Information Note for the Legislative Council Panel on Financial Affairs.
The Hong Kong Special Administrative Region Government Land Fund
This paper briefs Members on the Hong Kong Special Administrative Region Government (HKSARG) Land Fund.
2. The Joint Declaration (JD) provides that the ownership of half of the proceeds from land transactions (after deduction of the average cost of land production) from the date of entry into force of the JD up to 30 June 1997 rests with the HKSARG. A HKSARG Land Fund was established in 1986 by the Chinese side by way of a Deed of Declaration of Trust for the purpose of holding in trust for the future HKSARG its share of the land premium income. While the Trustees of the Land Fund are responsible for the management of the proceeds of the Land Fund, the beneficial ownership of the proceeds will belong to the HKSARG on 1 July 1997 as provided for under the JD.
3. According to the audited accounts of the Land Fund, its accumulated balance as at 31 March 1996 was $111 billion. Our forecast in the 1996-97 Budget was that the balance would reach $142 billion on 1 July 1997. We will update the forecast when announcing the 1997-98 Budget in mid-March.
Transfer of Assets
4. The Deed of Declaration of Trust for the establishment of the Land Fund stipulates that -
(a) once the HKSARG comes into being, the Land Fund shall vest in a public officer, body or entity as may be lawfully nominated by the HKSARG for the purpose of receiving and holding the Fund on behalf of the HKSARG, and the Trustees shall execute such documents and assurances as are required for the purpose; and
(b) in default of such nomination by the HKSARG by 31 March 1998, the Trustees shall realise all assets of the Fund and after paying off all liabilities, pay all proceeds to the HKSARG.
5. Although a decision on these matters is for the HKSARG, our view is that the transfer of the assets of the Land Fund to the HKSARG in the manner as described in paragraph 4 above should take place as soon as possible after the HKSARG comes into being. This would provide a practical demonstration to the international community of the financial autonomy of the HKSARG as set out in the Basic Law. Once the assets of the Land Fund are transferred to the HKSARG, it will also be up to the HKSARG to decide on their long-term use and management.
6. Section 3 of the Public Finance Ordinance (Cap. 2) (Annex) stipulates that unless otherwise provided, any moneys received by the Government shall form a part of the General Revenue. Any proceeds that are realised from the assets of the Land Fund and transferred to the HKSARG will therefore form a part of the General Revenue and will be shown as such in the HKSARGs accounts. This, however, will not pre-empt the decision of the HKSARG on the long-term use and management of such proceeds.
7. In line with the existing arrangement for the fiscal surpluses (which are described in a separate paper), any proceeds from the realisation of assets of the Land Fund, once they had become a part of the General Revenue, would be placed with the Exchange Fund until the HKSARG makes a decision on their long-term use and management.
FIN CR 1/2161/93 Pt. 4
Public Finance Ordinance (Cap. 2)
Section 3 - The general revenue
(1) Except where otherwise provided by or under this Ordinance or any other enactment any moneys raised or received for the purposes of the Government shall form part of the general revenue.
Last Updated on 18 August 1998