Council Meeting (Hansard) 2 Dec 1998

OFFICIAL RECORD OF PROCEEDINGS
Wednesday, 2 December 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 CHAN KWOK-KEUNG

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

DR THE HONOURABLE PHILIP WONG YU-HONG

THE HONOURABLE WONG YUNG-KAN

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

THE HONOURABLE HOWARD YOUNG, J.P.

DR THE HONOURABLE YEUNG SUM

THE HONOURABLE YEUNG YIU-CHUNG

THE HONOURABLE LAU KONG-WAH

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

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

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

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

THE HONOURABLE CHOY SO-YUK

THE HONOURABLE ANDREW CHENG KAR-FOO

THE HONOURABLE SZETO WAH

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

THE HONOURABLE LAW CHI-KWONG, J.P.

THE HONOURABLE TAM YIU-CHUNG, J.P.

THE HONOURABLE FUNG CHI-KIN

DR THE HONOURABLE TANG SIU-TONG, J.P.

MEMBERS ABSENT:

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

THE HONOURABLE CHRISTINE LOH

THE HONOURABLE CHAN YUEN-HAN

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

THE HONOURABLE LAU CHIN-SHEK, J.P.

PUBLIC OFFICERS ATTENDING:

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

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

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

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

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

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

MR STEPHEN IP SHU-KWAN, J.P.
SECRETARY FOR ECONOMIC SERVICES

MR BENEDICT KWONG HON-SANG, J.P.
SECRETARY FOR WORKS

MR DAVID LAN HONG-TSUNG, J.P.
SECRETARY FOR HOME AFFAIRS

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

CLERKS IN ATTENDANCE:

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

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

MRS JUSTINA LAM CHENG BO-LING, ASSISTANT SECRETARY GENERAL

PAPERS

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

Subsidiary Legislation	L.N. No.
Legal Practitioners (Fees) (Amendment) Rule 1998	359/98

Occupational Retirement Schemes (Notices of Changes) Rules	360/98

Occupational Retirement Schemes (Authentication and Certification of Documents) (Amendment) Rules 1998	361/98

Occupational Retirement Schemes (Fees) (Amendment) Rules 1998	362/98

Tax Reserve Certificates (Rate of Interest) (No. 4) Notice 1998	363/98

Veterinary Surgeons Registration (Fees) Regulation (L.N. 563 of 1997) (Commencement) Notice 1998	364/98

Sessional Papers

No. 62	─	Sir Edward Youde Memorial Fund Report of the Board of Trustees for the period 1 April 1997 to 31 March 1998

No. 63	─	Secretary for Home Affairs Incorporated Statement of Accounts for the year ended 31 March 1998

No. 64	─	Office of the Privacy Commissioner for Personal Data, Hong Kong Annual Report 1997-98

No. 65	─	Report of the Brewin Trust Fund Committee on the Administration of the Fund for the year ended 30 June 1998

ORAL ANSWERS TO QUESTIONS

PRESIDENT (in Cantonese): Questions. First question.

Submission of Reports on Human Rights

1. MR LEUNG YIU-CHUNG (in Cantonese): Madam President, the Government advised the Legislative Council Panel on Home Affairs on 27 July this year that the report on the implementation of the International Covenant on Civil and Political Rights (ICCPR) in the Hong Kong Special Administrative Region (SAR) would be submitted in late August to the relevant United Nations organizations through the relevant bodies of the Central People's Government; whereas the report on the International Covenant on Economic, Social and Cultural Rights (ICESCR) will be submitted in late September. After the submission, the Government would release them to the public. In this connection, will the Government inform this Council:

(a) of the progress in the submission of the two reports to the UN; and

(b) whether the Administration will consider publishing these reports upon completion and conducting a consultation exercise before submitting them to the United Nations in the future, so that people from various sectors can express their views on the reports?

SECRETARY FOR HOME AFFAIRS (in Cantonese): Madam President, taking the Honourable Member's question seriatim:

(a) The drafting process, which requires joint efforts by the Home Affairs Bureau and several other bureaux and departments, has taken longer than we originally anticipated. One major factor is that work on two other reports (that is, Convention on the Elimination of All Forms of Discrimination against Women and Convention against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment) had to proceed during the same period to ensure their timely submission to the United Nations as part of the reports of the Central People's Government. Past experience has shown that it normally takes us eight to nine months to complete one report. As a result, the limited resources of the Home Affairs Bureau have been considerably strained by these four drafting exercises taking place around the same time.

I am happy to say that the SAR Government report in relation to the ICCPR is now almost complete. We expect that the final version will be ready within the next two weeks and will thereafter be forwarded to the Hong Kong Office of the Ministry of Foreign Affairs for onward transmission to the United Nations through the Central People's Government Permanent Mission in New York.

As regards the SAR Government report in relation to the ICESCR, a first draft is already in place and we will be able to devote full attention to it once the ICCPR report is out of the way. Our revised timetable for completion is early February 1999.

(b) In line with established practice in the past, we consulted the public on the implementation of the two Covenants in Hong Kong when we issued the outline reports in March this year. I should add that in the course of public consultations, I invited some 28 non-governmental organizations (NGOs) to a special meeting to seek their views and comments on the outline reports. To suggest that there should be a further round of consultation at this juncture would unnecessarily cause further delay in submitting the reports to the United Nations.

Also in line with established practice, we will publish the reports as soon as they have been submitted to the United Nations. The public will have ample opportunity to study them before they are examined during public hearings of the relevant United Nations Treaty Monitoring Bodies. Moreover, as an integral part of the United Nations' reporting and monitoring system, members of the public are at liberty to submit their own comments ─ or, if they prefer, alternative reports ─ for discussion at these hearings should they consider that the SAR Government reports are in any way deficient. In this connection, I am aware that several NGOs in Hong Kong have extensive experience both in submitting their own reports and attending the public hearings of the United Nations Treaty Monitoring Bodies.

MR LEUNG YIU-CHUNG (in Cantonese): Madam President, the Secretary said that he did conduct some kind of consultation. But the consultation was just on the outline of the report, not its actual contents. Actually, many people do wish to express their opinions about the contents of the report, and for these people, it will not be at all easy to put forward their views to the United Nations after the submission of the report. Will the Secretary therefore allocate some time for members of the public to express their opinions about the actual contents of the report? And, will more channels be put in place in the future, so that people can comment on the contents of the report before it is submitted to the United Nations?

SECRETARY FOR HOME AFFAIRS (in Cantonese): Madam President, let me clarify here that under our current practice, we have in fact been doing much more than many other countries in terms of consultation. What we have been doing is to release the whole outline ─ not just a few items of it ─ to the whole of Hong Kong through established networks, and members of the public can also obtain the outline at our offices if they so wish. If they have any comments, they are welcome to put them forward to us. In this connection, they can of course make use of the networks mentioned, but I must add that as I mentioned in the main reply, we also held a public consultation meeting for this particular report, in which as many as 28 representatives of NGOs were invited to air their views. But at the time of the consultation meeting, it was impossible for us to follow the Honourable Member's proposal and release the contents of the report before seeking comments from the public, because when the meeting was held, we had not yet started the write-up of the report body. And, since we did not submit the report to the office of the Chief Executive until as recently as the day before yesterday, it will be impossible for us to release the contents of the report now for public consultation. Members of the public will have plenty of opportunities to comment on this report ─ a government report, I must say. And, as mentioned in my main reply, if people are not satisfied with our report in any way, they can by all means submit their alternative reports. Then, at the relevant United Nations public hearings, they can raise the issues they want to discuss. This is how the whole mechanism works. I do not know whether my reply can satisfy the Honourable Member.

PRESIDENT (in Cantonese): Mr LEUNG Yiu-chung, which part of your supplementary question has the Secretary failed to answer?

MR LEUNG YIU-CHUNG (in Cantonese): I am not quite satisfied with the Secretary's reply, not least because he has evaded part of my supplementary question. My main query is: If no consultation is possible this year, will an additional mechanism be put in place in the future, so that people can comment on the contents of the relevant reports before they are submitted to the United Nations?

SECRETARY FOR HOME AFFAIRS (in Cantonese): Madam President, I think Honourable Members do not quite understand the actual situation, because they seem to think that the Government is supposed to submit the report on behalf of the people. However, this should be nothing but a government report. The Honourable Member asked whether members of the public could be allowed to take part in the drafting of the report. The Government has actually listened to as many public views as possible before it wrote up the report. I may as well draw the Honourable Member's attention to the comments made by an authority in this field, Professor Rosalyn HIGGINS, a former member of the Human Rights Committee and an incumbent judge of the International Court of Justice. Let me now quote her comments, in the hope that this can answer the Honourable Member's queries. She said and I quote, "In terms of preparation of the periodic report, I know that some feel that NGOs should have an input into that. It is not a view that I share. I think it is healthy for there to be poachers and for there to be gamekeepers, and that their roles should not become too mixed. I think it is frankly much more useful for the Government to prepare its report and for NGOs to say what they want to say about it in the various ways available to them. This is not through any formal standing under the Civil and Political Covenant, but through all the papers and briefings materials they can and do make available to Committee member." I am sure that all of us do realize that this is in fact an internationally recognized practice. Well, there may well be some countries in which the people are allowed to take part in the preparation process, in very much the same way as advocated by the Honourable Member. But as far as I know, these countries are indeed very small in number, and one can count them on practically one hand. All the countries which I know do not adopt such a practice, and the approach adopted by Hong Kong is already very open.

MR MA FUNG-KWOK (in Cantonese): Madam President, I agree with the Government that it did conduct some kind of consultation. But if some organizations still want to submit their views to the Government and have them incorporated into the report, is it too late now? Will the Government accept these views now? This is the first part of my supplementary question. The other part of my supplementary question is: Before it submits the report, will the Government consider the possibility of releasing the report through other channels, such as submitting it to the Home Affairs Panel of the Legislative Council for discussions?

SECRETARY FOR HOME AFFAIRS (in Cantonese): Madam President, the consultation period was from March to April this year, lasting for one month. And, we continued to receive one or two more representations even after the consultation period. Whether or not we accept the views given in these representations, we have invariably tried to give an account or interpretation of them as far as they are related to the issues addressed in the report. But I must say that it is now already too late to submit any further comments. That said, I must stress that our current practice has been able to take account of all the various parties involved. Honourable Members and the various panels can of course continue to make known any good suggestions which they have.

MISS EMILY LAU (in Cantonese): Madam President, in his main reply, the Secretary quoted the comments made by Professor Rosalyn HIGGINS. Perhaps I am one of the few persons who have good experience in attending the hearings of the United Nations Human Rights Committee. Is the Secretary aware that during quite a number of these hearings, some members of the Committee did repeatedly call upon the countries concerned to consult their people in preparing their reports? I know that there are indeed different opinions, and the Secretary has in fact quoted some of these views on a selective basis to suit his own purpose. Why does the Secretary not quote the comments of those Committee members who have urged the countries concerned to consult their people? May I ask the Secretary to name the countries which, according to him, can be counted on just one hand?

SECRETARY FOR HOME AFFAIRS (in Cantonese): Madam President, we will also pay attention to the views expressed by other members of the Human Rights Committee. In terms of consultation, I think Hong Kong has really been doing quite a good job. As for the Honourable Member's question on the countries which can be counted on just one hand, that is, those countries which allow their people to take part in the drafting process, I cannot give an answer right now, because I do not want to give a wrong answer. Perhaps, it is better for me to give the Honourable Member a written reply later on. (Annex I)

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

MISS EMILY LAU (in Cantonese): Madam President, I hope you can make a ruling. Since the Secretary has referred to these countries with so much certainty, why can he not name them right now, on the spot?

PRESIDENT (in Cantonese): Miss LAU, the Secretary has already undertaken to give you a written reply.

MR MA FUNG-KWOK (in Cantonese): Madam President, the Secretary did not answer the second part of my supplementary question, which is on whether or not the Government will discuss with the Home Affairs Panel before submitting the report to the United Nations.

SECRETARY FOR HOME AFFAIRS (in Cantonese): Madam President, if I can remember correctly, we did in fact notify the Legislative Council during the consultation period. We will follow up on the suggestion made by the Honourable Member when we prepare similar reports in the future.

MR ALBERT HO (in Cantonese): Madam President, the Secretary has reiterated that he is not prepared to consult the public on the draft report before submission to the United Nations. Many Legislative Council Members including I myself do not think very much of his position. But since the Secretary thinks that NGOs should make more use of other channels to express their views, may I ask him whether any support will be given to those NGOs which want to prepare their alternative reports? Or, will these NGOs even be given support, I mean financial support, for the purpose of attending the human rights hearings at Geneva to air their views?

SECRETARY FOR HOME AFFAIRS (in Cantonese): Madam President, I am afraid I am no authority as far as financial support is concerned. As far as I know it, no such support has ever been offered. NGOs or any private individuals wishing to go to Geneva have to arrange for their own financial support.

PRESIDENT (in Cantonese): We have already spent 18 minutes on this particular question. So, I shall take one last supplementary question.

MR LEE CHEUK-YAN (in Cantonese): Madam President, it is mentioned in the main reply that the reports concerned will be forwarded to the Hong Kong office of the Ministry of Foreign Affairs for onward submission to the United Nations through the Permanent Mission of the People's Central Government in New York. That being the case, will the Central People's Government make any amendments when the reports are submitted to it? In the past, when the reports were submitted through the Foreign Affairs Office of Britain, did the Office ever made any amendments? Does the Secretary know the position of the Central People's Government?

SECRETARY FOR HOME AFFAIRS (in Cantonese): Madam President, the Central People's Government is the sovereign power of Hong Kong. That being the case, if the Honourable Member asks whether the Central People's Government has the power to make any amendments, I would say that the answer is always "yes". I have been asked such a question many times before; some have even asked the Ministry of Foreign Affairs on this. And, on many open occasions, I have also heard the Central People's Government say that it will not amend these reports. I myself believe what it says.

PRESIDENT (in Cantonese): Mr LEE Cheuk-yan, which part of your supplementary question has not been answered?

MR LEE CHEUK-YAN (in Cantonese): In my supplementary question, I asked whether the Foreign Affairs Office of Britain had ever amended any of these reports.

SECRETARY FOR HOME AFFAIRS (in Cantonese): Since I am speaking on behalf of the SAR Government, what I say will naturally cover the SAR Government only. If the Honourable Member wishes to get an answer to his question, I can look up the records and give him one later on.

PRESIDENT (in Cantonese): We have already spent 20 minutes on this question. The second question.

Interference with Radio Communications of Aeroplanes

2. DR RAYMOND HO (in Cantonese): Madam President, it is reported that radio communications between airplanes flying over Hong Kong and the Air Traffic Control Centre at the airport in Hong Kong are often jammed by radio waves transmitted from paging stations in the coastal cities of the Guangdong Province. In this regard, will the Government inform this Council:

(a) of the total number of reports received by the Administration concerning interference with such radio communications since the opening of the new airport;

(b) whether it has studied the effects of such interference on aviation safety; if so, of the details; and

(c) of the actions taken by the Administration to solve the problem; and the effectiveness of such actions?

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

(a) Since the opening of the new airport on 6 July 1998, the Civil Aviation Department (CAD) has received a total of 244 cases reporting interference on aviation communication channels, that is, an average of one to two cases per day.

(b) Among the 40 channels currently used by the CAD, four to five of them are subject to interference which intermittently affects the communications between air traffic control officers and flight crew. As the CAD uses only about 30 channels in its daily operations, it will switch to unaffected channel whenever interference occurs. Therefore aviation safety has not been seriously affected under the current situation.

(c) The CAD and the Office of the Telecommunications Authority (OFTA) have reported interference cases to the mainland authorities concerned and taken regular follow-up actions. Several measures have been adopted by the mainland authorities. These include the removal of some paging transmitters installed on hilltops in Shenzhen, Zhongshan and Zhuhai towards the end of last year. Furthermore, control over paging stations in the Pearl River Delta Region has been tightened, including inspections and closure of offending paging transmitters as well as requiring the paging stations to reduce their transmitting power and to install filters and isolators.

To further strengthen co-ordination and operations among concerned departments of Hong Kong and the Mainland, both sides have put in place an effective liaison mechanism to monitor radio frequency interference, and to facilitate the expeditious exchange of information for identifying and removing the sources of interference.

With the concerted efforts of both sides, there has been improvement in the interference situation compared with the initial period. However, the interference has yet to be resolved owing to the large number of paging station transmitters scattering over a large area. Furthermore, new transmitters are being put into use from time to time. However, the CAD has made available back-up communication channels for use whenever necessary. The CAD together with OFTA as well as the concerned mainland authorities will continue to monitor the situation closely and take follow-up actions to resolve the interference problem.

DR RAYMOND HO (in Cantonese): Madam President, I have highlighted the importance of keeping aviation communications free from interference of other radio waves. In the past, the Kai Tak Airprt had also suffered from the interference of radio waves transmitted by paging stations in Shenzhen, and now the new airport is also troubled by the same problem. As mentioned by the Secretary in part (c) of the main reply, the problem is "never-ending" since there is a large number of paging station transmitters scattering over the area and new transmitters are being put into use from time to time. Could the Secretary inform this Council what would happen if new transmitters just keep on increasing and the back-up communication channels were used up one day?

Secretary for Economic Services (in Cantonese): I should like to thank Dr the Honourable Raymond HO for raising the question. First of all, since the Kai Tak Airport has also suffered from the same problem in the past, there has in fact been very close co-operation between Hong Kong and the mainland authorities on this matter and a lot of work has also been done. Perhaps let me cite a few examples briefly. Towards the end of 1997, a large scale operation was conducted to remove the illegal transmitters located in Wutongshan in Shenzhen, Wuguishan in Zhongshan, Banzhangshan in Zhuhai and so on. In addition, paging stations have also been required to reduce their transmitting power since April 1998. We have all along been conducting operations continuously; for example, while 19 illegal transmitter had been removed during the period between July and September, three more were removed in the October operation.

Actually, the most important point is that we have a very effective mechanism, which is the committee of experts under the air traffic control sub-group of the Hong Kong and Mainland Cross-boundary Major Infrastructure Project Co-ordination Committee. the committee of experts on the mainland side is led by the Deputy Director for Air Traffic Control of the Civil Aviation Administration of China (CAAC) and supported by responsible officers from the Military Commission, Ministry of Posts and Telecommunications, State Radio Regulatory Committee, as well as Civil Aviation Administration; as for the side of the Hong Kong Special Administrative Region, the representatives comprise the Deputy Director of Civil Aviation and engineers from the OFTA. The committee of experts will meet regularly every quarter of the year. Furthermore, under the committee of experts we have set up a working sub-group comprising senior engineers, assistant directors, representatives from the military Commission, as well as representatives from radio broadcasting committees from Guangdong Province as well as Shenzhen and so on, all of whom are officers responsible for the practical work concerned. The working sub-group will meet every month to exchange information; besides, meetings will be conducted more frequently if required.

I believe Honourable Members can all see that many actions have already been taken over the past two years. The most important work in this connection is to locate the illegal transmitters and remove them. Naturally the illegal transmitters will be installed again, but as Members may be aware, the various mainland authorities have in fact been helping us vigorously in our actions to remove the illegal transmitters. We will continue to provide the mainland authorities with the information relevant to the actions.

Just now Dr HO has expressed his concern as to whether the communication channels will be exhausted. As a matter of fact, we have some 40 channels available for use at present, as compared to the 20 odd channels Kai Tak airport had. Of the channels available, only 30 of them are engaged in daily use; in other words, we have about 10 channels as back-ups. Actually, other than the back-ups, aeroplane pilots normally will not stick to only one single channel but will use several channels to communicate with our air traffic control officers; besides, some channels are reserved for emergency communications. For this reason, I do not think the problem will have any significant impact on aviation safety. That said, we will still handle with great care any matter that would impact on aviation safety. This is also the reason why the matter has been reflected to the mainland authorities at high levels ranging from the Hong Kong and Macau Affairs Office of the State Council, the CAAC, to a number of other relevant departments and dealt with by such authorities in close collaboration with Hong Kong. We could of course apply to the International Civil Aviation Organization for additional back-up communication channels when such need arises in the future.

MR BERNARD CHAN (in Cantonese): Madam President, could the Secretary inform this Council how many of the 244 reported cases of interference referred to in part (a) of the main reply were caused by mainland paging stations or amateur radio "fans" in Hong Kong?

SECRETARY FOR ECONOMIC SERVICES (in Cantonese): I should like to thank the Honourable Bernard CHAN for raising his supplementary. As I said before, our engineers from the OFTA are working in collaboration with the mainland authorities, in particular the Radio Regulatory Committee and other related departments of the Guangdong Province, in supervising the situation concerned. According to our understanding, the majority of the sources of interference are from the Guangdong Province, and mainly from regions like Shenzhen, Zhuhai, Zhongshan and so on.

MR LEE WING-TAT (in Cantonese): Madam President, could the Secretary inform this council whether any aeroplane pilots or international pilot associations have expressed concerns or lodged complaints with the Government, pointing out that the interference will cause pilots to lose contact temporarily with the Air Traffic Control Centre at Chek Lap Kok Airport, hence difficulties in piloting the aeroplane, and that such interference will cause danger under extreme circumstances?

SECRETARY FOR ECONOMIC SERVICES (in Cantonese): I should like to thank the Honourable LEE Wing-tat for raising his supplementary. In the past, the cases were mainly reported by the airlines to the CAD. And of course the information provided by the airlines was collected from their respective pilots. Just now I have referred to the reason why we have attached great importance to the issue; and it is also for this reason that we have reflected the situation to the mainland authorities. We have all along referred the relevant information received to the working sub-group and the committee of experts I mentioned before for their appropriate actions.

MR LEE WING-TAT (in Cantonese): Madam President, the Secretary has not answered my supplementary. My supplementary was asking whether aeroplane pilots have expressed their views and pointed out that if the interference causes them to lose contact with the Air Traffic Control Centre temporarily, they would have difficulties in piloting the aeroplane; and that such interference will cause potential hazards under extreme conditions? Have the aeroplane pilots ever reflected their views to the Secretary?

SECRETARY FOR ECONOMIC SERVICES (in Cantonese): Insofar as I understand it, interference of such kind is certainly very dangerous; that is why we have attached great importance to the issue. Although such kind of interference will give rise to dangers, so far it has never prevented any flights from landing or required any of them to re-route. No doubt such kind of interference is dangerous to a certain extent; however, as I explained before, the most important point is that the aeroplane pilots will not confine themselves to using one channel only, they could use the emergency channels as well as other back-up channels. The channels I refer to are the communication channels between the aeroplane pilots and the air traffic control officers. The most important point here is that aeroplane pilots could switch to other channels for communication with the air traffic control officers whenever interference occurs. In answering the supplementary raised by Mr LEE Wing-tat just now, I was mainly trying to point out that there were still other communication channels such as the back-up channels and the emergency channels.

MR LAU KONG-WAH (in Cantonese): Madam President, the Secretary appears to have taken the issue lightly, but the absence of accidents so far does not mean that they will never occur in the future. In view of the considerable number of interference cases reported, could the Secretary inform this Council whether the Government has conducted any risk assessment in this connection; of the kind of danger involved in switching communication channels whenever interference occurs; and if so, what the results are?

SECRETARY FOR ECONOMIC SERVICES (in Cantonese): Let me first thank the Honourable LAU Kong-wah for raising his supplementary. I do not think I have taken the issue as lightly as it appears to Mr LAU. We have in fact done a lot of work. The series of actions I referred to just now also serve to reflect the importance the mainland authorities have attached to the issue. In this connection, almost all relevant departments in the Mainland ranging from the Hong Kong and Macau Affairs Office, the CAAC, to the Radio Regulatory Committee, the Military Commission and so on, have all helped Hong Kong tackle the problem. This is because we consider the issue a very important problem which must be resolved and taken very seriously. I can tell Members that we have done a lot of work over the past two years, and that actions have been taken every month. We have never taken the matter lightly, nor have we overlooked its importance. Indeed there are few problems like this one which require us to hold meetings with the mainland authorities to discuss the necessary actions every month.

The CAD certainly attaches great importance to the issue. Just now the department has informed me that it has been keeping an eye on the situation, and that about four to five channels are currently being affected. Actually, after the series of actions I referred to just now, the situation of two channels has been improved substantially. In other words, the interference occurs mainly in three channels among the 30 we are using daily. The CAD has all along been paying close attention to the potential risks involved, and risk assessments will certainly be conducted if the situation turns worse. Insofar as the present situation is concerned, the CAD believes that the back-up and the emergency channels should suffice to ensure that the risks will not develop to an unacceptable level.

MR HO SAI-CHU (in Cantonese): Madam President, with regard to the degree of interference occurred, could the Secretary compare the situation of the Kai Tak Airport before its closure with that of the new airport so as to give this Council some idea of the seriousness of the present problem?

SECRETARY FOR ECONOMIC SERVICES (in Cantonese): I should thank the Honourable HO Sai-chu for raising his supplementary. The radio wave interference problem occurred at the Kai Tak Airport was far more serious than that of the new airport, since Kai Tak had about 20 channels available only. In the worst situation, about six to seven channels were subject to interference. The problem has by now been improved because, as I have referred to before, among the 40 channels available, only 30 are used in the daily operations, thus saving 10 channels as back-ups. In addition, since a series of actions have been taken, the situation is now further improving gradually. In this connection, the situation of those four to five channels subject to interference has also improved over the past two months. Comparatively speaking, the situation of the new airport is better than that of the Kai Tak Airport in early 1994.

MISS CHOY SO-YUK (in Cantonese): Madam President, could the Secretary inform this Council whether the Government has taken into account the possibility of such kind of interference in designing the new airport; if so, of the reasons why the problem has yet to be prevented from occurring so far; and if not, why not?

SECRETARY FOR ECONOMIC SERVICES (in Cantonese): Madam President, we cannot avoid completely such kind of radio wave interference by design means. As far as I know, the problem involved is so complicated that I am afraid I cannot explain it clearly at this moment, but I can say that the problem is caused mainly by the transmitting power of the paging stations. In this connection, the co-existence of two paging stations or more would give rise to such kind of interference. It is impossible for us to avoid completely such kind of radio wave interference by design means; the only effective solution to the problem is to remove all the illegal transmitters. If we could avoid the problem by design means, we would certainly have done so. But the crux of the matter lies not lie in the architectural design of the new airport.

PRESIDENT (in Cantonese): Last supplementary.

MR JAMES TO (in Cantonese): Madam President, according to part (c) of the main reply, there has been improvement in the interference situation compared with the initial period. In regard to the so-called "improvement", could the Secretary inform this Council whether the term should be interpreted as less complaints being received, channels being interfered for shorter periods of time, or sizes of affected areas being reduced? Could the Secretary give this Council a reply in more easily comprehensible terms?

SECRETARY FOR ECONOMIC SERVICES (in Cantonese): I will try to put my answer this way. I believe the simplest and most readily comprehensible answer is that the duration of interference has been shortened. In fact I have also referred to the number of occurrences just now, whereas the interference occurs once or twice a day at the new airport, the interference at Kai Tak used to occur three to four times a day in 1994 and lasted for a longer period. I hope my reply could answer the supplementary raised by the Honourable Member.

Appointment of Chairmen or Chief Executives of Statutory Public Bodies

3. MR LAU KONG-WAH (in Cantonese): Madam President, regarding the appointment of chairmen or chief executives of statutory public bodies (including the Hong Kong Monetary Authority (HKMA), the Securities and Futures Commission (SFC), the Mass Transit Railway Corporation (MTRC), the Kowloon-Canton Railway Corporation (KCRC), the Hospital Authority, the Office of the Ombudsman and the Hong Kong Housing Authority), will the Government inform this Council whether:

(a) it knows which persons are responsible for determining the appointment procedures, prescribing the remuneration and conditions of service and making appointments for the above posts;

(b) it knows if the above bodies have set up any mechanism to monitor and assess the competence of the person assuming the above posts, and to make recommendations regarding the renewal of appointment; if such mechanisms have been set up, of the details; and

(c) the Administration will review such appointment mechanisms and consider appointing Members of this Council to sit on the various appointment boards, with a view to enhancing the accountability of such boards?

CHIEF SECRETARY FOR ADMINISTRATION: Madam President, there are over 200 statutory bodies in Hong Kong, each with its own governing board, terms of reference and modus operandi defined by individual statutes. Matters relating to the appointment of the chairmen and/or the chief executive officers to these bodies vary. My answer would be very unwieldy if I were to attempt to cover all 200 bodies. Accordingly, I propose to confine my answer to those statutory bodies outlined in the Honourable LAU Kong-wah's question. If Members are interested in any other statutory bodies, I shall be happy to supply the necessary information in writing later.

With regard to parts (a) and (b) of the question, the information requested is as follows:

(i) The Hong Kong Monetary Authority (HKMA): The HKMA has no chairman. The chief executive of the HKMA is appointed by the Financial Secretary who, on the advice of the Exchange Fund Advisory Committee (EFAC), determines his terms and conditions of service. The remuneration package for the chief executive is determined by reference to the prevailing market rates for personnels in the banking sector. The HKMA implements a performance-based pay system, whereby the performance and pay of the chief executive is reviewed on an annual basis by the Financial Secretary on the advice of the EFAC.

(ii) The Securities and Futures Commission (SFC): The chairman of the SFC is also its chief executive. This executive chairman is recruited through open recruitment by a selection panel appointed by the Financial Secretary. He is appointed on terms and conditions determined by the Chief Executive of the Hong Kong Special Administrative Region (SAR). The remuneration package is drawn up with reference to prevailing arrangement for his counterparts in the financial services sector. His performance is monitored by the Financial Secretary.

(iii) The Mass Transit Railway Corporation (MTRC) and the Kowloon-Canton Railway Corporation (KCRC): The chairmen of these two Corporations are also their chief executives who are appointed after an open recruitment exercise. The appointment and terms and conditions are determined by the Chief Executive of the SAR. The remuneration packages are drawn up with reference to prevailing market rates in the commercial sector. Non-executive members of the governing boards of these two Corporations collectively assess the performance of their respective executive chairman in the context of the annual adjustment to his remuneration package.

(iv) The Hospital Authority (HA): The appointment of the chairman of the HA is determined by the Chief Executive of the SAR who is responsible for monitoring his performance. The chairman does not receive any remuneration. The chief executive of the HA was recruited through an open recruitment exercise. The appointment and remuneration package of the chief executive of the HA require approval by the Chief Executive of the SAR. An Assessment Panel comprising the chairman of the HA and chairmen of the functional committees is formed each year to review the performance of the chief executive. His remuneration is drawn up with reference to that of officers with comparable responsibilities in the Civil Service.

(v) The Office of the Ombudsman: The appointment and terms of conditions of the Ombudsman are determined by the Chief Executive of the SAR who is responsible for monitoring his performance. The remuneration package is comparable to a policy secretary having regard to the importance and level of responsibility of this public office. The next Ombudsman will be appointed by the Chief Executive on similar terms and conditions after an open recruitment exercise.

(vi) The Housing Authority: The appointment of the chairman of the Authority is determined by the Chief Executive of the SAR who is responsible for monitoring her performance. An allowance, determined by the Finance Committee of the Housing Authority, is payable to the chairman in recognition of her responsibilities.

With regard to part (c) of the question, current appointment mechanisms generally work well and there is no plan to carry out an overall review. Some Members of this Council do sit on the governing boards. There are already effective measures to ensure the accountability of statutory bodies including submission of annual reports and audited accounts to the Administration, tabling them at this Council for Members' scrutiny and attendance at relevant Panel meetings.

MR LAU KONG-WAH (in Cantonese): Madam President, the Government urges the persons in charge of some public bodies who do not wish to renew their appointment to stay, with the person in charge of the Airport Authority being an example, while it does not urge the persons in charge of certain bodies who really wish to renew their appointment to stay, with the Ombudsman being an example. I am certainly not appealing for the Ombudsman, (laughter) but I would like to ask a question about principles. If the Ombudsman indicates that he wishes to renew his appointment but he is not appointed again by the Government, does it mean that the Government is not satisfied with his performance? Is there a conflict of roles for an executive body to take part in the appraisal of the performance of the watchdog over an executive body?

CHIEF SECRETARY FOR ADMINISTRATION: Madam President, the renewal of appointment of a chief executive or chairman of a statutory body to the extent that it is determined by the Chief Executive of the SAR, the performance of that particular officer and his willingness to renew his appointment will clearly be taken into account. But in the final analysis, the decision is for the Chief Executive to make. I do not believe that there is a conflict of interests in effect that the Chief Executive has statutory responsibilities to appoint or to renew the appointment of chairman or chief executive of the body when carrying out the regulatory function.

PRESIDENT (in Cantonese): Mr LAU Kong-wah, which part of your supplementary has not been answered?

MR LAU KONG-WAH (in Cantonese): Madam President, the part relating to a conflict of roles. The Chief Secretary for Administration has said that there is no conflict, but why is there no conflict? In other words, the regulator of an executive body is supervising those people who take part in the appraisal, why is there no conflict of roles? How can this conflict be avoided?

CHIEF SECRETARY FOR ADMINISTRATION: Madam President, the function of the Chief Executive vis-a-vis the appointment and renewal of appointment of chairmen or chief executives of statutory bodies is, of course, laid down in their respective ordinances. If there is a conflict of interests that interferes with the performance of the mentioned responsibilities, then presumably, the necessary legislation would not be passed in their current forms by this Council.

MR CHEUNG MAN-KWONG (in Cantonese): Madam President, seven very important statutory public bodies are mentioned in the question, among the persons in charge given the highest remunerations, with the exception of the persons in charge of the HKMA and the Housing Authority who are appointed, the rest are recruited through open recruitment. Can the Government inform this Council why are the persons in charge of the HKMA and the Housing Authority appointed? Will it specify in future that the top persons in charge of similar important statutory bodies be recruited through open recruitment, and will they have to declare interests and go through vetting before appointment to ensure their integrity and that there is no conflict of interests?

CHIEF SECRETARY FOR ADMINISTRATION: Madam President, if you will permit, I will answer the second part of the question and then with your permission, I would like to defer to the Financial Secretary for the first part of the question.

So far as the Housing Authority is concerned, I think the decision must be for the Chief Executive to make as to whether he goes for open recruitment or he considers some other more appropriate forms of appointment. In terms of the integrity and the conduct or behaviour of the persons being considered for appointment to the chairman of the Housing Authority, I can assure the Honourable Member that the Chief Executive will take all these into account in making his final decision.

FINANCIAL SECRETARY (in Cantonese): Madam President, as regards the appointment of the chief executive of the HKMA, the story begins in 1993 when a substantial change was made to the HKMA, that is, a government department and a few bodies were merged into a statutory body. In the course of the merger, I believe that the then Financial Secretary had given comprehensive consideration to all aspects and concluded that a person qualified to assume the post of the chief executive of the HKMA should have supervisory experience in the banking sector and be very familiar with the monetary system, and he should also understand the impact of the change on the government system and be able to overcome these difficulties. I believe that the then Financial Secretary had decided that the first chief executive of the HKMA would not be recruited through open recruitment after he had considered all these. The Honourable Member has asked about the measures to be taken in future. I find the present circumstances different from those when the HKMA was established. At present, many methods may be adopted to recruit senior officers. The Member favours open recruitment and I believe that we will prudently consider his view next time when there is such a need.

MR CHEUNG MAN-KWONG (in Cantonese): Madam President, I do not doubt the ...... of the incumbent ......

PRESIDENT (in Cantonese): Mr CHEUNG Man-kwong, which part of your supplementary has not been answered? Please specify.

MR CHEUNG MAN-KWONG (in Cantonese): Madam President, the part about why there is no system. Why is there not a system for interest declaration and integrity examination in respect of the recruitment of these persons? Will there be such a system?

CHIEF SECRETARY FOR ADMINISTRATION: Madam President, although we have not established a hard and fast rule, the integrity of the individual persons being considered for appointment is, of course, a factor that we will take into account in making the final decision.

MR ALBERT HO (in Cantonese): Madam President, the Chief Secretary for Administration has said in her main answer that the remuneration packages for the persons in charge of these public bodies are often drawn up with reference to prevailing arrangements for their counterparts in the private sector. However, the obvious difference between public and private bodies is that public bodies do not regard profits as the most important or only goal. We do not think that the responsibilities of the persons in charge of public bodies are more important than those of the Bureau Secretaries present or that their work is tougher than that of our Bureau Secretaries. My supplementary question is, generally speaking, the average salaries of these persons in charge of public bodies are twice or thrice of those of the Bureau Secretaries present and the salaries of their aides are even higher than those of the Bureau Secretaries present. Will the morale of the Bureau Secretaries present be shaken as a result of the unreasonably high salaries of these people? (Laughter)

FINANCIAL SECRETARY (in Cantonese): Madam President, this involves the operation of the relevant statutory bodies in a business environment. Certainly, the chief executives or senior officers working with these statutory bodies get a sense of achievement and satisfaction from the public business they handle but their working environment is highly different from ours as they need to compete in the market. Therefore, the posts concerned should be assumed by qualified persons. Under these circumstances, although the candidates know at the recruitment stage that they have to provide public services, they are ordinary people but not monks after all, and they still have financial and material needs. If the bodies concerned wish to recruit suitable persons of ability to carry out the relevant work, they must pay certain prices and offer relevant remuneration as these bodies need to withstand market pressure. The remuneration of these persons in charge cannot be compared with that of civil servants. Take the HKMA as an example, the remuneration of the persons in charge does not include pension, housing allowance or education allowance for siblings while senior civil servants receive other benefits. For instance, we are honoured to be questioned by Honourable Members in this Council and be spurred on by them. For me, this is a source of satisfaction, (laughter and applause) but those persons in charge cannot experience this and they do not have the honour. In comparing the persons in charge of statutory bodies and senior civil servants, the most important point is whether the posts concerned should be taken up by persons with the expertise who are not available in the market. If we think so, we must pay market prices.

PRESIDENT (in Cantonese): Although Members appreciate the answer of the Financial Secretary, it is not appropriate for Members to applaud in this Chamber. (Laughter)

MISS CYD HO (in Cantonese): Madam President, there are committees under the listed statutory bodies such as the Exchange Fund Advisory Committee (EFAC), can the Government list out the members of these committees who are concurrently supervised by statutory bodies? The Chief Secretary for Administration has just said that if there is a conflict of interests, the legislation would not be passed, but I hope that the policy secretary can tell us whether people being supervised are empowered to appoint the top executives of these statutory bodies?

FINANCIAL SECRETARY (in Cantonese): Madam President, this was not the case with the HKMA then. I have said that the present chief executive of the HKMA was also a civil servant but he does not need supervision now. At that time, Members of the EFAC had not taken part in the selection process.

MR AMBROSE CHEUNG (in Cantonese): Madam President, we can see from the main answer of the Government that the selection mechanism is basically diversified. Why do four out of the six cited examples, including the two railways, the Hospital Authority, the Office of the Ombudsman and the Housing Authority not have selection committees while both the HKMA and the SFC have selection committees? Will the Government consider the introduction of a selection committee system to give the public a better account in respect of the appointment and dismissal of the officers concerned?

CHIEF SECRETARY FOR ADMINISTRATION: Madam President, I think I have made it clear in my principal reply that the appointment and the remuneration of individual chief executives or chairmen-cum-chief executives are generally perscribed in the law. In most of these incidents, the responsibility rests with the Chief Executive. I will, of course, be very happy to refer the Honourable Member's suggestion to the Chief Executive for his consideration. But as I have observed, in general, the current procedures seem to be working well.

MR JAMES TIEN: Madam President, I think Members are concerned about the responsibilities of all these bodies, for example, where the buck finally stops? In the Chief Secretary for Administration's reply in regard to the question itself, she has mentioned that the current appointment mechanisms are generally working well. But if we look at all the seven bodies cited, the HKMA has no chairman; the SFC, the MTRC and the KCRC have chairmen or chief executives; the Hospital Authority has a chairman who is not paid while the Housing Authority's chairman is paid. Thus, could the Chief Secretary for Administration explain a bit more on how these different systems have been working well, why are they so different, and is there any argument about actually having them all cast in uniform setup, for example, they should all have either chairmen or chief executives that are either paid or not paid, so that we could actually point out who is finally responsible for these bodies?

CHIEF SECRETARY FOR ADMINISTRATION: Madam President, these statutory bodies were established at different points of time, and clearly, the requirements of the posts and the level of responsibilities attached to the posts were determined at some particular points of time. Given the history of these individual statutory bodies, I think unless we are to conduct a complete review and overhaul, it would be extremely difficult to align all the different practices. And actually, I do not see the need for this. Clearly, in any specific case where it is indicated that the procedure is not working well, we would undertake to review that particular ordinance, and if necessary, to submit proposals to this Council for amendment to the individual ordinances.

PRESIDENT (in Cantonese): Last supplementary.

DR TANG SIU-TONG (in Cantonese): Madam President, according to paragraph (vi) of the main answer, the remuneration of the chairman of the Housing Authority is determined by the Establishment and Finance Committee under the Housing Authority. Will there be an illicit transfer or will it be unfair for a committee subordinate to a statutory body to determine the remuneration of the person in charge of the statutory body?

PRESIDENT (in Cantonese): Chief Secretary for Administration, do you understand this supplementary question?

CHIEF SECRETARY FOR ADMINISTRATION: Madam President, if I take the question at its face value, I do not see anything wrong, in principle, with a committee within the organization determining collectively what remuneration should be given an individual officer in particular. I think that it depends entirely on how the system itself is operated. And we have no evidence to suggest that there are any, as it were, privately vested interests or personal interests involved in the decision that was made about the remuneration for the chairman of the Housing Authority.

Parasites Found in Potable Water

4. MISS EMILY LAU (in Cantonese): Madam President, it is reported that in July and August this year, potable water in Sydney, Australia was found to contain two kinds of parasites, namely, giardia and cryptosporidia. In this connection, will the executive authorities inform this Council:

(a) how the health of people will be affected if they drink potable water containing these two kinds of parasites;

(b) whether laboratory tests have been conducted to ascertain if the potable water in Hong Kong contains these two kinds of parasites; if so, of the time when the tests were conducted and the results of such tests; if no, the reasons for it; and

(c) whether it has formulated contingency measures to cope with the situation when potable water is found to contain the two kinds of parasites?

SECRETARY FOR WORKS (in Cantonese): Madam President,

(a) Most people may not develop symptoms after drinking water containing giardia and cryptosporidia. Symptoms in healthy individuals are usually in the form of self-limiting diarrhoea. In more severe cases, patients may develop abdominal pain, diarrhoea, mal-absorption, fatigue and weight loss.

(b) Since September 1997, the Water Supplies Department (WSD) has been conducting regular tests of potable water every three months to check if the water contains any giardia or cryptosporidia. No giardia or cryptosporidia has been detected in the tests conducted so far except the one carried out in July 1998, during which only a very low level of giardia and cryptosporidia was detected in the water samples, ranging from 0.2 to 1.0 parasite per litre of water. According to the information and experience of the water supplies industry in other parts of the world, such a level of parasite content is regarded as very low.

(c) Basically, the water treatment processes undertaken by the WSD can effectively screen out the parasites, through natural purification in reservoirs and the process of coagulation by using aluminium sulphate, sedimentation, filtration and chlorination. This will ensure that the potable water in Hong Kong complies chemically, biologically as well as bacteriologically with the standards in the Guidelines of the World Health Organization (WHO), and is pure and safe for consumption.

Furthermore, treated water is also subject to stringent quality monitoring and testing by the WSD. Where necessary, consumers will be advised of the need to have the water boiled before consumption to ensure safety.

MISS EMILY LAU (in Cantonese): Madam President, in his main reply, the Secretary said that in the tests conducted in July this year only a very low level of giardia and cryptosporidia was detected in the water samples, ranging from 0.2 to 1.0 parasite per litre of water. I believe that the Secretary is also aware that the unit used internationally is 100 litres of water, meaning that 20 to 100 parasites were found in every 100 litre of water in Hong Kong. Madam President, does the Secretary know that the environmental protection authorities in the United States recommend that water must be boiled before use, even for rinsing the mouth, if five giardia or 50 cryptosporidia are found in every 100 litre of water; while the British law also provides that 100 litre of water shall not contain over 10 cryptosporidia?

SECRETARY FOR WORKS (in Cantonese): Madam President, according to our information, the WHO has not yet so far set a very clear standard in its guidelines in this regard. Miss Emily LAU has mentioned the British and United States standards on this, but it depends indeed on the duration of consumption and the length of the period over which water samples continue to be found to contain parasites before we should take corresponding actions. As far as I know, taking the incident happened in Australia cited by Miss LAU as an example, the Australian authorities only took action after a certain period over which the level of parasites continued to be found as being too high. What they mainly did was to tell the people to boil the water before drinking and the notice was cancelled when the level of parasites showed signs of decline. Comparing with the incident in Australia, the level of parasites that we found in July was still very low. I would like to tell Members one more thing. In the subsequent tests conducted after the one in July, no more samples containing cryptosporidia were found. Therefore, I feel that our existing monitoring, filtration processes and systems, and the quality of the potable water are all up to the safety standards.

MR CHAN WING-CHAN (in Cantonese): In part (c) of the main reply, it has been pointed out that the WSD will continue to see to it that treated water is subject to stringent quality monitoring and testing, and where necessary, will advise consumers to have the water boiled before consumption to ensure safety. Then, is the water in public places, such as the water from the drinking fountains in parks, still suitable for consumption or can be readily consumed? Is the water there safe for consumption now?

SECRETARY FOR WORKS (in Cantonese): Madam President, generally speaking, the monitoring of the water quality begins at the water treatment works because after the potable water leaves the works, it runs through an enclosed piping system and hence the possibility of it being contaminated is very low. However, the water must go through the people's very own water supply systems, such as the water tanks on the roof of their buildings and then through the piping. Therefore the WSD always reminds people to clean their water tanks regularly and to replace overly old pipings. In respect of monitoring, other than taking water samples from the water outlets of the water treatment plants, we also conduct spot checks and inspection in other places.

MR CHAN WING-CHAN (in Cantonese): My question was whether the water from the drinking fountains in parks can continue to be consumed or can be readily consumed. Is this water safe for consumption?

SECRETARY FOR WORKS (in Cantonese): Madam President, I believe that the drinking fountains may not have any direct relation with our water supply system because if a fountain is clean and well-maintained, then the drinking water from the fountain should not be any different from the water directly supplied by us. Since it depends on the maintenance and repair of the drinking fountains, it is very difficult to draw a conclusion here.

DR RAYMOND HO (in Cantonese): Madam President, in his answer to Miss Emily LAU's follow-up question, the Secretary said that after parasites were discovered in the potable water in the test carried out in July, none has been detected in the subsequent tests. Does this mean that after the detection of parasites, monitoring or tests have been conducted more frequently, that is, more than once every three months?

SECRETARY FOR WORKS (in Cantonese): Madam President, we will step up monitoring if special cases are found. I have also mentioned that we monitor the water in many different places other than the water treatment works.

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

DR RAYMOND HO (in Cantonese): I wish to ask about the frequency of the tests conducted. Are tests done once every month or once every month for six months after parasites were detected in order to increase the frequency?

SECRETARY FOR WORKS (in Cantonese): Madam President, I do not have the information on hand to say whether tests were conducted every day, every week or every month at that time. Nevertheless, our general practice is that once problems we consider to be of concern arise, we will step up the monitoring.

MISS CYD HO (in Cantonese): Madam President, it is indicated in the WHO's report in 1993 that these parasites have very high resistance against chlorine. Even when chlorine is added to the water, they can survive. Is the WSD aware of this report? Has the Administration adopted newer, more effective measures to control these two parasites to eliminate them from the water; or it is aware of this problem but tries to evade talking about it as it has no other way to control it?

SECRETARY FOR WORKS (in Cantonese): Madam President, we are fully aware of the information mentioned by Miss HO. Particularly, the effect of chlorination is indeed less than satisfactory in eliminating the two parasites. The two parasites are screened out through the coagulation, sedimentation and filtration processes I mentioned earlier. According to the latest research findings, the best way to screen them out is by ozone. Of course, this depends on whether we have the need to adopt this method. As far as our existing facilities at the water treatment works and the sources of the raw water are concerned, it seems that it is not necessary to adopt the ozone sterilization method so far.

MR AMBROSE CHEUNG (in Cantonese): Madam President, in paragraph (c) of his main reply, the Secretary said that the potable water in Hong Kong complies chemically, biologically as well as bacteriologically with safety standards and the treated water is subject to stringent quality monitoring and testing by the WSD. Will the Secretary inform this Council whether there is any mechanism or legislation to enable the WSD to monitor the safety of the potable water provided by restaurants to their customers? If yes, how do such mechanisms operate and what are the numbers of prosecutions and spot checks?

SECRETARY FOR WORKS (in Cantonese): Madam President, as I have mentioned in my answer to one of the questions, it is impossible for us to test the water from the taps of every consumer. Our main work is to ensure that the water is up to an acceptable safety level when it leaves the water treatment works. I have also mentioned earlier that owing to the different water supply systems installed in different households ─ some get the water from taps connected to the tanks while other taps are connected to the pipes ─ the degree of contamination in the water can vary greatly. Nevertheless, to protect the people's safety, we also conduct spot checks in other places to find out whether the water there reaches the required safety standard and take corresponding measures to ensure the water quality.

MR AMBROSE CHEUNG (in Cantonese): Madam President, the Secretary has not answered my question. Can the Secretary cite any example to illustrate which law empowers the WSD to take water samples from restaurants to ensure that drinking water there is up to the safety standards?

SECRETARY FOR WORKS (in Cantonese): Madam President, I do not consider it necessary to put in place legislation to ensure the safety of the potable water because the work to ensure the safety of potable water starts from the water treatment works. I do not think that we can use water services laws to regulate the facilities of the people to see to it that they meet the sanitary standards. What we can mainly do is to conduct tests at source to ensure the quality of the potable water available to the consumers is up to a certain level. If the sanitation of the water supply systems of the consumers themselves are below standard, then of course the sanitation level of the water they consume will not be up to standard.

MR LAU KONG-WAH (in Cantonese): Madam President, Miss Cyd HO has asked about the two parasites' resistance against chlorine. I would like to ask the Secretary about their reproduction capacity.

SECRETARY FOR WORKS (in Cantonese): With your indulgence, Madam President, as I am not an expert in this field, I do not know the reproductive capacity of these parasites. Yet, I can tell Mr LAU that according to the data we have, generally speaking, animal wastes are the source of contamination and so after the raw water is treated in the water treatment works and transported to the pipes, there is very little chance of it being contaminated again.

DR LEONG CHE-HUNG (in Cantonese): Madam President, it was mentioned in paragraph (a) of the main reply that most people may not develop any symptoms after drinking water containing giardia and cryptosporidia. But medical literature has recorded a disease known as chronic giardiasis, which is caused mainly by such parasites remaining in one's intestines and stomach. Does the Government know if there have been such cases in Hong Kong? If yes, what are the number and source of these cases?

SECRETARY FOR WORKS (in Cantonese): Madam President, as far as I am aware, since this is not a very serious contagious disease, under the present medical laws, there is no need to keep a record of each case. Therefore, insofar as I know, the Government does not have the statistics on how many people have contracted this disease caused by the two parasites.

MR LEE CHEUK-YAN (in Cantonese): Madam President, in paragraph (b) of the main reply, the Secretary stressed that according to the information and experience of the water supplies industry in other parts of the world, the level of 0.2 to 1.0 parasite per litre of water is regarded as very low. However, Miss Emily LAU has pointed out just now a specific standard laid down in the laws of the United States. Basing on the level set by the United States, has the level recorded in Hong Kong exceeded that standard? What level will the Secretary consider as dangerous?

SECRETARY FOR WORKS (in Cantonese): Madam President, I have also explained just now that we cannot regard the water as substandard just by looking at the parasites contained in one sample. To our understanding, according to the general international standard, the number of parasites detected in the water is of course an indicator, but only when the level of parasites in the water remains to be very high after repeated samples have been taken will it become a cause of concern that should necessitate any actions. Therefore, we cannot judge it by merely one figure.

MR LEE CHEUK-YAN (in Cantonese): Actually, what I am most concerned about is how the level is determined and how long the parasites continue to be detected. Three months? Half a year?

SECRETARY FOR WORKS (in Cantonese): Madam President, according to our understanding, normally it is determined by an annual average, that is, to look at the situation over a year. If the level remains high over a period, we must raise our attention. So it is not determined by any individual sample. As I have pointed out earlier, once the water is found to contain the parasites, we will continue to monitor the situation. If no further parasites are found in the subsequent samples, we will consider that the water quality control has reached an appropriate level.

PRESIDENT (in Cantonese): Last supplementary question.

MISS EMILY LAU (in Cantonese): Madam President, the Secretary mentioned in paragraph (a) of his main reply that the parasites actually do not cause serious health problems and in more severe cases, patients may only develop diarrhoea. Does the Secretary know that in 1993, when these parasites were found in Milwaukee, the United States, 400 000 people contracted the disease caused by them, among whom 4 000 were hospitalized and 100 lost their lives? Does the Secretary know about this incident?

SECRETARY FOR WORKS (in Cantonese): Madam President, we are not too clear about the details of the incident as regards how it exactly came about at that time but we do know that there was such an incident. Many people there were not used to having the water boiled before drinking. They drank the water from the tap direct. Of course I am not saying that there is any problem with that. But we are not too clear about their testing and filtration process. We do know that if these two parasites exist in the potable water over a prolonged period of time, problems will arise. As to why there was such a severe outbreak of the disease, I really do not have the details.

Asians Applying to Become Permanent Residents of Hong Kong

5. MISS CHOY SO-YUK (in Cantonese): Madam President, will the Government inform this Council:

(a) of the number of persons from Asian territories, including Nepal, Pakistan, Philippines, Thailand and India, who were issued employment visas and became Hong Kong residents in the past five years; and the number of such persons who became permanent residents in Hong Kong by virtue of having resided here for seven continuous years during the same period; and

(b) whether the Administration has plans to amend the immigration policies which allow foreigners holding an employment visa on arrival to submit applications immediately for their family members to come to Hong Kong for reunion and allow these foreigners and their family members to apply to become permanent residents of Hong Kong after residing in the territory for a continuous period of seven years?

SECRETARY FOR SECURITY (in Cantonese): Madam President,

(a) The number of persons from Nepal, Pakistan, the Philippines, Thailand and India who have been issued visas under the general policy on employment and investment over the past five years are as follows:

	Employment/investment visa issued

Year	Nepal	Pakistan	Philippines	Thailand	India	Total

1994	58	57	1 204	488	711	2 518

1995	62	46	976	373	637	2 094

1996	38	29	952	284	578	1 881

1997	17	36	672	226	537	1 488

1998 (January- October)	56	36	467	170	376	1 105

Total	231	204	4 271	1 541	2 839	9 086

Statistics on employment or investment visas issued to persons from the Asian region as a whole but excluding the Mainland are not readily available. This is because the number of Asian countries involved is too large and we do not have sufficient manpower to keep the statistics on the relevant countries.

Foreign nationals coming to Hong Kong on employment visas cannot automatically become Hong Kong permanent residents after residing here for seven years. Before reunification, they had to apply for naturalization as British Dependent Territories Citizens in order to become Hong Kong permanent residents. After reunification, they have to fulfil the criteria of entering Hong Kong with valid travel documents, residing in Hong Kong for seven years or more and taking Hong Kong as their place of permanent residence. These criteria are laid down in Article 24(2)(4) of the Basic Law and also in Schedule 1 to the Immigration Ordinance. These requirements apply to all foreign nationals and not just those who hold employment visas. We do not have separate statistics on the number of persons acquiring permanent resident status through employment.

(b) The policy to allow people admitted for employment or investment to bring in their immediate family members after entry is a long standing practice. Hong Kong is an international trade and financial centre, and home to the regional headquarters of some 900 multinational corporations. Encouraging foreigners to invest in Hong Kong is an important strategy to maintain Hong Kong's prosperity. Not allowing foreign investors and other foreigners admitted for employment to bring their dependants to Hong Kong would discourage their investing or working in Hong Kong and hinder Hong Kong's economic development. It would not be in Hong Kong's interest to do so and, therefore, we have no plan to alter this policy.

As mentioned in the first part of my reply, the provisions on right of abode for foreign nationals in Hong Kong are laid down in Article 24(2)(4) of the Basic Law. We do not see any compelling reason to seek any change to the Basic Law.

MISS CHOY SO-YUK (in Cantonese): Madam President, in answering part (b) of the question, the Secretary stated that the reason for dependants to apply to come to Hong Kong was for reunion only. Can the Secretary confirm whether dependants of people holding employment visas can apply for Comprehensive Social Security Assistance (CSSA) if they meet the financial requirements? If so, does it mean that Hong Kong has recognized them as Hong Kong residents?

SECRETARY FOR SECURITY (in Cantonese): Concerning whether dependants of people coming to Hong Kong for employment or investment can apply for CSSA, I understand that under the current policy, Hong Kong permanent residents, residents of unconditional stay, residents who have resided in Hong Kong for at least one year as well as residents who are subject to no conditions of stay and who have resided in Hong Kong for at least one year can apply for CSSA as long as they meet other requirements such as asset requirement.

MISS CHOY SO-YUK (in Cantonese): The Secretary has not answered my supplementary question directly. I was referring to those dependants brought into Hong Kong by those who came here by virtue of employment visas. Can they apply for CSSA as long as they meet the requirements?

SECRETARY FOR SECURITY (in Cantonese): What I meant just now is that people coming to Hong Kong by virtue of employment or investment visas must be Hong Kong permanent residents or people subject to no conditions of stay and who have been resided in Hong Kong for at least one year before they can apply for their dependants to come here. For instance, for employees who newly arrived from foreign countries, they will generally be granted a period of stay of one year upon their arrival. The dependants they bring in afterwards will also be granted a one-year stay. As such, new arrivals will not be able to meet our requirements immediately. They will only be qualified on the expiry day when their limit of stay is removed and when they meet other requirements.

MR FUNG CHI-KIN (in Cantonese): Madam President, from the statistics provided to us by the Secretary, I see that only 200-odd employment visas were issued to people from Nepal. Has this figure included those people such as Gurkhas?

SECRETARY FOR SECURITY (in Cantonese): Madam President, we do not have Gurkhas in Hong Kong anymore. Undoubtedly, Gurkhas are more experienced in security work. As to whether all these 200-odd people are engaged in the security profession, I am afraid I do not have the information in hand.

MR HUI CHEUNG-CHING (in Cantonese): Madam President, the Secretary mentioned the number of employment/investment visas in part (a) of the main reply. In this respect, how many dependants have applied to come to Hong Kong for reunion as a result of these visas?

SECRETARY FOR SECURITY (in Cantonese): Madam President, regarding the number of dependants who have come to Hong Kong after the issue of the investment/employment visas, I am afraid I do not have the relevant information in hand. According to our current policy, immediate dependants of those who have been granted investment or employment visas are allowed to come to Hong Kong. Generally speaking, immediate dependants include spouses, unmarried children who are aged under 21 and parents who are aged over 50. If the parents are widowed, they can apply even if they are under the age of 50. As for unmarried children over the age of 21, we can also consider their cases. We issue about 15 000 to 16 000 investment/employment visas each year. Unless we trace the cases one by one, we do not have information about the number of dependants brought into Hong Kong by each of those who have been issued with the relevant visas.

MR TAM YIU-CHUNG (in Cantonese): Madam President, will the Secretary inform this Council of the number of people of Nepalese and Pakistani origins who have resided in Hong Kong over the past five years?

PRESIDENT (in Cantonese): How do you mean by "resided"?

MR TAM YIU-CHUNG (in Cantonese): I meant those residing in Hong Kong.

SECRETARY FOR SECURITY (in Cantonese): Madam President, I do not have the statistics if what Mr TAM asked for is, for instance, how many Nepalese, Indians, Pakistanis stayed in Hong Kong in 1994 and then how many in 1996. But I have some figures of foreigners living in Hong Kong, including people of these countries. If Mr TAM is interested, I have in hand such information as how many foreigners are now staying in Hong Kong.

PRESIDENT (in Cantonese): Mr TAM, do you want the Secretary for Security to answer you right now or give you a written reply?

MR TAM YIU-CHUNG (in Cantonese): I would like to listen to it if the Secretary has the relevant information now.

SECRETARY FOR SECURITY (in Cantonese): Madam President, please give me a few seconds to trace the figures.

PRESIDENT (in Cantonese): Certainly, take your time.

SECRETARY FOR SECURITY (in Cantonese): Madam President, I have some statistics in hand. For instance, as at October this year, the greatest number of foreign nationals comes from the following five countries: the Philippines: 154 000 people; Thailand: 26 000 people; India: 23 000 people; Pakistan: 14 000 people; Nepal: 17 000 people. Perhaps let me make some clarification. The abovesaid people do not represent the greatest number of foreign nationals. Of course, we still have tens of thousands of people from such countries as Australia, Canada and the United States staying in Hong Kong. The figures I mentioned relate to the countries which Mr TAM has expressed concern with.

MR ANDREW CHENG (in Cantonese): Madam President, from part (a) of the main reply, we understand that the Government does not have separate statistics on the number of persons acquiring the right of abode through employment. Having a comprehensive set of policies on education, manpower and social welfare, the Government of the Hong Kong Special Administrative Region should at least keep a complete set of statistics covering the past five years on the total number of people who have, after gaining employment visas, succeeded in acquiring the right of abode under Article 24 of the Basic Law and becoming permanent residents. Will the Secretary inform this Council whether or not this set of statistics is available? If not, why not? As Article 24 of the Basic Law has given people the right to lodge applications, I believe the Government should have kept statistics on this.

SECRETARY FOR SECURITY (in Cantonese): Madam President, according to the provisions of the Basic Law, it is only after unification, that is, 1 July, that foreign nationals can, by virtue of the relevant provisions, acquire the right of abode. The statistics we have at the moment are of course classified according to different nationalities. But for the time being, we have not, through whatever means, acquired the statistics on the number of persons acquiring the right of abode through investment, employment or dependency. Nevertheless, I can consider adding these items when sorting the statistics in future.

MR ANDREW CHENG (in Cantonese): Can I ask the Government to provide the statistics on naturalization in writing? I estimate that before the reunification, that is, 1 July 1997, some people needed to naturalize as British Dependent Territories Citizens before they could become Hong Kong permanent residents. Does the Government have such information? If so, can the Government answer this supplementary question in writing?

PRESIDENT (in Cantonese): This is not the supplementary question you raised earlier.

MR ANDREW CHENG (in Cantonese): What I meant is through employment.

PRESIDENT (in Cantonese): Mr CHENG, please sit down. Mr CHENG has raised another supplementary question instead of a follow-up question. We still have two Members waiting to raise their questions. Let me first ask the Secretary whether she will give a written reply to this supplementary question?

SECRETARY FOR SECURITY (in Cantonese): Yes, but they are two completely different issues. (Annex II)

MR BERNARD CHAN (in Cantonese): Madam President, in part (b) of the main reply, the Secretary mentioned the foreign nationals who came to Hong Kong by virtue of employment visas. Does the Government have a quota? At the same time, can children born in Hong Kong to foreign nationals acquire the Hong Kong permanent resident status immediately?

SECRETARY FOR SECURITY (in Cantonese): Madam President, regarding the policy of issuing investment or employment visas to foreign nationals, there is absolutely no quota as it would not be in Hong Kong's interest for encouraging foreign investment if there is a lack of flexibility. According to our past records, we issued almost 16 000 visas each year. Although I do not have detailed statistics in hand, the figure for this year is lower. In accordance with Article 24 of the Basic Law, children born in Hong Kong to persons of foreign nationality who have acquired the right of abode will be able to acquire the right of abode, that is, when they reach 21 years of age, they will need to meet the requirement of residing in Hong Kong for not less than seven years and taking Hong Kong as their place of permanent residence before they can acquire the right of abode.

MISS CHOY SO-YUK (in Cantonese): Madam President, there is a quota for mainlanders applying to reside in Hong Kong. Can the Government inform this Council why it has failed to set a quota for employment visas for this category of people? Many countries have not laid down the requirement that one can go there on obtaining an employment visa and that his dependants can also become residents. Why can the Government not set a quota for restricting these people to come to Hong Kong to become residents?

SECRETARY FOR SECURITY (in Cantonese): Madam President, perhaps I need to stress one point to Miss CHOY and that is, foreign nationals cannot acquire the right of abode simply by virtue of their employment or investment visas. Apart from living in Hong Kong for at least seven years, they also need to meet other requirements as laid down in the Basic Law and the Immigration Ordinance. In other words, they can only acquire the right of abode provided that they have ordinarily resided in Hong Kong for not less than seven years, complied with our immigration requirements and are willing to take Hong Kong as their place of permanent residence. As a matter of fact, when foreign nationals enter Hong Kong by virtue of an employment or investment visa, we will only permit them to stay in Hong Kong for one year. We will only extend their stay on the expiry of one year if they have not violated the law. Foreign nationals cannot acquire the right of abode simply by virtue of their investment or employment in Hong Kong. In fact, not too many foreign nationals acquire the right of abode simply because they have lived in Hong Kong for at least seven years. Most of them are actually dependants. Why have so many people from the several countries in which Miss CHOY showed particular interests, that is, Nepal, India and Pakistan, acquired the right of abode after the reunification? This is because many Pakistanis and Indians have already been living in Hong Kong. Before the reunification, they were not allowed to acquire the right of abode under the British Nationality Act. After reunification, as the Basic Law stipulated that foreign nationals would be able to acquire the right of abode so long as they had lived in Hong Kong for at least seven years as well as meeting other requirements, these people, including their children who were under 21 years of age and who were born in Hong Kong, are thus allowed to acquire the right of abode.

MISS CHOY SO-YUK (in Cantonese): Madam President, I think my supplementary question has not been answered. We all know what requirements have to be met for one to reside in Hong Kong. But after 1997, many people became Hong Kong residents by virtue of the provisions of the Basic Law. These people can immediately apply for their dependants, who will in turn apply for their own dependants, to come to Hong Kong. Has the Government considered setting a quota so as to prevent our population from expanding and ensuring that various social resources can be better utilized?

PRESIDENT (in Cantonese): Miss CHOY, what you meant is the Secretary for Security has misunderstood the question you raised just now. Actually, your question is: Will the Government consider setting a quota restricting the number of people of these categories to become permanent residents each year?

MISS CHOY SO-YUK (in Cantonese): Yes.

SECRETARY FOR SECURITY (in Cantonese): Madam President, I see that Miss CHOY has the feeling that the arrival of so many foreign nationals in Hong Kong will lead to such problems as expansion of our population, increasing demands for social services and so on. Nevertheless, we have no plans to set a quota on employment or investment visas. As I said earlier, excessively stringent requirements will not be beneficial for the encouragement of foreign investment. In fact, there has been no quota for so many years. Neither do we see there is such a need in future. On the contrary, in response to the question raised by Miss CHOY, we are willing to review what dependants should be permitted to come to Hong Kong to join the person who has come here for investment or employment. What is meant by immediate dependants and can the criteria for assessing immediate dependants be tightened up? Apart from these, we will review under what circumstances dependants can apply for their own dependants to come to Hong Kong. As far as these two aspects are concerned, we are willing to conduct a review.

Supervision of Private Residential Care Homes for the Elderly

6. MR FRED LI (in Cantonese): Madam President, regarding the supervision of private residential care homes for the elderly (RCHEs), will the Government inform this Council:

(a) of the present number of private RCHEs; among them, the number operating under certificates of exemption issued under the Residential Care Homes (Elderly Persons) Ordinance (Cap. 459); whether the Administration has any plan to designate a date by which such certificates of exemption will be revoked and that all private RCHEs will have to operate under licence;

(b) of the supervision mechanism currently in place to ensure the services provided by private RCHEs comply with those specified in the "Code of Practice for Private Homes for the Elderly" in respect of taking care of the physical and psychological needs of the elderly; whether there are private RCHEs refused a licence for failing to comply with those specifications; and

(c) of the number of private RCHEs in Hong Kong currently participating in the Bought Place Scheme of the Administration; among them, the number not yet operating under licence; whether the Administration will set yardsticks to assess if the services provided by the private RCHEs participating in the Scheme are up to the required standards?

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

(a) As at 23 November 1998, there were altogether 427 private RCHEs in Hong Kong, of which 105 were licensed, and the remaining 322 were issued with certificates of exemption. The existing figure of 105 private RCHEs being licensed represents an increase of 80 over the figure of 25 in 1998. This shows that satisfactory progress has already been made.

We believe that, with the efforts of operators of private RCHEs and the assistance rendered by the Social Welfare Department (SWD), more RCHEs will meet the licensing standards through enhancement in service quality and will thus be able to obtain a licence. The Administration will decide the renewal of certificates of exemption for private RCHEs on individual merits. Since the circumstances of private RCHEs vary, it would be impractical and inflexible to fix a cut-off date upon which all certificates of exemption are to be revoked.

(b) The Code of Practice for Residential Care Homes (Elderly Persons) specifies the guidelines issued by the SWD on the provision of health and care services and social care services for the elderly, including arrangements for personal care and social activities. Social Work Inspectorate and Health Inspectorate Teams from the SWD's Licensing Office of Residential Care Homes for the Elderly (LORCHE) will visit RCHEs from time to time to ensure that the guidelines in the Code of Practice are complied with and to give advice as and when necessary. So far, no private RCHE has been denied a licence on account of failure to take care of the physical and psychological needs of the elderly residents as required.

(c) Of the 44 private RCHEs which have joined the Bought Place Scheme, 20 are licensed and 24 are operating on certificates of exemption.

In addition, 14 private RCHEs have joined the Enhanced Bought Place Scheme. 11 of these RCHEs are licensed, and the remaining three are issued with certificates of exemption.

Private RCHEs under the Bought Place Scheme and the Enhanced Bought Place Scheme are required to meet specified standards on staffing level and floor space. Inspectors from the SWD's LORCHE will visit the private RCHEs covered by the two schemes to make sure that they are up to the required standards.

Besides, the Administration is now formulating a set of "Service Quality Standards" to help private RCHEs enhance their service quality. It will set out the standards to be attained by private RCHEs on the use of information, records of daily operation and activities, staff recruitment and training, service management, clients' rights, and so on. The standards will be applied to all private RCHEs, but will first be implemented in private RCHEs under the Enhanced Bought Place Scheme. The SWD has consulted the two associations of private RCHEs as well as RCHEs under the Enhanced Bought Place Scheme on the draft standards. The views received are being considered by the SWD. This set of standards is expected to be introduced in 1999.

MR FRED LI (in Cantonese): Madam President, it has been three and a half years since the licensing system for private RCHEs was introduced in April 1995. As I can see from the Government's main reply, there were only about 25% of private RCHEs which were licensed within this period, but the Government still said that satisfactory progress had already been made. Madam President, is the Government being self-deceptive if we look at this figure?

SECRETARY FOR HEALTH AND WELFARE (in Cantonese): The relevant legislation came into force in June 1996. It is of course our wish that all private RCHEs should be licensed as early as possible. But we must realize that this is something we cannot do overnight. We need to allow many existing RCHEs to make gradual improvements. The Government has indeed many measures in place to assist these RCHEs to raise their standards of service. Honourable Members may recall that the Legislative Council at that time approved of some financial assistance schemes to help RCHEs carry out improvement works. We started to operate training courses for health workers. The Government used the Bought Place Scheme as an incentive to encourage private RCHEs to raise their standards of service.

Let me use figures to illustrate why I think that the progress has been satisfactory. In June 1996, there were only three licensed private RCHEs. In January 1997 there were only seven. But the figure rose to 25 at the beginning of this year. So the progress has been particularly fast in the recent one and a half years. Among private RCHEs, one quarter are licensed, and three quarters are issued certificates of exemption. In terms of residential places, one third are provided by licensed RCHEs and two thirds are provided by RCHEs issued with certificates of exemption. We will bring these unlicensed RCHEs into the licensed ranks as soon as possible.

MR TAM YIU-CHUNG (in Cantonese): Madam President, could the Secretary inform this Council of the number of complaints against private RCHEs lodged with the SWD over the past year? What are the contents of these cases? What has the Government done with these cases?

SECRETARY FOR HEALTH AND WELFARE (in Cantonese): Should family members or friends of those elderly people who live in RCHEs or the elderly people themselves feel dissatisfied with the operation of the RCHEs, they can lodge their complaints with the SWD. This mechanism has been very widely used. As at the end of this November, we have received a total of 134 complaints against RCHEs for the current year. There are three major kinds of complaints: those related to the staff's poor working attitude; those related to insufficient manpower; and those related to the meals provided in the RCHEs. After receiving these complaints, the LORCHE will make an investigation according to the nature of the complaint concerned. If the complaint is substantiated, the LORCHE will issue warning letters and take follow-up actions to see if the RCHE concerned has made any improvements and if so, the extent of improvement made. In general, the RCHEs will make improvements as required soon after they have received the warning letters.

MR LAW CHI-KWONG (in Cantonese): Madam President, originally I wished to ask the same supplementary question as raised by Mr TAM Yiu-chung, but since the question has been answered, I would like to raise another question. In part (c) of the main reply, it was mentioned that of the 44 private RCHEs which had joined the Bought Place Scheme, 24 were unable to meet the licensing requirements. I would like to ask the Secretary, would she also feel that the Government does not really have a great respect for the spirit of the legislation and has betrayed the welfare of the elderly, as it were, to some substandard RCHEs?

SECRETARY FOR HEALTH AND WELFARE (in Cantonese): Madam President, some of those unlicensed RCHEs are making good progress in their improvement works and will be issued a licence very soon. In our Bought Place Scheme, we would give each RCHE different time limits, three months for example, and should that RCHE concerned be unable to meet our requirements after the expiry date, we would stop buying places from it. For some other RCHEs, we will give them six months, but the time limit really depends on the circumstances of each private RCHE and whether improvement works would need some more time to complete. The most important things we will look into are the fire protection measures, fire escapes, and building structure. We would only issue certificates of exemption if we are satisfied that there is no danger involved.

MRS SELINA CHOW (in Cantonese): Madam President, this Council has in fact received complaints from some private RCHE operators on the many inadequacies of licensing work as carried out by the SWD. I would like to ask the Secretary whether the shortage of health workers is in any way related to the fact that the training of health workers is entirely in the hands of the Department of Health? And in licensing, is the delay in licensing due to poor co-ordination between the departments concerned? Are these two the major reasons accountable for such a small number of licenses issued? If this is the case, can this Council be informed of the practical ways to solve these fundamental problems on the part of the government departments in the first place?

SECRETARY FOR HEALTH AND WELFARE (in Cantonese): We have made a detailed review of the progress concerned together with different RCHEs and their association. The greatest problem is that many RCHEs have not hired any Authorized Persons to make some formal plans and drawings for them. If some ordinary contractor is employed instead of an Authorized Person, the contractor may not understand the statutory requirements in respect of fire safety doors, partitions, fire escapes and such like standards. Over the past year, most of the RCHEs have hired Authorized Persons and we have arranged to get a few RCHEs to hire an Authorized Person together so that they could obtain a licence sooner. Therefore, this is the greatest problem, and the difficulty in hiring staff or the slow pace in training are only minor problems. Another reason for the satisfactory progress recently is the lowering of rentals. Recently, there is a great disparity between current rentals and those of the past year and the RCHEs are able to find suitable premises at more reasonable prices. At the same time, the RCHEs are able to hire enough workers for this type of service and so things have got better in many respects.

MRS SELINA CHOW (in Cantonese): I think half of my supplementary question has not been answered by the Secretary. My question was referring to a complaint which pointed at the four departments involved in licensing, that is, the Fire Services Department, the Buildings Department, the Department of Health and the Social Welfare Department, which lacked co-ordination and so delayed the time for licensing. But just now the Secretary did not give me a reply on this. Can I take the Secretary to mean that the problem does not exist or that the problem has been solved or that it will be solved?

SECRETARY FOR HEALTH AND WELFARE (in Cantonese): In terms of co-ordination, we have building surveyors and also station officers of the Fire Services Department, nurses and social workers from the SWD on the LORCHE of the SWD specializing in RCHEs. And so there is definitely co-ordination among the departments. But why is licensing work delayed? This is due to the insufficient information provided in the plans and drawings or that they fail to meet our requirements. This is the principal reason. We have had a lot of discussions and meetings and we have all come to understand the requirements of the relevant legislation. So the progress in this year has been quite smooth.

MR MICHAEL HO (in Cantonese): Madam President, the Code of Practice includes guidelines on health and care services, diet, sanitation and hygiene. Will the Government inform us of the information it has at hand, that is, the number of RCHEs which have reached the required standards, the number of RCHEs which fail to do so, and what measures the Government has in place to assist or compel these RCHEs to meet the required standards?

SECRETARY FOR HEALTH AND WELFARE (in Cantonese): Most of the RCHEs are able to follow the guidelines set out in the Code of Practice, for these guidelines are on general services. In the provision of health and care services, the RCHEs have to keep health records of the residents, arrange prompt consultation and treatment by registered physicians, ensure the proper storage and dispensing of medicine, and to provide annual body check-ups. In the area of personal care, most of which are general care services and are well-provided by the RCHEs. In addition, staff from the SWD would make regular visits to inspect the records of the RCHEs. If any irregularities are found, advice will be given and the matter concerned will usually be followed up. In terms of nutrition and diet, the RCHEs are required to prepare menus a few weeks well in advance so that SWD staff and the family members of the elderly will be in a position to know whether the meals are of sufficient nutrition value and be able to meet hygienic requirements. In terms of social life, most of the RCHEs do provide many activities such as birthday parties and festival celebrations. For those physically able elderly, they can be arranged to go on outings. Some RCHEs also organize some visits and festival celebrations in co-operation with the religious organizations and social service organizations of their respective communities. So, in this respect, apart from following the Code of Practice, each RCHE would act in accordance with their individual needs.

DR YEUNG SUM (in Cantonese): Madam President, there are currently 427 private RCHEs. After the passage of the relevant legislation, there are only 105 which are licensed and the remaining 322 are issued with certificates of exemption which in reality is giving them a temporary permit to operate despite the fact that, strictly speaking, they are unable to meet the required standards. And the Government has no plans to impose a timetable stipulating when they can all be formally issued with a licence. What incentives does the Government have in place to enable them to get a licence? The issue of certificates of exemption is in fact an admission of inadequate care for the elderly on the part of the RCHEs concerned. Would the Government tell us what measures it has to encourage these RCHEs to get formally licensed and no longer need to be subject to an exemption?

SECRETARY FOR HEALTH AND WELFARE (in Cantonese): Madam President, there are a few areas which we can be of help. For one thing, we have launched some financial assistance schemes to offer some assistance to the RCHEs to help them carry out improvement works. But we understand that the premises of some RCHEs have some structural problems which cannot be rectified. In such circumstances, they have to be relocated elsewhere so that their environment can be improved. Over the past year, it has been easier to find places to set up RCHEs. Perhaps Honourable Members are aware that places which previously are not used as RCHEs are now turned into RCHEs. Furthermore, we have an Enhanced Bought Place Scheme whereby the Government will need to pay more to buy places from the RCHEs, but as a condition, they are required to provide better services in return. If RCHEs wish to join this Scheme, they need to provide services of a higher standard. This Scheme has been very well-received since its launch. Apart from that, we will make regular inspections. In this way, it can be said that there are incentives as well as inspections. As regards staff training, we have organized many courses to train health workers so that more qualified health workers can be deployed to provide services to RCHEs. All of the above can help RCHEs improve the quality of their service. The recent market situation also contributes to lower costs of operation for RCHEs, and that is certainly helpful to them.

PRESIDENT (in Cantonese): That is all for oral questions today.

WRITTEN ANSWERS TO QUESTIONS

Sale of Duty-not-paid Cigarettes

7. DR TANG SIU-TONG (in Chinese): Will the Government inform this Council of:

(a) the sale black spots of duty-not-paid cigarettes in the New Territories at present;

(b) the quantity of duty-not-paid cigarettes seized at the above black spots and the number of prosecutions instituted against such activities in the past three years; and

(c) the measure in place to step up efforts to combat the sale of duty-not-paid cigarettes?

SECRETARY FOR THE TREASURY (in Chinese): Madam President,

(a) The black spots for the sale of duty-not-paid cigarettes in the New Territories are as follows:

District	Black Spot

Tsuen Wan	Tsuen Wan MTR Station, Tsuen Wan Ferry Pier, Heung Che Street Market, Tai Wo Hau Road, Texaco Road and Sha Tsui Road

Kwai Chung	The roundabout on Cheung Wing Road, Tai Lin Pai Road, Ka Ting Road and Tai Loong Street

Tuen Mun	Leung King Estate, Shan King Estate, Lam Tei Main Street and Tuen Mun Ferry Pier

Yuen Long	Fau Tsoi Street, Tai Tong Road and Tai Kiu Market

Fanling	Fanling KCR Station and Cheung Wah Estate
Tai Po	Fu Shin Street
Sheung Shui	San Tsoi Street, Fu Hing Street and Sheung Shui KCR Station

(b) The quantity of duty-not-paid cigarettes seized at the black spots in the New Territories mentioned in paragraph (a) above and the number of persons arrested/prosecuted in the past three years are as follows:

Year	No. of Persons Arrested/Prosecuted	No. of Duty-not-paid Cigarettes (pieces)

1996	242	1 350 023
1997	193	1 009 386
1998 (January - October)	94	454 460

(c) The Government tackles illegal activities relating to cigarettes, including the sale of duty-not-paid cigarettes, in the following three ways:

(1) the Customs conducting joint operations with the police to launch rigorous raids on black spots and stepping up patrols to enhance the deterrent effect;

(2) encouraging the public to participate in the incentive scheme which rewards informers of illegal activities relating to cigarettes; and

(3) strengthening intelligence work in order to trace and tackle the source of cigarette smuggling.

Tackling the Millennium Bug Problem

8. DR RAYMOND HO (in Chinese): According to a survey conducted recently by the Hong Kong Productivity Council (HKPC) on the Year 2000 Compliance problem (commonly known as the "millennium bug problem"), over 30% of the small and medium-sized companies have no plans to tackle the problem. In this connection, will the Government inform this Council:

(a) if it knows whether the HKPC has taken the initiative to assist small and medium-sized companies in tackling the millennium bug problem; and of the difficulties the HKPC has encountered in assisting individual companies to tackle such problem;

(b) if it knows the effects of the "888 Bug-buster Programme" currently provided by the HKPC, and the scope of its market promotion; and

(c) whether it has assessed the number of companies that will not be able to completely solve the millennium bug problem before Year 2000?

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

(a) Since 1997, the HKPC has been promoting awareness of the Year 2000 problem among small and medium-sized companies through various channels including seminars and the publication of a "Year 2000 Date Problem Guidebook". In May this year, the HKPC established the Y2K Service Centre to provide technical support to individual companies in tackling the problem. The HKPC has also secured financial resources from the Industrial Support Fund to set up a helpline on the Year 2000 problem and to provide on-site checking services. The HKPC has encountered no difficulty in assisting individual companies to tackle the Year 2000 problem.

(b) The "888 Bug-buster Programme" mainly targets on small and medium-sized companies. During the period from formally launching the programme on 10 November to 30 November this year, the HKPC received 97 enquiries of which 78 are being followed up on their request for service. The HKPC is promoting the "888 Bug-buster Programme" by means of exhibitions, seminars, press advertisements and mail, and so on. In addition, the HKPC is working jointly with the Tradelink Electronic Commerce Limited to introduce and offer this programme to the subscribers (mostly small and medium-sized companies) of the Tradelink.

(c) The HKPC conducted a survey of about 3 000 local companies on the Year 2000 problem in September this year. According to the survey findings, companies which have already devised plans to solve the problem all expect the rectification work to be completed by the end of 1999. On the other hand, about 19% of the companies indicated that they will be affected by the Year 2000 problem but have not drawn up any rectification plan. Nevertheless, the survey findings show that the impact of the problem on those companies is relatively mild in general and less time will be required for rectification. Those companies should be able to achieve Year 2000 compliance by the end of 1999 if they take early action. The Information Technology and Broadcasting Bureau will continue its close co-operation with the HKPC to urge all concerned sectors (including small and medium-sized companies) to take immediate action to tackle the Year 2000 problem.

Issuing Electronic Bills via the Internet

9. MR SIN CHUNG-KAI (in Chinese): Currently, some companies issue electronic bills to their customers via the Internet. In this connection, will the Government inform this Council whether:

(a) electronic bills issued via the Internet carry the same legal effect as those issued on paper;

(b) it has assessed whether there is a need for introducing new legislation or making amendments to existing legislation to provide for issuing electronic bills via the Internet;

(c) it will encourage the business sector to issue electronic bills via the Internet; and

(d) it has explored the feasibility of issuing electronic bills by various providers of utility services such as the Water Supplies Department, power supply companies, and so on, via the Internet in the near future?

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

(a) Whether an electronic bill issued via the Internet has the same legal effect as a bill issued on paper depends on the terms and conditions agreed between the parties to the transaction. The matter can be decided by the court in cases of dispute.

(b) We consider that there is a need to provide a clear transaction environment in order to encourage the community to take part in electronic transactions. We plan to introduce legislation to establish a clear legal framework for electronic transactions and will stipulate that electronic messages have the same legal effect as their paper-based counterparts.

(c) It is a key element of our work under the recently formulated government "Digital 21" IT Strategy to promote the development of electronic commerce and the wider use of information technology in the community. We strongly encourage the business sector to widely use electronic means in their operations (for example, the issue of electronic bills) in order to enhance efficiency and productivity.

(d) It is up to the private sector utilities to explore themselves the feasibility of issuing electronic bills via the Internet in the near future. As regards the feasibility of issuing water bills electronically via the Internet, the Water Supplies Department will examine it within the context of its departmental Information System Strategy Study now being conducted.

Government's Investment in Hang Seng Index Futures and Option Contracts

10. MR ALBERT HO (in Chinese): Regarding the use of the Exchange Fund for the purchase of Hang Seng Index (HSI) futures contracts and options contracts in August this year, will the Government inform this Council:

(a) whether the authorities are still holding any HSI futures and options contracts; if so, whether these contracts are held through the Exchange Fund Investment Limited and the amount of investment in each type of contracts;

(b) of the respective numbers of HSI futures and options contracts held by the Administration at the end of August, September and October this year; and

(c) of the financial position in terms of profit and loss since its participation in the trading of HSI futures and options?

SECRETARY FOR FINANCIAL SERVICES (in Chinese): Madam President, the Government's trading in the futures market in August is part of the open market operations to frustrate double market play by manipulators. The objective of the operations is to protect the stability and integrity of the monetary and financial systems of Hong Kong.

(a) At present, the Government does not hold any HSI futures and options contracts.

(b) The Government purchased 36 935 August HSI futures contracts, 1 100 August HSI options contracts and 10 176 September HSI futures contracts but none of both October HSI futures and options contracts.

(c) The net profit generated from the transactions in HSI futures and options contracts as mentioned in part (b) above was about $350 million.

Strengthening the Status of Hong Kong as an International Financial Centre

11. MR LEE KAI-MING (in Chinese): Regarding the Singapore International Monetary Exchange's plan to launch Hong Kong index futures contracts, will the Government inform this Council:

(a) of the specific contingency measures which the relevant financial institutions in Hong Kong plan to take in order to cope with competition from outside;

(b) whether such financial institutions have considered implementing a long-term financial development strategy and developing new products, so as to strengthen the status of Hong Kong as an international financial centre; and

(c) of the measures the executive authorities have in place to enhance the status of Hong Kong as an international financial centre?

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

(a) The MSCI Hong Kong Stock Index (HiMSCI) futures contract recently launched by the Singapore International Monetary Exchange (SIMEX) does pose a direct competition to the Hang Seng Index (HSI) futures and options market in the Hong Kong Futures Exchange (HKFE). In response to the challenge, the HKFE with the approval by the Securities and Futures Commission (SFC) extended the trading hours of the HSI futures and options markets by 15 minutes each at both the opening and closing of the day's trading period. With effect from 20 November 1998, the new trading hours of HSI futures and options markets are from 9.45 am to 4.15 pm, the same as the SIMEX HiMSCI futures market. Members of the HKFE also waived the transaction fees for the HSI futures contracts trading in December 1998.

The HKFE Clearing Corporation (HKCC) also decided to reduce the retention rate of interest income of the margin deposit by members from 1.8% to 1.2%, with effect from January 1999. The measure will return more interest income derived from margin deposits to the HKFE's members.

As a related issue, the HKCC, after taking into account the current market volatilities also decided to reduce its initial client margin for HSI futures contracts from $80,000 per contract to HK$63,000 per contract. While the HKFE underlined that the decision was essentially based on risk management considerations and was not deliberately aimed to enhance the HKFE's competitiveness vis-a-vis SIMEX, a lower margin level would inevitably reduce the cost for trading for clients and therefore increase the HKFE's competitiveness. The SFC has also agreed to the proposed lowering of margin level, which came into effect on 30 November.

It is important to note that while the Administration is naturally keen to see that our market is capable of meeting this challenge, the integrity and stability of our financial markets continue to be our primary concern. In this connection, the SFC has reassured the Administration that, on approving the extension of trading hours and lowering of margin level, it would remain vigilant in monitoring the market in case there is any manipulative activities and that it is prepared to ask the HKFE to raise the margin level again should the market situation so requires.

(b) In the longer term, we believe the enhancement of our competitiveness as an international financial centre lies in continuously keeping our regulatory regime on a par with international standards, expanding our product base, increasing our market efficiency and lowering our transaction costs. Initiatives towards those objectives by the exchanges and clearing houses include, inter alia, the migration of the HSI futures and options market to the Automatic Trading System (ATS) by the third quarter of 1999 and the introduction of new products such as the Hang Seng 100 Index futures and options and one-month HIBOR futures by the HKFE, the plans of the Stock Exchange of Hong Kong (SEHK) to upgrade its trading system, establish a Second Board and extend its trading hours, as well as the joint initiative on the feasibility study on cross-margining between related products in the SEHK and the HKFE. The SFC has also constantly kept the securities/futures-related rules and regulations updated to meet new market developments and changing market needs.

(c) The Administration is always committed to enhancing the status of Hong Kong as an international financial centre and strengthening Hong Kong's competitiveness in the global financial market. As unveiled in the Chief Executive's policy address in October, the Administration will capitalize on the latest developments in information technology and its applications to enhance system security and efficiency of our financial infrastructures to consolidate our status as an international financial centre and to maintain our competitiveness. We will also encourage the development of new financial products and improvement of our regulatory, infrastructural as well as our analytical and statistical standards to meet the need of our investors and to keep us on a par with international market development and regulatory standards.

On the front of human resources development, the Administration has commenced a consultancy study to look into the demand for and supply of human resources development opportunities in the financial services sector. The result of the study will lay out the ground work for further studies on the need for and feasibility of setting up a Financial Services Institute for Hong Kong as undertaken by the Chief Executive in his policy address last year.

In addition, we are also committed to working closely with the market regulators including the Hong Kong Monetary Authority and the SFC to maintain a proper and modern regulatory regime in Hong Kong, and through them with overseas regulators on the promotion of international co-operation and best international practices on regulation of financial markets.

Retention and Disclosure of Patients' Medical Records

12. MR MICHAEL HO (in Chinese): Regarding the retention and disclosure of patients' medical records, will the Government inform this Council of the legislation, administrative arrangements or guidelines:

(a) in place to instruct hospitals, clinics and private medical practitioners on how to write and keep patients' information and case histories; and the provisions in them in respect of the information to be recorded and the minimum duration for medical records to be kept; and

(b) under which patients and their families can request the patients' own medical records from the parties concerned?

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

(a) All public and private hospitals, clinics and private practitioners should comply with the principles and provisions prescribed in the Personal Data (Privacy) Ordinance (Cap. 486) in collecting, retaining and releasing patients' information and case histories. According to such principles, a data user should only collect personal data that is related to his/her function. The amount of data collected should not be more than necessary and should not be kept longer than is required for the purpose it is to be used.

Based on the Personal Data (Privacy) Ordinance, the Hospital Authority (HA) and the Department of Health (DH) have issued guidelines to their respective hospitals and clinics on how to handle and protect medical records, and on the retention period of the records. According to the guidelines, the medical records of hospitals and clinics should only keep information relating to patients' health and treatment procedures. The HA's guidelines also set out in detail the information to be recorded, such as patient's admission date, medical history, reports of physical examination, clinical observations, therapeutic orders, medical procedures, test results and medication administration record. The DH's medical records also keep similar information. Regarding the retention period of medical records, it depends on the nature of the information contained therein. To cater for situations where patients may return for medical consultation or request access to their medical records, the HA and DH have prescribed that, in normal circumstances, medical records should be kept for six years.

The DH has requested private hospitals to be aware of and act according to the requirements of the law. The Hong Kong Medical Association has also compiled an information note introducing the Ordinance for members' reference, and has made recommendations on how to carry out the requirements of the Ordinance.

(b) According to the data protection principles set out in the Personal Data (Privacy) Ordinance, a patient or an authorized person acting on the patient's behalf, including the patient's family, may make a request to any medical institutions or private practitioners for access to and for obtaining a copy of the patient's medical record.

Moreover, the Government has drawn up a "Code on Access to Information", requiring the compliance of all government departments. A patient may make a request to the DH for obtaining his/her medical records in accordance with the Code.

Alleviation of Vehicle Emissions Problem

13. MISS CHRISTINE LOH: Regarding the alleviation of vehicle emissions problem, will the Government inform this Council:

(a) of the total number of repeat offenders found under the Environmental Protection Department's (EPD's) smoky vehicle control scheme in the past three years;

(b) of the respective manpower and financial resources that the EPD and the police used in the enforcement of vehicle emission regulations in each of the past three years;

(c) whether it will consider empowering traffic wardens and EPD staff to issue fixed-penalty tickets to smoky vehicles;

(d) whether it has estimated the percentage of small diesel vehicles, among all small diesel vehicles, that will pass the free acceleration smoke tests but not the dynamometer tests;

(e) of the timetable for introducing, and the measures for the early introduction of dynamometer tests for all vehicles;

(f) of the penalties to be imposed on the owners of vehicles failing the dynamometer tests; and

(g) whether it has plans to introduce annual or biannual compulsory emission tests for all vehicles; if yes, of the timetable?

SECRETARY FOR PLANNING, ENVIRONMENT AND LANDS: Madam President,

(a) Repeat offenders under the EPD's smoky vehicle control programme are defined as vehicles being spotted as smoky by accredited persons more than once within six months. The number of such offenders in the past three years are as follows:

1995	6 857
1996	5 882
1997	5 161

(b) In the past three years, the EPD deployed the following staff working full time on the enforcement against smoky vehicles:

Resources	1995	1996	1997

Professional Staff	2	2	3
Technical Staff	7	7	15
General Grade Staff	8	8	9
Workmen	1	1	3
Sub-total	18	18	30

Since 1997, the team has also assisted the Transport Department (TD) to introduce a strengthened smoke test on a sampling basis in their annual roadworthiness inspection and has been working on introducing an advanced smoke test (using dynamometers).

The police's action is mainly to report smoky vehicles for testing by the EPD and issue fixed penalty tickets on the spot under the smoky vehicle control programme. Any patrolling officer can take this action. Their contribution accounts for about 11% of the smoky vehicle reports received by the EPD. In the first 10 months of this year, 1 594 fixed penalty tickets have also been issued by police officers.

In addition, the police has a team of officers allocated to traffic enforcement and control duties. Its establishment was 1 387 in 1995, 1 392 in 1996 and 1 402 in 1997. Apart from enforcing traffic laws to prevent traffic accidents and congestion, they also carry out smoke enforcement duties. However, their role is limited by the current legislation to take action only in the most blatant cases, where large clouds of smoke can be photographed by Polaroid cameras. However, the police have recently mounted joint operations with the EPD to catch smoky vehicles for an immediate repair. Portable smokemeters will also be introduced shortly to allow the police to take more effective actions against smoky vehicles.

(c) The suggestion will be considered as a way to step up enforcement against smoky vehicles. However, many smoky vehicles are already being spotted and reported by more than one spotter. To further improve the effectiveness of the enforcement against smoky vehicles, the most pressing need is to introduce better inspection procedures and technology to compel the vehicle owners and mechanics to better maintain their vehicles.

(d) In the pilot scheme for introducing the dynamometer test for vehicles up to 5.5 tonnes, the vehicles were required to take both a free acceleration test and a dynamometer test. The failure rate was 17% for the free acceleration smoke test and 34% for the dynamometer test. In other words, the failure rate was double in the case of dynamometer test.

(e) The EPD aims to introduce the advanced smoke test (using chassis dynamometer) to test the smoke emission of smoky diesel vehicles up to 5.5 tonnes in mid 1999.

The EPD has just launched a three-month pilot scheme on an advanced smoke test for diesel vehicles over 5.5 tonnes. If the pilot scheme is successful, it is expected that this advanced smoke test can be introduced in early 2000.

The TD is exploring the feasibility of including this advanced smoke test into its annual roadworthiness inspection.

(f) If a vehicle fails to pass the dynamometer smoke test within 14 days, the TD will cancel its licence.

(g) Most diesel engined vehicles are commercial and public service vehicles which are already subject to annual inspection of the TD. The inspection includes a smoke emission test by means of smokemeter. There are only a very small number of diesel engined private cars less than six years of age which are not covered by such inspection. If a vehicle fails to pass the smoke test in its annual roadworthiness inspection, its vehicle licence will not be renewed.

To further reduce the number of smoky vehicles and raise the maintenance standard of local vehicles, it is more effective to introduce a more revealing test than increasing the frequency of inspection. Effort is being focused on introducing the advanced smoke test by means of dynamometer.

In addition, a proposal to introduce an emission inspection for petrol vehicles is being considered. Consultation with relevant parties will take place once the proposal is firmed up.

Decline in English Standard

14. DR DAVID LI: A survey conducted in October this year reported that about 20% of the members of the Swiss Business Council of Hong Kong considered that a decline in the English standard among workers in Hong Kong had adversely affected the business of their companies. In this connection, will the Government inform this Council whether it has assessed if Hong Kong's position as an international financial centre will be undermined by its policy to use Chinese as the medium of instruction in secondary schools?

SECRETARY FOR EDUCATION AND MANPOWER: Madam President, the effectiveness of mother tongue teaching has been well established through educational researches in Hong Kong and elsewhere. By adopting Chinese as the medium of instruction, students will be able to master academic subjects with greater ease, be more motivated to learn, and be more ready to ask and answer questions in class. Through schooling in the language which allows them to understand the content of their lessons better, students can more fully develop their high order critical thinking, inquisitiveness and creativity. This is essential if we are to enhance the quality of our human resources for the future.

At the same time, we are acutely aware of the importance of English in Hong Kong as an international city. The adoption of Chinese as the medium of instruction in no way affects our commitment to teaching English as a core subject in schools. In fact, the Government has been stepping up efforts to enhance the teaching and learning of English in schools.

Over 300 Native-speaking English Teachers are currently employed in local secondary schools to help create an environment conducive to learning English. For schools adopting mother-tongue teaching from 1998-99 school year, additional support measures have been made available since September 1998. These include additional English language teachers; one-off grants for purchasing equipment and for employing clerical staff; recurrent grants for library books and teaching materials; and funding for school-based English language enhancement programmes.

The switch to Chinese as the medium of instruction, in conjunction with enhanced support for the teaching and learning of English, is expected to bring positive effects to school education, and will be beneficial to Hong Kong's competitiveness in the long run.

Textbook and Stationery Grants for Primary and Secondary Schools

15. MR YEUNG YIU-CHUNG (in Chinese): Will the Government inform this Council, in respect of this school year:

(a) of the number of families which have children studying in primary or secondary schools and are granted textbook and stationery grants by the Student Financial Assistance Agency (SFAA); and

(b) of the respective numbers of primary and secondary school students who receive a full grant or half grant, and the respective total amounts of money involved in providing these grants?

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

(a) The SFAA received 308 260 applications for textbook and stationery grants under the School Textbook Assistance Scheme this year, involving 194 230 secondary students and 114 030 primary students of public sector schools. The number of applications from students in the Direct Subsidy Scheme schools is not yet known⁽¹⁾. The SFAA does not have a breakdown of the number of applications by number of families.

(b) The SFAA has almost completed vetting of the 308 260 applications. Preliminary results indicate that 282 900 students would receive the grant, and 20 770 students do not meet the eligibility criteria. Based on the approved grant rates⁽²⁾, about $219.4 million would be disbursed to successful applicants as follows:

Secondary students	No. of recipients	$m

. full grant	21 670	31.3
. half grant	154 570	114.4

Primary students

. full grant	14 180	17.3
. half grant	92 480	56.4

There are still 4 590 applications which are being verified. The SFAA will make a final decision on these applications on the basis of vetting results.

Nuisance Caused by the Work of MTR Tseung Kwan O Extention

16. MR LAU KONG-WAH (in Chinese): It is learned that the Mass Transit Railway Corporation (MTRC) will need to use Area 40A in Tseung Kwan O from April 1999 to February 2003 as a temporary work site for the construction of Phase I of the MTR Tseung Kwan O Extension project. In this connection, will the Government inform this Council:

(a) whether it knows if the MTRC has conducted any evaluation study on whether or not the project may cause an increase in the level of noise in the nearby area, and whether it knows of the measures that will be put in place to minimize the noise nuisance caused to residents in the vicinity; and

(b) of the plan the Administration has for supervising the MTRC, so as to ensure that it will assess the possible impact of the project on the structural safety of the nearby residential blocks on On Ning Garden, and that the MTRC will adopt measures to ensure the structural safety of the residential blocks of On Ning Garden?

SECRETARY FOR TRANSPORT (in Chinese): Madam President,

(a) The MTRC conducted a study on the environmental impact of the temporary works area (TWA) in Area 40A Tseung Kwan O earlier this year. The assessment concluded that the noise impact of the TWA on its surrounding areas would not exceed the stipulated criteria. However, the study also recommended a number of good site practices, such as locating storage and workshop areas as far away from the residential areas as possible, as further mitigation measures. In addition, two more measures will be adopted:

(i) The MTR Tseung Kwan O Extension, which includes the TWA, is controlled by the Environmental Impact Assessment Ordinance (Cap. 499). Under the conditions in the permit issued for the project, the MTRC is required to implement an environmental monitoring and audit programme and deal with any environmental problems that may occur during the construction period. Monthly reports on the programme will be submitted to the Environmental Protection Department (EPD) and will also be available to the public.

(ii) The normal working hours within the TWA will be from 7 am to 7 pm. Under the Noise Control Ordinance, permits from the EPD are required for construction works carried out on Sundays and public holidays, and from 7 pm to 7 am on weekdays.

(b) The MTRC which is undertaking the design and construction of the project is responsible for ensuring that the structural safety of nearby buildings would not be adversely affected by works related to the project. The structure of On Ning Garden will not be affected by the TWA where there will not be any major excavation or structural works. The existing settlement issue of buildings along the railway alignment including On Ning Garden has been thoroughly considered and taken into account during the design stage of the Tseung Kwan O Extension. In carrying out the construction works of the project, the MTRC will take it into consideration and adopt appropriate construction methods. Prior to the commencement of works, the Corporation will appoint an independent surveyor to conduct a condition survey of concerned buildings to record their present conditions. Settlement markers will also be installed to monitor the situation throughout the construction period. The MTRC will consult and work in conjunction with concerned departments on any works that may affect the structural safety of adjacent buildings/structures.

Homicide and Suicide Cases Involving Children

17. MR CHEUNG MAN KWONG (in Chinese): Regarding cases where it is suspected that adults killed children before committing suicide, will the Government inform this Council:

(a) in each of the past three years,

(i) of the number of such cases that took place;

(ii) of the respective numbers of adults and children who died in such cases each year; whether it has looked into the reasons why the adults concerned committed suicide in the five cases with the highest death tolls;

(b) whether any common causes have been identified for each cases; and

(c) of the specific measures in place to prevent the recurrence of such cases?

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

(a) (i) According to the police, there have been eight such cases over the past three years.

(ii) The number of adults and children who died in these cases is set out below:

Year	Number of cases	Number of adults who committed suicide in such cases	Number of children killed

1996	1	1	2

1997	2	2	2

1998	5	5	8
(up to November)		(one adult in each case)	(three cases involved two children each; and two cases involved one child each)

It has not been possible to study the precise reasons why the adults committed suicide. Suicide cases are always tragic and complex in nature.

(b) We do not have information on any common causes identified in respect of these cases. However, according to statistics maintained by the police, of the eight adults involved, seven were parents of the children killed. Inevitably, each tragic case will have its own separate causes.

(c) For its part, the Government provides a wide range of welfare services to the community with the assistance of non-governmental organizations (NGOs). These services are designed to help individuals and families overcome their problems and to this extent, would help to prevent such tragic cases.

Strengthening the family as a unit is a key policy of the Government. The extensive range of services provided aims to promote harmonious family life and prevent the occurrence of such tragedies. In response to the increasing complexity of modern day life and the resulting pressure on individuals and their families, we provide over 730 family caseworkers in 65 family service centres. Staff aim to provide early intervention and working together with clinical psychologists where appropriate, help ease the stress of individuals in trouble. The 79 family life education workers also contribute to this programme by organizing education programmes designed to help strengthen parenting skills and maintain positive marital relationships. Twenty-two Family Activity and Resource Centres are also available to encourage the establishment of mutual help networks amongst families in local neighbourhoods.

The Social Welfare Department has, in recent months, stepped up its publicity programmes in the electronic and printed media to encourage families in need to seek help at an early stage and to bring to the public attention the availability of family services.

Laser Vision Correction Surgeries Performed at Public Hospitals

18. MISS EMILY LAU (in Chinese): Regarding laser vision correction surgeries performed at public hospitals, will the executive authorities inform this Council if they know:

(a) the total number of such surgeries performed at public hospitals; together with the average cost of each operation and the fees payable by each person undergoing the surgeries in the past three years;

(b) the number of people on the waiting list for such surgeries and the average waiting time; and

(c) the criteria adopted by the management of public hospitals for the provision of subsidies to people undergoing such surgeries, and whether the relevant subsidy policy will be reviewed so as to ascertain whether resources have been put to good use?

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

(a) The Hospital Authority (HA) currently performs excimer laser surgeries on patients. The excimer laser in the Prince of Wales Hospital (PWH) belongs to the Chinese University of Hong Kong. About six hours per week are dedicated for excimer laser surgery for HA patients. Doctors from the eight ophthalmology teams of the HA rotate to conduct excimer laser surgery in PWH to keep them abreast with this laser vision correction and therapy surgery.

From January 1997 when this surgery was first performed in the HA and up to October 1998, a total of 479 surgeries have been performed by the HA. HA patients are required to pay $44 in accordance with the fees for day surgery charged by public hospitals.

As the HA does not collect costing data for excimer laser surgery as a standalone activity, there is at present no available information on the average cost of conducting an excimer laser surgery.

(b) There are about 120 patients on the waiting list for excimer laser surgery in public hospitals. The average waiting time for each surgery is around nine months.

(c) The HA adopts a stringent set of clinical criteria to determine the recipients of excimer laser surgery. The attending doctor will, in the first instance, consider the effectiveness of other treatment methods. In the case of a patient who has significant myopia or anisometropia, the wearing of glasses or contact lenses would not be the best way of correcting his/her vision. The attending doctor will, after detailed examination of the patient and on the basis of clinical judgement, decide whether the latter should undergo excimer laser surgery. Under certain circumstances, such as a patient has thin cornea, the patient concerned will not be suitable for such surgery.

Similar to other treatment procedures, doctors will base on their professional knowledge and clinical judgement to decide whether their patients should have excimer laser surgery. There is currently no plan to adjust the fee level for such surgery.

Blockage of River Channels

19. MR LEUNG YIU-CHUNG (in Chinese): The blockage of river channels frequently causes floods in the New Territories in recent years. In this connection, will the Government inform this Council:

(a) of the number of rivers that run through private land in Hong Kong; and

(b) of the provisions currently in place to require private landowners to maintain clear channels for the rivers running through their land; and whether there are provisions stipulating the party responsible for the expenses of clearing the river channels concerned?

SECRETARY FOR WORKS (in Chinese): Madam President,

(a) River systems are extensive in rural areas of the New Territories. Some may be dry during the winter time. Their configurations are complex with numerous tributaries. Furthermore, they can migrate with time as a natural process. Only the major rivers are named; while their tributaries and other smaller streamcourses are not normally named. As such, we cannot scientifically have a representative "number" of rivers in Hong Kong. At present, about 70 km of the prominent ones have been designated under the Land Drainage Ordinance (the Ordinance). For these 70 km main watercourses, majority of the land on both sides are private.

(b) Under the Ordinance, the Director of Drainage Services is empowered to enter any land for purposes of carrying out inspection and executing drainage works in any designated main watercourse. Besides, the Director of Drainage Services is also empowered under the Ordinance to control the carrying out of works or erection of obstructions or structures in any watercourse, and to require the removal of obstructions or structures which block any main watercourse or impede its free flow. Since silt and debris can be carried by the river flow to the downstream, it may not be possible to locate their sources or identify the responsible parties. Any desilting work carried out under such circumstances has to be funded by the Government.

Private Renal Dialysis Centres

20. MR YEUNG YIU-CHUNG (in Chinese): Will the Government inform this Council:

(a) of the present number of private renal dialysis centres (RDCs) in Hong Kong and, of these centres, the number which have not been registered in accordance with the relevant legislation;

(b) of the number of medical incidents occurring at private RDCs in each of the past five years and, of these incidents, the number of those occurring at unregistered RDCs; and;

(c) how it regulates private RDCs?

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

(a) Currently, there are five private RDCs in Hong Kong registered under the Hospitals, Nursing Homes and Maternity Homes Registration Ordinance (the Ordinance) (Cap. 165), which provides for the registration and inspection of hospitals, nursing homes and maternity homes. Medical Practitioners in private practice can also provide renal dialysis treatment in their own consultation rooms, without the need to register under Cap. 165. The Department of Health (DH) does not have information on the number of private practitioners providing such service.

(b) The DH has not received any report on medical incidents occurring in the five private RDCs registered under Cap. 165 during the last five years.

(c) RDCs are required to be registered in accordance with the Ordinance (Cap. 165) and are subject to monitoring by the DH. Prior to the first registration and renewal of licence, the DH will assess the suitability of the renal centres in terms of conditions relating to the accommodation, staffing and equipment to operate renal dialysis service. The management of the RDC is also required, on an annual basis, to submit a report on the operation of the centre to the DH.

The DH will also carry out annual or unannounced inspections to monitor these centres. A set of safety guidelines on haemodialysis has also been issued to RDCs for their reference.

BILLS

First Reading of Bills

PRESIDENT (in Cantonese): Bills: First Reading.

THEFT (AMENDMENT) BILL 1998

ROAD TRAFFIC (AMENDMENT) BILL 1998

ADAPTATION OF LAWS (NO. 10) BILL 1998

CLERK (in Cantonese):	Theft (Amendment) Bill 1998
	Road Traffic (Amendment) Bill 1998
	Adaptation of Laws (No. 10) 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.

THEFT (AMENDMENT) BILL 1998

SECRETARY FOR JUSTICE (in Cantonese): Madam President, I move that the Theft (Amendment) Bill 1998 be read a Second time.

The purpose of the Bill is to improve the existing law in respect of fraud-related crimes by creating new statutory offence of fraud. The Bill also provides for the retention of the existing common law offence of conspiracy to defraud.

It may come as a surprise to many to learn that there is at present in Hong Kong no general offence of fraud, either at common law or under any ordinance. Instead what might loosely be described as fraudulent conduct is dealt with in a variety of ways.

First, the Theft Ordinance creates a number of specific offences of fraud-related dishonesty, such as obtaining property by deception. But these offences are drawn in very specific terms, and are too restrictive and technical to cover all acts of fraud-related dishonesty. For example, a person borrowing property from another person by deception, but without the intention of permanently depriving the owner of it, cannot be charged with any of the existing offences under the Theft Ordinance.

Second, some fraudulent conduct can only be prosecuted by charging the offenders with the common law offence of conspiracy to defraud. However, a conspiracy charge can only apply to the actions of two or more persons. The actions of a single person acting alone fall outside the offence of conspiracy to defraud and are only criminal if one of the specific fraud-related offences applies.

In July 1996, the Law Reform Commission (LRC) published a report on the "Creation of a Substantive Offence of Fraud". The Report followed the issue of a consultation paper in June 1995 on the Commission's preliminary proposal that a new offence of fraud should be enacted in Hong Kong. The Report also recommended the abolition of the common law offence of conspiracy to defraud.

Concerns have recently been raised that, if the new offence of fraud were enacted as recommended, and the common law offence of conspiracy to defraud were repealed, the law of fraud would be defective. This is because the proposed offence would not cover two situations, which are now covered by conspiracy to defraud. The first situation is where a non-financial or non-proprietary prejudice or benefit is caused by deception, for example, a public officer is tricked into acting in a way in which he would not have acted if he had known the true position. The second situation is where no deception is involved, for example, directors of a company put the company funds at risk by making a loan other than on a commercial basis and hence prejudice the company's interest.

In order to address these concerns, it is proposed firstly that the new offence should not be restricted to deception causing financial or proprietary loss or gain. As a result, the new offence will protect not only the individual's proprietary interest, but also the public interest in the integrity of the administration of public affairs. That was indeed the approach favoured by the LRC in its original formulation of the offence. Secondly, to meet the concern that certain conduct not involving an element of deceit (currently covered by the existing common law conspiracy to defraud) would fall outside the new offence, it is considered that the existing offence of conspiracy to defraud should be retained, alongside the new substantive offence of fraud.

Another reason for retaining the offence of conspiracy to defraud is that the offence is listed as an extraditable offence in most of Hong Kong's agreements on the surrender of fugitive offenders. Common law jurisdictions in particular were anxious to ensure that extradition would be available for the common law offence of conspiracy to defraud and were assured that such an offence existed in the Hong Kong law. If the common law offence is abolished in Hong Kong and the new statutory offence does not comprehend all the conduct previously comprehended by the common law offence, some requests for extradition to Hong Kong could fail for want of double criminality. This could give rise to allegations of bad faith by Hong Kong's treaty partners.

The proposed new offence of fraud will remedy the deficiencies and shortcomings in the existing law, will correspond to what most people believe should be the law, will be a welcome addition in the fight against crime, and will add to Hong Kong's reputation as an international financial centre.

Let me now turn to the Bill. Clause 3 adds a new section 16A to the Theft Ordinance to create the offence of fraud. The offence will be committed when a person by deceit induces another to act or to make an omission resulting either in prejudice, or a substantial risk of prejudice, to another, or in benefit to the fraudster or another. The advantage of the new offence is that it would enable conduct to be properly charged as a substantive offence against an individual acting alone, without the necessity of involving another participant.

Clause 3 also provides that the common law offence of conspiracy to defraud shall not be affected or modified by the creation of the offence of fraud.

Madam President, this Bill is short but important. By putting in place a general offence of fraud, it will enable us to deal more effectively with all types of fraud. It would also help further enhance Hong Kong's position as the leading financial centre in the region. I commend the Bill to the Council.

Thank you, Madam President.

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

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

ROAD TRAFFIC (AMENDMENT) BILL 1998

SECRETARY FOR TRANSPORT (in Cantonese): Madam President, I move the Second Reading of the Road Traffic (Amendment) Bill 1998.

Three legislative proposals are made in the Bill:

(1) to tighten the statutory limits for alcohol concentration and to simplify the enforcement procedures against drink driving;

(2) to put school private light buses under the control of the passenger service licence scheme; and

(3) to rectify the existing arrangements for the payment of remuneration to the operators of parking meters and the new Kowloon Bay Vehicle Examination Centre by the Government.

In December 1995, the Government implemented a new set of drink driving legislation, specifying the statutory limits for alcohol concentration permitted in drivers' blood, urine and breath, and that drivers are legally obliged to provide blood, urine and breath specimens for testing. Although traffic accidents resulting in fatalities or serious injuries have fallen by 7% within two years after the implementation of the new legislation, drink driving is still one of the major causes of traffic accidents. In 1997, 30% of the drivers killed in traffic accidents have taken alcoholic drinks before the accidents.

For this reason, we find it necessary to further tighten the statutory limits for alcohol concentration in drivers' bodies, and reduce the limit from 80 mg alcohol in every 100 ml of blood to 50 mg as well as correspondingly reducing the statutory limits for alcohol concentration in drivers' urine and breath to achieve more deterring effect against drink driving. This measure falls in line with the international trend of tightening legislation against drink driving, and overseas studies have confirmed that lower statutory limits can help reduce the incidence of traffic accidents.

At the same time, to increase the efficiency of enforcement procedures against drink driving, we suggest that three new measures should be adopted. Firstly, permitting nurses in addition to doctors to extract blood specimens from persons suspected of drink driving. Secondly, permitting police officers to extract breath specimens at traffic police offices designated by the Commissioner of Police as "breath test centres" or on police vehicles apart from police stations. Thirdly, permitting persons suspected of drink driving to decline the requests for the provision of blood specimens at police stations or breath test centres instead of waiting until they arrive at hospitals before declining such requests. These new measures will help the police expedite the completion of specimen testing procedures, for the benefit of combating drink driving more effectively.

The second part of the Bill proposes to extend the scope of regulation of the passenger service licence scheme to school private light buses. At present, the Commissioner for Transport regulates the safety standard of private buses carrying students through the licensing conditions attached to the licence issued to individual vehicles. Under this regime, the Administration can only change the licensing conditions of the relevant buses one by one when the licence of individual private buses expires. To improve the efficiency of the regulatory regime, it is proposed that school private light buses be put under the passenger service licence scheme. This way, the Commissioner for Transport can, after consulting the relevant licence holders, give them three months' notice and amend the terms of passenger service licences to more effectively monitor the operational safety of school private light buses.

The last part of the Bill proposes to rectify the payment arrangements under the existing management agreements executed between the Government and private operators. At present, the management agreements of parking meters and the new Kowloon Bay Vehicle Examination Centre specify that the relevant operators will first collect vehicle examination fees or parking meter fees for the Government. Out of the moneys received, the operators will retain such portion equivalent to their remuneration due and return the remaining portion to the Government. We have recently reviewed the related payment arrangements and found that the existing arrangements are technically not in compliance with the Public Finance Ordinance. Under this Ordinance, the fees collected by these private operators make up the general revenue and the operators should not be permitted to retain any portion of the general revenue. To rectify this technical problem, we have proposed to amend the Road Traffic Ordinance to specify that with the permission of the Financial Secretary, the operators of parking meters and vehicle examination centres should be entitled to retain portions of the moneys collected for the Government under the management agreements as remuneration or reimbursement, and to treat such portions no longer part of general revenue.

Madam President, I commend the Road Traffic (Amendment) Bill 1998 to Members. Thank you, Madam President.

PRESIDENT (in Cantonese): I now propose the question to you and that is: That the Road Traffic (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.

ADAPTATION OF LAWS (NO. 10) BILL 1998

SECRETARY FOR FINANCIAL SERVICES (in Cantonese): Madam President, I move the Second Reading of the Adaptation of Laws (No. 10) Bill 1998.

The principal purpose of the Bill is to adapt certain Ordinances related to commerce to bring them into conformity with the Basic Law and Hong Kong's status as a Special Administrative Region (SAR) of the People's Republic of China.

Although the Hong Kong Reunification Ordinance and the Interpretation and General Clauses Ordinance have provisions regarding the interpretation of terminology inconsistent with the Basic Law and Hong Kong's status as a SAR of the People's Republic of China, a retention of such terminology in Hong Kong laws is still unacceptable. Thus, we have to enact this Bill to amend certain words and phrases. The proposed amendments are mainly terminological changes. For example, reference to such terms as "Governor", "Colony" or "Crown" has to be amended appropriately. Other amendments include the repeal of section 265(1)(d) of the Companies Ordinance which gives priority to statutory debts of the United Kingdom. As the giving of preference to debts due to the United Kingdom over other debts is tantamount to giving a privilege to the United Kingdom, the relevant provision should be amended so that it becomes ineffective under section 2A(2)(b) of the Interpretation and General Clauses Ordinance. Therefore, it is proposed that reference to "Crown" in the provision should be amended to "Government".

In addition, sections 294(1) and 295(2) of the Companies Ordinance relate to the power of the Official Receiver to invest surplus funds paid to the credit of the Companies Liquidation Account in securities issued by the Government of the United Kingdom. This reference is no longer appropriate. Moreover, since the Official Receiver has not invested in such securities for quite a number of years, it is proposed that the reference be repealed.

The Bill also provides that, in accordance with the provisions of Article 12 of the Hong Kong Bill of Rights Ordinance, the proposed adaptations when passed into law shall take effect retrospectively as from the date of the establishment of the SAR. This Bill obviates the need of referring to the Hong Kong Reunification Ordinance and the Interpretation and General Clauses Ordinance and states expressly the ways of dealing with the privileges enjoyed by the United Kingdom in Hong Kong before 1 July 1997. I hope Members can support the Bill. Thank you, Madam President.

PRESIDENT (in Cantonese): I now propose the question to you and that is: That the Adaptation of Laws (No. 10) Bill 1998 be read the Second time.

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

MEMBERS' MOTIONS

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

First motion: Promoting the development of the agriculture and fisheries industries.

PROMOTING THE DEVELOPMENT OF THE AGRICULTURE AND FISHERIES INDUSTRIES

MR WONG YUNG-KAN (in Cantonese): Madam President, Mr LO Shuk-ching and I share one thing in common, that is, our motions on the agriculture and fisheries industries, his being moved in the Provisional Legislative Council last year, are debated in the absence of any amendments. A case very rare indeed, they say. Why? I think this is because the subject fits the expectations of the public and is endorsed by Honourable Members. As the mover of the motion, I shall kick off the debate. Later, the Honourable Gary CHENG, TAM Yiu-chung and CHAN Kam-lam from the Democratic Alliance for the Betterment of Hong Kong will speak respectively on an overview of agriculture and fisheries in Hong Kong, the damage done to agriculture and fisheries resources due to dredging and reclamation, assistance given to the agricultural and fisheries industries, and expertise in research on agriculture and fisheries.

Before starting the debate on the subject, let me first talk about the value of agricultural and fisheries industries to Hong Kong. There are some in this community who think that the small number of employees in the agricultural and fisheries industries (an estimated 80 000), and its relatively low production value (but in 1997 the amount is $3 billion-odd) do not justify their existence at all. They even question the justification of a seat for these industries in this Council.

I do not think the existence of a trade should be justified simply by looking at its number of employees and production value. Otherwise, we can hardly justify the existence of social workers or clergymen who have fewer workers and who have no production value at all. In this regard, let me take the liberty to speak on behalf of the agriculture and fisheries industries that our value lies in keeping people alive and free them from starvation, just as the medical sector saves lives and free people from sufferings. The agricultural and fisheries industries in Hong Kong supply 13% of the fresh vegetables, 19% of live poultry, 19% of live pigs, 12% of freshwater fish and 69% of live and fresh marine fish. They can stabilize the price of goods and their products account for a heavy weighting in the Consumer Price Index (A). When there is a typhoon or rainstorm, we have to pay more for vegetables and inflation will rise. So, we can see that it is dangerous for Hong Kong to rely on imports alone for non-staple food.

Madam President, some people think that Hong Kong, small and highly urbanized, offers little room for the development of the agricultural and fisheries industries. No doubt, Hong Kong has small stretches of land and sea, but our fishermen never restrict themselves to the Hong Kong waters. They go out of the South Sea to capture fish. This has been the case since the establishment of new China. We have have set up common organizations between fishermen in Hong Kong and Guangdong.

About aquaculture, some people say given the limited number of bays in Hong Kong and the keen competition, there is little room for the development of this industry. As a result of such pessimistic views, investors turn to the Mainland and other East Asian countries to set up aquaculture farms. But when the agriculture and fisheries sector went on a study tour in Japan, we found that this similarly densely populated country has moved its aquaculture industry ashore and built multi-storey fish farms.

As to livestock and crop farming which are land based, we still have a lot of uncultivated land in the outer margins of the New Territories, hence room for expansion. I believe Members must have realized we have also seen in Japan multi-storey greenhouse farms. However, in Hong Kong, the land planning department would rather approve the construction of skyscrapers for domicile than farm houses more than 4.75 m tall.

So, we can see that the development potential of the agricultural and fisheries industries is not related to the availability of sea or land. If we look at the matter from different angles, we will see there is unlimited development potential for the industries. If we can catch up now, it is still possible.

Madam President, "sustainable development" has become a development theory that guides man into the 21st century. People may appear to understand the term but in fact they may not. There is up to now no generally accepted definition for the term. But I have chosen to agree with the words of Chairman JIANG Zemin of the People's Republic of China, who said: "The so-called sustainable development means taking care of present developmental needs as well as needs for future development. It also implies we should not sacrifice the interests of our next generations for the interests of the people at present." I have included the concept of "sustainable development" in my motion as I feel the agricultural and fisheries industries are the worst victims of the present development. Lots after lots of green farms have been levelled to make way for tall buildings. Large areas of the blue ocean have been dredged or reclaimed to become land, leaving nothing left as resources for the agricultural and fisheries industries. Over the last 30 years, farmland in Hong Kong has decreased from 12% in 1967 to 5.6% in 1997. And among the 5.6% of farmland, a lot of them are left fallow due to loss of irrigation water. The livestock farming industry has been subject to continual and draconian control by environmental laws. There were more than 4 000 pig farms and 700 000-odd pigs reared before the coming into effect of the waste control laws in 1987. By 1997 the numbers dropped abruptly to 360 and 325 000 respectively.

The concept of sustainable development originates from environmental protection. Unfortunately, the development of our agricultural and fisheries industries have been subject to harsh restrictions of environmental laws. Among the worst hit are the aquaculture industry and the livestock farming industry. Indeed, the sustained development of the agricultural and fisheries industries require the best natural resources and ecosystems, which is in line with the demands of the environmentalists. What surprises people is that the Government never placed any emphasis on returning wastes from the agricultural and fisheries industries to nature's cycle. Recently, I learned from the newspaper that a professor from the Baptist University had successfully recycled the sludge collected from water treatment plants into fertilizer. He proposed that the Government should try it on the parks of the Urban Council but he was only shown a cold shoulder. We can see from this that the Government is not interested in research connected to agriculture and fisheries at all.

Madam President, my proposal for a government research institute on agriculture and fisheries is not an idea snatched out of thin air. Rather it is one borne out of the world trend I have witnessed in agricultural and fisheries industries in which technology is employed and value added. In the modern world, technology is productivity. The leader of the G7, the United States, is a major agricultural country. Since the United States Government places emphasis on the application of technology to agricultural and fisheries industries, its agricultural products account for 20% of the global production of cereals and meat, although only 2% of its national workforce is engaged in agriculture and the production from agriculture occupies only less than 2% of its Gross National Product. The total production value is very high too.

It would not be fair to say that Hong Kong has never placed emphasis on research in agriculture and fisheries. In the 1967 Yearbook, we can find the Agriculture and Fisheries Department had a 240 tonne research trawler, Cape St Mary, which conducted investigations in the South China Sea for species of fish of important commercial value. So, we know government attention paid to the ocean has gone now.

Had the Government paid the slightest attention to the agricultural and fisheries industries, farmers in the New Territories would have not treated the large population of apple snails in vegetable fields this year as a disaster. In fact, it could have brought about a handsome income for only several years ago, an expert in Fujian had found that apple snails are a superb feed for the aquaculture.

Research institutes for agriculture and fisheries in Japan and Taiwan put half of the hatched fish fry into the sea each year and sell the other half to their fishermen. We do not have any assistance of this sort in Hong Kong, much to our envy so to say.

In fact it is not the first time that I put forward a proposal to the Government to set up a research institute on agriculture and fisheries. The Government has been thinking it is already good enough to set up an Industrial Support Fund for tertiary educational institutes to conduct research work. We must understand that research efforts by these institutes are passive. Since the initiative lies not in the hands of the Government or the agricultural and fisheries industries, little benefit will be gained by the industries. For example, the vegetable gardening industry is in urgent need of high technologies in raising seedlings, packaging and transportation so that its competitiveness against imported vegetables can be enhanced. But since the Government has given the initiative to the institutions, the agricultural and fisheries industries can only wait.

Lastly, I would like the Government to formulate a long-term development strategy for the agricultural and fisheries industries. The present government policy on the agriculture and fisheries industries is one of passive management rather than enterprising development. Under this policy, in addition to the above inadequacies, the Government would rather put the money in the artifical (which we endorse) than investing in the artificial hatching of fish fry. There are low interest loans but the loan funds are insufficient and the interest rate not attractive enough. Although there are loans for the construction of steel hull fishing boats, the Government does not model on Japan and Taiwan which organize multinational fleets, hence our offshore operating vessels are still competing with wooden hulls for marine produce in the South China Sea. The Government is less than enthusiastic in building glass fibre hulls. Knowing only too well that it is difficult to find new blood for the agricultural and fisheries industries, we initiated discussions with the Labour Advisory Board on the importation of labour but we have so far received no reply.

More ridiculous still is the fact that the current control policies apply on us only. There are no controls on imported produce. This has hurt the local market and the health of our people. For instance, the Government recently announced a strict pig-tracking system for local pigs but at the same time allowed large quantities of frozen pigs imported from Thailand to be sold in Hong Kong. Sitting back and doing nothing, the Government is causing great difficulties to the pig farming industry in Hong Kong. Such difficulties could have been avoided had the Government set up a complete quarantine system. At the same time, this long-term strategy should include a review of past laws, the possibility of modelling on China or Taiwan or other countries in introducing comprehensive legislation governing fisheries, agriculture and livestock farming. To implement this long-term strategy, I propose that the Government set up an Agriculture and Fisheries Development Committee comprising representatives from the Government, the agricultural and fisheries sector, research personnel and academics.

To match liberalization of trade, Madam President, advanced industrial countries such as the United States, Japan, and France have in recent years revised their agricultural policies to enlarge their market share in the world produce market. Our arch-competitor, Singapore, has recently begun to focus its attention on aquaculture. China, which has been trekking the reform and opening up path for 20 years, has in place an agricultural policy formulated by the Central Government that will see it through the millenium. Our neighbouring Guangdong Province has also made policies for the villages. Nearby Zhuhai municipality has also set up an experimental zone for marine development at Wangshan to help develop culturing activities by means of technology. If Hong Kong stands still, it will be forced out of the competition.

I so submit.

Mr WONG Yung-kan moved the following motion:

"That this Council urges the Government to promote the sustained development of Hong Kong's agriculture and fisheries industries and expeditiously establish a research institute on agriculture and fisheries, so that the industries can follow closely the world trend of developing technologically-advanced and high value-added modes of production, and to formulate a long-term agriculture and fisheries development strategy, in order to ensure that the industries contribute to Hong Kong's economy."

PRESIDENT (in Cantonese): I now propose the question to you and that is: That the motion moved by Mr WONG Yung-kan, as set out on the Agenda, be passed.

Does any Member wish to speak?

MR LAU WONG-FAT (in Cantonese): Madam President, although the agriculture and fisheries industries of Hong Kong do not account for an important share in the overall economy, their actual contribution to the community is much higher than the economic figures suggest. Over the years, Hong Kong's agriculture and fisheries industries have been able to provide quite a number of jobs. More importantly, they have supplied fresh and high quality non-staple food to the general public efficiently, offering a choice apart from imported food. Such competition helps to a certain extent to stabilize prices and keep prices low.

Due to various reasons, the agriculture and fisheries industries in Hong Kong are undoubtedly facing difficulties. However, they certainly serve a purpose in existence and possess room for development. On this question, the Government's attitude is extremely important. At present, the various problems confronting the agriculture and fisheries industries, such as marine pollution, excessive reclamation and marine dumping which affect the habitat of fish, the frequent floodings in the New Territories and the large volume of parallel imports of meat in the market, have a negative impact on the development of these industries.

The Administration is duty-bound to eliminate these problems which are stifling the operation of the agriculture and fisheries industries. Many members of the industries have already made a number of recommendations for improvement, such as prohibiting the wilful dumping at sea and permitting the transfer of licences of fish farming in order to enhance the vitality in the industry. They also propose that low-interest loans and training for prospective farmers should be provided. In particular, new immigrants who have worked in this field can be trained. The Administration should respond quickly to the relevant suggestions to help the industries overcome their difficulties.

In the long term, the Administration must formulate a policy to promote the sustained development of Hong Kong's agriculture and fisheries industries. I very much agree with the Honourable WONG Yung-kan's suggestion to establish a research institute on agriculture and fisheries, so as to popularize the use of high value-added modes of production in the agriculture and fisheries industries in Hong Kong.

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

THE PRESIDENT'S DEPUTY, DR YEUNG SUM, took the Chair.

DR TANG SIU-TONG (in Cantonese): Mr Deputy, as we progress, we live in a more convenient manner and our quality of life improves. But pollution worsens at the same time, and we become more vulnerable to health hazards. In recent years, there have been new species of viruses such as the O-157 and H5N1. In the past, these were technical terms known only among professionals, but now they are well-known even to children in the street. With a growing number of food poisoning cases, we can get into trouble eating chicken, fish, pork or beef. Even vegetables are poisonous. It seems we can only eat rice with soyabean sauce. That reflects how inadequate our food safety control measures are.

The number of cases of food poisoning increases due not only to loopholes in the policies of the Department of Health, but also to the lack of a proper set of policies on the agriculture and fisheries industries. This has undermined the development of the agricultural and fisheries industries and indirectly lowered our health standards.

Over the past few decades, Hong Kong has evolved from a centre of labour-intensive productions to a centre of financial services. This is an irresistible trend in keeping with the pursuit of cost-effectiveness. But does that mean there is no room for the local agricultural and fisheries industries and that these industries should not be developed? I think the answer is negative, for these industries have maintained their share of contribution. The fisheries industry alone provided Hong Kong people with 12% of the freshwater fish and 69% of the live and fresh fish last year. From this we can tell how important the industry is.

Regrettably, the Government has all along neglected the development of the agricultural and fisheries industries, failing to formulate a specific policy to foster the long-term development of the agriculture and fisheries industries. Unlike other countries, it has not provided sufficient loans or set up research funds for development of technologies to assist the industries enhance their productivity or competitiveness. It has even failed in the very basic health control and supervision of agricultural and fisheries products.

A very obvious example is the avian flu that plagued Hong Kong at the beginning of this year. The incident revealed not only the morbid conditions of Hong Kong chicken farms and the backward operation and technology employed, but also the lack of proper quarantine procedures for imported poultry on the part of the Government. The predicament of Hong Kong inflicted by the flu was related to improper management of the chicken merchants, a dereliction of duty of the Department of Health, and the difficulties faced by the two Municipal Councils in carrying out its duties. Despite that, the Government has to share part of the responsibility for its lack of an efficient set of long-term policies for the agricultural and fisheries industries, for its being less than caring for the industries in regard to their livelihood, business environment and technological upgrading. I think the Government is being very unfair by choosing not to review the problem of faulty policies on the agricultural and fisheries industries, by misleading the public to blame the trouble on the two Councils and even to finally strip them of their duties. To the agricultural and fisheries industries, they have lost a good chance to improve their operations.

Without any long-term policy, the agricultural and fisheries industries face huge difficulties in their development. But the Government, instead of providing help, continues with reclamation projects to obtain land, and repeatedly delays work on the improvement of water quality in Hong Kong. Thus fish farms continue to disappear and the livelihood of the fishermen are made more miserable. Despite oppositions against reclamation and demands for improvement in the water quality, reclamation works by the Government continue and delays in projects to improve water quality persist. Earlier, the Government even put in place Central Reclamation Phase III and Wan Chai Reclamation Phase III, East Kowloon Reclamation and the Whitehead landfill project. The most disheartening one is the Whitehead landfill project as it would do great harm to the fisheries industry because it will make a part of the sea and an important fishing ground disappear for ever. Delays by the Government and its willingness to implement only low level water treatment projects will make the water quality of Hong Kong continue to deteriorate. Eventually, this will put an end to the fisheries industry in Hong Kong.

Mr Deputy, the Asian financial turmoil has one important revelation for us. People cannot rely on speculation any more. To revive the Hong Kong economy to make it as prosperous as the good old days, we must change. We should change not only to high-tech industries but also to other industries and the agricultural and fisheries industries. To develop our agricultural and fisheries industries, I think the Special Administrative Region Government must establish a long-term policy by increasing the amount of loans, and by assisting them in the introduction of hi-tech production. At the same time, the Government should strengthen co-operation with mainland provinces such as Guangdong, Guangxi and Fujian. It should strengthen its exchange with them in terms of technology, transport and hygiene control. Most importantly, the Government should reduce reclamation projects and quicken its pace in the improvement of water quality in protection of the only natural resources in Hong Kong so that they can continue to benefit Hong Kong.

Mr Deputy, I so submit.

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

MR GARY CHENG (in Cantonese): Mr Deputy, Hong Kong emerged from a fishing port to a present day cosmopolitan city known all over the world. But how much room is there for the forerunner industries in Hong Kong ─ agriculture and fisheries industries?

People engaged in these industries have told us they are facing three major difficulties: First, shortage of manpower. Only very few among their children and the younger generation in Hong Kong are willing to join the industries. So, much of the catch in Hong Kong has to be sold elsewhere, not locally, thereby affecting the local market.

Second, the Government is seriously lacking in attention to the agricultural and fisheries industries, compared with other industries. Fishermen have no assistance in advanced technology or logistical support. They suffer from over-exploitation and illegal fishing activities such as the use of explosives. These activities have undermined their competitiveness in the local and external markets.

Third, ecological issues. The massive infrastructural construction in Hong Kong requires dredging and inshore reclamation, which severely damage the ecological balance and cause pollution to the water. The number of fish farms has been diminishing as a result. Hong Kong fishermen, who have been using individualistic management, are now facing the biggest challenge of all times. Has the Government thought about this point at the fundamentals?

Hong Kong fishermen achieve catches of 190 000 tonnes per year, accounting for 70% of the local consumption of marine fish. The decline of the agricultural and fisheries industries means not only that we have fewer gourmet foods, but also that we have to pay more for our fish, in turn affecting industries such as the suppliers of fishing tools and equipment, the ship-building industry, the frozen food industry, and the catering industry. The effects are far-reaching.

Just think about this. In my constituency, the Hong Kong Island, guess how many people are related directly or indirectly to the fishing industry and make a living out of it, from Causeway Bay to Shau Kei Wan, to Chai Wan, to Stanley, Shek O, Aberdeen and Ap Lei Chau? How will a decline of the industry affect their livelihood?

It goes without saying there are difficulties confronting the agricultural industry and livestock farming. According to statistics in 1997, 13% of the fresh vegetables and live poultry were supplied locally. Although the produce is priced higher, the public has more confidence in it. For instance, contamination seldom occurs in locally supplied vegetables.

At the same time as the agriculture and fisheries industries decline, demand for fresh seafood and fresh vegetables increases. What has the Government done? Although certain programmes of development and service aimed at assisting fishermen in their operation were reported in the Government's 1998 Progress Report, they were only minor activities instead of strategic plans. The Government is still holding an attitude of belittling the fisheries industry in their contribution or potential contribution to Hong Kong. It is even more apathetic to the agricultural industry.

We suggest the Government should first of all deal with the quota for imported fishermen in an expedient, reasonable and fair manner so that the problem of manpower shortage can be solved quickly. Secondly, it should take active steps to facilitate the fishermen in their marine fish culture operations and the building of modern fishing boats. Unnecessary and complicated procedures should be avoided and new concepts employed. As the Honourable WONG Yung-kan has pointed out, at present only wooden hulls and steel hulls are registrable but modernized ocean going fibre glass boats are not considered. What is the reason for this? In addition, the Government should go to great lengths in curbing illegal fishing, the use of prohibited feed and the use of insecticides. It should work closely with authorities in the Mainland to protect the reputation of the Hong Kong market and the interests of our fishermen and farmers.

Lastly, I would like to talk about the issue of high added value. Entering the hi-tech era, we cannot remain in the same position as before by employing traditional fishing methods. We should, on the contrary, develop the agricultural and fisheries industries into high value-added industries. When we talk about high value-added industries loudly, what we have in our minds are just computers, lasers and satellites. Why can the agricultural and fisheries industries not be high value-added industries? The key lies in whether the Government has the foresight and the right brains. I can cite several examples. The freshwater lake crab produced in the Jiangsu Province can bring about great economic benefits for the province and China. Is that not a high value-added industry? Why can they do that? The Netherlands is not a big place in terms of land, but guess how much revenue it obtains from selling flowers? I do not think the Hong Kong soil is any less fertile than the soil in the Netherlands. Why is it that other people can succeed? Kobe beef has generated a lot of income for Japan, directly or indirectly. Have we thought about that? So, agriculture is not necessarily a low value-added industry.

I hope the Government has the foresight to revive the agricultural and fisheries industries by taking a new approach to the matter. We place high hopes in the Government.

With these remarks, I support Mr WONG Yung-kan's motion.

MISS CHOY SO-YUK (in Cantonese): Mr Deputy, in promoting Hong Kong as a sight-seeing spot for tourists, the Government's favourite shot has been a junk or the weathered face of our fishermen, or the boat people family at the Aberdeen typhoon shelter repairing fishing nets together. All these show the dense eastern flavour and pristine nature preserved in Hong Kong despite its achievements as a cosmopolitan city. But what is the reality? After incessant reclamation year after year, the Victoria Harbour has little left that we can boast about. What is left is the inedible rabbit fish. Although Aberdeen is a fishing port, the water there is unfit for fish farming. Agricultural land in the New Territories is either dumped fully with containers or left fallow, waiting to be formed for buildings to be erected. So, we are having less and less farmland.

Most disappointing is that the Government only treated the avian flu last year and the poisonous red tide this year as issues of food safety and environmental hygiene, failing to realize sufficiently well that the plagues had brought about uprecedented difficulties for the agricultural and fisheries industries. Therefore, we cannot see any description in the policy addresses in the last couple of years about the issues affecting the industries.

There are 1 700 fishermen households and 15 000 farmers in Hong Kong. Although they make up less than 1% of the Hong Kong workforce, the agricultural and fisheries industries have been a major source of non-staple food for Hong Kong. Last year, nearly 70% of the live and fresh marine fish and more than 10% of the vegetables and 20% of the live pigs and poultry were locally supplied. Undoubtedly, the industries are important industries for Hong Kong. We must also note however that the industries do have great potentials of added value. Their development affects not only the transport, wholesale, retail, catering and tourism industries, but also serves as an index for the cost-effectiveness of our work on environmental protection. Moreover, there is a deficiency of a high 4 000 workers in capture fisheries and fish and poultry culture. The Government should take this opportunity to absorb some of the unemployed, especially labourers into the agricultural and fisheries industries ─ a primary production sector in Hong Kong. Thus we can achieve diversification in our industries. Of course, experts in technology, environmental protection and metereology are also indispensable for the agricultural and fisheries industries.

A more important reason for assisting the agricultural and fisheries industries is that they are industries familiar to Hong Kong. This means if Hong Kong does want to develop innovative technologies and high value-added industries, the agricultural and fisheries industries, which are among the industries with the longest history in Hong Kong, would be a good start. Indeed, the agricultural and fisheries industries have demands for innovative technologies, and this matches with the future development of Hong Kong.

I have been speaking about the opportunities of investment and employment in the agricultural and fisheries industries. The Government should take the opportunity offered by an economic recession and restructuring to formulate long-term development plans to assist the upgrading of the agricultural and fisheries industries. This would also correct the misconception of the general public about the industries, which may be regarded by some as having a low social or professional status. My pleas for the Government are as follows:

First, as Mr WONG Yung-kan has suggested, the Government should set up a research institute on agriculture and fisheries. It should assist the agricultural and fisheries industries in their application of high technologies, improvement in production methods and finding ways to tackle crop diseases, plagues and red tides so that the ability of the Government in dealing with crises can be enhanced.

Second, in view of the worsening red tide problem and the increased frequency of flooding in the New Territories, the agriculture and fisheries industries have been becoming an investment-intensive and risky undertaking. Therefore the Government should improve without delay water quality, drainage facilities in the New Territories and town planning, and review reclamation as a way of obtaining land. The ineffective and wasteful Strategic Sewage Disposal Scheme in particular should be revamped.

Third, in addition to work on environmental protection initiatives, which are long term, the Government can reduce the risks in the operations of the agricultural and fisheries industries by setting up loan funds and encouraging the industries to introduce advanced production technologies and warning systems against disasters. The policy bureau to be established soon to take charge of food safety and environmental hygiene must give top priority to bettering the food quality and health control systems to prevent vegetable and seafood contamination, as such incidents would tarnish the image of the agricultural and fisheries industries and affect the livelihood of the workers in these industries.

Lastly, I wish to draw the attention of the Government to the threats faced by our fishermen. To earn a living they often have to leave Hong Kong waters so that they are exposed to greater risks due to typhoon and detention by neighbouring countries if they trespass their waters by mistake. In the past year, I have been going between fishermen and overseas countries on more than one occasion. Just last week, I assisted a fisherman who was detained by the Filipino government for more than a month in bringing him back to Hong Kong. To protect the safety and livelihood of our fishermen, I hope the Government can take the initiative to provide more assistance to enhance the knowledge of workers in the agricultural and fisheries industries about international law and water boundaries.

With these remarks, Mr Deputy, I support Mr WONG Yung-kan's motion.

MR CHEUNG MAN-KWONG (in Cantonese): Mr Deputy, I am very happy to take part in this debate because I enjoy eating fish very much, in particular fresh seafood. Indeed, seafood has become a renowned Hong Kong dish for gourmets all over the world. If we look back on history, we will probably find Hong Kong was built on the fisheries industry. Today, the fisheries industry has passed its prime. We still have a harbour but no fish. Instead, we have to live with the aftermath of pollution: red tide, oil spills, and rubbish. For more than 20 years, the Hong Kong Government have been carrying out large-scale infrastructure developments along its coastline. The water quality along the shallow inshore areas has deteriorated due to reclamation, dredging and dumping. In addition, the Government has not been vigilant enough in its supervision, condoning over-exploitation, which results in serious damages to the marine ecosystem, thereby lowering the quality of the productive areas over the years. Today, the precious and long-time fishing port is approaching its end.

As industries in Hong Kong enter the 21st century, the Government stresses hi-tech, high value-added industries, with eyes set on establishing mid-stream scientific research institutes to transfer research achievements to the production line. But, as a primary industry, the agricultural and fisheries industries appear to be heading in an opposite direction. The local fisheries industry is diminishing and ageing. No scientific research institutes have been set up specifically to plan or introduce research achievements for use by the industry to enhance productivity. Even the very basic tool, which is the fishing boat, for our fishermen, it is beyond their means to buy modern or larger fishing boats taking into account the present difficult situation. Thus, thousands of fishermen went bankrupt or out of business. They could only resort to finding jobs on land. This is both ironic and sad.

Mr Deputy, one major reason contributing to our fishermen's failure to continue their livelihood is the reclamation and development projects of the Government. Such projects have been dealing continuous blows to the marine ecosystem, thereby forcing many fishing boats to stay half-idle. The Government has agreed to provide those affected fishermen payment of up to five years in compensation for the loss due to damage caused to the fishing grounds they have been relying on for generations. But from 1993 to the present, only $144 million has been paid to the 6 000 successful applications. In other words, each application receives only $13 per day. This amount, by the calculation I have done, is insufficient to buy two hamburgers or two fish o'fillet or even half a catty of golden thread fish. Five years henceforth, the fishermen will have to starve. Mr Deputy, the Government has gained a large amount of land at the expense of fishing grounds, but the compensation paid to the fishermen by way of ex-gratia allowance is meagre. The Government is in fact ripping the fishermen off. Recently, I received a letter from a fisherman saying the Whitehead landfill project would make a part of the sea disappear forever, affecting the livelihood of 3 000-odd fishermen and their 700-odd fishing boats. What the Agriculture and Fisheries Department did was giving them an ex-gratia allowance of just $3 million. So, each fisherman got $1,000 on average, as a deal for the permanent loss of rare and resourceful fish fry culture zone. This amount of compensation is sheer robbery, grossly unfair to the fishermen.

Therefore, the Government should conduct a full-scale review on the ex-gratia allowance on the one hand, and consider the possibility of providing other forms of assistance on the other. This is particularly important as fishing resources in Hong Kong waters are dwindling rapidly. Annual juvenile fish production has dropped for more than a half and annual fish fry production recorded an even greater drop. So, the Government should study in detail the possibility of helping the rehabilitation of the marine ecosystem in Hong Kong waters in the short term. Otherwise, I think I need to propose to the Government plans for compensation or low-interest loans for fishermen to purchase suitable fishing boats and for the provision of suitable training to help the fishermen on their own feet. This is a more realistic and long-term measure than ex-gratia allowance.

Another reason for the continual decrease of marine produce is over-exploitation and unlawful capture. The Government must develop control policies and strengthen supervision to prohibit all destructive fishing activities. The marine ecosystem, once destroyed, would take 10 times the resources and time to rehabilitate. In particular, over-exploitation, or fishing by using explosives, electricity or toxic materials may do harm to fish fry, marine organisms and reefs which form the essential habitat for fishes. These fishing activities would upset the ecocycle rule of the marine ecosystem, the impact of which would be far-reaching. As regards the ways to protect fisheries resources, the consultancy report commissioned by the Agriculture and Fisheries Department recently contained proposals to set up nursury and culture zones, deploy artificial reefs, and restrict the capture of juvenile fish. But to successfully implement these projects, we need to pay a price. For example, to set up fish fry culture zones, we need to close certain fishing grounds. To deploy artificial reefs, in addition to injecting capital, we also need to restrict fishing activities within the reefs, restrict recreational activities using the reefs and so on. But we must understand that if fishing activities are still allowed to go unchecked, over-exploitation will eventually quicken the steps of the fisheries industry towards its demise. If we do not protect the ecosystem of the Hong Kong waters properly to keep the quantity and species of fishes from diminishing abruptly, the price we need to pay later will surely be even greater.

Mr Deputy, we lost our sky due to air pollution. We do not want to lose our ocean due to damage done to our marine ecosystem. The harbour is too dear to be lost as it has been the cradle of our ancestors.

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

PROF NG CHING-FAI (in Cantonese): Mr Deputy, with the rapid development of commerce and the financial and services industries, the agriculture and fisheries industries in Hong Kong have received less and less attention. The Government's policy is basically to let these two industries run their own course. In the past, some policies and measures even led to their decline. Honourable colleagues have said a great deal on that already.

Today, what is left of Hong Kong's agriculture is only the growing of vegetables and flowers, fresh water aquaculture and the keeping of pigs and poultry. Although Hong Kong is not self-sufficient in terms of agricultural products, the over 10% market share of local products helps to stabilize the price of agricultural products and ensure that Hong Kong people have a steady supply of fresh vegetables and non-staple food. More importantly, with these high quality agricultural products competing with imports, the latter must also maintain a certain quality. Thus, while Hong Kong's agricultural industry is small in scale, it has many advantages. It is necessary that it should maintain a certain share in the economic structure of Hong Kong.

Mr Deputy, I have moved a motion on "sustainable development" in this Council. I believe that the Government should make "sustainable development" a general policy. Sustainable development is the new direction of the world's agricultural development. In 1988, the Food and Agricultural Organization (FAO) of the United Nations expressed the view that "sustainable agriculture" is a kind of agriculture that will not cause the degradation of the environment, and one that is technologically suitable, economically viable and socially acceptable. In Hong Kong, we should also practise "sustainable agriculture". I believe that the following policies should be adopted:

1. We should promote agriculture through the use of technology and develop hi-tech agricultural projects. Hong Kong has the conditions for developing agricultural technology. The tertiary institutions of Hong Kong have produced many biotechnologists who can contribute to promoting agriculture through the use of technology. In the cultivation of seeds and stocks, for example, Hong Kong can concentrate on the research and development of the seeds of vegetables and flowers, as well as breeding stocks for pigs and poultry and fry for fresh water aquaculture. We can also apply genetic engineering to create new and superior high-yield species of animals and plants resistant to diseases. As we all know, floriculture used to be a big business in Hong Kong. Unfortunately, we have almost handed it over to others. Why? This is because the flower business in other countries puts great emphasis on technology. Modern technology is applied to breeding, cultivation management, meticulous value-adding process and refrigerated transportation. Floriculture can once again become a high value-added industry in Hong Kong, should the Government have the determination to support it.

2. The quality of farmland needs to be improved. Although Hong Kong is short of land, there is surprisingly a lot of fallow arable land. Twenty years ago, the Agriculture and Fisheries Department started providing ploughing service to help farmers redevelop fallow land. However, this has not been very successful due to the difficulty in getting water supply. Without improving the quality of farmland and the farming environment, how can we develop high value-added agricultural products?

3. There is a great need for Hong Kong to strengthen the scientific research on animal and plant diseases and insect pests, and to establish a more effective preventive mechanism. Otherwise, once an epidemic breaks out, farmers will lose everything. The lesson of the avian flu is still fresh in our memory.

4. Agriculture cannot be developed at the expense of the environment. The conflict between agriculture and the environment is mainly due to livestock keeping. The disposal and treatment of livestock waste indeed warrants co-ordination, but it is not something that cannot be solved. The solution lies in technology and in educating and enhancing the skills of the livestock keepers.

Mr Deputy, in Hong Kong which started at as a fishing port, the fisheries industry has suffered a great decline since the mid-70s. The Government has never had a forward-looking policy for supporting the fisheries industry. It is now time to really do something to promote the development of the agriculture and fisheries industries.

First, the Government should not underestimate our marine resources. As the saying goes, when one is near the sea, one lives off the sea. The Government should formulate a long-term and up-to-date fisheries development policy. Many people consider the 21st century as the era for the exploitation of the ocean. I hope that in confronting this new era, the Government will draw up plans on the targets and development strategies for capture fishery and aquaculture in Hong Kong from the new perspective of sustainable development. At the same time, it should start developing marine science and technology in Hong Kong. In terms of modern oceanic engineering, Hong Kong should at least take the development of fisheries and aquaculture as the focal point of an extensive research.

Second, the Government should adopt some concrete measures for the development of fisheries. For instance, more funds should be injected into the relatively small Fisheries Development Loan Fund and the application procedures should be simplified in order to assist fishermen in buying new fishing vessels and encourage them to adopt advanced technology. It should speed up the plans to recover the marine environment and enhance the conservation of marine resources. Even more importantly, it should actively assist the fisheries industry in developing an "ocean farm", so as to help the industry gradually shift its focus from fish capturing to fish culturing. This will fundamentally solve the problem of over-fishing so that the ocean can maintain its ecological balance.

Third, aquaculture especially relies on technology to achieve the high value-added target. Technological innovation in the various production processes must be developed. One important area is the research and development of fish fry. At present, fish fry for marine fish culture is very expensive. Biologists can collaborate with fish farmers in developing technology for fish fry production and establish fish fry farms with the Government's assistance. The improvement of feed for marine fish and the technical training of existing and future mariculturists are also important tasks that require the Government's assistance.

Lastly, I have talked to the people about this. Dredging for marine fill, reclamation and large-scale infrastructural projects have seriously disrupted the marine ecology in Hong Kong waters. As a result, inshore marine resources have become scarce and all 26 zones for marine fish culture have not been spared. In addition, over-fishing, and fishing by means of electricity or explosive which destroys all marine resources are frequently reported. Discharge of sewage into mariculture zones also happens from time to time. The Government and members of the public should watch over this closely and treat it seriously.

I wish to take this opportunity to urge the industries to enhance their environmental awareness, develop the concept of environmental costs and adopt measures to protect the environment on their own accord. This way, they will obtain the general support of the public for the sustained development of the agriculture and fisheries industries. Mr Deputy, the future of the agriculture and fisheries industries is certainly closely linked to technology. I very much appreciate the fact that Mr WONG from the agriculture and fisheries sector attaches so much importance to modern technology. I appreciate his sound judgment and support his proposal to establish a research institute on agriculture and fisheries.

With these remarks, I support the motion.

MR AMBROSE LAU (in Cantonese): Mr Deputy, over the years, the former Government lacked a long-term and clear policy on agriculture and fisheries. Thus, the local agriculture and fisheries industries were left to their own devices. They have been in a crisis long before the local manufacturing industry. According to information provided by officials of the Economic Services Bureau to the Panel on Economic Services of the Provisional Legislative Council on 6 October last year, the agriculture and fisheries industries were still making an important contribution to Hong Kong. In 1996, the share of the products of local agriculture and fisheries in the products consumed by Hong Kong people was as follows: 70% of the marine fish, 26% of the chicken, 15% of the fresh vegetables and 11% of the pigs. In terms of meeting people's demand for fresh non-staple food and stabilizing the fluctuation of food prices, they play a role that cannot be ignored. Nor should we ignore the fact that the local agriculture and fisheries industries do have enormous potentials for development. Hong Kong has a long coastline and is situated near the South China Sea, with a warm and humid climate. There are still over 7 000 hectares of farmland, half of which are fallow, while one fourth have been turned into fish ponds. Only over 1 000 hectares are still agriculturally active. This shows that the decline of the agriculture and fisheries industries has something to do with the neglect of the rich natural resources of agriculture and fisheries in Hong Kong.

One reason for this state of affairs is that the former Government had always neglected to support the agriculture and fisheries industries. Another reason is the bubble economy produced by the rife speculation in Hong Kong over a long period of time. This has resulted in excessive reclamation and excavation of earth to obtain land, leading to the destruction of the marine ecology and fish farms. Due to massive purchase of farmland by developers, the area of farmland has also been reduced. In terms of social values, the bubble economy and the speculative trend have made people indulge in comfort and scornful of labour. Since agriculture and fisheries are looked down upon, more and more people have left the industries and there is no one to carry on the work. In contrast, in Asian countries and regions with an advanced economy like Japan, South Korea and Taiwan, agriculture and fisheries are important industries. This is evident from the fact that the Hong Kong market is flooded by the agricultural and fisheries products of Japan and South Korea. Although Japan is already an economic power, its people do not indulge in ease or despise labour and its fishermen are still fishing and farming in the cold and windy sea.

Mr Deputy, concerted effort is needed for promoting the development of the local agriculture and fisheries industries. In addition to the formulation of a long-term development strategy by the Government, the community also needs to change its values about work and employment. In this connection, the Hong Kong Progressive Alliance (HKPA) proposes the following six measures to deal with the issue:

(1) In terms of vocational training provided by the Government, the contents of the training courses for agriculture and fisheries should be enhanced and more places should be created. In the past, we have neglected vocational training for agriculture and fisheries, especially training for advanced technologies and skills for agriculture and fisheries. There are approximately 15 000 farmers in Hong Kong and 1 700 households engaging in marine fish farming in coastal areas. Thus, the percentage of the population engaged in agriculture and fisheries is very small. These industries can in fact absorb a large number of the unemployed. While giving priority to training for agriculture and fisheries, the Government can offer the industries additional incentives, so that they would become important industries to solve the problem of structural unemployment in Hong Kong. At present, the Government places emphasis on the development of industries with innovative technology, such as information technology. But what is the future of the large number of blue-collar and some white-collar workers who have been made redundant? One practical solution to this problem is by promoting the development of the local agriculture and fisheries industries;

(2) Priority areas should be designated for agriculture and fisheries. The Government should designate some priority areas for the development of agriculture and fisheries through town planning. Unless there is a great need, the Government should not allocate these areas to other purposes, nor should developers be allowed to purchase the land in these areas, in order to preserve the base for the existence and development of agriculture and fisheries in Hong Kong;

(3) The employment services of the Labour Department and the Government's electronic media should promote new values for employment. Actually, in advanced countries such as the United States, Britain, France, Japan, South Korea and Holland, people engaged in agriculture and fisheries make quite a high income and enjoy good social status. Thus, apart from educating people about employment values, the Government should enhance the status of agriculture and fisheries, so that they will play an important role in the diversified economy of Hong Kong;

(4) The problem of flooding in the low-lying areas of the New Territories should be expeditiously solved. Over the years, whenever there was heavy rain in the summer, the low-lying areas in the New Territories would be subjected to serious floodings, causing destruction to the vegetables, flowers, pigs, chickens and pond fishes in those areas and dealing a great blow to the development of their agriculture and fisheries. Apart from expeditiously solving the problem of flooding in the New Territories, the Government should also expedite the construction of infrastructure useful to promoting the development of agriculture and fisheries;

(5) Sewerage works should be speeded up in order to improve the water quality of Hong Kong waters. At the same time, the "artificial reef" scheme must also be expedited and expanded to ensure that the marine environment and ecology of Hong Kong will be conducive to the reproduction of all kinds of marine fish;

(6) The Agriculture and Fisheries Department should take the lead in promoting new technologies and help Hong Kong fishermen and farmers in acquire new technology for high value-added production. For instance, fish farmers in the New Territories have recently experimented with rearing expensive marine fish such as sea bass, yellow-finned sea bream and sea perch in fresh water. Some fish farmers have also experimented with rarer species of expensive marine fish such as scat. The Government should grant concessionary loans to and encourage such new high value-added research on agriculture and fisheries.

Lastly, the HKPA agrees with the proposal in the motion to expeditiously establish a research institute on agriculture and fisheries, in order to speed up the acquisition and introduction of new technologies from other countries for high value-added modes of production of the agriculture and fisheries industries.

Mr Deputy, I so submit.

MR TAM YIU-CHUNG (in Cantonese): Mr Deputy, there is a most puzzling affair recently. As reflected by fish farmers of the fish culture zone in Shap Long, Lantau Island, between September and November 1996, the Government carried out dredging and dumped stones for the construction of a typhoon shelter in Hei Ling Chau, causing serious pollution to waters in the Hei Ling Chau and Shap Long area. As a result, much of the marine fish that they cultured died due to a lack of oxygen because their gills were filled with sludge. The fish farmers have asked for compensation from the Government. However, today, two years later, the Government still insists that the dredging works had nothing to do with the deaths. Thus, their cause of death is still unknown. This incident shows that the motion on "promoting the development of the agriculture and fisheries industries" proposed by Mr WONG Yung-kan today is quite meaningful. I hope that through today's debate, we can urge the Government to pay attention to the problems of the agriculture and fisheries industries.

In recent years, the Government has carried out frequent excavation and reclamation works. This has both damaged the valuable sea-bed as well as dealt a blow to the coastal capture and fish farming industries. Besides, the Government and fishermen have very different standards for measuring water pollution. They also have divergent views with regard to the ex-gratia payments made as compensation. Thus, when fishermen are struck by natural disasters or accidents, they are very often unable to obtain timely assistance. To promote the development of agriculture and fisheries, the Government of the Special Administrative Region (SAR) must review the standards for measuring water pollution and the method of calculating ex-gratia payments.

As the primary sector in Hong Kong, the agriculture and fisheries industries help to maintain a stable food supply for the people in their daily lives. However, with the rapid development of the secondary and tertiary sectors, the agriculture and fisheries industries are often considered the "sunset" industries. But we should remember that as the sun sets today, it will certainly rise tomorrow.

The local fisheries industry has developed from fishing to fish farming. While Hong Kong used to take the lead in the past, it now lacks the strength to carry on, and this has something to do with the lack of government support. If the Government continues to leave the industry to its own devices and does not make haste to formulate a policy to promote the development of the agriculture and fisheries industries, it would surely be too short-sighted.

Our neighbouring countries such as Malaysia, South Korea and Indonesia provide huge subsidies to fish farming. Not only do they support it with various kinds of loans, they also help fish farmers upgrade their technologies with scientific research so that their fish farmers can sell fish cheaply to Hong Kong.

The massive import of reared fish from overseas has also indirectly led to the shrinking business of the Fish Marketing Organization (FMO). In 1991, the FMO sold a total of 76 000 tonnes of fresh fish. It sold 68 000 tonnes in 1992 and by 1994, the volume of fish sold dropped to 60 800 tonnes. In 1996, 50 000 tonnes were sold. In 1997, the volume of fish sold by the FMO dropped to 47 800. Thus, in four years, it has dropped by more than 40%. The total value also dropped from $680 million in 1991 to $464 million in 1997. If this trend continues, the FMO will not be able to get a commission from the sales to keep a balanced budget, much less make a profit and use it to help the development of the fisheries industry.

In order for the agriculture and fisheries industries to follow closely the world trend of developing technologically-advanced and high value-added modes of production, the basic research must first be enhanced, such as the development of fertilizers, pesticides, new feed for livestock and new fish feed. Secondly, new technologies must be developed to create new breeds, such as developing genetic engineering and improving the methods of cultivation or rearing. In addition, efforts must be stepped up in financing, market expansion and marketing in order to fully enhance the effectiveness of production of the agriculture and fisheries industries.

Mr Deputy, the world is progressing all the time. However, it does not necessarily mean that old things will be eliminated. For instance, before the hamburger company gave out the little figures, who would have thought that the not quite young Snoopy would be more popular than other new cartoon figures? Thus, the agriculture and fisheries industries in Hong Kong are not beyond all hope of recovery. As long as the SAR Government is prepared to take active measures as suggested above, the agriculture and fisheries industries can certainly expand and grow.

With these remarks, Mr Deputy, I support Mr WONG Yung-kan's motion.

MR LEE WING-TAT (in Cantonese): Mr Deputy, I rise to support the motion. With regard to the government policy on the agriculture and fisheries, Mr CHEUNG Man-kwong of the Democratic Party has already spoken in great details. I would just like to add a few points. First, in terms of the livelihood of fishermen, the greatest controversy over the past few years was about compensation for reclamation. Over the past few years, I have accompanied fishermen to meetings at the Agriculture and Fisheries Department (AFD) several times and the experience was quite humiliating. It seemed to me that in handling claims for compensation filed by fishermen, staff of the AFD often put on a certain manner, as if saying "what do you know about it? There can be no doubt about our scientific assessment of the impact of reclamation."

Apart from the case of Shap Long mentioned by the Honourable TAM Yiu-chung earlier, there are also problems like the impact of reclamation on the various fishing zones in Lantau Island, the construction of a typhoon shelter in Hei Ling Chau, the sludge area in Cheung Chau and even the case of Kau Shat Wan. Actually, in the arguments so far down the years, fishermen and the Government have in each case failed to arrive at a better agreement on compensation for large scale works projects. Needless to say, their views can hardly be more divergent. With the loss of every very important fish culture zone, the compensation paid to many small fishing vessels may be as little as a dollar and something per day. The $13 per day mentioned by Mr CHEUNG Man-kwong is not the smallest compensation amount. I have done some calculations once. With regard to compensation for Kau Shat Wan, some fishermen with small vessels only obtained compensation at the rate of a little more than a dollar per day. What good is a dollar and something for them? Of course, the AFD has explained that there are many places where fishermen can capture fish and not just in Kau Shat Wan. However, if reclamation is carried on at this rate, there will soon be no place for fishing in Hong Kong. The AFD told us that fishermen could fish in the South China Sea rather than in Hong Kong waters. But how are they supposed to get there? The fishing vessels are only 15 ft long. They would have sunk before reaching the high seas. The problems faced by these fishermen are not as simple as the Government thinks. Just now I heard the views expressed by Honourable colleagues. I could not entirely concur with them. While the former Government did not do well, the present Government is not doing any better either. Chairman Ambrose LAU, I do not see in what areas the present Government has improved on the former Government. In terms of dealing with the livelihood of fishermen and the development of fisheries, I do not see how the present Government is doing much better than the former. It has adopted the same policy and neglected them in the same way.

Second, some colleagues urge the fishermen to adopt more high value-added modes of operation. In my view, this is too unrealistic. Try asking the fishermen of a small shrimp trawler to adopt high value-added modes of operation and sail to the South China Sea to catch some expensive fish. Frankly speaking, these fishermen can hardly meet their most basic needs. Such a suggestion is a bit too utopian and far-fetched for them. Therefore, I have these questions for the Government. What policy is it pursuing? What does it intend to do for the existing fishermen, especially those who only own small shrimp trawlers and who are not able to fish outside of Hong Kong waters? If the Government says that these people should fend for themselves and that there is no need for a policy, then let them fend for themselves. However, if the Government does think that these people need a better environment to make their own living, hence enable them to capture fish in Hong Kong, we need a more long-term and comprehensive policy. This is the first point that I wish to make.

Second, the Government's way of handling many issues is extremely disappointing, and to name one, the much complained illegal disposal of sludge. I remember that this used to happen a lot in the harbour. There were times when I took the ferry to Cheung Chau or Lamma Island, I could see sludge vessels trailing a long tail of sludge. I only went to the outlying islands occasionally, yet still, I had seen such cases. If the Marine Department and the AFD were willing to help to apprehand them, there was no reason why it could not be done. After a long period of controversy, someone then suggested installing detectors on sludge vessels. If the sludge vessels lost weight too quickly, one would know that there was something wrong. However, in the end, this suggestion was not put into practice. As I see it, the Government attaches relatively less importance to agriculture and fisheries, since they are trivial and not the major industries in Hong Kong. On the contrary, dredging or dumping belongs to the large construction industry, which is the lifeblood and a main economic activity of Hong Kong. I hope that the Economic Services Bureau will spend some time on studying these matters. Apart from the avian flu and the airport problem, we also have many problems related to the livelihood of fishermen.

The third point concerns improvement and training in application of technology. The Government has just allocated funds for an artificial reef experiment in the waters of the Northeast New Territories which involves dumping old tyres and concrete blocks in the sea. However, it will take at least five to six years for the fish fry to grow and maybe another five to 10 years before the fish will be big enough to swim outside the culture zone for people to capture. Actually, is there not a need for the Government to further improve the technology so that the growth of fish fry can be speeded up and the fish population in Hong Kong be made to increase steadily and more quickly? Another problem that the Government needs to solve is the damage to fish and fishermen caused by environmental pollution. The Government has never systematically analysed and assessed the impact of this on fishermen. Whether in Tai Po, Aberdeen or Lamma Island, the pollution caused by the development of a certain region not only has an immediate effect on fishermen, but will also affect the harbour in the long term. I hope that the Economic Services Bureau and the Environmental Protection Department will work more closely to monitor any increase in the pollutants or the degree of pollution.

Lastly, I would like to make a suggestion. Frankly, sometimes I think that the fishermen really have no future at all. Should the Government provide them with some retraining courses? However, some fishermen have asked us for what they should be retrained. They have been fishing all their lives. What else can they do other than fishing? I agree with them. Thus, what the Government should do is to formulate a more long-term and comprehensive policy for the development of fisheries, so that the present or the next generation interested in working as fishermen can have a stable livelihood and development by adopting hi-tech, high value-added modes of production or farming as we have suggested. This might be a more pragmatic solution.

Thank you, Mr Deputy.

MR CHAN KAM-LAM (in Cantonese): Mr Deputy, it is true that the Government of the Special Administrative Region (SAR) does not put enough emphasis on the agriculture and fisheries industries. The relevant departments have not made any effort to promote them, nor do the entire Administration and the various departments attach importance to the protection of agriculture and fisheries.

This morning, at a meeting of the Panel on Works examining projects such as the reclamation and development of Tung Chung, we asked one question: Where will the materials for reclamation come from? The government officials present answered that most of it would be obtained from the sea, while the rest might be construction waste and so on. From this, we can see clearly that the Government does not have an overall policy for conserving marine resources and the ecology of fish farms. We can also imagine that due to the Government's neglect, the agriculture or fisheries industry will have an increasingly small chance of survival in Hong Kong.

In order to find out the views of the public on the development of agriculture and fisheries, the Democratic Alliance for the Betterment of Hong Kong (DAB) conducted a questionnaire survey on the 25th and 26th of this month. The findings show that Hong Kong people are very much in favour of the Government allocating more resources to finance the development of and scientific research on agriculture and fisheries. This reflects that the people attach great importance to the sustained development of these industries in Hong Kong, rather than considering them as "sunset" industries. Of course, one of the reasons is because Hong Kong people are fond of eating fish. In terms of supporting research on agriculture and fisheries, our competitors are extremely active. For instance, Singapore, Taiwan and Malaysia are more active than us in putting in capital and in the provision of government assistance. In Hong Kong, there were facilities for research on fisheries in the 1960s. However, they were closed after several years due to a lack of resources. This is a great pity. Over the years, Hong Kong has successfully developed from a fishing port to an international port, thanks to the important contribution to the Gross Domestic Product by agriculture and fisheries. Therefore, we should not neglect them at all. However, the Government fails to carry out any scientific research, relying only on the fruits of research from overseas. The biological research now being conducted in the universities of Hong Kong amounts only to some small discoveries or inventions. They have even come up with suggestions on methods of capture which may not be useful for the fisheries industry in practice. Therefore, members of the agriculture and fisheries industries have a great deal of resentment against the Government.

The DAB suggests that the Government should establish a research institute on agriculture and fisheries, so that these industries can increase their productivity through development of technology. This is in fact in keeping with the world trend of adding value to production. Our idea is that the Government should allocate resources to set up a research institute on agriculture and fisheries with Hong Kong characteristics. The subjects of research of this institute should of course be comprehensive. All areas relating to agriculture and fisheries should be covered, such as studying the species of fish with commercial value, developing fish feed or breeding species of livestock and fish, so that the results of academic scientific research could be speedily applied to production processes in the industries.

Of course, the DAB is not saying that there are no research personnel in agriculture and fisheries in Hong Kong. Members may recall that some time ago, a foreign magazine criticized that there are very few PhDs in the government departments of Hong Kong. However, having looked up the records, we found that the Agriculture and Fisheries Department (AFD) is the department with the largest number of PhDs, altogether 11 of them. I wonder if the Secretary is aware of this. But he might be quite gratified at learning the figures. Unfortunately, apart from one who is assistant director, the others are all mid-level officials with no power of policy-making. In our view, it would of course be better to promote them to appropriate posts so that the agriculture and fisheries industries can benefit from their knowledge. Otherwise, the Government can transfer these scientists or PhDs to the research institute to strengthen its manpower and allow these people to put their knowledge into practice. Therefore, I hope that Members will support Mr WONG Yung-kan's motion, so as to assist the agriculture and fisheries industries in enhancing their technology and train the scientific research personnel to promote the development of the agriculture and fisheries industries in Hong Kong. Thank you, Mr Deputy.

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

(No Member indicated a wish to speak)

SECRETARY FOR ECONOMIC SERVICES (in Cantonese): Mr Deputy, first of all, I would like to thank Mr WONG Yung-kan for initiating the motion debate on promoting the development of the agriculture and fisheries industries today. I would also like to thank Members for speaking on this motion. Now I am going to respond to the views put forward by Members. At the same time, I am very grateful to Mr CHAN Kam-lam for pointing out that there are a lot of officers holding a doctor's degree in the Agriculture and Fisheries Department (AFD). I hope this can boost Members' confidence in the AFD.

Just like Members, I enjoy eating fish and vegetables. As such, I absolutely support the development of our agriculture and fisheries industries, especially when Hong Kong is called the gourmets' paradise. We definitely hope that we can continue to have quality pig, chicken, vegetables and fish produced locally. I believe this is also Members' aspiration.

During the debate, Mr WONG Yung-kan and a number of Members urged the Government to help our agriculture and fisheries industries to move in the direction of hi-tech and high value-added modes of production, as well as formulating a long-term development strategy for agriculture and fisheries. I have, on past occasions, repeatedly pointed out that the Government attaches great importance to the development of our agriculture and fisheries industries. Moreover, we identify entirely with the contribution made by the people in the trade in providing the public with a continuous supply of non-staple food every day. The Government has in fact put in place a long-term development policy to provide assistance to the AFD in several areas such as promoting technological research, resources conservation, operation, wholesale and financial support so as to raise productivity and quality with a view to enhancing the competitive edge of local products and promoting the sustained development of our agriculture and fisheries industries.

Technological research

Insofar as the promotion of technological research is concerned, the Government's "Industrial Support Fund Scheme" provides a useful channel (of course this is only one of the channels) to encourage the academic sector and people in the trade to develop items which can contribute to the upgrading of the industries and technologies in various fields, including agriculture and fisheries industries. The Scheme has already subsidized nine research development items related to the agriculture and fisheries industries and the amount involved was more than $23 million. These items include developing and improving fish feed to speed up the growth rate of fish, studying how to improve the breeding of marine fish, setting up a gene pool for chicken so as to enhance the quality of chicken raised locally, culturing effective vaccines, developing plants and pot-plants of high production value.

Furthermore, the "Applied Research Fund" also provide loans or capital for some applied research items with commercial development potential. Subsidized items include the alteration of genes of animals and plants related to agriculture and fisheries industries.

In order to implement the policies and strategies related to promoting innovation and development of technology as outlined by the Chief Executive in the policy address in October, the Government plans to apply for a provision of $5 billion to establish an "Innovation and Technology Fund" which will subsidize the Government or non-governmental organizations to undertake non-current projects which will contribute to innovation and technological upgrading in the industries. This Fund will mainly cover research items related to commerce and industry, reinforcement of the technological infrastructure and so on. The Administration is now working on the details pertaining to the operation of the Fund, and expects to finish the relevant work by the summer of 1999. We believe research development items related to our agriculture and fisheries industries can then apply to the Fund for subsidy.

As regards improving the technological infrastructure, the Government has planned to build a "Science Park" and an "Applied Science and Technology Research Institute" for the purpose of strengthening our technological infrastructure, including giving support to technological research related to our agriculture and fisheries industries.

Apart from the abovementioned measures, indeed I believe Mr WONG is also aware that the AFD has set up experimental farms and research stations a long time ago as well as employing professional staff to introduce new technologies related to the agriculture and fisheries industries, study the feasibility of applying these technologies to Hong Kong as well as promoting the application of these technologies by people in the trade. For instance, three fisheries sub-stations managed by the department are now responsible for conducting a study on aquaculture adaptability for the purpose of assisting the sustained development of the marine fish culture industry in Hong Kong, reducing fish losses resulted from diseases, as well as enhancing the competitiveness of local fisheries products in the market. The fisheries sub-station set up at Kat O is equipped with experimental cage culture facilities, and is mainly engaged in technological research on fish culture such as culturing new species, improving fish feed formulae as well as fish culture technologies and so on. The fisheries sub-station at Au Tau is responsible for undertaking investigations and researches on fish diseases, whereas the one at Aberdeen is responsible for analysing water quality, including monitoring red tide. In addition, local tertiary institutions have also set up academic research institutes related to the agriculture and fisheries industries. Very often, the AFD will co-operate with these institutes to study topics related to technologies connected with the agriculture and fisheries industries. Of course, I greatly share the views put forward by Mr WONG and Members just now that although the Government has all the facilities as mentioned above, we should still do more and better in strengthening our technological research facilities. We will follow up these issues with the AFD to examine how we can strengthen the facilities in this area.

Resources conservation

Concerning resources conservation, Members have talked a lot about the sustained development of our agriculture and fisheries industries just now. The Government will of course give its support in this aspect. Actually, Members should be aware that the Environmental Impact Assessment Ordinance, which is targetted at sustained development, has already come into effect this year. The objective of this Ordinance is to require the relevant party to, before the commencement of reclamation and dredging projects, present an environmental impact assessment report that assesses the impact of the projects on the environment (including fisheries resources), as well as implementing mitigation measures to reduce the environmental impact to an acceptable level.

Insofar as assisting the sustainable development of capture fisheries is concerned, since inshore fisheries resources are constantly shrinking, the AFD has commissioned a consultancy to conduct a study on "Fisheries Resources and Fishing Operations in Hong Kong Waters" to ascertain the situation of local fisheries resources and recommend an appropriate conservation and management strategy. The consultancy study has now been completed, and the AFD is conducting a three-month public consultation on the recommendations made in the consultancy report. This consultancy study has provided useful information in connection with the conservation, development and sustainable use of inshore fisheries resources. The management strategy proposed by the consultancy includes improving and restoring the habitats of organisms, as well as establishing fish breeding grounds and protective zones. After consulting the public, we will formulate a long-term strategy for the conservation and management of fisheries resources so as to enable the local fisheries industry to undertake sustainable development.

In addition, the AFD is trying to promote the growth and increase the diversity of marine organisms through an artificial reefs project at a cost of approximately $100 million. This project will contribute to the sustainable use of our fisheries resources and promote the long-term development of inshore fisheries.

The Fisheries Protection (Amendment) Bill 1998 was passed by this Council in October. Subsequently, the Government raised the maximum penalties substantially for using destructive fishing methods, such as using explosives and poison to catch fish, as well as prohibiting or restricting the use of fishing apparatus detrimental to fisheries and the marine ecosystem. We have now embarked on formulating the relevant regulations with a view to exercising these new control measures as soon as possible.

Just now, many Members mentioned the impact of reclamation on the environment and the disputes between the Government and fishermen over such issues as ex-gratia compensation and allowances. I found out today that many of the problems are in fact related to the Planning, Environment and Lands Bureau. But regrettably, I have not invited officials from the Bureau to join me in responding to the views put forward by Members. I would like to inform Members that the Bureau and the AFD are in fact conducting a review on the method of calculating ex-gratia allowances. I believe Members probably remember that during the meeting held by the Legislative Council Panel on Economic Services on 28 September this year, the Planning, Environment and Lands Bureau undertook that it would consult the Panel again after completing the review on ex-gratia allowances.

Operation

As far as operation is concerned, the Government has commissioned a consultancy to conduct a study on making the best arrangements related to resource deployment and system operation in light of the direction to be taken for carrying out long-term agricultural development in future.

Furthermore, targeting at the manpower shortage problems raised by the agriculture and fisheries sector, we have implemented the Mainland Fishermen Deckhand Scheme to allow not more than 5 500 Chinese deckhands employed by distant water fishing vessels to enter Hong Kong to unload fish in designated wholesale fish markets. The operation of the Scheme should be able to help the fisheries industry to a certain extent. Apart from this, the Administration is now conducting a comprehensive review on the manpower needs of the fisheries industry in response to the demands of the industry. The review will be completed early next year. We will of course consider the views of the industry before making any decisions.

Earlier on, Mr WONG proposed that the Government should set up a research institute on agriculture and fisheries which should comprise officials, representatives from the agriculture and fisheries sector, experts on technological studies as well as academics. I would like to point out that the Government does have an Advisory Committee on Agriculture and Fishery in place, and its members are drawn from representatives from the agriculture and fisheries sector, academics engaging in biological research and so on. The first step I think we should take is to see how we can enhance the representativeness of similar committees, particularly to see whether there is a need for us to increase the number of technological research experts to help strengthen the development of our agriculture and fisheries industries.

As for developing distant water fishing, I believe Members should also be aware that it is not at all an easy task to develop distant water fishing. The relevant proposals have been discussed by the Capture Fisheries Sub-committee under the Advisory Committee on Agriculture and Fishery. We must study a number of issues, including designing proper fishing vessels, upgrading the skills of local fishermen, examining whether there are sufficient logistical port and wholesale supporting facilities, as well as discussing such issues as fishing rights, capital investment and so on. The AFD has succeeded in applying for funds and will commission a consultancy to examine the feasibility of developing distant water fishing next year.

Some Members also mentioned that we should enhance co-operation and exchange of skills with the Mainland. This is something we completely agree with. There is a need for us to maintain close liaison with the Mainland, enhance exchange of skills and co-operation in management. This will not only contribute to the development of our agriculture and fisheries industries, but also provide Hong Kong with a stable supply of quality non-staple food.

Since the reunification, officials from the AFD has held a number of talks with the relevant departments in the Mainland as well as exchanging views over relevant issues and discussing whether there are opportunities for both parties to co-operate. I entirely agree that we can have more exchanges and co-operation with the Mainland, particularly in the area of scientific research.

Financial support

As regards financial support, the AFD is now administering seven loan funds to provide our agriculture and fisheries industries with low-interest loans in such areas as operation and investment in new equipment and skills so as to meet the varied needs of fishermen and farmers. Among these funds, there is a "Fisheries Development Loan Fund" set up by the Government to provide fishermen with loans so as to help them build new fishing vessels as well as upgrading the performance of their fishing vessels. Taking into account the tendency of the local fishing industry to gradually switch to steel-hulled fishing vessels, the Government has drastically expanded the amount of capital of the development fund from $7 million to $100 million. The Government will review the various Funds on a regular basis to cope with the developmental needs of our agriculture and fisheries industries.

Red tide

I would like to take this opportunity to respond to the red tide issues mentioned by a couple of Members just now by introducing to Members six measures adopted by the AFD in connection with red tide, in the hope that the harm done to mariculture by red tide can be minimized.

(1) The AFD has set up an Expert Group on Red Tide in April to provide expert advice on how to tackle red tide effectively.

(2) Since May this year, the AFD has strengthened its Photoplankton Monitoring Programme by collecting water samples twice each week from 13 mariculture zones for the purpose of monitoring plankton in water.

(3) The AFD is now conducting a trial scheme by removing sediment from the seabed of the mariculture zones in order to improve the marine environment of the zones. The scheme is expected to finish by early next year.

(4) The AFD has strengthened its liaison with mariculturists. It can now raise the alarm or provide emergency support services even during non-office hours.

(5) The AFD is working with the Federation of Aquaculture Associations to set up liaison and self-help units in mariculture zones for the purpose of raising red tide alarm, monitoring the situation of the mariculture zones and co-ordinating appropriate remedial action.

(6) The AFD has recently embarked on a consultancy study on monitoring and managing red tide in the hope that it can further improve the alarm raised in connection with the outbreak of red tide in Hong Kong waters and to minimize the impact of red tide on mariculture as far as possible. The study is expected to be completed by the beginning of next year.

Finally, I take this opportunity to reiterate that the Government has taken the development of our agriculture and fisheries industries very seriously and is in full support of it. The AFD has, in the past, taken a number of measures in supporting our agriculture and fisheries industries. It is now promoting a number of important projects which will contribute to the long-term development of the industries. I hope the industries can, from now on, maintain close contact with the Government and work together to support and promote the development of our agriculture and fisheries industries.

Thank you, Mr Deputy.

THE PRESIDENT resumed the Chair.

PRESIDENT (in Cantonese): Mr WONG Yung-kan, you are now entitled to reply and you have two minutes 18 seconds out of your original 15 minutes.

MR WONG YUNG-KAN (in Cantonese): Madam President, just now, the Secretary has told us a lot of things which are quite appealing. But so far, the Government is still unable to carry out most of what the Secretary told us. Let me cite the simplest issue related to feed as an example. In spite of the fact that the study on new feed has been conducted for almost eight years, the situation remains the same. The replies we received when we asked the relevant department were the same: "We are conducting a study on new feed". Is it going to work? We are of the view that if we are to conduct a study, it must be comprehensive and cover every detail, from small to large. But the fish we breed are still feeding on the same stuff. There has not been even a small change eight years down the road.

Why do we insist on establishing a research institute on agriculture and fisheries? I know the relevant department has set up many so-called research stations. Although these stations can do a lot of other things, they are unable to carry out such researches as the hatching of fish fry. Let me tell the Secretary. We spend more than $20 million on purchasing fish fry from overseas each year. If the Government can carry out the study successfully, we can then spend the $20 million in this area. In doing so, we can not only add value to our resources, but also spend less on foreign exchange. Why did the Government fail to give consideration to this aspect? The Government just kept on mentioning those research stations and venture funds. I think the Government should do more rather than telling us what it has done. In fact, we know the Government has done something. It is only that people in our trade feel it has not done enough.

There is quite a big problem with farm sheds too. For the past two or three decades, Hong Kong has been following the same set of legislation, and farm sheds still measure 5.47 m tall. Nowadays, even people need to live more comfortably. But only one-storey pig sheds are allowed to be built. The pig-rearing industry in foreign countries has now developed to building multi-storey pig sheds. But the Hong Kong Government is still reluctant to amend the legislation. How can one say that the industry is developing? In fact, the Government has imposed excessive restriction on the development of the industry! Farmers will be prosecuted if they add a few more storeys to their pig sheds. I find the Government is going too far indeed.

I am very grateful to Honourable colleagues for their support. I also hope that the Secretary and the Agriculture and Fisheries Department can give serious consideration to substantially ameliorating the problems related to agriculture and fisheries. I hope Members can support my motion as well. Thank you, Madam President.

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

(Members raised their hands)

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

(No hands raised)

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

PRESIDENT (in Cantonese): Second motion: The Government's scheme of control agreements with the two power companies.

THE GOVERNMENT'S SCHEME OF CONTROL AGREEMENTS WITH THE TWO POWER COMPANIES

MR FRED LI (in Cantonese): Madam President, let me first say a few words on the history of scheme of control agreements. The scheme of control agreements applicable to the China Light and Power Company Limited (CLP) and the Hongkong Electric Company Limited (HEC) were introduced in 1964 and 1978 respectively. In the 1950s and the 1960s, since the industries of Hong Kong were still in their infancy and our economic conditions were not so good, the community did not have a very big demand for electricity. That is why I agree that under the realistic social condition at that time, there was indeed a need to attract investments and enhance investor confidence. So, I would say that the scheme of control agreements implemented by the Government at that time could indeed serve the purpose of ensuring that investors could make stable profits over a period of time. However, very obviously, this type of agreements will inevitably be biased towards the interests of investors.

The circumstances in our community and our economic conditions have since changed drastically, and they are now entirely different from those in the 1960s and 1970s. This type of scheme of control agreements, which are "tailor-made" for investors, have simply become outdated as a result. And, the biggest deficiency of such agreements is that they do not contain any incentive which can induce the companies concerned to raise their efficiency of production. Since their profits are directly pegged with their asset values, the two power companies have both been induced to construct more generator plants, so as to increase their asset values and thus their profits. In view of such a defect in this type of agreements, many countries such as the United States and the United Kingdom have already discarded them and replaced them with market competition and price control measures.

Actually, the scheme of control agreements which used to protect the interests of the local bus operators and telephone company have all been abolished. With a view to improving the services of public utilities, the Government has by now introduced a broad policy of fostering market competition for most public utilities, be they public bus services or local telephone services. And, even in the case of gas fuels, the Government is also exploring the feasibility of common transmission. In order to give the public more choices, and in order to enable people to enjoy price reductions and other benefits brought about by competition, the Democratic Party maintains that when the respective agreements applicable to the CLP and the HEC expire, the Government should introduce a full-scale liberalization of the electricity supply market. This proposal is in line with the policy of the Government to increase the elements of competition for various public utilities, and can also ensure that the public interest will not be harmed by any monopolistic control.

I must stress that the Democratic Party is not saying that after 2008, the Government should completely refrain from imposing any form of regulation on the electricity supply market. What we ask for is that when the said agreements with the CLP and the HEC expire, the Government should not renew them or extend their validity period. I wish to emphasize that the Government should still introduce some suitable regulatory measures in the light of the market competition conditions at that time.

Some government officials and Honourable Members may well say that 2008 is still 10 years away from now. Of course, we simply do not know whether we will still be in office 10 years later, and some may thus argue that there is no need for us to make such a long-term decision now. But I must say that this viewpoint is indeed very short-sighted. The Democratic Party maintains that the Government should now start to plan for the future; it should promptly draw up a long-term objective for the electricity supply market, one which aims to "introduce competition and achieve full-scale liberalization". Following this, the Government should draw up various support measures and a timetable for the purpose of materializing this objective. The reason for this is that market liberalization will need adequate time for preparation. It cannot be introduced overnight. If we do not make adequate preparation, then even though the market is somehow liberalized, there will not be any genuine competition to the benefit of consumers. The Hongkong Telecom is a good illustration.

The Democratic Party maintains that this is now the right time to draw up a long-term development objective for the electricity supply market, because over the next few years, the Government will have to deal with quite a number of issues relating to the electricity supply market. These issues include the interim review on the scheme of control agreements applicable to the two power companies, the studies on interconnection and market liberalization, the expansion of the Lamma Island plant of the HEC and the dates of inauguration for the CLP's No. 7 and No. 8 generating units at Black Point. All these issues are interrelated and will affect one another. Therefore, I must express my strong discontent about the piece-meal approach adopted by the Economic Services Bureau in handling these issues. The Government must stop handling these issues separately, and must instead tackle them altogether at the same time. The principle it should adopt while doing so should be one of "reducing electricity wastage and making preparation for introducing competition and market liberalization". Over the next 10 years, whenever the Government makes any decision concerning the electricity market, it should always keep in step with the trend of market liberalization. Besides, since the construction of power plants will require huge investments, and since the life span of a power plant is very long, the Government should notify the power companies well in advance of all possible market changes in the future. That way, investors will be able to plan their investments with full knowledge of what will happen in the market.

What is happening in our electricity market now is that the CLP is faced with the problem of surplus output, as a result of its over-estimation on the growth of electricity demand in Hong Kong which has led to an over-investment in the construction of additional generating units at Black Point. Although the Government has asked the CLP to defer the inauguration dates of the No. 7 and No. 8 generating units, the electricity reserve margin of the CLP this year is still as high as 50%, which far exceeds the international standard of 25%. Even if we assume that the annual growth rate of electricity demand is 3%, the electricity reserve margin of the CLP in 2006 will still be more than 25%! Surplus output will not only lead to electricity wastage, but will also make it necessary for people to pay more for these surplus assets.

The CLP's surplus output is already an irrevocable fact. But then, right at this time, the HEC on the other side of the Victoria Harbour is applying to the Government for the construction of an additional 300-megawatt power plant on Lamma Island, so as to enable it to supply enough electricity to Hong Kong Island in 2003. Hong Kong is such a tiny place, and Hong Kong Island and Kowloon are just separated by a harbour. But, believe it or not, the two power companies simply cannot purchase any electricity from each other. So, even when there is surplus output in Kowloon, the power company of Hong Kong Island still has to spend several billions on constructing another power plant. This is not only against all common sense, but is also absolutely absurd!

Last year, the Electrical and Mechanical Services Department estimated that regular transmission of electricity between the two power companies would only require an investment of $468 million on the installation of transmission cables. The same amount is only good enough for the construction of a 30 megawatts power plant. Thus interconnection is in fact not costly at all. The Democratic Party thinks that the Government should implement the proposed interconnection scheme as quickly as possible, because following interconnection, the CLP and the HEC will be able to buy and sell electricity between themselves. And, when there is mutual support in terms of electricity supply, the two power companies will not have to maintain their respective electricity reserve margins at too high a level. This will reduce electricity wastage and will also enable the HEC to defer its construction of the proposed Lamma plant. In the end, the upward pressure of electricity charges will be much relieved. Since the CLP's power plants at Black Point have already adversely affected the interests of the public, the Government must now handle the plant construction proposal of the HEC with particular care. And, before it makes any decisions, it must give top priority to the interests of the entire community. In addition, since interconnection is the pre-condition for future competition and market liberalization, the Democratic Party views that it is worthwhile to invest in it considering its immense significance.

With a view to inducing the two power companies to implement the interconnection scheme, I think that the Government should consider the idea of giving them some financial incentives. My colleague, the Honourable Andrew CHENG, will offer some suggestions later on for the consideration of the Government.

In regard to the interim review on the scheme of control agreements applicable to the two power companies, which is now near completion, the Democratic Party views that the Government has failed to fight on behalf of the public for better terms and conditions, such as a reduction in the rates of permitted return to be enjoyed by the power companies every year. Even when Hong Kong is undergoing a period of recession and deflation, the power companies are still allowed to enjoy return rates ranging from 13.5% to 15% of their average net fixed assets, or of 20% of their shareholders' investments. There can be no justification for the Government to allow the two power companies to reap excessive profits from members of the public and the industrial and commercial sector. The Democratic Party simply cannot endorse such a practice. We urge the Government to continue to apply pressure on the two power companies, so as to adjust the permitted return rates enjoyed by them.

A moment later, another colleague of mine, the Honourable CHEUNG Man-kwong, will give a detailed account of the Democratic Party's requests concerning the interim review. And, now, let me stress one point again. Probably influenced by the wording of my motion, some Honourable Members tend to have a wrong impression that I am advocating an immediate change or abolition of the scheme of control agreements. Let me state very clearly once again that we are not advocating any abolition before 2008. But we certainly do not want to see the Government renew these much criticized agreements with the two power companies in 2008.

With these remarks, I beg to move.

Mr Fred LI moved the following motion:

"That this Council urges the Government to abolish, in the year 2008, the profit control schemes made respectively with the China Light and Power Company Limited (CLP) and the Hongkong Electric Company Limited (HEC), so as to fully implement the opening up of the electricity supply market, and also urges the Government to expeditiously implement, in the meantime, the proposal to increase the interconnection capacity between CLP and HEC, so that the transfer of electricity between the two power companies can be extended, with a view to reducing the electricity reserve margin for the whole of Hong Kong, minimizing electricity wastage, deferring the implementation of HEC's proposal to build additional electricity generating capacity, and preparing for the introduction of market competition in future; furthermore, this Council also requests the Government to seek actively to amend those provisions in the two power companies' Scheme of Control Agreements that are against consumers' interests, and to lower their permitted rate of return on average net fixed assets, so as to safeguard consumers' interests."

PRESIDENT (in Cantonese): I now propose the question to you and that is: That the motion moved by Mr Fred LI, as set out on the Agenda, be passed.

Does any Member wish to speak?

MR FUNG CHI-KIN (in Cantonese): Thank you, Madam President. Mr Fred LI's motion involves policy decisions to be made in 10 years' time and it urges the Government to "expeditiously implement, in the meantime" certain proposals. Thus, it impresses me as being both farsighted and anxious for quick results and it covers matters to be done in the long and short runs. If he were an investor in the stock market, he would surely be an expert. Just now, Mr Fred LI has already explained clearly in his speech and remarks what was to be done. He was afraid that there might be some misunderstanding on our part. This is precisely because the motion is not well written. If it were well written, why would there be misunderstanding? Right?

Mr LI proposes that a decision should be made now (that is, 10 years in advance) for abolishing the Government's scheme of control agreements with the two power companies in 2008, obviating the need for discussions in the meantime. He also proposes that the electricity supply market should be fully opened up in 10 years' time. How should it be opened up? There is an old saying that "in 10 years' time, nothing will be the same". Will there be a third operator in 10 years' time? If the profit control schemes are abolished, would tariffs fall under competition, or would the companies reap staggering profits without control? The problem of petrol price is one example.

Electricity is the lifeline of a modern city, while power generation and supply is a huge, long-term investment and a commitment that involves thousands of households and hundreds of industries and trades. Thus, we must not formulate the policy on electricity supply rashly.

The Hong Kong Progressive Alliance (HKPA) is well aware that it is no longer appropriate to maintain the monopolistic franchised operations of the two power companies. The electricity supply market and business environment of the Special Administrative Region (SAR) lag far behind advanced countries in particular and are in urgent need of a review. However, before or while a detailed study is being conducted, if one hastily notifies the existing operators 10 years in advance that there will be no profit control schemes in 10 years' time, how are the operators and consumers going to interpret this? Frankly speaking, consumers do not have much choice. Due to the uncertain prospects and the many unstable factors in our economy in recent years, operators might be unwilling to invest further and just make do with what it has. Who would lose out in the end? The SAR Government should have a comprehensive plan and make adequate preparations before deciding whether or not to abolish the profit control schemes.

With regard to interconnection, even the lay general public knows its importance, since connecting to the internet is a popular thing. As far as the HKPA knows, the interconnection of the electricity system in Hong Kong lags behind that in other countries. With today's technology, it is possible for each generator set to be managed by an independent company, while the electricity generated by all the generators will be transmitted to the same network, so that local users can choose to buy electricity from any of the power companies. This mode of operation is similar to that of the present telecommunications market in Hong Kong, in which each telecommunications service company rents the network from the Hongkong Telecom and they can compete with one another in terms of the price of services. The electricity system in Los Angeles in the United States is operating in an interconnection mode. Interconnection between the power companies has a lot of advantages for consumers. For instance, with interconnection, the two power companies will share one electricity reserve. This way, the minimum requirement for the electricity reserve margin will be reduced and costs lowered, ultimately benefiting consumers.

However, interconnection is also related to the issue of effectiveness. How should the costs of across-the-sea interconnection be shared between the two power companies? Mr LI also mentioned just now that some incentives should be given. After interconnection, at what price should the surplus electricity of the China Light and Power Company Limited (CLP) be sold to the Hongkong Electric Company Limited (HEC)? How stable is the interconnection? Is interconnection possible when the electricity of the two power companies is generated with different fuels? I obtained such information from someone from HEC, who knows more about this than I. If there is a shortage of electricity supply in two years' time, for instance, which company should be asked to invest in building an additional power plant? Besides, should interconnection cover regions in southern China? Which regions or companies should be responsible for the supply? We believe that the Government should have studied these issues. Mr Fred LI's motion is nothing but an attempt to "forestall the others" and to "get credit", since the pros and cons of this are as yet unknown. It also involves the question of how to tidy up the aftermath of the abolition of the profit control schemes 10 years later. The HKPA cannot agree to drawing a conclusion now to "expeditiously implement" the proposal.

In the last part of his motion, Mr LI requests the Government to seek actively to amend certain provisions in the agreements executed with the two power companies. While this seems to attend to consumer interests, its corollary is that the Government will have to pressurize the two power companies into amending the agreements. How will such acts of the Government be regarded by local or foreign investors? We must deal with this carefully. As public utilities based in Hong Kong, the two power companies have separately announced a tariff freeze to show sympathy with the public in the face of an economic downturn. The HKPA welcomes this move. But since the two power companies are now making substantial profits, they can better show sympathy with the public by reducing tariffs and overcoming difficulties during an economic recession by tapping new resources and cutting down expenses. I hope that the two power companies will understand that the best way to make more profit and stabilize and expand the market is to give priority to the interests of their customers.

Madam President, I so submit.

MR LEE CHEUK-YAN (in Cantonese): Madam President, I remember that as early as the beginning of the 1980s, interest groups concerned about people's livelihood had already joined hands to oppose increase of tariffs by public utilities and object to the profit control schemes which guaranteed huge profits for these companies. This is something I need not repeat here. As we have pointed out time and again in the past, if these companies' returns are based on their net fixed assets, they will be encouraged to indefinitely inflate their assets, regardless of any justification, in order to maximize their profits. Eventually, "profit control" has become "profit guarantee". Without any other choice, the consumers are compelled to pay exorbitant tariffs.

The five major public utilities which had entered into scheme of control agreements with the Government were the Kowloon Motor Bus Company (1933) Limited, the China Motor Bus Company Limited, the Hongkong Telephone Company Limited, the China Light and Power Company Limited (CLP) and the Hongkong Electric Company Limited. Although the profit control schemes for the first three companies had gradually been scrapped over the past few years, the Government is still insisting on retaining the schemes for the two power companies. Obviously it is anachronistic.

The Government has been emphasizing that, under the Scheme of Control Agreements (SCAs), it has the right to approve the development plans of the two power companies to ensure that their investment in fixed assets such as the construction of power plants is carried out only when there is a genuine need. However, the CLP's excessive investment in the generating units at Black Point leading to surplus electricity has proved that the so-called government "control" is fundamentally futile. The CLP's over-estimation of electricity demand has led to an over-expansion of its assets. This had in fact been approved by the then Economic Services Branch of the Government and the former Executive Council. Now, despite its surplus electricity and over-investment, the CLP can still enjoy huge profits. On the other hand, no officials of the Hong Kong Government, which had erroneously granted approval, are held responsible. Eventually, it is the consumers and the ordinary citizens who are victimized!

In fact, in 1992 when the CLP proposed to invest a total of $60 billion in eight generating units at Black Point and other transmission facilities over the period from 1992 to 1999, we said publicly that the CLP's estimation of 6% to 7% annual growth rate in the electricity demand at its highest point was seriously on the extreme high side. The Honourable LAU Chin-shek even pointed out specifically that a 1% error in the CLP's estimation would lead to exorbitant extra tariffs to be borne by the consumers. Making no response at all to our query, the Government completely endorsed the CLP's development plans. Eventually, it was proved that the CLP had seriously over-estimated the growth rate in the demand at its highest point. Over the past six years, the average annual growth rate was around 4% only, thereby resulting in a 50% excess capacity of the company. I do not know whether the Government feels that it should be held responsible to the two-million clientele of the CLP. Nor do I know whether Mrs Anson CHAN, the then Secretary for Economic Services and the incumbent Chief Secretary for Administration, would consider making an apology to the CLP's clients.

After all, the problem lies in the profit control schemes which are totally against the interests of the consumers. In my opinion, instead of making piecemeal remedial modifications, the Government should resolutely do away with the profit control schemes and set up an approval system for tariff increase with a view to protecting the consumers' interests.

In my opinion, the improvement proposal put forward in the interim review of the SCAs, that is, to exclude the excess assets from attracting permitted returns, is in fact not effective at all. According to the new proposal, a new generating unit would be excluded from the assets attracting permitted returns if its operation gives rise to an excess generating capacity of over 30%. However, we should note and understand that a generating unit is not included in the power company's fixed assets only when it starts to operate. Rather, it is included in the company's fixed assets as soon as the company starts to procure it. In other words, a generating plant or generating unit is included in a power company's assets when it is still at its installation stage. This means that the permitted returns enjoyed by the company are increased instantly. It may take three or four years from the time when the company starts to invest in an asset to the time when the asset starts to operate. In other words, the consumers might have paid much more than they should for three or four years for no reason at all.

Hence, to really protect the interests of consumers, we have to eliminate the profit control schemes radically and change the ridiculous practice of pegging the power companies' profits with their net fixed assets.

Finally, Madam President, I would like to talk about electricity demand. To prevent the power companies from continuously constructing new generating facilities, it is imperative that the growth rate in the maximum demand be reduced, that is, the demand at its highest point. The so-called demand at its highest point refers to the highest consumption level in a year, which actually occurs only once a year. It usually takes place at around 11 am on the hottest working day in August, when the demand is at its peak as the air-conditioning systems in most commercial premises are in operation. Hence, if the demand at its highest point can be slightly reduced effectively through encouragement or other incentives, the installation of generating facilities can be deferred. This will not only reduce the electricity bills of the consumers, but also make some contribution to environmental protection. But the problem is that although the slogan of "demand side management" has been chanted for almost 10 years, the Government has never taken the initiative to propose any concrete measures. Nor has it required the two power companies to establish any performance indicators. It seems that the Government has just asked the two companies to do what they can. Such a slapdash attitude is really disappointing.

Electricity is the main source of energy in Hong Kong. It has a profound impact on people's livelihood, economic development and even environmental protection. I believe that the Government should radically change its previous development strategy which is entirely dependent on the submission of development plans by the power companies. Instead, it should be more proactive in its energy policies and ameliorate the current problem radically.

I so submit. Thank you, Madam President.

MR ANDREW CHENG (in Cantonese): Madam President, the Democratic Party maintains that if we want to reduce the surplus output of the CLP, and if we want to deal with the inadequate output of the HEC in the year 2003, the simplest and most cost-effective way will be to implement interconnection between these two power companies. The reason is that with interconnection, the HEC will be able to purchase electricity from the CLP, and this will help the CLP reduce the electricity reserve margin for Kowloon and the New Territories, in addition to enabling the HEC to defer its construction of additional power plants.

Madam President, we have been pursuing this matter at various meetings, asking the Government and the two power companies to state their positions regarding interconnection, but we have so far failed to get any satisfactory answers. One argument advanced by the Government is that interconnection is a commercial matter between the two power companies, and for this reason, they should be left to make the relevant commercial decisions. Some government officials, on the other hand, maintain that interconnection is much too costly to implement. As for the HEC, it maintains that interconnection will reduce the stability of its power supply networks. The HEC further argues that since the Government refuses to penalize the CLP for its surplus output, it would be most partial and unfair of it to forbid the HEC to construct new power plants and ask it to purchase electricity from the CLP instead.

We would like to respond to all these views. If interconnection can reduce electricity wastage, ease the upward pressure of electricity tariffs and bring economic and environmental benefits to the community at large, then, as the regulator of the two power companies, the Government should really work positively to foster interconnection between them. It should also be pointed out that the community at large and the shareholders of the two power companies do not actually share any common interests, and, for this reason, I do not think that the two power companies should be left to make their own decisions concerning interconnection.

Madam President, the Government estimated last year that an investment of $468 million would be required to implement interconnection. According to some academics, such an amount of money can build us an electricity plant with a capacity of only 30 megawatts, but if we invest this amount in interconnection, as much as 300 megawatts can be transmitted. And, interconnection can also pave the way for the liberalization of the electricity supply market in the future. That is why it can be said that interconnection will only do good but not any harm to us.

Madam President, interconnection of electricity supply networks has already been put in place in many different countries and cities all over the world, and the aim is to bring in more competition for electricity supply. The electricity supply networks in these foreign countries and cities are far bigger and more complicated than those in Hong Kong. That being the case, why is it impossible for Hong Kong to implement interconnection of electricity supply when even these foreign countries and cities have managed to do so? The Democratic Party thinks that sooner or later, we will certainly be able to work out a solution to the problems relating to network stability. And, as a matter of fact, the Democratic Party has always remained dissatisfied with the refusal of the Government to penalize the CLP for its surplus output. In requesting the HEC to purchase electricity from the CLP, the Democratic Party has only the overall interests of Hong Kong in mind, and it certainly does not aim to pick on the HEC. We are of the view that the Government should consider the possibility of giving the HEC some financial incentives. One example is to allow the HEC to enjoy additional permitted profits proportional to the asset value of the plants generating the electricity it purchases, so as to persuade it to defer its plan of building new power plants. We believe that this is a fairer treatment to the HEC.

Madam President, given the existing growth rates of electricity demand in Hong Kong, there is in fact no need for the CLP to use the No. 7 and No. 8 generating units at Black Point before the year 2006. Hence, the Democratic Party views that during the period from 2003 to 2005, should the HEC need any additional power plants, it should, through interconnection, make use of the No. 7 and No. 8 generating units of CLP at Black Point; it should not construct any additional power plants of its own. During the same period, the HEC should be allowed to enjoy additional permitted profits proportional to the asset value of the plants generating the electricity it purchases.

After this period, in the year 2006, if the CLP needs any additional power plants, it can then reserve the No. 7 and No. 8 electricity generating units at Black Point for its own use and start to enjoy the permitted profits associated with them again. As for the two 312-megawatt generating units which the HEC originally planned to inaugurate in 2003 and 2005, their inauguration can both be deferred to 2006.

Madam President, with the proposed arrangements, I believe that the profits enjoyed by the HEC between 2003 and 2005 will not be adversely affected by its deferment of power plant construction. In addition, the community can thus save depreciation-related expenses, and the life-span of the power plants concerned can also be extended by three years. We hope that the Economic Services Bureau will seriously consider the proposals of the Democratic Party and refrain from wasting resources.

With these remarks, I support the motion.

MR LEUNG YIU-CHUNG (in Cantonese): Madam President, the Government is currently working with the two power companies on the interim review of the Scheme of Control Agreements (SCAs) it has made with them respectively. As regards the many subjects under review, the community naturally focuses its attention on those few tariff-related issues.

According to the information paper provided by the Government for the Legislative Council Panel on Economic services, the Government has put forward a number of proposals to modify the existing arrangements which, if implemented, will help to lower tariff rates in the long run. However, it is most regrettable that the two power companies have only accepted the proposal to "exclude excess generating capacity from attracting permitted returns" and agreed to exclude a portion of the costs involved; as for the rest of the proposed modifications, such as the proposal to lower the rate of returns and the proposal to cap the tariff at a certain level under the Consumer Price Index, the two power companies have all considered them unacceptable. Besides, the two power companies have also refused not to pass directly the fuel cost onto consumers.

The reason for the two power companies' refusal to accept the proposals is that the proposed modifications have breached some of the major and fundamental terms and conditions set out in the SCAs they signed with the Government during 1991-92. Indeed, Madam President, as the two power companies talk business, they naturally do not want to amend the SCAs they have signed with the Government and affect their profits. It is therefore very obvious that the crux of the problem lies in the terms and conditions of the SCAs signed then, and thus creating a lot of obstacles to the Government's efforts in the interim review to strive for terms that are more in line with the interests of the public.

For this reason, the motion moved by the Honourable Fred LI has not said much about short-term measures. However, that does not mean Mr LI's motion is flawed. In fact, there is not much we can do, and a more practicable measure would be to promote the interconnection of the two power companies; as for the proposals to modify the terms of the SCAs, like I have analysed earlier, the two power companies will not agree to any modifications easily. Any measures that really strive for the best interests of the consumers could only be introduced in 2008 after the existing SCAs between the Government and the power companies have expired.

For many years the Council and the public alike have been criticizing the Government for the SCAs it has signed with the two power companies as well as other public utilities companies. The so-called "SCAs" are in fact "profit protection agreements" guaranteeing the public utilities of profits calculated at a specific rate of their fixed assets value, even if the investment or the management of the companies is in a mess. It is for this reason that the two power companies have not assessed the growth in electricity demand with great prudence, thereby giving rise to a large amount of excess generating capacity.

The crux of the problem actually lies in the fact that in negotiating the terms of any "scheme of control agreement" — which is in fact the "profit protection agreement" in our eyes — or licence and franchise with public utilities companies, the Government has failed to make its best efforts to safeguard the interests of the public; instead, it has always been taking care of the interests of the consortia applying for the permission to run public utilities companies. As a result, the terms and conditions of the relevant agreements are all biased towards the interests of the public utilities companies. I should like to remind the public officers responsible for negotiating with the consortia and public utilities companies that instead of helping the public utilities companies to "reap profits" from the public, they should in fact be representing the public to "negotiate" with the companies. Public officers should strive for the reasonable interests of the public; as for the interests of the consortia, that would be taken care of by their executive officers, public officers do not need to worry about that.

With regard to the problem of "high-priced electricity" suffered by the people, I am afraid the situation would not be changed substantially until 10 years later which would be 2008. I hope that in the next few years, public officers could make more efforts to negotiate with the consortia the requirements for operating public utilities, as well as to take into account the interests of the public when conducting the negotiations. At the present time when Hong Kong is in the midst of an economic recession, and that layoffs and salary cuts are prevalent, we urge the public officers to make their best efforts to help the people by extending and enhancing our supervision over the public utilities, thereby relieving part of the hardships on our shoulders. As a matter of fact, the same issue has already been raised in a motion moved by the Honourable Gary CHENG several weeks earlier and I do not want to repeat any of the views raised here. I just hope that public officers will pay more attention to the matter.

Finally, I should like to point out that although we believe the two power companies would not agree to amend the SCAs and thereby harm their own interests, I would like to urge them to take into account the social responsibilities that public utilities companies should bear and lower the tariff rates; in addition, the CLP should abolish the disguised tariff raise it has achieved by making use of the "loopholes" in the legislation and change the four-tier tariff structure back to the original three-tier one.

Madam President, I so submit.

MR CHEUNG MAN-KWONG (in Cantonese): Madam President, the SCAs signed by the Government with the two power companies carry the following main provisions:

(1) The permitted rate of return of the power companies shall be pitched at 13.5% of their average net fixed assets, and if these assets are the investments made by shareholders, then the rate can be as high as 15% of the fixed assets.

(2) When actual returns are bigger than permitted returns, the difference shall be paid into the Development Fund, or when the opposite is the case, money shall be paid out from the Development Fund to cover the shortfall.

(3) The maximum interest rate for long-term debts shall be 8% per annum.

(4) The above provisions can be amended only with the consent of both the Government and the two power companies.

Madam President, these provisions are obviously very much like an unequal treaty which place consumers entirely at the mercy of the power companies, because they give the power companies absolute powers to unilaterally reject any proposals that may harm their prospects of making huge profits. What is more, the SCAs have become increasingly like a "profit guarantee scheme", which guarantees the two power companies huge profits under whatever circumstances ─ whether they have made any wrong investment decisions, whether there is any over supply of electricity, whether there is any decline in productivity, and whether there is any deterioration in service quality. Moreover, whenever the power companies construct new power plants, electricity tariffs and their profits will go up immediately, regardless of whether or not such plants are really necessary. So, while the public is obligated to pay tariffs, they do not have any power to monitor these companies.

Facts speak louder than anything. In 1993, the CLP overestimated the demand for electricity, and made a wrong investment decision to construct a new power plant at Black Point, thus resulting in a surplus capacity. Though the CLP was eventually forced by public pressure to defer the inauguration of No. 7 and No. 8 of the Black Point generating units, its existing electricity reserve is still as high as 50%, and nothing can illustrate what is meant by electricity wastage more than this. However, as a result of the "profit guarantee scheme", the Government still has to accept the costs of surplus capacity as a justification for tariff increase, though in full knowledge that the CLP has made a wrong investment decision. In the end, the public has to pay for the mistake of the CLP. This is most unfair. The Democratic Party has formed the view that the "profit guarantee scheme" is an unequal treaty which must be amended to safeguard the consumers' interests.

Right now, the interim review on the scheme of control for the two power companies is near completion. The Government claims that one of the major achievements of the review is in ensuring that the costs of surplus electricity will not be transferred onto consumers. However, the new agreement will not apply to Nos. 7 and 8 of the Black Point generating units, which will generate surplus electricity. The Democratic Party is very disappointed about this new agreement, because the Black Point Power Plant is actually the major culprit as far as surplus electricity is concerned. Why is it that the new agreement is not going to be applied to this plant? Why should consumers be made to pay exorbitant electricity tariffs year after year for the investment mistakes of the CLP? Moreover, it is rather unlikely that the CLP will build any new power plant before the existing SCA expires in 2008. So, the new agreement is nothing but a nicely presented public relations gimmick, and will not produce any substantial effects on the actual profits of the CLP, for "what belongs to Caesar, Caesar has already taken"; the CLP has already safely pocketed its profits.

The Democratic Party is also unhappy about another aspect of the interim review and, that is, that the Government has not done enough to lower the permitted returns of the power companies. The highest permitted rate of return specified under the agreement is set at 15% of the average net fixed assets. If the power companies resort to borrowing to build a new plant at an interest rate of 8%, while the permitted rate of return for loans is 13.5%, then the power companies can always take advantage of the difference in interest rates to make profits without incurring any capital. In fact, according to the information provided by the CLP, the actual returns for the shareholders of the two power companies over the past five years were between 23% to 25% instead of 13.5% or 15%, and that means for every $100 invested, there was a profit of $25 per annum. This is an excessive amount of profit in view of the financial turmoil, and such guaranteed profits are indeed rarely found. This situation will go on until 10 years later, that is, the year 2008.

The Government actually asked the power companies to reduce their rate of return in the course of the interim review negotiations, but the power companies simply refused to do so. In fact, the CLP even asked the Government for an extension of their profit control schemes. This fully shows the greed of the power companies in an environment with absolutely no competition. Madam President, times have changed. The age of monopoly is over, and that of competition has arrived. Profit control schemes are not conducive to free competition, energy conservation, environmental protection and the interests of consumers. Therefore, they are not conducive to the economy of Hong Kong. The reason is that a great number of people including manufacturers who support the Honourable FUNG Chi-kin are required to pay hefty electricity tariffs as a result of the profit control schemes, and this will adversely affect our competitiveness and quality of life. The only recourse for the Government now is to declare the abolition of the profit control schemes of the two power companies in 2008, liberalize the electricity supply market, and bring in competition to benefit consumers and improve the performance of operators. Finally, I would like to respond to Mr FUNG Chi-kin's comments. He said that the motion moved by Mr Fred LI today on abolishing the profit control schemes is too "visionary". In other words, according to him, it is too early to discuss the issue now because there can be a lot of changes in 10 years. So, he wonders why we should cast our sights so far? Such comments only show that Mr FUNG has not read the papers properly, because in the papers given to us by the Government, the CLP says that since it will take 10 years to plan and implement investment proposals, the Government has to make an early decision on extending its profit control scheme beyond the year 2008. If the CLP is maintaining such a view, why then should the Legislative Council be prevented from discussing the issue? Since Mr FUNG Chi-kin comes from the commercial sector, we understand why he has sought to defend the interests of the CLP, but at least he has to read the papers properly before he does so, otherwise he cannot really defend the interests of the CLP, including its request to extend its profit control scheme by 10 years. Under such circumstances, my only piece of advice is that, before commenting on whether a Member is too "visionary", or whether today's motion debate has been moved at too early a time, he should read the papers first. Thank you, Madam President.

DR RAYMOND HO (in Cantonese): Madam President, a stable supply of electricity was very important to the development of Hong Kong in the past and this will remain the case in the future. Since a reliable and stable supply of electricity requires huge investments, we must make sure that the shareholders of the power companies can make reasonable returns. But we must at the same time ensure that members of the public can be supplied with the electricity they need at reasonable prices. This, I believe, should actually be the central issue of our discussions today.

As in the case of other public utilities, there is certainly a point in exploring the liberalization of the electricity supply market. Market liberalization will undoubtedly bring in competition. However, we must at the same time study in great depths the many other consequences which market liberalization will bring forward. As far as I know, the Special Administrative Region Government has already commissioned an electricity and environmental consultant to conduct a feasibility study. This study will cover, first, the interconnection between the two power companies in Hong Kong, namely, the CLP and the Hongkong Electric Company Limited (HEC), and, second, the bringing in of more power companies to foster competition in the electricity supply market. The results of the study will be released early next year. Because of this, I do not think that we should make any hasty attempts to liberalize the electricity supply market before the completion of the study report.

Moreover, we must also study the proposal on interconnection between the CLP and the HEC very carefully, because such an arrangement will certainly involve a whole series of issues such as the potential costs and effectiveness of interconnection, related technical constraints and the electricity consumption of Hong Kong in the future. In February 1997, the CLP offered to sell electricity to the HEC through interconnection, saying that this could enable the HEC to defer its construction of additional generating units in 2003. It was estimated at that time that the costs of interconnection would be around $468 million. However, this proposal was subsequently turned down by the consultant commissioned by the Government and the former Legislative Council on the ground that it was not economically advisable to do so.

By now, the electricity transmission systems of the two power companies have been connected. However, the connecting cables can only cater for the needs in case of emergency. If electricity is to be transmitted on a regular basis, additional interconnection cables would have to be installed. Actually, at a meeting of the Legislative Council this year, the HEC did point out that unless the existing interconnection facilities were enhanced before it purchased any electricity from the CLP, the stability of its power supply networks would be adversely affected. But we should also note that the costs of enhancing the existing interconnection facilities are very high too.

The motion proposes to reduce the permitted returns enjoyed by the two companies, which are calculated on the basis of the value of their average net fixed assets. We must think very carefully before we take any action in this respect. The SCAs signed by the Government with the power companies are legally binding commercial contracts with validity up to the year 2008. For this reason, any changes to these agreements must be duly accepted by both parties. If the Government attempts to change these agreements unilaterally now, or if it now decides to abolish the schemes of profit control which are supposed to expire not until 10 years later, it will deal a great blow to the confidence of the industrial and commercial sector in its operations. Likewise, this will also deliver a very bad message to foreign investors, financial institutions and even credit rating institutions. Besides, this will also increase the financing difficulties of the two power companies in the future, and they may have to pay higher interests for loans. In the end, consumers may have to suffer, the last thing we wish to see.

For the purpose of protecting consumer interests and ensuring a stable and adequate supply of electricity to cater for the needs of Hong Kong, the Government should really do some serious studies and develop a better electricity supply market. Before that, we should conduct careful studies and analyses, and avoid taking any rash actions, lest this may affect the long-term interests of the community at large.

With these remarks, Madam President, I oppose the motion moved by Mr Fred LI.

MR CHAN KAM-LAM (in Cantonese): Madam President, I have promised Mr Fred LI that I would listen to all the views his party has on this motion before making up my mind; as such, I could not raise my point earlier.

It was discovered in 1996 that the CLP had kept an electricity reserve margin far greater than practically necessary. Since then, the development of the power companies has become an important livelihood issue across the community.

In its attempt to maximize profits, the power company has been making investments indiscriminately and thus maintaining for a long time an excessive electricity reserve margin, thereby causing the public to pay for the tariffs at unreasonable rates. No doubt the power company must be held responsible for this situation, but the responsibility of the British Hong Kong Government should not be excused either, since the then Secretary for Economic Services permitted the power company to construct additional power stations in 1992 due to an over-estimation of the demand for electricity. For this reason, there have been voices from across the community asking for the abolition of the profit control schemes and the deletion of provisions that are against the interests of the consumers. This is fully understandable. Nevertheless, as we angrily reprimand the Government and the power companies, we should also consider the different aspects of the matter in a rational manner.

During a motion debate of the former Legislative Council held in March 1997, the Democratic Alliance for the Betterment of Hong Kong (DAB) has stated clearly its expectation regarding the interim review of the Government's SCAs with the power companies. The following are some of the proposals we put forward at that time:

1. Reducing the permitted rates of return of the power companies;

2. Deducting the investment in relation to the excessive electricity reserve margin from the assets on which the permitted return is calculable;

3. Protecting the interests of the consumers by setting up a regulatory mechanism and extending the power of the Energy Advisory Committee to cover the assessment and approval of tariff increase applications submitted by power companies;

4. Investigating actively how a competition mechanism could be introduced to the market to end the existing regional monopoly enjoyed by the two power companies; and

5. Studying in detail the electricity supply markets overseas, in particular their modes of operation, interconnection arrangements for power supply and so on.

At the Economic Services Panel meeting held last month, the Government made a brief report of the interim review. According to the Government, the latest consensus it has reached with the two power companies is that the maximum electricity reserve margin should be set at 30% of the capacity, and that investment in relation to the surplus capacity should not be counted. I believe these two decisions would be welcomed by the public. As regards those issues that have yet to be agreed upon, we believe the Government should keep negotiations open with the two power companies before the report on the interim review is due in 2003, with a view to finding out a dual-function proposal which could protect the interests of the consumers on the one hand, and take care of the investors' reasonable return on the stable supply of electricity on the other.

Madam President, the electricity problem before us today is undoubtedly a result of over-development in power stations and excessive investment in supply capacity. Bearing that in mind, we should find the right antidote to the problem by prescribing remedies in light of the crux of the matter.

With their respective surplus electricity reserve margins exceeding 51% and 45%, both the CLP and the Hongkong Electric Company Limited (HEC) are able to enjoy substantial growth in profits every year. Besides, the two companies have also made it a practice to raise the tariff rates annually. In this connection, the CLP has even secretly altered the original charging scale in the latest tariff adjustment exercise, thus stirring up grave dissatisfaction among the people.

The DAB believes that the development of the local electricity supply market has fully matured; as such, instead of seeking deliberately to reap profits by hook or by crook to please their shareholders, power companies should try to earn the confidence and support of their clients by providing quality services at competitive prices. This is in fact what I have been advocating so far. As a public utility company reaches a certain stage of development, the company should seek to integrate into the society, to become part of it, to shoulder a share of the social responsibility, and to pull together with the public in times of trouble. I believe this is the only long-term approach to staying in business for any businesses.

As regards the motion debate today, the DAB has studied very carefully the wording of Mr Fred LI's motion and the reference material Mr LI has provided us. Moreover, we have also paid attention to the arguments put forward by Mr Fred LI and the Honourable Andrew CHENG. Nevertheless, we have still found in the motion certain issues that are open to question. We may as well debate those issues in the future. But for this motion debate, I think the crux of the matter should actually lie in the issue of interconnection.

The major objective of interconnection is to include power stations into the electricity supply market as a means of competition. Yet the major purpose of the Democratic Party is to defer the implementation of HEC's plant building plans for three years. As a matter of fact, given the existing proposal, deferring the plan for three years would not result in any substantial benefits for the public. In speaking on the issue of interconnection just now, different views were raised by Members as to the amount of investment required; some said it would cost more than $400 million, others believed the amount to be $700 million or even more than $1 billion. It would simply be very imprudent of us to specify the amount of investment required when the comprehensive study on interconnection has yet to be completed.

Bearing that in mind, we believe the Government should study the feasibility of interconnection expeditiously and actively.

MR HOWARD YOUNG (in Cantonese): Madam President, electricity is not simply a daily necessity closely related to the livelihood of the people; it is also one essential element in improving the quality of life. Besides, an ample supply of electricity will also serve to ensure that the economic development of Hong Kong could progress steadily. The power companies supplying electricity to the community are public bodies, and their operation and services will impact directly on the quality of life of each and every member of the public. The Government and the power companies must adhere to the primary aim of serving the people and make continuous efforts to investigate and improve on practices, with a view to catering effectively for the interests and needs of the people.

Presently, SCAs valid for 15 years have been executed between the Government and the two power companies respectively. In accordance with the provisions in their respective SCAs, the two power companies have to conduct together with the Government two interim reviews of one-year duration each. During these reviews, both parties to the SCA may propose modifications to the SCA concerned. The first interim review is now under way.

With regard to the motion moved by the Democratic Party, it has proposed announcing at this stage the abolition of the SCAs between the Government and the two power companies in 2008. The liberal Party believes it is too early and too rash to put forward such a proposal, since the current SCAs have already provided for arrangements to introduce amendment. Both parties to the SCAs could enter into negotiations to improve on and amend the terms and conditions of the existing SCAs. In our opinion, the Government and the power companies should hold fast to the principle of safeguarding public interest and discuss as well as implement measures to modify the SCAs in a positive and practical manner. When the modified SCAs are in place, the Government should observe their development prudently before deciding whether the SCAs should be abolished in 2008. We believe this is a better way of handling the matter. At present, the first interim review of the SCA between the Government and the CLP has just been completed, while that of the SCA between the Government and the HEC is scheduled to be completed by the end of the year. To decide at this very moment the abolition of the SCAs between the Government and the two power companies in 2008 is not only too early but also too imprudent a measure. What is more, the confidence of other investors might also be affected adversely. I am not talking about the investors of the power companies; I mean the confidence of the investors of other public utilities. We must take into consideration the impact on other incestors, since we may need to construct new railways, underground railways, tunnels and so on in the future.

In fact, the existing SCAs do have their merits. We could all recall that at that time everyone was worrying about the lack of investors willing to invest in Hong Kong; besides, nobody could ever have imagined there would be surplus electricity supply in Guangdong Province. As such, everybody was worrying about how Hong Kong could protect its industries in the face of a short supply of electricity. Since electricity supply is an enormous and long-term investment, there is a need to bolster the investor confidence by offering them long-term and specific returns on their investments, so as to guarantee the quality of services as well as the reliability of electricity supply. The existing SCAs allow the rate of return to be pegged with the net fixed assets of the power companies, thereby providing investors with specific returns on the one hand and encouraging them to make continuous reinvestment on the other. Of course we could not rule out the possibility that the power companies might be making investments for profiteering purposes and thereby transferring the cost of the excess generating capacity onto the consumers. We should never allow that to happen either. Nevertheless, the proper way to tackle such a situation is to investigate measures to plug the loopholes; we do not need to make any decisions 10 years in advance and overrule the SCAs signed then.

At the present stage, we believe the Government should prudently and actively improve the terms and conditions of the SCAs, with a view to handling appropriately the problem of excess generating capacity in particular. Over the past 10 months when the Government was conducting the interim review with the CLP, it has proposed a number of modifications to the SCA and related arrangements, including the proposal to require the CLP to exclude the costs for excess generating capacity from attracting permitted returns. We believe this should be a feasible approach to tackling the issue.

We agree that the electricity supply market should develop towards competition and liberalization. However, to open up the market, we need to have specific and well-designed plans. Moreover, in planning the process and pace of market liberalization, we must also take into account the actual market situation and needs, with a view to ensuring that the liberalized market will attract real competitors on the one hand and contribute to the interests of the public on the other. We agree that the Government should look into the feasibility of interconnection so as to take the first step towards opening up the electricity supply market.

As public bodies supplying electricity to the people, the power companies should ensure that the public will be provided with reliable electricity supply at fair and reasonable tariff rates. With regard to the public interest, the Government should encourage the power companies to make continuous efforts to improve on their operation and management efficiency, with a view to upgrading the quality of service for the benefit of the public.

Madam President, I so submit.

MR NG LEUNG-SING (in Cantonese): Madam President, the Government's SCAs with the CLP and the HEC will expire only by 2008 as these are agreements on the investments in large-scale projects and the contract term is usually longer to ensure the stability of investments within the region. Under the relevant agreements, the two power companies can get a certain rate of profits calculated on the net fixed assets they have invested and possess, and available information shows that this rate has been 12% on average in the past 10 years. A point worth noting is that as a result of the changes in our economic structure, the demand for electricity in recent years has been less than that forecast and the power companies have surplus reserve electricity as a result. The investments made by the power companies to attain such a scale of electricity supply will make up the base of profit calculation.

As Members of this Council, we must note that the profit control schemes executed between the Government and the power companies are legally binding documents, and any actions of either parties shall be taken in accordance with these agreements. Under these agreements, from 1998 to 2003, the contracting parties must conduct an annual interim review to enable both parties to carry out reviews and negotiations on the provisions of the agreements as the case may be and make amendments upon the mutual consent of both parties after the agreements have been implemented for a certain period of time.

In the short run, there will be surplus electricity supply in Hong Kong under the profit control schemes and consumers have to bear the increased electricity tariffs as a result of increased investments, a case undoubtedly to their disadvantage. Therefore, in view of the interests of most people in our community, we urge the Government to raise the relevant issues for negotiation when it carries out an interim review on the agreements, for so doing will show that the Government respects the spirit of the agreements. At the same time, the Government should make efforts to look for remedial solutions concerning the schemes that are acceptable to all parties, including consumers.

From another perspective, the power companies trust that the agreements can be performed and they are confident in making huge investments on this basis. The profit control schemes may not be absolutely perfect and they place consumers in a relatively disadvantageous position. However, investors are assured of making stable profits from their investments in the industries concerned. Business is business, they will naturally seek the greatest profits permitted under legislative provisions. In the long run, a pricing mechanism which can better protect consumer interests and encourage more power companies to join the competition in the market is doubtlessly a most satisfactory arrangement. However, to attract more investors to join the competition in the future and provide the best services to the public, the Government has to respect the spirit of the agreements and carry out interim reviews in accordance with the agreement provisions. The social interests that we should fight for should still be fought through procedures specified under legislative provisions to avoid giving international investors in Hong Kong a negative impression. I believe that the prudent acts of the Government can ensure that the so-called liberalization of the electricity supply market in future will not become an empty talk.

Madam President, the existing SCAs have specified the said mechanism for an interim review and there is still 10 years to go before the agreements will expire. We should prudently consider whether we should make a proposal in the direction of abolishing the agreements today when they will expire 10 years from now. We have the mechanism and the time to carry out more comprehensive and in-depth review and appraisal on the existing mode of operation of the electricity supply market. The Government should make full use of the time and mechanism available to listen to the views of all sectors and make sounder adjustment and planning for the development of the future electricity supply market, including carrying out a continuous review of the existing pricing and profit control mechanism to allow more open and fairer competition in the future electricity supply market and ensure that interests of consumers and investors can be protected. Therefore, I believe that making adequate preparations for the interim review, providing more accurate information to the public and collecting the views of the industrial and commercial sectors, people from all walks of life and Members of this Council will be more appropriate than proposing an abolition or substantive amendments at this stage.

Madam President, I so submit.

MRS SELINA CHOW (in Cantonese): Madam President, I rise to speak especially for the retail and wholesale sector and to express the views I have received from the sector regarding the motion today. the sector, on the whole, has something to say about the tariff rates currently charged by the two power companies in Hong Kong. Members of the sector have considered, in their capacity as commercial consumers, the tariff rates too high in general. They hope that the Government would do something for the sector in this connection.

In regard to the SCAs, the sector urges the Government to consider actively striving to amend the provisions in the interests of the consumers, in particular commercial consumers, so as to help businesses reduce costs. In addition, the sector also urges the Government to take the opportunity to draw up agreement terms and conditions that are more favourable to the consumers.

Nevertheless, when I asked members of the sector to express their views on today's motion, which is the liberalization of the market and the abolition of the profit control schemes, they could hardly give me any reply. this is because they, being businessmen themselves, understand that while there are many types of businesses, power company should definitely be one which involves enormous investments; and that the huge capital involved in the construction of facilities would also give rise to more risks. As such, in requiring the power companies to provide Hong Kong with a reliable and stable supply of electricity, we should also ensure that the investments made in the power supply industry are reasonably protected.

For this reason, friends from the retail and wholesale sector have told me that they also believe the profit control schemes should not be abolished arbitrarily. Speaking of the profit control schemes, it is naturally their hope that the Government would strive for provisions that are in the best interests of the consumers; and since negotiations are still in progress, they expect the Government to take the opportunity to secure the best terms for the consumers.

I have also been informed that since Hong Kong is a shoppers' paradise and a world famous cosmopolitan city, the amount of electricity consumed will inevitably be very remarkable. It is particularly so for the retail and wholesale sector, one of the major components of the service industry. The sector understands that in order to achieve costs reduction, it is necessary for the trades to cut down on electricity consumption as far as possible. There are of course many ways to cut down on electricity consumption, and the sector should be able to figure out the best ways themselves; we do not need to give any suggestions in this respect. On the other hand, members of the sector have informed me of a strange phenomenon. According to them, while the units of electricity consumed have definitely been reduced, the tariffs charged on them have nevertheless increased. Should that be the case, we must look into the situation seriously. I hope the Secretary could later inform this Council whether this is really the case according to the Bureau's information.

It is often said that the Government has intended to support the business and industrial sectors in Hong Kong by creating for them an environment conducive to their operation. Power supply, in particular electricity, is a major component of the operating costs for all businesses and industries. In this connection, could the Government really strive hard to secure for them the best terms as far as practicable? All in all, the view of the retail and wholesale sector is that whilst looking forward to a fall in tariff rates, they fear that an abolition of the profit control schemes or liberalization of the market may not be able to achieve the goal, but would affect adversely the stable supply of electricity instead.

Thank you, Madam President.

MR KENNETH TING (in Cantonese): Madam President, the level of electricity tariffs has a direct bearing on the development of the industries. The industrial sector thinks that the Government must make the exorbitant tariffs of the two power companies go back to a reasonable level. Take the few major spinning factories in Hong Kong as an example, the expenses incurred in electricity take up one third of their production costs. With the increase in the number of automated production machines, the share of electricity expenses in the production costs has become greater. Therefore, a downward adjustment of electricity tariffs will ease the burden of the manufacturers and thereby raise their competitiveness.

Madam President, the major cause for the high electricity tariffs is the building of excessive reserve power generating facilities by the two power companies. According to estimates made by Prof LAM Pun-lee of the Hong Kong Polytechnic University, 5% of the power generating facilities of the China Light and Power Company Limited (CLP) are superfluous and exceeds market demand. As for the Hongkong Electric Company Limited (HEC), over 30% of its power generating facilities are excessive. If the Government turns a blind eye to this, the commercial and industrial sectors will have to pay unreasonable electricity tariffs over a long period of time as a result of the unchecked expansion of the two power companies. This is unacceptable to the commercial and industrial sectors. Therefore, the two power companies should bear the responsibility of investment costs incurred as a result of their over-expansion and they should not transfer such costs onto the industries and the public through exorbitant tariffs. On the other hand, the industrial sector hopes that the Government will soon complete its study on the proposal regarding the interconnection capacity of the CLP and HEC. An increase of the transmission capacity of the two power companies can reduce the electricity reserve for the territory. We hope the Government can make use of this interim review and help the industries and clients get more favourable tariffs, but we are opposed to the proposal of deciding at this stage to abolish in 2008 the profit control schemes for the two power companies. My two colleagues have put forward many ideas just now and I would like to add a point here, that is: before we decide whether or not to abolish the profit control scheme, the Government should think carefully to see whether any negative impact will be brought to the electricity supply market and hence smashing the confidence of the investors. So I have reservations for Mr Fred LI's motion. Thank you, Madam President.

MR JAMES TIEN (in Cantonese): Madam President, the economy of Hong Kong has met with some difficulties lately. If Hong Kong is to maintain its status as a financial centre and the economic doldrums are to bottom out as soon as possible, the Liberal Party thinks that the Government should increase the efficiency of all public facilities, apart from providing appropriate infrastructure support such as an airport and some container terminals. In order to do so, competition must be introduced to lower production costs. This is a point of paramount importance.

With regard to the development of the electricity supply market, we know that it is not as easy for the two power companies to introduce competition and open up the market as telephone companies or bus companies do. The reason is very simple. Take the recent case of Hongkong Telecom as an example, it is feasible to add three fixed network companies on top of the existing telephone company because the connection of cables is easy. However, for electricity, we have only two companies and it is not so easy to establish an interconnection between them. If competition really has to be introduced, can it be achieved so quickly or within 10 years? The HEC has furnished us with a lot of information and the latest information is that it hopes to build two power stations of 300 megawatts on Hong Kong Island. The cost will be US$300 million each which is equal to HK$2.4 billion. Under such circumstances, can other enterprises just wantonly build power stations at a cost of HK$2.4 billion each in Shenzhen? Several experts pointed out that it is reasonably efficient if a power station generates 300 megawatts of electricity, whereas a generation of several dozens or even 100 megawatts are not efficient enough, especially if the electricity is to be transmitted to Hong Kong. In fact, should the market be opened up today or the profit control schemes be abolished in 2008, will there really be so many investors coming in to invest in our market?

Due to environmental protection and various other factors, it is of course not quite possible to find a piece of land in Hong Kong now to build two power stations. They can only be considered to be built in other places of China. However, after making such an investment, thought still has to be given to questions such as: How can electricity be transmitted to Hong Kong? How much has to be spent on leasing cables in order to realize the so-called interconnection concept? Who will be responsible for the maintenance of the cables? I believe that the Government may have to hire consultant companies to study these problems and deliberate how such a plan can be implemented.

The Liberal Party objects to Mr Fred LI's motion. Just as Mr FUNG said earlier, what we most disagree with is the first sentence in the motion, that is, urging the Government to abolish the profit control schemes in 2008 without asking it to undertake reviews and find out if anybody is willing to invest before opening up the market. If the schemes are really abolished, then what will happen? Will there be no electricity supply in Hong Kong if no third, fourth or fifth company comes to make investment? I am sure this is not what Mr Fred LI means. We also encourage the Government to negotiate with the two power companies with regard to what the schemes will be like if the profit control schemes were to stay in 2008. The Liberal Party absolutely does not support the present practice, in which return is calculated at a rate of 13.5% to 15% of the investment made. We hope that there will be a better way of calculating the rate of return and thus making it more reasonable. According to the two power companies, the 13.5% to 15% rate of return was set in an agreement made in 1993 which was a very reasonable rate considering the investment climate at that time. However, the turnover of all trades has fallen in the wake of the financial turmoil and this rate of return is now on the high side. A rate of 13.5% to 15% may have been reasonable for the past 15 years, but will there be other choices after 2008? Would the parties concerned come up with some kind of arrangement in 2003, 04 or 05? If it is decided that these two power companies will continue with their businesses, will there be a need to slightly tighten the present terms and conditions so that consumers can save some money?

Madam President, as for the views of the business sector, naturally most businessmen are users and they have to pay electricity bills. While 70% of the income of the HEC and the CLP comes from the business sector, only about 30% comes from households. The business sector is therefore very concerned with electricity supply and tariffs. However, as Mrs Selina CHOW said a moment ago, other than a low tariff, the most important thing for many companies is the stable supply of electricity. Under such circumstances, if the profit control schemes are abolished right now and no other sound arrangements are put in to stabilize the supply of electricity, it will only cause great dissatisfaction in the business sector.

Madam President, our view on the issue of whether or not the HEC and CLP should be interconnected now is as follows: just as Mr LEE said earlier, for the few years from 1993 to the present, the performance of the CLP has indeed been worse than that of the HEC. A simple example is that a wrong estimation made by the CLP has led to a 52% surplus in electricity supply, whereas the HEC only generated 37% of electricity in excess. From the angle of the HEC, it does not have to buy electricity from the CLP today and such a need for additional electricity will not arise until 2003, although the CLP may not have a 52% surplus in electricity by then. This situation is like asking a good company to clean up the mess made by a bad company. Will it become an incentive for companies that they may as well perform badly because good companies will in the end come to their aid?

From a businessman's perspective, I think that a company should bear the responsibility for its own investment and endeavour to be a good investor. Why should the problem of surplus electricity be solved by other companies? This is a point that we should take into consideration. Furthermore, even if the two power companies are interconnected today, the HEC has already said that it does not need extra electricity for the moment; but comes 2003, the CLP may not have much surplus electricity. We therefore do not agree to the idea of postponing the HEC's proposal of building more power stations. However, on the whole, the stance of the Liberal Party is that the Government should try its best to introduce competition and open up the market so that the cost of generating electricity can be lowered with a view to benefiting both the business sector and the public.

Thank you, Madam President.

MR LEE WING-TAT (in Cantonese): Madam President, I am gravely astonished to find that Members have reservations concerning the motion moved by Mr Fred LI with the major objective of opening up the electricity market in the long run as I originally thought that it was not controversial. Members seem to regard the electricity market as a living creature in the fourth dimension or an alien from outer space. In fact, the electricity markets in foreign countries have been opened upon long ago and many Members have discussed at panel meetings about infrastructure that this has been done in the United States and New Zealand. Last Friday, I read from the newspaper that the spokesman of the Ministry of Energy in the Mainland also expresses the hope of separating power generation companies from the network between the years 2002 and 2003. I find it very strange that while the Mainland which is changing from socialist policies to policies for opening up China also hopes to open up the electricity market around five to six years later, Mr FUNG Chi-kin should say that it is too radical for Mr Fred LI to suggest opening up the electricity market by 2008, 10 years from now. But Mr FUNG is far too conservative. Nevertheless, the agreements have been executed now. For this reason, I find it really astonishing that friends from the financial sector, and those from the industrial and commercial sectors are so conservative towards opening up the electricity market. The Liberal Party in particular should stand by our side as they support freedom and liberalization while we think that there should be greater government control. However, we are advocating the exact opposite now. I do not understand why we should be still so conservative and just discuss about if this can be done 10 years later when mainland China which has always upheld socialism is bold enough to open up the electricity market five years later. It appears to me that Mr FUNG may have to go to Beijing to learn more, otherwise, there must be something wrong.

Will opening up the market surely result in an unstable supply of electricity? This is a scary question as we seem to be kindergarten students learning to understand the electricity market. Let us take a look at other countries. They will implement measures to couple with the liberalization of their electricity markets. If the opening up of the market and the separation of electricity suppliers from the network will often result in an unstable supply of electricity, I believe that cities such as New York, London and Paris will not adopt this method. Why is Hong Kong so special? Why is it that after the separation of electricity suppliers from the network, there will be an unstable supply of electricity? Why will this not occur in New York which is also a financial market? It is a pity that Mr FUNG does not have a chance to answer questions, otherwise, I will ask him a question: Are New York and London not financial markets? Now that their electricity suppliers have been separated from the networks for 10 years, why are there no major incidents? As I do not think that there will be problems, I find his argument very weird.

Will the method we proposed be unfavourable to consumers? No. Having listened to the speeches made by many Honourable colleagues today, I thought that this motion would certainly be passed as what they said within the first three to four minutes were entirely the same. For instance, the power companies are charging too much, the generating units have generated excessive reserve electricity and all our efforts are made for the electricity supplied at 11.30 am on a certain day in August each year as well as the environmental protection problem. However, they said "but ......" immediately after all this. Sometimes, I wonder whether we have been too lenient to the power companies.

Some Honourable colleagues have also said that it is too early for us to discuss about issues that will come up 10 years later. Please do not forget that when the power companies proposed a price increase around 1981 and 1982, the Coalition for Monitoring Public Utilities (the Coalition) had expressed this view, however, we were not Honourable Members then but only people protesting in the streets. I can recall that when I met the late Mr Stephen CHEONG on behalf of the Coalition, we discussed whether this profit control scheme should be established. Many people queried this scheme at that time and many others said that this scheme was not essential. Fifteen years down the road, it is still being suggested that we have to wait for another 10 years before a review will be conducted. How many 10 years do we have in our lifetime? Will our grandsons or great grandsons still fail to witness a so-called modern society opening up its electricity supply market?

I consider this only a matter of interests. Do we wish to take the stand of the companies deemed as reaping staggering profits? Around 60% to 70% of the users of the power company on Hong Kong Island are commercial users and Mr James TIEN knows this very well. Retailers know that electricity tariffs in Hong Kong are very high compared with that in our neighbouring countries in Asia. Even people running other businesses know that tariffs are high. However, they dare not speak or express their views firmly when the problem is raised for discussion. If we do not discuss about this problem, we may have to wait for five, 10 or even 20 years more before we will have a chance to raise this problem for discussion again. A few years later, when Members of the same party or group put forward this problem, other people may have other viewpoints. They may say that 2008 is drawing near, will it be too hasty for this change to be proposed in 2003? If it is proposed too early, people will say that time is too ample but if it is proposed too late, people will ask if it will be unfair to the existing companies as they will not be able to make investments and carry out planning and financing in a planned manner. What should we do?

We are now discussing about a direction and tasks that can actually be done. I do not wish to see Members reproving at the beginning of their speeches but recognizing the existing mechanism at the end. In other words, they keep reproving but they still vote in support of the power companies. If we find that all the rules of the game are only favourable to the two power companies, why can we not take a firm stand that the electricity market should be opened up in the long run? This is nothing new.

Some Honourable colleagues have asked if interconnection is effective in introducing competition. I find it effective as interconnection itself is an effective way to intensify competition and enable reasonable pricing. Furthermore, it will be favourable to consumers within a short period of time as the CLP has excessive reserve electricity at the moment, if interconnection is not adopted, the tariff in the next few years will not be reduced. Therefore, I hope that Honourable colleagues will think this over to see whether we should consider the issue of tariffs from the perspective of consumers.

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

(No Member indicated a wish to speak)

SECRETARY FOR ECONOMIC SERVICES (in Cantonese): Madam President, first of all, I would like to thank Mr Fred LI for moving today's motion debate and Members for presenting so many valuable ideas on the motion.

The objective of the Scheme of Control Agreements (SCAs) between the Government and the two power companies is to ensure that the investors who have invested large amounts of money in the construction of electricity generating facilities will supply electricity reliably, efficiently to the people at a reasonable price. Mr Howard YOUNG has already explained its background. This objective is in line with our power supply strategy in the sense that it encourages private organizations to provide the public with energy without subsidization from the Government.

The first SCA between the Government and the China Light and Power Company Limited (CLP), and the one between the Government and the Hongkong Electric Company Limited (HEC) were executed in 1963 and 1979 respectively. The SCAs set out the obligations of the power companies to provide electricity, the reasonable returns for shareholders and the processes by which the Government monitors the power companies' financial affairs, tariffs and technical performances. The SCAs have not granted the two companies the franchise for the supply of electricity, nor included any anti-competition provisions. In fact, any third party may enter the electricity supply market in Hong Kong and compete with the two companies. Of course, to take part in the competition, huge capital is required and an investor has to consider the development strategy very carefully before entering the market.

The existing SCAs are valid for 15 years and expire by 2008. They also provide two interim reviews of one-year duration each to be conducted during this period. The first has just been completed and later on I will discuss the matters that Members have asked for our active revision. Another review will be conducted in the year 2002-03. In the process of the review, both parties may propose modifications to the SCAs provided that such modifications have to be agreed on by both.

Despite the many criticisms by some Members, the SCAs have so far achieved their objectives effectively. The present stability rates of electricity supply of both companies are over 99.99%, among the highest in the world. During the 15 years from 1983 to date, the accumulated increase in tariff has been about 45% below the concurrent inflation rate. The two companies' performance in respect of environmental protection has also met the requirements of our laws and regulations. Moreover, the Government can monitor the operation of the two companies under the mechanism provided by the SCAs. For example, the companies must submit their financial plans for the next few years, such as the plan on the development of generation facilities, to the Government on a regular basis, and also have their forecast tariff level approved by the Government. In the annual review of the tariffs, they must seek the advice of the Energy Advisory Committee and explain to the Panel on Economic Services their reasons for adjusting the tariffs and answer the questions raised by the Panel. We also examine and review the two companies' financial affairs and technical performance every year. In the 1996 review, as Members have mentioned just now, we noticed the increase in electricity demand was lower than forecast and requested, on our own accord, the CLP to delay the installation of generating units Nos. 7 and 8 at Black Point so as to spare the consumers the burden arising from the cost of the excess generating capacity. Members also debated on this matter early last year. All these indicate that the SCAs have provided appropriate protection to the consumers and the operation of the power companies and their setting of the tariffs are also subject to effective monitoring.

The current SCAs came into effect in 1993 and there is still 10 years to go before their expiry. Before a more effective regulatory mechanism than the current one is found or even before we can be sure about the future direction or mode of development that should be adopted for the structure of the electricity supply market, I feel that it is far too early now, 10 years before their expiry in 2008, to decide to abolish the SCAs upon their expiry. This action may not be to the best interests of consumers. Of course we will not wait until 2008 to consider what to do or whether or not to continue with the SCA arrangement. We should start paying close attention to the development of the electricity market and consider other regulatory modes and consult the public about them.

Rightly as Mr Fred LI has mentioned just now, we cannot have a piecemeal solution but must consider the whole issue very carefully and have in mind a comprehensive plan before we can decide our future approach. Therefore, we think that it may be far too early today to decide to abolish the SCAs 10 years from now because we have to take time to consider what to do after we have abolished the SCAs. Should we replace them with a better agreement or should we abolish all agreements altogether? Or how are we to introduce competition? I believe that all these questions require very careful consideration and a future direction can be determined only after public consultation.

Over the past year, in conducting the interim review on the SCAs, we have discussed with the two companies the issues of concern to the public as well as the proposed modifications to the SCAs and related arrangements. The purpose of this review is to ensure that the two companies will continue to provide stable services to the consuming public so as to safeguard their interests. We have also reached an agreement in principle with the two companies on certain modifications to the SCAs. We will report the progress of the whole review to the Panel on Economic Services and discuss with it in detail at the meetings. We hope to submit the various details of the modifications to the SCAs and the related arrangements to the Executive Council for consideration as soon as possible in the hope that the relevant arrangements can be implemented early next year for the benefit of consumers.

I wish to take this opportunity to reiterate that any amendment to the provisions of the SCAs have to be agreed by the two companies. This is provided in the current SCAs and we must obey the legal spirit of the contracts.

The Member's motion urges us to actively seek to amend the SCAs by negotiating with the two companies so as to bring more economic benefits and better protection to consumers. I believe that before Members urge us to do so, we are already doing this. We actively engaged in this in the past year and have already reported the result to this Council. Perhaps once again I should talk about the arrangements agreed upon between the power companies and us. For example, if the installation of new generating units in future gives rise to excess generating capacity, the expenditure on some machinery and equipment will be excluded from the companies' net fixed assets, on which the shareholders' returns are calculated, meaning that this part of the expenditure will not generate returns for the shareholders even though it is permitted now. This new arrangement will provide better protection to the consumers as the shareholders will have to bear their own investment risks in future.

Many Members have also mentioned the permitted rate of return just now. In the course of the review, we, like Members, requested the power companies to consider lowering the permitted rate of return. The companies considered our proposal unacceptable. They pointed out that the provision on the permitted rate of return was essential and fundamental in the SCAs and it was also on this foundation of the agreement that they made the substantial investment and business contracts. After negotiation, the two companies agreed that in future fixed assets financed by additional customers' deposits collected by them will attract a lower rate of return.

As regards the environment, there is already a provision on environmental obligations in the SCA with the HEC. The CLP has also agreed to include in its SCA a similar provision on its obligations for it to conduct its business in a manner that is compatible with the balanced environmental and economic needs of the community. This indicates that the power companies recognize the interrelation between electricity supply and the environment, the rising expectations of the community on the environment as well as the need to strike a balance when conducting the electricity-related business.

The amendments proposed by the Government to the SCAs according to the findings of the interim review, which have been agreed by the two power companies, will contribute to the lowering of the costs of electricity supply borne by consumers and alleviating the pressure on tariff increases in the long run.

Members have urged us to actively strive for these. As I have just said, we are already doing so. Some Members have asked us to exert pressure on the power companies but some others have requested us to respect the spirit of the contract. I can tell Members that we work according to these two principles. We hope that while exerting healthy pressure on the companies, we also respect the spirit of the contract. Though the present result cannot satisfy all consumers, as our hands are tied ─ the SCAs provide that any amendments must be agreed by both parties and we have to respect the spirit of the contract ─ we feel that at least we have gained some success from our efforts to strive for improvements. We will certainly keep working in this direction and will not give up. We will go on striving for better results in the next interim interview.

With the progress in time and the structural changes that the electricity supply industry in other places is undergoing, we will certainly keep the electricity market under constant review so as to determine the direction for our future development to meet the needs of the community and the electricity supply business in its development. Therefore, we took the initiative to commission a consultant in May to study the feasibility of increasing the interconnection capacity of the two power companies and introducing competition into the market. Therefore Members need not worry that the Government is against the introduction of competition as we have proposed on our own accord to consider other alternatives. Although this has something to do with the longer run, seeing the development of the global electricity market, we think that we should consider all feasible ways and modes. Therefore, this consultancy report can be considered as a significant step forward. The consultant study will be finished within one or two months and we will publish the findings and consult the public about it. As this is a very important issue, we must widely consult the public and listen to their views on it.

I would like to point out here whether interconnection between the two power companies is feasible. Concerning this question, many issues have to be considered thoroughly, which include the costs involved and the benefits brought to the consumers, whether the reliability of the overall electricity supply will be affected, the various problems that may arise in the implementation, the planning and monitoring, as well as the feasibility of interconnection with the Mainland in future. Interconnection cannot be implemented and resolve all problems involving electricity supply overnight. Interconnection between the two power companies can reduce the need for reserve capacity, but in the long run, we still have to consider how to satisfy the future increase in the demand for electricity supply. Although interconnection can reduce the reserve capacity, it does not enhance the generation capacity. I hope that Members will understand that interconnection is a very important and complicated matter. Before any significant decision is made, I feel that we must consider the problems just mentioned very carefully. Since the consultant will soon come up with the preliminary findings, we should further listen to the public's views and probe into the issue more deeply.

From the technological and administrative points of view, there is a need to consider the electricity supply, energy-effectiveness, interconnection competition and also the regulatory mode together on a comprehensive scale. I do not wish to deal with the problem in a piecemeal manner as described by Mr Fred LI. That is never our intention. Since this is such an important and complicated matter, we feel that it must be dealt with carefully and comprehensively. The electricity supply business requires substantial investment in infrastructure and long-term commitment. We must consider the market reform in this perspective because before any major structural change is carried out, there must be a thoroughly thought out plan, in-depth discussion with the relevant parties, extensive consultation and also the consideration whether there is need for a new regulatory framework and new legislation. We are now considering the feasibility and cost-effectiveness of the interconnection in this direction and examining whether there are other alternatives.

Before any attempts to reform the market and the supervision system are made, we must be satisfied that these attempts will be, from the broad economic context, in the long-term interest of consumers and the community as a whole. What we have now is one of the most reliable electricity supply systems in the world, which is also one of the cornerstones of our economy. We have to ensure that any market reforms will not jeopardize this reliable and safe system or send out a mistaken message to potential investors in the electricity business. If we have to introduce competition, we will have to open up the market, and that means we need new investors.

At the present stage, we are doing our best to implement the Demand Side Management (DSM) to conserve energy. This certainly helps to reduce the demand for electricity. However, it is unrealistic to think that the implementation of DSM will resolve all problems and meet the increased demand within a short time. Although this measure will be helpful, it is a long-term measure. I can tell Mr LEE Cheuk-yan that we are not condoning market manipulation by the power companies. We have indeed put a great deal of appropriate pressure on the companies. For example, from now on until 2001, we have already set a goal to cut down on the electricity generating capacity and the two power companies will announce the figures for this goal and the details of the implementation of the DSM soon.

The DSM will not resolve all problems. We must actively set a goal, keep a close eye on the situation, make a plan, to ensure that Hong Kong has adequate electricity generating capacity to meet our future demands.

Just now, Mr Kenneth TING has asked whether we can take care of the needs of the industrial sector in respect of the tariffs. We have also reflected this to the CLP. As far as I understand it, the CLP will soon put forward some proposals for discussion with the industrial sector.

Members have also expressed concern for the question of whether there is a need to delay the proposed installation of additional generating units by the HEC. At present, we have yet to come to any conclusion about the proposal. Our consultants are conducting an in-depth study on the HEC's proposals on the generating facilities and financial arrangements. The Environmental Protection Department is also examining the HEC's environment impact assessment report on the proposed extension of the power plant on Lamma Island. We will submit the report to the Advisory Council on the Environment, the Energy Advisory Committee and so on for advice.

We will carefully examine the increase in electricity demand, the viability of meeting part of the demand by means of the energy conservation scheme, as well as the related matters on economy, works and the environment. We will also submit the views of Members and the public, the relevant information and recommendations put forward in the Report on the Study of Interconnection and Competition in the Electricity Sector that is now underway, as well as the views of the various councils and committees to the Executive Council for consideration.

Madam President, I feel that in respect of energy, we have to consider very carefully and thoroughly the feasibility and cost-effectiveness of the various plans, whether the various technical problems will affect the stability and reliability of electricity supply, whether the price levels and environmental requirements can be met, as well as the consumers' interests, as all are essential. What we need now is a comprehensive strategy. We should not have our hands tied and rigidly say that the SCAs must go as soon as they expire in 2008. We must draw up a plan to decide what to do to best safeguard the consumers' interests by that time.

Actually I have already said that we on our own accord suggested taking interconnection as an alternative and started studying this issue in May. Since interconnection will give rise to many problems, of course we cannot decide hastily today whether or not to implement it. We should thoroughly and carefully examine what problems will arise in interconnection and whether we can solve them. We must ensure that all measures adopted will be to the best interest of the consumers. These are all crucial factors for consideration. We cannot practically grasp all the information and make a decision today. The relevant consultancy report can only provide us with the preliminary information. For such a complicated and significant issue, I believe we must gather more information, conduct an extensive consultation and consider it very carefully.

Regarding opening up the market and introducing competition, having listened to the speeches of Members, I find that basically our views are consistent. Mr Fred LI has indeed given much thought to this problem. Our difference is only a matter of different approaches, that is, how to have this done. There is no need to decide at this moment to abolish the SCAs in 2008. We should consider this issue more carefully.

After listening to Members' speeches, I find that we all agree on one point, that is, anything we do must be in the interest of the consumers, bearing in mind the stability of electricity supply, for these are all very important. How are we going to open up the market and introduce competition? We have to consider it very carefully. In fact, we all agree on this direction and our only difference is our approaches. The Government opines that, as I have just said, we must consider the views of all sides and the various problems carefully. We will, of course, not wait until 2008 to consider these problems. When we have grasped all the information and conclude that a comprehensive policy can be made, we will report to Members as soon as possible.

Thank you, Madam President.

PRESIDENT (in Cantonese): Mr Fred LI, you may now reply and you have six minutes out of your original 15 minutes.

MR FRED LI (in Cantonese): Madam President, first of all, I would like to thank the 12 Honourable Members who have spoken on my motion. But after listening to the comments of some representatives of political parties, I feel a numbing pain in my heart because when apparently they were talking about the rights of the consumers, they meant in fact another thing. Mr Kenneth TING of the industrial sector and Mrs Selina CHOW of the retail and wholesale sector were all speaking for their sectors. They said that the electricity tariffs were too high and they wanted to strive for more consumer benefits. But the final conclusion was still that the current arrangement should not be revised for fear that stability would be affected.

The Secretary for Economic Services said that Hong Kong enjoyed world-class stable supply of electricity. But he forgot to say that Hong Kong's electricity reserve margin is also among the greatest in the world, totalling more than 50% of the capacity. Such a high electricity reserve margin implies that the public will have to pay more for the tariffs. Over the years, Hong Kong has been building more and more power stations, and these assets are closely linked with the tariffs we pay and which have contributed to the profits of the two power companies. All these are undeniable facts. Then where is the problem? The profit control schemes, it is as simple as that. If one wishes to put it in more radical terms, it is because of these "devilish" schemes that the power companies engaged in the ambitious building of power generating facilities, over-estimated the demand, increased the electricity reserve margin so that profits kept on increasing and inflating. And the public, among whom 70% are commercial and industrial users, will have to pay more tariffs.

Why do Members defend this "devil" despite all these? They said that it was too early to discuss this issue and advised against this course of action. They also said that if this "devil" was gone, there might appear an even more powerful "devil". I think that it is definitely not the case. We simply need to look at the experience of foreign countries. Back to the local scene, will the China Light and Power Company Limited (CLP) close down and the Hongkong Electric Company Limited (HEC) unable to continue with its operations and all the power stations become heaps of trash when the electricity supply market is opened up? Of course not. Has the Hongkong Telecom shut down when the telephone services market is liberalized? Are no buses running any more after the bus routes are opened up for tender and the profit control scheme scrapped? Are there no ferry services when the profit control schemes of the ferry companies have been abolished? The answer is of course "no". We still do have all kinds of ferry services. The existing operators still possess a well-established edge and newcomers are unable to and cannot compete with them right away. Then what do the two power companies have to fear? And what do they have to worry about? They are the existing giant power suppliers and it is unlikely that they will vanish all of a sudden for they have a solid edge.

The views put forward by Mr FUNG Chi-kin on behalf of the Hong Kong Progressive Alliance are indeed baffling to me. He said he was worried that there would be a shortage of power supply two years after. Did he miss the point? By the year 2006, the CLP would still have an electricity reserve margin of over 25%. Then why will there be a shortage of power supply two years after? That really beats me. Mr FUNG then said that I was trying to rush through and steal the limelight by moving this motion. If that is the case, I can only offer my apologies. The Government will publish a consultation paper on the liberalization of the electricity supply market in about January to February next year. I may have raised the issue earlier than the Government, but I am definitely not rushing through the matter rashly.

Many Members said that I was rushing through the matter rashly when I proposed to make a decision on something 10 years later. May I ask Members to take a look at my motion? I did not say that we should put an end to the profit control schemes right away. I accept the agreements which have been made and I respect the spirit of the agreements. What we are now discussing is whether we will use the profit control schemes 10 years from now. My answer is negative. Unless you say to me that you are still in support of the profit control schemes, and so you want to oppose my motion and you want to stand up and debate with me because I am advocating an abolition of these schemes. But this is not the case. Everybody thinks that the profit control schemes are no good. They will raise tariffs and increase the electricity reserve margin. But then Honourable Members are scared of this, I really do not understand what they have in mind.

Mr CHAN Kam-lam of the Democratic Alliance for the Betterment of Hong Kong talked about the views of his party. But I do not see any difference with those views presented by the Democratic Party. They are really identical. However, he said that he had some reservations because he was worried that my proposal of increasing the interconnection capacity between the two power companies was made due to my concern for the HEC. If Mr CHAN had listened to my speech carefully, he would have known that my proposal of increasing the interconnection capacity was absolutely not because the HEC could delay its plant building plans as a result of this. I stressed in my speech that the prerequisite for the opening up of the electricity supply market was to increase the interconnection capacity. Interconnection capacity is vital to the introduction of competition, to the reduction of electricity wastage, and to the reduction of the electricity reserve margin of the two power companies. So this is not just a question of enabling the HEC to defer building its plants. I do not know why Mr CHAN would abstain from voting or refuse to support my motion after listening to my proposal. I am really baffled. I do not know why. Is it because I am a member of the Democratic Party? (Laughter and talking)

PRESIDENT (in Cantonese): Would Honourable Members please keep quiet?

MR FRED LI (in Cantonese): A few Honourable colleagues from the Liberal Party, Mr Kenneth TING, Mrs Selina CHOW, Mr Howard YOUNG and Mr James TIEN stressed that I had moved the motion rashly and that it was too early to make a decision at this stage. If they are really for the interest of the sectors they represent, then they should not have said this. The profit control scheme has been operating in Hong Kong for 40 years. It would have been in force for more than 40 years by 2008. This kind of scheme is no longer practised in the whole world. As representatives of the commercial and industrial sectors, why do they remain silent when the interests of their voters are being exploited by the two power companies? I simply fail to understand it.

I believe the electricity supply market needs to make huge long-term investments, so discussions should be held earlier. The issue should be discussed 10 years before the agreements are due to expire. We should not just consider the issue of whether the HEC should build new plants. Rather we should consider how the electricity supply market is going to be opened up later. We need to consider what positions the HEC and CLP are placed, how is interconnection going to be made and how is competition going to be enhanced. All these issues should be discussed now. It is not too early, nor is it too rash to do so. I have not specified what model must be adopted. We must look into this now. The Government should also move in this direction.

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

MR FRED LI (in Cantonese): I urge all Honourable colleagues to give a further thought to this.

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

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

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

PRESIDENT (in Cantonese): Members may wish to check their votes. Are there any queries? If not, the result will now be displayed.

Functional Constituencies:

Mr Michael HO, Mr LEE Kai-ming, Miss Margaret NG, Mr CHEUNG Man-kwong, 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, Mrs Selina CHOW, Mr Ronald ARCULLI, Mr HUI Cheung-ching, Dr LEONG Che-hung, Mrs Sophie LEUNG, Dr Philip WONG, Mr Howard YOUNG, Mr LAU Wong-fat, Mrs Miriam LAU, Mr Timothy FOK, Mr FUNG Chi-kin and Dr TANG Siu-tong voted against the motion.

Mr Eric LI, Mr CHAN Kwok-keung, Mr Bernard CHAN, Mr CHAN Wing-chan and Mr WONG Yung-kan abstained.

Mr Ambrose CHEUNG did not cast any vote.

Geographical Constituencies and Election Committee:

Miss Cyd HO, Mr Albert HO, Mr LEE Wing-tat, Mr LEE Cheunk-yan, Mr Martin LEE, Mr Fred LI, Mr James TO, Mr LEUNG Yiu-chung, Dr YEUNG Sum, Miss Emily LAU, Mr Andrew CHENG and Mr SZETO Wah voted for the motion.

Mr David CHU, Mr HO Sai-chu, Mr Ambrose LAU and Miss CHOY So-yuk voted against the motion.

Mr Gary CHENG, Mr Jasper TSANG, Mr LAU Kong-wah, Mr TAM Yiu-chung, Mr NG Leung-sing, Prof NG Ching-fai, Mr MA Fung-kwok, Mr CHAN Kam-lam and Mr YEUNG Yiu-chung abstained.

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

THE PRESIDENT announced that among the Members returned by functional constituencies, 28 were present, six were in favour of the motion, 16 against it and five abstained; while among the Members returned by geographical constituencies through direct elections and by the Election Committee, 26 were present, 12 were in favour of the motion, four against it and nine abstained. 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.

NEXT MEETING

PRESIDENT (in Cantonese): I now adjourn the Council until 2.30 pm on Wednesday, 9 December 1998.

Adjourned accordingly at eighteen minutes past Eight o'clock.

Annex I

WRITTEN ANSWER

Written answer by the Secretary for Home Affairs to Miss Emily LAU's supplementary question to Question 1

To the best of our knowledge, only Norway regularly and systematically involves non-governmental organizations (NGOs) in the drafting process. Additionally, we know that Finland, New Zealand and the United Kingdom have done so on an occasional basis in respect of specific reports.

On the point that undue prominence has been given to the views expressed by Professor HIGGINS in regard to the role of NGOs in the preparation of human rights reports, I hereby quote the public remarks from two other sources as follows:

(a) Comments of the Committee on Economic, Social and Cultural Rights on Hong Kong's third periodic report under the ICESCR in December 1996

"The Committee welcomes the fact that non-governmental organizations, members of the Legislative Council and other interested parties have had an opportunity to contribute their comments on topics included in the report. The Committee lauds efforts made by the Hong Kong Government to promote public awareness of the Covenant, and to make available to the public at large a substantial number of copies of the report, in English and Chinese, both in printed form and on the Internet."

WRITTEN ANSWER ─ Continued

(b) Extracts from the publication "Human Rights and the UN ─ Practice Before the Treaty Bodies" by Michael O'FLAHERTY, former Secretary to the Committee on the Elimination of Racial Discrimination

"Various models exist for the manner in which NGOs might contribute to the report-drafting process. In many States they simply ignore it or are precluded from involvement. In others, NGOs make submissions to the government either on their own initiative or at its request. The government then proceeds with the drafting and may choose to allow them to influence the contents of the reports, append them as annexes or ignore them. Another model is for active participation by NGOs in the drafting process itself, so that the final product is fully representative of the views of the government and the participating NGOs. Each of the models has both advantages and disadvantages. Involvement in the drafting process can serve to give NGOs an important platform for the influencing of government policy. On the other hand it sharply limits the possibility for the NGOs to subsequently adopt an independent stance in criticizing positions taken by the government. It is, accordingly, for each NGO to assess its own circumstance and to establish an effective and appropriate relationship with government."

We believe that our model ─ whereby the Government drafts the reports taking into account views expressed by NGOs and others in the course of consultations on the outline reports ─ as sound as any. Indeed, as far as we have been able to discover, it is one of the most open and transparent in the world.

As I said during the meeting on 2 December, NGOs can always submit their own reports to the treaty monitoring bodies should they find our reports deficient. Indeed, the United Nations Manual clearly stipulates that this is an integral part of the reporting process.

Annex II

WRITTEN ANSWER

Translation of written answer by the Secretary for Security to Mr Andrew CHENG's supplementary question to Question 5

Before the setting up of the Hong Kong Special Administrative Region, people wishing to become Hong Kong permanent residents by way of naturalization as British Dependent Territories Citizens must submit their applications on or before 31 March 1996. According to our record, the number of people who have applied for naturalization or registered as British Dependent Territories Citizens between 1993 and March 1996 is as follows:

Year	Number of Applications

1993	17 391
1994	17 803
1995	34 580
1996 (January to March)	217 603

(1) At its meeting on 13 November 1998, the Finance Committee approved an expansion of the ambit of the School Textbook Assistance Scheme to include eligible students in local private schools under the Direct Subsidy Scheme with effect from the 1998-99 school year. The deadline for submission of applications from these students to the schools is 1 December (that is, yesterday). The schools will forward the applications to the SFAA for processing.

(2) The full grant levels for textbook and stationery assistance for the 1998-99 school year are: Primary 1 to 6 ─ $1,221; Secondary 1 to 3 ─ $1,766; Secondary 4 ─ $1,592; Secondary 5 ─ $978; Secondary 6 ─ $1,463; Secondary 7 ─ $416.

OFFICIAL RECORD OF PROCEEDINGS Wednesday, 2 December 1998 The Council met at half-past Two o'clock

OFFICIAL RECORD OF PROCEEDINGS
Wednesday, 2 December 1998
The Council met at half-past Two o'clock