LegCo Paper No. CB(1) 282/96-97
(These minutes have been seen
by the Administration)
Ref : CB1/PL/ES/1

LegCo Panel on Economic Services

Minutes of the Meeting held on Wednesday, 9 October 1996 at 11:00 a.m. in the Chamber of the Legislative Council Building

Members present :
    Hon Henry TANG Ying-yen, JP (Chairman)
    Dr Hon LAW Cheung-kwok (Deputy Chairman)
    Dr Hon David K P LI, OBE, LLD (Cantab), JP
    Hon Mrs Miriam LAU Kin-yee, OBE, JP
    Hon LEE Wing-tat
    Hon Fred LI Wah-ming
    Hon Howard YOUNG, JP
    Hon CHAN Kam-lam
    Hon SIN Chung-kai
Members absent :
    Hon Mrs Selina CHOW, OBE, JP
    Dr Hon HUANG Chen-ya, MBE
    Dr Hon Samuel WONG Ping-wai, MBE, FEng, JP
    Dr Hon Philip WONG Yu-hong
    Dr Hon Anthony CHEUNG Bing-leung
    Hon LAU Chin-shek
    Hon Mrs Elizabeth WONG, OBE, ISO, JP
Members attending :
    Hon Albert CHAN Wai-yip
    Hon CHAN Wing-chan
    Hon IP Kwok-him
    Hon LEE Kai-ming
Public officers attending :
    Mr Stephen IP, JP
    Secretary for Economic Services
    Mr KWAN Wing-wah, JP
    Deputy Secretary for Economic Services
    Ms Maria KWAN, JP
    Deputy Secretary for Economic Services
    Mr Tony Clark, JP
    Deputy Secretary for Economic Service
    Mr Richard YIP, JP
    Acting Director of Agriculture & Fisheries
    Mr Richard Siegel, JP
    Director of Civil Aviation
    Mr Alex Arena
    Director-General, Telecommunications
    Mr H B Philipson, JP
    Director of Electrical & Mechanical Services
    Mr Robert LAU, JP
    Director, Royal Observatory
    Mr Robert Footman, JP
    Postmaster General
    Mr Ian Dale, JP
    Director of Marine
Clerk in attendance :
    Ms Estella CHAN
    Chief Assistant Secretary (1)4
Staff in attendance :
    Miss Pauline NG
    Assistant Secretary General 1
    Mr Daniel HUI
    Senior Assistant Secretary (1)7

I Briefing by the Administration on the Governor’s Policy Address

Mr Stephen IP briefed members on the policy commitments he had made in the programme area for which the Economic Services Branch was responsible.

(Post-meeting note: A copy of the speech made by Mr IP was circulated vide LegCo Paper No. 197/96-97 dated 28 October 1996.)


2.A member enquired about the progress of negotiation of Air Services Agreements (ASAs) between Hong Kong and other countries in terms of the percentage of Hong Kong’s total air services covered so far. In response, Ms Maria KWAN advised that the Administration had almost completed the tasks relating to separation of Hong Kong’s air services arrangements from the current ASAs between the UK and other countries but she did not have the information sought at hand. Hitherto, 13 ASAs had been signed and four more would be signed in the coming few months. A few other ASAs were submitted to the Sino-British Joint Liaison Group for clearance.

3. As regards the localisation of the UK aviation laws, Ms KWAN advised that the Chinese side had recently agreed to the Administration’s localisation proposals and the Branch’s aim was to introduce a Carriage By Air Bill into LegCo as soon as possible. Responding to members’ concern about whether sufficient time would be available for airline companies to change the registration number on aircraft upon localisation of the legislation on aircraft registration, she said that the issue was being examined.

Container Terminal No. 9

4. Regarding the recently approved Container Terminal No. 9 (CT9) project, a member queried the principle adopted in the allocation of berths. He observed that the number of berths in CT9 was increased from four to six and the two additional berths were allocated to two existing terminal operators without going through an open tender. Furthermore, the land in CT9 would be sold under private treaty grant. He questioned how the arrangements could be considered as a fair commercial decision made in accordance with the free competition principle.

5. Mr IP replied that the Administration’s principal objective in this issue was to maximise land usage and other resources for container operators, which would also maximise the benefits to Hong Kong. Having regard to the ever changing commercial environment and the formation of world shipping alliances which made single-berth operation very difficult, the arrangements had been made to attain the following benefits:

  1. the limited land available was put to the best use;
  2. competition was introduced with the operation of the Asia Container Terminals Ltd.; and
  3. the increasing need for mid-stream container operation was addressed.

6. On (c) above, Mr IP elaborated that about 30% of Hong Kong’s container throughput was through mid-stream operation. As this operation involved transporting of containers from ports in China through sea routes to Hong Kong’s container terminals for export to overseas, it would relieve the pressure on land transport. He further remarked that the two existing terminal operators allocated with berths in CT9 had substantial experience in mid-stream operation.

7. In response to the member’s further query on whether the decision was based on political and/or economic considerations, Mr IP replied that it should be noted that the two additional berths in CT9 were not full berths. These additional berths each had a backup ancillary land of 3.85 hectares as compared with 15 hectares for a full berth. As unused land in CT9 had to be put to the best use having regard to various considerations including the operations of terminal operators in CT9, the demand on land transport and other environmental impacts, the allocation of the two additional berths was aimed to achieve the objective of maximization of land usage.

8. The Chairman advised that full details of this subject would be discussed at the next Panel meeting on 25 October 1996.

Telecommunication Service

9. On the international telecommunications licence granted to Hong Kong Telecom for 1981 to 2006, a member asked whether the Administration had any plan to terminate this agreement before its expiry; and if so, what the state of play was regarding negotiations with Hong Kong Telecom and how the consumers would be affected.

10. In response, Mr IP advised that the only telecommunication service that had yet to be opened up was the international direct dial service. The Administration was reviewing whether any change would need to be made to the licence with Hong Kong Telecom and, if there should be any changes to the licence, the benefits to Hong Kong and the consumers and the impact on Hong Kong Telecom. He further advised that the question of compensation to Hong Kong Telecom has not arisen at this stage and that it would enter into a dialogue with Hong Kong Telecom after the completion of the internal assessment.

11. On whether results of the internal assessment would be discussed at this Panel, Mr IP replied that as information relating to the internal assessment was commercially sensitive, it would not be appropriate to divulge results of the internal assessment before negotiation with Hong Kong Telecom.

12. Mr Fred LI opined that the Administration could be selective on this and disclose those information which was not commercially sensitive, for instance, the factors to be considered by the Administration in tackling this issue, so that the public could submit their views before the Administration concluded any new agreement with Hong Kong Telecom. The Chairman added that keeping LegCo Members fully informed at every stage during the Administration’s discussion with Hong Kong Telecom would facilitate subsequent requests for funds, if any, for compensating the Hong Kong Telecom.

13. Mr IP said that while the question of compensation had not yet come into the picture, he would take note of the views of Members on this issue. He would welcome and consider Members’ comments on the principles that should be adopted.

Infrastructural Projects Straddling 1997

14. As to whether infrastructural projects such as the proposed construction of container terminals 10-13 were within Hong Kong’s autonomy under the one country two systems arrangement, Mr IP explained that the Administration would consult the Chinese side on major projects which straddled 1997. Projects to commence construction after the handover would be matters for the Hong Kong Special Administrative Region Government. The Administration would consult the Sino-British Joint Liaison Group on those projects that would be implemented after 30 June 1997 but the decision of which had to be made and resources had to be used for its planning and setting up before 30 June 1997.

15. As regards the recently gazetted outline zoning plan for CT10 and CT11, Mr IP advised that this was merely a part of the planning process. As it required at least 5 years to plan and construct a container terminal, if the Administration did not include CT10 and CT11 in the outline zoning plan in 1996, it might not be possible to have suitable land for the development of the terminals in the future. He further remarked that the Port Development Board was closely monitoring the need for port facilities in Hong Kong.

Electricity Supply

16. A member enquired if the China Light and Power Co. Ltd (CLP) had substantial spare electricity generation capacity and whether it had recently declined ESB’s request to temporarily suspend the construction of an electricity generation plant which involved an investment of $24 billion.

17. Mr IP replied that the Administration’s policy in this regard was to ensure that there was an adequate and reliable electricity supply to meet with demand and that the tariff was set at a reasonable level. There was an on-going review on the electricity demand forecast, the electricity generation capacity and the price trends. A consultancy study had been completed recently and the Energy Advisory Committee was consulted on such issues.

18. Mr CHAN Kam-lam observed that while CLP had spare capacity, the Hong Kong Electric Co Ltd (HEC) had inadequate capacity. This situation arose because there was a lack of co-ordination between the two electricity companies. It would entail additional wastage and would not be beneficial to the consumers if HEC continued to build new generating plants while CLP was having spare capacity. He asked whether the Administration had considered the issue of sale of electricity between the two companies and what the Administration would do to address the issue of lack of coordination between CLP and HEC.

19. Mr IP shared Mr CHAN’s concern but doubted whether the sale of electricity from CLP to HEC would be a satisfactory solution having regard to a number of factors, including whether it would be a long term arrangement and the price involved. He said that the sale of electricity from CLP to HEC was only one of the options and other factors would need to be considered as well.

20. Mr CHAN expressed the concern that if CLP had spare capacity, it meant that CLP’s investment in plant and machinery was more than required and this would unnecessarily augment the Average Net Fixed Assets on which the tariff was based. He believed that bearing the interests of consumers in mind, the sale of electricity from CLP to HEC should be actively considered. In response, Mr IP said that he agreed that consumer interests were of utmost importance in this issue. He drew members’ attention to the fact that the real electricity price, after discounting inflation, had decreased by 40% over the last 10 years and assured that the ESB would continue its effort in protecting the interest of consumers.

21. In response to the question on the difficulty in determining the price of electricity for sale from CLP to HEC due to the difference in production costs of the two electricity companies, Mr IP said that the production cost, hence the price of electricity, was one of the many factors needed to be considered. An important consideration was whether the spare capacity would be available for a long period of time or it would be used up in a few years. Sale of electricity would not be the long-term solution if the spare capacity would be available for only a few years. New electricity plant would still need to be built.

22. In regard to how CLP’s spare capacity, which was reported in the press to be as high as 50%, would be handled, Mr IP said that it was common for electricity companies around the world to have a reserve margin of 25-30%. The question really was how many years of demand forecast was covered by the spare capacity and whether the existence of such amount of spare capacity was fair to the consumer and to the electricity company. He suggested that the topic of electricity supply be discussed in detail at the Panel meeting in November 1996.

Additional land for cargo backup services and lorry parks

23. As the bidding of sites for cargo backup services and lorry parks to support the operation of the port would involve a number of policy Branches, members asked how the ESB would co-ordinate these different Branches to ensure that land required for such purposes would be made available on a timely basis. Mr Tony Clark replied that a standing committee chaired by Transport Branch with representatives from the ESB and the Planning, Environment and Lands Branch had been formed to co-ordinate the matter.

24. As to when and how much land would be made available for this purpose, Mr Clark advised that there was plenty of land provided for stacking of containers and parking of vehicles in the CT9 project. The land required for backup of CT9 was provided for after the detailed analysis and forecast done four or five years ago. The future need for land for container related and lorry parking use would need to be assessed again taking into account recent trends in port cargo forecast. However, Mrs Miriam LAU emphasised that the problem was not only the backup land required for CT9, but was the territory-wide shortage of land for parking of goods and container vehicles. She urged the Administration to actively consider the issue and come up with concrete solutions to address the problem.

II Any other business

25. The Chairman informed members of the following meeting arrangements:

  1. members of the Economic Services Panel were invited to attend a meeting of the Planning, Lands and Works Panel to be held on 15 October 1996 at 4:30 pm in Conference Room B to discuss the supplemental agreements for the construction of passenger terminal building at the new airport. An information note on progress of passenger terminal building works for the new airport at Chek Lap Kok had been circulated to members on 20 September 1996;
  2. the issue of the adverse affects of the Black Point 400 kV power lines on health and the environment would be followed up by the Environmental Affairs Panel in November 1996 and members of this Panel and the Health Services Panel would be invited to attend; and
  3. the next Panel meeting would be held on 25 October 1996 at 10:45 am in Conference Room A

26. The meeting ended at 12:00 noon.

Legislative Council Secretariat

8 November 1996

Last Updated on 14 August 1998