Panel on Economic Services (Minutes) 9 Mar 98

Provisional Legislative Council

PLC Paper No. CB(1) 1370
(These minutes have been
seen by the Administration)

Ref: CB1/PL/ES/1

Panel on Economic Services

Minutes of meeting held on Monday, 9 March 1998, at 2:30 pm in Conference Room A of the Legislative Council Building

Members present :

Hon James TIEN Pei-chun, JP (Chairman)
Hon HO Sai-chu, JP
Hon Henry WU
Hon Henry TANG Ying-yen, JP
Hon CHAN Yuen-han
Hon CHAN Kam-lam
Hon Howard YOUNG, JP
Hon Mrs Miriam LAU Kin-yee, JP
Hon TAM Yiu-chung, JP

Members absent :

Dr Hon LAW Cheung-kwok (Deputy Chairman)
Dr Hon David LI Kwok-po, JP
Hon Allen LEE, JP
Hon YUEN Mo
Hon CHAN Choi-hi
Dr Hon Charles YEUNG Chun-kam
Hon Ambrose LAU Hon-chuen, JP
Hon Paul CHENG Ming-fun, JP
Hon LO Suk-ching

Members attending :

Hon LEE Kai-ming
Hon LAU Kong-wah

Public officers attending :

Mr Stephen IP, JP: Secretary for Economic Services
For Item III
Ms Maria KWAN: Deputy Secretary for Economic Services (2)
Miss Linda LAI: Principal Assistant Secretary for Economic; Services (New Airport)
Mr Martin GLASS: Deputy Secretary for the Treasury (2)
Mr Allan CHOW: Principal Assistant Secretary for Transport (6)
Mr Dick SIEGEL: Director of Civil Aviation
Mr Peter CHEUNG: Deputy Director, NAPCO
Airport Authority
Dr Henry TOWNSEND: Chief Executive Officer
Mr Douglas OAKERVEE: Project Director
Mr Raymond LAI: Finance & Commercial Director
For Items IV and V
Mr KWAN Wing-wah: Deputy Secretary for Economic Services
Mr E A JOHNSON: Principal Assistant Secretary for Economic Services
For Item IV
Mr K T LI: Principal Assistant Secretary for Economic Services; (Financial Monitoring)
Mr C T LEUNG: Regulatory Services Controller,; Electrical and Mechanical Services Department
Mr Ronald CHIN: Acting Assistant Director/Energy Efficiency,; Electrical and Mechanical Services Department
For Item V
Mrs Lessie WEI: Director of Agriculture and Fisheries
Dr K K LIU: Assistant Director (Agriculture & Regulatory); Agriculture and Fisheries Department

Clerk in attendance :

Ms Estella CHAN: Chief Assistant Secretary (1)4

Staff in attendance :

Ms Sarah YUEN: Senior Assistant Secretary (1)4

I Confirmation of minutes and matters arising
(PLC Paper Nos. CB(1)1050 and 1078)

The minutes of the meeting on 5 January 1998 were confirmed.

2 Members endorsed the draft report on the work of the Panel for the term of the Provisional Legislative Council for tabling at the Council Meeting to be held on 1 April 1998. They also agreed to authorise the Chairman and the Clerk to make subsequent updates to the report as necessary.	Clerk

II Information papers issued since last meeting

(PLC Paper No CB(1)909(01) - Information paper on the proposed retention of a supernumerary post of Assistant Director of the Hong Kong Observatory

Hong Kong Port Cargo Forecasts 1997/98 circulated to all PLC Members by general despatch)

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

III Delay of the opening of the new airport

(PLC Brief issued by the New Airport Projects Co-ordination Office on 13 January 1998 on the opening date of the new airport (File ref. NAP/CR(CON)14/1))

Cracks on the runway of the new airport

4 With the Chairman's agreement, a newspaper report on cracks found on the runway of the new airport was tabled at the meeting for members' information.

5 At the Chairman's invitation, the Project Director, Airport Authority (PD/AA) gave a brief account of the problem reported. He advised that there were altogether two such cracks. The first crack, discovered in the western safety extension area of the runway, was caused by faulty back-filling of a duct and had already been satisfactorily repaired more than a month ago. The second crack was in the area adjacent to the Eastern Tunnel beneath the runway caused by differential settlement. Repair work on it would start pending a suitable window in the schedule of flight calibration tests. The crack was within the main tolerance permitted and would only take three to four weeks to repair. He stressed that this would not cause any delay in the scheduled opening of the airport in July 1998.

Causes and extent of the cracks

6 Members noted that the Kansai International Airport in Japan, which was also built on reclaimed land, had a continuous soil settlement problem. While recognizing that soil settlement was a common phenomenon of reclaimed land, they were keen to seek assurance that the cracks in the new airport would be properly repaired in time for its scheduled opening and that the problem would not recur, as any such problem which necessitated closure of the airport would be detrimental to Hong Kong's image. Members were also keen to confirm that the cracks were not caused by the impact of heavy vehicles running on the runway as reported in the newspaper, and that the runway had been properly designed to sustain the impact of heavy air traffic.

7 To assure members that the cracks would not delay the opening of the new airport and were highly unlikely to recur, representatives of AA made the following clarifications regarding the causes and extent of the cracks -

As the new airport was built on reclaimed land where soil settlement was inevitable, such settlement had already been allowed for in the design. Both runways had been designed to the international standard and there would be rigorous inspection in accordance with such standards. In fact, settlement had been taking place better than planned and the location of the second crack was the only area of the runway that had experienced differential settlement, which might be attributable to the eastern vehicle tunnel and the alluvial strata underneath.
The geological conditions of Kansai were totally different from those of the new airport. The problem with Kansai was that there were pockets of softer layers more than 100 metres deep under the platform so that there was gradual compression of the sand layer during construction of the platform. In the case of the new airport, AA had taken considerable precautions and had dug out all the soft seabed materials before commencing reclamation. Moreover, it had also positioned the main part of the airport such as the passenger terminal building on the original island.
Claims that the cracks were caused by the impact of heavy vehicles running on the runway were unfounded. Both the southern and northern runways were designed for large loadings of a dynamic nature and could certainly sustain future air traffic. Notwithstanding, all runway surfaces required reconditioning every seven to ten years because of heavy landings, the effects of weather, etc. The availability of the second runway by the end of the year would provide the new airport with greater flexibility in carrying out such reconditioning works.

Maintenance and repair to ensure safety

8 Addressing members' concern about the frequency, extent, effect and costs of repair and maintenance of the runway, representatives of AA and the Director of Civil Aviation (D of CA) provided the following details -

Although the second crack was only three millimetres wide and 40 millimetres deep and could be repaired by an expedient patch if necessary, AA had intended to go for a thorough solution of the problem. As such, the proposed repair would involve taking up the tarmacadam 15 metres either side of the crack and excavating them to the competent level. After examining the nature of the movement, the material beneath would be consolidated, the crust bedrock re-laid and the tarmacadam re-placed after compacting the various layers. The tarmacadam would be raised to take into consideration future settlement. The maintenance cost of the runway had already been included in the operation budget.
In addition to the current repairs, a rigorous maintenance and inspection programme would be kept up to monitor the conditions of the two runways and to check for differential settlement and other irregularities.

9 The Secretary for Economic Services (SES) urged members to have faith in the advice of the AA experts and assured them that various Government bureaux and departments would work closely to ensure safety of the airport operation at all times. After declaring that he was a member of the Airport Authority, Mr HO Sai-chu echoed that the effects of settlement would unlikely lead to any safety problems. Where effects of settlement were concerned, only a part of the southern runway was built on reclaimed land and the runway had been completed well before airport opening to allow time for settlement and any necessary rectification. As for the second runway, which involved more reclamation, there would be careful monitoring and the availability of two runways would provide more flexibility in repair works if there were to be any.

Delay of the opening of the new airport

10 A few members considered that the extra costs of $2.2 billion arising out of acceleration measures to meet the original target of opening the airport in April 1998 a waste of public money as it had long been known that the airport railway (AR) would not be commissioned until June 1998. The decision to defer opening of the airport to tie in with the commissioning of the AR could have been made much earlier. They opined that the Administration should be held responsible for the indecision over the opening date and the extra costs so incurred.

Indecision on the opening date of the new airport

11 Where the opening date of the airport was concerned, representatives of the Administration and AA explained that the Administration had not been able to decide on deferring opening of the airport earlier because it had all along been confident that the Mass Transit Railway Corporation (MTRC), which had a very good track record, could commission the AR earlier. As a result, before the final decision was made, every possible effort had been made to meet the April target date.

Compensation or additional payments arising out of delays in works

12 At members' request for details on the extra costs incurred in speeding up the airport project, the Deputy Director, New Airport Project Co-ordination Office (DD/NAPCO) and PD/AA explained that of the $2.2 billion, $1.9 billion had already been accounted for in the note NAPCO submitted to the then Panel on Economic Services and the then Panel on Planning, Lands and Works in 1996. Out of the $1.9 billion, $730 million was used for project acceleration payments, $240 million for design modifications and $930 million for compensation arising out of claims relating to the terminal building. As for the remaining $0.3 billion which had not been accounted for in 1996, it was mainly used for acceleration payments in respect of ten major systems and fitting-out contracts.

13 In justifying the acceleration payments, PD/AA gave a detailed account of the works delays. Members noted that the initial contract for the substructure of the terminal building went into difficulty because of bad weather and difficult ground conditions, leading to a substantial change to the programme of the foundation works, hence causing a delay in the order of seven months. The main contract for the superstructure, though awarded on time, was delayed by the poor progress of the first contract and, although phased handover had been planned, there were still delays all the way through. Furthermore, there was delay in signing the financial support agreement for further funding needed for the first contractor to award the nominated subcontracts within his contract. The total delay so caused by the problems mentioned was eleven months. Given the extent of delays, SES and representatives of AA emphasised that acceleration payments were necessary to re-establish the actual working programme or else the airport might not be ready for opening even in July 1998. Some members were dissatisfied with the explanations and regretted the Administration's failure to keep the situation under control and to use public funds prudently.

Responsibility for the delay

14 Mrs Miriam LAU asked the Administration to confirm that the inability of the AR to commence operation in April was not to be blamed for the deferred opening of the new airport as MTRC was only aware of the April 1998 target date at the end of 1997 and that there was a delay of about nine months in its gaining access to the major works site for installation of facilities. In response, DD/NAPCO confirmed that MTRC was working within the tight AR working schedule of 43 months. However, it was also aware of the Administration's wish to expedite completion of the AR to tie in with the April target date. As a result, when the AR project reached its final stage where it became apparent that the margin of acceleration was limited, MTRC duly informed the Administration and the decision to defer opening of the airport was made.

15 As for delayed possession of the works site by MTRC, CEO/AA advised that owing to difficulties encountered in getting the work started on the ground transportation centre in early 1997, the AA had closely liaised and agreed with MTRC on the recovery programme. As a result of concerted efforts of all relevant parties, the site was turned over to MTRC on 29 December 1997 as agreed with MTRC. DD/NAPCO then referred members to the minutes of the last meeting of the Airport Consultative Committee, at which MTRC representatives agreed that although there had been a delay in site possession, the AR works programme could proceed on schedule.

Other concerns

16 Concerning the criteria and fees charged for issuance of parking permits for tourist coaches, hotel limousines, taxis, etc, CEO/AA explained that because it was a new airport and there were dedicated staging areas and facilities, there was a need for a new system of issuing vehicle permits. To that extent, AA had already consulted widely with the travel and hotel trades in working out relevant arrangements. Members were assured that the prevailing economic downturn would be taken into account when such charges were determined.

17 On progress of the landscaping works of the airport, CEO/AA and PD/AA advised that planning in this aspect had started as early as 1997 and when the airport opened in July 1998, 700 hectares out of its 1,250 hectares of land would be covered with grass landscaping. However, owing to difficulties in getting suitable vegetation and shrubs to grow on the reclaimed land under the adverse environment of Chek Lap Kok (CLK), first priority had been given to hard landscaping, i.e., clearing large rocks and construction debris, and the process was well under way. As for soft landscaping, AA had already liaised for supply of the kind of shrubs that could grow well in CLK and real progress would be made in the following month, which was the start of the favourable growing season for the said shrubs.

18 On delays in the progress of the Hong Kong Air Cargo Terminals Ltd (HACTL)'s facility, CEO/AA reported that it had been the Administration's intention to commission at least 50% of its 2.4 million tonne annual capacity by April 1998. However, since opening of the airport had been deferred to 6 July 1998, HACTL was presently making every effort to bring on 75% of the capacity instead so as to ensure it could maintain its market share it currently enjoyed.

IV Electricity: demand side management

(PLC Paper Nos. CB(1)459 and 909(02) - Information papers prepared by the Administration)

19 The script of the Administration's presentation was tabled at the meeting for members' reference.

20 During the presentation, the Acting Assistant Director of Electrical and Mechanical Services, Energy Efficiency (AD of EMS) briefed members on the demand side management (DSM) of electricity. Members noted that DSM involved asking the two local power companies to take measures to influence the level and timing of demand for electricity so as to optimise use of supply facilities. The objective was to reduce peak demand for electricity and longer term growth in demand so as to reduce the need for additional power generating capacity.

21 Members questioned the appropriateness of asking the two power companies to take measures to lower electricity consumption. Apart from their lack of mandate, it was also unlikely that the two power companies would implement DSM programmes whole-heartedly to the detriment of their incomes, especially as there were already excess generating capacities. In members' view, instead of encouraging the two power companies to implement DSM programmes through incentive arrangements under which they would earn a return for implementing DSM, which might lead to upward pressure on tariffs, the Administration should promote energy conservation through public education without incurring any additional cost to the public.

22 Defending the decision to rely on the two power companies to implement DSM, representatives of the Administration emphasised that the two companies would not be gaining any additional return from the DSM programmes, and that the incentive scheme would require them to meet a minimum performance threshold, i.e., 50% of target savings, before they could fully recover the programme costs and earn incentives. Moreover, the expected additional costs to consumers would not exceed 2% of the tariff that would have applied had there been no DSM, and substantial savings expected in the longer term would exert downward pressure on tariffs. On top of these, rebates would also be offered to consumers for purchase of energy efficient electrical appliances, and such rebates would more than offset increases in tariffs.

23 On Government's role, SES pointed out that the Government should play an active role in energy conservation. Apart from monitoring the DSM programmes of the two power companies, the Electrical and Mechanical Services Department was also implementing an energy efficiency labelling scheme. However, although Government efforts in public education were important, DSM was the ultimate solution and this could not be implemented by Government alone without due co-operation from the two power companies. Members were not convinced of the Administration's arguments. They maintained that it was unfair to ask the public to bear the cost of DSM. They also pointed out that unless there was a trade-in scheme to offer more incentives, rebates for purchase of energy efficient electrical appliances could only benefit people who had a real need to purchase new appliances.

24 Where excessive generating capacity was concerned, SES emphasised the need to plan ahead in anticipation of future demand and advised that all existing surplus generating capacity would have gone into operation in 2003. Moreover, as DSM programmes would require time to take effect, there was a need for their early implementation notwithstanding the existence of excess generating capacity to bring about reduction in peak demand and energy consumption by about 7% and 5% respectively by 2005. Members' attention was also drawn to DSM's contribution to mitigating the environmental impact of electricity generation.

25 Regarding the practicality of asking industrial and commercial undertakings to modify their patterns of operation so as to shift their electricity consumption from peak to off-peak periods, AD of EMS advised that with developments in science and technology such as the introduction of electronic ballasts and the design of energy efficient buildings, peak load shifting might not necessarily involve modification of operation patterns.

26 As for the viability of applying time-of-use tariffs, which involved the installation of special metres to record the time of use, AD of EMS advised that as the targets of DSM were major users of electricity which could greatly benefit from time-of-use tariffs, there should not be much difficulty in asking these clients to invest in the special metres.

27 Concluding the discussion, the Chairman stated that members in general supported the idea of DSM. They however had reservations about DSM programmes' impact on the level of tariffs and were keen to ensure that the public would not suffer as a result of such programmes. SES assured members that the Administration would seriously consider members' views in working out the operational details, and members were welcome to participate in the process.

V Resumption of the importation of live poultry

(PLC Brief issued by the Economic Services Bureau (ESB) in January 1998 on Public Health (Animals and Birds) (Amendment) Regulation 1998 (File Ref: ECON19/3231/59) and PLC Brief issued by ESB in February 1998 on segregation of chickens and water birds)

28 With the aid of a slide presentation, the Assistant Director of Agriculture and Fisheries (Agriculture & Regulatory) (AD of AF) briefed members on new controls over the importation of birds and the proposed segregation of live chickens and water birds. On the new controls, members noted that since the importation of live chickens was resumed on 7 February 1998, it had been an agreed arrangement with the Mainland authorities that poultry and other birds exported from the Mainland to Hong Kong would be accompanied by a health certificate issued by a veterinary authority. Some of the pre-entry procedures outlined in the brief on the Public Health (Animals and Birds) (Amendment) Regulation 1998 were also already in operation. Moreover, random tests on imported chickens for H5 avian influenza would be conducted upon entry. Trucks checked would be sealed and unloading could proceed only after test results had confirmed that the shipments were clear of H5 avian influenza. Trucks were also labelled to facilitate tracing of shipments in question. Water birds would undergo similar quarantine procedures and, in the interests of public health, segregation of live chickens and water birds would be implemented. It had been proposed that the poultry market at Western Wholesale Food Market (the Western Market) would be utilised solely for wholesale of water birds and the Cheung Sha Wan Temporary Wholesale Poultry Market (the Cheung Sha Wan Market) would be used solely for wholesale of chickens and other poultry that were not water birds.

The new quarantine procedures

29 Addressing members' concern about whether the above quarantine mechanism could be kept up in the interests of public health, the Director of Agriculture and Fisheries (D of AF) assured that close liaison with the Mainland authorities would be maintained to solve any problem identified and to exchange techniques in conducting tests.

30 On the problem of suffocation arising out of the need for imported chickens to go through more lengthy importation and quarantine procedures in overcrowded conditions, D of AF reported that the overcrowded condition in Cheung Sha Wan Market would be relieved with reopening of its Site B, which was presently closed for modification. She further reported that to help address the problem, the Mainland authorities had already instructed farms to put fewer chickens in one cage and fewer cages in one truck at the request of the Hong Kong side. In addressing a member's concern, AD of AF also clarified that sprinkling of water on the chickens for cooling purposes would not lead to H5 avian influenza as chicken feathers were water-proof and that H5 avian influenza would only spread if the disease was present in the first place.

31 Regarding the opening hours of the laboratories, AD of AF advised that the laboratories were already working two shifts to tie in with the chicken importation schedule. As the chickens would arrive in Hong Kong only after 9:00 a.m., there might not be the need for the laboratories to open earlier. However, the Administration was closely liaising with the control point at Man Kam To and the opening hours of the laboratories could be adjusted should the need arise.

Chicken prices

32 As for the price of chickens, which in members' view had yet to return to the normal level, D of AF clarified that the high price had nothing to do with any monopoly in the chicken trade as there were over 70 wholesalers in Cheung Sha Wan Market. AD of AF also advised that since the resumption of trading on 8 February 1998, supply had been increasing from 35,000 birds to the present levels of 80,000 and 90,000. As supply increased, the price of chickens had also gone down and remained at the present level of $14 to $17 per catty. He assured members that the price would fall as supplies increased, particularly when local produce, which accounted for one-fifth of the total supply, resumed. However, owing to the need to ensure that local farms' sanitary conditions were up to standard and for the 100-day lead time for chicks to grow to the marketable weight, the local supply would take a few more months to resume.

The conditions of the two wholesale markets

33 As regards the capacity and sanitary conditions of Cheung Sha Wan Market, which in members' view had much to be desired, D of AF reported that the chicken stalls there would be relocated to Phase II of the Cheung Sha Wan Subsidiary Food Market upon its completion in 2001-02. Meanwhile, improvements to the ventilation of the Market would be made and in fact, a lot of the improvement works had already been completed. She also pointed out that the Administration was well aware of the sanitation problems there and had already instructed the cleansing contractor to step up cleaning and encouraged stall owners to use plastic bags provided by the Administration for disposal of chicken carcasses.

34 On the ability of the Western Market to handle, according to new sanitation requirements, central slaughtering of the volume of the trade in water birds, which was estimated at an average of 10,000 birds a day, D of AF assured members that with 14 poultry stalls each equipped with a purpose-built slaughtering room with proper drainage facilities, there should not be any capacity problem as the Western Market was used to handling 20,000 birds before segregation. Moreover, its slaughtering rooms and ancillary facilities were presently being modified so that the stalls could comply with the sanitation requirements and conditions set down by the Provisional Urban Council.

VI Any other business

35 As this was the last regular meeting of the Panel in the Provisional Legislative Council term, the Chairman thanked members and the Administration for their contribution and support during the session.

36 There being no other business, the meeting ended at 5:30 p.m.

Provisional Legislative Council Secretariat
16 June 1998