MEMBERS PRESENT:

THE PRESIDENT
THE HONOURABLE MRS RITA FAN, G.B.S., J.P.

THE HONOURABLE KENNETH TING WOO-SHOU, J.P.

THE HONOURABLE JAMES TIEN PEI-CHUN, J.P.

THE HONOURABLE DAVID CHU YU-LIN

THE HONOURABLE HO SAI-CHU, J.P.

THE HONOURABLE CYD HO SAU-LAN

THE HONOURABLE EDWARD HO SING-TIN, J.P.

THE HONOURABLE ALBERT HO CHUN-YAN

THE HONOURABLE MICHAEL HO MUN-KA

DR THE HONOURABLE RAYMOND HO CHUNG-TAI, J.P.

THE HONOURABLE LEE WING-TAT

THE HONOURABLE LEE CHEUK-YAN

THE HONOURABLE MARTIN LEE CHU-MING, S.C., J.P.

THE HONOURABLE ERIC LI KA-CHEUNG, J.P.

THE HONOURABLE LEE KAI-MING, J.P.

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

THE HONOURABLE FRED LI WAH-MING

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

THE HONOURABLE NG LEUNG-SING

PROF THE HONOURABLE NG CHING-FAI

THE HONOURABLE MARGARET NG

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

THE HONOURABLE RONALD ARCULLI, J.P.

THE HONOURABLE MA FUNG-KWOK

THE HONOURABLE JAMES TO KUN-SUN

THE HONOURABLE CHEUNG MAN-KWONG

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

THE HONOURABLE 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 KONG-WAH

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

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

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

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

THE HONOURABLE CHOY SO-YUK

THE HONOURABLE ANDREW CHENG KAR-FOO

THE HONOURABLE SZETO WAH

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

THE HONOURABLE LAW CHI-KWONG, J.P.

THE HONOURABLE TAM YIU-CHUNG, J.P.

THE HONOURABLE FUNG CHI-KIN

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

MEMBER ABSENT:

THE HONOURABLE LAU CHIN-SHEK, J.P.

PUBLIC OFFICERS ATTENDING:

MR MICHAEL SUEN MING-YEUNG, J.P.
THE CHIEF SECRETARY FOR ADMINISTRATION

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

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

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

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

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

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

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

MISS YVONNE CHOI YING-PIK, J.P.
SECRETARY FOR TRADE AND INDUSTRY

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

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:

Subsidiary Legislation

L.N. No.

Waterworks (Amendment) Regulation 1999	106/99
Child Abduction and Custody (Parties to Convention) (Amendment) Order 1999	108/99
Official Languages (Alteration of Text Under Section 4D) Order 1999	109/99
Employees Retraining Ordinance (Amendment of Schedule 2) (No. 3) Notice 1999	110/99
Tax Reserve Certificates (Rate of Interest) (No. 3) Notice 1999	111/99
Banking Ordinance (Amendment of Schedule) Notice 1999	112/99

Sessional Papers

No. 124	─	Vocational Training Council Annual Report 1997/1998
No. 125	─	The Government Minute in response to the Report No. 30 of the Public Accounts Committee dated February 1999
No. 126	─	The Government Minute in response to the Report No. 31 of the Public Accounts Committee dated February 1999

PRESIDENT (in Cantonese): We will start with a few addresses. Under Rule 21(6) of the Rules of Procedure, no debate may arise on any address concerning papers and subsidiary legislation tabled in Council. The Chief Secretary for Administration will address the Council on the Government Minutes in response to Reports Nos. 30 and 31 of the Public Accounts Committee dated February 1999.

ADDRESSES

The Government Minutes in response to Report Nos. 30 and 31 of the Public Accounts Committee dated February 1999

CHIEF SECRETARY FOR ADMINISTRATION (in Cantonese): Madam President, laid on the table today are two government minutes responding to Reports Nos. 30 and 31 of the Public Accounts Committee (PAC). These Minutes set out the measures the Government is taking on the conclusions and recommendations contained in the Reports.

As is its usual practice, the Committee has selected for detailed study a total of 15 subjects investigated by the Director of Audit in his two Value For Money Reports. The Committee's conclusions and recommendations on 13 of them are contained in the PAC Reports published. The Administration will continue to offer its fullest co-operation to the PAC in its deliberations on the remaining two. Indeed, for the other nine subjects not selected for detailed study by the PAC, the relevant bureaux and departments are required to follow up the Director of Audit's recommendations and make regular progress reports. The Finance Bureau will monitor and co-ordinate half-yearly progress reports on these subjects and share these with the Director of Audit for any further investigation, if necessary. I wish to reassure Members that through this reporting system, every recommendation to improve the use of public resources brought to the Administration's attention will be vigorously pursued.

The Honourable Eric LI, Chairman of the Public Accounts Committee, spoke in this Council on 10 February when tabling the Committee's Reports. His speech touched on three general themes. I would like to respond to them in turn.

The first theme raised by Mr LI concerns the economical and efficient use of staff resources in the Civil Service. Members of this Council spoke passionately on this subject at the motion debate on "Civil Service's culture and efficiency" moved by Mr LI on 10 March. We share Members' expectations that the Civil Service should do more with less and should strive for a better management culture especially at a time when the private sector is going through a painful adjustment process. Our commitment to reform is reflected in the civil service reform proposals on which we are consulting the staff side.

We commented at length on the subject of Civil Service's culture and efficiency during the motion debate on 10 March. The Secretary for the Civil Service in unveiling the civil service reform proposals has elaborated on the principles, objectives and scope of the reform. I do not propose to repeat them here this afternoon. I would however like to respond to a few specific areas highlighted in the PAC's Reports.

The Director of Audit and his team have uncovered significant weaknesses in the monitoring of outdoor staff in three departments in his Report No. 31. As reported in the Government Minute, the concerned Heads of Department have all taken appropriate follow-up action to discipline staff involved where warranted, ensure that effective measures are in place to monitor the performance of outdoor staff, and review and redeploy staff resources in the light of changing needs.

We share the PAC's concern that similar problems in the monitoring of outdoor staff may exist in other departments. Our response, therefore, is not confined to the three concerned departments. We have taken immediate action to investigate supervision of outdoor staff on a service-wide basis. All Heads of Department have been asked to undertake a comprehensive review on their existing system to monitor outdoor staff. I am pleased to report that all Departments have completed the review and in all cases, they have reported that adequate supervisory systems are in place. Nonetheless, arising from this exercise, many Heads of Department have affirmed the need to continuously update the supervisory systems with the aid of modern electronic devices and additional measures of revised rules. The Civil Service Bureau has studied the results of the review and is drawing up a set of up-to-date guidelines to ensure consistent standards of supervision of staff on outdoor duties in all Departments.

We understand that improving the use of scarce public resources requires a multi-pronged approach. Members have heard a great deal in recent months about the progress of the Enhanced Productivity Programme announced by the Chief Executive in his 1998 policy address. The Financial Secretary has outlined in his 1999 Budget speech further measures to improve the delivery of public service. In the official response to the Budget debate in this Council on 31 March, we have pledged that we would explore all means to achieve the objective. The Chief Secretary for Administration referred specifically to initiatives in outsourcing, corporatization and changing the subvention practices. However, I believe that all these efforts will only bear fruit with the support of Members of this Council. And I look forward to our maintaining a useful and constructive dialogue with the Legislative Council on this in the months ahead.

The second theme to which Mr LI referred concerns the importance of planning in the use of government land and property. He has urged that the Property Strategy Group should take a proactive role in the relocation of the General Post Office. I can assure Members that the Administration attaches great importance to optimizing the use of sites occupied or reserved for government, institution and community (GIC) purposes. The case of the General Post Office illustrates the complexities of relocating a public facility when replacement sites were not readily available in the light of planning and development constraints. Since November 1997, the Secretary for the Treasury has personally chaired the Property Strategy Group to ensure that decisions are taken at a senior level and in a concerted manner in respect of relocation plans similar to those of the General Post Office, and to provide policy direction on all site-utilization matters. The Administration has so far identified a total of 68 GIC sites, with a total area of about 100 hectares, which can be released for redevelopment over the next five years. In addition, the Government Property Agency is compiling a comprehensive computerized database on all GIC sites, which is expected to be completed by the end of 1999.

In line with the PAC's recommendations, we are vigorously pursuing a review on canteens in government premises. As a result, we have already decided to close three canteens in joint-user government office buildings in Wan Chai. We are assessing the continued need of the remaining 117 canteens. Where their continued operation is not justified, we will close them and turn the surplus space into office and related uses. Those canteens which are required to be retained on operational grounds will be subject to strict control and management. The whole review is expected to be completed in the middle of this year. We will keep the PAC informed of the progress.

Finally, Mr LI commented on the accountability of the Administration to the Legislative Council on the use of funds, a recurring theme in the PAC's deliberations. Over the years, the Administration has established and reinforced our partnership with the legislature in pursuing our common objective of efficient use of public funds. On several past occasions in presenting the Government Minute, we have reassured Members that we attach the utmost importance to the principles of legislative control of public finance and public accountability. We have improved the substance and presentation of information in submissions to the Finance Committee to allow the Committee to make informed decisions. We also have a system to monitor all outstanding actions on the Administration arising from discussions at the Finance Committee and its subcommittees. However, on occasions, with the best of intentions, oversights do occur. This is what has happened regarding the construction of the Extension to the Hong Kong Convention and Exhibition Centre. Arising from this, the Secretary for the Treasury has undertaken that for major government projects the Administration will keep the Finance Committee informed of significant slippage, cost overruns or other major departure from the funding submissions.

In connection with the issue of accountability of the Government, Mr LI suggested that the Administration should review the financial accounting practices with a view to enhancing timely disclosure of information for scrutiny by legislators. In speaking during the 1999 Budget debate on 24 March, Mr LI elaborated on those areas in the current public finance accounting system where he feels should be reviewed. The Government also considers it important to ensure that the accounts of the Government are presented in a way that best meets the changing demands. In 1994 we conducted a review of the government financial reporting but concluded at the time that it was premature for the Government to go for private sector type of full accrual accounting. However, we agree that it is time to take another look at the issue again. I am pleased to inform Members that the job is handled under the steer of a task force chaired by the Secretary for the Treasury.

Madam President, as we are approaching the Year 2000, Members are rightly concerned about the progress of Y2K compliance work both within the Government and by essential service providers. We have detailed in the Government Minutes the comprehensive measures we have taken and the close monitoring put in place under the Secretary for Information Technology and Broadcasting. We will report the progress to the PAC in the middle of this year.

I wish to express my sincere thanks to the Chairman and members of the PAC for their valuable work and comments. The Administration will continue to co-operate fully with the Committee.

PRESIDENT (in Cantonese): Miss Margaret NG, Mr LEE Cheuk-yan, Mr Albert HO and the Secretary for the Treasury will address this Council respectively on Public Revenue Protection (Revenue) Order 1999, which was tabled to this Council for scrutiny in the form of subsidiary legislation on 31 March 1999.

Public Revenue Protection (Revenue) Order 1999

MISS MARGARET NG: Madam President, with your permission, I wish to make a short address on the Public Revenue Protection (Revenue) Order 1999 in my capacity as the Chairman of the Subcommittee which has been taken over by the Bills Committee on Revenue Bill 1999.

Members are aware that the Order is a temporary measure to give effect to most of the revenue proposals in the 1999-2000 Budget and has already come into force on 1 April 1999. The Order includes all the provisions of the Revenue Bill 1999 which are still under deliberation by the relevant Bills Committee. Without going into the contents of the Order, I only wish to draw Members' attention to a question of principle about the Order which has caused some debate among members of the Subcommittee and indeed, the Bills Committee.

As stated in the long title of the Ordinance, the purpose of the Public Revenue Protection Ordinance is to protect the revenue of Hong Kong. This purpose was affirmed by the then Attorney General in 1974 when the Ordinance was amended. Members have, therefore, questioned whether it is consistent with the legislative intent and the spirit of the Ordinance to make a public revenue protection order which includes proposals which are not required for that purpose, or are indeed criminal penalties. Some members do not accept that the adjustment of criminal penalties should be regarded as "revenue" within the meaning of the Ordinance. However, there is no collective view on the matter.

The Bills Committee notes that the Honourable Albert HO has given notice to move a number of motions to amend the Order. Members of the Bills Committee are also aware of the legal advice of the Legislative Council Secretariat that the Legislative Council could either support or reject the Order in its entirety. In other words, the legislature may only pass a resolution under section 34(2) of Cap. 1 to repeal but not to amend only some of the provisions of the Order. Subsequently, the proposed amendment of Mr Albert HO has been ruled against by you, Madam President, and the Bills Committee was duly notified. No other proposals to amend the Order had been raised.

Madam President, these are my short remarks on the Order. Thank you.

MR LEE CHEUK-YAN (in Cantonese): Madam President, on the Public Revenue Protection (Revenue) Order 1999, the legal advisers of this Council and I have questioned if some of the contents of the Order went beyond the scope of the Public Revenue Protection Ordinance. I consider it necessary to spell out these viewpoints for the record today.

The Public Revenue Protection Ordinance was enacted in 1927 to protect the revenue of Hong Kong. At the Second Reading debate of the Public Revenue Protection (Amendment) Bill 1974 held on 18 December 1974, Mr Oswald Victor CHEUNG, S.C., the then Unofficial Member of the Legislative Council, queried the Government on the early implementation of some non-urgent revenue proposals like vehicle licence fees, annual fees for business registration certificates through a public revenue protection order, which had already caused the early implementation of revenue proposals concerning liquor tax, tobacco duty and First Registration Tax of vehicles, which had to be introduced immediately. In his speech, Mr CHEUNG pointed out clearly that the sole purpose of the Ordinance was to protect the Government from loss of revenue arising from tax evasion or avoidance. It was never intended to be used either for pre-empting the decisions of the legislature on proposed changes in tax rates, or for the convenience of the authorities entrusted with the duties of revenue collection.

Mr Oswald Victor CHEUNG further pointed out that the Unofficial Members of the Legislative Council "would not find it possible to support use of the Public Revenue Protection Ordinance in relation to non-urgent annual payments". Therefore, Members requested the Government to make an assurance in the Council that the Ordinance would not be used for any purpose other than for the purpose of protecting the revenue. In his response on the same day, the Attorney General unequivocally gave the assurance requested by Members.

In my opinion, when interpreting the powers conferred by legislation, we must consider the long title and purpose of the Ordinance, the legislative history and the unequivocal undertaking given by the Government as to how the legislation should be applied. To my understanding, the Public Revenue Protection Order cannot be used to facilitate advanced implementation of non-urgent revenue proposals.

In my opinion, the proposals in the Public Revenue Protection (Revenue) Order 1999 have gone beyond the purpose of the Public Revenue Protection Ordinance which seeks to protect the Government from loss of revenue arising from tax avoidance or evasion. The Government should implement the revenue proposals only after the relevant legislative proposals have been passed by this Council instead of jumping the gun. The Secretary for the Treasury indicated that over the past 25 years, the Government has widely resorted to the Public Revenue Protection Order as a means to facilitate advanced implementation of revenue proposals. In this connection, I would like to point out again that although the legislature has never queried the practice, it does not mean that it must be lawful or reasonable.

There is another question. Legal advice to this Council considers that at least the fixed penalties should not have fallen within the scope of the Order as a matter of law. I believe the Government, whatever its interpretation, should respect the views of the legal advisers of this Council. Therefore, I urge the Government not to include these penalty items in the Order in future.

Lastly, we can see from this incident that the Government has not at all sought the consensus of this Council beforehand on matters concerning the timetable for implementing the Budget proposals and the relevant legislative procedures. What kind of taxes, for instance, can be enforced immediately? What kind of taxes can be implemented only after the approval of this Council has been sought? The Government should not make any unilateral decision on these questions. Otherwise it will seriously damage the important constitutional principle that revenue proposals should be passed by this Council. I urge that a discussion be held between the Government and Members of this Council as soon as possible with a view to laying down the manner in which Budget proposals and the relevant procedures should be implemented in future so as to avoid the recurrence of similar incidents.

Madam President, I so submit. Thank you.

MR ALBERT HO (in Cantonese): Madam President, the Government has decided to present the Budget proposals in the form of a consolidated bill this year and the Chief Executive has made the Public Revenue Protection (Revenue) Order 1999 by virtue of the Public Revenue Protection Ordinance. However, quite a number of Members have questioned the Government's practice. In an effort to rectify the impropriety of the Order, I have tried to propose four resolutions. Unfortunately, they were ruled down by the President on the ground that it is ultra vires of this Council to amend the Order under section 34(2), Chapter 1 of the Laws of Hong Kong. Still I would like to raise my queries and views on the Order in the hope that the Government will take them into serious reference and careful consideration.

Firstly, we are of the view that the protection order violates the verbal undertaking made by the then Attorney General to the Legislative Council in 1974. As stated by the long title of the Public Revenue Protection Ordinance (Cap. 120), the purpose of the Ordinance is to protect the revenue of Hong Kong. At the Second Reading debate of the Public Revenue Protection (Amendment) Bill held in December 1974, Mr Oswald Victor CHEUNG, S.C., an Unofficial Member of the Council then, pointed out in his speech that the sole purpose of the Ordinance was to protect the Government from loss of revenue rather than to be used either for pre-empting the decisions of this Council or for the convenience of the authorities entrusted with the duties of revenue collection. He further pointed out that although it was a general piece of legislation, its purpose was very clear, that is, to protect the Government from loss of revenue. He added that Unofficial Members would not accept that the Ordinance be used for revenue items which were non-urgent annual payments. Consequently, they asked for an assurance from the Government that the Ordinance would not be used for any purpose other than for the purpose of protecting the revenue. The then Attorney General gave the Legislative Council the following assurance: "The Ordinance will not be used except for its true purpose of protecting the revenue."

The above information spells out the legislative intent behind the Public Revenue Protection Ordinance. As the Government would use it restrictively to protect itself from loss of revenue, the revenue proposals must be implemented immediately to prevent tax evasion. In view of the urgency as far as implementation is concerned, this kind of taxes should cover liquor tax, tobacco duty, diesel duty or first registration tax of vehicles rather than those non-urgent general revenue items. Although the then Attorney General had made an undertaking in 1974, it has no binding effect insofar as the Government is concerned. However, in the Subcommittee on the Public Revenue Protection (Revenue) Order, Miss Denise YUE, the Secretary for the Treasury, stated that the undertaking still stood. That being the case, I am of the view that the Government should respect and discharge the assurance given to the Legislative Council by the then Attorney General in enforcing the relevant policies and making the public revenue protection order.

The proposals contained in the Public Revenue Protection Order made under the Public Revenue Protection Ordinance is not in compliance with the principle of the Ordinance, that is, "to protect the revenue and prevent tax avoidance". Furthermore, it has violated the undertaking given to the Legislative Council by the then Attorney General in 1974. Therefore I consider that the Public Revenue Protection Order introduced by the Government is inappropriate.

According to the Government's explanation, by virtue of section 2 of the Public Revenue Protection Ordinance, the Chief Executive may make an order giving full force and effect of law to all the provisions of the bill or resolution so long as such order remains in force. Since the Government has decided to present the proposals in a consolidated bill this year, it has to set out all provisions of the Bill in the Order. It has no alternative. In my opinion, it cannot explain satisfactorily why the Government should go back on its previous undertaking by relying on the powers conferred under this section alone. Nor can it answer the questions I have raised.

Secondly, I have to point out that the inclusion of increase in fixed penalties for traffic-related offences in the Order also violates some fundamental principles of law. As these penalties involve criminal penalties, if the Chief Executive orders that these penalties be given immediate effect by invoking section 2 of the Public Revenue Protection Ordinance before this Council has scrutinized and passed the Public Revenue Bill 1999 after the Third Reading, it probably, in our opinion, has violated provisions concerning human rights in the Basic Law and provisions concerning the retrospectivity of criminal penalties under the Hong Kong Bill of Rights Ordinance (Cap. 383). Article 12(1) in the Hong Kong Bill of Rights Ordinance states that "No one shall be held guilty of any criminal offence on account of any act or omission which did not constitute a criminal offence, under Hong Kong or international law, at the time when it was committed. Nor shall a heavier penalty be imposed than the one that was applicable at the time when the criminal offence was committed. If, subsequent to the commission of the offence, provision is made by law for the imposition of a lighter penalty, the offender shall benefit thereby." If the Government revises up the criminal penalties by way of an administrative order, conceptually it is in fact bringing legislation into effect before it has been formally enacted, in the belief and expectation that the relevant legislation will be passed by the Legislative Council in due course. In concept and in principle, it is to give certain criminal penalties retrospective effect when they are subsequently passed. Of course, the Government did explain that the law itself came into force immediately and reckoned that the Chief Executive was empowered to order the immediate implementation of such penalties under this provision. Thus, in exercising his power, the Chief Executive did not have to rely on the law enacted in future. So, it did not violate the Basic Law or the Hong Kong Bill of Rights Ordinance. In my opinion, however, even though the Chief Executive can technically exercise such prerogative to make an order to the effect that criminal penalties can come into force without waiting for the passage by the legislature after the Third Reading, it is a very dangerous approach and violates some fundamental principles. The Government must review such an approach and make it clear that it will not be abused. In a democratic and open society, the Government should never bring any criminal provisions into effect by way of an administrative order made in an arbitrary manner.

I hope the Government will take the points I have just raised into careful consideration when the Public Revenue Protection (Revenue) Order is applied in the future. Should there be any changes in policy, as the Honourable LEE Cheuk-yan has suggested, the Legislative Council must be consulted and the changes in policy must be announced.

I so submit. Thank you, Madam President.

SECRETARY FOR THE TREASURY: President, thank you for allowing me to speak on the Public Revenue Protection (Revenue) Order 1999, made by the Chief Executive after consultation with the Executive Council. The Order was tabled in this Council on 31 March and has come into force since 1 April 1999. The Order has given full force and effect of law to all the provisions of the Revenue Bill 1999 which are scheduled to it. The Revenue Bill 1999 covers all the legislative amendments required to implement the revenue proposals announced by the Financial Secretary in the 1999-2000 Budget, including both revenue concessions and revenue-raising measures.

The Order made by the Chief Executive is made under section 2 of the Public Revenue Protection Ordinance (Cap. 120). This section stipulates that:

"If the Chief Executive approves of the introduction into the Legislative Council of a bill or resolution whereby, if such bill or resolution were to become law:

(a) any duty, tax, fee, rate or other item of revenue would be imposed, removed or altered; or

(b) any allowance, in respect of a duty, tax, fee, rate or other item of revenue would be granted, altered or removed; or

(c) any administrative or general provisions in relation to a duty, tax, fee, rate or other item of revenue would be enacted, altered or removed,

the Chief Executive may make an order giving full force and effect of law to all the provisions of the bill or resolution so long as such order remains in force."

President, I wish to draw attention to four key terms used in this section of the Ordinance, namely, "altered or removed", "other item of revenue", "full force and effect of law", and "all the provisions of the bill".

"Altered" means either increase or decrease while "removed" means deleted. The use of these words in the Public Revenue Protection Ordinance puts it beyond any doubt that it is lawful and legal for a public revenue protection order made under the Public Revenue Protection Ordinance to cover a bill which sets out both revenue concessions and revenue-raising measures. Therefore, the Public Revenue Protection (Revenue) Order 1999, which includes both revenue concessions and revenue-raising measures, is entirely in compliance with the law.

The second key term used in section 2 of the Ordinance is "other item of revenue". The word "revenue" is not defined in the Ordinance. As such, the word bears its ordinary meaning, that is, income or "the annual income of a government or state, from all sources, out of which public expenses are met". This quote is taken from The New Shorter Oxford English Dictionary 1993 Vol II. This meaning is fully compatible with the object of the Ordinance which, as the title clearly suggests, is to protect public revenue. Furthermore, under section 3 of the Public Finance Ordinance (Cap. 2), it is stated that "any moneys raised or received for the purposes of the Government shall form part of the general revenue". Therefore, it is entirely proper and legal for the Public Revenue Protection (Revenue) Order 1999 to include amendments relating to fixed penalties for traffic offences, because fixed penalties constitute an income or revenue to the Government.

I turn to the third key term in section 2 of the Public Revenue Protection Ordinance, namely "full force and effect of law". An order made under this Ordinance has full force and effect of law as soon as it is implemented. Therefore, there can be no question of retrospectivity on the ground that a measure is implemented in accordance with the date stipulated in an order before the passage of the bill covered by the order. In the context of the Public Revenue Protection (Revenue) Order 1999 made by the Chief Executive, the inclusion of the amendment on fixed penalties for traffic offences is fully in compliance with the law, including compliance with the provisions in the Basic Law and the Hong Kong Bill of Rights Ordinance. The amendment does not introduce a new offence, it merely provides for an increase in the levels of fixed penalties on existing offences. The amendment is prospective, and not retrospective, as the increases in fixed penalties will only be applied to traffic offences which occur after the increases have taken legal effect. Therefore, it does not contravene Article 12(1) in the Hong Kong Bill of Rights Ordinance which states that "No one shall be held guilty of any criminal offence on account of any act or omission which did not constitute a criminal offence, under Hong Kong or international law, at the time when it was committed. Nor shall a heavier penalty be imposed than the one that was applicable at the time when the criminal offence was committed".

I turn now to the last key term appearing in section 2 of the Public Revenue Protection Ordinance, namely "all the provisions of the bill". The precision of this term is such that the Public Revenue Protection (Revenue) Order 1999 made by the Chief Executive has to include every provision in the Revenue Bill 1999, including the few measures which are to take effect on a date later than 1 April.

President, apart from being consistent with the provisions of the Public Revenue Protection Ordinance, the Order made by the Chief Executive this year is also in line with the long-standing practice adopted by the Administration and accepted by the legislature. For the last quarter of a century, the revenue proposals announced by successive Financial Secretaries in each year's budget have been given legal effect by means of orders made under the Public Revenue Protection Ordinance before the relevant legislative amendments were approved by the legislature. These orders included revenue-raising measures as well as revenue concessions, amendments relating to penalties, and measures which came into effect at a date much later than 1 April. The legislature of the day, including the Unofficial Members of the Legislative Council sitting in 1974-75 who sought and obtained the then Attorney General's assurance on the proper application of the Ordinance, accepted all the orders made under the Ordinance without any query. The Order made by the Chief Executive this year is no different from the orders made in 1975 and in all the subsequent years.

President, in closing, I wish to state that the purpose of the Public Revenue Protection Ordinance is to protect government revenue during the period when legislative amendments to implement revenue proposals are being considered by this Council. Any order made under the Ordinance is intended to be a provisional and temporary measure. It does not limit the Council's prerogative in scrutinizing the legislative amendments on revenue proposals, nor does it violate the principle that all such amendments have to be approved by the legislature.

Thank you.

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

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

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

PRESIDENT (in Cantonese): First question.

ORAL ANSWERS TO QUESTIONS

Immigration Department's Refusal to Grant Entry Visas

1. MR LEE WING-TAT (in Cantonese): Madam President, will the Government inform this Council:

(a) of the policies and criteria adopted by the Immigration Department of Hong Kong for processing entry visas applications from the holders of "United States re-entry permits" and Chinese passports;

(b) of the reasons for the Immigration Department's rejection last month of the entry visa applications by 11 holders of "United States re-entry permits" and Chinese passports, who had planned to attend an international seminar in Hong Kong; and whether, in making such a decision, the Immigration Department has considered if the refusal of these persons' entry into Hong Kong would produce any negative effects on the image of Hong Kong internationally; and

(c) whether the entry policies of Hong Kong before and after the reunification with China are consistent; if so, why some of the 11 persons in question who had been allowed entry into Hong Kong before the reunification are now denied entry visas by the Immigration Department; if not, the details of that?

SECRETARY FOR SECURITY (in Cantonese): Madam President,

(a) Holders of United States re-entry permits and Chinese passports are required to have a visa or entry permission for entry into Hong Kong. Each entry application is considered on its own merits and decided by the Director of Immigration in the light of prevailing circumstances.

(b) The entry applications by the 11 holders of United States re-entry permits and Chinese passports in question were rejected because, in the view of the Director of Immigration, approval would not be in the interest of Hong Kong. In so deciding, the Director of Immigration had considered all relevant factors including whether refusing their entry would produce any negative effect on the international image of Hong Kong. He was of the view that there would be no such effect.

(c) The entry policy of Hong Kong before and after the reunification with China is consistent. Some of the 11 applicants had been allowed entry before the reunification, but not last month, because each entry application is considered on its own merits and decided in the light of prevailing circumstances.

MR LEE WING-TAT (in Cantonese): Madam President, in paragraph (c) of the main reply, the Secretary admitted that some of the 11 applicants had been allowed entry before the reunification. Her explanation is that each entry application is considered on its own merits. Madam President, my supplementary question is, since the Government of the Hong Kong Special Administrative Region (SAR) stresses that the entry policy is consistent before and after the reunification, the Secretary should explain in greater detail why these applicants were denied entry; otherwise, it will only give an impression to the local community and foreign countries that the entry policy and freedom of speech have been tightened after the reunification.

SECRETARY FOR SECURITY (in Cantonese): Madam President, I would like to explain the operation of the entry policy here. We never make our decision by looking at the kinds of documents held by an applicant or whether he has entered Hong Kong before. The reason is very obvious. If we say that anyone holding a particular kind of documents or anyone who has come to Hong Kong before will be granted entry, it will constitute a big loophole in our entry control. A crime syndicate can use holders of that particular kind of documents or those who frequently go in and out of a certain place to engage in illegal activities. Therefore, like the immigration authority of any place in the world, the Immigration Department of Hong Kong considers each entry application on its own merits, and the factors for consideration certainly include the kind of document held by the applicant, whether he can return to his place of origin (such as whether he has a return ticket or the re-entry permit of that place), his purpose of coming to Hong Kong, the kind of activities he will be engaged in and so on. Basically, like all other immigration authorities in the world, when it makes the decision, the Immigration Department will look at whether the entry of this applicant will be to the interest of Hong Kong. The principle and policy are consistent before or after the reunification. I have learned from the Director of Immigration that after examining these 11 applications, he came to the view that granting them entry into Hong Kong would not be in the interest of Hong Kong and he therefore turned down their applications.

MR SZETO WAH (in Cantonese): Madam President, the Secretary has said in the main reply that "approval [for their entry] would not be in the interest of Hong Kong". I would like the Secretary to explain what kind of interest she refers to by this "interest of Hong Kong". Is it the same as or similar to the "public interest" to which the Secretary for Justice, Miss Elsie LEUNG referred?

SECRETARY FOR SECURITY (in Cantonese): Madam President, the "public interest" covers many aspects and must be decided according to the situation of each individual case. As such, the Immigration Ordinance of Hong Kong has not given a definition to "public interest" and in fact, it is impossible to define it. Having studied the immigration legislation of many countries, the Government finds that their immigration policies are the same as ours, that is, the authorities are given considerable room for the exercise of discretion. Take the Australian Government as an example. We have seen the operation report of their immigration department in which it is stated that their principle is very simple, that is, to strive for the best interest of the state possible. But as for what exactly "the interest of the state" is, there is no explanation as it has to be considered on the merits of each individual case.

DR YEUNG SUM (in Cantonese): Madam President, the Secretary said earlier that the entry of 11 holders of United States re-entry permits and Chinese passports was refused mainly because an approval would not be in the interest of Hong Kong. Does the so-called "not be in the interest of Hong Kong" include reasons such as jeopardizing the freedom of speech, undermining the high degree of autonomy, or even leading to social unrest?

SECRETARY FOR SECURITY (in Cantonese): Madam President, I have already explained that "public interest" indeed covers considerations in many respects. I can assure Dr YEUNG that from what I learned from the Director of Immigration, that their entry was refused had nothing to do with the freedom of speech, neither was it related to the concern that they would cause great unrest in Hong Kong. For example, when other governments consider the public interest, factors they might have to consider may include safety reasons, and even their diplomatic relations with other governments, or some other reasons. In this particular case, after the Director of Immigration had considered each applicant's purpose of coming to Hong Kong and the activities that they would engage in after their arrival, he considered that approval for their entry would not be in the interest of Hong Kong and therefore turned down their applications.

MR ALBERT HO (in Cantonese): Madam President, the age, education, occupation, background and so on of these 11 applicants are all different. Some of them are scholars, some professionals, some students; some of them have come to Hong Kong before and some have not. The only thing that they have in common is that all 11 of them made an application for entry into Hong Kong together and that they are all dissidents. In other words, our Central Government does not like their views and even bars them out of the country, that is, mainland China. Another thing that they share is this time they planned to come here to attend a seminar on the outlook of democracy in China. It was exactly due to this that many critics outside commented that they were refused entry because the SAR Government did not want them to come to Hong Kong to make speeches that would displease the Central Government; otherwise, it is impossible that all 11 persons' applications were turned down all at the same time. Would the Secretary respond to these questions?

SECRETARY FOR SECURITY (in Cantonese): Madam President, first of all, I would like to explain one point. It is the Government's long-standing policy not to comment on any individual case. Mr HO has made many speculations about the reasons for the denial of the 11 applicants' entry and has commented on their background. The Government will not openly participate in such discussions, neither will it comment on these speculations. I can only stress that the Director of Immigration has made an honest and fair decision after considering all the circumstances, and it has nothing whatsoever to do with the freedom of speech as suggested by Mr HO.

MR LEE CHEUK-YAN (in Cantonese): Madam President, may I ask the Secretary what government departments the Director of Immigration consulted when considering whether it was in the interest of Hong Kong? For instance, had the Director consulted the Secretary for Security herself, the Chief Secretary for Administration, Mrs Anson CHAN, and the Chief Executive, Mr TUNG Chee-hwa, before deciding whether it was in the interest of Hong Kong?

SECRETARY FOR SECURITY (in Cantonese): Madam President, I wish to explain the operation of the Immigration Ordinance. The power exercised by the Director of Immigration is an administrative power and when he exercises this power, he has considerable discretionary powers. These discretionary powers have been reviewed by the Court before and judgments have been made. In general, the Court has judged that the Director needs not explain his decisions as long as he discharges his duty honestly and fairly. Of course, in this case, the Director did consult the relevant government departments before discharging his duty. As for which departments and which officials he had consulted, I do not consider it appropriate to disclose here. What is most important is that before he made the decision, he had personally considered all factors, instead of letting some official's view override his own.

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

MR LEE CHEUK-YAN (in Cantonese): Madam President, I asked specifically whether the Director of Immigration had consulted three particular officials, namely the Secretary for Security, Mr TUNG Chee-hwa and Mrs Anson CHAN. I would like the Secretary to answer whether he has consulted these three persons.

PRESIDENT (in Cantonese): Mr LEE, you may sit down. You did mention this point in your question and it seems that the Secretary for Security has already answered your question. For the sake of clarity, however, I would ask the Secretary to repeat her answer given just now.

SECRETARY FOR SECURITY (in Cantonese): Madam President, I have already answered Mr LEE's supplementary question. I said that before making the decision, the Director of Immigration did consult certain government departments and officials. As regards the details about whom he consulted, I consider it confidential information which I am not at liberty to disclose.

MR JAMES TO (in Cantonese): Madam President, in part (c) of her main reply, the Secretary said that the entry policy of Hong Kong before and after the reunification with China is consistent, while in part (b) she said that the 11 persons were refused entry because approval for it was not in the interest of Hong Kong. Since the entry policy has not changed after the reunification, would the Secretary please explain whether the interest of Hong Kong remains the same after the reunification? For instance, am I right in saying that before the reunification it was the interest of Britain that was of the greatest concern while after the reunification it is the interest of China that is of the greatest concern? As for the officials concerned, whoever they were, when they considered the matter or when they offered advice, did they mention what the interest of Britain was in the past and what the interest of China is now?

SECRETARY FOR SECURITY (in Cantonese): Madam President, the Basic Law has stated very clearly that the SAR has the right to formulate and implement its entry policy. Therefore, before making any decisions, what the officials of the Immigration Department must consider is naturally the interest of Hong Kong. Of course, during different periods of time, they may have to consider different historic factors but it is the interest of Hong Kong that is our principal concern.

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

MR JAMES TO (in Cantonese): Madam President, the part on was it the interest of Britain before the reunification and is it the interest of China after the reunification that has been taken into consideration?

SECRETARY FOR SECURITY (in Cantonese): Madam President, I have already answered Mr TO's question. Basically, the Director of Immigration considers what is to be in the interest of Hong Kong according to his personal understanding before forming a judgment. As regards what is in the interest of Hong Kong, he would of course consider it when forming his judgment. For example, the constitutional status of Hong Kong is one relevant factor.

MR HOWARD YOUNG (in Cantonese): Madam President, can the Secretary confirm whether many applicants other than these 11 applicants have been refused entry on account of not being in the interest of Hong Kong no matter before or after the reunification? Once a person's application is turned down, does it mean there is no possibility that he will be granted entry at some other time under some other circumstances in future?

SECRETARY FOR SECURITY (in Cantonese): Madam President, I can confirm that every day, every minute, for every case that the Immigration Department makes a decision, the interest of Hong Kong is taken into account. For instance, the newspapers reported today that the Immigration Department has refused the entry of persons who have a record of drug trafficking. Just like other cases, we have not given any reasons for that. In fact, I can cite another example: About 20 years ago, the Immigration Department refused the entry of a famous rock star and the Government did not give any reason either. Of course, despite the objection of the star's manager and fans, we considered that to allow a singer who had a record of drug abuses entry would have adverse effect on Hong Kong. However, that does not mean that when the environment has changed or the problem of drug abuse is no longer so serious in Hong Kong at some other time, we would again deny the entry of that singer. Every case can be reconsidered.

MISS EMILY LAU (in Cantonese): Madam President, in her answer to a supplementary question earlier, the Secretary mentioned security, foreign countries and diplomatic relations considerations. May I ask the Secretary whether she considers that these applicants may have been used by foreign countries? If not, why did she mention about foreign countries and diplomatic relations? May I ask the Secretary whether it is necessary to request for the Central Government's instruction in regard to this case?

SECRETARY FOR SECURITY (in Cantonese): Madam President, I was only been trying to indicate that public interest might cover many aspects. For instance, we notice that in light of some cases, or the practice of some foreign governments would be, when deciding whether to allow certain persons entry, the authorities concerned would consider different factors which may sometimes include safety or the diplomatic relation of this particular government with another government. However, these are all examples. That does not imply that this is the reason for our denial of the 11 persons' entry. I can assure Miss LAU that before making the decision, the Director of Immigration did consult certain departments and officials in the SAR Government, but not the Central People's Government.

PRESIDENT (in Cantonese): Members, this Council has spent over 16 minutes on this question. Actually, I believe the time might have even been longer because the technician has forgotten to turn on the timer when we started this question. (Laughter) Therefore, we have to proceed to the second question now.

Remunerations of Contract Staff Employed by Government Departments

2. MR LEE CHEUK-YAN (in Cantonese): Madam President, the Government has suspended the appointment of civil servants on pensionable terms with effect from 1 April this year; instead, staff are recruited on contract terms. In this connection, will the Government inform this Council of:

(a) the entry points and pay and condition packages (the remunerations) of contract staff of various grades to be recruited by various government departments; how the remunerations for such staff compare with those of civil servants on pensionable terms; and

(b) the criteria adopted for determining the remunerations of contract staff employed by government departments?

SECRETARY FOR THE CIVIL SERVICE (in Cantonese): Madam President, all along, in response to service needs which are fluctuating, short-term or part-time in nature, government departments may employ short-term or temporary staff outside the civil service establishment in accordance with centrally promulgated guidelines. These guidelines were updated in January this year to provide Heads of Department with greater flexibility to deploy their resources and employ short-term staff to respond quickly to service demand from the public.

These short-term staff are distinct from civil servants. They are not included in the civil service establishment, and are not posted or promoted in civil service grades. If these staff are interested in applying for vacancies on the civil service establishment, they will have to apply and compete together with other applicants in open recruitment.

The Financial Secretary announced in March this year in the Budget speech that we should freeze the growth of the civil service establishment temporarily in view of the wide-ranging reviews and reforms of the civil service management system. If exception is required for essential services, Heads of Department will have to apply to the Civil Service Bureau and the Finance Bureau.

During the recruitment freeze, departments/grades may meet their additional or new service demands through other means that will not increase the civil service establishment, for example, streamlining operations, hiring external services, or employing staff outside the civil service establishment on short-term contracts.

The above sets out the policy background of non-civil service contract staff. The answer to the two questions raised are as follows:

(a) Starting from 1 April this year, if short-term manpower is required, Heads of Department may recruit staff outside the civil service establishment on short-term contracts in accordance with established guidelines. The conditions of service for employment of these short-term contract staff should be no less favourable than the benefits, allowances and compensation provided under the Employment Ordinance and the Employees' Compensation Ordinance, and at the same time no more favourable than the entry salary of civil servants in comparable civil service ranks. Heads of Department may determine the level of pay, having regard to the employment market situation. Where necessary, an end-of-contract gratuity not exceeding 15% of the total salary may also be offered to attract and recruit suitable candidates.

Heads of Department have the full discretion and flexibility to determine the job nature, duties and working hours of these short-term contract staff to meet the prevailing service demand. As such, the job duties and conditions of service of these non-civil service contract staff in different departments vary significantly, and could not be compared with the existing appointment terms and conditions of civil service grades.

(b) As stated above, the remuneration of short-term contract staff is determined by Heads of Department having regard to the employment market situation.

MR LEE CHEUK-YAN (in Cantonese): Madam President, in part (a) of the fifth paragraph of the main reply, the Secretary said that Heads of Department may determine the level of pay, having regard to the employment market situation. In reality, there is not a directory in the world in which we can looking up, just like looking up the dictionary, the employment market situation to determine the pay level immediately. Does the Secretary require Heads of Department to conduct a survey on the market; or they can arbitrarily and wilfully determine the entry salary level without conducting such survey?

SECRETARY FOR THE CIVIL SERVICE (in Cantonese): Madam President, we have devolved the power to Heads of Department to act on their own to find out the market pay level. So I do not concern myself with how they do it. However, as far as I know, one case is that the Director of General Grades has found out the approximate pay level in the market of the clerical grade through some professional organizations and issued this as a guideline to various departments. Therefore, the determination of pay levels is not purely a guessing exercise.

MR ANDREW WONG (in Cantonese): Madam President, if I am not mistaken, I hope that the Secretary can confirm a point, that is, generally speaking, there are three types of civil servants, namely, the permanent ones just like the Secretary for the Civil Service himself, the contractual staff just like the Secretary for Justice, and the third whom we call the temporary staff. If their work is no different from that of other civil servants, does it not appear that the Government is suppressing their pay under some sort of pretexts? I hope that the Secretary can explain whether when temporary posts outside the civil service establishment are required to meet temporary demands, the Government can open posts outside the permanent establishment and hire workers on contract while offering them the same employment terms as the civil servants'. I would like to ask the Secretary to confirm whether what I have said above was the established practice of the Government in the past and the introduction of recruiting temporary staff now is a disguised way to suppress their pay.

SECRETARY FOR THE CIVIL SERVICE (in Cantonese): Madam President, actually this is not anything new. The Government has all along recruited non-civil service staff according to the need. However, there might have been few such cases in the past. But with the advance of time, the rapid changes of the community, the ever increasing demand for our services and along with the need to carefully consider the cost-effectiveness, various government departments require greater flexibility in the arrangement of manpower to handle their work. Under such a special circumstance that the freeze on the growth of the Civil Service has been announced, various departments have to recruit non-civil service workers on contract terms on a larger scale. This is actually easily comprehensible.

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

MR ANDREW WONG (in Cantonese): Madam President, my supplementary question is that I hope the Secretary can confirm whether what I said just now was their practice in the past. If the Secretary agrees that this is their usual practice in the past, he has to give us some examples to indicate that their work in the past was not the same as the present. To hire staff to handle the same work in the past, was it their usual practice to open supermumerary or additional posts?

SECRETARY FOR THE CIVIL SERVICE (in Cantonese): Madam President, there are many different kinds of work which require different approaches. Under the present circumstances, it is perfectly reasonable and acceptable for Heads of Departments to choose a more flexible arrangement.

MR MICHAEL HO (in Cantonese): Madam President, in the third paragraph of his main reply, the Secretary said that we should freeze the growth of the civil service establishment temporarily. However, I could not find such allusion in the Financial Secretary's speech in the Second Reading of the Budget. In paragraph 82 of his speech, the Financial Secretary said they would "hold a firm grip on the size of the permanent Civil Service", which is "hold a firm grip", not "freeze". In paragraph 83, he said, "we will institute a general freeze on hiring into the permanent Civil Service, including hiring to fill new posts or vacancies". Madam President, may I ask why the wording has been changed? In which paragraph of the Financial Secretary's speech can we find such allusion to freezing the growth of the civil service establishment as mentioned in the main reply?

SECRETARY FOR THE CIVIL SERVICE (in Cantonese): Madam President, when the Government confirms the civil service system that is still under review, its view is that it should hold a grip on the size of the overall Civil Service. Whether this is to be achieved by taking the permanent system or contract system is of course a technical problem. As far as the overall spirit is concerned, we hope that the growth of the establishment can be frozen for the time being, except for some very special cases. Of course, there will be exceptions and so we will not call a complete halt to the recruitment of civil servants. Where necessary and Heads of the Department can prove indeed an exception in order, we will still conduct a recruitment.

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

MR MICHAEL HO (in Cantonese): Madam President, is the way that it is said in the third paragraph of the main reply about "[freezing] the growth of the civil service establishment temporarily" wrong then?

PRESIDENT (in Cantonese): Has the Secretary said something different from the Financial Secretary's speech in the Second Reading?

MR MICHAEL HO (in Cantonese): Madam President, they are different.

PRESIDENT (in Cantonese): I see. Please sit down. Secretary, please elucidate.

SECRETARY FOR THE CIVIL SERVICE (in Cantonese): Madam President, the wording may be different, but the spirit is identical. (Laughter)

MR MICHAEL HO (in Cantonese): Madam President, although the Secretary has said that the wording is different but the spirit is identical, "freeze temporarily" is completely different from "hold a firm grip" and "stop hiring permanent civil servants".

PRESIDENT (in Cantonese): Mr HO, this is not a debate but the question time. The Secretary has already answered your question. If you are not satisfied with his answer, you may follow up through other channels.

DR RAYMOND HO (in Cantonese): Madam President, the Secretary said that the wording is different but the spirit identical. It is mentioned in the main reply that Heads of Department may hire new staff on short-term contracts. But in late March, newspapers reported the Secretary as saying that the recruitment of staff of the administrative grade could be exempted. I would like the Secretary to confirm whether the report is true. If so, would that make the staff of the non-administrative grade feel that they are second class civil servants on appointment?

SECRETARY FOR THE CIVIL SERVICE (in Cantonese): Madam President, I can confirm that the employment of administrative grade staff such as Administrative Officers has been granted special exemption by the Chief Secretary for Administration. I would like to explain the reason here. This is mainly due to the job nature of the Administrative Officers as it is inappropriate to be placed under the care of temporary staff. The work they handle are all related to policy issues and is very often involved classified. Other than these very special considerations, another one is the vacancy rate in the administrative grade which is over 8%, four times higher than the general vacancy rate of the entire Civil Service. Therefore, taking into account of these special factors, exemption is granted to this grade. We do not think that this will create unfairness as the whole policy has made it very clear that should Heads of Department see a gunuine need, they can apply for exemption.

MISS CYD HO (in Cantonese): Madam President, the Secretary has missed out part of the question in his main reply in relation to the comparison between the remunerations for staff on short-term contracts and those of civil servants on pensionable terms. He only said that the conditions of service for employment of the former should be no less favourable than the benefits, allowances and compensation provided under the Employment Ordinance and the Employees' Compensation Ordinance, and at the same time no more favourable than the entry salary of civil servants in comparable civil service ranks. But how is the pay of the short-term contract staff compared to that of the existing civil servants? Recently, we have heard that the Social Welfare Department offers to hire this kind of staff at 70% of the civil servants' pay. Are we now promoting the "70% spirit" or that of an even lower percentage?

SECRETARY FOR THE CIVIL SERVICE (in Cantonese): Madam President, actually I have already explained in the main reply that the two kinds of staff fall under different categories, so there cannot and should not be a direct comparison of them both. As regards they are offered a certain percentage, as generally described, I believe that it is just a more convenient expression used by the media. In fact, they are not pegged together and therefore there is no question of to what percentage they are paid.

MR LAW CHI-KWONG (in Cantonese): Madam President, part (a) of Mr LEE Cheuk-yan's question asks about the entry points and remunerations of contract staff to be recruited by various government departments. The Secretary has only given an account of the principle, failing to answer Mr LEE's question in specific details regarding such items as the actual employment conditions, the number of departments that have adopted this principle and the entry points offered by various departments. Does the Government not intend to answer, not know how to answer or simply muddle through?

SECRETARY FOR THE CIVIL SERVICE (in Cantonese): Madam President, the spirit of devolution is when certain organizations or individual colleagues have been authorized to do a certain task, they have full powers to explain it to the public and take the full responsibility of all consequences. For the present example, if the pay is set too low, even lower than the market level, a very realistic outcome will be that we are unable to find the manpower we need and we will have to advertise the recruitment again the following week. If the pay is set too high, which of course cannot exceed our set level, it can be adjusted according to the market level the next time. After the guidelines are issued from the central, we will not query the over 70 departments again whether the law is unreasonable, the pay not in line with the market level and so on every time when they conduct a recruitment exercise. These should be left to the charge of the Heads of Department.

MISS CHAN YUEN-HAN (in Cantonese): Madam President, earlier the Director of Social Welfare told us here that the Government has frozen the recruitment of permanent civil servants in this year and that is why they employ staff on non-civil service terms. May I ask the Secretary whether this has anything to do with the spirit of imposing "a firm grip " and "temporary freeze"? The Director of Social Welfare has told us in this Chamber that because the Government freezes the recruitment of civil servants, they employ staff on non-civil service terms and offer a 70% pay. Is there any connection between this and the "firm grip" and "temporary freeze" mentioned by the Secretary just now?

SECRETARY FOR THE CIVIL SERVICE (in Cantonese): Madam President, insofar as I understand it, the Director of Social Welfare has indeed mentioned that because of the freeze on the growth of the civil service establishment this year and their urgent need for manpower which cannot be met by redeployment of their existing staff, he feels it necessary to recruit extra staff on non-civil service contract terms and provide those services by means of special arrangements.

PRESIDENT (in Cantonese): Members, since we have already spent almost 16 minutes on this question, we have to proceed to the third question.

Development of Chinese Medicine

3. MR CHAN WING-CHAN (in Cantonese): Madam President, regarding the measures to support the development of Chinese medicine in Hong Kong, will the Government inform this Council whether it has any plans:

(a) to employ public funds to train Chinese medicine dispensers; if so, the details of it; if not, the reasons for that; and

(b) to amend the Employment Ordinance (Cap. 57) to provide for the acceptance of the medical certificates issued by recognized Chinese medicine practitioners as valid documents for the purpose of sick leave certification; if so, the timing for the introduction of the amendment bill into this Council; if not, the reasons for that?

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

(a) In order to facilitate Hong Kong's development as an international centre for Chinese medicine, the Government has taken initiatives to strengthen the training of professionals in Chinese medicine. The University Grants Committee has provided funding support for the Hong Kong Baptist University to offer a degree programme in Chinese medicine in 1998. It will also provide funding support for the Chinese University of Hong Kong to offer a similar programme in 1999. The two programmes have comprehensive coverage in Chinese medicine, and traditional Chinese pharmacology constitutes an integral part of the curriculum. The two programmes will offer a total of some 40 training places each year.

The Vocational Training Council (VTC) and the Employees' Retraining Board (ERB) also plan to provide training in Chinese medicine dispensing. The VTC plans to run a higher certificate course in Chinese medicine dispensing and manufacturing in 2000, providing about 20 to 40 training places. The ERB will provide a Certificate course in Chinese Medicine Dispensing (Elementary Level) later this year in collaboration with the School of Professional and Continuing Education of the University of Hong Kong. The course will offer about 60 training places.

The Hong Kong Baptist University and the University of Hong Kong operate a total of three self-financed courses in Chinese Medicine Dispensing, enrolling more than 135 students each year. Besides, the University of Hong Kong plans to offer a self-financed Bachelor of Pharmacy in Chinese Medicine programme in 1999.

(b) Although the Chinese Medicine Bill has yet to be passed by the Legislative Council, the Labour Department has already set up a working group to study the impact of the Chinese medicine practitioner registration system including the sick leave certificates issued by Chinese medicine practitioners on the existing labour legislation.

The working group is now collecting data and information and soliciting the views of the practitioners, academic institutions, medical bodies and the insurance industry on this issue. We expect that the working group will complete the study and put forward a report later this year. The relevant Policy Bureaux and departments of the Administration will then decide on the way forward after careful consideration including whether amendments to the Employment Ordinance and the Employees' Compensation Ordinance will be necessary.

MR CHAN WING-CHAN (in Cantonese): Madam President, many people like to consult Chinese medicine practitioners in Hong Kong. The Chinese medicine practitioners of the eight clinics run by the Federation of Trade Unions, for example, received a total of almost 400 000 visits last year. It is obvious that Chinese medicine practitioners are in great demand. From part (a) of the main reply, we learn that the courses on Chinese medicine dispensing will not begin until 2000 and they will be offering a total of 100 places only. Will it be too few to meet the demand after the implementation of the Chinese medicine practitioner registration system? Moreover, the Secretary has not given us a clear answer as to when the bill on making the sick leave certificates issued by Chinese medicine practitioners a valid document will be submitted to this Council. May I ask the Secretary whether there is a preliminary timetable for the amendment of the Employment Ordinance and the Employees' Compensation Ordinance?

PRESIDENT (in Cantonese): Mr CHAN has raised two supplementary questions at one go. Secretary, if you have the information on hand, please try to answer them to save time.

SECRETARY FOR EDUCATION AND MANPOWER (in Cantonese): Madam President, I will respond to the two supplementary questions. The first is about whether there are too few places offered by the training courses on Chinese medicine dispensing. I feel that the number of places offered must depend on the market demand. In fact, many people are dispensing Chinese medicine every day. Hence I think that it all depends on whether the market has further need for the advancement of the profession.

Concerning the second supplementary question, as our working group has yet to finish the report, they cannot set a definite timetable at the moment. However, should amendments to these two Ordinances be deemed necessary, our preliminary plan is to submit bills to the Legislative Council in the next Legislative Session.

DR LEONG CHE-HUNG (in Cantonese): Madam President, the Secretary has mentioned about opening a series of training courses on Chinese medicine dispensing, which is a good thing. May I ask the Secretary whether these courses are targeted at the newcomers or those who are already in the profession? If the courses are intended for newcomers, are there any chances for the practising dispensers to receive training? If the courses are meant for the practising dispensers, is the number of places sufficient to train so many dispensers all at the same time?

SECRETARY FOR EDUCATION AND MANPOWER (in Cantonese): Madam President, from the information available to me, these training courses are basically open to all. There is no restriction on whether the applicants should be newcomers or those already in the business. As I have just said, as the bill on the registration of Chinese medicine practitioners has yet to be passed, there is much to find out about how much room there is for the Chinese medicine dispensing trade to develop, how many people are willing to take the courses, and whether the Chinese Medicine Bill will prescribe any professional demand in this regard. However, at least we are beginning to offer courses in this field. We are always prepared to review whether there is a need to increase the number of places concerned according to the number of applicants and enrolments.

MR HO SAI-CHU (in Cantonese): Madam President, in the last paragraph of his main reply, the Secretary has said that he will consult a number of bodies. May I ask whether he will consult the Labour Advisory Board (LAB) before making any decision on this issue, as there are representatives of employers and employees in the LAB and it is well versed in the labour legislation?

SECRETARY FOR EDUCATION AND MANPOWER (in Cantonese): Madam President, we will definitely do so. On any questions regarding the Employment Ordinance and the Employees' Compensation Ordinance, we will generally consult the LAB.

MR LEE KAI-MING (in Cantonese): Madam President, in part (b) of the main reply, the Secretary has said that the Chinese Medicine Bill has yet to be passed by the Legislative Council. When we examined the Bill this morning, the Government told us it hoped to have this Bill passed by June. However, now the Secretary has said that they will submit a report on this issue later this year and then study whether amendments to the Employment Ordinance are necessary. May I ask the Secretary, if they expect to pass the Bill in June, would it not be a bit too slow for the Government to take the above action? Will it expedite the process?

SECRETARY FOR EDUCATION AND MANPOWER (in Cantonese): Madam President, as far as I understand it, even after the Chinese Medicine Bill is passed, a registration system still needs to be established. The information I have on hand indicates that the registration of Chinese medicine practitioners will not be launched until 2000. Therefore, we feel that if decisions can be made with respect to the Employment Ordinance and the Employees' Compensation Ordinance this year, we can match the timetable for the implementation of the Chinese Medicine Ordinance and the registration of Chinese medicine practitioners. I can assure the Honourable Member that in the meantime we will work closely with the Health and Welfare Bureau to ensure the co-ordination between both bureaux.

MISS CHAN YUEN-HAN (in Cantonese): Madam President, in part (b) of the main reply, the Secretary has said that it is necessary to study the impact of the Chinese medicine practitioner registration system and the sick leave certificate issued by Chinese medicine practitioners on the existing labour legislation. As Mr LEE has just said, the Bill under scrutiny now states clearly that the status of Chinese medicine practitioners are the same as that of the practitioners of western medicine. Since both enjoy the same status, what else needs to be studied? Is the Education and Manpower Bureau prepared to vote against giving Chinese medicine practitioners an equal status as practitioners of western medicine? If both of them are doctors, why should there be such a study then? The amendment in regard to the sick leave certificate should be proposed altogether to the effect that sick leave certificates issued by practitioners of either western medicine or Chinese medicine are both valid. What else needs to be studied? May I ask the Secretary, since the law has clearly stated that they are doctors practising Chinese medicine, why then should the two practitioners, both being doctors, be treated differently?

SECRETARY FOR EDUCATION AND MANPOWER (in Cantonese): Madam President, as a matter of fact, it is necessary to conduct the studies. Of course, the general principle is that when the registration system is established in future, the practitioners of Chinese medicine will enjoy the same status as those practising western medicine, but in respect of the issuance of sick leave certificates by the former, we must consider the timetable and procedure of the implementation. Moreover, the Chinese Medicine Council to be established under the Chinese Medicine Bill may wish to set down some guidelines in relation to this. Since Chinese medicine practitioners have never issued sick leave certificates in the past, it warrants consideration as to whether it is necessary to set down some standardized rules and principles to be observed by all. At the same time, if we recognize the sick leave certificates issued by Chinese medicine practitioners as valid documents, we must also listen to the views of employers and the insurance industry. Therefore, I think that the principle is an issue, but other details also need to be worked out.

MR LEE CHEUK-YAN (in Cantonese): Madam President, will the Government amend the Chinese Medicine Ordinance accordingly, stating that sick leave certificates issued by Chinese medicine practitioners will be recognized as a valid document in principle?

SECRETARY FOR EDUCATION AND MANPOWER (in Cantonese): Madam President, concerning whether we may lay down a view in principle in the Chinese Medicine Ordinance regarding sick leave certificates issued by Chinese medicine practitioners without further details, I think I can only put Mr LEE's view on record. I must consult the views of our legal adviser and the Health and Welfare Bureau.

MR LEE CHEUK-YAN (in Cantonese): Madam President, the Secretary for Health and Welfare is sitting right next to the Secretary for Education and Manpower, will she agree to it in principle?

SECRETARY FOR HEALTH AND WELFARE (in Cantonese): Madam President, the Chinese Medicine Bill has been submitted to the Legislative Council for scrutiny. The Bill concentrates on the general regulations on the registration of Chinese medicine practitioners. As for the amendments to other ordinances, I wish to do so through some other bills. As Mr LEE Kai-ming has also mentioned, it is our wish to have the Chinese Medicine Bill passed in June, but if new provisions are added at this stage, consultation has to be conducted anew, and I worry that it will delay the deliberations on the Bill.

MR CHAN KWOK-KEUNG (in Cantonese): Madam President, since we are going to offer a certificate course in Chinese medicine dispensing (elementary level), may I ask the Secretary whether intermediate and advanced level courses will be offered in future; and how long will the training last?

SECRETARY FOR EDUCATION AND MANPOWER (in Cantonese): Madam President, I believe that it all depends on the response to the elementary course before we can decide whether or not to offer courses of higher levels. I am prepared to follow up on this. If I have the relevant information, I will certainly pass it to Mr CHAN. (Annex)

MISS CYD HO (in Cantonese): Madam President, the Secretary has said that a working group under the Labour Department is studying the regulation and principles concerning Chinese medicine practitioners' issuance of sick leave certificates in future. May I ask the Secretary, will there be any difference between the regulations and principles governing sick leave certificates issued by Chinese medicine practitioners and those by practitioners of western medicine? If not, why should there be such a study now?

SECRETARY FOR EDUCATION AND MANPOWER (in Cantonese): Madam President, it is still a new thing that Chinese medicine practitioners are registered as certified doctors. The existing Employment Ordinance and the Employees' Compensation Ordinance still do not recognize the sick leave certificates issued by Chinese medicine practitioners. As a matter of fact, we have not had registered Chinese medicine practitioners yet. I feel that we must do everything cautiously. At least, we have to understand the situation thoroughly and solicit the views of all bodies concerned. Other than the general principles, we must ensure that the procedures and other areas are all properly done before we can make the final decision.

PRESIDENT (in Cantonese): Owing to the time constraint, we must now proceed to the fourth question.

Elimination of Piracy Activities

4. MR MA FUNG-KWOK (in Cantonese): Madam President, regarding the elimination of the activities of manufacturing and selling pirated audio and visual products, will the Government inform this Council:

(a) of the number of operations jointly conducted by the police and the Customs and Excise Department to clamp down on the manufacture and sale of pirated goods in each of the past 12 months, and the outcome of these operations; if no joint operations have been conducted, the reasons for that;

(b) whether it knows if the sale of pirated audio and visual products is manipulated behind the scenes by criminal syndicates; and

(c) whether on completion of an initial analysis of the views expressed by the public in response to the consultation paper on "Combating Intellectual Property Rights Infringement", it will consider extending the application of the Organized and Serious Crimes Ordinance (Cap. 455) to the sale of pirated goods under the manipulation of criminal syndicates?

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

(a) The police have always liaised closely with the Customs and Excise Department (Customs) in combating intellectual property rights infringement activities such as copyright piracy. In the 12 months ending March this year, the Customs and the police have carried out four joint raids against shops involved in the sale of pirated discs, arresting 54 persons and seizing over 350 000 copies of pirated optical discs and other articles worth over $7.3 million in total.

In 1998, the police referred more than 320 suspected copyright piracy or trade mark counterfeiting cases to the Customs, and as a result more than 420 people were arrested and 1.8 million copies of pirated optical discs were seized. The police referred 172 pieces of intelligence/information to the Customs for investigation in 1998. In the first quarter of 1999, 105 piracy or trade mark counterfeiting cases were referred to the Customs by the police, resulting in the arrest of over 140 persons and the seizure of 640 000 copies of pirated optical discs.

The Customs will continue with its vigorous enforcement action against intellectual property rights infringement activities at both the production and retail levels in order to enhance protection of intellectual property rights.

The police have also undertaken that they will continue to support the Customs in providing intelligence, step up efforts in investigating and combating any organized or triad related piracy and counterfeiting activities.

(b) We have consulted the police as to whether organized criminal syndicates, including triad members, are involved in piracy activities. According to the police, although individual infringers may have triad background, there is no evidence that such activities are controlled by criminal syndicates or triads. The police advise that triad involvement in the sale of pirated discs is mostly occasional, unlike offences such as extortion and blackmailing which are more commonly associated with triad members.

(c) One of the options put forward in the public consultation paper issued by the Trade and Industry Bureau in late February is that the special investigation and enforcement powers available under the Organized and Serious Crimes Ordinance (Cap. 455) should be used to combat copyright piracy and trade mark counterfeiting offences. In the public consultation exercise which ended recently, most of the respondents who have expressed their opinions on this option, including members of the public and organizations, support this proposal. We will actively follow up those options which are widely supported by the public and which are less controversial. The necessary legislative amendments will be prepared as soon as possible for the Council's deliberation.

MR MA FUNG-KWOK (in Cantonese): Madam President, according to the reply given just now, the Secretary said the police had no evidence to show that piracy activities are organized crime. Will the Government inform this Council whether its interpretation of "organized criminal syndicates" is that only triad societies are organized criminal syndicates? According to estimates of the trade, at least over $10 billion annually is involved in the production of illegal discs. In such a lager scale activity which involves such areas as illegal importation, manufacturing, wholesale, distribution and retailing, there must be gigantic and organized networks in operation. How will the Government understand these networks? Is it true that activities not involving triad societies or not manipulated by triad societies are not treated as organized crimes? This is the first question. Furthermore, the police indicated the sale of pirated discs are mostly occasional .......

PRESIDENT (in Cantonese): You can only ask one supplementary question at a time. If you want to ask one more, you need to press the button.

MR MA FUNG-KWOK (in Cantonese): My question is: How will the Government interpret "organized crime"?

SECRETARY FOR TRADE AND INDUSTRY (in Cantonese): We consulted the police on that. They had their own definition of criminal syndicates and organized crime. As I said in the main reply, according to the evidence held by the police, although individual infringers may have triad background, the police do not regard that such activities are controlled by criminal syndicates or triads.

MR NG LEUNG-SING (in Cantonese): Madam President, does the Government think the joint raids by the Customs and the police were effective? If so, will it increase the frequency of the raids or even conduct raids on a regular basis?

SECRETARY FOR TRADE AND INDUSTRY (in Cantonese): Madam President, we certainly think the joint raids by the Customs and the police were effective, and they will continue these raids. But we do not think in combating piracy activities we need to rely solely on joint raids. The Customs will step up such actions to combat piracy activities. For instance, last Friday, the Commissioner announced he would set up a task force for the sole purpose of combating piracy activities on the retail level.

MR HUI CHEUNG-CHING (in Cantonese): Madam President, several days ago, a trade delegate of the United States expressed concern that the Hong Kong Government had not put in sufficient resources to combat piracy activities. Although the newspaper reported Secretary CHAU Tak-hay did not agree to that, will the Secretary inform this Council whether any measures have been taken to step up activities to combat piracy activities and to stop the United States from using this as a pretext to adversely affect the economic activities of Hong Kong?

SECRETARY FOR TRADE AND INDUSTRY (in Cantonese): Madam President, first of all, I must stress we have never been hesitant in our efforts to combat piracy activities. The Customs has been employing extra manpower to combat piracy activities. In the past five years, the manpower devoted to this area of work has been doubled. Despite the economic downturn, we will increase the manpower for this by 20%. As I said, last Friday, the Commissioner indicated he would set up a task force for the sole purpose of combating piracy activities on the retail level. The remarks by the trade delegate of the United States were purely personal. I think the Government has been very active in its efforts to curb piracy activities and additional manpower has been deployed for the purpose.

MR ERIC LI (in Cantonese): I often failed to understand the way the Government carried out its enforcement actions and the division of labour in these actions. From the reply given, it seems the joint raids were not systematic, that is, they were done on a haphazard basis. From the Secretary's reply, the police had provided a lot of intelligence to the Customs. But the reply given in yesterday's Public Accounts Committee was completely different. The Government said the police did not patrol these shops and all the intelligence was supplied by the Television and Entertainment Licensing Authority (TELA) which carried out the inspections. The Customs then acted on the intelligence. As I understand many of the departments in the Government are doing similar work, I would like to ask a question on the division of labour and efficiency. There are now four teams from the TELA which regularly inspect shops which sell pirated discs. Why have they not supplied any information to the Customs for action? The second part of my question is ......

PRESIDENT (in Cantonese): You can only ask one supplementary question at a time.

MR ERIC LI (in Cantonese): My second part relates to efficiency. (Laughter) Since the police know it is unlawful to sell pirated discs, why do they not act on the intelligence immediately?

SECRETARY FOR TRADE AND INDUSTRY (in Cantonese): In combating copyright piracy, the Customs has been liaising closely with the police. Where necessary, they will conduct joint raids. Police officers on patrol will not wink at piracy activities. When such activities are detected, police officers will inform the Police Headquarters, which will immediately follow the matter up with the Customs. As I said, the police have referred more than 300 cases to the Customs. The reply given at the meeting to which the Honourable Member referred is, as far as I know, about premises kept for the purpose of prostitution. It was not related to piracy activities.

MR SIN CHUNG-KAI (in Cantonese): Madam President, people in the trade told me licensed disc manufacturers could produce discs sufficient for a month's demand if they work for one day. That means the total production capacity far exceeds the demand for original products. How would the Government check whether licensed manufacturers have been involved in piracy activities? The Secretary has responded about inspection on the retail level, but how would the Government conduct effective checks on local manufacturing?

PRESIDENT (in Cantonese): Mr SIN, what is the relationship between your supplementary question and the main question?

MR SIN CHUNG-KAI (in Cantonese): Madam President, this is a question about action against piracy activities. My question is about ways to effectively combat piracy activities. The logic is simple: the Government issued a number of licences ......

PRESIDENT (in Cantonese): I accept your question, to save time on arguing about its relevance. (Laughter)

SECRETARY FOR TRADE AND INDUSTRY (in Cantonese): Madam President, I understand the Customs does conduct surprise checks on licensed manufacturers. They also deployed extra manpower when the Prevention of Copyright Piracy Ordinance came into effect. This not only caters to the examination of applications for manufacturer licences but also helps step up the inspection of workshops.

PROF NG CHING-FAI (in Cantonese): Madam President, will the Government inform this Council what evidence they had when the United States accused Hong Kong for not being vigilant enough in its action against piracy activities? If they do not have any evidence, does it not show that the United States are not being reasonable? I hope the Government can give a response to that.

SECRETARY FOR TRADE AND INDUSTRY (in Cantonese): Madam President, firstly, as I indicated, the remarks made were just some personal ones. As far as the Government is concerned, we have been doing all we can to combat piracy activities because we believe this is beneficial to the economy of Hong Kong and this is what Hong Kong needs to do to facilitate our development. We will not act on the remarks of a certain country. Members may be aware that for many years the Government has been employing extra staff to combat piracy activities with a view to improving the situation in Hong Kong. We also amend laws and enact new laws to facilitate our fight against piracy activities.

MR MA FUNG-KWOK (in Cantonese): Madam President, in fact, Hong Kong manufacturers can manufacture over 15 million discs daily but the demand for original discs is probably 100 000 copies. This is a sharp contrast and I wonder how the Government interprets this phenomenon and why it thinks no syndicates are behind the scene. Will the Secretary inform this Council how the four joint raids in the past 12 months were conducted? Did the Customs discover the activities but could not manage to take actions alone and therefore joined hands with the police for extra support for the raids or did the police discover the piracy activities and worked together with the Customs? The major concern of the industry is: Why did the police not take the initiative but referred the matter to the Customs? I think this is a crucial point and I hope the Government can give an answer to it.

SECRETARY FOR TRADE AND INDUSTRY (in Cantonese): Madam President, I understand that it was the Customs which approached the police for the joint raids.

PRESIDENT (in Cantonese): Although some Members are still waiting for their turn to raise supplementary questions, we need to go to the fifth question as we have spent more than 16 minutes on this question.

Supervision over Kindergartens

5. MR YEUNG YIU-CHUNG (in Cantonese): Madam President, it is reported that there are kindergartens found to be operating without registration, over-enrolled and over-charging tuition fees and incidentals. In this connection, will the Government inform this Council:

(a) of the number of complaints received by the Education Department (ED) in each of the past three years involving a breach of the stipulations for operating kindergartens, and whether the ED has investigated such complaints; if so, the results of the investigations;

(b) whether it has assessed the adequacy of the ED's supervision over kindergartens, and if there is any maladministration on the part of the ED in handling those cases; and

(c) of the measures taken by the ED to prevent the recurrence of similar incidents?

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

(a) All schools, including kindergartens, are required to comply with the provisions of the Education Ordinance and the Education Regulations. The ED monitors the operation of kindergartens primarily through two means:

On the one hand, the ED regularly carries out inspection visits of registered kindergartens to check whether they are operating in accordance with stipulated requirements, to assess the standard of school operation, and to make suggestions for improvements in various areas. In the past three years, a total of 2 136 inspection visits were made to registered kindergartens. It was revealed through these inspections that 180 kindergartens had over-enrolled and two had overcharged. Details are as follows:

School Year	No. of Inspections	Over- enrolment	Over-charging of tuition fees/incidentals
1996-97	1 040	102	0
1997-98	766	49	0
1998-99 (as at mid February 1999)	330	29	2

The ED has already asked these kindergartens to put a stop to the over-enrolment of students and to refund overcharged fees to parents.

On the other hand, whenever complaints are received from the public about kindergartens failing to comply with the Education Ordinance, the ED will institute investigations and take necessary steps to rectify the irregularities. Over the past three years, the ED received a total of 25 complaints involving kindergartens operating prior to completion of registration procedures, over-enrolling, and over-charging tuition fees/incidentals. A total of 18 cases were substantiated. The detailed breakdown is set out below:

School Year	Operation prior to completion of registration (number of substantiated cases)	Over-enrolment (number of substantiated cases)	Over-charging of tuition fees/incidentals (number of substantiated cases)
1996-97	1	1	1
	(1)	(0)	(1)
1997-98	7	1	6
	(5)	(0)	(4)
1998-99 (as at 31 March 1999)	0	4 (4)	4 (3)

The ED has laid down clear procedures on handling of complaints and all complaints received are investigated. For cases that are substantiated, verbal or written warnings will be issued to the offending kindergartens. They will be notified of the irregularities and required to take early action to rectify the situation. Serious cases will be referred to the police for further action. These procedures have been properly followed in respect of all recent complaints. The ED will continue to follow up on the cases to ensure that improvements are made.

(b) and (c)

We agree that there is scope to further improve the supervision of kindergartens. Indeed, we take a serious view of the recent incidents of kindergartens contravening the provisions in the Education Ordinance and Education Regulations and have introduced the following measures to prevent recurrence of similar incidents:

(i) Registration procedures of kindergartens

The ED has convened an inter-departmental meeting in early February 1999 to consider how existing procedures may be simplified so as to speed up the processing of applications for school registration.

(ii) Monitoring system

The ED has issued an administrative circular in February to remind all kindergartens of the requirement to comply with the relevant legislation. Apart from conducting regular inspections of kindergartens, the ED will also step up the monitoring of kindergartens which have previous records of over-charging or over-enrolment by checking more closely their fees as well as the number of intake and classes to be run in the next academic year.

(iii) Publicity

A list of registered schools as well as kindergartens undergoing the process of registration is kept in the District Education Offices for access by parents and the public; it is also uploaded to the ED website. The list is updated regularly. The ED will continue with publicity campaigns, including the production of Announcement of Public Interests and the publication of leaflets, to raise parents' awareness of the curriculum and facilities provided by kindergartens. To enhance transparency, the ED is also considering whether kindergartens should be required to compile school profiles for reference by parents and the public.

(iv) Prosecution procedures

An inter-departmental working group, including representatives from the police, has been set up to look into ways of improving the prosecution procedures.

I am aware that the Office of the Ombudsman has decided to conduct a direct investigation of the current system regarding the registration and inspection of kindergartens. The ED will fully co-operate with the Office of the Ombudsman to complete this investigation.

MR YEUNG YIU-CHUNG (in Cantonese): Madam President, I asked in part (b) of my question if there was any maladministration on the part of the ED in handling those cases, but it appears that the Secretary has not answered this particular part. I would like to raise the question clearly one more time: Does the Education and Manpower Bureau think that the ED has not exercised effective supervision in the present cases and there is maladministration on the part of the ED?

SECRETARY FOR EDUCATION AND MANPOWER (in Cantonese): Madam President, at the present moment, I cannot make a judgment as to whether there is maladministration by merely basing on the relevant information and the report I obtained from ED. However, I pointed out in the last paragraph of the main reply that the Office of the Ombudsman had decided to conduct a direct investigation of the current system regarding the registration and inspection of kindergartens. The investigation will be finished within four months. I will follow the investigation closely and read the investigation report in order to make a judgment.

DR TANG SIU-TONG (in Cantonese): Madam President, I would like to ask about the prosecution procedures mentioned in the main reply. Under which ordinance does the Government prosecute the kindergartens that over-enrol or over-charge?

SECRETARY FOR EDUCATION AND MANPOWER (in Cantonese): Madam President, we institute prosecution with the power conferred by the Education Ordinance.

MR CHEUNG MAN-KWONG (in Cantonese): Madam President, the main reply reveals that, in the past three years, there were almost 200 cases of kindergartens violating the relevant regulations and ordinances, which include operation without registration, over-enrolment and over-charging of tuition fees. In a meeting of the Legislative Council Panel on Education, the Director of Education, Mrs Fanny LAW, also admitted that the law had not been strictly enforced. So how does the Secretary still think that no maladministration is involved? How will the Secretary deal with such cases of slack enforcement and maladministration? Should anyone be held responsible?

SECRETARY FOR EDUCATION AND MANPOWER (in Cantonese): Madam President, I have already said that the Office of the Ombudsman had decided to conduct a direct investigation of the current system regarding the registration and inspection of kindergartens in order to find out whether there is procrastination in the procedures or a lack of co-ordination and whether improvement is needed. I hope to receive the investigation report first before making a judgment.

MR CHAN KAM-LAM (in Cantonese): Madam President, a kindergarten was recently found to be operating without registration and its supervisor was fined $10,000 but a criminal record was not left. While such penalties cannot act as a deterrent and so many cases of irregulatrities occured in the past three years, will the Secretary tell us what measures the Government has taken to ensure that similar incidents will not recur?

SECRETARY FOR EDUCATION AND MANPOWER (in Cantonese): Madam President, we are giving consideration to two aspects: firstly, if we should step up prosecution against irregularities; secondly, if we should increase the penalties prescribed in existing laws.

MR HO SAI-CHU (in Cantonese): Madam President, from the first table in the main reply we can see that the number of inspections in the past three years has been on the fall. It dropped from over 1 000 to 300-odd and the figure for the whole year of 1998-99 does not exceed 400 even after an adjustment in the calculation is made. The number of over-enrolment is smaller, but it is due to the dwindled number of inspections, rather than because of less cases of over-enrolment. Will the Secretary inform us why the number of inspections has decreased? Is it because the Administration is already very satisfied with the present situation? Or should inspection be stepped up so as to ensure that kindergartens really comply with the regulations?

SECRETARY FOR EDUCATION AND MANPOWER (in Cantonese): Madam President, when compared with 1996-97, the number of inspections indeed saw a drop in 1997-98. However, the figure for 1998-99 was counted only up to mid-February, so the number of inspections this year may not necessarily be less. Of course, the number of inspections hinges on the manpower available. Other than the regular inspection visits, as pointed out in the main reply, we also conduct investigation upon receipt of complaints. With the co-operation of the Office of the Ombudsman and the ED in the direct investigation of the current system regarding the registration and inspection of kindergartens, I hope that a package of improvement proposals can be drawn up in the future.

MR HO SAI-CHU (in Cantonese): It seems that the Secretary's answer was wrong. I said that even if I made adjustment to the figure of 1998-99, it would not exceed 400 and so we could immediately see that the number was dwindling every year and the rate of decrease was almost 50%. The Secretary should not say that the figure of 1999 should not be quoted because it was only a figure counted up to mid-February therefore the number of inspections this year might not necessarily be less, because if the figure is counted up to mid-February, that means 10.5 months have already passed in the year 1998-99 and there are only one and a half months to go. Under such circumstances, I arrived at the figure of 400 after making adjustment, that means the number of inspections is falling every year, not just the first two years. Therefore, I would like to ask the Secretary to rectify the answer he just gave me, that is, the figure of the last year was not necessarily less. Does the Secretary agree with me on this point?

PRESIDENT (in Cantonese): Mr HO, during the question time, you should not only be querying the Secretary's answers. I will ask the Secretary if he has anything to add. If you are not satisfied with the Secretary's reply, there is nothing the Chair can do.

SECRETARY FOR EDUCATION AND MANPOWER (in Cantonese): Madam President, I would like to elucidate one point. What we are talking about now is not the fiscal year but the academic year. The academic year starts in September and lasts until the end of August of the next year. Therefore, mid-February has gone only about halfway.

MR YEUNG YIU-CHUNG (in Cantonese): Madam President, according to the main reply, the inspection visits in 1996-97 and 1997-98 have never found any cases of over-charging tuition fees. But actually seven complaints have been received from parents in this respect. Will the Secretary tell us whether the 1 700 strong times of inspection were merely "skimming the surface" and did not serve any useful purpose?

SECRETARY FOR EDUCATION AND MANPOWER (in Cantonese): Madam President, I have already said many times that we are just listing out the figures. The Office of the Ombudsman has launched a direct investigation into the matter. With regard to the questions raised by many Honourable Members today, I hope that they can be reflected in the future investigation report.

PRESIDENT (in Cantonese): Sixth question.

Protection of Patients' Rights

6. MISS CHAN YUEN-HAN (in Cantonese): Madam President, with regard to the protection of patients' rights, will the Government inform this Council whether it has plans to:

(a) introduce legislation requiring all medical services providers to issue to their patients receipts with details of the charges; and

(b) conduct a study on the introduction into Hong Kong the system of "separation of prescribing and dispensing" across-the-board; if it has such plan, the timetable of that; if not, the reasons for that?

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

(a) At present, the Hospital Authority issues payment receipts to its patients based on the services it has provided. In the private sector, following the advice in "the Guide to Hospital Standards" as endorsed by the then Medical Development Advisory Committee, all private hospitals should provide payment receipts to their clients, with details on individual items shown in the receipts. On out-patient services, as a general practice, private practitioners would, on request, issue receipts to clients as proof of payment. Details on items charged may also be provided.

At present, there does not appear to be a serious problem regarding the issue of receipts, or the details of the charges, by medical services providers to their patients. We do not consider it necessary at present to provide legislation to enforce this requirement. Should the situation become unsatisfactory, we shall discuss the issue with the medical service profession to find ways for improvement.

(b) The public medical sector has already practised the system of "separation of prescribing and dispensing". Under the present arrangement, public doctors, after consultation, issue prescriptions to the patients, who then obtain their medicines from the pharmacists and dispensers. The pharmacists and dispensers also provide the patients with drug counselling services. In the private sector, the present one-stop arrangement, whereby the medical practitioners provide medicines directly to the patients, has also worked well for Hong Kong for many years. This arrangement provides convenience to the patients and caters for situations where the immediate use of medicines is necessary. On the other hand, patients at present have the right to choose not to obtain the medicines from their doctors if they so wish. Instead, they may request doctors to issue prescriptions and have the prescriptions filled by pharmacists. The current system provides patients with the freedom to choose the method that best suits their needs.

MISS CHAN YUEN-HAN (in Cantonese): Madam President, I would like to talk about two of the recommendations made in the report of the Harvard team. The first recommendation is that there should be a price list for each hospital; and the other recommendation is on the introduction of a system of "separation of prescribing and dispensing". Though the Secretary said that the system of "separation of prescribing and dispensing" is already in practice, I doubt if a patient will dare to ask his doctor to issue a prescription only. I believe that most patients will not dare to do so, so what will the Administration do in order to rectify this situation? Since the Harvard team has recommended that the Administration should take steps to improve these two areas, I cannot understand why the Administration still seems to believe that there is no need for improvements?

SECRETARY FOR HEALTH AND WELFARE (in Cantonese): Madam President, since later on we are going to debate on the Harvard team report in detail, I believe Miss CHAN will have an opportunity to voice her opinion when the time comes. As to whether there should be a one-stop arrangement, whereby doctors provide medicines direct to the patients or whether doctors should issue prescriptions only, it is entirely for the patients' decision. We know that some patients have actually asked their doctors to issue prescriptions only. I believe what the Administration can do is to step up our efforts on educating the patients on their rights. I do not think that patients will dare not make such a request, and so far, we have not received any specific complaints in this respect. If the problem is serious, we will surely have received complaints.

DR LEONG CHE-HUNG (in Cantonese): Madam President, as regards the system of "separation of prescribing and dispensing", the Administration indicated in its reply that the arrangement of obtaining medicine direct from private medical practitioners is more convenient to the patient. Will the Administration conduct a random sampling survey at the medical clinics, to see whether patients prefer the one-stop arrangement or prescriptions-only arrangement? Without a survey, how will the Administration be able to collect information? If the Administration is going to carry out a survey, how then will it be carried out?

SECRETARY FOR HEALTH AND WELFARE (in Cantonese): Madam President, I have taken note of Dr LEONG's suggestion and will give it serious consideration. As regards the issue of prescribing and dispensing, I would like to talk about the practice of Chinese medicine practitioners which provides more convenient services to members of the public. Apart from providing consultation services, there is also a dispensary at the office of the Chinese medicine practitioners, and if the office is in the urban area, it will also provide patients with the service of preparing herbal medicine. This is an example where doctors provide different services in accordance to the demands of patients, and at present, patients can choose to ask their doctors for prescriptions only or to get medicines from the clinic as well.

MR CHAN WING-CHAN (in Cantonese): Madam President, it is mentioned in paragraph (b) of the main reply that patients have the right to choose not to obtain medicine from their doctors and request for prescriptions instead so that they could have the prescriptions filled out at drug stores in order to save some money. At present, doctors charge about $200 for consultation and medicine, but if patients choose to have their prescriptions filled out elsewhere, doctors will still charge $180 to $200 for consultation, then how can patients' rights be protected?

SECRETARY FOR HEALTH AND WELFARE (in Cantonese): Madam President, I think the most important link in the protection of patients' rights is the patients' right to know, and patients should be informed of the prices of various services before visiting the doctor. In fact, a lot of medical clinics have compiled a fee list for patients' reference. There are different kinds of medical doctors, and as far as I understand it, the charges for dental service are usually more clearly listed and many dentists have clearly listed out their charges for various services. I believe that patients will certainly have the right to request their doctors for such information.

MR CHAN WING-CHAN (in Cantonese): Madam President, the Secretary has not answered my question. It is true that dentists have a charge list, but this is certainly not the case with general practitioners, for their consultation fees are usually not listed, not to mention the charges for medicine.

SECRETARY FOR HEALTH AND WELFARE (in Cantonese): Madam President, I believe that individual patients can certainly ask their doctors for such information.

MR MICHAEL HO (in Cantonese): Madam President, I would like to ask a follow-up question with regard to the Secretary's response to Dr LEONG Che-hung's supplementary question. If the Administration conducted surveys at medical clinics and asked members of the public whether they wish to have "separation of prescribing and dispensing", would such surveys yield meaningful answers? Do members of the public know that there are actually different ways of doing things in other places? I think it all really depends on the policy of the Administration. If the Administration thinks there should be a system of "separation of prescribing and dispensing", then it should be introduced, but if the Administration thinks that it is not feasible, then it should not be implemented. The Administration should not wait for an answer from the public before making a decision, for the decision should have been made in the course of deliberation on the medical policy. Can the Secretary tell us what are the procedures for formulating a government policy?

SECRETARY FOR HEALTH AND WELFARE (in Cantonese): Madam President, our present practice is to consider which system can best serve the needs of both patients and doctors. Since patients can now choose not to obtain medicine from their doctors, we do not think there will be serious difficulties in implementing the system of "separation of prescribing and dispensing" under the existing system. It may not be necessary for us to lay down regulations by way of legislation, for the enactment of legislation means regulations. Since choices are already available, the enactment of legislation may not be necessary.

PRESIDENT (in Cantonese): Mr HO, has the Secretary not answered your question?

MR MICHAEL HO (in Cantonese): Madam President, my supplementary question is: What are the procedures for formulating such a policy? And can the Administration get a meaningful answer from members of the public?

SECRETARY FOR HEALTH AND WELFARE (in Cantonese): Madam President, in reply to Dr LEONG's supplementary question, I indicated that I would consider his suggestion, but I did not say that I would go ahead with it immediately; moreover, even if we are going to conduct a survey, we still have to carefully consider how the survey should be conducted.

MR CHAN KWOK-KEUNG (in Cantonese): Madam President, may I ask the Secretary if the system of "separation of prescribing and dispensing" is introduced, will there be sufficient qualified pharmacists and dispensers in Hong Kong to implement this system?

SECRETARY FOR HEALTH AND WELFARE (in Cantonese): Madam President, dispensers are mainly employed in government hospitals and clinics, while pharmacists usually work for drug stores. Since pharmacists in Hong Kong are required to receive a long period of training, at present, we do have a pool of qualified pharmacists. However, in deciding whether the system of "separation of prescribing and dispensing" should be implemented, apart from the wishes of the public, we also need to consider whether members of the public will be paying higher or lower fees as a result. Factors like the cost-effectiveness of the system as well as whether it will be convenient to members of the public should also be taken into account. If the "separation of prescribing and dispensing" means that doctors are forbidden to dispense medicine in their clinics, then will this be acceptable to the public? We have to consider this point more carefully.

MR CHAN KWOK-KEUNG (in Cantonese): Madam President, my question is: If the system of "separation of prescribing and dispensing" is introduced, do we have suffiicient qualified dispensers and pharmacists to implement this system?

SECRETARY FOR HEALTH AND WELFARE (in Cantonese): Madam President, we have not made a detailed analysis of this. All I can say is, there are qualified pharmacists in Hong Kong, but as to whether they are sufficient, we need a detailed analysis.

MR MICHAEL HO (in Cantonese): Madam President, I would like to ask a similar question. When the issue of "separation of prescribing and dispensing" was discussed several years ago, the University of Hong Kong had yet to offer a course in pharmacy, so at that time, the Administration told us that this system could not be implemented for we did not have a sufficient number of pharmacists. I would like to ask the Administration whether this situation is still valid today?

SECRETARY FOR HEALTH AND WELFARE (in Cantonese): Madam President, at present we do have qualified pharmacists and the situation is different from the past. It is true that we did not have a sufficient number of pharmacists in the past, but I think an introduction of the system of "separation of prescribing and dispensing" will now be much easier .

MR CHAN KWOK-KEUNG (in Cantonese): Madam President, regarding the issue of doctors failing to issue receipts and itemize charges, the Secretary told us that the problem is not serious. Will the Secretary please quantify the degree of seriousness?

SECRETARY FOR HEALTH AND WELFARE (in Cantonese): Madam President, I said the problem is not serious because we have not received any complaints in this respect.

MISS CHAN YUEN-HAN (in Cantonese): Madam President, I would like to inform the Secretary that objectively speaking, patients who consult private medical practitioners will very much like to ask them for a prescription only, but like employees who would like to put a request to their employers, patients usually dare not ask the question. Madam President, my question is: Since both members of the public and the medical sector have given their views on the rights of patients, why does the Secretary still choose to say that the public demand is not strong? I am greatly puzzled because this issue was discussed at the Panel on Health Services.

SECRETARY FOR HEALTH AND WELFARE (in Cantonese): Madam President, I said we have not received any specific complaints in response to the question of whether we have encountered any problems or received any complaints in this respect. If there are specific complaints, then we will certainly deal with them.

WRITTEN ANSWERS TO QUESTIONS

Accession of China to World Trade Organization

7. MR DAVID CHU (in Chinese): It is reported that China is expected to join the World Trade Organization (WTO) this year, and the China market will consequently open up at a higher speed. The Chief Executive also advises that Hong Kong should take a head start to get well prepared, with a view to gaining new edges. In this regard, will the Government inform this Council:

(a) whether it will consider negotiating with the Central People's Government the establishment of a joint working group to study how the Hong Kong Special Administrative Region (SAR) and the Mainland can enhance economic and trading co-operation under the new circumstances; and

(b) whether it will consider establishing an organization dedicated to studying the problems encountered by the small and medium enterprises (SMEs) while doing business in the Mainland and soliciting their views and suggestions, and relaying such views and suggestions to the departments concerned in the Central People's Government?

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

(a) The successful accession of China, the largest trading partner of the SAR, to the WTO will not only create more opportunities and challenges to the SAR, but will also have significant impacts on the long-term development of our economy. In view of this, the Financial Secretary and the relevant Policy Bureaux have set up a research group to conduct an in-depth research on the accession of China to the WTO and the subsequent opening up of markets. The research group will carry out a detailed analysis on different sectors, such as commodity trade, retail and wholesale, telecommunications, finance and other service sectors with a view to assessing implications on the SAR and identifying new opportunities that may arise. In the meantime, we will maintain close liaison with the business sector in order to keep them abreast of the latest development of the bilateral negotiations between the Mainland and its trading partners and to gather their views.

As the bilateral negotiations between the Mainland and its trading partners are still in progress, we have to keep a close watch over their developments. We will complete the research as soon as possible, and based on the findings of the research, attempt to develop a strategy to promote further co-operation between the SAR and the Mainland. We wish to take the advantage of the accession of China to the WTO to orientate ourselves and devote efforts to working out development plans for the next century. Since the research is still underway, we have to await its findings and take into account other circumstantial factors before considering the need for setting up a joint working group or adopting other modus operandi to enhance economic and trading co-operation between the SAR and the Mainland under the new circumstances.

(b) The Administration has no intention at present to establish an organization dedicated to reflecting the views of the SMEs which have operations in the Mainland. However, regarding the solicitation of views, as aforementioned, the Administration maintains close contact with the trade, including the SMEs, to listen to their views. Furthermore, the Trade Department and the Trade Development Council have maintained close liaison with the relevant institutions in the Mainland to collect and disseminate information on doing business in the Mainland with a view to assisting the enterprises, including SMEs, in addressing any legal or regulatory problems they may encounter. Besides, the Office of the Government of the SAR in Beijing will report to the relevant Policy Bureaux and departments of the SAR on China's macro-economic and trade developments and to keep them abreast of the laws and regulations in respect of trade and commerce. The Trade Department will collate and disseminate such information to assist SMEs to acquire a better understanding of the economic situation as well as the trade and economic policies of the Mainland.

With regard to major issues of common concern among Hong Kong businessmen, we will reflect their views when coming into contact with authorities in the Mainland. For instance, at the end of October last year, the Director-General of Trade visited the relevant units in Beijing and relayed the views of local businessmen on the enforcement of anti-smuggling measures in the Mainland.

Task Force on Admission of Talents

8. MR ANDREW CHENG (in Chinese): Regarding the work of the Task Force on Admission of Talents, will the Government inform this Council:

(a) of the terms of reference and action plans of the Task Force; and

(b) whether the Task Force will make decisions on the categories of scientific researchers and specialized technical personnel to be admitted into Hong Kong, as well as the number of admissions in each category; if so, the criteria on which the decisions to be made by the Task Force will be based?

SECRETARY FOR SECURITY (in Chinese): Madam President,

(a) The terms of reference of the Task Force on Admission of Talents are as follows:

Having regard to the technological talents required by Hong Kong for enhancing competitiveness and development into a technology-based economy, including in particular qualified research scientists and engineers, and taking into account the recommendations of the Commission on Innovation and Technology, the Task Force will

(i) review the existing immigration policy on the admission of such talents especially from the Mainland to work in Hong Kong; and

(ii) make recommendations to facilitate the admission of such talents.

The Task Force is tasked to complete its work by September 1999.

(b) The Task Force will focus on how to remove the roadblocks in existing immigration policy against the entry of technological talents from the Mainland for work in Hong Kong. In carrying out its work, the Task Force will take into account the recommendations of the Commission on Innovation and Technology and Hong Kong's manpower needs as it transforms itself into a high value-added, knowledge-based economy. The criteria for considering the types of technological talent to be allowed in are being worked out and will be published after the Task Force has finalized its work.

Full-time Retraining Course

9. MR KENNETH TING (in Chinese): It is reported that a number of trainees in a full-time retraining course were found to have supplied false information on their academic qualifications so as to get enrolled and hence receive a monthly retraining allowance of $4,000 while attending the course. In this connection, will the Government inform this Council:

(a) whether any penalty has been imposed on those trainees who were proved to have supplied such false information; if so, of the penalty imposed; if not, the reasons for that; and of the measures in place to prevent the recurrence of similar incidents;

(b) of the criteria used in setting the amount of the retraining allowance and whether it has assessed if the amount is excessive; and

(c) how the retraining course in question compares with other training courses subsidized by the Employees Retraining Board (ERB) in terms of resources input and results achieved?

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

(a) The case as reported refers to the Certificate of Skills Training (Service Industries) Course, which is jointly offered by the ERB and the Vocational Training Council (VTC).

It was reported in a newspaper in April this year that some of the trainees were found to have supplied false information about their academic qualifications so as to enrol in the Certificate Course. However, following investigation by the ERB, no evidence has been found to substantiate this allegation.

Applicants are required to declare on the application form to the effect that all information furnished is true and correct. If the information declared is found to be false, appropriate action including disqualification of their eligibility for retraining will be taken. Furthermore, according to the Employees Retraining Ordinance, applicants who are found to have supplied false information shall be liable to prosecution and if convicted, to a fine of $20,000.

(b) When the retraining allowance was first introduced and payable to the unemployed retrainees only, the rate was determined having regard to the median monthly wage of the workforce in Hong Kong. The purpose of the retraining allowance is to help the unemployment retrainees defray the extra expenses arising from travelling and meal costs incurred by them whilst undergoing retraining.

The retraining allowance was reviewed in 1997 as part of an overall review of the Employee Retraining Programme. As a result, the eligibility of claiming the retraining allowance was tightened. For example, it was only payable to retrainees attending full-time courses lasting for more than one week.

The current rate at $153 per training day up to a maximum of $4,000 a month was set in 1995 and has not been adjusted since. For trainees who are also Comprehensive Social Security Assistance (CSSA) recipients, their CSSA payments will be deducted by any retraining allowance in excess of $1,805 a month, that is, the maximum level of disregarded earnings.

As most of the retraining courses are short-term in nature, the allowance received by each trainee averages about $2,000. This current rate is considered to be appropriate for the purpose.

(c) The average cost per trainee (excluding retraining allowance) for the retraining course in question is around $4,600 which is lower than the average cost per trainee (excluding retraining allowance) at around $5,700 for other full-time courses provided by the ERB. We will undertake a review of the effectiveness of the course after its completion in June this year.

Mid-summer Fishing Moratorium

10. MR WONG YUNG-KAN (in Chinese): In order to conserve fisheries resources, the Central People's Government will enforce a "mid-summer fishing moratorium" in South China Sea from 1 June to 31 July, banning all fishing operations in the said waters during the two-month period. In this connection, will the Government inform this Council:

(a) whether it knows the details of the moratorium to be enforced by the Central People's Government;

(b) whether it has plans to discuss with the Central People's Government the possibility of deferring the implementation of the moratorium, so as to avoid causing local fishermen economic hardship; and

(c) whether it will offer assistance to local fishermen affected by the moratorium, such as by:

(i) allowing those fishermen who have obtained loans from the Agriculture and Fisheries Department (AFD) to defer the repayment of loans; and

(ii) negotiating with banks or other financial institutions in Hong Kong, to see if those fishermen who have obtained loans from these institutions may be allowed to defer the repayment of loans;

if not, the reasons for that?

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

(a) The AFD knows that the Bureau of Fisheries Management and Fishing Port Superintendence of the Ministry of Agriculture of the Mainland will be enforcing a fishing moratorium starting this year. Every year in June and July, all fishing operations using trawl net, purse-seine and hang trawl would be banned in the South China Sea north of latitude 12^oN, with a view to conserving fisheries resources and promoting the long-term development of the fishing industry.

(b) The Government of the Hong Kong Special Administrative Region Government will reflect fishermen's request for deferring implementation of the fishing moratorium to the Bureau of Fisheries Management and Fishing Port Superintendence of the Ministry of Agriculture of the Mainland. The AFD also understands that the mainland authority has consulted Hong Kong fishermen who are permitted to fish in the South China Sea on the fishing moratorium.

(c) (i) Under the existing repayment guidelines of fisheries loan funds, the AFD may agree to deferment of loan repayment if the borrowers could provide reasonable explanations. The AFD will, in accordance with the existing guidelines, deal with requests for deferment of loan repayment by fishermen affected by the fishing moratorium; and

(ii) The Government will not intervene in loan arrangements made between fishermen and banks or financial institutions and consider such intervention in personal financial matters inappropriate.

Applied Research Council

11. DR LUI MING-WAH (in Chinese): In November last year, three private sector venture capital firms were appointed to manage the Government's Applied Research Fund (ARF) and approve investment proposals. In this connection, will the Government inform this Council:

(a) of the names of the companies which have obtained funding approval from the venture capital firms, the nature of the investments involved and the amounts of funds granted;

(b) whether it knows if the Applied Research Council (ARC)'s Board of Directors have any direct or indirect business relations with the companies receiving funding support from the Fund;

(c) whether it knows if the staff or former staff of these venture capital firms have any direct or indirect business relations with the companies receiving funding support from the Fund; and

(d) whether these venture capital firms have released a list of companies receiving funding support and the relevant information on a quarterly basis; if not, what the reasons are?

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

(a) Since the ARC appointed three venture capital firms to manage the ARF in November 1998, it has provided funding support to six companies. The names of the companies concerned, the nature of the investments involved and the amount of funds granted are set out at the Annex.

(b) The ARC members (including the Board of Directors and secretariat staff) have no direct or indirect business relations with the six companies that receive funding support.

(c) It is stipulated in the management contracts between the ARC and the three venture capital firms that these firms should avoid any conflict of interests in respect of the ARF supported projects. The three firms have also confirmed that the firms and their staff have no direct or indirect business relations with those companies that have received funding support. However, one of the venture capital firms informed the ARC in January this year that there had been some financial dealings between a former employee of the firm and a shareholder of a company supported by the ARF. The ARC is very concerned about this and is now actively following up the case.

(d) In order to ensure that all investments are in line with the mission of the Fund, the three venture capital firms responsible for the management of the ARF are required to report to the ARC on each proposed investment before making any investment decision. If the ARC considers that the investment proposal is not in line with the mission of the Fund, it can reject the proposal. In addition, the three firms are required to make quarterly reports to the ARC on the financial position of the funds managed by the firms, the business condition of the companies supported by the ARF and the progress of the ARF supported projects, and so on. Moreover, the ARC and the three venture capital firms issue press releases on the operation of the Fund and the latest investment projects.

Annex

Particulars of Companies Receiving Funding Support
from the Applied Research Fund

Name of Company		Nature of Investments	Amount of Funding Support
1.	Property Market Intelligence Limited	Provision of information services such as news, research and analysis on property markets and the construction industry in Asia through the Internet	$6.5m
2.	QuotePower Information Limited	Securities transactions and information system through the Internet	$8m
3.	Wafer Systems Holdings Limited	Telecommunications network system	$46.5m
4.	InfoTalk Corporation Limited	Speech recognition technology	$15.5m
5.	Unitech Networks Limited	Telecommunications network system	$11.63m
6.	I-Quest Corporation (HK) Limited	Provision of technology on Internet access service for hotels	$7.75m
			------------
			$95.88m =====

Language Skill of Judges

12. MR NG LEUNG-SING: In accordance with the Decision of the Standing Committee of the National People's Congress on the English Text of the Basic Law of the Hong Kong Special Administrative Region (SAR) of the People's Republic of China, in case of discrepancy between the English text and the Chinese text in the implication of any words used, the Chinese text shall prevail. In this connection, will the Government inform this Council:

(a) whether it has assessed if it is necessary, for the purpose of ascertaining the true meaning of the provisions of the Basic Law, for the judge(s) presiding in a case involving the interpretation of the Basic Law to possess the language skill to understand and analyse the Chinese text of the Basic Law; and

(b) of the measures it has taken to ensure that judges at all levels of courts hearing cases involving the interpretation of the Basic Law do possess the necessary language skill?

CHIEF SECRETARY FOR ADMINISTRATION: Madam President,

(a) Since the establishment of the SAR, there has not been any case involving a discrepancy between the Chinese and English texts of the Basic Law.

If there is a case where it is necessary to ascertain the meaning of certain provisions of the Basic Law or where it is alleged that there is a discrepancy between the Chinese and English texts of the Basic Law, the parties involved in the case will be required, where necessary, to assist the court with submissions and expert evidence on the alleged discrepancy and the true meaning of the Chinese text.

(b) If a case requires knowledge and skill of Chinese, regardless of whether the Basic Law is involved, the relevant Court Leader will, wherever feasible, ensure that a bilingual judge will hear the case. Otherwise, the court will rely on the assistance provided by the parties, in the manner described in (a) above.

Rent Allowances to Aged CSSA Recipients

13. MR LAW CHI-KWONG (in Chinese): Will the Government inform this Council of the number of Comprehensive Social Security Assistance (CSSA) recipients aged 60 or above whose CSSA payments include rent allowances, and the total amount of such allowances granted to these recipients in the past year?

SECRETARY FOR HEALTH AND WELFARE (in Chinese): Madam President, rent allowance is payable under the CSSA Scheme to cover the cost of accommodation of eligible recipients according to the size of the household. As at end of March 1999, there were about 112 800 CSSA cases involving about 132 000 recipients aged 60 or above who were receiving rent allowance. The total rent allowance payable to these cases was estimated at $1.18 billion in 1998-99.

Destruction on Natural Resources by Reclamation

14. MRS SOPHIE LEUNG (in Chinese): Will the Government inform this Council of the measures already taken by the authorities to minimize as far as possible the destruction caused by the reclamation works to the Victoria Harbour as a natural resource?

SECRETARY FOR PLANNING, ENVIRONMENT AND LANDS (in Chinese): Madam President, under the existing Environmental Impact Assessment Ordinance (EIAO), proponents of all large scale reclamation projects (over 5 hectares) or small scale reclamation projects (over 1 hectare) if they are close to environmentally sensitive areas, are required to conduct an environmental impact assessment (EIA) study to investigate the possible impact of the projects on the environment and to recommend any necessary measures to mitigate and/or minimize such impacts both during the process of reclamation and upon its completion. Where necessary, an ecological survey or a full-scale ecological impact assessment would also be required as part of the EIA to look into the possible impact on the ecology of the areas affected. No reclamation projects under the EIAO can commence work before the Director of Environmental Protection has, after consulting the public and the Advisory Council on the Environment on the relevant EIA reports, issued an Environmental Permit in respect of each of the projects concerned. The existing statutory procedures under EIAO therefore ensure that no reclamation projects that may significantly affect the environment will be approved if they are found to cause unacceptable impact on our harbour.

Depending on the geographical characteristics of the shoreline and the ecological value of the surrounding waters of specific reclamation projects, special mitigation measures would be undertaken to minimize its impact on the harbour. For example, "silt screen" may be used at a specific reclamation site to prevent the fill material from spreading and affecting the waters surrounding the area to be reclaimed. "Hydraulic filling" is another common method used at environmentally sensitive locations to deliver fill material right on to the seabed. This method speeds up the pace of sedimentation and confines considerably the spread of fill material, thus greatly minimizing any adverse impact on the marine habitat of nearby waters.

In view of the fact that a number of reclamation projects have been planned within the inner harbour, the Government has developed "Water Quality and Hydraulic Mathematical Models" (WAHMO) in 1990 to study the cumulative effects of reclamation on the water current and quality of the harbour. The findings were reviewed and updated in 1998. In addition, the Government has also commissioned a comprehensive study on the "Cumulative Effects of Reclamation on Harbour Regime" in 1996-97 to establish the cumulative impact of all reclamation projects planned on the harbour in terms of water quality, hydraulics, wave condition, marine safety, and so on. The findings of both studies concluded that the various reclamation projects being planned would not result in any unacceptable impact on our harbour.

Public Carparks in Lei Yue Mun

15. MR FRED LI (in Chinese): It is reported that since 1 April 1999, the operation of all three open-air public carparks in Lei Yue Mun has been contracted out to one single operator, who has subsequently significantly raised the parking fee for the evening session from $15 to $35 per hour, and that the tourism industry in the area and the livelihood of both the shop operators and the residents have hence been seriously affected. In this connection, will the Government inform this Council:

(a) of the reasons for contracting out the operation of all open-air carparks in the area to one single operator, and whether the selection of carpark operator was based solely on the criterion of accepting the highest bid;

(b) before deciding to contract out the operation of all open-air carparks in the area to one single operator, whether it has considered the impact of such decision on the tourism industry in the area, given that Lei Yue Mun is an internationally famous tourist spot; if not, the reasons for that;

(c) whether it has assessed if the decision to contract out the operation of all open-air carparks in the area to one single contractor has violated the principle of fair competition; and

(d) of the actions to be taken to address the above-mentioned situation of monopolized operation of carparks, and to solve the problems arising therefrom?

SECRETARY FOR PLANNING, ENVIRONMENT AND LANDS (in Chinese): Madam President, there are currently three open-air public carparks at different locations in Lei Yue Mun operated under three different short-term tenancies, KX1922, KX2001 and KX2028, granted by way of open tender in 1997, 1998 and 1999 respectively. They provide about 160, 180 and 110 car spaces respectively. The carpark covered by KX1922 is about 40 m from the restaurants at Lei Yue Mun whereas the other two carparks are about 22 m from the restaurants. In addition, there is a public carpark near Ko Fai Road, which is about 100 m from the restaurants.

In awarding these tenancies, the Government accepted the highest tender which is the normal criterion for awarding short-term tenancies and generally recognized as a fair method of land disposal in a market economy. Of the three tenancies, only two are held by the same tenant. There is no monopoly of the operation of the public carparks at Lei Yue Mun.

Whilst we are looking into the possibility of tendering another site in the area for use as a public carpark, it should be pointed out that Lei Yue Mun is not only accessible by private vehicles but is also served by public transport including Kowloon Motor Bus Route No. 14C serving between Yue Man Square in Kwun Tong and Sam Ka Tsuen Pier at Lei Yue Mun, Green Mini Bus Route No. 24M between Lam Tin MTR Station and Sam Ka Tsuen Pier, and a licensed ferry service between Sai Wan Ho and Sam Ka Tsuen Pier.

As regards the possible impact on tourism in the area, most tourists visit Lei Yue Mun by taxi or, if they are on a group tour, by tour buses, which drop off the passengers and return to pick them up at a designated time. We do not consider the present arrangement for carparking at Lei Yue Mun create an adverse impact on tourism in the area.

Minimum Age Requirement for Welfare Schemes

16. MR CHEUNG MAN-KWONG (in Chinese): The retirement age for civil servants, employees of public and public-funded organizations is generally 60 whereas the minimum age requirement for various welfare schemes available to the elderly, including the Senior Citizen Card Scheme, is 65. As such, retired persons aged between 60 to 64 are not fully entitled to the concessions provided under the schemes. In this connection, will the Government inform this Council:

(a) how the term "senior citizen" is defined under the various welfare schemes; the criteria adopted by the Administration in defining the term;

(b) whether the Administration will consider lowering the minimum age requirement for the various schemes to 60, so that all retired persons are fully entitled to the concessions provided under the various schemes; if not, the reasons for that; and

(c) of the minimum age requirements set by each and every welfare scheme available to the elderly at present; if there is inconsistency among such age limits, the reasons for such inconsistency?

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

(a) Internationally, there is no standard definition on "senior citizen". In the majority of industrialized countries, however, the age of 65 is adopted as a benchmark. In Hong Kong, the various welfare schemes and services for the elderly normally require participants to reach the age of 60 or 65 years. Some of the services prescribe other eligibility criteria in addition to the age requirement. For example, for Day Care Centre or Care-and-attention Home, apart from the age criterion, the applicant's health and family conditions will also have to fufil the stipulated criteria. We do not, at present, have any plans to provide a definition for "senior citizen".

(b) The Administration has no plans to specify a uniform or standard age to qualify for various elderly welfare services. Eligibility criteria for different types of elderly services are set having regard to the needs of the elderly and the nature of the service. As for the minimum age requirement of the Senior Citizen Card Scheme, it is set at 65 years having regard to the views of the participating corporate sponsors.

(c) The various welfare schemes and services for the elderly have different target clientele, details of which are set out below:

- Senior Citizen Card for persons aged 65 or over;

- Normal old age allowance for persons aged 65 or over, having been living in Hong Kong for five years or more, with income or asset not exceeding the prescribed limits;

- Care-and-attention Home's admission criteria are aged 65 or over, in poor health or suffering from functional disabilities to the extent that assistance with daily living activities is necessary. Persons aged between 60 and 64 can also apply for admission on health or social grounds;

- Nursing Home is for persons aged 65 or over, suffering from functional disability and in need of regular medical and nursing care;

- Day Care Centre is for persons aged 60 or over, in declining health, requiring personal care and lacking family members to look after them during the day;

- Support Teams provide social networking services for persons aged 60 or over living alone; and

- Social Centres and Multi-service Centres provide recreational and other services to persons aged 60 or over under an open membership system.

The reason for not setting a uniform or standard eligibility age for these schemes and services is explained at (b) above.

Leaving of High Court Judges

17. MISS EMILY LAU: It is reported that many High Court judges will be leaving the Judiciary in the coming months. In this connection, will the Administration inform this Council:

(a) of the respective numbers of judges who left the Judiciary in the last six months before reaching the retirement age and those who will be leaving in the next six months, and whether the Administration knows the reasons for their doing so;

(b) of the cut-backs in employment benefits in the Judiciary that took place in the last 12 months or will soon take place;

(c) whether it has assessed if such cut-backs are regarded as a disincentive for remaining on the Bench by judges and by potential candidates for accepting appointment as judges; and

(d) whether it has assessed if the morale of judicial officers has been adversely affected by recent incidents such as personal attacks on them and the row over the Court of Final Appeal's judgments on the right of abode issue?

CHIEF SECRETARY FOR ADMINISTRATION: Madam President,

(a) The normal retirement age for High Court judges is 65. In the past six months, one High Court judge for personal reasons left the Judiciary at the age of 59. In the next six months, another High Court judge will also retire for personal reasons at the age of 64.

(b) Following the annual review of movements in property prices and rentals, housing allowances for the public service were adjusted downwards as from 1 April 1999. The rates of housing allowances for judges and judicial officers were similarly adjusted as from that date.

In a time of financial constraint, the Judiciary drew up administrative measures to limit the growth in expenditure. One such measure involves limiting the usage of cars by judges, since the Judiciary is subject to inter-departmental charging for the use of government cars. This has been perceived as a cutback in benefits by some judges.

(c) We do not believe the matters in (b) would be a disincentive to judges to remain on the Bench or to potential candidates pursuing a career on the Bench.

(d) We have no reason to believe that the morale of judges has been affected by the incidents quoted by the Honourable Member.

Hill Fires during Ching Ming Festival

18. DR DAVID LI: It is reported that a total of 432 hill fires had razed more than 800 hectares of vegetation in the countryside during the last Ching Ming Festival, and most of the fires were caused by careless grave sweepers. In this connection, will the Government inform this Council:

(a) of the number of hill fires which broke out during the Ching Ming Festival in each of the past three years; and

(b) whether the Government will consider prosecuting grave sweepers who, due to their careless disposal of burning offerings, cause hill fires?

SECRETARY FOR SECURITY: Madam President,

(a) The number of hill fires which broke out around the Ching Ming Festival in each of the past three years is:

Year	No. of Hill Fires
3 - 5 April 1996	0
4 - 6 April 1997	7
4 - 6 April 1998	221

According to the Hong Kong Observatory, rainfall was recorded during the three-day period in 1996 and 1997. For the Ching Ming holidays on 4 April to 6 April this year when 433 hill fires took place, the recorded humidity level was relatively low compared to previous years.

(b) There is no specific provision to deal with careless disposal of burning offerings by grave sweepers causing hill fires. Nevertheless, regulation 7 of the Country Parks and Special Areas Regulations provides that no person shall discard any match, lighted cigarette, pipe ash or other substance in a manner likely to cause a fire. For areas outside country parks, section 16 of the Forests and Countryside Ordinance makes it clear that any person who has lit, or is using a fire in or near any forest, plantation or area of open countryside shall be guilty of an offence unless he shows that the lighting of the fire was reasonable in all the circumstances and he took all reasonable steps to prevent the fire from damaging or endangering anything growing in the forest, plantation or area of open countryside.

The Agriculture and Fisheries Department may prosecute any person who has caused hill fire due to, among other things, the careless disposal of burning offerings should there be sufficient evidence. However, the extensive area of our countryside and the scattering of graves in the rural areas pose considerable difficulty for effective enforcement of the legal provisions. We will review the adequacy of existing legislation and consider the need to further strengthen the deterrent effect and facilitate enforcement actions.

We will also enhance public education and publicity programmes, particularly before the Ching Ming Festival and the Chung Yeung Festival, to remind the community of the need for a concerted effort to protect our countryside. We will also remind grave sweepers of their responsibility to ensure safe and proper disposal of their burning offerings.

Promotion of Hong Kong Studies

19. MISS CHRISTINE LOH: Will the Administration inform this Council of the actions taken by the University Grants Committee (UGC) and the various tertiary institutions to encourage Hong Kong studies in all fields of academic researches, and their published guidelines for the promotion of such studies?

SECRETARY FOR EDUCATION AND MANPOWER: Madam President, the Research Grants Council (RGC) is responsible for vetting and allocating government funds towards academic research projects of the UGC-funded institutions. The RGC's main criteria for supporting research projects are the academic quality and intellectual content of proposals. 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. These are all published criteria well known to academic staff of the UGC-funded institutions.

To encourage research in relation to Hong Kong's industry, the RGC launched a Co-operative Research Centres Scheme in 1993 to promote collaboration in applied research between the UGC-funded institutions and the local industry. Partnership with local industry is a condition for funding under the Scheme.

In accordance with their missions, all UGC-funded institutions encourage and support research studies which are of high intellectual content and academic quality, and are of relevance and importance to Hong Kong. The institutions promote research with local relevance by such ways as:

(a) stating in their mission statements that one of the objectives of research is to assist in the economic, social and cultural development of Hong Kong;

(b) setting out a clear policy that in allocating internal research funding, preference will be given to projects of relevance to Hong Kong or China as a whole;

(c) encouraging consultancies which address local community needs; and

(d) establishing institutes/centres with a focus on local issues.

Impact of Millennium Bug Problem on Vehicles

20. MR LAU KONG-WAH (in Chinese): Some insurance companies have reportedly informed their motor vehicles insurance clients that their existing insurance policies do not cover the accidents and damage that may be caused by the millennium bug problem on their vehicles, and that these clients are not entitled to compensation for such accidents and damage. In this connection, will the Government inform this Council:

(a) whether it has assessed the impact of the millennium bug problem on the safe performance of motor vehicles; if so, the results of the assessment; and

(b) whether a study will be conducted to see if it is against the law for the insurance companies not to offer compensation for accidents and damage that may be caused by the millennium bug problem on vehicles; if so, the specific timetable for conducting such a study; if not, the reasons for that?

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

(a) Drivers who wish to know whether their motor vehicles will be affected by the Year 2000 (Y2K) problem should make enquiries with the concerned motor vehicle dealers. The Electrical and Mechanical Services Department has approached the motor vehicle dealers concerned to enquire about the impact of the Y2K problem on government vehicles. According to their replies, the basic functions of the vehicles they supply will not be affected by the Y2K problem.

(b) Under section 12(1)(b) of the Motor Vehicles Insurance (Third Party Risks) Ordinance (Cap. 272), if a motor vehicle insurance policy restricts the liabilities covered on third party injury by reference to the condition of the vehicle insured, the restriction clause shall be of no effect. Therefore, even if an exemption clause on the Y2K problem is included in the motor vehicle insurance policy, the insurance company concerned has to compensate the third party in accordance with the provision of the Ordinance if motor vehicle accidents caused by the Y2K problem has resulted in third party injury.

Apart from the third party injury compensation, it is not against the law for the insurance company to include in a motor vehicle insurance policy certain restrictions on liabilities covered on other aspects concerning the Y2K problem. The coverage and the terms of individual policies are to be set by the insured and the insurance company according to their practical needs. If an insured wishes to know whether he will be offered for compensation for accidents or damage caused by the Y2K problem under an existing insurance policy, he should make enquiries with his motor vehicle insurance company. Before entering into a new motor vehicle insurance policy, the insured should find out from the insurance company the exact coverage of the new policy and chooses an appropriate insurance plan that suits his own needs.

BILLS

First Reading of Bills

PRESIDENT (in Cantonese): Bills: First Reading.

ADAPTATION OF LAWS (NO. 11) BILL 1999

TRADE MARKS BILL

CLERK (in Cantonese): Adaptation of Laws (No. 11) Bill 1999

Trade Marks Bill.

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

Second Reading of Bills

PRESIDENT (in Cantonese): Bills: Second Reading.

ADAPTATION OF LAWS (NO. 11) BILL 1999

SECRETARY FOR TRADE AND INDUSTRY (in Cantonese): Madam President, I move the Second Reading of the Trade Marks Bill.

An independent trade mark registration system has been established in Hong Kong since 1873. Our Trade Marks Registry is the second earliest statutory registration body established in the world and there are more than 100 000 registered trade marks in our Register of Trade Marks. The existing Trade Marks Ordinance specifies the criteria and procedures for trade mark registration and record keeping but most provisions of the Ordinance have remained unchanged since 1955 despite changing international practice for the protection of intellectual property rights in the last few decades. It is really necessary to modernize our Trade Marks Ordinance.

The Trade Marks Bill seeks to cut tedious formalities to make it easier to register trade marks, allow more signs to be used as trade marks and to provide better protection.

Madam President, I do not intend to go into the details of the Bill ......

PRESIDENT (in Cantonese): Excuse me, Secretary, please move the Second Reading of the Adaptation of Laws (No. 11) Bill 1999 before moving the Second Reading of the Trade Marks Bill in the order read out by the Clerk. Please move the Second Reading of the Adaptation of Laws (No. 11) Bill 1999 first.

SECRETARY FOR TRADE AND INDUSTRY (in Cantonese): I am sorry, Madam President, I may have heard it wrong.

Madam President, I move the Second Reading of the Adaptation of Laws (No. 11) Bill 1999.

The Bill is to make necessary adaptations to six Ordinances related to intellectual property and their subsidiary legislation to bring them into conformity with the Basic Law and with the status of Hong Kong as a Special Administrative Region (SAR) of the People's Republic of China. These Ordinances are the Trade Marks Ordinance and its subsidiary legislation, the Director of Intellectual Property (Establishment) Ordinance, the Layout-Design (Topography) of Integrated Circuits Ordinance, the Patents Ordinance, the Registered Designs Ordinance and the Copyright Ordinance.

Certain terminologies in the six Ordinances such as "Governor", "Governor in Council" and "Crown" are considered inconsistent with the Basic Law or not in conformity with the status of Hong Kong as a SAR of the People's Republic of China and adaptations are deemed necessary. Although the Hong Kong Reunification Ordinance and the Interpretation and General Clauses Ordinance contain provisions as to how terminologies inconsistent with the Basic Law or not in conformity with the status of Hong Kong as a SAR of the People's Republic of China should be interpreted, the continued exitence of such terminologies in Hong Kong laws is considered inappropriate. Therefore, we need to enact this Bill so that the essential amendments can be made.

Most of the proposed amendments are terminological changes. These adaptations when passed into law will take retrospective effect from the date of the establishment of the SAR.

In addition to bringing the six Ordinances into conformity with the Basic Law and with the status of Hong Kong as a SAR, the Bill also obviates the need of making references to the Hong Kong Reunification Ordinance and the Interpretation and General Clauses Ordinance. I hope that Honourable Members will support the Bill.

Thank you, Madam President.

PRESIDENT (in Cantonese): I now propose the question to you and that is: That the Adaptation of Laws (No. 11) Bill 1999 be read the Second time.

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

TRADE MARKS BILL

SECRETARY FOR TRADE AND INDUSTRY (in Cantonese): Madam President, I move the Second Reading of the Trade Marks Bill.

An independent trade mark registration system has been established in Hong Kong since 1873. Our Trade Marks Registry is the second earliest statutory registration body established in the world and there are more than 100 000 registered trade marks in our Register of Trade Marks. The existing Trade Marks Ordinance specifies the criteria and procedures for trade mark registration and record keeping but most provisions of the Ordinance have almost remained unchanged since 1955 despite the changing international practice for the protection of intellectual property rights in the last few decades. It is really necessary to modernize our Trade Marks Ordinance.

The Trade Marks Bill seeks to cut tedious formalities to make it easier to register trade marks, allow more signs to be used as trade marks and to provide better protection.

Madam President, I do not intend to go into the details of the Bill but I would like to take this opportunity to explain to Honourable Members the more important ideas of the Bill.

A trade mark is a sign that represents different goods or services and is an important indicator by which most customers distinguish their preferred brands. For a particular brand to establish a style of its own, trade marks normally take on a novel and unique design. In the past, a trade mark could only be registered if it was visually distinguishable. As time progresses, businessmen will seek to highlight their products in various ways. For instance, the roaring lion of a certain film company has struck roots in the hearts of people. To suitably protect more creative trade marks, the Bill defines trade marks in a more comprehensive manner so that more signs of different shapes or colours, and even sound can be registered as trade marks.

Besides, the Bill has provisions which will give more protection to registered trade marks. Besides giving the term "infringement" a more comprehensive definition and clearly defining the rights of a trade mark owner, the Bill also provides that a registered trade mark owner can apply to the Court for an order for delivery up and an order for disposal against goods, materials or articles infringing upon a registered trade mark. In so doing, the rights of and compensation given by law to a trade mark owner will tally with the compensation given under other laws on copyright, patent and registered design.

To prevent a trade mark owner from abusing the civil proceedings for registered trade mark infringement, and bringing actions against another person without sufficient reasons, the Bill specifies the compensation to be given to a person victimized by such unreasonable threats in line with the civil compensation procedures specified in other intellectual property rigths laws.

Honourable Members and the public may be more concerned about parallel import goods, commonly known as "contraband goods". This is a fairly controversial issue insofar as intellectual property rights legislation is concerned. As the international community has not reached a consensus on this issue, major international conventions on intellectual property rights allow each contracting country or region to formulate on its own policies concerning "parallel import" intellectual property articles in the light of its economic situation and in accordance with its laws.

We are of the view that any restriction on parallel import trade mark products should not cause a reduced supply of the products concerned or jeopardize the interests of consumers in Hong Kong. As Hong Kong is not subject to restriction by any international rights or obligations concerning parallel imports, we propose that a trade mark owner should not have the right to prohibit the parallel import of goods affixed with its trade mark unless he can prove that the products concerned have been damaged (for instance, the goods have turned bad in the course of time or have been altered without authorization) to the effect that the reputation of its trade mark will suffer damage.

Madam President, I have said that a trade mark is a sign that represents goods or services. In many cases, it also represents the expectation of a customer of the quality of such goods or services. A trade mark is an important intangible asset of its owner, for distinguishing the brand it supplies. Therefore, the value of a "well-known trade mark" and the rights of its owner should be suitably protected.

Therefore, the Bill provides that if a person uses in Hong Kong a trade mark identical with or similar to a "well-known trade mark" on identical or similar goods or services which may cause confusion, the owner of the "well-known trade mark" has the right to apply to the Court for an injunction to restrict the use of the relevant trade mark in Hong Kong. The owner of a "well-known trade mark" enjoys this right regardless of whether or not he runs business or enjoys a goodwill in Hong Kong.

Putting it briefly, after the enactment of this Bill, the procedures of trade mark registration and record keeping will be simplified and it will be easier for a trade mark owner to register and protect his trade mark. A more effective or user-friendly intellectual property protection system is one of the factors conducive to the long-term economic development of Hong Kong.

I hope that Honourable Members will support the Trade Marks Bill. Thank you, Madam President.

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

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

MEMBERS' MOTIONS

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

First motion: Consultancy Report on Health Care Financing.

CONSULTANCY REPORT ON HEALTH CARE FINANCING

DR LEONG CHE-HUNG: Madam President, I rise to move the motion under my name as printed on the Agenda.

Madam President, a review of our health care policy, a revamp of our health care financing principles is long overdue. Our last policy derivative in the form of a White Paper is already 25 years old. The Harvard Report gives us an opportunity just for that. It is on this basis, Madam President, that I move this motion ─ a general motion calling on the Hong Kong people to study the report positively and make their comments on what they would like to have as a health care system and standard in the next millennium. Nothing more, nothing less.

Some Members questioned my reasons for using the word "positively". Let me state that I have no intention to call for total support to the Report or otherwise, but that it is a golden opportunity, and perhaps the only opportunity, to instigate a health care policy change, if a change is for the better. Any indication of a negative response, or non-constructive response by the public, will give the Government the excuse not to do anything to our health care system that may remain in hibernation for another 25 years.

Madam President, I was a member of the Steering Committee of the Health and Welfare Bureau for the Harvard Consultancy. I wonder if I need to declare my interest, for this Committee was never given the chance to steer the consultation, its comments and criticisms were seldom taken on board nor were they ever explained nor even acknowledged by the consultant. Incidentally, the Steering Committee never received, let alone endorsed, the Report before it went to the print. There is also one fallacy of the Steering Committee. It lacks grassroots input.

The Harvard consultant, as its base implies, comes from the United States. Many have queried such a move as to whether the United States' input could suit Hong Kong. Furthermore, the United States health care system is a very cost-ineffective one, and I stress the word "ineffective". In spite of it being the world's most expensive system, a significant number of its citizens are devoid of proper, equitable or even accessible medical care. To be fair, such criticisms are right but for the wrong reasons. The fact remains that many, if not all, of the problems and suggestions in the Report have been floated by local people for some time. The medical profession has identified and raised the problems for over 10 years, but that has consistently fallen on the Government's deaf ears. I presume that it is an issue of "local ginger is not hot" ("本地薑唔辣").

Madam President, I welcome the Report. I welcome it as it confirms many of the problems and worries raised by the medical profession. I welcome it as a tool to move Hong Kong people to think and give input. I welcome it as a vehicle to motivate the Government to change. Finally, I welcome the Report on its guiding principle, which is: "Every resident should have access to reasonable quality and affordable health care. The Government assures this access through a system of a shared responsibility between the Government and residents, where those who can afford to pay for health care should pay."

Hong Kong has an enviable health care motto: "Nobody would be devoid of proper care due to lack of means." Regrettably, it is often abused and interpreted as: "Anybody, irrespective of rich or poor, can utilize very highly subsidized medical care services." With rapidly rising health care costs, little wonder many, though well affordable, are cramming onto the public funded health care services. Overnight, it became clear to all that a limited budget will never sustain an infinite need, and that the Hospital Authority (HA), through its good work, has become a victim of its own success ─ albeit too late. If no change is to take place in the near future, our standard of health care will not sustain.

Let me now turn to make some comments on the Report itself. Rightly so, the Report identifies that our health care system needs to be looked at all the way from the policy decision bureau, through the health care structure and finally, the health care financing principles, and have made suggestions. Reading between the lines, it is obvious that the Report aims to alter the current funding concept to bring about a structural and a system change. But is it workable and to the best interests of Hong Kong people and Hong Kong service?

The consultant suggests a two-step financial revamp. Stage I is the introduction of MEDISAGE (a saving account for old age care) and a Health Security Plan (HSP) (an insurance system for hospitalization and chronic ill health) ─ all on a compulsory contributory basis. Yet, what are these contributions for and how long can these contributions sustain? Furthermore, primary health care, which is considered by all as the gatekeepers to hospitalization, is not covered.

For stage II, the consultant suggests that the HA be disbanded. Hong Kong will be divided into 12 to 18 regions, in each of which the public and private health care providers will group together to bid for patients and funding from the HSP.

What could all these entail? On a structural basis, it will mean that the time-honoured dual system practice in Hong Kong (public and private sectors operating side by side) will be disbanded. There will be a single system with no check and balance and no patient choices. Overnight, the honourable health care services may become completely commercialized. To attract patients, different perks will be offered on top of pure professional services.

The introduction of contributory saving and insurance, with possible progressive increase in contribution percentage, could pave the way for the Government to slowly relinquish its responsibility on health care and progressively increase the burden on the public to pay on their own.

It is obvious, too, that the consultant is suggesting that for minor ailments, it is the individual's own responsibility; for major ill health, then the HSP partly covers your medical bills.

Madam President, the Harvard solution, in short, is a revolutionary change to Hong Kong's time-honoured health care system. But is there an alternative? Can we base on our existing structure with many well tried benefits, improve on it and come out a winner? In short, can we have an evolutionary reform?

Let us look at a possible solution. Madam President, health care really consists of two parts ─ core or essential care is, to me, "welfare"; and the rest is "service". If I am knocked down by a car, it is the Government's responsibility to save my life at all cost; such service must be a welfare. Anything else in health care is service, and service must be paid for.

What are the options to foot the bills for "services"? For the poor and indigent, the Government will have to foot the bills. For the super rich, they could easily pull them out of their own wallets. For the middle class, it is time to take up private medical insurance. Perhaps a small percentage of territory-wide compulsory contributions should also be considered to enlarge the public health care budget. The benefit of such a system over the Harvard option is that it provides a complete free choice. Furthermore, every individual is paying mainly his own insurance for his own possible use. The poor and indigent will be supported by government revenue, which is already our practice. Patients who can afford to pay will be channelled from the public sector back to the private service, since they have to pay anyhow, hence decreasing the public service demand and better utilizing the private services' resources. It is a win-win situation.

In the meantime, many structural changes can be instigated immediately to meet the public demand and aspiration.

There is no reason, for example, why the HA could not, with all speed, properly implement its cluster concept, where the different public hospitals in the same cluster will be asked to provide different but complimentary services. The sum total is that in each cluster, a complete comprehensive service is available yet without duplicating efforts and resources.

Efforts should also be made to clearly define with the Government the role of highly subsidized public medical care ─ for whom and to what degree the services should be.

The Department of Health should review its role. Few would disagree that the roles of public health, safety and disease surveillance must be the department's main objective. It should focus on strengthening such important tasks.

But should the Department of Health still cling onto the general out-patient clinics, providing a half-hearted 15% of the total curative primary health care to the dissatisfaction of the users?

The medical profession should also move to do its own reform. There is no reason why the Medical Council cannot establish a quality assurance body. There is no reason why public hospitals cannot organize specialty peer review groups to analyse data, performance and standards of individual practitioners within that specialty in order to advise the hospital management the competence or otherwise of individual doctors.

There is no reason why a compulsory Continued Medical Education programme could not be instigated as a criteria for re-registration for doctors to practice, so that whilst variation in standards amongst doctors is inevitable, they must all meet the bottomline standard to the comfort of our patients.

The medical profession should publish regularly average fee charges for different types of services, such as operation. This will provide important information to the public and the private insurance companies. In no way is this curbing charges or interfering in the free market.

Madam President, I will pledge to ensure that the medical profession will take serious consideration of these suggestions, and if possible, implement them with no delay. The medical profession must improve our own house to strengthen the system. For at the end of the day, there is no difference, nor can there be any, in the ultimate goal between the patients and the health care providers, be they allied health care professionals, nurses or doctors.

Finally, Madam President, in the Report, much has been said to criticize the medical profession. Many of these are unfair and erroneous, for which I have to put it on record. I am not here to defend against these allegations no matter how deleterious they may be, for it is my belief that the medical profession should have the courage to face criticism, accept them if they are correct, and make possible improvements for future good.

There is one other shortcoming, too, in the Report. The Report is completely silent on oral health. Let me remind the Administration that good oral hygiene is essential to total health.

Madam President, I call again on the public to look at the Report positively and express their views. To me, if this Report can just achieve a good public debate and push the Government to come out of its prolonged hibernation, perhaps the money so spent is still worthwhile.

Dr LEONG Che-hung moved the following motion:

"That this Council urges the people of Hong Kong to respond positively to the report, "Improving Hong Kong's Health Care System: Why and For Whom?", so as to push a reform of our health care policies and structure that can be sustained in the next century; assure affordable, accessible and equitable quality care for the public; and build up Hong Kong as a healthy community."

PRESIDENT (in Cantonese): I now propose the question to you and that is: That the motion moved by Dr LEONG Che-hung, as set out on the Agenda, be passed.

Mr Michael HO is to move an amendment to this motion. Miss CHAN Yuen-han is to move an amendment to Mr Michael HO's amendment. The two amendments have been printed on the Agenda. In accordance with the Rules of Procedure, the motion, the amendment, and the amendment to amendment will be debated together in a joint debate.

I will first call upon Mr Michael HO to speak and to move his amendment to the motion. Then I will call upon Miss CHAN Yuen-han to speak and to move her amendment to Mr Michael HO's amendment. Members may then debate on the motion and the amendments. After Members have spoken, I will first put Miss CHAN Yuen-han's amendment to Mr Michael HO's amendment to vote. Then depending on the result of the vote, I will put Mr Michael HO's amendment, either in its original form or in the amended form, to vote.

I now call upon Mr Michael HO to speak and to move his amendment.

MR MICHAEL HO (in Cantonese): Madam President, I move that Dr the Honourable LEONG Che-hung's motion be amended.

First of all, I would like to talk about why I have sought to amend the motion. Dr LEONG's motion is rather broad in its wording, which may generate a number of different views in today's debate. We may have different ideas on the reform and financial arrangements but in the end the motion will be passed because it asks people to voice more of their views. So, I think that even if passed the motion will lack clarity.

I will try to highlight the most controversial items for discussion. It is not important whether my amendment is passed or not. If anyone should disagree with my amendment, please substantiate his or her argument with reasons to reject my amendment.

Another difference between my amendment and Dr LEONG's motion is that while Dr LEONG urges the public to do more, I urge the Government to do more, in consulting the community in future on those controversial topics under discussion today.

There are four main points to my amendment today:

First, I propose the establishment of a "complaints office". I learnt from the newspaper that the vice-President of the Hong Kong Medical Association, Dr LO Wing-lok, and Prof Grace TANG from the Faculty of Medicine, University of Hong Kong, had unequivocally objected to my proposal. I do not mind the objection as it is exactly a subject under debate.

Second, I propose establishing a "mechanism for quality audit", which I think is indispensable. Anyone who thinks otherwise should put forward his or her argument. Dr the Honourable YEUNG Sum and the Honourable Albert HO will later on advance arguments on some problems detected in private hospitals, fees charging, some case studies and to support our proposal to establish the mechanism.

Third, I propose that the Hospital Authority (HA) conduct a full-scale review. We must admit that despite the improvement seen after its establishment, there are still many problems with the HA. I urge Members to note that the HA was allocated with $11.1 billion in 1992-93, but $27.7 billion in 1999-2000, which is more than double the previous amount. The public health care system has seen some good years with enough to spend, and the improvements are therefore entirely justified. If there were none, the HA should be reprimanded. So, we should not be complacent with the seemingly smooth operation of the HA. Supervision is still needed. There is a sharp contrast between the HA now and the days when we had the Hospital Services Department, that is the eighties, when funds were limited; or even when the Hospital Services Department and the Medical and Health Department saw no increase in their provisions. We therefore need to have a thorough debate on how to monitor the HA in utilizing the $28 billion provision. The Honourable LEE Wing-tat will speak on this point.

Then I will speak on reforms in the HA. My speech will be mainly about what should be done in primary health care services. The Honourable CHEUNG Man-kwong will speak on this topic too.

Madam President, I would like to speak about the amendment put forward by the Honourable Miss CHAN Yuen-han to amend mine. In the first part of her amendment, Miss CHAN suggests changing the complaints office proposed by me to a committee. I do hope Miss CHAN can explain in her speech later the differences between her proposed committee and my proposed office. We are hoping to set up a body with administrative power and authority, like the Consumer Council or the Equal Opportunities Commission, both of which may follow up any complaints received. If that is the case in Miss CHAN's mind, we will have no objection; we will give her our support. If the committee Miss CHAN wants is just a body which talks a lot but does little, we are afraid we cannot support her.

Another point is about tax allowance for private medical insurance. Madam President, this is a matter of policy, which I hope Miss CHAN can explain clearly. Is it going to be a medical policy? Can we solve the current problems with private health care simply by introducing a tax concession to encourage people taking out private medical insurance? We have some reservations about this. At present, health care in the private sector is fraught with problems: exorbitant fees and unnecessary tests and treatments for patients and so on. We all know this very well. As long as such malpractice exists, I cannot tolerate continued exploitation after people have taken out insurance policies. The introduction of a tax allowance will only waste public money, although the Democratic Party has not arrived at any decision about contributions to be made, which we think may be an option for consideration.

Madam President, I wish to point out that in the United States, the Free for Service Type Insurance is the fundamental and classic factor for the increase in medical costs. Having taken out insurance policies and with the bills being footed by a third party, people would visit doctors who charge more, do more tests and thorough check-ups. As a result, expenses increase. Naturally, medical costs will rise, and this becomes a system that is most vulnerable to abuse.

The behaviour of Hong Kong people is very special. We often boast of our health indices. Often, the Secretary for Health and Welfare would say to the public we have a low infant mortality rate, a high life expectancy. We also need to note that Hong Kong people like to consult doctors very much. In the United States and European countries, people visit doctors four or five times a year, but people in Hong Kong visit doctors nine times each year on average. Just a sneeze and they would go for several consultations. We have data in support of this phenomenon, and this is a point we need to consider. I do not oppose people taking out private medical insurance but I think we need to rectify a lot of the existing problems.

Madam President, I am an insider in health care. My constituents will surely benefit from more people being covered by insurance and treated in private medical institutions, thereby generating more income for such institutions. Although the benefits to by my constituents will not be as great as those by Dr LEONG's, I would not object to it.

Miss CHAN spoke about family doctors, which is an idea congruent to the primary health service I propose. I must point out that family doctors, family medical service or primary medical treatment are just a part of primary health service. If we talk only about primary medical treatment and family doctors, we have not gone to the root of the problem.

Madam President, the report mentions the Health and Welfare Bureau. The Secretary of the Bureau is a de facto Health Minister. She is a poor lady, for she has only three deputies (only one of them is responsible for medical matters), and several principal assistant secretaries. There is no research department or data in the Bureau. When information is required, it has to approach the Department of Health or the HA. I am not sure if the Secretary can successfully collect the data she needs, but she does not know what data are available after all. Some of the data she needs may not be available even in the HA. She is in fact on a mission impossible for she has to formulate policies under such circumstances. So, I support the report by the Harvard team in which it is said the structure of the Bureau has to be strengthened.

Never have we a clear policy. We have been saying no one will be prevented by a lack of means from obtaining medical care. This is only a basic pledge, not a real medical policy. I do not think this is a medical policy accountable to the public. Madam President, I think a real medical policy should be one that clearly defines the varied terms of reference, priorities, division of labour, services to be provided, services by the hospitals, what primary health services should there be, and which services should be provided by hospitals and primary health care institutions. Quality standards should be set too. This is what it is all about a clear and decent medical policy.

Lastly, let me respond to several of the points raised by Dr LEONG. Madam President, I agree policies recommended by foreign experts may not suit us. Medical services in the United States are a mess. But the American consultants are lovable on one count. They are not in any way connected with the local people. I am sure some criticisms unleashed by the consultants are criticisms that local medical people including Dr LEONG and I will never dare to make. Therefore, we must hold a debate on this issue which has far-reaching implications.

Thank you, Madam President.

Mr Michael HO moved the following amendment:

"To delete "the people of Hong Kong to respond positively to the report, "Improving Hong Kong's Health Care System: Why and For Whom?"," after "That this Council urges" and substitute with "the Government to thoroughly review and overhaul Hong Kong's public and private health care policies, their structures and modes of service delivery, including: (a) establishing an independent complaints office with adequate public participation; (b) establishing a mechanism for public participation in quality audit, so as to ensure the quality of services provided by public and private hospitals; (c) reviewing the structure and monitoring systems of the Hospital Authority with a view to enhancing its accountability to the public; and (d) reviewing the role of the Department of Health and strengthening its work on health promotion and disease prevention, in order to enhance the public's knowledge in hygiene and health care,"; to add "at the same time, the Government should consider developing a long-term health care financing system" after "so as to push a reform of our health care policies and structure that can be sustained in the next century;"; to add ", discard the present professional-led mode of practice, provide the public with the right to choose the service providers freely" after "to assure affordable, accessible and equitable quality care for the public"; and to add "; furthermore, upon the expiry of the consultation period of the consultancy report, "Improving Hong Kong's Health Care System: Why and For Whom?", the Government should conduct specific consultation on the above recommendations; this Council also urges the people of Hong Kong to respond positively to the report" after "and build up Hong Kong as a healthy community"."

PRESIDENT (in Cantonese): I now propose the question to you and that is: That the amendment moved by Mr Michael HO be made to Dr LEONG Che-hung's motion.

I now call upon Miss CHAN Yuen-han to speak and to move her amendment to Mr Michael HO's amendment.

MISS CHAN YUEN-HAN (in Cantonese): Madam President, I move that Mr Michael HO's amendment be amended as set out on the Agenda.

Madam President, I need to say why I think the amendment has to be amended. Dr LEONG Che-hung said Mr Michael HO's amendment was too broad. If that were the case, I would not have proposed any amendment. But I had tried to figure out which part of Mr HO's amendment needed to be supplemented. I found there were three points that required amendment. I would like to use Mr HO's amendment as a basis. On that basis, I would add three points to amend one item. Mr HO asked me what was the difference between "office" and "committee". I asked him the same question. What difference does it make if I amended "office" to "committee"? I think the terms mean the same thing, not any different from what he said.

In the promotion of private medical insurance, I can say we are very much against the American style private medical insurance system. If we are to follow the United States example, I think we will oppose the idea. But we are not talking about this. What we are talking about is we accept a separation of public health care system and the private one. We can see that in recent years, the HA has been doing too well (though I doubt about it) and patrons of private hospitals have been attracted to hospitals under its management. Thus private hospitals need to cry out for help. I think the various points made by Prof HSIAO in the Harvard Team's report do merit our support. But if we want to promote non-government medical insurance, we can see that many people have already taken out such insurance. For example, the Hong Kong Federation of Trade Unions (FTU) has taken out private insurance cover for us. Our colleagues, when sick, may be covered. However, if private hospitals are anywhere near as good as Prof HSIAO indicated, I think more people will prefer going to private hospitals.

I would like to add one point about the proper use of resources. I am not suggesting, as did Mr HO or the Democratic Party, to replace the present system by the proposed plan. I just supplement the existing system with an idea, causing no changes to the existing system. That idea is about a tax allowance, which I think should be granted by the Government to help the people. Moreover, I have added two points to Mr HO's amendment, that is, the feasibility of promoting a network of Family Physicians, which is rather similar to the community health care network proposed by him. My proposal simply makes Mr HO's proposal more specific.

Besides, I have one point (I do not know if Dr LEONG is going to speak again but it is not in Mr HO's amendment), which is the definition of a proper role and position of the public health care system. I trust Mr HO talked about this point in the early stages in his promotion for research in health policies. The Democratic Alliance for the Betterment of Hong Kong (DAB) at that time stressed to the then Secretary for Health and Welfare that if B Class beds were to be provided in our public hospitals, we needed a guarantee from the Government. We were worried that it would be difficult to draw a line to mark off public health care. We need to ask ourselves: Is this the kind of service we want to provide to the people whom we think need to be taken care of? We had a debate with the then Secretary for Health and Welfare. All we wanted was just a guarantee from the Government that such beds would be restricted to a certain percentage, because we thought we needed to decide the positioning of public hospitals. I hope a debate can proceed in this direction today. Are we going to allow public hospitals to expand indefinitely? The HA hospitals appear to be rather ambitious nowadays. I can see they appear to be glad to have the opportunity to expand, but we do not want them to replace private hospitals in service delivery. So, I think the problem must be debated. If we let public hospitals expand indefinitely on all fronts, when it comes to financing, damage could be done to our present system. This is a direction in which I want Members to debate. Of course even if Mr HO's amendment is amended with three suggestions added, I think there may still be some inadequacies. I do want to take the opportunity as the Government reviews its health care structure to raise all the questions we have in today's debate. The FTU and the DAB support both the amendment and the original motion, but as I pointed out in my speech we need to amend the amendment and hope to bring questions out for discussion in this Chamber and in the community.

Madam President, I agree with what Dr LEONG said about a lack of opinion from the grassroots in the report by the Harvard Team. For instance, the opinion of the FTU has not been sought. Therefore, I think when the report is released, we should raise this question. The welfare (I regard these as welfare) Hong Kong people can enjoy now, irrespective of the social strata from which they come, are comparatively cheap medical service and nine-year compulsory education. Other than these we have nothing. We have to wait until next year to enjoy retirement protection. Housing benefits we are enjoying now are subject to certain prerequisites. The system puts some restrictions on people's eligibility. In the light of the circumstances, we cannot help asking whether the consultants were informed of the position when they were commissioned to conduct the study?

When we tell our consultants about the huge increase in medical expenses, did we also ask how we can cope with the demand for funding by 2016 as Hong Kong faces an ageing population? Naturally, Prof HSIAO will say the percentage has increased from 2% to 4%, which is significant in terms of increases in GDP. Madam President, I think if we have not told the consultants what the overall situation of Hong Kong is like, they will certainly make immense changes in the original system.

Madam President, I hope the buzzer would not give me pressure. Do I have four minutes to speak?

PRESIDENT (in Cantonese): You have a total of seven minutes to speak and now you have one minute left.

MISS CHAN YUEN-HAN (in Cantonese): So, I have seven minutes to speak on the amendment. Thank you, Madam President for your reminder. I thought I had 10 minutes. (Laughter) Then I have to leave out much of what I want to say. Thank you, Madam President for reminding me of that.

If we look at the whole review, what would happen if we pull down the whole medical system in which people, irrespective of their wealth, can enjoy a relatively cheap medical service? The Health Security Plan and the MEDISAGE proposed in the Harvard Team's report are in my opinion fraught with problems of far-reaching implications. The report also added a suggestion on the so-called "deductible". Can the people foot the bill? As regards the present HA and related government departments, Madam President ......

PRESIDENT (in Cantonese): Miss CHAN, your time is up.

MISS CHAN YUEN-HAN (in Cantonese): I was delayed two seconds so just give me two seconds more. It will not be long. (Laughter)

The system in the present HA and the Department of Health cause overlaps and the expenses of the HA are enormous. So, there should be reform in this area, rather than the implementation of another plan. That is all I want to say. Thank you, Madam President. (Laughter)

Miss CHAN Yuen-han moved the following amendment to Mr Michael HO's amendment:

"To delete "office" from "establishing an independent complaints office with adequate public participation" and substitute with "committee"; to delete "ensure" from "so as to ensure the quality of services provided by public and private hospitals" and substitute with "monitor"; to add "and cost-effectiveness" after "reviewing the structure and monitoring systems of the Hospital Authority with a view to enhancing its accountability to the public"; to delete "and" from "with a view to enhancing its accountability to the public; and"; to add "," after "reviewing the role of the Department of Health"; to delete "and" from "and strengthening its work on health promotion and disease prevention,"; to insert "and supervising" before "its work on health promotion and disease prevention,"; and to add "; (e) reviewing and establishing the proper role and position of the public health care system; (f) granting tax allowance for contribution to private medical insurance; and (g) examining the feasibility of promoting a network of family doctors" after "in order to enhance the public's knowledge in hygiene and health care"."

PRESIDENT (in Cantonese):I now propose the question to you and that is: That the amendment moved by Miss CHAN Yuen-han be made to Mr Michael HO's amendment.

Will Members who wish to speak please press the "Request-to-Speak" button.

MRS SOPHIE LEUNG (in Cantonese): Madam President, speaking on this issue today, I seem more or less a layman talking about something that concerns the professionals. Nevertheless, I have been participating in the management of the public health structure since 1982. I hope that by joining in the discussion today, we laymen could at least motivate more professionals in the community to discuss this issue.

The Liberal Party agrees that with the ageing of the population and the spiralling costs of medical technology, the existing health care system is inadequate to meet future needs and reforms must therefore be carried out. However, we must first find out where the crux of the problem is and suit the proper remedy to the problem in order to reform Hong Kong's health care system pragmatically.

In terms of hospital services, first, the public and private structures are now operating separately. While people can obtain the same service in either structure, their charging levels are widely apart. The Government has given the HA the power of administration, but not the power of setting charges. At present, the people only need to pay $68 a day for hospitalization, which is in fact heavily subsidized by the Government. With the spiralling health care expenditure, one can imagine the Government's heavy burden in terms of the health care budget. In contrast, the charges of private hospitals are extremely high. Very often, an ordinary operation with hospitalization costs tens of thousands of dollars. This is not what the common people can afford. Under these circumstances, even middle-income groups with some means have to rely on the services of public hospitals. This adds to the burden of public hospitals and people who need care have to wait even longer. In terms of the total expenditure on health care services in recent years, the growth of the public health care system has far exceeded that of the private health care system. In 1990, the former accounted for 48% of the total health care expenditure. This increased to 54% in 1996. In real terms, the expenditure rose from $24.3 billion to $56.2 billion, an increase of 74% from 1990. The over-reliance on the public health care system has led to an imbalance between the public and private health care systems. According to the HA's estimation, even if one only takes into account the two factors of ageing and increase of the population and excludes expenditure such as upgrading of medical technology, the HA's expenditure will at least increase annually by 20%. Since Hong Kong's public health care is mainly financed by taxation, people are worried that in the long term they might have to pay more taxes or be forced to put up with an inferior health care service.

The consultancy report on health care financing proposes a health care financing scheme to be participated by all. The Liberal Party does not think that this proposal is suited to Hong Kong's circumstances and needs. Moreover, the health care issue is extremely complex. We cannot solve this problem simply by considering health care financing or by relying on a single solution.

The health care report also mentions the problem of "compartmentalization". In the Liberal Party's view, the correct approach is to deal with this problem first. The roles of the public and private health care systems should be redefined, with a view to establishing a partnership between them so that the public and private health care systems can develop in parallel. This will provide the public with a wide choice of health care services and meet the needs of those willing to pay higher medical fees to obtain better service, while maintaining the quality of health care service for the grassroots.

The Liberal Party suggests the introduction of an interface product between the public and private health care systems by the Government. By allowing the private health care system to take over a part of public health care services, the burden on the public health care system will be reduced. Under this concept, the interface product as initially conceived could be in the form of a medical insurance scheme in which people could participate voluntarily, making contributions for the health care services that they need. The Government can also re-allocate some resources in the present health care budget for the financing of the insurance scheme, instead of making extra provisions for a large part of the necessary funding.

Participants in the scheme would be offered service of a medium level superior to that of the in-patient services of public hospitals at present. They may choose their own doctors, hospitalization at public or private hospitals or even doctors from the public or private sector. I believe that this concept will give the patients a choice and reduce the gap between the public and private health care systems, giving doctors of private practice greater scope for development.

Madam President, to effectively reform Hong Kong's health care system, we must first set a correct course. For the time being, we should concentrate our discussion on the course and aims of the overall health care reform, rather than setting a frame or going into details prematurely, thus limiting the discussion. Therefore, today, we will support Dr LEONG's motion. Both Mr Michael HO's and Miss CHAN Yuen-han's amendments contain suggestions that involve some concrete details, which we should not go into at this stage. The Liberal Party opposes drawing premature conclusions. Thus, we will oppose the two amendments mentioned above and support the original motion. Thank you, Madam President.

MISS CHOY SO-YUK (in Cantonese): Madam President, if Mrs Sophie LEUNG calls herself a layman when she is a member of the HA, then I am even more of a layman. However, I very much support Dr LEONG's motion. Therefore, even if I am very much a layman, I would like to express some of my views now.

The consultancy report on health care financing written by the Harvard Team has aroused widespread concern since its publication. The focus of discussion has been on the proposal for a Health Security Plan (HSP) with compulsory participation and Savings Accounts for Long Term Care (MEDISAGE). Since the Hong Kong economy has yet to recover and public expenditure difficult to be cut, the Government cannot but address the continuing rise in public health care expenditure seriously. Otherwise, health care expenditure might come to account for 20% of the Government's total expenditure, as forecast in the report. In that case, the Government might be forced to increase tax or even cut other public expenditure, which is of course the last thing we would like to see.

I agree that the Government should take the issue of health care seriously, conduct a study actively and carry out public consultation, with a view to establishing a higher quality and more effective health care system. I also agree with some of the recommendations of the consultancy report. However, in my view, the Government must approach the health care financing options, especially the HSP, cautiously. Since the relevant systems involve big and complex issues, they must be discussed and analysed in detail and no haste should be made.

Actually, the idea of the HSP is not new. The consultation document "Towards Better Health" released by the Government in 1993 already mentioned a similar compulsory medical insurance package. In 1995 and 1996, the Health and Welfare Bureau also made reference to the pooled insurance system in Singapore. However, the relevant proposals were all turned down in the end. A similar option is now proposed in the report by the Harvard Team. In my view, the Government must learn a lesson from the past and conduct a more thorough study on the various questions that might arise from the proposal, which is more in the overall interest of the people, such as: whether it is appropriate to implement the HSP in Hong Kong, whether the plan is acceptable to the people, how and when the HSP should be implemented and in particular, how to convince employers and employees to participate in the relevant health care plan under the present economic downturn and high unemployment rate, and considering the fact that the mandatory provident fund scheme is to be implemented next year.

Under a collective contribution system, how can people be prevented from further abusing health care services on account of the health care insurance? Since the people have very limited medical knowledge and the Government's public education in this respect is inadequate, how can we ensure that the people choose the right medical services for themselves? What happens if the insurance plan fails to be properly implemented and cannot be cancelled or changed? Even if the health care insurance proposed in the consultancy report is feasible, it can hardly solve the immediate problems. How will the Government relieve the pressure of the continuing rise in public health care expenditure in the next decade, while maintaining the quality of services?

Madam President, in order to find a solution to really solve the vicious circle of "demand outstripping supply" in public health care, the Government must place emphasis on economizing apart from finding additional sources of income. Unfortunately, the Government has always concentrated on cure, while neglecting preventive measures. Nor has the consultancy report made any recommendations on this. As the saying goes, "one should deal with the chaos before it starts and prevent trouble before it happens". Actually, if the Government can put more resources into prevention, the demand for public health care might fall instead of rise.

Take environmental protection as an example. Due to the Government's neglect of sustainable development in the past, the people have been subjected to all sorts of environmental pollution and health hazards at the same time when they enjoy the fruits of economic prosperity. According to a survey conducted by the Environmental Protection Department, the percentage of hospitalization due to deteriorating air pollution in Hong Kong is higher than that in the United States or Europe. The number of premature deaths due to air pollution is as high as 2 000 per year, while the relevant health care costs amount to billions of dollars. If the Government can enhance its environmental protection work soon, would the number of patients suffering from various respiratory diseases be reduced? Would the number of hospitalizations due to air pollution substantially drop? The Government should consider these questions carefully.

Another effective way of economizing is to encourage the use of Chinese medicine. With the ageing of Hong Kong's population, the number of old people suffering from chronic degenerative illnesses is expected to continue to rise. Chinese medicine, as the traditional medical science in China, is effective in health care and the prevention of illnesses, especially the degenerative illnesses of old people. Since it is also cheaper, it has always been popular with the people. In my view, in studying the reform of health care, the Government should place more emphasis on the co-ordination between Chinese and Western medicine. It should incorporate Chinese medicine into the public health care system, so that Chinese medical services will be provided at the various public and subsidized hospitals in Hong Kong to make up for the inadequacy of Western medicine in primary health care.

The health care reform is closely related to the lives of Hong Kong people, and even the whole economy. It is a long-term and arduous task. Therefore, the Government must deal with it carefully. Playing a leading role, it should study the matter thoroughly with members of the public, gathering different views to formulate the best health care policy that is in the interest of all.

Both amendments have put forward concrete suggestions with regard to the report of the Harvard Team. While these suggestions might be very useful, it is too hasty to make a decision at this stage. We will oppose both amendments. However, this does not mean that we object to or support the content of the amendments. It is only because we think that the Government should listen to more views, gather more ideas and conduct a more comprehensive review at this stage before making a decision. Therefore, we will support Dr LEONG Che-hung's original motion.

MISS CHRISTINE LOH: Madam President, we have come to take it for granted that the Government will look after us if we are sick and cannot afford private medicine. But what if the Government does not have the money to do this? How much are we prepared to pay to receive care for ourselves? And, how much are we willing to contribute to help others in need?

These are the issues posed in the consultation document "Improving Hong Kong's Health Care System: Why and For Whom?".

Many people, particularly those with vested interests to protect, have argued that there is not much need for big changes, and perhaps some adjustments here and there will do.

The question for the community to consider is, what is wrong with things now, and whether the present system can continue as is in future?

The common perception of health care services in Hong Kong is that they are good and cheap. The reality is that they are either good or cheap, but seldom both. In considering reform, how do we ensure that the future system can retain existing strengths while remedying weaknesses in quality and cost?

For current services, private out-patient care is generally affordable to most people, but the quality is variable. There is inadequate patient information. By international standards, consultation times are too short to enable any meaningful interaction between doctor and patient about the illness or its treatment and prevention. Antibiotics are given out too freely, often for illnesses which do not require them. This has led to the emergence of bacteria which are more drug-resistant. Doctors commonly dispense only two or three days' worth of medicine, which is insufficient for a complete course of treatment. Whether this is necessary to enable doctors to closely monitor progress at patients' request or just to generate more consultation fees is a matter of debate. Whatever the reason, it is not the practice in developed countries.

The cost of treatment in a private hospital is beyond the means of most people, mainly because of high surgeons' fees and other unpredictable expenses. In public hospitals, fees charged to patients are low, but actual operating costs are high and represent a heavy drain on the Government's budget.

Health care services are presently fragmented between public and private sectors, and among in-patient, out-patient and community care. Western and Chinese medicine are totally separated. This lack of overall complementation creates inefficiency and pushes up costs.

The blame for the present state of affairs must be shared among the Government, health care professions and patients.

The Government has failed to firstly, put in place a properly planned health care system which emphasizes disease prevention instead of cure, and secondly, set out the roles of the respective health service providers. It has allowed the private sector to develop without adequate regulation and has provided public services only on an ad hoc basis in response to crisis.

The medical profession does not monitor the performance of doctors or require them to undergo continuing medical education. It has not promoted a spirit of openness between doctors and patients or encouraged development of the family doctor concept.

Patients themselves are guilty of being careless about their own health, of jumping from doctor to doctor so that there is little continuity of care, and of expecting a quick-fix whenever they fall ill.

Even if this less-than-ideal level of quality is not a concern to most people, there is another more pressing reason for reform ─ how to cope with rising health care costs?

As Hong Kong's population ages and lifespans increase, the future will see an increasing number of elderly people with chronic illnesses. This will be the group with the greatest need for health care, coupled with the least ability to pay. Over the same period, the economy will see a slower rate of growth, meaning less revenue for the Government. Thus, there will be more people seeking treatment from the public sector and less money available to care for them. Unless an improved way is found to finance and deliver health care, the outcome will be longer queues, rationing of services and overall poorer quality of care.

If this happens, the existing system will lose one of its few good features ─ its equity. No longer will it be possible for all citizens (whether rich or poor) to enjoy access to a comparable level of health care. The Government will not be able to provide a safety net for those who cannot afford private treatment. The poor, the elderly and the chronically-ill will be severely disadvantaged.

The consultancy offers five options. Three of these ─ namely, doing nothing, freezing the Government's budget and raising public user fees ─ have been proposed previously. They are non-solutions. The fourth option can solve the financing problem, but probably not improve quality. The fifth and, therefore, probably the best option can do both. The patient also gains the freedom to choose his own doctor and receive treatment at either a public or private facility.

The latter two options introduce the idea of shared responsibility for health care financing. They are based around a pooled insurance Health Security Plan (HSP) and a personal long-term care savings account (MEDISAGE). Each is funded by deductions from an employee's salary, matched by an equal contribution from employers. Although these funding methods have been successfully implemented elsewhere, they are a radical approach for Hong Kong.

Some critics in the media have suggested that it would be better to increase taxes than to introduce these schemes. But if future public health care costs were to be funded in this way by taxpayers, we would be looking at much more than a 3% increase in tax because fewer people would be contributing to the pool of available funds. I am not sure whether taxpayers really want to do that.

As for the amendments, I support the Honourable Michael HO's. I cannot fully support those of the Honourable Miss CHAN Yuen-han's. For example, I also prefer an independent complaints office rather than a committee because I fear that an office would have an executive arm, but not a committee. But perhaps Miss CHAN Yuen-han did not have time to clarify. As regards granting tax allowance, this may be appropriate for the first three options in the consultancy but not for the fourth or the fifth, and, as I said, Madam President, so far, I prefer distinctly the last option.

MR LEUNG YIU-CHUNG (in Cantonese): Madam President, the report "Improving Hong Kong's Health Care System" written by the Harvard Team from the United States severely criticizes the present health care system in Hong Kong. Actually, it shows that the failure to overhaul Hong Kong's health care system over the past few decades has led to a lot of problems and shortcomings, and the inability to catch up with the times. Therefore, it is timely to propose reforms now.

However, the overall reform of the health care system is in itself a question of enormous proportions. The issue of financing is especially complex. Therefore, today, I will concentrate my speech on just the monitoring of the relevant health care services and the complaint mechanism.

Last Sunday, a newspaper published a full-page report on a case of alleged medical blunder on its front page. I have followed up this case for more than two years. A few years ago, a thirty-year-old patient underwent an operation in a hospital to remove a brain abscess. In the short space of three months, he underwent nine operations. Not only did this young man not recover, he became a vegetable. His parents of course suspect a case of medical blunder. Thus, they have tried their best to clear up this matter, hoping that the relevant authorities will give a detailed explanation. However, after four years, no department has come up with a clear explanation. The victim fails to get any redress.

Actually, it was not the first time that such incidents happened and it is not the only example. Similar incidents have frequently occurred over the past few years and they were also reported in the press recently. Actually, the present health care system is "seriously ill". We have to suit the proper remedy to its disease. If this problem is not solved, I fear that more patients would be victimized.

Medicine is a very specialized profession. We have to trust the professional skills and ethics of doctors and other medical staff. However, this trust must be built upon the proper monitoring and regulation of their ethics and performance. Actually, the present problem is a result of a monitoring and complaint system that is far from sound and complete. This leads to a situation where "doctors side with one another and complaints are blocked". These words are an apt description of the current situation.

At present, there are two main complaint mechanisms in Hong Kong. One of them is the Medical Council, with which people can lodge complaints about malpractice by registered doctors. But since the majority of members of the Medical Council are doctors, a situation where "doctors side with one another" as I said earlier would easily arise. In fact, the Harvard Team has also hit the nail on the head, pointing out that "the privilege enjoyed by the medical profession to self-regulate without interference and inadequate oversight from external organization ...... The leaders of organized medicine in Hong Kong are largely graduates of one medical school ...... creating close professional loyalties and collective defenses against external criticism ...... there is little transparency or public input in assuring quality of health care". The Team's criticism reflects the problem with the present health care complaint mechanism.

As for the Public Complaints Committee, with which people can lodge complaints against malpractice in hospitals under the Hospital Authority (HA), the situation is not much better. Since the majority of members of this Committee are not doctors, but members of the public, they can hardly fulfil the function of monitoring given their very passive position.

Why? One reason is that they are all appointed by the HA and therefore have to listen to the HA. They can hardly adopt an oppositional stand. More important, the HA has very seldom publicized the existence of this Committee. If patients or their family have any complaints about a hospital, the hospital usually deals with them itself. Any further complaints will only be dealt with by the HA. Unless patients or their family expressly ask to lodge their complaints with the Public Complaints Committee, complaints will not be directed to this Committee. As a member of the Committee said, each year, hospitals under the HA receive over a thousand complaints. However, only a few dozens are directed to the Public Complaints Committee each year eventually. Therefore, there is a great discrepancy between the number of complaints and the number of cases dealt with by the Public Complaints Committee.

Besides, the administrative and investigative work of this Committee is taken charge of by staff of the HA. Even if they procrastinate or cover up the facts, the Committee can hardly take any action. One Committee member told me that a staff member consulted an expert on a case but did not like the opinion he gave. In the end, he did not adopt his view and consulted another expert instead.

I find this very strange and unconvincing. Why was the view of this particular expert adopted but not the other? The main reason is perhaps that the staff member is employed by the HA. We might ask whether the expert's opinion was rejected because it was opposed to the HA's view.

Another reason why I have absolutely no confidence in the complaint mechanism of the HA is that it lacks transparency and openness, and fails to convince people that the monitoring mechanism is there to really serve the public.

There are many complaint mechanisms in Hong Kong now. However, the complaint mechanisms relating to health care are even worse than the currently much criticized Independent Police Complaints Council. The present health care complaint mechanisms lack transparency and power. When we talk about the reform of the health care system today, especially the reform of the complaint mechanism, I see a need to set up an independent complaint and monitoring mechanism that can inspire public confidence. As for the membership of this mechanism, apart from professionals, there should be people who are concerned about health care services and patients' interests, as well as some foreigners, in order to ensure the independence of this mechanism.

Thank you, Madam President.

DR YEUNG SUM (in Cantonese): Madam President, the Harvard Report has made the following criticisms against private medical services in Hong Kong: First, the quality of services is highly variable, with some services reaching the international standard, but some of third-rate standard; second, excessive fees charged by doctors, a point which I shall focus on later; third, indiscriminate dispensation of medicine, such as abusive use of antibiotics and I believe the medical profession will have great sympathy with me in this area; fourth, a lack of co-ordination with the public sector counterparts. For instance, a patient might have received a number of treatments from private practitioners. But the process will be repeated when he visits a public hospital.

Madam President, today I will speak on the supervision and complaints with respect to private hospitals. According to a survey conducted by the Island branch of the Democratic Party recently, more than 50% of the respondents expressed dissatisfaction with the existing medical services, while 30% of respondents were particularly dissatisfied with the exorbitant fees charged by private hospitals. Only about 10% of them considered the existing medical complaint system effective. Therefore, I will focus my speech on the charging system of private hospitals and the effectiveness of the complaints system.

Madam President, according to the figures published by a medical insurance company in April this year, fees for undergoing hysterectomy in private hospitals vary very greatly in 1997, with the lowest fee being $22,000 and the highest reaching $199,000, a difference of nearly 10 times. The difference in operation fees charged by doctors is even greater. For the same operation, the fees charged might range from $8,000 to $100,000, a difference of 13 times. It was also reported that the same doctor might, under the same situation, charge patient A for $10,000 but patient B for $20,000. The medical profession sees this as its tradition: even for patients who suffer from the same illness and are provided with the same service, patients of first-class wards will be charged a higher fee than those of general wards. I believe no doctor will tell us that the operations performed on patients of first-class wards will be of a higher standard. But as the wards chosen by the patients can reflect their ability to pay, doctors will adjust their charges accordingly so as to make a better profit.

Some people from the medical profession tell us that charges levied in regard of first-class wards are actually standard charges. The fact that a lower fee is charged for patients put up in general wards is because doctors have offered a discount and, therefore, there are different charges for different wards. Owing to social conscience, doctors usually charge patients of lesser financial power a lower fee. But according to the findings of the Harvard Report, the incomes of private practitioners in Hong Kong are four and a half times of their United States counterparts. If there is sufficient competition in the market, I believe the fees charged on patients in private hospitals might be lower than what they are paying at the moment. Nevertheless, with the lack of information and the patients' need for urgent medical services, competition finds it hard to operate in the market. Doctors have the entire power to decide what services the patients need and how much the patients need to pay, whereas patients are deprived of the right to choose the services they need as well as their bargaining power. Faced with this problem, the Government has failed to ask private hospitals and doctors to determine their charges in an unequivocal manner.

Even if patients in private hospitals have paid high charges, it does not necessarily mean that they will be provided with better service. At the moment, supervision of private hospitals, assurances of medical quality, the handling of complaints and so on are still grossly unsatisfactory.

Although the quality of clinical medical service is the most important part of health care, the Department of Health (DH) has not exercised stringent supervision in this area. The Government has also failed to systematically collect information on the effectiveness of clinical services provided in private hospitals. Neither has the DH laid down a minimum benchmark for private hospitals with respect to clinical medical services. Although standards of service have been laid down for both the College of Obstetricians and Gynaecologists and the College of Pathologists in recent years, the DH has, surprisingly, allowed private hospitals to decide whether or not to adhere to the standards. Supervision of services provided by private hospitals is now only limited to the setting up of self-regulatory committees by the hospital authorities. The authorities are only required to report to the DH in the form of questionnaires every year as to whether any approval committees have been set up and whether any mechanisms have been put in place to monitor medical services. But there is no way for the DH to know who the committee members are and, most importantly, whether the committees are operating effectively.

The criteria for issuing licenses for private hospitals are only restricted to such hardware as manpower, facilities and so on. In making applications for licences and renewal to the Government, private hospitals are only required to fill in an annual declaration in the form of a questionnaire and submit it to the DH. As for the facilities provided, the Department has not laid down any benchmark as far as the regulation of quality is concerned.

On the supervision of doctors, it is even looser. Generally, only a few doctors are employed by private hospitals. The remaining doctors are mostly independent private practitioners who provide treatment by making use of facilities provided by private hospitals. There is no subordinate relationship between these doctors and the hospitals. Even if the doctors have done something wrong, it will have nothing to do with the hospitals. Besides, the hospitals are now relying on the doctors for the referral of patients and, coupled with the fact that there is a high vacancy rate in private hospitals at the moment, they will therefore normally not interfere with the conduct of private doctors, such as whether or not the doctors are performing non-essential medical procedure for their patients, whether or not the doctors are capable of providing the relevant medical services and so on. In addition, there is no government supervision in this area. In 1998, the ratio of caesarean operations performed in public hospitals was less than 20%, but reaching up to 50% or even 70% in the case of private hospitals. This can be attributed to a number of factors. But undeniably, charges for performing caesarean operations are higher than those for natural delivery. Moreover, the period of stay will be longer and the doctor's charges will become higher too. This is probably one of the reasons why private hospitals registered a higher ratio of caesarean operations.

If patients are dissatisfied with the service they receive from private hospitals, they will often find that there is nowhere they can go to lodge complaints. In this aspect, Mr Albert HO will elaborate further later. Worse still, under quite a number of circumstances, the Consumer Council, the Ombudsman, the Complaints Division of the Legislative Council and the DH are not empowered to deal with the complaints. The only statutory mechanism for redress against doctors is the Medical Council. But still its power is limited.

Owing to the various problems mentioned above, it is indeed necessary for the Government to set up a mechanism to determine benchmarks for assessing various services, collect information on a regular basis and to make the result of the assessment known to the public.

In addition, the Government should set up an independent department to deal with complaints lodged by patients or amend the terms of reference of the complaints office for the handling of complaints involving clinical medical service for the sake of protecting the interests of patients. The most prominent feature of this complaints mechanism is that professionals will be there to follow up complaints. I think this will better safeguard the interests and rights of patients for they will be given their entitled compensation in case of medical accidents.

With these remarks, I support Mr Michael HO's amendment.

MR TAM YIU-CHUNG (in Cantonese): Madam President, the "Improving Hong Kong's Health Care System" report compiled by the Harvard Team has focused on exploring how to achieve such objectives as controlling medical costs, solving structural problems within our medical system and so on. Therefore, the Savings Accounts for Long Term Care (MEDISAGE) as mentioned in the report is put forward only as a matching measure for the Health Security Plan. Compared with the large quantity of data and surveys quoted for the sake of analysing the problems that exist in our medical system, the analysis made with respect to the implementation of MEDISAGE is indeed very poor.

Personally I have some doubts about the operation of MEDISAGE. According to the report proposals, employers and employees will, under MEDISAGE, be required to contribute 1% of wages (even non-working population is required to contribute). Assuming our annual wages will grow 2% in real terms each year, the actual annual rate of return will be 3% (this assumption is consistent with the assumption made by the Government in setting up the compulsory provident fund). If we calculate in terms of the latest median wage of $10,000, the balance may reach approximately $130,000 after 40 years. This sum of money will only be sufficient for an elderly person to stay in a private home for the elderly operating under the government brought place scheme for 17 months, as a A-grade home for the elderly is charging approximately $7,756 at the moment.

Currently, there are 421 private homes for the elderly in Hong Kong, providing a total of 24 000 places. Another 18 200 places are provided by the three types of homes for the elderly operated by the Government. A total of 13 000 elderly people are assessed to be eligible and put on the waiting list for admission to the three types of elderly homes operated by the Government. If we calculate on this basis, a total of 55 200 elderly people, or 9% of the population over the age of 65, will have a genuine need for institutional service. Members should be aware that this figure definitely fails to reflect the actual situation. Once MEDISAGE is implemented, the incentive for elderly people who have taken out insurance cover to receive long-term care will rise sharply. Their needs for institutional service as well as various community care services might also rise sharply. Will it eventually lead to a drastic increase in insurance premium for long-term care, thereby raising the contribution ratio? I believe Members will like to know more about this.

Furthermore, according to the proposals put forward in the report, all members of the public have to make contribution. Even non-working population (such as housewives) and low-income people are required to make compulsory contribution too. But in doing so, it will definitely pose a definite burden on family expenditure. Will the Government then consider subsidizing low-income people in making contribution? The report mentioned the point that the fairness of the system is based on the ground that the Government will contribute on behalf of the poor and the unemployed. But relative to elderly service expenditure of $2.5 billion this year, is the commitment made by the Government towards the contributory scheme enough? What about cost-effectiveness?

The report has taken long-term care and medical services into account jointly. While this is a positive attitude, we still feel that something is lacking. The Government should indeed continue to give consideration to the livelihood protection for retirees or retirees-to-be. In this area, the compulsory provident fund scheme, which is going to be implemented shortly, has still not given full play to its effectiveness. Therefore, it is necessary for a two-tiered social security package, similar to the proposal made by the Democratic Alliance for the Betterment of Hong Kong and the Hong Kong Federation of Trade Unions a few years ago, to be put in place before the problem can be thoroughly solved. Nevertheless, the report is short of figures, both with respect to current statistics or forecasts, on the demand and supply of resources for elderly care. Therefore, the proposed 1% contribution rate is naturally far from convincing.

Long-term care is closely related to medical services. As far as the existing hospital service is concerned, elderly people aged 65 and over have taken up 35% of hospital beds. From this figure, we can see that if there is a lack of care and continuing care facilities, elderly people will tend to approach hospitals for the provision of restorative care. The problem will only worsen, thus exerting a greater pressure on the medical institutions. Judging from another angle, if the Government can provide more medical care and continuing care facilities as well as establishing good community care networks, resources thus saved by the medical system will definitely be substantial. If this sum of money can cater to the needs resulted from the development of elderly services, will the public be required to make contribution again?

With the constant ageing of our population and the longer life expectancy of the people of Hong Kong, the number of people contracting illnesses due to old age will also grow. In planning for the financing of our elderly services, we must make a more comprehensive and concrete review of the existing services and their future needs. The proposals made by the Harvard Team serve only as a very good start for social discussion. I hope such discussion can continue and eventually provide a better solution for our medical care services and comprehensive social security.

MRS SELINA CHOW (in Cantonese): Madam President, our medical problems are not related to charges and the quality of hospital services only. Similarly, the out-patient system is fraught with serious problems and must be revamped thoroughly.

At present, the people of Hong Kong visit out-patient clinics nine times per year on average, a figure higher than that recorded in western countries. This is because not every member of the public can afford the exorbitant service provided by private clinics. The majority of the general public still rely on the out-patient service provided by the Government. However, public out-patient services provided in the territory are seriously below standard and can hardly cater to the needs of the public.

In Hong Kong, public out-patient services are divided into general out-patient service and specialist out-patient service, which are separately managed by the Department of Health (DH) and the Hospital Authority (HA). Insofar as the general out-patient service that the general public frequently come into contact is concerned, 63 general out-patient clinics are currently operated under the DH. They are open from 9.00 am to 1.00 pm and then from 2.00 pm to 5.00 pm from Monday to Friday. On Saturdays, the clinics operate in the morning only. Of these 63 clinics, only 22 operate from 6.00 pm to 10.00 pm from Monday to Friday. In other words, they provide evening service after normal working hours. On Sundays, only 11 public clinics provide out-patient services in the morning session. This timetable has clearly indicated that there is basically a serious discrepancy between the public out-patient services provided by the DH and the daily lives of the public.

There is no time limit for one to fall sick. A person may fall ill at any time and he will then need to be treated as soon as possible. However, public out-patient services are subject to a lot of time restraints in Hong Kong. No service is provided not only during most of the time on Saturdays and Sundays, but also on some public holidays such as the first day of the Lunar New Year. Even for weekday evenings, only a small number of public clinics provide service, not to mention 24-hour service. If someone suddenly has the need to consult a doctor in the middle of the night, the DH will be unable to cater for this need. How can we expect the public to "pick the right date and the right hour" to fall sick? If not, how can the general public who have fallen ill receive treatment outside the public clinics' opening hours? At present, members of the public are forced to swarm hospital casualties for treatment, resulting in abuses of casualty services. Last year, a total of 2 303 614 people visited casualties in public hospitals for treatment. But only 25% of them were considered as genuine urgent cases.

Out-patient services provided by the DH are not only unsatisfactory and unreasonable in terms of opening hours, the quality of the service is also seriously below standard. Late last year, it was discovered by the media that some "indolent" doctors providing evening service were found very often reporting late for work and leaving office early. After that, it was also reported that as far as evening services are concerned, patients were not provided with independent records. Even the contact telephone numbers and addresses of patients were put on record. What the DH did was to briefly put down the details of illnesses and prescriptions with respect to all patients in one single register only. Because of such an unimaginable and out-dated arrangement, the privacy of patients was not protected. What is more, it might even lead to serious consequences in case of medical blunders. In February last year, an incident related to chloroform cough syrup took place in Kowloon Clinic, which was operated under the DH. So far, the Government has been unable to get in touch with one of the affected patients who visited the Clinic in the evening because of a lack of information.

Madam President, today Hong Kong has become one of the international cosmopolitan cities. Please excuse me for finding it hard to accept that public out-patient services in Hong Kong still remain at the level we attained in the '70s or '80s. I think there is a need for the relevant authorities to review this problem thoroughly. Apart from considering seriously extending the opening hours and improving the quality of service, they should, more importantly, consider the fundamental structure, including whether or not a regulatory body similar to the mode of the Airport Authority should be set up independent of the Government to replace the unsatisfactory DH for the purpose of managing out-patient services, or to go one step further to allow one body to manage public out-patient services as well as hospital services for the purpose of strengthening co-ordination between these two types of services. The Government should also consider whether it is the best arrangement for an Administrative Officer to oversee medical policies and whether it is appropriate for a Bureau Secretary to be responsible for so many policies in such fields as sanitation, health care and welfare.

Apart from public out-patient services, I would also like to talk about private out-patient services delivered in public housing estates. If estate practitioners can provide the residents with comprehensive out-patient services, it will greatly relieve the public's demand for public out-patient services. But at the moment, neither the Housing Department nor the Housing Authority has a policy for facilitating the establishment of estate joint clinics. Neither is there any measure to encourage residents in housing estates to make better use of out-patient services available in housing estates. In renting estate shop premises to doctors, the Housing Authority will invariably apply the market value for the purpose of calculating rentals and offer no concession. Furthermore, the number of clinics is determined not according to the population of individual housing estates. Currently, there is basically only one doctor serving each clinic. Even if a number of doctors are interested in practising in housing estates, the space available is very often inadequate.

I would like to suggest the Housing Authority to amend the existing arrangement by providing doctors with bigger clinics at a rent below the market rate. This will attract doctors, be they general and specialist, to set up clinics in housing estates jointly to provide the residents with comprehensive out-patient service.

At the same time, the Housing Authority should also determine medical charges with doctors together with a view to keeping the charges below the market price so as to ensure that the charges are affordable to the residents. Such a rental concession is not supposed to be permanent. The Liberal Party can in fact propose concession by way of amending its proposed voluntary medical insurance scheme.

Thank you, Madam President.

DR TANG SIU-TONG (in Cantonese): Madam President, last month, the Harvard Team published a consultancy report entitled "Improving Hong Kong's Health Care System: Why and For Whom". Although the report, entitled "Improving Hong Kong's Health Care System", is aimed at embracing the whole medical system, its focus is, nevertheless, on health care financing. To put it simply, the major problems are: Why do we need to pay? How much do we need to pay? The report has also, at the end, devoted much space to the proposed establishment of the Health Security Plan and Savings Accounts for Long Term Care in order to tackle the constant rise in public medical expenditure in Hong Kong.

Madam President, it is pointed out in the report that the ageing population, rising public expectations for health services, adoption of new and costly technology and failure of the Government to put resources into most cost-effective services have all contributed to the rise in medical expenditure. But can these problems be solved through boosting finance? And to what extent shall finance be boosted before the problems can be solved? I really have reservations about this.

Medical resources in Hong Kong are unevenly distributed and lacking in effectiveness. This is because the Government has all along been adhering to its practice of taking stop-gap measures insofar as medical policies are concerned. This is in fact not directly related to how many resources we have. The concept of prevention is better than cure has been generally recognized throughout the world as a golden rule. It can also make medical resources to be utilized in a more effective manner. But the Administration still, for a long time, insists on injecting resources in a disproportionate manner into hospital services, while completely ignoring the demands of primary care, prevention of illness and health education promotion, thereby resulting in inappropriate use of resources. Although extra money has been paid by taxpayers and additional high-tech facilities have been installed in hospitals, members of the public still find that they cannot eventually relieve their pain. Once again, our social resources were utilized in an inappropriate manner.

Let me cite geriatric illnesses as an example. The most commonly seen debilitating or chronic diseases, such as diabetes, hypertension and arteriosclerosis, can be prevented through healthy diet, exercise and living styles. Even such serious complications as stroke and heart disease can be alleviated through early treatment and primary care. Let me cite the people living in Hong Kong as another example. The constant rise in the number of domestic injuries, traffic accidents and violent crimes, the fact that nearly one third of the people of Hong Kong suffer from over-weight, serious air pollution and intense pressure on livelihood will all lead to illnesses of various kinds. Healthy life is closely related to health care. If the Government can pay more attention to the prevention of diseases by raising the ratio between primary care and the overall medical expenditure, and strengthen corresponding measures like education, publicity and community care services, can the demand for health care in Hong Kong be reduced? These are the areas that the Harvard report has not mentioned, but certainly merit our serious consideration.

It is undeniable that technological advancement and the introduction of new medicine can enhance doctors' ability in making diagnosis and treating diseases, but to what extent can the constant injection of huge resources for the purchase of high-tech and new medical equipment bring no genuine efficiency? Is it worthwhile for the authorities concerned to pursue and rely on new and high technology blindly? Are these facilities essential? Can alternative medical treatments, including Chinese medicine, play another role? While expenditure on Western medicine is constantly rising, should we, in purchasing new technological facilities, consider other low-cost technologies which have the same or even greater effectiveness? To date, the Government has never made any assessment in this area. However, in the wake of the incessant injection of resources in new and high technology by public hospitals, primary health care services, the cost of which was originally not very high, have now turned into luxury services with their price exceeding their actual value. As a result, the public's expectations and demands for public hospital service have become even higher. Regrettably, with the drastic rise in the number of people seeking treatment, the efforts made in improving quality were unavoidably diluted. Consequently, the problems still remain though money has been spent. Does the loss outweigh the gain for we have devoted too much resources to new and high technology? Therefore, the Government should expeditiously review and establish the role and position of public sector health care to see what should be regarded as primary health care and what medical care it should provide.

Madam President, medical reform in Hong Kong is an in-depth and complicated problem. It is impossible for the Government to expect results overnight and solve all problems by relying solely on compulsory medical insurance. I think the first and foremost task for the Government is to play a more active role in encouraging the public to take part in relevant discussions. However, the Administration must bear in mind that during the consultation period, its role should only be limited to the staging of forums and collection of information. It should not take part in discussion and, more importantly, not repeat the mistake made by the Review of District Organisations by leading public opinions, twisting and taking advantage of public opinions to uphold the Government's established policies.

Furthermore, as the subjects covered in the report are relatively complicated and as only the English version is available, the Administration should expeditiously provide sufficient copies of Chinese translated version for public viewing. Moreover, the Government has on hand most of the accurate medical information and data. It should therefore provide relevant information for public reference. In particular, what does it mean by the so-called "public medical expenditure"? Are medical and welfare expenditures incurred by civil servants and staff of the Hospital Authority regarded as public medical expenditure? Should the huge expenses incurred in this area calculated as part of public medical expenditure as well? The Government must make the information known to the public for extensive discussion as well as inviting views and suggestions before it can formulate for Hong Kong a reform package which is going to be the most comprehensive, pragmatic and accountable.

The implementation of an insurance system will undoubtedly be beneficial to my colleagues from the medical profession and me as insurance can make us earn more. But once the insurance system is put in place, it will not be easy to remove it. Therefore, the Government should make very careful consideration in implementing the system. Moreover, it should compare the merits and demerits of the private and public medical insurance systems. As for those issues of over-charging of doctors, abusive use of antibiotics, varied standard and unsatisfactory medical complaints system as pointed out in the report, I think it is only a matter of different people having different views. But they are only side-issues, not the principal objectives of the report.

As the original motion covers a wider scope and encourages the public to put forward views more actively and take part in discussion to determine the direction for our development in future, I would like to give it my support.

Madam President, I so submit.

MISS EMILY LAU (in Cantonese): Madam President, I rise to speak in support of Dr LEONG Che-hung's motion. The whole review is very complicated. The Frontier has already carried out internal consultations. We hope we can also consult other people in the community. Therefore, what I am going to say today are my personal opinions only. I believe Miss Cyd HO and Mr LEE Cheuk-yan will be expressing their own opinions too. I hope the Secretary can consider whether the three-month consultation is too short for I hope we can be given more time. Even the Secretary said this issue was going to have a profound impact. We hope we can have more time for discussion.

Madam President, Mr Michael HO has just made a statement which is really remarkable. In fact, that statement was first made by Dr LEONG Che-hung. He said: "Local ginger is not hot". This explained why the Government asked professors from the Harvard University to compile this report. This is why Mr HO responded by saying that: This is actually not bad for the professors might have said something that even Mr HO or Dr LEONG dare not say. This is probably because they were returned through functional constituencies. What they want to say might involve their constituents as well as other interests. But I still hope that Mr HO, Dr LEONG or Dr TANG can behave like what the employee of the Urban Services Department did yesterday by showing bravery to sacrifice consanguinity for the sake of righteousness. They must come forward and point out any irregularities. Madam President, I believe the people of Hong Kong are extremely fair. If you are willing to remove the "blood stasis" or perhaps some rotten apples ─ despite the fact that you come from the coterie election, and I am now urging you to join our direct-election army quickly ─ electors will eventually give you their votes. This is why I hope you can sacrifice consanguinity for the sake of righteousness and come forward to speak out. You should not conceal what they have done wrong just because you are a representative of the medical sector or health care sector.

Madam President, one of the most serious problems of the report is that it has failed to mention how cost-effectiveness of the medical system can be enhanced. In this aspect, I feel extremely disappointed. This is because many people only want to talk about how to make and spend money only. Of course, these should come under our scope of discussion. But is the existing system so perfect that there is no need to make changes insofar as its cost-effectiveness is concerned? It is in these areas that I am gravely disappointed.

Just now, a number of Honourable colleagues have talked about private practitioners. In this aspect, I think the Government should take a great share of the responsibility. This is because, over the years, the Government has in fact spoiled the doctors. Madam President, I believe you are also aware that in the former Executive Council, one of the Members must be a private practitioner. It is only now that the situation has changed. Even the Legislative Council has purposely given the doctors a seat so that they can continue to enjoy a high status. As a result, they can run wild like a crab. Therefore, I am glad to hear the Chief Secretary for Administration say that it is also time to look at the charges levied by private practitioners. As for the other issue concerning the "unavailability of complaints channels", I believe many Members have received such complaints and run into many walls eventually. As for abusive prescription of medicine, some Members have raised this issue too. I believe it is necessary to review all these issues.

As for private hospitals, just as Dr YEUNG Sum said, I also feel that it is now time ─ perhaps it is actually too late ─ to set up a formal licensing system and conduct examination every year. We must discontinue with the current practice. I believe the Secretary can tell us something as far as this area is concerned. Nevertheless, I find the report contain a most appealing point and that is "money following the patients". In other words, patients are free to make their own choices. I have said, on previous occasions, that not only our medical system should be like that. Our education system should follow suit too. In doing so, parents and students can then make their own choices. I am supportive as far as these areas are concerned.

Madam President, recently, some newspapers published a lot of comments on this report. I support some of the comments but find it hard to accept some of them too. I even find some of them very remarkable, and I am going to read them out now. At the same time, I will read out their source for I do not want to take things belonging to other people as mine. This is an editorial from the Wen Wei Po dated 15 April and entitled: "Formulating major principles for medical security". Madam President, I greatly support many of the points contained therein. It is mentioned in the editorial that: "We should integrate our economic strength, the spending habits of Hong Kong residents, the characteristics of our low-tax system and cost control for the setting up of a medical system with its own characteristics." The editorial has also raised the point as to on what principles should we base our conduct of the review? Madam President, I greatly share its viewpoints. It says: "First, public health should provide incapable people with a safety net by way of welfare relief. The people we help are not necessarily the poor. Middle-income people might use up all their money because of some illnesses. Assistance should be provided to them when they are in such needs". Another principle which I greatly share is "people contributing more for health care should be better rewarded. With "money following the patients", people intending to enjoy free medical treatment without giving any contribution should be means-tested". Another principle I also share is: "The public should be given the right to opt for health care spending. There should be no broad-brush health care". What follows is probably reference to the comments made by the Harvard professors: "There is no need to require the poor and the rich to be treated equally. Health care of different standards should levy different charges. New technology and new medicine should of course charge higher fees". Apart from these, I also share the principle that reads: "It is not suitable for the Government to use public money to sustain the competition between public and private hospitals so that public hospitals are now taking up 92% of hospital business. Furthermore, a system should be set up for the purpose of monitoring charges levied by private hospitals and practitioners". At the same time, Madam President, I greatly support: "Public hospitals tend to purchase high-tech facilities in a generous manner for they are spending public money. These new facilities, worth tens of millions of dollars, can only cure a dozen patients each year. They are not only low in cost-effectiveness, but also extremely extravagant". It says: "To control hospital expenditure, we must put in place a specialized committee for vetting and approval".

Madam President, what I have quoted just now are general principles only. The Frontier will discuss minor principles in detail in future and present them to the Government. Nevertheless, I strongly agree with what the Wen Wei Po said because I believe for some matters, we should put forward the general principles as a guiding direction so that we can fully discuss this matter which will affect us for many decades to come. Thank you, Madam President.

MR ALBERT HO (in Cantonese): Madam President, the recently released Harvard Team report points out that there is the lack of a satisfactory complaints mechanism in the health care system of Hong Kong. For this reason, the report proposes the establishment of an independent complaints office. My remarks today will focus on the inadequacies of the existing complaints mechanisms.

At present, the Medical Council is the body responsible the overall monitoring of the professional conduct of medical doctors. The Medical Council is composed of 28 members; of these members, 24 are medical doctors and four are layman members drawn from the community. Under the existing mechanism, medical complaints are first vetted by a Preliminary Investigation Committee, or screened by the Chairman before referral to the Preliminary Investigation Committee. Disciplinary hearings may be held only when the cases concerned are deemed to be within the responsibilities of the Medical Council.

As for medical doctors and medical personnel working in hospitals, their professional conduct and quality of service are supervised by the Department of Health in the case of private hospitals and the Hospital Authority (HA) in the case of public hospitals. In the case of the latter, the HA Headquarters will receive the relevant complaints and refer them to a Public Complaints Committee only when it is deemed necessary to do so.

The first point I wish to raise is that although there have been some undeniable improvements in the work of the Medical Council and the Public Complaints Committee under the HA, complainants have still had the following overall impressions about these two complaints bodies. First, they feel that there is inadequate outside participation. Second, they feel that the medical doctors responsible for investigation are over-protecting the medical personnel under complaint. To find out why there have been such overall impressions, Madam President, let us first look at the statistics of the Medical Council and the Public Complaints Committee (I have to focus on these two complaints bodies because I do not have the statistics of any other complaints institutions). In 1994, the Medical Council received a total of 170 complaints. Following the screening by the Chairman, 62 cases were referred to the Preliminary Investigation Committee, and in the end, disciplinary hearings were held for 23 cases only. In 1995, 177 complaints were received; 78 cases were referred to the Preliminary Investigation Committee after screening, and, in the end, disciplinary hearings were held for only 14 cases. In 1996, the total was 168 complaints; 42 were referred to the Preliminary Investigation Committee for vetting, and disciplinary hearings were held for nine complaints. In 1997, there were 190 complaints; following the screening by the Chairman, 44 were referred to the Preliminary Investigation Committee and disciplinary hearings were held for 10 cases only. And, as can be expected, all through these years, only some of the complaints were found to be substantiated after disciplinary hearings.

Let us now look at the statistics of the Public Complaints Committee. In 1993-94, it received as many as 1 762 complaints; in 1994-95, it received 1 911 complaints; in 1995-96, it received 1 047 complaints; and, in 1996-97, it received 1 735 complaints. However, the cases referred to the HA Headquarters for investigation amounted only to 227 in 1993-94, 254 in 1994-95, 252 in 1995-96 and 272 in 1996-97. And, worse still, the cases referred to the Public Complaints Committee were even smaller in number: 31 in 1993-94; 38 in 1994-95; 30 in 1995-96 and 21 in 1996-97.

These statistics have naturally led many people to ask, "Given the so many complaints, why was only a very small number of them referred to the committee responsible for handling complaints? As far as the HA is concerned, why should the Chairman be asked to screen so many complaints? Why is it impossible to pass the work to a preliminary investigation committee, to let it decide whether disciplinary hearings should be conducted?" All these procedures have obviously led to a lot of discontent and queries. Such discontent and queries have probably intensified following the revelation in the Harvard report that according to some medical doctors, their complaints against their counterparts will not be entertained, and that only patients are allowed to lodge any complaints. Will this probably intensify people's impression that they are over-protecting members of their own profession?

I have also talked to some members of the Public Complaints Committee and complainants, and following the discussions with them, I notice a number of major problems. First, the secretariat of the Public Complaints Committee is manned wholly by HA staff, and all information and documents addressed to the Committee have to be submitted via the secretariat. Very often, members of the Committee may find the information provided insufficient, or even not useful at all. Second, the person in charge of the secretariat is a Deputy Director of the HA. Third, in case the Committee finds the information provided insufficient, it may not have the authority to ask for more information from the HA. What is most lethal, as mentioned by Mr LEUNG Yiu-chung, is that whenever there is a need to employ an outside consultant, the HA will always make the final decision and the Public Complaints Committee will have no say at all. And, there were indeed some past cases in which the HA sought to replace a consultant because his conclusions were not desirable to it. Such a practice has inevitably led complainants to ask, "Can consultants really provide the help required?"

Therefore, it is most important to ensure that the entire mechanism is independent, autonomous in operation, and vested with the power to ask for information from different organizations and a high degree of transparency. The Medical Council has now made some improvements, but the Public Complaints Committee is still working behind closed doors. Why? I thus think that the existing complaints mechanism warrants an overhaul. There are no doubt some good points with the Public Complaints Committee, but I still think that an independent complaints office should be established; the mode of operation of such a complaints office may well be modelled on the Public Complaints Committee, but it should have a wider scope of authority, so that its supervision can be extended to private hospitals and even individual medical doctors. This is extremely important. I think the medical profession should really support this proposal, so as to boost public confidence in their complaints mechanism.

Thank you, Madam President.

MR YEUNG YIU-CHUNG (in Cantonese): Madam President, the Harvard Team report recommends an overhaul of our health care system; with such an overhaul, our existing health care system, under which public sector medical services are accessible to all at low prices regardless of personal wealth, will be transformed into a central medical insurance system. This means that the public will have to pay more for medical services in the future.

Actually, from experience, we can see that all public sector medical insurance systems regardless of their forms are bound to be plagued with problems of cross-subsidy and abuses. Under the proposed Health Security Plan (HSP), abuses may well occur because patients may think that since they have contributed to the plan, they should make "full" use of their entitlement. The HSP will lead to many problems relating to fundamental principles and technicalities. For example, healthy people will be required to cross-subsidize those who are not, and those who are more healthy will be required to cross-subsidize those who are less healthy. And, is it fair to base contribution amounts on income levels? How are we going to meet the heavy expenses of administering and managing the medical insurance funds? Will HSP contributions always be able to meet medical expenses? When the average life expectancy is getting longer and longer, can MEDISAGE cope with the increasing demands for nursing care?

Before these questions can be answered, before the community has conducted enough discussions, and before people can reach a consensus, the Government should not take any rash actions, because once we implement the HSP, we will be embarking on a course of no return. The scheme being proposed is no more than a rough outline and no precise details have been released. But what matter most are precisely the specific arrangements, because they are going to determine whether or not people can afford the contributions. That is why the Government should first of all formulate a detailed plan before asking members of the public to make their choices.

This is indeed a very, very expensive report and it deals mainly with health care financing. So, I cannot help wondering why it has failed to make any mention of cutting costs and increasing cost-effectiveness. Instead of doing so, the report assumes that our ageing population will necessarily boost our health care expenses and render the Government unable to cope. I must point out that there are already a lot of statistics showing that the ratio of old people in a place and its public health care expenditure are not necessarily related. For example, according to press reports, in Sweden, 18% of its population are aged over 65, but its health care expenses amount only to 7.3% of its GNP. In contrast, in the United States, where the proportion of old people is just 13%, its health care expenditure amounts to as much as 9.4% of its GNP. So, it can be seen that ageing population is not a deciding factor at all. When it comes to financing, I think it is most important for us to reduce the costs of health care; one simply should not ask people to share the burden without mentioning anything about raising cost-effectiveness.

The report points out that our existing health care system is highly compartmentalized; well, this is not a problem unique to public and private hospitals, because there is an even bigger gap between Western and Chinese medicine. It is a pity that the report gives only a very slapdash treatment of Chinese medicine. In the past, the colonial government left Chinese medicine largely on its own and refused to render any assistance to its development. This explains why Chinese medicine was excluded from our health care system throughout all these years. The Legislative Council is now examining the Chinese Medicine Bill, which will give Chinese medicine a legal status. Since the report also agrees that Chinese medicine can benefit many chronic patients, I hope that when the Government conduct studies on health care reforms, it can incorporate Chinese medicine into our health care system.

If we want to solve the general problem of compartmentalization in our health care system, I think we should really introduce a portable medical history system, so that patients can switch among private and public hospitals at any time they like. Besides, the system of Family Physicians, which has been operating in many foreign countries for years, is a very effective means of solving the problem of inadequate communication, because no other doctors will know the health conditions of the members of a family better than their family physician. Family physicians can supply the medical history of their patients to hospitals, and they can also ask for such records from hospitals. This kind of two-way communication will solve the problem of compartmentalization and ease the pressure on hospitals. The Government should really explore its feasibility.

Actually, I very much agree with the report that "there is little transparency or public input in assuring quality of health care". Since medical doctors tend to side with one another, I think there is indeed a real need to establish an independent complaints committee to handle public complaints against public and private medical institutions. Public education is especially important to the achievement of the objective mentioned just now. It is only when people have access to sufficient information and knowledge that can they choose the medical services most suited to their own needs and monitor the whole system more effectively.

Madam President, the Democratic Alliance for the Betterment of Hong Kong maintains that the public sector health care system should be allowed to provide basic medical services at low charges. And, the Government should try to meet the expenses of public medical services out of taxation revenue.

With these remarks, Madam President, I support the amendment of Miss CHAN Yuen-han.

MR HOWARD YOUNG (in Cantonese): Madam President, my remarks will focus on the issue of financing.

The report written by the Harvard Team on reforming the health care system of Hong Kong recommends that Hong Kong should implement the MEDISAGE and the Health Security Plan (HSP) as a means of resolving our problem of health care financing in the long run. The recommended health care financing system is based on mandatory contributions, and lots of similar examples can be found in foreign countries, but the experience of these countries has exposed many problems and defects with such a financing system. The Liberal Party thinks that we will need to discuss the recommendations of the Harvard Team from three different perspectives: first, justifications; second, abuses; and, third, the current situation in Hong Kong.

To begin with, there are no justifications for a mandatory contribution system. In this connection, there should be three considerations. First, from the perspective of general principles, why should rates of contribution be pegged to employees' wages? Is the Harvard Team in fact saying that those with higher incomes or those who earn more money will necessarily have a greater demand for health care services? I am afraid that the two are not necessarily related. So, it seems that this is only a form of taxation in disguise, a form of tax increase, instead of genuine health care financing. Second, why should employers also be required to make contributions? What are the justifications for forcing employers to bear the health insurance risks of their employees? No doubt, some large employers in Hong Kong are doing this, but as far as I know, this is seldom the case with small and medium enterprises. Third, in the case of all those employees who are now already protected by various schemes of corporate medical insurance (especially non-contributory corporate medical insurance schemes), why should they be forced to join the HSP? What are the justifications? For those employers who have already taken out medical insurance policies for their employees, why should they not be exempted from making contributions? Why should they be forced to make double contributions? To sum up, we think that we should really discuss whether there are any justifications for the issues I have just mentioned. The system of contributions recommended by the Harvard Team gives us the impression that it is actually trying to "drag everybody into the water", so as to make sure that the amounts of contribution in the future can meet the medical expenses required. But we do not think that it has advanced any convincing justifications.

The second major problem with the proposed contributory scheme is that it may lead to even more abuses of medical services, thus pushing up our health care expenditure sharply in the future. In the end, this may destroy the whole scheme and force the Government to shoulder the consequences. The HSP is founded on the concept of resource sharing, under which healthy people have to cross-subsidize sick people, and people with fewer health problems have to cross-subsidize those with more health problems. Since resources are shared, and since there is cross-subsidy, users will easily be tempted to make numerous demands and exhaust all available services even though they may not be required at all. Besides, since payments for medical services will be met by the Health Security Funds, medical personnel will no longer have to worry about the financial ability of their patients. That being the case, they may probably do all they can to entertain the requests of their patients; they may think that by doing more, they can avoid complaints from their patients, and they may also think, in particular, that this can give them added defence when they are accused by the monitoring authorities of negligence. This type of mentality, called "defensive medicine", was once very popular in foreign countries. Because of these two factors, our medical expenditure will inevitably increase drastically, or even run out of control. Although the Harvard Team also recommends a " deductible" for the purpose of preventing abuses of medical services, there are still two problems. On the one hand, if the level of the "deductible" is set too low, it will not possibly produce the desired effect. On the other hand, if the level is set too high, it will be unfair to people contributing to the plan. The truth of this dilemma is illustrated fully by the level of " deductible" recommended by the Harvard Team, which has met with vigorous public opposition. Moreover, we must note that the "deductible" will not produce any effect on patients with financial difficulties because they do not have to pay for the medical services used.

The third problem with the recommended scheme is that it fails to take account of the current circumstances and culture of Hong Kong. At present, Hong Kong is undergoing a period of economic adjustment, and our enterprises and employers are all trying hard to improve the business environment. Employees are also struggling hard for their survival in the midst of pay reductions and layoffs. Next year, the Mandatory Provident Fund Scheme will be implemented, and under this scheme, employers and employees will each be required to contribute an amount equal to 5% of the employee's monthly wages. This alone will impose an added burden on employers. So, if the HSP and the MEDISAGE are really implemented, that is, if employers and employees are further required to make a combined contribution amounting to 3% of the employee's wages, the operating costs of our commerce and industries will only go further up. This will inevitably reduce our competitiveness and deter foreign investments.

Then, there is the cultural perspective. The people of Hong Kong believe that they should earn their own living, and they also believe that the harder they work, the more rewards they will get. Unless there are absolutely no alternatives, they are not prepared to live on public assistance. Basically, under the HSP recommended by the Harvard Team, when a patient seeks medical services, all the other contributors to the plan will have to pay. We think that this is very much against the culture of Hong Kong.

There is no doubt that there are long-term problems with our health care financing, and we must therefore work out appropriate solutions as quickly as possible. But we do not think that it is wise at all to finance our medical services by compelling both employers and employees to contribute to a health care insurance system.

I so submit.

DR RAYMOND HO (in Cantonese): Madam President, I am going to comment on the Harvard Team report from the perspectives of an ordinary member of the public.

According to the report, the share of our public health care expenditure in the Gross Domestic Product (GDP) has risen from 1.7% in 1989 to 2.5% in 1996. The report projects that if our GDP continues to record real growth at 5% per annuity, public health care expenditure will increase from the current 2.5% to between 3.4% and 4% of our GDP by 2016. And, this means that in the next 18 years, public health care expenditure may take up 20% to 23% of the total government budget, a significant increase from its current 14%. This will directly affect the funds available for other public programmes. So, since public health care expenditure will increase incessantly, we really need to review our existing health care system.

With respect to the incessant increases in public health care expenditure, we must first of all identify the underlying causes. This may well be caused by population growth and changes in demographic structure, and improvements to the quality of our health care services may also be a reason. Besides, increases in health care expenditure may also be caused by abuses of existing health care services, and another possible reason is that the existing health care system may well have failed to function effectively as desired. Before we can clearly identify the reasons, the adoption of a medical insurance system may not necessarily enable us to solve the problem once and for all.

The HSP and MEDISAGE recommended by the report have not been designed with the purpose of preventing abuses and reducing public health care expenditure. Rather, the main purpose is to enable the Government to shift its public health care expenditure to the HSP. Such an arrangement is unlikely to solve the problem; instead, the insurance system itself may well be open to abuse. What is more, a good part of the premiums will have to be used for meeting enormous administrative expenses and commissions. As the popular saying goes: "Whatever is given is paid for". So, if we cannot identify the main reasons for the incessant increases in our health care expenditure, no matter what forms of financing we adopt, the burden will still fall onto the shoulders of the broad masses in the end. Actually, what the Government should really do now is to properly address the problem relating to abuses of health care services.

Moreover, the Government should also seek to arrest the incessant increases in public health care expenditure by enhancing the efficiency of medical and health care institutions. What is more, the Government should invest more resources into promoting the importance of disease prevention among members of the public. If we can do well in promoting the importance of preventive medicine, we will be able to effectively reduce the incidence of diseases among people. This will in turn reduce our public health care expenditure in the future. At the same time, the existing out-patient and casualty ward services should be maintained, but effective measures must be put in place to prevent possible abuses. As for the medical records of patients, they should be made freely transferable, so that the doctors concerned can always gain easy access to them for diagnostic purposes. This will enable doctors to make more effective diagnosis on the one hand, and reduce the related medical charges on the other.

The report also recommends the MEDISAGE, under which working people are compelled to join, and their savings can only be used to take out a personal restorative care insurance policy when they reach the age of 65. The MEDISAGE is certainly well-intentioned, but the proposed arrangements are not flexible enough and may not thus look after the individual needs and wishes of all people.

Madam President, because of all these considerations, I will support the original motion moved by Dr LEONG Che-hung. I so submit.

MR CHEUNG MAN-KWONG (in Cantonese): Madam President, during the current Session of the Legislative Council, I have so far moved two motions on the health of children ─ one about overweight schoolbags and the other about the lunch problem of school children. These motions are related to the issue of primary health care. And, today, on behalf of the Democratic Party, I will talk about the issue of primary health care once again.

The recently published Harvard Team report recommends that more resources be spent on enhancing our primary health care services. The Democratic Party endorses this viewpoint entirely. To attach importance to primary health care is the same as recognizing the importance of "preventive medicine", which has already become a major trend in medical services and the only means to arrest the incessant increases in public health care expenditure. If one seeks medical treatment only after he has fallen sick, the expenses will be much too big, and all may well become too late as well. This will do no good, either to the patient himself or to the community at large. Hence, we must vigorously promote primary health care as an important focus of our efforts to reform our health care services.

Primary health care involves many aspects. It covers a wholesome living environment where, for example, clean drinking water and fresh air are available. It also covers a healthy lifestyle which attaches importance to a healthy diet.

Contaminated foods will lead to outbreaks of contagious diseases; foods containing too many additives can cause cancer; heavy metals found in our foods, such as lead contained in preserved eggs, can poison people; too much saturated fats can lead to obesity; and, high cholesterol may cause cardiac troubles and hypertension. So, it is very important that we should make the public understand the relationship between the foods they eat and their health. We should make aware them that improper diets will impair our health. This should be an important direction of our efforts in promoting primary health care.

Foods aside, we should also pay attention to our environment. Air pollution is deteriorating in Hong Kong and it has become our greatest common enemy. Years ago, our air pollution index was just about 30, but it is now 30 to 50 already, and, sometimes, it may be as high as 50 to 80. Polluted air has caused many, many diseases. In 1994, the hospitals under the Hospital Authority recorded a total of 7 000 inpatients suffering from asthma, but in 1997, the figure rose to more than 10 000. For inpatients suffering from chronic bronchitis, the figure in 1994 was just about 19 300, but in 1997, it soared to 24 600. All these figures can show that the incidence of respiratory diseases has been rising as our air pollution worsens. So, if our public health care policy aims only to provide out-patient services or to control diseases through the administering of drugs, and if we pay no heed to air pollution, we will be putting the cart before the horse; we will certainly fail to tackle diseases at source.

However, Madam President, can the Department of Health do anything to stop air pollution? No, and that is why we really need the concerted efforts of all government departments to promote primary health care. Only by this can we achieve the goal with half the effort.

In addition to targeting at specific areas, primary health care services should also be directed at specific age groups. In this connection, the Department of Health has already put in place a very good scheme, called the Student Health Service, which has become increasingly well-received among parents. But apart from this, have we ever paid any further attention to youngsters? Have we ever paid enough attention to the health hazards caused by smoking and drug abuse to teenagers? Smoking can cause lung or throat diseases, and even cancer; drug abuse can cause life-long impairment to the health of teenagers. Here, I have a true story, one about a 20-year-old young man who loved to inhale lighter gas vapour. His heavy addiction to this habit finally caused permanent damage to his brain, making him wheelchair-bound and dependent on others for spoon-feeding for the rest of his life. This true but certainly very unfortunate example serves precisely to show how important primary health care is. If we fail to do well in this area, life-long health damage may result.

For old people, the provision of primary health care services is actually a matter which concerns their life and death. Every winter, especially in times of severe chills, some old people will die of coldness. By this, I actually mean that severe coldness may cause old people suffering from chronic illnesses to turn acute, and they may die as a result. But if we can put in place a sound primary health care system, old people will be able to remain in healthy conditions. That way, the tragic deaths of old people resulting from coldness can be reduced greatly. Besides, we should also note that primary health care can also help old people lead a more enjoyable life. One of the aims of primary health care should be to constantly maintain the vitality of old people. Vitality means health, and it can prevent them from becoming senile and sick. When an old man is astute enough to win in a mahjong game, he will be able to enjoy life; he will not have to spend his twilight years in hospital, waiting for death to claim his life.

Madam President, the Audit Commission has recently published a report on the dental care policy in Hong Kong. Although the Democratic Party does not endorse this policy entirely, we are nonetheless greatly impressed by its meticulation in setting its targets, because it even specifies the number of teeth which old people of different ages should have.

I hope that in the future, our primary health care policy can also set down specific targets for each age group and each segment in the primary health care system for the benefit of all people. The reason is that although the Democratic Party thinks that people should inevitably pay for the increasingly high health care expenditure, they cannot possibly do so without any limits. Therefore, we should really start with primary health care and seek to ensure that all people can enjoy good health throughout their whole life. This is not only good to individuals, but will also help reduce the overall burden of our health care expenditure. I believe that this should be an important underlying spirit and aim of our health care reforms.

Thank you, Madam President.

PROF NG CHING-FAI (in Cantonese): Madam President, the topic of the motion debate today is "The Consultancy Report on Health Care Financing". But I think the report actually covers much more than health care financing. To be fair, the title of the report, "Improving Hong Kong's Health Care System", should be a more appropriate topic of the debate.

There is indeed a need to reform our existing health care system, to make it more satisfactory, and to prevent it from becoming out-dated. There is indeed a need for us to think well ahead before it is too late, so that we can avoid any possible crisis. But what problems are there? How should these problems be solved? And, for whom? These are all mentioned in the subtitle of the report.

As far as I am aware, there is in the medical sector a general discontent about the existing health care system and framework. The series of medical blunders which occurred a couple of years ago all show that the existing system is both unsound and unreasonable; they exerted immense pressure on the health care sector and led to considerable public discontent. The report written by the Harvard Team points out that the existing health care system is "compartmentalized", and this comment applies to the relationship between the Department of Health and the Hospital Authority, between public and private hospitals and between primary health care and medical services. Just two days ago, a hospital refused to release the X-ray negative of a patient to a private hospital; this is indeed a good example illustrating the truth of the comment. The lack of co-ordination among the various providers of health care services will not only prevent patients from receiving proper medical care, but will also waste a lot of resources.

Moreover, I also wish to point out the excessive supply of nurses. We have spent huge resources on training up nurses, but some of them cannot secure any jobs after graduation. This is not only a waste of resources, but also a blow to the morale of student nurses and nursing instructors. The irony is that there is at the same time a prolonged shortage of nurses in hospitals, requiring the employment of many nursing assistants. This has affected the quality of our nursing services. We really need to address all these problems properly.

Madam President, Hong Kong is now drawing up a regulatory framework for Chinese medicine, and the University of Hong Kong has already started to offer a degree programme on Chinese medicine. In addition, the Chief Executive has also expressed the hope to turn Hong Kong into a centre of Chinese medicine. Therefore, when we discuss our health care reforms, we must consider the idea of incorporating Chinese medicine into our future public health care system. One of my proposals is that we should set up departments of Chinese medicine in hospitals under the Hospital Authority. Or, we should even consider the establishment of an independent Chinese medicine hospital.

Madam President, a combination of Chinese medicine and Western medicine will definitely enable us to provide health care services which are more effective and economical. I have said this in response to the remarks made by Miss Emily LAU a moment ago. Our health care reforms, or our future health care system, must always be able to reflect the local characteristics of Hong Kong. The Harvard Team report points out a number of problems with our health care system, and it also makes a number of recommendations on health care financing. At a time when the age structure of our population is changing, and at a time when there are more and more types of chronic diseases, if we rely solely on the Government for medical financing, can we possibly avoid the emergence of a crisis? How can we ensure that people in need can gain fair and reasonable access to health care services? How can we ensure that there are sufficient resources for the provision of health care services? Since many Honourable colleagues of this Council have already put forward a lot of opinions about these questions today, I am not going to dwell on them any more now.

There is a need for the whole community to conduct e xtensive discussions on the various problems relating to health care financing. So, the motion moved by Dr LEONG Che-hung can provide precisely the opportunity for us to conduct in-depth discussions on the matter. The consultation period for "Improving Hong Kong's Health Care System" has only just begun. I hope that members of the public can express their comments enthusiastically during the consultation period, so as to facilitate the efforts to reform our health care policy and system.

I so submit.

MISS CYD HO (in Cantonese): Madam President, as the saying goes: "One should seek medical treatment before one's sickness gets too serious". The Harvard Professors are here in Hong Kong to conduct a diagnosis on the health care policy of Hong Kong. Unfortunately, however, all the discussions over the past few weeks have focused on health care financing only. Luckily, today, quite a number of Honourable colleagues in this Council have talked about the issue of cost-effectiveness; I think our primary concern in examining the health care policy of Hong Kong should precisely be this. The reason is that if we do not pay attention to how our money is spent, if we simply allow the Hospital Authority and the pharmaceutical industry to spend money or impose charges indiscriminately, all financing arrangements cannot possibly enable us to meet the endless expenditure.

Let us look at our primary health care services. As many Members have already pointed out, we must do well in this particular respect, and health education is far more important, far more cost-effective, than developing hospital services. But in Hong Kong, the money spent on specialist medical care and public hospitals represents as much as 80% of our public health care expenditure; for drugs and medicine, it is 9%, and the remaining 11% is for the Department of Health. And, we were told earlier on that as much as 60% of the money which goes to the Department of Health is for paying the salaries of civil servants. So, only 3% to 4% is left. One can therefore see that not much is in fact left for health education and promotion of disease prevention. As for the Environmental Protection Department, the money allocated to it is just about 0.4% of our annual public expenditure. If we continue to spend such meagre resources on primary health care, and if we think only about how we can finance the endless expenditure at the higher levels of our health care system, our health care policy will forever remain largely unrealistic.

Many Members have already discussed how we can eliminate the monopolistic conditions in the pharmaceutical industry. And, the Wen Wei Pao editorial cited by Miss Emily LAU just now also contains a very good point. The editorial says that the pharmaceutical industries of foreign countries, as part of their attempt to protect their commercial interests, will also sell their pharmaceutical products to other countries, and they will also sell their medicial insurance systems to others. The reason is that this can help them open up new markets and increase their business volumes. The editorials of Wen Wei Pao seldom discuss the issues raised by The Frontier in such an extensive manner. This is the one and only time that its editorial does so.

We have also discussed the problem of expensive pharmaceutical products. We know that the problem is not simply caused by doctors' indiscriminate prescription of antibiotics, which makes it necessary for patients to seek repeated consultations as they lose their resistance to viruses. Another cause is the desire of the pharmaceutical industry to promote its business. Recently, Hong Kong has started to pay more attention to Chinese medicine ─ chiropractors, natural therapists and the like. Why is it impossible to incorporate these methods of therapy in the formal health care system? Their inclusion in the formal health care system will involve not only the problem of registration. In fact, chiropractors, Chinese herbalists and natural therapists are all allowed to treat patients in Hong Kong now. But our public hospitals do not offer inpatient services for people receiving these types of therapy. In other words, people can only receive these types of therapy on an out-patient basis, and if they want to receive inpatient services, they will have to go to public hospitals. What is more, as mentioned during the question time, the sick leave certificates issued by these types of therapists are not given any statutory recognition. As a result, many patients who want to get valid sick leave certificates for the purpose of applying for paid sick leave are forced to consult practitioners of Western medicine. Then, there is also the insurance industry...... and, I hope Mr Bernard CHAN can also talk about it later on. Well, people who have sought treatment from bone-setters may not always be able to claim any money from their insurance companies, and if people want to seek treatment from chiropractors and claim insurance reimbursements later, they must first get the referrals of doctors before doing so. As for natural therapy, there will not be any possibility of insurance claims at all. Hence, we can see that both the public health care sector and the private insurance sector are making use of various means to restrict the choices of the public to Western medicine. I hope that when we conduct a review on Chinese medicine, we can explore the possibility of opening up the medical profession.

Many Honourable colleagues have talked about the issue of medical insurance. The sharp increases in medical expenditure in the United States is largely due to the presence of an alternative type of insurance, one which is not welcomed by doctors in Hong Kong. Under this form of insurance, insurance companies will operate some HMOs. The premiums charged are very low, and insurance companies make profits not by encouraging people to abuse the services available, but by providing many types of health care services. For example, people are taught how to do exercises and lead a wholesome lifestyle. Insurance companies are able to make profits because after collecting the premiums, they can make sure that their policy-holders do not have to visit HMOs very frequently. This is good to both parties; on the one hand, medical expenditure can be reduced, and on the other, people can remain healthy. Therefore, Madam President, I think what is most important is the notion of diversity. Whether it is the medical profession or the insurance industry, diversity and openness will always induce competition in all segments of services, and this is definitely good to the public.

We cannot of course avoid talking about financing, and I will not rashly rule out any contributory health care scheme. But following the announcement of the proposed scheme, the Government has behaved in a very contradictory manner in terms of health care financing and its taxation policy, and this is what I find most unacceptable. For years, the Financial Secretary has been raising the personal allowance for salaries tax, thus narrowing the tax base in Hong Kong. Now, however, we are told that because of insufficient funds, we will have to implement a new arrangement for health care financing, and we are further told that because of the new financing arrangements, many people who are now outside the tax net, that is, those earning $4,000 to $9,500 monthly, may also have to make contributions to the health care scheme. Is there really any difference between this and Mrs Anson CHAN's comment a couple of days ago that the tax base should be widened? Well, perhaps, there is only a difference in terminology. Therefore, I hope that the community can conduct more discussions on this matter. As for whether or not we should really adopt a health care insurance scheme, I hope that we can define income groups more clearly, so that those who are more financially able can be made to pay more and those in genuine need can be protected by a safety net. Thank you, Madam President.

MR LEE WING-TAT (in Cantonese): Madam President, the new airport chaos has taught us a lesson that the existing Government is unable to monitor the performance of statutory bodies effectively. This is indeed a very widespread problem; the Government cannot possibly deny its existence and must make serious efforts to identify the causes.

The amendment moved by Mr Michael HO today contains, among other things, a proposal on "reviewing the structure and monitoring systems of the Hospital Authority (HA) with a view to enhancing its accountability to the public". I think this proposal merits our discussions. Since the amount of government funds allocated to the HA this year is as large as $28 billion, we cannot possibly avoid a review on the monitoring mechanism of the HA when we discuss health care financing and reforms. Can the existing monitoring mechanism ensure that public money is always used properly? Or, has the HA in fact become another "independent realm" because it is given too much leeway? Can Members still remember that in 1997, the HA returned $400 million to the Treasury for a loan of just $200 million? See, the Secretary is also smiling because of this. But having made an error which involves such huge sums of money, the HA simply did not take the initiative to offer any explanation to the Board of Directors. If the Treasury officials concerned did not disclose the matter, I guess the Board of Directors would still be kept in the dark now. This is only the tip of an iceberg. So, what has the monitoring mechanism of the HA achieved so far?

The HA is a government-funded statutory body operating under the HA Ordinance (Cap. 113). When it first decided to introduce public participation into the Board of Directors, the Government hoped that members of the public could be enabled to decide the allocation of resources within the HA, and it was also hoped that the operation of the HA could be monitored by members of the public. But now, not all the meetings of the HA are opened to the public. There have no doubt been great improvements to the services in public hospitals since the establishment of the HA. But as rightly pointed out by the Harvard Team, one major problem with the health care system in Hong Kong is that the HA is playing a double, and conflicting, role of service provider and purchaser. In other words, the HA is responsible for both its own management and supervision. This is simply not workable, and is precisely the focus of the debate today.

According to the report of the Harvard Team, the health care system is dominated by specialist physicians. This is an apt description of the situation inside the HA. Although there is supervision by public elements in its Board of Directors, the effectiveness of public supervision is still very much open to question. The annual provision of $28 billion is a good example, because the annual programme endorsed by the HA does not set out any breakdown on the funds allocated to individual items of expenditure. The Executive Directors and heads of departments of individual hospitals are all given the power to allocate funds and resources. They are all free to allocate resources as they like. As a result, under an annual programme endorsed by the Board of Directors, some particular items may receive a lot of resources while others are just given very meagre resources. So, in a way, Executive Directors can actually decide the priority and scope of individual development items. All this lacks any public supervision.

Actually, all members on the Board of Directors are serving on a part-time basis. Many of them are extremely busy and they hold many different public offices all at the same time. So, just how much time can they spare for supervising the work of the HA? Worse still, though the HA receives a provision as huge as $28 billion annually, its Board of Directors is not provided with any administrative support at all. It simply does not have any administrative support which can enable it to supervise the low-ranking staff of the HA and the implementation of the various programmes. It is sometimes very difficult for it to ask for information from the top management of the HA. It is equally difficult for it to ask for information from the middle management so that it can supervise the top management. Therefore, we maintain that we must review the existing system, including the monitoring mechanism.

As I know it, members of the Board of Directors are still unable to reach any agreement on how far they should supervise the HA. This is a point not defined clearly in the Hospital Authority Ordinance. The situation as it is, we should no longer allow the Board of Directors to decide on its own how far it should supervise the HA. What the Legislative Council should discuss is how the public thinks the responsibilities of the HA should be defined. What is more, the Government should review and clearly define the extent to which the HA should be supervised, in addition to defining its accountability. In any case, the Board of Directors should no longer be allowed to make its own definitions. Once the extent of supervision is more clearly defined, the Government should then review the provision of administrative support to the Board of Directors; the Board of Directors simply should not be left to perish on its own.

Apart from the Board of Directors, the existing monitoring mechanism also comprises regional consultative committees and hospital management committees. But I would not discuss these organizations in detail here. Although public participation is already included in these channels of supervision, the standards of supervision are sometimes very different, and their effectiveness is thus very much open to question. Mr LAW Chi-kwong has once submitted a written question on the attendance rate of members of hospital management committees. The reply he has been given is that the average rate is about 68%; but, in some cases, the rate is lower than 50%. And, please do not forget, these hospital management committee usually hold just three to six meetings a year.

The Democratic Party maintains that there is a need to conduct a comprehensive review on the Hospital Authority Ordinance enacted in 1992. Besides, we also think that the set-up and monitoring mechanism of the HA should also be reviewed, so as to increase its public accountability. We do not wish to see the continuation of the existing situation under which the Government, the Board of Directors and the public are all unable to supervise the HA effectively, nor do we wish to see the HA continuing to operate as an "independent realm". Thank you, Madam President.

MR BERNARD CHAN: Madam President, the luxury we have in public health care may be somehow unobtrusive, until the Harvard Report on health care financing gave us a sharp prod. All of us, rich or poor, are now equal in receiving public hospital care. Those who are willing to pay more may go for private hospital service and enjoy better room service. This system has underpinned the values we treasure: first, people have the freedom to choose, and second, those who are sick are eligible for proper treatment, irrespective of their financial status.

The current situation is not too bad despite frequent complaints on the expensive private medical service and belated attention to patients in public hospitals. The Harvard Report has bluntly told us that the existing system, although imperfect, can hardly sustain without exhausting public money. Extra funds are needed in one form or another, no matter in the name of direct taxes, higher charges or Health Security Plan (HSP) as suggested by Prof William HSIAO. The bill has to come. I see no way we can avoid it. And the unchangeable rule is having the rich subsidizing the poor. This is not a matter of question. The key issue is how we can accomplish our goals in an effective and cost-saving manner, without forfeiting genuine choices.

In search for alternatives, I would like to point out some important issues. Firstly, I object to a uniform hospital service without top-up choices. As the mandatory scheme provides basic and general medical services to customers, people who want extra value by paying extra charges should be allowed. The top-up portion may exist beyond the insurance scheme. This is a way we remain pluralistic, rather than becoming socialistic, and just take away the privilege of choices of the affordable.

Secondly, we should never cast aside the welfare of the two million people who are engaged in private medical insurance. Most of them are covered in the form of fringe benefits provided by employers. If we opt for a mandatory insurance scheme, there should be a smooth interface of the existing voluntary system and the mandatory scheme. If the existing scheme were better off but had to be scrapped to give way to a mandatory one, I could envisage the resistance people would display. It is also unfair to the current medical insurance providers and their customers while free choices are deprived. It is essential to heed wishes of those insured and come up with a viable interface program. I am sure that the insurance industry has an integral part to play in making this possible.

Thirdly, in choosing between a mandatory or private insurance scheme, attention should be given to those with pre-existent illnesses which are now precluded from private insurance. In a mandatory scheme, we have to make prudent calculations on this category of people. If we were prone to a private scheme, I believe that there would be a skilled solution.

I think that it is too early to predict whether William HSIAO's proposal will be successful. We have to make up our mind what are desirable and hence take all necessary pains. There are lots of lessons available worldwide before we get into any system. In 1965, the Medicare Program was launched in the United States because people were unhappy with the fact that Americans over age 65 were spending 15% of their income on medical services. Twenty years later, in 1985, in addition to what Medicare covered, many Medicare beneficiaries still paid almost 17% of their income for medical care. The near exhaustive Ontario provincial insurance in Canada is another vivid example.

Although there are possibilities of failure, we have to face changes because a doomed fate is inevitable for the existing system. I hope that the Government will try all means to sustain the debate until we find a viable and acceptable solution. Madam President, with these remarks, I support the two amendments and Dr LEONG's original motion. Thank you.

MR DAVID CHU (in Cantonese): Madam President, the report of the Harvard Team is entitled "Improving Hong Kong's Health Care System: Why and For Whom?" and it has given these two questions very clear and reasonable explanations. As to how improvements can be made, they have made some basic suggestions for further study and discussions by Hong Kong people.

How can improvements be made? The reform proposals in the report basically include a Health Security Plan (HSP) and MEDISAGE. I support the MEDISAGE but I think that the following points warrant consideration in regard to the HSP. First, we have a public revenue principle of "the rich pays more and the poor pays less". Those who pay more tax are subsidizing those who pay less tax in respect of major public services and facilities in Hong Kong such as medical services, housing and social welfare. If we adopt the HSP, we will deviate from this principle because the essence of the scheme is for healthy people to subsidize unhealthy people. To a certain extent, the middle and lower classes will subsidize those with high income. Will this encourage people not to maintain their health or even abuse medical services?

As regards the HSP, I suggest that the Government should consider a savings scheme the principles of which are similar to those of the Mandatory Provident Fund Scheme. Every person opens a mandatory medical service savings account for meeting his own medical service expenses with the savings. Under such a scheme, people save up for themselves. We can consider permitting family members to subsidize one another. A person can voluntarily let his family members use his savings. If a person has used up his medical service savings, we can consider letting the Government pay or helping them pay their medical service expenses through small-scale insurance schemes. Unused savings can be left to the next generation. I believe this principle of making people responsible for themselves is the most efficient arrangement.

As for the supply of medical services, the Government should make reference to the views expressed in the report and reform the existing medical service framework to enhance efficiency and create a sound environment for competition so that users can choose among different medical services. Thus we can be assured of efficient medical services through market competition. The Government should give ample space for the development of private hospitals and practitioners to ensure that users have more choices.

However, the report has omitted an issue. It has not considered in detail how Chinese medicine practitioners and Chinese medicine can co-ordinate a medical service reform. I suggest that the Government should expeditiously incorporate Chinese medicine practitioners and Chinese medicine into the public health care system so that all public and subsidized hospitals in Hong Kong can provide Chinese medical treatment. If the HSP is implemented, we should also consider how the insurance coverage can be extended to Chinese medical services. Chinese medical services cost less and are particularly effective in daily heath care and the prevention and cure of chronic diseases. The introduction of Chinese medicine into our medical services will effectively cut down public medical expenses and improve the quality of services.

With these remarks, Madam President, I support Dr LEONG Che-hung's original motion.

MR FRED LI (in Cantonese): Madam President, I would simply give two examples to reflect the fact that the Board of Directors of the Hospital Authority (HA) cannot effectively monitor the operation of the HA. I will bring up matters of the past and look at the allocation to the HA for information system in subhead 978 under Head 177 (concerning subsidized bodies) in the 1997-98 Budget. That year, the Government did not follow the usual practice of allocating funds to the HA in a one-line vote but chosen certain items. The Government had chosen three systems related to clinical services. First, clinical management system; second, out-patient clinical operation support system; third, radiological service information system. The total expenditures on the three items amounted to $122 million. But by the end of 1996 when discussions were concluded, the HA took $4.5 million from the allocation for the first and second items and used it on network construction, administration and office systems. If the government representative on the Board of Directors did not point this out at that time, other directors did not know such changes would be made and they would be left in the dark.

Another example is the number of consultants. Consultants are D2 to D4 grade officers, and their remunerations are equivalent to that of the assistant directors, deputy secretaries and senior deputy directors in the Civil Service. If the Government wants to increase the number of D2 to D4 grade officers, its proposal has to be approved by the Establishment Subcommittee of the Legislative Council and then by the Finance Committee. I would cite some figures below for Members' comments as to whether applications filed with the Establishment Subcommittee are approved so easily. There were 291 consultants in 1993-94, 366 in 1994-95, 416 in 1995-96, 435 in 1996-97 and 466 in 1997-98. In a short duration of five years, the number of consultants has increased from 291 to 466 and they are all receiving remuneration for D2 to D4 grade officers. Will we approve applications filed with the Legislative Council so easily? However, the creation of consultant posts needs not be approved by the Board of Directors but only needs to be decided by the senior executives of the HA. The Board of Directors does not bother about or take part in the creation of these consultant posts. I hope that Members will comment if the Board of Directors of the HA has played its role conscientiously. I so submit.

MR JASPER TSANG (in Cantonese): Madam President, early one morning more than half a year ago, I had poor vision when I woke up and it seemed that there was a thin layer of mist on my glasses but I could not wipe it away. I was very afraid and I went to the doctor at once. The doctor told me that I had cataract and suggested that I should have an operation as soon as possible. I dared not ask the doctor how much the operation would cost. I found out later from those who had received similar operations that they paid some $10,000 to $100,000. Money was one of the factors I considered but the major reason was that I was afraid of the pain although the doctor said that the operation would not be too uncomfortable. Later, I make up an excuse and consulted another doctor and I was very glad that he told me that there was no urgent need for an operation, and I put off the operation. I visited the Hong Kong Eye Hospital of the Government instead as my case was not urgent. The doctor there told me that the seriousness of cataract depended on the degree to which a person could tolerate it. If I found that the illness hindered my daily life or work and an operation was inevitable, I could let him know and he would carry out an operation then. But it did not matter if I found that there was little hindrance.

I thought over this carefully when I returned home and I wondered who should be the one to decide whether I needed an operation. What if I suddenly ask the doctor to carry out an operation tomorrow? There may be many other patients whose conditions are more serious or who are inconvenienced more than I am. If patients have to queue up, how would the hospital set the priority? This is different from the case mentioned by Dr LEONG. He said that a person knocked down by a car needed emergency treatment by the Government, and convenience is out of question. According to the doctor, I can still drive although I have poorer vision.

I consulted the public on this report last week and an old lady complained to me. She has gallstone and the doctor told her that she needs an operation sooner or later, however, she needs not worry for this kind of illness would not endanger her life. Although she has told the doctor that she has pains all the time, the doctor asks her to put up with it for the pains would not cause death. She has been sick for more than half a year and she has pains all the time but she does not know how long she has to tolerate this. This makes me think of Dr LEONG's standard. If she is knocked down by a car, the Government is responsible for giving her emergency treatment. I have listened attentively to Dr LEONG's speech but I do not know if I have interpreted what he said wrongly. He said that other services should be charged but not offered free. How should we categorize cataract extraction and gallstone operation? Suppose a person tells me that my electors will favour me if my nose is a bit higher but if I ask for an operation for this reason, I believe public hospitals would definitely not give me a free operation. It proves that if we put the case of a person knocked down by a car and that of a person receiving an operation for a higher nose on both ends of a scale, there are indeed many other cases between them. How should we demarcate them? A demarcation line should be drawn, I think.

One of the points made in the Harvard Team's report is that it is not feasible to set a ceiling for public medical expenses. Once a ceiling is set, it will surely lower the quality of service which must be unacceptable to the community. I find it very strange why an expenditure ceiling cannot be set. It is not only a scientific problem to demarcate what ought to be done and otherwise. For instance, how serious should the condition of a cataract patient become before he can get an operation? This is not only a scientific or moral problem but also a problem involving resources. If resources are not limited, the sooner an operation is carried out, the better. But if we do not set a bottomline, I wonder how implementing the new health care financing methods proposed in the report can solve the problem of rising medical costs. The report also states that if we do not change the health care financing methods, 10 years later, our medical expenses will take up a fairly large proportion of the Gross Domestic Product and reach 23% of the total government expenditure, and they will not be affordable. Even though the health care financing methods are changed, if public medical expenses are not controlled, the situation will remain unchanged. There will only be different ways to charge patients, regardless of whether it is called a HSP or MEDISAGE, taxpayers will have to pay. How is it different from additional taxes? It is just a matter of who should pay more and who should pay less.

When Dr LEONG moved his motion, he indicated that he would like to call upon the community to have a conscientious debate over the problems with our medical system, just as many Honourable colleagues have also said. It is a pity that this report fails to arouse in-depth debates on this issue by the community. I admit that I have not gone over the whole report as I do not have the courage. Besides, the inch thick report is published only in English. We would know merely by reading the summary that five proposals are made. When the Harvard specialists put forward the proposals, they list out all proposals for the Hong Kong Government, the public and those in the industry to choose. However, I do not think I have any choice after I have gone over all the proposals. Proposal (a) is a blind alley; proposal (b) cannot solve problems and proposal (c) does not work. The report also states that if the suggestions are adopted, there will be a transition from proposal (d) to proposal (e). All the proposals are related to health care financing and proposal (e) also includes a systemic reform, that is, the so-called integration of the health care system. But we fail to see from the summary how this reform can solve the shortcomings and problems of the existing health care system in Hong Kong as stated at the very beginning of the report. How are people going to choose? According to the specialists, these suggestions are made after reference has been made to the health care financing methods in various parts of the world but they cannot give us the relevant materials. Finally, suggestions are made and we can choose any proposal we like. If I accept them, it is because I can do nothing, but if I do not accept them, I can say nothing more.

Thank you, Madam President.

MR LAW CHI-KWONG (in Cantonese): Madam President, as a lot of Honourable colleagues have talked about the reform, I will focus my discussion on health care financing. The Democratic Party does not have a formal position on the health care financing proposals so far but we have expressed some views on different forms of health care financing proposals. The first point I would like to make is that no health care financing method is perfect, and we will certainly be widely criticized for whatever proposal we choose to discuss. We have to adopt different criteria when we consider different proposals and strike an appropriate balance. The criteria I referred to include quality of service, fairness, cost control, people's choice and that people with different affordability can easily obtain the services they need. We also know that the medical structure is closely linked with the mode of health care financing and we should regard the two as inseparable when we carry out a reform. However, reform can be made quickly or slowly and we should consider the degree to which people can accept the reform and plan for the strategies to be adopted for implementing the reform.

Many have criticized the Harvard report for wielding the axe at the middle class. I hope that the public especially the middle class will consider my analysis as follows. At present, the health care financing system can be described as "slow for the poor, quick for the rich and the middle class may lose a family fortune". Many poor patients have to wait for more than 10 weeks before they can consult specialists for the first time. If they need operations, they may have to wait for more than a year. However, the rich need not wait and they can consult private practitioners at once. If the middle class cannot wait for over 10 weeks, they have to consult private practitioners. Unfortunately, if they suffer from chronic diseases and the treatment they require lasts a few months or years, many middle class patients on the verge of bankruptcy will be sent to public hospitals by ambulances. Do we want this phenomenon to continue?

A friend once asked me a question. The premium for the private medical insurance he took out was less than 1% of his salary but the Harvard report suggested that everybody should contribute 2% of his salary. Are we operating on the middle class? I smiled when I answered him, "I suppose you do not have chronic diseases such as kidney troubles or other hidden diseases, if you have, either you must pay very high insurance premium or you may not be able to take out insurance" at all. I have yet to mention that the private medical insurance operators in Hong Kong lack the ability to negotiate prices with medical service providers or the difficulties in controlling the cost of private medical insurance. If a health care financing mode mainly comprises private medical insurance, there will be more demerits than merits.

Honourable Members have mentioned how the health care financing problem can be solved. Some suggested setting a ceiling for public medical expenditure. In future, if we encounter difficulties when we meet public medical expenditure with general revenue, we will find it very hard to accept this proposal. The present situation of "slow for the poor, quick for the rich and the middle class may lose a family fortune" will become worse and the quality of public medical services will become poorer. In the longer run, increasing charges for users is not a proposal we can accept. Although hospital charges almost take up only 2% to 3% of the actual expenditure, a slight increase is acceptable. But a substantial increase will not be affordable by the lower class and does not comply with the basic principles of our medical policy. What if it is necessary to increase taxes in future? The provision of public services through taxation can serve to reallocate resources, reduce the disparity between the rich and the poor and the pressure affecting social stability. But we have to consider one point. Only around 10 000 people are paying tax at standard rate, that is, only 0.3% of salaried people pay tax at the standard rate. If the tax regime remains unchanged but the standard rate is increased, the 0.3% Hong Kong people with the highest income have to shoulder all the additional expenses. Is that fair? Please do not forget that, on the basis of the fiscal principles of the Government, the resources generated from a tax increase may not be usable because the extent of increase in government expenditure will be restricted by economic growth. When the pace of population ageing far exceeds that of economic growth, the above phenomena will emerge and the income generated from a tax increase cannot be utilized. There are problems with the HSP recommended by the Harvard report, especially in respect of cost control which is going to be a major challenge. I do not intend to repeat this point as Members know it well already.

Next year, the Mandatory Provident Fund Scheme will be implemented in Hong Kong and most people who do not have provident fund or pension protection have to make 5% contribution together with their employers from next year onwards, and they naturally oppose a medical insurance scheme with a stronger voice. Therefore, the Government has to meet the following requirements before it can gain public support for this health care financing scheme.

First, the estimated figures in the consultancy report are only calculated up to the year 2016 but we know that the ageing population problem will not become too serious before 2016 and the problem will really emerge after 2016 only. Therefore, I hope that the Health and Welfare Bureau will ask the Census and Statistics Department to calculate figures up to the year 2036 so that we can see what will happen when the ageing problem has become more serious. I hope that such information will be found in the Government's consultation paper.

Second, when we implement a medical system and health care financing mode reform, we need money. The Government should consider injecting money first for carrying out a medical structure reform to improve primary health, disease prevention and education. When this is seen to be effective, the Government can then implement a policy reform for health care financing. In so doing, it can show that the Government has made a pledge to improve people's health and the public will find the reform meritorious. Moreover, people will be willing to pay more when they know that the Government is willing to pay.

Third, it can be said that there is very little information on health care expenditure as many Honourable colleagues have said. The Government must improve the information collection system instead of relying on the Hospital Authority and other people to provide information.

The amendments of Miss CHAN Yuen-han and Mr Michael HO especially touch upon the health care financing mode. Their suggestions will actually lead us nowhere, other than just enhancing private medical insurance with the existing health care financing methods. As the Democratic Party cannot support this, we can only vote against the amendments.

I would like to add a point concerning the comparison between Sweden and the United States in terms of ageing population and expenditure just made by Mr YEUNG Yiu-chung who said on this basis that an ageing population was not related to medical expenditure. Similarly, if I compare the height and weight of Mr YEUNG and mine, I will come to a conclusion that a person's height is not related to his weight.

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

MR LAW CHI-KWONG (in Cantonese): Thank you,

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

(No Member indicated a wish to speak)

PRESIDENT (in Cantonese): Dr LEONG Che-hung, you may now speak on the two amendments. You have up to five minutes to speak.

DR LEONG CHE-HUNG (in Cantonese): Madam President, I speak to oppose the amendments proposed by Mr Michael HO and Miss CHAN Yuen-han.

The amendments proposed by the two Honourable Members are in fact additions to my original motion. In principle, I agree to these additions. But I cannot agree to their amendments principally because I do not think we should narrow down my motion which has an extensive coverage and embraces a wide range of opinions into one which is confined to a specific direction. The report by the Harvard experts has been released for only about 23 days and there are 71 more days to the expiry date of the Government's consultative period.

In the first couple of weeks, there have been many heated debates and discussions. But these are mainly confined to the merits and demerits of the two financing proposals. The saddest thing about this is that the controversies centering around this issue are cooling off. We see, for example, that most of the government officials are not present in this meeting. The Treasury which is closely related to financial matters does not want to come and listen to our views on the financial proposals. So at the present stage, the most important thing is to create more opportunities and more favourable conditions so that people from all sectors of the community can air their views on this very important topic of health care reforms which are related to many aspects of our lives. Please do not let your enthusiasm for that die off after a short time, otherwise the Government can resort to its old trick again and give all sorts of excuses, for doing nothing in the end.

Mr Michael HO's amendment, on the other hand, is simply trying to narrow down the scope of the motion and imposes wordings which are geared towards certain specific directions. Apparently, this will prevent Honourable colleagues from discussing in a wider perspective and discussions will be limited to the contents of his amendments. To me that is not a wise thing to do.

Miss CHAN Yuen-han's amendment strikes me as making amendments for the sake of making amendments. Miss CHAN has added three more points to Mr HO's list. As a matter of fact, many of our colleagues have put forward many suggestions, and many of these can be included in the scope of discussion. If every Honourable Member wants to put down his or her views into the motion like what Miss CHAN has done, then we will not only get seven points but it can be as many as 70. It is fortunate that most Honourable colleagues have not done that, because they are aware that under the extensive motion which I have proposed, they can make their views known freely.

Lastly, though I do not want to dwell on the fine shades of meaning of certain words in the amendment, there are still things which I feel compelled to make my views known. And that is what Mr HO said in his amendment, he said that we should "discard the present professional-led mode of practice". To me that is not acceptable. Madam President, it should be known that professional knowledge and skills are needed in health care services. If health care services are not led by professionals, should the laymen be allowed to lead the professionals? The well-known Hippocratic Oath and the Declaration of Geneva make it clear that every physician should make his patient's health the first and foremost consideration. Of course, being led by professionals does not mean that the views of the patients and the public are disregarded. On the other hand, health care services, planning and monitoring should have greater transparency so that there will be more participation from the public. But if we put the cart before the horse, as it were, and even adopts a non-professional-led mode of practice, then it will definitely do no good to the health of the patients.

Thank you, Madam President.

SECRETARY FOR HEALTH AND WELFARE (in Cantonese): Madam President, I would like to express my deep thanks to those Members who have spoken on this motion today. I have counted up to 25 Members who have spoken. Although Dr LEONG Che-hung's motion has been amended repeatedly, I have found that Members generally agree that the weaknesses of our existing health care financing system and service structure must be addressed and reviewed, and effective reforms must be launched so that they will be adapted to the needs of the community. I fully share Members' views on this. I would like to take this opportunity to reiterate that the Government's commitment to reforming the existing health care system remains unshakable.

We all understand that the health care system is a highly complicated and wide-ranging issue. Rightly as the consultants from Harvard University pointed out, it would take a long time for Hong Kong to complete a thorough reform of its system just as other countries did. However, we must begin discussions on this issue and decide the direction of reform right now, lest we should scramble for contingency plans when the crisis was imminent. It would be too late by then. It is obvious that the quality of public health care service will deteriorate rapidly in addition to the financing problem, which we are concerned about, if no appropriate reform measures are taken. Our next generation will bear the consequences of our reluctance to launch thorough reforms today.

I would like to stress that what we required the Harvard consultants to do was to conduct a comprehensive review of the entire health care system. The reform of the financing system is just part of the review and it is equally important to renew the structure, in order to continuously improve the quality of health care and protect the interests of patients. The reforms to financing and those to the structure are therefore complementary to each other and neither of them is dispensable. For example, patients' right of access to information and their right to choose will be further safeguarded through various financing methods, which in turn will instigate health care service providers to make the necessary adjustments in the structure and in the operation system to meet patients' needs.

The reform of the financing system means that the whole community looks for additional health care resources and distributes them more effectively. However, that does not mean the Government will shirk its existing financial commitment. In view of limited resources, it is necessary for us to use public money in the most appropriate way. The Government will continue to allocate a lot of resources for health care service to ensure that no one is denied adequate medical treatment because of a lack of means. It is our responsibility to take care of the needs of low-income people in this respect.

While we will stick to this policy, the report by the Harvard consultants has sounded a note of warning: If the current level of quality of health care service is to be maintained, public health care expenditure will account for 20% to 23% of total recurrent government expenditure by 2016, or 17 years from now. I do not think the public will accept such mode of financing because no one will accept the idea of funding health care service alone at the expense of other equally important public programmes, such as education, housing, welfare and so on.

Apart from financial consideration, it is more important for us to distribute and use future health care resources in the most effective way, in order to minimize the waste of resources resulted from the "compartmentalization" of service structure. In this respect, we should move towards strengthening primary and community health care services and the development of family health care so as to reduce duplication of services and improve service continuity. I am glad to see that all the Members who have spoken support these suggestions.

I am pleased to note that lively discussions among various parties in the community have been going on since the Harvard report was publicized. I would like to ask Dr LEONG not to worry about a short-lived zeal because we have received a lot of submissions and many people have made inquiries over the past several weeks. Judging by the initial response, I have found that there is broad consensus in the community on the need to reform the existing health care system. However, members of the public are divided on the new financing method proposed by the consultants, particularly on details of the implementation. As a matter of fact, the details of the method proposed by the consultants are mostly tentative ideas. Detailed study and consultations in respect of the specific contents of the financing proposals by the consultants, such as the rate of contribution, the coverage of the mandatory insurance scheme, how to identify the population groups who will receive government subsidy and so on, are required if the proposals are implemented in the future. Therefore, I hope that the public will focus their discussions on the objectives and direction of the future health care system, and on how to devise a scheme which provides cover for everyone in the community and is risk-pooling and effective in containing the rising health care costs. Specific measures and details can be further studied after the decision has been made as to which options proposed by the consultants should be adopted.

Recently, I have heard of other suggestions concerning the financing method. For example, some people ask: Is it not better to simply raise tax than to adopt the complicated mandatory Health Security Plan? Actually, from a financing point of view, this will not solve our problem for the following reasons: first, government revenue from salaries tax totals about $20 billion, which cannot fully meet the current expenditure of approximately $30 billion on public health care. If the shortfall is to be covered by increasing taxes, the level of increase will put a heavy burden on taxpayers. If other sources of tax income are to be explored or the tax net expanded, it will create other problems and contradict the Government's long-cherished principle of a simple and low-tax system. It may also cause adverse effect on the recovery of our economy. Most importantly, increasing taxes alone will not provide the solution to the problems inherent in the existing health service structure, such as discontinuity of service, disparity in workload between public and private hospitals. This will not be beneficial to the improvement in health care and the rejuvenation of the structure.

Another widely-asked question is: Why can the problem not be solved by increasing health care charges? Today, the daily fee of $68 charged by public hospitals is very low indeed and can be increased to a certain extent. However, according to the consultants' estimate, the rising health care costs mean that a user will have to pay a fee equivalent to $1,400 at today's value by 2016 if he is to enjoy a comparable quality of health care service. It is obvious that this option will lead to: (1) a heavier and heavier financial burden on patients; (2) the public having to make sacrifices in respect of health care quality and an equitable system if the increase in charges falls short of actual requirement. What is more, increasing charges will not be able to effectively solve various problems inherent in the existing health care system.

Another widespread misunderstanding is that the middle class will be exploited under a mandatory insurance scheme. I must clarify on this. A mandatory insurance scheme has the advantages of spreading an individual's financial risk associated with illness on a wider base so as to minimize the risk for individual members of the public covered. The people of Hong Kong are always optimistic about their health in that they never prepare for unexpected illness; they never think of the problems with getting old when they are young; when they are not suffering from chronic diseases, they never think of the possibility of it in the future. Therefore, many people strongly resist the idea of making contributions or preparing for the future. Under the option of increasing health care charges or taxes as mentioned earlier, the financial risk will concentrate on patients or taxpayers. By comparison, the option of a mandatory insurance scheme is fairer to the middle class in that the base for risk-pooling is wider than the present one, which in turn will reduce individual's burden resulted from illness.

Mr Bernard CHAN argued earlier that employees who are provided with medical insurance by their employers do not see the need to join a mandatory insurance scheme. Indeed, they should bear in mind that the medical benefits currently provided by their employers are confined to in-service use, which will stop once they change jobs or retire.

Regarding today's motion and the amendments, we agree that there is room for improvement in the existing health care complaint and monitoring mechanism. I hope that, through this consultation exercise in which various parties in the community and the public have been consulted and have joined in the discussions, we will be able to put in place a complaint and monitoring mechanism trusted by the public. We also agree that preventive and primary health care, health care promotion and the development of family health care should be strengthened. We must also recognize the importance of patients' right of access to information and their right to choose in a sound health care system. Regarding the proposal for a private health care insurance scheme, I would like to point out that private health care insurance schemes have their limitations in that it favours the young, healthy and financially sound clients with "a lower degree of risk" while those who are low-income, old and frail are left out and have difficulties in joining private health care insurance scheme or have to pay far higher premiums. Therefore, they do not receive comprehensive protection when they need it most. By comparison, the risk-pooling mandatory insurance scheme can effectively solve the problem. Moreover, the profit-making nature of private insurance schemes will drive health care costs to rise rapidly. We can draw lessons from the experiences of countries where private insurance schemes form the backbone of their health care systems.

Several Members have also talked about the review of the management and structure of the Hospital Authority (HA) and I will follow up on various comments made by Members in this debate. However, to be fair, the HA has been making strenuous efforts since its establishment in 1990 to improve the quality of service and its achievements have been acknowledged by the consultants. It is time to consider how to further improve its services on the present basis. The consultants have suggested that the HA's role be redefined and its operating structure revamped as part of the reform of the existing structure. Moreover, the integration of health care service is one of the feasible proposals to solve the "compartmentalization" of the existing health care service structure. Of course, we will not rule out the possibility that other proposals may be more effective than those put forward by the consultants. I hope that the medical profession, Members of this Council and the public will actively express their views on this subject so that we can draw on collective wisdom and work out a solution acceptable to all parties concerned.

I would like to reiterate that the Government is open-minded about which option should be adopted. What is undeniable is that a mandatory insurance scheme, Savings Accounts for Long Term Care (MEDISAGE) and the integration of health care services do have many advantages and they have been implemented in many places in the world. However, we still need to carefully study the details of these proposals to see whether these concepts are suitable to the needs of the people of Hong Kong.

We attach great importance to views expressed by both Members in this Council and the public. We will widely consult the public in the next two months so that people from all walks of life in the community will be given an opportunity to have a better understanding and in-depth discussions of this issue. We will also brief and hold discussions with various Provisional District Boards. Some Members pointed out that the consultation period might not be long enough and I have received suggestion in this respect. If many people feel a need to extend the consultation period so as to have a more detailed analysis of the report and express their views, I will consider extending the consultation period after the end of the current three-month period. But it will depend on the volume of views we will receive from now until July. The Government will carefully study these views and will prepare a consultation paper listing the reform options recommended by the Government for another comprehensive public consultation.

Thank you, Madam President.

PRESIDENT (in Cantonese): I now put the question to you and that is: That the amendment moved by Miss CHAN Yuen-han be made to Mr Michael HO's amendment. Will those in favour please raise their hands?

(Members raised their hands)

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

(Members raised their hands)

PRESIDENT (in Cantonese): I think we should proceed to a division. The division bell will ring for three minutes.

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

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

Functional Constituencies:

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

Mr James TIEN, Mr Edward HO, Mr Michael HO, Dr Raymond HO, Mr Eric LI, Dr LUI Ming-wah, Miss Margaret NG, Mrs Selina CHOW, Mr Ronald ARCULLI, Mr CHEUNG Man-kwong, Mr HUI Cheung-ching, Dr LEONG Che-hung, Mrs Sophie LEUNG, Mr SIN Chung-kai, Mr Howard YOUNG, Mrs Miriam LAU, Mr Timothy FOK, Mr LAW Chi-kwong, Mr FUNG Chi-kin and Dr TANG Siu-tong voted against the amendment.

Geographical Constituencies and Election Committee:

Miss CHAN Yuen-han, Mr LEUNG Yiu-chung, Mr Gary CHENG, Mr Jasper TSANG, Mr LAU Kong-wah, Mr TAM Yiu-chung, Mr CHAN Kam-lam and Mr YEUNG Yiu-chung voted for the amendment.

Mr Albert HO, Mr LEE Wing-tat, Mr Martin LEE, Mr Fred LI, Mr James TO, Miss Christine LOH, Mr Andrew WONG, Dr YEUNG Sum, Mr Andrew CHENG, Mr SZETO Wah, Mr David CHU, Mr HO Sai-chu, Mr NG Leung-sing, Prof NG Ching-fai, Mr MA Fung-kwok, Mr Ambrose LAU and Miss CHOY So-yuk voted against the amendment.

Miss Cyd HO and Miss Emily LAU abstained.

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

THE PRESIDENT announced that among the Members returned by functional constituencies, 25 were present, five were in favour of the amendment and 20 against it; while among the Members returned by geographical constituencies through direct elections and by the Election Committee, 28 were present, eight were in favour of the amendment, 17 against it and two abstained. Since the question was not agreed by a majority of each of the two groups of Members present, she therefore declared that the amendment was negatived.

PRESIDENT (in Cantonese): I now put the question to you and that is: That the amendment moved by Mr Michael HO be made to Dr LEONG Che-hung's motion. Will those in favour please raise their hands?

(Members raised their hands)

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

(Members raised their hands)

Mr Michael HO rose to claim a division.

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

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

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

Functional Constituencies:

Mr Michael HO, Mr LEE Kai-ming, Mr CHEUNG Man-kwong, Mr CHAN Kwok-keung, Mr CHAN Wing-chan, Mr SIN Chung-kai, Mr WONG Yung-kan and Mr LAW Chi-kwong voted for the amendment.

Mr James TIEN, Mr Edward HO, Dr Raymond HO, Mr Eric LI, Dr LUI Ming-wah, Miss Margaret NG, Mrs Selina CHOW, Mr Ronald ARCULLI, Mr HUI Cheung-ching, Dr LEONG Che-hung, Mrs Sophie LEUNG, Mr Howard YOUNG, Mrs Miriam LAU, Mr Timothy FOK, Mr FUNG Chi-kin and Dr TANG Siu-tong voted against the amendment.

Mr Bernard CHAN abstained.

Geographical Constituencies and Election Committee:

Miss Cyd HO, Mr Albert HO, Mr LEE Wing-tat, Mr Martin LEE, Mr Fred LI, Mr James TO, Miss Christine LOH, Miss CHAN Yuen-han, Mr LEUNG Yiu-chung, Mr Gary CHENG, Mr Jasper TSANG, Dr YEUNG Sum, Mr LAU Kong-wah, Miss Emily LAU, Mr Andrew CHENG, Mr SZETO Wah, Mr TAM Yiu-chung, Mr CHAN Kam-lam and Mr YEUNG Yiu-chung voted for the amendment.

Mr Andrew WONG, Mr David CHU, Mr HO Sai-chu, Mr NG Leung-sing, Prof NG Ching-fai, Mr MA Fung-kwok, Mr Ambrose LAU and Miss CHOY So-yuk voted against the amendment.

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

THE PRESIDENT announced that among the Members returned by functional constituencies, 25 were present, eight were in favour of the amendment, 16 against it and one abstained; while among the Members returned by geographical constituencies through direct elections and by the Election Committee, 28 were present, 19 were in favour of the amendment and eight against it. Since the question was not agreed by a majority of each of the two groups of Members present, she therefore declared that the amendment was negatived.

PRESIDENT (in Cantonese): Dr LEONG Che-hung, you may now reply. You have two minutes 52 seconds out of your original 15 minutes.

DR LEONG CHE-HUNG (in Cantonese): Madam President, first of all, I am glad to hear that the Secretary say that the Government was really committed to making reforms. I hope, however, that the reforms are made as a result of thorough and comprehensive reviews and that they are no longer done in a piecemeal fashion.

I am more concerned about the reforms in the Hospital Authority (HA). I am entirely in agreement with Mr Michael HO's view that the HA should be reformed. As a member of the HA, I have discussed this issue a number of times in this Council. The Secretary said that the performance of the HA has been good and I would not deny that. But even if a lot has been done, it does not mean that reforms are not necessary. On the other hand, things should get better. Take our airport as an example, although our new airport has won many grand prizes, that does not mean that the monitoring work or the operations are perfect. Many Honourable colleagues have put forward their views and many of these are very valuable ones. Both the Government and I are very grateful to them. There are, however, some views put forward by some Honourable colleagues which may have been blended with some misunderstanding and please allow me to explain to them later.

I would like to point out a few points. First, it is about what Mr Albert HO has said. He said that there is insufficient transparency in the Medical Council because there are only four people from outside the medical sector. I have no intention to argue whether the transparency of the Medical Council is adequate or not. But I would like to point out that every inquiry conducted by the Medical Council is public. May I ask Mr HO, in the inquiry committee of his profession, how many members come from outside the profession? Would he be as enthusiastic in pushing for more members from outside his profession to serve in the meetings of his profession and to make these meetings public? I hope he can let us know his views on this.

Mr TSANG and many Honourable Members have said that they are afraid to ask about how doctors charge their fees. To me that is very strange, for these very same Members are so bold in criticizing people of power and authority, even the Chief Executive, in this Chamber. But why are they so afraid of a physician who does not hold any weapon in his hands, except that it may be a surgeon's scalpel? (Laughter) To me that is very, very strange. Mr TSANG asked how my proposal would differentiate fundamental services from other services. That is not something which is to be decided by the HA or the doctors themselves. It is something which is to be decided by the community as a whole. For it is not just a professional issue, it is more of a political one.

Lastly, I hope that the public can make use of this opportunity to put forward their views and work with the Government to formulate a health care scheme which can really serve the people of Hong Kong. Thank you.

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

(Members raised their hands)

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

(No hands raised)

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

PRESIDENT (in Cantonese): The second motion: Reforming the Securities and Futures Markets.

REFORMING THE SECURITIES AND FUTURES MARKETS

MR AMBROSE LAU (in Cantonese): Madam President, I move the motion as set out on the Agenda.

The Government has decided to merge the two exchanges and the three clearing houses and incorporate them under one new holding company by the end of this September. It is expected that the new Exchange will be listed in September next year. The merging of the stock and futures exchanges is in keeping with the trends in international financial markets. It has been implemented in Frankfurt, Sweden and Australia. Singapore also declared the merger of its stock exchange and international financial exchange at the end of last year.

The advantages of a merger are obvious. First, a lot of investment activities in the financial markets these days are done in a cross-market context. This is more so after the onset of the Asian financial turmoil where international brokerages and major speculators holding a huge amount of capital and advanced financial expertise have been investing and speculating in markets here and abroad, using stocks, futures indices and many kinds of derivatives. In Hong Kong, as the stock exchange and the futures exchange and the three clearing houses are each working on their own, it is difficult for them to monitor cross-market manipulative activities effectively. This has led to an inability to assess promptly the danger of manipulative activities in the market. After the merger of the five institutions, it will be easier to monitor and unify the clearing system, as well as strengthening co-ordination and risk management.

Second, the merger can prevent the wastage of resources and it will increase efficiency and raise our competitiveness in the international financial markets. The magnitude and speed of advances made in the financial markets make it imperative to merge the five institutions in order to pool resources and avoid repetition and wastage. The merger can facilitate the establishment of advanced facilities and systems, and raise efficiency and the capacity for innovation, enabling the territory to become an international financial centre.

The restructuring of share rights and listing after the merger can provide incentive for a market-oriented operation. It can also avoid internal rivalries on the provision of product services so that combined efforts can be made to deal with outside challenges. A system of cross-market deposits can be launched to reduce the cost for investors.

Madam President, there are lots of advantages to a merger and I will not list each and every one of them. A merger is in keeping with the current trend and it is supported by the sector as well as the community.

However, the merger and listing of the five institutions are tremendous and complicated reform tasks. There are some issues of principle which should be properly dealt with. If not, it will deal a severe blow to the operations of the local financial market and will bring in negative impact. Therefore, I urge the Government to achieve the following when it launches the reforms: (1) to be impartial and open-minded, balance the interests of all parties concerned and to maintain a high degree of transparency; (2) to seek consensus among various sectors of the community; (3) to create a favourable investment environment for investors of the new Exchange; (4) to enhance the competitiveness of our financial services industry internationally. I will now go into the details of these four points.

Madam President, the reforms will first affect the members of the two existing exchanges. The Government should take into account their worries and their private assets so that the reforms can be carried out smoothly.

At present, the members of the exchanges have three kinds of rights: first, the right to vote, monitor and determine the policies of the exchange; second, the right to own the assets of the exchange; third, the right to trade in the exchange. Talking about the right to own assets, members can cash in a few million dollars (or close to $10 million during the peak time) by selling the broker's licence. After the merger, these three kinds of rights would definitely be affected. The Government should carefully deal with the problem of how to balance the members' interests.

After the merger, the licence of the existing members will have to be converted into shares. The setting of share prices will be a very complicated issue. And there is a question of the difference in net asset value of the stock exchange and the futures exchange. It is also a very complicated task to evaluate the value of membership. Even though the two exchanges have hired financial consultants to carry out evaluation work, the progress has not been that satisfactory because of the numerous factors involved. These include the past performance in profit-making, the different scopes of business, their business prospects and asset value. All these warrant consideration. To enable a fair and reasonable restructuring of share rights, the Government should make the exercise more transparent and make every effort to encourage the sector to put forward its views. In so doing, not only will private assets be protected, but the overall interests of the public can also be factored in.

Currently the two exchanges are playing four roles of operation, membership, monitoring and as a public body. These roles are overlapping and mutually conflicting. The role and power in discharging their duties are mutually offset. Therefore, the management board of the new Exchange which is to be composed of professionals should be given the task of increasing the power in making operation decisions. The new Exchange should also assign part of its monitoring powers to the Securities and Futures Commission whose new role in the financial market should be the supervisory authority for cross-market transactions, settlement and clearing.

Madam President, we should aim at strengthening the regulatory regime while merging the two exchanges and the clearing houses. We should realize that a preservation of the status quo would not be sufficient to deal with competition in a new environment. In terms of reforming the monitoring system, we realize that there exists overlappings and loopholes in the current framework. Through a delineation of monitoring powers and streamlining the management framework, we can prevent a recurrence of multi-front cross-market manipulation which happened in last year's financial turmoil and an imbalance between settlement and clearing. Only through the reaching of a consensus between merging and monitoring can the reform enable the territory to sustain attacks and sharpen our competitive edge in the international financial markets.

The second consensus that we should aim at is on how to set up the management framework of the new company. That is an important question. It is because while the new company is a public body under government supervision, it is also a service-oriented listed company. We need discussions and contributions from the sector and a consensus from all sectors. As proposed by the Government, there are three tiers in the management framework of the new company. The highest being the board of directors which represents the interests of the shareholders, market users and investors. The board also comprises some independent directors from the professional bodies as well as members of the public. The directors are responsible for the formulation of policies and decision-making. Obviously, there will be great controversies over the proportion of various parties in the board of directors. Therefore, a consensus has to be reached. The second tier in the management of the new company is the executive director and the management committee. They will be responsible for the professional management of the company, and the formulation and implementation of strategies for the operation departments. The third tier is the various operation departments. There are executive directors and management committees for each department and they are responsible for the day-to-day operation of the departments. The above-mentioned two tiers need to take in experts from the sector and professionals. And consensus has to be reached on that as well to make a rational composition of the management framework of the new company. This is also the key to the merger and reform exercise.

Madam President, the creation of a favourable investment and operation environment for the investors of the new company is also an issue which the Government has to look into. Such an environment would include the following factors: the enhancement of risk management; the reduction of costs of investors and operators; the improvement of electronic transaction facilities and the provision of a broad range of product services. Risk management can be enhanced through the merger, but the key to success lies in whether or not the new management can secure the representativeness and quality needed. In reducing the costs of the investors and the operators, the Government should control costs in the merger because the existing two exchanges and the related clearing houses employ a total of more than 1 000 staff and their operation costs stand at $1.2 billion. While co-operation is lacking, there is also an overlapping and hence wastage of products and services. If the present operations can be streamlined, the number of staff reduced, and the overlapping and wastage of products and services avoided, then the costs incurred on the investors and operators can certainly be reduced.

Madam President, the ultimate goal of the reform is to enhance the competitiveness of the Hong Kong financial services industry internationally. At present, the German stock exchange has merged all their local stock exchanges and incorporated the futures exchange into its operations. The Australian stock exchange has completed its demutualization reforms and it is operating as a listed company owned by its members. The Singaporean Government has announced that its stock exchange and international financial exchange will be merged. It can therefore be seen that the merging of stock and futures exchanges is becoming a global trend. What should be noted is that the current merging trend is not limited to those between cities and districts, but there is co-operation between markets across different regions, such as the merger plan between exchanges in Frankfurt and London. This has stimulated the growth of two camps of stock exchanges in Europe and their respective bid to link up with the stock exchanges in the United States. For Hong Kong, the Government should go beyond the merger between the local stock exchanges and clearing houses and think about co-operating with such cross-regional alliances. We need to work hard and make the best use of the opportunity of China's bid to become a member of the World Trade Organization to give full play to our role as the bridge and service centre between China and the rest of the world. And on this basis we should formulate our long-term development strategies, thus strengthening our position as the financial centre of the Asia-Pacific Region.

Madam President, I so submit.

Mr Ambrose LAU moved the following motion:

"That this Council urges that in promoting reforms of the securities and futures markets, the Government must be impartial and open-minded, face up to the worries of the industry, encourage the industry to participate in discussions on the reforms, seek consensus among various sectors of the community, promote the steady development of the financial market, as well as create a favourable investment environment and more opportunities for investors in the future new Exchange; furthermore, in keeping with the trends in the international financial markets, the Government should also formulate comprehensive and long-term development strategies with a view to enhancing the competitiveness of Hong Kong's financial services industry internationally."

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

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

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

I now call upon Mr SIN Chung-kai to speak and to move his amendment.

MR SIN CHUNG-KAI (in Cantonese): Mr Deputy, I move that Mr Ambrose LAU's motion be amended as set out on the Agenda. The Democratic Party put forward a list of eight wishes to the Government in July 1998 on reforming the stock exchanges. One of these is demutualization. This is to extend the share rights of the existing shareholders to other people in the market as well as the public. In so doing, the conflict between public interest and members' private interest can be reduced. The Democratic Party supports the reform proposal of the Government to merge, demutualize and list the exchanges and clearing houses. In March this year, the Democratic Party put forward suggestions again on the reforms of the securities and futures markets. The proposals have been distributed to the Members earlier. I hope that the Government can give serious thoughts to these proposals which include initial suggestions on the structure of the new organization, and the setting up of a set of regulatory rules which emphasize the disclosure of information and improving protection to investors.

Mr Deputy, let me first explain the reason why I have proposed this amendment. It is because Mr Ambrose LAU's original motion is different from mine in two ways. First, the original motion stresses the worries of the industry and second, the reform direction of the original motion is unclear.

On the first point, I understand the worries haunting the industry and I hope that a consensus can be reached between the Government and the industry through some legal means. In the past, the stock exchange and the Securities and Futures Commission (SFC) had a lot of quarrels and even rebuked each other over powers, responsibilities, roles and so on. Recently, we can notice in the media that a row has begun on the powers of the new Exchange. As shareholders, the brokers are naturally eager to know the structure and roles of the new Exchange. Therefore, I have proposed the amendment to address these key issues. I also urge the Government to inform the industry as well as the public on the composition of the new Exchange, the regulatory framework and work out a clear demarcation of powers and responsibilities. This will help the industry and the public to discuss this issue, for the development of the financial market is vital to the overall interest of Hong Kong.

Some of the brokers are worried about the number of new licences to be offered by the new Exchange. This is understandable. As Mr Ambrose LAU has mentioned, the problem which the local stock exchange is facing is not only limited to internal competition but those between stock exchanges. Mr LAU also said that the stock exchanges of London and Frankfurt have announced their co-operation plans. Yesterday, eight stock exchanges in Europe also announced the forming of an alliance, that is, the forming of a so-called "Pan-European" stock exchange whose business is on the trading of European blue chips, in competition with the NASDAQ market of the United States. From this we can see that competition in other parts of the world comes not only from inside but outside as well. The development of the stock market depends not only on the well-being of our own market. If our market operates well, then when foreign securities, especially quality securities, look for overseas listing they will be attracted to our market. Otherwise, they will be listed elsewhere.

The second difference is that my amendment is clearly in support of the Government's proposal of a merger, demutualization and listing as it is in keeping with the global trend. However, the reform proposals entail matching measures such as improvement to the information technology infrastructure and the development of statutory regulations with emphasis on the disclosure of information, as well as enhanced protection for investors. These measures will ensure that the securities market will operate in an open, fair and efficient manner. In this way, the reform will be wholesale and comprehensive. If we talk only about merging, demutualization and listing without paying attention to global developments such as electronic transactions and regulation with emphasis on the disclosure of information, then we are just putting old wine into new bottles.

On the other hand, Mr LAU's original motion is quite vague. It fails to make his stance known and we are not sure if he supports or opposes the merger. I wish to stress that we are very concerned about the worries of the industry. As a matter of fact, their worries are sufficiently well founded. I would like to ask a simple question: Do we need brokers any more 10 years from now? Now with the development of technology, we can have access to the system of the stock exchange through on-line transactions. I really have no idea what the role of the brokers will be after 10 or 15 years. I can cite an example to show what the latest developments are. This example does not relate to stock exchanges directly. It is about Fidelity, the greatest fund house in the United States. After they have started the on-line service, clients can buy the funds they want through computer networks. Within one year, the need for market intermediaries is almost gone. More than 80% of the tradings in funds are done through computer networks. Currently, the company has more than 6 million electronic accounts and it is expected that there will be an increase of 47% this year, bringing the number of such accounts to well over 10 million. With the development of technology, the role of brokers has changed. In the past, brokers act as market intermediaries, but such a role is bound to change with the development of technology. Scripless transactions will become order of the day and in the future, technology will become the heart of the securities and futures markets. Mr Ambrose LAU thinks that my amendment is focused only on the technical aspect. But it must be borne in mind that competitions between stock markets now is in fact between transaction systems. Markets which have the most advanced and least costly system will have the most robust trading. There are matching facilities like regulatory rules and laws which are also essential. We have just mentioned that already. We need to look into the crux of the matter, that is, we need to have a sound infrastructure, especially on information technology. This will spur developments in our market and make it robust. Then the investors will have the confidence to make investments and the brokers will do a lucrative business. This is beneficial to all the parties concerned.

Mr Deputy, I wish to stress that we are lagging behind our neighbours in market reforms. I believe Honourable colleagues will also feel that the Government is being very bold in pushing for the reforms. The timetable for the reforms is very tight and it can be said that the Government has shown great determination in taking the reforms forward.

Through the amendment which I have proposed, I hope Honourable colleagues of the Legislative Council can express what they feel towards reform proposals concerning the financial market. I hope the suggestions can be useful to the long-term interest of Hong Kong. Mr Philip THORPE, who used to work in the SFC in Hong Kong and is now the managing director of the Financial Services Authority in Britain, pointed out in a seminar commemorating the 10th anniversary of the SFC that the conventional stock exchanges are facing unprecedented challenges. New competitors are using flexible and less costly means to provide all kinds of financial products to clients. If the exchanges fail to make good use of new technologies, they will be eliminated in this ruthless race. Barring interference from regulatory bodies or protectionist measures from the Government, there are bound to be fundamental changes in the outlook of stock exchanges in the next five years.

Mr Deputy, may I quote a remark made by Mr DENG Xiaoping during his visit to southern China in 1992. He said, "Without reforms and an open-door policy, we will only be heading towards destruction". We are in pretty much the same position now and if there is no reform in our financial markets, our markets will only shrink and wither. I urge all Honourable colleagues to support my amendment.

Mr SIN Chung-kai moved the following amendment:

"To add "supports the merging, demutualization and listing of the exchanges and clearing houses in order to enable Hong Kong's financial market to operate more effectively and be better positioned to respond to competition globally; in this regard, this Council" after "That this Council"; to delete "that in promoting reforms of the securities and futures markets," after "urges"; to delete "must be impartial and open-minded, face up to the worries of the industry, encourage the industry to participate in discussions on the reforms, seek consensus among various sectors of the community, promote the steady development of the financial market, as well as create a favourable investment environment and more opportunities for investors in the future" after "the Government" and substitute with "to expeditiously put forward concrete proposals for the organization and structure of the"; to add ", the organization of the regulatory body and the demarcation of authorities and responsibilities between the two institutions, as well as to consult the public on these proposals" after "new Exchange"; to delete "in keeping with the trends in the international financial markets," after "furthermore," and substitute with "this Council urges"; and to delete "should also formulate comprehensive and long-term development strategies with a view to enhancing the competitiveness of Hong Kong's financial services industry internationally" after "the Government" and substitute with "to adopt measures to perfect the reforms of the securities and futures markets, including: (a) increasing its investment in information technology (IT) and improving the IT infrastructure to cater for the development of internet trading and scripless market; (b) developing statutory regulations with emphasis on the disclosure of information, which should include requirements for additional information disclosure and the setting up of an electronic filing system; and (c) enhancing the education and protection of minority shareholders and investors"."

DEPUTY PRESIDENT (in Cantonese): I now propose the question to you and that is: That the amendment moved by Mr SIN Chung-kai be made to Mr Ambrose's LAU's motion. We shall now proceed to a debate.

MR ERIC LI (in Cantonese): Mr Deputy, the scope of the question today is very broad and I would like to talk about global trends, especially the regulatory role played by the Government, and on competition. Mr SIN Chung-kai said that the Government is very determined and is making very fast moves this time. However, I remember about two or three years before the handover, many friends from Britain asked me whether or not there would be any great changes in Hong Kong after the handover. As a matter of fact, there has not been any after this one year or so. Recently, I went to Britain to visit them and to study the financial institutions there, including the Bank of England and the Financial Services Authority. I am aware that Mr SIN went there as well. At that time, I thought that it was Britain rather than Hong Kong which was witnessing great changes. Compared to Britain, the kind of reform that Hong Kong is contemplating is in fact no match with that of Britain and its scale is really insignificant. So, it cannot be said that the pace of our reform is fast.

After the Labour Party came to power in May 1997, it had carried out quite a few quick reforms which can be described as radical. These reforms are not limited to finance. They include the establishment of local assemblies in Scotland and Wales, the reforms in the House of Lords and in education. These also include those in financial services and especially in the regulation of the industry.

First of all, the British Government announced the independent operation of the monetary policies of the Bank of England. In less than two weeks later, it announced a thorough reform of the regulatory structure of the financial institutions, including a transfer of the regulatory work on private banks from the Bank of England to a newly established regulatory body, that is, the Financial Services Authority which Mr SIN Chung-kai has just mentioned.

The Authority may well be said to be the most extensive in the world in terms of its scope of regulation. It includes individual financial consultants, stock brokers, insurance companies, retirement funds and even the largest banks with global operations

The Labour Party acts swiftly and has the advantage of taking hold of more than 200 seats in the Parliament. Therefore, it did not bother to enact any laws and make any considerations and promptly arranged the regulatory bodies to sign a memorandum of understanding or management agreement with the Financial Services Authority. As a result, the authorities were transferred and the reform became a reality. What the Labour Party has done is that it is making some moves while learning and legislating. As one of the leading financial centres of the world, Britain is launching its reforms hastily. Why? What is the motivation behind it? Just now Mr Ambrose LAU and Mr SIN Chung-kai have mentioned that point, that is, it is not because Britain wants to change, it is because it wants to maintain its leading position. The incentive for change lies in the sweeping changes taking place across the world. The unitary management framework in Switzerland and Denmark has been in operation for quite some time. Ireland and Luxembourg are following suit. Australia opts for a unitary management framework which embraces all financial services. Japan and South Korea are not as lucky as Hong Kong and they suffered a lot during the Asian financial turmoil. Now the International Monetary Fund is lending money to them, and to a certain extent it is forcing them to introduce a similar regulatory framework as a condition for lending. Apart from the United States, there have been very rapid changes in Europe, Asia and Southeast Asia in the last couple of years. As Hong Kong is not so hard-hit in the financial turmoil, it can think carefully and ponder its way forward.

Under such circumstances, the financial ministers of the G7 countries agreed to set up a committee with a view to enhancing international co-operation and strength. Apart from national institutions, a major regulatory institution for each country also joins the committee as a representative. For Britain, it is easy to choose a representative from this new framework. But what about Hong Kong? Which institution can be the representative? Will it be the SFC or the Hong Kong Monetary Authority? It is difficult to identify a major regulatory institution when regulatory work is done by so many institutions.

If we look back at the way things are done in Britain, we know that they are doing this because of the need to conform with the requirements and guidelines of the European Union, that is, to make the financial services of the member states unitary. And that is why the above changes and design are made to the framework. Those who support the reform would think that this mode will enhance the regulatory body's sensitivity in monitoring the market and raise its operation efficiency. From the market perspective, many multinational corporations have as many as about a dozen or so monitoring bodies and to write so many documents for these bodies would be a duplication of efforts and would increase costs. It will also make monitoring work a gruesome task. From a simple economic perspective, the unification of monitoring work would result in the filling in of one form and the enforcement of one set of monitoring rules. This may help in reducing costs and create a competitive advantage internationally. From the perspective of market protection, this will help the institutions in managing their global risks. At present, the scale of multinational corporations is already very huge indeed and the trend of making mergers is sweeping right across Europe, North America, Switzerland, Belgium, Luxembourg, Italy, the Netherlands and so on. Many big financial institutions are merging with one another and new technological applications such as the Internet are becoming increasingly popular. It will be out of keeping with the times to manage just the affairs of one's own place. To a certain extent, it has also become obvious that one does not know all the things which happen in one's place. There may be loopholes which escape the monitoring efforts. With a unitary framework, market participants would be in a better position to make decisions and become more knowledgeable. They can also make better investments. Of course, there are also quite a lot of obstacles. For example, there are the worries of the industry because a lot of people's interests are at stake. But if we want to achieve a balance, the powers of the monitoring institutions must be effectively regulated. There should also be some corporate governance organizations with a wide spectrum of representatives, a set of detailed rules to govern market behaviour, a committee to be composed of market enforcers and investors or consumers, an independent ombudsman in financial affairs to prevent any abuse of powers, and a monitoring committee in the Legislative Council to oversee matters and to ensure a wholesome balance of ......

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

MR JASPER TSANG (in Cantonese): Mr Deputy, our health care reforms should meet our practical needs and they must be supported by the public. Likewise, reforms of the financial market should be the same. The success or failure of reforming the securities and futures markets which we are debating now would have a direct bearing on the maintaining of our position as an international financial centre in the 21st century. If the reforms are to succeed, it is important that the Government should make reference to the experience of other countries, listen to the advice of experts and academics and solicit the support and participation of people in the industry.

The Democratic Alliance for the Betterment of Hong Kong (DAB) supports the merger of the securities and futures exchanges and to go in the direction of demutualization. Experience in other countries shows that efficiency can be improved after the merging and demutualization of the exchanges to make them more effective in dealing with the increasingly complicated global transactions in derivatives and cross-market activities.

The merging and demutualization of the two exchanges will certainly have an impact on the future operation of the industry and create concern and worries in it. Just now Mr Ambrose LAU has listed some examples. These include: how the assets of the stock exchange and the futures exchange are to be computed; how the share rights of the members of the two exchanges are to be handled; should proper limitations be imposed on the operating rights of the new Exchange; and how should the management and operation of the new Exchange be like and so on. Although we understand that most members of the industry are supportive of this reform, they are still very concerned about how these issues are to be dealt with.

We notice that the Government and the industry look at the issues from different perspectives. Trading rights are an example. The SFC thinks that members of the existing exchanges will continue to have trading rights after the setting up of the new Exchange, so their rights will not be affected by the reforms. However, the trading rights conferred by relevant laws are only enjoyed by a fixed number of brokers. Should trading rights be extended to all eligible applicants, the existing brokers would of course worry that the number of competitors would increase greatly and their business would be affected. And when the new rules of the game have not yet been made public, their worries are quite understandable.

The DAB thinks that the Government should be impartial and open-minded in taking forward the reforms of the financial markets. The participation of the industry should be encouraged. We should try hard to convert their experience into resources for reform and their worries into a drive for it. We do not think that the interests of the industry should be placed first but we believe that active participation by the industry is indispensable to the success of the reform. In this regard, we are concerned about Mr SIN Chung-kai's amendment which deletes the parts related to the industry because it would strike home a negative message to the industry, in detriment to the reforms.

Mr SIN's amendment also deletes the words "comprehensive and long-term development strategies" because he thinks they are rather vague and not specific enough. He suggests three specific measures. We think that this is not an acceptable alteration. While we do not doubt the importance of Mr SIN's proposed measures, we simply think that merely proposing these three measures would not be helpful to meeting the objectives as stated in the motion. The DAB itself has many suggestions on reforming the securities and futures markets. I shall talk briefly on the development of on-line transactions and forging links with overseas exchanges. Then my colleague, Mr CHAN Kam-lam, will discuss other issues.

Mr Deputy, securities markets in other financial centres of the world are going in the direction of electronic and 24-hour transactions. If Hong Kong is to retain its competitiveness, it must head in the same direction. We must improve our financial infrastructure and meet the needs of direct access transactions, on-line trading, a scripless market and such like technological developments. The regulatory bodies must watch out for any new problems which may crop up when information communication, securities trading and capital flow are going fast in an electronic mode. The service providers in finance will need to change their mode of delivering services. If they cling onto their present mode, as Mr SIN has said, in 10 years' time there will not be any need for the kind of services which the brokers are providing . Brokers should therefore launch some reforms and adopt a customer-oriented mentality and offer new tailor-made products in electronic transaction services.

Another important direction of development is to forge strategic links with other exchanges. The Stock Exchange of Hong Kong (SEHK) has established links with the National Association of Securities Dealers Automated Quotations. We think that multi-market alliance and links are the right step to take. Mr SIN has also said just now that countries like Britain, Germany, France, Italy and many other European countries have formed a Pan-European stock exchange. The Stockholm Futures Exchange and the Oslo Stock Exchange, the Sydney Futures Exchange and the New Zealand Futures and Options Exchange has formed alliances. The DAB thinks that after the setting up of the new Exchange in Hong Kong, it should form an alliance with the other exchanges in Asia in the same time zone. This will expand the network of investors and increase the market volume.

Mr Deputy, many people have pointed out that we are already late in reforming our financial markets. Had it not been the Asian financial turmoil, we would not know if we could still have the determination to undertake reforms. Now no one will query the urgency of reforms. This may well be said to be one of the good things of the financial turmoil.

Newspapers today report on the "pain index" compiled by the International Monetary Fund. It is revealed that after the Asian financial turmoil, the pain borne by the people of Hong Kong is still not as much as that borne by countries in Europe and America, as well as most of the countries and places in Asia. The Hong Kong people do actually feel the pains brought about by the financial turmoil. Knowing that other people are suffering more than we do may be sort of a comfort for us. But the more important thing is that we must learn from our experience. If the turmoil has swept away our complacency and inactivity and brought in a sense of crisis and fuelled our drive to reform and self-strengthening, then when the pains are over, we will stand up and work a miracle.

MR RONALD ARCULLI: Mr Deputy, the motion moved by the Honourable Ambrose LAU and the amendment by the Honourable SIN Chung-kai are timely. As I understand, the main thrust of the motion and the amendment is that both support reform in our securities and futures markets. Whilst this reform was specifically mentioned by the Financial Secretary in his Budget speech, Honourable Members obviously and understandably have other equally important matters on their mind. Thus, this debate actually gives each of us seven minutes to speak on an extremely important and very complex matter.

Let me say at the outset that the Liberal Party very much favours the merging, demutualization and listing of the stock and futures exchanges and the clearing houses. At present, we have no details of these stated objectives, how they will be achieved and indeed, the terms on which they will happen. So far, all we know is that the financial and other advisers have been retained by the relevant parties. And as a practitioner in the legal aspect of our financial markets, I can say to Honourable Members that where there are benefits to share and responsibilities to assume, there will be little difficulty in sharing benefits but every party will try to avoid responsibilities. However on this occasion, I believe that our stock and futures exchanges and clearing houses will not be so short-sighted and will not shirk away from any responsibility that will properly and fairly fall on them under the new regime. The reason is simple. They, like all of us, will want Hong Kong as an international financial centre to go from strength to strength. They also know that Hong Kong's rightful place in China and in Southeast Asia is as an international financial centre. Furthermore, they definitely know that the benefits will flow from such a position and status. I confess that we are not as concerned on the terms and conditions of the merger as we believe that good commercial sense will prevail in the end. We will, however, be a little concerned if there is any suggestion that these terms and conditions will have to be acceptable to each and every member of these two exchanges or the clearing houses. I say this because in the motion, the phrase "seek consensus among various sectors of the community" is there whilst in the amendment, the phrase "to consult the public on these proposals" is there. Frankly, whilst a consensus may be highly desirable, it should not be an insurmountable obstacle or, in language more appropriate to the circumstances, it should not be a deal breaker. As for public consultation, we do subscribe to this provided that it does not extend to the commercial terms of the reform. This really should be left to the parties concerned. It is hard to imagine how one goes about public consultation in that respect.

The other aspect of the reform that we should pay much attention to is simply this: What is going to be the regulatory framework as a result of the reform? How much of the existing framework are we keeping? What new measures or framework are being introduced? What is the timetable for any of these new measures? Will we be over-regulating? How fast are we moving in a global context? Will we be competitive? Will we be prepared for the new millennium? The Honourable SIN Chung-kai says that if we have a good market, companies will come to us automatically. But it is only partly true. The other aspect of it is that not only do we need to develop Hong Kong's stock and futures markets, we also have to develop its debt market. Without that, no financial centre can truly describe itself as an international financial centre. Thus, I think this reform is simply one step in the right direction. And the last question is whether it is our mission, for instance, to make Hong Kong the premier international financial centre in this part of the world? These questions are simply scratching the surface of many many issues of this complex undertaking. Indeed, the specific points (a) and (c) in the amendment are two important areas. But I hope that we do not do an overkill on investor protection, because investors must bear some responsibilities. As for disclosure of information, the existing requirements seem to be functioning well and I seriously doubt whether there is a need for a major overhaul in the area. Market pressure generally operates well to prompt disclosure of information beyond, perhaps, statutory or exchange requirements.

Before I conclude, I would like to also alert Honourable Members to the need that we have to overhaul and modernize our securities and futures laws. This will also be a monumental undertaking and will undoubtedly need the support not just of this Council but also of the industry. Other markets, like London, are moving ahead and moving so quickly that I know some Honourable Members have visited London to have first hand experience in this respect. Mr Deputy, I suspect also that the resources of the Department of Justice in the area of financial markets is limited, and I sincerely hope that the Administration will do whatever is necessary to ensure that the lack of resources will not be an impediment to long overdue reform, so that we can go ahead and execute the proposals as quickly as possible.

In conclusion, Mr Deputy, the Liberal Party supports the motion and the amendment.

MISS CHOY SO-YUK (in Cantonese): Mr Deputy, after the outbreak of the Asian financial turmoil, trade volumes in the stock markets over the world shrink and the major stock exchanges are all racking their brains to attract more business. On the other hand, the increasingly bullish market in the United States is diverting a lot of business from other countries. This has become a catalyst for the stock exchanges in Europe to think of merging to counter-balance the threat from the United States. Amidst fierce competitions, the exchanges in Hong Kong are not only not merging with other exchanges in the region, they are even fighting each other. A lot of business is bound to lose if the stock market in Hong Kong is becoming less attractive and down-sized. The listing of the HSBC Holdings in the United States has its own commercial considerations, but the move also highlights the attractiveness of stock markets elsewhere. It is therefore a matter of most urgency that the two exchanges here should merge so that our financial markets can become more competitive.

Hong Kong's economic recovery hinges on the prosperity of the stock market. The Hong Kong Progressive Alliance (HKPA) recognizes the sense of crisis which the Government has on the short- and long-term competitiveness of our financial markets and a merger of the exchanges which it is pushing very hard. But though the merger is a matter of extreme urgency, the Government cannot impose its will from above and direct the merger arrangements. As a matter of fact, it is the market operators and the investors, rather than the Government, who have the best tap on the market pulse. The Government should give assistance and encouragement to make the merger an efficient and effective one, and one which takes fully into consideration the objective setting and needs of the local market. It should also help to pool ideas from market operators, investors and

people concerned about the development of the financial services industry so that the best merger plan can be worked out after discussions and debates.

If the Government pushes for a reform package which it has formulated beforehand and tries to impose it from above to make the industry and the ordinary investors accept it, even if the merger can complete within a short time, the market may query: As mergers are things which happen in a free market, now that the Government is giving directives in terms of the specific details of the merger and the direction in which the market is to go, is this a change of the Government's policy into one of active intervention?

The Government should remember that the merger is not merely an act of combination within the financial system, it is a process whereby the communication and understanding within the industry and that between the industry and the public investors are to be enhanced. The Government must "be impartial and open-minded, face up to the worries of the industry, encourage the industry to participate in discussions on the reforms, seek consensus among various sectors of the community." These demands advanced in the original motion are essential prerequisites for a successful merger.

What is most baffling to the people is that the amendment has taken away these essential prerequisites and replace them by three measures which are information-related measures that in any case should be improved or promoted even if there is no merger and reform. This is a total disregard of the essential elements leading to a successful merger and reform.

In fact, the stock market of Hong Kong has always been promoting information technology applications. The SEHK has been using the following systems for a long time: Automatic Order Matching and Execution System, the Central Clearing System, currency futures of the Futures Exchange, the red chips index futures options transaction system and so on. The Futures Exchange will include Hang Seng Index futures options products in the near future and will implement full-scale electronic transactions. It is true that the development of trading on the Internet in Hong Kong lags far behind that of the United States, but even if we do not have the new Exchange, the SEHK should work hard to catch up. As far as I know, the third generation trading system will be in use next year.

Mr Deputy, though the three measures proposed in the amendment are reasonable ones, they are not related to the thrust of the original motion. They are not the results of the merger. What the amendment has done is to put information technology and education measures arbitrarily together with the merger. This is really confusing the key issues of the merger.

A more serious flaw is that the wording of the amendment implies that the reforms should be initiated from top down. Such an arrangement shows that the Democratic Party is blind to the reality that the two exchanges are by nature private corporations and that they operate in a free market. On the one hand, the Democratic Party demands that the Government should put forward concrete proposals on the new Exchange. But on the other, it deletes entirely the words in the original motion on the participation of the industry and various sectors of the community in the reform. This has not only confused the role of the Government in the merger and reform exercise, but has also in a disguised way encouraged the Government to work in a black box without regard to the public and the industry. This is also a violation of the principle that the free market economy of Hong Kong should be subject to as little intervention from the Government as possible.

Mr Deputy, I so submit to support the original motion and oppose the amendment.

MR MA FUNG-KWOK (in Cantonese): Mr Deputy, after the outbreak of the Asian financial turmoil, we come to know that we must strengthen the fundamentals of our economy. Apart from developing technology and high value-added industries, we should also review and reform our financial system so that it can brave the storm and sharpen our competitive edge.

The Financial Secretary pointed out clearly in the Budget that it is important that reform be carried out in the securities and futures markets so that Hong Kong can become and maintain as an international financial centre. I agree that we should maintain Hong Kong's status as an international financial centre and to make our securities and futures markets capable of competing with other fast-developing international markets. To these ends, our markets have to make relevant and forward-looking reforms.

I support the idea of the merging, demutualization and listing of the exchanges and clearing houses. In fact merging is a trend of the times and it is beneficial to the long-term interest of Hong Kong. However, in the course of such moves, there are some people in the industry who are bound to become worried. Those brokers in the two exchanges who are doing a small business and the ordinary man-in-the-street investors are afraid that their interests may be sacrificed in the merger, so they have reservations about the merger, demutualization and listing proposal.

However, after the merger of the two exchanges, should trading rights and membership be dealt with separately, members of the two exchanges can continue to have trading rights and membership. And membership can be traded freely as shares. In this regard, the interests of the members should continued to be protected.

If various sectors of the community, including the financial sector, think that the merger is a good thing, and with such an optimistic market expectation, the value of membership is likely to go up. Moreover, when after the trading rights and membership are to be dealt with separately, those who wish to engage in the business only need to have trading rights, and membership can be transferred freely. This will provide an incentive to the membership trading market. From the example of the other international markets such as Australia, not only will the price of membership go up after the merger, but membership rights will also increase as well. Apart from that, after the merger and listing, the new Exchange can choose to pay out dividends and such like methods which are fairer, in order to determine the amount of profits paid out to members according to the amount of shares they hold.

From this, it can be seen that after the merger and listing, no harm will be done to the interest of the current members. As a matter of fact, the proposal of merging, demutualization and listing should be agreed by 75% of the members of the two exchanges. In this case, the interest of the current members should be protected.

At present, the small brokerages are worried that after the merger and listing, their voice will be muffled by big brokerages and they will have no say. Therefore, I hope that in the future board of directors of the merged exchange, a certain amount of seats will be allocated to representatives from the small and medium brokerages. This will ensure that they have a say in the policy making and operation of the exchange so that their situation and plight can receive sufficient attention and that their interests can be safeguarded.

Mr Deputy, I realize that when substantial changes are made to the existing organization and framework, some people are bound to feel dissatisfied and worried by such changes. In his concluding speech delivered on 31 March 1999 on the Second Reading of the Appropriation Bill 1999, the Financial Secretary pointed out that a co-ordinating committee would be set up to oversee the demutualization and merger exercise. Its members include the management of the two exchanges and the clearing houses and representatives from the industry. I hope that the co-ordinating committee will address the concerns of people in the industry in a fair and open manner, while also balance the interests of the parties concerned and allay their worries. In the end, the reform proposal can be materialized and the overall interest of the community be attended to.

The stock exchange in Singapore is preparing for listing, the exchange in Australia has completed its listing plans, and we have been informed earlier of the developments in this regard in Britain. And with the other listing plans of many large scale futures markets overseas, the merger, demutualization and listing plan of the Hong Kong exchanges is in line with the current trend in the world. We believe that such a move will enhance the competitiveness of our financial market. We must work hard within the tight schedules and complete the exercise by the end of next year.

In regard to the organization structure and the demarcation of authorities and responsibilities of the regulatory body, as this involves public interest, therefore I think that public consultation should be made on the proposals on the demarcation of authorities and responsibilities. The SEHK and the Futures Exchange are presently exercising some sort of self-regulation. And the SFC is playing the role of a government regulatory body. Admittedly, there are some grey areas in the demarcation of authorities and responsibilities. In this regard, the criterion to be used in deciding such matters should be based on which institution could be more efficient than others in undertaking such regulatory work. But the ultimate responsibility would still rest with the SFC.

Mr Deputy, when we are to launch our listing plan, we must undertake effective measures to make our securities and futures markets sound, and attention must be paid to upgrading the technological infrastructure and the related laws and regulations to suit the developments of on-line transactions and a scripless market. I hope that the SFC can submit a consolidated bill relevant to this as soon as possible so that the Legislative Council can have ample time to scrutinize it.

I so submit to support the original motion. Thank you.

MR CHEUNG MAN-KWONG (in Cantonese): Mr Deputy, recently, a number of listed companies have gone into trouble one after another. This situation has obviously exposed the fact that the existing laws could hardly do anything about the defaults on the part of the directors of listed companies or intermediaries. The Democratic Party supports the proposal to merge the exchanges put forward by the Government; however, since the Government so far has not made any specific proposals regarding the protection for investors or the control over any default by listed companies, the Democratic Party has to urge the Government to expeditiously adopt measures to plug the existing loopholes on the regulatory front and step up the protection for investors.

Let us first take a look at the recent troubles with those listing companies:

Category I	Being found to have incomplete books of accounts after getting listed for a year;
Category II	Having financial problems within the first year of listing and lost more than $500 million;
Category III	After getting listed, the major shareholder of the company was forced to transfer his controlling stake because the shares he had used as collateral were liquidated due to his own financial problems;
Category IV	The chairman of the company is being suspected of embezzlement of funds after the listing of the company;
Category V	Business performance of the company after listing has failed to attain the forecasted level of profits, or has managed to attain the level only by writing back other items; and
Category VI	The company's profit level has dropped tremendously within the first year of listing and thus become a problematic company.

Mr Deputy, in regard to the problems with the listed companies, there are of course cases in which the directors or management of the companies have failed to arrange for proper risk management and thereby caused the companies to have financial problems when the market conditions deteriorate rapidly. However, for such cases of directors committing forgery, incomplete books of accounts or embezzlement committed by the management of the companies found within the first year of listing, or cases in which the financial conditions of the companies have already been very unstable before listing, it is obvious that the management of the companies concerned have defaulted on their duties by deliberately defrauding the investors of their money or ignoring the interests of investors.

Let us now turn to the responsibilities of intermediaries. The sponsors of listed companies have the responsibility to safeguard the interests of investors, since they are the one who have the professional knowledge to assess the investment value of the companies and recommend them to investors for listing. As regards the auditors of listed companies, their work is to carry out an independent examination of the financial situation of the listed companies concerned, so as to enable members of the public to have professionally processed information. Nevertheless, there have been cases of companies recommended by sponsors or companies which have their accounts examined by auditors being found to have gone into trouble within the first year of listing or discovered to have problematic accounts even before getting listed. As for the profits forecasts set out in the prospectus, they are but meaningless.

In regard to the default of the directors or management of listed companies, the existing ordinances are simply unable to adequately regulate or hold accountable the persons concerned. Over the past years, the Financial Secretary has only invoked the Securities Ordinance on four occassions to investigate and prosecute the directors of listed companies. What is more, while sponsors defaulting on their duty to examine the relevant information in a strict manner will at best be reprimanded by the regulatory body, there is far less regulation on the work of auditors.

Apart from that, the prices of many second and third liners over the past year have been moving like roller coasters, soaring for a few days and then followed by deep plunges. What is more, such price fluctuations have in many case involved banker transactions, or even market manipulation and insider dealings. Worse still, since investors were more often than not unaware of such situations, their interests could hardly be safeguarded.

If our financial markets are to develop in a steady manner, the interests of investors must be protected. Aside from enhancing the education of investors, the regulatory role of relevant laws should also be strengthened. In regard to the quality of the companies' management, although the Government has put forward a proposal to review the measures to enhance company regulation, so far no marked progress has been made. In this connection, even the proposal to add under the Securities (Stock Exchange Listing) Rules a provision requiring a company to establish a "vetting committee" has so far been proceeding very slowly. Naturally the result of such a measure is far from satisfactory.

The Democratic Party holds that the Government should conduct a comprehensive review to speed up reforms to both company law and the Securities Ordinance, including:

1. Strengthening the disclosure-oriented regulatory structure and enhancing the investigation as well as law enforcement power of institutions such as the SFC and the SEHK;

2. Stipulating clearly the legal responsibilities of company directors and intermediaries to disclose and examine any relevant information, as well as the law enforcement agencies concerned;

3. Setting up a complaints board to enable investors to cut back on their costs of legal proceedings on the one hand and to claim compensation from defaulters for their losses on the other; and

4. Reviewing the existing roles of both the company law and the Securities Ordinance, with a view to plugging any loophole of duplicated regulatory efforts.

From the perspective of upgrading the competitiveness of our local exchanges, a merger will naturally help to enhance the operating efficiency of our local financial markets. However, it is also very important for us to establish a fair, reliable and appropriate regulatory structure if we are to bolster the confidence of investors in our financial markets. For this reason, the Democratic Party should like to urge the Government to adopt measures to perfect the reforms of the securities and futures markets, with a view to enhancing the education and protection of investors.

Also, I should like to respond to the remarks made by the Honourable Miss CHOY So-yuk regarding the proposed deletion of the phrases "face up to the worries of the industry, encourage the industry to participate in discussions on the reforms, seek consensus among various sectors of the community" contained in the Democratic Party's amendment. The Democratic Party believes that the concerns of the industry in fact include also the concrete proposals for the organization and the structure of the new Exchange, the organization of the regulatory body and the demarcation of authorities and responsibilities between the two institutions we have referred to. Since their concerns have been set out clearly in the Democratic Party's amendment, we do not think we are seeking any empty discussion to solicit views. As regards consultation with the industry, the proposal to consult the public referred to in the Democratic Party's amendment in fact covers consultations with the industry, the financial services sector, the Legislative Council, as well as certain members of the community. We believe a great many sectors of the community will be affected by the reform of the financial markets; as such, while great importance should naturally be attached to the views from the industry, it is also important to cater to the views from other sectors as well as the views of this Council. For this reason, we could say that the amendment proposed by Mr SIN Chung-kai has specifically amended the original motion moved by Mr Ambrose LAU. We did not propose the amendment for no reasons, instead, we have proposed the amendment to rectify the vagueness of Mr LAU's motion. Thank you, Mr Deputy.

MR HUI CHEUNG-CHING (in Cantonese): Mr Deputy, the two existing exchanges in Hong Kong are separated from each other in terms of their functions, products, as well as operation. There are many by-products of two separated markets, since the different regulatory bodies would most likely be serving its own respective masters, thereby giving rise to problems like unclear roles, loose co-ordination, as well as duplication of products and services; what is more, the two institutions might even have conflicts with each other and thus could not collaborate in dealing with competitions from overseas counterparts. At the same time, the rapid globalization of financial markets, the fast-paced development of derivatives, the increasing difficulties in supervising the flow of capital promptly, as well as the ever-increasing cross-market investment and speculative activities have all served to further expose the fact that the structure of separated financial markets existing in Hong Kong has become incompatible with present needs. What Hong Kong needs now is a streamlined institution capable of overseeing the overall situation and straightening out cross-market regulation, so as to improve risk management on the one hand and cut back on the transaction costs on the other.

For this reason, the Hong Kong Progressive Alliance (HKPA) agrees very much with the Government's proposal to consolidate the securities and futures markets and their clearing houses into one single new Exchange. The HKPA is also aware of the urgency of completing the merger within one and a half years, since the major competitor of Hong Kong in Asia, Singapore, has taken the lead by announcing a similar merger proposal by the end of last year.

In this connection, the HKPA just hope the Government could realize that the resolve of the Government is not the key to completing the reform within a short time; rather, the success of the reform depends on the abilities of the Government to remain impartial and open-minded throughout the entire process of reform, to encourage the collaboration of various sectors (including the financial services industry), as well as to draw on the collective wisdom of the community to ensure that the reform could be implemented smoothly, in particular, during the transition period.

The most urgent task for the Government now is to explain to the industry as to whether the efforts made by members of the sector would be rewarded similarly before and after the merger. For instance, whether the Government would consider it a fair arrangement if brokers who have several licenses could have only one single trading right? In addition, since members of the industry have all along been competing for business and development in a free and open market environment — just like the situation in any other industries — could the principle of "allowing both the big firms and the small firms to do business on their own scale" still be realized in the capital sum required of market participants by the new Exchange?

Certainly, the merging of the two exchanges would affect not only the business environment of the industry but also the competitiveness of Hong Kong's securities market. What strategies should Hong Kong adopt to seek alliance partners after the merger? Besides, since the merger could facilitate the introduction of more derivatives into the local market, how are we going to adjust the scale and pace of development of derivatives when seeking to strengthen the position of Hong Kong as a financial centre and enhance our competitiveness? These are issues which the Government must resolve through thorough discussions with the market operators.

Mr Deputy, it has always been easier said than done to introduce reforms. The reason why the original motion today merits our support is that it has brought into the Government's attention the fact that the smooth implementation or otherwise of the reforms will impact on the results of the reform efforts. In this connection, the original motion has raised five important points as follows for the Government's attention:

First, instead of doing everything behind closed doors, the Government should make the reform process as transparent as possible, for the investment opportunities, rights and interests of the shareholders of the exchanges (including investors from among the public) will be affected by the reforms.

Second, the Government should face up to the worries and needs of the financial services industry, since the reforms would affect both the business environment and the international competitiveness of the industry internationally.

Third, instead of forcing a reform package on the financial markets, the Government should cater to the needs of the markets; besides, it should also encourage the industry and the various sectors of the community to participate in discussions on the reforms and express their views, with a view to reaching a consensus among the public and drawing on their collective wisdom.

Fourth, the Government should never "improvise" reforms or overlook the importance of the steady development of the markets in seeking to catch up with the world trend, for haste makes waste, excessive enthusiasm will only serve to spoil things.

Fifth, the Government should not confine the reforms to the structural arrangements. Instead, it should formulate comprehensive and long-term development strategies, including studying the feasibility of developing networked transaction and clearing systems for Hong Kong, Shanghai and Shenzheng, with a view to exploring more room of development for our financial services industry to develop.

These five major points raised in the original motion are the conditions vital to the success of both the merger and the reforms, and since they involve a great many sectors of the community, they are by no means biased towards the interests of the industry as alleged by Mr SIN Chung-kai.

With these remarks, Mr Deputy, I support the original motion and object to the amendment proposed to it.

THE PRESIDENT resumed the Chair.

MR CHAN KAM-LAM (in Cantonese): Madam President, the Democratic Alliance for the Betterment of Hong Kong (DAB) holds that reforming the securities and futures markets alone is not enough. In our opinion, the Government should also formulate strategies for the long-term development of our own financial policy. Earlier our Chairman, the Honourable Jasper TSANG, has already spoken on the development of electronic transaction and forging links with overseas exchanges, my speech will concentrate on the DAB's views on other issues.

In regard to the direction in which the local financial services industry should develop, we believe the risk management of the financial services users themselves should be strengthened. In the aftermath of the financial turmoil, there is a need for the financial services industry to enhance its risk forecast system. It is particularly important for the industry to keep abreast of the development of both the interest rates and the exchange rates in the securities and futures markets, so as to get a better grasp of the market trends and formulate contingency plans accordingly. At present, the local financial services industry still has much room for improvement in regard to the application of information technology in risk management enhancement. Hence, we believe the financial services industry should develop upon the existing foundation risk management applications programmes suitable for use in analysing market data and forecasting market trends.

One of the directions in which Hong Kong should head is the development of a deep, liquid and mature debt market. In his Budget speech, the Financial Secretary has referred to a number of measures to promote the development of a debt market in Hong Kong, including listing the Exchange Fund Notes on the Securities Exchange in the second half of the year, promoting the development of a retail debt market, as well as encouraging overseas companies to issue debt instruments in Hong Kong. Nevertheless, it is by no means a simple task for Hong Kong to develop a mature debt market, in particular when the world's major debt markets have all become fairly mature after developing for quite some time. Bearing in mind the diversified products available in overseas debt markets, the future development of our own debt market should concentrate on developing a diversity of debt instruments with longer maturity terms, attracting retail investors, cutting back on the amount of transaction, as well as investigating into the possibility of offering tax concessions. That way, the appeal of the debt instruments available in Hong Kong may be enhanced in the market, thereby enabling the market to raise funds on the one hand, and boosting the volume of transaction of the debt market on the other.

Another direction is the development of an active second board. A second board will be established in the fourth quarter of the year to offer newly established enterprises an alternative source of business finance. This should contribute to the development of Hong Kong towards technological innovation and high value-added industries. We should encourage not only the local innovation and technology sector but also that of the Mainland, Taiwan, Southeast Asian countries, or even countries farther away, to list their enterprises on our venture board, with a view to increasing the number of listed companies on our venture board. Besides, we could also consider merging the venture board with the second board. In Europe, by making use of a common transaction and data network, a common set of listing requirements for issuers, and the practice of granting cross-market membership to intermediaries, Germany, France, Belgium and Luxembourg have forged a link among their second board markets, and thereby enabled the transaction of shares of small European firms to become more active in recent years. The DAB holds that Hong Kong should take the initiative to forge a link between the local second board with that of other countries, in particular, we should aim at developing a pan-Asia second board with emphasis being put on the small companies in Japan.

In addition, Hong Kong could also consider developing new investment instruments such as overseas indexes, futures and options, as well as forward securities market and foreign currency investment instruments. The development of new investment instruments could contribute to the market value appreciation of our securities market on the one hand, and enlarge the investor base for the market on the other. In promoting the new investment instruments, the focus of attention should be concentrated on retail investors, with a view to preventing overseas market from taking away our local clients. As a matter of fact, the Australian Securities Exchange is currently promoting its Asia 100 index concept, the constituent stock of the index comprises quality Asian blue chips listed on the Australian Securities Exchange. In addition, the Sydney Futures Exchange and the Singapore International Monetary Exchange have also started developing products in the light of the Dow Jones Regional Index and certain Asian stock indexes respectively. From this we can see that if we are to maintain our competitiveness, we must develop new derivatives to extend our market.

Last but not least, we should also seek to attract overseas financial services providers to set up their Asian headquarters or offices in Hong Kong, with a view to enhancing the position of Hong Kong as a financial centre. Let me cite an example with the fund industry. At present, certain major financial centres in the world are offering tax concessions to fund houses. In this connection, Singapore, our major competitor, has even offered to fund houses a 10% concessionary profits tax rate and exempted them from paying tax on income generated by qualified debt instruments in the coming five years. If we should be able to attract fund houses to set up regional offices in Hong Kong, more business opportunities could be brought to the relevant trades, and thus contribute to the improvement of the economy as a whole. As such, we could consider offering tax concessions to overseas financial institutions to attract them to establish regional headquarters in Hong Kong.

In the foreseeable future, competition in the local securities market would become even keener, while the amount of commission from traditional securities services would continue to decrease. The challenges facing brokers in the future will largely be coming from Internet trading; hence, brokers should prepare themselves well for the new challenges beforehand. As regards the regulatory bodies, they should also formulate long-term plans to cater for the changing needs of the fast developing financial markets.

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

MR ALBERT HO (in Cantonese): Madam President, my speech will concentrate on the regulation aspect. In the face of the globalization of securities markets and the development of electronic transaction, the Securities and Futures Commission (SFC) which has been established for 10 years should also head in the direction of modernization. It is only through reforming the obsolete regulatory system that the SFC could adapt to the new changes and provide investors with the proper protection.

The major exchanges of the world are all undergoing important restructuring processes such as merging or forging strategic alliances with other exchanges on a local or international scale. To cite some examples, the European Monetary Union is planning to establish a Pan-European Securities Exchange, while the National Association of Securities Dealers Automated Quotations of the United States has forged links with Singapore and the Stock Exchange of Hong Kong. Apparently, the concept of "securities transaction with no frontier" could be realized in the near future. Added to this is the development of Internet trading, which enables on-line securities brokers to buy and sell securities of different places round the clock for their clients. It is worth noting that with the growing popularity of on-line brokers, securities transaction will be reduced into a kind of low-cost basic service. If brokers are to make profits, they must be able to provide comprehensive financial services for their clients. As such, instead of confining their services to the transaction of securities, on-line brokers are providing a variety of financial services, including debt instruments, funds, financial consultation, monetary management and so on.

In the face of the trend towards globalization and on-line trading, regulatory bodies must prepare themselves for new challenges. In this connection, investigation should be made into how regulatory bodies of different countries could step up their co-operation and establish mutually acceptable standards to facilitate monitoring efforts; how an unitary financial regulatory body could monitor financial consortia with a variety of financial products; how on-line fraudulent activities could be monitored; how the accuracy of the low-cost and conveniently transmittable on-line information obtained by investors could be ensured and so on.

Hence, there is a need for regulatory bodies to break themselves from old traditions and reconsider their role as monitors. In this connection, the United Kingdom has merged all its financial regulatory bodies into one consolidated super regulatory institution, the European Union (EU) has set up the Forum of European Securities Commissions to promote the EU's integrated regulatory standards, while the United States Securities Commission has adopted measures to cope with the current trend of on-line trading, including establishing a technical support committee, collaborating with the FBI in exploring issues like on-line security, on-line investment education and so on. However, regardless of the structure of the regulatory body concerned, statutory regulations should all be developed with emphasis on the disclosure of information, and aimed at performing the effective regulatory role via both the investors and the markets concerned. As regards the disclosure of information, the principle is that the information disclosed must be accurate, up-to-date and adequate, these are three indispensable requirements.

The Democratic Party holds that the first and foremost task for the Government is to set up an electronic filing system following the example of the EDGAR system of the United States. This filing system should include the function of collecting, analysing and retrieving information electronically. Moreover, the listed companies should also be required to submit their papers (with a few exception) to the SFC for filing via the Internet. That way, investors should be able to read the information of relevant listed companies as well as that of trust funds by making use of the electronic filing system. In this connection, Canada and Taiwan have already made it a requirement for their listed companies to submit via electronic means their papers, including financial reports, statements, annual reports and so on.

Therefore, both the SFC and the exchanges must expeditiously set up their own websites and security systems, so as to require the listed companies to submit their information via the Internet. At the same time, the legislation on electronic transaction which the Government is now drafting should also formally recognize the Internet as well as other electronic media like CD-ROM and video tapes as means of submission.

In addition to the need to strengthen on-line information distribution, the timely submission of adequate information is equally important. At present, the exchanges in South Korea, Thailand, Taiwan, Australia, and New York have all required their listed companies to submit quarterly reports. In this connection, New York has required its listed companies to submit their reports within 45 days. The recent incident of the Guangdong Enterprise has fully reflected the importance and urgency of disclosing financial information on a quarterly basis. The Democratic Party holds that as an international hub, Hong Kong should not lag behind in its disclosure requirements; as such, listed companies should be required to submit quarterly reports. Besides, while the submission time limit for annual audit reports should be reduced from five months to three months, that for quarterly reports should be reduced from three months to two months. In addition, the scope of information to be disclosed should also be extended to include detailed balance sheets, income and expenditure accounts, cash flow statements and accounting policies.

The disclosure of information is of course important, however, of equal importance is the accuracy of the information disclosed. Many recent examples have told us that the inaccuracy of the information disclosed will cause the investors to suffer heavy losses. The many examples cited by the Honourable CHEUNG Man-kwong just now have all pointed to the fact that in the future development should head in the direction of conducting an overall review, expeditiously reforming our securities and company legislation, as well as stepping up the monitoring of relevant parties like financial consultants, merchant bankers and so on. Besides, the responsibilities of directors should also be reviewed and re-determined.

In regard to the protection for investors, as the traditional unitary financial services will gradually develop into all-rounded comprehensive services, the complaints against one single company might need to be lodged through different channels. Bearing in mind that investors may not be fully aware of the different channels for complaints relating to banking services, insurance services, pension schemes and investment consultancy, Australia has been running a "financial complaints referral centre" since February 1998. This is a pilot scheme which helps refer investors' complaints, and it will be reviewed this year. The Democratic Party should like to suggest the Financial Services Bureau considering setting a "financial complaints centre" to co-ordinate and assist in referring complaints relating to the financial services and ordinances within its ambit.

Madam President, given that the merging and demutualization of the exchanges will be unavoidable in any case, I suggest the industry drawing on the demutualization and listing experience of the Australia Securities Exchange. The Australian experience is indeed very encouraging. After the demutualization process which took place in 1997 to 1998, the Australian Securities Exchange was listed in October 1998, and the price of its shares has risen by more than two folds from the Aus $4.25 of the first closing day to the recent level of Aus $14; besides, while its after-tax operating profits for six months have amounted to $120 million, its market value has amounted to as much as $6.5 billion.

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

MR ALBERT HO (in Cantonese): I hereby urge Honourable Members to consider the amendment from a positive perspective.

PROF NG CHING-FAI (in Cantonese): Madam President, the economy of Hong Kong is now in the midst of its most difficult times in more than a dozen years. Hence, the various sectors of the community are making every effort to pull the economy out of recession. In this connection, I believe that in seeking to embark on the new courses of development to which the Chief Executive has referred in his policy address, such as high technology, high value-added industries, Chinese medicine and so on, we should never overlook the industries on which the success of our economy depends, including financial services, tourism and import/export trade.

In the Budget presented in March this year, the Financial Secretary has put forward a proposal to reform the securities and futures market, with a view to enhancing the competitiveness of our financial services industry, safeguarding the fairness of the market and protecting the interests of investors. However, if we are to make the proposed reform a success and achieve the objective of competitiveness enhancement, ample consultation and discussion beforehand is a must. In this connection, the motion moved by Mr Ambrose LAU today has provided us with a very good opportunity to discuss the issue.

Mr Ambrose LAU holds that the Government must encourage the industry to participate in discussions in order to reach a consensus before promoting the reforms, and that it must also seek to create a favourable investment environment and formulate long-term development strategies. Apparently Honourable Members will not raise any objection to such views of his. As regards the amendment proposed by Mr SIN Chung-kai, it has put forward a number of specific measures on which I should like to make a few comments.

The proposed merging, demutualization and listing of the exchanges and clearing houses as a course of reform is heading in the right direction; besides, it is also in line with the major trend of development of the international financial markets. The advantages of such a merger have already been detailed in the policy paper published by the Government and in other commentaries, and a great many views have also been raised by those Honourable colleagues who spoke before me. Nevertheless, I should still like to make one point and that is, I agree very much with the Government's practice of setting a timeframe for the reforms because so doing could reflect the resolve of the Government in introducing the reforms.

Of the three measures proposed in the amendment, I agree very much with Mr SIN Chung-kai on points (a) and (c), for they are the right courses of reform. In this connection, the measure of increasing government investment in information technology (IT) and improving the IT infrastructure proposed under point (a) will serve to enhance the competitiveness of Hong Kong as a financial centre in the international arena. Besides, I also agree that internet trading would become a trend in the future, and that the use of IT could help to reduce the costs of transaction, clearing arrangements, as well as information disclosure. As regards point (c), it urges the Government to adopt the measure of enhancing the education and protection of minority shareholders and investors. This is a measure of even greater importance to the local financial markets, in particular after they have come through the recent financial turmoil. Moreover, the sturdy growth of IT enterprises in Hong Kong is dependent upon the establishment of financing channels ranging from high-risk venture capital to venture board and so on in the capital market, but given the high-risk nature of these enterprises, the education and protection of minority shareholders and investors should all the more be enhanced.

In point (b), Mr SIN has referred to the measure of developing statutory regulations with emphasis on the disclosure of information, but I am afraid he is in a way putting the cart before the horse in putting forward such a proposal. Of course information disclosure is one of the key elements of perfect statutory regulations, and disclosing information instantly via electronic media has also become possible, yet information disclosure is still not an end in itself but a means to an end after all. The real end should be to safeguard the interests of investors, as well as enable the market to operate in a manner more in line with the principles of openness and fairness.

As such, I hold that the purposes of establishing a new market structure and formulating new statutory regulations should include at least the following three points:

(1) safeguarding the interests of investors in a more effective manner;

(2) enhancing the competitiveness of Hong Kong's financial markets in the international arena; and

(3) effectively preventing the market from being manipulated.

Although the last point "preventing the market from being manipulated" has always been overlooked, it is also highly important, in particular after we have had the frightening experience of dumping $120 billion into the market during the recent regional financial turmoil. If we are to safeguard the position of Hong Kong as an international financial centre, we must make sure that our market is highly transparent and open on the one hand, and well-equipped with the ability to resist attacks by international speculators on the other.

I so submit, Madam President.

MR NG LEUNG-SING (in Cantonese): Madam President, in view of the existing trend of development of the international financial markets, restructuring our securities and futures markets should be an important measure to safeguard Hong Kong's status as an international financial centre. The existing position of Hong Kong as the leading financial centre in the region is currently threntened by strong challenges from its competitors. In this connection, one very remarkable recent example is the direct competition between Singapore and Hong Kong in the Hang Seng Index Futures market. In order to attract more international investors, including those from Hong Kong, our competitors have embarked on a series of reforms relating to the organization and structure of their markets, the application of high technology in transaction and clearing systems, as well as other aspects. In the face of keen competition, the only way out for Hong Kong is to keep on improving itself. In this connection, Hong Kong should restructure the existing financial markets, with a view to enhancing the operating effectiveness of the markets, cutting back on the cost of transaction, optimizing the distribution of the monitoring functions, and thereby safeguarding the interests of investors. That way, the securities and futures markets of Hong Kong will be enabled to maintain a greater appeal among international competitors on the one hand, and attain enough power to brace themselves for challenges similar to that of the recent financial turmoil on the other.

In my opinion, the introduction of corresponding reforms in this regard is in line with not only the general trend but also the consensus of the market participants; as such, the reforms should be able to win support from market participants. On the other hand, in seeking to implement the reforms, the Government should respect and safeguard the lawful rights and interests acquired by these market participants under the existing legal structure and in accordance with the rules of the game of the market. The fair and reasonable valuation of the undertakings of the two exchanges is the most important part of the reform, for it would affect the proper distribution of rights and interest among the relevant parties after the merger. As such, the Government must conduct extensive consultation in this regard and maintain good communication with the sector, with a view to striking the best balance between the two exchanges in terms of the rights and interests of their members. Since the two exchanges are share-holding limited companies, the rights and interests of their shareholders are protected by the Companies Ordinance. Hence, the Government will find it difficult to implement the relevant reforms if it should fail to obtain the consensus of the majority of the market participants.

In addition, most of the existing market participants are veterans of the financial services industry, who have enormous experience with both the complicated mode of operation of the market and the operating mechanism of the industry. Hence, they should have a better understanding of the various reform-related issues, as well as the positive and negative impacts that the relevant measures may have on the market. For this reason, the concern they have expressed should by no means be perfunctorily viewed as being raised out of their own sectoral interests. Moreover, since members of the public have all along been clients of the market participants, a considerable part of the sectoral interests should in fact be regarded as the long-term common interests of the market participants and their clients. So, instead of overlooking the market participants' views and suggestions in this regard, the Government being the reformer should face up to the situation and seek to resolve the problems through consultation.

In regard to the proposed amendment, I feel that it has in a way taken the industry lightly, albeit it has given support to a strengthened market infrastructure. On the other hand, as it has particularly laid emphasis on the application of information technology in financial markets, it may as well be considered a constructive piece of proposal, and certainly a part of the reform exercise. Nevertheless, I believe that the original motion has been aimed at enabling this Council to speak on the direction of reform proposed by the Government. In putting forward various supplementary suggestions in support of the steady development of the financial markets, Honourable Members will naturally cover such areas as monitoring and control, modes of operation, software and hardware of the industry and so on. As such, the constructive suggestions made by Members should merit consideration by the Government. Speaking of suggestions, I must say that I have some reservations about the practice of indiscriminately turning one's own supplementary suggestions into an amendment.

I so submit, Madam President.

MR FUNG CHI-KIN (in Cantonese): Madam President, the motion put forward by the Hong Kong Progressive Alliance today is indeed timely, since a meeting of the committee co-ordinating the restructuring of the markets has been called for tomorrow morning by the Secretary for Financial Services in his capacity as the acting Financial Secretary. The committee will meet to discuss the substantive issues relating to the merging of the exchanges and clearing houses. Before expressing my views, I should like to declare an interest, for I am a securities and futures trader managing director.

I have all along advocated to merge the three clearing houses. Prior to the 1997 financial turmoil, I had already put forward this proposal when I was still a member of the Council of the Stock Exchange of Hong Kong Limited (SEHK). Actually, I had put forward the proposal at an even earlier date. Back in 1993 when I was serving on the boards of directors of both the SEHK and the Hong Kong Futures Exchange Limited (HKFE), my colleague Edgar CHENG and I had already urged the two exchanges to adopt the same clearing system. Yet in the end, the HKFE adopted the Swedish system while the SEHK adopted that of the German's. To the markets concerned, this was a very costly arrangement; and it was for this reason that we have urged for the adoption of a common clearing system.

Merging the three clearing houses could help to, first, enhance the efficiency of the clearing system; second, cut back on the cost of transaction; third, strengthen the risk management system; and fourth, monitor the capital flow as a whole, with a view to preventing manipulation on the one hand, and safeguarding the linked exchange rate on the other. Therefore, the merger of the three clearing houses should be implemented without a doubt.

As regards the proposal to merge the two exchanges, I have already given it my support earlier on. I can recall that I also spoke in support of the proposal on 25 March this year. Nevertheless, I still hope that the Financial Secretary or the Government could inform this Council of the reasons why the two exchanges must be merged; the matters that have to be handled after the merger; as well as the benefits that could only be enjoyed after the merger. Since the Financial Secretary has put forward the proposal to merge the two exchanges, members of the sector have all fully expressed their views, I am sure the Government should have apprehended them.

Actually, the views of the sector are largely related to two problems. Firstly, while at present we have only the right to trade in the exchanges but not the entitlement to dividends or bonuses, the shareholders of the new Exchange will be entitled to dividends and bonuses. But how is the new Exchange going to make profits? Besides, what are the promises that it has to make and what kinds of limitation will it be subject to?

It is said that the new Exchange will secure the necessary financing by listing and selling shares at the market. I went "limp" on hearing this. If the new Exchange should seek financing once after it has get listed, that means we will have to put in more money; what is more, the shares we have might at any time become the "ascent" shares, the shares that "ascent", the shares that worth a cent or two. What could we do then? We have already felt threatened before we could get a glimpse of the benefits.

The second one is the opening up of the right to trade. Traders, in particular traders with several broker's licences will find this a problem. In the past, because of the restrictions of the exchanges, traders had to acquire more licences if they were to do more business. But with the new rules of the game, it may be possible for one to do a lot of business with only one single licence. In that case, what should those traders who have or have bought a number of licences do to resolve their problems?

In addition, if the trading channel should be opened up in the future, and if the rates of commission should become negotiable, what kind of services could brokers provide for the investors then? Does it imply they have to cut back on their commission rates in a cut-throat competition? How are they going to stay in business? Earlier Mr SIN Chung-kai raised the question of whether there would still be brokers in 10 years. I could tell him that if things should develop in accordance with the existing arrangement, probably half of the brokers will have disappeared by next year. Perhaps there would still be brokers in the market, but they must be those larger broker's firms; if not, the Exchange must have become a broker itself.

As regards Internet trading, I consider it but an upgraded means of transaction which cannot dispense with an intermediary. Our worry is that while "infertile field attracts no tiller, once tilled, it attracts the field". If the right to trade should be opened up to the full, people will rush to do business in the market when the bull is there; but when the bear is roaming around, they will all be gone. Then, who is going to maintain the necessary services for the market? This is our grave concern, for we worry very much about the outcome of the opening up of the right to trade.

Although the Government has put forward the proposal for the merger, it has so far made no mention of the specific plans and ideas in this regard. This has added to the uncertainty over the prospect of the sector and caused the price of the broker's licence to plunge. While the volume of trade has risen recently, it is by no means comparable to that in the past. We always say that if things were like that in the past, we should be talking about some $20 billion-odd dollars instead of a mere $10 billion. We dare not increase our investment because we do not know what would happen to our share rights and the tight to trade in the future; we dare not increase our investment because we worry about how services could be improved in the future. I am saying this only to reflect the reason why members of the sector have harboured such fears, as well as to express our strong intention to participate in the formulation of the merger plan. I have all along been urging members of the sector on different occasions to give positive response to the Government by actively putting forward plans for the merger, with a view to entering into negotiations with the Government to produce a "win-win" proposal.

I do not think any person should be forced to accept the new arrangement, nor do I agree with the "take it or leave it" attitude — using the revocation of licences as a means of threat. In fact, a fast, simple and effective way to enable the Government to complete the planning work by September as scheduled is to find a long-term strategic investor to invest in the new Exchange. Since this investor expects to see the bull in the market, and is sailing in the same boat with us, we do not have to worry about issues such as licensing and Internet trading. Besides, this investor could justifiably "plant" some hands into the Exchange without arguing with the shareholders and brokers over the controlling right. In addition, the new Exchange could also be made into a quality blue chip; that way, not only better business performance and prospect could be ensured, the effectiveness of our investment could also be enhanced. Moreover, the capital invested by the strategic investor could dispel the brokers' concern that their shares will become "ascent" shares one day on the one hand, and "dismiss" the three financial consultants on the other. What is more, the presence of a strategic investor could also help to strengthen both the resources and the background of the exchange, thereby sharpening its edge to compete or collaborate with the neighbouring markets.

It is our hope that the Government, in playing the role as a matchmaker, will never force anyone to get married. Thank you, Madam President.

MISS CYD HO (in Cantonese): Madam President, the original motion today is actually very neutral. It urges the Government to face up to the worries of the industry, encourage the industry to participate in discussions on the reforms, seek consensus among various sectors of the community and so on. We have no reason to oppose these suggestions. In my view, Members should support them. As for the amendment, it makes some concrete suggestions. I believe the greatest difference is that it has a very clear direction. It supports the merging, demutualization and listing of the exchanges and clearing houses.

What I am more concerned about is, although many other financial centres have carried out similar mergers, one of the largest financial markets in the world, New York, has not. If we are to follow the trends in the international financial markets, which financial markets should we follow? Which financial markets should we take into account? Who are we competing with?

Actually, the Government has not provided many details on the merger plans. As the saying goes, "the devil is in the details". While the general direction might be neutral, what problems might arise in the details of implementation? Would power be highly centralized and would there be a lack of diverse competition? This is our concern. Fortunately, the amendment proposes that detailed consultation should be carried out. We hope that the Government will really carry out detailed consultation. If the results of consultation as well as the details do not have the support of the industry, I hope that this matter will be raised again so that we can discuss it objectively.

Madam President, I would like to add three points to the original motion and the amendment. First, whether in carrying out consultation or reforms, the Government, the market, the structures and the regulatory body must have transparency and accountability in order to keep the rules of the game fair and just. More importantly, over the past week or more precisely the recent few months, a lot of people have been extremely worried about the rule of law in Hong Kong. If international investors see that our Government does not comply with the judgment of the Court of Final Appeal and does not comply with the law, no matter how many reforms we carry out and no matter how diversified the securities market is and how many investment vehicles we introduce, they may not be able to attract international investors to our financial markets. Thank you, Madam President.

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

(No Member indicated a wish to speak)

PRESIDENT (in Cantonese): Mr Ambrose LAU, you may now speak on Mr SIN Chung-kai's amendment. You have up to five minutes to speak.

MR AMBROSE LAU (in Cantonese): Madam President, Mr SIN Chung-kai's amendment to my motion mixes up different issues and puts together issues belonging to different areas. Thus, it digresses from the theme of the "merging of the two exchanges and three clearing houses" in my motion. It both dilutes the subject of the motion and blurs its focus.

While Mr SIN Chung-kai's amendment begins by expressing support for the theme of my motion, the content of its items (a), (b) and (c) digresses from this theme. Item (a) is about "increasing its investment in information technology (IT) and improving the IT infrastructure to cater for the development of Internet trading and scripless market". Actually, the two exchanges are already doing this. This has nothing to do with the theme of the "merging of the two exchanges and three clearing houses".

Item (b) of Mr SIN's amendment is about "developing statutory regulations with emphasis on the disclosure of information, which should include requirements for additional information disclosure and the setting up of an electronic filing system". This also digresses from the central issue of the "merging of the two exchanges and three clearing houses" raised by me.

Item (c) of Mr SIN's amendment is about "enhancing the education and protection of minority shareholders and investors”. We have discussed this issue countless times in this Council ever since Hong Kong was hit by the financial turmoil in October 1997.

Mr SIN's amendment mentions the need to "perfect the reforms of the securities and futures markets". This is a very broad issue and involves countless number of questions. In the past, Members of this Council proposed many more comprehensive and thorough motions about reforming the financial market. However, Mr SIN merely makes three suggestions with regard to this big issue. This gives the Government and the public the impression that this Council is only concerned about these three suggestions now and ignores other more important improvement measures, including the invaluable suggestions made by various Members today.

While Mr SIN says that my motion lacks a clear direction, he does not specify what is not clear about it. I am told that many people consider that my direction and stand are too clear and that I am not tactful enough. As always, there is nothing ambiguous about the motion that I move today. Mr SIN said that my motion does not have any stand and that there is no mention of support for merger and reforms. My motion makes it clear at the outset "That this Council urges that in promoting reforms of the securities and futures markets, the Government must be......". Obviously, the premise to my motion is support for merger and reforms. There is no need to be redundant. However, if I treat Mr SIN to dinner in future, I will certainly say "I will treat you to dinner and pay for it too". Then Mr SIN will not say that I have not made myself clear.

My motion dares not talk about perfecting reforms, since it is a big issue. I only wish to raise some issues closely related to the theme of the reforms pertaining to the "merging of the two exchanges and the three clearing houses". This is also what various sectors of society and the Government focus on right now.

In Mr SIN's letter to Members on 3 May, he wrote that "I am amending Mr Ambrose LAU's motion chiefly because I wish to avoid overemphasis on the industry's interests". I do not think that this presents a true picture. My motion only mentions the industry in the phrases "face up to the worries of the industry, encourage the industry to participate in discussions on the reforms". In a major reform of the financial market, if we disregard the worries and views of the industry on which the success of the reform very much depends, how can we ensure the fairness, openness and transparency of the reform? As members of the legislature, we must strive to reflect the views and voices of the various sectors, rather than blocking them. Colleagues from the Democratic Party should understand this very well. By deleting the part of my motion about facing up to the worries of the industry and encouraging the industry to participate in discussions on the reforms, Mr SIN will make the industry feel that it is being discriminated against. Therefore, it warrants careful consideration.

Hence, I urge Honourable colleagues of the Legislative Council to support my motion and oppose Mr SIN's amendment.

PRESIDENT (in Cantonese): Mr Ambrose LAU, your time is up.

SECRETARY FOR FINANCIAL SERVICES (in Cantonese): Madam President, first of all, I would like to thank Mr Ambrose LAU for initiating today's motion debate, which has amply demonstrated Mr LAU's concern about and commitment to the development of the financial markets in Hong Kong. The timing could not have been better for Mr LAU to move this motion as it has enabled the Government to listen to the views of Legislative Council Members and the constituencies they represent at a critical juncture when the reforms are about to be launched. I am glad to see that Mr LAU's motion and Members' speeches unanimously support the Government's efforts to launch the reforms and improve the investment environment in Hong Kong and strengthen its competitiveness internationally, in order to strengthen our position as an international financial centre. I wish to express my gratitude for them.

The Financial Secretary announced in this year's Budget speech that the Government would adopt a "three-pronged" approach to reform the securities and futures markets in order to enhance Hong Kong's competitiveness, to meet the new challenges posed by the globalization of the international financial market and the development of information technology, and to satisfy the demand for financial products and services from investors who are becoming more mature.

These three reforms include: first, establishing a "Steering Committee on the Enhancement of the Financial Infrastructure" to be chaired personally by Mr Andrew SHENG, Chairman of the Securities and Futures Commission (SFC). The Committee will study the financial infrastructure in Hong Kong, including the proposals concerning the arrangement for integrating the clearing services on one platform, the development of straight-through processing and a fully scripless market. According to the timetable laid down by the Financial Secretary, this Committee will submit a report to him by mid-September this year on specific action plans and an implementation timetable.

Secondly, as pointed out by Mr Ronald ARCULLI, Mr Jasper TSANG and several other Members, we must streamline and reform existing market regulatory rules in the light of the trend in market development, including the new trend towards electronic trading, and existing international regulatory standards. We hope that the securities markets will be subject to proper regulation after the reform and provide adequate protection for investors. Some of the subjects have also been raised by Mr CHEUNG Man-kwong. For example, the SFC should define clearer regulatory objectives as a regulatory body, strengthen its supervisory and investigative powers, provide legal support for rules on listing and deal more effectively with market misconduct. Moreover, Mr Albert HO's concern about the regulatory problems arising from Internet trading and ever-changing and new products will also be addressed. While it is necessary to safeguard investors' interests, it is also important to leave adequate room for the markets to develop and to reduce the costs possibly incurred from overregulation. The legislation on these reforms will be based on the draft Securities and Futures Bill. The Financial Services Bureau and the SFC are actively working on the necessary legislation. This Bill is expected to be introduced to the Legislative Council by the end of 1999.

The third reform, which is of the biggest concern to the industry itself, calls for the demutualization, merging and listing of the exchanges and clearing houses. The backgrounds and objectives of this proposal were detailed in the policy paper issued by the Government on 3 March and I need not elaborate on them.

Mr LAU's motion urges us to "be impartial and open-minded, face up to the worries of the industry, encourage the industry to participate in discussions on the reforms, seek consensus among various sectors of the community" in promoting these reforms. I can assure Members that this is an important part of our policy objectives. We fully understand that these reforms cover a wide-ranging area and will have far-reaching implications on the markets. It is therefore necessary for the Government to have detailed plans and adequate consultation before implementing these reforms. I would like to stress that the Government is aware of the deep concern of the industry about these comprehensive and wide-ranging reforms. We have therefore created as many channels as possible to gather views of various sectors and to understand their concerns.

For example, after announcing the proposal concerning the demutualization and merging of the exchanges, the Financial Secretary held a briefing to listen to the views of the board and council members of the two exchanges and clearing houses on these measures and answer their questions. The Chairman of the SFC has also done a lot in this respect. My colleagues in the Financial Services Bureau and the SFC also explained on different occasions the backgrounds of this policy and the implementation timetable to the industry. In their speeches earlier, both Miss CHOY So-yuk and Mr HUI Cheung-ching, while supporting the relevant proposals, expressed worries and even questioned whether the Government had taken a heavy-handed approach by imposing its own view on the two exchanges and forcing them to accept the Government's agenda for the reforms. I would like to clarify the Government's position and that is, the merging process should be conducted in accordance with normal commercial and legal processes as far as possible. The two exchanges are moving in this direction and have appointed financial consultants to assist in the valuation of their undertakings. The Government is closely monitoring the conduct and progress of this process in the light of public interest and the overall interest of Hong Kong's financial markets. The Government and its consultants will play a supporting role only and the merging process will ultimately be embodied in the two schemes of arrangement to be voted by members of the two exchanges. As pointed out by Mr MA Fung-kwok, these schemes of arrangement must be agreed by a majority of members of the two exchanges. Therefore, I believe that the merger can be achieved only after it has secured the support of the industry itself.

We will also consult both the industry and the public on important policy proposals when drafting the new Securities and Futures Bill.

In fact, the Government has established three co-ordination committees on three areas of reform with participation of representatives of the industry and market practitioners in each of them, in order to ensure that different views are represented in the process of discussions. The committee co-ordinating the merging of the two exchanges will study the feasible modes in respect of trading rights and governance structure of the new company as mentioned by Members earlier, and will also listen to the industry on their concerns. The Government has promised to continue to actively communicate with the relevant organizations and to reflect their views in the implementation policy in the light of public interest and the overall interest of market development.

Mr LAU reminded us that the new market mechanism should create a favourable investment environment and more opportunities for investors. We are confident that the new trading company, which has clear objectives and is service-oriented and market-driven, flexible and efficient in decision-making and professionally run, will be able to create a more favourable investment environment, to reduce costs and risks, to increase cost-effectiveness, to diversify the products and to attract more market practitioners. It will also be beneficial to the formation of a cross-region alliance as championed by some Members.

Mr LAU also pointed out that "in keeping with the trends in the international financial markets, the Government should also formulate comprehensive and long-term development strategies with a view to enhancing the competitiveness of Hong Kong's financial services industry internationally." The Government has analysed in its paper issued on 3 March, among other things, the innovations and changes in international stock and futures markets, the globalization of markets and the diversification of products in line with the progress in information technology, keener competition between international markets and how Hong Kong should face up to these challenges. The paper also put forward solutions, which we think should be adopted, and specific proposals for implementing the market reforms and the timetable, coupled with the reform of the infrastructure and the innovation of regulatory rules as well as the announcement by the Chief Executive in his policy address that a review of human resources would be carried out in order to ensure that our market will have sufficient talents to meet tomorrow's needs. I believe that these measures of far-reaching implications will bring about a new look for Hong Kong's securities and futures markets as well as strengthen the competitiveness of Hong Kong's financial market internationally, thereby realizing what is demanded in Mr LAU's motion.

I would like to respond to Mr SIN Chung-kai's amendment.

First of all, I also wish to express thanks to Mr SIN for his unequivocal support of the Government's proposal for the merging, demutualization and listing of the exchanges and clearing houses. His amendment brings up an important aspect during the merging and demutualization of the exchanges and that is: How can the regulatory functions of the exchanges and the SFC be re-defined. The work in this respect is actually going on. Moreover, Mr SIN specifically put forward several measures aimed at perfecting the markets, which happen to be consistent with the Government's established policy. I now wish to respond in detail.

Firstly, regarding the proposal for the merger, we hope that the new company will have a modern governance structure to make its operation more market-driven and efficient while assuming certain public responsibilities. Therefore, the study and design of the new company's authorities and responsibilities as well as structure and operating regime are very complicated. A balance between public interest and the new company's commercial interest must be carefully struck. For example, with regard to regulatory functions, the SFC has held discussions with the two exchanges and the Hong Kong Securities Clearing Company Limited to study how to redistribute the market regulatory functions with a view to eliminating duplication of work and other shortcomings, as well as improving efficiency. The study covers four areas and four working groups have been set up subsequently. They have mostly completed their reports and are expected to put forward specific proposals within one month for consultation among the industry and relevant organizations.

Mr SIN expressed concern about the consultation arrangement in relation to the establishment of the new company, which, in my opinion, can be looked at from two angles. First, as pointed out by Mr Ronald ARCULLI, the two exchanges and their consultants should be left to formulate the operating and commercial details of the new company in accordance with normal commercial and legal procedures as far as practicable. We are of the view that it is not suitable to launch public consultation on this area. On the other hand, as I said earlier, the Government and the SFC would adequately consult the industry and the public when formulating the relevant policy. In addition, we have pointed out in our paper that legislation is required in respect of the reforms so that the procedures will be smooth, which include the establishment of the new company by way of legislation, and the definition of its functions, authorities and responsibilities and governance structure. Therefore, the Legislative Council will also be able to express views and make comments on the details of the relevant legislation. We believe that the reforms will receive the support of the majority of Members in this Council.

From a macro point of view, the thrust of Mr SIN's amendment is to increase the transparency of the regulatory measures and the market operation. The Government totally agrees with him. We also fully support the three main points of reform in his amendment. I am pleased to tell Members that the implementation of these main points has been contained in the current reform areas.

For example, one of the main tasks for the Steering Committee on the Enhancement of the Financial Infrastructure to be chaired by Mr SHENG, which I mentioned earlier, is to study how to increase investment in information technology (IT) and improve IT infrastructure to cater for the development of Internet trading and scripless market. As a matter of fact, enhancing Hong Kong's overall IT infrastructure has also been advocated repeatedly by the Chief Executive and the Financial Secretary as one of the important measures to enhance our competitiveness.

As to the study of setting up an electronic filing system, we will gradually implement such a system in the light of overseas experiences, such as the EDGAR System in the United States, as well as the development of IT in the local market. For instance, apart from an electronic system for licensees to submit papers, the SFC has joined with the Stock Exchange of Hong Kong to study on how to publicize information about listed companies on the Internet. The transmission, disclosure and retrieval of information on the Internet will be started with the future new companies market (the second board) and will be gradually extended to cover all listed companies. On a wider perspective, the Companies Registry is actively studying a new On-Line Public Search System, which will enable members of the public to access the Registry's database which contains information on about 500 000 companies, including their lists of directors, without having to personally come to the office of the Registry. This system is expected to be completed within this fiscal year. In the long run, the Companies Registry plans to have the entire process of company registration done in electronic form, including e-mail, electronic filing and so on. The Registry has set up a dedicated team for this purpose.

In addition, we will also move towards increasing the extent of the disclosure of information and putting in place a regulatory regime for the future, in order to ensure that investors have access to adequate information before making investment decisions. For instance, in the consultation conclusions on the proposed amendments to the Securities (Disclosure of Interests) Ordinance publicized last month, the SFC suggested that the extent of the disclosure of information should be increased so as to enhance market transparency while some outdated disclosure requirements should be removed to cater for market development. The relevant amendments will be contained in the composite Amendment Bill I referred to earlier. We plan to introduce this Amendment Bill to the Legislative Council by the end of this year. Furthermore, we will introduce a "Venture Capital Market" for new companies by the end of this year, with its proposed regulatory regime being emphasized on the disclosure of information as well.

Finally, strengthening education and protection of investors has always been and will continue to be the main task of both the Government and the SFC. As to the protection of investors, apart from legislative amendments and reforms mentioned earlier, when the structure of the new Exchange is established, careful consideration will be given to measures aimed at protecting investors, including the setting up of an effective compensation mechanism.

Madam President, Mr LAU's motion and Mr SIN's amendment are generally in line with the Government's objectives in respect of reforming the financial markets, namely, strengthening the competitiveness of Hong Kong's financial markets, improving the effectiveness of market regulatory regime and protecting the interests of investors. I wish to thank Mr LAU once again for initiating this motion debate, which has given us an opportunity to listen to Members' views, all of which will be carefully considered. We will also report the progress of the relevant work to the Financial Services Panel of the Legislative Council chaired by Mr LAU at its meetings in the future, as well as consult Members on certain specific proposals.

Members have reached a consensus at tonight's debate that the reforms we are discussing are of great urgency and we must seize this meteoric opportunity to launch the reforms swiftly. The Government has clearly demonstrated its determination. We hope that all the necessary legislative amendments will receive the full support of Members when they are submitted to the Legislative Council.

Thank you, Madam President.

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

(Members raised their hands)

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

(Members raised their hands)

Mr SIN Chung-kai rose to claim a division.

PRESIDENT (in Cantonese): Mr SIN Chung-kai has claimed a division. The division bell will ring for three minutes.

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

PRESIDENT (in Cantonese): Are there any queries? If not, I declare that voting shall now stop and the result will be displayed.

Functional Constituencies:

Mr James TIEN, Mr Michael HO, Mrs Selina CHOW, Mr CHEUNG Man-kwong, Mr SIN Chung-kai, Mr Howard YOUNG and Mr LAW Chi-kwong voted for the amendment.

Dr Raymond HO, Mr HUI Cheung-ching, Mr WONG Yung-kan, Mr Timothy FOK, Mr FUNG Chi-kin and Dr TANG Siu-tong voted against the amendment.

Mr Eric LI, LEE Kai-ming, Dr LUI Ming-wah, Mr Ambrose CHEUNG and Mr Bernard CHAN abstained.

Geographical Constituencies and Election Committee:

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

Mr Jasper TSANG, Mr LAU Kong-wah, Mr TAM Yiu-chung, Mr David CHU, Mr CHAN Kam-lam, Mr YEUNG Yiu-chung, Mr Ambrose LAU and Miss CHOY So-yuk voted against the amendment.

Mr NG Leung-sing, Prof NG Ching-fai and Mr MA Fung-kwok abstained.

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

THE PRESIDENT announced that among the Members returned by functional constituencies, 18 were present, seven were in favour of the amendment, six against it and five abstained; while among the Members returned by geographical constituencies through direct elections and by the Election Committee, 24 were present, 12 were in favour of the amendment, eight against it and three abstained. Since the question was not agreed by a majority of each of the two groups of Members present, she therefore declared that the amendment was negatived.

PRESIDENT (in Cantonese): Mr Ambrose LAU, you may now reply and you have three minutes 35 seconds out of your original 15 minutes.

MR AMBROSE LAU (in Cantonese): Madam President, I wish to thank Members for speaking with enthusiasm on my motion. Members have given a number of valuable, innovative and constructive comments on the merger of the stock and futures exchanges.

I hope the Government can take these views into account and give some serious considerations to them so that the merging hits success and the ultimate aim of my motion reached. That ultimate aim is to enhance the competitiveness of Hong Kong's financial services industry.

Madam President, I so submit.

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

(Members raised their hands)

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

(No hands raised)

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

NEXT MEETING

PRESIDENT (in Cantonese): I now adjourn the Council until 2.30 pm tomorrow.

Adjourned accordingly at twenty-three minutes past Ten o'clock.

Annex

WRITTEN ANSWER

Translation of written answer by the Secretary for Education and Manpower to Mr CHAN Kwok-keung's questtion to Question 3

We have consulted the Employees Retraining Board on this issue and learnt that the School of Professional and Continuing Education of the University of Hong Kong intended to run a refresher course on Chinese Medicine Dispensing for graduates of the Certificate course in Chinese Medicine Dispensing (Elementary Level). However, whether this plan will materialize or not depends on the response of the participants of the elementary course. Since the course only comes to an end in early September, we believe that no further decision could be made until some time later.