LC Paper No. CB(1)1013/98-99
(These minutes have been seen by the Administration)

Ref: CB1/PL/ES

LegCo Panel on Economic Services

Minutes of meeting
held on Monday, 25 January 1999, at 10:45 am
in the Chamber of the Legislative Council Building

Members present :

Hon James TIEN Pei-chun, JP (Chairman)
Hon Fred LI Wah-ming (Deputy Chairman)
Hon Kenneth TING Woo-shou, JP
Hon LEE Wing-tat
Hon Martin LEE Chu-ming, SC, JP
Dr Hon David LI Kwok-po, JP
Hon CHEUNG Man-kwong
Hon Christine LOH
Hon CHAN Yuen-han
Hon Bernard CHAN
Hon CHAN Kam-lam
Hon SIN Chung-kai
Hon WONG Yung-kan
Hon Howard YOUNG, JP
Hon LAU Chin-shek, JP
Hon Mrs Miriam LAU Kin-yee, JP
Hon Andrew CHENG Kar-foo
Hon FUNG Chi-kin

Members absent :

Hon David CHU Yu-lin
Hon Eric LI Ka-cheung, JP
Hon MA Fung-kwok
Hon Ambrose CHEUNG Wing-sum, JP
Hon HUI Cheung-ching
Dr Hon Philip WONG Yu-hong

Public officers attending :

Item IV

Mr Stephen IP
Secretary for Economic Services

Mr Richard YUEN
Deputy Secretary for Economic Services

Item V

Mr Stephen IP
Secretary for Economic Services

Mr Arthur HO
Deputy Secretary for Economic Services

Mr Howard LEE
Principal Assistant Secretary (Economic Services)
New Airport

Mr Albert K Y LAM
Director of Civil Aviation

Mr Stephen KWOK
Chief Operations Officer (Air Services)
Civil Aviation Department

Item VI

Mr Stephen IP
Secretary for Economic Services

Ms Maria KWAN
Deputy Secretary for Economic Services

Regulatory Services Controller
Electrical & Mechanical Services Department

Assistant Director (Gas & General Legislation)
Electrical & Mechanical Services Department

Mr FU Tai-pun
Chief Engineer (Gas Utilisation)
Electrical & Mechanical Services Department

Principal Assistant Secretary for Economic Services

Attendance by invitation :

Item VI

The HK & China Gas Co. Ltd.

Mr James Y C KWAN
Director & General Manager
(Marketing & Customer Services)

Mrs Grace P H LAM
Public Affairs Manager

Mr LEE Hon-wan
Customer Service Manager

Clerk in attendance :

Ms Estella CHAN
Chief Assistant Secretary (1)4

Staff in attendance :

Mr Daniel HUI
Senior Assistant Secretary (1) 5

I Confirmation of minutes and matters arising
(LC Paper No. CB(1)765/98-99 - Minutes of meeting held on 10 November 1998)

The minutes of the meeting held on 10 November 1998 were confirmed.

2. In reply to Mr Fred LI Wah-ming's question on the timing for follow-up discussion on retail prices of major fuels and the interconnection system of the two power companies, the Secretary for Economic Services (SES) advised that subsequent to the discussion at the Panel meeting on 23 November 1998, the Administration had requested the oil companies to provide data for an analysis of retail prices of major fuels. The Economic Services Bureau and the Consumer Council were at present examining the data collected and would prepare a report assessing the price and profit levels of major fuels on an industry-wide basis. The Administration hoped to be able to brief members on the findings by March/April 1999. Admin.

3. As regards the study on the interconnection system of the two power companies, SES said that the government appointed consultant was at the final stage of preparing the report on study of interconnection and competition in the electricity supply sector in Hong Kong. As the findings in this report would have a major bearing on the long term policy on electricity supply in Hong Kong, the Administration would publicize and provide the consultancy report for the Panel's consideration. Admin.

II Information papers issued since last meeting

(LC Paper No. CB(1)644/98-99 A submission from Hong Kong Pigfarm Association
LC Paper No. CB(1)674/98-99 Import and retail price of major fuels from November 1996 to October 1998
LC Paper No. CB(1)701 & 703/98-99 Implementation of the Electrical Products (Safety) Regulation
LC Paper No. CB(1)712/98-99 Reviewing the need for major infrastructure projects
LC Paper No. CB(1)752/98-99 Maintenance and transfer of titles of gas pipes laid along external walls of private premises)

4. Members noted the information papers issued since last meeting.

III Items for discussion at the next meeting

5. Members agreed that in view of the intervening Lunar New Year holidays, the date for the next regular meeting of the Panel be deferred to 2 March 1999 to discuss the following:

  1. Satellite based CNS/ATM System;

  2. Review of speed limits for vessels in Hong Kong waters;

  3. Sustainable development of the pig raising industry; and

  4. Transitional arrangements for the opening of the Sheung Shui Slaughterhouse.

IV Promotion of Hong Kong as an international shipping centre
(LC Paper No. CB(1)722/98-99(02) - information paper provided by the Administration)

6. The Deputy Secretary for Economic Services (DS/ES) briefed members on the salients points of the information paper provided by the Administration.

(Post-meeting note: A copy of the outline of the Administration's presentation has been circulated to members vide LC Paper No. CB(1)806/98-99(02).)

7. Noting that Hong Kong was the fifth largest shipowning centre in the world after Greece, Japan, Norway and the USA, the Chairman enquired whether the Administration was aware of the policy adopted by the four largest shipowning centres in promoting their shipping industry. DS/ES advised that the four largest shipowning centres had achieved their current status for different reasons. Greece owned the largest merchant ship tonnage for historial reasons. The USA and Japan owned big fleets of merchant ship because of their substantial trade volume. He further pointed out that ownership of ship tonnage did not necessarily make a place a shipping centre. For example, the merchant ship tonnage owned by the United Kingdom was not very large but London was an international shipping centre with many ships calling its port. London's shipping industry was assisted by its well developed ship insurance, financing and arbitration services. The Administration believed that Hong Kong with its excellent natural harbour, large ownership of merchant ships and development of excellent supporting services, should be able to become a major shipping centre in Asia and internationally.

8. Members generally welcomed the Administration's initiatives to promote Hong Kong as an international shipping centre but were concerned about whether the various targets set were attainable. Mr CHEUNG Man-kwong doubted whether it was realistic to set a target of increasing the tonnage of the Hong Kong Shipping Register from the current six million tonnes to ten million tonnes, particularly so in view of the prevailing tough economic conditions. Mr CHAN Kam-lam also expressed reservation about the forecast of 15,800 new posts to be created as a result of the target increase in gross tonnage of registration.

9. SES and DS/ES were confident that the target tonnage of registration would be achievable since according to the data provided by Hong Kong Shipowners' Association, the total ship tonnage owned by Hong Kong shipowners amounted to about 30 million tonnes, of which only about three million tonnes were registered in Hong Kong. Although Asia was experiencing economic problems, international trade, which was mainly facilitated by shipping, had continue to be developing well. If Hong Kong could lower its operation costs and have adequate supply of qualified labour and support services, many local shipowners would be willing to register their ships in Hong Kong. Moreover, Hong Kong would also target to attract the registration of large shipowners of the Mainland. Both the Ministry of Communication of China and COSCO, Mainland's largest shipping group, had indicated interest to strengthen their co-operation with Hong Kong in respect of international shipping. On the creation of new posts as a result of increased ship registration, DS/ES explained that the number of new posts forecast was a reference figure based on analysis of past experience. At members' request, the Administration undertook to provide further information on the analysis done by the Census and Statistics Department in this regard.

10. Miss CHAN Yuen-han was supportive of the Administration's initiatives to pomote the shipping industry but was concerned about whether there were effective corresponding measures in place to help achieve the ambitious targets. SES responded that as there were representatives of various sectors of the industry on the Shipping Committee of the Hong Kong Port and Maritime Board, the targets set were not purely the views of the Administration. He agreed that the goal was ambitious but the Administration would do all it could to achieve the targets. On specific measures to be taken to attract shipowners to register their ships in Hong Kong, DS/ES advised that in order to enhance the competitiveness of the Hong Kong Shipping Register, the Marine Department had introduced a series of measures to lower the cost of ship registration in Hong Kong. These included modification of the equipment standards required for ships to be registered in Hong Kong in line with International Maritime Conventions, reduction in the annual ship registration fee and licence fee for the crew and exempting ships less than ten years old from re-examination by Government ship surveyors when they first registered in Hong Kong.

11. Mrs Miriam LAU Kin-yee pointed out that the Administration had to consider providing more resources to the Hong Kong Port and Maritime Board to implement measures to promote Hong Kong as an international shipping centre. She enquired about ways to attract shipping companies to set up their offices in Hong Kong, and the progress with respect to discussion with other countries on the avoidance of double taxation on shipping incomes. SES agreed that additional resources were a pre-requisite for implementation of policy initiatives and advised that the Administration would take steps to review resources required in the long term for reinforcement of measures to promote Hong Kong as an international shipping centre. On attracting shipping organizations, DS/ES advised that as a result of a seminar held in London in November 1998 to promote Hong Kong's shipping industry, one of the world's largest ship insurance company based in London had expressed interest in setting up an office in Hong Kong. Similar efforts would be made to encourage international maritime organizations to establish their Asian headquarters in Hong Kong. As regards efforts in reducing the overseas tax liability of shipping companies in Hong Kong, the Government had signed a memorandum on the avoidance of double taxation on shipping incomes with the Mainland and the USA and was actively discussing with other places on similar arrangements.

12. On the provision of appropriately trained workforce to support the development of the shipping industry, DS/ES advised that the Economic Services Bureau was discussing with the Vocational Training Council and the Polytechnic University to improve their curriculum to provide more programmes to meet the modern day needs of the shipping industry. Mrs Miriam LAU Kin-yee opined that the Administration should allocate dedicated resources to the training of the workforce and enquired whether the Administration would set up a specialised training institute for training the required professionals for the shipping industry. DS/ES replied that as Hong Kong was not aiming to be a ship building centre, it should develop its strength in the provision of personnel on management, financing, insurance and legal services for the shipping industry. The training need of the shipping industry could be met through reinforced curriculum in existing universities and training institutes. He agreed that the Administration, in consultation with the trade, should keep the training needs of the shipping industry under review. On attracting new entrants to the industry, he advised that the Administration would encourage the industry to organize exhibitions and give talks in education institutions to provide information on the prospect of working in the shipping industry. The Chairman commented that the Administration should also give more publicity to positive news on the local shipping industry in order to promote the shipping industry to Hong Kong's labour market.

13. On Mr CHAN Kam-lam's view that the Administration should consider aligning or narrowing the difference between Hong Kong's ship registration system and the Mainland's, SES advised that to promote Hong Kong as an international shipping centre, the requirements of Hong Kong's shipping registration system should be on par with requirements of international maritime organizations. Hong Kong's objective was to attract not only local and Mainland's shipping companies but also overseas shipping companies to register their ships in Hong Kong. Nevertheless, the Administration would continue to co-ordinate and liaise with the Mainland on issues of common interests with regard to ship registration standards. Mr Martin LEE Chu-ming supported the view that Hong Kong should always strive to conform with international standards in order to become an international shipping centre.

V Third Party Insurance for Civil Aircraft
(LC Paper No. CB(1)772/98-99(03) - information paper provided by the Administration)

14. Mr Howard YOUNG expressed support to the Administration's proposal to enact legislation to require all civil aircraft operating in Hong Kong to carry third party insurance. He enquired whether non-revenue flights of a commercial airline would have to be covered by additional third party insurance under the proposals and whether aircraft owned by the Government Flying Service would also be subject to the proposed requirements. The Director of Civil Aviation (DCA) advised that airlines which had taken out sufficient third party insurance for aircraft used for commercial flights would not be required to take out new third party insurance when the aircraft was used for non-commercial flights such as charity flights. As for the Government Flying Service, information would have to be sought as to whether the Government would bear the third party risk itself.

15. Referring to the Annex to the information paper provided by the Administration, Mr YOUNG noted that the required level of third party insurance cover of Hong Kong was much higher than those of other countries including Singapore and the USA. He enquired about the basis for the high level of third party insurance required in Hong Kong. DCA advised that the higher insurance levels were justified since Hong Kong was a densely populated city and the airspace over the Pearl River Delta area was one of the world's busiest. Moreover, operators of commercial aircrafts had all along been able to comply with the requirements. In response to a question about insurance for domestic flights in foreign countries, the Chief Operations Officer/Air Services said that the data in the Annex were provided by the aviation authorities of the countries concerned and that the Administration had no data on these countries' third party insurance requirement on aircraft used for domestic flights only.

16. In reply to the Chairman's questions, DCA advised that the annual insurance premium would be about US$3,000 - 4,000 for third party insurance coverage for any one accident occurrence in Hong Kong with an insured amount of US$15 million. He also confirmed that helicopters were covered by the proposal.

17. The Chairman enquired whether the high level of insurance requirement for commercial aircraft would affect Hong Kong's status as an international aviation centre. SES said that third party insurance was not a major cost factor for an airline as compared with airport charges. Moreover, some airlines for their own benefits had already taken out a higher level of third party insurance than required. He believed that the current proposal which would only have practical impact on non-commercial aircraft should not have any adverse impact on Hong Kong's aviation industry.

18. Mr Andrew CHENG Kar-foo expressed concern about Government's existing practice of not taking out third party insurance with commercial insurance companies for government owned aircraft and motor vehicles. He pointed out that in the event of an accident, Government might have to pay out huge compensation from public funds. He urged the Administration to review whether a change of policy in this regard would be justified. DCA advised that it was a common practice in overseas countries for the government to have self-insurance cover for third party risks. SES remarked that the cost and benefit of taking out third party insurance with commercial insurance companies for all government owned aircraft and vehicles must have been considered. In response to Members' request, he agreed to ask the relevant Bureau to provide further information on the background to the government's existing arrangement for third party insurance for government owned aircraft and vehicles, and the practices of other countries in this respect. Admin.

19. In closing the disucssion, the Chairman concluded that the Panel supported the Administration's legislative proposal of requiring all civil aircraft operating in Hong Kong to carry third party insurance.

VI Safety of Gas Water Heaters
(LC Paper No. CB(1)772/98-99(04) - Information paper provided by the Administration)

20. Referring to paragraph 6 of the information paper provided by the Administration, Mr Fred LI was concerned that there was no readily available customer records in respect of Liquefied Petroleum Gas (LPG) flueless water heaters. He enquired whether there was any monitoring system to ensure that LPG supply companies did conduct regular safety checks on LPG flueless water heaters and whether there was any sanction on the LPG supply companies if they had not conducted regular safety checks on these water heaters. Mr CHEUNG Man-kwong also expressed concern about the inadequate control in ensuring that LPG gas water heaters installed, in particular flueless water heaters, were up to the statutory safety standards.

21. In response, the Regulatory Services Controller/Electrical and Mechanical Services Department (RSC/EMSD) advised that LPG was supplied to domestic customers either through pipes or by cylinders. There were about 11,000 customers using flueless water heaters on piped LPG supply and records of these water heaters installed were readily available. Records of water heaters installed in respect of the about 10,000 customers using LPG cylinders were not immediately available from LPG supply companies because the water heaters installed might not have been bought and installed through the gas supply companies' distributors. Nevertheless, the gas supply companies and their distributors were required to conduct safety inspection of their customers' gas equipment at 18-month intervals and the relevant customer records would be updated during the safety inspections. In the last five years, EMSD had handled about 50 cases in which the gas supply companies or their distributors encountered difficulties in conducting safety checks or cases which required follow-up actions. These cases were resolved after EMSD's intervention. He further advised that there were about 460 gas contractors registered with the EMSD and the Department conducted inspection visits to every gas contractor every two years to ensure that the registration requirement were met by the contractors.

22. As regards the monitoring system, RSC/EMSD said that the gas supply companies were required to register with the EMSD and these companies were required to monitor the activities of their distributors who supplied LPG to customers. The monitoring of the distributors' activities should be in accordance with operating manuals which had been examined by the Gas Standards Office (GSO). He agreed that the maintenance of proper customer records by the LPG supply companies and their distributors was not entirely satisfactory. The GSO had urged the LPG supply companies to provide updated customers records of flueless water heaters within 10 days in respect of piped LPG users and within one month in respect of LPG cylinder users. Furthermore, the Gas Safety Advisory Committee (GSAC) had supported a proposal to strengthen the regulation of the activities of LPG distributors including maintaining proper customer records. The GSAC also agreed that a new code of practice detailing the duties and responsibilities of LPG distributors should be prepared. He expected the new code to be completed by June 1999.

23. Noting that there were only six prosecutions relating to gas installations since the enactment of the Gas Safety Ordinance in 1991, Mr CHEUNG Man-kwong opined that it reflected a lack of control in so far as enforcement of the Ordinance was concerned. He enquired whether the Administration would consider total prohibition of the use of flueless gas water heaters in view of the serious hazards of using these heaters. RSC/EMSD replied that the number of prosecutions was small because the Administration would take legal action against users of flueless gas water heaters only when repeated warnings and suggestions on improvements in installation were ignored. As regards prohibiting the use of flueless gas water heaters, SES advised that the Gas Safety Ordinance allowed flueless gas water heater to be used other than serving bathroom or shower and subject to specified installation requirements. He agreed that it would require substantial resources to ensure that installation of flueless gas water heaters met the statutory requirements. Since eight years had lapsed since enactment of the Ordinance, it was timely to review whether the use of flueless gas water heaters should be prohibited. The Administration would thoroughly review the subject, taking into accounts comments of LegCo Members and consulting the GSAC.

24. Referring to the results of the safety inspection conducted by the Hong Kong and China Gas Company Limited (HKCG) from 18 to 24 January 1999 which indicated that only 30% of the households surveyed had adequate ventilation for their flueless gas water heaters, Mr Andrew CHENG Kar-foo expressed concern about follow-up actions to be taken in respect of those households with inadequate ventilation. Mr LAU Chin-shek enquired whether HKCG or the Government would provide incentives or assistance to households for replacing their flueless gas water heaters.

25. In relation to the problem of inadequate ventilation, RSC/EMSD advised that he would follow up with the Housing Department which was the largest domestic property owner in Hong Kong. As for assistance to citizens for replacement of flueless gas water heaters, SES said that the decision on whether to replace the gas water heaters lied with the users concerned. He hoped that HKCG and LPG suppliers would, for the long term benefits of both themselves and their customers, offer financial incentives for replacement of flueless gas water heaters. He cautioned that the Administration had to be very careful in considering whether to use public funds for financing the replacement of flueless gas water heaters. Mr James Y C KWAN, Director and General Manager of HKCG, said that HKCG had offered 40% discount on equipment price to its customers for replacing flueless gas water heaters. He added that as advised by the Social Welfare Department, apart from the annual allowance to replace household appliances, recipients of the Comprehensive Social Security Assistance scheme could also apply for a special allowance for replacement of flueless gas water heaters.

26. Mr CHAN Kam-lam agreed that it would not be appropriate to use public funds to finance the replacement of flueless gas water heaters. He was appreciative of HKCG's follow-up efforts in the light of recent incidents involving use of flueless gas water heaters. On Mr CHAN's enquiry about the company's follow-up action with those households found with inadequate ventilation for use of flueless gas water heaters, Mr KWAN replied that HKCG's staff together with officers of EMSD would discuss improvement works needed to improve the ventilation in these households. If these households refused to take remedial actions, HKCG would cap off the towngas supply to the flueless gas water heaters concerned but towngas supply for other purposes would not be affected. As to whether HKCG had the authority to cap off the gas supply under the circumstances where a household refused to take any action to improve ventilation etc, despite objection from the household concerned, RSC/EMSD advised that HKCG would normally obtain consent from the users before capping off gas supply even though it had the authority to do so without the users' consent.

27. Noting a recent advertisement placed by LPG suppliers requesting customers to telephone the suppliers, Mr Fred LI opined that the LPG suppliers should take the initiative to telephone all the customers to alert them of the potential hazards of LPG flueless water heaters and advise them to change to other models. RSC/EMSD replied that the gas supply companies had adopted a two-prong approach by placing an advertisement in the newspaper and having their distributors telephoning the customers direct to advise them the potential hazards of flueless LPG water heaters.

28. Mr Martin LEE Chu-ming pointed out that the safety instructions for using flueless gas water heaters were not practicable, yet the improper use of these water heaters could so easily kill a person. Considering that despite the publication of warning labels, etc., users of these water heaters could easily fall into a death trap, he asked if the Administration had sought legal opinion on whether the Government could be sued for negligence in allowing people to continue using these water heaters. RSC/EMSD said that as legislation was in place since 1991 to prohibit flueless water heaters to serve bathrooms or showers, the Administration had not seen the need for any legal opinion as suggested. However, SES supplemented that the Administration would take note of members' comments and conduct a review on further measures to be taken, including the total prohibition of use of flueless gas water heaters, with a view to minimizing the occurrence of accidents in using these water heaters. The Administration would brief members on progress of the review as soon as possible. Admin.

29. As suggested by Mr Martin LEE, members agreed to put this subject on the list of outstanding items for follow-up discussion.

VII Any other business

Meeting schedule

30. Members agreed that this Panel would continue to hold regular meetings on the fourth Monday of each month at 10:45 am during April to June 1999, and the scheduled dates of the meetings were:

    26 April 1999

    24 May 1999

    28 June 1999

31. Members agreed to consider in May whether the Panel would need to hold meetings during the summer recess from July to September 1999.

32. There being no other business, the meeting ended at 12:50 pm.

Legislative Council Secretariat
18 March 1999