LegCo Paper No. FC 112/96-97
(These minutes have been
seen by the Administration)
Ref : CB1/F/1/2

Legislative Council Finance Committee

Minutes of the proceedings of the meeting held on Friday, 21 March 1997, at 2:30 pm in the Legislative Council Chamber

Members present :

    Dr Hon YEUNG Sum (Chairman)
    Hon CHAN Kam-lam (Deputy Chairman)
    Hon Allen LEE, CBE, JP
    Hon Mrs Selina CHOW, OBE, JP
    Hon Ronald ARCULLI, OBE, JP
    Hon Mrs Miriam LAU Kin-yee, OBE, JP
    Hon Albert CHAN Wai-yip
    Hon CHEUNG Man-kwong
    Hon Michael HO Mun-ka
    Dr Hon HUANG Chen-ya, MBE
    Hon LEE Wing-tat
    Hon Eric LI Ka-cheung, OBE, JP
    Hon Fred LI Wah-ming
    Hon Henry TANG Yng-yen, JP
    Hon James TO Kun-sun
    Dr Hon Samuel WONG Ping-wai, OBE, FEng, JP
    Hon Howard YOUNG, JP
    Hon Zachary WONG Wai-yin
    Hon James TIEN Pei-chun, OBE, JP
    Hon CHAN Wing-chan
    Hon CHAN Yuen-han
    Hon Paul CHENG Ming-fun
    Hon CHENG Yiu-tong
    Dr Hon Anthony CHEUNG Bing-leung
    Hon CHEUNG Hon-chung
    Hon David CHU Yu-lin
    Hon IP Kwok-him
    Hon Ambrose LAU Hon-chuen, JP
    Dr Hon LAW Cheung-kwok
    Hon LAW Chi-kwong
    Hon LEE Kai-ming
    Hon LEUNG Yiu-chung
    Hon Bruce LIU Sing-lee
    Hon MOK Ying-fan
    Hon Margaret NG
    Hon NGAN Kam-chuen
    Hon SIN Chung-kai
    Hon TSANG Kin-shing
    Dr Hon John TSE Wing-ling
    Hon Lawrence YUM Sin-ling

Members absent :

    Hon Martin LEE, QC, JP
    Dr Hon David K P LI, OBE, LLD (Cantab), JP
    Hon NGAI Shiu-kit, OBE, JP
    Hon SZETO Wah
    Hon LAU Wong-fat, OBE, JP
    Hon Edward S T HO, OBE, JP
    Dr Hon LEONG Che-hung, OBE, JP
    Hon CHIM Pui-chung
    Hon Frederick FUNG Kin-kee
    Hon Emily LAU Wai-hing
    Dr Hon Philip WONG Yu-hong
    Hon Christine LOH Kung-wai
    Hon LEE Cheuk-yan
    Hon Andrew CHENG Kar-foo
    Hon CHOY Kan-pui, JP
    Hon Albert HO Chun-yan
    Hon LAU Chin-shek
    Hon LO Suk-ching
    Hon Mrs Elizabeth WONG, CBE, ISO, JP

Public officers attending :

    Mr K C KWONG, JP
    Secretary for the Treasury
    Mr Kevin HO, JP
    Deputy Secretary for the Treasury
    Ms Maureen WONG
    Principal Assistant Secretary for Transport
    Mr Peter Y K LUK
    Assistant Commissioner for Transport
    Mr W H LAI
    Electrical and Mechanical Manager of Electrical and Mechanical Services Trading Fund
    Mr Augustine L S CHENG
    Deputy Secretary for Trade and Industry
    Mr Patrick CHUNG, JP
    Electronic Data Interchange Co-ordinator of Trade and Industry Branch
    Mr Alan DIXEY
    Chief Systems Manager of Information Technology Services Department
    Mr Tony AU
    Senior Systems Manager of Information Technology Services Department
    Mr Edmund CHEUNG
    Assistant Director-General of Trade
    Ms Miranda CHIU
    Principal Assistant Secretary for Health and Welfare
    Mr Andrew LEUNG, JP
    Director of Social Welfare
    Mr CHENG Chok-man
    Assistant Director of Social Welfare
    Miss Lilian FUNG
    Senior Statistician of Social Welfare Department
    Mr K Y TANG, JP
    Government Economist

Clerk in attendance :

    Mrs Vivian KAM
    Assistant Secretary General 1
Staff in attendance :
    Mrs Constance LI
    Chief Assistant Secretary (Finance Committee)
    Miss Anita SIT
    Senior Assistant Secretary (Finance Committee)

Item No. 1 - FCR(96-97)114

The Committee approved the proposal.

Item No. 2 - FCR(96-97)115

2. The Committee approved the proposal.

Item No. 3 - FCR(96-97)116
Transport Department

• New Subhead "Upgrading of power supply system in the Lion Rock Tunnel"

3. Referring to a recent explosion incident in the vicinity of a tunnel, a member asked about the contingency plan for tunnel operation in case of emergency. In reply, the Assistant Commissioner for Transport (AC for T) advised that vehicles carrying dangerous goods such as petroleum and natural gas were prohibited from using the tunnel. In case of emergencies, the contingency plan would be activated. The Police and the Fire Services Department would be notified immediately for rescue actions, and a back-up system would provide uninterrupted power supply during this period.

4. On the reason for not carrying out the proposed power supply upgrading project together with the Lion Rock Tunnel ventilation system upgrading project in 1995, AC for T explained that these were separate projects. Existing power supply was adequate for the time being, and the proposed upgrading was to provide additional capacity to cater for future demands. Apart from increasing the overall stability of the tunnel power system, the upgrading would also enable future replacement of the existing transformers to take place without interrupting normal tunnel operation.

5. With regard to the engineering consultancy fees charged by the Electrical and Mechanical Services Trading Fund (EMSTF), the Electrical and Mechanical Manager of EMSTF advised that the charges included all services, and the proposed charge which amounted to about 10% of the project cost was very competitive when compared with the private sector. While private consultancy companies would charge a fee ranging from 9.8% to 13.84% of the project cost, additional charges would be required for services such as site investigation and supervision, technical drawings and photocopying.

6. The Committee approved the proposal.

Item No. 4 - FCR(96-97)117
Government Secretariat : Trade and Industry Branch
• Subhead A008XV Electronic data interchange system
Information Technology Services Department
• Subhead A064XS Bureau computer service 1997-98

7. While members generally supported the Government in taking the lead in the use of electronic trading methods to maintain Hong Kong’s position as a competitive international business centre, some members raised questions on the justifications and cost-effectiveness of the proposed system enhancement. In response to members’ queries, the Deputy Secretary for Trade and Industry (DS/TI) advised that the core system design capacity of the existing Government electronic data interchange (EDI) system could only cater for a projected caseload of 212 250 Restrained Textiles Export Licences (RTEL) and 1 610 000 Trade Declarations (TDEC) for the first full year commercial operation of the Community Electronic Trading Service (CETS). This design capacity and the need for another submission for an expansion of the system had been highlighted in FCR(93-94)11 which was approved by the Finance Committee in April 1993. As the CETS had commenced commercial operation in January 1997, it was necessary to expand the capacity of the existing Government EDI system to cope with the projected increases in caseloads. Furthermore, based on the experience of a trial service conducted for RTELs since September 1996, the Government had identified some new functions which its existing system could perform in order to save manpower and reduce processing time. This would involve extending the scope of computer validations to reduce manual data checking and providing additional computer reports for surveillance purposes. Moreover, as the present system could only process TDECs in English, and with the increasing number of TDECs submitted in Chinese, the TDEC sub-system would have to be enhanced to deal with TDEC in both English and Chinese. As a result of these developments, it was necessary to seek an increase in financial commitment for the expansion and upgrading of the existing Government EDI system.

8. On the additional resources required for the testing of RTELs in the trial run, the Chief Systems Manager of Information Technology Services Department (CSM/ITSD) explained that the testing period was extended due to problems encountered by Tradelink in defining its system specifications with its contractors. Consequently, extra resources had been directed to support the extended period and to reinstate certain functions in the core system.

9. Some members asked whether the present proposal was related to the previous Finance Committee approval of a convertible loan to the Tradelink in May 1996 (FCR(96-97)15 and 17). In response, DS/TI clarified that there was no direct relationship between the two funding proposals. The loan to Tradelink was to enable the company to continue its operation in providing CETS for a range of trade-related documents, while the present proposal sought to expand and upgrade the internal computer systems within Government for processing Government trade-related documents and sharing information electronically. Some members expressed concern that the present proposal might add extra costs to exporters and CETS users if the Government was to achieve full cost recovery. In this connection, the EDI Coordinator of Trade and Industry Branch (C/EDI) explained that Tradelink and the Government operated EDI system were two separate systems. In addition to paying Tradelink for using CETS, exporters and traders would have to pay declaration charges to the Government under the Import and Export (Registration) Regulations, Cap. 60. However, to encourage the use of CETS, the Government would reduce the declaration charges payable to Government so that the total Tradelink and Government charges for using CETS would as far as possible not be more than the current charges. While the Government would recover costs for services provided, it was anticipated that a lower Government charge could be brought about by manpower reductions following full implementation of the enhanced system.

10. On manpower savings, DS/TI advised that the proposed system would bring about a realisable saving of about $70 million per annum through the deletion of 255 posts from the existing establishment, in addition to a notional saving of about nine man-years of resources resulting from streamlined procedures. According to the cost-benefit analysis given at the Enclosure of the discussion paper, a net benefit would start to accrue in 1999-2000 and the break-even point would occur in 2003-04.

11. In reply to a member, CSM/ITSD advised that the normal usable life of computer systems was about seven years, but the software could still be used as long as the functionality requirements remained unchanged. While the design capacity was to cater for the forecast workload by the year 2000-01, further enhancement would be possible to meet increased demand. He also confirmed that the proposed system would be "year 2000 compliant".

12. On the future development of the system, C/EDI advised that each of the remaining Government trade-related documents such as manifests, Certificates of Origins and Dutiable Commodities Permits would require a separate feasibility study. Approvals for additional funds would be sought to extend the system to cover those documents found to be feasible and cost-justified.

13. After discussion, the Chairman put the proposal to vote. The Committee approved the proposal.

Item No. 5 - FCR(96-97)118
• Subhead 179 Comprehensive social security assistance scheme
• Subhead 180 Social security allowance scheme

14. Members enquired about the reasons for the over-projection of inflation in calculating the standard rates under the Comprehensive Social Security Assistance (CSSA) Scheme and the Social Security Allowance Scheme (SSA) in early 1996. In response, the Government Economist (GE) explained the forecast methodology. He said that adjustments to the standard rates under the CSSA and SSA Schemes were based on the forecast increase in the Social Security Assistance Index of Prices (SSAIP), while the maximum rent allowance under the CSSA Scheme was adjusted in accordance with the projected movement in the rent index for private housing under the Consumer Price Index (A). The increase in the SSAIP in the second half of 1996 was forecast at 7% at the beginning of the year, but the actual increase turned out to be much lower than the forecast rate. The discrepancy was largely attributable to the unexpectedly moderate increase in food prices in 1996 despite floodings in China. Since the basic food component had a very large weighting (43.5%) in the SSAIP, any variation in food prices would have a substantial impact on the movement in the SSAIP. Furthermore, the US dollar remained strong in 1996, and this had a positive impact on the overall inflation rate last year. Further, GE advised that the present forecast model was based on a widely adopted statistical model developed in the advanced countries. In view of the significant over-projection in the SSAIP in 1996-97, a member asked whether the Administration would review the forecast model. GE advised that a review would be carried out. He also considered that, even with a sophisticated model, discrepancy between the forecast and the outcome could still occur. In such circumstances, the introduction of a compensatory mechanism in each round of adjustment of the pay-outs to make up for the discrepancy as it emerged would seem to be an entirely reasonable approach.

15. Referring to the Supplementary Note to the paper, a member queried the Administration for making reference to the 1995 survey findings in determining the maximum rent allowance for CSSA recipients in 1997-98. He considered that the Administration should obtain more up-to-date statistics on the actual rent paid by CSSA recipient families living in private housing to provide a more realistic basis for calculating the rent allowances. In response, the Senior Statistician of Social Welfare Department explained that an annual survey of CSSA recipients was usually conducted at the end of each year, and the findings would only be available in July-August the following year. In view of the time gap between the survey and adjustments made to rent allowances, the Chairman suggested that the Administration should consider employing more up-to-date figures for the analysis.

16. As regards whether the maximum rent allowance under CSSA would be adequate to meet the actual cost of accommodation, the Director of Social Welfare (DSW) advised that where the actual rent was higher than the maximum rent allowance, compassionate re-housing or cheaper accommodation could be arranged for the CSSA households where appropriate. DSW could also exercise discretionary power to approve a higher payment to cover the actual rent paid by CSSA recipients. At the request of the member, DSW undertook to provide further information on the number of cases where a higher rent allowance had been approved under DSW’s discretionary power.Admin

17. Addressing a member’s concern about the adequacy of the meal allowance for students attending full-day school and taking lunch away from home, the Assistant Director of Social Welfare explained that food expenses for all family members had been included in the basic rates for CSSA households, and the meal allowance in question was only a supplement to allow for extra expenses for lunch taken by students away from home. At the request of the member, the Administration undertook to provide further information on the estimated cost per meal and the percentage allowed for food expenses in the current CSSA standard rate.Admin

18. Responding to members on the proposed review of allowances to the single elderlies, DSW advised that two consultancy studies were being carried out. One study would examine the expenditure pattern of the elderly CSSA recipients, and the other would ascertain the reasons for some eligible elderlies not to apply for CSSA. The review findings were expected to be available around July-August this year. As to whether adjustments or supplementary payments would be made should the review reveal gross inadequacy in the current rates, DSW replied that the Administration would have to assess the review findings with regard to the implications on the CSSA Scheme as a whole. The Chairman advised that the matter could be followed up by the LegCo Panel on Welfare Services.

19. The Committee approved the proposal.


20. The Committee was adjourned at 3:50 pm.

Legislative Council Secretariat
18 April 1997

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