Legislative Council of the Hong Kong Special Administrative Region

OFFICIAL RECORD OF PROCEEDINGS
Wednesday, 29 May 1996
The Council met at half-past Two o'clock

MEMBERS PRESENT

THE PRESIDENT
THE HONOURABLE ANDREW WONG WANG-FAT, O.B.E., J.P.

THE HONOURABLE ALLEN LEE PENG-FEI, C.B.E., J.P.

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

DR THE HONOURABLE DAVID LI KWOK-PO, O.B.E., LL.D. (CANTAB), J.P.

THE HONOURABLE NGAI SHIU-KIT, O.B.E., J.P.

THE HONOURABLE SZETO WAH

THE HONOURABLE LAU WONG-FAT, O.B.E., J.P.

THE HONOURABLE EDWARD HO SING-TIN, O.B.E., J.P.

THE HONOURABLE RONALD JOSEPH ARCULLI, O.B.E., J.P.

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

DR THE HONOURABLE EDWARD LEONG CHE-HUNG, O.B.E., J.P.

THE HONOURABLE ALBERT CHAN WAI-YIP

THE HONOURABLE CHEUNG MAN-KWONG

THE HONOURABLE CHIM PUI-CHUNG

THE HONOURABLE FREDERICK FUNG KIN-KEE

THE HONOURABLE MICHAEL HO MUN-KA

DR THE HONOURABLE HUANG CHEN-YA, M.B.E.

THE HONOURABLE EMILY LAU WAI-HING

THE HONOURABLE LEE WING-TAT

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

THE HONOURABLE FRED LI WAH-MING

THE HONOURABLE HENRY TANG YING-YEN, J.P.

THE HONOURABLE JAMES TO KUN-SUN

DR THE HONOURABLE SAMUEL WONG PING-WAI, M.B.E., F.Eng., J.P.

DR THE HONOURABLE PHILIP WONG YU-HONG

DR THE HONOURABLE YEUNG SUM

THE HONOURABLE HOWARD YOUNG, J.P.

THE HONOURABLE ZACHARY WONG WAI-YIN

THE HONOURABLE CHRISTINE LOH KUNG-WAI

THE HONOURABLE JAMES TIEN PEI-CHUN, O.B.E., J.P.

THE HONOURABLE LEE CHEUK-YAN

THE HONOURABLE CHAN KAM-LAM

THE HONOURABLE CHAN WING-CHAN

THE HONOURABLE CHAN YUEN-HAN

THE HONOURABLE ANDREW CHENG KAR-FOO

THE HONOURABLE PAUL CHENG MING-FUN

THE HONOURABLE CHENG YIU-TONG

DR THE HONOURABLE ANTHONY CHEUNG BING-LEUNG

THE HONOURABLE CHEUNG HON-CHUNG

THE HONOURABLE CHOY KAN-PUI, J.P.

THE HONOURABLE DAVID CHU YU-LIN

THE HONOURABLE ALBERT HO CHUN-YAN

THE HONOURABLE IP KWOK-HIM

THE HONOURABLE LAU CHIN-SHEK

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

DR THE HONOURABLE LAW CHEUNG-KWOK

THE HONOURABLE LAW CHI-KWONG

THE HONOURABLE LEE KAI-MING

THE HONOURABLE LEUNG YIU-CHUNG

THE HONOURABLE BRUCE LIU SING-LEE

THE HONOURABLE LO SUK-CHING

THE HONOURABLE MOK YING-FAN

THE HONOURABLE MARGARET NG

THE HONOURABLE NGAN KAM-CHUEN

THE HONOURABLE SIN CHUNG-KAI

THE HONOURABLE TSANG KIN-SHING

DR THE HONOURABLE JOHN TSE WING-LING

THE HONOURABLE MRS ELIZABETH WONG CHIEN CHI-LIEN, C.B.E., I.S.O., J.P.

THE HONOURABLE LAWRENCE YUM SIN-LING

MEMBER ABSENT

THE HONOURABLE MRS SELINA CHOW LIANG SHUK-YEE, O.B.E., J.P.
PUBLIC OFFICERS ATTENDING

MR MICHAEL SUEN MING-YEUNG, C.B.E., J.P.
CHIEF SECRETARY

MR RAFAEL HUI SI-YAN, J.P.
FINANCIAL SECRETARY

THE HONOURABLE JEREMY FELL MATHEWS, C.M.G., J.P.
ATTORNEY GENERAL

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

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

MR PETER LAI HING-LING, J.P.
SECRETARY FOR SECURITY

MISS DENISE YUE CHUNG-YEE, J.P.
SECRETARY FOR TRADE AND INDUSTRY

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

MRS LESSIE WEI CHUI KIT-YEE, J.P.
SECRETARY FOR FINANCIAL SERVICES

MR LEO KWAN WING-WAH, J.P.
SECRETARY FOR ECONOMIC SERVICES

MRS RITA LAU NG WAI-LAN, J.P.
SECRETARY FOR RECREATION AND CULTURE

MRS STELLA HUNG KWOK WAI-CHING, J.P.
SECRETARY FOR HOME AFFAIRS

CLERKS IN ATTENDANCE

MR RICKY FUNG CHOI-CHEUNG, SECRETARY GENERAL

MISS PAULINE NG MAN-WAH, ASSISTANT SECRETARY GENERAL

MR RAY CHAN YUM-MOU, ASSISTANT SECRETARY GENERAL

PAPERS

The following papers were laid on the table pursuant to Standing Order 14(2):

Subject

Subsidiary LegislationL.N. No.
Residential Care Homes (Elderly Persons) (Appeal Board) (Amendment) Regulation 1996198/96

Sewage Services (Sewage Charge) (Amendment) Regulation 1996199/96

Sewage Services (Trade Effluent Surcharge)(Amendment) Regulation 1996200/96

Import and Export (Fees) (Amendment) Regulation 1996202/96

Pounds Fees (Amendment) Regulation 1996203/96

Animals and Plants (Protection of Endangered Species) Ordinance (Amendment of Schedule 4) Order 1996204/96

Plant (Importation and Pest Control) (Fees)(Amendment) Regulation 1996205/96

Public Health (Animals and Birds) (Amendment)Regulation 1996206/96

Dairies (Amendment) Regulation 1996207/96

Public Health (Animals and Birds) (Exhibitions)(Amendment) Regulation 1996208/96

Public Health (Animals) (Boarding Establishment)(Amendment) Regulation 1996209/96

Public Health (Animals and Birds) (Animal Traders)(Amendment) Regulation 1996210/96

Public Health (Animals) (Riding Establishment)(Amendment) Regulation 1996211/96

Official Languages (Alteration of Text) (Air Pollution Control Ordinance) Order 1996212/96

Designation of Museums (Amendment) Order 1996213/96

Public Health and Municipal Services Ordinance (Civic Centres) (Amendment of Thirteenth Schedule) Order 1996214/96

Public Health and Municipal Services Ordinance (Public Markets) (Designation and Amendment of Tenth Schedule) (No. 2) Order 1996215/96

Public Health and Municipal Services Ordinance (Public Pleasure Grounds) (Amendment of Fourth Schedule) (No. 3) Order 1996216/96

Hawker (Urban Council) (Amendment) Bylaw 1996217/96

Slaughterhouses (Urban Council) (Amendment) Bylaw 1996218/96

Declaration of Markets in the Urban Council Area (Amendment) (No. 2) Declaration 1996219/96

Chinese Permanent Cemeteries (Amendment)Rules 1996220/96

Shipping and Port Control Regulations (Amendment of Seventh Schedule)(No. 2) Notice 1996221/96

Medical Registration (Amendment) Ordinance 1996 (7 of 1996) (Commencement) Notice 1996222/96

Merchant Shipping (Safety) (Amendment) Ordinance 1996 (20 of 1996) (Commencement) Notice 1996223/96

Official Languages (Authentic Chinese Text)(Hong Kong Treasury Bills (Local) Ordinance) order(C)51/96

Official Languages (Authentic Chinese Text)(Hong Kong Treasury Bills (London) Ordinance) Order(C) 52/96

Official Languages (Authentic Chinese Text)(Air Pollution Control Ordinance) Order(C) 53/96

Sessional Papers 1995-96

No.83─Revisions of the 1995-96 Estimates approved by the Urban Council during the fourth quarter of the 1995-96 financial year
No. 84─Regional Council
Revised list of works annexed to the Regional Council's Revised Estimates of Revenue and Expenditure for 1995-96

ORAL ANSWERS TO QUESTIONS

"One airline one route" Policy

1.MISS CHRISTINE LOH asked: Mr President, it was announced recently that an agreement had been reached between the Swire Group, CITIC Pacific and China National Aviation Corporation (CNAC) over the ownership rights of Dragon Air and Cathay Pacific Airways. In view of the fact that prior to the announcement of the agreement, the Government had been entertaining an application by CNAC for a licence to launch an airline in Hong Kong, will the Government inform this Council whether the Government has changed the "one airline one route" policy and whether, in principle, any qualified party may obtain such a licence?

SECRETARY FOR ECONOMIC SERVICES: Mr President, the China National Aviation Corporation (Hong Kong) Limited (CNAC(HK)) has applied for an Air Operators Certificate (AOC), not a licence. An AOC may be granted if the Government is satisfied that the company is competent to secure the safe operation of aircraft for the flights intended. It is essentially a mark of technical competence to operate a public transport service.

By itself, an AOC will not enable a company to operate air services to and from Hong Kong. To operate a scheduled service, a company would further require:

  1. a licence for a specific route granted by the Air Transport Licensing Authority (ATLA), an independent body established under the Air Transport (Licensing of Air Services) Regulations; and

  2. designation by the Government as a Hong Kong airline which can operate on the route under the relevant air services agreement.

The processing of CNAC(HK)'s application for an AOC has no direct bearing on the Government's "one airline one route" policy which concerns designation of airline for a specific route under the relevant air services agreement. An AOC and an ATLA licence are prerequisites to designation, but designation of an airline by the Government is not automatic.

International air transport is highly regulated. Hong Kong airlines can only operate in the international arena and, unlike many of their competitors, do not enjoy the financial benefits of a large domestic market. Furthermore, they face keen competition. Our bilateral agreements with other governments normally permit their airlines to exercise reciprocal traffic rights on the same routes as our airlines. Moreover, on the major international routes, such as those between Asia and North America, there is frequently additional competition from other third country airlines. Therefore, the most heavily travelled routes to and from Hong Kong have long been well served by several established operators.

In these circumstances, the Government has decided that as a general rule, and subject to the existing arrangements, in any given case, designation in respect of routes available to Hong Kong will be limited to one airline per route. The airline first licensed by ATLA for a route will normally be the one to be designated for that route.

Designation of more than one Hong Kong airline on any route would be considered only in circumstances where it was judged that more competition was needed in the public interest and that the traffic was sufficient to sustain a substantial operation by more than one Hong Kong airline. It would not be in Hong Kong's trade and other economic interests to see internecine competition by Hong Kong airlines weakening their overall ability to compete against foreign airlines.

There are other circumstances where the Government is prepared to exercise flexibility. They are:

  1. where one airline has been licensed and designated for a route, but for commercial reasons chooses not to or ceases to serve that route or does not operate services on it satisfactorily, consideration would be given to designating another licensed airline in place of the first; and

  2. where the primary roles of the airlines licensed to serve a route are different. There are routes, such as Hong Kong/Manchester and Hong Kong/Osaka where, in addition to an airline primarily carrying passengers, there is a second designated airline carrying air freight only.

In conclusion, the general rule of "one airline one route" has served Hong Kong well up to the present and the Government sees no reason for change.

MISS CHRISTINE LOH: Mr President, would the Secretary nevertheless agree that the CNAC's application for an AOC was the first step to operate air services?

Furthermore, that CNAC, a Chinese national regulator, is now a major shareholder in a local airline, that is, Dragon Air, might be perceived as backdoor nationalization and may be perceived negatively in terms of the economic autonomy of the Special Administrative Region (SAR) in future?

SECRETARY FOR ECONOMIC SERVICES: Mr President, as I explained earlier in my main reply, application for an AOC is one of the steps required in order to operate an airline.

On the second question, Dragon Air has a long-established identity as a Hong Kong airline. We do not believe that this will change in the future following the reshuffling of the ownership. Dragon Air will still be managed and controlled from within Hong Kong and we understand that its management and operational policies will remain largely unchanged.

PRESIDENT: Miss Christine LOH, are you claiming that your question has not been answered?

MISS CHRISTINE LOH: Yes.

PRESIDENT: Which part?

MISS CHRISTINE LOH: Mr President, because I asked that CNAC is the national regulator and therefore a state body which has now bought a major share holding in a local company, whether this is something that the Government is concerned about at all in terms of longer-term policy? The answer just seems to be that since it is supposed to continue operation out of Hong Kong then it is not. I am not sure that that is a sufficient answer.

SECRETARY FOR ECONOMIC SERVICES: Here we are talking about the CNAC or rather the China Navigation Aviation (Hong Kong) Limited which is a Hong Kong based company.

DR HUANG CHEN-YA (in Cantonese): Mr President, an airline may fail to provide sufficient flights due to inadequate fleet size; or, for the purpose of maintaining a high fare level, an airline may be reluctant to increase the passenger capacity of its flight, thus making it difficult for passengers to buy air tickets at lower prices. This is neither conducive to the interests of the local economy, nor is it fair to consumers.

PRESIDENT: Please come to your question, Dr HUANG.

DR HUANG CHEN-YA (in Cantonese): Yes, Mr President. In what ways does the Government's policy of "one airline one route" protect the interests of consumers and the economy of Hong Kong? What are the benchmarks adopted by the Government to assess the adequacy of the services provided? And, can the said policy continue to remain viable?

SECRETARY FOR ECONOMIC SERVICES: Mr President, as I mentioned earlier in my main reply, international air transport is highly regulated and highly competitive. The routes which our Hong Kong airlines operate are also operated by many other countries' airlines. So we think that competition is sufficient and keen enough to keep the airlines efficient and the service satisfactory.

DR HUANG CHEN-YA (in Cantonese): The Secretary has not answered my question, which is about the benchmarks adopted by the Government to establish that the policy concerned is correct. The Government simply cannot consider the problem solved just by saying that the routes concerned are also operated by other airlines. My question is: under the policy of "one airline one route", what benchmarks does the Government use to establish the adequacy or otherwise of the services provided by a certain company?

PRESIDENT: Dr HUANG Chen-ya, this is not a debate. You have made your point.

SECRETARY FOR ECONOMIC SERVICES: Mr President, we must uphold the general philosophy of letting the market determine, so we think that competition is the best way to ensure efficient and satisfactory service and we believe that the present arrangement allows sufficient competition in the aviation field.

MR ALBERT CHAN (in Cantonese): Mr President, on the licensing of airlines, the Government mentions in its main reply that if an airline licensed and designated for a route does not operate services on it satisfactorily, consideration would be given to designating another licensed airline in its place. Will the Government inform us how it has been monitoring operating airlines on their satisfactory performance since the implementation of the policy of "one airline one route"? What criteria does the Government use to determine whether the services of the airlines concerned are satisfactory? And, has the Government ever issued any warning to or withdrawn the licences of airline companies on the ground that the services provided are not satisfactory?

SECRETARY FOR ECONOMIC SERVICES: Mr President, we have no precedent of withdrawing or replacing a licence on the grounds of unsatisfactory service.

PRESIDENT: Mr CHAN, are you claiming that your question has not been answered?

MR ALBERT CHAN (in Cantonese): Mr President, besides withdrawal of airline licences, my question also seeks to ask the Government whether it has issued any warning to any airline. And, what criteria does the Government use to monitor the services provided by the airlines concerned? The main reply of the Government mentions the point of unsatisfactory services. How does the Government define " not satisfactory"?

SECRETARY FOR ECONOMIC SERVICES: Mr President, we have not, so far as I am aware, issued any warning to any airline company.

As I said earlier on, international air transport is highly competitive. We believe that allowing the market to play out is the best way to ensure the best interests of the consumer.

DR LEONG CHE-HUNG: Mr President, as a result obviously of CNAC purchasing a big stake in Dragon Air, there are concerns in the Hong Kong community. Will the Administration seek clarification from the Chinese Government that it has no intention of influencing the future Hong Kong SAR to intensify or perpetuate monopolistic operations within the Hong Kong economy through which vested interests may unduly profit at the expense of the community as a whole?

SECRETARY FOR ECONOMIC SERVICES: Mr President, as I replied to an earlier question, Dragon Air which now has CNAC (Hong Kong) as one of its owners will remain a Hong Kong airline. We see no signs of any threat to Hong Kong's aviation autonomy.

DR LEONG CHE-HUNG: I do not think the question has been answered. I am talking about conflicts of interest, through this instance to take away community interests, not the taking out of Dragon Air as a Hong Kong airline.

SECRETARY FOR ECONOMIC SERVICES: I am sorry, Mr President, I do not follow the question.

DR LEONG CHE-HUNG: Perhaps, Mr President, you will allow me to ask the question again. Obviously there are concerns because of CNAC taking over a major share in Dragon Air. Now will the Hong Kong Government seek the Chinese Government's assurance that it has no intention of influencing the future Hong Kong SAR to intensify or perpetuate monopolistic operations within the Hong Kong economy, through which vested interests can unduly profit at the expense of the community as a whole?

SECRETARY FOR ECONOMIC SERVICES: Mr President, here we are talking about ownership of Dragon Air and part of the ownership is now CNAC (Hong Kong). As I said earlier on, Dragon Air will remain a Hong Kong airline in respect of these ownership changes and it will continue to be subject to Hong Kong's technical standards, rules and regulations as well as our policies governing civil aviation. I see no relationship between the change of ownership in Dragon Air and the policy of the Chinese administration.

DR DAVID LI: Mr President, how can the Secretary justify his statement that "one airline one route" can encourage competition in the market place? I fail to see how.

PRESIDENT: Although framed in the form of a question, it is not really a question.

DR DAVID LI: Mr President, I would like the Secretary to inform the Council how he can justify that "one airline one route" actually enhances competition? I fail.

PRESIDENT: That is even worse. You are making a statement now. Next supplementary.

MR LEE WING-TAT (in Cantonese): It has been reported that CNAC, a Chinese capital-owned corporation, has purchased a major stake in Dragon air at 70% of the market price, and this has given it an influential position in the airline. Will the Secretary tell us whether this kind of transaction is in line with the interests of the small shareholders, particularly because CNAC is a Chinese capital-owned corporation and this transaction gives people a strong feeling that it is politically motivated? Is this transaction conducive to the interests of consumers? Why cannot the corporation sell its shares to consumers at 70% of the market price? Mr President, I want to buy some as well.

SECRETARY FOR ECONOMIC SERVICES: Mr President, the deal between the companies is a commercial transaction. I do not propose to comment. But I want to point out that Dragon Air is an unlisted company.

MR HOWARD YOUNG: Mr President, perhaps I can try to ask a question which Dr David LI has not been successful in asking.

With regard to the "one airline one route" policy, according to tourism figures, the Hong Kong/Manila route has seven airlines and 68 flights a week, Singapore has six airlines and 88 flights a week and Bangkok has eight airlines and 104 flights a week. Now would the Government be willing to produce figures for Members showing on most of Hong Kong's major routes whether there is only one airline or two airlines or more than two airlines, and how many flights, so that we can see for ourselves whether the current policy is encouraging competition or whether it has produced monopolies?

SECRETARY FOR ECONOMIC SERVICES: Yes, we are prepared to produce the figures. (Annex)

MR SIN CHUNG-KAI (in Cantonese): Mr President, in relation to the Secretary's reply to the Honourable LEE Wing-tat's question, we of course know that CNAC is not a listed company, but several listed companies, namely, the Canthy Pacific Airways and the Swire Group, were involved in this transaction. Have the interests of the small shareholders of these listed companies been adequately taken care of? Will the department concerned conduct any investigation into this case?

PRESIDENT: I am afraid this is outside the scope of the original question.

OFFICIAL RECORD OF PROCEEDINGS
Wednesday, 29 May 1996
The Council met at half-past Two o'clock

MEMBERS PRESENT

THE PRESIDENT
THE HONOURABLE ANDREW WONG WANG-FAT, O.B.E., J.P.

THE HONOURABLE ALLEN LEE PENG-FEI, C.B.E., J.P.

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

DR THE HONOURABLE DAVID LI KWOK-PO, O.B.E., LL.D. (CANTAB), J.P.

THE HONOURABLE NGAI SHIU-KIT, O.B.E., J.P.

THE HONOURABLE SZETO WAH

THE HONOURABLE LAU WONG-FAT, O.B.E., J.P.

THE HONOURABLE EDWARD HO SING-TIN, O.B.E., J.P.

THE HONOURABLE RONALD JOSEPH ARCULLI, O.B.E., J.P.

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

DR THE HONOURABLE EDWARD LEONG CHE-HUNG, O.B.E., J.P.

THE HONOURABLE ALBERT CHAN WAI-YIP

THE HONOURABLE CHEUNG MAN-KWONG

THE HONOURABLE CHIM PUI-CHUNG

THE HONOURABLE FREDERICK FUNG KIN-KEE

THE HONOURABLE MICHAEL HO MUN-KA

DR THE HONOURABLE HUANG CHEN-YA, M.B.E.

THE HONOURABLE EMILY LAU WAI-HING

THE HONOURABLE LEE WING-TAT

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

THE HONOURABLE FRED LI WAH-MING

THE HONOURABLE HENRY TANG YING-YEN, J.P.

THE HONOURABLE JAMES TO KUN-SUN

DR THE HONOURABLE SAMUEL WONG PING-WAI, M.B.E., F.Eng., J.P.

DR THE HONOURABLE PHILIP WONG YU-HONG

DR THE HONOURABLE YEUNG SUM

THE HONOURABLE HOWARD YOUNG, J.P.

THE HONOURABLE ZACHARY WONG WAI-YIN

THE HONOURABLE CHRISTINE LOH KUNG-WAI

THE HONOURABLE JAMES TIEN PEI-CHUN, O.B.E., J.P.

THE HONOURABLE LEE CHEUK-YAN

THE HONOURABLE CHAN KAM-LAM

THE HONOURABLE CHAN WING-CHAN

THE HONOURABLE CHAN YUEN-HAN

THE HONOURABLE ANDREW CHENG KAR-FOO

THE HONOURABLE PAUL CHENG MING-FUN

THE HONOURABLE CHENG YIU-TONG

DR THE HONOURABLE ANTHONY CHEUNG BING-LEUNG

THE HONOURABLE CHEUNG HON-CHUNG

THE HONOURABLE CHOY KAN-PUI, J.P.

THE HONOURABLE DAVID CHU YU-LIN

THE HONOURABLE ALBERT HO CHUN-YAN

THE HONOURABLE IP KWOK-HIM

THE HONOURABLE LAU CHIN-SHEK

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

DR THE HONOURABLE LAW CHEUNG-KWOK

THE HONOURABLE LAW CHI-KWONG

THE HONOURABLE LEE KAI-MING

THE HONOURABLE LEUNG YIU-CHUNG

THE HONOURABLE BRUCE LIU SING-LEE

THE HONOURABLE LO SUK-CHING

THE HONOURABLE MOK YING-FAN

THE HONOURABLE MARGARET NG

THE HONOURABLE NGAN KAM-CHUEN

THE HONOURABLE SIN CHUNG-KAI

THE HONOURABLE TSANG KIN-SHING

DR THE HONOURABLE JOHN TSE WING-LING

THE HONOURABLE MRS ELIZABETH WONG CHIEN CHI-LIEN, C.B.E., I.S.O., J.P.

THE HONOURABLE LAWRENCE YUM SIN-LING

MEMBER ABSENT

THE HONOURABLE MRS SELINA CHOW LIANG SHUK-YEE, O.B.E., J.P.
PUBLIC OFFICERS ATTENDING

MR MICHAEL SUEN MING-YEUNG, C.B.E., J.P.
CHIEF SECRETARY

MR RAFAEL HUI SI-YAN, J.P.
FINANCIAL SECRETARY

THE HONOURABLE JEREMY FELL MATHEWS, C.M.G., J.P.
ATTORNEY GENERAL

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

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

MR PETER LAI HING-LING, J.P.
SECRETARY FOR SECURITY

MISS DENISE YUE CHUNG-YEE, J.P.
SECRETARY FOR TRADE AND INDUSTRY

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

MRS LESSIE WEI CHUI KIT-YEE, J.P.
SECRETARY FOR FINANCIAL SERVICES

MR LEO KWAN WING-WAH, J.P.
SECRETARY FOR ECONOMIC SERVICES

MRS RITA LAU NG WAI-LAN, J.P.
SECRETARY FOR RECREATION AND CULTURE

MRS STELLA HUNG KWOK WAI-CHING, J.P.
SECRETARY FOR HOME AFFAIRS

CLERKS IN ATTENDANCE

MR RICKY FUNG CHOI-CHEUNG, SECRETARY GENERAL

MISS PAULINE NG MAN-WAH, ASSISTANT SECRETARY GENERAL

MR RAY CHAN YUM-MOU, ASSISTANT SECRETARY GENERAL

PAPERS

The following papers were laid on the table pursuant to Standing Order 14(2):

Subject

Subsidiary LegislationL.N. No.
Residential Care Homes (Elderly Persons) (Appeal Board) (Amendment) Regulation 1996198/96

Sewage Services (Sewage Charge) (Amendment) Regulation 1996199/96

Sewage Services (Trade Effluent Surcharge)(Amendment) Regulation 1996200/96

Import and Export (Fees) (Amendment) Regulation 1996202/96

Pounds Fees (Amendment) Regulation 1996203/96

Animals and Plants (Protection of Endangered Species) Ordinance (Amendment of Schedule 4) Order 1996204/96

Plant (Importation and Pest Control) (Fees)(Amendment) Regulation 1996205/96

Public Health (Animals and Birds) (Amendment)Regulation 1996206/96

Dairies (Amendment) Regulation 1996207/96

Public Health (Animals and Birds) (Exhibitions)(Amendment) Regulation 1996208/96

Public Health (Animals) (Boarding Establishment)(Amendment) Regulation 1996209/96

Public Health (Animals and Birds) (Animal Traders)(Amendment) Regulation 1996210/96

Public Health (Animals) (Riding Establishment)(Amendment) Regulation 1996211/96

Official Languages (Alteration of Text) (Air Pollution Control Ordinance) Order 1996212/96

Designation of Museums (Amendment) Order 1996213/96

Public Health and Municipal Services Ordinance (Civic Centres) (Amendment of Thirteenth Schedule) Order 1996214/96

Public Health and Municipal Services Ordinance (Public Markets) (Designation and Amendment of Tenth Schedule) (No. 2) Order 1996215/96

Public Health and Municipal Services Ordinance (Public Pleasure Grounds) (Amendment of Fourth Schedule) (No. 3) Order 1996216/96

Hawker (Urban Council) (Amendment) Bylaw 1996217/96

Slaughterhouses (Urban Council) (Amendment) Bylaw 1996218/96

Declaration of Markets in the Urban Council Area (Amendment) (No. 2) Declaration 1996219/96

Chinese Permanent Cemeteries (Amendment)Rules 1996220/96

Shipping and Port Control Regulations (Amendment of Seventh Schedule)(No. 2) Notice 1996221/96

Medical Registration (Amendment) Ordinance 1996 (7 of 1996) (Commencement) Notice 1996222/96

Merchant Shipping (Safety) (Amendment) Ordinance 1996 (20 of 1996) (Commencement) Notice 1996223/96

Official Languages (Authentic Chinese Text)(Hong Kong Treasury Bills (Local) Ordinance) order(C)51/96

Official Languages (Authentic Chinese Text)(Hong Kong Treasury Bills (London) Ordinance) Order(C) 52/96

Official Languages (Authentic Chinese Text)(Air Pollution Control Ordinance) Order(C) 53/96

Sessional Papers 1995-96

No.83─Revisions of the 1995-96 Estimates approved by the Urban Council during the fourth quarter of the 1995-96 financial year
No. 84─Regional Council
Revised list of works annexed to the Regional Council's Revised Estimates of Revenue and Expenditure for 1995-96

ORAL ANSWERS TO QUESTIONS

"One airline one route" Policy

1.MISS CHRISTINE LOH asked: Mr President, it was announced recently that an agreement had been reached between the Swire Group, CITIC Pacific and China National Aviation Corporation (CNAC) over the ownership rights of Dragon Air and Cathay Pacific Airways. In view of the fact that prior to the announcement of the agreement, the Government had been entertaining an application by CNAC for a licence to launch an airline in Hong Kong, will the Government inform this Council whether the Government has changed the "one airline one route" policy and whether, in principle, any qualified party may obtain such a licence?

SECRETARY FOR ECONOMIC SERVICES: Mr President, the China National Aviation Corporation (Hong Kong) Limited (CNAC(HK)) has applied for an Air Operators Certificate (AOC), not a licence. An AOC may be granted if the Government is satisfied that the company is competent to secure the safe operation of aircraft for the flights intended. It is essentially a mark of technical competence to operate a public transport service.

By itself, an AOC will not enable a company to operate air services to and from Hong Kong. To operate a scheduled service, a company would further require:

  1. a licence for a specific route granted by the Air Transport Licensing Authority (ATLA), an independent body established under the Air Transport (Licensing of Air Services) Regulations; and

  2. designation by the Government as a Hong Kong airline which can operate on the route under the relevant air services agreement.

The processing of CNAC(HK)'s application for an AOC has no direct bearing on the Government's "one airline one route" policy which concerns designation of airline for a specific route under the relevant air services agreement. An AOC and an ATLA licence are prerequisites to designation, but designation of an airline by the Government is not automatic.

International air transport is highly regulated. Hong Kong airlines can only operate in the international arena and, unlike many of their competitors, do not enjoy the financial benefits of a large domestic market. Furthermore, they face keen competition. Our bilateral agreements with other governments normally permit their airlines to exercise reciprocal traffic rights on the same routes as our airlines. Moreover, on the major international routes, such as those between Asia and North America, there is frequently additional competition from other third country airlines. Therefore, the most heavily travelled routes to and from Hong Kong have long been well served by several established operators.

In these circumstances, the Government has decided that as a general rule, and subject to the existing arrangements, in any given case, designation in respect of routes available to Hong Kong will be limited to one airline per route. The airline first licensed by ATLA for a route will normally be the one to be designated for that route.

Designation of more than one Hong Kong airline on any route would be considered only in circumstances where it was judged that more competition was needed in the public interest and that the traffic was sufficient to sustain a substantial operation by more than one Hong Kong airline. It would not be in Hong Kong's trade and other economic interests to see internecine competition by Hong Kong airlines weakening their overall ability to compete against foreign airlines.

There are other circumstances where the Government is prepared to exercise flexibility. They are:

  1. where one airline has been licensed and designated for a route, but for commercial reasons chooses not to or ceases to serve that route or does not operate services on it satisfactorily, consideration would be given to designating another licensed airline in place of the first; and

  2. where the primary roles of the airlines licensed to serve a route are different. There are routes, such as Hong Kong/Manchester and Hong Kong/Osaka where, in addition to an airline primarily carrying passengers, there is a second designated airline carrying air freight only.

In conclusion, the general rule of "one airline one route" has served Hong Kong well up to the present and the Government sees no reason for change.

MISS CHRISTINE LOH: Mr President, would the Secretary nevertheless agree that the CNAC's application for an AOC was the first step to operate air services?

Furthermore, that CNAC, a Chinese national regulator, is now a major shareholder in a local airline, that is, Dragon Air, might be perceived as backdoor nationalization and may be perceived negatively in terms of the economic autonomy of the Special Administrative Region (SAR) in future?

SECRETARY FOR ECONOMIC SERVICES: Mr President, as I explained earlier in my main reply, application for an AOC is one of the steps required in order to operate an airline.

On the second question, Dragon Air has a long-established identity as a Hong Kong airline. We do not believe that this will change in the future following the reshuffling of the ownership. Dragon Air will still be managed and controlled from within Hong Kong and we understand that its management and operational policies will remain largely unchanged.

PRESIDENT: Miss Christine LOH, are you claiming that your question has not been answered?

MISS CHRISTINE LOH: Yes.

PRESIDENT: Which part?

MISS CHRISTINE LOH: Mr President, because I asked that CNAC is the national regulator and therefore a state body which has now bought a major share holding in a local company, whether this is something that the Government is concerned about at all in terms of longer-term policy? The answer just seems to be that since it is supposed to continue operation out of Hong Kong then it is not. I am not sure that that is a sufficient answer.

SECRETARY FOR ECONOMIC SERVICES: Here we are talking about the CNAC or rather the China Navigation Aviation (Hong Kong) Limited which is a Hong Kong based company.

DR HUANG CHEN-YA (in Cantonese): Mr President, an airline may fail to provide sufficient flights due to inadequate fleet size; or, for the purpose of maintaining a high fare level, an airline may be reluctant to increase the passenger capacity of its flight, thus making it difficult for passengers to buy air tickets at lower prices. This is neither conducive to the interests of the local economy, nor is it fair to consumers.

PRESIDENT: Please come to your question, Dr HUANG.

DR HUANG CHEN-YA (in Cantonese): Yes, Mr President. In what ways does the Government's policy of "one airline one route" protect the interests of consumers and the economy of Hong Kong? What are the benchmarks adopted by the Government to assess the adequacy of the services provided? And, can the said policy continue to remain viable?

SECRETARY FOR ECONOMIC SERVICES: Mr President, as I mentioned earlier in my main reply, international air transport is highly regulated and highly competitive. The routes which our Hong Kong airlines operate are also operated by many other countries' airlines. So we think that competition is sufficient and keen enough to keep the airlines efficient and the service satisfactory.

DR HUANG CHEN-YA (in Cantonese): The Secretary has not answered my question, which is about the benchmarks adopted by the Government to establish that the policy concerned is correct. The Government simply cannot consider the problem solved just by saying that the routes concerned are also operated by other airlines. My question is: under the policy of "one airline one route", what benchmarks does the Government use to establish the adequacy or otherwise of the services provided by a certain company?

PRESIDENT: Dr HUANG Chen-ya, this is not a debate. You have made your point.

SECRETARY FOR ECONOMIC SERVICES: Mr President, we must uphold the general philosophy of letting the market determine, so we think that competition is the best way to ensure efficient and satisfactory service and we believe that the present arrangement allows sufficient competition in the aviation field.

MR ALBERT CHAN (in Cantonese): Mr President, on the licensing of airlines, the Government mentions in its main reply that if an airline licensed and designated for a route does not operate services on it satisfactorily, consideration would be given to designating another licensed airline in its place. Will the Government inform us how it has been monitoring operating airlines on their satisfactory performance since the implementation of the policy of "one airline one route"? What criteria does the Government use to determine whether the services of the airlines concerned are satisfactory? And, has the Government ever issued any warning to or withdrawn the licences of airline companies on the ground that the services provided are not satisfactory?

SECRETARY FOR ECONOMIC SERVICES: Mr President, we have no precedent of withdrawing or replacing a licence on the grounds of unsatisfactory service.

PRESIDENT: Mr CHAN, are you claiming that your question has not been answered?

MR ALBERT CHAN (in Cantonese): Mr President, besides withdrawal of airline licences, my question also seeks to ask the Government whether it has issued any warning to any airline. And, what criteria does the Government use to monitor the services provided by the airlines concerned? The main reply of the Government mentions the point of unsatisfactory services. How does the Government define " not satisfactory"?

SECRETARY FOR ECONOMIC SERVICES: Mr President, we have not, so far as I am aware, issued any warning to any airline company.

As I said earlier on, international air transport is highly competitive. We believe that allowing the market to play out is the best way to ensure the best interests of the consumer.

DR LEONG CHE-HUNG: Mr President, as a result obviously of CNAC purchasing a big stake in Dragon Air, there are concerns in the Hong Kong community. Will the Administration seek clarification from the Chinese Government that it has no intention of influencing the future Hong Kong SAR to intensify or perpetuate monopolistic operations within the Hong Kong economy through which vested interests may unduly profit at the expense of the community as a whole?

SECRETARY FOR ECONOMIC SERVICES: Mr President, as I replied to an earlier question, Dragon Air which now has CNAC (Hong Kong) as one of its owners will remain a Hong Kong airline. We see no signs of any threat to Hong Kong's aviation autonomy.

DR LEONG CHE-HUNG: I do not think the question has been answered. I am talking about conflicts of interest, through this instance to take away community interests, not the taking out of Dragon Air as a Hong Kong airline.

SECRETARY FOR ECONOMIC SERVICES: I am sorry, Mr President, I do not follow the question.

DR LEONG CHE-HUNG: Perhaps, Mr President, you will allow me to ask the question again. Obviously there are concerns because of CNAC taking over a major share in Dragon Air. Now will the Hong Kong Government seek the Chinese Government's assurance that it has no intention of influencing the future Hong Kong SAR to intensify or perpetuate monopolistic operations within the Hong Kong economy, through which vested interests can unduly profit at the expense of the community as a whole?

SECRETARY FOR ECONOMIC SERVICES: Mr President, here we are talking about ownership of Dragon Air and part of the ownership is now CNAC (Hong Kong). As I said earlier on, Dragon Air will remain a Hong Kong airline in respect of these ownership changes and it will continue to be subject to Hong Kong's technical standards, rules and regulations as well as our policies governing civil aviation. I see no relationship between the change of ownership in Dragon Air and the policy of the Chinese administration.

DR DAVID LI: Mr President, how can the Secretary justify his statement that "one airline one route" can encourage competition in the market place? I fail to see how.

PRESIDENT: Although framed in the form of a question, it is not really a question.

DR DAVID LI: Mr President, I would like the Secretary to inform the Council how he can justify that "one airline one route" actually enhances competition? I fail.

PRESIDENT: That is even worse. You are making a statement now. Next supplementary.

MR LEE WING-TAT (in Cantonese): It has been reported that CNAC, a Chinese capital-owned corporation, has purchased a major stake in Dragon air at 70% of the market price, and this has given it an influential position in the airline. Will the Secretary tell us whether this kind of transaction is in line with the interests of the small shareholders, particularly because CNAC is a Chinese capital-owned corporation and this transaction gives people a strong feeling that it is politically motivated? Is this transaction conducive to the interests of consumers? Why cannot the corporation sell its shares to consumers at 70% of the market price? Mr President, I want to buy some as well.

SECRETARY FOR ECONOMIC SERVICES: Mr President, the deal between the companies is a commercial transaction. I do not propose to comment. But I want to point out that Dragon Air is an unlisted company.

MR HOWARD YOUNG: Mr President, perhaps I can try to ask a question which Dr David LI has not been successful in asking.

With regard to the "one airline one route" policy, according to tourism figures, the Hong Kong/Manila route has seven airlines and 68 flights a week, Singapore has six airlines and 88 flights a week and Bangkok has eight airlines and 104 flights a week. Now would the Government be willing to produce figures for Members showing on most of Hong Kong's major routes whether there is only one airline or two airlines or more than two airlines, and how many flights, so that we can see for ourselves whether the current policy is encouraging competition or whether it has produced monopolies?

SECRETARY FOR ECONOMIC SERVICES: Yes, we are prepared to produce the figures. (Annex)

MR SIN CHUNG-KAI (in Cantonese): Mr President, in relation to the Secretary's reply to the Honourable LEE Wing-tat's question, we of course know that CNAC is not a listed company, but several listed companies, namely, the Canthy Pacific Airways and the Swire Group, were involved in this transaction. Have the interests of the small shareholders of these listed companies been adequately taken care of? Will the department concerned conduct any investigation into this case?

PRESIDENT: I am afraid this is outside the scope of the original question.

British National (Overseas) Passport Applications Necessitated by Naturalization

2.MR HOWARD YOUNG asked: Mr President, with regard to the large number of applications by holders of Certificate of Identity (CI) for naturalization which will lead to an increase in the number of applications for British National (Overseas) (BN(O)) passports, will the Government inform this Council of the steps which it will take:

  1. to ensure that there will be no time gap between a successful applicant's surrender of a CI and receipt of a BN(O) passport; and

  2. to preserve the validity of visas endorsed in a CI when its holder has acquired a BN(O) passport?

SECRETARY FOR SECURITY: Mr President,

  1. A Certificate of Identity (CI) is issued to a person who does not hold, and is unable to obtain, a national passport or other travel documents. It is therefore the normal practice to require a naturalized British Dependent Territories citizen (BDTC) to surrender his CI for cancellation at the time when a certificate of naturalization is issued to him. Application for BN(O) passports may be made at the time of issue of naturalization certificates, and the normal processing time for a BN(O) passport application is 15 to 17 working days. Priority in processing BN(O) passport application will be accorded to those who have urgent travel needs.

    However, in the light of the large number of applications for naturalization received recently, and in view of the restriction on persons newly naturalized as BDTCs to apply for a BN(O) passport within three months of their successful naturalization, we have reviewed our normal practice on the cancellation of CIs. Starting 1 July this year, successful naturalization applicants will not, repeat not, be required to surrender their CIs when they collect the naturalization certificates. Instead, they will only have to surrender their CIs when they collect their BN(O) passports. This will ensure that there is no time gap between the surrender of a CI and the receipt of a BN(O) passport.

  2. As regards the validity of visas in the CI, it will be up to the holder, after collecting this BN(O) passport, to approach the relevant consulate/commission to have a visa transferred to the passport if he, now a BN(O) passport holder, still requires a visa for that particular country of destination.

MR HOWARD YOUNG: Mr President, I thank the Secretary for his helpful reply in the second paragraph. But as regards validity of visas, since there are countries which do require visa for both CI and BN(O), namely, Australia and the United States, and these countries do issue multi-visit visas for which the validity of up to one year or, in the case of the United States even up to 10 years, is it possible for the Government to consider, when they actually cancel the CI's, to help the applicants save time and effort to re-apply in a very short period for a new visa by perhaps adopting the practice of binding together two different travel documents or at least not cancelling the particular page on which there is a valid visa on the old document?

SECRETARY FOR SECURITY: Mr President, we would be and are doing or rendering a service to bind two passports together to facilitate the extension of visa on the old passport or to bind two CIs together to facilitate the extension of the visa on the old CI. But because of the fact that a person who has naturalized as a British Dependent Territory Citizen and holds a BN(O) passport is disqualified from holding a CI, we do not cross-link a passport and a CI.

MR BRUCE LIU (in Cantonese): Mr President, what measures has the Government adopted to inform all applicants of this new and unconventional arrangement? In case the applicant has surrendered his CI but has not yet obtained his BN(O) Passport, can he claim back his CI for temporary use until he obtains his BN(O) Passport?

SECRETARY FOR SECURITY (in Cantonese): Mr President, let me explain that under the normal practice, which is also the existing practice, the Immigration Department will retrieve the applicant's CI when the Department issues to him a certificate of naturalization. This is still the prevailing practice. The applicant may apply for a BN(O) Passport as soon as he obtains his certificate of naturalization. The processing time is about 15 to 17 days in general. Under normal circumstances, no major problem should arise. If individual applicants must go overseas on business or for sight-seeing because of urgent reasons within these 10-odd days, the Immigration Department may consider according priority to their applications. In case of real and extreme emergency, the processing work may also be completed on the same day. But then, why do we want to adopt a new measure? We are all aware that before the deadline on 31 March, we received a large number of naturalization applications. During the four weeks before 31 March alone, we have already received almost 190 000 applications. First, we estimate that we have to finish processing these 100 000 to 200 000 naturalization applications within six months; second, we foresee that from 1 July onwards, the first batch of certificates of naturalization can be issued to applicants. As I have explained, this new practice, which refers to the practice of not requiring the applicant to surrender his CI upon the issue of his certificate of naturalization, is supposed to commence on 1 July. In the meantime, the existing practice will be maintained because for the time being, there will not be a sudden surge of successful naturalization applicants who can immediately apply for BN(O) Passports. In view of this, we do not want to implement the new measure at the moment. Before we start to introduce the new measure on 1 July, we will certainly identify suitable means to inform successful naturalization applicants who can apply for BN(O) Passports.

MR HENRY TANG: Mr President, in the Secretary's main reply, he says that Certificates of Identity will have to be surrendered when applicants collect their BN(O) passports, and then he went on to say that relevant visas can be transfered from one documentation to another. But after the CI has been surrendered, how can an applicant prove to the Consulate General that he still has that visa?

SECRETARY FOR SECURITY: Mr President, the Certificate of Identify has to be surrendered on the issue of a BN(O) at the latest because the person is, under the law, no longer eligible to hold such a document.

As regards the question of visa, it would be up to the particular country, through their consulate or commission, to decide in the light of the circumstances how they would extend a visa which has previously been issued to a CI holder and whether they will need to issue a new one to the BN(O) passport holder.

PRESIDENT: I think the question was whether or not the CI could be surrendered for cancellation and then the cancelled copy returned to the person concerned so that the visa could be transferred to the BN(O) passport?

SECRETARY FOR SECURITY: If there is such a need, then we would consider such an arrangement.

PRESIDENT: Mr Henry TANG, are you claiming that your question has not been answered?

MR HENRY TANG: Yes, Mr President.

PRESIDENT: Even after my assistance?

MR HENRY TANG: Yes, Mr President, I understand the current practice is, if you renew a BN(O) passport then your old BN(O) passport is cancelled, but returned to you, therefore you can take your old passport to the consulate and have the visa transferred to the new one. So essentially, the CI arrangement is different from the renewal of the BN(O) passport. Can the Secretary just clarify that because my original question was asking that point actually?

SECRETARY FOR SECURITY: Mr President, we do at the moment cross-link, if necessary, two British passports. We do at the moment cross-link two CIs, but under current arrangements, we cannot cross-link a CI and a BN(O) passport. Under the normal current arrangements, we would retrieve a CI upon the applicant's naturalization being successful and the issue of a certificate of naturalization to him. However, I have just said that if there are cases where the consulate insists that an old CI must be produced in order to facilitate a person's application for a visa on his BN(O) passport, then we are willing to consider whether or not a cancelled CI can be made available for that purpose. However, I am not, at the moment, aware of such cases.

MR JAMES TO (in Cantonese): Mr President, I understand that part (a) of the Secretary's reply is a new arrangement which allow applicants to retain and use their CIs although certificates of naturalization have been issued to them. However, will this give rise to another problem, that is, if they have obtained the nationality of BN(O) but are still going abroad with CIs, will that mislead other countries or regions as regards their genuine nationality and identity status, resulting in confusion concerning their nationality in case of accidents, which may then give rise to undesirable consequences?

SECRETARY FOR SECURITY (in Cantonese): Mr President, this problem should not arise because, in the main, the time gap involved is very short. If we allow these people to continue holding their CIs, and if we find it necessary when we draw up the relevant detailed arrangements, we may hold discussions with the consulates/commissions of the relevant countries in Hong Kong, so that those people of Hong Kong who continue to travel abroad with CIs will not experience any troubles.

PRESIDENT: Mr James TO, are you claiming that your question has not been answered?

MR JAMES TO (in Cantonese): The Secretary has not answered my question, that is, will this mislead other countries as regards the genuine nationality and identity status of this group of Hong Kong people? Will the Government then allow these people to mislead other countries into believing that they are holders of CIs only?

SECRETARY FOR SECURITY: I do not believe that should be the case, Mr President, because while I have said in the main reply that this is the general approach which we would adopt, because it would be impossible, given the large number of applications for naturalization involved, for us to stick rigidly to the normal practice. Nonetheless, when we work out the detailed arrangements for this new practice, we will ensure that there is no misleading of the nationality of the person concerned.

MR HOWARD YOUNG (in Cantonese): Mr President, in the first place, I know that the Government of Hong Kong's normal practice of cancelling old travel documents is to cut away a corner of or pinch a hole on the surrendered CI or the old passport while the pages on which there are valid visas will be retained. This is the existing practice. Secondly, many people may need to know, in future, how many times they have travelled to particular places in the past. In view of the above two points, will the Government consider dealing with the surrender and cancellation of travel documents in accordance with the established practice so that the pages on which there are valid visas will be retained after the old documents are cancelled and the old documents will then be given back to the holders for the purpose of allowing the holders to keep record without having to bind the two documents together?

SECRETARY FOR SECURITY: Mr President, the short answer is yes.

Funds Allocation by Hong Kong Arts Development Council

3.MRS ELIZABETH WONG asked: Mr President, will the Government inform this Council what mechanism is put in place to monitor the allocation of funds by the Hong Kong Arts Development Council?

SECRETARY FOR RECREATION AND CULTURE: Mr President, the Hong Kong Arts Development Council (ADC) is a statutory body set up under its own Ordinance on 1 June 1995. Under section 5 of the Hong Kong Arts Development Council Ordinance (the Ordinance), the ADC is empowered to formulate and implement proposals in regard to the promotion and broad development of the arts, and to disburse grants to organizations and individuals for the planning, development and promotion of the arts in any way it considers appropriate.

As an independent statutory body, with almost half of its members nominated by the arts community, and having its own employed staff, the ADC enjoys a high degree of autonomy in determining how its funds should be used to meet the needs of the development of the arts.

The Government monitors the work of the ADC through the following means:

  1. The Secretary for Recreation and Culture is an ex-officio member of the ADC; and he or his representative attends all meetings of the ADC. Members of the Recreation and Culture Branch also participate in the work of the ADC through their membership of the three boards under the ADC, that is, the Strategic Development Board, the Resource Management Board and the Artform Board.

  2. Section 11 of the Ordinance requires the ADC to submit to the Government a programme of its proposed activities and estimates of its income and expenditure.

  3. Section 15 of the Ordinance requires the ADC to submit, after the close of each financial year, a report on its activities and affairs for that year, a statement of the accounts for that year, and an auditor's report on the accounts, to the Governor for tabling before the Legislative Council.

  4. Section 14 of the Ordinance empowers the Director of Audit to carry out examinations into the economy, efficiency and effectiveness with which the ADC has used its funds in carrying out its functions, powers and duties. The Director of Audit may report to the Legislative Council the results of such examinations.

MRS ELIZABETH WONG: Mr President, I am grateful for the Secretary's comprehensive reply but in the second paragraph of her reply, it is not clear whether the words "high degree of autonomy" means actually no supplementary provision, so that they have to operate within the sum given that year. Can the Secretary please inform this Council, at what stage does the monitoring mechanism allow supplementary provision if there are not enough funds allocated for the particular year to meet contingencies unforeseen and requests which are important requests supported by the ADC?

PRESIDENT: Is the question on allocation of funds by the Hong Kong ADC or to the Hong Kong ADC?

MRS ELIZABETH WONG: To the Hong Kong ADC and allocated by the Hong Kong ADC, Mr President.

SECRETARY FOR RECREATION AND CULTURE: Mr President, as I said in the main reply, the ADC is fully autonomous in the disbursement of funds which are allocated to the ADC by the Government through the annual resource allocation exercise and it is up to the ADC to determine, in the light of the applications received, as to how much each individual or arts organization gets after the scrutiny of the applications.

MRS ELIZABETH WONG: I do not think the Secretary has replied to my original question. The question is at what stage does the Government allow additional funds to be allocated to the ADC so that the ADC can in turn allocate to meet contingency needs in the course of any financial year?

PRESIDENT: I should have ruled that out of order because your original question was on allocation of funds by the Hong Kong ADC and not to the Hong Kong ADC, but if the Secretary is prepared to answer ─

SECRETARY FOR RECREATION AND CULTURE: No, thank you.

MR ANDREW CHENG (in Cantonese): Mr President, the Hong Kong ADC's allocation of funds to arts organizations every year gives people the feeling of partiality because big art organizations often gets more than small art organizations. May I ask on what criteria does the Secretary for Recreation and Culture scrutinize the Hong Kong ADC's allocation of financial resources to arts organizations? Has the Government consulted the public on the criteria so as to prevent the Hong Kong ADC from "working behind closed doors"?

SECRETARY FOR RECREATION AND CULTURE (in Cantonese): Mr President, the Hong Kong ADC is an independent statutory body. It will work within the powers given to it by its Ordinance. The Council has under it, a number of Boards and Committees which are responsible for vetting applications by individual art groups and artists. The Boards and Committee have established criteria and procedures and will consider all applications accordingly. The Hong Kong ADC is fully autonomous in making its decisions.

Comprehensive Review of Nine-year Free and Compulsory Education

4.MR CHEUNG HON-CHUNG asked (in Cantonese): As the Board of Education (The Board) is undertaking a comprehensive review of the nine-year free and compulsory school education system, will the Government inform this Council:

  1. whether the Board will study the feasibility of providing 11 years (Primary 1 to Secondary V) of free and compulsory education, given that the completion of Form V Education is generally regarded by most employers as the basic entry requirement for employment; if not, why not, and

  2. whether the Government will consult the public before a decision is taken on the findings of the review?

SECRETARY FOR EDUCATION AND MANPOWER (in Cantonese): Mr President, as regard part (a) of the question, according to its terms of reference, the sub-committee set up under the board of Education will study the nine-year compulsory education system in the light of recent developments in education, and to make recommendations to the Board of Education on measures to further enhance the system. In other words, the sub-committee will not study the feasibility of providing 11 years of free and compulsory education.

Government's policy of providing nine years of free and compulsory education for our children from the age of six to 15 is in line with that of many countries and territories, including some advanced ones. In addition, we provide heavily subsidized senior secondary education or technical education for our children beyond the age of 15. Also, to ensure that no one is deprived of a place in our education system because of a lack of means, we offer financial assistance to needy students. In the circumstances, we have no plan to extend the existing nine-year period of free education to 11 years.

As regards part (b) of the question, we look forward to receiving the Board of Education's advice by the end of this year. We will decide whether to consult the public in the light of the Board's advice.

MR CHEUNG HON-CHUNG (in Cantonese): Now that the Government has been providing nine-year free and compulsory education for some ten to twenty years, has it ever conducted any feasibility study on the provision of 11-year free and compulsory education and what were the findings? If no, is that because 11-year free and compulsory education is not a long-term target of the Government?

SECRETARY FOR EDUCATION AND MANPOWER (in Cantonese): Mr President, the so-called feasibility study on extending free and compulsory education from nine years to 11 years is actually a very simple issue. For example, we know that extending free and compulsory education from nine years to 11 years, will involve a non-recurrent expenditure of $1.3 billion and an annual recurrent expenditure of $1 billion. Therefore, the feasibility or otherwise of such a scheme is actually not a complicated issue. The point is that, as I have said in my main reply, our current policy of providing nine-year free and compulsory education is already on a par with the corresponding policies of many advanced countries. And, the Government has also laid down a policy to ensure that no youngsters over 15 years of age will be deprived of further education through a lack of means. Therefore, we do not plan to extend free and compulsory education from nine years to 11 years at this stage.

PRESIDENT: Mr CHEUNG Hon-chung, are you claiming that your question has not been answered?

MR CHEUNG HON-CHUNG (in Cantonese): Mr President, my question is about whether or not the Government has ever conducted any feasibility study. Has it or has it not?

SECRETARY FOR EDUCATION AND MANPOWER (in Cantonese): Mr President, concerning the question on whether or not a feasibility study has ever been conducted, I have already given my answer. Actually, it is simply not necessary to conduct any such study as it is purely a matter of simple arithmetics. I have already told the Honourable Mr CHEUNG the result of the calculation.

PRESIDENT: The Secretary said he has just done it.

MR CHEUNG MAN-KWONG (in Cantonese): Mr President, the Government has already stated very clearly that it will not extend free and compulsory education from nine years to 11 years. But will the Government consider the provision of an adequate number of additional subsidized From IV places, not on a totally free, and not compulsory, basis, but with tuition fees charged according to the existing scale, so that students who want to proceed to Form IV can continue their education in their original schools without having to sit for the Junior Secondary Education Assessment (JSEA)?

SECRETARY FOR EDUCATION AND MANPOWER (in Cantonese): Mr President, let me, perhaps, give my answer to this question in the following manner. First, regarding Form III students, as I have mentioned in the main reply, the Government is already subsidizing the students in two ways. On the one hand, over 80% of the school places in question, are heavily subsidized by the Government, at a rate of 82% of the costs. On the other hand, we have a fee remission scheme to assist those students who are unable to further their schooling because of financial difficulties. As revealed by our findings, close to 40% of Form IV and Form V students have benefited under this scheme, and in the year 1995-96, the expenditure under the scheme amounts to $134,200,000. The Honourable Mr CHEUNG has just asked whether the Government will consider the straight promotion of Form III students to Form IV without requiring them to go through the JSEA. I have taken note of this suggestion and will study it.

PRESIDENT: Mr CHEUNG, are you claiming that your question has not been answered? Were you asking whether or not Form IV and Form V could be provided free but not compulsory?

MR CHEUNG MAN-KWONG (in Cantonese): Mr President, my question is not about the provision of free school places. I do not know if the Secretary is clear about my question. The 11-year education which the Honourable Mr CHEUNG Hon-chung mentioned in his question is based on two premises: first, it has to be free; secondly, it has to be compulsory, and the Government has also answered his question from this angle. But the question that I have just raised is different. First, students have to pay tuition fees, at a rate of 18% of the costs, as is currently required. Secondly, it is not compulsory for them to study Form IV ─ if they feel that they are incapable of studying Form IV, they can choose not to. Therefore, I want to ask the Government whether it will consider increasing the number of Form IV places in such a manner. The Secretary has not answered clearly whether or not the Government will do so or will consider doing so.

SECRETARY FOR EDUCATION AND MANPOWER (in Cantonese): Mr President , perhaps I still do not quite catch the point of Mr CHEUNG's question because I have already said that the Government is already providing heavy subsidy to over 80% of all Form IV and Form V places. If Mr CHEUNG wants to know whether the Government will consider increasing the proportion of subsidized places from 80% to 90% or 100%, I would have to say that we have to wait until we conduct a study on whether the whole basic education system needs any improvements before we can consider this suggestion in the light of available resources and the priority of competing claims. Nevertheless, my main reply has in fact given a very clear message: under the Government's policy, no one will be deprived of the opportunity to further his education through a lack of means because we have put in place the fee remission scheme.

MR CHAN WING-CHAN (in Cantonese): Mr President, the nine-year free and compulsory education currently provided runs from Primary I to Form III only, and many youngsters are thus forced to leave school. According to the law, they are not allowed to seek employment and consequently, they become gangsters and many social problems emerge. I wish to ask the government whether it has conducted any study on the existing morbid education system and youth problems.

SECRETARY FOR EDUCATION AND MANPOWER (in Cantonese): Mr President, perhaps I do not quite catch the point of this question either, as the Honourable Mr CHAN has assumed that our nine-year free and compulsory education system is a morbid one which deprives many people of their schooling. Actually, the "compulsory" element of our nine-year free and compulsory education lies in the fact that parents of children between six and 15 years of age will be penalized by law if they do not send their children to school. In fact, when the Director of Education followed up on some students' dropout cases in the past, he did issue quite a number of School Attendance Orders to require parents to send their children back to school. Therefore, Mr President, would you ask Mr CHAN to state the gist of his question?

MR CHAN WING-CHAN (in Cantonese): Mr President, I am concerned about those young people between the age of 15 and 17 who are neither at school nor able to get any jobs. Hence, I wish to ask the Government whether it will also study youth problems when it reviews the education issue.

SECRETARY FOR EDUCATION AND MANPOWER (in Cantonese): Mr President, concerning school children over 15 years old, first of all, I want to explain that as revealed by our information, over 90% of our school children can proceed to Form IV and Form V or enrol on technical courses offered by the Vocational Training Council. Of course, a small percentage of them, about 4 to 5% as revealed by our information, do not continue with their schooling or enrol on vocational skills training courses offered by the Vocational Training Council. Some of these children who stop going to school may join the workforce and others may study on their own or go to study abroad. As for whether these children will create social problems, I believe that this matter is beyond the scope of my work.

MR ALBERT CHAN (in Cantonese): Mr President, I want to follow up on Mr CHEUNG Man-kwong's question. Just now, the Secretary mentioned a 5% loss of our school children after Form III. Since 85% of the Form III graduates will proceed to Form IV and 10% will enrol on Vocational Training Council courses or other related courses, 5% will have to enrol at private schools or cannot proceed to Form IV for one reason or another. This situation is caused by the fact that their schools do not accept them because there are not enough places.

PRESIDENT: Mr CHAN, please state your question.

MR ALBERT CHAN (in Cantonese): Will the Government consider increasing the number of Form IV places so that these 5% children who cannot continue with their schooling at present will be able to get school places? This will not involve any policy changes.

SECRETARY FOR EDUCATION AND MANPOWER (in Cantonese): Mr President, the question can be answered from two angles. First, in fact, according to the Employment Ordinance, a 13-year-old youth who has finished Form III education and obtained his parents' consent can already join the workforce. Therefore, we can by no means rule out the possibility that some youths like to join the workforce after finishing Form III at the age of 15. Besides, as regards whether the Government should consider increasing the current proportion of heavily subsidized school places, I want to point out that if we consider improving basic education in future, this will certainly be one of the factors to be considered.

PRESIDENT: Secretary, did I hear 13 or 15, under the Employment Ordinance?

SECRETARY FOR EDUCATION AND MANPOWER (in Cantonese): Under the Employment Ordinance, the requirement is on reaching the age of 13, parents' consent, and completion of Form III. Of course, in general, children having finished Form III must be over 13 years of age.

MR CHEUNG HON-CHUNG asked (in Cantonese): Mr President, in the second part of my supplementary question, I asked whether the Government will consider 11-year free and compulsory education a long-term target and the Government cited some financial factors. If such financial problems are solved, will the Government consider making 11-year free and compulsory education its long-term target?

SECRETARY FOR EDUCATION AND MANPOWER answered (in Cantonese): Mr President, I reiterate that the Government has no plan to extend the present nine-year free and compulsory education to 11 years and that is a very clear message.

Performance Target for Emergency Ambulance Service

5.MISS CHAN YUEN-HAN asked (in Cantonese): Mr President, a resolution was passed at the joint meeting of the Panels on Health Services and Security held on 15 April this year urging the Government to use the "response time" instead of the "travel time" as the performance target for the emergency ambulance service (EAS). In this connection, will the Government inform this Council:

  1. of the additional numbers of ambulances, ambulance crew members as well as fire and ambulance equipment required as a result of adopting the "response time" as the performance target for the EAS; and

  2. whether provision will be made in the 1997-98 financial year to enable the Fire Services Department to put into effect the adoption of the "response time" as the performance target for the EAS?

SECRETARY FOR SECURITY (in Cantonese): Mr President,

  1. The Administration shares Honourable Members' concerns that our emergency ambulance service should continue to operate to the best standard practicable. To this end, we engaged a consultant last year to review the delivery of the emergency ambulance service. The consultant concluded that it is more realistic to first take action to ensure that the emergency ambulance service can reliably meet the performance target of answering 95% of all emergency calls within a ten minute travel time, before we consider switching to a response time target. We have accepted the consultant's recommendations. We are, therefore, concentrating our efforts on finding ways to achieve and, if possible, to improve on our existing performance target of responding to 92.5% of emergency calls within the 10-minute travel time target. At the same time, the Director of Fire Services has agreed to begin to establish the necessary data as a first step to determining an appropriate response time target which might be adopted for the future. It would, however, be premature to give any estimate as to the additional resources that may be required to meet a response time target before such a target is established.

  2. The allocation of additional resources to the emergency ambulance service will have to be dealt with within the budgetary planning cycle for 1997-98, and will thus be decided later in the year. We cannot, at this stage, confirm what resources might be allocated to the emergency ambulance service. However, I can assure Honourable Members that I would accord a high priority within my programme areas to improving the emergency ambulance service.

MISS CHAN YUEN-HAN (in Cantonese): Mr President, I think the Government's reply to parts (a) and (b) of the question has failed to make any undertaking on the implementation of the resolution passed in the joint meeting of the Panels on Health Services and Security of the Legislative Council held on 15th April, which urges the Government to improve the present emergency ambulance service in Hong Kong. In fact, we notice that as far as "travel time" is concerned, ......

PRESIDENT: Miss CHAN, please come to your question.

MISS CHAN YUEN-HAN (in Cantonese): My main point is that the Secretary for Security has not answered my question. Is the Government not prepared to use "response time" as its target?

SECRETARY FOR SECURITY (in Cantonese): Mr President, I believe this is not a question of discrepancy in the ultimate targets. Rather, it is question of whether we should adopt a gradual approach or an approach aimed at achieving the desired target in one stroke. Actually, in our discussion on which target to adopt, whether we are targetting at "response time" or "travel time", we can see that each target is supported by its own arguments. Just now I did not say that we would not adopt the target of "response time" in the future; I was simply saying, as recommended by our consultant, that we should first achieve what is attainable before we change our target. I believe that Members and the public are not concerned so much about which target must be adopted. Rather, they are concerned about what improvement measures we can adopt to ensure that our emergency ambulance service can reach a satisfactory level before it can attain our desired standard (be this measured in terms of "response time" or "travel time"). Do we need to allocate additional resources for the purpose? If so, when? In fact, we can bring about real improvements to this service by doing two things: first, improving the management work involved, as what we have started to do; and, second, injecting additional resources for the purpose. This we will consider, as I have mentioned in the main reply, in the 1997-98 budgetary planning cycle.

MR CHENG YIU-TONG (in Cantonese): Mr President, according to the information provided by the Hong Kong Non-emergency Ambulance Transfer Service Staff Association, at present, only 45% of the non-emergency ambulancemen of the Hospital Authority can work in three-member crews while on duties; the others have to work in two-member ones. Can the Government inform this Council whether there is a shortage of non-emergency ambulancemen? How will the Government solve this problem?

PRESIDENT: I am afraid this is outside the scope of the original question, but if the Secretary is prepared to answer it ─

SECRETARY FOR SECURITY: Mr President, I do not think I have the answer to that since this goes beyond my own responsibility.

DR HUANG CHEN-YA (in Cantonese): Mr President, does the Government know that "travel time" is only part of "response time"? While "travel time" may be ten minutes, "response time" may range from 10-odd minutes to an hour. Therefore, if the Government knows the difference between the two, apart from trying to shorten "travel time", what other measures, that is, those not connected with "travel time", will it adopt to improve "response time"?

SECRETARY FOR SECURITY (in Cantonese): Mr President, I understand very well that "response time" includes "travel time". Perhaps I have to explain to Dr HUANG that besides "travel time", "response time" also includes the "time taken to receive a call" and the "time taken to despatch an ambulance". I understand these things very well. However, the problem now is that before we are able to perform satisfactorily with regard to the present target of "travel time", we should focus our mind and effort on improving service management and injecting additional resources so that the services provided to the public can really be improved. One day, if we can switch to adopt "response time" as our target, we would of course, during the process of deliberation, consider what the appropriate target of "response time" should be. The Director of Fire Services has started the relevant study by collecting data on the current situation with a view to ascertaining an appropriate "response time" target.

DR HUANG CHEN-YA (in Cantonese): The Government has not really answered my question. If the Government admits that the two targets are really different, then whatever improvements made to "travel time" would in no way improve the "response time". Therefore, can the Government inform this Council what measures it will to take to make improvements to "response time"?

SECRETARY FOR SECURITY (in Cantonese): Mr President, I think I have already answered the question. "Response time" certainly includes "travel time", and it also includes, for example, the time taken to take a call from the public and put it on record, the time taken to call for emergency ambulance service from the control point and the time and procedures involved from the stage a call is received to the point an ambulance leaves the ambulance station. At this stage, of course, we cannot have any answers to these many details because we have not started to study what the target of "response time" in the future should be. In the process, the different components of "response time" will be looked into, and we will consider how improvements can be made in terms of service management and allocation of resources with a view to attaining the desired target of "response time" in the future.

MR CHAN WING-CHAN (in Cantonese): Mr President, both the "response time" or ten-minute "travel time" mentioned earlier cannot solve the problem. Does the problem lie in the shortage of manpower? Statistics reveals that one-third of the emergency ambulancemen employed at present are aged 40 or above. Of them, how many have to work in the front line? In view of the fact that these emergency ambulancemen are getting old and aging, will the Administration allocate additional resources to step up the recruitment of younger ambulancemen?

PRESIDENT: I am afraid this is outside the scope of the original question. You may wish to put it down as a separate question at a future sitting.

MRS ELIZABETH WONG: Mr President, it appears from the Secretary's reply that the Government's aim is noble but determination to reach the aim is rather dismal. So in the interest of protecting life and limb, can the Secretary tell us when or what is the timeframe, or does he actually have a timeframe that he intends to reach the performance target by improving and moving from "travel time" to "response time"?

SECRETARY FOR SECURITY: Moving from a "travel time" target to a "response time" target requires two things. Firstly, to establish what is the proper "response time" target requires a lot of study, including collection of data under the existing arrangements on the pattern of time taken to receive a call, to activate the ambulance and to despatch the ambulance and for the ambulance to arrive at the scene. Given the fact that our current computer system is not designed to collect that information, we believe that with some modification to the computer and communications system, we would be able to do that, but we would not be able to produce the necessary statistical data until probably─ and I use this word very cautiously ─ probably in the middle of 1997.

Secondly, it requires, if necessary, additional resources to be injected into the ambulance service. As the Honourable Member knows, the injection or otherwise of any additional resources is a matter to be dealt with in each year's budgetary planning cycle. I can no more commit myself, I can no more commit the Government, I can no more commit the Financial Secretary, as to what might or might not be available in the 1997-98 Budget now.

MR WONG WAI-YIN (in Cantonese): Mr President, it happens that Mrs Elizabeth WONG has asked the question I wanted to ask. However, I would like to ask a follow-up question. Can the Secretary for Security tell us how much resources will be needed if the emergency ambulance service is to follow the example of the Fire Services Department and adopt a six-minute target for its "response time"?

SECRETARY FOR SECURITY (in Cantonese): Mr President, in the first place, we would not adopt the six-minute target because it is absolutely unattainable. Second, the Fire Services Department's existing system of performance targets is a graded one, ranging from six to 23 minutes and the target is not set at six minutes for all cases. Third, the present "travel time" target is already set at ten minutes; if we switch to the target of "response time" without changing the present system or injecting any additional resources, "response time" will certainly exceed ten minutes. Therefore, in the foreseeable future, we cannot set our target at six minutes. In fact, there is no place in the world which has set its target at six minutes.

WRITTEN ANSWERS TO QUESTIONS

Abandoned Buffaloes

6.MR CHOY KAN-PUI asked (in Chinese): Will the Government inform this Council:

  1. whether it knows of the total number of abandoned buffaloes currently in the territory;

  2. of the total number of complaints about abandoned buffaloes causing nuisance to residents received by the Government in the past three years; and

  3. how it will deal with the abandoned buffaloes?

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

  1. It is estimated that there are about 200 buffaloes in Hong Kong, the great majority of which live on swampy private land in Kam Tin and have known owners. The Agriculture and Fisheries Department and the District Office have made arrangements with the owners for them to keep proper control of the animals and for the animals' disposal if they are no longer required. These arrangements ensure that the number of abandoned buffaloes is kept to the minimum.

  2. In the past three years, a total of four complaints about abandoned buffaloes causing nuisance to residents were received by the Government.

  3. An abandoned buffalo causing nuisance to residents will be impounded in the Government Kennels. If no one reclaims ownership of the buffalo within three days after impounding, the Director of Agriculture and Fisheries will publish a notice in the Gazette stating his intention to sell the animal. The buffalo will then be auctioned for slaughter on condition that no one has reclaimed ownership of the animal within one week from publication of the notice.

Acquisition of Private Land under New Town Development Programme

7.MR LAU WONG-FAT asked (in Chinese): Will the Government inform this Council of:

  1. the total hectares of private land in the New Territories it has acquired since the implementation of the New Town Development Programme; and

  2. the current total hectares of private land, broken down into building land and agricultural land, in the New Territories?

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

  1. For the period 1972-73 to 1995-96, 1 860 hectares of private land in the New Territories have been resumed by the Lands Department, a substantial proportion of which was resumed for the development of new towns and their relaied infrastructural projects, that is Sha Tin, Yuen Long, Tuen Mun, Tai Po , Fanling and Sheung Shui.

  2. We regret that there is no readily available data regarding the total area of private land in the New Territories. Since there are as many as 490 Demarcation Districts in the New Territories, it would be an extremely resource-intensive exercise for the Lands Department to search for the information required.

Termination of Public Housing Tenancies

8.MR CHOY KAN-PUI asked (in Chinese): Will the Government inform this Council, in regard to each of the past three years:

  1. of the number of public housing tenants whose tenancies were terminated by the Housing Authority (HA), with a breakdown of the reasons for termination as well as the number of cases in each category of reasons; and

  2. whether any of the above public housing tenants have lodged successful appeals against the HA's decision to terminate their tenancies; if so, how many appeals have been allowed and what the main reasons for allowing the appeals are?

SECRETARY FOR HOUSING (in Chinese): Mr President, the numbers of public housing tenants whose tenancies were terminated by the HA during the three years ending 31 March 1996 were:

1993-94353
1994-95511
1995-96561
------
1 425
===

A breakdown of cases by reason and number is at Annex.

Over the same period, the number of appeals against decisions by the HA to terminate tenancies which have been allowed (as a result of either the Authority's decision to withdraw or the Appeal Tribunal's decision) were:

1993-9428
1994-9524
1995-9629
----
81
==

The main reasons for allowing these appeals were:

  1. the appellants had rectified the concerned irregularities, for example, having settled payment of all outstanding rent; and

  2. the difficulty of the appellants' circumstances warranted exceptional consideration by the Housing Department.

Annex

Public housing tenants whose tenancies were terminated by the Housing Authority during the three years ending 31 March 1996 Reasons for termination and number of cases involved No. of cases Reason 1993-94 1994-95 1995-96 Rent in arrears59118279Non-occupation166241228Subletting504613Dogkeeping220Engaging in criminal activities in flats112Refusal to accept rehousing arrangements under Comprehensive Redevelopment Programme472137Others (for example, divorce, refusal to move into temporary accommodation pending completion of Home Ownership Scheme flats, making false statements when applying for public housing)28822Total353511561

Change of Land Use and Premium Assessment

9.MR CHIM PUI-CHUNG asked (in Chinese): With regard to the criteria adopted by the Government in handling "change of land use" and "premium assessment" cases, will the Government inform this Council:

  1. whether there is a comprehensive set of guidelines governing the scope of change of land use; if so, what the details are; if not, why not;

  2. whether there are certain standards laid down for assessing the amount of premium; if not, why not; and

    whether consideration has been given to formulating a comprehensive set of regulations for processing cases concerning change of land use and premium assessment?

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

  1. Change of land use is governed by either statutory or administrative procedures. If the site applying for change of use is covered by a statutory town plan, planning permission from the Town Planning Board or an amendment to the plan is required unless the proposed change of land use is permitted under the plan. Such application is processed in accordance with the procedures laid down in the Town Planning Ordinance. If the site falls outside the area of a statutory town plan, an amendment to the relevant departmental plan is required. There are established administrative procedures for processing such applications, and approval is considered by inter-departmental committees;

  2. premium charged in relation to any change of lease conditions are assessed by professional surveyors in the Lands Department, who are governed by a code of professional practice. The general principle for assessment is that the premium shall represent the difference in value of the land as between the previous lease conditions and the modified conditions; and

  3. as already explained above, there are already established procedures, either statutory or administrative, governing change of land use and premium assessment.

Appeals against Sewage Charges and Trade Effluent Surcharges

10.MR LEE KAI-MING asked (in Chinese): It is learnt that some organizations have lodged appeals in the past year against the amount of sewage charges and trade effluent surcharges levied by the Government. In this connection, will the Government inform this Council of:

  1. the number of such appeals received since the introduction of the sewage charging scheme; the number of appeals that have been allowed, and the total amount of sewage charges and trade effluent surcharges involved; and

  2. the scope and progress of the review of the trade effluent surcharges currently undertaken of the Government?

SECRETARY FOR WORKS (in Chinese): Mr President, in answer to part (a) of the question, may I first explain that under the Sewage Services Ordinance, a customer may apply for variation of the trade effluent surcharge (TES) rate applied to him and for variation of the discharge factor applied to him.

The TES rate will be adjusted if the effluent strength measured by Chemical Oxygen Demand (COD) values of the wastewater generated by the customer's premises are lower than the generic values.

Between 1 April 1995 and the end of April 1996, the Drainage Authority has received 259 applications for variations of TES rate. Out of these applications, 140 cases were approved, 39 cases were rejected and 33 cases withdrawn. The balance of 47 cases are still being processed. The overall reduction in charges is estimated to be about $3 million per month.

The discharge factor will be adjusted if the volume of wastewater being discharged to the public sewerage system is not more than 85% of the volume of water on which TES is based.

Between 1 April 1995 and the end of April 1996, the Drainage Authority has received 29 applications for variations of discharge factor. Out of these applications, 23 cases were approved, whilst the remaining six cases are still being processed. The approximate total reduction in charges is estimated to be about $0.2 million per month.

I now turn to part (b) of the question. When the Sewage Charging Scheme was introduced in April 1995, the Administration gave an undertaking to the Advisory Council on the Environment that the Trade Effluent Surcharge scheme would be reviewed after the scheme had been implemented for 12 months. An interdepartmental working group comprising representatives of Planning, Environment and Lands Branch, Works Branch, Drainage Services Department, and the Environmental Protection Department was formed in February this year to take the review forward. A paper was submitted to the Legislative Council's Environmental Affairs Panel on 9 February 1996 to inform the Panel of the Administration's intention to review the TES. The Advisory Council on the Environment was also consulted on the review on 29 April 1996.

Preparation for the review is underway. The detailed scope is being drawn up. It will include a consultancy to provide a comparison of the TES with similar schemes elsewhere. It is envisaged that the consultancy will begin in August and be completed by the end of the year.

Promotion of Putonghua Learning

11.DR DAVID LI asked: The Education Commission has recommended in its sixth Report that the Education Department should, starting from 1996, organize summer classes for primary and secondary school students who wish to learn Putonghua at an estimated cost of about $30 million over a three-year period. On the other hand, the findings of a recent survey conducted by an insurance firm show that 95% of those who cannot speak Putonghua make no attempt to learn it. In this connection, will the Government inform this Council whether measures will be adopted to promote Putonghua among people other than school students; if so, what the details are?

SECRETARY FOR EDUCATION AND MANPOWER: Mr President, the Government recognizes that there is a growing need to promote Putonghua. We have already announced in the 1995 policy address a number of initiatives to step up the teaching and learning of Putonghua in schools. These include developing a new Putonghua curriculum, enhancing teacher training and organizing summer classes for primary and secondary students starting this summer.

At the same time, there are a number of ongoing measures to promote the learning and use of Putonghua among people outside the school system. These include efforts in both the public and private sectors:

  1. Most tertiary and technical institutions offer Putonghua courses to their students or to the public. These are supplemented by courses offered by the Education Department and community bodies for adults;

  2. The Language Fund set up in 1994 to enhance efforts for raising the standards in English and Chinese including Putonghua has so far supported 10 Putonghua projects of which five are organized outside school targetting at tertiary students, teachers, parents and the public;

  3. There are a number of Putonghua programmes on radio and television produced by Radio Television Hong Kong for the general public;

  4. There are numerous activities and contests organized by professional institutions, non-profit-making organizations and community centres relating to the learning and speaking of Putonghua for both children and adults; and

  5. We have put in place a structured Putonghua training programme for the Civil Service. Our aim is that in the long run, those at the Directorate level or with an operational need to use Putonghua would be conversant in it. Our comprehensive training programme involves classroom teaching and self-learning packages. Some 14 000 civil servants benefited from such training in 1995-96 and 21 000 will be trained this year.

We believe the above efforts will intensify with the increasing importance in the use of Putonghua in Hong Kong. Indeed, the Education Commission Report No. 6 has recommended a number of major initiatives to enhance language proficiency including the further expansion of language courses offered by the various adult education and vocational institutions. The Government will continue to work closely with the relevant bodies in both the public and private sectors to promote programmes which help enhance language proficiency, including Putonghua.

United States Government Procurement of Hong Kong Products

12.DR LAW CHEUNG-KWOK asked (in Chinese): It is learnt that several months ago the United States Government prohibited United States Government agencies from purchasing products made in Hong Kong by removing Hong Kong from the list of designated countries for the purpose of government procurement made under the United States Trade Agreements Act. In view of this, will the Government inform this Council:

  1. whether it is aware of the reasons for the United States Government's move and the estimated loss which the local economy will suffer as a result of such a move, as well as its effect on the local job market; and;

  2. whether the Government has taken any remedial measures?

SECRETARY FOR TRADE AND INDUSTRY (in Chinese): Mr President, the United States Government amended its procurement regulations in December 1995 to implement the World Trade Organization (WTO) Government Procurement Agreement, which entered into force on 1 January 1996. The revised regulations generally exclude, under the United States Trade Agreements Act of 1979, the procurement by the United States Government of products of Hong Kong, on the ground that Hong Kong is not a signatory of the WTO Government Procurement Agreement. However, in certain circumstances, such as non-availability or insufficient supply of goods, United States government agencies can, in accordance with the relevant United States law, purchase products of Hong Kong notwithstanding the exclusion.

As our export trade statistics do not enable us to identify the ultimate buyers of our exports, we cannot ascertain how much of our exports are purchased for US Government procurement purpose. We are, therefore, not able to make an economic assessment of the possible impact of the exclusion on Hong Kong. So far only one firm has raised the issue with us.

We are actively considering Hong Kong's position vis-a-vis the signing of the WTO Government Procurement Agreement. Our aim is to secure an arrangement which will facilitate maximum market access for our producers and will comply with the principles and disciplines of the multilateral trading system.

Water Quality of Major Watercourses

13.DR JOHN TSE asked (in Chinese): Regarding the water quality of the major watercourses in the territory, will the Government inform this Council of:

  1. the respective gradings of the water quality of the territory's major watercourses;

  2. the measures adopted by the departments concerned during the past three years to improve the water quality of these watercourses;

  3. the current strength of the Government staff who are directly working on the improvement to the water quality of watercourses; and

  4. the long-term measures it will adopt to improve the water quality of watercourses?

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

  1. The water quality of watercourses varies along their length and therefore it is not possible to give a single grading for each watercourse. However, based on the Water Quality Index used by the Environmental Protection Department for assessing river water quality, the classifications at the most downstream sampling station in each of Hong Kong's 11 major watercourses in 1995 were as follows:

    River name Classification

    Mui WoExcellent
    Shing Mun Good
    Lam TsuenFair
    Tai PoGood
    Kam TinVery Bad
    Tuen MunGood
    Ho ChungGood
    GangesVery Bad
    IndusBad
    BeasVery Bad
    Yuen Long CreekVery Bad

  2. A wide variety of measures which contributed to improving river water quality have been implemented by various departments in the past three years. These measures included:

    (1)Environmental Protection Department:

    .Declaration of the last three Water Control Zones under the Water Pollution Control Ordinance, that is Eastern Buffer, Western Buffer, and Victoria Harbour.

    .Continuous enforcement of the Water Pollution Control Ordinance in all declared Water Control Zones throughout the period.

    .Enactment of the Water Pollution Control (Sewerage) Regulations to provide the Government with the power to require property owners to make connections to new sewers.

    .Continuous enforcement of the Waste Disposal (Chemical Waste) Regulations to ensure all toxic chemical wastes are properly disposed of.

    .Implementation of the livestock waste control scheme which by early 1996 had reduced the pollution load from this source directly discharged into rivers by an amount equivalent to the pollution generated by some 1.67 million people.

    .The carrying out of Sewerage Master Plan (SMP) studies to draw up short, medium and long-term plans for new and rehabilitated sewerage; in the New Territories much of the emphasis of these plans is on providing sewerage connections to currently unsewered villages thus removing for treatment sewage which would otherwise pollute nearby watercourses.

    (2)Drainage Services Department:

    .Under the stream course clearance programme, desilted some 65 km of major rivers at a total expenditure of about $30 million. Clearance of silt and other debris accumulated in river channels has helped to improve the river water quality indirectly.

    (3)Territory Development Department:

    .At Tin Shui Wai New Town, a low flow and amenity water system was installed to divert the polluted low flows from the Tin Shui Wai Western Drainage Channel and to fill the permanent section upstream of the inflatable dam with stream water which has been screened and aerated to remove offensive elements.

    .At Tuen Mun New Town, the Tuen Mun river channel between Pui To Road and the river outlet was dredged to improve the flow of the river channel which would help to reduce the build up of pollutants and hence would improve the water quality of the river channel. The dredging work was commenced in July 1993 and completed in January 1994.

    (4)Agriculture and Fisheries Department:

    .Implemented a livestock farm licensing scheme since July 1995 which required livestock keepers to install and operate waste treatment facilities. As at April 1996, 162 livestock farms have already been so licensed.

    .Carried out 525 cleansing operations at polluted agricultural weirs. In addition, 208 agricultural weirs had either been demolished or replaced by those capable of being drained for cleansing operations. These cleansing operations led to cleaner stream water flowing into major river channels.

    The above measures were to deal mainly with the major sources of pollution such as livestock waste and unsewered villages, and to regularly clean up the water courses.

    They have been effective in leading to steady and progressive improvements to the water quality of our watercourses. This is illustrated by the fact that in 1987 only 25% of all watercourse sampling stations received a grading of good or excellent whereas the similar figure for 1995 was 57%. These measures will continue to be enforced or carried out and further improvements are expected.

  3. Of the four departments identified in (b) above, the Environmental Protection Department is the main department working directly on improvement to the water quality of the watercourses in Hong Kong. Approximately 70 professional and 300 technical staff members are involved in enforcing legislation aimed at controlling the amount of pollution entering our fresh and marine waters. In addition, about 60 professional and 100 technical staff members are engaged in activities directly related to improving water quality such as monitoring, laboratory analysis, impact assessment, policy development and infrastructure planning.

    The Drainage Services Department deploys approximately 110 professional and technical staff members to deal with the maintenance of major watercourses.

    The Territory Development Department's New Territories (North) and New Territories (West) project management offices have a total of 39 professional and 17 technical staff members responsible for, amongst others, their projects listed in (b) above.

    The Agriculture and Fisheries Department has 14 full-time and five part-time staff working on managing agricultural weirs.

  4. With regard to long-term measures to improve the water quality of water courses, the Environmental Protection Department will continue to enforce the relevant environmental legislation. When the revised livestock waste control scheme is fully implemented, pollution from livestock waste is expected to be reduced by 98%. The Sewerage Master Plans providing new sewerage for unsewered areas will be progressively implemented for completion by 2005. Meanwhile, the Environmental Protection Department will continue to take action to ensure that currently unsewered properties are connected to the new sewers. The Drainage Services Department and the Territory Development Department will also continue to carry out regular desilting and maintenance of the river and drainage channels to minimize sediment and debris accumulation.

Investigation of the Allied Group

14.MISS EMILY LAU asked: Regarding the investigation of the Allied Group, will the Government inform this Council:

  1. of the amount of money spent on the inspector appointed to carry out an inspection on the affairs of the Allied Group and the results of the inspection;

  2. whether other investigations have been conducted on the Allied Group; if so, what the results are and the amount spent on such investigations; and

  3. how the Government has ensured that the inspection and other investigations have been conducted in a cost-effective manner?

SECRETARY FOR FINANCIAL SERVICES: Mr President,

  1. The actual expenditure incurred on the investigation of the affairs of a group of 27 companies including the Allied Group Limited, following the appointment of an independent inspector appointed by the Financial Secretary in August 1992 under section 143(1)(c) of the Companies Ordinance, was $46,478,295.65.

    The inspector submitted his report to the Financial Secretary in August 1993. The inspector revealed in his report extensive details about the specific activities he was asked to investigate. The findings indicated abuse of the group corporate structure and securities market ethical requirements. The legal implications could range from breach of civil law duties and regulatory rules to possible criminal offences including securities and regulatory statutory offences, Theft Ordinance offences and conspiracy to defraud. A substantial part of the report was made public in September 1993. The full report was referred to the law enforcement and regulatory bodies, as well as the 27 companies involved in the inspection for them to decide what actions to take within their respective areas of authority and to pursue those actions accordingly. In this connection, the Stock Exchange has publicly censured a number of individuals in senior management positions in the Allied Group companies. In addition, the inspection has achieved three main results. Firstly, it has resulted in a complete re-vamp of the management of the Allied Group companies. The chairman of the Group and others associated with him have stepped down from management positions. A number of independent directors have been appointed, and an Audit Committee has been established. Secondly, the report generated a higher level of public awareness regarding corporate governance. We believe that there has been a considerable increase in vigilance by auditors of listed companies since the publication of the report. Thirdly, the inspection underlined the Government's determination to expose facts behind any apparent malpractices in the financial market in order to maintain its integrity and to enable concerned parties to take appropriate action.

  2. The Commercial Crime Bureau (CCB) of the police has been conducting investigations into allegations of criminal acts involving the Allied Group companies. The Securities and Futures Commission (SFC) is also considering regulatory action relating to possible breaches of the Takeovers and Mergers Code. On operational grounds, it would not be appropriate to discuss or reveal progress of their respective actions on the case. These investigations are being undertaken as part of the regular enforcement and regulatory functions of the two bodies and are not separately costed. It would therefore not be feasible to provide a breakdown on the amount incurred so far on these Allied Group investigations.

  3. While the inspector was carrying out his investigations, his work progress was closely supervised by a Steering Group chaired by the Financial Services Branch with representatives from the Legal Department and the SFC. The CCB also attended the Steering Group meetings. As indicated in (a) above, the inspection has achieved some significant results. As regards the current investigations, the CCB and SFC are conscious of the need to ensure that the investigations are, and will continue to be, conducted in a cost-effective manner.

Monitoring Mechanism for Commercial Crime Bureau

15.MR CHIM PUI-CHUNG asked (in Chinese): Will the Government inform this Council:

  1. of the existing mechanism for monitoring the Commercial Crime Bureau in exercising its powers under the law in the execution of its duties; and

  2. whether there are any channels open to those people who have been investigated by the Commercial Crime Bureau and have as a result suffered monetary loss or damage to their reputation, but who are later found to be innocent, to claim compensation; if so, what the details are?

SECRETARY FOR SECURITY (in Chinese): Mr President,

  1. As part of the Police Force, the Commercial Crime Bureau is bound by the provisions of the Police Force Ordinance and the procedural guidelines in the Police General Orders. In the event of any complaints, the Bureau is subject to investigation by the Complaints Against Police Office, just as any other Police formations.

  2. Any person who believes that he has suffered damage as a result of an act or omission by any person or body may seek advice from his own lawyer as regards whether a claim of compensation might be sought from the civil court.

Control over Agencies Providing Labour Importation Services

16.MR LEUNG YIU-CHUNG asked (in Chinese): Recently, advertisements have appeared in some local newspapers concerning the provision of labour importation services by some "agencies" which claim that they could apply to the Government for the importation of foreign workers on behalf of employers. In answer to telephone enquiries, these "agencies" claim that they could help to bring in the types of foreign workers which are not permitted under the existing policy. In view of this, will the Government inform this Council:

  1. whether it exercises any control over agencies which provide labour importation services; if so, what the details of such control are; and

  2. what measures are in place to prevent some agencies from importing those types of foreign workers which are not permitted under the existing policy; and whether investigations will be carried out to ascertain if such agencies are involved in importing foreign workers illegally?

SECRETARY FOR EDUCATION AND MANPOWER (in Chinese): Mr President, all applications for imported workers under the Government's importation of labour schemes, including the Supplementary Labour Scheme, the Special Labour Importation Scheme for the New Airport and Related Projects (ACP Scheme) and the Pilot Scheme for the entry of PRC professionals for employment must be made by the employers of imported workers direct. Applications under the ACP Scheme from sub-contractors of ACP contracts who are direct employers of workers are made by the Principal Contractor on their behalf. Any applications for imported workers which are submitted by any other parties will not be accepted.

My answers to the specific questions are as follows:

  1. According to Part XII of the Employment Ordinance, a person who operates a business for the purpose of obtaining employment for another person, or supplying the labour of another person to an employer, is defined as an "employment agency". The Ordinance also provides that any person who wishes to operate, manage or assist in the management of an "employment agency" has to obtain a licence or a certificate of exemption issued by the Commissioner for Labour. It follows that any company which is engaged in the activities of an "employment agency", whether it is facilitating the recruitment of local or imported workers, will be subject to these legislative provisions.

    The Labour Department pays regular inspections to all the licensed employment agencies to ensure that they comply with the legislative provisions governing their operations. Any employment agency which is found to be engaged in activities deviating from the purpose under which the licence was issued may have its licence revoked or its application for licence renewal refused by the Commissioner for Labour.

  2. As mentioned in the preamble to this reply, only applications for imported workers from the employers direct will be accepted under any of our importation of labour schemes. As such, no other agencies or companies are allowed to import workers under any of our existing labour importation schemes.

    Any person or agency engaged in the business of deploying illegal workers for employment by employers commits the offence of aiding and abetting the breach of condition of stay under both the Immigration Ordinance and the Criminal Procedures Ordinance, for which he is liable on conviction to the maximum penalty of a fine of $50,000 and imprisonment for two years. The Immigration Department conducts regular and surprise raids at places and districts where ample opportunities of illegal employment are believed to exist. In the course of such operations, any persons or agencies suspected to be aiding and abetting the employment of illegal workers will be investigated with a view to prosecution under the above two Ordinances.

Rice Pricing

17.DR LAW CHEUNG-KWOK asked (in Chinese): Will the Government inform this Council:

  1. how the Rice Advisory Committee (RAC), which comprises mainly of rice importers, determines the prices at which rice is sold to retailers; and

  2. whether it has any specific plan to change the existing system of allowing the RAC to determine the prices of rice; if so, what the details are?

SECRETARY FOR TRADE AND INDUSTRY (in Chinese): Mr President, the Rice Advisory Committee (RAC) presently consists of 14 members, of whom only three are rice importers. Under its terms of reference, the RAC is required to advise the Government on the technical aspects of the operation of the Rice Control Scheme1 and on all aspects of the rice trade, and to consider such matters concerning the import and distribution of rice as may be referred to it by the Director-General of Trade and to make recommendation accordingly.

Thus the RAC neither advises on nor determines the price of rice sold to retailers. Individual rice importers, wholesalers and retailers determine their own selling price of rice. Nevertheless, the RAC monitors the rice supply situation and the operation of the Rice Control Scheme to ensure that there is an adequate supply of rice at reasonable price in Hong Kong. It has, for example, tendered its advice on the Government's recent review of the Rice Control Scheme, on which the views of the Trade and Industry Panel of this Council will be sought shortly.

Daya Bay Safety Hazard and Contingency Plan

18.MISS EMILY LAU asked: In view of the public concern about the lack of information from independent sources on the safety of the Guandong Daya Bay Nuclear Power Station, will the Administration inform this Council whether it will consider appointing an independent advisory body to provide technical support to the Government in interpreting and assessing information on the safety of the Guandgong Daya Bay Nuclear Power Station provided by the Hong Kong Nuclear Investment Company, and to assist the Government in reviewing its nuclear disaster contingency plan on a regular basis?

SECRETARY FOR SECURITY: Mr President, we have considered the question of whether to appoint an independent safety consultant or advisory body on several occasions, but concluded that for the following reasons there are no strong grounds to do so:

  1. We have sufficient expertise within the Government on nuclear safety technology to ensure that we are able to protect the health and safety of the people of Hong Kong. Staff in the Electrical and Mechanical Services Department, Royal Observatory and Department of Health have specialized training and experience in the operation of nuclear power stations, radiological monitoring and assessment, and health physics. We have been building up this capability for more than 10 years and will continue to improve it.

  2. We have maintained close contact with the International Atomic Energy Agency (IAEA), the United Kingdom's Atomic Energy Authority and other regulatory agencies, and other internationally-renowned radiological experts. These agencies are involved in advising us in drawing up contingency plans. They also act as observers in our exercises to test our contingency plans, and give regular advice to us on how our system, plans and procedures should be improved.

  3. The Hong Kong Nuclear Investment Company employs highly qualified and experienced unclear safety advisers from both France and China who are able to advise on both the normal operation of the Guangdong Nuclear Power Station at Daya Bay and on the related technical aspects of nuclear safety.

BILLS

First Reading of Bills

HOTEL ACCOMMODATION (MISCELLANEOUS PROVISIONS) BILL 1996

DENTISTS REGISTRATION (AMENDMENT) BILL 1996

NURSES REGISTRATION (AMENDMENT) BILL 1996

EMPLOYMENT (AMENDMENT) BILL 1996

EMPLOYMENT (AMENDMENT) (NO. 2) BILL 1996

IMMIGRATION (AMENDMENT) (NO. 2) BILL 1996

FIRE SAFETY (COMMERCIAL PREMISES) BILL

Bills read the First time and ordered to be set down for Second Reading pursuant to Standing Order 41(3).

Second Reading of Bills

HOTEL ACCOMMODATION (MISCELLANEOUS PROVISIONS) BILL 1996

THE SECRETARY FOR HOME AFFAIRS to move the Second Reading of: "A Bill to amend the Hotel Proprietors Ordinance, the Hotel Accommodation Tax Ordinance and the Hotel and Guesthouse Accommodation Ordinance."

She said: Mr President, I move the Second Reading of the Hotel Accommodation (Miscellaneous Provisions) Bill 1996.

The main objective of the Bill is to amend the definition of "hotel" in the Hotel Proprietors Ordinance and the Hotel Accommodation Tax Ordinance; and the definition of "hotel" and "guesthouse" in the Hotel and Guesthouse Accommodation Ordinance in order to specify the scope of the definitions. The other amendments to the Hotel and Guesthouse Accommodation Ordinance are to streamline the operation of the licensing scheme under that Ordinance.

The existing definition of "hotel"; and "hotel" and "guesthouse" in the three Ordinances have allowed establishments which offer accommodation only to limited categories of persons, for example, to persons of a particular nationality or clients of one tourist agency, to operate outside the ambit of the Ordinances. A High Court Judgement in March 1996 also has implications on the scope of application of the three Ordinances. It ruled that hotels that accepted guests with prior reservations would not fall within the purview of the Ordinances. A potential loophole has been created whereby hotels could claim that they let rooms in response to prior reservations (for example, telephone booking) and should not be subject to the Ordinances. This loophole needs to be plugged so that the licensing scheme under the Hotel and Guesthouse Accommodation Ordinance would continue to apply to all hotels to ensure the efficacy of safety in them; and that hotel accommodation tax should continue to be payable by all hotels under the Hotel Accommodation Tax Ordinance, otherwise there would be serious revenue implications.

Clauses 2, 4 and 5 of the Bill amend the definition of "hotel" in the Hotel Proprietors Ordinance, the definition of "hotel" in the Hotel Accommodation Tax Ordinance, and the definition of "hotel" and "guesthouse" in the Hotel and Guesthouse Accommodation Ordinance respectively to address the above-mentioned deficiencies.

The Bill proposes other amendments to the Hotel and Guesthouse Accommodation Ordinance to improve the operation of the licensing scheme. Clauses 6 and 7 amend the Ordinance so that the Licensing Authority can issue licences of up to three years' validity to obviate the need for annual licence renewal, as is the case now. We intend to issue three-year licences on a case by case basis. In principle, such licences will be granted only to those establishments that have shown integrity of continuing to fulfill the fire and building safety standards and that would not abuse the licensing control.

Clauses 8 and 9 allow notices under sections 19 and 20 of the Ordinance to be served by posting them in a conspicuous part of the premises without the need to state the name of the addressee. At present, notices may be served to the responsible person of a hotel or guesthouse personally or by registered post to direct remedial works under section 19 and to notify the Administration's intention to apply from the District Court for closure order under section 20. Serving of these notices would be difficult where the whereabouts or identity of the responsible persons are not known. It would assist operationally if these notices could be served by posting them in a conspicuous part of the premises.

Clause 9 also amends section 20 of the Ordinance to allow any person authorized by the Secretary for Home Affairs in writing to enter into a hotel or guesthouse to execute any remedial works while a closure order is in force. Clause 10 provides that it shall not be an offence for a person so authorized to enter into the closed premises. These amendments address a flaw in the Ordinance in that the premises, once closed by order, may not be re-entered for carrying out remedial works. Without these works, the premises cannot be made safe and cannot be reopened as a hotel or guesthouse.

Clause 11 extends the time limit for prosecution of offences under the Ordinance. Under section 26 of the Magistrates Ordinance, the Licensing Authority is time-barred from prosecution if an offence (for example, breach of licence conditions) has been committed more than six months before the Authority issues the summons. This is unsatisfactory because an offence may occur immediately after an inspection of the premises by the Licensing Authority at the time of renewal of the licence and in these circumstances the offence will not be discovered shortly. Many offences may be time-barred from prosecution. Clause 11 proposes that any prosecution under the Ordinance shall be commenced either within six months of the commission of the offence; or within six months of the offence being discovered by or coming to the notice of the Authority, whichever is the later.

Mr President, the Bill improves the definitions in three Ordinances to ensure, inter alia, that the fire and building safety of all hotels and guesthouses will continue to be regulated by the licensing scheme under the Hotel and Guesthouse Accommodation Ordinance; and that hotel accommodation tax is payable by all hotels. The Bill also improves the day to day operation of the licensing scheme under the Hotel and Guesthouse Accommodation Ordinance. I recommend the Bill to Members.

Thank you.

Question on the motion on the Second Reading of the Bill proposed.

Debate on the motion adjourned and Bill referred to the House Committee pursuant to Standing Order 42(3A).

DENTISTS REGISTRATION (AMENDMENT) BILL 1996

THE SECRETARY FOR HEALTH AND WELFARE to move the Second Reading of: "A Bill to amend the Dentists Registration Ordinance."

She said: Mr President, I move that the Dentists Registration (Amendment) Bill 1996 be read the Second time.

This Bill proposes two changes. The first proposed change concerns the Licensing Examination. Under the existing Dentists Registration Ordinance, applicants whose standard of achievement is equivalent to the passing of the Licensing Examination are qualified to be registered as dentists in Hong Kong. However, the Ordinance does not specify the qualification which is recognized for this purpose, that is, the award of a degree of dentistry by the University of Hong Kong. We propose to spell out clearly the qualification deemed to be equivalent to the passing of the Licensing Examination for the purpose of registration of dentists in the Ordinance.

The second proposed change is to require the applicant to show that he has not been convicted in Hong Kong or elsewhere of any offence punishable by imprisonment, when he applies for the issuance and renewal of practising certificates. This is necessary because the Secretary of the Dental Council is not empowered under the existing Ordinance to ask the applicant to submit such information, but such information is required for the Secretary to issue or renew the practising certificates.

Question on the motion on the Second Reading of the Bill proposed.

Debate on the motion adjourned and Bill referred to the House Committee pursuant to Standing Order 42(3A).

NURSES REGISTRATION (AMENDMENT) BILL 1996

THE SECRETARY FOR HEALTH AND WELFARE to move the Second Reading of: "A Bill to amend the Nurses Registration Ordinance."

She said: Mr President, I move that the Nurses Registration (Amendment) Bill 1996 be read the Second time.

The Bill aims to restrict the use of the title "nurse". The existing Nurses Registration Ordinance does not provide for sanctions against the use of the title "nurse" by unqualified persons. However, since nursing is a recognized profession, we proposed to restrict the use of the title to qualified persons only, namely, registered nurses and enrolled nurses. Any unauthorized use of the title would therefore be an offence.

Question on the motion on the Second Reading of the Bill proposed.

Debate on the motion adjourned and Bill referred to the House Committee pursuant to Standing Order 42(3A).

EMPLOYMENT (AMENDMENT) BILL 1996

THE SECRETARY FOR EDUCATION AND MANPOWER to move the Second Reading of: "A Bill to amend the Employment Ordinance."

He said (in Cantonese): Mr President, I move that the Employment (Amendment) Bill 1996 be read the Second time.

The Bill seeks to amend the provisions in the Employment Ordinance concerning the improvement of the protection for pregnant employees.

The Government's long standing employment policy is to gradually improve the interests and welfare of employees in the light of Hong Kong's socio-economic development, with the expectations of employees and the interests of employers being considered and balanced.

The recommendations contained in the Bill were drafted by the Administration with reference to the provisions in the International Labour Convention No. 3 regarding the employment of women before and after child birth, the United Nations Convention on the Elimination of All Forms of Discrimination Against Women and the practices of other neighbouring countries and regions. The eight proposals for improvement put forward by the Bill are as follows:

  1. To remove the requirement that an employee has to be employed continuously for 26 weeks to be entitled to unpaid maternity leave. Any pregnant employee who is under a continuous contract of employment, that is to say, having worked continuously for four weeks and for at least 18 hours in each of the weeks, shall be entitled to 10 weeks' unpaid maternity leave;

  2. To remove the existing requirement that a pregnant employee shall be entitled to paid maternity leave only if she has no more than two surviving children. This requirement was introduced in 1981 to avoid creating an open-ended commitment for the employer. With the present social tendency of reducing family sizes, we see that it is no longer necessary to retain this provision;

  3. To simplify and state clearly the provisions on the period of the maternity leave, that is to say, to state clearly that the four-week maternity leave should count from the date of commencement of leave so as to avoid causing confusion between the employees and their employers as a result of the discrepancy between the actual and the expected dates of confinement;

  4. To flexibly distribute the ten-week maternity leave to provide pregnant employees with more flexibility in arranging the leave before and after confinement. With the consent of the employer, the employee can request that the four-week leave taken before confinement be shortened to at least two weeks and the six-week leave taken after confinement be extended accordingly;

  5. To remove the requirement that an employee must be employed for at least 12 weeks to be eligible for employment protection so that any pregnant employee who has a continuous contract of employment will be entitled to such protection;

  6. To raise the penal damages for wrongful dismissal of a pregnant employee from an amount equal to seven days' wages to an amount equal to one month's wages to enhance the deterrent effect on employers;

  7. To prohibit the assignment of hazardous work to pregnant employees and offenders will be subject to a maximum fine of $50,000. If a pregnant employee produces a medical certificate certifying that she is unfit for undertaking certain work, her employer has to remove her from such work within 14 days; and

  8. To simplify the notifying procedure for maternity leave by removing the mandatory requirements to specify both the expected dates of confinement and commencement of leave on it to make things easier for pregnant employees.

The above recommendations have been repeatedly studied and discussed by the Labour Advisory Board, which is comprised of representatives of both the employers and employees, and have been endorsed in full consideration of the interests of the employers and employees.

Mr President, I beg to move.

Question on the motion on the Second Reading of the Bill proposed.

Debate on the motion adjourned and Bill referred to the House Committee pursuant to Standing Order 42(3A).

EMPLOYMENT (AMENDMENT) (NO. 2) BILL 1996

THE SECRETARY FOR EDUCATION AND MANPOWER to move the Second Reading of: "A Bill to amend the Employment Ordinance."

He said (in Cantonese): Mr President, I move that the Employment (Amendment) (No. 2) Bill be read the Second time.

The Bill seeks to amend the Employment Ordinance with a view to making improvements in the provisions relating to the definition of wages, long service payment, protection against outstanding wages and end of year payment. This Bill consists of seven proposals which are aimed at improving the rights and benefits of employees. Together with the proposals under the Employment (Amendment) Bill 1996 on which I moved a motion on Second Reading earlier, a total of 15 proposals are made under the two Bills to improve the existing arrangements.

This Bill proposes to amend provisions on:

- the definition of wages;

- protection against outstanding wages;

- end of year payment; and

- long service payment to employees under the age of 45.

First, the definition of wages. Under the existing Employment Ordinance, wages refer to all remuneration, earnings, allowances, tips and service charges capable of being expressed in terms of money payable to an employee in respect of work done or to be done under his contract of employment. Although the definition of wages is broadly-based, the question of whether certain payments should be considered as wages has constantly caused disputes between employers and employees. Having conducted a review in this regard, we suggest that wages should be clearly defined as remuneration of a constant character payable to an employee for work done. Meanwhile, it should also be clearly stated that:

  1. wages should include commission, attendance bonus, attendance allowances, travelling allowances and exclude certain specified items, for instance, any payment which is not stipulated in the contract of employment and which is of a gratuitous nature or is payable at the discretion of the employer; and

  2. wages should also include overtime pay which is of a constant character, or which is equivalent to or more than 20% of average monthly wages.

These proposals are not intended to require employers to take up additional responsibilities. They only seek to set out in clear terms that the said payments should be taken as part of the employee's wages in the calculation of remuneration to which the employee is entitled under the Employment Ordinance, thereby preventing disputes between employers and employees. These proposals are also in line with the court's ruling made recently on what items of payment should be included as wages in the calculation of compensation payable to employees in the event of termination of employment.

Secondly, in order to strengthen the protection of workers' interests against outstanding wages, we have two proposals to make:

  1. If wages are not paid within seven days from the date on which they become due, the employer shall pay interest to the employee at a rate equivalent to that fixed by the Chief Justice under the District Court Ordinance;

  2. If wages are not paid within one month from the date on which they become due, the employee may deem the contract of employment as being terminated by the employer without notice and may, therefore, claim compensation for the termination of the contract of employment. Under Section 10 of the existing Employment Ordinance, an employee may, in accordance with the common law, terminate his contract of employment without notice or payment in lieu but the employee still do not have the right to claim any statutory compensation for the termination of his employment. Therefore, we propose to add this new provision to strengthen the protection for workers whose wages have not been duly paid.

Thirdly, the provision relating to end of year payment. At present, it is always contentious as to whether end of year payment is of a contractual or gratuitous nature and whether the employer, in dismissing an employee, has the statutory obligation to pay the employee end of year payment on a pro rata basis. In order to improve the provision on end of year payment and minimize unnecessary disputes, we propose that:

  1. annual payment, regardless of the name of such payment, stipulated in any contract shall be governed by the provisions relating to end of year payment under the existing Employment Ordinance unless it is stipulated by the employer in writing that such payment is of a gratuitous nature and that it is payable at the discretion of the employer;

  2. the qualifying period of pro rata end of year payment should be reduced from 26 weeks to three months but the probation period, subject to a maximum of three months, set out in the contract shall be excluded.

Fourthly, long service payment. While it is stipulated under the existing Ordinance that all employees who have been employed under a continuous contract for five years are entitled to long service payment, the long service payments payable to employees who have been employed for less than 10 years are, nevertheless, reduced on a progressive scale pegged to their age and year of service. This calculation method is considered discriminatory to young employees. For this reason, we propose to remove, within one year and in two stages, the percentage reduction in long service payments payable to employees under the age of 45 and who have been employed for less than 10 years. The first stage is to remove immediately the percentage reduction in long service payments payable to young employees who have been employed for seven years or more. In the following year, the existing provision under which long service payments are reduced progressively will be removed in its entirety so that all employees regardless of their age, employed by the same employer under a continuous contract for five years shall be granted long service payments at the standardized rate stipulated under the Employment Ordinance.

Just like the eight proposals under the Employment (Amendment) Bill 1996, the seven proposals under this Bill are drafted by the Government after careful consideration. We think that these proposals can balance the employees' expectation and employers' interests and their specific contents have made reference to the international labour standard and the situation and practice of the neighbouring countries. Moreover, the members of the Labour Advisory Board has unanimously agreed to these proposals.

Mr President, I move the motion.

Question on the motion on the Second Reading of the Bill proposed.

Debate on the motion adjourned and Bill referred to the House Committee pursuant to Standing Order 42(3A).

IMMIGRATION (AMENDMENT) (NO. 2) BILL 1996

THE SECRETARY FOR SECURITY to move the Second Reading of: "A Bill to amend the Immigration Ordinance."

He said: Mr President, I move the Second Reading of the Immigration (Amendment) (No. 2) Bill 1996. The Bill seeks to amend the definition of a lawfully employable person, and to impose a duty on the employer to inspect the travel document of any person who is not a permanent resident before employing him.

In response to the growing community concern on the impact of illegal employment activities in Hong Kong, the Administration has launched a vigorous campaign against illegal workers and their employers. The strength of the Immigration Task Force deployed to tackle this problem has been doubled. As a result, there have been significant increases in the number of anti-illegal employment operations and arrests. In 1995, a total of 2 160 such operations were conducted, representating an increase of 101% when compared with 1 074 operations carried out in 1994. Also in 1995, 5 833 illegal workers and 2 302 employers were arrested, an increase of 7.9% and 62.6% respectively over the number of 5 404 illegal workers and 1 416 employers arrested in 1994.

However, the number of prosecutions in respect of employers who employ illegal workers is still relatively low. In 1994 and 1995, the percentage of employers who were prosecuted was 64% and 51% respectively. This compares with 70% and 80% of illegal workers prosecuted during the same period. One of the main reasons is that, at present, there are two impediments affecting the effective control of illegal employment. Firstly, the Immigration Ordinance defines a person holding a Hong Kong identity card as lawfully employable, albeit that the holder may be committing a breach of his condition of stay by taking unapproved employment. Secondly, whilst employers are required by law to inspect the Hong Kong identity cards of potential employees, most identity cards do not indicate whether the holders are being restricted to a specific employment. As a result, contract workers, mostly foreign domestic helpers, are able to obtain unapproved employment by presenting their identity cards for inspection by the employer. Such an employer cannot be prosecuted unless it can be proved, by the Crown, that he was aware of the restriction on the employee.

To remove the first obstacle, we are seeking to amend the law to make non-permanent residents not lawfully employable if they breach a condition of stay imposed on them. This means that employers who employ non-permanent identity card holders for any full-time or part-time job outside the scope of the authorization approved by the Director of Immigration will commit an offence under section 171 of the Immigration Ordinance, which carries a maximum fine of $350,000 and imprisonment for three years.

To overcome the second obstacle, we also propose to require employers to inspect the travel documents held by job-seekers who are holders of non-permanent identity cards, as well as their Hong Kong identity cards, to ensure that they are lawfully employable before offering them employment.

To help employers to identify more easily contract workers who are not free to take up employment without prior permission from the Director of Immigration, the Immigration Department has introduced the bilingual and easy-to-read immigration stamp on travel documents of foreign domestic helpers and imported workers. Meanwhile, the Immigration Department is also progressing with the exercise to issue "W"-prefix identity cards to all foreign domestic helpers. These "W"-prefix identity cards are already issued to imported workers under the Importation of Labour Schemes. The new stamp and the "W"-prefix identity card will together make it easier for employers to discharge their responsibility under the law. Employers who have doubts in ascertaining the employability of job-seekers can also make enquiries through the Immigration Department telephone hotline and faxline.

The amendments I have just outlined form part of our package of measures to combat illegal employment. The Bill facilitate the prosecution of unscrupulous employers of illegal labour, and enables law-enforcement agencies to tackle the issue more effectively at source.

Thank you, Mr President.

Question on the motion on the Second Reading of the Bill proposed.

Debate on the motion adjourned and Bill referred to the House Committee pursuant to Standing Order 42(3A).

FIRE SAFETY (COMMERCIAL PREMISES) BILL

THE SECRETARY FOR SECURITY to move the Second Reading of: "A Bill to provide for fire safety improvements to be made to certain commercial premises and to provide for related matters."

He said: Mr President, I move the Second Reading of the Fire Safety (Commercial Premises) Bill.

In January 1994, following a fatal fire at a bank in Shek Kip Mei, in which 13 people died, the Fire Investigation Team established to examine the circumstances of the incident found that certain types of premises are subject to particular fire risk. These premises are typically older commercial premises, where members of the public are likely to be present in significant numbers. In the light of the Investigation Team's recommendations, we concluded that steps must be taken to reduce this risk by upgrading the fire safety measures in these premises to up-to-date standards as far as practicable. We also concluded that this could only be done effectively through legislation.

The Investigation Team identified a need to upgrade the fire safety installations and means of escape in such commercial premises. After further consideration, we concluded that, if the proposed legislation is to be complete, it should also include requirements to upgrade the standard of means of access and of the use of fire resistant materials.

The provisions in the legislation will apply to premises with a total floor area exceeding 230 sq m where members of the public are likely to be present in significant numbers. Such premises include banks, off-course betting centres, jewellery and goldsmith shops, supermarkets, department stores and shopping arcades. The Director of Fire Services and the Director of Buildings, who will be the enforcement authorities, will be empowered to direct owners of the prescribed premises to implement specified fire safety measures. These measures, which will cover the provision of fire service installations and equipment, means of escape, means of access and the use of fire resistant materials, are already enshrined in codes of practice which have been issued by the authorities after extensive consultation.

We have maintained consultation with concerned business and professional bodies throughout the process of formulating this Bill. We have been encouraged by the level of support we have received for these proposals. In fact, several of the larger commercial establishments have made significant efforts to anticipate this Bill, by taking appropriate action based on the recommendations on which we consulted them. This early, voluntary action is a clear endorsement of the fact that our proposals are sound and reasonable.

Nevertheless, we understand that there have been some concerns on the application of these fire safety measures to other premises. We have already accepted that individual premises vary so much in their design and in their construction that each case will need to be considered on its own merits. We have explained to those concerned that the enforcement authorities will adopt a flexible approach, and will only require measures to be implemented which are reasonable and practicable. Nevertheless, the enforcement authorities need to be provided with the appropriate statutory powers to ensure compliance with these measures when it is necessary in the interests of public safety.

Honourable Members may be assured that our enforcement action will be taken on a measured, step-by-step basis. We do not propose to use a sledgehammer to crack a nut, and minor transgressions will be handled as such. It is only where owners of such premises refuse to comply with a reasonable requirement that we shall take stronger enforcement action. The enforcement authorities will be empowered under this Bill to issue fire safety directions to the owners of premises, requiring improvements to fire safety measures for their premises. Any owner who fails to comply with such a direction will be subject to a penalty. For more serious offences, the enforcement authorities may apply to the District Court for an order prohibiting the premises from being used for the prescribed commercial activities.

We have identified some 500 premises without sprinkler systems. We must take early action to improve fire safety measures in these particularly inadequate premises. The Director of Fire Services and the Director of Buildings have already formed a working group to consider the necessary enforcement actions and implementation plan for these premises.

We believe that with the enhanced control of fire safety standards in commercial premises that this Bill will provide, the risks to life and property will be greatly reduced.

Thank you, Mr President.

Question on the motion on the Second Reading of the Bill proposed.

Debate on the motion adjourned and Bill referred to the House Committee pursuant to Standing Order 42(3A).

Resumption of Second Reading Debate on Bills

PUBLIC HEALTH AND MUNICIPAL SERVICES (AMENDMENT) BILL 1996

Resumption of debate on Second Reading which was moved on 15 May 1996

MR LAW CHI-KWONG (in Cantonese): Mr President, when the Bill was gazetted, it caused some wories to certain organizations which provide services to street sleepers. As quite a number of street sleepers need to work during the daytime and the Bill proposes to shorten the notification period, street sleepers therefore start to worry that their personal belongings might be removed by government staff during daytime.

I am in support of making amendment to the Bill, but I hope that the Government will take into consideration the street sleepers' circumstances when handling matters concerning them. I also hope that it will contact the relevant organizations or bodies which provide the services to the street sleepers of the area before taking any action, so as to take care of the needs of individual street sleepers and to conduct the work more smoothly. For this reason, I shall provide some information to help the Urban Services Department to handle the liaison work concerned.

Thank you, Mr President.

SECRETARY FOR RECREATION AND CULTURE (in Cantonese): Mr President, I want to thank Members for their support for the Public Health and Municipal Services (Amendment) Bill 1996.

As I have explained on 15 May 1996 when introducing the Bill into this Council, the purpose of the Bill is to enable the Authority to facilitate early removal of articles or things so placed as to obstruct any scavenging or street sweeping operation. At present, to remove such obstructing articles, law enforcement officers have to give the owner of the obstructing articles a prior notice of not less than 24 hours before taking removal action. This arrangement is obviously undesirable as a notice which is unduly long may result in serious delays in removal and hence reduced efficiency in clearance. To solve the problem, it is necessary to reduce the minimum period of notice given to the owners concerned. The Bill proposes to reduce the period within which the owner is required to remove the articles from 24 hours to not more than 4 hours. The amendment will certainly enhance the efficiency of scavenging operations.

Thank you, Mr President.

Question on the Second Reading of the Bill put and agreed to.

Bill read the Second time.

Bill committed to a Committee of the whole Council pursuant to Standing Order 43(1).

INSURANCE COMPANIES (AMENDMENT) BILL 1996

Resumption of debate on Second Reading which was moved on 14 February 1996

Question on the Second Reading of the Bill put and agreed to.

Bill read the Second time.

Bill committed to a Committee of the whole Council pursuant to Standing Order 43(1).

EMPLOYEES COMPENSATION (AMENDMENT) BILL 1996

Resumption of debate on Second Reading which was moved on 8 May 1996

Question on the Second Reading of the Bill put and agreed to.

Bill read the Second time.

Bill committed to a Committee of the whole Council pursuant to Standing Order 43(1).

Committee Stage of Bills

Council went into Committee.

PUBLIC HEALTH AND MUNICIPAL SERVICES (AMENDMENT) BILL 1996

Clauses 1 and 2 were agreed to.

INSURANCE COMPANIES (AMENDMENT) BILL 1996

Clauses 1 to 35 were agreed to.

EMPLOYEES COMPENSATION (AMENDMENT) BILL 1996

Clauses 1 to 34 were agreed to.

Council then resumed.

Third Reading of Bills

THE SECRETARY FOR RECREATION AND CULTURE reported that the

PUBLIC HEALTH AND MUNICIPAL SERVICES (AMENDMENT) BILL 1996

had passed through Committee without amendment. She moved the Third Reading of the Bill.

Question on the Third Reading of the Bill proposed, put and agreed to.

Bill read the Third time and passed.

THE SECRETARY FOR FINANCIAL SERVICES reported that the

INSURANCE COMPANIES (AMENDMENT) BILL 1996

had passed through Committee without amendment. He moved the Third Reading of the Bill.

Question on the Third Reading of the Bill proposed, put and agreed to.

Bill read the Third time and passed.

THE SECRETARY FOR EDUCATION AND MANPOWER reported that the

EMPLOYEES COMPENSATION (AMENDMENT) BILL 1996

had passed through Committee without amendment. He moved the Third Reading of the Bill.

Question on the Third Reading of the Bill proposed, put and agreed to.

Bill read the Third time and passed.

MEMBER'S MOTIONS

PRESIDENT: I have accepted the recommendations of the House Committee as to the time limits on speeches for the motion debates and Members were informed by circular on 27 May. The movers of the motions will each have 15 minutes for their speeches including their replies, and another five minutes to speak on the proposed amendment, where applicable. Other Members, including the mover of the amendment, will each have seven minutes for their speeches. Under Standing Order 27A, I am obliged to direct any Member speaking in excess of the specified time to discontinue his or her speech.

DECLARATION OF POLITICAL STANCE BY CIVIL SERVANTS

MR SZETO WAH to move the following motion:

    "That this Council considers that Hong Kong's civil service system is the key element in maintaining the social stability, economic prosperity and smooth transition of the community, and opposes any person or organization requiring, directly or indirectly, civil servants especially principal policy secretaries, to declare their political stance and using such declaration as the criterion to examine their eligibility for transition to the new Government."

MR SZETO WAH (in Cantonese): Mr President, this motion should have been put forth more than a month ago. It was because for many times the motion has failed to be selected in the draw that the debate had to be postponed until today.

More than a month ago when the motion was proposed, the clamour for civil servants (especially principal secretary level officials) to declare their political stance and that they must support the provisional legislature loomed like a thunderstorm over the horizons. It cast dark clouds over the territory, as though "the city was on the verge of destruction when the dark overcast bore down upon the city". As soon as the clamour was raised, the whole territory was all public outcries, and the clamour immediately came under strong flak from public opinion and eventually found itself in absolute isolation. Only under these circumstances had the clamour of noises backed off and died down, only to see that those who had clamoured for such even made self-contradictory denials and self-repudiating statements.

Now, it seems that the worst of the issue is over. So why do I still insist that the motion be put forth? Of late, there has been a popular saying: "Judge people not just by their words, but also by their deeds." I think that a more valuable lesson could be gained by reversing the sentence structure into: "Judge people by their deeds, not just by their words." From the past deeds of those who had made the remarks, we can judge whether or not what he says now is credible and whether or not the remarks would be honoured.

It is the usual practice of some people to make U-turns, to go back on their words, to repeatedly make self-repudiating statements and to "square accounts after the autumn harvest." History has provided countless irrefutable evidence. Was it not that WANG Dan had once been praised as a patriotic student? Having served a four-year jail term, he suddenly disappeared about a year ago as if he had vapourized. Now, I have put forth this motion in an attempt to put on record and to establish a new piece of irrefutable evidence in history to testify against the usual practice of those people. But, if I fail to establish such irrefutable historical evidence, then my motion would be boundlessly beneficent and would have served its purpose.

In a democratic capitalist society where a multi-party system is practised, elections are held regularly. The party that has won the support of electors will become the ruling party and form a new government. The party that has been discarded by the electors has to step down and withdraw from government, thus becoming the opposition party. Hence, both the ruling party and the government are replacing one another from time to time. While the ruling party and its government are responsible for the formulation of policies, it is the civil servants who implement these policies. Although the ruling party and the government may be replaced, and the policies changed, the civil servants who implement policies will not consequentially be replaced and changed. They will maintain consistency and stability. Under a multi-party system, civil servants will maintain a neutral political stance and implement whatever policies formulated by whichever ruling party. Such is the civil service system which maintains the normal operations, social stability and prosperity of a country. Such a system is an indispensable component of a democratic political system.

In an autocratic or socialist society, dictatorship by one party is practised. Although regular elections are held, the autocratic ruling party has already decided at the higher level who will be the winning candidate before the votes are cast. It is an election in which the results are already known before any votes are cast. An autocratic party is the permanent ruling party. There is no question of change and replacement of the ruling party and government, except the change of leadership driven by internal power struggle. Party organizations are planted at various levels of national institutions and governments which have to unconditionally accept the leadership of the party. In these institutions and governments, all the key positions are held by party members. Now let me attempt to draw an analogy between this situation and playing mahjong. When one does not want to win his game by a "chicken wini" or a "one Farnii", he assumes a posture that would win a hand of "Waan Yat Sikiii". However, after he has drawn a few more tiles, he even discards all the "Farn Tseiv" tiles, determined to arrange a hand of "Ching Yat Sikv". Civil servants, under a political system as such, can only be the props and instruments in implementing dictatorship by one party. Under a political system like this, even the common people are not allowed to maintain political neutrality, not to mention civil servants. For the sake of differentiating it from the civil service system, I name such a system as the cadre system ─ an indispensable component of dictatorship by one party.

Well, was the system practised by Hong Kong in the past a civil service system? Was it that civil servants had to maintain political neutrality? Yes, it was. The Governor, as the chief executive, though not returned by election in the absence of an elected ruling party, is appointed by the cabinet of the ruling party in Britain ─ Hong Kong's sovereign state which practises a multi-party system and democratic elections. The Governor is also a civil servant of the British civil service system. He must carry out the policies formulated by the cabinet of the ruling party. In respect of the multi-party system of Britain, he also has to stick to his political neutrality. Therefore, the Civil Service under the Governor is a civil service system. In the past, what Governor WILSON implemented were the old policies of the ruling party of Britain. After his replacement by Governor PATTEN, what the latter Governor implements are the new policies formulated by the cabinet of the ruling party of Britain. In the past, what the civil servants of Hong Kong had implemented were the old policies as represented by Governor WILSON; and what they implement now are new policies as represented by Governor PATTEN. The policies may have changed, but they are still policies formulated by the cabinet of the ruling party of Britain. Therefore, I reckon that what is practised in Hong Kong is also the civil service system in which civil servants maintain their neutral neutrality.

I would like to add a few casual remarks here. Recently, some people lodged an "imperial complaint" in London with John MAJOR but only to be snubbed. Not only do they lack any political wisdom, but also political common sense.

About a month or so ago, the clamourings for civil servants to declare their political stance and to support the provisional legislature were indeed subconscious wrigglings of one-party dictatorship. Although these wrigglings have now been temporarily restrained, the old self has to be thoroughly cast off in order to get rid of this subconsciousness.

As I have mentioned, the civil service system and the cadre system are completely different systems. Any attempt to compel civil servants to declare their stance is to change the civil service system to a cadre system ─ an act akin to declaring the thorough bankruptcy of "one country, two systems." Thus the Sino-British Joint Declaration and the Basic Law would be swept into the heap of historical rubbish. What then could we say about social stability, economic prosperity and a smooth transition?

I welcome the amendment which Miss Emily LAU proposes to be made to my motion. Her amendment focuses on some opinions recently expressed. Since these opinions were raised only after the deadline for me to amend the wording of my own motion, perhaps Miss LAU has effectively done me a favour in putting forth her amendment in light of these opinions. I should like to thank her for that! Both Members from the Democratic Party and I will support her amendment. As it is, for something to be achieved, it does not necessarily have to be me to achieve it, but once success is achieved, I will naturally share the honour of it.

Mr President, I had meant to talk about whether or not your recent remark on something that you would be willing to do at your leisure is related to my motion. However, in view of the fact that of late you have frequently "snapped at" others by citing Standing Orders, and as I do not wish to be "snapped at" by you, I have swallowed my intended comments.

With these remarks, Mr President, I move the motion.

Question on the motion proposed.

PRESIDENT: Miss Emily LAU has given notice to move an amendment to this motion. Her amendment has been printed on the Order Paper and circularized to Members. I propose that the motion and the amendment be debated together in a joint debate.

Council shall debate the motion and the amendment together in a joint debate. I now call on Miss Emily LAU to speak and to move her amendment. After I have proposed the question on the amendment, Members may express their views on the motion and the amendment.

MISS EMILY LAU's amendment to MR SZETO WAH's motion:

    "To add "; this Council also opposes the secondment of civil servants to the "Provisional Legislature" as this is equivalent to declaration of political stance" after "transition to the new Government"."

MISS EMILY LAU (in Cantonese): Mr President, I move that Mr SZETO Wah's motion be amended as set out under my name in the Order Paper.

Mr President, I am glad to hear that Mr SZETO Wah welcomes my amendment. I am also thankful to Members belonging to the Democratic Party for their support of my amendment. It is my hope that Members who do not belong to the Democratic Party will also support my amendment because I believe that many government officials would very much like to see the passage of this amendment.

Mr President, I agree to Mr SZETO Wah's motion, which refers to the civil service system as extremely important to a smooth transition. This is because I think we all know that the future 300 days or so will be extremely eventful and turbulent for the Legislative Council; and we even do not know whether our judges can straddle the handover. Under a system which is divided into the executive, legislative and judicial branches, if the executive branch can remain comparatively stable, it can be relied upon as a last resort to maintain control over the situation. I believe this is what the business sector and all the people of Hong Kong would like to see. Therefore, I hope our civil service system will not be subjected to too much impact. This is essential to the smooth transition of Hong Kong.

However, I do not agree to Mr SZETO Wah's remark that civil servants under our existing civil service system are politically neutral. Members may remember that a few weeks ago, after their meeting in the Hague, the Foreign Minister of China and the Foreign Secretary of Britain did not have anything to announce because they had not reached any consensus. Their only consensus was that civil servants should continue to remain politically neutral. When the Secretary for the Civil Service attended a meeting of this Council later he also mentioned this point. At that time, I immediately challenged Mr LAM by asking him what was meant by "political neutrality" and how the Government interpreted this term. My view is that it is impossible to describe our policy secretaries as being "politically neutral" since many important policies are formulated with their assistance. Although the Executive Council is said to be the final decision-maker, policy secretaries know only too well that very often the Executive Council will act like a "rubber stamp" and approve their recommendations. The Executive Council may make certain changes, but, civil servants are after all the people who really formulate policies, though they have to act within the confines laid down by the sovereign state. In any case, they cannot possibly be described as politically neutral.

At that time, Mr LAM Woon-kwong said that this was so because civil servants do not belong to any party affiliations. I remarked that he was joking as they were the "ruling party". The imperial dynasty of the British Empire has governed Hong Kong for more than one hundred and fifty years, a period which is longer than the lifespan of some imperial dynasties in China. He said that if one did not belong to any political parties one could represent public interests. I think this is rather unfair to Members who belong to political parties because he was in fact saying that Members who belonged to political parties could never represent public interests. This is very arrogant and incorrect. I, Emily LAU, also belong to no political party, but am I politically neutral? Fine, if you say "yes", but you had better remember having said so.

Mr President, I therefore do not agree with Mr LAM that civil servants are politically neutral, but I think we should not force them to declare their political stances. Declaration of political stance in the present context means something very simple. Civil servants are of course not asked to declare their stances of supporting the British Administration in Hong Kong. They are asked, as Mr SZETO Wah said just now, to declare their support for a provisional legislature. This means that they are asked to declare their stances on some political issues which depart from the current policies of the British Administration in Hong Kong. This is the point of asking them to declare their political stances. Under such circumstances, the problem of double allegiance would emerge. Why must we force civil servants to do so? What is the point of doing so? Moreover, frankly speaking, since they are civil servants and since policy secretaries have even taken part in the formulation of these policies, they will support the Government's policies. After 1997, those officials who remain in the civil service will continue to support the then Government, and we understand the situation. What is the point of forcing them into such a dilemma now? By forcing civil servants to declare their support for something which the existing Government─ their present master ─ does not support, do people want them to be "fired" immediately? Or, do people want civil servants be ridiculed by members of the public? I think the whole idea is totally meaningless. I do not understand why some people have ever thought of this, and why they have even asked members of the public to declare their support! Many of our colleagues in this Council do not support a provisional legislature because we would not support anything not provided for in the Basic Law and the Sino-British Joint Declaration. We maintain that as far as legal basis is concerned, the existence of a provisional legislature is absolutely questionable. It is my view that we should not force civil servants to declare their stances. That said, I certainly do not agree that they are politically neutral.

Mr President, I have sought to amend Mr SZETO Wah's motion because the chairman of the Hong Kong Chamber of Commerce, Mr James TIEN, has written to Governor PATTEN, asking him to accept a provisional legislature as part of the political reality. He has asked the Government to second civil servants to assist a provisional legislature in its work. In no way can I accept this proposal. Firstly, as a matter of principle, the Government of Hong Kong does not support a provisional legislature. Though it is reluctant to say that a provisional legislature is an illegal organization, it has pointed out that if the Chinese Government insists on setting up a provisional legislature, it would have to explain to the general public how such an organization is in keeping with the Sino-British Joint Declaration and the Basic Law. In other words, the Government of Hong Kong has implied that the setting up of a provisional legislature is not in keeping with these two documents. Therefore, it can be seen that the Government of Hong Kong does not support a provisional legislature as matter of principle. Many Legislative Council Members also do not support a provisional legislature, and as a result, we will never ask the Government to second civil servants to work for them.

In terms of practicability, Mr President, I also believe that it is very difficult to entertain the request for secondment. This is because the workload of our civil servants are already very heavy. So, in case some officials are seconded out, will the highest management of the Government be directly affected? Also, I have heard that they want to second two officials, namely, the Secretary for Security and Secretary for Constitutional Affairs. If these officials are seconded out of the Government, would the operations of the Government be severely affected? This proposal is put forth by business sector organization. However, it is worth pointing out that what the business sector desires most is a smooth transition, an environment in which they can make money and carry on with their business. Will it be in the interests of the business sector and the six million people of Hong Kong if the whole Government were in a complete mess, or collapsed, or even paralyzed?

Mr President, in terms of practicability and principle, I will not support the secondment of civil servants to a provisional legislature. I trust that many civil servants themselves do not want to be seconded. Of course, those who want to declare their stances and like to do such work can always resign. This applies even to the staff of the Legislative Council Secretariat or Members of the Legislative Council. If government officials resign right away, they can declare their stances as much as they like. However, as long as they stay in their current posts, they must remain answerable to members of the public who expect them to discharge the duties required. Therefore, both myself and many colleagues of this Council will never render our support, nor will we allow the Government to second civil servants, to a provisional legislature.

Mr President, with these remarks, I move my amendment, and I also support Mr SZETO Wah's motion.

Question on the amendment proposed.

MR MARTIN LEE (in Cantonese): Mr President, that the Hong Kong community is concerned about the political neutrality of civil servants is due to the fact that after the Preparatory Committee (PC) had passed the resolution on 24 March to form the provisional legislature, Chinese officials asked government officials at the policy secretary level to declare their support. Therefore, our debate today is directly and closely related to the provisional legislature.

There is only one single purpose in the Beijing Government's forcing the provisional legislature upon the people of Hong Kong, including civil servants, that is, to assume full control of Hong Kong. Time and again, Chinese officials have claimed that it is the "three non-compliance" political reform package of Governor PATTEN that has led to the establishment of the provisional legislature, as the package has made the convergence of political institutions impossible. However, in saying so, it is merely using the "three non-compliance" political reform package of Governor PATTEN as a pretext to assume full control of Hong Kong. Therefore, as we see it, there is now no question not only of a through train for the Legislative Council, but also of a smooth transition for the Administration and the judicial system. China has claimed that it will place vetting barriers here and there. That the issue about the Civil Service cannot be resolved is due to the fact that China's intention to assume full control of Hong Kong has not changed. Hence, the controversy over the question of political neutrality of civil servants arose under such circumstances.

Mr President, smooth transition and assuming full control are mutually contradictory objectives. If full control is to be assumed, a separate centre of power has to be established. China claims that since the Special Administration Region (SAR) Government has yet to be formed, it is necessary for China to represent the SAR. At present, the Preporatory Committee is already playing such a role, intervening in all matters ranging from school textbooks to the Western Corridor. On top of this, as it also aims to suppress the rights and freedom of Hong Kong people, it therefore wants to amend the Hong Kong Bill of Rights Ordinance (BORO) and revert to the draconian laws of the colonial government. Someone must do this job. Those people who had served under British appointment but have now turned into people who cherish the so-called "love for China and for Hong Kong" are simply incompetent for the job. Now that Beijing wishes to "cut the Gordian knot" by way of the provisional legislature passing draconian laws that would give it full control of Hong Kong before 1997, it becomes necessary to mobilize civil servants to provide assistance.

Here, I wish to sound a warning. In April this year, the Government sent a brief to China on the question of the provisional legislature. In order to dissuade China from launching the provisional legislature into operation before 1997, the Government suggested that civil servants may be deployed to make preparations for the repealing and amending of the laws under the auspices of the Chief Executive (Designate) of the SAR. The Democratic Party objects to such a move because doing so is no different from "surrendering oneself voluntarily".

We would agree to the Government co-operating with the Chief Executive (Designate) and major official team designate of the SAR Government, providing them with information and explaining to them the policies of the Government. But assisting the Chief Executive (Designate) to make preparations for the repealing and amending of laws, changing good laws into draconian ones, amending the BORO and reinstating the draconian laws are tantamount to helping a tyrant to do evil.

The Government must understand that if it tries to do one thing under the cover of another so as to help the provisional legislature and under the auspices of the Chief Executive (Designate), or to do something detrimental to the freedom and rule of law of Hong Kong, not only will it seriously undermine the people's trust in the Government, but will also seriously damage the provision in Article 4 of the Sino-British Joint Declaration. It is because the provision stipulates that the Government of the United Kingdom will be responsible for the administration of Hong Kong with the object of maintaining and preserving its economic prosperity and social stability; and that the Government of the People's Republic of China will give its co-operation in this connection.

Finally, I sincerely hope that the Chinese Government will "rein in before it has gone the leftist way" and give up the intent to intervene in all the matters and to assume full control. As for the British Administration in Hong Kong, it also has to abide by the provision of Article 4 of the Joint Declaration and maintain effective governance before 30 June 1997. Only in this way can civil servants caught in the gap find a way out.

With these remarks, I support the original motion of Mr SZETO Wah and the amendment by Miss Emily LAU.

MR NGAN KAM-CHUEN (in Cantonese): Mr President, regarding the return of Hong Kong to China, apart from China's determination to implement the concepts of "one country, two systems" and "Hong Kong people governing Hong Kong", the stability of the civil service is also of pivotal importance. Therefore, during the late transition period, we need to be very cautious in our handling of all matters related to the civil service. Although this does not mean a lack of positive attitude in our dealing with matters involving civil servants during the transition period, we are firmly against anyone who attempt to dwell on an imagined problem and oppose the people who stir up unnecessary troubles and arguments about the civil service.

Mr President, the wording of Mr SZETO Wah's motion is both misleading and ambiguous. The motion, as it is worded, first highlights the importance of the civil service in Hong Kong, and then goes on to oppose the declaration of political stance by civil servants, especially principal policy secretaries, as though any such declaration will definitely damage the civil service of Hong Kong. Actually, under some situations, declaration of political stance is both necessary and in keeping with the law, and will not cause extensive damage as suggested by the wording.

According to Article 104 of the Basic Law, principal government officials of the Hong Kong Special Administrative Region (SAR) must, in accordance with legal requirements, swear to uphold the Basic Law and swear allegiance to the Hong Kong (SAR). No doubt, this is a provision on declaration of political stance. However, in view of Hong Kong's return to China, the declaration of political stance so required is necessary. Since the Basic Law was passed and promulgated by the National People's Congress for implementation with effect from 1 July 1997, and since these criteria for vetting the transition of officials will only take effect and come into operation on the day the sovereignty of Hong Kong is reverted, the declaration of stance involved is entirely legal and there is no question of undermining the civil service system of Hong Kong.

Before 1 July 1997, under the system of colonial government, officials of the British Administration in Hong Kong owe allegiance to the royal family of the United Kingdom. It is impossible for them to declare support for another government which is still in the course of formation. Moreover, the British Administration in Hong Kong has denied having asked its officials to declare their stances on any particular political issues. Similarly, the Chinese Government has never said that principal officials should now declare their stances according to the requirements of the Basic Law or other criteria. Since both China and Britain have not forced civil servants to declare their stances, why does the Honourable SZETO Wah want to take the unnecessary action of putting forth a misleading motion based on an imagined reason?

Mr President, under the Basic Law, only principal officials are required to swear to uphold the Basic Law and swear allegiance to the SAR; there is no across-the-board requirement under which each and every civil servant must declare his/her stance regardless of his/her rank as a pre-requisite for continuation of employment. For those civil servants who are not principal officials, the Basic Law has laid down any specific vetting criteria. However, Article 99 of the Basic Law does point out that public servants must be dedicated to their duties and be responsible to the Government of the Hong Kong SAR. Is this already a provision on declaration of political stance in the eyes of the Honourable SZETO Wah, a provision that would undermine the civil service system?

In Mr SZETO Wah's motion, civil servants of both high and low ranks are worded as one single group to confuse people and suit his purpose. It seems that he wants the declaration of political stance by civil servants to look larger in scope than it really is. Apart from failing to help boost civil servants' confidence in their prospects, this will rock the stability of the civil service instead, thus producing unfavourable effects on a smooth transition and social stability. This runs precisely counter to the spirit expressed in the opening part of the motion. As the motion contradicts itself, how can people be convinced?

On the recognization of and support for a provisional legislature, the Democratic Alliance for the Betterment of Hong Kong (DAB) is of the view that it is simply unnecessary for principal officials to declare their stances at this stage. As the Chinese Foreign Minister Mr QIAN Qichen said earlier, there is only one legislature before 1997. However, as China and Britain cannot come to any agreement on the transition of the legislature, there is a need for the setting up of a provisional legislature in order to prevent a legislative vacuum upon the return of Hong Kong to China. Since the provisional legislature thus set up will only start to operate with effect from 1 July 1997, by which time the SAR Government will have been formed, government officials will naturally have to work with it as part of the Government.

Mr President, the wording of the original motion magnifies and exaggerates the seriousness of what should have been an imagined problem. And Miss Emily LAU's amendment, being nothing but a further elaboration of the original motion, will not help solve the problem. For these reasons, the DAB will vote against both of them.

DR YEUNG SUM (in Cantonese): Mr President, the Honourable NGAN Kam-chuen just made some comments on the Honourable SZETO Wah's motion and the Honourable Miss Emily LAU's amendment. I think that Mr NGAN Kam-chuen has evaded two points. Firstly, the essence of Mr SZETO Wah's motion is that declaration of political stance must not be used for the purpose of political vetting. It seems that Mr NGAN Kam-chuen failed to mention the point that China wants to use declaration of political stance as a means of political vetting in determining whether government officials can straddle the handover. In fact, he has not mentioned this most important point. Moreover, he also said that since a provisional legislature would start to operate with effect from 1 July 1997 only, officials would have to assist its work by that time. But, the point is that a provisional legislature will be set up 6 months before the transfer of sovereignty, and there are voices demanding policy secretaries to "switch" to it and work for it. For that reason, there is a need to properly face the motion and amendment of these two Members. It seems Mr NGAN Kam-chuen has not responded directly to these two questions.

Mr President, as the spokesman for the Democratic Party on constitutional affairs, I speak in support of Mr SZETO Wah's motion and Miss Emily LAU's amendment, and object to the political vetting of Hong Kong civil servants by China. I also object to the request made by the chambers of commerce for the Hong Kong Government to second officials at the Secretary level to work for the Preparatory Committee (PC) on law drafting.

Mr President, our civil service has all along been adhering to the policy of "political neutrality". This means that civil servants are themselves professional administrators who faithfully execute Government policies and seek to serve the public without any political agenda of their own.

No doubt, Mr President, I have been very critical of the Government's policies, but I still have very high respect for those hardworking civil servants who make the best of their endeavours to accept public opinions as far as possible. Although we have different stances and are playing different roles, this does not affect my respect for civil servants.

However, Mr President, the recent actions of the people on the Chinese side have produced great impact on the civil service, and have seriously affected their morale. As the transfer of Hong Kong's sovereignty draws near, whether or not civil servants will be able to stay in service seems to have become a hot topic of discussion in Hong Kong.

Mr President, I want to put it very strongly today that China must respect the operation of the civil service and the morale of civil servants. It must not turn civil servants into the victims of Sino-British disputes by conducting political vetting on them. The reason is very simple. If China frequently asks civil servants to make open declaration of their support for a provisional legislature or to assist it in its work, it will only undermine the civil service tradition of "doing one's utmost to fulfil the duties of one's post". It will also plunge civil servants, especially policy secretaries, into a difficult situation in which they have to be accountable to and work for two legislatures. The biblical saying that one man cannot serve two masters does have a certain degree of truth in it.

Mr President, the Legal Adviser of the Legislative Council has already pointed out that setting up a provisional legislature in Hong Kong before 1997 is against the Letters Patent and the Royal Instructions. Some members of the chambers of commerce in Hong Kong are themselves Members of this Council. Given this, it is really absurd for them to send a written submission to the Governor, asking him to second some policy secretaries to assist a provisional legislature in law drafting. They should know in the first place that the setting up of a provisional legislature in Hong Kong by China before 1997 is against the constitution of Hong Kong. As Members of the Legislative Council, how can they make such a request? Secondly, have the people and the organizations which made the request given due respect for and consideration to the circumstances and feelings of our civil servants? I believe that those who still remain in the civil service to serve the public nowadays have not chosen to do so just for the salaries and career prospects. They all have the intention of helping Hong Kong face the future. So, should people of these chambers of commerce turn civil servants into the victims of political bickering in such a casual manner?

Mr President, let me reiterate that if the Chinese Government wants a smooth transition for Hong Kong, it must "let the civil servants go"; it must try to understand and respect the civil service system of Hong Kong, its tradition and mode of operation. China should not determine whether civil servants can straddle 1997 on the basis of political vetting.

A provisional legislature is an illegal body, and it is illegal both under the Basic Law and the constitution of Hong Kong. All arrangements made by a provisional legislature may face trail in court in the future. Therefore, Mr President, the civil servants of Hong Kong must never do anything for a provisional legislature; the Government must never second any civil servants to either the Preparatory Committee or a provisional legislature to assist in their work. From both the legal and political points of view, it is both illegal and unreasonable of the Government to assist a provisional legislature.

Recently, there has been unprecedented unity in the business sector. I sincerely hope that the business sector will unite to promote the democratization of Hong Kong's political system and safeguard the rule of law and the civil service system. All along, the business sector has been attaching importance to practical interests. It is precisely because of practical interests that the existing rule of law and the civil service of Hong Kong must not be damaged. If these two cornerstones of society were destroyed, what practical interests can there be for the business sector, be these practical interests short or long-term?

Mr President, I hope that the Hong Kong people will not blindly pledge allegiance to China and rashly destroy the rule of law of Hong Kong and the civil service.

Mr President, with these remarks, I support Mr SZETO Wah's motion and Miss Emily LAU's amendment.

MRS ELIZABETH WONG: Mr President, within the parameters of Hong Kong's unique, if not peculiar, executive-led Government, we have nevertheless a proud Hong Kong Civil Service. I think I am not exaggerating to say that every civil servant is there to serve the community like many of our honourable friends elected by the people to serve the people. Their spirit is to serve Hong Kong.

Whilst I am no expert on the definition of the term "political neutrality" ─ I do not think it is even up to me to define it, it is up to the Secretary for Civil Service to do this ─ but with my many years of experience in the Civil Service in my previous incarnation as a civil servant, I can truly say that every self-respecting civil servant serves the general public irrespective of personal political affiliation or alignment. To me, "political neutrality" would mean simply the Civil Service serves the people without fear or favour.

There is a clear distinction, therefore, between what is a private affiliation and a public duty and a public policy. To depart from this, I think, would be very sad. To compel a civil servant to declare his inner feelings, his political stance, in order to protect a job, in order to save his political future if he has any, is going to be a tragedy for Hong Kong.

To compel a civil servant to declare political stance, as we all know, was debated in Hong Kong, was reported in the press and then retracted very soon after. I took to the street because of that. It would spell the end of declaration of independence of the human spirit. That is going to be a very bad thing for Hong Kong. It will undermine Hong Kong's basic foundation for success, which is the rule of law and the impartiality of the Civil Service which serves Hong Kong people without fear or favour.

With these remarks, I appeal to the powers that be not to do any political vetting because if you vet a person you expect the person to declare political stance. So, I support the spirit behind the original motion and I support the clarity behind the amended motion. Thank you.

MR DAVID CHU: Mr President, I will vote against Miss Emily LAU's amendment because the provisional legislature she so opposes is an absolute reality. Hong Kong civil servants will work with this interim assembly come 1 July next year. Their co-operation with the provisional legislature before that date will assist its preparatory work in the interests of the Hong Kong people and a smooth transition.

I will also vote against Mr SZETO Wah's motion because no one is asking civil servants to be politicized. The concern about a politicized Civil Service stems from the reading of earlier and inaccurate media reports. Director LU Ping has on several occasions ─ including meetings with the Chief Secretary, Mrs Anson CHAN and with a delegation from the Hong Kong Chamber of Commerce recently, stated clearly the Chinese stance regarding the Hong Kong Civil Service. China only wants the Civil Service to serve the future Chief Executive, the institutions of the Special Administrative Region, and the people of Hong Kong faithfully just as it is rendering the same to the present Administration. I am sure our civil servants will not disappoint us.

What Mr SZETO Wah is talking about is essentially a non-issue. The motion indeed appears to me to be an attempt to make something out of nothing. What we need now is the opposite. We should be diminishing controversies and resolving problems, not exaggerating or creating them.

We should also be realistic. Hong Kong civil servants, like their counterparts in all other governments, do occasionally deal with political issues or issues which may have a political slant. The political reforms of 1994, old age pension, housing strategy and the Public Order Ordinance come immediately to mind. Civil servants are expected, out of duty and obligation to the Government, to shape and lobby support for these policies, whether or not they personally agree with the initiatives. Civil servants must certainly stay above the partisan fray, but that is not to say they are entirely shorn of politics ─ particularly the politics of dealing with this Council now and the provisional legislature soon.

To confirm, let me repeat that I shall vote against both the motion and its amendment.

Thank you, Mr President.

MR ALLEN LEE (in Cantonese) : Mr President, there are less than 400 days to go before the transfer of the sovereignty. I feel a bit worried after hearing some Members' speeches. They have expressed a high degree of no confidence towards our future sovereign state, China, and have made some very instigating speeches. Will this be beneficial to Hong Kong? I would like to ask Members to think about it.

Another worrying problem is of course the stability of the civil service. We could all see whether our civil servants were politically neutral when Governor PATTEN proposed the political reform package. Had the three government officials not voted in this Council then, would we have today's scenario? Therefore, when political neutrality of civil servants suits some people, they say that civil servants should remain politically neutral. But when it does not suit some people, they say that civil servants have to declare their political stance. I have heard just too much of such double-standard arguments in this Council in recent years. Today, some people again make use of this opportunity to make oblique accusations. What is their purpose? I find it very difficult to make a guess.

There is nothing wrong with the wordings of the Honourable SZETO Wah's motion. In fact, in other countries, civil servants need not declare their political stance. Once the ruling party has set the policy objectives, they have to carry them out. If the opposition party wins and becomes the ruling party, they have to implement its policies. The Honourable SZETO Wah has also mentioned this point earlier. However, the situation of Hong Kong is different and we ought to understand that politicized issues are not simple.

The amendment proposed by the Honourable Miss Emily LAU does politicize the issue. However, the underlying meaning of what she said at least admits that the provisional legislature will certainly be set up. That is why she said that civil servants would not be seconded to the provisional legislature rather than that the provisional legislature would not exist. At least, she admits that the provisional legislature will exist.

According to a resolution of the Preparatory Committee, the provisional legislature will be set up after the election of the Chief Executive. I do not know whether the Honourable Miss Emily LAU implies that civil servants should not be seconded to assist the Chief Executive. Maybe she thinks that the Chief Executive should wait by himself until 1 July 1997 to start work. Even though the Chief Executive has been elected, he can just sit there and need not start work. In fact, the Chief Executive designate must have his own duties to fulfil and has to cater for the setting up of the provisional legislature because some legislations have to be implemented on 1 July 1997. Therefore, some scenarios are inevitable. Do we expect the Chief Executive, after being elected, to wait until 1 July before he can start work and study which pieces of legislation should be implemented?

This is the political reality. No matter Members of this Council accept it or not, the Chief Executive himself will decide whom he will work with. Of course, those who do not want to work with the Chief Executive can reject it. This power lies in the hand of the civil servants, not the Chief Executive's. They can refuse to work for a new boss or even say that they do not like to work with the Chief Executive. Therefore, the right of the civil servants will not be deprived of.

I do not want to see that today's motion is used by some people to express their personal political opinions and criticize the formation of the provisional legislature. I believe Members of this Council have a thorough understanding of the reasons why the provisional legislature will be set up and its historical background. When the political reform package was proposed at the outset, many people had reminded Members of this Council of the consequences. Therefore, this consequence in fact existed a long time ago. What we now hope for is that the civil servants will work contentedly and continue to serve the Hong Kong people. Recently the Chief Secretary has met Director LU Ping and discussed issues of a pragmatic nature. I believe this is what Hong Kong people actually wish to see. If Members of this Council still engage themselves in political rows, I think it is not productive at all. In fact, I think it is a pity that we do not have the "through train" and this has led to the scenario today. I think there is no point in continuing to argue. I only hope that our civil servants will not be disappointed but will stand fast at their positions and continue to serve the Hong Kong people.

MR MOK YING-FAN (in Cantonese): Mr President with its sustained and steady economic growth, social stability and good order, Hong Kong today has earned itself the reputation of being one of the "Four Little Dragons of Asia". One major reason for the success of Hong Kong today is its time-tested civil service system which has served to ensure that the Government of Hong Kong can work efficiently without any corruption.

In fact, the civil service system in Hong Kong is copied from the "system of civil administration" which has been practised in the west with remarkable success. Political neutrality is a feature of Hong Kong civil servants whose duties are to execute the policies formulated and approved by the incumbent government. Even though they may have their own opinions about some specific policy issues, after the Government or the legislature has reached its final decisions on these issues, they will have to put aside their personal stances, and execute their duties with professionalism and dedication by identifying the most effective way of implementing the policies concerned in a pragmatic manner.

For the sake of strict adherence to political neutrality and upholding the Government's administrative authority, civil servants are not supposed to declare in public their personal stances or express their personal opinions on government policies. Instead, they can only express views which are in line with the Government's policies. It is precisely because of civil servants' strict adherance to political neutrality that they can serve any governments which are in power. It is also because of civil servants' detachment from any partisan struggles that incoming administrations are willing to retain the same civil servants who worked for their predecessors instead of replacing them all. This can be evidenced by the fact the Governors in the past usually came alone to assume office in Hong Kong without any worry that the civil servants in Hong Kong would not co-operate with him. Political neutrality of civil servants has thus guaranteed that government operation will not be affected by the change of leaders. This has led to continuity of government to a certain extent and has also ensured social stability.

This valuable feature of civil servants' "political neutrality" is especially important in the late transition period, not least because the volatile political situation of Hong Kong in recent years and its social repercussions have made political neutrality the only means through which civil servants in Hong Kong can withstand the pressure from all sides, maintain their team morale and continue to work hard to serve the Hong Kong people. This is the value of the civil service system of Hong Kong, an asset we should treasure and safeguard.

For the future prosperity and stability of Hong Kong, we need to ensure that this fine tradition of " a politically neutral civil service" can be maintained under the notion of "one country, two systems" in the future. For that reason, in my opinion, when some individual Chinese officials said that high-ranking Hong Kong Government officials must declare their support for a provisional legislature before they could continue their service after 1 July 1997, they were actually dealing a blow to the fine tradition of a "politically neutral civil service" by asking senior civil servants to declare their political stances. Although clarifications were subsequently made, we still have to note views of this kind and they must conduct some proper introspection. Each time they say anything, they should consider the feelings of the people in Hong Kong.

In fact, it is common in Chinese political culture that high ranking officials are required to declare their political stance openly. But to the Hong Kong people, this practice is altogether strange and odd. It is tantamount to imposing the Chinese political system on the Hong Kong people. It also reflects that when dealing with Hong Kong's reversion to Chinese sovereignty the Chinese side cannot free itself from the confines of its own political culture; this will shake the Hong Kong people's confidence in the realization of "one country two systems", "Hong Kong people ruling Hong Kong", and a "high degree of autonomy". What is more, a precedent thus set will impair civil servants' image of political neutrality in the eyes the of the Hong Kong people, who expect them to be politically detached when executing their duties. Such a precedent will also seriously dampen the Hong Kong people's confidence in the impartiality of civil servants.

Apart from impairing the political neutrality of civil servants, requiring high ranking government officials to declare their political stances will also violate the Basic Law provisions on the transition arrangement for civil servants. According to Articles 101 and 104 of the Basic Law, high ranking officials previously serving in the public service can remain in office provided that they swear to uphold the Basic Law and swear allegiance to the Hong Kong Special Administrative Region (SAR). In my opinion, when 1997 arrives, high ranking officials of the existing government should be considered as willing to owe allegiance to the SAR Government as long as they remain dedicated to their jobs and take the oaths as required by law. There is no need to impose any requirements additional to those stipulated in the Basic Law, such as declaration of political stance.

On the other hand, I do not agree to the suggestion that high ranking officials of the existing government should resign in order to join the preparatory team of the future SAR Government because this will paralyze the existing administrative system, indirectly divide up civil servants now, and deal a heavy blow to the morale of the civil service and the confidence of the Hong Kong people. What is more important is that since high ranking officials can deploy manpower and other resources to assist the preparatory team of the future SAR government only when they remain in office, asking high ranking officials to "switch to the other side" may not be the best way to assist the future SAR Government and may produce the opposite results instead. The best way will be to solve the problems which lie ahead through sincere co-operation between the Chinese and British sides.

In view of the above points, I, on behalf of the Hong Kong Association for Democracy and People's Livelihood, support Mr SZETO Wah's motion and Miss Emily LAU' amendment.

MR CHEUNG MAN-KWONG (in Cantonese) : Mr President, on the eve of the 1997 handover, civil servants are caught in the whirlpool of Sino-British disputes. They have genuinely become the "political sandwich class" and are in an awkward predicament.

First of all, civil servants have to implement the Hong Kong Government's policies while facing continuous interference from the Chinese side which exist everywhere. There was interference in respect of the construction of the new airport and Container Terminal 9, our welfare policy which was criticized by a Chinese official as "wrecking the vehicle and taking people's lives" and the revision of textbooks. It is difficult to predict when China will level criticisms and this makes the officers taking charge of these matters feel disturbed and frightened for fear of provoking this "octopus of power" from Beijing.

But the real nuisance is politics. The Chinese side has asked the high ranking officials of the Hong Kong Government to recongize the Preliminary Working Committee and the Provisional Legislature which are in breach of the Basic Law and to render them full co-operation which pushed these civil servants to a political dead angle. The Honourable NGAN Kam-chuen said that the Honourable SZETO Wah has fabricated rumours and made unnecessary troubles. The Honourable David CHU also commented that Mr SZETO Wah is deliberately making troubles. Let us see how troubles and disputes arise. The Foreign Minister, QIAN Qichen said the Provisional Legislature is something done which cannot be undone; Director LU Ping said that we have to face the reality; Deputy Director CHEN Ziying said that the officials have to recognize the provisional legislature before riding on the through train; the Deputy Secretary General SHIU Sin-por said that there is even no exception for civil servants who sweep streets. This "Chinese quartet" of the provisional legislature are the troubles and disputes instigated by the Chinese side rather than fabricated by anybody out of nothing. All these events reflect that the lower the ranking of the Chinese bureaucrats, the more they have the leftists* views. Their extremely leftists' views really strike terror into people.

Mr President, let us not refer to the provisional legislature as unlawful yet. Everybody knows that, politically, civil servants have to support the policies of the incumbent government. Regarding the issue of the provisional legislature, the Chinese side forces civil servants to oppose the Government, creating disintegration and confrontation within the Administration which will not be beneficial to the stability of the civil service of Hong Kong. Objectively speaking, this will only let people see that the Chinese side does not mind disrupting Hong Kong and breaking down the operational tradition of the civil service, forcing the civil servants to declare their political stance in order to confront Britain.

Declaration of political stance is followed by political vetting. The disaster of the provisional legislature has surprisingly become a political index for measuring civil servants' loyalty to the Chinese side. Those civil servants who do not agree or dare not immediately declare their support cannot ride on the through train. There is no exception even for the street sweepers. As a result, the transition of civil servants no longer relies on the guarantee provided by Article 100 of the Basic Law which stipulates that "public servants may all remain in employment with retained pay", but on political vetting outside the Basic Law. The problem is, if those civil servants who do not declare their support to the provisional legislature now will not be able to ride on the through train, the transition will be politically demarcated and this would entirely destroy the Basic Law. However, in recent years, it is no longer a new thing for the Chinese side to violate the Basic Law. How can the transition of civil servants be expected to be an exception?

What is most disappointing, on the contrary, is the attitude of the Hong Kong Government. The Chief Secretary's remark that they were seeking common grounds and reserving differences has turned on the green light for the unlawful provisional legislature. In its persuasive note to the Chinese side, the Government only emphasized that the provisional legislature will not be accepted before 1 July 1997 and this caused the provisional legislature to brazenly drive past the red light before 1 July 1997. At present, in respect of the selection committee under the control of the Chinese side, is it true that some people have politically commented that organizations of civil servants should be allowed to join the selection committee? Is it proposed that civil servants may join in other capacities such as the representatives of some professional or religious bodies? Once civil servants have joined the selection committee, they can legitimately carry out its functions, take part in the elections of the provisional legislature before 1997, openly declare their political stance and openly contravene Government policies and challenge the Government with opposing views. I would like to ask the Chief Secretary and the Secretary for the Civil Service a question: Do you still have the courage to uphold the principle that civil servants should not declare their political stance of being opposed to the Government and explicitly instruct that civil servants cannot join the selection committee or take part in the elections of the provisional legislature which are unlawful or which contravene government policies? We really do not want to see high ranking officials of the Hong Kong Government emphasizing an executive-led administration in front of the public while being reduced to "attendants of power" in front of the Chinese side, when upholding the rule of law, legal principles and policies, hiding up their cynicism and fear by remaining silent and by evasion. Hong Kong people do not only expect civil servants to adhere to their stance in respect of the provisional legislature. More importantly, they expect that the high ranking officials can uphold the rule of law and stick to principles on cardinal issues of right and wrong so as to make a model of a high degree of autonomy in Hong Kong, instead of giving concessions again and again and eventually abandoning a high degree of autonomy in Hong Kong.

Mr President, I support the Honourable Miss Emily LAU's amendment. As the Hong Kong Government opposes the provisional legislature, there is no ground for it to second officials to work for the provisional legislature, for this will bring about dual allegiance in disguise. I want to rebut the Honourable Allen LEE's argument on secondment. I want to point out further that if the Chinese side fails to second our officials, it will most probably adopt another measure and ask officials to take part in the preparatory work of the provisional legislature under the pretext of assisting the Chief Executive designate. For instance, it will invoke the provision regarding subversion in Article 23 of the Basic Law as a measure to set up a hurdle and re-enacting the electoral law; or restore the Bill of Rights Ordinance. All these can be described as "dismantling the legs of the table of Hong Kong people by the hand of the incumbent high ranking officials and in the name of Chief Executive". Please do not let me predict it right. Provided that this is intended by a party, it will be echoed by the other. Even though the party who has such an intention is Mr LO Tak-shing, who has recently made a lot of empty political promises, I am afraid there and be a lot of willing people who will echo and be "patriotic" for the sake of the general good.

Mr President, with these remarks, I support Mr SZETO Wah's motion and Miss Emily LAU's amendment.

MR CHIM PUI-CHUNG (in Cantonese): Mr President, the political system of a country or region has its own characteristics. For instance, the education now received by Hong Kong people enables them to give comments on the problems surrounding the royal family of Britain. But on the other hand, the king of Thailand is very popular among his people. Therefore, I personally think that criticizing the political system of any country or region will not actually do Hong Kong any good.

When communism emerged in the world decades ago, the Honourable SZETO Wah was also a sworn supporter. However, things have changed as time passed, and he now has his own political orientation. If he is asked who is right and who is wrong, I am afraid he is not quite sure until now. However, regarding the issue of Hong Kong, the Communist Party, as the ruling party of a country, has done what it ought to do in recovering its territory and this is an important event for the Chinese nation. As Chinese, we must support it, the fact that we may have different political views and are living in a different political environment is another issue.

Recently, many Hong Kong people have criticized the provisional legislature. But we all knew that we would have no "through train" after the endorsement of the political reform package on 29 June 1994. Under such circumstances, what do you expect China to do? If Members have any good ideas, I invite them to speak up. If Members are now allowed to ride on the "through train", this is the same as admitting that Britain is perfectly right. As Chinese, do we want to think like this? Members who do not have any good ideas are making wanton criticisms. Are they being responsible? As Members of this Council are accountable to the public, I hope they will make a self-assessment. I am not saying that Members are not right. It is all right to have different political views, but this matter concerns our reasoning, our will power as well as nationalism. If we criticize the Chinese Government, we are indirectly supporting the British Government. I believe the Honourable CHEUNG Man-kwong who is sitting beside me will neither agree nor support this.

Regarding the civil servants of Hong Kong, I would like to give them a word of advice: firstly, they are technocrats; secondly, they should absolutely be politically neutral. Of course, some Members have said that there is no political neutrality, but the incumbent civil servants should absolutely be politically neutral. If a civil servant has his own political deal, he may take up other public office or even become a Legislative Councillor after leaving his office or upon his retirement. This is another issue, but so long as he is in office, he must absolutely be politically neutral; thirdly, their job should be serving Hong Kong people; fourthly, as the British and Chinese Governments cannot achieve smooth transition on a common path, civil servants must take orders from Mr Chris PATTEN before 1997 because he is discharging duties in Hong Kong on behalf of the British Government; fifthly, if they want to transit 1997, they absolutely have to take orders from the Chief Executive of the Special Administrative Region after 1997. I hope that civil servants can responsibly observe these points when answering the questions raised by the media or Members of this Council. Although these are only my personal opinions which may not be absolutely right, they are subject to modifications.

There are comments that they should not recognize the provisional legislature. Quite a number of Members have just said that the provisional legislature is illegal. This may be too radical a view. We should understand that if a smooth transition were possible, there will not be such a mechanism. Although this may not be necessary, people are still forced to do so, is this a bit too radical? Putting forward such an argument will only make us the accomplice of the British Government. I think we can only convince others by putting forward facts. As members of the public, we have to know clearly what is in store for us. In the past few years, we have a number of motion debates on this. (Of course, politics is very often affected by circumstantial and objective factors as well as many other things). If we go into a blind alley or in one direction only, or if we eventually have to backtrack, we will be irresponsible to the public.

It is a fact that Hong Kong will be reverted to China. Too much confrontation will not be productive. I strongly believe that the Chinese Government will gladly listen to constructive and sensible suggestions made by the people of Hong Kong. China does not want Hong Kong to become its burden when it resumes its sovereignty. More importantly, the national policies of China will not be affected by any threats, intimidation, or other confrontation. A country as strong as the United States is still unable to use politics as a weapon to confront China. It can only make its voice heard on other issues such as armament, science and technology and other kinds of trade. So, Hong Kong people should face the reality and provide better and more convincing data to assist the Chinese Government and convey Hong Kong people's views. Of course, these opinions must be well-meant and constructive. I repeat, the situation is not like what some people have said, "I criticize, condemn and defame you, for which I do not have to pay any price." In fact, a greater price will have to be paid in the future.

The Chinese Government has made very clear its attitude towards Hong Kong's future. Of course, after having done that, it needs the co-operation of people concerned in order to ensure a better future for Hong Kong. Of course, there is no need for me to speak on behalf of the Chinese Government. If we make use of motion debates in this Council to wantonly criticize or maliciously defame the Chinese Government, we will benefit the British Government. Although we are grateful to the British Government for establishing a system in Hong Kong in the past, we must clearly understand that it is only reasonable for China to exercise its sovereignty over Hong Kong in the future. So I hope Members will not quibble about this issue any more.

Mr President, I so submit.

MR NGAI SHIU-KIT (in Cantonese): Mr President, it is a tradition of Hong Kong's civil service for civil servants to remain politically neutral. Besides, an executive-led government has been the consensus of those who uphold the prosperity and stability of Hong Kong. However, over the past three years or so, someone has time and again drawn the officials at Secretary level into the political rows on the issues relating to the transition of Hong Kong. This has affected the stability of the entire civil service and aggravated the divergence between China and Hong Kong. In addition, some people who echo such views added fuel to the flame while some, even worse, simply engaged in sheer fabrication out of nothing. They seized upon some pretexts and propagandize their ideas. All these have only made more apparent the instability of Hong Kong which is not advantageous to Hong Kong, neither is this a blessing to the people in Hong Kong. These people should be vehemently reprimanded.

Regarding the political neutrality of civil servants, Mr LAM Woon-kwong, the Secretary for the Civil Service, has earlier on given a pertinent explanation: although the Government has an established stance in respect of all policies, no party interests are involved and the basis of government administration is the long-term interests of Hong Kong as a whole. He added that this can be demonstrated through the process of providing services by the Hong Kong Government now and through the operation of the Special Administration Region (SAR) Government in the future. His words are succinct. In a fair, impartial and unbiased manner, principal government officials formulate policies on various social services according to the actual needs of society and ensure that the overall interests of our society have been most properly looked after.

Maintaining the political neutrality of civil servants is of particular importance at this later stage of the transition. This will not only enhance their confidence but also ensure that the superiority of the entire civil service system can smoothly straddle 1997 to the SAR Government and that the civil servants can continue to serve Hong Kong people. This is very important. This principle should remain unchanged before 1997 or at any time after. The Chinese side has reiterated several times in the past that civil servants should remain politically neutral and give allegiance to Hong Kong people whom they serve. They also stressed that they did not want to see a reshuffle of the principal government officials and expressed its hope that most civil servants could remain in office and continue to work for the SAR Government. Time and again, the Chinese side has made it clear that it attached great importance to this issue and its stance has been made sufficiently clear.

It is regrettable that some people have been making trouble at this later stage of the transition period with an attempt to "muddle up the water" and to persuade civil servants to toe their anti-Chinese line. Since the introduction of the political reform package, all policy secretaries have to carry a plate highlighting the word "bravery" and charge forward in the front line in order to promote the political reform package. Sino-British relations had once fell into low ebb when both social stability and our investment environment took a battering. All these made people feel anxious and disturbed.

Superficially, the motion moved by the Honourable SZETO Wah, a Democratic Party member, emphasizes upholding the civil service system but this is only a smoke screen. They are pretty well aware of who has ruined the tradition of political neutrality of civil servants. Yet they have refrained from mentioning or reprimanding these people. Mr SZETO has also forgotten that the Democratic Party was the supporter of the political reform package. If civil servants are locked in the horns of a dilemma today, the Democratic Party should also be largely responsible. Is today's motion an exact example of thief crying out "stop thief"? I hope Hong Kong people will not be misled by such views, instead they should resist outside political interference together with civil servants and insist on serving the overall interests of Hong Kong.

Mr President, with these remarks, I oppose the motion and the amendment.

DR ANTHONY CHEUNG (in Cantonese): Mr President, the principal focus of the Honourable SZETO Wah's motion today is to maintain the stability of civil servants in the hope that they can have a smooth transition and during the transition to 1997, they will not be subject to any unnecessary political vetting or be forced to declare their political stance.

The civilian administration system of Hong Kong is an important stabilizer for the economic development of our society. However, in recent years, due to the worsening of the Sino-British relations, civil servants are inevitably drawn into the conflicts between Britain and China. Recently, there are suggestions that government officials, especially those at the high ranks, have to pass the "political barricades" set by the Chinese side if they want to work for the SAR Government after 1997. Otherwise, they will have problems in transition. Moreover, it is suggested that some high-ranking officials have to be seconded before the handover, thus causing great anxiety among the civil servants. Such suggestions not only deal a blow to the civilian administration system of Hong Kong, but also ignore civil servants' basic duty to implement government policies. Before 1997, civil servants are duty-bound to uphold the Hong Kong Government's overall stance; after 1997, they will also be duty-bound to uphold the SAR Government's policy decisions.

Paragraph 3(4) of the Sino-British Joint Declaration stipulates that Chinese and foreign nationals previously working in the public service in the government departments of Hong Kong may remain in employment after 1997. Article 100 of the Basic Law has also clearly stated that public servants serving in all Hong Kong government departments before 1997 may all remain in employment after 1997 and retain their seniority with pay, allowances and benefits no less favourable than before. Therefore, we object to imposing on them any additional conditions other than those stipulated in the Sino-British Joint Declaration and the Basic Law. We also object to some people or organizations' suggestion that our civil servants have to declare their political stance because such a requirement will increase the uncertainty to their smooth transition.

Mr President, under the present circumstances of Hong Kong, "political neutrality" practised by our civil servants not only means that they will be "politically aloof" and impartial to the local political parties, but, also like what Mr SZETO Wah has mentioned earlier, they should be a civilian administration system that implements policies formulated by the Cabinet of the British Administration, our sovereign state, that is led by the Governor who is appointed by Britain, and that remains neutral to British politics.

However, the fact that Hong Kong civil servants at present have to implement the policies of Britain, our sovereign state, does not mean that the civil servants of the SAR have to implement the policies formulated by the Beijing Government after 1997. The reason is simple. After 1997, Hong Kong will be ruled under the principle of "one country, two systems", "highly autonomy" and "Hong Kong people ruling Hong Kong". The civil service system of the SAR will not be a part of the civil service system of China and will not be regulated by China's Provisional Regulation on Civil Service. Neither will it give allegiance to the Chinese Communist Party nor abide by the so-called "Four Persistence" as the cadres and civil servants in all government departments of China.

After 1997, "political neutrality" of the civil service system of Hong Kong means that they will practise political neutrality and political aloofness as expected from civilian administration system. They are ultimately accountable to and give allegiance to Hong Kong people. Specifically, they are accountable to the Chief Executive of the SAR who is returned by election and also accountable to the legislature through the executive body, thus subject to the monitoring of the legislature and the public. Therefore, no matter whether it is at present or in the future, civil servants of Hong Kong should not be required to declare their political stance to the Central Government of China. This is of paramount importance to the smooth transition of the civil servants and their stable operation.

Mr President, with these remarks, I support the motion and the amendment.

MR FREDERICK FUNG (in Cantonese): Mr President, as I am also a member of the Preparatory Committee and there may be a conflict of the roles I play if the motion debate touches upon the terms of reference or the scope of duties of the Preparatory Committee. So I do not intend to vote on the amendment of the Honourable Miss Emily LAU.

As regards my views on the incident, I believe my colleagues from the Hong Kong Association for Democracy and People's Livelihood, the speeches I made on public occasions and the documents I submitted to the Preparatory Committee have basically reflected my stance.

I so submit as a record of how I vote on this motion.

MR YUM SIN-LING (in Cantonese): Mr President, with the approach of 1997, people become timid and scared. It goes without saying that civil servants have an important role to play in maintaining the prosperity of Hong Kong and stability of society. In the past, civil servants, have all along been holding themselves aloof from the influence of partisan politics, and hence been able to exhibit high efficiency in carrying out their work. At this stage, they need to do so and in the coming year, they must remain so in order to conform to the interests of Hong Kong people. For this reason, I support the original motion.

I also support the amendment moved by the Honourable Miss Emily LAU. Nevertheless, the povisional legislature is at present just an imaginary entity and it has yet to be established. Apart from this, a great number of Hong Kong people are still opposed to the establishment of the provisional legislature. Hence, we hope the Chinese side could re-consider whether it is really necessary to set up the provisional legislature. But regardless of whether the provisional legislature would come into being or not , the creation of the post of the Chief Executive is definite. Any proposal made by any person or organization to second a certain secretary or directorate to assist the Chief Executive (Designate) is equivalent to naming the officer for declaration of political stance. I would like to point out in particular that we are not against the idea of the Chief Executive (Designate) obtaining assistance from persons having a lot of experience in the operation of the Hong Kong Government. We are only against the idea of specifying a certain person or official to provide assistance, since such an act of "naming" is equivalent to forcing senior civil servants to declare their stance.

We should make suggestions regarding the selection of personnel to provide assistance. Assistants to the Chief Executive (Designate) may come from aides recommended by various government departments rather than officials directly responsible for the daily operation of the Administration. Alternatively, individuals or companies that have, on past occasions, acted as government consultants may be hired to form a consultancy to assist the Chief Executive (Designate). In fact, since the last Governor Sir WILSON took office, the post of Governor's Adviser has begun to come into existence. And, it has been the practice of government departments to commission various consultancies to examine the operation of the Administration. Therefore, it is basically unnecessary to directly employ the officers in charge of government departments and force them to leave their posts. In so doing, their deputies will be required to carry out their duties on their behalf until they resume duties on 1 July 1997. Such a way of deployment is problematic. On the other hand, the introduction of aids and staff officers to provide assistance would not cause serious disruption to the relevant departments even if they have to leave their posts, because it is their original duties to give advice and formulate strategies and they are not responsible for personnel matters or direct operations. The participation of aides and staff officers, coupled with that of experienced advisers, should give play to the expected effect.

These are my views regarding my objection to the "secondment" of named civil servants, who will be forced to declare their political stance. I hope civil servants can stand fast at their posts and work for the stability and prosperity of Hong Kong after 1997!

Mr President, with these remarks, I support the original motion and the amendment.

MR LEE CHEUK-YAN (in Cantonese): Mr President, it is a fad to declare one's political stance. Fortunately, today, we have a motion moved by the Honourable SZETO Wah today against the declaration of stance. His motion brings to Hong Kong a fresh breeze of political culture. This motion debate involves the two completely different political cultures in China and Hong Kong. Hong Kong's success has done a good job in "counteracting" the political culture of stance declaration under the one-party dictatorship in China.

I believe Hong Kong owes its present success mainly to the fact that, in the past decades (except during the 1967 riot), it has been able to "keep itself at a distance" from political movements in Mainland China. It was thus able to stay clear of China's political unrest and power struggles, thereby developing into a place which upholds the rule of law and freedom, and thus enjoying a promising business environment.

However, very unfortunately, as 1997 approaches, Hong Kong has begun to lose such superiority. Originally, the principles of "one country, two systems" and "Hong Kong people ruling Hong Kong" have been clearly spelt out in the Sino-British Joint Declaration (the Joint Declaration) and the Basic Law. The original intention was clearly to continue to maintain a distance between the economic and social systems of Hong Kong and the system of one-party dictatorship in China. The decision-markers who designed the Joint Declaration knew clearly at that time that for Hong Kong to continue to be prosperous and stable after its reversion to China in 1997, it is necessary to ensure that the Hong Kong community will not be influenced by the political climate in the Mainland and that it will still respect the rule of law, human rights and freedom. The Joint Declaration has provided for a safety net of democracy and that the members of the post-1997 Legislative Council will be returned by election.

Unfortunately, however, the promise of "one country, two systems; Hong Kong people ruling Hong Kong" have been forsaken as the leaders of the Chinese Communist Party have imposed their patriarchal ruling style on Hong Kong, and they handle the affairs during the transition with the mentality of "the sovereign descending the world". The establishment of the provisional legislature is but an act of dismantling completely the safety net of democracy. With supreme arrogance, they have recently made some direct or indirect requests and compelled civil servants to declare their political stance, setting this as a vetting standard for permitting transition to the new government. Even worse, they have requested the secondment of civil servants to the provisional legislature. All these boil down to one simple request in essence, that is, to be consistent with the central authorities. Requesting civil servants to declare their political stance is just one example. Punishing the Honourable Frederick FUNG for not agreeing to the setting up of a provisional legislature is another. Refusing to let the Hong Kong Professional Teachers' Union to attend the consultation forum of the Preparatory Committee is yet another. It is extremely common for us to find instances of the Chinese Communist Party demanding that Hong Kong people be obedient and remain consistent with the central authorities. In future, such instances will only grow in number. If matters develop this way, how can Hong Kong enjoy a high degree of autonomy and support a favourable business environment after 1997?

Recently, the Chief Secretary, Mrs Anson CHAN, has indicated to the delegates attending the Commonwealth Parliamentary Association Seminar with much optimism that she hoped Hong Kong would maintain "one country, two systems" in the 50 years to come and that finally, perhaps after 100 years, Hong Kong and China would be "one country, one system" ─ commonly adopting the Hong Kong system. But, if Hong Kong people do not unite together today and defend the Hong Kong system and its culture, I am afraid the Chief Secretary's prophecy would come true 100 years earlier. There will also be "one country, one system", but it is the Chinese system which would start to exist in Hong Kong in July 1997, which means freedom will be suppressed and politics will be prioritized among all affairs. Legislators, judges, civil servants, media workers alike would have to declare that their stance is consistent with that of the central authorities, otherwise they would have to "alight". I trust Members in this Chamber know very well what would become of Hong Kong if the scenario comes true. Would Hong Kong continue to be a community upholding the rule of law and freedom as well as corruption-free? How could Hong Kong then provide a healthy and favourable environment for investment?

The most lamentable thing is that Hong Kong people fail to unite themselves in regard to this issue and they cannot tell China in one single voice their worries over the disappearance of "Hong Kong people ruling Hong Kong". More lamentable and detestable than this is the fact that besides failing to unite themselves, some wealthy and powerful Hong Kong businessmen curried favour with high-ranking officials of the central authorities in the past and toed the line of the policy of the Beijing Government on Hong Kong. The criticisms made by the Governor, Mr Chris PATTEN, in the United States on the tycoons in the Preparatory Committee caused the seven big commercial associations to jointly send a letter to Mr John MAJOR in denunciation. In response, the Governor stressed that he did not use the term "betray". Then, what the Governor said was not thorough enough. In fact, the businessmen among Preparatory Committee Members have really betrayed Hong Kong and democracy in Hong Kong. The only point I want to add is that the first party to betray democracy is the British Government represented by the Governor, Mr Chris PATTEN. In the past, Hong Kong was jointly governed by elite businessmen and the British Government in Hong Kong. Therefore, the elite businessmen in Hong Kong have learnt the betrayal of democracy from the British Government. They have learnt to always attach themselves to bigwigs. Behind their act of betrayal are their individual business interests which are in complete conflict with the interests of Hong Kong as a whole.

The latest move of the business sector is to request that civil servants be seconded to the provisional legislature. Surprisingly, it was a Member of this Council who made such a request. Why are Members of this Council so eager to undermine the present Legislative Council? Do we want officials to hold discussions about legislation at the Legislature Council today and then go to the provisional legislature on the other day to study means to nullify what has been legislated? If this happens, greater chaos will be caused and the operation of the Legislative Council disrupted. Although the General Chamber of Commerce has stressed in a statement that it has to co-operate with the present Legislative Council, we believe it was just a casual remark. Let me quote a popular saying: "Listen to what one says and observe how one behaves", the commercial associations are actually attempting to consolidate the provisional legislature, taking co-operation with the Legislative Council as a disguise.

Lastly, I sincerely hope that people in power who have intentionally or unintentionally betrayed Hong Kong people in the past can understand that if they continue to please the ruling party in respect of everything, they will be infringing upon the interests of the general public, other businessmen and eventually their own long-term interests. I would like to request Members to return to the right track before it is too late.

With these remarks, I support the original motion moved by the Honourable SZETO Wah and the amendment by the Honourable Miss Emily LAU. Thank you, Mr President.

MR JAMES TIEN (in Cantonese): Mr President, before the Honourable SZETO Wah moved his motion today, we originally thought that the wording of the motion, such as that about the neutrality of the Civil Service, was very neutral. What came up to our mind earlier was whether the composition of the Legislative Council would be the same as what we have today if the Civil Service is really neutral. About this time in June 1994, the political reform proposed by Mr PATTEN, the Governor, was carried by 29 votes to 28 and we were defeated by only one vote. If the three Official Members at that time had not voted for the proposal, would there still be 29 votes? Given 29 minus three equals 26, 26 would naturally lose out if it is against 28. Should this be the case, Members sitting in this Council today might not be all of us who are now here. The business sector has never supported Mr PATTEN's political reform package under which Members of the Legislative Council were elected. Now things just go the other way round, with some people saying that the civil servants should be politically neutral. Is this right to say so? If it is to their advantage, they would say that the civil servants need not be politically neutral. If it is not, they would say that the civil servants should remain politically neutral. I think we find it a bit difficult to accept such argument.

On the other hand, someone raised the question as to whether the provisional legislature needs the assistance of government officials, including a limited number of high-ranking officials. Today I am glad to hear the motion of the Honourable Miss Emily LAU because in moving this motion, she has at least accepted the provisional legislature. There is no need for discussion if she does not accept the legislature. If she does not accept it, that will be the end of the story and it will not be necessary for discussing whether or not we should support the civil servants to render assistance to the provisional legislature.

At a meeting of the Legislative Council Panel on Constitutional Affairs, the Honourable CHEUNG Man-kwong commented that government officials (who have all left their seats today) were hypocritical and have refused to face the reality. According to Mr CHEUNG, the officials kept cheating us by saying that we could have a four year's term of office although it was crystal clear that our term could only last for two years. As a matter of fact, is it, to a certain extent, also hypocritical to move the motion and the amendment today?

Regarding the question of addressing the question of whether the provisional legislature should enlist the assistance of the civil servants, perhaps I should take this opportunity to remind Members again that when the Hong Kong General Chamber of Commerce met with the officials of the Hong Kong and Macau Office on 6 May, the issue of the provisional legislature has been touched upon. The businesses sector was of the opinion that as we did not support the present composition of the Legislative Council, there was a need to amend the law governing election. We considered that a provisional legislature should be put in place to handle the matter. But on the other hand, we considered that it would be best for the provisional legislature to do the least possible work within the shortest period of time possible. Under this premise, we then talked about whether a small number of policy secretaries should be seconded to assist the provisional legislature so as to exert influence and to give advice so that the legislature could finish the work that needed to be done within a shorter period of time and be prevented to do too much work. Such incident was reported by the directors who have visited Beijing to other directors of the General Chamber of Commerce at a meeting on 10 May. And, upon the request of the directors, I have, in the capacity of Chairman of the General Chamber of Commerce, written a proposal to Mr PATTEN. The views contained therein are not my personal opinions but are simply intended to make the provisional legislature do less work and prevent it from spending too much time in actually doing the work.

My honourable colleagues, we can all see that, if not for the assistance rendered by the 300 staff members and legal advisers of this Council, the government officials and the government's legal advisers, I wonder whether we can really handle so many legislative amendments in one or two months? Sometimes, it may have to take half a year. If the provisional legislature really has to do what it needs to do, such as the Immigration Ordinance, to ascertain the immigration issue on 1 July 1997 and the issue relating to the judges, we do not want to see that we cannot even hold a court when cases are to be tried in court in early July 1997. Do we need to deal with a couple of legislation? If the answer is positive, we think that a few civil servants ─ perhaps the term "seconded" cannot fully express what we mean, as we are not saying that they should be seconded on a full-time basis and cease handling Hong Kong affairs ─can give advice only at meetings. Under such circumstances, other civil servants may be required to help amend legislation. In so doing, will that improve the amended legislation and really enable it to be implemented on 1 July 1997. It is for this reason that we put forward our proposal. Of course, we know it is premature to raise our proposal at this point in time, that is June 1996. It might be more opportune for us to wait until January or February 1997 to discuss whether a limited number of civil servants should be seconded when the provisional legislature should have been established. These are our opinions.

Mr President, with these remarks, I oppose the amendment and the original motion.

MR LEE WING-TAT (in Cantonese): Mr President, after listening to the Honourable James TIEN's speech, there is something I do not quite understand, for a politically neutral civil service simply means that policy secretaries or civil servants should be supportive of the decisions made by the politically appointed Governor or the post-1997 Chief Executive, all of which are not personal decisions. Before 1997, existing policy secretaries should unconditionally support the decisions of the Governor and this is well known by everybody. Starting from July 1997, policy secretaries then will have to unconditionally support the Chief Executive and this is also well known by everybody. This is because both the Governor and the Chief Executive are politically appointed or politically elected. If, now before July 1997, policy secretaries are requested to support the political stance of the post-1997 sovereign state, for instance, the provisional legislature, this is indeed a declaration of political stance which is embarrassing to us.

So, I hope Mr James TIEN will understand my position. I hope he would not think that we only adopt positions that are to our advantage. My personal view is that it would be equally unfair to the policy secretaries in office after July 1997 if they are requested to declare once again that they support the Governor, Mr Chris PATTEN, because this is indeed unnecessary. I hope Mr TIEN would not think that we only take positions that are advantageous to us. One more word about a conceptual mistake: the three ex officio Members must support the Governor, because they were politically appointed by a decision made by the Governor. As policy secretaries, they have no choice. If Mr LAM Woon-kwong is asked, he would also have to say he supports the Governor. This is merely very simple political knowledge.

The issue of secondment is in fact impossible. How can secondment be made? Can someone be asked to act as a policy secretary during the day and then assist in the work of the provisional legislature in the evening? In the morning, he says in the Legislative Council that a certain law, such as the Bill of Rights Ordinance is right; while in the evening, he has to say to members of the provisional legislature that it is an undesirable law which has to be amended. We do not want to force people to be politically divided. Even if they have divergent views, they cannot change their views so abruptly. If the worst comes to the worst, their divergent views at most would come by in their somniloquy at midnight. What are we going to do?

Some may say civil servants need not serve the Legislative Council in the morning and then the provisional legislature in the evening. Instead, they can be transferred in large groups or in small groups of two to three people. The problem they face is that some of the policies are formulated by them now. Unless the work they assist in doing in the provisional legislature is totally unrelated to the work they did before, otherwise, they will encounter this: things which were right before would become wrong when they assist the provisional legislature, which is equally embarrassing. More embarrassing than this is that how can the things they do be kept secret? The press will certainly know that. If Mr LAM Woon-kwong were to assist the provisional legislature, as soon as he steps out of his office, he would be asked question like: "So-and-so newspaper. What are your views on this stance. Are you now opposing what you thought before?" Would he have to put on a mask, as suspects attending court hearings would, and then say: "This has nothing to do with me. I am leaving." This cannot possibly be done. What should he do?

Mr James TIEN said it was too early to discuss secondment now. In fact, any time before 1 July 1997 is early, but we cannot evade this issue at all. The Honourable Allen LEE has mentioned whether we are not going to give any assistance to the Chief Executive after he has been elected. In fact, this is not the case. Although we think that the Chief Executive is not elected through a democratic process, at least, his office is in conformity with the Basic Law. We, the Democratic Party, have said very clearly that the provisional legislature is unconstitutional and unlawful, but we have never said that the Chief Executive is so. We have to agree to such an election even though we think that it is undemocratic, since this has been provided for in the Basic Law.

If the future Chief Executive, after being elected, needs any assistance, we may just discuss! At least, officials do not have to encounter the problem of double allegiance and divided political stance. Life is sometimes difficult. Whereas some are used to saying one thing in the morning and another in the evening, I think that life is difficult enough for the policy secretaries and anything which put them in such a dilemma is unacceptable.

I would like to respond to what my three colleagues, namely, the Honourable NGAN Kam-chuen, the Honourable David CHU and the Honourable NGAI Shiu-kit have said. They said the motion moved by the Honourable SZETO Wah intended to make trouble out of nothing. Recently, I have read the relevant commentaries in the Wen Wei Po and the Ta Kung Pao. I think they were all written by the same writer. Is the problem we are discussing created, by Mr SZETO Wah or the Democratic Party, out of nothing? Everything began just about two months ago. How did it begin? It was reported in the newspapers that people on the Chinese side requested policy secretaries to assist or help the provisional legislature or to declare their political stance.

When the matter was first reported, no names but only the "Chinese side" was mentioned, and one could not tell who the people were. But afterwards, all of us could see (unless we did not read newspapers) that an article was published in the Hong Kong Economic Times and it was mentioned that Mr LU Ping had an interview in private with some newspaper reporters. Now that the article has been published, are Mr NGAN Kam-chuen, Mr David CHU and Mr NGAI Shiu-kit saying that the newspaper was publishing lies or fabricating things? Did everyone not read the newspaper two months ago? Who made the statement? Mr LU Ping himself hinted that civil servants should assist the provisional legislature and declare their political stance. Was trouble created out of nothing? Mr NGAN Kam-chuen, Mr David CHU and Mr NGAI Shiu-kit are just deceiving nobody but themselves. They just regarded the things they did not want to see as something they did not see. If they missed the article, the Democratic Party could give them a xerox copy of a page of the Hong Kong Economic Times for them to re-read.

Mr President, I wish to add something to the thief-crying - "stop thief" story just told by Mr NGAI Shiu-kit. Now, in respect of political issues, the Chinese side often gives a little hint and asks others' opinions first. Then some "apple-polishers" or "pro-Communist parties" would chant their support. If, however, reactions are less than favourable, and public opinion is against it, they would refrain from such chanting and then accuse us of inventing stories. This happens every time. This is really a thief crying "stop thief". I hope such groups would, for the interests of Hong Kong people, ponder over what good their acts will do to the Chinese nation and Hong Kong.

Thank you, Mr President.

MR IP KWOK-HIM (in Cantonese): Mr President, today the Honourable SZETO Wah proposes a motion debate on declaration of political stance by civil servants. The Honourable NGAN Kam-chuen has spoken in detail on the position of the Democratic Alliance for the Betterment of Hong Kong (DAB). As Chairman of the Panel on Public Service, I would also like to voice my opinion on the issue.

In terms of wording, both the original motion moved by Mr SZETO Wah and the amendment moved by the Honourable Miss Emily LAU cover the issue of declaration of political stance by civil servants. Miss LAU's amendment also raises an objection to the secondment of civil servants to the provisional legislature. However, we can see clearly that, in fact, no Chinese officials have even publicly requested civil servant to declare their political stance or that civil servants be seconded to the provisional legislature. What the Honourable LEE Wing-tat referred to just now is merely "grape vine" in newspapers. What the Chinese Government has stated publicly have clearly indicated that civil servants need to ......

PRESIDENT: Mr LEE Wing-tat, do you have a point of order?

MR LEE WING-TAT: A point of elucidation.

PRESIDENT: Mr IP, do you wish to yield to Mr LEE who is seeking elucidation?

MR LEE WING-TAT (in Cantonese): Mr President, I wish the Honourable IP Kwok-him would clarify what he meant by "grape vine". Did he imply that the media were lying? I want him to clarify whether he was saying that the media and the newspapers were lying when he referred to the so-called the "grape vine". Thank you, Mr President.

MR IP KWOK-HIM (in Cantonese): I believe everyone knows clearly what "grape vine "means, and I am not prepared to elaborate on the term.

The topic raised by Mr SZETO and Miss LAU can be said to be purely made up and they are taking advantage use of this topic to put forth their ideas. They are just taking the opportunity to attack the provisional legislature. The provisional legislature is a component part of the future Government of the Special Administrative Region. Its constitutional legal status will not be affected by any speeches which wilfully defame or attack the provisional legislature.

Mr President, as the wording of the motion goes, Hong Kong's civil service system is the key element in maintaining the social stability, economic prosperity and smooth transition of the community. Hong Kong has been following the principle of an "executive-led" government. Those responsible for formulating, upholding and executing policies are civil servants. The DAB is unwilling to see that existing civil servants are being drawn into the political whirlpool.

Under British rule, civil servants in Hong Kong owe their allegiance to the Royal Family of the United Kingdom, and abide by the Letters Patent and Royal Instructions. When Hong Kong shall revert to China on 1 July 1997, what the Basic Law requires of civil servants is just that they should "be dedicated to their duties and be responsible to the Government of the Hong Kong Special Administrative Region", whereas principal officials need to swear allegiance to the Hong Kong Special Administrative Region of the People's Republic of China according to the Basic Law and uphold the Basic Law. These are reasonable requirements.

Do Members regard this as a declaration of political stance? If they do, civil servants are obliged to make commitments to those they serve. If, however, they do not regard this as a declaration of political stance, the motion moved by Mr SZETO and the amendment by Miss LAU are just meant to "seize upon a pretext" and give vent to their feelings.

Mr President, with these remarks, I oppose the original motion and the amendment.

MR ALBERT CHAN (in Cantonese): Mr President, I am not sure whether I have got the Honourable IP Kwok-him wrong. He said the Chinese side did not formally ask civil servants to declare their political stance. I am not sure if I have got Mr IP wrong. I am not sure if Deputy Director CHEN Ziying represents Chinese officials or if what that Deputy Secretary General SHIU Sin-por said could represent what the Chinese side wants to say. Deputy Director CHEN Ziying did say that officials need to identify with the provisional legislature for the purpose of transition. This was what he said. If this could not be taken as representing the Chinese side, and if this could not be regarded as a request for civil servants to declare their political stance, I am not sure what then could be regarded as a request for civil servants to declare their stance a request. I wonder if this is so-called "calling a stag a horse"? It is pretty obvious that some officials have requested Hong Kong civil servants to do certain things, but surprisingly, some Members of the Legislative Council said the Chinese side had never said so.

Mr President, many people talked about the issue of neutrality of civil servants. I have tired hard to think but still I fail to understand the rationale and logic of certain Members. They think that civil servants should be politically neutral. They saw no problem when many civil servants strived to defend the policies of the Hong Kong Government in the past. However, when some civil servants defended Governor PATTEN's reform package, they said those civil servants were not politically neutral. It seems that their logic is, if government policies defended by the civil servants are consistent with their stance and demands, they would consider that the civil servants are politically neutral. However, if the policies defended by the civil servants, particularly certain political stance the civil servants take, are not consistent with their views, they would say that the civil servants are not politically neutral. Perhaps we need to better understand what the lines of thinking and logic of their rationale are all about? Indeed, even if the Government wants to explain what the neutrality of civil servants means, I think the Government definitely could not convince every Member what it means. But in fact, it is very simple. Political neutrality means that civil servants absolutely obey government decisions and execute established policies formulated by the ruling authorities, without making any interpretations, instead of acting in accordance with their own preferences. This is what neutrality means to civil servants in a traditional civil service system. We are not saying that they have no political stance. Their stance is the same as the political stance of the Government, which they have to take.

Mr President, I wish to mention another point. Just now, a Member mentioned in his speech that people from the democratic camp has no faith at all in China. Let me state a historical fact. When the Sino-British talks on the future of Hong Kong were underway in the early eighties, some people demanded sovereignty in exchange for a governing power. A number of these people are now Members of the Preparatory Committee. If they had faith in China, why did they refuse to accept the reversion of sovereignty and, instead, propose that Hong Kong continued to be ruled by Britain? Some people even mentioned another 50 years of British rule. Did these people, who are not Preparatory Committee Members, have great confidence in China? Although those from the democratic camp at that time unanimously insisted the reversion of Hong Kong's sovereignty, they never demanded or insisted that sovereignty be exchanged for a governing power. Therefore, we need to look back at history to decide whether or not to trust those people. Blindly following those who are now in power does not mean that we have confidence in them.

Mr President, the neutrality of the civil servants is, I think, a very important issue in relation to the long term development of Hong Kong, particularly the transition in 1997. This is also a cornerstone that ensures the continued stability and prosperity of Hong Kong. There is also a need to uphold this principle and tradition. Furthermore, Members should refrain from putting labels on the civil service with their own interpretations that violate or distort logic.

I fully support the amendment of the Honourable Miss Emily LAU and the motion of the Honourable SZETO Wah. Thank you, Mr President.

PRESIDENT: I now invite Mr SZETO Wah to speak on the amendment to his motion. You have five minutes to speak on the amendment, Mr SZETO.

MR SZETO WAH (in Cantonese): Mr President, I find that whenever a debate is conducted in this Council, what a great number of people will become amnesiacs. Someone said I fabricated rumours out of thin air, made trouble out of nothing and so on. I have here with me a stack of newspaper clippings, and I could let him read them, if he wished to, after the meeting. On the 27 March issue of the Ming Pao, a headline in bold types read CHEN Ziying said senior Hong Kong officials must declare their political stance ......

PRESIDENT: Mr SZETO Wah, please resume your seat. I had in earlier debates in the current Session ruled that when I invite the Member to speak on an amendment to his motion, he should confine his remarks on the amendment, and not turning the speech into a general reply because at the end of the debate, there will be an opportunity for Mr SZETO Wah to make a final reply.

MR SZETO WAH (in Cantonese): If requesting civil servants to declare their support to the provisional legislature or be seconded to the legislature is not to be treated as a declaration of political stance, how should we treat it? Could that be a declaration of stance on economy, art, culture or a declaration of stance on nothing, trouble-making or pointlessness?

In moving the motion, I said, "for something to be achieved, it does not necessarily have to be me to achieve it, but once success is attained, I will naturally share the honour of it." This can be representative of my view on the amendment. Some people are calculating in doing everything. If success is achieved, they want people to know they have made contributions. If they cannot claim credit or no one is going to recognize their credit, they will simply not do it. They will not care or be enthusiastic about whether it will succeed or not. The attitude of "for something to be achieved, it does not necessarily have to be me to achieve it" is, therefore, completely different. As far as the thing to be done is meaningful, we should wish it success, totally regardless of whether we could claim credit or we would be recognized for the success or not. We should give active support, participate with enthusiasm and fully identify ourselves with it in order to ensure its success. This is what "it does not necessarily have to me to achieve it" really means. One should naturally feel happy because a meaningful task has been accomplished. Since the task is meaningful, even if one is not benefited, there is bound to be someone who would ultimately be benefited from it. If one's outlook on life is to make benefiting others as the goal of one's existence, then one will share a sense of achievement when the task is successfully completed. The realization of one's outlook on life through the effort of others is what I meant by "once success is attained, I will naturally share the honour of it". The attitude of "for something to be achieved, it does not necessarily have to be me to achieve it, but once success is attained, I will naturally share the honour of it" represents that which I take in behaving myself and handling matters. With this attitude in mind, I support the amendment moved by the Honourable Miss Emily LAU.

SECRETARY FOR THE CIVIL SERVICE (in Cantonese): Mr President, the Chinese Government, the British Government and Hong Kong people unanimously agree that the stability of the civil service is of paramount importance to the smooth transition of Hong Kong. Both Governments often commend civil servants in Hong Kong for the important role they play in maintaining the stability of Hong Kong and ensuring a smooth transition. For example, last year, the Chinese Vice-Premier Mr QIAN Qichen reiterated that the Chinese Government was very much concerned about maintaining a stable civil service and ensuring a smooth transition around 1997. He continued to say that 180 000 civil servants were a major asset of Hong Kong and a reliable strength for realizing the concept of "Hong Kong people ruling Hong Kong" after 1997. In his recent visit to Hong Kong, the British Prime Minister, Mr John MAJOR, also expressed that he appreciated the adaptability of Hong Kong civil servants very much, and that Hong Kong was really lucky to have a high quality and politically neutral civil service. There were numerous other comments.

In fact, the Hong Kong civil service need not be overly humble. Our highly efficient and excellent civil service has achieved glorious results for Hong Kong. Today, I do not intend to make a list of what the civil service has done. I only want to point out briefly that the excellent facilities and services provided by us in respect of housing, education, health, security and recreation only take up 18% of the gross domestic product of Hong Kong. This is a world record absolutely difficult to break. During this transition period, civil servants inevitably have to bear the pressure and worries brought about by changes. Like the general public, civil servants who come from all social strata in Hong Kong have to face great changes brought about by a change of sovereignty and they inevitably have worries over uncertainty. It is the policy of our Government to strive to ensure that civil servants at all levels remain confident during and after the transition period. We are making efforts to enhance the language and management abilities of the civil service and to help civil servants, especially those senior civil servants at management level, to know more about every aspect of China. We will continue to do our best to serve the long-term interests of Hong Kong and perform our duties in a professional manner, with rational judgements and a balanced policy-orientation as well as in good faith. At present, our series of measures for training and policy have the said aim as our orientation. Despite the pressures we are subjected to, the civil service system still remains stable. Our recent recruitment figures are highly satisfactory and the rate of loss of general grade or directorate grade civil servants is at a historical low level. More than 80% of the civil servants have opted for the new pension scheme ─ a sign that they are confident about the future. Of course, some civil servants will leave office, but most of them prefer to stay to continue to serve Hong Kong people.

The Honourable Miss Emily LAU has re-stated her opinion on the issue of political neutrality among civil servants. I do not intend to dwell on the issue with Miss LAU today. In reality, like other things in this city, the administrative structure of Hong Kong has its own characteristics. The policy branches and officials at secretary level are responsible for policy formulation. We need to lobby people from all sectors and defend our position. But this does not mean that as we promulgate policies and defend them, we are representing the interests of certain groups or serving individual strata. As I said earlier, we serve all Hong Kong people, over and above any interest groups or social strata. Very often, in putting forward policies, we have to consult the public, and then make amendments. Our aim is to strike a suitable balance among complicating interests that often arise, and among diverse public opinions. Our usual practice in respect of the implementation of major policies is that comprehensive public consultation will be made before formulating policies. As the Honourable Mrs Elizabeth WONG and the Honourable Albert CHAN have said just now, the position of the secretaries represent the overall position of the government in respect of administration, totally unrelated to their personal political beliefs or interests and the groups they personally belong to, regardless of the political stance of these groups. This is what we call the "political neutrality" of civil servants, especially those at senior level.

In the debate a moment ago, most Members agree that civil servants have to be politically neutral. This is a conviction of the Hong Kong Government. I wish to take the opportunity of this debate to stress once again the statement made by the Foreign Ministers of Britain and China, both of whom are in fact upholding the same position. Both Foreign Ministers agree that for Hong Kong to survive the transition, the continuity of the civil service system is the most important. They also reiterated that they would strive to make sure that civil servants remain politically neutral, and agreed that before July 1 1997, civil servant should owe their allegiance to the Hong Kong Government, and try their best to serve Hong Kong people. After that, civil servants should owe their allegiance to the Government of the Special Administrative Region (SAR) and they will also try their best to serve Hong Kong people. This view was unanimously held and clearly expressed.

I would also like to repeat briefly that the qualifications to be possessed by principal officials of the future SAR Government have been set forth in detail in the Basic Law. I will not go into details about these provisions. We firmly believe that the continuation of a civil service system and a transition for principal officials are of utmost importance to the successful and smooth transition of Hong Kong. We will determinedly abide by the conditions for the transition of the civil service system and principal officials as provided for in the Joint Declaration and the Basic Law and we will strongly oppose any other conditions. On the basis of such a position, we identify with the spirit of the motion moved by the Honourable SZETO Wah. In regard to the amendment put forward by Miss Emily LAU with the addition of "this Council also opposes the secondment of civil servants to the 'Provisional Legislature'", I would say as I clearly expressed in this Council last week, that the Government undertakes to continue to fully co-operate with the present Legislative Council and we would not give any assistance to the provisional legislature. However, as I have indicated before, we would fully co-operate with the Preparatory Committee and the future Chief Executive (Designate). We would provide reasonable assistance on matters having a basis for co-operation.

Mr President, the Hong Kong civil service is a highly professional, efficient and politically neutral team, widely supported by the general public. For many years, we have been trained to have a high degree of endurance and adaptability under the pressure brought about by changes. We are now used to being confronted with unexpected news or surprising events. In regard to these pressure and problems, we have proved in the past that we could handle all these with ease. We are confident that we will, as we did in the past, under the premise of protecting the long-term interests of the general public, determinedly uphold the spirit of "one country, two systems" and "Hong Kong people ruling Hong Kong", within the ambit defined by the Joint Declaration and the Basic Law. During the transition period and in the years to come, we will, together with the community, make efforts to build Hong Kong into a better and highly autonomous city. Thank you, Mr President.

Question on the amendment put.

Voice vote taken.

THE PRESIDENT said he thought the "Ayes" had it.

Miss Emily LAU claimed a division.

PRESIDENT: Council shall proceed to a division.

PRESIDENT: I would like to remind Members that they are now called upon to vote on the question that the amendment moved by Miss Emily LAU be made to Mr SZETO Wah's motion. Will Members please register their presence by pressing the top button and then proceed to vote by choosing one of the three buttons below?

PRESIDENT: Before I declare the result, Members may wish to check their votes. Are there any queries? The result will now be displayed.

Mr Martin LEE, Mr SZETO Wah, Dr LEONG Che-hung, Mr Albert CHAN, Mr CHEUNG Man-kwong, Mr Michael HO, Dr HUANG Chen-ya, Miss Emily LAU, Mr LEE Wing-tat, Mr Fred LI, Mr James TO, Dr YEUNG Sum, Mr WONG Wai-yin, Miss Christine LOH, Mr LEE Cheuk-yan, Mr Andrew CHENG, Dr Anthony CHEUNG, Mr Albert HO, Mr LAU Chin-shek, Dr LAW Cheung-kwok, Mr LAW Chi-kwong, Mr Bruce LIU, Mr MOK Ying-fan, Mr SIN Chung-kai, Mr TSANG Kin-shing, Dr John TSE, Mrs Elizabeth WONG and Mr YUM Sin-ling voted for the amendment.

Mr Allen LEE, Mr NGAI Shiu-kit, Mr LAU Wong-fat, Mr Edward HO, Mr Ronald ARCULLI, Mr CHIM Pui-chung, Mr Eric LI, Dr Philip WONG, Mr Howard YOUNG, Mr James TIEN, Mr CHAN Kam-lam, Mr CHAN Wing-chan, Miss CHAN Yuen-han, Mr CHENG Yiu-tong, Mr CHEUNG Hon-chung, Mr David CHU, Mr IP Kwok-him, Mr Ambrose LAU and Mr NGAN Kam-chuen voted against the amendment.

THE PRESIDENT announced that there were 28 votes in favour of the amendment and 19 votes against it. He therefore declared that the amendment was carried.

PRESIDENT: Mr SZETO Wah, you are now entitled to your final reply and you have four minutes 29 seconds out of your original 15 minutes.

MR SZETO WAH (in Cantonese): Mr President, it is fortunate that the delivery of speeches by Members are protected by the Legislative Council (Powers and Privileges) Ordinance. Otherwise, Members would be liable for libels. It does not matter that they said I trumped up a story. It would be serious, however, if they said the press trumped up a story. I have with me a copy of the extract concerning the kite-flying by an authoritative person of the Chinese side, which was published in the Economic Daily on 28 March. We all know very well who this person of the Chinese side was. There were an exchange which goes like this: "How is it going to be settled now," asked the reporter, "and will it be the case that principal officials have to support the provisional legislature for the purpose of transition?" "This is naturally the case. It ought to be so. How can one be accountable to the provisional legislature if one does not support it?" the authoritative person of the Chinese side answered. When I spoke in moving the motion, I had drawn an analogy of the cadre system of totalitarianism with playing mahjong, that is to say, when one does not want to win his game by a "chicken win" or a "one Farn", one assumes a posture to arrange a winning game hand of "Waan Yat Sik". But when one has drawn a number of tiles, one simply discards all the "Farn Tse" and is determined to arrange a winning game hand of "Ching Yat Sik". I do not play mahjong very often, and I have played only twice over the past ten years. However, I am going to use the simile of mahjong playing once again to describe the request for the civil servants to declare their stance of supporting the provisional legislature and the request to have civil servants seconded to assist in the work of the provisional legislature.

First of all, let me talk about compelling the civil servants to declare their political stance to support the provisional legislature. Now, a winning game hand of "Ching Yat Sik in the bamboo suit" is going to be arranged and, according to the rule, the "fore player", "hind player" and "opposite player" are not allowed to withhold any bamboo tiles, and all tiles of such suit that are in hand must be discarded. Otherwise, the winner will be treated as having a "false claim".

Now let me turn to the issue of seconding civil servants again. This time it would be even more high-handed as what I want to do is arranging an "exclusive hand suit of bamboos" and, according to the rule, the "fore player", "hind player" and "opposite player" have to lay open their tiles, so that I can exchange tiles with them whenever I like. In other words, if I want to swap another's "bamboo" tile with whichever tile I have in hand, he has to give it to me. Seeing that he is going to "call for a win", I will immediately swap a tile with him so that he cannot do so. Why has it to be "bamboo"? It is because "bamboo" can also look like a rope, which can be used for tying up or hanging people.

Mr President, these are my remarks.

Question on the motion as amended by Miss Emily LAU put.

Voice vote taken.

THE PRESIDENT said he thought the "Ayes" had it.

Mr TSANG Kin-shing and Miss Emily LAU claimed a division.

PRESIDENT: Council shall proceed to a division.

PRESIDENT: I would like to remind Members that they are now called upon to vote on the question that the motion moved by Mr SZETO Wah as amended by Miss Emily LAU be approved. Will Members please register their presence by pressing the top button and then proceed to vote by choosing one of the three buttons below?

PRESIDENT: Still one short of the head count. Before I declare the result, Members may wish to check their votes. Are there any queries? The result will now be displayed.

Mr Martin LEE, Mr SZETO Wah, Dr LEONG Che-hung, Mr Albert CHAN, Mr CHEUNG Man-kwong, Mr Michael HO, Dr HUANG Chen-ya, Miss Emily LAU, Mr LEE Wing-tat, Mr Fred LI, Mr James TO, Dr YEUNG Sum, Mr WONG Wai-yin, Miss Christine LOH, Mr LEE Cheuk-yan, Mr Andrew CHENG, Dr Anthony CHEUNG, Mr Albert HO, Mr LAU Chin-shek, Dr LAW Cheung-kwok, Mr LAW Chi-kwong, Mr Bruce LIU, Mr MOK Ying-fan, Mr SIN Chung-kai, Mr TSANG Kin-shing, Dr John TSE, Mrs Elizabeth WONG and Mr YUM Sin-ling voted for the amended motion.

Mr Allen LEE, Mr NGAI Shiu-kit, Mr LAU Wong-fat, Mr Edward HO, Mr Ronald ARCULLI, Mr CHIM Pui-chung, Mr Eric LI, Dr Philip WONG, Mr Howard YOUNG, Mr James TIEN, Mr CHAN Kam-lam, Mr CHAN Wing-chan, Miss CHAN Yuen-han, Mr CHENG Yiu-tong, Mr CHEUNG Hon-chung, Mr David CHU, Mr IP Kwok-him, Mr Ambrose LAU and Mr NGAN Kam-chuen voted against the amended motion.

THE PRESIDENT announced that there were 28 votes in favour of the amended motion and 19 votes against it. He therefore declared that Mr SZETO Wah's motion as amended by Miss Emily LAU was carried.

LEGISLATION ON FAIR TRADE

DR LAW CHEUNG-KWOK to move the following motion:

    "That the Government should enact legislation on fair trade and set up a Fair Trade Commission to enforce such legislation, so as to promote fair competition in various trades and industries and safeguard the interests of consumers."

DR LAW CHEUNG-KOWK (in Cantonese): Mr President, I move the motion standing in my name on the Order Paper.

In 1993, the Honourable Fred LI has moved a very similar motion in this Council and an amendment moved by the Honourable Jimmy McGREOGOR to his motion was passed by a narrow margin of one vote. The crux of the amendment was to improve competition in the market under the existing mechanism.

We admit that as a result of the efforts of this Council and the Consumer Council, some positive responses have been received from the Government. Phenomena such as interest rates on deposits being kept at a low level by banks through an "interest rate cartel" as well as charges for international calls being kept on the high side have all been somehow improved. Yet the problem is, all these have to rely on the large enterprises in the trade which exercise their self-discipline and slowly give up some of their advantageous monopolistic practices. As such, these results are not substantial enough to enhance fair competition in the relevant trade and to protect consumers' interests.

According to an opinion poll conducted by the Association for Democracy and People's Livelihood (ADPL), in regard to interest rates, telephone service charges, petrol prices and so on, a large majority of residents felt that they were not given fair deals and were not satisfied with the position. Nearly half of the interviewees thought that the existing banking cartel on interest rates was unfair to the residents. Nearly 70% of the interviewees regarded the proposal made by major business associations to restrict salary increases to below 9% as unfair to "employees". In addition, 76% of the interviewees thought that the existing situation in which the international telephone service market is still being monopolized by one company needed to be improved. Lastly, about 40% of the interviewees regarded it unfair for all petrol stations to charge a uniform price for petrol.

Many countries have had their own legislation on fair trade for years. Such legislation was enacted in the United States since 1890, in Germany since 1923, in Japan since 1945, in Britain since 1948, in the European Community since 1957, in Taiwan since 1991 and in China since 1995. Similar laws also exist in Korea and India. There are ample precedents and literature for Hong Kong's reference.

In fact, as referred to in a recent article by the Chairman of the Consumer Council, Professor CHEN Kwan-yiu, in as early as the Tang Dynasty more than 1000 years ago, China had already enacted its own "anti-monopoly" laws. Enterprises trying to form price cartel or hinder others from entering the market were deemed to be conducting illegal commercial activities. Convicted businessmen would be caned 80 strokes. I think this wisdom of our ancestors is still of good reference value today. I believe that, to those who manage big enterprises in Hong Kong, caning would be a more effective deterrent than fining.

Modern legislations on fair trade are laid down in small details. Take the United States as an example. In view of people's dissatisfaction towards the price control imposed by large-scale industries, the first "anti-trust" law was passed in the United States Congress in 1890. The Alderman Anti-trust Act contained three salient points, namely:

  1. any attempts to restrict free dealings by agreement, contract or co-operation will be penalized by imprisonment or fines;

  2. any attempts to monopolize the market will be penalized;

  3. the Government has the right to institute legal proceedings and to establish an "anti-trust" department under the Department of Justice to execute the relevant policies and laws.

In 1914, the United States Congress passed a supplementary act, the Clayton Act, to improve the original act. The important clauses of the Clayton Act stated that:

  1. price discrimination is prohibited;

  2. concluding contracts or exclusive dealing contracts which have been ruled to have bearings on competition are illegal;

  3. victims of monopoly, individuals or body corporates alike, could initiate legal action and be compensated;

  4. the Government could prohibit any mergers of companies if it believes that such mergers are deemed to reduce competition;

  5. competing companies should not allow for overlapping management. The Government will also set up an independent "Federal Trade Commission" to conduct investigation and to give verdicts.

I hope that by outlining the main points of the United States legislation, everyone may understand better the specific points of the relevant laws. The United States and the European countries as well as countries and regions in Asia have different historical backgrounds with regard to their policies in "anti-monopoly" and fair trade enhancement, their methods of investigation and mechanism for law implementation are also different. Nevertheless, they all deem it necessary to enhance competition and consumers' interests through comprehensive legislation and the establishment of an independent commission. Their rationale and policies in this respect are exactly the same.

As far as Hong Kong is concerned, in the absence of relevant laws, competition and interests of consumers are at risk while specific unfair market phenomena can be summarized into 4 areas:

(1)Agreements to restrict free dealings

In a number of trades in Hong Kong, product prices are fixed by resolutions among guilds. For instances, rates for small amount deposits less than seven days as well as other charges for banking services are fixed by the Hong Kong Association of Banks, wholesale prices for rice are set by rice importers, major commercial associations would urge members to set an upper limit for salary adjustment, the Law Society has set fixed charges for property transactions as well as the past retail price for newspapers set up by the Newspaper Society of Hong Kong. Furthermore, in some oligopolistic trades (such as petroleum products and the container and port services), major enterprises might most probably have secret agreements on the sale prices.

(2)Monopolistic behaviour in major trades

Some major trades in Hong Kong are not being closely monitored by the Government. These trades include aviation, container and port services, gas supply, telecommunications, real estate and so on. Large enterprises within each of these trades are increasing their influence on the market. Their control over people's livelihood and necessities in the course of economic development is being extended through diversification and co-operation with other consortiums. This has an adverse effect on consumers and others.

(3)Mergers and co-operation among large enterprises

In recent years, Hong Kong has seen arrangements for mergers (examples could be found in the cement industry and the edible oils industry) and co-operation (examples found among large developers and public utilities). The Government has to have a clear structure to investigate into such commercial activities to see if the interests of others in the relevant trade as well as the interests of consumers are unreasonably prejudiced.

(4)Arrangements for Compulsory sale of related products

Many enterprises in Hong Kong require buyers to buy under certain terms and conditions additional products or services in the sale of related goods. For instances, the service of certain lawyers are prescribed by developers in the sale of flats, the service of certain insurance companies is specified when banks make loans, and certain suppliers are specified in lift maintenance in public housing. In addition, while some telecommunication companies require consumers to sign a long-term maintenance contract when purchasing satellite antennae, publishers of school textbooks set a minimum retail price for their goods. Such commercial activities have significantly restricted consumers' right to choose, and thus required to be monitored by means of legislation.

Legislation on fair trade is the "basic law" for a free economy. Its purpose is to improve productivity and protect consumers' interests through enhanced fair competition among enterprises, rather than imposing restrictions on reasonable commercial activities.

Later, three Members from ADPL will analyze the market positions with respect to aviation, newspaper publication and credit cards. Their conclusions will once again show clearly that there is a need for Hong Kong to enact comprehensive legislation on fair trade and to set up a Fair Trade Commission. Although there is self-discipline and monitoring provisions among enterprises, there is no guarantee that free competition exists in the market and that consumers' interests are protected.

With these remarks, I beg to move.

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

Question on the motion proposed.

MR AMBROSE LAU (in Cantonese): Mr Deputy, the motion moved by Dr the Honourable LAW Cheung-kwok is in fact a repetition of the motion moved by the Honourable Fred LI in 1992. At that time, Mr McGREGOR moved a motion in opposition to the motion moved by Mr Fred LI, and Mr McGREGOR's motion was carried by a difference of only one vote. This illustrates that the issue involved in this motion has always been a subject of great controversy.

In fact, does Hong Kong need to enact "legislation on fair trade" and to set up a "Fair Trade Commission" to enforce such legislation?

Mr Deputy, I think there is a need to point out certain basic facts which are vitally important before answering the above question. For example, the service industry accounts for 83% of the Gross Domestic Product (GDP) of Hong Kong. From 1992 onwards, Hong Kong's service industry has been expanding at an average rate of 16% annually, a growth rate that outshines any other regions in the world. The 1995 World Competitiveness Report ranked Hong Kong as the second highly developed service-oriented economy in the world. At the same time, Hong Kong was praised as the freest economy in the world. If man-made obstacles really existed in Hong Kong, that would have deterred other competitors from entering the market and resulted in unfair competition and monopoly, how could our service industry grow at such an impressive speed and why do new players keep entering the market?

The advocation of enacting legislation on fair trade and setting up an enforcement agency, regardless of whether there is an actual need, is based on a fundamental misunderstanding about competition. It is because the rate of market share and fair competition do not necessarily have direct links. The most vital element of fair competition is the absence of man-made obstacles that deter others from entering the market. However, it is not easy at all to judge this element. If we hastily borrowed some anti-monopoly or anti-dumping out policies from the West and, based on these policies, set up a commission to interfere with the operation of a free market, it may not be suitable to the actual situation of Hong Kong. Judging from the price reduction war between the two supermarket chains that has resulted in the closure of many smaller provision stores a few years ago, can we confirm that the two supermarket chains were monopolizing the market by engaging in a battle of annihilation? Or could we say that the two supermarket chains' success in gaining a greater market share is due to their abilities to adapt themselves to the needs of the consumers when competing freely? Again let us cite the newspaper pricing war broke out at the end of last year. How can we actually specifically define who is engaged in dumping and who is just promoting one's business? For this reason, even if we can formulate an abstract principle on legislation on fair trade, it still presents enormous difficulties if the legislation is to be enforced in specific terms. And, even a minor careless mistake will interfere with the normal operation of the market.

Mr Deputy, what Hong Kong needs today is not an abstract legislation on fair trade, nor a commission to enforce the legislation. What it really needs is the Government's strengthened monitoring of the market, particularly a strengthened control over the profits of franchised companies. Franchised companies are generally closely related to the economy and the people's livelihood and having franchises implies having control over a relevant market. In recent years, however, franchised companies in control of certain relevant markets, such as those providing public transport services, ask for fare increases every year. Some of these companies even ask for fare increases despite of their huge profits. Under such circumstances, the Government is obliged to strengthen profit control and control fare increases with a view to safeguarding the interests of consumers.

Mr Deputy, at this critical moment of the latter part of the transition period, it is inappropriate to introduce drastic changes to our major economic policies. Therefore, we must exercise extreme caution in considering the proposal of enacting legislation on fair trade and setting up a commission to enforce such legislation as it will involve major changes in our economic policies. The most urgent task for the Government is to adopt pragmatic measures in order to step up profit control over franchised companies and protect the interests of consumers.

Mr Deputy, I so submit.

DR HUANG CHEN-YA (in Cantonese): Mr Deputy, does unfair competition exist in Hong Kong, a place which has been gaining a competitive edge by having free and fair competition? The answer is that unfair competition does exist in certain trades in Hong Kong, and Hong Kong is not free from such a problem as asserted by the Honourable Ambrose LAU. The issue of monopoly has for long been a subject of discussion and the Honourable Fred LI will later be speaking on this issue on behalf of the Democratic Party. I will therefore focus my discussion on another subject. Since 1994, the Consumer Council has been conducting case studies on certain trades and it has come to the conclusion that four other acts may have upset fair competition, namely: exclusive dealings, resale price maintenance, unfair competition and collaborative price fixing.

To address these acts of unfair competition, the Government must enact "legislation on fair trade" and set up a commission. If the Government turns a blind eye to this problem and allows these acts to exist and spread, our free market mechanism will be seriously distorted. The economic efficiency of the manufacturers will be reduced rather than enhanced and the interests of the consumers will be exploited, they have to bear the brunt of high commodity prices and few varieties and the Consumer Council's surveys carried out in the past would prove futile.

We think that the Government must take a square look at the phenomenon of unfair competition. Let me, in the first place, cite some examples. Firstly, the two major supermarket chains in Hong Kong prohibit the suppliers from participating in commodities fairs during peak seasons, thereby prohibiting them from selling their products directly to the consumers. This is an example of exclusive dealings. Firms also prohibit their trading partners from dealing with their competitors. If this is practised over a prolonged period, it would be very difficult for competitors to enter the market. The existing firms may then dictate the price in a competition-free environment, thereby limiting the choice of the consumers to the two existing supermarket chains. The prices of the products may will also be dictated by them. For the suppliers, since the sales channels are limited, they cannot produce on a large scale and enjoy the advantage of low costs which would be brought about by mass production. As a result, the ex-factory prices of products are higher. This would reduce the competitiveness of the suppliers and jeopardize the interests of the consumers.

Mr Deputy, the Trade Association on Textbooks which controls the wholesaling of textbooks provides that retailers could at most offer consumers a 5% discount on the prices of textbooks. This is an excellent example of resale price maintenance. The operators' request for their trading partners to maintain a fixed resale price in any contractual form will result in such undesirable consequences as even higher prices, windfall profits, low efficiency and consumers' interests being exploited. Furthermore, the flagrant act of collaborative price fixing by some trade unions also impedes fair competition.

In fact, other countries, such as Taiwan and the United States, control or prohibit the above acts through the enactment of legislation on unfair trade. How can Hong Kong, which is always proud of having open and fair competition, sit with its arms folded and be content with lagging behind other countries?

Mr Deputy, I will turn to talk about another crisis that will seriously jeopardize fair competition in Hong Kong. Now that 1997 is drawing near, the democratic system of Hong Kong would surely be dealt a severe blow, but it is worrying as to whether free and fair competition will be undermined instead of enhanced. In the past, the Government of Hong Kong has been holding fast to the policy of "one airline one route" so as to safeguard the monopolistic interests of the British-owned Swire Group. In the early days, the Dragon Air repeatedly applied for licences to operate new routes but all applications were turned down by the Government. In face of operational difficulties, the Dragon Air was ultimately taken over by Cathay Pacific Airways. Recently, for the sake of securing its monopolistic position in the aviation market, the Swire Group has sold some of its shares in the Dragon Air to China National Aviation Corporation (CNAC) and CNAC thus became the predominant shareholder of the Dragon Air. More importantly, this transaction extinguished CNAC's idea of establishing an independent airline to compete with Cathay Pacific Airways. I now raise three points of doubts regarding whether the transaction between the Swire Group and CNAC is an act against competition. Firstly, CNAC's purchase of stakes in the Dragon Air implies that the Civil Aviation Administration of China, which is charged with the responsibility of monitoring aviation affairs, is now blatantly and openly seeking to strengthen its monopolistic position in the aviation field in order to have a share of the windfall profits so derived.

Secondly, Chinese official bodies' purchasing of stakes in the Dragon Air at a price below market price triggers misgivings as to whether Chinese official bodies are attempting to obtain benefits by exerting political pressure and whether the aviation market is just the first target of these state-owned organs. Will they set their minds on other public utilities, such as telecommunications and infrastructure projects?

Thirdly, after CNAC has become the predominant shareholder, the Dragon Air will bear no difference to a state-owned airline. This will alter the situation of the Hong Kong aviation market which has all along been privately-operated. Under the principle of "one country, two systems", the aviation market should continue to be privately-run. However, this mode of operation is now under threat.

In fact, had legislation on fair trade been enacted and a "Fair Trade Commission" set up in Hong Kong, the Swire Group and CNAC would not have been able to share the profits of the Hong Kong aviation market so easily. The opening up of the aviation market is the general trend and the aviation undertakings of China are also breaking monopoly, why should the aviation market of Hong Kong head towards the opposite direction by continuing the policy of "one airline one route"? Is the merger between the Dragon Air and CNAC appropriate? Will it be more favourable to the consumers if the Dragon Air and CNAC compete separately?

I so submit in support of the motion.

MR CHAN KAM-LAM (in Cantonese): Mr Deputy, Hong Kong has always been upholding economic freedom, any product may enter Hong Kong this free trade port without having to be taxed. In addition, with the "minimum intervention policy" adopted by the Hong Kong Government, competition within our local market is very keen. In view of such, the Government has not been enthusiastic in examining anti-trust laws or legislation on fair trade.

However, the 1992 Governor's policy address pointed out that an overall competition policy had to be worked out and a vote was subsequently allocated to the Consumer Council to conduct studies on certain major trades in Hong Kong with a view to probing into the situation to see if monopoly does exist. According to the information of the Consumer Council, a study report on the overall competition policy will be published in September.

Ensuring that consumers pay reasonable prices for reasonable services

The economic philosophy of the Democratic Alliance for Betterment of Hong Kong (DAB) is to allow full play to our free economy under the principle of fair competition. Any monopolistic enterprise or enterprise that shows the tendency to monopolize should be regulated with a view to ensuring that consumers pay reasonable prices for reasonable services.

To the understanding of the DAB, the so-called fair trade legislation refers to the enactment of laws to ensure that the Government's economic policy is led by a pro-competition principle. I believe everyone of us is familiar with the saying that: "Where there is competition, there is progress". We expect the operators to continuously raise its effectiveness in order to survive the market through competition. Thus, the consumers may benefit through competition among operators.

Practical experience of foreign countries

If we view from this perspective, the spirit behind today's motion is commendable. However, I must emphasize that practical experience of foreign countries shows that legislation on fair trade will have certain bearing on economic development and a lot of specific issues will have to be discussed. Therefore, in enacting any relevant legislation, we must examine seriously the prevailing situation of the society.

Mr Deputy, there are precedents of "legislation on fair trade" or "legislation on competition" in foreign countries. Similar legislation may also be found in such Asian countries as China, Taiwan, South Korea and Japan. The objectives of enacting legislation as such are to promote competition among enterprises and to prevent enterprises from engaging in improper business practices which are detrimental to the fair competition mechanism of the market.

What does it mean by monopoly?

The practical experience gained by foreign countries shows that a lot of fundamental problems must first be solved before enforcing legislation on fair trade. The very first one is the definition of terms, such as what is meant by "monopoly". Take for example such public utilities as water and electricity, whatever operational mode the utilities companies may adopt, it is inevitable that certain degree of market dominance must be attained before the companies can operate on an economy of scale. Furthermore, the objective environment of Hong Kong has rendered it necessary for the operators of some public utilities to operate in an oligopolistic or monopolistic manner. The Government could only exercise reasonable monitoring through various means such as the granting of franchises.

As regards the form of monitoring action, the stand which the DAB has always been taking is that the long-term interests of consumers should be a major premise, while at the same time, the normal operation of a free market should not be affected. Members may recall that when I spoke on the motion on "Monitoring of gas supply and charges" in November last year, I pointed out that there were multiple reasons behind the taking up of a larger share in the market by a certain enterprise. The percentage of market share taken alone could not constitute a justifiable ground to introduce regulation into the market. If the larger market share gained by a certain company is not attributable to monopolization as a result of man-made obstructions deliberately set up but is rather a result of effective business tactics, then the Government should not rashly impose control; or else it will impede the free economic development of the society as a whole.

In enacting legislation on fair trade, we should, apart from considering how to define and calculate market share, clarify as well how the Administration is going to prove that certain enterprise is really employing monopolistic practices as referred to by the law.

Fair Trade Commission is by no means insignificant

According to the experience gained by foreign countries, in the process of examining cases of offence, a lot of efforts have to be spent on producing evidence and conducting investigations. As pointed out in the motion, therefore, a Fair Trade Commission has to be set up and empowered to enforce the law. Our concern is that to effectively enforce legislation on fair trade, it would not only be a co-ordination in the allocation of massive resources and the provision of support services in all aspects, but the power of this Commission could also be very great and by no means insignificant. In addition, there is also a chance that the Commission might become the military police of market economy and affect free economy. Therefore, legislative work should not be taken too lightly or rashly, or else counter effects such as unfairness and enforcement difficulties may be produced.

The DAB is not whistling a different tune

Mr Deputy, it seems that our arguments as stated above could be taken as a different tune, but in reality, the DAB is adopting an open attitude. From the wording of the motion alone, it is difficult to define clearly what fair trade is all about, while the terms of reference of the law enforcement agency remains unknown. Therefore, it is difficult for us to vote for or against this motion.

The DAB has all along maintained that the full extent of development of Hong Kong's free economy have to be ensured. On the other hand, we object to any monopolistic operation practices that are detrimental to the interests of the society as a whole. However, as our economic structure is becoming more complex everyday, we do not think that we should address all problems relating to free trade mechanism with a simple standard or a stroke across the board.

Of course, the DAB agrees that "prevention is always better than cure". We must take a close look at the market to see if there are any undesirable monopolies that may possibly be formed or any possible unfair treatment that consumers might be subject to so as to forestall the problems. Therefore, we support that in-depth and systematic surveys should be done on the competition environment of various local trades in the light of the experience gained by foreign countries in this aspect, we also hope that answers and feasible solutions could be worked out for the queries we raised.

I so submit.

MR JAMES TIEN: Mr Deputy, three years ago, the Honourable Fred LI also asked this Council to endorse his proposal for a free trade commission. Today, the motion is revived by Dr the Honourable LAW Cheung-kwok.

Everybody faithful to the spirit that has made Hong Kong commercially successful is by definition a true believer in competition. Competition that has brought us world class services at reasonable prices. Competition that has given us a high quality of life. What I question is whether competition can be completely regulated or managed by a commission the role of which is to also interfere.

Hong Kong has prospered on the principle of free trade so much so that we have enshrined the concept in the Basic Law. We already have a range of ordinances regarding the utilities so that they may not overcharge. We have laws related to sale of goods, supply of services, contracts and consumer goods safety. Those relating to banking, gas supply, supermarkets, telecommunication and property are currently being scrutinized by the Government to see whether more stringent control may be needed. The situation is far from static, but rather, it is constantly evolving and improving. "Progress", in a word.

Existing mechanism include the schemes of control which may be adjusted to ensure that monopolies invest in quality and not sacrifice public safety. We additionally have the Consumer Council, the power of which is expanding and which now has a legal fund in its arsenal, to defend the community's interests. Our Government also reserves the right as a last resort not to renew franchises or to revoke them if the utilities do not perform up to par. The Executive Council may turn down any fare or fee increase proposal that it considers extreme.

If our administration has abdicated its responsibility and let utilities do as they wish, then a commission may be necessary. But clearly and thankfully, this is not the case. Let me cite the example of the China Motor Bus (CMB), the services of which were so unreliable at one point that it drew a torrent of complaints from passengers. While the Transport Department did not cancel or take over the CMB, it did accede to public demand and hand over some routes to the upstart Citybus. Passengers are now better served.

Our media too have been a very effective monitor. Their reports and commentaries about unsatisfactory performances or mistakes by utilities have generated pressure. The pressure has in turn convinced many of these companies and corporations ─ the Mass Transit Railway Corporation, Kowloon-Canton Railway Corporation, Hong Kong Ferry ─ to upgrade their services.

Frequent complaints about the banking cartel over interest rates on deposits also led to the lending houses agreeing to competition. While depositors are getting a better return on their investments, other bank users now complain that they are being charged for services which were once free. This brings me to the point that costs are spread because companies will not take a loss and do not like to give subsidies. There is a simple saying in business and that is "buyers beware". But there is another saying too and it is "you cannot please everyone all the time".

Many of my constituents are small to medium businesses which understandably are stung by escalating costs. I empathize with them totally because they are being hurt by an inflation rate that has never gone lower than 7% a year for longer than a decade. I nevertheless doubt that having a commission is a solution, when it may be a problem unto itself, if it ever came to pass.

A few years back, I was not happy either with having to pay an exorbitant rate for long distance calls to the United States. The charges were so steep that an academic even wrote a book to show how Hong Kong long distance callers were allegedly cheated. But soon enough, other long distance specialists entered the field and competition from them has since brought the rates down to almost American levels. This is convincing proof that the existing format works if we let it.

I believe it is a myth that total deregulation is the answer to the prayers for better services at reduced costs. The question we must ask ourselves is whether we are willing to risk our quality of services, even safety, for cheaper fares and fees? The United States has had anti-trust laws for a century, but still verdict on direct government intervention in the market remains open.

Let me refer to the famous example of Ma Bell which in the early 1980s was forced to break up into regional firms. The result of that was, yes, lower charges but much hampered efficiency. The scramble among these children of Ma Bell for other businesses partly accounted for losses not only to the companies but to consumers. Now suddenly, these Baby Bells are merging with their other telecom and media service providers, throughout the United States and provoking another round of outcry against, what else? New monopolies.

Quite recently, we frequent business travellers were shocked by the Valuejet plane crash in the swamps of Florida. Reports subsequently informed us that the budget airline, a beneficiary of the deregulated American sky, may have scrimped on aircraft maintenance of an already aging fleet to stay aloft in profits. We must wonder whether a few dollars saved for an airplane ticket is worth a life? I am sure the answer is "no".

Enterprise may not be totally free in Hong Kong which is already widely hailed as the last bastion of pure capitalism. Some utilities are so vast and their capital investments so huge that they are either run by franchises with guaranteed profits or by the Government. We know from experiences all over the world that, given the chance, the private or quasi-private sector can outperform the Government at any time.

I trust that no commission, however grand, can give the consumers including businesses, value for their dollar better than free and fair competition. Competition in Hong Kong is already moving into areas once closed by dominant utilities and it is a natural process triggered by supply and demand. What we have to strike for is a balance between free trade and public interests so that we are not overcharged and that our safety would not be compromised. Mr Deputy, the Honourable Henry TANG, also shares my view. The Liberal Party will vote against Dr LAW's motion, but instead, for a Hong Kong operating at its optimal level through existing controls and regulations.

THE PRESIDENT resumed the Chair.

MRS ELIZABETH WONG: Mr President, in recent years, there has been a growing awareness to protect the interests of consumers against oppressive policies or fraudulent practices. This is good. But, commercial litigation here is not yet as rampant or as fashionable as it is elsewhere, probably because we do not have such a thing called "fair trading law".

There are calls today for enactment of fair trading laws to protect consumers even further. That also is good, but I think we must ask important questions which are relevant. The questions to ask must be whether Hong Kong needs a comprehensive competition policy and the enactment of laws to implement it. More importantly, from what I have learned from my experience in Harvard Business School, the question to ask is whether consumer protection is in itself an integral part of the market economy?

Where economic exploitations through lack of competition or excessive prices affect the ordinary man in the street, we must all fight against it. And I think also if we want to have a free economy, we must also introduce what we call fair competition. Although the word "free" may be a dirty word to many people, I myself am very proud that Hong Kong is one of the freest, if not the freest, economy in the world, and according to recent reports, Hong Kong ranks third next to United States and Singapore as the most competitive place in the world. These are some things to be proud of and I think if we are good at something, we should try to make it better instead of changing mid-stream.

So, as we progressively become more consumer-oriented in our thinking and as we are increasingly more concerned with the political nature of consumerism, we become more active in calling for a change to our current or previous attitude. As far as the man in the street is concerned, I am pretty sure that he does not even understand or know about, or care about micro-economic theory. He cares even less about the dismal science of demand and supply, but he does care about having the best value for money. He does care that he is not taken for a ride, and he does care about having avenues for seeking redress.

But today, consumer is supreme. We are all consumers. So, no one really dares to pour scorn onto the idea of consumer sovereignty in modern economy because no business can afford to treat the consumer with contempt, otherwise the businessman runs the risk of going out of business.

So, it is argued that having a fair trading law in Hong Kong will be a way of, at best, having a comprehensive measure to protect the economic interests of the consumer and to impose criminal sanctions against conduct which is detrimental to the interests of consumers. And at a more elevated level, we probably can deal with complex issues like mergers, monopolies and cartels. But we also need an effective mechanism, and to be effective, it costs money. We need a huge set-up if we want to do everything at once comprehensively.

And may I also say too many pieces of legislation borrowed from foreign lands to Hong Kong might get us down the slippery route of no return, and that slippery route is over-legislation, and I must sound a warning here that over-legislation is no panacea at all for all the problems that we may imagine or we may feel that are there.

Legislation for fair trading might be our costly way of striving for the economist's dream of the most perfect market. Most perfect market conditions mean no market monopoly, no cartel, competitive and fair entry into the market, absolute product homogeneity and perfect consumer knowledge. Until we have that, I think we have to be very careful we do not go overboard.

So, whilst the spirit behind the motion is laudable, praiseworthy, I think we should ask the Government to consider whether or not we need a competition policy, and if so what the ambit is? And I think the Government ought to make us study before we rush headlong into something which we might regret later on. Thank you.

MR YUM SIN-LING (in Cantonese) : Mr President, in 1993, this Council held a motion debate on the Honourable Fred LI's motion concerning "the enactment of a fair trade policy" and "the establishment of a Fair Trade Commission", which was aimed at safeguarding the principle of fair competition and the interests of consumers. However, following amendments, this motion was reduced to a "high profile but empty" proposal which simply expressed the hope that the Government would take some actions in this respect. Yet, over the past three years, the Government has not taken any notable actions, except the token responses to some recommendations made by the Consumer Council. At a time when many countries are already drawing up their own fair trade legislation, Hong Kong, as one of the most advanced economies in the world, has no time to lose in formulating its own fair trade policy; otherwise, it will be difficult for Hong Kong to gain its due respect in world trade organisations, and it will also be impossible for it to give enough confidence to its major trade partners.

Some people have queried whether the establishment of a Fair Trade Commission will increase Government expenses and repeat the work of existing organizations, and they also want to know whether a division should instead be set up under the Trade and Industry Department to monitor the market on fair competition.

Some people belonging to the business sector maintain that the enactment of a fair trade policy and relevant legislation or the setting up of a Fair Trade Commission to enforce the policy and legislation concerned will run counter to the principles of a free market economy. However, the point is that perfect competition in a free market economy has never existed in this world. In the United States, anti-trust (anti-monopoly) law already has a history of 100 years, and time and again over the past few decades, the Hong Kong Government has intervened in the market directly or indirectly, or has drawn up legislation or measures pertaining to awards of franchises or monopolistic control. In the past, the Hong Kong Government adopted some regulatory measures aimed mainly at adjusting rice supply. At present, the Housing Authority is responsible for satisfying 55% of our housing demand. Any student who has studied economics understands that all these are absolutely not supposed to be the features of a free market economy. What is more, different modes of public transport, electricity supply and telecommunication services operating under various franchises have already become the sole choices of the public, who are deprived of other alternatives. Someone will of course point out immediately that the markets of public transport and telecommunication are being gradually liberalized, with awards of more franchises. This granted, but such kind of market liberalization is in fact leading precisely to "fairness". We must never equate "fairness" with "regulation". "Fairness" is an end, and "regulation" and "liberalization" are the means to achieve it. This is similar to the case of individual freedom. Although everyone enjoys freedom, the law also guarantees that the exercise of one's freedom will not infringe on the freedom of others. Also, the concept of perfect competition in economics is founded on the assumption that the consumer possesses full and instantaneous knowledge about the product, including its quality and price, and can thus make immediate adjustments to his purchase decision. However, even in the technologically advanced society of today, such an assumption does not hold in the case of most products or service markets. Therefore, we must enact relevant legislation to supplement the inadequacy of the free market.

With the enactment of a fair trade policy, fair competition can be introduced into the market; consumers can be protected; suppliers will be able to obtain the accurate information necessary for adjusting their resources to achieve effective use; and the interests of investors can be protected. Such a policy can boost consumption desire on the other hand, and facilitate capital flow on the other.

Today's motion aims to introduce fair trade legislation into Hong Kong, I would like to take this opportunity to introduce the main features of the fair trade legislation in Taiwan. The fair trade legislation in Taiwan aims to set down regulations and guidelines to deal with the occurrence of "monopoly", "oligopoly", "cartel" and so on. Such legislation has also legalised the more reasonable commercial practices of "pyramid selling", but has prohibited those practices that will harm the interests of consumers. In addition, the relevant legislation also makes provisions for investigating and monitoring the control of re-sale prices, fake products, misrepresented or misleading advertisements and so on. Therefore, the "Fair Trade Commission" in Taiwan is monitored and managed by experts from different fields, with the result that investors' business and consumers' interests are both protected under fair trade conditions. The whole society will thus benefit.

In fact, many trades in Hong Kong have violated the fair trade principle, and many children and adults probably have the experience of being affected by misleading advertisements. For example, a primary school student who has seen the TV commercials of some little toy gifts offered by a fast-food chain may find out later on that the functions of these toys as advertised on television are in fact gross exaggerations of the real functions. This minor example already suffices to show that we are really in need of fair trade legislation. Another example is some of the foodstuffs sold in supermarkets. There is often a big difference between the pictorial depictions of the foodstuffs on the packaging and the contents inside, and this makes consumers feel that they have been deceived. Since they have no channels to lodge complaints, the only thing they can do is to accept the product. If they are not willing to do so, they can only reduce their consumption of the product concerned, and the supplier will be the eventual loser. For that reason, if the Government refrain from enacting clear legislation to promote fair trade, it will in fact be helping to perpetuate the negative factors which are harmful to our economy.

Therefore, in order to promote the economic prosperity of Hong Kong and keep abreast of world economy, we should learn from the experience of the United States, Britain, South Korea, Taiwan and so on, and study how they enact their fair trade policies and establish their Fair Trade Commissions.

With these remarks, I support the motion. Thank you, Mr President.

MR FRED LI (in Cantonese): Mr President, as far as the maintenance of fair competition and improvement of the consumers' interests in Hong Kong are concerned, I still think the Government has not done enough work in substantial terms. The Government began to allocate fund to the Consumer Council in 1993 to conduct studies on the specific competition policy of individual trades and professions. It is quite a good start indeed. At the same time, the Government took the initiative to abolish fixed costs charged by lawyers and open the rice market. These initiatives have also gained our support. The Democratic Party supports the Government's abolition of the lawyers' fixed costs system and introduction of free competition to reduce the monopoly of some law firms to enable them to fix reasonable charges according to their own terms. We also support the Government's opening up of the market for the importation of rice so that new rice suppliers can join in and enhance competition, thereby indirectly benefiting the consumers.

In our view, the Government has always been adopting an ostrich policy when faced with the problems of unfair trading. Since 1994, the Consumer Council has already carried out studies on four trades and professions, namely banking, supermarkets, gas and telecommunications Potentially unfair market structures and market behaviours have been identified and suggestions have been made accordingly to promote competition among the enterprises and protect the consumers' interests. However, the response from the Government was far from positive. Concerning the banking industry, the Consumer Council requested that the time-deposit interest rate agreement be abolished step by step. But eventually, in the second half of 1995, the Monetary Authority used the "political issue of 1997" as an excuse and broke its original promise, and without any substantial grounds, it dropped the last-phase agreement on the relaxation of the 24-hour time deposit interest rate and deferred it until after 1997. What the Monetary Authority did was obviously in the interests of the large banking consortium and against the principle of fair competition, hence unfair to the depositors. Pointing out that the two large supermarkets "suppressed" the prices of the suppliers and set down unfair trading terms, the Consumer Council proposed to establish complaint channels for unfair trading, and determine the planned ratio for opening supermarkets on the basis of the population ratio in housing estates. Apart from this, the Consumer Council also proposed to monitor the charge increases of the Towngas in view of the monopoly it holds. But to our disappointment, the Government has failed to make any positive response to the above proposals.

The Consumer Council has already taken the first step in creating a healthy environment for competition in Hong Kong. It will complete all the studies on fair competition by September this year and by then it shall be able to withdraw from its accomplished role. The Government should not use the studies as a shield again; instead, there is a need for it to decide whether legislation on fair trade should be enacted. The Democratic Party considers that the only, and the most effective and positive, way to rectify the unfair trading phenomenon is to enact legislation on fair trade and set up the Fair Trade Commission. Only by doing so will the effort made by the Consumer Council in conducting the studies on various trades and professions not be wasted. Some cases like the newspapers' price-war and the controversy surrounding the uniformed charges proposed by the pagers' associations will also die a natural death. This is because legislation on fair trade will define what is meant by market monopoly, enterprise merging, joint-pricing, maintenance of re-sale price, predatory pricing, exclusive dealing, fictitious advertising and will thereby help define some existing problems which are comparatively ambiguous. For example, can we consider the two supermarkets, with a market share of 70%, having a monopoly? Was the lowering of prices to below-cost level by the newspaper operator who was accused of undercutting its rivals aiming at excluding other competitors? The answers to all these questions can be found in legislation on fair trade. Furthermore, apart from providing channels to handle unfair competitions, legislation on fair trade will also openly set down a set of rules regarding the business practices acceptable and unacceptable to society. This will enable investors to compete within the same legal framework.

The enactment of legislation on fair trade and the setting up of the Fair Trade Commission are complementary while both are indispensable. Given its limited role and powers, it is indeed not easy for the Consumer Council to carry out investigations on various trades and professions. This is because business operators always use commercial confidentiality as an excuse for not providing information. Or maybe the operators, in the absence of legal protection, are scared of being revenged afterwards, so they dare not provide information. Unlike the Consumer Council, the Fair Trade Commission should be an independent institution and should possess statutory power. It should be able to accept complaints, solicit information and conduct in-depth investigations in relation to cases which are susceptible of contravening the fair trading law, as well as giving recommendations and releasing reports.

In fact, even the countries which are practicing free economy cannot deny that it is possible that the market mechanism will fail to work and the market be distorted, which may lead to the setting of an uniform price by manufacturers in order to evade the pressure of lowering their costs. Or, the buyers might engage in unfair competitions like exclusive dealing for they are reluctant to deal with other competitors. For this reason, it is necessary for the Government to enact legislation on fair trade to ensure the mechanism of a fair competition market to operate and to impel the manufacturers to produce goods or provide services in the most efficient manner in order that the consumers can benefit most. Today, nearly all the member countries of the Organization for Economic Co-operation and Development have enacted legislation on fair trade. And, what is worth nothing is that our neighbouring countries such as Taiwan and Korea have already enacted such legislation. Even China has enacted legislation in 1993 to prevent unfair competition.

At an international level, Hong Kong businessmen have obviously been benefited as other countries implement legislation on fair trade, such as legislation on the exclusion of a coalition of the importers and exporters. Recently, the Toys "R" us in America was accused of monopoly when it forces the manufacturers not to sell their goods at a lower price. This serves as a good example. Some toys manufacturers in Hong Kong said, "With a monopolized market, the exporters are indeed subject to tremendous pressure. As far as exporters are concerned, the reduction in monopoly will do them more good than harm." As Hong Kong businessmen perfectly understand the advantages of fair competition and Hong Kong also supports international fair competition, why does the Administration still refrain from introducing the law on fair trade?

Mr President, I would like to add one more point. Some people who are against legislation on fair trade may argue that the enactment of certain legislation will go against the non-intervention policy that the Government has long been practicing. I think there is a misunderstanding over legislation on fair trade. The relevant legislation will only set down a set of rules for the game, so that the participants can compete fairly. It does not intend to intervene the game and its role is just like a referee in every match.

According to a research on corruption carried out by a German organization in 1995, Hong Kong ranked 17 among 41 countries and ranked 10 on the Asian corruption billboard of Asia. This showed that Hong Kong was worse off than Singapore and Japan and there was a sign that the situation was deteriorating. With the worsening of the corruption problem, it is worrying that abuses of power for profit-making will aggravate and it will be increasingly difficult to maintain a free and fair environment for competition. Therefore, we have no time to lose in enacting legislation on fair trade and setting up the relevant Commission.

Mr President, these are my remarks, and I hope that the wish I made three years ago could be fulfilled today. Thank you.

MISS CHRISTINE LOH: Mr President, this Council last debated the subject of fair trade in February 1993. The issue has not gone away because much more could, and should, be done. There is no argument that our markets are probably more free and more open than those of any other economy in the world in terms of trade and investments, and that has been very good for us.

Three years ago, this Council sought an answer to the basic question: Do we have a fair trade policy, and if so, what is it? The answer seemed to have been: that Hong Kong has an ad hoc policy on competition, and perhaps an outdated policy to regulate monopolies generated by the Government through the granting of various franchises. Mr President, I do not think that we can accept this state of affairs. It is simply not good enough.

The problem that we have today is not with trade and investments, but with non-tradables, that is, products and services that are produced and consumed locally. Some of these areas cut into government-created monopolies and government policy.

Let us take the example of the power utilities. The profit arrangements under the Schemes of Control Agreements governing China Light and Power and Hongkong Electric are linked to continuous capital investments. Such schemes may be justifiable in the early days for the Government to attract private business to invest in power generation, but are they still appropriate when the same schemes provide a temptation to the utilities to retire assets early and to build-up excess capabilities? Furthermore, the agreements provide no incentive of energy efficiency and conservation.

In the old days, colonial civil servants may well have settled issues with the franchisees over a drink or two in the Hong Kong Club, and that may have been felt to be adequate. But today, the business of power generation, and the international trend for conservation and efficiency, have become much more sophisticated. Moreover, the rights of the consumer is now also considered paramount. Is the Economic Services Branch able to properly monitor the power utilities? I have had my doubts. Furthermore, is the Executive Council ─ a part-time advisory body to the Governor ─ best suited to safeguard the public interests since it ultimately oversees the schemes? Again, I have my doubts.

My doubts might be eased if we are to see the Government's determination to now consider how to revise the Schemes of Control Agreements at the next available opportunity to ensure that the consumer interest is properly protected, and for incentives to be given to the utilities for energy efficiency and conservation.

Other areas worthy of examination are the provision of public housing and public medical services. The key players here are of course the Housing Authority and the Hospital Authority. Mr President, let no one overlook them in this discussion because they are monopolies.

In the area of public housing, the fact that the Housing Authority needs to provide for over 50% of Hong Kong's housing need is a direct result of the Government's high land price policy because ordinary folks cannot afford their own homes. This Council has not had a debate on the social and economic implications of that policy. The Hospital Authority caters for 90% of the medical needs of the community. But, how efficient are these bodies? How well are they being monitored, and are consumer interests being adequately safeguarded?

In other areas, the Consumer Council has been vigorous in trying to break up the long-standing bank interest rate cartel. Unfortunately, it has only had partial success here. It has also looked into the gas industry, as well as supermarkets and other areas. Its efforts are to be applauded, but can Hong Kong rely entirely on the Consumer Council? Is it time to have a more formal legal and institutional structure?

The Government does not seem to have either the interest or the will to look at formulating a comprehensive competition policy that can take Hong Kong into the 21st century. Perhaps I am wrong, and that the Secretary for Economic Services will tell us in a moment what farsighted plans he has.

In 1993, I suggested that an ad hoc committee be formed in order for the Government to re-examine government-created monopolies. The committee might be charged with two main functions: first, to systematically and dispassionately look at each instance in which the Government deliberately restricts competition, and to examine whether those restrictions are still necessary and desirable; and, secondly, to investigate distortions and complaints. I wish to revitalize this suggestion as still a way to start.

Mr President, before I end, I do wish to highlight another potential problem, that is, whether consciously, or unconsciously, China's interest to buy into some of Hong Kong's major businesses, and Hong Kong's businesses' own interest to bring in Chinese involvement, may perpetuate, or even intensify, some monopolistic tendencies within the economy. We have just raised some serious questions earlier today relating to Swire's sales of Cathay Pacific and Dragon Air shares to China International Trust and Investments Corporation and China National Aviation Corporation (CNAC).

Let me list out some areas worthy of our attention. Firstly, how far can we regard certain Chinese investments, such as that of CNAC's purchase of Dragon Air, to be purely commercial transactions? In reality, is it not a state purchase? Mr President, if you should think that it is the Chinese Government buying into a Hong Kong commercial enterprise, might you not also think that it could be seen as a form of nationalization? It is unclear to me whether China may, consciously or unconsciously, be interested to buy significant shareholdings in a number of businesses here which it regards as strategic. If the answer is yes, then whether it is appreciated that it might have longer-term effect on Hong Kong's economic autonomy. The best way of elucidating a response is to ask questions publicly, and also to question the Hong Kong Government about its view on the matter. I urge this Council, and the media, to ask many more questions.

Mr President, I support the motion.

MR FREDERICK FUNG (in Cantonese): Mr President, I would like to follow up the speech of Dr the Honourable LAW Cheung-kwok of the Association of Democracy and People's Livelihood by giving an account of the reasons why we need legislation on fair trade, particularly in the context of the aviation industry.

Owing to the absence of legislation on fair trade in Hong Kong, the development of the local aviation industry has long been monopolized by the Swire Group. There have been significant changes in the shareholding of the two local airlines, namely, the Cathay Pacific and the Hong Kong Dragon Airlines, for many times. Although these changes may have a far-reaching bearing on the competition in the industry, the Government does not have any mechanism in place to monitor this.

Not long ago, there was a major change in the shareholding of two local airlines. The China National Aviation Corporation (CNAC) purchased from the Swire Cathay Pacific Group and the China International Trust and Investments Corporation (CITIC) a total of 37% of shares of the Dragon Air. This represents not only a quantum leap of CNAC into the biggest shareholder of the Dragon Air, but also that the two Chinese-controlled companies, CNAC and CITIC, have also gained an absolute control over the Dragon Air. Moreover, the Cathay Pacific has also issued and sold to CITIC an additional 500 million shares, thus increasing CITIC's stake in the Cathay Pacific from 10% to 25% and reducing that of the British-controlled Swire Group from 53% to 44%.

This transaction has brought about a redistribution of interests in the local aviation industry. The changes in the shareholding mark the end of the monopolistic status of the British-controlled companies (the Swire Group and the Cathay Pacific) in the local aviation industry and a further participation from the Chinese-controlled companies (CNAC and CITIC), which are due to exert greater influences in the industry.

My concern lies in what kind of impact will be brought about by this transaction on competition in the local aviation industry? Will competition in the local aviation market intensify or subside following the changes in the shareholding of these two airlines? Supposedly, competition should increase as the Dragon Air, formerly a subsidiary of the Swire Cathay Pacific, has now become an independent company financed by China. However, I think there are a number of factors which will have bearings on competition. Firstly, as CITIC has become the second largest shareholder of the Cathay Pacific and the Dragon Air for it concurrently holds 25% and 27% of shares of these two airlines respectively, direct competition may not be beneficial to CITIC; secondly, the CNAC spokesman, speaking after the announcement of the purchase of Dragon Air shares, stressed a close working relationship between the CNAC and the Cathay Pacific, so competition appears not to be its operating strategy; and thirdly, judging from the comparatively low price of the deal concluded between these two companies, the transaction does not seem to be purely a commercial one. All in all, we are doubtful whether there is anything purposely withheld from the public or whether any secret deal had been struck between the two sides. We feel that this warrants a clear explanation. Is it really the case that certain companies are preparing to divide among themselves the interests of the aviation market in Hong Kong?

Furthermore, as both CNAC and CITIC are commercial institutions under the State Council of China, will they take advantage of such special status to outdo competitors in Hong Kong's aviation industry? I think the Hong Kong Government should repeal the policy under which one route is exclusively operated by one airline company because it will impede fair competition among airline companies.

It is vitally important for Hong Kong to ensure fair competition in the development of the aviation industry in order to maintain its status as an international commercial city. In my view, it is essential for the Government to legislate on fair trade in order to attain a fair and effective development of Hong Kong's aviation industry.

With these remarks, I support the motion.

MR PAUL CHENG: Mr President, fair trade, open and fair competition in business and industry and safeguarding the interests of consumers are not concepts alien to Hong Kong. They are the very fundamentals on which modern-day Hong Kong is based.

Yet, an outsider reading Dr LAW's motion may inadvertently think, it could be that Hong Kong needs to introduce such fair trade principles, and swiftly. The motion implies there is something rotten in the "state" of Hong Kong ─ at least as far as fair play is concerned.

The fact of the matter is that Hong Kong is one of the freest and fairest markets in the world. That is not to say things cannot be improved. They probably can, and in a fast-changing, competitive world, we should never be complacent. However, we should be focusing on fine-tuning and further enhancing a system that works well and has served Hong Kong well, rather than the radical overhaul suggested by the motion.

Broad-based legislation and the establishment of a Fair Trade Commission would be overkill. Not only that, it would also:

-give rise to a greater possibility of bureaucratic interference and government intervention;

-alter the international perception (and, in turn, admiration) of Hong Kong as an open economy, combining a philosophy of free trade and a policy of non-intrusive government; and

-be tantamount to casting a vote of no confidence in the Hong Kong market's ability to adjust and adapt to changing economic and political realities ─ surely, a dangerous signal to send at such a sensitive time.

It is wrong to suggest that Hong Kong has no fair trade policy. "Fair trade policy" essentially means identifying and adjusting discriminatory, unfair and anti-competitive practices in the business community. Hong Kong already has the ability to do this through a variety of channels.

From a Hong Kong perspective, the pursuit of fair trade has been largely market and consumer driven, that is, consumers themselves have demonstrated their ability to identify practices that adversely affect their choices in the territory. Meanwhile, businesses ─ in the face of more demanding consumers ─ have had to continually improve the quality of their products and services simply to remain competitive.

Government policy has been, in the most part, quite clear that a "level playing field" must exist in Hong Kong, and in cases where the playing field was deemed to have tilted, either by changing economic circumstances or consumer demand, the situation must be remedied on a case by case basis. Examples of this reaction are evidenced by the deregulation of the telecommunications industry and the ongoing process within the broadcasting industry.

Many organizations exist in Hong Kong to promote, preserve and enhance fair trade. The Banking Commission, the Insurance Authority, the Securities and Futures Commission, the Trading Standards Advisory Committee and the Trade Advisory Board, to name but a few, are dedicated to this cause. Additionally, the Government has passed and amended legislation relating to trade description, the sale of goods, product safety and so on, to further increase the protection of Hong Kong's consumers.

Furthermore, let us not forget that Hong Kong is part of the international economy, and a highly open market by any comparison. Indeed, consumer choice in Hong Kong is strengthened by the territory's very openness to the world market. In most cases, new entrants to the Hong Kong market are restricted only by their own measurement of risk and reward in this open, but highly competitive, environment.

Hong Kong has enough checks and balances in place already to help ensure a free and fair trading environment. In any system, there will always be abuses, and firm action must be taken against those committing such abuses. But, there is no crisis, no emergency. Why then should we seek to make the Hong Kong's regulatory environment more complex than it needs to be?

Such action would simply take away some of the allure of Hong Kong. That in turn could discourage investments, slow economic growth, and reduce Hong Kong's ability to fund new initiatives in important areas such as education, social welfare and infrastructure development.

There are some Members of this Council who seem to believe that there is an urgent need to change this, or fix that before 1997. The call for legislation on fair trade and the establishment of a Fair Trade Commission, coming at this time, seems to be yet another example of that particular mind-set. By all means, we can always look at ways of further improving on things that are already working well, but the old adage, "If it is not broken, do not fix it" is very relevant here. By the same token, "If it is not broken now, do not always assume it will be broken after 1997".

As we move through the transition period, our guiding principle should be "the less change, the better". I hope Members of this Council will bear this in mind.

Mr President, for that reason, I cannot support the motion.

MR BRUCE LIU (in Cantonese): Mr President, competition in the credit card market has become a subject of concern. According to the findings of a survey recently published by the Consumer Council, the outstanding balance interest rates of Hong Kong credit card accounts are extremely high, ranging from 24% to 42% per annum. Such interest rates are 40% to 100% higher than those charged in the United States and Japan.

Competition in the credit card market of Hong Kong is keen, and credit card companies and card-issuing banks have been racking their brains and resorting to various means to attract new customers, including free gifts, annual fee waiver, bonus points for air tickets and so on. Yet, the problem is: while competition has become increasingly keen in the local credit card market, credit card interests rates, strangely enough, have remained persistently high. Competition has not brought about a reduction in overall interests rates to the direct benefit of consumers.

Some people argue that interest rates are determined by the market, and high credit card interest rates are the results of high operating costs and high risks. As far costs are concerned, however, the administration costs of credit cards in Hong Kong should not be very much higher than those in the United States and Japan. In regard to risks, the rate of bad debts in Hong Kong is below 2%, which is just half of that in the United States. Although the short-term interest rate in Hong Kong is more or less the same as that in the United States, the annual interest rates of credit cards in Hong Kong are 40% in excess of those charged in the United States. Therefore, the assertion that interest rates are determined by the demand and supply of capital in the market can hardly be convincing.

This situation can easily lead people to suspect whether there is a high degree of consensus or understanding among banks on the maintenance of a high interest level, which should not be tampered with despite their competition in any other areas. Whether the handful of largest banks in Hong Kong are exercising monopolistic influence in the credit card market is a matter that deserves our attention.

Besides, insufficient information will affect competition and the decision of consumers. Currently, credit card contracts signed between banks and their customers all contain complicated provisions written in abstruse language. Many customers, therefore, do not fully understand their contracts, nor do they have full knowledge about the calculations of interest rates and other forms of charges. The Association for Democracy and People's Livelihood suggests that the Government should learn from the relevant laws in Britain, including the legislation on transaction descriptions in 1986, that on the control of misrepresented advertisements in 1988 and that on consumer credit information in 1989. Banks should be required to state clearly and explicitly the terms and conditions governing the use of the credit cards issued by them so that consumers can make wise choices that meet their needs. Incomplete financial information will easily give rise to monopoly or distortions in the market.

Following the enactment of fair trade legislation, I believe that there will be a legal basis for the Government to conduct investigation into and deal with the possible problems of unreasonably high interest rates and insufficient and inaccurate information. It has been very clear to us that the rights of consumers are not adequately safeguarded under the existing regulatory mechanism in the market.

With these remarks, I support the original motion of Dr the Honourable LAW Cheung-kwok.

MR SIN CHUNG-KAI (in Cantonese): Mr President, the public utilities of Hong Kong such as gas, petroleum, telecommunications and newspapers, are either monopolized by a few companies, or gradually developing from franchised operation to open competition. However, since legislative control is inadequate, there is still not enough competition in the market.

That is the situation of the domestic fuel market of Hong Kong which has almost been monopolized by the Hong Kong and China Gas Company. According to the assessment results published by the Government in February 1996, the Hong Kong and China Gas Company has almost a two-third share of the domestic fuel market. It is in the lead and its market share is steadily increasing. Besides, for the sake of public safety, the Government has forbidden the installation of underground pipelines for the transmission of LP gas and this has greatly reduced the competitiveness of pipelined LP gas. As a result, the competition in the domestic fuel market have become unfair. Since there is a lack of effective competition in the domestic fuel market, it is highly possible that the Hong Kong and China Gas Company may make use of its strong market force to charge its customers relatively higher fees and infringe upon consumer interests. Although in July last year, the Consumer Council has suggested that the Government should monitor the Hong Kong and China Gas Company to prevent the Company from proposing an unreasonable rate of fee increase under the circumstances of its being a "natural monopoly" in order to protect consumer interests. However, at last, the Government only simply said that there was no evidence to show that the Hong Kong and China Gas Company had abused its domineering position in the market and rejected the Consumer Council's proposal to monitor the Hong Kong and China Gas Company. If there is legislation in Hong Kong on fair trade, a set of regulations on fair competition and a fair trade commission which will conduct investigations on markets suspected of having the existence of unfair and unreasonable competition, conflicts similar to those that occurs in the past, for instance, conflicts between the Consumer Council and the operators and those between the Consumer Council and the Government, will be greatly reduced. Most important of all, only by introducing legislations can the situation of unreasonable manipulation of the market be rectified, fair competition maintained and consumer interests protected.

At present, the local market of petroleum supply is an oligopoly of a few companies and the retail price of petroleum set by these companies is almost the same. Although the public has often criticized that the petroleum companies have increased prices too quickly but reducing them too slowly, the attitude of the petroleum companies has remained the same and the Government has not made any special efforts to intervene. In fact, under an oligopoly, if the companies reach a mutual agreement on fixing prices together, the market mechanism will be perverted and consumer interests directly infringed upon. Since there is no legislation on fair trade in Hong Kong, we cannot clearly define when unified pricing has gone against the principle of fair competition and therefore we cannot make any judgement on the present situation of the market of petroleum supply in Hong Kong. Even if suppliers take actions against competition or take actions which hamper consumer interests, the victims cannot complain at all. To ensure the normal development of the market and to allow the market mechanism to function effectively, I think a task of top priority is to introduce legislation on fair trade and establish a fair trade commission.

There is a similar problem in the telecommunications market. In the past, the Hong Kong Government has given a franchise to the Hong Kong Telecommunications Limited to operate both the telecommunications network and the telecommunications service for the sake of economic results. The franchise of the local telecommunications service has already expired in the middle of July last year and the Administration has given franchises to three new telecommunications companies and has hence introduced competition. The introduction of competition will certainly urge competitors to improve the quality of their services and reduce their prices which will be beneficial to consumers. However, since the opening up of the local telecommunications market is still at a very preliminary stage, the Hong Kong Telecommunications Limited still has a large market share. Take for example the basic telephone service, the Hong Kong Telecommunications Limited takes up 99% of the market share. The domineering position in the market of the company brought about by its monopolistic operation in the past will still remain quite stable in the next few years. As regards the franchise of international telephone service, it will only expire by 2006.

The present domineering position of the Hong Kong Telecommunications Limited has brought about many problems. The first problem is related to network connection. Since the Hong Kong Telecommunications Limited has a territory-wide telecommunications network, other telecommunications companies have to rent its network if they want to provide telephone services to the public. The Hong Kong Telecommunications Limited will probably make use of the fact that it is the greatest network provider and make things difficult for the new competitors as far as "network connection" is concerned, or it may raise the connection charges or delay network connection projects on the ground of technicalities. The contention between the New T & T Hong Kong Limited and the Hong Kong Telecommunication Limited on the question of "network connection" earlier on very well illustrates this problem. We can make a fair guess that telecommunications services and multi-media services will be introduced to the market in the future and the question of network connection will be a decisive factor determining whether the new competitors can stand firmly in the local telecommunications market.

The second problem relates to the provision of telecommunications service. Since multi-media service will be an important aspect of the information and entertainment market in the future, the Hong Kong Telecommunications Limited is actively developing internet service and VOD service, and is gearing its development towards this direction. However, we have to be aware that the Hong Kong Telecommunications Limited will probably make use of its advantageous position such as its network ownership and its big market share to undermine new competitors which has not yet established themselves firmly in the market by means of predatory pricing.

The Democratic Party thinks that the enactment of legislation on fair trade, legislating to prohibit commercial activities which contravene fair competition and conducting investigation on companies suspected of contravening fair competition by the fair trade commission will be very helpful in introducing fair competition to the telecommunications market and other public utilities, which will in turn be highly beneficial to consumers and the public.

Mr President, with these remarks, I support Dr LAW Cheung-kwok's motion.

MR MOK YING-FAN (in Cantonese): Mr President, today, let me act as a fortune-teller for a while. I believe the Honourable Mr Fred LI's wish for the past three years can be realized today. I also hope that the official responsible for Hong Kong's financial affairs can submit the results of the studies done over the last three years as soon as possible so that legislation on fair trade could be implemented without delay. Earlier on when colleagues spoke, they spoke in support of our direction, but they also think that time is not ripe for implementation. That puzzles me. Why do they agree with the direction of something which, in their view, cannot be done? Everything starts from a first step. If we think that a proposal or a piece of legislation is good and beneficial to Hong Kong, why do we not put it into effect? As Dr the Honourable LAW Cheung-kwok has said in moving his motion, there is legislation on fair trade in many countries and places in Asia, including China. Although Hong Kong is one of the "Four Dragons", it has regarded legislation on fair trade as a great scourge. Under the circumstances, Hong Kong should be regarded as a worm only. Mr President, today I will speak on the social significance of legislation on fair trade as far as the newspaper industry is concerned.

Mr President, the press is one of the weapons of the public. While it is a necessity in a democratic society, the freedom of the press is the foundation for the protection of liberty and the rule of law. Therefore, fair and effective competition among different newspapers has a special meaning to which we should pay close attention. The price war for newspapers which broke out at the end of last year has taught us a good lesson on the question of fair competition.

For a long period of time, the Federation of the Newspaper Trade has maintained a price-fixing agreement. Although the agreement has no binding effect in law, for several decades it has been complied with as if it were a convention of the trade. According to economic theory, the price fixed by this kind of cartel will be higher than the market price. Besides, the product will not have to face sufficient and full competition, unfavourable to the healthy development of the market and the interests of consumers. In the middle of last year, a new newspaper entered the market. At the end of the year, a price war broke out and the price-fixing agreement came to an end.

The price cutting of newspapers is a break from the restrictions of fixed pricing and the cartel. It promotes greater competition among different newspapers which is a good thing, but at the same time, we have to be aware of the motivation behind this price cut. Is it a rightful action taken to encourage competition or is it a step wrongfully and maliciously taken to attack competitors and defeat them by means of huge capital? This is a very important issue.

To defeat the other competitors by means of, so to speak, a huge capital or a predatory strategy of price cutting means that some companies or consortia may use their huge capital or abundant financial resources as back-up and continuously maintain prices below their marginal costs of production. The purpose of this is to wage a war of annihilation of competitors, forcing those who cannot hang on out of the market and finally, have all their competitors exterminated and monopolizing the market. This kind of "dumping" tactics is most unfavourable to competing parties who do not have a strong back-up. After an oligopoly has emerged on the market, the winners will probably raise the prices once again to reap even greater profits. In the end, consumers will be the actual sufferers, although they may have enjoyed some benefits at the beginning.

The newspaper trade has a few characteristics. First, the demand for newspaper is highly elastic. Secondly, newspaper cannot be stored for later use. Thirdly, the initial costs of entering the newspaper trade is high. A huge investment outlay is required before a new operator can enter the market. These characteristics have made room for the predatory strategy of price cutting mentioned above.

In a free market, competition among the enterprises, elimination of the weak and survival of the fittest are the rules of the game and they will not attract much criticizms. However, the important question is whether competition is carried out in a fair and open environment and whether efficiency is the determining factor of the results. Any improper and predatory competition should be forbidden. Whether the current price war of newspapers is a predatory and improper business activity should certainly not be determined merely on the basis of superficial analysis. It should actually be decided by a government body such as a Fair Trade Commission which will conduct fair and detailed investigation into the matter.

In an "uncontrolled" free market, unfair competition may occur, thus creating an oligopoly, or a cartel may be formed out of a price-fixing agreement. Whichever the case, the consumers will be the one to suffer in the end. Therefore, for the sake of consumer interests, we should be concerned with the competition in the newspaper trade and strive to preserve a fair competitive environment. However, without a clearly defined legal mechanism, the Government has no authority to interpret, investigate, arbitrate and impose sanctions against the unfavourable effects on press freedom and the rights of the public caused by the long standing fixed pricing of newspaper, or the predatory price war which has continued since the end of last year.

Considering this example, I think there really is a need for Hong Kong to enact legislation on fair trade and set up a Fair Trade Commission to deal with problems similar to those of the newspaper market and to work for the long-term interests of the public.

With these remarks, I support the motion.

SECRETARY FOR TRADE AND INDUSTRY (in Cantonese): Mr President, it is my pleasure to have this opportunity to speak on the policy of the Hong Kong Government with regard to the promotion of competition in the business and commerce sector of Hong Kong.

The Government has all along been making much efforts in the promotion of free trade and competition because a policy as such could best guarantee the enhancement of economic of returns, the maintenance of prices of goods at a low level, as well as the protection of consumers' interests. As we all know, since Hong Kong is a fully open economy, our traders and manufacturers are confronted with keen competition from all over the world and the Government's policy of free trade and competition is able to meet their needs. In fact, the Government's policy in this respect is also beneficial to Hong Kong. Hong Kong has been recognized as one of the most competitive places in the world. According to the report on the competitiveness of the world published by the Swiss International Society of Management Development and the World Economic Forum last year, Hong Kong has been ranked as the third most competitive place in the world. I have mentioned the results of an international assessment in particular because some Members have mentioned earlier on that there is already legislation on fair competition in many economies, including those in the Asian region, but the Government is still adopting an open attitude as to whether there should be legislation on fair competition. In fact, although there is no legislation on fair competition in Hong Kong, Hong Kong has been ranked as one of the three most competitive economies in the world. I hope that this point will not be neglected.

As we all know, the basic economic principle followed by the Hong Kong Government is to avoid intervening the market as far as possible. This is because we believe the best way to promote competition, improve efficiency, as well as to reduce costs and prices is to allow fair competition and avoid intervention. However, where necessary, the Government will take appropriate and practical measure so as to correct any unfair business practices, to maintain competition and to protect consumers' interests. For example, in order to curb unfair, deceptive or misleading business practices, the Government has enacted a number of legislation, including the Trade Descriptions Ordinance, the Control of Exemption Clauses Ordinance, the Unconscionable Contracts Ordinance, the Supply of Services (Implied Terms) Ordinance and the Sale of Goods (Amendment) Ordinance. Besides, the Consumer Council has set up the Consumer Legal Action Fund in November 1994 to assist individual consumers or groups of consumers to take legal action against unscrupulous merchants.

The Consumer Council has also established the Trade Practice Division which is responsible for investigating ways of business operation suspected of preventing, restricting or interrupting competition so as to advice the Government on ways to promote positive competition.

Besides taking the measures mentioned above, the Government also understands that free competition may not be possible under certain circumstances, including circumstances in which:

  1. a huge amount of investment is required;

  2. close monitor is required; or

  3. the long-term interests of the consumers have to be protected.

Under these circumstances, the Government should make arrangements to strike a reasonable balance between the situation of a reasonable monopoly or oligopoly and the advantages of good services and fair prices. In formulating monitoring measures against trades which need to be monitored, the first point that the Government has to consider is how to promote competition and how to protect consumers interests. These measures will be reviewed and revised from time to time so that improvements can be made to meet the changing needs of the situation. The present approach adopted by the Government is to work on individual industries with a view to promoting competition within each of them. Since 1993, the Government has, from time to time, allocated funds to the Consumer Council to enable it to carry out various studies on the competition of the six major industries which affect the livelihood of the public. These six industries are banking, supermarkets, fuel supply for domestic water-heating and cooking, telecommunications, as well as the broadcasting industry and the residential property market. Up to date, the Consumer Council has published study reports on five of these industries and the remaining report on the residential property market will soon be released as well. The Government has promised to publish its written response to the study reports of the individual industries six months after each report has been released. The Government has made positive and constructive response to these study reports. Up till now, the Government has responded to the Consumer Council's study report on the competition of the banking industry, as well as the industries of supermarkets and fuel supply for domestic water-heating and cooking respectively.

Firstly, as regards the banking industry, the Government has accepted and implemented some of the major recommendations of the study report, including the removal of interest rate ceilings of fixed deposits by stages. The Administration has started relaxing the restrictions on interest rates gradually since October 1994. Starting from November 1995, restrictions on the interest rates of fixed deposits for a period of seven days or longer have been relaxed completely. This measure has achieved desirable results. The interest rates of 99% of the fixed deposits of small sums have been relaxed and such relaxation has not resulted in any negative effects on the stability of the banks. Different interest rates are made available in the market to increase the options available to consumers and the banks can cope very well with the effects brought about by the relaxation of the restrictions on interest rates.

Secondly, expert opinion has been provided to the Consumer Council regarding methods to improve the collection of data of supermarkets as well as more effective measure to monitor the competition among them. Thirdly, the Government agrees that if a common pipe conveyance system is feasible, it will help to introduce more competition into the market of domestic gas supplies which will be beneficial to the consumers. As such, the Government will appoint a consultant to study the feasibility of introducing a common pipe conveyance system in Hong Kong. Besides, the Administration will set up an Energy Advisory Committee to advise the Government on policies of energy resources and related issues, including the question of charge increase of the two electricity companies and the Hong Kong Towngas Company Limited.

Besides responding to the study report of the Consumer Council, the Government has also implemented new policy measures in recent years to promote positive competition within individual industries and services according to the principle of taking measures against individual industries. These measures are: Firstly, in relation to communications, the Government has introduced competition into the established network services of telecommunications in Hong Kong since July last year. At present, franchises have been granted to Hong Kong Telecommunications Limited and three other new telephone companies to provide various kinds of established network services. These companies have to compete with each other in the market and the conditions set out in the franchises would provide full protection to safeguard the interests of consumers, promote fair competition and prevent anti-competition acts.

Secondly, in respect of broadcasting, as a measure to help implement its policy, the Government has been adding a new condition to protect free trade when issuing broadcasting franchises since 1994. This condition is now included in all existing franchises to ensure that the broadcasting companies will not stage unfair or anti-competition business activities.

Thirdly, as regards medical services, the Administration has amended the relevant legislation in August 1995 whereby medical practitioners who wish to register in Hong Kong are required to pass a uniformed entrance examination. The purpose of this measure is to provide an environment of fair competition for medical practitioners who wish to practise in Hong Kong.

Fourthly, in relation to transportation services, when renewing the bus franchises, the Administration has set aside and granted the right to run certain bus routes on the principle of non-franchised operation. This move is intended to introduce more competition where necessary and to facilitate any change in the method of operation of the bus service necessitated by changes in the circumstances of operation.

Fifthly, regarding legal services, the Government is drafting a bill to remove the standard rates of solicitor's charges on the conveyance of property and probate matters to promote competition and protect consumers' interests.

Sixthly, concerning the rice market, the Government is considering the introduction of more competitions into the market provided that it will not affect the stable supply of rice.

The present measures adopted by the Government do not include a comprehensive monitoring system. Whether Hong Kong needs such a system is the crux of today's motion. Considering the views expressed by Members today, it can be said that there is a variety of opinions or even an array of conflicting views concerning the motion. On one hand, some Members think that intervention by Government or intervention through legislation will most probably result in serious bureaucracy which would increase the complexity of official procedures and would possibly disrupt the normal market mechanism and the allocation of resources. Therefore, the Government should not intervene in this respect. Otherwise, it could strangle enterprises, reduce efficiency and cause damage to the economy of Hong Kong. On the other hand, some Members think that as the trend towards monopolization and anti-competition behaviour have already existed in certain industries in Hong Kong, anti-monopolizing legislation and legislation on fair trade should therefore be enacted and a Fair Trade Commission should also be established to ensure that consumers will be treated fairly. The different stances taken by Members show that there is an array of conflicting public opinions concerning the formulation of an economic policy on competition.

Since there is a variety of opinions, the Government has appointed the Consumer Council to study the general state of competition in the markets of Hong Kong so that a comprehensive assessment can be made. It is expected that the report will be published in the middle of the year. Although there is an array of conflicting ideas concerning the monitoring system to be established and the methods to be adopted to positive competition, I believe the basic objective is the same, and that is, to promote competition and to protect consumers' interests.

Mr President, the Government will continue to adopt a pragmatic and step by step approach to decide on measures which will achieve the best results in promoting positive competition within each of the various industries in Hong Kong and to implement policies to promote competition. As regard whether Hong Kong should enact a piece of legislation on competition or fair trade comprehensively, the Government has adopted an open attitude.

The Government will consider the above-mentioned issues carefully on the basis of the overall study and assessment results compiled by the Consumer Council in relation to the environment of competition in Hong Kong. We will also invite the public to express their opinion on the results of the studies conducted by the Consumer Council. The Administration would certainly give full consideration to the views expressed by all parties before drawing any conclusion. Thank you.

PRESIDENT: Dr LAW Cheung-kwok, you are now entitled to reply and you have six minutes 25 seconds out of your original 15 minutes.

DR LAW CHEUNG-KWOK (in Cantonese): Mr President, over ten Members have actively taken part in the debate on this motion just now. Some of them pointed out that in formulating legislation on fair trade, we need to pay attention to many areas and many issues are also involved. Colleagues who oppose this motion hold that legislation on fair trade may entail inappropriate interference in the economy and people's livelihood, which is detrimental to Hong Kong. Some colleagues who have reservations about the motion do not give their support because the wording of the motion is not specific enough. I agree that legislation on fair trade will produce far-reaching consequences as it will re-define the relationship among major enterprises, between major enterprises and small enterprises and even the relationship between the people and the enterprises. I also agree that we ought to be very careful in handling these relationships and what is more, we have to maintain a balance of these relationship. I am unable to convince all Members to support this motion today and I wish to keep up the effort in future to elucidate the points concerned in order to secure Members' support.

Lastly, I would like to tell a story. One day, I woke up and found that "pineapple buns" were sold at $3.95 each in all baker shops all over Hong Kong despite the difference in their sizes, shapes, colour and freshness. That night, I saw on television the spokesman of the Coalition of Pineapple Bun Tradesmen, who also owned the largest bakery in the territory, saying that since the flour, pineapple, workers' wages, shop rental and capital cost required for the production of pineapple buns were the same, so all pineapple buns should be sold at $3.95 each inclusive of reasonable profits. He added that in order to prove that competition still existed in the pineapple bun market, he decided that all baker shops are going to give customers a candy as a gift for every pineapple bun sold. Members may find this story ridiculous and think that it is impossible for such a thing to happen. Indeed, it is impossible for there to be a phenomenon of a standardized price, in the princeapple bun market. The main reason is not that the major bakeries do not want to standardize the price, but that thousands of baker shops will not allow the standardization of price. If Members think that the story of pineapple buns I just told them is utterly absurd, they should agree that the price of unleaded petrol being standardized at $9.67 per litre in Hong Kong's petrol market now is equally absurd and that the price may have probably been manipulated by human factors. In Hong Kong, there are five to six petrol suppliers and over a hundred petrol filling stations. Yet, the price of unleaded petrol is standardized at $9.67 per litre and even the two figures to the right of the decimal point are the same. Some two years ago, the largest petrol company in Hong Kong issued a statement in which it stated that since all petroleum products came from the same source and the workers' wages and other costs incurred were also the same, the price of petrol sold at all petrol filling stations should be standardized, and even the two figures to the right of the decimal point should also be standardized, notwithstanding the different locations of the stations. It was also stated that this was the result of competition. Nonetheless, I have reasons to believe that this company may have concluded a secret agreement with other companies on the price, or, at least, they understand fairly well that they will not compete at this price among themselves. I wish to remind Members that, in fact, the source of crude oil and the cost of exploitation vary from one company to another, as a petrol filling station can only go in business through tender and bidding, but the bidding price for stations at different locations or at different times vary. The competition faced by petrol filing stations located at different places are different and there is also a slight disparity in the physical properties of the petroleum products of different companies. However, petrol filling stations located at different places operated by different companies can standardize the price of unleaded petrol at $9.67 per litre.

Recently, all petrol filling stations have been offering gifts to their customers. They are giving out water, not candies and my car is filled with bottles after bottles of water. According to the petrol companies, they are giving out water as gift for the sake of competition. In fact, they can only deceive children by saying this. They are not giving out water as gift but forcing us to buy the water, that is, forcing us to buy their water when we patronize their petrol filling stations. I hope that Members, particularly those who cannot support my motion at this stage, will recall the story of pineapple buns and the story of buying water whenever they patronize petrol filling stations. Thank you, Mr President.

Question on the motion put and agreed to.

ADJOURNMENT AND NEXT SITTING

PRESIDENT: In accordance with Standing Orders, I now adjourn the Council until 2.30 pm on Thursday, 30 May 1996.

Adjourned accordingly at eighteen minutes past Eight o'clock.