut of 6% and 17% respectively. The largest single group of tenants, that is, those living in public rental housing, are generally not affected by changes in rates. The Housing Authority will absorb the effect of rates increases until the next rent review. Moreover, we should note that rents of public rental housing are revised on the basis of the affordability of tenants and with reference to the median household income.

The cases in opposition of new valuations received by the Rating and Valuation Department following the general revaluation of rates in 1997 only account for 1.2% of the total number of rateable properties. This precisely shows that the public in general find the result of the general revaluation acceptable. After the general revaluation, the rates of residential properties now stands at around 2% of the average family income, same as the case in 1996. As compared with the case before the '80s when rates accounted for 4% of the average family income, there has been an 50% decrease. In a word, the rates concessions we have proposed in the 1997-98 Budget is very reasonable and it has minimized the influence of the general revaluation on ratepayers. The existing rates commitment can definitely not be described as heavy.

I would like to turn to talk about the government rent collected in accordance with Annex III to the Joint Declaration and Article 121 of the Basic Law. Some Members have suggested a reduction in rates on the grounds that the collection of government rent will increase the rates commitment by 60%, but we find this point unacceptable. A Member just said that if we can clearly explain the difference between the nature of government rent and rates, they can consider not giving Mr NGAN Kam-chuen's motion their support. Of course, another Member immediately corrected him. However, let me explain here that government rent and rates are totally different in nature. Rates is collected for the occupation of properties while government rent is collected on the renewal of the following two types of land leases:

(A) the renewal of leases which contain on right of renewal until 2047 where government rent replaces premium; or

(B) new leases granted from 27 May 1985 which expire not later than 2047 where government rent is payable as the term extends beyond 30 June 1997.

Therefore, the collection of government rent is actually a concession for without this concession, an owner has to pay a premium upon the renewal of a lease or additional premium when the term of a new lease granted extends beyond 1997. Either way, the financial burdens of owners will then become heavier.

Rates and government rent are obviously collected for two entirely different purposes and it is inappropriate to mix up the two. In fact, although rates are payable for 2.5 million flats in Hong Kong, government rent is concurrently payable for less than 1 million of these flats. This is particularly true in the Urban Council area where rates and government rent are payable for only 320 000 out of one million rateable private flats, and about one fourth of these 320 000 flats are non-residential flats. After the general revaluation and the implementation of the concessions in the Budget, there was a cut in the rates payable per month by 3.4% or $65 on average. As regards the Regional Council area, although the number of private flats for which rates and government rent have to be concurrently paid is greater than that in the Urban Council area, there are still 21% of them being non-residential units the payable rates of which have also been reduced on average. Therefore, using the collection of government rent as the reason for a general reduction in rates is both insufficient and unfair. Quite a number of people who will benefit from the rates relief proposed by the motion do not have to pay government rent at all or have already benefitted from the general revaluation. Therefore, we find using the collection of government rent as the reason for a general reduction in rates unacceptable. Two Members just now said that if we reduce rates, we should only reduce the rates payable by people who have to pay government rent, but a Member also said in response that this is unfair.

Some Members are concerned that if people have to pay rates and government rent at the same time, their financial burdens will be increased. Although I have explained that rates and government rent are totally different taxes, we fully understand that some people have to concurrently pay rates and government rent. However, we should first get a clear idea and be aware of the influence of a cut in rates. In regard to private residential flats, the average government rent payable for each flat is $240 per month. As to those flats for which government rent and rates are payable, the total sum accounts for about 3.1% of the average household income. This percentage is even lower than that before the '80s rates was payable and when rates accounted for about 4% of the household income.

Third, I would like to talk about the Government's fiscal policies. Our sound financial situation is mainly dependent on the strict control of our expenditure and the efforts made to maintain a stable and efficient tax base. Rates is a long-standing and stable source of revenue with a wide tax base. We estimate that in 1997-98, the general rates revenue will be $6.3 billion, accounting for 3% of the Government's total estimated revenue. Why is there a difference between this figure and the more than $10 billion as mentioned by some Members just now? It is because some Members may be somewhat confused about how we define the Government's tax revenue. We define the Government's tax revenue as the revenue credited to the Government's account. If, take the urban area as an example, out of the 5% rates percentage charge, only 2.4% is credited to the General Revenue Account, while in the Regional Council area, only 0.8% is credited as government revenue. Therefore, when we talk about tax revenue, we are only talking about the tax revenue transferred to the Treasury. If the overall rates percentage charge is reduced by two percentage points as proposed by the motion today, our rates revenue will be reduced by more than $6 billion; we nearly have to give up fully the collection of the general rates revenue. We have to stress that it is the general rates revenue. Not only will we fail to maintain rates as a stable source of revenue but also entirely lose this source of revenue in the Regional Council area at the least. This will seriously narrow our tax base and have long-lasting effects on the financial stability of Hong Kong.

Moreover, if such a decision is made within a few weeks of the establishment of the SAR Government, it will easily give the world a wrong message that the SAR Government has started to deviate from the long-standing principle of prudent financial management. However, we have to understand that this principle is precisely the foundation of our success.

Some Members said that we can replace rates revenue with government rent but I find this not feasible. Firstly, the government rent revenue is only $4 billion to $5 billion a year which cannot replace our rates revenue; secondly, government rent is collected for the renewal of leases which contain on right of renewal or when new leases are granted from 1985 in place of some leases of land. In fact, it is a budgeted sum collected in arrears, therefore, it is not feasible for government rent to make up for reduced rates.

Thirdly, when we make our financial forecasts, we have assumed that there would be revenue from government rent and rates and we have formulated our future plans on the basis of this financial forecast. If we give up collecting all or most revenue from general rates, our financial forecast or future plans will be affected to a fairly large extent.

Some Members are of the view that now that Hong Kong has strong fiscal reserves and that we expect promising surpluses in the next few years, it does not matter even if we give up the collection of general rates. However, we have to remind Members that we may have to inject huge sums into the priority projects under the Railway Development Strategy in the next few years for the improvement of our transport facilities in the following century. A greater part of the estimatal surpluses will have to be injected into these large capital investments. If the Government still has sustained surpluses after deducting these huge sums of investment in our infrastructure, we can then consider giving tax concessions. However, I hope Members will understand that, as I have said just now, reducing the rates percentage charge by two percentage points is not appropriate.

Finally, I would like to discuss the influence of a reduction in the rates percentage charge by two percentage points on municipal services. As we all know and as I just said, most of the revenue from our 5% rates percentage charge is allocated to the Urban Council and the Regional Council. It would be misleading to regard the entire sum of the rates revenue as government revenue. After the rates revenue has been allocated to the two Municipal Councils, it is estimated that it will account for 80% of the total revenue of the two Municipal Councils. In the Urban Council area, the Urban Council gets 2.6% out of the 5% while the Regional Council gets 4.2% out of the 5%. Therefore, if we reduce the rates percentage charge by two percentage points in the Regional Council area, bearing in mind the fact that the Government has to fully give up the collection of general rates, the Regional Council still have to accept a reduction in the rate of rates from 4.2% to 3%. Its rates revenue will thus be reduced by almost 30%. As a result, in the three-year period from 1997-98 to 1999-2000, the Regional Council's rates revenue will be reduced by $4 billion. Of course, we would require the Regional Council to balance, like all the other government departments, its revenues and expenditures. Nevertheless, such a large decrease in rates revenue will compel the Regional Council to seriously reduce its services, thus seriously affecting its plans to extend its facilities and maintain its services to the residents in the New Territories.

In view of the above, I am really astonished by the motion moved by Mr NGAN Kam-chuen who is concurrently a Regional Council Member. Does this indicate that someone's view that as the Regional Council has excessive funding, it should have less rates revenue, cut some of its services, or cancel some development plans?

I can say for sure that the Government has carefully considered the requirements of the two Municipal Councils for rates revenue. The existing allocation arrangement has been made after having carefully considered the requirements of the two Municipal Councils so that they can maintain and extend their services and facilities on the basis of the demands of the community in their respective areas.

Some Members suggest that the reduced rates revenue of the two Municipal Councils can be subsidized by the Government. Some other Members suggest that, now that we do not have to pay for the expenses of the garrison or that the number of Vietnamese migrants has dropped, our expenditures in these respects have reduced and we can afford to cover the reduced revenue of the Urban Council or the Regional Council brought about by a reduction in rates.

When we calculate the resources that can be allocated by the Government for improving or extending services, we have to set a cap on government expenditure first. I mentioned earlier that this is determined on the basis of the trend of our economic growth. Having arrived at a cap on expenditure, we need to calculate our necessary expenditures. In our calculation of the necessary expenditures, we have actually taken into account the fact that the SAR Government would not have to pay the garrison expenses from 1 July 1997 onwards. The number of Vietnamese migrants has definitely dropped but the expenditure so saved had already been taken into account when we did such calculations. Therefore, the amounts that can be allocated for improving or extending services are limited. If we have to allocate certain amounts out of this limited sum to subsidize the two Municipal Councils, this will surely affect the remaining resources available for other public services.

Although some Members find the annual applications filed with the Legislative Council by the two Municipal Councils for appropriation very common, I must point out that this concerns the financial independence of the two Municipal Councils. This is a very important issue that directly affects the structural relationship between the three-tier councils, and we must take this into careful consideration.

Some Members may find that my point actually echoes the views expressed by certain Members. I thank them for their support but I have to say that we have not reached any tacit agreement in advance.

In conclusion, let me emphasize again that asking for a reduction in rates on the ground that the Government concurrently collects government rent is not only inadequately justified but also unfair and we cannot accept the motion. However, some Members are of the view that, as the overall growth of our economy and the financial situation of the Government are promising, we should allow all people to enjoy the fruits of our economic growth and get substantive return from the achievements they made as well as alleviate the burden on taxpayers. This we fully understand. When we make proposals for next year's budget, we will carefully consider other methods for achieving this.

Mr Deputy, tax adjustment is a budgeting task and the Government will consider making tax adjustments in the budget in the light of our overall economic and financial situation and social policies at that time. It has only been a few months since the beginning of the 1997-98 financial year and it is far too early for a conclusion to be drawn now. Moreover, before we have comprehensively weighed our overall revenue or the influence on the two Municipal Councils, it will be wrong for us to consider the rates issue in isolation. The Financial Secretary will consult Members as usual in autumn on the revenue proposals in next year's budget. We will carefully consider the views we got in the course of consultation. If we can really prove that it is feasible to implement tax concessions to give the public substantive return, we will surely consider the best method to reduce taxes in the light of our long-term interests and the general needs of society.

Therefore, I urge Members to wait patiently for the Financial Secretary's consultation and the publication of the budget early next year instead of hastily jumping onto the band-wagon without careful consideration just because of the sheer attractiveness and desirability of the motion on the surface.

Thank you.

THE PRESIDENT resumed the Chair.

PRESIDENT (in Cantonese): Mr NGAN Kam-chuen, you may reply now. You have only two minutes and 56 seconds out of your original 15 minutes.

MR NGAN KAM-CHUEN (in Cantonese): Time is very limited. Firstly, I would like to express my thanks to 12 Members for speaking on my motion. Some Members raised a number of questions and the Secretary for the Treasury has made some comments. I mainly want to highlight several points.

Firstly, it has just been mentioned distinctly the relationship between rates and government rent. The link between government rent and rates has nothing to do with the percentage charge. The Secretary for the Treasury's speech fails to tell us whether government rent has designated uses. From the citizens' perspective, they cannot tell the difference between them because the money is kept in the Government Treasury.

I think the speech just made by the Secretary for the Treasury is a kind of intimidation. He said that in so doing, the Government will have deviated from its original path of prudent financial management. He is merely exaggerating things to scare people. Members have mentioned "giving the community a dividend" and "storing wealth among people". The suggestion of the Democratic Alliance for Betterment of Hong Kong (DAB)will "store wealth among people" because the citizens have not paid out their money yet. If the Government accepts the DAB's suggestion and makes real changes, the citizens will not have to pay so much, and therefore it will "store wealth among people". The Government has all along insisted on upholding the principle of prudent financial management, but we do not think that this proposal of the DAB will go against the Hong Kong Government's principle of financial management. The Government has a huge surplus and numerous additional income, a reduction in rates does not contravene the principle of keeping our expenditures within the limits of our income, and will not cause our public expenditure to exceed the growth of our Gross Domestic Product. The Government has all along refused to accept this fair and reasonable request, undoubtedly much in the same way like a mean miser who possesses a gold mountain.

In respect of how the financial independence of the two Municipal Councils can be ensured, I believe that it will not pose any difficulty for the Government.

Madam President, I hope that the Government can put the DAB's proposal into practice. In the future, the DAB will definitely urge the Government to do so. In our discussion later on, we will surely continue to fight for this in the hope that "Nice rain falls every year" for the benefit of all people. Thank you.

PRESIDENT (in Cantonese): I now put the question to you and that is: That the motion moved by Mr NGAN Kam-chuen be approved.

Will those in favour please say "aye"?

(Members responded)

PRESIDENT (in Cantonese): Those against please say "no".

(Members responded)

Mr NGAN Kam-chuen, Mrs Selina CHOW and Mr Ronald ARCULLI rose to claim a division.

PRESIDENT (in Cantonese): Council will now proceed to a division. The division bell will ring for three minutes.

PRESIDENT (in Cantonese): Members, the question now put is: That the motion moved by Mr NGAN Kam-chuen be approved. Will Members please proceed to vote.

PRESIDENT (in Cantonese): Before I declare the result, are there any queries? The result will now be displayed.

Mr David CHU, Dr Raymond HO, Prof NG Ching-fai, Mr Eric LI, Mr LEE Kai-ming, Mrs Elsie TU, Mrs Peggy LAM, Mr CHEUNG Hon-chung, Dr LEONG Che-hung, Mr CHAN Choi-hi, Mr CHAN Wing-chan, Mr CHAN Kam-lam, Mr TSANG Yok-sing, Mr CHENG Kai-nam, Mr Frederick FUNG, Mr Andrew WONG, Mr YEUNG Yiu-chung, Mr IP Kwok-him, Mr CHIM Pui-chung, Mr LAU Kong-wah, Mr CHOY Kan-pui, Mr CHENG Yiu-tong, Dr TANG Siu-tong, Mr NGAN Kam-chuen, Mr LO Suk-ching, Dr LAW Cheung-kwok, Mr TAM Yiu-chung and Miss CHOY So-yuk voted for the motion.

Mr HO Sai-chu, Mr Edward HO, Mrs Selina CHOW, Mr Ronald ARCULLI, Mr MA Fung-kwok, Mrs Sophie LEUNG, Mr Howard YOUNG, Mrs Miriam LAU and Mr Timothy FOK voted against the motion.

Mr WONG Siu-yee, Mr NG Leung-sing, Mr Henry WU, Dr TSO WONG Man-yin, Mr Kennedy WONG and Mr KAN Fook-yee abstained.

THE PRESIDENT announced that there were 28 Members in favour of the motion, nine against and six abstaining. She therefore declared that the motion was carried.

Reduction of taxes

PRESIDENT (in Cantonese): Second motion: Reduction of taxes. Mr Ronald ARCULLI.

MR RONALD ARCULLI: Madam President, in his Budget in 1996-97, the Financial Secretary set out seven virtues, two of which I would like to draw Members' attention to this evening. First, he said that we must retain a low, simple, predictable tax regime; second, he said we must only raise sufficient revenue to meet known commitments. The Liberal Party entirely agrees with these two principles. Two years before that, his predecessor, Sir Hamish MACLEOD, said that in a year of buoyant revenues, the Government should take the opportunity to leave money where it can do most good, in the pockets of tax payers. We also endorse that statement. That year, Sir Hamish reduced profits tax by 1% and he did not reduce salaries tax, but he gave fairly generous allowances and concessions in terms of personal allowance and in terms of relief on tax bands.

In fact, the cost of the 1% reduction in profits tax was $1.6 billion for the year 94-95 and over $10 billion up to this year 97-98 whilst on the salaries tax concession the cost for that year was $3.2 billion and the cost up to 97-98 was some $20.7 billion. You can see that the relief given to salaries tax payer was double that given to profits tax payers. In that same year the Financial Secretary also set out what had been done for salaries tax payers for the last three Budgets and he said this, the last three Budgets had already provided substantial benefits to salaries tax payers. As a result, there has been an increase of 34% in both the basic and married persons allowances, the proportion of total work force with no liability to pay salaries tax has increased from 46% to 60%, the proportion of standard rate tax-payers had decreased from 6% to 2% and the average effective rate of tax paid by salary tax payers had decreased from 9% to 8%. These are very substantial benefits.

We now have a fiscal reserve, Madam President, of some $340 billion and by March 2001 our reserves, without taking into account any earnings or dividend or interest or appreciation over this period of time our reserves will be in the order of 400 billion dollars. In addition, we have an exchange fund of US$57.2 billion, we also have many other assets like the Mass Transit Railway, the Kowloon Canton Railway Corporation, the Housing Authority, our new airport to name a few. The Liberal Party does not begrudge the community receiving services like health services, education, welfare and housing which is subsidised, but it is a fact that profit tax payers do not generally participate in such benefits. Many services are subsidised and indeed it is Hong Kong's way of showing that we are a caring community, but we must also be a fair community.

In the 1997-98 Budget the Financial Secretary told us that the Government will spend over 32 billion dollars on public housing, over 45 billion on education, over $28 billion on health care over 21 billion on welfare and on this last one Madam President, some of us feel that not enough was spent, particularly as far as the elderly was concerned. But these four policy areas cover a total of over $126 billion. Despite all these benefits to salaries tax payers the Liberal Party believe that the Government should not tax for the sake of taxation. Our taxation policy should be, as stated by the Financial Secretary, and that is to raise sufficient revenue to meet known spending commitments, we must not lose sight of this very single purpose. The Liberal Party have other proposals including capping the rates, or reducing the rates, as I mentioned earlier, a housing allowance for some of our home owners and indeed those that rent their home, things like reduction in stamp duty on share and property transactions, but all these will be addressed in due course during the Financial Secretary's consultation on revenue measures with this Council and I do not propose to deal with them in any great detail now. So I believe that there is an irrefutable case for reducing both salaries and profits tax.

I ask my colleagues not to send the Administration the wrong message in the sense of either supporting the amendment of the Honourable LAW Cheung-kwok or the Honourable CHAN Choi-hi. The Administration colleagues do not need your help to amass more money. If you vote for either of those amendments you will be doing exactly that. If you vote for my motion in your speech you would be able to set out your wish list, if you want to, in great detail or in broad terms.

Two years ago, Madam President, we had a similar debate. At that time, the Democratic Alliance for Betterment of Hong Kong, my friends in the DAB, did not support a reduction in salaries tax but they supported increases in personal allowance and the rationale was simply that, that is the way that you can get most benefit to salaried tax payers. At that time they did not support changes in profits tax either. If they have not changed their minds they should vote against both amendments because it calls for reduction of salaries tax and indeed for a comprehensive review of our tax system. On the other hand my motion will allow the DAB to maintain their position by asking for increased allowances and they should therefore be in a position, if they do not agree with my proposition on the reduction of profits tax and salaries tax, at least abstain on my motion rather than to assist, rather than to assist the Administration in collecting more dollars which they do not need.

In terms of the purpose of this motion, Madam President, it will give colleagues a very good opportunity of not just expressing their own views but also to hear the views of other Members and it is really a run up to this consultation process so that if we can find some common ground, we can at least try and not allow the Administration to do what they have been doing to the Legislative Council for many, many years, and that is divide and conquer. Because whatever we ask for they will give each of us a little bit, to make sure that we will vote in favour of that little bit to make sure that the Budget will get through. Well, I think, that is why I decided to have this motion debate and that is why I would like also to hear from colleagues what they think that we should do with this rather robust economy that all of us and the whole community work so hard unfortunately to produce an awful lot of money, sitting in a bank somewhere where as I said time before we are actually losing money. Our fiscal reserve is being managed with a return of 4.5%, our inflation rate is 7%. 2.5% is lost every year. Fortunately for us, the land fund seems to have a better return and that is why as far as the Liberal Party is concerned we supported the Government's resolution today to set up the land fund so that it will be managed as it were on a different basis than the other half of our fiscal reserves. Madam President, with those words, I hope that my colleagues will seriously consider supporting my motion if they do not agree with reduction of profits tax to the extent of let us say 1.5% which is what we proposed last year, and indeed 1.5% from salaries tax as well, in fact the salaries tax payer gets about a 10% reduction whilst the profits tax payers only get about 9% reduction.

If they do not agree with that if they think it should be more, say so, if they think it should be less, say so. But I think they should not just vote against my motion, and particularly, they should not support either of the two amendments.

The last thing we need is to play into the Government's hands of asking for a comprehensive review of our tax system. When that happens the Government will do nothing in the meantime, indeed I was rather surprised that the Financial Secretary mentioned this in his Budget speech that there will be a comprehensive review to see how it can help businesses with efficiency and cost. The Secretary for Treasury is smiling, so I think that answers the question, so I hope that my colleagues will not support either amendment but will support my motion. Thank you, Madam President.

Mr Ronald ARCULLI moved the following motion:

"That this Council urges the Government to reduce profits and salaries taxes as well as consider implementing other revenue measures that may be proposed by Members of this Council for the 1998-99 Budget so as to strive to achieve fiscal balance."

PRESIDENT (in Cantonese): I now propose the question to you and that is: That this Council urges the Government to reduce profits and salaries taxes as well as consider implementing other revenue measures that may be proposed by Members of this Council for the 1998-99 Budget so as to strive to achieve fiscal balance.

Members have been informed by circular on 19 July, that Dr LAW Cheung-kwok and Mr CHAN Choi-hi have separately given notices to move amendments to this motion. As there are two amendments to the motion, I propose to have the motion and the amendments debated together in a joint debate.

Council shall now debate the motion and the amendments together in a joint debate. I will call upon Dr LAW Cheung-kwok to speak first, to be followed by Mr CHAN Choi-hi; but no amendments are to be moved at this stage. Members may then express their view on the main motion as well as on the amendments to the motion. Dr LAW Cheung-kwok.

DR LAW CHEUNG-KWOK (in Cantonese): Madam President, the Hong Kong Government has always maintained a low, simple and predictable tax regime, which has even been cited as one of the "seven heavenly virtues" by the Financial Secretary. Undeniably, the low tax rates and the simple tax regime have been very useful and have contributed greatly to the economic take-off of Hong Kong. However, in recent years, they have also led to an extremely uneven distribution of wealth and the aggravation of the problem of disparity between the rich and the poor in Hong Kong. The Hong Kong Association for Democracy and People's Livelihood (HKADPL) demands the Government to set up a Tax Review Committee to conduct a comprehensive review of the tax regime in Hong Kong. The HKADPL proposes that the Government should introduce a moderate progressive tax system to increase the revenues derived from large enterprises and high-salaried persons, in order to make necessary increases in expenditures on items relating to people's livelihood and to promote the effective and reasonable re-distribution of social resources.

The HKADPL considers that this is not the right time to reduce profits tax. Instead, the HKADPL proposes the introduction of a moderate progressive profits tax. For instance, companies with profits under $5 million should continue to pay profits tax at 16.5%, while the tax rate for companies with profits over $5 million should be increased to 18.5%. With the present rate of profits tax on the low side, an increase in the profits tax of large enterprises will enable the Government to put more resources into education, housing, infrastructure and welfare services to improve the livelihood of the lower strata. The HKADPL stresses that increasing the profits tax of large enterprises by 2% would not have an adverse effect on the business environment in Hong Kong, for comparing with the competing economies in our neighbouring countries and regions, the profits tax rate in Hong Kong is extremely low. In China, the rate is 33%. In Malaysia, Indonesia and Thailand, it is 30% and in Singapore, it is 26%. In 1992-93, the Government announced that it would increase profits tax by 1%. The business sector predicted that this would scare off investors. But the reality has proved this to be wholly untrue and nothing but alarmist talk. In putting their investment in Hong Kong, investors take into account different factors, including political stability, the sound legal system, the healthy financial system, reasonable rents, sufficient human resources and well-developed infrastructure. Profits tax is only one of the factors they considered.

With regard to salaries tax, the HKADPL proposes to replace the present standard rate of salaries tax with a progressive tax principle. Under the present system, the high income group only pay salaries tax at the standard rate of 15%, while middle and lower income groups pay as much as 20% tax based on the progressive tax rate. This is an absolutely unfair policy. I propose that the standard tax rate of 15% should be abolished in favour of a progressive tax principle, with the tax rate set at between 17% to 19%. The Government should also raise the allowances for salaries tax in order to relieve the salaries tax burden on the middle and lower classes.

With regard to the housing policy, recently, Mr TUNG Chee-hwa has made a pledge to Hong Kong people to build 85 000 housing units each year. The HKADPL would like to see this materialize. However, even if there is plenty of housing, people still need to find housing financially affordable. Thus I propose that the Government should introduce an interest payment allowance for first-time home purchasers in this year's tax regime in order to alleviate the burden of mortgage repayments on the people.

Hong Kong's economy is undergoing a transformation. In the rapidly changing environment of international competition, Hong Kong enterprises both in the field of services or industries should increase their investments in research and development. I propose that the Government should introduce an allowance for research and development in order to encourage more entrepreneurs to make capital investments so that the structure of Hong Kong's economy will develop in a more balanced and comprehensive manner, so as to increase its competitiveness. Many industries in Hong Kong have remained stagnant, there is increased unemployment among the lower classes, and there are also inadequate job opportunities. The Government should adopt appropriate measures for improving people's livelihood, increasing training and creating job opportunities. It should mobilize the positive factors to improve people's quality and the business environment for creation of wealth. At the same time, it should review the tax regime and use the surplus to cover the shortfalls. This is the way to maintain and promote stability and prosperity.

With these remarks, Madam President, I seek to amend the Honourable Ronald ARCULLI's motion. I urge Honourable Members to support my amendment. Thank you, Madam President.

PRESIDENT (in Cantonese): Mr CHAN Choi-hi.

MR CHAN CHOI-HI (in Cantonese): Madam President, I move my amendment to Mr Ronald ARCULLI's motion.

At a recent seminar, Mr KWONG Ki-chi, the Secretary for the Treasury said that tax reductions would allow Hong Kong people to share the fruits of our economic success. This message should be great news to the public. As a matter of fact, the Government's enormous financial surplus is indeed an object of envy.

Since "giving the community a dividend" is a principle endorsed by the SAR Government, it should not just pay lip service to it but put it into practice. In the 1998-99 financial year, I believe the most direct way to "give the community a dividend " is to reduce salaries tax and introduce a progressive tax system.

After the establishment of the SAR, it is time we reviewed the tax system in Hong Kong. In my opinion, this is a long-awaited spring rather than one which has come late. If I remember it correctly, the Honourable Eric LI who is sitting here was an advocator, too. I wonder if he will mention this later. As we can see, the tax base in Hong Kong is too narrow, with a large portion of our salaries tax shouldered by a minority of high income or medium income people, while those making big money in property transactions can evade tax payments by engaging clever accountants. Does Hong Kong need a tax reform? The answer is yes. It is because taxation is one of the tools of our fiscal policy which can be used to stimulate our economy or improve people's livelihood. Obviously, introducing a tax on property transfer or even a capital gains tax would provide a stable source of income for the Government. Many countries have a property transfer tax which has been proven effective. If the tax rate is set at not too high a level, it can both stabilize property prices and increase revenues. It is after all better than imposing a sales tax.

As for profits tax, the existing tax rate of 16.5% is already much lower than that in our neighbouring countries. I do not consider this an appropriate time to reduce the profits tax rate further. Our businessmen have already gained certain profits from our economic development, why could they not share our prosperity with the general public?

Just now Mr Ronald ARCULLI mentioned that proposing tax reforms might give the Government a very good excuse to procrastinate. I do not consider this a sensible and responsible thing to say. Actually, a tax review has long been overdue and should not be proposed only today.

Dr the Honourable LAW Cheung-kwok and I are only repeating our call in proposing it again today. Actually, when I joined the Meeting Point many years ago, it was the first political group to propose a tax reform.

With these remarks, I move to amend Mr Ronald ARCULLI's motion.

PRESIDENT (in Cantonese): Does any other Member wish to speak? Mrs Selina CHOW.

MRS SELINA CHOW (in Cantonese): Madam President, undoubtedly, the SAR Government is faced with a happy problem, that is, its overflowing coffers. This shows that the British Hong Kong Government was really good at managing money. However, before the Financial Secretary, who was also the Financial Secretary of the former Government, accepts cheers and applause, we should first ask why there is still such a huge surplus when the officials of the former Government have promised to put money back into the people's pockets. A question that especially requires an answer from the officials is whether the SAR Government will continue to adhere to the previous goal of giving the community a dividend? If the answer is yes, the follow-up question is how to achieve the goal of giving the community a dividend in a way that is both beneficial to Hong Kong and in keeping with the principle of fairness. Today's debate focuses on taxation. Actually, the original motion of Mr Ronald ARCULLI very clearly offers Honourable colleagues ample room to make different suggestions and express different views for the Government's consideration and reference. But unfortunately, some Honourable colleagues try to narrow down the scope of the motion through amendments which not only delete the part concerning reduction in profits tax but propose tax increases instead.

Furthermore, they demand a review and reform of the simple tax regime, which is recognized to be a strength of Hong Kong. Dr LAW Cheung-kwok talked about setting up a Tax Review Committee to consider tax reforms in various aspects, including the progressive tax system he is advocating and the various tax increases which we heard just now. It seems that he would like to see a slight adjustment of the standard tax rate, too. In a nutshell, both Dr LAW Cheung-kwok and Mr CHAN Choi-hi are against a reduction in profits tax. They only agree to the reduction of salaries tax in their amendments, but we did not hear clearly how they required this to be done.

I would like to point out that these proposals have a very basic flaw, that is, they serve to divide the community and are extremely unfair. One characteristic of the economic structure of Hong Kong is that salaries tax or profits tax may be paid by the upper, middle or lower classes. Of the over 700 000 companies in Hong Kong, over 90% are small and medium-sized enterprises. The proprietors of these companies earn less than many employees but they have to pay profits tax. With the government coffers overflowing and on the premise of giving the community a dividend, is it fair of the Government to give consideration only to employees, including those earning top salaries, and neglect those hundreds of thousands who do business?

I hope that Honourable colleagues who are against a reduction in profits tax will think twice and consider this as an investment from a commercial point of view. Tax reduction has always been used as the most effective means to attract investments. It can effectively increase investment despite reducing taxes. Therefore, I wholeheartedly support the reduction of profits and salaries tax.

The retail industry which I represented in the former Legislative Council has asked me to clearly submit their proposals for tax reductions. In view of the fact that the standard tax rate in the '60s was merely 12.5%, the Retail Management Association thinks that at a time when the Government has substantial revenue as it does now, it is reasonable for it to reduce salaries tax. At the same time, especially in view of the frequent negative press reports about Hong Kong recently, reducing profits tax can indeed convey a positive and strong message and show that Hong Kong is a desirable location for investment and business development.

In the retail industry, renovations have a limited life, since the retail points such as department stores or shops are often not the operator's properties. Many shops have to move every three to five years upon the expiry of their leases. However, the present rebuilding allowance can only be written off over 50 years. This is really quite disconnected with their actual circumstances and needs to be reviewed indeed. As far as I know, the Legislative Council managed some time ago to secure a refurbishment allowance for the hotel industry with a write-off period of five years. Unfortunately, the same treatment cannot be secured for the retail industry. I believe they also have a practical need for such an allowance.

Besides, I believe the SAR Government needs to fully consider introducing various allowances to encourage industrial and commercial investments in order to achieve the target of enhancing the international competitiveness of Hong Kong. The Liberal Party has repeatedly said that the group receiving most unfair treatment in Hong Kong is the so-called sandwich class. They have to pay intact taxes while getting extremely little benefit in terms of social services. Since the Government often applies the "user pays" principle, they have a really heavy burden indeed. I hope that the Government can attend to their needs and give them breathing space by widening the tax bands as far as possible. We also hope to secure an allowance for mortgage repayments for the middle class. I hope that the Government can help the sandwich class.

Thank you, Madam President.

PRESIDENT (in Cantonese): Mrs Elsie TU.

MRS ELSIE TU: Madam President, I hate this, the time of the year when I have to pay my taxes, and I am sure every other taxpayer does. If I were to move against this motion, I should be dropping a rock on my own foot. Well, in fact, I intend to drop the rock on my own foot on condition that the needs of, that the Honourable ARCULLI has mentioned are met speedily, that is, better conditions for the elderly, care and attention for the sick elderly, housing for the men and women who live in cages and have never seen the colour of a tax paper, speedier and better care for the sick, rented public housing for the lower paid workers, more schools for the influx of children expected to, arrive in Hong Kong. I could go on and on with my wish list, but I will stop there on that.

Mr ARCULLI mentioned the huge amount of money in the Government coffers, perhaps the secretary will tell us why it is lying in the coffers and not being used for the people that I have mentioned? If the money is not used for those who need it why should it be used to support, by giving it to those who do not need it, by reducing their taxes? Mr ARCULLI believes that there is enough in those coffers to meet the needs I have mentioned and still to reduce the taxes. He may well be right but let us put first things first, and insist that the needs of the under-privileged should be dealt with first. When those needs are met we can then sit back and agree to reducing taxes. We need to get our priorities right and for that reason, I shall support the Honourable LAW Cheung-kwok's amendment. Thank you.

PRESIDENT (in Cantonese): Mrs Peggy LAM.

MRS PEGGY LAM (in Cantonese): Madam President, after the establishment of the Special Administrative Region, the foremost task of Mr TUNG Chee-hwa and the SAR Government officials is to consider how the SAR Government, with its substantial fiscal reserves, can make use of its rich resources to enhance the competitiveness of the Hong Kong economy, improve people's livelihood and draw up a blueprint for the SAR in the next century which meets the expectations of the public, as embodied in the theme of the Chief Executive's inaugural speech "A Future of Excellence and Prosperity for All".

According to the latest figures, the Hong Kong Government has a surplus of $25.7 billion for the year 1996-97. Including the Land Fund which was formally transferred to the SAR on 1 July, the accumulated total fiscal reserves of the Hong Kong Government has reached the peak of over $370 billion. Since there is no need to apportion half of the income from land sales to the Land Fund anymore, the Hong Kong Government forecasts that future surpluses will even be greater. In view of the overflowing coffers, Mr Ronald ARCULLI's motion urging the Government to reduce profits and salaries taxes will certainly be welcomed by every member of the public. No one will object to the Government returning wealth to the people through appropriate tax concessions. However, what I would like to point out specially is that we should not reduce tax just because the Government's coffers are full. Whether there should be tax reductions should depend on the overall financial situation of the Hong Kong Government. We must do this with prudence and vision. It might be more in keeping with the community's interests and needs if the Government spends its fiscal reserves on social investments, an act perhaps more positive than merely reducing taxes.

In terms of building up our society, we have numerous tasks facing us. At the inauguration ceremony, the Chief Executive, Mr TUNG Chee-hwa, delivered his blueprint for governing Hong Kong, setting out his policy objectives and reform directions on various issues such as economy, education and welfare. He also made a number of concrete pledges. For instance, he said full-day schooling at primary level will be introduced as soon as possible, new teachers in primary and secondary schools should have university degrees, the waiting time for public housing will be shortened and Temporary Housing Areas will be cleared. All these policies require the input of huge resources and they are looked forward to by many people. If the SAR Government can put more efforts into improving people's livelihood and caring for the lower classes in the future, I believe we will all agree that the general public will definitely get more benefits from it than from tax reductions.

In the dark corners of our society, there are many old people who are living alone. This group of poor people are neglected by society and the Government. Some time ago, when the Financial Secretary, Mr Donald TSANG, visited a group of old people, he had to admit that the present Comprehensive Social Security Assistance (CSSA) payments to the elderly cannot meet their additional medical, travelling and social expenses or enable the elderly to live a normal life with dignity. The Government should do more than lip service. I hope that the Government will give financial backup to an elderly commission to be set up later and enhance the various support services for the elderly so that they can receive comprehensive care.

As for the so-called sandwich class, apart from giving them suitable salaries tax allowances, I have repeatedly asked the Government to give an allowance for interest payments to first-time home buyers in order to relieve their burden in terms of mortgage repayments. I hope the SAR Government can give this serious consideration.

But I have some reservations about profits tax reductions. Faced with the threat of our strong neighbouring countries, what Hong Kong needs most now is to increase the competitiveness of its products. However, reducing the profits tax rate would have no substantial effect in stimulating our economic development. In fact, many surveys have pointed out that tax rate is just a minor consideration when foreign investors choose their places of investment. If the Government is far-sighted, it should make good use of its resources to further improve the investment environment in Hong Kong by providing more technological support to the manufacturing industry and promoting the development of the services industry. I believe this will be more beneficial to the long term economic development of Hong Kong.

Since the Government has begun to collect a government rent equivalent to 3% of the rateable value with effect from 1 July, some political parties have demanded reducing the present rates percentage charge of 5%. In my view, this problem can be dealt with in different ways. While the Government might consider reducing the rates percentage charge for residential buildings for self-occupation, the rates percentage charge for residential flats for rent and all commercial and industrial buildings should remain unchanged. This would have less impact on the revenues of the Treasury.

Madam President, with regard to the financial management of the SAR Government, the Basic Law has, on the basis of the successful strategies adopted by Hong Kong in the past, stipulated that the SAR shall follow the principle of keeping expenditure within the limits of revenues in drawing up its budget, and keep the budget commensurate with the growth rate of its Gross Domestic Product. We should not expect any drastic changes in the first SAR budget to be delivered by the Financial Secretary next year. What the Government should do is to build a more prosperous SAR based on its past success and focus on the people. I would like to dedicate the following words to Mr Donald TSANG for his reference: "carrying on the past heritage and steadily opening up the future, we will together create a new era for the SAR".

Madam President, I so submit.

PRESIDENT (in Cantonese): Mr WONG Siu-yee.

MR WONG SIU-YEE (in Cantonese): Madam President, the Hong Kong Progressive Alliance (HKPA) abides by a principle with regard to this motion, and that is, we do not support a drastic reduction of taxes. However, on condition that it is in the interest of economic development and people's livelihood, we will support appropriate reductions of individual taxes. The HKPA thinks that the Government should consider reducing profits tax selectively.

The costs of operating business in Hong Kong are constantly escalating. The rents of office buildings are now among the highest in the world. In addition, with fierce competition from neighbouring Asian places, such as Singapore and Shanghai, Hong Kong's competitiveness is declining. Earlier, Dr LAW Cheung-kwok also mentioned the tax rates of some Asian countries. We suggest that the Government should borrow the merits of the tax systems of neighbouring Asian countries to make up for the shortcomings of our own system. For instance, although Hong Kong's corporate tax rate is lower than Singapore's 26% and Malaysia's 30%, the governments of the two countries offer a special preferential tax rate as low as 15% to those developing companies, especially those high value-added, high technology and capital intensive companies. For companies operating as regional headquarters, their tax rate is only 10%. Since the tax rates in overseas countries are gradually becoming lower, the Hong Kong Government may indeed consider selectively reducing the corporate tax rate and send a positive message to overseas investors that Hong Kong will continue to be a desirable location for foreign investment.

The HKPA opposes the setting up of a Tax Review Committee in Hong Kong. At present, the Hong Kong Government already has an adequate consultation mechanism. Before drafting the annual budget, the Financial Secretary will widely consult with different groups in our society and Members of the Council. Eventually, the budget will be submitted to the Legislative Council for scrutiny and approval. These are effective and reasonable mechanisms. We should not set up a separate and redundant tax review committee which will waste manpower and money and hamper efficiency.

At present, Hong Kong has a simple and sound tax regime highly praised by other countries. We should maintain this fine tradition in order to ensure the stability of our social and economic systems. We object to introducing the progressive tax system for profits tax, since this would complicate our simple tax regime. We do not want to make capitalists worry that the Hong Kong Government might punish the rich people by means of the progressive tax system. In order to maintain the stability and prosperity of Hong Kong, we should first ensure the competitiveness of Hong Kong in the international market. We should try our best to attract investors from different countries to invest in Hong Kong and create job opportunities. Only by doing so can the living standard of Hong Kong people be improved.

Moreover, the Government can consider reviewing some unclear provisions under the present tax system. For instance, under the present tax system, only profits arising from businesses run in Hong Kong are taxable. As compared with other tax systems which charge taxes on global income, this no doubt gives Hong Kong an edge. However, the definition of profits derived from Hong Kong is just a general one. The determination as to whether certain profits are derived in Hong Kong or in overseas countries is ambiguous. As a result, many multinational companies cannot forecast the taxation costs of doing business in Hong Kong. At present, more and more companies provide internet services, that is, they are doing business on the internet. Several companies in different geographical locations will profit from a transaction at the same time. Therefore, the Government needs to make a clear definition for the sources of profits.

To sum up, the HKPA thinks that the Government should consider reducing profits tax in order to boost the local and international enterprises' interest in investing in Hong Kong.

Thank you, Madam President. I so submit.

PRESIDENT (in Cantonese): Miss CHOY So-yuk.

MISS CHOY SO-YUK (in Cantonese): Madam President, the HKPA is basically in favour of the motion on reduction of taxes proposed by Mr Ronald ARCULLI.

Since there is a budgeted surplus of $30 billion in the 1997-98 Budget, the Government should "pay the community a dividend". In particular, it should offer tax concessions to the middle and lower classes as well as the sandwich class. Just now, Mr WONG Siu-yee of the HKPA expressed our views on profits tax. I will now make a few comments and submit some of our specific proposals on salaries tax.

In the 1998-99 Budget, the Government could consider increasing the basic allowance from $100,000 to $110,000, that is, by about 10%, while the married person's allowance could be raised from $200,000 to $220,000. Considering that the parents of this generation invest much more in the education of their children, I propose that the allowance for the first and second child be increased from $27,000 to $29,750, at a rate similar to last year's. We propose that the allowance for the third to ninth child should remain at $14,000. Since Hong Kong will see the arrival of a large number of children of Hong Kong people born in the Mainland to settle here, an increase in this allowance would be like an incentive for them to have more children. Hong Kong is such a small city and does not have sufficient capacity at this stage to cope with a large number of children. Furthermore, the things used by the first and second child can be passed on to the third child and so on. This would reduce parents' expenditure on the third child.

Besides, the Government could increase the basic allowance for dependent parents and grandparents from $27,000 to around $29,750, since we should respect and promote the traditional family values. Thus the Government can encourage young people to support their elders this way.

I propose that the single parent allowance be increased from $75,000 to around $82,600, since the single parent has to meet the expenses of a family alone and we can imagine how hard this is. Thus the Government should increase the allowances for single-parent families as a show of its solicitude for them.

Moreover, the Government could also consider increasing the disabled dependant person allowance by about 10%, from $25,000 to $27,500. The HKPA considers that the Government should show solicitude for the unfortunate in our society.

We also propose that the Government should consider increasing the deduction for training expenses from $20,000 to $25,000. This is because we believe that the deduction in respect of training course expenses will encourage employees to upgrade their professional and technical skills, which will in turn enhance the quality of human resources in general.

As mentioned above, we should not neglect the tax burden on the sandwich class. I propose that each of the marginal tax bands be widened from $30,000 to $45,000, while the top marginal rate should be kept at the current level of 20%.

Furthermore, the HKPA is concerned about the exorbitant property prices at present. In the past, members of the public have made suggestions to alleviate the burden of the middle-income first-time home buyers. I propose that the Government should respond to the public's demand and consider the introduction of an allowance for interest payments on mortgages for first-time home buyers.

Actually, we believe that the Government could increase its total revenues by cracking down on tax evasion activities. As far as we know, the Inland Revenue Department successfully collected over $2 billion in respect of unpaid taxes and penalties in the past year. Thus the Inland Revenue Department should try to improve their work in this respect this year in order to uphold the principle of fairness.

On the whole, the HKPA is basically in favour of Mr ARCULLI's proposal for the reduction of taxes.

Madam President, I so submit. Thank you.

PRESIDENT (in Cantonese): Mr Kennedy WONG.

MR KENNEDY WONG (in Cantonese): Madam President, as far as I understand, this evening we are discussing some general principles. Mr Ronald ARCULLI's motion chiefly urges the Government to reduce profits and salaries tax, while the amendments by Dr LAW Cheung-kwok and Mr CHAN Choi-hi call for the Government to review the tax regime or even conduct a comprehensive review of it.

In my opinion, the present tax regime in Hong Kong is simple and effective. It also involves low administrative cost and is time-saving. Under this regime, enterprises need not spend a lot of money hiring tax consultants or professionals. Since it is very simple and the standard rates have been set, individuals need not spend too much time and energy in studying the tax concessions.

I think the present tax regime in Hong Kong has many advantages. I have been a resident of the United States. Under the United States tax regime, for example, it is extremely time-consuming to fill out tax returns. There are all kinds of concessions which are very difficult to understand and ordinary people have to spend a lot of time studying them. I recall that during the last United States presidential election, a famous American millionaire Mr Fox MAGAZINE proposed that the United States should adopt a simple tax regime which is easy to understand and can enable the Government to reduce administrative costs. At that time, there were voices in the United States who also considered that the present tax regime in Hong Kong was effective. Therefore, I oppose Dr LAW Cheung-kwok's and Mr CHAN Choi-hi's amendments.

Mr ARCULLI's motion consists of two main parts, dealing with the reduction of profits tax and salaries tax respectively. In my view, reducing salaries tax will have the immediate effect of "paying the community a dividend ". At the same time, it can stimulate consumer spending and boost the rather depressed industries in Hong Kong, such as the retail industry. With its substantial fiscal surplus, I believe the Government can afford to consider this.

With regard to profits tax, I understand that there is a global trend for a downward adjustment in profits tax. Since Hong Kong has reunited with the motherland, we should also make comparisons with some regions in the Mainland. For instance, the current rate of profits tax in the Special Economic Zones such as Shenzhen and Zhuhai is 15%. In addition, incentives such as "two exemptions and three reductions" are given to certain new investments. Another example is Singapore. As far as I know, if a multinational enterprise chooses Singapore as its operation headquarters, a tax rate of around 10% will be charged, lower than the current level of profits tax in Hong Kong. I find that under the present investment environment of Hong Kong, the costs of doing business are quite high in all respects. Given such a small market in Hong Kong, how can it attract local enterprises to increase investment and attract overseas enterprises? I believe reducing profits tax will produce an immediate effect.

Therefore, I support Mr ARCULLI's motion.

I so submit. Thank you, Madam President.

PRESIDENT (in Cantonese): Mr CHAN Kam-lam.

MR CHAN KAM-LAM (in Cantonese): Madam President, on the fourth day of the establishment of the SAR Government, Mr KWONG Ki-chi, the Secretary for the Treasury, announced that the Treasury's surplus this year will be $10 billion higher than the original forecast, so that the fiscal reserves of the Government will reach $377 billion by March 1998. Mr Ronald ARCULLI's proposal to reduce taxes at this stage affords us an opportunity to give our views on the issue of tax concessions for the coming year and to urge the Government to make good use of its surplus to improve people's livelihood.

The Democratic Alliance for Betterment of Hong Kong (DAB) agrees that there is a need to lay up against a rainy day. However, if the Government sits on its huge financial surplus without putting it to good use, the saying "what is taken from the people should be used on the people" would merely be empty talk. In his 1996 Budget speech, Mr Donald TSANG, the Financial Secretary, mentioned that the Hong Kong Government had to maintain a certain amount of surplus to prepare for stormy times in the future. However, Mr TSANG suggested earlier that it is unlikely that Hong Kong will come across stormy times in the foreseeable future. Rather, prosperous times are to be expected. The DAB is therefore as confident as the Financial Secretary about the economic prospects of Hong Kong.

However, the DAB does not think that reducing profits tax now is an appropriate way to return wealth to the people. First, as we understand it, the annual revenue from profits tax accounts for an average 25% of the total revenue in Hong Kong. However, in the past two years, due to the economic slowdown and the unnecessary reduction of profits tax from 17.5% to 16.5% by the Financial Secretary in the financial year 1994-95, there was a negative growth in the revenue from profits tax. Thus we believe that while maintaining a low tax regime, it is necessary to ensure that the Government has a stable revenue.

Furthermore, the current rate of profits tax in Hong Kong is 16.5%, almost the lowest among all our neighbouring countries. We have never heard any consortium or investor complain that the profits tax rate is too high and give up investing in Hong Kong as a result. Rather, what they are concerned about are questions like the high land price policy and expensive production costs. As far as investors are concerned, the rate of profits tax should not be changed too often. Otherwise, it would only add to the uncertainties and would give investors a negative message that the profits tax rate would constantly go up and down. This would affect the confidence of investors in making long-term investments.

Therefore, in order to maintain the stability of the Government's recurrent revenues and our financial structure, the DAB considers the reduction of profits tax proposed by Mr ARCULLI unnecessary at this stage.

Madam President, as a matter of fact, not only did Hong Kong's economic structure undergo a transformation in recent years, but the financial structure of the Government also shows a trend of transformation. While profits tax shows a negative growth, the proceeds from land sales and land-related revenues have been on the increase. 20% of the $230 billion revenue in this financial year comes from proceeds from land sales and stamp duties on property transactions as a result of the booming property market. Since the Government's revenue is dependent on the high land price policy and high property prices, the Hong Kong Government dares not make any rash changes to the relevant policies. However, we think that it is unhealthy to be over-reliant on land sales and the related income and this also has a negative effect on the overall economy.

The DAB thinks that the SAR Government should address the question of the stability of its recurrent revenues and carry out a comprehensive review and reform of the present tax regime. Therefore, we support Dr LAW Cheung-kwok's amendment which proposes that the Government should set up a Tax Review Committee promptly to consider various tax reform proposals.

The DAB also has reservations about the original motion's proposal of a reduction of salaries tax. Mr ARCULLI has excellent memory. We have discussed this matter with him and he still remembers what our stand was. In our view, in order to really return wealth to the people, the Hong Kong Government should raise the allowances for salaries tax further so as to benefit the general middle income taxpayers and alleviate their tax burden, and to help more people of the low income group out of the tax net.

Undeniably, introducing the progressive tax system can achieve the effect of redistributing wealth to a certain extent. However, I can assert that what Dr LAW Cheung-kwok proposed earlier will deal a great blow to the business community and will not help Hong Kong attract investors at all. Thus I think that the Government should study this matter very carefully.

Besides, in order to help the sandwich class to buy their homes, the DAB has for several years repeatedly asked the Financial Secretary to introduce a new allowance for interest payments on first-time home purchase. Unfortunately, the Hong Kong Government has refused to commit itself, so that we have to continue fighting. We hope that the Secretary for the Treasury will keep his word and use the Government's surplus to return wealth to the public by means of tax concessions.

Madam President, the DAB believes that with the current financial surplus and the $170 billion Land Fund it has just resolved to set up, the Hong Kong Government can certainly afford to further improve people's livelihood and welfare. Based on the saying of "what is taken from the people should be used on the people", it should try to achieve social equality in terms of both the tax system and welfare to try its best to alleviate the financial burden on the low income groups. This is exactly the fiscal management philosophy of a responsible government.

Madam President, I so submit.

PRESIDENT (in Cantonese): Miss CHAN Yuen-han.

MISS CHAN YUEN-HAN (in Cantonese): Madam President, during the last ten years, Hong Kong's economy has continued to undergo transformation. This has resulted in such social problems as an increase in structural unemployment figures, problems of finding and changing jobs and underemployment, seriously annoying the employees in Hong Kong. We have had several debates over this question in the past. All along, the Hong Kong Federation of Trade Unions (FTU) has been very critical about the Government's support to the unemployed and its policies of retraining and employment assistance. We have always thought that in view of the uncertain prospects of employment of workers, the decrease in their income and their quality of life, and the fact that the Government has over $300 billion fiscal reserves, it should give people some tax concessions in order to really return wealth to the people.

In the 1997-98 transitional Budget, the then Financial Secretary accepted the FTU's proposal and widened the first tax band from $20,000 to $30,000, on par with the other tax bands, so that some of the low income group will be removed from the tax net. The basic allowance was increased to $100,000, at a rate slightly higher than the inflation rate. At that time, we found this proposal acceptable. However, since the rate of wage increase has been consistently lower than the inflation rate, consumption has declined and the standard of living visibly dropped, the Government should remove more low income people from the tax net.

The FTU has submitted proposals regarding the relevant issues to the then Financial Secretary, Mr Donald TSANG, who is also the incumbent Financial Secretary. We pointed out that in the 1998-99 Budget, he should consider increasing the basic allowance to $120,000, while the rate of increase in the allowances for dependent parents and children should be higher than the inflation rate. Madam President, if the Government shows solicitude for the conditions of people and adjust the basic allowances or directly increase tax allowances, we believe that this would certainly be welcomed by the grassroots in general.

With regard to housing, although Mr TUNG Chee-hwa has pledged to build up to 85 000 flats each year, the question remains how this can be achieved. There are as yet no concrete plans and it seems that the target can only be reached after a long period of time. The plans for public housing supply and the number of flats to be built also seem to remain on paper and it takes a long time before they would be put into practice. Faced with this situation, we hope that the Government will look squarely at the problem and provide appropriate rent assistance to households which have been on the Waiting List for a long time. During our past debates, I had raised this point which was a strong demand by the grassroots. In view of the high property prices, I feel that the Government should also give tax concessions to first-time home buyers to help them purchase their own homes. In our view, the present Government has not been able to solve the problem of housing. Although it seems that speculation has become less rife during the recent weeks, the Government has to face this problem and help the people.

Madam President, in today's motion, Mr Ronald ARCULLI proposes to reduce profits tax. Although I generally support tax reductions, I do not support a tax reduction this time. The FTU has told the Government that there are differences of opinion between us. In terms of the overall economy, we have always considered that the profits tax in Hong Kong is low as compared with our neighbouring regions. The profits tax which was once as high as 18.5% has been reduced to the present level of 16.5%. If the whole community is in need of resources, we may well increase profits tax. Therefore, the FTU thinks that profits tax should be increased by 1% rather than being reduced.

The reasons are several-fold. As I said just now, Hong Kong's profits tax is relatively low. Our neighbouring regions all have higher profits tax rates than Hong Kong. Therefore, increasing profits tax is not a big problem. But I would like to stress in particular that you pay more profits tax only if you make more profits. Furthermore, if we have more resources, it would be easier to negotiate with the Financial Secretary. Then we would be able to help some grassroots who are in dire need. We could allocate more resources to narrow the gap between the rich and the poor and uphold the principle of fairness which Hong Kong needs. Besides, very often, people from the industrial and commercial sectors, including the Chief Executive, Mr TUNG Chee-hwa, point out that we should contribute more to society as we have taken so much from it. If these problems can be solved, this goal can be achieved.

I believe that Members from the industrial and commercial sectors will not object to this. In the past, the Government has always had unexpectedly large budget surpluses. For instance, while the 1996 Budget forecast a surplus of $0.6 billion, the revenue during the year turned out to be $6.6 billion higher than the forecast. Such additional substantial surpluses should have helped to raise the standard of living of the people. But that is not the case. One could not help but feel that the Government has not made good use of resources despite the fact that it has several hundred billion dollars reserves and that it is extremely stingy about spending on building up our society and helping to improve people's livelihood. Sometimes we cannot but marvel at the Government in this respect. We hope that the new Government, that is, the SAR Government, can get rid of the miserly habits of the former Government and pay more attention to the needs of the people so that Hong Kong will become a place which better enable people to live and work in peace and contentment .

Mr President, on the basis of the above reasons, I think that it is clear to all Members that the FTU will oppose the original motion and support the two amendments. Thank you.

PRESIDENT (in Cantonese): Mr CHIM Pui-chung.

MR CHIM PUI-CHUNG (in Cantonese): Madam President, up to now, the two motions today are about taxation in Hong Kong. As I recall, 1957 was the so-called period of "letting a hundred flowers blossom and a hundred schools of thought contend" in China. Today, as we contend about taxation issues, I believe that under "one country, two systems", the Hong Kong Government will not judge our different opinions in a biased manner. Since everyone can give his own opinion, I will give my views on stamp duty on stock transactions in respect of other problems such as tax adjustment.

Madam President, maybe some Honourable colleagues have not yet joined the then Legislative Council and the present Provisional Legislative Council during the past few years. During that period, many people in Hong Kong and other parts of the world have already pointed out that the stamp duties on stock transactions in Hong Kong were very high, while other countries such as the United Kingdom had been progressing towards the complete abolition of such stamp duties. We understand that, at present, the Hong Kong Government still levies a rate of $1.5 for every $1,000, that is, for every $100, both the buyer and the seller has to pay $0.15 as stamp duty on stock transactions. For some time in the past, people from the sector have made a lot of comments, asking the Government to abolish this stamp duty. Of course, we now find it a great pity that during the last phase of the transitional period, the Hong Kong Government had not paid much attention to the motion debates in the Legislative Council. Only the Secretary for the Treasury is present when the Council conducts this motion debate today. Of course he had no idea and the other Secretaries also had no idea that my question is about something else. My question is directed at the Financial Services Bureau. Thus, I hope that in future, the various government bureaus will take the motion debates at the Provisional Legislative Council seriously as we are paving the way for the first legislature, and we should respect one another. For some time in the past, Members have thought that as the so-called sunset government would not last long and it was no longer important. But now, the sun has just risen and we should respect one another. I take this opportunity to call on the Secretaries to respect the motion debates of the Provisional Legislative Council.

Madam President, just now I talked about the question of stamp duty on stock transactions, and that the duty on such transactions has already been abolished throughout the world. We should thoroughly understand that now that Hong Kong is determined to maintain its position as an international financial centre, especially a financial centre for stock exchange, it should follow the trend and abolish such a stamp duty. Thus I call on the Government to reduce the stamp duty on stock transactions progressively over the next two to three years by reducing $0.0005 at a time, making such reductions in three phases or in three years, such that the stamp duty can be completely abolished within six years. This would tell the world that Hong Kong cannot stick to its own way if it wants to keep up with the international trend.

The Financial Secretary and the Secretary for Financial Services have asked Hong Kong stock brokers to adjust their commissions as negotiable commissions before considering this taxation issue. On behalf of the sector, I would like to take this opportunity to say that Members should understand that the brokers collect commissions for stock transactions at a uniform rate of 0.2% as they emphasize uniformity and they are not reaping exorbitant profits. Of course, during the past few months to one year, the sector made good profits. However, we must not forget that they have had a lot of "lean" times in the past. During the past 30 to 40 years, they have wholeheartedly contributed and fought for turning Hong Kong into a financial centre. We must not blot out their contribution and the efforts they have made.

Therefore, the Government should try to change its attitude. Now that the Government keeps on claiming that it has to maintain Hong Kong's position as a financial centre, and that Hong Kong has become the sixth largest stock market in the world, we should be proud of ourselves. But at the same time, we have to look after the interest of the sector, and to take account of the efforts and prices those practitioners have paid. Therefore, today I would like to take this opportunity to call on the Government to review the collection of stamp duty on stock transactions in order to arrive at a conclusion satisfactory to all or a starting point for all.

Madam President, I take this opportunity to express my hope that the SAR Government will study the allowances for the garrison in the future, as this will involve more expenses. We understand that Hong Kong had always met the expenses of the British garrison in Hong Kong in the past. As far as I can recall, the relevant expenses had been as much as over $0.2 to $0.3 billion. Now, the Chinese Government has pledged that all costs of the Chinese garrison in Hong Kong will be shouldered by the Central Government. However, Madam President, I propose that the SAR Government should make financial preparations for the garrison. The garrison sent by the Chinese Government to Hong Kong are basically paid according to Chinese standards and these amounts cannot cover their expenditures in Hong Kong at all. Since they will be living in Hong Kong for a long time, they would go out on Sundays to the movies, meals or shopping. I very much hope that the Government will give each member of the garrison troops an allowance of $1,000. Since the garrison troops comprise only 5 000 people now, their expenditures would be less than $5 million per month and only $60 million per year. This is a small number compared with the number of taxpayers in Hong Kong. However, it would greatly boost the morale of the garrison troops and be very useful to their future. I take this opportunity to call on the SAR Government to make the relevant preparations.

These are my remarks, and time is up.

PRESIDENT (in Cantonese): Mr KAN Fook-yee.

MR KAN FOOK-YEE (in Cantonese): Madam President, having listened to Dr LAW Cheung-kwok's speech moving his amendment, I very much appreciate his pragmatic and frank attitude towards how we can improve people's livelihood and welfare and deal with the constantly aggravating problem of disparity between the rich and the poor. His amendment neither conceals nor evades the reality.

He proposes certain policies which are similar to egalitarian policies, for instance, introducing the progressive tax system to make the industrial and commercial operators pay more taxes and reducing the salaries taxes payable by the middle and lower classes so that they would pay less. Compared to those who only make empty gestures in respect of this question, his attitude wins my respect.

However, Dr LAW, I am sorry to say that I cannot support you. Since Article 107 of the Basic Law stipulates that the SAR Government shall follow the principle of keeping expenditure within the limits of revenues in its budget and keep it commensurate with the growth rate of its Gross Domestic Product, the expenditure required to ameliorate the problem of disparity between the rich and the poor must also be commensurate with the growth rate of our Gross Domestic Product. It would be very wrong to meet our financial expenditures by making changes in the structure of tax burdens in the community .

Besides, Article 108 of the Basic Law stipulates that the SAR Government shall take the low tax policy previously pursued in Hong Kong as reference, and it is not allowed to disrupt this with a progressive tax system.

Thank you, Madam President.

PRESIDENT (in Cantonese): Does any other Member wish to speak? If not, I will invite Mr Ronald ARCULLI to speak on the amendments to his motion.

I now invite Mr Ronald ARCULLI to speak on the amendments. You have five minutes, Mr Ronald ARCULLI.

MR RONALD ARCULLI: Thank you, Madam President. I do not know whether I can take five minutes because the Honourable CHAN Choi-hi took about three and a half minutes to move his amendment and despite the rather radical suggestions from the Honourable LAW Cheung-kwok, he took just over five minutes, so I will try and keep my remarks very brief.

I want to ask Members this, both of them want a Review Committee, the Association for Democracy and People's Livelihood wants tax increase, is that what they want? Not tax increase over the board, but in very specific sectors, in profits tax and in the standard tax rate. The standard tax rate today is 15%. Do they know how many people in Hong Kong pay the standard tax rate? Most of them do. There are only 2% of our workforce that pays the 15%, 64 000 out of 3.2 million and do they know what proportion of salaries tax they pay? About 60% of the total salaries tax. So they have 64 000 people paying 60% of the salaries tax collected by the Government and he wants to increase it.

As far as profits tax is concerned, somebody criticized the Government for reducing the profits tax from 17.5% in 1993/94 to 16.5% in 1994-95. Do they know why the Government reduced it? Because they made a mistake in the first place. When the tax in 1992 was 17.5%, profits tax was $32.2 billion. In 93-94 it was 17.5%, profits tax was $39.8 billion, in 1994-95 when profits tax was reduced to 16.5% they collected $47.4 billion. So for those who say that a tax reduction does not help produce profits, please answer those figures. But I am really disappointed in my friends in the Democratic Alliance for the Betterment of Hong Kong. They are even more radical than my friend, the Honourable Miss CHAN Yuen-han in the Federation of Trade Unions. They are supporting a 2% increase in profits tax and a 2% to 4% increase in standard rate tax because that is what Mr LAW Cheung-kwok wants whereas Miss CHAN Yuen-han only wants a modest 1% increase. How can they support either amendment? I hope the Honourable Mrs Peggy LAM would reconsider her position.

Property Post States, "Over the next two years between August this year and March 99, land sales are estimated to fetch $120 billion". Even if we do not get that figure let us say we get $100 billion, they want the Government to increase taxes. The Secretary for Treasury must be having a really good day today. The other reason why they cannot support a call for a Tax Review Committee is that they have not told us what they want to review. Dr LAW Cheung-kwok at least has come up with two examples, he just wants increase in two levels, I do not know what else he wants. Mr CHAN Choi-hi has not mentioned anything at all. Dr LAW Cheung-kwok has not told us what the financial impact is, what the gain is, what the loss is, who will benefit, or who will suffer.

As I said earlier, if our Administration would manage our reserves better, we have $170 billion, 1% improvement in management is $1.7 billion, 2% is $3.4 billion, 2.5% to cover inflation would give us over $3 billion, plus the land fund. We will have money coming out of our ears and they want to support tax increases. Well, I suppose if they do then it will not surprise me if business moves away from Hong Kong, if our most talented people will move away from Hong Kong because what sustains Hong Kong is team work, it is not just the talented people, it is not just business people taking risks, but all the people working, wages are high, quality of living is good. So I think we should preserve that. Vote against the amendment. Thank you.

PRESIDENT (in Cantonese): Secretary for the Treasury.

SECRETARY FOR THE TREASURY (in Cantonese): Madam President, the motion moved by Mr RONALD ARCULLI today is the second motion at this meeting requesting for a reduction in taxes. It has really been co-ordinated very well for us to deal with these two motions at the same meeting. To avoid repetition, I will not repeat again and again the points I just made when we debated over the motion on rates. Some of those arguments are, in fact, also applicable to this motion debate.

Both Dr LAW Cheung-kwok and Mr CHAN Choi-hi have proposed amendments to this motion. Before I respond to the points raised by Honourable Members today, I would like to clarify one point. Mr CHAN Kam-lam has quoted my comments on 4 July on the increase in our surplus by $1 billion. I believe he has mistaken my words. At that time, I was referring to the surplus for the year 1996-97 but not that for the year 1997-98. It is because on 4 July, it was absolutely impossible for me to forecast how much surplus there would be for the year 1997-98.

Today, I will also reply in four respects: first of all, fiscal management principles. Let me first talk about the basic principles. Article 107 of the Basic Law stipulates clearly that the Hong Kong Special Administrative Region shall follow the principle of keeping expenditure within the limits of revenues in drawing up its budget, and strive to achieve a fiscal balance and avoid deficits. This is our constitutional duty. In preparing the budget, we will surely strive to achieve a fiscal balance, taking account of our revenues, expenditures and capital investment requirements in order to comply with the Basic Law.

In regard to revenues, Article 108 of the Basic Law stipulates that we shall adopt the low tax policy previously pursued in Hong Kong. It is our fiscal policy to maintain a low, simple and predictable tax regime. After collecting adequate revenues to meet our known expenditure commitments and keeping sufficient reserves to cope with future uncertainties, we would consider providing tax concessions in the light of the affordability of the Government in areas where concessions are most needed. Before implementing concessions, we have to examine carefully the effects of these measures on our tax base and carefully avoid the possible impact of tax reduction on inflation. Moreover, Honourable Members should also understand that tax reduction will lead to a decrease in recurrent revenues. Therefore, this decision cannot be made simply on the basis of non-recurrent or unstable revenues, such as exceptional increases in land revenues or stamp duties. At the same time, when adjusting our tax regime, we should try our best to refrain from unnecessarily complicating our tax regime. Therefore, for example, we are seriously reserved towards the proposal of changing the profits tax, from a standard tax rate to progressive tax rates, because it will lead to complicated tax avoidance acts and administrative and operational problems, which runs contrary to our principle of maintaining a low, simple and predictable tax regime. If we can resolve the issues I just raised and still maintain a surplus after deducting our expenditures and capital investments, there is room for us to consider tax reduction.

The second respect is budgeting. We have completed the consultation on the expenditures in the 1998-99 Budget, and the Financial Secretary will soon consult Honourable Members on the revenue proposals in the budget. We will carefully examine the opinions expressed by Honourable Members today and those raised in the course of the forthcoming consultation. We will adhere to our established practice to review all revenue items, including salaries tax and profits tax when preparing the budget each year. However, we do not consider that there is a need to conduct a comprehensive review on the existing tax regime as proposed by Mr CHAN Choi-hi or to set up a Tax Review Committee to consider tax reforms as proposed by Dr LAW Cheung-kwok. Our low, simple and predictable tax regime is one of the major elements contributing to the success of Hong Kong. Moreover, the implementation of the low tax policy is also stipulated clearly in the Basic Law. The Heritage Foundation ranked Hong Kong as the freest economic system in the world in the Economic Freedom Index published in 1997. Moreover, the World Economic Forum also considers Hong Kong the second most competitive place in the world. A good tax regime is one of the main reasons why Hong Kong gained the above reputations. It is obvious to all that our tax regime is well-known in the world. Therefore, we consider that there is no need to carry out any substantial tax reform. As a saying in the West goes, "If it ain't broke, don't fix it." Our aim should be to maintain the well-tested and proven effective taxation system, making adjustments wherever necessary to strengthen the competitiveness of Hong Kong and to improve the well-being of the community. We consider that there is no need to set up a committee to specially consider measures for tax concessions or increases as we have already got a well-established mechanism within the Government for this purpose.

The third respect is about tax concessions. As I have just mentioned, we firmly believe in a low tax regime. We will actively consider any room for tax reductions. In the 1997-98 Budget, we have introduced measures for tax concession which cut the government tax revenues by $5 billion per annum. Mr ARCULLI has urged for a reduction in profits tax whilst Dr LAW Cheung-kwok, Mr CHAN Choi-hi and other Members have proposed amendments to excise the above proposal from the motion. Dr LAW Cheung-kwok also emphasized that it was inappropriate to reduce profits tax at this stage, or else our fiscal foundation would be weakened. Obviously, Members have different views about this and we have to carry out a detailed study. For this reason, the Financial Secretary has pledged in the 1997-98 Budget to conduct a review on profits tax to examine whether we can make our tax regime and the business environment in Hong Kong even more competitive. Next week, we will issue letters to invite people, including Members of this Council, to express their opinions on the review of profits tax. To facilitate our discussion, we will also provide these people with a paper on the background of the profits tax system in Hong Kong. The consultation period will last from the end of July through early September. In conducting the review, we will consider Members' views seriously.

For salaries tax, it is our usual practice to review the relevant allowances every year. The basic personal allowance was $41,000 in 1991-92 and this will increase to $100,000 in 1997-98, a total increase of $59,000 and the accumulative rate of increase is over 140%. This well exceeds the accumulative inflation of 48% over the same period. In the 1997-98 Budget, we have also lowered the marginal tax rate and widened the tax band which is particularly beneficial to the sandwich class. When we review the salaries tax structure each year, we have always taken into account the needs of people with low and middle income and we have been looking for ways to alleviate their tax burdens. Nearly 60% of our working population do not have to pay salaries tax now.

Finally, I would like to turn to say something about government expenditures. Dr LAW Cheung-kwok suggested that now that we have a strong and huge reserve, we should increase our expenditures to improve people's livelihood and to ameliorate the aggravating disparity between the rich and the poor. Let me point out unequivocally that it has always been our objective to improve the living standard of our community and help those who are genuinely in need. However, any increase in government expenditures should follow the principle of keeping expenditures within the limits of revenues. I do appreciate the good intentions of Dr LAW Cheung-kwok, Mr CHAN Choi-hi and other Members who urged that the Government should increase the standard rate of salaries tax and to introduce new tax items, including capital gains tax, special taxes for property transactions and so on. Undoubtedly, if we accept these proposals, it will bring more revenues to the Government. However, we cannot increase our expenditures just because our revenues have increased. In drafting the budget throughout these years, we have all along abided by a golden rule that the growth of government expenditures should not exceed the estimated growth rate of our Gross Domestic Product over a period of time. The rationale behind this guideline is very simple. We firmly believe that as the private sector drives our economic growth, only by a sustained economic growth can we be sufficiently capable of continuing to improve and expand our public services. Therefore, we should never allow government expenditures to grow out of proportion or without limits, depriving the private sector of the resources required to continuously drive our economic growth. This guideline is stipulated in Article 107 of the Basic Law which requires us to keep the budget commensurate with the growth rate of our Gross Domestic Product.

However, with an estimated trend of economic growth at 5% in real terms in the Medium Range Forecast, there is ample room for us to enhance and improve government services within the scope specified by the guideline. We will try our best to ensure that the additional resources generated by our continuous economic growth would be used in areas which bring the most benefits to our community.

Madam President, we fully understand the views made by Members that we should allow the community to share the fruits of our economic success and relieve the burden on taxpayers in the light of our economic and fiscal situation. If we manage to have a sustained surplus, we can consider giving tax concessions. Under such circumstances, we will consider adopting the best measures for tax concessions in accordance with the long-term interest of Hong Kong and the overall needs of our community.

Finally, may I take this opportunity to thank all Members for their views and comments on taxation. We will surely consider them very carefully.

PRESIDENT (in Cantonese): I now call upon Dr LAW Cheung-kwok to move his amendment to the motion. Dr LAW Cheung-kwok.

DR LAW CHEUNG-KWOK (in Cantonese): Madam President, I move that Mr Ronald ARCULLI's motion be amended as set out on the Agenda.

Dr LAW Cheung-kwok moved the following amendment:

"To delete "reduce profits and salaries taxes as well as consider implementing other revenue measures that may be proposed by Members of this Council for the 1998-99 Budget so as to strive to achieve fiscal balance" and substitute with "set up a Tax Review Committee to consider tax reforms in various aspects, which include, inter alia, (1) introducing a moderate progressive tax system; and (2) establishing new forms of tax relief (such as allowance for interest payment on first-time home buying, allowance for research and development as an incentive for enterprises, as well as reduction of salaries tax to alleviate the burden on lower and middle income groups); and that this Council considers that in order to avoid weakening the fiscal foundation of the Hong Kong Special Administrative Region Government, it is inappropriate to reduce profits tax at the present stage; and furthermore, in view of the substantial fiscal reserve held currently by the Government, it should increase expenditure so as to improve the livelihood and welfare of the people and to ameliorate the aggravating disparity between the rich and the poor"."

PRESIDENT (in Cantonese): I now propose the question to you and that is: That the amendment moved by Dr LAW Cheung-kwok be made to Mr Ronald ARCULLI's motion.

PRESIDENT (in Cantonese): I now put the question to you as stated. Will those in favour please say "aye"?

(Members responded)

PRESIDENT (in Cantonese): Those against please say "no".

(Members responded)

DR LAW Cheung-kwok rose to claim a division.

PRESIDENT (in Cantonese): Dr LAW Cheung-kwok has claimed a division. The division bell will ring for three minutes.

PRESIDENT (in Cantonese): Members, question now put is: That the amendment moved by Dr LAW Cheung-kwok be made to Mr Ronald ARCULLI's motion. Will Members please proceed to vote.

PRESIDENT (in Cantonese): Before I declare the result, are there any queries? If not, the result will now be displayed.

Mr LEE Kai-ming, Mrs Elsie TU, Miss CHAN Yuen-han, Mr CHAN Wing-chan, Mr LO Suk-ching and Dr LAW Cheung-kwok voted for the amendment.

Mr WONG Siu-yee, Mr David CHU, Mr HO Sai-chu, Mr Edward HO, Dr Raymond HO, Mr NG Leung-sing, Prof NG Ching-fai, Mr Eric LI, Mrs Selina CHOW, Mrs Peggy LAM, Mr Henry WU, Mr Ronald ARCULLI, Mr MA Fung-kwok, Mrs TSO WONG Man-yin, Dr LEONG Che-hung, Mrs Sophie LEUNG, Mr CHAN Kam-lam, Mr TSANG Yok-sing, Mr CHENG Kai-nam, Mr Kennedy WONG, Mr Howard YOUNG, Dr Charles YEUNG, Mr YEUNG Yiu-chung, Mr IP Kwok-him, Mr LAU Kong-wah, Mrs Miriam LAU, Mr Ambrose LAU, Mr CHOY Kan-pui, Dr TANG Siu-tong, Mr KAN Fook-yee, Mr NGAN Kam-chuen, Mr TAM Yiu-chung and Miss CHOY So-yuk voted against the amendment.

Mr CHAN Choi-hi and Mr CHIM Pui-chung abstained.

THE PRESIDENT announced that there were six Members in favour of the amendment, 33 against and two abstaining. She therefore declared that the amendment was negatived.

PRESIDENT (in Cantonese): Now that we have dealt with Dr LAW's amendment, Mr CHAN Choi-hi may move his amendment. Mr CHAN.

MR CHAN CHOI-HI (in Cantonese): Madam President, I move that Mr Ronald ARCULLI's motion be amended as set out on the Agenda.

Mr CHAN Choi-hi moved the following amendment:

"To delete "profits and salaries taxes" and substitute with "salaries tax, conduct a comprehensive review of the tax system,"; to delete "that may be"; and to add "in compliance with the relevant provisions in the Basic Law" after "to achieve fiscal balance"."

PRESIDENT (in Cantonese): I now propose the question to you and that is: That the amendment moved by Mr CHAN Choi-hi be made to Mr Ronald ARCULLI's motion.

PRESIDENT (in Cantonese): I now put the question to you as stated. Will those in favour please say "aye"?

(Members responded)

PRESIDENT (in Cantonese): Those against please say "no".

(Members responded)

Mr CHAN Choi-hi rose to claim a division.

PRESIDENT (in Cantonese): Council will now proceed to a division. The division bell will ring for three minutes.

PRESIDENT (in Cantonese): Members, the question now put is: That the amendment moved by Mr CHAN Choi-hi be made to Mr Ronald ARCULLI's motion. Will Members please proceed to vote.

PRESIDENT (in Cantonese): Before I declare the result, are there any queries? The result will now be displayed.

Mr LEE Kai-ming, Mr CHAN Choi-hi, Miss CHAN Yuen-han, Mr CHAN Wing-chan, Mr CHAN Kam-lam, Mr TSANG Yok-sing, Mr CHENG Kai-nam, Mr YEUNG Yiu-chung, Mr IP Kwok-him, Mr NGAN Kam-chuen, Mr LO Suk-ching, Dr LAW Cheung-kwok and Mr TAM Yiu-chung voted for the amendment.

Mr WONG Siu-yee, Mr David CHU, Mr HO Sai-chu, Mr Edward HO, Dr Raymond HO, Mr NG Leung-sing, Prof NG Ching-fai, Mr Eric LI, Mrs Elsie TU, Mrs Selina CHOW, Mrs Peggy LAM, Mr Henry WU, Mr Ronald ARCULLI, Dr TSO WONG Man-yin, Dr LEONG Che-hung, Mrs Sophie LEUNG, Mr Kennedy WONG, Mr Howard YOUNG, Dr Charles YEUNG, Mr CHIM Pui-chung, Mr LAU Kong-wah, Mrs Miriam LAU, Mr Ambrose LAU, Mr CHOY Kan-pui, Dr TANG Siu-tong, Mr KAN Fook-yee and Miss CHOY So-yuk voted against the amendment.

Mr MA Fung-kwok abstained.

THE PRESIDENT announced that there were 13 Members in favour of the amendment, 27 against and one abstaining. She therefore declared that the amendment was negatived.

PRESIDENT (in Cantonese): Mr Ronald ARCULLI, you may now reply and you have three minutes and 45 seconds out of your original 15 minutes.

MR RONALD ARCULLI: Madam President, I do not wish to drag on proceedings any further, I simply want to thank all Members for the very interesting views that they have expressed, I only have one last request, do not fall for what the Secretary of Treasury said, he is already laughing, so please support my motion. Thank you.

PRESIDENT (in Cantonese): I now put the question to you and that is: That the motion moved by Mr Ronald ARCULLI as set out on the Agenda be approved.

Will those in favour please say "aye"?

(Members responded)

PRESIDENT (in Cantonese): Those against please say "no".

(Members responded)

Mr Ronald ARCULLI rose to claim a division.

PRESIDENT (in Cantonese): Council will now proceed to a division. The division bell will ring for three minutes.

PRESIDENT (in Cantonese): Members, the question now put is: That the motion moved by Mr Ronald ARCULLI as set out on the Agenda be approved. Will Members please proceed to vote.

PRESIDENT (in Cantonese): Are there any queries? If not, the result will now be displayed.

Mr WONG Siu-yee, Mr David CHU, Mr HO Sai-chu, Mr Edward HO, Prof NG Ching-fai, Mr Eric LI, Mrs Selina CHOW, Mrs Peggy LAM, Mr Henry WU, Mr Ronald ARCULLI, Mr MA Fung-kwok, Dr TSO WONG Man-yin, Dr LEONG Che-hung, Mr Kennedy WONG, Mr Howard YOUNG, Dr Charles YEUNG, Mr CHIM Pui-chung, Mr LAU Kong-wah, Mrs Miriam LAU, Mr Ambrose LAU, Mr CHOY Kan-pui, Dr TANG Siu-tong, Mr KAN Fook-yee, Mr LO Suk-ching and Miss CHOY So-yuk voted for the motion.

Mr LEE Kai-ming, Mrs Elsie TU, Mr CHAN Choi-hi, Miss CHAN Yuen-han, Mr CHAN Wing-chan, Mr CHAN Kam-lam, Mr TSANG Yok-sing, Mr CHENG Kai-nam, Mr YEUNG Yiu-chung, Mr IP Kwok-him, Mr NGAN Kam-chuen and Mr TAM Yiu-chung voted against the motion.

Dr Raymond HO, Mr NG Leung-sing, Mrs Sophie LEUNG and Dr LAW Cheung-kwok abstained.

THE PRESIDENT announced that there were 25 Members in favour of the amendment, 12 against and four abstaining. She therefore declared that the motion was carried.

Review of Education

PRESIDENT (in Cantonese): Third motion: Review of education. Mr David CHU.

MR DAVID CHU: Madam President, I move the motion as set out under my name in the Order Paper. Madam President, a consensus is emerging that Hong Kong education has to be updated and rejuvenated to suit these challenging times. For a while, I have been among many pondering this very question. I think most of us agree that education reform should be the enterprise of the whole community rather than the solo brief of any able individual with an executive mandate or that of the Education Commission alone.

When the Hong Kong Special Administrative Region (SAR) was conceived three weeks ago, the Chief Executive implored us to invest in the future with pride, hope and confidence. To me, there is only one way of going about this which is the revamping of our education to ensure that our youths are not only ready for the future but could also take charge of that future.

The British had been masters of using education to indoctrinate and then manipulate their overseas subjects. So effective were their methods of thought control that they boasted how the Americans with half a million troops in Vietnam could not manage that relatively small country whereas they never had to deploy more than 50 000 soldiers to dominate a place as vast and disparate as India. The colonial education was, therefore, by definition shaped not to benefit our people but to serve the United Kingdom, to turn us into clerks but never the masters of our destiny. I am not the first to say we have done remarkably well, not because of, but in spite of, our colonial upbringing. Others who are more extreme even claim that colonial education was another form of opium that dulled our sense of self-esteem and doped us with ignorance about our heritage.

If we are to reform our education, where do we start and from whom can we take inspiration? Some may say, "copy the West". But even in the West, the United States and Britain especially, educators are examining their systems, wondering where they have gone wrong with lowering academic scores, common classroom violence, and declining discipline.

We are an Asian society with a creed which has withstood the tests of time and of colonial domination. We note the startling advancements of students in mainland China, Taiwan, Korea, Japan and Singapore whose scores easily outpace those of the West. For sure we can learn a lot from those Confucian communities. But then we should also note their weaknesses of conformity, lack of initiative and imagination. What we are left with is blending the best from the East and the West to produce a hybrid which is right for us. Hong Kong, poised at the confluence of cultural currents, is perfectly placed to synthesiz these different influences. This is what we must do as we, step by step, redesign an SAR education which will put us ahead and keep us ahead.

Education is about sharpening our competitive edge. This competition is about individual students vying for top scores and about the race for supremacy among societies. During the colonial years we accepted mediocrity and took quantity over excellence and quality. Let us face the truth that education is elitist and selective. For those weeded out because they lack academic talent, they can count on the finest vocational training which has merits in its own right.

Education is about raising our self-esteem. Besides feeding our youths with the knowledge they seek from all over the world, it should instil in them dignity, morality, affinity for their Chinese culture and patriotism. We see all over the world countries infusing their youngsters with understanding and love of their communities. When ours was a colony, it was subversive for teachers to train their students to be leaders lest this make colonial rule indefensible. I am sure the Honourable Mrs Elsie TU will reflect on her 45 years as an educator in Hong Kong in her speech. I am also sure the Honourable TSANG Yok-sing will tell of his hard times operating a school which went against the colonial convention.

Education is about developing the individual. As such, we have a sacred obligation to educate our youths to the best of their potentials so that some day they will contribute to the renaissance of our nation.

Three weeks ago, President JIANG Zemin referred to our return to China as a cleaning agent that removed the people's shame which originated with the Opium War. With respect to the President, I suggest that the act of national redemption did not end but had only begun with the Chinese recovery of sovereignty over Hong Kong. The rest is up to us. Because we have the courage, conviction and confidence to fulfil the task, we can be sure that our superbly educated and motivated children and their children will continue what we have started. With those words, Madam President, I urge the Government to commit its reserve and resources to the enterprise. With those words also, I beg to move this motion under my name. Thank you, Madam President.

Mr David CHU moved the following motion:

"That this Council asks the Hong Kong Special Administrative Region Government to conduct a comprehensive, non-partisan and non-elitist review of education in the new era, with the aims of addressing the educational problems left behind by the colonial legacy and of attaining the goal of helping our youths achieve excellence in the 21st century."

PRESIDENT (in Cantonese): I now propose the question to you and that is: That this Council asks the Hong Kong Special Administrative Region Government to conduct a comprehensive, non-partisan and non-elitist review of education in the new era, with the aims of addressing the educational problems left behind by the colonial legacy and of attaining the goal of helping our youths achieve excellence in the 21st century.

PRESIDENT (in Cantonese): Mr CHAN Choi-hi has given notice to move an amendment to this motion. Prof NG Ching-fai has also given notice to move an amendment to Mr CHAN Choi-hi's proposed amendment. The amendments have been printed on the Agenda and Members have been advised by circulars issued on 19 and 22 July. I propose that the motion, the amendment, and the amendment to the amendment be debated together in a joint debate.

Council shall proceed to a joint debate. I will first call upon Mr CHAN to speak and to move his amendment to the motion, and will then call upon Prof NG to speak and to move his amendment to Mr CHAN's proposed amendment. After Members have debated the main motion as well as the amendments, I will first put to vote Prof NG's proposed amendment to Mr CHAN's amendment. I now call upon Mr CHAN to speak and to move his amendment. Mr CHAN Choi-hi.

MR CHAN CHOI-HI (in Cantonese): Madam President, I move that the Honourable David CHU's motion be amended as set out on the Agenda.

It is an indisputable fact that education in Hong Kong is beset with problems. However, until now, the Government has failed to conduct a comprehensive review of education in order to solve the problems. In recent years, the Education Commission (EC) has merely reviewed individual educational problems, such as the medium of instruction, quality school and target-oriented curriculum. But it has failed to get to the roots of the problems and conduct a comprehensive and overall review of the education system in Hong Kong.

The education system in Hong Kong is severely criticized for its overemphasis on examinations, its mode of learning based on the curriculum, its overemphasis on memorization, and its lack of active training and development in the realms of ethics, intellect, physical well-being, social skills and aesthetics. The entire mode of teaching fails to put the individual at the centre. Under this education system, students cannot develop their full potential and the school curriculum lacks diversified development.

Although the EC has reviewed the question of how to improve the quality of school education (proposed in the Education Commission Report No. 7) and explored the issue of how curriculum can become target-oriented instead of examination-oriented (described and discussed in the Education Commission Report No. 4), these reforms have met great resistance and difficulties. Thus the core of the problem is how we can best reform the whole education system to make education mean real education rather than merely attending school. We have to review how we can attain the so-called all-around education and how it can be co-ordinated in areas such as the school curriculum and so on in order to carry out effective reforms to help the younger generation attain all-round training and development in the realms of ethics, intellect, physical well-being, social skills and aesthetics, and to strengthen their national sense and civic responsibilities.

It should be pointed out that we paid too much attention to the representations of the problem in the past and neglected that it was just the tip of the iceberg. I think there is a more fundamental problem behind it. For instance, at present, many people criticize that the standard of university students has dropped. However, I have a feeling that what people see is merely the surface of the problem. The underlying problem is that the Government has kept on increasing the number of university places since 1989. However, since the Government has estimated the demand wrongly and paced up the increase too rapidly, giving rise to problems in co-ordination, resulting in the stress on quantity rather than quality. Of course, it is a good thing that more people can enter university. However, we should not just blame the university students alone for the dropped standard. The Government should also be criticized for the failure of its education policy. While the universities have provided courses such as "language courses" and "general education" as urgent and stop-gap measures, primary and secondary school teaching has remained unchanged. There is even nothing worth mentioning in regard to basic education.

I would like to raise a question and I hope that the Secretary for Education and Manpower can give me an answer later, that is why the implementation of whole-day primary schooling which has been talked about for over a decade is still progressing at a snail's pace? Is it because the Government does not want to implement it at all? Has it failed to put the policy into practice? Why? Or is there a lack of resources? The education policy is implemented by the bureaucracy and driven by administrative considerations rather than being oriented towards education targets. This is a question that merits deliberation by Members.

It is speculated that the Honourable Anthony LEUNG of the Executive Council has considered extending the powers of the EC to enhance the co-ordination and implementation of education policies, in a mode similar to that of the Housing Authority. I wonder if this is true but I hope that the Secretary for Education and Manpower will later give us some clues.

Another area that needs to be reviewed is pre-primary education. At present, pre-primary education does not receive full government subsidies. As we all know, over 90% children in Hong Kong aged between three to six attend nurseries or kindergartens. According to the professional opinions of many psychologists and educators, three to six years of age is a crucial period for the personality formation of children. Since the percentage of school age children attending kindergarten is so high, why does the Government not consider early childhood education as formal education? As we all know, kindergarten teachers have low pay and inadequate training ─ a long standing subject of criticism. However, the Government has so far been unable to come up with any solutions. If pre-primary education is not included in the review on or discussion of education, it would mean that we are neglecting the upbringing of children. Only by enhancing the training of kindergarten teachers, increasing their pay and remuneration can we attract more outstanding and talented people to participate in the work of educating the future masters of our society.

Some say that society is shaped by the kind of education we offer. Education is the source of social reform. In the past, Hong Kong had always avoided allowing people to have a sense of nation. However, Hong Kong is now reunited with China and Hong Kong students should no longer be unfamiliar with their nation as they used to be. If we would like Hong Kong people to be "patriotic", we have to let them learn about Chinese history, culture and politics first. However, at the same time when students get to know more about China, they must not be given the good news only and be ignorant of the bad. We have to give students an objective and comprehensive account of the situation in China today.

Recently, the Chief Executive, Mr TUNG Chee-hwa, attended a lecture. If I remember it correctly, there were three famous phrases in his speech. He said that Hong Kong students should learn to "cater for Hong Kong's needs, care about the motherland and adopt an international outlook". I find these slogans very appealing. However, how many resources do we have to put in if this is to be realized?

With these remarks, I move to amend Mr David CHU's motion.

MR CHAN CHOI-HI moved the following amendment:

"To delete "asks" and substitute with "requests"; to delete ", non-partisan and non-elitist" and substitute with "and extensive"; and to delete "in the new era, with the aims of addressing the educational problems left behind by the colonial legacy and of attaining the goal of helping our youths achieve excellence in the 21st Century" and substitute with "to help local students attain all-round training and development covering ethics, intellect, physical well-being, social skills and aesthetics, and to strengthen their sense of civic responsibility, nationalism and knowledge of the Basic Law"."

PRESIDENT (in Cantonese): I now propose the question to you and that is: That the amendment moved by Mr CHAN Choi-hi be made to Mr David CHU's motion.

I now call upon Prof NG Ching-fai to speak and to move his amendment to Mr CHAN Choi-hi's amendment. Prof NG Ching-fai.

PROF NG CHING-FAI (in Cantonese): Madam President, I move that the Honourable CHAN Choi-hi's amendment be amended as set out on the Agenda.

Madam President, at midnight on 1 July 1997, in the moving inaugural speech at the Ceremony to Celebrate the Establishment of the Hong Kong Special Administrative Region (SAR), the Chief Executive, Mr TUNG Chee-hwa, said that "Our vision of Hong Kong is ... a renowned international financial, trading, transportation and communication centre" as well as "a world class cultural, education and scientific research centre."

To attain these lofty goals, we must continue to improve the quality of Hong Kong people, that is, we must have quality education. Thus I very much agree to another sentence in Mr TUNG's speech, that is, "Education is the key to the future of Hong Kong". I am also very glad that this Council places emphasis on education and I thank Mr David CHU for moving today's motion.

What are the elements that constitute quality education? I simply understand them as: first, the right education policy; second, an efficient and effective administrative framework; third, quality and dedicated teachers and an environment that affords teachers professional satisfaction; fourth, a good academic system; and fifth, appropriate resources.

Truly as many people have pointed out, education in Hong Kong is beset with problems. Only through a comprehensive review and wide consultations can a suitable plan of reform be formulated and implemented step by step.

I will only comment on the following aspects which I hope will be considered in the comprehensive review.

Firstly, on the question of basic education. Primary and secondary education is extremely important for it lays the foundation for the youth to meet the minimum requirements for employment or further studies. For many years, due attention has not been given to basic education in Hong Kong. Thus the first priority now is to enhance the quality of primary and secondary education. Raising the quality of teachers and setting the academic standards to be attained by students at each stage are also keys to the effort. The concrete measures should be to implement whole-day schooling for primary and secondary education in the near future, to make all secondary for school and some primary school teachers graduates, to reduce the heavy work load of Hong Kong teachers so that they have time to acquire new knowledge and provide counselling to and solve problems for students, as well as to increase the opportunities for further studies for teachers.

Secondly, I think the interface between the various kinds of education should also be reviewed. At present, university, secondary, primary and pre-primary education and professional training are independent of each other and lack an overall link. To deal with the lack of interface between university and basic education, I suggest that the universities can offer various courses to primary and secondary school teachers, while university, primary and secondary school teachers can co-operate in writing and compiling textbooks for primary and secondary schools as well as working out their curriculum. At the same time, university teachers can increase their research on basic education in Hong Kong in order to support quality primary and secondary school teaching. Another extremely important issue related to interface is the question of the academic system which has aroused widespread concern, that is, the switch from three years of university and seven years of secondary school education to four years of university and six years of secondary school. From the viewpoint of training quality people, or according to most people from the education sector, four years of university and six years of secondary school education are more desirable ─ since Form 7 is after all not equivalent to the first year at university.

In his inaugural speech, Mr TUNG Chee-hwa undertook to further review the academic system and study the interface between the various stages and the length of studies, in order to ensure that the education system meets the long-term needs of Hong Kong. This is extremely encouraging to those from the education sector. However, according to a recent newspaper report, Mr Anthony LEUNG hinted that the change of the academic system would not be possible until 2007 at the earliest and that it is not yet certain whether it will be implemented at all after the review. If this report is accurate, many people from the education sector would feel puzzled, depressed and disappointed, for how could the earliest date of implementation be specified when the time for a review has not yet been decided. The change of the academic system is certainly a significant issue which should not be dealt with rashly. However, it must come under the scope of an overall review of education. Whether, when and how it should be implemented should naturally be part of the results of the overall review. In fact, if the overall review can begin next year, I do not see why the change of the academic system cannot be realized within three-year period from 2001 to 2004.

Madam President, in order to adopt the said series of improvement measures, the community needs to inject more resources into education. In my view, it is reasonable to increase the funding for education from 2.8% to 4% of the Gross Domestic Product. This proportion is by no means high in developed countries. I would like to mention in passing the report that the University Grants Committee's report on higher education at the end of last year recommended that the expenditure on higher education be cut by 10% in the years 1998 to 2001, supposedly to increase the cost effectiveness and improve the quality of education. I cannot agree to this. This recommendation has already caused a great deal of worry and concern among the leadership and frontline workers of universities. The higher education sector has struggled for 10 years to accomplish the task set by the Government of increasing the number of places. The hard work of the majority of members of the higher education sector during the last few years to raise the level of their teaching and research has brought about the lively scene today. If funding is cut next year, what message would Honourable colleagues get? Does this mean that the SAR Government is trying to cut back on higher education? Since everyone is talking about the "overflowing" coffers this evening, cutting back this way would certainly dampen morale. In fact, as an emergency measure, some universities have employed quite a number of professors on one-year contracts. How could these short-term professors concentrate on teaching and research and how could they have a sense of belonging? Relatively speaking, how could these short-term contracts attract outstanding talented people? In a recent international forum, the Chief Executive declared that Hong Kong universities need to recruit more excellent scholars with wisdom and intelligence. If funding is cut, this goal can certainly not be reached and the level of higher education cannot be raised further.

Lastly, I would like to very briefly explain why I have proposed the amendment. In my view, quality education would produce highly qualified people to take up the task of attaining the lofty goals which the Chief Executive and we have envisioned for Hong Kong in the 21st Century. Highly qualified people must be outstanding in all the five realms of education. They must have a strong sense of civic responsibility and identification with the Chinese nation. This has already covered knowledge of the Basic Law. As highly qualified people in the SAR, they also need to have a broad international vision.

On the basis of the above reasons, I move my amendment. With these remarks, I hope that Honourable colleagues will support my amendment. Thank you.

Prof NG Ching-fai moved the following motion:

"To add "in the territory" after "review of education"; to delete "help" and substitute with "enable"; to add "to" after "local students"; to delete "all-round training and development" and substitute with "an overall improvement in the areas"; to delete "social skills" and substitute with "team spirit"; to delete "and" before "to strengthen"; to delete "," of "responsibility," and substitute with "and"; and to delete "and knowledge of the Basic Law" and substitute with ", and to broaden their international vision so as to enhance the quality and competitiveness of our students in resonance with the needs of Hong Kong's development in the 21st century"."

PRESIDENT (in Cantonese): I now propose the question to you and that is: That the amendment moved by Prof NG Ching-fai be made to Mr CHAN Choi-hi's amendment.

Council shall now have a joint debate. Does any Member wish to speak? Mrs Selina CHOW.

MRS SELINA CHOW (in Cantonese): Madam President, the Liberal Party has always held the view that education is a social service that any society with aspiration and vision should be happy to invest in it. Since the scope of education is very broad, I will only make suggestions in respect of the following points.

First of all, I would like to talk about the role and training of a very important figure in the education system, that is, the school principal. At present, there are over 600 primary school and over 400 secondary school principals in Hong Kong. These leaders of over 1 000 schools exert a decisive influence on the development and progress of education.

Since 1994, the Education Department has been providing training to those people assuming the posts of primary and secondary school principals. The training covers three main types of courses, including basic management concepts, administrative skills, professional knowledge and common legal knowledge. In view of the ever-developing social situation and demands, I find this training inadequate.

Of course, the main responsibilities of the principal are related to management. There is nothing wrong with making it the core of the training. However, I believe we all agree that management training does not necessarily make the principal a leader. But if the principal can be a spiritual leader, he will have great influence on the whole school. Therefore, I suggest that when the Government conducts the education review, it should consider how to enhance the training of school principals in this respect.

In fact, as presently operated, the relevant training is only provided to those who will be taking up the post of school principal, while incumbent school principals can only attend some talks. I suggest that the Government should seriously consider providing incumbent school principals with regular and longer durations of training, so that they can learn new leadership and management skills and further improve their ability to be spiritual leaders of their schools.

Madam President, a few months ago, I proposed a motion debate at the Legislative Council on the subject of mother tongue teaching and keeping up English standards. My motion received affirmative support. I do not wish to repeat the points here. However, I believe that its importance deserves our approval and support.

On the question of innovative methods of teaching, I believe that they should be the trend in the long run. At present, schools at different levels in Hong Kong have adopted the activity approach, which clearly helps to enhance the learning speed and comprehensive power of students. Compared to the notorious "spoon-fed" education years ago, the lively activity approach is generally more welcomed and accepted by students and it has achieved positive results. Actually, we find that schools in Singapore and even in the Mainland have adopted more innovative teaching approaches with satisfactory results.

I believe that when the Government conducts the education review, it should consider how to develop teaching methods so that the new generation of students in Hong Kong can keep up with the rapid changes in the new era. We have all seen the innovations shown by the younger generation in Hong Kong in daily life. If these ideas are incorporated into education, I believe that the learning ability and standards of Hong Kong students will by no means be inferior to students in other places.

"Spoon-fed" education naturally reminds us of the examination system. A major flaw of the local examination system is that the future of candidates is decided within a few hours on the basis of their examination skills, such as whether they can guess the questions, are quick-witted or not and whether they can speedily fill in the answers. Some children who are not skilled at coping with the pressure of examination would be unable to give full play to their special skills and knowledge. I believe it is necessary to improve our examination system. I suggest that grades obtained at school should also be assessed to give us a true picture of the standards of individual students. In this respect, I believe we can refer to the successful examples of other countries.

Lastly, I would like to talk about the status of the teaching profession. Some people pointed out that the teaching profession is not respected since the pay of educators is not high enough. I think it is inaccurate. Actually, the entry point of Certificated and Graduate Masters is $18,000 and $20,000 respectively. Compared to people with other qualifications, this entry point is not bad at all. I believe one of the main reasons why the teaching profession is not respected is that the community has become very materialistic. Many people would not take up courses on education or regard teaching as their first choice when they begin their career. Some people might even consider it as the last choice. Many people do not think that educators deserve respect anymore. Rather, they admire the professions which allow people to make "quick money". In order to make people respect the professional status of teachers and in order to bring up our younger generation as more outstanding people, the Government must give the education profession full support.

Madam President, now I would like to talk about the Liberal Party's views on the two amendments. While the original motion has its merits, but comparing it with Prof NG Ching-fai's amendment, the latter is undeniably more comprehensive and positive, for we should not always look back at the negative comments on colonial education and we do not think that colonial education is devoid of merits. Therefore, we think we can support Prof NG's amendment.

On the other hand, we find that Mr CHAN Choi-hi's amendment lacks clear goals, in particular international vision. Thus we will not support that amendment. If Prof NG's amendment is negatived, we will support Mr David CHU's original motion.

Thank you, Madam President.

THE PRESIDENT'S DEPUTY, DR LEONG CHE-HUNG, took the Chair.

DEPUTY PRESIDENT (in Cantonese): Mr YEUNG Yiu-chung.

MR YEUNG YIU-CHUNG (in Cantonese): Mr Deputy, as we all know, education is a very important issue of concern to people. Education accounts for the greatest share of annual government expenditure. In the 1997-98 Budget, the overall expenditure on education is $45.3 billion, accounting for 18.2% of the overall public expenditure, far exceeding that on policy categories such as housing, health, social welfare and infrastructure.

As some people say, Hong Kong has neither gold, nor silver, nor oil, nor any natural resources. Hong Kong's prosperity is founded wholly on talent, the products of education.

From 1 July, Hong Kong entered a new era and Hong Kong's education also faces new opportunities and challenges. Certain things reminiscent of the colonial era must be eliminated, while education in patriotism must be strengthened. The phenomenon of putting emphasis on English at the expense of Chinese must be removed. The three-year university system has to be changed. The SAR Government must also deal with other problems left behind by the British Hong Kong Government, such as whole-day primary schooling, floating classes in secondary schools, employing graduate teachers for primary schools, education for new immigrant children, language proficiency, quality of education and civic education. However, the problems of education involve so many facets and are so complex that one hardly knows where to begin.

It is no doubt a good thing that everyone is concerned about and talks about education. However, education is a very complicated and professional issue which defies sensibly discussion by common people. Even people in the profession frequently have widely divergent views about the problems of education and their solutions.

With regard to Hong Kong's education, one can only go about it practically and introduce bold reforms in order to find a path leading to success. In order to improve education, we must first define the term "jiao yu" (education). As defined in Shuo Wen Jie Zi, "jiao" means "the superiors teach something that is to be followed by the inferiors" and "yu" means "bringing up someone so that he will perform good deeds". As I understand it, education means teaching and upbringing people. Teaching is the means and upbringing people the end. All along, the education system in Hong Kong has stressed teaching at the expense of upbringing. Without specific goals of education, it produces pragmatic "economic animals" instead of people with all-round development in ethics, intellect, physical well-being, social skills and aesthetics.

The Democratic Alliance for Betterment of Hong Kong (DAB) also sees a lot of problems in the process of teaching. If teachers teach well and students are willing to learn and learn well, the quality of education will naturally be improved. From this, it is clear that the professionalism and quality of teachers are very important. If teachers merely regard their job as a job and not as a career, they will lack devotion and it will be impossible for them to teach well. As the saying goes, "an accomplished disciple owes his accomplishment to his great teacher". Only quality teachers can produce quality students.

The students' unwillingness to learn can be attributed to learning motives as well as the contents and methods of teaching. Some textbooks are boring and detached from real life. Even we would find them uninteresting and dry, not to mention the students.

Therefore, in order to improve the quality of teaching, the DAB considers it necessary to start with both teaching and learning.

The future of Hong Kong's education lies in reforms and one must find the right remedy to the problem for the reforms to work. In choosing the reform strategies, the education sector must arrive at a consensus. Otherwise, each person will diagnose a different problem and prescribe a different remedy. With hundreds of prescriptions, how could one find a cure and save people?

Education reforms must grasp the core of the problem. Whole-day primary schooling, floating classes in secondary schools, graduate teachers for primary schools, teacher training and increasing funding are only some aspects of the problem. The key to reform is to promote teachers' initiative and upgrade the professional standards of teachers. Teachers' initiative is undermined by the various kinds of unreasonable systems. Therefore, the fundamental problem for an education reform is the problem with the system itself. Without a reform of the system, even the best teachers would lose their will to fight. Without a reform of the system, no matter how much resource is put in, it would have little effect. The previous short-sighted approach of applying stop-gap and piecemeal solutions must be discarded.

We need well-defined goals and policies of education; we need to co-ordinate the management system, language policy, structure of the academic system, school management, curriculum development, quality of textbooks, teaching to methods, quality of teachers and examination system; and we need to formulate comprehensive and long-term development plans for education in the SAR. Then, based on the priority of the items to be reformed, we need to increase expenditure on areas where required and increase the amounts of expenditures as required, so that resources will be put to better use, rather than securing the funding before deciding on the items.

Social development is based on education. It takes 10 years to grow trees but a hundred years to nurture a man. As the Chief Executive, Mr TUNG Chee-hwa, has said, "Education is the key to the future of Hong Kong". In order to solve the problems with the future development of Hong Kong, the education problem in Hong Kong must first be solved. I look forward to the Chief Executive proposing a whole series of comprehensive and long-term plans of education reform in his policy address in October and I hope that Mr Antony LEUNG of the Executive Council can publish the report on education for which he is responsible as soon as possible. I hope he will inform the public of the outcome of the review and conduct extensive consultations on the same.

Mr David CHU's original motion and the amendments of Mr CHAN Choi-hi and Prof NG Ching-fai have different emphases, and the DAB find that all of them can be supported .

I so submit. Thank you, Mr Deputy.

DEPUTY PRESIDENT (in Cantonese): Mrs Peggy LAM.

MRS PEGGY LAM (in Cantonese): Mr Deputy, for the past 20 years, the education in Hong Kong has developed considerably. The introduction of nine years of compulsory and free education in 1979 as well as the rapid increase in university places during the early '90s have had the most far-reaching effects. However, these reforms seem to stress "quantity" rather than "quality". They have achieved "technical targets" rather than realized "education ideals".

The Hong Kong Government's education policy stressing quantity rather than quality in the past has resulted in numerous problems. Many secondary school graduates and university graduates have poor language skills, lack their own values and are indifferent to social affairs. I am not trying to say that the young people nowadays are worthless, but I say this only to point out that the education system has not done enough for the development of our young people.

Since the Chief Executive, Mr TUNG Chee-hwa, has assumed office, he has shown great concern for education, and I appreciate it very much. I earnestly hope that the SAR Government can pluck up the courage to face the failure of our education system squarely and resolve to carry out a thorough reform.

In my view, the two urgent tasks of improving the education system are determining the goals of education and enhancing basic education. An education system without ideals or goals does not count as education at all. Basic education is the foundation of society and the parent body of the whole education system. However, basic education in Hong Kong is too badly run. Therefore, the first step in improving education should be enhancing basic education.

Collective education is a form of social education. It reflects the values of society and must meet the needs of social development. The aim of education is not merely to facilitate students' acquisition of knowledge on subjects such as Chinese, English, Mathematics, Science and Social Studies. What do students need to learn? How should they learn? What kinds of persons would they become after finishing school? This is the crux of the problem.

Actually, the colonial government was not unaware of the problem of educational goals. In the booklet "School Education in Hong Kong: A Statement of Aims" published in 1993, the Secretary for Education and Manpower already stated the fundamental aim of education: "The school education service should develop the potential of every individual child, so that our students become independent-minded and socially-aware adults, equipped with the knowledge, skills and attitudes which help them to lead a full life as individuals and play a positive role in the life of the community."

However, in reality, education ideals are nothing but officialese of the Government and are never actually realized. When has the mode of education with examination as its mainstay and memorization as its rule emphasized the development of independent thinking of students? With the learning time filled up by an examination-oriented curriculum, subjects such as civic, sex, moral and even physical education have become "minor" subjects. How could one even talk about teaching students to deal with matters with a mature attitude and to care about the community?

I firmly believe that Hong Kong society has sufficient resources to provide quality education to all children, including those particularly gifted, the average majority and those with weaker learning abilities. Also, whole-day primary schooling should be implemented so that pupils have more opportunities to learn more with more active approaches adopted by schools. The ratio of teacher to pupils should be reduced to 1:20, so that teachers will have more time to get in touch with each pupil and devise more active teaching methods.

So while it is important to upgrade the quality of teachers, if they have to pursue further studies all the time, their teaching workload will have to be adjusted. Most important of all, unnecessary elimination examinations should be abolished so that students, teachers and parents can properly spend their time and energy on "learning" itself, in order to meet the challenges of this age of "information explosion", rather than just knowing how to tackle "spoon-fed" examination questions.

Whether from the point of developing people's morality and intelligence, or that of increasing our international competitiveness, Hong Kong has to build up "universal" and "quality" education. We have only achieved the former but fall far short of achieving "quality". In order to achieve quality education, the Government must put more resources in education. Equally important is the participation of educators and members of the public in monitoring the work of the Government in order to put the education system on the right track.

Mr Deputy, I so submit.

DEPUTY PRESIDENT (in Cantonese): Mrs Elsie TU.

MRS ELSIE TU: Mr Deputy, the Honourable David CHU's motion and Professor the Honourable NG Ching-fai's amendments are both acceptable, being very similar, but the Honourable CHAN Choi-hi's amendment seems to be unnecessary. I think there is no need for Members to cannibalise the motions of others.

Some of us worked very hard throughout the 1960s to win universal free primary education in the early 1970s and free secondary education in 1978. It was intended that universal free education would save young people from child labour and from crime. Unfortunately things did not turn out that way. One reason for that was that little consideration was given to what kind of education was needed for the average or below average children. Nor was the training and quality of teachers sufficiently upgraded. Problems soon began to surface as the school leavers of Forms three and five found that the need for blue and white collar workers was reduced because factories closed down or moved over the border into China and education was taking them nowhere. Children who can make the higher grades in school now have little hope for the future. The other ones who lose interest in school begin to cause trouble, get involved in vice, join gangs and sometimes ruin their lives. Clearly the whole system needs revamping from nursery and kindergarten to primary and secondary school. Many improvements have been made and I do commend the Education Department for its efforts in the form of equipment but these efforts have been piecemeal and have not covered the fundamental problem of what kind of education is suitable for different types of students, how we can bring out the best in each type of child and also what kind of education will serve the community. The syllabus has scarcely changed with the times and most children are shaped on the same moulds.

Mr CHU's motion and Professor NG's amendment set the ideas that we should aim at in this new era of our history. We need a new beginning to save this generation and future generations of Hong Kong children, many of whom have been polluted by all the worst of the West, of what the West has to offer. I commend the booklet on education written by Mr David Chu which I presume all Members have received. That booklet points the way forward in education and I would not like to spend time repeating what he said nor would I like to repeat what other speakers have said.

Mr Deputy, I support both Mr CHU's motion and Prof NG's amendment to Mr CHAN's amendment. Thank you.

DEPUTY PRESIDENT (in Cantonese): Dr TANG Siu-tong.

DR TANG SIU-TONG (in Cantonese): Mr Deputy, human resources are the key to Hong Kong's development. It was so before and it will continue to be so in the future. Education is the cradle for the cultivation of human resources. A strong and developed country must be one that places emphasis on education. A government which runs education well must be a government that cares about the well-being of the next generation. The Hong Kong Progressive Alliance (HKPA) considers that Mr David CHU's moving of a motion at the Provisional Legislative Council urging the Government to conduct a comprehensive review of education is sensible.

The HKPA thinks that in order to run education well, one must first identify the roots of the problem. With the right remedy, we are going to yield twice the result with half the effort. If we have ideals only and shoot without aim, our efforts may be wasted or we may even yield the opposite results. At the end, our losses may outweigh our gains. This is why the HKPA cannot support the amendments by Mr CHAN Choi-hi and Prof NG Ching-fai.

Basically, their amendments have deviated from the original intention of Mr David CHU's motion. What Mr David CHU stresses is that we have to work together to identify the roots of the present educational problems in Hong Kong and its connection with colonial rule, in order to find the right remedies. In contrast, the amendments sound like empty slogans and they merely set out some empty goals and ideals without pragmatically calling upon people to look squarely at the flaws of colonial education.

We know that the ultimate goal of education is to train students in the realms of ethics, intellect, physical well-being, social skills and aesthetics. We also know the importance of the Basic Law and nationalism to the Chinese nationals in Hong Kong. However, these goals face certain obstacles in a particular historical time and space and they cannot be attained just by shouting empty slogans. I am afraid that just having lofty aims and making no preparation to identify and face the problems left behind by 150 years of colonial education would be impractical and it would hardly improve the quality of education in Hong Kong.

From a macroscopic perspective, the HKPA has identified four main problems left behind by colonial education.

1. Education has become more specialized with increasingly fine division, so that students' knowledge and vision have become more focussed, but narrower at the same time. With market-oriented education, students tend to choose subjects with better prospects after graduation and they are behaving in a materialistic way.

2. The formal education system which has always been examination-oriented is seriously threatened by different kinds of tutorial centres outside schools. More and more students measure learning only in terms of the examination skills imparted, and neglect the real meaning of education.

3. A general decline in the standards of Chinese and English of students at different levels has resulted in problems of interface between primary, secondary and tertiary education. Students also face more and more difficulties in the absorption of knowledge and in the training of analytical thinking.

4. Colonial education has always placed little emphasis on imparting knowledge of Chinese history and culture, so that the majority of Hong Kong students have no in-depth understanding of the fundamental ideology of Chinese culture and the political, economic and administrative systems in China. As a result, they have little sense of their own identity as Chinese nationals and little sense of belonging to Hong Kong and their nation.

The above four points might be the tip of the iceberg of the educational problems in Hong Kong. The HKPA would like to stress that focusing on the educational problems left behind by the colonial legacy in Hong Kong does not mean attacking or completely negating the British mode of education. British education has many advantages which we should preserve. However, as a unique city in a completely new historical situation, Hong Kong needs to develop a suitable education mode. To review the educational problems left behind by the colonial legacy is indeed an urgent task. The Government should conduct a comprehensive review and collect views from all quarters in order to establish the aims of education and allocate resources to help young people get outstanding achievements. This is very important to Hong Kong.

With these remarks, Mr Deputy, I support the original motion.

DEPUTY PRESIDENT (in Cantonese): Dr Charles YEUNG.

DR CHARLES YEUNG(in Cantonese): Mr Deputy, with the end of colonial rule, it has become imperative for us to reform the education system which has long been criticized by different sectors of the Hong Kong community. When the Chief Executive of the SAR, Mr TUNG Chee-hwa, outlined the blueprint for education in Hong Kong in his address at the Ceremony to Celebrate the Establishment of the SAR, he said that "Education is the key to the future of Hong Kong" and that the Government should provide "a level playing field for all, and the human resources required for further economic development". Mr TUNG further emphasized that the thrust of the education policy is to build a quality basic education.

I heartily agree with these remarks by the Chief Executive, Mr TUNG Chee-hwa. Actually, Hong Kong has no resources of its own and one of its wealth is the diligence, intelligence and adaptability of Hong Kong people, without which there would be no development and no stability and prosperity in Hong Kong.

However, we must not neglect that Hong Kong's economic development did not begin until the '70s. At that time, advanced production equipment and modernized management were introduced. However, since the workers were not well-educated, there was a lack of highly skilled labour and management staff with modernized development skills. As a result, the development of high tech industries in Hong Kong met obstacles.

Under these circumstances, it is imperative for us to expand vocational training to train up people, strengthen basic education, increase research on high and new technology, improve the quality of the workforce and raise its productivity. The educational institutions in Hong Kong should therefore make good use of their resources to contribute to the economic development of Hong Kong.

Mr Deputy, in terms of the aims of education in Hong Kong, apart from increasing the knowledge of young people, civic education is in my opinion also very important. The dictionary Ci Hai defines civic education as follows: "Its aim is to acquaint students with the various conditions in the social environment so that they can learn about the relationship between the individual and the community from real life and develop their sense of duty and ability as citizens." In other words, a person does not only have to acquire knowledge in order to be able to deal with affairs, but also learn how to behave himself and be accountable to himself, his family and society. Only such people are healthy and only such a society is healthy. If our citizens regard going after fame and fortune as their only aim in life, and neglect their friends, families, health, responsibilities and ideals, would we regard such a society ideal? Our civic education must be directed towards inculcating in the youth a sense of belonging, responsibility and commitment to Hong Kong and China.

Mr Deputy, on this basis, if the SAR Government can set clear goals for education and carry out a series of education reforms, it will surely bring up a new generation for the SAR with national pride, international vision and all-round development in respect of ethics, intellect, physical well-being, social skills and aesthetics. It would take education in the SAR to new heights and ensure that Hong Kong will continue to be a vibrant, prosperous and internationally famous city under Chinese sovereignty, where industrialists and businessmen are eager to invest, talented people are glad to converge and people live in peace and contentment.

With these remarks, Mr Deputy, I support Mr David CHU's motion.

DEPUTY PRESIDENT (in Cantonese): Dr TSO WONG Man-yin.

DR TSO WONG MAN-YIN (in Cantonese): Mr Deputy, the SAR Government needs to conduct a comprehensive and overall review of education soon. We all think this is necessary. As the old saying goes: "It takes more than one cold day for the river to freeze three feet deep." We have to deal with the problems left behind by the colonial education system which had been implemented for over 150 years.

I very much agree with the proposals made by Prof NG Ching-fai just now. However, I have reservations about the deletion of the words "colonial education" from Mr David CHU's motion by Prof NG and Mr CHAN Choi-hi.

Some Honourable colleagues might find the term "colonial education" derogatory and avoid using these words. Therefore, they wanted to delete them from the motion. However, in my opinion, whether we call the education system under British rule elite education, western education, enslaving education or colonial education, the education policy in Hong Kong over the past 150 years did have certain problems. After Hong Kong's reunification with China, we indeed need a thorough and comprehensive review of these problems, and the focus of the review cannot be separated from the premise of colonial rule. Therefore, from a realistic point of view, we should not avoid the words "colonial education".

The problems left behind by colonial education are manifold. Members who have spoken earlier have raised important points from different angles. I would like to briefly talk about the problems left behind by language teaching in the past.

Earlier, the Honourable YEUNG Yiu-chung talked about the problem of the emphasis on English at the expense of Chinese. Over the years, the colonial government merely regarded English as a tool of governing. From a particular perspective, English was a necessary instrument in the quest for political power. The better your English, the higher your social status, and the more political rights you have. In keeping with this policy, although the British Hong Kong Government knew very well that mother tongue teaching was beneficial to children, it insisted on using English as the teaching medium so that the majority of children whose learning was impeded by the language barrier failed to realize their full learning potential. The political effect of English education was the production of a group of people proud of being proficient in English. Often, they regarded themselves as the elite in our society on the basis of this standard. This phenomenon was in fact quite terrible.

The ideal education is all-round education. Apart from intellectual ability, moral education is particularly important. We can hardly imagine the continued implementation of an education system emphasizing English superior Chinese in the SAR. The emphasis on English at the expense of Chinese will run counter to the promotion of national sense and concepts among Hong Kong people.

Politically, Hong Kong was separated from mainland China for over 150 years. During these 150-odd years, there were distinct differences between Hong Kong and mainland China in terms of their political, economic and social systems as well as habits and customs. If the two are to become one entity, the only way is to rely on our 5000 years old common culture.

During his campaign for the Chief Executive office and after he had been elected, Mr TUNG Chee-hwa repeatedly stressed the importance of Confucian thoughts and national education. We fervently hope that he will propose practical and feasible long-term policies and the specific implementation measures and steps in his first policy address.

The Chief Executive has already asked Mr Antony LEUNG to propose long-term strategies and make specific recommendations regarding the future of education in Hong Kong. This shows that the SAR Government puts priority on improving its education policy, which we welcome. Mr Antony LEUNG is an expert in administrative and management reforms. Undoubtedly, colonial education had a lot of problems in respect of administration and management which need to be regulated. However, I would like to stress that in reforming Hong Kong's education, emphasis should be placed on its contents and quality rather than administration and management. If we forget about national education and ignore the traditional Chinese virtues, only focussing on the pursuit of practicability and material gains, Hong Kong's education will continue to remain in the shadow of the colonial age, leading to a dead end and will hardly advance any further.

With these remarks, Mr Deputy, I support Mr David CHU's motion.

DEPUTY PRESIDENT (in Cantonese): Mr NG Leung-sing.

MR NG LEUNG-SING (in Cantonese): Mr Deputy, first of all, I agree to the original motion and amendments to different extents.

To judge whether an education system is good or not, we often evaluate the quality of students on the basis of whether they are competitive in the ever-changing international environment.

After over 150 years of colonial rule and under the circumstances of being more internationalized, and a more complicated language environment, Hong Kong has diversified teaching modes. Chinese, American and English schools have educated students with different features under different circumstances. In recent years, we all agree that these students have relatively poor language skills and more importantly, very little knowledge about their country and nation. For young people who will have to keep up with the development in the 21st century, this is a fatal weakness. Therefore, any review of the education system should centre on this core. At the same time, we have to attach importance to a few other aspects:

1. After the establishment of the SAR Government, the status of Chinese has been raised, so that it is now on an equal footing with English. Improving the language standards of students is an important prerequisite for Hong Kong to maintain and enhance its position as an international financial and business centre and to tie in with the economic development of the Mainland.

2. Providing sufficient resources in order to implement whole-day schooling for all primary and secondary schools as soon as possible will help students lay a solid foundation in their early stages of learning.

3. With regard to higher education, the Government should enhance the development of colleges of education and teacher training on one hand and raise the quality of teaching in tertiary institutions and change their academic systems from three-year into four-year systems on the other. It should also gradually increase the number of hostel places in universities and promote a campus culture with local characteristics, as well as helping students acquire an international vision and all-round development in respect of morality, intelligence, physical well-being, social skills and aesthetics to prepare them for serving the community.

With these remarks, Mr Deputy, I support Prof NG Ching-fai's amendment.

DEPUTY PRESIDENT (in Cantonese): Dr Raymond HO.

DR RAYMOND HO (in Cantonese): Mr Deputy, every developed country or region will inject sufficient resources to give students the best education when they grow up, so that they can acquire various kinds of basic knowledge to prepare them well for work, in the hope that they will become the masters and pillars of society in the future.

With the reunification with China, Hong Kong has changed from a colony to a Special Administrative Region. The change of sovereignty has lashed at our society to a certain extent, especially to the younger generation. They might need more time to adapt and more psychological and spiritual guidance.

Academically speaking, Hong Kong students might have achieved a fairly high standard. According to past records, Hong Kong students who had chances of studying abroad had achieved outstanding academic results. However, we need to pay more attention to the training and counselling in terms of the qualities of the individual, that is, in ethics, intellect, physical well-being, social skills and aesthetics. More importantly, we should create a proper academic atmosphere at school so that students can learn and grow up in an ideal environment. This way, they would not feel like "transit passengers" when they start to work in future.

On the other hand, we must keep on improving the quality of teachers. The teachers' devotion and dedication to their work are essential. The Government should give them more opportunities for further studies and more encouragement, so that they can realize the importance of being teachers and the very important social responsibilities they carry.

At present, the resources allocated to education by the Government account for over 18% of the Budget. This is by no means a small percentage. If it is increased further, we might need to cut other expenditures ─ an act which is not desirable or suitable. Therefore, we have to conduct a comprehensive review of the pros and cons of the present education policy and actively and decisively work out a mode of education suitable for the 21st century.

With these remarks, Mr Deputy, I support Prof NG Ching-fai's amendment.

Thank you.

DEPUTY PRESIDENT (in Cantonese): Does any other Member wish to speak? Mr TSANG Yok-sing.

MR TSANG YOK-SING (in Cantonese): Mr Deputy, many Honourable colleagues guessed it right that our meeting this evening would certainly not be adjourned early since we are having a debate on education.

I believe that education is a subject most people would like to talk about, but few would like to listen to. A former Director of Education once said that Hong Kong had over six million experts on education. However, since Mr David CHU has called upon me to denounce colonial education, I have to say a few words even after other Members have spoken.

I have worked for more than 20 years in the school I used to serve. In the past, I really felt that we had been unfairly treated. The reasons were, first, we talked too much about patriotism, or one might say that we talked about patriotism at the wrong time. Thus, for many years. we had not been subsidized by the Government. The applications by many of our teachers for registration were unreasonably turned down. After graduation, our students were also unreasonably biased against when they looked for a job. My school has been using Chinese as the teaching medium. I did not think that we were prejudiced by the Government because we were a Chinese school. However, we met great difficulties in respect of enrolment and attracting parents. Sometimes, the students we admitted had poor English standards but were good in other subjects. After they had studied at our school for one or two years, and when their English had improved, their parents would arrange for them to transfer to English schools. My school is also a private school which has always been treated unfairly by members of the public. Over the years, as a private school, it has striven to win the support of parents through its own efforts, by upgrading its quality, without any other factors. However, it seems that we have not been sufficiently recognized by the public. With the end of colonial rule and the reunification of Hong Kong with China, will these circumstances be changed?

In view of principles, it seems that we have no reason to object to offering students patriotic education at school. Mother tongue teaching is also a matter of course. We advocate that schools should introduce a competition mechanism, whereby schools make efforts to enhance its quality in order to attract parents and students. This seems to be the right approach in a society like Hong Kong. However, there still seems to be controversies about these issues. On the question of patriotic education, different quarters and educators hold different views, and many people still have reservations. Without adding my own comments, the policy of mother tongue teaching proposed by the Education Department has also provoked much arguments in the community. As for introducing a competition mechanism in schools, while many people talked about it and the idea seemed quite attractive, it was by no means successful when it was put into practice.

Are all the above problems left behind by colonial education, or, in Mr David CHU's words, by the colonial legacy? I dare not say that all of them are. Moreover, if we have to review education in Hong Kong now, as some Members pointed out earlier, we cannot only pinpoint at the existing shortcomings of the system or of education itself, or reject it completely, saying that it is beset with problems or devoid of merit. The present state of education is not solely the outcome of colonial rule but also the outcome of years of efforts made by many zealous and dedicated professional educators in Hong Kong. If we simply affix to it a label of colonialism or colonial rule, we would easily be throwing the baby out with the bathwater. We have to conduct a comprehensive review, not only to look at our problems and the areas that call for improvement, but also to look at our existing strengths and develop further on this basis.

Mr Deputy, I very much agree with Mr David CHU that we have to deal with the problems left behind by the colonial legacy. I also agree with Mr CHAN Choi-hi that our students should be allowed to develop in the realms of ethics, intellect, physical well-being, social skills and aesthetics, and have a sense of civic responsibility and nation. I agree with Prof NG Ching-fai that we should enhance the quality and competitiveness of students to cope with the development of Hong Kong in the 21st century. Frankly speaking, who could object to these proposals?

Thank you.

DEPUTY PRESIDENT (in Cantonese): Mr Eric LI.

MR ERIC LI (in Cantonese): Mr Deputy, Mr David CHU has put forward a very good topic for discussion today. In fact, if I just take a look at this topic, I would give his motion my whole-hearted support. However, perhaps some points raised by some Honourable Members during the debate which made me somehow worried. Hence I would like to respond and explain why I support Prof NG Ching-fai's amendment.

First, some Honouarble colleagues suggested that there seemed to be a colonial policy, or indeed colonial education policy. I hope that the Secretary for Education and Manpower will explain later whether there was such a policy. If he says there was not, as a policy-making official, why does he not know that there was such a policy? But if he says there was such a colonial education policy, I have never heard of it. I do agree that colonial rule might have imposed some restrictions on education, for instance, textbooks might evade historical issues. I believe we need to review and study this. However, if someone says that young people in Hong Kong are lacking in something because of the colonial education policy, I believe I would be as astonished as some young people in Hong Kong. We would ponder whether this is really the case, and whether young people nowadays are, as some Members suggested, conformists with no independent thinking and who only put importance on acquiring skills for make a living. I believe this is not the case.

The Hong Kong people who govern Hong Kong now have also received an English education under the past colonial rule. We have absolute confidence in the management of our politics, economy and other areas. We are absolutely confident and know that the management will certainly be good. I do not believe that Members who have received such an education lack independent thinking. Many people say that young people nowadays are very rebellious. I think this is because they have their own way of thinking. I do not believe that they are subject to any ideological shackles because they have received this kind of education. I believe that the young people educated under the present education policy are not at all like what some Members have suggested.

Second, some colleagues mentioned that the present education system seems to favour English over Chinese. Fortunately, Mr TSANG Yok-sing the headmaster ─ as he is not a headmaster now, perhaps I should say the Honourable TSANG Yok-sing ─ has explained the problems faced by schools. Apparently, it is not that the Government deliberately takes the education policy of fostering the use of Chinese lightly. As I understand it, the Hong Kong Government has in fact been encouraging schools for years to adopt Chinese as the teaching medium. Unfortunately, the attempt failed. It is not because those schools did not want to adopt it. Some schools have tried, but some parents and students had doubts and were somewhat resistant to the use of Chinese.

Hong Kong is an international financial and service centre. The more snobbish employers will wish to employ staff who adapt well to this social environment and they therefore require staff to be proficient in English. We cannot change this environment on the basis of politically correct ideas and we cannot change the needs of society.

Of course I agree with and I trust Prof NG Ching-fai. His motion clearly states that we should strengthen the students' sense of civic responsibility and nation. This has been clearly pointed out by Prof NG, and I consider Prof NG's amendment better than the original motion. First, Prof NG's amendment does not contain politically sentimental wordings. Thus it is more neutral from the political point of view. Second, apart from strengthening their sense of nation, Prof NG also asks young people to broaden their international vision and respect other cultures. For young people, this is more reasonable and geared better towards meeting Hong Kong's present needs. Thus, comparing the motion and the amendment, I find Prof NG's amendment more neutral, reasonable and in keeping with the needs of society now. Therefore, I think I should give his amendment my full support.

Thank you, Mr Deputy.

THE PRESIDENT resumed the Chair.

PRESIDENT (in Cantonese): Since Mr CHAN Choi-hi has not had the opportunity to speak on Prof NG's amendment to his amendment, I now invite Mr CHAN to speak for the second time on the amendment moved by Prof NG Ching-fai only, for up to five minutes.

MR CHAN CHOI-HI (in Cantonese): Madam President, I have a few comments on the amendment proposed by Prof NG Ching-fai.

First, regarding his proposal of addressing the needs of Hong Kong's development in the 21st century which has already been proposed by Mr David CHU, Members have discussed it at some lengths just now. Must the problems of education be solved? I believe they do. The question is why we have to wait until the 21st century. We have to seize every moment and we cannot wait any longer. You say we need to address the needs of Hong Kong's development in the 21st century. Fine. It is now 1997 and just three years away from the 21st century, and within these three years, if the Government can conduct an substantive review, why can we not address the needs of the 20th century? Why the 21st century? Why not the 22nd century? This is the reason why I deleted the words "21st century".

Second, I very much object to Prof NG's deletion of the proposal about "knowledge of the Basic Law". As Hong Kong's constitution, the Basic Law is very important. I believe that Hong Kong students generally do not know the Basic Law very well. If the part about "knowledge of the Basic Law" is deleted, I would find it flawed. Though it might be a beauty spot, it is after all a blemish. In my view, it is very important to include knowledge of the Basic Law in the school curriculum of the SAR.

Third, regarding international vision, one needs not argue about it and I am not about to. The question is whether we can incorporate these elements into civic education. It seems that everyone is keen about broadening their international vision and I believe that no one will object.

Fourth, about enhancing the quality and competitiveness of local students, I think that if the review is well conducted, it would actually achieve the same aim, as we are also trying to enhance the quality of students. However, I am a bit sensitive to the word "competitiveness". Competitiveness reminds me of business behaviour. Enterprises stress competitiveness, but do students need to stress competitiveness, too? I am wondering whether "competitiveness" is the best word in this context. Of course, Members can argue that the idea is different and that "competitiveness" here refers to something else. I am not prepared to argue about this question. However, the word "competitiveness" makes my ear itch. Thank you.

PRESIDENT (in Cantonese): I now invite Mr David CHU to speak on the two amendments. You have five minutes to speak on the amendments, Mr CHU.

MR DAVID CHU: Madam President, the amendments moved by the Honourable Mr CHAN Choi-hi and Professor the Honourable NG Ching-fai are reasonably similar to my motion and I agree with many of their points. However, they eliminated part of my proposal which is addressing the educational problems left behind by the colonial legacy, and I would like to explain why I object to this.

First of all, if we do not have a clear understanding of our past and especially our past problems, how can we effectively plan for the future? Perhaps both of them overlooked this point, perhaps they think the colonial education in the past is perfect, it is without problems. But either way, this is a live demonstration of the effectiveness of colonial education. This is the first problem we must look at, that is, there are many people in Hong Kong who do not even realize there is a problem. For example, many of us here, all of us perhaps, are Chinese and we have been living in Hong Kong for many years. How many Members can tell me what province is the capital of China, Beijing in? How many Members can tell me? And this is the problem. Thank you, Madam President.

PRESIDENT (in Cantonese): Secretary for Education and Manpower.

SECRETARY FOR EDUCATION AND MANPOWER (in Cantonese): Madam President, first, I would like to thank the Honourable David CHU for his motion, and the Honourable CHAN Choi-hi and the Honourable NG Ching-fai for their amendments. Education is the cornerstone of Hong Kong's development. Its success determines the long term development of our society. The Government places great emphasis on education and invests heavily in it. For example, in the 1997-98 financial year, the recurrent expenditure on education is the largest public spending item, which amounts to 21% of the total recurrent public expenditure.

We should look into the problems and weaknesses in our education system for rectification and improvements, and at the same time, recognize and disseminate its merits and good practices. How to label the education system in the past is one thing. More importantly, as we live in a rapidly changing society, our education policy must cater for the demands of a dynamic world. With the establishment of the SAR, Hong Kong enters a new era and a new education scene is on the horizon.

In his inaugural speech, the Chief Executive, Mr TUNG Chee-hwa, laid down the overall principles for education policy for the SAR. He said,

"Education is the key to the future of Hong Kong. It provides a level playing field for all, and the human resources required for further economic development. Our education system must cater for Hong Kong's needs, contribute to the country, and adopt an international outlook. It should encourage diversification and combine the strengths of the east and the west. We shall draw up a comprehensive plan to improve the quality of education, and inject sufficient resources to achieve this goal."

This ambitious goal is widely supported and agreed by educators and the public. To achieve this goal, we will develop the merits of the present education system, review and identify areas which need improvements, and formulate appropriate measures. This mission covers a wide range of areas with far-reaching effects. Other than the unrelenting efforts of the Government, we also need wide participation of the education-related advisory bodies, educators and the public.

In fact, we have embarked on a number of studies in various education domains in the past few years and will conduct studies in other areas if required. The major education policies under review or to be reviewed are:

(1) ways to achieve quality education. In this connection, we will consider the deliberations of the Education Commission (EC) and the Board of Education (BoE). The objectives of the EC's review on "Quality School Education" are to inculcate a quality culture in the school system from a marco level and to enhance public awareness of the need for quality school education. The Consultation Document of ECR7 recommends the development of quality assurance mechanism and quality indicators for education, improvement of school management and enhancing their accountability. The EC is finalizing Report No. 7 (ECR7) which we expect to be published this year.

Meanwhile, in line with social development, the BoE is reviewing the nine-year compulsory education which has been implemented in Hong Kong for almost 20 years. The review which will be completed this year focuses on the academic assessment mechanism as well as the Secondary School Places Allocation System. We will carefully study the findings of the above-mentioned reviews, and on the basis of them, develop policies and measures to achieve quality education.

(2) The implementation and effectiveness of our education policies rely on the co-ordination between advisory bodies and the Government and the efficiency of their operations. The EC points out in the Consultation Document of ECR7 that the large number of education-related advisory bodies necessitates a review of the relationship between these advisory and the executive bodies, and clear delineation of their respective roles so as to avoid duplication of work and wasting of resources. A streamlined administrative and advisory framework will enable us to better co-ordinate and implement the various improvement proposals. The EC is considering the scope and approach of this review.

(3) Our examination system and the universities' admission criteria have direct bearing on schools' approach to teaching. To ensure that our students have all-round development covering ethics, the intellect, the physique, social skills and aesthetics, we will ask the Hong Kong Examination Authority to study ways to improve the present examination system and the grading method. We will also request the tertiary institutions to review their admission criteria to avoid over-emphasis on students' academic achievement and encourage the institutions to admit students who excel in non-academic subjects, such as Art, Music, Physical Education and who have a sense of civic responsibility.

(4) To ensure our education system caters for the long-term development of Hong Kong, the Government will conduct a comprehensive review on the academic system, which will cover the length of and the interface between various stages of education, that is, kindergarten, primary, secondary and tertiary education. This review will cover a wide range of areas and has far-reaching effect. We will study carefully and consult widely. I hope we will begin the review after we have considered the recommendations arising from ECR7 and the BoE's review of the nine-year compulsory education.

Apart from the above, the Government will make comprehensive plans and formulate specific policies and measures on the major policy objectives announced by the Chief Executive, including information technology education, teacher training and improvement of learning environment. Furthermore, we will continue with our efforts in enhancing the language proficiency of students whom we hope should be biliterate and trilingual.

We are formulating a long-term strategy to promote information technology education. The objectives are to equip students with the knowledge of information technology and to improve teaching quality through a wider application of information technology by teachers. The key elements of this strategy include development of learning targets for different levels; adequate provision of computer and information technology facilities for public sector schools, and provision of training to ensure teachers are able to conduct computer-aided teaching.

To achieve the Chief Executive's objective that all new primary and secondary school teachers should have university degrees and professional training in education, we have asked the University Grants Committee (UGC) to study how the Hong Kong Institute of Education (HKIEd) and all universities can collaborate to achieve this target. The most important area of study will be the future development of HKIEd to ensure it can continue to function effectively as a teacher training institution. We have also requested the UGC to put forth specific plans and implementation timetable, including changes in the curriculum, enrolment, structure and staffing of all tertiary institutions; the financial implications and the effects on the development of tertiary education. We have asked the UGC to conduct wide and in-depth consultation before the final recommendations are submitted to the Government.

As regards improving the learning environment, we will strive to implement whole-day schooling in primary schools and to abolish floating classes in secondary schools. If there are no corresponding new measures, we will need over 200 new primary schools to realize full-day schooling for all primary schools. Finding new school sites in densely populated areas such as the Eastern District, Kwai Chung and Kowloon City is not easy. We are now looking into a series of measures, including expanding and speeding up the School Building Programme, so as to achieve full-day schooling for as many primary schools as possible. I hope I can come up with more details in a few months' time.

On pre-primary education, we will advance the review of the Kindergarten Subsidy Scheme to be undertaken within this year. With the various improvement measures, we hope to increase the percentage of trained teachers in kindergartens.

As Mr TUNG has said, our young people should "have a passion for the country, cater for Hong Kong's needs, and adopt an international outlook". We therefore should cultivate their love for their country, concern about local affairs and have a global outlook. We will continue to strengthen our civic education and the Chinese elements in the curriculum, so that our students can have a better understanding of the Chinese history and culture, the concept of "one country, two systems" and the Basic Law.

Madam President, all of the above mean that we have to conduct comprehensive reviews in various major educational domains in order to bring about marked improvements in our education system. In the process, we will adopt a pragmatic approach and widely consult the education-related boards and committees. These boards and committees comprise people from all walks of life, including teachers, parents, academics, professionals and representatives of the industrial and commercial sectors, who can put forth representative views to the Government. Also, we are most willing to report and provide information to the Provisional Legislative Council Panel on Education on any issues regarding education. I am grateful for Members' views which we will carefully consider, to ensure that our new policies and measures meet the identified needs and can be implemented smoothly and effectively.

Madam President, I have spoken mainly on the review of education and have not elaborated on the policies or measures implemented in various educational domains such as mother-tongue education and closer ties between schools and parents. I believe there are lots of opportunities for further discussion with members of the Education Panel.

In response to the speeches made by several Members, I fully agree that substantial resources are needed to improve education. Mr TUNG has pledged to inject sufficient resources to support the future policies on education. We will work closely with the teacher education institutions to offer more and better training courses for teachers, including those on language and information technology. We acknowledge the important role school principals play in education and will strengthen training for them.

"It takes 10 years to grow a tree and 100 years to nurture a man". Education is a long-term and continuous process which takes years to see the results. The Chief Executive has already laid down the goal of education. Our work is to formulate policy, set the priorities, seek necessary resources and draw up specific measures. I sincerely hope that educators, parents and the public will work with the Government in the pursuit of quality education so that our young people can cater for Hong Kong's need, contribute to our society and excel in every field.

Thank you.

PRESIDENT (in Cantonese): I now put the question to you and that is: That the amendment moved by Prof NG Ching-fai be made to Mr CHAN Choi-hi's amendment.

Will those in favour please say "aye"?

(Members responded)

PRESIDENT (in Cantonese): Those against please say "no".

(Members responded)

PRESIDENT (in Cantonese): I think the "ayes" have it.

Mr David CHU and Miss CHAN Yuen-han rose to claim a division.

PRESIDENT (in Cantonese): Council will now proceed to a division. The division bell will ring for three minutes.

PRESIDENT (in Cantonese): Members, the question now put is: That the amendment moved by Prof NG Ching-fai be made to Mr CHAN Choi-hi's amendment. Will Members please proceed to vote.

PRESIDENT (in Cantonese): Before I declare the result, are there any queries? The result will now be displayed.

Dr Raymond HO, Mr NG Leung-sing, Prof NG Ching-fai, Mr Eric LI, Mr LEE Kai-ming, Mrs Elsie TU, Mrs Peggy LAM, Mr Ronald ARCULLI, Mr MA Fung-kwok, Dr LEONG Che-hung, Miss CHAN Yuen-han, Mr CHAN Wing-chan, Mr CHAN Kam-lam, Mr TSANG Yok-sing, Mr Kennedy WONG, Mr Howard YOUNG, Mr YEUNG Yiu-chung, Mr IP Kwok-him, Mr LAU Kong-wah, Mr NGAN Kam-chuen, Mr LO Suk-ching, Dr LAW Cheung-kwok and Mr TAM Yiu-chung voted for the amendment.

Mr WONG Siu-yee, Mr David CHU, Mr HO Sai-chu, Mr Henry WU, Dr TSO WONG Man-yin, Dr Charles YEUNG, Mr Ambrose LAU, Mr CHOY Kan-pui, Dr TANG Siu-tong, Mr Timothy FOK and Miss CHOY So-yuk voted against the amendment.

Mr CHAN Choi-hi abstained.

THE PRESIDENT announced that there were 23 Members in favour of the amendment, 11 against and one abstaining. She therefore declared that the amendment was carried.

PRESIDENT (in Cantonese): Now that Prof NG's amendment has been approved, Members will vote on Mr CHAN Choi-hi's amendment as amended by Prof NG Ching-fai to Mr David CHU's motion. I now put the question to you and that is: That Mr CHAN Choi-hi's amendment as amended by Prof NG Ching-fai be made to Mr David CHU's motion.

Will those in favour please say "aye"?

(Members responded)

PRESIDENT (in Cantonese): Those against please say "no".

(Members responded)

PRESIDENT (in Cantonese): I think the "ayes" have it. The "ayes" have it.

PRESIDENT (in Cantonese): Mr David CHU, you may now reply and you have seven minutes out of your original 15 minutes.

MR DAVID CHU: Madam President, I want to thank the Government and also my colleagues for giving so many constructive comments, especially my colleague, the Honourable Eric LI. Whenever he addresses me as the "highly respected" David CHU, I know something bad is coming. But I want to remind Mr LI that if he can show me a person who does not believe that there are education problems left behind by the colonial legacy, then I will show you a person who is the victim of this colonial education legacy. Thank you, Madam President.

PRESIDENT (in Cantonese): I now put the question to you and that is: That the motion moved by Mr David CHU as amended by Mr CHAN Choi-hi's amendment which has been amended by Prof NG be approved.

Will those in favour please say "aye"?

(Members responded)

PRESIDENT (in Cantonese): Those against please say "no".

(No Member responded)

PRESIDENT (in Cantonese): I think the "ayes" have it. The "ayes" have it.

NEXT MEETING

PRESIDENT (in Cantonese): In accordance with the Rules of Procedure, I now adjourn the Council until 2:30 pm on Wednesday, 20 August 1997.

Adjourned accordingly at twenty-five minutes to Midnight.

Annex I

WRITTEN ANSWER

Written answer by the Secretary for Health and Welfare to Mr Eric LI's supplementary question to Question 2

According to the figures for the year 1997-98, the amount of subsidy that the Government has to pay for each medical student is as follows:

(1)	Five-year degree course at the Faculty of Medicine the University of Hong Kong	around HK$2.05 million in total
(2)	Five-year degree course at the Faculty of Medicine the Chinese University of Hong Kong	around HK$2.80 million in total

Annex II

WRITTEN ANSWER

Written answer by the Secretary for Works to Mr CHOY Kan-pui's supplementary question to Question 4

According to both the Kowloon-Canton Railway Corporation's and Government's records, there has been no landslide incident which affected railway traffic along the Kowloon-Canton Railway in the past three years.

Annex III

WRITTEN ANSWER

Written answer by the Secretary for Works to Mr LAU Kong-wah's supplementary question to Question 5

Of the 41 gazetted beaches, only 10 beaches have submarine outfall pipes in the vicinity. The chance of bursting or being damaged by others is normally very remote because all submarine outfall pipes are protected by rubble mound which are capable of withstanding the impact load of marine traffic. Regular inspection, testing and maintenance of submarine outfall pipes are carried out at

fixed intervals to ensure there is no leakage in the outfalls. Nevertheless, in order to prevent the recurrence of the Tuen Mun incident, for marine works in the vicinity of submarine outfalls, the contractor of the works will be required to submit a statement of his construction method to the Drainage Services Department (DSD) for approval prior to commencement of works and to delineate restricted zones over the submarine outfalls with marker buoys to facilitate the monitoring by DSD operating staff.

Annex IV

HONG KONG SPECIAL ADMINISTRATIVE REGION PASSPORTS BILL

COMMITTEE STAGE

Amendments to be moved by the Secretary for Security

Clause	Amendment Proposed
2	In the definition of "permanent resident of the Hong Kong Special Administrative Region", by deleting "paragraph 2 of".
4	By deleting subclause (2) and substituting - "(2) The Director may, in any particular case, issue a passport which is valid for a period other than that stated in subsection (1) if he is satisfied that there are exceptional circumstances which render it inappropriate to comply with subsection (1).".
5(5)	By deleting "於被取代的護照如若非被如此取代則" and substituting "，於被取代的護照在假若沒有被如此取代的情況下".
8	In the heading, by adding "or collection of passports" after "Application".
8(2)	By deleting "If the applicant is required by the Director to collect his passport at the place where he makes the application or at another place outside Hong Kong" and substituting - "Regardless of whether an application under section 3(1), 5(1) or 6 is made outside Hong Kong, if the applicant wishes to collect his passport at a place outside Hong Kong and the Director considers that it is reasonably practicable to do so".
Clause	Amendment Proposed
9	By deleting subclause (1) and substituting - "(1) The Director may cancel a passport and may take possession thereof if - (a) the Director is satisfied on reasonable grounds that - (i) the holder of the passport ceases to satisfy the conditions mentioned in section 3(2); (ii) the passport or an amendment of the passport has been obtained by means of any false or misleading statement or information or has otherwise been obtained unlawfully; or (iii) any particular or matter recorded in the passport is incorrect and, in the opinion of the Director, it is not appropriate or practicable to correct it by way of an amendment under section 5; or (b) the holder of the passport has been issued with another passport under this Ordinance.".
9(2)	By deleting "申護" and substituting "申請".
Clause	Amendment Proposed
New	By adding - "9A. Appeals against decisions of Director (1) A person aggrieved by any decision made by the Director under section 3(1), 4(2), 5(1) or 9 may appeal against that decision in accordance with regulations made under subsection (2). (2) The Secretary for Security may by regulation provide for - (a) the authority to which or the person to whom an appeal under subsection (1) shall lie, or the establishment of an appeal board for the purpose of hearing and determining any such appeal; (b) the powers of the authority, person or appeal board referred to in paragraph (a) in relation to an appeal under subsection (1); (c) the procedure as regards the lodging of an appeal under subsection (1); (d) the practice and procedure upon the hearing of an appeal under subsection (1); and
	(e) matters ancillary or incidental to those specified under paragraph (a), (b), (c) or (d).".
Clause	Amendment Proposed
New	By adding after the heading "Consequential Amendments" - "Immigration Ordinance 11A. Interpretation Section 2(1) of the Immigration Ordinance (Cap. 115) is amended in the definition of "HKSAR passport" by repealing "by the Director" and substituting "under section 3 of the Hong Kong Special Administrative Region Passports Ordinance ( of 1997)".".
Schedule	In item 4, by deleting "本條例".

Annex V

CHINESE NATIONALITY (MISCELLANEOUS PROVISIONS) BILL

COMMITTEE STAGE

Amendments to be moved by the Secretary for Security

Clause	Amendment Proposed
3(2)	By deleting "approved" and substituting "processed".