PLC Paper No. CB(2) 1129

Paper for the House Committee Meeting
on 6 March 1998

Report of the Subcommittee on the nine Orders made under
the Port Control (Cargo Working Areas) Ordinance (Cap. 81)

Purpose

1.This paper reports on the deliberations of the Subcommittee on the nine Orders made under the Port Control (Cargo Working Areas) Ordinance (Cap. 81).

The Subsidiary Legislation

2.The nine Public Cargo Working Area (PCWA) Orders were gazetted on 27 January 1998 and tabled at the Provisional Legislative Council meeting on 11 February 1998. The nine Orders are as follows-

1. Port Control (Public Cargo Working Area) Order 1998 (L.N. 54)

2. Port Control (Public Cargo Working Area) (No. 2) Order 1998 (L.N. 55)

3. Port Control (Public Cargo Working Area) (No. 3) Order 1998 (L.N. 56)

4. Port Control (Public Cargo Working Area) (No. 4) Order 1998 (L.N. 57)

5. Port Control (Public Cargo Working Area) (No. 5) Order 1998 (L.N. 58)

6. Port Control (Public Cargo Working Area) (No. 6) Order 1998 (L.N. 59)

7. Port Control (Public Cargo Working Area) (No. 7) Order 1998 (L.N. 60)

8. Port Control (Public Cargo Working Area) (No. 8) Order 1998 (L.N. 61)

9. Port Control (Public Cargo Working Area) (No. 9) Order 1998 (L.N. 62)

The Subcommittee

3.The House Committee at its meeting on 13 February 1998 agreed to form a Subcommittee to study the nine Orders set out in paragraph 2 above.

4.Under the chairmanship of Hon IP Kwok-him, the Subcommittee has held one meeting with the Administration. A membership list of the Subcommittee is in Appendix.

Deliberations of the Subcommittee

Management Reform of Public Cargo Working Areas

5.The Administration outlines the background leading to the making of the nine Orders. On the recommendation of the Director of Audit and after consultation with the former Legislative Council Panel on Economic Services and the operators in the trade, the Marine Department has implemented the first phase of management reform of PCWAs. The reform involves the allocation of the PCWA berths to existing operators by a restricted tender exercise and the remaining berths to all interested parties by way of open tender. The restricted tender exercise was closed on 1 August 1997. The majority of existing operators had submitted their bids for 80% of the berth lengths. The remaining berths were allocated by way of open tender in November 1997. All berthing spaces in the PCWAs were let out to successful bidders for a period of three years (except those in Tsuen Wan PCWA) under a tenancy agreement starting from 1 February 1998. The successful tenderers are given the right to occupy berths for three years on payment of the monthly rent they bid in the tender exercises. The new arrangement will give the operators more certainty and better control of their berths. Previously, the berths were allocated on a first-come-first-served basis on payment of daily fees, which had brought about a lot of management problems. The new arrangement will be implemented on a trial basis and subject to review in three years’ time.

6.The Administration has further explained that in order to replace the previous daily fees arrangement by the monthly rental agreement under the new lease agreement, it is necessary to redefine the boundaries of PCWAs so that the waterfront areas of these PCWAs will be excluded from being subject to those fees set out in the Schedule to the Port Control (Cargo Working Areas) Regulation. In addition, due to low utilization and poor response of cargo operators in the restricted tender exercise, the two PCWAs in Sheung Wan and Chai Wan will be closed so that the land can be re-allocated for other uses. To put all these into effect, nine Port Control (Public Cargo Working Area) Orders were made by the Secretary for Economic Services and published in the Gazette on 27 January 1998.

7.In response to members, the Administration has explained that the previous rents for PCWA berths represented about 4% of the historical development costs of the berths, excluding land premises. Under the Government utilities approach, the lease rental should cover the cost of capital in providing PCWAs which is determined at 11% on average net fixed assets (ANFA). However, taking into account that there would be some competition under the tendering system, the reserve prices were determined on the basis of the historical capital costs (and not the market values) and fixed at a rate much lower than the return of 11% on ANFA.

8.The Administration has advised that the bidding prices under the restricted tender exercise were close to the reserve prices as they were only offered to existing operators. For the open tender exercise, the competition was keen on the more popular berths, with the highest bidding price being as much as four times the reserve price.

9.Members have noted that the revenue from the leasing of PCWA berths will be increased from $46 million in 1996-97 under the old arrangement to an estimated amount of $81 million in 1998-99 under the new arrangement. They have pointed out that the higher berthing fees will increase the operating costs of the operators in the trade. The Administration has explained that the return on investment in the PCWAs in 1998-99 is estimated to be about 9% which is higher than the return of 4% under the previous system but is still below the return of 11% on ANFA.

10.Members have expressed the view that the Government should conduct a comprehensive review on the land side management of PCWAs with a view to reducing vehicle parking fees and cargo storage fees to offset the hefty increase in berthing fees. In addition, they opine that operators should be allocated land for loading and unloading of cargoes in order to improve operational efficiency and cargo throughput. A member has suggested that the review should also take into account competition from mid-stream cargo operators.

11.Another member has suggested that the operating hours of PCWAs should be extended so as to facilitate greater utilization of the PCWAs. The Administration has expressed reservations on the proposal as it will cause noise nuisance to nearby residents.

12.Some members have pointed out that the operators have expressed concern about what will happen after the three-year trial period of the first phase of the management system. The Administration has advised that a working group, which comprises representatives from the PCWA operators, has been set up in the Marine Department. The working group will, within six months after letting out the berths, undertake a review of the land side management of PCWAs including vehicle parking fees, cargo storage fees and designated working areas for PCWA operators ... etc. The working group will review the experience of the first phase of reform before deciding on the next phase of reform to be implemented. The objective of the review is to simplify the fee and management structure so as to reduce management costs, facilitate operators’ business, and improve the productivity and operation of PCWA berths.

The Nine Orders

13.Members have examined the nine Orders in detail one by one. Members have noted that the first eight Orders seek to redefine the boundaries of eight existing PCWAs whereas the ninth Order seeks to declare the closure of the PCWAs in Sheung Wan and Chai Wan.

14.In the course of examining the Orders, one member has pointed out that there is inconsistency in expressing the area of the eight PCWAs covered in the first eight Orders in that the areas of two PCWAs are expressed in hectares whereas the areas of the other six PCWAs are expressed in square metres. The Administration has undertaken to convert "hectares" to "square metres" in respect of the PCWAs concerned in the next amendment exercise.

15.Members have concluded that it is necessary for the nine Orders to be made in order to implement the first phase of the management reform of the PCWAs.

Recommendation

16.The Subcommittee recommends that the nine Orders made under the Port Control (Cargo Working Areas) Ordinance (Cap. 81) and published in the Gazette on 27 January 1998 be supported.

Advice Sought

17.Members are invited to support the recommendation of the Subcommittee set out in paragraph 16 above.

Provisional Legislative Council Secretariat
5 March 1998

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Appendix

Subcommittee on the nine Orders made under the Port Control (Cargo Working Areas) Ordinance (Cap. 81)