Panel on Transport (Minutes) 22 Oct 97

PLC Paper No. CB(1) 624
(These minutes have been
seen by the Administration)

Ref : CB1/PL/TP/1

Panel on Transport

Minutes of meeting held on Wednesday, 22 October 1997, at 8:30 am in Conference Room A of the Legislative Council Building

Members present :

Hon Mrs Miriam LAU Kin-yee, JP (Chairman)
Hon CHEUNG Hon-chung (Deputy Chairman)
Hon WONG Siu-yee
Hon Edward HO Sing-tin, JP
Dr Hon Raymond HO Chung-tai, JP
Hon LEE Kai-ming
Hon Mrs Selina CHOW, JP
Hon Henry WU
Hon YUEN Mo
Hon CHAN Choi-hi
Hon CHAN Wing-chan
Hon CHAN Kam-lam
Hon Andrew WONG Wang-fat, JP
Hon LAU Kong-wah
Hon CHOY Kan-pui, JP
Dr Hon TANG Siu-tong, JP
Hon NGAN Kam-chuen
Dr Hon LAW Cheung-kwok

Member absent :

Hon CHENG Kai-nam

Public officers attending :

Mr Nicholas NG, JP: Secretary for Transport
Mrs Fanny LAW, JP: Commissioner for Transport

For items IV and V

Mr Isaac CHOW, JP: Deputy Secretary for Transport

For item IV only

Mr Davey CHUNG: Principal Assistant Secretary for Transport

For item VI only

Miss Nancy LAW, JP: Deputy Secretary for Transport
Miss Maureen WONG: Principal Assistant Secretary for Transport
Mr CHO Ping-chung: Chief Engineer/Highway Surveillance and Systems

Attendance by invitation :
For Item IV only
Mass Transit Railway Corporation

Mr Rob NOBLE: Marketing & Planning Director

Creative Star Ltd.

Mr Sammy KAM: System Design Manager

Kowloon-Canton Railway Corporation

Mr Jonathan YU: Light Rail Director
Mr Y T LI: General Manager (East Rail Operations)

Kowloon Motor Bus Co (1933) Ltd.

Mr Tim IP: Assistant to General Manager

Citybus Ltd.

Mr Lyndon REES: Managing Director

Hongkong & Yaumati Ferry Co., Ltd.

Mr Rayman YUEN: Assistant General Manager

Clerk in attendance :

Ms Estella CHAN,: Chief Assistant Secretary (1)4

Staff in attendance :

Mr Andy LAU,: Senior Assistant Secretary (1)6

I.Confirmation of minutes of previous meeting
(PLC Paper No. CB(1)362)

The minutes of the meeting held on 12 September 1997 were confirmed.

II.Information papers issued since last meeting

2.Members noted that no information paper had been issued since the last meeting.

III.Date of next meeting and items for discussion
(PLC Paper No. CB(1)361)

3.The Panel agreed that the following legislative and financial proposals as suggested by the Administration would be discussed at the next meeting on 14 November 1997 and other Council Members would be invited for the discussion:

Amendment Bills 1997 for Cross-Harbour Tunnel and Tate's Cairn Tunnel Ordinances (air quality standards);
Trial of taxis using liquefied petroleum gas; and
Study to review Railway Development Strategy.

IV.Operation of the Octopus ticketing system
(PLC Paper No. CB(1)360(01) - Information paper provided by the Administration)

4.At the invitation of the Chairman, the Light Rail Director, Kowloon-Canton Railway Corporation (LRD/KCRC) briefed members on the salient points of the information paper. The briefing was supplemented by screening of two educational television commercials and distribution of leaflets on the Octopus ticketing system for members' information.

5.Some members queried the basis for requiring a $50 deposit for an Octopus card. Noting that one of the reasons for requiring a deposit was that the maximum negative value that can be incurred in an Octopus card was $35, which was the fare for a trip from Lo Wu to the urban area or vice versa, they considered it unfair for the majority of the passengers who did not travel to or from Lo Wu to pay the high deposit. In most cases, the negative value incurred by the last journey would be much less than $35. Instead of pitching the deposit at such a high level, a member opined that the company should consider installing a special device at Lo Wu Station to alert passengers to recharge their cards if it was detected that the remaining value of a card was not sufficient to cover the full fare of the trip.

6.The Marketing & Planning Director, Mass Transit Railway Corporation (MPD/MTRC) further explained the reasons for requiring a deposit of $50. He said that the decision was made having regard to the need to guard against wasteful losses, and hence, cross-subsidies from other passengers if the card, which itself costed $30, was lost. As to the facility to allow a temporary negative value of up to $35 to enable a passenger to finish his last journey even if the remaining card value was not sufficient to pay for it, it was anticipated that more long distance journeys would be made with the opening of the airport railway. In fact, the maximum negative value permissible could be revised upward to $40 or even $45 in future. In response to members' and the public's views, the company had already kept the deposit at a low level of $50. He said that the deposit should be able to be maintained at this level for several years.

7.A member pointed out that with the autopay mechanism in place, a significant portion of overheads could be avoided, and hence, the company should be able to waive the deposit to enhance the attractiveness of Octopus. In response, MPD/MTRC said that under the proposed autopay arrangement, Creative Star would allow customers to automatically add value to their Octopus and charge the upgraded amounts to their credit card accounts subsequently. The company would waive the processing fee of $20 for issuing personalised cards to autopay passengers and the deposit for such cardholders would be set at $30 instead.

8.A member expressed his worries about passengers not being aware of having a negative value on an Octopus card when using the Light Rail Transit (LRT), which adopted an open system of entry and exit. The System Design Manager, Creative Star (SDM/CS) advised that an audible signal coupled with a message on the panel would be generated on the fare deducting processors which were located at platforms of the LRT to warn the passengers.

9.Some members urged Kowloon Motor Bus to extend the use of the Octopus to other bus routes as early as possible. In reply, the Assistant to General Manager, Kowloon Motor Bus Co (1933) Ltd. (AGM/KMB) said that presently, passengers could use Octopus on KMB's cross-harbour air-conditioned (AC) buses with route numbers beginning with " 1 " , " 6 " and " 9 " . The remaining cross-harbour AC buses would be equipped with Octopus processors by the end of the year. However, it was not cost effective to install Octopus processors on other cross-harbour non-AC buses as they would be gradually replaced by AC buses. Regarding the overall implementation programme for KMB's network, he said that as a fee would be levied on the company for each usage of the Octopus card, the extension programme had to be carried out in phases, taking into account the cost implications. Presently, the target was to complete the whole process in 6-7 years' time.

10.As to why China Motor Bus Company was excluded from the scheme, LRD/KCRC said that CMB was involved in the initial planning stage but had subsequently decided not to join the scheme.

11.A member opined that the Government should take the lead to encourage other public transport operators to participate in the scheme and to extend the system to cover all their networks. MPD/MTRC responded that as the system was getting more widely accepted by the general public, its coverage would be extended correspondingly.

12.Members expressed concern about the content of the advertisements of the Octopus and urged the company not to exaggerate the coverage and reliability of the system. On the Octopus' reliability, SDM/CS said that double fare deduction on LRT bus equipment had only occurred during the initial operation of the system. In fact, the error in the software had been rectified within the first week of operation. He assured members that there were sufficient safety mechanisms built into the system to avoid double fare deduction. In terms of reliability, the performance of the Octopus was much better than common stored value tickets. Only one malfunction case was reported for every 10,000 passengers as compared to 2,500 for common stored value tickets. Currently, around 200 cards were replaced daily. As to the causes of malfunctioning, he said that this was still being examined by the manufacturers. Regarding the contents of publicity materials and advertisements, MPD/MTRC advised that more detailed information regarding the coverage and usage of the Octopus ticketing system were listed in the leaflets published by the respective transport operators. After discussion, the Chairman requested the company to take note of members' concerns in this respect.

13.On the financing of the Creative Star, LRD/KCRC said that depending on the circumstances, the transaction fees levied on the transport operators for each usage of the smart card would be adjusted annually. Basically, the interest accrued from the deposits would be used to cover part of the transaction costs. MPD/MTRC said that Creative Star was a non-profit-making company and its costs and revenues would be released on an annual basis. Some members, however, opined that the company should consider reimbursing the accrued interests to cardholders by adding value to their cards.

14.In response to a member, LRD/KCRC advised that a specially designed Octopus card was being planned for use by tourists.

15.A member pointed out that many of the teething problems could be avoided if better planning, testing and publicity could be instituted at the outset. MPD/MTRC responded that for such a complex, pioneer system like the Octopus, the problems experienced were relatively few. In fact, the system was subject to extensive testing before launching. Furthermore, pre-sale publicity had been arranged to inform the travelling public. On the problem of acceptance of banknotes by re-charging machines, SDM/CS said that a sample of each different type of banknotes were indeed forwarded to the manufacturer for testing before the system was launched in the market. However, some adaptation problems were identified due to the subtle difference in the printing quality and specification of banknotes issued in 1997. They were currently liaising with the manufacturer and the problems should be resolved by mid November. Responding to a member's further query, SDM/CS said that the design standard was to recognize and accept all banknotes issued and circulated in Hong Kong.

16.After deliberation, members requested an information paper on the progress of implementation of Octopus, particularly on the following aspects:

improvements on the note acceptance problem;
publicity of the system;
timetable for the installation of Octopus processors on buses; and
levy on transport operators for each usage of the smart card.

Upon receipt of the paper, the Panel would decide whether the subject should be reviewed in another meeting.

V.Franchise of ferry services
(PLC Paper No. CB(1) 354(01) - Information paper provided by the Administration; and

PLC Paper No. CB(1)213 - Submission from The 'star " Ferry Company Limited)

17.The Panel noted the two submissions from The 'star " Ferry Company Limited and Hongkong & Yaumati Ferry Company Limited (HYF) on the discussion topic. It was also noted that the Hong Kong Tourist Association had written to the Secretary for Transport (S for T), conveying the Association's concern about the consequences of putting the Star Ferry franchise out to tender.

.(Post meeting note : The submissions were circulated to members vide PLC Paper No. CB(1)378 and CB(1)379 after the meeting)

18.Members generally considered that the Star Ferry Company Limited (SF) was able to provide a proper and efficient ferry service with a reasonable fare structure, and opined that there was no need to revamp the SF's network by putting out some of its loss-making routes to tender. Some members pointed out that whilst competition might give rise to service improvements, they were not convinced that the same effect could be achieved in the SF's case. Given the existing operating environment, they expressed grave concern about the Government's ability to identify a suitable replacement operator in time who was willing and able to provide a comparable service, including a reasonable fare structure, as presently provided by SF. They worried that the revamp of SF's network would eventually lead to a situation whereby the travelling public would have to pay higher fares in return for a lower level of service.

19.Noting that SF was willing to continue operating the existing network, members considered the delay in renewing SF's franchise unfair to the operator and opined that granting SF a new franchise with a smaller network was not an effective way to improve the financial position of the company.

20.Some members pointed out that SF was part of Hong Kong's heritage, representing an important aspect of Hong Kong's transport culture. It was also well received by tourists. In order to promote tourism in Hong Kong, ferry services provided by SF, including their vessels, should be retained.

21.S for T responded that the Administration would start the franchise negotiation shortly with SF. He stressed that the Administration had not formulated its own view on the franchise renewal of ferry services, they would carefully assess the implications of each and every option, having regard to comments from all concerned before making a decision on the matter. He said that franchised ferry services in Hong Kong were no longer viable and had to rely on other sources of income such as shop rentals and advertising at piers to sustain their operations. In view of the circumstances, the Administration was considering instituting a complete revamp of the current network to excise from it those heavily loss-making routes with land transport alternatives. The objective was to ensure that, following the rationalization, the franchisees were able to deploy their resources to improve essential ferry services, whilst being able to achieve a positive return to sustain operations. Whilst the Government had no intention to subsidize ferry operation, they had made an effort to relieve the financial burden of franchisees by taking over the financial responsibility for maintaining the pier structures from 1997/98 onwards.

22.On waterborne transport policy, S for T said that the Government's policy was to maintain the essential link to serve the transport needs of commuters. But for those non-essential and supplementary services, the Administration considered it more appropriate to let market forces determine the future of such routes. Responding to a member's further query, S for T clarified that it was not the Government's intention to cancel all loss-making routes. Apart from considering the actual needs of the travelling public, the Administration would also examine carefully whether it was commercially viable to tender out some of the routes as licensed services and let market forces determine the future of such routes. He said that there were successful cases in the past whereby the routes so excised from franchised operators were operated with different service levels, fare levels, vessel types and cost structures.

23.The Administration noted a member's comments on the possible safety implications relating to the use of smaller vessels for the provision of ferry services. In response to a member's query, the Commissioner for Transport (C for T) said that it would be difficult to stipulate in the tender that the operator must use the same type of vessels presently used by SF. It was also questionable whether such vessels were still being manufactured.

24.Members would like the Administration to formulate a long term policy on waterborne transport, including the potential need for ferry services on new reclaimed lands. They opined that ferry services could be put into more effective use to relieve traffic congestion on land and to meet the transport needs of the travelling public. They also said that adequate interchange facilities should be provided near ferry piers. .In reply, S for T said that the Administration was working on a paper on the overall policy on waterborne transport. The paper was expected to be completed in three months' time and would be provided to the Panel. Regarding the provision of piers, C for T said that they would be provided on a need basis, taking into account the population distribution and the relocation requirements arising from reclamations. The Administration would provide adequate feeder services to serve new piers as appropriate.

25.In response to a member, C for T said the Tsuen Wan - Central via Tsing Yi service had been incurring serious losses with the opening of the Western Harbour Crossing. As such, the Administration was considering HYF's proposal to cancel this franchised route next year prior to the expiry of its current franchise in March 1999. If there was sufficient demand, the service would be tendered out. On the other hand, as SF's franchise would expire in March 1998, the Administration was reviewing its whole network rather than individual routes.

26.After discussion, members were generally of the view that there was no need to revamp the SF's network. They also expressed grave concern about possible deterioration of service and upsurge of fares arising from the tendering of the SF's network. The Panel unanimously agreed that the Administration should complete the Star Ferry's franchise renewal exercise by end 1997 and report to the Panel the new franchise terms.

VI.Compatibility of the existing autotoll systems
(PLC Paper No. CB(1)354(02) - Information paper provided by the Administration)

27.Some members expressed concern about the Government's failure in addressing the problem of incompatibility of the autotoll systems and opined that a more proactive approach should be adopted in dealing with the matter. A member said that the Administration should work out the financial implications of each and every option so that members could consider whether it was justified to incur additional resources to rectify the problem. She also said that the Administration should address the issue from a motorist's point of view rather than simply focusing on issues relating to technology and monopoly.

28.In reply, C for T said that whilst Government encouraged tunnel operators to offer motorists the choice of autotoll, it was not considered appropriate for the Government to restrict approval to a single system as this would create a monopoly situation which went against the policy of free trade and fair competition. Given the changing technologies, it was also difficult at the time for Government not to approve a more advanced system, i.e., the Electronic Toll Systems (ETS) which had better features. However, the Administration would not approve any further introduction of new systems for the time being. She said that currently, the electronic tolling industry had not developed common standards which would ensure compatibility of products manufactured by different suppliers. However, the industry was working on this and new national standards could well emerge in a few years' time. Further, the Administration was also examining the possibility of applying the new technologies for Electronic Road Pricing (ERP) to the collection of tunnel tolls. Depending on the study findings, some of the technical options under consideration might enable the Administration to explore new ways in handling the compatibility issue. Given the cost and time required for studying and implementing the various proposals, the Administration considered it more appropriate to await the completion of the ERP study or the emergence of new national standards.

29.Responding to members' further query on ERP, C for T said that the ERP study would be completed in mid 1999. The legislative, financial, institutional and operational aspects of the ERP options would be examined and interim findings could be used for assessment purposes.

30.Responding to a member, C for T said that the contractual agreement between the Government and the tunnel operators on the choice of autotoll would remain valid until the expiry of the respective franchises. S for T added that they would explore every opportunity and bring in necessary legislative, financial proposals to resolve the problem of incompatibility as soon as possible.

31.On the number of autotoll users compared with the overall number of tunnel users, the Administration undertook to provide further written information after the meeting.

.(Post meeting note : The requested information was forwarded to members vide PLC Paper No. CB(1) 408 on 28 October 1997.)

32.A member urged the Administration to request tunnel operators to launch incentive schemes by reducing processing charges so as to attract more motorists to the autotoll systems. The Administration noted the member's request.

33.After discussion, members generally felt dissatisfied that there was no concrete proposal to resolve the problem of incompatibility. They urged the Administration to carry out further examination and report to the Panel in six months' time.

VII.Any other business

34.There being no other business, the meeting ended at 10:45 a.m.

Provisional Legislative Council Secretarial
10 December 1997