Provisional Legislative Council

PLC Paper No. CB(1) 1304
(These minutes have been seen
by the Administration)

Ref: CB1/PL/TI/1

Panel on Trade and Industry

Minutes of meeting
held on Monday, 23 March 1998, at 10:45 am
in Conference Room B of the Legislative Council Building

Members present :

Hon NGAI Shiu-kit, JP (Chairman)
Dr Hon Charles YEUNG Chun-kam (Deputy Chairman)
Hon James TIEN Pei-chun, JP
Hon NG Leung-sing
Hon Mrs Selina CHOW, JP
Hon Henry WU
Hon CHAN Kam-lam
Dr Hon LAW Cheung-kwok
Hon CHOY So-yuk

Members absent :

Hon HO Sai-chu, JP
Prof Hon NG Ching-fai
Hon Henry TANG Ying-yen, JP
Hon MA Fung-kwok
Hon Mrs Sophie LEUNG LAU Yau-fun, JP
Dr Hon Philip WONG Yu-hong
Hon CHIM Pui-chung
Hon Paul CHENG Ming-fun, JP

Public officers attending :

For item III

Trade and Industry Bureau

Miss Denise YUE, JP,
Secretary for Trade and Industry

For item IV

Trade and Industry Bureau

Miss Denise YUE, JP,
Secretary for Trade and Industry

Mr Bobby CHENG,
Principal Assistant Secretary for Trade and Industry

Industry Department

Mr Francis HO, JP,
Director-General of Industry

Miss Agnes WONG,
Assistant Director-General of Industry

Clerk in attendance :

Ms LEUNG Siu-kum,
Chief Assistant Secretary (1)2

Staff in attendance :

Miss Becky YU,
Senior Assistant Secretary (1)3

I Confirmation of minutes of previous meeting

(PLC Paper No. CB(1) 1160)

The minutes of the meeting held on 12 January 1998 were confirmed.

II Information paper issued since last meeting (PLC Paper Nos. CB(1) 774 - Review of the Industrial Support Fund" and CB(1) 1030 - Report on Civil Liability for Unsafe Products)

2. Members took note of the information papers.

III Assistance to entrepreneurs

(PLC Paper Nos. CB(1) 1164(01) and (02)) 3. The Chairman advised that the subject was referred to the Panel in the wake of the Provisional Legislative Council Members' meeting with Kwai Tsing Provisional District Board members on 18 December 1997, during which members of the Kwai Tsing Provisional District Board expressed concern about the lack of a reliable channel through which Hong Kong entrepreneurs could seek advice and assistance when they encountered problems in the Mainland.

4. In response, the Secretary for Trade and Industry (STI) advised that Hong Kong businessmen might encounter problems while doing business in the Mainland if they were unfamiliar with the local laws and regulations. In view of this, and for the purpose of trade and investment promotion, the Trade Development Council collected and disseminated information on laws and regulations of the Mainland regularly through its 11 branch offices in the Mainland. These offices could also offer advice, if necessary, to Hong Kong companies when they encountered problems in doing business in the Mainland or on the implementation of PRC laws and regulations relevant to trade and industry. Although it was understandable that Hong Kong businessmen wished to look to the Hong Kong Special Administrative Region Government (HKSARG) for assistance when they encountered difficulties in the Mainland, STI stressed that as a general rule, commercial disputes should be settled in accordance with the administrative, legal and judicial systems of the Mainland. Moreover, it would be inappropriate for HKSARG to intervene in such disputes under the principle of "One Country, Two Systems".

5. Mr James TIEN was not convinced that the "One Country, Two Systems" principle should inhibit HKSARG from providing assistance to Hong Kong entrepreneurs facing difficulties in the Mainland. He cautioned that the limited scope of Government's assistance to Hong Kong businessmen in the Mainland as opposed to those in other overseas countries, such as the United States (US) of America, would deter investment in China. Expressing similar concern, Mr NG Leung-sing considered that a high level liaison group comprising Hong Kong and Mainland officials should be established and entrusted with authority to deal with cross-border commercial disputes, including the charging of excessive fees by provincial governments, and that a data base of past cases should be set up with a view to formulating future guidelines for compliance with laws and regulations in both sides. In addition, the group would serve as a channel through which both sides could exchange views on policies relevant to trade and industry in the Mainland.

6. While appreciating Mr NG's suggestion of setting up a high level liaison group, STI advised that this might not be possible under the existing system in the Mainland. She emphasized that the Administration was extremely vigilant about changes in Mainland policies which had direct impact on the economy of Hong Kong as a whole. A Mainland Desk had been set up under the Trade Department to liaise with the relevant authorities in the Mainland with a view to facilitating a better understanding of all trade and industry related policies. As regards the role of the impending Beijing Office, STI advised that operational details for the Office had yet to be announced but she hoped that a specific division would be set up to deal with trade and industry matters between HKSAR and the Mainland.

7. A member asked if the Administration would, in collaboration with the relevant authorities in the Mainland, devise a standardized contract for Hong Kong entrepreneurs in order to minimize disputes. STI undertook to relay the member's concern to the relevant departments for consideration but cautioned that it would be difficult to formulate an all-embracing contract. Furthermore, it would be in the best interest of the contracting parties to work out the terms and conditions. Admin

8. Before concluding, members understood that they could further discuss the subject when a related question was raised by Mr James TIEN at the Provisional Legislative Council meeting on 25 March 1998.

IV Admission of service industries into the Industrial Estates
(PLC Paper No. CB(1) 1164(03))

9. While some members were supportive of the proposal to allow service industries for admission into the industrial estates, others expressed reservations on such a proposal as this would defeat the original mission of industrial estates to accommodate industrial operations that could not be housed in ordinary multi-storey buildings only. Mr James TIEN was of the view that instead of admitting service industries into the industrial estates, the Administration should consider allowing traditional manufacturing industries such as textile and plastic industries into these estates. This would help to provide more employment opportunities to local workers, in particular to those whose chance of finding work in the high technology fields was slim.

10. STI explained that the proposed revision in admission criteria was to take account of the changing character of the manufacturing sector in Hong Kong. At present, the differences between manufacturing and service industries were becoming increasingly blurred. This was partly attributable to the increasing geographical dispersal of the relevant processes and partly to the increasing technological application and innovation in these processes. There was also empirical evidence indicating that certain operations in the service sector could not be conducted in multi-storey premises, such as operation of massive computer facilities in the financial trade which would need a clean room. STI advised that the current obligatory and indicative admission criteria for manufacturing industries would apply equally to service industries. On the suggestion of allowing textile and plastic industries for admission into the industrial estates, STI advised that as these industries could be operated in ordinary multi-storey premises, they were not eligible for admission into the industrial estates. As to whether the Administration would consider building multi-storey premises within the industrial estates for both manufacturing and service industries, STI advised that this was not feasible given that the existing plot ratio of development in industrial estates was 2.5.

11. Some members expressed concern about the impact on the demand of land in the industrial estates and on the supporting infrastructure if service industries were to be admitted into these estates. STI advised that the outstanding stock of about 45 hectares of land in the three existing industrial estates and the additional 38 hectares at the fourth industrial estate, coupled with the need for applicants from the service sector to satisfy certain admission criteria, would provide a safety margin to prevent an early exhaustion of land reserve in the industrial estates. The Administration would also review the necessity for building the fifth industrial estate in the light of the proposed admission of service industries. STI supplemented that the Administration had consulted relevant bureaux and departments, including the Planning, Environment and Lands Bureau, regarding the impact on surrounding infrastructure if service industries were to be admitted to the industrial estates. The conclusion was that no significant implications were anticipated.

12. In response to Mr Henry WU's question, STI replied that there was no pre-determined quota for specific industries in the industrial estates. She supplemented that land in industrial estates was offered at cost to manufacturing operations. To facilitate a better understanding, the Administration undertook to provide information on the take-up rate of land in the existing industrial estates by trades.

(Post-meeting note: The Administration's response was circulated to members vide PLC Paper No. CB(1) 1245 on 3 April 1998.)

13. As to whether the proposed revision in admission criteria for industrial estates would in turn affect the pace of redevelopment of old flatted factory buildings, STI reiterated that the mission of industrial estates was to provide accommodation to those industries which could not be operated in ordinary multi-storey premises, and thus the proposed revision should not have any effect on the redevelopment of old factory buildings. STI added that redevelopment of flatted factory buildings was a complicated issue, in particular when this involved multiple ownership, and that the Planning, Environment and Lands Bureau would conduct further studies on this in due course.

14. On the progress of business park, STI advised that the Administration would commission a consultancy study to explore the feasibility and desirability of establishing such a park. The study would comprise two phases and the report for the first phase was expected to be ready in eight months' time. Members would be briefed on the report upon publication. Admin

V Any other business

Recent Wharf case between United International Holdings

15. At the Chairman's invitation, Mr James TIEN briefed members on the court case between Wharf (Holding) Limited and United International Holdings Incorporation. Mr TIEN said that although this was a commercial dispute, the case involved serious legal jurisdictional issues and the protection of Hong Kong corporate assets under Hong Kong law. As the US plaintiff sought to invest in a cable television project in Hong Kong, the dispute arose should have been heard in Hong Kong Court rather than by a jury in a US court room. Furthermore, the extraordinary power claimed by the US court which, through the issue of turnover and banking sanction orders, could deprive a Hong Kong company of its right to legally defend its assets in Hong Kong under Hong Kong law. Considering the important issues arising from the case, including the choice of law, jurisdiction and extra-territoriality as well as the threat to throw the legal and banking systems of Hong Kong into disarray, Mr TIEN was of the view that the Administration should take action to assist the appellant as was the case with the Matimak case.

16. STI explained that in considering whether Government's action should be taken, the Administration had to take into account the constitutional and judicial impact of the case on Hong Kong as a whole as well as its impact on overseas trading relationship of Hong Kong. In the Matimak case, the Administration was concerned that the relevant court rulings might deprive Hong Kong companies of the right to sue in a US federal court and thus submitted an amicus brief for consideration of the US Court of Appeals. However, the Administration considered it inappropriate to intervene in the Wharf case having regard to the fact that the case had been tried in a proper manner, and that there was no evidence suggesting that the choice of court was made on discriminatory grounds. Moreover, it was permissible under the common law for plaintiffs to choose the place where the case should be tried. To avoid future confusion, STI considered it useful to stipulate in future contracts the place of trial in case of any disputes. As regards the issue of turnover and banking sanction orders, STI advised that the courts in Hong Kong also had such a power to freeze the capital of convicted persons in execution of verdicts.

17. Mr TIEN expressed worries that the case would set a dangerous precedent and hamper Hong Kong companies' confidence in trading with overseas counterparts if the latter could freely choose the place of trial in the event of disputes. STI emphasized that the court concerned would need to consider if the case was relevant to its jurisdiction before accepting the case.

Commission on Innovation and Technology

18. STI reported that Professor TIEN Chang-lin, former chancellor of University of California, Berkeley, had agreed to chair the Commission on Innovation and Technology. The Commission would hold its first meeting in the afternoon. As a token of appreciation, the Administration proposed to offer an honorarium of $105,000 to members of the Commission not residing in Hong Kong for the purpose of travelling. This was consistent with the practice adopted by the University Grants Committee. The relevant proposal would be submitted to the Finance Committee for consideration on 27 March 1998. Members were supportive of the proposal.

Draft report of the Panel for submission to the Provisional Legislative Council
(PLC Paper No. CB(1) 1164(04))

19. The Chairman advised that according to Rule 77(14) of the Rules of Procedure of the Council, the Panel should submit at least one report during the session to the Council. The draft report had been circulated to members vide PLC Paper No. CB(1) 1164(04). Members took note of the draft report and authorized the Clerk to make necessary modifications to the report taking into account issues discussed at the current meeting.

20. The Chairman announced that this was the last meeting for the session. He warmly thanked STI for her attendance and contributions at the meetings, and the Clerk to Panel for the secretarial support.

21. The meeting ended at 12:40 pm.

Provisional Legislative Council Secretariat
11 May 1998