LC Paper No. FC199/98-99
(These minutes have been
seen by the Administration)

Ref : CB1/F/1/2

Finance Committee of the Legislative Council

Minutes of the 18th meeting
held at the Legislative Council Chamber
on Friday, 21 May 1999, at 2:30 pm

Members present :

Hon CHAN Kam-lam (Deputy Chairman)
Hon Kenneth TING Woo-shou, JP
Hon James TIEN Pei-chun, JP
Hon David CHU Yu-lin
Hon HO Sai-chu, JP
Hon Cyd HO Sau-lan
Hon Edward HO Sing-tin, JP
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 LEE Kai-ming, JP
Hon Fred LI Wah-ming
Dr Hon LUI Ming-wah, JP
Hon NG Leung-sing
Prof Hon NG Ching-fai
Hon Mrs Selina CHOW LIANG Shuk-yee, JP
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 Yuen-han
Hon Bernard CHAN
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 Andrew WONG Wang-fat, JP
Dr Hon Philip WONG Yu-hong
Hon WONG Yung-kan
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 LAU Wong-fat, GBS, JP
Hon Mrs Miriam LAU Kin-yee, JP
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 Timothy FOK Tsun-ting, JP
Hon LAW Chi-kwong, JP
Hon TAM Yiu-chung, JP
Hon FUNG Chi-kin
Dr Hon TANG Siu-tong, JP

Members absent:

Hon Ronald ARCULLI, JP (Chairman)
Hon Albert HO Chun-yan
Hon Eric LI Ka-cheung, JP
Dr Hon David LI Kwok-po, JP
Hon Margaret NG
Hon MA Fung-kwok

Public officers attending:

Miss Denise YUE, JP
Secretary for the Treasury

Mrs Carrie LAM, JP
Deputy Secretary for the Treasury

Mr K K LAM
Principal Executive Officer (General), Finance Bureau

Mr K C KWONG, GBS, JP
Secretary for Information Technology and Broadcasting

Ms Eva CHENG, JP
Deputy Secretary for Information Technology and Broadcasting

Mr Y C LO, JP
Deputy Director of Territory Development

Mr Albert CHENG
Chief Assistant Secretary (Programme Management) of Works Bureau

Mr C W KWAN
Chief Engineer (Hong Kong) of Transport Department

Mr H Y CHEUNG
Principal Economist of Financial Services Bureau

Mr H W FUNG, JP
Deputy Commissioner for Census and Statistics

Mr Alvin LI
Assistant Commissioner for Census and Statistics

Mrs CHEUNG WONG Wai-mui
Senior Systems Manager of Census and Statistics Department

Mr Arthur NG, JP
Deputy Secretary for Home Affairs

Mrs Erika HUI
Assistant Commissioner for Tourism

Mr John CORCORAN
Chief Executive, Ocean Park Corporation

Clerk in attendance:

Miss Polly YEUNG
Assistant Secretary General 1 (Acting)

Staff in attendance:

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

Miss Becky YU
Senior Assistant Secretary (1)3


The Deputy Chairman informed members that Mr Ronald ARCULLI, Chairman of the Finance Committee (FC), would not chair the meeting. Members noted that Mr ARCULLI had written in to declare his interest that his law firm Woo Kwan Lee & Lo was acting as solicitors for the Pacific Convergence Group in the Cyberport project and also his interest as a director of the Ocean Park Corporation (OPC).

2. The Deputy Chairman took the chair and reminded members of the relevant provisions in the Rules of Procedure regarding disclosure of personal pecuniary interest which also applied to the proceedings of FC.

Item No. 1 - FCR(1999-2000)12

RECOMMENDATIONS OF THE PUBLIC WORKS SUBCOMMITTEE MADE ON 28 APRIL 1999 AND 12 MAY 1999

3. As recommended by the Public Works Subcommittee (PWSC), the Chairman agreed that PWSC(1999-2000)13 be considered separately.

4. On voting, Miss Emily LAU registered her reservation expressed at the PWSC meeting on items PWSC(1999-2000)7 and PWSC(1999-2000)8 on account of the unsatisfactory provision of physical education facilities in the two proposed schools. Paper FCR(1999-2000)12, except item PWSC(1999-2000)13, was put to vote and approved.

PWSC(1999-2000)13 653CL Engineering infrastructure for Cyberport development at Telegraph Bay

5. Mr Edward HO declared interest as his company had submitted an architectural proposal on the Cyberport project. He said that he would not participate in the discussion and voting of this item.

6. Mr LEE Wing-tat stated that Members of the Democratic Party (DP) had raised objection to the item at the PWSC meeting and he requested to put on record the underlying reasons for their stance. He said that Members of DP supported in principle the Cyberport project but considered it inappropriate to grant the development right for the project without going through the usual competitive tendering process. He pointed out that the decision-making process had departed from the principles of fair, just and open competition and expressed grave concern that the Cyberport project had set an undesirable precedent as the Secretary for Information Technology and Broadcasting (SITB) had also acknowledged at the PWSC meeting that the arrangement for the project was not common. He requested the Administration to explain as soon as possible the principles underpinning its decision and how they were compatible with the operation of free market economy which had served Hong Kong well all along.

7. Miss Emily LAU stated that Members of the Frontier objected to the item. She was dissatisfied with the Government's using exigency and urgency as an excuse to justify a series of its recent actions such as intervention into the stock market, the decision to award the development right for the Cyberport to Pacific Century Group (PCG) and requesting the National People's Congress to explain the Basic Law. She was of the view that any Government decision and action should be firmly based on established principles and guidelines and expressed regret that in the case of the Cyberport, the Administration had made the decision before drawing up the relevant policy guidelines. She remarked that according to some property developers, they were also capable of implementing the project but their offers had been rejected by the Administration for being too late. She further questioned whether the Government had erred in its calculation of the land price which might result in multi-billion losses of public money, as some developers had commented. She considered that if this proved to be the case in due course, all officials involved in the project should be held responsible and should resign.

8. In response, SITB assured members that the Administration would consider drawing up guidelines for assessing projects of a similar nature in the future and would make known these guidelines as soon as possible after they had been worked out. As regards comments of the developers referred to by Miss Emily LAU, SITB confirmed that so far, he had not received any proposal from any property developer to undertake the Cyberport project. As the value of the land would be that prevailing at the time of the grant of development right to PCG, any forecast at this stage on land price was at best an estimate. SITB advised that even if the land price rose to $9 to $10 billion as some developers had suggested, the return to the Government could be safeguarded by virtue of the profit sharing agreement with PCG. SITB supplemented that unlike the Government which had already provided data to the relevant committee, the developers had not substantiated their forecast with relevant data. He also disagreed with Miss LAU's remark about the Administration's erring in its estimation of land premium. Admin

9. In response to Dr YEUNG Sum's request for quarterly reporting to the relevant Panel on the progress of the project, SITB undertook to make regular reports to the Panel on Information Technology & Broadcasting on the progress of the Cyberport project. Admin

10. Referring to other proposals like the herbal port and the biochemistry port, Dr YEUNG Sum enquired whether any interested parties had approached the Government and if so, whether the Government would improve on its decision-making process in the light of the experience of the Cyberport. In reply, SITB said that he was not in a position to comment on programme areas which were outside his purview. In this connection, the Chairman advised that members could pursue these issues at the relevant Panels if they so wished.

11. Mr NG Leung-sing clarified that he was a non-executive director of SmarTone, and did not have an interest in the project as some newspapers had reported. He expressed support for the proposal because it would benefit the future development of Hong Kong. He agreed that the Government should gain experience from the Cyberport project and develop the necessary guidelines so that any policy decision on similar projects in the future could be clearly accounted for.

12. Mr James TO remarked that good policy intention would not necessarily bring about good policy outcome. He considered that the decision making process for the Cyberport project was not a commendable act at all for the Chief Executive and his Administration.

13. The item was put to vote: 30 members voted for the proposal, 14 voted against and none abstained:

For:
Mr Kenneth TING Woo-shou Mr James TIEN Pei-chun
Mr HO Sai-chu Dr Raymond HO Chung-tai
Mr LEE Kai-ming Dr LUI Ming-wah
Mr NG Leung-sing Mrs Selina CHOW LIANG Shuk-yee
Mr HUI Cheung-ching Mr CHAN Kwok-keung
Miss CHAN Yuen-han Mr CHAN Wing-chan
Dr LEONG Che-hung Mrs Sophie LEUNG LAU Yau-fun
Mr Gary CHENG Kai-nam Mr SIN Chung-kai
Mr Andrew WONG Wang-fat Dr Philip WONG Yu-hong
Mr WONG Yung-kan Mr Jasper TSANG Yok-sing
Mr Howard YOUNG Mr YEUNG Yiu-chung
Mr LAU Kong-wah Mr LAU Wong-fat
Mrs Miriam LAU Kin-yee Mr Ambrose LAU Hon-chuen
Mr Timothy FOK Tsun-ting Mr TAM Yiu-chung
Mr FUNG Chi-kin Dr TANG Siu-tong
(30 members)

Against:
Miss Cyd HO Sau-lan Mr Michael HO Mun-ka
Mr LEE Wing-tat Mr LEE Cheuk-yan
Mr Martin LEE Chu-ming Mr Fred LI Wah-ming
Mr James TO Kun-sun Mr CHEUNG Man-kwong
Mr LEUNG Yiu-chung Dr YEUNG Sum
Miss Emily LAU Wai-hing Mr Andrew CHENG Kar-foo
Mr SZETO Wah Mr LAW Chi-kwong
(14 members)

14. The Committee approved the item.

Item No. 2 - FCR(1999-2000)13

CAPITAL WORKS RESERVE FUND
HEAD 710 - COMPUTERISATION
Census and Statistics Department
‥ New Subhead "Computer Equipment and Services for the 2001 Population Census"
HEAD 26 - CENSUS AND STATISTICS DEPARTMENT
‥ Subhead 001 Salaries

15. Noting that the computer system had only been developed for the 1996 Population By-census (96BC), Mr YEUNG Yiu-chung sought information on the serviceable lifespan of the new system proposed for the 2001 Population Census (2001C) and whether it would be used for just one occasion.

16. The Deputy Commissioner for Census and Statistics (DC/C&S) explained that in the 96BC, the computer system developed for the 1991 Population Census (1991C) had been largely re-used. The system could only handle single mode operation involving just one Long Form questionnaire while the 2001C would be conducted in twin mode consisting of both Long and Short Form questionnaires. Moreover, as the 1991C system had been developed for some 10 years, both the hardware and software had become obsolete. He further advised that the proposed system could largely be re-used in the 2006 By-census.

17. Referring to item (d) of paragraph 4 of the discussion paper, Mr LAW Chi-kwong asked why the sub-systems developed for the 96BC did not conform to the Government System Architecture (GSA) standard introduced in 1991. In reply, DC/C&S advised that in the 96BC, the Census and Statistics Department (C&SD) was trying to make use of the system for the 1991C as far as possible. However, this system was procured in 1989 and 1990 using the VAX platform which was not compatible with the current GSA standard. Hence, the sub-systems for the 96BC, which were developed on this platform, did not conform to the GSA standard.

18. On the cost for hiring contract staff, DC/C&S said that the proposed cost would cover a maximum of some 18 staff to assist in developing the computer system and did not include the remuneration for the 23 000 temporary field workers for which provision had already been made in the department's baseline expenditure.

19. As regards the stringent time frames for completing the 2001C operation within 13 days, DC/C&S confirmed that the 13-day operation period was not a requirement by the United Nations (UN). UN had only made some suggestions regarding the way of handling certain types of data and the Government would follow UN's suggestions as far as possible. DC/C&S added that as schools would be granted census holidays to allow teachers and students to assist in the operation, the operation period was restricted to 13 days to minimize the inconvenience caused to the public and schools. On whether the cost of the proposed computer system could be reduced if the 13-day operation period was extended to, say, 20 days, DC/C&S confirmed in the negative as the estimated cost was not calculated with regard to the duration of the operation period.

20. In response to Miss Emily LAU's comments that the paper had not provided detailed information on the cost-effectiveness of the new system, DC/C&S pointed out that it was not possible to quantify precisely the productivity gains and savings arising directly from the computer system as the only alternative of conducting a large census operation without an efficient computer system would be the requirement of an astronomical number of staff. He nevertheless advised that to ensure maximum cost-effectiveness, a feasibility study had been conducted to examine the various types of hardware and software before the proposed computer sub-systems were endorsed by the relevant committees. The Deputy Secretary for the Treasury also advised that the normal cost and benefit analysis with an estimated pay-back period was not applicable in this case because there was no feasible alternative to the present proposal. She clarified that the saving mentioned in paragraph 10 of the paper should not be considered as a direct saving from the 2001C operation, but rather a saving achieved upon the longer-term implementation of some of the computer sub-systems which would continue to be in use after the 2001C.

21. Mrs Miriam LAU referred to the cost breakdown in paragraph 11 of the discussion paper and sought clarification on why only some $20 million out of the total budget of $56 million was allocated to the procurement of hardware and software whereas items (b), (c) and (d) on related services accounted for a major portion of the estimated non-recurrent cost.

22. In response, DC/C&S explained that as the site for the 96BC was no longer in use and there was currently no site for installation of the computer system, item (b) on site preparation was necessary so as to provide a suitable site for housing the system as well as some 200 planning and supervision staff. Items (c) and (d) were on hiring of services for the development of computer programmes to meet the specific needs of the operation and on employment of temporary or contract staff. The staff costs referred to under item (g) were for internal staff responsible for planning and supervising the work of the contract staff or service providers to ensure that the work would be up to standard and would proceed smoothly.

23. In response to Mr Edward HO's query on why the system procured for the 96BC was not Year 2000 (Y2K) compliant, DC/C&S advised that a major portion of the system for the 96BC was developed on the facilities acquired for the 1991C which were not Y2K compliant. Although some additional pieces of computer equipment were acquired in 1994 and 1995, they were not Y2K compliant since some computer facilities manufactured after 1995 had still not catered for Y2K needs.

24. Mr SIN Chung-kai agreed that the large statistical operation of 2001C had to be conducted with the support of an efficient computer system. He however expressed concern that C&SD lacked communication with academics on issues relating to census and statistics. In view that the results of the 2001C would provide a useful basis for planning the economic and other developments of Hong Kong in the next century, he considered that the Administration should set up formal channels to seek the views of academics on how the 2001C should be conducted and examine whether some researches could be carried out in the context of the 2001C.

25. In response, DC/C&S confirmed that consultation work was in progress and a large number of organizations had already been consulted. These organizations included the relevant departments and faculties in academic institutions and other organizations such as the Hong Kong Council of Social Service, the Consumer Council and the Family Planning Association. He noted Mr SIN's view for further consideration. Admin

26. Mr FUNG Chi-kin sought further details on the "built-in control mechanism to control and check the amount and quality of outputs of temporary field workers". DC/C&S explained that a control mechanism was in place to ensure that the data collected by the field workers were accurate. By using the proposed computer system, the work of all the 23 000 field workers would be subject to a preliminary scrutiny daily where samples of returned questionnaires would be drawn and a second team of staff would verify the accuracy of the data on site. If the data were found to be inaccurate, immediate action would be taken to assess whether field work had to be re-conducted and whether disciplinary action should be taken out against the field workers concerned.

27. On the timetable for releasing the 2001C results, DC/C&S advised that it was the Administration's target to release a preliminary count in June 2001 and some summary results in November 2001.

28. The Committee approved the proposal.

Item No. 3 - FCR(1999-2000)14

LOAN FUND
HEAD 274 - TOURISM
‥ New Subhead "Ocean Park Lowland Redevelopment Fund"

29. Mr LEE Cheuk-yan enquired about the criteria which the Government would consider when granting loans to individual organizations. He also asked if low-interest loans similar to that for OPC could be granted to the Mass Transit Railway Corporation (MTRC) so that the pressure on fare increase could be alleviated. In response, the Secretary for the Treasury confirmed that under normal circumstances, the Government would not grant low-interest loans to individual organizations, in particular those of a commercial nature. As regards the Kowloon-Canton Railway Corporation and MTRC, they had already received capital injection from the Government for the construction of the West Rail and the Airport Railway respectively. She said that the Government had agreed to the proposal to provide a loan facility to OPC because of the Ocean Park's contribution to the tourism industry which accounted for some 7 to 8% of the Gross Domestic Product in Hong Kong. A similar loan had also been granted to the Hong Kong Tourist Association (HKTA) with the approval of FC in early 1998 for organizing international events.

30. Mr SIN Chung-kai asked if OPC had considered other sources of financing such as sponsorship from the Hong Kong Jockey Club (HKJC) for the construction of "Adventure Bay". The Deputy Secretary for Home Affairs (DSHA) said that HKJC had been a long-standing sponsor of OPC and its recent sponsorship was for the establishment of the Giant Panda Habitat. The Chief Executive of OPC (CE of OPC) supplemented that OPC had sought commercial sponsorship for the new facility. However, as commercial sponsors usually required immediate major publicity and marketing opportunities for their sponsorship programmes while the "Adventure Bay" would require several years to complete, OPC had not been successful in securing commercial sponsorship for this project. He nevertheless assured members that OPC would continue to explore alternative sources of financing. Mr SIN expressed disappointment that HKJC had declined to sponsor the construction of "Adventure Bay".

31. As regards the financial situation of OPC, CE of OPC remarked that since 1991, OPC had been generating an average annual operating surplus of $106 million, of which $100 million per year had been re-invested into the Park to develop new attractions and facilities. The surplus had also enabled OPC to maintain the admission fee at the 1991 level and provide concessions to senior citizens and welfare visitors, as well as to organize educational programmes for school children. CE of OPC added that Ocean Park was committed to promoting environmental conservation. OPC had set a goal of contributing $10 million to panda conservation in the Mainland during the next 10 years and expected that $3 million would be generated in the first two years after the opening of the Giant Panda Habitat.

32. On the Board membership of OPC, DSHA advised that all members of the Board were appointed by the Chief Executive. As OPC was a statutory body, its financial accounts were tabled at the Legislative Council for Members' scrutiny.

33. Referring to the number of tourists visiting the Park after the completion of "Adventure Bay" which, according to the Administration, was expected to rise from an annual average of 822 000 to 1.4 million in 2002-03, Mr CHAN Wing-chan enquired about the basis for such an estimate. In reply, DSHA advised that the estimate was based on the survey conducted by HKTA and the fact that the out-going "Water World" could only be open for business for 120 days a year while the new "Adventure Bay" could operate all year round. Mr HUI Cheung-ching and Mr CHEUNG Man-kwong however considered that the Administration might have over-estimated the number of tourists visiting Ocean Park, particularly if a Disney theme park was to be constructed.

34. In this regard, the Assistant Commissioner for Tourism (AC for T) pointed out that the tourism industry had picked up since mid-1998. A recent HKTA visitor survey indicated that as compared with the same period in the previous year, the number of tourists visiting Hong Kong had increased by 7.5% in the latter half of 1998 and 13.4% in the first quarter of 1999. HKTA's visitor survey had indicated that approximately 22% of the tourist arrivals to Hong Kong had expressed an interest in visiting Ocean Park. In addition, taking into consideration that around 28% of the 10 million visitors to Hong Kong in 1997 had visited the Ocean Park, the estimated 1.4 million visitors to Ocean Park in 2002-03 was not unreasonable.

35. On the impact of the proposed construction of Disney theme park on Ocean Park, AC for T advised that according to surveys conducted in the United States, the construction of new theme parks in the neighbourhood of an existing theme park would actually increase the number of visitors to the area in the long run. AC for T added that apart from Disney theme park, consideration was being given to put in place additional tourism infrastructure to further enhance the attractiveness of Hong Kong. These included the establishment of a wetland park in Tin Shui Wai and a fisherman's wharf. CE of OPC, who was also a member of the Board of Directors of the International Association of Amusement Parks and Attractions, shared the Association's observation on the positive effect of Disney theme parks on nearby tourist attractions in different markets. He informed members that experience had shown that other theme parks such as Magic Mountain and Sea World Organization had grown and developed well in the neighbourhood of Disneyland in both Southern California and Florida and thus created a synergy effect on tourism and enhanced the economy of these areas as a whole. CE of OPC was therefore of the view that the introduction of "Adventure Bay" would further strengthen Ocean Park as a preferred recreational and educational venue for local residents, as well as a destination which overseas visitors could not afford to miss.

36. As to how the estimated tourism receipts of some $2.7 billion (at 1998 price levels) had been arrived at, DSHA advised that the estimate was based on the HKTA surveys which showed that a tourist who visited Ocean Park would spend an extra 1.2 nights and about $1,600 a day in Hong Kong. On such basis, the tourism receipts to be brought by the 1.4 million tourists visiting Ocean Park in 2002-03 would be about $2.7 billion.

37. While supporting in principle the proposed construction of "Adventure Bay", Mr CHEUNG Man-kwong urged the Administration to take into account all possible factors which might affect the attractiveness of Ocean Park to ensure that the proposed loan facility would be financially viable. DSHA took note of Mr CHEUNG's view. Admin

38. The Committee approved the proposal.

Item No. 4 - FCR(1999-2000)15

FINANCE COMMITTEE PROCEDURE

39. Mr NG Leung-sing presented the item which invited members to approve proposed amendments to Paragraph 5 of the Finance Committee Procedure relating to the calling and convening of the first meeting of FC in a term. Members noted that the proposed amendments were consequential to amendments to the Rules of Procedure which had been approved by the Council on 28 April 1999.

40. The Committee approved the proposal.

41. The Committee was adjourned at 3:50 pm.


Legislative Council Secretariat
October 1999