Finance Committee (Minutes) 18 Dec 98

LC Paper No. FC127/98-99
(These minutes have been
seen by the Administration)

Ref : CB1/F/1/2

Finance Committee of the Legislative Council

Minutes of the 11th meeting held at the Legislative Council Chamber on Friday, 18 December 1998, at 2:30 pm

Members present :

Hon CHAN Kam-lam (Deputy Chairman)
Hon Kenneth TING Woo-shou, JP
Hon David CHU Yu-lin
Hon HO Sai-chu, JP
Hon Cyd HO Sau-lan
Hon Edward HO Sing-tin, JP
Hon Albert HO Chun-yan
Hon Michael HO Mun-ka
Dr Hon Raymond HO Chung-tai, JP
Hon LEE Wing-tat
Hon LEE Cheuk-yan
Hon Martin LEE Chu-ming, SC, JP
Hon Eric LI Ka-cheung, JP
Hon LEE Kai-ming, JP
Dr Hon LUI Ming-wah, JP
Hon NG Leung-sing
Prof Hon NG Ching-fai
Hon Mrs Selina CHOW LIANG Shuk-yee, JP
Hon MA Fung-kwok
Hon James TO Kun-sun
Hon CHEUNG Man-kwong
Hon Ambrose CHEUNG Wing-sum, JP
Hon HUI Cheung-ching
Hon Christine LOH
Hon CHAN Kwok-keung
Hon CHAN Wing-chan
Dr Hon LEONG Che-hung, JP
Hon Mrs Sophie LEUNG LAU Yau-fun, JP
Hon LEUNG Yiu-chung
Hon Gary CHENG Kai-nam
Hon SIN Chung-kai
Hon Jasper TSANG Yok-sing, JP
Hon Howard YOUNG, JP
Dr Hon YEUNG Sum
Hon YEUNG Yiu-chung
Hon LAU Chin-shek, JP
Hon LAU Kong-wah
Hon Ambrose LAU Hon-chuen, JP
Hon Emily LAU Wai-hing, JP
Hon CHOY So-yuk
Hon Andrew CHENG Kar-foo
Hon SZETO Wah
Hon TAM Yiu-chung, JP
Dr Hon TANG Siu-tong, JP

Members absent :

Hon Ronald ARCULLI, JP (Chairman)
Hon James TIEN Pei-chun, JP
Dr Hon David LI Kwok-po, JP
Hon Fred LI Wah-ming
Hon Margaret NG
Hon CHAN Yuen-han
Hon Bernard CHAN
Hon Andrew WONG Wang-fat, JP
Dr Hon Philip WONG Yu-hong
Hon WONG Yung-kan
Hon LAU Wong-fat, GBS, JP
Hon Mrs Miriam LAU Kin-yee, JP
Hon Timothy FOK Tsun-ting, JP
Hon LAW Chi-kwong, JP
Hon FUNG Chi-kin

Public officers attending :

Mrs Carrie LAM, JP: Deputy Secretary for the Treasury
Mr K K LAM: Principal Executive Officer (General), Finance Bureau
Ms Maria KWAN, JP: Deputy Secretary for Economic Services
Mr Joe WONG: Principal Assistant Secretary for Economic Services
Mr Albert LAI, JP: Government Property Administrator
Mr IP Kwok-chung, JP: Vice-Chairman, Provisional Urban Council
Ms Elaine CHUNG Lai-kwok, JP: Director of Urban Services
Mrs Lucia LI, JP: Assistant Director of Urban Services
Mr LAM Kam-kwong: Deputy Director of Regional Services
Miss Doris NG: Chief Treasury Accountant, Regional
Services Department
Mr K K MOK, JP: Assistant Commissioner of Rating and
Valuation
Mrs Jessie TING: Deputy Secretary for Information
Technology and Broadcasting
Mr Alan SIU: Principal Assistant Secretary for Information Technology and Broadcasting
Mr K H LAU, JP: Director of Information Technology Services
Mr Alan DIXEY: Assistant Director of Information
Technology Services (Infrastructure)
Mr K C LAU: Principal Assistant Secretary for Works
Mr Tony TOY: Project Director of Architectural Services Department
Mr Stephen H S MAK, JP: Assistant Director of Information
Technology Services (Departmental
Services) (D)
Mr Danny TSUI: Principal Assistant Secretary for Planning, Environment and Lands
Mr J P ROCKEY: Assistant Director of Environmental
Protection
Dr Malcolm J BROOM: Principal Environmental Protection Officer

Clerk in attendance :

Ms Pauline NG: Assistant Secretary General 1

Staff in attendance :

Miss Polly YEUNG: Chief Assistant Secretary (1)3
Ms Sarah YUEN: Senior Assistant Secretary (1)4

________________________________________________________________

As the Chairman, Mr Ronald ARCULLI, was not in Hong Kong, the Deputy Chairman, Mr CHAN Kam-lam, chaired the meeting.

Item No. 1 - FCR(98-99)59
RECOMMENDATION OF THE ESTABLISHMENT SUBCOMMITTEE MADE ON 16 DECEMBER 1998

2. Whilst expressing support in principle for the proposal and for advancing the item for early consideration by the Finance Committee (FC), Miss Emily LAU queried the need for four Personal Secretaries (PSs) to service three directorate officers in the proposed tourism office and suggested that one PS should suffice. She considered that irrespective of the macro economic climate, the Government should always exercise prudence and economy in its staffing proposals to ensure the best use of resources. Mr CHEUNG Man-kwong was also of the view that seven non-directorate posts were excessive and suggested that one secretarial post should be cut.

3. On the proposed four PS posts, the Deputy Secretary for Economic Services (DS/ES) explained that they would be required to provide secretarial support to three directorate officers and one Senior Executive Officer in handling an enormous amount of work arising from liaison with the industry and following up on a large number of recommendations and studies. She re-assured members that creation of the non-directorate posts would be vigorously vetted by the Departmental Establishment Committee (DEC) and the Finance Bureau (FB) and Civil Service Bureau (CSB) would be duly consulted before the creation of the posts in question. Nevertheless, taking into account members' concern about the number of secretarial posts expressed at the meeting of the Establishment Subcommittee (ESC) on 16 December 1998, the Secretary for Economic Service had agreed not to create one PSII post at the outset of the establishment of the tourism office and to review the need for this post in the light of workloads and operational requirements.

4. In this connection, the Deputy Secretary for the Treasury (DS/Tsy) recapitulated the Administration's undertaking given to ESC members that it would exercise extreme care before supporting additional posts in the present economic climate. She confirmed that in this case, the Economic Services Bureau (ESB) would have to satisfy the FB and CSB of the need for the creation of the proposed non-directorate posts although the two resource bureaux were no longer represented at the DECs of individual bureaux or departments. She further clarified that there was no hard and fast manning scale for executive staff and secretarial staff across the board and the number of supporting staff would be determined in the light of operational needs of the department/bureau concerned. Referring to ESB's agreement not to create one PSII post from the outset, DS/Tsy confirmed that the FB would, by way of administrative measure, freeze the total notional annual mid-point salary value of one PSII in the ESB.

5. Mrs Selina CHOW pointed out that the future Commissioner for Tourism (the Commissioner) and his deputies should be given adequate secretarial and clerical support to enable them to perform their work effectively. She also called on the Administration to make the best endeavour to simplify work procedures and reduce unnecessary correspondences and paper work. Mr Howard YOUNG echoed Mrs CHOW's concern and highlighted the need for adequate support to the Commissioner in the light of the workload arising from frequent communication with over 10 associations of travel agents, airlines and hotels in the industry.

6. Mr Howard YOUNG further relayed the concern of the tourism industry about whether the ranking of the Commissioner post at D5 was sufficiently high to enable the incumbent to discharge his duties effectively, given that the Executive Director of the Hong Kong Tourist Association (HKTA) was also ranked at D5.

7. In response, DS/ES advised that the future tourism office and HKTA would perform different functions. The Commissioner would work to the Secretary for Economic Services and be responsible for strategic policy formulation on tourism while the HKTA would focus on promotion work.

8. Miss Emily LAU and Mr CHEUNG Man-kwong reiterated their concern about the need to retain the existing DS/ES(1) post at D4 level, given that the post would be relieved of its policy responsibility on tourism matters upon creation of the Commissioner post.

9. In response, DS/ES advised that the remaining policy areas on energy and agriculture and fisheries in DS/ES(1)'s schedule of duties were subjects of widespread public concern and DS/ES(1) would be required to follow up on a number of consultancy studies and reports in the coming year. She pointed out that ESB had undertaken to review its staffing levels in a year's time and the need and ranking for the DS/ES(1) post would also be looked at.

Admin.

10. Mr CHEUNG Man-kwong stated that he could only accept the retention of the DS/ES(1) post at D4 level on the premises that the ESB had to address policy issues arising from the monopoly of utility operators, as well as the various studies on agriculture and fisheries, in the coming year. He considered that the post at D4 should no longer be justified when these issues were resolved.

11. In conclusion, the Chairman advised that where necessary, issues related to establishment matters in the civil service as a whole should be looked into by the Public Service Panel.

12. The Committee approved the proposal.

Item No. 2 - FCR(98-99)54
RECOMMENDATIONS OF THE PUBLIC WORKS SUBCOMMITTEE MADE ON 25 NOVEMBER 1998 AND 2 DECEMBER 1998

13. Members noted that of the recommendations endorsed by the Public Works Subcommittee (PWSC) and put to the FC, the Administration had deferred submission of two public works projects, i.e. PWSC(98-99)43 (125TB - Pedestrian subway at the junction of Kowloon Park Drive and Peking Road) and PWSC(98-99)50 (487CL - Tung Chung development phase 3A, reclamation for areas 51, 52(part) and 53 to 56).

14. Pursuant to Miss Emily LAU's request at the PWSC meeting on 2 December 1998, members agreed that PWSC(98-99)48 would be dealt with separately.

15. Paper FCR(98-99)54, except Item PWSC(98-99)48, was put to vote and approved.

PWSC(98-99)48 -- 104KA --SHATIN GOVERNMENT OFFICES BUILDING

16. Referring to the supplementary information provided by the Administration following the meeting of the PWSC on 2 December 1998, Miss Cyd HO questioned the large increase in estimated area to be allocated to the Post Office and the Labour Department upon their being reprovisioned to the Shatin Government Offices Building (STGOB).

17. In reply, the Government Property Administrator (GPA) explained that the existing Post Office was acutely short of space and a much larger area was required. The additional requirement of the Labour Department was due to its provision of a new service on occupational safety and health in the New Territories East region. GPA added that pending completion of the STGOB, temporary accommodation would have to be provided for the new service if the Labour Department decided to launch it in the near future.

18. Miss Cyd HO queried the justification for the estimated expenditure of $108.8 million on furniture and equipment (F&E), given that the user Government departments were just being reprovisioned to the STGOB. She considered the expenditure not cost-effective as only some 1 331 square metres of space saving was achievable through the use of new F&E.

19. GPA, in response, commented that the estimated expenditure on F&E, which amounted to about 10% of the total project cost, was reasonable when compared to that for other new office accommodations. He added that the $108.8 million was an estimate only and the actual cost would be ascertainable at a later stage when the detailed design had been completed. On the cost-effectiveness aspect, GPA said that the use of new, space-efficient F&E upon reprovisioning Government departments to new accommodation was an established practice. Apart from saving space, the use of a new line of furniture would also serve to provide a better environment for both the staff and members of the public.

20. Miss Emily LAU queried that the "10% expansion factor" included in deriving the total area required for allocation was incompatible with the Administration's pledge to achieve 5% productivity gains in the next three years. Noting that the use of some remaining area had not yet been finalized, she considered that there was a gross over-provisioning of office space which was conducive to the unnecessary expansion of the Government bureaucracy. She re-affirmed the objection of Members of the Frontier to the proposal. Her view was shared by Miss Cyd HO who urged that the Government should aim at streamlining its bureaucracy.

21. On the 10% expansion factor, GPA and DS/Tsy advised that the expansion allowance was in line with the established planning practice for Government office buildings to cater for possible expansion brought about by factors such as the provision of new services. GPA confirmed that the office space reserve would be allocated close to the completion of the project having regard to the needs of the user departments prevailing at the time. He believed that the question of unoccupied accommodation in the STGOB should not arise as even upon completion of the STGOB, the Government would still need to lease premises for some of its offices. GPA added that all the potential user departments were agreeable to being reprovisioned to the STGOB.

22. In this connection, DS/Tsy pointed out that in response to members' ongoing concern about effective site utilization, the Administration had optimized the plot ratio by providing for a total usable area of 25 365 square metres in STGOB. To make the most cost-effective use of resources, she said that should there be any unused office space, the Administration would not rule out the possibility of leasing it out.

23. Acknowledging that the optimal use of the plot ratio had been a major concern of the PWSC, Mr LEE Wing-tat sought the Administration's assurance that where there was surplus office space at the STGOB, Government offices occupying leased accommodation nearby should be reprovisioned there and over-provisioning of office space by senior departmental staff should not be allowed. In response, GPA assured members that surplus office space, if any, would not be misused as the total area to be allocated to a department would be drawn up according to the standard entitlement of various ranks of staff and the actual operational needs.

24. Mr MA Fung-kwok was of the view that in assessing its demand for office accommodation in Shatin, the Administration should take into account the need or otherwise for accommodating the Regional Services Department (RSD) in the Regional Council Building in Shatin if the two Municipal Councils were to be abolished. He also urged the Administration to conduct a comprehensive review on surplus office accommodation, if any, before deciding to proceed with the STGOB.

25. In response, GPA informed members that the current main user of the Regional Council Building was the RSD whose services currently provided might still be required in future. He confirmed that irrespective of the decision on the future of the Provisional Regional Council (ProRC) and RSD, the existing demand for office accommodation in Shatin remained. The need for office accommodation was imminent in view that the lease for some 10 000 square metres of office accommodation would expire in year 2001. In view that GPA was not in a position to comment on the future use of the Regional Council Building since properties of the ProRC were not under his purview, the Chairman asked GPA to take note of Mr MA's concern.

26. In his capacity as Chairman of PWSC, Mr HO Sai-chu informed members that the proposal had been discussed at length at the PWSC meeting. He pointed out that delay in the project might incur further costs on the Government due to the need to extend the lease of some of the accommodations.

27. The item was put to vote: 22 members voted for the proposal, 11 members voted against and two abstained:

For:
Mr Kenneth TING Woo-shou	Mr David CHU Yu-lin
Mr HO Sai-chu	Mr Edward HO Sing-tin
Mr Michael HO Mun-ka	Mr LEE Wing-tat
Mr Martin LEE Chu-ming	Mr LEE Kai-ming
Mr James TO Kun-sun	Mr Ambrose CHEUNG Wing-sum
Mr HUI Cheung-ching	Mr CHAN Kwok-keung
Mr CHAN Wing-chan	Mrs Sophie LEUNG LAU Yau-fun
Mr SIN Chung-kai	Dr YEUNG Sum
Mr YEUNG Yiu-chung	Mr LAU Chin-shek
Mr Andrew CHENG Kar-foo	Mr SZETO Wah
Mr TAM Yiu-chung	Dr TANG Siu-tong
(22 members)

Against:
Miss Cyd HO Sau-lan	Dr Raymond HO Chung-tai
Mr LEE Cheuk-yan	Mr Eric LI Ka-cheung
Dr LUI Ming-wah	Prof NG Ching-fai
Mr MA Fung-kwok	Miss Christine LOH
Dr LEONG Che-hung	Mr LEUNG Yiu-chung
Miss Emily LAU Wai-hing
(11 members)
Abstention:
Mr NG Leung-sing
Miss CHOY So-yuk
(2 members)

28. The Committee approved the proposal.

Item No. 3 - FCR(98-99)58
HEAD 106 - MISCELLANEOUS SERVICES
‥ New Capital Account Subhead "One-Off Grants to the Municipal Councils"

29. Members urged the Provisional Urban Council (PUC) and ProRC to manage and deploy their resources more cost-effectively and trim down on their unwieldy executive arms. They sought further information on how the two Councils had managed their finances with prudence and economy, as stated in the information paper.

30. In reply, the Director of Urban Services (DUS) advised that although the Urban Services Department (USD), being the executive arm of the PUC which was financially autonomous, had not been required to take part in the Enhanced Productivity Programme (EPP), the department had achieved 5% productivity gain in 1997 and would aim at a similar target this year. The department had implemented a total of 29 cost-saving measures in 1997 and achieved savings amounting to $1.2 billion. These measures included the outsourcing of services, hiring of contract staff, streamlining work procedures and placing a cap on capital expenditure during the current 1997-98 to 1999-2000 triennium. She confirmed that despite increases in urban facilities and services, the actual staff costs of the department had in real terms decreased by 0.6% in 1997-98. At members' request, DUS agreed to provide further details on the EPP undertaken by the USD, the targets to be achieved, as well as the increase, decrease and re-deployment of staff in certain service areas.

Admin.

31. On the resources requirements of the Regional Services Department (RSD), the Deputy Director of Regional Services advised that the increase in population in the New Territories had resulted in a growing demand for municipal services and facilities which the RSD had to meet. He stressed that the RSD had been very prudent over its financial management as the ProRC had only been allocated rates revenue of some $14 billion for the current triennium, which fell short of its funding request for $19 billion.

32. Having made reference to other large departments, Mr LEE Wing-tat and Mr CHEUNG Man-kwong queried the justification for 21 directorate posts in the USD, having regard to the fact that there were only 13 such posts in the RSD which provided similar services in the New Territories. In response, DUS explained that the USD was a much bigger department than the RSD with about 17,000 staff and an annual expenditure of some $8.8 billion this year. USD had a much bigger scope of work. For example, most major venues such as the Hong Kong Stadium, the Cultural Centre, the Coliseum etc., and three professional performing companies (namely, the Hong Kong Chinese Orchestra, the Hong Kong Repertory Theatre and the Hong Kong Dance Company) were managed by the USD. The computerized Urbtix system, which provided territory-wide ticketing services for PUC, ProRC and other organizations, was also run by USD. DUS also referred to the workload associated with a greater number of select committees in the PUC and undertook to provide further information on the amount of work such as attending meetings, preparing reports and papers and conducting reviews and follow-up actions for the PUC for which directorate input was required. The Vice-Chairman, PUC (VC/PUC) further advised that staffing and establishment needs were closely monitored by the Administration Select Committee of the PUC which would review, inter alia, the directorate establishment of the department.	Admin.

33. To enhance productivity, Mr CHEUNG Man-kwong specifically requested the USD to consider merging some of its directorate posts. In response, DUS pointed out that due to budgetary constraints, the department had all along been very cautious in its use of funds and the overall staffing requirements of the department, including those at the directorate level, was being examined by the Administration Select Committee. DUS agreed that the possibility of merging certain directorate posts should be looked into as possible ways to save costs and enhance productivity. She undertook to consult the PUC to seek its views on such a review. If affirmative, the department would work out a timetable for reviewing the directorate establishment. She said that PUC/USD could advise the FC in writing in about two weeks' time. Mr SIN Chung-kai further suggested that the USD should aim at deleting two directorate posts which represented a saving of 10%.	Admin.

34. Mr SIN further suggested that the Administration should withdraw this item pending further confirmation from DUS. In response, DS/Tsy did not consider it appropriate to withdraw the item as suggested by Mr SIN as the USD's review of its directorate establishment was not directly related to the present funding proposal.

35. On Mr CHEUNG Man-kwong's concern about whether the Legislative Council (LegCo) could, through its Public Accounts Committee (PAC), request the Audit Commission to look into the USD's use of resources, Mr Eric LI, in his capacity as Chairman of the PAC, confirmed that whilst the PAC could convey such a suggestion to the Audit Commission, it should be noted that in performing his duties, the Director of Audit was independent from the Administration and the legislature and was only accountable to the Chief Executive.

36. In reply to Mr LEE Wing-tat's enquiry about the contracting-out of services by the USD and RSD, the Assistant Director of Urban Services (AD/US) confirmed that one third of the street cleaning work in eight of the 11 urban services districts had been contracted out. Work in respect of the remaining three districts would be contracted out by next year. As regards the RSD, its Chief Treasury Accountant advised that the target for contracting out 50% of the department's services were currently under review by the ProRC. At present, 40% of the work in refuse collection, market cleaning and gardening had been contracted out. The two departments undertook to provide further information on the number of service contracts and the amount of money incurred by these service contracts, as compared to their annual departmental expenditures.

Admin.

37. Mr LEE Cheuk-yan was concerned that the USD would trim down its junior and frontline staff by way of contracting-out its services while retaining its cumbersome structure at the directorate level. In view of complaints he received about underpayment of wages by the department's contractors to their workers, he urged the Administration to monitor more closely the performance of their contractors.

38. In response, DUS assured members that the department's contractors were required to pay their workers reasonable wages the level of which was determined with reference to the average wage in Hong Kong according to statistics of the Labour Department and Census and Statistics Department. She also called upon Mr LEE to supply more details on the complaint cases for follow-up by the department. On the monitoring mechanism, AD/US advised that contractors were required to state in their tender proposal the wages to be offered to their workers. Moreover, site inspections were conducted by the department from time to time. In this regard, VC/PUC added that the relevant committee under the PUC would screen all tender conditions, including those relating to wages, before awarding the tender.

39. Mr CHAN Wing-chan asked whether the existing level of rates payable by the public would be reduced as a result of cost-savings, or upon abolition of the PUC and ProRC. In reply, DS/Tsy advised that overall rates percentage charge for the following year would be announced by the Financial Secretary (FS) in his 1999-2000 Budget in March 1999.

40. Mr Eric LI noted that the present funding proposal was put up pursuant to the agreement in principle by most LegCo Members-elect in June this year when discussing with the FS relief measures to cope with the economic downturn. He nevertheless expressed his dissatisfaction over resources management by the two Municipal Councils and considered that they should also explore all possible means to enhance productivity in the face of the current economic hardship. He pointed out that active steps should be taken to trim down staffing establishment, instead of relying on natural wastage to achieve reduction in staff costs. Mr LI urged the FB to follow up on members' proposals and the cost-saving measures highlighted by the two departments at this meeting and suggested that upon expiry of the current triennium, a full written report on details of productivity gains achieved and related information should be submitted to members.

41. In response to Mr LI, DUS stressed that there was a genuine need for the $1,526 million being requested because at the present stage, 20 capital works projects of the PUC had been completed and payment was due. Another 41 were under construction and could not be retracted. As regards staff costs, AD/US confirmed that as the rates revenue allocated to the PUC for the current triennium fell short of the Council's request by some $3.8 billion, the USD would be obliged to undertake cost-cutting measures. The $0.7 billion cut in expenditure on personal emolument would surely be implemented as otherwise, the USD would be unable to meet its payroll. She added that the surplus staff would be re-deployed to meet the needs of new services and facilities. In view of members' concern, DUS agreed to provide further information on how the said savings of $0.7 billion could be achieved.	Admin.
42. In undertaking to follow up various reports to be submitted by the two departments on their enhanced productivity and submit a report to the FC, DS/Tsy explained that FB's scrutiny of the funding requirements of the two Councils took place during the rates negotiation. For example, for the current triennium, the original requests of the PUC and ProRC were some $22 billion and $19 billion respectively and these had been trimmed down to $18.7 billion and $14 billion.	Admin.
43. Dr YEUNG Sum stated that Members of the Democratic Party (DP) supported the present proposal pursuant to the general agreement reached by most of the LegCo Members-elect in June 1998. Nevertheless, he shared other members' serious concerns about resources management by the two Councils and their executive arms. In connection with the funding requirements of the two Councils, Mr SZETO Wah highlighted his observation that most of the funds were used by the Councils' executive arms. In the light of views and concerns raised at this meeting, members requested the Administration to provide a written response as soon as possible for further consideration.	Admin.

44. The Committee approved the proposal.

Item No. 4 - FCR(98-99)55
CAPITAL WORKS RESERVE FUND

HEAD 710 - COMPUTERIZATION
Information Technology and Broadcasting Bureau
‥ New Subhead "Implementation of the First Phase of the Electronic Service Delivery scheme"

45. On the timetable for full implementation of the Electronic Service Delivery (ESD) scheme, the Deputy Secretary for Information Technology and Broadcasting (DS/ITB) advised that as the Administration intended to implement the scheme progressively by phases, it would examine the development of future phases of the scheme to cover other Government services in the light of operational experience after implementation of the first phase in 2000.

46. Addressing Mr CHAN Wing-chan's concern that under the user-pays principle, the public might have to pay higher fees as a result of the introduction of the scheme, DS/ITB confirmed that the fees payable for public services delivered electronically would unlikely increase for two reasons. Firstly, the Government would bear the transaction fees payable to the private sector operator contracted to establish the ESD information infrastructure. Secondly, the administrative overheads on the part of the Government for providing the services would be reduced in the longer term with the shift to electronic operation.

47. Noting that the Administration would have to pay the ESD operator an estimated transaction fee of $10 per transaction, Mr LEUNG Yiu-chung questioned the anticipated benefit of cost savings. In response, DS/ITB explained that the figure was only an estimate based on the Australian experience. The actual level of the transaction fees could only be ascertained when the result of the tender exercise was known. Notwithstanding the payment of such transaction fees, the Administration anticipated that cost savings could be achieved. For example, in the case of business registration, the Administration estimated that the administrative cost per transaction would drop from the current level of over $50 to about $35.

48. In view of some potential ESD operators' preference for some form of Government investment in the project as indicated in their response to the Administration's invitations for expression of interest on the scheme earlier this year, several members enquired about the requirement for additional funding for such purposes. In reply, DS/ITB explained that the present financial model for the ESD scheme had been drawn up on the basis of no Government investment in the ESD scheme. Nevertheless, the Administration would be prepared to consider proposals with an element of Government funding and decide whether additional injection of funds should be made having regard to the community's overall interests. To facilitate the Administration's consideration, a bidder who intended to provide the ESD system with some form of Government investment would be required to submit two separate proposals, one involving Government investment and the other involving his own investment only. DS/ITB added that if some form of Government investment was considered preferable, the Administration would seek the approval of the FC for additional funding. At Mr TAM Yiu-chung's request, DS/ITB undertook to provide the number of submissions of expression of interest on the scheme received by the Administration which had indicated preference for some form of Government investment.

Admin.

49. On the implications of Government investment on the cost of the scheme, DS/ITB advised that Government investment would reduce the operator's initial capital outlay and hence, enable the operator to yield earlier returns on his investment. As a result, the transaction fee payable by the Government and hence the service cost would be lowered.

50. Whilst indicating support for the scheme, Mr Kenneth TING enquired about the estimated number of ESD users in the first phase of implementation which might serve as an indicator of the cost-effectiveness of the scheme. In reply, DS/ITB said that while the Administration would aim at a high usage rate, it was difficult at the present stage to make an estimate. She further emphasized that in assessing the cost-benefits of the scheme, consideration should be given not only to the usage rate, but also the extent to which the ESD scheme had fulfilled its other objectives such as improvement in quality and efficiency in the delivery of public services to provide greater convenience to the public and the pump-priming effect on the development of electronic commerce in Hong Kong.

51. On the estimated $6 million to be spent on publicity and promotion, Mr YEUNG Yiu-chung stated his view that those costs should be borne by the operator being awarded the contract since his business would benefit directly. DS/ITB in response pointed out that publicity for the ESD scheme would be undertaken jointly by Government and the ESD operator. She remarked that the successful implementation of the ESD and in turn the wider adoption of electronic commerce in Hong Kong would ultimately help to sharpen Hong Kong's overall competitiveness in the new Information Age. Members noted that publicity and promotion efforts would include TV and radio announcements of public interest, seminars and exhibitions. In reply to Mr CHAN Wing-chan, DS/ITB advised that to promote the scheme among elderly persons and computer illiterate persons who might have difficulty in using ESD services, consideration would be given to setting up a help desk and installing computer terminals for public use at convenient locations such as the District Offices.

52. Whilst expressing support for the proposal, Mr SIN Chung-kai referred to the Community Electronic Trading Service (CETS) which he considered problem-prone and urged the Government to take heed of the operational experience of the CETS and monitor more closely the performance of the prospective ESD operator. Addressing his concern, DS/ITB clarified that there were a number of differences between the ESD scheme and CETS. While it was necessary to invest in specific software for the use of CETS, access to the ESD scheme was much easier and more economical as users could obtain ESD services through personal computers via the Internet. Moreover, the scheme would offer a wider range of services than CETS which only handled certain trade-related documents, e.g. restrained textiles export licences and import and export declarations.

53. To provide a degree of market competition so as to ensure a reasonable quality of service, Mr SIN Chung-kai suggested that the Administration should award the project contract to two operators instead of just one. Commenting on the proposal, DS/ITB highlighted the importance of a single entry point to provide services on a seamless basis to the community, so that users would not have to use the services provided by different operators when transacting business of different natures. Moreover, the awarding of the contract to a single operator would also enable the scheme to benefit from economy of scale and hence save cost and co-ordination efforts.

54. In reply to Mr MA Fung-kwok's enquiry on whether priority would be given to local companies when considering the bids received during the tender exercise, DS/ITB confirmed that the exercise would be conducted in accordance with established procedures which met the requirements of the World Trade Organization's Agreement on Government Procurement on procurement of government supplies.

55. Mr Edward HO expressed support for the proposal and asked about the amount of investment expected of potential ESD operators. In reply, DS/ITB explained that the Administration would provide full details of the services required in the tender document to be published and it would be up to the potential bidders to draw up their own business case for the project. Details on the potential operators' investment plans would be available upon completion of the tender exercise. She however reported that when the Administration invited expression of interest in June 1998, it received a total of 44 submissions. With such a good response, the Administration was optimistic that the scheme could attract investors. She further informed members that in the case of the Maxi project in Australia, the operator absorbed all the capital cost of establishing the system infrastructure and sought to recover such costs through revenue derived from the annual subscription fee and the transaction fees paid to it by the Government on the basis of usage.

56. The Committee approved the proposal.

Item No. 5 - FCR(98-99)56
CAPITAL WORKS RESERVE FUND

HEAD 710 - COMPUTERIZATION
Architectural Services Department
‥ New Subhead "Office Automation for Architectural Services Department"

57. Whilst indicating support for the proposal, Mr Edward HO sought further clarification on the savings achieved as a result of the computerization project, in particular whether the drawings and specifications currently prepared by the Architectural Services Department (Arch SD) could also be computerized.

58. In reply, the Principal Assistant Secretary for Works (PAS/W) advised that the proposed office automation (OA) system was for communication within the department and between Arch SD and other departments and policy bureaux. The Project Director, Arch SD, confirmed that the proposed system would not cover drawings and specifications as they were already dealt with by the Computer-aided Drafting system and other technical applications systems.

59. On productivity gains and savings, PAS/W explained that apart from improving communication, the OA system would enhance data management and retrieval, eliminate duplicating efforts, reduce the turn-around time in document production and delivery. These benefits would add up to a notional 1% saving in staff costs. He further confirmed that in the light of operational experience, OA would reduce the consumption of paper as most of the communication and transmission of data were done electronically, thereby minimizing the need for hard copies of documents.

60. In this regard, Mr Edward HO urged the Administration to improve its work procedures and cut down realistically on paper consumption.

61. The Committee approved the proposal.

Item No. 6 - FCR(98-99)57

HEAD 44 - ENVIRONMENTAL PROTECTION DEPARTMENT
‥ Subhead 700 General other non-recurrent
New item "Study on toxic substances pollution"

62. On the duration of the proposed study, the Principal Environmental Protection Officer of the Environmental Protection Department (PEPO/EPD) advised that the study, upon being commissioned after the tendering process, would commence in October 1999 and take about two years to complete. In this connection, Professor NG Ching-fai considered that certain tasks could be carried out in parallel, instead of sequentially, so as to expedite the process and incur less costs. For elucidation, PEPO/EPD explained that the study would comprise the following major phases:

compilation of necessary information and preparation of an inception report on the study by the consultant in the first two months;
a territory-wide survey of trade and usage of toxic substances and a review of existing published information in the next six months;
field sampling, followed by chemical analysis and the development of a database of priority pollutants expected to take a further six months; and
risk assessment and development of a risk management framework in the second half of 1999.

63. Regarding the relevancy of overseas researches to the local situation, PEPO/EPD advised in reply to Professor NG that it might not be appropriate to simply import overseas findings and stressed that relevant assumptions should be developed locally to ensure the most effective management framework.

64. Regarding the local marine biota included in the study, PEPO/EPD clarified that "flora" in the context of the marine environment referred to seaweed and other microscopic plants on which the effect of toxic substances was also felt. It was therefore necessary to address this aspect in the study.

65. Miss CHOY SO-yuk commented that as most of the industries prone to generating toxic pollutants had been re-located into the Mainland, the sources of toxic pollutants remaining in Hong Kong might be very few. She queried the need for a consultancy study lasting for two to three years and cast doubt on the effectiveness of control measures unless there was cross-border co-operation by the Mainland authorities.

66. In response, the Principal Assistant Secretary for Planning, Environment and Lands (PAS/PEL) reiterated that at present, there was insufficient published information to enable the Administration to devise an effective control strategy on toxic substances pollution in the marine environment of Hong Kong. He confirmed that there was on-going co-operation with Mainland authorities on dealing with pollutants from known sources.

67. Miss CHOY So-yuk stressed that she was aware of a large body of information on the subject currently available and a number of relevant researches being conducted by local universities. She did not consider the funding proposal justified and was of the view that the proposed consultancy study was a duplication of resources. Professor NG Ching-fai opined that the EPD should have a better grasp on existing research information and requested further details on similar studies currently available.

68. In response, PAS/PEL confirmed that at present, no comprehensive study had been conducted on the subject and funding was therefore sought for this purpose. PEPO/EPD supplemented that to the best of his knowledge, some researches had been conducted locally on a piece-meal basis, focusing only on particular aspects of interest to the researchers concerned. For example, researches currently available were more inclined to focus on some pollutants and their effect on certain organisms only whereas the proposed study would address the subject in a comprehensive and systematic manner. To avoid duplication, the Administration would include in the consultancy brief a requirement on the consultant to review all existing published information on the subject in the public domain. In reply to the Chairman, PEPO/EPD confirmed that for the time being, the Administration had no plan to invite individual academic institutions to undertake the study as it was believed that certain skills, notably those in risk analysis and management, were not widely available in Hong Kong. Nevertheless, the consultants bidding for the project could associate with local academic institutions to draw in the latter's expertise in specialized areas.

69. In reply to Professor NG about the multiplier factor of 3 in computing the consultant's staff cost, DS/Tsy informed members that the Administration had completed a review on the estimation methodology for consultancy fees and would brief members on the proposed changes at the joint meeting of the Financial Affairs Panel and the Planning, Lands and Works Panel to be held on 7 January 1999.

70. Dr YEUNG Sum stated that Members of the DP would support the proposed study which in their view should be conducted early. He nevertheless sought further information on the implementation of improvement measures upon completion of the study. His concern was shared by Miss Cyd HO.

71. In response, PEPO/EPD said that it was premature to specify implementation details at this stage. Depending on the recommendations, the Administration would decide whether legislative or other measures should be introduced to address the problem. PAS/PEL noted members' concern and added that one of the main objectives of the study was to identify the sources of toxic pollutants before suitable measures could be formulated to tackle the problem.

72. Miss Christine LOH reported that the Environmental Affairs Panel had been briefed and was in support of the present proposal in principle.

73. Miss CHOY So-yuk suggested that the item be deferred pending further information form the Administration in response to members' queries. Dr YEUNG Sum on the other hand suggested that the item be put to vote. 74. The Chairman put the item to vote: 15 members voted for the proposal, 13 voted against and six abstained:

For:
Miss Cyd HO Sau-lan	Dr Raymond HO Chung-tai
Mr LEE Wing-tat	Mr LEE Cheuk-yan
Mr Martin LEE Chu-ming	Mr LEE Kai-ming
Mr James TO Kun-sun	Miss Christine LOH
Dr LEONG Che-hung	Mr SIN Chung-kai
Dr YEUNG Sum	Mr LAU Chin-shek
Miss Emily LAU Wai-hing	Mr Andrew CHENG Kar-foo
Mr SZETO Wah
(15 members)

Against:
Mr Eric LI Ka-cheung	Dr LUI Ming-wah
Prof NG Ching-fai	Mr MA Fung-kwok
Mr HUI Cheung-ching	Mr CHAN Kwok-keung
Mr CHAN Wing-chan	Mr LEUNG Yiu-chung
Mr YEUNG Yiu-chung	Mr Ambrose LAU Hon-chuen
Miss CHOY So-yuk	Mr TAM Yiu-chung
Dr TANG Siu-tong
(13 members)

Abstention:
Mr Kenneth TING Woo-shou
Mr HO Sai-chu
Mr Edward HO Sing-tin
Mrs Selina CHOW LIANG Shuk-yee
Mr Ambrose CHEUNG Wing-sum
Mr Howard YOUNG
(6 members)

75. The Committee approved the proposal.

76. The Committee was adjourned at 5:20 pm.

Legislative Council Secretariat
April 1999