OFFICIAL RECORD OF PROCEEDINGS
Wednesday, 10 February 1999
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

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

THE HONOURABLE NG LEUNG-SING

PROF THE HONOURABLE NG CHING-FAI

THE HONOURABLE MARGARET NG

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

THE HONOURABLE RONALD ARCULLI, J.P.

THE HONOURABLE MA FUNG-KWOK

THE HONOURABLE JAMES TO KUN-SUN

THE HONOURABLE CHEUNG MAN-KWONG

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

THE HONOURABLE CHRISTINE LOH

THE HONOURABLE CHAN KWOK-KEUNG

THE HONOURABLE CHAN YUEN-HAN

THE HONOURABLE BERNARD CHAN

THE HONOURABLE CHAN WING-CHAN

THE HONOURABLE CHAN KAM-LAM

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

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

THE HONOURABLE LEUNG YIU-CHUNG

THE HONOURABLE GARY CHENG KAI-NAM

THE HONOURABLE SIN CHUNG-KAI

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

DR THE HONOURABLE PHILIP WONG YU-HONG

THE HONOURABLE WONG YUNG-KAN

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

THE HONOURABLE HOWARD YOUNG, J.P.

DR THE HONOURABLE YEUNG SUM

THE HONOURABLE YEUNG YIU-CHUNG

THE HONOURABLE LAU CHIN-SHEK, J.P.

THE HONOURABLE LAU KONG-WAH

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

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

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

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

THE HONOURABLE CHOY SO-YUK

THE HONOURABLE ANDREW CHENG KAR-FOO

THE HONOURABLE SZETO WAH

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

THE HONOURABLE LAW CHI-KWONG, J.P.

THE HONOURABLE TAM YIU-CHUNG, J.P.

THE HONOURABLE FUNG CHI-KIN

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

MEMBER ABSENT:

THE HONOURABLE HUI CHEUNG-CHING

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

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

MR GORDON SIU KWING-CHUE, J.P.
SECRETARY FOR PLANNING, ENVIRONMENT AND LANDS

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

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

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

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

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

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

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

MR LEO KWAN WING-WAH, J.P.
SECRETARY FOR HOME AFFAIRS

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

MR RAY CHAN YUM-MOU, 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.
Air Pollution Control (Motor Vehicle Fuel) (Amendment) Regulation 1999	35/99
Census and Statistics (Survey of External Claims, Liabilities and Income) Order	36/99
Animals and Plants (Protection of Endangered Species) (Exemption) (Amendment) Order 1999	37/99
Animals and Plants (Protection of Endangered Species) Ordinance (Amendment of Schedules)	38/99
Rules of the High Court (Amendment) Rules 1999	39/99
Pharmacy and Poisons (Amendment) (No. 2) Regulation 1998 (L.N. 22 of 1999) (Commencement) Notice 1999	40/99
Poisons List (Amendment) (No. 2) Regulation 1998 (L.N. 23 of 1999) (Commencement) Notice 1999	41/99
Census and Statistics (Quarterly Survey of Employment and Vacancies) (Amendment) Order 1999	42/99

Sessional Papers

No. 91	─	Estimates of Revenue and Expenditure of the Provisional Regional Council for 1999/2000 together with a list of works which it proposes to undertake during 1999/2000
No. 92	─	Estimates of Revenue and Expenditure of the Provisional Urban Council for 1999/2000 together with a list of works which it proposes to undertake during 1999/2000
No. 93	─	Revised list of works of the Provisional Urban Council for the 1998/99 financial year (during the third quarter ended 31 December 1998)
No. 94	─	Report by the Commissioner of Correctional Services on the administration of the Prisoners' Welfare Fund for the year ended 31 March 1998
No. 95	─	Audited Statement of Accounts together with the Director of Audit's Report of the Sing Tao Foundation Students' Loan Fund for the year ended 31 August 1998
No. 96	─	Audited Statement of Accounts together with the Director of Audit's Report of the Hong Kong Rotary Club Students' Loan Fund for the year ended 31 August 1998
No. 97	─	Audited Statement of Accounts together with the Director of Audit's Report and Trustee's Report on the Administration of the Education Scholarships Fund for the year ended 31 August 1998
No. 98	─	Audited Statement of Accounts of the Director of Social Welfare Incorporated together with the Director of Audit's Report for the year ended 31 March 1998
No. 99	─	Report of the Public Accounts Committee on Report No. 30 of the Director of Audit on the Results of Value for Money Audits (February 1999 - PAC Report No. 30)
No. 100	─	Report of the Public Accounts Committee on the Reports of the Director of Audit on the Accounts of the Government of the Hong Kong Special Administrative Region for the year ended 31 March 1998 and the Results of Value for Money Audits (Report No. 31) (February 1999 - PAC Report No. 31)

Reports

Report of the Bills Committee on Human Organ Transplant (Amendment) Bill 1999

Report of the Subcommittee on Ozone Layer Protection (Controlled Refrigerants) Regulation (Commencement) Notice 1998

ADDRESSES

PRESIDENT (in Cantonese): Addresses. The Public Accounts Committee has submitted two Reports to this Council on Reports Nos. 30 and 31 released by the Director of Audit. Mr Eric LI will address this Council on these two Reports submitted by the Public Accounts Committee.

Report of the Public Accounts Committee on Report No. 30 of the Director of Audit on the Results of Value for Money Audits
Report of the Public Accounts Committee on the Reports of the Director of Audit on the Accounts of the Government of the Hong Kong Special Administrative Region for the year ended 31 March 1998 and the Results of Value for Money Audits

MR ERIC LI (in Cantonese): Madam President, on behalf of the Public Accounts Committee (PAC), I have the honour to table our Reports Nos. 30 and 31 today.

According to the paper tabled in the Provisional Legislative Council on 11 February 1998 on the Scope of Government Audit in the Hong Kong Special Administrative Region ─ "Value for Money Audits", Report No. 30 of the Director of Audit on the results of value for money audits should have been submitted to the President of the Provisional Legislative Council in April 1998. It was deferred due to the cessation of business of the Provisional Legislative Council after 8 April 1998 in view of the elections of the first Legislative Council on 24 May 1998. The Chief Executive later determined that Report No. 30 should be submitted to the President of the first Legislative Council no later than the end of October 1998. The Report was submitted to the President on 30 October 1998 and tabled in the Legislative Council on 18 November 1998.

As in previous years, the Committee did not consider it necessary to investigate in detail every observation contained in the Director of Audit's Reports. We have selected only those chapters in the Director of Audit's Report No. 30 which, in our view, referred to more serious irregularities or shortcomings. It is the investigation of those chapters which constitutes the bulk of the Committee's Report No. 30.

The Public Accounts Committee's Report No. 31 contains three main parts:

(a) the Committee's assessment of the actions taken by the Administration in response to the recommendations made by the former Public Accounts Committee in Reports Nos. 28 and 29;

(b) the observation of the Committee on the Report of the Director of Audit on the accounts of the Government for the year ended 31 March 1998; and

(c) the conclusions reached by the Committee on the Director of Audit's Report on the results of value for money audits completed between July and September 1998 and tabled in this Council on 18 November 1998.

In considering the Report of the Director of Audit on the Accounts of the Government of the Hong Kong Special Administrative Region for 1997-98, the Committee noted that following the recommendation of the PAC, a variance analysis has been incorporated into the Government's Accounts. In respect of advances relating to expenditure on Vietnamese migrants, there is an accompanying note which states that the full recovery of the amount due from the United Nations High Commissioner for Refugees (UNHCR) has become doubtful. The Committee welcome these various improvements made to the reporting on the Government Accounts.

In examining the two value for money audits reports this year, the Committee has made a detailed study of 15 subjects. The two reports tabled today cover our deliberations on 13 subjects. The Committee is still considering the other two subjects, that is, Acceleration of works in the Strategic Sewage Disposal Scheme Stage I in Report No. 30 and Footbridge connections between five commercial buildings in the Central District in Report No. 31, and has requested the Administration to provide additional information on the issues raised. In view of the complexity of the issues involved and the need to examine the evidence in detail, the Committee has decided to defer a full report on these two subjects. The Committee will endeavour to finalize its report to the Council at the earliest opportunity.

There are three recurring themes around which the Committee's discussions on the Director of Audit's reports on the results of value for money audits evolve:

- first, the economical and efficient use of staff resources in the Civil Service;

- secondly, the importance of planning in the use of government land and property; and

- thirdly, the need for the Administration to account to this Council regularly for the use of resources, in particular, to report to the Finance Committee on any matters of significance.

Members will recall that the subject relating to the monitoring of outdoor staff caused considerable public concern when the Director of Audit's Report was tabled in this Council in November 1998. This covered both the management and staff in the Water Supplies Department (WSD), Census and Statistics Department and Government Supplies Department. The Committee is concerned about the existence of malpractice in these departments and has urged the three Heads of Department to follow up the irregularities identified and to take prompt remedial actions, including appropriate disciplinary actions. At the same time, the Committee would like to express its serious concern that there were weaknesses in the monitoring systems which open the opportunities for some dishonest staff members to cover up their idle time, make false claims, and give misleading information on their work. The Committee condemns the senior management of the respective departments for failing to give sufficient work for front-line staff to perform and for condoning slackness in the departments. They have also failed to install a proper system of control and accountability to ensure the full use of valuable staff resources.

The Committee believes that weaknesses in the internal staff control systems may not be confined to the three departments covered in the Audit Report and similar problems in the monitoring of outdoor staff may exist in other departments. The Committee has therefore recommended that the Director of Audit should review the operations of other government departments in order to reveal the true extent of the problem and to prompt the Heads of Department concerned to act with resolve to stem any malpractice.

In examining the evidence on this subject and that relating to the refuse collection service of the Regional Services Department (RSD), the Committee was astonished to find that various generous time allowances had been built into the system for a variety of purposes. The fact that the WSD was able to delete 1 085 meter-reading routes (out of its original 6 800 routes) and the RSD to delete 23 refuse collection teams (out of its original 143 teams) immediately after the Director of Audit's review has demonstrated a lack of discipline on the part of the departmental management to monitor the performance and productivity of their staff.

At a time when the Hong Kong economy is facing a downturn and when the private and public sectors are experiencing hardship, it is incumbent on the Government to demonstrate leadership by putting scarce public resources to good use, to wipe out any slackness and to deliver more with less. In this regard, the Committee takes note of the prompt response of the Secretary for the Civil Service in issuing a circular immediately after the tabling of the Director of Audit's Report, urging all Heads of Department to review immediately the existing systems on staff supervision. The Committee understands that the departments concerned have been asked to report to the Chief Secretary for Administration within three months. The Committee urges the Administration to inform this Council of the results of this review.

In this connection, the Committee also welcomes the statement made by the Chief Executive on 14 January 1999 about streamlining the disciplinary procedures in the Civil Service to ensure that an effective reward and punishment system is maintained. The Committee believes that this is the right direction to pursue and urges the Secretary for the Civil Service to proactively assist Heads of Department in managing their workforce with maximum flexibility and in exercising their authority without compromising fairness.

The Committee would also like to highlight its concern about the way in which the Administration handled the procurement of large saloon cars. The Committee deplore that in May 1996 tender for grade A cars, users' feedback was used as the sole reason for rejecting the tender offers which conformed to the technical specifications in the tender document; and while users' feedback was the sole reason for rejecting the tender offers, the Administration has not been able to provide any written record of such feedback to the Committee. The Committee also note that in both the September 1996 and October 1996 tenders, a weighted score assessment method was introduced to take into account both the price and quality of the vehicle in the tender evaluation. The same weight of 50% was assigned to the price score and the quality score to arrive at the total weighted score. The Committee considers it unacceptable that the Administration had not paid sufficient regard to economy by assigning the 50% weight to the quality score, which is contrary to the guidelines subsequently given in the Stores and Procurement Regulations stipulating a weight of no more than 30% to the quality score.

In order to minimize the perceived conflict of interests in that senior civil servants are selecting their own cars without taking economy into account, the Committee considers that there is a strong need to set up an independent vetting mechanism outside government departments for the selection of tender offers for the procurement of large saloon cars.

In order to urge the Administration to take note of the Committee's concern and to generate discussion among Members of this Council on the issues raised, I have been asked by members of the Committee to move a motion on "Civil Service's culture and efficiency" at the Council meeting on 10 March 1999.

Land and property are two of the most scarce resources in Hong Kong. In this connection, the Committee is dismayed that the proposal to relocate the General Post Office, first mooted in 1985, has dragged on for well over 13 years and yet, as things stand, there is no definitive date for completion of the process. The Committee notes that the inordinate delay in taking this project forward has been caused mainly by frequent changes made in the planning process and the absence of clearly established criteria which result in a lack of planning and co-ordination among the government departments concerned. As a result, a valuable public resources, a site worth billions of dollars, remains to be in uneconomical occupation and grossly under-utilized. The Committee urges the Property Strategy Group to take a proactive approach to ensure that the relocation exercise for the Post Office will be completed as scheduled and that the release of the General Post Office site will not be later than the target date of 2005 for the implementation of the relocation plan.

The Committee also examined the policy on and the operation of canteens in government premises. Canteens, as we have been advised, are not a welfare facility and it is very expensive to provide space for canteens. The Committee agrees with the Administration's decision to review the utilization and viability of all 117 government canteens. The Committee hopes that this will be pursued vigorously and that the space made available by scaling down the under-utilized canteens will be put to the best possible use.

The use of electricity in government buildings, which concerns both economy in the use of energy and the environmental benefits of so doing, also causes us concern. The Committee would like to express grave dissatisfaction that the Administration has failed to provide a clear steer in the implementation of the energy management programme and enforcing the Green Manager Scheme, and energy audits have been conducted only in 66 out of 1 300 government buildings. The Committee therefore considers that there is an urgent need for the Administration to take a more proactive approach in implementing the various energy-saving plans and to promote energy efficiency in both the public and private sectors.

The Committee emphasizes that we should never lose sight of the scarcity of Hong Kong's resources. The Government must ensure that opportunities are seized for making more effective use of the Government's assets and for protecting the environment.

A central feature of the Governance of the Hong Kong Special Administrative Region lies in the accountability of the Executive Authorities to the Legislative Council. One of the key ingredients of this relationship is the authority of the Finance Committee to approve funding for public purposes. In this connection, the Committee would like to express grave concern that the Administration failed to make periodic reports to the Finance Committee regarding the construction of the Extension to the Hong Kong Convention and Exhibition Centre. The Committee notes the Secretary for the Treasury's undertaking that for major projects undertaken by the Government in future, the Administration will keep the Finance Committee informed on a timely basis of any significant project slippage, cost overruns and any major departure from the funding submissions approved by the Finance Committee.

Secondly, the long-standing question of recovering the advances made in respect of Vietnamese migrants from the UNHCR remains unresolved and full recovery is now doubtful, to say the least. We urge the Government to continue to press for full recovery and to enlist the support of the Central People's Government and the British Government. The Committee has time and again raised the concern on the use of the advance account mechanism. We consider that in view of rising public expectation on the accountability of the Government, section 20 of the Public Finance Ordinance is outdated. From the above two cases, the Committee considers that it is time to review the Public Finance Ordinance, which was enacted back in 1983. The Administration is also urged to review the financial accounting practices with a view to enhancing timely disclosure of information for scrutiny by legislators.

Finally, I would like to refer to one other subject which carries important implications for our community ─ the tackling of the Year 2000 problem. The Committee examined the progress made by the Government in updating its computer systems and the efforts made to ensure that the private sector does so too. We note that significant progress is being made by the Government, but would urge all parties concerned to continue to be vigilant in tackling the problem in good time and to put in place effective contingency measures.

Madam President, as on previous occasions, the Committee has ranged across a full portfolio of subjects to safeguard the public interest in scrutinizing the use of taxpayers' money and to highlight the strategic directions which could be followed, so that the conduct of various policies is in tune with the Government's avowed accountability to the public. The PAC has established a fine tradition of being hardworking. We have had to exert ourselves doubly hard in this exercise, as two reports on the results of value for money audits had to be examined in parallel. I am indebted to members of the Committee and colleagues of the Legislative Council Secretariat for their contributions and dedication, and to members of the Administration for their co-operation. As always, the conclusions and recommendations made in the Reports tabled today have been put forth in the hope that they can bring forth positive changes to public administration in Hong Kong.

Thank you, Madam President.

PRESIDENT (in Cantonese): Mr Ronald ARCULLI will address this Council on the Report of the Subcommittee on Ozone Layer Protection (Controlled Refrigerants) Regulation (Commencement) Notice 1998.

Report of the Subcommittee on Ozone Layer Protection (Controlled Refrigerants) Regulation (Commencement) Notice 1998

MR RONALD ARCULLI: Madam President, with your permission, I present the Report of the Subcommittee on Ozone Layer Protection (Controlled Refrigerants) Regulation (Commencement) Notice 1998 in my capacity as its Chairman.

The Subcommittee was set up under the House Committee to study the Commencement Notice 1998. It is not our usual practice to table in this Council a report of a Subcommittee to study a piece of subsidiary legislation. But with the agreement of the House Committee, I would like to put on record the deliberations of our Subcommittee in respect of the validity of a piece of subsidiary legislation which has been published in the Gazette but not tabled in the Council in accordance with section 34 of the Interpretation and General Clauses Ordinance (Cap. 1).

To put Members into perspective, I shall start with the background leading to the publication of the 1998 Commencement Notice. The Ozone Layer Protection (Controlled Refrigerants) Regulation was made in 1993 to enable Hong Kong to meet its international obligations under the Montreal Protocol on Substances that Deplete the Ozone Layer. A Government Notice was published in the Gazette on 23 December 1993 to appoint 1 January 1994 as the commencement date of the Regulation. However, this Commencement Notice was published as a Government Notice, instead of a Legal Notice in Legal Supplement No. 2 of the Gazette, and was not laid on the table of the Legislative Council. Although a Government Notice is no different from a Legal Notice in the context of publication in the Gazette, the Administration holds the view that the Commencement Notice is ineffective because the requirement of tabling of subsidiary legislation in this Council is mandatory. Under these circumstances, the Administration considers it necessary to publish another Commencement Notice, that is, the 1998 Commencement Notice which appoints 1 January 1999 as the day on which the Regulation is to come into operation.

Members of the Subcommittee consider that the crux of the issue is whether the failure to table would make a piece of subsidiary legislation invalid. We note that there is no express provision or binding judicial authority on the validity or otherwise of subsidiary legislation which has not been tabled. In this respect, two provisions in Cap. 1 are relevant. Section 28 provides that a piece of subsidiary legislation comes into operation at the beginning of the day on which it is published in the Gazette. Section 34 requires all subsidiary legislation to be laid on the table of this Council at the next meeting after the publication in the Gazette. The consequence of a failure to table is silent in the Ordinance.

In determining the validity of the first Commencement Notice in respect of the Ozone Layer Protection (Controlled Refrigerants) Regulation, we have asked ourselves a fundamental question: Is the tabling of subsidiary legislation part and parcel of the legislative process?

The advice given to us by the Administration is that prior to any amendment by this Council under section 34(2) of Cap. 1 of any subsidiary legislation, anything done under such subsidiary legislation shall not be prejudiced. If the subsidiary legislation is amended, the amendment shall take effect from the date of publication in the Gazette of such amendment. In other words, such subsidiary legislation has already had legal effect prior to any amendment passed by this Council.

May I also draw Members' attention to the fact that there have been occasions on which this Council repealed subsidiary legislation as a result of scrutiny by a Subcommittee of the House Committee for various reasons. If the subsidiary legislation in question is not valid, there will be no point for us in repealing it. The points I have referred to lead us to the conclusion that the legislative process has been completed upon the publication of the subsidiary legislation in the Gazette. The tabling requirement stipulated in section 34 only provides a mechanism for Members of this Council to scrutinize subsidiary legislation made pursuant to delegated authority conferred in primary legislation. This is what we normally refer to as negative vetting. Of course, Honourable Members need not be reminded that under section 35 of Cap. 1, subsidiary legislation made under delegated authority is only valid upon its approval by this Council and we refer to this as positive vetting.

As the legislative process is considered completed upon the publication of the subsidiary legislation in the Gazette and the Commencement Notice 1993 was published in the Gazette, the Subcommittee came to the view that the Government Notice to appoint 1 January 1994 as the commencement date of the Ozone Layer Protection (Controlled Refrigerants) Regulation was validly made. This being the case, the Subcommittee considers it both unnecessary and ultra vires on the part of the Administration to publish the second Commencement Notice to appoint a fresh commencement date in respect of the Regulation. Although the Administration has advised the Subcommittee that the trade has complied with the provisions of the Regulation since 1 January 1994 and that no prosecution action has been taken, the Subcommittee is of the view that the existence of two commencement dates in the Gazette for the same regulation would cause confusion and has requested the Administration to find the best way to tackle the issue. One of the ways suggested by the Subcommittee is to issue a corrigendum notice.

Madam President, I would like to stress that we consider the Government Notice made in 1993 valid. There is no need to publish the 1998 Commencement Notice; and since the 1998 Notice is ultra vires, there is no way we can repeal it. I, therefore, put on record the views of the Subcommittee to put beyond doubt that we regard the Ozone Layer Protection (Controlled Refrigerants) Regulation had taken effect on 1 January 1994.

Thank you, Madam President.

ORAL ANSWERS TO QUESTIONS

PRESIDENT (in Cantonese): Questions. I would like to remind Members that question time normally does not exceed one and a half hours, with each question being allocated about 12 to 15 minutes. When asking supplementaries, Members should be as concise as possible so that more Members could have the chance to raise their supplementaries. In addition, Members should not ask more than one question, and should not make statements; to do so would contravene Rule 26 of the Rules of Procedure.

After I have called upon a Member to ask a main question, other Members who wish to ask supplementary questions to this question need, in addition to raising their hands, indicate the wish by pressing the "Request-to-speak" buttons in front of their seats.

On the other hand, if a Member wishes to follow-up and seek elucidation on an answer, or raise a point of order, please stand up to so indicate and wait for me to call before speaking.

PRESIDENT (in Cantonese): I now invite Mr Martin LEE to ask the first question.

Additions and Deletions to Annex III to the Basic Law

1. MR Martin LEE (in Cantonese): Madam President, With regard to the laws added to or deleted from Annex III to the Basic Law, will the Government inform this Council:

(a) of the number of times that laws have been added to or deleted from Annex III to the Basic Law since the passage of the Basic Law, and of the respective dates on which laws have been added or deleted, as well as the national laws involved;

(b) whether it knows the mechanism and procedure adopted by the Standing Committee of the National People's Congress (NPCSC) for consulting the Committee for the Basic Law and the Government of the Hong Kong Special Administrative Region (SAR) before determining on the addition or deletion of any law; and whether it has considered referring to the relevant Panel of this Council for discussion issues on which the SAR Government is being consulted; and

(c) of the legal status in the territory of the supplementary provisions of national laws listed in Annex III to the Basic Law, such as the Explanations of Some Questions Concerning the Implementation of the Nationality Law of the People's Republic of China; whether it knows if, before an additional supplementary provision is endorsed by the NPCSC, it is necessary to go through the relevant consultation procedure stated in Article 18 of the Basic Law, and if the additional supplementary provisions will be gazetted by the SAR Government?

SECRETARY FOR CONSTITUTIONAL AFFAIRS (in Cantonese): Madam President,

(a) Since the adoption of the Basic Law, the NPCSC has twice decided on the addition to and deletion from Annex III to the Basic Law:

(i) The first decision, adopted at the 26th Session of the 8th NPCSC on 1 July 1997, was to add five to and delete one from the list of national laws. The five laws added were:

(a) Law of the People's Republic of China on the National Flag;

(b) Regulations of the People's Republic of China concerning Consular Privileges and Immunities;

(c) Law of the People's Republic of China on the National Emblem;

(d) Law of the People's Republic of China on the Territorial Sea and the Contiguous Zone; and

(e) Law of the People's Republic of China on the Garrisoning of the Hong Kong Special Administrative Region.

The one deleted was the Order on the National Emblem of the People's Republic of China Proclaimed by the Central People's Government. Attached: Design of the national emblem, notes of explanation and instructions for use, which was originally listed in Annex III to the Basic Law.

(ii) The second decision, adopted at the 5th Session of the 9th NPCSC on 4 November 1998, was to add one national law to the list, and that is the Law of the People's Republic of China on the Exclusive Economic Zone and the Continental Shelf.

(b) Article 18 of the Basic Law provides:

The Standing Committee of the National People's Congress may add to or delete from the list of laws in Annex III after consulting its Committee for the Basic Law of the Hong Kong Special Administrative Region and the government of the Region. Laws listed in Annex III to this Law shall be confined to those relating to defence and foreign affairs as well as other matters outside the limits of the autonomy of the Region as specified by this Law.

The laws listed therein shall be applied locally by way of promulgation or legislation by the Region.

The NPCSC has consulted the SAR Government in accordance with Article 18 of the Basic Law before deciding on the addition to and deletion from the list of laws in Annex III. After study, the SAR Government considered that the relevant national laws met the requirement of Article 18 of the Basic Law, that is, they shall be confined to those relating to defence and foreign affairs as well as other matters outside the limits of the autonomy of the Region as specified by the Basic Law.

As to the arrangement for consultation with the Basic Law Committee, since the Committee is a working committee under the NPCSC, the SAR Government does not have information relating to the consultation mechanism and procedure between them.

The Law of the People's Republic of China on the Exclusive Economic Zone and the Continental Shelf, as added to Annex III to the Basic Law last year, regulates matters outside the SAR waters and has no practical effect in the SAR. In future, if any national law proposed to be added to Annex III to the Basic Law has any practical effect in the SAR, we will refer the issue to the relevant Legislative Council Panel for discussion.

(c) The "Explanations of some questions by the Standing Committee of the National People's Congress concerning the implementation of the Nationality Law of the People's Republic of China in the Hong Kong Special Administrative Region" (NPCSC Explanations) as referred to in the question is a piece of "legislative interpretation" of the NPCSC on the Nationality Law of the People's Republic of China adopted under its power of interpretation set out in Article 67(4) of the Constitution of the People's Republic of China. The "NPCSC Explanations" is a component part of the Nationality Law of the People's Republic of China.

The consultation requirement stipulated in Article 18 of the Basic Law applies to supplementary provisions proposed to be applied in the SAR as it does to the corresponding national law. The NPCSC has consulted the SAR Government on the application of the "NPCSC Explanations" in the SAR and we understand that the Basic Law Committee has also been consulted.

The Gazette Notice which promulgated the Nationality Law of the People's Republic of China has referred to the "NPCSC Explanations" adopted by the NPCSC on 15 May 1996.

MR MARTIN LEE (in Cantonese): Madam President, it has been set out clearly in the Joint Declaration that the socialist system and policies shall not be practised in the SAR. In this connection, could the Secretary inform this Council of the reason why both the on-line laws of Hong Kong and the Laws of Hong Kong Volume 1 have included the 1993 Amendment to the Constitution of the People's Republic of China which contains sentences like the following: "Being in an elementary stage of Socialism, the nation shall concentrate its effort on socialist modernization, as well as adhere to the socialist road under the guidance of Marxism-Leninism and Mao Zedong Thought"? Could the Secretary inform this Council why such socialist clauses could be incorporated into our laws?

SECRETARY FOR CONSTITUTIONAL AFFAIRS (in Cantonese): Madam President, with your permission, I should like to first make some explanation. The Secretary for Justice has intended to attend the meeting today to answer supplementary questions that are legal in nature; however, due to some urgent matters that need to be handled, she is unable to join us here. For this reason, should there be any supplementaries involving the explanation of legal provisions, I would give the explanations right in this Chamber if my colleagues here could offer me assistance; otherwise, I hope Honourable Members could allow me to reply in writing.

As regards the supplementary raised by the Honourable Martin LEE just now, according to my understanding, the Authorized Loose-leaf Edition of the Laws of Hong Kong does contain some articles for reference purposes, but those articles do not constitute part of the Laws of Hong Kong.

MR MARTIN LEE (in Cantonese): Madam President, I was asking why such sentences were incorporated into Volume 1 of the Laws of Hong Kong and put on the Internet, since it would lead other people into thinking that those sentences are part of the Laws of Hong Kong. This is the essence of my supplementary.

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

SECRETARY FOR CONSTITUTIONAL AFFAIRS (in Cantonese): Madam President, insofar as I understand it, it has been written very clearly that those are but reference materials, not part of the Laws of Hong Kong.

MR LEE WING-TAT (in Cantonese): Madam President, according to the Basic Law, the Committee for the Basic Law should be consulted before any addition to or deletion from Annex III could be made. However, in his main reply the Secretary first mentioned that he did not have information relating to the consultation mechanism and procedure, yet in a later paragraph, the understanding he referred to was that the Basic Law Committee had been consulted. Could the Secretary provide this Council with a concrete explanation in this connection, in particular, the issue as to whether the Basic Law Committee has been consulted on the addition and deletion in relation to the Nationality Law? If no consultation has been made, that would be a breach of the Basic Law.

SECRETARY FOR CONSTITUTIONAL AFFAIRS (in Cantonese): Madam President, the two parts of the reply quoted do not contradict each other. In referring to the issue for the first time, I made it clear that we did not have information relating to the consultation mechanism and procedure between them. By that we mean we do not know how the mechanism or the procedure works; however, we have also explained in the subsequent part of the reply that according to our understanding, the Basic Law Committee had also been consulted, only that we did not know what mechanism or in what manner had the consultation been conducted.

MR LEE WING-TAT (in Cantonese): Madam President, Madam President ......

PRESIDENT (in Cantonese): Please rise to speak, Mr LEE. Which part of your supplementary has not been answered by the Secretary?

MR LEE WING-TAT (in Cantonese): Madam President, I was asking the Secretary if he could provide this Council with a concrete answer as to whether or not the Basic Law Committee has really been formally consulted, rather than being "understood" by the Government as having been consulted. Could the Secretary give the Council a concrete answer in this respect?

SECRETARY FOR CONSTITUTIONAL AFFAIRS (in Cantonese): Madam President, we drafted the main reply in the light of our understanding; however, my colleagues here have assured me that the consultation process did take place.

MR LAU CHIN-SHEK (in Cantonese): Madam President, according to Article 18 of the Basic Law, the national laws listed in Annex III shall be applied locally by way of promulgation or legislation by the SAR. Could the Secretary inform this Council of the principle employed by the Government in deciding whether a certain piece of national law shall be applied by way of promulgation or legislation?

SECRETARY FOR CONSTITUTIONAL AFFAIRS (in Cantonese): Madam President, generally speaking, our principle is that if any specific piece of national law which needs to be amended or adapted locally before it could be applied in the SAR, that law would be applied through legislation by the Legislative Council of the SAR; otherwise, the laws concerned would be applied by way of promulgation. However, if appropriate, a local law may also be enacted to complement the application of a certain national law in the SAR.

MR CHEUNG MAN-KWONG (in Cantonese): Madam President, according to the Basic Law, the NPCSC needs to consult the SAR Government before introducing any national laws to Hong Kong for application. In this connection, could the Secretary inform this Council of the procedure and mechanism employed by the Government to determine whether the piece of national law concerned is related to defence and foreign affairs or matters outside the limits of the autonomy of the SAR; and whether the SAR Government has any mechanism or right of objection to prevent the national laws concerned from being applied in Hong Kong once the relevant decision has been made?

SECRETARY FOR CONSTITUTIONAL AFFAIRS(in Cantonese): Madam President, I hope the Honourable Member would allow me to provide a reply in writing, since we are not in the position to handle the matter; besides, I do not have any experience in this connection either. (Annex I)

MISS MARGARET NG (in Cantonese): Madam President, just now the Secretary said that the document to which Mr Martin LEE had referred was incorporated into the Authorized Loose-leaf Edition of the Laws of Hong Kong for reference only. However, I have learnt that the document is attached before the laws; this way, how could people know that the document is only some reference materials rather than part of the laws applicable in Hong Kong?

Madam President, in the past, reference materials used to be attached at the back of the laws instead of before; besides, only materials with legal effect would be published in full in the Laws of Hong Kong.

SECRETARY FOR CONSTITUTIONAL AFFAIRS (in Cantonese): Madam President, my colleagues have provided me with some advice. It is a general rule that a part of the law would set out clearly what the relevant piece of legislation is about; besides, the chapter number of the relevant ordinance will also be represented in numerals for easy identification. As for the document referred to by Honourable Members just now, it does not have the features I mentioned; hence, it could be identified easily at a glance.

MISS MARGARET NG (in Cantonese): Madam President, in addition to the loose-leaf edition, there is also the on-line edition of the Laws of Hong Kong. Could the Secretary explain to this Council whether in the on-line edition the said document is also not divided into chapters and sections?

SECRETARY FOR CONSTITUTIONAL AFFAIRS (in Cantonese): Madam President, I have become an expert all of a sudden. (Laughter) There are apparently differences between the loose-leaf edition and the on-line edition. We can look up the loose-leaf edition by co-ordinating our eyes, hands and brains, but a computer must rely on programmes to search the materials. Speaking of computer programmes, a computer could not start searching unless we have given the relevant instructions; as such, there should be some technical problems in this respect. In regard to the technical aspect, since the Honourable Member has raised her concern about the possible misunderstanding, I think we should look for a more effective and fool-proof programme. (Annex II)

MR JAMES TO (in Cantonese): Madam President, Article 18 of the Basic Law stipulates that the NPCSC may add to or delete from the list of laws in Annex III after consulting the Basic Law Committee and the SAR Government, but the addition or deletion shall be confined to those matters relating to defence and foreign affairs as well as other matters outside the limits of the autonomy of the SAR.

Madam President, the supplementary I wish to raise is related to the part on the "consultation with the SAR Government". In this connection, could the Secretary inform this Council whether, according to the interpretation of the SAR Government, the SAR Government has the right to advise the NPCSC of the laws which are related to defence and foreign affairs as well as other matters outside the limits of the autonomy of the SAR, or it could still raise its views in general, such as pointing out if the laws concerned are applicable in Hong Kong and in line with the matters or laws within the limits of the autonomy of the SAR? In regard to the understanding of the SAR Government, may we know whether the SAR Government could express its views to the NPCSC in general, or it could point out to the NPCSC as to which piece of national law is within the specified scope?

SECRETARY FOR CONSTITUTIONAL AFFAIRS (in Cantonese): Madam President, I believe this should be a more precise supplementary. As referred to by the Honourable James TO, the laws concerned are those relating to defence and foreign affairs as well as other matters outside the limits of the autonomy of the SAR as specified by the Basic Law, and they are the laws which Hong Kong does not have the right to handle on its own. As such, Hong Kong could invoke national laws when the need arises. Under Article 18 of the Basic Law, the SAR must be consulted before the national laws concerned could be applied in Hong Kong; in this connection, the SAR would of course consider the relevant national laws in the light of the following conditions: firstly, whether the law concerned is really related to defence and foreign affairs as well as other matters outside the limits of the autonomy of the SAR; and secondly, whether it will have any material impact on Hong Kong. For this reason, should the relevant law have any impact on Hong Kong in the future, we will raise the issue at the relevant Legislative Council Panel for discussion. If the law does not have any material impact on Hong Kong, such as the Law of the People's Republic of China on the Exclusive Economic Zone and the Continental Shelf passed in November last year, we would not consult the relevant Panels, since it would not have any relation with the internal affairs of Hong Kong.

PRESIDENT (in Cantonese): Honourable Members, although there are still several Members waiting to ask questions, we should move on to the second question since we have already spent 18 minutes on this.

Employment of Medical Graduates

2. DR TANG SIU-TONG (in Cantonese): Madam President, with regard to the employment of medical graduates, will the Government inform this Council whether it knows:

(a) the employment situation of medical graduates of local or Commonwealth universities who are Hong Kong residents in each of the past three years; the number of last year's medical graduates who have not yet secured houseman posts;

(b) the number of doctor vacancies in the Hospital Authority (HA) compared to the number of medical graduates in each of the past three years, and to the expected number of medical graduates in each of the next two years; and

(c) the measures that it adopts to help medical graduates secure suitable jobs in the light of the Enhanced Productivity Programme (EPP) implemented by the HA?

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

(a) The respective numbers of local and non-local medical graduates registered with the Medical Council, and the respective numbers of medical graduate, who have just completed their internship training and employed by the HA and the Department of Health (DH) in the past three years are set out in Table A for Members' reference. We have no information on the employment situation of those who are not employed by the HA or DH.

According to the information provided by the HA, the medical schools of the two universities will make arrangements for all local medical graduates to work as interns in HA hospitals, in order to enable them to fulfil the registration requirements of the Medical Council. In the past three years, there were no local medical graduates who failed to secure an internship post. For medical students who graduate abroad, we do not have information on whether they have all secured internship posts, but they usually complete their internship training in where they study.

(b) The number of doctor vacancies in the HA and the number of local medical graduates registered with the Medical Council in the past three years and the expected numbers in the next two years are set out in Table B. We have also provided the number of doctor vacancies in the DH for Members' reference.

Each year, apart from the HA and DH, the two universities also offer research and teaching jobs to medical graduates who have just completed their internship training. Moreover, some of these graduates will choose to work in private medical institutions or enter private practice.

(c) The HA has pledged to implement the EPP, with a view to improving the productivity and efficiency in delivery of services. By taking into account the needs of the community as a whole, the resources thus saved will be reallocated by the Government for provision of new services and improvement of existing services, and health care services are always one of the Government's key service areas.

In the coming few years, the Government will continue to provide resources to the HA for the commissioning of new hospitals and new beds. For example, in 1999-2000, the HA will provide an additional 853 beds and create about 180 doctor posts. Moreover, the HA expects to employ another 120 doctors to fill the vacancies arising from wastage. The DH also estimates that the department will employ about 50 doctors due to wastage and provision of new services.

Job opportunities for medical graduates are not confined to public medical institutions. About 40% of the some 8 400 registered doctors in Hong Kong are working in private medical institutions or having private practice.

The Health and Welfare Bureau is currently reviewing the supply of and demand for doctors, and one of the issues to be studied is whether there is over-supply of doctors in the long run. We will discuss the review results with the Education and Manpower Bureau and the medical schools of the two universities.

Table A

*

According to the Medical Registration (Amendment) Ordinance 1995, with effect from 1 September 1996, all non-local medical graduates are required to pass the licensing examination for registration as medical practitioners. Hence, relatively more medical graduates from the medical schools of the United Kingdom and some of the Commonwealth countries returned to Hong Kong for registration before this requirement came into force.

Table B

*	Estimated figures
**	Estimated figures have taken into account the estimated doctor wastage rate of 3.5%
***	Estimated figures have taken into account the estimated doctor wastage rate of less than 5%

DR TANG SIU-TONG (in Cantonese): Madam President, I am glad to hear that there will be sufficient job opportunities for medical graduates in the next two years. According to Table B, the estimated number of doctor vacancies is to the tune of 70 in 1999. How will the Government fill these vacancies? In the last paragraph of the main reply, it is pointed out that the Government is reviewing the supply of and demand for doctors. When will the respective study report be published?

SECRETARY FOR HEALTH AND WELFARE (in Cantonese): Madam President, I shall take the second part of the supplementary question first. As for the first part of his question, perhaps Dr TANG may care to repeat it later?

We are currently reviewing the demand for doctors. In the coming few months, the Health and Medical Development Advisory Committee will hold detailed discussions on hospital development, service demand of the DH, the number of doctors in Hong Kong as a whole and the yearly number of medical graduates from the two universities. Such a review is conducted every two or three years, mainly for the purpose of estimating the future demand for doctors in Hong Kong. With this information, the medical students can also plan for their future.

DR TANG SIU-TONG (in Cantonese): Madam President, I now repeat the first part of my supplementary question. As the number of doctor vacancies in 1999 is estimated to be 69 according to Table B, how will the Government fill these vacancies?

SECRETARY FOR HEALTH AND WELFARE (in Cantonese): Madam President, the figures set out in Table B are our estimates. The number of local medical graduates is expected to be 281. I do not understand why Dr TANG says that......

DR TANG SIU-TONG (in Cantonese): Madam President, the estimated number of medical graduates is 281 while the numbers of doctor vacancies in the HA and the DH are 300 and 50 respectively. It thus implies that there are 69 vacancies as a whole.

SECRETARY OF HEALTH AND WELFARE (in Cantonese): Madam President, our recruitment exercise does not confine to fresh graduates. Sometimes, we also recruit doctors who graduated in previous years.

PRESIDENT (in Cantonese): I would like to remind Members that each supplementary question should consist of one question only.

DR LEONG CHE-HUNG (in Cantonese): Madam President, according to the main reply and the tables, we note that the numbers of doctor vacancies in the HA and the DH are about 120 and 50 respectively. In the past two years, there were more vacancies because of the commissioning of new hospitals. But no more new hospitals will be built after the commissioning of Tseung Kwan O Hospital and Pok Oi Hospital. Meanwhile, about 300 fresh medical graduates will complete their internship training in Hong Kong every year. Does the Government consider that there is an over-supply of doctors under such circumstances? If so, will the Government consider reducing the intake of students by the medical schools of the two universities?

SECRETARY FOR HEALTH AND WELFARE (in Cantonese): Madam President, how to assess whether there is an over-supply of doctors is a very controversial issue since different criteria are adopted in different countries. Even if the simplest yardstick, that is, the doctors-to-population ratio, is adopted, accurate assessment can hardly be made simply on the basis of this ratio because population distribution, age, morbidity and health of people in different areas are different. According to an official survey conducted in 1996, the ratio of population to doctors is 1 000 to 1.2, which is different from many other countries. If the ratio is considered good enough, there will be an over-supply of doctors in the future. On the contrary, if it is considered unsuitable, there is no question of over-supply at all. We will take all factors into consideration in our detailed studies. I can assure Dr LEONG that all factors will be taken into account so as to ensure no wastage of resources.

MR MICHAEL HO (in Cantonese): Madam President, part (c) of the main question is concerned about the measures adopted by the Government to help medical graduates secure suitable jobs. Will the Government inform this Council whether different policies are adopted to help medical and non-medical graduates seek jobs?

SECRETARY FOR HEALTH AND WELFARE (in Cantonese): Madam President, thank you for the Honourable Michael HO's question. Different job opportunities are open to medical graduates who can either work in public hospitals or the DH. Besides, they can also choose to work in private institutions or enter private practice. The HA and the DH recruit doctors in order to cope with their service demand. Apart from these two organizations, they can work in any institutions they like. Certainly, no intervention can be imposed on them. Thus, the Government will neither arrange jobs especially for them after they have completed their internship training, nor is there any such procedures.

PRESIDENT (in Cantonese): Third question.

Visa-free Visit Period for Nationals of India, Pakistan and Bangladesh

3. MR JAMES TIEN:Madam President, the Government has changed the visa-free visit period in the territory for nationals of India, Pakistan and Bangladesh from three months to 14 days since 18 January. In this connection, will the Government inform this Council:

(a) if there have been upward trends of the above people overstaying in Hong Kong or taking up illegal employment in recent years; if so, the details of them; if not, the justifications for making the decision to change the visa-free visit period; and

(b) whether it has assessed the impacts of this decision on the above people who come to Hong Kong for the purposes of visiting relatives, sight-seeing and doing business, as well as the impact on the economy of Hong Kong; if so, the details of them?

SECRETARY FOR SECURITY (in Cantonese): Madam President,

(a) Our visa requirements for foreign visitors are reviewed from time to time to facilitate genuine visitors to visit Hong Kong while maintaining effective immigration control. The decision to reduce the visa-free period for nationals of India, Pakistan and Bangladesh from three months to 14 days was taken after careful consideration.

Records of the Immigration Department show that visitors from these three countries are involved in illegal employment more than visitors from other foreign countries:

- in 1998, 92 arrests for illegal employment were made of Indian, Pakistani and Bangladesh visitors, accounting for 52% of all arrests made of foreign visitors; and

- at the same time, 389 visitors from India, Pakistan and Bangladesh combined were arrested for overstaying, accounting for 34% of all overstaying cases detected of foreign visitors;

Similar figures have been recorded in recent years, showing that the problem is persistent. We have been monitoring the situation for some time before the decision was taken and announced in January. In times of high domestic unemployment, we cannot afford to maintain an over-generous visa-free treatment if the illegal employment and overstaying figures continue to be a cause for concern. We decided to reduce the visa-free period for the nationals of these three countries to discourage entering for the purpose of illegal employment or taking up residence, as part of our efforts to combat illegal work by visitors.

(b) We believe that genuine visitors and businessmen from India, Pakistan and Bangladesh will not be affected by the shortening of the visa-free period. According to statistics available, the average period of stay in Hong Kong for visitors from South Asia is three to four nights, for which a visa-free period of 14 days is more than adequate. If a longer period is required, application can be made for an extension of stay at the Immigration Department after arrival in Hong Kong. In most cases an extension of stay will be granted immediately over the counter. Alternatively, visitors who want to stay longer than 14 days can apply for a visit visa before coming to Hong Kong. Frequent visitors can apply for the Travel Pass, which allows multiple entry and a stay of two months each time.

As I have said, we do keep our visa policy under review. We will monitor the situation and consider adjustments as and when necessary.

MR JAMES TIEN (in Cantonese): Madam President, there are many people of Indian origin living in Hong Kong at the moment. Is it justified of the Government to alter its policy in a comprehensive manner simply because 92 Indian, Pakistani and Bangladesh visitors were arrested in 1998? Would the Secretary inform this Council of the number of Indian visitors out of these 92 arrests? If the number is small, can visitors from India, Pakistan and Bangladesh be dealt with separately instead of treating them together?

SECRETARY FOR SECURITY (in Cantonese): Madam President, we reviewed our visa policy after the reunification because the local worsening unemployment situation had made it necessary for us to endeavour to curb illegal work and overstaying. For visitors from regions or countries which have a large number of people coming to Hong Kong to overstay and engage in illegal work, we will adopt the same measure, that is, to abolish the visa-free arrangement or shorten the visa-free period. According to our records for 1996, 1997 and 1998, nationals of India, Pakistan and Bangladesh were among the highest in terms of the number of people engaging in illegal work as well as overstaying in Hong Kong. Although the figure of each of these countries is not too high, we consider it necessary to accord equal treatment. For the top five countries with the large number of their nationals engaging in illegal work and overstaying in Hong Kong, we will adopt the same measure, that is, to restore the visa requirements or shorten the visa-free period.

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

MR JAMES TIEN (in Cantonese): Madam President, I asked how many of the 92 arrested visitors are visitors from India?

SECRETARY FOR SECURITY (in Cantonese): Madam President, in 1998, about 15 visitors from India were arrested by us for working illegally.

MR TAM YIU-CHUNG (in Cantonese): Madam President, over the past few years, we could often see on our way past construction sites or roads where construction works was being carried out a large number of nationals from India and Pakistan working. Did the Government find in these places nationals of these two countries engaging in illegal work or overstaying?

SECRETARY FOR SECURITY (in Cantonese): Madam President, first of all, we need to understand that many ethnic Indians and Pakistanis living in Hong Kong do enjoy the right of abode here. Therefore, nationals of India and Pakistan who are working on roads or construction sites are not necessarily illegally employed. Both the Immigration Department and the police have paid great attention to black spots where illegal workers are found and conducted frequent raids on construction sites or commercial buildings where nationals of India and Pakistan are frequently employed as illegal workers.

MR ANDREW WONG (in Cantonese): Madam President, in my opinion, it may not be too meaningful for us to know the ratio between nationals of these three countries who overstay or engage in illegal employment and the total number of overseas visitors who have been arrested. Will the Secretary rather find out the ratio between these nationals and the total number of visitors coming from India, Pakistan and Bangladesh? We must calculate against an accurate yardstick as 92 cases may represent only a very small percentage. For instance, there may be some places from which no one has come to Hong Kong and, therefore, the percentage is zero. This is why it may be completely meaningless for us to look at one figure only. I hope the Secretary can provide one more figure. If not many visitors come from India, Pakistan and Bangladesh, the problem would then be very serious for 92 visitors from these countries had engaged in illegal employment and were arrested. I believe the Secretary understands what I mean. Will the Secretary inform Members if she has the figures on hand; if not, can she reply in writing? Furthermore, concerning visitors arrested for illegal employment and those arrested for overstaying, how many cases were overlapping?

SECRETARY FOR SECURITY (in Cantonese): Madam President, if I understand the supplementary question asked by the Honourable Andrew WONG correctly, what he wanted to know was, for instance, the ratio between visitors from India who were arrested for overstaying or illegal employment and the total number of visitors from India. I am afraid I do not have these figures on hand. But according to the information I do have, in 1996, 1997 and 1998, quite a large number of visitors from India, Pakistan and Bangladesh were found to have engaged in illegal employment, in possession of forged documents or overstayed and were subsequently repatriated or deported from Hong Kong. As regards the other question, perhaps Mr Andrew WONG may wish to repeat it.

PRESIDENT (in Cantonese): Mr WONG, please repeat your question. But I hope you could make it as concise as possible as I have given you special permission to raise two questions.

MR ANDREW WONG (in Cantonese): Madam President, according to the reply given by the Secretary just now, my second question is becoming more complicated as the Secretary has mentioned several additional offences. My question was: How many cases were overlapping? In other words, do we have any figures concerning the number of visitors who were arrested for illegal employment and overstaying at the same time?

SECRETARY FOR SECURITY (in Cantonese): Madam President, I do not have these breakdowns on hand. Of course, it is possible that the arrested visitors may have contravened several ordinances simultaneously. But the offences of possessing forged documents and overstaying are different in nature and they are therefore not regarded as overlapping cases. I believe that the figures of nationals from these three countries prosecuted by us for overstaying were comparatively low is because they were allowed to enjoy visa-free stay of three months before we amended our visa policy. That is why we seldom prosecuted them for overstaying. They could have done a lot of work during their three-month stay here but it might not be possible for us to detect what they have done. Now we have shortened the period to two weeks. I believe it will help us crack down on overstaying, illegal employment or other activities.

MR SIN CHUNG-KAI (in Cantonese): Madam President, the supplementary question raised by Mr James TIEN was really interesting. He asked whether there was any means or whether there was a need to deal with visitors from India, Pakistan and Bangladesh separately. Yesterday, we heard the Hong Kong Tourist Association say it would take the initiative to attract Indian visitors this year as India has a sizable middle class. In connection with this, will the Government consider it necessary policy-wise to deal with visitors from India, Pakistan and Bangladesh separately as well?

SECRETARY FOR SECURITY (in Cantonese): Madam President, we can of course consider such a possibility. But the main reason for us to amend the visa-free period was that nationals from these three countries had developed similar problems. If there is a change in circumstances that, compared with nationals from the other two countries, fewer nationals from India contravene the relevant legislation, we will consider this proposal. We are not abolishing the visa-free arrangement for nationals from these three countries; they can still enjoy a 14-day visa-free period. As a matter of fact, Indians coming to Hong Kong enjoy more convenience than Hong Kong people going to India as visitors from Hong Kong are required to obtain a visa for India. Furthermore, even if we have now shortened the visa-free period to two weeks, we are still more lenient than many countries, such as Britain, the United States and so on, which require visitors from Hong Kong to obtain visas.

MR SIN CHUNG-KAI (in Cantonese): Madam President, I raised the supplementary question because ─ I need to explain clearly to the Secretary which part of my question has not been answered ─ the ratios between visitors from India, Pakistan and Bangladesh are in fact different. Just now, the Secretary has already provided some figures in answering Mr TIEN's question. My question was: Given the fact that the situations of these three countries are not the same, will the Government consider dealing with them separately?

SECRETARY FOR SECURITY (in Cantonese): Madam President, visitors from these three countries are different in terms of ratios. But just as I said earlier, we need to see whether there is any difference in the situation of the nationals from these three countries contravening Hong Kong laws after the execution of the new policy. If we find their situation continue to show changes, we will consider revising the policy.

MISS EMILY LAU (in Cantonese): Madam President, will the Secretary inform this Council whether she is aware that some people consider this decision made by the Government smacks of racial discrimination as only nationals from three South Asian countries have been chosen as the target. The Secretary has mentioned earlier on that five countries are having such problems. Why has the Government not taken similar measures against nationals from the other two countries? In making the decision, should the Government consider whether it might be criticized for racial discrimination?

SECRETARY FOR SECURITY (in Cantonese): Madam President, I can assure the Honourable Member that we have revised the policy absolutely not on basis of racial or regional considerations. Instead, we have adopted objective and even quantified criteria. Just as I said earlier, we are only taking appropriate action against the top few countries with the largest number of their nationals engaging in illegal work and overstaying in Hong Kong in accordance with the figures we have for the past few years. As for the two remaining countries, that is, Nigeria and Nepal, we have announced and taken actions to resume visa arrangements because of the seriousness of the problems. The visa-free period for Sri Lanka has also been shortened.

PRESIDENT (in Cantonese): Honourable Members, last supplementary question.

MR HOWARD YOUNG (in Cantonese): Madam President, according to the Secretary, 10-odd visitors were from India out of the 92 arrested visitors. Will the Secretary inform this Council whether the Government will resort to more moderate measures if this figure is on the low side compared with the total number of visitors from India? Are there any other alternatives apart from shortening the visa-free period from three months to 14 days? This is because there are a large number of direct flights flying between Hong Kong and India. So by logic, there should be more visitors from India. Moreover, I reckon that the ratio of this category of visitors should be much lower than that of the other two countries.

SECRETARY FOR SECURITY (in Cantonese): Madam President, the ratio of Indian nationals engaging in illegal work or overstaying in Hong Kong is comparatively lower than that of the other two countries because there are more visitors coming from India. As regards our visa policy of granting a visa-free period from three months to 14 days, we still have much room for handling the matter flexibly. We will continue to review this issue.

PRESIDENT (in Cantonese): Fourth question.

Monitoring Construction Procedure at the Housing Department Sites

4. DR RAYMOND HO (in Cantonese): Madam President, regarding a recent case of suspected substandard piles at a Tung Chung site of the Housing Department, will the Government inform this Council whether:

(a) the contractor and the subcontractor involved in the case have been asked to suspend works at the other Housing Department sites in which they participate; if not, the reasons for it;

(b) it has assessed how far the incident is related to the subcontracting of works by the contractor upon securing the contract, hence resulting in the final subcontractors carrying out the actual construction works by "adjusting the quality in accordance with the price"; and

(c) consideration will be given to enhancing the measures for monitoring the construction procedure at the Housing Department sites, including requiring the posting of a resident registered structural engineer on site, so as to ensure that the quality of works comply with the required standard?

SECRETARY FOR HOUSING (in Cantonese): Madam President, the contractor concerned is involved in two other foundation projects of the Housing Authority (HA). While the HA is checking thoroughly the work done by the contractor in these projects, it cannot order suspension of work unilaterally unless non-compliance with the contract is found.

The subcontractor concerned has been removed by its contractors from the sites of two other foundation projects. The contractors have engaged other subcontractors to continue with the work. While the HA is also checking thoroughly the work done in these two projects, again it cannot order suspension of work unilaterally unless non-compliance with the contract is found.

As regards part (b) of the question, contractors for HA projects must carry out the work in accordance with the requirements of the contracts. If a contractor engages a subcontractor to execute any part of the work, the contractor will still be held responsible for performance. In considering the award of contracts, the HA will also take into consideration tenders' past performance, and not merely tender sums. The HA cannot ascertain if the recent incident is related to the subcontracting of work, but is examining the issue of multi-layered subcontracting with the construction industry and the Government.

As regards part (c) of the question, the HA has a system of monitoring construction procedures adopted by contractors. In each construction project, a qualified structural engineer is assigned to oversee the work. He visits the site regularly to check the contractor's work against the required standard. In addition, experienced site supervisory staff are deployed full-time on site to monitor work progress. The HA will also employ independent testing laboratories to carry out checks on the quality of work. Where the geological condition is complicated, a resident structural engineer will be posted on site.

DR RAYMOND HO (in Cantonese): Madam President, although there is no evidence to indicate the substandard work or corruption case was directly related to the "lowest-bid-gets-the-tender" or multi-layered subcontracting practice, the present practice of multi-layered subcontracting will eventually force contractors to choose, out of a no-profit situation, poorer materials or improper work procedures, thereby affecting the quality of the flats built. Will the Director inform this Council whether he will impose in the tender forms certain restrictions or requirements regarding subcontracting?

SECRETARY FOR HOUSING (in Cantonese): Madam President, in principle, the HA cannot control the subcontractors employed by contractors. However, the HA has laid down supervisory procedures and supervisory staff have certain rules to follow in their work. In this connection, in particular, the question of materials mentioned by Dr the Honourable Raymond HO, the HA has in place quality control procedures. Staff of the HA responsible for supervision over the contractors and their subcontractors will carry out tests on the materials used. Different test programmes are employed in checking other things such as piles or foundation. Supervisory staff will carry out their duties in accordance with certain procedures. The problems were detected this time, as everyone knows, is a result of the HA's supervisory staff discharging their duties.

MR LEE WING-TAT (in Cantonese): Madam President, I understand there is a list of approved contractors but not one for subcontractors one or two layers down, at the HA. In other words, their quality is not monitored. Will the Secretary inform this Council whether he thinks there is a need for the quality of the subcontractors to be monitored, or as Mr HO said, there should be some restrictions on the number of layers of subcontracting so that quality is assured?

SECRETARY FOR HOUSING (in Cantonese): Madam President, I spoke about this a while ago. In principle, contractors have the right to appoint their own subcontractors and the HA has no authority to intervene. But the responsibility of monitoring quality ultimately rests with the contractors. If anything goes wrong, the contractors will be held fully responsible. And if compensation arises, the contractors involved will be accordingly penalized or have their names struck off from the list. As I mentioned in the main reply, the HA is examining with the construction industry and the Government the multi-layered subcontracting of work. Both the Government and the construction industry are hoping to find a solution to the issue of multi-layered subcontracting to avoid any loopholes as far as possible.

MISS CYD HO (in Cantonese): Madam President, will the Secretary explain further the definition of "the geological condition is complicated"? On Ning Garden at Tseung Kwan O is built on reclaimed land. Is the geological condition complicated there, being a newly reclaimed piece of land? Was a resident structural engineer posted on site to make sure the foundation did not settle, thereby affecting the quality of the premises?

SECRETARY FOR HOUSING (in Cantonese): Madam President, I do not think I should comment on individual sites here. The HA, however, will send staff to conduct special studies at the site to see if there are geological problems. For example, there are some underground caverns in certain parts of the New Territories, in which case the HA will send engineers with geological knowledge to deal with the matter. In addition, resident structural engineers will be posted on-site. Therefore, in general, if the need arises, the HA will post a resident structural engineer on-site.

MISS CYD HO (in Cantonese): Madam President, if the Secretary cannot tell us the definition of "the geological condition is complicated", will he do so after this meeting in writing and will he give this Council a detailed explanation in respect of the case of On Ning Garden at Tseung Kwan O?

SECRETARY FOR HOUSING (in Cantonese): Madam President, I will be glad to inquire with the HA regarding what criteria there are for a definition. Miss HO referred to Tseung Kwan O in general. I wonder if she referred to a particular site or the entire area of Tseung Kwan O. In any case, I will discuss with the HA to see what information I can get for the Honourable Member. (Annex III).

PRESIDENT (in Cantonese): Miss HO, could you repeat the name of the estate so that the Secretary for Housing can look into the matter?

MISS CYD HO (in Cantonese): Madam President, I was speaking about On Ning Garden at Tseung Kwan O, but if other parts of the area also have complicated geological conditions, we would certainly like to obtain more information from the Secretary. Thank you.

MR HO SAI-CHU (in Cantonese): Madam President, in the last paragraph of his main reply, the Secretary said in each construction project a registered structural engineer is assigned to supervise the work and he visits the site regularly. Will the Secretary inform this Council whether each structural engineer is responsible for overseeing several projects? If so, how often will the engineer visit the sites? Monthly, weekly, or daily?

SECRETARY FOR HOUSING (in Cantonese): Madam President, the registered structural engineers are not assigned one site each. Depending on need and time available, they may each be assigned more than one site. As regards the frequency of visits, I tried to find it out from the HA. Usually, they pay visits to sites in the light of the progress of the projects. There are no specific requirements. When a certain stage of the projects is completed, the structural engineers will naturally visit the sites. Visits are not specified to be made once every day or two days. They visit the sites according to the progress of the works. They will visit at suitable stages of progress.

MISS CHAN YUEN-HAN (in Cantonese): Madam President, in the third paragraph of the main reply, it was said the HA is now examining the issue of multi-layered subcontracting. Will the Government inform this Council whether it will consider the system of permanent employment as suggested recently by the construction industry? Will the Government consider the proposed system, bearing in mind the quality of Hong Kong buildings are a major concern in the community?

SECRETARY FOR HOUSING (in Cantonese): Madam President, the question appears to cover a wide range. I am certainly not able to provide an answer now but I will forward the Honourable Member's concern to other government departments so that they may look into the issue. We will certainly follow up the issue of multi-layered subcontracting.

MR GARY CHENG (in Cantonese): Madam President, in part (c) of the main question it was asked whether there was posting of a resident registered structural engineer to monitor the construction procedure on-site. Despite the monitoring system problems still occur. Is this an issue about the effectiveness of the monitoring system? How can we make the monitoring system effective? If it is not effective, how will the Government deal with it?

SECRETARY FOR HOUSING (in Cantonese): Madam President, I have explained this already and maybe I should explain it again. The problems were discovered this time around because staff of the HA revealed them in the process of their supervision. A certain staff member was even intimidated and had to report the case to the Independent Commission Against Corruption so that the problems were disclosed. Indeed the problems were not discovered without the staff of the HA knowing it. The reality is quite different from what Mr CHENG thought. I really need to give credit to the HA staff for what they did because they have carried out their supervisory duties well.

PRESIDENT (in Cantonese): Fifth question.

Indoor Air Quality of MTR

5. MR LAU KONG-WAH (in Cantonese): Madam President, it is reported that the amounts of carbon dioxide and bacteria in the air of the station concourses, platforms and train compartments of the Mass Transit Railway (MTR) exceed general standards, and the air quality in such places is worse than that in other public places. In this connection, will the Government inform this Council:

(a) whether it has assessed the impact of the above situation on the health of passengers, in particular those who have respiratory problems;

(b) whether it knows when the MTR Corporation (MTRC) began to adopt the existing standards of indoor air quality and of the details thereof; how such standards compare to the corresponding standards in other public places; and

(c) whether it will consider enacting legislation or making other arrangements so as to monitor the air quality in the station concourses, platforms and train compartments of the MTR?

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

(a) The Environmental Protection Department (EPD) commissioned a consultancy study between 1995 to 1997 to look into the indoor air quality in offices and public places including the MTR. The study on the MTR was conducted in October 1996. Air quality at the MTR concourses and platforms of three stations, as well as train compartments of the Island Line, Tsuen Wan Line and Kwun Tong Line for both peak and off-peak periods were surveyed. In the surveyed platforms and concourses, the average carbon dioxide concentration levels were 992 and 1 208 ppm (parts per million) respectively. The average airborne bacteria level were 1 224 and 2 222 cfu/cu m (colony forming unit per cubic metre) respectively. In the train compartments, the average carbon dioxide concentration level was 2 195 ppm during peak and 1 243 ppm during off-peak. The average airborne bacteria level was 1 172 cfu/cu m during peak and 863 cfu/cu m during off-peak.

In October 1998 the MTRC conducted an air quality survey at the platforms and concourses of 13 selected stations, as well as train compartments of all MTR lines at that time. The average carbon dioxide concentration levels at platforms and concourses was 748 ppm. The average airborne bacteria level was 1 413 cfu/cu m. In the train compartments, the average carbon dioxide concentration level was 1 522 ppm during peak. The average airborne bacteria level was 831 cfu/cu m during peak.

Both the 1996 and 1998 air quality surveys found that the air quality at MTR concourses, platforms and train compartments were in full compliance with the guidelines set by the United States Department of Transportation designed for mass transit subway systems. In overcrowded areas, bacterial level is higher but the majority of this may just represent nonpathogenic bacteria which are not disease causing. In summary, the level of carbon dioxide as measured in the MTR will not cause any health effect on healthy people. As regards those with respiratory problems, the health effect on them will depend on the duration of stay under such conditions.

(b) The air quality system of the MTR was designed on the basis of the United States guidelines since the commencement of its operation in 1979. These guidelines are internationally recognized and continue to be used by other underground railways around the world. The United States guidelines recommend that for carbon dioxide the threshold level be set at 5 000 ppm.

The design of air quality standards depends on the use and purpose of the premises concerned. Many jurisdictions adopt different air quality standards for different premises on the basis of their use and purpose. The United States Department of Transportation adopts a set of air quality guidelines for underground transportation facilities. Other public agencies in the United States adopt different indoor air quality standards for other premises such as workplaces, public buildings, and so on. For example, the United States Department of Transportation guidelines for underground railway system recommend a threshold level of carbon dioxide at 5 000 ppm, whereas public agencies in a number of states in the United States adopt a maximum carbon dioxide level of 1 000 ppm for non-industrial and other public places.

(c) The Special Administrative Region Government is formulating an action plan for indoor air quality which will cover offices and public places including the MTR. Our aim is to promote better monitoring and ventilation maintenance practices. It would be premature to say whether it would be necessary to enact legislation for the purpose of monitoring the air quality in public places including the MTR system. On its own initiative, the MTRC intends to conduct its air quality study and research mentioned in (a) above on an annual basis and will pass on its monitoring data to the EPD for reference.

MR LAU KONG-WAH (in Cantonese): Madam President, at present, while it is very easy for the public to know the daily roadside air pollution index, they have no access to information on the air quality inside the MTR. Of course, the MTR has taken the initiative to monitor its own air quality. However, does the Government know whether such monitoring is continuous or one-off? And, will it be announced immediately if the airborne bacteria level really exceeds the standard?

SECRETARY FOR PLANNING, ENVIRONMENT AND LANDS (in Cantonese): Madam President, the monitoring is carried out on a regular basis. MTR staff will also join hands with our EPD colleagues in the monitoring. Improvement measures will be taken, if necessary.

MR LAW CHI-KWONG (in Cantonese): Madam President, in part (c) of his main reply, the Secretary mentioned that the Government is formulating an action plan for indoor air quality which will cover public places including the MTR. What is the timetable for formulating this plan? That is to say, when will the plan be finalized and when will it be implemented? Besides, the action plan aims at promoting better monitoring and ventilation maintenance practices, will it also include promoting public awareness of the seriousness of poor indoor air quality?

SECRETARY FOR PLANNING, ENVIRONMENT AND LANDS (in Cantonese): Madam President, the Government has already obtained the results of the study and initial research. What we are going to do now is to, on the existing basis, examine how to push forward the monitoring and maintenance of good air quality. At the present stage, we do not think legislation is a good way out. As for publicity, announcement on the air quality objectives for different premises, enhancement of the alertness in different organizations of improving air quality and maintenance, we are still studying. We may have a series of consultation exercises and announcements within this year.

MR LAW CHI-KWONG (in Cantonese): Madam President, my supplementary question just now was about the timetable, that is, when will the action plan commence?

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

SECRETARY FOR PLANNING, ENVIRONMENT AND LANDS (in Cantonese): Madam President, I said just now that consultation exercises and other relevant work will be carried out within this year, that is, within 1999.

MR CHAN WING-CHAN (in Cantonese): Madam President, part (a) of the main reply points out that the level of carbon dioxide as measured in the MTR will not cause any health effect on healthy people, but the health effect on those with respiratory problems will depend on the duration of stay under such conditions. Will the Government assess whether the level of carbon dioxide will cause any health effect on people who have to stay in the MTR for a long time such as the MTR staff? How can the staff work in the MTR for a lengthy period without suffering from the impact?

SECRETARY FOR PLANNING, ENVIRONMENT AND LANDS (in Cantonese): Madam President, in fact, other than the citizens who use the MTR, the targets of the survey conducted by the MTRC also included its own staff, especially those who have to work underground for a certain period of time. I mentioned earlier that two surveys have been conducted. In both surveys, the average levels of carbon dioxide were much lower than the established standard. If the MTR staff have to work in special conditions, for example, during maintenance work when the air pollution level may increase, the MTRC itself has a set of guidelines for them to follow so as to safeguard the health of staff under such working conditions.

DR RAYMOND HO (in Cantonese): Madam President, although the MTRC does not commission a consultancy study on air quality every year, will the Government encourage the MTRC to set up permanently fixed instruments inside the stations to monitor air quality and ask the MTRC to take contingency measures such as crowd control or pumping in fresh air once the air quality is detected to be lower than the lowest acceptable level?

SECRETARY FOR PLANNING, ENVIRONMENT AND LANDS (in Cantonese): Madam President, the present underground railway system in Hong Kong is already furnished with a lot of automatic adjustment installations to pump fresh air into the train compartments and tunnels. For example, if a train stays in a tunnel for more than 150 seconds, the computer will automatically instruct the ventilation system to increase the pumping of fresh air. This is the present measure adopted. As to whether the present instruments in the MTR are capable of measuring the exact carbon dioxide concentration level, I have to follow up with the parties concerned. However, as far as I know and with reference to the consultancy study on air quality commissioned by the Government, all the measurements were made during a certain period of time. I have to check whether there are instruments which can immediately show the carbon dioxide concentration level at a particular time or within a short period. I will submit a written reply to this supplementary question after obtaining the information. (Annex IV)

MR HOWARD YOUNG (in Cantonese): Madam President, in part (b) of his main reply, the Secretary said that the United States guidelines for carbon dioxide threshold level is 5 000 ppm for underground railways and 1 000 ppm for other premises. The big difference between the two is really surprising. I believe that it is related to passengers' limited duration of stay in the MTR as mentioned in part (a) of the main reply. Do the Secretary agree that the survey findings indicate a need on the part of the MTRC to remind passengers not to stay too long inside the MTR stations? Since the MTR stations are air-conditioned and sheltered from the inclemency of elements, they are very popular waiting places among Hong Kong people. Now we know that bad air quality may pose a health hazard, is it not imperative to remind the public to pay particular attention to this?

SECRETARY FOR PLANNING, ENVIRONMENT AND LANDS (in Cantonese): Madam President, the survey actually finds the present air quality in the MTR on a very safe level. Therefore, if we hope to reduce the number of people on the platforms, we may have to use other reasons such as crowdedness or blocking of other people; air quality may not be a good reason.

MISS CHAN YUEN-HAN (in Cantonese): Madam President, I would like to ask the Government clearly. Just now when the Secretary answered the Honourable CHAN Wing-chan's supplementary question, he assumed that the MTR staff only carry out maintenance works within a certain period of time. But I hope the Secretary will understand that some of the MTR staff have to work underground for a long time, whereas the platforms are also always stationed with staff. It was mentioned in part (a) of the main reply that the level of carbon dioxide will not cause any health effect on passengers with respiratory problems if they only stay in the MTR for a short while. However, I hope that the Government will also concern itself with the staff who have respiratory problems but still have to stay underground for a considerable period of time. Can the MTRC submit the medical reports of such staff to the Government? I hope that the Government will follow up for them or submit the relevant information to this Council.

PRESIDENT (in Cantonese): Miss CHAN, are you hoping that the Government will follow up or are you asking a supplementary question?

MISS CHAN YUEN-HAN (in Cantonese): Madam President, I am asking a supplementary question, only that the question lies in the front part of my remarks. I was afraid that the time for asking questions might be too short for me to ask the supplementary question in time, so I raised the question first before I added some other things I wanted to say.

SECRETARY FOR PLANNING, ENVIRONMENT AND LANDS (in Cantonese): Madam President, in fact, we understand completely Members' concern for the health of MTR staff and I will convey Members' opinions to the MTRC. What I want to say is that taking care of its own staff is indeed the responsibility of every company no matter whether it is a public or private one. The questions are what a company should do if the health of its staff is to be maintained at an optimal status, and how the company should help its staff if they suffer from certain diseases such as respiratory problems. I will follow up with the MTRC regarding this issue.

PRESIDENT (in Cantonese): The sixth question.

Collection of Air Passenger Departure Tax

6. MR HOWARD YOUNG: Madam President, from 1 September 1998 onwards, air passenger departure tax is collected by airlines and their agents on behalf of the Government immediately upon the sale of air tickets. In this connection, will the Government inform this Council of:

(a) the measures it has taken to ensure the smooth operation of the new arrangement; and

(b) the procedure for passengers who are exempted from paying the tax, such as diplomats of foreign countries, to apply for refund of the departure tax paid in respect of air tickets bought in Hong Kong or overseas?

SECRETARY FOR THE TREASURY: Madam President, with regard to part (a) of the question, under the Air Passenger Departure Tax Ordinance, airlines have to collect air passenger departure tax from air passengers on behalf of the Government. Before we implemented the arrangement to collect the departure tax upon the sale of air tickets, we discussed the details of the collection arrangement with the Board of Airline Representatives, the representative organization of airlines operating in Hong Kong. To ensure smooth operation of the collection arrangement, we also:

(i) set out the framework of the new collection arrangement in a Memorandum of Understanding signed between the Director of Civil Aviation and the Board of Airline Representatives;

(ii) set the implementation date of the new collection arrangement at 1 September 1998, so as to give airlines about four months to make the necessary preparations;

(iii) notified the general public of the new collection arrangement more than two months ahead of implementation through a press release, posters and publicity leaflets to airlines, travel agents, hotels and the like in Hong Kong;

(iv) informed consulates and international organizations in Hong Kong a month in advance of the implementation of the revised procedures for applying for tax exemption and refund;

(v) issued to all airlines and handling agents, prior to implementation of the new collection arrangement, revised accounting and handling procedures and informed the Airport Authority of the new collection arrangement; and

(vi) continue to provide tax refund, tax exemption service and inquiries relating to the departure tax through a Departure Tax Information Counter at the Chek Lap Kok airport.

With regard to part (b) of the question, under normal circumstances, if a passenger can provide evidence of his tax-exempt status at the time when he purchases an air ticket, the airline or its agent will not collect the departure tax from this passenger. However, if the tax-exempt status of the passenger cannot be verified at the time of purchase, he has to pay the departure tax and may apply for, and obtain, cash refund afterwards at the Departure Tax Information Counter at the airport upon production of the required evidence at the time of departure from Hong Kong. He may also apply for refund by post to the Civil Aviation Department after the departure.

MR HOWARD YOUNG: Madam President, correct me if I am wrong, but I believe that the Departure Tax Information Counter referred to in the second paragraph is, in fact, on the landside of the public area of the new airport. Since transfer or transit passengers who do not leave the airport through immigration should also be exempted from the tax, they would find it difficult to come out of the airside because that will make them subject to the tax payment, and obtaining an original refund by post is, I think, not worth the trouble. Can the Secretary advise whether they have given any thought on how to deal with such passengers who actually do not leave the airport but, for some reasons, have to pay the tax? How could they get a refund, apart from obtaining the refund by post?

SECRETARY FOR THE TREASURY: Madam President, I can confirm that the Departure Tax Information Counter is located on the landside of the Chek Lap Kok airport. With regard to the second part of the question, in fact, the simplest solution is for the airlines to implement the requirement that they do not need to collect departure tax from transit passengers or transfer passengers who do not leave the airside of the airport. Under the Air Passenger Departure Tax Ordinance, airlines are not required to collect tax from this group of passengers, in other words, from passengers who only transit or transfer through Hong Kong and stay inside the airside of the airport. That is the simplest arrangement. But obviously, we also envisage circumstances where the airlines sell tickets to their clients, but cannot be certain that these tickets will be used by passengers who will only be transiting or transferring through the airport of Hong Kong without leaving the airside. This is why we have introduced the application for refund through the Civil Aviation Department.

MR NG LEUNG-SING (in Cantonese): Madam President, in the second paragraph of the main reply, it was pointed out that if a passenger can provide evidence of his tax-exempt status at the time when he purchases an air ticket, the airline or its agent will not collect the departure tax from this passenger. I would like to ask if the passport alone can empower the airline to waive a passenger's departure tax.

SECRETARY FOR THE TREASURY (in Cantonese): Madam President, under the law, two types of persons have tax-exempt status. First, it is children under 12 years old. Second, it is representatives of foreign governments and members of international organizations with offices in Hong Kong with diplomatic immunities. In our present system, when an airline can ascertain from the date of birth on the passport that the ticket is going to be sold to a child under 12, it can waive the departure tax on selling the ticket. As regards persons and members of international organizations with offices in Hong Kong with diplomatic immunities, their departure tax may be waived through two channels. The first channel is sufficient evidence to be produced by the passenger on buying the ticket to show that he enjoys diplomatic immunities or is a member of an international organizations with tax-exempt status. The second channel is for foreign consulates or international organizations in Hong Kong to apply to the Director of Civil Aviation beforehand for tax exemption certificates, which come in 50 per book. Departure tax is exempted when tax exemption certificates are produced by foreign consulates on purchasing air tickets. I wish to take this opportunity to say that according to reports from the Director of Protocol, the system of tax exemption certificates is very much welcome among consulates in Hong Kong since its introduction.

MR HO SAI-CHU (in Cantonese): Madam President, the system has been running for five months. Has it been running very smoothly? If so, will the Secretary inform this Council whether the Government has saved a large sum, compared with previous schemes?

SECRETARY FOR THE TREASURY (in Cantonese): Madam President, the new system was implemented on 1 September. To date, more than 90% of the departing passengers have paid departure tax at purchase of their tickets. In addition, less than 10% of the passengers need to pay departure tax when they go through the boarding procedures as the relevant airlines and their agents are still negotiating. We very much hope that the airlines and their agents can resolve all the outstanding difficulties and questions as soon as possible.

I would like to take this opportunity to answer the second part of the supplementary question of the Honourable HO Sai-chu. One of the reasons for launching the new system is certainly for the control of costs. More importantly, we want to provide greater convenience to passengers. Many passengers forget to reserve $50 in their pockets for the departure tax as they leave. Very often, they need to go to the money changers at the airport because they do not have $50 and this costs them extra time. So, a major reason for the implementation of this new system is to make things easier for passengers and save their time. This is in line with the international trend.

MR AMBROSE CHEUNG (in Cantonese): Madam President, I would like to raise a supplementary question about the main reply in response to part (b) of the main question. Just now the Secretary said there were two types of persons who have tax-exempt status. They are diplomats and members of international organizations. I would like to know how many people there are in these two categories. Has the Secretary received any complaints? Although the Secretary said they were very satisfied but have there been any complaints? Moreover, has the Administration issued any exemption certificates to the relevant persons so that the evidence is more effective?

PRESIDENT (in Cantonese): Mr CHEUNG, you have raised three supplementary questions in a row. (Laughter) Let me state clearly to Members again they should not raise more than one supplementary question. I hope Members will understand and observe the rule. To save time, Secretary, will you try your best to answer?

SECRETARY FOR THE TREASURY (in Cantonese): Madam President, let me answer the second part of the supplementary question first. That part asks whether we have received any complaints since the new system was implemented. Let me solemnly declare to everyone we have received none so far. We have not received any complaints from consulates in Hong Kong or from any international organizations with offices here about the payment or exemption of departure tax.

I shall answer the first and third parts of the Honourable Ambrose CHEUNG's supplementary question together. We have no way of knowing the number of such persons because we know the number only afterwards. As I said a while ago, one of the ways is for consulates in Hong Kong to apply for 50-book tax exemption certificates from the Director of Civil Aviation. We request the consulates and international organizations to make a report to the Director of Civil Aviation at the end of each month, informing the Director how many certificates they have used for the month past and for whom the certificates have been used. Therefore we have such statistics, but it is only afterwards not beforehand. So, it is impossible to issue certificates to all exempted persons, as the Honourable Member has suggested.

PRESIDENT (in Cantonese): This Council has spent more than 15 minutes on this question. That is all for question time.

WRITTEN ANSWERS TO QUESTIONS

Payment of Remuneration to Civil Servants

7. MR HUI CHEUNG-CHING (in Chinese): It is learnt that the Government makes payment of remuneration to civil servants through the Hongkong and Shanghai Banking Corporation Limited (HSBC). In this connection, will the Government inform this Council:

(a) of the total amount of remuneration paid to civil servants monthly at present; and

(b) in respect of those civil servants who withdraw their remuneration through their accounts with other banks, whether it knows if the date and time of such withdrawals lag behind those of their counterparts who are directly paid through HSBC accounts; if so, the reasons for such a discrepancy and the improvement measures to be taken?

SECRETARY FOR THE TREASURY (in Chinese): Madam President, with regard to part (a) of the question, at present, the total amount of remuneration paid to civil servants is about $5 billion a month.

With regard to part (b) of the question, according to the agreement between the HSBC and the Treasury, the HSBC has to make suitable arrangements to ensure that civil servants who receive their remuneration by autopay through other banks can withdraw their remuneration on pay day. As regards the time, it may vary with the autopay arrangement and procedures of individual banks.

Implementation of the Smoky Vehicle Control Scheme

8. MRS MIRIAM LAU (in Chinese): With regard to the implementation of the Smoky Vehicle Control Programme, will the Government inform this Council of the respective numbers of the following in respect of each type of vehicles in each of the past three years:

(a) reports on excessive smoke emission received;

(b) fixed penalty tickets issued;

(c) examination orders issued;

(d) vehicles examined as required by the examination orders;

(e) repair orders issued; and

(f) vehicle licences suspended?

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

(a) Under the Smoky Vehicle Control Programme, the Environmental Protection Department (EPD) has processed 44 665, 40 536 and 46 802 smoky vehicle reports submitted by accredited spotters in 1996, 1997 and 1998 respectively. The breakdown by vehicle types is at Annex A.

(b) The police have issued 2 489, 1 084 and 1 517 fixed penalty tickets against smoky vehicles in 1996, 1997 and 1998 respectively. A breakdown by vehicle types is at Annex B. With the impending introduction of portable somkemeters, more effective action against smoky vehicle by the police is expected.

(c) (i) We have been issuing emission testing notices for smoky vehicles reported by accredited spotters. Such vehicles are required to be tested at the designated emission testing centres for excessive smoke. Non-attendance at the test or failures to pass the test within a prescribed period can result in the vehicle licence being cancelled. The EPD has issued 28 965, 25 868 and 31 018 emission testing notices in 1996, 1997 and 1998 respectively. A breakdown by vehicle types is at Annex C.

(ii) In addition to emission testing notices, the EPD also issues vehicle examination orders under the pilot schemes for introducing the advanced smoke test using chassis dynamometer for smoky vehicles up to 5.5 tonnes between August and November 1997 and for those above 5.5 tonnes since November 1998. These examination orders require vehicle owners to make available their vehicles for the dynamometer test at a specified time and place. For these pilot schemes, the EPD has issued 791 and 804 examination orders in 1997 and 1998 respectively. A breakdown by vehicle types is at Annex D. The advanced smoke test for vehicles up to 5.5 tonnes will be introduced to all of the designated emission testing centres within 1999 and for larger vehicles within 2000. Smoky vehicles will be tested at these centres through the issue of emission testing notices.

(d) Among the vehicles which were the subject of the examination orders mentioned in (c)(ii) above, 591 and 506 have been examined in 1997 and 1998 respectively. A breakdown by vehicle types is at Annex E.

(e) Vehicle repair orders are issued if vehicles fail to pass the dynamometer test under the pilot scheme detailed in (c)(ii), or which are found emitting excessive smoke during joint operations against smoky vehicles mounted since September 1998 by the police and EPD whenever the roadside Air Pollution Index exceeds 100. The number of such orders issued in 1997 and 1998 are 326 and 314 respectively. A breakdown by vehicle types is at Annex F.

(f) The EPD will recommend cancellation of the vehicle licences to the Transport Department (TD) for vehicles which fail to:

(i) attend test as required by examination orders or repair orders;

(ii) pass the emission test within the period prescribed in an emission testing notice as mentioned in (c)(i) above; or

(iii) comply with the vehicle repair orders issued in joint operations of the police and EPD.

For the pilot scheme mentioned in (c)(ii), recommendations for cancellation of vehicle licences have been made for those that do not attend the test. Those which fail to pass the test have been required to be re-tested until they are able to pass the test.

The TD, on the recommendation of the EPD, issued 734, 921 and 885 vehicle licence cancellation notices in 1996, 1997 and 1998 respectively. A breakdown by vehicle types is at Annex G.

Annex A

Annex B

Annex C

N/A ─ Not Applicable

Annex E

N/A ─ Not Applicable

Annex F

N/A ─ Not Applicable

Annex G

Financial Crisis of Listed China-affiliated Companies

9. MR ERIC LI (in Chinese): It is reported that among the China-affiliated companies which have recently run into financial difficulties, some of them are listed in the territory. In this connection, will the Government inform this Council:

(a) if the relevant local regulatory bodies have plans to conduct joint investigations into the cases in conjunction with the relevant regulatory bodies on the Mainland; and

(b) if these local bodies will review the relevant regulatory measures as well as how their co-operation with the relevant bodies on the Mainland can be enhanced, so as to restore the confidence of investors?

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

(a) Disclosure requirement is one of the general principles of the Listing Rules enforced by the Stock Exchange of Hong Kong (SEHK). When listed companies encounter financial difficulties, the SEHK as the front-line regulator has the duty to ensure that true, prompt and adequate disclosure of the situation is made to the investing public to enable them to make their investment decisions on a fully informed basis. The Securities and Futures Commission (SFC) as the market-wide regulator has the responsibility to ensure that securities-related legislation and regulations are strictly observed by market participants and the interests of the shareholders are properly protected. Where there are suspected elements of fraud or other market misconduct such as insider dealing, the SFC (or the police in respect of fraud) will conduct investigations into the case in accordance with the relevant laws and regulations.

In the recent cases of China-affiliated listed companies with financial difficulties, the SEHK has been in close contact with their management and closely monitored the information disclosure of these companies. The SEHK has also requested regular briefing by the companies concerned on the developments of their financial situation, including any restructuring of debts and injection of new capital and where warranted made inquiries in respect of suspected breaches of the Listing Rules.

Both the SFC and the SEHK will keep the matter under review and take appropriate actions as necessary in accordance with the relevant legislation, regulations and rules.

(b) In 1993, the SFC and its mainland counterpart, the China Securities Regulatory Commission (CSRC), entered into a Memorandum of Regulatory Co-operation. The Memorandum provides for regular active co-operation between the two regulators including periodic contact and on-going joint efforts on regulatory co-operation. The Memorandum has so far worked effectively and provided the basis for co-operation with the CSRC on a number of cases. The SFC will keep it under review to ensure that it continues to provide a viable and effective mechanism for close co-operation with the CSRC.

Separately, as proposed in the Report of the Financial Market Review, the SFC, in conjunction with the SEHK, are considering providing statutory backing to the Listing Rules to enable the SEHK to more effectively enforce compliance with its Listing Rules. We believe this will have a positive effect on public confidence in the stock market of Hong Kong.

It should also be pointed out that, barring market misconduct and fraud, financial problems of listed companies are essentially a commercial problem. Directors of listed companies have a primary duty to ensure that the companies operate in sound financial conditions and prevent them from running into financial difficulties. As noted above, the SFC and the SEHK as regulators will be vigilant in ensuring that the disclosure requirements are fully observed and the securities-related legislation and regulation are complied with.

Shortlist of Internet Service Providers

10. MR SIN CHUNG-KAI: In the reply to a question of the former Legislative Council on 13 November 1996, the Government said that it was formulating a revised procurement strategy and drawing up for departments' reference a shortlist of Internet Service Providers (ISPs). In this connection, will the Government inform this Council:

(a) whether the revised strategy has been formulated; if so, the details of it; and

(b) whether the shortlist of ISPs has been drawn up; if so, the criteria used in selecting ISPs; if not, the reasons for that?

SECRETARY FOR INFORMATION TECHNOLOGY AND BROADCASTING: Madam President,

(a) A revised strategy for the procurement of Internet services from ISPs has been in place since May 1997. Instead of asking government departments to procure ISP services from a bulk tender contractor as originally planned, government departments may now procure such services direct from an ISP of their choice in order to best meet their requirements. In doing so, they have to follow Stores and Procurement Regulation (SPR) 280. A copy of this regulation is annexed.

(b) Under the revised strategy referred to in (a) above, government departments may approach any licensed ISP for the provision of the required service. There is no need to draw up a list of pre-qualified ISPs.

Annex

Extract from Stores and Procurement Regulations

Procurement of Services
280.	(a)	Departments should follow the provisions set out in (b) - (f) below in the procurement of services with a value not exceeding the financial limits stated in SPR 220(a)1 and consultancy services with a value not exceeding $1,000,000, which cannot be undertaken by government departments or for which a government contract does not exist.
	(b)	For procuring services with a value not exceeding $20,000, departments must approach more than one contractor for quotations and accept the lowest offer to specification. A department may accept a higher offer provided that the Controlling Officer or an officer specially delegated by him to order the service considers that the rates quoted are reasonable, and certifies this on file.
	(c)	For procuring services with a value exceeding $20,000 but not exceeding $1,000,000 in respect of construction and engineering works and consultancy services and $500,000 in respect of other services, departments must obtain written quotations from not less than five contractors and accept the lowest offer to specification. Departments should designate officers of not lower than the rank of Executive Officer II/Assistant Supplies Officer or equivalent to handle the selection of contractors and to contact them for written quotations, and to record on file the particulars such as the names of the contractors contacted and the reasons for their selection.
	(d)	In cases where it is not possible to identify a sufficient number of contractors to obtain the minimum number of quotations required, an officer of not less than two ranks higher than an Executive Officer II/Assistant Supplies Officer or equivalent should approve the issue of invitations to contractors. The officer will then make a brief explanatory note on file for record purposes.
	(e)	Where written quotations are invited, departments should ask contractors to return the quotations in sealed envelopes by a specified time. A quotation opening team comprising two members, with the team leader at a rank not lower than that of Executive Officer II/Assistant Supplies Officer or equivalent, will open the envelopes, date-stamp and initial the quotations.
	(f)	In cases where a higher offer is to be accepted or less than the minimum number of quotations are received, the officer accepting the selected offer must be of a rank of D2 or above.

Charging of Transfer-route Fees on Passengers of Overnight Tunnel Buses

11. MR LAU KONG-WAH (in Chinese): At present, passengers on the two overnight cross-harbour bus routes jointly operated by the Kowloon Motor Bus Company (1933) Limited (KMB) and the New World First Bus Services Limited (the First Bus), namely routes N121 and N122, are allowed to make free onward rides on other bus routes at the bus stops situated at the entrance and the exit of the Cross Harbour Tunnel on the Hung Hom side. However, it is reported that during the last successive Christmas and New Year holidays, KMB and the First Bus had, on the excuse of maintaining order, charged passengers fares for making such onward rides on other routes. The two companies have indicated that such a measure will be put in place during holidays in the future. In this connection, will the Government inform this Council:

(a) whether it knows of:

(i) the justifications for the two bus companies charging such fares;

(ii) the criteria adopted by the two bus companies in determining the rates of such fares;

(b) of the criteria adopted by the Administration in granting approval to the two companies for charging such fares;

(c) how the number of boardings on franchised buses during holidays compares to that on weekdays;

(d) whether it has assessed if franchised bus companies can use the same excuse and charge passengers for such fares during the morning and evening peak hours on weekdays; and

(e) whether it has assessed if the practice of charging such fares is contradictory to the Administration's policy of encouraging people to travel by public transport during holidays to alleviate traffic congestion?

SECRETARY FOR TRANSPORT (in Chinese): Madam President, N121 (Ngau Tau Kok to Central (Macau Ferry)) and N122 (Mei Foo to North Point) are two all night cross-harbour bus routes jointly operated by KMB and the First Bus. In accordance with the scale of fares determined by the Chief Executive in Council under section 13 of the Public Bus Services Ordinance, the full fare of the bus routes are $12.80, $7.00 as section fare for commuters boarding after crossing the Cross Harbour Tunnel.

For passenger convenience, a concessionary arrangement of free interchange for the two bus routes has been offered by the bus companies since April 1976. Under this arrangement, passengers of N121 may interchange at no extra charge to N122 or vice versa, at the two bus stops on the Hung Hom side of the Cross Harbour Tunnel. Other than these interchange passengers, normal commuters who board the bus at the stops would be required to pay a full fare of $12.80 for the Hong Kong bound journey or $7.00 for destinations in Kowloon.

On a festive night, the number of passengers at the bus stops outside the Cross Harbour Tunnel taking N121 and N122 is about 10 times more than normal nights (about 160 passengers in a normal night). Because of the drastic increase in the number of late travellers during the festive season, it would be difficult to distinguish the interchange passengers with normal commuters and adopt two different fare-charging systems. The above concessionary arrangement is hence disapplied on major festive days, that is, Christmas, New Year and Lunar New Year holidays. Notices are posted at the bus stops whenever there is a need to temporarily suspend the fare concession for interchange commuters.

We believe that the present fare charging arrangement could be improved. The Transport Department would examine with the bus companies whether the concessionary arrangement could be made applicable also during festive nights when buses deployed to run N121 and N122 are fully equipped with Octopus later in the year. In the meantime, bus companies would be asked to examine the possibility of issuing coupons to interchange passengers to differentiate them from other commuters.

Safety of Hong Kong Residents on Vessels at Sea

12. MR WONG YUNG-KAN (in Chinese): Will the Government inform this Council of:

(a) the number of incidents in the past three years in which Hong Kong registered vessels were robbed by pirates while at sea;

(b) the number of casualties in these incidents, and the number of Hong Kong residents among such casualties;

(c) the waters in which these incidents occurred; and

(d) the measures adopted by the Administration to safeguard the personal safety and property of Hong Kong residents on vessels at sea?

SECRETARY FOR SECURITY (in Chinese): Madam President,

(a) - (c)

Based on information from the Marine Police and reports from the International Maritime Organization (IMO) and International Maritime Bureau (IMB), the statistics of maritime crime involving Hong Kong registered vessels are as set out in the Annex.

(d) We share international concerns about piracy and maritime crimes. As an Associate Member of the IMO, we support its initiatives to combat piracy and maritime crimes. We provide the IMO with information on piracy and maritime crimes which occurred in the waters near to Hong Kong and reports from Hong Kong registered vessels. We receive regular reports compiled by the IMO and the IMB's Piracy Report Centre and take the necessary supportive measures in response to their initiatives. For example, on receipt of reports of attacks on Hong Kong registered vessels outside Hong Kong waters, we will, where appropriate, enlist the assistance of the relevant country in the vicinity of the location concerned to step up enforcement actions to ensure navigation safety in the region. Merchant Shipping Notices are issued from time to time to ship owners to draw their attention to the advice issued by the IMO on how to deal with piracy attacks. Navigation warning is also broadcast to ships sailing in the region. Our Maritime Rescue Co-ordination Centre (MRCC) provides assistance, wherever possible, to vessels in distress when they are within its Search and Rescue Region. In addition, there is an effective liaison channel established between the MRCC and the Guangdong Maritime Rescue Co-ordination Centre for exchange of information on maritime safety.

The law and order within the Hong Kong waters is maintained by our law enforcement security forces. Police launches patrol in the territorial waters of Hong Kong round the clock and particular attention is paid to likely crime areas. They also work closely with their counterparts in the Mainland to combat all kinds of cross-boundary crimes.

Annex

Incidents of Piracy and Robberies
Involving Hong Kong Registered Ships

		1996	1997	1998
(a)	No. of incidents	2	2	5
(b)	Location
	(i) Piracy outside Hong Kong waters	(1) Indonesian water	(1) Indonesian waters (2) As above	(1) Indonesian waters (2) Waters of Gabon, West Africa
	(ii) Robberies inside Hong Kong waters	(1) Hong Kong waters, off Sea Ranch, South of Lantau Island	-	(1) Hong Kong waters, West of Shek Ku Chau (2) As above (3) As above
(c)	Total no. of casualties involved	Nil	(1) Nil (2) 3 injured	Nil
(d)	No. of casualties in (c) who are Hong Kong residents	-	(1) - (2) Nil	-

Appointment of Provisional District Board Members to Advisory Committees

13. MR ERIC LI (in Chinese): Will the Government inform this Council:

(a) of the total number of government advisory committees members who are also members of Provisional District Boards; and

(b) whether it will consider appointing more Provisional District Boards members to these advisory committees; if so, whether it has estimated the number of such appointments for next year; if not, the reasons for it?

SECRETARY FOR HOME AFFAIRS (in Chinese): Madam President,

(a) Among the 469 members of the Provisional District Boards, 447 are appointed to one or more government advisory bodies (other than the Provisional District Boards).

(b) Appointments to government advisory bodies are normally made on an ad personam basis taking into account the individuals' abilities, expertise, experience, integrity and commitment to public service. The overriding principle is to appoint the most suitable individuals available to these bodies. On the basis of these considerations and bearing in mind the enhanced advisory role of district boards in future, we will consider appointing more district board members to those advisory bodies concerned with the well-being of the people. The figures quoted in (a) above show that Provisional District Boards provide a substantial pool of candidates for appointments to these bodies. However, since future appointments are considered on an ad personam basis by the relevant bureaux and departments, it is not possible to provide an estimate of the number of district board members to be appointed to these bodies next year.

Assistance to the Unemployed CSSA Recipients

14. DR DAVID LI: It is reported that almost one third of those unemployed people receiving Comprehensive Social Security Assistance (CSSA) have been doing so for more than two years. In this connection, will the Government inform this Council whether it has assessed the effectiveness of the measures taken by the Labour Department (LD) and the Employees Retraining Board (ERB) to assist the unemployed CSSA recipients to find jobs?

SECRETARY FOR EDUCATION AND MANPOWER: Madam President, the LD and the ERB have been making sustained efforts, mainly through employment services and employees retraining, to help the unemployed, including the CSSA recipients, re-enter the workforce.

The Local Employment Service (LES) of the LD offers a full range of free employment and counselling services to job seekers, including the CSSA recipients. The CSSA recipients are given priority in the use of the LES. They can make use of the self-help mode of employment service and seek job referral assistance from the LES staff. Those who have difficulty in finding job themselves can join the Job Matching Programme to receive personalized and intensive counselling, job matching and, where appropriate, referrals to tailor-made retraining courses organized by the ERB.

In 1997, the LES made 2 803 job referrals and secured 329 placements for the CSSA recipients. In 1998, the numbers increased to 11 660 job referrals and 732 placements respectively.

The ERB is also actively helping unemployed persons, including the CSSA recipients, through the provision of retraining services. To encourage the CSSA recipients to take on retraining, the ERB accords priority to them in course enrolment. At present, there are over 150 types of full-time or part-time retraining courses available for them to choose from in accordance with their own interests and abilities. From April to December 1997, 563 CSSA recipients received retraining from the ERB while from January to December 1998, the number increased to 2 274. Most of them have acquired practical skills in jobs such as clerks, domestic helpers, security guards, and in areas such as basic computer knowledge. From January to September 1998, about 50% of these CSSA recipients who had received retraining were able to find new jobs upon completion of the ERB courses.

As part of a package of proposals recommended by an inter-departmental steering group on review of the CSSA Scheme, the LD and the ERB will strengthen their co-operation with the Social Welfare Department (SWD) through the proposed "Support for Self-reliance Scheme" to encourage and help the CSSA recipients of working age to re-enter the labour market. Under the Scheme, the SWD will help each participant to develop a personalized action plan to find work through a co-ordinated programme of counselling, retraining and employment service. The LD will provide the SWD with direct access to the LES vacancy information through the Internet. On obtaining such vacancy information at the SWD, the CSSA recipients will be able to arrange for job interviews with employers directly. Depending on the needs of the CSSA recipient, the SWD will also make referrals to the ERB for retraining courses. In addition, the ERB will consider conducting pre-training seminars/workshops for the CSSA recipients to help them adapt to the changing job market.

Upgrading the Professionalism of Tour Co-ordinators

15. MR HOWARD YOUNG: The study entitled "An Evaluation of the Need to Upgrade the Service Professionalism of Hong Kong's Tour Co-ordinators", which was commissioned by the Hong Kong Association of Registered Tour Co-ordinators, has made several recommendations for upgrading the professionalism of tour co-ordinators. In this connection, will the Government inform this Council whether it will consider implementing the recommendations made in the study?

SECRETARY FOR ECONOMIC SERVICES: Madam President, we have just received the report by the Hong Kong Association of Registered Tour Co-ordinators and shall study carefully its recommendations for upgrading the professionalism of tour co-ordinators in consultation with the Hong Kong Tourist Association, the Hong Kong Association of Registered Tour Co-ordinators, the Travel Industry Council of Hong Kong and the government bureaux and departments concerned.

Unavailability of Sea Water for Flushing

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

(a) of the total number of residential units in which fresh water is used for flushing because of the unavailability of sea water; and the number of village houses in the New Territories among them;

(b) of the percentage of such residential units to which sea water is not available, against the total number of residential units throughout the territory;

(c) of the reasons for unavailability of sea water for flushing in these residential units;

(d) how the relevant charges payable for using fresh water compare with those for using sea water for flushing in these residential units, when the latter is available; and

(e) whether it has any plans to provide these residential units, particularly village houses in the New Territories, with sea water for flushing; if so, the details of that; if not, the reasons for that?

SECRETARY FOR WORKS (in Chinese): Madam President,

(a) There are about 500 000 households in the territory using fresh water supplied by the Water Supplies Department (WSD) for flushing, but the number of village houses among them is not known.

(b) According to the information from the Census and Statistics Department, there are about 2.08 million households throughout the territory, of which 24% are provided with fresh water by the WSD for flushing.

(c) Districts where sea water supply is currently not available for various reasons include Tseung Kwan O, the Peak, Southern District, Sai Kung, Outlying Islands, Northern District and Yuen Long. These districts, however, are provided with fresh water for flushing. The works for sea water supply system for Tseung Kwan O New Town will be completed at the end of this month and the WSD has proceeded with the arrangement to supply sea water to the households progressively. The Peak, Southern District, Sai Kung and Outlying Islands are not provided with sea water for flushing mainly because the population is sparse and scattered. The population of North District mainly concentrates in Sheung Shui and Fanling which are not close to the waterfront. Sea water supply is therefore not available to North District. The water quality of Hau Hoi Wan near Yuen Long is below standard and it is costly to provide water treatment facility. Generally, long and extensive pipeworks and other associated facilities are required for the provision of sea water to the district. This will entail hefty investment and the optimal use of resources will not be achieved. Nevertheless, we will review the feasibility of providing sea water to these districts from time to time.

(d) The use of sea water for flushing is free of charge. Generally speaking, households using fresh water for flushing need not pay if their consumption in every four months is below 30 cu m. For consumption in excess of 30 cu m, each extra cu m consumed is charged at a rate of $4.58. According to the WSD, the average consumption of fresh water for flushing of each household in every four months is approximately 28 cu m. Amongst the 500 000 households using fresh water for flushing, about one third (that is, 170 000 households) consumes more than 30 cu m and has to pay. However, each household pays less than $10 a month on average.

(e) To better utilize resources, the Government will set priorities in the provision of sea water for flushing in the light of the need of the district as a whole. It will first be decided whether sea water should be supplied to the particular district and then the specific areas within the district to be provided with the service, taking into account the distribution of population and the topography of the areas and other engineering consideration. Whether the development in these areas are village houses is not a factor for consideration. For this reason, the Government has no plans at present to supply sea water to the Peak, Southern District, Sai Kung, Outlying Islands and North District. Only the consumers in Tseung Kwan O New Town will be provided with sea water for flushing in the near future. In anticipation of a large increase in population in Yuen Long New Town, the Government has commissioned a consultant to undertake a preliminary feasibility study of bringing in sea water from far-off areas (for example, Tuen Mun) for flushing to cope with the needs. Plans will be made once the report of the study is available by the year 2000.

Selecting Skilled People from the Mainland for Settlement in Hong Kong

17. DR LUI MING-WAH (in Chinese): According to the statistics on the labour market recently released by the Government, the growth rate of the labour force was higher than that of the employment size, resulting in a rise in the unemployment rate. In this connection, will the Government inform this Council whether it has plans to consult the Central People's Government on allowing the Government of the Hong Kong Special Administrative Region (SAR) to determine the criteria and to select skilled people from the Mainland for settlement in Hong Kong on One-way Exit Permit, to match Hong Kong's longer-term economic development?

SECRETARY FOR SECURITY (in Chinese): Madam President, we have no plan to consult the Central People's Government regarding the possible involvement of the SAR Government in determining the criteria for the issue of One-way Exit Permits to mainland residents so as to select skilled mainland residents for settlement in Hong Kong.

Height Restriction for Schools

18. MR LEUNG YIU-CHUNG (in Chinese): Section 7 of the Education Regulations (Cap. 279, sub. leg.) provides that no part of any school premises shall be situated at a height of more than 24 m above ground level. In this connection, will the Government inform this Council:

(a) of the reasons for imposing such a height restriction; and

(b) whether the Administration will consider relaxing the height restriction so that schools can increase the number of storeys and classrooms that can be built on school premises, in order to increase the intake of students; if not, the reasons for that?

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

(a) Section 7 of the Education Regulations (Cap. 279, sub. leg.) provides that no part of any school premises, except the parapet wall round a roof playground, shall be situated at a height of more than 24 m above ground level. However, the Director of Education, with the advice of the Director of Fire Services, may authorize that any part of such premises be situated at such height greater than 24 m.

According to the professional advice of the Fire Services Department (FSD), the imposition of the 24 m height restriction on school premises is based on the following fire safety requirements:

(i) In the case of a school fire, young students require greater care and assistance from adults in order to escape from the scene. If school premises are too tall and escape routes too long, students may not have the physical stamina required to flee to safety. Besides, it is hard to predict the behaviour of panic students in the event of a fire. Unduly tall school premises will definitely add to the confusion and danger at the fire ground.

(ii) In view of the large number of teachers and students, a fire may throw them into confusion. Apart from making use of the escape stairway, external rescue has to be carried out as well. In the past, FSD aerial ladders in general could be operated to reach a height of 30 m above the ground. However, subject to such factors as the conditions on the ground, the design of buildings and the areas accessible to vehicles, fire appliances may not be able to reach and operate at the height mentioned above. To ensure that rescue and evacuation operations can be effectively carried out, it is necessary to impose a height restriction on school premises.

(b) As the majority of FSD aerial ladders can now reach 37 m and a few can even reach 50 m, the Education Department (ED), FSD and Architectural Services Department are jointly conducting an overall review of the relaxation of height restriction of school premises. Pending the final outcome of the review, the ED and FSD will adopt a flexible approach by considering each case on its own merits and may, at their discretion, relax the height restriction of free-standing school premises. In fact, the height of primary and secondary schools adopting the latest standard design has already exceeded the original 24 m restriction. These schools are designed in accordance with the advice of the FSD with some of the non-teaching facilities, such as staff rooms, situated at a height of more than 24 m above ground level.

The Government will complete the review of height restriction of school premises as soon as possible and will examine whether it is necessary to amend the Education Regulations to reflect the relevant requirements.

Air Quality in Hong Kong

19. MISS CHRISTINE LOH: Regarding the current and future air quality in Hong Kong, will the Administration inform this Council of:

(a) the respective estimated proportion of respirable suspended particulates (RSP) and nitrogen dioxide (NO₂) pollutants in the air, which originate outside Hong Kong;

(b) the respective projected average annual concentration levels of RSP and NO₂ pollutants in the years 2005 and 2010, based on the current vehicle growth projections and vehicle emission standards to be implemented; and

(c) the target date for the annual average pollutant concentrations in all districts meetings the established air quality objectives (AQOs)?

SECRETARY FOR PLANNING, ENVIRONMENT AND LANDS: Madam President,

(a) Air pollution is affected by many factors both local and regional. Although monitoring and observation indicate that Hong Kong's air quality is affected by air pollutants originating outside the territory, particularly in the winter months, there is not as yet any reliable basis for assessing the quantitative contribution of particular air pollutants arising outside Hong Kong to local conditions. In the case of RSP and NO₂, little of these pollutants measured at roadside level are likely to originate outside Hong Kong. A joint study with Guangdong authorities on air quality across the entire Pearl River Delta Region will start later this year, and due for completion in 18 months. The joint study will provide the data needed to establish effective joint action plans with Guangdong authorities to address regional air quality issues. In the interim, we must continue to adopt measures to reduce local emissions.

(b) The projected concentration levels of RSP and NO₂ do not depend solely on vehicle growth and vehicle emission standards. They also depend on the growth in demand for power and how it is generated, changes in the composition and nature of industrial and commercial activities, and more importantly changes in background air pollution levels in the entire Pearl River Delta Region. The joint study mentioned in (a) above will, among other things, project the future levels of RSP and NO₂ both in Hong Kong and the entire Region taking into account the various factors mentioned above. In addition, the Government is conducting the Third Comprehensive Transport Study which includes a Strategic Environmental Assessment that will, among other things, assess the level of air pollution for the years 2006, 2011 and 2016 based upon the projected vehicle growth and vehicle emission standards to be implemented. The Assessment will be completed later this year.

(c) Our AQOs cover seven major air pollutants including sulphur dioxide (SO₂), carbon monoxide (CO), ozone, NO₂, total suspended particulates (TSP), RSP and lead. Depending on individual air pollutants, the objectives may be expressed in terms of concentration values averaged over a year, three months, 24 hours, eight hours and an hour. Last year, we met all of our objectives for SO₂, CO, ozone and lead. We also met the objectives for 24 hourly or hourly exposure to NO₂, TSP and RSP, except for RSP at the roadside station in Causeway Bay. We did not meet the annual average exposure for NO₂ at both the roadside stations at Causeway Bay and Mong Kok. The annual objective for TSP was not met at Mong Kok, Sham Shui Po and Yuen Long, while that for RSP was not met at Causeway Bay, Mong Kok and Yuen Long.

Our AQOs are a minimum standard and our objective should be to achieve the highest practical air quality level. Measures to reduce emissions have been put forward, therefore, on the basis of what will achieve the highest reduction in emissions at acceptable cost, rather than on what might be needed just to meet the AQOs. The timing within which existing measures, and others that will be introduced, will allow the AQOs to be bettered at all monitoring locations depends upon willingness of the community or particular sectors to accept emission control measures, growth in demand for transport and economic development both locally and in the region, and success in changing transport patterns and the efficiency with which economic demands are met, so as to reduce emissions ─ again both within Hong Kong and across the region. The studies noted in (a) and (b) above will give us a clearer indication of trends and provide the basis for further development of planning and emission control measures so as to improve air quality across the region.

Provision of Comprehensive Social Welfare Services

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

(a) of the current number of families all members of which are over the age of 60, among the families receiving Comprehensive Social Security Assistance (CSSA);

(b) whether the Social Welfare Department (SWD) has laid down guidelines instructing front-line staff to take the initiative to brief those families on other available social welfare services, such as residential care services; if so, the details of such guidelines; if not, whether the Administration will consider formulating such guidelines; and

(c) whether the Social Security Branch of the SWD has referred such cases for follow-up action by other branches within the Department, so as to ensure that these families are provided with comprehensive social welfare services; if so, of the number of referral cases in the past three years and other social welfare services received by such families as a result of such referral; if not, whether it will consider setting up such a referral mechanism?

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

(a) According to an annual study on CSSA recipients conducted by the SWD, as at the end of 1997, there were about 108 000 CSSA cases with all eligible members aged 60 or above.

(b) Internal guidelines are issued to assist staff of social security field unit (SSFUs) in referring social security clients, including elderly clients, to other welfare services. The guidelines cover responsibilities of SSFUs, attitude and approach in making referrals, identification of welfare needs, how welfare needs can be met, general referral procedures, and procedures for making referrals for specific services.

(c) With consent of the clients, the welfare needs identified will usually be referred to the Family Services Centre of the SWD for follow-up actions. According to the SWD's administrative records, the total number of referrals from SSFUs to the Family Services Centres in 1997-98 and 1998-99 (up to December 1998) were 1 300 and 1 540 respectively. The number of referrals made in 1996-97 is not available. The above figures have included referrals of various categories of CSSA cases. But there is no separate record for the referrals of elderly clients. The identified welfare needs of elderly CSSA clients in these referrals included counselling service, residential care service, compassionate rehousing, home help service, family aide, social networking for the elderly and so on.

BILLS

First Reading of Bills

PRESIDENT (in Cantonese): Bills: First Reading.

INTERNATIONAL ORGANIZATIONS (PRIVILEGES AND IMMUNITIES) BILL

ADAPTATION OF LAWS (NO. 3) BILL 1999

ADAPTATION OF LAWS (NO. 2) BILL 1999

ADAPTATION OF LAWS (NO. 4) BILL 1999

DISCIPLINED SERVICES WELFARE FUNDS LEGISLATION (AMENDMENT) BILL 1999

CLERK (in Cantonese):

International organizations (privileges and immunities) bill Adaptation of laws (no. 3) bill 1999 Adaptation of laws (no. 2) bill 1999 Adaptation of laws (no. 4) bill 1999 Disciplined services welfare funds legislation (amendment) bill 1999.

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.

INTERNATIONAL ORGANIZATIONS (PRIVILEGES AND IMMUNITIES) BILL

CHIEF SECRETARY FOR ADMINISTRATION (in Cantonese): Madam President, I move that the international organizations (privileges and immunities) bill be read the second time.

The Bill seeks to provide a framework to give effect to privileges and immunities of international organizations arising from international agreements which have been concluded by the Central People's Government or from international agreements which have been concluded by the Government of the Hong Kong Special Administrative Region with the authorization of the Central People's Government.

Under the common law system, international rights and obligations relating to privileges and immunities need to be implemented by domestic legislation. At present, the principal Ordinance in Hong Kong giving effect to privileges and immunities of international organizations is the International Organizations and Diplomatic Privileges Ordinance.

Under this Ordinance, only the privileges and immunities set out in the First Schedule to the Ordinance may be provided to an international organization and its personnel. This approach is too restrictive and has created difficulties as some international rights and obligations do not correspond exactly to the privileges and immunities in the Schedule.

The new Bill will provide a framework under which privileges and immunities conferred on an international organization may be given the force of law in Hong Kong by way of an order to be made by the Chief Executive in Council under the enabling provisions contained in the Bill.

Our intention is that current notifications under the International Organizations and Diplomatic Privileges Ordinance in respect of international organizations will be gradually replaced by orders to be made under the new Bill. When all notifications under the Ordinance have been replaced, those provisions in the Ordinance which deal with international organizations will also be repealed. The provisions which deal with diplomatic privileges and immunities will be retained.

The Bill rationalizes our law on privileges and immunities for international organizations and helps to promote Hong Kong as a centre for regional headquarters and offices of international organizations. I therefore commend it to this Council for early passage into law.

Thank you, Madam President.

PRESIDENT (in Cantonese): I now propose the question to you and that is: That the international organizations (privileges and immunities) bill 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. 3) BILL 1999

SECRETARY FOR HOUSING (in Cantonese): Madam President, I move the Second Reading of the Adaptation of Laws (No. 3) Bill 1999.

This Bill seeks to make adaptations to five Ordinances related to housing and their subsidiary legislation to bring them into conformity with the Basic Law and with the status of Hong Kong as a Special Administrative Region of the People's Republic of China.

Although the Hong Kong Reunification Ordinance and the Interpretation and General Clauses
Ordinance already specify how terminologies inconsistent with the Basic Law or the status of Hong
Kong as a Special Administrative Region of the People's Republic of China should be interpreted, it
is inappropriate to retain such terminology in the laws of Hong Kong. Therefore, we need to enact
this Bill to make necessary textual amendments to individual Ordinances. Most of the amendments
proposed are terminological. For instance, all references to the "Governor" and "立法局" are
substituted by "Chief Executive" and "立法會" respectively.

Subject to Article 12 of the Hong Kong Bill of Rights, most of the proposed adaptations when passed into law shall take effect retrospectively, as from the date of the establishment of the Hong Kong Special Administrative Region. The adaptations of provisions of the Estate Agents Ordinance which come into operation after 1 July 1997 shall take effect as from the date when the relevant provisions come into operation.

This Bill obviates the need to make reference to the Hong Kong Reunification Ordinance and the Interpretation and General Clauses Ordinance. I hope that Members will support this Bill.

Thank you, Madam President.

PRESIDENT (in Cantonese): I now propose the question to you and that is: That the Adaptation of Laws (No. 3) Bill 1999 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.

ADAPTATION OF LAWS (NO. 2) BILL 1999

Secretary for Education and Manpower (in Cantonese): Madam President, I move that the Adaptation of Laws (No. 2) Bill 1999 be read the second time.

The Bill seeks to effect necessary adaptations to 12 Ordinances and their subsidiary legislation relating to the Hong Kong Examinations Authority and tertiary institutions to bring them into conformity with the Basic Law and with the status of Hong Kong as a Special Administrative Region of the People's Republic of China.

Some of the references contained in these 12 Ordinances, such as "the Governor", "the Governor in Council" and "the Crown" are inconsistent with the Basic Law or with the status of Hong Kong as a Special Administrative Region of the People's Republic of China, and need to be amended as appropriate. Although the Hong Kong Reunification Ordinance and the Interpretation and General Clauses Ordinance already set out how terminology inconsistent with the Basic Law or with the status of Hong Kong as a Special Administrative Region of the People's Republic of China is to be construed, it is considered inappropriate to retain such terminology in our laws. Accordingly, we now need to introduce the Bill to effect the necessary textual amendments.

The proposed amendments are mainly terminological changes. In line with other Adaptation of Laws Bills, the adaptations in this Bill, when passed into law, shall take effect retrospectively, as from the date of the establishment of the Hong Kong Special Administrative Region.

The Bill obviates the need to make cross references to the Hong Kong Reunification Ordinance and the Interpretation and General Clauses Ordinance. I ask Members to support the passage of this Bill.

Thank you, Madam President.

PRESIDENT (in Cantonese): I now propose the question to you and that is: That the Adaptation of Laws (No. 2) Bill 1999 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. 4) BILL 1999

SECRETARY FOR WORKS (in Cantonese): Madam President, I move the Second Reading of the Adaptation of Laws (No. 4) Bill 1999.

The Bill seeks to effect adaptations to 15 Ordinances and their subsidiary legislation relating to waterworks or the relevant professionals or professional organizations to bring them into conformity with the Basic Law and with the status of Hong Kong as a Special Administrative Region of the People's Republic of China. Most of the proposed amendments are terminological changes. For example, all references to "the Colony" and "Governor" are substituted by "Hong Kong" and "Chief Executive" respectively. References to the rights of "Her Majesty the Queen, Her Heirs or Successors" in the savings are amended by substituting the rights of "the Central People's Government or the Government of the Hong Kong Special Administrative Region under the Basic Law or other laws" in accordance with section 21 of Schedule 8 of the Interpretation and General Clauses Ordinance. "Government" is used to substitute "Crown" in the Ordinances and in all provisions related to the grant or reversion of land.

This Bill also makes adaptation to references to "上訴法院" in the Architects Registration
Ordinance and the Engineers Registration Ordinance. Section 2 of the Chinese versions of these two
Ordinances contains the definition of "上訴庭" as "最高法院上訴庭". However, no reference is
made to "上訴庭" in either of these Ordinances. Instead, they make reference to "上訴法院".
Therefore, the term will be changed to "上訴法庭" and the definition of "上訴庭" in the
Ordinances can thus be repealed.

This Bill provides that subject to Article 12 of the Hong Kong Bill of Rights, the relevant adaptations when passed into law shall take effect retrospectively, as from the date of the establishment of the Hong Kong Special Administrative Region, with the exception of Regulation 33(1) of the Waterworks Regulations in Schedule 1 of the Bill. Regulation 33(1) of the Waterworks Regulations specifies the categories of persons that may apply for a plumber's licence. The relevant amendment abolishes the special status granted to a person who holds a Plumbing Craft Certificate issued by the City and Guilds of London or who is a fellow or member of the Institute of Plumbing of the United Kingdom. Basically, this amendment is in conformity with the status of Hong Kong as a Special Administrative Region after reunification. However, to avoid having retrospective effect on these people, this amendment shall only come into operation after this Bill is passed into law by the Legislative Council, at the beginning of the day on which this Ordinance is published in the Gazette. From then on, a person eligible to apply for a plumber's licence will be one who holds a Craft Certificate in Plumbing and Pipelifting issued by the Vocational Training Council after 1987, a Certificate in Plumbing Services (Hong Kong) issued by the Vocational Training Council or an equivalent qualification in the opinion of the Water Authority.

I hope that Members will support the passage of this Bill. Madam President, I beg to move.

PRESIDENT (in Cantonese): I now propose the question to you and that is: That the Adaptation of Laws (No. 4) Bill 1999 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.

DISCIPLINED SERVICES WELFARE FUNDS LEGISLATION (AMENDMENT) BILL 1999

SECRETARY FOR SECURITY (in Cantonese): Madam President, I move the Second Reading of the Disciplined Services Welfare Funds Legislation (Amendment) Bill 1999. This Bill seeks to improve the operation of the welfare funds of five disciplined services, including the Fire Services, the Police Force, the Correctional Services, Customs and Excise Service and the Immigration Service.

The welfare funds of the disciplined services are established for the purposes of providing recreational facilities and amenities for staff, in order to promote the welfare of staff, maintain the morale of the disciplined services and enhance their sense of belonging. It can also provide financial assistance to needy members of the disciplined services and dependants of diseased members.

The five disciplined services operate their welfare funds in accordance with their respective legislation, including the Fire Services Ordinance (Cap. 95), the Police Force Ordinance (Cap. 232), the Prisons Ordinance (Cap. 234), the Immigration Service Ordinance (Cap. 331) and the Customs and Excise Service Ordinance (Cap. 342) and their subsidiary legislation.

After a detailed review, we now introduce the Disciplined Services Welfare Funds Legislation (Amendment) Bill 1999 to improve the operation of the said funds to meet the actual needs of the services. This Bill includes the following two main points:

1. Making changes to the sources of income of the funds

In our view, money derived from the execution of their normal duties by members of the disciplined services, as well as fines paid by or sums confiscated from members of the services as a result of disciplinary procedures should not be credited to the welfare fund of the relevant service. Instead, they should be credited to the general revenue of the Government. Under the existing arrangement, members who have been punished are able to share through the welfare fund the benefits of the fines they paid. We consider this arrangement inappropriate and therefore propose to amend it by way of the Bill.

At present, apart from government grant, the sources of income of the welfare funds of the five disciplined services include donations, fees paid for special services performed by the disciplined services, interest derived from the investment of the funds, gifts of money that may be paid into the funds with the Chief Executive's consent and income derived from fees charged on the leasing of recreational facilities and so on. This Bill proposes to confirm such arrangements.

2. Making arrangements for the operation of the funds

We propose to extend the range of benefits that may be provided from these funds and the categories of beneficiaries in order to promote the welfare of staff. After the proposed amendments have been passed, the funds may be used for various purposes such as organizing social, educational and recreational activities, establishing and maintaining amenities, making souvenirs for sale and establishing staff purchase schemes.

Members of the disciplined services who suffer from illness or whose families are in financial difficulty may also apply for loans from the funds at low interest. Should members of the disciplined services unfortunately pass away, the funds may also grant financial assistance to help surviving dependants solve their financial problems.

This Bill also confirms the Police Force practice of crediting the fees paid for hire of services provided by auxiliary officers to the Police Welfare Fund and allow auxiliary officers to share the benefits of the Fund.

To ensure that the directors of the relevant disciplined services have sufficient powers and the statutory status to administer the welfare funds of their departments, the Bill proposes to constitute the heads of the departments as a "corporation sole" and provides for the funds to be vested in the corporations. The corporations have perpetual succession and may delegate their functions in relation to the funds, as well as enter into contracts and other transactions for the purposes of the funds.

In addition, since "cadets" no longer exist, this Bill proposes to repeal the relevant term in the provisions which make reference to "cadet".

This Bill is clear and simple. It merely covers the operation of the welfare funds of the five disciplined services and is policy neutral. I hope that the Legislative Council will pass this Bill into law at an early date.

Madam President, I beg to move. Thank you.

PRESIDENT (in Cantonese): I now propose the question to you and that is: That the Disciplined Services Welfare Funds Legislation (Amendment) Bill 1999 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.

Resumption of Second Reading Debate on Bill

PRESIDENT (in Cantonese): We will resume the Second Reading debate on the Human Organ Transplant (Amendment) Bill 1999.

Under Rule 21(4) of the Rules of Procedure, I have permitted Mr Ronald ARCULLI, Chairman of Bills Committee on Human Organ Transplant (Amendment) Bill 1999, to address the Council on the Committee's Report.

HUMAN ORGAN TRANSPLANT (AMENDMENT) BILL 1999

Resumption of debate on Second Reading which was moved on 13 January 1999

MR RONALD ARCULLI: Madam President, as Chairman of the Bills Committee on the Human Organ Transplant (Amendment) Bill 1999, I wish to report on the main deliberations of the Bills Committee.

New subsection (6A)

For organ transplants between living persons, section 5(4)(c) of the Ordinance requires that arrangement must be made prior to the transplant for the donor and recipient to be given an explanation of the procedure and the risk involved and their entitlement to withdraw consent at any time. The proposed amendment in the Bill provides that this requirement may be waived where circumstances have made compliance impossible, for instance, in cases where the patient has lapsed into unconsciousness or where a patient is a minor or a mentally incapacitated person.

The Bills Committee is satisfied that the proposal will be able to overcome the difficulties encountered in a small number of cases earlier where the medical practitioners concerned could not proceed with the transplant, because the patient had lapsed into unconsciousness before the required explanation could be made.

Members are also satisfied that the two medical certificates required under new subsection (6A)(b)(i) and (ii) should not present any problems, since an organ transplant normally requires a team of medical practitioners and one of the medical practitioners, other than the one who will remove the organ from the donor or transplant the organ into the recipient, can provide the required certificates.

Wish of a recipient

Members have also considered in detail how the wish of a recipient can be taken care of in an organ transplant.

In the context of medical treatment in general, members note that if a medical practitioner has treated a patient without his consent or despite his refusal of consent, it will constitute the civil wrong of trespass to the person and may constitute a crime. However, if the patient has made no choice, and is in no position to make one when the need for treatment arises, the medical practitioner can lawfully treat the patient in accordance with his clinical judgement of what is in the patient's best interests.

In the case of an organ transplant, since it involves a third person whose life could be at risk after donating an organ, a patient may make a decision not to receive a specific organ from a person who might be dear to him. Other patients may, for religious or other personal reasons, choose to refuse organs from a specific group of persons. If a patient has expressly indicated that he will not receive an organ from a specific live donor, the medical practitioner cannot act against his wish even if the patient has become unconscious. However, if a patient has not made any advance directives regarding his wish, the medical practitioner can act in accordance with his clinical judgment of what is in the patient's best interests. To facilitate the work of the medical practitioners, members have suggested that a new section be added to the form for doctors to sign stating whether the patient has made any directives in this regard.

Proof of marital relationship

Another main issue of concern is the proof of marital relationship. The Bill proposes to add a new subsection to specify that the fact of the marriage relationship should be established by such means as may be prescribed by the Human Organ Transplant Board (the Board) by regulation.

The Board has expressed its concern that it is very difficult to prove the "subsistence" of marriage and that the amendment may restrict the evidence the medical practitioner can consider. To overcome the difficulties in establishing a marriage relationship, the Hospital Authority has suggested that such relationship should be established by registration documents and a statutory declaration verifying the subsistence of marriage for not less than three years. The Bills Committee considers this to be a practical and viable approach and has recommended it to the Board for further consideration.

Time limit for the Board

The Bills Committee has also considered a proposal that a time limit should be set on the process of vetting application by the Board.

At the Bills Committee's request, the Board has briefed members on its working procedures in detail and has pointed out that it is not practicable or feasible to set a time limit for making a decision on applications. Members note that the Board is fully conscious of the importance of time in urgent cases. They also note that not all organ transplant operations are urgent and that in some cases, the Board may need clarification or further information from the applicant. If the Board is required to work under a strict time limit, it may not be possible to obtain evidence that would otherwise satisfy the Board that the required conditions have been met.

After considering the reasons put forward by the Board, members agree that a time limit should not be set as it will create practical problems which may hinder the whole process.

Facts about commercial dealing

Members share the Board's view that it is difficult to set out the criteria as to how the conditions of no coercion or offer of inducement and no commercial dealing in section 5(4)(d) and (e) can be satisfied. In this connection, members note that the Board will examine whether there is any emotional tie between the donor and the recipient, and will approve the application if there is no grave doubt. Since disapproving an application in some cases is tantamount to signing a death warrant, members are concerned about the enormous pressure faced by the Board in making a decision. In view of the immense responsibilities involved, members consider that the Board should have immunity from legal action so that any decision it makes is not out of fear of prosecution and other consequences.

Appeal mechanism

Under the existing law, the only way to appeal is through judicial review. Members have considered whether there is a need for an appeal board to be provided. After discussion, members agree that since the Board will only be challenged on its decision regarding commercial dealing, there is no need to provide a board of appeal to reassess the facts of commercial dealing established by the Board under section 5(4)(d) and (e).

Liability of medical practitioners

The Bills Committee has also considered the liability of medical practitioners and whether it is necessary to put in a defence provision for them. Members agree that since medical practitioners can only deal with documentary evidence provided to their best knowledge, they should not be held liable if forgery of document or commercial dealing is discovered subsequently. Members do not consider a defence provision for medical practitioners desirable or necessary, as they should refer the case to the Board for consideration if they are in doubt about the genetic or marriage relationship.

Drafting of the Bill and Ordinance

Members have commented on the complicated drafting of the Bill and the Ordinance which makes reading difficult and might cause misunderstanding of the provisions. In response to the Bills Committee's request, the Administration has undertaken to review the drafting and structure of the Ordinance and to include the proposed amendments in the next amendment bill dealing with other amendments to the Ordinance.

Madam President, the Bills Committee supports the Bill and the Committee stage amendments to be moved by the Administration, and we urge Members of the Council to support the Bill as well.

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

MRS SOPHIE LEUNG: Madam President, with your permission, I will first declare that I am the Chairman of the Human Organ Transplant Board (the Board). Today, however, I speak in my capacity as a Legislative Council Member and a member of the Bills Committee.

I will first consider the matter of comatose patients, who, of course, are incapable of receiving or understanding any explanation by a medical practitioner as to the procedure and its risks and unable to give their consent.

When the Human Organ Transplant (Amendment) Bill was discussed in the Bills Committee, the Board expressed its broad support. This was because the Bill, if enacted, would enlarge the rights of patients generally by putting even those who were comatose in the position of being able to receive an organ transplanted from a live donor.

In considering further the present requirement that such an explanation must be received and understood by all patients whatever their condition, we must consider the spirit and intention of the Ordinance. The Board suggested and believed that this was to ensure that each patient to be considered for a transplant would have the chance to make up his own mind and state quite clearly his own wishes in the matter when counselled by a registered medical practitioner. While opening the way for a patient to agree to a transplant, the Ordinance just as importantly allows him to refuse it ─ on whatever grounds he or she chooses ─ or indeed without giving any grounds at all.

While the present Bill would certainly seem to enlarge the rights of comatose patients, it also diminishes them. In an area of such sensitivity, this must give some cause for concern.

Then, there is another problem. According to common law, if an adult patient of sound mind has refused to undergo an operation, but is still subjected to it by a medical practitioner, that practitioner may have committed a crime. It must, therefore, be considered whether the Bill, by setting aside the requirement for consent under certain specified circumstances, breaches a common law principle.

The Board's concerns in these two areas were well recognized by the Bills Committee and the following unitary solution has been proposed. The medical practitioner can state in writing that the patient has not previously issued any specific directive against or raised any objection to receiving an organ transplant. If such a written statement can be put before the Board and confirmed by the medical practitioner making it, the wishes of patients will be more nearly taken into account and the scope of their treatment can be widened. In addition, the Board will be more secure under the law when it approves a transplant for a comatose patient, and the medical practitioner performing the transplant can proceed without the threat of legal action hanging over him.

I turn next to the means by which the fact of a marital relationship is to be established. The Bill also seeks to empower the Board to prescribe this by regulation. Here, too, the Board has made its concerns known to the Bills Committee. The Board feels that if it were to prescribe how this fact should be established, medical practitioners would find their present flexibility of inquiry sharply limited. This would restrict their endeavours.

The Board also inquired of the Bills Committee how it would be expected to prove the subsistence for not less than three years of a marriage. The Bills Committee recommended that a statutory declaration made by the persons concerned should be acceptable. I understand that the Board will accordingly take this direction in order to set up the appropriate regulation or guidelines. The Health and Welfare Bureau has indicated that it will assist the Board to follow up this matter after enactment.

I would like to mention one final concern raised by the Board to the Bills Committee. For an offence of knowingly or recklessly supplying false or misleading information in purported compliance with regulations made for the purposes of section 5(2A), the Bill adds a penalty which is less than that for making a false statutory declaration under section 36 of the Crimes Ordinance. Is this not inconsistent?

With such question, I support the Bill. Thank you, Madam President.

DR YEUNG SUM (in Cantonese): Madam President, I should like to say only a few words in support of the Bill.

When I was having a meeting in Wan Chai District one day, a lady and her family members came to me because her husband was in a coma and could not sign a letter of consent to undergo an organ transplant operation; this lady later went to the Complaints Division to meet us as well. Because of our concern about any possible commercial dealing involving human organs, we had included very stringent provisions in the Human Organ Transplant Ordinance before approving its passage; in this connection, we particularly set out that recipients of donated organs must indicate their consent. However, we had not envisaged the case that patients could not indicate their consent if they have lapsed into unconsciousness.

For the interests of the patients, the Amendment Bill proposes that if two medical practitioners have considered in accordance with their clinical judgment that the patient concerned could under go an organ transplant operation, the operation could still be conducted even though the patient has lapsed into unconsciousness.

Madam President, I should like to take this opportunity to commend the Government, since it has held meetings with us and expeditiously made efforts to amend the Ordinance upon learning this case; and as we all know, many legislation have to be initiated by the Government. With the concerted efforts of Honourable colleagues, the Bill is tabled at this Council for Second and Third Readings expeditiously. It is my hope that this case could be put on record, since the Government has indeed responded very promptly. There are in fact many circumstances which we are unable to forsee when making laws. What we can do is to put in our best efforts to handle each and every piece of legislation; and in the event that loopholes are identified in a certain piece of legislation after implementation, we would immediately request the Government to introduce amendments. As regards this case, both the Government and Members of this Council could be regarded as having responded promptly. I hope this could be put down on record. Thank you, Madam President.

MR YEUNG YIU-CHUNG (in Cantonese): Madam President, the Human Organ Transplant Ordinance took effect on 1 April 1998. The purpose of the Ordinance is to ban any commercial dealing in human organs for transplant, control the transplant of human organs between live donors and recipients, as well as monitor the import of organs for transplant purposes.

For these reasons, the provisions under the Ordinance are comparatively more stringent. under certain circumstances, however, it would be very difficult to meet the requirement such as giving explanations to comatose recipients; hence, it would not be possible to conduct the organ transplant operation concerned. As a matter of fact, one such case has taken place after the implementation of the Ordinance and given rise to widespread response from among the community. In this connection, the Human Organ Transplant Board has been criticized for being not humanitarian enough and overly rigid in dealing with matters. In order to rigorously monitor commercial dealings of organs for transplant purposes on the one hand, and look after the right to live and the personal wish of patients on the other, it is indeed necessary for us to amend the Ordinance to strike a balance between the two needs.

The Democratic Alliance for the Betterment of Hong Kong (DAB) is in support of the proposed amendments and consider the amendments helpful to resolving the practical problems involved in the enforcement of the existing Ordinance. Nevertheless, the DAB also believes the Government should give publicity to the donation of one's organs after death as a philanthropic act to bequeath love to humanity, since it is the only way to fundamentally resolve the shortage of organs for transplant and thereby eradicate the commercial dealings in human organs.

With these remarks, Madam President, I support the Amendment Bill.

DR TANG SIU-TONG (in Cantonese): Madam President, although "time limit" is not the triggering cause of this amendment exercise, "it" does have a decisive impact on the processes to save lives. Under the existing provisions, prior approval from the Human Organ Transplant Board (Board) must be sought before any organ transplant operation could be conducted if there is no genetic relationship between the live donor and the recipient or if they have been married for less than three years. In this connection, I have proposed at the meetings of the Bills Committee on Human Organ Transplant (Amendment) Bill that the Government should consider incorporating a "time limit" in the process of vetting application by the Board as well as setting up a contingency mechanism to ensure that urgent operations could be conducted.

I had put forward this proposal mainly out of my concern that the vetting mechanism might hinder the Board from approving expeditiously any urgent applications, bearing in mind the stringent conditions required by the Board. Under the existing working procedures, all applications must be voted on by the full Board and approved with the consent of more than half of the Board members. However, since the conditions of the patients concerned may change to warrant an urgent organ transplant operation any time, urgent applications might be lodged for vetting at any time, perhaps in the middle of the night or when some of the Board members are not in Hong Kong. If the secretariat of the Board was unable to make arrangement for a meeting within short notice or if it was unable to contact all members of the Board, would the stringent approval requirements become an obstacle to the efforts to save life; besides, would such requirements put Board members in another dilemma? Yet after the establishment of the Bills Committee, the Board has briefed members on its working procedures and stressed repeatedly that a contingency mechanism has been in place to enable the Board to handle urgent applications within a reasonable time limit. As such, I did not insist on including the "time limit" requirement in the provisions and thereby enabling the existing procedure to remain in force. It is my sincere hope that the Board could decide on whether an application should be approved or rejected within reasonable time so that dying patients could receive treatment promptly.

The transplants organs from live donors to patients are high risk operations. Any mistakes would cost not only the lives of the patients concerned but also that of the donors. Therefore, it is very important and necessary for the donors and recipients of organs to indicate their mutual consent before the operations.

I support the Amendment Bill before this Council today on the ground that it could, without sacrificing the wishes of individuals and the choices of the patients concerned, provide for a legal basis for medical practitioners to save the lives of patients in critical condition, thereby enabling the existing Ordinance to find a way out of the difficult position.

I so submit, Madam President.

DR LEONG CHE-HUNG: Madam President, I rise to support the Amendment Bill on behalf of the medical functional constituency and the frontline transplant medical professionals. No doubt the amendment will give a clearer working guideline for front-line staff, when saving life is the main concern, and yet the absence of a clear-cut consent by the potential recipient hangs like a sword of Damocles above the service provider's head.

Having supported the issue, I must state categorically that the medical profession considers the Amendment Bill only a transitional arrangement. The amendment only acts as a temporary stopgap measure to clarify one main point ─ which is, when no formal consent could be obtained from the potential recipient.

Madam President, many loopholes still exist in the Ordinance even with the amendments. Many of these have been acknowledged by the Administration and even the Human Organ Transplant Board and I look forward to the Government's response and confirm them in their replies and deliberations.

Madam President, during the deliberation of this Amendment Bill, it was obvious even to the Government that the way the Ordinance was written was clumsy, to say the least. This was obvious even when that original Ordinance was passed in February 1995 when I said "this Bill has provided no explicit distinction, obvious to any non-legal eyes, between the control and regulation of living versus cadaveric organ donation." I hope the Government will address this point later.

During the implementation of the main Ordinance since the establishment of the Human Organ Transplant Board, it became obvious that there is a problem of the need for obtaining authorization on using bank bone for grafting.

In this aspect, I would like to quote to Honourable Members what I said on 17 December 1997 when the Human Organ Transplant Regulation was passed by the then Provisional Legislative Council: "During surgical operation, a piece of bone may be removed either as a necessary procedure or because that piece of bone is of no use to that particular patient anymore. That piece of bone, which is basically from a living person, is not thrown away, but is usually stored in the bank, the bone bank, and that piece of bone which is stored in the bank will be used in the possible future for another patient in the form of bone-graft. Now, section 5(3) of the main Ordinance states that under such a condition, permission of the Human Organ Transplant Board must be obtained beforehand. This section of the law, if applied to bone-graft, would produce a lot of operational difficulties and unnecessary actions by the surgeon concerned who, in essence, is using a piece of discarded bone for the benefit of another patient. Furthermore, sometimes before the operation, he does not even know whether he needs a bone-graft. When he knows that he needs a bone-graft, he just obtains it from the bank and, therefore, there is no chance for him to make an application first."

In her reply, the Chairman of the Human Organ Transplant Board has this to say then: "the Board might prefer to exclude discarded bone, whether stored in a bank or not, from the list of organs to be included or to be regulated by this Ordinance as well as the regulations."

The Administration has promised the Bills Committee that an overall review of the Ordinance would be forthcoming. I hope that the amendments then would include bringing this point I mentioned into effect.

Madam President, during the deliberation of this Amendment Bill, it becomes obvious too that many concerned parties are still very unclear as to the spirit and the implication of the main Ordinance. With your permission, Madam President, I would volunteer a simple lay interpretation, hopefully the Secretary for Health and Welfare will confirm or correct my explanation when she replies for public good.

The main Ordinance aims to prohibit commercial dealings or coercion in human organs intended for transplantation, in particular, living donation. The medical doctors are at a liberty to do such living donor transplant if they are satisfied beyond reasonable doubt that genetic relation exists between the donor and the recipient or that they are married couple for not less than three years and that their marriage is still in subsistence; and no commercial dealing or coercion exist. Any doubt, permission must be obtained from the Human Organ Transplant Board which will then be considering whether commercial dealings or coercion exist. It will be on this and this alone that the Board will pass its approval or otherwise.

Madam President, as the society debates on the moral and legal issues of living donor transplant and as the Bills Committee deliberated on the Amendment Bill, one area of concern is that the public might be led to believe that we are or should be promoting living organ donation. Far from it, such erroneous concept must be stopped. Instead, all efforts must be made to promulgate willingness of donating one's organs or "parts" upon death when it is obviously "spare" to the dead but "vital" to the awaiting recipient.

It may be said that an organ donation campaign has been mounted in Hong Kong in varying degrees for some 30 years. Regrettably, the effective organ yield has been far from encouraging. But we are not alone on this. Experience overseas has demonstrated that calling for people to pledge their organs at death is never the successful way forward. Many countries have therefore promoted the so-called "opt-out" system with resounding increase in organ yield.

Regrettably, the call for such a concept was turned down twice in this Chamber for what I consider as flimsy reasons. Worse, the Government which initially expressed that the opt-out system is "the long-term goal for Hong Kong" has made a U-turn midstream and come out to condemn this scheme, as usual, without a concrete explanation. I stand to be advised by the Government on its fickle stand.

With these remarks, Madam President, I support the Amendment Bill and the amendment to be moved by the Administration. Thank you.

MR MICHAEL HO (in Cantonese): Madam President, I rise to speak in support of the Bill.

Today, we can say that we have only taken a very short time to solve part of the problem since the first time we read from the newspaper that the original Human Organ Transplant Ordinance had been written in such a rigid manner that it had prevented some patients who had lapsed into unconsciousness from undergoing organ transplant because they were unable to express their wishes. But in the course of discussion, we still found other areas in the Ordinance that needed to be amended.

We are very pleased to see that the Government has heeded good advice, and introduced this Bill for discussion so swiftly within such a short period of time, making it even possible to have sufficient time to resume its Second and Third Readings before the Lunar New Year holidays. There is a need for us to follow up the outstanding issues that warrant further legislative amendments, including issues like consideration of commercial interests, which were raised during the deliberation of the Bills Committee. I earnestly hope that amendments relating to this can be tabled to this Council as soon as possible.

Lastly, I hope the Government can continue with its effort to promote donation of organs after death as, to ultimately solve this problem, we need more people who will be willing to donate their organs after death so as to reduce the need for live transplants which will, after all, put the lives of donors under great risks.

Madam President, I so submit.

SECRETARY FOR HEALTH AND WELFARE (in Cantonese): Madam President, first of all, I wish to thank Honourable Members for their support for the Human Organ Transplant (Amendment) Bill 1999. I should like to thank the Bills Committee in particular chaired by Mr Ronald ARCULLI for studying the whole Bill carefully and in great details.

The main purpose of this Bill is to amend the Human Organ Transplant Ordinance by adding a new provision, specifying that an organ transplant may still be legally made notwithstanding the fact that the patient is incapable of understanding the explanation required to be given to him under section 5(4)(c) of the Ordinance because of some special circumstances, such as his suffering any illness or an impaired state of consciousness, or his being a minor or a mentally incapacitated person, in which case the said requirement will be waived.

During its deliberation on this Bill, the Bills Committee made many constructive suggestions to us. Clause 2(a) of the Bill confers on the Human Organ Transplant Board (the Board) the power to make regulations prescribing the means to establish the marital relationship between the donor and the recipient. Members suggested that the Board should be given more flexibility in prescribing the means to establish the subsistence of the marriage. We find this suggestion useful. Therefore, we will propose an appropriate amendment to the wording of clause 2(a).

In addition, since the Mental Health (Amendment) Ordinance 1997 already came into full operation on 1 February this year, we believe that there is a need to amend clause 2(b) of the Bill by substituting the word "patient" or "a mentally handicapped person" by "a mentally incapacitated person". The drafting of this Bill and the speedy scrutiny by the Legislative Council show that the Government and Members are anxious to plug the loopholes in the existing Ordinance. I hope that Members will support this Bill so that the various proposals can be implemented as soon as possible.

In their speeches just now, Mr Ronald ARCULLI, Dr LEONG and Mr HO mentioned that the provisions of the existing Ordinance had such complicated constructions that they would easily lead to misunderstandings. We will review this question and make improvements in the next stage of amending this Ordinance. I wish to stress that the Government will step up publicity and education to encourage organ donation after death.

Madam President, I recommend this Bill to Members for Second Reading. Thank you, Madam President.

PRESIDENT (in Cantonese): I now put the question to you and that is: That the Human Organ Transplant (Amendment) Bill 1999 be read the Second time. 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 of the Members present. I declare the motion passed.

CLERK (in Cantonese): Human Organ Transplant (Amendment) Bill 1999.

Council went into Committee.

Committee Stage

CHAIRMAN (in Cantonese): Committee stage. Council is now in Committee.

HUMAN ORGAN TRANSPLANT (AMENDMENT) BILL 1999

CHAIRMAN (in Cantonese): I now propose the question to you and that is: That the following clauses stand part of the Human Organ Transplant (Amendment) Bill 1999.

CLERK (in Cantonese): Clause 1.

CHAIRMAN (in Cantonese): Will those in favour please raise their hands?

(Members raised their hands)

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

(No hands raised)

CHAIRMAN (in Cantonese): I think the question is agreed by a majority of the Members present. I declare the motion passed.

CLERK (in Cantonese): Clause 2.

SECRETARY FOR HEALTH AND WELFARE (in Cantonese): Madam Chairman, I move that clause 2 be amended, as set out in the paper circularized to Members.

The first amendment adds ", or in accordance with such guidelines," after "means" in the proposed section 5(2A). The second amendment substitutes "any explanation" with "the explanation" in the English version of the proposed section 5(6A)(i). Lastly, I propose to substitute the original subparagraph (C) of the proposed section 5(6A)(i) with "his being a mentally incapacitated person within the meaning of the Mental Health Ordinance (Cap. 136); or".

Proposed amendment

Clause 2 (see Annex V)

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

(No Member indicated a wish to speak)

CHAIRMAN (in Cantonese): I now put the question to you and that is: That the amendment moved by the Secretary for Health and Welfare be passed. Will those in favour please raise their hands?

(Members raised their hands)

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

(No hands raised)

CHAIRMAN (in Cantonese): I think the question is agreed by a majority of the Members present. I declare the amendment passed.

CLERK (in Cantonese): Clause 2 as amended.

CHAIRMAN (in Cantonese): Will those in favour please raise their hands?

(Members raised their hands)

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

(No hands raised)

CHAIRMAN (in Cantonese): I think the question is agreed by a majority of the Members present. I declare the motion passed.

CHAIRMAN (in Cantonese): Council now resumes.

Council then resumed.

Third Reading of Bill

PRESIDENT (in Cantonese): Bill: Third Reading.

HUMAN ORGAN TRANSPLANT (AMENDMENT) BILL 1999

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

Human Organ Transplant (Amendment) Bill 1999

has passed through Committee with amendments. I move that this Bill be read the Third time and do pass.

PRESIDENT (in Cantonese): I now propose the question to you and that is: That the Human Organ Transplant (Amendment) Bill 1999 be read the Third time and do pass.

PRESIDENT (in Cantonese): I now put the question to you as stated. Will those in favour please raise their hands?

(Members raised their hands)

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

(No hands raised)

PRESIDENT (in Cantonese): I think the question is agreed by a majority of the Members present. I declare the motion passed.

CLERK (in Cantonese): Human Organ Transplant (Amendment) Bill 1999.

MEMBERS' MOTIONS

PRESIDENT (in Cantonese): Members' motions. Proposed resolution under the Interpretation and General Clauses Ordinance.

PROPOSED RESOLUTION UNDER THE INTERPRETATION AND GENERAL CLAUSES ORDINANCE

MR CHAN KAM-LAM (in Cantonese): Madam President, a Subcommittee was set up by the House Committee on 29 January 1999 to study the Electricity Ordinance (Cap. 406) (Commencement) Notice 1999 and Electrical Products (Safety) Regulation (Cap. 406 sub. leg.) (Commencement) Notice 1999. As Chairman of the Subcommittee, I move the resolution under my name which has been circularized to Members to repeal the two Commencement Notices and brief Members on the reasons for making such a decision.

The Subcommittee made the decision mainly on the following three reasons:

Firstly, according to the provision of the relevant principal Ordinance which the Government proposed to take effect on 25 February 1999, no person shall supply an electrical product for which no certificate of safety compliance has been issued as required by regulation in respect of electrical product safety. Members consider the scope covered by the definition of "supply" too wide. In particular, concern was raised about the letting and selling of residential premises. If a premises being sold or let includes electrical products, the owner of the property will be responsible for providing certificates of safety compliance. Otherwise, the owner will be deemed to have contravened the law. With the enormous number of newly developed and second hand properties being sold or let all the time in Hong Kong, members are gravely concerned about the burden imposed by the implementation of the provision on the general public, both in respect of arrangements for testing of electrical products by qualified technicians for the purpose of obtaining certificates of safety compliance and the costs involved. Members also note that when the relevant provisions were discussed by the Bills Committee on Electricity (Amendment) Bill 1996 set up under the former Legislative Council, matters concerning the scope covered by the definition of "supply" of premises to be let or sold together with electrical products were not discussed. Neither has the Administration mentioned to the Bills Committee the extent of the scope in this aspect.

Secondly, in respect of the implementation of the relevant legislation, the Administration has discussed with the relevant bodies to examine the difficulties they encountered in providing the certificates of safety compliance in respect of parallel imported electrical products, second hand products and locally fabricated personal computers. The Administration has also proposed that it will, after the provision on the certificate of safety compliance has come into effect, exercise flexibility in the enforcement of certain requirements under the Regulation for a "transitional period" of one year. For instance, under specified circumstances, declarations of conformity from local importers will be accepted as certificates of safety compliance for 110V "parallel" electrical products. Members question the legal basis for the implementation of the proposed "transitional arrangements". This is because the Subcommittee worries that unless the "transitional arrangements" have been explicitly specified in the Electrical Products (Safety) Regulation to be implemented on 25 February, private legal proceedings may arise where suppliers contravene the statutory requirements even though they may have complied with the "transitional arrangements".

Thirdly, the Administration has not put in place a comprehensive publicity programme to fully inform the general public of the wide implications of the legislation on the public and the "transitional arrangements" in respect of "parallel goods", second hand products and locally fabricated personal computers. In particular, the general public has virtually no idea of the impact on premises to be sold or let together with domestic electrical appliances and the owners' liability upon the implementation of the legislation.

Members have come to an unanimous view that the Administration should consider further narrowing the scope of the definition of "supply", as well as working out better arrangements in respect of provisions applicable to "parallel goods", second hand electrical products and locally fabricated personal computers. Moreover, the Administration should submit new bills and subsidiary legislation and publicity proposals to this Council after consulting the relevant Panel. As it will take some time for the Administration to take action, the Subcommittee considers that the Commencement Notices should be repealed.

On behalf of the Subcommittee, I move the motion and urge Members to support the resolution. Thank you.

Mr CHAN Kam-lam moved the following motion:

"That the Electricity Ordinance (Cap. 406) (Commencement) Notice 1999 and Electrical Products (Safety) Regulation (Cap. 406 sub. leg.) (Commencement) Notice 1999, respectively published as Legal Notices Nos. 19 and 20 of 1999 and laid on the table of the Legislative Council on 27 January 1999, be repealed."

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

Mr SIN Chung-kai has indicated his wish to speak.

MR SIN CHUNG-KAI (in Cantonese): Madam President, the implementation of the Electrical Products (Safety) Regulation will affect numerous trades and industries, one of those being computer assemblers. The computer assembly industry has had a long history. As far as the computer "fans" and the general public are concerned, it is far more attractive to ask computer assemblers to "assemble a computer" than purchasing a complete set of brand computer. Why do the public like purchasing the so-called "non-brand-name computers"? This is because it will cost less and take less time for them to acquire a computer. Moreover, purchasers can add or delete components according to their own wishes. A computer assembled in this way can be said to be tailor-made for users. This is also the main reason for computer assemblers to be able to maintain their business.

However, the implementation of the Electrical Products (Safety) Regulation will greatly raise their operating costs. Under the current economic depression, there is a sharp drop in commodity prices. It will definitely deal a blow to the industry if computers, as a consumer item, see a rise instead of a drop in prices. Regarding the Electrical Products (Safety) Regulation, many computer traders told me that they had basically no idea of the details of the Regulation in advance. It was not until they read the newspaper reports that they knew that fabricated computers were within the scope of the Electrical Products (Safety) Regulation. When I learned about this issue, it was already early January, that is only about a month before the Regulation came into effect.

I have met with some computer assemblers after the emergence of the problem and arranged for them to meet with the staff of the Electrical and Mechanical Services Department. During subsequent meetings, I found that most of those who attended the meetings had completely no idea of the computer inspection procedure such as the number of laboratories, location, charges, inspection standards and so on. The Government has simply not done enough in giving publicity to the legislation. If the Government insists on hastily putting the Regulation into effect in February, it will only "smash" the rice-bowls of small operators.

Of course, I understand the fundamental objective of the Government in enacting this piece of legislation is to ensure that electrical products are in compliance of safety standards so as to safeguard the safety of users. But the Government should also consider the negative impact of the legislation on the relevant industry. I would like to put forward a solution here for the consideration of the Secretary for Economic Services. The Government may perhaps consider making reference to the licensing system for electrical technicians by issuing approved licences to computer assemblers. They can acquire the relevant licences as long as they pass an approved test or examination. In doing so, computer assemblers will not need to comply with the complicated procedure of sending each set of computer components of the same model for inspection. It is indeed difficult for them to meet inspection fees which may amount to tens of millions of dollars. If the fees are transferred onto consumers, it will only boost the sales of brand computers supplied by big companies, thereby stifling the living space for small local operators.

In view of the extremely wide implications of the Electrical Products (Safety) Regulation, I urge the Government to provide sufficient information and time so as to allow the affected operators to make good preparation for adaptation to the Regulation. I support Mr CHAN Kam-lam's motion. Thank you, Madam President.

SECRETARY FOR ECONOMIC SERVICES (in Cantonese): Madam President, the Electricity Ordinance (Cap. 406) (Commencement) Notice 1999 and the Electrical Products (Safety) Regulation (Cap. 406 sub. leg.) (Commencement) Notice 1999 were tabled in the Legislative Council on 27 January this year.

The purpose of the Notices was to appoint 25 February 1999 as the day on which the provisions in the Electricity Ordinance and the Electrical Products (Safety) Regulation relating to safety certification of household electrical products will come into operation. It would then be against the law for any person to supply a household electrical product for which no "certificate of safety compliance" had been issued as required by the Electrical Products (Safety) Regulation.

At its meeting on 3 February, the Legislative Council Subcommittee set up to examine the Notices expressed the concern that there would be practical difficulties in applying the "certificate of safety compliance" requirements to electrical appliances supplied together with property for sale or rental. Members requested the Administration to amend the legislation so as to exclude such appliances from the certification requirement. Some members have raised the point that the Administration has failed to publicize the details relating to the Regulation. In this connection, I must point out that the Electrical Products (Safety) Regulation was long gazetted on 2 May 1997. It was brought into operation in stages since October that year. At this stage, only the provisions on "certificates of safety compliance" remain to be implemented.

The provisions on "certificates of safety compliance" were originally due to come into operation in November 1998. However, to address problems encountered by dealers in parallel imports, the Administration has on its initiative postponed the implementation of the provisions to facilitate discussions with dealers concerned. In fact, since May 1998, regular co-ordination meetings have been held between the Electrical and Mechanical Services Department (EMSD) and the relevant trade associations, including the Hong Kong and Kowloon Electrical Appliances Merchants Association, the Hong Kong Retail Management Association, the Radio Association of Hong Kong and the Hong Kong and Kowloon Electric Trade Association, to discuss any problems encountered in implementing the Electrical Products (Safety) Regulation, and to find solutions that are consistent with the overall objective of ensuring product safety. To date, the concerns of the trade have generally been addressed and resolved through this dialogue. In regard to the points raised by Mr SIN just now, we are prepared to bring them to the attention of the EMSD, so that further discussions can be conducted with the relevant merchants' associations.

The provisions on "certificates of safety compliance" requirements provide that all household electrical appliance must comply with the required safety standards. The purpose is to ensure that during normal use of the product, the user is protected from electrical shock and other dangers from hazardous materials or design.

The definition of the word "supply" as defined in the Electricity Ordinance includes all of the commercial means through which household electrical product may reach a consumer. The intention is to protect the safety of all users of household electrical products. Although the certification requirement may lead to extra costs and cause inconvenience to suppliers of household electrical products, the objective of the requirement should still deserve support. However, since Members already decided that the certification requirement should not apply to household electrical products supplied with property for rental or sale, the Government will amend the relevant legislation as appropriate and will put the amendments forward to the Legislative Council as soon as possible. And, we will also launch appropriate publicity on the arrangements concerned. I hope that with the amendment of the Regulation, the provisions on the certification requirement could be brought into operation soon to strengthen the protection of public safety. If the certification requirement cannot be implemented expeditiously, the overall safety of household electrical products supplied through other commercial means cannot be improved. This would not be in the interest of the public.

Thank you, Madam President.

PRESIDENT (in Cantonese): Mr CHAN Kam-lam, do you wish to reply?

(Mr CHAN Kam-lam indicated not to reply)

PRESIDENT (in Cantonese): I now put the question to you and that is: That the motion moved by Mr CHAN Kam-lam, as set out on the Agenda, be passed. Will those in favour please raise their hands?

(Members raised their hands)

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

(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): Two motions with no legal effect. I have accepted the recommendations of the House Committee as to the time limits for the motion debates. The movers of the motion will each have up to 15 minutes for their speeches including their replies, and another five minutes to speak on the amendments. The movers of amendments will each have up to 10 minutes to speak. Other Members will each have up to seven minutes for their speeches.

Today we will continue to try out the electronic queuing system for speaking in respect of debates on motion without legal effect. Members who wish to speak in a debate on a motion need, in addition to raising their hands, indicate the wish by pressing the "Request to speak" buttons.

The first motion: Promoting the economy.

PROMOTING THE ECONOMY

MR SIN CHUNG-KAI(in Cantonese): Madam President, I move the motion which has been printed on the Agenda.

Madam President, I believe Honourable colleagues of this Council will all agree that the motion I move today is a prelude to the Budget. It is our hope that the Financial Secretary will, in the forthcoming Budget, put forward some effective short-term measures to help Hong Kong to bounce back from the economic recession. In addition, the Financial Secretary should also formulate long-term measures and outline the prospects of the local economy, with a view to restoring the confidence of the people of Hong Kong and leading the economy of Hong Kong to advance into the 21st century.

The Democratic Party considers that the 1999-2000 Budget should comprise three objectives; first, to increase domestic demand by boosting consumer spending; second, to create more job opportunities by promoting innovation; and third, to get prepared for the onset of intellectual economy by re-creating talents.

To the people of Hong Kong, 1998 was undoubtedly a hard year, and perhaps the most difficult year since the economic take-off of Hong Kong in the '70s, because both the rate of negative economic growth and the rate of unemployment have reached a historical high in the year. Since the '70s, Hong Kong has experienced two economic recessions of a more serious magnitude. The first one was in 1975, being triggered off by an external factor in the oil crisis. As a result, the fourth quarter of 1974 recorded a negative economic growth rate of 3.7% while the corresponding figure of the first quarter of 1975 was 4.7%; nevertheless, as the crisis subsided, the economy was able to bounce back quickly. The recession in 1985 was mainly caused by political factors (the signing of the Sino-British Joint Declaration), but since public confidence in the politics stabilized shortly, the economy started to revive in the fourth quarter despite the 2.9% negative growth rate recorded in both the second and third quarters of the year.

The economic recession we are now facing is far more serious than the previous two. As 1998 recorded negative growth for three consecutive quarters, the annual economic growth is generally expected to be -5%. It is noteworthy that while in the past recessions those who suffered most were mainly the grassroots and the manual labourers, this time around the unemployment plight has spread to the middle level employees as well. As a matter of fact, our economy will be recovering at a much slower pace than in the past; besides, since it would take more than two to three quarters to turn around the negative growth, this growth trend may continue to exist in 1999.

The economic situation of Hong Kong this year should be better, compared to that of 1998. Nevertheless, we should not be too optimistic; at least we should not be as indiscriminately optimistic as the Government which has made boastful predictions that the economy of Hong Kong will revive shortly, even faster than that of other Asian countries. Actually, both the International Monetary Fund (IMF) and the Economist have forecasted that the economic performance of Hong Kong would not be as good as that of the other three small dragons in Asia. Many major organizations in Hong Kong have also forecast the local economy to sustain a -1% to -2% growth rate and a 1% to 2% rate of deflation. The rate of unemployment is another reason why one could hardly be optimistic. The IMF has estimated the unemployment rate to further rise from last year's 5% to 6.4%. Besides, there are also some external factors that may cause concern. Issues such as the debt problems of state enterprises and how they impact on the enterprises and banks in Hong Kong, as well as the ability of the Japanese economy to revive as expected will throw a gloom over the speed of recovery of our economy.

Yet another issue which warrants deliberation is price readjustments. Could the economy of Hong Kong revive and regain its vitality through price readjustments? We believe that price readjustment are an inevitable process, and that this process would be all the more distressful because of the linked exchange rate. However, it is impossible to rely solely on price readjustments for economic readjustment; besides, the development of Hong Kong in the long run should by no means be heading in this direction. The industrial restructuring we used to face in the past was the shift from manufacturing industries to service industries, but this time around we are confronted by a new stage of development, a development of cross-sector innovations.

Generally speaking, the tools employed by the Government to regulate and control the macro economy can be broadly divided into two categories, namely, fiscal policy and monetary policy. While the former encompasses mainly taxation policies and public expenditures, the latter involves mainly the control over money supply through interest rates. Limited by the premise that the linked exchange rate be maintained, the Government is unable to employ any monetary policy other than resorting to regulating and controlling the economy through fiscal policies. Upon this basis, I shall now express my views regarding how the annual Budget can achieve the three objectives I have referred to earlier on.

The Gross Domestic Product (GDP) of Hong Kong is largely made up of personal consumption. In this connection, the growth in consumer spending had already begun to drop during the third quarter of 1997, and by the third quarter of 1998, consumer spending dropped to a historical low since 1974. Following the rise in unemployment and the decrease in employment earnings, as well as the effect of people's dwindling wealth caused by the price fluctuations of securities and real estate properties, consumer spending has begun to toboggan to such a level that it could hardly be revived. As such, we suggest the Government adopting a series of measures, such as rebating part of the salaries tax and profits tax received, waiving the rates for one quarter, freezing government charges and reducing the fees charged by the three railways, so as to directly increase the disposable income of the public, thereby maintaining or even boosting the consumer sentiment of the people.

In the face of the forceful price competition from Southeast Asian countries and China, Hong Kong could not but embark on the road of innovative industrial and commercial services if we want our economy to continue to develop.

Innovation is relevant to all trades and industries. As a cosmopolitan city, Hong Kong also needs innovations in terms of improvement in technical development for commercial infrastructure and business practices, new forms of financial instrument, business applications programme engineering, financial system management, development of on-line brokers and so on.

In this age, Hong Kong needs to have innovative entrepreneurs in not only the service sector but also the industrial sector. As such, we put forward to the Government a proposal to set up a "start-up capital loan fund" for which innovative new enterprises of all sectors could apply. Besides, the venture capital fund may also conduct an open competition of innovative ventures to offer prize money to the best proposal and venture loans to the runners-up. In the face of this economic downturn, it is our hope that the enterprising spirit on which the people of Hong Kong have all along prided will once again enable Hong Kong to demonstrate its usual strong vitality and march into the multifarious age of innovation.

Education and training are no doubt decisive factors in enhancing competitiveness; however, the concept of education and training in the age of intellectual economy will be very different from that in the past. What is meant by "educated"? The old interpretation refers to someone who has received education when he or she was still young but has ended the learning process after joining the workforce. This concept has now become obsolete. An educated person should be someone who has the ability and the urge to continue to learn; in a knowledge-based society, the concept of continuous learning is all the more important, and learning has become a life-long activity as knowledge will become outdated in a few years. In 1996, the Democratic Party put forward a proposal to the Government to provide tax relief for training expenses as a means to encourage the working population to pursue further studies, the proposal was eventually accepted by the Government. This time we are putting forward a proposal to the Government to motivate the young people to pursue further studies by providing an incentive in the form of "training vouchers".

The tax allowance for training expenses and the training vouchers alike should be consumer-led because the people will choose the right courses for themselves. In fact, a "voucher system" has been introduced in the United States mainly to resolve the problem of substandard public schools. In this connection, parents who are dissatisfied with public schools could send their children to private schools and the sponsor will pay the private school concerned an amount of fee equal to that paid to a public school. In other words, private organizations will act as a contractor for the Government and accept government finance. The Democratic Party considers the Government should introduce this system into the field of retraining and further education.

Most of the enterprises in Hong Kong do not put many resources into vocational training and their expenditure on employee training is very limited. As indicated by the information in the World Competitiveness Yearbook, the investment Hong Kong has made in training is far less than that made by its competitors such as Japan, Singapore, Taiwan and so on. As we enter the innovation-driven stage of economic development, we must compete with our competitors in terms of productivity. For this reason, we need to deploy our manpower resources efficiently, train up top quality employees and make good use of advanced technologies. To this end, the Democratic Party proposes that tax incentives for employee training should be offered to encourage enterprises to invest in employee training.

Bearing in mind that the financial year 1998-1999 will inevitably see deficits, we believe the Government of the Special Administrative Region should also draw up a deficit Budget for the financial year 1999-2000 to co-ordinate with the needs of our economic revival. And at the same time, the Government should also make good preparations in terms of expenditure on housing and education to cater for the needs of the new immigrants. While we urge the Government to increase its expenditure, we also urge that it should take care not to expand too much the bureaucracy; what we need is a small but powerful, more efficient and more far-sighted Government.

Madam President, my Honourable colleagues from the Democratic Party will speak in detail on the various proposed measures. Next I should like to say a few words on the proposed amendment.

The main idea of the amendment proposed by the Honourable CHAN Kam-lam is the introduction of "purchase vouchers". This is a new concept recently introduced in Japan under the country's proposal to stimulate the economy. The purpose of this incentive is to encourage the people to spend on the one hand and to keep the amount of tax money saved on the other. Actually this is a well-intentioned measure, yet it has aroused much argument regarding its effectiveness and implementation. According to some economists, consumer spending might not be boosted since the people could use the purchase vouchers to buy the needed goods that they would otherwise buy with cash; as such, the effectiveness of purchase vouchers in boosting consumer spending is still unknown. Besides, the original purpose of rebating part of the profits tax received is to enable enterprises to have the resources to resolve their financial difficulties, so if the tax money is rebated in the form of purchase vouchers, not only would the enterprises find it inconvenient and impractical, the original purpose of the proposal to rebate part of the profits tax received will also be defeated. Honourable Members from the Democratic Alliance for the Betterment of Hong Kong should perhaps explain how the system of purchase vouchers works, such as the enterprises to which the vouchers could be applied, and the way in which the enterprises could convert the purchase vouchers back to cash. For this reason, the Democratic Party would abstain from voting on the amendment to be moved by Mr CHAN Kam-lam.

As regards the amendment proposed by the Honourable Miss Christine LOH, the Democratic Party considers it an ill-timed proposal. In this connection, we consider Miss LOH's proposal of urging the Government to resume land sales from April 1999 is obviously an act to gilt the lily, since the Honourable LEE Wing-tat from the Democratic Party had already moved a motion on the resumption of land sales and the motion was subsequently passed by this Council. On the other hand, Miss LOH has also proposed to delete the measures proposed in the original motion, obviously contrary to my view.

The tax reform and the proposal to reduce the dependency on land sales for government revenue put forward by Miss LOH are important issues. In the face of the current economic downturn, we should be particularly careful about any measures to increase tax or introduce new tax items (such as sales tax), since the slightest mistake made would cause the efforts to stimulate the economy to come to naught. We should indeed draw on the experience of Japan in this connection. In 1994 and 95, Japan tried to stimulate the economy through its fiscal policy, but then at the time when the first sign of revival appeared the sales tax was introduced and pushed the economy further down into the abyss. I hope that Miss LOH would choose an appropriate time to move a motion on this idea with more specific concepts and proposals for debate, so that Honourable colleagues could be given a chance to discuss the subject in detail.

The Democratic Party will vote against the amendment proposed by Miss LOH.

With these remarks, I beg to move.

Mr SIN Chung-kai moved the following motion:

"That, in the face of Hong Kong's economic downturn, high unemployment rate and declining competitiveness, and with a view to restoring the momentum of Hong Kong's economic growth, this Council urges the Government to adopt the following measures to boost consumer spending, promote innovation and re-create talents:

1. draw up a deficit budget for the financial year 1999-2000;

2. rebate part of the salaries tax and profits tax received;

3. waive the rates for one quarter in 1999;

4. reduce the fees charged by government-owned public utilities and freeze government charges;

5. improve the Special Finance Scheme for small and medium enterprises to ease their liquidity difficulties;

6. set up a "start-up capital loan fund" to give impetus to the establishment of innovative enterprises and increase job opportunities;

7. encourage enterprises to provide on-the-job training for their employees by offering tax incentives for employee training; and

8. motivate young graduates to pursue further studies and enhance their own competitiveness by providing an incentive in the form of "training vouchers"."

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

Miss Christine LOH and Mr CHAN Kam-lam will move amendments to this motion. Their amendments have been printed on the Agenda. In accordance with the Rules of Procedure, the motion and the two amendments will now be debated together in a joint debate.

In accordance with Rule 34(5) of the Rules of Procedure, I will call upon Miss Christine LOH to speak first, to be followed by Mr CHAN Kam-lam; but no amendments are to be moved at this stage.

MISS CHRISTINE LOH: Madam President, I want to move this amendment because I would like to put an alternative focus on today's debate. The original motion is the Democratic Party's eight-point Budget wish list, which the Democratic Alliance for the Betterment of Hong Kong (DAB) is seeking to expand.

The motion and the DAB's amendment are sensitive to the need for short-term relief but less so about Hong Kong's quickly worsening fundamentals. Although the Honourable SIN Chung-kai has acknowledged Hong Kong's dire circumstances in his speech, I guess despite agreement there, our solutions are quite different.

I question the wisdom of some parts of the combined wish list. While I do not disagree with the whole list, I do have reservations about a number of items. Furthermore, I want to bring into focus the necessity of tax reform in the medium term.

Let us look at some numbers. A year ago, the Financial Secretary was still confident that our economy would grow by 3.5% in 1998. The Gross Domestic Product (GDP) growth rate last year turned out to be a dismal minus 5%, and it remains doubtful whether we can even achieve a flat rate for the coming year.

For the current year, we are going to have a sizable deficit. Whether it is going to be $40 billion, $45 billion or $50 billion, I do not know, it seems that it will be in that order of magnitude. Furthermore, we should not be surprised if the deficit for the coming year is going to be similar. Indeed, it may well be that Hong Kong will run deficits, albeit smaller ones, for another one to two years beyond that.

Our fiscal reserves stand at some $415 billion. We are fortunate to have this cushion to help us through somewhere between three to four years of bad times. But how things have changed. A year ago, the Financial Secretary forecast that Hong Kong would continue to have budget surpluses, and that by the end of the year 2001-2002, our fiscal reserves would grow to $527 billion.

For the last few years, the Government has been using its five-year nominal real GDP forecast of 5% to plan growth in expenditure, revised in October last year to 4%. I believe that the Financial Secretary may have to revise this figure down under present circumstances. The reality is that it will impact into what Hong Kong can afford to do in this and the coming years.

In 1996-97, Madam President, the single biggest contributor to public revenue, at 23%, was the premium generated from land sales and land transactions. Five years before that, it was a mere 7%. For the 1998-99 budget projections, land sales and development premium was estimated at $50 billion-plus, and when you add on profits tax from the related sector, stamp duty, rates and rents, the Government would receive more than half of its revenue from the property sector.

Less will come in from land sales with the moratorium, as will from all the other related areas. This Council has debated the question of whether it is healthy for our economy to be so dependent on the real estate sector, and I believe the general answer was negative. I am now asking Members to consider the related public revenue angle as well. If we are not going to depend on the real estate sector for revenue ─ how else can the Government raise money for public use in the future?

Mr SIN Chung-kai questioned whether I should have included in my amendment the requirement to resume land sales, just because the Honourable LEE Wing-tat has already raised such a debate. I agree with him, and I am sure this is not something that the Democratic Party should object to. But I do wish to emphasize this for the purpose of revenue raising.

Let us take an honest look at Hong Kong's fundamentals. I hope that no one is still dreaming that our fundamentals are good. They are not good at all. We have a negative growth rate. We have 5.8% unemployment, and the rate is likely to climb. There is deflation, but some costs are still too high. We have a huge overhang of stocks in our market as a result of the Government's intervention last August. Exports are facing stiffer competition. Even our rule of law has been shaken in the last few days. The Hong Kong dollar could yet face another round of speculative attacks. The nature of financial markets is that players look for weakness, and they bet against weakness.

Let me also say a few words about the linked exchange rate. Members will recall Mr John GREENWOOD coming before the Panel on Financial Affairs last year reminding us that given the rigidity of the peg, it is necessary that there is as much flexibility as possible in the rest of the economy. This means that asset prices, interest rates, wholesale and consumer prices, wages, the structure of employment and the output mix of the economy must all remain free to vary in response to economic shocks. One area that has not perhaps adjusted as much as it could is the real estate sector, because the Government put a moratorium on land sales last June. These adjustments could be painful for individuals and businesses, but there is no way round it.

The Financial Secretary has a difficult budget to write for the coming year. He was generous in his last Budget. He then gave Hong Kong what was in effect a mid-year mini budget in June to help bring short-term relief after much pressing from Members. At this time, I am not sure what else he has up his sleeve that would be prudent to give us.

Naturally, the community would welcome a salaries tax rebate and not to have to pay rates for a quarter. I am sure, too, that many companies would be happy to have a profits tax rebate. However, I question the wisdom of these suggestions. The proponents may say that the rebates could be modest. I would prefer that we try to take a look at the total picture.

In terms of salaries tax, only 40% of the working population pay tax. Those who have to pay are higher income earners. Perhaps they are not so in need of a tax rebate. As for profits tax, the businesses which made money are paying a very modest tax already, and I wonder whether giving them back a small rebate will make that much difference.

As for rates, we have already had one rebate. Furthermore, the Government's announcement last November to reschedule rating valuations will reduce incomes in the coming year. Can Hong Kong afford a rates-free quarter this year, and even a rate reduction as the DAB suggests? I have my doubts.

If the Financial Secretary can find some short-term relief to give us, I doubt he can give us all the things in the Democratic Party and the DAB's combined wish list, without further cutting into revenues that may affect spending on essential services such as education, public health, social welfare and the environment.

Instead of putting forward only a spending wish list, we should also see how we can save some money. There is no doubt that we should freeze pay for the Civil Service and review its many perks, and that we should trim our not-so-small Government. We should seriously review government policy on out-sourcing to see where real savings can be made with no loss in efficiency or service. Madam President, may I add that the Legislative Council may also wish to see how we can trim our budget. We might also wish to defer some infrastructure spending, such as for South East Kowloon and some road projects.

Let me emphasize that I do not believe that it is appropriate to increase either rates, salaries tax or profits tax this year. Nevertheless, the upcoming budget offers a golden opportunity for the Financial Secretary to start a discussion about tax reform in the coming years. If we are to keep salaries tax and profits tax at low rates, it may be wise to consider widening the tax base in the future. We were able to take people off our tax bracket because we had an obscene amount of reserves. And that it would be an embarrassment not to continue to ask people to pay more tax. Mid-income earners who have dropped off the tax net, therefore, would have to be put back sometime in the foreseeable future. Hong Kong might also need to consider other forms of taxes as well.

The Financial Secretary and this Council should not rule out any form of taxation from the start but should be willing to examine the pros and cons of each type of tax and then allow a public discussion to see what package is most equitable for Hong Kong.

Perhaps we also need to think about taxing land development in a different way rather than just charge huge up-front land premiums. The current system, unique to Hong Kong, has resulted in massive returns for the big developers and a huge hidden indirect tax for residents and business in the form of high rents, mortgage payments and labour costs. Many small businesses pay a large percentage of their costs on rents. It is a massive distortion of the property market, which ties up enormous amounts of capital and causes the build-up of large land banks waiting for the optimum time for development. In a falling market, there is very little development, although the public continues to have needs.

If we can replace the current up-front tax on development rights with a tax based on the actual profits of development, this will result in more certainty in the market, help facilitate urban renewal, bring down rents and property prices and free liquidity in the banking sector.

We need to look at ways to wean ourselves off property and broaden the tax base. Many people in the financial, accounting and tax sectors, and I believe including the Honourable Eric LI, have already put forward the possibility of goods and sales tax. The Government has also tried to put the "polluter pays" principle into action with minimal success. As for capital gains tax, Hong Kong people seem to be unused to consider this form of taxation.

These discussions need to be considered and debated by this Council so that there is a consensus for the way forward. What I am concerned about is that we are only able to look at the short term but not the medium term, never mind about the long term. We need to determine our long-term funding needs and examine how we are going to pay for them.

MR CHAN KAM-LAM (in Cantonese): Madam President, Hong Kong has been in a state of economic depression over the past 10-odd months. While there were constant voices from the community asking the Government to take measures to improve our economy, not many people have come up with sound solutions and good policies.

The DAB has put forward some amendments for it considers the motion moved by Mr SIN Chung-kai today is not yet complete.

In our opinion, apart from boosting consumer spending, the most important thing we should do to enable Hong Kong's economy to bottom out so that it can revive expeditiously is to reduce the operating costs of small and medium enterprises (SMEs) as they still need to face various heavy burdens at the moment.

The DAB has proposed amendments in four areas in respect of the specific measures put forward in the original motion, and they include; introducing "purchase vouchers" to boost consumer spending, reducing fuel duty, lowering the rates percentage charges as well as formulating a policy to support SMEs. I will focus on discussing the first three proposals. Later, my colleagues from the DAB will further elaborate the proposal put forward by me for the purpose of assisting SMEs.

In the middle of last year, the DAB repeatedly urged the Government to rebate 20% of the tax paid by the public for 1996-97 in order to ease the pressure on the public instantly and return wealth to the public. It is estimated that, if calculated in terms of the tax received by the Government in 1996-97, rebating 20% of the salaries tax, profits tax, property tax and personal tax will involve $16.78 billion approximately. However, the DAB is of the view that a tax rebate alone cannot guarantee that the public will spend the tax money returned to them to boost consumer spending. Therefore, we suggest the Government to model after Japan to issue "purchase vouchers" instead of rebating tax in order to achieve the objective of boosting consumer spending and stimulating the economy.

The purchase voucher we have in mind can take the form of a cash coupon of $100 denomination. The public can use these coupons for shopping and spending in the territory. After receiving the coupons from the public, shop operators can redeem the coupons for cash from the Government. In order to boost public spending within a certain period of time, we suggest that an expiry date should be set for the coupons. As far as profits tax is concerned, we can consider returning a certain percentage of profits tax in the form of purchase vouchers and the rest in the form of cash vouchers so as to relieve the enterprises' liquidity difficulties or needs.

Madam President, faced with the current economic environment where consumer spending is extremely weak, tax rebate in the form of purchase vouchers can, on the one hand, boost the purchasing power of the public and, on the other, help retail and service industries. It is indeed worthwhile for us to put this into practice. Compared with the tax rebate proposal put forward in the original motion, this proposal is even more positive and effective.

The DAB has all along been expressing great concerns for the operating difficulties faced by the transport industry. For this reason, it has repeatedly asked the Government to reduce fuel duty. In the first motion debate held in this Legislative Session, the DAB also put forward the same request again. Although the Government reduced diesel duty by 30% in the middle of last year, it still accounts for more than 30% of the retail price of diesel oil after the reduction. The DAB is of the view that if the Government can reduce diesel duty from $2 to $1 per litre, it will lower the operating costs of the transport industry significantly and help professional drivers tide over their current difficulties. At the same time, the lowering of transport costs can benefit other industries. This is indeed conducive to the early revival of our economy.

At present, duty levied on leaded petrol and unleaded petrol still accounts for approximately 60% of the retail prices, a percentage which is considered to be too high by the DAB. We think the Government should deal with diesel duty and petrol duty with the same attitude. Therefore, we suggest that the Government should also reduce petrol duty by 50%. Today, Mrs Miriam LAU will move another motion related to prices of fuel. We will therefore further elaborate this issue later.

As regards reduction in the rates percentage charges, the DAB made such a request as early as before the reunification. As the 3% government rent, a new item added after the reunification, has already reaped an additional revenue, there should absolutely be room for the Government to lower the rates percentage charges to allay the public's burden. The DAB is of course in support of the Government's move to return one quarter's rates to the public. Nevertheless, we still hold that the practice of waiving the rates for one quarter is only an one-off measure. In fact, we hope the Government can allay the public's burden on a long-term basis. The proposal raised by the Government last year of reducing the rates percentage charges by 0.5% was only valid for one year. Therefore, we hope the Financial Secretary can further reduce the charges to 3% in this year's Budget.

We in the DAB consider that the amendment moved by Miss Christine LOH today is unnecessary. The main reason is that the contents of the amendment are relatively vague and the choice of words non-specific. For instance, her amendment mentions that, in formulating the upcoming Budget, the fiscal reserves should be used wisely. Does the expression "wisely" implies that the fiscal reserves has not been used wisely in the past and it is therefore necessary to use the reserves "wisely" now? Furthermore, Miss LOH proposes to resume land sales from April 1999 onwards. This Council has in fact, on past occasions, discussed this issue in motion debates and the relevant motions were passed by this Council too. A major issue we need to discuss in detail obviously relates to the reform package we can consider for the medium term to reduce the Government's reliance on revenues generated from land sales and properties. But without a concrete package, it will be extremely difficult for us to ask other Members to vote in support. As it is impossible for us to support Miss Christine LOH's amendment, we will therefore vote against it.

Thank you, Madam President.

MR ALBERT HO (in Cantonese): Madam President, today I will focus on discussing the criteria for formulating a deficit budget.

The Financial Secretary had chosen the form of a surplus budget when he formulated Budgets for the next four years in February 1998. But if the Government continues to formulate surplus Budgets under the current economic environment, it will definitely result in pressure calling for a drastic increase in tax or tightening of expenses. Eventually, it will only cause further aggravations to the Hong Kong economy. We are therefore of the view that the Financial Secretary should prepare a deficit Budget for the year 1999-2000 and, at the same time, take into account the following three criteria: First, is the formulation of the Budget in compliance with the Basic Law? Second, is a deficit Budget in compliance with our principle of maintaining the fiscal reserves? Third, does a deficit Budget meet our economic needs?

The first criterion is that we need to comply with the Basic Law. According to Article 107 of the Basic Law, "(The SAR) shall follow the principle of keeping expenditure within the limits of revenues in drawing up its budget, and strive to achieve a fiscal balance, avoid deficits ......". To start with, the definitions of such expressions as "keeping expenditure within the limits of revenues", "a fiscal balance" and "avoid deficits" are extremely controversial. For instance, some countries only put emphasis on the fiscal balance of their recurrent accounts. Is it then appropriate for the Government of the Hong Kong Special Administrative Region (SAR) to calculate deficit or surplus in terms of cash deposit and withdrawal for the year? Can the Government reflect its revenue and expenditure position accurately for the accounting system it has adopted at the moment is on a cash basis instead of an accrual basis? All these will influence our understanding of revenue and expenditure as well as deficit. I believe the community will have divergent views on this. But still I believe all parties and factions have one point in common and, that is, it is not provided in the Basic Law that the Budget prepared by the SAR Government must achieve a fiscal balance "every year". As a matter of fact, the Basic Law has chosen more flexible wordings such as "strive to", "avoid" and so on instead of such stronger wordings as "not" or "cannot". Therefore, the Government should be able to draw up deficit Budgets or balanced Budgets for certain years while striving to achieve a surplus within a certain period of time. It should not ignore the economic environment and social needs by using the Basic Law as a "protective shield" to justify its usual practice of drawing up a surplus Budget every year.

The second criterion relates to the principle of maintaining the reserves at a certain level. The Democratic Party is of the view that the Government should adopt a prudent fiscal policy. Moreover, it should take warning from those countries which have huge deficits and relied on borrowing for survival. However, a prudent fiscal policy does not mean that one has to become a miser. To accumulate surpluses indefinitely is actually not cost-effective.

I think the three criteria proposed by the Financial Secretary in 1998 for accumulating fiscal reserves are also questionable. Of these criteria, the adoption of M1 as the benchmark for accumulating reserves is the most controversial. The Government should indeed carry out consultation on these criteria to ensure that they are fair and reasonable and are agreeable to the community.

The Democratic Party has forecast that the Government will have a deficit of approximately $40 billion in 1998-99, and around $50 billion in 1999-2000. Adding the deficits for the two years, they will come close to $100 billion. As a result, the balance of our fiscal reserves for 1999-2000 will drop to approximately $350 billion. Roughly equal to one year's government expenditure, this amount is still close to the lower ceiling of the existing reserves guideline.

It is also worthwhile for us to make reference to another criterion set by those countries which have joined the Euro system. According to the criterion, these countries are not allowed to have a deficit budget exceeding 3% of GDP. If we calculate by assuming that Hong Kong will have a deficit of around $40 billion, our deficit will only account for 3% of our GDP. Therefore, a deficit of around $40 billion should still be acceptable.

Land sale constitutes one of the Government's main sources of revenue. The proportion of land premium proceeds (20%) only comes second after that of profits tax (22%). Under the economic depression, there has been a drop in revenue from profits tax. Should the Government cease selling land, it will further affect the Government's revenue. The Democratic Party therefore urges the Government to resume land sales after the first quarter of 1999 in accordance with the original schedule and to set an upset price for the same. In doing so, it will help stabilize the Government's receipts from land sales, reduce deficit and, at the same time, ensure a stable supply of land for the next few years. I believe the Government should remember that a relevant motion moved by Mr LEE Wing-tat at the end of last year was passed by this Council.

The third criterion relates to the satisfaction of social needs. In times of economic depression, governments generally resort to a expansionist fiscal policy, that is, reducing tax and increasing expenditure, in order to stabilize internal needs as well as preventing the economy from sliding further. It is in fact basically hard for the SAR Government to adjust its economy by means of a monetary policy because of the peg between the Hong Kong dollar and the US dollar. People will really find it hard to understand and accept if the Government insists on blocking its own way by abandoning the fiscal policy.

Although the SAR mainly operates on the basis of a small government with public expenditure representing only about 20% of GDP, the fiscal policy can still play a considerable role in regulating our economy. In the early '80s, Hong Kong was hit by an economic depression. In 1982, its real economic growth was only 1%. 1985 even witnessed a negative growth of 0.9%, but still the Government saw no needs to raise tax. Consequently, the Budgets were in deficit for the three consecutive fiscal years from 1982-83 to 1984-85. It was only until 1985-86 that Hong Kong finally registered a surplus. In 1995-96, because of the needs to carry out infrastructural projects, Hong Kong recorded another deficit Budget of $2.6 billion.

The Democratic Party agrees that we should draw up a short-term deficit Budget in order to allay our periodic economic difficulties. In fact, the International Monetary Fund will also ask its recipient countries to formulate deficit budgets for the purpose of boosting their economy. Therefore, we hope the Government can accede to this proposal.

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

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

MR ALBERT HO (in Cantonese): I so submit. Thank you, Mr Deputy.

MR FUNG CHI-KIN (in Cantonese): Mr Deputy, both Mr SIN Chung-kai's motion and Mr CHAN Kam-lam's amendment contain some specific proposals which are positive and recommendable. Examples are freezing charges levied by the Government and the public services under it, improving the Special Finance Scheme for small and medium enterprises, encouraging enterprises to provide on-the-job training for their employees, promoting continuing education and so on. Nevertheless, some proposals are not going to be very useful and they may even prove to be counter-productive for the purpose of stimulating the economy.

One of the more obvious examples is "training vouchers". The Hong Kong Progressive Alliance (HKPA) greatly encourages young graduates to further their studies. But under the system of " training vouchers", applicants are not required to pay for their school fees, how much incentive will they have to study hard? If training vouchers are found to be abused like an alternative form of comprehensive social security assistance, will the Government then need to distribute various kinds of "designated vouchers" like fruit vouchers, medical vouchers and spectacles vouchers? To help young graduates to further their studies, Members can simply ask the Government to improve or better utilize the resources currently provided for vocational schools, technical institutes, the Vocational Training Council and even the Employees Retraining Board. There is basically no need to spend extra administrative fees on new gimmicks whose the effectiveness of which is still questionable.

Similarly, the proposal of asking the Government to distribute purchase vouchers is just like asking it to distribute vouchers issued by major department stores. Or else, the Government can choose to hand out bank vouchers. After collecting part of the tax, the public naturally knows how to make good use of the money according to their own needs. It is simply not necessary to strictly specify where they should go shopping. Furthermore, if the proposal is implemented, other industries may not be pleased with it. They will ask: Why are certain department stores or retail industries benefited from the tax rebate? Does it mean that other industries do not need a shot in the arm?

Both the original motion and the amendment have put great emphasis on boosting consumer spending. The HKPA, however, is of the view that boosting consumer spending alone is not going to push the economy forward. It is more important for us to understand why the public is unwilling to or dares not spend money. The main causes leading to a shrinkage in local spending and investment are: the prevalence of retrenchment and wage cut, mortgagors finding their asserts having become liabilities because of the drop in property prices, enterprises (particularly small and medium enterprises) experiencing difficulties in liquidity and obtaining finance and they are even forced to repay their debts before due dates.

There is also a major shortcoming with the proposed start-up fund. First of all, how are we going to define "innovative"? What sort of people are going to be chosen to assess whether or not a business is innovative? It will be even more worrying if the start-up fund, which is going to be subsidized by taxpayers, is to permit unsecured loans. This is because such kind of loans will make it very easy for applicants to, intentionally or unintentionally, fall into the trap of doing business regardless of the risks involved. In case of business failure, who is going to compensate for the losses incurred by taxpayers? In fact, the Stock Exchange of Hong Kong Limited has already started making preparations for the introduction of a "venture board" to allow investors to choose and assess the risks themselves. Is it not a better alternative?

The HKPA understands and agrees that there is a need for the Government to draw up a deficit Budget to boost economic needs. But there are two foremost criteria which the Government must bear in mind: 1. the deficit for the coming year should not be higher than that of this year; 2. the deficit should not affect the stability of the exchange rate of Hong Kong dollar. What is more, the Government should not think it can solve the problems by simply saying that it will permit a deficit Budget to prepare for a substantial tax rebate so as to raise expenditure sharply.

The HKPA firmly believes it is the hope of the public as well as the commercial and industrial sectors that the Government can take the lead to revive our economy and that our deficit will not aggravate our burden. If the Government's reserves drop drastically by a large margin, international rating institutions will definitely lower the rating for Hong Kong and then the Hong Kong dollars may subject to attack again. Consequently, it will increase the costs for local enterprises to borrow from overseas and dampen the confidence of the public and investors in our economic prospects. We will then probably get half the results with twice the effort no matter what sound strategy is employed.

Mr Deputy, just as pointed out in Mr SIN Chung-kai's motion, what we are facing at the moment is an economic downturn, a high unemployment rate and a declining competitiveness. In order to stimulate the economy, we need to ask the Government to increase expenditure as well as grasping the core of Hong Kong's economy firmly.

The economic prosperity that Hong Kong has enjoyed over the past two decades has not been wholly dependent upon the Government's promotion of internal needs. The crux is Hong Kong as a provider of services and a financial centre must provide a favourable business environment to attract foreign investment and spending. To revive our prosperity, Hong Kong must continue to give play to its functions in terms of financing and making forex earnings.

At present, local banks are suffering from a drastic rise in bad debts and credit crunch. Both China-based and overseas enterprises have found it difficult to obtain finance and raise funds in Hong Kong. Because of various reasons, including the one related to the policies adopted by the Government in handling the sequel of the financial turmoil which has thus made a profound impact on the relevant industries and markets, the stock market is in the doldrums, thereby greatly undermining the stock market's ability of raising funds and making forex earnings. The Government should indeed make the stabilization of the banking sector and the entire financial system as its paramount task.

I advocate lowering the interest rates and relieving burdens on enterprises and mortgagors. The fact that real interest rates are now standing high will also affect investment and spending desires. But I do not agree to abolishing the interest rate agreement in a hasty manner as this will only trigger off unhealthy competition within the banking sector and, in particular, undermine the competitive edge of small and medium banks.

Stabilizing property prices will also help stabilize the banking system as well as the overall interests of the territory. Therefore, the HKPA agrees that the Government should resume land sales on the condition that it will not affect the stability of the property market. This will stimulate investment and boost revenue for public coffers.

Apart from these, the Government should speed up the progress of long-term infrastructural items and examine their effectiveness so as to lead Hong Kong out of the bottom as early as possible.

Lastly, I have to stress that imprudent squandering proposals, made on the excuse of allowing the Government to draw up a deficit Budget, are not necessarily desirable at the present stage.

Thank you, Mr Deputy.

DR RAYMOND HO (in Cantonese): Mr Deputy, there is only less than a month to go before the announcement of the Budget for the next financial year. While some advanced countries are looking forward delightedly to their first surplus budgets in so many years, our Government is, however, faced with a financial situation which it has not seen for many years. As for the people of Hong Kong, since they are hard-hit by the recent economic downturn, it is only natural that they all very much want the Government to draw up a Budget which can boost our economic development and bring our economy back to the desired track.

In the past, when our economy was booming, our Government derived its revenue mainly from land auctions and property-related taxes. Therefore, as a result of the sluggish property market and the nine-month moratorium on land sales in the past year or, the revenue situation of the Government this financial year has become rather unsatisfactory. Given the existing economic conditions, the Government is likely to face similar difficulties when drawing up the Budget for the next financial year. This indicates precisely the very fragile revenue base of Hong Kong.

It must be admitted that the Government did consider the introduction of taxation reforms in the past, but so far, no progress has been made at all. Under the existing economic conditions, we should really consider such reforms very carefully, so as to draw up a more stable revenue structure for Hong Kong. When considering such reforms, we must of course pay attention to their effects on our economy, or else we may well achieve the opposite results and hinder the progress of economic recovery.

Before the introduction of any taxation reforms, it is likely that the Government will continue to face the problem of reduced revenue, and, at the same time, it will also have to increase its expenditure to boost the economy and satisfy people's demand for government services. So, it will indeed be difficult for it to maintain a balanced Budget, much less a surplus Budget, as it did in the past. For this reason, when drawing up the Budget for next year, the Government should really respond to the current economic conditions and satisfy the people's demands as far as the Basic Law permits. It is hoped that the Government can thus play a more active role in boosting the economy, creating more jobs and assisting the people in tiding over their difficulties.

Since the property market has recently become more stable, the Government may now consider the possibility of resuming land sales in April on a selective basis. As a start, it can consider offering some small land lots for sale, so as to gauge the response of the market. Then, it can proceed with the long-term planning for its land policy, with a view to satisfying the various needs of the community. On the one hand, this can give a chance to interested property developers, thus increasing their interest in bidding for lands. On the other hand, this can also increase the revenue of the Government. More importantly, in the long run, this will prevent the property market from suffering too much from the moratorium on land sales.

Mr Deputy, I so submit, Thank you.

MR CHAN KWOK-KEUNG (in Cantonese): Mr Deputy, in the wake of a burst bubble economy, there will come an economic depression. In the 1930s, an economist offered a solution to an economic downturn — to stimulate the economy by increasing government expenditure and cutting taxes, and drawing up a deficit budget is the most direct way of doing it.

To resist deflation and stimulate people's desire to spend, the Government can cut taxes to increase their purchasing power. To resist an economic downturn, the output of products or services has to be enhanced to generate foreign exchange earnings. As our manufacturing industry dwindling and our service industry expanded excessively, industries became highly unbalanced and the export of goods was continuously weak, as a result, there was always a visible trade deficit. Being struck by the financial turmoil, the service industry was in a slump. As our economic foundation was so weak, it is doubtful if we could walk out of the abyss sooner than other Asian countries. Singapore has imported hi-tech manufacturing industries long ago, and foreign organizations such as SONY, NEC, SEAGATE and PHILIPS have set up factories there. On the contrary, the export industries in Hong Kong are shrinking and there are fewer and fewer foreign exchange generating sections. With a financial and property market slump, supporting the small and medium enterprises (SMEs) is another way out.

The measures adopted and resources utilized by the Government to support SMEs in recent years are utterly inadequate. Under the $2.5 billion Special Finance Scheme, only $0.52 billion has been given out so far, far less than the $230 billion for infrastructure programmes in the next five years. Evidently, the Government believes more in spending huge sums to promote our economy than the ability of SMEs in reviving our economy. The Government not only needs to develop large scale infrastructure, it also wants to stimulate local consumption this way. However, merely putting in huge sums to carry out projects the cost effectiveness of which is questionable is just like pouring medicine down the throat of a weak patient. The patient will have diarrhoea and the medicine will be wasted.

I wonder if the Special Administrative Region Government knows that other Asian countries are making intense preparations for sudden changes in the external environment. In fact, countries like Taiwan, Japan, Singapore and South Korea started developing high value-added technologies in the 1980s. In the wake of the financial turmoil, these countries concentrated on supporting SMEs and worked out measures for assisting SMEs. On the contrary, Hong Kong has been lagging behind others in this respect. Hong Kong is inferior to others in extending loans to enterprises. In Japan, there are start-up loan schemes providing without security low-interest loans to those who wish to start up their own business. The only condition is that an applicant should have at least six years' working experience in another company. However, the new loan scheme for SMEs in Hong Kong includes a lot of requirements to be met. For instance, a one-year term and 50% guarantee. These requirements have limited the opportunities of people with lofty ideals for starting up their business. Moreover, there is no comprehensive policy in Hong Kong for supporting SMEs and the relevant coupling measures are inferior to those of our neighbouring countries. The Small and Medium Enterprises Section of the Industry Department only provides information while the Small and Medium Enterprises Office of the Ministry of Economics of Taiwan is responsible for working out development plans for enterprises and the relevant regulations as well as other coupling facilities such as production technology training and guidance on modes of operation. The Small and Medium Enterprises Office in Japan is a government body comprising more than 200 people, responsible for planning, co-ordinating and arranging measures for the development of SMEs. Compared to these countries, the service standard of the local organizations serving SMEs is far worse than those of the organizations in the above places in terms of authority, scale and function. Under the circumstances that the service industries are saturated and easily affected by external factors, supporting the SMEs is a key policy for rescuing our economy.

In addition, when determining taxes, the Government should directly encourage employers to train their employees. The information industry will thrive in future, and people from all walks of life should take up further studies to maintain their competitiveness. At present, only the basic allowance serves to subsidize retraining. I suggest that the Government should give more tax concessions to enterprises that offer training to their employees. This way, we can cultivate a general learning atmosphere to enable Hong Kong people to compete with people in our neighbouring countries.

Mr Deputy, I so submit.

MR CHEUNG MAN-KWONG (in Cantonese): Mr Deputy, the Democratic Party has moved a motion on the ways to stimulate our economy. I would mainly talk about improving the Special Finance Scheme for SMEs and setting up a start-up capital loan fund.

Being struck by the financial turmoil, the property prices in Hong Kong have fallen substantially, bringing about a credit squeeze and slackened industrial activities. There are voices in the community asking the Government to play an active role in supporting local industries or service industries.

The first point of view is that the Government's non-intervention policy is already out-dated. As it has not supported local industries in the past, the local technological standard lags behind that of other Asian countries. Therefore, the Government should introduce various preferential policies for industries or establish an industrial development bank to directly assist in the development of local industries or individual industries.

The second point of view is that the Government should still maintain its non-intervention policy, and economic development and the allocation of resources should still be dictated by market forces. It should not intervene in individual industries in terms of policy or offer them subsidies.

There is no consensus on the above views so far. The main reason is that our economy really relied heavily on property investments in the past. Industries speculated in property transactions and generated quick money by speculating in properties while banks emphasize the importance of properties when they make financing arrangements. As a result, economic risks were overly concentrated and the bubble finally burst last year. After the financial turmoil, when we re-affirm the value of industries in our economic structure and draw up new industrial policies, we should avoid jumping from one extreme to another or giving up the market mechanism. We should not let political decisions interfere with the allocation of economic resources or subsidize industrial financing as this violates economic principles. The core question is: Are we confident that political decisions are certainly correct and more efficient than economic principles?

According to the Democratic Party, the market may not necessarily be rational in the short run, therefore, it needs certain form of monitoring, control and guidance. However, when we review our policy on local industries, we should avoid making excessive political considerations. Instead, we should strike a balance between political policy-making and market forces.

In the past, the Government adopted inadequate and narrow policies to assist local industries or service industries. The supportive measures were limited to lectures, promotion, or subsidizing technological studies conducted by individual institutions and government bodies which gave enterprises very limited assistance. At present, as local enterprises lack capital, even though they are interested in a technological upgrade, they lack funds. For sure, we do not intend to and are not able to order banks to change their lending policies. But the Government can adopt a strategy to monitor the market while encouraging financing to solve the fund shortage problems of local enterprises.

In respect of market supervision, if banks concentrate excessively on a certain type of loan, they may not be able to disperse risks effectively. The Government can exercise supervision in a certain manner and urge banks to offer more comprehensive loan schemes.

As to encouraging financing, the Government should offer additional loans to SMEs with inadequate mortgage abilities but good performance and prospects. It may even charge additional insurance interests for such loans according to commercial principles to ensure that the funds so lent can still tally with economic considerations. This way, it can supplement the loans offered by commercial banks and ensure that social resources are more effectively allocated to industrial development.

Most of the Government's plans for supporting industries or service industries are biased towards technological industries. The $5 billion innovative technology fund to be established also supports high and new technology mainly. But, is high and new technology the only choice for Hong Kong? Besides high technology, is there no other industry with potential for development that is worth developing? According to the Democratic Party, while the Government aids technological industries, it should also support other industries. One of the edges that drive our economy is a creative and agile workforce. Now that there is serious unemployment, the Government should encourage and assist these people in making proper use of their experience and knowledge to start up their business. Therefore, the Democratic Party suggests setting up a personal start-up capital loan fund that does not limit loans to supporting industries. The fund can partly solve the unemployment problem and assist Hong Kong people in developing a diversified system of industries and services, in order to reduce the risk of unified high technology investment.

Mr Deputy, the approval of all loans or assistance to enterprises or those starting up business will still be made on the basis of commercial principles. The Government should not bear excessive risks and it should not lend at excessively low preferential interests so that all assisted enterprises can maintain competitiveness in the market. It can also prevent enterprises from relying too heavily on or abusing government policies which will in turn lead to a waste of public money, in addition to leading Hong Kong onto a patch of subsidizing our economy and industries. The experience of some socialist countries or capitalist countries in Southeast Asia has proved that this is a road to failure. We should not follow the same old disastrous path.

Mr Deputy, I so submit.

MR LEUNG YIU-CHUNG (in Cantonese): Mr Deputy, since the end of 1997, our economy has been going downhill and the situation has not turned better but even worsened after almost a year and a half. The unemployment rate is 5.8% and the latest estimated economic growth rate is -5%. In the final analysis, in addition to the fact that the economic policies adopted by the Government in the past were short-sighted, as Members have said time and again, the Government had lowered its guard when our economy started slackening, and it had not taken any precautions to prevent the situation from deteriorating. On the contrary, it raised interests to combat foreign exchange speculators and brought trades and industries one disaster after another. Last June, the Government was forced to introduce the so-called "nine strokes to rescue the market" under the pressure of Members of different parties and public opinion. Unfortunately, the Government again became indifferent after having introduced these measures. It expected the measures to work but it did not bother to formulate more measures for solving the problem. The Chief Executive shirked his responsibility in his policy address and claimed that economic revival was dependent on several objective factors. It seemed that the Government was waiting for its luck, doing nothing all the while. It goes without saying that the Government's attitude put our economy in the longest and worst economic plight over the years.

I have taken all the trouble to elaborate on this background because I want to point out that the Government must formulate more measures to rescue our economy now that the measures introduced to rescue the market last June have failed to achieve the expected effects. Otherwise, the unemployment rate will keep rising and more people will have less income as a result of wage and benefit cuts, poor business or layoff, not to mention social unrest and a dwindling economy resultant from the vicious economic circle.

As regards today's motion debate, it is a pity that although the original motion contains various measures, only a few can directly benefit the lower stratum. What help can a tax rebate give to wage earners making little money? Their income is so meagre that they are not required to pay any tax. Therefore, only the third and fourth measures benefit the grassroots more directly, that is, waiving the rates for one quarter and reducing the fees charged by government-owned public utilities and freezing government charges.

Mr Deputy, when I talk about rescuing our economy, I am particularly concerned about how the lower stratum will be directly benefited as the relevant measures actually involve a re-allocation of social resources. The ideas behind the motion proposed by Mr SIN Chung-kai can be summed up as "returning wealth to the people". But who is he referring to? Most of the measures he has proposed allocate wealth or resources to the middle class or SMEs in the hope that our economy will revive. However, the lower stratum will only benefit indirectly from an economic revival. Even if these measures are effective, are they the fairest, most reasonable and effective?

To be fair and reasonable, the grassroots are undoubtedly affected most badly by the speedy dwindling of our economy. Wage reductions and layoffs have put many families in a plight. They have been forced to accept lower living standards and to live frugally, and it is doubtful if they can still subsist. Therefore, to return wealth to the people, we must first take care of the grassroots.

Leaving justice alone, to stimulate consumption, we must try our best to allocate resources to the grassroots. Relatively speaking, the rate of consumption of those with low income is usually higher than that of those with high income. This is the most basic socio-economic phenomenon. Therefore, if we can effectively and reasonably return wealth to the grassroots, the role it plays in stimulating consumption will definitely not be less important than allocating funds or returning wealth to the middle class.

The simplest government measure that will directly benefit ordinary people is naturally reducing the fees charged by public utilities and government charges as well as reducing public housing rental. In this respect, we expressed our views when Mr Gary CHENG moved a motion on encouraging public utilities to reduce fees last November, so I will not repeat them here. As most ordinary people will use the money they saved up from basic daily expenses for other purposes, a fees reduction can improve their living, drive local consumption and promote economic revival.

Furthermore, I also believe that the Budget to be delivered by the Financial Secretary next month will most probably be a deficit Budget as proposed in the motion. A more important point is how government resources will be utilized. On the various measures proposed, I earnestly hope that the Government will ponder over them and see how it can benefit the grassroots or create more job opportunities for them. So long as they have work, they can spend and help revive our economy. This method will work. Mr Deputy, I really hope that the Government will not return wealth to the middle class or other classes only. Whatever we said will be useless if the grassroots cannot be benefited.

Mr Deputy, I so submit.

DR LUI MING-WAH (in Cantonese): Mr Deputy, we have the poorest economic situation in decades and the Government is trying hard to look for ways to revive our economy. But we must identify the root of the problem clearly before we consider adopting policies to stimulate our economy. We all know that the major cause of the current economic situation is the non-intervention policy adopted by the colonial government in the past and its failure to support local industries. The outward relocation of our manufacturing industries has resulted in an excessive dependence on the service industries, mainly the financial and property industries. As a result, our industrial structure is seriously unbalanced. Under such circumstances, our principal economic foundation, industries on which we relied on for our success in past decades, is being undermined gradually.

For this reason, all measures for promoting economic growth should be made on the premise of reducing business costs and enhancing the competitiveness of local enterprises. Blindly using our fiscal reserves to stimulate consumption in a short-sighted manner will only waste public money. The result will be short-lived and it will not be a permanent cure to the basic problem with our economy.

To achieve the above aim, I urge the Government to reduce public utility charges and fuel tax, freeze government charges, improve the $2.5 billion Special Finance Scheme, introduce comprehensive industrial policies as well as expeditiously allow scientific and technological personnel to come to work and start up business in Hong Kong. It should also encourage and support local scientific, technological and innovative enterprises and drive economic development, as this will be a permanent solution.

Mr Deputy, we all know that the Government does not have a sound strategy for reviving our economy within a short period of time. But if the Government does not adopt effective measures at once to reduce business costs and stimulate industrial development, I am afraid Hong Kong people will have to bear hardship for a much longer time.

Mr Deputy, I so submit.

MR JAMES TIEN (in Cantonese): Mr Deputy, the Liberal Party has the following views on today's motion on promoting the economy. Today, we are in an economic slump and we have had a difficult time for more than a year. Indeed we have failed to fulfil some tasks which we wanted to do. First, we definitely support pegging the Hong Kong dollar to the US dollar. Under this premise, we have to pay attention to four points if we want to promote our economy. First, rents are expensive. However, we find that the rents of offices and shops in Central have automatically dropped recently as no one rents these premises. Therefore, this problem has more or less been relieved.

Second, the Government's aid to small and medium enterprises. The formalities to be completed according to government regulations are not satisfactory. We have discussed with the Government time and again over the fact that enterprises' complaints about the many complicated formalities and we hope that the Government can make improvements soon.

It is harder for us to handle two other points, interest rates and wages. Although the existing interest rates are lower than those a few months ago, the prime rate offered by most banks is still 8.75%. Under this circumstance, many enterprises can hardly remain in business. The most important reason is that even though the inflation rate is now zero, if the prime rate is 8.75%, the real interest rate is still very high and there will be poor investment return. We all know that given the US dollar peg, our interest rate has to be a bit higher than that of US dollar. Otherwise, there will be a big increase in US dollar deposits. Therefore, this problem has not been solved so far. Given the high interest rate, many in the business sector have found it hard to do business even though they are willing to invest.

The problem of high wages is hard to tackle. Even though many companies have frozen wages this year, it does not mean that they can cut wages. Under this circumstance, it will take much longer before our business environment can be improved.

Mr Deputy, I have the following views on the motion and the amendments today, that is, the original motion proposed by Mr SIN Chung-kai of the Democratic Party, and the amendments proposed respectively by Miss Christine LOH and Mr CHAN Kam-lam. First of all, the Liberal Party appreciates Mr SIN Chung-kai of the Democratic Party and Mr CHAN Kam-lam of the Democratic Alliance for the Betterment of Hong Kong (DAB) who represent the business sector. I encourage them to make some contributions to our economic development. In fact, we have discussed about the matters mentioned above and considered proposing amendments. But we later decided not to propose amendments after some deliberation. Yet, I would like to express my views on the eight points made by Mr SIN Chung-kai. The first point is drawing up a deficit Budget for the financial year 1999-2000. Actually, Mr Ronald ARCULLI has already conveyed this to the Financial Secretary. According to the Liberal Party, if the budget deficit this year and the year before together is $80 billion, we will give our support. This is an approximate figure which is more or less the same as that proposed by Mr SIN Chung-kai.

Secondly, on rebating part of the salaries tax and profits tax received, as we already have a huge deficit, the Liberal Party has not asked the Government to reduce salaries tax and profits tax substantially this year. The Democratic Party intends to convince the Government to reduce tax and we do not oppose this as we did make such a proposal a year or two ago.

Thirdly, on waiving the rates for one quarter in 1999, actually, waiving the rates for one quarter is the same as reducing the rates percentage charges from 4.5% to 3.33%. As the Liberal Party has suggested that the Government should reduce the rates percentage charges from 4.5% to 4%, we find this point acceptable.

We have always supported reducing the fees charged by public utilities, freezing government charges and improving the Special Finance Scheme for SMEs. As for the start-up capital loan fund, the Liberal Party also supports providing loans in this form.

We also support employee training and on-the-job training. Similarly, we also support motivating young graduates to pursue further studies and enhance their competitiveness by providing an incentive in the form of "training vouchers". Therefore, the Liberal Party supports Mr SIN Chung-kai's original motion.

We cannot support Miss Christine LOH's amendment for the major reason that the amendment urges the Government to discuss tax reform options that Hong Kong can consider in the medium term which involves sales tax and value-added tax. As Hong Kong is facing a lot of problems including the problems with our economy, the recent judgment of the Court of Final Appeal and other problems, we do not support a review on these proposals. Morgan and Banks interviewed more than 300 transnational companies in November and December last year and 82% of the interviewees indicated that, among the countries and regions in Asia including Singapore, Japan and Shanghai, Hong Kong was the best place for setting up headquarters. The most important reason was our simple and easily understood tax regime. For foreign investors, it is not the right time for us to propose making such a large-scale review merely on the ground that we may have such a sizeable deficit in these two years. For this reason, the Liberal Party will vote against the amendment of Miss Christine LOH.

Mr CHAN Kam-lam's amendment actually includes five points. We support the first point, that is, reducing fuel duty by 50%. We also support lowering the rates percentage charges to 3%. It is more or less the same for the rates percentage charge to be reduced from 4.5% to 3% or 3.33% or 4%. We also agree to the formulation of a comprehensive policy to support SMEs.

Nevertheless, we do not find it feasible to provide unsecured low-interest loans with the start-up capital loan fund. The business sector operates in such a way that those in the sector very often secure bank loans by providing machinery and raw materials, if not properties, as collateral. They can hardly secure bank loans without any collateral. Therefore, the start-up capital loan fund will not work this way.

As for purchase vouchers, we agree with Mr SIN Chung-kai that this has been tried out in Japan. Indeed with shops buying back the purchase vouchers they issued at discounted prices, consumption can hardly be stimulated.

With these remarks, Mr Deputy, I make it clear that the I will abstain from voting on the amendment to be moved by Mr CHAN Kam-lam of the DAB.

MISS CHOY SO-YUK (in Cantonese): Mr Deputy, in today's motion debate, both the original motion and the amendments have focused on increasing government expenditure. I agree that the Government should increase expenditure and stimulate demand at this time of an economic downturn when the investment atmosphere is not cheerful. But this does not mean that there are no feasible measures for stimulating the economy other than increasing government expenditure. If the Government can actively rectify the rigid policies that make the business sector and the public feel disturbed, it will be able to stimulate the economy effectively.

When I proposed a motion debate on rescuing the service industry last July, I suggested that improving government policies would help our economy. For instance, I called upon the Government to attach importance to nurturing local expertise in the fields of engineering, construction, Chinese medicine and environmental protection, so that it did not have to spend extraordinarily high consultancy fees to engage from abroad experts of doubtful quality which were often not worth the while, to maximize the economic benefits of educating local professionals. At the same time, I have been urging the Government to improve the tender system for contracting out large scale projects or services in order to increase the investments by local companies and the job opportunities for local professionals, executives and workers. I have also asked the Government to be sympathetic with the difficulties of the catering industry and immediately reduce general sewage charges substantially, and negotiate with those in the industry over a fair and reasonable regime for industrial and commercial sewage charges. Unfortunately, the Government has just accepted the criticisms made by the industry, not being mindful of changing the way it works. When will the Government look squarely at the problem and introduce improvement measures?

Another policy that will help stimulate consumption is a further reduction in the wages of foreign domestic workers in Hong Kong to reduce the burden of their employers. Last October, on the basis of the result of an opinion poll, I called upon the Government to be practical and reduce the minimum wage of a foreign domestic worker by 25% to 30%. Unfortunately, some people raised objection immediately. The Government is now willing to reduce the wages of foreign domestic workers and approves of this direction after all. However, a 5% reduction is rather nominal and impractical as the wages of foreign domestic workers in Hong Kong still rank first in Asia. If the Government does not want to charge foreign domestic workers taxes as the Singaporean Government is doing, why does it not set a lower minimum wage for a foreign domestic worker or permit the free negotiation of wages to allow the public to save some money for other economic activities?

In addition to improving the existing policies for promoting the economy, the Government can try its best to utilize its taxation policy to stimulate investment. The most evident example is, now that the Government is determined to develop innovative technology industries, it should offer tax concessions to suit such development. As the development of innovative technologies often requires long-term investments, the Government should offering preferential treatments such as a tax exemption period (say five years), tax reduction period or land appropriation to attract high technology enterprises to start up business in Hong Kong. The Government may not collect a lot of taxes from the industries but it can attract some enterprises which did not invest in Hong Kong to make investments here. This can create more job opportunities for the people, stimulate consumption and the demand for offices and housing.

Mr Deputy, we may agree that the most important factor that would affect our economy in future may be at least 400 000 to 500 000 mainland people who have the right of abode in Hong Kong. If these people really settle in Hong Kong within a short period of time, we certainly have to utilize public resources to meet their needs in such areas as education, housing and social welfare. The public should also be psychologically prepared that the public resources will be thinned out. The problems arising from a rapid population growth will definitely be bitter for Hong Kong people presently being pressurized by the economic downturn. However, now that Hong Kong will most probably face these problems, I hope that the Government and the public will share the burden and make efforts to turn the grave population pressure and consumption of resources into a driving force that will benefit our economy.

Mr Deputy, I so submit.

MR TAM YIU-CHUNG (in Cantonese): Mr Deputy, to revive the economy, we must attach importance to investment in cultivation of talents. Last month, I moved a motion urging the Government to express concern about continuous education. The motion was passed with the unanimous support of Honourable colleagues and I find this most heartening. But continuous education did not attract as much attention as the remarks of mainland legal experts. Having thought deeply about this, I find that the two issues pertain to different scopes but both are important to the overall development of Hong Kong. I am glad that the Democratic Party has proposed this motion today, linking up continuous education with economic development. This proves that I am not alone in this pursuit.

In August 1998, the United States enacted the Work Force Investment Act. One major policy development is directly giving out training subsidies to allow nationals to choose freely the training courses they would like to take up, so as to encourage them to pursue further studies to enhance their competitiveness. In view of the promotion of the development of continuous education in the United States over the past 20 years or so, this form of subsidization can be successful provided it is complemented by a continuous education infrastructure.

Looking back at Hong Kong, as the Government used to adopt a positive non-intervention policy in respect of continuous education, continuous education services had failed to meet social needs. The Government lacked effective measures and our continuous education infrastructure was unsatisfactory. Working people and fresh secondary school graduates alike encounter great difficulties in respect of further studies and training. Although there are a number of professional institutes in Hong Kong, to date, there are only a handful mature self-learning systems for some professions such as accountancy and engineering. Over the years, Hong Kong has relied on the examinations of professional institutes in Britain and local professional institutes seldom organize examinations and award academic qualifications. Besides, only certain trades recognize the professional titles people obtained by joining professional institutes. The mechanism is not comprehensive or structured. As a result, the public understands little about professional examinations and self-learning systems and they do not know clearly the career prospects of individual trades which directly dampen their desire to pursue further studies.

As the examinations organized by different professional institutes are separately held by these institutes, they are not mutually co-ordinated or recognized. Therefore, there are very few structured and inter-connected further study courses on professional subjects. People who aspire to pursue further studies continuously can hardly find a dovetailed course on completion of a previous course. As there is no co-ordination between the courses organized by various bodies and organizations or common course outline, duplicate and fragmentary courses are offered. Furthermore, in the absence of an accreditation mechanism, the academic results of those who have completed these courses will hardly be recognized by their employers. This wastes the time of those who take up further studies and social resources.

In the face of these difficulties, if we want to encourage the public to pursue further studies to enhance their competitiveness and stimulate economic growth, we cannot simply determine the form of further study subsidy to be given, we should promote continuous studies also in terms of mechanism, system and policy. Therefore, the Government must set up a continuous education affairs authority to draw up the short-term and long-term objectives and strategies for the future development of continuous education. Through this authority, the Government can play a co-ordinating role in establishing a unified and transparent academic accreditation mechanism as well as in developing a structured channel for further studies, for the creation of a complete qualification structure. Specifically, it can follow the example of the national occupational qualification authority in Britain and work out a complete system for qualification accreditation and training for different trades as well as a promotion system. At the same time, it has to develop systems for professional examinations and self-learning so that everybody can obtain higher professional qualifications through self-learning and taking examinations.

MR ANDREW CHENG (in Cantonese): Mr Deputy, our unemployment rate has been rising incessantly in 1998, and many economists have predicted that the average unemployment rate this year will soar to as high as 6%.

In the past, when our economy restructured and shifted from manufacturing industries to services industries, hundreds and thousands of manufacturing workers were displaced, and they had to switch to the services industries for employment. Today, unemployment is no longer limited to the manufacturing industries, nor is it confined to junior posts; unemployment has now become a problem which cuts across all occupations and all levels. Middle-level employees like managers, executives, professionals and the like are also faced with unemployment, and the number is on the rise. What is more, the number of unemployed young people is also alarming and worrying; in the third quarter of 1997, the unemployment figure for the 15-19 age group was only 7 900 people, but in the third quarter of 1998, the figure soared to well over 20 000.

Mr Deputy, increasing the number of job opportunities is no doubt the ultimate solution to the problem of unemployment, but retraining is also absolutely required. This is especially so in a society like ours, which is marked by ever-advancing technologies and rapidly changing economic circumstances. The idea that the completion of basic school education can provide a life-long guarantee of one's rice bowl is certainly outdated. Everyone must seek to grasp new technologies and upgrade his skills through retraining and continuous education, so as to maintain better employability, or else he will be knocked out from the game. Mr Deputy, in the following part of my remarks, I will focus on the training of young people and middle-level employees.

At present, retraining assistance is provided mainly in the forms of tax allowance for personal training and the course allowances offered by the New Technology Fund and the Employees' Retraining Board. But young graduates may not necessarily be able to benefit from these forms of assistance. Therefore, the Democratic Party proposes that training vouchers should be introduced to benefit those young people who fail to complete their secondary school education or those Secondary Five to Secondary Seven students who cannot enter any tertiary institutions. The denomination of each voucher should be around $5,000, which is in line with the tax allowance for personal training and the average allowances offered by the New Technology Fund and the Employees' Retraining Board.

Unlike the forms of assistance mentioned above, training vouchers should be user-oriented. In other words, users should be allowed to enrol in courses of their own choice. This will, as a corollary, induce private course-providers to offer training courses which are more innovative and practical. Therefore, the Democratic Party maintains that training vouchers should be preferred to direct course subsidies as a means of encouraging young people to receive retraining.

In addition, the Democratic Party also proposes the setting up of an interest-free loan scheme for young people who receive retraining. At present, young people who are studying in tertiary institutions or the Open University can apply for loans under a non-means-tested loan scheme. So, we should accord the same treatment to those young people who are unable to receive formal tertiary education, so as to ensure that they will not be barred from further training because of financial difficulties. The Democratic Party proposes that young people who need financial assistance for retraining purposes should each be offered an interest-free loan of up to $10,000, so as to encourage young school-leavers to enrol in vocational courses.

For people of Secondary Three standard or below, the Government should offer more courses with recognized qualifications, so as provide a link with the formal secondary school system, some examples being the establishment of day-time adult schools and the award of recognized academic qualifications by the Employees' Retraining Board. That way, the courses concerned will be able to converge with the formal secondary school curriculum and other recognized courses, thus encouraging these people to continue their studies.

Mr Deputy, at this very time of economic sluggishness, we must not turn a blind eye to the employment difficulties of university graduates either. In this connection, the Chinese University of Hong Kong (CUHK) and the University of Hong Kong (HKU) have conducted their own surveys on the employment of their fresh graduates. According to the survey conducted by the CUHK in October 1998, of all its 2 700 fresh graduates who were interviewed, nearly 11% of them were still looking for jobs by the time of the survey. And, the survey conducted by the HKU in August 1998 also reveals that 16% of the respondents were still looking for jobs then, and this represents a rise of 5% compared to the figure for the corresponding period in the previous year.

If the unemployment problem faced by university graduates deteriorates, huge wastage of talents and social instability will result. For this reason, five tertiary institutions funded by the University Grants Committee have sought to tackle this problem by admitting 460 more students to their 1998-1999 post-graduate programmes. The Democratic Party is of the view that the Government should allocate more resources to tertiary institutions to enable them to run more post-graduate programmes.

Mr Deputy, faced with the current economic difficulties, many enterprises have resorted to layoffs as a short-term solution to their hardships and reduced profits. This is most disappointing and is also a very short-sighted measure. In the case of the Mass Transit Railway Corporation (MTRC), for example, its profits in the first half of 1998 are as big as $1.2 billion. This level of profits is no doubt slightly lower than that in the same period last year, but, given the current economic downturn, it is already not bad at all. Unfortunately, the MTRC has still sought to lay off its staff on the pretext of dropping profits. By doing so, the MTRC has set a very bad example which encourages others to follow suit.

Actually, the MTRC should instead look at its overall development prospects and see how best it can cut down expenditure and increase revenue. Now that the construction of its Tseung Kwan O Extension is about to commence, it should really treasure the experience of its existing staff as an important asset. So, what the MTRC should have done should be to upgrade the skills of its staff through appropriate training.

The investment strategies of Hong Kong enterprises have tended to be short-sighted. For this reason, they have devoted very scant resources to research and development, and their investments in staff training are also very meagre. This is certainly not at all good to the long-term development of Hong Kong. Instead of regarding their staff as valuable assets, enterprises all treat their staff as disposable tools. But I think that enterprises should instead try to upgrade the abilities of their staff through appropriate training. This can raise staff productivity on the one hand, and facilitate the long-term development of enterprises on the other. Therefore, the Democratic Party proposes that a training-related tax allowance should be introduced. By this, we mean that all expenses on training courses should be made 200% tax deductible, provided that the courses concerned are related to the business of the employer; and we further propose that such a tax allowance should be applied only to employees earning an annual income of $360,000 or less. This will encourage enterprises to offer training courses to their middle-level staff, thus enabling them to master the skills required for the business development of their employers. This will also help enterprises raise their efficiency.

Mr Deputy, I so submit.

MR NG LEUNG-SING (in Cantonese): Mr Deputy, the contents of today's motion and amendments deserve our attention. However, for the purpose of a motion, it is far too detailed and complex by setting out each and every measure in it. I would briefly speak on some of these items.

First of all, under the Basic Law, the Hong Kong Special Administrative Region (SAR) shall follow the principle of keeping expenditure within the limits of revenues in drawing up its budget, and strive to achieve a fiscal balance, avoid deficits and keep the budget commensurate with the growth rate of its Gross Domestic Product (GDP). Under this provision, the SAR Government has to strive for a fiscal balance although a deficit budget necessitated by the prevailing economic situation is not disallowed. On the other hand, it must adhere to fiscal prudence by keeping expenditure within the limits of revenues, particularly when drawing up a deficit budget. Any increase in expenditure and decrease in revenue should be made on the basis of stimulating economic recovery, which is a necessary economic target. In other words, deficit should not be enlarged unjustifiably. This is the main principle that the SAR Government should abide by when drawing up its budget for next year.

Bearing the above-mentioned main principle in mind, we can take a look at the recent comments of some academics. They pointed out that public expenditure in relation to GDP had increased from 14% in 1987 to 18% in 1997. This signals the beginning of an unhealthy trend as it has departed from the small government principle and will pose an obstacle to our recovery from the economic doldrums. So, there should be appropriate control on expenditure incurred by government departments, and costs of staff and social services provided. Emphasis should be placed on improving efficiency rather than boosting expenditure blindly. This is essential to enhancing the productivity of society as a whole and our cost competitiveness fundamentally.

On the other hand, given the current economic situation, fiscal measures for stimulating local economic activities are acceptable though they may, to a certain extent, lead to a short-term reduction in General Revenue. However, these measures should be formulated with well-defined objectives and would foreseeable results. The original motion has proposed a rebate of part of the salaries tax and profits tax. But even if a rebate is possible, the amount of money returned to the people is so small that it may not find its way into the consumer market and achieve the purpose of stimulating the economy due to weak consumer spending and lack of consumer confidence. The amendment, on the other hand, proposes a rebate, in the form of purchase vouchers, of part of the salaries tax and profits tax. That may suit the needs of salaries taxpayers better and help stimulate personal consumption. But as far as enterprises are concerned, this is not apparently fair. Nor would it help improve the running of their businesses.

As regards the proposal for further improvement to the Special Finance Scheme for small and medium enterprises (SMEs), I believe it deserves prompt decision and action on the part of the Government. For instance, there is still room for improvement in some implemented schemes in which the Government and the financial institution concerned each shoulder 50% of the risk. Besides, there should be flexibility in the repayment period of these finance schemes. Concerning the requirement for good track records of loan repayment from the SMEs, flexibility should be exercised in view of the current actual situation. With these improvements, more SMEs can be benefited, more trades can stay afloat amidst such an economic hardship, and the unemployed ranks can be reduced.

Mr Deputy, I so submit.

DR TANG SIU-TONG (in Cantonese): Mr Deputy, the original motion and the amendments today all focus only on tax reduction and increases in expenditure, and they make no mention of any ways to cut down expenditure and increase the sources of revenue. The Hong Kong Progressive Alliance (HKPA) does have some reservations about such a "spendthrift" approach, because as the saying goes: "Eat without work, and the whole fortune will be used up very soon."

The HKPA agrees that a deficit Budget is unavoidable this year, but it also thinks that as long as essential social services and tax concessions conducive to our long-term economic development are not affected, the Government should still try to minimize the deficits by cutting down its expenditure and increasing its sources of revenue. The reason is that huge deficits over a prolonged period of time will not only violate our principle of prudent financial management, but will also adversely affect the stability of the exchange rate and investor confidence. What is more, the international credit rating of Hong Kong may also be lowered as a result, thereby increasing the financing costs of our enterprises. According to statistics, the cumulative deficit in 1998-99 is between $20 billion and $50 billion. It is expected that the cumulative deficit this year and the next may be as high as $80 billion to $100 billion. If the $100 billion worth of stocks held by the Exchange Fund is not taken into account, our fiscal reserves at the end of next year will just be about $400 billion to $500 billion. So, if our deficits keep on increasing year after year, we may well use up all our fiscal reserves in a matter of just a few years. And, if the Government is thus forced to cut down its expenditure or to increase taxes drastically, the ultimate victims will be the common masses, I believe. That is why we really hope that when the Financial Secretary prepares the Budget this year, he can exercise extreme caution.

Given the existing circumstances, tax increases will only do more harm to our already sluggish economy. But without any tax increases, it will be very difficult for the Government to increase public expenditure and boost the economy with only the limited resources available. The HKPA appreciates the difficulty confronting the Government. That is why we once presented to the Financial Secretary quite a number of proposals which, we believe, would increase government revenue without affecting people's livelihood: privatization of public utility management on a contract basis; resumption of land sales with due attention given to the effects on the stability of the property market; increases in the betting duty; and zero growth for the Civil Service. In addition, the HKPA has also proposed many other types of tax concessions which can boost the economy, some examples being tax holidays for innovative technologies development, suspension of the sewage surcharge imposed on industrial and commercial undertakings and reduction of fuel duties. We believe that all these proposals, though involving reduced tax revenue for the moment, will eventually generate more revenue for the Government. I hope that the Government can consider them very carefully.

Finally, I wish to raise the point that following the Court of Final Appeal ruling which confirms that children born to Hong Kong residents in the Mainland should be entitled to the right of abode, large numbers of new immigrants will come to Hong Kong. This will exert immense pressure on Hong Kong in terms of employment, social welfare services, housing, education and medical care, and the effects may be felt very soon, probably in the next financial year. So, the Government should really make early preparations. When it prepares the Budget next year, it must conduct a comprehensive review on the allocation of resources and control its expenditure prudently, so as to meet the new demands of the community. In the long-run, the Government should also review the resource allocation arrangements relating to education and manpower training, so as to turn the new immigrants into our economy's "reinforcements".

Mr Deputy, I so submit.

MR LEE CHEUK-YAN (in Cantonese): Mr Deputy, I wish to say a few words about the experience of three places: Japan, the United States and Hong Kong.

The experience of Japan. The Financial Secretary has just returned from a trip in Japan, but I do not know whether he has ever looked at the scheme of the Japanese Government to boost the economy of the country. I understand that the Japanese Government has recently announced that it will spend as much as 10 trillion yens on a scheme to boost the country's economy. I have roughly calculated that 10 trillion yens is about HK$680 billion. Out of the 10 trillion yens, 6 trillion will be used for offering tax concessions, and the rest will be spent on expanding social security services. And, if we also count the loans offered by the central government and regional authorities to finance various projects, the whole scheme will actually involve a total sum of 20 trillion yens. It is very obvious that by putting forward this scheme, the Japanese Government actually wants to boost its economy. If the scheme is really implemented, as many as one million jobs will be created between 1999 and 2000, with the elderly and social services sector, the environmental protection and repairs sector, the housing sector and the education sector getting 420 000 jobs, 370 000 jobs, 110 000 jobs and 120 000 jobs respectively. I do not know whether the Financial Secretary has learnt any "lesson" from all these measures, which are all capable of boosting the economy and creating job opportunities. I also do not know whether the Japanese experience will induce Hong Kong to say that it too will have the enterprise to spend some money on boosting its own economy.

The second kind of experience I wish to mention is the experience of the United States. But I am not going to talk about its experience of boosting its economy. As we all know, some years ago, the Republican Party voted down the budget prepared by the Democratic Party. In the end, the two parties had to resolve their differences through negotiations before normal business resumed. This is the American experience I want to talk about.

Let me now talk about the Hong Kong experience. What is the Hong Kong experience? The Hong Kong experience is something like this: First there is a motion debate like the one we are having now, in which Members engage themselves in lengthy discussions. Then, following the motion debate, the Government will give its reply, and the Financial Secretary will most likely say that Hong Kong has adopted the principle of prudent financial management, that as a golden rule, our expenditure must not exceed the rate of economic growth, that all these principles are very important as they underpin the success and prosperity of Hong Kong and so on. The Financial Secretary may even say, "Mr LEE Cheuk-yan frequently advocates the experience of the United States, but this is really a very vicious approach!" But I really hope that the Hong Kong experience can cease to be a series of fruitless motion debates, after which no one will change his stand. This very topic today was already debated once before, in July. To be fair, following the last debate, the Government did make some concessions, but it has still clung to its so-called golden rule of financial management. The Government will not after all take any prompt measures and commit any sizeable resources to remedying the situation, nor will it ever have the enterprise to inject as much as HK$680 for the purpose of revitalizing our economy, in very much the same way as the Japanese Government has decided to do to its own economy. Since the Hong Kong Government will never do this, it has frequently found it necessary to ask us to remain patient, to wait for the eventual recovery of our economy. But as Keynes, a famous economist, once remarked to the effect that, we would have long been dead by the time the long run arrives. So, we are frequently asked to wait for long-term solutions, but we are right now already facing an immediate crisis which calls for a scheme to boost our economy. What can Hong Kong do? Is the Hong Kong experience the only alternative? In other words, should we continue to debate, to discuss and to vent our feelings, knowing very well at the same time that there will not be any results? I do not wish to see the Hong Kong experience remaining at such a level forever. I think we should really consider the experience of Japan; in particular, I hope that the Special Administrative Region Government can consider the possibility of learning from the experience of Japan. I also hope that Members of this Council can study the experience of the United States.

Thank you, Mr Deputy.

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

(No Member indicated a wish to speak)

DEPUTY PRESIDENT (in Cantonese): Mr SIN Chung-kai, you may now speak on the two amendments. You have up to five minutes to speak.

MR SIN CHUNG-KAI (in Cantonese): Mr Deputy, I wish to thank all those Honourable Members who have spoken on the motion. I must first thank the Liberal Party for its support and the Democratic Alliance for the Betterment of Hong Kong (DAB) for its amendment.

The amendment moved by the DAB actually contains many ideas which the Democratic Party will also support, one example being the reduction of fuel duty. But since we will move another motion on this issue later on, I have decided not to incorporate it into my proposed scheme of measures. The main reason is that since a separate motion on fuel duty will be moved later, I do not find it appropriate to incorporate this issue into the motion today.

On purchase vouchers, I have already made clear my views. As for the proposals on improving our business environment and assisting the SMEs, we would of course render our support. However, I must say that from the overall perspective, purchase vouchers will inevitably defeat the purpose of a tax rebate. The Democratic Party was not the first one to raise the proposal on a tax rebate; such a proposal was actually first initiated by the "Six Parties and One Group" last year, only that some parties may have already stopped pursuing this issue after the passage of several months.

Miss Christine LOH also supported the proposal of the "Six Parties and One Group" at that time, but, well, she no longer supports it now, and I suppose this is largely because she may think that after the passage of seven or nine months, the circumstances are very different now. However, precisely because of the persistence of serious economic difficulties, I am all the more convinced that a tax rebate should be offered as one of the ways to ease the people's plight. The several points raised by Miss Christine LOH are also our concern, but if we propose to impose a sales tax and capital gains tax at this stage, what will happen? Will such proposals send off an alarm in the international community, thus producing long-term impacts on Hong Kong? I think this should be our concern and worry. On land sales, several colleagues have already put forward a lot of opinions. So, we will talk no more about this issue.

Mr FUNG Chi-kin questioned whether training vouchers would become something like CSSA payments. We too are of course very worried about such a possibility, and we will, therefore, make very special efforts to prevent training vouchers from becoming something like CSSA payments; CSSA payments are meant to cover the living expenses of the recipient, but training vouchers will aim only to assist the recipient in furthering his studies or acquiring new skills. In fact, Mr TAM Yiu-chung and Mr Andrew CHENG have already explained the concept of training vouchers in great detail. I am sure that their explanation can provide very useful reference to Mr FUNG Chi-kin. Our primary objective should be to solve the unemployment problem, to improve the employability of our citizens. Actually, even under the existing economic circumstances of Hong Kong, many industries and trades are still in great need of skilled manpower. Let me give an example. The information technology industry is now in great need of skilled manpower to tackle the millennium bug, but the training required cannot possibly be completed in any one-week courses; rather, several weeks or even two to three months of training may be required. But people of Secondary Five standard can be equipped with the skills required after proper training. So, there is indeed a need for reforms ─ oh, Miss Denise YUE seems to be smiling in response. As far as I know, the computer courses offered by some of our universities now no longer cover software like COBOL. But people with knowledge about similar softwares are required in the market. People who join this industry, having helped tackle the millennium bug, will have at least acquired the basic information technology skills required. In the future, they can always take up new kinds of jobs to help tackle any new problems which may arise. I think this is a point which the Government must consider.

Mr FUNG Chi-kin mentioned a "venture board" a moment ago. The Democratic Party supports this idea very much, and we have actually raised this idea several times before. Then, Mr FUNG said that we should lower our interest rate. Well, I really hope that he can tell the Legislative Council how we can possibly push down the interest rate. I think Mr James TIEN, the industrial and commercial sector and many others who are knowledgeable will all wish to push down the interest rate. But given the peg, can one actually come up with any specific scheme to push down the interest rate? Naturally, all people wish to push down the interest rate, because it is actually much too high now. We all wish to benefit from a low interest rate, but how can we achieve our goal? Are there any ways to push down the interest rate? If no, what can we do then?

On the Japanese experience mentioned by Mr LEE Cheuk-yan, we must think very carefully before taking any actions. The 10 trillion-yen scheme to which he has is after all just an experiment the success or otherwise of which is not yet known. It can be very risky to rely on such a scheme, which seeks to achieve the desired purpose simply by throwing out huge amounts of money.

The measures proposed by the Democratic Party in its motion will no doubt require the Government to incur some extra expenses, but the amount involved will be very small and will still be within the means of the Government. Since this will still be within the financial capability of Hong Kong, the slightly enlarged deficit should be regarded as mild. Some of my colleagues in the Democratic Party have made an estimation on the amount required, and their estimation is roughly the same as those of other Members. The problem with Japan is mainly caused by its banks; its whole banking system is plagued with the problem of "more liabilities than assets". Just read the latest issue of Business Week, and we will see that some people actually think that if Japan is to overcome its current problems, 10 more trillion yens on top of the 10 trillion yens already proposed will have to be spent on saving its banks.

THE PRESIDENT resumed the Chair.

FINANCIAL SECRETARY (in Cantonese): Madam President, the motion proposed by Mr SIN Chung-kai together with the amendments proposed by Miss Christine LOH and Mr CHAN Kam-lam has expanded the scope of the debate. Therefore in this afternoon, it can well be said that curtains are raised for the debate on the 1999-2000 Budget in this Council. The enthusiastic responses of Honourable Members here in this Chamber have demonstrated their concern for the economic situation of Hong Kong. They have also reiterated that in answering my questions during the budget consultation this year, the wish to put their proposals for the addition or otherwise of taxes for the coming year in the form of public and written statements. Their comments have also highlighted once again the dilemma which the Government faces, that is, it cannot reduce expenditure substantially, nor can it propose to increase taxes without considering the consequences. My colleagues and I are making a final review of the economic prospects and will decide on the financial measures for the coming year. I will consider carefully all the invaluable advice which Members have given today. The final decision will be announced in the 1999-2000 Budget to be delivered on 3 March.

I wish to make use of this opportunity today to share with Members the challenges and considerations which the Government has to take when drawing up the Budget for the coming year, as well as my own thoughts and feelings in the process.

Three weeks from now I shall be delivering my fourth Budget here in this same Chamber again. Whenever it comes to this time of the year, I feel the pressure of being a financial secretary falling on me especially hard. But at the same time I feel honoured to have the privilege of being able to head a team in the SAR Government to draw up the Budget. The current year has seen Hong Kong struggling in the aftermath of the global financial turmoil and its economy is undergoing the toughest ordeal that it has ever experienced since the end of the Second World War. The bullish economy, rising unemployment and weak consumption have struck home very forcefully on me the kind of expectations the public would hold for this upcoming Budget.

It is precisely for this reason that I wish to have a more accurate grasp of public opinion. Extensive consultations are a necessary and crucial step in the course of budgeting every year. Since the end of last year, I began to seek the advice of Members of the Legislative Council, the district boards, the business and professional bodies, the media and the academics with regard to the forthcoming Budget. The difference between this year's consultation exercise and the previous ones is that I have purposefully broadened the consultation network and through a number of channels I have listened very carefully to the views and wishes of people from all walks of life on the next year's Budget. To every person who has put forward his or her views to me, I wish to express my heart-felt gratitude, for they have taken a sympathetic and frank approach to understand the kind of situation we are in. I have learned a lot from these exchanges of opinion. The parties and independent legislators in this Council have shared with me their views at one time or another. What is slightly different from last year is that there are more exciting discussions going on about the Budget, especially related to the issue of a deficit budget. People from different sectors as well as the public at large have made their views known by a variety of opinion polls and surveys.

Many people would say that the Budget for 1999-2000 is the hardest ever budget to produce. It is a commonly acknowledged fact of life that the smartest housewife will be unable to cook a meal without any rice, as the Chinese saying goes. The latest opinion polls show that a vast majority of the public are aware of the hardship and restraints we are facing and they sense that the Government may have to cut expenses or to increase taxes. I am deeply moved by the cool-headed, understanding and sympathetic way the people have taken this.

We do share the pains and blows that the public has to bear. The surging waves of a downward revision of the economy are rolling onto our shores, we need to keep a stiff upper lip and take the challenge boldly. Public organizations and private companies alike must strive to raise efficiency, improve on the systems and be committed to innovation. We need to fortify our fundamentals and enhance our competitiveness, thereby paving the way for economic recovery. Let me assure Members that when drawing up the Budget, the Government will try its very best and stand on the premise that the provisions of the Basic Law must be conformed with and the principle of financial prudence be adhered to. Such a budget will not only help Hong Kong to tide over its present difficulties, but also safeguard our long-term interest as well.

The contents of the motion moved by Mr SIN and the amendments by Mr CHAN Kam-lam and Miss Christine LOH are all related to taxes and public expenditure items, some of which are related to budget deficit and tax proposals. A lot of tax concessions were proposed in last year's Budget and they served to ease the tax burdens of many businessmen as well as those employed. As a whole, tax revenue for the year 1998-99 would be reduced by as much as $13.6 billion, and rolling on to the year 2001-02, the amount of tax revenue lost would be close to $100 billion. In the middle of last year, the Government launched a $30 billion special tax relief package to address the impact of economic adjustment. That I think would still be fresh in our mind.

The year 1999-2000 would be the time when benefits received under these tax concessions and exemptions will see their maximum impact. For the period from this year to March next year, both corporate and individual tax burdens would be eased substantially.

It is a commonly known fact that the financial position of the Government is greatly affected by the decline in the territory's economic performance. According to the latest information, deficits for the current year will stand at more than $30 billion. Revenue prospects for the next few years will continue to be grim. In the face of such a state of affairs, the room for further tax cuts as a relief measure would be very limited indeed.

As today is not the most appropriate occasion to discuss specific financial proposals, so I will not respond to each of the proposals made by Mr SIN and Miss LOH. The following points would still be worth mentioning, though:

- The Government has always been paying much attention and encouraging those in employment to receive training and further their studies. Therefore:

- The Government will inject a further $500 million into the Employees' Retraining Board within the year 1999-2000 in an attempt to offer more courses for the unemployed and at the same time to improve on the quality of training services.

- In terms of taxes, the salaries taxpayers may enjoy an annual relief of a maximum of $30,000 for training expenses. In addition, employers also enjoy an 100% deduction in profits tax in respect of the training expenses on employees.

- In addition, the Trade and Industry Bureau and the Industry Department are presently reviewing the credit scheme especially designed for small and medium enterprises, to study if the current mode of operation should be improved to ease the liquidity problem of the enterprises more effectively.

I always remind myself that one of the objectives for next year's Budget should be set on relieving the pains brought on the public by the economic adjustment and to imbue hope and confidence in their place. At this critical juncture, whatever measure that may be adopted by the Government must strictly adhere to the cardinal principle of prudent financial management and our potentials for long-term development must not be given up for short and transitory gains. Only by doing so can we give full play to our strategic edges and meet the challenges of the next century.

Madam President, economic recovery is the wish shared by all the people of Hong Kong, and I hope it is also the common goal that we are all striving for. To reach this goal, there are a lot of hurdles that we have to clear. But we have no choice but to take on this rocky path. The Government shall walk hand in hand with the people. In this regard we also hope to get the full support of the Honourable Members of the Legislative Council. Together we shall tide over these difficult times.

Thank you, Madam President.

PRESIDENT (in Cantonese): I now invite Miss Christine LOH to move her amendment to the motion.

MISS CHRISTINE LOH: Madam President, I move that the Honourable SIN Chung-Kai's motion be amended, as set out on the Agenda.

Miss Christine LOH moved the following amendment:

"To add "this Council urges the Government in formulating the upcoming budget, to use the occasion to provide short-term relief" after "That"; to add "by using the fiscal reserves wisely, to resume land sales from April 1999 and to discuss tax reform options that Hong Kong can consider in the medium term so that Hong Kong can lessen its public finance dependency on land sales and property related revenues, thereby putting Hong Kong's long-term public finance on a more stable base" after "in the face of Hong Kong's economic downturn"; and to delete ", high unemployment rate and declining competitiveness, and with a view to restoring the momentum of Hong Kong's economic growth, this Council urges the Government to adopt the following measures to boost consumer spending, promote innovation and re-create talents:

1. draw up a deficit budget for the financial year 1999-2000;

2. rebate part of the salaries tax and profits tax received;

3. waive the rates for one quarter in 1999;

4. reduce the fees charged by Government-owned public utilities and freeze government charges;

5. improve the Special Finance Scheme for small and medium enterprises to ease their liquidity difficulties;

6. set up a "start-up capital loan fund" to give impetus to the establishment of innovative enterprises and increase job opportunities;

7. encourage enterprises to provide on-the-job training for their employees by offering tax incentives for employee training; and

8. motivate young graduates to pursue further studies and enhance their own competitiveness by providing an incentive in the form of 'training vouchers'"."

PRESIDENT (in Cantonese): I now propose the question to you and that is: That the amendment moved by Miss Christine LOH be made to Mr SIN Chung-kai's motion.

I now put the question to you as stated. Will those in favour please raise their hands?

(Members raised their hands)

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

(Members raised their hands)

PRESIDENT (in Cantonese): I think the question is not 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 amendment negatived.

PRESIDENT (in Cantonese): Now that we have dealt with Miss Christine LOH's amendment, Mr CHAN Kam-lam, you may move your amendment.

MR CHAN KAM-LAM (in Cantonese): Madam President, I move that Mr SIN Chung-kai's motion be amended as set out on the Agenda.

Mr CHAN Kam-lam moved the following amendment:

"To add "reduce the operating costs of enterprises," after "this Council urges the Government to adopt the following measures to"; to add ", in the form of 'purchase vouchers'," after "2. rebate"; to add "3. reduce fuel duty by 50% to lower the operating costs of the transport sector;"; to delete "3" from "3. waive the rates for one quarter in 1999" and substitute with "4"; to add "and lower the rates percentage charges to 3%" after "waive the rates for one quarter in 1999"; to delete "4" from "4. reduce the fees charged by Government-owned public utilities and freeze government charges;" and substitute with "5"; to delete "5" from "5. improve the Special Finance Scheme" and substitute with "6"; to insert "formulate a comprehensive policy to support small and medium enterprises, strengthen the role of the Small and Medium Enterprises Office, assist these enterprises in perfecting their management, opening up markets and developing products, and" before "improve the Special Finance Scheme for small and medium enterprises to ease their liquidity difficulties;"; to delete "6" from "6. set up a 'start-up capital loan fund'" and substitute with "7"; to add "to provide unsecured low-interest loans" after "set up a 'start-up capital loan fund'"; to delete "7" from "7. encourage enterprises to provide on-the-job training" and substitute with "8"; and to delete "8" from "8. motivate young graduates to pursue further studies" and substitute with "9"."

PRESIDENT (in Cantonese): I now propose the question to you and that is: That the amendment moved by Mr CHAN Kam-lam be made to Mr SIN Chung-kai's motion. I now put the question to you as stated. Will those in favour please raise their hands?

(Members raised their hands)

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

(Members raised their hands)

Mr LEE Wing-tat rose to claim a division.

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

PRESIDENT (in Cantonese): I wish to remind Members that the question now put is: That the amendment moved by Mr CHAN Kam-lam be made to Mr SIN Chung-kai's motion.

PRESIDENT (in Cantonese): Before I declare that voting shall stop, are there any queries? The voting shall stop and the result will now be displayed.

Functional Constituencies:

Mr LEE Kai-ming, Mr Ambrose CHEUNG, Mr CHAN Kwok-keung, Mr CHAN Wing-chan and Mr WONG Yung-kan voted for the amendment.

Dr Raymond HO, Miss Margaret NG and Mr Bernard CHAN voted against the amendment.

Mr Kenneth TING, Mr James TIEN, Mr Edward HO, Mr Michael HO, Dr LUI Ming-wah, Mr CHEUNG Man-kwong, Dr LEONG Che-hung, Mrs Sophie LEUNG, Mr SIN Chung-kai, Mr Howard YOUNG, Mrs Miriam LAU, Mr LAW Chi-kwong, Mr FUNG Chi-kin and Dr TANG Siu-tong abstained.

Geographical Constituencies and Election Committee:

Miss Cyd HO, Mr LEE Cheuk-yan, Miss CHAN Yuen-han, Mr Gary CHENG, Mr Jasper TSANG, Mr LAU Kong-wah, Miss Emily LAU, Mr TAM Yiu-chung, Mr CHAN Kam-lam and Mr YEUNG Yiu-chung voted for the amendment.

Miss Christine LOH and Mr LEUNG Yiu-chung voted against the amendment.

Mr Albert HO, Mr LEE Wing-tat, Mr Martin LEE, Mr Fred LI, Mr James TO, Dr YEUNG Sum, Mr LAU Chin-shek, Mr Andrew CHENG, Mr SZETO Wah, Mr HO Sai-chu, Mr NG Leung-sing, Prof NG Ching-fai, Mr MA Fung-kwok, Mr Ambrose LAU and Miss CHOY So-yuk abstained.

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

THE PRESIDENT announced that among the Members returned by functional constituencies, 22 were present, five were in favour of the amendment, three against it and 14 abstained; while among the Members returned by geographical constituencies through direct elections and by the Election Committee, 28 were present, 10 were in favour of the amendment, two against it and 15 abstained. Since the question was not agreed by a majority of each of the two groups of Members present, she therefore declared that the amendment was negatived.

PRESIDENT (in Cantonese): Mr SIN Chung-kai, you may now reply and you have three minutes 27 seconds out of your original 15 minutes.

MR SIN CHUNG-KAI (in Cantonese): Madam President, I would like to thank the Financial Secretary for his reply and Members for their speeches. I hope that Members will support my original motion. The original motion only suggests drawing up a mild deficit budget and I hope that Members will give their support. I am not going to repeat what I have said earlier. Thank you.

PRESIDENT (in Cantonese): I now put the question to you and that is: That the motion moved by Mr SIN Chung-kai be passed.

Will those in favour please raise their hands?

(Members raised their hands)

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

(Members raised their hands)

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

(No Member responded)

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

PRESIDENT (in Cantonese): Second motion: Prices of fuel.

PRICES OF FUEL

MRS MIRIAM LAU (in Cantonese): Madam President, the prices of fuel in Hong Kong can be described as the highest in the world. The price of unleaded petrol is a good example. If one compares the pump price of unleaded petrol here with those in other places in Asia in terms of the Hong Kong currency, one will have a per-litre price list like this: $9.84 in Hong Kong, $4.93 in Singapore, $3.88 in Taiwan and $2.24 in Malaysia. And, the pump prices in other places such as Australia and Canada are $2.50 to $3.00 and $2.20 to $2.50 respectively. Obviously, fuel prices in Hong Kong are far higher than those in other places.

To find out why fuel prices in Hong Kong are so high, we should of course take up the matter with the oil companies first. The price of crude oil in the world market in fact dropped from US$19.2 per barrel in December 1997 to US$10.2 per barrel in December 1998, and the import prices of fuel have also been dropping steadily. But the oil companies in Hong Kong have all along kept their prices at very high levels, instead of introducing any price reductions in response to falling import prices.

When our economy was still in good shape, people could still put up with high fuel prices. But now, since we are experiencing a prolonged economic downturn, people have started to express concern about high fuel prices. But however strong people's grievances and public opinions are, they can never be as powerful as the words from the Chief Executive; as soon as the Chief Executive made his comments, the four oil companies immediately, and at long last, hastened to lower their fuel prices ─ unleaded petrol by $0.2 per litre, diesel by $0.1 per litre and liquefied petroleum gas (LPG) by $0.4 per litre. Besides, the oil companies even launched a "price war" among themselves by offering price discounts at a small number of filling stations. However, strangely enough, they all offered the same discounts.

Fuel prices have indeed dropped a little bit, but the concessions simply cannot benefit all consumers, especially because the oil companies have made it clear that the price cuts will not be here to stay. So, there is indeed the worry that once the pressure of public opinions has subsided, fuel prices may well go up to their previously high levels again. Therefore, I think the Government should really take actions in several directions, so as to bring down fuel prices across the board as soon as possible and to maintain them at reasonable levels thereafter.

First, we think that fuel prices can be adjusted further downward, and our view is shared by the Chief Executive and senior government officials. Indeed, if the oil companies can offer cash discounts instead of gifts to their customers, they will certainly be able to adjust fuel prices further downward. In this connection, I must admit that the Government actually knows the situation of the oil companies far better then the general public do. For this reason, I hope that the Government can continue to negotiate with the oil companies, with a view to bringing about more substantial and comprehensive price reductions.

Second, the Government should grant more lands for the purpose of constructing filling stations, so as to reduce the premiums and rental costs involved. As informed by the oil companies, we understand that the premium for a filling station with a lease term of 21 years actually ranges from $100 million to $160 million. This means that in order to meet the premium costs, more than $1 has to be recovered from selling one litre of fuel, and one must consider the filling facilities as well; such costs may range from as much as $6 million to $10 million. The Government has never denied the truth of these costs calculations. So, if land premiums are really as high as claimed, it is indeed small wonder that fuel prices cannot go down by any substantial margin.

Third, the retail fuel market should be liberalized to bring in price competition. For years, the oil products market of Hong Kong has been marked by an absence of any genuine competition; the oil companies are almost monopolistic, and there is every reason to suspect that there is a form of cartel among them. The Government must try to rectify such an unhealthy situation. In order to enhance competition in the oil products market, the Government should consider the implementation of a points system for the bidding of lands designated for filling stations. Specifically, more points should be given to new operators, so as to facilitate their entry into the market.

Some people argue that it may not be easy to bring in competition because it requires an enormous capital outlay by new operators who will also have to compete with giant oil corporations which own huge financial resources. These people therefore think that it may be impossible to liberalize the fuel market after all. But I must say that even if it is difficult to do so, we should still try, or else it will be difficult to prevent the oil companies from selling their fuel at uniform prices; and, with the resultant lack of competition, prices of fuel will continue to remain at high levels.

Fourth, the principles of commercial operation permitting, the oil companies should be encouraged to adopt a higher degree of transparency with respect to the pricing of their fuel products. I maintain that the oil companies should release more specific information on the price structures of their fuel products, so that members of the public can be better-informed in judging whether or not the oil companies are making excessive profits. The 180 gas filling stations in Hong Kong are one example. Is the premium for each one of them really more than $100 million? Since we do not have any information on this, we cannot be sure whether more than $1 really has to be recovered from the sale of one litre of petrol in order to meet the premium costs.

The Government should take immediate actions to deal with the four points I have mentioned. In addition to advocating the need for reducing the prices of petrol and diesel as quickly as possible, I also wish to express my worry about the LPG taxi scheme. Whether or not the scheme can be successfully implemented at the end of 2001 or before will depend largely on the prices of LPG and the timely completion of logistical facilities such as LPG filling stations. If LPG prices are not lowered, or if the oil companies are reluctant to invest in LPG filling stations because of high land costs, then the whole scheme may well be held up. Therefore, the Government must take prompt actions to deal with these problems.

When the Government joins us in criticizing the oil companies, it is in fact behaving like "a thief who reproves the acts of his counterparts". The possibility of the oil companies making excessive profits and the high land costs of gas filling stations are of course two reasons for our high fuel prices. But these two reasons aside, there is still a third reason ─ the high rate of fuel duty levied by the Government, which is the direct cause of our persistently high fuel prices.

Just think about this. The pump price of unleaded petrol now is $9.84 per litre, but as much as 61% of it, or $6.06, will go to the pocket of the Government as fuel duty. If the oil companies are really honest in their claim that more than $1 in the price of one litre of petrol is for the payment of land premiums charged by the Government, then one can conclude that whenever one litre of unleaded petrol is sold, the Government will get more than $7, which is more than 70% of the pump price. So, if we say that the profits of the oil companies are handsome, then we must also say that those reaped by the Government are far more handsome. The rate of diesel oil duty is also very high, standing at 35% of the pump price now. After March this year, when the pump price of diesel oil climbs back to $2.98 again, the rate may well reach 43%.

Since 1996, I have been pursuing the issue of high fuel prices. All along, I have not only requested a freeze of fuel duty; I have also asked for a reduction of it. From the perspective of transport management, diesel oil is a necessity of the transport and freight forwarding industries. So, even if the fuel duty keeps rising, professional drivers will not possibly use less of or stop using their vehicles, with which they earn their living. From the perspective of people's livelihood, any increase in fuel duty is tantamount to increasing the "fuel-related direct tax" levied on professional drivers, and this will increase their operating costs directly. Although the Government did reduce the amount of fuel duty from $2.89 to $2.00 in June 1998, the reduction is scheduled to end in March this year. At that time, the Government said that it wanted to ease the difficulties confronted by the transportation trade; now, since our economic conditions are still very poor, the transportation trade is still facing immense difficulties. So, I think the Government should really extend the period of reduction and even consider the possibility of a further reduction.

More importantly, we must note that from the perspective of our whole economy, high fuel prices will inevitably increase the operating costs of the transportation trade, thus increasing the costs of freight forwarding in detriment to our overall competitiveness. Actually, we must not ignore the fact that our freight forwarding volume has already shown signs of a decline and that the whole industry is facing many difficulties and challenges.

For private car owners in general, exorbitant fuel prices are indeed a very heavy burden for them. Despite the constant improvements of our public transport system, those who have a need to use private cars will continue to do so, because private cars can offer a high degree of mobility in this society where the tempo of life is fast and time so precious. Therefore, people who need to use private cars in their work, or people who live in remote places, will continue to travel on private cars; even heavy taxes will not possibly force them to stop doing so. Admittedly, as revealed by the statistics supplied by the Census and Statistics Department, the growth in the number of newly registered private cars has indeed slowed down recently compared to the same period last year. But the overall number of private cars is still on the rise. So, it is obvious that the number of private cars is in fact closely related to our economic activities, and the levels of fuel prices do not produce any significant effects on it at all.

Well, the Government may put forward yet another reason, a grand and lofty one indeed, to justify the heavy fuel duty it imposes. Clinging to the "polluters pay" principle, the Government considers that private car owners should be made to pay more "fuel-related direct tax". But if environmental protection is really the rationale behind the high rate of fuel duty, why does the Government not ask drivers to use wooden handcarts to move their goods? Why does the Government not ask people to use tricycles or simply travel on foot? Since all vehicles used by the transportation trade must be powered by diesel, the imposition of heavy fuel duty is absolutely unfair to the drivers concerned. A more sensible approach should be to assist, where possible, diesel vehicles in switching to other environmentally friendly fuels as quickly as possible. And, as for those vehicles which cannot switch to other environmentally friendly fuels, appropriate regulatory measures should be imposed. One example is the adoption of more stringent standards governing vehicle emissions, so as to make the vehicles concerned more environmentally friendly. In the case of unleaded petrol, the "polluters pay" principle is simply inappropriate, because even the Government itself has already confirmed that it is more environmentally friendly than other types of fuels, otherwise the Government would not have recommended the diesel-to-petrol switch scheme back in 1995. For this reason, I maintain that it is inappropriate to impose heavy fuel duty on the excuse of environmental protection. And, if environmental protection and fuels should really be related in such a way as the Government thinks, there is all the more reason for the Government to exempt LPG from fuel duty, because LPG is an environmentally friendly fuel. Such an exemption will increase the acceptance of this type of fuel by the taxi trade, thus facilitating the smooth implementation of the LPG taxi scheme.

Some people ask, "If the Government freezes or even reduces fuel duty, how can the Treasury generate enough revenue?" In response, I must ask the Government this question: What is meant by the slogan "tiding over the difficulties together"? The Government itself also realizes the difficulties faced by the transportation sector. So, if it still insists on "fleecing" the transportation sector, it should really change the slogan and ask the sector to "sacrifice itself for the benefit of others". This may make those in the sector feel a bit better. But then, these hundred thousand or so people in the transportation sector and their dependants, numbering dozen hundred thousand, will surely become unable to live a good life.

It is actually a grave miscalculation for the Government to think that it can protect its revenue by maintaining a high rate of fuel duty. In recent years, the sale of black market fuels has become very rampant. There is only one simple reason for this. In the black market, one litre of diesel is sold at a low price of $2.8 only, and industrial marked oil and unleaded petrol are sold at $1.6 and $6.5 per litre respectively. These prices are far lower than those in the lawful fuel market. That is why many drivers want to buy their fuels in the black market, thus leading to the springing up of "milk tea stalls" (illegal gas filling stations) all over the territory. As a result, the law enforcement agencies have to expend a lot of resources on the raiding of these illegal gas filling stations, and the Treasury has also suffered immense losses in revenue. In last year alone, the total taxable value of all the illegal oil products seized by the Customs and Excise Department was as high as $12.4 million, and this amount is but the tip of the iceberg. The Government should simply not ignore this situation. Besides, we must also note that fuel prices in the Mainland are far lower than those in Hong Kong. Diesel, for example, is sold at a mere price of $2.00 RMB in the Mainland. So, many Hong Kong drivers plying between Hong Kong and the Mainland seldom refill their vehicles in Hong Kong. This has significantly reduced the amounts of fuel duty collected by the Special Administrative Region Government. Actually, if the Government can lower its fuel duty, its revenue from fuel duty may well go up instead of going down, because more people will then be willing to buy "legal" fuels and more revenue can thus be generated for the Treasury. And, if the Government really wants to protect the environment, it should find it all the more necessary to lower fuel duty because black market diesel is inferior to "legal" diesel in terms of quality and will thus cause more pollution. In addition, the Government must note that the absence of any safety measures at illegal gas filling stations will put public safety at risk. The most effective way to eliminate illegal gas filling stations will be to reduce the price differences between illegal fuels and "legal" fuels by lowering fuel duty.

Madam President, my analysis shows that there is room for the oil companies to further reduce their prices. But even if they agree to introduce any further reductions, the rates of reduction are likely to be rather small, because they have already volunteered to lower their prices a little bit. In contrast, the Government should be more capable of bringing about further price reductions by lowering fuel duty. If the Government is really concerned about the plight of the people and the transportation sector, it must make concessions in terms of fuel duty. In addition to paying attention to the economy as a whole, the Government must also pay special attention to the business environment of the transportation sector and its impacts on the community at large. More importantly, the Government must also note that a lower fuel duty may bring about substantial benefits to the Treasury.

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

Mrs Miriam LAU moved the following motion:

"That, in order that fuel prices can soon be reduced across the board and maintained at a reasonable level, this Council urges the Government to adopt comprehensive measures, including immediately reducing fuel duty, continuing to negotiate with oil companies for price reduction; lowering the land premium and rental costs of filling stations by granting more land designated for such stations; opening up the retail fuel market to introduce price competition; and, under the principle of not affecting commercial operations, encouraging oil companies to enhance the transparency in the determination of oil prices."

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

Mr Fred LI will move an amendment to this motion, as printed on the Agenda. In accordance with the Rules of Procedure, the motion and the amendment will now be debated together in a joint debate.

I now call upon Mr Fred LI to speak and to move his amendment.

MR FRED LI (in Cantonese): Madam President, I move that Mrs Miriam LAU's motion be amended, as set out on the Agenda.

Since the Asian financial turmoil last year, the whole world is in an economic recession and the global demand for crude oil has dropped drastically. As estimated by the International Energy Agency by the end of last year, there will still be a negative growth in the global demand for crude oil in 1999 and the price of crude oil will still be relatively low. Moreover, there will be space for a substantial reduction in the prices of petroleum products in the world.

Madam President, our oil products are mainly imported from Singapore. Available information shows that in the past year, the import prices of unleaded petrol and vehicle diesel have fallen by almost 20% and 25% respectively. However, the four major oil companies in Hong Kong have not reduced fuel prices along with the rate of reduction in import prices. On the contrary, they have kept giving out fuel coupons, tissues and distilled water to drivers. They are competing not in terms of prices and they have obviously violated the fair competition principle. Liquefied petroleum gas (LPG) is all the more unreasonably priced. The retail price of LPG has not been adjusted since November 1996 when the import price of LPG has fallen by more than 50% in these two years. The relatively high price is unfair to the 870 000 users, rendering them badly off in the process.

Since October last year, the public, Members, the Consumer Council and the Government have started looking closely at the relatively high fuel prices in Hong Kong. Even the Chief Executive, Mr TUNG Chee-hwa, has stated in a high-profile manner that fuel prices are excessively high. The Chief Executive seldom makes such high-profile criticisms indeed.

The Democratic Party finds it inappropriate for and does not encourage the Government to pressurize, through the media, oil companies into reducing fuel prices. This incident fully exposes that there may be a monopoly or pricing agreements in the local oil products market. To safeguard the interests of consumers and ensure that the prices of oil products are set at a level that permits reasonable competition, we think that the Government should not remain indifferent and it should apply legislation or other measures to establish a sound mechanism for monitoring and improving the future operation of and competition in the oil products market, so that the prices of oil products can revert to a reasonable level. Therefore, the Democratic Party and I do not agree to Mrs Miriam LAU's suggestion which asks the Government to continue to negotiate with the oil companies over a price reduction. Moreover, pressurizing oil companies is directly intervening in market operation and the determination of prices, deviating from the principle of non-intervention in the market, a principle on which the Liberal Party has always insisted.

On the other hand, we agree with Mrs LAU's urge on the Government to reduce fuel duty immediately as the Government should make an effort to tide over the difficulties with the public, so that some 160 000 commercial vehicles can immediately benefit from a drop in fuel prices and the transport industry reduced operational costs.

The Democratic Party thinks that the Government must quickly tackle two tasks. First of all, it has to enhance the operational transparency and accountability of oil companies.

Mrs LAU's original motion also urges the Government to "encourage" oil companies to enhance their transparency in the determination of oil prices. But we think the use of the word "encourage" is a bit too mild. To enhance the Government's monitoring of oil companies, it is imperative that the operational transparency and accountability of oil companies be enhanced. The three energy organizations in Hong Kong, Towngas, China Light and Power and Hongkong Electric, must consult the Energy Advisory Board and report to the Legislative Council before adjusting prices. To follow through the Government's energy policy, it must treat oil companies equally and apply to them the same monitoring mode. I have read and carefully studied the statement of position Mrs LAU sent us. Mrs LAU thinks that putting the oil companies under the ambit of the Energy Advisory Board may be tantamount to government intervention in the determination of product prices to a certain extent. However, I do not think the Energy Advisory Board has such power. The Government requires oil companies to consult the Energy Advisory Board because it hopes that the oil companies will make public more information and listen to various views when they determine prices, all this meant for enhanced accountability.

Secondly, looking for ways to promote market and price competition of oil products. Mrs Miriam LAU has suggested lowering the land premium and rental costs of filling stations by granting more land designated for such stations. The Democratic Party has reservation about this suggestion and queries its effectiveness. In fact, we have checked the record and found that the Government granted land for a total of five filling stations in the past three years and each piece of land costs more than $100 million. As far as I know, a large company has recently succeeded in bidding for a site for $165 million. Although the market is now open for tender by all, I believe that only a few financially strong transnational oil companies are capable of making a bid of high premiums and making huge investments. Even if the Government grants more land for filling stations, there will only be a limited number of sites in the newly developed areas. The companies that succeed in bidding for the new filling stations will still not be able to compete with the top four oil companies. If they rely on the existing oil companies for supply, they will be even less competitive. Furthermore, the premiums and high land grant costs of filling stations paid by oil companies cannot be reduced. Even if more land is granted in future for filling stations, it will not be able to facilitate price reduction by oil companies. The original motion suggests opening up the retail fuel market to introduce price competition but I do not think the Government has any feasible and effective measure for attaining this result.

Actually, the Government knows very little about the market structure and the modus operandi of oil companies and their distributors in wholesale and retail. Have the oil product prices remain uniform because there are price agreements or for other reasons? Does the uniform price of oil products indicate that there is problem at the wholesale or retail level? If we casually make proposals before we know clearly where the problem lies, we cannot pinpoint at the problem and we may be adopting methods to alleviate the symptom only, not getting at the root of the problem. We doubt the effectiveness of these methods.

To break the monopolistic situation, the Democratic Party thinks that the first and foremost task for the Government is to expeditiously survey the structure and modus operandi of the oil products market. It is most appropriate for the Competitive Policy Advisory Board, which is responsible for determining and promoting local competition policies, to carry out this survey. This Board is chaired by the Financial Secretary, Mr Donald TSANG, and the Secretary for Economic Services, Mr Stephen IP, is a member. Provided that the Government has completed the survey and identify the problems and proved that monopoly does exist, we can then pinpoint at the problems and draw up suitable legislation and measures to rectify and improve the market situation. I must stress that the aim of the Democratic Party in suggesting the formulation of legislation and measures is to eliminate unfair competition in the market, rather than intervening in the free market as Mrs LAU has suggested. Certainly, if we find that the market features make monopoly inevitable, the Government should suitably exercise supervision on the oil companies in order to protect public interest. To pinpoint at the problems to be solved and to give the measures to be adopted effect, an in-depth and detailed study is essential and important. We find the methods suggested in Mrs LAU's original motion somewhat speculative, and they have not touched upon and solved the most crucial problem.

Lastly, section 6 of the Oil (Conservation and Control) Ordinance (Cap. 264) of the Laws of Hong Kong has empowered the Government to regulate the supply and selling prices of oil while section 10 has specified that oil companies have to submit books and records related to their business.

For this debate, I have looked up the records of proceedings of the past meetings of the legislature. Fifteen years ago in 1983, at a meeting of the former Legislative Council held in May, Miss Maria TAM, a Legislative Council Member then, had asked the Government a similar question — whether the Government was empowered to regulate petrol and fuel prices. When the then Secretary for Economic Services, Mr Piers JACOBS, answered her question, he said that section 6 of the Oil (Conservation and Control) Ordinance had granted the Government this power but the Government's policy was not to intervene in the operation of the free market. Therefore, unless the market was monopolized or the rights to the supply of commodities or services were restricted, the Government would not exercise this power.

The Democratic Party agrees that the Government should not casually exercise the power conferred by the Ordinance. However, it is open to question if the oil products market in Hong Kong is a really free market with completely fair competition. If the Government is determined to develop in Hong Kong a market environment for free competition, it should expeditiously carry out a detailed study on the operation of the oil products market. If it is found that there is unfair competition in the market, the Government can consider exercising the power conferred by the Oil (Conservation and Control) Ordinance to effectively break monopoly. When necessary, it can also suitably supervise the oil companies. If it encounters difficulties in collecting information in the course of the study, the Government should exercise its power under section 10 of the Ordinance to ensure that it can collect adequate and accurate information for analysis.

As for the power given to the Government under this Ordinance, the Secretary for Economic Services, Mr Stephen IP, has not disclosed this to Members and the public. Even when I asked the Economic Services Bureau about the enforcement of the relevant ordinance, the officials in the Bureau told me that the ordinance was not related to fuel prices at all and this startled us. I hope that the Secretary will not just read out his script when he replies, and I hope that he would explain to Members the policy for enforcing the Oil (Conservation and Control) Ordinance.

With these remarks, I beg to move.

Mr Fred LI moved the following amendment:

"To delete ", in order that fuel prices can soon be reduced across the board and maintained at a reasonable level,"; to delete "adopt comprehensive measures, including"; to delete "reducing" and substitute with "reduce"; and to delete ", continuing to negotiate with oil companies for price reduction; lowering the land premium and rental costs of filling stations by granting more land designated for such stations; opening up the retail fuel market to introduce price competition; and, under the principle of not affecting commercial operations, encouraging oil companies to enhance the transparency in the determination of oil prices" and substitute with "so that fuel prices can be lowered and, in order to enhance the oil companies' transparency and accountability, to require these companies to consult the Energy Advisory Committee and brief the Legislative Council on price adjustments in future; this Council also requests the Competition Policy Advisory Group to expeditiously conduct a survey on the structure and mode of operation of the local fuel market, with a view to introducing appropriate legislation and measures to remove unfair competition among the oil companies, thereby bringing fuel prices back to a competitive level determined by the market"."

PRESIDENT (in Cantonese): I now propose the question to you and that is: That the amendment moved by Mr Fred LI be made to Mrs Miriam LAU's motion. Council will now proceed to a debate.

MR CHAN KAM-LAM (in Cantonese): Madam President, when prices of fuel products are too high, the livelihood of professional drivers is directly affected and motorists' interests prejudiced. In fact, fuel prices in Hong Kong are exorbitant. For example, our price of unleaded petrol minus tax is only second to Norway. It is the second highest in the world.

Currently, the price of crude oil has fallen to the lowest point since 1986. World crude oil price has fallen from $109 per barrel in 1986 to about $80 per barrel recently. The trend is expected to continue. In the refining process, there is an internationally unified price for refined products. That is to say refined oil products imported to Hong Kong from Singapore, South Korea or Japan should basically have a unified price. Therefore, we can see that the price of oil products has been fixed at a certain level at the international level. But it is worth noting that despite the fact that import prices have been falling for some time in the past, there has not been any corresponding adjustment in retail prices. On the other hand, the exorbitant fuel duty levied by the Government has driven the fuel prices in Hong Kong to a most unreasonable level. These are primary causes of high fuel prices in Hong Kong.

The Democratic Alliance for the Betterment of Hong Kong (DAB) understands that it is not easy to increase competition in the local fuel market which is controlled by a handful multinational companies. Economic theories have it that in an oligopoly, competitors have not much incentive to lower prices to attract new customers. This is so because even if new customers are attracted by the low price, the extra income may not outweigh the loss incurred by a reduction in income due to a price cut. In addition, in a monopolized market, supply is limited but demand is great. So, it is not necessary to cut prices.

At present, there are 18 000 taxis, 4 300 minibuses and over 100 000 lorries in Hong Kong. Their drivers have to shoulder several thousand dollars in fuel duty each month. So, when the economy is at its low, it is an urgent matter to reduce the expenses of people who drive for a living and to protect the interests of motorists as consumers.

Although it is unlikely that oligopoly in the fuel market can be improved over night, more so to introduce full competition in the short term, the Government of the Special Administrative Region must demonstrate the determination to improve competition in the market. The DAB is of the view that land premiums of filling stations and rents are two major components of their operating costs, so lowering these two components can cause oil prices to drop. But there are two factors that the Government must consider. First, will newly granted land designated as filling stations be obtained by several major oil companies easily due to their stronger financial position, thereby maintaining the state of an oligopoly in the market? Moreover, there are over a hundred filling stations in Hong Kong. How many more stations should there be so that land premiums and rents for these stations can be effectively lowered without undue wastage of the existing filling facilities?

In enhancing competition in the retail fuel market, the DAB agrees that small scale filling stations can be set up in garages and large scale supermarkets be allowed to sell oil products. The Government however must ensure that the new facilities are safe. Furthermore, the Government must be careful with the choice of sites to enhance existing competition among stations. For instance, when large scale supermarkets are allowed to sell oil products, they must have sufficient space to store and sell these products and ensure that safety requirements are met. However, the DAB does not envisage more space is available in most of the existing supermarkets for the installation of the relevant facilities. In the circumstances, probably the Government can only grant approvals for supermarket in the open space in the New Territories to sell oil products. Thus, to enhance competition in the sale of fuel products in urban areas, the Government should consider other means to avoid coming up with slow remedies for urgent needs.

Lastly, the DAB urges the Government once again to cut fuel duty and take active steps to tackle the problem of unreasonably high fuel prices.

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

DR RAYMOND HO (in Cantonese): Madam President, many experts think the 1999 world oil market will be a seller's market. Even if there are uncertainties, it is unlikely that there will be shortage in the oil market. Oil prices will continue to remain at the low level. In fact, on 27 January, Brent (North Sea) oil prices stood at US$11.15 a barrel while those at Dubai (Middle East) at US$10.38, both of which were an all-time low in recent years. However, retail prices for fuel in Hong Kong have not been adjusted to a reasonable level in the light of the falling import prices. Even the government officials who have not been able to do much about the matter also show their concern. It can be seen that the problem is a really serious one.

While import prices for crude oil have been falling, oil companies in Hong Kong are unwilling to lower the prices of their products. Instead, they only give away coupons and gifts. Although they cut their prices one after another because of pressure from the Government and the public, the financial burden of the people has not been reduced due to the small cut. According to surveys conducted by relevant organizations and scholars, there has been a considerable difference between the import price and retail price of fuel in Hong Kong, compared with other countries. Of course, as operating costs for each region are different, the difference between import and retail prices does not necessarily represent the real profit of the oil companies. However, in the absence of transparency in pricing the difference is easily open to question insofar as the prices of oil products are concerned.

To protect the interests of Hong Kong consumers, the Government must continue its efforts to negotiate price cuts with the oil companies. It should encourage oil companies to increase as far as is reasonable the transparency in their pricing. As fuel prices account for an important part of the operation costs of many trades, fuel prices have a direct impact on the competitiveness of all trades, in particular the industries, and transport and catering businesses. As fuel prices have such a great impact on the development of the Hong Kong economy as a whole, the Government should play a stronger supervisory role to ensure that a balance is struck between the interests of the consumer and the reasonable profits of the oil companies. On the other hand, the Government needs to consider opening the retail fuel market and introduce competition so that fuels are priced on the supply and demand situation of a free market. This is the way to solve the problem completely.

To a certain extent, the high fuel prices are also partly related to fuel duty. On the pretext of curbing the rise in the number of motor cars, the Government has been increasing fuel duty continuously. However, the number of registered vehicles has not diminished due to the increased duty. So, it is imperative that the Government should find other means to control the growth in the number of cars. At the same time, it should reduce fuel duty as soon as possible to relieve the burden on the people in this connection. This may also help in tackling the problem of smuggling and selling illegal petrol.

As regards the suggestion for the Government to grant more land to build filling stations, I have some reservations. All trades in Hong Kong face the problem of high land prices. There must be very compelling reasons if the Government is to give special consideration for a certain trade; otherwise other trades will make similar demands and the scenario is not what the people of Hong Kong would want to see.

Madam President, I so submit.

MR CHAN WING-CHAN (in Cantonese): Madam President, Hong Kong is a place with low tax rates. The Government, however, levies a considerable tax on those goods it regards as luxurious. It is therefore understandable that the Government imposes a high duty on tobacco, alcohol and cosmetics, but the same should not be imposed on fuel, which is a necessity. At a time when the Hong Kong economy is bad, an excessively high fuel duty has become a very heavy burden for many motorists and professional drivers, such as lorry drivers or container truck drivers.

Take taxis as an example. At the moment, day-shift drivers make an income of just around $300 daily, while night-shift drivers $400 (of course these are average numbers). Oil cost alone for a shift is $120 (about 21 litres). If this is deducted from the income only a small amount is left. There is also rental cost for the taxi. If business is poor and the taxi has no passenger most of the time, oil will be consumed for no useful purpose. Some taxi drivers even drive a long distance to the new airport, and wait for up to several hours for a journey that may bring an income of 200-odd dollars. Thus, given that business for taxi drivers is not good and fuel cost high, how can they make a living? One major reason for the high fuel cost is heavy fuel duty.

I understand that in Hong Kong imported petrol costs $1-odd per litre, and the duty levied by the Government is $6-odd. That is to say, for every $10 spent on a litre of petrol in the retail market, about 60% is on duty. This is an enormous rate of duty. In addition, while the price for imported diesel is only $1-odd, a third of the retail price of $5.59 goes to duty. During this economic downturn, it is inappropriate to levy a high duty on a necessity. Therefore, the Government should immediately lower fuel duty to ease the burden on drivers and relieve them of the pressures of living. I hope by so doing the Government can ride out the storm with the people.

On the other hand, while import prices of fuel continue to drop, there is no corresponding and prompt downward adjustment in retail prices. This is hard to understand, and grossly unfair to consumers. In this connection, the Government could do nothing about the matter. All it could do was to criticize the oil companies for failing to give due consideration to the present economic situation or to ride out the storm with the people. During the period between October 1997 and July 1998, the import prices of major fuels and LPG recorded great drops. The import prices of unleaded petrol, leaded petrol and diesel oil fell around 19%, 20% and 34% respectively, with LPG recording the largest drop at some 44%.

Given the dramatic drop in import prices, the LPG companies and oil companies should have cut the retail prices accordingly. But it was not until early this year, which was five months later, that oil stations started to reduce retail prices, but only slightly. So, consumers could not benefit from the drop in price. The cut on LPG was outrageous for it was a meagre 5%. Even after Mr Stephen IP, the Secretary for Economic Services, had unleashed strong criticisms, the LPG traders were only willing to slash their prices by $0.4. This was really unforgivable. Such a small cut by the LPG dealers was disappointing. Despite the fact that LPG is not charged any duty and its import price has fallen drastically, the retail price has remained at $8.35 per kg. Compared to petrol, this is obviously unreasonable.

So, we can see that even strong criticisms by the Government and public pressures cannot change radically the attitudes of LPG dealers. We hope the Government can, without affecting their commercial operation, request LPG suppliers to make known information on their costing, so that we know there is no rip-off. We need to let consumers exercise monitoring to determine if their pricing is set at a reasonable level so that consumers can make suitable choices.

As regards petrol, it seems oil companies used to have a tacit agreement among themselves because retail prices were unified. Competition comes only in the form of free distilled water and paper napkins. We cannot help wondering whether they had secret agreements with each other to reinforce the interests of each other. Keen competition has been lacking between oil suppliers in terms of retail prices. That is why we wanted to have a higher level of transparency in the fixing of oil prices. I hope that when the Consumer Council reports to this Council in March about the costing and pricing of the oil companies, there will be clear answers. In addition, the Government should grant more land for construction of filling stations and reduce land premium so that coupled with falling oil prices the burden of the people can be reduced.

Thank you, Madam President.

MR LAU KONG-WAH (in Cantonese): Madam President, "There is progress only where there is competition." In a free market, effective competition is the drive that pushes every competitor continuously forward. When competitors dare to change and are bold to make innovations, the competition in the market will become increasingly keen. Of course, in the end, it will benefit the whole market and all consumers.

In recent years, the most obvious example is the breaking of the monopoly over the telecommunications market and the introduction of competition into it. As consumers, we no longer need to be exploited by the monopolistic operator. Concerning whether it is "worth calling", the substantial decrease in the charges of overseas long-distance calls has in fact told us that that particular telephone company used to over-charge so much in the past that it "warrants a good beating".

Madam President, the same problem also exists in our oil products market today and the extent is just as serious. Although the market is not monopolized, there is obviously an unhealthy "horizontally manipulative" control in the market. Only under the earnest concern of the political parties, public opinion and the Government that the oil companies gave out some little favours. It was not a big discount offer, which was at most like "getting a green onion free for the purchase of some vegetables". Even so, this green onion is not given out at all outlets and sometimes I even feel that it is a nuisance. Yet, it is better late than never that the oil companies are willing to make concessions. However, to such a kind of special favours, I am very sorry to say that the Democratic Alliance for the Betterment of Hong Kong (DAB) does not find it adequate.

Madam President, the Honourable Fred LI proposes in his amendment that in order to enhance oil companies' transparency, they are required to, when adjusting their prices in future, consult the Energy Advisory Committee and brief the Legislative Council. There is no doubt that we agree that there is a need to enhance the transparency of pricing by oil companies so that we can get a clearer picture of the fluctuations in import prices and various other operating costs, but to achieve this end, it should not be limited to requiring them to brief the Legislative Council. The DAB has all along advocated that the Government should establish an Energy Management Board at an appropriate juncture to allow the Government to monitor through a statutory body the charges and prices of energy utility industries, which include electricity, oil and LPG and towngas and formulate a fair competition policy to enhance the Government's ability to deal with the highly complex energy market. Specialized bodies can also be set up to deal with specialized areas as it is impossible for the Legislative Council to poke its nose into everything. The Energy Management Board should be composed of representatives from relevant government departments and experts on energy to assist the Government in drawing up energy policies that suit the needs of Hong Kong. Its most important duty is to monitor the pricing policies of the energy utility industries, balance the interests of the energy operators and of consumers, and to promote healthy competition in the energy market.

Madam President, as a matter of fact, in 1995 the Government responded to the Consumer Council's recommendation to establish an Energy Management Board and promised that after the Energy Advisory Committee had operated for a period of time, it would review whether there was a need to establish an Energy Management Board. The Energy Advisory Committee has been in operation for two years now, I believe it is time the Government told us its future plans.

Madam President, Mr Fred LI has said in his speech that section 6 of the Oil (Conservation and Control) Ordinance has already empowered the Government to regulate the price at which oil is supplied or sold. If legislation is omnipotent, this Ordinance alone is sufficient to maintain the prices of fuel at a reasonable level. Then why does Mr Fred LI find it necessary to put forward other laws? Enforcement of this particular ordinance alone would have suffice. Mr Fred LI followed by saying that after the enactment of the law, he agreed that the Government should not "lightly invoke it". This really puzzles me. If we are to enact a law but not to enforce it, what then is the point of enacting it? What legislation exactly is in Mr LI's mind? What exactly is the text of the legislation? How can we enact a law that "should not be invoked lightly"? And how can we enact a law that "can be invoked lightly"?

Therefore, Madam President, to allow the situation that is "market-orientated" in name but "oligopoly" in deed to exist, or to enact a stringent law that cannot be invoked lightly for fear of interfering in the operation of the market, there are loopholes in both scenarios. Therefore, it is necessary for the Government to consider the DAB's proposal of setting up an Energy Management Board to especially oversee the energy utilities that affect many aspects of people's livelihood. The Government should also adopt a series of effective measures immediately to enhance competition in the oil products market so that prices can be maintained at a reasonable level. Therefore, I support the original motion, for at least it represents the most important starting point. Thank you, Madam President.

MR HOWARD YOUNG (in Cantonese): Madam President, I believe that in moving her motion, the Honourable Mrs Miriam LAU has fully explained her arguments and the effect of the proposals will have on the industrial and commercial sector. I would like to stress one point that concerning the reduction of fuel duty; I hope the Government will consider some past examples. Whenever tax cuts are brought up, the Government will certainly be unhappy, as it means that its revenue will decrease. I can still recall that two or three years ago, we asked the Government to reduce the duty on red wine. At that time, the Financial Secretary forecast the relevant revenue for that year would be reduced as a result of the tax cut. But it turned out that at the end of the year, the revenue did not fall but rose instead because the tax cut had stimulated the consumption of red wine.

Of course, the situation of red wine is not exactly like that of the fuel. We cannot say that a cut in fuel duty will stimulate the people to drive more often or consume more fuel, but I feel that this will at least prevent the loss of part of the revenue. I have noticed that there are two main channels through which the loss occurs, and it is becoming more and more visible. First of all, more and more smuggled oil, the marked oil, are on sale, and more and more illegal filling stations supplying this kind of duty-not-paid diesel oil can be found. This not only drains away the Government's revenue, it also endangers the safety of many who live in the neighbourhood. I remember that there were phenomena of similar nature in the '70s. At that time, the illegal activities were not duty driven but they were harboured by someone. The Independent Commission Against Corruption was not yet established then. Corruption was prevalent, and coupled with the slackness of law enforcement, many illegal gasoline filling stations had cropped up. Nevertheless, the situation is different today as there are ways that people can buy cheap oil. The cross-boundary traffic is very busy but smooth nowadays and thus, as Mrs Miriam LAU has said just now, many lorry drivers can drive to the Mainland to top up their tanks there at much reduced costs. Not only is this the case with diesel oil but I also know that petrol is also very cheap across the border. Although the price of petrol has dropped from over $10 to $9 per litre recently, it is only sold for $2.3 to $2.75 per litre at filling stations on the Mainland. As the difference is just too big, a breach is created. It is legal to fill up the vehicles in the Mainland. This has also instigated many people to smuggle fuel oil into Hong Kong for sale. I believe this breach is also involved with the high fuel duty in Hong Kong.

Moreover, I have noticed another argument that the Government's imposition of heavy fuel duty is due to environmental considerations. I can recall that in the Budget debate last year, Mrs Miriam LAU already refuted this argument by pointing out that motorists would not use less diesel oil as a result of the heavy duty. Drivers of taxis and buses, in particular, have no choice but to consume the usual amount of fuel. Therefore, raising the fuel duty will not solve the environmental problem but on the other hand impose a heavier burden on the industrial and commercial sector, small and medium enterprises, as well as the transportation industry. I feel that the Government should take note of that.

I very much appreciate the recent efforts by the Secretary for Financial Services in, using both hard and soft tactics, appealing to oil companies to lower their prices. We do welcome that. But the price cuts are after all very limited as the duty still accounts for a large part of the cost. If the Government only puts pressure on the oil companies, it will give people a feeling that the Government only pressurizes the oil companies into cutting the price but it does nothing itself. In the end, the companies that are willing to cut their prices will not buy this idea.

With the points mentioned above, I support Mrs Miriam LAU's original motion.

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

(No Member indicated a wish to speak)

PRESIDENT (in Cantonese): Mrs Miriam LAU, you may now speak on Mr Fred LI's amendment. You have up to five minutes to speak.

MRS MIRIAM LAU (in Cantonese): Madam President, first of all I would like to thank the six Members who have spoken on this motion. I also thank the Honourable Fred LI for supporting the first part of my original motion in regard to the lowering of fuel duty.

My original motion and the amendment of Mr Fred LI are actually pursuing the same goal, that is, to lower the fuel prices. To achieve this, we basically agree that the Government should do something ─ cut the fuel duty. As regards the oil companies, both of us suggest that the Government do something to help. Our difference is just that we have put forward different approaches, or we are trying to reach the same destination by different routes. Our ultimate goal is after all to bring down the oil prices.

In his amendment, Mr LI deletes from my motion the measures which can be achieved in a short time and replaces it with another set of measures. These other measures include consulting the Energy Advisory Committee and requesting the Competition Policy Advisory Group to conduct a survey and so on. Regarding the request that the Legislative Council pay attention to fuel prices and oil companies brief the Legislative Council, basically the Liberal Party does not object to it, as this will certainly enhance the transparency of the companies. Mr Fred LI considers that it is an effective measure to require oil companies to consult the Energy Advisory Committee. But regarding that, we are completely baffled as the Committee has no mechanism to set the prices. Mr Fred LI has criticized that the wording "encouraging oil companies to enhance the transparency" in my motion is far too mild. If "encouraging" is too mild a wording, what then is the actual meaning of consulting the Energy Advisory Committee which has no price-setting mechanism? The Democratic Party often criticizes any closed-door meeting as operation in a black box. But very strangely, this time around the Democratic Party considers that everything would be fine as long as oil companies consult the Energy Advisory Committee about their price adjustments. In my paper circulated to Members, I mentioned our worries that it would ultimately lead to the Government getting involved in the determination of product prices. The first step is to consult and then the second step would be to request the Government to set down the price-setting mechanism; and finally it would lead to the Government having a hand in the determination of product prices. This is my biggest worry.

At the motion debate on anti-monopolization on 27th last month, the Honourable LEE Wing-tat spoke loud and clear on behalf of the Democratic Party that they would not harbour any expectations on the Competition Policy Advisory Group. He also criticized the Group as merely a vase which did not even match up to a toothless tiger that could at least put up some bluffing. With these words still ringing in our ears, today Mr Fred LI ─ I believe he is also representing the Democratic Party ─ has placed high hopes on the Group and requested it to conduct a survey on the structure and modus operandi of the local fuel market, with a view to introducing legislation and measures.

Basically, we do not object to having the Group conduct a survey on the local oil products market to look for ways to enhance competition. However, it takes time to conduct the survey, which may last for several years, and therefore that can only be regarded as a long-term measure.

In addition, we believe that the thrust of Mr Fred LI's proposals is the conviction that ultimately it takes legislation to rectify and improve the market situation. To intervene in the operation of a free market by means of legislation is the disbenefit of the local economy and it runs totally opposite to the free economy policy adopted by Hong Kong. The Liberal Party will not endorse this. We consider that a government's role in a free market should be to improve the business environment and to assist and encourage new investors to enter the market. In an environment of stable market competition, consumers will certainly enjoy the greatest benefit.

Mr Fred LI criticized that the Government has used public opinion to pressurize oil companies into cutting their prices. On this, he has given too much credit to the Government. As a matter of fact, the Democratic Party has also used public opinion to pressurize the oil companies into cutting prices, so have the Liberal Party, the Democratic Alliance for the Betterment of Hong Kong (DAB) and other parties. Now that the oil companies have cut their prices, is it to the credit of the Government? Or of Members? Or others? No one knows. Are we going to remain silent about problematic issues in future? We will not, neither will the Democratic Party nor the DAB, I believe.

We do not think that we should lay too much blame on the Government for expressing its views on certain problems or situations in the community. According to Mr Fred LI, the Democratic Party thinks that the Government's use public opinion to pressurize the oil companies into reducing the prices should not be encouraged. If "voicing the opinions" should not be encouraged, then should "having a hand in matters" be encouraged? The Liberal Party does not support any government intervention in a free market; rather, the Government should use the market forces to rectify the operation of the market.

My time is running out. I here call upon Members to support my original motion and object to Mr Fred LI's amendment.

SECRETARY FOR ECONOMIC SERVICES (in Cantonese): Madam President, now Mrs Miriam LAU, Mr Fred LI and other Honourable Members have given a lot of valuable advice on the motion on fuel prices. I am very grateful to the views they have expressed. I feel that in general, apart from fuel duty, there is not much we need to discuss about. For our goals are clear enough and there is not much difference between us. And it may be said that we are aiming at the same goal though we have taken different paths. As a matter of fact, we are hoping that more competitions may be brought into the fuel market and that fuel prices can be more reasonable. Although in the past I expressed my views on the issue of fuel prices, I wish to make use of today's discussions to talk about the Government's stance on this issue once again and to respond to some of the arguments put forward by Honourable Members.

I am very grateful to Mrs Miriam LAU for making a fair comment when she said that when the government officials made some comments, the people would say that they were being pressured against, and when the Government was silent, the people would say that the Government was standing aloof, not knowing what should be done. Honourable Members have a right to make their views known, and so has the Government. And it is good that everyone can make their views known. As for putting forward arguments, I am of course no better than Members. I only hope for the day to come when I can sit on the Members' bench, then it will be easier for me to speak.

Like every Honourable Member, the Government is very much concerned about competition in the fuel market and fuel prices. Actually, in the past, especially in the past few months, the Government, Honourable Members present and the political parties, expressed their concern for the issue in their own ways. I am glad that the oil companies can listen to the voice of the public and begin to lower the prices of petrol and LPG. Although this price reduction has come somewhat belatedly, I believe that it is better late than never. We hope that this is only a beginning, and when the oil companies have found the right direction, they would make further progress in that. Without being urged by Honourable Members, the Government would keep a close eye on market developments and take whatever steps that should be taken. The Government would also like to see more competition among the oil companies. The recent reduction of fuel prices among oil companies is of course a good thing for the public and it can prove that a considerable degree of competition does exist.

The Government will be glad to do what it can to facilitate competition among oil companies, for example, in the granting of land designated for use as filling stations. We will consider granting more land for such purposes and this would be an on-going job. The Planning, Environment and Lands Bureau is actively deliberating on the suitability of many land lots that may meet the traffic demands, safety and environmental standards for use as filling stations. A floor price will not be set for these lots designated for filling stations when they are offered for tender, for the price of these lots should be determined by market conditions and commercial considerations. I think if we have more land for filling stations and if there is support from market forces, fuel prices cannot possibly remain at a high level.

Under the current land policy, people who bid for the land to be used for new filling stations must produce proof of an undertaking made by licensed suppliers to supply oil products. The Government is presently studying into the question of whether the grounds for setting this requirement still stand, if they do not, then we will consider withdrawing them to make tenders more competitive. Under the same policy, when the lease for a filling station expires, the current lessee may have his lease renewed if he pays a land premium which reflects prevailing market prices. The arrangement is presently reviewed by the Planning, Environment and Lands Bureau from the perspective of competition to see if it is proper.

As a matter of fact, when granting more land for filling stations, the Government needs to exercise more imagination. We need to introduce more new measures and raise our flexibility, in order that there will be more competition at the retail level. The Government will not exclude the possibilities of allowing filling stations to be attached to megastores (or large scale supermarkets which I hope to see more opened in the future) and some car parks. Of course, in order that permission can be obtained from the authorities, the prerequisite will be that all the safety requirements have first to be complied with. Safety is the most important consideration, and I do not think anyone will object to this. Apart from safety, other considerations will include environment, traffic, land use and so on. All in all, any measure which is conducive to more competition and will not affect safety, environment and traffic will need to be considered by the Government. I do not agree with some Honourable Members who said that the Government should follow established policies and should not venture into new policies. For if this is so, then there will never be any new policies on the part of the Government.

In the long run, in respect of the market for gas fuels, we hope that in future we can model on other advanced countries in using shared pipelines for the transmission of gas fuels. Our long-term goal is to model on other member countries of the Asia-Pacific Economic Co-operation and use liquefied natural gas to replace towngas and LPG. That will of course be our long-term goal, and the prerequisite for that will be a reliable and sufficient supply of natural gas which is, however, not yet available in Hong Kong.

In this motion debate, Mr Fred LI has asked the Competition Policy Advisory Group to investigate into the structure and modus operandi of the fuel market in Hong Kong. I wish to thank Mr LI for thinking so highly of the Competition Policy Advisory Group and I am sure they will work hard in this respect. Actually, before Mr LI made such a request, the Consumer Council has already decided to conduct a study of the structure of the fuel market. At the beginning of this month, the Consumer Council began a study on the competition of oil products in the local market, and the study brief includes petrol, diesel oil and LPG. The study is expected to complete in nine months. The Consumer Council will study and analyse the arrangements found in the various operation levels of the market mechanisms. This will enable a thorough assessment to be made. The operation levels which I have just mentioned include those on procurement during the process of oil refining; import arrangements, costs from loading to warehousing, arrangements for storage in large quantities, transportation and retail and so on. It is hoped that through an understanding of these operations, the Consumer Council can engage in detailed analyses of the behaviour and performance of the oil companies, including the existence or otherwise of market entry obstacles, pricing behaviour, efficiency and so on. The study will also consider the ways to improve or enhance competition. When the study is finished at the end of this year, the Economic Services Bureau will take on the conclusions and recommendations of the study and follow up with the departments concerned, including the Competition Policy Advisory Group.

In the motion debate, Mrs Miriam LAU has mentioned that encouragement should be made to increase transparency in pricing of oil products. I fully support this idea. In fact, I have also asked the oil companies to submit information regarding fuel prices, operation costs and such like information, so that the Government and the Consumer Council can make an in-depth study of these aspects. Recently, we have received such information and I would like to thank the majority of the oil companies which have been very co-operative. We are now studying the data together with the Consumer Council. We hope that the oil companies will follow the footsteps of the Hong Kong and China Gas Company Limited in being willing to submit relevant information to the Government on a regular basis in order that there will be greater transparency and that the public will be in a position to determine whether or not the fuel prices are reasonable.

In the debate, Honourable Members have asked for a reduction of the fuel duty. Although taxation is not within the purview of the Economic Services Bureau, I have obtained the consent of the Secretary for the Treasury to explain on her behalf the stance of the Government with respect to this issue. Fuel duty is an important source of revenue for the Government. In the year 1997-98, fuel duty took up 58% of the total tax revenue from dutiable commodities. It has been the established policy of the Government to maintain tax revenue in real terms. Such is crucial to the financial stability of the Government. The low taxation and narrow tax base of the territory have made it imperative for the Government to maintain the tax revenue in real terms through relatively more stable revenue measures such as tax on dutiable commodities, for otherwise we would have to rely on certain relatively unstable sources of income. Such moves would impose restraints or pressure on the Government when appropriate tax concessions are contemplated. As a result, other forms of tax may have to be levied at higher rates to cover any spending in excess of income. Each year in the course of preparing the Budget, the Financial Secretary has to scrutinize revenue proposals and he would also look at the overall financial picture and sources of all tax items and their weight in balancing public finance. In this year's Budget to be delivered on 3 March, the Financial Secretary would take on the matter in much the same manner.

Apart from financial reasons, fuel duty has an important bearing on transport and environment policies. Due to great limitations of the road surface and the impact of vehicles on the environment, there have been public demands for a higher fuel duty as part of the measures to encourage better use of roads and limit the consumption of fuels. Therefore, the preservation of fuel duty which has impact in real terms would enable this taxation item to continue to play an important role in transport management and public health protection.

Honourable Members may of course disagree with my opinion, but I can assure them that I will relay their arguments and views in their entirety to the Secretary for the Treasury and the Financial Secretary, so that careful considerations can be made.

Madam President, I believe ...... just now Mr LI asked me not to read out from my prepared script. He was simply overjoyed when he talked about the Oil (Conservation and Control) Ordinance, as if he had discovered something new. But I can tell Mr LI that this Ordinance has been in existence all the time. I have just had a chance to read it over carefully once again. I hope Members still recall the background against which this Ordinance was enacted. It was back in 1973 when there was a shortage of oil and an oil crisis. Due to the importance of oil to transport and power generation, the Government's position is that at times of emergency and critical periods, such as when a severe shortage of oil emerges, the Government will have to enact some laws in this respect. It has at least the power to do something to ensure there is sufficient oil in storage. As for the conservation and control of oil, section 9 of the Ordinance provides that the Government has the right to the extent of making a requisition of any stock of oil and to sell, dispose of, or use it. Of course, requisition is not to be made at the whims of the Government, and compensation has to be paid to the oil merchants. Therefore, section 10 empowers the Government to act in connection with these measures to demand relevant information for the requisition and compensation of fuels. I believe Members will agree that it refers to only times of emergency and critical periods. If the Government is alleged to be interfering and exerting pressure just because of a few remarks that it has made, then does that mean that the situation today has gone so bad that the Government should set up an oil company of its own or to make requisitions of fuels? That is totally beyond my imagination and I do no think that is the original intention of Mr LI either. For later he said that that was not an appropriate thing to do. And I agree with him completely in this respect.

Just now Mr LAU Kong-wah mentioned the establishment of an energy authority. Actually, I have discussed that with him. But I am not denying the need to set up an energy authority at all, if in the future, long-term projects like shared pipelines and interconnection in electricity become a reality, then there is definitely a need to do so. But at this point in time, at least for the time being, I do not think that there is such a need. In any case, we will keep that matter under constant review.

Madam President, there is not much difference between the stance of the Government and that of Honourable Members on this issue of fuel prices. Just now Mrs LAU also said that we should try even if there were difficulties. I agree with that completely. I should also think that the Government ought to exercise some imagination and that it should look into every detail of the proposals raised. In some aspects, we may need to make some changes. Any measures that may enhance competition and make prices more reasonable should be taken by the Government if these are within its capacity to do so. I think we will all be very happy to see the oil companies become more transparent, as it were. The most ideal thing would of course be that the oil companies will take the initiative like the gas company and agree to take such measures. And both the Government and Honourable Members should not mind who will get the credit in this matter, because we are all working hard for the interest of the public and for more reasonable fuel prices. We should work hard and do the best we can, and each in our own ways, in the hope that our common goal can be reached finally.

Thank you, Madam President.

PRESIDENT (in Cantonese): I now put the question to you and that is: That the amendment moved by Mr Fred LI be made to Mrs Miriam LAU's motion. Will those in favour please raise their hands?

(Members raised their hands)

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

(Members raised their hands)

Mr Fred LI rose to claim a division.

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

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

MR LEUNG YIU-CHUNG (in Cantonese): Madam President, just now I have pressed the wrong button, may I change my voting intention?

PRESIDENT (in Cantonese): Yes, you may.

PRESIDENT (in Cantonese): Before I declare voting shall stop, are there any queries? If not, the result will now be displayed.

Functional Constituencies:

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

Mr Kenneth TING, Mr Edward HO, Dr Raymond HO, Dr LUI Ming-wah, Miss Margaret NG, Mr CHAN Kwok-keung, Mr CHAN Wing-chan, Dr LEONG Che-hung, Mrs Sophie LEUNG, Dr Philip WONG, Mr Howard YOUNG, Mr LAU Wong-fat, Mrs Miriam LAU, Mr FUNG Chi-kin and Dr TANG Siu-tong voted against the amendment.

Mr LEE Kai-ming abstained.

Geographical Constituencies and Election Committee:

Mr Albert HO, Mr LEE Wing-tat, Mr LEE Cheuk-yan, Mr Martin LEE, Mr Fred LI, Mr James TO, Mr LEUNG Yiu-chung, Dr YEUNG Sum, Mr Andrew CHENG and Mr SZETO Wah voted for the amendment.

Miss Cyd HO, Miss CHAN Yuen-han, Mr Gary CHENG, Mr LAU Kong-wah, Miss Emily LAU, Mr TAM Yiu-chung, Mr NG Leung-sing, Prof NG Ching-fai, Mr MA Fung-kwok, Mr CHAN Kam-lam and Mr Ambrose LAU voted against the amendment.

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

THE PRESIDENT announced that among the Members returned by functional constituencies, 20 were present, four were in favour of the amendment, 15 against it and one abstained; while among the Members returned by geographical constituencies through direct elections and by the Election Committee, 22 were present, 10 were in favour of the amendment and 11 against it. Since the question was not agreed by a majority of each of the two groups of Members present, she therefore declared that the amendment was negatived.

PRESIDENT (in Cantonese): Mrs Miriam LAU, you may now reply, you have two minutes out of your original 15 minutes.

MRS MIRIAM LAU (in Cantonese): Madam President, the most successful thing about this motion today is that almost the whole Council has come to the same view about the issue of fuel duty. Before the meeting started today, a group of people from the transportation sector had gathered outside the Council building. They loudly and earnestly requested the Government to reduce the fuel duty to alleviate people's hardships. Hence, Members share the same view and the transportation sector has a very strong request. The only pity is that the key persons are absent from this Chamber today. They are the Financial Secretary and the Secretary for the Treasury, and so the views of the Secretary for the Treasury on tax matters have to be conveyed to Members by the Secretary for Financial Services. We have actually heard a great deal of the Government's views on this issue and these views have been refuted point by point on many occasions, including this debate. When speaking to us just now, the Secretary's voice turned lower and lower and finally he told us that he would convey Members' views to the Secretary for the Treasury. Now, I earnestly hope that the Secretary can convey my following view. In the past few blooming years, the Government insisted on adhering to the principle of fiscal prudence and every year the fuel duty was increased at a rate at least as high as the inflation rate, the purpose of which was to allow the Government a sufficient fiscal reserve, or "to store up grain". With such abundant grain in store now, if it is not used to relieve a famine, what else is its use? Now we are faced with an economic downturn and everyone leads a difficult life. To relieve a famine, the Government should seriously consider reducing the fuel duty as soon as possible.

I would like to spend a little time on the question of land premium. Dr the Honourable Raymond HO said earlier on that he was not too much in favour of this proposal as it might set a precedent. But may I ask that if a lot still fetches $100 million or $160 million in a bid, that means the price of every litre of LPG will have to be factored in a land premium cost of over $1, would it not be a great obstacle to the promotion of the entire LPG taxi scheme? The Government must handle this very carefully and resolve the problem in this regard promptly.

Thank you, Madam President.

PRESIDENT (in Cantonese): I now put the question to you and that is: That the motion moved by Mrs Miriam LAU, as set out on the Agenda, be passed.

Will those in favour please raise their hands?

(Members raised their hands)

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

(Members raised their hands)

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

Dr YEUNG Sum rose to claim a division.

PRESIDENT (in Cantonese): Dr YEUNG Sum has claimed a division. The division bell will ring for three minutes.

PRESIDENT (in Cantonese): Before I declare that voting shall stop, are there any queries? Voting shall stop and the result will now be displayed.

Functional Constituencies:

Mr Kenneth TING, Mr Edward HO, Mr LEE Kai-ming, Dr LUI Ming-wah, Mr CHAN Kwok-keung, Mr CHAN Wing-chan, Dr LEONG Che-hung, Mrs Sophie LEUNG, Dr Philip WONG, Mr Howard YOUNG, Mr LAU Wong-fat, Mrs Miriam LAU, Mr FUNG Chi-kin and Dr TANG Siu-tong voted for the motion.

Dr Raymond HO and Miss Margaret NG voted against the motion.

Mr Michael HO, Mr CHEUNG Man-kwong, Mr SIN Chung-kai and Mr LAW Chi-kwong abstained.

Geographical Constituencies and Election Committee:

Mr LEE Cheuk-yan, Miss CHAN Yuen-han, Mr Gary CHENG, 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 Ambrose LAU voted for the motion.

Miss Cyd HO, Mr LEUNG Yiu-chung and Miss Emily LAU voted against the motion.

Mr Albert HO, Mr LEE Wing-tat, Mr Martin LEE, Mr Fred LI, Mr James TO, Dr YEUNG Sum, Mr Andrew CHENG and Mr SZETO Wah abstained.

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

THE PRESIDENT announced that among the Members returned by functional constituencies, 20 were present, 14 were in favour of the motion, two against it and four abstained; while among the Members returned by geographical constituencies through direct elections and by the Election Committee, 22 were present, 10 were in favour of the motion, three against it and eight 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): The Council is now adjourned. I wish every Member a very happy New Year. The Council will resume at 2.30 pm on Wednesday, 3 March 1999 and I hope to see everyone return here in full spirits for the meeting when I see you again. (Laughter)

Adjourned accordingly at two minutes past Nine o'clock.

Annex I

WRITTEN ANSWER

Translation of written answer by the Secretary for Constitutional Affairs to Mr CHEUNG Man-kwong's supplementary question to Question 1

As regards whether a certain provision of the national laws should be added to Annex III of the Basic Law, the Standing Committee of the National People's Congress would, in accordance with Article 18 of the Basic Law, consult the Government of the SAR. Based on the nature and content of that particular provision of the national laws, the bureaux and departments of the Government of the SAR as well as the Department of Justice will examine carefully whether that particular provision of the national laws relates to defence, foreign affairs or other laws outside the limits of the autonomy of the Hong Kong SAR as provided by the Basic Law. If any of the national laws to be added to Annex III to the Basic Law is to have substantial effect on Hong Kong, we will bring up the matter for discussion in the relevant Panel of the Legislative Council, and will also consult the legal circle or other parties concerned.

Upon examination and discussion, if it is found that a certain provision of the national laws should not be added to Annex III to the Basic Law, the Government of the SAR will submit the opinion as relevant to the Standing Committee of the National People's Congress.

Annex II

WRITTEN ANSWER

Translation of written answer by the Secretary for Constitutional Affairs to Miss Margaret NG's supplementary question to Question 1

We have consulted the Department of Justice and enclosed please find the information provided by the Department of Justice.

Constitution in Loose-leaf Edition

1. The decision to publish the Constitution of the People's Republic of China and the amendments to it ("Constitution") in the loose-leaf edition of the Laws of Hong Kong ("loose-leaf edition") is an editorial one.

2. Hong Kong is now subject to the sovereignty of the People's Republic of China. The Constitution is the fundamental instrument that provides for the legal basis on which the 1990 Decision of the National People's Congress to establish the Hong Kong Special Administrative Region was made and the Basic Law was enacted. The Constitution is published in the loose-leaf edition so as to enable users of the loose-leaf edition to have a complete picture of our constitutional framework. As explained by the Secretary for Justice in her Foreword to the loose-leaf edition, this arrangement is also more convenient to users in making reference to the Constitution when necessary.

3. The Secretary for Justice publishes the Constitution in the loose-leaf edition in full under section 2(4) of the Laws (Loose-leaf Publication) Ordinance 1990, which provides that she may include in the loose-leaf edition such "notes, indexes and other information" as she considers useful.

Chapter Number in BLIS

4. Because of the design of the Bilingual Laws Information System (BLIS), any instrument in the database that is available for search (including Ordinances, Constitution and national laws) must bear a chapter number. When a BLIS user carries out a search that is restricted to a particular instrument, that instrument is identified within the BLIS by the chapter number.

WRITTEN ANSWER─ Continued

5. Section 2(2)(b) of the 1990 Ordinance provides that the Secretary for Justice may in the loose-leaf edition give a chapter number to each Ordinance. When an Ordinance has been lawfully given a chapter number in the loose-leaf edition, that Ordinance will have the same chapter number in the BLIS database. Although constitutional instruments and national laws are not given any chapter numbers in the loose-leaf edition, it is necessary to assign arbitrary chapter numbers to them for the purposes of the BLIS only.

Annex III

WRITTEN ANSWER

Written answer by the Secretary for Housing to Miss Cyd HO's supplementary question to Question 4

A site of complicated geological condition is one where the subsoil condition varies substantially and is difficult to predict with sufficient accuracy based on ground investigation, for example, a site with the existence of underground cavities or geological faults. In such circumstances, the Housing Authority will station a resident structural engineer at the site.

As far as pile installation is concerned, reclamation alone is not regarded as a cause for geological complication.

The geological condition of sites in Tseung Kwan O is in general not complicated. The Housing Authority will not normally station resident structural engineers at these sites. However, the foundation works for Phase One of Tseung Kwan O Area 74 include the construction of a basement car park which involves complicated construction techniques. Hence the Housing Authority stations a resident structural engineer there to oversee the project.

On Ning Garden in Tseung Kwan O was developed by a private developer under the Private Sector Participation Scheme. As the Housing Authority was not directly involved, it did not station a resident structural engineer at the site during the construction period.

Annex IV

WRITTEN ANSWER

Written answer by the Secretary for Planning, Environment and Lands to Dr Raymond HO's supplementary question to Question 5

The standards for air quality that the Mass Transit Railway Corporation (MTRC) aims to observe are contained in guidelines issued by the United States Department of Transportation for mass transit subway systems. The standards are based on average concentrations of pollutants over time, not on threshold levels that should not be exceeded at any particular moment. Monitoring by the MTRC at concourses, platforms and in train compartments during 1998 has indicated that the air quality is in compliance with these standards.

There are equipment on the market to measure the concentration of carbon dioxide and other air pollutants within a short period of time. Nevertheless, we are not aware of any underground rail system that installs equipment to provide measurement of pollution at fixed locations. In line with best practice elsewhere, the MTRC has taken the approach of monitoring at regular intervals and developing contingency plans for activation in circumstances where it would be likely that the station is reaching its capacity. These include measures such as regulating the flow of passengers at the entrance gates to concourse and platform levels to prevent too many passengers crowding into these areas, and automatic activation of tunnel fans if any train is stopped in a tunnel for more than 150 seconds.

The Government is formulating an action plan for improving indoor air quality. Part of this plan includes the development of professional practice notes for public transport systems such as the MTR. We intend to consult the Legislative Council and the public on the proposed plan in the near future.

Annex V

HUMAN ORGAN TRANSPLANT (AMENDMENT) BILL 1999

COMMITTEE STAGE

Amendments to be moved by the Secretary for Health and Welfare

Clause	Amendment Proposed
2(a)	In the proposed section 5(2A), by adding ", or in accordance with such guidelines," after "means".
2(b)	In the proposed section 5(6A)(i) - (a) by deleting "any explanation" and substituting "the explanation"; (b) by deleting subparagraph (C) and substituting - "(C) his being a mentally incapacitated person within the meaning of the Mental Health Ordinance (Cap. 136); or".

1 The financial limits referred to in SPR 220(a) are:
(i) for stores - $500,000;
(ii) for services for construction and engineering works - $1,000,000; and
(iii) for other services (excluding consultancy services) - $500,000.