Thursday, 25 March 1999
The Council met at half-past Two o'clock





















































































Second Reading of Bill

Resumption of Second Reading Debate on Bill

PRESIDENT (in Cantonese): This Council shall now resume the Second Reading debate on the Appropriation Bill 1999.

Will Members who wish to speak please press the "Request-to-Speak" button?


Resumption of debate on Second Reading which was moved on 3 March 1999

MRS SELINA CHOW (in Cantonese): Madam President, thank you for allowing me to speak. Just two minutes ago, I thought I would not be able to do so.

The Budget this year has received more praises than criticisms since its announcement. Opinion polls reveal that following the announcement of the Budget, public confidence in the Government of the Special Administrative Region has climbed from 78% to 99.2%. The reason for this is that the Financial Secretary has learnt from the experience of last year and adjusted his approach accordingly. His sensitivity to the plight of the masses, to say the least, has increased considerably. People thus feel that the Government has now become more sensitive to their sufferings, and is also willing to put forward some relief measures accordingly. They feel that although the Budget is not entirely satisfactory, it still displays a concern about the people's plight and a determination to come to their assistance.

Some Members of this Council criticize the Budget for failing to ease the unemployment problem and help the grassroots. Many people, including I myself and the Liberal Party, would disagree with these Members; and, even businessmen or people with only an elementary understanding of economics would join us in this disagreement. The reason is that in any capitalistic, free market economy, people will invariably try as much as possible to keep the size of their government within the limits of economic efficiency; they all wish to have a "small government" which can provide efficient public services. The last thing people wish to see is any government attempt to increase the number of sinecures simply for the sake of creating job opportunities. There are frankly only two ways for any government to assist its people in their employment. One way is to identify suitable social investment projects, such as infrastructure construction, education and promotion of industries and commerce, and then invest in them. That way, it can hopefully offset the effects of declining investment desires in times of an economic downturn. The other way is to inject resources into the economy, so as to stimulate its development and to help its industries and commerce. The Budget takes account of both of these two ways. Its orientation is certainly correct.

I am sure that all the signs we can see and all those media reports we come across should have made us realize that the retail and wholesale businesses are facing a very severe plight. This very functional sector which I represent, being also the biggest segment of the services industries, was the worst-hit sector in the past year. In 1998, there was a real drop of 17% in retail business volume; the Consumer Price Index experienced a sustained negative growth; retail value as at January this year records a drop of 21.1% against that of the corresponding period last year; and in February this year, retail volume also went down by 18.7%.

The tax rebate and Rates reduction can both put money back into the pockets of taxpayers. They will definitely help, at least psychologically, by boosting consumption desire to a certain extent. And, the Rates reduction will also ease the situation of tight cash flow. Understandably, some professionals have questioned whether people would spend their tax rebate in Hong Kong to boost local consumption, and some services industries have even raised the point that if the tax rebate can take the form of consumption vouchers, its effects on boosting local consumption will be better guaranteed. The Government should make more publicity efforts to explain the importance of spending the tax rebate in Hong Kong, and the retail sector should also adopt some corresponding sales promotion measures such as giving tax rebate price cuts to their customers. All this can help improve the business situation of the retail sector. The Liberal Party will launch a "self-strengthening" campaign, asking the people of Hong Kong to help boost our economy by spending their money in Hong Kong.

At this point, I must state very clearly the unambiguous consensus of the functional sector which I represent: No sales tax of any forms. Although the Financial Secretary has already said that now is not the right time to introduce any new taxes based on retail sales and consumption, the retail sector, the wholesale sector and the catering industry are still not satisfied, because they are totally against the introduction of such taxes at any time. Their strongest point is of course that such taxes will seriously impair the image of Hong Kong as a shoppers' paradise and a city for gourmets. They also think that such taxes will greatly inconvenience consumers, thus affecting their consumption desire. Just think about the United States, where, in some individual States, footing the bill is such a cumbersome matter. Just think about Europe, where tourists are bothered so much by the trouble resulting from getting tax refund for the goods they have bought. I have heard that the Government intends to levy taxes in the wholesale segment. This will certainly increase the costs of goods and in turn the burden of people; this will also render our retail prices less competitive when compared with those in other countries. In the end, people will probably choose to consume in places outside Hong Kong, and tourists will also refrain from coming here to buy any goods. So, I must offer a piece of sincere advice to the Financial Secretary: Forget about sales tax.

Madam President, sales tax aside, the 38 trades and occupations which I represent in general do not find any big problems with the Budget; the only exception is the car sales trade. We must note that the sales volume of this trade in January 1999 recorded a sharp fall of 42% against that recorded in the corresponding period of 1998. So, it can be said that this trade has been the worst-hit segment in the entire retail sector. The motorist-related proposals of the Budget will certainly add to the plight of this particular trade. In particular, the increases in on-street meter parking charges and fixed penalties will probably induce car parks to increase their charges. This will increase the burden of motorists tremendously, thus indirectly affecting the car sales trade.

My constituents are mostly small and medium enterprises (SMEs). There are at present some 200 000 such enterprises in Hong Kong, which is why the Government has started to pay special attention to their needs in recent years, and some special forms of assistance have been made available to them, some examples being a $2.5 billion loan scheme and a special committee on SMEs. But to most SMEs, the Budget cannot possibly offer them any substantial help. The loan scheme, as expected, has failed to achieve any great results, and this must be improved as soon as possible. Besides, these enterprises also hope that the Government can contract out more of its work for their bidding, and to ensure competition in the free market. For wages and property prices, these enterprises hope that the Government can leave it to the market to set the appropriate levels as far as possible. They have also told me that they are already much too exhausted by the combined pressure of an economic downturn and labour legislation; they thus feel that life is indeed very difficult, whether they choose to continue their business or not. Small employers feel very strongly that the Government is often biased towards the labour side when handling labour disputes. These grievances simply should not be ignored. The introduction of three-year Business Registration Certificates is certainly a good policy, because it can save a lot of registration formalities on top of eliminating the effects of inflation on registration fees. Many businessmen, however, hope that the implementation of the Mandatory Provident Fund Scheme can be deferred for a year or two, because they think that by then our economy will have recovered, and contributions to the Scheme will not cause any great difficulties to them.

The Government proposes to freeze its fees and charges for half a year only. This really baffles me. In the midst of deflation and wage reductions, how can there be any justifications for fee increases?

Actually, instead of relying on fee increases as a means of increasing Treasury revenue, the Government should really seek to recover the revenue lost through cracking down on the contraband trade. Please note that I am talking about recovering the revenue lost through banning contraband trade. The revenue losses relating to tobacco duty are one important example which must be tackled seriously. I once remarked during the 1996 Budget debate that if we kept on increasing tobacco duty, we would only give more market opportunities to contraband tobacco, and that public revenue would fall as a result despite the increases in tobacco duty. Facts have proven me correct. And, this year, even the Financial Secretary admits that duty increases are not an effective means of discouraging smoking. Over the past few years, the number of smokers has kept on rising, but the consumption of duty-paid tobacco has been declining year after year. This is incontestable evidence that the sale of contraband tobacco has become very, very rampant. Survey findings show that over the past eight years, the number of smokers has increased by 113 100 people, and there are now a total of some 800 000 smokers in Hong Kong. Besides, the average daily cigarette consumption of each smoker has also increased, from 13 sticks to 16 sticks. But the total volume of cigarettes sold in 1998 was just half of that sold in 1990. The duty revenue from cigarette sales in 1998 should have been $4.63 billion, but the amount actually collected was just $2.27 billion. In other words, there was a total loss of tax revenue amounting to $2.36 million in this particular year. That being the case, what explanation can the Customs and Excise Department offer? And, how can the Financial Secretary let the Customs go? And, how are they going to deal with the situation? The Customs must be held responsible for the losses in tobacco duty; similarly, it must also be held responsible for piracy and faked goods. Admittedly, piracy and faked goods do not involve any tax revenue. But at a time when the Chief Executive is vigorously championing his high value-added policies, if the Government does not protect intellectual property effectively, what is the use of talking so much about high value-added activities?

The most well-received item in the Budget is certainly the news that a Disney theme park may probably be built in Hong Kong. The findings of a survey show that the prospect of building this theme park alone has already increased the confidence of 70% of the people of Hong Kong. As one of the Members who first advocated this idea in this very Chamber, I naturally hope that the theme park can be built. But as a member of the Finance Committee, I must ensure that the investments made by Hong Kong in the end will be real value for money. Therefore, I must repeat the advice which I gave in the debate held on 11 November 1998: We must never do anything to increase the bargaining of the other side during the process of negotiations. Though Disney is the most famous brand name among all theme parks, it is certainly not our only choice. The Universal Studios, for example, is another type of world renowned theme park. To sum up, we must give full play to the best of our negotiating skills during the process, and we must fight for the best possible terms and conditions for Hong Kong. Actually, Hong Kong enjoys many advantages over other places. Compared to other Chinese cities, we are the most international one. In terms of language, culture and communication facilities, no other Chinese cities can outcompete us. And, our currency is also freely convertible. Then, if we look at other Southeast Asian cities, we will see that very much unlike us, they all lack the back-up of a huge China market. So, how can these Southeast Asian countries compete with us?

Let me perhaps also follow the analogy frequently made by Mr Stephen IP, Secretary for Economic Services. Though the lady being courted is both beautiful and competent, her admirer is also handsome and elegant. And, the biggest asset of the admirer is that he has a very big family; if they can get married eventually, their wedding will certainly be very, very grand and attended by such large numbers of guests probably never found elsewhere in the world.

The construction of a Disney theme park has led me to ask a question like this: Is a theme park alone really able to make the world look at Hong Kong differently? No, it cannot. We must think about the matter very carefully. If we are to upgrade our status, and if we are to make the world look at Hong Kong really differently, we must not place all our hopes on a Disney theme park. And, do not forget, this project cannot be realized until four or five years later!

Recently, there is a stage drama in Hong Kong. It is genuinely made in Hong Kong, because all its production crew and actors and actresses are Hong Kong people. As initially planned, this stage drama would run for 40 shows only, but now, it has been decided that it will run to the 100th show, and the performance venue has been shifted to Sha Tin and Tuen Mun. Its premiere was attended by 80 overseas Chinese who flew here from San Francisco for the sole purpose of watching the drama. Huge numbers of tourists from Singapore, the United States, Canada and even the Mainland subsequently came to Hong Kong to watch it. It is estimated that 5%, or as many as 6 000, of the audience are tourists. This is a drama starred by CHAN Po-chu, on the life of YAM Kim-fai and PAK Suet-sin. Sentimental Journey is its name.

The success story of this stage drama teaches us a lesson that good, creative forms of entertainment can bring to us handsome economic benefits. Hong Kong possesses all the talents and conditions to make itself a City of Sight and Sound in Southeast Asia. We have all kinds of first-rate creative talents ─ for the movie industry, the stage, television, design, the performing arts and so on. The only problem is how we are going to provide an environment conducive to their growth and development. Frankly speaking, through different organizations, the Government has already started the development in such a direction, in different degrees and in different ways. If the Financial Secretary can give it a further push by formulating an integrated strategy on a macro basis, encouraging results will certainly be forthcoming within three to five years.

Madam President, the Budget has given the people of Hong Kong new hopes, because it has led the whole community to concentrate on finding out the ways of revitalizing our economy. This is most commendable. But there is still one weakness. The Government has failed to bring home to all its various departments the importance of making joint efforts to create an environment which is really conducive to businesses, of streamlining the often complicated bureaucratic formalities, and of refraining from dealing a blow to business operations unknowingly. I need only to mention the example of licensing to illustrate my point. There are now different licensing systems ─ for supermarkets, eating establishments, cinemas, games centres and karaoke lounges under preparation. But the serious problems with all these licensing systems are just all too obvious and should never have been tolerated by an administration which so very often boasts of its high efficiency. The lack of co-ordination between enforcement departments and Policy Bureaux is yet another cause of despair and helplessness among our trades and industries. The sewage surcharge is one example, and the management of the non-staple food markets is yet another. Now that the Financial Secretary has shown his strong determination to revitalize our economy, he must also seek to change civil servants' indifferent attitude towards the industrial and commercial sector; he must make civil servants realize that their attitudes and approaches will play a vital role in determining the success or otherwise of our economy. Only in this way can he enable the whole community to move "onward with new strengths".

DR LUI MING-WAH (in Cantonese): Madam President, the past year has seen Hong Kong experience its most difficult period over the past 30 years or so, with the economy turning from a growth of 5.3% in 1997 to a shrinkage of 5.1% in 1998, consumer spending dropping by 6.8% from a growth of 6.7%, total exports of goods contracting by 4.3% from an increase of 6.1% and the number of unemployed people jumping from 88 000 in early 1998 to the present 206 000.

In response to the impact on our economy of the financial turmoil, the Financial Secretary, in his Budget last year, unveiled a major fiscal principle of "riding out the storm" and proposed a number of tax concessions and reductions, which were well received by the community as a whole. Nevertheless, these short-term incentive measures have been proved ineffective in stimulating the economy.

This year, the Financial Secretary has switched the emphasis from "riding out the storm" to "strengthening the fundamentals and fiscal prudence". However, the allocation of resources in the Budget as a whole has given me the impression that "fiscal prudence" has taken precedence over "strengthening the fundamentals", for the Budget has placed emphasis on stimulating local consumption in order to achieve a recovery in the economy. Although local consumption accounts for 60% of the Gross Domestic Product (GDP), the effect of these measures is questionable as they can only tackle the problems on the surface rather than at the root. One can see in a simple analysis that there are many factors contributing to a weak local consumer market and chief among them is the significant depreciation in asset values in the wake of the financial turmoil, which has caught various trades in the doldrums, resulting in the closure of many companies, freezing and reduction of wages for employees and retrenchment, thus throwing the public into a state of uncertainty about the future and undermining their confidence, hence a cutback in spending on major purchases and consumption. Therefore, stimulating local consumption is not the proper way to tackle the problem at root, nor can it produce the effect of "strengthening the fundamentals".

In an economic entity like Hong Kong which lacks natural resources, continuous growth can only be sustained by industries that can make forex earnings, such as tourism, financial services and export manufacturing. The real estate industry, though sometimes prosperous, is only a tool for the accumulation of wealth and a strong local consumer market can only create a false impression of a prosperous economy. But these two are nothing more than a process of "making money from each other within the same circle rather than creating genuine wealth". The economic development in the past 20-odd years has seen the manufacturing industry in Hong Kong, which still accounted for 24% of our GDP up to 1980, almost entirely relocated to other places, leaving behind the tourism and financial services industries as the only forex earners. However, one of the biggest weaknesses of these two industries is their dependence on overseas markets. The financial turmoil has played havoc with the economies of our neighbours in Southeast Asia, which has inevitably dealt a direct blow to various trades and sectors in Hong Kong. Moreover, a credit crunch caused by a massive outflow of foreign capitals has rubbed salt into the wound in the Hong Kong economy. Let us take a look at Taiwan and Singapore, two of our competitors. Though equally affected by the financial turmoil, they have fared much better than us. Many scholars and economists have attributed this to their strong foundation in the development of hi-tech industry that has consistently accounted for about 25% of their respective GDP for many years.

Madam President, I fully agree with what the Financial Secretary's point that building on strengths is a prerequisite for facilitating a recovery in the economy. The way to do so lies in adjusting the economic structure, which has been in an unhealthy state for too long, and adopting various measures to promote the development of hi-tech and high value-added industries to gradually increase their shares in our GDP, in order to consolidate the local economic foundation.

The proposed Cyberport project is a commercially viable idea. According to the Government, the Cyberport, after completion, will be composed of a group of supermodern and intelligent buildings equipped with the most advanced communication and information facilities to meet the requirements of prominent multinational and local information services companies. To put it plainly, the Cyberport will be a property development project of high quality, which can attract many information services companies to converge on Hong Kong to do business. The project, if successfully implemented, will bring handsome profits to the private developer. But how much benefit it will bring to Hong Kong? The Government estimated that it could bring enormous economic benefits to Hong Kong and create 16 000 jobs. As a matter of fact, I sincerely hope the Government's estimates will prove correct. Otherwise, the Cyberport will become nothing more than another quality industrial estate which will gradually lose its attraction. Alas!

On the other hand, a successful Cyberport will help to improve our image internationally and bring about hi-tech and multimedia facilities as well as a dose of stimulant for the local hi-tech industry and business sector. What is more, the way technology is spread is not necessarily like the technology transfer as stipulated by some Honourable Members. In fact, scientific and technical personnel from Hong Kong who work in the future hi-tech companies will be an ideal medium for technology transfer. The development of electronics industry in Hong Kong is a testament to this, which is probably an example of historical dialectics.

Madam President, what has baffled me the most is why the Government cannot combine the Cyberport and the Science Park, which is under construction, as this will produce a better effect of amalgamation apart from saving thousands of millions of dollars for taxpayers. As the Science Park is located in Sha Tin while the Cyberport is in Pok Fu Lam, it will be difficult for companies to co-operate and effect technical exchange. Is this a reflection of a lack of long-term policy and co-ordination on the part of the Government? The community, including the business and commercial organizations as well as this Council, has all along been calling on the Government to set up an industrial technology council to co-ordinate the development of both industry and technology. But the Government has turned a deaf ear to this appeal. It seems that the Government is being insensitive in receiving message from the community. This is really disappointing. The Government's inaction will waste taxpayers' money as well as obstruct the development of hi-tech industries in Hong Kong.

Finally, the recurrent public expenditure for the next fiscal year will grow by up to 6.4%, most of which will go to social welfare and community services while the spending on the economy will grow by 2.8% only, and the provisions for the Industry Department on investment promotion will be even less than those in the last fiscal year. This is really unthinkable. An increase in government expenditure to relieve the public of their hardship during a recession is of course a welcome move. But I hope the Government will show its vision about the future by concentrating the resources on the technology industry which can help to build on our strengths. By so doing, Hong Kong will have a prosperous future to the benefit of its people!

MR SZETO WAH (in Cantonese): Madam President, it can be foreseen that the ruling of the Court of Final Appeal (CFA) will bring about rapid growth in the local population, causing a great impact on various social aspects and creating very obvious pressures on our housing, medical care, education, social welfare and so on. In the long run, it will also affect the quality of our population, employment, social harmony and stability.

What sets out to be a bane can turn into a boon, but it can also get even worse. The key is whether timely and correct measures can be adopted, suiting the opportunities and the trend, to convert the negative conditions and pessimistic factors into favourable and positive ones.

When the preparation of this Budget was still underway, the CFA was yet to deliver its ruling. When the Budget was published, the ruling had already been out. We have yet to grasp an accurate figure on how many new immigrants will come to Hong Kong as a result of this ruling. Therefore, we are perhaps demanding too much to ask the Administration to come up with a contingency plan in the Budget for the population explosion. Even so, given that the Budget has mentioned nothing whatsoever about such a concern and to give a message to the community, would that not be a sign that the Administration totally lacks a sense of vigilance against this problem?

Education is the most important means to turn this matter from a bane to a boon. Only by integrating these large numbers of new arrivals into the community through education and nurturing them into a quality workforce will we attain the effect of "many hands make a task light".

I would like to thank the Education Department for providing me with the profile of children who migrated to Hong Kong in the 18 months between July 1997 and December 1998. Those under 19 totalled 46 536. Among them 26 590 were of primary school age, that is, between six and 11, and 14 053 were of junior secondary school age, that is, between 12 and 15. These two groups of young people added up to 40 643, or 87.3% of the total.

Under the present law, these two groups of children have the right and obligation to receive education, and the Government is obligated to provide them with this chance and see to it that they are sent to school. However, according to the information, out of these children who have recently migrated to Hong Kong, 25 779 have entered primary schools and 5 262 have entered secondary schools during these 18 months. If all those entering primary schools are between six and 11, that means 95.5% of this age group are attending school, which is rather good. But if all those entering secondary schools are between 12 and 15, then only 37.4% of that age group are attending school, meaning that about two thirds of the group are not. These adolescents are developing rapidly both physically and psychologically. If they are not admitted into schools, it will give rise to serious social problems and exacerbate the youth gang problem. This cannot but call for our due attention and worry us.

The Budget pledges to allocate about $500 million to provide various education services for these new arrival children in the 1999-2000 school year. 80% of this money will be used to provide 15 000 primary school places and 4 400 secondary school places. As compared to the situation even before the ruling of the CFA was delivered, there is not a substantial increase, but a slight decrease instead, in the number of places provided. That has obviously fallen short of what is needed as the situation continues to develop.

I urge the Administration to truly implement the law regarding the nine-year compulsory education to provide education to the new arrival children between six and 15 years of age. It must ensure that sufficient resources are set aside in this Budget for the provision of this service.

I also call on the Education Department to learn from the experience in providing education to the new arrival children so as to better utilize the resources and achieve better results. In summing up the experience, they need to see the forest and also the trees. They must conduct a comprehensive scrutiny of the overall situation and also an in-depth analysis of individual cases and learn from both.

On the issue of education for the new arrival children, Hong Kong has to demonstrate itself as an accommodating society with a strong integrating power. Only then can Hong Kong become a healthy and progressive society.

Madam President, I so submit.

MR NG LEUNG-SING (in Cantonese): Madam President, the 1999-2000 Budget released by the Financial Secretary has commanded a certain degree of favourable response from society. Given the present economic situation and demands for ways to help the people from all social strata out of their plight, the Budget is in general a prudent and realistic one. It manages to focus on the long-term development of Hong Kong and to provide some specific fiscal measures, including tax rebate, bringing a pleasant surprise to the community. All these show that the Government is willing to respond positively to the difficulties in the livelihood of the people. It is difficult to design a budget with merits all over it at a time when Hong Kong is in an economic recession after the War. It is even more difficult to adhere to prudent fiscal principles in preparing the Budget. Therefore, basically, the direction and fiscal skills shown by the Budget as a whole and the measures stated in it should be endorsed.

An important factor leading to the success of Hong Kong was the Government's adherence to prudent fiscal principles. A healthy public financial position is an important safeguard for Hong Kong to continue to maintain its status as an international financial centre and attraction to investors. It is also a requirement of the Basic Law. Prudent fiscal principles are embodied in the fact that over a period of time government expenditure grows at a rate no faster than the economy as a whole. Moreover, the proportion of GDP allocated for public expenditure should be maintained at a suitable level.

Faced with the current economic downturn, the Government must continue to pay for the necessary expenditure and services, and it must appropriately increase investment in infrastructure construction in order to stimulate the economy. In the circumstances, a budget deficit of $3.65 billion in the coming year is basically acceptable. As far as balance is restored in the medium range, the Basic Law is not contravened. The Budget proposes a medium range trend growth rate of 3.5%, which is a significant reduction from the trend growth rate of 5% of past years. The Financial Secretary frankly admitted that he had been overly optimistic in his assessment of the effects of the financial turmoil last year. I personally believe the Government has learned from past experience in its adjustment of the forecast in medium range trend growth rate. I however think that there are certain difficulties if we were to achieve a 3.5% medium range trend growth rate.

The Budget forecasts the overall economic growth for 1999 will be 0.5%, which appears to be rather optimistic, compared with the estimate reached by institutions in the private sector. To achieve the target of an average trend growth rate of 3.5% in the medium range, the Budget maintains that achievement of this target will hinge on the economy being able to sustain its upswing to around 3.5% to 4% in 2000 and to appreciably above that in the two years that follow. As a developed economic system, we need to be cautious in assessing the possibility of Hong Kong achieving high economic growth in future. Looking back, just before and after 1997, the Hong Kong economy was given a boost with a bubble economy element to a high level under the effect of reunification and rapid expansion in the property and securities markets. In the short term, we need to carefully consider which industries can realistically bring about a high growth rate so that the said target can be achieved.

I maintain that a prudent financial philosophy requires a prudent forecast. We should prepare ourselves for future monitoring of public expenditure by projecting a prudent Medium Range Forecast. We need to be prepared mentally and act accordingly for a series of bold reforms to the administration of the Government and in the social services, especially those to the structure of the medical and welfare system.

The Budget proposes to take the opportunity offered by the current economic downturn to eliminate structural hurdles. Such hurdles, in the Hong Kong context, mean the imbalance in the composition of the industries and in the income and expenditure in public finances. The Budget puts forward some fiscal proposals, such as a 10% tax rebate on salaries tax and profits tax without any change in the actual tax rate, and a reduction in the Rates percentage charge to 5%, taking the opportunity of an adjustment in the property market. All these show that the Government is aware of the structural problem in the tax system, and is working to prevent the tax base from narrowing further. On the other hand, the Government proposes to start considering a land departure tax, showing that it is beginning to find reasonable revenue sources. Of course, the Government still needs to look into the technical feasibility of such measures. If land departure tax is charged, the administrative costs should be kept low, and people who need to commute between Shenzhen and Hong Kong for work or as part of their daily activities should not be inconvenienced. As regards the generation of revenue by increasing fixed penalties for traffic-related offences, we need to consider the matter in a careful and practical manner. Indeed there is still a need for the Government to consolidate and improve the structure of the entire tax system. It should not rely too heavily on income from sale of landed properties and taxes from land-related businesses. Privatization of certain public assets alone will not suffice to meet future needs of expenditure and to maintain a sound position of public finance. I think the Government should actively consider suitably expanding revenue sources, rationalizing the revenue structure and ensuring a sound financial position in the long term, in order to face up to the various issues in the economic cycle.

Madam President, in terms of expenditure, allocation of resources continues to tilt towards recurrent expenditure, especially items such as social welfare and medical care. This is suitable when the grassroots have to be assisted during an economic downturn. But once recurrent expenditure is increased, it is difficult to cut back on it. Non-productive expenditure such as welfare and medical expenditure have insatiable demands and will exert pressure on our resources. In addition, the establishment and expenditure on the public sector are on the rise. Although Hong Kong needs not shoulder international expenses, its public expenditure amounts to over 20% of the GDP. So we can see that there is an urgent need for measures to control public expenditure.

The Budget proposes certain measures to strengthen our fundamentals. This is a positive step. One strategy in the reform of the financial market is the demutualizing of the exchanges and clearing houses, consolidating them into a single market operator and list it on the financial market. This is conducive to strengthening competition and getting rid of diversification and mismatch in operation. This will also plug loopholes in supervision. Moreover, this can promote the development of the local debt market, further improve the completeness of the Hong Kong financial markets, and reduce the reliance on short-term cash. I am of the view that in promoting reforms in the financial system and improving the banking industry, the Government should work closely together with the relevant industries to acquire consensus and minimize any negative effects so that the confidence of investors are preserved. This is beneficial to the operation of the market.

The Budget also puts forward some longer-term policies and measures to develop the industries. These policies and measures have yet to be implemented, for example, the Cyberport, and the efforts to construct a Disney theme park. All these show that the Government is taking an active step to introduce diversification in the structure of the industries and taking on a leading role in key projects. It is desirable to see the Government implementing a policy to lead industries at the macro level. The inflexible positive non-intervention policy should be rectified. Of course, we have to have a clear mind and a practical attitude in assessing the risks involved in the development of hi-tech industries and the time when the relevant projects can solve the structural problems in the Hong Kong economy. We must not be short-sighted or overly optimistic.

Madam President, traditional industries, in particular small and medium enterprises, have made contributions to the accumulation of wealth for Hong Kong. They still form an important part of the Hong Kong economy at present. They are crucial to solving the problem of unemployment. But the Budget has not placed sufficient emphasis on this fact. Other than the original Special Finance Scheme for SMEs, the Budget has come up short of any new plans for assistance to be given to these enterprises. So, I hope the review of the Scheme can be pragmatic and speedy so that it can effectively lend a helping hand to the enterprises. Indeed, the Government is duty-bound to look into and launch any feasible measures to provide further help to these enterprises for the benefit of an early revival of the economy.

With these remarks, Madam President, I support the Budget.

MR YEUNG YIU-CHUNG (in Cantonese): Madam President, the Budget this year adopts the theme and content of "Onward with New Strengths" and this has certainly brought some innovation and vitality to the people of Hong Kong. It can be said to be a pragmatic and progressive Budget to be welcome and supported. It is pragmatic because it addresses the present serious problem of economic adversity. Relief measures such as tax rebate, freezing of fees and charges and reduction of Rates are introduced to ease the financial burden of the public. They are also aimed at spurring local consumption and minimizing the pains of economic adjustments. The Budget is also progressive in that it seizes the opportunity brought about by recession and proposes to strengthen our fundamentals and sharpen our competitive edge. Reforms in eight areas are proposed, these being in the reform of Hong Kong's financial systems, the development of Cyberport, the construction of a Disney theme park, lifting the restrictions on scientists and highly-skilled technologists from the Mainland entering Hong Kong to work, launching a reform in the Civil Service and changing the mode of providing public services. All these are intended to provide stimuli to the economy and facilitate its recovery and growth.

It must be emphasized that the progressive nature of the Budget is especially seen in its bold attempts to break the fetters and inject new thinking of innovation and reform. The $8.5 billion tax rebate is unprecedented. The privatization of certain government operations and public organizations, the privatization of a substantial share of the MTRC through a public offering, and revamping the remuneration package of civil servants are all unthought-of fundamental reforms and mammoth tasks to accomplish, but they are commendable efforts.

Notwithstanding our affirmation of the Budget's ability to relieve hardship and boost confidence, there are also some inadequacies which I would like to point out. These include considerations on the levy of a land departure tax at Lo Wu which does no good to the increasing cross-boundary flows; the overtly optimistic Medium Range Forecast; and the lack of transparency in the handling of the Cyberport development.

Madam President, the Democratic Alliance for the Betterment of Hong Kong (DAB) supports the Cyberport development because it is especially beneficial to the economic growth of Hong Kong. The queries raised by some people on the development centre around two issues. One is whether the Cyberport development is a property development or an information technology project. The other is why does the Government not invite open tender for it?

The DAB thinks that the Cyberport development is indeed an information technology project and it is not appropriate to treat it as a property development. The reason is that only one third of the total area in the Cyberport development is set aside as land for residential use. Though the proceeds from sales of residential flats in the development are meant to be used as capital to build the Cyberport, the focus is still on the development of information technology. I would like to point out that it is regrettable that there is a lack of transparency in the way the Government has handled this matter. Hong Kong has lagged behind in this rapidly changing world of information technology and we must work hard to catch up. As a matter of fact, high technology is a high-risk industry. In developing hi-tech projects, many countries and places do not use the method of invitation for open tender. There are previous examples in Hong Kong where some projects do not have to undergo the process of open tender. Therefore, the DAB thinks that we should not spend too much time arguing on this issue of open tender. The Cyberport is a fabulous project and if it is to be abandoned because of some minor drawbacks in the way the Government has handled it, then Hong Kong will suffer. We hope that the Government can learn a good lesson from this and sell its shares at the right time, so that other people can also take part in the planning and construction of the Cyberport. On the other hand, the Government should make clarifications as to why the Cyberport development does not need to undergo the procedure of open tender, and whether it is an exceptional case or if it is a precedent for future cases. In this way can clear-cut rules of the game be laid down for all to follow.

The DAB also thinks that the focus of attention should lie in the entire concept of the Cyberport and its way forward, as well as the direction of the Government's technology policy.

First, how is Hong Kong going to benefit from the Cyberport? The Government hopes that it can produce an effect of pooling talents. But what kinds of talents are we going to pool? What kind of technology are we going to develop? Should emphasis be placed on software, hardware or applications? What are the special features of the Cyberport as compared to similar projects in Singapore and Taiwan?

Secondly, how is Hong Kong going to publicize the Cyberport overseas and to relax the restrictions on scientists entering Hong Kong to work? How will the Government improve the training of local scientists?

Thirdly, the original intention of the residential area in the Cyberport is for financing and also the provision of a cosy working and living environment, so how is the Government going to ensure that there will not be too many outsiders, that is, people not involved in information technology, in the Cyberport? For this will render the entire project meaningless.

We hope that the Government can respond to these points.

Madam President, one will greet the part on education in the Budget with mixed feelings. At a time when there is a great fall in revenue, the spending in education for the coming year amounts to $55.2 billion, representing a real growth of 7.9% over last year. Such an increase is higher than the average increase of 4.3% in public spending as a whole. Total recurrent expenditure stands at $44 billion, representing a real growth of 5.1% over last year. This is welcome because that shows the importance attached to education and the commitment of the Government in this policy area. The increased expenditure is to be used in the development of information technology education, the addition of counselling teachers in primary schools and the provision of specialized training for in-service music teachers and arts and crafts teachers. The increases in non-recurrent expenditures are mainly used in the construction of primary and secondary schools and the improvement of facilities for special schools. All these are commendable.

A pleasant surprise is that the proportion of education in the Gross Domestic Product (GDP) has raised sharply from 3.5% last year to 4% this year. I am very pleased to learn that this increase is realized one year ahead of the schedule which I proposed in last year's Budget debate. I am delighted to learn that this level of spending in education is comparable to that in advanced countries. We must bear in mind, however, that this surge in education spending is quite dramatic. As there has been a substantial shrinking in GDP, the growth in education spending is not that much, but enough to cause a great growth in its share in the GDP. The DAB hopes that from this year onwards, and when the economy turns for the better, the Government can keep a consistent growth in the share of education spending in the GDP and keep it at a level of 4% or more.

There are, of course, some obvious shortcomings in the education spending for the coming year, these include:

First, there is a severe shortage in the amount of money put into pre-school education, reflecting a lack of commitment on the part of the Government in that area. Recently, the press has exposed certain kindergartens operating without a licence, admitting too many children and charging fees excessively. This shows a gross inadequacy on the part of the authorities in monitoring these kindergartens. As pre-school education is of great importance to the development of a person for his or her entire life, we hope that the consensus reached by the public during the consultation exercise conducted by the Education Commission can be taken seriously. This means to increase the subsidies given to pre-school education and to step up its monitoring.

Second, the teacher/pupil ratio is not improved. Even if this is not improved, at least the existing ratio should remain unchanged. While the Government proposes to increase two pupils in each class in Primary One and freeze the number of pupils to be reduced in secondary forms, it fails to increase the number of teachers according to the ratio in order that the original teacher/pupil ratio will remain unchanged. That is much regretted.

Third, the number of social workers in schools is not increased. The recent spate of cases involving youth gangs burning a dead body, indecent assault and pupils beating up teachers, all call for a greater stride towards the goal of one social worker for each school. The increase of school social workers has become an issue which brooks no delay.

Fourth, not enough attention has been paid to the problem of newly arrived school children from the Mainland. The recent ruling by the Court of Final Appeal will lead to an influx of tens of thousands of school age children into Hong Kong. But the Government lacks a sense of crisis. No contingency plans are formulated and there are not enough resources to improve education services for these newly arrived children. The DAB hopes that the Government will grant more land to build more primary and secondary schools to meet the needs of these children for school places.

Fifth, the rate of increase in expenditure in the Education Department (ED) head office is far more than that for the recurrent expenditure in education. This is inappropriate in light of the reforms to be implemented in the ED. About reforms to be carried out in the ED, the Government has already spent $4.3 million to commission a consultancy firm to make a study and produce a report of the review. In addition to setting up steering committees and ad hoc groups on the reforms, and the establishment of directorate and non-directorate posts, the Government plans to spend a huge sum of more than $9 million to commission yet another consultancy study. But we have no idea whether or not the ED will become more cost-effective after the reforms. It is really bringing in harms before benefits are seen.

Similar examples abound in consultation fees for education. For example, the ED spends $10 million to employ professional companies to assist in its quality assurance inspections. The Department also spends $2.2 million to hire consultants to make a study on the advantages of implementing whole-day schooling. Such a myriad of expenses in consultation services is disturbing.

Madam President, it is not possible to increase education resources indefinitely. I hope that the authorities can really make good use of the precious resources in education and in so doing enhance their cost-effectiveness. Apparently, the Government still has a lot of work to do in the allocation of resources in education, the setting of priorities and raising cost-effectiveness.

With these remarks, I support the Appropriation Bill 1999.

MR TIMOTHY FOK: Madam President, some people pick faults in the Budget. I do not think that it is difficult to do so. The Budget cannot please everybody. Of course, the Government can make more concessions that the $10 billion in tax rebate. However, the Financial Secretary is right not to give too much more. He has to keep the deficit in check. Our deficit, at around $33 billion, is 2.8% of the Gross Domestic Product. He believes that we can slip back into the black in two years. Our fiscal reserves should tide us over until then. If we do not contain the deficit, it would affect our credit rating.

This Budget has some big and bold ideas. Such ideas were rare in past budgets. But a time like this demands big and bold ideas, and initiatives. The Government has bought many arguments that the quality of life matters.

Hong Kong has gone beyond the sweat by the brow way of making a living. Our property and operating costs have chased away most of our manufacturers. We aspire to be the financial centre of Asia, sort of New York and London of the East. For us to be the equivalent of New York and London, we cannot be just about business. What makes New York and London so sophisticated is that they also celebrate life through arts, sports and culture. We, too, must have the same because, when the working day is done, people still need some place to go to relax or expand their minds.

Nowadays in the global economy and with open frontiers, people can invest anywhere and just about live anywhere, too. We must, therefore, have the attributes that enthral world citizens. The Disney theme park concept is part and parcel of our striving to become a centre for entertainment.

I believe that it is important for us to win the Disney deal to tell the world that Hong Kong is much more than a commercial Mecca. With Disney, we import much more than amusement park rides, cartoon mascots and a tourist attraction. With Disney, we will have allure and we can tell the world that you can do business and have fun here. With Disney, tourists would know Hong Kong has gone beyond just shopping and dining. Maybe when they are here, we can convince them that there is more to see beyond the Magic Kingdom.

We have a lot of advantages for Disney, too. Shanghai and Zhuhai are also interested. But, to be fair to us, there is only one place for the fifth Disney theme park, and that is Hong Kong. We have the geography, being at the centre of Asia. We have the demography, with a large population who can afford to spend. We have the talents as Hollywood East. In recent years, we have sent to Hollywood West our actors, directors and animators. I urge the Financial Secretary to negotiate from strength and seek from Disney a commitment to building a studio here and to using much more local artists.

Since Hong Kong would have to invest billions in infrastructure to lure Disney, it must demand a big return beyond Mickey Mouse jobs. We should be able to learn management skills from the Walt Disney Company and learn how to fuse sports with pop culture and mass entertainment.

Another brave idea from the Budget is the Cyberport scheme. Such a project is belated. I agree with the Government that speed is of the essence with technology. We have to get going and we cannot fool ourselves that the likes of Microsoft, Oracle and Sun Microsystems would invest in Hong Kong just for office space and nice apartments.

Those highly sought after corporations can demand every kind of breaks imaginable from any place, any time. What may draw and keep them here is when we have got a superior quality of life. Those companies cluster in Washington State and California because their bosses and employees warm to the lifestyles of Seattle and San Francisco. If we do not provide the excitement or the buzz, these investors would leave faster than they come. Moving is easy for them, since their wealth is not locked up in heavy machinery but in their minds.

As much as I cheer for the Cyberport and Disney concepts, I am disheartened that the Financial Secretary did not refer to the new stadium complex and aquatic centre mentioned in the Chief Executive's policy address. Am I right to suspect that the proposal of the fall is out of season in the spring? I would like to remind the Government that past promises had been broken. The Football Association was assured of a field for the game when it moved into the headquarters in Ho Man Tin in the 1970s. A generation later, that field is still a distant dream.

In the coming years, the Asia Pacific Region shall be the focal point of sports. The next World Cup will be held in Seoul and Tokyo, and the next Olympics in Sydney. Bangkok, in the midst of a recession, hosted the best Asian Games ever in December. The Thais used those Games to arouse pride, revive tourism and advertise their determination to overcome adversity. The French earlier used the World Cup to galvanize the nation. This is what a great event can do for the people.

A hundred miles north of here, Guangzhou has commissioned the French to build a multi-purpose stadium. Shanghai considers sports facilities to be an indispensable source of its renaissance. I am startled that Hong Kong has not emulated them and has not decided to cash in on the sports bonanza sweeping through Asia.

The Financial Secretary believes that reform has to go beyond construction projects. He wants it for the Civil Service, too. I second his emotion. I agree with him that the civil servants should stand with the people in our time of challenge and some of their benefits should be reviewed. But I do not subscribe to the idea that the Civil Service should be overhauled and its benefits slashed. The question is not whether the civil servants are overpaid and overcompensated. The question is whether they do a good job. If they do a good job, pay them well. If they do not, something has got to be done to shape them up.

Madam President, I have confidence that we can emerge from the recession leaner and better than when we were dragged into it. The slump affords us a chance to think the unthinkable, change the unchangeable. We have got to seize the chance rather than to mire in misery. I support the Budget.

MR FUNG CHI-KIN (in Cantonese): Madam President, the present economic difficulties which Hong Kong is facing are certainly unprecedented for the young people; but even for those of our generation who have experienced a slump more than once, the present difficulties are still a great cause of frustration. New ideas are needed to deal with the new situation. As the most important tool in the regulation of the economy, the Budget for the coming year has not let us down, for it has put in a lot of novel ideas.

In the Budget, the Financial Secretary has seized this opportunity and introduced a blueprint for reform to the financial services sector which is the linchpin of the local economy. These reforms in the financial sector are nothing new and have been under discussion for a long time. But they can be said to be an actualization of the new thinking, for they are boldly put forward by the Government.

The Hong Kong Progressive Alliance (HKPA) supports the idea of merging the two exchanges. It will help to solve the problems of each for its own good, a blurring of roles, loose co-ordination and an overlapping of products and services and even mutual hostility. Resources of the exchanges are wasted in internal rivalries and are not used to meet outside challenges. Although the goals of the Government are right, the difficulties of reform should not be taken too lightly, nor should there be any rash moves made to catch up with the trend.

As the representative of the financial services sector, I wish to talk about my views as well as those of the sector on reforms to the securities and futures markets proposed by the Financial Secretary in the Budget.

The financial services sector is well aware of the various changes and competitions found in the international financial markets. Both the public officers in charge of financial affairs as well as the sector are especially concerned with the problem of how to make the territory which has been hard-hit in the Asian financial turmoil recover speedily. It is our common concern to revive the territory as a regional financial centre and to enable it to play an important role in financial affairs. In last year's policy debate, I pointed out that there was no organization under the Financial Secretary which was responsible for the laying down of development strategies and directions, carrying out the co-ordination work in the bureau and co-ordination of the various market supervision organizations. I also pointed out that it was difficult to detect capital flow promptly under the present market developments. It would be unfavourable to the maintenance of the linked exchange rate system. So I suggest setting up a cross-market supervisory mechanism over the clearing houses of the exchanges, with a view to limiting such clearing houses to one or two in the long run.

Therefore, the proposals made by the Financial Secretary are indeed timely measures, for they will help to strengthen the fundamentals of our financial system. They include merging the clearing systems of the securities and futures markets, undertaking a reform of the securities and futures markets, bringing in new regulations on Internet trading, and streamlining the licensing regime for market intermediaries.

As for the Financial Secretary's proposal to modernize the structure governing our exchanges and clearing houses to make them more efficient, more market-driven and better able to respond to global competition, these are goals which no one will question. But can they be achieved simply by pushing through a merger of the two exchanges, demutualizing and operating in the form of a commercial entity?

The Government should not dismiss the efforts paid by the sector over the past 10 years after the 1987 stock market crash in rebuilding the securities and futures markets. These efforts include those contributed by the executives and directors appointed and recommended by the Government, for they have helped to make the financial markets of Hong Kong develop very rapidly. The present governing structure is not one which is conservative and resistant to changes as the Financial Secretary would incline to think, and it has long departed from the days of being a private club for members only. The closure of a few securities houses and investment banks in the wake of a ferocious financial turmoil cannot be attributed to backward management, lack of foresight and enterprise in the sector. The financial markets in Hong Kong have always been extremely open. And it is because of this openness and the introduction of so many derivatives over a short span of time that the international market manipulators are attracted to launch speculative attacks on the Hong Kong dollar. Like other sectors, the financial sector has always been striving to survive and make progress under free and open market competition. It is the hope and wish of the sector to do as much business as it can, no matter it means big business or small business. There is no government in the world like ours which asks local companies to close and make way for outsiders who are not committed to Hong Kong and would just grab as much as they can when the market situation is favourable and would disappear when it turns bad. I do not believe that the sector will be ignorant of the meaning of competition. I also trust that the sector will certainly support any practical and reasonable reform made by the Government to sharpen our competitive edge in the international financial market.

To be honest, the promotion of the venture board, the upgrading of the straight-through processing electronic trading system, the electronic trading of Hang Seng Index futures and so on are the competitive measures launched using existing resources under the current supervisory structure. These are not products after the merger. Even the synchronic market closure agreement made by the two exchanges at the beginning of last year was something reached after minimal co-ordination efforts made by the officials in charge of financial affairs and the supervisory organizations. The management of the new exchange will see a reduction in the number of brokers who are familiar with the trade, but what kind of brilliant and smart persons will be put in their place? What kind of combination of interests will be formed? Will these experts be able to look after the interests of those involved and will they be able to provide opportunities to make profits for the traders? Can they be able to give a satisfactory return to the shareholders of the exchange, including the public who also makes investments? To dispel the apprehensions of the sector, the Government must clarify what are the things which can only be achieved through the merger and what kind of interests can only be obtained after the merger.

Also, when pushing for a merger, as the Financial Secretary has said, the interests of all parties must be balanced. The Government should not push forward the ideas of the officials and bent on having its own way. It must not make use of the relatively quiet time in the market to drive away the small and medium local brokerages who have made great contributions to the stock market of Hong Kong and have been doing proper and law-abiding business by a paper showing share rights of some dubious prices, and an exchange of administration powers and licensing rights. On the other hand, the Government should adopt an open and fair mentality and listen to the views of the sector, be more concerned about its interests and allow a proper degree of participation in formulating the merger scheme. This will serve to increase transparency and elicit understanding and support from the sector. As I have indicated, this will produce a win-win situation within the tight schedules. I have also said that the Government had made a decisive and bold market excursion last August. Most of the people in the financial sector were in full support of the Government and applauded its market activity from the first day it was made. This time the Financial Secretary is determined to push forward the merger of the two exchanges, but what kind of scheme has he got up his sleeves? I wish him good luck and I hope that his new thinking will get the support of the financial sector.

Madam President, in view of the competitive setting in the global financial market, the Government has decided to lift the restriction on the exemption of stamp duty applicable only to shares whose loan period does not exceed 12 months. The Government also plans to let the market bankers enjoy exemption from stamp duty in respect of hedging transactions on securities and futures. The abolition of stamp duty for stock transactions has been the proposal of the HKPA as well as that of mine. I welcome the Government's decisions on this for it is in line with international market practice. It will spur on share trading and will raise the position of the financial market of Hong Kong as a financing centre. What is still not satisfactory is that the moves are not thorough enough and the interests of the investors at large are not taken equally well of. Moreover, there will be administrative expenses to monitor the possible abuse of such exemptions. Such administrative expenses can in fact be avoided.

Madam President, another highlight of the Budget is its $36 billion deficit. There is also the problem of an "open scissors" situation where income for the few years to come will be in serious mismatch with the expenditure. The Financial Secretary pointed out that the gradual recovery of the economy, with a pace greater than the growth in government expenditure, will lead to a disappearance of deficit in the medium range. The HKPA thinks that the forecast of public revenue has been modest and is quite reasonable, but that is only a forecast. The most worrying thing is that the Financial Secretary's forecast is mainly grounded in quite a number of rather unstable sources of income, for example, the profit to be made by the share portfolio held by the Exchange Fund, and the realization of public assets.

Madam President, the HKPA welcomes the $8.5 billion tax rebate made by the Government in a bid to relieve public hardship despite the Government's being stuck deep in the reds. But at the same time, the HKPA beseeches the Government to maintain a high sense of crisis in the face of the gap between continued growth in public expenditure and a negative growth in the economy. Major public services such as social welfare, public housing, medical care and education have always been easy to expand but difficult to keep in check. This problem is particularly hard to get round in the face of the present economic downturn, the ageing population and the influx of the children of Hong Kong citizens.

What is most worrying for the HKPA is not that the appearance of an "open scissors" phenomenon in the disparity between income and expenditure in the Government. Such a gaping lion's mouth, as it were, is only transitory. But what is more worrying is that there may be deviation in the economic forecast of the Government, to such an extent that the lion will be unable to close its mouth and will devour in greater and greater mouthfuls, and in the end will run out of control. There must be a rigourous supervision of the growth of public expenditure. Public expenditure must be held in check by all means, until the expected goal in economic growth is reached and even surpassed, and when the streamlining efforts on public bodies and the Enhanced Productivity Programme turn out to be a success, then the spending on major public services may be increased as when appropriate. But the principles of prudent financial management and spending within the limits of income must be upheld by all means.

Madam President, I so submit.

MR JAMES TO (in Cantonese): Madam President, let me speak on the expenditure and policies on security. First, let us look at security at a macro level. We can say that we can be optimistic about the present state of affairs in security at a macro level because the fact is that we have a crime rate last year which is the lowest for the last 25 years. The rise so far this year is only very modest. But if we look carefully at the breakdown of the crime figures, we have reason to believe that we must keep a close eye on how things are going. For example, compared to the same period last year, the past four months saw a surge in street crimes. Robbery, for example, rose by 40%, snatching purses by 40%, picking pockets by 50%. There are several things we ought to do when faced with such a situation.

First, there are some very fundamental stabilizing services which we must provide. For example, our CSSA. I hope the Financial Secretary will be very careful about this. If we are to tighten our purse strings too much on this, a very destabilizing effect is bound to appear. How are we going to deal with this? I think we should increase the number of policemen on patrol and make some strategic deployments. As for the future, we still need to implement the Enhanced Productivity Programme (EPP) in the Police Force as in other departments. In this regard, I think the Police Force is capable of doing so. First, the amount of expenditure incurred by the police is well over $10 billion. If we look back at the past few years, we will find that the police have met the requirements of EPP. But there are quite a few areas that improvements can still be made. Let me give some examples. In 1996-97, the cut in auxiliary police made a $50 million saving for the Police Force, and in return 258 regular policemen were added. In 1998, the merging of the boundary patrol and the boundary districts saved more than $40 million, and 235 new police constable posts were created. In 1997-98, through reforming the shift system of the marine police and the overtime allowance for disciplined forces, as much as more than $60 million were saved. As a result, 314 posts were created. Guess how much was saved when the catering agreement in the Police Cadet School was terminated in 1998? That was enough to create 26 posts, including three clinical psychologists. I believe that with this year's one line vote, that is the granting of funds en bloc, the management quality of the police can be raised, and to such an extent that it may exceed the base number required by the Financial Secretary.

The most effective tool to higher value-added and efficiency would be technology, at least for the few years to come. Recently, I joined the 25th anniversary celebration of the Independent Commission Against Corruption (ICAC). There one Interpol expert made the following comment which went something like this: The 21st century will see a hi-tech and high intelligence race. For example, Internet banks will appear and countless transactions are made everyday on the Internet. Money earned from illegal activities can be remitted from one country to another in just a matter of minutes, instead of a few hours as it used to be. When law-enforcers are working hard at tracking down the whereabouts of the money, it has already been in and out of a few countries for a number of times. Banks will be unable to know their clients in detail as they used to be, and to require banks to report to the police any dubious deposits of a great amount would be a fairy tale. According to figures from the United Nations narcotics control scheme, there are at least 70 000 monetary transactions going on everyday through international telephone lines, amounting to US$0.2 trillion. Law enforcement departments used to rely on the banks to crack down on money laundering activities and other illegal activities of crime syndicates. But these crime syndicates have acted first and bought some banks and set up off-shore banking operations through the Internet. And these hi-tech crimes are not just incredible things we see in movies. A life example is that the Interpol has recently cracked a Russian organized crime syndicate which set up its own off-shore bank in Antigua, South America. Computer technology such as ink-jet printing has been used to produce counterfeit bank notes of such a high quality that are difficult to tell from genuine ones. These activities are gradually appearing in Hong Kong. Reportedly, some countries, that is to say, some naughty countries, are having their intelligence departments producing counterfeit notes to amass foreign exchange.

What has aroused great concern in the Interpol recently is that in the United States, the personal data on the magnetic strip in a credit card is often stolen and fake cards are produced in Asia and all over the world in just moments. Before the police is alerted, the credit limit which the card carries is spent completely. At present, with the wide use of computers and the linking up of computer systems, vital messages and information are sent. As the newspapers in the United States have reported, with just a personal computer and a telephone line, any person with professional knowledge of computers can disrupt the utilities of an entire city, such as its water and electricity supplies. Reportedly, there are at least 1 700 people in the United States capable of making such devastating attacks.

Recently, I was on an inspection tour in Britain trying to learn more about its technological developments. I can tell Members, now that we are still thinking of how computers can help us to conduct DNA tests and in obtaining fingerprints. But towards the end of this year, policemen on crime scenes will be able to use some kind of laser device as short as a fountain pen to scan finerprints and send the information to the headquarters through a wireless communication programme. In a few minutes or an hour or so, information such as the suspect's address and so on would be sent to the policemen on the site. This will help to detect the offender in a very short time.

In the course of great strides made in science and technology, our police and law enforcers still leave me with an impression that they are still very backward. One of the key reasons accountable for this state of affairs is that we do not have something like a defence industry or an intelligence department. If we look at some internal newsletters published by the police, we can see things like: We are making a great step ahead. We are discarding typewriters and we are into the computer age. I think we must really throw away our typewriters. Recently, the Government applied for a funding of more than $170 million and it was stressed that no typewriters were wanted and computers and E-mail were needed instead. In fact, the request was not well explained and in the end it was turned down. That is regrettable. In any case, I think we must enhance the development of technology. And it is a competition for intelligence. In the past few years, I have always been pushing for asset investigation and cracking down on triad activities, but the results have been very limited. Why? The Government said there was not enough power for it to undertake such a move, so the Organized and Serious Crimes Ordinance was enacted. Then it said there was not enough manpower to carry out the job, then about 200 people were added to carry out investigations into the triad societies. In the past few years, it seems that not much has been heard on this. I have no idea how many years more will these undercover policemen have to work undercover before a big case is cracked. But I know I have been saying these for five years. I am beginning to get very impatient. The same mediocre results are found in the police's efforts to investigate the assets of law-breakers.

Something which is of wide concern crops up in the bid to crack down on copyright piracy. Some people say that if there is massive a crack down on piracy activities, then those who are engaging in such activities will turn to other forms of criminal activities. These people preferred selling pirated products to pushing drugs and other illegal activities, for the reason that the former will bring very lucrative returns. Now they may turn to theft, fraudulence or robbery again. And that will be even worse. I am not saying that the police is harbouring such thoughts, but as the public is getting very concerned, there is a need for the police to make a strategic plan on this in the near future and put it into practice. I am not denigrating the capabilities of the Customs, but with the huge manpower and resources in the form of police stations in every district, together with the intelligence network, if the police is really putting efforts into it, it is capable of producing some dynamite effects. Some people think that people who sell pirated goods will turn away from other illegal activities and that cracking down on piracy will only upset the balance and that will be dangerous. I wish to warn those who think so. I would like them to think what will those people or syndicates who sell pirated goods do with the money they make if they do not use it in other illegal activities. They will use the money to keep some young subordinates. That is to say, they will keep some subordinates and to keep the group going. After a certain time, they will use the money in some other illegal activities, get some more advanced technology or recruit more people to embark on another fight with the police. That is for sure. So, I hope that the police can detect the sinister activities of these gangs.

Another issue which I am greatly concerned is that I shall propose an amendment at the Committee stage of the Appropriation Bill 1999 to cancel a $100 million funding for the police. At that time I would explain in detail why we must pay special attention to the expenses on informers' rewards and the expenses under the former Special Branch, that is, the so-called special services now. If we as Members of the Legislative Council are not given sufficient information to vet these expenses, then how are we going to discharge our constitutional duties? Members of parliament or regional assemblies in foreign countries can scrutinize every item of expenses in national defence in meetings held in camera. As this item of expenditure is as much as $100 million, how can it be appropriated without any monitoring and scrutiny? Is the nature of this expenditure item more confidential than that of national defence and security organizations of any other country?

Another issue is one which I have been talking about for many years, that is about the independence of the Complaints Against Police Office (CAPO). Let me try to discuss it from a financial perspective. Under the existing system, we spend about $63 million every year on the CAPO. About 185 disciplined service officers and clerical staff are employed in the CAPO. But the work of the CAPO has been so far unable to instil confidence in the public and to make them believe that the CAPO is making independent and fair investigations. As a matter of fact, looking at past figures, it is hard for the public to be convinced of its findings, and that the public is left with the impression that there has been an abuse of power. As the findings are often inconclusive, there is no justification for the continued existence of the CAPO. I would say that to a large extent, the $63 million are spent in vain. If we are not going to make any reforms, the only option left for us is to cut this $63 million in the near future or in the next budget, so that the Government will be compelled to consider other courses of action.

About offences, there is another thing which I feel worth mentioning and that is, we must step up international co-operation efforts, for most of the offences as seen in the information supplied by the ICAC, the Customs and the police, are committed on an international scale. We need to scrutinize the legal framework governing this kind of international co-operations. I believe we have to increase co-operation in this aspect, in particular with the Mainland.

Another thing I wish to talk about is the investigations carried out by undercover officers and informers of the ICAC and the police. Over the past five years, I have been watching this very closely. I cannot talk about this on many public occasions, as a lot of these activities are undertaken in secret. I believe among the Honourable Members of this Council, Miss Margaret NG is very knowledgeable in this. For she is a member of a very important committee in the ICAC and she has access to much confidential information. I think that there may be some ethical issues involved in the investigation efforts. I hope that the police can step up the review of these procedures and to study if more stringent control is required.

The last thing I would like to talk about is urban renewal. In the near future, a bill on the Urban Renewal Authority will be introduced to this Council. I know that there may be some changes on the part of the Government and it may be re-considering the entire related framework. I hope that the Government can realize that no matter how hard it thinks, there is one key element to it, and that is, from a financial perspective, there must be sufficient funds to set up this Urban Renewal Authority. Speaking of the a few hundred plans seen by the Government, I would think that two thirds of these plans may be incurring losses, taking into consideration the current market situation. Unless of course, there are some very dramatic changes in the market, these plans will be doomed to fail even under stable market situations. Then how are we going to use public money? If the Government is just thinking of making profits out of nothing and redevelopment for free, then I would say it will never work. I hope that when a review is made in respect of the Urban Renewal Authority, some effective measures will be proposed to convince us that at least most of these plans are viable. Otherwise, there will be no justifications to set up this Urban Renewal Authority. Madam President, I so submit.

MR KENNETH TING (in Cantonese): Madam President, the Federation of Hong Kong Industries (FHKI) and the Liberal Party both agree that this Budget is a good one on the whole.

Over the past year, Hong Kong has experienced all kinds of unprecedented hardships, and its economy has been seriously hit. With the emergence of negative economic growth, it is inevitable that we will have a deficit Budget next year.

Luckily, the prospects of a deficit Budget next year has not made the Financial Secretary "cowardly and timid". Quite the contrary, the Financial Secretary has made a whole series of positive measures in the Budget, all aimed at improving the state of our economy. There are proposals on the Cyberport and the vigorous development of information technology; and there are also huge tourism development projects like a "Fisherman's Wharf", a cruise terminal and a Disney theme park. The FHKI and the Liberal Party will definitely support these proposals.

We also think that the proposal on tax rebate will give the industrial sector some positive and concrete assistance. Following the outbreak of the financial turmoil, banks have tightened their lending to industries, and up to now, the credit crunch is still rather serious. The partial rebate of profits tax will, to a certain extent, ease the financial pressure of manufacturers because the rebate will give them more liquidity.

But it is a pity that some Members of this Council have proposed to move an amendment on capping the amount of tax rebate at $100,000. The FHKI thinks that this amendment is not sensible, and it is also a discriminatory act against those Hong Kong enterprises which are making profits. We must note that those manufacturers who still managed to make profits last year did not actually succeed in doing because of no reasons. They all worked very hard to design innovative products; they all worked incessantly to improve their production procedures; and as true entrepreneurs, they all had to bear the risks of the market. These are the reasons why they still managed to make some profits amidst the very difficult circumstances last year. The efforts of these manufacturers should be recognized and supported. One simply should not act like the Members I have mentioned, for what they advocate is tantamount to a discriminatory act against all successful enterprises.

If we want our economy to recover, we must encourage investments. The so-called tax rebate ceiling advocated by those Honourable colleagues will, without any doubt, impart a most negative message to all potential investors, thus weakening their desire to invest in Hong Kong.

Madam President, obviously, the amendment proposed by these Members will stand little chance of being passed. That being the case, they should no longer try to upset our normal business. The industrial sector sincerely hopes that these Members can withdraw their motion immediately. According to Mr H S WONG, Commissioner of Inland Revenue, if these Members can withdraw their amendment before next Monday, the Inland Revenue Department can guarantee that it can mail all tax rebate cheques before the Easter holidays. So, I hope that these Members can consider the interests of the whole community and withdraw their amendment as advised.

Madam President, the FHKI very much welcomes the large scale development projects and the tax rebate proposal which I have mentioned just now. But we also think that in connection with some particular proposals, the Financial Secretary should really do more work, so as to make more contributions to our industrial development.

Let me cite one example. The Financial Secretary has proposed just an extension of six months for the freeze of those government fees and charges affecting the industrial and commercial sector. But the FHKI estimates that in the coming year, the manufacturing sector will still be faced with very difficult financial circumstances. Therefore, the FHKI maintains that all fees and charges affecting industries and commerce should be frozen for one more year.

The Financial Secretary has indeed made very vigorous efforts to promote and develop the new cyber industries. But what has he proposed for the existing types of industries? The FHKI views that what is most lacking in the Budget are measures to encourage the further development of the existing industries. Let me give some examples. We very much hope that "research and development expenditure" can be made 200% tax deductible, instead of 100% tax deductible as is the case now, because this will encourage manufacturers to conduct their own research on new technologies. Besides, we also hope to increase the depreciation allowance for landed industrial properties and industrial buildings from 4% to 10%. And, we also hope to have a 100% write-off rate for money spent on purchasing new machines relating to business operations. But the Financial Secretary has rejected all these proposals. That is why the industrial sector thinks that the Budget is still not entirely satisfactory despite its many merits.

Madam President, with respect to port development, the FHKI also has some comments to make. In order to consolidate the status of Hong Kong as a world shipping centre, the Financial Secretary has proposed to lower ship registration fees. And, in the briefing session on the expenditure part of the Budget, the Secretary for Economic Services also stated that the Government would do its utmost to enhance the operational efficiency of our port. The industrial sector is in full support of the effort in this respect. But the FHKI also thinks that apart from stressing the importance of port efficiency, the Government should, as a more important concern, ensure that our port charges are always reasonable, fair and acceptable to the industrial and commercial sector. I have already relayed this view of the FHKI to the Secretary for Economic Services, and I hope that the Government can pay more attention to this aspect in the future.

I also wish to talk about our interest rates. The Financial Secretary mentions in the Budget that the Government will strengthen its supervision of the banking sector, and that it will abolish the remaining Interest Rate Rules. The industrial sector and the community are all very supportive of this decision of the Government. But since there will still be quite some time before the total abolition of the Interest Rate Agreement, the Government must remain alert to the possibility that high interest rates may well slow down the pace of our economic recovery. With the current deflation, the real interest rate in Hong Kong is nearly as high as 10.15%. I am sure that the Financial Secretary can also understand that lingering high interest rates will slow down the pace of industrial and commercial revival, or at least make this more difficult. The FHKI hopes that the Financial Secretary can work out some ways of lowering our interest rates, so as to reduce manufacturers' operating costs and speed up our industrial recovery.

Madam President, although the FHKI has made some improvement proposals, we still find the Budget worthy of support on the whole. Thank you, Madam President.

MR CHAN WING-CHAN (in Cantonese): Madam President, the main thrust of this 1999-2000 Budget lies in the development of information technology and the tourism industry. But as for trades which are most devastated by unemployment, the Government has offered no direct assistance to their employees. These trades include catering, retail and department stores, building, transport, manufacturing and so on. The Government lacks in a sense of mission to rescue these unemployed from the abyss of depression and they have to face the pressure of unemployment and bear the unbearable pain and anguish of it.

The latest unemployment rate has climbed to 6%, with the population of unemployed reaching 200 000. And there will certainly be more people unemployed in the second quarter. With rising unemployment figures, even a child will know how serious the problem is. Why has the Government not offered any rescue measures in the Budget? The problem of unemployment is indeed a grave one, for it involves more than 200 000 unemployed people and more than 100 000 underemployed workers. This is a critical problem which we cannot afford to neglect.

If this is allowed to go on, even if the Cyberport can create 12 000 jobs in the future and even if the Disney theme park is eventually built in Hong Kong, the jobless people will not be able to hold out for so long to see the dawning of that day. I have said on other occasions that the impression which the working class, especially the unemployed ones, on the Budget is like the Financial Secretary is making out a gorgeous menu for the unemployed, listing such mouth-watering dishes made from fresh giant garoupa like saut sliced giant garoupa, stewed giant garoupa head and so on. But the belly of the unemployed is still empty, because the giant garoupa is still roaming freely in the sea. It has not been caught. The magic trick that the Financial Secretary is performing before us is like a mirage of an oasis seen in the arid desert by a team of explorers. We all know that the forging of an alliance between Mickey Mouse and the Chinese white dolphin is still at an early stage, and there is no way to tell whether it will be a success or not. The Government has painted a rosy picture before us, but what we want the Government to realize is that we are deep in the water of unemployment.

It is disheartening to see that the Government has not taken the needs of the unemployed well into account. Even though the Secretary for Education and Manpower stated that the Government would make every effort to help the unemployed return to the labour market, there is little mention on this in the Budget. To solve the unemployment problem, the Government needs to have a sense of direction, enterprise and innovative thinking. I wish to ask the Government, why did the plan proposed by some groups to turn the former Kai Tak airport into a flea market fall through? Why was the Government unwilling to bear the utilities expenses and the costs of borrowing the toilet facilities which are quite insignificant, so that the unemployed will have a chance to make a living? There are only 90 000 something retraining places for more than 200 000 unemployed people, would you call that enough? For all these problems, has the Government ever tried to solve them with sufficient breadth of mind and innovative thinking? The Federation of Trade Unions has submitted a retraining support scheme to the Government, but despite applause and promise of follow-up by the officials in the Education and Manpower Bureau, it is disappointing to learn that not a word on it is mentioned in the Budget.

There is no comprehensive training scheme set up by the Government to enable those with low skill levels and academic qualifications to acquire the ability to engage in another occupation. Has it ever worked out how many posts in the Cyberport development can be taken up by graduates of the Employees Retraining Board? When new technologies are being developed, has it ever occurred to the officials that this group of low-skill and poorly-educated jobless people will be left so helpless behind? When high valued-added and hi-tech industries are being developed, have any thoughts been given to develop some environmental protection industries and create some jobs for the low-skill workers? A few months ago, tonnes of recycled paper were thrown away and the owners of paper recycling factories attacked the authorities for standing aloof and let a promising industry die off.

With the continually deteriorating economic condition, many companies are laying off staff and this makes the unemployed even more helpless. Wage reductions and layoffs become the order of the day. Even companies making hundreds of million dollars a year are scrapping the fringe benefits of their employees, reducing their wages or simply sacking them.

Recently, the Hong Kong Department Stores and Commercial Staff General Union has conducted an opinion survey and found that over half of the unemployed interviewees have stayed jobless for half a year. 40% of the these unemployed interviewees experienced repeated setbacks in finding jobs. Some interviewees said that business of the companies they were working might contract. The situation is worrying.

The hardest hit areas in unemployment are the catering industry. Ever since the financial turmoil, the catering industry has been going from bad to worse. More than 400 restaurants and eating establishments closed over the past year alone. Conservative estimates are that more than 12 000 people in the catering industry have lost their jobs. In the past, most of the restaurants and eating establishments adopted the marketing strategy of selling quality food at low prices. They were also able to attract poorly educated and low-skill people to work in the industry. The economic downturn has made the restaurants and eating establishments embark on cut-throat competition among themselves. This is to attract more customers and enable them to survive the rough times. The Government should do something to help the catering industry as well as other industries in difficulties, such as lowering the sewage surcharges, thus enabling these industries to tide over the difficult period and prevent the unemployment situation from worsening.

Professional drivers have been dealt the greatest blow from the Budget. The Motor Transport Workers General Union and many taxi and minibus owners associations complained to us that in the present slump, when business was slack for taxis and minibuses, the increase in fixed penalties had greatly increased the burden of the drivers and operators. Drivers get tickets when they eat their meals or go to toilet because there are not enough parking spaces. When the fixed penalty is increased from $450 to $570, getting a ticket would mean two days' work going down the drain, instead of one day's work as it used to be. Fee hikes have become a fact of life. It is also a well-known fact that the traffic measures are unable to meet the practical needs of driving. Drivers are frequently penalized for some trivial things and it is very unfair to them.

As a matter of fact, there are quite a number of proposals in the Budget which benefit the public, but why do professional drivers alone have to bear such a heavy burden? When compiling the Budget, has the Financial Secretary ever thought about the predicament of the drivers? Both professional drivers and operators are making a strong demand that the fixed penalties and parking meter charges be frozen at their existing levels. I hope that the Financial Secretary can respond to this in his reply next week.

In a reply given in the Legislative Council, the Financial Secretary made a remark to the effect that even a skillful woman cannot cook when there is no rice in the pot. We were all thinking at that time that we should not be expecting too much when the Budget was to be announced later.

It is fortunate that the Government proposes to make a tax rebate which amounts to $8.5 billion. Although tax rebates are only to be made to three groups of taxpayers and not across the board to everyone, it can still be considered to be good news. For at least the $8.5 billion rebate can benefit those individuals and companies in financial difficulties, it can also stimulate consumption and ease the liquidity problems of companies. All these will have positive effects on the economy. For example, restaurant owners are eagerly awaiting the patronage of clients visiting their establishments with a tax rebate note to get a concessionary meal. More than 200 restaurants and eating establishments are prepared to give a special discount or a free dish to those who come with a tax rebate note. They are hoping that this $8.5 billion tax rebate can give a welcome shower to the parched land of the catering industry, the retail outlets and department stores, as well as other industries in Hong Kong.

As a skilled cook, the Financial Secretary will have to cook with his limited amount of rice. But he manages to make some modest but tasty dishes for some people like preserved eggs and scrambled eggs soup, fried bean sprouts, and fried golden thread fish and so on. When the Budget was delivered, it was generally met with welcome. But that of course did not include the working class at the grassroots and the unemployed. Some newspapers even heaped praises onto the Financial Secretary and pointed out that the Secretary had changed for the better. The Secretary then became widely popular among the middle class and he got a shower of praises from the media. There are reports that the Legislative Council Members loved the Financial Secretary more than the public did. Was this because of the marks I gave to the Secretary in a questionnaire set by Commercial Radio One that the rating of the Secretary had been pulled upwards? Whatever the case, I am only speaking of my views on the issue rather than the person.

Madam President, I so submit.

MR LEE CHEUK-YAN (in Cantonese): Madam President, I will oppose the Budget on behalf of the Hong Kong Confederation of Trade Unions (HKCTU). I will vote against the Budget definitely not to negate the efforts made by the Financial Secretary and his colleagues but the fiscal management philosophy of the Government of the Special Administrative Region (SAR). The SAR Government practises capitalism of small government and laissez-faire and it completely loses sight of social injustice. The HKCTU is in pursuit of a prosperous and just community in which everybody can "have meals" with dignity and without fear, and fiscal policies are important tools for achieving this aim.

We will enter the year 2000 in less than 300 days' time. In the face of this historic moment, we should identify clearly the challenges before us and greet the beginning of a new era in a positive manner.

Before this millennium comes to an end, Hong Kong has experienced a financial turmoil. The economic bubble that has existed for long burst and people from all walks of life suffered to various extents. However, from another perspective, this turmoil let people become aware that the development of Hong Kong in the past involved a lot of contradictions and fallacies which should be reviewed and rectified. In a word, Hong Kong is facing four challenges: an unstable employment situation, intensifying disparity between the rich and the poor, the loss of a locomotive for economic development and the need for a sustainable mode of development.

We need to adopt a new thinking in the face of the challenge of a new epoch. I would also like to examine this Budget that straddles 2000 from this angle.

The unemployment problem is undoubtedly the prime concern of people. It is a pity that the Government still follows its usual stance and asks the public to pray for good fortune and obey the will of Heaven. According to the wishful thinking of the Government, when our economy starts reviving, the unemployment rate will naturally drop. But no one can tell when our economy will revive, and the unemployment problem cannot be solved within the foreseeable future.

A more important point is that the unemployment problem is basically a structural problem. Our economic structure fails to align with the labour force structure. Middle-aged workers have lower academic levels and are less adaptive to the fast changing technical requirements. After they have received short-term retraining, they may find that what they have learnt is outdated when they look for jobs. With age discrimination, job search becomes even harder for them. I recall that a female worker once asked me if the Government wanted to give them arsenic. Even people aged 40 cannot find jobs. I hope that Members will look squarely at the age discrimination problem.

When the whole world is discussing life-long education, Hong Kong still remains at the stage of allocating $500 million a year for the retraining programme. The investment by private enterprises in human resources training is inadequate. Besides middle-aged workers, even university graduates are unemployed. This sounds the alarm.

Can university education meet future challenges? The Cyberport is the best example. I heard that even if the Cyberport is in operation, only foreign professionals may be recruited. Does it reflect that local university education is of no use and our graduates utterly fail to follow the trend in terms of science and technology?

The community thinks that there are problems with education. Although more money is spent on education, it cannot bring about a drastic solution to the problems and we still fail to follow the trend and face challenges. The Government should allocate more resources for education and continued education and promote education strongly.

We also find that the polarization of the labour market is getting more and more serious. Senior executives and professionals receive disproportionate remuneration while most workers are hard pressed by low skills and wages, harsh working conditions and unstable prospects.

From a fiscal perspective, the Financial Secretary plans to privatize some government services and contract out certain work. But this will cause the situation to deteriorate, press for a downward adjustment in the wages of junior workers and intensify the polarization of the labour market.

We forecast that the number of chronically unemployed will increase as we enter 2000 and some people may waver between being unemployed and having unstable jobs. Unfortunately, the Budget has not addressed this tendency.

The employment situation mentioned above will directly intensify the disparity between the rich and the poor. The per capita number of Rolls Royce owned by Hong Kong people ranks first in the world but the number of impoverished in Hong Kong also ranks first among developed countries. The disparity between the rich and the poor is also second to none and our Gini coefficient, which reflects the distribution of income, also comes first among the four little dragons in Asia.

The disparity between the rich and the poor in Hong Kong has been very serious. Rapid economic growth in the past has concealed the social contradictions brought about by the disparity. But now the contradictions will appear before our eyes one after another.

Public finance policies are important tools for solving the disparity problem. Unfortunately, this Budget is extorting the poor to relieve the rich. The growth in public expenditure is restricted by a golden rule, the livelihood of lower class people cannot be improved through services provided by the Government, and badly off people cannot compete with other Hong Kong people under fairer conditions, therefore, the poverty problem keeps tossing in a cycle. With this restriction, the Government cannot solve the unemployment problem by substantially increasing public expenditure, stimulating our economy and creating job opportunities.

Other measures that extort the poor include:

- reducing Comprehensive Social Security Assistance, even the $7,000 to $8,000 allowance for denture is reduced, and this really affects people's meals;

- freezing civil service pay and further containing wages; this affects the wage levels of private enterprises and consumption;

- employing most civil servants as contract staff; this intensifies the instability of the labour market;

- with the Enhanced Productivity Programme, productivity is enhanced through contracting out work, employing temporary staff at lower wages and exploitation;

- the Government is indifferent to the $60 million fund shortage of the Community Chest;

- while senior officials receive air-conditioning allowances, Mr CHEUNG Man-kwong said that the installation of air-conditioners in a centre for the handicapped is not approved and those in the centre have to endure mosquito and insect bites;

- it is generally accepted that old age supplement is insufficient but the Government has not revised it. Besides, there is no social insurance system in Hong Kong so far.

As to relieving the rich, the Government gives consortia tax rebate with public money. I have given notice that I will propose a resolution on the coming Wednesday to amend the tax rebate proposal of the Government.

The resolution sets a ceiling for tax rebate at $100,000 for I want to ask a question on behalf of the public. Should $3.1 billion public money be distributed to 5 800 companies and "superior workers" that have more than $6 million profits or income a year or spent on needy grassroots to help them tide over difficulties?

Public money belongs to all Hong Kong people and we must be careful and prudent when we decide how it should be used and it should also be used to meet actual needs. Many people are of the view that the Government should give concessions to the sandwich class and small and medium enterprises. I agree to this but I have not heard anyone say that the Government should use over $3 billion public money that belongs to the public to give companies making generous profits or "superior workers" as sobering agents. Our amendment precisely gives a 10% tax concession to the sandwich class and small and medium enterprises in need. However, the rate of concession for more capable companies or persons can be relatively lower. When the Government decides how public money that belongs to the public should be used, it should allocate the resources proportionate to the different degrees of need. Is a reasonable allocation of public resources discrimination against the rich? Is that unfair? Is the tax rebate fair to people who pay indirect taxes only?

Yesterday, many Members opposed my amendment but I would like to ask them to take account of public opinion. Two opinion polls have shown that more people support the amendment. It proves that people support our proposal that sets the tax rebate ceiling at $100,000. However, the Government's claim that this will delay tax rebate turns the whole discussion into one about when tax rebate will be made and whether people will receive tax rebate by Easter. We think that the nature of the discussion has changed. In fact, the Government did not respect the business order of the Council when it initially indicated that cheques would be posted by the end of March for it said that cheques would be sent before the Council scrutinized the Bill. It inaccurately gave the public greater expectations and it later suppressed our amendment with the public's expectations. I have said time and again that even if I propose an amendment, the Government can definitely give tax rebate to people who will receive less than $100,000 first. I still requested the Financial Secretary to do so today but he flatly turned down my request.

In this case, to meet the public's expectations, I declare on behalf of Mr LAU Chin-shek, Mr LEUNG Yiu-chung and I that we have decided to withdraw the amendment for two reasons. Firstly, in proposing the amendment, we hope to arouse discussion and cause people to examine whether public money should be used this way, that is, for distribution to super tycoons. This is our aim in proposing the amendment. Although we have discussed whether my proposal is right this week, the focus has not been on the question of whether the amendment is in the interest of the public. Rather, it has been on the question of when the tax rebate will be made. Our discussions have focused on the tax rebate schedule and the nature of the debate has changed. I really worry that if such a debate continues, we will be quibbling over when tax rebate will be made, to the neglect of the message I wanted to strike home, that is, tax rebate should not be made to consortia. Now that this message has become vague and our discussions changed in nature, we find it necessary to withdraw the amendment.

Secondly, I want to meet the public's expectations. I think that the public will support our amendment and the opinion polls just mentioned showed this clearly. But some people (whom I believe will receive tax rebate) have told us that they will not support the amendment for it will upset the tax rebate schedule. I believe and hope that if we withdraw the amendment and share the public's sentiments, we will be able to get their support for our original principle. Our original principle is: As there are so many needy people in our community, we should not distribute public money to the most capable and richest class in our community, but we should take care of the grassroots instead.

In withdrawing the amendment today, I believe that we can allow people to continue to think about our original message, that our community should definitely not extort the poor to relieve the rich. I also want to remind the community that we should not forget those who have extreme difficulties. I call upon those who will receive tax rebate to make charitable contributions to help those who have difficulties. Last but not least, I can only wish those who will receive tax rebate a happy Easter.

We have just referred to two challenges: Disparity between the rich and the poor and the employment situation. The third challenge is an "economic locomotive". After the bitter experience of a burst bubble economy, we must reconsider the harms of pinching our economic growth only on the property market. Where should we look for a locomotive to put our economy back on the track?

The Financial Secretary proposed letting the Pacific Century Group carry out the Cyberport development by a private agreement. Some Members have reservations about this, but I want to discuss the matter from another angle.

In respect of promoting economic development, the Government has always emphasized the market forces. The Government is of the view that so long as profits may be reaped, capitalists will naturally make investments and it needs not worry. If profits can really be reaped from the Cyberport project, why is it that only the Pacific Century Group has contacted the Government? If profits can really be reaped from the Cyberport project, why does the Government have to grant the right to property development together while a high technology project?

I would like to say that market operation has restrictions. Local capitalists are used to making quick money in the property market, and most of them have no interest at all in investments that take longer to bring in returns. As the development of high technology projects involve certain risks, investors will certainly shrink away from it if risks are not effectively shared.

Foreign experience shows that the Government plays a decisive role in the development of innovative industries, especially in respect of research and development, initial financing and risk sharing. The Budget actually reflects that the Government is still wavering between its consistent laissez-faire policy and active intervention, but it has not suitably oriented itself yet.

Lastly, I would like to discuss sustainable development. As time is limited, I will only make one point. If we want continuous social development, we should close up the disparity between the rich and the poor and improve our seriously polluted environment, otherwise, the foundation of social stability will be shaken and prosperity destroyed in the end.

As this Budget cannot allow the prosperity of Hong Kong and justice to co-exist or lead the public to face the challenge of the times, I will vote against the Appropriation Bill 1999.

Thank you, Madam President.

MR AMBROSE CHEUNG (in Cantonese): Madam President, I welcome Mr LEE Cheuk-yan's remark that he will withdraw his amendment. I wanted to speak on his amendment but it is no longer necessary for me to do so now.

I believe Members will find that the public welcomes this Budget. I also think that this Budget is acceptable. In my view, this is an enterprising Budget with foresight albeit with some blemishes. Let me make some points.

Firstly, the Budget is excessively skilful but insufficiently practical. The Budget is excessively skilful for a few reasons. When the Financial Secretary considers formulating short-term measures bearing in mind two major objectives, tiding over difficulties together and stimulating our economy, he cannot find any panacea or method that will get instant results. While sticking to a pegged exchange rate, he cannot reduce interest rates to stimulate our economy, therefore, he has to exercise some skills, that is, a tax rebate and a Rates reduction, to solidify the base to restore vigour. I believe that the Government does not want to give people arsenic but tonic. However, the tonic only fills deep-boiled chicken with American Ginseng while a Rates reduction at best adds two pieces of Chinese angelica to it. In this case, the Government has to take the huge fiscal deficit and a feel good factor into account in its attempt to boost people's confidence. I hope that the Government will understand that this will only have short-lived effects.

The short-lived effects bring out the key point of this Budget, that is, how long and medium term investments in high technologies can stimulate our economy as a whole. The Budget is actually inadequate in this respect. The Budget basically contains itemized measures but lacks comprehensive strategies or co-ordination. Perhaps I can give some examples to illustrate my point. The first example is the proposed construction of a Disney theme park. It can illustrate why we think that the Government still needs to work harder in terms of co-ordination and comprehensive strategies. The proposed construction of a Disney theme park has aroused discussions and many people think that if we can bring a Disney theme park to Hong Kong, it can promote the tourism industry and economic growth. Many people also think that if we can execute a great co-operation agreement, we will achieve success. However, the matter may not be that simple.

The construction of a Disney theme park is a development project and we should consider the gains such a park will bring upon its completion five years later and whether it can achieve our aim. I will consider whether it can achieve our aim from another angle. We are not short of knowledge about the strengths of Disney theme parks from public information and analyses. But what is our aim in promoting local tourism? I will give a few examples. One of the strengths of Disney theme parks is imagination, another is that theme parks are developed as theme parks and resorts. What are the latest programmes? The Disney theme parks have recently introduced the Disney Cruise and two cruises have been launched while the Tokyo Disneyland is promoting the Disney Sea concept.

Why have I quoted these examples? Let us consider the ideas being promoted in Hong Kong as far as tourism is concerned. We are promoting ideas such as a cruise terminal, a Fisherman's Wharf, the Adventure Bay in the Ocean Park, and the construction of an international opera house in the West Kowloon Reclamation Area or along the coast of another reclamation area. In regard to the planned development of Southeast Kowloon, among other things, a tourist and water activity centre will be constructed at the Kai Tak Airport site. Many tourist facilities will actually be developed along the natural coastline. The Government should consider how the construction of a Disney theme park in Hong Kong can enhance the multiplier effect of the tourism industry which has been developing for over 50 years and stimulate our economy.

In addition to constructing a theme park in Hong Kong, the Walt Disney Company will construct resorts including hotels, shopping malls, convention centres, golf courses and day and night entertainment facilities. Besides, the Disney Cruise will enter our cruise terminal, water world and Fisherman's Wharf. Just like the Darling Harbour, Opera House cruise in Sydney, it will also bring guests to our new international opera house. This is an example illustrating how the construction of the theme park can match our comprehensive strategies. In my view, this is the most important.

Let us take a look at the Disney World in Florida. There are four theme parks: Magic Kingdom, a cartoon figures' world; Animal Kingdom with the recent introduction of an Asian theme park; Epcot, a place for power-driven games; and a theme park similar to the Universal Studios run by Disney and MGM. Looking back at Hong Kong, there is a lack of ample space. A car park in a foreign country may be as big as a 150 hectares park in Hong Kong. We have to choose the most suitable theme and mixture. The Tokyo Disney theme park will introduce the Disney Sea soon. What is our attractiveness? What should we do? I hope that the Government will spare no efforts in these areas.

The financial problems arising from the co-operation have also been a subject of discussion. We know from public information that the Disney theme parks are financially strong in three areas, and they are creative contents, theme parks and resorts, and broadcasting. If we take a closer look, we will find that their creative contents comprise selling Disney souvenirs and the income derived from patent rights which is twice their income derived from theme parks and resorts. The Walt Disney Company does not have share rights but only franchise rights in the project developed in co-operation with Tokyo. It has a 39% share in the project developed in co-operation with Paris under lease for 12 years. With different forms available, the Government can prudently consider the comprehensive strategies it will adopt.

Having said that, I would like to discuss the question of schedule. The Government hopes that an agreement will be reached by 30 June but the schedule is actually very tight. In our experience, if we want to conclude a great agreement and carry out a sound development project and co-operation, the schedule is a bit too tight. I hope that the Government will not let time restrict a development project that will definitely promise success. This is a very important project for Hong Kong indeed. We also find from a general survey that the project can maintain people's confidence. That is why it is a very important project.

I would like to illustrate with another example my worry that the Government has co-ordinated insufficiently. If developing a Cyberport is identical to developing high technology, it will be a unitary project. The Government introduced the idea of a science park more than a decade ago and it commissioned a consultancy report in 1995. Now, the Government tells us again that we may have to wait for 15 years more as the project will be developed in three phases. However, the Government has not told us clearly what coupling measures it has. In my opinion, the Cyberport cannot replace a science park for more high technology development projects will be carried out in the science park. The Government should tell us clearly how work on the science park and the Cyberport will be divided up and co-ordinated. This is another example. I hope that the Government will effect closer co-ordination.

I would like to discuss the listing of the Mass Transit Railway Corporation (MTRC) on the local stock exchange and privatization of the Water Supplies Department. I believe that the Government is using these two models to drive the listing and privatization of other public organizations in future. Some Honourable colleagues worry if the Government is doing so because there is a deficit. I am not worried because listing can basically be carried out in various forms. For example, the MTRC can issue new shares to enlarge the share basis of the MTRC; it can also issue some new shares while retaining some old shares that bring the Government profits and income. Honourable colleagues have also discussed if the employees' welfare will be affected. I am not worried at all. Before a company is listed, its accounts in the past three to five years may have to be inspected and the accounts contain actual figures which cannot be altered. Will a listed organization think that merely cutting staff welfare can improve its profit-making performance? Listed companies usually focus on profits. If a listed company has good performance, there will be a corresponding increase in staff welfare. Moreover, I am not worried about fares. Provided that there is a suitable monitoring or profit control mechanism, fares can be maintained at a reasonable level.

In addition, I would like to discuss Rates and the two Municipal Councils. This Rates reduction will reduce the income of the two Municipal Councils by around $1.8 billion. The Financial Secretary has said that consideration will be made at an appropriate time. I would like to stress that two years have passed in the three-year budgets of the Municipal Councils. This is the third and last year, and the $1.8 billion actually accounts for a large proportion of the expenditures of the Municipal Councils. Therefore, the Municipal Councils may have to apply to this Council for additional funding.

Lastly, I would like to discuss the situation of the Municipal Councils. The Government wants to abolish the Municipal Councils but I think that the Government must put in place a feasible structure. The Government has a tight schedule but it does not have a feasible structure or specific information that proves that the structure it has proposed is better than the old. The Government always says that the abolition of the Municipal Councils is driven by public opinion. Recently, we have conducted an independent survey by random sampling. The 2 080 samples have clearly expressed the public's views on the provision of unified municipal services in Hong Kong. 74% of the samples support merging the Municipal Councils while 70% are satisfied with the services currently provided by the Municipal Councils. I really hope that the Government will prudently consider the schedule and I find it absolutely unsuitable for the relevant bill to be introduced in April.

Thank you, Madam President.

DR RAYMOND HO (in Cantonese): Madam President, I will focus on one topic — What is Hong Kong going to do when our population will increase to 10 million?

Madam President, this year's Budget can be described as quite innovative, and some even think that it contains elements of the policy address and is characterized by being forward-looking and strategic. To achieve the aim of "strengthening the fundamentals and fiscal prudence", the Financial Secretary, Mr Donald TSANG, and his colleagues have made great efforts for Hong Kong to move "onward with new strengths". In respect of finance, tourism and technology, measures with far-reaching effects are proposed to enhance our competitiveness and the impetus for economic development. However, the Budget has not attended fully to an important variable that will affect our economic development, that is, a substantial growth in our population.

As estimated by the Government earlier, our population will increase to 8.1 million by 2011. However, as a result of an increase in returning emigrants and new arrivals from the Mainland, and the recent ruling of the Court of Final Appeal concerning the right of abode in Hong Kong, the pace of population growth will definitely be quicker than that originally forecast by the Government. It is not at all surprising if our population exceeds 10 million. On the Mid-Autumn Festival two years ago, I did relay this possibility to the Chief Executive in his office. I would like to take this opportunity to ask a question: What is Hong Kong going to do when our population will increase to 10 million?

In delivering his policy address last year, the Chief Executive said the Special Administrative Region Government was conducting a study on Sustainable Development for the 21st Century. The substance of the sustainable development concept is that we should satisfy in a balanced way the social, economic and environmental needs of this generation and later generations, and pool together the wisdom and efforts of the community and the Government to attain economic prosperity, social progress and a beautiful environment. The concept will bring about economic growth and a framework for development at a minimum depletion of available resources.

In fact, there are similar discussions in Chinese culture. The famous doctrine of the "unity between Man and Nature" is one example. In the book "Discourse on Nature", Xunzi states that "Heaven has its seasons; Earth its resources; and Man his government. This, of course, is why it is said that they "can form a triad"". He also touches upon the interactive relationship between man and the universe. Man should not oppose or conquer nature but conform to, assist and facilitate nature. In other words, man should "assist the transforming and nurturing processes of Heaven and Earth". The above discussions emphasize the importance of protecting natural resources. But with rapid population growth and limited natural resources, we cannot develop without limit although we want to comply with the requirements and principles of sustainable development.

As land is limited in Hong Kong, the population density in some areas have become worrying. To meet the needs of our growing population, we have to open up new land for housing construction and related infrastructural facilities, and this affects our finite natural resources even more. Therefore, we must make careful planning for future development and we should estimate the maximum population Hong Kong can put up with so that corresponding population and immigration policies can be made.

Environmental protection is a fairly important link in the realization of sustainable development. Our air quality, the water quality within our waters and the urban environment is worrying but this Budget does not include capital investments in environmental protection other than recurrent expenditure. It is really essential for the Government to attach more importance to environmental protection and improve the overall environment so that it can really act in the spirit of sustainable development.

To alleviate the deteriorating air pollution problem, the Government should expeditiously study the introduction of other environmentally friendly vehicles to substitute for diesel vehicles that cause serious air pollution. At the same time, the authority concerned should also review the existing public bus policies. Undeniably, the competition between bus companies can help improve the quality of services but there are now too many buses on the road, far more than required by the public. They cause traffic congestion and further deteriorate our air quality.

To reduce resources wastage, the Government should also consider giving tax concessions to promote the development of recycling industries and facilitate their existence.

In this year's Budget, the Financial Secretary only deals lightly with the problem of an estimated population growth. In fact, we must study the future population increase and make corresponding preparations quickly. In addition to meeting housing demands, we have to estimate the needs for infrastructure. As housing construction and infrastructural construction take time, we must make preparations in advance, otherwise, shortage may occur when a large number of new arrivals settle in Hong Kong. I hope that the steering group led by the Chief Secretary for Administration will expeditiously evaluate the effects of an influx of mainlanders who have the right of abode in Hong Kong and take corresponding measures to meet the needs.

As the representative of the engineering functional constituency, I agree that the Government should continue to allocate resources to carry out important infrastructural construction. This can help promote economic activities and pace up economic revival on the one hand and create more job opportunities for local professionals including engineers and local workers on the other. However, the Government must ensure that the greater part of expenditure on infrastructure is used in Hong Kong as only this will have a leverage effect on local economic production, otherwise, the projects will only cause a greater fiscal deficit but fail to achieve the aim of nurturing local talent. Similarly important is that the progress and schedule of work should be suitably averaged out and dispersed to avoid manpower and resources shortage and to ensure the steady growth and development of the engineering and construction sectors.

The Government should pace up the following projects. Firstly, to cope with the proposed construction of the Cyberport at Telegraph Bay, Pok Fu Lam, top priority should be given to the construction of Route 7 connecting Kennedy Town and Aberdeen. Secondly, if the Disney theme park under negotiation is really constructed on Lantau Island, construction of the Green Island link road to Lantau should be carried out as soon as possible to improve coupling traffic facilities in the area. Thirdly, priority should be given to the construction of the North Island line of the Mass Transit Railway (MTR) including the extension to Kennedy Town. The project will play an important role in diverting the traffic on Hong Kong Island.

Furthermore, infrastructural construction is not necessarily restricted to projects, construction and transportation. It is also important to consider how the information infrastructure in Hong Kong can be improved, for instance, by developing broad band networks and high-speed international networks. The Government should take the lead just like the United States Government which has developed Internet 2 with the industrial and academic sectors. This development increases network speeds and substantially increases competitiveness in this respect in the future. To prevent increased government expenditure on infrastructure from affecting the financial position of the Government, more private companies and organizations should be encouraged to take part in the relevant infrastructure projects through building, operation and transfer (BOT).

The construction of the Cyberport will help promote the development of high technologies and high value-added industries in Hong Kong and nurture local high technology professionals. This project can also set a precedent for the joint investment by the Government and private developers in industrial development. The Government can actually study and consider developing with interested private organizations different business and service centres such as centres for Chinese patent medicines and fashion design and trendy centres in other locations through similar modes of co-operation. To carry on information technology development, the Government should study the feasibility of adopting "intelligence city designs" when constructing new towns, infrastructure and buildings to ensure that modern information systems can be used in new buildings and construction works.

The Budget is short of proposals for promoting local manufacturing industries. The Government should introduce a clear and consistent industrial policy to attract more local and foreign investors to invest in the manufacturing industries.

The Government really needs to give small and medium enterprises (SMEs), the mainstay of our economy, more assistance. It is not adequate to rely merely on the Special Finance Scheme established earlier for SMEs. The stringent application procedures prescribed by the Scheme have denied many factory owners with difficulties the assistance they need. In consideration of the importance of SMEs to Hong Kong, the Government should give them the greatest assistance possible.

To make Hong Kong a centre of innovation and technology, we need a knowledge-based economy and manpower training is therefore fairly important. Besides making efforts to train up people in scientific research and high technology, it is also very important to train up technicians and skilled workers for these are important or even basic conditions when foreign enterprises consider whether or not they should invest in Hong Kong.

We should make use of the present strengths of Hong Kong and devote efforts to developing Hong Kong into a regional human resources centre. The Government can make effective arrangements to encourage private companies to export certain professional services to the Mainland and other countries. Hong Kong has indeed accumulated much experience and technology in large scale construction in terms of project management, civil engineering, transport infrastructure, telecommunications infrastructure and skyscraper construction. It is worthwhile for us to encourage the export of such professional services.

While effectively controlling public expenses, the Financial Secretary proposes the privatization of some share rights of the MTR Corporation as this can really relieve the Government's burden. On the one hand, it permits market financing and opening up more capital sources, on the other hand, it increases its attractiveness to investors. I also made these points when I met the Financial Secretary a few months ago.

While privatization is encouraged, the Government should establish mechanisms that can allow it to continue to take the initiative to develop new routes. Railway development is an important infrastructure and an important link in the Government's fiscal measures. The authority concerned can stimulate our economy by launching railway projects when necessary and this arrangement can let the Government continue to take the initiative. Besides, the MTR as a mass carrier will bring the community many hidden benefits, for example, it is highly efficient and more environmentally friendly. But these factors may not be considered by a private railway company when it makes investments. Therefore, the Government must deal with the partial privatization of the MTR Corporation carefully.

When the Government makes plans for the full or partial corporatization of government departments, it must proceed with prudence and make reference to foreign experience. In foreign countries, some attempts to corporatize government departments have not been successful. The Government must make its plans more transparent and consult more with the employees concerned.

As for the proposed civil service reform and the Enhanced Productivity Programme to be implemented, I consider the Government is moving in the right direction. However, the Government must attend to the stability and morale of the Civil Service when it considers the details and pace of implementation. Sufficient consultation is indispensable.

With these remarks, Madam President, I support the Appropriation Bill 1999. Thank you.

MR HO SAI-CHU (in Cantonese): Madam President, a downturn in the Hong Kong economy and a weak consumer market have resulted accordingly in a reduced government revenue. Nevertheless, the demand for social services at the same time is growing bigger due to the worsening economic situation for the public as a whole, which has made it impossible for the Government to cut its spending. So it is by no means an easy task to draw up a public finance programme in such a situation.

I am glad to see that the Financial Secretary has employed some flexible fiscal management techniques to come up with a Budget which can continue to increase spending in various areas of social service without having to significantly increase taxes. Generally speaking, the Budget for the next financial year is a balanced and pragmatic public finance programme which offers breathing space for the community to prepare for a turnaround in the economy.

As the spokesman on social welfare for the Liberal Party, I would like to first talk about the social welfare aspects of the Budget. The spending on welfare for the next financial year will rise by up to 13.7%, the biggest increase as far as expenditure on various social services is concerned. Of course, even such an increase is unlikely to satisfy everybody. As a matter of fact, this increase is insufficient to bring about a significant improvement in various social services which still have to be prioritized in the allocation of resources. But I would like to point out that such an allocation of resources is a trend in the international community. Many western countries have experienced changes in governments in recent years, in which parties that used to be left wing but have since revised their traditional policies have become ruling parties. These parties used to champion for a welfare state and pay little attention to the creation of wealth, hence their rejection by voters. After suffering the humiliation of being in opposition for a long time, they have significantly revised their policies on social welfare. Although they continue to talk about the importance of social welfare, the meaning of which is no longer confined to the universal social welfare in a broad sense, which is characterized by "everyone is entitled to an equal share and no one will be left out", they have focused on the development of certain social welfare services in order to achieve a more effective allocation of public resources.

When the Government publicized the results of the review of the Comprehensive Social Security Assistance (CSSA) Scheme recently, its proposals for slashing allowances for certain items came under strong criticism from some people. Nevertheless, the Liberal Party is of the view that resources for social welfare must be put to the best possible use. It is absolutely right to reduce allowances for certain items which have a lower demand and make available more resources for items which have a higher demand. In fact, we can see from the Budget that the overall spending on CSSA will continue to grow in the next financial year. I am aware that service for the elderly is one of the focal points in terms of spending on various social welfare services. It is right to put more resources into improving service for the elderly in view of a rapidly ageing population. Today, I would like to focus my comment on the service for demented elderly people.

Demented elderly people are incapable of taking care of themselves. They may even have a confused memory and find it difficult to take their bearings and recognize their family members. Most demented elderly people require care and attention on a long term basis, putting their family members under tremendous physiological pressure.

According to a survey conducted by the Chinese University in 1995, 4% or 25 000 persons among the elderly aged 65 or above suffered from a varying degree, from medium to acute, of dementia. These people all required care and attention. According to the information provided by the Social Welfare Department, there are 200 places for demented elderly people in subvented residential care homes at present. There will be an additional 181 such places in the next financial year, making a total of 381 places available for demented elderly people. Despite an improvement in residential care home service in this respect, it is still far from being adequate to meet the actual demand. The Government should study how to further improve the residential care service for demented elderly people.

As a matter of fact, before adequate residential care service for demented elderly can be provided, the Government could increase the number of places for demented elderly people at day care centres in response to the demand so that they can be taken care of during day time. At present, of the 28 day care centres throughout the territory, only a small number have accepted five or six demented elderly people. Although the Director of Social Welfare has revealed that a total of 20 additional places for demented elderly people will be provided at four day care centres in the next financial year, the total number is still far from being adequate to meet the actual demand. The Government should make immediate improvement in this respect. One of the methods is to make more space available at each day care centre to cater for demented elderly people. In addition, day care centres should also be set up in regions where there is a high concentration of elderly people, in order to alleviate the shortage of places in residential care homes for demented elderly people.

Now I would like to turn to infrastructure projects. The Government has indicated that it will undertake a number of major infrastructure programmes in the next few years, which include the West Rail project announced earlier, the Cyberport which was unveiled in this Budget and the Disney theme park which is still undergoing negotiations. Some people might think that while the construction of infrastructure projects can create jobs, as the saying goes: "distant water will not put out a fire close at hand". Moreover, only jobs in the construction industry will be created, which will provide no solution to the current unemployment problem in Hong Kong. I take exception to such a one-sided and short-sighted view. Indeed, the latest employment figures announced recently has indicated that both the construction and catering industries have borne the brunt of the unemployment problem. Therefore, investing in infrastructure will definitely help to alleviate the current unemployment problem.

What is more, bidding prices for projects have fallen to a record low in recent years. For example, after going through the tendering procedure, the bidding prices for the West Rail project have been found to be lower than expected. Therefore, the Government should seize the current opportunity to make use of lower bidding prices by undertaking more infrastructure programmes and other projects. I would also like to call on my Honourable colleagues to help the Government to undertake more projects in order to achieve full employment among the construction workers.

Moreover, the effects of infrastructure programmes are not short-lived. They can produce long-term economic benefits even after completion. In the Disney theme park, for example, sectors expected to be benefited include the catering, retail, transport and tourism. How can the beneficiaries be confined to construction workers in the long run? In addition, major infrastructure projects will also improve Hong Kong's image as a modern and international metropolis. Such intangible benefits will in turn promote international investment and ultimately benefit our economy.

I fully support the Government's plan to speed up its investment in major infrastructure projects. But at the same time, I also hope that local companies will be given more opportunities to take part in the construction of these projects. I am not championing the cause of parochial protectionism. What I wish to emphasize is the need for the Government to carefully assess bids for certain projects from local companies which possess the level of technical competence required for the project as this will be good for upgrading the local engineering level and improving the overall allocation of resources.

With these remarks, Madam President, I support the Bill.

MR CHEUNG MAN-KWONG (in Cantonese): Madam President, in regard to the section on education in this year's Budget, I will focus my discussions on basic education and higher education.

Basic education has not freed itself from poverty so far. Out of the education funding this year, 23% is used on primary education, and this is discriminatory. I recall that when I joined the former Legislative Council eight years ago, primary education funding accounted for more than 30% of the education provision. However, primary education funding becomes less and less year after year and it has fallen to the lowest level of around 20%. There are over 400 000 primary school students in Hong Kong and it is annoying that primary education funding only accounts for around 20% of the education share. Madam President, there are children in every family and every child has to go through the primary school stage. Primary education is the foundation of learning and a failure of primary education will make many students detest, fear and decline learning. Therefore, it is extremely important to support primary education, the first lesson in education. But the officials who make education policies are bullying the small ones and crippling the growth of primary education year after year. I will extend a warning that this situation must be reversed, otherwise, I will organize all primary school teachers, students and parents in Hong Kong to carry on a sustained campaign against the discrimination of the Education and Manpower Bureau against primary school students.

The situation of secondary schools is by no means better. As the Government has constructed an insufficient number of schools, secondary schools, even those admitting Band 5 students, have 40 students in a class. At present, students start showing learning differences when they are in Primary Three, and their differences will become even more conspicuous when they enter secondary schools, requiring teachers' individualized attention. Otherwise, students will not only have declining academic levels but also encounter developmental problems. This year, many soul-stirring juvenile gang cases and some cases in which principals and teachers are beaten up have occurred. This sounds a great alarm and the education authority has to look squarely at the rebellious acts of students initiated by learning difficulties. They use violence to confirm their existence and protest against the education system. Violence is definitely wrong but if we do not understand that the loss of effectiveness of education underlies the use of violence, we will make more serious mistakes. Therefore, I have to say that secondary schools have to head towards the target of substantially reducing class size to around 20 students because we have to get more chances to contact students before we can teach them well. The Government must construct more secondary and primary schools, employ more teachers and demonstrators and centre on basic education in future, otherwise, education in Hong Kong will be on the decline and sinking fast.

Madam President, university education funding accounts for 32% of the total education share and it must be properly utilized. Mr LIU Shuxian, a famous scholar, has criticized that higher education in Hong Kong no longer puts teaching first and universities emphasize research more. Universities are competing less on the basis of the effects of teaching and only concentrate efforts on the struggle for research funding. Insofar as research is concerned, universities emphasize international recognition and target at publishing papers in international publications for they seek to ascertain their international status this way. A ridiculous situation, however, is that many such papers are written in Chinese and despite the fact that they are published in first-rate publications in China, they are not recognized internationally. Furthermore, universities offer high salaries to visiting scholars from abroad and deem the academic works of other people as their academic achievements. Madam President, higher education emphasizes research and recognition by the international community to the neglect of the public's expectation of universities which is most important. People expect universities to train up local talent through teaching. Universities put the cart before the horse, lose their bearings and unsuitably utilize their most precious resources.

Madam President, while universities are facing the difficulties of having less funding, news are spread that teaching staff are dismissed and old professors compelled to resign. Universities do not offer "iron rice bowls" though and they may dismiss their staff. However, are the procedures and grounds of dismissal fair and reasonable? Will genuine talent be sacrificed as a result of organizational conflicts? Will scholars who teach and research silently be bullied? As unrest may be produced in universities shortly before such dismissals, I ask the Government to set up eight statutory bodies in respective universities to make decisions on dismissals and appeals. Elected staff representatives should make up the majority of these bodies to ensure that universities will not abuse power and all staff will be given reasonable treatment. As universities are the mainstay of social justice and venues where intellectuals gather, they must uphold justice and show knowledge respect.

Madam President, a civil service reform will be triggered at any moment. This reform shoulders heavy responsibilities for it is made after an economic crisis and is going to meet the challenge of a new century. In this reform, we have to change the policies handed down from the past which are out of keeping with the times. The multifarious allowances established at different times are most unreasonable. I have roughly counted that there are almost 30 allowance items for central and departmental staff, including allowances for education, housing, quarters, passage, acting appointment, overtime work, call duty, extraneous duties and hardship, and the expenses incurred amount to $6 billion. In individual departments, there are also numerous, more than 35, non-standard allowances that are odd, inexplicable and unimaginably queer. For example, disturbance grant, air-conditioning allowances and family member travel allowances for directorate grade officers. In a word, civil servants are given all kinds of allowances one can think of. Madam President, it is trendy to talk about losers, and taxpayers are the biggest losers in terms of allowances. I would like to ask Mr LAM Woon-kwong when he will stop giving out allowances. While recognizing the existing contracts, we must simplify, rationalize and modernize allowances instead of hauling the burden while we head towards the 21st century.

As regards the civil service reform, another point at issue is the switch from the pension system to the contract system. Madam President, the pension scheme belongs to the past and it does not mean that civil servants cannot be employed on long-term contracts of a more flexible and stable nature. Government departments are not commercial organizations and the Government has to provide non-stop services all the time. To maintain the Government's stability and quality, we must retain outstanding employees. In my opinion, the employment of specialist and disciplined grade staff can be made on the basis of long-term contracts. A long-term contract system that replaces pension with progressive provident fund and lifelong "iron rice bowls" with reasonable promotion and dismissal mechanism, together with an award and punishment system under which adjustment can be made flexibly in response to changes in the economic situation and individual performance, can inject more market elements and new vitality into the government structure. The Civil Service needs a reform in terms of system and culture rather than an earth-shaking revolution.

The Government should remain small and flexible and provide essential government services. Therefore, I agree that while the Government provides government services at reasonable charges and assured quality, it should privatize suitable departments step by step. The listing of the Mass Transit Railway Corporation should not be regarded merely as timely rain when we have a fiscal deficit but also a healthy direction for development, otherwise, the Government will always be a jumbo elephant without due flexibility. However, privatization is not a single solution for all problems and many government services cannot be fully privatized, otherwise, they will go completely out of control. Perhaps, it is still necessary for the Government to function through public bodies. Many important public bodies such as the Hong Kong Monetary Authority, the Securities and Futures Commission and the Airport Authority have become independent empires one after another and they come within nobody's jurisdiction. This is not in the public interest. The annual remuneration of the chairman or president of such a body ranges from $6 million to over $8 million, two or three times more than that of the Financial Secretary. When there is an economic take-off, the chairman or president will be paid more as the market situation is good but when there is an economic downturn, he does not spontaneously ask to be paid less. In this lose-hit, win-take situation, he always has money in pocket. I ask the Financial Secretary to "operate a surgery" not only on civil servants but also the chairmen and presidents of these public bodies.

Madam President, insofar as our economy is concerned, the Government must draw a lesson from the bitter experience of the financial turmoil and bring about a change in our economic structure which all along has given priority to property, speculation and quick money. As it must attach importance to industries, a $2.5 billion Special Finance Scheme has emerged as required. The Scheme has been implemented for more than half a year but the Government has only paid out $660 million in guarantee for loans, in other words, $1.9 billion has not been lent, and the lending rate is less than 30%. Out of the 290 000 small and medium enterprises (SMEs) in Hong Kong, many have potentials for development and can alleviate unemployment. But they have failed to borrow money for they do not have property on which mortgage can be placed. They cannot turn to anybody for help and have to await their doom. If the Government does not change the mode of lending, the $1.9 billion fund will be reduced to illusions and fancies. In addition to having banks as the major providers of loans, I hope that the Government will adopt new ideas and consider allowing independent institutions to provide SMEs with "life-saving money". This will not only save small factory owners but also remedy the unemployment problem.

Lastly, two parting shots in the arm came in two projects of hope in the Budget, the Disney theme park and the Cyberport. We earnestly welcome international, high technology investments but we must solemnly state that all investments must comply with the commercial principle of fair competition. The participation and investments by the Government must also be cost effective. In the tender process of the Cyberport, open tenders are not invited and this violates the fair competition principle. The Government must remedy the situation so that all consortia interested in making investments and undertaking the project can have a chance to participate. However, we oppose turning the Cyberport into a pure property project for which tenders will be invited anew. We always think that diversified industries must be developed in Hong Kong. We are glad that the Cyberport, a high technology undertaking, will be established but we do not want it to become another piece of fat meat of contention by developers. As for a Disney theme park, I think that children in Hong Kong will benefit most for they do not need to fly to Disney theme parks overseas to meet Mickey Mouse and Donald Duck. For this reason alone, I welcome the construction of a Disney theme park in Hong Kong. For sure, we have to negotiate the best investment proposal with the Walt Disney Company. It is natural and normal to marry but while lovers are wildly in love, they should take care not to find the wrong match for what is done cannot be undone.

With these remarks, Madam President, I support the Cyberport and I love to have a Disney theme park.

MR GARY CHENG (in Cantonese): Madam President, the Financial Secretary, the Budget is entitled "Onward with New Strengths". It has indeed injected some positive elements into Hong Kong which is presently plagued by recession, deflation, and serious unemployment. To a certain extent, this shows that a positive attitude has been adopted for Hong Kong's medium range planning. Apparently, the Government has taken the right step in coming to rescue the economy and to find a way out, or it can be said that it is trying to seek reform in the midst of an economic downturn, rather than sitting there and waiting passively. We think that is a right mentality to face the predicament.

But how are we going to make these wishes come true? If we look at the Budget as a whole, we can see that measures like giving incentives to investment, exercising control on social welfare spending, privatization of government services, and pushing for a down-sized government and so on are proposed. To someone well-versed in socio-economics, these may be seen as routine tricks. These tricks have been used by western countries to solve economic crises. We do not mind if these tricks are old or new. As the saying goes, it does not matter if a cat is black or white, it is considered to be a good cat if it can catch mice.

However, we think that all these are simply not enough. We need a new thinking and determination. We are always hoping that our economy will recover and forge ahead. But we should not just wait for superficial and deceptive phenomena such as those happened in 1994 and 1995 to appear again. We need a fresh start. We should not sit here and hope for the property market to soar, bubbles start to form and heated speculations to appear again before we can say that the good old times have come back. If this is so, then we have not yet learned a good lesson from the financial turmoil.

In the Budget, we can vaguely discern that the Government is trying to conclude from the lessons learned and make adjustments on the way ahead. These include revamping the civil service structure, merging the exchanges, and developing large scale projects and so on. But all these are only vague outlines of development not presented as a major policy direction. We cannot see how in the Budget an environment is created to facilitate the operation of small and medium enterprises and the establishment of new ones. Despite the creation of job opportunities, the Budget is silent on plans to make the people abandon their dreams to reap huge profits by speculating on the shares and uncompleted flats. The people are not encouraged to go back to their jobs and work hard to improve their quality of living with their knowledge and expertise. If this situation is not improved, then we can never say we have any new thinking, for we are still waiting for the superficial and deceptive good old days to come back. Therefore, as I have said, the recovery and take-off of our economy does not mean that we are to return to the times of 1994 and 1995. We need to look forward and face the challenges of the 21st century squarely.

My Honourable colleagues have expressed their views on many of the details of the Budget already. I wish to talk about the issue of tax rebate. Although Mr LEE Cheuk-yan has withdrawn his resolution, our efforts have not been made in vain. The piece of paper I am now holding has signatures from 29 of my Honourable colleagues who put down their names yesterday. Today it has increased to 31 signatures. Someone said that we are doing this to force the Government not to respect the status of the Legislative Council and the Rules of Procedure. But we are not forcing the Government to do anything like that, we are only forcing Mr LEE Cheuk-yan to do something. We are not showing any disrespect for the status of the Legislative Council. Fortunately, Mr LEE has respected the views of Members and withdrawn his resolution. It is fortunate that Mr LEE does not want to be the odd-man-out and he is well aware of the fact that his insistence on the resolution will not advance the cause for which he feels to be rightful and for which he will persist though it is hard to succeed and will be easily misunderstood. A group of Members have jointly put up a petition to support the tax rebate as scheduled and oppose to any attempt to make any changes. As a member of this group, I wish to thank my colleagues for their support. For those colleagues who have not signed in, they are also opposed to the resolution. I am also grateful for their moral support. I am happy to see that the public will have some more money to spend during the Easter holidays, for that will give some stimuli to the slack market.

I so submit. Thank you, Madam President.

MISS CYD HO (in Cantonese): Thank you, Madam President. Today, I wish to assess this year's Budget from the women's point of view.

During the boom of the manufacturing industry, women were a pillar in Hong Kong's manufacturing industry. They provided plenty of cheap labour and contributed considerably to the take-off of the Hong Kong economy, "holding up half the sky" so to speak. However, many government policies are made without taking into account women's situation and how they are confined by their traditional role. In this year's Budget, women from the grassroots are especially totally ignored. Apart from continuing to play the role of providers of unpaid services, grassroots women have no status at all. Due to the Government's neglect, grassroots women have always held an unfavourable position of competition. Being deprived of the opportunity to advance themselves, they are caught in a vicious circle of poverty. They remain in the poorest stratum of the grassroots all their lives, having no alternative but to rely on Comprehensive Social Security Assistance (CSSA) in their senile years.

Traditionally, the Chinese place men above women who have a smaller chance of receiving education than men. Many women who are now middle-aged had to quit school very early and work to support their family. As a result, they have little competitiveness. In terms of the share of women's income in the GDP, Hong Kong ranks 132 in the world, even lower than Malaysia. Such a ranking is disgraceful when we think of the ambitious plans in our policy address to make Hong Kong a design centre and a centre for Chinese medicine and so on.

According to the survey of the Audit Commission for the third quarter of 1997, for those in managerial posts, a man earned $30,000 on average while a woman earned $25,000 on average. The difference is even greater when it comes to grassroots jobs that involve manual labour. While a man earned $8,000, a woman only earned $4,000. I hope that the Government will provide additional funding the Equal Opportunities Commission, so that it can complete the study on equal pay for work of equal value as soon as possible in order to eliminate unfairness.

While the manufacturing industry prospered, women could still find jobs in industries such as textiles and clothing and the electronics industry. With the relocation of the manufacturing industry to the north or with its decline, they have lost their job opportunities.

The Government has allocated $500 million for a retraining scheme. The fact that 70% of the participants in this scheme are women shows that women encounter more difficulties in changing jobs than men. However, this retraining scheme fails to give women sufficient competitiveness. Many Honourable colleagues have expressed doubt about whether participants can learn Chinese and English and basic computer skills in nine months of retraining. Grassroots women in particular have to receive basic education for adults. They might even have to start from Primary Two or Primary Three before they can undergo computer training. The "fast-food" courses of the Employees Retraining Board are not of much help to them.

However, the resources for adult education are scant. Its annual expenditure is just $84 million. Compared to the expenditure of the whole Education Department which stands at $28.5 billion, this is merely a drop in the bucket. While there are only 12 000 places for adult education provided by the Government directly or by subvented organizations, there are 1.6 million adults in Hong Kong with an education level below Form Three. With such limited resources and at such a pace, when can the overall quality of the population be enhanced?

Furthermore, the Government has not taken the education and employment problems of women seriously. Even in its compilation of unemployment statistics, many women who have been unemployed for over six months and who have become full-time housewives because they have given up hope of finding a job are not counted.

At the same time, since the Government refuses to provide adequate resources to services such as education, counselling for school children and residential care for the elderly, many women have to give up their opportunities of learning and gaining work experience. Instead, they have to stay home to take care of the young and old to fill a gap caused by an inadequate provision of resources by the Government.

Let us talk about education first. The target pupil/teacher ratio in Hong Kong is 32:1. As many colleagues suggested in the last debate on the "Target Oriented Curriculum", with this ratio, not every pupil can be properly taught according to his ability. A pupil may have difficulty understanding some parts of a lesson. If he cannot keep up with his fellow students or get the teacher's help in time, he might drop behind from then on. We hope that the pupil/teacher ratio could be reduced to 24:1. However, before this ratio could be achieved, parents still have the responsibility of helping children with their school work. Usually, it is the mother who has to act as tutor to compensate for the inadequate number of teachers. Since there are 480 000 primary pupils, if the pupil/teacher ratio has to be reduced from 32:1 to 24:1, 5 000 additional teachers will have to be recruited. This will cost $95 million in salary alone for the first year, without counting the cost of facilities such as classrooms. If this costs $95 million, how much unpaid work has been done by the mothers?

Parents have the responsibility of teaching their children. They would like to understand their children, communicate with them and improve their relationship with them. However, many parents do not know how to do this. Grassroots women are especially helpless. However, the Education Department merely allocates $2.5 million to the parenting programme. This is quite pathetic, considering that there are 710 000 primary and secondary students in Hong Kong. It means that each parent has $3.5 to learn "parenting" each year. With such resources, how can one teach grassroots women how to educate their children? How can one prevent youth problems through the fundamental unit, the family? The result is that grassroots women feel guilty and blame themselves for being unable to teach their children. Later, the parents of the problem youth will be beset with family problems and might even become protagonists in family tragedies. The problem youth will also become a heavy burden on society.

In terms of traditional family values, it is the women's job to care for the elderly. This view still persists in Hong Kong. Due to the inadequate number of places of residential care for the elderly, one has to wait for a place. During the waiting period, if there is a daughter-in-law in the family, it will be her responsibility. Under the present concept of residential care for the elderly, only old people whose health are "extremely poor" will be admitted to a residential care home. If the old people are in poor health but cannot be proved to be in "extremely poor" health, who is to take care of them? Again, the responsibility will fall on the daughter-in-law. I hope that the Government's five-year plan for providing services to the elderly will be implemented within this year soon so as to release women for the workforce.

Unfortunately, the work and contribution of full-time housewives are not recognized by the community. The mandatory provident fund scheme is meant only for salaried employees, while housewives who have no salary, holiday or pension will not get a cent. Some officials say that women can share the economic gains when the economy of Hong Kong is doing well. While men work for a living, women could stay home. This is of course not true. However, such comments reflect that many people do not consider housekeeping a kind of work. Full-time housewives deserve our respect.

The Government's Budget this year proposes two projects of hope, several measures to improve the business environment and the creation of 122 000 jobs through the implementation of infrastructure projects. I have asked the Financial Secretary in a meeting what job opportunities grassroots women have and whether they are being taken care of. I found that the infrastructure projects would be of little benefit to women. I have gone through the whole Budget. I hope I have overlooked something. If so, I would be grateful if the Financial Secretary could tell me. Only in the part on the development of the manufacturing industry is there some hope for grassroots women to find employment again. The Trade and Industry Bureau will conduct a $6.5 million study to assess the difficulties faced by the manufacturing industry at present and its development in the next few years. However, $6.5 million is only a drop in a bucket. Is the Government giving up the manufacturing industry and turning its back on grassroots women?

However, as far as the cuts in expenditure is concerned, housekeeping women from the grassroots are the first to be hit. What I mean is of course the $700 million cut in the CSSA Scheme. For the sake of cutting expenditure by $700 million, the CSSA payments for households of three persons or above are cut by 10% or more. This will put further strain on housewives who are receiving CSSA.

Madam President, between the time when I decided to assess the Budget from the women's point of view and the time when I prepared this speech, I looked for data and I was puzzled by them, because the sums involved are all very small. The greatest amount is the $500 million grant to the Employees Retraining Board. It seems sort of a waste of time to pick out these trivial items out of the whole Budget of this year. However, this is precisely why it is so sad. I am speaking for half of the population. Yet the amounts are so small in the areas where they need help most. I hope that the Government will take this issue seriously.

The Government has a committee on policies related to women under the Chief Secretary for Administration. Last time, we asked the Secretary for Home Affairs, Mr David LAN, to submit the minutes of meetings of the committee to the Legislative Council. We wanted to find out what policies about women the Committee had discussed. Members need not look at them. It did not discuss such policies at all. Why did it not discuss them? I wonder. I urge the Government to start taking the policies on women seriously now and set up a Woman Commission to deal with women's affairs which involve various departments, such as the questions of single-parent households, abused spouses and so on. In making various decisions, the Government should assess the impact of the policies on women so that women who have long been underprivileged will have an equal opportunity for development.

If women are to "hold up half the sky", they must be given half the ground for development. Besides, by enhancing the education level of women and helping them to educate their children, youth problems can be reduced effectively. The manpower and resources that the Government puts into education would yield twice the result. Ultimately, it will benefit the whole community.

Madam President, now I would like to speak on the revenue part of the Budget on behalf of the Frontier. The Government's fiscal policy should follow this fundamental principle: ""save" where savings should be made and "spend" where spending is due. The better off should pay more in order to give relief to the grassroots". While we ask the Government to increase spending in various areas and provide so many services, this could not be done without revenue. We understand this perfectly. The Government cannot keep spending without generating any income. However, to increase revenue, tax increase is not the only way. Sometimes, tax reduction can not only promote consumption, but will also increase job opportunities and stimulate the whole economy. This will bring in more revenue overall. However, this year's revenue policy wavers between increase and reduction. We fail to see any innovative ideas to stimulate consumption and strengthen the initiative for work or investment.

This year, there are 14 new measures on revenue. The most outstanding measure is the privatization of the Mass Transit Railway Corporation. Yesterday, Mr LAU Chin-shek already commented on this in detail. I will not repeat it here. However, from the speeches of several colleagues yesterday, it is clear that privatization is controversial and Members have reservations about it. Therefore, I urge the Secretary not to count the prospective $30 billion as part of the revenue right now.

The third item that involves big money is the resumption of land sales. In the Budget, the Secretary indicates that the moratorium on land sales last year resulted in a revenue loss of $32.2 billion. We in the Frontier have always opposed the moratorium. This is not only because of the cost to the revenue, but also because of the suspicion of propping up the market and favouring the big developers. We urge the Government to review its land policy and balance the supply and demand to prevent an overheating of the property market and the reappearance of the bubble economy. We hope that the wealth in society will not just flow into the property market and that there will be balanced and diversified development.

With regard to merchant shipping registration and related fees, the Secretary estimates that the reduction of fees will lead to the creation of 15 000 jobs. Following the same logic, we hope that the Airport Authority will consider reducing the parking charges of aircraft. So far, two airlines have cancelled their routes to Hong Kong. Has the Government estimated the number of jobs affected as a result?

Lastly, I would like to talk about the several revenue measures related to transport. The increases in the tunnel tolls, parking meter charges and fixed penalties for traffic-related offences altogether will bring in an additional revenue of only $510 million. However, 350 000 private car owners will be affected. It will cause even greater inconvenience to the drivers of commercial vehicles. In my view, these measures will inconvenience the public. The authority concerned has failed to review the speed limits on roads properly and there are also many unreasonable regulations on the stopping of commercial vehicles for passengers to get on and get off. If penalties are increased now without reviewing these regulations, it would be very unreasonable and unfair to the drivers of commercial vehicles.

On the whole, I do not think that there are any new measures in this year's revenue policy that can promote economic recovery.

Finally, I regret that Mr LEE Cheuk-yan had to withdraw his resolution on tax rebate. I want to talk about a principle of fairness: Is it fair to ask two people to finish one lap of the racecourse together, with one driving a racing car and the other riding a bicycle, both starting at the same time? Even if the resolution had to be withdrawn, the community can continue to debate whether our revenue policy can make "the better off pay more in order to give relief to the grassroots". In my view, the Budget has failed to do so. Therefore, I will vote against it. Thank you, Madam President.

MR ANDREW WONG (in Cantonese): Madam President, the Financial Secretary, Mr Donald TSANG, chose to deliver his Budget speech on Wednesday, 3 March. In Cantonese, the letter "three" and its repetitions imply continuous growth. He also chose green as the colour of the cover, which rhymes with the letter "six" in Cantonese and suggests endlessness. This is the Budget of 1999, and "99" means long-lasting. This is auspicious indeed. However, I do not think that he is superstitious. Neither am I superstitious. Nevertheless, one should have a good heart and goodwill. I believe that the Secretary has that. Madam President, in my view, Members should also demonstrate goodwill in order for Hong Kong to press "onward with new strengths".

Madam President, the Financial Secretary not only has a heart, he also has strength. I do not agree entirely with all the measures in the Budget. But the Budget cannot satisfy everyone after all. Besides, everybody has different views and not every view is correct. One has to look at the effects after the implementation of the measures. However, on the whole, his strength is that despite the economic recession and the sharp reduction in revenue, the opinion poll on the day of the delivery of the Budget showed that 46% of the people were satisfied with the Budget, 27% of them accepted it, while only 10% were dissatisfied. The main reason for dissatisfaction might be because it is a deficit budget. Mr Donald TSANG is not the miserly Donald Duck, but may very well be a magician. As for whether he is a great doctor who can make the patient well immediately and bring the dying back to life, one can only tell after the Budget is implemented.

Madam President, notwithstanding that the outturn this year shows a deficit, the Financial Secretary prepared a deficit budget for the coming year and expects to prepare deficit budgets for the following two years. This has aroused a discussion about the principle of a prudent fiscal policy under Article 107 of the Basic Law. The Secretary said that "returning to a fiscal balance over the medium term is prudent and rational. It would be inflexible and unreasonable to try to achieve a strict balance year after year". The Secretary's view was immediately echoed by the Chinese Minister of Finance, Mr XIANG Huaicheng. He said that "three successive budget deficits do not necessarily constitute a breach of the Basic Law. Instead, one must look at whether the budget is balanced on average within three to five years."

Madam President, since there is a deficit, one must deal with it. In my view, there are but three solutions: first, by drawing on the reserves; second, by selling one's assets and third, by borrowing. The Secretary did not go into the pros and cons of these three solutions. Instead, he said that there are two ways of dealing with the deficit: first, substantial tax increases and second, swingeing cuts in expenditure. However, he said that both solutions are undesirable, since they "could well prove fiscally counter-productive as well as economically disastrous". These comments, in addition to the earlier part of his speech where he announced that part of the shares of the Mass Transit Railway Corporation (MTRC) would be privatized and sold, show that he is obviously trying to deal with the deficit by "selling assets". In his Budget speech, he did not talk about drawing on the reserves to cover the deficit in the coming year. It may be that he is against this method in principle. Actually, I agree with this too. The reserves have been accumulated by our predecessors and should only be used to meet urgent needs. The $24.5 billion deficit in this year's outturn is covered entirely by the reserves. If the economy remains poor next year ( I certainly do not hope so) and if there is no increase in revenue and the MTRC shares could not be sold, we must use the reserves to cover the deficit. This is the correct way to use the fiscal reserves.

Madam President, I do not oppose the privatization of the MTRC. However, if privatization is made only for the sake of selling assets to cover the deficit, it should not be done. The Secretary even said that "When successfully implemented, this ground-breaking initiative will become the benchmark for privatization, where appropriate, of other government-owned assets in future." It makes one wonder whether the Government plans to make it a rule of selling its assets to meet expenditure or to resort to this if another crisis should occur.

Madam President, personally, I am more in favour of dealing with the deficit by borrowing, even though I am not in favour of borrowing to meet the general and recurrent expenditure. I recall that when Mr Philip HADDON-CAVE was Financial Secretary in the '70s, he obtained the Legislative Council's approval to borrow to meet the general expenditure. He used the loan obtained from the Asian Development Bank to finance the reclamation project in the Yuen Chau Kok area in Sha Tin. After the land was sold, the loan and interest were repaid. It made possible the development of the Yuen Chau Kok area (that is, the area where Sha Tin City One and the Prince of Wales Hospital are now). Therefore, of the three solutions, borrowing is the most desirable (especially when interest rates are low).

Madam President, to be fair, the Financial Secretary might be worried about some psychological factors that cannot be quantified. Perhaps he was worried that borrowing would make the international community, the Central Government and the Hong Kong people lose confidence in the future. However, one must remember that privatization should not be carried out for the sake of selling assets to make ends meet. But it should only be carried out for the sake of improving a particular service and strengthening the economy, from which one would obtain the cash to reduce the deficit. In the present economic situation, this is not a bad idea.

Madam President, Hong Kong's success has always relied on the administrative philosophy of small government. This means that the Government should only be engaged in the activities of a government, such as law and order, overseeing society and the economy (but not guiding society and the economy), without competing for credit with the community or for profit with businessmen. These are the core activities that a government should be engaged in. Of course, if the community and the private sector hesitate to proceed with large infrastructure projects due to a lack of capital and determination, the Government should take the lead or even undertake the work on its own. However, once these infrastructure projects are well under way, it should withdraw immediately. Therefore, not only do I not object to privatization, I wholeheartedly support privatization for the sake of privatization, since these are not things that should be done by the Government.

Madam President, according to the small government philosophy, the activities that a government must run or must still run can also be accomplished in ways that have been established and are familiar to us. For instance, works projects, cleaning and design work can be contracted out to private companies. School and social services can also be contracted out to educational and welfare organizations. If the Government has to carry out a certain infrastructure project, it can do so through a company wholly-owned by it instead of through a department directly under it. The MTR was already like this when it was established. The Kowloon Canton Railway (KCR) used to be under a government department. It has now turned into a corporation. Both the MTR and the KCR take this form. It has enabled the Government to substantially reduce the number of its employees and achieve the purpose of downsizing.

Madam President, since I consider the problem with the civil service system now faced by the Government as a matter of small government and downsizing, I do not agree at all with the direction of the civil service reform outlined in the Secretary's Budget and in the consultation paper by the Secretary for the Civil Service.

Madam President, in my view, one must first distinguish between the core and non-core activities of the Government. The non-core activities can be corporatized or even privatized. Second, one must distinguish between the core activities that must be run by civil servants and those that need not be run by civil servants. The latter, such as cleaning work, can be contracted out. This way, the huge Civil Service can be downsized, since the staff that will remain are the core staff responsible for the core activities of the Government.

Madam President, since these core staff responsible for the core activities of the Government will carry out work of governance, there is a need to ensure that the system remains apolitical and politically neutral. Therefore, one must ensure the stability and separateness of the civil service system, the maintenance of the system of permanent appointment and the stability of salary and benefits. For instance, a system of linking salary to performance is totally infeasible. The pay scale must be retained. There is a need for a generous pension. Alternately, it can be turned into a contributory retirement provident fund. This way, civil servants will remain in their posts contentedly and give honest advice to their superiors that is in the public interest without having to engage in intrigue, flatter their superiors or follow the political lines of those in power.

Madam President, I consider that the reform has taken a wrong direction. In my view, it is revolution instead of reform. It will fundamentally change the nature of the civil service system. However, some suggestions are still worth adopting. For instance, with regard to the reform of the salaries system, the past salary level surveys are in my view all wrong. It might be better to compare each different grade with the private sector. Besides, the allowance policy should be tightened and the disciplinary procedures reformed. But since there are still over two months left for the consultation, I will not go into the details here.

Lastly, Madam President, I want to talk about the question of tax rebate. Basically, I do not agree with the tax rebate measure, since I am doubtful about its effectiveness in stimulating consumption. After the people have received the refund, even if they spend it, the one who collects this money will not spend it again. Thus, one could say there is hardly any multiplying effect. Therefore, if the Government wants to rebate tax in the amount of $8.5 billion, I would rather that it spends $8.5 billion on development projects or improving some social services. This would contribute to development or the redistribution of wealth. Although the Secretary's measure is quite popular and I do not object to it, the additional expenditure of $8.5 billion should only be added to the 1999-2000 Budget. By adding $8.5 billion to the expected deficit of $36.5 billion, the deficit for the next year would amount to a staggering $45 billion. However, under the tax rebate arrangement, the amount of tax refunded will be put under this year's outturn, that is, the 1998-99 outturn, so that this year's deficit will be increased from $24.5 billion to $33 billion (this is the figure mentioned in paragraph 127. However, paragraph 140 mentions that the deficit will be $32.3 billion. I do not understand why there is such a discrepancy). Mr LEE Cheuk-yan has withdrawn the resolution proposed jointly by him, Mr LAU Chin-shek and Mr LEUNG Yiu-chung to put a ceiling on the tax rebate. I have no wish to discuss it in detail. I just want to say that while putting a ceiling on the tax rebate can reduce the deficit, I have no intention of supporting the resolution. Even if it were proposed, I would not support it. Although I would rather that expenditure be increased by $8.5 billion, a tax rebate in the amount of $8.5 billion can still have the effect of "returning wealth to the people and putting money in the pockets of the people".

Madam President, on the whole, the 1999-2000 Budget deserves our support. I have the impression that the Financial Secretary has taken great pains over it and given it much thought. As a result, it has won the acceptance and support of the public. If I, the President or any political party were in his shoes and had to prepare this Budget, could we do better on the whole? I have always felt that levelling criticism and objection is much easier than presenting one's argument and effecting administration.

With these remarks, Madam President, I support the Second Reading of the Bill.


MISS CHOY SO-YUK (in Cantonese): Mr Deputy, the Budget is always the most important policy programme and has the most direct bearing on the economy and people's livelihood. The current downturn in the economy is more serious than any of the previous ones. So I believe this Budget will receive more attention and have a greater impact than any of the previous ones. It is therefore necessary to have a close look at the effectiveness of the Government's revenue and expenditure policies.

The Government has proposed to increase expenditure and produce a deficit Budget in response to the special needs of the community in exceptional circumstances. This is understandable. But the question is whether the Government can put a brake at an appropriate time after "accelerating" in the form of increasing expenditure?

The latest statistics indicate that consumer spending shrank by another 9.3% in the fourth quarter of 1998; fixed capital investment dropped by another 18.7%; private sector construction spending decreased by another 13%. The deflation rate reached a record high in more than 20 years of 1.7%. As we have not seen a significant improvement in the economy and the Government has also said that there will not be any panacea that can stimulate the economy in the immediate future, how can it be so sure that our economy will grow by 0.5% in real terms this year?

The Government's intention to cut spending will meet with stronger resistance at a time when the prospects of the economy remain uncertain. In fact, 56.9% of the total public expenditure for the next fiscal year has been earmarked for welfare, education, health and housing. Even if the demand for these basic public services from the public remains stable, the prospects of hundreds of thousands of persons who were born to parents of Hong Kong permanent residence settling in Hong Kong mean that it is very likely that the Government will have to increase its expenditure on such services and a reduction is out of the question.

As the Government is unlikely to meet its target on cost-cutting, what about exploring new sources of income? I of course support the initiatives by the Government to promote Hong Kong and attract foreign investment. However, the Government should not be so anxious for quick success and instant benefit when making such efforts. Although a speedy implementation of the Cyberport which the Government is determined to develop, the Disney theme park which the Government is striving for it to be built in Hong Kong, and other major projects are certainly important, it is equally important to ensure that local professionals, managers and workers will be given preference in taking up jobs in such projects. More importantly, technology transfer should be given a higher priority so that Hong Kong people can learn more in terms of the development and management of major projects. I really do not want to see a repeat of the new airport, the Tsing Ma Bridge and other major infrastructure projects in the development of the Cyberport and Disney theme park, where local professionals could stand on the sideline only and failed to learn anything despite the payment of "tuition fees" in the form of huge construction costs by the people of Hong Kong.

As it is difficult for efforts in attracting foreign investment and hence an increase in tax revenue to quickly produce the desired effects, the Government has turned its attention to the introduction of some taxes that can improve its financial position in the medium term. The idea of a land departure tax is an obvious example.

Mr Deputy, I am opposed to such an idea as it will definitely cause nuisance to the public in that administration costs will rise for the Government and cross-boundary traffic will be delayed. Moreover, it will also increase the burden on businessmen and grassroots members of the public who choose to go to the Mainland to spend money in order to cope with the downturn in Hong Kong's economy. As far as the relationship between Hong Kong and the Mainland is concerned, an introduction of a land departure tax will result in an unfair cross-boundary arrangement between both places. More importantly, if Shenzhen and other cities in the Mainland are also prompted to introduce a departure tax, Hong Kong will suffer a big loss for a little gain. In view of the fact that 80% of Hong Kong's GDP is directly or indirectly associated with China, is such a form of tax revenue that is worth only a few hundred million dollars more important than the maintenance of a smooth flow of traffic between Hong Kong and the Mainland to the benefit of both places?

Mr Deputy, in the face of a downturn in the economy, the Government should strengthen its foundation on its own instead of building a fortress to advocate protectionism in a disguised form.

In fact, if the Government is serious about tightening the expenditure on implementing various policies, it will bring in more economic benefits than a land departure tax and the adverse effects will be much smaller. The commission of consultancy studies is a cause of concern. It is estimated that the Government approved a total of 237 contracts for consultancy studies in the period between 1995 and 1997 alone. The Government has a tendency to commission consultancy studies regardless of the nature of the matter concerned, and how many of them have resulted in good value for money? Are government officials unable to formulate good policies without the help of consultants? The Government's proposal to invite the private sector to participate in the supply of water is good for improving efficiency, but before the benefits are reaped, it has spent a large sum of money on commissioning a consultant from outside the Water Supplies Department to interview those in the department and teach them how to work? Is this really necessary? Is finding a scapegoat when something goes wrong the Government's true intention behind its indiscriminate spending of taxpayers' money? Or does the Government intend to make use of the so-called independent consultants to launch some policies finalized not in the best interest of the public?

Apart from consultancy fees, other policies on the economy are also worth attention. For example, will the Government consider postponing some infrastructure projects which are not effective in creating jobs and stimulating the local economy in order to reduce expenditure? Another example is that the Government's decision to offer a $6.7 billion cash compensation to Hongkong Telecom for the early surrender of its franchise was based on the assumption that such a move would create investment and job opportunities and promote competition in the local telecommunications market. One year later, what we are seeing now is the successive relocation out of Hong Kong of paging companies, wage reduction for employees of Hongkong Telecom and no signs of an increase in job opportunities. At the same time, consumers have realized that they were ripped off in the past whenever they used mobile phones and long-distance call service. Apart from this, is there a really fair and healthy environment for competition in the residential telephone market? Can the Government tell us when competition in the local fixed telecommunications market will become as strong and fair as that in the mobile phone and long-distance call market?

The policy on environmental protection has a direct bearing on the cost of doing business, and it is a question that should also be taken seriously. However, the Budget has not reviewed the current ineffective policy on environmental protection, which at the same time lacks incentive and is not education-oriented. For example, the Government still refuses to adopt a more effective policy on waste disposal, and sticks to its one and only trick of charging a fee for dumping at landfills. The waste-to-energy incinerators scheme which has been endorsed by the Provisional Legislative Council is still at the consultancy study stage. At the current pace of progress, I am afraid Hong Kong will have to wait for another eight to 10 years for a modern incinerator. Does the Government want to turn Hong Kong into the biggest dumping ground in the world? Does the Government wish to see the demise of the entire recycling industry, resulting in those underprivileged who depend on it for a living having to apply for Comprehensive Social Security Assistance? Moreover, the Government is still reluctant to review the Trade Effluent Surcharge Scheme and relies on the imposition of penalties instead of making more efforts to help the catering industry to learn the techniques for improving the environment, which has made it even more difficult for the struggling catering industry to operate in a recession and more workers in this trade have thus become unemployed. Is this the proper way for environmental protection? The Government lacks the determination to vigorously promote the LPG taxi scheme despite a deterioration in air quality. It has adopted only one trick to improve road traffic and that is to increase both the fixed penalties for traffic-related offenses and the tolls for cars using the Cross Harbour Tunnel in Hung Hom. This method, though open to question, is definitely not the best solution. In view of the difficulties faced by the public and a rising resentment among them, the Government must indeed think carefully and come up with measures which can bring in more sources of income but will not affect people's livelihood.

Finally, Mr Deputy, I consider that the Government's decision to return $8.5 billion in tax revenue in one go to the public and merchants will help to stimulate the local economy. But in order to make the tax rebate more effective, the Government should come up with some specific ideas to ensure that both employers and the public at large will spend this windfall in Hong Kong. For example, big corporations should be required to use their tax rebates as bonuses for their employees or for purchasing new office equipment instead of depositing them in banks, in order not to defeat the purpose of the tax rebate.

Mr Deputy, I so submit.

MR MA FUNG-KWOK (in Cantonese): Mr Deputy, the Budget for the next financial year deserves much recognition for the Government of the Hong Kong Special Administrative Region (SAR) decided not to raise tax in spite of the enormous pressure exerted by the huge Budget deficits, taking account of the pain borne by the public as a result of the economic adjustment. The Financial Secretary has also, for the first time, proposed an unprecedented $8.5 billion tax rebate in an attempt to stimulate spending. I think the tax rebate can give the public a good feeling and express the Government's sympathy for the public as well as showing that the Government has given much thought to the public plight. This is, at any rate, worth our support. However, I cannot see any strong reasons to support the argument that the tax rebate can stimulate spending while everyone is still predicting economic depression and instability. The Government will fall fault of being unrealistic if it sees the rebate as an important step on the road to economic recovery. Faced with a budget deficit of $36 billion, a rebate of $8.5 billion represents a substantial proportion of the government expenditure deficit. It is expected that a number of uncertainties will still be there insofar as our future economy is concerned. The Government might even need to sell its assets, such as listing the Mass Transit Railway Corporation, in boosting its income. A tax rebate can be considered as an extraordinary measure that must not be repeated.

I think the Financial Secretary is overly optimistic for he has forecast a medium range growth rate of 3.5%. The actual deficit for the coming financial year might exceed $36.5 billion. Perhaps the Financial Secretary has his own difficulties for making such an optimistic forecast because if the Government hopes to maintain its previous prudent fiscal principle whereby public expenditure has to be suppressed to not exceeding 21% of GDP and not to reduce expenditure sharply, it will need to maintain a growth rate of 3.5%. But actually, the ratio of 21% is still on the high side compared to other countries like Japan. We should bear in mind that if the ratio remains to be higher than 20%, it will be unhealthy to Hong Kong in the long run as we do not need to spend in such areas as defence, diplomacy and so on.

Mr Deputy, I want to stress that, in considering reducing expenditure, the Government should absolutely not ignore the maintenance of services for the community and their quality. It is noted that related expenditure of civil servants and staff of public bodies represents a substantial proportion of public expenditure. If we can make some savings in this area, we can then inject more resources into such social services as education, social welfare, health care and so on. As the civil service framework is now "overstaffed", it desperately needs to "lose weight". In addition, there is a serious gap between the Civil Service and private organizations in terms of remuneration. The Government should also carry out a radical review of the existing appraisal, reward and punishment systems, the mechanism for adjusting the civil service remuneration and the pension system for they are all fraught with problems. It is overly simplistic of the Government to adjust the percentage of salary increase just by dividing civil servants into high, middle and lower ranks. It should instead formulate remuneration standards commensurate with the market by comparing with counterpart public bodies in accordance with different types of work. At the same time, the Government should introduce long-term contract systems in an appropriate manner. As regards controlling officials, law enforcement officers and so on, the Government should continue to give them high salaries to keep them free from corruptive practices and allay their extraneous worries in order to maintain their quality. In formulating policies in the past, the Government often commissioned consultants to carry out reviews. But similar arrangements are absent in the current institutional reform of the Civil Service. Does it mean that the Government is confident that it can carry out this reform on its own?

As far as various public expenditure items are concerned, expenditure on social welfare sees the biggest increase because of the dramatic rise in spending on Comprehensive Social Security Assistance (CSSA). Originally aimed at providing a safety net, CSSA should be targeted mainly at the elderly and the disabled. The community might need to provide them with long-term care so as to give them a chance to share social resources and lead a humane livelihood. But now even the responsibility of taking care of the unemployed is included under the CSSA Scheme. As a result, the unemployed will lack incentives or initiatives to seek work. Those who fall into the safety net will hardly become independent again. For these reasons, I propose that the Government should set up a separate unemployment assistance fund to be taken charge of by a unit under the Labour Department or an independent unit. Under the new mechanism, a time limit shall be imposed on recipients of unemployment assistance. Employment counselling and follow-up will also be specially provided for the recipients with a view to encouraging them to re-join the labour market. This will effectively stop CSSA spending from growing dramatically. At the same time, the Government should provide the elderly and the disabled CSSA recipients with counselling. This might help get some of them out of the safety net.

Insofar as spending on education is concerned, education expenses have, for the first time, reached four percentage points of GDP, illustrating that the Government's commitment to education is closer to the level of a medium-range developed country. But it is regrettable that we can only reach 4% when there is a sharp drop in GDP. Education spending is supposed to be long-term investment in the community, not a spending item. It is both worthy and essential for the Government to increase resources in this area. At a time when we expect that a substantial number of school-age children from the Mainland will come to Hong Kong in the near future and that the demands for education will rise sharply, I hope the SAR Government's commitment to upgrading the quality of our education services, particularly in the area of basic education, will not be affected. The Government still needs to make an extra effort in such areas as implementing whole-day schooling for primary schools, achieving the ratio of one social worker to one school, improving the ratio of teachers to pupils, upgrading teacher qualification and teaching quality and so on.

Mr Deputy, as the Government is facing tremendous pressure because of the deficit, spending on a number of services will see a shrinkage for the next financial year. In particular, I want to point out the problems pertaining to the allocation of funds in the areas of culture and arts. In the policy address published in October last year, the Chief Executive stressed that the SAR Government would continue to support the development of culture, arts and sport and upgrade the quality of our society as a whole. But it is regrettable that the Financial Secretary has in the Budget failed to put the commitments made by Mr TUNG into practice. Although there is a 9.4% increase in the total allocation for the relevant items, this is attributed to the rise in the allocation for the two Municipal Councils. For instance, the rise in allocation for the Hong Kong Sports Development Board and the Hong Kong Arts Development Council is 4% only, whereas the Hong Kong Academy for Performing Arts, which is specially responsible for training local art talents, has registered an increase of $300,000 only. This is very disappointing indeed.

I fully understand that our economy is still facing difficulties and the Government has its priorities concerning various services and investments. But the SAR Government will go against its objective of upgrading the quality and competitiveness of the local community as a whole if it puts culture, arts and sport development items in a relatively backward position. More importantly, cultural, art and sport development is a continual investment. If the flow of injecting resources is not stable, it will affect the continuity of item development. I have two important aspirations with respect to the review of the cultural and sport administrative framework which is still in progress at the moment. What I want to see is, apart from the formulation and realization of long-term cultural policies, in a more practical term, a drastic suppression of administrative expenses so as to add value to resources, reduce wastage, loss and repetition. I earnestly hope that my hope will not fall apart.

At a time when our economy is having difficulties, the Government must put its emphasis on "opening sources of income". Faced with the keen demands of the community for various public services while the Government has no intention of raising salaries tax, or corporate profits tax in order not to increase the financial burden of the public, problems pertaining to the fact that the tax base of Hong Kong is too narrow have become even more prominent. Therefore, I earnestly hope that the Financial Secretary can actively consider various possibilities of broadening the tax base, including raising the rates charge of some tax items which have no direct bearing on the public's livelihood, such as cosmetics and wine duties.

The Financial Secretary has mentioned in the Budget two large scale economic development items ─ the Cyberport and the Disney theme park. Both notions deserve our great support. In particular, the notion of the Cyberport is innovative and forward-looking. Changing its usual practice, the Government has taken the initiative to fight for achieving its goal, displaying a dully active attitude and accepting recommendations from the public. To those investors who are considering making long-term investment in Hong Kong, the Government has given them a favourable message. And as far as the overall direction is concerned, this merits our support. Moreover, such an approach is not rare in foreign countries. But in handling specific problems, the Government has given us a feeling that it is not comprehensive enough and there is a lack of transparency. In changing its usual practice, has the Government fully considered whether there is a need for consultation? Will it impact on the relevant trades? In addition, has the Government given the project proposers specific requests, particularly technical requirements and received guarantee that the plans will be put into practice? Or has it considered whether or not the terms of the plans are reasonable? Are the overall arrangements in the best interests of the community? But according to the information provided by the Government, I still feel that it is hard to make an assessment of the abovesaid two projects.

I entirely agree that the Government should adopt a positive attitude towards some large scale projects. Moreover, it should tie in with its policies and set up permanent mechanisms to increase its transparency. I suggest that the Government should set up a mechanism which is similar to an "Economic Development Board" or a committee which will be authorized to take up an co-ordination role to deal with lobbying, promotion, demonstration, appraisal and co-ordination of local and foreign mammoth investment items. Moreover, it should be responsible for liaising with various relevant departments, including bureaux in such fields as trade and industry, information technology, planning and environment, economic services and so on, with a view to making decisions jointly and setting up relevant advisory committees to seek opinions from experts and relevant professions. This will ensure that each development plan will have a fair and reasonable chance of being vetted and prevent the making of decisions by one or two persons from the highest level only, thereby allaying any worries the public might possibly harbour. At the same time, it can co-ordinate such projects as the industrial estate, Science Park and Cyberport to prevent them from possibly being administered by too many departments so as to enable Hong Kong to secure a better position when it comes to bargaining for investment projects.

Mr Deputy, while the Government is actively fighting for mammoth projects and exploring new industries, some professions which have been enjoying a very prospects, such as the movie, music, software, publication and even design industries, are facing serious threats of extinction because of copyright infringement. This highlights the fact that the community's notion of protecting intellectual copyrights is still very primitive and that our civic education and resources for law enforcement and protection are grossly inadequate. I hope that the Government can address this issue squarely, cope with changes flexibly and enact legislation as soon as possible to plug the existing loopholes in our laws.

On the whole, our long-term economic development still needs to rely on industries, particularly high value-added industries and intellectual industries. We need to raise the quality of our working population, reduce the costs of production and enhance the overall competitiveness and productivity of Hong Kong. Compared with the squandering Budgets for the past few years, this Budget is more pragmatic and directional in terms of its contents. Nevertheless, this Budget can only provide a frame as to how to really enhance the long-term competitiveness of Hong Kong. Quite a lot of plans, like such mammoth investment items as the Cyberport, Disney theme park and the institutional reform of the Civil Service, still await implementation. I hope the government officials responsible for the relevant items can launch the plans actively to put the beautiful prospect shown to the public by the Budget into practice as soon as possible.

With these remarks, I support the Bill. Thank you.

MR MICHAEL HO (in Cantonese): Mr Deputy, the greatest difference between this year's Budget and the previous ones lies in the fact that we are going to see a bigger deficit in this Budget. But at the same time, the Government has put forward some major directions. The Financial Secretary has made such proposals as developing the Cyberport, reforming the securities and futures exchanges, carrying out the civil service reform and so on. All these reforms, which would never be put forward in the former colonial government, will have a major impact on the long-term development of Hong Kong. I fully support the Government in moving in these directions. Of course, we still need to consider the specific details carefully.

The Financial Secretary has also touched upon health care reform in his speech. He said: "...... we can no longer defer a serious and purposeful discussion on the issue of health care financing". Not only do I agree that this is an issue we can no longer defer, I think it has been too late for us to carry out the work as well. This is because the last document on health care policies was a white paper on medical care which was compiled in 1974. Without a clear-cut policy, it is simply impossible for us to talk about financing as we have no idea at all as to what and how many services the Government is prepared to provide. The Secretary has also mentioned that "We cannot ignore the burden on the public purse of a quality, accessible and virtually free public hospital service". Right. Public medical care has already exerted pressure on our public expenditure. I also hope the Financial Secretary or the relevant Secretary can tell us in their replies what "financing" is meant by the Government in its allusion. This is because there is such a prevailing saying: The driving force for the current review of health care financing comes from the Financial Secretary, rather than from the Health and Wealth Bureau, for the review aims at reducing the pressure on public expenditure. I wonder if the officials can give us a clearer answer.

I hope the Government can truly introduce reforms to health care with the same determination it has given to the Cyberport project. No such reform has ever been carried out over the past few decades. Only through carrying out such reforms can the people of Hong Kong really enjoy a more reasonable service. I hope the review of financing will not be restricted only to discussing how to recover resources which should be recouped. It should also discuss how to distribute and use the recovered resources in a reasonable manner. More importantly, the policy on public medical care should spell out what services need to be provided and what services need not be provided.

Furthermore, the report compiled by the Harvard professors is the first report we have for the past few decades which touches upon the private medical care market. I really hope we can carry out a reform on the private hospital market this time. This is because if we do not reform our private practice, including its level of charges, the public will only go to public hospitals. But this is actually something our system cannot cope. It has been time and again reported in the newspapers and pointed out by documentation that our private medical charges nearly reach the highest level in the world. Some unnecessary operations and examinations were also included. If we do not deal with this problem in this reform, I am sure the public can only choose to go to public hospitals. Our public expenditure can definitely not stand such pressures. If the Government really wants to resort to the measures of cost recovery, "user pays" and so on as mentioned in numerous previous reports, it can actually raise this issue for discussion in an imposing manner.

As for hospital management and added value, we have actually set up a number of statutory organizations, including the Housing Authority, the Airport Authority, the Hospital Authority and so on. The legislature has through legislation given various management bodies the power to manage. But in what way are these management bodies going to be accountable to the public? Actually, we have not conducted any review here after we have handed out the power by passing through a number of legislation. Has the Government asked these management bodies to explain in unequivocal terms how they are going to be accountable to the public?

I would like to cite the Hospital Authority (HA) as an example. Mr Deputy, I am a HA member. This year, the HA will receive an allocation of more than $28 billion. So far as this sum of money is concerned, the HA is only required to be accountable to the Secretary for Health and Welfare. And through the Secretary, the executive organ will in turn be accountable to the legislature. What the HA needs to do is to present an annual report only. $28 billion represents a handsome proportion of our overall expenditure. Should we ask this organ, which is going to use up more than $28 billion, to be directly accountable to us as well as to the public? Do we accept such an indirect system of accountability?

In his speech yesterday, Dr LEONG Che-hung mentioned that some HA members only treated their Board of Director as a consultative committee and had not performed different work seriously after giving comments. I entirely share his view. Of course, we cannot simply enumerate and reprove these members for what they have failed to do as the Government has not spelt out clearly what they should do. The relevant legislation has only roughly outline their terms of reference. So far, it has not mentioned in what way the Authority should be accountable to the public and instructed the members as to how they should exercise management. There is no yardstick whatsoever. Apart from asking them to attend meetings, the Government has not raised any other requests. The answer is that there is simply no other request. Neither the Legislative Council nor the community has raised any request too. Muddling along, these management bodies have been in operation for years.

Are we are going to hand over the $28-odd billion under the Appropriation Bill to the HA in this way? As a HA member, I feel very ashamed too. I have not exercised effective supervision over the HA ─ the other two HA members in this Council are not here today ─ of the more than $20 billion provision, the Queen Elizabeth Hospital alone has accounted for more than $2 billion. Such a ratio is already higher than those government departments with limited staff. By comparing the reports compiled by government departments, the HA and the Queen Elizabeth Hospital, we will be able to see how the authorities concerned explain to the public with respect to that sum of money and which has given a clearer explanation. As a matter of fact, even HA members do not know very well whether or not certain allocation is reasonable. Of course, it is the Secretary for the Treasury, Mrs C LAM, the Deputy Secretary for the Treasury (as she is a HA member) and Mr G LEUNG, the Deputy Secretary for Health and Welfare who have the clearest picture.

Honourable colleagues, I would like to cite two examples to illustrate my points. An incident broke out last year concerning the return of an extra $200 million to the Government by the HA. Another incident was related to the Government's past practice of making one-line vote in the field of information technology. A few years ago, the Government altered its policy of making one-line vote to allocating funds to designated items. But after specifying the items and allocating funds to the HA, the Government retrieved some of the funds for other purposes. What do I want to illustrate by citing these two examples? The answer is if Mrs C LAM did not tell us what had happened in the Board of Directors, all HA members, including me, will completely be unaware of what has happened. We have, in this way, allocated more than $28 billion. Will Members ask the relevant departments or organizations to explain to the public on the various allocations as mentioned in the Budget? I hope after finishing discussings the Budget, we can conduct further discussions in concrete terms with respect to how these statutory organizations should explain to the legislature.

Mr Deputy, I turn now to the reform of the Civil Service. I fully support the direction to be taken in connection with the civil service reform. Many of my colleagues have mentioned about "iron rice bowl", "gold rice bowl" and so on. All Members share the view that there are still a lot of areas that need to be improved insofar as the civil service system is concerned. I also fully agree that there are problems pertaining to allowances and management. There are also cases where we find it difficult to dismiss staff members who have made obvious mistakes or who have performed badly. It is imperative for the Government to improve the system as soon as possible. But we are not "gunning for the tiger" now. Basically, our civil service system has proved to be effective. I think Members should look at this reform in a positive manner and rectify those undesirable areas as soon as possible. I hope the Government can really make up its mind to carry out the reform this time.

Lastly, I want to talk about the Disney theme park. This topic does not fall within my brief. I only want to express my personal feelings. Having listened to the speech delivered by Mr Ambrose CHEUNG, which is very rich in contents, I want to share with Members my own feelings. We all feel that if Hong Kong can succeed in securing the project for constructing the Disney theme park, it can help boost our tourism and economy. Imagine we have secured this project, what preparations have we made in order to remain resilient? We can now share some experiences gained by different Disney theme parks. For the Disney World in Japan, we can feel the staff's hospitality in providing services for the guests; for the Disney theme park in the United States, we can feel a different culture for the staff there really have fun with visitors. There are a number of service industries in Hong Kong. Compared to Japan, what impression will the services provided for tourists by our Chinese restaurants, restaurants and shops give the tourists? If Hong Kong is to build a Disney theme park, we will attract more visitors. What preparations do we need to make? Can our employers provide better training? Should our employees be more resilient? Can workers' unions provide a source of strength in this area? I think we should seriously consider all these issues before securing the Disney theme park construction project.

Mr Deputy, I so submit.

PROF NG CHING-FAI (in Cantonese): Mr Deputy, the 1999-2000 Budget was published at a time when the Hong Kong economy was in a depression. Undeniably, the rather innovative Budget is carefully thought out. Under the prerequisite of not raising tax, it manages to sustain public expenditure, thus winning applause from the public. In particular, I believe the Financial Secretary is hoping to achieve a certain social effect by deciding to grant a tax rebate. As was expected, the decision was welcomed by the public. Nevertheless, there is still room for discussion as to whether the Budget is able to really stimulate spending and help the local economy to revive.

The Government has decided not to suppress expenditure because of pressure exerted by a deficit budget. Instead, it will continue to maintain growth in public expenditure by keeping pace with the local economic growth over the medium term so that services committed by the Government in the past can continue to be provided. At the same time, the Budget can prevent further affecting Hong Kong's domestic needs of consumption and slowing down the pace of our economic revival as a result of a reduction in expenditure. This merits our commendation. On the other hand, we cannot help worrying as a deficit of $36.5 billion is forecast for the coming year and another $5.6 billion for the following year. But still I think this figure is acceptable against the current economic situation and the fact that Hong Kong has huge reserves. As long as the Government is not forming a habit of formulating a deficit budget each year, it shall not be taken as violating the Basic Law's principle of striving to achieve a fiscal balance.

The Financial Secretary admitted that he had underestimated the impact and fall-out of the Asian financial turmoil. I hope that such an over-optimistic forecast will not appear again. If the economic depression continues (of course, we do not want to see this happen), government officials must consider reducing public expenditure in a progressive manner and re-adjusting the allocation of resources. Otherwise, we will end up like Japan which has overestimated its economic growth for years in succession. And as a result, it achieves zero economic growth in the end despite constant increases in public expenditure.

Mr Deputy, it is a general trend to adopt the principle of "small government". We can use two yardsticks to evaluate the size of a government. One is the ratio of civil servants to the population of the whole country (or the whole region); the other one being the ratio of public expenditure to GNP or GDP. As at March 1999, we have more than 180 000 civil servants and 140 0000 staff working in subvented organizations which have structures and remuneration packages comparable to those of the Civil Service. In other words, we have nearly 320 000 people or 5% of the total population who are, so to speak, "feeding on royal provisions". This ratio is even larger than that of Japan for the ratio with the Japanese Government is 3.9% only. For the coming year, public expenditure will account for 21.1% of GDP, which is higher than such developed countries as the United States and France and is much higher than Japan which has 15.8% only. We should also bear in mind that, as already mentioned by a number of colleagues, we do not need to spend on such areas as national defence and diplomacy. Furthermore, the ratio of 21.1% is based on a Medium Range Forecast of 3.5% as the trend growth rate. In other words, the actual ratio mentioned just now might be 23%, 24% or even higher, rather than a mere 21.1%. Both these two data illustrate the fact that the Hong Kong Government is a "big government" and must "lose weight". Perhaps some people think that this will affect the morale of civil servants. But streamlining can actually enhance efficiency. If "gold rice bowls" no longer exist, competition will arise accordingly. Civil servants will then give play to their combatant spirit that is characteristic of the people of Hong Kong.

At the moment, the salary adjustments made for the Civil Service in accordance with the pay trend survey conducted by the Standing Commission on Civil Service Salaries and Conditions of Service are divided into three categories ─high, medium and low only. The fact that there is no detailed differentiation between various types of work is overly generalized and simplistic. I think it is also timely for the Government to conduct a comprehensive review of the remuneration regime of the Civil Service. But we must try to avoid taking a broad-brush approach and even cutting off those parts which are good, as mentioned by some of my colleagues just now. The Government should invite members of the community who are not from the Civil Service or employment consultancies to take part in the review. Just now, both Miss CHOY So-yuk and Mr MA Fung-kwok raised the same question as to why has the Government not invited consultants to take part in the review for it has been the usual practice of the Government to do so? Insofar as this matter is concerned, I share the view that the Government should seek outside input to prevent other people from thinking that the Government is assessing itself for it is hard to avoid conflicts of interests.

A number of Members have expressed their views on the Cyberport yesterday and today. Perhaps it is now fashionable to give something "outside the judgment". The Cyberport and the Disney theme park, as mentioned by the Financial Secretary, are in fact unrelated to the crux of the Budget. Moreover, they are not going to take shape until a few years later. But they have become the focus of the public and the media and have given the public a good feeling. Judging from the limited information available, the Cyberport project is not just a property project. Maybe it is for commercial reasons that the Government has not yet published its detailed conception and planning. As a result, we find it hard to make a comprehensive judgement. As the project is of such a large scale and is one of the highlights of our future development, it is hard to prevent the public from casting doubt and developers from feeling dissatisfied for the Government has, for the first time, directly awarded the project to a consortium for development. Actually, if in the details to be published by the Government, it can be spelt out in specific terms that the success or otherwise of this project hinges on the participation of the Pacific Century Group and its risks sharing whereas other developers in general are unable to meet these requirements, I think the Government is doing the right thing in adopting such a measure as "direct award without the tendering procedures", a practice generally adopted by countries all over the world for the purpose of promoting key technological items or large scale enterprise items.

What we need is, on the contrary, a standing mechanism with a certain degree of transparency so as to enable the Government to, through consultation, effectively reach an agreement with private organizations without the need to go through tenders. For this reason, I agree with the proposal of setting up an economic development board as put forward by Mr MA Fung-kwok just now. In my opinion, the Government should set up a department with special responsibility for industrial and technological development under the economic development board to keep tap on the needs of the market, investment environment, matching of talents and so on. It should also be responsible for vetting relevant development items for we should not let the Chief Executive or a certain Policy Bureau make the final decision alone. The setting up of the economic development board will help large scale investment items, particularly in making the most appropriate allocation of resources and long-term planning in the area of technological and industrial development. The board can take the form of a decision-making and executive department to be chaired by the Financial Secretary. Representatives from different sectors can join the board to operate in a highly transparent manner, with focus on the industrial and technological development of Hong Kong to encourage both local and overseas technological enterprises to operate here. I was told that a minister who was responsible for technological development in Israel came to Hong Kong in the hope of making exchanges and co-operating with Hong Kong in the area of technology. But the Government was unable to identify an official from a counterpart Policy Bureau to hold talks with him and finally the Chief Executive was asked to meet with him. This is something we need to think over carefully.

The Financial Secretary has, in the Budget, announced the competition for building a Disney theme park though the negotiation has yet to borne any result. Undoubtedly, this can boost the public's confidence in our economic prospects. But from the angle of negotiation, this will give us a feeling that the responsible government officials lack experience in conducting international negotiations and the Government is unable to adhere to the important principle of not making any announcement before the signing of agreements. We should also take note of the fact that the relationship between the Government of the Hong Kong Special Administrative Region (SAR) and the Mainland regional government has apparently been affected. Some regional governments on the Mainland have also expressed discontent in the course of the negotiations. The SAR Government should take extra care in dealing with its relationship with the regional governments on the Mainland. We should not hold on to the mentality that the SAR is specially taken care of by the Central Government.

Mr Deputy, the theme of the Budget is "Onward with New Strengths". Education is, of course, one of the means that can give us new strengths. I am glad to see that the Government is still giving education a bigger share despite the economic depression. The growth in education funding illustrates the fact that the Government is able to fulfil the commitments made by the Chief Executive years ago and that it has taken the training of talents seriously. Education spending has just reached about 4% of our GDP. This percentage is only close to the level of a medium developed region albeit it can indeed be raised further. Nevertheless, this has already been proved to be useful insofar as raising the consolidated economic strength of Hong Kong is concerned. In the next century, talents and knowledge will become a factor determining whether or not a region will prosper. Therefore, it is perfectly correct for the SAR Government to take education seriously. But I still need to reiterate two points here. First, the Government has increased resources for primary and secondary schools. Though it is necessary to develop basic education, we must pay attention to how we can make the best use of resources. For instance, the standard for vetting the $5 billion Quality Education Fund must be strict, and any project upon completion should be subject to a mechanism whereby proper assessments can be made. But does the increase in funds for primary and secondary schools imply a reduction in funds for universities? Allocation for tertiary institutions has been cut by 10% in the last financial year. In this respect, I have raised repeated objections. Today, I have no intention to criticize this decision again. But I must point out that the side-effect arising out of this has emerged. We can see that more and more short-term contract teachers have been employed by the universities. This is going to do great harm to the maintenance and enhancement of the quality of teaching and research. This is worrying indeed. It has been rumoured that the Government intends to further cut back on allocation for tertiary institutions. I hope this is only an "illusion" created as a result of worries. The Government must not contemplate such a measure again. Otherwise, the quality of teaching and research of tertiary institutions will definitely fall, thus going against the desperate need of our community for training quality talents.

I would like to respond to the point raised by Mr CHEUNG Man-kwong just now in connection with individual teachers who have taken the research result of other people as their own. I think that if the relevant institutions are aware of this phenomenon, they must deal with it seriously and prevent such an abnormal practice to develop. I also want to point out that nowadays universities can no longer rely mainly on teaching. If university professors or lecturers do not engage in research, they will then not be able to pass the most up-to-date knowledge on to their students. Judging from this angle, research is essential. The crux of the problem lies in the fact that we must strike a proper balance. We must not focus on research at the expense of the quality of teaching.

Mr Deputy, public expenditure is not going to be cut because of the demands for services and the needs to stimulate the economy. Therefore, we must consider broadening sources of income. The Government has proposed raising the charges related to driving. From the standpoint of drivers, including myself, they will definitely not want to see a rise in charges. But in consideration of the low utilization rate of the Western Harbour Crossing and the protracted long queues in the Cross Harbour Tunnel, we must solve the problem for there is indeed a waste of social resources. Raising the tunnel tolls for the Cross Harbour Tunnel in Hung Hom can only be regarded as an expedient measure for boosting revenue. But in the long run, if the three tunnels can standardize their tolls, we can then consider adopting a unified charging system so that the operating costs of tunnels can be reduced substantially.

We have to wait and see whether the Budget can really help the people ride out the storm. Many of the proposals in the Budget still remain at the conception stage. I hope they can be put into practice in the end. Hong Kong is now in an economic depression. As the saying goes, adversities will give rise to opportunities. We should take this opportunity to "trim" public and private organizations properly and reorganize our economic structure so as to boost the overall productivity of our community. Furthermore, we must explore new focal points for economic growth, such as technological industries, high value-added service industries, large scale theme parks and so on. All these are viable proposals.

With these remarks, Mr Deputy, I support the Bill.

MR CHAN KAM-LAM (in Cantonese): Mr Deputy, when the Financial Secretary, Mr Donald TSANG, prepared his second Budget after the reunification of Hong Kong with China, the Hong Kong economy has just entered its second year of adjustment. In view of the extent and impact of the economic adjustment, even the Financial Secretary has to admit that he was over-optimistic last year to think that by now the storm should be over. In other words, the previous Budget was apparently not fully prepared for dealing with the various problems pertaining to the people's livelihood and the economy brought about by the financial turmoil. It was not until strong voices heard in society and our economy was subject to tall challenges that the Government started to take contingency measures. As the fiscal arrangements for the past year have virtually been disrupted, revenue and expenditure for 1998-1999 will register a huge deficit of $32.3 billion. Frankly speaking, under such an adverse condition where there is slack business, a shrinkage of asset value, a plummeting economy and coupled with the fact that the Government firmly put a halt to its land sales programme last year and took a number of relief measures, a deficit of $32.3 billion can be said to be a stroke of good luck in a stretch of bad.

Faced with a dwindling economy and a reduction in income, the Government of the Hong Kong Special Administrative Region (SAR) must identify a means that can, on the one hand, tackle the shrinkage of income and, on the other, revive the growth of our economy. The Financial Secretary has been able to prevent the overall spending desire from being hampered by employing selective tax increases for individual items alongside with a temporary tax rebate. The Democratic Alliance for the Betterment of Hong Kong (DAB) fully supports what the Financial Secretary has done. But the Government must, in the long run, expand the scope of our economic activities so as to broaden our sources of income and reform old systems to meet the requirement of the new era for high value and efficiency.

The Financial Secretary has announced in this Budget a number of plans conducive to our economic development such as the Cyberport, theme park, Fisherman's Wharf and cruise terminal to tie in with the grand projects envisaged by the Chief Executive in the policy address published in October last year and make use of the predominant position of Hong Kong in striving to set up a new international economic and trade and tourist centre. This is completely different from the old "active non-intervention" strategy, thus illustrating precisely the fact that the SAR Government is determined to lead the public to move towards economic development in a comprehensive manner. In the long run, this is going to be of great significance to the adjustment of our economic structure.

Mr Deputy, the DAB welcomes a series of proposals put forward by the Financial Secretary in the Budget for the purpose of reforming the existing financial system, with reforms to the securities and futures exchanges and clearing houses forming an integral part of the proposals. Looking back at the past year, Hong Kong has suffered from external challenges from financial snipers, which highlights the management problems with the local financial markets. The three-in-one package might provide the best solution to the problems caused by the separate administration of the exchanges and clearing houses as well as to safeguarding the interests of investors and small shareholders. In order to provide a favourable condition for fully implementing electronic trading of securities and prevent the assets of small investors from being misappropriated by financial institutions without authorization, the DAB suggests that the Government should require every investor to open an account with the Hong Kong Securities Clearing Company to enable investors to deploy assets in their own accounts. Of course, we understand that securities companies might incur some losses as a result of this proposal. But we consider that the proposal of one person to one account can boost investor confidence and this will be conducive to competition in the market as well as giving the market vitality. The DAB hopes that the Government can consider this matter in an in-depth manner.

In the area of tourism, the Budget has put forward a number of pleasant plans to boost the competitiveness of our tourism industry. For instance, $500 million will be granted over four years for the construction of a new theme area, "Adventure Bay", to replace Waterworld in the Ocean Park. In addition, the Government will be building a "Fisherman's Wharf" in Aberdeen and a cruise terminal in North Point. It will also hold talks with the Walt Disney Company of the United States in connection with the construction of a Disney theme park. All these are proactive measures.

Disney World is internationally renowned for its tourism facilities. Many regions have expressed interests to introduce such facilities to boost their competitive edge in tourism. With its favourable conditions, Hong Kong is easily accessible by transport networks on land as well as by sea and air. Apart form being an international financial and trade centre with strong spending power, Hong Kong can be called a shipping, information and tourism centre of Southeast Asia. Our simple taxation system and low taxation have attracted investors to make Hong Kong their first choice to make investment. The DAB supports the Government's move to conduct active talks with the Disney Company with a view to opening up a new phase for our tourism industry expeditiously.

Furthermore, the DAB hopes that the Government can continue to examine measures to promote tourism and to work closely with the Hong Kong Tourist Association and related organizations to carry out more tourism projects to boost the status of Hong Kong as a tourist centre. Otherwise, the revival experienced by our tourist industry over the past months will soon disappear.

Mr Deputy, the Budget has put forward a number of innovative proposals in developing tourism and stimulating the economy. But insofar as easing pressure on the public and assisting small and medium enterprises (SMEs) is concerned, the 10% tax rebate carries the greatest significance.

Originally, every member of the general public applauded to show their support for the Financial Secretary's proposal of rebating 10% of tax across the board for it could at least stimulate consumer industries which were in depression and fully manifest the care shown by the SAR Government for the people and enterprises suffering from shrinkage in assets and the traumas thus inflicted. But regrettably, some Members in this Council have, thinking in a restricted manner that there is no need to take care of the middle and upper strata and that a tax rebate will only benefit a minority of consortium, abused the principle of "reasonably allocating resources" by trying hard to complicate the issue by means of imposing a $100,000 ceiling on tax rebate. The grassroots have of course suffered from losses in the midst of the financial turmoil last year. But is Mr LEE Cheuk-yan aware that the losses incurred by the middle class and commercial sector are even worse? The DAB is of the view that such a measure will only divide the community and highlight class hatred, which is detrimental to social harmony. The tax rebate is originally meant to express the Government's sympathy for members of the public who are facing financial difficulties. This is precisely what the various political parties and people of the community have strongly urged for over the past year. It is really ridiculous that while the SAR Government acts in accordance with the will of the people by rebating tax to ease pressure on the public, some people are using this as an unreasonable excuse to attack the Government. Furthermore, they accused the Government of "on the one hand, rebating tax to ease pressure on the public and, on the other, suppressing the growth of expenditure for the coming years". They are virtually ignorant of how expenditure is determined. In response to the emergence of this proposal, Members from the Democratic Party immediately showed their support with gladness. I was later told that they would take advantage of the excitement by proposing an amendment to impose a ceiling of $100,000 on the rebate and raising the rebate rate to 15%. We were told yesterday that Mr LAW Chi-kwong, who is from the Democratic Party, threatened that he would not stand for election in the next term of the Legislative Council for he disagreed with the support shown by the Democratic Party for the amendment. One can thus easily imagine that the amendment to the tax rebate proposal is against the will of the people. The DAB is pleased to see that the Democratic Party has made the right decision at the last minute by supporting the rebate proposal put forward by the Financial Secretary. Mr LAW Chi-kwong has surprisingly played the role of Robin Hood of the Democratic Party. Yesterday, the DAB staged a signature campaign for Members of this Council and has secured support from the majority of Members for voting against the motion. Just now, we were pleased to learn that Mr LEE Cheuk-yan had withdrawn after learning of the difficulties and announced that he would withdraw the amendment on his own. He has, finally, done a good thing. I believe what he has done can reduce the accusations lodged by the community.

As for assistance to the SMEs, the Government has not further introduced any plans for rendering support in this area in the Budget for the next fiscal year. As far as the 200 000-odd SMEs are concerned, I think this should be taken as a disappointing message. In addition, the Government has not yet announced the findings of its review of the Special Finance Scheme for SMEs and made any improvement. As a result, a number of SMEs still need to struggle very hard during this period. Some of them were even on the verge of closure.

According to the initial analysis of a survey entitled "Outlook for the operating environment for SMEs in 1999" conducted by the DAB lately, of the 100-odd clothing, textile, toy and electronic factories, over one third stated "it is very difficult to say" in response to the question as to whether they would be forced to close down because of great economic difficulties, while at the same time expressing uncertainty about the future. In addition, 10% indicated that they would definitely cease their business in 1999. The situation is very worrying indeed. The Government will only force more SMEs to "close their doors" and break the rice bowls of many people if it does not publish expeditiously the findings of the review of the Special Finance Scheme for SMEs and propose effective improvement measures. The DAB strongly urges the Government to at least take three effective measures with respect to the Special Finance Scheme for SMEs: First, to raise the Government's risk share to 70%; second, to raise the loan amount by 100%; third, to extend the repayment period by one year to enable the Scheme to really alleviate liquidity problems experienced by enterprises.

Mr Deputy, another matter of great concern to the commercial and industrial sectors is the combat against piracy activities. The DAB is of the view that the Financial Secretary should give the Customs and Excise Department more resources, co-ordinate with the Security Bureau for the deployment of police manpower, carry out a full-scale crackdown on the rampant piracy activities and protect intellectual property rights to facilitate the development of innovative industries in Hong Kong.

Mr Deputy, lastly, I want to briefly discuss the proposed partial listing of assets of the Mass Transit Railway Corporation (MTRC). Although the DAB considers it feasible for some public utilities to be listed to obtain cash for the purpose of solving their financial difficulties, they must do it in a prudent manner. Let me cite the MTRC as an example. In 1997, its assets value reached $68.8 billion, without including the value of the sites under its name. To list the MTRC will, as the Financial Secretary said, provide a useful boost to our finances over the medium term. But we have to consider carefully whether or not we have now "come to a dead end" and whether or not there is no other alternative but to sell our assets. As a matter of fact, even if part of the MTRC assets are privatized, the earnings thus incurred will only be accounted as part of non-recurrent revenue. We cannot rely on selling assets constantly to maintain a stable revenue position. Otherwise, after selling the MTRC and the Kowloon-Canton Railway Corporation, are we going to sell the airport and the Hospital Authority too?

Before deciding to list the MTRC, the Government, as the major shareholder, must define clearly as to how it is going to reconcile the contradictions between the interests of small shareholders and the public in general.

Mr Deputy, discussion has been going on for numerous years as to how to strengthen the supervision on the two railway corporations. The DAB has all along held the view that the two corporations should be included in the scope of supervision of the Transport Advisory Committee (TAC). The TAC and the Executive Council should also be responsible for endorsing fare adjustments. The Government has stated repeatedly that the performance of the railway corporations, which are wholly owned by the Government and operate in accordance with prudent commercial principles, has been satisfactory. As a result, it sees no need for change. But with the introduction of small investors and with the listing of the MTRC, the corporation will completely turn into a private company. This will make it all the more difficult for the public to supervise the railway corporation. Therefore, as far as the public in general and MTRC commuters are concerned, the inclusion of the two railway corporations into the jurisdiction of the TAC will enhance the transparency of fare pricing in future. Moreover, unnecessary disputes can be avoided with an independent body supervising the fare prices.

Mr Deputy, on the whole, I think the Budget prepared by the Financial Secretary for this year is acceptable. With these remarks, I support the Second Reading of the Bill.

THE PRESIDENT resumed the Chair.

MR DAVID CHU (in Cantonese): Madam President, although the Budget has failed to achieve a fiscal balance and there is still room for improvement, the Hong Kong Progressive Alliance considers that, against the current economic environment, the Budget has generally been able to balance the needs in various areas and help stabilize public confidence. It is for these reasons that the Budget deserves our commendation.

I support the Budget's proposal of listing the Mass Transit Railway Corporation (MTRC) through a public offering and streamlining the framework of public corporations for it can help boost revenue, enhance operating efficiency and improve the quality of service. I hope the Government can continue to examine the feasibility of privatizing other government departments or public corporations.

Just as in past years, the Budget this year has made education a key area of expenditure which has registered a real growth of 5.1% or $44 billion. The fact that the Government has endeavoured to inject resources to nurture talents is worthy of recognition. But it is regrettable that the Budget has failed to propose solutions to some urgent education problems.

Let me cite school social workers as an example. In recent years, the problem pertaining to juvenile gangs has become increasingly serious. It is extremely shocking that a group murder case and a rape case, both committed by a juvenile gang, broke out successively earlier on. In recent years, the divorce rate continued to rise and there was an increasing number of single-parent families. Our economic problems and the high unemployment rate have triggered off numerous family problems. Coupled with the continual arrival of school-age immigrants, the need for student counselling has been growing bigger and bigger. For many years, the education sector has repeatedly urged for "one social worker for one school". Regrettably, the Budget this year has not allocated funds for increasing the number of school social workers. This is really disappointing.

Lastly, I support the Government's endeavour to seek Disney to make investment in Hong Kong. I believe the construction of a Disney theme park will not only boost the attractiveness of Hong Kong's tourism and provide relief to the unemployment problem, but also affect our economy in a constructive manner. However, in negotiating with the Disney Company, the Hong Kong Government must take cost-effectiveness into full consideration with a view to striking an agreement which will reap Hong Kong the maximum benefits.

With these remarks, Madam President, I support the Budget.

MR LEE WING-TAT (in Cantonese): Madam President, the Honourable David CHU spoke so fast that I do not even realize he has finished his speech. Since its delivery, the Budget has found general support in the community. In the face of the present straits, it is exceptionably commendable that the Financial Secretary has managed to draw up a budget that gives substantial increases in expenditures on education, health care and welfare without a severe tax hike.

However, the Financial Secretary should not, and will not, I believe, be intoxicated with the transient applause because the real challenge has but just begun. First of all, in accordance with the fiscal management principles of the Government, any increase in public expenditure in the future should tie in with the trend economic growth. While the Government estimates that the average rate of economic growth for the next five years will be 3.5% per annum, not a single academic or professional agrees upon this figure except the Government itself. With this figure which is considered "over-estimated" or even "exaggerated" by many people, if the real economic performance of next year turns out to be poorer than expected, the Government will have to consider freezing or even slashing the increase in public expenditure. At a time when the economy has not yet recovered and people are still demanding the Government to improve its services, a freeze or slash on services will definitely meet with social opposition, and I also object to such measures.

I think it is high time that the Government showed its leadership and determination. Reforms to services provided by the Government must be sped up. No matter whether the reform is the implementation of the Enhanced Productivity Programme, the contracting-out, privatization or corporatization of government services, or reform to civil service salaries and conditions of service, it must be carried out as soon as possible so as to release extra resources for the provision of new services.

Another area which needs a reform is the statutory bodies of which the operations incur enormous expenses. Such bodies include the Hospital Authority, the Airport Authority, the Housing Authority, the two railway corporations, the Vocational Training Council and the Employees Retraining Board, and so on. The total expenditure of these statutory bodies amounts to tens of billions of dollars a year. Since they all have independent financial powers, it can be said that they are independent kingdoms which both the Legislative Council and the public cannot monitor.

I want to tell the Financial Secretary that this is already the second time I make such a demand in this Council. I will be very disappointed if the Secretary still does not adopt any proactive measures in response to my demand within a certain period of time.

Madam President, now I would like to turn to one of the two "projects of hope" in the Budget — the Cyberport development. The Democratic Party does support the development of the Cyberport. In principle, we endorse the idea of jointly developing high technology and property. But we in the Democratic Party cannot accept that the right to develop the whole project should be given to the Pacific Century Group without calling for open tenders, which is a practice against the principle of fair competition in a free market. Such a non-transparent approach will make people feel that the Government is making a deal under the table with a private company. The Government uses the pretext that, other than the Pacific Century Group, no other hi-tech company in Hong Kong has shown interest in the project. However, since this is an integrated development of high technology and property, why does the Government not consult local property developers to see if they are interested? How can the Government conclude that the property developers in Hong Kong are unable to form a financial group with locally or internationally famous hi-tech companies to put in a tender for this project? The Government also alleges that it is pressed for time, which is yet another unacceptable explanation. If, after the Pacific Century Group had shown an initial interest, the Government put forward the proposal to other property developers and other consortia, asking them to submit a plan to the Government within a short period of time, say, three months, I feel that they are capable of doing so. With the fighting spirit of Hong Kong businessmen, there should not be any problem.

The Government again alleges that this is a high-risk project with a low rate of return, so property developers will not be interested. I want to ask: Why is it the Government, but not the rules of the market, that decides in advance other consortia are not interested? If the Government follows thoroughly the open and fair procedures and eventually only the Pacific Century Group expresses an interest, I believe that the public and the Democratic Party will not question the present way of doing things. But given that the information about the project is incomplete and the transparency extremely low, the Government should make known to the Legislative Council the information and financial analysis regarding the Cyberport as soon as possible. Before further information is available, the Democratic Party thinks that tenders should be invited for the Cyberport project openly.

Madam President, now I would like to talk about housing policies.

The average waiting time for the allocation of a public housing flat is six years at present. In July 1997, the Chief Executive undertook that the waiting time will be reduced to an average of three years by 2005. We have always been worried whether the Housing Authority can honour this undertaking with its existing resources. Recently, the Court of Final Appeal ruled that children born in the Mainland of Hong Kong parents can enjoy the right of abode in Hong Kong. This will definitely increase the demand for housing, especially public housing. The Secretary for Housing has stressed time and again that surveys on tenants' housing intentions are being carried out at the moment, and he has to wait for the findings before housing policies can be reviewed. However, as we all know, it usually takes seven to 10 years to draw up housing plans. Besides, without a land reserve mechanism to cope with a sudden surge in demand, the Government must look for lands immediately and expedite planning and construction in order to meet the escalating demands for housing. I urge the Special Committee on Land Supply headed by the Financial Secretary to convene a meeting as soon as possible (I believe that it has not met for a long time) so as to do preparatory work for locating new lands.

Since the land supply was reduced last year due to the moratorium on land sale, I am very concerned about the supply of private housing in three to four years, that is, in 2001-02. The Secretary for Housing also said that, in the coming four years, only an average of 24 000 new private flats will be available each year. Moreover, as the pace of redeveloping private housing is slower than expected, a shortage of housing supply may occur in two years. We should be prepared for this situation lest we repeat the same disastrous consequence of 1994 in which property prices soared because of the shortage in housing supply. I suggest that the Secretary for Housing build up a sufficient land reserve as soon as possible so that the Government can enhance land supply in time to stabilize the supply of private housing when the provision of private housing falls short or the demand for housing increases.

Since the Chief Executive announced the goal of achieving home ownership for 70% households by 2005, the Housing Authority has kept on offering existing or prospective public housing tenants more opportunities to buy their own homes. The measures include: assisting households affected by redevelopment projects to purchase homes, launching 250 000 Tenant Purchase Scheme units within 10 years, increasing the quota of Home Purchase Loan Scheme to 10 000, and recently introducing the Option to Rent or Buy Scheme, and so on. The Democratic Party supports in principle the provision of more choices to people, but the period of application or preferential period for such schemes are all limited, trying to create the impression of a so-called "chance of a lifetime". In an economic downturn, if the public puts its money in the purchase of properties or payment of mortgage, it is sometimes unfavourable to stimulating the economy and may indirectly delay the economic recovery. We think that, in times of economic doldrums, the setting of too many limits, especially time limits, to the preferential periods within which tenants can enjoy certain housing concessions is unfavourable to economic revival. We propose that the Government should exercise more flexibility in setting these preferential periods, such as prolonging the time for "discount over discount" under the Tenant Purchase Scheme, or lengthening the "to buy" period in the Option to Rent or Buy Scheme, so that the tenants who have already chosen to rent public housing flats will have another chance to buy the flat they are living in after accumulating some wealth or when the economy picks up.

Madam President, the Budget proposes to slightly adjust the stamp duty on property transactions and the Democratic Party supports this proposal. However, we think that the Government should be careful in exempting confirmors from payment of stamp duty on property transactions lest a misleading message of encouraging property speculation is conveyed.

Lastly, Madam President, I would like to talk about taxation.

With the budget deficit and the fall in revenue, many organizations and people have been suggesting different methods of increasing revenue to the Government so as to pave the way for the introduction of land departure tax and sales tax. I cannot agree to this practice of putting forward one or two new items selectively as the Government's new taxes. In a question time with the Financial Secretary, I have asked the following question: In face of the estimated downward plunge of revenue from lands and properties (such as stamp duty and Rates), how are we going to tackle the difficulties caused by the reduction in revenue?

Since the economy has taken a turn for the worse, we should conduct a comprehensive review on the taxation system of Hong Kong with new thinking and new ways, in order to meet the challenge of the 21st century.

Thank you, Madam President.

MISS MARGARET NG: Madam President, I congratulate the Financial Secretary on the most plain-speaking Budget speech he has made. It shows a sober determination to face the reality. This is exactly what Hong Kong needs. We should remain unruffled by adversity. I go further. We should make today's adversity work for our better future. We should use this reversal of fortunes to push the long needed reforms to stop the trends which are fast destroying Hong Kong's efficiency and competitiveness. If the Financial Secretary is prepared to make the right hard decisions, I am prepared to give him my full support.

I refer particularly to his proposals on civil service pay and establishment. For a population of 6.5 million people, 189 000 civil servants and another 140 000 employees in government-subvented organizations are huge numbers. Recent reports of the Director of Audit had shown the shocking extent of over provision of manpower and lack of supervision in some of the largest government departments. In itself scandalous, it has potential for further scandal because of the corruption opportunity this may create.

Separately, a survey published on 15 March shows that civil service pay far exceeds private sector salaries. At entry point, civil service pay is, on average, 20% higher than the private sector. In some categories, it can be as much as 60% higher. Further, over the years, annual pay rise on top of the automatic annual increment has resulted in civil service pay getting seriously out of line with the private sector. In an economic downturn, when the private sector has to resort to down-sizing and pay cut, the discrepancy becomes glaringly unjustifiable.

It is obvious that, on an already large base number, unchecked growth in establishment and in pay rise will quickly result in a huge burden on public expenditure which can be hard to shake off. I support, therefore, the proposed freeze in salary and strength. In doing so, the Government is merely following the lead of the private sector.

It should be noted that the pay freeze does not affect the annual increment. The review of the Civil Service announced earlier is most timely and will, I hope, be pursued with vigour. I have no doubt that a real and much needed reform can be achieved without sacrificing stability and security.

Madam President, I want to respond to the Financial Secretary's initiative on strengthening the quality and competitiveness of Hong Kong's services sector. I want to address, in special, legal services.

Hong Kong's unique strength and attraction to investors lie in its rule of law. This is what makes an open, free and vibrant society possible. This is the bedrock upon which free commercial enterprise can thrive. The rule of law is seamless. Criminal justice and commercial justice rise and decline together. Only when an individual's rights are fully respected can there be the rule of law in the real sense. At the same time, our law and legal system must respond to changing international commercial practice in a competent and timely fashion.

The public sector, in special, the independent Judiciary and the Department of Justice, has a vital mission in maintaining high quality. The high quality cannot be achieved by the public sector alone. It can only do so with the support of a legal profession dedicated to the same ideal. Indeed, private practitioners stand in the forefront of supplying the legal services the world expects of a sophisticated place of business. The public and private sectors must work in partnership, must complement each other to create the strongest and most cost-effective system.

To respond to the more exacting demands of the times, the Hong Kong Bar Association and the Law Society of Hong Kong have jointly and separately launched far-reaching programmes of self-renewal. They have each strengthened post-qualification training and education to ensure that gaps of knowledge or experience are remedied, and to facilitate the development of needed areas of expertise. The Government should give recognition to these initiatives. Applications have been made by the two professional bodies to the Services Support Fund for:

(a) a review by an independent consultant of the education and training system of lawyers in Hong Kong, with the aim of making recommendations to the universities and the professional bodies; and

(b) the financing of Advanced Legal Education for barristers.

Since the legal profession nourishes both the public and private sectors, the projects will be well worth the modest investment.

With an annual increase of almost 500 lawyers, the Department of Justice should be in a far better position of filling their posts with legally qualified staff. It is highly desirable that all levels of public prosecutions are conducted by legally qualified persons. With pay and fees coming down in private practice, this is now more viable than ever. At the moment, Magistrates Court prosecutions, (and some 500 000 persons are prosecuted per year) are almost entirely conducted by 127 Court Prosecutors who have no legal qualification but only a nine-month in-house legal training. These posts were established in the name of cost saving. According to the Department of Justice, the average staff cost of a Court Prosecutor works out to be $44,000 per month, while that of a Government Counsel would be some $80,000.

This in itself demonstrates how out of line government pay is with the private sector. Most barristers of one to five years' experience do not even make even a gross income of $44,000 per month. A solicitor who has completed his two years' traineeship would consider himself lucky if he is paid that salary.

Further, with the Department of Justice, career scope for the unqualified person is severely limited. This would either create dead-end jobs for most of the 127 Court Prosecutors, or the Department will be obliged to create senior posts to which they can be promoted. This is false economy indeed.

I propose that the Department of Justice should seriously consider a gradual replacement of Court Prosecutors by qualified lawyers. This will increase potential value without any, or any significant increase of cost.

Similarly, for the Legal Aid Department, a comparison of staff salaries and payment made to outside lawyers shows that in-house costs are likely to be significantly higher, thereby making it much more sensible to have a smaller department staff using more outside lawyers. The total estimate for salaries is about $221 million. A large proportion must go to the 70 lawyers, 35 of whom conduct litigation. They deal with less than 30% of the Legal Aid cases, a large portion of which are simply family cases. This contrasts with a total of some $460 million in fees for outside lawyers, for conducting the bulk of the legal work.

Apart from saving expenditure and making money work harder for the public in need of legal aid, there is scope in recovering more in legal costs from the other side when a legal aid litigant has won the case. The $268 million estimate in recovery of costs strikes me as capable of improvement.

Madam President, in spite of the good things one can say of the Budget, there are also flaws which need to be pointed out.

First, on the tax rebate, my view is that this expenditure is neither rational nor justified. It cannot, with respect, do much of what the Financial Secretary says it would in his speech. Because of its nature, the largest rebates will be given to people who least need them, while the most hard-hit will receive only token sums, if anything at all. $8.5 billion is a valuable sum in a deficit budget. If it can be spared, there are far more urgent things, far more compatible with improving Hong Kong's competitiveness, to spend it on, such as reducing the cut in welfare and strengthening environmental protection.

I am going to vote against the Honourable LEE Cheuk-yan's resolution, because it is unjustifiable to give the rebate to some but not others, and any ceiling can only be arbitrary. Either everyone should be given the rebate or none. I do think that "none" is the more rational course. However, as everyone has come to expect his cheque, if he has not already spent it, it is unrealistic for the rebate to be now withdrawn.

Second, I do understand the need for "feel good" factors and to give the public something "positive" to look forward to, such as the theme park, such as the Cyberport. But in doing so, the Financial Secretary has, with respect, deviated from his sober tone. They wax too much of wishful thinking, while hard calculation is more appropriate. Rushing ahead in the Cyberport deal has also compromised the Government's hard earned reputation for impartiality and transparency. I hope that this Financial Secretary will, in his reply, give this Council full explanation.

Third, on stamp duty, I cannot see the basis for the proposed increase. True, at the present stage, the first increase of 0.25% starts at properties of $3,000,001, while the majority of properties are below $3 million. However, even a slight recovery in prices would immediately change the picture. Given the general aim of bringing price down, this is certainly incongruous. I feel that the Financial Secretary could have done better.

With these words, Madam President, I support the Bill.

MR CHAN KWOK-KEUNG (in Cantonese): Madam President, Hong Kong has experienced in recent years its first economic recession in several decades. After the onslaught of the financial turmoil, both the Chief Executive and the Financial Secretary had predicted that Hong Kong would be the first to recover in Asia. However, this prediction has been proven wrong. The latest economic data indicate that Hong Kong's economy has shrunk by 7.1%, Singapore by 0.8% while Taiwan's economy has grown by 3.71%, pointing to the fact that Hong Kong lags far behind Singapore and Taiwan in the pace of economic recovery.

As the economy is still in the doldrums, the number of unemployed people is increasing daily. Hong Kong's unemployment rate has been on the increase since the third quarter of 1997 with the latest provisional unemployment rate standing at 6%, which means there are more than 206 000 jobless people out of a workforce of more than 3.4 million. And this rate is expected to continue to rise.

The downturn in the economy, coupled with the threat of losing jobs which haunts employees, has spread a feeling of discontent among the people of Hong Kong, particularly the unemployed. The recent successive cases involving unemployed persons committing suicide indicate the seriousness of anxiety among the unemployed. Two weeks ago, a person who had psychiatric problems related to unemployment pushed an innocent female passenger onto MTR tracks. All of these cases have sounded an alarm in the community. Moreover, even those who are lucky enough to keep their jobs are also affected by reduction in wages and benefits, which they have to bear and keep the resentment to themselves for fear of losing their jobs.

What the public wishes to see is a budget that can bring comfort to them and alleviate their hardship, as well as stimulate the sagging economy. As a matter of fact, the Financial Secretary did paint a beautiful picture for the future. For example, the Government will strive for the building of a Disney theme park in Hong Kong, and the proposed Cyberport at Telegraph Bay. These projects, if implemented, will create tens of thousands of jobs for Hong Kong as well as break new ground for our economy. What is more, many revenue proposals in the Budget, such as the 10% tax rebate and the concession of 50% of the Rates for the next quarter, have been applauded by the public in general. Nevertheless, the Budget has offered no solution to the unemployment problem that plagues the public seriously. Miss CHAN Yuen-han and Mr CHAN Wing-chan, two of my colleagues, have commented on this subject. I do not want to repeat what they have said.

I would like to talk about the proposed civil service reform. I am glad to see the presence of Mr LAM Woon-kwong, the Secretary for the Civil Service, because he is the most suitable person to listen to my views on this subject.

The Government unveiled its civil service reform proposals in this Budget. The Federation of Trade Unions (FTU) supports the principle and spirit of this reform. We see the need for reform, but how to carry it out is open to debate. We are of the view that a mechanism must be put in place before embarking on a series of reform, so that civil service unions can have a role to play. However, it is apparent that the Government has unilaterally unveiled its ideas about the reform only. Therefore, civil servant's morale as a whole has been seriously hit after the publication of the consultation paper. In addition to the views of the public, the Government should also listen to the views of civil service unions.

The Government must get to know the problems and their roots in the present civil service system before embarking on any reform. We agree that there are many problems in the present civil service system, such as a bloated structure, low efficiency, slackness and a lack of competitiveness. Many people therefore consider it important to launch reforms so as to improve the efficiency and service of the Civil Service, and to ensure the proper use and allocation of public resources. These reforms are welcomed not only by the public but also by civil servants themselves.

There have been some adverse reports about civil servants in the media recently, such as underwork among meter readers in the Water Supplies Department, who were also found to get off work early; lazy employees in the Urban Services Department and so on. While such a low efficiency, slack attitude and poor quality of service should be criticized, it is obviously the loopholes in the system which are at the root of such an unhealthy culture, for which the management is to blame for the greater part. It is impossible for front line staff at basic ranks to be lazy if a sound management system which is fair in meting out rewards and punishments is put in place. An ideal civil service should have better service objectives, higher efficiency and stronger competitiveness comparable to those of the private sector. These should be the aims of the reform.

However, the direction for the reform as outlined in the consultation document has run counter to these aims. The Financial Secretary highlighted a few initiatives, such as the recruitment of more contract staff to replace those on pensionable terms, the contracting out of certain services and the "privatization of public corporations" and so on. All of these initiatives only give the impression that the Government is very determined to get rid of what it considers a huge civil service burden.

We consider the transition from pensionable terms to contract terms in the civil service system itself a big "revolution". The obvious targets of the reform are civil servants at basic ranks. The Government aims to create a bottleneck. Those civil servants who manage to pass through this bottleneck will be offered pensionable terms and become formal civil servants while those squeezed out will remain contract staff only.

This initiative is based on the assumption that stability among front-line civil servants at basic ranks is no longer required. As long as their performance is not satisfactory, they can be sacked at any time. But we consider that a certain degree of stability, loyalty and cleanness should be maintained among civil servants at basic ranks as they directly implement government policies and provide service to the public. The adoption of contract terms will increase the wastage among civil servants and result in their being not content with their jobs.

While contract terms are more flexible, pensionable terms can ensure the relative stability in the Civil Service as a whole. The question of whether or not pensionable terms are more suitable than contract terms for the public sector or vice versa should be carefully studied in the community, and reforms in this respect should not be rushed through.

In addition, another important aspect of reform mentioned by the Financial Secretary in this Budget is the "privatization of public corporations". The Government wishes to solve the problem of low efficiency and management by adopting approaches in the open market. Nevertheless, privatization is not suitable for all public services, such as those provided by the police and the Customs and Excise Department. Moreover, the proposal mentioned by the Financial Secretary to allow private sector participation in the supply of water requires careful consideration as fresh water is a daily necessity for the public. The public will be very concerned about whether water charges will be kept to a reasonable level and the quality of the water will meet the standards if the private sector is allowed to supply or participate in the supply of water.

If improvements can be made to the existing civil service system and to problems with management, then why is privatization necessary? The privatization of public sector services is not the solution to all problems. What is more, such reforms may bring about new problems in that it will become very difficult to control and monitor the utilization of resources by public corporations after they have been delegated the power to run independently. The Kowloon and Canton Railway Corporation and the Mass Transit Railway Corporation are two examples in point.

Take the Hospital Authority (HA) as an example, while medical service has improved after the establishment of the HA, many more problems have emerged at the same time, with the most serious being a bloated establishment of management and senior staff. As resources are limited, a multiple increase in expenditure on salary packages for senior staff is achieved at the expense of expenditure on other aspects. As the management did not want to reduce its own establishment, its natural target was staff at middle and junior levels, thus increasing the workload of and pressure on front-line staff, which in turn has hit their morale and resulted in more medical incidents. Careful review and intensive discussions are therefore required before privatization should be launched.

We disagree with the idea of a whole sale privatization for the public sector because this will affect not only civil servants' interests, but also the community as a whole. Has the Government assessed the impact? For example, in the privatization of public housing estates management by the Housing Department (HD), the Government gives two options to HD staff: to form their own companies to bid for the relevant work or to voluntarily seek employment from the new company, otherwise, they must leave their jobs. If a large number of civil servants at basic ranks are pushed into the job market at this time, it will cause a huge impact on the market and ultimately place a huge burden on the community which will pay a high price. During the seventies and eighties, the privatization of state enterprises in some countries brought a serious impact on the labour market. With a highly unfavourable business environment in Hong Kong at present, privatization will only increase the burden on society. Instead of solving the problem, it will just shift it from the Government to the community. As a matter of fact, HD staff are willing to accept reform and put in their best performance and raise efficiency. However, the Government is obsessed with privatization without considering the need to provide opportunities for staff to stay in their jobs, to transfer to another job and to undergo retraining. Is this fair and reasonable?

We are aware of the existence of many shortcomings in the civil service system which has such a long history. What the public, including the civil servants themselves, would like to see is an improvement and modernization of management within the civil service system through reforming certain unreasonable aspects in the existing system. However, the civil service reform in its current form is not moving in this direction. It amounts to a revolutionary transformation. What is more, the reform has now a framework only. The Government should consult civil service unions extensively on the specific course of action.

To sum up, civil service reform concerns the interest of the community as a whole. It is not a simple question of "yes" or "no". We particularly oppose the Government launching a stormy "revolution" because we are worried that such a hasty move to privatize the Civil Service and to embark on an overhaul of the system may devastate the stability, loyalty and cleanness of the Civil Service, instead of targeting on the deficiencies in management and the shortcomings in the existing system for reform. Finally, we consider it imperative for the Government to listen to the views expressed by various parties in the community, including those of civil service unions, in the course of reform, in order to let civil servants participate in the reform and to draw up a civil service reform programme which is suitable to the social environment and practical needs of Hong Kong.

Madam President, I so submit.

MR FRED LI (in Cantonese): Madam President, I will speak on three issues: first, the question of welfare; second, consumer rights and third, the privatization of the Water Supplies Department.

In terms of social welfare, I will talk about the contracting out of home help service, the follow-up to the review on the Comprehensive Social Security Assistance (CSSA) Scheme and the development of direct services. This year, the Government will establish 21 additional home help teams as a pilot scheme for the contracting out of welfare services by the Social Welfare Department (SWD). Services will be contracted out by means of competitive bidding, on a cost and quality basis. The meal delivery service will be separated from other care services, so that trained members of home help teams can provide more highly skilled services, such as helping disabled old people to take baths, in order to enhance the cost effectiveness of home help teams. While I am in favour of this, we are concerned about how, in contracting out services, the Government can ensure that the old people will get reasonable services. How will it ensure that meals will be delivered to their places punctually? The SWD started buying places from private residential care homes several years ago. However, to date, some of the private residential care homes participating in the Bought Place Scheme have still not met the requirements for applying for a formal licence. In view of this experience, we are really worried about the contracting out of meal delivery service by the SWD. Besides, the consultancy report was completed in two months and the first contracts will be awarded in the middle of this year. With such hastiness, can the SWD do a good monitoring job? We are concerned about this. Meal delivery service will be contracted out by the SWD to both private organizations and non-government organizations (NGOs). The salary and benefits of staff of private organizations are not as good as those of NGOs and personnel changes are relatively frequent. If handled carelessly, it might cause hazards to the old people and staff making deliveries. Since their salary cost is lower, private organizations can provide service at a lower price. Therefore, I hope that when contracting out services, "quality will not be scarified for the sake of price". Rather, priority should be given to quality and the standards of which spelt out in detail.

The Government has completed its review on the CSSA Scheme. We regret that the Government will implement several measures to reduce CSSA for the sake of cutting public expenditure. I will not repeat my previous points today. I just want to talk about the question of whether the Government has provided adequate resources to help CSSA recipients re-enter the labour market. The CSSA review recommends the active provision of employment support services, providing information on job vacancies to CSSA recipients, organizing talks on job seeking and drawing up individual job seeking plans. However, instead of setting up ad hoc groups to provide these services, arrangements are made for staff of the Social Security Branch to provide them. Yet the Government has established a 16-strong special investigation team to combat cases of fraud in the collection of CSSA. This shows clearly the priority in the allocation of resources. The Government is half-hearted in helping CSSA recipients find jobs. The present Job Matching Programme financed by the Lottery Fund provides leave relief jobs to unemployed CSSA recipients. However, the pay received by unemployed CSSA recipients for low-pay or part-time jobs must be deducted from the CSSA amount in full. In other words, CSSA recipients participating in this programme will not be able to increase their income through work. One can imagine how effective such a programme would be. I hope that the Government could give the Legislative Council a satisfactory reply and allow CSSA recipients doing part-time jobs to retain part of their income.

With regard to the establishment of a social welfare development fund, we have talked about this repeatedly and the Government has repeatedly objected to it. However, I want to propose it again and hope that the Administration will reconsider it, since the economic factors have already had a very negative impact on social services. Although the real growth in this year's expenditure on welfare is 13.6%, 72.6% of it is used on financial assistance in terms of CSSA. The increase in expenditure on CSSA creates a false impression that the Government has injected large amount of resources to improve some direct social welfare services. But in fact, the resources allocated to social services (such as school social workers) account for only 3.8% of public expenditure. Very few services could be expanded and the amount of additional resources they get is meagre. Most disappointing of all is the so-called newly added services, such as the additional 1 765 day nursery places. In fact, last year's Budget already made provision for these places. However, due to the SWD's inefficiency, the plan for creating these places has been delayed. In other words, these services are in fact not added this year. I hope that the Administration will stop manipulating the facts and putting the commitments that have not been fulfilled this year into the Budget again next year, passing them for new commitments and misleading the people. With regard to services that have long been gravely inadequate, such as the number of medical social workers, although the Administration says that six additional medical social workers will be recruited this year, the workload of each social worker will increase rather than decrease. Unreasonable workload will ultimately lead to a decline in the quality of service and the recipients of service will suffer in the end. As for youth services, while 16 school social workers are added this year, the goal of "one social worker for every school" demanded by the various quarters over the years has not been reached. Even the aim of "two social workers for every three schools" proposed in the relevant review of the SWD has not been achieved. The Government's Steering Group on Outreaching Social Work's proposal to add two teams each year has also been turned down due to the shortage of resources. Because of the economic downturn, the Community Chest has failed to raise sufficient funds. The funds raised by the Community Chest are used to finance social services in general. It is expected that $187 million will be needed for the year 1999 to 2000. However, the Community Chest has so far raised only $127 million. Thus, it will have a deficit of $60 million. It is clear that under the present economic conditions, both services subvented by the Government and services financed by funds raised in the private sector are facing a financially tight situation. Under these circumstances, it is difficult enough to maintain the existing standards of service, not to mention improve the services and attain the standards of service pledged by the Government years ago. However, it is precisely because of the economic recession that people have more urgent need for social welfare services. If proper support is not provided in time, it will ultimately lead to a deterioration of social problems, such as juvenile delinquency, family violence and so on, and the community will have an even heavier price to pay. Therefore, I have raised this point again in the hope that the Government will seriously consider the establishment of a social welfare development fund, in order to reduce the negative impact of economic factors on social services.

With regard to the consumers, during the past year, the people and the enterprises suffered greatly under the high oil prices and interest rates. One of the main reasons was that prices were controlled by enterprises instead of the market mechanism. In the Financial Secretary's present Budget, it seems to me that he has not seen these problems. He has not mentioned the issue of fair competition again, or how a really fair business environment conducive to promoting the long-term development of Hong Kong should be created. The Democratic Party is disappointed about this.

After repeated requests by the Legislative Council, the Competition Policy Advisory Group finally published a report recently, listing 32 measures made government departments that may be considered anti-competitive. However, the report has made no recommendations concerning these anti-competitive measures. Nor has it set out any concrete proposal or agenda. In our view, this is a window-dressing report done in a half-hearted manner. Most disappointing of all, the Competition Policy Advisory Group has come up with no solution or recommendation about well known business practices that go against fair competition, such as in the areas of electricity and gas supply, interest rate agreements and container handling charges. While the Advisory Group knows that there are plenty of practices that run counter to fair competition in government departments, it is helpless against them. We cannot help but think of this Advisory Group as just a white elephant that is even worse than a bluffing toothless tiger. I wonder how the Financial Secretary feels as chairman of this Advisory Group.

Lastly, I would like to talk about the question of privatization of the Water Supplies Department (WSD). With regard to this issue, our views differ from the views of some friends. In the Budget, the Financial Secretary indicates that the Government intends to introduce private sector participation into the provision of water supply services. The Democratic Party supports this proposal of the Government in principle. Actually, with the exception of water supply services, other public utilities, such as electricity, towngas and telephone services, are private sector businesses, with the Government playing only a monitoring role. Therefore, in principle, there is no need to insist that water supply services must be provided by the Government. If one studies the matter and finds that private sector participation will make water supply services more cost-effective and more efficient in operation, as well as greatly enhance the quality of service, while prices will be maintained at a reasonable level, I am sure that the community will support privatization. Besides, other private companies have always had greater operational efficiency, productivity and capacity for profit-making as well as better quality of service than government departments. Therefore, the Democratic Party considers it appropriate for the Government to commission a consultancy study on the privatization of water supply services at this stage. Hong Kong can also learn from the experience of other countries. Some academics in Hong Kong have studied the privatization of water supply services in detail. They pointed out that in Britain, the United States and even in neighbouring Macau, water supply services are provided by the private sector. They even found a marked improvement in the water supply services after the introduction of private sector participation. Another point that should be noted is that the operational efficiency, productivity and rate of return of the WSD in Hong Kong in recent years have gradually declined. Water charges are increasingly subsidized by the rates and the cases of mains leaks and bursts have become more frequent. It is obvious that the operation of the WSD is rather undesirable. No matter whether the Government should consider introducing private sector participation, I think that this is the right time to conduct a full review of the operation of the WSD. According to the annual reports of the WSD and the Government's operating accounts of the public utilities, since 1985-86, the actual rate of return of the WSD has been lower than the target rate of return of 7%, while the actual rate of return in 1997 dropped to only 2.9%. Due to the gradual ageing of water pipes, there were as many as 1 473 cases of mains bursts in 1997-98. The WSD claims that 22.5% of potable water is wasted through leaks. However, we find that the share of chargeable water consumption in the total water consumption has consistently declined over the past 10 years, dropping from 72% in 1988 to 64% in 1997. In other words, in 1997, 63% of the water consumption could not be charged because of leaks or illegal tapping. The share of the rates and the subsidy for free supply in the total income of the WSD has also kept increasing, reaching 50.9% of its total income in 1996-97. Although water consumption in Hong Kong has consistently decreased, the number of staff of the WSD has kept increasing. In 1997-98, the WSD has 6 056 staff members, representing an increase of 7.8% compared to five years ago. This shows that the productivity of the WSD has consistently declined.

Finally, I wish to point out that overseas experience in privatization of water supply services shows that the large input of capital by private companies brings about improvement in the production equipment and the quality of service. Actually, water supply services require large capital input. In 1997-98, the capital investment of the WSD was approximately $2.5 billion. If the WSD is corporatized or operates with a trading fund, it will only change the mode of management of the WSD, rather than open up new channels for raising funds for water supply services, so as to reduce the Government's financial commitment in infrastructure for water supply. The undesirable operation of the WSD cannot be ignored. I believe that in the process of privatizing the water supply services, we might encounter many problems such as staff arrangement, the monitoring of charges and whether the mechanism of subsidy needs to be changed. I hope that the Government will not make compromises to evade some sensitive issues, and "make a muddle" of the privatization plan.

Madam President, we know that Mr LEE Cheuk-yan has withdrawn his amendment and that the people should receive the tax rebate cheques soon. I hope that the 60 Members of this Council will also receive these cheques in the next few days. I urge Members to spend the money locally, instead of going to karaokes in the Mainland. With these remarks, I support the Bill.

MR LAU KONG-WAH (in Cantonese): Madam President, as the spokesman on transport affairs for the Democratic Alliance for the Betterment of Hong Kong (DAB), I have originally intended to speak on revenue and expenditure on transport. However, some Honourable Members have spoken on these matters in great detail, especially those concerning fares charged by public transport companies and the listing of the Mass Transit Railway Corporation (MTRC). The DAB's stance on these matters is very clear.

As a matter of fact, being the last in line to speak enjoys the advantage of commenting on the views expressed by some Honourable Members just now, especially on matters concerning the philosophy of fiscal management. I therefore wish to effect an exchange of ideas on this matter.

The majority of my colleagues in this Council support the Budget for the next financial year, though there are a few who are against it with the Honourable Miss Emily LAU and the Honourable LEE Cheuk-yan having stated their opposition. It is of course only natural for government policy to meet with both support and opposition. Nevertheless, those against it should give their reasons.

I have found three points in Miss LAU's speech yesterday open to debate. First, Miss LAU spoke on behalf of the Frontier against the proposal for a tax rebate, especially a rebate in profits tax. The Frontier will therefore vote against this Budget. However, I have noticed from the record that a joint meeting was held last year between the Financial Secretary and "the six Parties plus one Group and one Front", in which a demand for a 20% tax rebate was made and the Honourable Miss Cyd HO from the Frontier was present. In other words, the Frontier was then in favour of a tax rebate. Why are they against it now? If it is because the present situation is different from that in the past, is this a reflection of their lack of mature consideration at that time? Why are they overturning their own position of yesterday? If the Frontier is to use these contradictory reasons to oppose this Budget, I think they owe us a further explanation.

Mr LEE Cheuk-yan's withdrawal of his motion just now has again demonstrated the Frontier's inconspicuous stance. Mr LEE ......

PRESIDENT (in Cantonese): Miss Cyd HO, do you want to elucidate? If so, please do it after Mr LAU has finished speaking. Please sit down first.

MR LAU KONG-WAH (in Cantonese): Mr LEE Chuek-yan often says that he will "stand firmly" by what he champions, but he gives in in the face of pressure. He still considered an early or late payment of the tax rebate to taxpayers the focal point. He was wrong. The focal point of our argument concerns a matter of principle. His principle is wrong. When Mr LEE proposed a cap of $100,000 on the tax rebate, I immediacy got the impression that this was a typical mentality of "being jealous of other people getting rich", which is unfair and sends out an erroneous message. The original purpose of a tax rebate was to produce some psychologically positive effect on employees or businessmen. Unfortunately, the amendment proposed by Mr LEE has produced a psychological blow and a far-reaching adverse effect. Madam President, should Hong Kong be hostile to big corporations? My answer is an emphatic "no".

Miss LAU talked about her expectations of the younger generations yesterday. She was against the worship for money, which is characteristic of Hong Kong. I totally agree with her. I also hope we can do more in nurturing the next generation. However, do Members from the Frontier agree that we should not instil a sense of hatred of big business groups or antagonism in our next generation as this will do serious harm to Hong Kong? I therefore very much hope the Frontier will take account of the overall interest of Hong Kong when they play their games.

Let us look at other countries and regions, such as South Korea, Japan and Singapore and so on, where the people are always united when their country is in economic recession and no one will do anything to divide the community. Why should they struggle against big corporations? Even though the DAB's stronghold lies in the middle and grassroots classes, we have never shown a hatred of the business sector. We are of the view that the business sector and the middle and grassroots classes depend on each other for survival. This is also the foundation for Hong Kong's survival as well as a trend in the world.

My impression is that the Frontier is always against the implementation of policies by the Chief Executive, Mr TUNG Chee-hwa, ever since the establishment of the Special Administrative Region. There is no escape for his decision to ask Mrs Anson CHAN to stay on as Chief Secretary for Administration. Moreover, the Frontier always wields a stick against the three most senior secretaries in the Administration, namely the Chief Secretary for Administration, the Financial Secretary and the Secretary for Justice. They have even demanded their resignations. The Frontier also shows a hatred of big corporations, regarding them as being "unscrupulous". Therefore, the Frontier's tactics can be described as "opposing anything about Mr TUNG Chee-hwa"; "regarding every businessman as unscrupulous"; "every policy secretary should be subject to ridicule, after which they should be removed". Are these combatant tactics good for Hong Kong?

Madam President, the second point raised by Miss LAU concerns the relationship between the development of the Cyberport and the Government. Why was a single tender invited? Of course, my DAB colleagues have also raised this point. But please remember that the Government has in fact unveiled two infrastructure proposals. Apart from the Cyberport, the proposed Disney theme park has not gone through an open tendering process either. Why did the Government favour the Disney theme park? Apart from the Disney, we can also approach Hello Kitty and the Warner Brothers. Why did Miss LAU single out the Government's handling of the Cyberport for query while letting it get away with its handling of the Disney theme park? Does this amount to double standards? Why are they especially harsh to local companies while showing remarkable generosity to consortia from the United States? Why do they always wield a stick to local companies while favouring investors from the United States? The DAB is of the view that we should welcome investors from everywhere in the world and this is what has made Hong Kong such a successful city.

Madam President, Prof TIEN Chang-lin said recently that the latest studies by economists in the West have found that the economic prosperity in a country or a region cannot depend entirely on financial services and foreign trade; it must be accompanied by the development of high value-added technologies. I fully agree with this view. Hong Kong is moving in this direction and this is the path we must take in spite of the risks involved.

Overseas experience has indicated that participation of the business sector is of paramount importance to the development of high value-added technologies though support from the government is also indispensable. Let us take a look at the experiences in Taiwan and Israel. I think that the key to their success is a combination of policy and the strong feelings towards the homeland among their people. We have seen Chinese people return to Taiwan from the United States, Jews return to Israel from Russia. This is their secret of success. As many Chinese people from Hong Kong and the Mainland now live in Europe and North America, coupled with its geographical location, highly educated population and a smooth flow of capital, Hong Kong is ideally placed to break new ground. What is lacking is a proper policy. I am pleased to note that such a policy is now put into practice and a decisive factor is leadership in this respect. For example, in Taiwan during the seventies, Mr LI Kuo-ting went to the United States a few times just to show his sincerity in inviting ethnic Chinese scientists to return to Taiwan for development. His efforts have been paid off. I would like to ask an urgent question: When will we find our Mr LI Kuo-ting in Hong Kong?

Thirdly, I disagree with Miss LAU's opposition to Article 107 of the Basic Law, which outlines the principle of fiscal prudence. She regards the provision that "the Hong Kong Special Administrative Region shall follow the principle of keeping expenditure within the limits of revenues in drawing up its budget, and strive to achieve a fiscal balance, avoid deficits and keep the budget commensurate with the growth rate of its gross domestic product" as "a pair of manacles". I would like to ask what is wrong with the principle of "keeping expenditure within the limits of revenues"? What is wrong with the principle of "striving to achieve a fiscal balance"?

As a matter of fact, I have found that the Government has departed a little bit from this principle in the past year or two. While I fully understand the reasons for the departure, what is alarming is that such a departure indicates that the increase in real terms in government expenditure will outpace the growth of GDP in real terms in the next few years. Hong Kong's lifeline is its huge fiscal reserves which have proved their value, particularly when we look back in the aftermath of the financial turmoil from a global perspective. Hong Kong must uphold its fiscal prudence. In my opinion, such a safeguard provided in the Basic Law should also be preserved.

I would like to suggest that Miss LAU read an article in the latest edition of Foreign Affairs, a monthly periodical in the United States, in which an economist from the Harvard University gave a piece of advice to the emerging markets, which can also be regarded as the latest conclusion, that whenever a financial storm strikes, rescue from the international community is in fact very limited and the best way out was through self-rescue. He advanced the most important measure for self-rescue and that was: to maintain liquidity and huge foreign exchange reserves. Therefore, I think that the purpose of Article 107 of the Basic Law is to provide such a safeguard. Should our success in the past be regarded as a failure of today? Before the transfer of the sovereignty, some people advocated leaving no fiscal reserves, not even a cent, to the future SAR Government. After the transfer of sovereignty, some other people are opposed to the Basic Law and the principle of fiscal prudence. One cannot help questioning their motives.

Madam President, the Budget reflects to a certain extent the SAR Government's philosophy of fiscal management. It is also a focal point of how the Government administers Hong Kong and deals with the interrelations between various strata in society. I would like to see more debate on this in the community so as to help the Government to plan for the long term instead of living from hand to mouth.

With these remarks, I support the Bill. Thank you, Madam President.

PRESIDENT (in Cantonese): Miss Cyd HO wishes to elucidate her speech just now. Under Rule 38(3) of the Rules of Procedure, Miss HO, you can speak again to explain the part in your previous speech which has been misunderstood, but you cannot introduce new matter.

MISS CYD HO (in Cantonese): Thank you, Madam President. What I wish to clarify is the part of my speech on tax rebate. In requesting the Government to offer tax rebate in summer 1998, the six parties, the Frontier and the breakfast group proposed to use the surplus gained in the financial year 1996-97 to support the tax rebate payments. At that time, the Honourable Ronald ARCULLI put forward a very good idea. In view of the $26 billion surplus gained in that financial year, we asked for a 20% tax rebate, which would amount to $16.8 billion. That way, the Government could still keep some surplus after making the tax rebate. Nevertheless, the Government has chosen to set aside $8.5 billion for tax rebate from the deficit budget of the coming financial year, thereby causing the financial years 2001-02 and 2002-03 to cut back on expenditure to forcibly produce a surplus of some $22 billion plus. As to the arguments advanced by the Honourable Member against the views raised by Miss Emily LAU regarding the Budget, I am afraid they sounded more like arguments made in an election debate. Perhaps we should wait until 2000 to discuss them.

PRESIDENT (in Cantonese): Miss HO, I have told you from the very beginning that you could clarify only the part of your speech which has been misunderstood, and you should not introduce new matters in your explanation. Just now you have referred to a series of figures which I could not recall whether you had already referred to in your first speech. Anyway, now that you have raised them, I must remind you that you shall not do that again.

MISS CYD HO (in Cantonese): Thank you, Madam President.

MR RONALD ARCULLI: Madam President, I am grateful that you have acceded to my request to be the last speaker on the motion that the Appropriation Bill 1999 be read a Second time. It is not because I want to have the last word because that is the prerogative of the Financial Secretary. Maybe it is because the new millennium is just over nine months away and we have not focused on the fact that this is the last Budget for Hong Kong in the 20th century. Someone said to me that he thought I was reserving the last spot for myself, as there may be some significance in being the last Member to speak on the last Budget in this century. Madam President, the truth of the matter is that I put pen to paper to jot down my speech at 2.30 pm today.

Madam President, some Honourable Members have suggested and implied that the Financial Secretary has once again performed like a magician. I understand their sentiment but disagree with their comparison, for magic implies tricks or illusions, neither of which is in his Budget, although there are areas which I would describe as tricky, like increasing stamp duty on property transactions or increasing fixed penalty for traffic related offences.

Madam President, some Honourable Members have criticized aspects of the Budget as unfair or inequality of treatment, and I specifically refer to the proposed 10% tax refund of salaries, profits and property taxes for the year 1997-98. The Financial Secretary has not discriminated against salaries or profits taxpayers in that neither tax rates have changed. Fees and charges remain frozen whoever pays. Rateable values for commercial, industrial or residential properties will all be reassessed and will take effect on 1 April 1999. In this Budget, there are other examples of equal or fair treatment.

Madam President, I shall now turn to the management of public finances before I deal with specific policies or measures.

I do not think any Honourable Member will advocate that we as a community should live beyond our means. Anyone who has ever doubted the wisdom of living within our means must admit that it was not simply the right policy for Hong Kong but indeed, the only policy for Hong Kong. Whenever we disagree with the Financial Secretary or his predecessors, the argument is generally over the allocation of resources or, more importantly, the efficiency or cost-effectiveness of using such resources. The Financial Secretary in this Budget has thrown down his gauntlet to challenge not only his 189 000 civil service colleagues but also the 140 000-strong government-subvented public sector. The Financial Secretary has reminded us that education, health and social welfare account for 50% of total recurrent public expenditure. Our public health services are virtually free with a 98% subsidy looking after 92% of the community. We have nine years of free primary and secondary (partly) education, and our tertiary students are subsidized 82%. It is, therefore, quite right that we must critically examine our ability to continue these policies. Many of the more fortunate members of our community, ranging from new graduates to tycoons, question our financial ability to carry on whilst some wonder why these subsidies are not means-tested. When the Financial Secretary said it was not easy drawing up this Budget, I suspect that these reforms topped the unpopularity chart, but we as a community will remember the Financial Secretary's courage in putting forward these essential reforms. Today is neither the time nor place to debate the details of these initiatives. We will have plenty of time to do that.

Madam President, I shall now turn to that part of the Budget entitled "Strengthening Our Fundamentals".

On a global basis, we must not abandon our pursuit for upgrading the global financial architecture. We must use every opportunity we have to push for this highly desirable new order. We must not let it become mere buzz words.

Madam President, one of the more controversial moves in 1998-99 was the Government's incursion into the stock market last August. Most of us supported the move as necessary. It appears that we have not just driven away speculators who were bent on mischief, but we have also gained about $9.3 billion in the process for the year 1998-99. I would, however, add a word of caution. When the Hong Kong Monetary Authority reduces our local equity holdings from 17% of the Exchange Fund to 5%, it is possible that this realization would give a return lower or higher than the levels at which we receive the windfall of $9.3 billion. If it is lower, future returns on our fiscal reserves will be lower.

I will now deal with our banking sector, securities, debt and futures markets.

In the banking sector consultancy study, there are four major issues. First, abolition of interest rate rule on current and savings accounts and time deposits of up to six days. Second, consolidating the existing three-tier authorized institutions into two tiers, so that we have licensed banks and restricted license banks, the latter not being allowed to take small deposits or operate current or savings accounts. Third, relaxing qualifying requirements for foreign banks including multi-branch operations. Fourth, to revisit the issue of deposit insurance for bank depositors.

Madam President, the implementation of most of these key issues is likely to enhance our banking sector. Personally, I have some reservations about not requiring foreign bank branches in Hong Kong to have branch capital. My reasons include the withdrawal by quite a few branches of foreign banks from the Hong Kong loan market, creating the liquidity crunch we are still facing, and the proposal to increase minimum capital of locally incorporated banks from $150 million to $300 million. These two factors may be unrelated, but it would be interpreted as "big and foreign" is beautiful.

Madam President, I have long advocated for the development of a debt market. Our claim that Hong Kong is a premier international financial centre will ring a little hollow if we do not establish a debt market as soon as possible. The Financial Secretary has set out in paragraphs 43, 44 and 45 some of the steps we can take that will develop Hong Kong into the debt capital of Asia. Perhaps with the reforms to be undertaken by our stock and futures markets, we should also tackle this aspiration in earnest.

I now turn to our securities and futures markets. I must say I am delighted that the proposals put forward by the Financial Secretary have been welcomed by the exchanges. I confess I had some doubts as to how these proposals would be received. In Hong Kong, we pride ourselves as a market leader in the region, if not in the world. The reform proposals in my view have been long overdue. No one should underestimate their complexity or their far-reaching implications. However, because I am convinced that Hong Kong's future economic success is as a major financial and service centre, the quicker we move, the better for us.

Madam President, no Budget debate by any Honourable Member would be complete if we cannot find any fault. It, therefore, should come as no surprise to the Financial Secretary that I am no exception. Perhaps he can take some comfort that I actually toyed with the idea but decided that the increase of stamp duty on property transactions cannot be supported. Some years ago when the Administration introduced stamp duty on agreements for sale and purchase, I opposed that measure because it increased the price of a property to a purchaser, particularly if he cancelled or rescinded the agreement or, indeed, wanted to re-sell even at a loss. It was also wrong that stamp duty be paid without the legal title being assigned. The Financial Secretary has finally seen the error of his ways. Unfortunately, what he has given with one hand, he has taken away with the other by increasing the stamp duty payable for properties costing over $3 million. The increase for properties over $3 million and up to $4 million is 12.5%, for those over $4 million and up to $6 million is 9.1%, and for those over $6 million is 36.37%. It seems extremely odd that the Financial Secretary increases the stamp duty in the midst of attempts to enhance stability in the property market. Madam President, I shall vote against this measure in due course.

Madam President, overall, this Budget is a good budget, for it includes bold initiatives and measures that will set the scene for Hong Kong's recovery to economic growth. Initiatives like the civil service and public sector reforms will reduce the burden on the public purse, but these alone will not spare our future generations for the policies we have today. It is, therefore, vital that we do not only support these bold and visionary initiatives, but we must also have the courage to push for policy reform in areas that we know we are heading for trouble.

With these observations, I support the Second Reading of the Bill.

PRESIDENT (in Cantonese): Thirty Honourable Members have spoken in this motion debate. There are altogether 59 Honourable Members who have spoken on this topic yesterday and today.

DR YEUNG SUM (in Cantonese): Madam President, thank you for granting me leave to speak for the second time. I move that the debate on the Second Reading of the Appropriation Bill 1999 be adjourned to the meeting on 31 March 1999.

PRESIDENT (in Cantonese): I now propose the question to you and that is: That the debate on the Second Reading of the Appropriation Bill 1999 be adjourned to the meeting on 31 March 1999.

I now put the question to you as stated. Will those in favour please raise their hands?

(Members raised their hands)

PRESIDENT (in Cantonese): Those against please raise their hands.

(No hands raised)

PRESIDENT (in Cantonese): I think the question is agreed by a majority respectively of each of the two groups of Members, that is, those returned by functional constituencies and those returned by geographical constituencies through direct elections and by the Election Committee, who are present. I declare the motion passed.


PRESIDENT (in Cantonese): I now adjourn the Council until 2.30 pm on Wednesday, 31 March 1999.

Adjourned accordingly at nineteen minutes past Eight o'clock. -