OFFICIAL RECORD OF PROCEEDINGS
Wednesday, 16 September 1998
The Council met at half-past Two o'clock

MEMBERS PRESENT:

THE PRESIDENT
THE HONOURABLE MRS RITA FAN, G.B.S., J.P.

THE HONOURABLE KENNETH TING WOO-SHOU, J.P.

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

THE HONOURABLE DAVID CHU YU-LIN

THE HONOURABLE HO SAI-CHU, J.P.

THE HONOURABLE CYD HO SAU-LAN

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

THE HONOURABLE ALBERT HO CHUN-YAN

THE HONOURABLE MICHAEL HO MUN-KA

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

THE HONOURABLE LEE WING-TAT

THE HONOURABLE LEE CHEUK-YAN

THE HONOURABLE MARTIN LEE CHU-MING, S.C., J.P.

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

THE HONOURABLE LEE KAI-MING, J.P.

THE HONOURABLE FRED LI WAH-MING

DR THE HONOURABLE LUI MING-WAH, J.P.

THE HONOURABLE NG LEUNG-SING

PROF THE HONOURABLE NG CHING-FAI

THE HONOURABLE MARGARET NG

THE HONOURABLE MRS SELINA CHOW LIANG SHUK-YEE, J.P.

THE HONOURABLE RONALD ARCULLI, J.P.

THE HONOURABLE MA FUNG-KWOK

THE HONOURABLE JAMES TO KUN-SUN

THE HONOURABLE CHEUNG MAN-KWONG

THE HONOURABLE AMBROSE CHEUNG WING-SUM, J.P.

THE HONOURABLE HUI CHEUNG-CHING

THE HONOURABLE CHRISTINE LOH

THE HONOURABLE CHAN KWOK-KEUNG

THE HONOURABLE CHAN YUEN-HAN

THE HONOURABLE BERNARD CHAN

THE HONOURABLE CHAN WING-CHAN

THE HONOURABLE CHAN KAM-LAM

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

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

THE HONOURABLE LEUNG YIU-CHUNG

THE HONOURABLE GARY CHENG KAI-NAM

THE HONOURABLE SIN CHUNG-KAI

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

DR THE HONOURABLE PHILIP WONG YU-HONG

THE HONOURABLE WONG YUNG-KAN

THE HONOURABLE JASPER TSANG YOK-SING, J.P.

THE HONOURABLE HOWARD YOUNG, J.P.

DR THE HONOURABLE YEUNG SUM

THE HONOURABLE YEUNG YIU-CHUNG

THE HONOURABLE LAU CHIN-SHEK, J.P.

THE HONOURABLE LAU KONG-WAH

THE HONOURABLE LAU WONG-FAT, G.B.S., J.P.

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

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

THE HONOURABLE EMILY LAU WAI-HING, J.P.

THE HONOURABLE CHOY SO-YUK

THE HONOURABLE ANDREW CHENG KAR-FOO

THE HONOURABLE SZETO WAH

THE HONOURABLE TIMOTHY FOK TSUN-TING, J.P.

THE HONOURABLE LAW CHI-KWONG, J.P.

THE HONOURABLE TAM YIU-CHUNG, J.P.

MEMBER ABSENT:

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

PUBLIC OFFICERS ATTENDING:

THE HONOURABLE MRS ANSON CHAN, J.P.
THE CHIEF SECRETARY FOR ADMINISTRATION

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

THE HONOURABLE ELSIE LEUNG OI-SIE, J.P.
THE SECRETARY FOR JUSTICE

MR CHAU TAK-HAY, J.P.
SECRETARY FOR TRADE AND INDUSTRY

MR NICHOLAS NG WING-FUI, J.P.
SECRETARY FOR TRANSPORT

MRS KATHERINE FOK LO SHIU-CHING, J.P.
SECRETARY FOR HEALTH AND WELFARE

MR PETER LO YAT-FAI, J.P.
SECRETARY FOR HOME AFFAIRS

MR LEO KWAN WING-WAH, J.P.
SECRETARY FOR ECONOMIC SERVICES

MRS REBECCA LAI KO WING-YEE, J.P.
SECRETARY FOR FINANCIAL SERVICES

CLERKS IN ATTENDANCE:

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

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

MS PAULINE NG MAN-WAH, ASSISTANT SECRETARY GENERAL

PAPERS

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

Subsidiary LegislationL.N. No.
    Telecommunication (Mobile Earth Stations) (Exemption) Order
310/98

    Rectification of Errors (No. 3) Order 1998
312/98


Sessional Papers
    No. 21─The Airport Authority of Hong Kong
    Annual Report 1997-1998

    No. 22─J.E. Joseph Trust Fund Report
    for the period 1 April 1997 to 31 March 1998

    No. 23─Kadoorie Agricultural Aid Loan Fund Report
    for the period 1 April 1997 to 31 March 1998


    ORAL ANSWERS TO QUESTIONS

    PRESIDENT (in Cantonese): Questions. I would like to remind Members that question time normally does not exceed one and a half hours, with each question being allocated about 15 minutes on an average. When asking supplementaries, Member should be as concise as possible, should not ask more than one question, and should not make statements, as this contravenes the Rules of Procedure.

    First question. Mrs Selina CHOW.

    Wrongful Grant of Financial Assistance

    1. MRS SELINA CHOW (in Cantonese): Madam President, it is reported that there were cases in which the Social Welfare Department (SWD) had granted Child Care Centre Fee Assistance (the Fee Assistance) to foreign domestic helpers and Comprehensive Social Security Assistance (CSSA) to a multi-billionaire. In this connection, will the Government inform this Council:

  1. whether it is a mistake to grant assistance to such persons; if so, the reasons for granting such assistance;

  2. of the number of such cases and the total amount of funds involved; and

  3. whether it has reviewed the SWD's vetting mechanism and monitoring system for the granting of financial assistance?
PRESIDENT (in Cantonese): Secretary for Health and Welfare.

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

  1. Under the Fee Assistance Scheme for Child Care Centres, the SWD takes into account the applicants' residency status, household income, household size and the need of the family for day child care services when considering their applications. The eligibility criteria state that both the child and the applicant should be Hong Kong residents and have lived here for at least one year. In the cases referred to by the Honourable Member, it appears that mistakes were made in the application of the guidelines. The guidelines were revised in April this year to clarify the residency requirements in the applications process. The Director of Social Welfare, however, has the discretion to waive the requirements on residency status and the period of stay in Hong Kong.

    As regards the reference to the CSSA, I presume the Honourable Member is referring to an elderly recipient who was found to possess a large bank deposit after he had passed away. When he applied for the CSSA, the old man was 74 years old. He claimed to be a retired painter who had not worked for years owing to poor health. According to the information he provided, the old man had lived on his savings since retirement but these had become exhausted. A home visit by SWD staff revealed that the elderly applicant was living alone in a small self-owned flat in Wan Chai which appeared to be commensurate with his declared limited means. The applicant claimed that he had only one bank account and inspection of the bank passbook showed a balance of about $1,000. Based on the false information provided, the application was approved.

  2. In the academic year 1997-98, there were four cases in which the Fee Assistance was granted to foreign domestic helpers involving a total of $123,000.

    During the past three years, the number of CSSA fraud cases detected by SWD and the total amount of over-payment involved were as follows:

    YearNumber of fraud
    cases detected    		Total amount of
    over-payment ($)
    1995-96360.66 million
    1996-97170.67 million
    1997-98571.47 million
    Total1102.8 million

  3. To access the needs of applicants and to detect fraud, the SWD has put in place vetting mechanisms for applicants under various financial assistance schemes. In regard to the CSSA Scheme, all applicants are subject to investigation, assessment and authorization by the Social Security Field Unit staff. Applicants' claims are verified through home visits, checking of bank accounts and other documents, and contacts with the families and employers of the applicants. The SWD has also set up special investigation teams to conduct random checks on CSSA cases and in-depth investigation on suspected fraud cases.

    Furthermore, the SWD's internal audit team conducts regular random checks on cases approved by different Social Security Field Units to ensure that the cases are properly approved in accordance with the relevant rules and regulations. In addition, the Audit Commission conducts checks to ensure that funds paid out through various social security schemes are properly accounted for.

    We are stepping up our fraud investigation and detection activities. With increased public support in reporting suspected fraud cases, the existing vetting and monitoring mechanisms will be more effective in screening out fraudulent applications.

PRESIDENT (in Cantonese): Mrs Selina CHOW.

MRS SELINA CHOW (in Cantonese): Madam President, in paragraph (a) of her main reply, the Secretary points out that the eligibility criteria state the applicant must be a Hong Kong resident. Hence, for cases referred to in paragraph (b) in which the Fee Assistance was granted to foreign domestic helpers, mistakes had definitely been made. But in paragraph (a) of the main reply, it is also mentioned that the Director of Social Welfare has the discretion to waive the requirements on residency status and the period of stay in Hong Kong. I would like to ask the Secretary under what conditions could an applicant be exempted from these requirements and why are such exemptions set?

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

SECRETARY FOR HEALTH AND WELFARE (in Cantonese): Madam President, according to the information I have at hand, there are no cases of foreign domestic helpers being exempted. The discretion to waive the requirements is mainly applied to CSSA cases in which the recipients have all lived in Hong Kong for less than a year and most of these people are new immigrants.

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

MISS CHAN YUEN-HAN (in Cantonese): Madam President, I would like to follow up on Mrs Selina CHOW's last question. The Secretary has said that the discretion over the exemption is applied to Hong Kong residents only and foreign domestic helpers do not enjoy any of such exemptions. I would like to ask whether the Government has granted any of the applications for assistance made by foreign domestic helpers owing to economic difficulties or exempted the requirements concerned?

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

SECRETARY FOR HEALTH AND WELFARE (in Cantonese): Madam President, according to the record, in the past year, other than the four mentioned earlier, no other cases have occurred since then.

PRESIDENT (in Cantonese): Mr MA Fung-kwok.

MR MA FUNG-KWOK (in Cantonese): Madam President, it has been mentioned in paragraph (c) of the main reply that there was increased public support in reporting suspected fraud cases. It has been reported that a hotline has been set up to facilitate the public in making reports. I would like to ask the Secretary for Health and Welfare about the effect of the reportings and how many of these reported cases have proven to be true after investigation?

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

SECRETARY FOR HEALTH AND WELFARE (in Cantonese): Madam President, this special hotline has been set up in August this year. According to our record, there have been a total of 1 094 reports made and out of them, 258 have been referred to our investigation teams for further inquiry. We will conduct in-depth investigation on these cases according to the information submitted to see if fraud has indeed been involved in any of them.

PRESIDENT (in Cantonese): Mr Fred LI.

MR FRED LI (in Cantonese): Madam President, earlier on, the Government has highly publicized its handling of the abuse of the CSSA Scheme but there has not been any substantial evidence that the problem is serious. I would like to ask whether the Government has considered that while these actions may have a deterrent effect on the abusing of the CSSA Scheme, it may at the same time cause people's rejection of and discrimination against CSSA recipients? What exactly is the Government's real purpose of handling this problem in such a high-profile fashion?

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

SECRETARY FOR HEALTH AND WELFARE (in Cantonese): Madam President, we have been conducting investigation on suspected fraud cases all along. Setting up a hotline for reports is a new attempt on our part. To people who have genuine needs, we will certainly arrange for interviews and home visits, but will only approve the application after thorough investigation. According to our experience, what we are doing will not dampen people's desire to apply, nor will it affect the CSSA recipients.

PRESIDENT (in Cantonese): Mr Fred LI.

MR FRED LI (in Cantonese): The Secretary has not answered part of my supplementary question concerning whether the Government realizes that such actions will cause people's rejection of and discrimination against the CSSA recipients.

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

SECRETARY FOR HEALTH AND WELFARE (in Cantonese): Madam President, we have not made very thorough investigation into what kind of actions will arouse what kind of behaviour in people. As regards how people would feel or think is of course something beyond our power to control.

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

MR CHAN KAM-LAM (in Cantonese): Madam President, we believe that fraud cases only make up a very small proportion, but is the workload of the internal audit team or Special Investigation Teams very heavy, leading to oversights in the approval procedures and thus resulting in unhealthy outcomes? Very often, it is the social effects that would cause one or two fraud cases to be exaggerated to look like a very grave situation. I would like to ask how many members are there in the internal audit team or Special Investigation Teams and how heavy their workload is?

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

SECRETARY FOR HEALTH AND WELFARE (in Cantonese): Madam President, we have at present three Special Investigation Teams to follow up on this kind of suspected cases and they will only launch an investigation when a certain case is suspected to be fraud. Definitely, we will not casually harass any CSSA recipient families. As for the past cases, although they did not represent a large number, we do have the responsibility to conduct investigations as the public money is involved.

PRESIDENT (in Cantonese): Miss CHOY So-yuk.

MISS CHOY SO-YUK (in Cantonese): Madam President, in the main reply, the Government mentioned about stepping up investigation and detection as well as internal investigations just now. I would like to ask whether the Government does, other than investigating after receiving complaints, have internal procedures to guide them rather than passively depending on the needs of the situation to launch an investigation? If so, what are the procedures? If not, why not?

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

SECRETARY FOR HEALTH AND WELFARE (in Cantonese): Madam President, in the past few years, because of the increasing number of CSSA applications, we have been running very low on manpower. Hence, home visits have not been so frequent as before and some have even been stopped completely. We have increased our manpower recently and so have been able to step up or resume these visits. Other than enabling us to inspect whether frauds are committed, home visits also serve other purposes such as checking whether the recipients have other social needs.

PRESIDENT (in Cantonese): Mr YEUNG Yiu-chung.

MR YEUNG YIU-CHUNG (in Cantonese): Madam President, in part (c) of the main reply, it was mentioned that the SWD will only verify the information supplied by applicants. Such information will of course have no problem. The problem is, if an applicant has failed to submit a certain information, has the Government any other effective means to check on him? Under the Personal Data (Privacy) Ordinance, if the applicant has failed to submit certain information, we will have no way to find that out. Also, if frauds have been proven, what are the penalties?

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

SECRETARY FOR HEALTH AND WELFARE (in Cantonese): Madam President, we will certainly conduct investigations according to the information supplied to us. If fraud is detected and convicted, the penalties are very heavy. Other than having to refund the money given out by the Government, the offender may also be sentenced to jail because the crime is theft.

PRESIDENT (in Cantonese): Mr YEUNG Yiu-chung.

MR YEUNG YIU-CHUNG (in Cantonese): Madam President, my question is, other than verifying the information submitted, are there any more effective ways to investigate whether there is information not submitted or withheld?

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

SECRETARY FOR HEALTH AND WELFARE (in Cantonese): Madam President, other than verifying the information submitted, the most important means is our home visits. During a home visit, many details of the daily life and assets of the recipient can be found out, besides, other things such as false claim on rents and the like can also be discovered.

PRESIDENT (in Cantonese): Mr Ronald ARCULLI.

MR RONALD ARCULLI: Madam President, in response to the question, the Secretary for Health and Welfare told us of an incident of an elderly man who had actually left quite a lot of money after he passed away and there were also four other cases detected. What action has the Government taken in terms of recovering benefits paid out to people who were actually not entitled to them?

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

SECRETARY FOR HEALTH AND WELFARE (in Cantonese): Madam President, if CSSA payments are found to have been given to a recipient who has submitted false information, we will recover the payment made to the recipient. If the fraud is serious, we will report it in the way prescribed by the law and proceed with the hearing.

PRESIDENT (in Cantonese): Mrs Sophie LEUNG.

MRS SOPHIE LEUNG (in Cantonese): Madam President, it has been clearly shown in the second paragraph of the main reply that the number of frauds has increased several folds since 1995. In order not to let the public discriminate against the CSSA applicants who have genuine needs, it is all the more necessary for the Secretary to ensure that after the mechanism is revised, this number will go down. A message should also be given to the CSSA applicants who have genuine needs that they must not use any fraudulent means to obtain the CSSA payments.

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

SECRETARY FOR HEALTH AND WELFARE (in Cantonese): Madam President, I thank the Honourable Member for raising this supplementary question. In order to further revise the existing system and step up investigations, we have already increased our manpower and have also put in more resources in this respect in the year 1998-99. In addition, we have also strengthened the training of our staff to enhance their understanding of the procedures of vetting from case to case and that they have to pay attention to various aspects of the information submitted, so that whenever they have any doubts, they should investigate more thoroughly.

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

Operations of Airport Express and Tung Chung Lines

2. MR CHAN WING-CHAN (in Cantonese): Madam President, does the Government know:

  1. about the operations of the Airport Express Line (AEL) and Tung Chung Line (TCL) managed by the Mass Transit Railway (MTR) Corporation, including:

    1. whether the computerized signalling systems controlling the operations of the two lines have encountered failures;

    2. the average frequency of trains per hour;

    3. whether there have been cases of trains running behind schedule, if so, what the reasons were; and

    4. the average ridership per train; and

  2. whether the MTR Corporation has any plan to increase the frequency of trains running on these two lines; if so, what the details are?
    3.
PRESIDENT (in Cantonese): Secretary for Transport.

SECRETARY FOR TRANSPORT (in Cantonese): Madam President,

  1. (i) Since the commencement of operations, there have been a few minor train incidents caused by some equipment failures of the signalling systems, resulting in trains being diverted to a platform on another line and trains not receiving start signals from the train control. Though causing inconvenience to passengers, none of these incidents had safety implications. Improvement measures have been carried out to rectify deficiencies identified after the incidents.

    (ii) The average frequency for the AEL and TCL since the commencement of operations is 10 minutes. Since 16 August, train service between the Tsing Yi and Hong Kong Stations of the TCL has been enhanced to five-minute intervals during the morning and evening peak hours on weekdays. This provides better connection between the Tsuen Wan and Tung Chung Lines.

    (iii) There have been instances of trains running behind schedule. These are not uncommon to any new railways. During the first two months of operations, minor delays of up to a few minutes have occurred in about 5% of the trips. These delays were caused by operational reasons such as incongruous interface of signalling and mismatch between train and platform doors.

    (iv) The average daily ridership of AEL and TCL is 25 000 and 90 000 respectively.

  2. The MTR Corporation is committed to improving the quality of its passenger services. With two months of actual operational experience of the new rail system, the MTR Corporation is now in a better position to further fine-tune the signalling system. As a result, Corporation expects that the average frequency of train service will be enhanced to eight minutes for both the AEL and TCL in about two months' time.
PRESIDENT (in Cantonese): Mr CHAN Wing-chan.

MR CHAN WING-CHAN (in Cantonese): Madam President, I would like to follow up on the delays of the TCL which is of great concern to the residents in the areas of Tung Chung, Kwai Chung and Tsing Yi. In paragraph (a)(iii) of his main reply, the Secretary has said that delays of up to a few minutes have occurred in about 5% of the trips. That is incorrect. Some residents have complained to me about incidents of trains departing only after eight to 10 minutes as they boarded the trains. I have also experienced minor breakdowns while travelling by the TCL myself. Perhaps I can tell the President ......

PRESIDENT (in Cantonese): Please state your supplementary question directly.

MR CHAN WING-CHAN (in Cantonese): Yes. (Laughter) I have personally experienced train delays twice in just a few days. On one occasion, the exact time was at 9.35 am on 15 July before the Legislative Council closed for a holiday ......

PRESIDENT (in Cantonese): Mr CHAN, what is your question? Please state your supplementary question.

MR CHAN WING-CHAN (in Cantonese): I waited for the Central-bound train of the TCL at Lai King for as long as 25 minutes. I have already put down the date of the incident. I would like to ask the Government what practical measures it will take to improve the present services of the MTR, especially the TCL, to guarantee their quality and avoid further delays? Thank you, Madam President.

PRESIDENT (in Cantonese): Secretary for Transport.

SECRETARY FOR TRANSPORT (in Cantonese): I do not know how I should respond to Mr CHAN's question. Nevertheless, the main reply has basically indicated that it is inevitable for any new railway to experience delays as the new system has yet to reach its full proficiency during the early stage of its operation.

According to the actual statistics, the operation of the AEL and the TCL is improving and making progress each day. During the early stage of their operation, the trains of both the AEL and the TCL took 30 to 35 minutes to reach the final terminus, and delays caused therein were due to reasons I have just now mentioned. However, after one month since the commencement of their operation, 95% of the trips were kept to within 30 minutes, while 75% (that is, the majority) were kept to under 25 minutes. Recently, the average travelling time per trip has reached 25 minutes and some are even down to 23 minutes. By the way, the 23-minute travelling time highlighted by the MTR Corporation actually refers to the time and speed of the trains that can be achieved when the system has reached its full proficiency. At present, although the railways have only been in operation for about three months, they have basically reached the most proficient timing as projected.

PRESIDENT (in Cantonese): Mrs Miriam LAU.

MRS MIRIAM LAU (in Cantonese): Madam President, trains on the TCL are scheduled to depart every 10 minutes on an average and the frequency will only be enhanced to eight-minute interval in two months, but even so, it bears a great difference from that of the Tsuen Wan Line (TWL) where trains are scheduled to depart every two to less than two minutes. Will the Secretary for Transport tell this Council whether the low frequency of the TCL is one reason why the congestion of the TWL cannot be alleviated? Has the Government any plan to request the MTR Corporation to reduce the difference between the frequencies of the TCL and the TWL? If so, what will the frequency be?

PRESIDENT (in Cantonese): Secretary for Transport.

SECRETARY FOR TRANSPORT (in Cantonese): Madam President, the TCL and the AEL were designed to handle an average frequency of eight minutes. But I have already said that the MTR Corporation has already shortened the service frequency of the TCL to five minutes during peaks hours. In the coming two months, apart from enhancing the normal service of the TCL to the projected eight-minute interval, its service between the Tsing Yi and Hong Kong Stations will even be enhanced from the present interval of five minutes to four minutes during peak hours. Basically, the peak hour train service can be considered very frequent and this is done to relieve the congestion of the Nathan Road section of the TWL.

MRS MIRIAM LAU (in Cantonese): The Secretary for Transport has not explained whether the low frequency of train service on the TCL has led to its failure to relieve the congestion of the TWL.

PRESIDENT (in Cantonese): Secretary for Transport.

SECRETARY FOR TRANSPORT (in Cantonese): No, that is not the case.

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

MR LAU KONG-WAH (in Cantonese): Madam President, the frequency during peak hours has increased to once every five minutes, but I wonder if the ridership has risen during the last month? I would like to know whether there are measures other than increasing the frequency that would divert the commuters from the TWL in order to relieve the congestion of the section along Nathan Road?

PRESIDENT (in Cantonese): Secretary for Transport.

SECRETARY FOR TRANSPORT (in Cantonese): Madam President, the commuters will choose the line that meets their need. If a certain line can take them to their destination directly, they will certainly choose that line. Of course, the frequency of train service and the degree of congestion are also factors for consideration when there are other options. Obviously, the TCL is less congested than the TWL whether during or off the peak hours and passengers should find it more convenient to ride the TCL. As regards the frequency of train service, there is of course a difference between the TCL and the TWL because the designed average frequency of the former has been set at eight minutes. As the system is subject to this predetermined standard and limitation, it is impossible to arbitrarily increase its frequency, but we have nevertheless increased its peak-hour frequency by discretion.

PRESIDENT (in Cantonese): Mr LAU, which part of your question has not been answered?

MR LAU KONG-WAH (in Cantonese): The Secretary has not answered the main part of my supplementary question concerning other than increasing the frequency, what specific measures are there to attract Tsuen Wan residents to ride the TCL?

PRESIDENT (in Cantonese): Secretary for Transport.

SECRETARY FOR TRANSPORT (in Cantonese): All I can think of is to step up publicity work; or perhaps the Honourable Member can also help with the publicity and call on people to travel on the TCL more often.

PRESIDENT (in Cantonese): Mr LAU Chin-shek.

MR LAU CHIN-SHEK (in Cantonese): Will the Secretary for Transport inform this Council how many passengers of the TWL have switched to the TCL in the past two months? If no obvious improvement has been shown even after increasing the frequency to eight minutes, will the MTR Corporation try to increase passenger capacity of the TCL by way of fare reduction?

PRESIDENT (in Cantonese): Secretary for Transport.

SECRETARY FOR TRANSPORT (in Cantonese): Regarding the first part of the question, I do not have the statistics concerned at hand, but I can ask whether the MTR Corporation have conducted a survey on this, because it is only through surveys and interviews that we can find out clearly the exact number of riders switching from line A to line B. As regards the fare of the TCL, it is set under the same criteria as that of other MTR lines, that is, according to the distance of the trip. As to whether other preferential treatment will be given or adjustments made, as appropriate, based on commercial considerations, I will refer the question to the MTR Corporation and will also request it to consider the suggestion of the Honourable Member.

PRESIDENT (in Cantonese): Miss Cyd HO.

MISS CYD HO (in Cantonese): Madam President, ample time was taken in making preparations and conducting tests for these two railway lines than the line to the new airport. Were there ever any delays during their testing, or have all the solutions conceived during their testing still failed to solve the problems now? Can the Secretary tell this Council whether the same problems were encountered during their testing, or is this the result of inadequate anticipation beforehand?

PRESIDENT (in Cantonese): Secretary for Transport.

SECRETARY FOR TRANSPORT (in Cantonese): Madam President, concerning the problem of delays, I have already said that up till now, in less than three months of their operation, the services of the TCL and the AEL have basically reached their highest proficiency, as projected, of taking 23 minutes per trip. As it will take a certain time at the beginning for all new systems to become fully operational before reaching their highest proficiency, so the problem of delays at the initial stage is neither significant nor unanticipated. If everything has to be properly prepared before the operation, it is not impossible, but it may have to take one whole year before the commencement. On the contrary, without a sufficient number of riders, the system will not be able to reach its full operational capacity. Therefore, it is impossible for any new rail system to be completely free from all problems at the initial stage of their operation. But in general, I believe that the operation of the TCL and the AEL have soon reached their projected efficiency already.

MISS CYD HO (in Cantonese): Madam President, I would like to bring up a simple follow-up.

PRESIDENT (in Cantonese): Which part of your supplementary question has not been answered, Miss HO?

MISS CYD HO (in Cantonese): I just wish to continue asking the Secretary ......

PRESIDENT (in Cantonese): Miss HO, if you wish to continue asking questions, then that should be considered as another supplementary question. I will allow you to wait for your turn to ask again.

MISS CYD HO (in Cantonese): The Secretary has not answered part of my question.

PRESIDENT (in Cantonese): Please state only that part of your supplementary question.

MISS CYD HO (in Cantonese): The Secretary has said that the delays have been anticipated, but my question was whether they had anticipated there could be so many problems beforehand. I would like to ask the Secretary whether the actual problems encountered have been the same as those anticipated?

PRESIDENT (in Cantonese): Secretary for Transport.

SECRETARY FOR TRANSPORT (in Cantonese): If I say that the situation anticipated matches the actual one, the Honourable Member will definitely say that we had failed to make adequate preparations, and so my answer is a definite no. We did anticipate some problems and have taken the necessary precautions. But in the actual operation, when unanticipated incidents occur, we will make use of all resources available to deal with them and that is the situation of the actual operation.

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

MR CHAN KAM-LAM (in Cantonese): Paragraph (a)(iii) of the main reply given by the Secretary can be said to be a very casual and brief description of the problem. In fact, from the complaints we received from the residents or as we heard on the radio, we noted that delays have been very serious, as they can range from 10-odd minutes to over 20 minutes. I would like to ask whether the Government has any agreement with the MTR Corporation that the service must be regularized within a certain period of time. If not, although the Secretary has said in paragraph (b) that the average frequency of the average train service is expected to be enhanced to eight minutes in about two months' time, delays will still happen by then. Would the Secretary please inform this Council whether the Government has reached any agreement with the MTR Corporation on how this problem should be solved, or whether it has held regular discussions with the Corporation about this problem?

PRESIDENT (in Cantonese): Secretary for Transport.

SECRETARY FOR TRANSPORT (in Cantonese): This supplementary question involves several levels. As far as safety of the operation is concerned, we have an independent Hong Kong Railway Inspectorate which holds discussions frequently with the MTR Corporation on safety issues, and the MTR Corporation is also required to submit reports on this matter on a regular basis. As for the general operation, we will, basing on the designed standard, monitor whether or not their operation has reached the standard required. I have said before that the frequency of the train service has increased to five minutes during the peak hours, and although the off-peak-hour frequency is 10 minutes on an average, its signalling system is gradually becoming fully operational, and so the MTR Corporation has had full confidence that it would be able to increase the frequency to the designed standard within two months.

PRESIDENT (in Cantonese): Third question. Mr Albert HO.

Traffic Flows of Cross Harbour Tunnels

3. MR ALBERT HO (in Cantonese): Madam President, at present, the respective traffic volume of the Eastern Harbour Crossing (EHC) and the Western Harbour Crossing (WHC) is less than that of the Cross-Harbour Tunnel (CHT). In this connection, will the Government inform this Council:

  1. of the original forecast traffic flows of the three tunnels respectively;

  2. of the current traffic flows of the three tunnels during rush hours; and how they compare with the original forecast for rush hours;

  3. the effectiveness of EHC and WHC in easing traffic congestion at the CHT;

  4. whether it has examined if the low traffic volume of WHC constitutes a waste of social resources; and

  5. whether it has examined if the lower traffic volume of EHC and WHC is related to their higher tolls; if so, whether it will take measures such as adjusting the tolls of the three tunnels in order to ease traffic congestion at the CHT?
PRESIDENT (in Cantonese): Secretary for Transport.

SECRETARY FOR TRANSPORT (in Cantonese): Madam President, there are actually five parts to the question. I will be answering seriatim:

  1. A transport study undertaken by the Transport Department in 1996 estimated that upon the opening of the new airport and the WHC in 1997, the average two-way traffic volume of the CHT, EHC and WHC would be 106 000, 85 000 and 59 000 vehicles per day respectively, while the two-way traffic volume of these three tunnels during rush hours would reach 6 400, 6 100 and 3 700 vehicles per hour.

  2. In August 1998, the maximum two-way traffic volume of the three tunnels during rush hours was: 6 200 vehicles per hour (97% of the forecast) for CHT, 4 800 (79%) for EHC and 2 800 (76%) for WHC.

  3. The opening of the EHC and WHC had the immediate effect of relieving congestion at CHT. Following the opening of the EHC in September 1989, the daily average usage rate of the CHT dropped from 118 400 vehicles in August 1989 to 115 800 vehicles in October 1989, that is, a reduction of 2.2%. The same effect was observed after the opening of the WHC in April 1997 ─ the daily average usage rate of the CHT decreased from 126 100 vehicles in March 1997 to 123 100 vehicles in May 1997, that is, a reduction of 2.4%.

  4. The three cross-harbour tunnels were planned, approved and built at different times to meet the Government's policy objectives on transport and development. The CHT was constructed in the sixties to link the Hong Kong Island with the Kowloon Peninsula to provide a direct and convenient all-weather strategic route across the harbour. Its impact was immediate and most significant.

    It was due to the growing volume of cross harbour traffic that the EHC was constructed in the '80s to help relieve congestion at the CHT. Its site was chosen to serve another purpose, that is, to promote the development of Island East, Kowloon East and Tseung Kwan O. Again, the impact was obvious.

    The WHC is one of the Airport Core Programme Projects, the construction of which is designed with a capacity adequate to cope with the transport needs of the new airport and the future overall development of Hong Kong. The new airport was just commissioned in July this year. Tung Chung new town is only at the initial stage of development while the land at West Kowloon Reclamation is yet to be developed. It is expected that the usage rate of the WHC will increase when these developments gradually take shape. WHC's strategic role will then become apparent.

  5. The usage rate of the cross-harbour tunnels is affected by a number of factors, namely, the distribution of population and employment, economic development, road networks, number of vehicles, toll charges and the destination of the commuters.

    Where it is judged by the tunnel operators that the toll level may have an impact on patronage, the operators may seek an adjustment in accordance with the provisions in the relevant laws governing their operation.

PRESIDENT (in Cantonese): Mr Albert HO.

MR ALBERT HO (in Cantonese): Madam President, at present, the CHT is often congested and patronage of the WHC is low. I think this reflects to a certain extent the failure of the Government in matters on transport, planning and management, resulting in a waste of public resources. I wish to ask the Secretary if he could simply or directly state that there is no other way than to wait for the developments in West Kowloon Reclamation and other new towns such as the Tung Chung new town?

PRESIDENT (in Cantonese): Secretary for Transport.

SECRETARY FOR TRANSPORT (in Cantonese): Madam President, other than to wait for the completion of all developments serviced by the WHC to boost patronage, we have adopted some measures to encourage the use of the WHC. An obvious example is the road works at the waterfront of the Central District, which include drainage works but which is not related to railway works. We have urged the relevant departments to expedite the completion of these projects. We expect they can at least relieve the traffic flow from Central to the entrance of the WHC.

The Western Harbour Crossing Company Limited (WHCC) itself has commercial considerations as to ways to attract drivers to use the tunnel. In the past few months, the WHCC provided various benefits to users, including offering two tunnel coupons for every purchase of 10, and rewarding users with gas coupons. In fact, I think, there must be sufficient passengers and cars to achieve high patronage. Over the past few months, patronage has been affected by the economic climate to a certain extent, as shown by the overall patronage for these tunnels. Therefore, I think other factors must be present before a noticeable rise in the patronage of the WHC can be seen.

PRESIDENT (in Cantonese): Mr Edward HO.

MR EDWARD HO (in Cantonese): Madam President, in paragraph (e) of the main reply it was said that tunnel operators may seek an adjustment in toll charges in accordance with the provisions in the relevant laws governing their operation, where it is judged that the toll level may have an impact on patronage. What we can see now is a huge gap in the average usage rates and toll levels among the three tunnels, particularly so between the CHT and the WHC. The toll for the WHC is $30, three times as much as those of the other tunnels. But the WHC sees no commercial grounds for a price reduction because even if more cars use it after a price reduction the total income would remain more or less the same. In the circumstances, can the Secretary inform this Council how the traffic flow can be improved?

PRESIDENT (in Cantonese): Secretary for Transport.

SECRETARY FOR TRANSPORT (in Cantonese): Madam President, I recall that in discussing the issue at the Panel on Transport, some Members wanted the Government to ask the WHCC to consider proposals to reduce the toll. We undertook to do the same. The WHCC is now aware of the comments of Members. Furthermore, the Government has no legal authority to request the WHCC to reduce the toll. The WHCC will surely consider the overall operation from a commercial viewpoint, but we must not forget that a huge amount of money has been invested in the WHC project and any investor would expect a reasonable return on investment before investing further. That is a factor we need to consider.

PRESIDENT (in Cantonese): Mr LEUNG Yiu-chung.

MR LEUNG YIU-CHUNG (in Cantonese): Madam President, in paragraph (c) of the main reply it was said that following the opening of WHC, there was a 2.2% reduction in usage rate of the CHT, that is about 2 600 vehicles, which is indeed too small to be of any help to ease the congestion in the CHT. Notwithstanding this, would the Government tell me what caused a reduction in the 20 000-odd vehicles or 2.2% usage rate? Was that due to the opening of the WHC or the economic climate? Has the Government conducted any research in this direction?

PRESIDENT (in Cantonese): Secretary for Transport.

SECRETARY FOR TRANSPORT (in Cantonese): Madam President, the usage rate of the three tunnels taken together recorded a slight decrease actually, in particular in the past few months. When the WHC started its operation, there was no noticeable drop in the total number of vehicles. The drop was not apparent until the recent months. So, obviously the noticeable drop in the number of vehicles using the CHT and the EHC was due to the use of the WHC during the period immediately following its opening. In fact, during that period, the total patronage of the three tunnels was not reduced.

PRESIDENT (in Cantonese): Mr LEUNG, which part of your supplementary question was not answered?

MR LEUNG YIU-CHUNG (in Cantonese): Madam President, the Secretary's answer is based on the obvious flow in traffic. Would the Secretary tell me whether there has been any research in this direction, or was his conclusion a result of intuitive observation?

PRESIDENT (in Cantonese): Secretary for Transport.

SECRETARY FOR TRANSPORT (in Cantonese): Madam President, I remember when I studied mathematics, 1+2+3=6. If 6 is not changed, the combination in 1+2+3 can obviously be changed. Now I assume 6 refers to the original usage rate. Yes, clearly I arrived at the conclusion by intuition. However, as for in-depth investigation by tracking down cars which used the CHT before and finding out whether they have switched to the CHT, we have not conducted any such investigations.

PRESIDENT (in Cantonese): Mr Andrew CHENG.

MR ANDREW CHENG (in Cantonese): Madam President, we know the CHT is blessed with a mechanism for automatic toll increase. If the actual income for any year is lower than a minimum level, that is, if the internal rate of return is less than 15%, it can increase the toll. If that is the case, patronage at the CHT will further dwindle. I would like to ask the Secretary if the Government has thought of a specific solution to cope with this vicious circle, for example, will it review the mechanism mentioned?

PRESIDENT (in Cantonese): Secretary for Transport.

SECRETARY FOR TRANSPORT (in Cantonese): Madam President, I think this is a hypothetical question. Up to this moment, I have not received any application in this regard.

PRESIDENT (in Cantonese): Mrs Miriam LAU.

MRS MIRIAM LAU (in Cantonese): Madam President, the CHT is the best positioned in transport terms, and its toll is the lowest. The toll is about one-third of that of the WHC, making it impossible for the WHC to effect a diversion of the traffic. In view of this, will the Secretary inform this Council whether the Government will consider negotiating with the EHC and the WHC to merge all three tunnels , when the franchise of the CHT will end in August next year, and then equalize the toll for all three to achieve the result of an even flow for the tunnels?

PRESIDENT (in Cantonese): Secretary for Transport.

SECRETARY FOR TRANSPORT (in Cantonese): Madam President, this is an innovative suggestion. We did not have that idea before; but we will consider it as a Member has raised it now.

PRESIDENT (in Cantonese): Miss Emily LAU.

MISS EMILY LAU (in Cantonese): Madam President, in paragraph (c) of the main reply it was said that the opening of the EHC and WHC had the immediate effect of relieving congestion at the CHT. But the actual effect was that the EHC contributed to a 2.2% reduction in usage rate for the CHT, and WHC, a 2.4% reduction, which were minimal. I would like to ask the Secretary if this is the designed effect? People had then thought the CHT was too heavily congested, so there was the decision to build two more tunnels to relieve the congestion. But did the result so turned out match with that anticipated? Or was it never thought of, nor was any attention paid to that result, so that there was never any indicator?

PRESIDENT (in Cantonese): Secretary for Transport.

SECRETARY FOR TRANSPORT (in Cantonese): Madam President, I will use the 1+2+3=6 formula as an answer. At the beginning, we only had the CHT; the sum was 6. Later we found the sum has arisen to 7, 8, 9, so we decided to build one more tunnel. At the inception of the second tunnel, the sum became 6+3=9. After several years, the sum rose to 10, 11, 12, we therefore built the EHC. What I wanted to say was since the construction of the first tunnel, the number of vehicles using it to cross the harbour had been increasing. After the construction of the second tunnel, we found congestion persisted. Congestion was, I must stress, even worse during peak hours. Now we have a third tunnel, which is the WHC. It has another strategic use: we need a passage to the new airport to smooth out the traffic. At the moment, the WHC has come into operation for just a short while and the total number of vehicles using the tunnels is more or less the same as that a year before. So, apparently the total number of vehicles using the tunnels had not continued to increase. In short, the construction of the second and the third tunnel was the result of an increase in the total number of vehicles, which makes the infrastructure inadequate, hence the need for an increased number of tunnels.

PRESIDENT (in Cantonese): Miss Emily LAU.

MISS EMILY LAU (in Cantonese): Madam President, the Secretary has not answered my supplementary question. My question is simple: In constructing a new tunnel, had the Government anticipated the relief it could achieve? What was the percentage? The result after the inception was 2.2%. How much does this differ from the Government's expectation? The Secretary has not answered my question at all. He just repeatedly added up the figures. Madam President, I hope the Secretary can genuinely give a reply. If the Government did not make any forecast, just say so. If it did, it should say, for example, the EHC was expected to relieve 10% of the flow, but the result that turned out was 2%, whereas the WHC, expected to relieve 11% of the flow, did only turn out to be 2% as a result. That should be the kind of answer given.

PRESIDENT (in Cantonese): Secretary for Transport.

SECRETARY FOR TRANSPORT (in Cantonese): Madam President, now I understand. (Laughter) I will let the Honourable Member know the specific figures after I make some investigations. But I want to stress I was referring to immediate effects. The figures I mentioned were those obtained one month after the opening of the tunnels. I will provide an answer in writing on the detailed analysis. (Annex I)

PRESIDENT (in Cantonese): Mr Howard YOUNG.

MR HOWARD YOUNG: Madam President, I want to follow up on what the Secretary called an innovative suggestion on equalization as raised by the Honourable Mrs Miriam LAU. Apart from thinking about it, can the Secretary actually undertake to bring this idea to the operators or perhaps the road user organizations to see whether it might be feasible? And, can the Secretary tell us will there be any legal barriers preventing the implementation of any sort of equalization scheme?

PRESIDENT (in Cantonese): Secretary for Transport.

SECRETARY FOR TRANSPORT: In order to be positive, I would not start from the basis of problems or legal impediments. I will certainly undertake to consider this proposition seriously and conduct necessary consultation if we decide to proceed further with the exploration of this option.

PRESIDENT (in Cantonese): Fourth question. Mr Howard YOUNG.

Relaxing the Restrictions on Installation of Signboards

4.MR HOWARD YOUNG (in Cantonese): Madam President, when the airport was situated in the urban area, the Government imposed stringent restrictions on the installation of neon signboards and electronic flashing signboards in the urban area, in order not to affect the safe flight of aircraft. Now that the airport has moved out of the urban area, will the Government inform this Council whether it will shortly review the feasibility of relaxing such restrictions; if so, what the review schedule is; if not; why not?

PRESIDENT (in Cantonese): Secretary for Economic Services.

SECRETARY FOR ECONOMIC SERVICES (in Cantonese): Madam President, at present, the exhibition of animated or occulting signs is prohibited in various manners under a number of ordinances. Ensuring flight safety is not the sole purpose of the concerned requirements.

As far as civil aviation is concerned, the Air Navigation (Hong Kong) Order 1995 provides for the prohibition of any light which may be mistaken for an aeronautical light or cause glare to pilots and endanger the safety of aircraft. The Hong Kong Airport (Control of Obstructions) Ordinance (Cap. 301) restricts the display of occulting lights over a specified intensity in Kowloon and New Kowloon and empowers the Director of Civil Aviation to, where the safety of aircraft so requires, prohibit the use of any light exposed to the sky.

To ensure marine safety, there are also provisions in the Shipping and Port Control Ordinance (Cap. 313) imposing controls on the display of lights or illuminated signs which may or are likely to interfere with or cause confusion to the navigation of vessels.

The above legislation does not pose any restriction on neon signboards or electronic flashing signs which do not affect air navigation or marine safety.

At present, the most stringent control on the installation of occulting signs is provided under the Advertisements By-laws made under the Public Health and Municipal Services Ordinance (Cap. 132). Section 5 of the By-laws specifies that no occulting signs may be exhibited on any premises in Hong Kong. This total prohibition of occulting signs still exists mainly because at present there is no legislation controlling such signs from the road traffic safety viewpoint. The preliminary view of the Government is that this prohibition can be relaxed, subject to the prerequisite that road traffic safety will not be affected.

The Transport Department has drawn up its proposed regulatory guidelines on occulting signs and is discussing the approach for implementation with the Buildings Department. It is expected that a conclusion would be reached within this year.

PRESIDENT (in Cantonese): Mr Howard YOUNG.

MR HOWARD YOUNG (in Cantonese): Madam President, over the years, many industries, including the retail, advertising and tourist industries, have been lobbying the Government for the relaxation of restrictions on these kinds of lights, as occulting lights can add more colour to Hong Kong. It seems that the Secretary has passed the ball on to the Transport Department. Can the Secretary for Economic Services make the Transport Department understand that, in addition to the traffic viewpoint, the overall economic effectiveness of the territory should be taken into account in reviewing this issue? Perhaps, should the Secretary for Transport be asked to answer this question?

PRESIDENT (in Cantonese): Secretary for Economic Services, please answer the question first.

SECRETARY FOR ECONOMIC SERVICES (in Cantonese): Madam President, of course, from the viewpoint of tourism, neon signboards will definitely add more colours to Hong Kong, but we must also consider road traffic safety. We must put effective legislation in place in order not to affect road traffic safety.

PRESIDENT (in Cantonese): Secretary for Transport, do you have anything to add?

(Secretary for Transport indicated that he had nothing else to add)

PRESIDENT (in Cantonese): Mr NG Leung-sing.

MR NG LEUNG-SING (in Cantonese): Madam President, the fifth paragraph of the Government's main reply mentioned that, at present, the most stringent control on the installation of occulting signs was provided under the Advertisements By-laws made under the Public Health and Municipal Services Ordinance (Cap. 132). Will the Government inform this Council how many people or commercial premises have been prosecuted by the Government by application of the By-laws over the past three years and what sentences were eventually imposed on them?

PRESIDENT (in Cantonese): Secretary for Economic Services.

SECRETARY FOR ECONOMIC SERVICES (in Cantonese): We have not applied the By-laws to institute any prosecutions over the past three years.

PRESIDENT (in Cantonese): Mr Andrew CHENG.

MR ANDREW CHENG (in Cantonese): Madam President, in the fifth paragraph of the main reply, the Secretary mentioned that only the Public Health and Municipal Services Ordinance could ensure road traffic safety in this respect. But, on the other hand, the Secretary said that the Government held the preliminary view that the prohibition could be relaxed. In accordance with the principle of ensuring road traffic safety, will the Government inform this Council according to what argument or principle it considers that the prohibition may possibly be relaxed? Given that legislation is already in place to regulate as far as the principle of road traffic safety is concerned, will the Secretary clearly inform this Council according to what argument or principle the Government will consider relaxing the requirements?

PRESIDENT (in Cantonese): Secretary for Economic Services.

SECRETARY FOR ECONOMIC SERVICES (in Cantonese): Madam President, the Secretary for Transport is sitting here at the moment. If he does not mind my speaking on his behalf, I will answer this question.

In studying the proposed guidelines, the Transport Department has taken into account a few factors, including the location, area, colour and occulting frequency of the signs. The Department is of the preliminary view that these occulting signs should not be allowed to exist under certain circumstances. But they can be allowed to exist in some other situations. Such signs are not allowed to exist in such places as expressways, highways and crossroads, where such signs should not be installed. Moreover, the colour and shape of the signs must not make drivers mistake the signs for traffic signals. If the signs take the form of a television screen, their position and design must not distract the attention of drivers. These are the factors considered by the Transport Department at the moment.

PRESIDENT (in Cantonese): Mr Howard YOUNG.

MR HOWARD YOUNG (in Cantonese): Madam President, just now the Secretary said that no prosecutions had been instituted under the By-laws. I remember I had asked the Government two years ago whether the quasi-television screens located on Hennessy Road, Causeway Bay and outside Times Square had any impact on road safety. The Government's reply at that time was in the negative. Will the Transport Bureau take these factors into account in considering the relaxation of the requirements?

PRESIDENT (in Cantonese): Secretary for Economic Services.

SECRETARY FOR ECONOMIC SERVICES (in Cantonese): In considering the guidelines, the Transport Department will consider the factors I mentioned earlier. As far as I understand, the Department is of the view that the occulting signs located outside the Sogo Department Store and Times Square will not affect traffic safety. As such, I believe these signs will not be affected when the new legislation comes into effect in future.

PRESIDENT (in Cantonese): Last oral question. Dr Raymond HO.

Legislation on Carriage of Heavy Machinery

5.DR RAYMOND HO (in Cantonese): Some time ago, an accident occurred at a bend near Nam Wai section of the Hiram's Highway, resulting in a large concrete piling machine, which was placed in a trailer dragged by a tractor, being tossed off the trailer and hitting a private car head-on, with casualties caused. In this connection, will the Government inform this Council:

  1. whether the existing legislation and safety guidelines can adequately monitor the carriage of heavy machinery on vehicles; and

  2. how the relevant legislation and safety guidelines are enforced by the authorities, in order to ensure that drivers comply with the relevant legal provisions and safety guidelines?
PRESIDENT (in Cantonese): Secretary for Transport.

SECRETARY FOR TRANSPORT (in Cantonese): Madam President, control of overloading and insecure loading on vehicles is regulated by the Road Traffic (Traffic Control) Regulations. The relevant offences when prosecuted by summons are punishable by a maximum fine of $5,000 and three-month imprisonment for the first conviction and a fine of $10,000 and imprisonment for six months for the second conviction. Less serious offences are punishable by fixed penalty tickets, which are $1,000 for overloading and $450 for insecure loading.

General safety guidelines on carriage of heavy machinery on vehicles are set out in a Code of Practice for the Loading of Vehicles published by the Transport Department. The Code of Practice provides detailed advice, with the aid of diagrams, on how a large variety of loads, including engineering plants, should be arranged. The Transport Department also holds regular meetings with the trucking industry where messages against overloading and insecure loading are disseminated.

The police take vigorous enforcement actions against overloading and insecure loading. Particular attention is given to major highways frequently used by goods vehicles.

The number of tickets and summons issued for the overloading offence has decreased by 15% in 1996 and 1% in 1997. Casualties arising from this offence have also dropped from 33 in 1996 to 20 in 1997. These statistics suggest that the problem of overloading is becoming less serious. However, the number of tickets and summons issued for insecure loading has increased by 14% in 1996 and 24% in 1997. Casualties arising from this offence have also risen from 15 in 1996 to 27 in 1997. These figures suggest that insecure loading is becoming more serious. This is an area which the police will enhance their enforcement.

In an effort to identify additional measures to tackle overloading and insecure loading, I have asked the Transport Department to review with relevant departments the existing legislative and administrative measures and to identify the need to introduce new measures to deal with these offences. The review is expected to complete before the end of this year. Measures being studied include the updating of pecuniary fines to restore their deterrence effects and incorporating the offences into the Driving Offence Points System.

The Government will consult the concerned parties including the trucking industry before firming up any recommendations.

PRESIDENT (in Cantonese): Dr Raymond HO.

DR RAYMOND HO (in Cantonese): The number of tickets and summons issued for overloading offence has slightly decreased by 15% and 1% respectively over the past two years, but looking at these figures from a scientific perspective, the truth cannot be discerned so easily. For there would be a big difference between strict and lenient enforcement. On the other hand, it is easy to see that the offence of insecure loading has become more serious because the number of casualties arising from this offence has already increased by 53.33% over the past year alone. If the matter is still under review and findings will only be obtained by the end of this year before measures are to be studied to deal with the situation, then we shall have to wait for a few months more (that is , about half a year) before any final decisions could be made. In the meantime, can the police take more vigorous prosecution actions against these offences because very often it can be seen even with the naked eye that the goods or heavy machinery carried by heavy goods vehicles on major highways are not securely loaded?

PRESIDENT(in Cantonese): Secretary for Transport.

SECRETARY FOR TRANSPORT (in Cantonese): Madam President, I agree with the view expressed by the Honourable Member. In my main reply I also mentioned that the police will certainly step up their enforcement actions, especially against insecure loading. Actually, the number of offences in this regard is very large. The number of overloading cases I mentioned earlier seems to have fallen, but in fact there are still quite a lot of cases involving this kind of offence. Therefore, the police will not relax its enforcement actions in this respect.

PRESIDENT( in Cantonese): Mr LEE Wing-tat.

MR LEE WING-TAT (in Cantonese): Madam President, over the past few years there were cases such as where a concrete mixer truck carrying concrete overturned and killed a passer-by; an overloaded container truck overturned and killed a private car driver on the other driving lane; plus this case. All of these cases have caused serious injuries to those who complied with traffic regulations. But each time after the accident has happened, the Transport Bureau would only make a review of the accident itself. Has the Transport Bureau or the Transport Department considered making a comprehensive review of the safety problem of the carriage of goods by heavy vehicles, or will the Government merely make a review of the unpleasant accident itself each time after one such incident has happened?

PRESIDENT (in Cantonese): Secretary for Transport.

SECRETARY FOR TRANSPORT(in Cantonese): I have only mentioned two examples when I talked about the scope of the review, that is, the two examples in considering the new measures. We will definitely make use of the experience we have gained over the past few years, especially that from the serious incidents mentioned by Mr LEE, and study the regulatory effect of the related legislation to see what areas can be enhanced and tightened up in order to reduce the number of offences.

PRESIDENT (in Cantonese): Mrs Miriam LAU.

MRS MIRIAM LAU (in Cantonese): Madam President, as the problem of insecure loading in vehicles is getting more serious, apart from enhancing prosecution actions and imposing heavier penalties, will the Government consider reviewing the Code of Practice for the Loading of Vehicles issued by the Transport Department to see if there are sufficient guidelines to teach people how to make the loads secure and whether promotion work for the Code of Practice is adequate? I notice that the emphasis of this Code of Practice seems to be placed on the warning against overloading and on the proper positions of loads, but there is little information and guidance given to truck drivers on how the loads could be secured.

PRESIDENT(in Cantonese): Secretary for Transport.

SECRETARY FOR TRANSPORT(in Cantonese): Madam President, no matter whether or not new measures are suggested in our review, we will do that for sure. If there are new measures, the Code of Practice would of course need to be amended or enhanced. Even if there are no new measures, we will conduct a review to see which areas in the existing Code of Practice could be improved.

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

MR LAU KONG-WAH (in Cantonese): Madam President, the main reply refers to quite an astonishing increase in the accumulated number of tickets issued for the insecure loading offence in 1996 and 1997. The main reply also mentions that the maximum penalty is imprisonment while less serious offences can get away with just a $450 fine. I would like to ask the Secretary for Transport whether there are figures in the past two years showing that the related penalties could be too heavy or otherwise, and if the penalties are too light, whether this would create a tendency for the number of offenders to be increased?

PRESIDENT (in Cantonese): Secretary for Transport.

SECRETARY FOR TRANSPORT (in Cantonese): Madam President, I do not have any figures on the penalties at hand, but I can provide the information to Mr LAU in writing. (Annex II)

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

MR HO SAI-CHU (in Cantonese): Madam President, my question is quite similar in nature. I would like to know that in the past few years, did anyone receive a prison sentence because of these serious accidents? If so, what is the number of such cases? The level of fine for the existing penalty is low. When was this level of fine set? Were there any adjustments made since then?

PRESIDENT (in Cantonese): Secretary for Transport.

SECRETARY FOR TRANSPORT (in Cantonese): The question of whether penaltiesshould be adjusted or not is one of those areas to be reviewed. As for the number of persons over the past few years who received a prison sentence after committing offences under the related legislation, I do not have the information at hand right now, but I will offer the information requested to Members. (Annex III)

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

MR HO SAI-CHU (in Cantonese): Madam President, just now I also asked when was the level of fine set and whether there were any amendments made since then? There will certainly be a review conducted by the Government later, and there will be changes. But my question is: when was the present level of fines set and were there any revisions made since then?

PRESIDENT (in Cantonese): Secretary for Transport.

SECRETARY FOR TRANSPORT (in Cantonese): I do not have these information at hand, I will inform the Honourable Members after looking up the information we got.

WRITTEN ANSWERS TO QUESTIONS

Relationship between Hong Kong and Taiwan

6. MR FRED LI (in Chinese): Regarding the relationship between the Hong Kong Special Administrative Region (SAR) and Taiwan, will the Government inform this Council:

  1. of the changes to the policies of and the procedures for issuing entry visas to residents of Taiwan after Hong Kong's reunification with China;

  2. of the government official who decided to adopt the earlier practice of placing a warning sentence on the passports of visiting Taiwanese residents, and the justifications for so doing;

  3. of the existing criteria for issuing entry visas to the government officials of Taiwan; and

  4. as a founding member of the World Trade Organization (WTO), whether the Government has supported Taiwan's application for joining that Organization; if so, what specific actions have been taken; if not, why not?
SECRETARY FOR SECURITY (in Chinese): Madam President,

  1. Taiwan residents are required to apply for an entry permit (Taiwan Visit Permit (TVP)) before entering Hong Kong. This policy has not changed after the reunification. The application procedures for TVPs have remained the same. TVP applicants have to submit their applications to the Immigration Department through the authorized offices of altogether 21 airlines in Taiwan. Applications for renewal of TVPs may however be submitted to the Immigration Department in person, through their authorized persons in Hong Kong, or through the authorized airline offices in Taiwan.

    We have recently introduced a number of improvement measures to enhance the travel convenience of Taiwan visitors, viz:

    1. on 1 June 1998, we started allowing holders of Mainland Travel Permit for Taiwan Residents (MTP) with an entry-exit endorsement issued by the mainland authorities to transit Hong Kong en route to or from the Mainland for a period of up to seven days without a TVP;

    2. on 5 June 1998, we launched a fast-track service of issuing multiple-journey TVPs valid for three years to bona fide visitors. The normal processing time for TVP applications under this service is reduced from five to two working days; and

    3. as from 1 June 1998, we have extended the transit period allowed for Taiwan residents holding other acceptable travel documents than TVPs and MTPs from two to seven days.

  2. The so-called "warning sentence" was in fact conditions which had been in place for many years in TVP application forms. With the introduction of the improvement measure set out in my reply (a)(i) above, the Administration transcribed these conditions onto a stamp which was placed on the visitors' MTPs. A collective decision was taken by the officials responsible.

    In view of concerns expressed that the conditions might be regarded as discriminatory, the Administration reviewed the situation and decided that there was no continued need for this stamp. We have stopped putting the stamp on visitors' MTPs and removed the conditions from TVP application forms since 20 July 1998.

  3. Each application for a TVP from a Taiwan visitor will be considered on its own merit.

  4. The SAR Government has long supported Chinese Taipei's application for WTO membership. As an open economy, Hong Kong attaches tremendous importance to the multilateral trading system built on the basis of the WTO. It is also a fact that Chinese Taipei is our fourth largest trading partner. Nonetheless, the timing of Chinese Taipei's accession hinges on the progress of the overall negotiation and examination process necessary for entry into the WTO. This includes the drafting of a Protocol on Chinese Taipei's accession and a final decision to be made by the WTO General Council composed of representatives of all the WTO members. The SAR Government is a member of the Working Party on the drafting of the Protocol on Chinese Taipei's accession. Furthermore, the General Council of the General Agreement on Tariffs and Trade (GATT, the predecessor of the WTO) reached an understanding in 1992 that China's accession to the GATT should precede that of Chinese Taipei. The SAR Government has all along abided by this understanding.
Traffic Volume of Western Harbour Crossing

7. MR CHAN KAM-LAM (in Chinese): In connection with the low traffic volume of the Western Harbour Crossing (WHC), will the Government inform this Council:

  1. of the average monthly traffic volume of the WHC at present;

  2. of the comparison between the average monthly volume and the originally estimated volume; and

  3. whether the traffic volume of the WHC has increased since the opening of the new airport; if so, what the rate of increase is?
SECRETARY FOR TRANSPORT (in Chinese): Madam President,

  1. The average monthly traffic volume of the WHC in July and August 1998 was about 1 097 700 vehicles;

  2. This average monthly traffic is about 60% of the original forecast of 1.8 million per month.

  3. The average monthly traffic of 1 097 700 vehicles using the WHC after the opening of the new airport represents an increase of 14.2% over the corresponding figure of 961 300 vehicles in May and June 1998.
Employees Compensation Assistance Fund Board

8. MR BERNARD CHAN: Regarding the Employees Compensation Assistance Fund Board (the Fund Board), will the Government inform this Council:

  1. of the respective numbers of settled claims in 1997-98 and outstanding claims as at 1 April 1998;

  2. of the total amount paid in respect of the settled claims in 1997-98;

  3. of the surplus of the Employees Compensation Assistance Fund (the Fund) as at 31 March 1998;

  4. whether the surplus of the Fund is adequate for settling the outstanding claims; and

  5. whether the Fund Board will consider taking a more active approach in negotiating and settling claims at an early stage before going to court, so that the resources of the Fund can be enhanced?
SECRETARY FOR EDUCATION AND MANPOWER: Madam President, the Fund Board was established on 1 July 1991 under the Employees Compensation Assistance Ordinance (the Ordinance) for the protection of the entitlement of employees to compensation or damages for employment-related injury and of employers against default of their insurers. Under section 4 of the Ordinance, the Fund Board is mainly responsible for holding the Fund upon trust, administering the Fund in accordance with the objects of the Ordinance, and determining the eligibility of persons applying for payment from the Fund. The Fund mainly comprises income from a levy imposed on the premium of employees compensation insurance policies.

Under section 16 of the Ordinance, employees or dependants of deceased employees who are unable to receive compensation under the Employees' Compensation Ordinance or damages under the common law from their employer or insurer after exhausting legal and financially viable means of recovery as are reasonable in the circumstances may apply for payment from the Fund. Sections 17 and 18 of the Ordinance provide for applications from employers in the event that their insurers with whom they have taken out employees compensation insurance become insolvent.

So far, all cases assisted by the Fund Board have been applications from employees or dependants of deceased employees. Answers to the specific questions are:

  1. The Fund Board assisted and settled 23 cases in 1997-98. As at 1 April 1998, there were six outstanding cases and they have now been settled.

  2. The Fund Board paid a total amount of $47.27 million in respect of the cases settled in 1997-98.

  3. The Fund had an accumulated surplus of $34.09 million as at 31 March 1998.

  4. The Fund Board continues to receive new applications after 1 April 1998. In the five months from April to August 1998, the Fund Board paid $5.69 million to settle 10 cases. As at 1 September 1998, there were 13 outstanding cases with a total estimated claim of $14 million. There will be sufficient financial resources in the Fund to settle the 13 outstanding claims at the current claim level.

  5. Under section 28 of the Ordinance, where it appears to the Fund Board that a person is or might be entitled to apply under the Ordinance for a payment from the Fund, the Fund Board may, in the interests of the protection of the Fund, and on such terms as it sees fit, offer to pay from the Fund to that person an amount in satisfaction of such entitlement. So far, all applications received by the Fund Board are cases of which the employees or dependants of deceased employees concerned have already filed claims for employees' compensation or damages against the employer in court. Upon receipt of an application for assistance, the Fund Board will carry out necessary inquiries and consider available documents to assess the applicant's eligibility for payment. Where the Fund Board is satisfied that a case may fall under section 28 of the Ordinance, it will attempt to negotiate settlements before the court makes an award on the liability or amount of compensation.

    In 1997-98, the Fund Board assisted eight cases by settlement negotiations under section 28. This represented 35% of the cases settled in that year. In the five months from April to August 1998, the Fund Board settled two cases (or 20%) under section 28 out of a total of 10 cases settled in the same period. The total amount of settlement paid out in respect of those 10 cases was $3.7 million as compared against the original claim amount of about $6.7 million (interest not yet included). In negotiated settlements, applicants could receive earlier payment since concerned parties need not wait for a court award on the amount of compensation.

Improvement Works to Hiram's Highway

9.MRS MIRIAM LAU (in Chinese): On 19 July this year, a serious traffic accident occurred at the Nam Wai Section of Hiram's Highway in Sai Kung resulting in casualties. In this connection, will the Government inform this Council:

  1. how motorists were advised not to use that section of the road concerned after the accident had happened, so as to minimize traffic congestion on that day;

  2. of the total number of traffic accidents which occurred on Hiram's Highway in the past three years as well as their respective causes and, among these accidents, the number of those involving goods vehicles or container trucks;

  3. whether it has any plan to improve Hiram's Highway as well as the critical bends and traffic black spots along it, especially the Nam Wai, Pak Wai and Ho Chung sections and the section of Clear Water Bay Road leading to the Highway; if so, what the details are; if not, why not;

  4. whether it will consider prohibiting heavy goods vehicles from using Hiram's Highway before the completion of such road improvement works; and

  5. whether it will consider widening Hiram's Highway on a large scale in order to improve the traffic between Sai Kung and the urban areas?
SECRETARY FOR TRANSPORT (in Chinese): Madam President, immediately after the occurrence of the accident on 19 July this year, the police made announcement through the media about the closure of the concerned section of Hiram's Highway and the traffic diversion route via Sai Sha Road.

Between 1 January 1996 and 4 September 1998, 154 accidents involving injuries happened on Hiram's Highway. Major causes of the accidents included driving too close to vehicle in front, changing lanes negligently, making turns carelessly, side swipe and loss of control. Fourty-nine of these 154 accidents involved goods vehicles or container trucks.

There is an extensive programme of improvements to Hiram's Highway. It comprises four phases:

  1. Phase 1 - provision of a climbing lane between Clear Water Bay Road and Nam Wai. Works were completed in March 1994;

  2. Phase 2 - construction of a flyover and improvements to the junction with Clear Water Bay Road. Works started in January 1997 and will be completed in early 2000;

  3. Phase 3 - improvements between Nam Wai and Ho Chung and upgrading of local access road. The sharp bend at Nam Wai will be removed. Works are planned to commence in early 1999 for completion in August 2001; and

  4. Phase 4 - conversion of the section between Clear Water Bay Road and Marina Cove to dual-two-lane standard. Works are scheduled to start in 2001 for completion in 2003.
We do not consider it appropriate to prohibit heavy goods vehicles from using Hiram's Highway because:
  1. the use of Hiram's Highway by heavy goods vehicles does not by itself represent a danger threat provided that the users abide by the speed limit and take the usual safety precautions;

  2. the prohibition will divert heavy goods vehicles to a very long detour via Sai Sha Road, which will unlikely be acceptable to the trade;

  3. Sai Sha Road, the only other access to Sai Kung, does not have adequate capacity to cope with the additional heavy goods vehicle traffic diverted from Hiram's Highway; and

  4. the divertion will involve more heavy goods vehicles travelling through Sha Tin and Ma On Shan town centres, resulting in more noise and air pollution problems in these areas.
Placement Rate of the Disabled

10. MR ERIC LI (in Chinese): In view of the exceedingly low placement rate of the disabled as compared with the overall placement rate in the territory, will the Government inform this Council:

  1. of the total number of disabled persons currently employed by the Government, the departments they are working in and the highest rank in which they are employed;

  2. of their present percentage against the total number of government employees and how this percentage compares to the relevant percentage in private companies; and

  3. how the current median wage of the disabled persons compares to that of the entire working population in the territory?
SECRETARY FOR EDUCATION AND MANPOWER (in Chinese): Madam President, we have no statistics on the overall placement rate of all disabled persons in Hong Kong. However, statistics of the Labour Department indicate that the placement rate of job-seekers with a disability compares favourably with that of the able-bodied ones.

In the first eight months of 1998, the Selective Placement Division of the Labour Department ─the division responsible for helping disabled job-seekers find jobs through intensive and personalized employment assistance ─ registered 2 363 job-seekers with disabilities and placed 979 of them in open employment, with a placement rate of 41.4%. During the same period, the Local Employment Service of the Department which offers mainly a semi-self help mode of employment service, registered 130 548 able-bodied job-seekers and placed 20 198 of them in jobs, with a placement rate of 15.5%.

My reply to the Honourable Member's specific questions are:

  1. As at 1 April 1998, the Government employed a total of 3 646 people with a disability on its establishment. The number would rise to 5 019 if those with colour-blindness and defective colour perception are included. They are employed in different bureaux and departments at various grades and ranks.

  2. As at 1 April 1998, the number of civil servants with disabilities accounted for 1.96% of the total strength, or 2.7% if those with colour-blindness and defective colour perception are included. We have no corresponding statistics on the percentage share of employees with a disability in the workforce of the private sector.

  3. Statistics on wages and earnings are regularly compiled by the Census and Statistics Department through establishment and household surveys. Since information on whether employees in establishments and working members of households are disabled is not collected in these surveys, statistics on the median wage of disabled employees are not available. As such, we are not able to compare the median wage of disabled persons with that of the entire workforce in Hong Kong.
Assurance of Adequate Supply of Drinking Water

11. MRS SOPHIE LEUNG (in Chinese): Will the Government inform this Council whether any contingency measures are in place to ensure that, in the event of serious contamination of the quality of raw water supplied to Hong Kong, there will still be an adequate supply of drinking water for Hong Kong residents, with its quality complying with the standards prescribed by the World Health Organization; if so, what the details of the measures are; if not, why not?

SECRETARY FOR WORKS (in Chinese): Madam President, in the event of an unexpected serious contamination of the Dongjiang water supplied to Hong Kong, the Water Supplies Department (WSD) has contingency measures in place to ensure that an adequate supply of water up to potable standard is maintained.

Contingency measures covering both technical and operational aspects are laid down in detail in the guidelines issued to WSD staff. The measures include procedures for monitoring the water quality, diverting and adjusting our supply systems as and when necessary, co-ordinating internal communication and taking emergency actions. Basically, the contingency plan is to stop receiving Dongjiang water immediately, and maintain water supply for the territory solely with the storage in local reservoirs. In fact, water supply from Dongjiang is suspended for one month every year for the purpose of maintenance and inspection of the supply system. Water storage in local reservoirs is then used to maintain the supply for the territory during this period. Therefore, WSD staff are highly experienced and well-prepared for the contingencies in the event of an unexpected contamination of Dongjiang water.

Should such an emergency occur, under the present arrangement agreed between Hong Kong and Guangdong, the Guangdong side will inform Hong Kong of the event immediately through the established liaison channel between the two sides. The Water Quality Monitoring System of the WSD, which works independently, is capable of timely detecting and verifying if the Dongjiang water is seriously contaminated. In such case, the WSD will stop receiving Dongjiang water immediately and maintain water supply for Hong Kong solely with the water storage in local reservoirs which is generally sufficient to meet our own consumption for several months. The water supply from Dongjiang will resume only when the problem of unexpected serious contamination is resolved.

Issue of Certificates of Absence of Marriage Record

12. MISS CHAN YUEN-HAN (in Chinese): Regarding the Certificate of Absence of Marriage Record (the Certificate) issued by the Immigration Department, will the Government inform this Council of:

  1. when the Immigration Department started issuing the Certificate, and the total number issued;

  2. the total number of applications for the Certificate received by the Immigration Department and the number issued, since January this year; and

  3. whether the Certificates issued have legal effect; if not, what remedial measures the Government will adopt?
SECRETARY FOR SECURITY (in Chinese): Madam President,

  1. The Immigration Department has been issuing the Certificates since it took over the responsibilities of marriage registration from the Registrar General's Department in 1979. From January 1979 to August 1998, the cumulative total number of Certificates issued is 444 979.

  2. From January to August 1998, the number of applications received and the Certificates issued are 20 803 and 16 047 respectively. Details of the statistics are at Annex.

  3. The Certificates issued in accordance with section 13 of the Marriage Reform Ordinance, (Cap. 178) and section 26 of the Marriage Ordinance, (Cap. 181) are valid.

Annex

Statistics on Application and Issuance of Certificate of Absence of Marriage Record (the Certificate)

(January - August 1998)

1998No. of Applications ReceivedNo. of Certificate Issued
January1 9541 971
February2 9251 610
March3 0492 730
April2 6101 855
May2 4052 113
June2 5191 896
July2 7112 104
August2 6301 768
Total20 80316 047


Provision of Emergency Medical Treatment in New Airport

13. DR LEONG CHE-HUNG:In connection with the provision of emergency medical treatment in the new airport at Chek Lap Kok, and the recent reports that patients requiring emergency medical treatment in the new airport, including passengers on board aircraft, had to pay medical expenses before they are attended to, will the Administration inform this Council whether it knows:
  1. the rationale for requiring such patients to pay before they are attended to;

  2. the number of private doctors allowed to provide medical services in the new airport;

  3. the amount of fees charged by these doctors and the criteria for referring cases to these doctors;

  4. the target arrival time of an emergency ambulance attending to a patient at the new airport; and

  5. whether the Port Health Section of the Department of Health at the new airport may provide emergency medical services to patients?
SECRETARY FOR HEALTH AND WELFARE: Madam President,
  1. According to the Airport Authority (AA), persons in the airport requiring emergency medical treatment, including passengers on board aircraft, are not required to pay before they are attended to by the medical service provider at the airport. The Authority has advised its staff and business partners of this arrangement and will remind them again from time to time to ensure that all parties concerned are aware of it.

  2. The AA has awarded a non-exclusive licence for a medical service provider to provide at the airport emergency medical services and out-patient services in two clinic premises within the passenger terminal building. The medical service provider is required to provide 24-hour coverage with at least one medical practitioner on duty.

  3. Upon receipt of emergency calls from airline/airport staff or the patients concerned, AA's Airport Operations Control Centre will immediately call an ambulance and at the same time notify the medical service provider, who will provide the stabilization and resuscitation services on-site pending the arrival of the ambulance. In cases of genuine emergency call-outs, the provider will not require the patients to pay and will instead charge the Authority at rates of $650 to $1,200.

  4. The performance target of the emergency ambulance services provided by the Fire Services Department requires the ambulances to arrive at the site within 10 minutes. The new airport is served by ambulances of the Chek Lap Kok and Tung Chung Fire Stations, and it normally takes only two to five minutes for ambulances from these two stations to reach the airport passenger terminal building. The exact time required for the ambulance crew to reach the patient would depend on the patient's exact location within the airport.

  5. The duties of the Port Health Office of the Department of Health at the airport are to enforce the relevant provisions of the Quarantine and Prevention of Disease Ordinance (Cap. 141) and prevent the entry of quarantinable diseases into Hong Kong. It monitors the standard of hygiene and sanitation within the airport and on board aircraft, and scrutinizes food catering service to airlines. The provision of emergency medical services falls outside the purview of the Port Health Office, but the Office will assist in the management and care of victims in case of major disasters at the new airport.
Ruling made by CIETAC

14. MR JASPER TSANG (in Chinese): It was ruled by the High Court in a case early this year that arbitral awards made by the China International Economic and Trade Arbitration Commission (CIETAC) could not be enforced through applications to the courts of Hong Kong after the handover. In this connection, will the Government inform this Council:

  1. how the ruling affects contracts containing arbitration clauses of CIETAC which were made before the handover; and how the Administration will assist the parties concerned if the arbitral awards are rendered unenforceable through applications in Hong Kong after the handover;

  2. of the impact of the ruling on the enforcement of arbitration law in Hong Kong; and

  3. whether the ruling will affect the status of Hong Kong as a financial, trade and arbitration centre; if so, what remedial measures will be taken?
SECRETARY FOR JUSTICE (in Chinese): Madam President, the answers to the three questions are as follows.
  1. The ruling does not affect the validity of agreements to submit disputes to the CIETAC for arbitration, whether made before or after reunification. Moreover, an arbitral award made pursuant to such an agreement remains directly enforceable in states that (like the People's Republic of China) are parties to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958, and that (where necessary) have implemented that Convention.

    So far as Hong Kong is concerned, awards made by an Arbitration Tribunal appointed by the CIETAC can still be enforced by action in the courts of the Hong Kong Special Administrative Region (SAR) on the basis that the award constitutes a debt due, by the party against whom the award was made, to the party in whose favour the award was made. However, such an arbitral award cannot be directly enforced under section 2GG of the Arbitration Ordinance by proceedings commenced in the SAR after reunification.

    In a Court of First Instance decision in January this year, it was conceded by counsel for the party seeking to enforce the CIETAC award that it was not directly enforceable as a Convention award. The court was not therefore called upon to rule on this issue. Statements in a Court of Appeal decision also in January of this year suggest that it is arguable that mainland arbitral awards can be enforced directly as Convention awards in Hong Kong courts. The lack of certainty on this point is, however, a cause for concern.

    The Administration is taking the steps outlined in part (c) of this answer in order to assist parties to contracts containing agreements to submit disputes to the CIETAC.

  2. The Arbitration Ordinance remains enforceable, but its application to the enforcement of mainland arbitral awards is as stated in the answer to part (a) of the question.

  3. The current uncertainty on the issue has caused concern amongst the business sector, the legal profession and arbitral bodies. In order to maintain confidence in Hong Kong as a financial, trade and arbitration centre, the Administration would like to put in place arrangements between the Mainland and the SAR for the mutual enforcement of arbitral awards.

    With this in mind, the Department of Justice has entered into discussions with relevant mainland authorities. It is intended that, after an agreement has been reached, an amendment will be proposed to the Arbitration Ordinance to ensure that a mainland arbitral award can be enforced summarily in Hong Kong.

Problem of Overcrowding in Public Hospitals

15. DR DAVID LI: It is reported that canvas beds have been added to wards of public hospitals in order to cope with the rising demand. In this connection, will the Government inform this Council whether it knows:

  1. if patients who need to stay in hospitals for comprehensive treatment and observation are being released early due to the shortage of beds;

  2. whether the overcrowding has affected the efficiency and morale of the front-line medical staff in the hospitals; and

  3. if the Hospital Authority has any long-term solutions to the problem of overcrowding in public hospitals?
SECRETARY FOR HEALTH AND WELFARE: Madam President,
  1. As at end March 1998, there was a total of 26 790 public hospital beds, with an overall in-patient occupancy rate of 85% in 1997-98. When a patient should be discharged from hospital is a clinical decision determined by the attending doctor according to the patients' conditions, and no patient will be discharged prematurely.

  2. With an overall in-patient occupancy rate of 85%, there are occasions when extra beds have to be added to some of the wards in a hospital to meet peak demands. This arrangement is not intended to be permanent and will not affect the overall service efficiency. Front-line clinical staff will always make their best efforts to provide professional and quality service to patients under all circumstances.

  3. To tie in with the local population growth, the Hospital Authority has plans to commission another 2 800 hospital beds in the coming four years, through construction of new hospitals and extension of existing ones. In parallel, the Authority seeks to increase productivity through process re-engineering and to maximize utilization of resources through internal re-deployments. With the advance in medical technology, the Authority is now able to make more frequent use of day surgery/procedures to reduce demand on hospital beds. Altogether, the implementation of these measures goes a long way to prevent the occurrence of overcrowding in public hospitals.
Admission Mechanism for Form Six Classes

16. MR LEUNG YIU-CHUNG (in Chinese): In recent years, Form 5 graduates in each year had to approach different schools to scramble for admission to Form 6 classes immediately after the publication of the results of the Certificate of Education Examinations resulting in very chaotic situations. Some students with outstanding examination results could not even secure Form 6 places. In this regard, will the Government inform this Council:

  1. whether it has reviewed the admission mechanism for Form 6 classes; if so, what the outcome is; and

  2. whether it will consider allocating Form 6 places by a central allocation system, if not, why not?
SECRETARY FOR EDUCATION AND MANPOWER (in Chinese): Madam President,
  1. The Secondary 6 admission procedure set by the Education Department aims to best utilize subsidized Secondary 6 school places, and, without prejudice to school administration and operation, to minimize the anxiety and rushing-about of students and parents. Upon the completion of the Secondary 6 admission procedure each year, the Education Department reviews the procedure based on opinions collected from relevant parties, so as to formulate the procedure for the following year.

    During last year's review, the Education Department gathered views and comments of many educational bodies, interested groups, the mass media and the public, and consulted various school councils, secondary school principal associations and parents' associations. The general consensus was that the admission procedure should be shortened as far as possible to relieve students' anxiety in the course of finding Secondary 6 school places. After careful consideration and wide consultation, the Education Department decided to keep the practice of admitting Secondary 6 students in five stages1 , but to introduce the following changes to the admission procedure:

    1 The existing allocation procedure for Secondary 6 school places consists of the following five stages:

    Stage I ─Students who have obtained 14 points (that is the total number of points scored for the best six subjects in one sitting at the HKCEE, based on a five-point system with five points for Grade A lowering to one point for Grade E) or more may apply for admission to their own schools or linked schools

    Stage II ─Students who have obtained 14 points or more may apply for admission to other schools

    Stage III ─Students who satisfy the minimum Advanced Level (AL) entry requirements may apply for admission to their own schools or linked schools

    Stage IV ─Students who satisfy the minimum AL entry requirements may apply for admission to other schools

    Stage V ─Students who satisfy the minimum AL entry requirements may apply for Secondary 6 school places through central allocation

      (1) shorten Stage I from one day to half a day to enable students who fail to gain admission to Secondary 6 in their original schools in Stage I to apply for admission to other schools on the same day so as to alleviate their anxiety;

      (2) extend Stage II and Stage IV from one day to one and a half days so that students would have sufficient time to apply for admission to different schools, and schools would have more time to interview and select suitable students;

      (3) set out more clearly in the guidelines issued by the Education Department matters for compliance in admitting students, and to clarify ambiguities so as to minimize irregularities; and

      (4) continue to inspect schools and step up sanctions against schools for breaches of rules.

      The Education Department consulted the Provisional Legislative Council Panel on Education on the changes above. A circular memorandum was sent to all secondary schools in January this year, and briefings on the details of this year's procedure were held in March for secondary school principals and teachers in charge of admission of Secondary 6 students. The Education Department also informed the public of the new procedure through the media.

      The Education Department is now reviewing the Secondary 6 admission procedure for 1998 and will gather views from all parties concerned.

  2. Under Stage V of the existing procedure, Secondary 6 school places are allocated by a central allocation system. When formulating the admission procedure for 1999, the Education Department will gather public views and carefully examine the possibility of a wider application of the central allocation system.
Review on Small House Policy

17. MISS CHRISTINE LOH: The Government set up a committee to examine how best to replace the existing small house policy in September 1997. In this connection, will the Government inform this Council:

  1. of the details and work of the committee including its terms of reference, membership, date on which it commenced work and number of meetings held;

  2. whether the committee has completed its examination of the policy and reached any conclusions; if not, when it will do so; and

  3. whether the committee has consulted any interested parties in the course of its examination; if so, what the details are; if not, why not?
SECRETARY FOR PLANNING, ENVIRONMENT AND LANDS: Madam President,

  1. The terms of reference for the committee are to take stock of the latest position on small house demands and to consider all relevant issues such as land availability, eligibility criteria, standards for a small house, existing procedures and options on the way forward for the New Territories Small House Policy. It is chaired by me and attended by representatives from the Finance Bureau, Home Affairs Bureau, Department of Justice, Lands Department, Planning Department and Home Affairs Department. Considerable research has to be made into the background leading to the existing policy and its implementation.

  2. The committee has yet to complete its work. We expect the review to be completed in early 1999.

  3. The work of the committee has been confined to internal government deliberations and examination so far. We acknowledge the need to consult interested parties or perhaps even the wider public before a decision is made on the future of the Small House Policy, and intend to do so when the outcome of the review is available.
Traffic Accident Problem

18. MR ALBERT HO (in Chinese): In connection with the traffic accident problem in Hong Kong, will the Government inform this Council:

  1. of the major causes of traffic black spots at various locations;

  2. of the casualty tolls involved in accidents which took place in all the traffic black spots in Hong Kong in the past three years;

  3. of the measures to be taken to reduce the possible occurrence of traffic accidents in these black spots;

  4. of the traffic accident rate in Hong Kong as compared with other major cities;

  5. whether the Transport Department and the police have conducted any research on the causes of traffic accidents; if so, of the scope of the research and the amount of resources allocated for such purpose; and

  6. whether it has considered funding local academic institutions or commissioning consultants for conducting in-depth studies on the causes of traffic accidents in Hong Kong, so as to identify the ways to reduce traffic accidents?
SECRETARY FOR TRANSPORT (in Chinese): Madam President,

  1. A certain site will be defined as a traffic black spot if, in a 12-month period, there were:

    1. six or more accidents involving pedestrians; or

    2. nine or more traffic accidents of any kind.

    The most common contributory factors for traffic accidents at black spots are improper driving behaviour such as disobeying traffic signal, tail-gating, speeding and improper changing of lanes.

  2. Deaths and injuries statistics over the last three years for accidents at black spots are as follows:

    Year
    199519961997Total
    Fatalities23151755
    Injuries1 3811 2191 3953 995
    Total1 4041 2341 4124 050

  3. Traffic black spots are monitored closely by the Government. For each black spot, a review is carried out to identify causes of accidents. Remedial measures are tailor-made for each black spot which may include traffic engineering measures and enforcement measures to tackle improper driving and pedestrian behaviour.

  4. The statistics shown at the Annex show that in terms of fatality rates (road traffic deaths per 100 000 population), Hong Kong compares favourably with many major overseas cities.

  5. The analytical and research work on the causes and prevention of traffic accidents is undertaken by a specialist division (Road Safety and Standard Division) in the Transport Department which has an establishment of 25, comprising mainly engineers and Transport Officers who are responsible for compiling statistics on traffic accidents, analyse the causes of accidents and devising preventive and remedial measures. Their efforts are also complemented by experts in the Road Safety Unit of Traffic Branch Headquarters of the police which has a total establishment of 65. Both specialist units will be able to draw support from other sections of their departments to support their work when required.

  6. The promotion of road safety involves many different areas of expertise, namely road standards and traffic management, legislation and enforcement, publicity and education. They are now undertaken by a number of government departments and community organizations. The Road Safety Council (RSC) assumes the overall responsibility for co-ordinating road safety activities. This existing set-up has been proved to be very effective in reducing the accident rate over the years. Although the Government does not preclude the possibility of engaging external consultants to carry out studies into the causes of traffic accidents, we do not think there is the need at this stage, as we believe resources within the Government are adequate for the moment.
Annex



Phase II of the MTR Tseung Kwan O Extension Project

19. MR LAU KONG-WAH (in Chinese): It is learnt that phase II of the Mass Transit Railway (MTR) Tseung Kwan O Extension project will necessitate underground works to be carried out beneath certain private lots in Sai Kung. In this connection, will the Government inform this Council whether:

  1. it knows if the project will affect the geological structure of the lots concerned;

  2. it knows if the project will result in user restrictions on the future developments upon the relevant lots; if it will result in such restrictions, what the details are; if not, whether the Administration will give assurance to that effect to land owners of the relevant lots; if it has no intention to give such assurance, what the reasons are; and

  3. it plans to proceed with acquisition of the space underneath the relevant lots and to offer compensation to the land owners concerned; if so, of the details of the compensation plans; if not, why not?
SECRETARY FOR TRANSPORT (in Chinese): Madam President, the proposed MTR Tseung Kwan O Extension Phase II scheme will require the resumption of the underground strata of some private lots in the Pak Shing Kok area in Tseung Kwan O. The proposed railway scheme involves tunnelling at approximately 12 m to 35 m below ground in this area and will not affect the geological structure of the lots concerned.

The proposed scheme will not result in any additional user restrictions on the future development of the private lots concerned. Nevertheless, as the lots lie in the MTR protection zone, their development should be such as not to affect the operation of the MTR.

Upon authorization of the proposed scheme and the resumption of the underground strata of the private lots involved, any claims to compensation will be dealt with in accordance with the provisions in the law. In this connection, the Lands Department has published a pamphlet entitled "Lands Resumption and Clearance for Railway Projects - Information for Owners and Occupiers" for the information of the public.

BILL

First Reading of Bill

PRESIDENT (in Cantonese): Bill: First Reading.

HOTEL ACCOMMODATION (MISCELLANEOUS PROVISIONS) BILL 1998

CLERK (in Cantonese): Hotel Accommodation (Miscellaneous Provisions) Bill 1998.

Bill 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 Bill

PRESIDENT (in Cantonese): Bill: Second Reading. Secretary for Home Affairs.

HOTEL ACCOMMODATION (MISCELLANEOUS PROVISIONS) BILL 1998

SECRETARY FOR HOME AFFAIRS (in Cantonese): Madam President, I move the Second Reading of the Hotel Accommodation (Miscellaneous Provisions) Bill 1998.

The main objective of the Bill is to amend the definition of "hotel" in the Hotel Proprietors Ordinance and the Hotel Accommodation Tax Ordinance; and the definition of "hotel" and "guesthouse" in the Hotel and Guesthouse Accommodation Ordinance in order to specify the scope of the definitions clearly.

The existing definitions of "hotel"; and "hotel" and "guesthouse" in the three Ordinances have allowed establishments which offer accommodation only to limited categories of persons, for example, to persons to a particular nationality or clients of one tourist agency, to operate outside the ambit of the Ordinances. A High Court Judgement in March 1996 also has implications on the scope of application of the Ordinances. It ruled that hotels that accepted guests with prior reservations would not fall within the purview of the Ordinances. A potential loophole has been created whereby hotels could claim that they let rooms in response to prior reservations (for example, telephone booking) and should not be subject to the Ordinances. This loophole needs to be plugged expeditiously so that the licensing scheme under the Hotel and Guesthouse Accommodation Ordinance would continue to apply to all hotels to ensure the efficacy of safety in them; and that hotel accommodation tax should continue to be payable by all hotels under the Hotel Accommodation Tax Ordinance. Otherwise there would be serious revenue implications.

Clauses 2, 4 and 5 of the Bill propose to amend the definition of "hotel" in the Hotel Proprietors Ordinance, the definition of "hotel" in the Hotel Accommodation Tax Ordinance, and the definition of "hotel" and "guesthouse" in the Hotel and Guesthouse Accommodation Ordinance respectively to address the above-mentioned deficiencies.

The Bill also proposes certain technical amendments to the Hotel and Guesthouse Accommodation Ordinance to improve the operation of the licensing scheme. Clauses 6 and 7 propose to amend the Ordinance so that the Licensing Authority can issue licences of up to three years' validity to obviate the need for annual licence renewal, as is the case now. We intend to issue three-year licences on a case by case basis. In principle, such licences will be granted only to those establishments that have shown integrity of continuing to fulfil the fire and building safety standards and would not abuse the licensing control.

Clauses 8 and 9 propose to allow notice under sections 19 and 20 of the Ordinance to be served by posting them in a conspicuous part of the premises without the need to state the name of the addressee. At present, notices may be served to the responsible person of a hotel or guesthouse personally or by registered post to direct remedial works under section 19 and to notify the Administration's intention to apply from the District Court for closure order under section 20. Serving of these notices would be difficult where the whereabouts or identity of the responsible persons are not known. It would assist operationally if these notices could be served by posting them in a conspicuous part of the premises.

Clause 9 also proposes to amend section 20 of the Ordinance to allow any person authorized by the Secretary for Home Affairs in writing to enter into a hotel or guesthouse to execute any remedial works while a closure order is in force. Clause 10 provides that it shall not be an offence for a person so authorized to enter into the closed premises. These amendments address a flaw in the Ordinance in that the premises, once closed by order, may not be re-entered for carrying out remedial works. Without these works, the premises cannot be made safe and cannot be reopened as a hotel or guesthouse.

Clause 11 proposes to extend the time limit for prosecution of offences under the Ordinance. Under section 26 of the Magistrates Ordinance, the Licensing Authority is time-barred from prosecution if an offence (for example, breach of licence conditions) has been committed more than six months before the Authority issues the summons. This is unsatisfactory because an offence may occur immediately after an inspection of the premises by the Licensing Authority at the time of renewal of the licence and in these circumstances the offence will not be discovered shortly. Many offences may be time-barred from prosecution. Clause 11 proposes that any prosecution under the Ordinance shall be commenced either within six months of the commission of the offence; or within six months of the offence being discovered by or coming to the notice of the Authority, whichever is the later.

Madam President, the Bill improves the definitions in three Ordinances to ensure, inter alia, that the fire and building safety of all hotels and guesthouses will continue to be regulated by the licensing scheme under the Hotel and Guesthouse Accommodation Ordinance; and that hotel accommodation tax is payable by all hotels. The Bill also improves the day to day operation of the licensing scheme under the Hotel and Guesthouse Accommodation Ordinance. I recommend the Bill to Members.

    Thank you, Madam President.
PRESIDENT (in Cantonese): I now propose the question to you and that is: That the Hotel Accommodation (Miscellaneous Provisions) Bill be read the Second time.

In accordance with the Rules of Procedure, the debate is now adjourned and the Bill referred to the House Committee.

MEMBERS' MOTIONS

PRESIDENT (in Cantonese): Members' Motions. Two motions with no legal effect. I have accepted the recommendations of the House Committee as to the time limits on speeches for the motion debates. The movers of the motions will each have up to 15 minutes for their speeches including their replies. Other Members will each have up to 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.

    First motion: Relaxing the ceiling for residential mortgage loans. Mr James TIEN.
RELAXING THE CEILING FOR RESIDENTIAL MORTGAGE LOANS

MR JAMES TIEN (in Cantonese): Madam President, I move the motion which has been printed on the Agenda. Today, my motion is: That, in view of the significant downturn in the property market in Hong Kong and the cessation of speculations on property, this Council urges the Government to relax the guideline on the 70% ceiling for residential mortgage loans, so that banks may, on the merits of individual cases and according to prudent principle, process residential mortgage lendings flexibly, with a view to assisting the public in buying their own homes.

Madam President, today's motion is actually a simple one. But since I have 15 minutes to speak, I would start with some broad issues, such as: What kind of economic position do we envisage for the people in the future?

Since I joined the Legislative Council, I have had ample opportunities of communication with directly-elected Members who represent the grassroots. An issue that often crops up in our discussion is: Given the success of Hong Kong today, how can the people or the grassroots share the fruits of economic success? We did have numerous debates previously on how management and staff could share the fruits of the community. Examples were: long service payment, or the one-day paid leave, which was an issue raised by the Honourable LEUNG Yiu-chung last week. All this can surely let most "wage earners" or employees enjoy a greater share of the economic success. Viewed from another angle, in addition to enjoying a greater share of the economic success, people will do something else such as making investments, like their counterparts in other free economies such as the United States, the United Kingdom, Australia or Canada. The people may certainly invest, usually in stocks and shares, or in the purchase of their own homes. If the next generation of Hong Kong want to make a small investment, they do not have to quit their jobs then go into business, or speculate. They can in all likelihood buy homes for themselves. They can then have a place to live in, obviate the need to pay rent, and thus save some money. After some years, they will own their flats. When their flats appreciate, this brings benefits to them in their retirement. This is obviously the case in other parts of the world, especially in the United States, where many 50-year-olds or 60-year-olds each have a flat, or I should say a house as the Unites States is a vast country where people own houses instead of flats. This is their most valuable assets. Whereas years before they bought their homes at possibly several ten thousand US dollars, their houses are now worth several hundred thousand each. If and when they retire, they will have made for themselves a secured retirement life.

Now let me come to my motion today, which is about the 70% ceiling for residential mortgage loans. The ceiling was first introduced in November 1991 as a measure to tackle the rocketing property prices since 1990. Is the ceiling reasonable? Is it too high or too low? I do not think I can give an answer to that question; in fact no one can. My long experience in investment tells me it is very difficult to be able to buy at the lowest and sell at the highest. One would be lucky if one could do so in seven or eight times out of 10. It is utterly impossible to buy at the lowest point all the time. If you ask me today whether the price of property is at its lowest, I would never give an answer again because several senior officials attempted to answer the same question and they have been proven wrong. (Laughter) Property prices may drop further. The point is people may consider purchasing, provided they can afford it and are willing to take the risk.

Let me be more specific. At its peak, a flat which measures 500 to 600 sq ft may sell at $6,000 or $7,000 per sq ft. So, flats of this area may sell at about $4 million. Now the price has fallen by 50%. We can find offers at $2,000 to $3,000 per sq ft recently. Therefore flats measuring 600-odd sq ft are now being offered at about $2 million each. When this flat cost $4 million before, the buyer had to pay $1.2 million and then the remainder of $2.8 million by instalments, based on a 70% mortgage loan. It is hugely unaffordable for a small household with two bread-winners and a $30,000-odd income. What does "affordable" mean, in economic terms? If one earns $35,000 and uses about $17,000 or $18,000 to repay the mortgage, only $10,000-odd is left for daily expenses, school fees for the children and others. It is therefore impossible for such a household to take out a loan of more than $2 million as it would become unaffordable. But now, the same flat costs only $2 million. After making a down payment of several hundred thousand dollars, the remaining $1 million-odd mortgage loan would be affordable for the household. The purpose of my motion is to facilitate such households in buying their own homes. The price of properties may not be at their lowest; it may go down further. If people think that flats are affordable and in the next few decades their jobs are quite stable, with reasonably good prospects, why do we not lend them a helping hand?

Like the Government, many colleagues are concerned that if the ceiling is relaxed, the banking sector may not appreciate the relaxation even though purchasers may, and so may property developers as they will then sell more flats. Some people in the banking sector think that a 70% mortgage ceiling may put the banking business on a healthier foothold. Although I am proposing to relax the ceiling, I have not specified the extent of relaxation. I have not said the ceiling should be 80% or 90%. I hope that banks can be allowed to make their own decisions in a flexible but prudent manner. If a certain bank has little property-related business it may be more aggressive and do more business in this direction. We cannot apply the 70% rule across the board to all banks. If the borrower is a couple with stable jobs and stable income, and even stable employers, a bank may act flexibly and lend more. If in the opinion of the bank a potential borrower is not stable for certain reasons, it may lend less. The 70% rule may be too loose for luxurious properties. Properties at the mid-levels selling at over $10 million, for example, should perhaps continue to be subject to the 50% ceiling, which is the existing ceiling. I think banks, which are acting prudently nowadays, may make their own decisions without any ceiling.

The Government used to lay down a guideline for the banking sector, stating that 40% of their loans should be given to landed properties while the remaining 60% to businesses such as factories, restaurants and hotels; such loans are not subject to a ceiling. Banks have been using different approaches in granting loans to factories and restaurants. While one bank may lend $5 million to a business, another may not lend at all to the same business. Here the banks are exercising their discretion and are dealing with each case on its own merits. But that does not mean banks are not prudent. Even if there is no ceiling, banks in Hong Kong have always been very prudent. I am absolutely in support of their usual prudent practice and would ask them to continue the practice.

Let us re-examine the capital ratio of our banks. Most of them reach 17%, a ratio which, in the Government's view, is much higher than the international standard of 8%. So, the Hong Kong banking system is absolutely healthy and sound, and our banks are prudent. Even if my motion is passed, that is, banks are left to their own decisions without being subject to the ceiling, it does not necessarily mean some banks may become financially unstable, go bankrupt or cause losses to depositors as a result of the relaxation. I think the Hong Kong Association of Banks has voiced its concern. It is up to Members to support my motion or otherwise.

Recently a Chinese language newspaper conducted a survey on 30 July. The results showed that about 62% of the respondents supported the proposal, that is, that the 70% ceiling be relaxed. 38% of the subjects said they would consider buying their own homes if the ceiling was relaxed. I trust the flexibility is helpful to the people. It will not necessarily increase the risks of banks. Madam President, let us look at several examples overseas. Countries, which we know well, such as the United States, the United Kingdom, Canada and Australia do not impose mortgage ceilings. Many of their banks provide a 70%, 80% or 90% loan on properties. Of course, fluctuation of property prices there are not as dramatic as that in Hong Kong and that is one of the reasons for their high mortgage rate. But the fact remains: the absence of a mortgage ceiling does not necessarily mean their banking system or their mechanism for provision of loans for residential properties will face problems. With these remarks, Madam President, I beg to move.

Mr James TIEN moved the following motion:

    "That, in view of the significant downturn in the property market in Hong Kong and the cessation of speculations on property, this Council urges the Government to relax the guideline on the 70% ceiling for residential mortgage loans, so that banks may, on the merits of individual cases and according to prudent principle, process residential mortgage lendings flexibly, with a view to assisting the public in buying their own homes."
PRESIDENT (in Cantonese): I now propose the question to you and that is: That, in view of the significant downturn in the property market in Hong Kong and the cessation of speculations on property, this Council urges the Government to relax the guideline on the 70% ceiling for residential mortgage loans, so that banks may, on the merits of individual cases and according to prudent principle, process residential mortgage lendings flexibly, with a view to assisting the public in buying their own homes.
    We will now proceed to the debate. Mr Gary CHENG.
MR GARY CHENG (in Cantonese): Madam President, owing to the 70% mortgage ceiling which has been enforced for seven years, and the guideline to limit mortgage lending to 40% of total lending in value, the Hong Kong banking system was shielded from the financial turmoil. But will the Government consider updating these measures by suitably relaxing the limits, when it assesses the current property market?

Since measures were announced in May, the Government announced further relaxations to measures designed to combat property speculation. The Secretary for Housing admitted that there are almost no speculative activities on property now. He also indicated the relevant relaxations announced will render more flexibility to market operations. Figures for July show that over 90% of the mortgage loans provided by banks in Hong Kong were made for genuine end-users. Hence the position of the present property market has changed when compared with that at its peak. In addition it seems impossible for speculators to reap huge profits within a short time, given the current economic conditions of the territory.

The earlier lifting of the guideline to limit mortgage lending to 40% of total lending and relaxation of the anti-speculation measures for the property market are indicative of the Government's determination to encourage the buying and selling of flats. However, its insistence on the 70% mortgage limit for flats shows that it is still concerned about the risk management of banks. The position of the limit is still unclear in a number of areas. For example, in one of the measures announced, the Government reduces the deposit requirement from 10% of the purchase price to 5%, and eliminates the 20% limit on the purchase price for the down payment. A purchaser needs to pay only 5% of the purchase price as deposit to apply for a second mortgage from the developer. Then the purchaser becomes the owner of the property. Together with the 70% mortgage from the bank, a purchaser actually gets a 95% mortgage. The second mortgage arrangement has been actively pursued by developers in order to entice prospective purchasers. So, in fact we can say the 70% ceiling is practically non-existent. If the Government insists on imposing the ceiling, it smacks of transferring the risks to buyers, although its action is useful in helping to stabilize the financial systems.

Government figures show that by 2011, the total population may reach 8.1 million. Therefore, there may still be a great demand for housing. There may be a great demand for mortgages at 80% or 90% of the purchase price. A higher mortgage rate would be encouraging for those who want to sell their flats for alternative ones or those who are not qualified for the various home purchase loan schemes offered by the Government.

Will a relaxation of the 70% ceiling abruptly increase risks for the banks? The present market position shows that property prices have plunged from their peak to a very low position. Even if banks relaxed its lending, the relative risks would not be too high.

In the past, many banks were willing to take risks by going over the 40% lending limit owing to the keen competition in a booming property market. After the financial turmoil, however, banks have become very cautious in their lending business because of the economic uncertainties and business considerations. This self-restraint has practically reduced risks to a large extent.

At the moment there is a temporary calm amidst the financial turmoil in Southeast Asia. The Hong Kong Monetary Authority has pumped out a number of measures to stabilize interbank rates. Banks can now sell mortgages to the Mortgage Corporation. So, the tight money market can be eased for a while. In the circumstances, removing the 70% ceiling may increase flexibility for the banks so that they can provide more mortgages based on the quality of the properties or the repaying power of the purchasers. Lending risks are in fact relatively low due to the stable demand for small to medium units which, being the favourite of most end-users, have maintained stable prices even after the financial turmoil.

Operating costs for some banks, especially small to medium ones, have been rising recently because they need to attract deposits through high interest rates and reduced lending to solve their funding problem. If the 70% ceiling is relaxed, these banks may then selectively provide loans on quality properties and buyers with high repaying powers, based on the merits of each case and the assessed risks. Thus they can have more business.

The Democratic Alliance for the Betterment of Hong Kong (DAB) agrees that the Government should relax the measures designed to combat property speculation, which in our view is proactive. However, we need co-operation from the banks to facilitate home purchase. We do understand the Government's concern about the credit rating of Hong Kong in the international community following the relaxation of these measures. But we do not think banks will provide loans blindly because of the relaxation. As I said, banks will act on the risk assessment they make. So, once again the DAB hereby urges the Government to relax the mortgage ceiling to allow more space and flexibility for banking operations. If financial crises re-emerged or speculation returned, the Government could still adopt measures in accordance with the actual situation. Only when the Government is flexible in its policies will it be applauded. This is particularly true under the present circumstances.

    With these remarks, I support the Honourable James TIEN's motion.
PRESIDENT (in Cantonese): Miss CHOY So-yuk.

MISS CHOY SO-YUK (in Cantonese): Madam President, in order to rescue the local property market, the Government has earlier announced the abolition of the guideline on the 40% ceiling on landed property loans. This makes people sense that the Government may further abolish the 70% ceiling on property mortgages. However, government officials have all along objected to such a move. In fact, the 70% restriction on property mortgages was formulated as early as in early 1992, whereas the 40% ceiling on lending was formulated in 1994. Both were targeted at the intense speculation at that time. I remember property developers were all shocked on learning the announcement of the Government in implementing the restrictions. Some developers even claimed that they would make up for 90% mortgage for owners in secret. But it has been proved that these measures, which aimed at restricting the size of bank loans, had produced a positive effect on stabilizing the banking industry of the territory. The fact that there was no bank closure in the wake of the financial turmoil can serve as the best proof.

However, does it mean that this 70% mortgage ceiling cannot be lifted? I do not think so. In times of inadequate supply of flats, high property prices and rife speculation, both the 40% loans guideline and the 70% mortgage ceiling are essential and effective. But when the property market has bottomed out or is nearing the bottom after sliding down from the peak by nearly 50%, it seems that it is no longer proper for the Government to insist on imposing these restrictions. In my opinion, the Government should adopt an expedient administrative principle instead of adhering to its old practices. The existing 70% mortgage ceiling has now acted like a hoop on the banks and stifled their operational flexibility. As the Government has already taken the initiative to abolish the 40% loans guideline, why can it not lift the 70% mortgage restriction as well?

A lot of evidences have illustrated that the public's demand for private flats is still quite keen. The main reason for buyers to hold a cautions attitude is that they are not sure if the property prices can maintain at a stable level. When they are confident that property prices will not further slide down sharply, they will naturally have the desire to purchase flats in the market actively. Faced with this psychological barrier, it will definitely boost the market mentality in a positive manner if the Government can abolish the 70% mortgage restriction. At the same time, it will produce a positive impact on the policies launched by the Government earlier, such as increasing capital for the banks' mortgage markets, expanding the quota for the Home Starter Loan Scheme and so on. The Government can then naturally stimulate the markets if it can abolish the 70% mortgage restriction and give out the message that the property prices have stabilized.

Some people hold the view that an abolition of mortgage restrictions on property will lead to a significant rise in property prices so much so that they will climb to an unreasonable level again. But I consider such situation unlikely to happen, or at least not going to happen in the near future. The dramatic rise in property prices in the past was mainly attributed to the imbalance of supply and demand. But since the Chief Executive formulated the policy to build 85 000 flats annually last year, the Government has indicated clearly that sufficient land will be provided. If property prices should climb to an unreasonable level again, the Government can in all likelihood make adjustments through the supply of land. The government decision to suspend land sales temporarily for nine months when the property market was in doldrums earlier in one good example. In addition, should property prices rise too high again, can the Government not impose restrictive measures once again?

There are also some people who hold the view that imposing no restriction on property mortgages will increase the risks shouldered by the banks and even jeopardize their stability. Although this argument has its ground, it is still open to question. It has been the practice for most banks in Hong Kong to adopt a moderate attitude. In the wake of the financial turmoil, they acted even more prudently in lending money. Even if the mortgage ceiling is relaxed, it does not mean that the banks will abuse their business. In approving mortgage ratios, the banks will naturally take into account the operational risks and give corresponding consideration to such factors as the situation of clients, the quality of the collaterals, the repayment ability of borrowers and so on. From another point of view, a relaxation happens to benefit a number of stable-income people who wish to purchase their own homes in the slack market but lack capital on hand so that they can realize their dreams of buying their own homes. The abolition of the mortgage guideline can, on the one hand, help genuine end-users and, on the other, directly stimulate the market. Why then does the Government not go ahead with the proposal when it can kill two birds with one stone?

An abolition of the mortgage ceiling will enable banks to make use of their resources more flexibly, thereby directly stabilizing the property market. Therefore, I support the motion moved by Mr James TIEN.

    Madam President, I so submit.
PRESIDENT (in Cantonese): LEE Wing-tat.

MR LEE WING-TAT (in Cantonese): Madam President, since the outbreak of the financial turmoil in October last year, property prices have fallen overall by 40%. In order to rescue the property market, the Government has, within just a few months, put forward a series of measures to stimulate the market, including expanding the quota for the Home Starter Loan Scheme from the existing 6 000 to 12 000, setting a 10 000 quota for the Home Purchase Loan Scheme by the Housing Authority, relaxing past restrictions on property developers and so on. A few days ago, the Government even lowered the amount of deposit from 10% to 5% for uncompleted flats, and allowed property developers to decide on the amount of down payments. And before that, the Hong Kong Monetary Authority even relaxed the 40% guideline on property-related loans. Within just a few months, these measures have given hope to those people who used to be unable to buy flats as well as those who have only a hundred of thousand of dollars in savings and were previously not able to even pay for the down payments. In addition, property prices have now dropped to a more affordable level, thus giving opportunities to those who have been longing to purchase their own homes to realize their dreams. From the huge number of people visiting the uncompleted flats put on sale last week, we can see that these measures did encourage a lot of people to buy property.

Further relaxing the 70% mortgage ceiling at this point will, on the one hand, easily make the public over-estimate their ability to pay for mortgages and, on the other, lead to the emergence in one go of the demands which have been restrained over a long period of time, thereby exerting pressure on property prices to rise rapidly. This will go against the Government's wish to stabilize property prices. Originally, the Government's measures were good for they managed to help those who previously had no chances to buy property to "catch the train". However, many uncertain factors still exist in our economy. The launching of too many measures in one stroke to encourage people to purchase property will give people a positive message that the Government is positive about the economic and market prospects and therefore the public should be confident of buying their own homes. But is it really the case that the economy and the property market will not fluctuate again in future? Will our financial system be challenged if the market fluctuates again? If the economy recovers more slowly than what we have expected so that a large number of home-buyers fail to pay for their mortgages or the mortgages exert pressure on the livelihood of the public, it will lead to a tragedy in which "a well-intentioned act turns out to poison you".

In fact, both the overall economy and the property market have not yet stabilized at the moment. Therefore, the Government must exercise extreme caution in implementing any further measures to encourage people to buy property. Although it was reported that the property market had registered "a rebound" in the wake of the Government's implementation of measures to encourage property ownership and stimulate the property market, many people were still adopting a "wait-and-see" attitude. I believe it is still some time before we can see the real impact. Members should be aware that apart from the Home Starter Loan Scheme, the Housing Authority is going to launch the Home Purchase Loan Scheme with a quota of nearly 10 000 at the end of this month, and this is going to boost the demand in the private property market. In my opinion, the Government should wait until all measures have been implemented for a considerable period of time, so that both the public and this Council have seen the reaction to these measures, before it conducts another review to see if there is a need to put in place more measures to encourage home ownership.

Just now, one of my colleagues mentioned that the mortgage percentage offered by banks at the moment was not 70% any longer. Adding to this 10% or 20% offered by property developers, the mortgage percentage has now changed in effect to 90%. But in fact, the difference lies here. The offer of 90% mortgage by banks differs from the offer of 70% mortgage by banks with another 20% mortgage by property developers in that this is a risk-sharing process. If a property developer considers that it has adequate lending ability and that it can encourage home-buyers to make the purchase, it can of course make up for the remaining mortgage percentage. But at least that part of the risk will not be passed on to the banks.

Another colleague stated that if the property prices rose dramatically again after the implementation of this measure or if the property market fluctuated again, the Government could impose the 70% mortgage ceiling again. But I consider this suggestion not prudent. Moreover, property developers and property buyers will form an impression of inconsistency on the part of the Government in dealing with such situation in future.

The Democratic Party has come to the view that now is not a suitable time for abolishing the 70% mortgage restriction. Moreover, there are divergent views towards this proposal even within the banking sector itself.

Finally, the Democratic Party perfectly understands that it will benefit genuine users if a higher mortgage percentage can be offered by the banks. In fact, we have been paying great attention to all matters of public interest. But we think the Government should better wait until the economic conditions and the financial and private property markets have become more stable before it reviews the restriction again.

    Thank you, Madam President.
PRESIDENT (in Cantonese): Mr Eric LI.

MR ERIC LI (in Cantonese):Madam President, on 28 July, the Hong Kong Monetary Authority abolished the 40% ratio for property mortgages for the banks. The reasons given then was that restrictions that were out-dated should be replaced and the ceiling was an out-dated restriction. Therefore I agree it should be abolished at a suitable time.

During that time the Government announced guidelines for a 70% ceiling for residential mortgage loans. The ceiling was meant to achieve two aims: firstly, to curb speculation and stabilize the market; secondly to prevent banks from over-lending and taking too many risks, for the benefit of maintaining the stability of the financial system. When the Government announced the abolition of the 40% lending ratio, it rather clearly pointed out speculation had subsided. But when it considered an abolition of the 70% ceiling for residential mortgage loans, the Government said it was worried speculators were still active in the market. I think the Government must find out whether those people active in the market are speculators or genuine end-users. As many Members have pointed out, we are using anti-speculation measures to treat genuine users.

If the Government does want to restore the vitality of the property market, I think it must relax the 70% ceiling. At present, many potential buyers are not making use of the downturn in the property market to purchase their homes or change to new ones chiefly because they are worried about a tight money market or unemployment. They would rather keep the cash. Apart from those without the means, those who hold cash are not able to pay for the 30% down payment. Indeed while there are special arrangements for the purchase of new flats, there are none for the purchase of old ones or used ones. Prospective owners may have the financial capability to pay the instalments and are desirous of buying, but they are prevented to do so due to the anti-speculation measures. Thus it would be difficult to restore true vitality to the market or to reveal the real potentials of the market.

I think the Chief Executive should think carefully. If the overall government policy is to enable people to ultimately buy their own homes, then the ceiling is running counter to that aim. The ceiling is also increasing the vacancy rate of premises, resulting in a number of flats unoccupied.

As far as banks are concerned, relaxing the mortgage ceiling will not, under the present circumstances, readily affect the stability of the financial system. Although the Honourable LEE Wing-tat said he was worried some purchasers would over-rate their own financial capability, it is up to the banks to approve the loans. Successful borrowing does not hinge on the intention of the purchasers alone. I think the question under discussion is whether the Government can trust the self-discipline of the banks. Strangely, the Government trusts the banks whole-heartedly for loans they make to small enterprises. When it set aside $500 million for such loans it indicated it would remit the money if the banks approve the loans, trusting the self-restraint of banks. Why then does it cast doubts on the banks when it comes to residential mortgage loans, so that a 70% ceiling is imposed? Is this rational? Is the Government being consistent?

Of course, in lending money to end-users ─ if we assume there are only end-users in the market ─ the banks are making their appraisals not on the property "bricks" alone. They will also consider the borrower's ability to repay, the quality of the borrower's job and whether the borrower is making the purchase for self-occupation or is only a "vulnerable speculator" who relies on bank loans to speculate. I believe even if the property prices fall to below 70% of their value, the possibility of a financial crisis is still slim as long as the borrower stays in employment and continues to service the instalments. So, when banks lend money to home purchasers, they should not just consider the fluctuation in the price of properties. Prime consideration should be on the borrower's capability to repay and the use to which the loan is put.

If the Government does wish to make Hong Kong a free market, we believe it is already interfering too much. It is now time to relax superfluous and unnecessary restrictions for this is the formal way of giving the market a positive message that the Government does not expect a sharp fall or a sharp rise in property prices. The message has nothing to do with hints for a fall or a rise. Even Members should refrain from making such hints, as we cannot make a professional judgement. It is time to deal with what is not rational or obsolete, something which has been in existence for some time.

In fact, the 70% ceiling for residential mortgage loans is effectively non-existent as far as the sale and purchase of new flats is concerned. Some Members pointed out that developers have provided second mortgages or been using other means to give first-time home purchasers transitional loan arrangements during the building stage. Developers even pay solicitors' fees and decoration costs for purchasers. All these are calculated to obviate the need of taking out a large sum of money at one go. The arrangements actually means a lot of trouble and risks for the developers, and since many of the loans are taken out with the help of banks, these risks eventually find their way to the financial system.

Since the measure causes so much trouble to everyone, exists in name only, and is not particularly meaningful, should we let it stay?

Of course, we all understand that the Government is mindful of maintaining the stability of the banking system. I agree with the point made by the Democratic Party that many measures to revitalize the property market have been out for a short time only, and we do not know what the actual development will be. But in any case the Government should give us a rather positive message on this motion. Most importantly, it must not tell everyone there will not be any review as this will convey a negative message to the market. The Government should instead state clearly when is the right time to review, and under what conditions it will relax the measures to enable the market to regain its vitality and to allow the banks autonomy in dealing with loans.

    Thank you, Madam President.
PRESIDENT (in Cantonese): Mr SIN Chung-kai.

MR SIN CHUNG-KAI (in Cantonese): Madam President, the debate on Mr James TIEN's motion today concerns not only property but also the banking system. I will speak on this subject.

There are two major restrictions on mortgage loans offered by banks. The first restriction is the guideline on 40% ceiling for property mortgage loans set during rife speculations on property in 1994, and the second is the guideline on 70% ceiling for mortgage loans set in 1991. Due to the downturn in the property market and the fact that the actual value of mortgage loans granted by many banks has exceeded 40%, the Hong Kong Monetary Authority (HKMA) announced the relaxation of this nominal guideline on the 40% ceiling at the end of July.

The Government has objected to a relaxation of the second restriction at this stage mainly on the ground that it needs to monitor banks prudently. The Democratic Party supports suitable supervision of banks, such as assessing the financial conditions of banks in terms of capital adequacy ratio, liquidity and through on-site supervision by the HKMA but we should not assume that banks know nothing about risk management. Excessive restrictions should not be imposed. We do not think the 70% ceiling on mortgage loans should be regarded as a golden rule. Instead, it should be abolished at the right time. There are three main reasons why the Democratic Party considers that the guideline on 70% ceiling should not be relaxed at this stage. As the banking system of Hong Kong lacks a deposit insurance system and transparency, at a time of economic downturn and when people lack confidence, a relaxation of the guideline on 70% ceiling would in our view intensify the competition among banks and provoke a systemic crisis. Moreover, under the interest rate agreement, a relaxation of the guideline on 70% ceiling for mortgage loans might not necessarily benefit home buyers.

Madam President, I will make three points in detail. First, the run on the International Bank of Asia and Standard Chartered Bank (this happened last year, not a long time ago) has shown that depositors would withdraw their deposits to protect themselves at the breaking of unfavourable news or rumours, as long as there is no deposit insurance system in Hong Kong. This would cause a panic run on banks that might even have a domino effect on several banks. Due to the economic downturn and the lack of confidence, there is a greater potential risk of problematic bank loans. Any sign of trouble might cause a confidence crisis. Actually, many countries in the world including the United States, the European Union and Japan have in a place deposit insurance system to protect the interests of small depositors. Even DAI Xianglong, the President of the People's Bank of China, revealed recently that a deposit insurance system would be established in the Mainland. The Democratic Party considers that Hong Kong should promptly establish a deposit insurance system in order to minimize such systemic risks.

Second, we consider that there is a need to enhance the transparency of regulation. At present, neither the Government nor the HKMA provides simple and easily understandable information on the capital and credit of banks on a regular basis. Therefore, the public has little knowledge of banking operations and can only choose a bank on the basis of its size. They have inadequate information on which they can judge which bank is financially sound. We believe that regulation should be based on the disclosure of information. The Government should enhance the transparency of information on banks so that the people can grasp enough facts to understand the risks they have to bear. This should help minimize the emergence of a confidence crisis. Therefore, we believe that the HKMA should regularly disclose fundamental information on banks to the public, such as their loan packages, capital ratio and capital position, and make such information available on-line through information technology, so that the public can have easy access to such information at any time.

Third, a relaxation of the guideline on 70% ceiling cannot help home buyers out of their predicament. At present, in order to reduce risks, the values of properties as assessed by many banks are lower than their market values. As a result, home buyers are usually unable to obtain 70% mortgage. Therefore, there is still room for banks to grant more loans. Actually, with a high mortgage interest rate of over 10%, the burden of servicing a 70% mortgage is already fairly heavy. Even if banks can provide mortgage at a higher percentage, many home buyers would decline it as they cannot repay the loan.

The present interest rate agreement is the chief accessory to the high interest rates. The interest rate agreement protects the interests of banks at the expense of consumer interests. It also leads to unfair competition among banks to the advantage of big banks. Mortgagors and businessmen are loudly complaining that banks increase their interest rates quickly but lower them slowly. The continual increase in mortgage and business loan interests makes the burden of people heavier and increases the operating costs of businessmen. If the guideline on 70% mortgage is relaxed while the interest rate agreement is maintained, banks might have more business but people will still have to reckon with high interest rates. If we really want to help alleviate the hardship on home buyers, we should ask the Government to cancel the interest rate agreement rather than relaxing the guideline on the 70% mortgage ceiling. Originally, the Government pledged that the fixed deposit interest rate agreement would be abolished in 1995. However, it made all kinds of excuses afterwards and the 24-hour call deposit interest rate agreement has still not been abolished. Thus, the Government should relax the control on the 24-hour call deposit interest rate as soon as possible according to its original plan and set a timetable for abolishing the deposit interest rate ceiling.

Madam President, for the sake of maintaining the stability of the banking system, the Democratic Party considers that the guideline on 70% ceiling for mortgage loans should not be relaxed at this stage. The Government should adopt a three-fold approach. It should enhance the disclosure of information and set up a deposit insurance system to ensure the soundness of the banking system, as well as abolish the interest rate agreement and lower the mortgage interest rate to relieve the burden on people who have to repay their mortgage.

    With these remarks, Madam President, I oppose Mr James TIEN's motion.
PRESIDENT (in Cantonese): Mrs Selina CHOW.

MRS SELINA CHOW (in Cantonese): Madam President, the fact that Hong Kong people love to buy properties is indisputable. We can also see that Hong Kong people loves to buy properties in foreign countries by just reading some advertisements of overseas real estates placed in the newspapers. Why do Hong Kong people like to buy properties in foreign countries? Of course, it is partly due to the fact that some people are going to emigrate to those countries. Some people, just like you and me, Madam President, have their children studying abroad. And perhaps their families have such a need. Compared with local housing, some overseas houses are really incredibly cheap. The Honourable Eric LI nodded his head for he is also one of us. But part of the reason is also related to mortgage. If one wants to secure a mortgage in a foreign country, he will definitely be offered a mortgage percentage in excess of 70%. Generally speaking, the percentage may reach 85% or 90%. We do not quite understand why the Government imposes such a restriction on those who wish to buy property in Hong Kong. At first, I really did not understand. Later, I found that the Government had to impose some restrictions or adopt some guidelines of this type for fear of heated speculation.

But if we think hard, we will find that there is no more speculation while many other restrictive measures have already been scrapped. How did speculation arise then? When supply and demand are not in balance so that the market is badly in need of flats as there is an inadequate supply of land, the market will become speculative. But still speculators will only engage in speculative activities after examining whether supply and demand are not in balance. This is why the Liberal Party has stated repeatedly that in order to solve this problem once and for all, just as the Honourable Edward HO said, there must ultimately be an adequate supply of land.

Besides, I do not quite understand the point raised earlier by the Honourable SIN Chung-kai. He said that an abolition of the 70% mortgage ceiling will undermine the stability of the banks or the financial system. I really do not quite understand his point. If the banks still adhere to the principle of prudent lending and take into account the repayment capacity of home mortgagors, how can a 70% or 90% mortgage loan undermine the stability of the banks severely? In particular, the discretion of extending loans lies in the hands of the banks and it is up to the banks to make their own decision. Of course, some banks will think otherwise. In the face of keen competition, they consider that some banks will loosen up on lending should the 70% ceiling be relaxed. In my opinion, the crux of the problem eventually lies in the banks. I cannot see why local banks and foreign banks should have taken such a different approach towards this issue. As far as lending is concerned, the power to assess the risks eventually lies in the hands of the banks. A relaxation should produce a stimulating rather than an undermining effect.

But I think this problem has one very important point and that is the Government's attitude. Does the Government really want to, as far as the overriding principle is concerned, help those who can afford to buy their own homes? This is very important as far as the overall interest of the community is concerned because we have been encouraging the public to buy their own homes so as to strengthen their sense of belonging and sense of responsibility. Besides, the banks can also make use of this measure to help certain people, particularly the middle-income class. These people may find it difficult to pay for the down payments in spite of the fact that their incomes are sufficient to service the mortgages. If these people can buy their own homes through this mechanism, the need for the Government to subsidize them with public money will diminish accordingly. In other words, the Government will no longer need to come up with so many forms of loans to help these sandwich-class or middle-income people buy their own homes.

As such, the Liberal Party considers it essential and necessary for the Government to implement this measure, particularly under the current market situation. As regards those who are capable of paying for the mortgages but experience difficulty in deciding to make the purchases, the Government should make good use of this opportunity to help them buy their own homes. As for those aspiring and capable home buyers, their repayment ability should be determined by the banks in a prudent manner. As such, a relaxation of the mortgage ceiling is, to a certain extent, beneficial to these people and to the community as a whole. Thank you, Madam President.

PRESIDENT (in Cantonese): Mr LEUNG Yiu-chung.

MR LEUNG YIU-CHUNG (in Cantonese): Madam President, the Honourable James TIEN proposes relaxing the ceiling for property mortgages. As regards this measure, I think the most important question is: Who will be benefited if such a measure were to be implemented? On the face of it, if the ceiling is relaxed, we can claim with splendour that we are helping humble citizens who are desirous of purchasing homes but are prevented from doing so due to a lack of means to save money sufficient for the 30% down payment. But are we really able to achieve such an aim? I would quite doubt it.

At the moment, many developers and individual banks are providing a second mortgage at 20% of the purchase price. Some even provide protection against fluctuations in interest rates and against depreciation in the properties bought. But still they cannot attract purchasers. Even Home Ownership Scheme (HOS) flats, which can secure mortgages up to over 100%, have also failed to attract purchasers. Earlier, the sale of HOS flats in Phase 19B was especially deplorable. This shows not that Hong Kong people have no desire to buy flats, but that they dare not to. Why? It is not a question of they do not have the money for the down payment as they are worried. They do not want to follow the footsteps of those who have recently forfeited the down payment after buying the flats. What has made these people forfeit their down payments in hundreds of thousands of dollars? It was their worries that they would not be able to service the mortgage in future. Besides, the fluctuation in interest rates also added to their worries, hence deterring them from buying properties. So, the problem does not only lie in the need for a 30% down payment or the lifting of the mortgage ceiling. There are many other factors that we have to consider.

What advice can we give to those who aspire to own their own homes, who are over-qualified for buying HOS flats but can afford flats in the private property market? Earlier, the Government tried very hard to persuade this Council to lend our support to its loan schemes such as the Home Purchase Loan Scheme and the Sandwich Class Housing Loan Scheme which can help the humble citizens to a certain extent buy their own homes. But are there not any existing policies to help these citizens? In fact, there are. So, I believe relaxing the mortgage ceiling now would probably result in "popping up" the property market ultimately. When the market is popped up, however, people with genuine needs may not get what they aspire to. Those who do benefit would be property developers and banks instead. Therefore, we should not proclaim with such splendour that the relaxation will benefit a desired sector of society. That is not the case.

What the Honourable Mrs Selina CHOW said was nice to the ears. I think she did manage to answer many of the questions asked. She mentioned just now that some people bought properties overseas. Why did they have to buy properties overseas? What they did has given us a very important message─ property prices overseas are low and attractive to people, a case not simply because mortgage could be secured up to 80% or 90% of the purchase price. And this is a very important message ─ property prices are low, so they would buy. I think if the property prices continue to fall, more people may be attracted to buy properties. So, the solution takes more than simply relaxing the mortgage ceiling. Rather, the problem lies with people's confidence and their views on property prices. Now, many people are still waiting to see whether property prices will drop further and they dare not buy flats for the time being.

Therefore, to lift the mortgage ceiling, the Honourable Member may only wish to see a rise in property prices eventually. I do not see how the measure can stimulate the demand for housing in the long run.

I think that whether we can help people buy their homes depends on the capacity of the Government to provide adequate land supply and sufficient housing units. That is the only effective solution in the long run. It takes much more than just relaxing the mortgage ceiling to address the problem.

I think the Government is duty-bound to take a good look at the problem. The fact remains that the Government lacks a long-term housing policy, especially on land supply. If the Government can tell the people clearly the direction of its policy in this respect so that they can have a better understanding of the land and housing supply, it will certainly help stabilize the market. So, I think the Government should make it clear to the people about its land policy. It should not oscillate between its policies of stopping the land sale and relaxing the sale, or between relaxing and tightening the control on the forward sale of flats. This would only give people an impression that the Government is acting haphazardly and unpredictably. The people will then only stand by and observe as they cannot understand government policy and find it difficult to follow. Thus, the Government should formulate some long-term policies, and only then will this prove helpful in stabilizing the property market.

    Thank you, Madam President.
PRESIDENT (in Cantonese): Mr Ronald ARCULLI.

MR RONALD ARCULLI: As the representative for the real estate and the construction sector, I have never supported any measures introduced in 1991 or 1994 by the Government. I have always said that the Government got it wrong in 1994 and created a panic in the minds of the purchasing public that there was a dire shortage of flats. The dire shortage of flats was actually advised to the Government by the Panel on Housing of this Council in 1993 and 1994 that for the years 1996 and 1997, the production in the private sector would be lucky if it reached 20 000 units.

The Honourable LEE Wing-tat will bear me out when we had this meeting five or six years ago. What the Government seems to be doing is to be using that as an excuse to invade the independence of the banking sector, to query and to challenge the management skills and the valuation of their business. I would like to ask the Secretary for Financial Services whether and, if so, what other areas of business in the banking sector are subjected to a ceiling in terms of loan? I would also like to ask the Secretary for Financial Services what the bad debt experience in the housing loan market is as compared to normal commercial lending?

I would like to ask the Secretary for Financial Services whether it is, in fact, not easier for a bank to assess the value of the property, to assess the ability of the borrower, that is, the home purchaser to repay that loan, as opposed to a business borrowing money for trading, for manufacturing and the like? It is, in fact, the easiest and the simplest of business as far as banks are concerned, and that is why they are very keen to do it. But that having been said, I think the bad debt experience would show that the banks are prudent, are conservative, if anything at all, to a fault in terms of assessing value. The banks have rarely accepted 70% of the purchase price as the amount of the loan. It is inevitably 70% of their assessed value. And generally speaking, even with brand new properties, assessed value is in fact lower than market value. So I do not quite apprehend why my colleagues would have talked about danger to the banking system, and why the Honourable SIN Chung-kai, in his very imaginative speech in this debate, would have brought in deposit insurance, brought in interest cartel as reasons to oppose the dropping of the 70% ceiling. He, of course, has not mentioned whether in the view of the Democratic Party, deposit insurance means all deposits or a fixed amount? I suspect that it has to be a fixed amount, because I do not think even my democratic friends are that ignorant of the size of deposits to suggest that all deposits have to be repaid in case there is any trouble with the bank.

Thus, Madam President, what are we really talking about? We are talking about the ability of the bank to assess and manage its own risk. I shall take for example the latest scheme from the Government which I think this Council wholly endorses, and that is, the Home Starter Loan Scheme where the applicant has to observe certain financial criteria, that is, he cannot have more than $70,000 of income and he cannot have assets which are assessed very loosely and not very precisely of more than $1.2 million. For instance, if you have a property abroad, it might be counted. But if you have jewellery and gold bars, they will not be counted in your $1.2 million assets assessment.

That Scheme allows a potential borrower to apply for 30% of the purchase price or $600,000, whichever is the lower, for the purchase of a home. Of course, if the purchase price is $2 million, 30% of the purchase price and $600,000 are identical. But if the purchase price is in excess of $2 million, the lower limit of $600,000 will apply. Therefore, if an applicant was successful and got his application granted, and he later bought the $2 million home, he would get $600,000 from the Government to pay to the property developer and get 70% mortgage or perhaps a little less from the bank. With the $600,000, there would be a moratorium on repayment. As far as he is concerned, he has virtually got a 100% loan. How can the Government allow people with limited income per month to borrow effectively 100% of the purchase price, and yet in an open market where people do have the ability to repay, perhaps even at a 80% or 90% level, no such allowance will be granted? I think it is wholly illogical and I think, frankly, the sooner the Government do away with the 70% ceiling, and the sooner it allows the banking sector to decide for themselves, the better it would be for Hong Kong generally.

    Thank you.
PRESIDENT (in Cantonese): Miss Cyd HO.

MISS CYD HO (in Cantonese): Thank you, Madam President. The Frontier supports Mr James TIEN's motion on relaxing the ceiling for mortgage loans.

In fact, when the Government tightened the ceiling for mortgage loans to 70% of the purchase price in 1994, it aimed at suppressing speculation. Under the existing economic conditions, there can hardly be any speculative activities in which flats are bought and sold right away. Therefore, relaxing the ceiling for mortgage loans now can actually home purchase by people who need it for self-occupation. Therefore, the Frontier supports the motion on relaxing the ceiling for mortgage loans. Although some Honourable colleagues are worried that after the ceiling has been relaxed, speculation will again be stimulated. We wish to put forward some points to dispel such worries.

The only reason why investors or speculators enter the market is that quick profits can be reaped. It is best if they can buy flats and sell them right away as profits can be obtained very quickly. However, people have little desire to buy flats now, even flat buyers who do not intend to live in the flats so purchased will only buy flats for medium or long-term investment. If these investors enter the market, they can really help to bring about a soft landing of the property market during a slump. I believe that this will have positive effects on the overall economy and the banking system, and it is easier for people to accept this than the Government using the taxpayers' money to shore up the market.

Given the existing economic conditions, few people dare buy flats for self-occupation. I think that the first group of people who dare do so are civil servants who have a sense of security about their jobs, or people who have saved so much money that they even have enough money to pay for half or more of the price of flats. Therefore, this is a really good opportunity for freer bank mortgage business and property transactions. We certainly have to be careful and I absolutely agree to the worries expressed by some Honourable colleagues that we certainly have to prevent Hong Kong from trekking the same old disastrous road and facing a crazy surge in property prices once again. Therefore, we urge the Government once again to put an immediate stop to the suspension of land sales. We hope that there will be a continuous supply of land so that small developers who failed to enter the market in the past can join the property development industry. In the next few years, if more people compete with large property developers in a prosperous market, it can avoid another upsurge in property prices caused by a small number of people hoarding and speculating on properties.

We would also like to take this opportunity to point out that every family should use a certain percentage of their total income on housing, as some Honourable colleagues have said. The Frontier has discussed this with the property sector but they have not directly answered our question. They have only said that when the property prices have fallen to 55% of the family income, more people can then afford to buy properties, but they dare not say whether this is a good phenomenon. If people spend 55% of their family income on housing, it is definitely unfavourable to the long-term development of Hong Kong. Let us think about this: If young property buyers spend half or more of their salaries on mortgage instalments and tax payments, they may only spend 30% of their income to meet their basic living expenses. Do they have enough money to pursue further studies? They may even have to work part-time in order to service their mortgages. As a result, their knowledge and experience and standard will remain at the same stage before and after they have bought properties. In the long run, this is absolutely not good for the human resources development in Hong Kong.

Therefore, while we agree to relaxing the ceiling for mortgage loans, we would like to remind people that they should carefully evaluate their financial capabilities. Firstly, they should not let themselves become a second batch of suffering owners. Secondly, we hope that people will carefully plan for their lives. Even if we can afford mortgage payments, is life as simple as spending 20 years of our lives on making home mortgage payments or a new home? Should there be greater goals worthy of our pursuance? I hope that people will carefully make the best decisions for themselves?

Yesterday, I heard government officials say that they had reservation about relaxing the ceiling for mortgage loans. From this, we find that the Government has once again come up with contradictory housing policies. Last month, the Government said that it hoped to encourage home ownership and it even offered loans to first-time home buyers. Why does the Government not leave to banks the commercial decision concerning the ceiling for mortgage loans instead of seizing the initiative? I hope that officials will explain this later.

Madam President, we support Mr James TIEN's motion according to the principles of small government and free economy.

PRESIDENT (in Cantonese): Mr NG Leung-sing.

MR NG LEUNG-SING (in Cantonese): Madam President, under the challenge of the financial turmoil, Hong Kong is now facing the most serious economic recession after the war, with such grave problems as a rising unemployment rate, an intense turbulence of the financial markets and high interest rates. Coupled with the fact that there was heated speculation in the property market over a considerable period of time, property prices were pushed up to an extremely unreasonable level. It is therefore inevitable that the property market adjusted downward over the past year.

Compared with the peak of the property market in October last year, property prices have now registered an accumulative drop of more than 40%, with the price index basically having fallen to the level of the first half of 1994. After the dramatic adjustment, the existing 70% mortgage ceiling differs greatly from the 70% mortgage ceiling imposed during the peak of the market in terms of the impact produced. We agree that the administrative intervention measures taken in the past to tackle abnormal speculation has produced a certain complementary effect on the healthy operation of the financial systems.

It is now an indisputable fact that speculative activities have found it hard to survive in the residential property market. According to the survey data collected by the Hong Kong Monetary Authority (HKMA) over the two months of June and July, 99.3% of the mortgage loans approved by financial institutions were provided for self-occupation properties, reflecting that the market is now dominated by users. At the end of July, the HKMA abolished the 40% ratio on property loans provided by banks. Its officer-in-charge also indicated that local banks had exercised considerable restraint in risk management, and the phenomenon of over-heating had not been seen in the local property market again.

With the cessation of speculation and the abolition of the 40% ratio on property loans offered by banks, we can reconsider the actual need and effect of the continuous enforcement of the 70% guideline. As a result of the relaxation of the 40% ratio on property loans, banks can boost their business in property lending. Although the regulator understands that credit risks thus incurred will increase accordingly, it can accept this as the property values have dropped sharply to a certain level. Similarly, I believe the regulator can accept the actual risks possibly incurred by the banking system as a result of relaxing or gradually relaxing the mortgage percentage ceiling.

Faced with the fact that money is in short supply and the overall economic factors are still unfavourable, our banking system will continue to maintain its usual prudent attitude in approving loans. Moreover, the banks will adhere to the overriding lending principle of giving emphasis to the repayment ability of clients. According to the credit rating of clients, the banks will deal with loans by various means. As such, most banks can stand the test of time in maintaining stability and self-discipline in the territory's economic activities.

From another point of view, a relaxation of the 70% mortgage ceiling will be conducive to the free operation of the market. In addition, it will enable commercial organizations to give full play to their professional assessment of the trend of market prices, and help tie in with the actual supply and demand of the market. Other regulatory measures currently targeting at the banking system as well as the transparency of its operation are already sufficient for maintaining risk control at a suitable level. Under such circumstances and given the actual market situation today, it is indeed necessary for the Administration to consider and review such issues as whether there is still a need for the continued existence of the 70% mortgage ceiling and whether the ceiling is useful to genuine home-buyers in making financial arrangements.

    Madam President, I so submit.
PRESIDENT (in Cantonese): Mr Howard YOUNG.

MR HOWARD YOUNG (in Cantonese): Madam President, some Members indicated in their speeches earlier that they were opposed to this motion because they had doubts regarding the "significant downturn in the property market" as mentioned in the original motion. The property market, in their opinion, is still very volatile. Some other Members have said that although property speculation has ceased, they are still worried that a relaxation of the residential mortgage ceiling will lead to a resurgence of speculation.

I think there may be such a possibility, but as Mr James TIEN is used to expressing his opinions in a very concise manner, he has put forward only two reasons for relaxing the 70% ceiling in his motion. In fact, there are more than two reasons for doing so. We should be aware that many developers are now providing second mortgages, which means that apart from the 70% mortgage provided by banks, the developer concerned will offer an additional 10% or 20%. Therefore, the phenomenon of 90% mortgages does exist in the market. However, such arrangements can only be made by large developers with enormous financial resources, and since small developers can hardly have the means to do so, it will be more difficult for them to sell their units. For that reason, to maintain the 70% ceiling is in fact unfair to small developers, for it will hamper large and small developers in promoting and selling their products on an equal basis.

The second reason I would like to give is related to a recent controversy. The Government indicated that applicants for public rental housing have to undergo a means test, and that those who own assets valued at over $470,000 will not be eligible for allocation of public housing. I am not sure whether it is the view of the Government that these people should not live in public housing but should buy their homes instead. However, if those who own assets of $470,000 are already considered to be capable of buying their own homes, then with a residential mortgage loan of 70%, what choices do they have? They will only be able to buy properties valued around $1.5 million. The question is: Where can they find such properties? Therefore, this is simply unrealistic. On the other hand, if they have $470,000 and are able to secure a 80% residential mortgage loan, then they would be able to buy properties valued at around $2.3 million. This would be more in line with the reality. Therefore, the reasons for relaxing the 70% ceiling for residential mortgage loans are not only related to the downturn in the property market or the cessation of property speculation. In fact, there are a number of other factors. In view of the above reasons, Madam President, I support the motion.

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

MR CHAN KAM-LAM (in Cantonese): Madam President, the existing measure for a 70% ceiling for residential mortgage loans has been implemented since 1991 when the property prices had been increasing substantially since mid-1990. In addition, the Hong Kong dollar interests have continuously dropped along with the US dollar interests in mid-1991, therefore, the Government proposed a 70% ceiling for mortgage loans to avoid banks assuming excessively high risks.

In fact, although the enforcement of a 70% ceiling for mortgage loans can reduce the risks assumed by banks, it does not contribute largely to the suppression of property prices. Since 1992, there have been a few peaks in the property market, in 1992, 1994 and 1997 respectively. The Government has taken some measures one after another to contain property prices. During these peaks, the property prices kept surging while the purchasing power of people also increased under certain circumstances. Moreover, the price hike was also caused by an insufficient supply of flats.

During the peak of the property market in mid-1997, quite a number of banks introduced interest rate cuts to attract mortgage clients and some were even excessively aggressive in respect of property mortgage businesses, thus giving rise to concerns of risks with the overall banking system. As the current property prices have fallen by 40% to 50%, the Democratic Alliance for the Betterment of Hong Kong (DAB) thinks that we have the conditions for relaxing the ceiling for residential mortgage loans under the present circumstances in order to give banks and home-buyers more flexibility and assist the general public in getting on the train.

In the past two to three years, although the Government still limited bank mortgages at less than 70% of the property prices, the developers offered second mortgages or other mortgage arrangements to attract buyers who did not have enough money to pay for the down payment. However, most of these second mortgages were provided by financial institutions closely linked with the developers and they charged higher interest rates than banks. Therefore, for newly completed flats, the 70% ceiling actually exists in name only and property buyers are forced to pay higher interests. However, people who wish to buy second-hand flats are not benefited at all.

The Government worries that relaxing the 70% ceiling will give rise to problems with the banking system or that banks will fiercely compete for property mortgage businesses, or that vicious competition will arise. However, when some newly completed flats were recently put on sale, banks sent many staff to canvass buyers and some banks even offered a 0.25% interest rate cut to attract buyers. This showed that even though there is a 70% ceiling, competition is still very fierce, therefore, we think that relaxing the ceiling for residential mortgage loans will help the general public buy flats.

Some Honourable colleagues said that some people recently gave up their deposits for they were afraid that they would not be able to service mortgage payments. This is actually not true. Some people recently gave up their deposits for they had bought uncompleted flats in 1996 and 1997. At that time, the prices of the flats were high but now that prices have fallen and the prices of the flats as assessed by banks have dropped, buyers have to pay more cash in order to secure mortgages. As these buyers cannot raise around $1 million within a short time, they have to give up their deposits.

Relaxing the 70% ceiling will not artificially shore up the market as people who borrow money for buying flats must be clear about their affordability. They know how much they can borrow and repay and they will surely assess their capacity prudently. Madam President, the prices of flats have substantially dropped and the Government also believes that increasing property mortgages will not adversely affect the banking system. Therefore, it has earlier cancelled the guideline given to banks that mortgage loans shall not exceed 40% of their loan businesses. It is now the right time to relax the 70% mortgage ceiling to allow banks to determine the mortgage percentage on the basis of the actual circumstances of individual clients. However, the DAB is of the view that, in order to prevent speculation from emerging again, the Government should continue to maintain some other suppressing measures such as early collection of stamp duties which have been proven to be effective. We also think that the Government should make a change in its land sale policy upon the expiration of the land sale suspension period by the end of next March. By that time, it should make public the amount of formed land ready for sale for which developers can apply before putting the land up for public auction. We think that the Government can further consider this measure in order to improve the existing land sale policy to ensure that there will be a stable land supply for residential flats in the future so as to stabilize the property market and prevent property prices from becoming highly volatile.

    With these remarks, Madam President, I so submit in support of the motion.
PRESIDENT (in Cantonese): Mr Bernard CHAN.

MR BERNARD CHAN: Madam President, although the motion moved by the Honourable James TIEN provides the banks with greater flexibility in handling mortgage loans, I am afraid I cannot lend my support to it lightly. I do not believe that the lift of the residential mortgage loans limit would help relieve our flagging property market, or draw closer the revival of economy. Serious contemplation is needed before we take any further stride in rule changes.

The 70% ceiling for residential mortgage loans was introduced to lessen the risk of banks in the face of an utterly speculative property market in the early '90s. But in view of the drastic plunge of property prices of over 40% in the last 11 months, the fact is, for most mortgaged properties, the banks have been providing mortgage loans up to even 120% of the existing value of the properties. As a member of the financial sector, I would like to say that we should not fantasize about an immediate change of mortgage policy of the banks. For them, quite a significant part of their collateral has already been devalued.

A major constraint facing the banks is its limited fund raising capacity by selling mortgages or by securitizing their assets. The Hong Kong Mortgage Corporation (HKMC) has been purchasing mortgage loans from banks at a loan-to-value ratio of no more than 70% at origination, that is, at the time the deal is made between the property owner and buyer. The loan-to-value ratio represents the loan amount against market value of the property. In addition, should the property owners' instalment payment is more than 90 days overdue, the HKMC may ask the relevant banks to repurchase loans exceeding 90% of the current loan-to-value ratio.

The economic turmoil has made mortgage securitization very difficult. On Monday, Chief Executive of the HKMC, Mr Peter PANG, told the South China Morning Post that the HKMC would not issue any mortgage-backed securities as a source of funding in the near future, unless the interest rates fell to a favourable level. Instead, the HKMC would consider borrowing short-term funds from banks as an interim measure.

In fact, the mortgage value of property lies not solely in the hands of banks, but in the way public investors perceive it. Only if popular sentiments are in favour of higher property values will mortgage securitization be possible and mortgage prices be propped up. We may resort to political or administrative measures to lift mortgage limits, such as urging the Government to issue new guidelines to banks, but we cannot legislate for positive sentiments in market. In the end, it is the market as a whole which will bear the risk.

In considering approval of mortgage loans, the banks have been taking into account all factors concerning the quality and variety of assets, market situation, risk factors and possible sources of funding. Mr TIEN's suggestion may change the surface outlook of the property market, but will not soothe our ailing economy in a deeper sense. If individual property buyers have ungrounded expectations over the prospect of their mortgage applications, I am afraid the market will probably be filled with chaos instead of vitality.

    Thank you.
PRESIDENT (in Cantonese): Does any other Member wish to speak?

(No Member indicated a wish to speak)

PRESIDENT (in Cantonese): Secretary for Financial Services.

SECRETARY FOR FINANCIAL SERVICES (in Cantonese): Madam President, Members who spoke just now share the common aim of helping people purchase their own homes, irrespective of their support or otherwise for relaxing the 70% ceiling for residential mortgage loans. I would like to point out that the Government is at one with Members with regard to the target of helping people purchase their own homes. Members also pointed out the principles for prudent banking supervision. The guideline on the 70% ceiling is precisely part of the banking supervision policy. Later on, I will explain in greater details why the Government considers that it is inappropriate to use that guideline to achieve any housing policy or target. As some Members suggested, abolishing the 70% ceiling is not without its price. It might even affect the overall stability of the banking system. Certainly, we cannot sacrifice the important premise of maintaining the stability of the financial system and prudent banking supervision for other policy objectives. If we did not maintain the stability of the banking and financial systems, other participants in the economy, whether depositors or borrowers, would also be affected. Furthermore, we believe that there are other measures and policies that will more effectively help people purchase their own homes without affecting the stability of the banking sector. Therefore, even if we insist on some of these measures, it does not mean that there is a conflict with other housing policies.

The background of the 70% ceiling for mortgage loans

The 70% ceiling for mortgage loans was adopted by agreement among banks in November 1991 and fully supported by the regulator of banking. It has become part of the policy of prudent banking supervision. This guideline is not a government measure enforced for the sole purpose of combating speculations on property. Actually, over the past seven years, despite the ups and downs in the property market, we maintained this measure as part of our effort of prudent banking supervision, since this is precisely its principal purpose. If the mortgage percentage is too high, with a significant drop in property prices, one will naturally be unable to repay the loans. As some Members pointed out, there is no such restriction overseas. However, the experience of these countries, such as Britain or the United States, shows that the higher the mortgage percentage, the higher the default rate. Therefore, we believe that the risks of banks will be increased with an excessively high mortgage percentage.

Since its enforcement in November 1991, this ceiling for mortgage loans has become an important risk management tool for maintaining the stability of the banking system in the face of a volatile market and an uncertain future. Some Members also mentioned this just now. Banks have been confronted with tremendous fluctuations in property prices. However, thanks to the guideline on the 70% ceiling for mortgage loans and the prudent lending policy of banks, the quality of mortgage loans is still good. There is no doubt that this guideline has a positive effect in maintaining the stability of the banking system. We must be mindful of guarding against financial risks during good or bad economic times and whether the market is up or down. At present, due to uncertain external factors and uncertain prospects of a economic recovery, we are all the more convinced that the stability of the financial system is most important.

The difference with the 40% ceiling for property lending

Some Members asked why the 70% ceiling for mortgage loans should be maintained when the Hong Kong Monetary Authority (HKMA) already said there was no need to maintain the 40% ceiling for property lending. Is this not a contradiction in policy? Actually, there is no contradiction in policy, since the two guidelines are designed to manage different risks.

The 40% ceiling for property lending is meant to prevent an excessive concentration of the risks of authorized institutions (commonly known as banks) on property lending. The abolition of the guideline does not mean that there is no longer a need to monitor the relevant risks. Rather, it is because there are other measures and means of supervision to ensure the stability of banks and protect the interests of other depositors.

First, the HKMA considers that banks should disclose the ratio of their property lending. This way, these institutions will come under the supervision of the market and thus exercise more self-discipline. Second, by selling mortgage loans to the Hong Kong Mortgage Corporation (HKMC), the institutions can effectively and speedily adjust the risks which are overly concentrated on the property market. Third, these institutions should control the ratio and quality of their property lending properly through more effective and reliable internal risk control measures, including compliance with the guideline on the 70% ceiling for residential mortgage loans. After the abolition of the guideline on the 40% ratio, the HKMA will continue to discuss with the institutions the expected growth of property lending in the beginning of each year, in order to maintain supervision over the question of excessive concentration of the risks of banks. These constitute a whole set of supervisory measures. One cannot separate them and only pick out one.

The guideline on the 70% ceiling for mortgage loans is meant to protect the institutions against position risks, that is, the impact of price fluctuations. Past experience has shown that there can be huge fluctuations in property prices in Hong Kong. The guideline on the 70% ceiling for mortgage loans effectively provides the institutions with adequate protection and reduces the risks that the collateral might become a liability.

In view of the present adjustment in the property market and the slight deterioration of the quality of residential mortgage loans, as well as the increase in the default rate for three months or more from 0.29% in June to 0.34% in July, banks should strengthen their risk management measures, including adhering to the guideline on the 70% ceiling for mortgage loans, rather than relaxing the ceiling. Only this way can the stability of the banking system be maintained.

With regard to the question of the percentage of bad debts, some Members have asked me how I compare mortgage loans with general commercial and industrial loans, and questioned whether it is unfair to impose a ceiling on mortgage loans only. Let me respond to this question now.

We stress that the various measures formulated for prudent supervision must constitute an overall system. Not only must they be determined according to international standards, they must also be tailored to the local conditions. In Hong Kong, since mortgage loans play a very important part, we pay more attention to them. It is relatively easy to supervise mortgage loans, since property has a price. As Members mentioned just now, it is easy to put a price on property and set the risks of lending acceptable to individual institutions, such as a 40% or 70% ceiling. This is relatively easy for the public to grasp. However, as I said, even if we abolish a ceiling, we will maintain other supervisory factors in the system. Each factor is an important part of the whole system. It is not the case that once a ceiling is abolished, another ceiling can be abolished too.

As for other commercial and industrial loans, we do not have a percentage that can be easily agreed upon. Actually, individual banks are extremely prudent in this. They will decide on the approval of loans after spending a lot of time looking into these businesses and their operations, as well as assessing their repayment ability very carefully. Moreover, each loan they approve must be backed by the bank's own assets, in order to meet the requirements of capital adequacy, whereas mortgage loans can be backed by the asset itself, that is, property. Therefore, even though there is no prescribed limit on commercial and industrial loans, it does not mean that there is a lack of prudent supervision over these loans or that there is latitude or unfairness involved.

Just now, Members repeated three arguments for relaxing the 70% ceiling. I will respond to them now.

First, since property prices have already dropped considerably, it is unlikely that they will drop further. Therefore, is it not true that the 70% ceiling for mortgage loans is no longer necessary? Second, should banks not be given greater autonomy? Third, would it not make it easier for people to purchase their own homes? I will make a collective response to these arguments.

I have repeatedly pointed out that the 70% ceiling for mortgage loans is a tool for risk management and a part of the policy of prudent banking supervision. We should not mix up the significance of the guideline and treat it as a measure for regulating the property market. More importantly, for mortgage loans, the property is used as a collateral to secure loans. However, due to the fluctuation of property prices, there must be a ceiling for mortgage loans so that banks can withstand the fluctuations in the property market. As I said, in the face of constant fluctuations in the market and a rising default rate for mortgage repayments, we must take an even more prudent course, rather than going in the opposite direction of relaxing the ceiling for mortgage loans and sacrificing the stability of banks.

There is another very important factor, namely, when international rating agencies analyse Hong Kong's overall economy and the ratings of individual banks or even announce their downgrading decisions recently (that is, from last October), they repeatedly refer to the anxiety about the impact on the stability of banks as a result of the fall in property prices.

I will not cite these examples one by one. However, I can tell Honourable Members that in the reports published by several rating agencies at different times for the purpose of supervision, giving negative analysis or announcing downgrading decisions, they repeatedly mention that even though the fall in the property market has not caused problems to the stability of the banking system, they will take any change in measure or a further drop in the property market into serious consideration.

We are worried that if the 70% ceiling for mortgage loans is relaxed, the risks of mortgage loans will be increased and the overall stability of banks will be affected. It might also affect the credit ratings of Hong Kong and Hong Kong banks, thus indirectly affecting the financing costs and ability of banks. This will have a negative impact on those who need the credit facility of banks, including home buyers.

Besides, if this measure is really implemented, it can easily be exaggerated by speculators. They would say that the financial authorities in Hong Kong have given up all considerations of prudent supervision and adopted these measures under political pressure. This might give them another chance to launch another speculative raid. Therefore, we consider it extremely unwise to make such a relaxation.

As to whether the banks will be given greater autonomy, I would like to point out that according to information of the HKMA, in general, for mortgage loans approved in July, banks only provided loans at around 60% on average. This means that banks do have flexibility under the guideline on the 70% ceiling for mortgage loans. They do not make full use of the 70%, since they decide on individual cases based on other prudent considerations.

Since we have abolished the guideline on the 40% ceiling for the total lending of banks, they already have greater flexibility in approving these loans. As for the impact on the property market, we are not sure if relaxing the 70% ceiling for mortgage loans will have a positive impact on the market and an immediate effect in helping people purchase their own homes.

Members will agree that there are many factors affecting the property market, including supply and demand, interest rates, the income and job prospects of home buyers, the credit policy and orientations of banks and the money supply in the whole banking system. Therefore, there is no telling if a single factor can directly affect the property market or benefit the people. Actually, I wish to point out that while we seem to have restricted banks' business with prudent supervision, we have indeed done some proactive work to make money supply less tight in the whole financial system, especially making more funds available for mortgage loans. In this connection, I wish to point out that we have set up the HKMC. As Members know, the Government set up the HKMC last October to promote the development of the mortgage market in Hong Kong, in order to help the people to purchase their own homes and stimulate the development of banks and the money market. Banks can sell their mortgage loans to the HKMC to obtain steady liquid capital to make lendings available to more home buyers. By the end of August 1998, banks have sold mortgage loans worth over $5 billion to the HKMC. This means that we have provided additional liquidity in the same amount in this area. The HKMC also actively promotes fixed interest mortgage loans to protect home buyers from the risks of interest rate fluctuation and make it easier for banks to approve such loans. Up to 10 September 1998, that is, during the first six months after the implementation of this pilot scheme, 1 000 fixed interest mortgage loans were approved in principle, involving a sum of $1.35 billion, while more than half of these loans were already granted. When the pilot scheme was first implemented, there were two banks that provided fixed interest mortgage loans. Now, the number has increased to eight. In the next six months, the HKMC plans to approve fixed interest loans in the amount of $3.5 billion to help home buyers through these banks. Thus, the authorities will try their best to help the people purchase their own homes and obtain loans, as long as it does not contravene the principle of prudent supervision.

Schemes to promote home ownership

As Members also mentioned, the Government has introduced three schemes to help the people purchase their own homes, so that people from different strata, especially those of the middle and lower strata, can afford to buy their own homes. These schemes include: the Home Purchase Loan Scheme for public housing tenants and prospective public housing tenants, the Sandwich Class Housing Loan Scheme for middle income households and the Home Starter Loan Scheme for households with a monthly income not exceeding $70,000. These three schemes, especially the Sandwich Class Housing Loan Scheme and the Home Starter Loan Scheme, are meant to help these households pay the down payment. These schemes are implemented only thanks to the support of the various terms of the Legislative Council. Up to now, about 22 000 households have benefited from the Home Purchase Loan Scheme and up to 10 000 households can benefit from it in this financial year. This year, 12 000 households can benefit from the Home Starter Loan Scheme and in the subsequent three years, there will be a quota of 6 000 per annum. As for the Sandwich Class Housing Loan Scheme, over 5 000 applications have been approved between 1993-94 and now. In the near future, a loan quota of 1 500 will be introduced. Therefore, we would like to point out to Members that we are perfectly willing to use other measures to help the people achieve the goal of home ownership.

Just now some Members said that in order to sell their new flats, many developers provided second mortgages at 20% to 30%, so that home buyers could buy a flat according to their means by making a smaller down payment. The market has provided an answer. Developers are willing to bear part of the risk. Without increasing the risks of the banking system, they undertake part of the responsibility to help home buyers achieve their goal.

Conclusion

To conclude, we agree that there is a need to help people purchase their own homes. However, we do not agree that relaxing the 70% ceiling for mortgage loans is the means to achieve this end. Basically, the 70% ceiling for mortgage loans is a risk management tool for banking supervision. In terms of policy, one should not confuse it and see it as a measure for influencing the property market or as part of the housing policy. Given the present state of the economy, any relaxation of this effective supervisory measure could easily be conceived by international investors as a factor increasing the risks of banks. This might have a negative impact on Hong Kong and is an important consideration that should not be ignored. We have provided various loan schemes. The market also responds to the demand and provides assistance through commercial plans. In our view, these are all effective ways to help home buyers.

For the above reasons, the Government cannot support today's motion. Thank you, Madam President.

PRESIDENT (in Cantonese): Mr James TIEN. You may now reply and you have up to four minutes and 40 seconds.

MR JAMES TIEN (in Cantonese): Thank you, Madam President, I would first thank all Members and government officials who have spoken, and I would especially thank Members of the Democratic Alliance for the Betterment of Hong Kong, the Hong Kong Progressive Alliance, the Frontier and other independent Members for their support. I would like to speak in response to the Government's remarks. The Government is concerned about the risks of banks. We certainly agree that banks have such risks but we think that the Government should give consideration to balancing bank risks against people's needs, otherwise, why was it necessary to set the ceiling at 70%? To best secure the banks, the mortgage ceiling may well be changed to 50% or even lower. However, I think that the Government should look squarely at people's needs and how bank loans should assist the business sector in doing business.

According to the Government, if the 70% ceiling is relaxed, there will be higher risks. As shown in the example I cited earlier, a 600 sq ft flat was sold at $6,000 a sq ft and its price was some $4 million. However, its price has dropped to $2 million now, only $2,000 a sq ft. Previously, when the flat was sold at $4 million, a 70% mortgage was $2.8 million. Today, when its price has fallen to $2 million, even a 85% mortgage is only $1.7 million. There is a very big difference between $2.8 million and $1.7 million. I think that the foreign credit ratings agencies are now most concerned about how the bank is going to deal with the $800,000 difference. The bank granted a 70% mortgage, $2.8 million, on the basis of the $4 million transaction price of the flat but the price of the flat has now dropped to $2 million. Will this put a heavy pressure on the bank? The bank therefore receives a lower rating. I definitely do not agree to the international ratings agencies' view. At present, in regard to bad debts, so long as a person making mortgage payments can afford to repay $2.8 million and will not repudiate the debt or surrender the flat back to the bank, banks in Hong Kong will regard his debt as good debt not bad one regardless of the fact that he owes the bank $2.8 million while his asset is only worth $2 million. The bank will not underestimate him and this accounting criterion has long been adopted. On the contrary, even if we relax the ceiling and the bank grants a $1.7 million mortgage, it definitely does not mean that $300,000 more can be taken out on the $2 million flat to make up for the $800,000 loss. Bank accountants will definitely not use the sums from a new mortgage to compensate for past losses. Even if the mortgage ceiling is relaxed, there may be positive or negative impacts but the loss incurred in the past cannot be made up for. What is passed is passed. Banks only hope that their clients can continue to make mortgage payments and they do not regard their debts as bad debts.

As for the remarks of Mr LEE Wing-tat and Mr SIN Chung-kai of the Democratic Party, they actually do not oppose my suggestion to relax the 70% mortgage ceiling but they hope that banks will adopt other measures. They may think that banks have not done enough today. For instance, Mr SIN Chung-kai's speech discussed at great lengths about a deposit insurance system and the abolition of the interest rate agreement. Certainly, I think that these points should come under another topic for future discussion. But this does not mean that we do not support the Democratic Party in urging the Government to implement those measures. However, it seems to me that the contents of their discussions are not directly related to the 70% mortgage ceiling we are discussing about today. I respect their views and if they decide to vote against the motion, I think that I can hardly lobby them further.

As to the point raised by Mr LEE Wing-tat, Mr Eric LI has explained for me, and that is the public had over-estimated their abilities at that time. Mr LI also said that banks can take up the role, that is, if the Government can trust the banks so much in respect of the $2.5 billion loan fund for small and medium sized enterprises, why can it not trust the banks to do so in respect of home mortgage loans? This point has also been made by Mr Eric LI.

Furthermore, the Honourable LEUNG Yiu-chung has referred to the fact that many buyers have gone on default with their deposits. I am grateful to the Honourable CHAN Kam-lam for pointing out for me that the buyers have given up their deposits mainly because the prices of the flats they bought were high but they cannot raise a mortgage on the flats they bought at such high prices. They are not doing so because of the price slump. The Honourable Bernard CHAN has made a brief speech but probably because he had arrived late, he had not listened to the beginning of my speech. My motion will definitely not revive our economy, for is it that simple to revive our economy? My motion is purely intended to help those who wish to buy their homes now. Lastly, I hope that other Honourable Members who have not spoken will support me. Thank you.

PRESIDENT (in Cantonese): I now put the question to you and that is: That the motion moved by Mr James TIEN be passed. Will those in favour please raise their hands?

(Members raised their hands)

PRESIDENT (in Cantonese): Those against please raise their hands.

(Members raised their hands)

Mr CHAN Kam-lam rose to claim a division.

PRESIDENT (in Cantonese): Mr CHAN Kam-lam has claimed a division. The division bell will ring for three minutes.

PRESIDENT (in Cantonese): Will Members please register their presence by pressing the button and then proceed to vote.

PRESIDENT (in Cantonese): Before I declare that the voting shall stop, Members may wish to check their votes. Are there any queries? If not, voting shall now stop.

PRESIDENT (in Cantonese): The result will now be displayed.

Functional Constituencies:

Mr Kenneth TING, Mr James TIEN, Mr Edward HO, Dr Raymond HO, Mr Eric LI, Dr LUI Ming-wah, Mrs Selina CHOW, Mr Ronald ARCULLI, Mr HUI Cheung-ching, Mr CHAN Kwok-keung, Mr CHAN Wing-chan, Dr LEONG Che-hung, Mrs Sophie LEUNG, Mr WONG Yung-kan, Mr Howard YOUNG and Mrs Miriam LAU voted for the motion.

Mr Michael HO, Mr LEE Kai-ming, Mr CHEUNG Man-kwong, Mr Bernard CHAN, Mr SIN Chung-kai and Mr LAW Chi-kwong voted against the motion.

Geographical Constituencies and Election Committee:

Miss Cyd HO, Mr LEE Cheuk-yan, Miss Christine LOH, Miss CHAN Yuen-han, Mr Gary CHENG, Mr Andrew WONG, Mr LAU Kong-wah, Miss Emily LAU, Mr HO Sai-chu, Mr NG Leung-sing, Prof NG Ching-fai, Mr MA Fung-kwok, Mr CHAN Kam-lam, Mr Ambrose LAU and Miss CHOY So-yuk voted for the motion.

Mr Albert HO, Mr LEE Wing-tat, Mr Martin LEE, Mr Fred LI, Mr James TO, Mr LEUNG Yiu-chung, Dr YEUNG Sum, Mr LAU Chin-shek, Mr Andrew CHENG, Mr SZETO Wah and Mr TAM Yiu-chung voted against the motion.

THE PRESIDENT, Mrs Rita FAN, did not cast any vote.

THE PRESIDENT announced that among Members returned by functional constituencies, 22 were present, 16 were in favour of the motion and six against it; while among Members returned by geographical constituencies through direct elections and by the Election Committee, 27 were present, 15 were in favour of the motion and 11 against it. Since the question was agreed by a majority vote of each of the two groups of Members present, she therefore declared that the motion was carried.

PRESIDENT (in Cantonese): The second motion: Promoting industrial development in Hong Kong. Dr LUI Ming-wah.

PROMOTING INDUSTRIAL DEVELOPMENT IN HONG KONG

DR LUI MING-WAH (in Cantonese): Madam President, I move the following motion as set out on the Agenda: "That, as the relocation of manufacturing industries out of Hong Kong has seriously affected employment opportunities and the balanced development of the economy in Hong Kong, this Council urges the Government to expeditiously set up an independent organization vested with the administrative powers, such as an industrial technology council or an industrial technology commission, to co-ordinate and formulate a long-term industrial policy, so as to promote industrial development and economic prosperity."

The Legislative Council has been in session for more than two months. Many of my Honourable colleagues have put forward many useful motions and suggestions on economic problems in the territory. However, if the economy of Hong Kong is to achieve a steady growth in future, it is imperative that an industrial technology council should be set up and a long-term industrial policy be formulated. This is precisely the reason why I move this motion today.

Madam President, the Government announced that there was a negative economic growth rate of 2.8% in the first quarter of this year. It is a record -low for 15 years. The economic situation is extremely worrying. Let us take a look at two of our competitors ─ Taiwan and Singapore. Their economies have also been under the impact of the Asian financial turmoil. But at the end of June, annual economic growth for Taiwan is still expected to reach 5.9% while that for Singapore will be 5.6%. Unemployment rates for the two places are only 2.7% and 2.2% respectively, much lower than the 4.8% unemployment rate of Hong Kong, or the latest figure of 5.2% to be released tomorrow. Why is this so? I think this is related to the fact that the Governments of these places have a long-term industrial policy and that they started to develop high value-added and hi-tech industries more than a decade ago.

Let us look at how it is like in Hong Kong.

With the introduction of the open door policy in China since 1978, labour-intensive manufacturing industries in Hong Kong such as the toy, textile and garment industries, spearheaded massive relocation to areas in the Pearl River Delta. Their operation there gave a breathing space for the low value-added industries which were then experiencing a tough time. Other manufacturing industries subsequently followed their footsteps and moved northwards in a bid to raise their competitiveness.

The fundamental cause leading to this internal migration of Hong Kong industries was the high prices of land and wages at that time in Hong Kong. The shortage of labour led to high production costs, and in turn greatly reduced the competitiveness of Hong Kong products in the global market. The move into the Mainland was made as a struggle for survival, by making use of the cheap and abundant supply of land and labour to preserve the competitive edge of low-cost production in the hope of staying in business.

This massive migration of the Hong Kong manufacturing industries created far-reaching impact on the economic structure of the territory and the mode of operation of the manufacturing industries, giving off extensive implications. First, towards the end of the 1980s, both the Government and the public urged the upgrading of Hong Kong industries and shifting into a hi-tech basis. The opening up of the Mainland created a vacuum in Hong Kong industries in such a short span of a dozen years or so. Hi-tech industries have failed to become the dominant trend. As a result, the share of manufacturing industries in the gross national product saw a continual drop from 23.7% in 1980 to 7.2% in 1996. Hong Kong shifted from quite a balanced economic system to one which was heavily dependent on the service sectors. The impact and weight of manufacturing industries in economic activities have become minimal.

During this period, there were two factors which influenced this change in economic structure. The first is the "active non-intervention" policy of the Government which created a decisive effect. The outward movement of factories was tolerated and factories in the territory decreased as a result of natural wastage. The Government did not realize the consequence of this serious imbalance in economic structure. Second, both the Government and the people thought that the use of cheap and abundant land and labour in the Mainland to produce cheap products of good quality was a perfect arrangement, amounting to a divine blessing. Many people had thought that there was no need for Hong Kong to have its own manufacturing industries.

As history tells us, it is because of this foundation cast by manufacturing industries that Hong Kong could recover speedily despite the few times of economic recession it had experienced over the past 30 years. But, in the present recession, there is a general pessimistic sentiment that spreads throughout the society. The Government is also in lack of confidence and is at a loss as to what should be done. No one knows when we can get over this recession and return to the upward trend of our good old times.

Madam President, although this economic recession may last for quite a few years, and Hong Kong people may have to live a hard time. But the most important thing for a government to do is to rebuild confidence in its people. It should tell the people of Hong Kong clearly that the dark clouds will pass and there is a bright future lying ahead. To revive the industries, high value-added and hi-tech industries, especially, is the only way out, they can give the people a ray of hope to make them strong and determined to tide over the difficult times.

Now, the revival of industries in Hong Kong is like fighting a battle. We need to have a high command to make plans, give orders and deploy resources and manpower to fight this holy war which will benefit Hong Kong. This high command is the industrial technology council as mentioned in the motion. In mainland China, the State Science and Technology Commission takes charge of technological developments and the industries are taken care of by different departments concerned. In Taiwan, the vice-President himself took over the task of supervising the development of hi-tech industries. Singapore has a similar organization which has full powers to chart developments in science and technology. We trust that this is high time for the setting up of an industrial technology council headed by the Chief Executive to assume leadership in the task of reviving Hong Kong industries. Or alternatively, this organization should also be directly accountable to the Chief Executive.

Madam President, this industrial technology council, the members of which will compose of government officials, scholars, representatives from the industries and foreign experts, should be given the full powers to formulate the direction and strategies for the development of Hong Kong industries and technologies. It should co-ordinate and supervise the implementation of all related tasks and to oversee the use of resources and the co-operation between different organizations. Besides, this organization must be independent and have enough resources and high-level executive powers for policies and measures to be carried out smoothly.

Madam President, I think that the industrial technology council should assist industrial developments from three aspects, that is, technology, professional talents and resources.

In the aspect of technology, the Government of the Hong Kong Special Administrative Region should set up professional research institutes with the primary aim of developing new products and the secondary aim of technology transfer. At present, Hong Kong has many government-funded research institutes. These can be reorganized and made to come under the industrial technology council for better use of resources. Products of research can be put into the market earlier. The industrial technology council can introduce new technology and skills from abroad and to upgrade the quality of local industrial products. Besides, the Government should support industrial research and development made by local private enterprises in order to assist in the production of new products.

As for professional talents, the efforts made by the Government over the past few years to greatly increase places in tertiary institutions and to train up technical personnel are worth supporting. But the Government should provide concessionary terms to attract technical personnel from the Mainland and abroad to set up new enterprises and make investments. This will speed up the development of local technological industries. Certainly, the immigration policy will have to be revised accordingly.

As far as resources are concerned, there had been very few government funding in scientific research in the past. In 1996, funding for scientific research only occupied 0.26% of the value of Gross Domestic Product. But funding for scientific research in Taiwan and Singapore during the same period accounted for 1.85% and 1.35% respectively. For some developed countries such as the United States and Japan, the figures are 2.42% and 3.33% respectively. As Hong Kong greatly lags behind our neighbouring countries in resources in scientific development, I think the Government should make substantial increases in funding for scientific research.

Madam President, my message is clear. Without an industrial base, the economy of Hong Kong will be very fragile and is vulnerable to attacks from outside. It is true for the present and will also remain true for the future.

    Madam President, these are my remarks. Thank you.
Dr LUI Ming-wah moved the following motion:
    "That, as the relocation of manufacturing industries out of Hong Kong has seriously affected employment opportunities and the balanced development of the economy in Hong Kong, this Council urges the Government to expeditiously set up an independent organization vested with administrative powers, such as an industrial technology council or an industrial technology commission, to co-ordinate and formulate a long-term industrial policy, so as to promote industrial development and economic prosperity."
PRESIDENT(in Cantonese): I now propose the question to you and that is: That, as the relocation of manufacturing industries out of Hong Kong has seriously affected employment opportunities and the balanced development of the economy in Hong Kong, this Council urges the Government to expeditiously set up an independent organization vested with administrative powers, such as an industrial technology council or an industrial technology commission, to co-ordinate and formulate a long-term industrial policy, so as to promote industrial development and economic prosperity.
    We will now proceed to the debate. Mr CHAN Kwok-keung.
MR CHAN KWOK-KEUNG (in Cantonese): Madam President, recently there are two things which worried me the most. The first is the persistent rise in unemployment rate from 4.5% to 4.8% as at present, and it may even increase to more than five per cent. Second, the Government was compelled to gamble with the market makers and more than $100 billion were manoeuvred in a very short span of time.

I was thinking: had the Government possessed that breadth of mind to make huge investments in reviving local industries, in carrying out structural planning for a balanced development of the economy and in guiding the directions for foreign investments, it would have prevented the over-emphasis of foreign investments on the financial and property sectors, and there would be no need for the Government to stage an episode of "cops and thieves".

In the face of the present economic predicament and the serious unemployment situation, many people have suggested quite a number of short-term measures. But I think that the Government should adopt measures to assist the small and medium enterprises and to formulate a long-term industrial policy, in order to provide jobs to people with different education background and skills. This will be a key point in the solution for structural unemployment.

Therefore, it would be a good thing for the Government to set up a statutory body which is independent and have administrative powers to co-ordinate the development of industries. Such a measure will bring life and vitality to the dormant and declining state of the industries.

But I would like to emphasize one point and that is: the way out for the future economic development of Hong Kong does not only lie in plans formulated from the angle of domestic structural developments, but also in the fostering of economic co-operations with the Mainland. To use the existing resources and those of the Mainland to make full play of Hong Kong's advantages is very vital and useful to the development of local industries.

The Federation of Trade Unions proposes the setting up of a Hong Kong and Mainland Economic Co-operation Commission. This Commission is different from the existing Guangdong Hong Kong Forum on Co-operation formed between Hong Kong and Guangdong province. It will endeavour to enhance the advantages of the Hong Kong Special Administrative Region (SAR) in the use of mainland resources, for example in obtaining the grant of the right of "domestic market sales" from the central authorities for products developed and produced in Hong Kong (especially hi-tech products). This will attract foreign capital to invest and set up factories in Hong Kong. Apart from that, those industrialists and businessmen who wish to develop hi-tech industries in Hong Kong may choose the territory for its excellent legal system and financing environment to start production here. In this way, local employment opportunities may increase as a result.

Apart from the long-term need of the territory to develop its own hi-tech and high value-added industries, the territory can in the short run, make use of the results of hi-tech research in the Mainland, and with the ingenuity of the Hong Kong people, these results of scientific research can be turned into commercial products for sale. In this way, the Mainland and the territory can complement each other and be mutually benefited. Hong Kong can then solve the problem of a vacuum period in the sale of hi-tech products before they are substantially developed in the wake of hi-tech product researches. We can also consider attracting those experts and professional talents from the Mainland who have emigrated overseas to come to Hong Kong to take part in scientific research and development.

As for manufacturers who wish to invest in the Mainland or in the territory, the Government should follow the footsteps of cities in other countries and set up business offices in the major cities of the Mainland. These offices will enhance the co-operation and interchange between Hong Kong and the Mainland in economic and trade affairs. Legal assistance will be given when economic disputes arise. In fact, the forging of interactive economic relationship between the two places cannot just rely on the efforts of the people but on the support and initiative of the Government.

Madam President, over the past 10 to 20 years, there was no substantive support given to help small and medium enterprises in their operation and the upgrading of technology of local industries. Many countries in Southeast Asia have formulated policies which aim at encouraging foreign investment and increasing local employment opportunities. If the SAR Government in its efforts to maintain the stability of the financial system will not draw a lesson from this bitter experience, and work hard to restructure the local economy, revive local industries and increase employment in order to contribute to a balanced development of the economy, then I am afraid the results would be even more dreadful.

    Madam President, these are my remarks.
THE PRESIDENT'S DEPUTY, DR LEONG CHE-HUNG, took the Chair.

DEPUTY PRESIDENT (in Cantonese): Prof NG Ching-fai.

PROF NG CHING-FAI (in Cantonese): Mr Deputy, I am very pleased to see Dr the Honourable LUI Ming-wah move a motion on the future of industrial development in Hong Kong at a time when the territory is in need of a comprehensive review of its economic structure and in a bid to get out of its economic predicament without delay. I hope that the debate on this motion will help to speed up the transformation of the territory into an economic system based on high value-added and high-technology industries, and also help to boost the confidence of the people who are suffering the pains of economic adjustment.

As we all know, the issues of whether or not local industries are on the decline, or should they be revived, can they be developed in the direction of high value-added and high-technology industries, should the Government support the research and development of innovative industries and how assistance should be rendered to industries, have been under discussion for many years. In the few months before and after the handover, there were a number of debates held in this Chamber on this topic. I feel that some government officials in their search for a more rational and diversified economic structure to rebuild and develop traditional and high-technology industries in Hong Kong, do unfortunately lack the right kind of enthusiasm. They are complacent with the existing inadequate system and seek refuge within the confines of an ideological framework of active non-intervention which is incomplete and out of touch with the reality of the economic development of the world. Without careful consideration they made PAVLOV remarks such as: "The Government will never provide funds to support any particular trade". This is in fact shirking off the responsibility of fostering development of industries. This is indeed regrettable. In an era of knowledge economy like today, such an ignorance of the intellectual trends found amongst certain government officials is deplorable.

In September last year, the Hong Kong Institution of Science (HKIS) and I submitted a proposal to the Chief Executive Mr TUNG Chee-hwa and the relevant government departments. We expressed our views on the development of technology-based industries in Hong Kong. We stressed that Hong Kong had to have its own industries so that the economic structure of Hong Kong could be more diversified, thereby eliminating the chances of forming a bubble economy as a result of an over-reliance on the financial and property sectors. We analysed the various positive and negative factors affecting industrial development in Hong Kong. We pointed out that we should upgrade traditional industries and develop higher valued-added technology-based industries. Furthermore, we pointed out that in the development of innovative high technology, emphasis should be placed on building mid-stream industrial bases which were pivotal in the process of transforming scientific research into commercial applications. In this regard, we have referred the Government of the Special Administrative Region to the experience of the Industrial Technology Research Institute of Taiwan.

Mr Deputy, it would be unfair to say there has not been any positive response on the part of the Government to the proposals put forward by the HKIS and people from the industrial sector and academic circle. I think that over the past year, Mr TUNG and the Commission on Innovation and Technology headed by Prof TIEN Chang-lin have put in a lot of efforts in this respect. I am looking forward to getting a pleasant surprise from the first report compiled by this Commission and the second policy address made by Mr TUNG.

But at a time when the first report and the second policy address have not yet been released, the motion moved by Dr LUI Ming-wah is both timely and meaningful.

Mr Deputy, all along I believe that the Government should bear the historical responsibility of perfecting the economic structure, strengthening the economic base and promoting a technological development which is growing in the direction of knowledge economy. In line with the changes and needs of the Hong Kong economic structure, and matching the long-term goals of reviving industries, there is a need to adjust and enrich the existing industrial administration organizations. We really need an independent administration organization to undertake the task of planning the development of Hong Kong's technology-based industries and co-ordinate the co-operation with mainland industries. The proposal made by Dr LUI Ming-wah in his motion to set up an industrial technology council ties in with this idea. As for the details, we can discuss about them in full. Some time ago there were people from the academic circle who suggested separating the Trade and Industry Bureau into two bureaux, each catering for trade and industry affairs respectively. This is a good suggestion made with the intention of promoting industrial development in Hong Kong. I hope that the Government can give serious consideration to these suggestions and in due course make reasonable adjustments to the government management framework. Because of the above, I support Dr LUI Ming-wah's motion.

DEPUTY PRESIDENT (in Cantonese): Mr CHEUNG Man-kwong.

MR CHEUNG MAN-KWONG (in Cantonese): Mr Deputy, in the wake of the Asian financial turmoil, the whole Southeast Asia is now reviewing its economic structure. Hong Kong is no exception. The Democratic Party has repeatedly pointed out that Hong Kong has to re-adjust its economic structure. Apart from the financial, real estate and service sectors, we must re-develop our industrial system so that our economy will not suffer from recession and unemployment crises due to sharp fluctuations in the financial and real estate sectors.

In the past, Hong Kong's economic policies were profit-oriented. As a result, our industries were completely replaced by the financial and real estate sectors, which have thus become the only pillar that generate income for our economy. As a result, our bubble economy came into being. Now, this bubble economy has completely burst, bringing to Hong Kong a lot of pains. But pains keep us sober. We must identify a new economic system to prepare Hong Kong for the 21st century so that we can face many more financial turmoils which may occur in future. Now, we are not providing against danger while living in peace. Rather, we are providing against danger while living in crisis. When we are in crisis, we should remind ourselves of a greater crisis.

The Democratic Party supports part of Dr LUI Ming-wah's motion that the Government must formulate a long-term industrial policy, so as to promote industrial development and economic prosperity. But we have to point out that in an era of economic globalization, industrial and financial policies are closely related. When Hong Kong's financial system is unstable and the linked exchange rate is subject to challenge, our interest rates will rise sharply. This will affect normal lending activities of industries, consequently, the small and medium-sized enterprises, which bear the brunt, will be at their last gasp and will even have to close down.

The present situation is critical, the Government must, first and foremost, stabilize the financial system and unemployment figures. To take a step further, it should develop new industrial technology. Dr LUI Ming-wah suggested the setting up of an industrial technology council to be directly accountable to the Chief Executive in co-ordinating these work. However, what is the difference between this industrial technology council and the existing Trade and Industry Bureau as well as the Industry and Technology Development Council in terms of functions? Dr LUI Ming-wah also suggested the setting up of an industrial technology commission. Again, what is the difference between this commission and the Commission on Innovation and Technology under the leadership of Prof TIEN Chang-lin? The crux of the question lies in what we expect the Government to do in promoting industrial development, rather than focusing on the setting up of new organizations and new structures. Otherwise, this will only lead to duplication of organizations and administrative confusion. In this aspect, we have reservations about Dr LUI Ming-wah's proposal.

However, we must point out that in the past, as the Government has all along insisted on adopting the non-intervention industrial policy the Trade and Industry Bureau has existed in name only. As a result, the Bureau has made no achievements and has instead become a vase for ornamental purpose in the industrial sector. The Industry and Technology Development Council, on the other hand, has sadly become a tool responsible for checking and granting funds for scientific research. Two industrial reports, including the "Hong Kong Industrial Diversification Report", and "Made in Hong Kong" published by Massachusetts Institute of Technology, have pointed out that government officials lack adequate technical knowledge to formulate industrial policies. I think it is imperative for the Government to solve the problem that experts are being led by laymen. It should seriously consider seconding technical experts from the industrial sector and the academic field to help formulate government policies. Just like the Applied Research Fund, its approval is now handled by experts instead of government officials. Wisdom should be taken from the general public rather than from those government officials who are not professionals.

What Hong Kong is doing in technology transfer is far from satisfactory. Both the Hong Kong Industrial Technology Centre Corporation and the Hong Kong Productivity Council aim at helping the industrial sector to upgrade technology. However, what they have done attracted more criticisms than praise. They have not only failed to act as a bridge between the academic field and the industrial sector, but also failed to help the industrial sector to bring in new technologies. The Democratic Party has proposed to strengthen the technological support functions of the Hong Kong Productivity Council and the Technology Centres, or set up a technology research centre to use research findings of the academic field for commercial purposes. Recently, the Commission on Innovation and Technology, which is led by Prof TIEN Chang-lin, proposed the setting up of a "mid-stream" research institute, the Applied Science and Technology Research Institute, in order to bridge the gap between the academic field and the industrial sector, to bring in new technologies and to develop products of innovative technology. The Democratic Party thinks that this proposal is worth supporting. But the Government has to allocate a substantial amount of research funds to support industrial research in order to bring this proposal into reality. Otherwise, this mid-stream body will be like a commander with no soldier under his command, and will only be asked to cook rice without the grain. Our industries will still be unable to take off the runway of innovative technology. In the past, scientific research and development expenditure accounted for less than 0.3% of the value of our Gross Domestic Product, a percentage which was lower than that of Japan and the United States, as well as Taiwan and Singapore. As our industrial research and development are basically inherently deficient, they will definitely end in backwardness and failure. This also explains why Hong Kong finds it harder to bear with the financial turmoil than Taiwan and Singapore do. If we do not undergo a complete transformation, our industries will be unable to have a better future. Our economy and society will also suffer from instability.

Mr Deputy, crisis will lead to reforms and only through reforms can we have hope. It was only after the financial crisis then Hong Kong people have come to realize the importance of our industries again. I really do not know whether this is a misfortune or a blessing. The only thing we can do now is to muster our strength from the crisis and exert ourselves to catch up with others.

Mr Deputy, these are my remarks. The Democratic Party half supports and half opposes Dr LUI Ming-wah's motion. So we choose to abstain.

DEPUTY PRESIDENT (in Cantonese): Mr Kenneth TING.

MR KENNETH TING (in Cantonese): Mr Deputy, while we the Liberal Party support the main direction of Dr LUI Ming-wah's motion, we have reservations about some of the suggestions.

As Dr LUI said, in the past, Hong Kong's economy has over-depended on the services industry and finance. As a result, it has become extremely vulnerable. Once hit by the financial turmoil, it has fallen like a bridge without pillars. If we look at countries around the world, those that can weather storms have one thing in common: they invariably have a solid industrial basis. Furthermore, the greater their industrial production, the better they can weather storms. Taiwan and Singapore are very good examples. I need not elaborate further. In short, we have to rebuild Hong Kong's industrial basis before our economy can develop steadily again. Therefore, we agree with Dr LUI's suggestion in terms of the main direction.

Mr Deputy, as for setting up an independent industrial technology council vested with administrative powers, we have some reservations about this. Setting up an organization vested with powers does not necessarily mean that the problem of the current lack of co-operation among various organizations could be solved. Actually, we have already had organizations like the Industry Department, the Hong Kong Productivity Council and the Industry and Technology Development Council to co-ordinate and implement the industrial policy.

The stagnate state of our industries is a result of the Government's active non-intervention policy in the past, which has led to a lack of clear directions in the industrial policy. Due to the lack of co-operation among departments, resources failed to be put to good use. Therefore, we need to have a clear and forward-looking industrial policy first. In order to effectively implement the industrial policy, the co-operation among the various departments must be strengthened and their actions must be more concerted.

How can co-operation be enhanced? We think that we should wait until the Commission on Innovation and Technology has completed its study report before deciding on this. It is said that Prof TIEN Chang-lin will recommend to the Chief Executive that a "mid-stream scientific research institute" should be set up to provide technological research to enterprises in order to bridge the gap between the academic field and enterprises. I consider this to be a step in the right direction. The Commission will also review the modes of co-operation among the various scientific research organizations. I believe that Prof TIEN Chang-lin will draw a conclusion on this question soon. Therefore, I think this is not the time to suggest that the Government should set up another organization, or else it will lead to duplication of efforts and policy in future which need to be avoided.

Lastly, I would like to talk about one more issue. As Dr LUI pointed out, the Special Administrative Region Government has not put enough capital and resources into industrial development. We very much agree with this. The development of high value-added and high technology industries requires considerable resources. At present, the funding for scientific research in Hong Kong merely accounts for 0.3% of the value of our Gross Domestic Product, as against 3.75% in Sweden for instance. Compared to other countries which place emphasis on industrial development, the difference is great indeed. Therefore, the Government must inject more resources into industrial development. Only when all the infrastructure for promoting industry and stimulating investment is in place and resources are put to good use can we successfully promote industrial development.

Mr Deputy, these are my remarks. Thank you. We support Dr LUI Ming-wah's motion.

DEPUTY PRESIDENT (in Cantonese): Dr Raymond HO.

DR RAYMOND HO (in Cantonese): Mr Deputy, as far as I can remember, this is the first time this Council discusses about promoting industrial development in Hong Kong. However, related topics have been debated for several times in this Chamber. On each occasion, Honourable Members expressed in their speeches their concerns about the effects of the outward relocation of our manufacturing industries on our economic development and employment situation and they touched upon issues such as the unemployment of manufacturing workers and the loss of balance in our economic development. However, as the economic situation then was fairly good and the monetary services industry vigorously developing, Members' worries were incompatible with the generally flourishing atmosphere at that time. I am not sure if the Government has not been paying much attention to the problem up till this day for the same reason.

After Hong Kong has been attacked by the financial turmoil, trades and industries are in a slump and the unemployment rate keeps rising, and discussing about promoting industrial development in Hong Kong is no longer considered to be groundless anxiety. In the past, government policies has focused on the development of the monetary and services industries and neglected supporting industrial development, but this is wrong, for industries are our economic foundation. In view of the present circumstances, immediate attention is demanded in developing our industries. Under the present circumstances, I think that it will be more convincing to discuss this topic again and to urge the Government to look squarely at the problem.

In the past, the Government only concentrated on providing support to industrial development. In respect of personnel training, higher level education and training courses are mainly offered by the tertiary institutions in Hong Kong, and the Vocational Training Council also offered industrial education and industrial training. A few years ago, the Government set up the Industrial Technology Development Council chaired by the then Financial Secretary and I was a member. When I took charge of the Technology Committee, I have appointed consultants to study the promotion of industrial automation and published a research report.

As for upgrading other technologies, we have various industrial support bodies. These include the Hong Kong Productivity Council which provides the manufacturing industry with various professional services for improving the abilities of products and services in adding values. The establishment of the Hong Kong Industrial Technology Centre Corporation is aimed at assisting Hong Kong industries in bringing forth new technologies and applying novel technologies. Recently, Hong Kong has been encouraging applied research and development, in such a way that applied research and development schemes and co-operative applied research and development schemes have been launched one after another.

In addition, the Government is planning to build a science park in Hong Kong to promote the development of local high technology companies and introduce to Hong Kong technology-oriented activities. In respect of the said industrial support services, we cannot completely deny that efforts have been made by the Government. However, if we compare Hong Kong with our adjacent regions such as Singapore and Taiwan as referred to by many people, it seems that we have to ask ourselves whether Hong Kong has done enough. The governments of these countries and regions have provided basic support and taken concerted actions in regard to the relevant policies and even the tax systems.

The financial turmoil this time has highlighted the short-sightedness of the Government in industrial development. The Government probably thinks that Hong Kong is successful as positive non-interventionism has been adopted and no exception is made in respect of the policy for industrial development. However, I think that flexible government policies are very important to our success. Successful policies should be changed and adapted along with the trend of the times and no exception should be made in respect of the policy for industrial development. Therefore, Hong Kong should focus on the development of potential industries while government policies should cope with such development at different levels. To achieve this aim, the Government should quickly set up an independent body with an appropriate terms of reference so that it can effectively co-ordinate and formulate long-term industrial policies to avoid following the same old path of putting too much emphasis on the property market, monetary or services industry, for in the past, too many people have concentrated only on speculative activities and neglected that engaging in production to improve productivity was the most fundamental factor contributing to economic development.

    These are my remarks in support of the motion.

    Thank you, Mr Deputy.

DEPUTY PRESIDENT (in Cantonese): Mr HUI Cheung-ching.

MR HUI CHEUNG-CHING (in Cantonese):Mr Deputy, I will support Dr LUI Ming-wah's motion on establishing an industrial technology council for the following three reasons:

    1. Hong Kong industries will continue to find room for development if positive measures are taken to introduce new technologies and recruit suitable talents;

    2. Such an industrial technology council can see things from the perspectives of industrialists, and for that reason, it will be able to introduce the fruits of technological research from all parts of the world and apply them to our industries in a positive and expedient manner; and

    3. The establishment of an industrial technology council will serve a psychological purpose, enabling the people of Hong Kong to see the confidence of our Government in the future of Hong Kong.

Here, I should caution the Administration against a duplication of the functions and powers of this industrial technology council with those of the existing institutions, such as the Commission on Innovation and Technology and the Industry Department, so as to avoid redundancies and a waste of public funds and human resources.

Mr Deputy, in the wake of the financial turmoil, members of the community have gradually come to realize the importance of our import and export trades, industries and the tourism industry, and they have also realized that our industries can provide a steady source of foreign exchange earnings and create a lot of job opportunities. However, since our goal is to manufacture high-value added products, we must keep on improving our products, so as to make them value-for-money and secure more orders.

Mr Deputy, after the industrial technology council is established, it can first focus its work on two areas. Firstly, for existing industries, it must study very seriously the problems faced by both small and large manufacturers in the course of upgrading their technologies and updating their equipment. One example is a recent problem encountered by the textile industry, which apparently does not involve any complicated technologies. Specifically, the industry has to satisfy the colour requirements of some customers and find out a dying method which can produce, at reasonable costs, products which can remain colourfast up to a specified light intensity. Many other industries are facing problems of a similar nature; continuous research is therefore required to solve the technological problems faced by them, to upgrade their products and to enhance their competitiveness. Besides, the industrial technology council should try to attract more young people to the industrial sector by instilling in them a sense of pride.

Second, I should say a few words on those industries which require high technology and intensive machinery operations. Plant premises have become cheaper in Hong Kong; tens of thousands of secondary and university graduates will join the workforce each year; it is now easier to recruit ordinary workers; our political system is highly transparent; our financial market is stable; our customs procedures are simple and efficient; our telecommunications services are highly developed; our links with other parts of the world are close and frequent; our taxation system is straightforward and easy to understand; and all miscellaneous expenditure items can be calculated beforehand. Given all these factors, and if industrial operating costs and land prices can drop still further, local investors will probably stay and foreign investors may also be attracted to Hong Kong to start high-tech and machinery intensive industries as long-term investments. As far as I know, a major corporation has opted to build a manufacturing plant in Tuen Mun when choosing between investing abroad and Hong Kong, and the manufacturing plant will soon start its operations.

Therefore, I am in support of Dr LUI Ming-wah's motion on the setting up of an industrial technology council, so as to co-ordinate with other government departments in actively planning and promoting our long-term industrial development, and to upgrade our industries through technological developments.

    Mr Deputy, I so submit.
DEPUTY PRESIDENT (in Cantonese): Mr LEUNG Yiu-chung.

MR LEUNG YIU-CHUNG (in Cantonese): Mr Deputy, the topic of promoting the industries of Hong Kong has been discussed on quite a number occasions before, and all along, I have been advocating that we should do our best to improve our industries. Therefore, I will support Dr LUI Ming-wah's proposal that the Government should set up an independent body with administrative powers to co-ordinate our industrial development.

During another motion debate in July, the Secretary for Trade and Industry introduced the various measures currently taken by the Government to promote industrial development. Most of these measures are basically very passive in nature, some examples being tax concessions and the granting of lands for the construction of industrial estates. The rest of the measures are just a number of subsidy schemes which can at best provide some form of fragmentary assistance only. I thus think that the Government is actually lacking in any macro and far-sighted vision, and I do not think that it has in any way really put in place any concrete policies to promote industrial development. What the Government has actually put in place are just some haphazard and window-dressing measures. This explains precisely why we have so far failed to arrest the decline of our industries.

In contrast, other places in Southeast Asia have done much better than Hong Kong, though, to be fair, their performance in this respect is still not entirely satisfactory. In Singapore, in South Korea, in Taiwan and even in Malaysia and Thailand, pronounced policies have been implemented to promote industries and technology, and industrial development is promoted under the vigorous direction of the governments there. Hong Kong is the only place where absolutely nothing has been done in this particular respect. Such an approach has been described euphemistically as "positive non-intervention", but it should be called "negative non-intervention". As a result of this approach, the industries of Hong Kong are now lagging far behind other places and countries in terms of technology, and this has in turn rendered the Hong Kong people far less competitive than others.

What is more, the technological backwardness of Hong Kong will also create a kind of vicious circle. Influenced by their impression that Hong Kong is backward in technology, foreign high-tech companies planning to expand their businesses will probably stay away from Hong Kong, because they will think that Hong Kong is unable to provide adequate logistic support, whether in terms of talents or other areas. When this happens, our own talents may well become reluctant to join the industrial sector. That way, the situation will deteriorate continuously, thus making the technological backwardness of Hong Kong a permanent drawback.

If Hong Kong is to revitalize its industries, and if it is to restore its competitiveness, it must then adopt a hi-tech, high value-added and design-intensive approach for its industries. And, the Government does indeed have a definite responsibility for promoting the development in these directions, not least because such a responsibility is stated very clearly in Articles 118 and 119 of the Basic Law. As far this issue is concerned, the Government needs not only to make efforts; it must also ensure that administrative and policy support is available. For this reason, I am of the view that instead of relying solely on the Trade and Industry Bureau, the Government should set up an industrial technology council to assume responsibility for the work of co-ordination and development.

I wish to discuss the issue of talents in particular. I am not sure whether the Government will really set up the industrial technology council I have mentioned, but, whatever its decision may be, it should still employ full-time professionals from the hi-tech fields to take charge of the industrial development of Hong Kong. The various bodies which have been set up by the Government to develop new technologies, such as the Chief Executive's Commission on Innovation and Technology, are all nothing but consultative bodies staffed by part-time instead of full-time members. I think drastic changes are really required in this respect. In fact, as rightly pointed out by many of my friends in the manufacturing sector, the problem with Hong Kong is not so much a lack of the required talents, but the government practice of putting laymen in charge of the management and development of industrial promotion, and this has created a situation under which outsiders are entrusted with the task of leading insiders. Therefore, the Government must employ technology experts, and these experts should be given the task of co-ordinating the technological research efforts in different fields; they should also keep in touch with the various industries and seek to attract foreign investors in the hi-tech fields.

However, even if the Hong Kong Government can learn from the bitter experience and seeks to make up for its leeway by setting up an industrial technology council immediately, I believe that we will still have to endure a rather long period of difficulties and pains, because we are already lagging far behind many other places and countries in terms of high technology development. When compared with Taiwan, for example, we are probably several years behind in terms of electronic and high technology development, and if we want to catch up, we will have to redouble our efforts. I think we are really facing a very formidable difficulty, but this does not mean that we should give up altogether, because the arduous journey of achieving a goal should be no excuse for surrender. I hope the Government will just hold on and make continued efforts to develop our industries. Actually, industries are of vital importance to our whole economy; it can be said that we are now facing a life-and-death situation. If the Government still turns a blind eye to the situation, there will be no hope for our economy. Recently, the Government has spent more than $100 billion on jacking up our financial markets, and it claims that it is worthwhile to do so. Likewise, I would say that it is in fact equally worthwhile for the Government to invest more money in the development of our industries. I hope the Government can tell us very specifically the long-term strategies which it will adopt to develop the industries of Hong Kong.

    Mr Deputy, I so submit.
DEPUTY PRESIDENT (in Cantonese): Mr LAU Chin-shek.

MR LAU CHIN-SHEK (in Cantonese): Mr Deputy, the advocacy that the Government should pay adequate attention to industrial development is fact "age-old". The only thing which is new in our discussions today is that our bubble economy has finally burst, and the Government can thus no longer evade the reality of an "industrial vacuum" in our economy.

At one time, before the mid-1980s, the manufacturing industries were the pillar of our economy, employing something close to 1 million workers, or 40% of our entire working population. Therefore, it can be said that the post-war prosperity of Hong Kong would not have been possible without the boom of the manufacturing industries. From yesterday to today, I have been stressing the point that industrial development will constitute the very foundation on which the continued prosperity of an economy depends. Unfortunately, over the years, the Government has failed to put in place a pronounced policy on industrial development. Instead, it has been watching the exodus of our manufacturing industries with folded arms; it has not taken any positive steps to train and upgrade our industrial manpower, nor has it provided any resources to assist in the restructuring of our manufacturing industries. This approach of the Government is indeed the culprit of the present-day decline of the manufacturing industries! I hope that the Government will from now on stop being evasive and stop paying mere "lip service". I hope it will instead lay down a serious policy on our long-term industrial development, so that our manufacturing industries can be revitalized to boost our economy and provide more job opportunities.

In this connection, I think all of us will know only too well that if our industries cannot proceed along the path of high technology and high value-added development, all talks about revitalizing our industries will become mere "day-dreams". And, we also know that when it comes to high technology and high value-added development, it is indeed easier said than done, particularly because Hong Kong is already lagging far, far behind other economies in the same region. Although the Commission on Innovation and Technology of the Special Administrative Region has already started some of the required research projects, I suppose it will still take at least eight years, if not 10, before any of its recommendations can be implemented to achieve the desired results. For that reason, apart from looking to the Commission on Innovation and Technology for advice, the Government should really need to reorganize the haphazard division of responsibilities among the several government departments and bodies which are involved in the formulation of our industrial policies. Specifically, a body with actual administrative powers should be set up to assume a co-ordinative role. Such a body should be given sole responsibility for the formulation of long-term industrial policies, and it should also take actions to promote applied technology, high value-added products and skills training, so as to assist in the development of the manufacturing industries as soon as possible.

Mr Deputy, I am particularly concerned about the protection of workers' employment rights in the course of industrial development. Actually, if Hong Kong is to be led onto the path of high technology and high value-added development, the strengthening of skills training for local workers will be of key significance; equipping our workers with more and varied skills is the only means to raise our industrial productivity, to increase the value of our industrial products, and thus to enhance the competitiveness of our industrial products in the world market. What is more, this is also the only means to enable workers to really benefit from industrial development. I consider that if the Government really wants to set up a co-ordinative body on the formulation of industrial policies, it must make sure that workers are represented on this very body. That way, workers will be able to take part in the formulation of our industrial development strategies. Actually, in Singapore, a tripartite skills training board comprising representatives from the Government, employers and employees was already set up several years ago, with the objectives of enhancing the occupational skills of in-service workers and satisfying the ever-increasing needs for new and sophisticated occupational skills in the course of industrial development. Besides, in order to sustain the provision of skills training, Singapore has even established a skills training fund to provide the necessary resources for upgrading workers' skills. We should really learn from the experience of Singapore.

I hope that the Government can really learn from our bitter experience and stop indulging itself in the almost superstitious belief that "the economic foundation of Hong Kong is robust". I hope that it will make determined and renewed efforts to develop our manufacturing industries, so as to open up new horizons for both our economy and the employment prospects of our workers.

    Mr Deputy, I so submit. Thank you.
DEPUTY PRESIDENT (in Cantonese): Mr NG Leung-sing.

MR NG LEUNG-SING (in Cantonese): Mr Deputy, over the years, Hong Kong has developed for itself an outwardly-oriented economy, and its economic activities are thus subject heavily to the cyclical fluctuations caused by external factors; therefore, the diminished consumption power elsewhere in Southeast Asia and the fluctuations of the financial markets all over the world have all produced their bearing on the prospects on our economic recovery. However, as a Member of the Legislative Council, even at this very time of economic downturn, I remain convinced that the long-term prospects of our economy will still be very promising. If only we can look carefully at our existing economic and legal frameworks and then introduce some visionary reforms on a prudent basis, I am sure that we will be able to grasp new development opportunities as soon as they arise. That way, we will be able to bring about the recovery of our economy very quickly.

Over the years, the Government has failed to render any concrete support to our industrial development in terms of either resources or directions, and this has frequently been criticized by the industrial sector. Unlike our competitors such as Taiwan and Singapore, our own Government has done remarkably little to support the industrial sector. We do of course admit that it will be most desirable to have a free market, a level playing field, where different manufacturers can compete with one another solely on the strength of their own capitals and technical capabilities. However, what we are now facing in the world market are rivals supported in varying degrees by their own governments in terms of technology and finance. That being the case, it is only natural for us to worry that the competitiveness of Hong Kong's industries may gradually diminish to a disadvantageous position. If the Government really wants high value-added and hi-tech industries to gain a firm footing in Hong Kong, and if it really wants them to become the new impetus for our economic development, it must of course inject a reasonable amount of resources for the purpose. However, it is equally necessary for the Government to introduce some corresponding policy and management reforms, so as to co-ordinate all the efforts of promoting the long-term development of our industries.

Regarding the injection of additional resources, many recommendations have been put forward in the community, some examples being the establishment of a second-board securities market, the setting up of an industrial technology fund or a business-starters' fund, the recruitment of talents from the Mainland and the adoption of mainland technological research findings. The Commission on Innovation and Technology will release its interim report in early October, and members of the public do look forward to many valuable recommendations from the Commission. However, we should not thus lose sight of the point that our efforts of industrial promotion will achieve their maximum effectiveness only when better administrative arrangements are put in place to improve the co-ordination among the parties involved. As pointed out by some academics, for example, some research projects of local tertiary institutions can already compare favourably with those of their counterparts in Europe and America. According to these academics, what we now lack is just a co-ordination mechanism which can channel these technologies and research findings to the open market. Another important point is that we must lay stress on giving ample opportunities to local talents and on upgrading their quality. To tackle these problems, the co-ordination of the Government is obviously required. Specifically, the Government should look at the existing administrative framework and the division of responsibilities within it, so as to see whether there is any effective co-ordination for the various areas, such as the promotion of technologies and industrial development. That way, all the relevant efforts can be made with a common direction to serve really practical purposes.

Admittedly, the existing Commission on Innovation and Technology is already quite a heavyweight body, whether in terms of its composition or its level, and there should be no doubt about its consultative function. However, if we are to implement its research findings and recommendations effectively, and if we are to follow up and review the issues continuously, we will really need to set up a full-time administrative body with sole responsibility for such purposes. This should be considered by the Government very seriously as a long-term objective.

    Mr Deputy, I so submit.
DEPUTY PRESIDENT (in Cantonese): Mr James TIEN.

MR JAMES TIEN (in Cantonese): Mr Deputy, we have been undergoing economic restructuring for several years already, and all along, we have been criticizing the Government for its so-called "positive non-intervention". Recently, we have even started to call upon the Government to formulate appropriate policies. However, we certainly do not mean that the Government should start to interfere today, nor do we mean that actions and efforts should always be guided by corresponding policies ─ well, perhaps, as mentioned by some Honourable Members a moment ago, the Government simply does not have any policies at all.

In regard to industrial development, we have been pointing repeatedly at the outward shift of our manufacturing industries over the past decade or so. In Hong Kong, land prices are high, wages are high and production costs are high. In contrast, labour and lands in the Mainland are very economical. This has led to a continuous outflow of local industries, and traditional enterprises are leaving Hong Kong one after another. With the outward shift of manufacturing industries over the past 10 years or so, our services sectors such as tourism, transport and banking services have kept on expanding. It was not until the outbreak of the financial turmoil that we started to realize the problem with our economy ─ a lack of sufficient diversification. The Liberal Party would therefore like to ask, "When the Government draws up its economic policies now, should it aim at economic diversification?" We should really aim at a wide variety of economic activities ─financial services, tourism, or even manufacturing industries, commerce and hi-tech industries which we now talk about.

The Liberal Party fully supports the motion moved by Dr LUI Ming-wah today, especially the part on the development of hi-tech industries. Although we may well have a late start, and although we may thus lag behind Taiwan and Singapore, to be late, in the words of many Honourable Members, is certainly better than doing nothing at all. That said, I wish to introduce one more point today, a point which is of particular concern to Mr LAU Chin-shek and Mr LEE Cheuk-yan. During the period of restructuring, whether we talk about the traditional industries which have left Hong Kong or the hi-tech industries to be developed, can the majority of our workforce, especially our industrial workforce, cope with the ensuing changes? If not, how are we going to ensure their employment at least in the immediate future? While the Liberal Party agrees that there is a need to promote high technology, it also realizes that the results of our efforts will not be forthcoming until after five years, 10 years or even 15 years. The high technology which we talk about now ...... Well, perhaps, we will have to wait until the University of Science and Technology, the Polytechnic University and the City University can produce the engineers and professionals required. Before this, if we look at the existing manufacturing workers, we will see that most of them are already in their forties or even fifties. What is more, they know very little English and their standard of Chinese is not very high either. It will thus be impossible to retrain them successfully in high technology over a short period of time. And, even in the long run, because of their age, I just do not think that it will be at all easy for them to make any adjustments. In view of this, I would instead advise the Government to apply high value-added concepts to our traditional industries. What I mean is that high technology can in fact be introduced to many aspects of our traditional manufacturing industries such as the garment industry, the plastics industry, the metalware industry and the electronics industry. And, even if new technologies are introduced into these industries, the workers of Hong Kong will still be able to adapt themselves to the new ways of operations, and so will the existing management staff. If we can do this, we may then be able to achieve a much smoother transition to hi-tech industries. The Government used to render no assistance to retain our traditional industries. It should now reconsider such an attitude.

Initially, I did not quite understand what the industrial technology council advocated by Dr LUI Ming-wah was all about. After hearing his clear explanation in moving his motion today, I have come to understand that there is only one difference between his industrial technology council and the existing Industry and Technology Development Council (ITDC) of the Government ─ the word "Development". So, in a sense, the body advocated by Dr LUI has in fact been set up by the Government already, and this existing body already comprises government officials, academics and representatives from the industrial sector, very much similar to the proposal of Dr LUI. The only thing is that as far as I know (but I may be wrong), the latter is made up entirely of local experts, and no experts from outside Hong Kong are found. Actually, the ITDC has been doing precisely the work advocated by Dr LUI ─ the formulation of industrial policies and directions of technological development, the work of strategic planning and that of overall co-ordination. Of course, Dr LUI is right in saying that other aspects of work have been assigned to other bodies. One example is the Hong Kong Productivity Council (I was appointed its Chairman by the Government from 1988 to 1993), which is responsible for upgrading local products by introducing new technologies and techniques from abroad. That being the case, is there still any need for us to set up a separate body called an industrial technology council, which will at best duplicate the efforts already made by an existing body? This is indeed open to question.

Then, there is the problem of manpower training. Over the years, this has been the responsibility of the University of Science and Technology, the Polytechnic University, the City University and so on. If we now say that we do not need them any more and we want to pass over the task to a new "council", how are we going to deal with these universities, bearing in mind that they are educational institutions not under the charge of the Trade and Industry Bureau?

I agree with Dr LUI that the Hong Kong Government has allocated very little resources to the development of new technologies. However, I suppose we will be giving our government officials quite a hard time if we ask them to decide all by themselves how much is to be spent on what particular technological research areas. Let us not forget that even with the modest loan fund for small and medium enterprises, which involves a mere sum of $2.5 billion, our government officials still do not have any courage to vet the applications themselves and have to ask participating banks to do the job for them. So, we can easily imagine what they will think now, when the amount of money involved may well be much, much more enormous than $2.5 billion. How can we possibly ask them to decide which kinds of technology to develop, what foreign experts to employ and how much money is to be spent? Given their abilities now, they are possibly unable to make such decisions.

Mr Deputy, the Liberal Party is in total support of the motion as a whole. However, when it comes to the part on an industrial technology council, we will only support some of the recommendations; and, we want to express reservations about the rest.

DEPUTY PRESIDENT (in Cantonese): Mr LEE Cheuk-yan.

MR LEE CHEUK-YAN (in Cantonese): Mr Deputy, I think the motion debate we have today is one of those rare occasions in the Legislative Council on which there is so much consensus and so little controversy. Actually, Dr LUI Ming-wah can ask the 60 of us to sign up for his motion and give the signatures to the Government. I do not think that the Government is likely to raise any objections.

After the outbreak of the financial turmoil, there is a clear consensus in this Council and in every social stratum that the present economic structure is a distorted one. It is overwhelmingly tilted towards the financial and property sectors, so much so that it is a so-called bubble economy. I think there is a consensus in society, and I hope that the Government in making a reply later would say whether it also has this consensus within the Government too. That consensus is the most important part of Dr LUI Ming-wah's motion, that is, Hong Kong should develop a long-term industrial policy of its own. Both the Frontier or the Hong Kong Confederation of Trade Unions which I am representing are all firmly in support of the imperative to develop industries. I agree with what Dr LUI has said just now, that Hong Kong would not have a sound economic base at all if it did not have any industries. When the Government commented on the financial turmoil, very often it would say that Hong Kong had a very strong economic base, that it was the first place to rebound. I do not agree to this entirely. Our weakness lies precisely in industries. So I do not understand why we can make a rebound. How can such a rebound be made? Just now Dr LUI also mentioned the examples of Singapore and Taiwan. It is precisely because these countries have a good industrial base that the adverse impact on economic growth they had experienced during the onslaught of the financial turmoil was very minimal. The problem with Hong Kong is that our economy seems to be built on quicksand. A wave will sweep the sand away.

Given that the mainstream opinion of society is to develop high value-added industries, I fail to understand why over the years, there has not been any concrete steps taken to really change the entire economic structure of Hong Kong. In the past, the Government said that it did not want to formulate a long-term industrial policy because the invisible hand of the free market would cause capital to flow to the industries where there was profit to be made. So it is not proper for the Government to step in. But the question is that the market mechanism can be said to be a powerless one now. Speculations in the financial and property markets have distorted the incentive structure. The short-term return of industrial investments is no match for investments in the financial and property markets. Of course, things may have gone better recently. Because in the recent financial turmoil, the least affected have been the industries. Of so many trades, the profits and prospects of industries are the most outstanding. Industries may have a better time in future because there has been some change in the former incentive structure. But the fact is, many people who used to engage in industrial activities are now investing in properties. Funding for research carried out by local tertiary institutions comes mostly from government subsidies. There is very little funding from the business sector because of the lack of confidence in long-term investment. This state of affairs also accounts for the lack of co-ordination between the research done in the tertiary institutions and local industrial development.

Another very obvious problem must be money. Banks and financial institutions rarely provide long-term financing for investments in innovative technologies. We have no idea how the Government can solve this problem. Banks are like modern pawn shops. When someone brings in a piece of brick, they will lend that person money right away. However, they will stop lending money now that this piece of brick is worthless. Will the banks not consider whether a certain industrial project can bring in good returns in the long run and therefore put its confidence in some innovative technologies, instead of lending money to someone who brings in a piece of brick? For many funds in foreign countries, the decision of whether to lend money or not does not depend on that piece of brick, but on whether any profit can be made from that industrial project concerned. In fact, at their initial stage, many industries need to rely on investments made by these so-called starter funds. Unfortunately, Hong Kong banks are like modern pawn shops. If they do not lend money, industries will never have a chance to grow. Why are the financial institutions not willing to lend money? Because they do not have professionals who are familiar with the industries. Since the banks are in lack of this kind of professionals, they are naturally hesitant in lending money to the industries. This shortage of funds has undermined the prospects of the technology-based industries and affected the direction which professional talents are moving. Thus a vicious circle is formed. What can be done if there are no money and manpower when we wish to develop our industries?

Recently, the Government has made some very positive suggestions such as the second board market. Although this is a positive suggestion, it is doubtful whether any immediate effect can be seen even if there is a second board market or technology-based stocks are put up for trading. There may be some problems if we ask the public to invest for they are not sure of the future developments of industries because the banks refuse to lend money. So, the Government should first solve the problem of financing. I really want to know how the Government will solve this problem.

The Government has in fact done something already. For example, it has set up the Applied Research Fund and the Industrial Support Fund. Will the Government expand these schemes to solve the problem of financing so that industries can really make some long-term progresses? I really hope that in this debate when we already have a consensus, there will finally be some concrete measures that can facilitate our stride in the direction of industrial development. Just now I heard Mr James TIEN say that there was concern for workers in the manufacturing industries. So I feel we should develop some high value-added industries on the basis of our existing industries. Many people now talk about developing our own brands. How will the Government help local industries develop their own brands instead of letting the industries continue to plagiarize and imitate overseas products. We wish to improve our product design and develop our own brands, then our workers can take care of the production. I very much hope that we can reach a conclusion on this respect today. Thank you Mr Deputy.

THE PRESIDENT resumed the Chair.

PRESIDENT (in Cantonese): Mrs Sophie LEUNG.

MRS SOPHIE LEUNG (in Cantonese): Madam President, as I think that many Honourable Members will speak today and Dr LUI Ming-wah's motion will be supported by all Members, I originally did not intend to speak as I did not want to take up Members' time. However, having listened to the views expressed by Honourable colleagues, I am very excited at the fact that all Members have joined the keen discussion on the topic about industries and given their support, and I feel that we finally see the bright moon after we have waited so long for the clouds to disperse.

In this connection, I have discussed with Honourable colleagues about Taiwan and India and I would now talk about these two places with which I have come into contact.

I have taken part in the design of a product brand for some 20 years and we have luckily been in business till now and it can be said that we have been very successful. It is a great pity that although I always have Hong Kong at my heart, I sincerely wish to invest in Hong Kong and I have been co-operating with Hong Kong factories, I find that it has become more and more difficult in the past decade or so. I find that Hong Kong factories are very pitiable. In the past five years, I was forced to place orders for high value-added products in Taiwan and I probably have to place orders in Macau lately. What is wrong? Many Honourable colleagues have referred to Taiwan and I wish that Members can really understand why Taiwan has been so successful in the last five years. We should not just blot out something we do not like to see while highlighting something we like to see as such probing will then be incomplete. I would like to discuss this issue in greater depth with all Members or any interested party.

As far as high technology is concerned, India is a very good example and we should follow its steps. In 1975, India started its development of high technology. However, it is a great pity that they regard themselves as very smart and have recently launched a very high-tech product into the sky but they offended their high technology helper, the United States. India engaged in software development at the very beginning.

We have to remember that the human brain is the most important element in development of high technology. To develop in this respect, the most important factor is the human brain. It is most important for the human brain to carry out highly logical thinking. Hong Kong has been God's favoured city for 20 years and we no longer think logically. Many Members present are teachers and I believe that their teachers who may have passed away will have an impression that logic has been seriously neglected in Hong Kong. Ten years ago when I travelled to the Mainland, I made a special trip to their bookshops. I appreciated it very much that they published books on logic for primary students and I brought some of these books back to Hong Kong to share with our primary school teachers. However, it was a pity that they did not know simplified Chinese characters (nor do I but I will try my best to comprehend), therefore, nobody paid attention. Secondly, people need a high degree of patience when probing into problems. It is a great pity that young people in Hong Kong lack such patience.

In my opinion, Hong Kong has the requisite conditions for promoting development of high technology and it can develop software as a start. I have contacted 20-odd young people who worked in the Silicon Valley and would like to return to work in Hong Kong. Can we do something to cope with their work in this respect? How can we find people to support their industry? This is a very big problem.

Furthermore, I would like to share another point with Honourable colleagues. If we really wish to develop industries, we cannot overlook one question: What is the biggest difference between the existing internal structure and that in the 1970s? The biggest difference lies in the various degrees of changes in our working population. We cannot only talk about industrial development and neglect these issues. I find this a very good subject for future discussions in this Council.

I would like to touch upon two factors for Members' reference. From the '70s till now, our work on universal education has been very successful. I would like to praise three teachers and a retired teacher, the Honourable TSANG Yok-sing, among Members for this. Now that there is universal education in Hong Kong, we should compare some figures. For example, the number of primary students in the '70s, the educational levels of newly arrived people who have settled in Hong Kong and the present situation. In the '70s, the two universities practised elitism but we now have universal university education offered by seven to eight universities. However, it is such a pity that although such a change has been made, the sensitivity of university students towards society or the market still remains at the level in the '70s, without making any progress. How are we going to look into this problem? How do we solve the problem? The Committee led by Prof TIEN Chang-lin is still saying that there are insufficient talented people. Where should we look for these people? There are talented people all over the world, why are they not found in Hong Kong?

I have a friend in the commercial sector who is a foreigner. He told me earlier on that when a society attached excessive importance to resource allocation, capital would flow elsewhere. This is another topic for debate. I do not agree with him but his remark inspired me to think deeply.

Madam President, I speak in support of Dr LUI Ming-wah's motion. I will surely rise in support of any motion moved by any Member for supporting industries. Thank you, Madam President.

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

MR CHAN KAM-LAM (in Cantonese): Madam President, the Honourable Mrs Sophie LEUNG will certainly be very glad to hear that Honourable Members will support this motion. If the Secretary for Trade and Industry can now tell us that he will take actions in response to our views, I think all of us will be even more delighted.

In the 1970s, the industries of Hong Kong prospered and boomed. Our neighbouring countries and regions all looked upon us with envy, and they hastened to learn from our experience. At that time, Hong Kong and its competitors, namely Singapore, South Korea and Taiwan, were collectively referred to as the "Four Little Dragons of Asia", and Hong Kong was generally regarded as the leader of these little dragons. However, over just a matter of some 20 years, thanks to the deliberate attempt of the former government to develop Hong Kong into an international financial and services centre, Hong Kong has gradually abandoned its industries. Although the then government did not actually put in place any specific policies to strangle our industries, it did not adopt any positive measures to sustain them either. As a result, the industries of Hong Kong started to shift northward to China in the 1980s.

We often hear industrialists grumble that there is no future for industries in Hong Kong. The reason is that the Government has been adopting a policy of "positive non-intervention", under which industries are left largely on their own. Some industrialists have even remarked that "high tech" means high risks and "low-tech" means profits.

In the 1980s, we often talked about finding a way out by restructuring our economy, and this almost became sort of catchword of the time. At that time, industrialists all thought that under the leadership of the Government, they could start a new industrial revolution in Hong Kong, transforming our industries from labour-intensive and low-tech ones to high-tech and high value-added ones. Unfortunately, this subsequently turned out to be a beautiful misunderstanding, for what the Government had in mind was in fact quite another matter: the financial and services industries. So, when rising environmental aspirations emerged, the Government immediately hit on the expedient of demolishing the chimneys of factories and blocking their sewage pipes. And, it even constructed a highly expensive chemical wastes treatment plant. It never considered the difficulties and survival of our industries, nor did it do anything to help industrialists reduce their wastes treatment costs. So, without any positive assistance from the Government, industrialists began to lose heart, thus leading to a dwindling of industries in Hong Kong. At this particular juncture, the Mainland launched its policy of opening and reforms, and huge quantities of cheap lands and labour were thus made available. This induced local industrialists to shift their production lines northward, and they became all the more reluctant to develop new techniques and technologies.

Another point is that the Government has done extremely little to upgrade the technologies and productivity of local industries. Madam President, government expenditure on industrial technology research is far less than that spent by other governments in the region. Therefore, although the financial turmoil has hit our economy very seriously and our fiscal reserves have thus been reduced, the Democratic Alliance for the Betterment of Hong Kong (DAB) still maintains that the Government should adopt the far-sighted strategy of allocating more funds to industrial technology research, and such allocation should not be less than 0.5% of our Gross Domestic Product (GDP).

Madam President, the formulation of industrial policies and the provision of technical support and manpower training are currently scattered among many different bodies such as the Trade and Industry Bureau, the Industry Department, the Hong Kong Productivity Council, the Industrial Technology Centre and even the research departments of the tertiary institutions; there has never been any attempt to formulate a set of long-term industrial policies. As a result, the industries of Hong Kong have long been developing entirely on their own without any central co-ordination whatsoever. That is why as soon as the Hong Kong Special Administrative Region (SAR) Government came into being, the Commission on Innovation and Technology was quickly set up to study the ways of launching Hong Kong onto the path of high technology development. The DAB supports this approach. The setting up of the Commission shows that the SAR Government has already abandoned the old policy of absolute non-intervention, and adopted a more positive and proactive attitude instead. This is indeed very encouraging. We maintain that the Government must establish an industrial technology council with decision-making and administrative powers, so as to plan and promote the development of local industries. At the same time, in order to avoid any duplication of efforts and the consequent waste of resources, the respective functions of existing industrial support bodies must be reviewed.

Madam President, the DAB also thinks that the SAR Government should set up some "industrial technology development centres" in provinces and cities on the Mainland. These centres should seek to promote the high value-added development of our industries by enhancing industrial technology exchanges between Hong Kong and the Mainland and by pooling together the manpower and technological resources of both sides. Specifically, one important task of these centres should be to assist Hong Kong industrialists in identifying mainland experts who can apply available technologies to actual commercial uses. As a corollary of this, a propagation effect in the mainland can be achieved, thus enabling the industries concerned to build up networks of talents there.

Madam President, industrial development indeed calls for a very long-term strategy. For that reason, we naturally will not cherish any ambitious hope that what is done to revitalize our industries today will be able to solve our economic problems tomorrow. That said, we also wish to say that if we do not make a new start now, our economy will continue to remain susceptible to the influences of external factors and we will certainly lag behind our rivals.

    With these remarks, Madam President, I support the motion.
PRESIDENT (in Cantonese): Does any other Member wish to speak?

(No Member indicated a wish to speak)

PRESIDENT (in Cantonese): Secretary for Trade and Industry.

SECRETARY FOR TRADE AND INDUSTRY (in Cantonese): Madam President, I am very grateful to all those Honourable Members who have given their valuable opinions on how to support the development of our industries.

The Government has always attached very great importance to the role played by our industries in the economic development of Hong Kong. It is precisely because of this reason that the Government has been doing its level best to provide the best possible business environment and all appropriate support, in the hope that the various industries can thus increase their productivity and competitiveness. Therefore, from the macro perspective, the concern of the Government about industrial development is actually no different from that of many Honourable Members. However, when it comes to underlying concepts and specific measures, I do have some reservations about the proposals made by some Honourable Members.

The outward shift of manufacturing industries

Many Honourable Members have expressed their views on how the outward shift of our manufacturing industries has affected Hong Kong. This is indeed a very important subject, one which I wish to discuss in greater details. Since the mid-1980s, Hong Kong manufacturers have embarked on a large-scale relocation of their labour-intensive production lines to the Mainland and other neighbouring places in Asia. As a result, the proportion occupied by manufacturing industries in our Gross Domestic Product (GDP) has shown a marked decline, falling from 24% in 1980 to 7% in 1996. At the same time, the proportion occupied by services industries in our GDP has increased, from 67% in 1980 to 84% in 1996. These data are facts which cannot be disputed. However, what is more important should be how we are going to interpret their implications. On the surface, these data may well signify that Hong Kong manufacturing industries "have already passed their prime", and that they have become "withered flowers"; or, in the words of Dr the Honourable LUI Ming-wah, the outward shift of our manufacturing industries have already rocked the balanced development of our economy to a very serious extent.

Indeed, if we bother to analyse the data at any greater depths, we will certainly see that the above-mentioned statistics cannot in any way give a direct indication of the contribution made by our manufacturing industries. The outward shift of our manufacturing industries has enabled Hong Kong manufacturers to take advantage of the land and manpower resources in the Mainland and Southeast Asia. At its peak in the 1980s, our manufacturing industries employed as many as 900 000 workers. Today, in the Guangdong Province alone, for example, Hong Kong manufacturers are estimated to be employing well over 5 million manufacturing workers. Since huge quantities of relatively cheap labour and lands are available in the Mainland, the prices of the goods produced by Hong Kong manufacturers can remain competitive, or even become more competitive than before. The Government simply cannot forcibly reverse the trend of our economic development; it should not seek to lure back those low value-added production lines which have been relocated outside Hong Kong, nor should it try to retain other production lines for which relocation have been planned, because this will only hinder us from making full use of our social resources. What is more, we should realize that unless the Government is prepared to give direct monetary subsidy to individual manufacturers as a means of reducing their production costs in Hong Kong, it will be impossible to retain or lure back low value-added production lines.

Following the outward shift of some production processes, those manufacturing industries which are still based in Hong Kong have started to adapt themselves to market needs, and they have shifted their focus to some high value-added productions requiring intensive intellectual input. This has greatly increased the productivity of local manufacturing industries and their competitiveness in the world market. Over the past 10 years, the output per employee in our manufacturing industries has been increasing at a rate of 12% per annum. From this, we can see that the outward shift of production lines have in fact helped our manufacturing industries overcome the various resource constraints which they face locally, and this has enabled them to attain levels of growth and competitiveness which are otherwise unattainable if they remain in Hong Kong.

If we forget about the narrow definitions, we will see that the outward shift of production lines has not in any way led to the decline of our industries. Instead, we will see that the outward shift has actually provided an opportunity for Hong Kong industrialists to expand their production activities outside Hong Kong, to set up large multi-regional production bases which are highly competitive. This has produced quite a positive bearing on the economic development of Hong Kong. For example, since most of the finished products processed outside Hong Kong are transported to overseas markets through the port of Hong Kong, our external trade, in particular our entrepot trade, has benefited a great deal in the process. Besides, local services sectors related to manufacturing industries, such as headquarters operations, trade financing, cargo transport, product design and research, marketing and product packaging have also prospered because of our ever-expanding production bases.

Between 1987 and 1997, the services industries created as many as 770 000 posts, far exceeding the 570 000 posts lost in the manufacturing industries during the same period. And, precisely because of the rapid growth of the services industries and the resultant continuous creation of new posts, the unemployment rate of Hong Kong has stayed below 3% for a good period over the past 10 years. From this, it is evident that instead of pulling up the unemployment rate or thwarting our economic growth, the outward shift of our manufacturing industries has actually provided us with a huge supply of manpower, thus making it possible for Hong Kong to develop into an economy based on high value-added activities. As for the shooting up of the unemployment rate to 4.8% over the past few months, I would say that this is in fact due to the drastic economic downturn resulting from the impact sustained by our economy during the Asian financial crisis. I do not think that this is related directly to our economic restructuring and the outward shift of our production lines.

In regard to the point of balanced economic development mentioned by Dr LUI Ming-wah, I must stress that the industries of Hong Kong, and even our entire economy, have always been characterized in the main by private enterprises, and market forces have been the main impetus. Under the principles of a free market economy, the role of the Government should be to provide maximum support to the economic sectors concerned. It is our conviction that any attempt to tamper with the operation of market forces is bound to result in an under-utilization of social resources. If this happens, our economic efficiency will drop, and so will our competitiveness, much to the detriment of our long-term economic interests.

To achieve real divercification of our economy, the Government should simply play the role of creating a stable and business-friendly environment; and, it should of course also provide appropriate support whenever necessary. As for the relative proportions to be occupied by the services industries and the manufacturing industries, the market should be left alone to decide. The Government simply should not step in without any good reason, for this will impair the operation of the free market.

The formulation of industrial policies

Honourable Members have just raised the point that the Government is obligated to formulate an appropriate long-term industrial policy, so as to promote the development of our industries and boost our economy. We cannot agree more. We understand fully well that the promotion of industrial development actually needs the co-ordinated efforts of many parties, and we also know that many fields and areas are involved. For that reason, precisely because of that reason, we need to put in place a mechanism whereby close liaison and co-operation can be maintained among all those government departments and bodies responsible for policy implementation. At present, industrial policies are formulated and co-ordinated by the Trade and Industry Bureau, and the work of actual implementation is undertaken by the various departments under the Bureau and other relevant bodies. Such a system can ensure that the work of all relevant departments and even all industrial and technology support bodies can always be put under the central co-ordination of one single policy bureau. The departments under the Trade and Industry Bureau are the Industry Department, the Trade Department, the Intellectual Property Department and the Customs and Excise Department. And, the industrial and technology support bodies are the Hong Kong Productivity Council, the Hong Kong Trade Development Council, the Hong Kong Industrial Estates Corporation, the Hong Kong Industrial Technology Centre Company Limited and the Hong Kong Export Credit Insurance Corporation. The existing mechanism has been able to make effective arrangements with respect to policy implementation and allocation of resources. In regard to those policy areas outside the ambit of the Trade and Industry Bureau, the Bureau is also able to take an active and effective part in the process of policy formulation, and these policy areas include the establishment of a business-friendly taxation system, the training of local manpower resources, the recruitment of overseas experts and the provision of telecommunications, transport and financial services and so on, which constitute an overall environment conducive to business operation. All this aims to ensure that the long-term interests of our industrial development are always adequately considered.

Apart from ensuring that the Government is always able to formulate integrated industrial policies, the arrangements I have mentioned can also enable the Government to deal flexibly with the effects produced by the changes which occur in the various segments of the market. If the relevant tasks are performed by an independent body without the involvement of the Trade and Industry Bureau or even the Government as a whole, then, contrary to expectation, extra co-ordination efforts, slower progress of work and reduced effectiveness and flexibility of our industrial policies may well be the results.

A moment ago, some Honourable Members asserted that the overall economic development of Hong Kong and the attractiveness of its investment environment were closely related to its industrial development. I fully agree with them. However, I must also point out that in the course of formulating and implementing any policies, we must always keep in mind the overall interests of the entire community; we must not allow any bias towards the development of any particular sector. And, in order to avoid such a bias, we will need the full co-operation of different policy bureaux, relevant departments and even the industrial sector itself. If we set up an independent body and overlook the more important issue of overall co-ordination, we might as well be acting against the long-term interests of industrial development.

We do of course attach very great importance to the views of those not belonging to any government departments or industrial support bodies. That is why we have set up a number of consultative bodies to collect as many opinions as possible, in the hope that the policies formulated by the Government can cater for the needs of the community. One of these bodies is the Industry and Technology Development Council (ITDC) responsible for advising the Government on matters relating to our overall policies on industrial and technological development. The membership of the ITDC comprises representatives from the industrial sector, the academic circles, commercial and industrial organizations and the Government.

I must emphasize that the Government is absolutely not complacent. Quite the contrary, we have been making continuous efforts to explore the directions of our industrial development and the ways of improving our industrial support services. Dr LUI and many other Honourable Members have pointed out the need for Hong Kong industries to develop along the path of high value-added and high technology activities. The Government shares their view completely. And the Chief Executive's Commission on Innovation and Technology set up early this year is precisely a body serving the purpose of giving advice on how Hong Kong can become a centre of high value-added activities and innovative technologies in South China and even the whole of Asia. The Commission will also conduct in-depth studies on those issues raised by Honourable Members just now, including the encouragement of technological research, Mainland-Hong Kong co-operation and the recruitment of mainland experts on technology. The Commission will shortly submit its first report to the Chief Executive and it will also complete all its work within 12 months following the submission of the report. Members of the Commission are the elite of different fields who all have a very good grasp of the subjects being studied. And, they have also carried out extensive consultation to gauge the views of those in the industries. Therefore, we expect that the Commission will come up with a number of enlightening recommendations on the intensification of innovative technology industries and on the structural arrangements required. The Government will certainly study the recommendations of the Commission very seriously.

I am very grateful to all those Honourable Members who have expressed support for the work of the Commission. As a member of the Commission, I am indeed very delighted to hear of their support. Actually, the Commission will submit its first report to the Chief Executive next week. The second stage of its work, that is, the last stage, will cover several research areas, and one of these areas will involve the need or otherwise to adjust or reorganize the administrative framework for the support of industrial development. When the Commission releases its recommendations on this area, we will certainly consider them with a most constructive attitude.

Madam President, before closing, I wish to thank Honourable Members once again for their advice and proposals, which, I must say, are both valuable and constructive. Owing to the time constraints, I cannot of course reply to all their advices and recommendations here. However, we will certainly study all of them very carefully and make reference to them.

Some Honourable Members have referred to the debate today as harmonious and calm, without producing any "sparkles". As one who is not a Member of the Legislative Council, let me then perhaps draw in some points of disputes and therefore produce some "sparkles". Some Honourable Members have mentioned Taiwan and Singapore, saying that their industrial development has been better than that of Hong Kong. Taiwan and Singapore do of course have their competitive edges and strengths, and so do we. However, they in fact have a competitive edge which is not enjoyed by us: they have been able to import foreign workers in huge quantities over the past decade or so, and have thus enjoyed prosperous and incessant industrial growth. On a certain occasion eight years ago when I first met Major General LEE Hsien-loong, who was then the Trade Minister and Vice-Premier of Singapore, he told me that Singapore was already able to import foreign workers at a ratio of 20%. This really deserves our exploration and studies. I am not saying that the Government is now making a request for any large-scale importation of foreign labour. Given the current economic downturn and the high unemployment rate, such a request will certainly cause a huge outcry. And, it is certainly not my intention to make myself a target of attacks. I am simply pointing out a fact.

Conclusion

Madam President, in my conclusion, I wish to reiterate three points. First, there is no direct relationship between our current unemployment problem and the outward shift of our industries. The facts remain that the manufacturing industries of Hong Kong have broken the old limitations and established huge production networks outside Hong Kong, thus bringing more opportunities of development and growth for our economy. "Free market economy" has not become out-dated. Quite the contrary, it is still the key to our success. That is why we should not abandon its time-tested principles just because of short-term economic sluggishness.

The second point is that the Government has never abandoned our manufacturing industries. As pointed out by the Chief Executive in his policy address last year, the Government will continue to support traditional manufacturing industries and do its best to assist these industries in meeting the challenges of manpower training and quotas. However, while the Government is doing so, we should all look forward into the future and admit the fact that if the industries of Hong Kong are to remain competitive, they will need to develop along the path of innovative technologies and high value-added activities. For that reason, we have already laid down a long-term objective of upgrading our industrial standards and promoting the development of technology. We will strive to make Hong Kong a centre of innovative technologies in South China and even the whole of the Asia-Pacific Region.

Lastly, with a view to promoting industrial development, the Government has already put in place a set of mechanisms for the co-ordination, formulation and implementation of industrial policies. The Government will of course review the existing mechanisms from time to time and introduce improvement measures if necessary. However, the remarks of Honourable Members in the debate today cannot convince me that there is any need to set up an independent body on top of the existing mechanisms, nor can their remarks convince me of the effectiveness of such an independent body. Therefore, I will not support the motion moved by Dr LUI Ming-wah.

    Thank you, Madam President.
PRESIDENT (in Cantonese): Dr LUI Ming-wah, you may now reply and you have up to six minutes 58 seconds.

DR LUI MING-WAH (in Cantonese): Madam President, I am very glad that Honourable Members are discussing about this topic today. Their views are very important as they can serve as reference for the Government and impose more pressure upon it, and I hope that it will make more efforts. The topic of our debate is very important. If we wish to revitalize our industries, we certainly have to establish an industrial technology council. If the existing structure is useful, we should have seen the results in the last 10 years. If it is really effective, we will not have to waste our time carrying out discussions here. I believe that Members are in general highly intelligent.

First, I would like to say that although the Government has done a lot in the past, it lacks a complete set of industrial and economic policies and a long-term development direction. Therefore, we need to establish an industrial technology council to specify a development direction and formulate long-term industrial policies and coupling measures. We have proposed the establishment of such a body as an industrial technology council for we really need such a structure if we really wish to develop our industries. The Government, not us, has to consider issues such as the level to which the Secretary for Trade and Industry should be upgraded or the level to which the Industry Department should be upgraded. I think that the Government will not create one more body and let the relevant bodies overlap.

What is the difference between the industrial technology council and the existing government-aided organizations? Let us take the Vocational Training Council (VTC) as an example. We all know that it is purely an institution offering technical training while the Hong Kong Productivity Council is only an institution for productivity improvement. I do not think it has done anything else in the past 20 years or so other than conducting studies on how productivity can be improved. As for the Industrial Technology Centre, it is a land owner offering venues for hi-tech industries which have started developing and its nature is similar to that of an incubator. The Industry and Technology Development Council (ITDC) is even stranger. I am a member of the Electronics Committee under the ITDC but I only know that we have to carry out examinations and make payments but not formulate policies. Therefore, in the existing government structure, no organization can replace the conceived industrial technology council. Neither the Secretary for Trade and Industry nor the Industry Department performs this function.

Members may not be clear about the fact that the Commission on Innovation and Technology is actually only an advisory committee. It will have fulfilled its tasks once it has completed its report. For many years in the past, the Hong Kong Government has made many consultancy reports and this is not the first of such reports. I know this pretty well as the Electronics Committee makes a consultancy report every two years and spends a few million dollars on these reports. What has been done with the completed reports? Government officials just take a look and no one ever takes follow-up actions or further implement the suggestions made by these consultants. Therefore, the Commission on Innovation and Technology is only an advisory body and its work will come to an end by the middle of next year.

We need an industrial technology council for its most important task is to formulate industrial policies and specify a long-term development direction. The Secretary has just said that the idea of an industrial technology council is not put forward as a result of the recent economic recession. Two years ago, we also discussed about upgrading technologies. However, we want long-term policies. To achieve steady economic development, we must establish such a body. In addition to policies, we have to be concerned with qualified personnel. When I say qualified personnel, I am not referring to university education or education provided by the ITDC or the VTC but the coupling measures for finding qualified personnel. Should we import qualified personnel from abroad or nurture such personnel ourselves? Where can we find such personnel?

I would also like to say that the Secretary's remarks have really sparked discussions. He mentioned the labour importation by Singapore and I wonder if he wishes to sow dissension (Laughter). If industries are developing so prosperously that labour has to be imported, I believe that both the industrial sector and the labour sector will be very happy as the economy as a whole is flourishing and there will definitely not be any problem. The Secretary has therefore failed.

The Secretary said that we should not bring low value-added working procedures back to Hong Kong. We are not advocating this as low value-added working procedures can no longer be carried out in Hong Kong in view of our competitiveness. We hope that a new generation of technology-based industries will be developed for production to be carried out in Hong Kong.

Besides, the Secretary has said that carrying out production in the Mainland is advantageous to Hong Kong. If the Secretary is speaking in his capacity as an investor, this certainly sounds good as he can carry out production in the Mainland and then sell the finished products to other countries. Or he can invest in Vietnam and then sell the finished products to other countries. However, Hong Kong is an independent economic entity, we need to do business as much as we need to attend to the employment problem. Metropolitan economic concepts do not work in Hong Kong, after all, Hong Kong cannot be turned into London in England or New York in the United States within 50 years. I hope that the Secretary will further consider this in detail.

Furthermore, the Secretary said that our economic development should be led by the services industry but I would like to ask the Secretary to consider one point. At present, the growth rate of the services industry is slowly falling and, after a certain period of time, our services industry may be even poorer than that in Taiwan or Singapore.

Having considered these problems, I think that Hong Kong will not have any prospect if it does not develop industries and we must have an industrial technology council if we wish to develop industries. I hope that the Secretary will reconsider this.

PRESIDENT (in Cantonese): I now put the question to you and that is: That the motion moved by Dr LUI Ming-wah be passed. Will those in favour please raise their hands?

(Members raised their hands)

PRESIDENT (in Cantonese): Those against please raise their hands.

(No hands raised)

PRESIDENT (in Cantonese): Does any Member wish to claim a division?

(No Member responded)

PRESIDENT (in Cantonese): I think the question is agreed by a majority respectively of each of the two groups of Members, that is, those returned by functional constituencies and those returned by geographical constituencies through direct elections and by the Election Committee, who are present. I declare the motion passed.

NEXT MEETING

PRESIDENT (in Cantonese): In accordance with the Rules of Procedure, I now adjourn the Council until 2.30 pm on Wednesday, 23 September 1998.

Adjourned accordingly at twenty-seven minutes past Seven o'clock.

Annex I

WRITTEN ANSWER

Written answer by the Secretary for Transport to Miss Emily LAU's supplementary question to Question 3

In 1996, the Transport Department conducted an update traffic forecast for the three cross harbour tunnels after the opening of the Airport. The forecast as against actual patronage is set out below:

No. of vehicles - Daily Average
CHTEHCWHC
Forecast according to Base Case106 00085 00059 000
Actual (July - September 1998)117 90067 200 35 700

Annex II

WRITTEN ANSWER

Translation of written answer by the Secretary for Transport to Mr LAU Kong-wah's supplementary question to Question 5

The relevant legal provision provides that for overloading and insecure loading, the maximum penalty is a fine of $5,000 and three months' imprisonment for the first conviction and a fine of $10,000 and imprisonment for six months for the second conviction. Less serious offenses are however punishable by fixed penalty tickets, the fines of which are $1,000 for overloading and $450 for insecure loading. For the past two years, the maximum and average sentences meted out by the court with regard to overloading and insecure loading are as follows:

OverloadingInsecure loading
YearMaximumAverage Maximum Average
1995$10,000$3,228$3,000$75
1996$10,000$3,324$2,000$711

The penalties were last revised in 1994. At the moment, we are reviewing whether or not the relevant penalties are still being kept in line with the present need.

Annex III

WRITTEN ANSWER

Translation of written answer by the Secretary for Transport to Mr HO Sai-chu's supplementary question to Question 5

The relevant legal provision provides that for overloading and insecure loading, the maximum penalty is a fine of $5,000 and three months' imprisonment for the first conviction and a fine of $10,000 and imprisonment for six months for the second conviction. Less serious offenses are however punishable by fixed penalty tickets, the fines of which are $1,000 for overloading and $450 for insecure loading.

In the past two years, no driver or vehicle owner has been sentenced to prison for overloading or insecure loading.

At the moment, the Government is reviewing whether or not the relevant penalties are still being kept in line with the present need.