For discussion FCR(96-97)14
on 24 May 1996
ITEM FOR FINANCE COMMITTEE
LOAN FUND
HEAD 252 - LOANS TO SCHOOLS/TEACHERS
Subhead 103 Loans to schools in the Direct Subsidy Scheme
Capital assistance loan to the French International School
Members are invited to approve -
- an increase in commitment under Head 252 Subhead 103 Loans to schools in the Direct Subsidy Scheme from $102,192,000 by $79,769,000 to $181,961,000; and
- an allocation of $79,769,000 from the Loan Fund to enable the Government to offer a loan to the French International School to meet part of the construction cost of its extension building at Blue Pool Road, Hong Kong.
The French International School (FIS) needs to build an extension building to accommodate the increasing demand for both school places in its French and English streams.
2. The Director of Education (D of E) proposes to grant the FIS an interest-free loan of $79,769,000 to meet part of the construction cost of its extension building at Blue Pool Road, Hong Kong.
3. The FIS is a non-profit-making international school operating on a co-educational basis. It operates kindergarten, primary and secondary sections of both French and English streams. The Education Department accepted its secondary section into the Direct Subsidy Scheme (DSS) in September 1991 with an enrolment of 370. At present, there are 430 secondary students in the school, divided into a French stream and an English stream in the ratio of 7 : 3 in 21 classes. The increase in student enrolment has necessitated the move of the kindergarten section to Stanley Fort in 1994. The FIS expects that student population will continue to grow. It therefore needs a new extension building to meet the increasing demand.
4. In January 1995, the FIS identified a site at Blue Pool Road for building an extension for secondary classes to meet the increasing demand for places in both French and English streams of the school. The land grant formalities are proceeding. In the meantime, the FIS has applied for an interest-free loan of 155% of the building cost of a standard aided secondary school to help meet part of the cost of the extension project. The extension will provide the secondary section of the school with 46 additional teaching rooms (of which 19 are special rooms), a physical education hall, a dining room, covered play areas and a garage. The FIS estimates that, with the necessary funds, it will be able to complete the extension works in the summer of 1997. This will enable the school to accommodate a total of about 550 secondary students by September 1997, and 750 secondary students by September 2003 (the full capacity).
5. As a non-profit-making school under the DSS, the FIS is eligible for a capital assistance loan. From an educational perspective, D of E considers it desirable for the FIS to have the 46 additional teaching rooms in the same school premises to accommodate all its secondary students and to meet the required standards applicable to the French and English curricula. The Private Schools Review Committee (PSRC), an advisory body chaired by a non-official to advise the D of E on matters relating to private school policy, including the DSS, also supports the application, subject to the amount of the loan being determined by the D of E in consultation with the Director of Architectural Services (D Arch S).
6. The extension, with 46 teaching rooms, will have six more teaching rooms than a standard aided secondary school 1 D of E recommends that the maximum loan, which is 155% of the building cost of a standard aided secondary school, be made available to the FIS.
7. D Arch S estimates that the average cost of building a standard aided secondary school with 40 teaching rooms based on a fixed price lump sum contract at the price level in the first quarter of 1996 is $51,464,000. The maximum loan to be made available to the FIS should therefore be $79,769,000, calculated as follows -
$51,464,000 x 155% = $79,769,200
say $79,769,000
8. If Members approve the proposal, we will offer to the FIS a loan of $79,769,000 under Head 252 Subhead 103 Loans to schools in the Direct Subsidy Scheme.
9. As recommended by the Governor-in-Council on 5 June 1990, the loan will be at nil interest and repayable over a period of ten years. The first instalment of the loan repayment will become due one year after the completion of the extension. We will make repayment of the loan a first call upon the liquidated assets of the school in the event it closes down, and in case of default of repayment of the loan, D of E may take possession of the premises and assets of the school. We will specify these terms and conditions in the loan agreement and secure the loan by a legal charge.
10. Government recognises the importance of international schools to the continued development of the Hong Kong economy. International schools cater for the needs of the children in the expatriate community. In the past few years, international schools have also provided education for children of emigrants who have returned to Hong Kong. To ensure an adequate supply of international school places to meet demand, Government policy is to offer support to eligible non-profit-making international schools. The support includes the grant of land by private treaty to those schools which meet our assessment criteria and which help meet an identified demand of school places.
11. On 26 September 1989, the Governor-in-Council, following recommendations made in Education Commission Report No. 3, approved the introduction of a DSS, to encourage the development of a strong private school sector. Entry into the Scheme is open to local private schools, aided schools and international schools, subject to the D of E being satisfied that they meet prescribed standards as advised by the PSRC. DSS schools receive a recurrent subsidy, calculated on the basis of fixed percentages of the average cost of a local aided place, depending on the actual fees charged.
12. On 5 June 1990, the Governor-in-Council decided to extend financial assistance to include a capital assistance loan for non-profit-making schools in the DSS, up to 155% of the cost of a standard aided secondary school. The loan would cover above standard facilities, redevelopment, major structural repairs, emergency repairs and, in the case of international schools only, expansion2 . It would be interest-free and repayable over ten years. In the case of international schools undertaking an expansion project, we would limit the size of the loan to cover only provisions which would be standard provision in their country of origin.
13. We have admitted twelve schools into the DSS, including four international schools, as listed in the Enclosure. To date, Members have approved three capital assistance loans - a loan of $36,760,000 to the Chinese International School on 12 July 1991, a loan of $20,225,000 to the German Swiss International School on 5 March 1993 and a loan of $45,207,000 to the Hong Kong International School on 16 April 1993. In all three cases, the main purpose of the loan was to enable the school to expand.
14. Under the Governments revised package of assistance to eligible non-profit-making international schools introduced in October 1995, international schools are no longer eligible for admission into the DSS which is intended to encourage the growth of a strong private school sector to provide alternative types of schooling to local children. We would gradually phase out from the Scheme international schools already admitted before that date. Under the revised package applicable to new applications since October 1995, eligible non-profit-making international schools can apply for an interest-free loan up to 100% of the cost of building a standard design primary or secondary public sector school. We have set out details of the revised scheme in the Legislative Council Brief (Ref EMBCR 15/581/94 III) issued to Members on 11 October 1995.
15. The FIS is eligible for capital assistance loan under the DSS because it submitted the application before the introduction of the revised package as described in paragraph 14 above.
Education and Manpower Branch
May 1996
1 -- 40 teaching rooms comprising 26 classrooms and 14 special rooms.
2 -- Local DSS schools are not expected to meet increased demand for places since these are provided for by government or aided schools.
Enclosure to FCR(96-97)14
- Chinese International School
- French International School
- German Swiss International School
- Hong Kong International School
- Fukien Middle School
- Heung To Middle School
- Hon Wah Middle School
- Mongkok Workers Children School
- Pui Kiu Middle School
- Hang Sang School of Commerce (Sixth Form Section)
- Kiangsu-Chekiang College
- Li Po Chun United World College of Hong Kong
Last Updated on 2 December 1998
