OFFICIAL RECORD OF PROCEEDINGS
Wednesday, 30 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.

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

THE HONOURABLE FRED LI WAH-MING

THE HONOURABLE NG LEUNG-SING

PROF THE HONOURABLE NG CHING-FAI

THE HONOURABLE MARGARET NG

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

THE HONOURABLE RONALD ARCULLI, J.P.

THE HONOURABLE MA FUNG-KWOK

THE HONOURABLE JAMES TO KUN-SUN

THE HONOURABLE CHEUNG MAN-KWONG

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

THE HONOURABLE HUI CHEUNG-CHING

THE HONOURABLE CHRISTINE LOH

THE HONOURABLE CHAN KWOK-KEUNG

THE HONOURABLE CHAN YUEN-HAN

THE HONOURABLE BERNARD CHAN

THE HONOURABLE CHAN WING-CHAN

THE HONOURABLE CHAN KAM-LAM

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

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

THE HONOURABLE LEUNG YIU-CHUNG

THE HONOURABLE GARY CHENG KAI-NAM

THE HONOURABLE SIN CHUNG-KAI

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

DR THE HONOURABLE PHILIP WONG YU-HONG

THE HONOURABLE WONG YUNG-KAN

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

DR THE HONOURABLE YEUNG SUM

THE HONOURABLE LAU CHIN-SHEK, J.P.

THE HONOURABLE LAU KONG-WAH

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

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

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

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

THE HONOURABLE CHOY SO-YUK

THE HONOURABLE ANDREW CHENG KAR-FOO

THE HONOURABLE SZETO WAH

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

THE HONOURABLE LAW CHI-KWONG, J.P.

MEMBERS ABSENT:

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

THE HONOURABLE YEUNG YIU-CHUNG

THE HONOURABLE TAM YIU-CHUNG, J.P.

PUBLIC OFFICERS ATTENDING:

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

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

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

MR KWONG KI-CHI, G.B.S., J.P.
SECRETARY FOR INFORMATION TECHNOLOGY AND BROADCASTING

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

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

MR PATRICK LAU LAI-CHIU, J.P.
SECRETARY FOR PLANNING, ENVIRONMENT AND LANDS

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

CLERKS IN ATTENDANCE:

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

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

MS PAULINE NG MAN-WAH, ASSISTANT SECRETARY GENERAL

PAPERS

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

Subsidiary Legislation	L.N. No.
Immigration (Amendment) Regulation 1998	318/98
Aviation Security Ordinance (Amendment of Schedule 1) Order 1998	319/98
Specification of Public Office	320/98
Admission and Registration (Amendment) Rules 1998	321/98
Rules of the High Court (Amendment) (No. 3) Rules 1998	322/98

Sessional Paper

No. 27

─

Annual Report of the Protection of Wages on Insolvency Fund Board 1997-98

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, Members should be as concise as possible, should not ask more than one question, and should not make statements.

First question. Mr CHAN Kwok-keung.

Issue of Employment Visas

1. MR CHAN KWOK-KEUNG (in Cantonese): Will the Government inform this Council:

(a) of a breakdown of the number of employment visas issued since January 1997 by industry sector and position held;

(b) whether a ceiling is set for the issue of employment visas each year; and

(c) the procedure and criteria for approving applications for various types of employment visas?

PRESIDENT (in Cantonese): Secretary for Security.

SECRETARY FOR SECURITY (in Cantonese): Madam President,

(a) From January 1997 to August 1998, 25 477 employment visas were issued under the general policy on entry for employment to foreign nationals to come to work in Hong Kong. Under this policy, the entrants are businessmen making investments, professionals, managers and specialists. A breakdown by nature of occupation is at Annex. A breakdown by industry sector and position held is not available as the Administration does not keep such detailed statistics. Separately, during the above period, 72 870 employment visas were issued to foreign domestic helpers.

(b) There is no pre-set ceiling for the number of employment visas which may be approved each year.

(c) Under the general policy on entry for employment or investment, an application for employment visa may be approved provided that:

(i) there is no known record to the detriment of the applicant;

(ii) there is no likelihood of the applicant becoming a burden on Hong Kong;

(iii) the employing firm is a reputable one;

(iv) the activities of the applicant and his employer are beneficial to Hong Kong as a whole;

(v) the applicant possesses a special skill, knowledge or experience of value to and not readily available in Hong Kong, or will be able to make a substantial contribution to the economy of Hong Kong; and

(vi) normal immigration requirements are met (for example, the applicant possesses a valid and acceptable travel document, and his re-entry to his country of domicile is assured).

In assessing an application for employment, the Immigration Department will consider whether the proposed post can be readily filled by local residents and whether the applicant's salary is commensurate with that for local employees. Where necessary, comments from relevant government departments and competent organizations will be sought.

In assessing an application for entry for investment, the Immigration Department will consider whether the applicant will be able to make a substantial contribution to the economy of Hong Kong. The number of local jobs which will be created as a consequence; the amount of investment involved and whether any technology or management know-how will be introduced into Hong Kong will be taken into account.

Annex

Number of employment visas issued to foreign nationals
	1997	1998(1-8)
Employment Visas issued to Foreign Nationals
General policy on entry for employment
Businessmen making Investment	195	175
Technical Professionals	3 961	2 095
Administrators, managers and professionals	8 089	5 159
Others (for example, representatives of overseas companies)	3 585	2 218
Sub-Total	15 830	9 647
Foreign domestic helpers	45 327	27 543
Total	76 987	46 837

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

MR CHAN KWOK-KEUNG (in Cantonese): Madam President, with respect to the types of labour required by Hong Kong, the authority responsible for central co-ordination and planning should be the Education and Manpower Bureau. That being the case, why should the Immigration Department be allowed to approve applications for labour importation, thus depriving the Education and Manpower Bureau of its manpower planning authority?

PRESIDENT(in Cantonese): Secretary for Security.

SECRETARY FOR SECURITY (in Cantonese): Madam President, the general policy on entry for employment or investment is applicable to two types of persons. The first type covers businessmen making investment; the second type covers persons of a higher level who possess professional expertise or administrative management experience, and persons with skills of a lower level such as manual labourers or skilled workers are not included. In regard to the Honourable CHAN Kwok-keung's proposal that labour importation should be regulated, I wish to add that the Government has already put in place a number of labour importation schemes for the purpose, namely, the General Importation of Labour Scheme, the Supplementary Labour Scheme and the labour importation schemes for the new airport and other infrastructure construction projects. I think the Secretary for Education and Manpower should be in a better position to give more details about this matter.

PRESIDENT (in Cantonese): Mr Edward HO.

MR EDWARD HO (in Cantonese): Madam President, the Annex indicates that permission is granted every year for technical professionals to come to work in Hong Kong. In general, I welcome these technical professionals, but I should add that under the current economic situation of Hong Kong, many local professionals are themselves facing employment difficulties. It is pointed out in part (c) of the Government's main reply that the Immigration Department may seek comments from relevant government departments and competent organizations. May I ask the Secretary whether she will consider seeking comments on the demands for professionals from organizations such as the Hong Kong Institute of Architects or the Hong Kong Institute of Surveyors before making any related decision?

PRESIDENT (in Cantonese): Secretary for Security.

SECRETARY FOR SECURITY (in Cantonese): Madam President, when we vet this type of applications, in addition to consulting the Labour Department of the Government, we will also seek comments from competent organizations such as the Vocational Training Council and those representative bodies of engineering professionals mentioned by the Honourable Member. For example, if we receive an application from an overseas marine biologist, and if we do not know whether such talents are readily available in Hong Kong, we will write to the universities in Hong Kong such as the University of Science and Technology and the Chinese University, so as to enquire whether there are any local graduates in this particular field and whether there are any such talents in Hong Kong. To sum up, I can assure the Honourable Member that where necessary, we will certainly consult the professional organizations which he has mentioned.

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

MR CHAN WING-CHAN (in Cantonese): Madam President, I wish to ask a follow-up question on the Supplementary Labour Scheme mentioned by the Secretary a moment ago. Under this scheme, the importation of any worker must first be recommended by the Labour Advisory Board (LAB) under the principle of according employment priority to local workers, and the recommendations of the LAB are then referred to the Education and Manpower Bureau for approval. If an employer bypasses this scheme and applies to the Immigration Department direct, does the Department have any mechanism in place to safeguard the employment priority of local workers? How is the Government going to ensure that the employment priority of local workers can always be safeguarded under the general policy on entry for employment?

PRESIDENT(in Cantonese): Secretary for Security.

SECRETARY FOR SECURITY (in Cantonese): Madam President, as I explained a moment ago, the general policy on entry for employment is different from the various importation of labour schemes which are of a lower level. Even if an employer bypasses the LAB and applies direct to the Immigration Department for the importation of steel fixers, for example, his application will be rejected for it cannot meet the technical and professional requirements under the general policy on entry for employment. We will advise the employer concerned to submit a formal application under one of the various labour importation schemes.

PRESIDENT (in Cantonese):Mrs Selina CHOW.

MRS SELINA CHOW (in Cantonese): Madam President, item (v) of the approval conditions specifies that the applicant must possess a special skill, knowledge or experience of value to and not readily available in Hong Kong. However, the Annex indicates that 45 327 employment visas were issued to foreign domestic helpers last year, and during the several months since the beginning of this year, as many as 27 543 such visas have already been issued. When added together, these two figures actually represent 43% of the overall figure. May I ask the Secretary why these workers have been imported in such large numbers so very suddenly? In what ways are these workers able to satisfy item (v) of the approval conditions, which specifies that the applicant must possess a special skill, knowledge or experience not readily available in Hong Kong?

PRESIDENT (in Cantonese): Secretary for Security.

SECRETARY FOR SECURITY (in Cantonese): Madam President, the general policy on entry for employment which I described a moment ago actually does not apply to foreign domestic helpers. The interpretation of the Honourable Member is certainly correct, because the skills possessed by domestic helpers do not in general meet the requirements of our policy. Why, then, have I included the figures relating to foreign domestic helpers in my main reply? Well, one reason is that the question asked by Mr CHAN Kwok-keung concerns the number of employment visas issued, and for that reason, we have to include these figures. Another reason is that, as rightly pointed out by Mrs Selina CHOW, the number of employment visas issued to foreign domestic helpers is indeed very large. Actually, there are three main types of imported labour in Hong Kong. The first type covers those persons of a higher level who possess professional or administrative expertise, and they have to apply to the Immigration Department under the general policy on entry for employment before they can come to Hong Kong for work. The second type covers workers with skills of a lower level, and they must apply to the Education and Manpower Bureau through the LAB. As for foreign domestic helpers, their importation has had a history of more than 20 years, and there is thus a separate vetting policy for them. What I have tried to do is just to give Honourable Members a comprehensive statistical picture.

PRESIDENT(in Cantonese): Mrs Selina CHOW.

MRS SELINA CHOW (in Cantonese): Madam President, the Secretary has not answered why the figure concerned has "jumped" so dramatically during the first eight months of this year.

PRESIDENT(in Cantonese): Did you say "has jumped so dramatically" or "has plunged so drastically"?

MRS SELINA CHOW (in Cantonese): "Has jumped so dramatically". As we all know, the overall figure is just about 180 000. Why has there been such a big "jump" in the first eight months of this year?

PRESIDENT(in Cantonese): Secretary for Security.

SECRETARY FOR SECURITY (in Cantonese): Madam President, I now have the information about the number of employment visas issued to foreign domestic helpers from 1995 onwards. In 1995, we issued a total of 34 362 employment visas to foreign domestic helpers. In 1996, we issued 32 864 such visas, and in 1997 the number was 45 327. For this year, the number as at August is 27 543. The number of 45 000 for last year is indeed a record, and we have in fact tried to find out why. The experience of the Immigration Department seems to suggest that the number of applications for employing foreign domestic helpers is directly related to the state of our economy; there will be more applications in times of an economic boom. I presume Members will recall we did have such a boom from end 1996 to early 1997. This may be a reason for the large number of applications received by the Immigration Department in 1997. The average number of applications per year in the past is about 30 000, and this year, the number is not small either, because we have already received some 27 000 applications up to August.

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

MR LEE CHEUK-YAN (in Cantonese): Madam President, according to the Secretary, there are three types of imported labour in Hong Kong. However, I must say that there are in fact four types, the fourth being the employees of state enterprises holding business passports. I do not know whether the name of their passports has been changed; maybe their passports are no longer called business passports. Anyway, as far as I can remember, about 10 000 such people should be working in Hong Kong now. Does the Secretary have any records on those employees of state enterprises who are working in Hong Kong? In deciding whether employment visas will be issued to these people, does the Government follow the conditions mentioned in part (c) of the main reply? Or, are these people simply exempted from visa application? Will the Secretary please give an account on this?

PRESIDENT(in Cantonese): Mr LEE Cheuk-yan, this question is about employment visas. Your supplementary question should thus also be related to employment visas.

MR LEE CHEUK-YAN (in Cantonese): Will the Secretary please tell us whether the employees of state enterprises are required to apply for employment visas if they want to work in Hong Kong? The Annex contains no information about the number of visas issued to these people last year. What is number of visas issued to these people last year?

PRESIDENT (in Cantonese): Secretary for Security.

SECRETARY FOR SECURITY (in Cantonese): Madam President, the reason why my main reply does not contain the number of employment visas issued to people from the Mainland is that as I have already explained, the policy on employment visas simply does not apply to people from the Mainland. In other words, people from the Mainland cannot apply for permission to work in Hong Kong through this channel. Basically, with the exception of those stationed in Hong Kong by state organizations, all people from the Mainland are not allowed to engage in any work here unless they are here on official business. "Official business" also covers working for state enterprises. Besides, the Immigration Department will also issue short-term work permits with validity of one or two weeks. These work permits are mostly issued to artistes putting up cultural performances in Hong Kong on some special occasions such as the reunification and the National Day. And, usually, each of these performing companies is made up of one or two hundred artistes. Since they will stay in Hong Kong for just a few days, we will usually issue them with work permits valid for one or two weeks. The statistics on these work permits are not included in the Annex to the main reply.

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

MR LEE CHEUK-YAN (in Cantonese): Madam President, will the Secretary please tell us whether she has any records on those mainlanders who are stationed in Hong Kong by state organizations?

PRESIDENT(in Cantonese): Mr LEE Cheuk-yan, the Secretary has explained that these people do not need any employment visas. I think she has already answered your supplementary question. Since we are dealing with a question on employment visas, you are advised to follow up your question through other channels.

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

MISS CHAN YUEN-HAN (in Cantonese): Madam President, in addition to saying that the Education and Manpower Bureau is responsible for implementing the policy of general labour importation, the Secretary has also talked about experts of a higher level. The Secretary has repeatedly referred to "a higher level" and "a lower level". Can she tell us how we should define them? Is a person who blends wines in a bar an expert of a higher level? Or, is he just an ordinary worker of a lower level?

PRESIDENT(in Cantonese): Secretary for Security.

SECRETARY FOR SECURITY (in Cantonese): Madam President, in regard to the definition of "a higher level", I think that in general, academic qualifications can be used as a criterion. For example, we may use first degree qualifications as a criterion; or, we may even use professional qualifications as an additional criterion. This means that apart from first degree qualifications, professional qualifications in medicine and engineering may also be used as an additional criterion. We of course understand that academic qualifications cannot be used as a criterion in some cases. One example is fashion designers, who may have become outstanding in the trade without necessarily receiving any formal training in famous fashion design schools. That being the case, if someone claims in his application that he is a world-renowned fashion designer, we will make appropriate decisions on the basis of his career history and reputation in the trade. This is very much different from the General Importation of Labour Scheme, which lays a heavier emphasis on purely manual skills such as steel fixing and painting.

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

MISS CHAN YUEN-HAN (in Cantonese): Let me repeat the example I mentioned a moment ago. Is a person who blends wines in a bar an expert of a higher level or just an ordinary worker of a lower level?

PRESIDENT(in Cantonese): Secretary for Security.

SECRETARY FOR SECURITY(in Cantonese): Madam President, we have indeed received many applications for the importation of workers to blend wines in local bars, especially those in Lan Kwai Fong, and we have turned down quite a number of these applications. However, from time to time, we may also receive some special requests from investors. For example, an investor who wishes to open an Austrian-style restaurant in Hong Kong may ask specifically to bring along one or two expatriate bartenders on the ground that they are the only persons who know how to blend and prepare a particular kind of famous Austrian drink. In order to make it easier for foreigners to invest in Hong Kong, and in order to increase the tourist attraction of Hong Kong, we are prepared to give positive consideration to these applications.

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

SECRETARY FOR EDUCATION AND MANPOWER (in Cantonese): Madam President, I wish to add one point. Under the Supplementary Labour Scheme, though the number is very small, we do also allow employers to import workers to fill basic level posts in eating establishments. However, the employers concerned must first follow the specified procedures under the Scheme before doing so. In other words, they must first conduct local recruitment exercises and prove that no suitable candidates can be recruited locally, or that there is an inadequate supply of local workers with the skills required.

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

Implementation of Recommendations on Education

2. PROF NG CHING-FAI (in Cantonese): Will the Government inform this Council how and when the recommendations made in the Board of Education Report on Review of 9-year Compulsory Education System published in October last year will be implemented?

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

SECRETARY FOR EDUCATION AND MANPOWER (in Cantonese): Madam President, the Board of Education (BoE) has put forward 77 sets of recommendations in the "Report on Review of 9-year Compulsory Education" (the Report). After careful consideration, the Government has categorized these recommendations into three main groups for follow-up action.

The Government has accepted in full the 11 sets of recommendations under Group 1; these are being progressively implemented. Details of the recommendations and their implementation status are set out at Annex A. Madam President, owing to time constraint, I will not describe the Annexes in detail.

The 59 sets of recommendations under Group 2 have very broad coverage. They include promoting the use of information technology in education, implementing whole-day schooling in primary schools, and allowing schools more flexibility in the use of resources. Details of the recommendations are set out at Annex B. These recommendations are generally in line with the overall direction of existing policies. When we implement the policies concerned, we will consider further these recommendations from both the practical and the financial points of view.

For the seven sets of recommendations under Group 3, further consideration as to whether they should be implemented is required. We, therefore, do not have a detailed timetable for their implementation. Details of these recommendations are set out at Annex C. Before coming to a decision, we will take account of the areas covered by these recommendations, their implications on various aspects, as well as the resources and the financial commitment required. Moreover, implementation of some of the recommendations depends on the result of other educational research and studies on academic structure undertaken by the Government, such that they can complement each other for better use of resources.

Since the Report covers a wide range of issues and its recommendations carry far-reaching implications, we should be cautious in planning their implementation. The Education Department (ED) has reported to the BoE the progress of the follow-up work. The Department will submit another report on the latest progress by the end of this year.

Annex A

Implementation Framework for Recommendations in

Report on Review of 9-year Compulsory Education

　

	Proposal	Present Position	Time Frame
1.	To change the term "compulsory education (強迫教育)" to "universal basic education (普及基礎教育)" to focus on the positive aspect of such provision (para 3.13)	The new term has been adopted and used in all documents including circulars to schools	On-gong
2.	To amend section 74(3)(c)(i) of the Education Ordinance (Cap. 279) by inserting", or who has attained the age of 15 years, whichever is earlier" to rectify the present disparity between statutory provisions and administrative measures (para 4.14)	Proposed amendment to be taken forward as part of a package of possible amendments to update the Education Ordinance.	1999-2000 Legislative Council session
3.	Pupils' personal and ethical quality to be developed by schools' enhancing ties with social bodies and parents to promote family education (para 4.23(c))	ED would continue to encourage the setting-up of parent-teacher associations through the Committee on Home-School Co-operation to enhance parents' awareness and involvement in their children's education and development. ED would also continue to encourage school guidance teachers and school social workers to mobilize community resources to provide family education and services for the pupils.	On-going
	Home-school Co-operation Scheme to be enhanced and extended (para 7.14)	Works will start to set up a Parents' Centre.	Centre to open in 1999
4.	Under exceptional circumstances, pupils to be allowed to repeat more than once; no pupils to be allowed to repeat more than twice in primary education (para 7.34)	A review is being conducted.	Review to complete within the 1998-99 school year
5.	BoE to review effectiveness of existing practical schools and skills opportunity schools (para 7.43)	As a first step, a paper on practical schools and skills opportunity schools will be submitted to the BoE by the end of 1998.	To be decided by BoE
6.	To review the manpower of the Non-attendance Cases Team to enable the team to play a more proactive role and give due emphasis on preventive measures geared to the needs of pupils concerned (para 7.39)	Preparation work to set up a working group within ED is in progress.	Working group to start work by the end of 1998
7.	ED to conduct surveys to understand needs of both potential and genuine dropouts (para 7.40(c))	Preparatory work in progress. The 2-year surveys to start in the 1998-99 school year.	Surveys to complete in the 1999-2000 school year
8.	Short-term in-service refresher courses to be provided to train teachers of secondary schools admitting at least one class of territory-wide bottom 25% pupils to handle academically weak pupils with associated behaviour or emotional problems (para 7.29)	Preparatory work is in progress.	Starting from early 1999
9.	Pilot study on approaches and methods for coping with individual differences over a three-year period to be conducted; pilot schools to be provided with additional resources similar to those currently provided in the SBCTS in secondary schools; if effective, scheme to be extended to other eligible primary schools by phases (para 7.16 and 7.17)	Preparatory work is in progress. Survey to start in January 1999.	Survey to complete in December 2001
10.	Research to be conducted on current remedial teaching practice in primary and secondary schools to formulate the most effective remedial teaching mode (para 5.21)	Preparatory work for a two-year research is in progress. Research to start in the 1998-99 school year.	Research to complete in the 1999-2000 school year.
11.	Research to be conducted on the optimum age of entry to P1 in Hong Kong (para 9.6)	Preparatory work for a 2-year research is in progress. Research to start in the 1998-99 school year.	Research to complete in the 1999-2000 school year

Annex B

Proposals covered in existing policy documents or programmes

　

Proposal
(a)	Existing policy/programmes
1.	Provision of nine years of free and compulsory education to continue (para 3.13);
2.	CDI to review the adequacy of daily life skills topics in primary schools' General Studies syllabus (para 4.20)
3.	Pupils' personal and ethical quality to be developed by a wholeschool approach in building pupils' positive views on self and positive value on life (para 4.23 (b))
4.	To provide sufficient space for school activities: Schools to be given priority in the use of activity space nearby (para 4.25(a)) Co-operation between schools and private/public sports associations to be strengthened to ensure effective use of available community sports and activity facilities (para 4.25(c)) Schools to consider opening own playground on non-school days for pupils' use (para 4.25(d))
5.	Pupils' health awareness and physical well-being to be developed through ED's setting up of a norm of general physical attainment, encouraging schools to provide pupils with health education focus programmes, parents being encouraged to support pupils' participation in physical activities, and consideration of additional resources for schools' employment of specialists/tutors for recreational/aesthetic activities and establishing regional children development centres to promote these activities (para 4.26)
6.	Aesthetic and cultural values in pupils to be promoted by: Encouraging other sectors' commitment in education (through support for pupils' participation in relevant activities) (para 4.27(b))
(a)	Existing policy/programmes
	Enhancing co-ordination between schools and other community sectors in developing and organizing relevant activities (para 4.27(c)) Schools' incorporation of relevant activities in the curriculum (para 4.27(d)) Providing manpower in CDI to strengthen support in curriculum development for extra-curricular activities. (para 4.27(e))
7.	For full development of pupils' potentials, curriculum design to be geared to individual pupils' needs and potentials, and school curriculum to enable balanced development of pupils' multiple intelligences and include specific components for developing life skills, attitudes and competitiveness for work as a global citizen (para 4.31 and 4.32)
8.	Integrated approach in curriculum initiatives and subject syllabuses revision to continue (para 4.36)
9.	Resources, facilities and manpower for extra-curricular activities [ECA] to be reviewed and strengthened (para 4.38)
10.	As an interim quality assurance mechanism, all schools to be encouraged to submit pupils' Hong Kong Attainment Tests (HKAT) raw scores to ED for drawing up territory-wide profiles of pupils' attainments; HKAT items to be more objective-based and tie in with the P6 and S3 Target Oriented Curriculum (TOC) learning targets (para 5.8)
11.	Schools to consider adopting subject-setting on an individual basis and to be encouraged to use the method with Mastery Learning. Subject to outcome of a proposed study, ED to consider additional resources for schools, if required, for wide implementation (para 5.13)
(a)	Existing policy/programmes
12.	In primary schools, early detection and provision of remedial teaching to needy pupils to be ensured, remedial teaching guidelines to be revised, use of remedial classes for AAT drilling to be strongly discouraged, regular inspections to be conducted to ensure proper use of remedial teaching, schools to use HKAT for detection purpose and training on proper use of HKAT to be provided, and retraining courses for primary school teachers to be strengthened (para 5.19)
13.	In secondary schools, more remedial teaching groups to be organized to enable more pupils to benefit, remedial teaching guidelines to be revised, senior teacher to be assigned as co-ordinator, relevant short-term training (three hours per week for 10 weeks) to be provided to co-ordinators with priority for places from schools having at least one class of territory-wide bottom 25% S1 pupils and seminars to be organized for other teachers concerned (para 5.20)
14.	School-based remedial support to be offered in both primary and secondary schools to New Arrival Children (NAC) with learning difficulties to help them cope (para 5.21)
15.	Schools implementing Target Oriented Curriculum [TOC] to be encouraged to adopt Activity Approach [AA] and AA to be promoted to ensure full implementation in schools (para 5.26)
16.	All pre-service teacher education programmes to provide adequate preparation for language proficiency to meet benchmark requirements, with in-service programmes for existing teachers' language enhancement (para 6.5(d))
17.	Consideration to be given to devising a policy and system of teacher registration at regular intervals based on evidence of completing appropriate in-service teacher education and reaching established benchmarks and teaching standards. Proposed General Teaching Council (GTC) to contribute to such functions (para 6.5(f)) Proposed GTC to take lead in enhancing teachers' professional status (para 6.20)
18.	Schools to be offered consultancy and expert advice by inspectors from ED's CDI and Advisory Inspectorate, and lecturers from teacher education institutions (para 6.7)
(a)	Existing policy/programmes
19.	To induce changes in school culture/ethos, teachers to be encouraged to work collaboratively in planning and development of work within school (para 6.11)
20.	Directions for teacher education, various aspects of provisions, course curriculum and roles of teacher education institutions to be regularly reviewed so as to match the needs of schools and the system (para 6.5(g))
21.	All principals to be provided with suitable management training. Existing ED-run Primary and Secondary School Administration Courses for new school heads to be strengthened accordingly (para 6.14(a))
22.	Middle managers to be provided with suitable management training. In addition to ED-run courses, self-financed management teacher training courses to be considered. (para 6.14(b))
23.	Better use of other relevant community resources such as museums or workplace education to be promoted (para 6.25)
24.	Primary curriculum (particularly P1 and P4) to be reviewed, prevocational schools to give higher percentage of teaching time to humanities subjects and to ensure inclusion of cultural and humanities elements in both formal and informal curricula, balanced curriculum (especially in practical, cultural, moral and civic aspects) to be provided in the junior secondary stage, present requirement of 40 FACE="Symbol">± 2% technical and practical contents for prevocational schools to be adjusted, schools to be given more support for better management of available resources of teaching and curriculum materials, and cross-curricular activities (such as civic, environmental, sex and moral education) to be included in secondary schools' time-tables (para 6.37(a) -(e))
25.	Formative assessment to be stressed in the design of curriculum (para 6.51)
26.	Individual learning and co-operative learning instead of competitive learning to be promoted in curriculum implementation (para 6.54)
(a)	Existing policy/programmes
27.	Use of HKAT and SSPA scores together with Intensive Remedial Support (IRS) assessment to identify pupils with weak academic performance in primary schools for special assistance (para 7.6)
28.	Report of the BoE Sub-committee on Special Education recommendations to make resource classes to be made more effective supported (para. 7.10) Additional resources to be increased to improve special education services (para 10.23)
29.	Schools in the School-based Remedial Support Programme (SBRSP) to be encouraged to share experiences in curriculum tailoring among themselves (para 7.25)
30.	Report of the BoE Sub-committee on Special Education recommendation for early implementation of new appointment conditions for educational psychologists supported (para 7.26)
31.	Mechanism to be set up in school to co-ordinate and evaluate use of the additional resources. ED also to ensure effective use of these resources and to delineate clearly the roles of different programmes or schemes such as SBCTS and SBRSP (para 7.30)
32.	To minimize untraceable cases of non-attendance, schools to keep pupil information up-to-date, regularly remind parents to inform the school of changes in personal particulars and nominate a teacher to take charge of dropout cases within school and liaison with relevant ED sections (para 7.40(a))
33.	Existing Advisory Committee on the Placement of Pupils in ED to strengthen role in co-ordinating efforts of different sections in the handling of suspected drop-out cases (para 7.40(b))
(a)	Existing policy/programmes
34.	Other forms of support failing and subject to screening by an improved Central Co-ordinating Referral Mechanism, disruptive pupils in ordinary schools to be transferred temporarily to schools for social development for short-term behavioural modification programme. Ad-hoc committee to be formed on a need basis to co-ordinate referrals and programmes. ED to consider additional resources for staff of schools for social development for allow-up work on pupils' return to normal schools (para 7.44(a) - (b))
35.	Services of the Student Discipline Section to be extended to primary schools (para 7.46)
36.	Practice of advancing Mathematics teaching by half a year indiscriminately without due consideration to pupils' ability to be discouraged (para 8.14(b))
37.	New set of AAT practice items to be issued to schools, and parent education to be strengthened to promote understanding of SSPA System and AAT (para 8.14 (e) - (f))
38.	Revised guidelines on setting assessments to be issued to strengthen validity of Schools' internal assessments. ED subject experts or tertiary institutions to share experience and offer expert advice on assessment to schools (para 8.14(k))
39.	Schools to be strongly advised to change class structure according to their eligibility rate. Strong stand to be taken against schools refusing to restructure classes without good reasons (para 9.18(b))
40.	Working Group to Review the SFP Allocation Method for JSEA to review situation. Consideration to be made to recognize schooling effects, if possible, in the JSEA (para 9.18(c))
41.	Wide publicity on need for gifted education plus more resources to enable the gifted to fully develop potential (para 10.24)
(b)	ECR7 programmes
42.	Schools to be more accountable to the public and to provide information (para 4.15)
43.	Schools to be allowed more flexibility in the use of school resources (para 4.16) In the long run, support and flexibility for primary schools to be enhanced through provision of an administration grant, similar to existing secondary schools, for clerical and janitor staff (para 6.16(b))
44.	Pupils' personal and ethical quality to be developed by including such indicators in quality assurance inspection to ensure schools' efforts (para 4.23(a)) As an interim quality assurance mechanism, schools to be encouraged to review and report to parents their pupils' development in a wider range of aspects including Art, Music, Physical Education, and so on (para 5.8)
45.	All-round education to be promoted through efforts to translate educational aims into measurable indicators and a study to monitor implementation (para 4.29) Research to be conducted to explore possibility of introducing elements of balanced education in assessing Schools' performance (para 4.29)
46.	Mother-tongue teaching policy supported (para 6.46)
47.	Curriculum Development Council to review subject curricula at various levels to make contents of all subject curricula relevant, interesting and related to daily life and enable early adoption of interactive and heuristic methods. Curriculum to aim at developing in pupils the necessary attitudes and skills for learning how to learn (para 6.48 - 6.49) Government to consider providing more expert support to schools in developing and implementing a balanced curriculum (para 6.55)
(c)	Chief Executive's 1997 Policy Address Programmes
48.	Triangular co-operation between families, the community and schools to be propagated (para 4.17)
49.	Pupils' effective learning and self-learning to be enhanced by strengthening physical, financial and manpower support for primary schools' library services (para 4.19(a))
50.	Pupils' effective learning and self-learning to be enhanced by: . Making the use of information technology in teaching and learning a policy and providing IT support (hardware, software, training and manpower) (para 4.19(b)) . Schools' strengthening of pupils' exposure to different media and community resources (para 4.19(d)) . IT to be given strong emphasis in the curriculum (para 4.34) . Suitable IT technology facilities to be provided to schools, teachers to be encouraged to make wider use of IT in their teaching (para 6.24(b)) . Use of IT for effective teaching and learning to be made policy. Use of IT in teaching to be strengthened and pupils to be taught IT skills (para 6.50)
51.	Civic education in schools to be better promoted by allowing allocation of definite time and resources, enhancing pupils' learning opportunities and strengthening pupils' education on China and on being Chinese (para 4.22)
52.	The present policy to be reviewed to ensure sufficient space for activities, especially in new school building design (para 4.25(b)) Government to consider improving school facilities to make the school environment more attractive. (para 6.20(e)) Schools' physical environment to be up-graded (para 6.24(a))
(c)	Chief Executive's 1997 Policy Address Programmes
53.	Pupils to be enabled to be biliterate and trilingual (para 4.33)
54.	Government to move towards an all-graduate and all-trained teaching profession as soon as possible, with a degree and initial teacher education made mandatory for all new primary and secondary school teachers (para 6.5(a)) Before full achievement of an all-graduate and all-trained teaching profession, pre-service initial teacher education to be lengthened (para 6.5(b)) Tertiary institutions offering teacher education to provide relevant part/full-time conversion courses for serving non-graduate teachers to upgrade qualifications to graduate status (para 6.5(c))
55.	Schools to be provided with sufficient financial resources to try out innovative ideas for teaching curriculum development and other school practices to encourage enhancement of quality (para 6.9)
56.	Reasonable time-table to be devised to achieve whole-day primary schooling as soon as possible (para 6.33)
57.	Stepped-up action to be taken to achieve stated target of phasing out floating classes in S1-5 by the year 2000 (para 6.41)
58.	School-based curriculum tailoring scheme to be extended to primary schools (para 7.15)
59.	Pilot tests to be conducted to validate the new assessments of Academic Ability Assessment (AAA) and to verify their discriminatory power before full implementation of AAA to replace the Academic Aptitude Test (AAT) (para 8.14(h))

　

Annex C

Proposals requiring further consideration

　

Proposal
(a)	Recommendation concerning teachers Government policies to require serving principals and teachers to undergo in-service teacher education at regular and specified intervals. Performance appraisal systems in schools to identify areas of staff development needs other than indicating performance (para 6.5(e))
(b)	Provision of one school social worker per secondary school One school social worker to be allocated to each secondary school admitting at least one class of territory-wide bottom 25% pupils first, and then one social worker for each of the other secondary schools as soon as possible (para 7.24)
(c)	Enhancement of school staffing provision and benefits
(i)	Staff review
	Comprehensive staff review in primary and secondary schools to be conducted (para 6.18)
(ii)	Additional teachers
	More teachers to be provided to schools, exact number subject to results of the comprehensive review of staffing provision recommended in para 6.18. (para 6.15) Government to review the existing provision of additional teachers to strengthen assistance to schools admitting territory-wide bottom 25% pupils (para 7.23)
(iii)	Additional clerical support
	For every 20 teachers in primary and secondary schools, a Clerical Officer II (COII) to be provided for teaching-related clerical duties (para 6.16(a))
	For primary schools with 24 classes or more, one additional Clerical Assistant (CA) to be provided (para 6.16(b)) Government to extend clerical staff provision for schools admitting at least one class of Band 5 pupils to cover those admitting at least one class of S1 territory-wide bottom 25% pupils and examine adequacy of the existing clerical support in both primary and secondary schools in the proposed staff review recommended at para 6.18 (para 7.27)
(iv)	Promotion ranks
	Government to consider introducing appropriate ranks(s) for deputy heads in primary schools (para 6.14(c)) Government to introduce the special rank of master teacher (para 6.21)
(v)	Pay and benefits
	Further extrinsic motivation to teachers to be considered (para 6.20) Government to consider: . providing aided school teachers with the same benefits as civil servants (para 6.20(a)) . offering the same pay scale to graduate teachers in primary and secondary schools (para 6.20(b)) . counting towards teachers' workload the time for interacting with colleagues/external experts and professional development (para 6.20(d)) . improving the Mortgage Interest Subsidy Scheme (MISS) (para 6.20(c))
(d)	Measures dependent on future programmes
(i)	TOC-based quality assurance mechanism
	Upon full implementation of TOC and full confidence in the usage of Bands of Performance, a quality assurance mechanism to be established, with academic attainment represented by learning levels instead of year levels, prescribed minimum attainment for pupils, submission of annual report of pupils' attainment profiles by schools and monitoring by ED (para 5.4)
(ii)	Proposed AAA measures
	Exact scope or coverage of AAT to be made clearly know to schools and test date of AAT to be later than December (para 8.14(c)) AAT to be replaced by an Academic Ability Assessment (AAA) (para 8.14(g)) Upon AAA implementation, sample items of papers to be made public periodically and test date to be later than December (para 8.14(i) - (k)) TOC Section to carry out follow-up research to study the correlation between AAA and internal assessments as AAA could be an interim measure since the Target-Oriented Assessment (TOA) is supposed to replace all external assessments in the long run. (para 8.14(l)) Secondary schools to be provided with, in addition to current information on pupils' individual banding (which reflects banding within their own nets), the exact names of the bottom 25% pupils allocated (para 8.14(m))
(e)	Other proposals requiring further feasibility studies
(i)	Curriculum matters
	Pupils to be given opportunities to study both some arts and some sciences in their senior secondary studies (para 4.37)
	ED's CDI curriculum support teams to be broadened into special expert consultancy support teams to serve all schools on a regular basis in future. Each team to comprise curriculum experts, experienced teacher educators, inspectors and experienced teachers to provide on-the-site expert advice to school teachers and organize relevant activities (para 6.8)
(f)	School places allocation systems Present Secondary School Places Allocation System with existing banding system for school places allocation to continue (para 8.14(a)) Present Primary One Admission Points System to continue (para 9.11) Present Junior Secondary Education Assessment System with existing Secondary Four Places Allocation Method to continue (para 9.18(a)).

PRESIDENT (in Cantonese): Prof NG Ching-fai

PROF NG CHING-FAI (in Cantonese): Madam President, has the Government briefed the review subgroup under the Education Commission (EC) on the progress of the situation? If not, will the Government do so as soon as possible?

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

SECRETARY FOR EDUCATION AND MANPOWER (in Cantonese): Madam President, we have already briefed the EC on the contents of the Report and the position of the Government, including the progress of our follow-up actions. The EC is right now carrying out a comprehensive review of our school system, and in the course of doing so, it will take into consideration the contents of the Report and the follow-up measures of the Government.

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

MR CHEUNG MAN-KWONG (in Cantonese): Madam President, the Report on Review of 9-year Compulsory Education System has been written by the Board of Education (BoE) after extensive consultation and with government input. In view of the fact that the Government has also taken part in drawing up the recommendations contained in the Report, will the Government please tell us why it has still decided not to implement some of these recommendations? Under what kind of mechanism has the Government decided that these recommendations can be deferred in implementation, or even shelved?

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

SECRETARY FOR EDUCATION AND MANPOWER (in Cantonese): Madam President, in my main reply, the recommendations concerned are categorized into several main groups. One of these groups does indeed require further consideration, and basically, we will take account of the areas covered by these recommendations, their implications on various aspects, as well as the resources and financial commitment required. One example is the allocation of one school social worker to each secondary school as mentioned in Annex C. Naturally, from the standpoint of educational policy-makers, we would very much like to increase our subsidy to schools finance permitting. However, when it comes to the specific issue of how much more is required, we will of course have to consider the factors of financial arrangements and priority. For cases like this, we will certainly review the situation on a continuous basis, or, let me put it this way, we will not be able to make any decision until resource allocations and spending priorities are considered every year.

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

MR NG LEUNG-SING (in Cantonese): Madam President, the Report contains a recommendation on the assessment of learning ability, and I understand that a university is right now conducting a research project on this particular area. Will the Government do anything to tie in with the results of this research project? And, does the Government plan to replace the Academic Aptitude Test currently used for allocation of secondary school places? If yes, when?

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

SECRETARY FOR EDUCATION AND MANPOWER (in Cantonese): Madam President, yes, the Education Department (ED) has indeed asked a university to conduct studies on the ways of implementing the learning ability assessment proposed in the Report, and the university is also asked to devise a suitable model of assessment. On the basis of the assessment model worked out by the university, the ED will compile a set of assessment questions. We expect to conduct two pilot assessment tests some time later , one in 2000 and the other in 2001. At the same time, we will also ask our tertiary institutions to evaluate the effectiveness and screening function of the assessment tests. The Government will make its final decisions on the basis of the assessment results and the research report.

PRESIDENT (in Cantonese): Dr YEUNG Sum.

DR YEUNG SUM (in Cantonese): Madam President, the implementation of these proposals will of course require resources, which is why the Secretary has referred to the proposal of allocating one school social worker to each secondary school. Has the Government drawn up any timetable for acquiring the resources required, so that the proposal of one social worker for each secondary school can be implemented after a certain period of time?

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

SECRETARY FOR EDUCATION AND MANPOWER (in Cantonese): Madam President, with respect to the number of social workers required by our schools, the Social Welfare Department has in fact carried out a review this year. As I explained a moment ago, since this proposal will involve extra resources, we will not be able to make any final decision until resource allocations and spending priorities are considered every year.

PRESIDENT(in Cantonese): Dr YEUNG Sum.

DR YEUNG SUM (in Cantonese): Madam President, is there any timetable? That is my question. I know very well that we will have to fight for the resources required, but is there any timetable for the purpose?

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

SECRETARY FOR EDUCATION AND MANPOWER (in Cantonese): Madam President, as far as this specific proposal is concerned, we have not drawn up any timetable so far.

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

MR LEE CHEUK-YAN (in Cantonese): Madam President, Annex C of the main reply contains a proposal on improving the teacher to student ratio. This will in effect means the employment of more teachers. As far as I know, at the employment summit, representatives of employers and employees alike supported such a proposal. In other words, from the perspective of providing employment opportunities, they all hoped that more teachers could be employed. Since this issue was raised in the employment summit, will the Government consider according priority to the proposal contained in item (c)(ii) of Annex C, so that it can be implemented as soon as possible?

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

SECRETARY FOR EDUCATION AND MANPOWER(in Cantonese): Madam President, over the past few years, the Government has already allocated a lot of resources for the employment of more teachers as part of the attempts to tie in with the educational policies implemented by the Government. Resources permitting, and having regard to the priorities of the entire education system, we will continue to make improvements in this respect.

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

MR MA FUNG-KWOK (in Cantonese): Madam President, a year has passed since the release of the Report, and some of its recommendations will involve legislative amendments. What progress has the Government made in respect of preparing the legislative amendments required? When will the relevant legislative amendments be put before the Legislative Council for scrutiny?

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

SECRETARY FOR EDUCATION AND MANPOWER (in Cantonese): Madam President, the second proposal contained in Annex A does involve an amendment to the Education Ordinance, and we have already made it very clear that the proposed amendment will be taken forward as part of a package of possible amendments to update the Education Ordinance. According to our programme, we hope to introduce the relevant amendments to the Legislative Council during its next Session, that is, the 1999-2000 Session.

PRESIDENT (in Cantonese): Third question. Dr Raymond HO.

Removal of Underground Contaminants at the Old Airport

3. DR RAYMOND HO (in Cantonese): Regarding the cleaning up of the underground contaminants at the northern apron of the old Kai Tak Airport, will the Government inform this Council:

(a) whether there are any potential explosion hazards before the cleaning up of the oil patches; if so, what measures have been adopted to reduce the explosion hazards; and whether the suitability of the venue for holding large scale events has been assessed;

(b) what factors will be taken into consideration in selecting the method of cleaning up the oil patches; and

(c) which party will bear the costs of cleaning up the oil patches?

PRESIDENT (in Cantonese): Secretary for Planning, Environment and Lands.

SECRETARY FOR PLANNING, ENVIRONMENT AND LANDS (in Cantonese): Madam President,

(a) The surface of the Kai Tak Airport apron is covered by a concrete layer varying in thickness between 0.6 m to 1 m (equivalent to 2 ft to 3 ft). The concrete effectively seals the underground contaminants from the open air. There is no potential explosion hazard at the Kai Tak airport site.

We have nevertheless taken a number of precautionary safety measures to protect the public when they are allowed access to the airport site for participation in public events. No public events are permitted to be held within the three contaminated sites in the airport area. When public events are being held at other parts of the airport area, the contaminated sites are fenced off.

(b) The Government has commissioned a consultancy to investigate into the methods which would be most effective in decontaminating the site without causing undue environmental impact. Our consultants comprise both local and overseas experts who are well-experienced in oil terminal and airport decontamination work.

In considering the selection of the decontamination methods, the consultants have taken into account the type, extent and spread of the contamination, prevailing work safety requirements, international standards on the level of soil contamination; and the geographical setting of the contaminated areas and any possible secondary environmental impact on the neighbourhood. The Advisory Council on Environment has also been consulted and is satisfied with the proposed methods.

(c) The Government's intention is to recover the decontamination costs from the parties concerned in accordance with the "polluter pays" principle. However, during the past 50 years of the operation of the Kai Tak Airport, there might have been more than one source of contamination. A certain period of time will be needed to establish the precise causes and level of the contamination over the years. The Government is currently discussing with the Oil Companies Tank Farm (OCTF) and the OCTF has agreed that they are willing to contribute their reasonable part of the cost.

PRESIDENT (in Cantonese): Dr Raymond HO.

DR RAYMOND HO (in Cantonese): Madam President, the reply of the Secretary really surprises me a great deal because given the fact that the oil contaminants are sealed in by such a thick layer of concrete, we can actually use some fairly simple methods to decontaminate the site, one example being the use of sodium nitrate; thus we can obviate the need to commission a consultancy to conduct a large-scale study. I understand that they are actually boring into the apron area to explore whether gas should be pumped through a shaft into the contaminated soil to speed up evaporation.

PRESIDENT (in Cantonese): Dr Raymond HO, please state your supplementary question.

DR RAYMOND HO (in Cantonese): If they are really carrying out the investigation work I have just mentioned, then is there a possibility that the underground oil pipes or oil tanks there may simply explode? That is my question.

PRESIDENT (in Cantonese): Secretary for Planning, Environment and Lands.

SECRETARY FOR PLANNING, ENVIRONMENT AND LANDS (in Cantonese):Madam President, let me first make it clear that the boring works which are going on in the apron area are in fact an initial investigation exercise aimed at ascertaining whether or not the decontamination method we have proposed is effective. That is why this should not be regarded as part of the formal decontamination project. Then, there is the question of whether or not the underground facilities there will be damaged when we carry out the formal decontamination work or even remove the concrete layer. In this connection, I must point out that following the relocation of the airport, no more oil is stored in all the underground oil tanks at the site. What is left, as shown by our initial investigation, is just the oil contaminants accumulated in the soil there over the years. These contaminants are precisely what we must clean and remove.

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

MR HO SAI-CHU (in Cantonese): Madam President, in the last paragraph of the Secretary's main reply, it is pointed out that the companies concerned may be required to shoulder part of the decontamination costs. How much will the whole decontamination project cost? And, according to the estimation of the Government, how much will the companies concerned pay?

PRESIDENT (in Cantonese): Secretary for Planning, Environment and Lands.

SECRETARY FOR PLANNING, ENVIRONMENT AND LANDS (in Cantonese): Madam President, we estimate that the whole decontamination project will cost about $70 million. As for how much the OCTF should pay to the Government, we are still conducting the relevant negotiations. The position of the OCTF is that it must first be satisfied that the proposed decontamination method will really be effective, because it does not want to shoulder any open-ended liabilities if follow-up work is required after the completion of the decontamination project. However, in principle, it agrees that it is one of the polluters, and for that reason, it is prepared to pay its share to the Government as long as the method proposed can be proved effective. As for how much they should pay, I must say that the work of investigation is still in progress, and we must first ascertain the share of the OCTF in causing the contamination at the three sites in question. And, since we are now negotiating positively with the OCTF on this matter, I am unable to give a concrete figure to Honourable Members at this stage.

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

MR LAU KONG-WAH (in Cantonese): Madam President, on the one hand, the Secretary says that the Government has commissioned a consultancy to study the matter, but, on the other, he claims that the Advisory Council on Environment has been consulted on the decontamination method proposed. Why is it that two different approaches are being adopted all at the same time? When the risk assessment on the decontamination project is completed, will the findings be released for public information?

PRESIDENT(in Cantonese): Secretary for Planning, Environment and Lands.

SECRETARY FOR PLANNING, ENVIRONMENT AND LANDS (in Cantonese): Madam President, my answer is "yes". To begin with, we have already submitted the findings of our investigation work to the Advisory Council on Environment, and once we have completed our initial investigation, we will submit the results to the Director of Environmental Protection and the Advisory Council on Environment for their consideration. After the results have been cleared with them, and after the method proposed has been proved feasible, we will launch the decontamination project formally. Following the completion of all decontamination works, we will collect soil samples from the sites in question and forward them to the Advisory Council on Environment . Members of the public can all access all these results and findings. And, with respect to the investigation work going on right now, the representatives of the OCTF are also taking part in the work of monitoring.

PRESIDENT (in Cantonese): Dr Raymond HO.

DR RAYMOND HO (in Cantonese): Madam President, according to the Secretary, the underground oil tanks and pipes at the apron area have all been cleaned. However, who were responsible for cleaning them in the past? The Government, or some other people?

PRESIDENT (in Cantonese): Secretary for Planning, Environment and Lands.

SECRETARY FOR PLANNING, ENVIRONMENT AND LANDS (in Cantonese): Madam President, let me first clarify one point. What I actually said a moment ago was that the oil contained in the oil banks and oil pipes had all been pumped away. I did not say that they had all been cleaned already. And, let me just add that the oil companies has pumped water into these pipes and tanks. Therefore, what we are talking about now should be the oil contaminants which have seeped through the oil pipes and tanks into the soil over the years. These contaminants are the things which we have to clean and remove now.

PRESIDENT(in Cantonese): Dr Raymond HO.

DR RAYMOND HO (in Cantonese): Madam President, I too wish to clarify one point. Is the Secretary saying that all the oil pipes and tanks have been cleansed by water and the contaminants have all been washed into the sea? Besides, are all the oil pipes and tanks perfectly clean now? I have asked this question because washing away the oil does not necessarily mean that the innards of all these pipes and tanks are entirely clean.

PRESIDENT (in Cantonese): Secretary for Planning, Environment and Lands.

SECRETARY FOR PLANNING, ENVIRONMENT AND LANDS (in Cantonese): Madam President, let me perhaps try to explain the situation once again. The oil companies have already pumped away all the oil in the oil tanks and pipes and filled them up with water. The reason for doing so is that air will otherwise be trapped inside the tanks and pipes. As we all know, air will expand and contract in response to temperature changes, and when this happens, the stability of the tanks and pipes will be adversely affected. Therefore, the purpose of pumping water into the pipes and tanks is not so much to clean them, but to maintain their stability. And, we have not been washing any oil contaminants in the soil into the sea either, because the Director of Environmental Protection will certainly forbid us to do so.

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

Cable Failure

4. MR ANDREW CHENG (in Cantonese): Madam President, on 28 July this year, an extensive area in Tai Po experienced power failure for more than 10 hours. According to the findings of the investigation announced subsequently by the China Light and Power Company, Limited (CLP), the power supplier for that district, the incident was caused by the consecutive failure of three underground cables in the district. In this connection, will the Government inform this Council whether:

(a) it knows how frequently maintenance works were carried out by the CLP for the cables in question in the past five years; and whether the CLP has cut down the number of staff in the department responsible for relevant maintenance works in recent years; if so, of the number of staff reduced and whether an assessment has been made on whether the cable failure was related to such staff reduction;

(b) the Administration has, in response to this incident, required the CLP to conduct an overall review on its repair and maintenance works; if so, what the details are; if not, what the reasons are; and

(c) it will consider reviewing the relevant legislation, so as to step up the regulation of the company, thus minimizing the possibility of cable failure?

PRESIDENT (in Cantonese): Secretary for Economic Services.

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

(a) Maintenance inspections on cable terminations, such as those involved in the incident at Tai Po, are conducted every three years. This frequency of inspection is in line with international best practice among power utilities. Maintenance inspections of two of the cables that failed at Tai Po were carried out by the CLP twice in the past five years in 1995 and 1998 respectively. The other one was last inspected in 1996.

The CLP's reduction of staff in recent years has been achieved mainly through an internal restructuring designed to introduce new work processes, better resource allocation and programming, automation and other measures leading to improved efficiency and service quality. The staff reduction programme affected employees in various areas of the company's operations, including maintenance operations. According to the CLP:

- in 1997, the company's former transmission and distribution business groups, which comprised 3 866 staff responsible for power system maintenance among other duties, were reorganized into power systems and marketing and customer services business groups with a staff complement of 2 861;

- the current number of staff in the power systems and marketing and customer services business groups is 2 621, of whom 1 351 are directly involved in the daily operation and maintenance of power systems; and

- the company's internal restructuring has not resulted in a reduction in the level of maintenance.

There is no evidence that the failure of the cables at Tai Po was related to staff reductions.

(b) In response to the Tai Po incident, the Director of Electrical and Mechanical Services has asked the CLP to carry out inspections of all similar cables installed in their system and to draw up a replacement programme by mid-October 1998. It is unnecessary to require the CLP to conduct an overall review of their repair and maintenance works programme, as the Director of Electrical and Mechanical Services is satisfied that the existing programme is satisfactory. The Electrical and Mechanical Services Department (EMSD) will continue to monitor the CLP's technical performance.

(c) The Electricity Ordinance provides safety requirements for electricity supply and the enabling power to regulate an electricity supplier's maintenance of its cables. The Ordinance provides, among other things, that if an unintended electricity supply interruption occurs, causing distress of inconvenience to the public, the Director of Electrical and Mechanical Services may require from the electricity supplier concerned a report of the cause of the interruption and what remedial action has been or will be taken to prevent a recurrence.

The EMSD has been conducting a review of the Electricity Supply Regulations. The objective is to update these Regulations to take account of changing circumstances and recent technological developments. We intend to strengthen the provisions in the Ordinance on reliability of electricity supply through amendments to the Regulations and publication of a code of practice. We are currently finalizing a public consultation paper on our proposals for issue in October 1998, with a view to drafting revised regulations in 1999. We also intend to introduce new legislation early in 1999 to prevent damage to underground electricity cables and overhead electricity lines in the interests of safety and reliability of electricity supply.

PRESIDENT(in Cantonese): Mr Andrew CHENG.

MR ANDREW CHENG(in Cantonese): Madam President, it is an indisputable fact that the CLP has been cutting down the number of staff in the last five years. In the main reply, it was said that the number of staff for power system maintenance had been reduced from 3 866 to 1 351, a high 60% reduction. Will the Government inform this Council why it still asserts that the quality of maintenance by the CLP had not been affected by the reduction, despite the severe power failure at Tai Po? Furthermore, the last sentence in part (a) of the main reply said there was no evidence that the failure of the cables at Tai Po was related to staff reductions. What kind of proof does the Government require to establish that the failure was related to staff reductions? Will the Government take the initiative to conduct an investigation?

PRESIDENT(in Cantonese): Secretary for Economic Services.

SECRETARY FOR ECONOMIC SERVICES(in Cantonese): Madam President, 3 866 represented the total number of staff from several departments. After the reorganization, a new department was formed, consisting of 2 861 staff. 2 861 is the base number for 1997, and it dropped to 2 621 this year. Not all but 1 351 of the 2 621 staff are responsible for maintenance. The new department is also required to provide customer service in addition to maintenance service. This answers the first part of the supplementary question.

After the incident, the EMSD requested the CLP to submit a report, and initiated an investigation. The findings show that the failure was principally caused by some damaged parts, the durability of which was much shorter than expected. So, it can be seen that the incident has no direct relationship with the staff reductions. The cause was mainly the quality of parts.

PRESIDENT(in Cantonese): Mr Andrew CHENG.

MR ANDREW CHENG(in Cantonese): Madam President, the Secretary did not say whether the Government would take the initiative to conduct an investigation. The thrust of my supplementary question was on the findings of the CLP, which would naturally maintain in the report they should not be blamed for the failure. This was exactly what happened. The Government said it required some evidence and all the evidence came from the CLP. Will the Government take the initiative to conduct an investigation?

PRESIDENT(in Cantonese): Secretary for Economic Services.

SECRETARY FOR ECONOMIC SERVICES (in Cantonese): I believe I have answered it already. The EMSD took the initiative to conduct an investigation and arrived at the findings. When the EMSD has finished compiling the findings, it will make the same public later.

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

MR LAU KONG-WAH(in Cantonese): The Secretary said the 10-hour power failure was due mainly to parts having a durability shorter than expected. This is the CLP's negligence. Did the Government agree with the conclusion that the CLP had not been negligent, which conclusion was relayed to the EMSD? If yes, why did the EMSD then request the CLP to draw up a new programme to replace all cables as soon as possible?

PRESIDENT(in Cantonese): Secretary for Economic Services.

SECRETARY FOR ECONOMIC SERVICES(in Cantonese): The EMSD, having completed the investigation initiated by it, is now compiling the relevant information and trying to reach a conclusion. It has not yet been concluded that the CLP was negligent. I believe the EMSD would announce the results soon. Regarding the defective parts, investigation shows they should have a durability of 40 years but now they have broken down after 10 years only. The EMSD is looking into the reason for that. This is a rather complicated issue as it involves legal considerations and responsibilities of the supplier. We hope the EMSD can submit a detailed report shortly and account to the public the whole incident.

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

MR LAU KONG-WAH(in Cantonese): Madam President, my supplementary question was: If the CLP was not held responsible, why did the Government require it to draw up a new programme before October?

PRESIDENT(in Cantonese): Mr LAU, I think the Secretary has answered your supplementary question. He said he would give you a reply after investigation. Do you have anything to add, Secretary?

SECRETARY FOR ECONOMIC SERVICES(in Cantonese): I have some additional information for the Honourable Member. It was found the parts were faulty. For the sake of safety, the EMSD considered it prudent to request the CLP to conduct an overhaul on all similar installations to see if similar problems would occur. If similar problems are found then the CLP must replace the installations. Even if there are no similar problems, we will still request the CLP to replace the installations within a specified period. Therefore, we have requested the CLP to submit a replacement report to the EMSD in mid-October after the respective inspection.

PRESIDENT(in Cantonese): Mr Fred LI.

MR FRED LI(in Cantonese): Madam President, in paragraph (a) of the main reply, the Government said that of the three defective cables, two were inspected twice in 1995 and 1998. The inspection in 1998 was a rather recent one. So, why did the Government say in paragraph (b) of the main reply that the Director of theEMSD was satisfied the existing programme was satisfactory? Can the Secretary explain the inconsistency?

PRESIDENT(in Cantonese): Secretary for Economic Services.

SECRETARY FOR ECONOMIC SERVICES(in Cantonese): Carrying out inspections once every three years is in line with international best practice. In this connection, we think the practice is satisfactory. As regards the inspection in 1998, as I said, the cause of the failure was due mainly to a part having a durability shorter than the expected 40 years: the part broke down after 10-odd years. This was beyond the expectation of the CLP and experts. As to the reasons for that, a detailed investigation is required. So, it has nothing to do with inspections, for it was an unexpected failure parts.

PRESIDENT(in Cantonese): Mr Andrew CHENG.

MR ANDREW CHENG(in Cantonese): Madam President, in paragraph (c) of the main reply, it was said the Government had been conducting a review of the Electricity Supply Regulations. We understand the Regulations were first drawn up in 1911 but the Secretary's reply focuses only on amendments to these Regulations to enhance reliability in electricity supply. Will the Government inform this Council whether it has considered the punitive provisions? Under the present Regulations, if an electricity supplier is found to be negligent, it would be punished by a fine of only $100 a day. Has the Government conducted any review in this respect?

PRESIDENT(in Cantonese): Secretary for Economic Services.

SECRETARY FOR ECONOMIC SERVICES(in Cantonese): Yes, we know we need to catch up with the times as far as this is concerned. Therefore, we will be making proposals to increase the fine. We are now discussing with the Secretary for Justice on the rate of increase. The proposed increase will be included in the consultation paper.

PRESIDENT(in Cantonese): Fifth question. Mr James TO.

Commencement Date of the Interception of Communications Ordinance

5. MR JAMES TO (in Cantonese): Madam President, as the Government has not yet promulgated the commencement date of the Interception of Communications Ordinance (the Ordinance) enacted at the end of June 1997, will the Government inform this Council :

(a) why the commencement date of the Ordinance has not yet been promulgated;

(b) when it plans to promulgate the commencement date of the Ordinance; and

(c) of the principles adopted in deciding the commencement dates of the ordinances passed by the legislature?

PRESIDENT(in Cantonese): Secretary for Security.

SECRETARY FOR SECURITY(in Cantonese): Madam President,

(a) When the Interception of Communications Bill (the Bill) was being debated in the former Legislative Council in June 1997, the Administration has indicated very clearly that we were strongly opposed to the passage of the Bill. The legislative proposals were drawn up without prior consultation with the law enforcement agencies. The implementation of the Ordinance could seriously jeopardize our law enforcement agencies' capability to combat serious crimes and safeguard the security of Hong Kong. We are assessing the impact that the Ordinance could bring to our law enforcement work and have therefore not appointed a commencement date for the Ordinance.

(b) We are now pressing ahead with a thorough review of the whole issue of regulation of interception of communications taking into account comments received from the public consultation on the White Bill on Interception of Communications, changes introduced by the Ordinance and the law enforcement problems arising from the Ordinance. As the issue is still under review, we do not yet have any plan to promulgate the commencement date of the Ordinance.

(c) There are many reasons why ordinances provide for the appointment of commencement dates. These include allowing time for necessary subsidiary legislation to be made; for the public or an affected sector of the community to be informed of the implications of the legislation; or for the officials to be educated in respect of its implementation. In such cases, the public officer concerned will take into account the above factors before appointing the commencement date.

However, the public officer is not constrained by these considerations, but has a discretion to decide to bring the provisions into effect when it is appropriate to do so. He is therefore entitled to take into account other relevant circumstances, including the results of further study of the legislation.

The key principle adopted is that an ordinance will be brought into operation when it is in the interest of the community to do so.

PRESIDENT (in Cantonese): Mr James TO.

MR JAMES TO(in Cantonese): Madam President, one very important constitutional principle is that whilst the passage of laws is the responsibility of the legislature, the executive authorities is responsible for bringing the laws into operation. Although an ordinance may provide for the appointment of a commencement date by the executive authorities, the purpose of the provision is to entrust the executive authorities with the implementation of the ordinance, not the disguised veto on it. Could the Secretary inform this Council whether it is out of its opposition to the Ordinance that the Government has adopted such a "lose-hit, win-take" approach as to resort to actions which would undermine the rule of law, and even at the expense of the most fundamental constitutional principle?

PRESIDENT (in Cantonese): Secretary for Security.

SECRETARY FOR SECURITY(in Cantonese): Madam President, as I explained earlier, I have sought legal advice on the matter and understood that many factors must be taken into account before the commencement date of an ordinance could be appointed. These include allowing sufficient time for the Government to prepare for the implementation of the ordinance, for the public or an affected sector of the community to understand the provisions, or for the officials to be educated in respect of the operation of the ordinance and so on. For these reasons, we have a discretion to implement the Ordinance when we have gained an in-depth understanding of and reviewed thoroughly the impact that it could have on our law enforcement agencies.

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

MR CHEUNG MAN-KWONG(in Cantonese): Madam President, I should like to ask the Government whether it is true that because of the Government's strong opposition, the Ordinance will not be put in force despite the fact that it has been enacted by the Council. Further, does the Government consider discretion is equivalent to the power of veto, thus it could exercise its "discretion" incessantly to avoid bringing the Ordinance into operation; if so, what is the difference between the discretion it has and the power of veto?

PRESIDENT (in Cantonese): Secretary for Security.

SECRETARY FOR SECURITY(in Cantonese): Madam President, we will not deliberate over the commencement date of the Ordinance indefinitely. On the other hand, I do take the Honourable Member's point that we should put forward our proposal to repeal the Ordinance passed if we have come to the conclusion that it is neither practical nor feasible. However, as we are reviewing the issue as a whole, we could not promulgate the commencement date of the Ordinance at this stage.

PRESIDENT (in Cantonese): Mr Andrew CHENG.

Mr ANDREW CHENG(in Cantonese): Madam President, so long as the Ordinance is not yet put in effect, the Chief Executive could issue an order on such ambiguous grounds as "public interest" to allow the practice of intercepting communications arbitrarily to continue. Could the Secretary inform this Council how much longer would the consultation last, bearing in mind that the public concern over the privacy of information is on the increase? Is it true that the Government is making use of the consultation exercise as a pretext to defer the implementation of the Ordinance?

PRESIDENT (in Cantonese): Secretary for Security.

SECRETARY FOR SECURITY(in Cantonese): Madam President, we attach great importance to the advice given by the Law Reform Commission (LRC), that is, the existing legislation should be amended to provide for the better protection of personal privacy and the freedom of communication. For this reason, we will not review the issue indefinitely. However, as far as I understand it, the experience of other countries in this connection is that it has also taken them quite some time to review the legislation and to appoint a commencement date for it. Although I cannot draw up any timetable at the moment, I could still assure the Honourable Andrew CHENG that we would complete the review and put forward our proposal as soon as practicable.

PRESIDENT (in Cantonese): Miss Emily LAU.

MISS EMILY LAU(in Cantonese): Madam President, as referred to by the Secretary in her main reply, the Government had raised strong objections to the Bill when it was being debated; the objections were raised on the ground that the legislative proposals had been drawn up without prior consultation with the law enforcement agencies, and that the Government was concerned that the Bill would jeopardize the law enforcement agencies' capability to combat serious crimes and protect the security of Hong Kong. In this connection, could the Secretary inform this Council of the comments that the relevant law enforcement agencies have made, bearing in mind that it has been more than a year since the Government started consulting those agencies? Just now the Secretary referred to the LRC in answering a previous supplementary. In fact, the Chairman of the LRC was here before and advised us that the existing practice runs counter to the international norm for protection of human rights. Is the Secretary aware of this?

PRESIDENT (in Cantonese): Secretary for Security.

SECRETARY FOR SECURITY(in Cantonese): Madam President, the Honourable Miss Emily LAU has raised a number of questions, which I will try my best to answer. To begin with, the stance of the Government has remained unchanged. In this connection, we hold that the law enforcement problems arising from the Bill upon its passage in the former Legislative Council last year still exist. As my predecessor, Mr Peter LAI, has explained to the former Legislative Council, many of the provisions under the Ordinance would create grave problems for law enforcement agencies. For instances, the interception of radio communications from unidentifiable sources by law enforcement agencies is not exempted from the Ordinance, the validity of the court order is not sufficiently long and the renewable span is also very limited; what is more, the Ordinance also provides that intercepted material shall be admissible as evidence in court. Provisions of these kinds would certainly create serious problems for the law enforcement agencies. In regard to the views of the LRC, we certainly understand that its target is to ensure on one hand that the law enforcement agencies' capability to combat serious crimes and protect the security of Hong Kong will not be jeopardized, and to safeguard personal privacy and freedom of communication on the other. As such, we are now studying in detail the practices of other countries for reference purposes. in this connection, we are particularly interested in that of the democratic countries in the western world, since their relevant mechanisms should have been perfected after several decades of evolution. In addition to studying in detail the practices of these countries, we are also collecting data and information for the review. We hope to submit our views to the Legislative Council upon the completion of the review.

PRESIDENT (in Cantonese): Mr James TO.

MR JAMES TO(in Cantonese): Since the focus of the question is on the commencement date of the Ordinance, I hope the Secretary could answer this supplementary in more specific terms. Could the Secretary assure this Council that the principle that the permission to intercept an communication should not be granted by the Chief Executive but by court order as embodied in the Ordinance would remain intact? Does the Government have the courage to make such a pledge?

PRESIDENT (in Cantonese): Secretary for Security.

SECRETARY FOR SECURITY(in Cantonese): Madam President, I think it is not appropriate to make such a pledge at this stage. As I said, we are now studying in detail the practices of many democratic countries, including the United Kingdom, the United States, Canada, Australia and so on. In this connection, we have found out that the practices adopted by these countries are essentially different from each other. For example, in the United States and in Canada, the authorization to intercept communication must be granted by court order; but in Britain, the same would be granted by a Home Secretary, who is a senior government official. As regards Australia, there are two kinds of authorization; if the interception is for combating serious crime purposes, the authorization would be granted by the court, but if the same is in the interest of national security, the authorization would have to be granted by a senior government official. Since we need time to conduct in-depth studies into the various practices, it is therefore not appropriate for the Government to make the pledge as requested by the Honourable James TO.

PRESIDENT (in Cantonese): Miss Margaret NG.

MISS MARGARET NG: Madam President, under Article 64 of the Basic Law, it is said that the Government shall implement laws passed by the Council and already in force. Does the Secretary agree with me that it, therefore, implies that the Government does not have a discretion whether or not to put a law in force but must implement it, and that all the discretion they have is that they must make their best endeavour to ensure that the law which is passed is going to be put in force?

PRESIDENT (in Cantonese): Secretary for Security.

SECRETARY FOR SECURITY(in Cantonese): Madam President, I understand very well the provision under Article 64 of the Basic Law. However, we have also sought legal advice. Our understanding is that the public officer concerned could take into account the factors I have referred to earlier before appointing a commencement date for an ordinance. As regards other countries, the appointment of commencement date for a piece of legislation also takes time.

PRESIDENT (in Cantonese): Mr Andrew WONG.

MR ANDREW WONG(in Cantonese): Madam President, perhaps no oral reply could be made readily to the supplementary I wish to raise and the Secretary might need to furnish the Council with a written reply. In the event of it really being the case, Madam President, could I have your leave to raise another supplementary?

PRESIDENT (in Cantonese): I will not give you the permission, Mr Andrew WONG, but you could wait for your next turn to raise another supplementary. All Members have to wait for their turns, and you are no exception.

MR ANDREW WONG(in Cantonese): Madam President, I do not wish to dwell on the debate held in June 1997. I just want to inquire the Secretary of the total number of applications for permission to intercept communications the Chief Executive and his authorized persons have approved of under the existing legislation since 1 July 1997.

PRESIDENT (in Cantonese): Secretary for Security.

SECRETARY FOR SECURITY(in Cantonese): Madam President, the answer to this supplementary involves confidential information which I cannot disclose.

MR ANDREW WONG(in Cantonese): Madam President, I do not think that would involve confidential information. I am interested in the number of approvals only, I did not ask about the nature or the involved parties of those cases. I do not believe the answer would involve confidential information.

PRESIDENT (in Cantonese): Mr Andrew WONG, you are only expressing your views. Please indicate which part of your supplementary has not been answered by the Secretary.

MR ANDREW WONG(in Cantonese): Madam President, I wish to seek your ruling as to whether the answer to my supplementary involves any confidential information. My supplementary was on the number of cases, not the parties involved. I do not believe such figures would be confidential information. Madam President, may I seek your ruling please?

PRESIDENT (in Cantonese): Mr James TO.

MR JAMES TO(in Cantonese): I think a grave constitutional problem is involved here. With respect to the various questions raised by Honourable Members so far, regardless of whether they were raised during the Budget debate, during question times, at Security Panel meetings, or at Bills Committee meetings, they were in fact of a nature similar to this one. For this reason, Madam President, I wish to seek your ruling on this supplementary which has only asked about the number of cases. If the President were unable to rule on the matter at the moment, I still hope you would consider the case prudently and then give us your ruling. Bearing in mind that we have to monitor the law enforcement duties discharged by the security forces or law enforcement agencies under the Government, the President's ruling on this point is of enormous import.

PRESIDENT (in Cantonese): Honourable Members, before Mr Andrew WONG raised his supplementary, this Council had already spent 13 minutes on this question, so I am drawing the line at that and the Council will continue with the question time later. I have to take into account the various circumstances before ruling on the matter, I will therefore temporarily suspend the meeting.

3.43 pm

Meeting suspended.

4.10 pm

Council then resumed.

PRESIDENT (in Cantonese): Honourable Members, just now Mr Andrew WONG inquired the Government of the figures of the interceptions authorized, I did not forbid Mr Andrew WONG to raise the supplementary because I did not know whether or not the figures were confidential information. The Secretary's reply was that she could not disclose the figures since they were related to confidential information. Mr Andrew WONG held a different view and considered the figures not related to any confidential information. As such, Mr Andrew WONG and Mr James TO have both sought my ruling on the matter.

I have consulted some materials on the practice in other legislatures. In this connection, I have noticed that there have also been occasions on which ministers representing the government would refuse to answer directly the questions raised by their legislators for reasons of confidentiality. Very often, the speaker of the legislature was unable to rule whether the answer sought related to confidential information without the support of other relevant argument or information; as such, the confidentiality or otherwise of the information could only be judged by the minister speaking on behalf of the government. Likewise, I am also unable to rule whether the answer to the supplementary is related to confidential information, nor do I have sufficient information to enable me to do so. I therefore believe it should be the responsibility of the Secretary to make the judgement, and I think she has already done so.

MR ANDREW WONG (in Cantonese):Madam President, in view of the fact that you are unable to rule whether the answer to my supplementary is related to confidential information while the Secretary has affirmed its confidentiality, could the Secretary inform this Council of the reasons why the answer to a supplementary seeking broad figures instead of asking for specific data such as the figures of interceptions carried out at the Chinese University of Hong Kong ─ in which case I would be affected ─ would have any relation with confidential information?

PRESIDENT (in Cantonese): The timer shall now be activated. Secretary for Security.

SECRETARY FOR SECURITY(in Cantonese): Madam President, I do see the Honourable Andrew WONG's point, but the law enforcement agencies really have much reservation about the disclosure of such figures. Although the information disclosed would only be on the figures and not the details of individual cases, if the practice of disclosing figures remains long enough, by comparing the figures at different intervals, observant people could very easily figure out any trend or changes concerning the conduct of the interceptions. In that case, the capability and tendency of the law enforcement agencies in this respect would be exposed. For this reason, our law enforcement agencies do have much reservation about the disclosure of such figures. On the other hand, I should also like to inform Mr WONG that in studying the mechanisms of other countries, I have noticed that the transparency of such kind of secret work have been increasing tremendously in many countries, and in some countries, the relevant figures would even be submitted to their legislatures annually. In addition to exploring the possibility of developing towards this end, we are also considering the mechanisms that could enable us to enhance the transparency and accountability of our work on this front.

MR ANDREW WONG (in Cantonese):I think the Secretary has not answered my supplementary. Just now I deliberately cited an example which involved myself; however, I could cite another example, such as the number of interceptions on the Honourable Martin LEE. It is very obvious that as the scope of the question narrows down, the information that it seeks would become more restricted, but how could certain general figures be classified as confidential information? In regard to the reply the Secretary has given, the first half of it has not touched upon my supplementary at all; yet in the second half, the Secretary has admitted that such general figures would be disclosed in certain countries. Just now the Secretary has also talked about exploring the possibility of disclosing the relevant information, that means she also agrees that the figures could be disclosed. But then again, she has informed this Council that the figures were confidential and should not be disclosed. I really could not understand her rationale here. Madam President, may I seek your ruling on this answer provided by the Secretary?

PRESIDENT (in Cantonese): I think the Secretary has already answered your supplementary. Perhaps you are not satisfied with the Secretary's reply, but that is not a point of order; besides, I could not guarantee that you will always find the answers satisfactory. Miss Emily LAU.

MISS EMILY LAU(in Cantonese): Madam President, since the Secretary has admitted that she had consulted the Chairman of the LRC and agreed that the existing practice of intercepting communications was a breach of the International Covenant on Human Rights, I should like to ask the Secretary for how long would the Government like to defer the actions to bring the work of our law enforcement agencies in line with the provisions under the Bill of Rights Ordinance and the International Covenant on Human Rights?

PRESIDENT (in Cantonese): Secretary for Security.

SECRETARY FOR SECURITY(in Cantonese): Madam President, I am sure I did not say I agreed with the view that the existing provisions have breached the Bill of Rights Ordinance. I have only said I agreed that the protection for personal privacy and freedom of communication should be strengthened. In this connection, the objective could be achieved by enacting new laws with more definite provisions and making improvements to the existing system; and we have in fact been working actively in this direction.

PRESIDENT (in Cantonese): Last supplementary. Mr James TO.

MR JAMES TO(in Cantonese): Madam President, could the Secretary inform this Council whether the Government has received any legal advice indicating that once the Bill had been passed, the longer the period of time the Government defers the implementation as well as the commencement date of the Ordinance, the weaker would be the legal status of the Government; and that the legal status of the Government could be severely undermined to such an extent that the Government would be rendered a law offender should any party apply for a judicial review?

PRESIDENT(in Cantonese): Secretary for Security.

SECRETARY FOR SECURITY(in Cantonese): First of all, let me assure Mr James TO that we are not delaying the implementation for no reason, we are in fact actively reviewing the issue as a whole. As the issues involved are rather complicated and controversial, it would take us some time to complete the review; we will certainly put forward our proposals and appoint a commencement date for the Ordinance once we have summed up the review.

PRESIDENT (in Cantonese): Mr James TO.

MR JAMES TO(in Cantonese): Madam President, I think the Secretary has not answered my supplementary. I was asking whether the Government was aware that the longer the period of time it has dwelled on the issue ─ I would not use the word "delay", since it carries many implications ─ the weaker would be its legal status in a judicial review. Could the Secretary inform this Council whether the Government would agree with me?

PRESIDENT (in Cantonese): Secretary for Security, could you clarify that?

SECRETARY FOR SECURITY(in Cantonese): Madam President, since we are not making unreasonable delays but have in fact been reviewing the entire issue actively, I do not think our status would in any way be weakened.

PRESIDENT(in Cantonese): Last question seeking an oral reply. Mrs Selina CHOW.

Sale and Publication of Pornographic VCDs

6. MRS SELINA CHOW(in Cantonese): Madam President, will the Government inform this Council of:

(a) the number of law enforcement actions taken by the Television and Entertainment Licensing Authority (TELA), the Hong Kong Police Force (the police), and the Customs and Excise Department (the Customs) respectively against the sale and publication of pornographic video compact discs (VCDs) over the past three years; and the number of successful prosecutions as a result of such enforcement actions, as well as the total amount of fines involved; and

(b) the measures in place to tackle the problem of selling and publishing pornographic VCDs?

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

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

(a) Since compact disc is a relatively new form of media, the law enforcement agencies only started to keep separate enforcement statistics in respect of obscene VCDs in 1996. In 1996, 805 operations against obscene VCDs were taken by the police and Customs, 799 operations were launched in 1997 and 297 during January to August 1998. The number of successful prosecutions amounted to 188 in 1996, 368 in 1997 and 333 during January to August 1998. To work out the total amount of fines levied, the enforcement agencies need to go through some 900 prosecution files kept in various districts. Due to resource constraints, we are not able to provide the requested data at the moment. However, the police and Customs have advised that the heaviest fine imposed by the court since 1996 in relation to offences relating to obscene VCDs was $50,000, and the longest term of imprisonment sentenced was 28 months.

(b) The police combats sale of obscene VCDs by launching operations based on intelligence gathered in various districts on sale activities of such VCDs. Customs tackles the publication, distribution and sale of obscene VCDs at import/export entry points and in the course of their copyright and patent enforcement work. The TELA collects information on black spots regarding sale outlets through inspections and complaints from the public. Such intelligence would be forwarded to the police to facilitate their enforcement actions. The three enforcement agencies also conduct joint operations to combat pornographic articles, targeting factories and retail black spots in particular. Two special campaigns against pornographic articles have been launched thus far: one during March to May 1997 and one during April to May this year, resulting in 428 and 276 prosecutions respectively. Some 147 688 obscene VCDs were seized in the 1997 campaign and seizure amounted to 122 603 in the 1998 campaign. All three enforcement agencies will continue to combat the sale, distribution and publication of obscene articles (including obscene VCDs) vigorously. They will also closely monitor developments and if necessary, arrange special enforcement operations to combat pornographic articles.

PRESIDENT(in Cantonese): Mrs Selina CHOW.

MRS SELINA CHOW (in Cantonese): Madam President, has the Information Technology and Broadcasting Bureau ever estimated the size of the pornographic VCD business? Since the profits of this kind of business are so big, can the existing penalties produce adequate deterrent effects?

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

SECRETARY FOR INFORMATION TECHNOLOGY AND BROADCASTING (in Cantonese): Madam President, I do not have the information required to hand.

MRS SELINA CHOW (in Cantonese): Madam President, will the Secretary provide a written reply later?

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

SECRETARY FOR INFORMATION TECHNOLOGY AND BROADCASTING(in Cantonese): Madam President, I am not sure whether we have made any such estimates. If yes, I will provide a written reply.

PRESIDENT (in Cantonese): Mr James TO.

MR JAMES TO (in Cantonese): Madam President, may I ask whether the sale of pornographic VCD actually involves any organized crime or triad control? I understand that even now, the police do have the practice of assigning some elite officers as undercover agents to penetrate and root out crime syndicates. That being the case, will the Government regard the combat against pornographic VCDs as a means of cutting a source of income for triad elements?

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

SECRETARY FOR INFORMATION TECHNOLOGY AND BROADCASTING(in Cantonese): Madam President, we can of course ask the police to follow up the proposal made by the Honourable Member. However, I have to point out that our actions against pornographic VCDs have so far been directed especially at some known black spots.

PRESIDENT (in Cantonese): Mrs Selina CHOW.

MRS SELINA CHOW (in Cantonese): Madam President, according to paragraph (b) of the main reply, some special campaigns against obscene articles were launched between March and May last year and between April and May this year. May I ask whether the Government has taken any other initiatives in addition to these special campaigns? In other words, are these special campaigns all about the positive enforcement actions referred to by the Government?

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

SECRETARY FOR INFORMATION TECHNOLOGY AND BROADCASTING (in Cantonese): Madam President, special campaigns are in fact tripartite operations involving the TELA, the Customs and the police. The number of pornographic VCDs seized during these operations is naturally larger when compared with routine operations.

MRS SELINA CHOW (in Cantonese): How does the Government distinguish special campaigns from non-special operations. Is it correct to think that no major actions will be taken against pornographic VCDs when special campaigns are not launched? And, are enforcement actions restricted to some specific periods of the year, say, the two to three months mentioned in the main reply?

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

SECRETARY FOR INFORMATION TECHNOLOGY AND BROADCASTING (in Cantonese): Madam President, if we just look at the prosecution figures ...... . Actually, the number of prosecutions not arising from special campaigns is not small either. In 1997, for example, the total number of prosecutions was 671, and the number of prosecutions arising from special campaigns launched between March and May in the same year was 428. In other words, as many as 200 prosecutions were initiated not as a result of special campaigns.

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

MR HO SAI-CHU (in Cantonese): Madam President, paragraph (a) of the mainly reply indicates that an average of about 800 operations are usually launched every year. However, from January to August this year, only 297 operations were carried out. Given such a frequency, it is likely that the whole of this year will see only 400 operations in total. This will mean a reduction by half, when, obviously, there are no signs for the better. Is it right to say that we have carried out fewer operations so far this year? Is it correct to say that the authorities concerned have failed to do their best to combat the sale of pornographic VCDs?

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

SECRETARY FOR INFORMATION TECHNOLOGY AND BROADCASTING (in Cantonese): Madam President, we have actually been making continuous efforts to combat the sale of pornographic VCDs, and in this particular respect, we do not see any great difference between last year and this year. In addition to routine operations, we will launch some special campaigns. This year, up to August, the authorities concerned have seized as many as 92 000 pornographic VCDs, and this number is already bigger than the yearly total of 1997.

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

MR HO SAI-CHU (in Cantonese): Sorry, Madam President, my supplementary question was on the number of operations. The obvious fact is that the number of operations this year will just be half of the corresponding total for last year. What are the reasons for such a drastic reduction?

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

SECRETARY FOR INFORMATION TECHNOLOGY AND BROADCASTING (in Cantonese): Madam President, the number of operations alone cannot possibly tell the whole story, because an operation may be very large in scale, covering the whole of a large shopping centre, or, it may just be a small-scale operation in a small shopping centre, carried out in response to complaints. So simply by looking at the number of operations, one cannot possibly know whether the enforcement agencies have in fact made enough positive efforts.

PRESIDENT (in Cantonese): Mr Andrew CHENG.

MR ANDREW CHENG (in Cantonese): Madam President, it is mentioned in paragraph (b) of the main reply that the TELA collects the relevant information through inspections and complaints from the public. My supplementary question involves my observation that the sale of pornographic VCDs in those black spots which have been raided will usually resume right afterwards. The problem seems to be that the TELA simply does not have enough inspection manpower, and that public complaints do not always give the most accurate information on these activities. May I therefore ask the Government whether it will review the manpower resources of the TELA and its powers?

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

SECRETARY FOR INFORMATION TECHNOLOGY AND BROADCASTING (in Cantonese): Madam President, during this financial year, the TELA has already been given more manpower for enforcement of the Control of Obscene and Indecent Articles Ordinance. So far this year, as many as 3 000 inspections have been carried out, and this shows the positive efforts of the TELA.

WRITTEN ANSWERS TO QUESTIONS

Sale and Resale of Subsidized Home Ownership Flats

7. MR GARY CHENG (in Chinese): Regarding the sale and resale of flats under the Home Ownership Scheme (HOS) and Private Sector Participation Scheme (PSPS) in the past five years, will the Government inform this Council:

(a) of the respective numbers of flats sold to green form applicants (the residents of public housing estates as well as other persons eligible for public housing) and White Form applicants (other eligible persons) each year;

(b) of the number of Green Form applications for subsidized home ownership flats on each occasion;

(c) of the numbers of successful Green Form applicants for subsidized home ownership flats each year who were:

(i) public housing residents who were thus required to surrender their residing public housing units, and of the ages of these public housing blocks;

(ii) residents affected by the redevelopment projects of public housing estates; and

(iii) persons of other categories;

(d) of the respective numbers of subsidized home ownership flat owners who sold their flats back to the Housing Authority (HA) at the original selling prices or at market prices each year; and the number of these owners and their family members who were reallocated with public housing units by the HA;

(e) whether it is aware of the number of subsidized home ownership flats of more than three years but less than 10 years of age which were resold by the owners at the secondary market of subsidized home ownership flats each year; and

(f) whether it is aware of the number of subsidized home ownership flats which were resold at the private property market each year?

SECRETARY FOR HOUSING (in Chinese): Madam President, the numbers of subsidized housing flats sold under the HOS and the PSPS to Green Form and White Form applicants in the past five years are:

	Green Form purchasers(1)	White Form purchasers
1993-94	8 918	6 960
1994-95	8 683	4 511
1995-96	9 113	4 665
1996-97	11 758	3 281
1997-98(2)	14 998	6 354
	---------	---------
Total	53 470	25 771

The numbers of Green Form applications on different occasions are:

	Phase	No of applications
1993-94	15A	14 702
	15B	20 488
	15C	28 495
1994-95	16A	25 482
	16B	35 069
1995-96	17A	24 604
	17B	16 743
1996-97	18A	21 829
	18B	19 946
	18C	31 485
1997-98	19A	45 143
	19B	32 650
	19C	24 036

The numbers of Green Form purchasers living in public rental housing and the age of flats surrendered or to be surrendered by them are:

	No. of purchasers	Age of flats surrendered
		Below five	five to 10	10 to 15	15 to 20	over 20
		years	years	years	years	years
1993-94	8 406	1	340	858	1 293	5 914
1994-95	7 676	19	467	1 033	1 323	4 834
1995-96	7 462	28	624	1 249	1 562	3 999
1996-97	9 963	69	1 044	1 215	2 177	5 458
1997-98	9 414	122	724	1 911	2 860	3 797
	---------	----	-------	-------	-------	---------
Total	42 921	239	3 199	6 266	9 215	24 002

The respective numbers of Green Form purchasers who were public housing tenants affected by redevelopment or who were applicants of other categories are:

	Public housing tenants	Applicants of
	affected by redevelopment	other categories
1993-94	1 345	1 558
1994-95	1 092	1 342
1995-96	608	1 860
1996-97	1 391	2 589
1997-98	1 381	1 654
	-------	-------
Total	5 817	9 003

The respective numbers of HOS and PSPS flats sold back to the HA at original selling prices or sold at prevailing HOS prices are:

	At original price	At prevailing HOS price
1993-94	28	258
1994-95	47	167
1995-96	105	312
1996-97	117	283
1997-98	62	101
	-----	-------
Total	359	1 121

The HA does not keep statistics of the number of owners or their family members who were re-allocated public housing flats after selling their HOS/PSPS flats to the HA. Since December 1996, the HA does not allow former HOS and PSPS flat owners to apply for public rental flats after selling their flats. This restriction is not applicable to unmarried children who subsequently form their own families upon marriage.

Since the introduction in June 1997 of secondary market for the resale of HOS/PSPS flats, some 1 200 transactions have taken place.

The HA does not keep statistics of the number of HOS/PSPS flats resold in the open market. Notwithstanding this, an HOS/PSPS flat owner has to pay a premium before he/she is allowed to resell the flat in the open market. The payment of premium may give an indication, as follows:

	No. of units effected payment of premium
1993-94	646
1994-95	1 268
1995-96	2 858
1996-97	4 918
1997-98	4 259
	--------
Total	13 949

It is believed that the majority of HOS/PSPS flat owners will resell their flats after paying the premium to the HA.

Ownership of Gas Pipes

8. MR NG LEUNG-SING (in Chinese): Recently, when a private housing estate requested the Hong Kong and China Gas Company Limited (HKCG) to carry out maintenance works to the gas pipes in the estate, the HKCG advised that free maintenance service would only be provided if the ownership of such pipes was transferred from the estate to the Company. In this connection, will the Government inform this Council whether:

(a) it knows the number of cases in which private housing estates were asked by the HKCG to transfer the ownership of their gas pipes, as well as the number of those cases in which the ownership has been transferred; and

(b) it will consider amending existing legislation to make the HKCG responsible for maintaining gas pipes in safe working order?

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

(a) The number of cases in which the HKCG have asked that private residential buildings or estates transfer the ownership of their towngas pipes to the company so as to enjoy free maintenance services is, according to the company, about 180. Transfer of ownership procedures has been completed in 45 of these cases.

(b) The responsibility for maintaining gas pipes in safe working order rests with the owners of the pipes concerned. It would therefore not be appropriate to legislate to make the HKCG responsible for maintaining all gas pipes regardless of their ownership.

Guardianship Board

9. MR FRED LI (in Chinese): The Mental Health (Amendment) Ordinance 1997 (Ordinance No. 81 of 1997) enacted in June last year stipulates that a Guardianship Board (the Board) shall be established and that the chairperson of the Board shall have suitable legal experience. However, it is learnt that to date the Board has still not been established because the Administration cannot identify a suitable person as the chairperson. In this connection, will the Government inform this Council:

(a) whether it has considered amending the above Ordinance, in order to relax the eligibility requirements in respect of the chairperson of the Board;

(b) according to its plan, the date of appointment of the chairperson and members of the Board; and

(c) of the measures to be adopted to facilitate the commencement of operation of the Board at the earliest possible date?

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

(a) The Mental Health (Amendment) Ordinance 1997 stipulates that the Chief Executive shall appoint to the Guardianship Board a chairperson having such legal experience as he considers suitable. The Board will be independent and responsible for determining applications for appointment of guardians, making and reviewing guardianship orders, and giving directions to guardians as to the nature and extent of the relevant guardianship orders. When determining guardianship applications, the Board will have to make decisions which may restrict the personal rights and freedoms of mentally incapacitated persons.

In view of the functions and powers of the Board, it is important that it be chaired by a competent person with suitable legal experience. The eligibility requirements in respect of the chairperson of the Board were thoroughly considered and agreed by the Administration and the Legislative Council after consultation with relevant parties. As such, we do not consider it necessary nor justified to relax the requirement.

(b) A candidate to fill the position of chairperson of the Board has been identified and formal appointment procedures are progressing. In addition, a sufficient number of candidates for membership of the Board have been identified and we expect to announce all of the appointments before the end of this year.

(c) Action to ensure early commencement of the operation of the Board continues to be made. Measures include the shortlisting of members; selection of the Board's secretariat staff; acquisition and fitting-out of the Board's office; compilation of procedural guidelines for social workers on implementation of the new guardianship provisions; and preparation of publicity material and briefings on the new guardianship system and its associated application procedures.

Portability of Telephone Numbers on Fixed Telecommunications Networks

10. MR CHAN KAM-LAM (in Chinese): In connection with the direction issued by the Telecommunications Authority (TA) to Hongkong Telecom (HKT) in 1995 which specified that the company should facilitate the portability of telephone numbers on fixed telecommunications networks, will the Government inform this Council:

(a) how the HKT has complied with the direction; and

(b) whether it has received any complaints about the HKT rejecting the applications made by its customers for transfer of telephone numbers to other fixed network operators; if so, of a breakdown of such complaints by residential and commercial users, the number of such complaints which involved telephone numbers starting with "3"; and the follow-up actions that the authorities have taken?

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

(a) It is a licence condition that all holders of Fixed Telecommunication Network Services (FTNS) licences should facilitate the portability of the telephone numbers on fixed telecommunication networks in accordance with directions of the TA. The HKT complies fully with the directions of the TA on number portability.

(b) The TA has so far received only one anonymous complaint from a business operator against the HKT on a refusal to port a number beginning with "3", but the complainant has not provided sufficient information for the TA to follow up on the alleged refusal.

Recovery of CSSA Payments and Old Age Allowance

11. MR LEUNG YIU-CHUNG (in Chinese): With regard to the Social Welfare Department (SWD)'s efforts to recover the Comprehensive Social Security Assistance (CSSA) payments and Old Age Allowance (OAA) wrongly paid out in the past year, will the Government inform this Council of:

(a) the number of cases in which such payments were successfully recovered and the total amount involved; and the number of cases still outstanding; and

(b) the means adopted for recovering such payments; whether there have been cases of directly deducting the payments from the recipients' bank accounts without giving them prior notice or seeking their consent; if so, of the number of such cases, the amount of money involved and the legal basis for such action?

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

(a) In 1997-98, there were 20 064 overpaid CSSA cases and 10 348 overpaid OAA cases. In most cases, the overpayment was due to the recipients being absent from Hong Kong over the prescribed period. The amount of overpayment involved was $52 million and $23 million respectively. The SWD has been taking action to recover the overpayment from these cases and all recipients concerned have agreed to repay the overpaid amount. Nevertheless, we cannot provide the exact amount of overpayment successfully recovered, because some recipients are making repayment in instalments. As at end August 1998, there were only four CSSA and 23 OAA overpayment cases for which action to recover the overpaid amount has yet to start.

(b) In the event of overpayment of social security assistance, the SWD is responsible for recovering the relevant amount and will make contact with the recipients as soon as practicable. Overpayments will normally be recovered by:

(i) asking the recipient to return the amount;

(ii) deducting the amount overpaid from the recipient's subsequent payments; or

(iii) recovering the amount overpaid from his estates if the recipient is deceased.

If the recipient concerned does not respond and cannot be contacted, the SWD will serve a seven-day notice to the recipient before stopping future payment and proceeding to retrieve any overpaid amount from the recipient's bank account. All social security recipients are required to give consent to such an arrangement when they make their applications for assistance. Another notification on recovery of payment through bank will be sent to the recipient concerned after the retrieval. The recipient will also be informed that he may make an appeal to the Social Security Appeal Board against the SWD's action if he is not satisfied with the decision of the SWD.

River Trade Terminal in Tuen Mun

12. MR ALBERT HO(in Chinese): Will the Government inform this Council whether it will consider relocating the existing immigration anchorage off Butterfly Beach at Tuen Mun to the river trade terminal to be commissioned shortly in Tuen Mun, so as to reduce the pollution caused by the anchorage to the coastal waters of Butterfly Beach and the noise nuisance caused to residents in the neighbourhood during the late night operations hours of the anchorage?

SECRETARY FOR ECONOMIC SERVICES (in Chinese): Madam President, the first operating area of the River Trade Terminal at Tuen Mun will come into operation in October and the whole terminal will be completed in late 1999. In the light of experience gained from its actual operation, the Government will consider whether there is any need to change the existing arrangements for immigration clearance in the area. If there are sufficient justifications, the Government will consider to relocate the immigration anchorage off Butterfly Beach to other suitable locations.

Mainland Visitors to Hong Kong

13. MISS CHAN YUEN-HAN (in Chinese): Regarding mainland people touring Hong Kong, will the Government inform this Council:

(a) of the quota in respect of the number of mainland visitors to Hong Kong in each of the past three years; whether it has assessed the revenue generated for Hong Kong by these visitors;

(b) whether there is any plan to increase the quota; if so, what the details are;

(c) whether it knows about the departments in mainland China which are responsible for allocating the quota in respect of visitors to Hong Kong; of the criteria for allocation; of the respective quotas allocated to different provinces in mainland China in the past year;

(d) whether it knows about the procedure that mainland people have to go through when applying to visit Hong Kong; of the normal period of time taken to process an application; of the shortest and longest periods of time taken to process such applications;

(e) whether there is a limit to the number of visits to Hong Kong for mainland people; if so, of the number of visits to Hong Kong that can be made in one year; if not, what the reasons are;

(f) of the length of stay in Hong Kong allowed for mainland visitors each trip; and

(g) of the number of mainland visitors who overstayed in Hong Kong in the past three years and the longest time of overstaying; what measures the Government has in place to prevent mainland visitors from overstaying in Hong Kong?

SECRETARY FOR SECURITY (in Chinese): Madam President,

(a) The daily quota of the number of mainland visitors allowed for entry under the Group Tour Scheme was 928, 1 026 and 1 046 respectively in 1995, 1996 and 1997. On 17 November 1997, the daily quota was increased to 1 142. As from 6 July 1998, this quota has been further expanded to 1 500.

In terms of their spending in Hong Kong, mainland visitors (including Group Tour visitors, transittees, business visitors and Two-way Permits holders) ranked the third, the second and the first amongst visitors respectively in 1995, 1996 and 1997. In January - June 1998, the spending of mainland visitors has remained at the top. The amount is as follows:

Year	Amount ($M)
1995	13,746
1996	15,209
1997	15,579
1998 (January-June)	6,540

We do not have a specific breakdown of the spending by Group Tour visitors.

(b) As explained in (a) above, the daily quota of the Group Tour Scheme has recently been increased in July 1998. Depending on the utilization rate of the current quota, the need for any further increase in the quota will be reviewed in due course, taking into account the capacity of our immigration control points and any enforcement problems.

(c) The Hong Kong and Macau Affairs Office of the State Council is responsible for co-ordinating arrangements for the operation of the Group Tour Scheme in the Mainland. We understand that there are no fixed sub-quotas allocated to individual provinces under the Scheme. The daily quota is allocated to four designated tour operators in the Mainland. Each of these operators organizes group tours within the sub-quota assigned to it.

(d) As far as we are aware, mainland residents who wish to join the Group Tour Scheme have to submit their applications to the four designated tour operators. The latter will in turn help them apply to the Public Security Bureau for an exit permit. The whole process normally takes about eight to 20 days.

(e) We do not impose a restriction on the number of trips a Group Tour visitor can make to Hong Kong, but he or she must be able to meet our normal immigration requirements, that is, that they are bona fide visitors unlikely to breach their conditions of stay in Hong Kong. This is in line with our policy on the admission of tourists from other parts of the world.

(f) Group Tour visitors can normally stay in Hong Kong for three to 15 days.

(g) The number of overstayers amongst Group Tour visitors was 1 247, 1 410, 2 939 respectively in 1995, 1996 and 1997. In January - August 1998, the figure was 2 709. These figures represent respectively an overstaying rate of 0.53%, 0.57%, 1.20% and 1.46% in the periods in question. There was one Group Tour visitor who overstayed for 40 months. This is the longest overstaying period for Group Tour members on record.

The Immigration Department has adopted a number of measures to minimize overstaying by Group Tour visitors. These include, among other things, refusing the entry of Group Tour visitors whose bona fides are in doubt; requesting the tour operators to inform the Immigration Department of doubtful applications and requiring Group Tour visitors to enter and leave Hong Kong as a group. These measures will continue to be enforced vigilantly.

Appointment Ratio of Graduate Teachers and Certificated Masters in Secondary Schools

14. MR ERIC LI (in Chinese): Regarding the appointment ratio of graduate teachers and certificated masters in secondary schools, will the Government inform this Council:

(a) of the current appointment ratio of graduate and non-graduate teachers in government secondary schools and subsidized secondary schools respectively;

(b) whether, with the increase in the numbers of university degree graduates and of serving certificated masters studying degree courses, the Government has any plan to adjust the above ratio; if so, what the target ratio is; and

(c) whether there is any plan in place to encourage serving certificated masters to enrol in university degree courses, so as to qualify as graduate teachers; if so, what the details are; if not, why not?

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

(a) Under the current establishment in government and subsidized secondary schools, the ratio between graduate teachers and non-graduate teachers is 7:3 in general. (Note: The ratio for prevocational schools has been improved from 1:1 to 6:4 since September 1998. It will be further improved to 7:3 in 2000. For special schools (secondary), the ratio is 3:7).

(b) The Government has no plan to adjust the above ratio.

(c) The Government always encourages teachers to pursue professional development, including undertaking degree programmes. In 1998-99, the University Grants Committee-funded institutions have provided a total of 3 795 part-time first degree places which non-graduate teachers can pursue. Of these, there are 549 places in education-related first degree programmes. In 1989, the Government established the Open Learning Institute of Hong Kong, which was upgraded to become the Open University of Hong Kong in 1997. The Institute provides degree courses which teachers can complete in their own time and pace. The Education Department has also been encouraging schools to make flexible arrangements on teaching timetables to facilitate Certificated Masters to study for part-time degrees.

Furthermore, in order to encourage serving Certificated Masters to pursue degrees so as to qualify as Graduate Masters, serving Certificated Masters in secondary schools who are re-graded as Graduate Masters in their own schools or other secondary schools can retain their existing salaries if their salaries are higher than the entry point for Graduate Masters, and receive annual increments until they reach the maximum salary point of the Graduate Masters rank.

Measures to Solve Parking Problem

15. MRS MIRIAM LAU (in Chinese): In the Parking Demand Study Report published by the Government in December 1995, 13 measures were recommended for immediate action to alleviate the parking problem. In this connection, will the Government inform this Council:

(a) which of these measures have already been implemented and how effective they are; and

(b) which of these measures have yet to be implemented and the reasons for not implementing such measures yet?

SECRETARY FOR TRANSPORT (in Chinese): Madam President, the Government has already implemented 11 out of the 13 measures recommended for immediate action by the Parking Demand Study:

(1) Revision of Hong Kong Planning Standards and Guidelines: The Hong Kong Planning Standards and Guidelines (HKPSG) have been revised in October 1996 to ensure that adequate provisions will be made in new development to accommodate the parking and loading/unloading requirement to be generated by that development.

(2) Provision of on-street overnight parking spaces for goods vehicles: 628 additional on-street overnight parking spaces for goods vehicles have been created since 1995.

(3) Phasing out of mechanical parking meters: A programme to install 14 000 electronic parking meters in phases to replace all existing meters has started since April 1998 for completion by the end of 1998.

(4) Introduction of more "Kiss and Ride" points: Sixteen locations have been identified to provide 340 spaces for setting down/picking up of passengers at public transport nodes of which 228 have been implemented.

(5) Creation of more parking spaces by the construction of multi-storey car/goods vehicle parks: Twelve sites for building multi-storey vehicle parks have been included in the Land Sales Programme between 1998 and 2003. Altogether, these sites will provide parking spaces for 1 300 light goods vehicles, 800 medium and heavy goods vehicles and 1 220 private cars.

(6) Creation of more parking spaces by letting out of short term tenancy sites for parking: Up to March 1998, an additional 412 000 sq m of short term tenancy sites were let out for commercial parking.

(7) Creation of more parking spaces through the use of landfill sites for goods vehicles parking: The Ngau Chi Wan landfill site is now used as a goods vehicles park providing 66 medium/heavy goods vehicle spaces.

(8) Overnight parking for goods vehicles within multi-storey car parks in office development: Owners of office buildings can now apply to the Lands Department to let parking spaces to non-occupiers of the building for overnight parking.

(9) Development of more underground parking facilities: An underground goods vehicle park within a Regional Council complex cum GIC development in Tseung Kwan O will be constructed to accommodate about 130 goods vehicles. Construction will commence in 1999-2000. The Transport Department is also currently working with the Planning Department on the redevelopment of Wan Chai Police Station and staff quarters for office, commercial or hotel development with the provision of an underground public car park.

(10) Encouraging the creation of car parks in excess of HKPSG: The Lands Department, upon the advice of the Transport Department, is now empowered to require developers applying for lease modification to provide parking spaces in excess of HKPSG, provided that the total Gross Floor Area is still within the maximum plot ratio. For example, 280 public lorry parking spaces in the proposed Cheung Sha Wan Shipyard Development will be created through this process.

(11) Improvement of public transport services: It is an on-going commitment of the Government to improve the reliability and efficiency of public transport, thereby reducing the need for parking demands generated by private car trips.

Two recommendations of the Parking Demand Study, namely, privatization of enforcement against parking offences and differential parking penalties for selected streets, did not receive much support during the public consultation. They will be kept under regular review.

Heads of Tertiary Institutions Holding Directorships in Public or Private Companies

16. MISS EMILY LAU (in Chinese): Will the executive authorities inform this Council if they know:

(a) whether any of the heads of the eight public-funded tertiary institutions sits on the board of directors in public bodies or private companies; if so, what the details are;

(b) the respective total amounts of director's fee and other remuneration received annually by the heads of tertiary institutions concerned for holding such directorships; and

(c) whether any of the key executives or shareholders in the public bodies or private companies, referred to in the answer to part (a), sits on the council or board of governors or holds similar position in any of the tertiary institutions concerned; if so, what the details are?

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

(a) According to information provided by the Heads of the eight University Grants Committee (UGC)-funded institutions (HoIs) to the UGC, some of the HoIs serve as Directors of public or private corporations. The requested information in respect of such appointments is at Annex. These appointments have all been approved or reported to the governing councils of the institutions concerned.

(b) The Head of the Hong Kong Institute of Education does not sit on the board of directors of any corporation. The Heads of City University of Hong Kong, the Hong Kong Polytechnic University and the University of Hong Kong receive no directors' fees or remuneration from their directorships. As regards the respective amounts of directors' fees and remuneration received by the other HoIs, the information cannot be provided without prior approval of the companies concerned.

(c) The Administration does not have available the requested information. Under the present arrangement between the Government and the institutions, the institutions manage their own internal affairs and are not required to report such matters to the UGC or the Government. We have been assured by the UGC that all the governing councils of the institutions have a well-established mechanism of declaration of interests for their members.

Annex

Information of HoIs serving as Director of Public Bodies/Private Corporations

Institution		Corporations in which HoI serves as a Director
City University	1.	Member of Board of Directors, The Hong Kong Industrial and Technology Centre Corporation
	2.	Member of Board of Directors, The City University Enterprises Limited (wholly owned subsidiary of CityU)
Hong Kong Baptist University	1.	Independent, non-executive director, Hon Kwok Land Investment Company (since 1993)
	2.	Independent, non-executive director, Dong-Jun (Holdings) Limited (since 1996)
Lingnan College	1.	Non-executive Director, First Pacific Company
	2.	Non-executive Director, Asia Satellite Telecommunications Holdings Limited
	3.	Board Member, Mass Transit Railway Corporations (MTRC)
Chinese University of Hong Kong	1.	Non-executive Director, The Bank of East Asia Limited
	2.	Non-executive Director, Glaxo Wellcome plc
	3.	Non-executive Director, China Telecom (Hong Kong) Limited
Hong Kong Institute of Education	Nil
Hong Kong Polytechnic University	1.	Director of PolyU Technology and Consultancy Company Limited
	2.	Director of Hong Kong Plastics Technology Centre Limited (HKPTC)
		Note: Both positions are ex-officio positions as the President of PolyU
Hong Kong University of Science and Technology	1.	Independent non-executive director, First Shanghai Investment Limited
	2.	Independent non-executive director, Midas Printing Group Limited
	3.	Independent non-executive director, Shanghai Industrial Holdings Limited
University of Hong Kong	1.	Director, Jian Hua Foundation Limited
	2.	Director, Cedar Fund Limited
	3.	Director, The University of Hong Kong Foundation for Educational Development and Research (owned by HKU)
	4.	Director, Poon Kam Kai Institute of Management (subsidiary of HKU)
	5.	Director, Versitech Limited (subsidiary of HKU)

Growth in Civil Service Workforce

17. MR HOWARD YOUNG (in Chinese): Will the Government inform this Council, in respect of the past five years:

(a) of the growth in the number of directorate officers and non-directorate officers with professional qualifications, in the Civil Service in each year;

(b) of the growth in the establishment of public bodies and organizations in each year, as well as the growth in their respective payroll costs; and

(c) of the respective percentages of the total payroll amounts of civil servants and employees of public bodies and organizations in the total payroll amount of the entire labour force of Hong Kong in each year?

SECRETARY FOR THE CIVIL SERVICE (in Chinese): Madam President,

(a) The strengths and growth rates of directorate officers and non-directorate officers in the professional and related grades in the Civil Service for the past five years are listed in Appendix A.

(b) We do not have readily available information on the establishment and payroll of all "public bodies" (as defined in the Interpretation and General Clauses Ordinance, Cap. 1) since many of these bodies do not receive government subventions. As regards " organizations", we only have information on the major organizations in the education, medical and welfare sectors for posts which we fund. These are detailed in Appendix B.

(c) The percentages of the personal emoluments and personnel related expenses for the Civil Service together with those of the organizations in the total payroll amount of the Hong Kong labour force are at Appendix C. For the reasons explained in (b), we cannot calculate the percentage for other public bodies. Care must be exercised in comparing the costs between the different sectors as the components making up the costs are not fully identical.

Appendix A

Civil Service
	1993-94	1994-95	1995-96	1996-97	1997-98
	(1 April 1994)	(1 April 1995)	(1 April 1996)	(1 April 1997)	(1 April 1998)
Strength of directorate officers or equivalent	1 281	1 276	1 318	1 403	1 321
Change in strength Growth rate	21 1.7%	-5 -0.4%	42 3.3%	85 6.4%	-82 -5.8%
Strength of non-directorate officers with professional qualifications and related grades	6 657	6 500	6 868	7 098	7 312
Change in strength Growth rate	-66 -1.0%	-157 -2.4%	368 5.7%	230 3.3%	214 3.0%

Appendix B

　

Subvented Organization
	1993-94	1994-95	1995-96	1996-97	1997-98
(a) No. of posts 　 Increase in No. of posts Growth rate	110 437 　 16 037 　 17.0%	116 580 　 6 143 　 5.6%	121 195 　 4 615 　 4.0%	130 011 　 8 816 　 7.3%	132 978 　 2 967 　 2.3%
(b) Personal emoluments and personnel-related cost	$28,331 m	$36,373 m	$39,050 m	$46,770 m	$52,177 m
Increase in cost Growth rate	$4,258 m 17.7%	$8,042 m 28.4%	$2,677 m 7.4%	$7,720 m 19.8%	$5,407 m 11.6%

　

Note:

(a) The organizations are the major organizations in the education, medical and welfare sectors where certain posts are funded by the Government.

(b) The number of posts refers to those posts funded or subsidized by the Government.

(c) The personal emoluments and personnel-related costs are assessed in connection with the annual pay adjustment.

(d) The information on posts and personal emoluments include civil servants who are seconded to the organizations.

(e) Personal emoluments refers to salary and allowances.

(f) Personnel related cost refers to costs related to the employment other than pay and allowances for example, staff housing, employer's contribution to provident fund.

　

Appendix C

　

	1993-94	1994-95	1995-96	1996-97	1997-98
Civil Service
(a) Personal emoluments and personnel related costs of the Civil Service	$37,397 m	$41,912 m	$46,136 m	$50,257 m	$54,536 m
(b) Payroll amount of the Hong Kong labour force	$345,000 m	$404,000 m	$448,200 m	$506,000 m	$565,500 m
(c) % of the personal emoluments and personnel related costs of the Civil Service in the payroll amount of the Hong Kong labour force (that is a/b x 100%)	10.8%	10.4%	10.3%	9.9%	9.6%
Organizations
(d) Personal emoluments and personnel-related cost	$28,331 m	$36,373 m	$39,050 m	$46,770 m	$52,177 m
(e) % of the personal emoluments and personnel related costs of the organizations in the Hong Kong payroll amount of the labour force (that is, d/b x 100%)	8.2%	9.0%	8.7%	9.2%	9.2%

　

　

　

Note:

　

(1) Personal emoluments for the Civil Service refers to salaries and allowances and personnel related cost for the Civil Service refers to costs related to the employment other than pay and allowances for example, pensions, staff housing.

(2) The payroll amount of the Hong Kong labour force refers to earnings of an employed person from all jobs. For employees, payroll refer to wage and salary, bonus, commission, housing allowance, overtime allowance and attendance allowance, excluding back pays. For employers and self-employed persons, payroll refer to net earnings from business or amounts drawn from the enterprise for personal and household use.

Home Starter Loan Scheme

18. DR DAVID LI: Will the Government consider relaxing the eligibility criteria in respect of the Home Starter Loan Scheme, in order to allow single persons to apply?

SECRETARY FOR HOUSING: Madam President, the purpose of the Home Starter Loan Scheme is to help first-time home buyers purchase their own homes, by providing loans at low interest to meet the downpayments. The Scheme was launched in April 1998, and each application must have at least two directly related family members. The Government keeps the various subsidized home ownership schemes under review to ensure that the housing needs of different groups of people, including single persons, are addressed.

Indoor Air Quality Study

19. MISS CHRISTINE LOH: Regarding the Indoor Air Quality (IAQ) Study which was completed in September 1997, will the Government inform this Council of:

(a) the findings of the Study;

(b) the reasons for not yet publishing the findings of the Study; and

(c) the scheduled time for publishing the Study?

SECRETARY FOR PLANNING, ENVIRONMENT AND LANDS: Madam President,

(a) Our study of the indoor air pollution in offices and public places has found that:

(i) occasional high levels of pollutants such as carbon dioxide which exceeded internationally accepted guidelines were measured in some offices and public places. They were mainly caused by high occupancy density and inadequate ventilation;

(ii) about one third of the occupants surveyed were dissatisfied with the IAQ of the respective buildings. Their perception of the IAQ was found to have significant correlation with the actual measurement results including temperature, humidity, air change per hour and levels of major air pollutants;

(iii) an IAQ management scheme was recommended, with different implementation options for further consideration, and an inter-departmental IAQ Management Group should be set up to co-ordinate the implementation of any scheme.

(b) We have briefed Members of the Provisional Legislative Council on the main findings of the Study when replying to a similar question raised at the meeting of 14 January 1998. At that time, we mentioned that we would consult the Advisory Council on the Environment and the Panel on Environmental Affairs on the recommendations arising from the Study and our proposed way forward in a few months' time. It has taken longer than expected for us to formulate an IAQ management strategy due to the wide range of existing legislation bearing on the issue. An IAQ Management Group comprising all of the relevant government departments has recently been set up to co-ordinate this effort. The Management Group is examining the findings and recommendations of the Study and is formulating implementation plans.

(c) We will present findings of the Study to the Advisory Council on the Environment and the Panel on Environmental Affairs of this Council in October and November 1998 respectively, together with proposals for the way forward.

Class Sizes of Primary and Secondary Schools

20. MR CHEUNG MAN-KWONG (in Chinese): The Government has decided to increase the size of each class in primary schools by two pupils with effect from this school year, while shelving the plan for reducing the class size by five students in secondary schools. The Government has further pledged to make optimum use of vacant classrooms in primary schools and allocate more resources to schools, so as to alleviate the difficulties experienced by school management and teachers' work pressure. In this connection, will the Government inform this Council of the following:

(a) the number of vacant classrooms in primary schools and the number of the schools concerned by districts in the last and the current school years respectively;

(b) the reasons why these classrooms are left vacant;

(c) the plan as to how and when these classrooms will be put to use; and

(d) the details of proposed additional resources to schools?

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

My reply to the above questions is as follows:

(a) The number of vacant classrooms and the number of schools concerned in the whole of Hong Kong for the last and current school years are set out in Tables 1 and 2. The number of vacant classrooms in the current year is 1 650, which is 311 fewer when compared with the number in the last school year.

(b) The reasons for vacant classrooms in primary schools are manifold. These include:

(1) Some areas in which the schools are located are currently at the development stage. The demand for primary school places in these areas has not yet reached the ultimate planning target for the time being. However, we expect the demand to increase with the continuous in-take of population;

(2) In some other areas, demographic changes have resulted in vacant classrooms;

(3) Some bisessional schools already have plans to convert to whole-day schooling in the near future. At present, these schools are taking steps to progressively consolidate their students in either the morning or afternoon session to pave way for the implementation of whole-day schooling;

(4) Fewer enrolments in the schools concerned;

(5) Some schools already have plan to cease operation in the near future; and

(6) Some schools are situated in remote areas.

(c) We have planned to use the vacant classrooms as follows:

(1) 188 vacant classrooms (involving 27 bisessional schools): The vacant classrooms will be used for turning the schools to whole-day operation within the 1999-2000 to 2002-03 school years.

(2) 111 vacant classrooms (involving 20 schools soon to be closed): We will encourage the schools to make use of the vacant classrooms during the transitional period as special rooms for the improvement of teaching and learning.

(3) 822 vacant classrooms (involving 108 whole-day schools): Some of the schools are located in developing areas. We expect these vacant classrooms to be gradually utilized with the continuous population in-take to area. As for other vacant classrooms in schools situated in remote areas, schools with few enrolment or schools in areas with declining demand for school places, we encourage the schools to make use of them for other teaching purposes such as computer room, student activity centre and so on.

(4) 529 vacant classrooms (involving 97 bisessional schools): We shall progressively convert these schools to whole-day operation. These vacant classrooms will be used to facilitate the schools for the conversion as far as possible. For the time being, we encourage schools to make use of the vacant classrooms for the improvement of teaching and learning.

(d) In implementing the interim measure of slight adjustment of class size, the Government has at the same time comprehensively increased its support to schools and teachers. In this school year, 180 teaching posts and 421 clerical posts are created in primary schools, whereas 580 teaching posts and 410 clerical posts are created in secondary schools. In the 1999-2000 to 2001-02 school years, an additional 469 and 300 teaching posts will be created in primary and secondary schools respectively.

We shall regularly review the need to provide additional resources to our schools when implementing various education policies.

Table 1

Distribution of Vacant Classrooms in Public Sector Primary Schools (as at April 1998)

District	(A) Vacant classrooms in bisessional schools which are being considered for conversion to whole-day. Some of the vacant classrooms will be used for converting schools to whole-day			(B) Vacant classrooms in schools turning to whole-day before 2002-03		(C) Vacant classrooms in whole-day schools		(D) Vacant classrooms in schools soon to be closed		Total
	No. of Schools	No. of Vacant Classrooms	No. of Schools	No. of Vacant Classrooms	No. of Schools	No. of Vacant Classrooms	No. of Schools	No. of Vacant Classrooms	No. of Schools	No. of Vacant Classrooms
Central and Western	0	0	0	0	4	22	0	0	4	22
Wan Chai	0	0	1	2	5	25	1	8	7	35
Eastern	7	31	2	28	3	31	0	0	12	90
Southern	3	14	0	0	6	57	0	0	9	71
Yau Tsim	2	16	0	0	2	9	1	3	5	28
Mong Kok	14	26	0	0	1	1	0	0	15	27
Sham Shui Po	3	22	4	37	1	1	2	4	10	64
Kowloon City	5	16	4	14	5	62	0	0	14	92
Wong Tai Sin	9	51	0	0	6	64	0	0	15	115
Kwun Tong	11	56	2	24	9	82	1	9	23	171
Kwai Tsing	11	41	5	52	8	92	0	0	24	185
Tsuen Wan	1	4	4	52	2	16	0	0	7	72
Tuen Mun	19	136	3	31	12	77	0	0	34	244
Yuen Long	12	60	3	7	12	51	2	32	29	150
North	3	10	1	2	14	40	0	0	18	52
Tai Po	4	24	0	0	6	11	0	0	10	35
Sha Tin	11	96	5	57	14	152	0	0	30	305
Sai Kung	2	3	6	28	9	116	0	0	17	147
Islands	0	0	0	0	8	56	0	0	8	56
Total	117	606	40	334	127	965	7	56	291	1 961

　

Note: The information on vacant classrooms for 1997-98 school year is based on a survey conducted in April 1998.

　

Table 2

　

Distribution of Vacant Classrooms in Public Sector Primary Schools (as at September 1998)

　

District	(A) Vacant classrooms in bisessional schools which are being considered for conversion to whole-day. Some of the vacant classrooms will be used for converting schools to whole-day			B) Vacant classrooms in schools turning to whole-day before 2002-03		(C) Vacant classrooms in whole-day schools		(D) Vacant classrooms in schools soon to be closed		Total
	No. of Schools	No. of Vacant Classrooms	No. of Schools	No. of Vacant Classrooms	No. of Schools	No. of Vacant Classrooms	No. of Schools	No. of Vacant Classrooms	No. of Schools	No. of Vacant Classrooms
Central and Western	0	0	0	0	3	15	0	0	3	15
Wan Chai	0	0	0	0	4	17	1	10	5	27
Eastern	9	34	0	0	4	31	0	0	13	65
Southern	3	16	0	0	7	61	0	0	10	77
Yau Tsim	3	25	0	0	4	21	2	16	9	62
Mong Kok	2	11	0	0	0	0	0	0	2	11
Sham Shui Po	2	7	4	37	1	1	0	0	7	45
Kowloon City	4	13	1	6	2	15	3	33	10	67
Wong Tai Sin	7	41	0	0	6	47	0	0	13	88
Kwun Tong	7	30	4	21	9	71	0	0	20	122
Kwai Tsing	9	41	0	0	9	96	0	0	18	137
Tsuen Wan	1	1	7	64	4	31	0	0	12	96
Tuen Mun	22	121	0	0	9	76	0	0	31	197
Yuen Long	5	44	5	16	3	7	10	39	23	106
North	2	5	0	0	8	26	0	0	10	31
Tai Po	5	24	0	0	2	5	3	8	10	37
Sha Tin	14	112	0	0	15	138	0	0	29	250
Sai Kung	2	4	6	44	11	127	0	0	19	175
Islands	0	0	0	0	7	37	1	5	8	42
Total	97	529	27	188	108	822	20	111	252	1 650

　

Note: The information on vacant classrooms for 1998-99 school year is based on a survey conducted in September 1998.

　

BILLS

First Reading of Bills

PRESIDENT (in Cantonese): Bills: First Reading.

BANKRUPTCY (AMENDMENT) BILL 1998

LIFTS AND ESCALATORS (SAFETY)(AMENDMENT) BILL 1998

CLERK(in Cantonese): Bankruptcy (Amendment) Bill 1998.

Lifts and Escalators (Safety)(Amendment) Bill 1998.

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

Second Reading of Bills

PRESIDENT(in Cantonese): Bills: Second Reading. Secretary for Financial Services.

BANKRUPTCY (AMENDMENT) BILL 1998

SECRETARY FOR FINANCIAL SERVICES (in Cantonese): Madam President, I move that the Bankruptcy (Amendment) Bill 1998 be read the Second time. The Amendment Bill seeks to delete from the Bankruptcy Ordinance and 10 other Ordinances such obsolete terms as the act of bankruptcy, receiving order, and compositions or schemes of arrangement and to make other consequential amendments.

The former Legislative Council passed the Bankruptcy (Amendment) Bill 1996 in December 1996 in which the new personal bankruptcy provisions and procedures were introduced. They included the repealing of the such obsolete terms as the act of bankruptcy and bankruptcy notice and replacing them with the simpler and more direct term of grounds for bankruptcy petition, repealing the receiving order and adjudication order issued in two stages and replacing them with a single bankruptcy order, and also repealing the provisions about a composition and a scheme of arrangement and replacing them with a more flexible voluntary arrangement.

When drafting the Amendment Bill, we made substantial amendments to the Bankruptcy Ordinance then as well as consequential amendments to 19 other Ordinances in line with the above suggestions. The Amendment Bill proposed a total of close to 100 amendments, which included deleting the obsolete provisions and terms in the principal ordinance and replacing them with new provisions and terms. After the Amendment Ordinance was enacted, we immediately made the related subsidiary legislation. The Amendment Ordinance was put into effect on 1 April this year. However, in a recent review, we found that references to the terms such as the act of bankruptcy, receiving order, and composition or scheme of arrangement were still made in the Bankruptcy Ordinance and 10 other Ordinances. As these terms are no longer applicable, we submitted the Bankruptcy (Amendment) Bill 1998 to propose 13 consequential amendments to delete the obsolete terms and replace them with appropriate terms. These are all consequential amendments of a technical nature.

Thank you, Madam President.

PRESIDENT (in Cantonese): I now propose the question to you and that is: That the Bankruptcy (Amendment) Bill 1998 be read the Second time.

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

PRESIDENT (in Cantonese): Secretary for Planning, Environment and Lands.

LIFTS AND ESCALATORS (SAFETY)(AMENDMENT) BILL 1998

SECRETARY FOR PLANNING, ENVIRONMENT AND LANDS (in Cantonese): Madam President, I move that the Lifts and Escalators (Safety) (Amendment) Bill 1998 be read the Second time.

The Bill proposes a number of amendments aimed at improving the statutory control over the safety of lifts and escalators and the associated administrative arrangements. The need for such improvements has stemmed from the empirical experience of the Director of Electrical and Mechanical Services in recent years in enforcing the Lifts and Escalators (Safety) Ordinance.

The amendments covered by the Bill broadly fall into two categories. The first relates to the safety of lifts and escalators. The Bill extends the scope of the Lifts and Escalators (Safety) Ordinance to cover most types of mechanized vehicle parking systems which are not presently regulated. The examination, testing and maintenance requirements for service lifts will also be upgraded. Registered lift or escalator engineers and contractors will be required to ensure that the lifts or escalators that they install, examine or test are in compliance with the codes of practice for specifying safety requirements relating to the design and construction or lifts and escalators.

Under the Bill, the Director of Electrical and Mechanical Services will be empowered to establish codes of practice for specifying safety requirements relating to the design and construction of lifts and escalators; and to impose conditions when giving approval to lift works or escalators works which are not in accordance with the relevant codes of practice.

To facilitate compliance with the new requirements, grace periods will be allowed for owners of service lifts installed before the commencement of the proposed legislative amendments and for owners of mechanized vehicle parking systems not presently regulated by the Ordinance.

The second category of improvement measures relates to the engineers and contractors who perform works on the lifts and escalators. The Bill includes provisions to expand and upgrade the minimum qualifications for the registration of lift or escalator engineers. It also spells out clearer the scope of their duties and the restrictions over sub-contracting or assignment of lift or escalator works.

The Bill also amends the existing provisions for the appointment of disciplinary board panel members and appeal board panel members under the Ordinance so as to enhance their independent roles and improve the administrative efficiency.

We have consulted all major professional bodies of the industry on our legislative proposals. They have given their support.

Madam President, our legislative proposals are mainly related to improving the safety of lifts and escalators, which is a matter of public concern. I therefore commend the Bill to Honourable Members for early passage into law.

Thank you, Madam President.

PRESIDENT (in Cantonese): I now propose the question to you and that is: That the Lifts and Escalators (Safety) (Amendment) Bill 1998 be read the Second time.

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

MEMBERS' MOTIONS

PRESIDENT(in Cantonese): Members' motions. Resolution under the Interpretation and General Clauses Ordinance. Mr Andrew WONG.

INTERPRETATION AND GENERAL CLAUSES ORDINANCE

MR ANDREW WONG(in Cantonese): Madam President, in my capacity as the Chairman of the Subcommittee on the Statutes of the University of Hong Kong (Amendment) Statutes 1998, I move that in relation to the Statutes of the University of Hong Kong (Amendment) Statutes 1998 which were laid on the table of the Legislative Council on 9 September 1998, the period referred to in section 34(2) of the Interpretation and General Clauses Ordinance (Cap. 1) for amending subsidiary legislation be extended under section 34(4) of that Ordinance to the meeting of 14 October 1998.

With regard to the amendment statutes, the Subcommittee held two meetings with the University of Hong Kong (HKU) and the Administration. Some members of the Subcommittee were concerned about the amendment to Statute IX(a)(1), for from its wording, the amended Statute seemed to have introduced a new system of appointed Deans of Faculties.

Representatives from the University of Hong Kong (HKU) clarified this point and pointed out that the original intention of the amended Statute IX(a)(1) was not to use a new appointed Deans of Faculties system to replace the original elected Deans of Faculties system, but to allow the Board of Faculties in individual faculties to choose between the systems of election and appointment.

As Members of the Subcommittee thought that the Chinese and English texts of the amended Statute IX(a)(1) did not accurately reflect the purpose of making the amendment and the established practice of HKU, therefore it was suggested that HKU should re-draft the respective Statute. And HKU agreed to this proposal. Since the amendment proposed HKU on 22 September included some suggestions for improvement which still failed to meet the requirements of some members of the Subcommittee, therefore I proposed some textual amendments to HKU on 24 September. The new amendment was agreed by the Subcommittee and the representatives from HKU. Discussions on this have been covered in detail in the Subcommittee's report to the House Committee, and so I would not repeat the details here.

Since HKU needed time to seek the approval of the management, that is, the Court and the Council of the University, for the new text of the amended Statute, therefore the new amended text could not be confirmed by the original deadline, that is, 7 October 1998, as set down by the Legislative Council. Furthermore, amendments cannot be made on 7 October 1998 as the policy address will be delivered on that day. Therefore, I move that the period referred to in section 34(2) of the Interpretation and General Clauses Ordinance (Cap. 1) for amending subsidiary legislation be extended under section 34(4) of the Ordinance to the meeting of 14 October 1998.

Madam President, I beg to move.

Mr Andrew WONG moved the following resolution:

"That in relation to the Statutes of the University of Hong Kong (Amendment) Statutes 1998, published as Legal Notice No. 299 of 1998, and laid on the table of the Legislative Council on 9 September, the period referred to in section 34(2) of the Interpretation and General Clauses Ordinance (Cap. 1) for amending subsidiary legislation be extended under section 34(4) of that Ordinance to the meeting of 14 October 1998."

PRESIDENT(in Cantonese): I now propose the question to you and that is: That the resolution moved by Mr Andrew WONG, as set out on the Agenda, be passed. Does any Member wish to speak? Mr CHEUNG Man-kwong.

MR CHEUNG MAN-KWONG (in Cantonese): Madam President, the Democratic Party's stance towards the debate on the Statutes of the University of Hong Kong (Amendment) Statues 1998 comprises a number of points.

First of all, we hold the view that any statute of University providing for elections should adhere to the principles of democracy and autonomy maintained by the university; as for the statute under discussion, we believe the autonomy of the faculties should be one most important basis. For this reason, we would agree to the provision that the dean of each faculty shall be elected democratically from among the teachers of the faculty. In addition, we have also noted that individual faculties would be compelled to resort to the system of an appointed Dean if none of their teachers is willing to take up the post. In this connection, if the Dean of a faculty is to be selected from among its teachers, the method of selection should be in the form of a democratic election in the first place; and in the event that nobody is willing to stand in the election and a Dean has to be appointed, the appointment should still be subject to a democratic decision-making mechanism. This is the only arrangement that we would accept under the circumstances.

In the view of the Democratic Party, this should be the only way in which the principles of democracy and autonomy prevalent in the University could be carried out through to the end. However, all that we could accept today is an alternate proposal which provides for a system of an appointed Dean. On the other hand, the Democratic Party is sorry to learn that the Faculties of the University of Hong Kong may at times be forced to resort to the system of an appointed Dean because nobody is willing to take up the post. This is certainly a most unfortunate and highly regrettable situation. nevertheless, since we are now dealing with the provisions under a piece of legislation, we cannot but accept that the system of an appointed Dean stands part of the statute under discussion. Thank you, Madam President.

PRESIDENT (in Cantonese): Mr Andrew WONG, do you wish to reply?

MR ANDREW WONG (in Cantonese):Madam President, first of all, let me thank the Honourable CHEUNG Man-kwong and the Democratic Party for their participation in the Subcommittee and the many views they have raised. I should also like to point out that I have yet another role to play here, since I am both a member of the Court of the University of Hong Kong (HKU) and a teacher teaching at the Chinese University of Hong Kong (CUHK). I understand that among the UGC-funded institutions, HKU and CUHK are the only two institutions which still maintain the system of an elected dean despite the international trend towards the appointment system. As regards the appointment decision, naturally that should by no means be an arbitrary one, for the appointee should be sought out in much the same way as the process to seek out a head of university.

I am not saying that we have to choose between the system of an elected Dean and that of an appointed Dean. What I want to point out is that in regard to the amendments proposed to its Statutes, HKU does have a rationale that might not have been reflected in between the lines, and that is to allow the relevant Boards of the Faculties to decide whether they would prefer to have an elected Dean or an appointed Dean. If a Dean is to be appointed, there would of course be a set of carefully-defined procedures governing the appointment of a suitable person to the post of the Dean of the Faculty. In regard to the faculties of a university, such as the Faculty of Medicine, the Faculty of Science, the Faculty of Social Sciences, the Faculty of Arts and so on, the administrative work involved could be rather considerable in size, in particular in respect of cultural subjects. For this reason, some people are most reluctant to take up the post of the Dean. As a matter of fact, academic writings and publications is the only key to career success in the academic circle, too many administrative obligations may serve to undermine one's performance on the academic front.

By the same token, I think it is very clever of Dr the Honourable YEUNG Sum not to want to be a head of department. I just hope Honourable colleagues would understand that the matter is not as grave as they thought, and that the proposals contained in the Statutes of the University of Hong Kong (Amendment) Statutes 1998 are in fact rather democratic, since it would still be up to the members of the Board of the Faculty concerned, who are also teachers of the Faculty, to make the decision regarding the way in which the Dean of the Faculty should be selected. Here I wish to thank once again the government officials and members of the Subcommittee who have attended the meetings. Apart from the Members affiliated to the Democratic Party, the Honourable YEUNG Yiu-chung is also a member of the Subcommittee. It was out of the intention to facilitate further advancement for the tertiary education institutions in Hong Kong and under the major premise of upholding the autonomy of the University that we and HKU ─ the representatives from HKU were polite in discussing with us ─ have finally come up with the Amendment Statutes before Members. I am pleased with the result of the discussion, and hope that Honourable colleagues would lend their support to the resolution I have moved today to extend the study period concerned. At the Council meeting to be held on 14 October, I will move an amendment the wording of which would remain intact. However, if HKU is able to submit a new text of the Amendment Statutes before 14 October, subject to the consent of Honourable colleagues, I hope to seek the President's permission to waive the notice requirement and substitute the old text with the new, which should be a better text. And it is also my hope that Honourable Members would lend their support to the proposed amendment then.

Thank you, Madam President.

PRESIDENT(in Cantonese): I now put the question to you and that is: That the resolution moved by Mr Andrew WONG, 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)

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 resolution passed.

PRESIDENT (in Cantonese): 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: Review of the Hong Kong Monetary Authority. Mr Albert HO.

REVIEW OF THE HONG KONG MONETARY AUTHORITY

MR ALBERT HO (in Cantonese): Madam President, I move that the motion as printed on the Agenda be approved.

My motion today does not aim to impeach Mr Joseph YAM, the Chief Executive of the Hong Kong Monetary Authority (HKMA), nor is it meant to impair the credibility of this institution. Rather, the motion simply asks for a review of the errors committed by the HKMA, in the hope that by looking at its past experience and by taking stock of the lessons learnt, we can establish a future direction for its work. In brief, the Democratic Party hopes that the HKMA can operate under a sound institutional framework characterized by a high degree of transparency and accountability. Besides, we also hope that the HKMA can make attempts to enhance and consolidate the existing mechanisms and operate in strict accordance with the relevant rules and regulations; it should from now stop relying on positive intervention measures such as market actions and squeezing up interest rates. Therefore, I can say that my motion actually asks for both recapitulation on past experience and forward-looking reforms.

However, I am really surprised by the recent comments made by some critics, who dismiss the motion today as inappropriate, saying that the open criticisms levelled at the head of the HKMA will deal a blow to the Authority's credibility. There are also arguments that at a time when international speculators may stage further attacks on our financial system, we may weaken investor confidence and give yet another opportunity to speculators if we criticize the policies of the HKMA so severely.

Madam President, I think the worries of these critics have precisely made the motion today all the more meaningful and valuable. First, as we can all recall vividly, the HKMA's policy of squeezing up interest rates during the financial turmoil of October last year, that is, the so-called "one-measure" approach of Mr YAM, did really inflict immense sufferings on the commercial and industrial sector and our economy. What is more, in August this year, in a bid to defend the linked exchange rate and the order of our financial system, the HKMA even expended well over $100 billion on intervening in the stock and index futures markets, much to the shock of Hong Kong and the whole world. These are indeed very important decisions, and whether or not the market actions of the Government at that time were correct and justified, they are bound to produce immense and far-reaching impacts on our economy and the people's livelihood. So how can the Legislative Council refrain from showing its concern? How can it remain indifferent? If we, Members of the Legislative Council, do not show our concern, and if we choose to remain indifferent, we will have failed to discharge our duties. Second, at this very time when no government departments or even public organizations can possibly continue to claim any immunity to public criticisms, monitoring and accountability, should the HKMA be allowed to stand as an exception? The Government and the HKMA should realize that genuine self-confidence actually consists in a willingness to heed and tolerate criticisms, and such a willingness is in turn the only way to maintain credibility. But before this motion debate, the HKMA repeatedly asked organizations under its supervision, such as the Hong Kong Association of Banks and the Deposit-taking Companies Association, to issue public statements in support of its actions. This really baffles me and reminds me of how the various military commands in China were forced to make immediate declaration of their loyalty to the Central Government during the June 4 Incident. Has not the HKMA itself tried to politicize the issue? Worse still, the actions of the HKMA also reflect its lack of self-confidence. Instead of admitting its errors, the HKMA has lashed out at its critics. I must say that this is really a self-opinionated attitude, and nothing has impaired the HKMA's own credibility more genuinely than this kind of attitude.

Actually, even before the Democratic Party moved this motion of criticisms today, the entire community has long since come to a conclusion that the HKMA has committed a series of errors since the outbreak of the financial turmoil in October last year. The aim of our discussions today is not so much to ascertain whether the all-out market intervention of the Government on 14 August was correct and justified. Rather, we would all like to find out why the HKMA, the principal policy-maker responsible for defending the linked exchange rate, has made so many mistakes, plunging the Government into such a difficult situation. We all want to find out why the Government has been compelled to say, "Market intervention is absolutely required; huge capitals must be used to maintain the stability of our financial systems." We all want to know why we have been made to pay such a heavy price.

In brief, the mistakes committed by the HKMA can be summarized as follows:

(1) In July and August last year, when our currency was attacked for the first time, the HKMA did not step up its vigilance. Then, on 23 October, when the Hong Kong dollar was attacked severely for the second time, the HKMA gave local banks a sudden notice, telling them that the Liquidity Adjustment Facility (LAF) would be tightened. Consequently, the interbank rate was squeezed up to almost 300%, much to the horror of the market and the financial sector and inflicting serious harm on normal borrowers. I am sure that in retrospect, all of us now know that since the speculators had already sold all their forward contracts by that time, the interest spike eventually achieved the opposite result of enabling them to close their positions and reap profits from swap transactions. So instead of sustaining any losses, the speculators were able to make gains; besides, they were also able to make gains from short selling index futures and from the spot market. And, it was not until quite some time afterward, in late November, that the HKMA finally sought to clarify some specific points in its letter of 23 October, such as the definition of "repeated borrowers". Only then, I must say, was the anxiety of the financial sector allayed and the harm of Mr YAM's one-measure approach reduced.

(2) Since the end of last year, politicians, bankers and people in the securities and investment sector had all been advising the Government, I mean, the HKMA and the Financial Services Bureau, that the attacks launched by international speculators were three-dimensional in nature. They had been advising the Government that since integrated manipulative attempts covering the foreign exchange, stock and index futures markets were detected, the Government must draw up corresponding strategies to deal with the situation. Unfortunately, the HKMA, which was supposed to defend the linked exchange rate, did not react with any crisis awareness, nor had it discharged its duty of finding out what was really going on in the financial markets. Instead, in April, we were simply told by the Report on Financial Market Review (written basically by the Financial Services Bureau, but certainly with HKMA input) that there was no evidence of any cross-market manipulation. Actually, the mistakes concerned have largely resulted from a failure to ask these questions: (a) Even if there is no concrete evidence, can one thus conclude that cross-market manipulation does not exist? (b) Should the absence of cross-market manipulation today be taken to mean that there will not be any such manipulation tomorrow, or the day after tomorrow? (c) If cross-market manipulation does indeed occur, albeit some time later, what will be the consequences? And, what will be the risks faced by Hong Kong? These are the questions on which no evaluation whatsoever has ever been conducted. So I must say that the HKMA and the Financial Services Bureau have indeed been much too complacent, for they have displayed an entire lack of vigilance; they have failed to look into and monitor the situation properly; and, they have failed to draw up any contingency measures in advance.

On 14 August, the Government suddenly told Hong Kong and even the whole world that if it did not intervene immediately ─ if it did not intervene in the stock, index futures and foreign exchange markets all at the same time, the market order of Hong Kong would be shattered and Hong Kong would be turned into a "cash dispenser". How really shocking were these words! The Government had simply failed to put in place any precautionary measures; so when a crisis emerged, it was forced to wrestle with the speculators in the ring at a cost of $100 billion. In view of such a belated and self-opinionated response from the Government at that time, is it not correct for us to criticize that it has actually committed the gravest of all errors?

(3) Over the past two days, the Government has been trying to explain to the banking sector why it did not implement the seven technical measures at an earlier time, and one of the reasons given by it is that these measures will cause a lot of problems. Well, I am sure that all of us will agree that all measures and policies will have both pros and cons. But the HKMA has so far overlooked the very important fact that our primary concern during the financial turmoil should be the maintenance of a stable exchange rate and a stable order in the financial markets. Once we are able to identify our primary concern, I am sure that the scale of priorities will be very obvious: The seven technical measures should have been implemented much earlier. We should at least ask the Government why it did not implement these measures immediately before or after its market intervention on 14 August. Had the Government done so, I am sure that the Government would have been able to reduce the extent of its intervention, and we would also have been able to avoid all those problems which we now face after the intervention.

Having learnt a lesson from our past experience, we must implement the contingency measures and reforms required, and we must then try to move forward again in a steady manner. The Asian financial turmoil has indeed produced very far-reaching impacts on economies all over the world, and, for this reason, even advanced countries have to take it very seriously. The strengthening of the global financial system and order has thus become an important issue. Obviously, with the emergence of a global economic and financial system, with the advancements of telecommunication facilities and, more importantly, with the development of highly sophisticated derivative tools in the capital markets, the relatively fragile financial markets of Asia have either been hit or even damaged by various highly mobile and potentially dangerous hedge funds. That said, we must admit that the bubble economies in Asia and the rotten political and economic systems of countries in Asia are also the main causes leading to the attacks by international speculators. Worms breed only in rotten matter; so the saying goes. The Democratic Party agrees that the Government should strengthen its links and co-operation with other countries in the world, so as to draw up rules to restrict the speculative activities of hedge funds and to control bank lendings to them. At the same time, our government, I mean, the HKMA and the Financial Services Bureau, and even other market regulators, should all try to perfect our framework and monitoring mechanisms, so as to maintain the stability and order of our financial system.

The existing HKMA was established under the Foreign Exchange Ordinance as amended in 1992. Its primary function is to assist the Financial Secretary in handling the Exchange Fund and in maintaining the sound and stable development of Hong Kong's financial and monetary policies. The Ordinance does not contain detailed provisions on the set-up and terms of reference of the HKMA. As a result, the HKMA has by now developed into a huge and independent realm. Being the employer of about 500 people, the HKMA now runs a Banking Supervision Department, and over the past two years, it has also acquired a note-printing plant and set up a mortgage corporation.

All along, the HKMA has not operated with any high degree of transparency. Its Exchange Fund Advising Committee and Currency Board Sub-committee, for example, have never released the time, dates and venues of their meetings, nor have they ever announced any deliberations and justifications to the public. What is more, the Chief Executive of the HKMA has rarely attended the meetings of the Legislative Council to offer any explanation or account of the HKMA's work and policies. According to the Government, because the HKMA has to maintain its neutrality, it cannot attend the meetings of the Legislative Council on a regular basis. But if we look at other countries, we will see that their central bank officials do very often attend the hearings conducted by their legislatures. This shows that the Government's point is simply not valid.

That is why the Democratic Party would like to urge the HKMA to increase its transparency and accountability. We believe that the only way to solve the aforesaid problems is to enact a separate piece of legislation on the HKMA, under which its structure and the scope of duties of its principal officials are to be clearly defined. Moreover, the various committees under the HKMA should, as far as possible, make post-meeting announcements on their decisions and contents of discussions. And, I must add that the streamlining of its set up is also an important area which warrants a review.

I very much hope that the motion today can elicit discussions from Honourable Members and set down a direction of reform and progress. I so submit, thank you, Madam President.

Mr Albert HO moved the following motion:

"That, as the Hong Kong Monetary Authority (HKMA) has repeadly erred in its efforts to maintain the linked exchange rate system in the wake of speculative attacks on the Hong Kong currency since October last year, including failing to introduce timely measures to strengthen the currency board arrangements, this Council expresses strong dissatisfaction with the performance of the HKMA and urges the HKMA to learn earnestly from the lesson so as to avoid repeating the mistakes; this Council also urges the Government to review the structure and regulatory mechanism of the HKMA, with a view to enhancing its transparency and accountability."

PRESIDENT(in Cantonese): I now propose the question to you and that is: That, as the Hong Kong Monetary Authority (HKMA) has repeadly erred in its efforts to maintain the linked exchange rate system in the wake of speculative attacks on the Hong Kong currency since October last year, including failing to introduce timely measures to strengthen the currency board arrangements, this Council expresses strong dissatisfaction with the performance of the HKMA and urges the HKMA to learn earnestly from the lesson so as to avoid repeating the mistakes; this Council also urges the Government to review the structure and regulatory mechanism of the HKMA, with a view to enhancing its transparency and accountability. Does any Member wish to speak? Mr Bernard CHAN.

MR BERNARD CHAN: Madam President, I would have gladly addressed this Council on my amendment to the Honourable Albert HO's motion should I have not withdrawn it yesterday.

My amendment was drafted to represent some major views of the financial sector, of which I am a member. I have intended to send a clear message to the local and international communities that our fully-elected legislature is backing the Hong Kong Monetary Authority (HKMA) in its bid to introduce new and effective measures to protect market integrity and maintain confidence in the wake of speculative attacks on the Hong Kong currency. I regretted that these new measures had not been introduced to strengthen the currency board system in a timely manner, because I was in full support of them and had urged for their early implementation. I also urged the Government to play a more active role in soliciting opinions of the financial sector and to review the structure and regulatory mechanism of the HKMA, so that its transparency and accountability are parallel to those of the central banks in other advanced countries.

I understand some Honourable colleagues have disagreed with the mild criticism embedded in my amendment. I would not have felt frustrated if the amendment were abandoned simply out of its contents, rather than party politics.

After I realized my amendment had only a scanty chance to pass in this Council, I opted for a withdrawal and gave way to the second best on my agenda. That is, I would like to send a clear message to the international community that our legislature is overwhelmingly against a motion to reprimand our monetary body, which has safeguarded our currency and capital markets. To me, this is certainly not the best scenario I would opt for. I am somehow disappointed that our Council has failed to agree on a motion, which would have been a clear statement to the world, but has got the chance of only vetoing something we do not want to have.

I am delighted to see the formidable support to the Government's drastic actions to defend our currency and to regulate our financial market. As I spoke in the motion debate that I moved on 9 September, restoration of public confidence is the key to economic revival. Only if we have faith in the policy makers, and believe that remedial measures will be promptly in place when misfortune looms large, can we endure the hardship and embrace hopes in our hearts.

Integrity of the market and credibility of our regulatory institutions are among the very few assets we can count on in the midst of financial turmoil. Some opinion leaders argue that the integrity of our market can be entrenched only if the Government keeps its hands off and let the market fully regulate itself. Surely, it is a myth that even George SOROS would oppose to it. In an article entitled Toward a Global Open Society, he wrote, and I quote: "The benefits of the present global capitalist system, I believe, can be sustained only by deliberate and persistent efforts to correct and contain the system's deficiencies. That is where I am at loggerheads with laissez-faire ideology, which contends that free markets are self-sustaining and market excesses will correct themselves, provided that governments or regulators do not interfere with the self-correcting mechanism."

He also considers the influential laissez-faire idea as dangerous while markets are left to their own devices. He warns that instability of financial markets can cause serious economic and social dislocations.

I believe that the integrity of our market hinges on an unrelentingly self-improving mechanism that allows opinion input from broad-based sources. The financial sector, the banks in particular, is most ready to have regular dialogue with the HKMA, so as to let the regulatory body understand their needs and concerns. Given an open system for free opinion exchange, market rumours and suspicion will somehow be cut down and be replaced by mutual understanding.

It is only fair to say that our officials' clean records and widely recognized dignity have been our invaluable treasure. This is particularly true when compared with their Asian counterparts. But we have to face the fact that after the HKMA adopted the seven measures to regulate the financial market, the influential body has become even more powerful in monetary control. Only if the credibility of the HKMA and the officials in charge of it matches their counterparts in other advanced countries will the market substantially be benefited, especially in times of social instability.

Now it is time for the Government to consider new measures to complete the overhaul of our financial system. Reference may be drawn to the practice of some major central banks. The Deutsche Bundesbank of Germany has been accorded a high degree of independence. Only without prejudice to the performance of its duties, it is required to support the general economic policy of the Federal Cabinet. The Federal Reserve System of the United States carries a mission to conduct monetary policy by influencing the money and credit conditions in the economy in pursuit of full employment and stable prices. I believe that the new role of the HKMA should be accompanied with new missions and a new code of practice.

Madam President, I shall oppose Mr Albert HO's motion. Thank you.

PRESIDENT (in Cantonese): Dr David LI.

DR DAVID LI: Madam President, since this motion was published, I have received numerous letters and calls from individual friends and colleagues throughout the financial industry. In the past few days, I have been very busy talking with local, foreign and regional central bankers and eminent economists. Like me, they cannot understand why anyone would want to denigrate the outstanding record of the Hong Kong Monetary Authority (HKMA).

I have also received written statements of strong support from the Hong Kong Association of Banks, the Chinese Bankers Association, the Deposit-taking Companies Association and the Hong Kong Financial Markets Association. All of them have urged me to voice my support for the HKMA. I do so without hesitation.

As the longest serving member of the Exchange Fund Advisory Committee, and as the representative of the Financial Constituency, I know the HKMA well. I know it from the inside, and from the outside. But I do not recognize it from this motion.

Put in clear language, this motion tells us that since October last year, the HKMA has made repeated mistakes in maintaining the stability of our monetary system.

Now, if the Hong Kong dollar had declined by 80% at some stage in the last 12 months, like the Indonesian Rupiah, I would certainly believe this. If our currency had declined by 40%, like that of South Korea, I would be inclined to agree. Even if our dollar had declined by 20% ─ like that of Singapore ─ I would consider mistakes a possibility. But the Hong Kong dollar has not budged. It is the only ─ I repeat ─ the only, freely convertible currency in Asia to have remained stable throughout that time.

And we are invited to believe that this is the result of mistakes? Other Asian economies must wish they could make mistakes like this.

The reality is that, over the last 12 months, the HKMA has repeatedly succeeded in defending our currency against fierce speculative attacks. This is the same HKMA that was recently described by the Federal Reserve Chairman, Mr Alan GREENSPAN, as having "extraordinary credibility". It is the same HKMA that received, last year, the highest score in a survey of public institutions in Asia. It is the same HKMA whose Chief Executive, Mr Joseph YAM, has been named the Best Asian Central Banker and World Central Banker of the Year. And it is the same HKMA that has exercised great foresight over many years in adapting the currency board system to changing circumstances. Perhaps the Honourable Member who is moving this motion is unaware of this record.

May I remind him of the many innovative measures introduced by our monetary authority to strengthen and enhance our monetary system throughout this time: the Accounting Arrangements of 1988; the Exchange Fund debt programme in 1990; the Central Moneymarkets Unit electronic debt clearing system in 1991; the Liquidity Adjustment Facility in 1992; the bilateral repurchase programme with other central banks in 1995; and the Real Time Gross Settlement System in 1996.

Most of all, may I remind him of the HKMA's actions in the last 12 months. These actions successfully defended the purchasing power of the people of Hong Kong against serious and unprecedented assaults.

The assaults culminated in an extraordinary severe attempt at market manipulation in mid-August. The speculators' actions raised the very real possibility of a serious loss of confidence among the public. The HKMA had to take action, and it did so with the Administration's full blessing and approval.

It knew full well that its market operation could be misunderstood. Sure enough, the HKMA's market operation attracted criticism from various parties, including well-intentioned Members of this Council. They then criticized the HKMA for not introducing its seven technical measures against speculation earlier.

This is totally unrealistic. The speculators did not give advance warning of their intentions, and you do not implement such measures without an extremely good reason. To do otherwise would send all the wrong signals to the international financial community.

Throughout this episode, the critics offered no viable alternative course of action. This is hardly surprising. These critics are not known for their economics expertise. And ─ quite frankly ─ there was no alternative. What the HKMA did last month was necessary, timely and successful.

In other words, this motion is simply wrong.

Madam President, I would not normally speak at such length ─ or perhaps any length ─ on a motion as ill-informed as this. However, the words in the motion are not simply out of touch with the real world. They are not simply an example of ignorance. At this time, they are potentially dangerous.

They may be taken seriously within Hong Kong, thus inviting political interference in the work of the HKMA. This could expose the HKMA to the influence of narrow interest groups, and prevent it from acting in a timely manner and for the benefits of the whole community.

And these words may be taken seriously around the world, thus inviting further attacks on our markets ─ and undermining the credibility that the HKMA has earned for our whole community. And make no mistake ─ the integrity of our monetary and financial systems is founded on the reputation of the HKMA.

It seems to me that this motion is designed to damage an institution that has defended the interests of our community with unqualified success. We should be proud of the HKMA. It deserves our gratitude and respect. It is unforgivable to harm its image. And it is irresponsible to use it in an exercise in posturing or publicity-seeking. I urge all Members, whatever their political positions, to give this motion the total rejection it deserves.

PRESIDENT (in Cantonese): Miss Christine LOH.

MISS CHRISTINE LOH: Madam President, I wish I could do as my friend, Dr the Honourable David LI, has suggested. But let me be the first detractor from the first two speakers as I am much less sympathetic to the Hong Kong Monetary Authority (HKMA).

Perhaps I should start commenting on the motion. While I do have sympathy for its broad direction, in fact, I think it does not go far enough. What we need is a complete reform of the entire structure of financial decision-making process in Hong Kong.

Our problems with the HKMA did not just begin last October. The HKMA has in fact "erred" in its effort to maintain the linked rate over a long period of time. What we have is the result of accumulation of policy errors. Furthermore, it is not just whether the introduction of the seven measures were timely or not, but whether the Hong Kong currency board system has been bastardized to become a band intervention mechanism instead of an auto-pilot system.

Structural Problems

Madam President, please allow me to back up a little. I want to examine the structure of decision-making first.

Firstly, how well is the relationship between the HKMA and the Financial Secretary defined? Who really formulates policy? Furthermore, what are the roles of the Financial Secretary and the Secretary for Financial Services? It is high time that this Council takes a close look at these relationships and see if their roles are clear if we are to enhance the level of transparency and accountability.

Secondly, who actually oversees the HKMA? Is it the Financial Secretary? Or, is it the Chief Executive? Who gives performance ratings of its officials? Not other Central Bankers, surely, Dr David LI. Who can appoint and dismiss officials at the HKMA? Who can overrule the HKMA's decisions? I assume both the Financial Secretary and the Chief Executive have some roles to play. But is that the sum total of our accountability system for financial decision-making? I am afraid that just might be it, and I find it wanting.

Thirdly, are our officials competent enough to deal with financial markets? They come from our colonial system of bureaucrats with general backgrounds. Is that the best training ground for dealing with global markets? Some of you might say that more experienced officials around the world have not an easier time ─ yes, but that is not an excuse for our own failings. You do not excuse a student for failing his exams because others also failed.

There is another key difference, too. In the more serious markets, there is a much higher level of transparency and accountability which is lacking in Hong Kong. The public can better judge the on-going competence of their officials if there is adequate disclosure. We still do not know exactly how much our Government spent to intervene in the stock and futures markets, and they will not tell us what criteria they used to judge success or failure. You will remember, when questioned at the Panel on Financial Services, the Financial Secretary told us that "success or failure" would have to be left to history to judge. With evasive answers like that, how are we to judge the competence of the decision-makers?

Some Recommendations

Madam President, so my first and central recommendation is for the whole system of decision-making to be reviewed by an independent body. Perhaps Dr David LI can give my suggestions some thought. And I hope he does not think they are totally groundless.

My second recommendation is that a proper currency board must be set up to be operated on an auto-pilot basis. This should be governed by law, and not by administrative decree as it is right now. The currency board should be independent of the Government, and not intimately linked to it as it is right now with the HKMA. The regulating law for the currency board should require the board to appear before this Council no less than twice annually to explain its actions. The board itself should be made up of independent and knowledgeable parties whose appointment is not beholden to the executive branch. For example, the United States Federal Reserve's board members serve for many years and the President can probably only appoint two to four members during any one term of office.

My third recommendation is that the HKMA, as the currency board, should not carry out various other functions, such as managing government funds, banking supervision, market development, debt issuance and trading. These functions should be more properly done by other institutions. For example, treasury functions should be carried out by the Treasury and this Council should have general oversight; banking supervision can be carried out independently by an independent commissioner; market development should be left to the market; and debt issuance and trading be left to the Treasury. These changes, Madam President, will enhance transparency and accountability.

The consequence of these changes is, of course, a more passive role for the HKMA. The HKMA will not like this, but it is in the public interest.

My fourth recommendation is that we should move quickly to institute these measures. The financial crisis on a global basis is not abating, but seems to be gathering force. We have to clean up our own house sooner rather than later. We need a body to guide this transition. One possibility is to revamp the Exchange Fund Committee. The Financial Secretary should not chair it. That role should be left to a non-official with a good grounding in financial markets. We also should limit the number of bankers who might have vested interests to serve on it.

The consequences of reforming our financial decision-making might well mean a major overhaul of the Civil Service itself. Well, so be it. Madam President, the time has come for some strong medicine. If Hong Kong seriously wants to be Asia's premier financial centre of the future, then we must reform now.

I wish to close by suggesting a few guiding principles for our Administration in climbing out of the mess created by the intervention:

- Market distortions ─ such as those created by the intervention ─ tend to get worse over time, and so need to be dealt with sooner rather than later;

- The various measures put in place by the Administration are not an alternative for deeper reform;

- The assumed soundness of the pre-crisis economy should not be used as an excuse for doing the minimum;

- The weakness of the hedge funds should not be used as an excuse for our own failings; and

- Hong Kong should create the forum for international discussion about how to deal with the unwieldy global capital markets.

Thank you.

PRESIDENT(in Cantonese): Dr Philip WONG.

DR PHILIP WONG (in Cantonese): Madam President, the recent "market actions" of the Government have received both praises and criticisms.

The mainstream argument against the government intervention in the stock market holds that it will upset our free market operations and impair the reputation of Hong Kong as an international financial centre, thus driving away foreign investors. This criticism no doubt holds in theory, but in reality the market actions of the Government have earned the commendation of an overwhelming majority in the financial sector, basically because those who understand how our financial markets operate are able to see this important point: the Government of Hong Kong has been forced to take such a highly risky step in order to save Hong Kong from being eaten up by the so-called "financial predators".

Over the years, foreign investors have no doubt been contributing to a certain extent to the prosperity of Hong Kong. But we should not thus lose our vigilance; we should not thus overlook the fact that for long, among these foreign investors, some wolves disguising as sheep have been waiting for the right opportunity to spring their attacks. These "wolves" have long been eyeing the hard-earned money of the Hong Kong people with watering mouths; with great care and patience, they have planned to loot Hong Kong and turn it into a killing field by making use of their huge financial strengths and their knowledge about the various derivative tools and our financial markets. These "wolves" have long drawn up a very meticulous scheme to loot Hong Kong. We must guard ourselves against them, because the damage they can do to us will probably offset or even undermine the prosperity which has been brought to us over the years by normal, well-behaved foreign investors. What is most deplorable is that back in the early years of the transition period, the British Hong Kong Administration had already taken various steps to change our securities legislation, and some new rules were drawn up to make it easier for these "wolves" to loot Hong Kong. As a result, with statutory connivance, these "wolves" have been able to openly trample on the shares of local enterprises and "suck away" the investments of the Hong Kong people.

I must appeal to all those who indulge in pure theoretical arguments and I must advise them that they should respect and get to know the views of the financial sector. The market actions of the Government may well be disputable in some respects, but we should still support its well-intentioned efforts to fight for our survival in the midst of desperation. To those impetuous people who lack any practical understanding of our financial operations, I must give them an honest piece of advice: Do not be fooled by those financial scoundrels who seek to eat up the hard-earned money of the Hong Kong people. We must be aware that behind the banner of "Hong Kong as an international financial centre", there are in fact secret motives. We must not lower our guard, nor should we allow ourselves to be used by them, to do any posturing for them. If we fail to follow this advice, we will be inviting the wolf into our own house, thus plunging ourselves into endless disasters.

We are now faced with an unprecedented economic downturn, and for this reason, we must act in solidarity. One very important point which we must see at this very moment is that foreign manipulation and monopolization is never allowed in any financial markets of the world, be they large or small. The only reason for this is that an economy will be safe only when it is under the control of the local people themselves. Why then should Hong Kong be an exception? Madam President, it is still open to debate if Hong Kong should continue to be maintained as a goose that lays golden eggs for foreign investors. However, at a time when foreign bandits are trying to kill the goose for its eggs, and at a time when our economy is facing a life-and-death situation, we will certainly let the Hong Kong people down, if we still do not pick up our weapons and fight for our very survival.

I so submit.

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

MR NG LEUNG-SING (in Cantonese): Madam President, since its establishment in 1993, the Hong Kong Monetary Authority (HKMA) has within just a few years, won good international reputation in respect of its prudence and professionalism. On the whole, its systems and technical measures implemented over the last few years for maintaining the linked exchange rate and consolidating Hong Kong's status as an international financial centre have been very effective. Hong Kong's banking system is stable and the value of the Hong Kong dollar assets held by the Hong Kong people is more stable and more favourable than that of our neighbouring countries and regions. These are indisputable facts.

Since October last year, Hong Kong's financial markets have been subject to unprecedented external challenges. The fact that the global financial system is moving constantly towards liberalization and integration, and that the financial markets in various regions are indeed influencing and relying on each other have made it easy for huge international speculative capitals to find opportunities to launch attacks against smaller financial systems, in the absence of an effective international regulatory mechanism for the financial systems. Therefore, the sphere of influence and the destructiveness of the financial turmoil, which first started off in the newly emerged markets in Southeast Asia, are far beyond the expectation of many prestigious experts and academics who have based their predictions on traditional theories. As regards the way to effectively prevent recurrence of similar disasters, the international community has not come up to any conclusion for the time being. What the HKMA was facing during this extraordinary period was an unprecedented challenge in the financial markets, in terms of both the amount of money involved and the extensiveness of the area being affected. Hence, there was a need for the HKMA to make a decision immediately to deal with and defuse the crisis. To give the matter its fair deal, such decisions and measures were very urgent and technically complex.

Of course, it is important for the HKMA, as a responsible and professional financial management body, to maintain its own independent judgement in face of crises. What is more, it needs to examine the market systems from time to time to see if there are any loopholes, as well as having a clear and comprehensive picture of the situation. Furthermore, it needs to act prudently in putting forward prompt reform measures targeted at those loopholes and make co-ordinated and concerted efforts. Since October last year, the local financial markets have rarely remained unstable. It is therefore natural for investors to lose their confidence. Information revealed that market manipulators resorted to multiple play in a bid to reap profits by manipulating the foreign exchange, stock and futures markets in Hong Kong. The HKMA, on the one hand, has to plug the market loopholes in order to stabilize the linked exchange rate. On the other hand, it has to take account of investors' sentiment and response in a gloomy market. What is more, it is duty-bound to maintain the stability and attractiveness of the local markets. Thus, any decisions made must be prudent. In fact, in the Report on Financial Market Review published in April, the Government has conducted a detailed review on the stabilization of market operations. It is noteworthy that different views of many academics and experts were also reflected in the report. Furthermore, the HKMA has also taken such action as consulting international bodies, like the International Monetary Fund, in making many of its decisions.

In face of manipulators' extremely harmful action against our financial markets, the HKMA intervened in August in a bid to stabilize the market operations. These measures were necessary at such a critical moment. Data showed that the market at that time was obviously under manipulation. Intervention was a timely and expeditious measure for stabilizing the market. Otherwise, a collapse of confidence in the market would lead to a panic sale of assets. Such disastrous consequences would be unpredictable and unimaginable. When the market began to stabilize in early September, the HKMA introduced various measures to further consolidate the currency board system by targeting at the loopholes of the system. In my opinion, these measures are in line with the interests of Hong Kong and merit our affirmation and support.

Faced with our economic environment under the influence of the financial turmoil, one of the pressing tasks of the HKMA is to revive the confidence of the people and investors in our financial markets and in holding Hong Kong dollar assets. This confidence is built fundamentally upon the solidity and soundness of Hong Kong's financial markets and system, free from manipulation or distortion by any manipulators. In other words, it depends on whether all investors are provided with a level playing field. The package of measures implemented by the HKMA are basically oriented towards the correct direction as they can gradually plug the market loopholes and reduce the possibility of market manipulation. Of course, in face of the ever-changing circumstances amidst the financial turmoil, I, as a Legislative Council Member, hope that the HKMA can continue to maintain its high degree of vigilance at all times and, at the right time, conduct a systematic and comprehensive review of the position taken and preparation made for the purpose of intervening in the market this time as well as the co-ordination work with various regulatory bodies and so on, so as to draw a valuable lesson from the event.

In a nutshell, I believe the financial turmoil is not yet over. As attacks on our financial markets will take place at any time today, the public will be happy to see that the executive authorities and legislature unite together for the best interests of the community. Concerning the intervention by the Government, the performance of the HKMA and its various measures to stabilize the linked exchange rate, I think they all merit our affirmation and support. I also strongly believe that these measures are in line with the overall stability of our financial system and the long-term interests of the public.

Madam President, I so submit.

PRESIDENT(in Cantonese): Mr David CHU

MR DAVID CHU (in Cantonese): Madam President, all of us, I am sure, will agree that the financial turmoil recently encountered by Hong Kong has produced the greatest ever impacts on Hong Kong and the rest of Asia. I am of the view that the Special Administrative Region (SAR) Government and the HKMA have already done the best they can to deal with this financial crisis. And, facts have shown that the impact sustained by Hong Kong in this financial crisis is far less serious than that sustained by other Southeast Asian countries.

We can actually notice that at different stages in the recent financial crisis, the HKMA was able to implement different measures to maintain the stability of our financial markets and banking system. Unfortunately, however, there are always a minority of critics who are forever critical of their own Government but extremely tolerant of foreign speculators. It can be said that these critics cannot really distinguish "thieves" from "policemen".

These critics of the Government have advanced three main arguments:

1. "The Government's intervention in the market will upset free market operations"

This criticism is simply wrong.

Over quite a long period of time, the financial markets of Hong Kong have been manipulated by a number of large hedge funds. So our markets have in effect been monopolized, and are no longer fair and free markets. The HKMA actions do not aim so much to intervene in the market, but to remove the manipulation by hedge funds, so as to enable the market to resume normal and fair operations.

2. "The Government's market actions have undermined the confidence of international investors"

This criticism is also wrong.

The various measures announced by the HKMA have not only enhanced our currency board system, but also perfected the rules governing the operations of our financial markets. In doing so, the HKMA has imparted a clear message to foreign investors: The SAR Government is determined and fully capable of maintaining the orderly, normal and free operation of the financial markets of Hong Kong. In fact, the recent actions of the HKMA have scared off only speculators with ulterior motives, not any genuine investors.

3. "The free market philosophy upheld by Hong Kong over the years has become a policy which exists in name only"

This is also wrong.

When a country is faced with unusual crises, military or economic, its government will invariably take some special measures to maintain stability. The case of the Long-term Capital Management (LTCM) of the United States, a large hedge fund, can serve as a good example. When this hedge fund faced imminent collapse recently, the Federal Reserve Board and many large financial institutions and banks all found it necessary to inject funds into the LTCM immediately, so as to avoid any chain effects which might otherwise harm the country's financial system. Like the capital injections made by the Federal Reserve Board, the HKMA's use of our foreign reserves for market actions is also meant to maintain the stability of our financial markets and banking system.

Without the series of actions and measures taken by the HKMA over the past one month, it is highly probable that our financial markets will have lost control by now, and, in this case, our banking system will surely be affected as well. That is why I maintain that the actions and measures taken by the HKMA so far are both timely and effective.

With these remarks, Madam President, I oppose the motion moved by Mr Albert HO.

PRESIDENT(in Cantonese): Dr Raymond HO.

DR RAYMOND HO (in Cantonese): Madam President, the financial turmoil first started in Thailand in July last year, and very quickly, it spread to the rest of Asia. Recently, places far away, such as Russia and some South American countries, have also been affected. With even Japan failing to solve its own problems, mainland China, Hong Kong and Singapore seem to be the only places in Asia which can still stand firm against the repercussions triggered off by this financial turmoil.

As to why Hong Kong can stand so firm against this global super financial turmoil, its relatively sound financial system and economic base are certainly one of the reasons, but one should not forget that the determination of the Hong Kong financial authorities to maintain the linked exchange rate and their efforts in this direction have also contributed very significantly to the stability of our economy. Of course, in terms of the economy, maintaining the value of our currency has inevitably cost us a price.

As a result, some in the community have started to question the wisdom of maintaining the peg, and many alternative exchange rates arrangements have been proposed. The proposals put forward so far all have their strengths and weaknesses, but, invariably, none of the proponents can give any guarantee that their proposals will definitely be better than the existing arrangement. At a time when the financial markets of the world are still in such a volatile state, if the Government really seeks to replace the peg with other new arrangements, the risks will be very high. To be fair, one must of course admit that the maintenance of the peg will not be entirely risk-free either. But such risks should understandably be much easier to foresee than those associated with any new and untested arrangements.

Besides, some critics have also attributed our current economic problems to the policies implemented by the HKMA at the early stages of the financial turmoil, saying that these policies have pushed up local interest rates, thus dealing severe blows to our stock and property markets. Well, whenever a problem arises, most of us will readily fall prey to the easy temptation of finding a scapegoat, instead of trying to identify the real causes. This is only natural, but this is also very dangerous, because if we focus only on apportioning blame, it will be very difficult for us to zero in on the roots of the problem. That way, it will become all the more difficult to work out any solutions.

I must add in passing that the HKMA has actually been enjoying a very good reputation among the global financial community. This may not really mean anything substantial, but the fact remains that in the midst of a super financial turmoil which has shocked even the financial authorities of Europe and America, the HKMA has indeed acquitted itself very well in stabilizing our financial systems and the exchange rate, thus saving us from the plight suffered by many other emerging economies. For this reason, we should render vigorous support to the HKMA. The recent market actions of our financial authorities have indeed led to renewed outcries from our community, but this should not make us forget that the only targets of these market actions are those speculators whose pursuits have upset the order of our financial markets; and, more importantly, in the absence of any viable alternatives, these market actions are fairly acceptable. What has actually happened over the past one year is that our financial authorities have been making continuous adjustments to their policies of dealing with the ever-changing and ever-unpredictable circumstances surrounding a global financial crisis. In this connection, I must add that it has indeed become increasingly obvious, thanks to more and more information, that global co-operation, not just the efforts of the Hong Kong authorities alone, is required if the world is to overcome this current financial crisis.

So much about the case for the HKMA, and it must be rightly criticized that if the HKMA had been more open-minded in seeking the views and suggestions of the financial sector, it would have been able to put in place, at a much earlier time, what are now widely known as the "seven strokes and 30 twists", which aim to maintain the reputation of our financial systems and the confidence in them. Had the HKMA really done this, the prices of the Government's recent market actions would have been greatly reduced. So I hope that the HKMA can learn a good lesson from this bitter experience. That way, it will be able to cope with and solve all financial troubles in the future.

As for the transparency and accountability of the HKMA, I think we can actually make use of this opportunity to carry out a review on its set-up and the monitoring mechanisms applicable to it. In doing so, we may well succeed in enhancing its transparency and accountability. I am sure that this is what all the Hong Kong people wish to see.

Madam President, I so submit.

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

MISS CHOY SO-YUK (in Cantonese): Madam President, Hong Kong has never had a central bank, and the role of a central bank used to be played by the HongkongBank. Then, following the establishment of the HKMA in 1993, this very institution has been vested with the important central bank functions of adjusting the exchange rate of the Hong Kong dollar, managing our foreign exchange reserves and so on. Regrettably, the performance of the HKMA as the highest financial authority of Hong Kong in the recent Asian financial turmoil has turned out to be extremely disappointing, with nothing worth mentioning. Over the past one year, the HKMA has exposed all its weaknesses before the whole community: it does not have the ability to deal adequately with emergency circumstances; it lacks the professionalism required; it tends to underestimate the proportions of crises and its officials are self-opinionated.

These criticisms are absolutely not ungrounded. I am sure that all of us will still remember how the Hong Kong dollar interbank rate was once pushed up to 300% in October last year when the HKMA sought to defend the linked exchange rate by resorting to high interests. At that time, many experts and academics warned that the target of speculators was actually not the foreign exchange market but the futures market. And, for this reason, they cautioned that attempts to push up interest rates and increase speculators' costs of borrowing would not work at all. Quite the contrary, they advised, such attempts would only do harm to our own economy. The Hong Kong Progressive Alliance then moved a motion in the Provisional Legislative Council, urging the HKMA to defend the peg by some other means.

Unfortunately, the HKMA officials simply turned a deaf ear to our advice and continued to tackle speculators by resorting to high interests. Their approach was entirely out of touch with the realities, and exemplified a gross underestimation of the gravity of the situation. Lingering high interests subsequently inflicted further damages on our already declining economy, and Hong Kong was even referred mockingly to as a "cash dispenser" by international speculators. This really calls into question the professional competence of HKMA officials. What is most deplorable is that the HKMA has all along refused to admit its mistakes; in the Report on Financial Market Review, the HKMA even claims that it has not noticed any "market manipulators" and that the policy of pushing up interest rates has worked very well. It can be said that the HKMA is just blowing its own trumpet, trying to deceive itself as well as others. It is small wonder that an economist has criticized Mr Joseph YAM for making a mistake "which even a first year economics undergraduate will never make".

Fortunately, however, the HKMA finally realized its mistakes and changed its tactics of dealing with speculators. In August, when international speculators attacked the Hong Kong dollar again, it finally abandoned the policy of high interests. Instead, it sought to stabilize the foreign exchange market by using our Exchange Fund to buy up the Hong Kong dollar put on sale. Then, it also used the Exchange Fund to buy stocks in the stock market and succeeded in forcing speculators to close their positions and leave. We cannot tell what consequences will follow, but neither can we dispute the fact that our stock and foreign exchange markets have since stabilized. Following the market actions just described, Mr Joseph YAM, nicknamed One-stroke Master, announced a further package of "seven strokes" to plug the loopholes in the foreign exchange market and stabilize the exchange rate of the Hong Kong dollar. To sum up, we simply should not gainsay the role of the HKMA in defending the linked exchange rate this time around.

The performance of the HKMA over the past one year has been marked with both mistakes and achievements. As early as October last year, the HKMA was already able to ascertain that international speculative activities were found in our stock, foreign exchange and futures markets. That being the case, should the HKMA still resort to high interests, particularly when it knew that this would do harm to our own economy? If the HKMA had taken the advice of experts and scholars at an earlier time, could the "seven strokes" have been put in place much earlier? And, if the "seven strokes" had been implemented earlier, would it have been necessary for the Government to take the subsequent market actions, much to the worries and horror of the community? The HKMA claims that the "opportune time" of introducing the "seven strokes" has only just arrived. But how can one be thus convinced?

Although the performance of the HKMA has been somewhat disappointing, I do not think that it is now the right time to review its set-up and monitoring mechanisms, not least because our financial markets are not yet well developed; international speculators have not all left; and hedge funds are not yet subject to international monitoring. If the set-up and powers of the HKMA are reviewed now, international speculators will think that its actions to defend the linked exchange rate are being challenged politically in Hong Kong. They will then stage further blatant attacks on the Hong Kong dollar. It is inadvisable to review the HKMA now because any attempt to do so will be tantamount to creating havoc in our own house. I hope that Honourable colleagues will really think twice before making their decisions. At this very sensitive moment, they must not do anything which may create dissension among ourselves, because this will only give a chance to our enemies.

With these remarks, Madam President, I oppose the motion.

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

MR CHEUNG MAN-KWONG (in Cantonese): Madam President, the Hong Kong Monetary Authority (HKMA) has been criticized for being an independent kingdom, and Mr Joseph YAM the financial tsar. The reason is that the HKMA and Mr YAM have too much authority and they can act on their own without being kept in check. Laws at present allow the HKMA to keep on expanding its powers. It can manage the Exchange Fund and expend $100 billion dollars to prop up the market. But it is not subject to any statutory regulation, not any checks by the Legislative Council. The Democratic Party thinks that the powers of the HKMA should be expressly regulated by law and be kept in check properly, otherwise, it might become a derailed roller coaster lost in the whirlwind of the financial turmoil, bringing disaster to the Hong Kong economy.

The debate we have today would have been a very good opportunity for different opinions in the Council to confront each other, in order to make a review of HKMA's past performance, lay down specific laws for the HKMA and to strike a balance between power and regulation. But some very unusual things happened before the debate, that is, the sudden withdrawal of all amendments. This is surprising and makes one feel that the HKMA really has such amazing powers that it can silence the voice of the Legislative Council. Today I read from the papers that the Democratic Alliance for the Betterment of Hong Kong and Mr Bernard CHAN decided to withdraw their amendments simply because they were afraid of "losing". What a most absurd reason! When have the political parties and Members of the Legislative Council become so timid all of a sudden and dare not propose any amendments? Obviously, there may be something which cannot be disclosed, or could there be something behind it all?

At the same time when amendments are withdrawn from the Legislative Council, we can see that the Hong Kong Association of Banks, the Hong Kong Financial Markets Association, the Deposit-taking Companies Association, and the Hong Kong Stockbrokers Association all expressing their support for the HKMA and trying to create a tide of favourable opinions for the HKMA. The stance of some of them is exactly the same as that found in an official statement. Madam President, the HKMA is really incredible, once it is in need of help, people from all sides will come to its rescue. Copycats who can copy and parrot ideas from the official statement are good copycats, regardless whether they are black, white or red. Anyone who can read from the official statement is a good copycat. But regrettably, they have all misread the intention of the motion proposed by the Democratic Party. We are not putting the blame on the HKMA or Mr YAM, but importantly, we are hoping to conduct a review of the laws and the system related to the HKMA and to build a sound legal system to face the worsening financial turmoil.

Of course, the Democratic Party understands that we need no politicization of financial matters, but that does not mean that the HKMA should be spared criticisms and changes in the wake of the financial turmoil. We believe that the Asian financial turmoil has lashed all existing financial order and exposed the structural weaknesses of the global financial system. Therefore, there is an urgent need for the financial systems in the capitalist world to embark on a course of reform. On the international level, there is a need to impose greater control on capital flow and the hedging funds. The financial institutions and systems of the emerging markets must be strengthened to enable them to meet the challenges posed by the trend of the unitarization of global economic systems and to work for the sustained growth of their economies.

Given that Hong Kong is an international financial centre and since we have frequently come under the attack of hedge funds, of course we support the suggestions made by Mr Donald TSANG, the Financial Secretary, in that there should be control over the capital flow of hedge funds by increasing its transparency and imposing restraints to prevent the funds from over-borrowing, in order to prevent a serial crumbling of hedge funds and the occurrence of a disastrous avalanche in the global financial system. At the same time, we need to reform the financial system of Hong Kong, perfect our system and laws, so that capital from all over the world can invest in Hong Kong in an orderly manner. One of the highlights of this reform is the HKMA.

The Democratic Party is of the opinion that the most important task at present is to draw up specific laws for the HKMA, affirm its powers and responsibilities, hold fast to its currency board functions, and maintain the stability of the linked exchange rate system. Besides, there is a need to enhance the transparency of the Exchange Fund Advisory Committee, and to establish an accountability relationship between the HKMA and the Legislative Council through hearings and meetings. At last, we should make the Exchange Fund Advisory Committee more representative, so that the diversified views from the banking, finance, academic and other professional sectors can be reflected, for the benefit of formulating a financial policy which can balance various interests in society.

We believe that this kind of reform, when made after summing up the faults committed during the financial turmoil and those by the HKMA, is both useful and constructive. The suggestion should not be treated as a scourge that should be attacked and eradicated so that the Legislative Council can be silenced. Our aim is to make the HKMA a robust organization and rid it of the bad names of a kingdom on its own and Mr YAM a financial tsar. To those who defended the HKMA or Mr YAM out of their own will or were forced to do so, I must say we have a common cause though we may use different means. And so there is nothing to be upset or anxious about.

Madam President, the Democratic Party believes in a free economy and agrees that there should be laws and regulations to maintain order in a free economic system. One thing we have in common with the Government is our support for the linked exchange rate system. We are aware that this system will lead to fluctuations in interest rates. But through laws in finance and regulations in the market, it is possible to reduce a roller coaster style ups and downs in interest rates. Different ways should be used to minimize the pounding impact of the international flow of capital to the Hong Kong economy. We oppose market intervention because we think that a more fundamental way is to make our financial system and the relevant regulations and laws sound, rather than to enter the market and gamble with the manipulators. Therefore, the market actions of the HKMA should receive criticism while the structural reforms of the HKMA should be supported. Or at least a chance for open discussion should be given. Otherwise, if we only come together in the name of unity and face outside attacks, forgetting that the Legislative Council is intended as to be a forum for free discussions, then what we shall lose is not only a free economy market, but an assembly where free will prevails.

Thank you, Madam President.

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

MR HUI CHEUNG-CHING (in Cantonese): Madam President, Hong Kong is an international city and a free trading port of excellent reputation. It exercises no foreign exchange control and the Hong Kong dollar can be exchanged freely. It is because of these that the stability or otherwise of the Hong Kong dollar is closely related to the transaction expenses involved in the day-to-day economic activities of its people. It also affects the businessmen, especially those engaging in the import and export trade, the investors and the transactions made by way of the prices and costs involved. It is thus very obvious that the prosperity and continuous growth of the outward-oriented economy of Hong Kong hinges on the stability of the Hong Kong dollar. Under these circumstances, the HKMA which is charged with the duties of managing the Exchange Fund and regulating the exchange rate of the Hong Kong dollar, therefore has a very important role to play and a vital task to fulfil. At the time of the Asian financial turmoil last year, this task had become not only vital but a very gruelling one. In this respect, I appreciate the determination of the HKMA and the financial officials of the Government in trying their best to maintain the stability of the Hong Kong dollar.

With regard to the above-mentioned task, the HKMA has unfortunately been lacking in making decisive and prompt moves despite its determination. This is not to say that the HKMA is complacent, resistant to changes and shuts itself off from the outside world; but that there is much room for improvement in its ability to react in a contingency such as sudden speculative activities and financial crises. This lack of ability to react in a contingency is largely related to the lack of a sense of crisis and a humble attitude in seeking advice from others and to be receptive to different opinions.

The Hong Kong Progressive Alliance (HKPA) proposed a motion debate on the improvement of the administrative and operating mechanisms of the local financial markets in the Provisional Legislative Council last November. Under the premises of maintaining a free and open market and lending support to the linked exchange rate, the Government was urged to "expeditiously review the operating mechanism of the local financial market, including the chain relationship between the stock, foreign exchange and index futures markets". The Government was further urged to be vigilant against market manipulation, unlawful shortselling of index futures and arbitrage activities being distorted into purely speculative activities. In fact, the mega-speculator Soros who took part in the attack on the Hong Kong dollar had publicly admitted in an interview found in his book Soros on Soros some years ago that the funds under his management would try to find loopholes in financial markets all over the world, and seize opportunities to launch three-dimensional attacks in the foreign exchange markets, stocks markets and futures markets.

Unfortunately, it seems that the HKMA had not known itself and its opponents well enough, nor had it paid serious attention to the advice of the HKPA and other Members of the Provisional Legislative Council. It did not give serious thoughts to the many useful suggestions made by experts and academics on strengthening the linked exchange rate. The Government only stated that it did not believe speculators would adopt multiple-play to manipulate the stocks, futures and currency markets and reap profits. As a result, a series of technical improvement measures were proposed. At a time when the Hong Kong economy was about to enter into a period of recession, the Government only invariably relied on imposing high interest rates to defend the linked exchange rate. There was a lack of vision to introduce institutional reforms to prevent those speculators from using deceptive strategies to attack the Hong Kong dollar. It was only until last month when the HKMA and the Government had to use $100 billion from the reserves to intervene in the market then they realized at last the strengths of the market manipulators could not be dismissed so lightly.

Madam President, there are many talented people in the field of international investment. Their versatility in making financial strategies and rich experience in staging practical attacks, plus the state-of-the-art computer technology they possessed, have enabled them to make swift and ruthless movements of huge amounts of capital. So, it does not really matter if they are able to make any profits out of their market manipulation, these activities alone can inflict disasters on a country's economy. The reason why I say this is not to inflate other people's ego while humiliating our own. I just want to stress that these speculators are not ordinary men-in-the-street. Our experience last year showed that the manpower and resources of the HKMA are no match for these speculators. To contend with these people, the HKMA must raise its crisis awareness and treasure the importance of embracing different opinions and to capitalize on the advantages of collective wisdom and concerted efforts. This crisis awareness is especially important at a time when global hedge funds are not yet under effective control, when a new international financial order is not yet established, and when the Hong Kong regulatory framework for the financial markets is not yet perfected.

It should also be remembered that Hong Kong's foreign exchange reserves are the money earned and saved up by its people through many years of hard work. If from now on the HKMA often needs to use the foreign exchange reserves to fight against the speculators, then it must make itself more accountable to the public. I think the Chief Executive of the HKMA and the policy-making government officials in the financial and monetary fields should attend the public hearings of the Legislative Council on a regular basis, and make analyses and reports on the financial issues of Hong Kong and the effects of the international economical scene on Hong Kong. These will hopefully raise public awareness of the financial market and related government policies.

Madam President, I so submit.

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

MR CHAN KAM-LAM (in Cantonese): Madam President, the people of Hong Kong have been crushed to the ground and trampled all over by the financial turmoil for a whole year. The value of assets has made a nose-dive. People's lives are greatly affected. They long for the storm to pass so that they can take a break and quietly lick their wounds. They have got fed up with the senseless political arguments. The fact is: the ordinary people are most concerned about whether the local financial market has matured after more than 20 years of operation and whether the monitoring mechanisms are sound enough to ensure that the market operate in a robust manner.

At the onset of the financial turmoil, the Democratic Alliance for the Betterment of Hong Kong (DAB) had repeatedly proposed measures to plug the loopholes in the financial system. Hong Kong has been a financial centre for only a short time and its scale of operation is limited. If the capital and investment vehicles of the advanced countries are introduced rapidly and in a wholesale manner, then there are bound to be negative impacts should the structure of the local economy fail to make the right adaptation. It is already an indisputable fact that the market is manipulated by speculators. And no one will object to the remark that the investment market has become speculative, and instead of being used for financing, the market has become a casino for gamblers.

The DAB does not object to the idea that the financial, stocks and foreign exchange markets should be free and open. The Government should play the pole of a regulator rather than a participant, or one which permits it to make interventions at its own will. We believe that the basic requirements of a free market are excellent monitoring mechanisms and a sound system of regulation. Otherwise, the market will be plagued with the defects of laissez-faire, with the market being manipulated beyond remedy. In the end, the market will become the paradise of speculators and manipulators. This state of affairs is often found in developing countries and in places where the financial markets are not well-developed. The Government should address the problems exposed by this financial turmoil and take the initiative to make remedies. It should reorganize and restructure the unhealthy areas in the market in a bold and decisive manner. In this connection, the DAB lends its full support to the "seven strokes and 30 twists" proposed by the Government recently. Whenever the people of Hong Kong refer to the place they live as one of the financial centres of the world, they would be very proud. And so they always talk about terms like free market and free economy. This is to show their profound knowledge in economic operations. There are all kinds of experts and academics in the field of economics and there are all sorts of opinions belonging to all sorts of schools of thought. There are also different views on financial management in practice. It is fortunate that they all agree to the measures put forward by the Government recently.

Madam President, the Third World War has quietly begun in the middle of last year. But we can see no cannonballs and bullets flying all over this battlefield, because the war is fought in the realm of economics. Over the past few months, some countries have fallen in the heat of the battle, some are making a desperate, last-ditch defence. And on the Hong Kong front, though fightings have quieted down for the time being the enemies have not yet beaten a retreat. In these couple of days, those who started the war found their backyard on fire and those economic superpowers which had been bossing around were making a hasty attempt to save their own markets. The facts have shown that there is a need to cultivate a sense of national defence even in the economic domain. I believe this is a lesson which we should learn from this financial turmoil.

As for the motion moved by the Honourable Albert HO of the Democratic Party, the DAB thinks that it is not worth proposing any amendments to it at all. For if the Hong Kong Monetary Authority and the government officials in charge of economic and financial affairs are not doing a good job, we shall level criticisms against them. If they are doing a good job, we shall show our appreciation for their work though they are duty-bound to do it well.

The positions of the Democratic Party on economic issues are constantly shifting and they are so baffling that they are always beyond our wildest imagination. May I quote a passage from today's editorial of the Hong Kong Economic Journal to conclude my speech: "The two spokesmen on economic policies for the Democratic Party held a press conference on Monday to explain the background to the motion they would be moving and the package of suggestions they had made. Reports on this press conference showed that the Democratic Party was self-contradictory even in the suggestions they made. What good will these suggestions which are so full of muddled concepts and given after the crisis is over and through serve to improve on the financial markets of Hong Kong?"

With these remarks, Madam President, I oppose the motion.

PRESIDENT (in Cantonese): Mr Ronald ARCULLI.

MR RONALD ARCULLI: Madam President, of my 10 years in this Council, I have rarely seen and heard our Honourable colleague, Dr the Honourable David LI, show such emotive praise for the Administration and the Hong Kong Monetary Authority (HKMA), or such criticism on the Democratic Party. I applaud him. I think he is right on both counts.

I would like to emphasize at the outset that the Liberal Party has never been afraid of criticizing the Administration or, indeed, any institution like the HKMA, when we believe that mistakes have been made, whether these were in the form of action or inaction. This has been and, indeed, still remains our position. But, we will also praise where praise is due. That having been said, Madam President, let us look at the circumstances and events that have resulted in today's motion debate.

The whole Asian contagion started last summer, the first time we in Hong Kong were confronted with this dilemma. In this Council, our Finance Committee was asked to approve a loan of US$1 billion to a fund, put together by the International Monetary Fund, for Thailand. As we all know, we approved this request. Little did we know then that Hong Kong would be drawn or pushed into this turmoil with a little help from our global financial predators, roaming the world looking for easy prey. And if there was none around, they would create one by fair or foul means.

In view of the three attacks in one year on our exchange link, as well as continuous assaults on our futures and stock markets, the Administration unleashed its firepower to stabilize these markets. Since the first attack in October last year, our one-month Hong Kong dollar interbank rate has stayed above our prime rate for about 30 days. These defensive measures introduced by the HKMA reduced that period during which the interest differential prevailed from 30 days in October 1997 to 10 days after the second attack in January this year, and to three days after the third attack in June this year. All these seem to work well until August when the predators attacked again. We are now told that it was the first time that it became quite clear that these predators used the double-play strategy. We do not, of course, have the full fact, but it is enough for me to say that the markets have been full of rumours that the double-play strategy has been used since last year. We are told that the Administration and the HKMA were convinced that something had to be done to stabilize our financial markets, failing which, we would be faced with a significant and systemic risk.

The Liberal Party, Madam President, unreservedly agrees with this assessment and endorses the action that the Administration took in August. Some critics say that the September measures should have been taken before the August action. But these are the very same critics that characterize the August action as a government intervention bringing about the early demise of our free market economy.

What is a free market economy? To my understanding, a free market economy cannot mean that we have to stand idly by if our very existence is threatened by manipulative actions, any more than freedom of speech is a licence to defame.

Madam President, when fundamentals cease to have the rightful road, particularly if this has been brought about by predators, we would behold those who have the responsibility for the stability and integrity of our financial markets to take corrective measures. The Administration and the HKMA took corrective measures. They have the support of the people of Hong Kong. They should also have the support of this Council. The Liberal Party cannot and will not support the motion.

In conclusion, the Liberal Party has urged many times that additional measures should be considered to best ensure the stability and integrity of our financial markets. And I urge the Administration to seriously consider one particular measure that we have mentioned, and that is, to introduce the concept of treasury stock into our company law as quickly as possible. In that way, a company may, if it feels that the market conditions and the value of its stock on the stock market is right, purchase or repurchase its own shares, or leave its stock in the Treasury without a reduction in capital. Such actions can, therefore, avoid triggering off the necessity of a general offer by the major shareholder of that particular company. I believe that these measures will help stabilize our stock market. It is a measure that is recognized in a lot of markets in the world, particularly in the United States. Therefore, I really urge the Administration to seriously consider this particular measure.

Thank you.

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

MR SIN CHUNG-KAI (in Cantonese): Madam President, first of all, I would like to thank several of my colleagues who have spoken earlier. In particular, I would like to thank Dr the Honourable David LI, who mentioned the praise given to the HKMA by a number of people from the banking sector and the financial industry. If there is such an opportunity, I hope Dr David LI can make arrangements to enable the Democratic Party to have a better understanding of the views of these people. Having an incisive judgement, Dr LI urged the Government in the newspaper on 26 October and 27 October to pay attention to issues related to the so-called "double-play". I have no idea as to whether he, as a member of the Exchange Fund Advisory Committee, has raised these issues in the Committee with a view to plugging the loopholes. If so, has the Committee discussed these issues during the period from 26 October to 14 August?

Earlier on, a number of my colleagues touched upon the issue pertaining to the so-called "mutual manipulation", which has existed for 10 months ─ yes, it is 10 months. Just now, my Honourable colleagues from the Democratic Alliance for the Betterment of Hong Kong (DAB) also mentioned this point. Let me read out a few captions raised during the Provisional Legislative Council meeting on 26 November. These captions were written by Mr NGAN Kam-chuen of the DAB: "The HKMA's active interference dampening the confidence of the market", "The HKMA destroying the co-ordination of the banks". Of course, I think Members understand that to criticize the HKMA does not necessarily mean that one has to support the motion moved by the Democratic Party. I would like to thank the Honourable Miss CHOY So-yuk in particular. Having listened to the first part of her speech in commenting on the HKMA, I thought she should have come to sit with us. But she changed course in the latter part of her speech.

As regards the issue pertaining to the market's so-called "currency board", I only came to know that there was a "Currency Board Operations Sub-Committee" under the HKMA on 5 September. Its members include Dr David LI, Mr Marvin CHEUNG, Prof JAO Yu-ching, Mr Mervyn DAVIS (that is the Chairman of the Hong Kong Association of Banks), Mr David CARSE, Mr Andrew SHENG, Mr Norman CHAN, with Mr Joseph YAM as Chairman of the Sub-Committee. On 23 October, the first challenge was launched. On 5 September, this Sub-Committee was said to be "recently established, approved by the Financial Secretary". For 10 months, why has the HKMA still failed to put in place a mechanism and considered how to operate? I have no idea whether the Exchange Fund Advisory Committee wholly agreed with this report. Was there any area with which the Committee did not agree?

One of my colleagues particularly raised the point today that the HKMA had been operating smoothly and therefore it should not be subject to political intervention. Political intervention is a good question. In fact, the Democratic Party is of the same view as the colleague who spoke just now. We all hold that these economic or financial issues should not be subject to political intervention. In this respect, there is no divergence of views. But we have to point out that, under the existing mechanism, the Chief Executive of the HKMA was appointed by the Financial Secretary, while the Financial Secretary was appointed by the Chief Executive. As the Chief Executive was selected, he himself is a political figure. Through the exertion of political pressure, the Chief Executive will be able to influence the HKMA. Maybe a few decades later, a Chief Executive with people's support will be returned by universal suffrage. By that time, political pressure will be changed from the existing pressure exerted by the electoral college to that exerted by the public. But still there will be political pressure. Independence is not the same as black-box operation. I support independence, but still it needs transparency and accountability.

Just now, the Honourable Bernard CHAN also mentioned the operational transparency of the Federal Reserve Board. Even Mr Joseph YAM, the Chief Executive of the HKMA, said the most independent bank chief of the world at the moment is the Chairman of the Federal Reserve. It is laid down in law that the Chairman has to attend the Congress (House of Representatives) at least twice a year. But actually, it is more than two times. I learned from the news and the newspapers that he often made use of opportunities to explain the policies of the Federal Reserve. I think there is no reason for market participants to object to such a move. In that case, why should we object to the proposals?

Talking about transparency, we should all be aware of the systems adopted by the United States and Britain. For instance, there was a reduction of interest rates yesterday. The Open Market Committee holds a meeting every six weeks. After holding a five-hour meeting, there will be a "press statement", that is, the so-called press release. The whole operation is clear to all and people can expect what to come next. Why can we not do better in this direction? Why have we failed to do better during the period from October till now?

The members of this recently-established Sub-Committee were drawn from among many outstanding figures of the industry. We would like to emphasize the point that what we ask for is a system. We are not talking about the incident that took place on 14 August any longer. Just now, a number of my colleagues commented on whether or not it was right for the Government to intervene in the market on 14 August. But we are not going to discuss these issues. Just now, I asked one of my colleagues ─ he asked me not to quote his name and so let us conceal his name for the moment ─ a very simple question. In response to my question as to whether there was a structural problem, he simply said "yes". In that case, is it necessary for us to review the structure? If we are to review the structure, is it the right time to do so? The HKMA was set up under the Exchange Fund Ordinance. However, the organization structure of our Exchange Fund was not subject to any ordinances related to the HKMA for the purpose of exercising checks and balances. The Chief Executive of the HKMA is not subject to any restriction on his tenure. His tenure can even go beyond his retirement age because it is not specified in writing. On the contrary, the Financial Secretary will have to retire when he reaches the age of 60. I want to emphasize that we are not talking about some past issues any longer. What we need to do is to design a system so as to make good preparations for our future banking and financial systems in order to guard against future challenges.

Thank you, Madam President.

PRESIDENT (in Cantonese): Mr Eric LI.

MR ERIC LI (in Cantonese): Madam President, the Member referred to by Mr SIN just now is me. I hope that after listening to my speech, he will understand what I am thinking about.

When the Government announced its decision to intervene in the market on 14 August, I made an immediate response by holding that there was no alternative for the Government under the circumstances then. In my opinion, the Government should, apart from maintaining the order of the market by itself, communicate with G7 countries expeditiously to discuss ways of maintaining the order of the global financial markets so as to put hundreds of billions of dollars worth of hedge fund's investment power back to the right track for the purpose of pooling funds for the financial market.

The Financial Secretary visited Europe and the United States on 27 September to seek the understanding and support of other countries in respect of the Government's market actions. The comments he is going to face will not be like some of those given by the local financial sector. Instead, it is likely for him to face some foreign media and investors who may be very rude or who may even assume an antagonistic attitude towards him by lambasting him. However, this trip is essential and it is going to be an arduous task. As such, if we are to see off the Financial Secretary by voting in favour of the motion moved by Mr Albert HO, the wordings may not be appropriate and the timing may not be suitable, no matter how good our motive is. Now Hong Kong is still at a sensitive moment. It will be very easy for international media or professional investment institutes to mistake that our financial officials, including those who are "explaining" at the moment, are not reliable and should not be trusted at all. What is more, they may even think that Hong Kong's political sector only knows how to make some political gestures in a superficial manner to "square accounts with people afterwards". In fact, our commercial sector and financial sector only aim at making money rather than stirring up quarrels. It is my belief that people engaging in financial business pay more attention to actual result than to political accountability. Though political accountability may offer outlets for our sentiments, it may not be able to maintain the market's confidence in a constructive manner. Eventually, it may even bring short-term negative consequences immediately.

Those who engage in financial trading have all got used to comments made by people who are wise after the event ─ why not do something like this at that time? Of course, it is very easy for them to analyse with the benefit of hindsight those blind spots that were not visible on the outbreak of speculative activities. I believe the Hong Kong Monetary Authority (HKMA) may not have sufficient experience in the actual operation of the market, whereas the amount of public funds involved this time is quite substantial. Officials have the reason to and should admit that they have learned from the lesson this time the strength of the market force as well as how negligible their ability is. Fightings were still fierce by the end of August in the wake of the financial turmoil, few people could predict at that time such dramatic changes would occur in such places as Japan, Russia and Latin America. I believe financial officials should now have the answer in mind if we are to look back at whether our intervention strategy should be more flexible and whether we should have done better. Even the man in the street has made a lot of incisive criticisms, and I do not want to repeat them here again. I think it is most important for the HKMA to figure out how to concentrate its effort to carry out remedial work. I hope financial officials can act in an open-minded manner by listening to the advice given by others with a view to reforming the market rules and structure, as well as looking ahead in a positive manner by seeking solutions with local, mainland and even international investors in a modest manner. If some Members or government officials really think that financial officials are so smart that they know how to handle things well in advance and can even do anything they want in the stock market, it will be totally unnecessary for them to remain in their posts. Instead, they can speculate in gold and shares to "make some real bucks". But where do we find such officials?

Nevertheless, Members should be aware that the financial markets are still in a state of war. I am not saying that we have an immediate crisis and that some speculators will emerge from hiding tomorrow to take action. But the handling of crises includes the carrying out of remedial work after the outbreak of crises. Unlike reforms, this is going to take some time. In discussing the direction we should take in carrying out reforms, we can do it in a calm and objective manner. The criticisms levelled at financial officials at the moment may not help the matter. What is more, people from the financial sector may have the feeling that someone is trying to find fault with government officials when the officials are trying to carry out remedial work positively. It is for these reasons that I do not agree with the wordings of today's motion. But I would like to put forward four positive comments, which I believe are better than the motion's proposals.

Firstly, I gave Mr Rafael HUI a letter on 19 August, that is, several days after the Government's intervention, in the hope that he could provide more accurate information to let us know the actual results we gained from the action we took this time. I believe Members are still unable to grasp the major facts. Similar to the airport case, I think it is premature for us to immediately give comments, conduct reviews and put forward constructive ideas before we see the matter clearly. But I think it is time for Mr Rafael HUI to give us an account of the case.

Secondly, I hope this Council can give the international community a message today that it is the unanimous wish of all Members in this Council to maintain the linked exchange rate. I would like the international community to know that no Member objects to the "seven strokes and 30 twists" as put forward by the Government for remedial purposes. This is the most important and positive message that I would like other people to see.

Thirdly, I hope the Government can put forward its proposed legislative and concrete measures expeditiously. Only through these measures can the public and outsiders see more clearly that we have moved one step forward in carrying out reforms for Hong Kong in a practical, concrete, pragmatic and constructive manner and can Hong Kong show that it is open, liberal, mature and pragmatic. The motion debate today, no matter how good its motive is, seems to have failed to achieve a positive effect. We can see that no concrete advice has been put forward.

Fourthly, the Financial Secretary has a heavy responsibility in making his visit this time. I hope that he is not alone. What is more, I hope that he can invite more people who have experience and good reputations in global financial management, such as Sir Quo-wei LEE, Mr Antony LEUNG and Dr David LI, who spoke just now, to share his work. This will enable the international financial sector to have a better understanding of our situation, instead of restricting to the views held by officials and the financial sector. Thank you, Madam President.

PRESIDENT (in Cantonese): Mr Ambrose LAU.

MR AMBROSE LAU(in Cantonese): Madam President, with the Hong Kong dollar coming under repeated attacks from international speculators during last year's regional financial turmoil, the pace of our economic development was quickly tied down, thereby affecting directly the people's means of support as well as their daily lives. There have been suggestions that since the Hong Kong Monetary Authority (HKMA) has erred in its efforts to maintain the linked exchange rate system and failed to introduce in time effective measures to tackle the situation, it should justly be reprimanded. However, as rational and responsible legislators, we should always get at the facts in a prudent and objective manner before dealing with any social affairs or making any severe criticisms; moreover, what we do should also be in the interest of the people of Hong Kong as a whole.

In adherence to our unswerving constructive attitude, the Hong Kong Progressive Alliance (HKPA) holds that the existing tendency towards fault-finding and condemnation should not be encouraged. First of all, given that the financial turmoil has yet to subside and speculative attacks would come at any time, we should focus our efforts on the international speculators. This would mean disproving the rumours that speculators have spread to malign and defame the HKMA, as well as rebutting both the allegation of robbery and the outcry calling for maintenance of normal market order; and aside from that, we should also call upon the international community to establish level playing fields worldwide and to step up control over the activities of certain hedge funds. Secondly, the series of effective new measures the HKMA introduced in early September to safeguard the market order had been drawn up as a result of the HKMA's comprehensive conclusion of its past experience and thorough assimilation of the views from the various sectors of the community. From this we could see not only the importance of constructive opinions but also the fact that effective new measures cannot be formulated overnight; indeed, it was only after the HKMA had practically battled against the international speculators that the popularly supported "seven strokes and 30 twists" could be formulated eventually.

Furthermore, let us put ourselves in the shoes of the financial officials for a minute. In the face of an unprecedented and menacing financial turmoil, what better measures could we come up with under such time constraint? Would the measures we introduce give rise to other social and economic problems? What impact would such measures have on the public at large? It is always easy to "act" wise after the event and criticize others, but if we were in other people's shoes, the view would be very different.

Madam President, over the past year or so, the HKMA has been fighting hard to defend the linked exchange rate. In regard to this stringent test, the HKMA has basically achieved three effects.

(1) Safeguarding the stability of the local currency, thereby making the Hong Kong dollar the only currency in the region that could withstand the speculative attacks and stand firm. As a result, not only the overall condition of Hong Kong's financial system could be stabilized, the stability of the Hong Kong dollar has also contributed significantly to the economic and financial sectors of the region in terms of their restoration of stability and revival after the heavy blow.

(2) In safeguarding the stability of the Hong Kong dollar, the HKMA has all along succeeded in ensuring that while the free market economy is still in operation in Hong Kong, the market would always remain fair and open. as a result, the confidence of the international community and investors in Hong Kong is maintained and bolstered.

(3) After summing up its experience, the HKMA has resolved to introduce defensive measures to safeguard the interests of both the general masses and the investors. As a result, not only could the confidence of the community be bolstered, the fair order and transparency of the free market could also be further enhanced, thereby providing the international community with some constructive insights in connection with the formulation of a set of new rules for the financial services.

Nevertheless, if the HKMA had improved its crisis awareness and take precautionary measures beforehand, it could certainly attain even better results with less efforts in dealing with the financial turmoil. Since the international speculators had attacked the Hong Kong dollar for the first time in October last year, on behalf of the HKPA, I have moved a motion at a meeting of the Provisional Legislative Council to urge the government to review the operation mechanism of the local financial markets. In the light of our constructive attitude, the HKPA presented a number of proposals regarding the measures to strengthen the currency board system, as well as the measures to enhance both the control over and the transparency of the securities and futures markets. Before we made those proposals, we had taken into consideration the views from the financial sector, the academics, as well as the various sectors of the community whom we had consulted comprehensively. Our constructive proposals were of a similar nature as that of a "seven strokes and 30 twists" introduced by the HKMA in early September this year.

I am of the view that the financial turmoil has yet to subside, and that market manipulation would look for the slightest chance to sneak back in at any time. Therefore, in addition to strengthening the currency board system and enhancing the order of the financial markets, our first and foremost task is to make our best efforts to understand and then master both the financial instrument of all kinds that exist among the international community and the rapidly developing information industries. Condemnation would only serve to arouse conflicts in the community and send out wrong messages to the markets, thus giving market manipulators the opportunity to reap profits. In the circumstances, the executive authorities and the legislature should join hands together; it is only on the basis of their mutual understanding and support, as well as through their active co-operation that the executive authorities could be enabled to combat the international speculators more effectively and more efficiently, thereby protecting the interest of Hong Kong as a whole.

Madam President, the HKPA is in support of the continuous efforts made by the Government of the Special Administrative Region (SAR) and the HKMA to take the initiative to seek and receive views from the various sectors, with a view to drawing experience that could help further strengthen the currency board system and enhance the order as well as transparency of the financial markets. However, it does not imply that we would expect less of the SAR Government and the HKMA. There is an ancient saying which goes like this: "He who governs best draws not on personal fortes but on successful experience of predecessors". I think the HKMA should really learn from the wisdom in this. In the face of the fast-changing and volatile international financial markets as well as the exceptional skills and resources of international speculators, we hope that the HKMA would make further efforts to learn lessons and take advices, with a view to making "better" and "earlier" responses in the future. As regards the HKPA, we would continue with our practice of actively giving advices in the light of our constructive attitude; besides, we would also give our support to the efforts made by the SAR Government and the HKMA to safeguard the interests of both the public and the investors and to further enhance the order as well as transparency of the markets.

Thank you, Madam President.

PRESIDENT (in Cantonese): Miss Cyd HO.

MISS CYD HO (in Cantonese): Madam President, the Frontier is in support of the motion moved by Mr Albert HO. Regarding the first half of the motion moved by Mr Albert Ho, I see that there is no divergence of views among Members. We all agree that the new measures put forward by the HKMA have produced a definite effect on stabilizing the market. We also agree that the HKMA was a bit late in putting forward the measures. It should have taken actions earlier. Though it was a bit late, it was somehow better than doing nothing. I do not understand why the attitudes of Members differ so greatly as we found the new measures taken by the HKMA so satisfactory in the first half of the motion debate. After listening to the speeches delivered by a number of my colleagues, I noticed a basic divergence and that is: some colleagues considered that it would destroy our unity and embarrass officials as well as giving the global market a worse message if we were to conduct a review; but some colleagues thought that we should face the matter in a candid manner as this could help us learn the lesson.

In fact, I find it very strange that originally we should have two amendments to the motion today. The one suggested by the Honourable Bernard CHAN was supposed to be more constructive as he raised the point that the role played by the HKMA actually overlapped with that played by a central bank. It was my original expectation that Members could express more valuable opinions in today's debate. But unfortunately, due to various reasons, Members have withdrawn their amendments. As a result, today's motion debate has become less interesting than it should be.

On the other hand, I think Honourable colleagues have failed to see, apart from the effect produced on the market, whether the measures put forward by the HKMA in stabilizing the market have given rise to problems of exercising checks and balances as far as the spirit of the rule of law and the infinite expansion of the Government's power is concerned. These are issues that Members have not mentioned. Let us look at Monday, the one that came right after the implementation of "seven strokes" by Mr Joseph YAM. Many people engaging in the banking sector clapped their hands on that day to express their support. I think we need not mention the relationship between the structure of the HKMA and the banking sector. We only need to look at the fact that a mechanism has already been built into the "seven strokes" that makes it impossible for the banks, for a number of reasons, not to clap their hands to express their support. Such a mechanism is the service provided by the discount window. If the HKMA has any reason to believe that certain banks have taken part in assisting the launching of attacks against the Hong Kong currency, it can stop offering the discount window service to such banks. In this respect, there is no objective standard whatsoever for the banking sector to follow. It will be up to the HKMA's subjective judgement as to how the banks can avoid being suspected of assisting in attacking the Hong Kong currency. As such, I now come to understand why the banking sector dared not disagree with the new measures put forward by the HKMA. Perhaps these measures really have the support of the industry, but as far as the mechanism is concerned, I have failed to find an objective standard to convince me that the industry is not under any threats to support these measures. The HKMA must put forward some objective standards to lobby the public and me so as to convince us that the industry is in real support of these measures.

Let us now come back to the spirit of the rule of law. We can see that when the HKMA and financial officials put forward the new measures, the Government's power was extended to its maximum limit. For instance, after buying shares from the market, the Government was not required to declare its interest; nor was it required to disclose the amount of shares it had in hand. The Government only showed its willingness to disclose such information after the HongkongBank in Britain asked it to do so. As for the amount of other blue-chips in possession, the Government is still tight-lipped about it. Another example is related to the Securities and Futures Commission (SFC) which has all along held that it has not noticed anyone "manipulating the market". But regarding the Government's injection of a large amount of capital into the market, the SFC indicated that it had no power to investigate whether the Government had "manipulated the market" because of the law. All these have dealt a serious blow to our confidence in safeguarding the spirit of the rule of law. I believe our economy and the rule of law are equally important to us. The rule of law has been a very important element in enabling Hong Kong to maintain its status as an international financial centre and its economic position. If our foundation is undermined, I cannot see how we can keep the achievements we have already made today no matter how many new measures the Government will launch and how much capital it will inject.

Madam President, we support the motion moved by Mr Albert HO. We should face the errors made by the Government over the past year in a candid manner so that we can learn the lesson carefully. We have paid substantial tuition fees over the past year. The money will be wasted if we fail to review what we have done seriously. Finally, we support the motion.

PRESIDENT (in Cantonese): Mr James TIEN.

MR JAMES TIEN (in Cantonese): Madam President, in the wake of the financial turmoil that took place in October last year, the Hong Kong Government adopted a policy of abandoning the "cart" in exchange for the "commander" in order to defend the Hong Kong currency. Of course, the "commander" here refers to the linked exchange rate. Perhaps many "carts", "horses" and "cannons" were also sacrificed. At that time, the Government said that there was only one solution and that is to protect the Hong Kong dollar by means of raising interest rates in the market. In response to this, the Liberal Party and the commercial sector raised their concerns with the Government. At the same time, we told the Government that with the high interest rates, we could only grudge along for a few more months. If the situation lasted too long, it would produce an adverse impact on the fundamentals of our economy. For instance, many companies might need to lay off their staff or close down because of the high interest rates.

The Hong Kong Monetary Authority (HKMA) has all along held that it is right to maintain high interest rates. So it made use of the money from the commercial and industrial sector as well as from the general public to defend the Hong Kong dollar. As a result, the Government has never resorted to its reserves over the past couple of months. So far, it has been relying on high interest rates to defend our currency. Even up to May and June this year, the Government offered no improvement to the problem. It was only during the two weeks between 14 August and 28 August that the Government came to realize that the sharp fall in stock prices might affect not only people from the real estate or commercial sector, but also our banking and deposit-taking systems. On 5 September, the Government finally announced the implementation of the "seven strokes" as mentioned by Members. Of the "seven strokes", the most important one is the discount window, which means that the Government guarantees that within the next six months, all registered banks can convert Hong Kong dollar in their clearing accounts into US dollar at an exchange rate of HK$7.75 to US$1. While the Government had always tried to make us believe that the linked exchange rate was not going to change, it was unwilling to do something specific. We used to question why the Government refused to make the commitment to guarantee the exchange rate within a certain period of time. Now the Government finally did it. We can see this from the interest rates since September. The interest rate was raised from an average of 13% during the week from 14 August to 21 August to 17.18% during the week from 21 August to 28 August. On 29 August and 30 August, the interest rate even climbed up to 21%. It was only until September that the interest rate dropped back to 8.75%. What I am talking about is the interbank rate. Comparing the 8.75% we have at the moment with the interbank rate of 7% offered for the US dollar in the United States and London, there is a gap of 1.75%. As far as this gap is concerned, I believe those who are operating business in Hong Kong at the moment will find it affordable. But as the interest rates were so high in the past, we found it hard to continue with our business.

In spite of the fact that the Government had decided to intervene in the market, the "seven strokes and 30 twists" were only put forward by the Government during the period between 28 August and 5 September when it found that the situation remained unfavourable. But in our opinion, it would be better for the Government to first of all introduce the 30 twists, such as setting up a monitoring unit and making other arrangements, which are still under study at the moment before introducing the discount window or clearing account rates. In doing so, the Government might not need to intervene in the market between 14 August and 28 August, or at least waste so much money. It is our view that the whole operation is far from being satisfactory. But the democrats─ excuse me, I should have said the Democratic Party, have used such wordings as "repeatedly erred" and "strong dissatisfaction". Now the interest rates have finally stabilized, and the Hang Seng Index today closed at 7 800-odd points. Even without market intervention, the Government is able to maintain the index at this level. For the time being, the whole market has indeed stabilized.

What I am more concerned with is, apart from how Hong Kong is going to report this piece of news, how foreign media will report the event if this motion is passed. The media may say that we ask for a review to enhance the transparency and accountability of the HKMA because we have no confidence in it. As far as transparency is concerned, the HKMA, which functions like a central bank, is not going to have very high transparency anyhow. Even for similar organizations in foreign countries, they will not have very high transparency. I do not want foreign media to make negative reports on this matter by saying that this Council in Hong Kong has passed a motion with such wordings. This does not mean that the Government is not required to do anything in future. The Government may say that it is always better to do something late than doing nothing. Of course, we hope that it can take action earlier.

Today, the Liberal Party is going to vote against the motion. The Honourable Ronald ARCULLI has already presented his main reasons for objection. I would like to add that the Financial Secretary is travelling abroad at the moment to explain to the financial chiefs of foreign countries as to why the Government finally did something like this. The existing circumstances are our market has already stabilized. Of course, we can say that the Government is quite lucky this time as the Japanese yen has stabilized and the US dollar has also stabilized with the drop of stock prices in the United States. As the whole financial market has stabilized over the past one or two weeks, the interbank rate and stock market have become stable again today.

Madam President, on the basis of the abovementioned reasons, the Liberal Party opposes the motion.

PRESIDENT (in Cantonese): Mr Martin LEE.

MR MARTIN LEE (in Cantonese): Madam President, I have served the Legislative Council for 13 years. For all these years, I have been sitting next to Dr the Honourable David LI, and I have never heard him deliver his speech in such an emotional manner. This is why I was not sure whether I should act more emotionally than Dr LI. Finally, I decided that I should not do this. This is because it was said in the Quotations from Chairman MAO that "one should retreat as the enemy advances". Therefore, I will act calmly today so as to avoid jeopardizing the relationship with my neighbour.

As a matter of fact, the Democratic Party has all along supported the linked exchange rate. This is why I would like to make a declaration again this time. We are not saying that the Government should sit back and do nothing, and allow the so-called "market manipulators" to do what they want. We have all along hoped that the Government can take action. And we also agree that the Government should do so. It is only that the Government has been too slow in taking action. The motion will explain this very clearly.

If the "seven strokes and 30 twists" are really so effective, why did the Government not turn to them earlier? I believe many Members in this Council share this view. We consider that the Hong Kong Monetary Authority (HKMA) has made a mistake, particularly in intervening in the market this time. In our opinion, it has made a really big mistake. The Government said that it could not let the enemy take away money as if Hong Kong is an automatic teller machine. However, the Government has forgotten one point and that is: as it does not want other people to take away its money, why did it put $100 billion into the machine?

I remember DENG Xiaoping once said that if there is a good system, even a bad guy finds it impossible to do something bad. On the contrary, without a good system, even a good guy finds it impossible to do something good. I really worry that if we do not have a good system, even Mr TSANG or Mr YAM, albeit being good guys, will be forced to do something bad.

The most important wordings of the motion we have this time are put at the end, that is "this Council also urges the Government to review the structure and regulatory mechanism of the HKMA, with a view to enhancing its transparency and accountability". Are we disallowed to say something like this? I really find it quite difficult to understand why so many Members objected to our comments. Why is it not a good suggestion for the HKMA to increase its transparency, particularly bearing in mind the fact that all 60 Members in this Council were elected? Do we really want the Government to engage in black-box operation before we can express our support by clapping our hands?

Dr David LI said that the Government decided to intervene in the market this time because there was no alternative. The Honourable David CHU also raised the point that, under the circumstances then, that was the best course of action. But we still have the query as to why the Government should have failed to turn to the "seven strokes and 30 twists" earlier. I have listened to the Government's explanation a number of times. We have also met with government officials four times in the Panel on Financial Affairs. They have so far failed to put forward a good reason for explaining why the Government has failed to turn to the rescue measures earlier. In fact, the reason is very simple ─ as the Government wanted to punish the "market manipulators", it had to push the Hang Seng Index up to 7 800 points. If the Government's fear was that the market would collapse, it would have already served the purpose after the Index had climbed up to 6 500 points. Why did the Government push the Index to such a high level? I think the Government will not be able to give other explanations. Otherwise, I will be very pleased to listen to it with respectful attention. It is actually my hope that the government representative can deliver his speech earlier. When I met him today, I suggested that it would be better for him to state the Government's position earlier so that this Council would not pick the wrong shoe polish if it wished to polish the Government's shoes. But he refused to do so, saying that he would be the last to speak. I hope the Government can explain clearly why it pushed the market to 7 800 points. If the Government had no intention to punish other people, and if the Government really wanted to reinforce our framework, why did it fail to turn to the rescue measures earlier?

I just do not know whether I should laugh or cry in response to the speech delivered by the Honourable CHAN Kam-lam. Perhaps he heard the Honourable CHEUNG Man-kwong criticize the Government for coercing the withdrawal of amendments for fear of being beaten down, he resorted to a tricky move by saying that it is not worth amending this time. He then went on to say that if the Government had done something wrong, we would criticize it; and if the Government had done something right, we would praise it ─ as I do not write very fast, I hope he can forgive me if one or two words are missing. According to this logic, we will never need to debate in this Council again. You can praise the Government in private if it has done something good; if not, you can condemn it in private. In that case, what is the purpose of Members coming to this Council? I really do not understand it. This is particularly so as the amendment has been tabled formally and granted approval by the President. Now it is said that the motion is not worth amending. It looks as if the President has done something that is not worthwhile. Members need not worry as I always do something like this. Some of my Honourable colleagues warned us not to talk about this issue for our enemies were lurking out there. Yet I recall that a government representative mentioned in a meeting of the Finance Committee that the "market manipulators" had by and large left. The Financial Secretary also thanked the Finance Committee for not criticizing the Government on the spot. In other words, it will be all right for us to discuss the issue leisurely right now. Where will the problem arise if we discuss the issue here? Let us not to make any excuses, shall we?

Many people expressed their worry that we might convey a wrong message to overseas reporters, governments, investors and speculators who would then think that we were not in harmony and united. As a result, they would attack us more fiercely. Such a good idea was in fact conceived by the Government. As it has done something wrong, it naturally put forward a number of excuses so as to prevent others from levelling criticism at it. One of the excuses is not to attack the Government in Hong Kong. If not in Hong Kong, then where? If we attack the Government in overseas countries, the Government will say that we are trying to "badmouth" Hong Kong. If we do it here, the Government will again say that this will attract criticism. What is the right time to discuss the issue if we do not do so now? In fact, I think foreigners know what is going on in Hong Kong. United States Federal Reserve Chairman Alan GREENSPAN did clearly indicate that it was not right to do so and it was not going to succeed. I remember when I made these remarks in the Finance Committee, Mr YAM was very annoyed. He was all along very calm. But when I came to this sentence, he appeared to be very upset. Given that other people have already known about it and criticized it, it will be even worse if we say nothing about it as people will think that Hong Kong has now changed ─ being a special administrative region for just over a year, no one dares to speak out even though the Government has done something wrong. Therefore, it is proper for us to give out such a message. We have to let people living abroad know that Hong Kong does not make decision by one man's say; and neither has this Council ever allowed such thing to happen. The fact that there are still some people here who dare to criticize the Government should be taken as a good message. Therefore, we should support the motion, and there is no need for Members to worry.

PRESIDENT(in Cantonese):Mr Jasper TSANG.

MR JASPER TSANG(in Cantonese):Madam President, the Honourable SIN Chung-kai is the major spokesman of the Democratic Party on economic affairs. He said earlier that he would no longer discuss about the Government's intervention in the market. Besides Mr SIN Chung-kai, some other Members of the Democratic Party also touched upon the Government's intervention in the market when they spoke.

Madam President, when the media report on our debate tomorrow, I believe that they would surely use such expressions as "Legislative Council Members blasted the Hong Kong Monetary Authority (HKMA)". However, if Mr Albert HO's motion is passed, what message will it give? I do not think it is about whether views are adopted, whether people dare criticize the Government or whether they are "shoe-shining". Outside observers will ask if certain officers of the HKMA will be replaced. Does the Legislative Council's request for a review and change in the structure of the HKMA signify that someone will resign and leave office? Will the mode of operation and policy-making mechanism of the HKMA be changed very soon under pressure? Will the decisions formerly made by the HKMA including the latest measures be overturned soon? We are worried that these messages might be coming out of this motion.

Madam President, there is an Englishman who has long been working in Hong Kong but has returned to his hometown in August on vacation. He knows the situation in Hong Kong extremely well and when he heard during his stay in England that the Hong Kong Government intervened in the market, he said that he felt astonished, like what Mr Albert HO just said. He said that the Government was certainly crazy. When he returned to Hong Kong in September and found out about the situation, he said that he understood why the Government had done that and the reasons behind its move. He even criticized that Alan GREENSPAN did not know what happened in Hong Kong.

As Mr Albert HO has said, we actually do not have to discuss about the issue here. Since the fourth quarter last year, the academics, the media and even those in the industry have criticized the HKMA and the financial officials of the Hong Kong Government. These criticisms have dragged on endlessly and I think that many of them are fairly balanced. The Democratic Alliance for the Betterment of Hong Kong (DAB) has no intention of stepping into the shoes of government officials and saying that these views are incorrect. However, I think that the Government's policy formulation is after all different from the academic debates of academics.

Some people teased that Members of the DAB and the Democratic Party have been spoon-fed with knowledge about economic and monetary affairs because we know nothing about them. Even the editorial just read out by the Honourable CHAN Kam-lam states that we are trying hard to learn more about them. What is wrong with this? Now that these problems have emerged, we have to master and understand them. On the contrary, we also find that the economists who speak most often or command high respect in the media always express contradictory views. Two days ago, an economist whose writings are frequently published criticized in the Ming Pao another academic who has fairly high standing in Hong Kong. According to the economist, the academic said that the measures introduced by the HKMA turned the currency board into a 4% currency board. This criticism reveals that the academic does not even understand the most basic principle of the currency board. While an economist can even use such an expression when criticizing another economist, we will certainly be disappointed if we expect an in-depth academic debate in this Chamber concerning the currency issue or currency system of Hong Kong. We can certainly put forward various suggestions when we hold discussions here but if we wish to reach a consensus as to whether we support the suggestions made by the Democratic Party, whether we would not allow the HKMA to control the mortgage corporation in future or whether the HKMA has to hand over the currency board functions, we think that it is very dangerous for us to decide in this Chamber whether we support these suggestions. We would not make such decisions or we refuse to make such decisions here precisely because we are being responsible.

Madam President, we do not wish to give the community, especially those observing Hong Kong from afar, just like the friend mentioned above who got the news in England, a confused and erroneous message. We do not want to give them an impression that the Legislative Council has to conduct a comprehensive review of the monetary control system and promote a reform of and a complete change in the mechanism, thereby affecting their confidence in the measures recently adopted.

The DAB can adopt two measures. One measure is my amendment as published earlier. If Members have gone over its contents, they will know that we explicitly support the measures of the HKMA for stabilizing the exchange rate. However, having discussed with Honourable colleagues of the DAB in the past few days, we have come up with a better measure. We are not going to make any amendment but only oppose the original motion so that it cannot be passed. As a result, the community and the public will know clearly that this proposal is not supported by the Council. This is also the reason why I have withdrawn my amendment. Members of the DAB will unanimously vote against Mr Albert HO's motion. Thank you.

PRESIDENT(in Cantonese):Dr YEUNG Sum.

DR YEUNG SUM(in Cantonese):Madam President, the Honourable CHAN Kam-lam of the Democratic Alliance for the Betterment of Hong Kong (DAB) has earlier said that the Democratic Party's motion is not worth amending while the Honourable Jasper TSANG, Chairman of the DAB who has just spoken has also sent us the amendment he proposed. In fact, there was such a paper and when the DAB made the amendment, it was obvious that it had not thought it through as they were doing it so hastily. Perhaps the situation might have changed, so they considered something else. Mr Jasper TSANG just said that the Legislative Council Members' blast of the Hong Kong Monetary Authority (HKMA) would hit the international news headline. Having listened to Members' speeches so far, I think that it is more likely that the Democratic Party will be criticized rather than the HKMA. Mr TSANG knows very clearly that there is little chance that the motion could be passed today, therefore, the news headline he forecast will not appear.

We are speaking in respect of issues not persons. In all the speeches made by the Democratic Party, we have never asked an official to resign. Why is it mentioned just now that some people outside think that we have asked a certain official to resign? I understand that our views differ. However, I have been listening very carefully and I have not found anybody saying that a certain official has to resign, right? Do Members agree? Why did Mr Jasper TSANG say so? I find it really strange.

Madam President, I would mainly talk about structural changes today. If Members think that the HKMA is too powerful or its decisions on policies have great influence on us while the Legislative Council does not have the power or chance to hold discussions and ask questions, or the authority concerned just attends our meetings after certain incidents in the light of the political situation, then how can such an important structure not be monitored by the Legislative Council in a modern society like ours? Today, Mr Albert HO of the Democratic Party just wishes to ask such a question. We are not pinpointing at individuals or asking for a certain person to resign. In our opinion, while Hong Kong is so modernized, should the powerful HKMA be subject to a certain degree of control so as to enhance its transparency and accountability?

It is very important for a person to be able to correct the mistakes he is aware of. Our Financial Secretary is not in Hong Kong now because he has to travel far and wide and brief other people as he fear that other people will say that the market actions have upset our free economy. He obviously knows that the market actions have given rise to adverse effects, therefore, he has to brief other people. We also find that the intervention in the market is problematic. When we know our mistakes and can correct them, what is wrong? We have to let people of foreign countries know that Hong Kong is a dynamic city and a city of action. We will learn our lessons when we know that we have done something wrong. What is wrong with this? If we mention nothing about our mistakes and do not correct them for fear that other people will misunderstand us, it will instead give them an impression that Hong Kong is a closed city. What good will this do to this dynamic city that is full of vitality? I would like to stress once again that this motion is absolutely not pinpointing at individuals. We are only trying to highlight the question that whether such an important structure has to be subject to a certain degree of control in order to enhance its transparency and accountability so that its future operation will become sounder. My remarks are pretty straightforward. Thank you, Madam President.

PRESIDENT (in Cantonese): Mr James TO.

MR JAMES TO (in Cantonese): Madam President, just let me repeat what I said casually outside this Chamber a moment ago, for record purpose. If what I am going to say should offend Dr David LI in any way, let me beg his pardon here, in advance. Having listened to his remarks, I have the strong feeling that practically no one in Hong Kong, including our respectable Dr David LI and many others, can now refuse to commend the HKMA. The HKMA is really something, such that everyone must now shout "Long Live the HKMA", at least three times. Faced with this, I just wonder how our financial systems will develop in the future. Will they be able to develop soundly? I do have very great reservations.

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

MR LEE WING-TAT(in Cantonese):Madam President, I originally did not intend to speak but after I have heard the remarks of the Honourable Jasper TSANG, I found some problems of logic with his remarks, and I would therefore make a few points in response.

I find that Mr TSANG is a very good opponent in a debate as his logical thinking is very discreet. However, he has just made the point that whenever the Government conducts a review, it may replace certain officials and I find this gravely illogical. We have had dozens or even hundreds of motion debates in this Council and we often ask the Government to conduct a review. On 26 November 1997, the Honourable Ambrose LAU moved a motion at a meeting of the Provisional Legislative Council, that is, "In view of the recent international financial turmoil, this Council urges the Government, under the principle of maintaining a free and open market, to expeditiously review the operating mechanism of the local financial market". According to Mr TSANG's logic, whenever a review is made, it will give the local community or the international media an impression that we may not have confidence in this structure as the Council is asking for the replacement of certain officials. Does this mean that last year, Mr Ambrose LAU dared intend to seek the replacement of the Financial Secretary and Mr YAM, the Chief Executive of the Hong Kong Monetary Authority (HKMA) and the hero of the popular slogan "long live Chief Executive YAM"? Although I do not quite understand it, this motion was supported by the Democratic Alliance for the Betterment of Hong Kong (DAB). Some Honourable colleagues of the DAB have still not spoken and they may later correct my logic. If such a message will be given whenever a review has to be made, are we supposed not to debate freely in this Council? I really hope that Mr TSANG can give me an answer especially when this debate was held in the Provisional Legislative Council less than a month after the outbreak of the financial turmoil last year. Why had the review proposed by the Chairman of the Hong Kong Progressive Alliance and the motion debate then supported by the DAB not given the local and international community a message that a strike would be blown at the financial institutions, the Financial Services Bureau or the HKMA, and that it was intended to replace Mr Rafael HUI, Mr Donald TSANG or Mr Joseph YAM? Why was such a logical conclusion drawn when Mr Albert HO proposed that a review should be made? I do not quite understand this. Certainly, Mr TSANG probably has not made another point, that all the suggestions made by the Democratic Party are not good. If he said so, I would accept it instead as the Democratic Party is certainly an opposing group, therefore, any motion moved by the Democratic Party must have ulterior motives and the motion debate moved by the Democratic Party is different in nature from that moved by Mr Ambrose LAU. In a word, everything the Democratic Party proposes is wrong, incorrect and not good. If so, I can accept this logic instead. Therefore, I hope that Honourable colleagues of the DAB can make a response and explain why they supported a review last year and say that we are not giving a good message when both reviews are not much different from the other. The situation last year was actually very risky because the financial turmoil had just broken out then.

Secondly, I would like to discuss about responsible conduct. Some Honourable colleagues have said that there is no place for democratic debates during wartime. We do not totally oppose this. Whenever a place is at war, the commander in chief will never discuss with the company commander and platoon leader about how they will fight as they certainly have to take military actions. Do we need to take military actions now? Mr CHAN Kam-lam has just said that the Third World War has broken out, I hope that this is not true. After we have taken those measures, the financial markets have really stabilized and the officials of the Financial Services Bureau and the HKMA have said in the press that the present situation has become much better and they are confident that this stable situation will sustain. Therefore, the Financial Secretary has time to tour around. If we are in a battle, how can the Financial Secretary have time to tour around? Therefore, Mr CHAN Kam-lam's premise does not stand as he has said that many more blows will strike at any time. In fact, in an open internationalized financial market, foreign investors may attack the local financial market at any time. Therefore, if one does not have sufficient reasons, one should not describe the situation as so critical and scare everybody.

I remember a movie about the United States President with John TRAVOLTA as the protagonist but I do not wish to touch upon the part about scandals. In the movie, when the protagonist was running for the United States President election, and the situation was not favourable, he intentionally made an enemy of somebody so that the nationals would unite against the enemy and he could then gain a higher status. This was not the first time in history that such a strategy was adopted, Iraq and Iran have also used it. How can the dissatisfaction of the nationals with the Government be diverted? When countries are threatened and military actions must be taken, many backward countries adopt this measure. As the United States was threatened and must go to war, the nationals unite. This is exactly the case with the present situation. As Mr CHAN Kam-lam and the Government have said, we are being attacked by joint international forces and we must unite, otherwise, we will collapse. Whenever views differ, somebody will use this tactic and it has been proven that it works.

I do not wish to cite certain expressions but I have to do so now. When we talk about the internationalization of the financial markets, people often use such expressions as "the enemy and us", "foreigners" and "local people". Sometimes I will ask if all speculators are really foreigners, are there no local speculators? This reminds me of the people's state of mind in the face of the Eight-Power Allied Forces and the Yihetuan. Some people have given Mr Jasper TSANG a nickname, "Yihequan". Why? An internationalized city must face this kind of problem and we should not project national affection and enmity onto such matters as this is a very dangerous act. This will bring about more adverse than positive effects in the course of the development of Hong Kong into an international financial centre.

Thank you, Madam President.

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

(No Member indicated a wish to speak)

PRESIDENT (in Cantonese): Financial Secretary.

FINANCIAL SECRETARY (in Cantonese): Madam President, first of all I have to thank all Members who have spoken. Of course, I feel even more obligated to thank those who have spoken in opposition to the motion of the Honourable Albert HO. (Laughter)

Some of the Members who have spoken have affirmed the efforts and contributions of the Hong Kong Monetary Authority (HKMA) and the Government in maintaining the stability of the Hong Kong financial system over the years. Since October last year, the HKMA has, according to the market situation, adopted a host of measures at appropriate junctures to solidify the linked exchange rate mechanism and successfully stabilized the exchange rate of the Hong Kong dollar. While various Asian currencies have devaluated one after another, the values of the Hong Kong dollar and the Renminbi have remained intact. The seven technical measures put forward by the HKMA recently have won the general support of the financial sector and the academia and the interest rate has also remained relatively stable after the measures were launched, indicating that the measures are indeed very effective in strengthening the currency board system.

To maintain the stability of the market, the Government took market actions in August and it is of course a very controversial course of action. But in the last few meetings of the Panel on Financial Affairs and also this Council's motion debate on 9 September, the Financial Secretary, the Chief Executive of the HKMA and the Secretary for Financial Services spent over 18 hours on explaining to Members in great details about the background, purpose and other matters of the Government's market actions. The voices of support to the Government could be heard inside and outside the Legislative Council. We have always kept our minds open in listening to Members' views. Under such circumstances, some Members still think that the HKMA has repeatedly erred in its efforts to maintain the peg and neither its transparency nor its accountability is sufficient over this issue. I just cannot see any fact to support such allegations. To us, all suggestions are welcome. We always do our best to maintain the high transparency of the Government and we also highly respect the accountability pursuit of the legislature. The Government is obligated to take criticisms, but it is also duty-bound to clarify any unfounded allegations and stances.

Mr Albert HO suggests that the HKMA has repeatedly erred in its efforts to maintain the peg, including failing to perceive the gravity of the situation well in advance and thus failing to take prompt preventive measures, lack of a sense of crisis, not introducing timely measures to strengthen the currency board arrangements and deploying excessive capital in its market actions.

It has been over a year since the outbreak of the financial crisis now, everyone, including the Government and I myself, has played the smart guy with hindsight and made a lot of comments. But as far as I remember, in October and December last year, and January and March this year, how many people could have indeed been able to anticipate the events and come up with genuinely effective precautionary measures that could stop the financial crisis from intensifying to the present proportions? Even the financial ministers, central bankers and even international financial organizations such as the International Monetary Fund have not been able to draw the conclusion until only recently that the financial turmoil is the most serious one since the Second World War. Actually, a few years before the outbreak, the HKMA already took long-term and visionary measures to strengthen and consolidate our financial system and to enhance its capability to withstand impacts. Therefore, as regards its vision and crisis mentality, I really do not think that the HKMA has committed any errors as described by Mr HO. The HKMA has also been watching the development of events closely in the wake of the financial turmoil and taken corresponding actions according to the changes of the situation in order to maintain the stability of Hong Kong's financial system.

In March and April this year, that is around the time that the Report on Financial Market Review was published, the interest rate of the Hong Kong dollar dropped substantially, reducing the gap between it and that of the US dollar significantly. As far as the situation then was concerned, everything was done on the basis of two paramount principles: first, to adhere strictly to the basic principles of the currency board system, and second, to maintain the free market economy as far as possible. Unless it is absolutely necessary, the Government needs not and should not take any action lightly to change the existing arrangements.

In August this year, the Government continued to adhere to these two principles and used them as parameters for its consideration of actions. But the realistic situation was intensifying and deteriorating so rapidly that we could not but resort to intervene in the market and at the same time plan on a series of follow-up measures. Therefore, it is indeed futile to discuss why the Government had not introduced these measures earlier because the time was different and so were the objectivities. Everyone knows that to implement policies in Hong Kong, particularly those related to the financial and monetary matters, we have to take account of the external factors and situations. Putting it in the term commonly used in the market, that is, it depends on the trend sometimes. If the trend is unfavourable, these measures may not necessarily achieve the right effects. By the same token, during the period from early this year to April and May, and even in early summer, should we consider the power of the hedge funds and multinational companies that were engaged in many transactions or trading, particularly in speculative transactions at that time? Were the views of the European and American countries on this financial turmoil then any different from their views now? I believe that no one should overlook these factors and everything depends on the trend and the objectivities. Therefore, although we might have a plan or ideas worked out in our minds, we still had to weigh the pros and cons of our action, and whether to choose an appropriate situation to introduce the measures or to introduce them when we had no other alternative but to take such actions. A responsible government should never take hasty actions.

We have repeatedly told Members under what circumstances had the Government decided to take actions in the market and hence I will not repeat the details here. The Government was under a critical situation when it decided to take actions in mid-August and its purpose was to put a halt to the speculators' employment of the double-play strategy in the market. And because the stability of the local financial system was under serious threat, the HKMA put forth seven measures in September to strengthen the currency board arrangements and reduce the chance of the market manipulators who had been attacking the Hong Kong dollar of assaulting the currency board system by means of the double-play strategy. Up till now, as far as what we have observed, our market actions, entrenched by the measures of strengthening the currency board system, have achieved the desired effects.

It was indeed an extremely difficult decision to make as regards whether or not to intervene in the market. The Government was aware that the action might make people mistake that the Government was trying to shore up the stock market. This we have repeatedly reiterated to the negative. Of course, some would accept our explanation and some would not; and perhaps because of their different standpoints, the two sides might never be able to convince the other of its own view. Nevertheless, the Government ultimately decided to take action because if we did not take the resolute measures, the risks would have been even higher. We believe that if the Government had not taken action promptly in mid-August, the stability and integrity of the local financial markets would have been shaken up so badly that the public would lose their confidence and as a result, we would have to face with even greater systemic risks.

Some Members questioned why the HKMA had not pushed out the seven measures before the Government's market actions or why it had not pushed out the measures earlier so as to obviate the need for the government intervention. In the actual course of consideration, that is, from the middle of last year when the financial turmoil broke out up to now, as I have explained, many objective external factors have been changing. For example, in March this year, the interest rate of the Hong Kong dollar was on a decline, gradually narrowing the gap between it and that of the US dollar, and at that time, there was actually no clear indication of double-play in the market. However, by August, there were clear signs that the market manipulators were employing double-play in the market and attacks on an unprecedented scale were poised on the local market. Besides, as these market manipulators had already pooled sufficient amounts of Hong Kong dollar, so even if the interest rate shot up, it would not increase the costs of their capital; rather it would even be favourable to their short position in the stock and futures markets. The power and attacks of the market manipulators could create such tremendous repercussions that they could bring about a public panic and a systematic crisis. It was under such a situation that the Government took action in the market immediately and resolve the market problem by means of market strategies. It eliminated the possible systematic risks and also affirmed the urgency of introducing the seven technical measures.

Let me explain our consideration of the negative effects of these measures. These measures for reining in the fluctuations of the interest rate may be mistaken by the international financial sector as an unwillingness on Hong Kong's part to suffer the pain caused by the interest rate adjustments under the operation principle of the currency board. It might also lead to a greater fluctuation in the level of the Government's foreign exchange reserve, thus slowing down the development of the bond market in Hong Kong. Therefore, the Government could not and should not decide hastily on launching the seven measures. The policy-makers have a responsibility to bear and this responsibility can be significant. No matter under what circumstances, they have to be more prudent and conclude the situation more thoroughly than those who advocate the measures. Only when they conclude that the policies are essential, the chance of success is big, the risks are acceptable, and even though they have to pay a price, the price is worth it, then should they decide to implement them.

In the debate just now, I have heard many views about transparency and accountability and I should therefore make a more specific response here.

Concerning transparency, actually the HKMA has over the years worked hard to enhance the transparency of the financial system of Hong Kong and itself. A good example is that it started to release the total bank balance regularly under the Real Time Gross Settlement System in June this year. Also, the HKMA has, for the same purpose, published the Monthly Statistical Bulletin, the Quarterly Bulletin and other related publications. The HKMA submits an annual report to the Legislative Council every year and also frequently attends the meetings of the Legislative Council's Panel on Financial Affairs to brief Members on its work. In the past year, the HKMA attended nine of the meetings of the Panel to explain to Members its working policy and legislative proposals. The HKMA is also very willing to continue to have its work monitored by the Legislative Council through these channels.

As we all know, the present supervisory arrangement for the HKMA requires, in a nutshell, the HKMA to be accountable to the Financial Secretary through the Exchange Fund Advisory Committee (EFAC) and the EFAC has the same function as the HKMA's Board of Directors. The credibility and performance of the HKMA hinges upon its autonomy in carrying out the functions of currency management and bank regulation. In the process of carrying out these functions, it is imperative that the HKMA should be free from political intervention as far as possible. I understand that nobody in this Council will buy the idea that the HKMA should be completely free from political intervention.

As regards the suggestion that the EFAC's discussions be made public, I am sorry to say that we cannot agree to that because these discussions will involve the investment strategies of the Exchange Fund and the performance of individual fund managers and even for foreign central banks, such information will not be disclosed lightly either. Moreover, ordinary central banks are vested with the power and responsibility to decide the interest rates and that is something that does not exist in the linked exchange rate system, and hence the two cannot be placed on a par.

Given the recent experience of Hong Kong and the financial crisis in Asia as a whole, it shows that the present order of international currencies has several fundamental problems. The huge international capital flow armed with an extremely high leverage ratio has altered the global trading and investment environment. The rapid flow of capital among the international boundaries has created tremendous and far-reaching impacts on almost every economy. Ultimately even large-scale economic systems will not be spared. Because some fund managers stop at nothing to strive for higher returns, they tend to resort to attacks as a means of investment, and coupled with the rapid globalization of markets, in the end not only the emerging markets but also the developed ones begin to feel the serious destabilizing impact. It is impossible for Hong Kong to resolve problems on its own. The long-term solution depends on the emergence of a new international financial framework to carry forward and promote an open and properly regulated market. This way, cross-boundary manipulations as massive as the present ones can be reduced and further widespread damages can be avoided.

Hong Kong is now seeking the support of the international community for the establishment of this new framework. However, it was only until recently that the United Stated has admitted such fluctuation is global. It is a recently found fact that no economic system, no matter how huge and stable it is, can be spared. The leading executives of the HKMA and the Financial Secretary have, starting from December last year, begun to advocate this on international occassions. Now we can only say that at that time we were "naive children". I hope that all Members will understand that when dealing with the financial turmoil, our officials concerned did have done something in the international community.

In retrospect of the development of the financial system of Hong Kong, since the implementation of the linked exchange rate system in October 1983, the HKMA has never ceased introducing measures at appropriate junctures to improve the currency board system. Back in 1988, the Financial Services Branch then introduced the "accounting arrangements" which clarified the definition of the currency base. In 1996, the HKMA launched the Real Time Gross Settlement System under which all licensed banks have to open an account with the Exchange Fund through the HKMA. All these measures ensure the whole currency base is in compliance with the operating principle of the currency board system, thus enhancing the effect of the linked exchange rate system on the maintenance of the exchange rate of the Hong Kong dollar. The seven measures introduced by the HKMA recently are also part of this continuous self-improving process.

The HKMA has also made great contributions to the strengthening of the stability of the whole financial system. To develop the local bond market, it has launched the Exchange Fund Bills Programme and set the reference index for the interest rate of 10-year bonds. Our central bonds settlement system is the most advanced in the region, which lays down the essential infrastructure for the bond market. Even before the outbreak of the financial turmoil, the HKMA already advocated that Asia should speed up the development of the bond market to facilitate the financing services in the region, so as to reduce the need to borrow outside the region, which could in turn reduce the risks. It also advocated that we should vigorously link up the central bond settlement systems of the various countries in the region, making a forward-looking contribution to the development of the regional bond market.

I mentioned earlier that before the G7 countries recognized the need to increase the transparency of hedge funds, the Government and the HKMA had already gone to great lengths to highlight its importance in many international meetings. Therefore, it does not occur to me that as the monetary authority of an international financial centre, the HKMA has any problem with its crisis awareness.

Some Members also suggested that while observing the currency board arrangements, the HKMA should not participate in the other aspects of a central bank's work so as to allow the currency board system total independence. I have to point out here that the HKMA's macro responsibility is to maintain the stability of the financial system and the work of monitoring the banks, developing the bond market, establishing the Mortgage Corporation and so on are all carried out under this principle and there is nothing against the principle of the currency board system. I would also like to point out that in the United States there are two mortgage corporations with a long history now occupying 50% of the market share of the mortgage business of residential flats in the whole nation. These two corporations were established over 30 years ago. They had been under the supervision of the central bank until they were sold in the form of listed companies not long ago. Actually, when the HKMA established the Mortgage Corporation two years ago, it already thought about following the practice of the United States by selling the Mortgage Corporation in the form of a listed company at the right time. Therefore, we cannot shelve other matters just because we need to put the proposals of the currency board in practice. If that is the case, it will definitely do a great harm to the stability of the financial markets and currency of Hong Kong.

There were yet other suggestions that in order to intervene in the market, the HKMA neglected its responsibility of stabilizing the peg and order of the financial markets, thus compromising the Exchange Fund as well as the overall economy. The Financial Secretary has repeatedly explained that the aim of intervening in the stock and futures markets was to counter-attack the actions of the speculators who used the double-play tactics in the foreign exchange and securities markets, sending the stock market straight down and exerting pressure on the peg. The Government's action was to maintain the stability and integrity of our financial system and it was absolutely necessary to use the Exchange Fund to intervene in the market. The stock and foreign exchange markets have now stabilized after the Government's market actions, hence, proving that the intervention was beneficial to the overall economy of Hong Kong.

Lastly, Madam President, I would like to talk about the framework of the HKMA. First of all, I am very grateful to those Members who have, through press releases or press conferences, expressed their views on the legal basis, administrative framework of the HKMA as well as the modes of international central banks and financial regulation. They have indeed done some study beforehand. I am also very glad to hear Members point out that the purpose of their request of drawing up a HKMA law is not to influence its independence in making decisions but to define the power, role, duty, structure, framework, financial position of the HKMA so as to ensure the HKMA's independence in carrying out its responsibility of monitoring and managing the financial system of Hong Kong and to increase the transparency and accountability of its operation. These are all very constructive views that are quite similar to the Government's.

In fact, about two years ago, the Government already started to study this issue. As Members pointed out, there is now the Banking Ordinance that sets out the HKMA's power and responsibility clearly and regulates its work in respect of banking management while the Exchange Fund Ordinance regulates the currency management and financial policies. This latter Ordinance specifies the three objectives of our financial policy, including to stabilize the exchange rate and maintain the public's confidence in the currency, to maintain the overall stability and reliability of the economic and financial systems, as well as to impel Hong Kong to maintain and develop its position as an international financial centre. The Ordinance empowers the Financial Secretary to appropriately use, manage and invest the Exchange Fund after consulting the EFAC. It also provides that the Monetary Authority (the Chief Executive of the HKMA is only a title) is to be accountable to the Financial Secretary. In the Ordinance, the HKMA is treated as a person, the Monetary Authority, and hence we also consider that the ideal way is to amend the Ordinance to define the power and responsibility of the HKMA more clearly and comprehensively. We think that this not only increases the independence of the HKMA in its implementation of the three major financial policies I mentioned before but also spares the HKMA from, excuse me, being exposed to too much political influence in executing the financial and currency policies and monitoring the banks.

As the Government has yet to draw up a final plan, we cannot make amendments to the Ordinance in this respect yet. At the same time, we think that before the financial turmoil is really over, it is not appropriate for us to propose an amendment bill to the Legislative Council. I hope that Members still bear in mind that those who have spoken in the meeting today are generally in favour of allowing the HKMA greater independence. I also believe that Members are aware that regulation up to a certain extent can, of course, not co-exist with independent operation, so when the independence is enhanced, to what extent should regulation be increased? In other advanced democratic countries, such as Germany, the United States and England in particular, their relevant frameworks are drawn up in strict adherence to this principle.

Madam President, the Government does not consider that Mr Albert HO's motion is in compliance with the facts. Over the years, the HKMA has built up a good reputation and status in the territory as well as the international community which are backed by its performance and facts. I believe that this status will never and should never be shaken by this motion debate. Thank you, Madam President.

PRESIDENT (in Cantonese): Mr Albert HO, you have one minute 40 seconds for your reply.

MR ALBERT HO (in Cantonese): Madam President, firstly, I am very grateful to Mr Rafael HUI for at least supporting half my motion. He supports our proposal concerning the formulation of legislation for regulating the Hong Kong Monetary Authority (HKMA) and a review regarding how its transparency and accountability can be enhanced while allowing it to operate independently. As the Secretary at least supports half my motion, he should not call upon other Members to oppose this motion, for at best he can only ask them to abstain from voting.

Moreover, I have just heard Mr Rafael HUI say that the Government has not done anything wrong. There were only signs of cross-market manipulation in August and the Government so far does not think that the HKMA has done anything wrong. This attitude is hardly acceptable. In fact, in the past week or so, I have read several articles published within the period between last October and the recent months and they touch upon the risks we face. I have an article at hand written by Dr David LI in October 1997. Dr David LI wrote that there was cross-market manipulation and that lending should be restricted. These are his suggestions. Why did the Government not listen? Now, it is forcing Dr David LI to provide escort and show his support. I really have to say that it is making life difficult for Dr David LI. Therefore, I hope that the Government will listen to the opinions of the banking sector with an open mind. It should not also listen to the views of the chairmen or chief executives but also the management. They should not only listen to supportive views but also to some other really helpful views.

PRESIDENT (in Cantonese): Mr HO, time is up.

MR ALBERT HO (in Cantonese): In a word, we hope that the Government will keep looking forward and carry out reviews and reforms. Thank you, Madam President.

PRESIDENT (in Cantonese): I now put the question to you and that is: That the motion moved by Mr Albert HO 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 Albert HO rose to claim a division.

PRESIDENT (in Cantonese): Mr Albert HO 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, Miss Margaret NG, Mr CHEUNG Man-kwong, Dr LEONG Che-hung, Mr SIN Chung-kai and Mr LAW Chi-kwong voted for the motion.

Mr Kenneth TING, Mr James TIEN, Mr Edward HO, Dr Raymond HO, Mr Eric LI, Mr LEE Kai-ming, Dr David LI, Mrs Selina CHOW, Mr Ronald ARCULLI, Mr HUI Cheung-ching, Mr CHAN Kwok-keung, Mr Bernard CHAN, Mr CHAN Wing-chan, Mrs Sophie LEUNG, Dr Philip WONG, Mr WONG Yung-kan, Mr LAU Wong-fat and Mrs Miriam LAU voted against the motion.

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, Miss Emily LAU, Mr Andrew CHENG and Mr SZETO Wah voted for the motion.

Miss CHAN Yuen-han, Mr Gary CHENG, Mr Jasper TSANG, Mr LAU Kong-wah, Mr David CHU, Mr HO Sai-chu, Mr NG Leung-sing, Prof NG Ching-fai, Mr MA Fung-kwok, Mr CHAN Kam-lam, Mr Ambrose LAU and Miss CHOY So-yuk voted against the motion.

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

THE PRESIDENT announced that among the Members returned by functional constituencies, 24 were present, six were in favour of the motion and 18 against it; while among the Members returned by geographical constituencies through direct elections and by the Election Committee, 27 were present, 14 were in favour of the motion 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 motion was negatived.

PRESIDENT: (in Cantonese): Second motion. Liberalization of the telecommunications and television markets. Mr Fred LI.

LIBERALIZATION OF THE TELECOMMUNICATIONS AND TELEVISION MARKETS

MR FRED LI(in Cantonese): Madam President, I move the motion which has been printed on the Agenda and that is: That this Council urges the Government to adopt positive measures to expeditiously implement the full liberalization of the local and external telecommunications and television markets, so as to enhance Hong Kong's status as a communications and broadcasting hub of the Asia-Pacific region.

I have moved the motion on behalf of the Democratic Party. The objective of the motion is to help Hong Kong become an information city through the full liberalization of the telecommunications and television markets.

If Hong Kong is to develop into an information city, if we are to become the regional hub of information technology, telecommunications and electronic commerce, we must fully liberalize our telecommunications and television markets. Also, we must set up an open and reliable legal system as well as a comprehensive regulatory regime to create a level playing field in the telecommunications and broadcasting markets.

In regard to the review of Fixed Telecommunications Network Service (FTNS), the Democratic Party believes there is no need for the Government to impose a cap on the number of FTNS licences because the market is capable of setting its own standards as far as competition is concerned.

As a member of the World Trade Organization, Hong Kong has been upholding the principles of free market economy. With free markets, not only could Hong Kong enjoy a better international image and a better business environment, the consumer at large could also benefit from the continuous improvements in our goods and services as well as the eventual price reductions brought about by the free competition.

Moreover, if the markets were not liberalized, foreign investors could still do business in Hong Kong by acquiring the existing FTNS companies. That being the case, the acquisition prices for the three existing FTNS companies might be pushed up simply because the market is not yet liberalized. The high prices would eventually be transferred onto consumers.

Even if we do not liberalize the market now, there is no guarantee that the existing FTNS companies will make further investments. Besides, even if the companies had pledged to make further investments, such pledges would not be legally binding and there is nothing the Government could do in the event of non-compliance. The dominant position of Hongkong Telecom (HKT) may in all likelihood persist for some time, due to the monopolistic situation created in the past.

It appears that the three new FTNS companies are the only parties objecting to the liberalization, their grounds being the past three years were not long enough for them to build up their competitiveness. In addition, they have threatened not to rule out the possibility of changing their investment strategies if the Government increased the number of licences. Such threats are objectionable. From this we can see that the business attitude of today's major businessmen and business groups. They would operate if there are profits to be reaped, and withdraw if faced with a possibility of making a loss. They care only about immediate profits, but not long-term investments. Why are FTNS operators so short-sighted? There are three reasons:

First, the Government has already given the three new FTNS companies sufficient time to develop over the last three years. Even if competition is introduced later, they will still have an edge due to their earlier entry into the market, for new operators would need some time for investment and construction purposes before they can provide service to the market and compete with the existing FTNS operators. The reality is the three existing FTNS operators already have a head start of three years (may be more than three, say three and a half or three years and nine months). So they were not justified to say three years were not sufficient for them to build up their competitiveness. If the three existing FTNS operators need time, the new operators need time too!

Second, liberalization of the market does not mean that local companies will be deprived of the chance of competition. Communication in future is different from that in the past. Telecommunications service is not limited to provision of telephone service at 60-odd dollars a month. In this information era, telecommunications companies have the potential to operate services such as internet service, long distance calls, interactive television and so on. To enjoy the consolidated services, subscribers have to pay several hundred dollars a month. More importantly, developments in Electronic Commerce allows telecommunications companies to develop into Certificate Authority. That potential is unlimited. The question is whether operators are willing to invest the time, money and human resources into this business.

Third, government policies should be formulated for the benefit of the community, the good of the people, not for the interests or the revenue of major businessmen and major business groups. To force the Government to keep markets closed by threatening to change investment strategies is absurd. Are FTNS companies trying to ask the Government to formulate policies to benefit them at the expense of the public, so that major business groups can obstruct the Government's opening of the market? The President of Hutchison Whampao Limited, holding company of Hutchison Telecommunications (HK) Limited, told the press on 27 August this year that the issue of more FTNS licences would discourage the company from operating and would force it to reduce their investment. I regret this. Obviously, it is the company that chose to leave the market, not the policies that hinder its development. We have no sympathy for operators who have no plans to invest in the long term or to take risks. Government policies should not be there to accommodate the likes and dislikes of the president of a certain business group.

Only by liberalizing the market can we bring in more competition, thereby enabling the people to enjoy better services at cheaper prices. This is our aim. So, we should not allow the FTNS operators to enjoy the franchise they used to enjoy.

However, in liberalizing the market, the Government should strive to clear any obstacles to free competition. I understand that the three FTNS operators have been under the shadow of the colossal HKT. That is why we make it a point to urge the Government to strengthen supervision in order to stamp out anti-competitive practices. The $20,000 fine imposed, which was a joke, should not be repeated. The Government should establish a market with free competition to ensure that new and existing operators can compete in a level playing field. For example, it could encourage interconnection and study the United States legislation on anti-competitive acts.

Moreover, we have reservations about the Government's proposal for FTNS operators to charge interconnection and connection fees on a forward-looking basis. This is because this will slow down the pace of Hong Kong in becoming an Internet and electronic commerce hub of the Asia-Pacific region. The Government should let the market decide the connection charges and at the same time ensure fair competition. The Government should state clearly the difference between projective costing and basic costing. On the other hand, the Democratic Party opposes to the Government introducing legislation to control developing technologies such as Internet Telephony and the provision of multimedia and Internet television programming. To impose too much control on these technologies and services will hinder their development as they are not yet mature. We suggest the Government should include a franchise for Internet voice phone service in the licences for FTNS operators starting from 1 January 1999.

The review has not discussed electronic commerce. The Democratic Party agrees that the status quo of the Internet market, that is, a free and open environment, should be maintained because this is conducive to market development. But the Government should encourage the application and development of technologies to ensure communication on the Internet is protected. The most important thing is that it should expeditiously draft laws for copyright and electronic commerce to help the development of electronic commerce.

In the television market, the Democratic Party welcomes the Government's proposal to liberalize the market especially its proposal to not limiting the number of licences for interactive television, to liberalize the cable television market, to allow cable television to enter the telecommunications market and so on. All these proposals are conducive to the development of the telecommunications market and coincide with the trend for the integration of telecommunications and television. However, we oppose the Government's imposition of control over the mode and direction of the development of digital television. This is because information technology has been advancing so quickly that we cannot predict what will happen next. If controls are put in place at such an early stage to restrict the standard for digital terrestrial television, we would be wrapping a statutory straitjacket around a fast developing technology. Its development will be stifled. In the United States, Europe and Japan, different standards are pursued. Why must Hong Kong place restrictions on them? Hence, developments in digital television and orientations in the development of technologies should be decided by the market. The Government should not interfere.

In addition, the Democratic Party also proposes to completely liberalize the markets for pay television and free television. Television programming, domestic or otherwise, should not be subject to different treatment under the law. The Democratic Party regards it an unhealthy phenomenon for one television station to monopolize the television market. We ask that the Government set up a public channel as soon as possible for the public to make known their works and opinions. In this way, more production companies would be encouraged to join in for creative work while more channels would be available for artists to express their creativity, thereby making way for more diversified television programmes to replace the existing routine ones. Eventually, the people would have more choices.

In a nutshell, the Government should lay down a timetable for the liberalization of the market as soon as possible to encourage fair competition. This is the correct way forward.

Later I will respond to the two amendments on behalf of the Democratic Party.

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

Mr Fred LI moved the following motion:

"That this Council urges the Government to adopt positive measures to expeditiously implement the full liberalization of the local and external telecommunications and television markets, so as to enhance Hong Kong's status as a communications and broadcasting hub of the Asia-Pacific region."

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

DEPUTY PRESIDENT (in Cantonese): I now propose the question to you and that is: That this Council urges the Government to adopt positive measures to expeditiously implement the full liberalization of the local and external telecommunications and television markets, so as to enhance Hong Kong's status as a communications and broadcasting hub of the Asia-Pacific region.

Members have been informed by circular on 25 September that Mrs Selina CHOW and Mr MA Fung-kwok 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 Mrs Selina CHOW to speak first, to be followed by Mr MA Fung-kwok; but no amendments are to be moved at this stage. Members may then speak on the motion and the amendments. Mrs Selina CHOW.

MRS SELINA CHOW(in Cantonese): Mr Deputy, market liberalization and free economies are a world trend that cannot be reversed. But they should not form a straitjacket for all communities. Every care should be taken to cater to the different social environment by adjusting the pace and specific arrangement of liberalization.

The Democratic Party's urge for the Government to expeditiously implement the full liberalization of the local and external telecommunications and television markets is a hasty one to which the Liberal Party cannot agree as it would bring about severe negative effects.

A major argument in support of the further liberalization of the telecommunications market is that the three FTNS operators have not been performing satisfactorily in the past three years. So, the Government must bring in more operators to facilitate competition. From the fact that HKT is still occupying 98% of the market share, it appears criticisms against the three FTNS operators are justified. But this does not necessarily mean that the Government must immediately liberalize the market. The first question to ask is: Why have the three FTNS operators been doing so badly? Are they the only ones to blame or is it the market that is to blame? Second: Faced with an overall downturn in the economy, have there been any changes in the supply and demand situation of the telecommunications market? How many FTNS operators can the market accommodate? Third: Is the immediate and full liberalization of the market a way out or is it a harmful act to the development of the telecommunications industry? It would be a hasty and irresponsible act if one jumps to the conclusion in favour of an immediate and full liberalization of the market before the above questions are properly addressed.

Indeed, since 1995, the Government has not laid down relevant laws for the supervision of market operations. As a result, the market has not been properly monitored. Anti-competitive activities have not been duly punished or checked. Thus the original dominant operator is still able to stifle the development of new operators by using various edges it already has. The most crucial point is that the Government has not been actively involved in the negotiations about interconnection between FTNS operators. So, the desired competition has not been achieved in local telephone service. In addition, the Government has failed to produce measures to ensure new FTNS can operators can secure prompt access to buildings in Hong Kong. Therefore, the HKT or building owners are given the opportunity to prevent new FTNS operators from gaining access to buildings or flats. The solution lies not in the issue of more licences but in improvements on interconnection and other fundamental issues.

The Liberal Party thinks that the Government should now focus on improving the operations of the market, and on promoting fair and healthy competition so that existing operators can fully develop. For example, the Government should promptly provide a legal basis for market supervision to facilitate active investigation by the Telecommunications Authority into anti-competitive acts in the market, and to bring about effective sanctions. The Government should also require buildings to be completed in future to provide sufficient space for all FTNS operators to install suitable facilities. Let us not forget that the real meaning of market liberalization lies not in issuing licences without limit but in establishing a market environment free of monopoly and with fair competition. The Democratic Party considers my amendment smacks heavily of protectionism. Yes, the Liberal Party is trying to protect. We are trying to protect the entire telecommunications and television markets to ensure that they can develop healthily and give the people a real choice.

In fact, a distorted market situation similarly exists in the television industry too. Over the last seven years, the Government brought in the satellite television and cable television. At the Asia Television Limited (ATV), there have been new investors joining and reforms taking place. But why is it that the Television Broadcasts Limited (TVB) still earns 80% of the revenue in television advertising and over 80% of the ratings? Several days ago, some of the telecommunications licensees and television licensees made submissions to the Panel on Information Technology and Broadcasting indicating their resentment against TVB's dominance. They wanted the Government to undermine the market position of TVB by all means available.

Undoubtedly, people in the trade agree on the whole that TVB is domineering. Its dominance is attributable to the fact that it has been successful all these years and it can win the support of the vast majority of people in Hong Kong. I find its competition practices objectionable. It tends to copy from other less competitive channels when they come up with some popular ideas, making viewers have fewer choices. Nor do I think it should control singers, thereby indirectly controlling the music and phonographic industries. If the Government is determined to solve such problems, it can do so not by way of interfering with the operational autonomy of TVB, but by finding some investors with foresight and capability, encouraging them to make long-term investments by granting them privileges such as assistance through land grants or government commitments in the provision of technology and equipment. The relevant authorities should put in place a mechanism for investigating unusual competition. Unfair practices or rigging should not be tolerated. They should be eradicated.

I very much agree with someone who pointed out in the hearing several days ago that the review has neglected the opinion of viewers. It has not explored to sufficient depth into the role and operation of the Broadcasting Authority (BA). I suggest that the BA must be reformed completely for the benefit of more transparency. It should state explicitly the manner in which it receives, discusses and deals with complaints. It should open its hearings to the public. In addition, the BA must continuously and accurately grasp viewer preferences and social standards by research that is scientific, objective and fair. It should announce the research results regularly. Moreover, to encourage the industry to take on creative talents on an extensive scale, the Government should consider linking the abolition of royalty schemes with "contracting out", in that part of the royalty liability may be abolished unconditionally while part of it conditional upon the cost, volume and type of "contracting out" work. This can encourage television broadcasters to co-operate with non-contract expertise. The Government should also actively consider setting up an awards scheme for television production in Hong Kong to reward efforts in the production of various types of programmes against fair and objective standards. This will serve to raise the standard of productions, in large or small scale, in the industry.

The Liberal Party thinks that the television industry, like the telecommunications industry, will not benefit from more licensees if competition is not allowed to come into full play. More licensees will not stamp out imbalance. On the contrary, it will create a favourable environment for the domineering operator in the market. This is why my amendment stresses prudence in approach.

Finally, I would like to speak about the amendment put forward by the Honourable MA Fung-kwok. Mr MA urges the Government to ensure that operators in the broadcasting industry can promote the overall development of local culture and the movie, television and phonographic industries. I think the suggestion smacks of official direction in the business strategy of operators. At the same time, Mr MA's amendment still insists on asking the Government to expeditiously implement the full liberalization of the market. It fails to fully reflect our conviction that a prudent approach is essential to liberalization. For these reasons, Members of the Liberal Party and I will vote against Mr MA's amendment.

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

MR MA FUNG-KWOK (in Cantonese): Mr Deputy, information technology is developing by leaps and bounds. The broadcasting, telecommunications and information technology industries are undergoing rapid development and moving towards convergence. The Government plans to establish a licensing and regulatory system for television and broadcasting services which is mode-neutral in terms of technology and transmission and user-based, rather than on the means of transmission as in the past. It also advocates the full liberalization of the telecommunications and television markets to promote their mutual penetration which will facilitate their cross-fertilization and convergence with the development of digital transmission technology.

While market liberalization can enhance competition and the quality of telecommunications, television and information services, it will also enhance the overall competitiveness of Hong Kong and provide consumers with a wider choice and better services. This is an opportunity for which the people of Hong Kong have had over $10 billion and must therefore be dealt with seriously. However, what I would like to ask is whether the full liberalization of the markets will automatically produce an effective level playing field and the subsequent advantages as mentioned above. This is precisely the core of today's debate.

Let me remind Members that while the two leading operators in the telecommunications and broadcasting markets are extremely in favour of liberalizing the markets, their existing competitors have great reservations. I suggest that Members should do some simple thinking in the reverse direction. This way, they will certainly find some enlightenment. If the Government does not introduce measures to ensure fair competition in fully liberalizing the markets, objectively speaking, the liberalization policy will only perpetuate the existing unfair competition. The present structural problem of virtual monopoly will not only remain, but will even aggravate further. The markets will continue to be dominated by some extremely strong domineering players.

Although the local market of fixed network telecommunications has been opened for three years, HKT still occupies nearly 98% share of the market, while the three new licensed FTNS operators together share less than 2% of the market. Effective competition just does not exist in the market and the liberalization has achieved none of its purposes.

There are many factors contributing to such a situation. First, the three new FTNS operators have set their eyes only on the short-term profit of long distance calls services. They are certainly to blame for failing to fully utilize the precious three-year head start effected by a moratorium and to make positive progress. However, during the past three years, the operators have invested billions of dollars into rolling out the networks. They have already met the licence requirements in respect of infrastructure construction. This shows not only that the initial requirements of the Telecommunications Authority were set too low, but also that it has underestimated the monopolizing edge of HKT in the marketplace and its ability to block the way of the new operators. The Government has also failed to remove all existing obstacles, thus giving rise to a series of problems such as the problem of access to buildings. Moreover, the high network interconnection charges have also eroded the competitiveness of the new FTNS operators. Worse still, while HKT was able to subsidize its domestic telephone services which were running at a loss with lucrative profits from its exclusive international call service, how would the new operators which could only provide domestic telephone services find the incentive to make huge investments in laying networks and engaging in such a high-risk competition?

The Government's consultation paper suggests that overseas companies must invest in the infrastructure of local telecommunications in entering our out-bound telecommunications market. This is not necessarily practical. If the Government does not require operators in the telecommunications industry to commit to the development of the local telecommunications industry in respect of technology transfer, capital injection, scale and coverage of networks and so on, future investors can reap huge profits just by providing international resale services, without having to set up local networks, or by providing localized services to areas such as Central, Wan Chai and Tsim Sha Tsui where there is a high concentration of international customers and high volume users. In this case, Hong Kong people would have little to gain from the liberalization, which would not create large numbers of job opportunities and opportunities for local investment. It is also extremely unfair to FTNS operators who are already in the business.

Therefore, I suggest that the Government should delay issuing new FTNS licences, while requiring the existing FTNS operators to make new commitments, to allow them some breathing space to address their long-standing problem of insufficient competitiveness. At the same time, the Government should clearly set out the timetable for subsequent liberalization and the concrete measures for further liberalization, as well as take actions to remove all obstructions to fair competition.

With regard to the television broadcasting policy, satellite television was introduced seven years ago and cable television five years ago, while video-on-demand services were launched in the beginning of this year. Although these pay television services have been introduced into the Hong Kong television broadcasting market for some years, their market penetration is still much lower than free television services. Free terrestrial television broadcasting services continue to dominate the local television broadcasting market. For over three decades, the local television market has been dominated by one single company. The ratio of ratings and advertising revenue of one operator to all other operators is still eight to two. None of the competitors has shown a turn from loss to profit. Therefore, effective competition is practically non-existent.

With regard to the question of abolishing the royalties of free terrestrial wireless television, if the franchises are to be abolished, so too must be the royalties. However, at present, airwaves are an extremely valuable public resource. Before compression technology is available for practical application, only five channels are open to television broadcasting. Therefore, they should be open to public tender to introduce competition and reasonable fees should be charged to be used in turn on the centrally co-ordinated development of digital broadcasting technology so as to pave the way for the future digital broadcasting era. For example, consideration can be given to the possibility of using the same transmission facilities in order to save the social resources.

At present, the two terrestrial wireless television broadcasters are both operating one Chinese and one English channel of their own. This should be adjusted according to society's needs, such as keeping only one English channel so as to make airwaves available for other broadcasting purposes and avoid duplication. Some channels can divide up their air time to accommodate public programmes and diversified programmes, in order to balance the social and cultural development.

The consultation paper merely proposes to liberalize the pay television market but not the free television market, without giving any reasons. If operators are willing to provide free television broadcasting services through cable or other means, we should take it into consideration to uphold the principles of open and fair competition.

The liberalization of the television market will intensify competition. While the choice opened to consumers is broadened, it does not mean that the quality of television programmes will necessarily be improved. Operators might have fewer scruples about offending public decency, and might pander to some viewers for the sake of profit and market considerations. The "pretty girls" shows are one example. If no steps are taken, it would not be long before weather reports on screen would be presented by girls in swimming suits.

In order to realize the aim stated in the consultation paper to "widen viewers' choice of quality programming, to ensure television meet the diverse needs of society", under the overriding principle of ensuring freedom of information, the Government should lay down relevant requirements when issuing additional licences for the telecommunications and broadcasting industries in the future. It should also require licensees to provide a certain ratio of local productions and local cultural programmes, in order to promote the development of the movie, television and phonographic industries as well as local culture, to equip us with the software that the "broadcasting hub of Asia" ought to possess.

The consultation paper makes the reasonable suggestion to abolish the present restrictions imposed on "disqualified persons", so that operators can make cross-media investments that correspond to the development of information technology. However, Hong Kong has as yet no anti-trust legislation governing the relationship between broadcasters and programme providers. Therefore, the Government must take measures to ensure that broadcasters will adopt a fair and open attitude in selecting programmes, and not just use the programmes of one single programme provider or individual providers, thus stripping other programme providers of the chance of fair competition. Only this way will Hong Kong have a chance of becoming a genuine broadcasting hub, while innovative industries such as the movie, television and phonographic industries will be able to develop healthily and the policy of cultural pluralism can be enforced.

On the basis of the above points, I have sought to make additions and amendments to the Honourable Fred LI's motion. I hope colleagues will support me.

Thank you, Mr Deputy.

DEPUTY PRESIDENT(in Cantonese): Mr Gary CHENG.

MR GARY CHENG(in Cantonese): Mr Deputy, three years ago, competition was first introduced into the Hong Kong telecommunications market. During the period, Hong Kong people did receive more choices and cheaper services in international call service. But the position in domestic residential telephone service has not been as satisfactory as originally expected.

Competition should be introduced to benefit the community as a whole

The Democratic Alliance for the Betterment of Hong Kong (DAB) agrees that the markets for local and external services and the television should be liberalized and healthy competition should be introduced. And in this course, we must adhere to the principle that the community as a whole should be benefited. On that premise, all operators must treat the telecommunications industry as a long-term investment rather than a means to make quick money. Therefore, the DAB would like to request that all operators must undertake that they are there to benefit the people of Hong Kong in both residential and commercial telecommunication services.

A natural defect in the Hong Kong telecommunications market

The local telephone service has long been charged at below-cost levels, and thus subsidized by the international call service. Even if an operator only hires existing networks, interconnection charges are so high that business becomes unprofitable. Therefore, local telephone service has become a liability: the more subscribers there are, the heavier burden they become. This has given rise to an abnormal business environment. The DAB contacted a number of people in the trade for their opinion on the liberalization of the telecommunications market. Some operators pointed out that overseas operators are barely willing to construct infrastructure for networks or to benefit the people of Hong Kong.

The above situation may or may not be a fact, but profit-skimming will likely to occur. For example, new operators may cater only to profitable commercial areas like Central or Wan Chai and neglect the local residential areas, if the Government does not impose certain restrictions on their operation. While there is nothing wrong with servicing some areas first, this will become unfair for those operators who were prepared to and did invest the time and money in setting up networks for the local residents. More importantly, our intention was to allow, through bringing in competition, the 6 million people in Hong Kong to have more than one choice, which is what we have been hoping for.

Ensure new operators are committed to Hong Kong

Bringing in overseas operators can certainly bring in new technology and experience. Hong Kong is not the first place to liberalize its telecommunications market. By opening it up, it may solve some difficult problems with overseas experience. But as Hong Kong liberalizes its telecommunications market, the DAB would request the Government to consider requiring licensees to invest in local and external telecommunications market, and lay down a minimum scale of investment by the new operators in local infrastructure against concrete achievements by the three new FNTS operators in placing commercial and residential lines. In so doing, the Government not only allows the market to decide for itself the number of competitors but also weeds out those operators who are not committed to the Hong Kong telecommunications industry.

Potential problems in liberalizing the telecommunications market

A liberalization of either the telecommunications market or the television market will bring about a host of immediate problems waiting to be resolved. One of these problems is the powers of the Telecommunications Authority (TA), which is empowered to liberalize the market and at the same time act as an arbitrator on such matters as interconnection charges, international accounting arrangements, spectrum planning and right of access to buildings. Recently there were reports in the local newspapers about HKT applying to the court for a judicial review on the TA's power to arbitrate on Type II interconnection. Whatever the result of the review, the case shows that the credibility of the TA is being challenged. With a liberalized market, issues on charges and planning will emerge. The Government must define the powers and purview of the TA as soon as possible in anticipation of the challenges that will arise in the future.

Liberalization of airwaves must be matched with terrestrial arrangements

The technology for television transmission is on a course of diversification. We can now make use of airwaves to transmit free television programme services, satellite broadcasting service to transmit satellite television programmes, and optical fibre to transmit cable television. Whereas in the past, the distinction between each type of service was determined by the charging or otherwise of fees, the present consultation document proposes to break the distinction. Whatever the case, more choices will invariably benefit the consumer.

A determining factor is, however, matching arrangements on the ground as the airwaves are liberalized. As long as problems of spectrum allocation and access to buildings remain unresolved, consumer choices remain limited if the bottleneck on the ground is not removed, despite advanced technology and the good intentions associated with market liberalization. Hence, the DAB proposes that the Government should strengthen its arbitration powers and deal with the numerous problems including those connected to access to buildings, spectrum redistribution, and enhanced transparency in spectrum allocation. It should also encourage operators to use compression technology and digital technology to transmit programmes so as to make way for more channels and facilitate the opening up of airwaves.

With these remarks, Mr Deputy, I support the amendments moved by the Honourable Mrs Selina CHOW and the Honourable MA Fung-kwok.

THE PRESIDENT resumed the Chair.

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

PROF NG CHING-FAI(in Cantonese): Madam President, on the fourth of this month, the Information Technology and Broadcasting Bureau issued two consultation papers on the review of Hong Kong's telecommunications and television policies. The Bureau also stated that the broadcasting and telecommunications markets will be opened up. Since the consultation period of these papers will end in a few days' time and the result of the consultation will influence the Government's future drafting of new legislation on regulation of broadcasting, I believe it is essential to move a debate on this issue in the Legislative Council today. I would like to talk about my views on and feeling about the issue.

First of all, I think that the Information Technology and Broadcasting Bureau which was established only in April this year has presented us with two highly technical consultation papers, which have perceived telecommunications and television broadcasting as one single industry. This shows that the Government has finally realized that the rapid development of digital technology in the world today has already removed the boundary between telecommunications and television broadcasting. The old policy which stipulated that telecommunications operators could only conduct telecommunications business whereas television broadcasters could only provide television programmes is already out of keeping with the times.

I can see and appreciate that, in its television and telecommunications policies, the Government is able to make appropriate adjustments in the light of the constant development of information technology. I hope that the Government can, in the course of formulating other policies in the future, take into consideration the latest technological developments of the world so as to keep in pace with the advancement of mankind in terms of technology. This is my first point.

Secondly, I would like to talk about my two expectations of the full liberalization of the telecommunications and television markets. Firstly, such a liberalization must ensure that healthy competition is facilitated by a level playing field. In brief, the liberalization must be a fair one. This point is covered in both the amendments proposed by Mrs Selina CHOW and Mr MA Fung-kwok. I think we should lay emphasis on fairness. However, there are unfair policy proposals in the two consultation papers issued by the Government. For example, I am baffled as to why the Government should propose to abolish television royalties. The atmospheric spectrum is a kind of public assets and a very limited kind at that, it is indeed unjustified to allow commercial organizations to utilize such public assets for free to make profits while the spectrum is still being monopolized in reality. While I think that the Government must review its old policy of levying royalties according to turnover and income from advertisements, it should not be too rigid and abolish all the royalties in one go. Even if digitalization is realized in the future, I still think that a certain amount of royalty or tax under some other names should continue to be levied.

My second expectation is that, through a full liberalization of markets, Hong Kong can really rise to become a communications and broadcasting hub of the Asia-Pacific region. Mr Fred LI proposes in his original motion that the Government should "enhance Hong Kong's status as a communications and broadcasting hub of the Asia-Pacific region". I believe if we say that Hong Kong is a communications hub of the region, people will not laugh at us and say we are bragging without the least bit of embarrassment because we do have certain strengths in this aspect. However, if I have to speak out loudly that Hong Kong is a broadcasting hub of the Asia-Pacific region, I will feel a little twinge in my conscience. I have no idea if the broadcasting and television industries of Hong Kong are far more advanced than other countries and places in the region with regard to hardware, I only know that it will take at least 10 years for the digitalization of television to complete in Hong Kong. As for hardware, I guess that Hong Kong at least does not lag behind others, but how about software? I think Hong Kong still has a long way to go before it can be a genuine "hub of the Asia-Pacific region". It is so in terms of quantity, and more so in terms of quality.

So how is the quality of our television programmes at present? Can our infotainment programmes, news programmes and drama serials satisfy the viewers of Hong Kong as well as other places in the Asia-Pacific region who have such diverse tastes? Are the languages used and viewpoints presented in these programmes tailor-made for Asia and are they welcome and enjoyed by Asian people? I think we all have a pretty good idea. It is said in the Government's consultation paper that "the Government's long-standing policy on television broadcasting has been to widen viewers' choice of quality programming, to ensure television programmes meet the diverse needs of society and do not offend public taste and decency". While this remark is made very cautiously, we have to ask: How can the Government guarantee that there will be more quality programming? So far, I have not seen any government measures aiming at achieving "quality" programming. Therefore, this remark made by the Information Technology and Broadcasting Bureau can easily be taken as idle talk.

This is exactly why I think Mr MA's amendment is so important. When we discuss the "liberalization of the telecommunications and television markets", we cannot place undue emphasis on hardware, that is, we cannot attach importance to the upgrading of hardware while disregarding the quality of software. This will result in a situation where quality hardwares are used to broadcast substandard softwares, which are not something the Asian audiences would like to see. On the other hand, we should not put commercial considerations before cultural considerations and set our eyes only on the degree of market liberalization. We should neither overlook the heritage and the innovation of culture, nor the nurturing and the right to survive of local quality cultures. Therefore, I very much appreciate Mr MA's amendment which proposes that the Government should adopt measures to ensure that "the operators in the broadcasting industry can promote the overall development of local culture ......". The term "local culture" here does not mean that we are looking at the issue from a protectionist point of view. As Mr MA's amendment attaches importance to both hardware and software, as well as business and culture with regard to the policy of developing the movie and television industries, I hope that the Secretary, Mr KWONG Ki-chi, will be more receptive to public opinions. I also wish him every success in his work. I support Mr MA Fung-kwok's amendment.

Thank you, Madam President.

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

MISS CHOY SO-YUK(in Cantonese): Madam President, the Hong Kong Progressive Alliance has always supported the liberalization of the local television and telecommunications markets. But we think that a liberalization of these markets will not necessarily bring about fair competition, because signs from many areas do indicate that the local television and telecommunications markets are at present still in a deceptively open but really monopolistic situation.

What I have just said is not unfounded. The Government has all along used the method of granting more licences to open up the markets. But the fact remains: more licences do not necessarily mean fair competition, for there is often one single company which monopolizes the market owing to its greater scale of operation. Such a big company will make use of and abuse its dominant market position, unleashing all sorts of unfair competition tactics against its competitors. An obvious example is the Hongkong Telecom (HKT). In July 1995, the Government granted FTNS licences to three companies, and ended the monopoly of HKT in the provision of commercial and residential telephone services. But the Government did not introduce any anti-trust policies to go along with the granting of licences. Thus HKT could continue to monopolize despite the opening up of the market.

For example, the Universal Service Obligation of the HKT has enabled the company to occupy the limited space of the buildings of its clients and install its telecommunications equipment much faster than other FTNS operators. On the other hand, the Government has done nothing to help new FTNS operators to secure enough space in client buildings to install their equipment. This obliges new service operators to use a lot of time to lay the network section by section, thus greatly impedes their progress of work. HKT is also placing a lot of obstructions to those new service providers which lease its cables, for example by limiting the amount of work done daily to connect the cables to the client buildings. This is aimed at slowing down the competitors' pace of development.

Similar problems exist in the television market. Despite the introduction of the satellite television, cable television and video-on-demand services during the past seven years and the increase of television channels from four to nearly 50, the Television Broadcasting Limited (TVB) still accounts for 80% of the market share for ratings and advertisement revenue. Such an impressive achievement is of course due to the successful work of TVB. But there is no denying that a company, having become the dominant player in the market, will find little incentive for reform. This situation will only be disadvantageous rather than beneficial to the development of the local movie and television industries. Another obvious example is that TVB has an exclusive membership to the Asia-Pacific Broadcasting Union which has enabled it to get exclusive broadcasting rights of certain large-scale international sporting events. TVB has not encouraged other competitors to join the Union. Moreover, it is extremely rare for programmes produced by local independent producers to be shown during the prime time of the TVB. This produces a disincentive on local production efforts and discourages development.

Madam President, to make the telecommunications market not just open but also fair, the Government should introduce matching anti-trust measures. A market devoid of anti-trust measures is only an open form of monopoly even if it is opened. To put an end to this kind of monopoly, the Government must drum up the determination to assume a proactive and clear-cut monitoring role. In my opinion, the Government can adopt the following anti-trust measures, including:

(1) For the telecommunications industry, the Telecommunications Authority should set up a special department to deal with anti-competitive acts in the marketplace, including unlawful price reduction, overcharging connection fees and so on, and to strictly enforce and impose much heavier penalties on anti-competitive acts;

(2) A new package of network connection proposals should be drawn up to encourage new FTNS operators to get a reasonable return for their network investment. At the same time, considerations can be given to let new FTNS operators to benefit from the other non-franchised telecommunications services and public mobile telecommunications services;

(3) Supervision should be stepped up to prevent those dominant telecommunications operators from monopolizing the television market and exert control over the transmission network; and

(4) For the television industry, the Hong Kong Government has not introduced any mechanisms for competition to improve the situation of a long-standing deterioration of overall programming quality in the two free television stations. The Government also has not encouraged more operators to take part in the competition in the free television market. In this respect, the Government can consider issuing more licences for free television so that operators can run free and paid television business at the same time in accordance with their business strategies.

With these remarks, Madam President, I oppose the original motion but support the two amendments.

PRESIDENT(in Cantonese):Dr Raymond HO.

DR RAYMOND HO(in Cantonese):Madam President, like it or not, we are now in the information era and information technology has completely changed our lives. Mastering information technology is a prerequisite for our march towards the 21st century while we must also put in place a correct telecommunications policy to ensure that we can successfully meet the challenge of the new century. As a financial, trade, transportation and communication centre in the Asia-Pacific region, Hong Kong has to be particularly careful when formulating the relevant development direction, otherwise, not only will we lose the status of a regional communication centre, our financial and transportation businesses will most probably be affected as well. We can be quite certain that a good telecommunications network is the most important infrastructure for keeping Hong Kong as an economic centre in the Asia-Pacific region.

As a free economy, Hong Kong has always encouraged fair competition and the telecommunications and television markets which have been operating under franchise arrangements have gradually become more open. Under the principle of fair competition, the public can have more choices in terms of the types and quality of services. I believe that the public, Honourable colleagues and the Government will all agree to this principle. However, as the market distortion caused by the previous franchise arrangements for telecommunication operation has yet to be rectified completely, and given the established edge of HKT, the concerned parties, especially the three new FNTS operators or those operators who intend to join in, have divergent views on the pace and extent of liberalization. The television industry has also encountered similar problems.

If the said problems really exist, it may not be most beneficial to Hong Kong for the Government to fully liberalize the local and external telecommunications markets and the television market in a hurry. Therefore, the Government must consider this very carefully and expeditiously adopt effective measures to liberalize the telecommunications and television markets in a fair and competitive environment. Besides, we must bear in mind that we should not liberalize the telecommunications and television markets merely for the sake of following the world trend. We also believe that in addition to allowing Hong Kong people to benefit from the relevant services, a full liberalization of the markets will be conducive to competition and to promoting the long-term development of the telecommunications industry and will also ensure that there are adequate telecommunications facilities, networks and qualified telecommunications personnel in Hong Kong to meet the needs of our economic development in the 21st century information era. Taking these into consideration, the Government must in liberalizing the markets ensure that the telecommunications operators will commit themselves to the local telecommunications industry and make long-term investments in technologies, equipment and personnel rather than attaching importance only to investment-lean service items that will reap great profits. Only by this arrangement can we ensure that Hong Kong will come out the winner in liberalizing the telecommunications market.

Furthermore, in regard to the broadcasting industry, the Government should also adopt effective measures to liberalize the local market while giving local culture and the movie and phonographic industries ample room of development. In view of the structure of the broadcasting industry and the huge investments required, the television and news networks of some advanced countries are dominating the international market. As a result, some information and cultural programmes carry with them certain cultural inclinations and the audience are opened to a restricted choice of programmes or viewpoints. When Hong Kong liberalizes its market, it should avoid such situations. On the contrary, it should take the opportunity of market liberalization to promote the development of the cultural production industry. In addition to giving this industry greater chances of and room for development, as well as bringing in economic results and creating job opportunities and preserving our unique culture, our culture can also be developed in other overseas places especially where there are Chinese inhabitants.

In a word, on basis of these considerations, I think that the Government should actively adopt measures to expeditiously implement the full liberalization of the local and external telecommunications and television markets to facilitate their comprehensive, healthy and stable development to cope with the existing social circumstances and future development of Hong Kong. However, while we cannot overlook the urgency of liberalizing the markets, the markets should definitely not be liberalized unconditionally.

Madam President, I so submit.

PRESIDENT (in Cantonese): Mr James TIEN.

MR JAMES TIEN (in Cantonese): Madam President, today's motion is about the full liberalization of the telecommunications and television markets as well as the call for the Government to liberalize these two markets expeditiously. The telecommunications and television markets we are talking about involve huge investments. We are not talking about other businesses. If we are to introduce competition, we will need to fully liberalize the markets as far as possible. As for the telecommunications and television markets, they make no distinction between the interests of the commercial and industrial sector and the public interests. This is because we are all users except for one telecommunications company and one television company.

The view taken by the Hong Kong General Chamber of Commerce towards this matter is: The HKT, the three new FTNS operators as well as thousands of small and medium-sized enterprises (SMEs) which need to pay telephone charges are all members of the Chamber. In fully liberalizing the market, are we going to change the situation in which a single company is able to make a lot of profits by way of monopoly to a better situation in which a few companies are able to operate side by side and each of them will only be able to make modest profits? In fact, if a great number of licences are issued in a one-off manner for the purpose of fully liberalizing the market, the situation may more often than not change from one in which only a single company makes a lot of profits to one in which a number of companies are making no profit at all. If a number of companies are unable to make profit, it will do no good to other users, including the SMEs and the public in general. In particular, stability is very important to telecommunications and television services. Without a sound financial base and a desirable rate of return, shareholders of these services will refrain from making further investments. Users will definitely gain nothing from such a development.

Let us look at the situation in Hong Kong. As a matter of fact, HKT has been losing money in operating the local FTNS over the past years. It is only relying on long distance telephone charges for subsidy. Although some improvement has gradually been made but the situation remains the same. We absolutely agree that the newly joined three FTNS operators have failed to do what they are required to do over the past three years. Their speed of roll-out has been really slow. We have discussed this issue in meetings held by the relevant panel and we were told that this was attributed to a number of reasons. In this respect, I think the Government should, apart from making HKT do what it is required to do, help the three companies as they have failed to do what they have promised. The Government must urge these three FTNS operators to honour the promise they made three years ago. So far, they have only taken up 2% of the market. This is something that the Government cannot tolerate.

Another question is: Does it mean that prices will definitely go down if more licences are issued? This is probably one of the key points raised by the Honourable Fred LI. It is also for this reason that I have been closely watching the situation in New York right now. There are more than 10 licensees in New York, but all of them are actually wholesale licensees, not the FTNS licensees we are talking about. In New York, telephone charges are fixed at US$10 each month. This is approximately equal to HK$70 or so, which is more or less the same as what is being charged in Hong Kong. However, each telephone call made will be charged US$0.1. If scores of telephone calls are made each month, the caller will be required to pay a few more dollars. In Tokyo, a telephone fee fixed at nine yens for three minutes is charged every month. An additional fee is also charged against the number of calls made. Such kind of operation is of course different from ours. There is one more special feature in the New York case and that is the telephone line utilized by the 14 so-called FTNS operators belongs to the government. In other words, the government invests in laying of exchange lines and then the lines are rented out to the telephone operators. But what happens in Hong Kong is the Government was not responsible for laying exchange lines in the past. All networks therefore belong to HKT. Will HKT be pleased to open up its market to other operators, and will it be so co-operative as to let several new operators to snatch its customers away? Speaking from a commercial angle, I believe HKT has definitely tried to make things difficult for the new operators over the past three years, and definitely discouraged them from snatching away its own customers.

Mrs Selina CHOW's amendment mentions healthy competition. We feel that this point is very important. Given the fact that the number of operators has been expanded from one to four, competition will become unhealthy if the new operators are not given a few more years' time before more licensees are issued. Instead, vicious competition is likely to be resulted. Even though the market share of the new operators may rise from 2% to 5% or 6% several years later, the situation will still remain extremely unsatisfactory. As such, we hold that we should proceed gradually by giving the three new operators a few years' time (not necessarily three years) so as to give them a chance to do their very best. If after three years, for instance, they are still unable to take up scores of percentage points in the market, the Government can then consider further liberalizing the market. We have to examine whether newly-joined overseas companies will do something like cherry-picking if the three new operators (all of them are local companies with strong capital: Hutchison Communications Limited, New World Telephone Limited and New T & T Hong Kong Limited) fail to do what they are expected to do. If an operator from New York chooses only to operate long distance telephone service in Central and refuses to provide other services, how can we issue a licence to it? In addition, many foreign countries cover an extensive area. For instance, one needs to make a long distance call even within the United States itself. This means that a telephone call from New York to another state is charged as a long distance call. But this is not going to happen in Hong Kong. We cannot say that an additional charge is required if one makes a telephone call from Central to Sheung Shui as Hong Kong is such a small place. For these reasons, we must deal with the matter very carefully in liberalizing the market.

With these remarks, Madam President, I support Mrs Selina CHOW's amendment and oppose the original motion.

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

MR LEUNG YIU-CHUNG(in Cantonese):Madam President, in a modernized city like Hong Kong, people should be able to enjoy inexpensive and advanced communication services as well as more diversified and high quality television programmes. The Government proposes to liberalize the two markets and increase competition as this in principle can allow consumers to have cheaper services and more diversified choices. Therefore, I support the general orientation of these two policies.

The problem is we cannot take it for granted that by merely issuing more licences we can reach the said target. The telecommunications and television markets in Hong Kong have gradually been liberalized in the past few years but the competition in these areas has not been satisfactory. In the telecommunications industry, the total user population of the three new fixed network operators licensed in 1995 so far only accounts for 2% of the market because, among other things, HKT has slowed down the liberalization of its telephone exchange. As far as television is concerned, although there are a few television broadcasters in Hong Kong, we all know that only one outshines others and the other two television broadcasters do not have satisfactory profits. These two markets have obviously been monopolized. If the markets are further liberalized under these circumstances, can this really give consumers more choices? We really hope that it is the case but will this work in practice? We have doubts about it.

Telecommunications networks and television broadcasting are industries that require enormous investments. In the Hong Kong environment where there is no anti-trust or anti-dumping legislation, wealthy and powerful groups or groups having traditional advantages enjoy a great edge. Perhaps they can employ methods to force those operators that have newly joined the industries to gradually leave the scene so that the monopolized situation persists.

The amendment proposed by Mrs Selina CHOW states that local operators have to be protected. I find that the problem does not lies in the fact that local operators can hardly contend with big international groups but that under the existing market circumstances, big firms still bully small firms while old ones still bully new ones. Therefore, it is most important that legislation on fair competition be enacted to ensure that operators or investors that have newly joined the industries can compete in a level playing field.

I recall that there were three debates on the relevant motion in the former Legislative Council. The motion asking the Government to enact a fair competition law was approved but it is a great pity that the Government has been procrastinating. Until now, the Government still replies that it will prudently consider the issue but it has not taken any actions. The Government says that it will incorporate into the legislation measures for safeguarding competition in the existing fixed network licence agreement but these measures are obviously inadequate in view of the development during the last three years. Otherwise, the telecommunications market will not remain lop-sided today. Besides, the anti-trust suggestions in the consultation paper concerning television policy are vague and not specific. I hope that the Government will formulate a comprehensive fair competition law applicable to all industries while it liberalizes the markets to cope with the development of the markets.

I would especially like to discuss about television. Diversified television programmes have become the usual recreational activity and entertainment of the public and they are very important to them. However, not long ago, many people criticized the two television broadcasters for broadcasting the World Cup together, not giving the audience any choice. I think that the Government must attach particular importance to the two principles of the Government's broadcasting policy objectives, that is, "widen programme choices" and "encourage innovation", when issuing new television licences. It should require new television licencees to provide alternative programmes that are different from the existing television programmes to give consumers more choices. Or the Government can establish public channels to allow other people to take part in the provision of programmes. This is similar to the spirit of "promoting local culture" as proposed by Mr MA Fung-kwok, therefore, I hope that the Government will consider it.

Another criticism in the mass media on television is that television programmes have fallen to a state of bad taste, indecency and even obscenity. I doubt if this problem can be solved by the liberalization of the market. We can see that the situation of the newspaper industry which is not subject to licence control is also unsatisfactory. There is free competition in the newspaper industry and we can see that many reports or pictures are highly sensational or trying to please the public with claptrap. Moreover, their taste or quality does not tend to be more healthy and more acceptable to the public. Friends in the media have told me that "the audience and readers make the media". From their perspective, nudity on television and newspapers has been driven by audience and reader preferences, and businessmen are only concerned about their business.

Therefore, the liberalization of the market alone is insufficient to bring about improvement in the taste of programmes and to upgrade the quality of popular culture. More importantly, the Government should find out how the public, especially the younger generation, can be nurtured to appreciate, analyse and criticize popular culture and build up good taste. However, it is a pity that this is not a part of our school curricula and the younger generation is not nurtured to appreciate movie productions, music and other cultural and artistic works, therefore, they are led by the nose by the mainstream popular culture. Under these circumstances, if the television market is to be liberalized, it is imperative that we should no longer facilitate the establishment of other television broadcasters similar to TVB, ATV and Cable TV channel for adults. I hope that the Education and Manpower Bureau will carefully consider adding some subjects to the existing curricula to let students know more about the mass media, literature and art so that they can pay more attention to these fields.

Madam President, I so submit.

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

MR SIN CHUNG-KAI (in Cantonese): Madam President, first of all, let me thank the Information Technology and Broadcasting Bureau for completing these two reviews within such a short span of four months following its establishment. During these four months, the Secretary for Information Technology and Broadcasting indeed have had a very busy schedule, travelling to countries such as Singapore, the United States and Canada, and later on he will visit these countries again. If we are to develop information technology, we have to go to other places in the world to look at their developments. We have to look at the developments in the United States, Canada, Australia, Taiwan, Singapore and so on before we think about the role which Hong Kong should play in the Asia-Pacific region and the world, and the circumstances under which Hong Kong can compete with other countries. Later on, the Secretary may wish to tell us more about our future strategy of developing information technology. This review should also achieve the two objectives which I have just mentioned: Firstly, to assess the competitiveness of Hong Kong; and secondly, given our strategy on the development of information technology, what results should we aim to get in these two reviews?

I would like to draw an analogy between this review and a "penalty kick" in a soccer game. Hong Kong and Singapore have always been competing against each other, and it seems that (at least I feel that) over the past four or five years, Hong Kong and Singapore have been competing against each other in the liberalization of telecommunications markets. We have passed the ball up to the penalty spot and are quite prepared for the kick; if we can kick the ball into the goal, we will win the game. Why have I said so? This is because it is mentioned in the review that among the developed telecommunications markets, we have completed the liberalization of the whole long distance calls market and the retailing of the local "ISR". The liberalization of the local FTNS aside, we are also developing more rapidly than Singapore. Once we complete this task, we will shoot the ball into the goal of our opponent and win the game.

I would like to thank those colleagues who have talked about the issue of anti-trust mechanisms, and I share with their views totally. The fact that the Democratic Party has not included this in our motion does not mean that we do not attach importance to this issue. Rather, we do take this issue very seriously. In fact, one of our colleagues in the Democratic Party, the Honourable Fred LI, tried repeatedly to raise this point in the former Legislative Council meetings arguing for the need to enact anti-trust laws in Hong Kong. Of course, I realize that the Government does not want to enact anti-trust laws, but would like to introduce anti-trust mechanisms into different trades instead. Our views on this point should not be very much different.

I would like to respond to some of the arguments advanced by the Liberal Party. I find it rather surprising that when we discussed the 70% mortgage ceiling last week, the Liberal Party said that the Government should not be over cautious on the supervision of banks, but today, they said that we should be very cautious over the issue of liberalizing the telecommunications market. Our opinions on these two issues are exactly opposite to those of the Liberal Party. We think that the issue of banks should be handled cautiously. As for telecommunications, we are not saying that we act with a smaller measure of caution, but we also think that the strong abilities of Hong Kong can enable us to be more aggressive in terms of liberalization. The amendment proposed by the Liberal Party is protectionist in nature and runs counter to the principles of market economy upheld by Hong Kong. It is thus not quite in line with the spirit underlying the name "Liberal Party".

Some companies argue that if the market is liberalized, some foreign companies may penetrate into the market of Hong Kong and engage in profit-skimming. I would like to stress that, from another point of view, the licences of the three existing telecommunications companies may also allow them to engage in profit-skimming but even with profit-skimming (I beg your pardon, the Honourable Emily LAU, I would only say this one more time and would not repeat it again), everyone can still compete on a fair basis and employ the same tactics. However, I hope that when issuing licences in the future, the Government will (like what the Democratic Alliance for the Betterment of Hong Kong (DAB) has requested earlier) set up some mechanisms requiring new entrants to demonstrate their overall commitment to the telecommunications industry of Hong Kong. In this regard, we do agree with the DAB.

According to Prof NG Ching-fai, atmospheric airwaves is a rare asset, and for this reason, he says, we think very carefully before deciding whether to abolish the payment of royalties. A few years ago, I would have agreed with Prof NG, but today I cannot agree with him. The reason is that if we liberalize the telecommunications market (if this is indeed the conclusion reached by the review), and if we allow all forms of competition to take place in Hong Kong all at the same time, competition will no longer be restricted to among local companies, and Hong Kong companies will have to compete against foreign companies. Over the past two or three years, the Government has frequently quoted statistics in this respect, and we have been told that while there were only a certain number of frequency channels a few years ago, the number has now increased to 30 or 40. Undoubtedly, we have now got more choices, and if local companies have to pay royalties whenever they produce a programme, their production costs would surely go up, thus reducing their ability to compete against foreign companies.

As regards the issue of Hong Kong as a broadcasting hub, I share the views of Prof NG Ching-fai. In fact, at present, the figures we have do send off a warning signal. In 1995, seven international broadcasting companies operated their Asia-Pacific broadcasting centres in Hong Kong, but in 1997, only three of these centres were left due to our unfavourable operating environment. When we make our long-term plans, we should also consider how we can create a favourable environment to attract local and international investments. I believe that if we are to achieve this goal, we will have to rely on a fair and open market. Therefore, I urge Members to support Mr Fred LI's motion. Thank you, Madam President.

PRESIDENT (in Cantonese): Mr Eric LI.

MR ERIC LI (in Cantonese): Madam President, both of the motions today are extremely serious and technical. I have no wish to talk too much about the technical issues, since my views are quite similar to those expressed by the Honourable MA Fung-kwok and he has already spoken in great detail. Moreover, as I respect the Secretary, Mr KWONG Ki-chi, very much, I have hardly any professional advice to offer him. Since the Honourable SIN Chung-kai has made use of the metaphor of the penalty kick in football, I would also like to bring in a lighter side to this debate and talk about this motion with a few metaphors. First, I would like to say that the rationale behind the two motions today have much in common. In the last analysis, what the first debate and the present debate amount to is how the Government should deal with matters which belong to the realm of business. Everyone would agree that as a major principle, the Government should intervene in the financial or telecommunications market only when there is no other choice, and there should be as little intervention as possible. I believe, however, that total non-intervention or laissez-faire is not feasible in today's society. I would like to use three metaphors. The first metaphor is that of the absence of fish in a barren pond. The second metaphor is the leading of a wolf into the sheepfold and the third one is the throwing of sheep to the lions.

First, I would like to talk about fish farming. The Government tries to install a very lively fish farm by putting fish in three different ponds. The fishes in the first pond soon starve to death, while the fishes in the second pond disappear after two days. The fishes in the third pond, in contrast, become very strong and lively.

Why is that so? The first pond is probably too barren. It has been sterilized and the fishes cannot but die in the dark pond with little nutrition and no food. There is a super gigantic crocodile in the second pond and the fishes are soon being eaten up by it. The third pond has not been sterilized and is quite an ideal "natural habitat". Although still there are survival of the fittest, and the natural happenings of births, deaths, sickness and old age, the fishes prosper because of the normal interlocking food chain and the ecological equilibrium there.

The business environment is very much similar to a fish pond. If there is too much regulation and legislation, it would stifle the desire for speculation, just like when the pond is too barren, it would be impossible to breed fish. There are comments saying that it would go against "business ecology" if one cannot "make some money" from the public, and instead has to make long-term investment even at a loss. In business, what have been most talked about are risks, certainty of the returns and the profits from investment. If investors are asked to make risky long-term investments with no certainty of returns and no hope of profit, it would be a miracle to maintain their willingness in continual investment.

The second solution, that is, total laissez-faire, might be too radical. It sounds very well in theory. However, if there is already a crocodile in the pond, such as when a big telecommunications company is dominating the telecommunications market, or when a big company has dominated the television market for years and is in possession of enormous resources, the small fishes that try to compete with them would only end up in their stomach. We can hardly expect a miracle of the defeat of Goliath by David under these circumstances. Actually, the Honourable Fred LI has already given us some hints in the debate. Although he spoke of liberalization all the way, but when he spoke of the telecommunications companies, he suddenly talked about asking the Government to strengthen regulation. He also knows that it is not all that easy to beat all the competitors. In debating today's first motion, the Democratic Party knew that very well and fully supported the Honourable Albert HO's motion for a more regulated and stable environment. If the market is opened up all of a sudden, as the Government did at first, it would be like opening the door to let in the crocodile, thus leaving the people and stockholders of Hong Kong to its mercies. This is called "leading a wolf into the sheepfold". If the television market is to be opened up all of a sudden as some people suggest, it would be like "throwing sheep to the lions". Actually, it is my guess ─ I do not know if I have guessed correctly or not ─ that Mr Fred LI's ultimate aim is for the people to have the widest choice and most reasonable choices at the lowest price after the markets are liberalized. I believe this is his ultimate aim. If he considers that liberalization, as described in the motion, is the end, one might not be able to achieve this. Liberalization can only be regarded as a means and not an end. It is very dangerous to assume that the liberalization of the markets is bound to produce these results and that the ultimate aim will be achieved through liberalization. As I said, it might not necessarily achieve this. I hope that through this debate, Members of this Council can convey a clear message to the Government and that is, for any kind of business, a reasonable business environment must be maintained with adequate guidelines and incentives for investment and speculation. Only then will a balance in terms of investment, speculation or competition be achieved. I quite agree with what the Honourable LEUNG Yiu-chung said and I want to say this too: those countries that embrace free competition always create a level playing field for business before talking about liberalization. Seldom will they liberalize before such a playing field is created. In Hong Kong, where the market capacity is small and before there are fair competition laws and other measures in place to safeguard fair competition, it is very dangerous and premature to liberalize the market. We can wait a little longer, such as two to three years. The Honourable MA Fung-kwok was quite right. We do not have to wait too long. We merely need to ask some competitors to make commitments on how long and how much they will invest. I consider his views more acceptable and practical. I also agree with what he said about culture. If one merely relies on free competition, how could minority interests, such as the interests of young people, be safeguarded? How would Radio Television Hong Kong operate? I believe Members also agree that there are still the so-called elements that need to be protected.

Actually, I do not see much difference between the wording of the Honourable Mrs Selina CHOW's motion and that of Mr MA Fung-kwok's amendment. However, I consider Mr MA's amendment to be more progressive and precise. Hence, I support Mr MA Fung-kwok's amendment. Thank you.

PRESIDENT (in Cantonese): Miss Emily LAU.

MISS EMILY LAU (in Cantonese): Madam President, I rise to support the Honourable Fred LI's motion and the Honourable MA Fung-kwok's amendment.

Introduction

Madam President, the main purpose of liberalizing the telecommunications and television markets is that I believe it is important to give people real freedom of choice and to enable them to obtain quality services at reasonable prices. We also hope that by doing so, Hong Kong will become the communications and broadcasting hub of the Asia-Pacific region. I am in favour of the full liberalization of the telecommunications and television markets in Hong Kong. However, I do not think that this should be achieved by issuing more licences. Rather, a fair and reasonable licensing system should be established in Hong Kong. As many Honourable colleagues have pointed out, the Government should enact laws on fair trade to check the formation of cartels and anti-competition practices.

Madam President, if the Government hopes to bring about a wholesome development of the telecommunications and television markets, it will agree that it has the unshirkable responsibility of providing and maintaining a level playing field, to ensure that consumers can genuinely have a variety of choice.

Fixed telecommunications services

Madam President, in March this year, in order to liberalize the international telecommunications market, the Government "generously" "bought back" the Hongkong Telecom International (HKTI) licence from the Hongkong Telecom (HKT) for $6.7 billion. However, it seems that we have not seen any reduction in the monopolization of the telecommunications market. The benefit has not been apparent to consumers though billions of money have been spent. Madam President, in 1995, the Government introduced competition to the fixed network services market and issued licences to three companies controlled by three major property developers. Unfortunately, the aim of promoting competition in fixed network services has not been achieved. As many Honourable colleagues have pointed out just now, the three companies have only taken up a total of 2% market share. However, all three companies are against the issuing of further licences and ask that they be given a chance to compete. Actually, we do not agree to the remarks of these three companies. We do not think that not granting further licences would be of benefit to consumers (I am not referring to the benefits to these three companies). However, we do understand them and share their feelings. Last Friday, many representatives of the trade came (the Secretary was out of town that day) and expressed a lot of different views. While some were in favour of competition, others considered that it might not work under the present circumstances. Although the Honourable SIN Chung-kai has just now complimented the Secretary on the paper he presented, I believe the Secretary will also give some explanations on this shortly. The paper has not analysed in detail for the people in Hong Kong whether there is really room or not in the existing market for new entrants, or whether it is as some Honourable colleagues have said that new entrants would lead to unhealthy competition. I am not yet convinced myself. However, I told the Acting Secretary at that time that I hoped that they could provide a detailed analysis and inform the public whether there was really room or not for further competition soon ─ very soon, since there is only one month for conducting the review. In fact, the Government is also against issuing further licences for fixed networks, it has intended to let those three companies compete with the giant. I hope that later the Secretary can speak a little more, if possible. Otherwise, he will have to explain this in the future, for he cannot refrain from explaining to the public about such a complex and controversial review which involved so many issues.

Television policy

Madam President, with regard to the development of the television industry, I very much agree with what many Honourable colleagues have said just now. During the past seven years, despite the introduction of satellite television, cable television and interactive television, wireless television has still maintained its very strong position and an 80% share in both advertising revenue and ratings. Some people even suggest that the introduction of interactive television merely further enhances the leading role of HKT. Madam President, I am also in favour of more competition in this area. Therefore, if the Government wants to introduce competition into the television market, I believe it should consider liberalizing the free television market. Mr Stephen NG of the Cable Television also asked the Government that day to give Cable TV a channel for broadcasting free television programmes. I hope that the Secretary will explain to us whether this can be done in Hong Kong. Will the situation become so bad under fierce competition that no one will be benefited in the end? Even if the Secretary cannot explain these points this evening, he has the responsibility of offering an explanation to us after all.

The Government also intends to develop multi-media services. In this respect, I believe the Government may have to further amend the legislation to establish a licensing mechanism for different modes of transmission. I also hope that the Government will consider issuing separate licences for modes of transmission and television production, in order to break up cartels and to enable broadcasting services to have a really diversified development.

Conclusion

Madam President, as I have just said, there is only a one-month consultation period for this complex review on telecommunications and television and I find this quite unacceptable. There are numerous issues and they have to be wrapped up hastily. I find that this way of handling the matter is being irresponsible to the people in Hong Kong. Madam President, I said that we had a meeting last Friday and around 20 representatives of the trade came and expressed varied views. At that time, I said to the Chairman of the Panel that the Government should come forward and respond to the views expressed. Yet, if it were to respond to all these views, the time taken for consultation would be much longer. Is this not ridiculous? Therefore, I hope the Secretary will later explain clearly to the public why such a complicated matter should be dealt with in such a clumsy way. It would be best if he could respond to those 20 to 30 submissions within a month. I really find the one-month consultation period very ridiculous. Such a precedent should not be casually set. It is most important that the public and the community should be given sufficient time to discuss the matter.

Thank you, Madam President.

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

(No Member indicated a wish to speak)

PRESIDENT (in Cantonese): I now invite Mr Fred LI to speak on the two amendments. Mr Fred LI, you have up to five minutes.

MR FRED LI(in Cantonese):I am very glad that two Honourable Members have not withdrawn their amendments today so that I can speak for five minutes more.

First, the Honourable MA Fung-kwok's amendment has basically made an addition to my original motion and the former part of the original motion basically remains unchanged. After repeated discussions and having listened to the speech just made by Mr MA Fung-kwok, the Democratic Party decides to support Mr MA Fung-kwok's amendment as he also suggests that we should "require operators in the telecommunications industry to commit to the development of the local telecommunications industry". This suggestion can be considered and we are also appreciative of this point of view.

However, we would like to make it clear that we oppose the Honourable Mrs Selina CHOW's amendment as we find that the Liberal Party's amendment does not comply with the principle of free economy. As the Honourable SIN Chung-kai has just said, the Liberal Party should support a free market and the number of licences to be issued should be determined by the market economy rather than the Government. The Government should not consider the number of licences to be issued or set a ceiling for it. Perhaps the Honourable Eric LI has accurately said, we have to protect the fish pond as there are many huge crocodiles outside. The problem is, should we let the market determine how investment should be made? The Honourable James TIEN has said that a lot of investments (I respond this way because I regard Mr TIEN as a political party, I will later discuss about the views of other Members) in the telecommunications market are huge which is definitely true, and therefore no one would spend money insensibly and invest in the market without considering the rate of return and the risks involved. This matter should basically be determined by the market. Investors will certainly make careful considerations before making such huge investments. If we liberalize the market even though no one is going to make an investment, there will be no investment even after the market has been liberalized. We cannot think that this can be done by human efforts and we should wait for three more years before liberalizing the market and see whether these three fixed network operators will make improvements or increase their investments from 2% to 4% or even 6% and whether there will be enough competitions. Let us think about this, three more years later, that is, a total of six years later, there will be an economic giant in the market, the Hongkong Telecom, and three small fishes, and the market will be monopolized, can any other people enter the market? They will have been there for six years, and to put it coarsely, will any other people have a chance to play? They will not. The market has been monopolized by one giant plus three small fishes, who else can take part in the competition? There have been enough troubles in these few years as three small fishes are confronting a giant, the new comers will face the same problems and it will be even more difficult for them as the networks of the three small fishes already exist, and other operators will only become "small shrimps" which cannot enter the market at all. We can foresee this situation. We are now saying that the three fixed network operators would be given three years' franchise for them to monopolize the market but actually I find it astonishing even if they are being given a two years' franchise.

In 1995, the Government prudently liberalized the telecommunications market and issued three fixed network licences. Today, many Honourable colleagues including Mrs Selina CHOW of the Liberal Party have mentioned that the Hongkong Telecom still has 98% share of the telecommunications market. In the past three years, the performance of these three new fixed network operators in the telecommunications market has not been satisfactory. Not only are they disappointed, the consumers at large including us, the Democratic Party, are actually also disappointed. The policies should not be formulated on the basis of the profitability of the operators but the general interests of the general consumers and Hong Kong as a whole. In view of the prudent liberalization of the market in 1995 which has failed and the importance of a free market, Mr James TIEN has just cited the experience of New York and the example of Tokyo which are actually very different from Hong Kong. We hope that the market will determine whether there should be more fixed network operators. In the face of an economic recession, it does not matter even if nobody joins the market. Yet, we are not the ones to determine the number of licences to be issued. Perhaps we should wait for a few more years and make decisions on the basis of the actual situation then. Therefore, the Democratic Party supports Mr MA Fung-kwok's amendment and opposes Mrs Selina CHOW's amendment.

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

SECRETARY FOR INFORMATION TECHNOLOGY AND BROADCASTING(in Cantonese): Madam President, first of all, I wish to thank the Honourable Fred LI for moving a motion on the liberalization of the telecommunications and television markets so that I can have a chance to listen to the views of the Members of the Legislative Council on these two policy consultation papers and to make use of this opportunity to further describe and explain the relevant policy proposals made by the Administration.

I wish to point out that it is not for the sake of liberalization that we propose to liberalize the telecommunications and television markets. Liberalizing the market is only a way and a means to achieve the goals set by the Government in telecommunications and television policies.

I wish to reiterate that the aims of our policy are for the greatest benefits of the people of Hong Kong, so that they will benefit from the choice, service quality and service standards. To achieve these goals, the Government must foster a regulation environment which is fair, open, highly flexible, conducive to competition and technologically neutral. Such an environment will encourage and stimulate investments, promote technological transfer and spur an innovative and diversified development in the telecommunications and television industries. Therefore, we propose to strengthen and expand the infrastructure of telecommunications and broadcasting, facilitate the interconnection of networks and the mutual development of the telecommunications and broadcasting markets, and to promote effective competition. This package of policies is intended to place Hong Kong at the forefront of the new information era so that the territory can in time become a centre of excellence in broadcasting, information technology and telecommunications in the Asia-Pacific region.

In the area of telecommunications, the government policy has been going in the direction of market liberalization. We believe the best way to ensure greater consumer benefits and economic viability is to make way for fair and effective competition.

During the past 15 years, we had introduced competition in various segments of the telecommunications industry on a gradual basis. For example from 1983 onwards, there has been a complete lifting of all regulations in respect of client equipment which is connected to the public exchange mode telephone network. Competition has been introduced into the mobile telecommunications market and the value-added services market, so that consumers can enjoy more diversified services offered at reasonable prices. We understand that with the liberalization of the market, it is essential to safeguard the existence of fair competition. It is because of this consideration that we set up the Telecommunications Authority (TA) in 1993 and drew up a fair regulation system. Our aim is to foster the development of the telecommunications industry based on market demand and to impose suitable regulation to protect consumer interests if necessary. The TA has all along been committed to ensuring that those operators which possess a leading edge in the market will not abuse their market advantage and do anything to undermine competition. The TA will keep a close watch of the market situation and take actions against any practice which violates fair competition. Besides, through a fair interconnection system and charging a reasonable interconnection fee to cover the costs, those new operators can set up and expand their networks.

In the consultation document on fixed telecommunications services issued in early September, the Government has put forward some policy suggestions on the further liberalization of the telecommunications market, especially in the areas of speeding up the pace of granting more fixed telecommunications network services (FTNS) licences, external telecommunications services licences and external telecommunications facilities licences.

In sum, I believe that the role of the Government is to explore and maintain a fair business environment to induce operators to make investments in telecommunications infrastructure and services. This will also promote competition. In determining the number of licences, we will be primarily concerned with the interests of the consumers and taking into consideration that there are no technical barriers. We now propose to let the market decide the number of licences for external telecommunication services and facilities. But when implementing the market liberalization policy, the TA will strictly enforce the licensing terms which safeguard fair competition. We also plan to amend the Telecommunication Ordinance and incorporate these licensing terms and other competitive safeguards into the primary legislation. On the other hand, we also suggest imposing heavier penalties to make these competitive safeguards more effective. Such amendments will also be applicable to local FTNS.

Regarding local FTNS, our main aim is to increase competition in the local FTNS market. We agree that there are not enough competition in the local FTNS market, and to foster competition, we may consider issuing more licences or to expand the coverage of the existing networks. We understand that the laying of a network with a wide coverage will need a lot of time and a large amount of continual investment. As the three new FTNS operators have already injected a large amount of resources to build the trunk network, we would give priority to considering the intention and commitment of these operators in continuing to expand their networks so that we can have more effective competitions as soon as possible. Of course, we will adopt certain effective measures such as requiring them to pay a guarantee to bind them in fulfilling their contract obligations in order to ensure that these FTNS operators will fulfil their undertaking. But at the same time we shall be pleased to hear what those operators who wish to apply for local FTNS licences have to say about their investment intentions and commitment. What the Members have said about interconnection and access to buildings have been elaborated and proposed in the consultation document, so I do not wish to repeat these points here. All in all, our aim is to achieve an effective and fair competition in the market.

During the past few years the policies adopted by the Government in the telecommunications industry have been aimed at promoting competition and taking care of consumer interest. These policies have propelled a vigorous growth in the telecommunications industry to the benefits of the consumers. The Government will continue to adhere to these policies.

In television broadcasting, in order to facilitate the development of the television market, the first condition is to foster a fair and open environment so that service providers can have equal opportunity to link up with the existing network facilities. At present, the optic fibre network laid by the four licensed FTNS operators has already reached 300 000 km. The network of the Cable Television has a coverage of 600 000 households. These two massive broad-spectrum networks are invaluable infrastructure assets of Hong Kong and have the potentials of upgrading the local information services. If they can be interconnected and mutually accessible, their applications can be vastly enhanced. Therefore, we suggest that the licensed FTNS operators should transmit and provide television services. And at the same time, we also suggest that cable television network be opened up for telecommunications services. In the long run, our aim is to build an information infrastructure which is open and uses a common interface.

In network interconnection arrangements, we suggest that the Cable Television can charge a network interconnection fee which is determined according to the cost recovery principle and has been approved by the Director of the TA. Similar arrangements have been made in FTNS. We believe that this suggestion can encourage the Cable Television to continue to invest, lay cables and expand their network. This will ensure that a reasonable return can be obtained from their investment. On the other hand, this can increase the options available to new television service providers in transmission. New television services can start to develop through the interconnection and direct lease of networks.

Some Honourable Members criticized the Government for not proposing to open up the free television market and introduce a third or more new operators while opening up the paid television and video-on-demand markets. There were Members who even suggested putting an end to the monopoly in the television market. I just want to ask: Is the television market really monopolized by one company? Or is it because someone thinks that since only one company is making profits, then the market is as a matter of fact monopolized by that company? One must remember that every household in Hong Kong can view the programmes of the two ground television stations, the choice of which programme from which station to watch is entirely up to the individual viewer. As to the question of whether the support of the viewers can be secured, that would have to depend on the strategies of the television stations. So I am very surprised to hear that there is monopoly in the television market and I would be pleased to hear the reasons and the grounds for such a view. I wish to point out that the reason that the Government did not propose to grant more licences for ground television broadcasting was mainly due to limitations of the frequency spectrum. In fact, frequency spectrums which can be used for ground television broadcasting have all been allocated. There is no remaining spectrum which can be used for ground television broadcasting. But when digitized ground television is available, the limitations of the frequency spectrums can be eased. It is also because of this that we have outlined a specific plan in our consultation paper to introduce digitized ground television in the hope that technical testings can commence as soon as possible. Since free television services penetrate into every household in Hong Kong, we shall ensure that existing services will not be disrupted when we launch tests for the new digitized television. When the tests are successfully carried out, we will carefully consider the time to introduce fully digitized television broadcasting. This will fall in line with market developments and minimize the effects on the viewers at present. Of course, if there are suggestions which state that there is no need to use atmospheric radio wave to provide free television services, we will be happy to consider them. In fact, the suggestions that we have made on telecommunications and cable television network, and the permission to use any scientifically neutral means of transmission to provide television services should be able to help the introduction of these free broadcasting services. Should our proposals regarding the television broadcasting market be supported and put into practice, competitions in the television market will be more fierce. There will be competitions among ground television, cable television, satellite television, telecommunications network providers and all kinds of multi-media broadcasting services. In order to preserve their own competitiveness, licensed operators must increase their investments on programming and technology so as to meet the needs of the viewers. Royalties will not only directly increase the operation costs of the licensed operators, but will also affect their competitiveness indirectly. Since other kinds of services such as telecommunication services do not require licensed operators to pay royalties, we suggest cancelling the broadcasting royalties so that the industry can place its resources directly in providing service to the viewers.

The Honourable Mrs Selina CHOW urged the Government to be prudent in formulating policies. A few Members also have quite similar ideas. The Government has always been prudent in management. And so I have nothing against this point. But the so-called wholesome competition in the amendment proposal is very controversial. Some people may think that there is really no such distinction between wholesome and unwholesome competitions. It is only a matter of different perspectives and angles of looking at things. No matter how competitions are described, from the consumers' perspective, they will bring more choices and make improvements in service quality and prices. That is exactly the reason why the Government encourages competition. To create a favourable environment for competition, the Government as a monitor and referee, is charged with the responsibility to make competitions proceed in a fair manner. So there is a necessity to lay down fair, just and open rules for competition, and to make each competitor willing and able to comply with these rules. For those competitors who holds a market edge, we should not discriminate against them, nor should we use any legal and administrative means to rid them of their chance of making further success when they have already adhered to the rules of fair competition. The essence of fair competition is not to get rid of those who are successful, but to enable those who lag behind to catch up in a fair environment. Therefore, when drawing up the rules of the competition game, we must protect the rights of all competitors. Also, there must be stringent regulation and proper deterrent measures to stop all acts which undermine fair competition.

Mr MA Fung-kwok mentioned that he hoped that broadcasting operators can promote a comprehensive development of local culture, as well as that of the film, television and recording industries. A few Members have spoken on this topic. The promotion and support of the development of a diversified culture have always been the aims of government policies. Although cultural policies belong to the purview of the Home Affairs Bureau, in the areas of film and television, as well as in music, we would of course like to see a diversified development there. The proposals made by the Government on television broadcasting are aimed at giving the industry a bigger, broader and more innovative space to develop, so that providers of broadcasting services will be able to try their best in programme production and to provide all kinds of programmes for the public to choose. In so doing, other related industries such as music, recording and film industries will also acquire their own space for development.

At last, I wish to thank all Members who spoke on the motion. Your views will help the Government greatly in making policy decisions. We would certainly put these into careful consideration. The issue under consultation has far-reaching effects and the response from all parties are basically very supportive. The only point which is quite controversial is about the liberalization of the local FTNS market. But all interested parties have been given enough time and chance to express their views. We will work hard and try our best to reach a policy decision which could be announced before the end of this year, so that legislative work can commence right away to implement a telecommunications and television policy that will enable Hong Kong to march boldly into the 21st century. Thank you, Madam President.

PRESIDENT(in Cantonese): I now call upon Mrs Selina CHOW to move her amendment on the motion. Mrs Selina CHOW.

MRS SELINA CHOW (in Cantonese): Madam President, I move that the Honourable Fred LI's motion be amended, as set out on the Agenda.

PRESIDENT (in Cantonese): I now propose the question to you and that is: That the amendment moved by Mrs Selina CHOW be made to Mr Fred LI'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)

Mrs Selina CHOW rose to claim a division.

PRESIDENT (in Cantonese): Mrs Selina CHOW 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 of the voting unit and then cast their votes?

PRESIDENT (in Cantonese): Before I announce that the 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 Kenneth TING, Mr James TIEN, Mr Edward HO, Mrs Selina CHOW, Mr Ronald ARCULLI, Mr Ambrose CHEUNG, Mr HUI Cheung-ching, Mr CHAN Wing-chan, Mrs Sophie LEUNG, Dr Philip WONG, Mr WONG Yung-kan, Mr LAU Wong-fat and Mrs Miriam LAU voted for the amendment.

Mr Michael HO, Dr Raymond HO, Mr Eric LI, Mr CHEUNG Man-kwong, Mr Bernard CHAN, Mr SIN Chung-kai and Mr LAW Chi-kwong voted against the amendment.

Geographical Constituencies and Election Committee:

Miss CHAN Yuen-han, Mr Gary CHENG, Mr Andrew WONG, Mr LAU Kong-wah, Mr David CHU, Mr HO Sai-chu, Mr NG Leung-sing and Mr Ambrose LAU voted for the amendment.

Miss Cyd HO, Mr Albert HO, Mr LEE Wing-tat, Mr Fred LI, Mr James TO, Mr LEUNG Yiu-chung, Dr YEUNG Sum, Miss Emily LAU, Mr Andrew CHENG, Mr SZETO Wah and Mr MA Fung-kwok 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, 20 were present, 13 were in favour of the amendment and seven against it; while among the Members returned by geographical constituencies through direct elections and by the Election Committee, 20 were present, eight were in favour of the amendment and 11 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 MA Fung-kwok, you may move your amendment.

MR MA FUNG-KWOK (in Cantonese): Madam President, I move that the Honourable Fred LI's motion be amended, as set out on the Agenda.

PRESIDENT (in Cantonese): I now propose the question to you and that is: That the amendment moved by Mr MA Fung-kwok be made to Mr Fred LI'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 MA Fung-kwok rose to claim a division.

PRESIDENT (in Cantonese): Mr MA Fung-kwok 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 of the voting unit and then cast their votes?

PRESIDENT (in Cantonese): Before I announce that the 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, Dr Raymond HO, Mr Eric LI, Mr CHEUNG Man-kwong, Mr Ambrose CHEUNG, Mr HUI Cheung-ching, Mr Bernard CHAN, Mr CHAN Wing-chan, Mr SIN Chung-kai, Mr WONG Yung-kan and Mr LAW Chi-kwong voted for the amendment.

Mr Kenneth TING, Mr James TIEN, Mr Edward HO, Mrs Selina CHOW, Mr Ronald ARCULLI, Mrs Sophie LEUNG, Dr Philip WONG, Mr LAU Wong-fat and Mrs Miriam LAU voted against the amendment.

Geographical Constituencies and Election Committee:

Miss Cyd HO, Mr Albert HO, Mr LEE Wing-tat, Mr Fred LI, Mr James TO, Miss CHAN Yuen-han, Mr LEUNG Yiu-chung, Mr Andrew WONG, Dr YEUNG Sum, Mr LAU Kong-wah, Miss Emily LAU, Mr Andrew CHENG, Mr SZETO Wah, Mr David CHU, Mr NG Leung-sing, Mr MA Fung-kwok and Mr Ambrose LAU voted for the amendment.

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, 20 were present, 11 were in favour of the amendment and nine against it; while among the Members returned by geographical constituencies through direct elections and by the Election Committee, 19 were present, 17 were in favour of the amendment and one against it. Since the question was agreed by a majority of each of the two groups of Members present, she therefore declared that the amendment was carried.

PRESIDENT(in Cantonese): Mr Fred LI, you have five minutes and four seconds to reply.

MR FRED LI (in Cantonese): Madam President, first of all, I am very grateful to the 11 Members who have just spoken on this motion. These Honourable colleagues of mine come from different political backgrounds and some do not have any background at all, but together we have conveyed a very strong and clear message to the Government, and that is it is to help those companies which are not able to catch up with the giants and compete with them.

All of the Members who have spoken said that the Hongkong Telecom (HKT) was really such a powerful giant that more time should be given to the other three fixed network providers to develop. But in fact, time is not the most crucial factor. Many colleagues have already talked about how the Government should help these providers under a competition situation which is characterized by monopoly. Even if they are given 10 years' time, there would still be an 89% monopoly if the Government does not do anything. I believe this is the consensus that has been reached today and the Government should have received the message loud and clear.

I do not wish to make a rebuttal against the 15-minute speech made by the Secretary just now. I only hope that he would do what he has said. For over the past three years, these three fixed network providers have been expecting the Government to do more in arbitration and connecting. As for the penalties, they are much too light for the HKT which has more than $100 billion's worth of market value. A fine of $20,000 would have no effect at all. It would just be taken as a joke.

I would like to express my gratitude towards all the Honourable colleagues who have spoken. I think there would be no such need for a division later on. Thank you.

PRESIDENT(in Cantonese): I now put the question to you and that is: That the amendment moved by Mr MA Fung-kwok be made to Mr Fred LI's motion.

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): Is there any Member who wishes to claim a division?

(No Member responded)

PRESIDENT(in Cantonese): I think the question is agreed by a majority respectively of each of the two groups of Members, that is, those returned by functional constituencies and those returned by geographical constituencies through direct elections and by the Election Committee, who are present. I declare the amended 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, 7 October 1998.

Adjourned accordingly at eighteen minutes to Ten o'clock.