OFFICIAL RECORD OF PROCEEDINGS
Wednesday, 23 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

THE HONOURABLE NG LEUNG-SING

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.

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 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.

MEMBERS ABSENT:

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

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

PROF THE HONOURABLE NG CHING-FAI

DR THE HONOURABLE PHILIP WONG YU-HONG

THE HONOURABLE CHOY SO-YUK

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 MICHAEL SUEN MING-YEUNG, J.P.
SECRETARY FOR CONSTITUTIONAL AFFAIRS

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

MR DOMINIC WONG SHING-WAH, J.P.
SECRETARY FOR HOUSING

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

MR RAFAEL HUI SI-YAN, G.B.S., J.P.
SECRETARY FOR FINANCIAL SERVICES

MR JOSEPH WONG WING-PING, G.B.S., J.P.
SECRETARY FOR EDUCATION AND MANPOWER

MRS REGINA IP LAU SUK-YEE, J.P.
SECRETARY FOR SECURITY

MISS DENISE YUE CHUNG-YEE, J.P.
SECRETARY FOR THE TREASURY

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

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

MRS RITA LAU NG WAI-LAN, J.P.
SECRETARY FOR INFORMATION, TECHNOLOGY AND BROADCASTING

CLERKS IN ATTENDANCE:

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

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

MRS JUSTINA LAM CHENG BO-LING, ASSISTANT SECRETARY GENERAL

PAPERS

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

Subsidiary Legislation	L.N. No.
Prevention of Bribery Ordinance (Amendment of Schedule) (No. 3) Order 1998	313/98
Official Languages (Alteration of Text under section 4D) (No. 2) Order 1998	315/98
Public Health and Municipal Services Ordinance (Public Pleasure Grounds) (Amendment of Fourth Schedule) (No. 3) Order 1998	316/98
Employees Retraining Ordinance (Amendment of Schedule 2) Notice 1998	317/98

Sessional Papers

No. 24	─	Schedule of revisions to the 1997/98 Estimates approved by the Provisional Urban Council during the fourth quarter of the 1997/98 financial year
No. 25	─	Revised list of works of the Provisional Regional Council for the 1998/99 financial year (during the first quarter ended 30 June 1998)
No. 26	─	Initial Report on the Hong Kong Special Administrative Region under Article 18 of the Convention on the Elimination of All Forms of Discrimination against Women

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 average. When asking supplementaries, Member should be as concise as possible, should not ask more than one question, and should not make statements.

First question. Mr James TIEN.

Implementation of Special Finance Scheme for SMEs

1. MR JAMES TIEN (in Cantonese): Will the Government inform this Council:

(a) of the total number of applications received since the Special Finance Scheme for small and medium enterprises (the Scheme) has been brought into operation, together with a breakdown of the number of applications approved and the sizes of the loans involved in respect of each type of trade; and

(b) whether it has reviewed the Scheme to identify the areas requiring improvement; if so, what the details are?

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

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

(a) Since the introduction of the Scheme on 24 August this year, we have received a total of 53 applications. With the exception of one application which has been withdrawn by the applicant, all of the applications have been approved with the loans involved amounting to $110 million.

A breakdown of the number of applications approved and the size of the loans involved in respect of each type of trade is given in the written reply tabled before Members of this Council (see Annex).

(b) Since the introduction of the Scheme, the Government has been closely monitoring its performance and progress as well as soliciting the views of relevant parties on its operation. The review of the Scheme has in a way already begun. However, in view of the fact that the Scheme has been in existence for just a short while, we consider it more appropriate for the Scheme to operate for a longer period of time to allow the relevant government departments as well as financial institutions and small and medium enterprises (SMEs) participating in the Scheme alike to accumulate adequate practical experience for areas for improvement to be identified.

Annex

Special Finance Scheme
for Small and Medium Enterprises

Type of Trade	No. of approved applications	Size of loans involved ($)
Manufacturing	27	49,931,770
Import and Export Trades	17	40,550,000
Wholesale and Retail	7	19,400,000
Transport, Storage and Communication	1	155,000

PRESIDENT (in Cantonese): Mr James TIEN.

Mr James TIEN (in Cantonese): Madam President, first of all, I should like to thank the Trade and Industry Bureau as well as the Secretary for the concern they have expressed over the issue and the efforts made in this respect. Madam President, the Scheme has been implemented for almost a month, but out of the $2.5 billion set aside for the purpose, the loans approved so far amount to some $100 million only. As regards the 53 applications received, they have all been approved with the exception of the one withdrawal. Why is it so because they had all been assessed by the participating banks beforehand? Members of various trade associations have told me that since they had failed to pass the bank assessment, they simply could not file their applications. In the last paragraph of its main reply, the Government mentioned about allowing the SMEs to accumulate some practical experience, but how could these enterprises accumulate experience to file another application if their first attempt had been rejected? Could the Secretary inform this Council whether the Government would improve the Scheme according to a timetable, for instance, to lend out as much as possible all those $2.5 billion to loan applicants within six months' time?

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

Secretary for Trade and Industry (in Cantonese): Madam President, since this is a brand new scheme, it is in fact very difficult for us to say whether or not we would consider lending out $110 million or approving 52 loan applications within a month a satisfactory rate of progress. However, we could compare the Scheme with the Credit Guarantee Scheme (CGS) implemented by the Export Credit Insurance Corporation (the Corporation) in the past. The CGS was strongly criticized by various sectors for its complicated procedures, as further assessment by the Corporation was also required of the applications in addition to vetting by banks or financial institutions; besides, in its first month of operation, only one single application was approved for a loan of some $1 million. That was in stark contrast to the present situation. The relevant figures of the Scheme have surpassed that of the CGS by many folds; in this connection, 52 applications have been approved with loans amounting to $110 million. We consider it more appropriate for the Scheme to operate for a longer period of time to allow us to observe its performance; and I will also personally keep a close eye on the situation. Indeed the number of approved applications has soared sharply during the last 10 days or so, whereas the rate of progress in the first two weeks was naturally slower. I hope that a review would be conducted after the Scheme has been in further operation for a longer period of time, say five to six months later.

PRESIDENT (in Cantonese): Mr TIEN, has the Secretary missed part of your supplementary?

MR JAMES TIEN (in Cantonese): The Secretary has not answered my supplementary. My question was whether he would promise to lend out those $2.5 billion within six months' time; I did not ask him if he would conduct a review six months later.

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

Secretary for Trade and Industry (in Cantonese): Madam President, I am sorry for not having answered the supplementary just now. And I must say "sorry" to this Council once again because I really cannot undertake to lend out all those $2.5 billion in about six months' time. However, we will certainly keep a close eye on the progress of the Scheme and conduct a review six months later.

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

Mr HUI Cheung-ching (in Cantonese): Madam President, some people have criticized the Scheme for its prohibitively high interest rates which have discouraged many interested SMEs from filing applications. Could the Secretary inform this Council whether the Government would lower down the interest rates so as to attract more SMEs to participate in the Scheme?

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

Secretary for Trade and Industry (in Cantonese): Madam President, the interest rate issue is one of the questions raised by SMEs. The Scheme observes two very important principles: first, market-orientation; second, participating banks will assess the loan applications in the light of their usual criteria for lending. In the circumstances, it is utterly impossible for us to compel the banks to lend money out at lower interests, such as charging on the loans a rate of interest that is below the market rate. The only way out is to request the Government to provide its part of the loans interest-free, for after averaging out the bank rate between the two parts of the loans, the interest charged on the combined loans would then be lowered. However, we must not forget that those $2.5 billion are public funds, and we should use them prudently and never grant them out generously as a concession.

PRESIDENT (in Cantonese): Mr Kenneth TING.

Mr Kenneth TING (in Cantonese): Madam President, first of all, let me thank the Secretary for the efforts he has put into facilitating the smooth implementation of the Scheme. It has been said that the successful loan applications this time are mostly submitted by the old clients of the participating banks. With respect to these old clients, the banks are willing to offer them loans regardless of whether the Government has undertaken to provide 50% of the loans; whereas loan applications made by new clients would have more difficulties in winning the confidence of the banks. In this connection, could the Secretary inform this Council whether the Government has any measures to make the banks approve more loan applications submitted by new clients?

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

Secretary for Trade and Industry (in Cantonese): Madam President, one principle of this Scheme is that it should be market-oriented, while the other one is that participating banks will assess the loan applications in the light of their usual operating practices and criteria. That being the case, it would be very difficult for the Scheme to operate if the Government imposes on the banks certain measures, for too many government requirements will serve to create adverse effects, and the banks will then lose interest in participating in the Scheme.

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

Mr CHEUNG Man-kwong (in Cantonese): Madam President, at the time when the Scheme was first introduced, the Democratic Party advised the Government that it should take care to prevent the Scheme from becoming a "white elephant". Now that the Scheme has been in operation for some time, but the value of the loans approved so far only amounts to 4% of the fund set aside for the purpose, will the Government find such a result satisfactory? Many have criticized the Scheme for the interest rates which serve to scare manufacturers away, while others have complained against the harsh terms set by banks ......

PRESIDENT (in Cantonese): Mr CHEUNG, you have just raised a supplementary, does the remark you are about to make bear any relevance to that question?

Mr CHEUNG Man-kwong (in Cantonese): Yes, it does, Madam President.

PRESIDENT (in Cantonese): Then please ask your question promptly.

Mr CHEUNG Man-kwong (in Cantonese): Madam President, my question is: Why does the Government still insist on reviewing the Scheme half a year later, in spite of the many criticisms it has received? will the Government look into the reasons why certain loan applications made by manufacturers have been rejected, with a view to rectifying the shortcomings of the Scheme when conducting the review?

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

Secretary for Trade and Industry (in Cantonese): Madam President, I think what is most important is the two principles I have referred to earlier on. The first one is market-orientation. In addition, we also need to attract more banks and other financial institutions to participate in the Scheme. In this connection, we must not forget that many banks have in fact joined the previous scheme, but they did not make use of it because they were not happy with the existence of an institution overseeing their operation and making further assessments of the applications received. As such, we have made it the second principle of the Scheme that participating banks will deliberate over the loan applications made by SMEs, the interest chargeable on the loans, as well as the loan agreements in the light of their operating principles and criteria. In regard to the question concerning whether we are satisfied with the present result that only $110 million have been loaned out into a month's operation of the Scheme, as I have pointed out in my reply to the first supplementary, it would be very hard for us to say whether or not we are satisfied in the absence of suitable criteria. However, if we compare this Scheme with the previous one which approved only one single application involving $1 million in a month against 12 applications involving $6.8 million in two months, I would say we are satisfied with the Scheme.

As to the question of whether we have in place any measures to loan out all the funds under the Scheme promptly, we had in fact conducted very extensive studies and consultation in this respect and considered many methods before making any decisions or submitting the Scheme to the Finance Committee for approval. In this connection, some said that if the government would bear more than 50% of the risk involved, say 70% or even 80%, the banks would naturally be willing to offer more loans. However, the response we received from one political party was that they would certainly object to the Scheme if the Government were to take up more than 50% of the risk. The important consideration here is that while banks could offer loans more readily if they have to bear only 30% or even 20% of the risk involved, the risk borne by the Government would become greater, that means taxpayers will need to bear 70% to 80% of the risk involved. Here I should like to stress that it is the taxpayers, not the Government, who bear most of the risk, that is, the risk of not recovering the repayment for the loans made. Is it what we should do to win the appreciation from this Council? I do not think so.

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

Mr CHEUNG Man-kwong (in Cantonese): Madam President, my question was in fact asking for the reasons why the Government still insisted on reviewing the Scheme half a year later despite the limited number of successful loan applications; besides, I was also asking the Government if it would look into the reasons why certain loan applications had been rejected, with a view to laying the groundwork for the review to be conducted later. The Secretary has answered none of these questions.

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

Secretary for Trade and Industry (in Cantonese): As I have referred to in my main reply just now, the review of the Scheme has in fact commenced but no conclusions could be drawn at the present stage. Let me repeat, compared with the previous scheme, the number of approved applications as well as the size of the loans should not be regarded as small; besides, we have also been canvassing the views of SMEs on the Scheme for review purposes.

PRESIDENT (in Cantonese): Mr Ronald Arculli.

MR RONALD ARCULLI: Madam President, the Secretary has partly given an answer that might be relevant to the question that I am about to ask. In terms of schemes of this kind, we know that, for instance, in Singapore, our neighbour, the government and the banks are sharing the ratio of 70% to 30%; and in America, they have a 100% government fund, but the grant of which would be determined on a slightly different basis. So you really have a whole range of possibilities. What I really want to ask the Secretary is: Why the Government and its departments do not, in fact, review the situation to see whether the complaints that we hear from the banks on a fifty-fifty split is in fact inappropriate for the policy objectives that have been said? They can increase the ratio to 60:40, 70:30 or 80:20. Could it be as flexible as to depend on, for instance, the applicants' ability assessed by the banks in terms of the credit risks, and a variety of circumstances? Can we have a more flexible percentage split?

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

Secretary for Trade and Industry (in Cantonese): Madam President, as I have referred to earlier on, we had considered the risk commitment issue very thoroughly before introducing the Scheme. We are aware that in certain countries, the respective governments may be bearing as much as 70% or 80% of the risk; as for others that are more generous in spending the taxpayers' money, their governments are willing to bear 100% of the risk involved. However, the message we received after the extensive consultation exercise was that the Scheme might not be approved if the Government were to bear more than 50% of the risk. This is one of the reasons why we have then decided not to underwrite more than 50% of the risk. Another reason is exactly the crux of the risk commitment issue. Is it necessary or appropriate for us to risk the taxpayers' money to that extent? Whereas the risk on the part of the banks is relatively very small, we are running the risk of losing all those public funds. We believe it an ideal arrangement to have 50% of the risk borne by the banks and the remaining 50% by the Government. While we do not have any plans to revise this ratio for the time being, further decision would depend on the situation then when we conduct the review later.

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

Mr NG Leung-sing (in Cantonese): Madam President, just like other Honourable colleagues, I am also very much concerned about the effectiveness of the Scheme since its introduction. As the Scheme has been in operation for some time, I should like to ask the Government if the financial institutions have referred to any specific problems, including the risk-sharing ratio, in the course of handling the 53 applications; whether these financial institutions have encountered any difficulties when assessing the applications; and if the participating financial institutions have encountered difficulties when processing the loan applications from SMEs, whether it will consider adjusting the relevant terms promptly instead of deferring the action for six months?

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

Secretary for Trade and Industry (in Cantonese): Madam President, we have basically set all the terms with the highest flexibility and adaptability possible, allowing the banks to make decisions in the light of their operating criteria regarding the approval or otherwise of the loan applications as well as the interest chargeable on the loans. As such, we have not heard of any inconvenience the Scheme has caused to the participating banks, nor have we heard of any problems encountered by the banks when offering loans under the Scheme. As far as the Government is concerned, since the Treasury manages to provide an answer within one working day on receipt of the bank's notification, we have received no report of problems from the banks.

PRESIDENT (in Cantonese): Last supplementary. Mr SIN Chung-kai.

Mr SIN-Chung-kai (in Cantonese): Madam President, it is stated in paragraph (a) of the main reply that the Government has received a total of 53 applications since the introduction of the Scheme on 24 August this year. I believe that these 53 applications should be those referred to the Trade and Industry Bureau or other concerned authorities for further approval upon assessment and approval by the banks. Could the Secretary inform this Council of the total number of applications received by the participating banks since 24 August, as well as the number of applications rejected by the banks? In addition, could the Secretary inform this Council whether the Government would analyse the reasons for rejection, since this should be one important factor for consideration when reviewing the Scheme in future?

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

Secretary for Trade and Industry (in Cantonese): Madam President, I do not have those information at hand, though we could certainly consider requesting the banks to furnish us with the relevant figures. However, we must not forget that if the banks are required to put in extra effort to explain the various situations to us, their desire to participate in the Scheme in future would be adversely affected. If the Honourable SIN Chung-kai is really interested in getting the information, we will approach the participating banks one by one to make the request, but it might take a considerable length of time before the information so collected could be presented to Honourable Members.

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

Review on the Supply Rules

2. MR LAU KONG-WAH (in Cantonese): The power failure in most areas of Tai Po on 28 July 1998 for over 10 hours had inflicted losses on quite a number of consumers. However, on the basis of its Supply Rules, the China Light and Power Company Limited (CLP) refused to compensate the affected customers on the ground that the incident was not caused by negligence on the part of the Company. In this connection, will the Government inform this Council:

(a) of the number of complaints received by the Administration about power failures of the CLP over the past three years;

(b) whether it knows when the Supply Rules were formulated; and whether it will consider urging the CLP to review and revise the provisions in the Supply Rules which are unfair to customers, so as to safeguard the interests of the consumers; and

(c) which person or organization should determine whether an electricity company shall be held responsible for compensation in respect of the losses suffered by consumers in case of power failure?

PRESIDENT (in Cantonese): Secretary for Economic Services.

SECRETARY FOR ECONOMIC SERVICES (in Cantonese): Madam President,

(a) Over the past three years, a total of 10 complaints have been received by the Administration about interruptions to the electricity supply provided by the CLP. The complaints related to seven separate incidents of power interruption.

(b) The CLP's Supply Rules (the Supply Rules) were first formulated in 1936. They set out the terms and conditions upon which the Company will supply electricity and stipulate among other things that, in applying for or obtaining electricity from the Company, customers agree to be bound by the rules as revised from time to time.

The Supply Rules commit the Company to endeavouring to ensure that electricity supply is normally continually available. At the same time, they provide that the Company shall not be liable for any loss or damage or inconvenience occasioned directly or indirectly by any interruption or failure of the supply, except to the extent that such damage or loss cannot be excluded by law. They also provide that the Company is not liable for any direct loss or damage to a customer except to the extent that it is caused by the negligence of the Company; nor for any indirect or consequential loss or damage suffered by a customer whether or not it arises as a result of the negligence of the Company. They do not, however, restrict or exclude the liability of the Company to anyone for death or personal injury resulting from the negligence of the Company.

It is the CLP's practice to review the Supply Rules from time to time with the objective of ensuring that they balance the rights and interests of both the Company and its customers. The Government will continue to monitor the situation closely.

With regard to the incident in Tai Po, the CLP has voluntarily offered a "business support package" to help business customers affected by the power interruption. The package comprises:

(a) a 50% discount off the "current charges" in the next electricity bill;

(b) free visual safety check; and

(c) free energy audit.

The business customers concerned have already been informed of the package individually by the CLP and it has been implemented for individual customers since the middle of August 1998.

(c) Any person who believes that he is entitled to recover compensation from the CLP for loss or damage sustained by him as a result of an interruption of electricity supply may seek to recover such compensation from the CLP. If the matter cannot be resolved or settled between them, he may pursue his claim against the CLP through the court, which may adjudicate the claim according to the facts and circumstances of the case.

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

MR LAU KONG-WAH (in Cantonese): Madam President, the Supply Rules were formulated more than 60 years ago. I wonder if the Government would do everything to urge the CLP to review any unfairness in it. On the question of responsibility for the interruption of power supply as a result of negligence, the CLP can afford to hire a lawyer to prove that it has nothing to do with this incident and that it is not liable. However, the general public does not have the money or resources to hire a lawyer to prove that such big companies are liable. This is extremely unfair. Usually, after such serious incidents, the Government will intervene and conduct investigations. Will the Government inform this Council if any department would attempt to find out whether or not the CLP is liable?

PRESIDENT (in Cantonese): Secretary for Economic Services.

SECRETARY FOR ECONOMIC SERVICES (in Cantonese): Madam President, Mr LAU has raised two questions. The first question is whether the Government will ask the CLP to review the Supply Rules. As I said in the main reply, it is the CLP's practice to review these Supply Rules and the Government will also monitor the situation closely. The second question is about liability. In general, it involves a lot of legal questions and each individual and each household are affected to different extents. As I said in the main reply, the best way is to claim compensation directly from the CLP. If the matter cannot be resolved between them, I believe it will have to be settled in court. Government departments do not have the power, nor is it appropriate for them to adjudicate on matters that involve legal liability.

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

MR LAU WONG-FAT (in Cantonese): Madam President, the present case is that although the CLP is not a franchise company in name and not subject to strict supervision in terms of the supply of services, it in fact enjoys the rights of a franchisee and makes huge profits. Has the Government considered rectifying this unfair situation in order to safeguard the rightful interests of consumers? Second, will the Government consider carrying out a study to open up the electricity market and introduce competition, following the example of Singapore?

PRESIDENT (in Cantonese): Secretary for Economic Services.

SECRETARY FOR ECONOMIC SERVICES (in Cantonese): Madam President, this supplementary question is about opening up the electricity market. Actually, the Government has always considered that the best way is to introduce competition, since any monopolistic operation has its shortcomings. The Government has already commissioned a consultancy study on the opening up of the Hong Kong electricity market, the possibility of introducing competition and the factors that must be considered. We expect that a conclusion will be coming out of this at the end of the year.

PRESIDENT (in Cantonese): Mr Fred LI.

MR FRED LI (in Cantonese): Madam President, in the main reply, the Government mentioned that the Supply Rules provided that the CLP would not be liable for any indirect or consequential loss or damage suffered by a customer whether or not it arose as a result of the negligence of the Company. Does the Government think that such terms in the Supply Rules are unfair and that they seriously deprive consumers of their rights?

PRESIDENT (in Cantonese): Secretary for Economic Services.

SECRETARY FOR ECONOMIC SERVICES (in Cantonese): Madam President, according to our general understanding, our neighbouring countries such as Japan, Malaysia and South Korea have rules similar to the Supply Rules of the CLP. As to whether their terms are fair, there are laws in Hong Kong to safeguard this. The Control of Exemption Clauses Ordinance imposes restriction on the evasion of civil liability through terms of contract and sets out clearly the guidelines on reasonable criteria. Therefore, if anyone considers that certain terms are unfair or unreasonable, he can initiate legal actions by virtue of this law.

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

MR CHAN KAM-LAM (in Cantonese): Madam President, in the main reply, the Government mentioned that the CLP reviewed these Rules from time to time. However, since the review is conducted by the CLP itself, obviously the Rules will be in its favour. Therefore, I would like to know how the Government will deal with this and what amendments the CLP has made to the Rules as a result of its review.

PRESIDENT (in Cantonese): Secretary for Economic Services.

SECRETARY FOR ECONOMIC SERVICES (in Cantonese): Madam President, the CLP has reviewed its Supply Rules. But as I said just now, the Government will monitor the situation closely. As far as I recall, about two years ago ─ Mr LAU Kong-wah probably knows this very well, some consumers queried the CLP's system for collecting new electricity charges. We questioned the CLP about this and an agreement was reached. Before the new electricity charges became effective last year, the CLP adopted a new system. This is an example of our close monitoring of the situation.

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

MR LAU CHIN-SHEK (in Cantonese): Madam President, it is very difficult for consumers to prove that this power failure was due to negligence on the part of the CLP. Even if there is reason to believe that it was caused by the CLP's negligence, if the CLP refuses to settle or make compensation, consumers seeking a judgment from the court will be "punished even before they have seen the judge". Has the Government considered actively helping those affected customers and providing feasible solutions? Will the Government consider the suggestion made by a Member to amend the schemes of control for the two power companies, so as to ensure that consumers who suffer losses due to power interruption will receive fair treatment?

PRESIDENT (in Cantonese): Secretary for Economic Services.

SECRETARY FOR ECONOMIC SERVICES (in Cantonese): Madam President, as I said, liability and compensation involve a lot of legal questions. We still consider that the court is the best place to solve these questions. Of course, if consumers need to obtain legal aid, we do have legal aid services available.

PRESIDENT (in Cantonese): Mr Andrew CHENG.

MR ANDREW CHENG (in Cantonese): Madam President, in the incident of the power failure in Tai Po, the CLP considers that there was no negligence on its part. Therefore, as the Secretary explained, customers should go to the court in the hope of obtaining justice. As we all know, with the economic downturn, if small business customers try to take on the financial group of the CLP, it will obviously be a situation where the poor cannot hope to beat the rich. However, the power failure did inflict losses on these small business customers. Will the Government consider asking the CLP to propose a method of compensation, such as setting up a compensation fund, so that these business customers affected by the power failure will receive fair and reasonable compensation without going to the court?

PRESIDENT (in Cantonese): Secretary for Economic Services.

SECRETARY FOR ECONOMIC SERVICES (in Cantonese): Madam President, I still think that setting a fair and reasonable method of compensation is a legal procedure. I do not think that any administration or company can unilaterally decide what is reasonable compensation. Therefore, I still consider that the court is the best place to deal with these matters.

PRESIDENT (in Cantonese): Third question. Mr Kenneth TING.

Unauthorized Discount Packages by Hongkong Telecom

3. MR KENNETH TING (in Cantonese): Madam President, it is learnt that the Hongkong Telecom (HKT) was in breach of the provisions of its licence some time ago by offering discounts to its IDD call customers without the prior unauthorization of the Telecommunications Authority. A financial penalty was imposed on the HKT as a result and the company was required to recover the shortfalls between the approved rates and the unauthorized discounted rates from the customers concerned. In this connection, will the Government inform this Council whether it knows:

(a)	what proposals the HKT has put forward to the Office of the Telecommunications Authority (OTA) after the imposition of the financial penalty in order to reduce the impact of this matter on the customers concerned; whether the OTA has accepted such proposals; if not, why not;
(b)	the number of the business customers involved and the total amount of the shortfalls in question; and
(c)	whether the Consumer Council has received complaints from the business customers concerned about this matter?

PRESIDENT (in Cantonese): Secretary for Information Technology and Broadcasting.

SECRETARY FOR INFORMATION TECHNOLOGY AND BROADCASTING (in Cantonese): Madam President,

(a)	Following the issue of the first direction under section 36B of the Telecommunication Ordinance by the Telecommunications Authority (TA) on 1 April 1998, the HKT had proposed to charge its customers at the approved rates from the end of July. The TA rejected the proposal. To do so would amount to allowing the HKT to continue the provision of services which are in breach of the licence conditions. Not only would the continued breach of the licence conditions be unacceptable legally, it would also run counter to the principle of fair competition. As the HKT had not implemented in full the direction issued by the TA, the TA decided, and announced his decision on 29 June, to fine the HKT in accordance with the penal provisions laid down and with the power vested in the TA under the Telecommunication Ordinance. As for the affected consumers, having regard to the fact that they have no knowledge of the unauthorized nature of the offers when they used the service, the TA has decided not to insist that the HKT should recover from customers who used the services from 1 April to 29 June the difference between the unauthorized discounted prices and the approved prices.
(b)	According to information obtained from the HKT, the number of business customers involved was 8 000. The price differential for services used between 1 April and 29 June was $2.5 million.
(c)	The Consumer Council normally does not handle complaints from business customers in the course of business transactions. Therefore, it has not kept records of complaints from business customers.

PRESIDENT (in Cantonese): Mr Kenneth TING.

MR KENNETH TING (in Cantonese): Madam President, the Consumer Council criticized the HKT for transferring the fine to consumers as an unfair practice, but the Government indicated it would not take any action against HKT customers. Will the Government inform this Council whether there are measures to prevent the recurrence of similar events in future?

PRESIDENT (in Cantonese): Secretary for Information Technology and Broadcasting.

SECRETARY FOR INFORMATION TECHNOLOGY AND BROADCASTING (in Cantonese): Madam President, consumer interests can be protected in several aspects. In the consultation paper we issued in early September, there are proposals to amend the Telecommunication Ordinance in respect of the powers of the TA. The proposals include the right to seek remedies when a third party suffers as a result of a licensee's breach of the relevant conditions. We think this proposal can protect the interests of the consumer.

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

MR HO SAI-CHU (in Cantonese): Madam President, in paragraph (a) of the main reply it was said that the TA had decided not to insist that the HKT should recover from customers who used the services from 1 April to 29 June the difference between the unauthorized discounted prices and the approved prices. Should the Government actually bar the HKT from making the recovery rather than just "not insisting" that it should do so? By "not insisting" it could be construed that the Government does not insist that the HKT should do so though the HKT may do so. Should the Government actually bar HKT from making the recovery?

PRESIDENT (in Cantonese): Secretary for Information Technology and Broadcasting.

SECRETARY FOR INFORMATION TECHNOLOGY AND BROADCASTING (in Cantonese): Madam President, the fact is the HKT is barred from making the recovery.

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

MR YEUNG YIU-CHUNG (in Cantonese): Madam President, in the main reply it was said that the affected customers had no knowledge of the unauthorized nature of the offers when they used the service. Will the Government inform this Council what is meant by "have no knowledge"? Why did they "have no knowledge"? Did the HKT hide the facts from the customers? Did the fine imposed by the Government achieve any deterrent effect?

PRESIDENT (in Cantonese): Secretary for Information Technology and Broadcasting.

SECRETARY FOR INFORMATION TECHNOLOGY AND BROADCASTING (in Cantonese): Madam President, that the customers did not have the knowledge is a fact. After the TA issued the first direction on 1 April, we continued to receive complaints and so we continued with our investigation. We later found out the HKT had not implemented fully the direction, whereupon the TA imposed a fine on the HKT by invoking the power conferred upon him under the law.

The Government agrees that the fine should be adjusted suitably and we have proposed to increase the same 10 times. That is the proposal of the Government.

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

MR LAU CHIN-SHEK (in Cantonese): Madam President, will the Government withdraw the last sentence in paragraph (a), as a matter of principle? In fact the customers had no knowledge. Furthermore, how exactly was the HKT punished?

PRESIDENT (in Cantonese): Secretary for Information Technology and Broadcasting.

SECRETARY FOR INFORMATION TECHNOLOGY AND BROADCASTING (in Cantonese): Madam President, perhaps I should explain again what the meaning of "not to insist" is. This refers to ensuring that the HKT will not recover the difference from its customers. The fine on the HKT was $20,000.

PRESIDENT (in Cantonese): Mr SIN Chung-kai.

MR SIN CHUNG-KAI (in Cantonese): Madam President, the incident has revealed a problem. In other cases, if a licensee fails to comply with the TA's directions, the Secretary can revoke the licence. But if a major licensee ─ the HKT ─ is in breach either of the licensing conditions or of the TA's directions, the TA cannot use the same method to penalize it. Will the Government inform this Council whether that is the case? That the Government is reluctant to revoke its licence is because it fears that once the company ceases operation, telecommunication service to the entire community will be affected. But the Government did revoke the licences of some small scale telecommunication companies. In the circumstances, will the Government inform this Council what methods other than increased fines can be used to improve the penalty mechanism?

PRESIDENT (in Cantonese): Secretary for Information Technology and Broadcasting.

SECRETARY FOR INFORMATION TECHNOLOGY AND BROADCASTING (in Cantonese): Madam President, on the question of dealing with dominant telecommunication service providers; there are indeed very stringent regulations governing service providers which stipulate that their tariffs have to be approved by the TA before implementation. If the TA wishes to invoke the power conferred upon him under the Telecommunication Ordinance, he must adhere to the punitive provisions contained in the respective Ordinance. The said fine is already the highest for the first breach (that is $20,000). But, as I said, I agreed that the fine might not be sufficient to achieve the desired deterrent effect when it was first formulated. So we have proposed to increase the fines by 10 times.

PRESIDENT (in Cantonese): Fourth question. Mr Gary CHENG.

Weight of Schoolbags

4. MR GARY CHENG (in Cantonese): Madam President, experts have pointed out that the weight of the schoolbag carried by a primary school student should not exceed one tenth of the student's body weight. However, according to a sample survey carried out by the Democratic Alliance for the Betterment of Hong Kong (DAB) on the weight of schoolbags carried to schools by primary school students conducted at the beginning of the current school term, 82% and 56% of half-day and full-time primary school students respectively carry schoolbags which exceed the weight limit suggested by experts. In this connection, will the Government inform this Council:

(a) whether it will stipulate a ratio between the body weight of primary school students and the weight of schoolbags; and

(b) whether it has assessed if the measures now being adopted, such as suggesting improvements to the design of textbooks; providing students with lockers at schools; and issuing guidelines to schools on the quantity of textbooks and exercise books to be brought to schools by students, have effectively address the issue; if the measures are not effective, the reasons for this; and whether it has other effective measures to thoroughly address the issue?

PRESIDENT (in Cantonese): Secretary for Education and Manpower.

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

(a) We understand that a number of experts consider that as a general rule, the weight of a student's schoolbag should not exceed one tenth of his body weight. We are seeking views from the Department of Health and will also make reference to the experiences of nearby regions, with a view to deciding whether to include in the guidelines to schools to be issued in the current school year, an ideal ratio of a student's body weight to his schoolbag weight, as well as the average weights of students of different ages, as reference for schools to facilitate textbook selection and timetabling.

(b) In the past years, the Education Department (ED) introduced a number of measures to tackle the problem of overweight schoolbags. These measures include providing lockers to schools; issuing guidelines to remind schools to take account of textbook weight in textbook selection and timetabling; reminding schools and parents to help students develop the habit of packing schoolbag everyday, and to give guidance to students so that they do not carry unnecessary textbooks and other items to schools; encouraging students to use light and endurable schoolbags, pencil-cases and stationery; and urging publishers to separate textbooks into volumes, to print textbooks and exercise books separately, to use lightweight paper and so on.

Of the measures adopted, those with more obvious results include the separation of textbooks into volumes and the separate publication of textbooks and exercise books. The percentage of primary school textbooks separated into volumes has increased from 83.34% in 1989 to 100% in 1991. Moreover, over 85% of primary schools have installed lockers.

There are many factors determining schoolbag weight, including textbook weight, subject mix, timetabling, exercise books/workbooks, students' habits and so on. Therefore, in order to fully address the problem of overweight schoolbags, we consider it necessary for schools, publishers, teachers, parents and students to make concerted efforts. At the same time, the ED will study ways to tackle the problem, including measures to increase the awareness of the issue among concerned parties. Apart from the guidelines to schools which I have just mentioned, the ED will, through conducting surveys on schools and students, evaluate the effectiveness of existing measures and make improvements where appropriate. For example, the ED will study the utilization of lockers in schools and actively remind teachers that they should provide guidance to students, especially primary school students, on ways to more fully utilize their lockers, and so on.

Should the ED decide to include in the guidelines to schools an ideal ratio of a student's body weight to his schoolbag weight, as well as the average weights of students of different ages, the same information would also be made available to publishers for reference. They will also be encouraged to use lighter papers for textbook printing.

Lastly, the ED will liaise with the Committee on Home-School Co-operation to promote parents' awareness of schoolbag weight, so that they can join efforts with the schools.

PRESIDENT (in Cantonese): Mr Gary CHENG.

MR GARY CHENG (in Cantonese): In the second paragraph of part (b) of the main answer, it is stated that measures which have achieved more obvious results include the separation of textbooks into volumes and the use of lockers, and lockers are also mentioned time and again in some other paragraphs. The Government is actually admitting that, at present, the measures have not had obvious results in improving the problem of overweight schoolbags. The Secretary said that the ED would study the utilization of lockers but as far as we know, the principals and students have very different views on the utilization of lockers. Can the ED or Secretary provide us with further information in this respect?

PRESIDENT (in Cantonese): Secretary for Education and Manpower.

SECRETARY FOR EDUCATION AND MANPOWER (in Cantonese): Madam President, as I have said in my main answer, there are many factors determining schoolbag weight. Certainly, if schools are provided with lockers, and students leave in the lockers those books or exercise books which they do not need to carry to school, their schoolbags will surely be lighter. Moreover, it is mentioned in the main answer that the ED will conduct questionnaire surveys among schools during this academic year, evaluate the effectiveness of existing measures, and look into the utilization of lockers in schools. We believe that the outcome of the surveys will help us study how the present situation can be further improved. For instance, if we find that the utilization rate of lockers is unsatisfactory, we can explore how the Administration can make improvements in this respect.

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

MR CHEUNG MAN-KWONG (in Cantonese): Madam President, the Secretary has pointed out in his main answer that the separation of textbooks into volumes can effectively reduce schoolbag weight, and that the percentage of primary school textbooks separated into volumes has increased to 100%. However, he has not given the figure concerning the separation of secondary school textbooks into volumes. Is the Government intentionally concealing the figure for the percentage of secondary school textbooks separated into volumes, that is, it is too low, and it is only announcing the good news but not the bad one? Can the Government inform this Council of the percentage of secondary school textbooks separated into volumes and stringently require publishers to separate textbooks into volumes, say one volume for the first term and another for the second, otherwise, schools will not be recommended to use such textbooks?

PRESIDENT (in Cantonese): Mr CHEUNG, your supplementary question concerns the separation of secondary school textbooks into volumes while the subject of this question concerns primary schools, therefore, your question has gone beyond the scope of the question. However, you can raise your question again later in another way.

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

MR YEUNG YIU-CHUNG (in Cantonese): Madam President, the Secretary has indicated in his main answer that the ED will conduct surveys among schools and evaluate the effectiveness of existing measures. Now that the DAB has already carried out a relevant survey and found out that 78% schoolbags exceed the weight limit suggested by experts, I would like to ask why the Government has not considered carrying out comprehensive backbone examination on all school children or introduced remedial measures for the health problem so as to alleviate the harms suffered by school students now?

PRESIDENT (in Cantonese): Secretary for Education and Manpower.

SECRETARY FOR EDUCATION AND MANPOWER (in Cantonese): Madam President, I can perhaps answer this supplementary in two parts. First, the survey is intended not just to find out how much the weight of schoolbags carried by students exceeds their body weight. We admit that the DAB and many other bodies have actually conducted such surveys but the scope of our survey is relatively wider, including an evaluation of the effectiveness of the measures which have been implemented for quite some time. For example, we remind schools to take account of textbook weight in textbook selection and timetabling, and remind schools to help students develop the habit of packing schoolbag everyday. We hope to gather more information in this respect. In addition to the weight of schoolbags, we actually wish to know the effectiveness of many existing measures, including students' habits of putting things into schoolbags. According to another survey we have conducted, about 20% of the weight of schoolbags comes from the miscellaneous items students put in their schoolbags.

Second, Mr YEUNG has asked if we will study whether schoolbag weight will have adverse effects on school students' backbones. In this regard, we have sought the advice of experts and the medical sector and they think that the heavy schoolbags carried by students will affect their normal heartbeats and blood pressures, making them tired and exerting more pressure on their backs. But so far, no evidence shows that the unhealthy growth of backbones is directly related to carrying overweight schoolbags. However, I am prepared to discuss this with my colleagues from the ED after this meeting, and I will seek the advice of the Department of Health to see if there are relevant surveys or information in other respects. We will study the physical conditions of Hong Kong children in the past few years, especially the growth of their backbones, and find out the factors contributing to the problem.

PRESIDENT (in Cantonese): Mr Andrew WONG.

MR ANDREW WONG (in Cantonese): Madam President, a feasible measure is for schools to utilize public funds to provide students with textbooks. Students need then only bring home the textbooks they need for the evening. Not only can this solve the problem of schoolbag weight but also that of expenses such as high textbook and exercise book charges. If there are new editions of textbooks, the expenses will also be borne by the schools. The problem of expenses on new editions of textbooks will also be solved this way. As the Honourable Gary CHENG has asked, are there other effective measures for solving the problem? Has the Government considered this? If so, why does it not adopt this measure?

PRESIDENT (in Cantonese): Secretary for Education and Manpower.

SECRETARY FOR EDUCATION AND MANPOWER (in Cantonese): Madam President, this view has already been expressed when we discussed about textbook prices or the fact that many parents spent a lot on textbooks. Under the present system, publishers publish textbooks for students' purchase. If this system is changed so that textbooks will be bought by schools and distributed to students, the problem involved will not only be overweight schoolbags. However, I am very pleased to mark down this suggestion and I believe that we can certainly spend plenty of time discussing about this in the Panel on Education in the future.

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

MR LEUNG YIU-CHUNG (in Cantonese): Madam President, the schoolbag weight problem has long been the concern of the community, but it is a pity that the Secretary keeps telling us today that they are still examining many problems or that they would continue to look for solutions. Would the Secretary tell us why it takes so long, and they are still examining this problem, especially the issue of giving guidelines to schools? What difficulties are there that have delayed the outcome of the Government's study after all these years and the Secretary still cannot give schools effective guidelines? As regards solutions, what is the timetable in the Secretary's mind?

PRESIDENT (in Cantonese): Secretary for Education and Manpower.

SECRETARY FOR EDUCATION AND MANPOWER (in Cantonese): Madam President, this is really a relatively difficult problem which cannot be solved by the Government issuing guidelines alone. If it can be solved this way, I will certainly issue guidelines immediately after this meeting. In fact, this problem involves several aspects such as whether students have the habits of packing schoolbags, whether better co-ordination between textbooks and school timetables can be achieved and whether schools and publishers can further consider schoolbag weight when publishing or determining the textbooks and exercise books to be used. Therefore, it has been stressed in my main answer that we really hope that not only the Government will actively tackle the problem but schools, publishers, teachers, parents and students will also work together. However, as I said in my main answer, we will take positive actions and start considering the guidelines to be issued. Actually, we issue similar guidelines every year, for instance, "light schoolbags, light classes". But we will further consider whether we can specifically define an ideal ratio. For example, we will specify how heavy one tenth of a student's body weight is. We will seek expert advice and set out the average weight of students (especially primary school students) in different grades so that schools can give parents or publishers more information. For example, they can state the number of books Primary 1 students will use and the average weight of Primary 1 students, as well as the appropriate total weight of their books.

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

MR LEUNG YIU-CHUNG (in Cantonese): Madam President, there are two parts. First, I would like to ask the Secretary why it has taken so long but the outcome of the study on issuing guidelines is still not known? Can the Secretary inform this Council of the difficulties encountered? Second, the Secretary has said that the ED would continue to look for solutions, what is the timetable?

PRESIDENT (in Cantonese): Mr LEUNG, a Member can only ask a supplementary at a time but you are saying that the Secretary has not answered two questions you have asked. I suggest that you should choose to ask either one of the questions now and raise the other later. Which supplementary question do you wish the Secretary to answer?

MR LEUNG YIU-CHUNG (in Cantonese): I would let the Secretary choose. (Laughter)

PRESIDENT (in Cantonese): Secretary for Education and Manpower.

SECRETARY FOR EDUCATION AND MANPOWER (in Cantonese): Madam President, I have actually answered Mr LEUNG Yiu-chung's supplementaries but he is probably not satisfied with my answer. As to why it has taken so long but this problem is still not solved or not completely solved, I have answered that the problem involves many factors and many aspects, including schools, teachers, students and the Government. As to the other part of the supplementary question concerning the study we are conducting, I have actually said that we are studying whether we can give specific information and data in the guidelines issued to schools this year so that schools, parents and students can follow specific instructions concerning overweight schoolbags.

PRESIDENT (in Cantonese): Dr YEUNG Sum.

DR YEUNG SUM (in Cantonese): Madam President, in addition to issuing guidelines to schools concerning the volume of homework or schoolbag weight, will the ED enhance the role of school inspectors and expand the scope of their work to cover schoolbag weight to encourage schools to be concerned about students' growth and health?

PRESIDENT (in Cantonese): Secretary for Education and Manpower.

SECRETARY FOR EDUCATION AND MANPOWER (in Cantonese): Madam President, perhaps I should note down this suggestion and wait until we have the outcome of the survey to see whether it is worthwhile to follow up this suggestion.

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

MR CHAN WING-CHAN (in Cantonese): Madam President, it is stated in part (a) of the main answer that the Government understands that the weight of a student's schoolbag should not exceed one tenth of his body weight. The DAB has carried out a survey on the schoolbags and weight of all students for five consecutive years and we find that most (70%) of the schoolbags are overweight. I would like to ask the Secretary why this problem cannot be solved?

In answering Mr YEUNG Yiu-chung's supplementary question, the Secretary said that experts are of the view that, carrying heavy schoolbags would not have influence on students' skeleton and it would only affect their heartbeats and make them thirsty. The Secretary often says that people should maintain good posture when lifting things. Students have delicate skeletons and if students' bodies are tilted to one side when they carry schoolbags, will the schoolbags make their backbones out of shape? Does the Administration have any remedial measures?

PRESIDENT (in Cantonese): Mr CHAN, you have asked two supplementaries. Mr YEUNG Yiu-chung has already raised the first supplementary and the Secretary has given an answer twice. Therefore, I would now ask the Secretary to answer you second supplementary.

PRESIDENT (in Cantonese): Secretary for Education and Manpower.

SECRETARY FOR EDUCATION AND MANPOWER (in Cantonese): Madam President, experts will certainly have many different views. For instance, some experts say that the weight of a student's schoolbag should not exceed one tenth of his body weight, but some other experts say that there is no evidence that the weight of a student's schoolbag will have adverse influence on the student's skeleton. In fact, even without expert's advice, I believe that Members will agree that overweight schoolbags will really affect the health of primary school students. Therefore, I have just said that I am very willing to find out together with the ED and Department of Health as to how the physical strength and growth of local students, especially their backbone growth, compare with those in other places. We would find out if there are specific figures and completed studies that illustrate that other factors affect local children's growth, including their backbones, as compared with children in other countries. I find this a more practical method.

PRESIDENT (in Cantonese): Fifth question. Mr Ambrose CHEUNG.

Allocation to the Provisional Urban Council

5. MR AMBROSE CHEUNG (in Cantonese): In January 1997, the Government undertook to allocate $18.7 billion from the Rates income to the then Urban Council (now the Provisional Urban Council) to meet its expenditure for the three financial years from 1997 to 2000. Compared with the requested $22.5 billion of the then Urban Council, the allocation was short of $3.8 billion. In order to maintain the quality of and the public's demand on its service, the Provisional Urban Council decided to allocate all the $3.1 billion in its reserve, and to implement a series of measures to increase income and to reduce expenditure in the three financial years, in order to make up for the shortfall in its operating expenditure. In August 1998, the Government estimated that the amount of allocation from Rates income would be reduced from $18.7 billion to $18.3 billion. In this connection, will the Government inform this Council of the rationale for reducing the allocation further?

PRESIDENT (in Cantonese): Secretary for the Treasury.

SECRETARY FOR THE TREASURY (in Cantonese): Madam President, to answer the question raised by the Honourable Member, I need to explain the Rates financing arrangement between the Government and the two Municipal Councils. I hope Members would appreciate.

Rates are the main source of revenue for the Municipal Councils. Under the Rates financing arrangement, the Government discusses with the Municipal Councils their Rates revenue requirement every three years. This three-year cycle is to tie in with the triennial Rates revaluation cycle.

As expected in any negotiations, the Government and the Municipal Councils do not always have a complete agreement on the level of revenue that the Municipal Councils should receive from Rates. The $22.5 billion quoted in the Honourable Member's question represented only the position of the then Urban Council during the triennial discussions in early 1997. The Government's position, after having taken into account all relevant factors such as the Urban Council's past and projected expenditure and non-Rates revenue, its accumulated reserve and the Government's overall budgetary policy and guidelines, was that Rates revenue of $18.7 billion would be sufficient to meet the Urban Council's needs for the triennium. That level of Rates revenue would have provided the Urban Council with a nominal annual growth of 10.6%, or a real annual growth of 2.6%, based on the then assumed inflation rate of 8% per year. It was further estimated at the time that if the Urban Council was prepared to live within this level of expenditure growth, it would end up with a healthy reserve of over $1 billion at the end of the triennium. I should add that the then Urban Council did not agree with the Government's proposed level of Rates revenue. Hence the reference to a shortfall of $3.8 billion in the Honourable Member's question.

As the Urban Council receives its Rates revenue directly from a share of the Rates charge, based on the rateable values of properties effective from 1 April 1997 following the revaluation exercise, we calculated that a percentage charge of 2.6% for the Urban Council Rates would enable the Urban Council to receive Rates revenue estimated at $18.7 billion over the three-year period. In a letter to the Urban Council Chairman in January 1997, my predecessor clearly explained that there are bound to be variations between the estimated and the actual Rates receipts. However, the variations are not expected to be drastic as the projections are already based on reassessed rateable values of properties.

Another important feature of the established Rates financing arrangement for the Urban Council (and for the Regional Council) is that there is no automatic topping up or clawing back when the actual Rates receipts by the Municipal Councils are smaller or greater than those estimated during the triennial discussions. As a matter of fact, in the two preceding trienniums of 1991 to 1996, the actual Rates receipts by the Urban Council exceeded the estimated amounts by a total of $808 million. The Government never raised the question of clawing back the excess.

For the current triennium, the Commissioner for Rating and Valuation's latest forecast on the total Rates revenue for the Provisional Urban Council is $18.311 billion. This represents a variance of $389 million, or 2% only of the original estimated Rates revenue. In our view, provided the Provisional Urban Council has exercised proper management of its budget and will continue to manage its finances in a prudent manner and review its expenditure plans and revenue measures in the light of its financial situation, this small variance should not cause a problem. For example, the Provisional Urban Council could readily offset the "shortfall" by reduced expenditure arising from the considerable lower price increases than those assumed in the triennial discussions. Alternatively, the shortfall could be met by the Provisional Urban Council's reserve of over $1 billion projected to remain during the triennial discussions.

The Honourable Member has referred to an undertaking by the Government to allocate $18.7 billion to the Urban Council in January 1997. I would like to state clearly that there is no such undertaking. In his letter of January 1997 to the Chairman of the Urban Council, my predecessor said that the percentage charge for the Urban Council Rates will be such as to enable the Urban Council to receive Rates revenue, on the basis of our best estimate, amounting to our proposed level of $18.7 billion over the next triennium. He also pointed out "The actual amount to be received by the Urban Council will, of course, depend on the actual rates revenue collected by the Government in the Urban Council area". He further made it clear that should a large shortfall result due to an over-estimation on our part of the Rates revenue to be received by the Urban Council and as a result the Urban Council's planned activities are affected, the Government would be prepared to support the Urban Council in applying for additional funds. We do not consider a variance of only 2% between the original and the revised Rates receipts to constitute a large shortfall. My predecessor also reiterated in his letter that the Government would be prepared to support the Urban Council to seek additional funding from the legislature only if the Rates revenue received by the Urban Council turned out to be insufficient to meet its needs on justifiable grounds. For the reasons already explained, we can see no such justifiable grounds.

PRESIDENT (in Cantonese): Mr Ambrose CHEUNG.

MR AMBROSE CHEUNG (in Cantonese): Madam President, the reply of the Secretary is based on three points. First, there is only a very small variance of 2%. Second, the Urban Council has a reserve of $1 billion. And, third, the Government has never promised to allocate $18.7 billion to the then Urban Council. I am going to give some information about these three points. After I have done so, will the Secretary reconsider the possibility of applying to the Legislative Council for supplementary provision? First, I want to make it clear that the Urban Council does not have a reserve of $1 billion. In fact, it will be in the red during the financial year of 1999-2000, and the deficit will be $400 million as pointed out by the Secretary herself. Second, the $400 million shortfall does not represent a mere variance of 2%; rather it will represent approximately 7% of the budget of the Urban Council in 1999-2000. Third, in the letter of January 1997, I cannot find any mention of the percentage charge for the Urban Council Rates as quoted by the Government. I can only find the figure of $18.7 billion in this letter. For the three reasons which I have mentioned, will the Government reconsider the possibility of applying to the Legislative Council for supplementary provision?

PRESIDENT (in Cantonese): Secretary for the Treasury.

SECRETARY FOR THE TREASURY (in Cantonese): Madam President, the Honourable Member has stated three points which he thinks should be regarded as justifications, but I do not think that the Government will apply to the Legislative Council for allocation of additional funds on the basis of these three points. The standpoint of the Government is that the Urban Council is a financially autonomous body, and the Rates revenue of the Urban Council is determined between the Urban Council and the Government under a mechanism of "triennial negotiations". Under this mechanism of "triennial negotiations", the Urban Council will inform the Government of its estimated expenditure and non-Rates revenue in the next triennium. During their practical discussions, the Government and the Urban Council will reach an agreement on some assumptions which they both accept as justifiable, such as those relating to inflation and price increases which I have just mentioned. And, upon the completion of their discussions, there will be an outcome. In the case under discussion now, the outcome was that the Government expected the Urban Council to receive a Rates revenue of $18.7 billion in the following triennium. At that time, both the Government and the Urban Council understood fully well that this figure was merely a projection, and the Rates revenue actually received by the Urban Council might well be more, or less, than that. As a financially autonomous body, the Urban Council should be well aware of the factor of variance, and it should thus make adequate allowance when drawing up its revenue and expenditure estimates. Under the broad principle of financial autonomy, and since the variance is just a mere 2%, the Urban Council should really work out its own ways of tackling any expenditure problems which may arise. Given the financial autonomy of the Urban Council, the Government has no authority whatsoever to control its expenses. For that reason, the Government cannot accept the argument that it should meet the shortfall for the Urban Council. The Government cannot accept such an argument.

PRESIDENT (in Cantonese): Mr Fred LI.

MR FRED LI (in Cantonese): Madam President, the Secretary has repeatedly stressed the financial autonomy of the Urban Council. So, I just wonder how the Government was able to come up with the projection that the Urban Council would have a reserve of $1 billion three years later ─ a projection which has led it to conclude that a variance of $389 million should not cause any problem. Will the Government please inform this Council how it was able to project that the Urban Council would have a reserve of $1 billion?

PRESIDENT (in Cantonese): Secretary for the Treasury.

SECRETARY FOR THE TREASURY (in Cantonese): Madam President, in late 1996 and early 1997, the then Finance Branch started its discussions with the Urban Services Department (USD) on the amount of Rates revenue for the Urban Council in the following triennium. In the course of the discussions, the USD supplied the following statistics to the then Finance Branch: the projected expenditure of the Urban Council in the following three years, its non-Rates income during the same period and its estimated reserve accumulated up to 31 March 1997. On the basis of these statistics supplied by the USD, we were able to conclude that if the Urban Council could spend within its means and adhere to the principle of prudent financial management, it should have a reserve of $1 billion at the end of the following triennium on 31 March 2000.

PRESIDENT (in Cantonese): Mr Andrew WONG.

MR ANDREW WONG (in Cantonese): Madam President, I have heard many references to "allocation", and even the Honourable Ambrose CHEUNG used terms like "funds allocation" and "reduced allocation" in his question. And, although it is stated clearly at the beginning of the Secretary for the Treasury's main reply that the issue actually involves the Rates financing arrangement between the Government and the two Municipal Councils, she still refers to "additional funding" in the last paragraph of the same reply, and I quote: "My predecessor also reiterated in his letter that the Government would be prepared to support the (Urban) Council to seek additional funding from the legislature only if the Rates revenue received by the (Urban) Council turned out to be insufficient to meet its needs on justifiable grounds." I really cannot understand it. What is actually meant by "allocation" here? Does it mean an increase in the Urban Council's share of the Rates charge? Or, does it mean an allocation of funds from elsewhere? This is my first question. I have more questions to follow.

PRESIDENT (in Cantonese): Secretary for the Treasury.

SECRETARY FOR THE TREASURY (in Cantonese): Madam President, I am very grateful to the Honourable Andrew WONG for asking this question because I think the question actually involves a point which the general public does not grasp. Mr Andrew WONG, however, can fully understand the situation. Actually, under the existing mechanism, we do not allocate funds to the Urban Council; in other words, we have never asked the Legislative Council to make any provision to the Urban Council. Rather, the existing mechanism is meant to determine how much the Urban Council, the Government and the Regional Council are to get from the Rates charge. In other words, the Rates charge is to be divided among the three of them. By using the term "additional funding" in the last paragraph of my reply, I actually wish to say that if there is a huge variance between the estimated and actual Rates receipts, the Government may request the Legislative Council to make supplementary provision for the Urban Council from General Revenue. I certainly do not refer to an adjustment of the percentage charge applicable to the Urban Council.

PRESIDENT (in Cantonese): Mr Ambrose CHEUNG.

MR AMBROSE CHEUNG (in Cantonese): Madam President, it is stated very clearly in the Secretary's reply that the estimated Rates receipt of $18.7 billion was actually a projection made by the Government itself. What we are now asking for is $18.7 billion, not $18.3 billion. As pointed out by the Secretary just now, the projected reserve of $1 billion was calculated on the basis of the information available to the Finance Bureau and the USD. May I ask whether such a projection was in fact made on the assumption that $22.5 billion would be granted to the Urban Council as requested? Is the Secretary aware that the Urban Council would face a shortfall of $400 million in the third year of the triennium? Is she aware that the Urban Council will face a deficit and thus possible bankruptcy?

PRESIDENT (in Cantonese): Secretary for the Treasury.

SECRETARY FOR THE TREASURY (in Cantonese): Madam President, perhaps, let me just put it this way. During the discussions, the USD informed us that the estimated expenditure of the Urban Council during the triennium would be as much as $22.5 billion. However, this projection was actually made on several assumptions. Of these assumptions, two are of more significance. First, it was assumed that the annual inflation rate would be about 8%. At that time, we accepted this assumption because it was then late 1996 and early 1997. Second, it was assumed that the non-recurrent expenditure of the Urban Council would grow at a rate of 100% in the following three years. The Finance Bureau could not accept such an assumption. As we all know, the Urban Council area covers mainly the Hong Kong Island and the Kowloon Peninsular where no dramatic population growth is envisaged in the following three years. Besides, we also do not see any other justifications which can support the claim that the non-recurrent expenditure of the Urban Council should be increased by nearly 100% between 1997 and 2000. For these reasons, we would think that it is indeed reasonable for the Urban Council to keep its expenditure within its Rates receipt limits of $18.7 billion.

As pointed out in my main reply, the $18.7 billion of Rates revenue would provide the Urban Council with a nominal annual growth in expenditure of 10.6%, or a real annual growth of 2.6%. Since the salary increases for civil servants are lower than the rates assumed at the time of the discussions (Let me use the case of this year as an example. When we conducted our discussions, we expected that civil servants would receive an increase of 8% in their salaries, but the average rate of increase this year turned out to be 6% only), and since the slower pace of inflation has kept price increases well below the 8% level projected at that time, we consider that there should be a corresponding and real decrease in the expenditure of the Urban Council. Besides, if we compare the latest Rates revenue forecast of $18.3 billion with the original forecast of $18.7 billion, we can see that there is indeed a very small variance. For these reasons, we do not think that there are any justifications for giving additional financial support to the Urban Council.

Finally, I wish to point out that as a financially autonomous body, the Urban Council will draw up its own budget every year. Therefore, it should have realized a long time ago that if it does not manage its finances prudently, it will run into a deficit of 7% next year. Actually, every year when the Urban Council draws up its budget, it should be able to forecast its financial situation in the following year, or even in the year after that. From the point of view of prudent financial management, the Urban Council should not have waited until today before it hastens to say that if the Government does not come to its assistance, it will run into a 7% deficit next year. And, even if the Urban Council was really not aware of this possible situation until as late as August this year, there are still 20 months (if not as long as 20 months, there is at least 18 months) to go before the end of March in 2000. I believe that from the point of view of prudent financial management, 18 months can already allow sufficient time for the Urban Council to make its ends meet.

The Government has no wish to see the Urban Council run into bankruptcy, but I can say here that if such a crisis really occurs, we do not rule out the possibility of invoking the Urban Council Ordinance, whereby the Chief Executive may issue a general directive to require the Urban Council to spend within its means.

PRESIDENT (in Cantonese): Honourable Members, since the Secretary has given quite a long reply, I will take just one last question. Mr Andrew WONG.

MR ANDREW WONG (in Cantonese): I see, Madam President, but my question may also be very long.

PRESIDENT (in Cantonese): Be concise as much as possible, Mr Andrew WONG.

MR ANDREW WONG (in Cantonese): The existing arrangement was first put in place back in 1973. In 1971, a White paper was published, and in it the financial autonomy of the Urban Council was established (At that time, we had the Urban Council only, for the Regional Council had not yet come into being). The Regional Council is also financially autonomous now. However, it should be noted that despite the financial autonomy of the two Municipal Councils, their Rates financing proposals must be submitted through the Government to the legislature for approval. If there is any real intention to make the two Municipal Councils financially autonomous, why is the Urban Council not simply allowed to submit its own Rates charge percentage proposals to the legislature for approval? Why does the Government not submit its own separate proposals on the general Rates charge percentage? When the Urban Council submits its proposals to the legislature, the Government can argue against them if it has any divergent views. This is the only way to achieve genuine financial autonomy and to make the two Municipal Councils assume the associated responsibility. What we are doing now is to divide up the Rates charge, which has somehow been fixed in the light of other factors beforehand. Maybe, this is because the Legislative Council ......

PRESIDENT (in Cantonese): Mr Andrew WONG, I believe you have already made yourself fully understood. Please state your question directly.

MR ANDREW WONG (in Cantonese): I wish to propose a very simple arrangement, because I think it will be very difficult to insist on their financial autonomy if they are not allowed to assume the associated responsibility. I do not know whether the Secretary for the Treasury has actually considered the following point while thinking about "killing the two Municipal Councils: In case the two Municipal Councils are "spared the killing", or if some other councils are to be established, will she consider the idea of giving them genuine financial autonomy?

PRESIDENT (in Cantonese): Secretary for the Treasury.

SECRETARY FOR THE TREASURY (in Cantonese): Madam President, let me just give a very brief reply. The question asked by the Honourable Member just now actually involves constitutional implications and no longer falls within the scope of financing arrangements between the Government and the two Municipal Councils. In Hong Kong, all revenue proposals (Rates are also a type of revenue) must be submitted by the Government to the legislature for approval. This was the case before the reunification and is still the case now. This is in fact a constitutional requirement. And, whether in the past or now, we must work in accordance with the relevant constitutional requirements. The scope of the question asked by the Honourable Member goes beyond the ambit of the Finance Bureau, so I will have to defer to the Secretary for Constitutional Affairs.

PRESIDENT (in Cantonese): The sixth question.

MR ANDREW WONG (in Cantonese): Who can give a reply to my question on behalf of the Government or the Secretary for Constitutional Affairs?

PRESIDENT (in Cantonese): Mr Andrew WONG, please sit down.

MR ANDREW WONG (in Cantonese): No one is here, not even the Chief Secretary for Administration.

PRESIDENT (in Cantonese): Mr Andrew WONG, please sit down. Members who wish to follow up this question are advised to do so in the relevant Panel. As I announced just now, this should be the last supplementary question.

The last question seeking an oral reply. Mr LEUNG Yiu-chung.

Handling of Pay Reduction by Employer Cases

6. MR LEUNG YIU-CHUNG (in Cantonese): In order to reduce their operating costs in the wake of the downturn in the economy, quite a number of employers have asked their employees to accept pay reductions. In this connection, will the Government inform this Council:

(a) of the number of complaints lodged with the Labour Department by employees concerning pay reductions by employers in the past year; the trades, number of employees involved in these complaints and the extent of the pay reductions involved;

(b) of the policy and principles based on which the Labour Department handles these complaints; and

(c) whether it will make reference to other countries' practice and consider establishing a minimum wage system, so as to ensure a decent life for employees; if it does not plan to establish such a system, what the reasons are?

PRESIDENT (in Cantonese): Secretary for Education and Manpower.

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

(a) Since June 1998, the Labour Department has started to compile statistics on claims and disputes involving reduction in wages handled by the Labour Relations Service (LRS). During the three-month period from June to August 1998, the LRS handled 24 such cases, out of a total number of 8 297 claims and disputes handled by the LRS. Of these 24 cases, two thirds were settled through conciliation and the rest were referred to the Labour Tribunal for adjudication.

Of these 24 cases, 10 were from the wholesale, retail, import/export trades, restaurants and hotels, and six were from the real estate and business services. The remaining eight were from the transport, community, social and personal services, manufacturing and construction. About 700 employees involved have lodged their complaints with the Labour Department.

As regards the extent of the wage reduction, in eight cases, the employers only expressed the intention to reduce wages but had not proposed any percentage of reduction. Of the other 16 cases, the proposed wage reduction in 11 cases ranged from 6% to 20%. In the remaining five cases, the proposed wage reduction exceeded 20%.

(b) In handling cases involving wage reduction, the LRS ensures that employers act in accordance with the employment contract and the Employment Ordinance and that employees' statutory and contractual rights are protected. An employer should not impose wage reduction unilaterally on his employees without their consent and an employee has the right to decide whether or not to accept the wage reduction proposed by his employer.

The LRS encourage employers who are adversely affected by the present economic downturn to discuss their problem with their employees and explore all possible options. Where there is a dispute, the LRS stands ready to provide conciliation service to help both parties come to an amicable settlement.

(c) The Government has no intention of establishing a minimum wage system. This is because in a free market like Hong Kong, wage levels vary from trade to trade and from time to time depending primarily on the demand and supply of labour and the prevailing business environment. We do not consider it appropriate for the Government to interfere with the free market by setting a minimum wage for any particular trade.

However, the Government does provide a safety net for those unemployed persons with genuine financial hardship. They may apply for assistance under the Comprehensive Social Security Assistance Scheme (CSSA).

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

MR LEUNG YIU-CHUNG (in Cantonese): Madam President, in part (b) of his main reply the Secretary mentioned that "Where there is a dispute, the LRS stands ready to provide conciliation service to help both parties come to an amicable settlement." Madam President, there is a trend now in which some unscrupulous employers still reduce their employees' wages despite their companies having a huge surplus. Take the example of the Hongkong Telecom case, it seems that the dispute cannot be settled even with the conciliation efforts of the Government. Will the Government consider conducting a review of the method to solve problems merely by co-ordination and conciliation services? Will it also consider whether it should legislate to protect the rights of the employees, including the legislation of the right of collective bargaining?

PRESIDENT (in Cantonese): Secretary for Education and Manpower.

SECRETARY FOR EDUCATION AND MANPOWER (in Cantonese): Madam President, the first thing I would like to say is: at this time of an economic downturn, the Government would like to see employers and employees face the difficulties in as much a rational and calm manner as possible, and work out a solution together. The Labour Department serves as an intermediary and stands ready to provide conciliation service at the request of the employees or the employers. We also understand that at this time of an economic downturn, both parties need to sit down for discussions on quite a lot of problems. Therefore, the Labour Department is drafting a set of guidelines to serve as a reference to the employers when they have to think about questions such as layoff and variation of the terms of employment of the employees. The set of guidelines should be able to make the negotiation process smooth and reduce a lot of unnecessary misunderstanding and disputes. The Labour Department will consult the Labour Advisory Board in October on the contents of the guidelines. Also, I would like to add that the Labour Department has set up the Workplace Consultation Promotion Unit in April this year with the intention of making more publicity and facilitating communication in matters relating to voluntary negotiation between employers and employees. As for the right of collective bargaining mentioned by the Honourable Member, I wish to reiterate that the stance of the Government has all along been very clear. The Government is against legislating for compulsory collective bargaining. But the Government, especially the Labour Department, is more than willing to try our best to achieve a consensus in promoting dialogue and consultation between employers and employees on a voluntary basis.

PRESIDENT(in Cantonese): Mr LEE Kai-ming.

MR LEE KAI-MING (in Cantonese): Madam President, about part (b) of the main reply, I would like to ask the Secretary, of the 24 cases of wage reduction, how many cases involved wage reduction made unilaterally by employers? What measures does the Government have in place to protect the rights of employees whose wage has been reduced unilaterally? How many employers have received punishment as a result of the breach of relevant legislation?

PRESIDENT (in Cantonese): Secretary for Education and Manpower.

SECRETARY FOR EDUCATION AND MANPOWER (in Cantonese): Madam President, it can be seen from the 24 cases we received that all the proposals for wage reduction have come from employers. Of course, I mentioned in my main reply that the employees' consent would have to be sought for any proposal to reduce wages made by the employer unilaterally. Otherwise, the employer could not enforce his wage reduction proposal unilaterally. As for the latter half of Mr LEE Kai-ming's supplementary question, I am afraid I did not hear it very well, could Mr LEE please repeat it?

PRESIDENT (in Cantonese): Mr LEE Kai-ming.

MR LEE KAI-MING (in Cantonese): Madam President, the main reply mentions that the Government will ensure that employers act in accordance with the employment contract and the Employment Ordinance and that employees' statutory and contractual rights are protected. What measures has the Government taken to ensure the above-mentioned assurances are carried out? How will employers be punished if they have breached the employment contract?

PRESIDENT (in Cantonese): Secretary for Education and Manpower.

SECRETARY FOR EDUCATION AND MANPOWER (in Cantonese): Madam President, "to ensure" means that we will require employers to abide by the employment contract or to observe the obligations required of them under the Employment Ordinance. For example, if employees are firmly opposed to the wage reduction proposal, employers cannot of course impose wage reduction on the employees unilaterally. I mentioned just now that some of the cases had been settled. Settlement was made possible through the conciliation service provided by the Labour Department to both parties and as a result a solution was worked out. That could be a voluntary acceptance of the wage reduction proposal on the part of the employees; or that both parties agreed to a wage reduction within a certain period or that both parties agreed to a level of wage reduction lower than that originally proposed by the employers. If no consensus can be reached and the employees are willing to resign, then the employers would have to make adequate compensation according to the employment contract and the Employment Ordinance.

PRESIDENT (in Cantonese): Mr CHAN Kwok-keung.

MR CHAN KWOK-KEUNG (in Cantonese): Madam President, now the employers are making some irrational moves, such as proposing to reduce the wages of employees when they are making huge profits. Their next move may be to reduce the number of employees, that is, to lay them off. If employers use this method to lay off employees, has the Government specified any methods that employers should use to calculate the severance payment of the employees in order that a reasonable compensation be made? For apart from wage reduction, the employers' next move will be to seize an opportunity to lay off employees and start to suppress the wage of the employees.

PRESIDENT (in Cantonese): Secretary for Education and Manpower.

SECRETARY FOR EDUCATION AND MANPOWER (in Cantonese): Madam President, in some of the cases handled by the Labour Department, under certain circumstances the employers and employees have agreed to a wage reduction proposal which includes a certain provision which states that the employer agrees that should the company be compelled to lay off employees in an economic downturn or business difficulty, severance payments will be made according to the wage level before wage reduction. This is of course one of the terms of employment when both parties enter into a new employment contract. I would like to stress that what we want to ensure is that at this difficult time, both employers and employees can face the difficulties together in a calm and rational manner. Besides, as I have said, we shall keep a close eye on the events and if necessary, the Labour Department will consult the Labour Advisory Board and see if we should give clear reference materials to employers and employees when we issue any guidelines. This will prevent the occurrence of too many conflicts and contradictions in the two parties.

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

MR LEE CHEUK-YAN (in Cantonese): Madam President, the main reply said, "Of these 24 cases, ...... the rest were referred to the Labour Tribunal for adjudication". I do not understand why the remaining one third of the cases were referred to the Labour Tribunal, for it is outside the purview of the Labour Tribunal to make adjudications on matters relating to wage reduction. Does it mean that in the remaining one third of the cases, the employers have sacked all the employees and so the latter need to go to the Labour Tribunal to fight for severance payments and long service payments? I hope the Secretary could give us an explanation. I wish to tell the Secretary that it is imperative to have the right to collective bargaining and a mechanism for communication if we want negotiations to be calm and rational. If we solely rely on a set of guidelines, labour relations will never be harmonious no matter how calm and rational the employees are.

PRESIDENT (in Cantonese): Mr LEE, no personal views can be put forward during question time.

LEE CHEUK-YAN (in Cantonese): Would the Secretary agree to that? (Laughter)

PRESIDENT (in Cantonese): Secretary for Education and Manpower.

SECRETARY FOR EDUCATION AND MANPOWER (in Cantonese): Madam President, some of the cases were referred to the Labour Tribunal because both parties had different opinions on wage reduction. I do not have any information on this kind of cases at hand, I will provide more information to Mr LEE Cheuk-yan later. (Annex)

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

MISS CHAN YUEN-HAN (in Cantonese): Madam President, I wish to refer to Mr LEE Kai-ming's supplementary question again, because the Government has not given a clear answer. The Government pointed out that most of these 24 cases of wage reduction were imposed unilaterally by the employers. But the Government did not state clearly how it could ensure that the employees could be protected under existing legislation. Many of such cases were imposed unilaterally and the objective reality was that the employees signed an agreement upon coercion and compulsion. Hence they were unable to get any protection. I would like to ask the Government what is it prepared to do to fight against the current wave of wage reduction? I hope that the Government can give us a clear answer. Besides, in the Government's reply to the supplementary answer earlier, it was stated that if both parties reached an agreement on the issue of severance payment and agreed to use the former wages which were higher as a basis for calculation, then when the severance payment is to be made later, the higher wages will be used. But I know that many employers have already reduced the wages before they agree to anything. Could the Government give an answer to this supplementary question?

PRESIDENT (in Cantonese): Secretary for Education and Manpower.

SECRETARY FOR EDUCATION AND MANPOWER (in Cantonese): Madam President, when I answered Mr LEE Kai-ming's supplementary question earlier I had already answered Miss CHAN Yuen-han's supplementary question. First, on wage reduction proposals. I believe people would normally understand that these proposals are made by the employers and not by the employees. But how can we ensure that the interests of the employees are protected? Of course, the employer cannot enforce the wage reduction proposal at once if the employees do not agree to it, for it is not permitted. But if the dispute is referred to the Labour Department for conciliation, then both parties can at least discuss their problem. In fact, there have been cases in which both parties can reach a consensus. Such a consensus can be a temporary suspension of the wage reduction proposal, wage reduction for a period of time pending a review later, or wage reduction at a rate lower than that originally proposed. Or it could be, as I have said, a wage reduction, but as undertaken by the employer in the contract, should the need for layoff arise at some point in time in the future, the severance payment would use the former wages which are higher as the base for calculation. The above measures show that the Labour Department is trying its best to ensure as far as possible that the statutory and contractual rights of employees are protected. Madam President, I am sorry I have forgotten the second part of Miss CHAN's supplementary question.

MISS CHAN YUEN-HAN (in Cantonese): Madam President, I wish to add that despite the answer given, he has not actually answered my question. The Secretary now uses the expression "to ensure as far as possible", but the main reply says that the Labour Department "ensures that ..... the employees'" rights are protected. I would like to raise two points. Just now the Secretary said that there were actually some successful cases, but there were far more cases in which the employees' rights were not protected, for the employees had signed something and what they had signed could not be changed. They were at a dilemma because they would be dismissed if they did not put their names on it. So the legislation cannot provide any protection at all. The Secretary has answered a major part of the supplementary question, but he did not say anything on the question of what the Government could do if the employees' rights cannot be protected.

PRESIDENT (in Cantonese): Secretary for Education and Manpower.

SECRETARY FOR EDUCATION AND MANPOWER (in Cantonese): Madam President, I still fail to understand this supplementary question. If the employer proposes to reduce wages, the employee can choose to put his name on it or otherwise; he can accept it or reject it. If he makes a complaint to the Labour Department after he has accepted it, then what is he complaining of? Is he complaining of coercion and inducement, or does it involve the Employment Ordinance or does it involve a criminal offence? I can hardly add anything to this. I was only saying that if a complaint was received, the Labour Department would try its best to provide conciliation service, and would at least ensure that the rights of the employees under the employment contract or the Employment Ordinance would be protected, and would not be unilaterally forfeited by the employer.

PRESIDENT (in Cantonese): Honourable Members, I know that you may still have a lot to say on this question, but the time originally set for Question Time is already over. And as far as I know, the Panel on Manpower will discuss this tomorrow, that is, 24 September. Members may wish to follow this up in the meeting.

WRITTEN ANSWERS TO QUESTIONS

Applications for CSSA by New Arrivals from Mainland China

7. MRS SELINA CHOW (in Chinese): Regarding the applications for Comprehensive Social Security Assistance (CSSA) by persons from mainland China who have resided in Hong Kong for less than seven years, will the Government inform this Council:

(a) of the total number of such applications received by the Government over the past three years; and

(b) among such applications, whether the Government has discovered cases of obtaining CSSA by deception; if so, of the number of cases in which the applicants did not disclose their assets outside Hong Kong?

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

(a) The Social Welfare Department (SWD) started in July 1997 to collect information on the number of CSSA cases involving persons who have resided in Hong Kong for less than seven years. As at end August 1998, there were 20 100 cases of such nature.

(b) During the past three years, the SWD detected three CSSA fraud cases which involved recipients who had resided in Hong Kong for less than seven years. But none of these cases was related to non-disclosure of assets outside Hong Kong.

Security Services in Public Housing Estates

8. MR CHAN WING-CHAN (in Chinese): Regarding the security services provided by private security contractors on contract terms in public housing estates of the Housing Department, is the Government aware of:

(a) the total number of contractors currently providing such security services to the Housing Department;

(b) the total number of security guards employed by these contractors to provide security services in public housing estates, and the details of their terms of employment, including the following:

(i) the maximum and minimum hours of work per day;

(ii) the maximum and minimum hourly or monthly wage for security guards working on day shift and night shift respectively;

(iii) the number of days of leave as well as leave pay the security guards are entitled to, and the difference between their leave pay and their on-duty pay;

(c) whether the Housing Department has taken any measures to ensure that the security guards can enjoy their leave entitlement as provided for in their employment contracts, and what actions it will take against those contractors who have contravened labour legislation; and

(d) whether a minimum wage for security guards has been stipulated in the security service contracts signed between the Housing Department and the security contractors; if so, what the amount is; if not, whether consideration will be given to adding such a provision in the new contracts?

SECRETARY FOR HOUSING (in Chinese): Madam President, 12 contractors now provide security services to public housing estates, temporary housing areas and shopping centres managed by the Housing Authority.

These contractors employ a total of 4 800 security guards who are classified into five types, namely, Guard, Counter Guard, Special Guard, Supervisor and Controller. They work no longer than 12 hours in any 24-hour period. Most of them work in shifts, except for Counter Guards who work according to office hours.

The wages of day-time and night-time security guards are the same. Monthly wage levels vary with contracts, roughly as follows:

Employment contracts are drawn up in accordance with the Employment Ordinance. Provisions for holidays are as follows:

(a) one rest day in every period of seven days;

(b) statutory holidays (11 days in 1998 and 12 days in 1999) with pay if the employee has been employed for not less than three months; and

(c) seven days' annual leave with pay after serving every period of 12 months. An employee's entitlement to paid annual leave increases progressively to a maximum of 14 days according to length of service.

Holiday pay is given in accordance with the Employment Ordinance, that is, a sum equivalent to normal wages which an employee would have earned on a full working day.

An employer who fails to grant rest days to employees or compels them to work on rest days is liable to prosecution. However, under existing legislation an employee may work voluntarily on a rest day if agreed between the employer and the employee.

A contractor who has been convicted of any offence under the Employment Ordinance, including failure to observe the requirements concerning rest days, holidays and annual leave, will be debarred from tendering for a certain number of security services contracts of the Housing Authority, depending on the seriousness of the offence.

To improve the quality of security services, the Housing Authority has specified the wage levels for Special Guards and Supervisors in tender documents. For new contracts commencing between December 1998 and May 1999, the specified monthly wages for Special Guards and Supervisors are set at $6,700 and $7,200 respectively. These wages are reviewed every six months with reference to the nominal wage index.

Operation of the Protection of Wages On Insolvency Fund

9. MR CHAN KAM-LAM (in Chinese): With regard to the operation of the Protection of Wages on Insolvency Fund (the Fund) in the past year, will the Government inform this Council of:

(a) the number of applications for ex-gratia payments received from employees and, of these, the number of cases approved by the Fund;

(b) the main reasons for disapproving the applications for ex-gratia payments made by employees; and

(c) a breakdown of the different categories of applications which have been granted the statutory maximum ex-gratia payments by the Fund; and the percentage of these cases in the total number of successful applications for ex-gratia payments in each category?

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

(a) During the 1997-98 financial year, a total of 12 716 applications for ex-gratia payments were received by the Fund. During the same period, 11 274 applications were processed and of these, 10 141 applications were approved.

(b) There are two main reasons for not approving applications, that is, insufficient documentation or evidence to support the applications or the applicants were company directors who could have contributed to the insolvency of their companies.

(c) Under the Protection of Wages on Insolvency Ordinance (the Ordinance), an employee who is owed wages, wages in lieu of notice and severance payment by his insolvent employer may apply for ex-gratia payment from the Fund. At present, the statutory maximum coverage of the Fund is:

(i) wages on an employee for services rendered during the four-month period prior to the last day of service up to $36,000;

(ii) wages in lieu of notice up to one month's wages or $22,500, whichever is the less, and

(iii) severance payment up to $36,000, plus 50% of that part of the employee's entitlement to severance payment in excess of $36,000.

The breakdown of the number of applicants recovering their full entitlement, as allowable for their individual applications under the provisions of the Ordinance, in respect of arrears of wages, wages in lieu of notice and severance payment is as follows:

Type of ex-gratia payment	Total number of applications approved*	Number of applications recovering full entitlement	Percentage of total approved applications
Arrears of wages	8 987	8 376	93.20%
Wages in lieu of notice	8 097	7 871	97.21%
Severance payment	4 505	3 353	74.43%

Although most applicants receive the full entitlement, they still cannot receive the statutory maximum ex-gratia payment mainly because of their lower level of wages or insufficient period of service.

The breakdown of the different categories of applications which have been granted statutory maximum ex-gratia payments and the percentage in relation to the total number of approved applications for ex-gratia payments in each category is as follows:

Type of ex-gratia payment	Statutory maximum payments under the Fund	Total number of approved applications*	No. of approved applications receiving statutory maximum payment	Percentage of total number of approved applications
Arrears of wages	$36,000	8 987	628	7%
Wages in lieu of notice	$22,500	8 097	258	3.2%
Severance payment	$143,000 (1 April 97 to 30 September 97) $153,000 (1 October 97 to 31 March 98)	4 505	2 3	0.04% 0.06%

* Some applicants only apply for one or two types of ex-gratia payment. The number of applications for severance payment is much smaller because an employee with less than two years' service is not entitled to severance payment.

Takeover of Taxis by Creditors

10. MR ALBERT HO (in Chinese): It is learnt that quite a number of taxi owners have had their taxi licences and taxis taken over by creditors due to their inability to repay the mortgage loans in respect of their taxis. In this connection, will the Government inform this Council whether:

(a) it has estimated the number of taxis which will be taken over in the next three months and, among them, the respective numbers owned by taxi dealers and by individuals holding only one taxi licence;

(b) it has received any request for assistance from the taxi trade and its response; and

(c) it has estimated the impact of such takeovers by creditors on the taxi service?

SECRETARY FOR TRANSPORT (in Chinese): Madam President, the Administration does not have information on the estimated number of taxis which will be taken over by lending institutions in the next three months. The circumstances under which lending institutions would consider taking over the mortgagors' taxis are commercial decisions for individual institution.

Some taxi operators' associations have requested the Government's assistance in obtaining finance from banks and identifying measures to improve the operating environment of the taxi trade. In February 1998, the Hong Kong Monetary Authority discussed with the Finance Houses Association of Hong Kong and agreed to relax the loan-to-value ratio for taxi loans to end-users. Such relaxation should enable taxi owners to obtain finance from banks more easily. In addition, the Administration is pursuing the Transport Advisory Committee's recommendations arising from its recent Report on the Review of Taxi Licensing System to improve the taxi trade's operating environment, for example, relaxation of restricted zones for taxis to pick up and set down passengers wherever traffic conditions allow.

There is no information suggesting that the level and quality of taxi services has been negatively affected by the takeovers of some taxis by their creditors. Indeed, the results of the recent taxi surveys conducted by the Transport Department have indicated a lower passenger waiting time by about 30% for an urban taxi and 60% for a New Territories taxi. Also, the number of complaints received against taxis has been reduced from 1 850 in the first six months of 1997 by about 18% to 1 525 in the same period this year.

Purchase of "Ice" by Youngsters from the Mainland

11. MR ERIC LI (in Chinese): It is reported that as the prices of dangerous drugs on the Mainland is 20% to 30% lower than those in the territory, quite a large number of local youngsters go to the Mainland to purchase methylamphetamine (commonly known as "ice"). In this connection, will the Government inform this Council:

(a) of the quantity of the dangerous drug "ice" seized at various cross-border control points by the Customs and Excise Department in the past three years;

(b) whether the Customs and Excise Department will step up the interception measures at these control points; if so, what the details are; if not, why not; and

(c) whether it has estimated the number of local youngsters who frequently took "ice" in each of the past three years?

SECRETARY FOR SECURITY (in Chinese): Madam President,

(a) A total of 6.683 kg of "ice" were seized at various entry and exit control points by the Customs and Excise Department between 1995 and 1997. The breakdown is as follows:

Of the "ice" seized by the Department in the past three years, 3.636 kg were seized from incoming and outgoing passengers at the Lo Wu KCR Station, the Kowloon KCR Station and the Hong Kong-Macau Ferry Terminal while 3.047 kg were seized at the Hong Kong International Airport.

(b) In order to step up the interception of "ice" smuggled across the border, the Customs and Excise Department keeps close watch over the demand for "ice" in Hong Kong, the Mainland and neighbouring countries and, based on the information gathered, conducts selective inspections of vehicles, goods and passengers at various control points, including the Lok Ma Chau Terminal, the Man Kam To Terminal, the Sha Tau Kok Terminal, the Lo Wu KCR Station, the Kowloon KCR Station, the Hong Kong-Macau Ferry Terminal, the China Ferry Terminal and the Hong Kong International Airport. Close liaison is also maintained with the relevant law enforcement authorities in the Mainland for the exchange of intelligence on "ice" trafficking activities and trends. Information so obtained is disseminated to front-line law enforcement officers at various control points to help step up their interception work.

(c) The Government monitors changes in trends and characteristics of the local drug abuser population through the Central Registry of Drug Abuse. The number of youngsters (aged under 21) reported in the past three years to the Central Registry of Drug Abuse to have abused "ice" is as follows:

Shortage of Parking Spaces for Light Buses

12. MRS MIRIAM LAU (in Chinese): In the Parking Demand Study Report published by the Government in December 1995, it was pointed out that there was a total deficit of 5 200 parking spaces for public and private light buses. In this connection, will the Government inform this Council of the measures that have been taken by the Government to resolve the shortage of parking spaces for light buses, since the publication of the report?

SECRETARY FOR TRANSPORT (in Chinese): Madam President, since December 1995, the Government has been actively pursuing the increase in the supply of parking spaces for public and private light buses on two fronts.

Firstly, we have increased the number of parking spaces specifically designated for parking by Public Light Buses by 500.

Secondly, there has also been an increase in off-street parking facilities which, though not specifically designated for public and private light buses, may be used for parking by light buses. The area of short-term tenancy sites let out to commercial car park operators which permits parking by vehicles including light buses has been increased by 152 000 sq m. This is equal to about 4 800 parking spaces if they are all used up by light buses. The number of on-street parking spaces which can be used for parking by vehicles including light buses has also been increased by 100.

Meanwhile, there are indications that the shortfall situation is easing off. For example, according to a recent Transport Department survey, about 190 000 sq m of parking spaces in commercial car parks on short-term tenancy sites alone, which permit parking by vehicles including light buses, are vacant at night. These vacant spaces can theoretically accommodate up to 6 000 light buses. The number of registered light buses has also slightly declined from 6 750 in 1995 to 6 560 in June 1998.

Leasing of Public Flatted Factory Buildings

13. MRS SOPHIE LEUNG (in Chinese): Regarding the leasing of public flatted factory buildings, will the Government inform this Council whether it knows:

(a) the gross floor areas and occupancy rates of these factory buildings respectively in each of the past three years;

(b) the major types of trades in which the tenants are engaged at present; and the number of enterprises among them with less than 50 employees each;

(c) the existing criteria for determining the level of rents of these factory buildings and the changes in rents per sq m in the past three years; and

(d) whether there were any cases in which the tenants terminated their tenancies due to rent increases in the past three years; if so, the percentage of such tenants who have terminated their tenancies in the total number of tenants?

SECRETARY FOR HOUSING (in Chinese): Madam President, there are 15 public flatted factory estates. Their total internal floor area (IFA) and letting rates in the past three years are:

All factory tenants must operate trades approved by the Housing Authority (HA), and a large variety of trades is operated by these factories. The HA does not keep a record of the number of workers employed by each factory tenant. However, the trades permitted in these factories, together with the range of their sizes, suggest that the industrial activities are of a small scale.

There are two rental levels for the flatted factories. About 48% of tenants, whose tenancies were acquired before 1 September 1974, are paying scheduled rents. Because of low initial rent levels, scheduled rents are still below market rents despite the increase of 25% every two years since 1977. (A comparison is shown at Annex.)

The remaining 52% of factory tenants pay market rents. Factors such as location, design, ceiling height and permitted floor loading are taken into account in determining rent levels. Rents are normally reviewed at three year intervals upon tenancy renewal. In line with rent re-assessment measures recently introduced by the HA for commercial premises, tenants with tenancies commencing or renewed between 1 January 1996 and 31 January 1998 may apply for re-assessment of rent payable from 1 July 1998 for the residual period of existing tenancies.

Since rents for flatted factories vary with a number of factors, it is difficult to provide details on changes in rents per sq m for all factories in the past three years. However, factories let at market rents have had their rents decreased upon tenancy renewal over the past three years, as follows:

The number of tenants terminating their tenancies in the past three years is as follows:

The HA has no knowledge of the reasons why tenants surrender tenancies. Since scheduled rents are low, and many tenants paying market rents have enjoyed rent reduction in the past three years, it is believed that few tenants surrender tenancies because of rent increases.

Annex

Comparison of Scheduled Rents for HA's Flatted Factories
With Market Rents in the Private Sector
(Position as at August 1998)

Estate	Scheduled Rent (HK$ per sq m per month)	Market Rent (HK$ per sq m per month)
Hong Kong Island
Chai Wan Factory	25-41	54-113
Kowloon
Cheung Sha Wan Factory	21-59	52-127
Jordan Valley Factory	24-39	48-102
Kwun Tong Factory	27-59	41-109
San Po Kong Factory	27-59	46-114
New Territories
Kwai Chung Factory	26-56	32-89
Tai Wo Hau Factory	25-56	38-96

Charge of Rates on Advertising Station on External Walls of Buildings

14. MR HOWARD YOUNG (in Chinese): It is learnt that the Government is currently charging rates on advertising stations on the external walls of buildings. In this connection, will the Government inform this Council:

(a) whether it has consulted the advertising industry before formulating the policy to charge rates on such advertising stations;

(b) of the criteria adopted by the Government, in implementing the policy, for determining the advertising stations that are liable to be charged rates;

(c) of the rates percentage charge concerned and the basis on which such a percentage charge is determined; and

(d) of the avenues for those affected to lodge appeals against this policy as well as the amounts of the assessed rates?

SECRETARY FOR THE TREASURY (in Chinese): Madam President, under the Rating Ordinance, any tenement which is capable of being held or occupied as a distinct or separate holding is generally speaking liable to rates. This includes any structure, hoarding, frame, post or external wall of buildings which is let out or reserved for display of advertisements.

(a) Advertising stations/signs on the external walls of buildings have always been rateable tenements. As the authority for such assessment is set out in section 9 of the Rating Ordinance, there is no new policy on the charging of rates on such stations/signs, and no need to consult the advertising industry on this.

(b) Rates on advertising stations/signs on the external walls of buildings are charged based on their rateable values which are the estimated annual rental value of such stations/signs at a designated valuation reference date. Advertising stations/signs are assessed either as separate tenements or their rateable values are included in the rateable values of the tenements with which they are connected.

(c) The overall rates percentage charge of 4.5% for 1998-99 applies to all rateable tenements, including advertising stations/signs on the external walls of buildings. The percentage charge is determined by resolution of this Council.

(d) According to the Rating Ordinance, a ratepayer who is not satisfied with the assessment of rateable value may lodge an objection with the Commissioner of Rating and Valuation within 28 days of the Notice of Interim Valuation or during April and May each year. The ratepayer may further appeal to the Lands Tribunal if he is not satisfied with the Commissioner's decision in respect of his objection.

Staffing Changes of the Water Supplies Department

15. DR RAYMOND HO (in Chinese): In view of the fact that the Director of Water Supplies and four of the five Assistant Directors of the Department will retire in succession next year, will the Government inform this Council of the measures in place to ensure that the contingency-handling capability and the performance of the Department will not be affected by these staffing changes?

SECRETARY FOR WORKS (in Chinese): Madam President, the Administration attaches great importance to directorate succession in the Civil Service. Heads of Departments draw up directorate succession plans annually, which form the basis of discussion with relevant Bureau Secretaries and the Secretary for the Civil Service to examine succession arrangements in detail. Senior officers' retirement plans are always taken into account in succession planning. The Secretary for the Civil Service also reviews the situation six-monthly to monitor progress.

Procedures for the selection of officers to fill vacancies in the Water Supplies Department arising from retirement will be initiated at an appropriate juncture. There is a pool of experienced and qualified officers eligible for consideration for directorate posting. Also, a sound system of management and operation that has been established over the years will ensure the continued high standards of performance and contingency-handling capability of the Department. We are confident that timely succession arrangements will be made to minimize the effect of staffing changes.

Recruitment of Native-speaking English Teachers

16. DR DAVID LI: The Chief Executive announced in his policy address last year that each public sector secondary school would be provided with one additional native-speaking English teacher (NET) to enhance English Language teaching. Recently, the Education Department (ED) admitted that many schools would be short of such teachers, at least for several months; because of the fact that a quarter of the job offers had been turned down by overseas recruits. In this connection, will the Government inform this Council:

(a) whether it knows the reasons why the offers were turned down; and

(b) how the ED will assist the schools in recruiting NETs?

SECRETARY FOR EDUCATION AND MANPOWER: Madam President,

(a) Qualified NETs may not accept our offer of appointment for a variety of personal reasons. As we do not require an explanation from them for turning down our offer, we do not have sufficient information to draw any conclusion.

(b) The ED has conducted a comprehensive survey to determine which schools required assistance in recruiting NETs for the coming school term in 1999 and/or the 1999-2000 school year. Based on the school's responses, a second round recruitment exercise has been launched.

The advertisement on the vacancies is accessible on the Internet via the ED's homepage. A series of job advertisements have been placed in major newspapers locally and overseas in mid-September (in Australia and New Zealand in particular, as the beginning of Hong Kong's next school term coincides with the beginning of the new school year in these two countries). The Australian and New Zealand Consulates and Chambers of Commerce have also been notified and have been requested to assist in disseminating information on the NET vacancies. The application deadline is 1 October 1998.

A dedicated team of Education Officers will be processing the applications. Recruitment teams will be interviewing candidates in Hong Kong, Australia and New Zealand. Successful candidates will then be assigned to schools.

For schools choosing to recruit NETs directly, the ED will continue to provide recruitment subsidies. A school is entitled to be reimbursed for up to $8,000 for recruitment expenses per NET recruited.

We will launch the third round of recruitment worldwide towards the end of this school year to fill positions for September 1999.

New Quarantine Measures for Poultry and Pigs

17. DR LEONG CHE-HUNG: Regarding the new quarantine measures on import and slaughter of poultry and pigs for local consumption, will the Government inform this Council of:

(a) the respective numbers of tests conducted on local and imported poultry since the introduction of new quarantine measures; among them, the respective numbers found positive for avian flu virus;

(b) the respective numbers of tests conducted on local and imported pigs since the introduction of new quarantine measures; among them, the respective numbers found positive for the asthma drug, Clenbuterol;

(c) the prohibitive measures and penalty on pig feed suppliers for supplying pig feed with the asthma drug, Clenbuterol; and

(d) the manpower and financial resources for enforcing the new quarantine measures for poultry and pigs respectively?

SECRETARY FOR ECONOMIC SERVICES: Madam President,

(a) As at 16 September 1998, 6 060 tests and 157 600 tests were conducted on local and imported live birds respectively since the introduction of the respective quarantine measures on 7 February 1998. So far, no case of H5 influenza disease was detected;

(b) As at 16 September 1998, 2 422 and 801 urine tests were conducted on local and imported live pigs respectively since the introduction of the respective quarantine measures on 8 August 1998. Of these tests, 36 tests on local pig samples and six tests on imported pig samples were found positive for Clenbuterol;

(c) Clenbuterol is not a registered drug under the Pharmacy and Poisons Regulations. It is an offence to sell, offer for sale or distribute or possess for the purpose of sale, distribution or other use any unregistered drug under section 36(1) of the Regulations. Any person guilty of such an offence is liable on conviction to a fine of $100,000 and to imprisonment for two years. The Department of Health, with the assistance from the Agriculture and Fisheries Department, have raided feed suppliers suspected of supplying animal feed containing Clenbuterol and taken animal feed samples for testing. Legal opinion is being sought for prosecution under the Pharmacy and Poisons Ordinance (Cap. 138); and

(d) The implementation of the quarantine measures for live birds involves creation of 42 additional posts at a cost of $12.4 million and operational expenses of $700,000 for a full year.

The quarantine measures for live pigs is now largely implemented with existing manpower and financial resources. We will review the need for additional resources towards the end of the year.

Review of Advisory and Statutory Bodies

18. MISS CHRISTINE LOH: In early 1997, a subcommittee of the Panel on Home Affairs of the former Legislative Council compiled a report entitled "Review of Advisory and Statutory Bodies" and recommended, among other things, a more transparent system of boards and committees, which the Government agreed to pursue then. In this connection, will the Government inform this Council of the action which it has taken so far to:

(a) encourage these bodies to hold open meetings; and

(b) provide greater transparency in making appointments of members to such bodies?

SECRETARY FOR HOME AFFAIRS: Madam President, in response to the recommendations made by a subcommittee of the Panel on Home Affairs of the former Legislative Council on the transparency of our system of advisory and statutory bodies, the Government has undertaken to adopt a number of specific measures to further enhance the transparency of these bodies and has reported to the Panel on Home Affairs on 20 June 1997 on its undertaking. These measures include:

(i) all policy bureaux to keep and update relevant information on the composition, background of members, functions and transparency measures of the advisory and statutory bodies under their respective purview and to make available such information to the public upon request, provided that such disclosure will not infringe upon the concerned individual's privacy and will not breach the data protection principles enshrined in the Personal Data (Privacy) Ordinance;

(ii) to redesign the curriculum vitae form for members of these bodies to enable, where appropriate, disclosure of their background information, such as their profession and record of public services, without breaching the Personal Data (Privacy) Ordinance;

(iii) to upload the Civil and Miscellaneous Lists, which contain information on the membership and terms of reference of these bodies, onto the Internet, subject to technical and financial feasibility; and

(iv) to continue to encourage these bodies to adopt further transparency measures as far as possible, including opening up their meetings, taking account of their own functions and nature of business.

All policy bureaux have been advised to implement the above measures since June last year and good progress has been made so far. Details are provided below.

All policy bureaux are now maintaining relevant and updated information on the membership of the advisory and statutory bodies under their purview and will disclose relevant information to the public upon request, in accordance with the Code on Access to Information. We have also redesigned the curriculum vitae form to enable disclosure of the background information of members of these bodies without breaching the Personal Data (Privacy) Ordinance.

While the present practice of announcing appointments and reappointments of the members of these bodies by way of a press release and/or gazette notice will be maintained, we will upload the new edition of Civil and Miscellaneous Lists onto the Internet by early next year, once compilation work is completed. This will be followed by updating of the relevant information on a regular basis.

According to the latest information, 175 (out of a total of around 360) of the advisory and statutory bodies now conduct open meetings to allow public attendance. However, whether a particular advisory and statutory body should hold open meetings depends largely on the particular needs, nature of business and functions of the body concerned. It would not be appropriate to require those bodies which may deal with classified and commercially sensitive information as well as personal data to open up meetings. Moreover, some of these bodies are prohibited by the relevant legislation to disclose certain information. However, most of these bodies will issue press releases and/or hold press briefings after their meetings to inform the public of their work and to answer enquiries on those issues which are of public concern.

When making appointments to advisory and statutory bodies, the Government's overriding objective is to ensure that the best individuals capable of meeting the specific requirements of the bodies concerned are appointed. Appointments are made on the basis of the merits of the individuals concerned, taking account of their personal ability, expertise, experience, integrity, commitment to public service and their overall suitability for appointment. However, we have reservations on making the appointment process, which includes the process of consideration and selection of suitable individuals, more transparent than it is now since personal information of the individuals concerned is involved. Premature disclosure of such data will cause embarrassment to those being considered and may affect the availability of the most suitable individuals for appointment. In view of the above considerations, the Government has not committed itself in the above-mentioned report to adopt any measure to radically change the present appointment process.

We are firmly committed to further enhancing the openness of government advisory and statutory bodies as far as possible and will continue to do so in the public interest.

Provision of Special Education

19. MR CHEUNG MAN-KWONG (in Chinese): With regard to the placement referral and the planning of places in various kinds of special schools, will the Government inform this Council of the following:

(a) the number of school children registered with the Education Department (ED) for placement in various kinds of special schools through its referral in each of the past three school years; the respective numbers of school children who were successfully referred and placed by the ED according to their needs in special schools, schools for social development, practical schools and skills opportunity schools;

(b) the respective numbers of places available for male and female students, the respective numbers of male and female students already placed, and of boys and girls waiting for placement in each of the schools for social development (including primary and secondary schools); whether the Administration has any plan to review the adequacy of such places for boys and girls; and

(c) the technical subjects currently offered in schools for social development which are eligible for subject grants; and the criteria that are adopted to determine their eligibility for such grants?

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

(a) In 1995-96, 1996-97 and 1997-98 school years, the Education Department (ED) received 5 312, 5 489 and 6 548 registered cases of school children with special educational needs respectively. After assessment, 2 033, 2 426 and 2 873 students were referred to various types of special schools, schools for social development, practical schools and skills opportunity schools for placement. Details are as follows:

Number of school children referred
Types of schools	1995-96	1996-97	1997-98
Special schools for mildly mentally handicapped children	350	313	327
Special schools for moderately mentally handicapped children	215	224	257
Special schools for severely mentally handicapped children	68	77	119
Special schools for physically handicapped children	86	92	106
Special schools for hearing impaired children	50	59	45
Special schools for visually impaired children	23	34	20
Schools for social development	464	597	695
Practical schools	496	662	978
Skills opportunity schools	281	368	326
Total:	2 033	2 426	2 873

Apart from a handful of students who, after assessment, did not require referral to any special educational services, the rest were referred to other types of special educational services, including audiological and speech/language training, psychological support, and so on.

(b) As at 14 September 1998, a total of 945 school places are provided by the seven schools for social development, comprising 735 places in boys' schools and 210 places in girls' schools. The number of students admitted to boys' and girls' schools are 418 and 145 respectively. Together with the 26 cases being processed by the central referral system, there are 92 students waiting for admission to schools for social development, amongst whom 47 are boys and 45 are girls. Details are as follows:

Name of school	Capacity	Number of students admitted	Number of students waiting for admission (Note 1)
Boys' schools
Hong Kong Juvenile Care Centre	135	79	10
Chan Nam Cheong Memorial School
The Society of Boys' Centres ─	270	138	8
Chak Yan Centre School
The Society of Boys' Centres ─	150	95	19
Hui Chung Sing Memorial School
The Society of Boys' Centres ─	105	72	1
Shing Tak Centre School
Tung Wan Mok Law Shui Wah School	75	34	4
Sub-total:	735	418	42
Name of school	Places available	Number of students admitted	Number of students waiting for placement (Note 1)
Girls' schools
Marycove School	105	71	3
Pelletier School	105	74	21
Sub-total:	210	145	24
Total:	945	563	66 (Note 2)

Note 1:	Admission is being processed by the schools concerned, such as obtaining parents' consent for placement.
Note 2:	Cases involving five boys and 21 girls are still being processed by the central referral system. They will be referred to relevant schools for social development in due course.

There are at present vacancies in schools for social development. As admission is conducted throughout the school year, it is anticipated that student intake will increase, which may result in school places in girls' schools becoming slightly over-subscribed. The ED has already made arrangements to increase the provision of school places in girls' schools by constructing additional classrooms through the School Improvement Programme. Construction work is expected to be completed in the year 2000. Furthermore, the Department is considering ways of utilizing existing resources more effectively, such as exploring the feasibility of admitting girls in boys' schools. The Department will also encourage and assist schools for social development to publicize and promote the services provided in order to enhance the understanding of parents and the community towards these schools.

(c) Practical/technical subjects offered in schools for social development include Design and Technology, Electrical Studies, Home Economics, Commerce, Computer Studies, Automobile Repairs, Technical Drawing, Fashion and Clothing, and so on. Subject grant is provided for the subjects of Design and Technology as well as Home Economics. In general, the payment of subject grant is governed by the following criteria:

(1) schools need to purchase a large amount of consumable items for students taking these subjects; and

(2) schools need to assist students in preparing the project work required for sitting the Hong Kong Certificate of Education Examination and the Hong Kong Advanced Level Examination.

Emergency Medical Services at the New Airport

20. MR LEE KAI-MING (in Chinese): It is reported that a passenger suffered a heart attack on a plane when it landed at the new airport at Chek Lap Kok, but the ambulance arrived at the scene only 20 minutes after receiving the emergency call. In this connection, will the Government inform this Council:

(a) why the ambulance failed to arrive at the scene within the target travel time of 10 minutes, as set down in the Performance Pledge of the Fire Services Department; and

(b) whether it has any plan to set up a first aid station in the restricted area of the airport; if so, when such a station will be set up; if not, why not?

SECRETARY FOR SECURITY (in Chinese): Madam President,

(a) It is not true that in the case referred to by the Honourable LEE Kai-ming, the ambulance failed to arrive at the scene within the target travel time of 10 minutes, as set out in the performance pledge of the Fire Services Department (FSD). The Emergency Ambulance Service of the FSD pledges to meet 92.5% of emergency calls within a travel time of 10 minutes. Travel time measures the interval between the despatch of an ambulance and its arrival at the street level of the scene. In the case of the airport, street level represents the emergency vehicle assembly point to the apron area (that is, Gate House No. 2) or the Passenger Terminal Building (PTB) (that is, departures kerb at Level 8 or emergency access at Level 3).

On 11 August 1998, the Fire Services Communications Centre (FSCC) of the FSD received an emergency call from an air passenger that another passenger on board an aircraft taxiing in the apron of the airport was suffering from heart disease. An ambulance from the Chek Lap Kok (CLK) Fire Station was despatched at 10.57 am and arrived at the apron gate in a travel time of four minutes at 11.01 am.

The ambulance was guided to the designated parking stand and reached the patient on board the aircraft at 11.09 am. The ambulance crew immediately provided initial treatment to the patient and stabilized his condition before he was conveyed to hospital. There was no delay in the provision of emergency service to the patient.

Subsequent to this incident the FSD and the Airport Authority (AA) have reviewed and further refined the arrangements; at the same time airlines have been reminded that if a passenger is taken ill on board an inbound flight, the flight crew should notify the airport before landing so that an ambulance can be standing-by on arrival of the aircraft at its parking stand.

(b) Emergency ambulance service for the international airport or the CLK Island is provided by the CLK Fire Station (location as indicated in the sketch map attached). Under normal circumstances, an ambulance from the Fire Station can reach the airfield or the PTB within a four-minute travel time, and it takes another three to five minutes for the ambulance crew to reach a patient within the PTB or on board an aircraft parking in the apron. The FSD has undertaken to station at least two ambulances at the CLK Fire Station at any time to serve airport users or passengers. Such a level of service provision is considered adequate, given that an ambulance of the CLK Fire Station currently handles less than four emergency calls a day, whereas ambulances in other areas are each responding to nine calls daily.

The attached sketch map indicates that the CLK Fire Station is located fairly close to the airport operational area, allowing direct and easy access to the different facilities, including the PTB, the apron area and other major service providers.

As the emergency ambulance service for air passengers or other airport users is considered adequate, the Administration has no plan to set up an additional ambulance depot in the airport restricted area at this stage. Moreover, first-aid services may also be obtained from two private medical clinics within and outside the airport restricted area. The FSD will nevertheless keep the situation under review.

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BILL

First Reading of Bill

PRESIDENT (in Cantonese): Bill: First Reading.

SECURITIES (INSIDER DEALING) (AMENDMENT) BILL 1998

CLERK (in Cantonese): Securities (Insider Dealing) (Amendment) 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 Financial Services.

SECURITIES (INSIDER DEALING) (AMENDMENT) BILL 1998

SECRETARY FOR FINANCIAL SERVICES (in Cantonese): Madam President, I move the Second Reading of the Securities (Insider Dealing) Bill 1998.

The object of the Bill is to amend the definition of "judge" in the Securities (Insider Dealing) Ordinance. At present, "judge" in the Ordinance includes a judge or former judge of the Court of First Instance. In the Bill, the term is extended to include a deputy judge of the Court of First Instance to enlarge the scope of candidates qualified for appointment as chairman of the Insider Dealing Tribunal.

The Securities (Insider Dealing) Ordinance came into force in 1991. The Ordinance laid down provisions for insider dealing relating to listed companies, including the setting up of an Insider Dealing Tribunal. Since its first inquiry in 1994, the Tribunal has so far completed eight inquiries, seven of which have been established to be insider dealings. Those persons involved in such insider dealings were suitably penalized. This resulted in sufficient deterrent effect in the combat against insider dealings and the purpose of the Ordinance is achieved.

As the local securities market continues to develop, products have become more diversified. As a result we can expect an increase in the number of insider dealings of an increasingly complex nature. To cope with the increasing workload of the Tribunal and to ensure its work is not disrupted, an expansion of the scope of candidates qualified for appointment as chairman of the Insider Dealing Tribunal brooks no delay.

The effective operation of the Tribunal is conducive to maintaining fairness in the operation of our securities market. If we fail to expeditiously deal with inquiries into suspected insider dealings, the market would wrongly interpret that the Hong Kong Special Administrative Region Government attaches little importance to the fight against insider dealing activities. This would seriously tarnish our international image.

We believe that allowing a deputy judge of the Court of First Instance to be appointed chairman of the Insider Dealing Tribunal, as proposed in the Bill, we can ensure there are a sufficient number of qualified candidates. We also believe the proposal will not affect the quality of work of the Tribunal in dealing with cases before it. We have explained clearly in the brief to Members that a provision in the Supreme Court Ordinance states: "Subject to the terms of his appointment, a deputy judge shall have and may exercise all the jurisdiction, powers and privileges and shall have and perform all the duties of a judge of the Court of First Instance ......". Therefore we have never doubted the ability of deputy judges of the Court of First Instance in dealing with the work of the Tribunal.

From discussions of the Panel on Financial Affairs, I understand some Members expressed concern about the question of possible conflict of interest in appointing senior solicitors in private practice as deputy judges of the Court of First Instance. Deputy judges of the Court of First Instance are appointed by the Chief Justice of the Court of Final Appeal, who we trust will give due consideration to the suitability of the candidates for appointment. In addition, a guideline which is issued by the Judiciary on the appointment of temporary officers to the Supreme Court is also applicable to the deputy judges of the Court of First Instance. The guideline requires that the relevant judicial officers be bound by the common law principle of judicial impartiality. So, in the listing of cases, the Judiciary will take great care to avoid appointing a deputy judge to deal with those cases with an obvious possibility for a conflict of interest. Factors to be considered include: Whether the case involves financial interests of the deputy judge or his or her relatives; or the comments, decisions or cases being dealt with; or whether the deputy judge or his or her partner has previously represented a party to the proceedings, or whether any person in connection with the case has any personal, family or employment relationship with the deputy judge that will bias the decision. We will be issuing a similar guideline to the deputy judges of the Court of First Instance appointed to be chairman of the Tribunal to ensure cases are tried in accordance with the principle of judicial impartiality. Hence we trust these measures will effectively deal with the problem of conflict of interest.

I urge Members to support the Bill.

PRESIDENT (in Cantonese): I now propose the question to you and that is: That the Securities (Insider Dealing) (Amendment) Bill 1998 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, and another five minutes to speak on the amendments. The movers of amendments will each have up to 10 minutes to speak. 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: Relationship between the executive authorities and the legislature. Mr Ambrose CHEUNG.

RELATIONSHIP BETWEEN THE EXECUTIVE AUTHORITIES AND THE LEGISLATURE

MR AMBROSE CHEUNG (in Cantonese): Madam President, I move the motion which has been printed on the Agenda.

I think the people of Hong Kong have been paying great attention to the relationship between the executive authorities and the legislature over the past four months. As reported by yesterday's newspapers, the relationship has also become a focus of attention among foreign political groups and think-tanks when our representatives visited the foreign countries. The relationship is indeed tense, evident from the three instances below.

The first instance relates to the interpretation of the Basic Law by the executive authorities and the legislature, both of which have different interpretations in a number of areas, including the Rules of Procedure and even the proceedings of judicial reviews. The second relates to the financial turmoil and economic issues. There have been differences between the executive authorities and the legislature in terms of the manner in which they have handled the respective problems, the decision-making mechanism, as well as the proposals made in relation to the problems. The Government did not consult the Legislative Council beforehand; nor did it give us the opportunity to participate in the matter, great differences between the Government and Members have thus arisen. The third relates to the two Municipal Councils. There are differences between the executive authorities and the legislature as to the "scrapping", dissolution or re-organization of the councils.

These instances show that our relationship really needs to be improved. To improve the relationship, we must first find out the causes of the problem, and why there are conflicts. I think we can narrow it down to two reasons: first, a structural problem arising from the constitution; and second, possibly a mentality problem which is existing in the executive authorities and the legislature.

Let me first talk about the constitutional aspect. I think it has been stipulated clearly in the Basic Law. As early as during its drafting stage, the Basic Law has established the separation of the three powers, whereby the power for an executive-led government would be handed over to the executive authorities in a well-protected manner while the power of the Legislative Council would be limited by a number of terms and conditions, thus rendering the executive authorities, though not popularly elected, a body with real power. On the other hand, the Legislative Council, though popularly elected, would become a body without real power. It can only monitor the Government and exercise checks and balances in a passive manner. Such a structure will certainly create conflicts. The Basic Law does not provide for any way to cope with this state of affairs. This is in a way a good point, for in the absence of a specified resolution, the Government can take the initiative to devise a mechanism to co-ordinate, to communicate with the relevant parties in dealing with the issue.

In addition to the constitutional factor, there is the issue of mentality within the Government and the Legislative Council. Various problems that arose in the past year may mean setbacks for the Government in terms of its credibility and performance. The Government appears to have lost confidence. On the economic front, we, the six parties, one frontier and one group, appear to have scared the Government as we negotiate with the Government on ways to stimulate the economy. The Government is wondering whether we want to press for more power. Gradually, it is having less and less trust in the Legislative Council to the extent that it has even become suspicious of us. Affected by such kind of mentality, the Government has chosen to use the Basic Law to protect its executive-led position, thus giving rise to a number of confrontations and conflicts.

In my opinion, since the Government is not an elected one, it should co-operate with the Legislative Council if it is to gain credibility and performance. Support from the Legislative Council, which has a sound opinion base, would be enormously helpful either directly or indirectly to the Government as it strives to improve its credibility and performance.

Having analysed these two reasons, let us now see how the relationship can be improved. I have mentioned three proposals in my motion, with examples for each. Honourable Members may like only one of the proposals but not the rest. That does not matter, since I am just trying to give some examples.

My first point is that the Government must strengthen its cast of administrators, oriented towards political appointment. I think the system of administrative officers and executive officers ─ a system of civil servants ─ has numerous merits and we should retain such merits. However, I also find the affairs Hong Kong has to deal with have become increasingly professional. Many issues are rather technical and to tackle them we had better turn to experts, whom we should recruit as supplement to our system of administrative officers. One may coin this a ministerial system or cabinet with Hong Kong characteristics, but the point is we should advance in this direction. The Government should form a politically appointed cabinet which has its ministers or members coming basically from the following sources: first, existing principal officials and secretaries; second, members of the Executive Council who have turned full-time and become cabinet ministers; and third, experts enlisted from outside as cabinet ministers.

Some civil servants have told me that this is equivalent to "sacking" them. That is not so. The arrangement is meant to actually elevate our principal officials to a state of political appointment where their responsibility and accountability are commensurate with their authority. I do not think the term of office should be fixed, but as their appointments are made by the Chief Executive, the officials must be responsible to the Chief Executive. If an official succeeds in launching and implementing a policy, he or she should continue to be vested with the power and responsibility; otherwise he or she should be dismissed. As such, it is in effect an upgrading of the incumbent government officials to a new level. One may even say that would amount to a "raise" for them. Compared with the market, I think what the politically appointed officials will be receiving are "a raise", not "the sack".

I think this is step one. As we gradually move to step two, that is, when the Legislative Council and the Chief Executive are both returned by universal suffrage, step one will be transformed to a new stage in which a ministerial system will be transformed into a new system under which the Legislative Council and a Chief Executive together with his cabinet will both be returned by direct elections.

In addition to a ministerial system, I would like to put forward two suggestions for a mechanism for co-operation. I would call the first of these a co-ordination committee between the executive authorities and the legislature. It is not really a committee but a meeting, a co-ordination meeting held to effect co-ordination on major decisions and policies. It is not a system but an arrangement with flexibility. For example, when economic or financial problems arise, the executive authorities and the legislature could expeditiously discuss the possible solutions or measures to cope with the situation if we have in place such a meeting.

The co-ordination meeting is not a super-legislature. As far as administration is concerned, the initiative remains in the hands of the Chief Executive and the Government. If discussions are required, the Chief Executive may make a decision to convene the meeting. However, this initiative does not rest with the Legislative Council, which in its present form, consists of Members affiliated to various political parties and returned through different means. We do not have a single leader to facilitate one-to-one dialogue to represent the views of the Legislative Council. So, in the co-ordination meeting, we come in a unit consisting of the six political parties, one frontier and one group, plus the independent Members, which may then join in with the Chief Executive and the senior government officials to discuss major issues and policies. This is my proposed mechanism. Is the co-ordination meeting a super-legislature? No, it is not. It would be one if Legislative Council Members became Members of the Executive Council. My proposed mechanism will indeed prevent the formation of a super-legislature.

My other suggestion is to set up a policy consultative committee. This is a real committee. Let us take financial affairs and economic services as examples. We now have four panels dealing with matters in this respect. We have indeed agreed upon an arrangement whereby the ambit of the Panel on Financial Affairs would be slightly broadened to facilitate discussions. This idea is rather close to the direction I have proposed. When major policy decisions are required, I think the Government should adopt an accommodating attitude to allow us to take part in the planning, discussion, consultation and even formulation stages through the policy consultative committee. Although it is the Government that has the final say, we would at least be allowed sufficient participation in the entire process of policy formulation. This is what real communication should be like.

With these proposals, Madam President, I think the ball is now in the Government's court. It should have faith, and discuss with the Legislative Council in a sincere and co-operative manner. I hope the Government can set aside its suspicions and put more trust in the Legislative Council. We see no need to confront the Government, but quite on the contrary, we do want to co-operate with the Government to help it perform better.

Madam President, I so submit.

Mr Ambrose CHEUNG moved the following motion:

"That this Council urges the Government to actively improve the relationship between the executive authorities and the legislature by faithfully adhering to the principle of the executive authorities being accountable to the legislature on the constitutional basis of the Basic Law, enhancing communication and co-operation between the executive authorities and the legislature to foster mutual trust and partnership, and expeditiously instituting a co-operation mechanism for improving the relationship between the two, which should include holding regular executive-legislature co-ordination meetings; setting up a policy consultative committee system to enable the legislature to participate in policy discussion and formulation; as well as strengthening the decision-making structure of the executive authorities, including enlisting outside experts to serve as principal officials and making political appointments of principal officials, so that the officials concerned will assume the political responsibility and accountability commensurate with their authority."

PRESIDENT (in Cantonese): I now propose the question to you and that is: That this Council urges the Government to actively improve the relationship between the executive authorities and the legislature by faithfully adhering to the principle of the executive authorities being accountable to the legislature on the constitutional basis of the Basic Law, enhancing communication and co-operation between the executive authorities and the legislature to foster mutual trust and partnership, and expeditiously instituting a co-operation mechanism for improving the relationship between the two, which should include holding regular executive-legislature co-ordination meetings; setting up a policy consultative committee system to enable the legislature to participate in policy discussion and formulation; as well as strengthening the decision-making structure of the executive authorities, including enlisting outside experts to serve as principal officials and making political appointments of principal officials, so that the officials concerned will assume the political responsibility and accountability commensurate with their authority.

Members have been informed by circular on 18 July that Mr LEE Cheuk-yan and Mr Gary CHENG have separately given notice to move amendments to this motion. Their amendments have been printed on the Agenda. In accordance with the Rules of Procedure, the motion and the two amendments will now be debated together in a joint debate.

In accordance with Rule 34(5) of the Rules of Procedure, I will call upon Mr LEE Cheuk-yan to speak first, to be followed by Mr Gary CHENG; but no amendments are to be moved at this stage. Members may express their views on the motion and the amendments. Mr LEE Cheuk-yan.

MR LEE CHEUK-YAN (in Cantonese): Thank you, Madam President. Recently, the relationship between the executive authorities and the legislature has been tense and the Government has exhausted every means to pressurize the Legislative Council by means of its "executive hegemony". The root of all this is, I think, the Basic Law cooked up single-handedly by the Chinese Government. The Basic Law has made for us an abnormal, lopsided and even deformed framework for the legislature and the executive authorities which is "insufficiently prepared and maladjusted after its enactment".

Under the Basic Law, the executive authorities are devoid of a popular mandate but vested with the initiative to formulate policies. As a result they have to depend on their "hegemony" and make use of the executive powers and resources vested in them by the Basic Law to suppress Legislative Council Members' motions and challenge them in the hope of maintaining their outward administrative authority. In order to make it possible for the executive authorities which are not returned by democratic elections to maintain their "executive-led" authority, the Government has applied all possible tactics and intrigues to "castrate" the Legislative Council of its power.

First of all, the Basic Law explicitly restricts Members' power in introducing motions, and also through the mechanism of voting in groups, it renders the passage of Members' motions almost impossible. It looks very likely that the motion today will hardly escape this fate. This is the first "castration" of the Legislative Council. Other than the restriction mentioned above, the Government goes even further to impose its will as the master by insisting that the restriction stipulated in Article 74 of the Basic Law also applies to bill amendments introduced by Members, hoping to strip the Council of the power to amend government bills too. It suggests that the Chief Executive's consent shall be required beforehand even for Members' motions that are not legally binding but related to public expenditure. This act is to inflict "castration after castration" on the Council. Third, the Government has employed administrative tactics. For example, when I proposed the amendment about pneumoconiosis compensation, it threatened to let neither side gain. Also in the incident about the Holidays Bill, the Government disregarded its own dignity, and gave no heed to the public's interest in its decision to postpone the Second Reading of the Bill. Mr WONG, the Secretary for Housing, you were also present in the debate about the means test on public housing applicants. At that time, I saw you but you did not see me. You only treated the Legislative Council as something that was negligible. This incident has underscored the Government's attitude towards the Legislative Council ─ that it is non-existent.

Madam President, I believe that that tension exists between the executive authorities and the legislature is a well-known fact and even the Government also sees the need to review it. But of course, we are holding different views on how it should be dealt with.

Today, the Honourable Ambrose CHEUNG diagnoses this relationship. Actually, he has put it very well that the constitutional system is at fault. Yet, when it comes to proposals, he only briefly requests the adoption of "three technical measures". I describe these "three strokes of Mr CHEUNG" as technical because they have no legal binding effect and will hardly achieve his desired effects. The biggest problem with the "three strokes of Mr CHEUNG" is that they are underlined by two insistences, namely, the insistence on not amending the Basic Law and the maintenance of the executive-led mode. It is exactly due to the burden of these "two insistences" that the solution prescribed by Mr Ambrose CHEUNG becomes something like smoking marijuana. It will give you the hallucination that the problem between the executive authorities and the legislature can be resolved. But he fails to prescribe a treatment that is sufficient to deal with the constitutional problems. Mr CHEUNG has only diagnosed the sickness, which is the problem with the constitutional system itself, without making the right prescription.

I have also proposed three measures in my amendment which seeks to perform an operation so as to establish, by way of an amendment to the Basic Law, a new relationship between the executive authorities and the legislature basing on the principle of democracy and positive mutual interaction. I need not explain the first measure in too much detail other than to say that only when both the Chief Executive and the Legislative Council are elected by universal suffrage can we ensure that the policies of the two parties are made according to the will and interests of the majority of the public. The second measure is to eliminate the various unreasonable restrictions imposed by the Basic Law on the Legislative Council and also to abolish the mechanism of voting in groups so as to give the "castrated" Council genuine monitoring powers, including the power to introduce private bills and amendments. The third measure concerns the political appointment of principal officials. Actually, the Basic Law also provides a form of political appointment but the officials thus appointed are, rather than to the majority of the Hong Kong people, accountable to the Chief Executive returned by a small circle election and to Beijing. Hence, it is actually misleading just to talk about political appointment without specifying the line of accountability. My proposal of passing a vote of no confidence to impeach officials for dereliction of duties is the most solid measure to realize the concept of making the executive authorities accountable to the legislature.

As regards the amendment of the Honourable Gary CHENG, it is "no stroke of Mr CHENG", which aims at making the Legislative Council accept its fate of being the "Government's lackey" or the "modern-day LI Lianying (an eunuch of the Empress Dowager)". I wonder if Members have found that every time when political issues are discussed, the Democratic Alliance for the Betterment of Hong Kong (DAB) will take sides. But when we comment on government policies in the panels, the DAB often rebukes the Government for not heeding the people's opinion. However, despite such rebukes, when we actually discuss the relationship between the executive authorities and the legislature, the DAB takes sides again in support of such a Government with "executive hegemony", also in support of a Basic Law constitutional system which castrates the Legislative Council of its power. Why? Why is it that when we deal with the meat of any issue, they seem to feel that the Government needs not be rebuked anymore and everything it does is right? I can recall that when the Honourable Miss CHAN Yuen-han mentioned the assets test on public housing applicants, she was very angry that the Government had turned a deaf ear to the Provisional Legislative Council and the Legislative Council. It is exactly because the Government does not listen to the Legislative Council which represents the people that we have to introduce this motion to amend the Basic Law. If we accept the Basic Law, we will have to accept the fact that no matter how hard we reprimand the Government, we can do nothing about it if it does not listen. Does the DAB feel that after given a few slaps on the face by the Government, we still have to say "I love you" to the Government? Is it that since the Honourable TAM Yiu-chung has entered the Executive Council the whole DAB is willing to become the lackey of the Government? Is it because it often receives favour from the Chief Executive that the DAB has to "give face" to the Administration? Is that because there is no democracy now, they can have "free political lunches", and they therefore accept the Legislative Council being castrated of its power by the Basic Law?

With these remarks, Madam President, I hope that Members will support my amendment that proposes doing an "operation" to end this absurd relationship between the executive authorities and the legislature which is neither fish nor fowl.

Thank you, Madam President.

PRESIDENT (in Cantonese): Mr Gary CHENG.

MR GARY CHENG (in Cantonese): Madam President, today we are going to discuss the motion on the relationship between the executive authorities and the legislature, not to quarrel with someone.

By way of the motion debate moved by Mr Ambrose CHEUNG today on the relationship between the executive authorities and the legislature, I believe we can have a more focused discussion on questions and incidents arisen in this area over the past year.

In his motion, Mr Ambrose CHEUNG urges the Government to actively improve the relationship between the executive authorities and the legislature by faithfully adhering to the principle of the executive authorities being accountable to the legislature on the constitutional basis of the Basic Law, and enhancing communication and co-operation between the executive authorities and the legislature. The Democratic Alliance for the Betterment of Hong Kong (DAB) supports this proposal. In fact, in looking back at what the Provisional Legislative Council had done over the past year when the Council was going to dissolve early this year, the DAB made a specific demand that the relationship between the executive authorities and the legislature should be enhanced, and urged government departments to enhance their accountability and transparency.

In our opinion, unlike what Mr Ambrose CHEUNG has mentioned, the mutual trust and partnership between the executive authorities and the legislature should not be fostered only starting today. Rather, such relationship should be promoted and improved on the original historical basis, as well as upon its adaptation to the new rules of the game set by the Basic Law. It is in fact fair to comment that we cannot say that there is absolutely no co-operation mechanism or channel for communication between the executive authorities and the legislature. For instance, there are the Chief Executive's policy address and question's session, the Budget, Legislative Council panels, Bills Committees and so on, which give both parties opportunities of communication and co-operation with regard to the formulation and implementation of policies. In addition, there are opportunities for government officials to discuss, meet with and exchange views with Members and political parties. Nevertheless, when the Hong Kong Special Administrative Region (SAR) was newly established, these mechanism and channel had failed to be put into full use, and the basis for mutual trust was apparently shaken. We are of the view that the responsibility mainly lies with the Government. On the other hand, we must also concede that although Hong Kong has remained basically unchanged after the 1997 handover, the Basic Law has indeed made certain new provisions for the SAR Government and the legislature. On encountering specific matters and questions, both parties are still trying to feel out how the other party will react, and try to adapt to each other. We consider this process normal and essential. During the process, even if both parties insist on and cling to their own ideas and even lead to confrontations and conflicts, this does not necessarily mean that the process is undesirable.

Given the fact that Members returned by the new Legislative Council election have taken their office and that our economy has entered into a recession, the public's demands, urges and aspirations for the Government have become unprecedentedly pressing. As a result, the relationship appears to be comparatively tense and conflicts arise in respect of numerous questions and incidents. Examples abound. For instance, disputes between the Department of Justice and this Council on whether the Rules of Procedure of the Legislative Council are in breach of the Basic Law, disputes between the Government and this Council on the Public Holidays (Amendment) Bill, conduct of concurrent inquiries into the new airport by this Council and the Government, conflicts arising from the proposed dissolution of the two Municipal Councils by the Government as well as conflicts between this Council and members of the two Municipal Councils and so on. All these examples have shown that the Government has failed to make full use of the existing channel and framework to co-operate and communicate with the legislature. In addition, the Government's attitude of refusing to accept opinions has undermined the basis for mutual trust. With regard to the numerous conflicts and confrontations mentioned, the DAB has levelled severe criticisms at the Government. When it comes to practical issues, the DAB will, unlike what Mr LEE Cheuk-yan said just now, take sides. Of course, we need to take sides, which precisely means that we "justify what is correct, and denounce what is not". We comment on government deeds on their own merits and level criticisms or lend support where it is due. But it does not mean that we consider that the existing relationship between the executive authorities and the legislature has turned into a crisis or disaster. Coincidentally, both Mr LEE Cheuk-yan and I have chosen the same metaphor, and that is taking medicine and undergoing an operation, though we have not made any arrangements regarding this beforehand. We would rather conduct a detailed examination and finished all the medicine needed for treatment than perform a major operation hastily. A lot of recommendations have been put forward in the community as well as in this Council regarding how to strengthen the decision-making ability and accountability of the executive authorities. Just now, both Mr Ambrose CHEUNG and Mr LEE Cheuk-yan have put forward some proposals. We can discuss these proposals to see if we should accept or reject or take the proposals altogether. We stand prepared to adopt an open attitude in discussing the matters. What is most important however is that we should first discuss and listen to the comments given by all parties before deciding which proposal best suits the political situation in Hong Kong. Before a conclusion is drawn, the executive authorities and the legislature, particularly the executive authorities, should do more and better within the existing framework, and take more initiatives to communicate with Members, as well as frequently exchanging views on policy issues with Members outside this Chamber and refraining from its past practice of "closing the door in normal times and following Members even into the toilet when something happens".

The DAB does not support the amendment moved by Mr LEE Cheuk-yan. Of course, we do not support the practice of the so-called "executive hegemony" by the Government. Neither do we wish to see Members' power of monitoring the Government to be undermined. Nor do we wish to see the executive authorities and the legislature being caught in a state of tension over a long period of time, or even turned into a confrontational situation. Is it really the case that we have to rely on the only solution ─ an amendment of the Basic Law ─ to achieve all these? On the contrary, the executive authorities of the SAR should strictly enforce Article 64 of the Basic Law and be accountable to the Legislative Council of the SAR. As such, we have come to the view that the Government should, based on the original basis and mechanism, try to take initiative to do more and listen to comments from all sides in a comprehensive and in-depth manner.

With these remarks, I oppose the motion as well as the amendment moved by Mr LEE Cheuk-yan. Thank you, Madam President.

PRESIDENT (in Cantonese): Does any Member wish to speak on the motion and the amendment? Dr LEONG Che-hung.

DR LEONG CHE-HUNG: Madam President, I rise to speak in support of any calls for improvement of the working relationship between the executive authorities and this legislature. I say this because such a relation is not only important for any proper governance, but in this Special Administrative Region (SAR), it is a constitutional requirement ─ Article 64 of the Basic Law stipulates in no uncertain terms that the executive authorities must be accountable to the legislature.

Madam President, I am speaking not as the Chairman of the House Committee, yet as I speak, I am only too well aware of the fact that each and every single Member of this Council yearns for an improvement on such a relationship. To wit, this is already the fourth similar motion debated in this Chamber, the last one was in February 1998. In each debate, the message is loud and clear ─ do something to improve the relationship. Nor can it be said that this Council have not made any suggestions, though most, if not all, have fallen on deaf ear.

Regrettably, the relationship has turned for the worse. In a very short span of less than three months of the life of this legislature, we have already seen myriads of examples of our work not given the necessary support by the Administration. In some, a sense of obstruction was obvious. To wit, of the 10 bills introduced into this Council so far, only four have their policies explained to the relevant panels. Only last week, two panels lamented their disappointment, if not their discontent, with the Government. The Panel on Housing, for example, regretted that the Government has implemented such an important policy of comprehensive means testing for all prospective public housing tenants before even notifying the Panel. The Panel on Administration of Justice and Legal Services regretted the wishy-washy response to the policy behind 17 adaptation laws that bind the SAR Government but not central governmental organs in spite of a two-month prior request.

Madam President, the Administration will argue that on better relationship between them and us, they share the same feelings. Even Mr TUNG, our Chief Executive, has said that he was aware of and concerned with the dwindling relationship, and he appealed for the two sides to work together. Yet, Madam President, this is an executive-led government, like it or not ─ the Government alone sets the policies; the Government alone introduces the bills. In short, even with the best intentions of the world, even if legislators are willing to bend over backwards, and many times we have, unless and until the executive authorities are willing to condescend from cloud nine, recognize and accept sincerely the constitutional rights of this Council, the captioned relationship will only continue to deteriorate.

Madam President, as I stand here to debate on this motion which obviously encroaches on "political structure or the operation of the Government", I am not even sure whether the act is "unconstitutional" under the interpretation of our executive-led government. In a recent paper from the Administrative Wing of the Chief Secretary's Office, it states, "Members have queried whether motion debates should be subject to the Chief Executive's consent. Our response is that Article 48(10) of the Basic Law encompassed all motions". The paper further added that "the Chief Executive will have no difficulty in giving a blanket approval to the conduct of motion debate". Madam President, have we obtained this "blanket approval"?

Madam President, I would be the first to admit that channels are in abundance for the executive authorities and the Legislative Council to co-operate. The Chairman of the House Committee meets the Chief Secretary for Administration every week; Bureau Secretaries or their deputies attend the meeting of the panels and bills committees of the Legislative Council; and there are many social encounters. But it is the attitude not the channel that counts. Madam President, there are comments that the Legislative Council should be given more respect. Let me state in no uncertain terms that it is not more respect that we are urging. We are asking to do our constitutional responsibilities and to do it well with the co-operation of the executive authorities.

Madam President, I talk about attitude. When a Member of the Executive Council has openly remarked that all 60 Members of the legislature, including yourself, Madam President, belonged to the opposition party, how can the Legislative Council and the Executive Council strike a rapport? When a Member of this Council intended to introduce an amendment to a government resolution that you, Madam President, have allowed, and the Administration immediately threatened to withdraw the whole resolution instead of bringing it for proper debate in this Council, how can the Legislative Council and the executive authorities' rapport be improved?

What then can be done? As a start, I call for the Chief Executive and senior government officials to appear more in this Council to explain their new and amended policies. Through open meetings and through questions and answers, this Council will be able to understand more of the Administration, and through this Council, the Government's policies could be improved and explained to the public.

Secondly, the whole structure of the executive authorities ought to be reviewed. Is the current system, which is a legacy of colonial governance, the best way for this new Hong Kong? Is the current system where a supposedly apolitical civil service has to take on political role as ministers without mandate, yet being employed not on a political appointment basis but as permanent civil servants, the best way to achieve public accountability for Hong Kong, now that we are masters of our own house? Politically engaged ministers, preferably from the elected legislature, and thus carry the people's mandate, would not only strengthen the issue of accountability but, no doubt, also the co-operation of the Legislative Council and the executive authorities.

The committee structure of this legislature can also be technically reformed to establish well defined standing committee system to mirror policy bureaux. These standing committees will move together with the government bureaux through the embryonic stage of any policy formulation to the mature stage of bill drafting. But for this to be successful, again, co-operation from the Administration is essential.

Madam President, I have been speaking on all the debates for the last four times, and every time I look forward to the Administration for a positive response, I am always disappointed. Therefore, this time, I look forward to the Administration for a proper response and furthermore, to such vision in the forthcoming policy address of the Chief Executive.

Thank you.

PRESIDENT (in Cantonese): Dr YEUNG Sum.

DR YEUNG SUM (in Cantonese): Thank you, Madam President. After a series of arguments about appropriation for the Home Starter Loan Scheme, the investigation on the new airport and the review of district organizations (the so-called "scrapping of the Municipal Councils") as well as the amendment to the Public Holidays Ordinance, the community has formed an impression that the Government and Members of the Legislative Council are not giving way to one another. The tensed relationship between the executive authorities and the legislature has aroused the concern of all sectors, especially this Council. How can the relationship between the executive authorities and the legislature be improved?

Madam President, the Democratic Party is of the view that the mutual pressure exertion and checks and balances between the executive authorities and the legislature are not inappropriate constitutionally and are perfectly normal. If the mode of our political system is a true realization of the separation of powers and checks and balances between the executive authorities and the legislature, it will be normal for the two to refuse to give in. Certainly, here I am talking about positive strong arguments on just grounds, not vicious abuses.

The United States has practised the separation of powers for more than 200 years. The elected president and the elected parliament do not always give way to each other in relation to the federal budget and some material bills, and sometimes their relationship may ground to a standstill. However, a systemic tradition has to be developed through political acts, in other words, the executive authorities and the legislature must seek communication and compromises politics-wise, otherwise, they will only fall out of electors' favour (as they are elected by universal suffrage) and both sides will lose politically.

Looking at the existing constitutional arrangements of Hong Kong, the Basic Law has not provided adequate incentive for co-ordination between the executive authorities and the legislature. On the contrary, the members of the Basic Law Drafting Committee were then excessively rigid about maintaining an executive-led government, for they feared that an elected Legislative Council would grow in power and worried about the influence of the democrats. Therefore, they erected various barriers when they made Article 74 of the Basic Law in order to undermine the constitutional power of the Legislative Council.

I have to point out, Madam President, that it is most unfortunate that the Legislative Council now has less power than before. For instance, the Members' Bills introduced by Members cannot involve public expenditure, the Government or its operation. And if such bills involve government policies, the prior consent of the Chief Executive must be sought. Even ordinary motions without legal binding force should be voted upon by Members of the Council in two separate groups in an effort to reduce the chances of these motions passing through Council. During this period, how often do we find motions moved by elected Members approved? Such occasions are so rare that they can actually be counted. This adverse consequence is brought about by the then conservatives and it greatly weakened the power of the Legislative Council. Earlier, the Government still argued with us that the decision on whether or not Members' motions are in line with the provisions of Article 74 of the Basic Law rests with the executive authorities, rather than the President of the Legislative Council as was the practice in the past. If the consent of the Chief Executive must be sought when Members' motions involve expenditure, the political system and government policies, we had better ask Members to go home earlier for sleep. It would be very difficult for Members to move motions only after they have obtained the Chief Executive's consent, and essentially it is seriously crippling the power of the Legislative Council to a greater extent. Therefore, we must argue strongly on just grounds and completely oppose the Government's suggestions.

Obviously, under the existing system, the powers of the executive authorities and the legislature are not on a reciprocal basis. If this is maintained, our discussions about the relationship between the executive authorities and the legislature will hardly achieve any satisfactory results. Here I should like to point out specifically that Mr Ambrose CHEUNG and Mr Gary CHENG are totally oblivious to the non-reciprocal relationship of the executive authorities and the legislature in terms of powers. It is basically impossible and virtually ineffective for us to discuss about the improvement of the relationship between the executive authorities and the legislature when their powers are founded not on a reciprocal basis. If we wish to effectively improve the relationship, the Democratic Party thinks that a prerequisite is that the Chief Executive and the legislature must be elected by universal suffrage as soon as possible, and the existing constitutional arrangement has to be changed so that the Legislative Council will have sufficient powers to exercise checks and balances on the executive authorities. We must recognize that the separation of powers and checks and balances must operate on the basis whereby the two bodies should have real powers and each of them cannot unilaterally persist in its own way. This way, each of them can fight for what it wants while being mutually dependent institutionally. They will then achieve balance and both will not become losers.

Therefore, the Democratic Party supports Mr LEE Cheuk-yan's amendment. It is because we entirely support the fundamental spirit of the amendment, that is, the Chief Executive and all Members of the Legislative Council should be elected by universal suffrage. As Mr Gary CHENG's amendment still maintains the status quo and dares not propose an amendment to the Basic Law or break through the restriction of the Basic Law (Mr LEE Cheuk-yan probably criticizes the Democratic Alliance for the Betterment of Hong Kong in the same way, perhaps I will leave the topic for discussion later), without indicating any direction for improvements on the existing system. Therefore, the amendment fails to give the legislature sufficient powers to monitor and exercise checks and balances on the executive authorities, or make the executive authorities accountable to the legislature. Thus the Democratic Party cannot support his amendment.

I would also like to say a few words on the original motion of Mr Ambrose CHEUNG. It is a pity that its spirit only spins around the basis of the existing imbalanced powers and mentions nothing about institutional reforms. As for the so-called concrete suggestions made at the latter part of the original motion, Mr Gary CHENG's amendment includes clearer and more concrete suggestions on such matters as holding regular executive-legislature co-ordination meetings, setting up a policy consultative committee system and enlisting outside experts (probably because Members do not regard the Secretaries present as experts) and making political appointments of principal officials. Unfortunately, they are just "monsters" that would only upset the present Civil Service system and dampen their morale. Besides, it would make businessmen who are not representative and who do not have a mandate become Secretaries. If Mr LEUNG Chun-ying and Mr Anthony LEUNG assume the office of Secretary for Housing and Secretary for Education and Manpower respectively, what advantage will this have compared with the existing system? On the contrary, as political interests mingle with commercial interests, the public will even keep a wary eye on the administration by the Government in the future. I am not saying that the present system is good, but Mr Ambrose CHEUNG has upset the old system but not set up a new and better one. Moreover, a new and better system must be founded on the election of the legislature and the Chief Executive by universal suffrage.

Therefore, the Government should expeditiously realize the goal of electing the legislature and the Chief Executive by universal suffrage in order to establish a sound political system, thereby putting beyond doubt the political prestige and mandate of the Chief Executive. Under such circumstances, government policies will be further consolidated. The executive authorities and the legislature can only exercise mutual checks and balances on one another if they have reciprocal powers and mutual respect.

PRESIDENT (in Cantonese): Dr YEUNG, time is up.

DR YEUNG SUM (in Cantonese): I so submit.

PRESIDENT (in Cantonese): Miss Christine LOH.

MISS CHRISTINE LOH (in Cantonese): Thank you, Madam President. I am very happy today to be able to discuss this question that is considered so important by both the executive authorities and the legislature. I find that the Secretaries are doing us great honour today. Rarely do we have a debate with so many Secretaries present. This is a good sign. It shows that both the executive authorities and the legislature are very concerned about this question. However, I remember the comments made by Dr the Honourable LEONG Che-hung, that is, what can we achieve in the end? It is because it is about time.

Perhaps other Members also remember that not so long ago, several of us went to meet the Chief Executive together. At that time, the Chief Executive said that he was very concerned that the relationship between the executive authorities and the legislature was not very good. He expressed the hope that Members would think about how our mutual trust could be enhanced. I told him that instead of Members thinking about the matter, we should consider it with him. Otherwise, if we consider it separately, there would not be any realistic results. I hope that today's debate will really give us a chance to explore how to improve our relationship.

In my view, it would be better if Mr Ambrose CHEUNG's motion and Mr LEE Cheuk-yan's amendment could be combined. Why? The inadequacy I find in Mr CHEUNG's motion is that he has not considered the long-term developments, although he has raised some issues that can be considered now, while Mr LEE's amendment suggests that there can be no checks and balances without a sound political framework. However, as we know, any amendment of the Basic Law must be made by the National People's Congress (NPC), and it will be some time before the next NPC convenes. What is more, how do we want it amended? I find that what is lacking now is a real discussion in Hong Kong. A discussion about: What exactly is our goal? I fully endorse Mr LEE Cheuk-yan's goal, that is, the Chief Executive and all Members of the Legislative Council should be elected by universal suffrage. In this case, how should we go about it in order to achieve that goal? Moreover, how should that framework look like?

Just now Dr YEUNG Sum also said that if we had political appointments now, we would have people who were not directly elected. If people become ministers through direct elections, it would be the British parliamentary system. In the long term, do we want Hong Kong to take this path? We have not discussed this. Alternately, we could have a presidential system, that is, the American congressional system. These are very different systems. In the long term, what sort of framework does Hong Kong want? Previously when we debated whether we could have full direct elections in the year 2000, I proposed an amendment to set up a constitutional convention to discuss these major issues. Frankly, I am very frustrated about one thing. While we know that our ultimate goal is to achieve full direct elections in Hong Kong, we do not know how we should go from this starting point towards reaching the goal. I am very disappointed with the Government, including Mr TUNG Chee-hwa, since they are unwilling to set up a framework for us to conduct discussions. Therefore, I have always insisted that we need to set up a constitutional convention in the long run, to provide Hong Kong with a forum for discussions about the constitution and constitutional changes in an open and organized manner. In the meantime, what can we do? What can we do now before we can achieve the long-term goal proposed by Mr LEE Cheuk-yan? Actually, I consider the matters raised by Mr Ambrose CHEUNG quite revolutionary and worthy of our consideration.

I also have a few concrete suggestions which I would like to put forth for Members' consideration. These are temporary measures which can be described as nothing but "putting on adhesive plasters". Even though they are temporary, are we prepared to put on adhesive plasters? Even if we agree to amend the Basic Law, it might take half a year or a year. This is already very fast and a very optimistic estimation. During these few months or the year, what should we do? If we are less optimistic, it might take five or 10 years to amend the Basic Law. What should we do during these five or 10 years? We always say that our goal is full direct elections, but can we do something in the meantime? My first suggestion is that a regular meeting should be held between the Chief Executive and the Legislative Council once every month. This meeting must have an agenda and must be different from our current meetings with the Chief Executive, at which we sit down and have a cup of tea, while each of the six speakers speaks for a few minutes out of a total of 40. This will not work or improve our relationship. If these meetings remain that way, some Members might not be willing to spend time attending such a meeting upon an invitation by the Chief Executive. However, if there are regular meetings with an agenda, we can then explore the directions of some policies. I believe this will be useful for the time being.

Next is an even more revolutionary proposal. At present, we have certain committees under the Chief Secretary for Administration formulating government policies and determining and finalizing necessary legislative proposals. Would it be possible for Members of this Council to participate in those committees to a certain extent? Although that is an established framework, are we willing to incorporate some innovative ideas?

I would like to talk about political appointments again. I know that Dr YEUNG Sum thinks that political appointments might not be very suitable for the time being, since those people are not elected by the people. However, in my view, if we have political appointments or partial political appointments, we might be able to find some suitable persons to fill certain posts. This might not be a bad thing for Hong Kong. For instance, in the recent financial turmoil, as Mr Ambrose CHEUNG said, could we not find someone who has hands-on experience in the market to fill a temporary post in the Financial Services Bureau? You can call it a political appointment or the ministerial system or whatever? Please do not misunderstand me. I am not asking Mr HUI to resign. If we really have the need, can it be done?

Let me cite another example, Mr Dominic WONG. Although he is a good friend of mine, I have to say that the housing policy in the past year has really been very problematic. Actually, the problems were only carried over from the colonial era. The help of Mr LEUNG Chun-ying, an Executive Council member was enlisted. But what was the result? A mess. In my view, one of the problems is that the housing policy has not been considered in conjunction with the financial policy. Can we think of any solutions? Who can we turn to for help? Perhaps I shall stop here.

Thank you, Madam President.

PRESIDENT (in Cantonese): Dr Raymond HO.

DR RAYMOND HO (in Cantonese): Madam President, today, I am very glad that Mr Ambrose CHEUNG has proposed a very important and timely motion. In fact, in 1986, I submitted a policy proposal concerning the Hong Kong Special Administrative Region (SAR) to the Basic Law Drafting Committee. As far as I know, it was discussed at a meeting in Xiamen. Due to the time constraints, I could only expressed a few views on the main principles. After the handover of Hong Kong, the relationship between the executive authorities and the legislature of the SAR has been a subject of constant concern. Their differences have become more evident as colleagues in this Council and the Government give different interpretations to the respective provisions in the Basic Law. However, in order for the executive authorities and the legislature to exercise checks and balances on each other, it is normal that conflicts should arise between them. I believe that the working relationship between the two is not necessarily and should not be confrontational, for any confrontational or opposing stance will only do harm to the people of Hong Kong. Therefore, for the sake of the interests of Hong Kong, it is necessary to enhance the co-ordination and co-operation between the executive authorities and the legislature.

After the establishment of the SAR Government, it has shown its determination to maintain an executive-led government on different occasions. Relevant arrangements and provisions have been made in the Basic Law to embody this principle. Of course, it is only understandable that the executive authorities and the legislature may have different interpretations of the relevant provisions. However, the Government must understand that apart from adhering to relevant constitutional arrangements, the ability and popularity of the Government are equally important to maintaining an executive-led government. Only a self-confident, far-sighted and pragmatic government that is open to views from all sides and acceptable to the public can be executive-led. Otherwise, if a government which is not funded on an opinion base tries to force its dominance upon the legislature, it will only intensify the conflict between the two. This will not help to solve the many pressing problems in addition to undermining the prestige and authority of the Government. Therefore, I think that the Government's first and foremost task is to improve its governance and restore public confidence. Only then will there be a healthier basis to deal with the relationship between the executive authorities and the legislature.

In developing and formulating policies, the Government can also try to increase the participation of the legislature and assimilate its views. Such an arrangement will not create conflict of roles as both sides have the people's interests at heart. It is only that they have different considerations. Through the relevant consultations and participation, Legislative Council Members will then be able to understand the Government's stand and the basis and principles of its policies. This way, the Government can more easily obtain their support for the relevant policies. Such an arrangement will also allay Members' fears that the Government is trying to impose its policies on the legislature and turn the legislature into a rubber stamp. As a result, they will adopt a more rational rather than confrontational attitude towards the working relationship between both parties.

Despite this, I do not agree to the establishment of a policy consultative committee system, because if handled not properly, the committee might become a so-called "super committee" or even a "super legislative council" that would override the legislature, as many people fear. Of course, the proposal in Mr LEE Cheuk-yan's amendment should be our long-term goal. However, since it would take a long time to amend the Basic Law, it would not help to solve the pressing problems. Since there are so many important matters for us to resolve now, we cannot wait that long. As to Mr Gary CHENG's amendment, it is in my view too general to be useful to bringing about any positive improvement to the relationship between the executive authorities and the legislature.

With these remarks and having put forth my opinions, I support Mr Ambrose CHEUNG's motion. Thank you.

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

MR LEUNG YIU-CHUNG (in Cantonese): Madam President, although I am fully in support of the amendment proposed by Mr LEE Cheuk-yan, I reckon that he will lose. I can tell that this amendment will most likely be negatived because we have a most ridiculous voting system, that is, voting in groups. Therefore, we can only fantasize about the result that we hope to achieve but it will never realize.

Dr YEUNG Sum has asked us to try to count the motions that were passed through the mechanism of voting in groups and I have come up with the following figures. Between July and now, we have proposed 36 amendments or motions where voting in groups was required. Disregarding those that were not controversial or those that did not call for a division during the vote, there were 19 motions against which a division had been claimed and six of them were negatived despite a majority of Members had voted in their favour.

Madam President, since our primary school years, we have learned that when we need to decide a certain matter by vote, the simplest way is to have the minority obey the majority. But the Basic Law has actually opened to us a new perspective. What exactly is this perspective? It is to convey a new concept of democracy, which is to have the majority obey the minority. Is it democratic then? Does it truly comply with the concept and idea about democracy that we have had since childhood? I believe that if I tell others about this idea, I will only become a laughing stock of the whole world.

In addition to turning us into a laughing stock, this mechanism also leads to another consequence. What is it? The consequence is that it will turn us one against another. I recall that among the six motions mentioned earlier that were negatived as a result of "the majority having to obey the minority", three of them were negatived because more Members from the functional constituencies voted against them. Let us think about this: everyone knows that most of these so-called representatives and Members returned by functional constituencies were elected in small circles; we hence have another question: how representative are these Members? Let me cite another very ridiculous example. There were occassions on which motions were negatived even though a majority of Members in both groups voted in favour of them. Why was it so? That was because the number of Members who voted was less than half of the total number of seats in the Legislative Council and consequently those motions were negatived. Given so many such incidents, we can see that this mode of voting in groups will only create one situation, that is, to make us "try to drag each other down" or "rather mess up the situation than let either side benefit from it". Very obviously, such a mechanism is totally destructive.

What impacts has this "abnormal creature" on the relationship between us, the Legislative Council and the executive authorities? In fact, I think, as far as today is concerned, it is not so much a question of tension between the executive authorities and the legislature, but rather between the executive authorities and the people.

Madam President, we have witnessed how very successfully has the mechanism of voting in groups blocked the channel through which the people's will could possibly change the Government's perverse policies. We, elected Members, have moved motions and managed to have some passed in the former Legislative Council before, but there is little chance that we can do so now. A case in point is the amendment that I moved to the Holidays (Amendment) Ordinance early this month which received the support of 19 out of 20 elected Members with the only exception of the Honourable TAM Yiu-chung. If Mr TAM Yiu-chung was not a Member of the Executive Council, he would have followed the other Members of the Democratic Alliance for the Betterment of Hong Kong to vote in favour of the amendment. Am I not right? But everyone can see that the amendment was not passed despite the 19 votes in favour of it. In other words, even the vote of representatives of 1.5 million people according to the will of these people still failed to get endorsed in the Council. How then are we to reflect the people's will? Therefore, my final conclusion is that this mechanism has turned the executive authorities into an enemy of the people!

When we see that the Government practically turns a deaf ear to the people's aspirations, I recall that three years ago Mr Donald TSANG, the then Financial Secretary, once wrote an article in a newspaper quoting a Greek myth as an analogy. In that particular article, he said that the Government had to block its ears with wax and insist on its own view. Now, I feel that he should thank the Basic Law for giving him two pieces of wax so that he can even more wilfully ignore the people's will and have his own way without any restraints.

The piece of wax that plugs the left ear is the mechanism of voting in groups that I have mentioned before. The other piece is even more handy. It is Article 74 of the Basic Law which forbids Members to introduce any amendments relating to public money or expenditure, or political structure or the operation of the Government. Therefore, we are now faced with enormous obstacles in addressing livelihood problems. There is little room left for us Members, especially the elected ones, to help relieve the people's hardships. Hence, to improve the relationship between the executive authorities and the legislature, it takes more than simply proposing several measures to patch up here and there. Nor does it work by exhausting all manners of rhetoric. Rather, to deal with this problem completely and thoroughly, I think the fundamental solution is to base on the measures put forward in Mr LEE Cheuk-yan's amendment.

Madam President, I wonder if you would reconsider this: today's debate deals with "the relationship between the executive authorities and the legislature" but the official to answer this today is the Secretary for Constitutional Affairs. I do not consider him the right choice as he cannot answer us regarding the relationship between us and the executive authorities, and all he can comment on are the constitutional and political issues. I think that it will only be appropriate for the Chief Secretary for Administration to answer us on this issue. Therefore, I wonder if the President would reconsider my view.

With these remarks, I support Mr LEE Cheuk-yan's amendment. Thank you, Madam President.

PRESIDENT (in Cantonese): Mr Ambrose LAU.

Mr Ambrose LAU (in Cantonese): Madam President, the political structure of the Hong Kong Special Administrative Region (SAR) is not a model of the parliamentary and presidential systems of the west, nor is it a revised version of the governorship as seen in the pre-reunification days, and all the more not an adaptation of the National People's Congress system practised in China. Ours is a brand new system developed under the principle of "one country, two systems".

There is now a suggestion that the SAR should adopt the ministerial system. However, it seems all too general and abstract, since no specification has been given as to whether a ministerial system under the cabinet system or the presidential system should be adopted by the SAR. Besides, in regard to ministerial cabinets, there are still the French and German models. In my opinion, since the Basic Law has not provided for a ruling party within the constitutional framework, however complicated the ministerial system is, neither the cabinet model nor the presidential model would be appropriate for the situation in Hong Kong as a whole.

Madam President, I think that we should not mechanically apply to Hong Kong the political system of other countries or regions. Rather, it is only through actions taken on the constitutional basis of the Basic Law and in the light of the practical situation in Hong Kong could we rectify and improve the relationship between the executive authorities and the legislature.

Why then has the relationship between the executive authorities and the legislature gone wrong, or even given rise to "tension" as referred to by some Honourable colleagues? I think one major reason is that Hong Kong had been ruled by colonial governors before its reunification with China. Since the governors were appointed by the British Government, they were of a position much higher than that of the executive authorities and the legislature of Hong Kong; besides, the governors were answerable solely to London but never to the Legislative Council of Hong Kong. As such, the British Government and the Governor of Hong Kong could give orders to resolve any disputes between the executive authorities and the legislature. For this reason, there was no problem of "tension" in regard to the relationship between the executive authorities and the legislature of Hong Kong in the pre-reunification days. Since the reunification of Hong Kong with China, the executive authorities and the legislature are supposed to exercise checks and balances on each other as well as co-ordinate their activities. It is true that no provision for such checks and balances and co-ordination are found in the Basic Law, but the essence of these has in fact been embodied in many articles. With regard to checks and balances, the idea is mainly embodied in Articles 49, 50, 52, and 64, as well as Section 9 of Article 73 of the Basic Law. These articles provided for the Chief Executive to dissolve the legislature in accordance with conditions and procedures prescribed by law; on the other hand, they also provided for the legislature to move a motion of impeachment against the Chief Executive in accordance with conditions and procedures prescribed by law, and that the executive authorities should be accountable to the legislature. The so-called "accountability" here is not the same as a relationship of superiority or the subordination of one party to another. The "accountability" here should be referring to the division of responsibilities under the principle of checks and balances, whereby the executive authorities would be responsible for the administration while the legislature would be responsible for law making and amendment. Through the division of responsibilities, the executive authorities and the legislature could then be able to effect checks and balances on each other as well as co-ordination.

The requirement regarding the co-ordination of activities between the executive authorities and the legislature under the Basic Law are mainly embodied in Articles 54, 55 and 56. While Article 54 has provided that the Executive Council shall be an organ for assisting the chief Executive in policy-making, Article 55 has provided for some of the Members of the Executive Council to be appointed by the chief Executive from among Members of the Legislative Council. The intention of this provision is to eliminate any divergence between the executive authorities and the legislature through mutual communication effected between the principal officials on the Executive Council and Members of the Legislative Council, with a view to achieving mutual understanding and accommodation, as well as the objective of preserving differences while attaining agreement. Article 56 requires the chief Executive to consult the Executive Council before making important policy decisions, introducing bills to the Legislative Council, making subordinate legislation, or dissolving the Legislative Council. This provision is meant to realize the spirit of co-ordination between the executive authorities and the legislature through consultation of the Executive Council by the chief Executive.

I agree very much to the proposition to enhance the communication and co-operation between the executive authorities and the legislature on the constitutional basis provided in the Basic Law with a view to promoting mutual trust and partnership. In regard to the improvement of relationship between the executive authorities and the legislature, I think there are two key points.

First, the relationship of checks and balances and co-ordination between the executive authorities and the legislature should be attained through the division of responsibilities. Therefore, in order to improve the relationship, the executive authorities and the legislature must discharge their respective responsibilities as provided for under the Basic Law. The better the performance of the two institutions and the better the overall and long-term interests of Hong Kong being taken care of, the better would be their relationship. The principle here could not be simpler. For instance, while the legislature should reasonably lend its support to policy proposals or bills introduced by the executive authorities that are in line with public interest and conducive to economic development, the executive authorities should likewise abide by the laws made and amended by the legislature, as well as accept promptly the surveillance and respond swiftly to the questioning by the legislature in regard to certain work of the Government. However, if both the executive authorities and the legislature are not discharging their duties, or if either of them is not performing satisfactorily on certain issues, the good relationship between the executive authorities and the legislature would be affected adversely. Has there been any deficiency in regard to the relationship between the executive authorities and the legislature or even "tension" in their relationship since the establishment of the SAR? If so, where does the crux of the problem lie? I think these are issues that both the executive authorities and the legislature should review and reflect on. It would just be unfair to attribute the "tension" in their relationship or the lack of communication to either of the two parties.

Second, the co-ordination between the executive authorities and the legislature within the constitutional framework provided by the Basic Law should be realized through the Chief Executive's appointment of Members from the Legislative Council to the Executive Council. However, it is obviously insufficient for the communication gap to be bridged by Legislative Council Members who are also Members of the Executive Council. The government officials should actively take the initiative to foster a relationship of mutual trust and partnership with the legislature in a more open and transparent manner.

Madam President, I so submit.

PRESIDENT (in Cantonese): CHEUNG Man-kwong.

MR CHEUNG MAN-KWONG (in Cantonese): Madam President, I do not wish to talk nonsense by saying that the relationship between the executive authorities and the legislature is still good. Even if I say so, nobody will believe me because we all know that this is only empty talk under a beautiful cover. On the other hand, I do not wish to tone down what I am going to say by resigning the relationship between the executive authorities and the legislature to co-ordination and co-operation only. The Government is now apparently executive-led, with executive hegemony obviously prevailing. But the legislature still indulges in its wishful thinking by saying affectionately that it was going to improve its relationship with the executive authorities. I think the legislature is under the hallucination that the other party is willing but actually its love is unrequited. The legislature is effectively making a fool of itself. In my opinion, the best solution is to redefine the role of the legislature, and then re-affirm the relationship between the executive authorities and the legislature.

I think the existence of the legislature is necessary, first of all, to monitor the Government and to exercise checks and balances. It is only under this prerequisite that can we talk about co-operation and co-ordination. It would be negligent on our part if we forget the legislature's role of monitoring the Government and exercising checks and balances, and emphasize co-operation and co-ordination instead. In doing so, we will only turn into a mouthpiece for the executive authorities instead of a loud hailer for transmitting public opinions. We will only help the executive authorities to move towards executive hegemony though they are already in a dominant position. This will not in the least help the manifestation of public opinions. Rather, this will turn into a new way of encouraging oppression. We will not support the amendment moved by the Democratic Alliance for the Betterment of Hong Kong exactly because we have not forgotten our vocation to act as a monitor and to exercise checks and balances. Another major point of today's debate concerns the political appointments of officials. Political appointment is not a mere formality. It is not just a change of personnel, like replacing Mr Dominic WONG, Mr Joseph WONG and Mrs Anson CHAN by Mr LEUNG Chun-ying, Mr Antony LEUNG Kam-chung and Sir S Y CHUNG respectively to enable Members of the Executive Council to replace officials and become ministers. This is because in doing so, the Government is only carrying out a superficial reform by making political appointments within a small circle. Political appointments of this type are not genuine, and they are indeed another kind of deceptive acts.

True political appointments must be a ministerial system founded on a democratic basis. We need to elect the Chief Executive and Legislative Council Members. We need to pick those backed by a public opinion base to be our Chief Executive and ministers. In doing so, they will be accountable to the people, and be responsible for each and every policy, success or failure. As a minister, he can carry on with his work if his policy turns out to be good. Otherwise, he will have to step down, like what Members do. The most fatal shortcoming of the motion moved by Mr Ambrose CHEUNG as far as the making of political appointments is concerned is that it lacks a democratic base. Ministers selected without a democratic base will be like a body minus its soul, without the fundamental spirit of democratic politics.

As for the amendment of Mr Gary CHENG, we fail to see both election by the people and political appointments in it. Without the soul as well as the body, there is only a blank space. It has therefore turned into an invisible motion without a question. However, behind the invisible motion, there appears indistinctly a system, an undemocratic system, that is already in existence. It serves a defensive but at the same time an evasive purpose. It even strangles a major debate on democratic systems and political responsibilities. This is therefore extremely undesirable, and we can definitely not lend it our support.

Madam President, as long as the political system of executive hegemony remains unchanged, as long as political appointments or political appointments in a disguised form remain unchanged, and as long as an undemocratic election system still go on stifling public opinions, we need not beautify the relationship between the executive authorities and the legislature. Such a relationship is in fact abnormal. It is built on a power structure in which the strong and the weak differ greatly. Let us look at today's motion and debate. Let us look at the fact that all powers of this Council are regulated by the Basic Law, and judging from all this we can see and understand deeply the real disparity between the strong and the weak and that official opinions have completely overwhelmed public opinions. Under such oppression, a so-called relationship established under an undemocratic system will only turn the legislature into a rubber stamp under strong power, or into a "Hong Kong people ruling Hong Kong people" machine that can only talk to itself without the power to do anything. A motion or a half-baked attempt cannot practically alter such kind of relationship. Therefore, today we will object to the original motion and the amendment of Mr Gary CHENG. We still wish to reiterate that the first prerequisite is democratic politics, while the second is political appointments made under democratic politics, that is, a ministerial system. The Democratic Party has all along upheld this belief. And in today's debate, we will continue to uphold this belief.

Thank you, Madam President.

PRESIDENT (in Cantonese): Mr Ronald ARCULLI.

MR RONALD ARCULLI: Madam President, the motion moved by the Honourable Ambrose CHEUNG really has three limbs. The first is improving the relationship between the executive authorities and this Council. The second is setting up a policy consultative committee to enable the Legislative Council to participate in policy formulation, and the third, I would simply described as a ministerial system.

There is no denying that our existing constitutional arrangements probably have no parallel anywhere else in the world. Where do you have a government that has no votes in the legislature, and indeed, where do you have a legislature that has no participation in the inner sanctum of policy-making? Some of us would like to put the blame of this on the Basic Law. But that is wrong. This state of affairs was brought about before the Basic Law came into operation, way back in 1992 when we stopped having Members from this Council in the Executive Council. However, this was reinstated in 1997 when three Members of this Council were appointed Members of the Executive Council. Today, only one Member of this Council sits in that body.

The Executive Council is regarded today as, and perhaps has always been, an advisory body to the former Governors and the present and future Chief Executives. Those of us who have served in this Council for a few years would have known that as time went by over the years, that relationship between Members of the Executive Council and Members of the Legislative Council really grew apart. Perhaps this was due to the fact that more and more Members of the Legislative Council became elected rather than appointed, and until 1995 when every Member of this Council was elected. At that time, as the Executive Council Members shied away from the political limelight, the spotlight shifted from them to our Policy Secretaries. This became increasingly obvious during the tenure of Governor PATTEN. Even in those days, the relationship grew apart and sometimes strained. I admire Mr Ambrose CHEUNG for once again raising this issue of a policy consultative committee. But I can tell him that it will not work. You may ask me why. It is not because of the political parties. We can always choose our representatives to be on that committee. It is because of you, the so-called independent Members. You cannot agree among the 15 of you to choose anywhere between three to six representatives on the committee. Look where you are sitting in this Chamber today. You have the best seats in the house. But what have they done for you? You still have only one vote by yourself. (Laughter)

Madam President, the Liberal Party has long advocated a ministerial system. We have also long advocated that it was the Chief Executive and the Chief Executive alone who should have the power to appoint or to sack any principal official under the ministerial system. These ministers can be Policy Secretaries, no one is wanting to deprive them of their jobs. Of course, if they accept the appointment, they will have to give up the iron rice bowls for ministerial positions and therefore, political responsibilities which they say they have today, and accountability which they say they have today, but with the iron rice bowls. Those who decline can remain as civil servants and continue serving the community as they have been doing. The Chief Executive could, of course, also appoint non-civil servants, whether from this Council or outside this Council as members of his cabinet. Now, a smart Chief Executive may wish to appoint enough Members from this Council, provided his ministers could command the majority in this Council, not just for government measures, but perhaps when an amendment comes about. Dr the Honourable YEUNG Sum and the Honourable Miss Christine LOH criticize the appointment of non-elected persons as ministers or as principal officials. They, of course, say this from their own points of view. However, not every system of government in the world has elected members of any government or cabinet as ministers. I think one colleague has indeed drawn the difference between the English and the American systems. I also suspect whether these appointees-to-be, before they accept the appointment from the Chief Executive to be ministers or principal officials, will have a fair degree of confidence in themselves that they hold the respect of this Council, that they can garner support of this Council when they need that support? Because, otherwise, they would not stay in these positions very long.

The Liberty Party, Madam President, believes that the ministerial system is our best chance. It is because the Chief Executive is only allowed to serve a maximum of two terms. If there is any major policy change, you really cannot have our Bureau Secretaries doing a 180 degree turn every five or 10 years. Because if the new boss changes the major policy, they will have to change as well.

Thus, for these and for other reasons, Madam President, we feel that we cannot support the Honourable Gary CHENG's amendment. As far as the Honourable LEE Cheuk-yan's amendment is concerned, we cannot support either because under his version of ministerial system, the Chief Executive appoints, but we fire. And of course, as far as the amendments of the Basic Law are concerned, we think that the time to make serious and major amendments to the Basic Law is too short and we believe that the community should have a little more time to consider.

PRESIDENT (in Cantonese): Miss Margaret NG.

MISS MARGARET NG: Madam President, I support the motion to the extent that I agree that the relationship between the executive authorities and this Council could be, and should be, improved. But I do not agree with the methods proposed by the Honourable Ambrose CHEUNG; I do not agree with the Honourable LEE Cheuk-yan that improvement depends on the Basic Law being amended; nor do I entirely agree with the Honourable Gary CHENG that it is a matter of trust and partnership. But insofar as Mr CHENG's amendment produces the most general proposition, I shall be supporting the motion as amended by him.

Madam President, I believe the matter is quite simple. It lies in obeying the law while making every effort to strive for reform in the law, for example, by amending the Basic Law to achieve a more democratically elected government.

The powers and functions of the Government, that is, the executive authorities, are laid down in Article 62 of the Basic Law. Those of this Council are laid down in Article 73. As provided, the executive formulates and implements policies, draws up budgets, drafts and introduces bills, and designates officials to sit on the meetings of this Council. This Council enacts, amends or repeals laws, examines and approves budgets, raises questions on the work of the government, and debates any issue concerning public interest.

There is thus a division of labour and separation of powers.

The relationship between the executive and this Council is provided in Article 64: the Government must be accountable to this Council as the elected representatives of the people.

This is not a relationship of just "trust and partnership", nor is it achieved merely by more communication. It can only be given full effect by both parties fully understanding their respective constitutional roles and duties.

The Government has obviously misunderstood their constitutional roles, and the constraints which it is their duty to observe. Officials appear to see every constraint placed upon them by the processes in this Council as a challenge to their authority, and are instantly distressed that, unless they can keep the upper hand and do as they think best, it would undermine the "executive-led" government.

But the term "executive-led government", held sacrosanct by the Government, is not even found in the Basic Law. Mr JI Peng-fei, in his address to the National People's Congress on 28 March 1990 on the promulgation of the Basic Law, referred expressly to the relationship between the executive authorities and the legislature in the Hong Kong Special Administrative Region (SAR) as provided in the Basic Law. His description is "they should regulate each other as well as co-ordinate their
activities" ─ In the Chinese original, it is "互相制衡, 互相配合"; "The Chief Executive must have
real power, but at the same time, his power should be subject to restrictions" ─ "應有實權,
但要受到制約".

Thus, it is clear, and fully acknowledged by those who promulgated the Basic Law, that the system we have in the SAR is one of checks and balances; of real executive power subject to the real restrictions by an elected legislature acting according to law.

In such a context, it is not at all surprising that there should be disagreement, conflicts, or even what is liberally called "constitutional crises" ─which I understand to be some kind of stalemate. But there are really no insolvable crises. For they are fully within the contemplation of the Basic Law, which provides for the ways in which the "stalemate" is to be resolved. Ultimately, the courts have the authority to adjudicate on the lawfulness of the acts of the executive or the legislature.

Conservative as the Basic Law is on the pace and degree of democracy, I really and frankly cannot see the system enshrined in it as one in which the executive plays the dominant role and the legislature only a supportive role; or one in which this Council performs its duties under the approval or at the behest of the executive. I think this is where the Government has gone wrong.

We are to seek co-ordination and so work together. This Council already does. We facilitate the conduct of government business in every way. Government business is by law given priority over any business of Members of this Council. I do not think any official can point to any instance in which this Council has not given the Administration every consideration. We have done our part and will no doubt continue to do so meticulously. But we must also continue to act as checks and balances independently, strongly and conscientiously. With respect to the Honourable Ronald ARCULLI, this is where the independent Members can contribute substantially.

I have only this concrete suggestion to the Government. Mr TUNG should come regularly to address this Council and answer Members' questions. This is not a question of "communication" with Members, which can be done just as well in private meetings. This is to acknowledge the constitutional relationship between the executive and the legislature: that the executive makes itself accountable to the people through their elected representatives. This in no way diminishes his authority, or compromises the "executive-led" government. In obeying the constitution, Mr TUNG can only increase his stature and the public's respect for him. He should come to this Council on a monthly basis, or he prefers on a bi-monthly basis, as well as whenever anything of great public concern has arisen ─ such as the Government's recent intervention in the market. He should explain the actions that Government has taken, and he should do so as the head of the executive authorities.

Madam President, the Chief Executive is not only the head of the executive authorities. Under the Basic Law, he represents the SAR. He should uphold the Basic Law, and this requires him to defend this Council's constitutional standing, too. I urge him to take the lead, to set the tone, to build the relationship between the executive and the legislature upon firm constitutional ground.

Thank you, Madam President.

PRESIDENT (in Cantonese): Mr Andrew WONG.

MR ANDREW WONG (in Cantonese): Madam President, since I could not hear very clearly just now, I would like to seek elucidation on one point.

PRESIDENT (in Cantonese): Mr WONG, I believe you should also understand that in accordance to the usual practice, elucidation actually means the clarification of a Member's own remarks. So, you cannot request Miss Margaret NG to elucidate her own remarks after she has delivered her speech. Therefore, I advise you to seek elucidation from her after the meeting.

MR ANDREW WONG (in Cantonese): Madam President, I did not interrupt Miss Margaret NG during her speech because that would be very rude, so I decided to defer my request for elucidation until after her speech.

PRESIDENT (in Cantonese): I see your point, but in order to avoid setting any precedent, I cannot accede to your request. In other words, after a Member has concluded his or her speech, other Members are not allowed to request elucidation on any part of his or her speech. I rule that you cannot so do.

PRESIDENT (in Cantonese): Miss Cyd HO.

MISS CYD HO (in Cantonese): Madam President, there are in fact a number of provisions in the Basic Law illustrating the relationship between the executive authorities and the legislature. Article 64 stipulates that the executive authorities must be accountable to the legislature; Articles 49 and 50 provide for the procedures regarding the dissolution of the legislature and the impeachment of the Chief Executive; while the powers and functions of the legislature are laid down in Article 73, and restrictions on private Members' Bills in Article 74. I am sure Honourable colleagues of this Council and the media are very familiar with all these provisions and I need not read them out one by one. All these provisions are in fact pointing towards the legislative intent of an "executive-led government", although it is not written in explicit terms.

With the formation of the first Legislative Council, there was an increase in democratic elements in this Council. And probably because of this, the executive authorities are not as lucky as before. In implementing their policies, they are now required to face challenges from elected Members as well as other Members. It is for this reason that during such a short span of time over the past two or three months in this Session, a lot of disputes have arisen over such controversial issues like the Holidays (Amendment) Bill 1998, Home Starter Loan Scheme, Pneumoconiosis (Compensation) Ordinance, Rules of Procedures, asset test for all prospective public housing tenants, ordinances relating to the airport inquiry and management and so on. Members even went into such details as to how much time the Chief Executive would spend on answering questions from this Council. From these we can see that the executive authorities has adopted a stalling tactic in conducting their business. For instance, having failed to obtain support from this Council, the Government withdrew the Holidays (Amendment) Bill 1998 and the Home Starter Loan Scheme and made use of public opinions as a bargaining chip. The next tactic is threatening. For instance, the Government said it would withdraw the whole resolution if the Honourable LEE Cheuk-yan introduced an amendment to a government resolution under the Pneumoconiosis (Compensation) Ordinance. In addition, the Government even resorted to the trick of bypassing this Council. For example, the asset test for public housing applicants was introduced without being scrutinized by this Council. A better practice is by competing. For instance, on learning that this Council would call an inquiry into the airport incident, the executive authorities immediately set up another investigation organ and put forward an ordinance pertaining to judicial independence in order to prevent the media to give full coverage. Besides, there is the evasive tactic. The Chief Executive has only agreed to appear in this Council three times in this year. Whatever the approach, the executive authorities' only goal is to avoid the monitoring of this Council.

During the trial of strength between the two parties, some government officials even raised the point that criticism from Members of this Council had greatly undermined their morale. If I adopt an accommodating attitude towards their response, I would ask why our officials' minds are so fragile? How can their morale be undermined so easily? Will they be able to stand big storms? If I am to lash out harsh criticisms, I would advise the officials not to resort to emotional blackmail but to face criticisms with an open mind. Sometimes, they can even treat criticisms with a sense of humour as what they have done on some recent occasions. The effects were quite good, were they not? But they should bear in mind not to act stubbornly and insist on their wrongs. It was only after Hong Kong people have paid a tuition fee out of our huge reserves that officials began to show their willingness to listen to people's advice with a more open attitude.

Many of my colleagues have remarked that as far as the relationship between the executive authorities and the legislature is concerned, the executive authorities are basically accountable to the legislature, while the legislature is responsible for monitoring the executive arm. Even if we hold different views, we should aim at the same goal: To strive for the best for the sake of Hong Kong and resolve problems through a democratic mechanism. Although communication and mutual understanding are very important, I hope that we are not aiming at communication and harmonious partnership only. Collusion is also an excellent partnership and it can be harmonious too. Is it going to serve the interests of Hong Kong best if a large number of policies are passed without any dispute?

At the moment, I believe it is more important for Hong Kong to look at the relationship between the people and the Government, with the Government being responsible to its people. However, such a relationship will never come into being without a system of full direct elections. Hence, the Frontier has always supported the implementation of direct elections as early as possible. We have been reiterating this point with unflagging patience because this is the fundamental key to the whole issue. We keep on saying this because so far no solution has been offered. Nor is there any sign indicating that the executive authorities are interested in implementing direct elections to resolve this issue. Perhaps, the crux of the problem is something which most people want to avoid. So, when many colleagues are discussing whether we should have a ministerial system or presidential system, how we should be accountable to each other, what kind of policy committees should be set up, how communication can be improved on other occasions, and in what manner the Chief Executive should meet the political parties, when and how they should meet, and for how many minutes they should talk, the Frontier really does not want to see that these technical issues should overshallow the discussion of principles and the direction to be taken.

So, we are all the more determined in putting forward full direct elections. We would like to remind the Government and some of our colleagues in this Council: The people have not forgotten the fact that there are still no direct elections in Hong Kong today and that we have yet to fully realize "Hong Kong people ruling Hong Kong". The Frontier will therefore continue to insist on our stance and we support the spirit of Mr LEE Cheuk-yan's amendment.

Madam President, I so submit.

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

MR NG LEUNG-SING (in Cantonese): Madam President, the relationship between the executive authorities and the legislature is clearly regulated by law. According to the provisions of the Basic Law, the executive authorities are charged with the duty to formulate and implement policies; on the other hand, they must be accountable to the legislature. The concept of executive accountability to the legislature is after all not abstract and vague. Article 64 of the Basic Law makes clear provisions on this accountability mechanism in the following four aspects: the implementation of laws passed by the Legislative Council; the regular presentation of policy addresses to the Council; the answering of questions raised by Members of the Council; and the obtaining of approval from the Council for taxation and public expenditure proposals.

Therefore, when consideration is given to determine whether or not a policy is accountable to the Legislative Council, we must use the constitutional framework provided by the Basic Law as a basis to assess and review the formulation and implementation of policies and to see if they have any legal grounds. If we were to deviate from the stipulations of the Basic Law and to expand the concept of executive accountability to the legislature indefinitely, ultimately this will lead to the determination of all policies by the legislature. Hence the line of the division of responsibilities between the executive authorities and the legislature would become blurred.

Given the division of responsibilities between the executive authorities and the legislature and the provision of Article 62 of the Basic Law whereby, the Government of the Special Administrative Region (SAR) is responsible for the formulation and implementation of policies, the conduct of administrative affairs and so on, and that the Basic Law has spelt out in unequivocal terms that the executive authorities must be accountable to the legislature in the course of exercising its executive powers, the SAR Government will of course act according to these stipulations and the Legislative Council will act likewise within its ambit and require the Government to be accountable. An amicable relationship between these two bodies will help the executive authorities effectively grasp and exercise the executive powers and to do well the affairs related to politics, economy and people's livelihood in the SAR. This is what the public would be very pleased to see.

On the other hand, according to stipulations in the Basic Law, the Legislative Council is vested with a monitoring function which it can exercise on the executive authorities. This includes various means such as the enactment of legislation, the vetting of taxation and public expenditure proposals, the raising of questions, and even the impeachment of the Chief Executive. Therefore, the public should harbour no worries as to whether the administration of the executive authorities goes unchecked. There is a common wish among the people for the Government to implement its policies effectively and to maintain a harmonious political ethos. To achieve these goals, the executive authorities must naturally maintain a cordial relationship with the Legislative Council which can facilitate communication on policies and foster co-operation. I think no one will question the importance of this point. On the issue of the relationship between the executive authorities and the legislature in the SAR which has been established for just over a year, and in a society which is highly demanding in terms of transparency, I hope that the Government can work on its present way of doing things and take the initiative to effect co-ordination and to make sincere improvements. Looking at the matter from a long-term perspective and under the present constitutional framework, there is bound to be some kind of clash between the Administration and the Legislative Council. It is something natural which happens between those who make the policies and those who oversee them each in their different capacities and discharging their responsibilities. This state of affairs will not cause any confusion to the existing system even if it is found there. To label any party as "unconstitutional" is really not a fit and proper thing to do. All in all, while the executive authorities and the legislature may hold fast to their respective positions, they must make rational choices and make themselves accountable to the overall interests of the public.

Madam President, I so submit.

PRESIDENT (in Cantonese): Mr Martin LEE.

MR MARTIN LEE (in Cantonese): Madam President, in fact it was set out very clearly in the Joint Declaration that the executive authorities shall abide by the law and shall be accountable to the legislature. Now let us take a look at the Basic Law and see if it meets this requirement. Before we look at the Basic Law, I would like to remind Members that, in the Legislative Council there are currently only five Members who used to be members of the Basic Law Drafting Committee. The first one is Dr David LI. Why do I mention him first? Because he was the Vice-Chairman. Then there is Mr LAU Wong-fat of the Liberal Party; Mr TAM Yiu-chung of the Democratic Alliance for the Betterment of Hong Kong; as well as Mr SZETO Wah and me. That is true, there are as many as two members from the Democratic Party out of the five I have mentioned. In this connection, we have a very good understanding of the drafting process of the Basic Law.

I still remember once in 1987, all members of the Drafting Committee met in Beijing to discuss the issue of political system. At that time, it could be said that we had already reached a consensus, that is, the three powers of the executive, the legislature and the judiciary should be separated. The relevant provisions were already formulated, but of course, they were only drafts. However, on the following day, I remember it was a Thursday, Comrade DENG Xiaoping gave us a talk which we could only listen to but not ask any question about. At that time, he made a remark: the separation of powers is infeasible. He took the United States as an example and said that the separation of powers had given rise to three governments. We were very puzzled why the separation of powers would give rise to three governments, unfortunately, Comrade DENG Xiaoping did not give us an explanation. When we went back to the Drafting Committee, from that moment onwards, nobody dared mention the term "separation of powers" anymore. It was changed to "the mutual checks and balances of the executive and the legislature ". We could no longer talk about "the separation of powers" as Comrade DENG Xiaoping had made such a remark. Who dared mention it again?

Now, let us see how the Basic Law embodies the following statement in the Joint Declaration: "The executive authorities shall be accountable to the legislature". There are actually seven magic spells which allow the executive authorities to check the legislature:

1. restricting the number of directly-elected seats in the Legislative Council to 20 only;

2. voting in groups (just now the Honourable LEUNG Yiu-chung has already talked about his painful experience with this system)

3. restricting Members' right to introduce bills and motions;

4. the right of the Chief Executive to refuse to sign the laws we have passed;

5. the right of the Chief Executive to dissolve the Legislative Council; and

6. the selection of the Chief Executive is controlled by the Central Authorities.

Since the Chief Executive plays an important role in the legislative process, the method for his selection must be put under control. We all know that even if the Basic Law can be amended in 2007 and we can then go forward, the right for nominating the Chief Executive still lies in the hands of a "nomination committee". If Members want to know how this nomination works, just take a look at the last nomination. Members may remember that in the last selection of the Chief Executive, there were four nominations — no, actually there were only three as the fourth one was not successful. These four candidates had an interesting point in common, that is, they have never taken the Mass Transit Railway (MTR). Who would have thought that even a person who has never taken the MTR could be nominated!

As a result, the Central Authorities must control the Chief Executive. And this is still not enough, as all the bills relating to government policies have to be signed by the Chief Executive, the Central Authorities fear that he may one day be silly enough to sign the bills we have passed. The Central Authorities are still not at ease. In accordance with Article 74 of the Basic Law, even though the Chief Executive is willing to sign, there are still certain bills that we cannot introduce. They include those which relate to public expenditure, the political structure or the operation of the Government. In other words, we cannot introduce these kinds of bills even if the Chief Executive is willing to sign them.

The seventh magic spell is that the Standing Committee of the National People's Congress may return any law which has already been enacted and signed by the Chief Executive. Any law so returned shall immediately be invalidated. So there are altogether seven magic spells. Then there is the eighth magic spell which, though having nothing to do with us, tries to override the courts when it comes to the power of interpreting the Basic Law. Although the Joint Declaration has given the power of final adjudication to the Hong Kong Special Administrative Region (SAR), Article 158 is an example of how Hong Kong still fails after five years of hard fight: for all the provisions in the Basic Law which concern the Central Authorities and the SAR — this is the most important provisions — the power of interpretation is not vested in our Court of Final Appeal, but in the Standing Committee of the National People's Congress. In fact, the Central Authorities do not even place trust in the Judiciary.

Therefore, Mr SZETO Wah and I have all along been fighting for the Chief Executive to be returned by direct election, and all the seats in the Legislative Council are to be returned in a similar way through direct elections. But actually we know this is only a wild wish. Under such a system, it is very hard to expect a good relationship between the executive authorities and the legislature. It is like trying to persuade a young woman who has been raped to marry her rapist so as to set their relationship right.

The executive authorities will not be accountable to the legislature at all if the Basic Law is not amended, so we must continue to strive for the amendment of the Basic Law. Perhaps in my lifetime I may not be able to witness the day when the Chief Executive and all Members of the Legislative Council are elected by universal suffrage. But it does not matter. I believe as long as we continue to fight, the final victory shall still be ours. The whole world is marching in the direction of democracy, freedom and the rule of law, and I do not believe that China our great motherland, will stand in the way of this worldwide trend.

Madam President, I hope that China, our great motherland, will truly be great one day, that is, all the people of China will be able to enjoy freedom, and the human rights of all Chinese will be respected by our Government and protected by the law. If only we can keep on fighting, I believe victory will surely come some day.

Thank you.

PRESIDENT (in Cantonese): Mr Andrew WONG.

Mr Andrew WONG (in Cantonese): Madam President, I am sorry about the point of elucidation I sought just now, but that was very important to me. In regard to the Honourable Miss Margaret Ng's speech, I agree with every word she has just said, with the exception of that particular sentence. I thought I heard it wrong, and I do wish I did, since I soon found out outside this Chamber that I did not get her wrong.

Madam President, I do not dispute your ruling. But then again you have rejected a similar request of mine before. In the past, when the Honourable John SWAINE was President of the Council, quite often legislators would come up with this request at length: I am afraid I did not get some of the points very clearly ......

PRESIDENT (in Cantonese): Mr WONG, you should not comment on the President's rulings at Council meetings. For this reason, I hope you will not make any reference to the ruling in this motion debate, whether or not you agree to it. You should speak to the question under discussion as far as possible.

MR ANDREW WONG (in Cantonese): Yes, Madam President. I was only trying to give you the background to my seeking a point of elucidation, so that you would know it was based on past rulings that I had made the request. However, if the practice has now been changed, I would also agree that this is an appropriate arrangement, as it might help to pre-empt a lot of debate. What I do not agree with Miss Margaret NG is that she would lend her support to the most general and vague amendment proposed by Mr Gary CHENG to Mr Ambrose CHEUNG's motion.

In regard to Mr Ambrose CHEUNG's motion or the motion as incidentally amended by Mr LEE Cheuk-yan, whether you support either one or not, there is in fact one very important underlying meaning common to both of them, which is the notion that the existing relationship between the executive authorities and the legislature is not good enough and needs to be improved. And it is on this point that Honourable colleagues have been expressing their different views. With respect to Mr Gary CHENG's amendment, the first half of it urges the Government to enhance the communication and co-operation between the executive authorities and the legislature by faithfully adhering to the principle of the executive authorities being accountable to the legislature on the constitutional basis of the Basic Law; however, it then proposes to delete the word "foster" ─ the implication of this word is really very subtle, as Mr Ambrose CHEUNG might consider that such kind of relationship does not seem to exist now and so he has sought to "establish" one ─ and replace it with the word "promote", as well as delete the specific proposals made in the remaining part of the original motion.

Like some of my Honourable colleagues, I do not agree with the motion moved by Mr Ambrose CHEUNG on several points. I have in fact made this clear in front of the Chief Executive, and Mr Ambrose CHEUNG should be aware of that as he was also present then. Perhaps that is why he has adapted my view of a executive-legislature co-ordination committee into executive-legislature co-ordination meetings. As referred to clearly in Mr CHEUNG's speech, the meetings are meant for Members to meet regularly ─ so the Honourable Ronald ARCULLI should not worry himself too much, I do not intend to refer to the so-called breakfast meetings as the "Breakfast Group"; we are not a group, we do not share the same views. While we could understand or even think that executive-legislature co-ordination meetings may as well be acceptable, such meetings may be unnecessary since the crux of the problem does not lie here.

As regards the policy consultative committee system, another member of the breakfast meeting, Dr the Honourable Raymond HO, has also raised his objection just now. Such a system would serve to create a super committee whereby the Government and the super committee members would sit together and collude with each other to get everything done before notifying the Legislative Council of the results In this way, the Council would be rendered a rubber stamp. This I cannot subscribe to. What I do agree to is the first part of the motion, which is on the adherence to certain principles on the constitutional basis of the Basic Law and so on. Under these principles, there are still many things that could be done. In this connection, I do share the views expressed by Miss Margaret NG as well as that of Mr LEE Cheuk-yan, since many areas under the existing system of the Basic Law are essentially inappropriate for the favourable functioning of the relationship between the executive authorities and the legislature.

Just now the Honourable Ambrose LAU has raised the question concerning which model of political system we should adopt. We have before us the German model, the French model and the British model, all of which are in the process of finding out whether ministers could also be members of the legislature as well. There have even been suggestions that we should adopt the American system, but the problem is should we now switch to the American system or should we keep the parliamentary system?

The Democratic Party is in favour of electing the Chief Executive by universal suffrage. It is certainly possible to have the Chief Executive elected by universal suffrage under the parliamentary system, the case in France is an example, despite its hint of the presidential system as practised in the United States. The Frontier may also share the same view. However, I consider that a quality democratic government system may not necessarily be the presidential system, for the parliamentary system could also work to the same effect. Just now Dr YEUNG Sum raised the questions of whom should we appoint and of how we could appoint someone without any opinion base. Things may not be so. Certain capable Democratic Party members who are not incumbent Members of the council, one example is Dr Anthony CHEUNG, may well be a suitable appointee. There could of course be other nominees, the Liberal Party could make their nominations, others could also make their nominations. In that case, where does the crux of the problem regarding the relationship between the executive authorities and the legislature lie? In my opinion, the major problem does not lie in the fact that we could not make any improvement under the existing ambit of Basic Law, nor does it imply that we should not make any improvement. the crux of the problem is should we introduce more improvements on top of the improvement to the existing relationship? I hope that the debate today would not be overly politicized, and I also hope that we should recognize the fact that while improvements could be made within the existing framework provided by Basic Law, the Basic Law itself should also be perfected through further improvements.

Now that the Frontier, or I should say Mr LEE Cheuk-yan, has put forth an amendment to urge the Government to expeditiously introduce bills to amend the Basic Law ─ which is rather benign, as it does not require actions to be taken immediately or forthwith ─ we should all recognize the fact that we are now confronted by a situation in which problems have obviously arisen from our existing system. Therefore, I wish to make clear my voting intention to Honourable Members, with a view to persuading the Democratic Party as well as the Frontier to share my view. I will vote for Mr LEE Cheuk-yan's amendment, and should Mr Gary CHENG's amendment be put to this Council upon Mr LEE Cheuk-yan's amendment being negatived, I will vote against the amendment then. But if Mr LEE Cheuk-yan's amendment is carried, Mr Gary CHENG could not move his amendment then. I have in hand a memo which says Mr Gary CHENG has given notice to withdraw his amendment if Mr LEE Cheuk-yan's amendment is carried. Upon the withdrawal of Mr Gary CHENG's amendment, the question put to the Council would be Mr Ambrose CHEUNG's motion as amended by Mr LEE Cheuk-yan, so I will then vote in favour of the amended motion. But if both Mr LEE Cheuk-yan's and Mr Gary CHENG's amendments were negatived, I would vote for the original motion as moved by Mr Ambrose CHEUNG. This is how I would cast my vote. I hope Honourable colleagues would take this stance of mine into consideration, otherwise we might end up "getting nothing": neither the original motion nor the proposed amendments would be carried. With the three of them negatived, we would end up achieving nothing. Thank you, Madam President.

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

MR LEE WING-TAT (in Cantonese): Madam President, I just want to respond to a few points as some Honourable Members have mentioned the suggestions of the Democratic Party.

Firstly, the Democratic Party has suggested that we can only have a true political appointment system under a system of popular elections and we extremely insist on that. As Mr Andrew WONG and Mr Ronald ARCULLI have just said, why can the Chief Executive not appoint some people who are not civil servants as ministers? It is not because this cannot be done but we must ask, "What is the source of the power of the one who is making the appointment (the Chief Executive)"? We agree that cabinet members and ministers of some western parliaments are not legislators returned by election. Madeleine ALBRIGHT of the United States is not elected. Some cabinet ministers of some other countries are also not elected. However, the most important point which Mr Andrew WONG also agrees is that the one who appoints them should be a person returned by popular election. The difference between our views and those of other people lies here.

Secondly, from our standpoint, we have never said that the presidential system is the only system that can manifest that the executive is accountable to the legislature or realize political appointment. Even the British system can be our reference. However, we must bear in mind one point, and that is, all systems, be them presidential systems, parliamentary systems or other state systems, do have a fairly unified basis. The members of their parliaments, chief executives or presidents are returned by popular elections. Without this basis, empty talks about superficial political appointment or superficial and impractical ministerial systems basically cannot solve the problem of accountability to the people. Yet, we have the same questions as Mr Andrew WONG's: Are improvements not required at all? No. Although the Basic Law has not been amended, improvements can actually be made. In this regard, I agree very much to the views expressed by Miss Margaret NG and Miss Cyd HO. In fact, I have asked a question for oral answer at a meeting of the Legislative Council in July about the accountability of the executive authorities to the legislature. The most important point is how the Chief Executive should be accountable to the legislature, for this is meant not only to embody the provisions of the Basic Law, but more importantly, it indicates to all Secretaries, Directors and the community in what way the supreme leader of government is accountable to the elected Legislative Council.

I am very glad today as many Secretaries attend this meeting. I have not seen so many Secretaries attending Legislative Council meetings this year as the policy address has still not been released. The Honourable NG Leung-sing said that the interpretation and implementation of Article 64 of the Basic Law can be very flexible. Now the Chief Executive has said that he will attend Legislative Council meetings thrice a year and give the public explanations about government policies at such meetings. We doubt whether it is adequate for the Chief Executive to do so thrice a year. Sometimes it is not a question of adequacy. I often wonder why our Chief Executive finds it hard for him to spend a little time at open meetings in this Chamber answering questions asked by elected Members which are also concerns of the people. Why does he say that he will only do so thrice a year? I wonder why it is often shown on television or reported in newspapers that our Chief Executive spends plenty of time attending the art exhibitions of the relatives of state leaders, book exhibitions, film shows or other activities. It takes him one to two hours to attend each of these activities. We are only asking him to attend one less activity each month so that he can attend Legislative Council meetings once a month to answer our questions. If he can earnestly practise this, he will be setting an example for the various Secretaries and Directors. I shall come back to the Secretaries and Directors later, but I feel that that example is very important. If the Chief Executive personally adopts an open attitude and actively answers questions on material issues at meetings of the Legislative Council, I believe the Secretaries and Directors would feel obliged to do the same. Moreover, I think that the Secretaries and Directors would then be proud of their head as he does not evade questions asked by the public or their representatives. This is the demeanour of a leader.

I once received a fax from a person who said that Mr TUNG attended various activities, book exhibitions and art exhibitions but did not show up when people lived in misery. From the beginning of the term of the new Legislative Council till now, we have not had a chance to ask our Chief Executive questions at an open meeting. The public really wish to ask him questions directly about the financial turmoil, the airport and many issues closely related to them. Does he really have so little time? I cannot agree to this.

Some Honourable colleagues have criticized the poor performance of some Secretaries. I have different views on this. Sometimes I think that a good system will allow those with poor performance to perform better while a poor system will allow those with good performance to perform badly. The Basic Law has indeed undermined the power of the former elected Legislative Council. I am not going to repeat the points already made about this, but this has indeed induced officials to give up the former channels of lobbying for the passage of bills or voting against certain issues at divisions. Therefore, they no longer make lobbying or co-ordination efforts. I do not find any difference between the Secretaries today and those before. The only difference is perhaps we have a new head, the Chief Executive, whose attitude towards administration and administrative acts are different. For us, the stipulations of the Basic Law are more stringent.

Lastly, as regards the role of the Executive Council, we actually do not have time to debate this today. According to the Basic Law, the Executive Council should assist the Chief Executive in policy-making. But how? Should they be accountable and if yes, how? These are not stated. However, as the Executive Council is similar to the cabinet of a foreign country, its members should bear more important responsibilities and they must give the public explanations about government policies as well as answer the public's questions. Only with such an open attitude can the executive authorities increase the public's confidence.

Thank you, Madam President.

PRESIDENT (in Cantonese): Miss Emily LAU.

MISS EMILY LAU (in Cantonese): Madam President, I speak in support of Mr LEE Cheuk-yan's amendment to Mr Ambrose CHEUNG's motion. We, members from the Frontier, insist that we must go for direct elections. Just now, Mr Andrew WONG said that we were very benign. I hope Members understand that we, members from the Frontier, are very benign and yet very determined. We hope that the Government can amend the Basic Law as soon as possible so that we can elect the Chief Executive and legislature by way of universal suffrage.

Mr Ambrose CHEUNG has in his motion put forward some patchwork proposals on the existing relationship between the executive authorities and the legislature. For instance, he mentioned the holding of executive-legislature co-ordination meetings, the setting up of consultative committees and so on. Madam President, in fact you and we know that there is no need to do all these things.

It is a great honour to us that today we have so many Secretaries and Deputy Secretaries attending the meeting. I told some of my Honourable colleagues that this was really hard to come by as we seldom found so many Secretaries attending motion debates. And yet we see that there are not many people from the media. Perhaps some of them are listening to us inside. There are not many members of the public here too. At one stage, many of my colleagues were not here. Why? Madam President, this is because both you and I know that we are only engaging in empty talk today. Our discussion is not going to bear fruit; nor will anything really happen. When the Secretary deliver his speech later, he will definitely not say that as Members have really come up with some proposals, they will make some changes so that both the relationship and framework will be altered. The media and the public will naturally feel interested if some changes are really going to take place. But we all know that this is just empty talk. This explains why the question, despite its import, has failed to arouse public concern. This point also illustrates precisely that what this Council says carries no strength. Even you, Madam President, are aware that, in relation to the Rules of Procedure, the Government may later institute proceedings against many of the proposals put forward by us for the Government considers that we have violated the Basic Law. One of the rules concerns the point that we think we have the right to debate the proposals put forward by us. However, the Government holds that if the debate involves expenditure, we have to seek approval from the Chief Executive before we can hold the debate. Such being the case, what else can this Council be apart from being a rubber stamp?

What we said is completely lack of legal effect, but there is nothing we can do about it. Mrs YAU is here at the moment. She told us yesterday that the Chief Executive had given us the approval to discuss subjects which have no legal effect or impact. This is really laughable. But this also illustrates very clearly that this Council is powerless in many aspects. Madam President, this is why I think what Mr Ambrose CHEUNG's proposal is unnecessary. If the executive authorities are sincere in listening to Members' advice so as to let this legislature into the process of policy-making, then we have already had the necessary framework in place because we have a number of committees. Just now, Dr LEONG Che-hung also mentioned the point that some legislation had failed to be explained to Members before they were tabled to this Council in spite of the fact that it had been stipulated long time ago that the Government was required to explain new legislation in committees before tabling before Council. But the Government is not following this practice anymore. We can even say that the Government is acting recklessly.

Madam President, just as what I have mentioned during a debate in a previous Meeting, it seems that government officials have heaved a sigh of relief after the handover of sovereignty. They have the feeling that as they are allowed to continue with their appointment, they can take a more relaxing attitude in dealing with a lot of things. The Honourable LEE Wing-tat was right in saying that even the Chief Executive himself failed to carry out his duty ─ so far he has not come to see us. It is only natural that "the subordinates follow what their superior does". If even the Chief Executive refuses to do what he should do, why should the officials do so? Were they not afraid of being taken by others as having an ulterior motive?

Over the past year or so, civil servants have given this legislature as well as the general public an impression that they usually deal with their business in a disorganized and even conceited manner. They think it is easy to do a lot of things. For instance, they thought that one day's time was sufficient for killing one million chickens, and similarly so for moving an airport. For the purpose of "shoring up" the market, they have expended tens and even hundreds of billions of dollars.

Madam President, the public in Hong Kong cannot identify with what the executive authorities have done over the past year or so. There is no need for me to further elaborate and I believe it is clear to various secretaries that many citizens, rich and poor, resent the Government. We are now facing a crisis and this crisis is related to the credibility of the Government. This point has also been raised by Mr Ambrose CHEUNG. As such, I find it impossible to support Mr Gary CHENG's amendment as he has made a lot of amendments to the entire motion moved by Mr CHEUNG. In addition, Mr CHENG has made a major deletion and substitute "foster" with "promote", but he has also failed to explain how he will go about promoting the cause.

I believe this Council is powerless in pressing the Government. In fact, I have raised the point repeatedly that Members might be divided by serious differences. Madam President, I believe you fully understand that the main reason is that we are elected to this Council by various means. This is why the Government always says that Members are divided in their opinions. The executive authorities can therefore take expedience with this to do what they like. They also say something like this even in dealing with the issue related to the two Municipal Councils, and I reckon they may really push this through. Madam President, it is simply because we do not have much power. Even the Hong Kong people allow the Administration to deceive them, but it is not going to last long. If the executive authorities lack credibility, and if they know clearly that they are being treated as "an object of hatred", how can they raise their heads in running their business?

Madam President, I can support one point in Mr Ambrose CHEUNG's motion, and that is the point concerning "political appointments". But this is absolutely not the same as a ministerial system, which I think can only be implemented through genuine popular elections. Through "political appointments", it is hoped that people who are really accountable to the public can be appointed to give explanation and take up responsibilities. If they have done something wrong, they will have to resign. Although Mr TUNG Chee-hwa, the Chief Executive, was not elected, I think it is desirable for him to accept the idea of "political appointments". I hope officials will show that they are willing to explain to the public what they are doing, or willing to attend meetings of this Council to consult all parties. I believe this is the minimum requirement they should meet. This is something they can still do under the existing not at all democratic system.

Madam President, there is no need for us to do any patching up. What we ask for is the sincerity of the executive authorities. This is something that the Hong Kong people can see for themselves. I would like to appeal to the executive authorities ─ the executive authorities under the leadership of Mr TUNG Chee-hwa ─ here and hope that they can listen to the public opinion attentively. Thank you, Madam President.

PRESIDENT (in Cantonese): Mrs Selina CHOW.

MRS SELINA CHOW (in Cantonese): Madam President, just now we have listened to a lot of comments expressed by numerous colleagues on the original motion and the two amendments. I would like to raise a point and that is: Is it the general view of the people of Hong Kong that a government which is elected, accepted by the people as well as made up by ministers, that is the kind of government as referred to in the amendment moved by Mr LEE Cheuk-yan, will definitely be well accepted by the people or meet our expectations; whereas a so-called executive-led government, which is not necessarily directly-elected, will fail to meet our expectations? If we leaf through Hong Kong's history or look at the numerous opinion polls conducted nowadays and the five years before 1997, we can see that Mr PATTEN always topped the list and gained the support of the opinion polls. Of course, these achievements could be attributed to the fact that he was a very successful political figure. Today, we often see that both Mrs Anson CHAN and Mr Donald TSANG also topped the list of the opinion polls. Why? In judging a government or some principal officials, many people always base their judgement on their expectations towards the officials, that is, the attitude of the officials in dealing with administrative affairs and whether their achievements meet the expectations of the public.

Of course, a major expectation held by the public towards these officials is that they must be accountable to the representatives elected by the public, that is, the Legislative Council. But actually, it is the hope of the public that they can hold the officials responsible, and this is extremely important. What the Legislative Council should do is to represent the public in asking the officials to be responsible and accountable only. Therefore, we can see that the public is not satisfied with the officials in a lot of areas. Are they going to be solved once the Basic Law is amended? I think the answer is in the negative. There are a lot of other examples. For instance, the Chief Secretary is not here today to listen to such an important debate, though we hope that she can be present. But this has nothing to do with the Basic Law. On the day in question, the Chief Executive had failed to inspect the airport early in the morning, and we were greatly dissatisfied with that. But this has nothing to do with the Basic Law. Just now, Mr LEE Wing-tat remarked that the Chief Executive had failed to come to this Council to answer questions from Members or make a report to Members. But once again, this has nothing to do with the Basic Law. We cannot require great details be written into the Basic Law on all the things that need to be done. What I mean is the relatively tense relationship that exists between the executive authorities and the legislature at the moment can actually be improved in a number of areas without amending the Basic Law. We in the Liberal Party consider the Basic Law not a perfect constitution, but still it provides a reliable and stable guideline for the people of Hong Kong. Therefore we do not want to see amendments to be made to the Basic Law soon after it came into effect. We hope that this set of constitution can be given time to develop. But this does not mean that it is impossible for us to improve the relationship between the executive authorities and the legislature under this set of Basic Law which is far from being perfect. It is not the case that the public does not accept an executive-led government. Nor is it insisting that an executive-led government must be elected by the people. But if the Government fails to convince its citizens and make them aware that the Administration will be willing to accept the opinions of the community and will, balancing the interests of all sides in a fair manner, try its best for the interests of the overall development of society so as to enable the people to live freely, it will then fail to meet our expectations.

Actually, after going through the original motion and the two amendments today, the Liberal Party has made it clear that, as far as the amendment proposed by Mr LEE Cheuk-yan is concerned, basically we do not support amending the Basic Law at this stage. On the other hand, we consider the amendment proposed by the Democratic Alliance for the Betterment of Hong Kong, that is, Mr Gary CHENG's amendment, lack initiative. We are also aware that the original motion moved by Mr Ambrose CHEUNG is not perfect. But as Mr Ronald ARCULLI has put it, there are some areas in the motion that we know are not going to work. Nevertheless, as far as the overall direction and spirit is concerned, we feel that it is imperative for us to look for a better way to, insofar as the relationship between the executive authorities and the legislature is concerned, enable the legislature to keep counterbalancing as well as monitoring the executive authorities and, on the other hand, enable both parties to try their best to serve the people of Hong Kong through mutual communication and co-operation. Therefore, though we consider the original motion moved by Mr Ambrose CHEUNG not perfect, its spirit still merits our support. Under such circumstances, we will support the original motion, and oppose the two amendments.

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

MR TAM YIU-CHUNG (in Cantonese): Madam President, under the existing constitutional arrangements, the executive and legislative organs have different functions and roles to play ─ a relationship of the supervising and the supervised. Though government officials and Members of this Council may have different views on certain social policies, this is not at all surprising. In fact, since the introduction of elected Members into the legislature, we can frequently see that the Government and Members have heated arguments on certain policies, with Members putting forward forceful questions on the Government's administration. It is therefore unavoidable for the Government and Members to get sparks flying during the discussion. And it is in fact basically impossible and also unnecessary to hope for the maintenance of a harmonious relationship between the executive authorities and the legislature as this is not necessarily in line with the overall interests of the community. On the contrary, it will benefit the public more if we can explore various public policies in detail and hold more debates to clarify the matters.

Nevertheless, in daily operation, those who supervise as well as those who are being supervised should observe certain rules of the game. Sometimes, officials complained of Members not supporting the motions moved by the Government, thereby affecting the Government's daily operation. On the other hand, Members complained of officials not respecting the Legislative Council by regarding the Council as a rubber stamp only. In short, both sides have made various complaints against each other.

If the arguments of certain policies put forward by the Government fail to convince the people, or if the Government conducts consultation after all things have been given the go-ahead, how can the legislature be expected to accept it? As for the legislature, some Members always speculate on the officials' intentions by way of their conspiracy theory and know only to level negative criticisms against any government policies. No wonder some government officials have gradually developed sentiments of resistance against Members and show an unwillingness to discuss with Members even when something happens. Under this vicious circle, the basis for mutual trust between both parties becomes increasingly weak.

In fact, it is not very difficult to strengthen mutual trust between the executive authorities and the legislature. It is most important for both parties to think in the other's position and understand the situation of the other party. They should be able to enhance communication between one another and find a better solution to certain social problems if government officials can listen to the views of Members with an open mind and understand the Members' way of thinking, and if Members can try to find out the manner in which the executive authorities conduct their business.

Broadly speaking, I think the Government can set up certain mechanisms to strengthen communication between the executive and legislative organs. For instance, the Chief Executive, the Chief Secretary for Administration, the Financial Secretary, the Secretary for Justice and Secretaries of various Policy Bureaux can consider setting up a system to meet with Members on a regular basis, or even appointing specialized staff in various Policy Bureaux to maintain close links with Members. I believe both officials and Members understand that it is extremely difficult to achieve a goal if one makes efforts at the last moment. The earlier the communication work is done, the greater the effect will be. Whenever we look up the English dictionaries, we will find that the word "communication" comes before the word "success". This means that without communication, there will be no success.

Finally, I would like to emphasize the point that it is impossible to establish an ideal relationship between friends, husband and wife or working partners by means of empty discussion. Relationship is not like truth: the more the truth is debated, the clearer it becomes. On the contrary, the more we talk about a relationship, the more complicated it becomes. The most important point rather lies in how both parties make the actual effort. Therefore, I think it is better for us to save a little time to do something good for the public than to talk about the lack of co-ordination between the executive and legislative organs in a high profile. We should not forget that both the executive and legislative organs need to come face to face with the 6 million-plus members of the public, who are the best witnesses. If the Government can carry out its public consultation work properly by giving more explanation to the public and seek the public's understanding of and support for government policies, I believe Members of this Council, as representatives of public opinion, will not negate the aspirations of the public by insisting on acting contrary to the Government. In this way, how will the relationship between the executive and legislative organs grow tense?

Madam President, when I was donating blood upstairs just now, I heard Mr LEE Cheuk-yan mention my name and the Democratic Alliance for the Betterment of Hong Kong in his speech. I hope he is still acting as a representative of the workers' union instead of a pointless shooter.

With these remarks, I support Mr Gary CHENG's amendment.

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

(No Member indicated a wish to speak)

PRESIDENT (in Cantonese): I now invite Mr Ambrose CHEUNG to speak on the two amendments to his motion. Mr Ambrose CHEUNG, you have up to five minutes to speak.

MR AMBROSE CHEUNG (in Cantonese): Madam President, being green in the Legislative Council, I am very glad to hear so many Members express their views today. But I am also very disappointed to see the Legislative Council not being respected by the executive authorities out of its own doing.

I am in support of full direct elections and opine that the pace towards returning both the Legislative Council and the Chief Executive by way of direct elections should be quickened. I do not see that there is an imbalance of power between the Legislative Council and the executive authorities. But even in a mire, we still have to work hard for a solution and to find ways to address the problem without amending the Basic Law, so that when there is a need to amend the Basic Law ultimately, we will also have a route to follow.

Mr LEE Cheuk-yan made an analogy of an acute disease just now and I would like to share the same analogy with Members. Mr LEE has diagnosed a patient with an acute disease who keeps bleeding, so he decided to send for an ambulance to take the patient to hospital. But when I ask him where the hospital is, he says that he does not know; and I ask when they will arrive at the hospital, I get the same answer. Under such circumstances, do the paramedics need to give emergency treatment to the patient on the way to hospital? Are they expected to do the patching up work as suggested by Miss Christine LOH earlier? I recommend that this be done. Even if the ambulance is heading nowhere, we still need to do some patching up work, and only then are we doing the job step by step instead of just making empty talks. Mr LEE Cheuk-yan's proposal has the right goal, but it lacks the necessary steps to reach the final destination.

Mr Gary CHENG's amendment proposes an approach which is evasive, negative, has no solid points and goes back to square one, and so I cannot support it.

On the other hand, everyone should have been very glad to see so many Policy Secretaries in attendance to listen to our debate, but I regret it very much. Why? That is because we let them see that the Legislative Council has fallen exactly into the trap of division set by the Basic Law. The Basic Law is to create a weak and divided Legislative Council. Under such circumstances, Members lack the esprit de corps and insist on their own views. In that case, what is the difference between having a particular political party to form the government and having the present executive authorities? Both will insist on their own views, turn a deaf ear and a blind eye to outside voices and situations. There are many kinds of ministerial systems, some under a parliament and some under the president. If we insist that only when the president or Chief Executive is elected by direct election will ministers be appointed, then this is one of the ways that can be considered. That is, if ministers are appointed before the Chief Executive is elected by direct election, the ministers can be dismissed through the Legislative Council and be accountable to the public through the same channel. Nevertheless, what the public see today is a divided Legislative Council. All the various political bodies have shown that they are divided among themselves, insist on their own points, and lack esprit de corps. Although the ambulance has started running, no emergence treatment is provided on the way. When they get to the hospital, they find that there are no operating theatres. No time, no goal, where exactly are we heading?

In this regard, I am more inclined to agree to the direction suggested by Mr Andrew WONG. Here I would like to call upon Members to consider it very carefully. If again it turns out today that neither the motion nor the amendments are passed, the Government will be very glad for it needs not do anything. Hence, it is really unfortunate to have so many Policy Secretaries here today to see us divide among ourselves, and see that we lack a step-by-step approach and that we cannot unite ourselves even if we are working towards the goal of having Legislative Council Members or the Chief Executive fully and directly elected. I think that we have to be accountable to the public and answer for our own decision. I feel that we have no one but ourselves to blame for the Legislative Council's failure to earn the respect of the executive authorities.

Thank you, Madam President.

PRESIDENT (in Cantonese): Secretary for Constitutional Affairs.

SECRETARY FOR CONSTITUTIONAL AFFAIRS (in Cantonese): Madam President, just now many Honourable Members have expressed many different views on the topic of the relationship between the executive authorities and the legislature. I have listened very carefully to the contents of each Member's speech, and we will certainly consider carefully the suggestions put forward by Members on how to further improve the communication between the two parties and the working relationship.

Mrs Selina CHOW asked earlier why the Chief Secretary for Administration did not attend this motion debate today. In fact, the Chief Secretary for Administration would like very much to attend today's motion debate and to hear Members' views personally. But as she has explained to the Chairman and Deputy Chairman of the Legislative Council House Committee, she had to meet the members of the Guangdong delegation who came to Hong Kong to attend the meeting of the Hong Kong-Guangdong Co-operation Joint Conference, she would be unable to attend this meeting and would like to extend her apology.

The Government's view on this issue is: there must be close communication and co-operation between the executive authorities and the legislature, and we must foster a relationship of mutual trust and partnership. The Government has all along been using the existing mechanisms to exchange views with the legislature and to work out solutions together. We are genuinely sincere in making use of these mechanisms to achieve a consensus. According to our past experience, most of the problems can be solved smoothly, for example, an overwhelming majority of the bills introduced by the Government over the past few years were supported and passed by the legislature.

Of course, as the executive authorities and the legislature are playing different roles, sometimes it is inevitable for either of them to cling to its own views. If someone thinks that a divergence of opinions between the two implies a kind of crisis, I think that is not a mature way of looking at things. In any pluralistic society, the existence of different views among the people is a most natural, common and healthy phenomenon and is often found in other democratic political systems. Recently, there have been reports pointing out that some problems appeared in the relationship between the executive authorities and the legislature. Many people have only paid attention to the differences between the two in a small number of things. In the debate today, a few Members intentionally revealed these differences in a few issues. They have highlighted our differences but have not mentioned that we had co-operated very well and solved many problems. In this respect, I think that we need to be more practical. It is not surprising at all for us to hold different opinions. Even within the Government there are different opinions. The most important thing is to find out what has led to this difference. If we use public opinion as the basis of our actions, then it will be easy for us to close the gap between us. We should not come to a piecemeal and hasty conclusion and to think that serious problems have appeared in the relationship between the executive authorities and the legislature. I think the most important thing is to make the best use of our well-developed mechanism and to strengthen it, with a view to ironing out our differences and conflicts as well as increasing our co-operation. A healthy debate based on reason is nothing unusual. What we must try our best to avoid are scornful abuses and irrational remarks.

Mr Ambrose CHEUNG suggested that we should expeditiously institute a co-operation mechanism for improving the relationship between the executive authorities and the legislature. In fact, there are various kinds of formal and informal channels of communication and co-operation between the executive authorities and the legislature. The formal link between the Legislative Council and the executive authorities is the meeting of the Legislative Council, such as the debate we have today. This kind of debate can enable us to explain our different opinions to the people in public. I trust that the people have discerning eyes and can tell the differences. They will take in reasonable remarks while ignoring absurd and weird remarks. Apart from Legislative Council meetings, there are 17 panels in the Legislative Council. When our colleagues from the various bureaux formulate policies, they would submit the preliminary suggestions to the relevant panels in the Legislative Council for discussion. We are genuinely sincere in listening to the views of Honourable Members because very often Members are reflecting the views of the public. We will collect the views and make deductions, then we will submit the findings to the Chief Executive in Council for decision. Just now some Honourable Members mentioned this practice, but I would like to stress again that we are not stubbornly pursuing our own will and making up public opinion behind closed doors. If the policies are about the enactment or the amendment of legislation, then the related bills should be introduced to the Legislative Council for deliberation. In the course of deliberation, Members may relay their views to the Policy Bureaux through channels such as the Bills Committees. Besides, Members of the Legislative Council can raise questions on the work of the Government and hold debates on any topic of public interest. Since the formation of the first Legislative Council in July, seven meetings have been held and Members have raised 36 oral questions, 213 follow-up questions and 80 written questions. A total of 12 motion debates have been held and government officials have attended 36 meetings of the panels where Members were consulted on policies and matters of public interest. Views were also exchanged. There are criticisms that we could not face the public and could not lift up our heads. We feel that these remarks are too much exaggerated and out of touch with the reality.

Apart from that, the Chief Executive attends the special meetings of the Legislative Council, and answers the questions raised by the Members. He also attends ad hoc meetings with Members where their views are heard. For example, the Chief Executive met Members and representatives of the parties last week where they exchanged views with each other on many economic issues and those of people's livelihood. The Chief Executive also listened to their views on the suggestions made in the policy address soon to be released. Also, the Chief Secretary for Administration meets with the Chairman and Deputy Chairman of the House Committee every week where matters of concern to the Legislative Council are discussed. This will enable the Government to take follow-up actions. Government officials will also consult Members and brief them on certain special matters such as the compilation of the annual budget.

Apart from these more formal communication channels, the Chief Executive, Members of the Executive Council, and government officials also keep in touch with Members and increase their understanding of each other through other informal channels. They also attend the monthly luncheon meetings hosted by Members in order to enhance communication and deepen their understanding of public opinions.

As the original motion has stated, the relationship between the executive authorities and the legislature must be built on the constitutional basis of the Basic Law. The Basic Law has clearly delineated the functions of the executive authorities and the legislature and their relationship. Someone talked about the "vocation" of the Members of the Legislative Council. I do not really know what did that Member refer to. The Basic Law has clearly defined the duties of Members. There is no such thing as the "vocation" of the Members in the Basic Law. According to Chapter IV Section 2 of the Basic Law, the Government of the Hong Kong Special Administrative Region (SAR) shall be the executive authorities of the Region. The head of the SAR shall be the Chief Executive. The SAR Government exercises the following powers and functions conferred under Article 62 of the Basic Law: To formulate and implement policies; to draw up and introduce budgets and final accounts; to draft and introduce bills, motions and subordinate legislation and so on. Article 64 of the Basic Law further provides that the SAR Government must abide by the law and be accountable to the Legislative Council. A few Members have mentioned this point earlier but I would like to stress again that we will certainly comply with the requirements of Article 64 of the Basic Law and implement laws passed by the Legislative Council and those which are already in force. We will also present regular policy addresses to the Council, answer questions raised by Members and obtain approval from the Council for taxation and public expenditure.

Article 73 of the Basic Law also clearly provides that the Legislative Council shall exercise the following powers and functions: to enact laws, to examine and approve budgets introduced by the Government, to approve taxation and public expenditure, to raise questions on the work of the Government, to receive and handle complaints from Hong Kong residents and to debate any issue concerning public interests and so on. All of the above are very concrete powers and functions. I do not understand why some Members said they themselves were rubber stamps.

In the political system affirmed by the Basic Law, there is a clear division of labour between the executive authorities and the legislature. The two shall co-operate and maintain a close relationship as partners. The executive authorities are responsible for drafting and introducing bills which must then be passed by the Legislative Council, signed and promulgated by the Chief Executive before taking effect. The annual budget is drawn up by the executive authorities, examined and approved by the Legislative Council. And the executive authorities are responsible for formulating and implementing related policies. The Council is empowered to raise questions on the work of the Government. Besides, the Basic Law also provides that the executive authorities shall be accountable to the legislature, implement laws, present policy addresses, answer questions, obtain approval from the Legislative Council for taxation and public expenditure. So I cannot agree to Mr LEE Cheuk-yan's criticism that the Basic Law does not provide for an effective constitutional framework.

As pointed out by many Honourable Members, under the existing mechanism, as the executive authorities do not have any seats in the Legislative Council, therefore there is no guarantee that the bills introduced and the funding requested will certainly be passed by the Legislative Council. Undoubtedly, this will have a certain effect on the formulation and implementation of policies. But we believe that differences can be ironed out if both parties can put the overall interests of the people of Hong Kong before everything else and foster communication between themselves. Even if differences do appear, a consensus can be reached after consultation. We all know very well that only those policies which are in line with public interests will gain public support. Bills and funding requests must meet this criterion before they can be passed by the Legislative Council. Some Members think that if they co-operate with the Government, they will need to change themselves into rubber stamps. This is not right. Although we may have different opinions, if we can have a common foundation in public opinion and close the gap between our differences, I cannot see how this can be misunderstood as failing to give full play to the requirement of making executive authorities accountable to the legislature.

We all know that in making policies, the Government has to make an overall consideration and to balance the interests of all sides. When allocating limited resources, considerations must be given to the long-term interests of the territory. There may well be a time when some individuals or groups may express their views from a certain specific angle, I think that this is bound to happen and there is nothing wrong about it. But as a government which is accountable to the people, we need to take the overall interests of society into consideration. If the Government is unable to accept certain views, it must be the result of careful consideration with sufficient justifications. The Government will surely make a detailed explanation of it in order to gain the acceptance and support of the Members and the public at large. In brief, though the Government is not formed by popular elections, it still has to rely on the support of the people. As long as the policies of the Government are practicable and firmly founded on public support, any contradictions that may arise from the proposals made by the Government and the views of the Members can certainly be removed.

Some Members pointed out that the ministerial system should be adopted if the executive authorities were really to be made accountable to the legislature and that the relationship between the two was to be improved. However, the ministerial system proposed by Honourable Members varies with each Member who made the proposal. Some Members suggested that the key officials in the Government should be filled by persons appointed from outside; some suggested that Members of the Legislative Council should be appointed as Members of the Executive Council, each to be in charge of a policy area; and some others suggested using the British ministerial system with Members of the Legislative Council forming a cabinet. As for this point, we should bear in mind that the Basic Law has not made any arrangements for the implementation of a ministerial system. On the other hand, the Basic Law provides that once a Member of the Legislative Council accepts appointment and becomes a public servant, then the Member will no longer be qualified for the office. Under the present political circumstances, we feel that there is no need to adopt the ministerial system. As I pointed out during the debate on direct elections in July, we must give careful consideration to the mode of long-term constitutional development in the territory, including issues concerning the Chief Executive and Legislative Council elections. A few Members have also mentioned this point just now. Issues such as the relationship between the executive authorities and the legislature, the appointment of major government officials and the Civil Service system are such key issues that need to be studied in detail and carefully analysed before any proposals are put forward to Members and the public for consideration. At present, we will develop our political system in a gradual and orderly manner in accordance with the Basic Law, and we will be committed to enhancing and improving the existing mechanisms. Besides, we will carefully study different proposals and work out the next step forward.

In the July debate I also pointed out clearly that as the Basic Law is the most important constitutional document in the Hong Kong legal system, its stability was therefore of great importance. We should not make hasty proposals to amend it in such a short period of time as one year after its implementation. Therefore, I cannot agree to the amendment moved by Mr LEE Cheuk-yan.

Like every Honourable Member, we attach great importance to the relationship between the executive authorities and the legislature. As some Members have put it, there is room for improvement in the existing system. Therefore, we will make regular review of the communication channels and working relationship between the two, so that this system can become better and that the partnership relationship can become closer. Government officials will continue to keep in touch with Members of the Legislative Council in the hope that through the work of Members, the public can understand the Government's beliefs and stance behind the various proposals put forward by the Government. Before any policy is drawn up, we will explain our policy directions to Members and exchange views with them. In the course of formulating policies, we will take the initiative to explain to Members the crux of the matter and put forward practical suggestions and solutions for discussion and exchange of opinions between Members and government officials. Besides, Members can also raise questions at each week's Legislative Council meeting and ask the Government to give an explanation. During this process, members of the public can make use of various channels, such as other standing committees of the Government, the mass media and suggestions in writing, to air their views for the Government's consideration. We hope that through a highly transparent mechanism, government policies will have already gained firm grounds in public opinion before they are submitted for approval by the Chief Executive in Council. If the enactment of certain legislation or the use of public money is required for policy implementation, the Legislative Council will have the chance to deliberate on the bills concerned or vet the funding applications.

We will endeavour to further strengthen and perfect the existing system so that the channels of communication between the Government and the legislature can be free from obstruction and that the working relationship between the two can be more intimate. I hope the relationship between both parties can be built upon mutual understanding and co-operation. And through the enhancement of communication between the two, a partnership relationship of mutual trust can be established.

Thank you, Madam President.

PRESIDENT (in Cantonese): I now call upon Mr LEE Cheuk-yan to move his amendment. Mr LEE Cheuk-yan.

MR LEE CHEUK-YAN (in Cantonese): Madam President, I move that Mr Ambrose CHEUNG's motion be amended, as set out on the Agenda.

Mr LEE Cheuk-yan moved the following amendment:

"To delete "urges the Government to actively improve the relationship between the executive authorities and the legislature by faithfully adhering to the principle of the executive authorities being accountable to the legislature on the constitutional basis of the Basic Law, enhancing communication and co-operation between the executive authorities and the legislature to foster mutual trust and partnership, and expeditiously instituting a co-operation mechanism for improving the relationship between the two, which should include holding regular executive-legislature co-ordination meetings; setting up a policy consultative committee system to enable the legislature to participate in policy discussion and formulation; as well as strengthening the decision-making structure of the executive authorities, including enlisting outside experts to serve as principal officials and making political appointments of principal officials, so that the officials concerned will assume the political responsibility and accountability commensurate with their authority" after "That this Council", and substitute with "considers that the recent tension in the relationship between the executive authorities and the legislature is caused mainly by the various forms of "executive hegemony" the executive authorities have over the scope of the Legislative Council's work, undermining the power of the Legislative Councillors in monitoring the Government, so as to exert complete executive powers; besides, the Basic Law does not provide an effective framework for the executive authorities and the legislature to exercise checks and balances on each other and be accountable to the public; in this regard, this Council urges the Government to expeditiously introduce bills to amend the Basic Law so as to achieve the following objectives: 1. the Chief Executive and all Members of the Legislative Council be elected by universal suffrage to make both the executive authorities and the legislature accountable to the Hong Kong public; 2. the provisions which restrict the introduction of bills by Members of the Legislative Council and which require Members' proposals to be voted in groups be repealed, to enable the Legislative Council to exercise more effective checks and balances on the acts of the executive authorities; and 3. the Chief Executive makes political appointments of principal officials and the legislature may, by passing a vote of no confidence, impeach officials for dereliction of duties, so as to fulfil the objective that principal officials should assume political responsibility"."

PRESIDENT (in Cantonese): I now propose the question to you and that is: That the amendment moved by Mr LEE Cheuk-yan be made to Mr Ambrose CHEUNG's motion.

I now put the question to you as stated. 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 LEE Cheuk-yan rose to claim a division.

PRESIDENT (in Cantonese): Mr LEE Cheuk-yan has claimed a division. The division bell will ring for three minutes.

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

PRESIDENT (in Cantonese): Before I declare that voting shall stop, Members may wish to check their votes. If there are no queries, voting shall now stop.

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

Functional Constituencies:

Mr Michael HO, Mr CHEUNG Man-kwong, Mr SIN Chung-kai and Mr LAW Chi-kwong voted for the amendment.

Mr James TIEN, Mr Edward HO, Dr Raymond HO, Mr Eric LI, Mr LEE Kai-ming, Miss Margaret NG, Mrs Selina CHOW, Mr Ronald ARCULLI, Mr Ambrose CHEUNG, Mr HUI Cheung-ching, Mr CHAN Kwok-keung, Mr Bernard CHAN, Mr CHAN Wing-chan, Dr LEONG Che-hung, Mrs Sophie LEUNG, Mr WONG Yung-kan, Mr Howard YOUNG, Mrs Miriam LAU and Mr Timothy FOK voted against the amendment.

Geographical Constituencies and Election Committee:

Miss Cyd HO, Mr Albert HO, Mr LEE Wing-tat, Mr LEE Cheuk-yan, Mr Martin LEE, Mr Fred LI, Mr James TO, Miss Christine LOH, Mr LEUNG Yiu-chung, Mr Andrew WONG, Dr YEUNG Sum, Mr LAU Chin-shek, Miss Emily LAU, Mr Andrew CHENG and Mr SZETO Wah voted for the amendment.

Miss CHAN Yuen-han, Mr Gary CHENG, Mr Jasper TSANG, Mr LAU Kong-wah, Mr TAM Yiu-chung, Mr David CHU, Mr HO Sai-chu, Mr NG Leung-sing, Mr MA Fung-kwok, Mr CHAN Kam-lam, Mr YEUNG Yiu-chung and Mr Ambrose LAU voted against the amendment.

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

THE PRESIDENT announced that among the Members returned by functional constituencies, 23 were present, four were in favour of the amendment and 19 against it; while among the Members returned by geographical constituencies through direct elections and by the Election Committee, 28 were present, 15 were in favour of the amendment and 12 against it. Since the question was not agreed by a majority of each of the two groups of Members present, she therefore declared that the amendment was negatived.

PRESIDENT (in Cantonese): Now that we have dealt with Mr LEE Cheuk-yan's amendment, Mr Gary CHENG, you may move your amendment.

MR GARY CHENG (in Cantonese): Madam President, I move that Mr Ambrose CHEUNG's motion be amended, as set out on the Agenda.

Mr Gary CHENG moved the following amendment:

"To add "and" after "on the constitutional basis of the Basic Law,"; to delete "foster" from "to foster mutual trust and partnership" and substitute with "promote"; and to delete ", and expeditiously instituting a co-operation mechanism for improving the relationship between the two, which should include holding regular executive-legislature co-ordination meetings; setting up a policy consultative committee system to enable the legislature to participate in policy discussion and formulation; as well as strengthening the decision-making structure of the executive authorities, including enlisting outside experts to serve as principal officials and making political appointments of principal officials, so that the officials concerned will assume the political responsibility and accountability commensurate with their authority"."

PRESIDENT (in Cantonese): I now propose the question to you and that is: That the amendment moved by Mr Gary CHENG be made to Mr Ambrose CHEUNG's motion.

I now put the question to you as stated. 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 Wing-chan rose to claim a division.

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

PRESIDENT (in Cantonese): Will Members please proceed to vote.

PRESIDENT (in Cantonese): Before I declare that 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:

Miss Margaret NG, Mr HUI Cheung-ching, Mr CHAN Kwok-keung, Mr Bernard CHAN, Mr CHAN Wing-chan, Mr WONG Yung-kan and Mr Timothy FOK voted for the amendment.

Mr James TIEN, Mr Edward HO, Mr Michael HO, Dr Raymond HO, Mr Eric LI, Mrs Selina CHOW, Mr Ronald ARCULLI, Mr CHEUNG Man-kwong, Mr Ambrose CHEUNG, Dr LEONG Che-hung, Mrs Sophie LEUNG, Mr SIN Chung-kai, Mr Howard YOUNG, Mrs Miriam LAU and Mr LAW Chi-kwong voted against the amendment.

Mr LEE Kai-ming abstained.

Geographical Constituencies and Election Committee:

Miss CHAN Yuen-han, Mr Gary CHENG, Mr Jasper TSANG, Mr LAU Kong-wah, Mr TAM Yiu-chung, Mr David CHU, Mr NG Leung-sing, Mr MA Fung-kwok, Mr CHAN Kam-lam, Mr YEUNG Yiu-chung and Mr Ambrose LAU voted for the amendment.

Miss Cyd HO, Mr Albert HO, Mr LEE Wing-tat, Mr LEE Cheuk-yan, Mr Martin LEE, Mr Fred LI, Mr James TO, Miss Christine LOH, Mr LEUNG Yiu-chung, Mr Andrew WONG, Dr YEUNG Sum, Mr LAU Chin-shek, Miss Emily LAU, Mr Andrew CHENG, Mr SZETO Wah and Mr HO Sai-chu voted against the amendment.

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

THE PRESIDENT announced that among the Members returned by functional constituencies, 23 were present, seven were in favour of the amendment, 15 against it and one abstained; while among the Members returned by geographical constituencies through direct elections and by the Election Committee, 28 were present, 11 were in favour of the amendment and 16 against it. Since the question was not agreed by a majority of each of the two groups of Members present, she therefore declared that the amendment was negatived.

PRESIDENT (in Cantonese): Mr Ambrose CHEUNG, you may now reply and you have up to two minutes 54 seconds out of your original 15 minutes.

MR AMBROSE CHEUNG (in Cantonese): Madam President, from the Secretary's speech just now, Members can see that the Government was displaying its "routine" stand and attitude. However, I am also grateful to the Secretary for reading out paragraphs of the Basic Law which are incomprehensible to us.

What we ask of the Government is sincerity and honesty. Just now the Secretary cited some facts. However, it was a case of "quantity" against "quality". I would like to briefly respond to it. The Secretary is of the view that there is basically nothing wrong with the relationship between the executive authorities and the legislature. There is merely a difference of opinion. In terms of bills tabled for the Legislative Council's debate, the majority of them were passed and only a few were not passed. However, these few differences include first, the debate on the Basic Law; second, the big issue of the financial turmoil, which involved a sum of over $120 billion; third, bills on the constitution, such as the question of dissolving the Municipal Councils. The Secretary emphasized "quantity" and ignored "quality". However, if we look at these few differences, they are much more important in terms of "quality". Yet when it comes to the proposal to dissolve the Municipal Councils, the Secretary emphasized "quality". Thus, over 700 questionnaires in an opinion survey are said to be more important than 4 900 other questionnaires in terms of "quality". In this case, "quantity" is not that important. What we know is the findings of 2 600 questionnaires, but what about the over 1 600 questionnaires that the Government has kept somewhere? The Government did not publish these views. This is why I doubt the Government. If the relationship between the executive authorities and the legislature is to be improved, the Government must be honest. The Government's sincerity and credibility are crucial. If one wants to play around with "quality" and "quantity", we can go on debating. However, if the Government keeps over 1 600 questionnaires to itself and tells us that they are now under analysis and the results will not be announced until after October, we find this unacceptable.

Just now I passed a note to Mr YEUNG to say that I am fed up with the Government's attitude. I call on this Council not to let this motion and the amendments be negatived. I hope that the Legislative Council will at least be united before the Government for this once in asking the Government to take concrete actions to improve the relationship between the executive authorities and the legislature, and to respect this Council.

Thank you, Madam President.

PRESIDENT (in Cantonese): I now put the question to you and that is: That the motion moved by Mr Ambrose CHEUNG, as set out on the Agenda, 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 Ambrose CHEUNG rose to claim a division.

PRESIDENT (in Cantonese): Mr Ambrose CHEUNG has claimed a division. The division bell will ring for three minutes.

PRESIDENT (in Cantonese): Will Members please proceed to vote.

PRESIDENT (in Cantonese): Before I declare that 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 James TIEN, Mr Edward HO, Dr Raymond HO, Mr Eric LI, Mrs Selina CHOW, Mr Ronald ARCULLI, Mr Ambrose CHEUNG, Dr LEONG Che-hung, Mrs Sophie LEUNG, Mr Howard YOUNG and Mrs Miriam LAU voted for the motion.

Mr Michael HO, Mr LEE Kai-ming, Miss Margaret NG, Mr CHEUNG Man-kwong, Mr HUI Cheung-ching, Mr CHAN Kwok-keung, Mr CHAN Wing-chan, Mr SIN Chung-kai, Mr WONG Yung-kan, Mr Timothy FOK and Mr LAW Chi-kwong voted against the motion.

Mr Bernard CHAN abstained.

Geographical Constituencies and Election Committee:

Miss Christine LOH, Mr Andrew WONG, Mr HO Sai-chu, Mr NG Leung-sing and Mr MA Fung-kwok voted for the motion.

Miss Cyd HO, Mr Albert HO, Mr LEE Wing-tat, Mr LEE Cheuk-yan, Mr Martin LEE, Mr Fred LI, Mr James TO, Miss CHAN Yuen-han, Mr LEUNG Yiu-chung, Mr Gary CHENG, Mr Jasper TSANG, Dr YEUNG Sum, Mr LAU Chin-shek, Mr LAU Kong-wah, Miss Emily LAU, Mr Andrew CHENG, Mr SZETO Wah, Mr TAM Yiu-chung, Mr David CHU, Mr CHAN Kam-lam, Mr YEUNG Yiu-chung and Mr Ambrose LAU voted against the motion.

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

THE PRESIDENT announced that among the Members returned by functional constituencies, 23 were present, 11 were in favour of the motion, 11 against it and one abstained; while among the Members returned by geographical constituencies through direct elections and by the Election Committee, 28 were present, five were in favour of the motion and 22 against it. Since the question was not agreed by a majority of each of the two groups of Members present, she therefore declared that the motion was negatived.

PRESIDENT (in Cantonese): Second motion: Restoring confidence in Hong Kong's air cargo service. Mrs Miriam LAU.

RESTORING CONFIDENCE IN HONG KONG'S AIR CARGO SERVICE

MRS MIRIAM LAU (in Cantonese): Madam President, first of all, let me clarify that I have moved this motion today not so much out of any desire to find out who are to blame for the recent air cargo blunder, because the work in this respect is right now being undertaken by the Commission of Enquiry on the New Airport and by the Legislative Council Select Committee chaired by the Honourable Mrs Selina CHOW. The main intention behind my motion is rather that since the recent chaos following the opening of the air cargo terminals have exposed the problems with our air cargo service, the Government must look squarely at the problems and take immediate remedial measures. An added reason is that I want to raise a topic which both enquiry bodies will not touch upon: the ways in which Hong Kong can enhance its status as a centre of air cargo service. Even if the two air cargo terminals can resume normal operation, this will not mean that the crisis for Hong Kong is over and everything will be all right. Faced with international competition and developments, Hong Kong must make extensive and intensified efforts on a much larger scale before it can really consolidate its position as a centre of air cargo service.

In terms of the volume of air cargo, Hong Kong is the busiest airport in the world. In 1997, the volume handled stood at 1.78 million tonnes, with a total value of $654.9 billion and representing 21% of the total value of all our imports/exports. From this, we can see the immense significance of air cargo service to both our external trade and our entire economy. The air cargo trade brings to Hong Kong billions of income every year. In 1996, for example, the income derived from the air cargo trade was as high as $21.5 billion, which is about 1.91% of our Gross Domestic Product (GDP).

Before the inauguration of the new airport, the Government estimated that the volume of air cargo to be handled by the new airport every year would be far larger than the 1.6 million tonnes in the "Kai Tak era". It further estimated that in the run-up to 2002, the air cargo handling volume of the new airport would increase by 7.4% per annum. And, starting from 2010, the annual increase would be 5.6%.

The new Hong Kong International Airport eventually opened on 6 July, but the volume of air cargo handled by the two air cargo terminals has decreased rather than increased. In July this year, the cargo volume handled by them was just 100 000 tonnes, which is 50 000 tonnes, or 33%, less than the 150 000 tonnes handled in July last year. The Government estimated Hong Kong has sustained an economic loss of $4.6 billion as a result of the failure of the two air cargo terminals to function normally, and the losses represent 0.35% of our GDP.

However, I must say that the estimation of the Government can at best cover only those losses resulting directly from the paralysing of our air cargo service; indirect losses, including the losses incurred because of the chain effects of the moratorium, are not covered. According to the findings of a survey conducted by the Hong Kong Air Freight Forwarding Association, the losses sustained by individual freight forwarding agents as a result of the paralysing of the air cargo terminals actually range from several dozen thousand dollars to several millions. For manufacturers, the blunder has plunged some of them into liquidity difficulties, and others have sustained huge losses due to buyers' forfeiture of deposits, cancellation of orders and claims for compensation. So, the scale of losses will certainly be much bigger than the government estimate when both direct and indirect losses are considered. In the long run, the good name of Hong Kong manufacturers will bound to suffer, thus adversely affecting their ability to get orders from overseas in the future. What is more, the reputation of Hong Kong as an efficient international air cargo centre will also be dealt a heavy blow.

Madam President, although it is claimed that since 24 August, the Super No. 1 Air Cargo Terminal has resumed normal operation, there are all kinds of signs that the situation is still far from being satisfactory. According to a questionnaire survey conducted by the Hong Kong Air Freight Forwarding Association, 75% of the 197 respondents complained that between 10 August and 11 September, they had to wait four hours, or even 12 hours in some cases, before they could claim back their imported goods from the Super No. 1 Air Cargo Terminal. Such a length of waiting is much longer than that required in the "Kai Tak era". Besides, during the period from 25 August to 15 September, the average daily throughput of the Super No. 1 Air Cargo Terminal was just 3 500 tonnes, which is far smaller than the average daily volume of some 4 800 tonnes handled by the Kai Tak terminal in the past. This is indeed a very worrying problem.

The peak season of the export trade usually begins in September, and for that reason, we cannot afford any further mistakes. However, if we are to avoid further mistakes, should we still trust the unilateral assurance given by the Hong Kong Air Cargo Terminals Limited (HACTL)? From the recent air cargo chaos, we can actually notice an entire lack of communication between the two air cargo terminals, between the ramps handlers and the air cargo terminals, and between the air cargo terminals and freight forwarding agents. Given such a lack of communication, how can there be any co-operation? It will be strange if there have been no problems. The body responsible for co-ordination and communication should be the Airport Authority (the AA), but it has obviously failed to do its job well; the air cargo terminal blunder has also highlighted the AA's poor supervisory performance. I am of the view that if we want to ensure the smooth operation of our air cargo service, we will need to establish a mechanism similar to a joint conference in nature. Under such a mechanism, the AA should assume the responsibility for co-ordinating all the service providers in the air cargo trade, including the HACTL, the Asia Air Freight Terminal, the Airport Freight Forwarding Centre, the Hong Kong Air Freight Forwarding Association and representatives of the truck driving trade. These concerned parties should hold regular meetings so that they can grasp the relevant information more accurately and exchange their professional views on the actual operation of the air cargo service. That way, communication and co-operation can be enhanced and so can the efficiency of the freight forwarding service. Furthermore, the two air cargo terminals should each draw up their performance pledges, so as to give the AA and the freight forwarding trade a basis on which to monitor their performance.

In theory, the AA is obviously duty-bound to supervise the operation of the two air cargo terminals. In reality, however, we can see that the AA is obviously unable to do so despite all its wishes. The two air cargo terminals are both computer-operated, but if we look at the Chief Executive Officer and eight Executive Directors of the AA, we will see that none of them is an expert in computer or information technology. As a result, the AA has had no alternative but to trust the HACTL. The lack of any computer expert is not the end of the story, because in the entire AA, there is only one person who has any experience in airport management. Therefore, following the inauguration of the new airport, the AA should start to reduce the number of civil engineering personnel who were once required during the construction period. Instead, it should recruit more people with experience in airport management.

However much the AA is going to strengthen its work of supervision, and however well the two air cargo terminals are going to operate, no one, I am sure, can possibly guarantee that the air cargo terminals will never run into trouble again. In the past 22 years, during the time of Kai Tak, the HACTL did operate with very high efficiency. And possibly because of this, the HACTL has somewhat become extremely over-confident, to the extent that it simply does not have any crisis awareness at all, and it has thus failed to draw up any contingency plans. It was not until serious problems were detected that it decided to re-open the No. 2 Air Cargo Terminal at Kai Tak to handle imported goods. However, such an arrangement cannot in any way be regarded as a contingency measure; it is simply a "remedial" measure. Besides, the chaos in the new airport also reveals the lack of any vigilance on the part of the AA.

Up to this very moment, the HACTL is still insisting that its stand-by computer system is suffice as back-up, and, as a result, there is no need to draw up any contingency plans. The HACTL has once again asked us to have confidence in its performance, but the freight forwarding trade has indeed learnt enough from the recent blunder, and it simply cannot be reassured any more. The trade has suffered so immensely this time that it is no longer able to withstand any further blow. That is why it has insisted very firmly that the two air cargo terminals must come up with appropriate contingency plans. It also insists that the AA should draw up its own contingency plans to cope with unexpected incidents.

The recent blunder will definitely deal a blow to the position of Hong Kong as a leading air cargo centre. The best way to rebuild our reputation and users' confidence is of course to restore the past efficiency of our air cargo service as quickly as possible. While efforts in this direction are being made, the Government should also launch an appropriate publicity campaign to respond appropriately to the negative reports of foreign media, and one example of what this is to invite representatives of foreign media to conduct on-site visits in Hong Kong.

As I said at the beginning of my speech, even if the two air cargo terminals can resume normal operation, this will not mean that the crisis for Hong Kong is over and everything will be all right. The recent air cargo blunder has shown us that we should not take the competitive edge of our air cargo service for granted, and that Hong Kong must have an awareness of possible crises.

The prospects of our air cargo service are indeed very worrying, because even before the opening of the new airport, there were already signs that our air cargo handling volume was on the decline. Compared with the corresponding period last year, the first half of this year actually saw a drop of 1% in air cargo handling volume, and this is very much different from our original expectation of having an increase. One of the reasons for the drop in cargo handling volume is our high charges. If we look at Singapore, we will see that the air cargo terminals there charge only $0.7 for one kg. However, we in Hong Kong charge as much as $1.3. Before the financial turmoil, when the economy of Hong Kong was booming, consignors were on the whole still willing to pay more because they had confidence in our air cargo service, believing that by using the service of Hong Kong, they would always be able to deliver on time and thus avoid losses. However, after the financial turmoil, they may now have vastly different considerations.

Besides, the competition faced by Hong Kong has become increasingly keen, with competitors coming not only from foreign countries but also from the Mainland. Actually, the Mainland, in particular the South China region, is the source of most of our goods. Therefore, in theory, it should be more convenient and cost-efficient to export these goods by using the air cargo service there. At present, though the Huangtian Airport in Shenzhen is still unable to compete with Hong Kong in terms of cargo handling volume and customs clearance, it may well catch up over time. And, there is also the competition from Taiwan, which possesses a great advantage due to its geographical proximity to the Mainland. Although the customs clearance procedures of Taiwan have been criticized for being very complicated, the people there have been trying very hard to develop their air cargo service. So, Taiwan indeed poses a great threat to Hong Kong. Besides, we also need to consider Singapore, where excellent air cargo service facilities, enough cargo flights, adequate handling capacity and low charges are found. I know that during the time when the air cargo terminals of Hong Kong could not function normally, many goods were shipped from Hong Kong to Singapore for re-export.

Such is indeed a very critical situation, and the Government must therefore adopt appropriate policies and measures to increase the competitiveness of our air cargo service and assist the overall development of the freight forwarding trade. In this connection, I would like to make the following recommendations for the consideration of the Government.

First, the Government should review the franchises for air cargo service at the new airport. Specifically, it should assess the existing arrangements to see whether they are conducive to the long-term development of our air cargo service. Under the existing arrangements, the HACTL can handle a maximum of 2.6 million tonnes of cargo a year, and the maximum handling capacity of the Asia Air Freight Terminal is only 420 000 tonnes a year. The original intent of the Government is to introduce competition, but the vast difference in cargo handling capacity between these two terminals has made it impossible to achieve the goal of introducing competition.

As far as I know, under the existing air cargo service franchises, the AA cannot grant a third franchise unless the actual volume of cargo handled by any one of the existing franchised air cargo terminal five years later exceeds 75% of its maximum handling capacity. I do respect the existing franchises. However, if we rely on cargo handling volume as the sole criterion for introducing competition, I simply do not think that we will be able to ensure quality services from the two air cargo terminals, nor do I believe that we will be able to introduce any competition as intended. The reason is that if the air cargo volume handled by Hong Kong fails to attain the projected levels, or if the two air cargo terminals fail to attract users because of poor service quality or high charges, then we will be forced to make do with the reality of having only two air cargo terminals. This will greatly reduce the competitiveness of our air cargo service. Therefore, I really think that the Government should consider once again whether the existing criterion for introducing a third air cargo terminal is at all appropriate. Furthermore, the Government should also explore how best it can introduce healthy competition without violating existing franchise conditions, so as to suit the needs and long-term development of the freight forwarding industry.

Second, the Government should encourage the freight forwarding industry to develop logistics management centres, because air cargo terminals alone cannot possibly consolidate the position of Hong Kong as an air cargo service centre. Actually, from the experience of Singapore or even that of the Netherlands, we can see that logistics management centres can provide strong support for the development of the freight forwarding industry.

Logistics management denotes all those value-added input services such as packaging, quality management, product tests, repairs and maintenance provided on top of the conventional services of storage, distribution and transportation. For example, when a logistics management company receives an order from a multi-national corporation, it will start to gather raw materials and semi-finished products from suppliers all over the world. Following this, the logistics management company will provide some value-added input such as assembly, product tests and packaging services. And, finally, it will put the products into containers and forward them to the specified destinations.

Over the past 10 years, and until quite recently, the various economies in Asia have all grown rapidly, and an increasing number of multinational corporations have been making strenuous efforts to build up their global logistics management centres. Singapore was quick to notice such a global trend, and has long since been making positive efforts to develop its logistics management services. In this country, multinational corporations are encouraged either to establish their own logistics management companies or to conduct the work of logistics management through other companies. That way, it is hoped that Singapore can become the logistics management centre of these corporations in the region. As far as I know, more than 80 multinational corporations are already using Singapore as their product distribution centre in the region. Besides, Taiwan is also seeking to make itself a leading logistics management centre, and even some cities in the Mainland, including Shenzhen, Shanghai and Beijing, are also making positive efforts to develop their logistics management business.

Since logistics management companies need a lot of space for storage, distribution and other value-added activities, land prices are naturally their main concern. In the case of Singapore, the Government has been providing lands to logistics management companies at a preferential rate ─ S$50 per sq m per year for a period of 60 years. This is roughly equivalent to $2 per sq ft per month in Hong Kong. Unfortunately, in the case of Hong Kong, because of high land costs and expensive rents, the few so-called logistics management companies existing in Hong Kong are of a much smaller scale than those in Singapore. What is more, they are still characterized by the freight forwarding industry's traditional modus operandi of simply engaging in loading/unloading and storage of goods, falling far short of meeting the logistics management needs of multinational corporations. As far as I know, even the Mainland is now offering lands at low prices to the freight forwarding industry of Hong Kong as an incentive for the industry to develop logistics management centres there.

Indeed, the Government should consider the idea of assisting the development of logistics management services by providing lands to operators under the principle of costs recovery. If Hong Kong continues to make no vigorous attempts to develop logistics management centres, then our freight forwarding industry will never be able to make any progress at all. What is more, faced with outside competition, the freight forwarding industry will even be forced to develop their business in the Mainland, thus weakening the position of Hong Kong as an air cargo service centre.

Third, the Government should seek to strengthen the position of Hong Kong as a re-exports centre. At present, goods re-exported through Hong Kong are all required to pay handling charges upon entry and exit. So, the Government should consider how this can be improved. Besides, the two air cargo terminals should strengthen their ties, so that goods for re-export going through them can be handled more efficiently.

Forth, the AA should consider the possibility of reducing the landing charges for cargo flights, so as to encourage more cargo flights to use our international airport. When there are more cargo flights, and when the handling of air cargo can thus become more flexible, more manufacturers will be willing to use our airport for import and export of goods. This will thus boost the development of our freight forwarding industry.

The various difficulties faced by the air cargo industry can only be overcome when there are proactive and aggressive actions from the Government. It is only with government support that the freight forwarding industry can continue to develop, thus consolidating the position of Hong Kong as an air cargo service centre.

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

DEPUTY PRESIDENT (in Cantonese): Mrs Miriam LAU, your time is up.

Mrs Miriam LAU moved the following motion:

"That, as the air cargo terminals at the Hong Kong International Airport at Chek Lap Kok failed to operate normally at the commencement of the operation of the airport and brought Hong Kong's air cargo service almost to a standstill, resulting in substantial losses for Hong Kong's air cargo industry and the overall economy as well as seriously tarnishing the territory's reputation as an air cargo centre, this Council urges the Government and the Airport Authority to formulate expeditiously measures to strengthen supervision over the air cargo terminal and ensure that adequate contingency measures are in place to prevent the occurrence of incidents at the terminal from affecting Hong Kong's air cargo operations; at the same time, the Government should review the franchise for air cargo services at the new airport and consider the introduction of positive competition as a long-term objective, so as to enhance the quality and competitiveness of Hong Kong's air cargo service in the international arena; furthermore, the Government should also adopt expeditiously a comprehensive strategy to restore the confidence of the local and international communities in Hong Kong's air cargo service, thereby further consolidating the territory's position as a global air cargo hub."

DEPUTY PRESIDENT (in Cantonese): I now propose the question to you and that is: That, as the air cargo terminals at the Hong Kong International Airport at Chek Lap Kok failed to operate normally at the commencement of the operation of the airport and brought Hong Kong's air cargo service almost to a standstill, resulting in substantial losses for Hong Kong's air cargo industry and the overall economy as well as seriously tarnishing the territory's reputation as an air cargo centre, this Council urges the Government and the Airport Authority to formulate expeditiously measures to strengthen supervision over the air cargo terminal and ensure that adequate contingency measures are in place to prevent the occurrence of incidents at the terminal from affecting Hong Kong's air cargo operations; at the same time, the Government should review the franchise for air cargo services at the new airport and consider the introduction of positive competition as a long-term objective, so as to enhance the quality and competitiveness of Hong Kong's air cargo service in the international arena; furthermore, the Government should also adopt expeditiously a comprehensive strategy to restore the confidence of the local and international communities in Hong Kong's air cargo service, thereby further consolidating the territory's position as a global air cargo hub.

We now proceed to the debate. Does any Member wish to speak? Mr CHAN Wing-chan.

MR CHAN WING-CHAN (in Cantonese): Mr Deputy, the new airport, built at a cost of $80 billion, was at last opened on 6 July, an event awaited anxiously by many people. However, it failed to bring Hong Kong people a pleasing surprise. To those using the new airport with high hopes, it was a great disappointment. At the time of its opening, the management of the new airport blundered, with flight information display boards in a big mess, and baggage turning up late or not turning up at all. As a result, in-bound visitors got a very bad impression about Hong Kong's new airport.

Of all these, the failure of Super Terminal No. 1 to operate normally, of course, dealt the heaviest blow to Hong Kong's economy. At present, the Hong Kong Air Cargo Terminals Limited (HACTL) handles over 80% of Hong Kong's air freight (more than 4 800 tonnes of cargoes) daily, leaving the remaining (less than one fifth) to the Asia Airfreight Terminal Company Limited. In other words, the HACTL more or less monopolizes the lifeline of Hong Kong's air cargo service. It is worrying that the breakdown of HACTL operation means the paralysis of air cargo service in Hong Kong. With such a heavy responsibility placed on its shoulders and the airport scheduled to move from Kai Tak to Chek Lap Kok overnight, the HACTL should have made the fullest preparations, such as checking each and every one of the cargo handling procedures as well as the computer systems so as to get them tested to the fullest extent, and drawing up contingency plans. Unfortunately, the HACTL had not got the preparation work fully done, the reasons for which have yet to be looked into. But the fact remains that for some time it did bring air cargo service in Hong Kong to a total standstill, resulting in heavy economic losses and, above all, dealing a blow to international confidence in Hong Kong's air cargo service.

I am a layman in matters concerning computers. However, I believe that both the AA and HACTL have employed some outstanding computer engineers and that computer systems can function more smoothly if they have been tested repeatedly, comprehensively and thoroughly. But that did not turn out to be the case.

This is not the first time for the HACTL to handle more than 4 000 tonnes of cargoes per day. They have all along been handling the same amount of cargoes daily and it can be said to be something well-practised. The HACTL also ought to be very familiar with all the cargo handling procedures. Thus problems such as the failure of sensors at the storage area of the cargo terminal because of dust accumulation and the breakdown of the computer systems should have been expected. They ought to have been repeatedly tested well in advance to ensure proper functioning instead of being left to develop problems in actual operation. Furthermore, because of the total reliance on computerized operations and the absence of a contingency plan with manual operational procedures, the situation literally "got out of hand" and the whole air cargo service in Hong Kong ran into a big mess when the computer systems developed problems.

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

MR LEE WING-TAT (in Cantonese): I have just returned to the Chamber from the Ante-Chamber. I want to ask one question. As we all know, the Legislative Council has set up a Select Committee to look into this matter. Generally speaking, there is no problem with this motion debate discussing the development of cargo service. But how is the boundary to be defined if the scope of discussion touches the question of responsibility in respect of 6 July? Can colleagues, when speaking, touch the question of responsibility with regard to the messy operation of the airport at the time of its opening? I hope you, Mr Deputy, will make a ruling and give Members some guidance. I think the Chair should give colleagues some guidance. Many areas might, otherwise, be touched. Thank you, Mr Deputy.

DEPUTY PRESIDENT (in Cantonese): I believe that Members clearly understand that the Legislative Council has set up a Select Committee to look into the issue. So at this point, Members should, as far as possible, refrain from talking about the Select Committees' work. I hope that Members, when speaking, can confine themselves as far as possible to the overall principle and spirit of the original motion. Mr CHAN Wing-chan, please continue.

DEPUTY PRESIDENT (in Cantonese): Mr LAU Kong-wah, do you have a point of order?

MR LAU KONG-WAH (in Cantonese): Mr Deputy, the topic of the debate itself in fact reflects such a viewpoint. It touches on the event of 6 July. Does it mean that we cannot refer to the wording of the motion?

DEPUTY PRESIDENT (in Cantonese): The Chair will make a ruling in accordance with the circumstances when a Member speaking touches upon a point of order. Mr CHAN Wing-chan, please continue.

MR CHAN WING-CHAN (in Cantonese): Mr Deputy, Mr LEE Wing-tat has just mentioned this question. The airport case is now being looked into by various committees. I have no intention to comment on it here. However, I believe that the inquiry results will open up new horizons to the people of Hong Kong. Now we have seen the evils arising from the near-monopoly exercised by the Hong Kong Air Cargo Terminals Limited (HACTL) over air cargo service. The Honourable Mrs Miriam LAU, the mover of the original motion, already pointed out that because of the air cargo service franchise, little room has been left for other air freight companies to put up competition. Precisely on account of this, Hong Kong's air cargo service came to a standstill immediately when the HACTL's computer systems broke down because other air freight companies are not able to offer competition or remedy.

Mr Deputy, it can be seen from the incident that the Government's supervision over the HACTL is inadequate and that there is also a lack of supervision over the HACTL's rights and obligations.

DEPUTY PRESIDENT (in Cantonese): Mr CHAN, when you speak, you may talk about the future but not the existing situation.

MR CHAN WING-CHAN (in Cantonese): Yes, Mr Deputy. It seems that the Government cannot intervene and is helpless. Nor is there any organization to exercise checks and balances. I think that we should make use of this opportunity to review the HACTL's franchise and supervision, so as to restore people's confidence in Hong Kong's air cargo service. There can be improvement only if there is competition. And I believe there are companies in the market interested in joining the air cargo industry. Then, even if a company develops problems, the air cargo service still will not come to a total standstill. I, therefore, support Mrs Miriam LAU's motion.

DEPUTY PRESIDENT (in Cantonese): Mr SIN Chung-kai.

MR SIN CHUNG-KAI (in Cantonese): Mr Deputy, the Super Terminal No. 1 which was built by the HACTL at a cost of US$1 billion went into service on 6 July this year, when the new airport started was inaugurated. At that time a problem cropped up. Super Terminal No. 1 is the largest and most advanced stand-alone air cargo handling facility in the world, with an estimated annual cargo handling capacity of 2.6 million tonnes. Such a world-class air cargo terminal plays a positive role in further consolidating Hong Kong's position as an Asian Pacific air cargo hub. So its opening ought to have been a piece of very good news to Hong Kong.

However, it is a great pity that during the initial operation of Super Terminal No. 1, its systems developed serious problems, paralyzing Hong Kong's air cargo service for more than a month and, consequently, turning a piece of good news into a nightmare instantly.

The consequence of franchised operation

There are two air cargo terminals at the new airport. Apart from the HACTL, there is the Asia Airfreight Terminal Company Limited (AAT). With a cargo handling capacity of 0.42 million tonnes, about one sixth of HACTL's, the AAT was unable to help when the HACTL ran into problems.

This incident reflects a very significant issue, namely, the excessive reliance on one company by Hong Kong's air cargo service, a serious case of monopoly. According to government estimate, the disruption of air cargo service inflicted on Hong Kong a total loss of $4.6 billion, equivalent to a 0.35% cut in the economic growth of Hong Kong in the current year. Irrespective of whether the Government has underestimated the economic losses, the incident has definitely tarnished Hong Kong's reputation as an air cargo centre. Amid the current economic downturn, the disruption of cargo service has dealt a heavy blow to Hong Kong's medium and small enterprises, rubbing salt on Hong Kong's economic wound.

Lack of supervision from the Airport Authority

In the past, the Kai Tak Airport was directly managed by the Civil Aviation Department of the Government. But now the new airport is operated on commercial principles by the Airport Authority (AA), a statutory body. The AA supervises the operation of the HACTL by way of a private contract, that is, a franchise agreement. In the present case, as the HACTL ran into serious problems, the AA is directly responsible for its supervision and government officials overseeing the entire new airport project really have to shoulder the blame.

Regarding the present incident concerning air cargo service, let us leave it to the various investigative committees to establish the causes and determine the question where responsibility should rest. However, both the Government and the AA should expeditiously conduct a review that should cover the relationship between the Government and the AA, as well as the franchise provisions governing the HACTL so as to strengthen the supervision over it. In addition, the Government should draw up a set of contingency measures, mapping out what should be done in the event of recurrence of similar incidents and minimizing potential losses.

A definite need to revise the franchise agreement

Insofar as I understand it, the agreement concluded in 1995 between the AA and the HACTL guarantees that the HACTL shall have an annual profit return of 15% to 19% of its investment. The median point is 17.5%. There is justification for the HACTL to increase charges if the profit return is less than 15%. The calculation of profit on the basis of assets is in fact obsolete. I have to stress that all these are based on reported information. The Government and the AA have not disclosed to relevant members of the public, including the Legislative Council, the contract between the AA and the HACTL on the ground that it is a private contract. I must stress that while the AA used to maintain a direct relationship with the Government, it now plays the role of a middle-man. In the past the Government could directly supervise some franchised companies, including the HACTL, but now there is no way for the Government to intervene even if it wants to because there stands the AA in the middle. I have to emphasize that the Democratic Party does not oppose such a mechanism. We do not necessarily oppose slackening a government-controlled mechanism so as to make way for a mechanism run by the AA or operated under competition among private parties. However, in designing the mechanism, we must ensure that there is sufficient competition as only competition can improve the standard of service and offer choices to medium and small enterprises as well as big and small companies when they have to use air cargo terminals. The present situation is that more than 80% of the service is in the hands of one single company and there is simply no choice. Moreover, the agreement also gives the HACTL handsome profit return, which in fact is a major step backward in the supervision of public enterprises. With monopolized operations, consumers do not have any choice. We therefore urge the Government to come to an agreement with the AA as soon as possible to revise the franchise so as to lower the HACTL's profit return and introduce provisions to prepare for the future when the Government and the AA open the market.

An absolute need to bring in competition in the long run

In the long run, the Government ought to open the market of Hong Kong's air cargo service so as to bring in more competition. In this way, both the quality and efficiency of Hong Kong's air cargo service can be improved, and, at the same time, better and cheaper rates can be offered to consumers too.

Adopting measures to restore confidence

The incident is a fait accompli. It is a matter of great urgency to restore the confidence of the local and international communities in Hong Kong's air cargo service. Therefore both the Government and the HACTL should put in extra efforts in a bid to convince all parties with facts and performance that the event is an isolated incident and that there definitely will be no recurrence.

With these remarks, Mr Deputy, I support the original motion.

DEPUTY PRESIDENT (in Cantonese): Dr Raymond HO.

DR RAYMOND HO (in Cantonese): Mr Deputy, on the world list of tip-tops, quite a number of items belong to Hong Kong. Among these is the world's busiest international cargo airport. For the year 1996, the air cargo handling capacity reached 1.56 million tonnes. The figure went up to 1.78 million tonnes in 1997. Passenger carriers handled 55% while the rest was processed by cargo aircrafts. Super Terminal No. 1, which went into service this July, was acclaimed as the world's largest air cargo handling facility. Many a times, things said to be the world's tip-tops often run into problems when first put to use. It is not known whether this is due to jealousy on the part of Providence or men's over-confidence. For instance, the super ocean liner Titanic, the theme of a movie that kept Hong Kong cinema-goers on the move, went straight down to the seabed of Atlantic Ocean on her maiden voyage even though she was said to be a vessel never to sink. All kinds of problems cropped up too when Super Terminal No. 1 first went into service, plunging Hong Kong's air cargo service into deep waters and badly hitting consignors and consignees. Besides inflicting losses on Hong Kong's overall economy, it also severely tarnished Hong Kong's reputation as an international air cargo hub.

It was not by chance that Hong Kong became the world's busiest international cargo airport. Apart from its geographical position, good and efficient services available in Hong Kong are also the key factors. However, because of the failure of the air cargo terminal to operate normally when Hong Kong's new airport first went into service, its long-established and hard-earned reputation as an aviation centre was seriously tarnished. Anyway, the incident taught us the important lesson that success should not be taken for granted and will not last long if we fail to continuously put in efforts and make improvements, just as in the case of Hong Kong's tourist industry and other service industries.

Though Hong Kong is located at the centre of the Far East, such a favourable location cannot automatically make it an air cargo hub. In fact, there has been a continuously rising global demand for air cargo service, and Hong Kong has been able to provide consignors with efficient and reliable cargo service. All these are key factors. However, because of the rapid economic growth over the last 20 years, we became over-confident and obsessed with the firm belief that Hong Kong was especially well-gifted by nature and could take success for granted. Gradually we forgot the fundamental link between good services and success, thus neglecting the importance of upgrading our services.

The present problems encountered by the new airport at its inception have caused some cargo aircrafts to be diverted to nearby airports, such as Macau Airport and Huang Tien Airport in Shenzhen. To maintain Hong Kong's leading position in air cargo service, we should expeditiously strengthen our services to win back the confidence of airlines and cargo companies in Hong Kong so as to persuade them to return their operations back to Hong Kong.

At the same time, it is necessary for Hong Kong to bring in more positive competition for air cargo handling as improvement would be a result of competitions. Of course, I am very much in favour of Government's awarding to one more company the franchise for air cargo service. However, to keep Hong Kong's air cargo service in line with the requirements of the international market, it is necessary for the Government to continue its review on the relevant policies as air cargo service is expected to have rapid growth in the future, especially in the area of courier service.

In addition to providing important supporting services to Hong Kong's industries and commerce, the Hong Kong's air cargo industry also provides many jobs. Just by noting the losses that Hong Kong sustained in July and August this year when the air cargo service ran into problems, we can clearly see its importance to Hong Kong, even though this has to be taken as a negative example which can serve as a lesson. The Government, therefore, really has the duty to draw up an overall strategy to enable Hong Kong's air cargo industry to grow steadily and healthily. At the same time, the Government and officials of the relevant departments, as well as all Members, should also make full use of different international arenas to promote Hong Kong as an important air cargo hub in the Far East.

Mr Deputy, I support Mrs Miriam LAU's motion and so submit.

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

MR HUI CHEUNG-CHING (in Cantonese): Mr Deputy, the air cargo industry has always been Hong Kong's lifeline. With a daily cargo handling capacity as high as some 5 000 tonnes, it tops the world. As an industry that counts on every minute as well as every second, it depends very much on the service qualities of punctuality, expedition, stability and reliability. Unfortunately, Hong Kong Air Cargo Terminals Limited (HACTL), which monopolizes Hong Kong's air cargo service, ran into a major standstill lasting for a month and half following the opening of the new airport, instantly ruining Hong Kong's long-established reputation as an international air cargo centre and, above all, dealing long-lasting and serious blows to local import and export trades. According to estimates made by members of the industry, in the days to come, 10% to 20% of Hong Kong's cargo handling business will flow into the hands of our competitors. I am of the view that Hong Kong will be absolutely unable to sustain another blow arising from a major standstill of the air cargo service, hence, it is unwholesome to allow one single private company to monopolize 85% of Hong Kong's air cargo service and the situation must be rectified as soon as possible.

Facts have revealed that monopoly does not in any way bring in good quality services. CMB, holding the franchise for decades, only provided services that kept going downhill. Not until Hong Kong's various international telephone markets were thrown open then the people came to realize that making long-distance calls were not that expensive. I think the Government should immediately review the franchise agreement concluded between the Airport Authority (AA) and HACTL to see what HACTL services can be contracted to other air freight companies, and approach companies which are interested for advice on improving cargo service. Upon completion of the review, the Government should, as soon as possible, initiate tendering exercise to bring in positive competition for Hong Kong's air cargo service. Pending the completion of the review, the Government can appoint to the Airport Steering Committee more experts who are familiar with airport operations to strengthen supervision, and also ask HACTL to get more special equipment and talents so as to improve management and prevent a recurrence of a major standstill of the air cargo service.

On the other hand, to restore confidence of international communities in Hong Kong's air cargo service, the Government must conduct a comprehensive review of its supervisory measures in respect of the AA to see if they are all proper, paying special attention to the question as to whether or not the AA has been vested with powers which are too extensive. At present, the AA, totally in charge of all matters of the new airport, has great powers as well as heavy responsibilities. The standstill at the air cargo terminal reveals the fact that the AA has failed to discharge its responsibilities despite the powers it holds. The AA has no contingency plans for problems and emergencies arising from the new airport. Besides this, the AA and HACTL have been trying to pass the buck to each other since the incident. It is really disappointing. Equally disappointing is the fact that many members of the Board of Directors of the AA has often failed to turn up at meetings on account of other engagements. When once the professional work of the AA run into problems ......

DEPUTY PRESIDENT (in Cantonese): Mr HUI, your speech has somewhat touched on the work of the Select Committee and gone beyond the scope of the motion. Please avoid that as far as possible.

MR HUI CHEUNG-CHING (in Cantonese): Yes, Mr Deputy. I think the Government should take the following actions after the investigation of the Commission of Inquiry:

1. To conduct a review to see if there is enough supervision over the AA, with special attention to the question as to whether or not some of the senior members have measured up to their requirements. Also, to urge the AA to initiate suitable staff movements and improve the recruiting mechanism; and

2. The Government should review its relationship with the AA and to make the AA more accountable and transparent to the Government and the public.

At a time when the international economic climate is of such keen competition, one of the valuable merits enjoyed by Hong Kong is its highly efficient management. I hope that the Government can make every effort to retain this merit and definitely will not allow the great turmoil and extensive standstill at the new airport to repeat themselves for cases as such will weaken global confidence in Hong Kong's investment environment.

Mr Deputy, I so submit.

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

MR LAU KONG-WAH (in Cantonese): Mr Deputy, when the Hong Kong International Airport at Chek Lap Kok first went into service, computer systems of the air cargo terminal at the airport experienced great chaos, consequently bringing Hong Kong's air cargo service almost to a complete standstill, inflicting on Hong Kong's air cargo industry as well as the overall economy losses amounting to billions of dollars, and, at the same time, badly tarnishing Hong Kong's reputation as an air cargo centre.

Furthermore, the fact that the Government has allowed the existence of monopoly in the air cargo industry explains why it was not possible to ask other air freight companies to help ease the situation and minimize economic losses arising from the chaos at the air cargo terminal when problems cropped up. The Airport Authority (AA) agreed to allow the Hong Kong Air Cargo Terminals Limited (HACTL) to take up 80% of the market share and to have a profit margin of 17.5%. By so doing, the Government has run counter to the long-upheld business principle of fair competition. In fact, according to the franchise agreement awarded to the HACTL, there should not be more than three operators in the five years immediately following the opening of the airport and there should not be more than four operators in the next five years. But at present there are only two. Obviously, in accordance with the agreement, the Government can additionally award the franchise to another operator or two in the next decade. We are in favour of the spirit of the agreement. The Government, therefore, should bring in positive competition for the business of air cargo terminals. Furthermore, the air cargo industry and the import and export trade are the lifeline of Hong Kong. How can we afford to allow one private firm to monopolize the entire air cargo industry and not to bring in fair competition?

As the HACTL takes up most of the market, when it runs into problems, no other air freight company is capable of easing the burden of air cargo service. This was exactly the case of what happened at the new airport. Members of the industrial and commercial sectors in Hong Kong as well as the public could only look blankly at the standstill of the air cargo terminal, and witnessed how their goods were detained in the airport's cargo terminal and how heavy economic losses were sustained.

The Democratic Alliance for the Betterment of Hong Kong is of the view that the Government should again review the franchise of the air cargo service at the new airport and bring in positive competition without delay to break the monopoly. With regard to the air cargo industry in Hong Kong, the Government should draw up long-term policies on the basis of fair competition so as to improve the quality of air cargo service in Hong Kong and its competitiveness in the international arena. We believe that with fair competition in the air cargo service, both its price levels and service can be favourably enhanced and its overall competitiveness improved.

With these remarks, I support the motion.

DEPUTY PRESIDENT (in Cantonese): Mrs Selina CHOW.

MRS SELINA CHOW (in Cantonese): Mr Deputy, cargo service directly affects small and medium-sized enterprises (SMEs), which make up 99% of local enterprises. In Hong Kong, there are, on analysis, the following unfavourable factors to the cargo service and SMEs:

1. High operational cost of the port, a cause for concern even before the outbreak of the financial turmoil;

2. The rise of potential competitors: in addition to Singapore, ports in Southern China have been incessantly opened up and developed;

3. Hong Kong's competitiveness has been weakened following the financial turmoil in Asia;

4. High land prices; and

5. High cost for good-quality labour.

The concept of logistics management put forward by the Honourable Mrs Miriam LAU not only can solve the problems of high land prices and expensive cost of good-quality labour, thereby enabling the operational costs of cargo industry and that of big and small-sized enterprises to be lowered, but can also save time, improve production and forwarding efficiency, expand the international scope of the service and enhance competitiveness.

At present, as far as the quantities of both air cargoes and sea cargoes are concerned, Hong Kong is still the top entrepot in the world. The SMEs have always been the main driving forces of Hong Kong's economy. To upkeep our favourable position and maintain the driving forces at a time of financial turmoil and growing competitions, the cargo industry and big and small-sized enterprises must not stay put on old patterns. To be ahead of neighbouring nations and to turn Hong Kong into an international centre of logistics management, the Government should help these people develop logistics management.

First, the management and equipment of the new airport and the air cargo terminal should be reviewed so as to eliminate any possibility for the recurrence of the chaos experienced at the time when the new airport first went into service. At the same time, conditions for the promotion of logistics management should be enhanced, such as providing a lot of open space for storage and dispatch of commodities, good communication networks, advanced information technology, and talents and so on.

Second, electronic trading and electronic data interchange are still at a primitive stage in Hong Kong. It is necessary to make every sector thoroughly understand, operate and promote Trade Link and electronic trading.

Third, Hong Kong's cargo industry knows little about logistics management. The concept is still unclear. Only a few individual manufacturers have adopted professional logistics management. The Government should have it publicized among the cargo industry and the SMEs, and strengthen studies in universities and polytechnics in order to train up talents with skills to apply information technology to logistics management.

Hong Kong should maintain its own conditions that are more favourable than those of neighbouring nations, for example, low tax, laissez-faire policy, free trading port legislation, efficiency, and sophisticated trading knowledge and experience. It should be further developed into an international centre of logistics management with information technology. It is hoped that the cargo industry can thus turn over a new chapter.

Furthermore, I want to add a few remarks to what Mrs Miriam LAU just mentioned in respect of transit cargoes. Hong Kong should be encouraged to become an entrepot for cargoes by the Government. At present, incoming transit cargoes are charged handling fees by cargo terminals. They are again charged handling fees on export, which adds to the handling cost of transit cargoes. To attract more transit cargoes, Singapore, it is said, does not charge any handling fee. Though no handling fee is charged for it, transit cargoes still generate a lot of income for Singapore's cargo industry and other related trades and make the cargo industry even more prosperous. Hong Kong should take that into consideration and encourage cargo terminals to lower handling cost for transit cargoes.

The various problems faced by the air cargo service have got to be solved with the assistance of Government's initiatives and forward-moving policies. Only in this way can the cargo industry continue to grow and Hong Kong consolidate its position as an air cargo centre.

With these remarks, Mr Deputy, I support the motion.

DEPUTY PRESIDENT (in Cantonese): Mr Howard YOUNG.

MR HOWARD YOUNG (in Cantonese): Mr Deputy, as Hong Kong is an international centre of cargo service, air freight takes up a substantial proportion of the total quantity of cargo service. Air cargo industry is a major lifeline of the Hong Kong economy. It is a pity that in recent years, there are signs that the growth of the air cargo industry has slackened.

On top of the fact that the growth of the overall quantity of cargoes has slackened, the development of air cargo service in neighbouring places has constantly posed a threat to Hong Kong's leading position. Take Huang Tien Airport in Shenzhen as an example. Although its cargo handling capacity is far smaller than that of Hong Kong, it has potential for growth; then both Singapore and Taiwan are actively developing logistics management centres (a point just mentioned by the Honourable Mrs Selina CHOW). Thus, the air cargo industry in Hong Kong is facing strong competitors.

The recent errors made in the air cargo terminal at the new airport dealt an even heavier blow to the air cargo industry of Hong Kong. Besides bringing about a certain extent of economic losses, the incident also tarnished Hong Kong's long-established reputation as an international air cargo centre.

In the long run, it is necessary to improve Hong Kong's competitiveness in order to maintain our favourable position. The Government and the parties concerned should actively study and develop plans favourable to the air cargo industry so as to ensure that Hong Kong may become a collecting and distributing centre of goods.

Asian economy is growing rapidly. The government of Singapore has put in great efforts to develop a logistics management centre. She has become a major distributing centre of goods in the region. Besides Singapore, Taiwan and mainland China, which are places adjacent to Hong Kong, are also actively developing logistics management.

In Asia, Hong Kong enjoys geographical and economic advantages. We have advanced transport infrastructural facilities, free trade, a simple taxation system, and a reliable judicial system. Providing full ranges of credit facilities for import and export as well as insurance services, Hong Kong is also a financial centre. This also accounts for one of the reasons why Hong Kong has been able to become a shipping centre. However, in the development of logistics management, Hong Kong lags behind the others. With its competitiveness going downhill and growth remaining stagnant, Hong Kong's position as an international shipping centre is very much in jeopardy.

At present, the Government puts in great efforts to promote and develop high-yield and high-tech industries. While the development of logistics management is an important component for the development of high value-addedness and high-technology in the shipping industry ─ they are inseparable ─ it is also a key factor in improving the competitiveness of the air cargo industry. The Government may take reference from Singapore, by granting land to logistics management companies on concessionary terms. Another alternative is to consider afresh the idea of allowing Cargo Terminal No. 2 in the former Kai Tak Airport to contribute its use in air cargo industry, which is a move to consolidate Hong Kong's position as an international cargo centre by making available to companies interested in developing logistics management an environment that is favourable and full of potentials.

With these remarks, I support the motion.

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

MR NG LEUNG-SING (in Cantonese):Mr Deputy, the chaos at the air cargo terminal since the inception of the new airport dealt a heavy blow to air cargo industry in Hong Kong, bringing immediate and long-lasting adverse effects to Hong Kong's overall economy. According to reports received, during the affected period, the average daily handling capacity of the Hong Kong Air Cargo Terminals Limited (HACTL) was 30% lower than that for the same period of last year. According to the Government's initial estimate, the Gross Domestic Product for the whole year will go down by 0.35% on that account. Besides, during the said period, many consignors have instead forwarded their cargoes through nearby places, draining away much of the business of our air cargo agents and, in the long run, weakening Hong Kong's important position as an air cargo centre in the Asian Pacific region.

As Hong Kong is an open international business city, air cargo traffic is one of its key lifelines. A guarantee on the quality, quantity and efficiency of the basic facilities and services of the air cargo industry is of the utmost significance to the future development of Hong Kong. People in Hong Kong have learned from the standstill of the air cargo service at the new airport that the operation of an air cargo company to a great extent determines the flow of that economic lifeline. It is, therefore, essential that the Government should take a lesson from the case and seriously review the present-day supervision and franchise arrangements of the air cargo service.

At present, the HACTL handles 80% of Hong Kong's air cargo throughput. "Super Terminal No. 1", the said company's air cargo handling facility, is a complicated stand-alone system. In the event that it runs into any sudden operational problems, Hong Kong will lose most of its capability in handling imported and exported goods. Not even the Government can step in to rectify the situation. The company, therefore, must have a satisfactory fall-back contingency plan. This is a minimum requirement. At present, only two companies are franchised. Of the two, Asia Airfreight Terminal Company Limited (AAT) has just taken up 20% of the market share. As indicated by the standstill of the air cargo service in this case, the AAT was unable to fill in the gap in the air cargo handling capability when the other company ran into problems. So in the long run if more operators would share the said market to have the market share more evenly distributed, then the overall quality of the service and the fees charged will improve on account of competition, and the response to emergency too will be more effective.

With regard to the specific franchise agreement, the Government should strictly enforce the provisions on supervision. A guaranteed profit return equivalent to 18% of the total investment particularly warrants a review. The reason is that it will not be conducive to Hong Kong in its attempt to upgrade its competitiveness as an international air cargo centre with regard to cost. It is especially so now that quite a few airports running at lower operational cost are in service at places close to Hong Kong. In view of such circumstances, we, for our long-term interests, should abolish the arrangement in respect of guaranteed profit and bring in full-scale market competitions so as to further the growth of the air cargo industry.

Mr Deputy, I so submit.

THE PRESIDENT resumed the Chair.

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

(No Member indicated a wish to speak)

PRESIDENT (in Cantonese): Secretary for Economic Services.

SECRETARY FOR ECONOMIC SERVICES (in Cantonese): Madam President, first of all, I thank Members for their comments.

Air Cargo Services after airport opening

There were problems with air cargo handling at the new airport on opening which caused disruption to the import and export of air cargo. The Hong Kong Air Cargo Terminals Limited (HACTL) had to stop handling certain types of air cargo while its problems were being solved. The other air cargo franchisee, the Asia Airfreight Terminal Limited (AAT) also had initial operating difficulties. They and the express cargo handlers, however, continue their operation at the new airport.

Pending the resumption of full operation of the air cargo facilities at the new airport, Government worked with the Airport Authority (AA) and other concerned parties to put in place contingency arrangements to help airlines and the air cargo industry to handle as much air cargo as possible.

These included measures to facilitate the movement of air cargo between Chek Lap Kok and Kai Tak by trucks or barges. Special arrangements were also made to enable customs clearance of cargo at the air cargo handling facilities at Kai Tak. In response to a suggestion by the Honourable Mrs Miriam LAU and the trade, Government in conjunction with the AA also helped to put in place a special arrangement to enable airlines and freight forwarders to make use of the Airport Freight Forwarding Centre (AFFC) to help handle air cargo.

Government also approached the Macau aviation authorities and some concerned aviation partners for support and assistance. The purpose is to enable Hong Kong airlines to make use of the Macau International Airport to handle their cargo. With the full support of the Central People's Government, special arrangements were also made at very short notice to enable airlines and freight forwarders to utilize air cargo handling facilities at the Shenzhen Huangtian Airport for the export and import of air cargo between Hong Kong and other places.

With the efforts and co-operation of all parties concerned, all restrictions on import and export cargo earlier imposed by HACTL were lifted on 14 August 1998. The company resumed handling all types of air cargo at the new airport on 24 August 1998, one week earlier than envisaged in its recovery plan.

Looking at the big picture, the volume of cargo handled at the new airport has increased steadily since shortly after airport opening. After mid-August, the volume of air cargo handled remained fairly steady at an average of around 4 500 tonnes per day. On particular days mainly in September, over 5 000, and in some cases, 5 500 tonnes, of air cargo were handled. This shows that the two air cargo operators could now process air cargo above the average daily volume of around 4 900 tonnes handled at Kai Tak in 1997.

Notwithstanding progress made, there is of course always room for improvement. Given that the airport is still a very new facility and the sheer scale and complexity of various operations, fine-tuning and adjustment in the light of operational experience will be a continuing process for quite a while. I am sure all parties concerned would continue to strive to improve their services.

Supervision over air cargo franchisees

Various Members have urged the Government and the AA to strengthen supervision over the air cargo operators. We understand the concerns expressed.

Air cargo operators at the new airport are franchisees of the AA. They are required by the Authority to provide services in accordance with standards of comparable airports. There are provisions in the franchise agreement for the AA to monitor service standards, terminate the franchise and introduce additional franchisees.

In practice, the AA is in close contact with the air cargo franchisees to monitor their actual operations on the ground and their interface with other operators/users. It also receives regular update of their operating data as well as their business forecast and plans.

Apart from monitoring the service standards of franchisees themselves, the AA also brings in users and other concerned parties to this end. It has also put in place a number of consultative forums, involving government regulators, various industry user groups and the franchisees to review franchisees' performance and to gauge customer feedback. The major one is the Airport Facilitation Committee chaired by the Airport Management Director of the AA. It includes an air cargo forum which involves the cargo terminal operators and those which have an operational interface with them. The latter includes airlines and/or handling agents, the freight forwarding industry, ramp handlers and government departments such as the Customs and Excise Department. The first meeting, chaired by the AA, was held on 16 September and the AA's plan is to hold meetings bi-monthly to, inter alia, resolve interface and co-ordination issues with a view to ensuring smooth operation.

The AA will keep under review the above arrangements and consider ways to further strengthen the monitoring mechanism as necessary.

That said, I would like to point out that the air cargo franchisees have made considerable investment in their facilities at the new airport. In the case of HACTL, the investment amounted to around $8 billion. The franchisees therefore have every incentive to perform as efficiently as possible because it is very much in their own commercial interests to do so.

Commercial incentive has worked in the case of Kai Tak. HACTL, as the sole provider of air cargo handling services there, had been providing highly efficient services for over 20 years. Between 1977 and 1997, the air cargo throughput increased by 10 times from 170 000 tones to some 1.8 million tonnes per annum, reflecting a compound growth rate of around 12.5% per annum.

At the new airport, the incentive for the cargo operators to enhance their services and increase efficiency and productivity is expected to be even greater now that we have two operators instead of one.

Contingency Arrangement

Members emphasized the need for adequate contingency measures to prevent the occurrence of incidents at the air cargo terminal from affecting Hong Kong's air cargo operations. I cannot agree more. We should avoid a repetition of what happened in respect of air cargo during the initial operation of the new airport.

This brings us to the question as to what is necessary. The question is primarily one for the companies concerned as they know their operations and systems best. Furthermore, it is in their own commercial interests to ensure the quality and reliability of their service.

As HACTL had explained at the meeting of the Panel on Economic Services of this Council on 21 July 1998, they had fall-back arrangements for their computers, systems and power supply. Their terminal building was modular in design so that it would be able to continue to operate even if a section failed. As regards AAT, we understand that its cargo handling system is less complex than that of HACTL. In case of breakdown, it could fall back on a manual system for processing cargo through its facility, albeit at a slower pace.

A number of special arrangements were put in place during the initial operation of the new airport, thanks to the support rendered by the Central People's Government, other aviation/airport authorities, airlines, freight forwarders, AFFC, the cargo industry and all parties concerned. That experience was invaluable. It shows that contingency measures could be put in place quickly if necessary. With the support of all parties concerned, all the special measures previously implemented could be reactivated if the need arises.

Review of the air cargo franchise and introduction of competition

Various Members have suggested that the air cargo franchises at the new airport should be reviewed and that consideration be given to the introduction of more competition.

Competition already exists at the new airport. Compared to Kai Tak where all cargo went through one operator, the new airport has two operators on top of the four specialist express cargo operators who handle their own goods. I can assure Members that it has been the objective of the AA to encourage competition in the provision of airport support services including air cargo handling service. This is evident from the fact that from the outset, the AA planned to have more than one operator at the new airport.

During the franchise awarding process, the Provisional Airport Authority issued open invitation worldwide for the expression of interest to provide air cargo services at the new airport. Advertisements were put in local and international publications and information was sent to all consulates for dissemination in their country. Eventually, only two companies submitted their business plans. These set out the proponents' proposal including investment level, size and capacity of facility, mode of operation and so on, according to their own assessment of the market situation and the target market share they wished to achieve. The AA did not stipulate a target for them. Neither did it restrict the level of investment or capacity sought. This was left to the market to determine and both proponents were subsequently awarded a franchise.

While competition in air cargo handling at the new airport is welcome, we should be mindful that competition is only a means to an end. Increased competition would benefit users only if it would lead to greater efficiency, lower prices and other advantages. We also need to consider other factors such as economy of scale, and the optimum use of limited land on the airport island.

In fact it is the view of some freight forwarders that having two air cargo operators at the new airport has caused inconvenience to them as compared to the Kai Tak era. The areas of concern include additional procedures involved in interline cargo handling and the need to deal with different operators in respect of cargo carried by different airlines.

Furthermore, artificially restricting the capacity of one franchisee as against another might undermine the effectiveness of the market mechanism in ensuring effective service.

Anyhow, the AA would no doubt in the light of experience evaluate whether there is a need for more competition in the long run. This could include the award of new franchise where appropriate.

Hong Kong's position as a major air cargo hub

Let us now turn to how we should rebuild local and international confidence in our air cargo service and indeed our airport as a whole.

First, air cargo operations at the new airport must be efficient and reliable. We understand that the performance of the air cargo operators have improved considerably for the last two months. This must be maintained and further improved as necessary. We should get everybody including air cargo operators, other operators with an interface with them, users, to work together. I cannot agree with Members more that good liaison, communication and co-ordination among all parties concerned are very important and that the AA should in consultation with parties concerned further improve on arrangement to this end. We are confident that with the combined efforts and support of all concerned parties, the efficiency and reliability of air cargo operations at our new airport will grow from speed to speed. This would be the best selling point in the long run.

Second, whilst we should continue to keep the AA and other providers of services on their toes, any satisfactory experience should equally be given the full publicity it deserves. The media has a very useful role to play in this respect. Honourable Members and members of the public could also relay to their local and overseas contacts any positive experience they have had in using the new airport. After all, the Hong Kong International Airport is our airport and something we all would wish to be proud of.

Third, we will have a range of promotional activities targeting an appropriate audience. The Government is working together with other parties concerned to publicize the new airport, including the resumption of normal cargo handling operations. The aim is to demonstrate that in spite of the problems experienced upon its opening, Hong Kong has one of the world's finest airports. This will be done through various means in the months ahead.

The AA will publicize the new airport on a regular basis, and respond promptly to complaints. Promotional materials such as briefing kits, videos and photographs will be updated for wide distribution locally and overseas. HACTL will brief users and invite heads of overseas air cargo operators to view its facility and operations. The overseas Economic and Trade Offices of the Government will publicize the new airport and all positive developments through their newsletters, websites and the distribution of written and visual materials. They will also take the message direct to targetted audiences in their respective countries through briefings of influential groups such as businessmen, journalists, and so on. Every opportunity will be taken to include the airport in all the government's overseas promotional efforts. These include participation of Hong Kong in talks, exhibitions, conferences and other similar events. Publicity programmes will also be arranged to take full advantage of the completion of new facilities at Chek Lap Kok.

The Government, HACTL, the Hong Kong Trade Development Council, Hong Kong Tourist Association and the airline companies will also continue to invite more overseas journalists ─ including those from trade and specialist publications ─ to visit Hong Kong to see for themselves the attraction of the new airport, and how we have been tackling the problems. This programme has already paid dividends in terms of the journalists who have completed such visits and the articles which have appeared, singing the praises of the new airport.

Conclusion

Looking ahead to the future, we are confident that Hong Kong will be able to maintain and enhance its position as a major air cargo hub. Hong Kong has its strengths. To name a few: We are geographically located right at the heart of Asia; we have an extensive and expanding air services network currently providing scheduled services to some 120 destinations worldwide; we are the gateway to the Mainland with direct air links to around 40 cities there; we are served by over 60 international airlines, we have a modern 24-hour airport with greater cargo handling capacity than Kai Tak which could be further increased if necessary; and we have a solid traffic base which is backed up by the enormous mainland market.

The incident concerning air cargo after airport opening was most unfortunate, but it also demonstrated that Government, the AA and the air cargo industry could join hands to address problems quickly. The liaison mechanism established among all parties concerned since airport opening would certainly continue to help foster a closer relationship among all to further improve our air cargo industry and air cargo services provided. We are confident that with the efforts of the industry and parties concerned, the airport opening saga will soon be behind us and that our air cargo industry will continue to grow in the years to come.

Madam President, we agree with the objective of the motion to restore confidence in the air cargo industry of Hong Kong and consolidate further the territory's position as a global air cargo hub. We are grateful for comments made by Honourable Members this afternoon. We together with the AA will certainly consider the invaluable views of the Members carefully.

Thank you.

PRESIDENT (in Cantonese): Mrs LAU, as you have used up all of your 15 minutes, you cannot make a reply now.

PRESIDENT (in Cantonese): I now put the question to you and that is: That the motion moved by Mrs Miriam LAU 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)

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, 30 September 1998.

Adjourned accordingly at Nine o'clock.

Annex

WRITTEN ANSWER

Written answer by the Secretary for Education and Manpower to Mr LEE Cheuk-yan's supplementary question to Question 6

According to the Labour Department, of the 24 cases of wage reduction handled during the period June to August 1998, 16 were settled amicably through conciliation. The remaining eight cases were referred to the Labour Tribunal for adjudication for the following reasons:

(a) The employee concerned refused to accept unilateral wage reduction proposed by the employer and left employment. There was also dispute as to whether the employee resigned on his own accord or was dismissed; and

(b) In calculating termination compensation, there was dispute on whether the employee was eligible for certain payments.

Any case which is referred to the Labour Tribunal does not necessarily mean that termination of employment is involved since an employee may pursue a claim for unreasonable variation against his employer in the Tribunal whilst he is still in employment. However, in the above eight cases, all the claimants had left employment when they lodged their claims with the Tribunal.