LC Paper No. FC180/98-99
(These minutes have been
seen by the Administration)

Ref : CB1/F/1/2

Finance Committee of the Legislative Council

Minutes of the 16th meeting
held at the Legislative Council Chamber
on Friday, 23 April 1999, at 2:30 pm

Members present :

Hon Ronald ARCULLI, JP (Chairman)
Hon CHAN Kam-lam (Deputy Chairman)
Hon Kenneth TING Woo-shou, JP
Hon James TIEN Pei-chun, JP
Hon David CHU Yu-lin
Hon Cyd HO Sau-lan
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 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 Margaret NG
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 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
Hon WONG Yung-kan
Hon Jasper TSANG Yok-sing, JP
Hon Howard YOUNG, JP
Dr Hon YEUNG Sum
Hon YEUNG Yiu-chung
Hon LAU Kong-wah
Hon Mrs Miriam LAU Kin-yee, JP
Hon Ambrose LAU Hon-chuen, JP
Hon Emily LAU Wai-hing, JP
Hon CHOY So-yuk
Hon SZETO Wah
Hon Timothy FOK Tsun-ting, JP
Hon LAW Chi-kwong, JP
Hon TAM Yiu-chung, JP
Dr Hon TANG Siu-tong, JP

Members absent :

Hon HO Sai-chu, JP
Hon Edward HO Sing-tin, JP
Hon Martin LEE Chu-ming, SC, JP
Hon Eric LI Ka-cheung, JP
Dr Hon David LI Kwok-po, JP
Hon Mrs Selina CHOW LIANG Shuk-yee, JP
Dr Hon Philip WONG Yu-hong
Hon LAU Chin-shek, JP
Hon LAU Wong-fat, GBS, JP
Hon Andrew CHENG Kar-foo
Hon FUNG Chi-kin

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 Philip CHAN Kwan-yee

Principal Assistant Secretary for Security

Mr LEE Ming-kwai

Director of Management Services, Hong Kong Police Force

Mr P E HALLIDAY

Assistant Commissioner of Police

Mr George LEUNG

Chief Systems Manager of Hong Kong Police Force

Mr Alex MA

Assistant Director of Information Technology Services

Mr FOO Tsun-kong

Regional Commander Marine, Hong Kong Police Force

Mr LEE Wai-kuen

General Manager, Government Dockyard, Marine Department

Mr CHAN Ming-yau

Senior Maintenance Manager, Government Dockyard, Marine Department

Mr Robin IP, JP

Deputy Secretary for Constitutional Affairs

Miss Shirley YUNG

Principal Assistant Secretary for Constitutional Affairs

Mr LI Wing

Chief Electoral Officer

Mr Alex LEE

Chief Systems Manager of Information Technology Services Department

Mr Alan SIU

Principal Assistant Secretary for Information Technology and Broadcasting

Mr Y C CHENG

Deputy Director of Information Technology Services

Mr Alan DIXEY

Assistant Director of Information Technology Services

Mr Owen WONG

Senior Systems Manager of Information Technology Services Department

Miss CHEUNG Siu-hing

Deputy Secretary for Trade and Industry

Mr Francis HO, JP

Director-General of Industry

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

---

Item No. 1 - FCR(1999-2000)6

RECOMMENDATION OF THE PUBLIC WORKS SUBCOMMITTEE MADE ON 14 APRIL 1999

The Committee approved the proposal.

Item No. 2 - FCR(1999-2000)1

CAPITAL WORKS RESERVE FUND
HEAD 710 - COMPUTERISATION
Hong Kong Police Force
New Subhead "Office Automation for Hong Kong Police Force"

2. Miss Emily LAU requested further quantitative information on the productivity gain or savings resulting from the installation of the office automation (OA) network system, as well as future improvement in crime detection. She also sought clarification on the progress of saving on staff cost arising from the implementation of the Information Technology Strategy (ITS).

3. In response, the Director of Management Services, Hong Kong Police Force (D of Mgt Services) pointed out that the existing proposal on OA should be distinguished from ITS. The proposed OA system would improve communication between all Police units and other policy bureaux/departments but its direct benefit to the public was not readily measurable. Whilst it was hard to quantify the improvements gained under the OA system, a notional 1% saving in staff costs was anticipated. In parallel with the planning of the OA system, the Police Force had been implementing a five-year ITS which was scheduled to be completed by September 1999. The ITS had brought about improvements in services provided to the public, such as improving success in crime detection through enhancing the fingerprint matching process which reduced the processing time for fingerprint matching from weeks to about 15 minutes. Besides, the processing time for licence applications and for traffic accident enquiries, as well as the time for compiling statistics on traffic accidents, had also been shortened. D of Mgt Services undertook to provide more information to substantiate the improvements gained through the computerisation of the Police Force, in particular on the improvement in crime detection rate.

Admin.

4. D of Mgt Services also confirmed that up to now, staff savings of 584 posts had been achieved from implementation of ITS. One further post would be deleted upon completion of ITS.

5. The Committee approved the proposal.

Item No. 3 - FCR(1999-2000)2

HEAD 122 - HONG KONG POLICE FORCE
Subhead 603 Plant, vehicles and equipment
New item "Replacement of six police launches"

6. Responding to Mr CHAN Wing-chan's and Mrs Miriam LAU's concern on whether the enhanced speed (25 knots) of the replacement launches was adequate in meeting operational needs such as the Marine Police's surveillance over illegal immigration, the Regional Commander Marine, Hong Kong Police Force (RCM) advised that each launch would carry on board a small vessel with a speed of 35 to 40 knots for fast-speed pursuit. Besides using patrol launches in combating illegal immigration, the Marine Police had adopted various measures which included collecting intelligence and taking action against vessels carrying illegal immigrants upon their landing. RCM also pointed out that enhancing the speed of the patrol launches to any higher level would be very expensive and would not be cost-effective. On why all the replacement launches were of the same size and speed, RCM confirmed that six patrol launches of this type were required for allocation to each of the five sea divisions under the Marine Police Region.

7. As regards the life expectancy of the new launches, the General Manager, Government Dockyard of the Marine Department (GM/Govt Dockyard) advised that the power of the engine of the replacement launch was 2000 kilowatts which doubled that of the existing launches and the life expectancy of this type of steel hull vessel was usually 18 to 22 years.

8. On the pricing of the replacement launches, the Principal Assistant Secretary for Security (PAS/S) advised that a market research into the price of similar vessels all over the world was conducted prior to each launch procurement exercise. The estimated cost per launch of $42,480,000 under the present proposal was based on the result of the market research.

9. Considering that the manufacturing cost of launches might be lower in Hong Kong and the Mainland, Mr LUI Ming-wah asked whether the replacement launches had to be procured from overseas. GM/Govt Dockyard advised that in accordance with the requirement of the World Trade Organization, a tendering exercise had to be conducted and open to all interested parties worldwide. He added that the number of local bids had increased in the past few years and the manufacturing place was usually in the Mainland.

10. Mr Howard YOUNG was concerned about whether the repair and maintenance costs of launches would be lower if all launches were of the same model requiring the same spare parts. In reply, the Senior Maintenance Manager, Government Dockyard of the Marine Department (SMM/Govt Dockyard) said that the Administration had no preference for any model or manufacturer. As long as the tender conditions were fulfilled, each tender would be considered on its merits. At present, the Marine Police fleet comprised vessels of various models and the repair and maintenance costs were kept down by using spare parts that were widely available in the market.

11. In response to Mr CHAN Kam-lam's query on the justification for replacing the patrol launches instead of upgrading the existing ones, PAS/S advised that it would not be cost-effective to continue maintenance upon imminent expiry of the serviceable lifespan of the existing launches. In view of the high repair costs, a replacement programme for the Marine Police fleet had been drawn up to replace the existing fleet by phases over a period of 17 years. On whether the number of new launches required could be reduced due to improved co-operation with the Mainland authorities in combating illegal immigration, PAS/S stressed that besides maintaining close liaison with the Mainland authorities, vigilance was still required in beat patrol. He added that apart from anti-illegal immigration duties, the replacement launches would be used for other purposes such as maritime safety, conservancy and maritime law enforcement.

12. As regards environmental implications, Miss Emily LAU was concerned whether the design capacity of the replacement launches had taken into account future developments for environmental improvements. Mr James TIEN also raised concern about the need to consult a professional naval architect to ensure that the replacement launches could meet high environmental standards as those in Northern Europe. In response, GM/Govt Dockyard advised that the tender specifications for the launches were based on the most up-to-date prevailing international standards. The Administration would give due consideration to those tenders which included the capability to make minor modification to the launches to meet higher environmental requirements in future.

13. On the disposal of the existing launches after the replacement exercise, SMM/Govt Dockyard advised in reply to Mr Andrew WONG that the launches would be handed over to the Marine Department or to the Government Supplies Department for public auction in accordance with existing disposal procedures. Permits/licences would be required to ensure compliance with relevant regulations if a replaced launch were to continue operation in Hong Kong. Members however noted that since the existing launches were built in the early 1980s, they were by and large unable to meet present-day standards.

14. In response to Miss Cyd HO's enquiry on whether the replaced launches would be utilized in clearing the remains of a vessel sunken in Tap Mun last year, RCM clarified that such clearance work was not under the purview of the Police Force. He further confirmed that duties of the Marine Police included law enforcement against illegal fishing and illegal entry into Hong Kong waters by fishing junks.

15. The Committee approved the proposal.

Item No. 4 - FCR(1999-2000)3

CAPITAL WORKS RESERVE FUND
HEAD 710 - COMPUTERISATION
Registration and Electoral Office
New Subhead "Enhancement to the Electoral and Registration System for the 1999 District Councils election and the 2000 Legislative Council election"

16. The Committee approved the proposal.

Item No. 5 - FCR(1999-2000)4

CAPITAL WORKS RESERVE FUND
HEAD 710 - COMPUTERISATION
Information Technology Services Department
New Subhead "Secure Central Internet Gateway System"

17. On whether supplementary funding would be required in the event that the proposed storage capacity of the Secure Central Internet Gateway System would no longer be able to meet the future increase in data storage requirement, the Deputy Director of Information Technology Services (DD/ITS) acknowledged that it was difficult to estimate the future growth in the information storage requirement of the Government Information Centre having regard to the fast development in the use of the Internet. To this end, the proposed system was designed to be readily expandable at a minimal cost to meet future demand, without the need for re-design or installation of a new system. It was estimated that a capital cost of $40,000 would be required for every 10GB enhancement in the capacity of the proposed system.

18. Dr LAW Chi-kwong expressed concern that the low storage capacity assigned to individual bureaux and departments might limit their capability of using the Internet, in particular on the use of multi-media elements. He considered that the Administration should issue a set of guidelines on the use of the proposed system to bureaux and departments concerned and report the information storage capacity provided for bureaux and departments to the Panel on Information Technology and Broadcasting. DD/ITS took note of Dr LAW's view.

Admin.

19. The Committee approved the proposal.

Item No. 6 - FCR(1999-2000)5

LOAN FUND
HEAD 275 - SMALL AND MEDIUM ENTERPRISES
Subhead 101 Special finance scheme for small and medium enterprises

20. On the risk-sharing ratio, Mr CHEUNG Man-kwong noted that with the proposed change in the ratio between the Government and participating lending institutions (PLIs) from 50:50 to 70:30, the maximum loan available to small and medium enterprises (SMEs) would be reduced from $4 to $2.86 million. He expressed concern that according to past experience, some 11% of applicants who applied for loans exceeding $3 million would not be able to obtain adequate loans as a result of the change. Mr CHEUNG asked if the Government would consider raising its maximum guarantee limit from $2 to $2.8 million so that the maximum loan available to SMEs could remain at $4 million.

21. In response, the Director-General of Industry (DG of I) advised that the change in risk-sharing ratio should not have a significant impact on the loan size of most applicants as statistics revealed that the average loan size per applicant was around $700,000 to $800,000. Moreover, the actual amount of loans to be offered to SMEs was determined by PLIs in accordance with their established lending principles. As regards those applicants who applied for loans exceeding $2.86 million, DG of I admitted that they might not be able to obtain sufficient loans if PLIs strictly adhered to the risk-sharing ratio of 70 (Government):30 (PLIs). Notwithstanding, the Administration had to strike a balance between the interest of these applicants and the need to optimize the number of beneficiaries under the Special Finance Scheme (SFS). At Ms CHOY So-yuk's request, the Administration undertook to provide information on the number of successful applications involving a loan facility of less than $2.86 million.

Admin.

22. Mr CHEUNG was not convinced of the Administration's response. He remarked that of the total commitment of $2.5 billion under the Scheme, only $770 million had been approved so far. As such, the Scheme should have adequate financial support to help the 11% of applicants in question to obtain sufficient loans. DG of I however pointed out that as PLIs would tend to be more lenient in considering loan applications after the change in risk-sharing ratio, the number of successful applications under SFS was expected to increase shortly. Whilst agreeing with the need to optimize the number of beneficiaries, the Chairman asked if the Administration would re-visit Mr CHEUNG's suggestion of raising the maximum guarantee limit to $2.8 million if it was later found that no significant improvement had been made in the approval of loan applications. DG of I assured members that the Administration would keep SFS under constant review, but there was no plan for a major review for the time being. Nevertheless, the Administration would revert to the Finance Committee if circumstances warranted any revision to the Scheme.

23. As regards Ms CHOY So-yuk's concern that some PLIs might use SFS to offset other loans acquired by the beneficiaries, DG of I advised that as details of the agreement on loan facility was made between PLIs and SFS applicants, the Administration would not be in a position to know if the guarantee had been used to offset other loans. Nevertheless, the Administration would not provide the necessary guarantee if there was clear evidence indicating that this was the case. In fact, the Administration had rejected one SFS application on such grounds.

24. On default cases, DG of I advised that five default cases were registered as at 22 April 1999 and the loan involved amounted to $7 million. PLIs would recover the loan through disposal of the collateral deposited by the relevant borrowers. If this was not feasible, the amount of loan would be shared between the Government and the PLIs concerned in accordance with the risk-sharing ratio.

25. Given the temporary nature of SFS, Mr NG Leung-sing considered that the Administration should look into other alternatives to provide assistance to SMEs on a longer term basis. DG of I took note of Mr NG's view and advised that the Administration was studying overseas experience in this respect. It would consult interested parties when more concrete proposals were available.

26. The Committee approved the proposal.

27. The Committee was adjourned at 3:45 pm.

Legislative Council Secretariat
July 1999