PLC Paper No. CB(1)57
Paper for the House Committee meeting
on 18 July 1997
Report of the Subcommittee on
Resolution under section 29 of the Public Finance Ordinance (Cap. 2)
1. This paper reports on the deliberations of the Subcommittee on Resolution under section 29 of the Public Finance Ordinance (Cap. 2) (the Subcommittee).
2. The Administration gave notice to move a resolution under section 29 of the Public Finance Ordinance (the Resolution) at the Council meeting on 16 July 1997 to set up a fund called the Land Fund (the Fund) with effect from 1 July 1997 to receive, hold and invest the assets of the Hong Kong Special Administrative Region Government (HKSARG) Land Fund. The assets, totalling some $170 billion, were handed over to the Special Administrative Region Government upon its establishment. The Resolution mainly provides for:
- the administration and management of the Fund by the Financial Secretary;
- the credit to the Fund of all sums earned by investment and disposal of the assets after deduction of administration and management expenses;
- payment of all administration and management expenses by the Fund;
- assumption by the Fund of all liabilities of the Trustees of the HKSARG Land Fund Trust and the indemnity obligations of the Financial Secretary to the Trustees in respect of the Trust; and
- the power of the Financial Secretary to authorize and direct investment of the assets.
3. Upon request of the House Committee, the Administration agreed to defer moving the Resolution to a later Council meeting.
4. The Subcommittee comprises 9 members; with Hon CHAN Kam-lam elected as Chairman. The membership list of the Subcommittee is at Appendix I. The Subcommittee met on 17 July 1997 and invited the Administration to provide background information on the setting up of the Fund. The Subcommittee completed its deliberations in one meeting.
Deliberations of the Subcommittee
5. Members notice that the Administration has yet to decide on the long term use of the assets transferred from the HKSARG Land Fund and are concerned about the managment and investment strategy of the Fund in the interim period. The Administration explains that the Fund will be invested under the advice of the Land Fund Advisory Committee appointed by the Financial Secretary. Before conducting a review of the investment strategy by the Land Fund Advisory Committee in 1998-99, the investment strategy for the assets will remain the same as before 1 July 1997. The Subcommittee is assured that the use of the Fund is subject to the control of the legislature as any change in policy on use of the Fund can only be effected by a resolution of the Provisional Legislative Council (the Council). Furthermore, the Administration undertakes to take into account the views of the Council on the management of the Fund and inform the Council of any change in the investment strategy. As the investment of the assets is managed by the Hong Kong Monetary Authority (HKMA) as a separate portfolio from the Exchange Fund, the Administration stresses that the arrangement will enhance transparency of the Fund and allow its assets to be clearly identified and its investment performance separately assessed.
6. After noting the composition of the Land Fund Advisory Committee, members of the Subcommittee consider it more important to appoint persons with appropriate experience and expertise in investment than to appoint representatives from major banks only for the sake of equity. The Administration maintains that members of the Land Fund Advisory Committee are appointed in their personal capacities and they possess, inter alia, investment expertise both in Hong Kong and internationally.
7. According to the Administration, continuity in the management of the asset portfolio is maintained because staff members of the former HKSARG Land Fund Secretariat have been transferred to HKMA to manage the Fund. On members�concern about the arrangements for such staff if there are major changes to the Fund, the Administration advises that as the long term investment strategy or use of the Fund is still unknown, the staff members concerned have been offered two and a half year contracts with the same terms and conditions of employment as before.
8. At the request of the Subcommittee, the Administration undertakes to provide in writing information on the amount of 弌ccounts receivable�by the Fund. According to the Administration, a major component of the accounts receivable is a half-share of the premium income obtained by the British Hong Kong Government from land transactions from 1 April to 30 June 1997, after deduction of the average cost of land production.
9. During the examination of the provisions of the Resolution, the Subcommittee has made some suggestions on the technical drafting aspect to improve clarity and maintain consistency. The Administration agrees to consider the suggestions.
10. The Subcommittee has no further question on the Resolution and supports that President permission to waive the notice period be sought if the Administration decides to move the Resolution at the Council meeting on 23 July 1997.
11. Members are invited to note the deliberations of the Subcommittee and support the recommendation at paragraph 10 above.
Provisional Legislative Council Secretariat
18 July 1997
Last Updated on 23 October 1997