PLC Paper No. CB(1) 421
(These minutes have been seen by the Administration)
Ref: CB1/PL/ES/1

Provisional Legislative Council
Panel on Economic Services

Minutes of meeting held on Monday, 6 October 1997, at 10:45 am in Conference Room A of the Legislative Council Building

Members present :

    Hon James TIEN Pei-chun, JP (Chairman)
    Hon HO Sai-chu, JP
    Dr Hon David LI Kwok-po, JP
    Hon Allen LEE, JP
    Hon Henry WU
    Hon Henry TANG Ying-yen, JP
    Hon YUEN Mo
    Hon CHAN Choi-hi
    Hon CHAN Kam-lam
    Hon Mrs Miriam LAU Kin-yee, JP
    Hon Ambrose LAU Hon-chuen, JP
    Hon Paul CHENG Ming-fun, JP
    Hon LO Suk-ching
    Hon TAM Yiu-chung, JP

Members absent :

    Dr Hon LAW Cheung-kwok (Deputy Chairman)
    Hon CHAN Yuen-han
    Hon Howard YOUNG, JP
    Dr Hon Charles YEUNG Chun-kam

Public officers attending :

Ms Maria KWAN
Acting Secretary for Economic Services

For Agenda Item III
Mr Richard YUEN
Deputy Secretary for Economic Services

For Agenda Item IV
Mr LI Kwok-tso
Principal Assistant Secretary for Economic Services
(Financial Monitoring)
Mr Eric Johnson
Principal Assistant Secretary for Economic Services
(Economic Services)
Mr Peter Littlewood
General Manager, Strategic Development and Administration, China Light and Power Co. Ltd. (CLP)
Mr Mark Rhys
General Manger, CLP International
Mrs Sandra MAK
Public Affairs Manager, CLP

For Agenda Item V
Mr Eric Johnson
Principal Assistant Secretary for Economic Services
(Economic Services)
Mr Richard YIP
Acting Director of Agriculture and Fisheries
Assistant Director (Agriculture and Regulation)
Agriculture and Fisheries Department
Mr Joseph SHAM
Acting Assistant Director (Fisheries)
Agriculture and Fisheries Department

Clerk in attendance :

Ms Estella CHAN
Chief Assistant Secretary (1)4

Staff in attendance :

Mr Daniel HUI
Senior Assistant Secretary (1)5

I Information paper issued since last meeting
(PLC Paper No. CB(1)246)

Members noted the information paper issued since the last meeting.

II Items for discussion for the next meeting scheduled for 3 November 1997

2. Members agreed to discuss Government's policy to promote tourist industry at the next regular meeting of the Panel scheduled for 3 November 1997.
(Post-meeting note: At the suggestion of the Administration and with the concurrence of the Chairman, the items on Northshore Lantau Development Study and tariff revision for the Hong Kong and China Gas Co. Ltd. have been added to the agenda.)

III Location and development of Container Terminals 10 and 11
(PLC Paper No. CB(1)285(01))

3. The Deputy Secretary for Economic Services (DS/ES) briefed members on the planning for Container Terminals (CT) 10 and 11 as set out in the information paper.

4. Members enquired about the impact of direct shipping between Taiwan and the Mainland on the forecast throughput for Hong Kong's container port. DS/ES responded that the impact of direct shipping between Taiwan and the Mainland had been taken into account in preparing the cargo forecast for the planning of CT10 and 11. To take a conservative approach, cargoes from Taiwan which were expected to be transhipped to the Mainland through Hong Kong had been excluded from the cargo forecast since 1995. It was estimated some 1.5 million Twenty-foot Equivalent Units (TEUs) of Hong Kong's annual throughput would be affected by the opening up of direct shipping links between the Mainland and Taiwan.

5. Members pointed out that the Mainland was engaging in significant development of container port facilities in the southern coastal provinces and enquired whether this development had been taken into consideration in the planning for CT10 and 11. DS/ES confirmed that the development of South China ports had been taken into account. It was estimated that containers to be handled by ports in Shekou and Yantien would increase from 4.15 million TEUs in year 2001 to 11.97 million TEUs in year 2011. Consequently, the share of South China cargo handled by Hong Kong was estimated to grow at a much slower pace between year 2001 and 2011. Hong Kong had maintained close liaison with port authorities in the Mainland with whom regular meetings were held and port cargo statistics were exchanged to update relevant forecasts.

6. Referring to paragraph 9 of the information paper, the Chairman noted that cargoes directly exported from Hong Kong was estimated to grow from 14.87 million TEUs in year 2001 to 23.90 million TEUs in year 2011 and enquired about the basis for this optimistic forecast. DS/ES responded that the forecasts were prepared by the consultants based on many assumptions and calculations. Comments from the trade had been sought before the forecasts were finalised. For comparison, he advised that the throughput in Hong Kong's container port was 13.5 million TEUs in 1995 and estimated growth for 1996 was 8%.

7. Noting that the completion of CT10 and 11 which would double the current capacity, members were concerned that if actual growth of cargoes going through Hong Kong was less than the forecast, there would be an over-provision of port facilities. The development of port facilities in North China and the cheaper price of port services in South China ports would also affect the demand for Hong Kong's port facilities. In response, DS/ES advised that Hong Kong was mainly competing with South China ports. As the Mainland economy grew, it would need ports in central and northern Mainland, such as Shanghai and Dalian, to serve its needs. The competitive edge of Hong Kong's port services were fast turnaround time, good land transportation support and excellent communication services. He shared members?concern about the need in avoiding over-provision of port capacity and emphasized that CT10 and 11 were only in their planning stage. The actual timing for their completion would be adjusted in accordance with actual growth in container throughput in the years ahead. Besides, since all Hong Kong container terminals were built by private companies, market forces would provide a built-in system for a check on excessive capacity. The Administration had yet to decide on the disposal mechanism for CT10 and 11.

8. Members opined that Hong Kong should aim at increasing its competitiveness in port services rather than just increasing the capacity of its container port and enquired about the Administration's plan to enhance the competitiveness of Hong Kong's container port, including its price competitiveness. DS/ES agreed that increasing the competitiveness of Hong Kong's port services was of utmost importance and the Government had adopted a long term policy to achieve this objective. In the past few years, demand for port services had outgrown supply and therefore prices were pushed up. With the anticipated increase in capacity after the completion of CT9 and efforts to increase efficiency of existing facilities, price increases had slowed down this year. The development of mid-stream operation and cooperation with Mainland authorities to divert cargoes would also help to suppress prices. In the long term, the Administration would encourage terminal operators to improve efficiency and reliability so as to upgrade their competitiveness. The Administration would also look at the feasibility of providing a rail link to Hong Kong's container port to enhance efficiency.

9. At members?request, DS/ES agreed to provide relevant extracts from the consultant's 1995 report on the basis of the forecast of port cargo statistics. As the consultant was currently embarking on a new study on port cargo forecast, members also requested the Administration to report to the Panel when the new study was completed.

IV Implication of China Light and Power Company Limited (CLP)'s corporate restructuring
(PLC Papers No. CB(1)285(02) and (03))

10. Mr Peter Littlewood highlighted to members the main features of CLP's corporate restructuring as set out in the information papers.

11. Members enquired about the re-grouping of personnel after CLP's corporate restructuring and the current reserve capacity of CLP. Mr Littlewood advised that apart from a small number of staff members in the holding company who would serve both the Scheme of Control (SOC) business and the non-SOC business, other staff members would be streamed into SOC business and non-SOC business. As regards reserve capacity, CLP's current reserve level was about 50%. As agreed with the Government earlier this year, CLP would defer construction of some units in Black Point power station which would lower the reserve margin over time.

12. In response to members?question relating to CLP's nuclear power investment, Mr Littlewood clarified that CLP's investment in the nuclear power plant in Daya Bay had been outside the SOC before the corporate restructuring and would remain so after the reorganization.

13. Members enquired whether the Administration was satisfied that CLP's corporate restructuring would not adversely affect consumer interest. The Secretary for Economic Services (Acting) (SES(Ag)) responded that CLP's corporate restructuring did not require Government's approval under the SOC but CLP had informed the Government about its corporate restructuring. Government considered that the restructuring would not affect its monitoring of CLP under the SOC. CLP had emphasized that the restructuring would not affect electricity tariff and Government would closely monitor CLP's asset allocation in respect of SOC and non-SOC business after the reorganization to ensure that consumers?interest would not be adversely affected.

14. Members enquired about the rationale for placing the Hong Kong Pumped Storage Development Company, Limited (PSDC), a subsidiary company involving in non-SOC business, under the control of a company involved in SOC business after the reorganization. Mr Littlewood explained that PSDC was a pump storage electricity plant in China. CLP purchased about 50% of PSDC's capacity in order to optimize CLP's system in Hong Kong. Although CLP's holding in PSDC was not subject to the SOC, PSDC's operation was closely related to CLP's electricity generation business in Hong Kong and was therefore held by CLP rather than CLP Holdings after the reorganization. Mr Mark Rhys supplemented that as PSDC was partly owned by CLP and Castle Peak Power Company Limited (a joint venture between CLP and Exxon Energy Limited), it would be appropriate for CLP instead of CLP Holdings to hold ownership of PSDC after the reorganization.

15. Members enquired whether the Government was satisfied that it could effectively monitor the part of PSDC which related to CLP's SOC business after the reorganization. The Principal Assistant Secretary for Economic Service (Financial Monitoring) responded that under existing arrangement, CLP provided information to the Government annually on its SOC-business, including those under PSDC. The arrangement would continue after CLP's corporate restructuring. The Government would continue to monitor PSDC's expenses to protect consumer interests and had no objection to PSDC not being included as a part of CLP's SOC business.

16. In response to members?query, Mr Littlewood confirmed that CLP had offered discounts to its customers to encourage consumption of electricity during night time so as to optimize CLP's operation.

V Policy on development of the agriculture and fisheries industry
(PLC Paper No. CB(1)292 and CB(1)320)

17. SES(Ag) said that Government mainly provided support to the agriculture and fisheries industries in four-areas: technical support services, wholesale marketing facilities, loan funds and resources conservation programmes.

18. The Acting Director of Agriculture and Fisheries (DAF (Ag)) briefed members on the work being done to support Hong Kong's agriculture and fisheries industries. (Post-meeting note : A copy of the presentation materials has been circulated to members vide PLC Paper No. CB(1)320 dated 8 October 1997).

19. In response to members?enquiry on the Administration's long term policy on development of the agriculture and fisheries industries, DAF (Ag) said that the Administration was aware of Article 119 of the Basic Law which provided that the Government of the Hong Kong Special Administrative Region should formulate appropriate policy to promote and co-ordinate the development of various trades including agriculture and fisheries. A consultancy study to examine how best our resources and institutional arrangements could be organised to support the future development of agriculture in Hong Kong was being undertaken.

20. Mr LO Suk-ching noted that there was development potential for Hong Kong's flower farming and enquired about the Administration's plan to promote this sector of the industry. DAF(Ag) responded that support for flower farming was included in the Administration's support to the agriculture industry in general. The Agriculture and Fisheries Department (AFD) was aware of the rapid development of the market for flower and ornamental plants in Hong Kong and would be consulting the trade on the need to provide wholesale flower market in planning new wholesale marketing facilities. The Assistant Director/Agriculture and Regulation (AD/AR) supplemented that the consultancy study on development of the agriculture industry would examine the market potential of flower farming and would propose development objectives.

21. Members noted that agricultural produce from Hong Kong farms were generally more expensive than produce from farms in the Mainland and enquired about measures to assist local farmers to compete in the market. AD/AR responded that AFD had launched an Accredited Farm Scheme aiming to assist local farmers to improve their quality control and use of pesticides. The Scheme would build up consumers?confidence in local farmers?produce.

22. Noting the shortage of agricultural land in Hong Kong, Mr LO Suk-ching expressed concern about the further reduction of agricultural land due to designation of new country parks. DAF(Ag) clarified that under existing legislation, the use of land for the purpose of agriculture was allowed within country park areas.

23. Mr LO Suk-ching pointed out that Hong Kong farmers?production bases in the Mainland were mainly restricted to vegetable farming and enquired about the Administration's efforts in exploring with mainland authorities to facilitate operations in pig and chicken farming. AD/AR responded that AFD was aware of increasing investment by Hong Kong farmers in vegetable production in the Mainland. Development of pig and chicken farming by Hong Kong farmers in the mainland was restricted because of the quota system adopted by Mainland authorities. AFD would liaise with Mainland authorities to further facilitate Hong Kong farmers?operation in the Mainland.

24. On fishing industry, Mr LO Suk-ching supported Government's proposal for increasing the Fisheries Development Loan Fund to $100 million and enquired about the Administration's plan for development of off-shore fishing. The Acting Assistant Director/Fisheries (AD/F (Ag)) responded that AFD was examining various factors for development of off-shore fishing, including international fishing right, manpower needs and fishing boat design. A study of these issues would be conducted and would take about nine months. AFD would examine findings of this study before deciding on the way forward.

25. As regards the issue relating to pollution in fish culture zones, AD/F (Ag) advised that AFD was aware of the problem and was discussing with relevant parties on possible measures to address the problem.

26. On the issue of manpower shortage, AD/F(Ag) advised that the Mainland Fisherman Deckhands Scheme was implemented in 1995 to alleviate the manpower shortage on fishing vessels engaged in distant water fishing. In-shore fisherman and mariculturists who operated mainly within Hong Kong and who faced difficulties in finding suitable workers locally might apply under the Supplementary Labour Scheme to import workers to fill their vacancies.

27. Members enquired about assistance provided to aquaculturists in developing new fish species. DAF(Ag) replied that technical advice was provided to introduce new feed formulation and fish disease prevention and control. A number of new fish species such as sea bass had been successfully introduced to aquaculturists.

VI Any other business

28. The Chairman reported that five Panel members participated in the visit to the new airport on 29 September 1997 to gain an understanding of the progress of construction of the new airport.

29. Members noted that a special meeting of the Panel had been scheduled for 11 October 1997 at 11:15 am for the Secretary for Economic Services to brief members on the Chief Executive's Policy Address.

30. The meeting ended at 12:55 pm.

Provisional Legislative Council Secretariat
29 October 1997

Last Updated on 5 November 1997