PLC Paper No. FC 163
(These minutes have been
seen by the Administration)

Ref : CB1/F/1/2

Finance Committee of the Provisional Legislative Council

Minutes of the meeting
held at the Legislative Council Chamber
on Friday, 3 April 1998, at 2:30 pm

Members present :

Hon Ronald ARCULLI, JP (Chairman)
Hon Henry WU (Deputy Chairman)
Hon WONG Siu-yee
Hon David CHU Yu-lin
Hon HO Sai-chu, JP
Dr Hon Raymond HO Chung-tai, JP
Hon NG Leung-sing
Prof Hon NG Ching-fai
Hon Eric LI Ka-cheung, JP
Hon LEE Kai-ming
Hon Allen LEE, JP
Hon Mrs Elsie TU, GBM
Hon Mrs Selina CHOW, JP
Hon Mrs Peggy LAM, JP
Hon NGAI Shiu-kit, JP
Hon MA Fung-kwok
Dr Hon Mrs TSO WONG Man-yin
Dr Hon LEONG Che-hung, JP
Hon Mrs Sophie LEUNG LAU Yau-fun, JP
Hon CHAN Choi-hi
Hon CHAN Wing-chan
Hon CHAN Kam-lam
Hon TSANG Yok-sing
Hon CHENG Kai-nam
Hon Frederick FUNG Kin-kee
Hon Andrew WONG Wang-fat, JP
Hon Kennedy WONG Ying-ho
Hon Howard YOUNG, JP
Dr Hon Charles YEUNG Chun-kam
Hon YEUNG Yiu-chung
Hon IP Kwok-him
Hon Bruce LIU Sing-lee
Hon LAU Kong-wah
Hon Ambrose LAU Hon-chuen, JP
Hon CHOY Kan-pui, JP
Hon CHENG Yiu-tong
Dr Hon TANG Siu-tong, JP
Hon NGAN Kam-chuen
Hon LO Suk-ching
Hon TAM Yiu-chung, JP

Members absent :

Hon James TIEN Pei-chun, JP
Hon Edward HO Sing-tin, JP
Dr Hon David LI Kwok-po, JP
Hon Henry TANG Ying-yen, JP
Hon CHEUNG Hon-chung
Hon LEUNG Chun-ying, JP
Hon MOK Ying-fan
Hon HUI Yin-fat, JP
Hon CHAN Yuen-han
Dr Hon Philip WONG Yu-Hong
Hon CHIM Pui-chung
Hon LAU Wong-fat, JP
Hon Mrs Miriam LAU Kin-yee, JP
Hon Paul CHENG Ming-fun, JP
Hon Timothy FOK Tsun-ting
Hon KAN Fook-yee
Dr Hon LAW Cheung-kwok
Hon CHOY So-yuk

Public officers attending :

Secretary for the Treasury

Mrs Carrie LAM, JP
Deputy Secretary for the Treasury

Principal Executive Officer (General), Finance Bureau

Deputy Secretary for Economic Services

Principal Assistant Secretary for Economic Services

Mrs Amy CHAN
Executive Director, Hong Kong Tourist Association

Mrs Lily SHUM
General Manager (Marketing Communications), Hong Kong Tourist Association

Mr Rafael HUI, JP
Secretary for Financial Services

Mrs Pamela TAN, JP
Director, Mandatory Provident Fund Office

Mr Stephen PANG
Principal Executive Officer, Mandatory Provident Fund Office

Mrs Jenny WALLIS
Deputy Secretary for Broadcasting, Culture and Sport

Deputy Secretary for Works

Director of Water Supplies

Mr Joseph Y T LAI
Deputy Secretary for Education and Manpower

Senior Assistant Director of Education

Assistant Director of Education (Information Systems)

Mr Raymond P H CHAN
Chief Systems Manager of Information Technology Services Department

Ms Michelle LI
Principal Assistant Secretary for Education and Manpower (1)

Controller, Student Financial Assistance Agency

Ms Eva TO Hau-yin
Principal Assistant Secretary for Housing

Mr HUI Chee-chung
Assistant Director of Housing (Operations and Redevelopment)

Mr Simon LEE Pak-sing
Assistant Director of Housing (Legal Advice)

Mr CHAN Nam-sang
Senior Housing Manager of Housing Department

Mrs Margaret CHAN
Principal Assistant Secretary for Education and Manpower (9)

Assistant Director of Education (Schools)

Mr HO Wing-him
Deputy Secretary for Health and Welfare

Ms Miranda CHIU
Principal Assistant Secretary for Health and Welfare

Mr Andrew LEUNG, JP
Director of Social Welfare

Mrs Louise WONG, JP
Deputy Director of Social Welfare

Miss Lilian FUNG
Senior Statistician, Social Welfare Department

Government Economist

Mr Dominic K T LEUNG, JP
Assistant Commissioner for Census and Statistics

Clerk in attendance :

Ms Pauline NG
Assistant Secretary General 1

Staff in attendance :

Mrs Vivian KAM
Chief Assistant Secretary (1)5

Mr Matthew LOO
Senior Assistant Secretary (1)7

Item No. 1 - FCR(98-99)1


The Committee approved the proposal.

Item No. 2 - FCR(98-99)2


2. The Committee approved the proposal.

Item No. 3 - FCR(98-99)4


Subhead 870 Hong Kong Tourist Association

New item "New Hong Kong Destination Campaign"

3. Mr Henry WU declared an interest on the item.

4. Some members noted that a major part of the grant to enhance the Hong Kong New Destination Campaign would be spent on media promotions, including TV and newspaper advertisements. A member asked what mechanism would be put in place to measure the results of such efforts, in particular their effectiveness in attracting tourists.

5. In reply, the Executive Director, Hong Kong Tourist Association (ED/HKTA) advised that the Campaign was an ongoing programme to project Hong Kong's image, and the purpose of the proposed grant was to enhance promotional activities in target markets, such as the Mainland, Taiwan and the Unites States. The Deputy Secretary for Economic Services (DS/ES) added that there was no simple scientific basis for assessing the effectiveness as many different aspects were involved. He reckoned however that the number of tourists should pick up. ED/HKTA supplemented that in order to assess the effectiveness of the plans, Hong Kong Tourist Association (HKTA) had conducted surveys on tourists before their departure at the airport, and on 33 focus groups in 10 overseas cities. In addition, HKTA had also launched tactical campaigns all of which were aimed at assessing the effectiveness of such promotional efforts.

6. Referring to an enquiry from another member about the publicity efforts of Hong Kong's competitors, ED/HKTA stressed that the advertisement costs spent for the same purpose by these countries were in general higher than those by Hong Kong. Australia had spent A$13 million in advertising in Japan last year, and A$5 million in other parts of the Asian Region; Singapore had spent S$70 million on publicity and promotion; while Thailand had spent some HK$23 million just on CNN and Time magazine.

7. As regards the distribution of HKTA's resources in advertizing, ED/HKTA explained that emphasis would be placed on markets in the United States, Japan and Taiwan where media advertizing had proven to be effective on consumers. Approximately $6 million would be spent on advertizing in China where the media network was less complicated; and about $4 to $5 million on markets in European countries on average. On the other hand, there would be a need to tighten up on markets in Thailand, Indonesia and Korea in view of the economic developments in these countries. Other activities to be organized in connection with the Campaign would include activities to tie in with the opening of the new airport and those organized jointly with the local media and other trades to enhance interest in Hong Kong.

8. In reply to a member, ED/HKTA confirmed that assistance would be provided to local hotel groups and member organizations of the HKTA in the form of financial subsidy for participation in events organized overseas.

9. Some members considered that more efforts should be directed towards the Mainland to tap resources in such a potentially large market. They enquired about the possibility of relaxing entry requirements and promotional efforts aiming at specific target groups, such as newlyweds. ED/HKTA advised that following the opening of HKTA's office in the Mainland in March 1997, a series of promotional activities had been planned. These included advertisements in the media network, the promotion of travel packages to Hong Kong, and participation in major tourism promotion events in Shanghai and other major cities. DS/ES added that the Government had been in contact with relevant authorities in the Mainland over the past few months, and he envisaged that both the quota and the procedures for applying for entry into Hong Kong would be relaxed.

10. The Committee approved the proposal.

Item No. 4 - FCR(98-99)6


New Capital Account Subhead "Mandatory Provident Fund Schemes Authority"

New Capital Account Subhead "Compensation Fund for the Mandatory Provident Fund Schemes"

11. As $22 million had been approved in 1995 for engaging consultants to assist in the preparation of subsidiary legislation relevant to the Mandatory Provident Fund (MPF) Schemes, a member expressed concern over the proposed appointment of another group of consultants to advise on the pay and conditions of service for staff of the Mandatory Provident Fund Schemes Authority (MPFA). He enquired about the cost and the time frame involved. The Secretary for Financial Services (SFS) and the Principal Executive Officer, Mandatory Provident Fund Office confirmed that the cost to be incurred would be less than $500,000 and that the expenses had already been included in the $5 billion sought for the setting up of the MPFA. The study, which would commence in April 1998, was expected to take two months. In response to another member, SFS advised that consequent upon an amendment to the MPF Schemes Bill, the MPFA would be the authority for deciding on inter alia the staff remuneration package and the Administration would not be in a position to make such decisions.

12. On the schedule for the setting up of the MPFA, SFS advised that the Authority would be set up as soon as practicable and that members of the Management Board would hopefully be appointed by June 1998. As regards remuneration for Board members, SFS said that the executive directors of the Board were employees of the MPFA and would therefore receive salaries. Details for the non-executive directors had yet to be decided, although in principle the service they provided should not be free.

13. In reply to a member on the financing of the MPFA, the Director, Mandatory Provident Fund Office (D/MPFO) advised that the Authority would be expected to operate on a self-financing basis in the long term through fees and charges collected and investment returns generated from the grant of $5 billion. SFS stressed that figures on the resource requirements of the MPFA were prepared by the MPFO and were indicative only; these would be subject to the eventual decisions of the MPFA.

14. Having regard to the significant grant of $600 million, which originally was proposed at $300 million, as seed money for the MPF Compensation Fund, a member asked if the levy rate of 0.03% per year of the accrued benefits of members under the MPF Compensation Fund could be reduced. The member was of the view that in consideration of the imminent retirement of some contributors to the scheme, a reduction of the levy rate in the initial years should be considered in order to minimize losses to such contributors. D/MPFO advised that the amount of contribution for an average member at about $50 per year was relatively small, and there was a limit to which the amount could be further reduced. The details would nevertheless have to be considered by the MPFA.

15. Mr Frederick FUNG Kin-kee advised that Members of the Hong Kong Association for Democracy and People's Livelihood were, in line with their usual stand on the issue, not in support of the proposal.

16. The Committee approved the proposal.

Item No. 5 - FCR(98-99)11


Recurrent Account

Subhead 475 Outward Bound Trust of Hong Kong

Subhead 502 Hong Kong Archaeological Society

Subhead 503 Subventions to non-government organisation camps

Capital Account

Subhead 948 Non-government organisation camps


Recurrent Account

Subhead 415 Hong Kong Sports Development Board

Subhead 459 Hong Kong Academy for Performing Arts

Subhead 525 Hong Kong Arts Development Council

Capital Account

Subhead 942 Hong Kong Academy for Performing Arts

Subhead 973Hong Kong Academy for Performing Arts - minor plant,

vehicles and equipment (block vote)

17. The Committee approved the proposal.

Item No. 6 - FCR(98-99)12



New Subhead "Loan to the Guangdong Provincial People's Government for water quality improvement project"

18. Members noted that the proposed interest-free loan was in return for Guangdong authorities’ agreement to reduce the committed increase of water supply by a total of 560 million cubic metres (mcm) from 1998 to 2004. A member questioned the reasons for such a reduction and for a more accurate forecast of the water demand not having been made.

19. The Director of Water Supplies (DWS) explained that the reduction in water consumption was the result of the relocation of industries to the Mainland, which was not foreseen at the time when the agreement on the supply of water was signed between the Hong Kong Government and the Guangdong Provincial People's Government in 1989. He added that the annual increase in water consumption had been 6% in the past 20 to 30 years, and the water bought from Guangdong was equivalent only to a 3.5% increase in water consumption.

20. In response to further enquiries, DWS confirmed that the estimated savings of $2,240 million referred to the cost of the 560 mcm of water which would no longer be required for the period between 1998 and 2004. As regards the effect of water overflowing from reservoirs, DWS also assured members that the overflowing of water from reservoirs was a natural phenomenon, and that preventive measures were in place to guard against danger to nearby residents.

21. Some members were concerned about the quality of water, and enquired if other means of obtaining improved quality of water had been explored, such as that of obtaining water from north Guangdong. DWS advised that such a request had been made to the relevant authority in Guangdong, but the advice was that the investment necessary to facilitate such supplies would be considerable, and that it would not be appropriate for water resources to be used in such a manner. DWS also confirmed that the construction of a new closed aqueduct for conveying water from Dongjiang to Hong Kong was the solution to the water pollution problem. He assured members that the water supplied was clean at source, that it was up to the standard stipulated in the 1989 Agreement and was suitable for use and drinking. He acknowledged that the provision of an interest-free loan to the Guangdong Provincial People's Government to help finance the construction of the aqueduct was an indirect way of improving the quality of water supplied to Hong Kong.

22. As the interest-free loan would be provided without security, a member asked if the Hong Kong Special Administrative Region Government could offset the amount due by paying less for the water supplied in case the Guangdong Provincial People's Government failed to repay the loan. In reply, DWS advised that due consideration had been given to the financial ability of the Guangdong Provincial People's Government. Since the annual repayment would only be in the region of $110 million, problem in this respect was not envisaged.

23. The Committee approved the proposal.

Item No. 7 - FCR(98-99)5



Education Department

New Subhead "Implementation of Information Systems Strategy 1998 Phase I"

24. Mrs Elsie TU and Mrs Peggy LAM declared an interest.

25. A member questioned the launching of Year 2000 (Y2K) Compliance projects at such a late stage, given that the problem should have been foreseen much earlier. He enquired about the number of Y2K Compliance projects in Government departments as a whole and the implementation time frame. The Deputy Secretary for the Treasury (DS/Tsy) undertook to provide after the meeting information relating to Y2K Compliance projects in Government departments. Admin

26. The member further questioned why implementation of the Target Oriented Curriculum (TOC) System required seven years. Apart from schools having to put up with the long wait, rapid developments in information technology would mean that some of the hardware and software would become outdated and incompatible. He enquired if the implementation schedule could be expedited.

27. In response, the Senior Assistant Director of Education (SAD/ED) explained that the provision of hardware and software for the TOC System would have to tie in with the organization of training and other related services, and that the software would be provided by stages instead of at one go. The schedule was drawn up having regard to the Education Department's experience in carrying out the Information System Strategy of 1993, to recommendations of consultants who undertook the feasibility study on the project and to schools’ readiness in employing target-oriented assessment. If the implementation schedule were to be significantly shortened, the ability of schools in accepting the whole system at the same time would be in doubt and considerable manpower resources would be incurred. He nevertheless appreciated the member's concern and undertook to expedite the schedule where practicable. The member, however, did not accept the Administration's explanation.

28. Members noted that the commitment of $357,130,000 in the proposal was for implementing two different projects. While the urgency of implementing the Y2K Compliance was understandable, members questioned why the TOC project, which would alone cost $346,270,000, was not first put to the Education Panel for discussion.

29. In response, SAD/ED explained that both projects were urgent items identified for implementation under Phase I of the Information Systems Strategy 1998 of the Education Department, and reports would be made in due course to the Education Panel on other items upon completion of relevant feasibility studies; funding requests would also be made where necessary. He apologized for not having briefed the Education Panel about the TOC proposal, adding that this was on account of the understanding that TOC was not a new policy but had been introduced consequent upon the Education Commission's recommendation in its report No. 4 issued in 1990 and after detailed studies and due consultation with the teaching profession.

30. SAD/ED further advised that pursuant to the implementation of TOC, teachers in general agreed with the objectives of TOC for the focus of learning to be placed on students. However, teachers had been using different means for recording the performance of students and many considered this unsatisfactory. The installation of a new computerized system in the Education Department and schools to support the implementation of TOC would standardize practices, and facilitate the analysis of assessment data for effective monitoring of students’ performance throughout their school years. SAD/ED emphasized that TOC had induced students’ interest in learning, and that similar information systems were used in schools overseas to keep track of students’ performance.

31. Members pointed out that there were more criticisms than support on TOC. Many teaching professionals had cast doubts on its effectiveness. TOC was implemented in different means in schools and, in many cases, was practised reluctantly. The subject ought to be further examined in the Panel, especially when a non-recurrent staff cost of $127,570,000 for the project would be incurred in addition to the commitment of $346,270,000. Some members suggested that the two projects be voted on separately or that the proposal on the TOC project be deferred. They also requested the Administration to conduct an overall review on the effectiveness of TOC in the meantime and duly consult the Education Panel before making the requisite funding request. A member pointed out that even the Board of Education had not been consulted on the current proposal. She urged the Education Department to adopt an open attitude and undertake due consultation with parties concerned instead of rushing to implement its decisions.

32. On the last point, SAD/ED clarified that the Administration had not ignored views expressed. TOC originated from the recommendations of the Education Commission and its progress had been monitored by the Board of Education; regular reports had been also made to the Education Panel. He had attended over 30 meetings to explain the policy aspect of TOC and the implementation of information technology systems in schools.

33. Responding to some members’ proposal for the two projects to be voted on separately or for the proposal on the TOC project to be deferred, DS/Tsy advised that while the Administration understood members’ concern on consultation, there would not be separate voting for the two projects as they had been proposed as a package. However, she advised Members that there were still one or two major funding proposals on Y2K Compliance projects which would be submitted for consideration in the following LegCo session. She believed that this particular Y2K Compliance project of the Education Department would be able to complete in time even if it were to experience a short delay.

34. The Committee rejected the proposal.

Item No. 8 - FCR(98-99)7


Subhead 274 Student finance - grants



Subhead 101Students of the universities, Lingnan College, technical

colleges, Prince Philip Dental Hospital, Hong Kong Institute of Education and Hong Kong Academy for Performing Arts

35. The Committee approved the proposal.

Item No. 9 - FCR(98-99)8



New Subhead "Special Compensation Payments for Former Residents of the Tiu Keng Leng Cottage Area"

36. In response to a member who sought clarification on the current proposal and that in 1995 for which $972 million was approved, the Principal Assistant Secretary for Housing explained that the commitment approved in 1995 was for the payment of special ex-gratia allowances to residents of the Tiu Keng Leng Cottage Area in compensation for the loss of their cottage structures, ancillary areas, etc., as a result of the clearance of the Area. The proposal under consideration was a separate issue and was to follow-up on the ruling by Hon Mr Justice Sears in June 1996 to compensate eligible residents for damages on their loss of opportunity to reside in the area at low rentals.

37. The Committee approved the proposal.

Item No. 10 - FCR(98-99)9


Subhead 326 Kindergarten Subsidy Scheme

38. While welcoming the proposal for changing the basis for the subsidy for the Kindergarten Subsidy Scheme from per pupil per annum to per class per annum, which represented an improvement over the existing scheme, a member was of the view that the scheme could be further improved. Referring to the motion on the Review of the Local Pre-School Education Policy carried by the Council on 14 January 1998, she asked how far Members’ views expressed during the motion debate had been taken into account, in particular, in relation to Miss CHOY So-yuk's proposal of using the percentage of qualified teachers as the basis for the subsidy. She also questioned the Administration's failure to consult the Education Panel and the teaching profession on the proposal.

39. The Deputy Secretary for Education and Manpower (DS/E&M) said in response that the proposal had regard to the fact that the number of classes in a kindergarten would affect operating costs. The proposed change would address the problem of fluctuations in subsidy as a result of changes in the number of pupils, and be particularly beneficial to kindergartens operating in areas with an ageing population or in remote or low income areas as they would encounter financial difficulties when their enrolment dropped. The alternative of using the number of qualified teachers as the basis of subsidy had been duly examined, but was considered not advisable as the number of such teachers would also vary and the end result would be similar to that calculating on the basis of the number of pupils. As the proposal had just been finalized within the Administration, there was no opportunity to brief the Education Panel. Nevertheless, the Administration had taken account of the views expressed by Members and the teaching profession when drawing up the recommendations. There were also contacts with individual members of the Education Panel over the last few days to explain the proposal. DS/E&M apologized for not bringing the proposal to the Education Panel, and assured members that improvements would be made in this direction in future. In response to the member who maintained that further consideration should be given to the suggestion for disbursing subsidy on the basis of qualified teachers, DS/E&M agreed to take this into account when the Administration conducted the major review on the effectiveness of the Scheme in two years’ time.

40. Mr YEUNG Yiu-chung pointed out that the Secretary for Education and Manpower advised the Council at the motion debate on 14 January 1998 that the subsidy would be based on the percentage of qualified teachers, and the Education Panel was so briefed at the meeting on 16 January 1998. He asked for the reason for the change in policy. DS/E&M explained that these were preliminary proposals, but had subsequently been modified having regard to the fact that 80% of the expenses of kindergartens were spent on teachers’ salaries and that the present proposal would better meet the Scheme's objective. Mr YEUNG, on behalf of members of the Democratic Alliance for Betterment of Hong Kong, expressed dissatisfaction at the Administration's change in policy.

41. A member enquired if kindergartens associations had been consulted on the proposal, and about progress on the training of qualified teachers. DS/E&M advised that consultation had been made with all major kindergarten sponsoring organizations and a number of kindergarten principals who were in general supportive of the proposal. Some saw a need to further increase the rate of subsidy or to appoint more qualified teachers, and these views would also be considered in the context of the major review. As regards the training of teachers, the Assistant Director of Education (Schools) said that 3 200 out of the 8 000 existing kindergarten teachers had been trained, and this had met the prevailing target of 40% of qualified teachers. In addition, the Hong Kong Institute of Education was training about 1 000 teachers per annum. It would not be possible however to expedite the pace of training as a member suggested owing partly to the limited capacity of the Hong Kong Institute of Education, and partly to the difficulty of releasing large numbers of teachers for the on-the-job training at the same time.

42. Commenting on the proposal by the Administration for the subsidy to be provided at a basic rate and an enhanced rate, a member asked if this could be further improved by introducing another level of rate to give greater encouragement to kindergartens in employing qualified teachers. DS/E&M advised that with the current proposal, it was envisaged that over 90% of the kindergartens would receive the enhanced rate by 1999 and that the target of kindergartens employing at least 60% of qualified teachers by 2000 would be met. Further refinements to the Scheme would complicate the system and create administrative problems.

43. The Committee approved the proposal.

Item No. 11 - FCR(98-99)10


Subhead 179 Comprehensive social security assistance scheme

Subhead 180 Social security allowance scheme

44. A member advised that although the proposed improvements to the Comprehensive Social Security Assistance Scheme still lagged behind those recommended by Members of the Council, she would support the proposals with reluctance as these were afterall improvements. If the item were voted down, the needy would not get even the monthly increase of $380. She nevertheless remained of the view that the rate of payment was still insufficient and requested the Administration to further consider Members’ suggestions for improvements to the Scheme, having regard to the need of the elderly and the prevailing economic situation. The Chairman added that the member's views probably represented the views of Members of the entire Council.

45. The Committee approved the proposal.

46. As this was the last meeting of the Finance Committee of the Provisional Legislative Council, the Chairman thanked members of the Committee for their views. On behalf of the Committee, he also extended appreciation to Mr K C KWONG, who would soon be leaving the post of Secretary for the Treasury, for attending the Committee's meetings.

47. The Committee was adjourned at 4:30 pm.

Legislative Council Secretariat

15 July 1998