Establishment Subcommittee of the Finance Committee -- Minutes -- 13 Jan 99

LC Paper No. ESC33/98-99
(These minutes have been seen by the Administration)

Ref : CB1/F/3/2

Establishment Subcommittee of the Finance Committee of the Legislative Council

Minutes of the sixth meeting held at the Legislative Council Chamber on Wednesday, 13 January 1999, at 10:45 am

Members present :

Hon NG Leung-sing (Deputy Chairman)
Hon David CHU Yu-lin
Hon Michael HO Mun-ka
Dr Hon Raymond HO Chung-tai, JP
Dr Hon David LI Kwok-po, JP
Hon Margaret NG
Hon Mrs Selina CHOW LIANG Shuk-yee, JP
Hon CHEUNG Man-kwong
Hon Bernard CHAN
Hon CHAN Wing-chan
Hon Jasper TSANG Yok-sing, JP
Hon Howard YOUNG, JP
Hon YEUNG Yiu-chung
Hon CHOY So-yuk
Hon SZETO Wah

Members absent :

Dr Hon Philip WONG Yu-hong (Chairman)
Hon Cyd HO Sau-lan
Hon Eric LI Ka-cheung, JP
Hon MA Fung-kwok
Hon CHAN Kwok-keung
Dr Hon LEONG Che-hung, JP
Hon Andrew WONG Wang-fat, JP
Hon Emily LAU Wai-hing, JP

Public officers attending :

Mrs Carrie LAM, JP: Deputy Secretary for the Treasury
Mr D W PESCOD, JP: Deputy Secretary for the Civil Service
Mr Kevin HO, JP: Deputy Secretary for Transport
Mr K C LAU: Principal Assistant Secretary for Works
Mr K L CHUNG, JP: Deputy Director of Drainage Services
Mr Richard LUK: Principal Assistant Secretary for Planning, Environment and Lands
Mrs June LI: Assistant Director of Planning
Mr Philip CHOK: Deputy Secretary for Education and Manpower
Miss Erica NG: Principal Assistant Secretary for Education and Manpower
Mr S S KWONG: Executive Director, Employees Retraining Board
Mr Rafael HUI, GBS, JP: Secretary for Financial Services
Mrs Rebecca LAI, JP: Deputy Secretary for Financial Services

Clerk in attendance :

Miss Polly YEUNG: Chief Assistant Secretary (1)3

Staff in attendance :

Ms Pauline NG: Assistant Secretary General 1
Ms Anita SIT: Senior Assistant Secretary (1)8

As Dr Philip WONG was out of town, Mr NG Leung-sing, Deputy Chairman, chaired the meeting.

EC(98-99)17

Proposed -
re-organisation of the directorate structure;

creation of one permanent post of Administrative Officer Staff Grade C (D2); and

creation of one supernumerary post of Administrative Officer Staff Grade C (D2) for a period of two years
in the Transport Bureau of Government Secretariat to cope with the increasing workload and responsibilities arising from the major infrastructure developments

2. Regarding the need for the proposed re-structuring of the Transport Bureau (TB), the Deputy Secretary for Transport (DS/T) explained that two officers of Administrative Officer Staff Grade C (AOSGC) had been on loan from the Civil Service Bureau during the past two years to undertake the increasing workload arising from the planning and implementation of major railway and highway projects, as well as the conduct of strategic transport planning studies. Against this background, and particularly following the completion of Airport Core Programme (ACP) Projects which had in the past taken up 50% of the capacity of AOSGC, the Administration considered it necessary to strengthen the directorate support and re-organize the management structure of TB to bring about a clearer delineation of responsibilities and more equitable distribution of workload.

3. At members' request for further elucidation, DS/T elaborated that the present proposal to create two posts of AOSGC, one supernumerary and one permanent, would strengthen directorate support for the planning and steering of railway projects from the existing 1.5 officers to two officers. As TB would embark on a programme of major highways and was committed to strengthening the transport planning input by fully incorporating suitable transport facilities in the course of land use and territorial development planning, the current arrangement of one AOSGC officer being responsible for the key tasks of steering major highway projects and providing transport planning input into various planning studies could no longer cope with the increased work requirements. The present proposal would enable TB to designate an AOSGC officer for each of these two important areas of work. As regards the supernumerary directorate posts created in the works group of departments specifically for ACP projects, DS/T confirmed that these posts had lapsed or would lapse upon completion of the respective projects.

4. In response to Miss Margaret NG's concern about the compatibility of the proposed creation of additional posts with the Government's pledge to enhance productivity, DS/T stressed that the increase in TB's workload and responsibilities had arisen mainly from new policy initiatives and committed infrastructure projects. He re-affirmed that TB and its executive departments were committed to the target of attaining 5% productivity gains by year 2002/03, and this target had been fully taken into account in drawing up the present proposal.

5. Responding to enquiries about the progress of the Third Comprehensive Transport Study (CTS-3) and the Second Railway Development Study (RDS-2), which would be overseen by the proposed supernumerary AOSGC post, DS/T advised that CTS-3 would be completed in the first half of 1999 and RDS-2 by the end of 1999. On the basis of the studies, the Administration would develop blue-prints on the long-term transport infrastructure programme, hopefully by mid-2000. He pointed out that the proposed supernumerary post would lapse at an earlier date if the studies and the necessary follow-up actions could be completed earlier than scheduled.

6. The item was voted on and endorsed.

EC(98-99)20	Proposed deletion of one permanent post of Deputy Director of Accounting Services (D3) and the consequential re-organisation of the directorate structure in the Drainage Services Department upon completion of the residual work related to the closure of the Sewage Services Trading Fund and a review of the remaining duties

7. Mr CHAN Wing-chan questioned why the proposed deletion of the Deputy Director of Accounting Services (DDAS) post was submitted eight months after the closure of the Sewage Services Trading Fund (SSTF). The Principal Assistant Secretary for Works (PAS/W) explained that the input of DDAS was still required for a period of time upon the official closure of SSTF on 1 April 1998. His residual work included finalising the accounts and compiling the annual report of SSTF for submission to the Legislative Council (LegCo) and preparing the 1999/2000 estimates on sewage services to facilitate a smooth transition from the trading fund operation to the vote funding operation. DDAS vacated the post on 1 September 1998 and its residual responsibilities were taken over by the Deputy Secretary for Drainage Services (DD/DS) and the Assistant Director of Sewage Services (AD/SS). Thereafter, the Administration had taken some time to examine the effect of deleting the DDAS post on the directorate strength of the Drainage Services Department (DSD) having regard to the current and anticipated work requirements. It was decided that the DDAS post should be deleted in the first instance while directorate staffing in the DSD would be reviewed in about a year's time when the remaining stages of the Strategic Sewage Disposal Scheme (SSDS) and the housing infrastructure projects picked up momentum from 1999/2000 onwards. DD/DS added that the outcome of the review would be known towards the end of 1999.

8. Miss Margaret NG was concerned that the aforesaid review on directorate structure might result in additional requirement for staff which would offset the savings achieved under the present deletion of post. In response, PAS/W clarified that the Administration had no pre-conceived idea on the need or otherwise for additional posts and he assured members that the review would be conducted in the context of the Enhanced Productivity Programme of DSD.

9. Regarding the difference between the existing and revised duty schedules of AD/SS, DD/DS advised that as the planning work on the remaining stages of SSDS had been completed, item (4) in the revised job description would reflect more accurately the responsibility of AD/SS in this aspect. He further confirmed that items (6) and (7) of the revised job description were new duties arising from the implementation of the announced housing development programme and had not been transferred from the duty schedules of any existing officers.

10. The item was voted on and endorsed.

EC(98-99)21	Proposed retention of two supernumerary posts of one Government Town Planner (D2) and one Chief Town Planner (D1) in the Planning Department from 21 March 1999 to the date of the dissolution of the Land Development Corporation or 30 June 2000, whichever is the earlier, to cope with the workload associated with the urban renewal initiatives and projects of the Land Development Corporation

11. On the manpower requirements of the future Urban Renewal Authority (URA), the Principal Assistant Secretary for Planning, Environment and Lands (PAS/PEL) advised that such requirements would depend on the urban renewal strategy currently being finalised and the future mode of operation of the URA for which relevant legislation was being prepared for submission to the LegCo in mid-1999.

12. Referring to the work of the Urban Renewal Division (URD), which was headed by the Government Town Planner (GTP) in question over the past year, Mrs Selina CHOW enquired about the achievement made so far in streamlining the planning procedures with a view to shortening the time required for processing Land Development Corporation projects for submission to the Executive Council from 44 months to 18 months. In reply, the Assistant Director of Planning (AD/P) advised that URD had implemented the streamlined procedures in some of the 26 LDC projects submitted to the Secretary for Planning, Environment and Lands (SPEL) in mid-1997. As these projects were only halfway through the planning process, statistics on the total processing time saved would only be available at a later stage. She added that as there was delay on the part of LDC in submitting the development scheme proposals after the initial approval in principle was given by SPEL , it was unlikely that the target of completing the planning procedures within 18 months could be achieved for these projects.

13. Mrs Selina Chow said that it was necessary to obtain further information on the planning time saved in respect of the LDC projects for which URD had adopted the streamlined procedures in its planning input. She stressed that timing was a critical factor for urban renewal and thus the Administration should provide more information on the substantive achievement made in this regard to facilitate members' assessment of the cost-effectiveness of the proposed retention of the two supernumerary posts of GTP and Chief Town Planner in URD. In reply, AD/P advised that processing time somewhat longer than the 18 months originally envisaged would be required but the precise figures were not available at present.

14. In the absence of the required information and in view of members' concern about the effect of the URD's work on expediting the planning process, the Deputy Secretary for the Treasury (DS/Tsy) advised that the Administration would withdraw the proposal and re-submit it at the next meeting of this Subcommittee with more detailed information.

Admin.

15. The item was withdrawn by the Administration.

EC(98-99)22

Proposed retention of one supernumerary post of Senior Principal Executive Officer (D2) in the Education and Manpower Bureau of Government Secretariat up to 29 February 2000 to enable the continued secondment of a suitable officer to the Employees Retraining Board

16. The item was voted on and endorsed.

EC(98-99)18

Proposed creation of two permanent posts of one Administrative Officer Staff Grade B (D3) and one Administrative Officer Staff Grade C (D2) in the Financial Services Bureau of Government Secretariat to cope with the increasingly substantial and complex work in the wide range of policy areas handled, especially in respect of companies, insolvency, insurance, occupational retirement schemes and Mandatory Provident Fund schemes

17. In response to members' concerns and enquiries about the duties of the proposed permanent Principal Assistant Secretary (Retirement Schemes and Insurance) (PAS(RSI)) post in relation to the future Mandatory Provident Fund System (MPFS), the Secretary for Financial Services (SFS) confirmed the following -

as had been announced by the Chief Executive; the MPFS would be implemented in the year 2000;
all posts in the existing Mandatory Provident Fund Office (MPFO) under the Financial Services Bureau (FSB) would lapse on 1 April 1999; temporary secondment of some of the existing MPFO staff to the Mandatory Provident Fund Schemes Authority (MPFA) might be required but only as a transitional arrangement; and
after the formal establishment of the MPFA, FSB would act as the housekeeping bureau for the MPFA. The incumbent of the PAS(RSI) post would act as the point of contact between the Administration and the MPFA and handle all policy and legislative matters relating to MPFS. The most imminent tasks would be the introduction of subsidiary legislation for implementation of the MPFS Ordinance and for prescribing scheme charges.

18. Mr Michael HO commented that the discussion paper had not provided sufficient information, particularly with regard to the work on the areas of insurance and retirement schemes, to justify the proposed new posts.

19. On the policy area of insurance, SFS advised that apart from the growth in quantitative terms, the insurance industry was becoming increasingly sophisticated with the launch of new insurance products which had features akin to other financial products. This development had necessitated greater involvement of FSB in co-ordinating various regulatory bodies to ensure that there was no overlapping of functions or slippage in supervision, at the same time ensuring that the regulatory framework did not become unduly restrictive for industry participants. Furthermore, the Commissioner of Insurance was considering an examination system aimed at more effective monitoring of the service standard of insurance agents. SFS reiterated that the present strength of one Deputy Secretary for Financial Services (DS/FS) and an Assistant Secretary could not cope with the increasing complexity and volume of work relating to insurance and retirement schemes. To ensure that these two policy areas would be given adequate and sustained policy input, it was necessary to create the proposed PAS(RSI) post on a permanent basis.

20. Regarding the work on company law reform and insolvency administration, which would form the main thrust of the duties of the proposed DS(FS)2 post on the companies schedule, SFS explained that the comprehensive review of the Companies Ordinance was an enormous on-going exercise which would have profound implications on the corporate regime in Hong Kong. This exercise would require considerable high level policy input and steer from FSB over numerous critical issues. Moreover, the Standing Committee on Company Law Reform (SCCLR) met every month and made a number of recommendations each year. However, owing to inadequate directorate capacity, FSB had not made great progress in following up the recommendations of SCCLR over the past few years and so far, had only studied recommendations up to 1996. In this connection, SFS undertook to provide a list of the recommendations of SCCLR over the years for members' reference.

Admin.

21. As regards insolvency administration, SFS advised that the Law Reform Commission would complete the final report of the comprehensive review of the winding up provisions in the Companies Ordinance shortly. It was expected that the recommendations would call for a fundamental review of the existing insolvency administration system, including the functions of the Official Receiver's Office. Having regard to the increased complexity and profound implications of the aforesaid portfolio of work, the Administration considered it necessary to create a dedicated DS(FS) post to spearhead the work.

22. Mr Michael HO concurred with the need for a permanent PAS(RSI) post to oversee the work on retirement schemes and insurance. However, he disagreed that the work requirements for company law reform and insolvency administration would sustain in the long term to justify the creation of the DS(FS)2 post on a permanent basis. He pointed out that upon completion of the comprehensive review of the Companies Ordinance, the workload of the Companies section might be substantially reduced. As the proposed DS(FS)2 post was already underpinned by a permanent PAS(Companies) to oversee company law reform and insolvency administration, and by the proposed permanent PAS(RSI) who would oversee work on retirement schemes and insurance, Mr HO considered it more reasonable to create the DS(FS)2 post on a supernumerary basis at this point of time and review the situation in two years' time. Mr HO's view was echoed by Mr CHEUNG Man-kwong, who recalled that a supernumerary PAS post had already been created recently in FSB to assist the existing DS(FS) to oversee the work on financial infrastructure. Mr CHEUNG stressed that it was of utmost importance to consider critically the need for additional posts especially those at such a senior level.

23. To elucidate the need for the proposed DS(FS)2 post on a permanent basis, SFS advised that work on the policy areas of banking, securities and financial infrastructure had increased substantially over the past 18 months and would take up all the capacity of the existing DS(FS) in the long term. He remarked that the various work programmes detailed in the paper were not solely targeted at dealing with the aftermath of the Asian financial turmoil. Instead, the Administration had to reckon with the emergence of a new competitive economic environment and re-examine the market systems and regulatory framework, and more importantly, to make long term commitments to improving the financial infrastructure. Hence, it would be necessary to create the DS(FS)2 post on a permanent basis so that the existing DS(FS)1 could concentrate on the policy areas of banking, securities and financial infrastructure, and that other key policy areas of companies, retirement schemes and insurance would be provided with adequate and sustained policy steer.

24. While appreciating the substantial increase in workload of the existing DS(FS) on the banking and securities areas in the wake of the Asian financial turmoil, Mr YEUNG Yiu-chung expressed concern that the increase in workload might fall steadily as and when the financial markets were stabilised. Miss CHOY So-yuk agreed with the need for the DS(FS)2 post but considered it more appropriate to create the post on a supernumerary basis in the first place to allow for greater flexibility in the light of changing circumstances.

25. In reply to Mr SZETO Wah's concern on whether a supernumerary, instead of a permanent, DS(FS)2 post would affect the commitment and quality of work of the officer concerned, SFS confirmed that the work requirements on the officer would be the same irrespective of the supernumerary/permanent status of the post. He however reiterated that if the existing DS(FS) was not relieved of the work on some of the programme areas under her schedule, the quality of FSB's assistance to the Financial Secretary (FS) might be adversely affected.

26. Miss Margaret NG commented that the timing of the various work requirements was critical for assessing the permanent need for the DS(FS)2 post. In this regard, SFS advised that within the coming six months, FSB would need to take forward various initiatives, including the introduction of the composite Securities and Futures Bill, the scrutiny of forthcoming proposals from the Securities and Futures Commission on reforming the securities and futures markets, and following up the consultancy report on the comprehensive review of the Companies Ordinance as well as the Law Reform Commission's final report on the comprehensive review of the winding up provisions in the Companies Ordinance. He envisaged that even with the creation of the proposed two posts under the present proposal, FSB would still be stretched to the limit in handling an increasingly complex programme of work in the coming years.

27. On the timing for creation of the proposed two posts, SFS and DS/Tsy advised that in view of the urgent work requirements, the two posts would be created immediately upon the approval of the Finance Committee, notwithstanding that provision had not been made in the 1998-99 Estimates to meet the costs of the DS(FS)2 post. In this connection, DS/Tsy reiterated the pledge that the Finance Bureau had scrutinized each staffing proposal very carefully bearing in mind the current economic climate and the Administration's commitment to enhancing productivity. She assured members that creation of posts would not be recommended unless there were adequate justifications. Having thoroughly assessed the operational requirements in conjunction with the need to maintain Hong Kong's competitive position under the new global and regional economic order, the Administration considered the two proposed posts in the FSB fully justified. She added that creation of the proposed permanent DS(FS)2 post would help demonstrate to the business world Hong Kong's long-term commitment to strengthening its financial market systems and regulatory framework.

28. Mr Bernard CHAN expressed support for the proposal partly on account of the need to strengthen the regulation of insurance companies and agents and to provide more policy input for the development of the insurance industry. In reply to his enquiry about the relationship between FSB and the Hong Kong Monetary Authority (HKMA), SFS stressed that FSB and HKMA had no direct reporting relationship. Both the Chief Executive of HKMA and SFS were answerable to FS. While HKMA had its own statutory powers and forwarded proposals on banking and currency matters to FS directly, FSB would provide further comments on HKMA's proposals involving legislation and policy issues. Moreover, as the Chief Executive of HKMA was not a principal official of the SAR Government, FS and SFS would normally account for policies and decisions on behalf of HKMA at meetings of the Legislative Council. As FSB was responsible for introducing legislative proposals relating to the financial services sector, it would work closely with HKMA in drawing up legislative proposals on banking and currency matters.

29. Michael HO stated that whilst Members of the Democratic Party were in support of the Administration's initiatives in strengthening Hong Kong's financial market systems and regulatory framework, they were not convinced of the need for the permanent creation of an additional DS(FS) post at this stage. He suggested that the proposal in respect of the DS(FS)2 post be revised to provide for the creation of a supernumerary DS(FS) post for two years.

30. In view of members' concerns and comments and with the concurrence of SFS, DS/Tsy advised that the Administration would modify the proposal in respect of the DS(FS)2 post as follows -

creation of one supernumerary post of Administrative Officer Staff Grade B (D3) in FSB to oversee the Companies section and the Retirement Schemes and Insurance section for two years with effect from the date of approval of the Finance Committee." The proposal with regard to the creation of a permanent AOSGC post, to be designated as PAS(RSI), remained unchanged.

31. The item as modified in paragraph 30 was voted on and endorsed.

32. The Subcommittee was adjourned at 12:25 pm.

Legislative Council Secretariat
3 February 1999