OFFICIAL RECORD OF PROCEEDINGS
Wednesday, 24 March 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 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 HUI CHEUNG-CHING

THE HONOURABLE CHRISTINE LOH

THE HONOURABLE CHAN KWOK-KEUNG

THE HONOURABLE CHAN YUEN-HAN

THE HONOURABLE BERNARD CHAN

THE HONOURABLE CHAN WING-CHAN

THE HONOURABLE CHAN KAM-LAM

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

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

THE HONOURABLE LEUNG YIU-CHUNG

THE HONOURABLE GARY CHENG KAI-NAM

THE HONOURABLE SIN CHUNG-KAI

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

DR THE HONOURABLE PHILIP WONG YU-HONG

THE HONOURABLE WONG YUNG-KAN

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

THE HONOURABLE HOWARD YOUNG, J.P.

DR THE HONOURABLE YEUNG SUM

THE HONOURABLE YEUNG YIU-CHUNG

THE HONOURABLE LAU CHIN-SHEK, J.P.

THE HONOURABLE LAU KONG-WAH

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

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

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

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

THE HONOURABLE CHOY SO-YUK

THE HONOURABLE ANDREW CHENG KAR-FOO

THE HONOURABLE SZETO WAH

THE HONOURABLE LAW CHI-KWONG, J.P.

THE HONOURABLE TAM YIU-CHUNG, J.P.

THE HONOURABLE FUNG CHI-KIN

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

MEMBERS ABSENT:

THE HONOURABLE CYD HO SAU-LAN

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

PUBLIC OFFICERS ATTENDING:

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

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

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

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

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

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

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

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

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

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

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

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

MR LAM WOON-KWONG, J.P.
SECRETARY FOR THE CIVIL SERVICE

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

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

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

MR PHILIP CHOK KIN-FUN, J.P.
SECRETARY FOR EDUCATION AND MANPOWER

DR EDGAR CHENG WAI-KIN, J.P.
HEAD, CENTRAL POLICY UNIT

CLERKS IN ATTENDANCE:

MR RICKY FUNG CHOI-CHEUNG, J.P., 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:

Sessional Papers

No. 107	─	Occupational Safety and Health Council Annual Report 1997-98
No. 108	─	Hospital Authority Annual Report 1997-1998 with Statement of Accounts and Auditors' Report
No. 109	─	Report and Statement of Accounts of the Samaritan Fund together with the Director of Audit's Report for the year ended 31 March 1998
No. 110	─	Aids Trust Fund 1997-98 Annual Accounts together with the Director of Audit's Report

WRITTEN ANSWERS TO QUESTIONS

Air Pollution

1. MR HUI CHEUNG-CHING (in Chinese): It is reported that according to a research study, if air pollution continues to worsen, Hong Kong will become an uninhabitable place in 15 years' time. One of the contributors to air pollution in Hong Kong is the use of low-grade diesel purchased in the Mainland by the returning cross-border heavy goods vehicles. In this connection, will the Government inform this Council:

(a) of the annual average figures in respect of the following in various areas of Hong Kong over the past three years:

(i) the air pollution index; and

(ii) the concentrations of respirable suspended particulates, nitrogen dioxide and ozone in the air;

(b) how these figures compare with those in major cities in the world; and

(c) whether it has assessed the impact of the use of low-grade diesel purchased in the Mainland by the returning cross-border vehicles on the air quality in Hong Kong, and the measures in place to deter such a practice?

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

(a) (i) The annual average air pollution index (API) for various areas of Hong Kong is provided at Appendix A. It should be noted that prior to June 1998, the Environmental Protection Department (EPD) only compiled the annual average API on the basis of three broad categories: urban area, industrial area and new development area. From June 1998 onwards, the API system was enhanced to enable the reporting of API for individual monitoring stations.

(ii) The average concentration levels of respirable suspended particulates (RSP), nitrogen dioxide and ozone in various areas in Hong Kong over the past three years are provided at Appendix B.

(b) Comparisons of our air quality figures with those in other major cities are provided at Appendix C, D and E.

Our major problem is with RSP, which is attributable mainly to diesel vehicle emissions. In this regard, our annual average concentration level of RSP is comparable to those of the more polluted cities but not among the worst.

(c) Lower quality vehicle diesel may be brought into Hong Kong in the fuel tanks of cross-boundary goods vehicles. This is permitted under the current Dutiable Commodities Regulations as long as the fuel is for use by that vehicle and does not exceed the prescribed limits.

The main difference in fuel quality is the sulphur content. In Hong Kong, the sulphur content of vehicle diesel is limited to below 0.05%. The EPD has sample checked the sulphur content of the vehicle diesel brought into Hong Kong in the fuel tanks of cross-boundary goods vehicles. It was found that their sulphur content was about 0.3%. A vehicle using diesel with this level of sulphur content could result in about 10% higher particulate emissions. About 12 000 cross-boundary goods vehicles come into Hong Kong each day, compared with the total number of 150 000 diesel vehicles in Hong Kong. We estimate that the overall particulate emissions from vehicle fleet may be reduced by about 1% to 2% if cross-boundary goods vehicles could use diesel meeting Hong Kong standards.

Vehicle engine design and emission standards have much more effect on emission levels than fuel. We have tightened the vehicle emission standards for diesel vehicles a number of times in recent years. The particulate emissions from vehicles meeting the latest EURO II standards will be 80% less than the older models. But we recognize the use of substandard vehicle diesel will detract from our efforts to improve the air quality. We are therefore studying the feasibility of reducing the quantities of duty-free vehicle diesel carried by goods vehicles entering Hong Kong.

Appendix A

Annual Average Figures of Air Pollution Index (API)
in the Past Three Years

From January 1996 to June 1998:
Areas	1996	1997	1998 (1 January to 14 June)
Urban Area (Central/Western, Sham Shui Po)	47	49	48
Industrial Area (Kwai Chung, Kwun Tong, Tsuen Wan)	52	52	50
New Development Area (Sha Tin, Tai Po, Yuen Long)	49	49	46

From June 1998 to December 1998:
General Stations
Central/ Western	Kwai Chung	Kwun Tong	Sha Tin	Sham Shui Po	Tai Po	Tsuen Wan	Yuen Long	Tap Mun*
41	40	43	41	44	41	43	47	53

Roadside Stations
Causeway Bay	Mong Kok	Central*
79	56	69

Notes:

The system of reporting APIs was changed on 15 June 1998. The practice of reporting APIs by three broad categories was replaced by reporting APIs of individual air monitoring stations. Classification of air pollution levels prior to the change was: good (0-50); moderate (51-100); unhealthy (101-200); very unhealthy (201-500). The existing classification is: low (0-25); medium (26-50); high (51-100); very high (101-200); severe (201-500). * Tap Mun and Central stations started operation on 5 October 1998.

Appendix B

Average Concentrations of Nitrogen Dioxide (NO2), Respirable Suspended
Particulates (RSP) and Ozone (O3) for the Past Three years

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Drug Evaluation Centres

2. MR BERNARD CHAN: It is reported that the Singaporean Government is setting up a Centre for Drug Evaluation in respect of new drugs for registration. In this connection, will the Government inform this Council whether it has similar plans to establish such a centre in Hong Kong, particularly in respect of Chinese medicine; if it has, of the steps it will take to ensure its competitiveness among drug evaluation centres in the region; if not, the reasons for that?

SECRETARY FOR HEALTH AND WELFARE: Madam President, in Hong Kong, pharmaceutical products are evaluated for their safety, efficacy and quality before they are approved for registration and sale. Evaluation is performed by the Pharmaceuticals Registration Committee, established by the Pharmacy and Poisons Board under the Pharmacy and Poisons Ordinance (Cap. 138). The Committee comprises medical doctors, pharmacists, a veterinary surgeon and a chemist. In carrying out its functions, the Committee, where necessary, will also seek the expert advice of specialist doctors and university academics. This arrangement is serving a similar purpose as the Centre for Drug Evaluation in Singapore.

As regards Chinese medicines, subject to the passage of the Chinese Medicine Bill by the Legislative Council, a statutory regulatory framework will be established in the future to control the practice, use and trading of Chinese medicine, including a requirement for all proprietary Chinese medicines to be registered before they can be sold in Hong Kong. An evaluation mechanism, similar to the existing one for pharmaceutical products, will be set up for the evaluation of the proprietary Chinese medicines seeking registration.

Blood Stock

3. MR MICHAEL HO (in Chinese): It is reported that on average 400 packets of blood donated by the public were discarded by the Hong Kong Red Cross Blood Transfusion Service (BTS) under the Hospital Authority (HA) in each of the past six months. In response, the BTS indicated that the annual surplus-supply rate of blood stock during the period from 1995 to 1998 was less than 1%, which was lower than the international standard of 5%. In this connection, will the Government inform this Council:

(a) of the details of the international standard;

(b) whether it knows:

(i) the BTS's criteria for determining the quantities of blood to be collected and stored;

(ii) the respective quantities of blood collected and discarded by the BTS in each of the past 36 months; the total quantities of blood discarded by all public hospitals in each month during the same period; and

(iii) the average quantities of blood disposed of in other countries during the same period; and

(c) whether it has issued any guidelines to the HA on matters relating to blood stock, including setting of the standard surplus supply rate; if so, the details of them?

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

(a) According to the experiences of other countries and the consensus of expert haematologists in international conferences and seminars, the disposal of expired blood ranges from 5% to 10% of the total quantities of blood collected is well accepted. Given the fluctuation in blood demand, particularly that the occurrences of disasters cannot be anticipated, it is necessary for all blood transfusion service and blood banks to maintain an adequate reserve of blood to ensure sufficiency to cater for needs at all times.

(b) (i) Each year, the BTS will take into account various factors that will affect the blood demand, such as population increase and ageing population, when determining the quantities of blood to be collected and stored in the year. It will also liaise with individual hospitals with blood banks on the quantities of blood to be supplied, based on the past trends of blood supply and demand. Moreover, the BTS will analyse the blood stock and usage in hospitals from time to time, in order to adjust the quantities of blood to be collected and stored according to changes in demand.

(ii) A breakdown of the quantities of blood collected and the quantities of expired blood discarded by the BTS in the past 36 months, and the total quantities of expired blood discarded by public hospitals, by month, during the same period is respectively shown in the Annex. A respective annual average of only 0.49% and 1.24% of the total blood units obtained by the BTS and the public hospitals was discarded.

(iii) The HA does not have information on the average quantities of blood disposed of in other countries in the past 36 months. However, according to the information available, the average expiration rate of blood transfusion service in the United States in 1992 was about 10%; while in a blood transfusion centre in Australia, the rate for red blood cell expiration in 1998 was above 10%. In most blood transfusion centres of other areas, about 5% to 10% of their blood would be disposed of upon expiry.

(c) The BTS under the HA possesses professional knowledge and experiences to manage the operation of the blood transfusion service, including the matters relating to blood collection and storage. In order to cater for urgent needs, the blood stock of the BTS is sufficient for use for at least one week. The BTS will agree with individual hospitals with blood banks on their blood stock level, including the blood quantities for reserve. To facilitate hospitals in estimating their blood usage and stock in a more reasonable and accurate manner, the BTS has formulated guidelines which set out the usual blood requirements under different circumstances. The BTS will replenish the blood stock in receiving hospitals according to the agreed level. According to the information reported by the hospitals, such as the blood usage, storage and expiration rate, the BTS will closely monitor whether the blood requirements of individual hospitals are reasonable. Moreover, the BTS provides 24-hour services to ensure sufficient blood supply to all hospitals even in emergencies, so as to minimize the need for hospitals to store an excessive amount of blood.

Annex

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Mainland Migrants

4. MR LAW CHI-KWONG (in Chinese): Will the Government inform this Council of the following statistical breakdowns relating to persons, divided into groups by sex and age (with each age group covering 10 years), who came to settle in Hong Kong from the Mainland last year:

(a) the number and percentage of such persons in the relevant age group of the male and female populations of Hong Kong;

(b) the percentage of those who were allowed to come to Hong Kong for settlement on the grounds of family reunion in each age group of the male and female mainland migrants concerned; and

(c) the percentage of holders of Certificate of Entitlement in each age group of the male and female mainland migrants concerned?

SECRETARY FOR SECURITY (in Chinese): Madam President,

(a), (b) and (c)

The statistics asked for in (a) to (c) are set out in the attached tables.

Table a:

Number of One-way Permit holders entering Hong Kong in 1998 by age and sex

		Male		Female		Total
Age	No.	%	No.	%	No.	%
below 10	7 497	1.93	6 905	1.93	14 402	1.93
10-19	9 375	2.13	9 300	2.24	18 675	2.19
20-29	830	0.17	1 925	0.37	2 755	0.27
30-39	515	0.08	8 002	1.15	8 517	0.63
40-49	666	0.11	5 585	1.02	6 251	0.55
50-59	178	0.05	2 449	0.91	2 627	0.44
60+	319	0.07	2 493	0.49	2 812	0.29
Total	19 380	0.58	36 659	1.10	56 039	0.84
Note:	% refers to percentage in the same age group of Hong Kong mid-1998 population.
Table b:	Number of One-way Permit holders entering Hong Kong to join immediate family member(s) (that is, spouse/parent/children) in 1998 by age and sex
		Male		Female		Total
Age	No.	%	No.	%	No.	%
below 10	7 491	99.92	6 902	99.96	14 393	99.94
10-19	9 357	99.81	9 290	99.89	18 647	99.85
20-29	744	89.64	1 865	96.88	2 609	94.70
30-39	336	65.24	7 936	99.18	8 272	97.12
40-49	528	79.28	5 534	99.09	6 062	96.98
50-59	153	85.96	2 442	99.71	2 595	98.78
60+	313	98.12	2 477	99.36	2 790	99.22
Total	18 922	97.64	36 446	99.42	55 368	98.80
Note:	% refers to percentage in the same age group of all One-way Permit holders entering Hong Kong in 1998
Table c:	Number of Certificate of Entitlement holders entering Hong Kong from the Mainland in 1998 by age and sex
		Male		Female		Total
Age	No.	%	No.	%	No.	%
below 10	6 449	86.02	6 015	87.11	12 464	86.54
10-19	6 021	64.22	5 846	62.86	11 867	63.54
20-29	668	80.48	812	42.18	1 480	53.72
30-39	3	0.58	1	0.01	4	0.05
40+	-	-	-	-	-	-
Total	13 141	67.81	12 674	34.57	25 815	46.07
Note:	% refers to percentage in the same age group of all One-way Permit holders entering Hong Kong in 1998.

Application of Information Technology in Schools

5. MR SIN CHUNG-KAI: Regarding the pilot scheme in respect of the application of information technology (IT) in schools, will the Government inform this Council:

(a) of the criteria used in selecting the participating schools and the measures taken to ensure fairness in fund allocation;

(b) of the amount of money granted to each school in the scheme;

(c) of the progress and the estimated completion time of its evaluation of the scheme; and

(d) whether it will consider providing funds to all schools for them to undertake IT projects; if so, the estimated total costs and the sources of funds; if not, the reasons for that?

SECRETARY FOR EDUCATION AND MANPOWER: Madam President,

(a) With a view to identifying and disseminating the best practices in using IT in education, the Government has introduced an IT Pilot Scheme in the 1998-99 school year for two years. Ten primary and 10 secondary schools have been selected as IT pilot schools, based largely on the following criteria:

(i) staff readiness in terms of qualification and experiences on using IT in teaching and learning activities;

(ii) quality of schools' IT development plans;

(iii) schools' track record on computer usage, as well as involvement and participation in computer related activities;

(iv) availability of space to accommodate additional computers; and

(v) location of schools (this is to ensure as far as possible that the pilot schools are geographically distributed evenly so that non-pilot schools nearby can easily visit and share experience with them).

To ensure fairness, all primary and secondary schools were briefed in advance on the objectives of the scheme, schools' entitlement and responsibility under the scheme, as well as the key selection criteria. Applications were assessed by a selection panel comprising representatives from the Education Department (ED), the Information Technology Services Department, the Hong Kong Computer Society, the Hong Kong Association for Computer Education and the Hong Kong Institute of Education.

(b) Under the scheme, each selected primary and secondary schools have been allocated $3.71 million and $6.073 million respectively. The grant is provided for acquiring computer equipment, arranging networking and related site preparation works, and other IT related activities. In addition, each school is provided with an additional graduate teaching post for two years to co-ordinate IT related activities in schools, at an annual recurrent cost of $0.39 million for one primary teaching post and $0.42 million for one secondary teaching post.

(c) All pilot schools have already completed their site preparation works, acquired their computers and made the necessary networking. They are now actively implementing their IT plans and are at different stages of progress. The ED is closely monitoring their implementation. Experience sharing sessions will be held from April 1999 onwards for dissemination of their experience in using IT in education to other schools. The ED will commission a tertiary institution to conduct and complete an evaluation of the pilot scheme in the second half of 2000.

(d) The Government has been implementing a number of initiatives on IT in education, which cover all public sector primary schools, secondary schools, special schools, secondary technical schools as well as prevocational schools. A capital sum of $3,200 million (from the 1998-99 to 2002-03 school years) and a recurrent sum of $600 million (starting from the 1998-99 school year) have been set aside for their implementation. The provision is mainly for acquiring computer equipment, arranging networking and related site preparation works, teacher training, as well as the provision of technical, professional and resource support. We will regularly review the provision for schools to ensure that schools can benefit from the latest advancement in IT and that their needs are adequately met.

In addition, individual schools may apply to the Quality Education Fund to carry out school-based IT in education projects. So far, the Quality Education Fund has supported about 50 such projects amounting to $50 million.

Granting of Funds for Research Projects

6. MR ERIC LI (in Chinese): Regarding the granting of funds for various research projects by the Research Grants Council (RGC) of Hong Kong, will the Government inform this Council whether it knows of the following:

(a) the number of research projects approved by the Council in the past three years that were directly related to policy matters and people's livelihood in the territory; the total amount granted and the percentage of such grants out of the total amount granted by the Council;

(b) whether people from the relevant sector or professionals concerned were involved in the approval of grants for these research projects; and

(c) the mechanism in place to prevent overseas academics from obtaining grants to conduct researches that have no direct bearing on the territory during their short stay in Hong Kong?

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

(a) The RGC has awarded research grants to 1 613 research projects in the past three years from 1996-97 to 1998-99. The RGC's main criteria for supporting research projects are the academic quality and intellectual content of proposals. In addition, the relevance of proposals to the needs of Hong Kong and the potential for social, cultural or economic application are also important points to be considered.

Although the RGC does not keep separate statistics on research projects that are "directly related to policy matters and people's livelihood in the territory", many of the research projects supported by the RGC have direct bearing on local policies and the everyday life of Hong Kong people. Funded projects cover a wide range of areas from economic, business, political, social and education issues to medical and engineering problems relevant to Hong Kong. A full list of research projects supported by the RGC is published every year in the RGC's annual reports, which are accessible to the public both in printed form and on the University Grants Committee (UGC) website (http://www.ugc.edu.hk). Some examples of projects with direct relevance to Hong Kong are:

- An Examination of Equity Carve-Outs in Hong Kong

- Perception of Family Functioning amongst Adolescents in Hong Kong

- Global Telemedicine for Hong Kong: A Requirement and Effectiveness Analysis

- Strategies for Environmental Assessment of Aquatic Ecosystems in Hong Kong

The RGC also launched a Co-operative Research Centre Scheme in 1993 to promote collaboration in applied research between the UGC-funded institutions and the local industry. A total of 16 projects have been supported under this Scheme with grants totalling over $36 million. All of these projects have direct relevance to Hong Kong industry as partnership with local industry is a prerequisite for funding under the Scheme.

(b) All research proposals submitted to the RGC undergo a rigorous peer-review process. They are examined by specialist subject panels, comprising in total some 80 members who are predominately local academics with expertise in the relevant discipline areas. These panels are assisted by external reviewers who are recognized experts in the relevant fields. In the 1998-99 exercise, about 5 300 reviewers were involved. These external reviewers, who may be either from within or from outside Hong Kong, will usually include professionals or other qualified personnel from non-academic sectors, if this is relevant to the particular proposal under consideration. The RGC, which comprises both local lay members as well as local and non-local academics, determines the funding allocation based on the recommendations of the subject panels.

(c) Eligibility to apply for RGC grants is limited to full-time academic staff of the UGC-funded institutions. Where an applicant, whether of local or overseas origin, is employed on a fixed term contract, he/she is required to be employed for at least one year or the expected duration of the project whichever is the longer. All grant applications made by eligible staff are assessed based on the same criteria as mentioned at (a) above. The RGC also monitors the progress and outcome of the projects it funds. The grant holder has to submit an annual progress report and a final report on project completion. The project completion reports are also subject to peer-review, and comments received are fed back to the researcher for reference and action as appropriate.

Building of Walt Disney Theme Park on Lantau Island

7. MISS CHRISTINE LOH: Regarding the proposal to build a Walt Disney theme park on Lantau Island, will the Government inform this Council:

(a) of the body or government department that will enter into contracts with the Walt Disney Company;

(b) whether this Council will be consulted about various details, such as the terms of the draft contracts, the concessions made and the infrastructure to be provided by the Government, before the contracts are signed;

(c) whether the Government will compare the overall benefits to tourism and the economy which will be derived from the Government's investments in the theme park project, to those benefits which will be gained if such investments are put to other uses; and

(d) how the port development plans on Lantau Island will be affected, and if the port facilities have to be relocated, of the recommended alternative locations?

SECRETARY FOR ECONOMIC SERVICES: Madam President, our replies to the four parts of the question are as follows:

(a) Should an agreement be reached between the Government and the Walt Disney Company, we would seek legal advice on who would be the most appropriate person to sign the agreement on behalf of the Government.

(b) Provided that we could reach mutually acceptable terms and conditions with the Walt Disney Company, we will consult the Council.

(c) The Government will conduct a cost-benefit analysis of the impact on the economy and tourism of its investment in the theme park compared to alternative uses of the land.

(d) The planned port development at Northeast Lantau will be reviewed if it is decided to proceed with the theme park development. This does not necessarily mean that the planned port facilities will have to be relocated.

Promoting the Protection of Intellectual Property Rights

8. DR DAVID LI: According to a survey conducted by the Federation of Youth Groups, almost half of the young people interviewed believe that there is nothing wrong in buying pirated goods, whilst one third of them have no idea that laws protecting intellectual property rights have been enacted and another one third consider that a thriving market in fake items helps reviving the economy. In this connection, will the Government inform this Council whether:

(a) it will step up efforts to promote the protection of intellectual property rights in primary and secondary schools; and

(b) it will consider launching specific educational programmes and providing additional funding for such programmes?

SECRETARY FOR TRADE AND INDUSTRY: The Government fully recognizes the importance of education in raising the awareness of the public, especially the younger generation, of the need to respect intellectual property rights.

(a) The Intellectual Property Department (IPD) has been conducting a Secondary School Visits Programme since September 1997. During these visits, IPD staff explain to secondary school students what intellectual property rights are and their importance to Hong Kong. Since then, over 160 secondary schools with more than 55 000 students have been covered.

In addition, a tailor-made teaching kit has been produced with the help of local film and music producers, pop artists, cartoonists and designers. We have already distributed more than 1 000 free copies of this teaching kit to both primary and secondary schools.

From time to time, IPD staff also visit tertiary educational institutes to discuss with the staff and students about the importance of protecting intellectual property rights.

(b) We will continue with the existing school visits programme. An additional provision of $9 million has been earmarked for the coming three years to strengthen the Government's effort to conduct more promotional activities to both students and the public in general, and to produce publicity materials on the theme.

Unauthorized Alteration of Bus Routes

9. MR LAU KONG-WAH (in Chinese): It is reported that the New World First Bus Services Limited (the First Bus) and the Citybus Limited (Citybus) have, without the approval of the authorities, altered the routes of some scheduled buses. In this connection, will the Government inform this Council whether:

(a) the authorities have detected any unauthorized alteration of bus routes by franchised bus companies (except alterations necessitated by emergencies on the road) during the past year; if so, the details of that, and whether prosecutions have been instituted against the bus companies concerned; if prosecutions have been instituted, the number of them; if prosecutions have not been instituted, the reasons for that; and

(b) it has assessed the impacts on the rights of passengers in case of traffic accidents involving buses running on unauthorized routes; and whether there were cases in which the passengers involved in such accidents were denied compensation?

SECRETARY FOR TRANSPORT (in Chinese): Madam President, under the Public Bus Services Ordinance, franchised bus operators are not permitted to alter the approved routings without the prior consent of the Commissioner for Transport. Bus franchisees in contravention of this provision are liable to financial penalties or more seriously, revocation of franchise.

During the past year, the Transport Department (TD) did not observe or receive reports on any unauthorized alteration of routings by any franchised bus companies, including the First Bus and Citybus.

On 12 February 1999, there was a press report alleging that both the First Bus and Citybus had buses with "private" or "out of service" signs operating from Shau Kei Wan bus terminus along the Island Eastern Corridor to Causeway Bay, carrying fare-paying passengers on board. In response to the TD's enquiries about the alleged incidents, the bus companies replied that it was their usual operational arrangement to dispatch "empty" buses as and when necessary to travel via a less congested route to catch up with the timetable, which might have been delayed due to traffic congestion or other reasons. They added that they never allowed those buses to carry passengers and that they had recently issued an instruction to their staff to put it beyond doubt that under no circumstances should such buses carry any passengers. Subsequent spot checks carried out by the TD confirmed that no passengers were carried on such dispatches.

On insurance coverage, we understand that all bus passengers are fully covered by third party insurance under all circumstances irrespective of whether the bus is running on a scheduled route or otherwise.

Appointment of Women to Advisory and Statutory Bodies

10. MISS EMILY LAU: Will the executive authorities inform this Council:

(a) of the respective numbers of men and women in the overall membership of the 350 government advisory and statutory bodies;

(b) of the respective numbers of men and women on the Home Affairs Bureau's database on persons who have a record of or interest in public service; and

(c) whether they have formulated plans to boost the number of women appointed to such bodies?

SECRETARY FOR HOME AFFAIRS: Madam President,

(a) According to the latest information available, there are 3 893 men and 949 women appointed to government advisory and statutory bodies.

(b) The Home Affairs Bureau maintains a Central Personality Index System which is a database containing personal data of individuals who are serving or have served on government advisory and statutory bodies and those who have indicated an interest to serve on these bodies. The database currently keeps the personal data of 14 104 men and 3 146 women.

(c) Appointments to government advisory and statutory bodies are normally made on an ad personam basis taking into consideration the individual's abilities, expertise, experience, integrity and commitment to public service, regardless of the gender. Members of over 100 women organizations as well as professional bodies, trade and industrial organizations, academic institutions, among others, have been invited to indicate their interest to serve on these bodies by submitting their personal information for inclusion into the database maintained by the Home Affairs Bureau. Moreover, to further facilitate members of the public who are interested in serving on these bodies to provide their personal information to be included into the above database, the relevant proforma has recently been uploaded onto the Internet for their easy access.

Provision of Free Pick-up Area at New Airport

11. MR BERNARD CHAN: At present, private car drivers picking up passengers in the airport at Chek Lap Kok can park their cars only at the fee-charging car parks, which offer no grace period for short stay. In this connection, will the Government inform this Council if it knows:

(a) whether the Airport Authority (AA) had surveyed the practices in other major international airports before it made the decision of not providing a free pick-up area; if so, the results of the survey;

(b) whether the AA has plans to designate such a pick-up area for private cars; if not, the reasons for that; and

(c) given the long walking distance from the arrival hall to the car park, whether the AA will consider providing more convenient picking up arrangements for arriving business leaders?

SECRETARY FOR ECONOMIC SERVICES: Madam President, we have consulted the AA. The information provided by the AA in response to the three parts of the question is as follows:

(a) The airport's design consultant had taken into consideration the practices at other major international airports in the general design of the Passenger Terminal Building (PTB). However, the AA does not have information on whether the pick-up arrangements at other airports had been specifically deliberated at the design stage. In considering the pick-up arrangement at the new airport, the AA also has to take into account the operational needs. No passenger pick-up, free or otherwise, can be provided on the road down the arrivals level (Cheong Tat Road) as it is primarily for Emergency Vehicle Access and dispersal from fire exits at the lower levels of the PTB.

(b) There are designated pick-up areas for private cars at the open car park to the south of the PTB and the multi-storey car park to the north. Vehicles using the car parks are charged at $13 (in the case of open car park) or $16 (in the case of multi-storey car park) an hour. The AA has examined the possibility of designating areas close to the PTB as free pick-up areas or offering a grace period for short stay at the car parks. However, based on experience at Kai Tak and actual operational experience at the new airport, there is a real risk of clogging up the traffic in the surrounding areas if such arrangements are introduced. While waiting for their passengers, drivers would tend to drive in and out of the pick-up areas or car parks when the grace period is expired, thus causing traffic congestion in the nearby road system. Immense resources would be required to maintain order with no guarantee of smooth operation. Such arrangements would also encourage touting activities.

(c) The AA has estimated that the walking distance between the meeters and greeters areas in the PTB and the pick-up areas in the public car parks is on average five to six minutes, which would normally not be considered as excessively long. The AA attaches great importance to the convenience of passengers. However, given the physical constraints, there is little scope for making significant changes to the present arrangements.

Museum Collections

12. MISS CHRISTINE LOH: With regard to the museums managed by the two Provisional Municipal Councils, will the Government inform this Council:

(a) of the categories of collections currently held in such museums;

(b) whether it has estimated the value of such collections by category; and

(c) of the current ownership and management responsibility of such collections; and how these will be affected upon dissolution of the two Provisional Municipal Councils?

SECRETARY FOR HOME AFFAIRS: Madam President, on the basis of information provided by the Urban Services Department and the Regional Services Department, the answers to the Honourable Miss Christine LOH's questions are as follows:

(a) and (b)

The categories of collections currently held by the Provisional Urban Council and Provisional Regional Council museums, and their estimated value are tabulated below:

A. Provisional Urban Council

Hong Kong Museum of Art
(including the Flagstaff House Museum of Tea Ware)

Category	No. of Items	Estimated Value (HK$)*
Chinese Antiquities	4 074	435,557,793
Chinese Painting and Calligraphy	3 910	452,262,755
Historical Pictures	1 185	65,890,307
Contemporary Hong Kong Art	2 756	71,896,632
Total:	11 925	1,025,607,487

* Based on the market value of the collections
Hong Kong Museum of History
(including the Law Uk Folk Museum, Lei Cheng Uk Han Tomb Museum and Hong Kong Museum of Coastal Defence)

Category	No. of Items	Estimated Value (HK$)*
Archaeology	7 023	2,090,000
Ethnography	14 237	13,450,000
Local History	41 265	30,860,000
Natural History	4 579	3,600,000
Total:	67 104	50,000,000

* Based on the insured value of the collections

B. Provisional Regional Council

Hong Kong Heritage Museum
(including the Sam Tung Uk Museum, Sheung Yiu Folk Museum, Hong Kong Railway Museum and Tak Wah Gallery)

Category	No. of Items	Estimated Value (HK$)*
Hong Kong Contemporary Art	1 987	5,451,980
Chinese Art	1 220	137,542,600
Hong Kong Design Works	5 968	3,126,169
Historical Objects	52 811	33,121,029
Total:	61 986	179,241,778

* Based on the insured value of the collections

The materials on display at the Hong Kong Science Museum and the Hong Kong Space Museum are not included in the above tables as they are regarded as exhibits and most of them are fabricated.

(c) The ownership and management of such museum collections currently rest with the two Provisional Municipal Councils. Should the two Provisional Municipal Councils be dissolved, it is envisaged that the ownership of the collections will be vested in the Hong Kong Special Administrative Region Government while the management responsibility will be transferred to a government department responsible for leisure and cultural services.

Causes of Cancer

13. MR LAU KONG-WAH (in Chinese): Will the Government inform this Council whether:

(a) it knows the numbers of new cases of various types of cancer in each of the past three years; whether the numbers are on the rise, and how they compare with the corresponding figures in other cities with similar levels of development;

(b) it knows the types of cancer which are more commonly found in Hong Kong than in the cities of western countries, and the reasons for that;

(c) it knows the main causes of the three types of cancer with the highest incidence rates in Hong Kong; and

(d) it has any plan to step up educational programmes designed to enhance the awareness of the public about cancer and its causes?

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

(a) At present, statistical information about new cancer cases is compiled by the Hong Kong Cancer Registry (the Registry) of the Queen Elizabeth Hospital. It regularly collects cancer-related information from oncology and pathology departments of public and private hospitals, and pathology department of the Department of Health. The information is verified, analysed, cross-checked, and published in the Registry's Annual Reports which are available to health services providers and the public. Due to the need to verify the accuracy of the data, and to cross-check over 90 000 cases reported from different sources to avoid double-counting, the compilation of the Annual Report is very time-consuming. The Registry can only produce in its latest 1998 Annual Report the number of various types of new cancer cases up to 1994. According to the information provided by the Registry, the respective numbers of new cases of various types of cancer from 1992 to 1994 are 17 250, 17 275 and 17 974. A detailed breakdown of the figures is at Annex.

In order to minimize the deviation of the analysis of the trend of new cancer cases, the Registry has studied the data over a period of 10 years. Its study shows that during the 10 years from 1985 to 1994, the age standardized incidence rates of the five most common cancers in Hong Kong (the first to fifth types of cancers in the table at Annex) remained the same or showed a slightly downward trend, except for colon and breast cancers which appeared to be on the rise.

(b) The Registry has compared the incidence rates of the five most common types of cancer in Hong Kong against those in other selected places, such as New South Wales in Australia, the Canada and Los Angeles in the United States. The data shows that the incidence rates of lung, liver and nasopharyngeal cancers are higher in Hong Kong than those in the selected places. Liver cancer is closely associated with Hepatitis B infection which is prevalent in Hong Kong. Nasopharyngeal cancer is particularly common in Hong Kong Chinese and ethnic Chinese in Southeast Asia. Epidemiological studies in Hong Kong have provided strong evidence that intakes of salted fish and some pickled food, particularly during the weaning period, and exposure to the Epstein-Barr (EB) virus, are associated with a high risk of nasopharyngeal cancer. The causal and risk factors of lung cancer include, among others, smoking and exposure to carcinogenic substances such as asbestos.

(c) According to the information provided by the Registry, for the 10 years from 1985 to 1994, the three types of cancer with the highest incidence rates in Hong Kong are lung, liver, and female breast cancers. In general, there are epidemiological information about the causal and risk factors of various types of cancer. For female breast cancer, women with late age of first pregnancy, strong family history and previous exposure to radiation are particularly at risk. The risk factors of lung and liver cancers have already been alluded in (b).

(d) No smoking and healthy diet are important measures to prevent cancer. The Department of Health will strengthen publicity and health education in these two areas through health education programmes targeted towards the general public, students and patients of general out-patient clinics. Health talks on specific cancers, for example, cervix uteri cancer, will also be featured in Woman Health Centres and Elderly Health Centres.

The Hospital Authority (HA) has also been actively involved in collaboration with other organizations in the organization and promotion of health education programmes to enhance the public's awareness of cancer prevention. Most of theses activities are conducted in the Health InfoWorld in the HA Building, patient resource centres of hospitals, and specialist out-patient clinics providing services for cancer patients.

Annex

Number of New Cases of Various Types of Cancer
(1992-1994)

Refusal to Handle Dead Bodies of AIDS Patients

14. MISS EMILY LAU: It is reported that some funeral parlours refuse to handle dead bodies of AIDS patients or to provide funeral services for them. In this connection, will the executive authorities inform this Council whether they have received such complaints, if so:

(a) whether they have investigated such complaints; and

(b) of the names of the funeral parlours which were the subjects of the substantiated complaint cases; and the actions they have taken in respect of such funeral parlours?

SECRETARY FOR HOME AFFAIRS: Madam President, on the basis of information provided by the Urban Services Department and the Regional Services Department, answers to the Honourable Miss Emily LAU's questions are as follows:

Under the Public Health and Municipal Services Ordinance (Cap. 132), the two Provisional Municipal Councils (the two Councils) are the licensing authorities for funeral parlours and undertakers. The role of the two Councils is to protect public health through licensing control of the funeral parlours and undertakers. The aim of control is to ensure proper handling of dead bodies without interfering with the normal business and management decisions of the operators concerned.

The two Municipal Services Departments (the two Departments) have issued a set of guidelines on Precautions for Handling and Disposal of Dead Bodies prepared jointly by the Department of Health, the Hospital Authority and the two Departments to the funeral parlours and undertakers for adoption by their staff. The guidelines state that any dead bodies carrying an infectious disease including AIDS (that is, HIV infection), should be handled and disposed of with special procedures so as to minimize the risk of transmission of disease.

So far, the two Departments have no record of having received any complaint against funeral parlour operators or undertakers for refusing to handle bodies of persons infected by AIDS or to hold funeral services for their relatives.

Occupancy Position of Industrial Estates

15. DR LUI MING-WAH (in Chinese): Regarding the occupancy position of industrial estates and the effectiveness of the industrial estates scheme, will the Government inform this Council:

(a) of the proportion of the total area of land occupied by factories in operation to the total leasable area of land in these estates;

(b) of the proportion of tenants who have vacated the sites to the total number of tenants;

(c) of the ways to dispose of the factories vacated by tenants; whether such vacant factories will be re-let to new tenants; and

(d) as the leased area of land in the Tseung Kwan O Industrial Estate only accounts for half of the total leasable area, whether it will review the effectiveness of the industrial estates scheme and consider re-designating the unleased land of the said industrial estate as a science park; if this will not be considered, the reasons for that?

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

(a) The total area of land occupied by factories in operation accounts for about 75% of the total leasable area of land in the industrial estates.

(b) In the 1998-99 financial year, tenants vacating their sites accounted for 5% of the total number of tenants.

(c) The factories vacated will be sold or rented to new operators meeting the selection criteria of the Hong Kong Industrial Estates Corporation. Seven surrender cases were completed in the 1998-99 financial year : four involving land with buildings and the other three involving undeveloped sites. Of the four factories surrendered, two have been rented out; the sale of one factory is now under negotiation while the remaining factory is being let/sold.

(d) The Industrial Estates Corporation has appointed a consultant to conduct a strategic review to ensure that the industrial estates will continue to satisfactorily meet the demands of tenants and remain competitive in the Asia Pacific Region. The effectiveness, mode of operation and future directions of the industrial estates are key areas being examined by the consultancy. The review is expected to complete in mid-1999.

Forged Travel Documents

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

(a) of the number of forged travel documents seized in each of the past three years;

(b) whether it has been notified by other countries of any detected cases involving the holding and the use of forged passports of the Hong Kong Special Administrative Region (SAR) of the People's Republic of China within their territories since the issuance of the SAR passports; if so, the number of forged passports involved in those cases; and

(c) whether it has assessed the adequacy of the security design of the SAR passports; if it is assessed as inadequate, the plans to improve the security design of such passports?

SECRETARY FOR SECURITY (in Chinese): Madam President,

(a) The number of forged travel documents seized in each of the past three years is:

Year	Number of forged travel documents seized
1996	3 192
1997	3 083
1998	3 594

(b) Since the issuance of SAR passports in July 1997, only two forged passports have been detected. The first one was detected by the Immigration Department at our airport on 2 April 1998, and the second one by the Canadian authorities acting on our intelligence at the Vancouver International Airport on 24 April 1998. Members of the syndicate responsible for the forged passports were arrested in May 1998 and the syndicate was neutralized.

(c) We believe that the SAR passport, which contains state-of-the-art anti-forgery features, is of world class quality. We are satisfied that it meets the most stringent security requirements. The security features of the SAR passport are held in high regard by immigration authorities worldwide and no complaints whatsoever have been made by overseas countries regarding the security of the SAR passport. However, we will keep under review the adequacy of the security design in the light of detected forgery cases and latest development in passport production technology. We will not hesitate to make the necessary improvements should the situation so warrant.

Use of Antibiotics by Agricultural and Fisheries Industries

17. MR MICHAEL HO (in Chinese): It is reported that antibiotics are commonly used by the agricultural and fisheries industries in Hong Kong, which has resulted in the emergence of drug-resistant bacteria. In this connection, will the Government inform this Council whether:

(a) it knows if it is common for the agricultural and fisheries industries in Hong Kong to mix antibiotics into the feed, and whether any survey has been conducted on the dosage of antibiotics used in the feed by the agricultural and fisheries industries in Hong Kong;

(b) it knows the percentage of antibiotics used by the agricultural and fisheries industries against the total amount used in Hong Kong last year; how such percentage compares with the global percentage as surveyed by the World Health Organization;

(c) the use of antibiotics by agricultural and fisheries industries and veterinary surgeons in Hong Kong is regulated by the Agriculture and Fisheries Department (AFD); if so, the details of that; and

(d) measures will be formulated to monitor or control the use of antibiotics; if so, the details of them; if not, the reasons for that?

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

(a) The livestock industry in Hong Kong mixes antibiotic feed premixes with livestock feed to control and treat bacterial diseases. These antibiotic feed premixes are imported products and specially formulated for use in livestock feed. We are not aware that the fisheries industry mixes antibiotics into fish feed. To date, the Government has not conducted any survey on the amount of antibiotics used in feed;

(b) Statistics on the amount of antibiotics contained in antibiotic feed premixes imported and the amount of antibiotics used by the livestock industry in Hong Kong are not available;

(c) The registration of all antibiotic products (including antibiotic feed premixes) imported into Hong Kong is subject to the control of the Pharmacy and Poisons Regulations administered by the Pharmacy and Poisons Board established under the Pharmacy and Poisons Ordinance (Cap. 138). The Pharmaceuticals Registration Committee, established by the Pharmacy and Poisons Board, considers product safety, labelling and clarity of user instructions before approving the registration of an antibiotic feed premix. The use of unregistered antibiotic feed premixes is an offence under the Ordinance. Measures taken or to be taken by the AFD to monitor and control the use of registered antibiotic feed premixes by the livestock industry are set out in paragraph (d) below.

Veterinary surgeons are subject to regulation by the Veterinary Surgeons Board established under the Veterinary Surgeons Registration Ordinance (Cap. 529). Veterinary surgeons who are found to have been guilty of misuse of drugs including antibiotics may be subject to disciplinary proceedings under Cap. 529; and

(d) To monitor and control the use of antibiotics in livestock feed, the AFD have been educating farmers on the proper use of antibiotics through their extension offices. They have also prepared an easy-to-understand pamphlet listing out simple guidelines for farmers to follow. Moreover, the AFD will extend the testing and tracing system to cover antibiotics. This will involve testing for antibiotics residues in urine and viscera of livestock on farms and at slaughterhouses and investigation of farms of origin where antibiotic residues are detected.

Installation of Computerized Retrieval and Circulation Systems in Libraries

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

(a) of the respective numbers of government and aided secondary schools the libraries of which are equipped with computerized retrieval and circulation systems at present; the respective proportions of these schools to the total numbers of government and aided secondary schools; and

(b) whether there is any plan to subsidize the remaining government and aided secondary schools in installing such computer systems in their libraries; if so, of the estimated costs involved; if not, why not?

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

(a) At present, about 115 aided secondary schools, accounting for 26% of all aided secondary schools, have their libraries equipped with computerized retrieval and circulation systems. Libraries of government schools do not have such systems.

(b) The Administration is now actively considering to provide, as soon as possible, all public sector secondary schools with the softwares and bar code scanners required for the computerized retrieval and circulation systems. The estimated cost is about $6 million.

Government Pensions

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

(a) of the following in each of the past three years:

(i) the number of pensioners on the government payroll;

(ii) the total amount of pensions paid to the 10% lowest-paid pensioners on the government payroll and the proportion of this amount in the Government's overall expenditure on pensions;

(iii) the number of pensioners whose pensions were less than the standard amount payable to single persons for the same year under the Comprehensive Social Security Assistance (CSSA) Scheme; and

(b) whether there is any plan to review, in the consultancy study on the civil service retirement benefits schemes, if the pensions of low-income civil servants will be adequate to meet their basic needs in daily lives; if not, the reasons for that?

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

(a) The requested figures are as follows:

(i) number of civil service pensioners:

Year	No. of civil service pensioners
1996-97	50 065
1997-98	53 080
1998-99	54 110

(ii) amount of pensions paid to the 10% lowest-paid civil service pensioners:

Year	Total amount of monthly pension paid to the 10% lowest-paid civil service pensioners	Proportion of overall expenditure on monthly pension
1997-98	$38.5M	0.95%
1998-99	$46.2M	1.02%

(iii) number of civil service pensioners whose pensions were less than the standard amount payable to single (elderly) persons for the same year under the CSSA Scheme in the past two years:

Year	CSSA single (elderly) person allowance	Number of civil service pensioners with monthly pensions less than the left column
1997-98	$2,060 per month	17 347
1998-99	$2,555 per month	20 351

Figures for the year 1996-97 for items (ii) and (iii) are not available due to limited records currently accessible.

(b) The purpose of the proposed consultancy study on civil service retirement benefits schemes is to study the feasibility of introducing a new retirement benefits scheme based on provident fund for new recruits to the Civil Service. The existing pensions legislation have set out in details the calculation of a civil servant's pensions in proportion to his length of service and highest salary. We have no plan to review the pensions calculation formula therein. If the income of retired civil service pensioners including their monthly pensions meet the set criteria under the CSSA Scheme, they may apply to the Social Welfare Department under the Scheme for assistance to meet their basic needs.

Regulation of Auditors

20. MR CHEUNG MAN-KWONG (in Chinese): It is learnt that the accounts of a number of listed companies were only found to be irregular after the companies' financial hardship came to the surface and the auditors of such companies had not been able to uncover such irregularities during the regular audit exercises. On the other hand, quite a number of newly listed companies reported profits which fall far short of the profit estimates made in their prospectuses. In this connection, will the Government inform this Council whether it has assessed:

(a) how the above situations are related to the professional competence and conduct of auditors; and

(b) if the existing legislation is adequate for regulating the work of auditors; if it has, the details of the assessment; if not, whether it will conduct such an assessment; as well as the plans it has to strengthen the regulation of auditors?

SECRETARY FOR FINANCIAL SERVICES (in Chinese): Madam President, the Government fully recognizes the importance of compliance with accounting standards and disclosure requirements in preparing financial statements for listed companies. In this regard, the listed companies, the accounting profession, the Stock Exchange of Hong Kong (SEHK) and the Securities and Futures Commission (SFC) are each playing a key role in ensuring compliance. This is important for the better protection of investors.

Turning to part (a) of the question, it is important to note that the board of directors of each company have the legal responsibility to prepare financial statements that show a "true and fair view" of the financial position of the company. An auditor's responsibility is to ensure that these financial statements reflect the underlying records maintained by the company and are in accordance with acceptable accounting standards. The ability of an auditor to detect errors in conducting an audit will be undermined if these errors are caused by management fraud or other deliberate wrongdoing.

Similarly, the preparation of a profit forecast is the responsibility of the board of directors of the company to be listed. The directors are responsible to make reasonable assumptions and meet profit forecast. The reporting accountants' responsibility is to ensure that the profit forecast is properly compiled in accordance with the assumptions made by the directors.

In ensuring compliance with the Listing Rules, the SEHK looks into listed companies the previously audited financial statements of which do not reflect the company's financial position as of that date. In addition, the SFC as regulator of the securities market also has a strong interest in this area. Where appropriate, both the SEHK and SFC will refer cases of material misstatements to the Hong Kong Society of Accountants (HKSA) for review. In the past six months the SEHK has referred 11 cases to the HKSA.

We understand that the HKSA is investigating into the accounts of these companies to ascertain the circumstances in which such companies had failed, and whether the auditors concerned had failed in their reporting duties. The Society has undertaken to announce the results of these investigations as soon as possible. It would be premature therefore to rush to judgement as to whether the irregularities of these companies have any relationship with the auditors involved.

Turning to part (b) of the question, we should note that in the present financial climate, it is not surprising that some listed companies will experience financial difficulties. The functioning of the existing regulatory regime for auditors should be assessed against this background.

Under the Professional Accountants Ordinance, the HKSA as the self-regulator of the accounting profession is vested with statutory powers to establish entry requirements for the accounting and auditing profession, specify professional standards for its members, carry out regular reviews on members' practices, conduct investigations and order disciplinary actions.

The HKSA monitors the work of auditors on a continuous basis through reviews of the financial statements of listed companies as well as reviews of the practice of certified public accountants. It will initiate investigation into the affairs of its members should it have reasonable suspicion of significant non-compliance with professional standards or misconduct. In addition, the Society also acts on complaints from the public and referrals from other regulatory bodies, such as the SEHK and SFC. The Society is empowered to conduct disciplinary hearings and impose sanctions on its members, including reprimand orders, penalties up to $500,000 and removal from its professional accountant register. There are precedents of major accounting firms being subject to disciplinary actions.

In general, the existing regulatory arrangements for the auditors have served us well. However we should not be complacent. The HKSA, the market regulators and the Government are making renewed efforts with a view to improving the professional standards of auditors. This will help strengthen corporate governance, especially among the listed sector, so that we are better equipped to meet new market challenges.

In this regard, the HKSA has required that with effect from 1999 all its members must undertake a minimum of 40 Continuing Professional Development hours every year to keep themselves abreast of current developments in professional and economic matters.

To improve the corporate governance of listed companies, the SEHK published in April 1998, as part of the Code of Best Practice under its Listing Rules, a guideline to set up an "audit committee" within each listed company. The audit committee should be appointed from amongst the non-executive directors of the company's board to ensure objectivity and independence. Its principal duties include the review and supervision of the company's financial reporting process and internal controls. This guideline came into operation on 1 January 1999. A listed company will be required to provide an explanation in its annual report should it choose not to establish an audit committee.

At the same time, the SEHK is negotiating a Memorandum of Understanding with the HKSA on the division of regulatory work in respect of listed companies.

Moreover, the Administration is prepared to provide immunity to auditors who see it necessary to report suspected fraud or malpractices to regulatory authorities. This has been a subject of extensive consultation in the past two years. We shall include relevant legislative amendments in the composite Securities and Futures Bill scheduled for introduction into this Council before the end of this year.

BILL

Second Reading of Bill

Resumption of Second Reading Debate on Bill

PRESIDENT (in Cantonese): Bill: Second Reading. At the meeting today and tomorrow, we will resume the Second Reading debate on the Appropriation Bill 1999. The question before the Council is: That the Appropriation Bill 1999 be read the Second time.

I will try to balance the number of Members speaking on the question each day and will suspend the meeting at an appropriate time.

Under the Rules of Procedure, each Member has a maximum of 15 minutes for his/her speech. I will direct a Member to discontinue when he/she speaks in excess of the specified time.

Will Members who wish to speak today please press the "Request-to-speak" button?

APPROPRIATION BILL 1999

Resumption of debate on Second Reading which was moved on 3 March 1999

DR LEONG CHE-HUNG: Madam President, once again, the Financial Secretary has pull a hat trick in his Budget for the year 1999-2000 to win a round of applause, if not approval, amongst major political parties. For under the constraint of "you can only cut your clothes according to your cloth", in this economic downturn, there is not much cloth for him to cut, nor are there that many rabbits which he could pull out from his hat.

There is yet another angle of the Budget for which the credit goes to the Financial Secretary ─ there is a distinct sense of boldness and innovation ─ a breath of fresh air quite different from the usual civil service culture of "bureaucracy", from the age-old attitude claiming that we should not "rock the applecart".

To wit, the move to demutualization and the merging of the exchanges and clearing houses, as well as the suggestion for a major civil service reform are bold moves. The idea of a Cyberport and the theme park are new innovations.

I particularly welcome the commitment to a health care financing reform when the Financial Secretary said, "In health care, we can no longer defer a serious and purposeful discussion on the issue of health care financing. We cannot ignore the burden on the public purse of a quality, accessible and virtually free public hospital service."

Let us hope that all these are deeds and not just words. Some have commented that the Budget speech goes beyond the Budget and that it borders on changes in major policies. In short, it could be seen as a mid-term policy address. But if it is for the better, so be it.

Yet, are all that glitter really gold? Is the Financial Secretary pulling wool over the public's eyes using his masterly Houdini's act?

Let us, therefore, look at the different proposals of the Budget and gauge their effectiveness or otherwise in "relieving the pain" the community suffered from the economic downturn, and in producing an environment conducive for doing business and turning the tide so that Hong Kong can move onwards and sustain with new strength.

The tax rebate is the talk of the town. Whilst few would not welcome an unexpected windfall and as the Financial Secretary suggested, it will initiate a pleasant mood, many regard this as an unnecessary step.

As a start, most consider that paying full tax is an obligation and that once paid, they are so prepared. A legacy of a couple of thousand dollars or a few hundred which most taxpayers in the medium income brackets would receive is not going to stimulate their spending to help the retail market. Furthermore, the administrative cost must be phenomenal. One wonders whether the $8.5 billion so handed out could not be put to even better use. After all, it only takes twice that much to build a Cyberport.

Worse still, with all the efforts done, the lower income groups, which must be perhaps hardest hit by the economy, are not benefited as only 40% of the public in Hong Kong pay tax.

Yet, if a tax rebate is to be the order of the day, it must be done quickly and in equal ratio amongst the taxpayers. The move to cap the tax rebate to a ceiling of $100,000 as proposed by the Honourable LEE Cheuk-yan is, therefore, against the principle of fairness and natural justice, and should not be supported.

It may not be completely wrong to "rob the rich" in these lean times. To many, the Budget gives that cynical impression. To wit, there will be an adjustment of stamp duty rates and banding on property transactions. Whilst properties below $3 million will not be affected, stamp duty for real estates over $6 million will rise from 3% to 3.75%. To add to the perceived atonement, tunnel toll will be doubled for private cars; so is parking meter charges and fixed rate penalty for traffic related offences, which will be increased by 26.5%.

Let the Government not forget, the apparent well-to-do group in the community do "hurt" perhaps even more on a proportional basis from these bad times. Their moods must not be taken for granted, let alone completely ignored.

Few would disagree that the efficiency of the Civil Service in Hong Kong has much improved nowadays. Yet, most would agree that after so many decades, a reform is much warranted, if not already too late.

Yes, we must pay our public and civil servants reasonably and sufficiently to attract those with talent and retain them to serve the public with no distraction. Yet, their pay and benefit must not overly out-step the private sector. It is thus a welcome move that the Standing Commission on Civil Service Salaries and Conditions of Service is to conduct a benchmark review of entry points for new recruits to be in step with the private sector. Similarly, it is welcoming that justifications for various civil servants' allowances as well as the pension scheme be re-examined.

But will these changes affect those incumbent? If it does, full consideration must be given to the possible impact on the morale of our 180 000-odd civil servants and 140 000-odd subvented staff. Full consideration must be given to the contractual obligation that the Government has on existing staff. On the contrary, if only new recruits are to be paid on a lower package, the morale will be similarly affected when two staff members of the same grade with the same responsibility are being rewarded differently.

Civil service reform is not simply a matter of review of emoluments and benefits, but much depends on cultural alteration and change in service mode. The idea of fully corporatize suitable government services could well be the way forward. Yes, proper corporatization provides greater flexibility in hiring and firing. It could also put in place an appraisal system which can be used effectively in determining performance pay. Yet, it must not be simply paying a lip service.

The Government is well advised to take stock of the Hospital Authority (HA) ─ a corporatized quasi-governmental body which aims to introduce corporate initiatives. Yet, eight years down the line of its establishment, although improvement has been brought to the services, the HA is viewed by the public as problem-plagued. Much of the corporatization culture, such as greater flexibility in hiring and firing, still await to be witnessed.

The reasons? There is an inherent fault of the Government's "shedding responsibility" attitude ─ getting hospital service responsibility off their shoulders ─ very little nurture and monitoring, let alone direction, is given to the HA.

More, whilst the HA Board by statute is to manage public hospital services, many Board members regard it as an advisory body with little accountability, let alone ownership of the activities or the mishaps of the organization. Is this the mere fault of individual members, or is it a lack of clear directives from the Government?

Worst, whilst responsible for health policy setting, the relevant government bureaux lack the expertise to oversee, let alone to guide the HA, which is already out of civil service regime and perhaps, control.

Corporatization will undoubtedly lead to privatization and on that, the Budget speech has cited the water supply as a suitable candidate. Yes, many cities around the world, even our closest neighbour, Macau, allow private sector participation in the supply of water and claim success. Yet, let us not forget that water is an essential element that we all need. More, we need safe, clean and affordable water for which utmost monitoring and maximum accountability is essential. This, the Government cannot shed its responsibility, nor should we allow any private organization to hold Hong Kong to ransom on a monopoly of an essential service.

Any decision on corporatization or privatization of public assets must strike a well balance of all factors affecting the public or the commercial sector. More, the Government must still ensure holding the proper monitoring string for public good and public accountability.

Madam President, the medical and dental profession are downright disappointed that no move is being made to raise tobacco tax. To me, the reluctance to increase excise duty on tobacco is unforgivable and the reasons submitted unpalatable.

The Financial Secretary argued that "increasing tobacco duty will only enhance the attractiveness of contraband cigarettes and provide further impetus to smuggling and illegal sale. It would be counter-productive in revenue terms and would contribute little to furthering our anti-smoking policy. Worst of all, it would further erode public respect for the rule of law." That is what the Financial Secretary said.

In short, the Administration is bowing to the pressure of illegal forces and activities. Surely, if the law prohibits smuggling of cigarettes and their illegal sales, the proper way is to strengthen law enforcement, and not compete with illegal sales through cheaper legal transaction. The Government's commitment to anti-smoking is thus put on doubt.

Madam President, in my opening remarks, I praised the Financial Secretary for his boldness in suggesting a change of health care financing policy. Yet, for this to bring on any benefit, it will be years away. What about the current status for health care? Is the health care budget enough?

For years, the Government has been "playing around with figures" in claiming that health expenditure has been increasing by "leaps and bounds". This year, it said that the health sector has the second largest share of 14.6% of the overall recurrent public expenditure in 1999-2000. Also, over the past five years, health expenditure has a 38% growth, representing 7% per annum.

However, let us not be misled. The majority of such "increases" were in fact used for the operation of new hospital beds or clinics, or for paying or taking over of government services previously not appearing in the HA account book. In short, little is used on the improvement of existing services.

There is also an apparent worry of underestimation of the projected increase in service demand for the HA. For example, the projection of only 1.6% rise in accident and emergency department attendance, 2% rise in in-patient admissions and 1.7% rise in specialist out-patient clinics attendance can hardly compare with the experience of the past few years.

Madam President, with the increase in infectious diseases and emergence of new bacteria strain of communicable diseases, it is disappointing that the Department of Health is still adopting a piece-meal approach in disease surveillance as well as control of food, environment and drug safety, judging from the budget estimates.

In view of the rising concern of health prevention, primary health care should be given high priority. Regrettably, the Department of Health (which is responsible for primary health care services) is only allocated 11% of overall health expenditure.

It might be argued that a 26% rise in budget is allocated to "health promotion". It is hoped that the money would be put in proper use instead of just mounting large scale "healthy living" fanfare.

It is disappointing that the Government refuses to reconsider providing some degree of public dental services ─ at least to the needy and the elderly. It is more ironic in the recent Comprehensive Social Security Assistance review that, even the special grant for denture is cut. This merely indicates the Government's ignoring of the oral health needs of our citizens.

Neither is the oral health of "special needs group" (that is, mental and physical handicap, those with serious and disabling oral diseases or specific medical diseases) being well taken care of. Despite the Government's previous over-conservative estimation of 11 500 patients demanding such a service this year, there is only a financial provision for 7 600 patients.

Our Government can hardly claim that it is safeguarding "total health for all" for Hong Kong public when oral health of the public is being ignored for long.

With these remarks, Madam President, I support the Appropriation Bill 1999.

MR JASPER TSANG (in Cantonese): Madam President, in the 1999-2000 Budget, the Government has proposed a number of initiatives to boost the economic growth of Hong Kong. They are strongly endorsed by the Democratic Alliance for the Betterment of Hong Kong (DAB).

The announcement of the plan to construct a Disney theme park in Hong Kong is a booster to the local tourism industry which has been in a poor shape for quite some time. Coupled with the Adventure Bay in the Ocean Park, the Fisherman's Wharf in Aberdeen and the cruise terminal in North Point, people would look forward to a totally new look of the local tourism and its revival to the former robustness.

The Budget also proposes to develop a Cyberport, to relax the restrictions on scientists and highly-skilled technologists from the Mainland to work in Hong Kong. This is in concert with the development of the Science Park, which helps to put the development of high value-added and high technology industries proposed in last year's policy address into effect and strive to put us on par with the world's top information technology cities.

In regard to boosting the local consumer spending and relieving the people's hardships, the Budget proposes to give out a 10% tax rebate, continue to freeze government fees and charges, and grant a concession of the Rates for a quarter. The DAB welcomes all these moves.

We have noticed that the announcement of the tax rebate has met with strong support and warm welcome in society. Many salaries taxpayers are waiting to spend the rebated tax on the extra daily expenses. Some small and medium enterprises which are in greater difficulties are waiting for this money to relieve them of the pressing hardships. However, since some colleagues in this Council have indicated their wish to amend the tax rebate arrangements, although the rebate cheques have all been ready for the post, they cannot be sent out as scheduled. I hope that those colleagues in this Council who support the tax rebate but oppose to the amendment will make their thoughts known. I also hope the colleagues who have announced their intention to amend the plan can see that without support from other colleagues, the only consequence of their moving an amendment will simply be a delay in the pay-out of the tax rebate, which would not have any positive meaning. I hope that they will withdraw the amendment so that the public can get the rebate as early as possible.

In order to strengthen the position of Hong Kong as an international financial centre and prevent financial crises, the Budget proposes several reforms, which include the consolidation and integration of the clearing systems to enhance the efficiency and competence of the overall risk management systems, establishment of a Market Misconduct Tribunal to strengthen the regulation of the markets, as well as the merger of the Hong Kong Stock Exchange and the Hong Kong Futures Exchange Limited. We think that these measures will have a positive effect on promoting the healthy development of the financial markets.

Madam President, we must point out that the colossal works projects mentioned in the Budget, though helpful in creating employment opportunities, will not have an immediate effect on relieving the present high unemployment. It is a shame that the Government has turned down the DAB's proposal to introduce an emergency unemployment aid and neither has it put forward any positive measures to relieve the hardships of the unemployed. At the same time, there is no increase in the Old Age Allowance and Comprehensive Social Security Allowance for the aged. These are all very disappointing.

As regards the proposed raising of the fixed penalties for traffic-related offences, and substantial increase in the toll of the cross harbour tunnels and on-street meter charges, the DAB does not consider them good ways to raise the government revenue. Other Members from the DAB will express our views in this respect later on.

Madam President, I would like to talk about the listing of the Mass Transit Railway Corporation (MTRC). In the Budget speech, the Financial Secretary proposes, under the title Privatisation of Public Corporations, the plan to privatize a substantial minority share of the MTRC. He points out the various merits of securing the listing of the MTRC, which include providing the people of Hong Kong with an opportunity to participate in the ownership of a successful and profitable public corporation, reinforcing the MTRC's commitment to enhancing competitiveness and efficiency, and helping to strengthen the local stock market.

However, of particular note is the Financial Secretary's point that over the medium term, the listing of the MTRC will provide a "useful boost" to Government finances, and the Government forecasts receipt of privatization proceeds of $15 billion in each of 2000-01 and 2001-02 from the floating of a partial stake in the MTRC. This is quite a considerable amount, sufficient to restore the budgeted estimates to the black in these two years. The Financial Secretary also says that without the revenue raising measures "and the proceeds from the partial privatisation of the MTRC, our finances, over the medium term, would remain in a much more fragile state."

From this, I wonder whether to reduce the financial deficits is the main motive for the Government to privatize part of the MTRC's share. If the Government estimates that there will be surpluses in our finances in the coming few years and it is unnecessary to realize the assets, would it still consider the various merits of privatization of the public corporations and put the privatization of the MTRC on the Government's agenda?

Such a move of accounting the proceeds from the partial privatization of the MTRC as government revenue to reduce the deficits is open to question. As pointed out by the Financial Secretary, the MTRC is a "successful and profitable corporation" and being the shareholder of the corporation, the Government holds a sound investment. While the Treasury has an ample reserve, why should the Government sell off its quality investment to meet the financial shortfall for one or two years? Is it a wise choice for financial management?

There are many good reasons to support the listing of the MTRC, but to raise the government revenue is definitely not a good one. We doubt whether the introduction of the privatization of the MTRC under the glamorous banner of privatization of public corporations is only but a cover-up for the financial deficits.

Madam President, one golden rule followed by the Government when preparing the Budget is that the growth rate of public expenditure must not exceed the trend growth rate of the economy during a specific period of time. Although keeping expenditures within the limits of revenue has long been a financial management policy of Hong Kong, actually the Government's budgeted expenditure in a certain year is not determined by the projected revenue of that particular year, rather, it is calculated on the basis of the Government's projection of the trend economic growth rate.

In preparing the 1998-99 Budget, the Government's estimated trend growth rate in Hong Kong was still an optimistic 5% and that was the projected growth rate of expenditure for that year as compared to the previous. But the local economy contracted 5.1% in that year. Now, the Government adjusts the projected medium range growth rate down to 3.5%. Therefore, although the projected growth for 1999 is only 0.5%, the budgeted expenditure for 1999-2000 still rises by 3.5% as compared to the previous year. This is slightly lower than the Government's forecast around the time when the Chief Executive released the policy address last October, which was 4%. But it still provides the Government with adequate financial resources to see to it that the pledges in the policy address to increase and enhance public services will be basically met. Actually the Government has not tightened up all resources immediately this year on account of the economic downturn.

However, the Financial Secretary has not evaded the fact that the cumulative economic contraction will be over 4.5% in the years 1998-1999 and 1999-2000, but public expenditure during the same period has a real cumulative increase of 8.5%. The Financial Secretary has stressed that to avoid the expenditure growth from deviating further away from the economic growth, when the economy recovers and the growth picks up again, the public expenditure will not be able to keep pace with the growth our Gross Domestic Product (GDP).

Over the past decade, the proportions of the local public expenditure in the GDP have, most of the time, ranged between 16% and 18%, with most of them being close to 16% and 18% in 1997-1998. In 1998-1999, even with the economic contraction, public expenditure grew at the usual rate as the past, and that was why the proportion of public expenditure in the GDP could shoot up to over 21%.

In this year's Budget, the Government estimates that the percentage will be 21.1%. The Government has based this calculation on the assumption that the economy and public expenditure will both grow at a rate of 3.5%. As pointed out by the Financial Secretary, this rate far exceeds the projected economic growth rate of 0.5% for 1999. Assuming the public expenditure increase rate is 3.5% and the local GDP growth 0.5%, the former will account for an even larger proportion of the latter.

Assuming that there will be a real growth of 3.5% in the local economy annually between this and the year 2003 on average, as estimated by the Government, to lower the proportion of the public expenditure in the GDP in 2003 back to the level of the year before last, there will have to be a real growth of -2% in public expenditure annually from this year onwards. At the same time, our population is expected to grow at 2% per annum. From this we can see that the resources available to public services will be very tight in the next few years. This has not taken into account of the influx of large numbers of new immigrants from the Mainland who have the right of abode, possibly in the next few years.

Madam President, the Financial Secretary has once indicated that the Budget for this year is very hard to draft. Actually, even if the local economy really swings up by the latter half of this year as expected by the Financial Secretary, it is afraid that there are even harder days ahead. There is still real growth in public expenditure in this year as compared to the last. And since the whole community supports a deficit Budget this year, it has provided the Government with more leeway in considering the revenue and expenditure policies. However, by the next year and the year after that, the Government will have to be face tremendous social pressures as to how to reduce the expenditure and suppress the deficit.

I hope that when the incumbent Financial Secretary hands over this duty of preparing the Budget to his successor, these pressures will have become history, and the local financial situation will have been restored to the sound position.

Madam President, I so submit.

MR JAMES TIEN: Madam President, all previous Budget speeches were annual financial reports. This year's reads like a five-year plan. The reason for it is clear. We do not have much to look forward to in the near future and so must look to the longer term.

The Financial Secretary is in the visionary mode, so should we. Before I gaze at the horizon, I must focus on what is in front of us. The sight is not pretty. These are hard times. Our Gross Domestic Product (GDP) contracted by 5.1% last year after a 5.3% growth in 1997. This is quite a reversal of fortunes. Tourist receipt fell by 14% and export of services by 6.6%. Official unemployment stands at 6% and unofficially, it is probably worse. The statistics look bad. The retail shops look worse.

The Financial Secretary seeks a silver lining and finds it. He thinks that we are more competitive now. Property value and rental are half of what they were at the peak. Salaries are stagnant. Consumer prices are shrinking. The costs of doing business are coming down.

I am not as cheered by these figures as the Financial Secretary is. We are more competitive now relative to ourselves two years ago. However, we are still not competitive relative to our rivals. Others have restructured since the recession began. We are doing it slowly.

Hong Kong still labours under the illusion that our problems are external, that once the economy has bottomed out, it would rebound and we might as well forget about serious structural reform. I am not so sure. My view is that many of our problems are domestic and latent. The Asian crisis came along and simply exposed them.

I agree with the Financial Secretary that we must go into deficit spending in the short term to revive the economy. The 10% tax rebate should encourage consumer spending and help company finances. But our unionist legislator, the Honourable LEE Cheuk-yan, wants to turn an economic stimulus issue into a class issue. He is proposing to limit the rebate to $100,000 at the maximum. He does not want corporations, the small and medium enterprises, to enjoy the break.

Mr LEE understands populist politics. But I am not sure whether he understands economics. Everybody in Hong Kong needs a bit of help right now, including the companies, for many of them are in the red or close to it. The rebate can make companies more willing to hire more people or not lay as many of them off. This is good for the workers and for the unemployed. Why should we punish those who are the first to suffer from the recession and the last to benefit from a recovery, just to serve Mr LEE's envy of the more successful? Mr LEE's proposal not only violates the principle of fairness, but also contradicts the long-standing taxation policies of Hong Kong.

"Earn more, tax more" has proved to be a fair and well-accepted way of taxation. If there is a tax rebate, the same principle should also apply, that is "paid more, return more". I cannot find any reason to support the set up of a maximum rebate limit. If one supports a maximum rebate limit, why not also set up a maximum tax paid limit by any person or corporation?

In supporting this amendment, we would only send a wrong message to the international communities that Hong Kong has become discriminating against successful people or businesses.

Madam President, the Liberal Party supports extending the freeze on government fees and charges for one year. We accept the increase on tunnel toll. However, we are not so sure of the steep increase in fixed penalty, which would hurt a lot of our small delivery businesses and others who earn a tough living in the transport trades.

The Liberal Party also supports the Financial Secretary for not reducing spending on education, health care, housing and welfare. He is right to be compassionate for those down and out. He is just as right arguing that Hong Kong must continue to provide adequate services for our people and prepare our next generation to meet the challenges of the coming century.

The Financial Secretary also suggests merging the two stock markets and making our financial institutions less vulnerable to hedge fund speculators. He has obviously learned the lesson of last year when the Government and the Hong Kong Monetary Authority intervened in the markets.

Hong Kong aspires to be the financial centre of Asia, sort of a halfway point between New York and London. Geographically, we are perfectly situated. Financially, we are not there yet. Our financial architecture needs a strong foundation and the time to lay the stone is now.

Since we are talking about finances, let me praise the Financial Secretary for proposing to list the Mass Transit Railway Corporation (MTRC). There are people who say that this is like selling the family silver, but I disagree. We are not going to sell controlling shares of the MTRC, just a minority stake to help the MTRC expand.

Selling some blue chip MTRC shares in the midst of a record Dow-Jones run should be easy. The proceeds would also push up the credit rating of the MTRC and also that of Hong Kong.

I also suggest the listing to be extended to include the Kowloon-Canton Railway Corporation (KCRC). The money from the stock selling would enable the KCRC, for example, to build its Ma On Shan feeder line and partly finance the hugely expensive Western Corridor Railway. The KCRC and the MTRC would then not have to secure huge bank loans, the interests of which would be passed to the passengers in the form of increased fares. They also would secure much more of their own working capital rather than have to rely on the Government for capital injection. The Government could then use the saving to cover its other commitments ─ in housing, education, health care, welfare and so on.

The Financial Secretary, our most famous Mr TSANG, has announced the Government's courtship of Disney. I have no doubt that Hong Kong is the best place in the world to accommodate the fifth Disney theme park. Our territory has a lot of assets, advantages and general allure. We need Disney to soften our overly commercial image globally, to draw in several million more visitors to help revive our tourist industry, and give our artists a new lease. When we have a Disney theme park, business travellers will not mind bringing their families here. People drawn to Disney would get a chance to see the other aspects of Hong Kong, appreciate our culture and way of life.

Our Government, however, has not got a great track record negotiating great deals for Hong Kong. We can see that with the airport contracts, the Government Stadium management deal and the telecom franchise, which is only now deregulating. But as always, I am an optimist and have faith in the learning of the Financial Secretary from his and others' mistakes. With Disney, we may have to shell out billions of dollars in infrastructure and revise our whole urban planning strategy for the next century. For this price, we must be sure that we get more in return than just a few manual jobs selling tickets, serving beverages and wearing Mickey and Mini costumes.

Madam President, the Liberal Party supports the Cyberport scheme. We know our future as a technological centre rests with this project. Some businessmen are not happy that the Government has not opened the Cyberport scheme to public tender. The Liberal Party would back such a tender, if other consortia have more viable plans than what has been presented to the Government. So far, we have not seen any alternative scheme. We do not want a protracted tender process because the project cannot afford to be delayed.

Time is the essence in high technology. A couple of years wasted is like an eternity in an industry in which a generation is measured by months, not decades. The Liberal Party also does not want the whole Cyberport issue to deteriorate into yet another mad scramble for cheap land for housing development. The Cyberport has its own merits other than an excuse for a land grab.

Having a Cyberport, that is true to its purposes, would send a powerful, positive image to the world that Hong Kong has come of age. We want the Cyberport to be a beacon for the best technological talents, whatever their nationality. We want it to advertize our cosmopolitan outlook and savvy.

Today, Malaysia is about to resurrect its high-tech ambitions, so are Singapore and Pudong of Shanghai. We believe that there can be room for only one high-tech centre in Asia in the 21st century. Let this be Hong Kong.

Madam President, the Government is in the mood for a serious shakeup of the Civil Service. This is because the Civil Service has become a drag on our economy recently. For years, we have heard the Government telling us, again and again, the importance of civil service morale. This has got to a ridiculous point on which we are not supposed to criticize the civil servants or question their pay and benefits.

Let me, without offence, remind government employees that they must be civil and they are servants of the people. That is why they are called civil servants. This may seem obvious, but it is not getting through to the 190 000 of them. In the name of civil service morale, we have made concession after concession, until we could not give anymore.

What have we got in return for these concessions? We have got the world's most expensive and protected civil service. We have got entry level Administrative Officers in their early 20s being paid $35,000 a month, not including matching fringe benefits. We have got a head of the Civil Service who is better paid than the British Prime Minister. I have not even added in the fringe benefits that others can only envy. They have got housing, education, travel, medical, dental, furniture, car, club and air conditioning allowances. An officer posted overseas can expect to spend practically nothing, because he or she is covered by a special allowance.

The last time the Government conducted a major civil service review was more than 25 years ago when it commissioned the McKENZIE report. The study is by now totally outdated and must be reviewed. This time, a survey should be done, both the public and the private corporations must be thoroughly consulted so that the exercise reflects the real world.

People do not mind cushioning our civil servants from the vagaries of the real world. We do not mind paying them so much if we got in return a first rate Civil Service. Everybody is hurting now, but not our civil servants in the past year of our economic downturn. They are getting more out of a recession because their guaranteed salaries and perks can now go a longer way. Is this fair? Is this right?

The Government promises to look into the fringe benefits, including housing and education. The Liberal Party welcomes the Chief Secretary, Mrs Anson CHAN, to stay on till 2002 to help push through many of the changes, including the civil service review. We hope that the exercise is not cosmetic. I believe that I am speaking for the majority in Hong Kong when I say enough is enough. For years, we have had a Civil Service widening the pay discrepancy between the directorate level and the others and between itself and the private sector. The civil servants also have their "iron rice bowls" or, should I say, "golden rice bowls" when outside the Government, the rice bowls are porcelain, easy to chip, crack and break.

We have been asked again and again to forgive policymakers for their legion mistakes. From the chicken flu, the airport blunder, to the Sally AW case, legislators are always lobbied to forgive. But how much forgiving can we do without civil servants showing remorse, making amends and improving their work?

One answer to the civil service practice of lifelong employment, in which mediocrity is rewarded, is a ministerial system. Someday, Hong Kong must have ministers with portfolios and are accountable. The other answer is the privatization of more government works. By this, I do not mean hiving off more government responsibilities. In years past, the Government has created such statutory institutions as the Hospital Authority, the Airport Authority and the Housing Authority, which remain an extension of the Civil Service. These bodies spend public resources but are not held as directly accountable as specific government departments.

The people of Hong Kong are exceedingly patient and tolerant. Such patience and tolerance have been taken for granted ─ and sometimes abused when the economy is strong. But now, facing hardship, we are beginning to run out of patience and becoming less tolerant of incompetence and arrogance. I hope that my civil service associates will take my message to heart and reflect on what they have done instead of passing it off on collective responsibility.

Let me conclude this on a positive yet cautious note. I applaud the Financial Secretary for at least thinking of the previously unthinkable as he looks in his own house and sees problems. Whereas his predecessors always underestimated our GDP growth, he overestimates it. He reckons our GDP would rise by 3.5% in the medium term while many analysts think we are lucky to get to 2%. Our industrial production has shrunk by 10.2% over the past year and trade balance is -10.8%. A year ago, I cast doubt on his mid-term GDP growth of 4% and this was later revised downward. Rather than be bullish for the sake of appearance, we should be realistic, which is how investors see us.

With these remarks, Madam President, the Liberal Party supports the Budget.

MR MARTIN LEE (in Cantonese): Madam President, some say that business is as usual in Hong Kong after the reunification, but there have been substantial changes. In terms of the democratic development, the Government of the Hong Kong Special Administrative Region (SAR) has been leading Hong Kong on a backward track; in respect of the rule of law, the SAR Government has repeatedly breached the principle of "everyone being equal before the law"; on the economic front, there are also fundamental changes.

Before the reunification, everyone said that Hong Kong was a goose that laid golden eggs for China and if it stopped laying golden eggs, there would be grave impact on the four modernizations of China. And now, less than two years down the road, the economy of Hong Kong has already lost its independence and everything has to rely on the Central Government for its support, and everyone thinks that if the economy of the Mainland loses its stability, it will have serious impact on our economy. That is to say: before the reunification, it is the Mainland that depended on Hong Kong, but now it is Hong Kong that depends on the Mainland.

One year into the reunification, the Financial Secretary added a new item to the 1998-99 Budget entitled Economic Reform in the Mainland of China, indicating the intertwining relationship between economic growth in the Mainland and that of Hong Kong. However, this topic is absent in this Budget. Perhaps if the mainland economy is brought up again in this Budget, one cannot avoid discussing such very sensitive issues as the state-owned enterprises and red chip stocks which would be better left out of the discussion.

Everyone should be very familiar with the pet phrase of the Chief Executive, Mr TUNG, that, "When our motherland does well, Hong Kong will be well; when Hong Kong does well, our motherland will even be better". Mr TUNG's way of thinking is actually out of step with the principle of "one country, two systems" because the gist of Mr DENG Xiaoping's idea was that although China had implemented the open door policy, it would take at least 50 years before it could be on a par with Hong Kong and hence the "one country, two systems" policy had to be adopted to ensure that even before the reform could take hold in the Mainland, the stability and prosperity of Hong Kong could still be maintained.

Hong Kong has to run its own course in respect of the economy, finance, political system, human rights, freedom, and the rule of law, and set an example for the Mainland. To subordinate the fate of Hong Kong to that of the Mainland, the SAR Government will not help bring success to the "one country, two systems" policy, neither will it do either side any good.

In fact, the idea of catching up in 50 years may have already been overtaken by the events. Many people predict that Shanghai will surpass Hong Kong and take over its position as a major financial centre in just a few years.

The recent months have seen keen competition between the Mainland and Hong Kong in a number of events. When the Chief Executive asked Mr JIANG Zhemin on behalf of Hong Kong reporters whether he agreed Hong Kong should build a Disney theme park, Mr JIANG replied that it was Hong Kong's own business. Soon afterwards, the Shanghai Municipal Government announced their intention to build a Disney theme park and opined that Shanghai was in a better position than Hong Kong in this matter. After Hong Kong had announced the Cyberport project, the mayor of Shenzhen insisted that without the co-operation of Hong Kong, Shenzhen could still rely on its own efforts to build a science park.

Some suggest that Hong Kong impose a departure tax at Lo Wu to reduce the attraction of Shenzhen to Hong Kong shoppers. But the mayor of Shenzhen responded bluntly that mainlanders can spend $50,000 or $70,000 on a necklace in Hong Kong, good enough for Hong Kong people to buy two containers of vegetables in the Mainland.

Therefore it is impractical for the SAR Government to think that the Central Government would always put the development of Hong Kong on top priority and that is just its wishful thinking. As the Chief Executive of Hong Kong, Mr TUNG Chee-hwa should always consider the interests of Hong Kong first. Hong Kong must depend on itself to deal with its economy, otherwise, in such a highly competitive market, its position will only be taken over by others.

Madam President, before the reunification, the Renminbi was devaluated several times but never did it pose any threat to the Hong Kong dollar. After the reunification, thanks to their concern for Hong Kong, the leadership in the Central Government have repeatedly maintained that for the sake of defending the Hong Kong dollar, the Mainland is willing to sacrifice and will not devalue the Renminbi. In fact, this advocacy is very dangerous. If one day the Renminbi cannot withstand the pressure of the Japanese Yen and has to be devalued, by then, will anyone believe that the peg between the Hong Kong dollar and the US dollar can be held? Therefore, psychologically, people have pegged the Hong Kong dollar to the Renminbi.

I think that whenever Central Government officials say in good faith that the Renminbi will not be devalued, SAR Government officials must also stand up and emphasize that whether or not the Renminbi is devalued is the sole decision of the Mainland. At the same time, they should also make it clear that with the SAR's huge reserves in foreign exchange, a devaluation of the Renminbi will not affect the linked exchange rate between the Hong Kong dollar and the US dollar. It is a shame that the SAR Government has failed to do so. Hence, I worry that when the Renminbi really has to be devalued, and foreign speculators jump at the opportunity to attack the Hong Kong dollar, the SAR Government will be unable to defend the Hong Kong dollar, as by that time, no one in the world would believe that the Hong Kong dollar will not be impacted by the devaluation and can continue to maintain the peg.

Madam President, to truly implement the "one country, two systems" policy, Hong Kong must stay on its own boat and row hard on its own. We cannot rely on others to lend us a hand. Of course, we hope that the mainland boat can keep abreast of the Hong Kong boat. But if for any reason that the mainland boat is not able to keep pace with us, the Hong Kong boat should not be thus held back. Both Hong Kong and the Mainland should establish their own economic strengths through fair competition and to work together on the basis of equality with mutual benefits.

Madam President, in the past, the British Hong Kong Government basically adopted the policy of positive non-intervention and principally took a non-interfering and laissez-faire attitude. Today, the SAR practises "positive intervention" and has spent over $100 billion to interfere in the stock market, gravely tarnishing our reputation as a financial centre. Because of the enormous government stock holdings, the circulation of stocks in the market has been reduced and the confidence of investors greatly undermined. In addition, the Government has also suspended land sales for nine months in order to prop up the property market, hindering the property prices from reaching an equillibrium through the market mechanism.

Other than vigorously propping up the market, the Government has also participated in the allocation of commercial interests in the market. When a commercial consortium or a certain sector makes a request to the Government, it will hand out big presents generously like Santa Claus. But the whole process of how the present is handed out lacks transparency and criteria. As a result, when the Government hands out a present to one sector, requests from other sectors will subsequently pour in for presents from the Chief Executive.

In the Cyberport project, for example, since the Government did not invite an open tender before awarding the contract to the Pacific Century Group, it has aroused the resentment of other developers. In fact, given the lack of transparency in the whole process, no matter how hard the Government explains afterwards, it will not dispel the doubts of other commercial groups or the public that illicit transfers have not been involved in this dealing and that interests have not been obtained through relations.

Such a practice of the SAR Government will only encourage the industrial and commercial sectors to seek backing from the Government for their businesses to ensure the continuous buoyancy of their empires. In that case, the enterprises will only lose their innovative power and the ability to face fair competition.

Madam President, the success of our economy is based on the principle of freedom and fairness and enterprising spirit. Therefore, the Democratic Party does not consider that the Government should interfere in the market and show favouritism to certain business groups. The first and foremost task of the Government is to clear market barriers to ensure fair competition. The reason why the Democratic Party has all along requested for the introduction of a law on fair competition is that we want to set down a set of rules to allow all participants to compete in a level playing field. But the Government has objected to this idea all along. Can it be that the Government does not want to be the referee but want to enter the game instead?

Owing to the lack of an effective and legal channel and an independent body to deal with anti-fair-competition behaviour, government officials have to resort to "making public statements". For example, the Secretary for Economic Services has repeatedly called on oil companies to lower oil prices and the Chief Executive has publicly commented that interest rates and oil prices are too high, in the hope that the businessmen will "get the message" from their public statements. Such a practice of government officials openly intervening in the enterprises' commercial decisions rather than regulating commercial dealings by law is extremely undesirable. As they have no legal means to fall back on, it will only create uncertainties in the business environment.

The Democratic Party hopes that the Government will draw up a fair competition law as soon as possible and resume its role as the referee and regulator.

Madam President, the Democratic Party is supports a small and efficient government and that it should keep intervention to the minimum. Of course, this does not mean that the Government should wash its hands of the business and stay away from everything. The Government's economic policies should ensure that the free market mechanism can function at its full capacity and to promote the overall development of the economy. I must stress that the role of the Government is to "promote" but not to "lead" in the market.

Since the outbreak of the financial turmoil, the local economy has been faced with a serious recession. It has to restore its competitiveness through the market mechanism, and downward adjustment of property prices and wages. On the other hand, the economy should also develop towards innovation. The service trades and industries must have innovative ideas. Therefore, it is the duty of the Government to establish a favourable business environment so that Hong Kong's enterprising spirit of flexibility and readiness to take risks can be given full play.

Madam President, the Financial Secretary has shown great tact in putting up this Budget in which he has proposed some high-sounding, grand-looking projects, bringing new hopes to the public and gaining fairly good comments for it generally. We profoundly hope that this Budget will not win an applause for just a while. I deeply hope that this "project of hope" will not be shattered and ultimately become a "project of disappointment", getting endless boos in return.

Madam President, I so submit.

MR AMBROSE LAU (in Cantonese): Madam President, what is worth our most recognition about the Budget of the new financial year is that the Administration has conducted widespread consultation and heeded good advice of the public. The Hong Kong Progress Alliance (HKPA) also widely consulted the industrial and commercial sector, professionals, the labour sector and other walks of life in society on this Budget. After combining and compiling their opinions, we presented a series of recommendations to the Financial Secretary in last year's consultation conducted by the Government.

In many respects, this Budget has basically incorporated the recommendations of the HKPA. For example, many initiatives put forward in the Budget such as the investment in the development of information technology, promotion of tourism, exploration of new tourist spots, expedition of the infrastructural construction, and improvement of education are actually inspired by our recommendations.

Madam President, under the double impact of the Asian financial turmoil and the burst bubble economy, Hong Kong is suffering from an economic downturn, and people's lives are hard and their confidence weak. Thus there must be a revolutionary approach in fiscal management. The HKPA considers that this revolutionary approach summarized in the Budget as "strengthening the fundamentals and fiscal prudence" has basically hit the nail on its head.

"Strengthening the fundamentals" is to solidify the base to restore the vigour. Hong Kong is having a recession today and it no longer stands out as an economy that has strong prospective competitiveness as compared to its neighbours. The crux for this is the economy's fragile fundamentals and lack of diversity. Hence, to revive the economy, the only option is to strengthen the fundamentals. Moreover, with the long-standing economic growth in the past, even until the development of the recent bubble economy, the structure of the Government and public bodies has also expanded substantially and public expenditure risen sharply. Following the economic downturn, the whole community, the Government and public bodies in particular, have to learn to turn from spending freely to going frugal now. Government departments even have to undergo comprehensive reform, turning from expanding to using resources sparingly and enhancing their productivity. This is the principle of "fiscal prudence". The approach of linking "strengthening the fundamentals" and "fiscal prudence" merits our support.

Madam President, in respect of strengthening the fundamentals, the Budget proposes three measures with respect to the finance, tourism and technology. The first two are to enhance the long-standing advantages of Hong Kong over the years while the latter is to tap a new source for our economic development and a new direction for Hong Kong in this global trend of knowledge-based economy.

The Budget states, "The financial turmoil has brought our monetary regime into sharp focus." The HKPA was one of the first groups who paid close attention to this subject. As early as October 1997, after the international speculators had launched the first round of attacks on the Hong Kong dollar, I immediately moved a motion in the Provisional Legislative Council on reviewing the local financial system, and Members of the Provisional Legislative Council also put forward many proposals on how to reform our financial system. Afterwards, the HKPA has listened closely to the views of the financial sector and various other sectors in society and continued to provide input to the Government on the reform of the financial system. At the same time, the HKPA has always thought that the Hong Kong Stock Exchange and the Hong Kong Futures Exchange are each having their own policies and co-ordination between them is weak. Such a modus operandi can neither reach the market regulation standard required by an international financial centre nor co-ordinate their moves in an anti-manipulative action in the market. Therefore, the Budget's proposal to demutualize the two exchanges and relevant clearing houses as well as the various modernization initiatives and reforms are all in line with the trend of the international financial development. While supporting this major reform scheme, the HKPA hopes that the Government will take account of the views of those in the business and balance the interests of various parties involved to attain a win-win situation.

The HKPA also supports the Government's vigorous development of the debt market. The Budget's proposal to develop the debt market by means of listing Exchange Fund Notes and so on can kill two birds with one stone, as it can stabilize the amounts of foreign exchange circulating in the banking system and at the same time develop the debt market. Moreover, by lowering the trading costs through partially exempting the stamp duty of stock trading, it will also help stimulate the trading of stocks. These measures proposed in the Budget will all be helpful to enhancing the functions of the Hong Kong financial market as a capital raising and financing centre.

Madam President, the HKPA has also advised the Government to revive the tourism. Our recommendations include constructing theme parks, cruise terminals and large water sports centres, as well as redesigning Hong Kong's image as a leisure centre. The Budget has also accepted this good advice and put forward a number of initiatives, including the redevelopment of the Ocean Park, construction of a cruise terminal, active negotiation over the construction of a Disney theme park, and also construction of a Fisherman's Wharf in Aberdeen. Nevertheless, in striving for a deal over a Disney theme park, the HKPA advises that the Government be fully aware that Hong Kong has sufficient chips to haggle for a deal with the Walt Disney Company. We cannot one-sidedly offer a handsome "dowry" to win the groom's favour at all costs. In other words, Hong Kong can never pay for the whole wedding dress. The Government must strive for a fair share of the interests with the Walt Disney Company in regard to the admission fees, franchised products and services of the theme park. Moreover, we feel it is a shame that the Government has failed to accept our recommendation to build a large water sports centre. According to the current tourism trend of the world, water sports are a major heat. Besides, with our many attractive beaches, the harbour and beautiful sunshine all year round, it seems that it is a waste of our natural resources for not having a large water sports centre built yet which at the same time also weakens our appeal to tourists.

Madam President, the most important initiative to strengthen our fundamentals insofar as technology is concerned is the development of the Cyberport. The Cyberport is closely related to the information economy. In this era of information economy, information industry has great development potentials. Some people have expressed doubts over Hong Kong's development of high technology and high value-added industries. But the Cyberport project has effectively cleared all such doubts. Other than vigorously promoting education on information technology to all walks of life, the Budget also proposes to develop human capital, and particularly, to remove restrictions on scientists and highly-skilled technologists from the Mainland to work in Hong Kong. The HKPA suggests that apart from constructing the hardware of the Cyberport, the Government should also pay due attention to the establishment of software items such as technology, talent and risk investments.

During the years of economic prosperity, Hong Kong substantially expanded the establishment of the Civil Service and the scales of public bodies in keeping with the expansion of public services, which has resulted in the ever-expanding civil service framework and public bodies. The salaries and benefits of the civil servants and employees of government-subvented bodies already account for two thirds of the Government's recurrent expenditure and the levels of their salaries and benefits are also higher than those of the private sector counterparts. Therefore, the reform to the civil service framework has significant bearing on whether or not Hong Kong can lower the costs and raise the competitiveness. The HKPA supports the Government's vigorous reform of the civil service system to suit the needs of the economic development as far as the recruitment, appraisal, discipline, rewards and also retirement protection are concerned to make it practical and reasonable. We welcome the proposed salary freeze of civil servants and suspension of the employment of pensionable civil servants. All these proposals will help to send out the message that the Government is willing to ride over the hard times together with the public.

The proposed privatization of public corporations is a move in the right direction. The floating of a partial stake in the Mass Transit Railway Corporation (MTRC) will bring in proceeds for the Government and lower the pressure of future deficits. In addition, the listing of public corporations will also solidify the stock market in Hong Kong and enhance its attraction to investors. In the long run, the privatization will be able to increase the flexibility of such organizations and raise their economic effectiveness.

However, the civil service reform and the privatization of public corporations alike must be carried out in a gradual and orderly manner without overlooking the community's stability. While the Civil Service has to be reformed to get rid of its inert culture of keeping the same old rut, we cannot affect their morale in doing so. In privatizing public corporations, we have to prevent a drastic reduction in the role and responsibility of the Government as the provider of major social services as that would affect the provision of fair and reasonable social services.

Madam President, on the taxation adjustment, through appropriately increasing some revenue boosting taxes that will not directly affect the people's livelihood, such as the betting duty, and substantially lowering some others such as the re-export declaration fee and merchant shipping registration and related fees, the Financial Secretary has managed to maintain the Government's revenue and help create a more favourable business environment. By granting a 10% tax rebate, the Government has shown its compassionate concern over the people's hardships while avoiding narrowing next year's tax base. This can be considered an excellent move. Moreover, the HKPA also welcomes the Government's extension of the freeze on the various public service charges and fees that have a direct bearing on our livelihood. During these hard times, the Government's various tax adjustments and the tax rebate have benefited the middle class more. This merits our support.

Madam President, the Government puts forward a deficit budget for the medium range forecast and hopes to return to fiscal balance in five years. This does not breach the provision of the Basic Law, but the key lies in an accurate Medium Range Forecast. However, the Budget adjusts the trend growth rate for the medium range forecast to 3.5%. Would that be overly optimistic? This warrants our cautious consideration. The Government has to ensure the various proceeds, including the realization of government assets, will all achieve the forecast targets so as to attain a fiscal balance over the medium term to maintain the confidence of the public and international investors in the economic prospects of Hong Kong.

Madam President, the HKPA thinks that there are still inadequacies in the Budget, for example, insufficient attention has been paid to the environmental problems, insufficient rationalizing of the civil service system and also a lack of support to the small and medium enterprises. Other Members from the HKPA will express their views on the various policy areas of the Budget later on.

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

DR DAVID LI: Madam President, I have had the honour of commenting on 14 Budgets in this Council. None has been presented in such a difficult economic climate as this.

In order to help the community during this difficult period, the Administration is proposing sensible, short-term measures. At the same time, our Government is looking ahead. It has unveiled innovative plans to encourage economic competitiveness and efficiency in the years to come. I sincerely congratulate the Financial Secretary and his team for presenting a Budget that is both compassionate and comprehensive.

I am sure that all parts of the community support the continued increases in spending on education, welfare, health care and infrastructure. And I have no doubt that there is universal support for the decision to freeze taxes and government fees, and to provide a rebate to taxpayers. These measures certainly help to provide a "feel good" factor.

It is true that, at a time of declining revenues, this requires the Government to run a deficit. However, given the substantial surpluses of previous years, I believe that this is perfectly justifiable. Indeed, if we add up the revenue and expenditure for the four years from 1997 to 2000, the Government still has a surplus of HK$6.4 billion, which is extremely healthy. Our Administration, therefore, deserves full marks ─ for caring for the community, and at the same time for maintaining fiscal prudence.

This Budget does not stop there. It goes on to encourage renewed and greater economic success in the long term. Most important, perhaps, is the commitment to the privatization of government assets and government services.

The Financial Secretary proposes the partial privatization of the Mass Transit Railway Corporation. He also mentions water and welfare services as suitable candidates for private sector involvement. I would strongly urge him to be bold in seeking more opportunities for privatization, out-sourcing and corporatization of government activities. The aim is not to sell the family jade simply to raise cash. The aim should be to maximize levels of productivity, service and flexibility in important areas of the economy.

In America, Britain and Australia, private sector involvement has been extended to social housing, public schools and even to prisons. I am not suggesting that we imitate those societies. But I encourage the Administration to examine every way in which the state sector can help to improve the competitiveness of our whole economy. This obviously includes the Civil Service ─ and the Finance Functional Constituency welcomes the proposal to review the structure of that institution.

I commend the Financial Secretary for devoting a significant part of his Budget proposals to the financial services sector.

Members of the Finance Functional Constituency have voiced some reservations about some details in the Budget. For several years, the banking sector has asked for tax relief on general loan loss provisions, as is found in many other leading financial centres. There is some disappointment that this has not been forthcoming. There are also some concerns about the proposals arising from the recent strategic review of the banking sector. Some members would like a more thorough consultation process. On the whole, however, the Finance Functional Constituency warmly welcomes the Administration's support for our industry.

Quite rightly, the Government wants the local financial sector to be competitive and to keep up with the long-term trends in the international financial scene. At the same time, I believe that our Administration realizes the importance of short-term stability.

In this connection, I am very pleased that the Financial Secretary mentioned the issue of deposit insurance during his Budget speech. I believe that deposit insurance could provide an important source of stability as the banking industry develops in the years ahead.

I also welcome the Administration's measures to encourage the development of the local debt market, and I fully support its proposals to reform the securities and futures markets. Both these areas are vital if Hong Kong is to enhance its status as an international financial services centre. This also applies to fund management and foreign exchange dealing.

There is much talk about support and encouragement targeted at particular business activities ─ in the financial sector, and in other areas. I would strongly urge the Government not to grant special treatment to chosen sectors. Rather, I would ask the Administration to do more to make Hong Kong even more attractive for all businesses ─ across the board.

Cheaper housing and office space would help profits as much as any tax cut. Higher standards of English and other skills would improve the value of our workforce. Immediate action to reduce air pollution would undoubtedly make other cities less tempting as financial locations. This is a particularly serious problem. I realize that it is not a fiscal issue. But a budget that encourages investors is pointless if the air is not fit to breath. We cannot attract fund management, foreign exchange dealing, high-tech business or theme parks, if we have air that stunts children mentally and physically.

Where fiscal issues are concerned, I believe that we can do more in the future to attract investment to Hong Kong. I believe that there may even be scope for further reducing the tax burden on business in the years ahead. This would involve the broadening of our existing tax base. And, as our Financial Secretary said in his Budget speech, now is not the right time to pursue that idea. However, I look forward to discussing this issue this time next year.

In the meantime, Madam President, I congratulate the Financial Secretary for his achievement in drawing up this Budget. It gives Hong Kong a big morale-boost, and it expands services for the community ─ while maintaining fiscal prudence. It commits one of our biggest industries ─ the Government ─ to lead the economy to greater competitiveness and efficiency. And it looks to the future. It looks to the potential of new technology and new tourist attractions. Most importantly, it recognizes the continued importance of the development of a world-class financial services industry.

Madam President, I take pleasure in wholeheartedly supporting the Budget.

DR PHILIP WONG (in Cantonese): Madam President, the Financial Secretary has succeeded in formulating a practical Budget amid an economic downturn. I trust this can gain him very high marks. Many people in the commercial sector and members of the public regard this Budget that straddles the millennium worthy of support. Most of its proposals, including reform to the Civil Service, investments in infrastructure such as the Cyberport, expenditures in some of the public services and other means to revive the economy, are reasonable and prudent. I agree to all these proposals and hope that as they materialize they can help the people save expenses, open up new sources of earning and ride out the storm. I hope the proposals can foster a business friendly environment and stabilize the Hong Kong economy.

I would like to put forward three recommendations.

First, the SAR Government should adopt effective measures to allow room for the existence and development of small and medium enterprises (SMEs), which form the life-line of the Hong Kong economy. We learn from past experience that the prosperity of Hong Kong is related to the operation of these enterprises. At the present stage, I see no conflict between helping SMEs, fostering their development, and encouraging innovation and new high technology. In fact, both acts are complementary to each other. Both SMEs and new high technology can add vitality to the Hong Kong economy. In the long term, providing room for development of SMEs may enhance the overall competitiveness of Hong Kong for the benefit of sustainable economic growth. From the point of view of employment, SMEs act as a "sponge" or "reservoir". They provide a vast amount of employment opportunities. If the "sponge" or "reservoir" dries up, the unemployment rate in Hong Kong will rise to an even higher rate. The propensity to spend and the willingness to invest will thus dwindle. Stability and harmony in the community will be adversely affected. This is a situation that none of us would want to see arise. At the moment, what is high on everyone's agenda is how to keep their jobs, and how to solve the unemployment problem. So, I hope the Government can act in a realistic manner by realistically looking into ways to improve the business environment for SMEs, to help entrepreneurs renew their strengths and stand on their own feet, to help them to become more flexible and survive the crisis, from which they would emerge with a better tomorrow.

Secondly, the Government should concern itself with the position of small and medium banks. At the moment, difficulties faced by small and medium banks are worrying. If their problems remain unsolved problems with other enterprises would be difficult to deal with. On the other hand, if these banks can stabilize, they would do their part in helping the numerous SMEs to tide over this difficult period. I recall a major cause to the problem of the banks was due to the abolition of the Interest Rate Agreement in the early nineties by the British Hong Kong Government. At that time, there was a debate in the Legislative Council, and other Member and I voted against the proposal. My reason for so doing was under a free market economy, each trade should decide its own direction of development. The abolition of the Interest Rate Agreement by the Government was an unnecessary intervention in the free development of the banking industry. A certain Member, who also held office in the Consumer Council, made the proposal to abolish the Agreement, intending perhaps to benefit depositors in an environment in which there was competition in interest rates. Competition is meritorious but it must be achieved in a fair manner. When most of the depositing and lending business is being monopolized by large banks, small and medium banks are finding it increasingly difficult to compete against their larger competitors. Their profits thus dwindle. For example, large banks may generate considerable profit from an interest rate difference of 2.5%. For small and medium banks, that difference has to go up to above 4% to yield a barely acceptable profit. In order to survive, small and medium banks need to raise the interest rate on deposits and lower that for lending. After the abolishment of the Interest Rate Agreement, if large banks further minimize the interest rate difference, small and medium banks would find it very hard to survive. They would even face merger or closure. Without small and medium banks, Hong Kong would only have several large banks and competition would be reduced. What benefit can this bring to depositors or SMEs? This is my worry since then and to date. Therefore I would urge the Government to duly consider and improve the business environment for small and medium banks. It should respect the opinion of those in the trade, especially the Hong Kong Association of Banks. I trust the industry will know what to do to protect the long-term interest of Hong Kong.

In addition, I would propose that the banking industry consider extending the term of mortgage suitably. I think, this may have three results. Firstly, this may ease the burden of mortgagors and immediately increase the propensity to spend and the desire to invest. The effect may be even more marked than the Government's tax rebate. Secondly, this may have positive effects in stabilizing the property market. Thirdly, this may reduce bad debts due to a smaller amount of instalments payable. If we look at countries such as the United States or Europe, property mortgages are usually repayable over a period of 30 years or more; or up to 50 years in Switzerland and Malaysia. If the banking sector can take the initiative to extend the period of repayment to boost the market, it can surely help the banking business.

Third, as the Hong Kong economy is undergoing a period of adjustment, there are a rising unemployment rate and an ageing population. On top of these, more people in mainland China with a right of abode in Hong Kong will be arriving. Pressure on social welfare expenditure is thus mounting. Truly, it is an important part of the Hong Kong social welfare system to provide Comprehensive Social Security Assistance (CSSA) to those in need. But I think we should restrict expenditure on social welfare and social services to a level which is realistically affordable to the people of Hong Kong, in the light of the uncertainties in neighbouring economies and a lack of signs of revival in the Hong Kong economy. We must unite together to tide over this difficult period during this economic downturn in which all trades face trying conditions. Hence the Government should examine closely the various rates of CSSA. We must prevent abuse of the system. We must ensure the CSSA rates remain at a reasonable level and do no harm to the labour market.

Madam President, I so submit.

MR LEE KAI-MING (in Cantonese): Madam President, the Financial Secretary seemed to know the art of "alchemy" for local stock prices have soared right after the Budget is announced. The Hang Seng Index has even crossed the 11 000 hurdle in the past few days, bringing in substantial appreciation in the book value of the Administration's stock portfolio, and a windfall for the public at large. However, the recent rally in the stock market is not supported by any substantive economic data. High interest rates continue to dampen investment interests in 1999, and while private consumption spending may rebound, it alone is not sufficient to propel economic growth. The rally in the stock market is actually due to the fact that a large number of foreign funds are buying Hong Kong stocks. However, as the saying goes "what floats a boat may also sink it", the stock market will certainly plunge again if foreign funds decide to short sell in the future. My view on our economic outlook is, therefore, not as optimistic as that of the Financial Secretary. According to a survey, 10 securities companies envisaged a negative economic growth of 1.9% for Hong Kong this year. They believed that the economic growth on the Mainland will not induce a significant growth in the Hong Kong economy, and the deficit Budget itself will not do much in boosting our economy. I am not an economist, but I sincerely hope that the Financial Secretary will be right in his forecast. It will certainly be a blessing to Hong Kong people if we could bid farewell to negative economic growth.

I appreciate the fact that the Financial Secretary has taken public opinions, including my suggestions on revaluating rateable values, freezing government fees and charges and offering concessions on diesel duty, into consideration in formulating this year's Budget.

On the whole, the 1999-2000 Budget is quite innovative and has freed itself from a lot of old restrictions by proposing a number of unprecedented measures. Those measures include a $36.5 billion deficit Budget; a tax rebate which will benefit all taxpayers; a major reform on demutualizing the securities and futures exchanges and the three clearing houses; a series of initiatives, such as the construction of a Disney theme park in co-operation with the Walt Disney Company and a Fishermen's Wharf, to boost tourism; the development of a Cyberport as the first step towards innovative technology; plans for listing the Mass Transit Railway Corporation; and the development of a debt market. All these measures show that the Budget is focused on the future development of our economy, and the medium-to-long-term plans are all formulated with the objective to "strengthen our economic foundations and enhance the robustness of our markets". I believe that the great pains taken by our "coffers keeper" in drawing up this year's Budget will not be in vain, and the Budget will achieve its objective of anchoring our fundamentals and invigorating our economy.

The tax concessions of $8.5 billion from a 10% rebate on profits, salary and property taxes collected, $1.8 billion from a 50% concession on Rates payable for one quarter, and $590 million from reduction on fuel duty will undoubtedly be welcomed by the middle class and related industries as timely assistance to tide them over difficult times. It is hoped that such measures will stimulate consumer spending and in turn relieve unemployment.

Technological development in Hong Kong has always been lagging behind Singapore, Taiwan and Korea. This time, by developing a Cyberport at Telegraph Bay, Pokfulam, the Administration is finally taking steps to carry out the Chief Executive's commitment in his policy address with regard to the development of innovations and technology, and hi-tech and high value-added industries. It is said that nowadays, wealth can only be created through developing hi-tech and high value-added industries, and this has proved to be true by the sustained growth in the United States economy. In Hong Kong, traditional industries have actually ceased to exist except in name while competition among service industries has become more and more acute. It is only through the development of innovations and technology and high value-added industries will Hong Kong be able to sustain its growth. I support the measures taken by the Government in perfecting the financial system and boosting tourism. However, I hope that the price to be paid by the Administration in inviting Mickey and his friends to Hong Kong will be fair and reasonable, and that it will not impose an unduly heavy burden on Hong Kong.

Madam President, the Financial Secretary said in his Budget speech that "many people have suffered a pay freeze, a pay cut or even unemployment. The immediate task of the Government is to relieve, as far as possible, some of the pain caused by economic adjustment." As early as 1997, I have advised the Administration during the Budget debate that "it should not underestimate the unemployment problem or relax its restrictions on the importation of foreign labour because a little lax in its policy will push it back on the same disastrous road." Unfortunately, my warning has now proved to be true. Though the Administration has done a lot in the past year, including the establishment of a task force, the introduction of a series of measures and creating more job opportunities to relieve the unemployment problem, and about 122 000 new jobs will be created within the next two years through the implementation of the Administration's policy commitments and infrastructural projects, that alone cannot solve the unemployment problem. However, the Government has also indicated that it will seriously consider reviewing the existing immigration policy, especially on relaxing the restrictions for mainland scientists and highly skilled technologists to work in Hong Kong. At a time when the unemployment rate is as high as 6% and in view of the fact that it may even continue to grow, will this policy relaxation affect the employment opportunities of local university graduates and those with special skills? The Administration should really consult the labour sector before it makes a decision on this issue, so as to safeguard the interests of local talents and accord them priority in employment. I think it will be more realistic to do so. Moreover, representatives from the labour sector should also be allowed to participate in the work of vetting applications from mainland professionals.

While the Financial Secretary claims that he is strictly adhering to the free market principle and emphasizes that intervention will be kept to the minimum, he has departed from the normal procedure for determining civil service pay increase, by announcing his decision on freezing civil service pay in 1999 even before the Standing Commission on Civil Service Salaries and Conditions of Service has completed its Pay Trend Survey. It is very disappointing that the Secretary has taken advantage of the economic downturn to cut civil service pay and benefits, with the intention of making downward adjustments on the pay and benefits of the whole Civil Service. At a time when the unemployment rate is at its high and where there is surplus supply in the labour market, employees do hardly have any bargaining power. It really makes our blood run cold that the Government is taking such a mean advantage. Under such circumstances, how can we ride out the storm together?

Care must be taken in dealing with issues like the freeze on civil service pay, review of civil service entry requirements, amendments to the pension system, cuts on benefits and adjustment of starting salary points, and the privatization of the Water Supplies Department. Moreover, civil service unions should also be consulted and an agreement must be reached with civil servants before any gradual reforms should be introduced. Any hasty changes will deal a blow to the civil service morale and jeopardize staff relations, and this in turn will affect the operations of the Administration. It is certainly not in the interests of both the Administration and the public at large.

Madam President, the Financial Secretary pointed out that expenditure on social welfare is bound to increase owing to rising unemployment and an ageing population, and it is anticipated that the large influx of people from the Mainland who have right of abode in Hong Kong will create added pressure. This only shows that the Administration lacks visionary planning in the formulation of its policy. The rising unemployment is the result of a long-standing mistake in the manpower policy, and the problem of ageing population is foreseeable. However, no retirement protection and social insurance plans have ever been established. If we resort to our reserves in coping with these problems, there will be a day when our reserves will finally be depleted. Since it is never too late to make amends, the Administration should expeditiously establish a social insurance or unemployment insurance plan in order to perfect the social security system, and to formulate an acceptable population and immigration policy. The benefits system for new arrivals to Hong Kong should also be reviewed so that existing social resources could be allocated more rationally.

Madam President, the Administration has proposed to charge a modest land and sea departure tax by arguing that all passengers leaving Hong Kong, irrespective of their mode of travel, should pay taxes, and that this tax will eliminate the existing inequitable condition. While it is entirely understandable that the Administration will try to introduce a new tax against a background of economic downturn and budget deficits, issues like the type of tax to be levied, the rate and its impact, and whether the new tax will harm our cross-boundary relations should be carefully considered. For more than a hundred years, the British Hong Kong Government has respected history and the fact that leaving Hong Kong via Lo Wu is the lawful right of Hong Kong people and that Lo Wu Bridge is an important link between Hong Kong and the Mainland. The Administration must not neglect the fact that those who pass through the Lo Wu checkpoint are mostly on business or leisure trips, or visiting relatives in China. It is in the interest of both Hong Kong and mainland residents to maintain closer contacts, and to hinder such contacts by levying a tax is unreasonable. Moreover, for years, people who travel to the Mainland through Lo Wu have to pay a much higher train fare than those travelling by other routes, and the beneficiary of such hefty fares is the Hong Kong Government which wholly owns the Kowloon Canton Railway. Therefore, I oppose the introduction of the land and sea departure tax, and would like to warn the Administration against a measure which only achieves a small gain but loses out on principles. If the land and sea departure tax were taken as an act of protectionism, and thus harmed the relationship between Hong Kong and the Mainland and tarnished the reputation of Hong Kong as a free economy, then the game is really not worth the candle.

With these remarks, I support the Budget.

MR HOWARD YOUNG (in Cantonese): Madam President, in his 1999-2000 Budget, the Financial Secretary has adopted a number of the proposals put forward by the Liberal Party. In addition to those mentioned by the Honourable James TIEN, other Members from the Liberal Party would also describe those in their areas of interest. For now, I would like to speak about the measures relating to the tourism industry, which the industry welcomes as they are conducive to the development of the industry.

The Liberal Party supports the Government in its negotiation with the Walt Disney Company to construct a theme park in Hong Kong on terms favourable to Hong Kong. This is what the Liberal Party would like to see happen, but during the negotiations we must not try to please the other side at all costs. The Government must place the interest of Hong Kong first and foremost, and prepare itself for any unexpected variables that may emerge in the course. We are of the view that the Government may use the Cyberport co-operation model as reference. In that model, the Government provides land for the development and is considering to use part of the market value of the land as share capital as a basis for profit sharing in future.

It is mentioned in the Budget that the Town Planning Board has given in-principle approval to a cruise terminal development at North Point proposed by a private sector developer. Given its scenic Victoria Harbour, its special geographic position, development potential and the fact that Hong Kong is surrounded by sea, it can certainly accommodate one more cruise terminal. Passengers who sail into Hong Kong on their cruises will surely be impressed. The Government should also consider the suggestions contained in the Alternative South East Kowloon Reclamation Proposal, jointly put forward by the Hong Kong Institute of Architects, Hong Kong Institute of Engineers, and Hong Kong Institute of Surveyors. According to this proposal, the whole Kowloon Bay and the far end of the airport runway should be reserved for use as a cruise terminal, shopping centre and hotel. This can help make Hong Kong a hub for ships, reduce the scale of reclamation, preserve the harbour and minimize the negative impact on the environment.

To promote the tourism industry, Hong Kong should target at those people who come to attend large conferences and exhibitions. It should not just focus its attention on those markets with vast numbers of people who come to Hong Kong (there has been an increased number of visitors recently but spending is weak). The former category, though not in large numbers, have greater spending power. They spend more than double of the average visitor. Therefore, Hong Kong should make an effort to host all kinds of conferences and exhibitions to attract visitors with greater spending power so as to increase our income in foreign exchange to improve our economic position.

The Honourable LEE Kai-ming mentioned the departure tax. I also want to talk about this issue. I have consulted some people in the tourism industry about the possibility of imposing departure tax on those who leave on land. They are not strongly against the idea. Many of them think the tax for land passengers have not as much effect on foreign visitors and tours leaving Hong Kong as that on the general traveller, that is, those who, as Mr LEE said, are leaving to pay visits to their relatives or for business purposes. We in the tourism industry admit that it is unfair to levy tax on air passengers and sea passengers but not on land passengers. I wonder if the Government would consider spending the tax on sea, land, and air passengers for improvements and operation of the checkpoint facilities borne by users? I believe the Government should give some thought to the suggestion.

When the costs of operation were mentioned in the Budget, no mention was made at all about the fees charged by the new airport. Maybe the Financial Secretary did not think it was appropriate to mention charges in the Budget, but the tourism industry was disappointed at this. To enhance the competitiveness of Hong Kong's airlines among its neighbouring regions, airport charges must be lowered to a reasonable level. With high operating costs, travelling to and from Hong Kong is more expensive than what it takes in other countries. This makes Hong Kong less attractive to travellers. Faced with high operating costs and customers who are more closefisted than before, some airlines are forced to cancel fights to Hong Kong or reduce them at the last minute. This will adversely affect the possibility of Hong Kong becoming a hub for civil aviation in the Asia.

The Budget has reduced the allocation of funds relating to environmental policy for two consecutive years. This year, only $5.92 billion is allocated, that is $0.63 billion less than the revised amount of $6.55 in the 1996-97 Budget. The proportion of expenditure on environment in the total expenditure is dwindling. This year, it occupies only two percentage points. The Government projects an image in which it does not appear to be sufficiently conscious of the importance of environmental protection. Nor has it recognized the importance of environmental protection to many other industries, not just the tourism industry, and even to the entire region. So, we hope the Government can step up the awareness of environmental protection in itself and among the people.

To enhance the long-term development of information technology in Hong Kong, the Liberal Party supports the positive efforts of the Government to build a Cyberport to attract large multinational companies to come to Hong Kong for investment and research in information technology. Indeed many neighbouring countries have started to develop their hi-tech and high value-added industries. Hong Kong should lose no time to catch up in this direction. The Government should state to investors in a convincing manner the details about the equity injection.

The Government has sought to implement the Enhanced Productivity Programme in the public sector. It is proposing to enhance productivity by 5% within five years. We think this is too slow. The target should be achieved within a shorter time. And the Government should also account to taxpayers periodically the progress of the Programme.

The reform of the Civil Service is inevitable. This can be seen from the consultation document on civil service reform released following the Budget. The Liberal Party supports the proposal to use a provident fund scheme in the place of pension to relieve the heavy financial burden on the Government, to recruit civil servants on contract basis, to increase the flexibility of deployment of human resources and to raise cost-effectiveness.

This year, the Budget has not factored in the ruling of the Court of Final Appeal. Based on the judgement, there can be a large number of people who are eligible to resettle in Hong Kong. The Liberal Party hopes the Government can make preparations for the influx so that all policy units can be given the necessary resources to cope with the possible rise in expenditure.

The Liberal Party has once suggested abolishing the estate duty. The Government is proposing to exempt insurance-related taxes. This is half a step forward. Revenue from estate duty is not much. With an exemption on all estate duty, I believe capital will be attracted from overseas to flow into Hong Kong. The money supply position of Hong Kong may then be strengthened. The concomitant low interest rate may appear and this is what Hong Kong needs now.

Lastly, the Liberal Party has come to the view that the Government can afford a deficit of $80 billion under the present economic position within the next two years. That is why the projected deficit put forward by the Financial Secretary is not a problem. We do not think this will contravene provisions contained in Article 107 of the Basic Law. We think the Government still may find room to freeze all charges for one year rather than just half a year so that the burden on the people can be eased.

With these remarks, Madam President, I support the Second Reading of the Bill.

MR LAU CHIN-SHEK (in Cantonese): Madam President, Mr LEE Cheuk-yan and I will speak on behalf of the Hong Kong Confederation of Trade Unions on the Budget. Mr LEE will generally comment on the fiscal philosophy and financial management principles of the Government, while I shall talk about the privatization of public corporations.

Partial listing of the Mass Transit Railway Corporation (MTRC) has been proposed in the Budget, heralding the privatization drive in the public sector. As a matter of fact, once privatization gets started, I believe that apart from the MTRC, the Kowloon-Canton Railway Corporation (KCRC), government departments and bodies such as the estate management and maintenance branches of the Housing Department, Water Supplies Department, Postal Office, Printing Department are bound to go in the same direction.

However, the Financial Secretary has not clearly explained what are the purposes of privatization and what problems there are with the present mode of operation that require a solution in the form of privatization. On the other hand, people will ask: Would there be any deterioration of existing services after privatization and would it not be even more difficult to monitor such services?

Nowadays, privatization seems to be the trend. But I have to point out that we must not blindly believe that a public corporation will certainly operate better after privatization. I wish to ask: Does the Government believe that any and all things done by a private concern are perforce better than by the Government? Does it believe that a private corporation, while operating under commercial principles, will give top priority to "public interest"?

I believe that before launching any privatization scheme, the Government must explain the above problems to the public in clear terms, otherwise, the citizens will find it hard to support such schemes.

Take the MTRC for an example, why do we need to privatize the MTRC? The Financial Secretary, in paragraph 92 of his Budget speech, said, "An offering of this nature will provide the people of Hong Kong with an unrivalled opportunity to participate in the ownership of a successful and profitable public corporation. The introduction of private ownership will reinforce the MTRC's commitment to competitiveness and efficiency. It will broaden the Corporation's access to funds and reduce its reliance on government equity injection or loans for future development. The introduction of the MTRC as a company listed on the local stock exchange will strengthen the market and enhance Hong Kong's attractiveness to investors. In addition, the proceeds from the sale of this stock will also provide a useful boost to our finances over the medium term."

Is the operating efficiency of the MTRC very poor at present? Is it not in the least competitive? It appears not. On the contrary, over the years, the Government has been lumping praises on the MTRC for its remarkable efficiency. At the same time, the MTRC has been very actively competing with other modes of transport. The recent cross-harbour concession is but one example.

Then, can the listing of the MTRC enable the corporation to have better access to funds? I do not think this is a sure thing either. At present, the MTRC and the KCRC have no difficulty at all securing loans, and international consortia are only too happy to lend to the two corporations, the main reason being that their "backstage boss" is the Government of Hong Kong. I doubt very much if the two Corporations' ability to raise loans can be maintained after privatization. In fact, immediately after the privatization of the MTRC was proposed in the Budget speech, a number of international financial corporations expressed their doubts as to the ability of the MTRC to repay its loans. The Financial Secretary had to invite them to an explanation session. It can be seen that privatization might reduce, instead of enhance, the ability of the MTRC to get loans.

Despite all the rhetoric, the Government merely wishes to "get cash" by floating the MTRC. The Government has estimated that the privatization of the MTRC will bring in a profit of $30 billion, and it also seems that the Government is relying very much on this $30 billion to reduce the aggregate deficits that will be incurred in the coming few years.

However, while proposing to permanently privatize the MTRC to "make quick money", has the Government considered the other problems that might arise in the process? Nothing is said about this in the Budget speech, nor is there any explanation from the Government. But I am very much worried.

Firstly, after privatization, the top priority of the MTRC will be to make the biggest possible profit, and the so-called "public interest" would at best be a secondary consideration. To put it bluntly, as the MTRC has a fine network and a speedy passenger moving system, and it has sent a strong message that it would retain its "fare increase autonomy" even after privatization, I believe that a privatized MTRC would literally be under no control when it sets its fares, and the citizens can only be subject to extortion!

Secondly, railway network development, apart from its economic significance, does have the public interest objectives of improving transport facilities and the environment. But after privatization, would the corporation only think about cost effectiveness when considering network development? Lines with not too high profitability might never be built, and this would be unfair to the people living in certain areas, and runs counter to the transport policy objectives of the Government.

Thirdly, privatizing the MTRC must harm the Government financially in the long term. The two public railway corporations do not lose money, instead they make big money year after year. The MTRC alone has a net profit of $2.8 billion in the recent two years, and the Government was paid a dividend of $700 million in 1997. Basically, instead of being a big burden to the Government, the MTRC is its money maker. To privatize the MTRC, the Government would get less benefit in the future, because part of the profits of the corporation will be pocketed by private shareholders.

Fourthly, I am very much concerned about the impact of privatization on the staff of the MTRC. The Secretary for Transport, replying my question last week, said that as far as he knew, the staff of the MTRC were "jumping for joy" about the floating of the corporation, because they would soon be the employees of one of the 10 biggest listed companies in Hong Kong. I do not know if the Secretary arrived at the "jumping for joy" conclusion after personally talking to ordinary members of the MTRC staff. But among those I contacted, many lower rank employees were worried that after privatization they would have less job security because a company offering its shares to the public would surely "put its account books in a good shape", and the most probable way of achieving this, needless to say, would be at the expense of the staff, by cutting the number of workers, reducing wages and allowances, and increasing work hours.

In fact, be it the two railway corporations, or other government departments such as the Housing Department and the Water Supplies Department, they have a mission of serving the public. The overall service objectives and pledges of the public sector cannot be replaced by those of private concerns which are willing to take up. At the same time, many services cannot be judged by their cost effectiveness in strict commercial terms. Therefore, we must not privatize for the sake of privatization.

The current development indicates that the Government only considers all the merits of privatization, and not the inherent problem of whether there will be any significant change in the content of services, the quality of services and the culture of services, and once the provider of public services becomes a private one, that could result in reduced public services. I wish to reiterate that public interest rather than the market rule of survival of the fittest must dictate the provision of public services.

Madam President, I have reservations about the trend of public sector privatization. I am strongly against the privatization of the MTRC. I wish to offer a piece of advice to the Government, and that is, unless the Government can convince the public that the merits of floating the MTRC outweigh the disadvantages, and that stringent rules for future public monitoring of the operation of the privatized MTRC must be drawn up, otherwise, I would firmly oppose the scheme to float the MTRC.

Madam President, I so submit. Thank you.

DR TANG SIU-TONG (in Cantonese): Madam President, in the face of the present economic downturn and rising unemployment, the SAR Government has resolutely prepared a budget aiming at "strengthening the fundamentals and fiscal prudence", making full use of its limited financial resources and not eschewing short-term deficits. Generally, the Budget is innovative and it helps stabilize public sentiments, and is therefore worthy of our support. I shall confine my views to the medical services, land planning and transport, while other Members from the Hong Kong Progress Alliance (HKPA) will speak on other areas.

In the expenditure part, the three major items of expenditure in the Budget are respectively social welfare, medical services and education. The expenditure for medical services grows by 3.5% in real terms; and totalling $30.2 billion, it represents 14.6% of the recurrent public expenditure. In view of the public medical services charging principle of "low charges and high subsidies" of the Government in the past, the Government has been paying for nearly 97% of the cost of public medical services.

With an ageing population and the imminent arrival of huge numbers of new immigrants in Hong Kong in the next few years, the demand for medical services will only increase. This is to be expected. On the other hand, public medical services have improved year after year both in quality, which is about to surpass that in the private sector; and in quantity in that the waiting time has been steadily shortened, making the basically cheap and good service appear to have even more value for money. The public medical system's effort to improve its services has brought increasing demand on itself, and at the same time snatched a chunk of the market share of the private medical sector.

I welcome very much the many schemes under the Enhanced Productivity Programme proposed in the Budget for the medical services, because these proposals can really raise the cost effectiveness. However, I worry very much that in the long run "enhanced productivity" and increased quality would eventually be shattered to pieces by the ever-increasing demand. When the system can no longer hold up, camp beds will once again appear, and the risk of medical blunders will inevitably increase! With a strong economy in the past, Hong Kong was able to alleviate the pressure on the medical system through injection of funds. But with the present recession and a fiscal deficit of $36 billion, if the Government is to maintain its present charging policy in providing public medical services, the deficit will hardly be reduced; what is worse, it is feared that the proceeds from selling assets (such as the $30 billions from floating the MTRC) might all be consumed. In the long term, the public medical financing system has to be reformed, and reformed quickly.

Last year I requested the Government to publish as soon as possible the report of the review on medical financing, and to set a definite timetable and direction for the review and improvement of the medical system of Hong Kong. It is a pity that while the report was submitted to the Government at the end of last year, and the media have been telling us in a convincing manner some content of the report, the Government has not been able to publish any of the report proposals in the present Budget speech. This is really disappointing. On the other hand, another report, namely the Consultancy Report on Food Safety and Environmental Health Services in Hong Kong, was published and responded to by the Government in an extraordinarily efficient manner. The Government took less than a month after the receipt of the report to accept the proposal to "scrap the councils". The reason behind this is all too obvious.

In the health area, incidents of contaminated vegetables, and fish and pigs fed with asthma medicine repeatedly happened in recent years. As the front-line service bodies for food safety and environmental hygiene, the two Municipal Councils should have their functions furthered strengthened. It is regrettable that in order to resume powers, the Government has been adamant in disbanding the two Municipal Councils. The most high-sounding reason for "scrapping the councils" offered by the Government is to centralize the work of handling food safety and environmental hygiene by taking the duties of handling and monitoring food safety from the Department of Health and place them in a new Policy Bureau, so as to address the so-called power and responsibility fragmentation, resources overlap and lack of co-ordination in the present system. Early this month, the Secretary for Constitutional Affairs vowed to the Legislative Council that the Government would carefully study how to streamline the Food and Environment Bureau through merger and re-organization. While his words were still ringing in our ears, the Department of Health has proposed to create 22 new posts in its food safety monitoring section, and to substantially increase the estimated expenditure, making the department about to merge and reorganize more bloated. Is this way of "putting on weight before losing weight" aimed at matching the theme of this Budget speech of "strengthening the fundamentals before achieving fiscal prudence"? Or is it just some kind of mockery?

At the special Finance Committee meeting, I specifically asked who would take charge of any food poisoning incident after the increased expenditure for the food safety monitoring section of the Department of Health, would it be the two Municipal Councils, or the Department of Health? The reply offered by the Director of Health was equivocal and ambiguous. The Department of Health, being the executive authority of health policies and the consultant to the two Municipal Councils on food safety and environmental hygiene matters, basically has the unshirkable responsibility for monitoring food safety. How can we support such a funding request from a department that wishes only to get the resources, but not the responsibility? From a macroscopic point of view, this further highlights the lack of sincerity on the part of the Government to strengthen the monitoring of food safety. To raise the banner of "food safety" is only for the purpose of "scrapping the councils and resume the powers".

Madam President, in the area of land planning, the Budget has put forward two innovative but controversial projects, namely, the building of a Cyberport and a Disney theme park. As these two "projects of hope" would become the key development projects of the SAR, I would like to focus on them.

Information technology (IT) develops by more than leaps and bounds. That our production of IT hardware is well behind our major competitors in Asia is an undisputed fact. But in IT application and electronic commerce, Hong Kong has a substantial edge over them; we have, for example, advanced telecommunications networks, high quality goods and services, and well-developed financial markets. All these can back up our effort to promote our information industry. Besides, while IT application and electronic commerce are at their initial development stages in other parts of Asia, our information industry has been able to record an average annual growth of 23.5% in recent years. This indicates that the information industry in Hong Kong has ample vitality and enormous space for development. Therefore, we must not hesitate, and must be resolute to fully take advantage of our strength to greatly develop our information industry.

However, in the development of our IT industry, we meet some problems, including the lack of confidence in the future of IT industry on the part of some businessmen, and the lack of IT talent and basic facilities in Hong Kong; these have resulted in high operating costs. The cost for repairs and maintenance, for example, is five to 10 times that in the United States. This will undoubtedly hamper the development of our IT industry. The construction of the Cyberport might not bring immediate relief, nor would it solve all our problems, but it can show the business sector, our society as well as the international community that the SAR Government is determined to give impetus to the development of our IT industry. This important infrastructure facility can hopefully attract information services companies and talent to Hong Kong. With its own facilities, it is believed that the Cyberport is able to bring fundamental improvements to the business environment for our information services sector. Therefore, I support the Government's proposal to build the Cyberport.

Some people have criticized the Government for violating the principle of fair competition by granting the land by a private treaty to an individual company. Others have queried that the Cyberport with its residential element is in fact a property development project in disguise. But I am of the opinion that at this crucial moment when our IT industry needs to compete for a breakthrough, it is an indication of the sincerity of the developer in investing in information services by first proposing the innovative project to inject vitality into Hong Kong's information services sector; by signifying its willingness to invest huge capital for a project that has a long return period when local investment desire is low; by inviting a number of multinational companies to come to invest in Hong Kong when international rating agencies have been downgrading the rating of Hong Kong. The building of the Cyberport has all merits and no demerits. It is beyond any harsh reproach for the Government to work with that company. If in the future any company can put forward an equally imaginative or even better idea to inject vitality into the economy of Hong Kong and is willing to make investments, the Government should similarly give it active support, to work together for the economic development of Hong Kong.

Nevertheless, the injection of share capital in the form of the assessed value of the land concerned in effect involves the use of public fund. Therefore, the Government must further inform this Council and the community the details of the partnership, and to provide sufficient information so that Members and the public are satisfied that the Cyberport will, as suggested in paragraph 59 of the Budget speech, attract "the formation of a strategic cluster of information services companies", and bring the economic benefits as envisioned in paragraph 62. Only thus can we ensure that the original intention of the project will not be distorted, a "project of hope" will not be turned into a project for luxury homes, and that it can receive support from this Council and the community.

The building of a Disney theme park, though also one of the "projects of hope" as put forward in the Budget, is not in the same league as the Cyberport. Even if eventually built, the Disney park is not the asset of the SAR, and the admission fees and proceeds from the sale of Disney products might not be shared with the SAR Government. Hong Kong will be benefited only indirectly from the theme park, such as an increase in the number of tourists.

European, American and Japanese tourists account for a very important portion of the huge income from our tourism industry. But there are already Disney parks in their countries and region, and a new Disney park in itself might not attract them to Hong Kong. Such a park has certain attraction to our mainland compatriots, naturally. Besides, all Disney parks have a strong and distinct pan-American flavour. If the Disney culture would one day bury the local culture, turning the Pearl of the Orient where the East and the West meet into just another part of the Disney world, to what extent our attraction to these tourists would diminish? How much loss would that bring us?

I think that despite the merits of a Disney theme park which could also be a "wonder prescription" to revitalize our tourism industry, Hong Kong has its own long suits, has sufficient strengths and imaginative talent. If the terms set by the Disney company for the co-operation are too harsh, or if the SAR has to make unreasonable financial commitments, we could very well try to find our own way by building a theme park with local characteristics. It is believed that we can attract tourists all the same with satisfactory returns.

In the area of transport, I concur with the Government in advancing the various railway projects to an earlier date to serve as a locomotive to pull our economy out of its doldrums and to ameliorate our unemployment problem. However, while hoping the Government would speed up the progress of the works, in particular those for the West Rail, I would insist that the interest of the residents affected should be taken care of. Land must be resumed with a sensible, reasonable and fair principle so as to ensure the protection of the interest of the affected residents and landowners. They should be compensated in a way commensurate with the extent of their sacrifice for the economic development of Hong Kong.

I also hope that the Government would consider bringing forward the construction of Phase II of the West Rail, to extend the railway to the Lok Ma Chau border control point so as to make the West Rail the alternative route to the Mainland. This would not only take away some of the pressure on the cross-boundary passenger traffic on the East Rail, but would also expedite the economic development of northwest New Territories while providing a quicker and more convenient cross-boundary route for the increasing population in that area. If Phase II of the West Rail only connects Lok Ma Chau with an East Rail station, cross-boundary residents would directly put more pressure on the East Rail, resulting in more crowded East Rail carriages and there would be a mismatch and waste of resources to the inconvenience of passengers.

Lastly, about government revenue. In the face of the present economic hardship, the Government will have a deficit for the next two years. It is a real difficulty for the Government to find more ways to collect revenue while not cutting back on expenditure. I welcome the acceptance by the Financial Secretary of the many proposals put forward by the HKPA for increasing revenue and restraining expenses without affect people's livelihood. However, I think that among the many revenue proposals of the Government, some are arguable such as the increase of the penalty for traffic-related offences, the toll for private cars using the Hung Hom cross-harbour tunnel. It is because in the present economic climate, such increases would further add to the burden of the people. Furthermore, with traffic offence traps everywhere in Hong Kong, and before this problem is resolved in a reasonable way, the hasty increase of penalties would become a pure revenue-raising measure and a nuisance to the public. The above problems warrant prudent consideration by the Government.

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

MISS CHAN YUEN-HAN (in Cantonese): Madam President, Members from the Federation of Trade Unions will speak on three areas of the Budget. The first concerns unemployment and people's livelihood; the second, reform of the Civil Service; and the third, future development.

The Financial Secretary used the colour of the lake at Jiu Zhai Gau for the cover of his Budget speech, alluding to the hope of spring for the economy of Hong Kong. The generous $8.5 billion tax rebate has brought a moment of joy to the territory and has been the most talked-about proposal in town. However, in the realistic "situation", can it actually bring optimism? The reply is "not necessarily". Our worst fear is that the people would receive a "naught" after their eager wait.

Madam President, the citizens are most concerned about are rising unemployment and improvement to their livelihood ─ issues that have not been addressed in the Budget. Actually, we have not expected the Budget to suddenly turn out some panacea to save the unemployed from their present dire straits. But however we might have imagined, we failed to anticipate the Government's proposals to privatize public enterprises it owns, an approach copied from Britain when it tried to solve its own economic problems back in the '70s and '80s. I fear that while Hong Kong might fail to achieve the desire good results as other people did, we would later find ourselves in the middle of the mire with no way of getting rid of the harm of the vicious circle resulting from "the consistent failure to seriously improve our human resources and the structural problems of our economy". Those who will eventually suffer are our grassroots citizens.

The Budget speech paints a rosy picture in which there are two "projects of hope", namely, the development of the Cyberport and the building of a Disney theme park. The Government expects that during and after the construction of the Cyberport, a total of 16 000 jobs would be provided; and more if the Disney park is eventually built. These will provide more employment opportunities. These schemes are lovely music to our ears, and bring the citizens some expectations. However, I am worrying that the actual result and the beautiful picture painted by the Government are two different things if preparations and implementation are not done well. For example, in trying to win over the Walt Disney Company to build a theme park in Hong Kong, we have quite a number of competitors. The results of the negotiations are yet to be announced. If in the event that Hong Kong fails to secure the building of the park, or Hong Kong withdraws from the race, what other projects are there as alternatives? I think the Government should prepare for such an eventuality.

Now turning back to the Cyberport, emphasis should be put on giving impetus to our high-tech development. Its mode of operation is of the same nature as the existing industrial estates, though targeting a different group of tenants, mainly those companies specializing in high-tech or intelligence technology development. However, the Government still does not have a complete set of plans for developing technology. If the project is, as the Financial Secretary said a few days ago, basically an infrastructure facility to attract outside investors, with the people of Hong Kong chipping in in the form of the land involved, and if the Government really does not have a comprehensive plan to support and develop high-tech industries, then the Government is simply putting the cart before the horse.

In fact, quite a number of real estate developers are at present looking at this Cyberport idea more as one "real estate development project" than as a development of Hong Kong industries. There are reports telling us that within this information technology centre involving a total investment of $13 billion covering an area of 26 hectares, over 70% of the total floor area would be for residential and commercial purposes. As the property development element in the project will bring as much as $6.8 billion of profits to the developer concerned and the Government, many real estate developers do not like it at all, and there is also the public criticism that the Government is "blatantly favouring" a certain company. The matter has given rise to many arguments centring around the concept of "real estate". Madam President, I am sorry to say that the mentality is exactly the same as the previously popular speculative one of "high-tech high risk, low-tech loaded with profits". This is a short-sighted approach of those who do not have any commitment to Hong Kong. I think that details must be included when the Government draws up the relevant contracts and drafting the necessary law to stipulate that the Cyberport project will truly achieve the long-term goal of high technology development in Hong Kong. Otherwise, the project might degenerate into one for some "intelligent" commercial buildings; this is not what the people of Hong Kong want.

Besides, the Government should be prepared to handle any problem that may come with the development of high technology. In the '80s and '90s when the people of Hong Kong went crazy about the property and financial markets, the once balanced economic structure of Hong Kong was lopsided. Local industries withered, less educated and low-skilled workers were kicked out of the labour market in one wave after another. Having learned a hard lesson from the financial turmoil, the community has come to a consensus that our future lies in developing local industries, including high-tech ones. While high-tech industries will create new jobs, the experience of other places and countries tells us that one of the consequences of an industrial revolution is more serious unemployment. Has the Government thought about this? New technology replaces out-dated one, and workers unable to keep abreast of the times will find themselves unemployed or semi-unemployed. What is more, new and evolving computer technology will make many jobs obsolete, and the rice bowls of low-level workers will be broken. This is inevitable. In that case, how can the Government only happily declare that over 30 000 new jobs will appear, and ignore the fact that 100 000 old jobs may disappear? Therefore, before the next economic transformation produces successful results, the Government must be well prepared to push the development of medium-level technology industries, such as environmental industries. To place all hopes of improving the job opportunities for the local labour force entirely on the building of the Cyberport and the Disney theme park is both short-sighted and lacking in comprehensive consideration.

While the Financial Secretary hopes to attract experts from all over the world with the Cyberport, the Government must review the present immigration policy to facilitate the inflow of talent, particularly technological and research personnel and highly skilled technicians from the Mainland. We have not much objection against such an arrangement if an insufficient number of local talent can be recruited in the short term. However, if such people are locally available, we should not think of importation as a simple solution. When experts are attracted from around the world, we must have a policy to achieve transfer of technology in the process so as to realize our objective of nurturing local talent.

One third of our three-million strong labour force are low-skilled workers with an education below the Form Three level. During the economic transformation in the '80s, the Government had no policy to help them, and as a result, for the past 10-odd years, they have had their wages restrained, have seen their quality of life deteriorated, or have been in and out of numerous jobs. At present, many of our young people, including university graduates and post-secondary school leavers, are unable to secure better jobs for themselves. Recently, the University of Science and Technology announced that nearly 5% of their 1998 graduates were unemployed, three times higher than the figure in 1997; and among the graduates who have jobs, less than 20% (18.5%) are engaged in information system and computer programming work. I want to specifically ask, regarding the future mode and trend of employment of the young people of Hong Kong, what ideas and solutions does the Government have?

Madam President, the greatest disappointment in the present Budget is that we cannot see the Government have any new ideas and new thinking regarding the changes in our human resources. Here in Hong Kong the framework for human resources training is many-tiered and overlapping, where enormous expenses have produced only doubtful results. Now that the Government is determined to shake up our financial structure and to embark on the road to high technology development, it should also have the courage to revamp our human resources framework at the same time, and to improve our training and retraining mechanism with emphasis on effectiveness. Something concrete must be done instead of merely talking about ideas. Nor should the Government be any longer free-spending. A case in point is the 11 measures drawn up by the employment task force headed by the Financial Secretary. Except for the immediate appropriation of $20 million to finance youth volunteer work, there is little achievement worth mentioning. In the previous so-called "4.9.1" training programme, that is, the one involving nine months of continuous training for 1 000 unemployed workers each receiving $4,000 of allowance monthly, how much was spent on this? $80 million to $90 million, with over half of the funding covering administrative expenses. With only 1 000 trainees among our over 200 000 unemployed, the programme could hardly meet the need of the market, and there is not too much actual benefits for the workers. If the Government keeps on refraining from tackling these problems pragmatically, I am afraid that the jobless workers might become permanently unemployed, imposing then an even heavier burden on society.

Lastly, I wish to talk about the Government's proposal to privatize the Mass Transit Railway Corporation (MTRC) to let the public participate in its ownership. This approach of selling off government assets to pave the way for "a small government" is no doubt a preparation to meet the deficit budgets for the next few years. Obviously, the "small government" role the Government wants to play is similar to the drive to privatize national enterprises in Britain in the '70s and '80s. However, I wish to stress that there are many differences between Hong Kong and Britain then. For example, Britain has a comparatively sound system of social security, and also when the reform was implemented, we saw that British workers could choose to work in other Commonwealth areas, taking up jobs in the primary industry of agriculture and mining in Australia, for example. This served as a cushion to ameliorate the shock to the community. But here in Hong Kong people do not have such opportunities. What do we do? What can our workers do in the face of the corporatization and privatization actions of the Government? I think that the Government must think carefully, must consider the circumstances of society as a whole.

Lastly, Madam President, I wish to say a few words about the idea of civil service reform. In fact, this issue will be covered by my colleague, Mr CHAN Kwok-keung, but I still wish to raise some issues because I simply wish to share my views. This reform idea of the Government, I believe, meets no objection. The point is I feel that the idea is not for any reform, but is itself a revolutionary proposal. I have to emphasize that to reform the civil service structure and to "revolutionize" it are two distinctly different issues. I think that the scheme aims at the 120 000 to 130 000 bottom rank civil servants. We are worried, I wish to stress, we are very much worried, that the objective of the Government is to gradually lower the salary of middle and junior civil servants under the pretext of enhancing productivity, thus providing a guiding indicator for the private sector to put a lid on wages. If the Government thinks that by doing so the competitiveness of Hong Kong can be increased, we think the Government is wrong. I have to emphasize that there are many factors influencing Hong Kong's competitiveness, and there are many reasons for the wages of Hong Kong workers to be higher than their counterparts in the neighbouring Southeast Asian areas. For example, the cost of housing, transport and public services as well as other daily expenses are very high here in Hong Kong as compared to neighbouring areas. While we see no lowering of any of all these other costs, why single out wages for reduction? As long as such problems remain, the overall problem can only turn into a vicious circle.

Madam President, the Government is going to forget the fundamentals in its quest for the peripherals by "revolutionizing" bottom rank civil servants out of their "livelihood". How can this help maintain the stability of the Civil Service, the balance between the implementation of policies and the quality of public services? As I said the last time, previously we have all along thought that our Civil Service was one reason for the success of Hong Kong, and during the transitional period, our Civil Service was a signpost of public confidence in Hong Kong. Now, we are rashly introducing a revolutionary scheme, how on earth are we going to strike the balance? I hope that the Government would think and rethink before it puts the scheme into action because we have grave misgivings about this proposal.

Madam President, I so submit.

MR SIN CHUNG-KAI ((in Cantonese): Madam President, the Government's proposal to develop the Cyberport to give impetus to the development of information technology (IT) is a good proposal that merits our support.

Technological development in Hong Kong was slow in the past, and the Government seldom used public resources to develop science and research, while resources invested in the Science Park, the Industrial Technology Centre and the Productivity Council were limited. We have to date little satisfactory results in leading technological development. However the Cyberport project is a $13-billion venture jointly undertaken by the Government and the Pacific Century Group. The characteristics of the Cyberport are that two thirds of the land will be used for the Cyberport the tenants of which will be the various IT companies, while the remaining one third is for property development the proceeds from which will finance the Cyberport development. Under this partnership, the Government will provide land as its share of the capital, while the Pacific Century Group will provide $7 billion for the whole development project and to actually design and build the Cyberport. Any profits from the sale of the residential property, after deducting the initial investment amounts and $200 million for the maintenance of the Cyberport, will be shared according to the investment ratio. This form of partnership between the Government and a private company and the investment in the present adverse economic climate will bring new opportunities to Hong Kong.

Since the government moratorium on land sales last June, there have been uncertainties in the property market. Therefore it has been more difficult to convince investors to invest in the development of the Cyberport. Besides, the huge fiscal deficits to be incurred by the Government can hardly permit it to make any direct investment in the Cyberport project. Now that the Government enters into partnership with a private company, this problem is solved by turning the proceeds from the land into IT infrastructure construction.

We can anticipate that all the five phases of the whole Cyberport project will be completed in eight years, and the main IT facilities will even be ready within 2003. Compared to the Science Park which needs 15 years to complete counting from 1995 when the consultant submitted his report, the Cyberport project will have a relatively higher efficiency. On the other hand, the Government should plough the profits from the property development of the project and future rental income from the Cyberport back into the Cyberport, so as to further strengthen Hong Kong's IT development.

An ideal Cyberport project would attract more related international companies to invest in Hong Kong. For this I conducted a questionnaire survey to canvass the opinions of the IT sector. The results show that 70% of the respondents think that the Cyberport project will give an impetus to IT development and help economic revival. However, the IT sector is of the opinion that in considering the Cyberport project, the Government has neglected the principle of openness and fairness by giving the development right to the Pacific Century Group without first going through a tendering process. The same questionnaire survey shows that half of the respondents are against giving the Pacific Century Group the development right without the tendering process. Though I agree that no time should be lost in IT development, I also think that the established principle of openness and fairness in Hong Kong should be observed in IT development. These two are not mutually exclusive. We want to develop technology, and we also want a fair environment, so as to achieve a win-win situation on both the political and economic fronts.

While the Cyberport project merits support and implementation, we must look into the Government's deviation from the principle of fair competition. Close to half of the respondents consider that the principle of fairness has been violated because the Government awards the development right of the Cyberport to the Pacific Century Group without tendering. To ensure that Hong Kong will still have a high degree of transparency in the future, and that the Government will maintain a level playing field, the Government should remedy this problem or slip, and one of the ways is to offer the whole Cyberport project for tender again, so as to maintain fairness. In my questionnaire survey, we have an equal number of respondents supporting and opposing this proposal. In fact, the Government could list the detailed requirements in its tender invitation so that the various real estate developers and technology companies can study and decide for themselves whether or not to participate in the project or in other schemes instead. This procedure will not delay the whole IT development scheme or the Cyberport project for too long.

Further, the Government should also set up a company to manage the income from the Cyberport project. Profits from property development in the project should remain with this company for re-investment in long-term IT projects. Technology is always developing, and itself a form of long-term investment. To make the Cyberport the Silicon Valley of Hong Kong, continuous investment and renewal are necessary to attract new capital and to develop new research projects. However, our objective should not be limited to the Cyberport alone. We should use the Cyberport as the starting point for developing Hong Kong into a knowledge-based city, into the IT centre of Asia. Development and investment ideas in this respect are long-term and practical ones. Like planting fruit trees, we need to be patient in nurturing the trees before they bear fruits. Hong Kong must learn precisely this kind of concepts and give up the speculative "make-money-quick" ways of the past. The Cyberport project is a beginning, and the IT sector is giving it full support and is doing its best to it see that it comes to fruition.

To ensure that Hong Kong has an open and fair business environment, we should now focus our effort to make sure that the Cyberport will become an information infrastructure project of Hong Kong in the new century. In my questionnaire survey, over half of the respondents do not believe the Government's claim that the Cyberport is purely an IT project rather than a property development. This sends us an important message. We think that the Government should enhance transparency, and disclose more information regarding the Cyberport development, such as details of construction, area of the building site, rate of return and mode of the partnership. Enhancing the transparency of the Cyberport project will let overseas and local investors have more confidence; and disclosing more financial information will be beneficial to the Cyberport project as well as the investment atmosphere of the whole of Hong Kong.

The Government should also strengthen the training of local talent so as to dovetail with the technological development of the Cyberport. To develop the Cyberport we need an enormous supply of talents. Be it the Silicon Valley, Israel or any other place where technology develops rapidly, their most important asset is not infrastructure, but their large number of professionals who, apart from their knowledge in science and other professions, are bold in experimenting, are innovative with the spirit to break out into new research frontiers. This is their way to success. Hong Kong has all along insufficient technological talents. Local talents have gone overseas because Hong Kong has not provided them with opportunities to make use of their expertise. Hong Kong should do more to train and retain local talents, only this is the sensible long-term approach, because recruiting talents from outside can only solve our immediate staff shortage problems. What Hong Kong needs is more than higher education in our universities and colleges (of course, we need university talent and research, and we should invest in and encourage them), on-the-job and continuous training is also very important. Technology develops most rapidly. In the information age, those not going ahead will be left behind. To enhance and maintain the competitiveness of Hong Kong, we must emphasize training and refresher courses for people on the job so as to match social and technological developments. The Government must revise the vocational training programmes, and change to direct issuance of training vouchers or coupons to let the trainees concerned effectively use the subsidy from the Government to meet their own training needs. At the same time, the Government should introduce professional accreditation for the IT profession as well as a system for advancement. This will also facilitate some none-IT people to enter the profession.

On the other hand, the Government should also consider the views of outsiders, and refrain from working behind closed doors. Respondents to my questionnaire survey think that for companies to qualify as tenants in the Cyberport, they must be in the IT business to provide new services, or must apply IT for the development of electronic commerce; and those in multimedia production should come behind the previous two types. They think that factors like the amount of investment, the scale of business and the number of employees are secondary considerations. When the Government gets down to detail planning for the building of the Cyberport, suitable facilities and services should be provided according to the demand of the tenants and the market.

Finally, about market liberalization. Mr TUNG Chee-hwa is going to visit the Silicon Valley in May. Recently I read the memoirs of President REAGAN. In this book, an old staff member of the former President mentioned that when Mr REAGAN was Governor of California, he opened up the Californian market, thus sowing the seeds for the success of the Silicon Valley. This is a reason behind the success of the Silicon Valley.

In this respect, I would again urge the Government to announce the opening up of the local fixed network market as soon as possible. The Government has prevaricated for half a year over the issue of local networks. During the past half year, the Government has been maintaining the closed market, without further opening it up. This does not bring a more open environment for information technology. Only an open market can create more opportunities and foster better innovation. Just look at the past half year, the portability of phone numbers and the opening up of the long distance telephone market have brought significant changes to the entire telecommunications market. Such changes benefit not only the consumers, but also the trade itself. We must note that technological development requires an open market. The Government must not solely focus on one item of investment and forget the need to maintain an open and fair market environment.

Both the IT sector and the people of Hong Kong are placing great hopes in the Cyberport because we do not want a repeat of the sole dominance by the property sector, do not want to see ever again Hong Kong people indulge only in speculative deals and forget that in the real world there is such a thing as industrial investment and technology investment and that our economy must be built on a firm foundation before we can compete for survival in the 21st century. Thank you, Madam President.

MR LAU WONG-FAT (in Cantonese): Madam President, the new Budget has as its objective "Onward with New Strengths". However, despite the many measures to alleviate people's hardships introduced by the Financial Secretary since his last Budget, Hong Kong has not recovered from its dire straits now that it has been more than one year after the financial tempest began wrecking havoc in Hong Kong. Our vast population is still suffering from the pain of the economic downturn. The Financial Secretary should be praised for his consideration of the public plight, and his caring approach to financial management. What is even more commendable is that in the midst of the present harsh economic reality, he has managed to produce a Budget that is generally accepted in all strata of society. He has been able to do so, I believe, largely because of his extensive consultative work and his personal visits to the various districts to gather first-hand knowledge of public sentiments beforehand.

The 1998-99 fiscal year that is about to end will have a deficit of over $30 billion after the tax rebate. And the Financial Secretary predicted that there would also be deficit in the two years ahead, to the tune respectively of $36.5 billion and $5.6 billion. We would not see any surplus until 2001-02. Whether the medium-term economic forecast is accurate or not, Hong Kong is in the middle of a rare recession, and it is an undisputed fact that we have to tolerate deficit budgets for some time. I am sure the majority of the citizens would treat this fact with helplessness and understanding. It is of course marvellous to have balanced budgets or surpluses year after year. But things are not always so beautiful. In fact, deficit budgets are not necessarily a horrible thing. As long as there is justification and need for a deficit, a deficit budget could be treated as paving our way for economic revival and for balanced budgets to come. This is in line with the principle of prudent financial management.

As things stand, I agree with the Financial Secretary in refusing to achieve budget balance through hefty increase of taxes or cutbacks in public expenditure. Because in doing so in the current circumstances, we would pay a huge price for that balance in that investment and spending would further contract and the recession would deepen. In our boom years, we have accumulated ample fiscal reserves which, as the term suggests, are reserved for use in rainy days. If we still refuse to use the reserves when the need arises, the original purpose of having fiscal reserves and the function of the reserves would be defeated.

Madam President, measures in the Budget to ameliorate public hardships include the tax rebate, the extended freeze on government fees and charges and a reduction of Rates. These measures will no doubt reduce the pain of the people, the tax rebate in particular was what I strongly promoted during the Budget debate last year. The beauty of it is that it is simple, direct and effective. When consumer spending is shrinking, and the marketplace quiet, a tax rebate would go a certain way in stimulating consumer spending with the resultant effect of pushing up economic growth.

The dismal desire to spend money is a major problem faced by Hong Kong now. I do not think I need to dwell any more on the very significant effect of the vicious circle so created. I think that the Government should take a more proactive approach to encourage consumer spending. A tax rebate would no doubt help stimulate spending, but it alone does not guarantee success. For example, quite a percentage of people would use their tax rebate money for a trip outside Hong Kong or to buy things outside Hong Kong. In that case, Hong Kong does not get much benefit. The Commissioner of Inland Revenue earlier made a public appeal to ask the citizens to spend their tax rebate money in Hong Kong. This is commendable. The preferential discount for tax rebate spending launched by the "Better Hong Kong Foundation" is also a good idea. However, these are all piecemeal and unco-ordinated efforts, needless to say obviously insufficient. I think that the Government should form a team, like the employment task force, to study ways to stimulate local consumer spending so as to quicken the pace of economic revival.

Madam President, it is understandable for selective raise of revenue as suggested in the Budget. However, certain measures and the rationale offered are arguable. I oppose the increases in on-street parking meter charges and fixed penalties for traffic-related offences. I think these increases are not in line with the present poor economic atmosphere. They should be introduced during a boom. When the timing is wrong, the effectiveness will not be significant. Besides, they run counter to the spirit of alleviating public hardships. It must be borne in mind that cars are not necessarily luxury items, while some bought cars for leisure, some car owners bought theirs because they need them for their work, and not all car owners are rich people. To label them roughly as a group of people able to pay more is unfair. Earlier this year, carparks in public housing estates reduced parking charges in the spirit of sharing some of the hardships of the time. The sharp increase in meter charges is a measure going against the spirit and is contradictory in itself. Its implementation in the present time, together with the increase in penalties for traffic-related offences, would put greater pressure on the already suffering car dealerships. Other related trades, such as insurance, oil, car maintenance will all be affected, eventually resulting in reduced profits taxes for the Government from these trades. It is therefore doubtful if these two particular revenue proposals would achieve their original goals at the end of the day.

Further, I cannot agree with the words of the Financial Secretary when he discoursed on maintaining the tobacco duty unchanged. He said, "...... increasing tobacco duty will only enhance the attractiveness of contraband cigarettes and provide further impetus to smuggling and illegal sale. It would be counter-productive in revenue terms and would contribute little to furthering our anti-smoking policy. Worst of all, it would further erode public respect for the rule of law".

Madam President, if this argument is correct, tobacco duty should be reduced rather than increased, so is the duty on fuel oil because the same problem of smuggling and illegal sale exists precisely because of high duty on fuel oils. Hong Kong is a society ruled by law. Smuggling and illegal sale activities will be handled by law enforcement departments, and are punished under the law. To bow to such activities because of the rampant black market activities, I believe, will affect public respect for the spirit of the rule of law. Policies on taxes and duties should be drawn up according to the financial needs of the Government, and should be based on whether the taxes and duties are fair and reasonable and also on the overall interest of society, definitely not as a result of government knuckling under certain illegal activities.

The Budget has introduced a number of encouraging measures, including the on-going "review on the strategy to attract foreign capital" which, I hope, can also consider ways to promote some industries with good development prospects. Though the significance of industry to the Hong Kong economy has been on the decline, it is still an element not to be ignored in earning foreign exchange, in providing jobs and in creating wealth. No doubt Hong Kong industries are facing many unfavourable factors, but if the Government can give them a push in the form of appropriate incentives and support, they still have a part to play. The Government for example can consider granting industrial land at concessionary premium, allowing factory owners to pay for the land by instalments, and granting them tax preferences, so as to lighten their burden in the initial stage of investment. As to the existing small industries, particularly those in the New Territories operating under short term tenancies, the Government should be sympathetic and helpful in the present recession, and should lower the rents so as to help them pull through.

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

MR LAW CHI-KWONG (in Cantonese): Madam President, on the face of it, expenditure on social welfare gets the biggest growth in this year's Budget, amounting to 13.6%. However, everybody knows that it is because of the expected increase in Comprehensive Social Security Assistance (CSSA) caseload of close to 20% which will result in an estimated increase of CSSA expenditure of 18%. For social services in general, the main increase is seen in old age services, and then in rehabilitation services. Other areas of social services are given only meagre additional funding.

I hope everybody would understand that the relatively bigger increase in old age and rehabilitation services is the result of less attention given by the Government to these two areas in the past, therefore there have been the slight adjustments in recent years. Even with the recent small adjustments, the base is still very small. So when the percentage increase is looked at out of context, such as that for old age services, the increase for this year, at over 20%, may seem very high. But I hope that Members would understand that in a fraction, the quotient is big when the denominator is small.

In the recent CSSA review, the Government cut the standard rate of payment for families with over three members as well as a number of special subsidies. As we all know, the main reason behind the cuts is that the Government is beginning to feel the pinch in face of the approximately 20% annual increase in CSSA expenditure. Now the CSSA expenditure takes up over half of the whole social welfare budget. Even if the Government is not to improve any other areas of social welfare services, the expenditure for social welfare will still see double-digit annual increases. The continued increase of welfare expenditure will not only affect social services, but will also have an impact on the whole government expenditure. Therefore in the present Budget debate, I would like to say more in this respect. Owing to the time constraint, I shall be as concise as possible.

Many people think that the increase in CSSA caseload is the result of the ageing population or the rise in unemployment. Both are wrong. At present, the number of old people increases only 2.5% every year, but the average annual increase in CSSA in respect of the elderly is as much as 15%. In other words, the increase in the number of old people is not the reason for the increase in the cases of old people applying for CSSA. The rate of unemployment before 1997 was very low, not even 2%, but in the years 1995-97, the annual increase in unemployment CSSA cases was over 50%, the highest one being 70%. Where does the problem lie? It is not unemployment, nor is it the ageing population. The problem is the widened gap between the rich and the poor; the low-income group, in particular, has not gotten any significant increase in their income over the past 10-odd years. An example always quoted by me is the hourly rate at the McDonald's which was a little over $10 10-odd years ago is now $15. Just think about this, if you clock up 200 hours, you will only get $3,000. How can you cope when other people in society are getting huge increases of income? This has resulted in what the Government has frequently said, that is, the standard rate CSSA payment is now appearing to be better than what low-income people can earn. But where does the problem lie? It lies in the maladjustment of the labour market. There is basically a surplus of supply in the low-skilled, less-educated labour market, and the increase in such supply has far outpaced the creation of jobs. This is why the wages have remained at a very low level. Try to think, when one cannot manage to support oneself by working at places like the McDonald's for 200 hours, how can CSSA cases not increase? This is obvious. This pressure is also considerably heavy.

The Government also has another theory, that by the end of next year, the mandatory provident fund (MPF) will be launched, thinking that CSSA caseload would see smaller increase in the future, thinking that the MPF could put a lid on the increase of old people CSSA cases. This is also a very erroneous way of thinking. Over 20% of the working people in Hong Kong have less than the 10 years of qualifying service, and this 20% will not benefit from the MPF. 40% of those with income will have to contribute into the MPF, and when they retire after working for 40 years, what they get will be less than what they would receive as CSSA payment. Therefore, I have been figuring that in the long run, 30% or more of our elderly population will be on CSSA. The percentage of old people on CSSA has increased from less than 10% in the early '90s to the present close to 20%. Based on this, I believe that in less than a decade, close to 30% of the elderly will be on CSSA. The MPF does not help this in any significant way. Even in 20 or 30 years' time, the MPF will not help the 30% of people who have the lowest income or no income. Therefore, when discussing this issue, I hope that the Government would stop thinking of reducing the pressure in this respect by way of cutting CSSA. Rather it should seek the right solution for this problem. Of course, the first and foremost problem is the maladjustment of the labour market. I am not going to elaborate on this because I believe we have discussed on many occasions how to help these low-skilled, less-educated workers survive in the labour market in Hong Kong. Otherwise, if and when the labour market in Hong Kong meets the influx of the one hundred or two hundred thousand low-skilled and less-educated workers from the Mainland who might resettle here in the future, I believe that by that time, the hourly rate at the McDonald's might only be $9.

The second matter I hope the Government would think about is that the demand in other areas of social services is also very big. Though admittedly, the increase in CSSA will be very large, but family problems are also becoming more serious by the day. Every year, family cases handled by social service agencies increase by over 10%. While the annual increase in the number of households is no more than 2%, the number of family cases increases by over 10%, with the past average of close to 13%. Even in the face of an increase in these social problems, the Government has never increased the amount of resources allocated to the service providers. I hope that in future the Government would make improvements over these problems. In the current Budget, the Government has only made a token increase of 29 social workers for the family services. This is utterly inadequate and I am very disappointed. Naturally, as a representative of the social welfare sector, I would appeal to the Government to consider as far as possible the issue of welfare spending, specifically the issue of the development of welfare service. I would on the other hand make an effort to promote more cost-effective services within the social welfare sector and to push for more and better services to the public with the limited resources available.

I would also like to take this opportunity to talk about another matter, that is, the tax rebate. Outside this Chamber I was asked a lot of questions on this subject by reporters. I am not going to discuss the details of this subject, for Dr YEUNG Sum will speak on it on behalf of the Democratic Party. The subject of tax rebate was first raised by the Democratic Party last year, hoping that the Government would return wealth to the people, and to stimulate our economy. This the Democratic Party supports. The most important element I wish to discuss now is still one relating to social welfare. At the last meeting of the Social Welfare Panel, we discussed a problem that was quite a headache, that is, the $60 million deficit in the Community Chest. I wish to let everybody know how half of the $60 million deficit was incurred, because the Community Chest has been subsidizing the Government by providing some services deemed necessary by the Government, including the elderly activities centres and comprehensive service centres for which the Government has only been able to supply 80% to 85% of the resources required, with the Community Chest making up the shortfall. This amounts to an annual sum of over $30 million. Therefore in the $60 million deficit in the Community Chest this year, half came by because the Chest had subsidized the Government. However, during the recent discussions, the Government refused to help, and I have more or less lost hope. I do not think that the Government would dish out several ten million dollars to help the Community Chest after my appeal. Therefore, I would like to appeal instead to the President and all Members as well as the high-ranking officials in this Chamber to donate a portion of their tax rebate to the Community Chest or other charities, many of which in the past year could only manage to raise half or less than half as much as they did previously. Many service agencies are now facing the need to cut services, staff and salaries in order to get by in the coming year and survive the crisis. I hope that the tax rebate could bring them some hope. I know that many agencies have contacted some big corporations, and the latter are all willing to donate a portion of their tax rebate. I hope that all who are present here would support this action.

Another subject I wish to mention is environmental protection. In the present policy address, pardon me, I mean the Budget, little was in fact said in relation to environmental protection. The issue of fuel duty was raised in the past, but I am not prepared to go into the details because other Members will discuss it. However, the relation between the issue of fuel duty and air pollution is one of the big factors we need to consider. Furthermore, the proposed construction of the Disney theme park must also be mentioned. On the face of it, this project will bring tremendous economic benefits. Of course, I also hope that the Government could build a Disney theme park on Lantau, and while doing so, would pay attention to the issue of environmental protection, in particular to the overall development strategy for Lantau in that significant damage would not be inflicted upon this very important green environment of Hong Kong. I hope that there would not be such damage, and also that the Government would monitor this matter very closely. However, if the air quality of Hong Kong keeps deteriorating, I believe that even if the Disney theme park is built by 2004 as scheduled, there might not be anybody willing to come to Hong Kong. If tourists would cough their lungs out after staying in Hong Kong for a couple of days, why would they come to Hong Kong? Therefore, the issue of environmental pollution must be solved as soon as possible, otherwise I fear that by the time the Disney theme park opens in 2004, nobody would dare to come to Hong Kong and risk its heavily polluted air. When Hong Kong is about to enter a new century, I hope that the Government would also do something to meet the environmental protection challenges in addition. Only thus could the Government win back public confidence and international reputation. I also believe that environment is a priority element if we wish to get a rebound in our economy and seek development within the overall environment of Hong Kong. Regrettably, I have failed to find any significant mentioning of this matter in the present Budget. I am therefore rather disappointed.

Still one more point I wish to mention is the subject of waste recycling, a topic which we repeatedly talked about a few months back. The Government said that it would promote some new recycling technology through certain subsidy programmes. This we in the Democratic Party support. However, the Government has still taken no concrete actions to help some recycling traders solve their operational problems. In the Environmental Affairs Panel, I raised a very important concept, and that is, there are very important externalities in our environmental protection industry. It is often impossible to turn such externalities into operating revenue through the market mechanism. They are called externalities because a government mechanism is required before they can be transferred to the operators through tax means, resources or other subsidy programmes. However, there is still nothing in the present Budget that shows the Government would act in this spirit, that gives any indication how the environmental protection industry would be helped to develop in a sound way and to achieve in a reasonable way effectiveness in their operation, turning such effectiveness into part of their profit, so as to give them incentive to further promote the environmental industry.

Madam President, I so submit. Thank you.

MR WONG YUNG-KAN (in Cantonese): Madam President, at a time when the shadow of the financial turmoil still refuses to go away, the Financial Secretary, Mr Donald TSANG has painted a magnificent picture for the people of Hong Kong by including a number of significant programmes in his Budget with the objective of "Onward with New Strengths". While such programmes will pull Hong Kong back into an economic boom in the long run, they are however something a bit remote to the general public. The Democratic Alliance for the Betterment of Hong Kong (DAB) hopes that the Government would lead the people of Hong Kong in their struggle in the face of adversity, and in building a more beautiful tomorrow.

Like the Chief Executive in his policy address, the Financial Secretary made no mention of the agriculture and fisheries industries in his Budget. No doubt, the agriculture and fisheries sector has a small working population (an estimated 80 000) and also a small value of production (but still amounting to over $3 billion in 1997), but its existence should not thus simply be ignored. It must be understood that this sector makes considerable contribution to the economy of Hong Kong and to the livelihood of Hong Kong people. A good proportion of the non-staple food consumed by the people comes from the local agriculture and fisheries sector. Take fish as an example, 90% of live fish and frozen marine fish is supplied by local fishermen.

Mr Stephen IP, Secretary for Economic Services, pointed out at a Finance Committee meeting that the Agriculture and Fisheries Department would commission a consultant in 1999-2000 to study the feasibility of developing Hong Kong's blue water fishing industry, and would formulate strategies for fishery resources conservation and management. As the representative of the agriculture and fisheries constituency, I still think that this is not enough, because what the sector expects is that the Government should formulate a long-term policy for agriculture and fisheries development and would give them adequate support, rather than responses to individual problems. As a matter of fact, the operating environment of the sector has long been unsatisfactory, a question all along known to the Agriculture and Fisheries Department. Within the fishing industry, for instance, those in the fishing and fish farming businesses are complaining most vocally because of water pollution. Had there early been a set of long-term development policies, had fishery resources conservation work been properly done, it would have obviated the need for these last-minute measures now to formulate strategies for fishery resources conservation and management.

I wish to reiterate here that the Government has been treating agricultural and fishery produce as ordinary commodities, and adhered to the principle of free trade. In fact, the agriculture and fisheries industries are most closely associated with the daily life of the people. So long as the Government is unable to shed its concept as mentioned above, unable to treat agricultural and fishery produce as necessities, there will not be any sustained development for the agriculture and fisheries sector. In the past, the sector repeatedly requested the Government to set up an agriculture and fisheries research centre, to help the sector make swift response to changes in the natural environment, in the market and in the taste of consumers, so as to seek the greatest economic benefit. Unfortunately, the Government always adopted a careless attitude. In time, the agriculture and fisheries industries can hardly avoid being eliminated and such industries would then vanish from Hong Kong.

Shortage of labour is a fatal problem for the development of agriculture and fisheries. This is still a labour-intensive operation, but in view of the obnoxious working environment, a large number of vacancies remain vacant. After chairing a meeting of the employment task force last Friday, the Financial Secretary also said that though the rate of unemployment remained a high of 6%, some trades still failed to recruit workers over a long period of time, among them were the poultry and fish farming industries. To solve the problem of manpower shortage, the industries have for many years asked for government permission to import special labour to solve the immediate problem. But the Government has been unsympathetic with the plight of the industries. In fact, the labour shortage has not only killed any further development for the industries, but actually affected the livelihood of the operators. My experience is a case in point. During the onslaught of the red tide last year, I watched helplessly my fish die of asphyxiation because I did not have sufficient manpower to tow away my fish rafts.

I expect the Government to understand the hardships of the agriculture and fisheries sector, to improve the operating environment for the sector, and to consider the requirements of the industries when doing planning. For example, marginal land should be designated agriculture priority area, with the infrastructure built by the Government, for farmers to do the tilling; the water quality of fishing ground and fish farming areas must be kept from being polluted by nearby development. These are the requests of the sector.

Madam President, as the lands matter spokesman for the DAB, I wish to offer some views regarding planning and building safety. Mr Gordon SIU, Secretary for Planning, Environment and Lands, proposed earlier that new concepts should be introduced in future planning to replace old planning concepts; and environmental protection should become the new theme. The DAB supports this idea. In fact, the DAB did previously propose to the Government that apart from developing surface space, study should be made to develop underground space, to build underground streets and roads. This will not only reduce pollution from vehicular emission, but will also free more surface space for development purposes. Shockingly, vast area of land is taken up by our roads. Take the West Kowloon Reclamation for example, road surface takes up 40% of the whole development area.

The DAB naturally understands that developing underground roads and streets involves huge costs. But this will not only improve the environment, but will also enable more optimum use of surface space. Therefore, such an investment is absolutely worth it. It is learned that in Boston, United States back in 1986, a six-lane elevated highway and its connecting road system with a daily traffic flow of 190 000 vehicles were rebuilt, with a major part of it underground. As there is a precedent of an underground road system abroad, Hong Kong should active study its feasibility.

Moreover, can the new concepts of Mr SIU be applied to land production? Could the Government cease to produce land by reclamation? The continued reclamation in the Victoria Harbour has been a subject of contention between the Government and environmental protection bodies. Though government officials have kept stressing that there is no question of over-reclaiming, that the Victoria Harbour is narrowing is an undisputed fact, and it has evoked public sentiments for the protection of this precious asset of ours. Therefore, in recent years, whenever the Government puts forward any plan for urban reclamation, strong opposition has become a routine. This is public sentiment, and it will not change because of government explanations or the vast information and data it supplies. The DAB thinks that the Government must properly heed public opinion and give the protection of our harbour top priority when planning local development.

Another issue is the safety of and fire prevention in the older buildings in Hong Kong. This issue has long been a worrying one. The DAB did a number of questionnaire surveys in the past and found that the public had very little knowledge and awareness of building safety and fire prevention. Therefore, the Government must provide more support and assistance in this aspect so as to generally raise the degree of safety.

It is regrettable that government support has always been inadequate. In respect of building safety, the Government proposed a "building safety inspection scheme" in August 1997, requiring the owners of all buildings with an age of 20 years or more to conduct regular building inspections. The scheme was supported by the DAB in principle because it helps improve building safety in Hong Kong and enhance protection for the public. Unfortunately, the Government has shelved the scheme indefinitely for fear that it would be asked to take up the building inspection responsibility. Instead, it now encourages voluntary building inspections by the citizens. This is really disappointing.

The DAB opines that the Government should launch the above compulsory building inspection scheme as soon as possible, and take up the responsibility to conduct the preliminary inspection of buildings so as to raise the safety of buildings in Hong Kong.

On the other hand, the Government introduced last August the Building Safety Improvement Loan Scheme to provide low-interest loans as an incentive and assistance to building owners to carry out maintenance and improvement works. However, the number of successful applications has remained pitifully small. In the past fiscal year, a mere 24 applications were received. Though the Government indicated that the loan application procedure and terms would be reviewed to facilitate applications by building owners, this is still insufficient. In fact, the scheme covers only the structural and fire prevention aspects of buildings, and general maintenance and repairs are not included. The DAB urges the Government to extend the loan scheme to cover general building maintenance and improvement works.

In respect of fire safety, the Government has said that an ad hoc group would be set up to step up enforcement actions against rooftop illegal structures in one-staircase buildings so that in the event of a fire, residents can use the rooftop as a fire escape. Unfortunately, the progress of the Government in this respect has been unacceptably slow. It is learned that among the 4 000-odd older buildings with only one staircase in Hong Kong, 1 000 have illegal structures on the rooftop. If the Buildings Department maintains its present speed of handling the illegal structures of 100-odd buildings every year, it would require at least 10 years to complete its task. The safety of the residents can hardly get any protection.

The Urban Renewal Authority (URA) that we have heard long enough will hopefully be established by the end of this year as scheduled. The Government is now drafting the law to provide the legal basis for the URA. However, the financial arrangement of the URA have caused much worries among the people. In his Budget speech, the Financial Secretary plainly indicated that after its establishment, the URA would get its financial resources from the Land Development Corporation (LDC). The problem is, with the poorly performing property market and sharply reduced property prices, property developers have had greatly reduced profits from property sales, and the LDC is no exception. Towards the end of late last year, there was a report that because of the nose-diving property prices, the LDC suffered a loss to the tune of $3 billion in its redevelopment of the five Kennedy Town streets and seven Tsuen Wan streets. Therefore, it is doubtful if the financial position of the LDC is as robust as it was previously, sufficient to support the above concept.

Urban renewal undertaken by private real estate developers in the past has almost exhausted profitable sites. The redevelopment projects to be undertaken by the future URA will likely entail huge subsidies. Therefore whether the URA could in the future push forward with urban renewal depends on whether it has a sound financial position. The DAB hopes that the Government would made definite commitments to provide the URA with sufficient capital to implement the various renewal projects.

Madam President, I so submit.

MRS SOPHIE LEUNG (in Cantonese): Madam President, the Budget for the new fiscal year announced by the Financial Secretary has received generally favourable comments from society. This Budget has added colours to the concepts of governance as we saw in the policy address. The measures proposed for the speeding up of Hong Kong's economic restructuring as well as the rebuilding of Hong Kong as a tourism centre are particularly forward-looking, giving the citizens a clearer idea about the direction of our overall and long-term development, specifically in areas involving the economy and knowledge-based social development. I would like to talk about the knowledge-based society and the business environment in the following.

On knowledge-based society, I would say that Hong Kong is an open economy, what we face is competition from all over the world. If we want to maintain our competitiveness in the 21st century, we must reform our economic system and match it with human resources. The two articles entitled respectively "Hong Kong to go the dead-end way of Japan, or the prosperous road of the United States" and "New Formulas needed to revive Hong Kong" published recently in the Economic Daily have not only made it plain that our society needs change, but also quoted authoritative information to expound how other places have embarked on the road to a knowledge-based society. I agree with the articles in this respect.

In April 1998, several of my friends and I helped organize and took part in a seminar called "The Future of Information and Communications Technology in Asia". The organizing body invited representatives of the information sector elite from over 20 countries who were all young and talented people. In the seminar we probed into two issues: the first, should the Silicon Valley be extended to the Asian area; and the second, where in Asia could become the focal point for the Silicon Valley network. The conclusion was that Hong Kong is one of the areas with very high development potential, with the advantage of its geographical position and international perspective, but also the disadvantage of its lack of the necessary talent. The proceedings of the seminar have been submitted to the relevant government departments. The Cyberport project now proposed represents the first step to be taken towards a knowledge-based society. In this project, strategic preparations are also very important, selection of site, terms to attract tenants, for example, should all be considered in detail. Otherwise there would be impact on the rental in nearby areas, or pressure on the property market. Therefore, no matter how good an idea is, each and every implementation detail should be well thought out before the long-term development objective of the project can be realized.

Talent is a very important factor to technological development. I am pleased that the Government is beginning to study schemes to encourage the inflow of technological talent. As I said during the policy debate last October, when drawing up the relevant schemes, the Government should draw reference from how the Silicon Valley in its nascent stage attracted foreign students studying in the United States to stay behind and how overseas talent was recruited to work in the United States. As a matter of principle, the procedures for application and approval must be simple and quick.

To attract talent is at present not only a way to develop technology in Hong Kong, but also the necessary way. Regardless of our own way of thinking, this is undeniable. But in the long term, Hong Kong should produce its own technological experts.

During the boom years in the '80s and '90s when the service and financial industries thrived, there formed in the community the mentality of "making quick money".

Technological development requires strong logical thinking, high innovative power as well as the perseverance and adventurous spirit of entrepreneurs. Our youths brought up under the present Hong Kong social atmosphere and education system precisely lack these qualities; as a result, technological staff and resources are seriously in short supply. Therefore, adaptive changes must be made at once in our education system.

The civil service reform now in process is most timely. Two days ago, I watched the evening TV programme of the 71st Oscar presentation ceremony. One of the episodes made me think of the direction of the civil service reform the Government is taking. The film "Save Private Ryan" directed by Stephen SPIELBERG won five awards. I was not in the least surprised by the outcome, but what moved me immensely was how co-workers of SPIELBERG talked about the effect SPIELBERG had on them, and how especially high were his expectations of them: He not only expected them to be highly motivated, and to throw themselves fully into their work, he also continuously developed their potential to achieve the best results. For this they thanked SPIELBERG for the opportunities offered them. I wholly agree that all leaders should have the charisma of Stephen SPIELBERG to get the best out of our colleagues, to let them give full play to their potential. I recount this episode to share it with senior officers and leaders of our Civil Service.

Madam President, I would like to turn now to the issue of business environment. The tax rebate announced in the Budget is no doubt a shot in the arm to the business sector for the short term, to the small and medium enterprises in particular. However, for the long term, the creation of a better business environment is the main direction in developing commerce and industry.

The financial turmoil has exposed the weaknesses of the economic structure of Hong Kong. We must now pay more attention to the development of high valued-added industries, and the Government must set a clear objective to raise the share of industry in our Gross Domestic Product (GDP), hopefully from the present 7% to 18%. Please do not forget, in neighbouring areas, their industry accounts for 25% of their GDP.

Madam President, here I would like to disclose some statistics to demonstrate to the Financial Secretary changes in the business environment in Hong Kong over the last decade.

According to information from the annual report of the Labour Department, the daily wage of technicians and other operators in the manufacturing sector was $139 in 1988; in 1997, it was $329, an increase of 1.37 times. For supervisors and technical/clerical staff and non-production-line workers, their monthly salary was $4,332 in 1988, and $11,592 in 1997, an increase of 168%. Besides, laws in respect of employee benefits have been improved along with the changing circumstances, putting added burden on employers generally. A study also reveals that for companies with 200 employees, with the same rate of wastage, employers had to reserve $700,000 to pay for the long service payment and severance pay before their upper limits were adjusted in 1996; after the adjustment, they had to put aside $1.4 million, double of the previous sum. Some of the manufacturers could not but move their production lines out of Hong Kong in order to maintain their external competitiveness and in the world market. The result is that our labour force has been shrinking all the way, from 837 000 in 1988, to 443 000 in 1997, a reduction of 47%. In the same period of time, the number of factories in the manufacturing sector also dwindled from the 56 000 in 1988 to 26 000-odd in 1997. Also, the rate of inflation in Hong Kong in the same period was shocking, an annual average of 8.83%.

Foreign investors have also raised the alarm about Hong Kong's business environment. According to the "1998 Survey of Inward Investment in Hong Kong Manufacturing Sector" conducted by the Department of Industry, among the 362 factories with foreign investment surveyed, 69% felt that the overall investment environment in Hong Kong was not favourable. Though 46% thought that cost of office/plant was a disadvantage, over 50% of the respondents deemed labour cost in Hong Kong (that is, the most important element for investment) was also an unfavourable factor. To Hong Kong, and to our industrial development in particular, would this situation result in losses for the three parties? On the other hand, everybody is affected by high inflation.

In the past, the policies we drew up perhaps tended to be superficial, without comprehensive consideration. Now when we formulate policies, we should aim at benefits for the three parties. The SAR Government which has been stressing on being executive-led, should drum up its courage and drive, and contemplate carefully to draw up detailed plans for the overall development of Hong Kong.

There have been reports recently that shoe factories and timepiece factories that are already moved out of Hong Kong have the intention of returning. I hope the Government would grasp this opportunity and actively improve the business environment for the manufacturing industry.

Finally, Madam President, I would like to say a few words about the issue of turning Hong Kong into a world-class design and fashion centre. The Chief Executive proposed in his policy address last October to make Hong Kong a world-class design and fashion centre. Regrettably, the Financial Secretary has not earmarked any fund in his Budget for this project. I hope that he would explain this in his reply at the end of this Budget debate so as to let the industry and the public understand the degree of importance the Government has attached to this idea, and also the timetable for the necessary work.

Madam President, I so submit.

MR TAM YIU-CHUNG (in Cantonese): Madam President, the onslaught of the financial turmoil has pushed unemployment rate in Hong Kong to new highs, and our overall volume of export has yet to manage to get growing again. As a result, consumer spending is still weak. To meet the challenge of the economic difficulties lying ahead, the Financial Secretary proposed a number of initiatives in the Budget announced earlier this month, hoping to grasp the opportunity afforded by the present recession to consolidate Hong Kong's economic foundation, and to raise our future competitiveness. I personally think that this direction is correct and necessary.

The Budget outlined for us a magnificent future, strengthening public confidence. However, Hong Kong needs to face a lot of challenges in the future, though there might not be a minefield, nor an abyss, ahead, the difficulties involved compel us to make good preparations.

One of the reasons for the worsening employment picture is that the creation of jobs has failed dismally to catch up with the growth in our workforce. According to the demographic forecast of the Government, the overall population of Hong Kong will increase to 8.2 million by 2016, and there will be a net increase of 880 000 in our workforce, representing a growth of 28%. If we count the eligible mainlanders who have the right of abode in Hong Kong as a result of the ruling of the Court of Final Appeal and former Hong Kong residents now living overseas who according to the Basic Law have the right of abode in Hong Kong, the population might easily shoot beyond the 10 million mark. Our labour force will have bigger and bigger demand for jobs. However, on the contrary, in the future knowledge-based mode of economic growth, the demand for labour in Hong Kong can only become smaller and smaller. This would produce more and more unemployed people, and social welfare spending would keep on swelling, further aggravating the shrinking of internal demand.

Therefore, the SAR Government should accord priority to the creation of jobs, and aim at high employment, in addition to making efforts to boost the economic vitality of Hong Kong. In other words, apart from developing hi-tech and high value-added industries, the Government should at the same time and through positive and reasonable policies of redistribution, give incentive and assistance to the development of labour-intensive industries such as community and personal services businesses, to lend a helping hand to small and medium enterprises (SMEs), to review the provision of services by subsidized organizations, to reform the Civil Service, and to enhance efficiency and conserve resources, so as to create more jobs to achieve total employment.

On the other hand, past experience has told us the importance of SMEs in job creation. Even in the United States, SMEs have provided two thirds of the jobs since 1993. However Hong Kong has seriously hampered the development of SMEs with certain government policies. Recently I again assisted several long-established factories in Chuen Lung and Tsuen Wan and the Tsing Yi Shipyard in their discussion with the Planning, Environment and Lands Bureau over the matter of their relocation. These factories include a winery, an iron foundry and a steel rolling factory. They have to move either because the land disposal programme of the Government has changed or because the circumstances have changed. However, in view of their very clumsy production equipment and machines, or because of government policy constraints, they cannot move to ordinary factory buildings, or even seek alternative accommodation. As a result, they are about to go out of business. In fact, such small factories still have their competitiveness. If the Government can provide them some assistance, such as helping them solve the relocation problem, they can survive, thus their workers will not become unemployed, and will continue to create wealth for society.

According to incomplete figures, among the 474 000-odd registered companies in Hong Kong, 380 000 are SMEs, representing 80% of the total. This vast number of SMEs have often faced various difficulties, some of which are the result of government policies. For example, the most pressing hardship facing SMEs presently is the difficulty in cash flow. But under the Special Finance Scheme for the SMEs launched last year, the Government only paid out a total of $690 million of loans as at 15 March, a mere quarter of the planned amount of the scheme. The slow progress has caused complaints among the SMEs.

Our neighbours, on the contrary, have done much to promote the development of SMEs. Japan for example has laws like the "SMEs Basic Law" and "SMEs Affairs Offices" to push local governments, special agencies and the various business organizations to take measures to help SMEs. Taiwan also has an "SMEs Development Act", and is doing a lot to improve the business environment for SMEs through the "SMEs Development Department" under the Economic Ministry so as to promote co-operation. Further, the healthy development of SMEs is also promoted through the effective use of its SMEs development fund. Thus it can be seen that apart from setting up a convenient and effective finance scheme, the SAR Government has to draw up a long-term and comprehensive development policy to provide adequate assistance to SMEs in areas ranging from business management, technical upgrading, financing and market development, so as to create an environment favourable to SMEs to spur our overall economic growth.

To bring a rebound to the Hong Kong economy, we must attach importance to investment in human resources. Therefore, apart from doing its best to raise the quality of primary and secondary education, the Government should provide more training opportunities to the working people. The development of continuing education is one important way to achieve this objective. I visited the Open University of Hong Kong just this morning. And from my conversation with the senior staff of the university, I deeply felt the urgency of developing continuing education in Hong Kong; I also came to appreciate the vast room for development of continuing education. However, the Open University of Hong Kong faces problems such as the lack of research resources and the difficulty in obtaining grants. I hope that the Government would increase resources for people and institutions interested in seeking academic advancement, just as it has done so strongly in supporting primary and secondary education.

I would like to turn to the issues relating to the civil service reform.

The Hong Kong civil service system has evolved through a long time into its present form. Though it has its merits, its bloated structure, meticulous division of labour and high administrative costs have often been the subject of criticisms. These problems are not made by staff of ordinary ranks; the blame lies with the Government. Therefore the reform now proposed by the SAR Government is in line with the social development and public wish. Nobody would oppose this major principle. However, the ways of implementing the reform attract many views and much worry. I hope that the Civil Service Bureau would in the few months to come conduct extensive consultation to canvass opinions, and to table a practical and acceptable reform programme. Any reform programme must be understood and supported by civil servants, otherwise implementation would be difficult. Besides, this programme should be able to stand the test of time so that there would not be repeated changes owing to incomplete deliberation, making people more confused.

Madam President, the Financial Secretary initiated an unprecedented tax rebate in the present Budget, bringing a happy surprise to 1.5 million taxpayers. However, while these people are expecting their cheques, the amendment proposed by the Honourable LEE Cheuk-yan and some other Members has brought a twist. With the Government holding the cheques for the time being, the effect of the tax rebate in stimulating consumer spending is very much affected, and those people or companies requiring the expected tax rebate to pay other taxes or for cash flow are even more seriously affected.

What I am going to say was meant to be said in the presence of Mr LEE Cheuk-yan, hoping that he would consider my words. It is a pity that a few minutes before I was called upon by the President to speak, Mr LEE left his seat. The amendment of Mr LEE does not seem to be able to get the support of this Council, because in my hand are the signatures of 29 Members who support the payment of the tax rebate as originally scheduled and oppose branching out to side issues. These signatures do not include Members from the Liberal Party and the Democratic Party. As I understand it, the Liberal Party similarly supports the tax rebate as scheduled and opposes any side issue. This in fact represents the absolute majority of this Council. Therefore, I hope that Mr LEE Cheuk-yan would consider withdrawing the amendment under such circumstances, so that the 1.5 million citizens can receive their tax rebate before the long holidays.

Lastly, measures to alleviate public hardships are painkillers that the Government must give the citizens in the painful period of economic adjustment. However, after the surgery, a body-building prescription is needed if Hong Kong is to restore its past vitality. In the days ahead, the local economy would see low growth, low income for a long time. Would this result in any significant effect to public services? Obviously we must look beyond the tax measures in the Budget that aim at financial balance, conduct a comprehensive review of our public policies, and make preparations for any long-term influence that future social changes will have on public finance, so that public financial measures could meet the demand for steady social development. While pursuing economy growth, Hong Kong must in no way overlook the many worries that come along with population growth and serious unemployment.

I so submit.

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

MISS CHRISTINE LOH: Mr Deputy, let me start with those areas of the Budget which I agree with wholeheartedly. I agree that the Government must reduce its present holdings of local equity as soon as possible, because this overhang is a weakness in our economy. I agree that Hong Kong needs to strengthen the supervision of banks. I agree that we need to reform the securities and futures markets, and develop the debt market. I look forward to participating in further discussions on these important matters. I support the efforts being made to enhance public sector efficiency. I support exploring out-sourcing as many public services as possible, and it is about time that the Government considers privatization of government-owned corporations. Like Dr the Honourable David LI, I would like the Government to proceed full steam ahead on privatization in other areas beyond the Mass Transit Railway Corporation.

I would now like to talk about the environment, since it is an issue that I feel strongly about. I am sure the Financial Secretary is more interested to hear, nevertheless, about those areas that we do not disagree with him. The Budget found no room to even mention our natural environment that is so much in need of a higher level of protection. Despite a greater emphasis made in the Chief Executive's policy address last year, at the Finance Committee, the Financial Secretary excused himself for not discussing the environment because he said that he could not cover everything. What this indicates to me is that the officers in charge of money in the Government has a very low awareness in that direction. He did promise me that he would try to do better in his next Budget and I look forward to his efforts.

For the coming year, total spending on the environment is being decreased in real and in percentage terms. The Government will allocate a mere 2% of its spending on the environment. That was the same percentage allocated in the 1993-94 Budget. What real progress have we made?

The Financial Secretary will argue that on recurrent expenditure, there is going to be an increase of 3.5%. I wrote to the Financial Secretary asking for the breakdown. He wrote back and referred me to various areas of the estimates, which, by the way, I have already looked at. For example, under Head 48, Government Laboratory (part of Programme 2), it is impossible to discern what is really under the programme. I am sorry to be so tedious with details, but there is one item, for example, that talks about new posts to the Government Laboratory to implement the Chemical Weapons Convention. Is that part of the 3.5%? There is no way for me to find out just by looking at the Estimates. I have asked the Environmental Protection Department (EPD) for help, but they could not figure it out either.

I would not be surprised if the Financial Secretary is to take five minutes to look at the Estimates and the reply that he has given me to see whether he really does know where the 3.5% is going, and more importantly, how the 3.5% can really improve the environment, and to find that he is not able to answer me. But he can do some homework, since he has a little bit of time.

Another way of assessing the Government's priority is to compare where it is willing to give additional staffing support. Let us compare the EPD with a comparable size department, the Highways Department. There is an increase of 16 EPD non-directorate posts, largely for the implementation of the waste reduction plan. By comparison, the Highways Department has an additional allocation of 72 posts. What are they going to do? So the Government might like to consider how it allocates resources to measure its own commitment to the environment.

The Financial Secretary may well say that Hong Kong cannot afford to do more for the environment and that he has done his very best to find that 3.5%, but we are not quite sure exactly where they are going. Well, but he did find $8.5 billion that he is willing to give back to taxpayers.

I would like to make some suggestions that if we do have this $8.5 billion, what he might be able to do for the environment. Let me just throw out a few things. With that sum of money, we can buy an entirely new fleet of liquefied petroleum gas taxis and public light buses. We would have plenty of money left over for buying say, up to 10 dynamometers for emission testing of diesel vehicles, and we can get more smoke meters to help the police to catch offenders. We can still afford to set up a testing centre to pilot cleaner fuels and technologies. We can do a detailed feasibility study on trolley buses, and to give a matching grant for piloting new bus technologies. We still have money in the kitty.

Thus, we can buy another two or three purpose-built marine skimmers for collecting floating refuse from our harbour. We can also finally turn the North Lantau Country Park Extension from a plan into reality that would mitigate the infrastructure development that has taken place on Lantau. We will still have money in our pocket to extend the Government's own Energy Efficiency Programme to all government departments and subvented organizations, perhaps even including this Council. And, we will still have money left over to commission studies on bio-engineering techniques as alternatives to shotcreting so that our hill slopes do not look so ugly.

Let me move on. I would now like to talk about the Cyberport Development ─ a key measure that the Financial Secretary believes would lift Hong Kong out of recession. A lot has been said about the development since the announcement in his Budget, much of it negative. People in technology see it as a glorified property development. I am afraid I agree with them. It seems that many people have missed the point that if we are talking about floor space, the residential part of the deal far exceeds the Cyberport part although publicly, we are told only one third of the land would go towards residential development.

The Government seems so keen on the deal that it may not have done its homework thoroughly. The partner in the project is the Pacific Century Group. Why does the Government think this company is a worthy partner? Is it really a technology company? Perhaps the Financial Secretary is impressed by the company's contract with Intel. Perhaps he might also like to check out which part of the Intel empire the Pacific Century Group contracted with. I am told that it is the consumer products division. Does that make it a technology company? If my facts are wrong, I would appreciate a clarification. And further, is someone providing a financial guarantee for the Pacific Century Group's performance? From the information available, it would appear that the company is financially not very strong. I ask again ─ on what basis did the Government assess the Pacific Century Group to be a worthy partner in developing the Cyberport?

Furthermore, the Cyberport, as described to us so far, does not have anything that other buildings in Hong Kong cannot install. Building owners and developers can create a whole host of mini-cyberports all over Hong Kong right now. So, why do taxpayers have to spend several million dollars for one in Telegraph Bay several years later?

I think the Government's vision is too limited. If we seriously believe that by constructing a building, that will turn Hong Kong into a hi-tech and information services centre, we are dreaming. The Cyberport is only a piece of hardware. It is only a building. The so-called anchor tenants have merely signed letters of intent to move there. They may never move there.

We should make the whole of Hong Kong into a Cyberport. There are other areas of public policy that we can think about if the Government is really serious to attract business to Hong Kong. I would like to highlight three areas. Firstly, the Government's task force to review Hong Kong's immigration policy to facilitate the flow of talent should enable companies to bring in whomever they want and from wherever they want. In the innovation business, brains can come from anywhere. There is no need to give special favour to mainland scientists as the Financial Secretary suggests. Indeed, hi-tech companies or incubator companies may want to ask for experts to come from anywhere else of the world. What about India? Bangalore has become a great centre for high technology. Are we prepared to give visas to Indians to come here, when basically the Government has little sensitivity to fight racial discrimination?

Secondly, what about the Government and the banking sector doing something to facilitate "e-commerce"? It is very hard today to get the banks to accept electronic payment. This Council can, in fact, help. I suggest that the Honourable Ambrose LAU can, in his capacity as Chairman of the Panel on Financial Affairs, get the banks to come and explain to us what they are doing. The Honourable SIN Chung-kai, who is the representative for the Information Technology Functional Constituency and who works, I believe, for the Hongkong and Shanghai Bank, can do more, too, to push and get things in place as soon as possible. What about Dr the Honourable David LI and all the banking Members here? Why should they not be going to the Association of Banks and get them to kick-start themselves into putting something else in place?

Thirdly, what about implementing a serious competition policy? To make Hong Kong an even more attractive place to do business, the Government must deregulate. One of the areas it should deregulate is the power industry. The electronic industry is going to use a lot of electricity. Right now, electricity prices are being controlled by monopolies. The other area that the Government has already started to do is the broadcasting and telecommunication area. And as we all know, they can do more as well.

The one good thing that has come out of this controversy is that many people are now talking about how Hong Kong can be a leader in information technology, and I truly believe that we can. We simply need to harness the energy and the expertise that is out there. The Cyberport as a building will not do it. But perhaps the Cyberport has already served its purpose by igniting an active debate in the community.

I would now like to move on to tourism. One of the sexier measures in the Budget is the possibility of Disney coming to Hong Kong. I know that many Members here believe that it is a very good thing, however, we know very little about the negotiations. We know that it is going to be in Penny's Bay and that we would need to reclaim that Bay. From the Government's answer to my written question today ─ as Members have not seen it, I recommend that it is in written question No. 7 ─ the Government cannot even tell us at this moment which government department or which body would be the contracting partner with Disney if negotiations came to fruition.

Moreover, the Government told us in its reply that it would consult this Council if terms and conditions can be agreed with Disney. Is that not another way of telling us that they will present us with a fait accompli? It will be on a take it or leave it basis when the Government comes to the Finance Committee.

We also understand that a letter of intent has been signed and that the Government is now entering into detailed negotiations with Disney. Well, has the Government done sufficient homework? In its reply to my question, the Government admits that it has yet to carry out a cost-benefit analysis and alternative use assessment. It simply says that it will do it. Since we are told that the Government wants to wrap the negotiations up by June, is it not leaving very late to do these critical assessments? I remain extremely concerned that our Government has not done enough homework and may not be able to properly assess the value of the deal with Disney.

I am in support of the Government's various revenue measures. I hope that colleagues will not be putting forward measures to reduce those proposals. Like Dr the Honourable LEONG Che-hung, I, too, am disappointed that tobacco duty has not been raised. The argument that higher duty leads to more illegal products is specious.

I am disappointed that the Financial Secretary has not taken the opportunity to ask the community to consider Hong Kong's longer-term fiscal policy. In the Citizens Party's shadow budget, we suggested that land development should be taxed differently, and that developers' profits should be taxed at a higher rate than the current 16% profits tax. I will not go into details, but I hope that the Financial Secretary will give our proposals consideration.

Lastly, I want to talk about the tax rebate to taxpayers. This brought general support for his Budget. If I were him, I would not have done it because Hong Kong is already running a sizeable deficit. However, he tells us that while the rebate will not spur consumption, it does provide a "feel good" factor. It is always nice to know that we can get the money back.

This issue has now been immeasurably complicated by the Honourable LEE Cheuk-yan's resolution next week. I raise a number of questions and hope to hear from him in due course. If there is to be a tax rebate, should we discriminate between those who earned more and those who earned less? On what basis can we justify this discrimination? Anyway, I will not go into the details, but will await next week's debate. I am just concerned that his resolution raises social division between the "haves" and the "have nots". And I am not sure whether that is very good for our community.

MR ALBERT HO (in Cantonese): Mr Deputy, the Democratic Party put forward to the Financial Services Bureau in July 1998 a number of reform proposals for the future development of the Hong Kong Stock Exchange. The Democratic Party is pleased that the Financial Secretary has accepted many of our views in his new Budget.

The Democratic Party supports the demutualization and merger of the two exchanges and the clearing houses, and turning the resultant new corporation into a listed commercial entity. It would be a form of progress for the new exchange, with management and ownership separated, to break away from the existing structure of its present components under which taking care of the interest of members is the primary objective. At the same time, the new exchange should throw open the trading right to allow the participation of more innovative brokers and investors so as to make our market more active.

Through amalgamation, demutualization and public listing, the new holding corporation will operate under commercial principles and will bring in diversified and professional decision-making and management staff to increase efficiency so as to compete directly against overseas exchanges.

The merger of the two exchanges will eliminate any unnecessary contradiction between the two so that the new corporation will focus on developing new products. The merger is also conducive to the building of an inter-market early warning mechanism, and of monitoring market manipulation activities.

After the merger, the new exchange will enjoy the economies of scale, centralize resources for optimum use, and strengthen the co-ordination of system facilities. Other benefits include streamlining the structure to reduce unnecessary administrative cost, and obtaining new capital from the market rather than relying as it does now on investment from members or government funding.

It should be noted that the Government has indicated that the consolidation and demutualization of the exchanges and clearing houses is an urgent matter, scheduled to be completed within one and a half year, including the consultation period. The whole process does give people a feeling of being "rushed". Therefore we hope that the Government would publish a detailed timeframe in respect of computer facilities, monitoring system, staff merger and drafting of enabling legislation, so as to remove any doubt and worry.

Amalgamation, demutualization and listing are steps to remove the conflict of interest under the existing structure, but they alone are not sufficient to ensure fair and efficient operation of the market. The Government must put in place supporting measures, including reviewing the supervisory structure, formulating rules and regulations and improving protection for investors.

Since the new exchange will become the biggest operator in the Hong Kong financial market, and with its role as the front-line supervisor of listed companies, it is inadvisable to let individual major shareholders have control of it. The Democratic Party supports the Government in borrowing the experience from other countries such as Australia in putting a cap on the percentage of stock anybody or any concerted group of persons may hold, so as to protect public interest.

As the new exchange enjoys a monopolistic position and its operation involves public interest, the Government should let representatives of the public play a supervisory role. The Democratic Party proposes that the Government should study the merits of appointing an independent supervisory committee of the board of directors with membership filled by independent people appointed by the Government (such as academics in the finance and economic fields, professionals and representatives of investors) to be responsible for setting the qualifications of board directors, prescribing director's fee and recommending directors. An alternative is to empower the Government to appoint a certain proportion of the membership of the board.

With the new exchange being a commercial entity playing the role of overseer of other commercial organizations, the question of conflict of interest may arise. However there are examples showing that the exchange can retain its supervisory role. The Australian Stock Exchange and the Stockholm Stock Exchange both think that sound supervision helps enhance the commercial value of the exchange. Therefore the two exchanges have retained their supervisory role after listing.

Operating under commercial principles, and to earn a profit, the new exchange must ensure the market is fair and open so as to attract investors, companies seeking listing and the various investment products and make the market both diversified and active. On the other hand, with management and ownership separated, with a board of directors comprising different interest groups and with shareholders monitoring, we hope that the problem of conflict of interest could be avoided. Therefore the exchange should maintain its role as the front-line supervisor. In fact, the powers of the Securities and Futures Commission (SFC) should better not be too big, turning it into some form of super-supervisor. As a listed entity, the new exchange should be monitored by the SFC, and the SFC should concentrate its effort on monitoring misconduct of intermediary bodies and in the market. Its present function of promoting the stock market should be given to the new exchange.

On regulatory legislation, the Democratic Party thinks that three aspects should be followed up. First, the outdated company laws should be reviewed with a view to drafting laws to regulate merchant banks, accountants and auditors in their responsibilities to check and disclose information. Second, a set of regulations, with stress on disclosure of information, should be drawn up. For example, the SFC and the exchange should set up websites and introduce security systems to require listed companies to supply information through their websites. At the same time, in the legislation regarding e-commerce being drafted by the Government, supply of documents through the Internet or other electronic media such as CD ROM or videotape should be recognized. The time lag for the publication of annual auditor's reports and interim financial reports should be shortened, and the contents and requirements of such reports should be strengthened. Third, we should review the existing organizations, including the SFC and the Commercial Crime Bureau, to see if they have sufficient and effective powers to enforce the law and perform their supervisory roles.

Lastly, in the area of investor protection, in the wake of the development of information technology, the traditional unitary financial services will gradually change to comprehensive consolidated services. For example, when e-broker is generally accepted, stock trading will become an inexpensive basic service. To earn a profit, one must provide comprehensive consolidated services. Therefore, in the future, pensions, funds trading as well as investment consultation would also be part of the comprehensive services. If we complain against one company, it may at present involves different complaint channels (such as the SFC, the Office of the Commissioner of Insurance, the Mandatory Provident Fund Authority or the Monetary Authority), therefore the Democratic Party proposes that the Financial Services Bureau should study the merits of setting up under the Bureau a financial services complaints centre, to co-ordinate and help refer complaints against the various financial services within its purview or under the relevant ordinance (such as the Protection of Investors Ordinance).

The existing mechanism for the handling complaints is inadequate. Therefore the Democratic Party welcomes the setting up by the Government of the Market Misconduct Tribunal to handle disputes between brokers and investors so that investors have the option of choosing a simpler and less expensive way of arbitrating their disputes.

Further, as the Democratic Party spokesman on transport matters, I would like to voice the Party's views on the transport part of the Budget.

1. Proposal to increase to $15 the toll for private cars using the Cross Harbour Tunnel

The Democratic Party is against this principle of the Government to raise revenue through sharp increase of the tunnel tolls for private cars, particularly in respect of the Cross Harbour Tunnel in Hung Hom, because tunnel tolls should be fixed from traffic management point of view, while due consideration is given to ensure that the level is not too high or unreasonable. To impose a toll increase simply to raise revenue is unfair to the owners of the 350 000 private cars.

In fact the congestion in the Cross Harbour Tunnel is not due to its lower toll. On the contrary, it is due to the excessively high toll of the Western Harbour Crossing which thus cannot attract drivers, defeating its function to divert traffic from other tunnels. A hefty raise of the Cross Harbour Tunnel toll to suit the Western Harbour Crossing Tunnel is in a way an approval of the high toll policy of the latter. We are also worried at the same time that the increase of the Cross Harbour Tunnel toll to $20 may result in a raise also by the Eastern Harbour Crossing.

To achieve optimum use of the three cross-harbour tunnels, the Democratic Party thinks that the way is to close the gap among the tolls of the different tunnels. Under this principle, the Democratic Party can only agree with an increase to $15 for private cars using the Cross Harbour Tunnel, and not the $20 proposed by the Government, and our proposal is also made on the condition that use of the tunnel by commercial vehicles must not be affected. At the same time when the Cross Harbour Tunnel toll is increased, the Democratic Party hopes that the Government can actively persuade the Western Harbour Crossing to lower its toll to $20 so that with more uniform tolls, the Western Harbour Crossing will be fully utilized to divert traffic from congested tunnels. We believe this would increase revenue for the Western Harbour Crossing.

2. Maximum hourly parking meter charge of $12

At present, the hourly rates charged by private car parks in the urban areas are about $14 to $18. If on-street parking meters charge $16 per hour, it would be inevitable for some car parks to raise their charges. Therefore, the Democratic Party proposes a maximum hourly meter charge of $12. Besides, taxis and vans are at present frequent users of car parks, and if car parks sharply raise their charges, the operating costs of these vehicles will increase, making their business even more difficult in the present hard times.

3. Oppose increases in fixed penalties for traffic-related offences

The Democratic Party opposes the Government's proposal to increase fixed penalties for traffic-related offences by 26.5%. As penalties serve as a deterrent, they should not become a means for the Government to raise revenue. In 1998, parking and speeding tickets decreased respectively by 21.6% and 5.8%, indicating that there has not been any increase in traffic-related offences, and that the current penalties have achieved their desired deterrent effect, so there is no need to have any increase. Further, we hope that the Government would review the speed limits in our highways as well as the design and positioning of road signs which, with their many problems, have ensnared many drivers. The Government should review the speed limits in a reasonable manner and make the required improvements to the road signs before adjusting the level of fixed penalties.

4. Floating the stock of the MTRC

We think that floating the Mass Transit Railway Corporation (MTRC) by the Government opens a new way for the MTRC to raise funds for future extension of its railroad network, reducing the Government's financial commitment at the same time. This we approve. We also hope that through corporate management, the efficiency of the Corporation would be further enhanced, quality of service raised, and pressure to increase fares reduced. The Democratic Party supports this listing plan. However, we must point out that we cannot tolerate the listed MTRC to continue to unilaterally determine the level of fares as well as any increase thereof. We think that the Government must work out a reasonable supervisory framework for scrutinizing and approving fare adjustment proposals by public transport operators so as to safeguard public interest. At the same time, I think that quality of service is very important and this supervisory mechanism should also monitor the services of these companies.

Mr Deputy, I so submit. Thank you.

MR BERNARD CHAN: Mr Deputy, at the turn of the millennium, we are debating not only on a specific Budget, but also on what we consider as a desirable fiscal policy, which will pave the way to success in the next century.

In the past, Hong Kong has experienced an economic miracle. I do not think that another miracle will come forth to tide us over the recession just by sheer luck. Our only way forward is to face the head-on fight for survival on the regional and global front. In the course of becoming competitive, there are things to uphold and things to let go. It is imperative to uphold principles that set our society equitable and free. What we have to let go, however, are our pride and privileges.

People in an equitable society may not be equal in wealth. Individuals and corporations with excellent accomplishments deserve better returns. It is the essence of social equity and the cause of upward mobility. I think the Honourable LEE Cheuk-yan also knows it quite well. The higher-income group has been paying more taxes to subsidize the disadvantaged. Their higher level of tax rebate is enviable, but not forfeitable. Everyone in society who was heartened by Mr TSANG's windfall, has a right to dispose of it at wish. The money should never be used as a tool to achieve equality of wealth.

A free society means that people have a full range of choices to live their lives. People who wish to live in luxury have to bear higher costs. This is the key to a low tax system. Foreign business leaders have long been amazed by our success to keep a low tax and a strong fiscal reserve. This is exactly the message that I received from the recent delegate from the international-based Young Presidents' Organization. In achieving this, I fully support the "user pays" policy which allows more choices.

The policy is manifested in the revenue raising measures in the Budget. The inflated betting duty, stamp duty on luxury flats and traffic-related expenses may increase specific expenses. But people are still free to opt for less betting, less luxury flats and less driving at all. The health care system is another area that suits the "user pays" policy. I also support the land and sea departure taxes for travellers under study. However, exceptions should be given to those who cross the border for schooling.

I understand that the fee rise will upset some sectors in society. But if we wish to maintain low taxes across the board, the most equitable way to do so is to let the user pays. As long as the affluent can afford it, these are the very few income-generating areas we can think of.

In order to provide genuine choices, we have to maintain a balanced market in which the small and medium companies can survive. Their slim size does not prevent them from being prudent, sound, flexible and innovative. In this connection, market regulation should be introduced to remove those unfit and flawed, rather than superseding the small ones.

To relax restrictions on foreign banks as suggested by the Banking Sector Consultancy Report is one measure that will drive many small and medium local banks into difficulty. As Hong Kong's market is in a relatively small size, a complete open door policy will only achieve giant monopoly rather than market equilibrium. In the face of foreign giants whose capital even outstrips Hong Kong's entire stock market, most local banks are doomed to lose out. The result is fewer choices for the customers and an uneven playing field. I strongly urge the Government to rethink about it.

When compared with his last Budget, the Financial Secretary does have a better grasp of reality ─ Hong Kong is lagging behind our counterparts in many ways, including technological and financial developments. It hurts our pride by admitting this. There is no instant formula of easing our economic plight. But the first step is to erase our pride, which has seriously impeded our progress of learning.

I do not expect a single Disneyland or a combination of the Cyberport can save us, nor is the listing of the Mass Transit Railway Corporation. It is the fresh impetus and firm determination behind these ideas that really count. Mr TSANG has successfully heeded public wishes by using entrepreneurial skills to promote business, rather than exhausting public money in a bureaucratic way. He has apparently grasped a sense of direction in the search for a way out of the jungle. This is the best news brought by the Budget.

I envisage that there will be many obstacles against the overhaul of the financial structure. But I believe that these are necessary pains that we have to endure in order to be competitive in the global financial market.

On the insurance front, I am more than happy to find that proposals of the insurance industry have been favourably addressed, in particular, measures on estate duty and double taxation. Alleviating estate duty on insurance beneficiary will give a wider range of choices to policyholders and will help the debt market in the long run.

The proposed qualifying examination for insurance intermediaries will enhance the standard of insurance service, which will in turn boost public confidence in the industry.

The Government's efforts in developing the local debt market should be applauded. It will go a long way to solidify Hong Kong's status as a premier Asian financial centre besides Japan.

The listing of Exchange Fund Notes on the Stock Exchange of Hong Kong will invariably enhance liquidity in the secondary market and contribute to the development of a retail debt market. However, a well-organized "repo market" is a critical component of all advanced debt markets worldwide. Allowing the use of Exchange Fund paper as margin collateral for trading in stock options and futures is only one of the first steps in the development of a mature repo market.

As the Hong Kong Mortgage Corporation has already been in operation, it should be encouraged to play a bigger role in the development of the regional debt markets. Papers with credit enhanced by receivables have a much better appeal to both local and foreign investors.

The Government should stimulate the local fund management by structuring fixed-income investment funds that appeal to both retail and institutional investors. Unless new market participants like pooled funds are attracted into the market place, it will be difficult for the debt market to make any significant headway in development.

I support the drastic reform of demutualizing the exchanges and clearing houses, as well as consolidating them into a listed commercial entity. However, as some local market participants are understandably reluctant to agree with the proposed reform, especially at this economic downturn, the Government has to consult all parties thoroughly, so as to reduce clashes of interests.

Before closing the speech, I would like to express that I am disappointed with the Budget's silence on the deteriorating environment, in particular, the air quality. The Government seems to be the last to realize that the problem has become an adverse factor in business considerations. Apart from the regular environmental expenses, I urge for more drastic measures in saving the dim pearl before it is too late.

Mr Deputy, I support the Bill. Thank you.

MR ERIC LI (in Cantonese): Mr Deputy, the Budget that leads us into the millennium has, in terms of financial management, made a tacit breakthrough from the old thinking in the colonial era. The Financial Secretary has not followed the strait-jacket of the old ways. Rather he places emphasis on the balance between income and expenditure for each year. He has far-sight in setting the economic development of Hong Kong.

This Council should have identified with some of the positive innovations and the determination of the Government to lay down a foundation for the long-term economic benefit for Hong Kong. Amidst all the gloom, hope is given as the Government has a rather optimistic Medium Range Forecast, a decisive proposal to reform the Civil Service and the financial system, plans for a Disney theme park, the Cyberport and the listing of the Mass Transit Railway Corporation (MTRC). These are dynamic plans full of opportunities. The tax rebate of $8.5 billion is a pleasant surprise, giving the people some extra money when they lack cash.

These good ideas are also hot topics for discussion among the people. After all the glamour they get, the proposals are subject to the close scrutiny of practical Hong Kong people who examine on the one hand how the plans will be implemented with the joint efforts of the Government and the people, and begin to think on the other whether it is a good thing to adopt a new approach in the financial management concept revealed by the Budget.

Critics say the Budget follows the shadow of the policy address because the practice of the Government has been: only after careful policy considerations will policies be reflected in the Budget, following announcements by the Chief Executive or the Policy Bureaus. Super projects such as the Disney theme park and the Cyberport are at this stage not directly related to the government account and the forecast for income and expenditure. No wonder, critics are surprised by the high-key manner in which the Financial Secretary dealt with the projects. Is this a hasty manner? Will the implementation of the projects ultimately be a curse or a blessing?

After the Disney theme park project was announced, the public had to shut their mouths up before they had had the chance to have any in-depth discussion. At this stage, Hong Kong people can only wait for the arrival of Mickey Mouse. The Cyberport project is more down-to-earth but details and terms of co-operation with commercial companies have to be withheld for the time being. Apparently, there are many problems in this. The Government must back its decisions up with reason and convince the public before it actually proceeds with any of these projects.

As a major project, the Cyberport project is both attractive and practical. Understandably, the Government would want to push ahead with it as soon as it can. But it must state clearly the actual cost of investment and economic benefits the project can bring. Moreover, on the project, the Government has chosen to invest heavily on a single technology and even to subjectively form a joint venture with a single commercial partner, which is quite different from the past practice of not supporting any individual industry or commercial sector. What fair criteria have been employed in this?

What the public fails to understand is: Other than being a tenant, do the eight technological companies obtain preferential treatment because they have undertaken to invest large sums of money in the long term? How will the terms be enforced? How did the Government arrive at the expected elevation in the level of new technologies in Hong Kong? How will the Government ensure the relevant technological transfer?

How is it possible for the Legislative Council to monitor the costs of investment for the Government and the companies which are a part of the joint venture? Is there an upper limit to the costs? Why does the Government not use the method of fixed investment, rather than a land grant which involves a more unpredictable cost that may be much higher than the present estimate?

It is true there is an urgent need to develop high technologies, but the people do not expect to attract big name companies with promises of gains. More importantly, we need to make it a policy to motivate the entire community to embark on the hi-tech path on all fronts. More certain, open and equitable ways would be: importation of expertise, long-term training programmes, preferential tax treatments or even low-interest loans and suitable injection of funds. Such are the ways that can guarantee return on investment in the long term.

The huge budget deficit is expected. Increases in tax are however unexpectedly mild. Extra expenses, small as they are though, are basically imposed on the high-income group who own cars, look after better housing and bet on horses as their pastime. Frankly speaking, such people are prepared for such increased taxation, although they do not know under which heads the increases will be charged. So, the overall increase in tax is mild, coupled by a tax rebate and a reduction in Rates. When we look at the Budget as a whole, and its effect on the general public rather than at the individual items, I trust only very few people would find a reason to object to the Budget. The various amendments proposed by Honourable colleagues in this Council obviously lack real support from the people. If they pushed ahead, they might be doing more than is necessary for a Budget that has gained acceptance. The reasons are clear enough and so I would not spend too much time on this.

In the Budget last year, the forecast for increase in public expenditure was a drastic drop to 1.2% but now the Financial Secretary follows the public opinion by maintaining a growth of 3.5% in public expenditure. This shows that demands for social services may increase, not decrease, in an economic recession. This also shows that in the coming two years there is pressure to delay a decrease in expenditure to achieve a balance in the Budget. In other words, the Financial Secretary must take the limited opportunity this year to control expenditure in the next two years. If there is the slightest delay in the economic revival forecast by the Government, pressure to control expenditure will mount and the Government must provide further plans for contingency.

Since the beginning of 1998, I saw a strong Hong Kong dollar and the economy began to show signs of a structural downturn. I strongly urged the Government to trim government departments and other trading funds operating on commercial principles and the corporations wholly owned by the Government such as the MTRC should make efforts to save, to control their costs and to maintain or even enhance their competitiveness. One implication of that is: On the one hand, public assets should be preserved or even appreciate, and when the right time comes, privatize them by listing them on the stock market; while on the other hand, the productivity of the parts of the Government, which are increasing in their share of the community resources, should be maintained. From the value-for-money viewpoint, their efficiency should not lag too much behind private enterprises; it should be comparable to them in terms of efficiency. Such concepts and spirit are evident in the Budget. This is the main reason why I give the Budget this year a lot of credit and I fully support it.

I have spoken in detail about drastic reforms in the Civil Service in the motion debate on 10 March and I am not going to repeat my ideas. To preserve the value of public assets, listing and privatizing them can expand the choice of tools for investment in the local financial market, and enhance the Government's ability in raising finance at low costs. This can introduce an element of supervision on public corporations by expert investors in the market. This can ensure a full play of their operation on commercial principles and at high efficiency. I have made known my views repeatedly in this regard in the press. In today's speech, I want to propose to the Government another important concept on the allocation of resources and financial management, using a completely new and comprehensive approach.

In expert financial management, we must have the best political ideas and unique accounting language as its major tools. Many accounting people find government accounts and its fiscal measures difficult to understand, despite their many years of training in financial expertise. Other people find them even more incomprehensible. Indeed, public accounts, though slightly large in scale and complex in nature, rest on accounting principles which are not sophisticated. It uses the oldest way of cash-posting. For middle management, allocation of resources and management concepts are still based on the principle of "cutting your coat according to your cloth" and "spending all you can spend." They still do not think very much in terms of efficiency, thrifty, increases in income and so on, which are concepts habitually employed by enterprises.

Let me quote some simple but important examples:

(1) At present, the pension of civil servants are not posted into any accounts. Controlling departments and the public cannot get a full picture of the real total staff costs;

(2) The Government has no consolidated accounts. With the establishment of trading funds, independent statutory organizations such as the Hospital Authority, the Airport Authority and so on, it is not meaningful to look just at the residual accounts of public corporations. In addition, we have the listing of some assets such as the MTRC coming on stream. Huge sums might transfer between individual and independent organizations. Examples of these sums are subsidies, dividends, taxes and management fees. So, looking at individual accounts separately, people may be easily misled by the transfer of these sums.

(3) In the Cyberport project, the Government injects no cash but land instead. Since there is no statement of balances in the government account, such transactions, in the absence of cash, cannot be fully reflected in the relevant accounts. Hence, the proper channels through which the Legislative Council should be monitoring the Government would be compromised.

(4) Part of this year's income, including the $3.6 billion return on investment, is largely the annual dividend from the Hong Kong Monetary Authority. Paragraph 122 of the Budget clearly states: "This windfall is a by-product of our incursion into the stock market last August and the subsequent rise in the Hang Seng Index." Under the existing posting method employed by the Government, it is technically correct to distribute dividend on appreciation of stocks on account not yet fully paid up. However, is this a prudent and desirable method? This is debatable. Similar dividend distribution is against the company law if done in a private company.

After many years of research, the Association of International Accountants have issued consultative accounting standards to relevant member states to invoke the experience of advanced countries which have been employing resource accounting, with a view to establishing a set of clear and fair modern international standards for accounting tools in public financial management.

I have discussed the issue repeatedly with the Director of Accounting Services and the Director of Audit. I have obtained their support in principle and will be making some preliminary discussion with colleagues in this Council at the Public Accounts Committee.

I also understand it takes time, patience and money to improve the entire concept of public financial management and the modern accounting tools used. It may mean a big reform in terms of the management culture of the Civil Service. It is the right time to put forward such an issue for discussion, in particular, at a time when the reform of the Civil Service is due to take place, a reform that is meant to encourage government departments and private enterprises to mutually exchange expertise, with a view to establishing a set of appropriate and interchangeable management accounting tools. This will help greatly in the exchange of expertise. Not only do we want to enhance the productivity of the two thirds of government expenditure in the form of salary and benefits, we also want to enhance the productivity of the remaining one third of the resources under the management and control of the Civil Service.

The accounting profession has a number of proposals about other matters as well:

1. Tax allowance for charitable donations

The allowance should be increased from 10% to 20% of taxable profit. This should be done particularly when the base of profits for enterprises have plummeted. Charitable organizations such as the Community Chest will have difficulty in obtaining donations. Raising the upper limit of allowances slightly will not affect the revenue to any great extent, but it may encourage private resources to be channelled for public good. In addition, after adopting the proposals from the Public Accounts Committee, the Inland Revenue Department and the Audit Department have stepped up supervision on exempted charitable organizations. So, unlike the case in the past, the Government should have no reason to worry about tax avoidance. I suggest trying to grant allowance for a period of two years first and then review the matter in 2002-03, depending on the actual outcome.

2. Double Taxation Agreement

The accounting profession welcomes the Government's initiative to strive for the conclusion of such agreements with governments of the Nederlands and other countries. I would still want to reiterate the importance of the preservation of secrecy with regard to the information of taxpayers.

3. Preferential tax treatments for boutique fund managers

The accounting profession made the proposal many years ago but unfortunately it was not adopted by the Government. On the other hand the Singaporean Government has made a head-start by providing a five-year tax holiday. I regret the opportunity Hong Kong has lost. I now hope the Government can examine this proposed change in competitiveness to see what effects it has on the outflow of funds.

4. Language Fund

The accounting profession and the business sector fought very hard to set up the Fund to enhance the level of competence in commercial language and hence Hong Kong's competitive edge. But recent developments have shown that the application of the Fund appears to have deviated from the original intention. Applications by the commercial or professional groups to train people on-the-job have been turned away. I suspect the Fund has now been used for subsidizing general teaching. I hope the Administration can look squarely at the problem and make rectifications as soon as possible.

The 21st century is fast approaching. "Borrowed time, borrowed place" is not applicable to the Government of the Special Administrative Region any more. On the contrary, Hong Kong is at the starting point from which it should be striving to make progresses in a brave new world. It is a most courageous and conscientious act of the Financial Secretary in devising a Budget that grasps the opportunity for reform, despite the possible political risks.

Hong Kong is caught in an economic downturn. We must not make light of the risks of prolonged imbalance in our accounts. To get Hong Kong out of lasting reds in the books, we need resilience. In making investments, the Government has boosted confidence in the people. Only with that confidence can Hong Kong avoid tax increase or a drastic cut in expenditure in the next two years. The Budget is more a manifestation of "confidence" than "strengthening of the fundamentals". Next year would be a really trying year for Hong Kong to "face up to uncertainties".

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

MR LEUNG YIU-CHUNG (in Cantonese): Mr Deputy, just now quite a number of colleagues have commented on the tax rebate. Since this Council will discuss the issue next week, I will leave it until then. Today I will mainly express my views on the Budget.

After the publication of this year's Budget, the public response seems to be very favourable. That should be a good thing. But when we look at it closer, we find nothing over which we should rejoice. Why? The Budget has received favourable comments not because it can solve the most critical economic difficulties before us, but simply because the Financial Secretary has racked his brains to give some small favours to the consortia and even the middle class. Having got an interest, they support the Budget.

When we comment on a budget, we should first of all ask a question: What purpose is supposed to be served by a government budget? The answer is indeed very simple: it is to allocate resources for the provision of essential services to the public on the one hand, and stimulate economic development by the implementation of an appropriate fiscal policy on the other. However, the matter should be viewed from a macro perspective. In other words, taxation and the government budget should be conducive to a more reasonable income redistribution social income.

The Financial Secretary, as we found when studying the Budget comprehensively, did not give priority to improving the economy and people's livelihood when he formulated the Budget. Instead, he wanted to produce a Budget which would strike superficial success. And in fact, what is uppermost in his mind is whether the Budget has departed on the surface from the golden rule in the Basic Law on government expenditure, that is, to maintain a "fiscal balance" and "keep the budget commensurate with the growth rate of its gross domestic product". To achieve this target, the Financial Secretary, in his Medium Range Forecast, optimistically forecast that the economic growth rate will reach as high as 3.5% over the next five years from the previous year. Having made a bold forecast, however, he fails to propose any supporting measure to revitalize the economy in the short term. I am afraid it might do no good to Hong Kong's development in the end. In order to generate more revenue for the Government, the Financial Secretary, on the other hand, proposes to sell part of the shares of the Mass Transit Railway Corporation (MTRC), hoping that it can raise $30 billion to balance out the Budget. However, the Government has overlooked that the MTRC's service would be subject to lesser public supervision as a result of such a policy.

The Financial Secretary actually cannot come up with many particularly effective measures to please the public. And in fact, he has admitted in a radio programme that a 10% tax rebate could only give psychological relief to the public rather than any actual effect. Such being the case, why did the Secretary not think of some pragmatic measures which can really bring favours and benefits to the public? In my opinion, the Secretary is like an acrobat in a circus. He is doing rope dancing, trying to keep a balance by tossing a number of balls in his hands. Now, he manages to balance himself and wins a lot of applause. But unfortunately, in my opinion, he is not supposed to be playing such a role. He should be the master of the circus, striving to promote its business and set up a safety net for other acrobats who are performing dangerous acts. In other words, he should try to revive the economy and create job opportunities on the one hand and to strengthen protection for the grassroots who have suffered from unemployment or pay cuts due to economic contraction on the other so that they can ride out the difficulties. I have repeated these two points on many occasions in this Council. I do not mind reiterating them here because they are matters of enormous import and urgency.

On the question of job creation, what the Budget reveals to us is that the Financial Secretary pins his hopes on the Cyberport, a slash on merchant shipping registration fees and a Disney theme park. As we all know, whether the Disney project can be brought to fruition is still unknown. The jobs it will bring to Hong Kong, so to speak, may be just a castle in the air. The Government estimates that the Cyberport and the reduction in merchant shipping registration fees will bring Hong Kong a total of 31 800 new jobs. As many colleagues pointed out in the Panel on Manpower yesterday, this would be an over-optimistic estimation, not to mention that the Government has not yet provided any supporting measures. What worries us is that even if these jobs will be created in the future, those who are unemployed now may not be able to fill up these vacancies. So, I cannot see that these so-called new measures could bring any hope to the jobless. Even though jobs are created, these are but "distant water which will not put out a fire close at hand". I am afraid these measures will be of little help to the army of unemployed people.

Notwithstanding the above, does it mean that the Government can do nothing? Of course not. First of all, the Government can create some posts itself, particularly posts such as school social workers and home helpers, which have long been considered inadequate. To reduce the current unemployment rate, the Government should, as some academics have suggested, consider subsidizing corporations for hiring the chronically unemployed or the second-rate workers.

On welfare spending, in spite of an overall increase of 13.6%, the real-term assistance provided to those who are in genuine need has decreased rather than increased mainly because welfare spending in the Budget is calculated on the basis of the reduced Comprehensive Social Security Assistance (CSSA) payments. I am strongly opposed to that. In fact, protection for the underprivileged offered by the Government at such a time should be increased rather than decreased. In particular, it should provide unemployment assistance to the jobless.

According to the latest figure published by the Government, the number of unemployed is 206 000. Suppose we are going to pay each of them $4,000 a month, the expenditure to be incurred in a year is only $1 billion. When the public purse can only save $700 million annually by reducing the CSSA payments, the cost of the tax rebate to the consortia and the well-off proposed by the Financial Secretary will reach $3.1 billion! Is it really because the Government cannot afford such an amount of welfare spending or because the Government is more concerned about the interests of the consortia and the well-off than the difficulties and hardships suffered by the grassroots and the unemployed?

On government revenue, only one third of Hong Kong's workforce now fall within the tax net of salaries tax and the actual number of taxpayers has been on the decline over the past few years. As a result, the contribution of salaries tax to total government revenue has also been on the decline. This is in fact unhealthy. But what is the crux of the problem? Why so? The problem is not due to excessive or generous tax allowances which have exempted a lot of people from paying tax. Rather, it is because of the widening gulf between the rich and the poor. At present, the 20% of households earning the highest income contribute one half of the total income earned in Hong Kong, while the 20% of families at the lowest end contribute only 4.3%. And the situation is worsening. So, the Government should devise some protective measures to ensure a reasonable income for the grassroots, such as prescribing the minimum wage, so as to give them an equal opportunity of development and to narrow the gap between the rich and the poor. In the long run, these measures will offer stability to government revenue from salaries tax. But what we see is that policies in the Budget over the past years have only led to a situation in which the poor get poorer and the rich richer. A vicious circle is thus formed, resulting in a decline in the contribution by salaries tax to government revenue.

Mr Deputy, when we vote on the Appropriation Bill next week, I will vote against it. In the former Legislative Council, I had voted against it twice. The Financial Secretary may think that I will still vote against whatever Budget he produces. I would like to tell him most earnestly here: that is not the case and I would not necessarily vote against it.

Mr Deputy, I am absolutely not an oppositionist who opposes everything just for the sake of opposition. If the Financial Secretary can formulate a Budget that can really help the grassroots and lead to a more reasonable distribution of social resources, I will certainly support it. But the problem is whether the Financial Secretary can abandon his fiscal philosophy which attaches importance to the rich and ignores the poor, meaning that favours are unceasingly given to the consortia or the rich but the Government is unwilling to see its revenue really spent on the men in the street. As a result, the problem of the poor getting poorer and the rich richer cannot be redressed.

Let me say this to the Financial Secretary again: I am more than willing to vote for the Budget but it really depends on whether the Budget can meet those objectives.

Mr Deputy, I so submit.

THE PRESIDENT resumed the Chair.

MR EDWARD HO (in Cantonese): Madam President, since the economy of Hong Kong has been in its difficult time in this recent two years, the Financial Secretary has to face a tough challenge in publishing this Budget. In view of the positive response from the public, the Secretary has risen to the challenge.

In view of the negative economic growth and the drop in government revenue, the Budget prepared by the Financial Secretary needs to provide in the short run sufficient government services to cater to the expectations and needs of the public, as well as adequate infrastructural investment to cope with future demands; besides, it must also be able to boost economic development. As for the mid-term, the Budget must strive to achieve a fiscal balance as required by the Basic Law.

Bearing in mind the limitations mentioned, I consider this Budget a good one and worthy of our support. On the other hand, we must not forget that although the stormy weather outside has calmed down a little, the days ahead will not necessarily be all plain sailing. We have always considered the external environment a major factor affecting the economy of Hong Kong, yet we must also admit that some long-standing fundamental problems are still disturbing us.

Population Growth

Firstly, and most importantly, the population of Hong Kong has increased sharply. Yet this is not due to a natural rise in the birth rate but the influx of new immigrants. According to the Report on Territorial Development Strategy Review published in 1996, if the population increases at a rate of 100 000 people yearly, by 2011 the total population of Hong Kong will amount to some 8.1 million. However, following the Court of Final Appeal's decision regarding the right of abode issue, the population growth forecast must be adjusted upwards accordingly. Without proper planning, a rapid population increase will serve to create various social and economic problems to our community.

Business Costs

Secondly, as more and more local industries are moving either northward to the Mainland or to other areas where the cost of business is lower, the economy of Hong Kong is dwindling continuously. Although business costs have adjusted substantially in the face of the present economic downturn, the cost of doing business in Hong Kong is still too high; as such, it is very hard for Hong Kong to compete with our neighbouring countries in this respect.

Education

Thirdly, the existing education system is not perfect in nurturing for Hong Kong quality manpower comparable to that of other Asian countries. Should our education system remain unimproved, the service industries, hi-tech industries or high value-added industries we have established will find it hard to develop. If we do not mind lagging behind, others will overtake us very easily. In continuing to invest in such hardware as high technologies and other infrastructural projects, we must also develop our own manpower resources, for they are our software.

A comprehensive review of our existing education system would be indispensable if we are to cope with such fast changing needs of the global commercial world as advanced management, skills, communication techniques and so on. In regard to the issue of education, many Honourable Members are more professional than me and they will certainly express their views on this front. As for myself, I welcome the Government's review of the existing immigration policy, with a view to relaxing the restrictions on the immigration of professionals. That way, quality and senior hi-tech professionals from the Mainland could move to Hong Kong more easily to supplement the local manpower supply on the one hand, while the development of such hi-tech projects of Hong Kong as the Cyberport and so on could be facilitated on the other. Besides, the ability of local professionals to develop mainland markets could also be enhanced, since many of them are already developing their business in the Mainland.

Environment

Fourthly, the environment of Hong Kong has been deteriorating continuously to such an extent that our air has been polluted and impacted on the living environment at large. The public are becoming more and more concerned about such issues lately. Whilst "development" used to be the target of the people of Hong Kong in the past, we have now become strongly aware of the needs to improve and protect the environment, and that we cannot afford to destroy the environment any more. The Government should take a much stronger initiative in this connection; apart from reducing pollution of all kinds, it should also create a better living environment for us as we advance into the next century.

The first and foremost step to improve the environment is town planning. Recently, a number of reclamation projects proposed by the Government have caused considerable controversy. This is attributable to not only the people's passion for Hong Kong's precious natural assets but also to their concern about the creation of a new neighbourhood. Indeed, nothing is more ironical than the Government's attempt to launch in haste several large scale reclamation projects at the Victoria Harbour when the sustainable development study has yet to be completed.

Let me take the proposed Kowloon Bay reclamation as an example. The crux of the problem is not confined to the size of the area to be reclaimed; rather, it lies in whether 0.32 million more people should be squeezed into the over-crowded heart of the city, and whether the natural assets of the harbour should be sacrificed for 30% more land for road construction purposes. In the future, the noise pollution and air pollution problems will also further limit land use in many areas. A number of professional bodies like the associations of architects, surveyors, engineers and so on have taken the initiative and made use of their own resources to jointly draw up another development plan for Southeast Kowloon. I very much appreciate their efforts and hope that the Government would consider their proposal in a prudent and objective manner.

The speech made by Mr Gordon SIU, the Secretary for Planning, Environment and Lands, at the special meeting of the Finance Committee held on 17 March have given me great encouragement. The new Secretary has assured Members that the Government would make use of innovative ideas to formulate plans for a better environment in the future. In this connection, he has referred to the possibility of building underground roads, but then he has also reminded us that this would entail a much higher cost. My personal view is that despite the expensive costs involved, underground roads could enable us to make more effective use of our land resources and to create a living environment of better quality, with a view to benefiting the community by saving it some medical expenses. With such benefits, I dare to say that the public would be happy to pay more to build underground roads.

As I mentioned before, our population growth would certainly exceed the estimate in the Final Report on Territorial Development Strategy Review published in 1998. Although this would imply we must comprehensively review all our plans in the light of the future needs, the aim of review should by no means be confined to resolving the problems expected to arise from the increasing demands. From a positive perspective, this could be a turning point which enables us to make future plans for our city in a brand new way. I hereby urge the Government to consult comprehensively the relevant sectors and collaborate closely with the professional bodies concerned in this connection, for it is only in this way that insights and opinions could be solicited with a view to getting the best ideas.

Madam President, I think what we should bear in mind is "urban renewal", albeit "urban redevelopment" is the term we often use. Certainly there are old areas that need to be renewed very badly or in due course; nevertheless, I do not think urban renewal should necessarily imply the demolition of the old areas. In fact, urban renewal could be achieved through conservation, maintenance and renovation. Conservation activities could help to preserve the original structure of both the community and the urban areas. That way, neither the valuable historical relics nor the irreplaceable features of the territory would be damaged. As regards compensation, by making use of the negotiable plot ratio, the potential development entitlement of the owners of protected architectures could be compensated. Many places in the world, such as our neighbours Macau and Singapore, have adopted this measure to preserve their important historical relics. For instance, the external features of the architecture concerned or part of its original structure would be preserved while the rest of them could be reconstructed or redeveloped for other purposes.

I used to be a member of the Antiquities Advisory Board, and I still am currently a member of the Board of Trustees of the Lord Wilson Heritage Trust. Therefore, I could understand the enthusiasm of the people in conserving the cultural heritage of Hong Kong. Regrettably, however, with the exception of a few front-line officials, the Government has in general ignored the needs for conservation. I hope it does not imply that all our previous Financial Secretaries have considered themselves the people's treasurer and hence been willing to spend money for development purposes but overlooked the loss suffered by the natural environment. It is all the more my hope that the incumbent Financial Secretary will not follow his predecessors' footsteps.

In regard to the problem of air pollution, I moved a motion on "air quality improvement" during the Council meeting held on 25 November 1998 and put forward many new ideas. I am very glad to find that the Director of Environmental Protection has adopted many of my views in his recent talks, among such are the provision of pedestrian precincts, use of electric buses or other environmentally-friendly modes of transport. Nevertheless, in replying my question regarding the provision of pedestrian precincts, the Government pointed out at the special meeting of the Finance Committee that only a few streets and roads (including the Chater Road in Central) would be set aside for the purpose on Sundays. Although pedestrian precincts will be provided at the Time Square in Causeway Bay, the area would still be transport-oriented. Besides, the entire plan would not be completed until 2001. So, we could see from here the attitude adopted by the Government regarding environmental improvement. I consider the Government should adopt an environment-led principle in implementing the relevant proposals.

Although the liquefied petroleum gas (LPG) taxis trial run scheme has completed in success, the Financial Secretary has only decided to exempt auto-LPG from the duty. I must say that I am very much disappointed, since this would by no means constitute an incentive to attract the taxi owners to convert their taxis to LPG-driven ones. Since taxi owners are neither being supported with sufficient financial aids nor joining the scheme voluntarily, it will certainly take a great many years for the LPG taxi scheme be implemented to the full. Before the full implementation of the scheme, the people of Hong Kong would still need to suffer the unbearable pollution problems. It has been estimated that the number of premature-death caused by air pollution problems has amounted to 2 000 a year. I was shocked when I saw in the papers the headline "Clean-up air delayed by Legco). Why could the Director of Environmental Protection not talk to the Financial Secretary regarding this issue? I hereby urge the Financial Secretary to help taxi drivers to convert their taxi to LPG by offering them assistance or low-interest loans.

Instead of sticking to those obsolete methods like imposing heavier fines on vehicles, I urge the Government to implement expeditiously the proposal to convert taxis to LPG as well as other relatively more innovative environmental protection ideas.

Civil Service

In regard to the Government's resolve to enhance its productivity and its courage to reform the civil service structure, I consider this an attempt worthy of our commendation. The civil service systems in many places of the world are largely "iron rice bowls", and I suppose a majority of the civil servants would welcome such a system. Some members of my functional constituency are also working for the Government, and they have expressed to me their concern that the reform would give rise to concerns of instability among civil servants. However, I have told them in response that the Government will certainly be a good employer which strives to make the staff wastage much lower than that of the private sector; besides, a structural reform of the Civil Service would bring along benefits on the management front like greater flexibility in handling recruitment exercises, more flexible dismissal procedures, more effective management and so on.

For these reasons, the Government's attempt to reform the Civil Service and to privatize government departments providing services for the public should be encouraged.

Land Departure Tax

In regard to the land departure tax, I have noticed that my views might not be the same as that of the Liberal Party or members of my functional constituency. I am opposed to the proposal in principle. However, if the tax rate is reasonable or the mechanism is simple, say visitors making multiple departures may use stored value tickets or the tax payments received would be used to improve the cross-boundary facilities, I may well be convinced.

The principle on which I have based my objection is that I believe land boundary-crossing would become a part of the people's daily life; besides, I also believe that this kind of activities would benefit Hong Kong in the long run. The economy of Hong Kong in the 21st century will be closely related to the larger region of the Pearl River Delta, and this reinforced economic region would help to resolve Hong Kong's forthcoming problem of rapid population growth, including the housing, employment and recreational needs.

Finally, Madam President, as I have said last October during the debate on the Chief Executive's policy address, we should not look upon the Government as a "miracle worker"; likewise, although the Budget put forward by the Financial Secretary merits our support, it could never do us any miracle. To the people of Hong Kong, the most important point is that we should not lose our usual spirit of self-reliance. In the face of adversity, we should march forward courageously with self-improvement and self-confidence.

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

DR YEUNG SUM (in Cantonese): Madam President, I will concentrate my discussion on the revenue proposals and the drafting principles of the Budget. The Democratic Party has put forward several major tax proposals, including a 20% tax rebate for income earners as well as small and medium enterprizes, a concession of the Rates payable for one quarter of the year, maintaining the Rates percentage charge at 4.5%, freezing government fees for one financial year and so on. Regrettably, however, the Financial Secretary has only accepted 30% of our proposals. So, we now have a 10% tax rebate, a one-off concession of the Rates payable for half a quarter, an increased percentage charge for the Rates which stands at 5%, as well as a six-month extension of the freeze on government fees. The Democratic Party believes there is still room for the Government to accept our proposals to the full in helping the people ride out the storm. I just hope the Financial Secretary will show some sincerity in responding to my speech.

Madam President, I should like to supplement a point regarding the tax rebate proposal, and that is, the Democratic Party will not lend any support to the amendment proposed by the Honourable LEE Cheuk-yan. This is because Hong Kong is currently facing the worst ever economic recession in which all industries and businesses are having difficulties in operation regardless of their scale and size. Hence, we support the universal tax rebate proposal made by the Government, so as to help enterprises out on the one hand and boost the revival of the economy on the other. In the midst of an economic downturn, the operation of SMEs would certainly experience more difficulties; as such, we urge the Government to formulate measures to help the SMEs to resolve their capital shortage problems. For instance, the Government may improve the Credit Guarantee Scheme for SMEs, or it may also set up a loan fund for new ventures and so on. I hereby should like to urge those capable large enterprises to adopt as far as possible such measures as donation, price reduction, no-more-lay-offs and so on to make the best use of the tax money reimbursed and to help relieve the burden on the people.

Madam President, may I now turn to a technical issue? The Democratic Party is opposed to Mr LEE Cheuk-yan's proposed amendment. Just now some Honourable Members have invited us to sign in support of a request urging the Government to send out the tax refund cheques as scheduled. Nevertheless, since the Honourable Member has proposed an amendment to the Bill, we think we should respect his attempt. As such, we still respect the Member's wish to amend the Bill despite our clear objection to the amendment. In this connection, the Government might need to deal with the issue from a technical angle.

Objection to departure and sales taxes

In the coming meeting government officials may be heard talking on and on about the difficulties in handling the public funds and getting things done without sufficient income. It is true that public expenditure is still on the increase despite revenue from profits tax payments and land sales, which are the major sources of government revenue, has decreased due to the economic recession; however, with the handsome fiscal reserves, the Government should be able to handle the situation with ease. I must stress that at the present stage the Government should never introduce tax increases or new taxes such as departure taxes and sales tax. This is because any imprudent move would cause the many efforts designed and made to boost the economy in vain. We should draw lessons from Japan's experience. In this connection, the Japanese Government has attempted to boost the economy with fiscal policies during 1994 and 1995; however, just when things were starting to get better, the sales tax was introduced and forced the Janpanese economy to its doom. In view of the downturning economy, the Democratic Party holds that no departure taxes should be introduced or the burden on the people will be adversely affected.

After the financial turmoil which has caused the property market bubble to burst, the economy of Hong Kong should indeed develop towards diversification. Besides, the Government should refrain from sticking to its high land price policy to maintain a high level of land sale revenue. In the future, the Government should steadily rely less and less on land sales for revenue. On the other hand, the economy of Hong Kong could no longer restore its high vitality as in the past even if it has been revived. Under the existing salaries tax and profits tax arrangements, the revenue generated from tax payments could hardly increase substantially. As such, the Government should make hay while the sun shines and find new ways out for its source of income. As a first step, the Democratic Party believes the Government should review the existing tax structure, with a view to, for example, abandoning the standard tax rates for salaries tax and implementing a progressive profits tax system. Secondly, the Government should look into the possibility of introducing new tax items. Sales tax is levied generally on daily necessities and services. This is a regressive kind of taxation since the burden on the lower strata of the community would be relatively heavier than that felt by the higher-income groups. This would serve to further aggravate the problem of polarization of the rich and the poor. For this reason, the Democratic Party is opposed to the proposal put forward by the Government to levy sales tax extensively. However, we do believe that the Government could consider introducing sales tax to expensive luxury goods like yachts and so on.

Support for a deficit budget

In the face of a downturning economy, the Financial Secretary has referred to a need to formulate a surplus budget as far as possible. The Democratic Party has all along opposed the formulation of a surplus budget on the grounds that so doing would inevitably give rise to substantial tax increases or public expenditure cut-backs, and eventually cause the economy of Hong Kong to further deteriorate. Fortunately the Financial Secretary has responded to the needs of the community and formulated a deficit budget for the financial years from 1999 to 2001. The budget deficits of these three years will amount to $66.6 billion; and if the privatization of the Mass Transit Railway could not generate successfully an income of $30 billion, the deficits will rise to as high as $96.6 billion. Yet this is acceptable. The Democratic Party holds that the Government should exercise fiscal prudence on the one hand, and draw lessons from countries which have accumulated huge deficits and been living on loans on the other. Nevertheless, fiscal prudence is not a synonym for being stingy; besides, accumulating fiscal reserves endlessly is by no means cost-effective. Therefore, the Government should indeed put the fiscal reserves to proper use via a deficit budget.

As a matter of fact, suppose the deficit for four years would amount to $100 billion, the total amount of our fiscal reserves would stand at some $360 billion. This amount should be enough to cover public expenditure for more than a year and is very close to the bottomline of the fiscal reserve guidelines. On 10 February this year, the Democratic Party has put forward a proposal during a motion debate to consider the principles of the European Monetary Union (EMU). The member countries of the EMU are countries which have adopted the Euro as their currencies. For these countries, their budgets are not allowed to have a deficit exceeding 3% of their respective GDPs. It has been pointed out for the first time in paragraph 131 of the Budget that in 1999-2000, the forecast deficit would represent 2.8% of our GDP. I think there is a need for the Government to clarify whether the percentage would serve as a reference guideline in the future.

Unclear budgetary guidelines

Compared to the budgeting exercise in the past, the Government has adopted a more flexible set of guidelines in formulating this Budget. Besides, it has also revised some of the unwritten rules of the past. In this connection, the time limit for the economic growth to catch up with the growth in government expenditure used to be five years; indeed, the Financial Secretary has also pointed out in the 1997 Budget that: "The rates of growth of the government expenditure and the GDP in real terms over the five financial years starting from 1991 were both 30%." However, the Secretary for the Treasury made the following remarks at a press conference: "I could say that it would stretch over a period of time, not 50 years or 10 years but a period much shorter than that. However, we will not specifically point out to the public the number of years involved." What she has said sounded very complicated, but the underlying meaning is in fact very simple. We all understand what the Government was trying to say. What had been said indirectly was that the Government would not stick to the five-year limit anymore, the new time limit would be not exceeding 10 years. But why could the Government not inform the public of the actual number of years involved?

The annual negative economic growth for the financial year 1998-99 has amounted to 5%, representing the worst economic recession Hong Kong has ever had since the '70s. However, unlike the past exercise, this figure has not been taken into account in the formulation of the growth trend forecast. As for another guideline, the former Secretary for the Treasury, Mr KWONG Ki-chi, made the following remarks in a written reply in 1997: "We have adopted the financial year 1990-91 as a fixed reference date, and from there we will roll forward every year ...... ." However, this year the written reply provided by the Secretary for the Treasury is that: "We do not need to use the financial year 1990-91 as a reference year." So, what actually has the Government based its calculations on and what are its calculation methods? I hope that the Financial Secretary would respond to this question in his reply speech later on.

The Democratic Party has all along been urging the Government to abandon those unnecessary rules so as to avoid the risk of putting itself under excessive restrictions. For instance, the Government should not force itself to formulate a surplus budget every year. However, I must stress one point and that is, breaking the rules or interpreting the rules "flexibly" does not imply acting without any guidelines. What is more worrying is that the Government may perhaps have some secret guidelines. This is a very unhealthy approach, since the Government could follow one set of guidelines and support our proposals today, but then the next day it could use another set of guidelines to negative the same proposal, thereby making it impossible for the people to know what course to take.

I hope that in responding to this Council next week, the Financial Secretary will point out clearly the guidelines according to which the Budget has been formulated and the deficit has been estimated, so as to improve the transparency of the Government's fiscal policies. The Financial Secretary has all along been pointing to the need to build up sufficient fiscal reserves, but since he has never disclosed the guidelines for the accumulation of fiscal reserves, considerable controversy has been aroused. It was until 1998 that the Financial Secretary referred to three guidelines for accumulating fiscal reserves. Although we do not fully agree with the guidelines, they could at least serve as a basis for discussion as well as a reference indicator.

Public expenditure has been maintained at a level not exceeding 20% since 1998. In the financial year 1998-99, the level has exceeded 20% for the first time, and the same is estimated to reach 21% for the financial year 1999-2000. However, according to the Government, the ratio would eventually fall back to the original level, which is 20%. Unless the economy of Hong Kong is reviving more promisingly that the Government has expected, the Democratic Party is afraid that the Government will try every means to cut down on public expenditure so as to achieve the rate of 20%. The Democratic Party is in support of the Government's principle of being small but powerful. However, we do have doubts as to whether the rate of 20% can cater for the growth in population (in particular, the growing number of new immigrants), the various social service needs, the slackening economic growth and so on.

The Democratic Party holds that the Government should give a clear account of the guidelines for formulating the Budget in an open manner to facilitate discussion by the public.

I so submit, Madam President.

MR HUI CHEUNG-CHING (in Cantonese): Madam President, the new annual Budget put forward by the Government has paid particular attention to the credit and debit accounts of the Treasury. In this connection, the Government has strived to keep the deficit under control, reform the civil service system, straighten the financial structure, as well as announce the various proposals for long-term investment to reinforce the confidence both the public and the investors have in Hong Kong. This is very much welcomed. Nevertheless, I cannot help but wonder if the Government has attached the same importance to the goods importing into and exporting from Hong Kong, or the import/export trade which is one vital source of revenue to the Treasury.

The import/export trade has all along been a pillar of the economy of Hong Kong. Last year alone, the sector has generated 18% of Hong Kong's GDP. With such an economic importance, the import/export trade will certainly affect directly the revenue level of the Treasury.

According to government statistics, the total value of export and re-export trades last year have dropped 11% and 6.95% respectively compared to that of 1997. In this connection, the most severe decreases were seen in the value of domestic exports to Japan and Singapore, both of which have dropped by almost 40%. The runner-up is domestic exports to mainland China, a decrease of more than 10% in total value. As regards the import trade, the total value of goods imported have also lowered significantly, representing a 11.5% fall compared to 1997. I have been in the import/export trade for 30 years, and there has never been a fall in the performance of the import/export sector as severe as that of last year. On the other hand, many off-shore trades operated by many local firms have been expanding continuously in recent years, but since they are not reflected in the import/export or re-export declarations, the total value concerned could only be estimated roughly.

I was glad to see in paragraph 151 of the Budget that the Financial Secretary has proposed to halve the charge for re-export declarations from 0.05% of the value of the article declared to 0.025%. This is indeed a very trivial concession, since only $250 could be saved for every $1 million worth of goods. Still, little concession is better than none at all. Moreover, this would serve as an indication of the Government's sincerity in helping the import/export sector on the one hand, and help setting an example for other relevant institutions to review the need to lower their charges on the other. In addition, the Financial Secretary has also proposed in paragraph 150 to reduce merchant shipping registration and related fees. This proposal would certainly help to sharpen the competitive edges of Hong Kong in the shipping industry, thereby helping slightly the import/export industry in an indirect manner. It would be an even more timely act of the Government if more policies could be introduced to help the import/export industry to cut down on operating costs on the one hand and sharpen its competitive edge on the other.

Madam President, I understand that the measures put forward in the Budget to alleviate the hardship of the sector is unable to alter the scene; however, this is not the fault of the Government. The value of domestic imports and exports has dropped significantly over the past year. This has reflected not only the slackening of Hong Kong's domestic demand but also the fact that Hong Kong's major export markets like mainland China and Japan are also experiencing a decrease in demand for goods. After all, external factors are the key to the success or failure of Hong Kong's import export trade. However, there are still issues that the Government of the Special Administrative Region (SAR) could handle, including measures to help the sector to sharpen its competitive edge. The question is: Are those measures enough? With respect to electronic filing of declarations as well as other forms of electronic document, electronic transaction and so on, I suggest the Government should either directly provide training courses in this connection or assist the relevant business associations to offer free training courses with unlimited places for the sector, with a view to encouraging each and every firm to make arrangement for staff members to receive training during working hours. That way, Hong Kong's import/export sector will be able to cope with the global trend towards electronization within a shorter time, and thereby enhance the professional standard of the sector on the one hand, enabling it to make use of the ever-advancing technologies to develop new products and new markets.

According to the statistics released by the Ministry of Foreign Trade and Economic Co-operation in February this year, Hong Kong ranked fourth after Japan, the United States and the European Union in China's top 10 trade partners in 1998, representing a fall of two ranks when compared with the position in 1997. This ranking has reflected not only a fall in the demand for Hong Kong products in the Mainland but also the fact that Hong Kong has been beaten by its competitors in terms of export competitiveness; as such, the SAR Government should face the situation squarely. The SAR Government should come to realize that Hong Kong's import/export trade is now in its difficult time, and that the hardships could never be resolved solely by a single fee concession.

As a matter of fact, while the infrastructural packages for the import and export trade in the Mainland has kept on improving, the operating cost is still comparatively lower. Besides, after the visit of Premier ZHU Rongji to the United States in April, there may be a possibility for China to join the World Trade Organization within this year. The development in this connection bring along an unprecedented challenge to the unique position of Hong Kong as China's most important entrepot. Indeed, the ways to build on Hong Kong's existing strengths, as well as to develop complementary modes of trade with the Mainland have become the main concern of the sector. On the other hand, we have accumulated plenty of experience in fields like shipping and bank financing over the years, our export and import trades are basically free while most of the exports and imports are tax-free; besides, our information is fast and concentrated, and because of some historical reasons, the people of Hong Kong hold an international outlook of a greater magnitude. What is more, Hong Kong has also been named by the Heritage Foundation of the United States as one of the freest economies in the world. In regard to trade and commerce, Hong Kong should still be enjoying some advantages in terms of procurement and sale. As such, there is a need for the SAR Government to keep in close contact with the sector on the one hand, and enhance the collaboration with the Central Authorities as well as mainland cities on the other, with a view to formulating a set of long-term development strategies for the import/export industry of Hong Kong.

As regards short-term measures, I should like to urge the Government to bear in mind the expenditures of the import/export industry and make every effort to encourage the private corporations to freeze or even lower the various service charges. For instance, the terminal handling charge is an unreasonable fee that should be abolished and covered under the freight rate. On the other hand, since our import/export industry could hardly compete with our counterparts in terms of "low price", the Government should help the small and medium enterprizes (SMEs) to apply high value-added technologies in the fields of quality control and packaging, with a view to building up a good image and reputation for the products of Hong Kong. In addition, I also hope that the Government can complete the review of the special loan scheme for SMEs expeditiously and put forward improvement measures in the light of the difficulties confronting the SMEs, with a view to catering for their specific needs. Since the Hong Kong Progressive Alliance and I have already put forward many improvement proposals to the Trade and Industry Bureau before, including increasing the ratio of government investment, increasing the ratio of loan responsibility and so on, I am not going to repeat them here.

It has been referred by the Trade Department in the draft Estimates of expenditure that active participation in the various international trade negotiations should be one of the major concerns in the coming year. The two major fronts of the Department, namely, external trade relations and trade promotion, have respectively received 7.6% and 7.7% more funds compared to that in the previous year. However, why does the Department not have any intention to invest more resources in its trade negotiation work and the related activities? I should like to point out that while it is right for the Government to streamline its manpower, the streamlining exercises should by no means be conducted for the name's sake. The services provided by the Trade Department are not only productive and rewarding, they are also closely related to the import/export industry which is one of the four pillars supporting the economy of Hong Kong. I hope that the Trade Department could attract both local and international talents to work in Hong Kong on the one hand, and fight for Hong Kong the best opportunities to enter the international market as well as the fairest treatment possible on the other.

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

MISS EMILY LAU (in Cantonese): Madam President, this is the first time I speak in a Budget debate after the transfer of sovereignty. To begin with, I should like to point out that we Members from the Frontier are not in support of Article 107 of the Basic Law, the provision of which stipulates that "The Hong Kong Special Administrative Region 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." Madam President, I believe none of us would question the principle of "keeping expenditure within the limits of revenues". We are all in favour of small government; as such, we do not like to spend extravagantly. However, if we put this principle down in our "constitution", the planning and operation of our Government will be subject to considerable restrictions. This is exactly what we, the Frontier, cannot agree. I hope that we can have in the future the chance to convince the powerful and influential people in Hong Kong — I will come back to that later on — because we ordinary people do not really have any say at all. Nevertheless, we would still like to be "speakers speaking to themselves". By that I mean we are talking to ourselves, or perhaps to you as well, Madam President. I wish to make it clear that we are not in support of Article 107. We understand that since there is such an article in the Basic Law, the Financial Secretary is obligated to act accordingly. Nonetheless, we would still like to express our views clearly. We know that this year we are going to have a budget deficit of more than $30 billion, and that the figure will most probably be higher next year; yet we are also aware that we still have handsome fiscal reserves of $400 billion, and that they belong to the people of Hong Kong. For this reason, Madam President, I do not think we should always put ourselves under so many restrictions. The public at large experience a great many hardships in their daily lives under the present economic downturn, but the Government is still unwilling to make good use of our fiscal reserves. Actually, the Frontier has already criticized the Financial Secretary for this before.

As regards the tax rebate, the Honourable LEE Cheuk-yan will speak on that tomorrow. Last night, the executive committee of the Frontier held a meeting to discuss the proposal put forward by the Confederation of Trade Unions, and Mr LEE Cheuk-yan was also there at our meeting where we discussed the proposal over and over again. As a matter of fact, Madam President, I can tell you that many of us from the Frontier are opposed to the proposal made by the Financial Secretary, since we do not see any reason for the tax rebate. The Government has said that the six parties, the Frontier and the breakfast group were in support of a similar proposal last time. But mind you, last time the Government was still enjoying some budget surpluses. Madam President, this time around the Government is having a deficit budget. At present, we have a budget deficit of more than $30 billion, of which as much as $8.5 billion are the tax rebate payments. The Financial Secretary has also told us that since we will spend a little more this year, we will need to spend much less in a few years. That being the case, we consider the Government had better save that $8 billion. Or, if the same amount of money is to be spent on other necessary items, we would be ready to lend our support. Moreover, if that amount of money were saved, the deficit would be smaller and hence our expenditure in the future would not be that tight. I think this idea should be worthy of our consideration. For these reasons, almost all of us from the Frontier are opposed to the tax rebate proposal. Later, as we learned of the wishes of the public, some of us have decided to support the tax rebate proposal instead. In other words, a majority of the Frontier members are in support of Mr LEE Cheuk-yan's proposal.

Madam President, according to the Financial Secretary, the economy of Hong Kong will grow by 0.5% in the coming year. However, he has also mentioned in his speech that the rate of unemployment would still be on the rise, and that he had no idea whether the rate would soar to 10% high (some people are indeed very pessimistic in this regard). Besides, we should expect to see a fall in the value of imports and exports, as well as in the value of investment. But then the Financial Secretary told us the reason why he could stay optimistic. The answer is the development in mainland China. I hope that the Financial Secretary could provide us with more information in his reply, in particular, the details regarding the development he referred to. I should like to know how well the economy of our other trade partners have been doing; I would need some proof to boost my confidence before I could believe that the economy would really have a 0.5% growth. I think we should all keep our eyes wide open in examining the actual situation. Madam President, I am a very practical person, and at the same time I am also a pessimist. I have no idea when our economy would rebound from the present downturn. I have noticed that the government economists had recently said the worst time had passed; however, I have heard them say that for a great many times. Madam President, if they keep on saying that for too many times, other people will just think the Government of Hong Kong is a laughing stock. For this reason, I will not dwell on this issue any more. Nevertheless, Madam President, I think the most important point is not that the Government would refund the people — even though the refund payments would amount to $100,000, $1 million or more than $1 million; it is more important for the Government to tell other people that we have a very good business environment in Hong Kong, doing business and investing money here would generate good profit. Compared to the proposal which makes the people feel good for a very short while, the prospect of making good profits should be the most persuasive attraction. As such, I hope that the Financial Secretary can put forward some measures that can improve our business environment (the Frontier will certainly give full support to such proposed measures of the Financial Secretary), render the environment here more business-friendly, and make other people feel that Hong Kong is a very competitive and attractive place.

As to expenditure, Madam President, although the present situation is so unfavourable, we still hope that the Government can allocate more resources for several purposes. Firstly, education. We can see that the expenditure earmarked for education this year will amount to some 4% of the GDP. This is a rather high percentage and I believe this should be the highest ever. Nevertheless, should the Government want to spend more in this connection, the Frontier will be ready to lend our support. This is because education is a very important investment, provided we spend the money correctly. We should not confine our expenditure to problem-solving purposes. We have now many university graduates who, after spending four to five years in the universities, still do not know how to write an essay. We just cannot imagine what kind of persons we have nurtured, despite the thousands of million dollars we have spent on them. It seems to me that we have nurtured a group of puppets who have neither the ability to think nor to write. The Government has recently referred to the need to review the education objectives. In this connection, we have discussed with the Honourable Antony LEUNG and put forward many proposals, including whole-day schooling for all primary schools, investing more for teaching quality enhancement purposes and so on. Regrettably, Madam President, the cult of money-worship is prevalent among our community. Many of us have cast aside democracy and concerned themselves only with fast money making, thereby giving rise to problems of unfairness on the one hand and distorting the rules of games on the other. How could we educate our next generations if this culture still exist in our community? How could we expect our children to have social morality and to make commitment? I am afraid these are but daydreams. As such, it would not be possible for us to close our eyes to the outside world and comment on the consultation document regarding the review of the education objectives. Who will our young people have contacts with? What will they learn from their teachers, their family members, as well as government officials?

Perhaps we are all surprised by the way how our younger generations behave these days. Hence, it is just impossible for us to reform our education system or enhance the standard of education by merely reading this thick document on education objectives. I hope that the Financial Secretary as well as other bureaux secretaries could understand the expectations of the majority of the public. What we are looking forward to is a good education system, so that we could have a group of people who are willing to commit themselves and who have the ability to think independently and to serve our community after they have received education in Hong Kong.

Apart from that, the social service facilities have also been mentioned by the six parties, the Frontier and the breakfast group last year. At that time, we urged the Government to spend more in this connection because the provision of certain kinds of social services are indeed far from adequate. Besides, there are also other services which the Government has promised to but have yet to be provided; they are mostly facilities needed by the elderly, infants, women and so on. I hope that the Financial Secretary could see for himself which are the most needy aspects. We in the Frontier would like him to allocate more funds to such fronts. On the other hand, I have discussed the loan scheme for small and medium enterprises (SMEs) with the Secretary for Trade and Industry at a Finance Committee meeting. I understand that many SMEs are interested in applying for the loan and I think the amount of loans approved should be growing gradually, perhaps one out of every five applications will be approved. Madam President, as we all know, the SMEs are now in their most difficult times. I just hope the Financial Secretary could cater more for their needs, in particular, their need for capital. Madam President, I believe the existing situation is the most important factor affecting the way we spend our money. Actually, as referred to by many Honourable Members this afternoon, we should all share some responsibilities in this connection. Madam President, when the Financial Secretary consulted Members on the draft Budget, many of us would point to the needs in the fields of housing, transport, medical services, welfare services and so on; since all our views have been reflected in the Budget, I suppose some of us have not made our points strong enough, but I think we could all see that very clearly for ourselves.

The air quality these days is indeed very poor. It has recently been mentioned by some government officials or perhaps other people that in a few years' time the people of Hong Kong will no longer be able to see the sky-blue colour when they look upwards. It is the blue sky that I am referring to, Madam President. I just hope I have heard that wrong, since it would mean our air quality would have deteriorated very badly then. Worse still, not only Hong Kong's air quality is so poor, that of the Mainland is equally bad; what is more, the polluted air will flow from the Mainland to Hong Kong. Nevertheless, we should at least do our part of the job. As such, I am really glad to hear that the Secretary for Planning, Environment and Lands, Mr Gordon SIU, mention that innovative concepts and ideas would be employed to make planning for new towns. Perhaps there will be roads that are designed exclusively for trains, or perhaps the public may need to walk a little more and pay a little more for transportation fares, but in return they could enjoy a better environment. It is my hope that other bureaux secretaries, in particular Secretary NG Wing-fui, would discuss with the Secretary for Housing. This is because they are all dealing with construction projects which may perhaps be running counter to the environmental protection needs. These bureaux secretaries may be planning some new roads with four or even six lanes. Our Honourable Mrs Miriam LAU would of course be ready to endorse such projects. However, it is because the number of vehicles has been on the increase that we need more roads, with more roads there will be even more vehicles running about; hence, the pollution problem will further deteriorate. I do not know how the government officials discuss these issues within the Government; however, it is my hope that Financial Secretary Donald TSANG could make it clear to his colleagues that from next year onwards the draft estimates they prepare should include also a report on the environmental protection-related issues. The Financial Secretary should also require Honourable Members to give more thoughts to the fact that from a policy-making point of view, environmental protection is concerned with not only the enhancement or improvement of the environment but also its sustainable development. The funding earmarked for environmental protection purposes this year has amounted to only 0.4% of the GDP, which is indeed a terribly small amount. I admit that we have not adequately touched upon this aspect over the past years; however, I hope that the Financial Secretary can do something more courageous this time. The issue of LPG taxis has also been mentioned by Honourable Members just now. In this connection, we will start to have LPG taxis towards the end of next year, while the entire conversion process would take five years to complete. Nevertheless, Madam President, I am afraid the polluted air has caused many people to die by then. As mentioned by the Honourable Edward HO just now, every year some 2 000 people will lose their lives due to pollution reasons. I believe we should use our money for environmental protection purposes. This is because it would be very difficult to require the taxi operators to convert their vehicles to LPG fuel — in particular our Mrs Miriam LAU will raise her objection, since this would cost the taxi operators a lot of money. However, the Government could consider using the public funds to convert all the taxis in Hong Kong to LPG fuel. Actually, converting all taxis to LPG fuel is unable to resolve the problem, since the air pollution problem is attributable to also the public light buses, large buses, trucks and so on. Nonetheless, we should at least drum up the courage to do something. We must tackle the problem. Besides, so doing could also arouse the concern of the community. This is a very important point, Madam President. Many members of the community do understand the importance of environmental protection, yet they cannot feel the urge to take actions. As such, if the Government is willing to step up the promotional and educational work in this respect, I am sure the general environmental protection concept of the community as a whole will certainly be transformed. I hope that the reply to be made by Financial Secretary can bolster our confidence in his willingness to take actions. I agree very much to the measures proposed by Secretary Gordon SIU and I just hope that other bureaux secretaries will not pose as hindrance in this connection.

Madam President, I should also like to speak on the Cyberport Development. The Frontier concerns about this project very much. It has been referred to by the Secretary for Economic Services that the Walt Disney Company is having "an affair" with the various consortia, and I believe most bureaux secretaries will not agree with him on this point. However, I do think we can use the same remarks to describe the Cyberport Development project. While it has taken the Government only eight months to approve such a large scale development project, the science park project would take 15 years to complete. So, what kind of standards should we refer to when we assess the performance of the Government? Madam President, there have been remarks that the Financial Secretary or Mr TUNG Chee-hwa is biased towards Mr LI Ka-shing on the grounds that the Government's partner in this Cyberport Development is Pacific Convergence Corporation, the Chairman of which is Mr Richard LI, Mr LI Ka-shing's son. We are very much concerned about this issue, Madam President. I hope that the Financial Secretary can show us proof that the Government has not favoured Mr LI. I notice that the Financial Secretary has mentioned on 13 March that the word "favouritism" could not be found in his dictionary. Nevertheless, I was brought up in Hong Kong and I have all along heard of such thing as "favouritism". Back in the '80s, an appointed Member of the then Legislative Council has already told me that the several million people of Hong Kong were working so hard just to feed the real estate developers. I believe this remark is still true these days. Madam President, I think you could also recall that on 22 December last year Mr LI Ka-shing, Chairman of Cheung Kong (Holdings) Limited, claimed that the existing political environment in Hong Kong has discouraged the corporations under his control from investing too much capital in Hong Kong, since the political environment had deteriorated and lost the harmony it used to have. He also said that he had originally planned to invest $10 billion in a joint venture with an overseas corporation but the plan was eventually cancelled. On hearing his remarks, I could not but have the feeling that he was threatening us. Now, what has the Financial Secretary proposed in his draft Budget? To collaborate with Mr LI in the Cyberport Development project on the one hand, and grant him the approval to develop a cruise terminal at North Point. As a result, other developers have raised their objection. Madam President, eight major developers, namely, the Swire Group, New World Development, Sun Hung Kai Properties, Great Eagle, Hang Lung Development, Hysan Development, Henderson Land and Hong Kong Land, have expressed their concerns. What has the Government done in response then? Two Secretaries have conducted meetings with these developers immediately. I should like to ask everyone of us sitting in this Chamber today, has it not been very difficult for this Council to have meetings with government officials? But then even Mr TUNG Chee-hwa has personally met with the KWOK brothers from Sun Hung Kai Properties. If the reports in this respect are correct, Madam President, what do you think the people of Hong Kong will say about such measures? Recently, some friends of mine — they are all professionals who used to have nil interest in politics — have told me that they are very much shocked, disappointed and agitated. They are afraid that Hong Kong is developing towards the so-called favouritism as referred to by the Financial Secretary. They are afraid that the problem of corruption in our community would become more serious; besides, they also feel that the relatively fair rules of the game that we used to have will vanish very quickly. Madam President, since the value of the Cyberport Development project amounts to only a dozen billion dollars, it may not look like too serious a problem to many people. However, if the wrong decisions made by some persons have caused the reputation of Hong Kong as well as the ways of getting things done that we have established throughout the years to suffer, the people of Hong Kong will lose their confidence in the Government. By then, I am afraid the price would be too high for the Government to pay.

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

MRS MIRIAM LAU (in Cantonese): Madam President, the transportation industry and related trades find the Budget this year full of contradictory policies, and they have received the Budget with mixed feelings, with both approval and grievances. No doubt, the Financial Secretary has not picked on the transportation industry, but he has not let it go so easily either.

Over several successive years in the recent past, the Financial Secretary has insisted on increasing fuel duties. But this year, he proposes to extend the diesel duty relief measure by one more year. Besides, he also refrains from increasing unleaded petrol duty and even excludes the transportation industry from the toll increases of the Cross Harbour Tunnel. The transportation industry is grateful to the Financial Secretary, because he can appreciate its current plight and is willing to offer a helping hand. But the Financial Secretary's help is somewhat offset when he proposes some revenue measures directed at motorists such as increases in the fixed penalties for traffic-related offences. Actually, the transportation industry will be worst hit by these proposals.

While I welcome the action of the Government to extend the diesel duty relief measure by one more year, I must add that this alone is not adequate. The Government should reduce fuel duties drastically and across the board. If the Government can do this, it will not only increase its revenue, but will also improve the quality of our air. According to the Government, the one-year extension will cost it as much as $590 million. But if the Government refuses to lower diesel duties, its losses may well be far larger than this very amount. For the five financial years between 1993 and 1998, for example, the cumulative rate of increase for diesel duty was 40%, and the cumulative increase in the number of diesel vehicles was about 4%. But the revenue from diesel duty saw a mere increase of 24% only. So, very obviously, even with more diesel vehicles and higher diesel prices, the revenue from diesel duty has simply failed to increase proportionately. The reason for this is very simple ─ more people are using contraband fuel.

The Government should be well aware of the fact that the quality of contraband fuel is far worse than that of duty-paid fuel. Contraband fuel will produce more pollutants, thus leading to serious air pollution. To deal with the illegal sale of fuel, nothing will be better than reducing the price differences between contraband fuel and duty-paid fuel, because this will deprive the former of its attractiveness. The reasons advanced by the Financial Secretary to justify the freeze on tobacco duty can show precisely that he is well aware of the rationale involved. Unfortunately, the Financial Secretary still refuses to reduce fuel duty any further. A certain survey shows that fuel prices in Hong Kong are the highest among the 85 selected places all over the world. As I pointed out during an earlier motion debate on fuel prices, fuel duties and premiums are one of the main reasons for our high fuel prices over the years. It is the Government which is guilty of "profiteering". The fact is that the high prices of diesel and unleaded petrol have created a huge market for contraband fuel. The illegal sale of fuel has become increasingly rampant recently; some illegal gas filling stations have even started to "compete" with their legal counterparts, also offering tissue papers as gifts. This is a situation which must not be ignored any longer, and the Government must work out some effective measures to combat the illegal sale of fuel.

The transportation industry welcomes the decision of the Government to waive LPG duty but regrets the fact that the Government has stopped short of saying how much more resources it would inject for the purpose of implementing the LPG taxi scheme. The success of the scheme will require back-up facilities of various kinds such as repair and maintenance, LPG filling stations and subsidies for vehicle replacements. According to the figures supplied by the Government itself on the implementation of the LPG taxi scheme, the Government will only allocate a mere $2.2 million to the Electrical and Mechanical Services Department (EMSD) for gas safety work and another $4.1 million to the Vocational Training Council for the organization of training courses on maintaining LPG taxis. This shows that the resources provided by the Government are extremely limited. How is the Government going to assist the taxi trade in switching to LPG taxis? How many repair workshops will there be? And, how many LPG filling stations are there? All these questions have yet been answered. The only thing I know is that as many as 50 garages have applied for permission to provide LPG taxi repairs and maintenance, but only one of them has been approved by the EMSD as being able to meet the requirements. This makes us worry that only a very small number of garages will be permitted to provide the required services in the end. I hope that the Government can answer all these questions clearly, and as soon as possible, or else it will be difficult for the LPG taxi scheme to commence operation smoothly at the end of next year or before.

Another point I wish to raise is that the funding allocated by the Government to improve air quality is just $216 million, which is far smaller than the $1.53 billion to be spent on wastes treatment facilities. Since air pollution in Hong Kong is worsening, we really find it hard to understand why the Government has still decided to spent such a meagre sum of money on tackling the problem. Worse still, these very limited resources will all be spent on research, monitoring and enforcement only, and not a single cent will be spent on actually assisting the transportation industry in dealing with vehicle emissions. The Government plans to encourage the installation of catalytic converters and diesel particulate filters in diesel vehicles. Well, as we know, in the market, there are all types of catalytic converters, diesel particulate filters and additives which all claim that they can effectively reduce vehicle emissions. Very often, however, these products are not really that effective despite their attractive packaging. That is why it is often difficult for those in the transportation industry to ascertain their effectiveness without any outside help. If the Government itself does not conduct any research on these products, how can the industry choose the right products? Environmental protection should be a common concern of the whole community. It should be tackled by the joint efforts of the whole community, the Government and the transportation industry. The industry simply should not be held solely responsible.

Regarding the increases in Cross Harbour Tunnel tolls, the specific enforcement on private cars and motorcycles is obviously an attempt made by the Financial Secretary to avoid producing any impact on the transportation industry. The proposed toll increases may induce more people to travel on the public transportation system and make less use of private cars; motorists may also be encouraged to use other tunnels, thus improving road traffic and reducing congestion. But I must point out that the Cross Harbour Tunnel was constructed at much lower costs years ago, and, for this reason, it is capable of charging lower tolls. What is more, the Cross Harbour Tunnel also enjoys all kinds of geographical advantages and is served by better feeder road networks. Then, there is also the inertia of motorists. So, even though the Government increases the tolls of the Cross Harbour Tunnel, it may still fail to induce motorists to use other tunnels, because differences in toll levels are still found among the three harbour crossings. It must also be noted that the construction costs of the Western Harbour Crossing are much higher than those of the Cross Harbour Tunnel, and it is also difficult for it to lower its tolls due to bank loan commitments. So, if revenue is really not the only concern of the Government, and if it also wants to improve traffic management, it should in the long run find out how the tolls of the three cross harbour tunnels should be standardized, so as to achieve the desired goal of traffic diversion.

Madam President, the Financial Secretary has proposed to increase the fixed penalties for traffic-related offences under the beautiful excuse of deterring this type of offences. But at the same time, he also expects the fixed penalties for this type of offences to provide an additional revenue of $140 million. I do not think that this proposal is at all sensible, and I must add that it actually stands against any sound logic. Over the past few years, there has been a steady decline in the number of fixed penalty tickets issued. The number dropped from 2.37 million in 1996 to 2.16 million in 1997, and last year, only 1.74 million fixed penalty tickets were issued. Such a steady decline shows that the existing levels of fixed penalties can already deter traffic-related offences. The Financial Secretary has proposed to treat fixed penalties as a source of revenue, but in doing so, he actually fails to see that fixed penalties and revenue are two entirely different matters which should not be related in the way he has proposed. The point is that if increased fixed penalties can really achieve a greater deterrent effect and reduce the number of traffic-related offences, the revenue from them may well go down instead of going up as desired. If what the Financial Secretary think is really correct ─ that is, if increased fixed penalties can really lead to more revenue, the only explanation we can think of will be this: front-line police officers have issued more fixed penalty tickets as a means of proving their good performance. When front-line police officers do so, treasury revenue will of course increase. Honestly speaking, it will not be difficult at all for police officers to issue more fixed penalty tickets. This is not so much because motorists have no respect for the law, but rather because police officers can always issue fixed penalty tickets indiscriminately.

Let us look at the case of taxis. Taxi stands are now always jammed with waiting taxis. So, if a taxi driver wants to enter a taxi stand, he may have to circle around, waiting for an opportunity to do so. But in that case, he may be charged for loitering; if he stops his taxi outside the taxi stand, waiting for his turn to enter, he may still be charged for stopping inside a prohibited zone. Let us also look at the case of public light buses. According to the law, the drivers of the first and second public light buses parking at a public light bus stand are not allowed to leave the driver's seats. Well, if a law enforcement officer abuses his powers and orders the first and second public light buses to leave, while the drivers of the third and fourth public light buses are still away and cannot come back in time, he may well have "good reasons" to issue fixed penalty tickets to the third and fourth public light buses, which have now become the first and second on the waiting line. These are just two examples among many others, illustrating my point on the unreasonable issuance of fixed penalty tickets. I can give more examples at a later time if necessary. Now that the Financial Secretary has proposed to treat fixed penalties for traffic-related offences as a regular source of revenue, the transportation industry is extremely worried that the police may thus step up the work of enforcement still further. Can the Financial Secretary therefore assure us that there will be no indiscriminate issuance of fixed penalty tickets?

Of the 1.74 million fixed penalty tickets issued in 1998, 1.2 million were for illegal parking. The Study on Parking Demands, which looks into the latest situation of parking demands, forecasts that by 2001, there will be a shortage of 49 600 lorry parking spaces; and, for public and private light buses, there will be a shortage of 5 200 packing spaces. These figures show that professional drivers are in fact facing an acute shortage of parking spaces. After work, they are often forced to park their vehicles on roadsides at the risk of being prosecuted, and they do frequently receive fixed penalty tickets as a result. Government officials often say that the police would try to be flexible as much as possible, and that they would not issue any fixed penalty tickets after midnight, during the small hours, as long as no traffic obstruction is caused. But I often receive complaints from the transportation industry that the police would still issue fixed penalty tickets as late as one o'clock, two o'clock or even three o'clock and four o'clock in the morning, and even vehicles parked in the remote countryside are not spared. The situation as such, it does seem a bit too harsh to further increase these fixed penalties.

Besides, an average of 200 000 fixed penalty tickets are issued every year against speeding. At an earlier meeting of the Transport Panel of the Legislative Council, during which possible measures to deal with speeding were discussed, the Government admitted that the speed limits prescribed for some particular road sections were in fact impractical, and agreed to conduct a review. According to statistics, of these 200 000 fixed penalty tickets, 23% were issued against motorists driving in excess of the prescribed speed limits by lower than 15 kph; and 67% were issued against those driving in excess of the prescribed speed limits by 15 kph to 30 kph. If speed limits are raised, I am sure that many cases similar to some of the aforesaid 200 000 fixed penalty offences will no longer be treated as such. So, it is very unfair to prosecute drivers for speeding on these road sections before the speed limits are raised, and it is even more unfair to increase the fixed penalties.

Since on-street meter parking is quite economical, many metered parking spaces are occupied for individual uses on a long-term basis, and this has defeated the original purpose of metered parking spaces. The transportation industry is worried that when metered parking charges are doubled, private car parks may increase their charges in response. In that case, metered parking spaces may still remain relatively economical; long-term occupation of metered parking spaces will probably continue, especially when the Government still fails to work out any measures to tackle the problem. I hope that the Government can work out some measures to eliminate the problem of long-term occupation of metered parking spaces.

Madam President, let me now turn to the shipping industry. In this regard, the Financial Secretary has proposed some drastic reductions for shipping registration fees and annual tonnage charges, and he has also proposed to abolish other related fees. It is hoped that this can induce more overseas and mainland shipping companies to register their ships in Hong Kong or at least establish fleet management offices here. By doing so, the Financial Secretary also hopes to create 158 000 additional jobs. But are there enough shipping personnel in Hong Kong? And, when it comes to the availability of shipping personnel, it must be pointed out that the most acute shortage is actually found at the management level. The Hong Kong Polytechnic University is the only academic institution in Hong Kong which offers training courses on shipping management, at both higher diploma and degree levels. In the admission exercise for 1998-99, 6 688 students applied for admission to the higher diploma programme and 1 638 students applied for enrolment in the bachelor's degree programme. In the admission exercise for 1999-2000, the number of admission applications for the higher diploma programme was 5 985 and that for the first degree programme was 2 512. Unfortunately, the University can at most offer 98 higher diploma places and 27 degree places. There is thus a huge excessive demand for such courses. Many young people want to join the shipping industry because they notice that given the determination of Hong Kong to turn itself into an international shipping centre, the industry actually offers very bright prospects. And, the huge demand for the relevant courses is very much attributable to the fact that the industry is now demanding increasingly high entry qualifications. For this reason, the Government should allocate more resources for the purpose of offering more training places, so as to cater for the development needs of Hong Kong as a shipping centre.

Besides, I must point out that the Government has spent only $3.6 million on promoting Hong Kong as a shipping centre; in contrast, it has spent $170 million on promoting the tourism industry. For the promotion of trade, there is the Trade Development Council; and for the promotion of tourism, there is the Tourist Association. So, the promotion of the shipping industry should naturally be the responsibility of the Port and Maritime Board. But as it is, the Board is nothing but a consultative body under the Economic Services Bureau. The Government should consider the possibility of enhancing the functions of the Board, and it should also give the Board more resources, so as to enable it to promote the shipping industry.

In addition to inducing more ships to register in Hong Kong, the Government should also promote the development of shipping-related industries. Actually, some of these industries are already found in Hong Kong, one example being the ship repairs industry. But because of the lack of government support, these industries are now facing a grim struggle for survival, despite their long history and significant contributions to Hong Kong in the past. I am referring to the eviction of the shipyards in Tsing Yi, which has dragged on for many years. In the end, I am afraid that these shipyards may have to close down. It is indeed very ironic that at a time when we are actively developing shipping-related industries, we are also giving up some existing industries so very easily. The Government should really do all it can to assist these shipyards, to enable them to survive.

The shipping industry and the freight forwarding industry are closely related and inter-dependent. But at a time when the shipping industry of Hong Kong is beginning to regain its past glamour, the alarm has been sounded for the freight forwarding industry. In 1998, the volume of cargoes handled by our port was just 14.65 million tons, which was roughly the same as that handled in 1997. And, for the air cargo service, the situation was even worse, as the volume dropped by as much as 6%. The Government must do something to assist the freight forwarding industry; in addition to helping the industry to reduce costs and increase its competitiveness, the Government must also take note of international trends and foster the modernization of the industry. At present, many countries are attaching very great importance to logistics management. These countries are now actively developing high value-added logistics management services by setting up cargo distribution centres in different places. Singapore, for example, has set up two such logistics management centres, and many foreign countries are already using their services. The Mainland is also beginning its development in this respect. So, Hong Kong must make earnest efforts to catch up with them.

In order to develop hi-tech industries in Hong Kong, the Government has decided to develop the Cyberport in co-operation with a consortium. This is indeed very much desirable, but if the Government can also make use of our existing strengths and hi-tech knowledge to further develop our shipping and freight forwarding industries, the structure of our economy will become more balanced, and our employment situation will also become much better. The development of logistics management centres in Hong Kong will not only be an innovation for us, but will also be one of the vital measures to consolidate our existing strengths.

Finally, I wish to talk about departure taxes. I have been urging the Government to reduce or even abolish the passenger embarkation fee. My request is based on the principle of equity, because people departing from the land crossings are not required to pay any form of departure charge. Now even the Government has admitted that the existing arrangements are inequitable. In order to eliminate this inequitable phenomenon, I urge the Government to abolish the passenger embarkation fee for people leaving Hong Kong by sea. Or, at least, the Government should further reduce the passenger embarkation fee. I hope that the Government can accord uniform and equitable treatment to all passengers, whether they leave for the Mainland by sea or by land.

Madam President, I so submit.

MR ANDREW CHENG (in Cantonese): Madam President, today, I am going to speak for the Democratic Party on three of the topics covered by the Budget: labour, transport and culture and recreation.

First, let me talk about manpower and labour. The theme of the Budget this year is "Onward with New Strengths", and the Budget does indeed contain many innovations: the Cyberport, a Disney theme park, tax rebate and so on. All this seems to give people at least some rays of hope amidst the cloudy stormy sky. But when people's initial rejoicing is over, and when they look again at their own situation, they will see that none of their pressing problems has in fact be solved. The unemployed still remain jobless; those whose salaries have been cut or whose double pay has been axed by their employers are still unable to see any promising prospects for themselves. They will realize that most of the so-called "new strengths" are simply too remote to be of any immediate help to them.

Madam President, the Financial Secretary stresses that the various proposals in the Budget this year will create 32 000 jobs. But most of these jobs, such as the 12 000 jobs associated with the Cyberport and those which are expected to come with the reduction of ship registration fees, will only become available in stages at least three years later, in 2001. If we bother to look more closely, we will notice that these 32 000 jobs are only the projection of the Government. If we bother to ask any further, we will find to our amazement that all the Bureau can project now is that the companies stationed in the Cyberport may establish 12 000 posts. When we questioned the Bureau at the meeting of the Manpower Panel yesterday, the Bureau simply could not tell us how many of these posts would be filled by people brought along by individual companies from overseas. So, we simply do not know how many jobs will actually be filled by the people of Hong Kong in the end. Madam President, the Cyberport project can well be described as a project lacking in transparency, though it does involve a field of development which is of indisputable significance. But the indisputable significance of the development should be no excuse for working behind closed doors. Such a lack of transparency is evidenced not only by the favouritism accorded by the Government to the Pacific Century Group, but also by the failure of the Government in giving any definite statistics on the number of jobs to be created.

Madam President, the 15 800 posts associated with the reduction of ship registration fees are once again nothing but the projection of the Government. But many people in the shipping industry think that such a projection may be too optimistic. This reminds me of a claim frequently made by the Government. The Government often says that its major policies and large scale infrastructure projects will create as many as 122 000 jobs in the years to come. But, as far as I know, only 20 000 to 30 000 jobs have been created. And, when asked to give a formal assessment of the manpower needs relating to these infrastructure projects, the Government simply employs a delaying tactic. So, one simply wonders whether the number of jobs to be created is really as large as what the Government has said. One cannot help wondering whether the Government has in fact tried to comfort the unemployed by "inflating" the number of jobs to be brought about by the Cyberport and other infrastructure projects.

Madam President, even if the number of jobs to be created is really as big as what the Government has said, these jobs will only become available in stages at least three years later. So, we cannot rely on these jobs to provide any immediate relief to the unemployment problem. The Democratic Party maintains that the Government should create at least 9 000 additional jobs in 1999-2000; we are not urging the Government to establishing these posts simply for the sake of establishing them; rather, our demand is based on actual needs ─ the needs to improve our various social services.

Madam President, although education is already the biggest public expenditure item in the Budget this year, the Democratic Party still thinks that the Government should allocate more resources for the purpose of improving the quality of our education. The Government attaches great importance to target oriented curriculum and the activity approach, but local teachers are very much overloaded; apart from routine teaching work, they still have to cope with numerous administrative duties. We also know that this year, as many as 3 600 degree holders from the Chinese University and the University of Hong Kong have applied for admission to the teachers' training courses offered by the two universities. This shows that more and more local university graduates are willing to choose education as their career. So, the Democratic Party proposes that the Government should consider the possibility of employing teaching assistants for all the secondary and primary schools in Hong Kong. These teaching assistants can help implement the activity approach and tailor curriculums, and they can also assist teachers in their administrative duties.

Initially, the Government may employ one teaching assistant for each level in each primary school and secondary school, and for the purpose of employing teaching assistants, Secondary VI and Secondary VII can be considered as one level. At present, there are roughly 725 primary schools and 450 secondary schools in Hong Kong. If one teaching assistant is employed for each level, each primary/secondary school will have to employ a total of six teaching assistants. It is expected that 7 000 posts will thus be created.

Besides, the Government has announced that the Education Department would grant a special allowance to all schools in Hong Kong to enable each primary school and each secondary school to own respectively 40 computers and 82 computers on average. But when it comes to assisting local schools in formulating their IT application measures, the only thing which the Government will do over the next two years is to supply IT co-ordinators to 250 selected schools which are more active in and better-prepared for IT application. This is far from being adequate. The Democratic Party thinks that each school should be given the resources to employ one computer technician to assist in managing its newly acquired computer equipment. It is expected that this proposal will create 1 175 computer technician posts at a cost of $200 million.

The Democratic Party has also requested the Government to withdraw its plan on increasing the average class size in primary schools by two students. This proposal will necessitate the employment of 182 additional teachers, involving a cost of about $39.31 million.

Madam President, in terms of the social service objectives laid down by the Government itself, the existing number of social workers is actually not enough to cope with the demands. One example is the demand for one social worker per school. If this demand is entertained, we will need to employ 31 more social work assistants and 668 more social work officers. Madam President, taken altogether, the proposals I have put forward will create as many as 9 055 immediate vacancies, and the recurrent expenditure involved will be about $1.55 billion.

Madam President, we are not asking the Government to squander its money; rather, we are just asking it to adopt extraordinary measures to cope with the extraordinary circumstances now. The Government should really pluck up more courage, make more commitments and deal decisively with the very acute problem of unemployment.

Madam President, the Democratic Party has long since been asking the Government to study the possibility of setting up an unemployment security fund. The statistics of a certain economic co-operation organization reveal that unemployment security is indeed very common, with 26 out its 28 member states practising a central unemployment security system of some kind. At present, about 200 000 people in Hong Kong are unemployed. Suppose each of these unemployed persons claims a monthly security payment of $5,000 on average (which is half of the median wage), a total of $1 billion will have to be paid out every month from the unemployment security fund to be established. According to the latest quarterly report of the General Household Survey, the size of the active working population is about 3.18 million people. This means that on average, each working person will have to contribute $314 a month to the fund. And, suppose employees and employers are to share the contributions, each employee will only have to contribute 1.6% of his or her monthly wages, and the security fund will have enough money to meet its payments. Besides, during the period immediately following the inception of the fund, we can also ask the Government to inject a sum of money into the fund as reserves. That way, employers and employees may be able to contribute even less.

The rationale behind an unemployment security fund is that people should be required to make contributions before they can receive any security assistance. However, since there are already 200 000 unemployed people, the Democratic Party thinks that the Government should first inject a sum of money for the purpose of establishing an unemployment security fund. And, during the initial operation of the fund, payments should first be made to the unemployed to help them deal with their immediate financial difficulties. As for eligibility, we can lay down the condition that before a person can become eligible, he or she must have paid salaries taxes one or two years before the commencement of the fund, or that he or she must have worked for a specified period of time. It is expected that the Government will have to inject $20 billion.

Madam President, let me now turn to local manpower training, because besides creating jobs, the Government should also take active steps to draw up plans on training our people, so as to cope with the needs of our future development. The Cyberport project announced by the Financial Secretary in the Budget is expected to create 120 000 jobs. But at the same time, the Government has also announced that a special working group will be set up to explore the possibility of relaxing our immigration policies to bring in more technological research experts or even senior technicians from the Mainland. This is very disappointing. According to government statistics, in the 1997-98 academic year, the eight tertiary institutions in Hong Kong spent a total of $2.777 billion on technology-related research activities. Besides, the Government has also spent $250 million on setting up the Hong Kong Industrial Technology Centre; it also makes an annual grant of $180 million to the Hong Kong Productivity Council. And, the construction of the science park is already in full swing, with most of its hardware facilities near completion. Every year, the University Grants Committee will make grants to local universities for the training of hundreds and thousands of undergraduates. According to government statistics, for the 1999-2000 academic year alone, our tertiary academic institutions have spent $4.2 billion on offering 18 300 places relating to computer technology, science and engineering. Unfortunately, of all the science graduates in 1997, only 35% of them took up jobs related to their field of studies. And, for engineering and technology graduates, the rate was about 74% only. These figures suggest that local university graduates are still very capable of offering more manpower for the development of hi-tech and high value-added industries. The Government should then make good use of their help, so as not to waste the public money spent on training them.

Madam President, I now wish to talk about the problems relating to public transport.

Public transport services in Hong Kong are in the main provided by private and public corporations on a commercial basis. The role of the Government is to monitor the performance of the service providers, so as to ensure that the bus, ferry and railway operators will always provide adequate, efficient, reliable, safe and reasonably priced services. And, for the protection of public interests, there is a real need for the Government to closely monitor many aspects of these services. But the Government has spent indeed very limited manpower and resources on the monitoring of public transport services, with the result that it frequently has to count on the self-discipline and sense of responsibility of the service providers. So, we notice that due to the lack of adequate monitoring, some public transport operators have simply failed to meet people's demand and expectations.

One example is the black smoke emitted by franchised buses, a problem which has led to serious environmental pollution. Though the problem is very serious, the Transport Department has deployed only two to three Motor Vehicle Examiners for the random inspection of franchised buses. This simply cannot achieve any deterrent effect. According to the statistics of the Environment Protection Department, of all the cases of black smoke emissions reported by its authorized spotters in 1998, as many as 1 396 cases involved franchised buses. Worse still, no prosecution was ever initiated against the bus companies concerned. Is this because of lax enforcement? Or, is this because of the privileged position enjoyed by franchised buses? Since buses are required to make long journeys, and since they frequently operate in the urban areas, the Democratic Party maintains that the Transport Department should impose more stringent vehicle emissions standards on them. The Democratic Party also maintains that more manpower should be deployed to conduct random inspections on a more frequent and demanding basis.

Madam President, let me now say a few words for the Democratic Party on culture and recreation. According to the Home Affairs Bureau, one of its responsibilities is to handle the licensing matters relating to recreation, sports and entertainment. As far as I am aware, its licensing work actually covers games centres, dancing schools, lottery events and so on. The Budget states that the Government will streamline the licensing procedures applicable to different kinds of places of entertainment. The Democratic Party really looks forward to the proposals of the Government in this respect; we very much want to see what wonderful proposals it will eventually work out. The Democratic Party has always maintained that there should be a central body to handle all licensing matters, so that an operator's application for one single licence does not have to be vetted by many different government departments. The Democratic Party can still remember that when the Government responded to our proposal, it said that due to resource constraints and administrative problems, it was difficult to implement our proposal. This is obviously an attitude of refusal. I naturally hope that the streamlined licensing mechanism put forward by the Government can eventually benefit all those concerned. But for as long as the licensing work done by different government departments is not centralized, and for as long as a central licensing authority is not set up to handle all licensing matters, the situation, I believe, will not improve by any great extent. In the end, many operators who lose patience with the bureaucratic procedure may still be forced to operate without a licence.

Madam President, Hong Kong will hold millennium celebration activities at the turn of the century. But when we look closely at the table of events released by the Home Affairs Bureau, we really cannot help sighing, because this table shows to the full how very deceitful and credit-thirsty the Government is. This table lists a whole range of celebration items, including a Hong Kong cultural museum, a world-class wetland park, millennium horse racing, the Hong Kong Arts Festival and even Christmas festive lighting. As the Democratic Party understands it, the cultural museum is actually a project of the Provisional Regional Council. This project started as early as six years ago, and is expected to complete in 2000. But then, without even the decency of saying "Thank you", the Government has included the project as a ready celebration item for the new millennium. The project has not been initiated as a celebration item for the new millennium, and in all the publicity leaflets, the Government simply makes no mention of the Provisional Regional Council as the organization responsible for constructing the museum. The Provisional Regional Council has not yet been scrapped, but the Government has already ignored its existence. Worse still, it has even misled the public into believing that it will do a lot of work to celebrate the arrival of the new millennium. The same tactic can also be seen when we look at the wetland park and Christmas festive lighting, because even without the arrival of the year 2000, both these two projects will still be implemented any way. I hope that government officials will not surrender to the boastful culture of the senior circles of the Civil Service. I also hope that they can stop misleading the public. They should instead tell the community very clearly how many activities will be organized with the specific aim of celebrating the arrival of the new millennium. They should of course also mention all those participating organizations.

Madam President, I so submit.

SUSPENSION OF MEETING

PRESIDENT (in Cantonese): A total of 29 Members have spoken today. I now suspend the meeting until 2.30 pm tomorrow.

Suspended accordingly at thirteen minutes past Eight o'clock.