Legislative Council

LC Paper No. FC192/98-99
(These minutes have been
seen by the Administration)

Ref: CB1/F/1/2

Finance Committee of the Legislative Council

Minutes of the 20th meeting
held at the Legislative Council Chamber
on Friday, 25 June 1999, at 2:30 pm

Members present :

Hon Ronald ARCULLI, JP (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 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 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 Bernard CHAN
Hon CHAN Wing-chan
Hon Mrs Sophie LEUNG LAU Yau-fun, JP
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 Andrew CHENG Kar-foo
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 CHAN Kam-lam (Deputy Chairman)
Hon Edward HO Sing-tin, JP
Hon Albert HO Chun-yan
Hon Eric LI Ka-cheung, JP
Dr Hon David LI Kwok-po, JP
Hon Margaret NG
Hon Mrs Selina CHOW LIANG Shuk-yee, JP
Hon CHAN Yuen-han
Dr Hon LEONG Che-hung, JP
Hon LEUNG Yiu-chung
Hon CHOY So-yuk

Public officers attending :

Miss Denise YUE, JP
Secretary for the Treasury

Mrs Carrie LAM, JP
Deputy Secretary for the Treasury

Principal Executive Officer (General), Finance Bureau

Deputy Secretary for Works

Chief Assistant Secretary of Works Bureau

Deputy Secretary for Planning, Environment and Lands

Director of Drainage Services

Assistant Director of Drainage Services

Dr Malcolm BROOM
Principal Environmental Protection Officer, Environmental Protection Department

Mr Nicholas YEK, JP
Deputy Judiciary Administrator

Mr Alex MA
Assistant Director of Information Technology Services

Miss CHEUNG Siu-hing, JP
Deputy Secretary for Trade and Industry

Mr AU Yee-leung, Ronald
Assistant Commissioner of Customs and Excise

Mr CHOW Oi-tung, William
Senior Staff Officer (Information Technology) of Customs and Excise Department

Mr Joseph Y T LAI
Deputy Secretary for Education and Manpower

Mr Patrick LI
Principal Assistant Secretary for Education and Manpower

Assistant Director of Education

Chief Geotechnical Engineer/Landslip Investigation, Civil Engineering Department

Chief Building Surveyor/Slope Safety, Buildings Department

Ms Maria KWAN, JP
Deputy Secretary for Economic Services

Miss Dora FU
Principal Assistant Secretary for Economic Services

Mrs Lessie WEI, JP
Director of Agriculture and Fisheries

Assistant Director of Agriculture and Fisheries

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

Item No. 1 - FCR(1999-2000)22


As requested by members of the Public Works Subcommittee (PWSC), the Chairman agreed that PWSC(1999-2000)39 would be dealt with separately.

2. The proposal, except PWSC(1999-2000)39, was put to vote and approved.

PWSC(1999-2000)39 312DS Strategic Sewage Disposal Scheme stage I - construction supervision of the main works

3. Members noted that the proposed increase of $98.8 million in the approved project estimate (APE) was due to the need to retain site staff to supervise the works over the longer construction period and the increase in consultants' fees for the extended supervision period. Mr LEE Wing-tat reiterated his grave concern about the liability of the Government in the forfeiture of the original contracts, particularly in the event that the Government lost its case in the arbitration.

4. In response, the Deputy Secretary for Planning, Environment and Lands (DS/PEL) referred members to the supplementary information (PWSCI(1999-2000)4) provided to PWSC in which the Administration had disclosed all relevant information on the Government's stance and the circumstances leading to the arbitration. In accordance with legal advice, the Administration would not be in a position to make further comments on the question of liability since arbitration was in progress. However, DS/PEL assured members that upon conclusion of the arbitration proceedings, the Administration would give a full briefing to members. Mr LEE Wing-tat stressed that should the Government be found at fault, the matter should be followed up by the Finance Committee (FC). Admin.

5. Miss Emily LAU shared Mr LEE Wing-tat's concern and asked whether disciplinary action against individual staff would be initiated if the Government was found at fault. In reply, the Director of Drainage Services (DDS) reiterated that the Administration would conduct an investigation. In this connection, the Chairman advised that issues related to the arbitration should be pursued through other channels. He nevertheless pointed out that should the case be settled by mutual consent, the responsibility of the litigating parties would not be adjudicated.

6. On Miss Emily LAU's reference to recent press reports about further delay in Strategic Sewage Disposal Scheme (SSDS) Stage I works, DDS explained that there was an unusual machine failure in the tunnel drive from Kwun Tong to To Kwa Wan. At present, the contractor concerned was sourcing replacement parts internationally and a delay of three to five months was expected. Given the short distance of the drive in question and some 50% of the excavation works had been completed, DDS anticipated that this incident would not have a major impact on the deep tunnel completion contract. The engineer of the contract would adjudicate at a later stage on whether an extension of time could be rightfully claimed. In reply to Miss LAU, DDS commented that the completion contractor was properly resourced and motivated for the job.

7. Regarding the wider concern about further delay in SSDS Stage I works, DDS advised that as only about 50% of the deep tunnelling works had been completed, there could not be a strict guarantee against further delay or cost overrun. DS/PEL and DDS assured members that at present, the provision of $8.2 billion for SSDS was adequate to cover the overall costs of the project and absorb the proposed increase of $98.8 million in APE through savings in other items.

8. To update members on the SSDS, DS/PEL advised that quarterly reports on the SSDS Stage I project had all along been provided to the Advisory Council on the Environment and the Panel on Environmental Affairs. He undertook to include information on works progress and problems encountered in future reports for circulation to all Legislative Council Members. Admin.

9. At voting, Miss Emily LAU requested that her reservation on the proposal be recorded.

10. The Committee approved the proposal.

Item No. 2 - FCR(1999-2000)23

‥ Subhead A025YL Implementation of information systems strategy plan (phase III)
‥ Subhead 001 Salaries

11. Referring to the notional savings of $9,490,000 and cost avoidance of $5,543,000 as a result of the Judiciary Information Systems Strategy (JISS), the Deputy Judiciary Administrator (DJA) clarified that if the workload of the Judiciary remained stable, these savings could be achieved in terms of reduced staff costs.

12. In this connection, the Deputy Secretary for the Treasury (DS/Tsy) explained that where realizable savings were achieved as a result of computerisation, the Finance Bureau (FB) would reduce from the relevant draft Estimates of the department/bureau the amount of the costs saved. For savings which were not readily realizable because they were in the form of percentage savings of a large number of posts spread over a large number of offices, the usual arrangement was to allow the departments to retain these savings to meet anticipated increases in workload. DS/Tsy assured members that the reference to a review in the FC paper meant that FB would follow up closely and if the anticipated increases in workload had not arisen, FB might consider other appropriate treatment of the savings.

13. Miss Emily LAU stressed that the needs of the judges should also be taken into account when implementing computerisation at the Judiciary. On the question of direct benefits to judges brought about by the JISS, DJA pointed out that the electronic legal reference system, for example, implemented under Phase II of JISS, was of direct benefit to judges. The proposed Automated LEadership Resource Tool system under Phase III of JISS would also enable the Chief Judge at each court to deploy resources more effectively. DJA added that in each of the working groups set up for the implementation of each Phase of JISS, judges were included as members. The consultant also consulted the judges in preparing its study report. The Administration was therefore aware of the importance to take into account the needs of judges.

14. The Committee approved the proposal.

Item No. 3 - FCR(1999-2000)24

Government Secretariat: Trade and Industry Bureau
‥ Subhead A008XV Electronic data interchange system
‥ Subhead 001 Salaries
‥ Subhead 001 Salaries

15. Referring to the impact on small and medium enterprises (SMEs) as a result of the implementation of the electronic system, the Deputy Secretary for Trade and Industry (DS/TI) said that while efforts had been made to assist SMEs to move towards computerisation, applications from traders could still be processed manually. There were provisions in the Government's agreement with the Tradelink Electronic Commerce Limited (Tradelink) which allowed for the submission of trade-related documents through non-electronic means. DS/TI pointed out that according to Tradelink, about 30% of its clients filed less than 10 Import and Export Declarations each month and this category of clients might be enterprises of a smaller scale. Nevertheless, she would check with the Information Technology and Broadcasting Bureau on whether statistics on the extent of business automation among SMEs were available. Admin.

16. On the anticipated benefits in relation to actions against tax evasion, the Assistant Commissioner for Customs and Excise advised that through computerised data cross matching among Dutiable Commodities Permits, delay and human errors which might be associated with manual processing could be avoided and hence, the chance of duty evasion could be minimized.

17. The Committee approved the proposal.

Item No. 4 - FCR(1999-2000)25

‥ New Subhead "Slope Improvement Loan Scheme for Private Schools"

18. Dr YEUNG Sum stated that Members of the Democratic Party (DP) supported the present proposal. Professor NG Ching-fai also considered the proposal reasonable and expressed his support.

19. Regarding the failure of borrowing schools to repay loans, the Assistant Director of Education (AD/E) advised that this had not been a problem as all loans were provided with security which might take the form of a legal charge registered against a property or a bank guarantee. For an unsecured loan, the applicant had to provide a guarantor.

20. On adequacy of the proposed commitment of $100 million to provide loans to other private schools in need of assistance, AD/E informed members that 16 schools which had already received Dangerous Hillside Orders (DHOs) served by the Building Authority (BA) to carry out investigation and upgrading works had indicated difficulties in raising funds within a short period to carry out the works. He assured members that funds should be sufficient to cater for these and more schools. Moreover, the loan scheme would operate on a revolving basis and loan repayments would be credited back into the scheme for further loans.

21. Responding to Miss Emily LAU's question on why the approval of loans was non-means-tested, AD/E and the Deputy Secretary for Education and Manpower (DS/EM) reiterated the need to assist schools to take prompt remedial action as soon as possible. This would in turn safeguard the safety of the public at large as well as the students and staff. They pointed out that introducing a means-testing requirement and setting relevant criteria to determine eligibility would make the loan releasing process a time-consuming one, thus defeating the objective of enabling schools to take quick remedial action. In this regard, the Chairman commented that a policy on means-testing might take long to formulate and such a system would be costly to administer.

22. Mr James TIEN stated that Members of the Liberal Party (LP) were in support of the proposal. However he suggested that in determining whether an interest-free loan should be granted, consideration should be given to the financial position of the private school concerned, rather than whether the school is profit-making or otherwise.

23. In response, DS/EM advised that from the outset, the Administration had consulted the 22 private schools in receipt of DHOs from the BA with regard to their financial position and 16 had indicated difficulties in raising funds. After the present proposal had been drawn up, the 22 schools were consulted again. DS/EM added in reply to Mr TIEN that of the 16 private schools in need of assistance, 13 were non-profit-making and three were profit-making.

24. On Mr James TIEN's enquiry about the "no-gain, no-loss" interest rate, DS/Tsy confirmed that the interest rate had all along been used for certain loans administered by the Government to provide some form of assistance but would not constitute a financial subsidy. The current "no-gain, no-loss" interest rate had been set at 2% below the average best lending rate of the note-issuing banks with effect from 1 April 1999. FC had noted this formula when considering a funding proposal (FCR(98-99)81) on the Home Purchase Scheme and Home Financing Scheme on 12 March 1999. DS/Tsy recapitulated that in past years, different bases, including the return on fiscal reserves, had been used in determining the "no-gain, no-loss" interest rate.

25. In reply to Miss Cyd HO about the need for recurrent expenses to maintain slopes, AD/E clarified that the present proposal sought to provide a one-off loan to private schools being served with DHOs to meet the considerable cost for upgrading sub-standard slopes. The recurrent cost for slope maintenance was the responsibility of individual schools concerned. In this connection, members noted that periodic maintenance included annual minor repair works and inspection by qualified engineers once every five years, both of which were not very costly.

26. The Committee approved the proposal.

Item No. 5 - FCR(1999-2000)26

‥ New Subhead "Fish Marketing Organization Loan Fund - loans to fishermen"

27. Dr YEUNG Sum stated that Members of DP supported the proposal. He further informed members that he, together with Miss CHOY So-yuk and Mr WONG Yung-kan, had taken up the affected fishermen's complaint with the Administration. He appreciated the Administration's prompt response to this matter and urged other members to support the present proposal which sought to provide a low-interest loan to fishermen affected by the fishing moratorium in the South China Sea. He also pointed out that according to his knowledge, some of the affected fishermen might not be inclined to apply for financial assistance under the Comprehensive Social Security Assistance (CSSA) Scheme if they were provided with loans to tide over the current difficulties.

28. In this connection, Dr YEUNG requested that the Social Welfare Department (SWD) should deploy sufficient staff at some of its Social Security Unit offices to handle CSSA applications from affected fishermen. The Principal Assistant Secretary for Economic Services advised that according to the SWD, it had reviewed the situation with the fishermen and the Agriculture and Fisheries Department (AFD) and had agreed to expedite the processing of the CSSA applications by redeployment of existing staff.

29. Mr Gary CHENG confirmed that Members of the Democratic Alliance for Betterment of Hong Kong were in support of the proposal. Nevertheless, he was concerned about the adequacy of the funds for the forecast number of applications and the assistance available to affected fishermen with large vessels exceeding 25 metres in length.

30. In response, the Director of Agriculture and Fisheries (D of A&F) confirmed that according to the 1997 survey figures, the number of fishing vessels which would be affected by the fishing moratorium would be in the region of 1 350 and this number had not changed significantly in 1998. The commitment of $65 million being sought should be adequate to cater for all affected vessels. Regarding the request from fishermen with vessels exceeding 25 metres in length for a greater loan amount, D of A&F pointed out that according to information gathered from shipyards, $50,000 should be sufficient for basic repairs and maintenance. Loan requirements in excess of $50,000 would likely involve expenses such as replacement of the engine and purchase of fuel which were not directly related to the fishing moratorium.

31. Mr WONG Yung-kan remarked that owing to the short notice for implementation of the fishing moratorium in the South China Sea, most fishermen had not been well prepared financially to cope with the situation. On the question of consultation, D of A&F explained a working group had been set up to look into the assistance to be provided to the affected fishermen. This working group comprised representatives from the Government and the fishing industry. She reiterated that it was virtually impossible to consult each and every affected fisherman, and it was understandable that individual fishermen with larger vessels might request a higher loan amount. D of A&F also pointed out that loan requirements exceeding $50,000 could be dealt with by the Fish Marketing Organization Loan Fund under existing criteria.

32. Mr CHAN Wing-chan confirmed the support of Members of the Hong Kong Federation of Trade Unions for the proposal and urged the Administration to strengthen communication with the Mainland authorities regarding the implementation of fishing moratorium.

33. Mrs Sophie LEUNG stated that Members of the LP were in support of the proposal. Nevertheless, she pointed out that similar moratorium had been enforced in other parts of the Mainland and questioned whether the Administration had maintained close communication with the relevant Mainland authorities on this matter.

34. In response, D of A&F said that the Administration first learned about the fishing moratorium in the South China Sea at the end of February 1999 and confirmation of the implementation timeframe from the Mainland authorities was received in mid March 1999. She assured members that the Administration would communicate closely with the Mainland authorities and keep in view similar arrangements next year. She supplemented that AFD had regular liaison with its counterpart in the region - the Fisheries Management & Fishing Port Superintendence Bureau of South China Sea of the Mainland but the present decision on the fishing moratorium in June and July 1999 was made by the Central Government. Whilst knowing that similar fishing moratorium had been enforced in the East China Sea and Bohai Sea, AFD had sought confirmation from the Mainland authorities last year about any moratorium which might affect Hong Kong fishermen but such information was only available in mid March 1999.

35. On the Mainland authorities' offer to issue a certain number of permits to Hong Kong fishing vessels to fish in Nansha waters, D of A&F informed members that about 100 fishing vessels had been issued such permits and they were vessels of a larger size.

36. Noting that the fishing moratorium in the South China Sea would be implemented annually, Miss Emily LAU enquired about the need for similar funding next year. In response, D of A&F pointed out that in the light of this year's experience, the fishermen should be in a position to schedule their routine maintenance to fit in with the annual moratorium in subsequent years. For example, basic repairs and maintenance could be carried out during the moratorium in the months of June and July, instead of during Chinese New Year. D of A&F and the Deputy Secretary for Economic Services reiterated that the Administration would examine in consultation with the industry future arrangements to cope with the annual moratorium.

37. Mr James TIEN said that in his view, the affected fishermen were small business operators and he welcomed the proposed loan fund to assist small-sized businesses. He also questioned the Government's policy, if any, on providing financial assistance to certain industries.

38. In response, the Secretary for the Treasury (S for Tsy) re-affirmed that under established policy, the Government would not interfere with free market operations, nor subsidize industrial or commercial activities. Only under very exceptional circumstances would the Government provide some form of assistance/relief by way of loans. The Special Finance Scheme for SMEs, for example, was introduced to help SMEs tide over a period of liquidity crunch. As the Administration attached considerable importance to education, means-tested and non-means-tested loans were available to undergraduates. S for Tsy stressed that the Administration would consider each case for assistance on its own merits and there was no intention to change the existing policy whereby the Government would not subsidize individual trades/industries. The present proposal was a special arrangement to assist affected fishermen to tide over unforeseeable difficulties. She therefore did not anticipate the need to put up a similar funding request next year as the fishing industry should have prepared themselves adequately for the annual moratorium.

39. In reply to Mr James TIEN's enquiry about another loan scheme for fishermen affected by red tide last year, D of A&F informed members that a total of 832 applications had been approved. Of the commitment of $200 million approved by FC, $130 million had been lent. As at 25 June 1999, a total of about $1.6 million had been repaid as most applicants had opted to repay the loan after two years.

40. Mrs Sophie LEUNG cautioned that the repayment ability of affected fishermen should also be considered when introducing loan schemes. She also expressed concern about the Administration's future strategy on dealing with the problem of red tide.

41. D of A&F said that the present proposal and the loan scheme for red tide catered for two different categories of fishermen. The former was sea-going while the later was engaged in marine fish culture. On the overall strategy, she confirmed that the Administration had already implemented some of the improvement measures recommended in the Consultancy Study on Red Tide Monitoring and Management in Hong Kong.

42. The Committee approved the proposal.

43. The Committee was adjourned at 4:00 pm.

Legislative Council Secretariat
September 1999