OFFICIAL RECORD OF PROCEEDINGS
Wednesday, 22 July 1998
The Council met at half-past Two o'clock

MEMBERS PRESENT:

THE PRESIDENT
THE HONOURABLE MRS RITA FAN, G.B.S., J.P.

THE HONOURABLE KENNETH TING WOO-SHOU, J.P.

THE HONOURABLE JAMES TIEN PEI-CHUN, J.P.

THE HONOURABLE DAVID CHU YU-LIN

THE HONOURABLE HO SAI-CHU, J.P.

THE HONOURABLE CYD HO SAU-LAN

THE HONOURABLE EDWARD HO SING-TIN, J.P.

THE HONOURABLE ALBERT HO CHUN-YAN

THE HONOURABLE MICHAEL HO MUN-KA

DR THE HONOURABLE RAYMOND HO CHUNG-TAI, J.P.

THE HONOURABLE LEE WING-TAT

THE HONOURABLE LEE CHEUK-YAN

THE HONOURABLE MARTIN LEE CHU-MING, S.C., J.P.

THE HONOURABLE ERIC LI KA-CHEUNG, J.P.

THE HONOURABLE LEE KAI-MING, J.P.

DR THE HONOURABLE DAVID LI KWOK-PO, J.P.

THE HONOURABLE FRED LI WAH-MING

DR THE HONOURABLE LUI MING-WAH, J.P.

THE HONOURABLE NG LEUNG-SING

PROF THE HONOURABLE NG CHING-FAI

THE HONOURABLE MARGARET NG

THE HONOURABLE MRS SELINA CHOW LIANG SHUK-YEE, J.P.

THE HONOURABLE RONALD ARCULLI, J.P.

THE HONOURABLE MA FUNG-KWOK

THE HONOURABLE JAMES TO KUN-SUN

THE HONOURABLE CHEUNG MAN-KWONG

THE HONOURABLE AMBROSE CHEUNG WING-SUM, J.P.

THE HONOURABLE HUI CHEUNG-CHING

THE HONOURABLE CHRISTINE LOH

THE HONOURABLE CHAN KWOK-KEUNG

THE HONOURABLE CHAN YUEN-HAN

THE HONOURABLE BERNARD CHAN

THE HONOURABLE CHAN WING-CHAN

THE HONOURABLE CHAN KAM-LAM

DR THE HONOURABLE LEONG CHE-HUNG, J.P.

THE HONOURABLE MRS SOPHIE LEUNG LAU YAU-FUN, J.P.

THE HONOURABLE LEUNG YIU-CHUNG

THE HONOURABLE GARY CHENG KAI-NAM

THE HONOURABLE SIN CHUNG-KAI

THE HONOURABLE ANDREW WONG WANG-FAT, J.P.

THE HONOURABLE WONG YUNG-KAN

THE HONOURABLE JASPER TSANG YOK-SING, J.P.

THE HONOURABLE HOWARD YOUNG, J.P.

DR THE HONOURABLE YEUNG SUM

THE HONOURABLE YEUNG YIU-CHUNG

THE HONOURABLE CHIM PUI-CHUNG

THE HONOURABLE LAU CHIN-SHEK, J.P.

THE HONOURABLE LAU KONG-WAH

THE HONOURABLE LAU WONG-FAT, G.B.S., J.P.

THE HONOURABLE MRS MIRIAM LAU KIN-YEE, J.P.

THE HONOURABLE AMBROSE LAU HON-CHUEN, J.P.

THE HONOURABLE EMILY LAU WAI-HING, J.P.

DR THE HONOURABLE TANG SIU-TONG, J.P.

THE HONOURABLE CHOY SO-YUK

THE HONOURABLE ANDREW CHENG KAR-FOO

THE HONOURABLE SZETO WAH

THE HONOURABLE LAW CHI-KWONG, J.P.

THE HONOURABLE TAM YIU-CHUNG, J.P.

MEMBERS ABSENT:

DR THE HONOURABLE PHILIP WONG YU-HONG

THE HONOURABLE TIMOTHY FOK TSUN-TING, J.P.

PUBLIC OFFICERS ATTENDING:

THE HONOURABLE MRS ANSON CHAN, J.P.
THE CHIEF SECRETARY FOR ADMINISTRATION

THE HONOURABLE DONALD TSANG YAM-KUEN, J.P.
THE FINANCIAL SECRETARY

THE HONOURABLE ELSIE LEUNG OI-SIE, J.P.
THE SECRETARY FOR JUSTICE

MR CHAU TAK-HAY, J.P.
SECRETARY FOR TRADE AND INDUSTRY

MR NICHOLAS NG WING-FUI, J.P.
SECRETARY FOR TRANSPORT

MR JOSEPH WONG WING-PING, G.B.S., J.P.
SECRETARY FOR EDUCATION AND MANPOWER

MR BOWEN LEUNG PO-WING, J.P.
SECRETARY FOR PLANNING, ENVIRONMENT AND LANDS

MR KWONG KI-CHI, G.B.S., J.P.
SECRETARY FOR INFORMATION, TECHNOLOGY AND BROADCASTING

MISS DENISE YUE CHUNG-YEE, J.P.
SECRETARY FOR THE TREASURY

MR STEPHEN IP SHU-KWAN, J.P.
SECRETARY FOR ECONOMIC SERVICES

MR BENEDICT KWONG HON-SANG, J.P.
SECRETARY FOR WORKS

MR DAVID LAN HONG-TSUNG, J.P.
SECRETARY FOR HOME AFFAIRS

CLERKS IN ATTENDANCE:

MR RICKY FUNG CHOI-CHEUNG, J.P., SECRETARY GENERAL

MR LAW KAM-SANG, J.P., DEPUTY SECRETARY GENERAL

MRS JUSTINA LAM CHENG BO-LING, ASSISTANT SECRETARY GENERAL

PAPERS

The following papers were laid on the table pursuant to Rule 21(2) of the Rules of Procedure:

Subsidiary Legislation	L.N. No.
Water Pollution Control (Sewerage) (Amendment) Regulation 1998	281/98
Specification of Public Office	282/98
Pilotage (Amendment) Order 1998	283/98

Sessional Paper

No. 7

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The Tenth Annual Report of the Ombudsman, June 1998

ORAL ANSWERS TO QUESTIONS

PRESIDENT (in Cantonese): Questions. I would like to inform Members that question time normally does not exceed one and a half hours, with each question being allocated about 15 minutes on average. Members should have received the notice which I instructed the Clerk to issue on 17 July, reminding Members of the rules relating to supplementary questions and interruptions during debates in Council meetings, stipulated in the Rules of Procedures and the House Rules. I should like to remind Members once again that supplementaries should be as concise as possible, should not include statements, and should not contain more than one question.

First question. Mr MA Fung-kwok.

Impact of the Media on Young People

1. MR MA FUNG-KWOK (in Cantonese): Recently, many organizations concerned about the growth of young people pointed out that some publications and television and radio programmes in Hong Kong have a negative influence on the moral concepts of young people. In this connection, will the Government inform this Council:

(a) of its current policies on the regulation of publications and television and radio programmes which contain immoral ideas;

(b) of the respective numbers of prosecutions against publications and television and radio programmes containing immoral ideas, the criteria for instituting the prosecutions and the outcomes thereof, in each of the past three years;

(c) whether it will consider imposing heavier penalties on the operators of such illegal publications and programmes, or reviewing the relevant legislation and regulatory mechanism; and

(d) whether the Information Technology and Broadcasting Bureau will step up the monitoring of the impact of the media's programmes and reports containing immoral ideas on young people and consider setting up a semi-official or non-official committee to follow the issue up?

PRESIDENT (in Cantonese): Secretary for Information, Technology and Broadcasting.

SECRETARY FOR INFORMATION, TECHNOLOGY AND BROADCASTING (in Cantonese): Madam President, my reply is as follows:

(a) The policy of the Government is to uphold freedom of expression and right of access to information while, at the same time, protecting children and youngsters from harmful influence. Publications which contain unsuitable materials are regulated by legislation ─ that is, the Control of Obscene and Indecent Articles Ordinance.

Under the Ordinance, it is an offence to publish any indecent article to persons under the age of 18; the Ordinance also prohibits the publication and distribution of obscene articles.

Contents of television and radio broadcasts are regulated by the Broadcasting Authority (BA). The Television and Radio Codes of Practice issued by the BA set out the programming standards for materials which are not suitable for children or youngsters. The commercial television broadcasting licensees are required to classify their programmes so as to assist parents in providing guidance to their children.

(b) In the past three years, the numbers of prosecutions instituted by the Television and Entertainment Licensing Authority (TELA) in respect of unlawful publication of articles amounted to 157 cases in 1995, 49 in 1996 and 33 in 1997; and the numbers of successful prosecutions are 99, 50 and 36 respectively. During the year of 1997, the Police and the Customs prosecuted 1 081 cases involving obscene and indecent laser discs, video tapes and publications, of which 646 were successful.

Contravention of any provisions in the Control of Obscene and Indecent Articles Ordinance is the basis for instituting prosecution and prosecution will be instituted if there is sufficient evidence that the Ordinance has been contravened.

In the past three years, the numbers of cases dealt with by the Broadcasting Authority Complaints Committee (BACC) in respect of television and radio programmes which had bad influence on youngsters were 28 in 1995, 36 in 1996, and 23 in 1997. The number of cases found by the BA to be substantiated were 25 in 1995, 31 in 1996 and 17 in 1997.

Upon receiving a complaint, the BA will conduct an investigation to establish whether the television or radio programme concerned has violated any standards laid down in the Codes of Practice and, if there is prima facie evidence, the case will be referred to the BACC for action in accordance with the statutory procedures.

(c) Under the Control of Obscene and Indecent Articles Ordinance, any person who publishes, possesses or imports obscene articles for the purpose of publication commits an offence and is liable to a maximum penalty of $1 million and imprisonment for three years. As for the publication of indecent articles, the maximum penalty will be $400,000 plus imprisonment for one year, and on subsequent conviction, the penalty can be doubled to $800,000 and imprisonment for one year. We believe such penalty already has a deterrent effect, so we have no intention for the time being to introduce any amendment. Regarding enforcement, the division of work and co-operation among the police, the Customs and the TELA is working well and does not call for changes.

Regarding television and radio programmes, it is stipulated in the Television Ordinance and the Broadcasting Authority Ordinance that the BA may, depending on the seriousness of the breach, impose financial penalty on any broadcasting licensee for contravening any Codes of Practice. The maximum fines for the television broadcasting licensees and the radio broadcasting licensees are $250,000 and $100,000 respectively. The existing regulatory system and penalties are effective in the regulation of the electronic media. There is no need to conduct a review at the present stage.

(d) The BA, with most of its members drawn from a wide cross section of the community, is already responsible for monitoring the electronic media. It also has the statutory powers to ensure that the television and radio programmes comply with the moral standard generally accepted by the community, hence, there is no need to set up a separate monitoring committee.

As one of the law enforcement agencies for the Control of Obscene and Indecent Articles Ordinance, the TELA conducts regular checks on newspapers, magazines and publications that are in circulation and its also handles public complaints. Articles found to be containing materials which may violate the provisions in the law will be submitted to the Obscene Articles Tribunal for adjudication. The Tribunal comprises members coming from all walks of life in the community, so the setting up of another monitoring committee is not necessary.

PRESIDENT (in Cantonese): Mr MA Fung-kwok.

MR MA FUNG-KWOK (in Cantonese): Madam President, I would like to raise a case again and that is a television station had recently given extensive coverage in its prime time to the legend of some triad figures but it was only fined $100,000 afterwards. I would like to follow up the issue here and ask the Government if it considers that the $100,000 fine is a commensurate level as, relative to the huge efforts spent on educating youngsters by a great number of social workers or educators, the acts committed by the television station have inflicted such great damage on the community? Is the penalty sufficient?

PRESIDENT (in Cantonese): Secretary for Information, Technology and Broadcasting.

SECRETARY FOR INFORMATION, TECHNOLOGY AND BROADCASTING (in Cantonese): Madam President, compared with the maximum fine of $200,000, the $100,000 fine is a relatively heavy penalty. The BA is concerned about the act committed by the television station, and has expressed its concern to the station. The station has also accepted the views of the BA that control of such programmes should be stepped up.

PRESIDENT (in Cantonese): Mr Eric LI.

MR ERIC LI (in Cantonese): Madam President, I would like to follow up the question raised by Mr MA Fung-kwok. There are in fact too many things that can influence the youngsters adversely. But the existing legislation has only, relatively speaking, concentrated on specifying clearly that prosecutions can be instituted in respect of obscene and indecent articles. If the fines imposed fail to achieve a deterring effect, should the Government enact legislation in clearer terms by setting up clear-cut criteria and disallowing television stations to broadcast certain programmes of questionable moral standards? If not, will the situation deteriorate?

PRESIDENT (in Cantonese): Secretary for Information, Technology and Broadcasting.

SECRETARY FOR INFORMATION, TECHNOLOGY AND BROADCASTING (in Cantonese): Madam President, the Honourable Member is indeed talking about two different issues. The first issue relates to the control of obscene and indecent articles. The other one relates to the control of television stations and television broadcasting. As for the control of obscene and indecent articles, the legislation has provided for the maximum penalty and, that is, the offender might be sentenced to one year's imprisonment in addition to the fine, as I said in the main reply. As for television and radio stations, they are subject to the control of the Codes of Practice issued by the BA. According to the Codes of Practice, the television and radio stations should take certain actions, if certain programmes are not suitable for viewing or listening by youngsters and children. For instance, the television stations should specify that the programmes should be viewed with parent's guidance or efforts should be made to prevent adult programmes to be aired during family hours.

PRESIDENT (in Cantonese): Mr NG Leung-sing.

MR NG LEUNG-SING (in Cantonese): Madam President, messages of immoral mentality can also be found on the Internet now. Will the Government inform this Council if policies or measures are in place for protecting youngsters against such messages on the Internet?

PRESIDENT (in Cantonese): Mr NG Leung-sing, the main question is on publications, television and radio stations. Although your supplementary question is important, it is not suitable to be followed up here. You may consider raising another independent question on this issue. Mr SIN Chung-kai.

MR SIN CHUNG-KAI (in Cantonese): Madam President, the Secretary pointed out in part (b) of his reply that prosecutions have been instituted against more than 1 000 cases involving laser discs and video tapes in 1997, whereas the success rate of prosecution by the police was quite high. From this we can see that obscene and indecent laser discs and video tapes were so rampant that the situation has in fact turned very serious. In view of this, will the Secretary inform this Council whether the Government should impose heavier penalties and strengthen legislation or strategies in respect of enforcement?

PRESIDENT (in Cantonese): Secretary for Information, Technology and Broadcasting.

SECRETARY FOR INFORMATION, TECHNOLOGY AND BROADCASTING (in Cantonese): Madam President, just as I have pointed out in the main reply, if prosecution is taken under the Control of Obscene and Indecent Articles Ordinance against laser discs, video tapes or publications, the maximum penalty will be a fine of $1 million and imprisonment for three years. As for the publication of indecent articles, the maximum penalty will be $400,000 plus imprisonment for one year, and on subsequent conviction, the penalty can be doubled to $800,000 and imprisonment for one year. We consider that these maximum penalties do produce a certain degree of deterring effect.

PRESIDENT (in Cantonese): Mr Gary CHENG.

MR GARY CHENG (in Cantonese): Madam President, a World Cup programme retransmitted by the television station lately was glutted with the gambling mentality. Some of the hosts even used vulgar language and made indecent gestures. The media have also given extensive coverage to this programme, the viewing rate of which is extremely high. Has the Government considered imposing penalties?

PRESIDENT (in Cantonese): Secretary for Information, Technology and Broadcasting.

SECRETARY FOR INFORMATION, TECHNOLOGY AND BROADCASTING (in Cantonese): Madam President, as far as I understand it, we have received complaints about this, and we will refer these complaints to the BACC for examination and consideration.

PRESIDENT (in Cantonese): Mrs Selina CHOW.

MRS SELINA CHOW (in Cantonese): Madam President, part (c) of the main reply has mentioned, and the Secretary has also touched upon, the point that the Government believes the maximum penalty does produce a certain deterring effect and therefore it has, for the time being, no intention to introduce amendments. But whether or not there is a deterring effect does not actually lies in the fact that the legislation has provided for the maximum punishable fines. It rather lies in whether the actual amount of fines imposed by the court is able to achieve a certain deterring effect. Will the Secretary inform this Council, as far as the fines in respect of these two types of articles are concerned, of the maximum fines imposed by the court?

PRESIDENT (in Cantonese): Secretary for Information, Technology and Broadcasting.

SECRETARY FOR INFORMATION, TECHNOLOGY AND BROADCASTING (in Cantonese): For the prosecutions instituted by the Administration against obscene and indecent laser discs, video tapes and publications over the past three years, the maximum fine was $80,000 and the longest period of imprisonment was 26 months.

MRS SELINA CHOW (in Cantonese): Here we have two situations. One concerns obscene articles, and the other concerns indecent articles. But it appears that the Secretary has only answered one.

PRESIDENT (in Cantonese): Does the Secretary have anything to add?

SECRETARY FOR INFORMATION, TECHNOLOGY AND BROADCASTING (in Cantonese): Madam President, according to the information I have on hand, prosecutions in respect of obscene and indecent articles are classified as the same category. If Members wish to have the information separately, I will give a written reply in due course. (Annex I)

PRESIDENT (in Cantonese): Mr YEUNG Yiu-chung.

MR YEUNG YIU-CHUNG (in Cantonese): Madam President, part (d) of the main reply has mentioned the point about the moral standard generally accepted by the community. But this is constantly changing, and I would like to ask if the BA is authorized to examine these moral standards, will this lead to a situation that what is accepted by the BA will be taken as acceptable? Will the Government formulate a set of objective guidelines relating to the moral standard for the BA to follow?

PRESIDENT (in Cantonese): Secretary for Information, Technology and Broadcasting.

SECRETARY FOR INFORMATION, TECHNOLOGY AND BROADCASTING (in Cantonese): Madam President, as regards guidelines, the BA has in fact issued detailed guidelines to television and radio stations. As for obscene and indecent articles, the TELA conducts opinion surveys regularly with a view to soliciting the latest information relating to the way how the public looks at the yardstick for indecent and obscene publications.

PRESIDENT (in Cantonese): Mr MA Fung-kwok.

MR MA FUNG-KWOK (in Cantonese): Madam President, some best-selling newspapers in Hong Kong publish some articles containing pornographic elements or some guides on sexual services almost everyday. Will the Government inform this Council how it views this situation and whether it considers that the problem has become very serious? Should the Government adopt some measures?

PRESIDENT (in Cantonese): Secretary for Information, Technology and Broadcasting.

SECRETARY FOR INFORMATION, TECHNOLOGY AND BROADCASTING (in Cantonese): Madam President, the TELA will monitor publications, including newspapers. As regards the question raised by Mr MA in respect of the seriousness of the situation, I have some information on the number of complaints on hand. The number of complaints lodged against newspapers under the Control of Obscene and Indecent Articles Ordinance was 177 in 1996, and 153 in 1997. Therefore judging from these complaint figures, the situation has not deteriorated.

PRESIDENT (in Cantonese): The second question. Mrs Selina CHOW.

Pilot Credit Guarantee Scheme

2. MRS SELINA CHOW (in Cantonese): Will the Government inform this Council:

(a) of the respective numbers of applications received, processed, and approved since the establishment of the Credit Guarantee Scheme for small and medium enterprises; and

(b) of the target time for processing the applications, and whether such target has been met?

PRESIDENT (in Cantonese): Secretary for Trade and Industry.

SECRETARY FOR TRADE AND INDUSTRY (in Cantonese): Madam President, since the launching of the Pilot Credit Guarantee Scheme on 3 June 1998, and up to today, that is, 22 July, 12 applications have been received. Of these, eight have been approved and four are being processed. I wish to add that the eight approved applications involve a total credit guarantee of $5.3 million, which means that the banks concerned will extend a total loan amount of $10.6 million for all these applications.

The Scheme is administered by the Hong Kong Export Credit Insurance Corporation (ECIC). The target time for processing applications is five working days after the receipt of all the necessary information. For the above eight approved cases, statistics show that the average processing time for the first three applications is three working days, which means that the target time has been met in all these three cases. If Mrs Selina CHOW wishes to know the average processing time for the remaining five cases, I can provide a written reply later. (Annex II).

Madam President, I wish to add one more point. As I announced at the meeting of the Trade and Industry Panel this morning, following the Executive Council approval yesterday, we have decided to transfer the remaining $500 million under the Pilot Credit Guarantee Scheme to the $2 billion Credit Scheme for small and medium enterprises (SMEs). Of course, the approval of the Finance Committee later this month is required before this decision can be implemented.

PRESIDENT (in Cantonese): Mrs Selina CHOW.

MRS SELINA CHOW (in Cantonese): Madam President, the allocation of $500 million for the Pilot Credit Guarantee Scheme was approved by the Provisional Legislative Council as early as February this year, and it is already July now. At that time, the Government claimed that this scheme was badly needed by SMEs, and we agreed. However, at the panel meeting this morning, the Secretary for Trade and Industry admitted that the scheme had proved to be a failure. On the basis of their analysis, will the Secretary please tell this Council why the scheme has failed?

PRESIDENT (in Cantonese): Secretary for Trade and Industry.

SECRETARY FOR TRADE AND INDUSTRY (in Cantonese): Madam President, Honourable Members, including those who have newly joined this Council, may well recall that the Pilot Credit Guarantee Scheme was first mooted over a year ago, and its implementation was formally announced by the Chief Executive in his policy address in October last year. At that time, the economic conditions of Hong Kong were entirely different; the Asian financial turmoil had not broken out, and local banks did not face any liquidity problems. Hence, because of the changed circumstances, the Government has found it necessary to handle this scheme in a flexible manner.

One of the major reasons for the lack of success with this scheme, or even its failure, is that on top of the existing banking system, we have put in place an additional institution, namely, the ECIC, to carry out the work of vetting and approving applications. Under this scheme, when SMEs apply for loans from participating banks, apart from having to obtain the approval of the respective banking institutions by going through the normal vetting procedures, they also need to produce export documentation to the ECIC for additional vetting and approval, because this scheme is intended solely for SMEs engaging in the export business. We have been given to understand that such an extra vetting and approval requirement has come to be regarded as a complicated procedure by the SMEs and banking institutions alike. Besides, an enterprise which wishes to apply successfully for a loan under the scheme will have to take out an insurance policy with the ECIC for the goods in question. This will involve a premium at 0.22% of the value of the goods. What is more, SMEs applying for loans under this scheme will also have to pay a handling charge at 0.5% of the value of the goods concerned. Hence, when compared with normal loan products, loans granted under the scheme are actually more expensive, involving an additional cost of 0.72%. This has been the major reason which has discouraged SMEs from submitting applications, and in turn reduced the interest of banking institutions in taking part in the scheme.

Our circumstances have now changed drastically. In view of this, on 22 June, we announced the establishment of a new fund to promote a new scheme; and this new scheme is meant for all SMEs, whether or not they are engaged in the export business. Since there are some funds left under the old scheme, we have decided to transfer such remaining funds to the new scheme as quickly as possible, and with such an additional allocation, the funds available under the new scheme will be increased to $2.5 billion.

PRESIDENT (in Cantonese): Mr HUI Cheung-ching.

MR HUI CHEUNG-CHING (in Cantonese): Madam President, the Pilot Credit Guarantee Scheme and the $2-billion credit loan scheme for SMEs were both established before the moratorium of the cargo handling terminal at the new airport. Following the blunder of the air cargo terminal at the new airport, many export businessmen have been plunged into liquidity difficulties. Has the Government ever considered the possibility of increasing the funding for the loan scheme as a result of the new airport blunder?

PRESIDENT (in Cantonese): Mr HUI, your question involves a very significant problem, especially for consignors. Unfortunately, this question has already gone beyond the scope of the main question. As a result, you may as well raise a separate question on it. Mr James TIEN.

MR JAMES TIEN (in Cantonese): Madam President, we basically want to ask questions on the $2-billion Pilot Credit Guarantee Scheme. In his reply, the Secretary referred to the ECIC as an additional vetting and approval mechanism imposed on the existing banking system. However, may I ask the Secretary one question: As far as the 12 applications are concerned, have any applicants decided to discontinue their applications, despite prior bank approval, for reasons relating to the ECIC? As far as I know, this is simply not the crux of the problem because, in any case, not many people have bothered to apply.

PRESIDENT (in Cantonese): Secretary for Trade and Industry.

SECRETARY FOR TRADE AND INDUSTRY (in Cantonese): Madam President, since the scheme was launched on 3 June, the ECIC has received some 1 000 enquiries, which were either made over the phone or in person. However, the actual number of applications received by the banking sector is just 11. In other words, there have been many enquiries but very few applications. I believe that this has been caused by the complicated procedures involved. Besides, the scheme is just a credit guarantee scheme, and as a result, the Government does not really inject any funds into the banking sector for the purpose of extending loans to applicants. Instead, the Government simply provides credit guarantee for a loan, at a rate of 50% of the principal, or up to a maximum of $2 million (whichever is the less). This is also one of the reasons for the unpopularity of the scheme. What is more, under this scheme, each loan application is granted solely for the purpose of meeting the expenses arising from a specific export order, and the loan proceeds cannot therefore be used flexibly for any other purposes. This is another limitation of the scheme.

PRESIDENT (in Cantonese): Miss CHOY So-yuk.

MISS CHOY SO-YUK (in Cantonese): Madam President, according to the main reply of the Secretary, the remaining funds under the Pilot Credit Guarantee Scheme will be transferred to the new scheme. That being the case, if there are any applications for export credit guarantee in the future, will the Government give priority to them within the limits of such remaining funds? Since the Secretary himself also referred to the complicated formalities and high costs under the old scheme, will the Government consider the possibility of streamlining the procedures and reducing the handling charge for applications of this nature?

PRESIDENT (in Cantonese): Before the start of the Question Time, I already expressed the hope that Honourable Members should raise only one supplementary question at any one time. However, since Miss CHOY So-yuk has raised two questions, and since I want to save time, I will call upon the Secretary to answer the two questions together if he thinks it possible to do so.

SECRETARY FOR TRADE AND INDUSTRY (in Cantonese): Madam President, our plan is to suspend the Pilot Credit Guarantee Scheme for the time being once the funding for the new scheme is endorsed by the Finance Committee. The remaining funds will be transferred to the new credit scheme for SMEs. The funds will not be reserved solely for export businesses. Actually, there are approximately 300 000 SMEs in Hong Kong, of which about one third are related to the export trade and 15% to various industries. Therefore, about half of those enterprises granted loan approval under the new scheme in the future should be related to the export trade. Thus the cancellation of the Pilot Credit Guarantee Scheme will not adversely affect those enterprises engaging in the export trade.

PRESIDENT (in Cantonese): Mr Howard YOUNG.

MR HOWARD YOUNG (in Cantonese): Madam President, does the Secretary agree that initially, the Pilot Credit Guarantee Scheme did appear to be quite well-received, with some 20 banks indicating their interest in participation? However, this scheme has subsequently proved to be unpopular. Is it because banks have lost their interest as a result of the scattered customer base and the very small profits which can be reaped?

PRESIDENT (in Cantonese): Secretary for Trade and Industry.

SECRETARY FOR TRADE AND INDUSTRY (in Cantonese): Madam President, I have never heard of such a reason.

PRESIDENT (in Cantonese): Miss Christine LOH.

MISS CHRISTINE LOH (in Cantonese): Madam President, even the Secretary himself has admitted that this scheme has become unpopular largely because of its complicated application procedures, high costs and bureaucratic practices. The Government has now decided to discontinue this scheme and replace it with another loan scheme. What lessons has the Secretary learnt from the implementation of the old scheme ─ I mean, lessons which can ensure the absence of any bureaucratic practices in the new scheme, so that the parties concerned can really benefit from the funds allocated?

PRESIDENT (in Cantonese): Secretary for Trade and Industry.

SECRETARY FOR TRADE AND INDUSTRY (in Cantonese): Madam president, I have always regarded myself as a bureaucrat who is relatively not so bureaucratic. (Laughter) That is why I am sure that I will be able to learn very valuable lessons from the implementation of the old scheme. The new scheme will be very simple in structure; there will be no other vetting and approval authority apart from banks. We will make sure that the new scheme will have the simplest structure, one which can serve applicants in the most convenient and direct manner

PRESIDENT (in Cantonese): Third question. Mr Andrew CHENG.

Commencement of the Priority Railway Projects

3. MR ANDREW CHENG (in Cantonese): In an effort to stimulate Hong Kong's economy and to increase employment opportunities, the Government has proposed to speed up the implementation of infrastructural projects. However, the works on the three priority railway projects, namely the West Rail (WR), the Mass Transit Railway Tseung Kwan O Extension(TKO Extension), and the Ma On Shan/Tai Wai Rail Link (MOS Railway) together with the Kowloon-Canton Railway extension from Hung Hom to Tsim Sha Tsui(TST Extension), have yet to commence. In this regard, will the Government inform this Council:

(a) of the up-to-date position of the planning in regard to those three railway projects;

(b) whether it will allocate additional resources or streamline the planning procedure, so that the works of these projects can commence as early as possible; if so, what the details are; if not, why not; and

(c) whether it will reconsider the possibility of extending the terminus of the MOS Railway to Kowloon in 2003, and completing at the same time the WR (Phase II) cross-border passenger and freight line?

PRESIDENT (in Cantonese): Secretary for Transport.

SECRETARY FOR TRANSPORT (in Cantonese): Madam President, the Government and the two railway corporations have made good progress in implementing the three priority railway projects. Let me summarize the progress made.

First, the WR Phase I. Following the Executive Council's approval in principle for implementing the WR Phase I in December 1996, we gazetted the railway scheme for the WR Phase I in two stages in July and October 1997 under the Railways Ordinance. We received more than 200 objections and both the Government and Kowloon-Canton Railway Corporation (KCRC) have worked hard to resolve these objections. Twenty-three of these objections were withdrawn following our efforts and a total of 14 panel hearings were held in June this year in respect of the unwithdrawn objections. We plan to submit the unwithdrawn objections to the Executive Council for consideration in September. Construction is expected to commence in the fourth quarter of 1998 for completion in late 2003.

Up to now, the KCRC has completed 60% of the design for the railway scheme and awarded nine detailed design contracts totalling $1.06 billion. The KCRC is processing the tenders for the major design-build contracts, so that these contracts, costing over $6 billion, can be awarded and work started once the Chief Executive in Council authorizes the scheme.

Second, the TKO Extension. In December 1996, the Executive Council also endorsed in principle the Mass Transit Railway Corporation (MTRC)'s proposal for the TKO Extension, including the Quarry Bay Congestion Relief Works to alleviate pressure at Quarry Bay Station. The railway scheme was gazetted in phases under the Railways Ordinance in September 1997 and February 1998. There were 17 objections to the TKO Extension scheme. Only eight objections remain unwithdrawn and the scheme will also be submitted to the Chief Executive in Council for a decision in September.

Again, as the MTRC is now processing tenders for the construction contracts, construction can start immediately following formal authorization by the Chief Executive in Council. Our target completion date remains to be end of 2002.

Thirdly, the MOS Railway and TST Extension. In December 1997, the Executive Council endorsed the feasibility study on the MOS Railway and TST Extension. The Government invited the KCRC to submit a proposal to implement the projects. We have received at the end of June the KCRC's proposal on how they can implement this project.

We are now examining the KCRC's proposal and will have intensive discussions with the KCRC to agree on the details of the scheme. We intend to submit the proposal to the Executive Council for consideration in the next few months. This will be slightly in advance of our original schedule and will facilitate construction to begin in early 2000 for completion in 2004.

Madam President, what I have described in respect of the three priority projects shows very good progress in the work of taking these projects forward. Much of what we have done in recent months has gone well beyond the planning stages of these projects and is part of the implementation stages for these projects. Such rapid progress would not have been possible without our putting in the necessary resources and streamlining procedures.

The Government fully recognizes the importance of an early start on the railway projects. For this purpose, we have arranged an equity injection into the KCRC in the amount of $14.5 billion in April this year to enable it to work on the WR Phase I project. We have also allocated additional staff resources to government departments which have responsibility to help deliver the rail project. A total of 118 posts will be given to the Planning, Lands, Civil Engineering, Transport and Highways Departments to reinforce their teams working on railway planning, implementation and supervision. Internally, the Government is taking steps to ensure that the railway projects are given the highest priority in the transport planning and implementation processes, and that early attention at a high level will lead to timely decisions on all the critical stages of the implementation process. The Government has also set up a liaison network with the two railway corporations to ensure that problems encountered in the planning and implementation stages are quickly solved. All these measures will help to ensure that railway projects are implemented in the shortest possible time.

Honourable Members may recall that we started the second Railway Development Study (RDS-2) in March this year. The main aim of the Study is to map out the railway network which we need in the next two decades. One of the immediate tasks in the Study is to identify railway projects which we need to undertake following implementation of the three priority projects. Clearly the WR Phase II and a further link from the MOS Railway to the urban area will be among those projects on which the RDS-2 will focus. On the other hand, as I have explained, we must get on with the three priority projects in the quickest possible way, but this will not preclude future extensions to the projects.

Thank you, Madam President.

PRESIDENT (in Cantonese): Mr Andrew CHENG.

MR ANDREW CHENG (in Cantonese):Madam President, the East Rail (ER) is very congested during rush hours and many people even violate the bylaw and ride on a northbound train to the Lo Wu Station before returning to the urban area on the same train. If the MOS Railway only goes to the Tai Wai Station, people who live in Ma On Shan will very likely give up taking this railway and they would rather go to the University Station by bus and then switch to the Kowloon-Canton Railway. In future, the MOS Railway will incur losses as a result of this. Instead of building a railway that may incur losses but may not really help people, and turning the Tai Wai Station into a station where people will pack like sardines, will the Government immediately decide to extend the MOS Railway to urban Kowloon instead of designing a railway that is neither fish nor fowl?

PRESIDENT (in Cantonese):Secretary for Transport.

SECRETARY FOR TRANSPORT (in Cantonese): Madam President, I shall answer Mr CHENG's question in two parts. Firstly, I would like to talk about the congestion of the ER. On many occasions, I mentioned that the KCRC has a series of plans for improving the congestion along the ER, including modernizing the signalling system and improving the design of seats in compartments. Upon the scheduled completion of these improvement projects this year, the passenger capacity of the ER will increase by 30% and it should be able to relieve the congestion of the ER to a certain extent.

Secondly, as regards the MOS Railway, I said in my main answer that we will soon study the possibility of further developing Ma On Shan and Tai Wai. As proposed, the new Ma On Shan/Tai Wai Rail Link will not be the last stop of the MOS Railway and we will study what further arrangements can be made for extending the railway to Kowloon. However, we have not yet made an in-depth study into the technical problems such an extension will involve. Such a technical study if required, firstly, will take a certain period of time, and secondly, an extension will entail an investment to the tune of several billions of dollars. If we wait for the outcome of such a study and until we know more about the financial situation before we make a decision as to whether the Ma On Shan/Tai Wai Rail Link should be built as well, this will at least take one to two years. Under such circumstances, rather than waiting for the outcome of an overall study or the respective development has stabilized at a certain stage, we should implement the first phase project of the MOS Railway as this is a more practicable approach for the specific design and resource allocation have actually been covered by our plan. If everything progresses smoothly, as I said in my main answer, the construction of the railway project should commence in early 2000, slightly more than a year from now.

PRESIDENT (in Cantonese): Mrs Miriam LAU.

MRS MIRIAM LAU (in Cantonese): Madam President, as regards the WR Phase I, the Government has said in the second paragraph of its main answer that more than 200 objections will be submitted to the Executive Council for consideration in September but it has stated in that same paragraph that construction is expected to commence in the fourth quarter of 1998. When the Government gave the answer, was it implying that the objections would not be established and therefore it could specify an expected date of commencement? If any objection is established, will it affect the date of commencement of the construction of WR Phase I? More importantly, will it affect the date of completion?

PRESIDENT (in Cantonese): Secretary for Transport.

SECRETARY FOR TRANSPORT (in Cantonese): Madam President, before the commencement of any transport project, we will gazette the details. If there are objections, we will surely try our best to handle such objections in a positive manner in order to resolve the problem by administrative arrangements so that court proceedings will not be initiated and decisions need not be made by the Executive Council. Therefore, in many cases, even if objections are filed, they will be withdrawn or properly resolved before the final stage.

Undeniably, there are many objections to the WR project but many of these cases come under the same category or from the same region. Although there are more than 200 objections on the surface, there are actually only a few types of objections. It is undeniable that many cases will have to be submitted to the Executive Council for final decisions but I would not speculate on the final decisions of the Executive Council. If many objections are established, we may have to make suitable adjustment to the specific arrangements of the project will be delayed to a certain degree. At this stage, I cannot make any speculation. Nevertheless, before putting the cases to the Executive Council for final decisions, we will make our last efforts to give explanations and handle the cases in order to induce the people who filed those objections to withdraw them, or to properly resolve these objections.

PRESIDENT (in Cantonese): Mr Albert HO.

MR ALBERT HO (in Cantonese): Madam President, a recent press report states that the KCRC hopes that the Government can make a 100% equity injection into the construction of the MOS Railway, and give the KCRC concessions on the premium to be paid for the Tsim Sha Tsui Station and Tai Wai Station. If the Government has still not worked out specific policies for handling these problems, will it affect the progress of the construction of the MOS Railway?

PRESIDENT (in Cantonese): Secretary for Transport.

SECRETARY FOR TRANSPORT (in Cantonese): Madam President, we have just received a specific proposal from the KCRC for the construction of the MOS Railway. I said in my main answer that we will thoroughly discuss with the KCRC about the particulars of its proposal. I am sure that we will ultimately be able to make mutually acceptable arrangements on the basis of the specific proposal of the KCRC and the original proposal of the Government before submitting them to the Executive Council for decision. I am confident that we can complete the Ma On Shan/Tai Wai Rail Link as scheduled and according to our plan.

PRESIDENT (in Cantonese): Mr LAU Kong-wah.

MR LAU KONG-WAH (in Cantonese): Madam President, I still worry that the MOS Railway will be a dead-end railway that is not cost effective. In fact, the Government has planned for the East Kowloon rail line long ago and the MTRC has prepared a report on this subject. Will the Secretary consider advancing the construction of the East Kowloon rail line that will link up with the MOS Railway for the convenience of people living in Sha Tin, Ma On Shan, To Kwa Wan and Hung Hom?

PRESIDENT (in Cantonese): Secretary for Transport.

SECRETARY FOR TRANSPORT (in Cantonese): Madam President, it appears that the question can be answered in two parts. Firstly, we have to specifically study the possibility of linking up Ma On Shan and urban Kowloon in future and whether the Ma On Shan/Tai Wai Rail Link should be extended southwards or westwards. However, we have more than one proposals. Extending southwards to Diamond Hill and East Kowloon is not the only alignment with urban Kowloon and we can also develop the rail line westwards. This is actually the scope of our technical study and we have to study whether we can better meet actual needs by developing westwards or southwards and which direction of development is more practical as far as technology, feasibility and costs are concerned. It is impossible for us to make a rash proposal and decision at this stage.

As regards the East Kowloon rail line, after we have completed the three priority railway projects, we will certainly place the East Kowloon rail line among the next batch of priority railway projects. After the removal of the airport, we will actively pace up the development of East Kowloon, and a suitable transport network including a railway network is an essential infrastructural project.

PRESIDENT (in Cantonese): Mr Ambrose CHEUNG.

MR AMBROSE CHEUNG (in Cantonese): Madam President, I would like to follow up about the WR. According to the Secretary's answer the consultation regarding the WR and tender for the major contracts have apparently been made at the same time. Will the Secretary inform this Council, in respect of the three proposals for the Mei Foo Station of the WR, namely, the proposals regarding the raised platform, underground construction and location to the east of the bus depot, have the major contracts of this station been included in the major contracts mentioned in the Secretary's answer and put out to tender? If the Executive Council makes a decision on the proposals regarding low platform or location to the east of the bus depot in September, will the Secretary inform this Council of the current progress of the tender procedure? As regards the tender and consultation arrangements, are the consultations genuine or half-hearted ones in form only?

PRESIDENT (in Cantonese): Secretary for Transport.

SECRETARY FOR TRANSPORT (in Cantonese): The answer is in the negative. Any tender invited by the KCRC for the preparatory works for the WR Phase I does not include works within the proposed scope of construction against which objections have been filed. There are obviously no objections to the existing tender within the specified scope. As the deadline for objection has passed, tender has been made for the preparatory works such as the early stage works that can be carried out for there are no objections to the resumption of land, as for other works that have been objected to, we will certainly wait until a decision has been made by the Executive Council before taking forward the works.

PRESIDENT (in Cantonese): Miss Emily LAU.

MISS EMILY LAU (in Cantonese): Madam President, I would like to follow up the supplementary question asked by Mr Ambrose CHEUNG as some residents in Mei Foo Sun Chuen told me last evening that although they had been quibbling over the issue with the Government for more than two years, they were still very dissatisfied as they had a feeling that the Government had not listened to their views and that the plan would affect the daily lives of some 6 million residents of Mei Foo Sun Chuen. Will the Secretary consider moving the station away from the Lai Chi Kok Park to a place further south near the bus depot of the Kowloon Motor Bus (KMB) as they requested for they think that this will be conducive to future development? I hope that the Secretary will give these residents a detailed explanation as to why the well-being of some 6 million people has been overlooked.

PRESIDENT (in Cantonese): Secretary for Transport.

SECRETARY FOR TRANSPORT (in Cantonese): Madam President, I am very much concerned with the impact of the railway works on residents and we hope that we can actively cater for their interests while looking after the demands made by other people for pacing up the progress of the works. We are studying how we can effect a compromise between the two. In respect of the Mei Foo Station proposal, I am happy to provide Miss LAU with information on and records showing how the Government and the KCRC explained, studied and explored new proposals in the past two years for her reference. In the past two years, the KCRC had maintained continuous liaison with those who filed objections in respect of the actual design needs and technical arrangements of the Mei Foo Station and it held meetings, printed leaflets, published a few issues of the West Rail Newsletter and exchanged letters with those who objected. According to the Transport Bureau, meetings had also been held. I mentioned panel hearings in my main answer, and these hearings included meetings at which explanations were given to the residents of Mei Foo concerning the proposals for raised platform, low platform and the bus depot of the KMB. Certainly, we cannot meet the demand of every person who has filed an objection and there are actually some technical and geographical limitations. For instance, concerning building raised platforms or low platforms, low platforms can be built by demolishing the flyover in Mei Foo, but what will the traffic conditions become after the flyover has been demolished? How are we going to solve the traffic problems during those years when construction is in progress? These are the technical and resource difficulties we have. However, we must look after the interests of residents and we will try our best to come up with a proposal that will have minimal impact. Nevertheless, some people may still be disappointed at the end.

PRESIDENT (in Cantonese): Fourth question. Mr Kenneth TING.

Terminal Handling Charges

4. MR KENNETH TING (in Cantonese): As many business and industrial organizations point out that the handling charges at Hong Kong's container terminals are very high and have seriously affected the development of business and industries in the territory, will the Government inform this Council:

(a) of the system in place to monitor the terminal handling charges (THC) levied by shipping companies to ensure that the charges are set at a level that is both reasonable and acceptable to the shippers;

(b) whether comparisons have been made between Hong Kong and other major foreign ports in respect of THC rates; if so, what the findings are; if not, whether it will make such comparisons expeditiously and announce the findings to the industry;

(c) whether there is any plan to set up a mechanism whereby shipping companies are required to consult shippers organizations and explain the reasons to them before revising THC, so as to enhance the transparency of the mechanism for determining such charges; and

(d) of the plans to open up Hong Kong's container terminal industry with a view to introducing competition and minimizing monopoly in the industry?

PRESIDENT (in Cantonese): Secretary for Economic Services.

SECRETARY FOR ECONOMIC SERVICES (in Cantonese): Madam President, I would like to respond as follows:

(a) Apart from a small number of shipping companies who operate independently, the THC levied by the majority of shipping companies are firstly proposed by liner conferences or organizations formed by shipping companies on the basis of the charges actually paid by the shipping companies to the container terminals, and, based on such proposals, finally decided by individual shipping companies after discussions with their own clients, that is, the shippers. Hence, the THC levied by shipping companies are basically determined by the charges actually levied by the container terminal companies and by supply and demand of the market.

(b) Since the THC levied by shipping companies are set by shipping companies concerned and their shippers, involving commercial information which the shipping companies are unwilling to divulge, such as the actual charges levied by the various container terminals, how the discounts are calculated and the pricing strategies of the shipping companies, we do not have the detailed information on THC rates in respect of all the shipping companies. However, as far as we know, concerning the average charges at market rate, the THC levied by the shipping companies in Hong Kong is 25% to 60% higher than that in other major ports in the region (such as Singapore, Taiwan and Shenzhen). That the rates levied by the Hong Kong container terminals are higher compared with other ports, apart from the factor of supply and demand of the market, is due mainly to the reason that the Hong Kong container terminals are built and operated entirely by private enterprise without any participation or subsidy, direct or indirect, from the Government. Hence, charges levied by the container terminals, it can be said, just reflect the actual costs of commercial operations.

(c) We understand the THC has an important bearing on the costs of shippers as well as importers and exporters. In accordance with the principle of minimum intervention of the market, we are holding discussions with the representatives of liner conferences to request the liner conferences, when revising THC, to consult shippers' organizations, and explain the reasons to them so as to enhance the transparency of the mechanism and set the charges at a level that is both fair and reasonable.

(d) The Kwai Chung Container Terminal is at present run by four operators. Hence, there is no question of any operator monopolizing the market. In addition to the existing eight terminals, we will be building Container Terminal 9 (CT9) later this year. When the new terminal comes into operation, not only will the handling capacity of Hong Kong container terminals be increased, it will also introduce a new operator to increase competition on the market. We will continue the monitoring of the operations of the market and the charges levied by the container terminals. We will, through the provision of new terminal facilities and bringing in more competition, encourage the operators to enhance their efficiency and lower the charges.

Thank you, Madam President.

PRESIDENT (in Cantonese): Mr Kenneth TING.

Mr Kenneth TING (in Cantonese): Madam President, the original idea of the THC was that the shipping companies would collect on behalf of the container terminals the charges for handling the containers, but now the container terminals have agreed to the shipping companies' practice to overcharge the shippers at rates that are higher than the actual costs of operations. It seems that the "price cheating" practice is employed to cover the continuous reductions in shipping charges. Could the Secretary inform this Council whether the said situation has happened before; and if so, of the measures the Government has in place to deal with this unfair practice? In regard to the "price cheating" practice employed by the shipping companies, could the Secretary inform this Council of the time required to resolve the problem?

PRESIDENT (in Cantonese): Secretary for Economic Services.

Secretary for Economic Services (in Cantonese): Thank you, Madam President. I believe the Honourable Kenneth TING understands very clearly that the original idea of the THC levied by the shipping companies was that "the shipping companies would recover the actual charges they had paid to the container terminals for the shippers". However, as far as I understand it, when the shipping companies began to collect the THC in 1990, they had set the THC rates at around 50% of the actual handling charges levied by the container terminals so as not to overburden the shippers. The shipping companies have explained that the increases in THC rates over the past few years reflected not only the increased costs of operations but also the outstanding handling charges that the shipping companies had paid in the past.

As I have referred to in my main reply, it is also our hope that the transparency of the mechanism could be enhanced while more consultation and discussions could be conducted. I think Mr TING also understands that very well. As a matter of fact, the Port Development Board (PDB) has in the past made arrangements with the parties concerned such as the shippers, the operators of the container terminals, the shipping companies and so on to look into the matter. The Intra-Asia Discussion Agreement (IADA) has initially agreed that there should be more consultation and discussions. Since members of the IADA are currently having a meeting in Singapore, I hope that arrangements could be made with the IADA and the Shippers Association in the next few weeks to discuss the possible ways to promote communication, enhance consultation, as well as improve the transparency of the mechanism.

PRESIDENT (in Cantonese): Mr HUI Cheung-ching.

Mr HUI Cheung-ching (in Cantonese): Madam President, I learn from paragraph (b) of the main reply that the charges levied by the container terminals are commercially decided, and that the Government has no participation direct or indirect. However, is the Government aware that the rates charged by the terminals at the Huangpu Port nearby and the Yantian Port in Shenzhen are comparatively lower than those in Hong Kong, and that both the scheduled liner frequency and the quality of services provided by these terminals are improving gradually? Has the Government made any efforts to help the container terminals to lower the THC rates, and thereby prevent the industry from losing its container transshipment business gradually?

PRESIDENT (in Cantonese): Secretary for Economic Services.

Secretary for Economic Services (in Cantonese): Madam President, we have of course been keeping an eye closely on the competitiveness of the container terminals in Hong Kong. As pointed out by the Honourable HUI Cheung-ching just now, the charges levied by the Yantian Port and Shekou Port are comparatively lower than those in Hong Kong. Nevertheless, in selecting the container terminals, apart from charges such as the THC, transportation costs and so on, clients will also take into consideration other factors such as the cost of land transportation; the cost of marine transportation and the efficiency, security as well as customs clearance procedures; and most importantly, the scheduled liner frequency. Take Hong Kong as an example, the scheduled frequency is 400 liners per week. Our competitive edge is certainly sharper in this respect, but we do agree that every effort should be made to ensure that our container terminals could maintain this edge. We hold discussions with the operators of the terminals from time to time to consider the possibility of allocating at the vicinity of the terminals more lands that are suitable for long-term development as backup areas, with a view to enhancing the handling capacity and operational efficiency of the terminals, encouranging competition, as well as lowering the charge rates.

In regard to the competitiveness of the terminals as a whole, the Government has been strengthening its communication and co-ordination with the mainland customs authorities and other relevant authorities, to discuss the measures to alleviate the congestion at control points, and to encourage the use of river freight transport to help reduce the costs involved in forwarding the containers from the Pearl River Delta to Hong Kong, thereby enhancing our competitiveness as a container port.

PRESIDENT (in Cantonese): Mr NG Leung-sing.

MR NG LEUNG-SING (in Cantonese): Thank you, Madam President. The Secretary has mentioned in paragraph (b) of his main reply that the THC levied in Hong Kong is 25% to 60% higher than those in other neighbouring ports. Could the Secretary inform this Council whether the higher rates serve to reflect certain strong points of our container terminals, such as being far more efficient than our neighbouring competitors? Could the Secretary illustrate with some examples that the charges levied are at reasonable rates?

PRESIDENT (in Cantonese): Secretary for Economic Services.

Secretary for Economic Services (in Cantonese): Madam President, the THC are commercial charges. They are agreed upon by the parties concerned, that is, the shippers and the shipping companies. The rates are determined solely by supply and demand of the market without any government participation. As I have made clear in my main reply, the major reason why the THC rates levied by container terminals in Hong Kong are higher than those in neighbouring ports is that container terminals in Hong Kong are built and operated entirely by private enterprises. Being business charges, the THC rates certainly have to reflect both the premium paid for the land and the costs of commercial operations. Since there is no direct or indirect subsidy from the Government, the operators will of course try to recover their costs of operations at rates they regard as reasonable. In my reply to a supplementary raised by Mr HUI Cheung-ching just now, I have pointed out that the Government would also like to maintain the competitiveness of the container terminals in Hong Kong; and since I have already referred to a series of measures that could help the industry enhance efficiency and lower the charge rates, I do not wish to repeat them now. Thank you, Madam President.

PRESIDENT (in Cantonese): Mr HO Sai-chu.

Mr HO Sai-chu (in Cantonese): Madam President, could the Secretary inform this Council whether the Government knows that the terminals in other parts of the world have employed any mechanisms to deal with rate increases; and whether the Government would take into consideration the practices adopted by them?

PRESIDENT (in Cantonese): Secretary for Economic Services.

Secretary for Economic Services (in Cantonese): Madam President, in fact we have been discussing the issue with the Shippers Association from time to time. THC are not levied in Hong Kong alone, they are levied by container terminals all over the world. In regard to the issue of whether there is any legislation governing THC rates, as far as our research result reveals, Australia does have legislation requiring the operators concerned to consult the shippers before raising the THC rates. However, the requirement is applicable to export shippers only, and no control of any kind has so far been introduced to imports. Another country which has legal requirement similar to that of Australia is Korea. Yet the corresponding legislation in Korea does not have any penalty provision, and is it not binding on foreign shipping companies. As for the rest of the world, no country has any laws in this respect, albeit Thailand is now giving thoughts to legislative control.

So, these two are the only countries in the world that have enacted laws in that respect; though none of these laws could take any effective at all. I am sure Honourable Members could understand very well that if legislative means had to be employed to put THC rates under control, a lot of problems would certainly be created.

PRESIDENT (in Cantonese): Mr Fred LI.

Mr Fred LI (in Cantonese): Madam President, since the freight capacity of Hong Kong Air Cargo Terminals Limited accounts for 80% of the total freight volume, our air freight service is thus a shambles. At present, there are four container terminal operators in Hong Kong; yet as 60% of the berthing facilities are in the hands of two operators, an oligopolistic market situation has therefore emerged. Could the Government inform this Council whether the 25% to 60% rate differentials are resulted from the oligopolized market; and whether such oligopoly would weaken the competitive edge Hong Kong has over competing terminals in neighbouring areas?

PRESIDENT (in Cantonese): Secretary for Economic Services.

Secretary for Economic Services (in Cantonese): Madam President, as I have referred to in my reply just now, the Kwai Chung Container Terminal is at present run by four operators. As regards the THC rates, I think Honourable Members could see very clearly there has not been any major increase lately. Besides, I have also mentioned in the main reply that we welcome more competition. Let me exemplify with CT9. We hope that when the construction of CT9 commences at the end of the year, apart from the existing four operators, a number of new operators will be introduced to run the new terminal. We will likewise take into consideration the need to bring in more competition when formulating plans for Container Terminal 10 or other container terminals.

MR FRED LI (in Cantonese): My question is on the oligopolistic market situation resulted from the fact that 60% of the berthing facilities are in the hands of two of the four existing operators. I would like the Secretary to respond in that respect, as he claims that there is no question of any operator monopolizing the market.

PRESIDENT (in Cantonese): The Secretary has already answered your supplementary. As the Secretary believes that there is no question of oligopoly while you believe otherwise, it is obvious that both of you are holding different views, but that has nothing to do with the main question. Mrs Sophie LEUNG.

MRS SOPHIE LEUNG (in Cantonese): Madam President, while many industrial and commercial enterprises regard the THC levied in Hong Kong are the highest among the ports worldwide, the Secretary has also pointed out just now that the THC levied in Hong Kong are 25% to 60% higher than those in other major ports in the region such as Singapore, Taiwan and Shenzhen. In transshipping the containers to other countries, the manufacturers are in fact required to pay not only the THC but also miscellaneous charges and documentation fees. Could the Secretary inform this Council whether the Government has made any assessment regarding the impact imposed on businesses and industries by the container transport industry through the various fees and charges?

PRESIDENT (in Cantonese): Secretary for Economic Services.

Secretary for Economic Services (in Cantonese): Madam President, the THC in fact constitute a very small part of the charges involved in container transportation or the cost of production of the goods concerned. On average, the various costs of transportation and THC together would account for about 1% of the value of the goods concerned; as such, it is not easy to assess the impact the THC rates have on the economy or the volume of trade. We do not have at present any such data, but our economists will conduct research in that respect. Just now the Honourable Member has also referred to other charges such as miscellaneous charges, documentation fees and so on. In fact, when we consider the issue of THC rates, we should look at the cost of transportation as a whole. I am sure Members are well aware that, after deducting the adjustment for inflation, the cost of transportation as a whole has in fact been on the decrease over the past 10 years. Nevertheless, we will certainly look into the question raised by the Honourable Member just now.

PRESIDENT (in Cantonese): There are still many Members who are interested in this question and wish to raise supplementaries. I suggest Members should follow up the issue at the relevant panel meetings.

PRESIDENT (in Cantonese): Fifth question. Miss Emily LAU.

Differential Rates Charged by Bars and Clubs

5. MISS EMILY LAU (in Cantonese): It is reported that the operators of some bars and clubs had charged non-white customers at higher rates. The Secretary for Home Affairs said that a letter would be sent to the operators concerned explaining to them the Government's anti-discrimination policy and drawing their attention to the contents of the Code of Practice Against Discrimination in Employment on the Ground of Race. In this connection, will the Executive Authorities inform this Council:

(a) whether and when the Secretary for Home Affairs has sent the letter;

(b) of the names and addresses of the bars and clubs concerned;

(c) how the Code of Practice applies to such cases; and

(d) whether these operators are still charging their customers at differential rates?

PRESIDENT (in Cantonese): Secretary for Home Affairs.

SECRETARY FOR HOME AFFAIRS (in Cantonese): Madam President, I would like to thank the Honourable Miss Emily LAU very much for raising this question. My reply is as follows:

(a) When we read about the incident reported in the press last month, we decided that the best way to address this issue was to write to the 500 bars and clubs known to cater to a relatively cosmopolitan clientele, explaining the Government's opposition to racial discrimination and encouraging them to join us in our efforts to eliminate discriminatory practices and attitudes. Because of the time required to obtain the names and addresses of these establishments, we only managed to issue the letters on 8 July. We also sent as enclosures copies of our leaflet: Equal Opportunities: Race and the Code of Practice Against Discrimination in Employment on the Ground of Race and invited owners and managers to draw them to the attention of their staff and customers.

(b) As the list of names and addresses is a long one, I do not think it is appropriate to go through it now. I shall, however, be pleased to provide a copy to any Member who wishes to see it.

(c) We believe that public education and persuasion represent the best and most suitable approach to address this issue. In addition to the leaflet and the Code of Practice which I have just mentioned, other education/promotional activities which we have conducted recently include TV APIs (announcements of public interest), TV variety show, drawing competition/exhibition, as well as launching a modest funding scheme ($2.5 million) to sponsor community projects aimed at promoting equal opportunities and support for the needs of minority groups.

Our decision that continuous efforts in civic education and self regulation are preferable to coercion in the promotion of racial equality also took into account the public consultation held early last year which clearly indicated that legislation in this area would not enjoy a significant level of public acceptance or support. On the other hand, we trust that the various educational initiatives which I have just mentioned will gradually and progressively foster a culture of racial equality within our community.

(d) We have not received further reports or complaints of this kind.

Thank you, Madam President.

PRESIDENT (in Cantonese): Miss Emily LAU.

MISS EMILY LAU (in Cantonese): Madam President, I believe the Hong Kong Government is the only one of its kind in the whole world which believes that the mere sending of a few hundred letters will be sufficient to deal with the problem of racial discrimination. Madam President, I think the Secretary has not answered part (c) of my question, that is, why documents such as the Code of Practice Against Discrimination in Employment were sent to the operators concerned? I would like the Secretary to tell me why this was done because the charging of differential rates to non-white customers has nothing to do with this Code of Practice. I wish to follow up part (d) of my question. I wish to ask the Secretary whether he knows such things still exist but the reply he gave was no complaints had been received. If this is really the response from the Government, then I think this is a very passive attitude to take. All along the Government has never looked into this matter and even when it was informed of the situation, only a few letters were sent, thinking that the matter would hence be settled. Unless the Government thinks that this kind of things can be tolerated, it should at least go there and have a look. If this kind of things cannot be tolerated in Hong Kong, then may I ask the Secretary, why an investigation is not made into the bars?

PRESIDENT (in Cantonese): Secretary, actually, Miss LAU has raised a follow-up question and a supplementary question. The follow-up question is: What is the relationship of the Code of Practice Against Discrimination in Employment to the charging of higher fees to non-white customers? This is a follow-up question. Her supplementary question is: Will the Government take the initiative to look into the matter? Secretary?

SECRETARY FOR HOME AFFAIRS (in Cantonese): Madam President, first I wish to explain why the Code of Practice does have direct bearing on the matter mentioned by Miss LAU. Racial discrimination may come in different forms. It may be in words or action, like the event which Miss LAU mentioned. Now there are a few bars which reportedly charge customers of certain races a higher fee, and the differential fee does not apply to some other people. This is of course racial discrimination and it is something we do not approve of. But in the many forms of racial discrimination, we think the employment issue is more important. There are people of different races living and working here in Hong Kong. Employment relations affect their lives and families, and such relations are more important for society. It is a proper thing for us to urge the people concerned to pay attention to racial discrimination in this respect. Although the Code of Practice is on employment matters, it also clearly conveys the message of equal opportunities, and that one should not discriminate against people of other races. So I think it is relevant. Besides, I have clearly stated in my reply that apart from this leaflet, we also have other follow-up measures. These include TV API, civic education activities, and public education work done by non-governmental organizations at the district level. We have a variety of public education work. As for our sending out a few hundred letters, the addressees of these letters are bar operators who serve an international clientele. It is a proper thing to do when we send letters to bar operators and explain to them since the root of the problem lies in the bars.

MISS EMILY LAU (in Cantonese): Would the Secretary please answer the other question raised by me?

PRESIDENT (in Cantonese): Secretary, Miss LAU's supplementary question is: Will the Government take the initiative to follow up the matter?

SECRETARY FOR HOME AFFAIRS (in Cantonese): There are 18 offices under the Home Affairs Department and we have direct links with the residents. We have reported on this matter in the meetings and I myself have talked to the Director on this. We agreed that the matter should be followed up. I have not asked people to pretend to be foreigners and go to these bars or to ask people of certain nationalities to go to every bar to carry out follow-up work. Thank you, Madam President.

PRESIDENT (in Cantonese): Miss Christine LOH.

MISS CHRISTINE LOH (in Cantonese): Madam President, I was between tears and laughter when I heard the Secretary making his reply. If these measures are used to deal with the problem of racial discrimination, I think they are far from being adequate. Madam President, I wish to seek clarification. In part(b) of his reply, the Secretary states that the list of the names and addresses of these bars and clubs is a long one, but he said just now that only a few of them had this problem. I would like the Secretary to make a clarification on this point. My question is on part (c) of the reply in which the Secretary mentioned a consultation exercise was conducted last year and most of the people consulted did not think there was any need to legislate on racial discrimination. I would like to ask the Secretary, if the survey was on the majority, would he consider conducting another survey on the minorities since they are the ones who are being discriminated against?

PRESIDENT (in Cantonese): Miss LOH wanted the Secretary to clarify on the number of letters sent. In part (a) of his main reply, the Secretary has clearly stated that there were 500 such letters and so the list of addresses was very long.

MISS CHRISTINE LOH (in Cantonese): Just now in replying to the second question raised by Miss Emily LAU, the Secretary said that the number of these bars was three or four. I have no idea as to the actual number of these bars having a problem of racial discrimination.

PRESIDENT (in Cantonese): As we have spent a lot of time on this question, so I hope that the Secretary can give as brief a reply as possible and Members can be as brief as possible when raising questions.

SECRETARY FOR HOME AFFAIRS (in Cantonese): Madam President, racial discrimination was reportedly found in three or four bars. We have sent letters to 500 bars and clubs because some of their customers are foreigners. So these are two separate things. I have with me a list of these 500 bars and clubs, if Miss LOH is interested, I can give her a copy. Is there another question?

PRESIDENT (in Cantonese): Miss LOH would like to know if the Secretary would carry out another survey.

MISS CHRISTINE LOH (in Cantonese): I wish to raise the question once again. The Secretary said that the findings of the survey showed that the majority of the people did not think there was any need to legislate. If the interviewees are not those who have to face the problem of racial discrimination, obviously, they would not feel the need for legislation. So I would like to ask the Secretary whether he would plan to carry out another survey to interview the minority of people who really face racial discrimination and ask them if there is any need to legislate and what problems they face.

PRESIDENT (in Cantonese): Secretary for Home Affairs.

SECRETARY FOR HOME AFFAIRS (in Cantonese): Madam President, I am not going to carry out this survey, because if we plan to legislate, we must have the support of the majority of the people of Hong Kong. Thank you, Madam President.

PRESIDENT (in Cantonese): Miss Cyd HO.

MISS CYD HO (in Cantonese): Madam President, I think the Secretary does not quite understand the concept of human rights. Human rights are meant to protect the minority, but the Secretary said that the 6 million people will all have to be consulted and their support secured before we can introduce any legislation. My question is: Given that this case of discrimination happened despite on-going efforts of persuasion and education, what effective measures the Government has in place to prevent this kind of discriminatory acts from recurring in future in view of its insistence not to legislate? If there are no effective measures, why then is the Government not willing to legislate?

PRESIDENT (in Cantonese): Secretary for Home Affairs.

SECRETARY FOR HOME AFFAIRS (in Cantonese): Madam President, even if there is legislation, the problem of racial discrimination will not necessarily disappear. Let us look at many countries in the world, and I think Miss LAU herself has been to many advanced countries, and will certainly notice that the problem of racial discrimination still exists even with anti-discrimination legislation in place. Are the legislators of these countries not making racist remarks in public all the same? We do have laws and we are not refusing to make legislation on this. We have the Bill of Rights Ordinance which prohibits government and public bodies from taking any racially discriminatory measures. We certainly have laws addressing racial discrimination. As for education, it would be a long-term measure and we shall continue with it. But judging from the present situation, racial discrimination is not such a serious problem in Hong Kong, so we think that education is the most suitable method to deal with racial discrimination. Thank you, Madam President.

PRESIDENT (in Cantonese): Many Honourable Members are very interested in this problem, but since we have already spent more than 16 minutes on this question, I suggest Members may wish to follow up the issue in the relevant panels. The sixth question. Mr LEE Wing-tat.

Chief Executive's Question-and-Answer Sessions

6. MR LEE WING-TAT (in Cantonese): Will the Government inform this Council whether the Chief Executive:

(a) will, according to the Rules of Procedure of the Legislative Council, attend meetings of the Council during this Legislative Session to answer questions put to him by Members on the work of the Government; if so, what the details are;

(b) plans to address the Council and answer questions from Members after each trip to Beijing to report on his work;

(c) plans to hold question-and-answer sessions in various districts of Hong Kong after delivering his policy address this year, so as to solicit views directly from the public; and

(d) plans other arrangements to explain the work of the Government directly to the Council and the public; if so, what the details are; if not, why not?

PRESIDENT (in Cantonese): Chief Secretary for Administration.

CHIEF SECRETARY FOR ADMINISTRATION (in Cantonese): Madam President,

(a) The Chief Executive will attend meetings of the Legislative Council to address the Council or answer questions put to him by Members on the work of the Government when he considers it appropriate. Tentatively, he proposes to do so in October for his policy address, in February before the Budget and in June. The Chief Executive will also keep in touch with Members through various other channels, including meetings with Legislative Council Members and political parties from time to time.

(b) Unless he sees a special need to do so, the Chief Executive has no plans at present to address the Council and answer Members' questions after each trip to Beijing.

(c) The publicity programme for the 1998 policy address is not yet finalized. The Chief Executive would wish to consider all avenues of soliciting public opinion including district question-and-answer sessions before taking a final decision.

(d) In addition to attending meetings of the Legislative Council and addressing the public after each policy address, the Chief Executive will also have various other opportunities to reach out to different sectors of the community. These include press sessions, radio or television programmes and regular visits to districts, organizations and service units.

PRESIDENT (in Cantonese): Mr LEE Wing-tat.

MR LEE WING-TAT (in Cantonese): Madam President, after the fiasco of the new airport, will the Chief Executive consider coming to this Council and answer questions from Members so as to give the public an account of the great confusion of the new airport? If the Chief Executive indicates that he does not have the time or he is unwilling to come, will it give the public an impression that the Chief Executive has plenty of time for cocktail parties, book exhibitions, painting exhibitions and photographic exhibitions of big shots from Beijing but not the time to attend the Legislative Council meetings to answer the questions of the public?

PRESIDENT (in Cantonese): Chief Secretary for Administration.

CHIEF SECRETARY FOR ADMINISTRATION (in Cantonese): Madam President, I believe it is not true that the Chief Executive does not have time to attend Legislative Council meetings and answer Members' questions. In respect of the new airport, we all know that the Chief Executive commissioned an inquiry commission yesterday to investigate the causes of the trouble and who is to be held accountable. I think that it is best to wait for the commission report before making any decision. Of course, I will gladly convey Mr LEE's opinion to the Chief Executive.

PRESIDENT (in Cantonese): Mr James TO.

MR JAMES TO (in Cantonese): Madam President, in her main reply, the Chief Secretary for Administration has mentioned that unless he sees a special need to do so, the Chief Executive has no plans to address the Council and answer Members' questions after each trip to Beijing. I would like to ask the Chief Secretary for Administration under what circumstances the Government or the Chief Executive would consider that there are special needs. What are the criteria for their consideration; or the decision is made at will? If the Legislative Council requests the Chief Executive to attend its meeting after his trip to Beijing or other important visits abroad, would that be a criterion for his consideration?

PRESIDENT (in Cantonese): Chief Secretary for Administration.

CHIEF SECRETARY FOR ADMINISTRATION (in Cantonese): Madam President, I have already pointed out very clearly in my main reply that the Chief Executive has no plans to address the Council after each trip to Beijing and he says that it will have to depend on the need. Of course, the Chief Executive will attend Legislative Council meetings three times each year and Members may take these opportunities to ask the Chief Executive about his visits to Beijing.

PRESIDENT (in Cantonese): Dr LEONG Che-hung.

DR LEONG CHE-HUNG (in Cantonese): Madam President, I do not know whether my question strays away from the subject. During the two Legislative Sessions from 1995 to 1997, not only the Governor then attended the Question and Answer sessions, but the Chief Secretary then, that is the Chief Secretary for Administration now, also attended to explain her work. Will the Chief Secretary for Administration do the same in this Legislative Session; if not, why not?

PRESIDENT (In Cantonese): The Chief Secretary for Administration is not obliged to answer this supplementary question, but if she is willing, she may.

CHIEF SECRETARY FOR ADMINISTRATION (in Cantonese): Madam President, I am willing to answer. First of all, I would like to say that other Policy Secretaries and I do attend Legislative Council meetings on a regular basis. Legislative Council Members may raise questions about the work of the Government in Legislative Council meetings and meetings of the various panels and my colleagues and I are very happy to answer them. I will also consider attending special briefing sessions to answer Members' questions when necessary.

PRESIDENT (in Cantonese): Dr YEUNG Sum.

DR YEUNG SUM (in Cantonese): Madam President, according to part (a) of the main reply, it seems that the Government's preliminary plan at present is to have three "routine appearances" each year only, that is, to attend the Legislative Council meetings in October for the policy address, in February after the Budget announcement and in June. It has also been mentioned in the main reply that the Chief Executive will keep in touch with political parties but such contact with political parties is after all different from attending the Legislative Council meetings where the questions and answers are open to the public. Will the Government consider having more of these "routine appearances", that is, other than the three mentioned above, so that the Chief Executive will also attend one Legislative Council meeting every two months?

PRESIDENT (in Cantonese): Chief Secretary for Administration.

CHIEF SECRETARY FOR ADMINISTRATION (in Cantonese): Madam President, I will convey Dr YEUNG's view to the Chief Executive. However, I wish to point out that other than attending the Legislative Council meetings in person, the Chief Executive may also arrange special meetings with Members, or they may even exchange ideas by correspondence.

PRESIDENT (in Cantonese): Mr Andrew WONG.

MR ANDREW WONG (in Cantonese): Madam President, I do not know whether this question will stray from the main question either. We have to understand that the answer of the Chief Secretary for Administration was very simple. According to Rule 8 of the Rules of Procedure, the Chief Executive may decide at his discretion whether to attend Legislative Council meetings or meetings of any committees or subcommittees of the Legislative Council. He has the absolute right to do so. He sets the number of attendance to three but we hope and request that he will attend more often. Nevertheless, the thrust of the original question is that though the Chief Executive may not be part of the Government or part of the Administration — I wonder how Members interpret Chapter 4 of the Basic Law — at least he is the leader of the Government, that is, this is his government. The Chief Secretary for Administration has answered Mr LEE Wing-tat's supplementary question on the new airport so I would also like to talk about the new airport. The Chief Secretary for Administration once told the public, she was not addressing this Council at that time, that the Government was to set up an independent inquiry commission to be chaired by a social celebrity with two other experts as members. But later the Chief Executive, not addressing this Council either, announced that the inquiry commission which he commissioned consisted of the chairman, Mr Justice WOO Kwok-hing, and a celebrity in society. Does this imply that the Chief Secretary for Administration is not in a position to answer questions on behalf of the Chief Executive?

PRESIDENT (in Cantonese): I think that this supplementary question is hardly related to the main question and so I would direct that the Chief Secretary for Administration needs not answer it. Mr LEE Cheuk-yan.

MR LEE CHEUK-YAN (in Cantonese): Madam President, I also wish to follow up on the issue of the three "routine appearances" each year. If there are only three "routine appearances" in one year, does the Government agree that the relation between the Chief Executive and the Legislative Council will become wider apart and his relation with the people will also be very wide apart for the representatives of the people have little chance to question the Chief Executive? Will this make it hard for the Chief Executive to improve his relationship with the people?

PRESIDENT (in Cantonese): Chief Secretary for Administration.

CHIEF SECRETARY FOR ADMINISTRATION (in Cantonese): Madam President, I have already made it very clear in my reply to the main question and supplementary questions that the Chief Executive's attendance at the Legislative Council meetings is merely one of the ways to build up his relation with Legislative Council Members. I have mentioned that there are many other channels through which the Chief Executive may strengthen his communication with Members and also opportunities for them to exchange ideas.

PRESIDENT (in Cantonese): Mr LEE Cheuk-yan.

MR LEE CHEUK-YAN (in Cantonese): Madam President, my question is mainly on the relationship between the Chief Executive and the public. Legislative Council meetings are open to the public and we raise questions on behalf of the people; hence I am not simply directing at the relationship between the Chief Executive and Members. Will the Chief Executive consider attending Legislative Council meetings more often so as to improve his relationship with the people?

PRESIDENT (in Cantonese): Chief Secretary for Administration.

CHIEF SECRETARY FOR ADMINISTRATION (in Cantonese): Madam President, I have explicitly stated in my main reply that other than attending Legislative Council meetings in person, the Chief Executive also has many other channels to solicit public opinions, including paying visits to different districts and service units, and also visiting organizations which organize activities or have service units. All this offers him plenty of opportunities to widely solicit people's views.

PRESIDENT (in Cantonese): Miss Margaret NG.

MISS MARGARET NG: I would like to ask the Chief Secretary for Administration that on the understanding that there are other channels for the Chief Executive to account to the people, why does he prefer to do so through this Legislative Council only three times a year?

PRESIDENT (in Cantonese): Chief Secretary for Administration.

CHIEF SECRETARY FOR ADMINISTRATION: It is indicated both in my main reply and my answer to the supplementary questions that the Chief Executive prefers to use a variety of channels not only to maintain contact with Members of this Legislative Council, but also to communicate and to receive views from the public, and from as wide an avenue as possible.

PRESIDENT (in Cantonese): Mr Andrew WONG.

MR ANDREW WONG (in Cantonese): Madam President, I would like to put my earlier question in another way, that is, ......

PRESIDENT (in Cantonese): You may rephrase your supplementary question in such a way that it is related to the main question.

MR ANDREW WONG (in Cantonese): Since the Government is accountable to the legislature, the Chief Secretary for Administration attends all our meetings to answer questions for the Government now. She has once told the public that an independent commission of inquiry with certain characteristics would be set up while the Chief Executive announced that it would be of some other characteristics. Why was this Council not chosen as a forum or a place for the announcement?

PRESIDENT (in Cantonese): Mr WONG, my understanding of your question is: Will the Chief Executive consider using this Council as a place for his announcements of public concern? Do I understand your supplementary question correctly?

MR ANDREW WONG (in Cantonese): Madam President, perhaps this is a rather complicated question. According to the Rules of Procedure, the Chief Executive has the right to decide at his own discretion whether or not to come to this Council to explain his policies. But since the highest government official present here, the Chief Secretary for Administration, had made a certain public announcement and later the Chief Executive decided on something else, why was this announcement not made in this Council so as to stick to the principle that the Government is to be accountable to the legislature?

PRESIDENT (in Cantonese): Chief Secretary for Administration.

CHIEF SECRETARY FOR ADMINISTRATION (in Cantonese): Madam President, the issue of the new airport is of course not only of great concern to Legislative Council Members but also to all members of the public. In view of that, the Chief Executive considers that it is most appropriate for him to announce the independent inquiry commission appointed by him.

PRESIDENT (in Cantonese): Mr LEUNG Yiu-chung.

MR LEUNG YIU-CHUNG (in Cantonese): Madam President, in part (a) of her main reply, the Chief Secretary for Administration has mentioned that the Chief Executive will attend meetings of the Legislative Council to answer questions put to him by Members on the work of the Government when he considers it appropriate. Concerning whether "to attend meetings of the Legislative Council", is the initiative ultimately to be taken by the Chief Executive himself? For instance, if this Council requests the Chief Executive to come and explain the work of the Government, how will the Chief Executive handle our request? What criteria does he use to decide whether or not to attend our meetings? It has not been specified in the main reply what criteria will be used to determine when it is considered appropriate for the Chief Executive to attend our meetings. At the same time, I would also like to ask ......

PRESIDENT (in Cantonese): Mr LEUNG, you may only ask one supplementary question at a time but you may put other questions later on. I understand that your question asks the Chief Secretary for Administrative what criteria the Chief Executive uses to decide whether or not to attend Legislative Council meetings. Chief Secretary for Administration.

CHIEF SECRETARY FOR ADMINISTRATION (in Cantonese): Madam President, if Members wish to invite the Chief Executive to attend their meeting on account of a particular issue, I am sure that he will certainly consider it.

PRESIDENT (in Cantonese): Mr Martin LEE.

MR MARTIN LEE (in Cantonese): Madam President, I wish to follow up on the last sentence of part (a) of the main reply concerning "The Chief Executive will also keep in touch with Members through various other channels, including meetings with Legislative Council Members and political parties from time to time." The last time that the Democratic Party met with the Chief Executive was on 16 January this year. The nature of such meetings is different from his attendance at the meetings of this Council because when the Chief Executive attends the meeting of this Council, we can ask questions publicly while we have to comply with the rule that we cannot reveal to others what the Chief Executive tells us but only what we say to the Chief Executive during our private meeting with him. In this way, the public will not be able to learn the Chief Executive's views about a certain issue. Does the Government see that the nature of the two are different? Therefore, we hope that the Chief Executive will attend Legislative Council meetings frequently to discuss various important issues publicly rather than to discuss with political parties or Members in private.

PRESIDENT (in Cantonese): Chief Secretary for Administration.

CHIEF SECRETARY FOR ADMINISTRATION (in Cantonese): Madam President, I certainly recognize the difference between the two. I have already said earlier that the Chief Executive has decided to attend Legislative Council meetings three times in a Legislative Session. Members can put questions to him at these three meetings.

PRESIDENT (in Cantonese): Mr Albert HO.

MR ALBERT HO (in Cantonese): Madam President, I believe that the answers given by the Chief Secretary for Administration today have disappointed many Members. Does the Chief Secretary feel that her answers or the answers she gives on behalf of the Chief Executive today will give the public an impression that after the reunification with China, our Chief Executive is not doing so well as his predecessors because the relationship between the executive and the legislature is further apart, failing to embody the Basic Law principle that the executive authorities are to be accountable to the Legislative Council.

PRESIDENT (in Cantonese): You may ask the Secretary's opinion. Chief Secretary for Administration.

CHIEF SECRETARY FOR ADMINISTRATION (in Cantonese): Madam President, of course the Chief Executive is accountable to the Legislative Council and he also highly respects the views of all Legislative Council Members. The Government led by the Chief Executive will do its best to establish a positive and co-operative relationship with the Legislative Council. I have also said earlier that attending the meetings of the Legislative Council is only one of the Chief Executive's ways to strengthen his relationship with this Council.

WRITTEN ANSWERS TO QUESTIONS

Supply and Demand of School Places

7. MR CHEUNG MAN-KWONG (in Chinese): Regarding various kinds of special schools (including schools for social development), practical schools and skills opportunity schools, will the Government inform this Council of:

(a) the supply and demand of school places in each school; the number of schools planned to be built and commissioned during the next three years and the number of additional school places available as a result; and

(b) the reasons for the surplus or shortfall in the supply of these school places and the counter-measures in place?

SECRETARY FOR EDUCATION AND MANPOWER (in Chinese): Madam President,

(a) The supply and demand situation of school places in each special school, practical school and skills opportunity school as at 15 June 1998 is detailed at the Appendix.

The Education Department (ED) has no plans to build more special schools. However, in the next three years, it will redevelop or reprovision four schools for mentally handicapped children to provide 120 additional school places for the mildly mentally handicapped, 40 for the moderately mentally handicapped and 16 for the severely mentally handicapped. In addition, the commissioning of one practical school and three skills opportunity schools in the 1998-99 academic year will provide 450 and 900 additional school places respectively.

(b) At present, the supply and demand situation of school places in most special schools is generally balanced, but the enrolment ratio for special schools for visually impaired and hearing impaired children is slightly lower. The reason is that there are only two schools for visually impaired children and four schools for hearing impaired children and each school has to maintain a full primary and/or secondary class structure.

For special schools for physically handicapped or mentally handicapped children, the supply and demand situation of school places is on the whole balanced. There are children awaiting admission to these schools in September 1998. In general, places vacated by school leavers in July this year will be sufficient to accommodate these children. In case there is any insufficient supply in individual schools, the ED will make arrangements for the children to be admitted to nearby schools or consider requesting schools that have not yet reached their maximum capacity to operate additional classes to accommodate them.

With regard to schools for social development, the demand for school places for the two girls' schools is quite high. However, with students graduating in July this year, there will be sufficient places to meet the demand. While the enrolment ratio for the remaining five boys' schools is slightly on the low side, this year's enrolment has shown an increase.

As for practical schools, the places offered by the three existing practical schools can satisfy the demand. A new practical school will begin operation in September 1998 and offer 150 places in the first year. As at mid-June 1998, there are over 100 pupils awaiting admission to the new school in September. There is unlikely to be a great surplus supply of school places.

The four existing skills opportunity schools offer a total of 1 200 school places. The number of pupils enrolled is 780. Although it is established that about 800 Primary Six pupils are considered suitable for admission to skills opportunity schools each year, many parents prefer to send their children to ordinary secondary schools. In the 1998-99 academic year, three more skills opportunity schools will be completed and the total number of school places will increase to 2 100. As a result, there will continue to be some surplus supply of school places in skills opportunity schools for the time being.

In order to increase the enrolment ratio of skills opportunity schools, the ED has been carrying out a series of promotion activities by means of seminars, interview sessions on radio and television, press releases, publicity pamphlets, posters, videos and so on, so that the parents will know more about these schools and understand that these schools are more suited for the learning needs of their children. Moreover, from June 1998, apart from the ED, ordinary schools can also directly refer pupils to skills opportunity schools with their parents' consent. Skills opportunity schools can therefore directly admit pupils throughout the year in accordance with the admission criteria laid down by the ED. The ED will continue to promote skills opportunity schools through various promotion activities. It will also assist in school-based activities to promote public awareness of these schools in the hope of increasing the enrolment ratio.

Appendix

Demand and Supply of School Places in Various Categories of
Special Schools, Practical Schools and Skills Opportunity Schools
(as at 15 June 1998)
Schools for the Visually Impaired

		No. of Places Required
School Name	No. of Places Provided	No. of Pupils on Roll	No. of Pupils Awaiting Admission in September	Total
Ebenezer School	165	101	11	112
Ebenezer Training Centre	60	52	2	54

Schools for Hearing Impaired Children

		No. of Places Required
School Name	No. of Places Provided	No. of Pupils on Roll	No. of Pupils Awaiting Admission in September	Total
Caritas Magdalene School	120	82	0	82
Hong Kong School for the Deaf	270	226	2	228
Lutheran School for the Deaf	200	143	0	143
Victoria Park School for the Deaf	90	73	1	74

Schools for Physically Handicapped Children

		No. of Places Required
School Name	No. of Places Provided	No. of Pupils on Roll	No. of Pupils Awaiting Admission in September	Total
Jockey Club Elaine Field School, the Spastics Association of Hong Kong	90	72	6	78
Hong Kong Christian Service Pui oi School	90	64	7	71
John F Kennedy Centre	140	133	18	151
Schools for Physically Handicapped Children
		No. of Places Required
School Name	No. of Places Provided	No. of Pupils on Roll	No. of Pupils Awaiting Admission in September	Total
Ko Fook Iu Memorial School the Spastics Association of Hong Kong	100	85	16	101
Margaret Trench Red Cross School	60	49	3	52
Princess Alexandra Red Cross Residential School	180	179	21	200
BM Kotewall Memorial School the Spastics Association of Hong Kong	120	105	11	116

Schools for Mentally Handicapped Children

		No. of Places Required
School Name	No. of Places Provided	No. of Pupils on Roll	No. of Pupils Awaiting Admission in September	Total
Buddhist Po Kwong School	140	127	30	157
Mary Rose School	300	284	31	315
Rotary Club of HK Island West Hong Chi Morninghope School	300	254	24	278
TWGHs Tsui Tsin Tong School	230	201	25	226
Hong Chi Morninghope School, Wu King	160	148	13	161
Hong Chi Wintfred Mary Cheung Morninghope School	280	238	16	254
B.T.C.F.S. Yeung Yat Lam Memorial School	180	151	24	175
Hong Chi Lions Morninghill School	200	169	12	181
SSNA Lau Pun Cheung School	200	177	14	191
Saviour Lutheran School	200	159	18	177
Sha Tin Public School	200	186	21	207
C.C.C. Hong Kong Council Kei Shun Special School	200	190	29	219
C.C.C. Mongkok Church Kai Oi School	200	186	20	206
The Salvation Army Shek Wu School	200	190	8	198
Choi Jun School	200	176	9	185
Schools for Mentally Handicapped Children
		No. of Places Required
School Name	No. of Places Provided	No. of Pupils on Roll	No. of Pupils Awaiting Admission in September	Total
Hong Chi Morninghill School, Tsui Lam	200	197	11	208
Hong Chi Morninghill School, Tuen Mun	200	169	17	186
Caritas Resurrection School	90	72	8	80
Hong Kong & Kowloon Joint Kaifong School	100	86	5	91
The Jockey Club Hong Chi School	80	60	4	64
Ngau Tau Kok Holy Word School	100	95	7	102
Hong Chi Morninglight School, Tuen Mun	100	100	7	107
Hong Chi Pinehill School	110	105	9	114
Po Leung Kuk Centenary School	100	97	6	103
Po Leung Kuk Yu Lee Mo Fan Mem School	90	81	10	91
The HKSYC & I Assn Chan Nam Chong Mem School	100	82	18	100
Rhenish Church Grace School	100	94	13	107
TWGHs Kwan Fong Kai Chi School	100	94	11	105
Hong Chi Morninglight School, Wah Fu	60	40	4	44
Hong Chi Morninglight School, Yuen Long	100	91	8	99
Caritas Lok Jun School	80	66	15	81
Caritas Lok Kan School	64	52	5	57
Caritas Lok Yi School	64	66	3	69
Caritas Jockey Club Lok Yan School	160	152	23	175
Chi Yun School	80	66	2	68
MHA of Hong Kong Pak Tin Children's Centre	80	59	14	73
Hong Chi Pinehill No. 2 School	56	43	2	45
Hong Chi Pinehill No. 3 School	64	61	6	67
PLK Mr & Mrs Chan Pak Keung Tsing Yi School	64	45	17	62
Haven of Hope Sunnyside School	80	66	14	80
Po Leung Kuk Law's Foundation School	64	58	21	79

Schools for Social Development

　

		No. of Places Required
School Name	No. of Places Provided	No. of Pupils on Roll	No. of Pupils Awaiting Admission in September	Total
HK Juvenile Care Centre Chan Nam Cheong Memorial School	135	100	12	112
Marycove School (Girls' School)	105	87	3	90
Pelletier School (Girls' School)	105	95	21	116
The Society of Boys' Centres - Chak Yan Centre School	270	164	24	188
The Society of Boys' Centres - Hui Chung Sing Memorial School	150	113	3	116
The Society of Boys' Centres - Shing Tak Centre School	105	87	3	90
Tung Wan Mok Law Shui Wah School	75	49	0	49

Note: There are 51 additional suitable cases being processed by the Central Co-ordinating Referral Mechanism which will be referred to the schools for social development at later stages.

Hospital Schools

		No. of Places Required
School Name	No. of Places Provided	No. of Pupils on Roll	No. of Pupils Awaiting Admission in September	Total
Hong Kong Red Cross Hospital Schools	465	426	0	426

Note: Hong Kong Red Cross Hospital Schools is regarded as 1 school with classes operated in 15 locations.

Practical Schools

		No. of Places Required
School Name	No. of Places Provided	No. of Pupils on Roll	No. of Pupils Awaiting Admission in September	Total
Hong Kong Sea School	450	302	11	313
TWGHs C Y Ma Charity Fund Practical School	450	404	107	511
Po Leung Kuk Practical School	450*	149	165	314

Note: Po Leung Kuk Practical School has started operation since 1997-98. It is currently operating 5 classes (150 school places). It is planned for expansion up to 15 classes, providing a total of 450 school places.

Skills Opportunity Schools

　

		No. of Places Required
School Name	No. of Places Provided	No. of Pupils on Roll	No. of Pupils Awaiting Admission in September	Total
C.C.C. Nim Tsi School	300	274	0	274
Yuen Long Catholic Secondary School (Skills Opportunity School)	300	210	2	212
Fortress Hill Methodist School (Skills Opportunity School)	300	237	1	238
Yan Chai Hospital No. 5 Secondary School (Skills Opportunity School)	300*	59	1	60

Note: Yan Chai Hospital No. 5 Secondary School (Skills Opportunity School) has started operation since 1997-98. It is currently operating 5 classes (100 school places). It is planned for expansion up to 15 classes, providing a total of 300 school places.

Feasibility Study on Installing Traffic Noise Mitigation Facilities

8. MR TAM YIU-CHUNG (in Chinese): It is learnt that the consultancy study on the feasibility of installing traffic noise mitigation facilities for existing roads has been completed. In this connection, will the Government inform this Council:

(a) whether it has reviewed the existing policy on abating traffic noise in the light of the study's findings, if so, what the outcome is;

(b) of the consultancy study's recommendations in respect of the following places:

(i) Fung Shue Wo Road in Tsing Yi;

(ii) Tsuen Wan, Tsing Lung Tau and Sam Shing Hui sections of Tuen Mun Road;

(iii) Hung Shui Kiu and Ping Shan sections of Castle Peak Road in Yuen Long; and

when the recommendations are planned to be implemented; and

(c) whether it has conducted another study to examine the feasibility of installing noise mitigation facilities on certain sections of elevated roads; if so, of the locations of these road sections?

SECRETARY FOR PLANNING, ENVIRONMENT AND LANDS (in Chinese): Madam President,

(a) The consultants have initially completed the feasibility study for retro-fitting noise mitigation measures on 16 existing at-grade roads. The Environmental Protection Department (EPD) is reviewing the draft final report prepared by the consultants. On the basis of the findings of the study, the Administration will review the policy in tackling traffic noise from existing roads.

(b) The road sections concerned have been selected for more detailed engineering investigations in the feasibility study which has yet to be concluded. The actual implementation timetable will be drawn up in the light of the findings and resources available.

(c) The EPD has commissioned in mid-June 1998 another feasibility study of retro-fitting noise mitigation measures on existing flyovers. The consultants are studying three typical and representative flyovers at Tsing Tsuen Road, Ap Lei Chau Bridge and Mei Foo. The study is expected to complete by the end of this year.

Air Pollution on Roads

9. MISS EMILY LAU (in Chinese): According to a number of surveys conducted recently, air pollution on roads in Hong Kong is so serious that pollutant concentrations are found to be far exceeding the air quality objectives set by the Environmental Protection Department (EPD), and high enough to make people feel sick. In this connection, will the Executive Authorities inform this Council:

(a) when the EPD is expected to be able to measure accurately the level of air pollution on roads in various districts in the territory;

(b) whether they know the number of people who contracted diseases or died because of air pollution in each of the past three years; and

(c) whether they will consider providing air filtration masks for people who work on roads for long hours and arranging medical check-ups for them on a regular basis?

SECRETARY FOR PLANNING, ENVIRONMENT AND LANDS (in Chinese): Madam President,

(a) The EPD operates two roadside monitoring stations: one at Mong Kok and the other at Causeway Bay. By October 1998, a third station in the Central District will be put in operation. These roadside stations are located at typical urban areas with heavy traffic and high pedestrian flow. They therefore provide good representative measurements of the roadside air pollution in Hong Kong. To enhance public awareness, in particular among those who need to work or stay in busy streets with heavy traffic for extended periods, the EPD has since 15 June 1998 issued roadside Air Pollution Index (API). This keeps the public informed about roadside air quality. Advice has also been given on the appropriate precautionary measures to be taken at different levels of air quality.

(b) There is no information on the number of people who contracted diseases or died because of air pollution in Hong Kong. Studies have suggested that there is a correlation between the concentration of air pollutants and the mortality and morbidity rates for respiratory and cardiovascular diseases. It is, however, difficult to isolate the contribution of air pollution as a single factor because these illnesses are associated with other factors such as underlying diseases, individual susceptibility and smoking. The EPD has established a working group comprising medical and environmental professionals to review and advise on any need to update our Air Quality Objectives. As part of the review, the working group will also examine the health effects of air pollution. We expect the review to be completed by the end of this year.

(c) The Administration has not considered providing respirators or arranging regular medical examinations for those who work at street levels for extended periods. However, under the Occupational Safety and Health Ordinance, responsible persons have the general duty to ensure the safety and health of employees at work. They should, therefore, take precautionary measures if their employees are required to work outdoors during times of severe air pollution. These measures may include an assessment of the risk to the health of the workers, having regard to the nature of the activities and the worker's physical condition, and whether or not respirators are required. As a general rule, the EPD advises those with existing heart or respiratory illness to avoid prolonged stay in areas with heavy traffic when the roadside API is higher than 100. If it is necessary to stay in streets with heavy traffic, such persons are advised to reduce physical exertion as far as possible and to consult their doctors on their fitness to work outdoors under such conditions.

Expansion of Pok Oi Hospital

10. DR TANG SIU-TONG (in Chinese): Will the Government inform this Council whether it knows if the Hospital Authority (HA) has any plan to expand the Pok Oi Hospital, so as to cope with the demands for medical services of residents in the Yuen Long District (including Tin Shui Wai); if so, of the schedule of the expansion works, the party to bear the costs and the rationale therefor?

SECRETARY FOR HEALTH AND WELFARE (in Chinese): Madam President, the HA has submitted to the Government a proposal seeking funds for the expansion of the Pok Oi Hospital by increasing the number of beds in the hospital from the existing 470 to 742. According to the current plan, the Hospital will continue to provide services, on a limited basis, during the re-development period. The construction, to be carried out in two phases, will take about six years to complete.

The capital cost of the proposed redevelopment is estimated to be $2 billion. Since the Pok Oi Hospital is co-managed by the HA and the Pok Oi Hospital Board of Directors, the Government will, in accordance with current practice, request the Board of Directors to contribute towards the capital cost. The Government will discuss the detailed arrangements with the HA and the Board of Directors.

The Government will consider, in the context of the coming Resource Allocation Exercise for 1999-2000, whether funds should be reserved for the expansion of the Pok Oi Hospital so that the preparatory work for the project may commence next year.

Education Department's Measure to Solve Unemployment Problem

11. DR DAVID LI: It is reported that, as a measure to solve the acute unemployment problem, the Director of Education informed schools on 3 June 1998 that staff aged 60 or above should retire, unless permitted otherwise. As a result, many applications for extension of service by one year from teachers and principals who have reached the retirement age had been rejected. In this connection, will the Government inform this Council whether:

(a) as the notice was issued only in June, it has studied if there is sufficient lead time for schools to recruit new teachers and principals before the new academic year begins in September; if so, what the results are; and

(b) it has considered creating more teaching posts as an alternative for solving the acute unemployment problem; if so, what the details are; if not, why not?

SECRETARY FOR EDUCATION AND MANPOWER:

(a) Under the Codes of Aid for aided schools, it is stipulated that teachers (including school principals) shall retire at the end of the school year in which they reach the age of 60. However, the Director of Education may, on the recommendation of the Management Committee of the schools concerned and subject to the submission of satisfactory medical proof as to fitness, permit teachers and principals to continue in service for a period of one school year after they reach the age of 60, and for further period each of one school year up to the end of the school year in which they reach the age of 65.

On 3 June 1998, the Director of Education wrote to all schools reminding them of this provision.

Extension of service is not automatic and each application is considered on its own merits. In examining individual applications, the Director of Education takes into account all relevant factors before reaching a decision in the best interests of the schools and students, including any difficulties the schools may have in finding suitable replacements for the retiring principals and teachers.

(b) The Government is committed to improving teaching and learning in schools. An estimated 2 700 new posts are expected to be created during the next two academic years to enhance staffing support for schools. Of these, about 1 600 are teaching posts while some 1 100 posts are at the supporting level. These new posts arise mainly from the following major initiatives:

- more than 1 100 additional staff, including 800 teaching staff and 300 clerical staff/workmen, to fill new positions arising from operation of new schools and conversion of bisessional/ unisessional primary school to whole day operation.

- some 380 additional teachers of English in secondary schools adopting Chinese as the medium of instruction;

- some 350 additional teachers of primary schools to implement the Chinese and English Extensive Reading Schemes and improve library service;

- more than 800 clerical staff for primary and secondary schools;

- some 40 teaching and professional posts for extending services to schools to support academically low achievers, target oriented curriculum teacher education, orientation and mobility training for the visually impaired, and remedial services for hearing impaired children.

Apart from enhancing the quality of education, the creation of these posts also offers employment opportunities.

Disturbances Caused by Aircraft Noise

12. MR LEE WING-TAT (in Chinese): Since the opening of the new airport, a large number of residents of Tung Chung, Tsing Yi, Kwai Chung, Tsuen Wan and Sha Tin have complained about the disturbances caused by aircraft noise. In this connection, will the Government inform this Council whether:

(a) the environmental noises in these districts are mainly generated by the air traffic along the new flight path;

(b) it has studied the effect of future flight movements late at night or in the early hours in the morning on the noise levels in these districts; if so, what the findings are; and

(c) it will conduct late-night noise tests in these districts and adopt appropriate noise mitigation measures in the light of the findings of these tests?

SECRETARY FOR ECONOMIC SERVICES (in Chinese): Madam President,

(a) As with residents in other built-up areas, those in Tung Chung, Tsing Yi, Kwai Chung, Tsuen Wan and Sha Tin are exposed to various community noise sources including road and rail traffic, commercial and industrial activities as well as neighbourhood activities. For some remote residential areas within these districts, located well away from major noise sources, the general background noise level may be comparatively low and hence noise generated from passing aircraft may become more audible.

(b) The new airport at Chek Lap Kok was designed in accordance with the "Hong Kong Planning Standards and Guidelines" which provide that there should be no noise sensitive receivers (for example, residential developments and schools and so on) within the Noise Exposure Forecast (NEF) 25 contour. The planning parameter based on the NEF 25 contour rule is in compliance with international environmental standards, which are adopted by international airports in many developed countries in assessing the impact of aircraft noise on noise sensitive receivers. According to the findings of the Environmental Impact Assessment (EIA) carried out by consultants in 1991-92 and the EIA update in 1997-98 prior to the operation of the new airport, it has been confirmed that the aforementioned districts are outside the NEF 25 contour.

(c) After the opening of the new airport, the Civil Aviation Department and the Environmental Protection Department have conducted field measurements of the noise levels in these districts. The results are as follows:

Based on the above results and the number of flights over these districts, it is considered that these districts, as forecast by the EIA, are outside the NEF 25 contour and the noise levels thereat are in compliance with international standards. However, some of the flights can use the flight path west to the new airport for landing to avoid overflying districts like Sha Tin, subject to the prevailing wind direction.

Ensurance that Public Works Projects Meet the Required Standards

13. DR RAYMOND HO (in Chinese): It is reported that the Buildings Department is at present investigating 15 cases of suspected piling problems involving private construction projects, and that the contractors responsible for those projects are also carrying out 14 public works projects for the Government at the moment. In this connection, will the Government inform this Council:

(a) of the public works projects being handled by the contractors concerned, the location of the construction sites and the construction costs thereof;

(b) how it ensures that these public works projects meet the required construction and safety standards;

(c) whether a comprehensive investigation will be conducted on the operation of the contractors; and

(d) whether a contractor found to have carried out foundation piling work not in accordance with approved building plans will have his licence revoked by the Works Bureau, so as to stop him from tendering for further works?

SECRETARY FOR WORKS (in Chinese): Madam President,

(a) The contractor concerned has participated in altogether 13 public works contracts in recent years. Eight of them are on-going contracts. Please refer to the Annex for details of the site locations and values of the projects.

(b) All public works contracts are supervised by resident engineers and inspectors of works to ensure that the works meet construction and safety standards. Engineering personnel also take measurements and conduct inspections when the piling works are carried out. Completed piling works have to be inspected by engineers and undergo the tests required for acceptance. Detailed records are kept for all working procedures and the measurements taken during the course of works as well as the acceptance inspection and tests conducted on completion.

Regarding the above on-going projects, the Works Bureau (WB) has instructed the relevant departments to step up supervision of the contractor concerned. Additional tests will be conducted, when necessary, to ensure that the works are up to the standards.

(c) As similar problems have not been identified in the public works contracts carried out by the contractor, the WB has no plan to investigate its operations at the moment. Nevertheless, we will pay attention to the assessments regularly made by the relevant departments of the contractor's performance in various aspects of the works.

(d) As far as public works contracts are concerned, if a contractor is found to have carried out foundation piling works not in accordance with the building plans, he will be required by the relevant department to take remedial measures to ensure that safety and building standards are met. However, if the irregularity is a result of misconduct such as fraud or bribery and is confirmed to be related to the contractor, the WB will consider removing the name of the contractor from the Lists of Approved Contractors.

If public works contractors are found to have committed the above improper or illegal acts in private construction works, the WB will impose penalties on them such as removing their names, suspending them from tendering and downgrading their tendering status as appropriate.

Annex

Contract No.	Contract Title	Contract Value ($)	Site Location
32/WSD/95	Salt Water Supply System for Pokfulam Area and Improvement of Fresh & Salt Water Supply to Central Mid-level and High Level Areas Mainlaying along Victoria Road and Robinson Road	23,880,000	Hong Kong
DC/95/01	Village Flood Protection for Yuen Long, Kam Tin & Ngau Tam Mei, NWNT, Stage I - Sha Po Tsuen	71,380,000	New Territories
Contract No.	Contract Title	Contract Value ($)	Site Location
GE/96/04	Landslip Preventure Measures	33,900,000	Hong Kong, Kowloon, New Territories
HY/95/24	Improvement to Castle Peak Road from Siu Lam to So Kwun Tan	243,300,000	New Territories
HY/96/08	Hiram's Highway Improvement Phase 2 Flyover and Junction Improvement at Junction with Clear Water Bay Road	136,300,000	New Territories
HY/95/03	Victoria Road Improvements Stage II, Phase I Section Between Mount Davis Road & Sand Bay Road	116,730,000	Hong Kong
TK42/96	Tsueng Kwan O Development - Engineering Infrastructure in Tseung Kwan O Town Centre	236,900,000	New Territories
TM85/95	Footbridge across Road D15 near San Shek Wan LRT Stop and Combined Pedestrian/Cycle Bridge across Tuen Mun Nullah Between Areas 16 and 18, Tuen Mun	76,300,000		New Territories
*UA21/93	West Kowloon Reclamation Sewerage Network Package II	219,988,000		Kowloon
*DC/93/18	Strategic Sewage Disposal Scheme - Stage I, Principal Collection & Treatment System, Stage I Outfall	537,816,860		New Territories
*PIF390	Design and Construction of Piled Foundations and Caps for Conversion and Extension to Existing Aided Schools - Group P1 under School Improvement Programme Phase III, Package 2	19,420,000		Hong Kong, Kowloon & New Territories
*HY/91/08	North Lantau Expressway - Yam O Section	2,472,266,365		New Territories
*HY/92/04	Route 3 - Kwai Chung Viaduct	2,677,234,000		New Territories
* works completed

Implementation of School-based Management

14. MR YEUNG YIU-CHUNG (in Chinese): It is recommended in the Education Commission Report No. 7 that all schools in Hong Kong should implement school-based management by the year 2000. In this connection, will the Government inform this Council whether:

(a) the Education Department will streamline its organizational structure and confer more powers on schools in order to expedite and give impetus to the implementation of school-based management in schools; if so, of the details and the specific timing of such initiatives; and

(b) it will consider amending the Education Ordinance to tie in with the implementation of school-based management; if so, what the details are; if not, why not?

SECRETARY FOR EDUCATION AND MANPOWER (in Chinese): Madam President,

(a) The Education Department (ED) is taking action to streamline the existing procedures to provide schools with greater autonomy and flexibility in management and financial matters to tie in with the development of school-based management. In accordance with the recommendations by the ECR7, it plans to complete the following tasks before September 2000:

(i) preparing a new Code of Aid to define clearly the various roles and responsibilities and to devolve greater responsibilities and autonomy to schools in management and financial matters;

(ii) requiring schools to prepare school plans, annual reports and constitutions for the school management committees; to broaden participation from teachers and parents in school management; and to develop formal procedures for staff appraisal;

(iii) reviewing the funding arrangement for major repairs to provide schools with more flexibility;

(iv) streamlining the tendering and purchasing procedures for furniture and equipment;

(v) allocating grants (apart from salaries grant) to schools in the form of a block grant to allow schools more flexibility in funding arrangement and allowing schools to retain savings for school development projects; and

(vi) providing a block subject grant to schools to enable them to use funds interchangeably between subjects.

Meanwhile, the Education and Manpower Bureau has also issued a consultation document on the review of the ED which has recommended, inter alia, ways to strengthen the role of the ED in the promotion of school-based management. Subject to the views received from the education sector and the community during consultation, we will consider further measures to facilitate school-based management before the end of this year.

(b) The ED will review the need to amend the Education Ordinance to tie in with the implementation of school-based management.

Train Failure on Tung Chung Line of Airport Railway

15. MR LAU KONG-WAH (in Chinese): It is reported that two successive incidents of train failure on the Tung Chung Line of the Airport Railway in the morning of 8 July this year caused a delay of services for about 20 minutes. In this connection, will the Government inform this Council whether it knows:

(a) if the incidents were caused by insufficient tests prior to the coming into operation of the Airport Railway, insufficient training for train operators, or some other reasons; and

(b) the measures to be adopted by the Mass Transit Railway Corporation to prevent the recurrence of similar incidents?

SECRETARY FOR TRANSPORT (in Chinese): Madam President, there were two train incidents of the Tung Chung Line on the morning of 8 July. Though causing inconvenience to passengers, they did not have any safety implications.

The first incident involved a train which did not receive any start signal from the train control system when leaving Hong Kong Station. The train operator needed to run the train manually at low speed and let the passengers get off at Olympic Station. The incident was due to a defective computer card, which was replaced immediately.

The second incident involved the routing of a train to Airport Station, rather than Tung Chung. An interim report has been submitted to Hong Kong Railway Inspectorate, appointed for the purpose of ensuring the safety of the MTR railway system, for study. According to the report, the incident was due to a problem in the system which identifies trains and requests routes to be set. To prevent recurrence, the computer software will require to be modified and the necessary modification will be completed within the next few weeks. In the interim, train identifications are being checked manually by Central Control Room Controllers who will then set the routes accordingly. As with all railways having different routes for trains in service, the system design allows for trains to use any routes in order to provide for train regulation.

Neither of the above incidents can be attributed to lack of testing. All the systems in use on the Airport Railway have undergone extensive tests by both suppliers and MTR staff. Also the operational staff involved in the Airport Railway have undergone the prescribed classroom and practical training for some months before commencement of operation. Additionally, the Corporation has conducted a period of "trial operations" before commencing passenger services. It should be noted that with a system as complex as the Airport Railway, it is inevitable that some teething problems will occur in the initial period of operation.

Postgraduate Places in Universities

16. MR YEUNG YIU-CHUNG (in Chinese): Will the Government inform this Council whether it knows:

(a) how the universities in Hong Kong determine the number of their postgraduate places; and

(b) the respective numbers of applicants for taught postgraduate programmes and research postgraduate programmes provided by local universities, as well as the number of successful applicants, in each of the past five academic years, together with the respective numbers of local and non-local applicants and the intake?

SECRETARY FOR EDUCATION AND MANPOWER (in Chinese): Madam President,

(a) The Administration, on the advice of the University Grants Committee (UGC), determines the student number targets by institution, level and year for each triennium. In advising the distribution of student numbers among the UGC-funded institutions, the UGC considers the Academic Development Proposals submitted by each institution, taking into account its roles and missions, physical limitations, the ways in which it could best contribute to the needs of Hong Kong, as well as the manpower requirements specified by the Government for the triennium. In recommending the allocation of research postgraduate student numbers among institutions, the UGC also considers the quality of the research projects, research education programmes and research students of respective institutions.

(b) The number of applications for and intakes to the taught postgraduate programme and research postgraduate programme are set out at Annex A and Annex B respectively.

Annex A

UGC-funded Taught Postgraduate Programmes (1993-94 to 1997-98)

A. Number of Applications^{1 and 2}

	1993-94			1994-95			1995-96			1996-97			1997-98
Institution	Local	Non-local	Total	Local	Non-local	Total	Local	Non-local	Total	Local	Non-local	Total	Local	Non-local	Total
CityU	3 416	17	3433	3891	19	3910	5940	41	5981	6117	29	6146	4792	14	4806
HKBU	238	3	241	564	1	565	845	11	856	1180	10	1190	1160	4	1164
LC	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-
CUHK	2135	16	2151	2618	18	2636	2480	7	2487	3522	21	3543	4048	23	4071
HKIEd3	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-
PolyU	2047	32	2079	2320	36	2356	3377	29	3406	3515	10	3525	3433	14	3447
HKUST	909	78	987	929	89	1018	1146	135	1281	1348	125	1473	1586	116	1702
HKU	3478	136	3614	3502	135	3637	4152	130	4282	4502	168	4670	4373	148	4521
Grand	12223	282	12505	13824	298	14122	17940	353	18293	20184	363	20547	19392	319	19711

B. Student Intakes¹

	1993-94			1994-95			1995-96			1996-97			1997-98
Institution	Local	Non-local	Total	Local	Non-local	Total	Local	Non-local	Total	Local	Non-local	Total	Local	Non-local	Total
CityU	842	-	842	814	-	814	1022	7	1 029	1 066	5	1071	1001	3	1004
HKBU	97	1	98	231	-	231	237	3	240	247	2	249	261	1	262
LC	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-
CUHK	679	5	684	723	5	728	714	2	716	825	5	830	868	5	873
HKIEd3	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-
PolyU	712	10	722	939	6	945	894	2	896	862	1	863	580	-	580
HKUST	139	5	144	220	12	232	253	14	267	287	16	303	289	13	302
HKU	1354	53	1407	1429	55	1484	1466	46	1512	1419	53	1472	1532	52	1584
Grand	3823	74	3897	4356	78	4434	4586	74	4660	4706	82	4788	4531	74	4605

¹ The figures are expressed in head-counts, not full-time-equivalent places.

²The breakdown figures on local and non-local applicants are estimates only.

³The HKIEd came under the aegis of the UGC in July 1996, and did not offer postgraduate programmes in the past five years.

Annex B

　

UGC-funded Research Postgraduate Programmes (1993-94 to 1997-98)

A. Number of Applications^{1 and 2}

	1993-94			1994-95			1995-96			1996-97			1997-98
Institution	Local	Non-local	Total	Local	Non-local	Total	Local	Non-local	Total	Local	Non-local	Total	Local	Non-local	Total
CityU	137	26	163	158	68	226	198	223	421	139	226	365	184	185	369
HKBU	85	41	126	117	49	166	95	88	183	113	71	184	156	77	233
LC	-	-	-	-	-	-	17	-	17	18	1	19	49	4	53
CUHK	1336	15	1351	1626	18	1644	1296	135	1431	1718	297	2015	1580	310	1890
HKIEd3	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-
PolyU	282	82	364	210	152	362	152	174	326	167	90	257	144	74	218
HKUST	514	277	791	491	435	926	546	463	1009	517	514	1031	594	525	1119
HKU	515	216	731	523	224	747	494	278	772	573	290	863	536	222	758
Grand	2869	657	3526	3125	946	4071	2798	1361	4159	3245	1489	4734	3243	1397	4640

B. Student Intakes¹

	1993-94			1994-95			1995-96			1996-97			1997-98
Institution	Local	Non-local	Total	Local	Non-local	Total	Local	Non-local	Total	Local	Non-local	Total	Local	Non-local	Total
CityU	100	6	106	98	14	112	118	34	152	95	48	143	102	42	144
HKBU	19	10	29	37	12	49	16	21	37	65	25	90	54	15	69
LC	-	-	-	-	-	-	6	-	6	8	-	8	10	1	11
CUHK	352	4	356	357	4	361	451	47	498	370	64	434	402	79	481
HKIEd3	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-
PolyU	82	21	103	111	44	155	107	78	185	148	36	184	128	20	148
HKUST	154	56	210	135	39	174	142	53	195	181	61	242	201	90	291
HKU	238	100	338	277	119	396	328	185	513	366	185	551	352	146	498
Grand	945	197	1142	1015	232	1247	1168	418	1586	1233	419	1652	1249	393	1642

¹ The figures are expressed in head-counts, not full-time-equivalent places.
²The breakdown figures on local and non-local applicants are estimates only.
³The HKIEd came under the aegis of the UGC in July 1996, and did not offer postgraduate programmes in the past five years.

Facilities for Use by Taxi Drivers in New Airport

17. MR LAU KONG-WAH (in Chinese): Complaints were reportedly received from taxi drivers about the fact that there was only one entry/exit thoroughfare at the taxi stand outside the passenger terminal of the new airport, with no way out for taxi drivers who wish to move out of the queue, and about the inadequate provision of washroom facilities outside the passenger terminal of the new airport. In this connection, will the Government inform this Council whether it knows:

(a) the reasons for not providing alternative exits at the taxi stand for drivers to leave the queue;

(b) whether the Airport Authority will consider providing additional exits along the taxi stand so that taxi drivers may leave the queue; if not, why not; and

(c) whether the Airport Authority will provide additional washroom facilities outside the passenger terminal of the new airport; if so, of the additional number of washrooms to be provided; if not, why not?

SECRETARY FOR ECONOMIC SERVICES (in Chinese): Madam President, we have consulted the Airport Authority and the Transport Bureau. Replies to the three parts of the question are as follows:

(a) There are a total of 14 taxi waiting lanes at the taxi staging area of the airport. A number of these lanes can function as escape lanes if they are maintained free-flowing by the operational staff. In addition, a dedicated escape route is provided at the periphery of the staging area for taxi drivers who, before entering the staging area, choose not to join the taxi queues.

(b) In view of the traffic situation at the taxi staging area on the first day of operation of the airport, the Airport Authority has, since 7 July, maintained a sufficient number of free-flowing lanes in the staging area. This is to ensure that taxi drivers can, if they wish, leave the queues any time.

(c) A total of seven temporary toilets have already been provided. Additional toilets can be provided if and when necessary.

Districts Affected by Aircraft Noise

18. MR TAM YIU-CHUNG (in Chinese): In view of the complaints from the public about disturbances caused by aircraft noise after the opening of the new airport, will the Government inform this Council:

(a) of the districts identified as noise sensitive areas in the noise assessments in respect of the flight path conducted prior to the construction of the new airport, and the projected noise impacts on these districts;

(b) whether, after the opening of the new airport, the Environmental Protection Department has conducted tests on the noise levels in these districts or other districts which, according to complaints from the public, are affected by aircraft noise; if so, of the results of such tests; if not, why not;

(c) whether the Civil Aviation Department (CAD) has considered revising the flight path to alleviate the disturbances to residents; if so, what the outcome is; if not, why not;

(d) whether the CAD will ban aircrafts emitting a high level of noise from taking off or landing during late hours at night and early hours in the morning; if so, of the details of such a plan; if not, why not; and

(e) whether it has considered using new technologies, such as installing equipment capable of transmitting noise-reflecting electric waves on the rooftops of buildings, to alleviate the disturbances caused by aircraft noise to the residents?

SECRETARY FOR ECONOMIC SERVICES (in Chinese): Madam President, the Government's reply is as follows:

(a) The new airport at Chek Lap Kok was designed in accordance with the "Hong Kong Planning Standards and Guidelines" which provide that there should be no noise sensitive receivers (for example, residential developments and schools and so on) within the Noise Exposure Forecast (NEF) 25 contour. The planning parameter based on the NEF 25 contour rule is in compliance with international environmental standards, which are adopted by international airports in many developed countries in assessing the impact of aircraft noise on noise sensitive receivers. According to the findings of the Environmental Impact Assessment (EIA) carried out by consultants in 1991-92 and the EIA update in 1997-98 prior to the operation of the new airport, it has been confirmed that except a small number of residents in North Lantau, predominantly in Sha Lo Wan, there are no other noise sensitive receivers within the NEF 25 contour. Arrangements will be made for the installation of noise abatement facilities for these residents.

(b) After the opening of the new airport, the CAD and the Environmental Protection Department have conducted field measurements of the noise levels in districts including Sai Kung, Sha Tin, Kwai Chung, Tsuen Wan and Tsing Yi. The results are as follows:

	Highest Noise Level
Sai Kung	54.4 - 69.7 dB
Sha Tin	61.2 - 72.1 dB
Kwai Chung	60.7 - 71.6 dB
Tsuen Wan	62.5 - 71.5 dB
Tsing Yi	63.8 - 73.9 dB

Based on the above results and the number of flights over these districts, it is considered that these districts, as forecast by the EIA, are outside the NEF 25 contour and the noise levels thereat are in compliance with international standards.

(c) In designing the flight paths for the new airport, apart from aircraft noise, various factors were also taken into account including topographical environment and obstacles, runway orientation, airspace management with neighbouring airports, locations of navigation equipment and aircraft performance and so on. Hong Kong is small in size but hilly in topography. It is not possible to design a flight path that is in compliance with international aviation safety requirements on the one hand and completely clear of all residential developments on the other. When the CAD appointed international aviation experts to assist in the detailed planning of the flight paths for the new airport in 1994, various factors had been taken into account and in-depth study conducted before the existing arrangements were drawn up. In view of airspace constraints and flight safety consideration, the existing flight paths cannot possibly be altered. However, some of the flights can use the flight path west to the new airport for landing to avoid overflying districts like Sha Tin, subject to the prevailing wind direction.

(d) The new airport is designed for 24-hour operation in order to cope with the demand of air transport and maintain Hong Kong's status as a centre of international and regional aviation. Except a small number of residents in North Lantau, other noise sensitive receivers (for example, residential developments and schools and so on) are outside the NEF 25 contour and this is in compliance with international environmental standards. For this reason, the Government has no intention to restrict the taking off and landing of aircraft during late hours at night and early hours in the morning.

(e) While active noise control (that is, noise reduction by means of anti-wave) may be useful in confined spaces such as rooms, there is at present no technical device available that could help reduce aircraft noise impact on residents underneath the flight paths.

BILL

First Reading of Bill

PRESIDENT (in Cantonese): Bill. First Reading.

FISHERIES PROTECTION (AMENDMENT) BILL 1998

CLERK (in Cantonese): Fisheries Protection (Amendment) Bill 1998.

Bill read the First time and ordered to be set down for Second Reading pursuant to Rule 53(3) of the Rules of Procedure.

Second Reading of Bill

PRESIDENT (in Cantonese): Bill: Second Reading. Secretary for Economic Services.

FISHERIES PROTECTION (AMENDMENT) BILL 1998

SECRETARY FOR ECONOMIC SERVICES (in Cantonese): Madam President, I move the Second Reading of the Fisheries Protection (Amendment) Bill 1998.

The Bill seeks to amend the Fisheries Protection Ordinance in order to:

- impose heavier penalties on the use or possession of explosives or toxic substances for fishing so as to enhance the deterrent effect of the Ordinance;

- expand the scope of the law to cover the use of apparatus in destructive fishing activities; and

- transfer the power to amend the Schedule to the Director of Agriculture and Fisheries (Director).

There are three major proposals in the Bill. First, under the existing legislation, the use of explosives or toxic substances for the purpose of fishing shall constitute an offence and is liable to penalties therefor not exceeding $10,000 and imprisonment for not exceeding six months. The Bill provides that the maximum fine for such offences be raised substantially from $10,000 to $200,000.

Second, the Bill proposes to extend the scope of the regulations to prohibit the use of apparatus for destructive fishing activities. Such apparatuses may be specified by the Director by notice in the Gazette. Contravention of provisions in the amended regulations shall constitute an offence and may result in a maximum penalty identical to that for the use of explosives or toxic substances for fishing, which is a maximum fine of $200,000 and imprisonment for not exceeding six months.

Third, under the existing legislation, the Chief Executive in Council may by order published in the Gazette amend the Schedule for toxic substances. We also propose that the power to amend the Schedule be transferred from the Chief Executive to the Director.

The use of destructive means of fishing not only damages fisheries resources but also deals a heavy blow to the oceanic ecological system. The Bill will serve as a deterrent to such fishing methods in Hong Kong waters, in addition to preserving Hong Kong waters and fisheries resources. This is beneficial to the continued development of the fishing industry in Hong Kong in the long run.

Madam President, I recommend the Bill to Members.

PRESIDENT (in Cantonese): I now propose the question to you and that is: That the Fisheries Protection (Amendment) Bill 1998 be read the Second time.

In accordance with Rule 54(4) of the Rules of Procedure, the debate is now adjourned and the Bill referred to the House Committee.

MOTIONS

PRESIDENT (in Cantonese): Motions. Resolution under the Public Bus Services Ordinance. Secretary for Transport.

PUBLIC BUS SERVICES ORDINANCE

SECRETARY FOR TRANSPORT (in Cantonese): Madam President, I move the resolution standing in my name on the Agenda.

Unless disapplied by resolution of this Council, sections 26 to 32 of the Public Bus Services Ordinance specify the provisions for allowing a franchised bus company to earn a permitted return in an accounting year, calculated with reference to the percentage per annum specified in its franchise of its average net fixed assets in that accounting year.

Our current policy for processing fare increase applications from bus franchisees is to balance the interests of commuters and bus companies. In examining fare increase applications, the Administration takes various factors into account, including, without limitation, the bus companies' representations, operating costs and performance, and public acceptability. Given this approach, there are no provisions for a permitted return in any existing bus franchises. In negotiating new franchises, we also make it clear that the arrangements for a permitted return will not be included in the new franchises.

Accordingly, it is the Administration's intention that the new franchise granted by the Chief Executive in Council on 31 March 1998 to New World First Bus Services Limited (the First Bus) commencing on 1 September 1998, should not be subject to the same arrangements.

According to section 5(3)(b) of the Public Bus Services Ordinance, except where the Legislative Council by resolution excludes the application of all or any of the provisions under sections 26 to 32, a franchise shall be subject to the provisions of these sections. We therefore need to disapply sections 27, 28, 29 and 31 to the franchise of the First Bus, whilst retaining:

(a) section 26 which defines terms used in the following sections;

(b) section 26A which specifies that financial penalties levied against a bus company shall not be taken into account in ascertaining the operating cost or service related expenditure of the company for any purpose related to the Ordinance or the franchise;

(c) section 30 which enables depreciation rates in respect of fixed assets used or kept by a bus company for the purpose of or in connection with its franchise to be specified by the Government in the franchise; and

(d) section 32 which requires a bus company to produce accounts and other information in relation to the public bus service operation as the Financial Secretary may require.

With these remarks, I move the resolution which will give effect to these arrangements. Thank you, Madam President.

The Secretary for Transport moved the following resolution:

"That the franchise conferring the right on the New World First Bus Services Limited to operate a public bus service on the routes specified in the Schedule of Routes (New World First Bus Services Limited) Order 1998 (L.N. 238 of 1998) and in any subsequent order made by the Chief Executive in Council shall not, for the entire period of the franchise, be subject to sections 27, 28, 29 and 31 in Part V of the Public Bus Services Ordinance."

PRESIDENT (in Cantonese): I now propose the question to you and that is: That the resolution moved by the Secretary for Transport as printed on the Agenda be approved. Does any Member wish to speak? Mr LAU Chin-shek.

MR LAU CHIN-SHEK (in Cantonese): Madam President, although there is nothing controversial about this resolution, I must say that its passage will actually signify the end of an era. As a franchised bus operator, the China Motor Bus Company (CMB) has been serving the community of Hong Kong for nearly three quarters of a century. I believe that one or two decades ago, no one would ever imagine that a "veteran franchised company" like the CMB would later lose its entire bus franchise.

The poor services of the CMB, its ageing fleet, its reluctance to invest in service improvement and its poor management have long been criticized by its passengers. That is why the full-scale abolition of the franchise held by the CMB is indeed a very reasonable move well supported by the public. The end of the CMB era can serve precisely to impart a very clear message to all franchised or quasi-franchised public utility operators: if they procrastinate, and if they do not respond to the grievances of consumers, they will be discarded by history sooner or later!

Yet, the procrastination that has been plaguing the CMB in recent years is largely attributable to the profit control scheme implemented by the Government over the years ─ a scheme which guarantees that a franchised company can always enjoy huge profits year after year. Today, all franchised bus companies are no longer protected by any profit control scheme, and the New World First Bus Services Limited (the First Bus), which will shortly be awarded a bus franchise, is no exception, because it too will not enjoy any "profit guarantee". The absence of any "profit guarantee" is indeed the most important pre-condition enabling us to bring in a new culture under which public utility companies must seek to obtain the returns they deserve through service improvement. In this connection, I hereby call upon the Government to do the same with the two electricity companies and abolish the profit control scheme applicable to them. That way, the unfairness resulting from "profit guarantee" will be totally eliminated.

As for the First Bus, I am sure that the residents on Hong Kong Island will all have very high expectations. They all hope that the First Bus will be able to provide quality services at reasonable fare levels. However, I must point out that the hand-over arrangements between the incoming operator and the outgoing operator will certainly constitute a problem which the Government can ill-afford to ignore. As far as I am aware, the CMB and the First Bus have not yet reached any agreement on many hand-over issues. These issues include:

First, the First Bus will not be able to know the number of CMB staff members to be dismissed and the number of such staff members it can employ until 9 August;

Second, the exact number of existing CMB buses which will be sold to the First Bus will not be known until after the CMB shareholders' meeting on 14 August; and

Third, will the CMB be willing to sell its depots to the First Bus? If yes, at what prices? So far, there have not been any agreement on this important issue of assets transfer.

Then, there is something even worse. The First Bus has been trying to approach the CMB management and arrange some meetings at which all matters relating to the hand-over of bus operation can be fixed in detail, but so far, it has failed to do so. It is only some 40 days to go before 1 September, but quite many major problems have yet to be dealt with. I am really worried by this, and I just wonder whether the bus services on Hong Kong Island will be able to operate as usual by the time the new franchise comes into effect!

I think that the Government should no longer play the role of a "bystander". Instead, it must step in positively by urging the CMB to reach agreement with the First Bus on staff re-employment and the transfer of buses and depots as soon as possible. It must not allow the CMB to delay the matter any further because any delay will adversely affect bus passengers in the end. In September 1993, when the Citibus Company started to operate just 26 bus routes on Hong Kong Island, there was already big chaos. Now, the First Bus has only three to four months to prepare for the operation of 80 bus routes. Therefore, the Government must exercise extreme caution and work out ways of ensuring a smooth hand-over and the effective and normal operation of bus services.

Madam President, I support the motion, but would also like to urge the Government to seriously tackle the problems I have mentioned. Thank you.

PRESIDENT (in Cantonese): Mr LAU Kong-wah.

MR LAU KONG-WAH (in Cantonese): Madam President, there are no longer any needs to retain the profit control scheme for the public bus operators in Hong Kong, and I think the Hong Kong Government should also share this view. Since the Public Bus Services Ordinance still carries provisions on such a scheme, we have to pass a resolution today to disapply the provisions on the First Bus. The Democratic Alliance for the Betterment of Hong Kong (DAB) will support this resolution, but it hopes that the Government will put forward proposals to delete the provisions on the profit control scheme from the Public Bus Services Ordinance.

The profit control scheme is actually a "profit guarantee scheme" in all its practical effects, and this shows fully that the system is very unfair to the public. What has been happening is that whenever their profits fall below the level of their permitted rate of return, public utility operators will invariably use this as a justification for fee increases. Such a scheme actually runs counter to the long-standing emphasis of Hong Kong on market economy, because public utility operators are protected against the harsh realities of profits reduction or even losses, despite their weak competitiveness.

It is only natural that all businessmen will wish to see their profits protected by the law. However, the termination of the CMB's franchise is really a very good and appropriate example to show that if a public utility operator shies away from meeting the challenges of competition, if it procrastinates, if it simply does nothing but hastens to increase its fees as soon as it is informed by its accountants that its profits have dropped below the level of permitted return, it will lead itself onto the path of self-destruction sooner or later.

Some public utility operators in Hong Kong are still protected by the profit control scheme now. The DAB therefore urges the Government to continue its work towards the direction of abolishing the profit control scheme all together. That way, a market with more fairness in competition will emerge.

With these remarks, I support the motion.

PRESIDENT (in Cantonese): Mrs Miriam LAU.

MRS MIRIAM LAU (in Cantonese): Madam President, the resolution moved by the Secretary for Transport seeks to disapply the provisions on the profit control scheme and permitted return from the franchise to be awarded to the First Bus. Since the profit control scheme and permitted return are no longer applied to any franchised bus companies, these provisions have actually become out-dated, and it can be said that they are existing in name only. That being the case, the Government should really seek to remove these provisions from the Public Bus Services Ordinance instead of moving a resolution aiming at excluding them from the franchise of the First Bus. The latter is really an improper approach. I propose that the Government should delete these provisions all together. That way, it will not have to move any resolutions of this nature every time when it grants new franchises or renew existing franchises in the future. I believe that this is a more reasonable approach, one which can solve the problem once and for all.

I believe that given an environment of fair competition, if the various franchised bus companies want to increase their patronage and make reasonable returns in the future, they will all have to satisfy the needs of their passengers by making continuos efforts to improve their services. Although we are very delighted to hear that the First Bus has pledged to freeze its fares during the first year of its operation, I must hasten to say that it is after all not practicable to ask bus companies to freeze their fares forever. The reason is that what members of the public need are quality services at reasonable prices; and, what bus companies need are sufficient resources for continuous service improvement, which will in turn enable them to make reasonable returns.

Therefore, I hope that the Government will carefully handle the three issues of service quality, fare levels and reasonable returns, and seek to strike a proper balance.

With these remarks, Madam President, I support the motion.

PRESIDENT (in Cantonese): Dr YEUNG Sum.

DR YEUNG SUM (in Cantonese): Madam President, I rise to speak in support of the motion, but I would also like to raise several questions. Actually, these questions have already been raised by the Honourable LAU Chin-shek a moment ago.

Since school will resume on 1 September, it can rightly be asked: When the First Bus takes over the 88 bus routes on that very day, will it have enough properly trained personnel and enough buses to handle the traffic demands imposed by school re-opening? If not, will the Government put in place any contingency measures to ensure that no chaos will occur on that day?

Besides, I wish to make a special mention of fare concessions for the elderly. Will the Government negotiate with the First Bus again, with a view to lowering the qualifying age from 65 to 60?

PRESIDENT (in Cantonese): Mr Albert HO.

MR ALBERT HO (in Cantonese): Madam President, I rise to speak in support of the motion, also on behalf of the Democratic Party. Let me just repeat the reminder which the Honourable LAU Chin-shek gave the Government a moment ago. The Government must follow the hand-over work closely, and it must ensure that when the First Bus takes over the bus routes, everything will go smoothly and nothing will go wrong. The new airport alone has aroused the grave concern and worries of many. However, let me just quote one more case which is of a similar nature. Following the recent inauguration of Route 3 (Country Park Section), the Kowloon Motor Bus Company Limited (KMB) implemented a series of route re-groupings. Unfortunately, owing to erroneous projections on road traffic conditions, the route re-grouping exercise eventually plunged the traffic in Tuen Mun and Yuen Long into big chaos. Although the Transport Department subsequently held several meetings with the KMB and managed to work out some solutions, the traffic chaos had already led to loud public outcries and immense public discontent. I hope that the Transport Department can learn a lesson from this incident and step up its supervision in respect of the hand-over of bus routes to the First Bus. Specifically, the Department must hold more meetings with this bus company so as to ensure that it will draw up a well-thought-out plan for the take-over. In particular, the Department must draw up a contingency plan which can provide immediate remedies once anything goes wrong.

Second, that the CMB has failed to have its franchise renewed is of course largely attributable to its deteriorating service standards over the years, but such a deterioration does reflect another problem: the authorities concerned have failed to monitor the CMB effectively over the years, thus victimizing all those Hong Kong Island residents who have to rely on CMB services. I hope that the Government will make attempts to improve its mechanism of monitoring the services offered by bus companies. Specifically, I hope that more representatives of the people can be allowed to take part in the work of monitoring bus services. That way, if problems are detected, early remedies can be sought, and more effective sanction against the bus companies concerned can be imposed.

Besides, I also wish to talk about the issue of fee increases, a matter which has been debated several times in the legislature. All along, we in the Democratic Party have been advocating that the legislature should be vested with the power to monitor the fee increases of public utility operators. However, the Government has been holding a different view, and past transport officials also mentioned that the Government would consider the possibility of establishing some mechanisms to lay down policies on fee increases. I think that this issue will inevitably arouse a lot of debates, and I hope that the Transport Bureau will conduct further negotiations with Legislative Council Members on this issue. I also hope that in the end, we can establish an effective monitoring mechanism in which the representatives of the people can play an active role to impose checks and balances.

To sum up, we do look forward to the inauguration of the First Bus with some expectations. We support and appreciate the decisive move made by the Government to terminate the franchise of the CMB. We hope that more efforts will be made to ensure that this new public bus operator, the First Bus, can provide good services to the satisfaction of Hong Kong Island residents.

With these remarks, I support the motion.

PRESIDENT (in Cantonese): Secretary for Transport. Please reply.

SECRETARY FOR TRANSPORT (in Cantonese): Madam President, first of all, I wish to thank the five Members who spoke in support of my motion.

The Honourable Mrs Miriam LAU would rather have the relevant sections deleted from Chapter 230 of the Laws of Hong Kong than to move a resolution to disapply them on each occasion. Indeed, we have plans to do so but I would like to wait till the next time when we make amendments to the Public Bus Services Ordinance in order to save the time of this Council. I also hope I would not need to issue new bus franchises for some time.

Several Members spoke about the progress in the preparatory work of New World First Bus Services Limited (the First Bus) and what to look out for. We agree with that. Certainly, when there is a change in service of this magnitude certain problems of varied severity are bound to occur. Therefore I cannot guarantee, for instance, the exact time needed to travel from the Western District to a certain place. However, I can guarantee people can move from the Western District to Central pretty quickly and safely at a reasonable price. This is also the objective of the new company. But we must be prepared that during the preliminary stage of change of franchise involving such a large-scale service a certain degree of confusion is inevitable. Nevertheless, both the Government and the new company are determined to do its best at the preliminary stage.

Where preparatory work is concerned, the First Bus and China Motor Bus Company Limited (CMB) are having discussions and progress has been satisfactory. There has been good progress in general in staff arrangement, purchase of fleet, rental of plants and other hand-over matters. There are certain procedures to follow, of course, under the Companies Ordinance, including procedures to effect the transfer of properties and assets with endorsement from the board of directors. But that does not mean that there is any problem in the agreements reached between both parties.

Regarding the question of how the Government will cope in the event of confusion arising at the beginning of the transfer of the franchise, we will as I said minimize that possibility during that period. We request that the First Bus maintain the present operational arrangements, including the present routes, drivers and the bus allocation system to smoothen the transition. In future, the First Bus will certainly improve and develop its services step by step according to the needs of commuters and traffic conditions. As it does so, it must conform completely to the terms and conditions under the new franchise, including a series of service objectives. The Transport Department will monitor and supervise the operation of the new franchisee according to these service objectives.

About charging of fares, including future fare increases and concessionary fares for the elderly, we will discuss with the First Bus and forward Members' suggestions to them for reference. On the fare increase mechanism, as I mentioned on other occasions, we are looking at what objective criteria can be used to assist the Government in determining the application for fare increase by bus companies. We have appointed a consultancy to conduct a study for us. Once we have the outcome we will submit the same to the Panel on Transport of this Council to take follow-up actions.

Madam President, I have responded to the questions raised by the five Members. Thank you.

PRESIDENT (in Cantonese): I now propose the question to you and that is: That the resolution moved by the Secretary for Transport be passed. Will those in favour please raise their hands?

(Members raised their hands)

PRESIDENT (in Cantonese): Those against please raise their hands.

(No hands raised)

PRESIDENT (in Cantonese): I think the question is agreed by a majority from the Members who are present. I declare the resolution passed.

PRESIDENT (in Cantonese): Motion under the Employees' Compensation Ordinance. Secretary for Education and Manpower.

EMPLOYEES' COMPENSATION ORDINANCE

SECRETARY FOR EDUCATION AND MANPOWER (in Cantonese): Madam President, I move the motion standing in my name on the Agenda.

The purpose of this resolution is to revise the levels of compensation under the Employees' Compensation Ordinance. The Ordinance provides for payment of compensation by employers to the dependants of employees who are injured or killed as a result of employment-related accidents. The levels of compensation are normally revised every two years to take into account wage movements, inflation and other changes. The existing levels of compensation came into effect on 1 January 1996. Since the legislative proposal to revise the levels of compensation did not satisfy the test of "indispensability" laid down by the Preparatory Committee of the Hong Kong Special Administrative Region in March 1996 for legislative activities by the Provisional Legislative Council, the resolution is now put forward to this Council for consideration. We propose that the revised rates should take effect from 1 August 1998. The revisions will take into account the price or wage movements for the full years from 1 January 1996 to 31 December 1998.

We propose to increase the ceiling for monthly earnings from $18,000 to $21,000. This figure is the basis on which the maximum amounts of compensation for permanent total incapacity and for death are calculated under the Ordinance. We also propose to increase the minimum levels of compensation for death from $262,000 to $303,000, and for permanent total incapacity from $297,000 to $344,000. In addition, we propose that the maximum amount of compensation for employees requiring attention by another person be revised from $356,000 to $412,000. For late payment of compensation, we propose to increase the minimum amount of surcharge imposed upon expiry of the payment period from $420 to $490 and the minimum additional surcharge imposed three months after the expiry of the payment period from $840 to $970. Each of these six proposed revisions represents an increase of about 15.8% over the existing levels which is in line with the estimated increase in nominal wages for the period from 1996 to 1998.

The ceilings on three other forms of compensation are to be adjusted to take into account the estimated inflation for the period between 1 January 1996 and 31 December 1998. The proposed changes include increasing the maximum amount for burial expenses from $14,000 to $16,000, and increasing the maximum payments to be made by an employer towards the costs of supplying and fitting a prosthesis or surgical appliance from $28,000 to $33,000, and towards the costs of repair or renewal of a prosthesis or surgical appliance from $86,000 to $100,000.

We also propose to raise the maximum daily rate of reimbursement of medical expenses from $160 to $175 to take into account the increase in fees charged by public hospitals and clinics since November 1996.

Finally, we propose to revise the amount that is deemed to be the minimum earnings per month for the purpose of calculating compensation from $2,450 to $3,490. This proposed increase serves to keep the deemed minimum earnings of an injured employee broadly in line with the existing rate of payment to a single adult under the Comprehensive Social Security Assistance Scheme.

These proposals have been endorsed by the Labour Advisory Board and the Subcommittee of the Legislative Council for studying the relevant resolution. As regards the proposal to adjust the levels of compensation on a yearly basis, we will look into its effects in detail. I recommend the proposals to this Council for approval.

Madam President, I beg to move.

The Secretary for Education and Manpower moved the following motion:

"That, with effect from 1 August 1998, the Employees' Compensation Ordinance be amended:

(a) in paragraphs 1(b), 2(b) and 3 of the Third Schedule, by repealing "$160" and substituting "$175";

(b) in the Sixth Schedule, by repealing all the amounts mentioned in column 2 and substituting:

"$21,000
$21,000
$21,000
$303,000
$16,000
$21,000
$21,000
$21,000
$344,000
$412,000
$412,000
$3,490
$490
$970
$33,000
$100,000"."

PRESIDENT (in Cantonese): I now propose the question to you and that is: That the resolution moved by the Secretary for Education and Manpower, as set out on the Agenda, be passed. Does any Member wish to speak? Mr CHAN Kam-lam.

MR CHAN KAM-LAM (in Cantonese): Madam President, although the question we are now dealing with is on the Employees' Compensation Ordinance, I would like to, as Chairman of the Subcommittee on Government Motions under section 48A of the Employees' Compensation Ordinance (ECO) and section 40 of the Pneumoconiosis (Compensation) Ordinance (PCO), make a report on these two motions.

The levels of compensation under the ECO and the PCO are normally revised every two years to catch up with the wage and price movements. The current compensation levels came into effect on 1 January 1996.

The Secretary for Education and Manpower has given notice in early July to move the two motions at the Legislative Council meeting on 22 July 1998. At the House Committee meeting held on 10 July 1998, Members agreed to form a subcommittee to study the two motions. The Subcommittee met on 16 July 1998 and met representatives of the Administration and a deputation from the Pneumoconiosis Mutual Aid Association and concluded its deliberations at that meeting.

In respect of the motion moved under section 48A of the ECO, it was suggested that the ceiling of monthly earnings for calculating compensation for death and permanent total incapacity should be raised from $18,000 to $21,000. Except for one member who has reservation about this proposal, the Subcommittee agrees that the resolution is acceptable.

As regards the motion moved under section 40 of the PCO, members of the Subcommittee shared the view that the proposed revised level of compensation for pain, suffering and loss of amenities under the PCO should be made retrospective to 1 January 1998. Having regard to the Administration's explanation of the technical difficulties involved and the time constraint, members of the Subcommittee have agreed that the Administration should review the proposed level of compensation in order to make up for the amount of additional compensation foregone by the recipients since 1 January 1998. In response to the demand of the Subcommittee, the Administration pointed out that, on the basis of inflation as reflected in the Consumer Price Index for the period between 1 January 1996 and 31 December 1997, that compensation item should have been adjusted from $2,570 to $2,870, if it was revised on 1 January 1998. Hence the total amount of additional compensation which should have been payable to the recipients but is now foregone because the revision will only take effect on 1 August 1998 is $2,100. The Administration proposes to offset the amount of additional compensation foregone by the recipients by increasing the level of compensation by $180 on top of the originally proposed new compensation level of $3,000. This revised level of compensation is included in the new resolution under the PCO.

Compensation for bereavement provided under the PCO is payable to the family members of a deceased pneumoconiotic if he dies before the Pneumoconiosis Compensation Fund Board (PCFB) issues the certificate for determining the amount of compensation payable. Under section 5 of the PCO, the minimum amount of compensation for death is pegged to the amount of compensation for bereavement. The current amount of $70,000 was set in July 1993. To preserve the value of these two compensation items, the Administration proposes to revise the amount according to the rate of inflation for the period between 1 July 1993 to 31 December 1998 which is estimated to be 43.2%. The proposed revised amount is $100,000. A member of the Subcommittee has pointed out that the two items are related to a similar item under the Fatal Accidents Ordinance (Cap. 22) which has been revised to $150,000. Members of the Subcommittee have asked the Administration to provide information on the reasons for the difference in the amount payable, and the Administration has agreed to pursue the matter later.

The Subcommittee recommends that Members should support the two government motions.

Thank you, Madam President.

PRESIDENT (in Cantonese): Mr LAU Chin-shek.

MR LAU CHIN-SHEK (in Cantonese): Madam President, the resolution moved under the ECO today can be regarded "routine business". What has been proposed is only to adjust the amount of the compensation items under the Ordinance in accordance with inflation. However, the Government has so far failed to respond to the demands we have raised a long time ago for conducting a comprehensive review of the ECO and reforming the compensation system. I am extremely disappointed.

Whenever the social service pages of the newspapers publish the plights of the family members of some of those who died as a result of work injury, donations will come forward readily from the many benefactors in Hong Kong. When accidents happen to some people, such like the Mr LEE who, regardless of personal danger, saved the lives of other people during the storm last month, the whole of our community will feel the grief and express sympathy. Hong Kong people have also taken concrete action by donating million of dollars to the family members survived by Mr LEE. I believe, however, if our society is to become a sympathetic society, we cannot rely solely on the compassion and sympathy of individuals only. Instead, we should inject our compassion and sympathy into our institutions so as to set up a well-established employees' compensation system.

In 1997, the number of occupational accidents that took place in Hong Kong reached 62 776, of which 247 were fatal cases. The impact of occupational accidents on employees can either be big or small. Some employees may sustain minor injuries only, but some may need to be hospitalized for treatment. Some people even sustain permanent partial incapacity so that they will no longer be able to earn their living by means of the skills they are familiar with and, as a result of which, they are forced to change their occupations. Faced with an uncertain future, some people who have sustained permanent total incapacity are unable to work again and even lose their dignity as a human being. Some people may become handicapped or even lapse into a "vegetative state". Of course, some people have even sacrificed their lives!

As far as victims are concerned, the existing employees' compensation system is just like a thin blanket which has been patched up numerous times. But no matter how it is patched up, it is still full of holes and is not warm enough to help the victims make it through the long winter. Although the "wage earners" have made contributions to the prosperity of Hong Kong, the Hong Kong Government has failed to make strenuous efforts to improve industrial safety. Even when employees sustain injuries or meet death as a result of work, the compensations offered to them are very limited.

For these reasons, I would like to urge the Government once again to review the entire compensation system relating to work injuries and, at the same time, legislate to implement improvement measures in the following three aspects.

Firstly, to reform the compensation system. At present, compensation offered to death or permanent disability arising out of work is calculated in accordance with the provisions of the ECO. According to the existing system, the calculation method is determined by a "three-tier" system in accordance with the age and monthly salary of the injured employee. In the case of death, the amount of compensation will be equivalent to three to seven years of the relevant employee's wages. In the case of permanent disability, the amount of compensation will be equivalent to four to eight years of the relevant employee's wages. To put it in simple terms, younger employees will be offered more compensation. The existing "three-tier compensation system" has been in force since 1980 and has not been subject to any substantial amendment so far. But during the same period, our economy has registered a considerable real growth. To this end, the Hong Kong Confederation of Trade Unions and the Association for the Rights of Industrial Accident Victims proposed early last year that the "three-tier compensation", which is classified in terms of age, should be changed to "five-tier". Moreover, it was suggested that the maximum compensation for death arising out of work should be raised from seven years of the employee's wages to 13 years, whereas the maximum compensation for permanent total incapacity should be raised from eight years of the employee's wages to 14 years.

Secondly, we propose to abolish the existing ceiling of monthly earnings ceiling imposed for the purpose of calculating the amount of compensation so as to enable injured employees to receive the compensation they deserve in accordance with their actual incomes. In fact, under the system of an imposed earnings ceiling, approximately 2 000 out of the 60 000 or so employees who sustain work injury per annuity are unable to obtain full compensation because of the ceiling.

The third reform is that the Government should set up a central employees' compensation fund so as to provide industrial accident victims with better protection. In fact, I have moved a motion on "the setting up of a central employees' compensation fund" on as early as 3 November 1993. The proposal was subsequently passed by the Legislative Council with no objection. The setting up of a central insurance mechanism in the form of the central employees' compensation fund can reduce insurance-related administration fees and commissions and, at the same time, speed up the processing of compensation claims. This is going to serve multiple purposes indeed.

I hope the Government can really respond to the abovementioned demands made by the Hong Kong Confederation of Trade Unions and the Association for the Rights of Industrial Accident Victims by improving the work injury compensation system and giving more support to the industrial accident victims as well as their family members.

Madam President, I so submit. Thank you.

PRESIDENT (in Cantonese): Mr LEUNG Yiu-chung.

MR LEUNG YIU-CHUNG (in Cantonese): Madam President, today the Government has moved a resolution to amend some of the provisions of the Employees' Compensation Ordinance. Obviously, the current amendment is aimed at making adjustments to some of the compensation items only. There is no change at all as far as the overall compensation system is concerned. The Government is only trying to add some more compensation into the compensation system, which is originally scarred and battered, instead of pinpointing the core of the problem. The compensation received by the victims or family members of those who sustain injuries or meet death as a result of industrial accidents has not seen a great improvement.

We have come to the view that "employees' compensation" is not the same as "labour welfare" for employees. In the past, they worked hard to contribute their time and prime to the prosperity of Hong Kong, and some of them even sacrificed their lives. As such, we should not regard the compensation given to those who sustain work injury as charity. It is also for these reasons that I consider we should examine the enactment of this compensation legislation from this angle. We need to consider in particular the fact that not only those who have been incapacitated are being affected, their families are subject to enormous financial pressure as well. Under the new proposal, compensation rates are adjusted in line with inflation only. This is extremely disappointing indeed.

Although many labour organizations have, in the past, incessantly asked for the abolition of the monthly earnings ceiling, the Government has not made any special consideration to make amendments in adjusting the rates of compensation this time. In fact, numerous employees will be badly affected if the ceiling is maintained. In the past, out of the 60 000 employees who sustained work injuries, about 2 000 or more than 2 000 employees had their monthly earnings exceeded the upper ceiling. As a result, the compensation they received did not actually reflect their actual wages. We therefore earnestly hope that after this amendment, the Government will keep on making amendment with a view to eventually abolishing the ceiling.

Sharing the viewpoint put forward by the Honourable LAU Chin-shek earlier, the Neighbourhood and Workers Service Centre earnestly hopes that the Government can seriously consider the abovementioned problems. But for the proposed resolution which seeks to amend the Ordinance today, Madam President, I can say that we are reluctant to give our support albeit we are also being forced to do so. In fact, we are not very willing to support this Ordinance. This is because, just as I have said earlier, there are so many areas that this piece of legislation is unable to meet the demands of the injured employees or the family members of those killed at work. But why did I still support it? This is because, as Members are all aware, under the restriction of the Basic Law, Members are not allowed to make enormous amendment to our laws. Otherwise, the Government will say that this is going to affect public revenue, government policies and so on. This makes it impossible for us to make amendment even if we wish to do so. It can be said that our "hands and feet are tied" already.

Mr LEE Cheuk-yan was meant to move an amendment to the Pneumoconiosis (Compensation) Ordinance later. But unfortunately, the Government threatened that it would withdraw the whole piece of legislation if Mr LEE moved his amendment. This is really like "amputating our limbs". We will really let the employees down if we do not support this resolution which is going to make some improvement to employees' compensation. Therefore, I would like to tell the Secretary again that although we support the resolution today, we are still extremely dissatisfied. This is because it seems that the Secretary is still turning a deaf ear to many of the voices. What he did was to make some amendment once in a while. I hope he can view the problem from more angles, particularly the employees' angle. In view of the enormous contributions they have made to Hong Kong society, I hope the Secretary will refrain from making consideration from the perspective of compensation only. Instead, he should consider this as something which the employees duly deserve. Given the enormous contribution the employees have made to Hong Kong, why can we not give them more compensation for the losses they have suffered?

Just as I said earlier, Madam President, I support this resolution very reluctantly. Thank you.

PRESIDENT (in Cantonese): Mr LEE Cheuk-yan.

MR LEE CHEUK-YAN (in Cantonese): Madam President, on behalf of the Hong Kong Confederation of Trade Unions, I will add some additional information to the speech given by our Chairman, Mr LAU Chin-shek, earlier. What he talked about was the areas that need to be reviewed from a general point of view. But my speech will particularly focus on one of the items covered by the resolution today, that is, the lifting of the monthly earnings ceiling from $18,000 to $21,000.

The problem we have now is if a person dies or becomes permanently incapacitated because of his work, the income earnings will, for the purpose of calculating his permanent disability compensation or death compensation (six years' earnings), act as a cap on the compensation he will receive, regardless whether his original monthly income was $30,000, $50,000 or $60,000. While the old cap was at $18,000 previously, it is now changed to $21,000. I would like to ask: Why does such a restriction still exist in society? When a middle income (with a monthly salary of over $21,000) person sustains work injury or when he makes sacrifice for the prosperity of Hong Kong, why should we let him as well as his family members suffer from an abrupt drop in living standard? Members may perhaps imagine the case of a family with a monthly income of $30,000, and one of the family members, who provided the main source of income, died as a result of his employment. His monthly income was originally $30,000, but the income ceiling is now set at $21,000 per month. As a result, we will have to time $21,000 by six years. But why should the Government make a 30% discount? Why should the Government allow their living standard to drop abruptly? This is one of the questions I wish to ask the Government today. Why does the Government not strengthen the protection to prevent them from falling too hard? They have already made the sacrifice, then why not give better protection to his family members?

In fact, how many people are being affected? In accordance with the figures supplied to us by the Government in the subcommittee scrutinizing the resolution, the number of victims who were drawing a monthly income of more than $18,000 and who are suffering from work injury stands at 3 500 approximately, that is, 20% of the total number of injured employees. The relevant officials indicated that if the ceiling is raised to $21,000, the number of affected people will be reduced, with the number of affected people now stands at more than 1 000. However, I cannot agree to this figure. This is because salaries will, after all, increase and eventually 20% of the employees will be affected. The Honourable Bernard CHAN said the figure may be 10%. But no matter whether it is 10% or 20%, a considerable number of people ─ about several thousands of people─ will come under the restriction.

What we are talking about is to make improvement. Actually, not too much money is at stake. I want to ask why it is impossible for society to shoulder the responsibility? We made some calculations on that day. In fact, of all the compensations to be offered at the moment, one third involves permanent incapacity and death. Of these one third of the employees, only 20% of them are subject to the $21,000 ceiling. 20% of that one third equals to 6%, and what we are talking about is those people who comprise the 6%. If the earnings ceiling is raised from $21,000 to $30,000, the overall increase is only 2% to 3%. Why is this 2% to 3% not allowed by society? I did ask Mr Bernard CHAN from the insurance sector. According to Mr CHAN, actually the insurance fees do not necessarily need to be raised. For the purpose of maintaining competitiveness, insurers might pay for it themselves. No matter whether they pay for it or the employers enlarge the insurance to make up for it, this is only a small sum for them. But as far as victims are concerned, this can be regarded as a huge sum. Members can imagine if $21,000 is raised to $30,000, it will mean so much to a person who drew a monthly income of $30,000 for he can now get back the 30%.

For these reasons, today I would like to ask the Government again "why". I have said that numerous times and this is not the first time I say so. We had said the same thing when the adjustment was made the last time. This time we say it again. I do not want to say it again two years later. In doing so, our society will not be able to make progress. I would like to hand this "why" to the Government. It is actually not me who asked this "why" question. I am representing those who have a monthly income of over $21,000, the family members of the dead, those who sustain work injury or suffer from permanent incapacity in asking: Why? It is hoped that the Government can give us a reply later. It is also hoped that the Government can make improvement and the Financial Secretary can give his support. Thank you, Madam President.

PRESIDENT (in Cantonese): Mr Andrew CHENG.

MR ANDREW CHENG (in Cantonese): Madam President, I rise to speak today for I hope that the Government can understand that in the existing employees' compensation framework in Hong Kong, the culture of industrial safety or occupational health has in fact not yet laid a sound foundation. As far as the culture of occupational health is concerned, the previous government paid more lip service than actually doing anything in policy addresses or on some other occasions. For instance, in the Governor's policy address in 1993, we registered an unacceptable industrial safety record. The chances that local workers suffered injuries were several times higher than those in most of the developing regions. The Governor even regrettably admitted in 1995 that the safety record of local industries (including the manufacturing industry, catering industry and construction industry) was far from being satisfactory. As for the industrial safety record of the construction industry, it was even "tragic". And he even used the expression "tragically". Among various developed regions, Hong Kong is still one of the places that have the worst records in terms of industrial safety.

Let me turn back to our Special Administrative Region. What did our Chief Executive, Mr TUNG Chee-hwa, say? In the inauguration speech delivered by him on 1 July 1997 as well as in his first policy address delivered on 8 October 1997, he had, to our surprise, not mentioned a word about occupational safety and health. Mr LEE Cheuk-yan and Mr LAU Chin-shek have previously been following up this issue. I just cannot understand why the existing Hong Kong Special Administrative Region (SAR) Government had tried to do something in a perfunctory manner regarding the Employees' Compensation Ordinance every two years by raising some of the compensation rates. Can the new rate really reflect the level of compensation offered to injured workers? Can it reflect the contributions they have made in the past? Is it reasonable that they are only being treated like this? Is it necessary for the Government to restructure the concept and culture of occupational safety?

Let us look at the work the Labour Department is now doing. Occupational health only accounts for one fourth of the work done by the Labour Department. The Department is mainly responsible for executing and co-ordinating the work relating to labour administration and management, labour-management relations, work safety, employment services, employees' rights and welfare and so on. Members may take a look at the amount of resources available to the Labour Department again. If only one fourth of its functions is devoted to occupational health, Members will have an even stronger feeling that our SAR Government is not attaching importance to occupational safety at all.

Prevention is always better than cure. Madam President, if the Government fails to develop an occupational safety culture, people will only regard all these compensations as a flower vase. Since the establishment of the Occupational Safety and Health Council in 1988, many people have criticized that the Council is only a flower vase in the sense that it is completely incapable of leading Hong Kong to address, in terms of policy-making and execution, the potential hazards to occupational health that may exist in our industries ─ and even in the common office environment. So long as the SAR Government fails to establish a framework for occupational health, I will consider it still owes our workers and all those who work in offices a debt.

Madam President, the Democratic Party finds it extremely deplorable that the Government has exerted pressure on Mr LEE Cheuk-yan for he wishes to move an amendment to the Pneumoconiosis (Compensation) Ordinance. Given the fact that we are legislators, the Government should provide us with the space to enable us to have an opportunity to amend those ordinances that we are not satisfied with or those we deem inadequate. The Government has not only "held those cards to its advantage", it even acted like holding a telephone directory against Members' chests and then beating us up with all its might. Like driving Members to the corner of the wall, the Government would simply not allow Members of this Council to make any further amendment in this respect. In my opinion, such a culture and such a relation between the Government and the Legislative Council will only intensify the tension between us and there is absolutely no room for conciliation. I would definitely not hope to see the Government do it again in future. Otherwise, apart from facing so many barriers set up by the Basic Law, we, as legislators, are forced to feel the growing discord between the Government and this Council as well.

Madam President, I so submit.

PRESIDENT (in Cantonese): Miss CHAN Yuen-han.

MISS CHAN YUEN-HAN (in Cantonese): Madam President, with respect to the Employees' Compensation Ordinance (ECO) and the Pneumoconiosis (Compensation) Ordinance (PCO), which the Government has put before this Council today, the Federation of Trade Unions (FTU) does have its own ways of looking at them, and this applies especially to the ECO. Under other existing labour legislation, severance payments are subject to an income ceiling, which is pitched at $22,500. That is why when one looks at the proposal of the Government to revise the income ceiling in the ECO from $18,000 to $21,000, one may have the impression that this is really a good proposal. However, if one also looks at other labour legislation, such as the Employment Ordinance which I have mentioned, one will see that the income ceiling applicable to severance payments is $22,500. Hence, it can be seen that there are actually two standards for different labour legislation, one for the ECO and the other for other labour legislation. What is more, given the huge variations in wage levels, I really wonder whether the proposed income ceiling can achieve any meaningful purpose at all. Actually, the Government may well have to consider whether or not the income ceiling should be abolished. In this particular respect, I am sure that the labour sector will have very different views from those of the Government.

In addition, the ECO also involves the issue of drugs and treatment expenses. In regard to the related problems, there have been a lot of different arguments and controversies. The ad hoc committee under the FTU has submitted many representations on the Ordinance to the Government. One of our recommendations, which was first made as early as the 1980's, involves the establishment of a central compensation fund. We have made such a recommendation because we understand that any attempts to raise the level of compensation may involve the question of insurance premiums and insurance premiums will more often than not go to the pockets of insurance agents or insurance companies. That being the case, is it not a good idea for the Government to set up a central compensation fund? We have raised this issue many times before, but the Government has so far been employing a delaying tactic. In the past, whenever we put this Ordinance before this Council, we invariably raised the same viewpoints. When this Ordinance was submitted to us for scrutiny this time around, time was already running short. I hope that when he speaks later on, the Secretary can tell us whether it is now a suitable time to review the issue once again. Let us look at the issue of income ceiling, for example. In this regard, there are in fact different standards for different legislation. What is the Government going to say about this? I hope that the Secretary can later on explain why the standard applied to the ECO is different from that applied to other legislation on labour compensation.

Besides, Madam President, I would like to take this opportunity to talk about the problems related to pneumoconiosis. The FTU will also raise some viewpoints when the next ordinance is debated. When this amendment was submitted to the Subcommittee for scrutiny, many chronic patients' organizations urged us to pass it as quickly as possible. However, they did not realize that many long-standing problems must be resolved first. And, since we respect the arrangement that the Provisional Legislative Council should deal only with those "absolutely indispensable" legislative matters, the work on this Ordinance has been held up until recently. However, when we scrutinized this Ordinance this time around, we went to great lengths to emphasize that 1 January 1998 should be the implementation date for all compensation claims. On that basis, we maintained that this resolution should carry retrospective effect. Fortunately, the Government has accepted our request and has made the necessary adjustment. However, does this then mean that once this resolution is passed today, there will not be any more problems? Chronic patients' organizations have put forward many arguments to show that it will not be good enough to adjust the level of compensation once every two years according to the inflation rate, and one of these arguments is about the high incidence of death among pneumoconiosis patients. They maintain that the level of compensation must be adjusted once every year.

Madam President, we know that chronic pneumoconiosis patients do face many difficulties. That being the case, why has the Government refused to adjust the level of compensation once every year? These are the viewpoints which we have all along been putting forward. However, since we also want to pass these two resolutions as quickly as possible, those Honourable Members belonging to the FTU agreed to pass them first when they were submitted to this Council by the Government. However, this does not mean that we are entirely satisfied with the ECO and the PCO. We still hope that the Secretary will follow up on these two aspects in the future. Alternatively, he may initiate further discussions in the Labour Advisory Board. Thank you, Madam President.

PRESIDENT (in Cantonese): Secretary for Education and Manpower, do you wish to reply?

SECRETARY FOR EDUCATION AND MANPOWER (in Cantonese): Madam President, first of all, I would like to express my thanks once again to the Subcommittee on the resolution chaired by the Honourable CHAN Kam-lam for their support for the passage of this resolution. I have also mentioned earlier that, in view of the proposals put forward by the Subcommittee, we undertook to study whether the compensation level should be adjusted annually. Just now many Honourable Members have spoken on the Pneumoconiosis (Compensation) Ordinance. As to the questions relating to the resolution concerning pneumoconiosis, I would like to respond later when I speak on that particular resolution. My response now will mainly focus on the resolution under the Employees' Compensation Ordinance.

Other than supporting the resolution, a lot of Members also expressed their views on the compensation level and other matters such as the income ceiling. In fact, many of these views have been advanced before and I would like to respond to them briefly here. Regarding the compensation level, in addition to the regular increase according to price and wage movements every two years, we did actually try to make individual or comprehensive reviews of the compensation level as a whole. For example, in 1994, we raised the compensation level substantially by 130%. In 1996, we had a change in policy in which the minimum requirement of three days' sick leave to qualify for compensation was reduced to one day. In the legislative year of 1998-99, we also intend to put forward proposals to improve the compensation for fatal cases.

I will of course also study thoroughly the relevant opinions expressed by Members in their speeches. But I hope Members will understand that the whole employees' compensation scheme does not only involve the interests of employees, the affordability of employers has to be taken into account too, especially when this is a no-fault system. Therefore, I have mentioned in my main speech that our present proposal is approved by the Labour Advisory Board (LAB), including representatives of employers and employees. If there are any major amendments in the future, I hope that we will also be able to reach a consensus through our studies and discussions within the Government, as well as candid discussions between the representatives of employers and employees in the LAB. Just as I said a moment ago, I will put down all the opinions after the meeting and I will be glad to further discuss in detail with Members about these more basic and policy-related proposals at appropriate times and on suitable occasions, such as in a relevant motion debate or at a Panel on Manpower meeting. Thank you, Madam President.

PRESIDENT (in Cantonese): I now put the question to you and that is: That the resolution moved by the Secretary for Education and Manpower be passed. Will those in favour please raise their hands?

(Members raised their hands)

PRESIDENT (in Cantonese): Those against please raise their hands.

(No hands raised)

PRESIDENT (in Cantonese): I think the question is agreed by a majority from the Members who are present. I declare the resolution passed.

PRESIDENT (in Cantonese): Resolution under the Pneumoconiosis (Compensation) Ordinance. Secretary for Education and Manpower.

PNEUMOCONIOSIS (COMPENSATION) ORDINANCE

SECRETARY FOR EDUCATION AND MANPOWER (in Cantonese): Madam President, I move the motion standing in my name on the Agenda.

The purpose of this resolution is to revise the levels of compensation under the Pneumoconiosis (Compensation) Ordinance (PCO). The Ordinance provides for payment of compensation for persons, or family members of persons, who have been diagnosed on or after 1 January 1981 as suffering from pneumoconiosis and are incapacitated by or die as a result of pneumoconiosis. The levels of compensation are normally revised every two years to take into account wage movements, inflation and other changes. The existing levels of compensation came into effect on 1 January 1996. Similar to the circumstances under the Employees' Compensation Ordinance, the legislative proposal to revise the levels of compensation under the Ordinance did not satisfy the "indispensability" test for legislative activities by the Provisional Legislative Council. The resolution is now put forward to this Council for consideration. We propose that the revised rates should take effect from 1 August 1998. The revisions will take into account the price or wage movements for the full years from 1 January 1996 to 31 December 1998.

A Subcommittee was set up by the Legislative Council to study these two resolutions. At the Subcommittee meeting held on 16 July 1998, Members expressed concern about paying compensations for pain, suffering and loss of amenities under the PCO, because the level of compensation amount had not been adjusted from 1 January 1998 as scheduled. After careful study, we have decided to raise the level of compensation from $2,570 to $3,180. We originally proposed to raise the level of monthly compensation to $3,000, based on the actual and estimated inflation rate for the period from 1 January 1998 to 31 December 1998, but in order to make up for the additional amount foregone by the compensation recipients for the months from January to July 1998, we have decided to raise the proposed amount by $180 to $3,180. So, there is an increase of 23.7% or $610 as compared with the 1996 level.

Furthermore, we propose to increase the monthly rate for care and attention compensation from $4,050 to $4,160 to take into account the raise in wages and food provisions for foreign domestic helpers since the rate of monthly compensation was last revised; we also propose to revise the maximum amount for funeral expenses from $14,000 to $16,000 to take into account the estimated inflation for the period between 1996 and 1998.

Separately, we propose to raise the compensation for bereavement from $70,000 to $100,000. Under section 5 of the PCO, the minimum amount of compensation for death is pegged to the amount of compensation for bereavement. The revision of the amount of compensation for bereavement will automatically adjust the minimum amount of compensation for death. To preserve the value of these two compensation items, the proposed amount is set according to the estimated accumulated inflation from July 1993 to December 1998. A Member proposed to raise the level of bereavement compensation to $150,000. We will consider the implications and feasibility of this proposal, and the possibility of revising the level of compensation once every 12 months. We will consult the Labour Advisory Board (LAB) and the Pneumoconiosis Compensation Fund Board (PCFB) on these proposals.

Finally, we propose to raise the maximum daily rate of reimbursement of medical expenses from $160 to $175 to take into account the increase in fees charged by public hospitals and clinics since November 1996.

These proposals have been endorsed by the LAB and the PCFB and supported by the Legislative Council Subcommittee responsible for scrutinizing the relevant resolutions. Once again, I would like to thank the Subcommittee for its efforts. Madam President, just now some Members mentioned certain points, especially some recent press reports, which led people to believe that the Education and Manpower Bureau or my colleague had requested or forced a Member to withdraw his amendment proposal seeking to raise the bereavement compensation from $70,000 to $150,000. With your leave, Madam President, I would like to clarify this matter briefly.

First of all, I understand that when my deputy, Mr CHEUNG Kin-chung — whom I believe Members are all quite familiar with —learned about Mr LEE Cheuk-yan's proposal, he did call Mr LEE on Monday to explain the stance of the Administration on Mr LEE's proposal to raise the level of bereavement compensation. Simply put, we think that the adjustment of the amount of bereavement compensation from $70,000 to $100,000 is adequate in view of the current inflation rate. Mr LEE Cheuk-yan's proposal to raise the amount significantly to $150,000 would add an extra burden on the Pneumoconiosis Compensation Fund and on the Pneumoconiosis Ex-gratia Payment Plan which made ex-gratia payments to pneumoconiosis patients before the PCO came into effect in 1981. Therefore, our position is that we must conduct a detailed study on the financial position of the Pneumoconiosis Compensation Fund and Ex-gratia Payment Plan and to seek the views of the PCFB and the LAB before we can assess the implications of Mr LEE's proposal. On basis of the above reasons, my deputy, Mr CHEUNG Kin-chung, pointed out to Mr LEE that if he insisted on the proposed amendment, then the Administration would be forced to withdraw the present resolution for the time being and that would defer the implementation of the proposal on increasing the level of compensation payments, and the interests of the compensation recipients would be jeopardized. That is why we proposed that Mr Lee should withdraw his amendment for the time being, so that the government resolution can be carried for the benefit of pneumoconiosis patients and their family members at an earlier date. I am very grateful to Mr LEE Cheuk-yan for accepting our suggestion, and I am fully aware (perhaps Mr LEE Cheuk-yan may clarify on this point later on) that my deputy, Mr CHEUNG, and Mr LEE had explained and exchanged their views in a cordial and friendly atmosphere. I would also like to take this opportunity to reiterate that our objectives are virtually the same, and we all want to implement the proposal on raising the compensation levels as provided under the PCO with effect from 1 August 1998. That would help pneumoconiosis patients and their family members. So, the fact is contrary to what certain newspapers have described, and the Government is not adopting a "lose-hit, win-take" approach. There are neither losers nor winners in this case, and this is also not a case of "overturning the tables before the fight" because there were neither any fights nor tables. Why do we have to carry out a detailed study? I have already clarified the situation, but if Members want me to elaborate, I would be happy to do so. However, as we do not have very much time, I would just stop here. Once again, I urge Members to support the resolution, so that pneumoconiosis patients and their family members can receive additional financial assistance at an earlier date.

Thank you, Madam President.

The Secretary for Education and Manpower moved the following resolution:

"That, with effect from 1 August 1998, the Pneumoconiosis (Compensation) Ordinance be amended —

(a) in the First Schedule -

(i) in Part IIA, by repealing "$2,570" and substituting "$3,180";

(ii) in Part IV, by repealing "$4,050" and substituting "$4,160";

(iii) in Part V, by repealing "$70,000" and substituting "$100,000";

(iv) in Part VI, by repealing "$14,000" and substituting "$16,000";

(b) in the Second Schedule, in paragraphs 1 (b), 2 (b) and 3 of Part I, by repealing "$160" and substituting "$175"."

PRESIDENT (in Cantonese): I now propose the question to you and that is: That the resolution moved by the Secretary for Education and Manpower, as set out on the Agenda, be passed. Does any Member wish to speak? Mr CHAN Wing-chan.

MR CHAN WING-CHAN (in Cantonese): Madam President, the Pneumoconiosis (Compensation) Ordinance (PCO) referred to in the resolution provides that compensation shall be payable to a person or his family members if, according to a diagnosis on or after 1 January 1981, that person suffers from pneumoconiosis and sustains a resultant incapacity or dies of the disease.

Under the PCO, the existing amount of compensation for "any pain, suffering and loss of amenities" is $2,570 a month, and this started to take effect on 1 January 1996. Since this level of compensation should be adjusted once every two years, and assuming that the inflation rate for the period between 1 January 1996 and 31 December 1998 is 16.8%, the amount of compensation should by now be adjusted to $3,000.

However, the original resolution has specified 1 August 1998 as the effective date, with no retrospective effect to take account of the inflation rate in the seven months between February and August. This is indeed unfair because workers suffering from the disease will have to suffer losses.

During the scrutiny of the resolution, our focus was on the issue of "retrospective effect", and some Honourable Members even proposed to amend the resolution. The initial stance of government officials was very firm and negative. They insisted that any change to the level of compensation and any incorporation of "retrospective effect" would necessitate amendments to the principal ordinance. For this reason, they maintained that amendments to the resolution would not be practicable due to the shortage of time.

Fortunately, Madam President, government officials eventually yielded to Members' demands and proposed to increase the monthly compensation from $3,000 to $3,180, taking account of the effects of inflation during the seven months in question.

I really welcome the pragmatic approach of the Government and its willingness to take good advice this time around. That said, Madam President, I still want to raise one point. Some Honourable Members once wanted to move amendments to some items in the resolution, and they even managed to obtain your permission to do so. However, Mr CHEUNG Kin-chung, Deputy Secretary for Education and Manpower, hastened to warn them beforehand that if they insisted on moving their amendments, the Government would certainly do something in response. And, believe it or not, he did succeed in "scaring off" those Members who wanted to amend the resolution. In the end, these Members decided to withdraw their amendments. The Secretary has already offered an explanation for his actions. Madam President, however, I really do not know whether the Secretary has in fact been inspired to follow suit by the highly effective "surprise attack" of Miss YUE the other day. Well, the Government needs not respond to this question because its reply a moment ago has actually offered a partial answer. Of course, the Secretary may still answer it if he really wishes to do so.

Anyway, I will support the resolution on behalf of the Federation of Trade Unions and the Democratic Alliance for the Betterment of Hong Kong.

Thank you, Madam President.

PRESIDENT (in Cantonese): Mr LAU Chin-shek.

MR LAU CHIN-SHEK (in Cantonese): Madam President, workers who are suffering from pneumoconiosis were mostly engaged in the construction industry, and they are the "unsung heroes" who have contributed to the prosperity of Hong Kong. Therefore, while we look at the jungle of towering buildings outside this Chamber, we must also look sympathetically at the pneumoconiosis patients who are sitting in the public gallery today. They contracted this disease in the course of their work; as a result, today, they have to live with various difficulties both in their daily life and in their work, and this will probably go on tomorrow and even in the years ahead. This is nothing but the result of the past emphasis of the construction industry on achieving efficiency at the expense of occupational safety. Therefore, it can rightly be said that our community and our Government do "owe these workers a debt"!

That being the case, if the Government continues to remain so mean and refuses to make any positive attempt to improve the compensation payable to workers suffering from pneumoconiosis, I do not think that we can still face these workers without any sense of guilt. Mr LEE Cheuk-yan will shortly speak to explain his remark of "overturning the tables before the fight". As for me, I will put forward three demands on behalf of all those workers who are suffering from pneumoconiosis.

First, the frequency of adjusting the amount of compensation according to the inflation rate should be changed from once every two years to once every year. That way, workers will be able to benefit from a more reasonable compensation system.

Second, about the "compensation payable in respect of any pain arising from pneumoconiosis". At present, most workers can receive only $2,570 a month. Although our persistent demands have been answered by a proposal in the resolution to increase the amount of such compensation to $3,180, I still maintain that if these workers are to have any reasonable improvement to their basic living standards, the amount should be increased to $4,000.

Third, the compensation payable to pneumoconiosis patients is currently characterized by the existence of "two compensation systems for one single disease". Patients diagnosed before 1981 to be suffering from the disease are not protected by the relevant legislation, and they cannot seek to increase their amount of compensation by undergoing a medical examination again. Therefore, I maintain that it is necessary to put in place a uniform and equal system of compensation for all workers suffering from pneumoconiosis.

During the time of the former Legislative Council, Dr the Honourable LEONG Che-hung and I made a lot of attempts to improve the compensation payable to workers suffering from the disease. In 1996, I started to suffer from asthma. Since then, whenever there is any temperature change, I will suffer, and this has reminded me most deeply of the suffering of pneumoconiosis patients. The amount of increase which has been proposed can never be considered adequate. For this reason, when I heard the Secretary referring to this increase as adequate, I was caught by pathos. I think only pneumoconiosis patients themselves will able to tell that their suffering is actually beyond any compensation. If we continue to remain so mean, being so particular about how much we have to pay or how much the Government has to pay, we will never be able to offer any meaningful compensation to pneumoconiosis patients. I hope that the Government will actively consider the idea of improving the compensation system, so as to provide reasonable protection to those workers who are facing immense difficulties.

Thank you, Madam President.

PRESIDENT (in Cantonese): Mr LEUNG Yiu-chung.

MR LEUNG YIU-CHUNG (in Cantonese): Madam President, in regard to this Ordinance, I wish to raise several problems and put forward some opinions for the consideration of the Secretary.

First, according to the Secretary, he is prepared to adjust the "compensation for pain", and he is even prepared to date back the adjustment so as to cover the period between January 1998 and July 1998. Although this can serve as a compensation for the error of failing to do so in the past, I still wish to ask the Secretary a number of questions. During the seven months in question, when the level of compensation was not adjusted, did any worker die unfortunately as a result of this disease? Did any family members of these workers suffer during this period, for the reason that the lack of any adjustment had rendered them unable to get more compensation despite the pressure and difficulties which they faced in their living?

I do not know whether the Secretary has conducted any survey. If he has done so, I hope he can answer this question: Does he have any statistics on the number of workers who have suffered losses in compensation as a result of the lack of any adjustment? My point in asking this question is that even if the level of compensation is really raised, and even if the shortfall is paid over the next 17 months, some people may still fail to benefit. I hope the Secretary can give us the relevant statistics.

I also wish to point out that the amendments now in question do not actually touch upon yet another issue: the death of a pneumoconiosis patients may not always be caused by the disease of pneumoconiosis itself, and he may simply die of other complications such as tuberculosis, alveolar emphysema and cardiac failure. Besides, long-term medication may also cause lung mutation in a chronic pneumoconiosis patient and lead to his death. However, those workers who die of such complications will not be given any compensation because pneumoconiosis is not the direct cause of their death. In other words, there will not be any compensation for their death, nor will there be any reimbursement of funeral expenses at all.

Maybe, Dr LEONG Che-hung can tell us whether or not many pneumoconiosis patients have in fact died of related complications. And, if this is indeed the case, what compensation can the workers concerned receive under the relevant legislation?

I do not know whether the Secretary has ever conducted any survey on cases of this nature. If we are to really tackle the situation confronted by the workers concerned ...... I hope that the Secretary will consider the matter once again and work out ways to ensure that if any person was once genuinely engaged in the construction industry and later died of any complications related to pneumoconiosis, his family members or other persons concerned will be able to receive compensation. That way, we can ensure that these workers will not be denied any compensation after making contributions to this industry.

Another matter relates to the expenses incurred by provision of care and attention to pneumoconiosis patients. The Ordinance does not lay down any specific provisions on such expenses, and so, the doctors or medical staff in charge will make all the decisions. That being the case, compensation for such expenses will vary from person to person. If a doctor thinks that the matter is important, he may give his approval, but if he thinks otherwise, he may simply refuse to give his approval. There are absolutely no uniform criteria at all. The result is that some family members of pneumoconiosis patients may fail to get any compensation after taking leave from their employers to look after these patients. Pneumoconiosis patients who have to carry oxygen masks when going out are one example; they cannot look after themselves and must need help from their family members. In cases like this, what can their family members do? They must take leave from their employers in order to look after these patients. Unfortunately, doctors usually do not apply uniform standards in cases like this, and as a result, some people will fail to get any compensation for such expenses. I do not think that this is fair at all. We all hope that the Ordinance can help pneumoconiosis patients and enable their family members to look after them. However, the Ordinance has obviously failed to realize our hope.

Therefore, I hope that the Secretary will tell us whether he will consider this problem once again and introduce relevant improvements to the Ordinance.

Some colleagues have mentioned the point on using 1981 as a dividing line. I will not repeat this point now.

Just now, I also mentioned that Mr LEE Cheuk-yan once wanted to move an amendment to the resolution. I believe that Mr LEE has not actually been scared off. And, I believe that nothing can scare him off anyway; can we not see that many times in the past, he did press ahead with his demands despite difficulties? However, I am really not quite sure what has happened this time around. Perhaps, Mr LEE should really clarify whether he has really been scared off. The Secretary has simply played the whole thing down, saying that his deputy, Mr CHEUNG Kin-chung, is a good friend of Mr LEE, and for this reason, just a simple pat on Mr LEE's shoulder is sufficient coercion on Mr LEE to withdraw his amendment. Is that really the case? This is not the first time these problems are raised. If Mr CHEUNG Kin-chung really thinks that he has to study them in detail, he should not have waited until today. I think that the Government should have noticed these problems much, much earlier. The Government may well argue that far-reaching implications are involved. However, today is not the first time these problems are raised. Therefore, I can never accept the argument that more time is required to study these problems. The reason is that pneumoconiosis patients and related organizations have been raising these problems over and over again. Why has the Government waited until the last minute, and then say that it wants more time to study them? I do not know what other people think, but I for one find the argument of the Government totally unconvincing.

Therefore, Madam President, as I stated just now, I will support the passage of the resolution. I hope that it can be passed as quickly as possible. In the words of the Secretary, the resolution must be passed as quickly as possible for the benefit of employees. That said, I must still say that the Ordinance is far from being able to solve all those problems which I have mentioned. And, remember, these are actually problems raised by workers repeatedly. Unfortunately, the Government has so far remained lukewarm in response, and it has even turned a blind eye and a deaf ear to their demands. I really think that having to support the passage of the resolution is indeed a very painful task for all of us. I used the adjective "reluctant" just now. I must now add the word "painful", because given the suffering of workers, if we do not pass the resolution as quickly as possible, how can we possibly ease their pain? Their suffering is just far too great to be eased very easily. Therefore, we must pass the resolution as quickly as possible. The point, however, is that after we have passed the resolution, how are we going to solve the many problems I have mentioned?

We are now hamstrung by many constraints. The Secretary knows this very well, and he knows that this is our weakness. That is why he thinks that he can do whatever he likes; he thinks that he can amend the Ordinance in any way he sees fit: he thinks that he is free to choose between "generosity" and "meanness". However, since we have already decided to help employees by drawing up legislation and by setting up funds, why not just do our very best, so as to give them more security and comfort in their late years?

Finally, Madam President, when I was speaking just now, I saw the Secretary smiling. I do not know why he did so. Maybe I was not articulate enough to convey my points. Maybe he did not find my remarks useful at all. Whatever the case, he seemed to be jeering at me. However, all this does not matter to me at all. My only sincere hope is that he will pay serious attention to the suffering and hardship of pneumoconiosis patients and their family members. I hope that he will review the Ordinance once again, so as to give them more assistance.

Thank you, Madam President.

PRESIDENT (in Cantonese): Dr LEONG Che-hung.

DR LEONG CHE-HUNG (in Cantonese): Madam President, I have been concerned with the case of compensation for people suffering from pneumoconiosis for a long time. I am so concerned for the simple reason that I am a medical practitioner. Although I am not suffering from asthma, I definitely understand the pain suffered and problems faced by pneumoconiosis patients.

Two Honourable colleagues have mentioned my name. That I am making a response today not because they have mentioned my name for the problem lies with the Government, not me, and the Government should give an answer.

Nor am I representing workers or employers. I am neutral and I would like to express my views on the issue. I hope that the Government will listen to a more neutral view and take advice more readily.

Since the Pneumoconiosis (Compensation) Ordinance (PCO) was introduced to the then Legislative Council, I have a feeling that the criteria for compensation or the help given under the Ordinance to pneumoconiosis patients are inadequate. I am always dissatisfied with these and I hope that given time, the Ordinance can be amended to such an extent that it will be commonly accepted and can really help the victims. Therefore, just like the Honourable LEUNG Yiu-chung or the Honourable LAU Chin-shek, I had no choice but accepted the PCO at that time as I thought that having some compensation was better than none at all. I likewise accept this resolution as I think that we can at least allow the victims to get certain help, and if I do not accept it, the victims may not get any help. I would only like to express my views within these 10 minutes.

Firstly, I would like to express my views on this resolution and the attitude of the Government. Secondly, I would like to add some remarks concerning the compensation for and development of pneumoconiosis and the overall policy of the Government in the hope that the Government will follow this up in future. As regards this resolution, as Mr LEUNG Yiu-chung just said, superficially, the Government says that the Ordinance will be reviewed once every two years such that the amount of compensation given to each worker can be increased once every two years to give them greater help. The amount should be reviewed early this year but the Government used the excuse that this legislation was not indispensable and the Government could do nothing. I think that we do not need to argue about whether the Government is right or wrong. However, we can clearly see that the act of the Government was unreasonable. It can be said that the Government has dealt with the matter in a rigid way. As Mr LEUNG just mentioned, I definitely agree that pneumoconiosis patients will have mishaps at any time. If the Government does not give a patient more compensation before he has a mishap, and if he has a mishap in the next few months, he will not be able to get the compensation he should have. I find this practice of the Government regrettable. The Government has agreed to change its usual practice and increase compensation. However, an increase in compensation cannot make up for things lost. For instance, if one or two such patients die in the meantime, how can they get compensation? This is the first thing we find regrettable.

The second thing we find regrettable is related to the compensation for bereavement which Mr LEE Cheuk-yan intended to propose. The Secretary just said that "no, we are just discussing, and we would like to consider it later". However, there are problems with the attitude of the Government. If the Government really has a rationale for not increasing the compensation to a large extent or that this will involve problems, it may as well put forward its rationale in this Council and convince or lobby Members to adopt a proper practice, instead of treating Mr LEE Cheuk-yan this way. I think that it should lobby the Council instead of threatening Members to withdraw their amendments. It is definitely not sensible for the Government to do so and this has definitely defeated our aim of achieving a harmonious and co-operative relationship between the executive and the legislature. I earnestly warn the Government against using this administrative measure again as this will jeopardize the relationship between the two bodies that really help Hong Kong.

I also hope that the Government will consider three points apart from this resolution. First, the Government should consider the fact that it has so far failed to properly deal with those who fell victims before 1981. I really hope that the Government will consider not drawing a demarcation line at 1998 and will deal with the cases before or after 1998 in the same way so that all victims can be benefited. It is because not many of those who fell victims before 1998 are still alive. Why do we not allow them to be benefited as well? The Government should consider this. Second, as a medical worker, as expressed by Mr CHAN Wing-chan and Mr CHAN Kam-lam, I thoroughly understand that prevention is better than cure and I therefore often advocate that workers should go through check-ups before and during employment. Although the last policy address of the Chief Executive fails to mention occupational safety, the Secretary for Education and Manpower has clearly indicated in the Annex that legislation will be enacted this year for the implementation of check-ups before and during employment. However, we fail to witness so far the implementation of such check-ups. I hope that the Government will implement such check-ups as soon as possible so that less people will suffer from the disease and that less people engaged in hazardous work will suffer from occupational diseases. Third, pneumoconiosis patients need costly rehabilitation services while the allocation made out of the Fund to these rehabilitation services is extremely inadequate, I hope that the Government will consider this. Thank you, Madam President.

PRESIDENT (in Cantonese): Mr LEE Cheuk-yan.

MR LEE CHEUK-YAN (in Cantonese): Thank you, Madam President. The Secretary said that the Deputy Secretary for Education and Manpower, Mr CHEUNG Kin-chung, and I discussed about this in a calm and friendly manner. At around 5 pm on that day, I received a call from Mr CHEUNG asking me to withdraw my amendment when I was at a meeting. I told him that I would talk to him later. He called again at around 7 pm and we held a meeting afterwards. At that meeting, although I just said that we discussed about this in a calm and friendly manner, I was calm but I wonder if Members know how much stamina it required, how crafty was it behind a friendly face, and how I stretched my brain figuring out how I was going to handle the situation? I came up with an idea but I finally decided against it. I thought that I could still present a private resolution in the Council on 29 July to obliterate all matters proposed by the Government and ward off the Government's blow. However, I understand that this will really exhaust my stamina and involve great risks. The first risk is that I have to ask the President for leave and I wonder whether the President will grant it. The second risk is that I still have to ride over the hurdle of charging effect. The third risk is that the resolution has to go through voting by two groups of Members. Mr CHAN Wing-chan just asked if I was scared off. I just found that the Government wanted to destroy good and bad alike. I did not wish to go on fighting and I finally decided to withdraw my amendment. Throughout the whole course, I turned the matter in my mind again and again and when I talked with Mr CHEUNG over the phone for the third time, I told him that I would withdraw the amendment so that we could pass the resolution. However, I am very disappointed. I find that the executive is wrestling with the legislature and the whole process has become fairly crooked.

I still recall that when Mr LAU Chin-shek moved an amendment in 1994, the Government adopted a "lose-hit, win-take" attitude and withdrew the amendment during the Second Reading. The second incident that made me feel sad is related to the legislation abolishing the collective bargaining right of employees ─ another incident in which the Government adopted a "lose-hit, win-take" attitude. Yet, I agree with Mr WONG that we even do not have a chance to hit this time as the Government wishes to destroy good and bad alike and it reckons that I will not be able to fight back. I cannot do anything and I do not wish to go on fighting. The Secretary needs not thank me but the pneumoconiosis patients I care about as I do not wish to risk at their expense. Whatever happens in future, we must pass the resolution today and I earnestly hope that the Secretary will consider giving them $150,000 compensation and finally give them the compensation as promised. I would like to follow the example of Mr CHAU Tak-hay and express that I am not regretful but angry, as Dr the Honourable LEONG Che-hung just mentioned, the biggest fault of the Government lies in that it does not allow fair competition. Why can it not take up an open challenge instead of stabbing someone in the back? Should this be the relationship between us? We can actually have a discussion. For me, it is not easy to secure votes as voting by two groups of Members will be held and our demand for specifying the compensation as $150,000 may not be met. However, I wonder if the Government fears that I will be too busy, and therefore, it strikes the last blow, turning the tables even before the fight. Nevertheless, I do not find the reasons given by the Government sufficient. The Government gave two reasons. Firstly, it has to consult the Pneumoconiosis Patients Fund and the Labour Advisory Board (LAB). In fact, the incident has indicated that the Government had not given the Fund and the LAB certain information when it made the first consultation and proposed increasing the compensation from $70,000 to $100,000. Why did it do so? What are we discussing about? We are discussing about the compensation for bereavement.

In 1997, the Honourable Albert HO and I proposed this legislation concerning compensation for incidents other than death to the Department of Justice. I have to admit one thing for which I have to apologise, that is, I left out pneumoconiosis at that time. As I now know that I left out pneumoconiosis at that time, I certainly have to make up for my mistake and I hope that the amount will be increased to $150,000. I hope that Honourable Members will not forget how we arrived at $70,000. At the beginning, this compensation was linked with the compensation for fatal accidents. Why do we not link up these compensations as we have always done? The Honourable Ronald ARCULLI correctly asked at the Bills Committee the other day if those pneumoconiosis patients were suffering less pain. All patients are in great pain, can we say that some patients are suffering less than other patients? While some patients get $150,000 compensation, can other patients only get $100,000? The Secretary has to give us an answer. The Secretary just said that the Government has not fully consulted the Fund. I would like to ask the Secretary if he has told the Fund and the LAB that the compensation under the legislation for incidents other than death has been revised to $150,000. If he has not, he has not given them adequate information. If there is a new piece of information that the compensation has really been increased to $150,000, should the compensation in question be linked with that compensation and revised as $150,000?

Secondly, the Secretary just said that he asked me to withdraw my amendment to allow the Government to carefully study the possible impacts. What are the impacts? We are discussing about compensation for bereavement. If patients have claimed compensation, certain amounts will be deducted from the compensation awarded in future. However, the surviving families of persons who fell victims before 1981 cannot get this compensation for bereavement. There are 500 such surviving families who hope to receive this compensation for bereavement and there will surely be a limited number of new patients. It is precisely this pre-1981 group who urgently hope to get this compensation for bereavement. How much compensation is involved? A $50,000 compensation for each of these 500 people makes up a total of $25 million. The amount will be paid in instalments in a few years after their actual death. How much impact will paying $25 million in instalments in a few years have on our rich Government? The $25 million may be paid in instalments over 10 years, in other words, only $2 million a year. Probably, the amount will be paid in instalments over 20 years. We have precisely been discussing about this amount. The Secretary says that he has to carefully study the possible impacts but I wonder if there is a need to do so. Regardless of how things turn out, I earnestly hope that we will keep looking forward after crossing swords. I really hope that when the Administration presents the resolution again, it will agree to give them $150,000 compensation, and that it will do so quickly as it will be unfair for certain people as time goes by. I hope that the Administration will expeditiously present the resolution again and that all Honourable colleagues will give their support at that time. If the Administration does not present the resolution again, I promise the patients concerned that I will certainly present a private resolution to help make improvement.

I would like to raise another issue that is not related to death. I just mentioned that the allowance will be increased from $2,570 to $3,180. We certainly welcome this move of the Government but I hope that the Government will ponder over this: some patients have 60% to 70% disabilities, they have used up the compensation they got and they depend on $3,180 for subsistence. Can we give them more assistance. Can a review be made once again? As Dr LEONG Che-hung just said, we should review whether it is reasonable that these people get $3,180 for subsistence? I earnestly hope that the Government will make more efforts in this regard. I am grateful to the Government for promising to carry out a review once every two years but I wonder if it can consider doing so once a year. I speak strongly for this as we actually owe those patients one year in carrying out a review once every two years. Therefore, I hope that a review can be held once a year as we will then owe them less. Lastly, I call upon the Government to do more for these people. Thank you, Madam President.

PRESIDENT (in Cantonese): Mr Michael HO.

MR MICHAEL HO (in Cantonese): Madam President, the Democratic Party supports this resolution. However, we support it because we are left with no choice. As Members of the Legislative Council, we are actually not left with no choices. Constitution-wise, Members of this Council are allowed to move an amendment to a resolution. Mr LEE Cheuk-yan did try to move an amendment to this resolution. But regrettably, during the process, the Government has actually resorted to these means and made these threats. In 1994, Mr LAU Chin-shek did not admit defeat by "lose-hit, win-take" tactic in respect of the proposed amendment, which was also debated in this Chamber at that time. All Members abided by the parliamentary rules and lobbied for votes. In fact, whether one loses or wins is not important. This is precisely the way we should follow in dealing with business in this Council. But this time ......

MR LAU CHIN-SHEK (in Cantonese): I should like to clarify that it was not LAU Chin-shek who took the "lose-hit, win-take" tactic ─ Excuse me, Mr Michael HO ─ It was the Government which took the "lose-hit, win-take" tactic".

PRESIDENT (in Cantonese): Clarification should be made later. Mr Michael HO, please continue.

MR MICHAEL HO (in Cantonese): Yes, I meant the Government. We were not even given a chance to propose this in this Council for debate this time. Under the existing system, I actually do not believe Mr LEE Cheuk-yan's amendment can be passed. How can it possibly be passed? In fact, it is impossible for it to be passed. But according to the Rules of Procedure laid down in this Chamber, it will be all right if the Government deems the need to spend some time to conduct consultation. It will be perfectly all right for the Government to, depending on the various encumbrances, make all sorts of calculations. Why did it not put forward all the excuses to do the lobbying? I am sure the Government will definitely be able to secure enough votes to veto any amendment moved by Mr LEE Cheuk-yan. Why did it choose not to lobby here in an open and above-board manner by putting forward its arguments in this Chamber and, by way of debates, arrive at a decision in the end? The Administration asked Mr LEE to withdraw his amendment. Withdrawal means that nothing will be done. We can see that this resolution precisely aims at destroying all proposals, good and bad alike. Madam President, in fact, the Administration is treating this group of sick people who are suffering from pneumoconiosis as chips by holding firmly that Mr LEE Cheuk-yan cannot afford to lose and there is nothing for him to choose. This is because he can only choose to offer these people who are suffering from pneumoconiosis some compensation expeditiously, regardless of the amount. In fact, the matter is very simple. Now the Administration says that it needs to conduct consultation and go back to make some calculations. In fact, the Administration has got enough arguments to secure enough votes or lobby my colleagues in this Council to vote against the amendment. The Administration will surely be able to secure enough votes so that Mr LEE's amendment will not be passed. Why did it need to adopt such inferior means? If the Government still needs to adopt such means under such a safe situation, Madam President, I do not really know what tricks the officials will play once the votes are not secure. Madam President, I consider it really shameful for the Government to resort to such means as threatening. The Democratic Party feels extremely regrettable about the whole process of moving the resolution this time.

PRESIDENT (in Cantonese): Secretary for Education and Manpower, do you wish to reply?

SECRETARY FOR EDUCATION AND MANPOWER (in Cantonese): Madam President, I wish to make a number of responses and clarifications with regard to Members' speeches.

First, I have to point out that the Government certainly respects pneumoconiotics as well as understands and sympathizes with the difficulties and the situation of the pneumoconiotics. Just now in my speech, I said that the amount of compensation would be increased from $70,000 to $100,000, which should be enough. Basically, this is based on the criterion of compensation that we have set, that is to say, the compensation amount will be adjusted according to the inflation rate. This does not mean that the Government does not respect pneumoconiotics or that it does not understand their difficulties. According to Dr LEONG Che-hung, the fact that the Government did not propose a resolution in the Provisional Legislative Council on the grounds that it was not "indispensable" seemed to show a lack of sympathy. We understand this argument. However, we can also say that we had consulted legal advisors on our decision as to not to propose the resolution on these grounds. In other words, the reason put forward was based on the legal viewpoint of legal advisors.

Just now Mr LEUNG Yiu-chung raised many technical questions about the legislation. My colleague from the Labour Department sitting next to me has noted these down. We will be happy to respond to his views. We will also be happy to review the whole Pneumoconiosis (Compensation) Ordinance (PCO) at an appropriate time in the future to see if improvements need be made. I also wish to clarify that that I did not know why and I was not aware that I was smiling, or that I had cracked a smile during his speech, until he told me. I wish to clarify that if I did smile, it was certainly not because of his speech or because I did not respect his speech. Maybe I should remind myself to frown rather than smile in future in the Legislative Council.

Just now Mr LEE Cheuk-yan also commented on the exchanges between him and my colleagues and me during the course of discussion. He seemed to give us the impression that it would be quite simple to increase the amount of compensation from $70,000 to $150,000 under the Fatal Accidents Ordinance (FAO), and that there is no need to study its effects or submit it to the Pneumoconiosis Compensation Fund or the Labour Advisory Board (LAB) for discussion. Since he takes this view, for the record at least, I wish to spend some time on making several points to explain why we consider that we need to take some time to study this matter.

The reason is that in our view, the PCO and the FAO are entirely different, with different legislative intent and of different nature.

First, the PCO stipulates that compensation for bereavement (or simply "bereavement compensation") refers to compensation payable to the family of a pneumoconiotic who has died before a certificate assessing the amounts of compensation is issued by the Pneumoconiosis Compensation Fund Board (PCFB). In other words, the pnenmoconiotic has never received any compensation for incapacity in his lifetime. The bereavement compensation is in addition to the compensation for death and funeral expenses. As for the damages for bereavement under the FAO (now at the amount of $150,000), it is a kind of damages. If the accident which led to a person's death was caused by any default, neglect or wrongful act of another person, his family can bring an action for damages for bereavement against the relevant person.

Second, compensation payable under the PCO is based on a compensation system of collective responsibility (in respect of the persons paying the levy) that does not take the default of anyone into account. In claiming compensation for bereavement, there is no need to prove that the death of a pneumoconiotic was caused by the default, neglect or wrongful act of any person. The PCFB will automatically pay the relevant compensation to the family of the deceased in accordance with the stipulations of the relevant legislation. The damages for bereavement under the FAO are compensations payable as a result of tortious acts by individuals to the relevant persons for the loss of their relative. The relevant claims must be dealt with by the courts and high legal costs are involved.

Third, under the PCO, if the pneumoconiotic has never received compensation in his lifetime, his family can receive the following compensation:

1. compensation for bereavement: $100,000 as proposed by the Government.

2. compensation for death: if the pneumoconiotic has not reached the age of 40 when he dies, the maximum amount of compensation can reach $2.19 million.

3. reimbursement of the funeral expenses actually incurred, at an amount not exceeding $16,000 as proposed by the Government.

Under the FAO, on the other hand, dependants of the deceased are entitled to claim other damages. However, they must prove their damages as a result of the death and that the relevant death was caused by the default, neglect or wrongful act of the person against whom the claim is made.

Due to the above reasons, our initial view is that it is inappropriate to equate the compensation for bereavement under the PCO with the damages under the FAO. In addition, increasing the amount of compensation for bereavement substantially to $150,000 will put an additional financial burden on the Pneumoconiosis Compensation Fund and the Pneumoconiosis Ex-gratia Scheme funded by the Government. Therefore, we have to examine the relevant impact carefully. Our grounds are indeed justified. Nevertheless, we pledge and reiterate that we will examine the relevant proposals very carefully and consult the PCFB and the LAB on the relevant proposals.

I believe that the Legislative Council or the Legislative Council Panel on Manpower will definitely discuss these issues in detail in the future. I just wish to leave a record here to at least, make it clear that the Government, for some reasons, hopes that Members can pass this resolution as soon as possible by aiming at the same goal to increase the amounts of compensation payable to pneumoconiotics with effect from 1 August. Thank you, Madam President.

PRESIDENT (in Cantonese): I now put the question to you and that is: That the resolution moved by the Secretary for Education and Manpower, as set out on the Agenda, be passed. Will those in favour please raise their hands?

(Members raised their hands)

PRESIDENT (in Cantonese): Those against please raise their hands.

(No hands raised)

PRESIDENT (in Cantonese): I think the question is agreed by a majority from the Members who are present. I declare the resolution passed.

PRESIDENT (in Cantonese): Resolution under the Buildings Ordinance. Secretary for Planning, Environment and Lands.

BUILDINGS ORDINANCE

SECRETARY FOR PLANNING, ENVIRONMENT AND LANDS (in Cantonese): Madam President, I move the motion standing in my name on the Agenda.

The motion seeks to amend the description of Scheduled Area No. 3 in the Fifth Schedule to the Buildings Ordinance (the Ordinance) to refer to the plans dated 29 June 1998 deposited in the Land Registry.

At present, Scheduled Area No. 3 is defined as the "the railway protection areas along the Mass Transit Railway lines being the areas delineated and shown edged black on the plans numbered MT/RP/1 to 21, MT/G/113, MT/RP/30 to 42, MT/G/115, MT/RP/50 to 65, MT/G/310, EHC/RP/1 to 5 and EHC/019 dated 17 March 1992 signed by the Secretary for Planning, Environment and Lands and deposited in the Land Registry.

The railway protection areas are those within 30 m from the edges of the Mass Transit Railway (MTR) structures. Any ground investigation and underground drainage works in Scheduled Area No. 3 fall within the definition of "building works" under the Ordinance. Pursuant to section 14 of the Ordinance, such building works require the Building Authority's prior approval and consent for commencement. This is to protect the MTR structure from being affected by the carrying out of the ground investigation and drainage works.

The plans to which the description of Scheduled Area No. 3 now refers do not reflect the changes that have been made to the existing MTR system since 1989 when the plans were last updated. The changes include additional entrances at Diamond Hill Station, Kowloon Tong Station and Wan Chai Station, and the relocation of cooling water mains at Lai Chi Kok Station. Moreover, the plans do not cover the railway protection areas for the Airport Railway comprising Tung Chung Line and Airport Express Line.

We have therefore prepared a new set of plans to replace the existing plans, the numbering of which has incidentally been amended to be MTR/G/1 to 3, MTR/RP/1 to 46, MTR/RP/50 to 66 and MTR/RP/101 to 170. The plans, which were dated 29 June 1998, were deposited in the Land Registry.

I urge Members to support this resolution as this ensures that Scheduled Area No. 3 in the Fifth Schedule refers to the plans showing the latest railway protection areas for the MTR system.

Madam President, I beg to move.

The Secretary for Planning, Environment and Lands moved the following resolution:

"That the Fifth Schedule to the Buildings Ordinance be amended in area number 3, by repealing everything from and including "MT/RP/1" to and including "1992" and substituting "MTR/G/1 to 3, MTR/RP/1 to 46, MTR/RP/50 to 66 and MTR/RP/101 to 170 dated 29 June 1998"."

PRESIDENT (in Cantonese): I now propose the question to you and that is: That the resolution moved by the Secretary for Planning, Environment and Lands, as set out on the Agenda, be passed. Does any Member wish to speak?

(No Member indicated a wish to speak)

PRESIDENT (in Cantonese): I now put the question to you and that is: That the resolution moved by the Secretary for Planning, Environment and Lands be passed. Will those in favour please raise their hands?

(Members raised their hands)

PRESIDENT (in Cantonese): Those against please raise their hands.

(No hands raised)

PRESIDENT (in Cantonese): I think the question is agreed by a majority from the Members who are present. I declare the resolution passed.

PRESIDENT (in Cantonese): Resolution under the Dutiable Commodities Ordinance. Secretary for the Treasury.

DUTIABLE COMMODITIES ORDINANCE

SECRETARY FOR THE TREASURY (in Cantonese): Madam President, I move the motion standing in my name on the Agenda.

On 22 June, the Chief Executive announced a package of special relief measures to help the community in the current economic adjustment. One of the measures announced to ease costs of doing business is to reduce the duty rate on light diesel oil by 30% from $2.89 per litre to $2.00 per litre until 31 March 1999. The diesel duty reduction will provide relief to the transport trade and professional drivers at this time of economic difficulties. It is expected to benefit drivers of about 18 000 taxis and 4 300 public light buses and help transport trade in which over 127 000 goods vehicles are currently diesel-driven.

To provide immediate relief, the reduction has already been effected on 22 June, the day the Chief Executive announced the relief measures, by a Public Revenue Protection Order made under the Public Revenue Protection Ordinance. The oil companies promptly reduced the retail price of diesel oil. This has enabled those concerned to be benefited immediately. The duty rate on light diesel oil is set out in Schedule 1 to the Dutiable Commodities Ordinance. Section 4(2) of the Ordinance stipulates that the duty rate can be adjusted by the Legislative Council by resolution. The resolution before Members aims at amending Schedule 1 to the Ordinance to reduce the duty rate on light diesel oil from $2.89 per litre to $2 per litre up to 31 March 1999. The resolution also provides that the duty rate of $2.89 per litre will be resumed on 1 April 1999. Revenue loss during 1998-99 arising from the reduction is estimated at $450 million.

Madam President, I beg to move.

The Secretary for the Treasury moved the following resolution:

"That:

Part III of Schedule 1 to the Dutiable Commodities Ordinance (Cap. 109) is amended in paragraph 1(b), effective 23 June 1998, by repealing "2.89" and substituting "2.00" and effective 1 April 1999, by repealing "2.00" and substituting "2.89"."

PRESIDENT (in Cantonese): I now propose the question to you and that is: That the resolution moved by the Secretary for the Treasury as printed on the Agenda be passed. We now proceed to a debate. Mr CHAN Kam-lam.

MR CHAN KAM-LAM (in Cantonese): Madam President, whenever the Financial Secretary proposes "as a rule" an increase in diesel oil duty to keep up with inflation in the Budget, he will face strong criticisms from the community especially professional drivers who find it hard to accept the proportion of diesel oil duty in the retail price. In the past two years, the Provisional Legislative Council and the former Legislative Council twice turned down the government proposals for an increase in diesel oil duty.

When the Financial Secretary recently announced nine measures for alleviating the hardship of people's livelihood, he had finally accepted good advice and sympathized with the plight of the public during this period of economic adjustment, and reduced the rate of diesel oil duty by 30% from $2.89 to $2 per litre. There is still a great distance between this rate of reduction and a 50% slash proposed by the Democratic Alliance for the Betterment of Hong Kong (DAB). After this reduction, diesel oil duty still accounts for more than 30% of the retail price of diesel oil. We think that there is still room for a further reduction in the duty given the existing financial capacity of the Special Administrative Region Government. Besides, the reduction should be a long-term rather than a short-term measure effective until the end of March next year.

In the past when the Government proposed an increase in diesel oil duty, it justified it either as an attempt to keep up with the rate of inflation or to limit the number of vehicles, or to discourage the use of diesel oil to keep the air fresh. However, diesel prices, the business costs of commercial vehicles and the burden on private vehicle owners gradually have increased as a result. Recently, the problem of illegal marked oil has been worsening principally because of the fairly big difference between the price of lawful diesel oil and illegal marked diesel oil. Some owners of large trucks intentionally enlarge the oil tanks or install additional oil tanks and top up these tanks when the vehicles arrive at the Mainland. Therefore, the DAB has come to the view that cutting diesel oil duty should be adopted not as a special measure for alleviating hardship, but rather as an effective measure for reducing the operational costs of the transport industry and for solving the problem of illegal marked oil in the long run.

Madam President, although the DAB supports the resolution proposed by the Government today, we still hope that the Financial Secretary will further consider our proposal and reduce diesel oil duty further in the next Budget.

Thank you, Madam President.

PRESIDENT (in Cantonese): Mrs Miriam LAU.

Mrs Miriam LAU (in Cantonese): Madam President, the transport industry is happy to see that the Government sympathizes with the industry's hardships in doing business and reduces the rate of diesel oil duty by 30%. However, the industry does not receive the diesel duty reduction without disappointment. Indeed, many transport services such as land freight transport which involves trucks, container trucks, taxis and so on are now in deep water, as most of them are suffering a substantial decrease in business turnover by 40% to 50%. A 30% diesel oil duty reduction could do only very little help to them; they had expected a more generous reduction in the duty rate. In view of the plight currently confronting Hong Kong, I should like to encourage the various transport service trades to stand on their own feets and brace up. At an all-transport-services joint meeting was held last month, trade representatives present agreed to observe the business performance of their respective trades for another three months before making any moves.

Nevertheless, what concerns the transport industry most is that the existing measure to reduce the rate of diesel oil duty will remain in effect until the end of March next year only. We all understand very well that it is impossible for the economy of Hong Kong to improve within a short period of time, and hence the competitiveness of Hong Kong as a whole would face rigorous challenges on all fronts. Instead of limiting the effective date to 31 March next year, the measure introduced to alleviate the hardships of the industry should not have any time limit at all. Besides, the Government should also take this opportunity to review if there is still any need for a high diesel duty rate policy.

In the past when the Government tried to defend its high diesel duty rate policy, it would either claim that the high rates serve to help improve traffic condition by discouraging fuel consumption, or that the high rates could facilitate environmental improvement and so on. However, as we all know, a vast majority of the diesel vehicles are business vehicles, a reduction or increase in the rate of diesel oil duty would not have any bearing on the mileage of these vehicles. Moreover, as there is not any substitute for diesel oil, these business vehicles have to use diesel oil anyway.

As a measure to keep public bus fares at low levels, the Government has all along exempted the franchised bus companies from paying diesel oil duty. In regard to minibuses or taxis which are also means of public transport, they are not exempted from diesel oil duty despite the fact that their daily passenger volume has amounted to 80% of that of franchised buses, and that the fares charged by taxis and green minibuses are also subject to government supervision. As such, taxis and minibus operators have to bear higher operating costs; the additional costs would be reflected in the fares and then borne by members of the community eventually.

If taxis and minibuses were exempted from diesel oil duty, operators would be able to maintain the fares at reasonable levels; they might even lower down the fare rates so as to induce more people to take these means of public transport. If the Government is minded to encourage a switch from private cars to public transport, it should consider treating all modes of public transport fairly and granting all of them diesel oil duty exemption, so as to help lower their operating costs, and thereby enhance their competitiveness.

The weight of diesel oil duty would be shifted from taxis and minibuses to the passengers, thereby adding burden to people's livelihood. In much the same way, the diesel oil duty burden would also be shifted from the trucking and container trucking industry to their clients, thereby increasing the operating costs of their clients. According to the Freight Transport Study, the slackened development in land freight transport is certainly attributable to a number of economic reasons, but the main reason is that the comparatively higher costs of operation of the local land freight transport have been undermining the competitiveness of the freight industry in Hong Kong as a whole. The price levels of diesel oil in Hong Kong are still very high even after the 30% reduction, and they are more than 100% higher than that in other countries.

Fuel oil is indispensable to land freight transport. If the cost of land transport is to be lowered, fuel oil is the first and foremost factor to be tackled. As such, I believe that the Government should consider reducing further or even lifting the diesel oil duty.

With these remarks, Madam President, I support the motion.

PRESIDENT (in Cantonese): Mr LEE Cheuk-yan.

MR LEE CHEUK-YAN (in Cantonese): Madam President, I would like to speak on behalf of the Motor Transport Workers General Union under the Hong Kong Confederation of Trade Unions.

The industry certainly welcomes this reduction in duty but there are two issues that I would like the Secretary to consider. Firstly, the reduction in duty will last until 31 March 1999, and if the duty rate returns to the previous level then, it will bring about a great shock as a breathing space of nine months is not enough and the recovery of our economy takes a long period of time. Therefore, I believe that keeping the reduction effective until 31 March 1999 is not enough.

Secondly, will the Government consider not imposing diesel oil duty at all? Certainly environmental protection considerations do figure in this but as we are discussing about the use of Liquefied Petroleum Gas (LPG) in place of diesel, and if this substitute is practical, the environment will no longer be the major factor for consideration. I would prefer promoting the use of LPG in place of diesel as this may be a better direction. If diesel oil duty can be exempted, people do not have to use marked oil and the Customs and Excise Department does not have to chase after people unlawfully selling marked oil. We certainly disapprove of people using marked oil to avoid proper taxation. However, incidents in which marked oil is used still take place everyday, and the Customs and Excise Department should carry out an investigation. If diesel oil duty is lifted, the workload of the Customs and Excise Department can be reduced and the drivers in the industry do not have to take that risk. Moreover, we oppose to the risk-taking acts of these drivers and we think that they should observe the law. If diesel oil duty can be lifted, I believe that drivers will form a stronger feeling that they are taking part in the development of our economy and that their means of livelihood can be maintained.

Thank you, Madam President.

PRESIDENT (in Cantonese): Secretary for the Treasury.

SECRETARY FOR THE TREASURY (in Cantonese): Madam President, I am very grateful to the three Members for the views they expressed just now.

The three Members were quite correct in their interpretation. There is a time limit to the reduction of diesel oil duty, which is from 22 June this year to 31 March next year. Perhaps I should explain in detail why we have this time limit. The reason is that this special arrangement was made exceptionally after the financial year has begun and the Budget has been compiled and approved by the Legislative Council. This was resulted from the fact that the Government has come to realize that Hong Kong's economy is at present facing difficulties. For this reason, we have made an exception and proposed this measure to reduce diesel oil duty for the affected transport industry, in the hope that it will help to relieve the hardship of operators in the short term.

I remember that when the Financial Secretary introduced the different measures to Members of the Provisional Legislative Council and Members of this Legislative Council, he stressed that this adjustment of the diesel oil duty was an exceptional arrangement for this year only. The way the Financial Secretary and the whole Government see the question of diesel oil duty as well as their position are consistent and have never changed. We still consider diesel oil duty a major source of revenue for the Special Administrative Region Government.

There is also a reason in terms of policy for levying the diesel oil duty. Although we have failed in the past two years, we will continue to fight for the support of the Legislative Council every year to maintain the real value of the diesel oil duty. There is a reason in terms of policy for this. In our view, reducing diesel oil duty will help reduce the gap between the price of diesel and the price of fuels which are more environmentally-friendly. And in doing so, it will be very difficult for us to provide sufficient incentives in the future for the transport industry to give up diesel in favour of fuels which are more environmentally-friendly.

Just now Mr LEE mentioned that the Government was implementing a pilot scheme jointly with the taxi industry to use Liquefied Petroleum Gas (LPG) as fuel. As far as I know, the pilot scheme has achieved a certain degree of success and the trade has expressed its views to us. One of the questions they raised was whether LPG would be taxed and what the taxation rate would be. These are the questions that we are now studying. However, if we cannot maintain our diesel oil duty at a certain level, we will then not be able to keep a great gap between diesel oil duty and the future LPG duty. If so, it will be difficult to use fiscal means to encourage taxi drivers to switch from diesel to LPG. I do not want to say something "wishy-washy" and make some ambiguous remarks to mislead the Legislative Council.

I wish to stress once again that the position of the Government and the Financial Secretary on diesel oil duty has remained unchanged. We still consider diesel oil duty an important item of revenue. We will continue to seek the approval of the Legislative Council in the coming financial year to enable us to at least recover the loss in revenue from diesel oil duty in real terms over the past few years due to inflation.

Some Member also mentioned earlier that it seemed that a reduction by 30% for a limited period of time would still be insufficient. For any taxpayer, it is of course best if he is not required to pay tax. Therefore, for any tax reduction, it is definitely the greater the better. I would like to provide some information: with the proposed 30% reduction of diesel oil duty, the monthly operating cost of each taxi will be lowered by $1,000, while the monthly operating cost of each public light bus will be lowered by $1,400. As far as trucks are concerned, since there are many different kinds of trucks, we can only estimate from our information that the average monthly operating cost can be reduced by an amount between $500 and $1,000 for trucks in general. In our view, by reducing the rate of diesel oil duty by 30%, the operating costs of the industry can be significantly reduced. Apart from small trucks, other transport industries can also gain at least $1,000 per month, which is also significant.

I hope Members will support this motion moved by the Government. Thank you, Madam President.

PRESIDENT (in Cantonese): I now put the question to you and that is: That the resolution moved by the Secretary for the Treasury, as set out on the Agenda, be passed. Will those in favour please raise their hands?

(Members raised their hands)

PRESIDENT (in Cantonese): Those against please raise their hands.

(No hands raised)

PRESIDENT (in Cantonese): I think the question is agreed by a majority from the Members who are present. I declare the resolution passed.

MEMBERS' MOTIONS

PRESIDENT (in Cantonese): Two motions with no legal effect. I would like to remind Members to observe the provisions relating to interruption during debate under the Rules of Procedure. A Member shall not interrupt another Member speaking, except: first, by rising to a point of order, and shall state to the President the point which he wishes to bring to notice, for the President's ruling; second, when he wishes to seek elucidation of some matter raised by the Member speaking. Unless the Member speaking gives way and with the permission of the President, the Member interrupting may not speak.

As an established practice, a Member who feels that his earlier speech or part of his earlier speech has been misunderstood, misquoted or misrepresented by a Member speaking, or that the Member speaking needs to clarify part of his speech, may at the end of the speech of that Member concerned, seek the President's permission to explain his speech or the relevant part of his speech, or for that Member to explain. It is not in order for a Member to either rise or to interrupt the Member speaking under the pretext of point of order, and to proceed to seek elucidation.

I have accepted the recommendations of the House Committee as to the limits on speeches for the motion debates. The movers of the motions will each have up to 15 minutes for their speeches including their replies, and another five minutes to speak on the amendments. The movers of the amendments will each have up to 10 minutes to speak. Other Members will each have up to seven minutes for their speeches. According to the Rules of Procedure, I am obliged to direct any Member speaking in excess of the specified time to discontinue.

First motion: Ensuring employment opportunities for local personnel engaging in infrastructural projects. Dr Raymond HO.

ENSURING EMPLOYMENT OPPORTUNITIES FOR LOCAL PERSONNEL ENGAGING IN INFRASTRUCTURAL PROJECTS

DR RAYMOND HO (in Cantonese): Madam President, I move that the following motion be passed: "That, on the premise of accelerating the implementation of infrastructural projects and creating more job opportunities in order to relieve the unemployment situation in the territory, this Council urges that the Government, in drawing up the scope of the relevant contracts, tender specifications and employment provisions, must ensure that local companies can take part and accord priority to providing more employment opportunities for local expertise and workers."

To ease Hong Kong's unemployment, the Government recently undertook to accelerate infrastructural projects. I fully support this. In fact, in the past year or so, when the Provisional Legislative Council was in session, I made several written submissions to the Chief Executive and discussed with him the issue on increasing infrastructural projects to keep pace with population growth and economic development. However, I have doubts about one thing, namely, whether or not the Government's claim that more infrastructural projects mean more employment opportunities is true. According to present and past experience, Hong Kong projects, especially large infrastructural projects tend to be more to the advantage of participation by foreign companies and technicians in aspects such as size of contract, tendering criteria and employment arrangement. On the contrary, local professionals and workers can only "sigh at the sight of the doorway" of those projects. It is, therefore, quite important to ensure that local companies participate in those projects and the relevant projects do give priority to local professionals and workers in employment. Otherwise, more infrastructural projects can only mean more employment opportunities for foreigners, which can bring no benefit to locals. By local company, I mean a company with over 50% shares owned by local shareholders.

To accelerate infrastructural developments at a time when the economy is weak can reduce cost. It is also totally cost effective as labour and machinery lying idle in the society can thus be fully utilized. Furthermore, capital funding those projects and the jobs thus created can also be a stimulus to the recovery of other professions. However, in the long run, there can be maximum benefit to Hong Kong only if opportunities are given to local companies and professionals to participate in large infrastructural projects.

Many friends in the engineering sector have told me that, as local companies are not in a position to compete with foreign companies in bidding for major contracts because of limited financial strength and resources, we can easily notice that in tendering for consultancy contracts as well as construction contracts of the projects, both the terms of contracts and the system for selecting tenders do not encourage creation of jobs or technology transfer. In the past, for major infrastructural projects, including major core projects of the new airport, most of the consultancy contracts were won by foreign companies. However, those companies would divide up the projects, assigning parts of the projects to their overseas head offices for design or importing cheap overseas engineers from subsidiaries in places like Manila or Kuala Lumpur or from countries like Indonesia and Australia, or even allowing them to work in Hong Kong on tourist visas. So if we let such an unhealthy pattern continue, then even though the Government accelerates infrastructural projects, the beneficiaries will only be those foreign technicians, not local people. It therefore will not result in any relief to unemployment.

I understand that in May last year the Government signed the Government Procurement Agreement (the Agreement) of the World Trade Organization (WTO), which prescribes that in all circumstances, there must be open invitation for tenders for the purchase of any goods or service exceeding a certain amount in value. Of course, I fully support the point that local companies and foreign companies should have equal chances to compete. However, the state of affairs has always been one-sided, thus resulting in an unfair situation in which most of the large projects are monopolized by those foreign companies. In this respect, the Hong Kong Government is far more generous than other governments. Has the Government, while allowing foreign companies to bid, given thoughts to the actual room of survival and margin for competition that local companies have? Have they really been given chances to bid? There is indeed a need for the Government to review as soon as possible the criteria and processes for selection of engineering consultants and contractors to let local companies and professionals achieve the principle of "equal opportunities and fair competition". If the Government still adheres to this so-called "fair and impartial" system, then the Government's "unemployment salvage" measures will just be meaningless. As the Government has been using taxpayers' money to train up professionals in different fields, if it does not try to safeguard their employment opportunities, it can be considered to be irresponsible indeed.

I consider that in order to let local companies take part, it is, first of all, necessary to have large infrastructural projects, consultancy engineering and contractual engineering divided up into smaller items so as to give local companies with less financial resources but sound technology chances to compete, and quash the long-standing unfair situation in which foreign companies monopolize projects.

More important is the point that contracts of such consultancy engineering and building projects should require the successful tendering companies to hire a certain percentage of local professionals and workers, including local engineers. With such a provision, funds invested in infrastructural projects can then really be used in Hong Kong, thus stimulating the local economy and also providing more employment opportunities for local people. If the Government lets the monopolization by foreign companies continue as what it has been, more jobs will be created for foreigners only, whilst the locals will be the ones "first to become jobless", eventually draining us of our valuable resources.

Some time ago, the "seven parties and one faction" met with officials from four government bureaux to hold discussions on accelerating infrastructural projects and tendering procedures. At the meeting, I asked attending officials whether or not it was possible to specify on the project tender submission the proportion of local and foreign workers, or request them to write on the bidding forms for consultancy engineering contracts the ratio of local professionals that they are going to hire, so that the assessment in this respect can serve as an incentive for them to employ local professionals as many as possible. However, at that time officials used the Agreement as their "shield". I was greatly disappointed. As the Government is unwilling to put in some effort to endorse and encourage a higher ratio of local professionals and workers, how can we believe that the Government is capable of ensuring that priority in employment goes to local people? I surely understand that it is necessary to make use of foreign expertise in some projects. However, I believe that to a very great extent, we have sufficient expertise locally for such purposes.

On the other hand, policies on localization and equal opportunities of employment implemented by some public corporations, such as the Airport Authority (AA), the Kowloon-Canton Railway Corporation (KCRC) , and the Mass Transit Railway Corporation (MTRC), are very disappointing. It is indeed doubtful if the managements of those corporations have the determination to implement the policies on localization and equal opportunities. It is an open secret that the management of those corporations, especially AA and KCRC, have long been monopolized by foreigners. Whenever queried by the public, they usually bring up numerous statistical figures on staff to prove that most members of their staff already are local Chinese. According to an engineer who once worked for the AA, these overall staff figures do not reflect the actual situation at the middle and upper levels; the AA is still a kingdom for foreigners. As he is a local professional, his chance for promotion was limited. Many engineers with these public corporations have written to me or approached me and some friends in the engineering profession to air the unfair treatments experienced by them in the course of work, which is very saddening. According to them, even though they have years of experience and got professionally qualified long time ago, it is likely that supervisors a rank or two above them are foreign engineers not yet professionally qualified and coming to work here on contract terms. They have no local experience, and treat local engineers as their secretaries or clerks. I think that for reason of the principle of equal opportunities as well as for the purpose of improving local employment, these corporations must put an end to the present unreasonable practice so as to give more employment opportunities to locals who possess the abilities and talents.

Let me quote another example. Recently, the operation of the new airport has been "in a mess". Apparently, it is due to mistakes in administration and execution on the part of the AA. For posts ranging from the management level to senior technical positions, the AA rarely hires local people or local experts. Not until recently was Mr Billy LAM Chung-lun appointed to a position on the management level. I am of the view that technology involved in a massive project like the new airport cannot be totally taken up by foreign experts because they are usually not familiar with local conditions. Take the removal of the airport as an example. They greatly underestimated the complexity of the operation and the extensiveness of the scope involved, thus causing problems of various magnitudes. Had there been sufficient local professionals to participate in the decision-making in respect of many plans and arrangements, all those problems would not have cropped up probably. Of course, it is very important to refer to foreign technology. However, it is a far cry from being satisfactory not to have the participation of local expertise, not to mention creating jobs and effecting technology transfer. Judging from the incident of the new airport, it can be seen that local people's participation is important for both the management level and the engineering technology level. We are not trying to exclude foreign expertise; nor are we viewing them through tinted lenses. We just want to draw attention to the point that if the problem remains, incidents like that of the new airport will recur again and again. The authorities concerned, including the AA and the Government, have all along failed to notice the problem. When the new airport went into operation, the grave consequences and economic losses brought about by the problem went out of control and beyond measurement. The world image of Hong Kong was, of course, ruined.

On the other hand, it is only by giving local professionals the opportunities to participate in major infrastructural projects, such as the airport and Airport Railway, can we absorb foreign experience and retain high-level technology; otherwise, we still have to rely on foreign technical staff to carry out our major infrastructural projects 20 or 30 years later. They may think that we do not know how to design and manage airports and railways. Thus technology transfer is very important. In the past, many infrastructural projects were contracted to foreign companies. They seldom transferred to local companies relevant high technology, which in fact are important to improving the competitiveness of local companies. I hope that through the acceleration of infrastructural projects by the Government, technology transfer can be materialized.

In Singapore, for example, where foreign companies are engaged for certain projects and the projects have to be designed abroad, the government will stipulate that local persons with go abroad with the companies to work there and learn the technology required for designing the relevant engineering projects. In this way, the technology can be brought back to the country.

Furthermore, I hope that Members will understand the point that even though some projects are taken up by foreign companies, it does not necessarily mean that those actually doing the design are foreign technical staff. It has been learned that the Tsing Ma Bridge, the design of which was contracted to a British consultant that was to do the design in Britain, was actually designed by a Hong Kong engineer resident in Britain, and that the Tsing Lung Bridge, one with a wider bridge span, will also be designed by him. This proves that Hong Kong people have sufficient expertise to design and take charge of major projects.

Finally, I hope that the problem of unemployment can be solved through thorough planning. With regard to the issue on technology transfer, I also hope that the ultimate goal can be achieved through proper arrangements. Thank you, Madam President.

Dr Raymond HO moved the following motion:

"That, on the premise of accelerating the implementation of infrastructural projects and creating more job opportunities in order to relieve the employment situation in the territory, this Council urges that the Government, in drawing up the scope of the relevant contracts, tender specifications and employment provisions, must ensure that local companies can take part and accord priority to providing more employment opportunities for local expertise and workers."

PRESIDENT (in Cantonese): I now propose the question to you and that is: That, on the premise of accelerating the implementation of infrastructural projects and creating more job opportunities in order to relieve the employment situation in the territory, this Council urges that the Government, in drawing up the scope of the relevant contracts, tender specifications and employment provisions, must ensure that local companies can take part and accord priority to providing more employment opportunities for local expertise and workers.

Members have been informed by circular on 21 July that Mr David CHU has given notice to move an amendment to this motion. His amendment has been printed on the Agenda. In accordance with the Rules of Procedure, the motion and the amendment will now be debated together in a joint debate.

I now call upon Mr David CHU to speak and to move his amendment. After I have proposed the question on the amendment, Members may express their views on the motion and the amendment. Mr David CHU.

MR DAVID CHU: Madam President, I move to amend Dr the Honourable Raymond HO's motion as set out under my name on the Agenda.

Dr Raymond HO's motion is necessary and timely. I agree and whole-heartedly support his motion. My amendment only serves to add a little more detail and suggest the formation of a committee to carry out and monitor the progress of our suggestions.

Hong Kong is in an economic crisis and the unemployment rate is approaching 5%, which is very high for Hong Kong. The Government has decided to speed up future infrastructural development in order to stimulate the economy. Although we all support this decision, I believe that it is the responsibility of the Government to ensure that local professionals, businesses and our labour force receive their fair shares. The past record of the Government in supporting our local professionals needs improvement. For example, 69% of the New Airport Core Programme projects have been granted to foreign contractors and 90% of its project managers are foreign engineers. The Tsing Ma Bridge was built as a result of an Anglo-Japanese joint venture. When the bridge was completed, the contractors said goodbye to us and brought with them the technology and our money.

Here are four suggestions for the Government:

1. When appropriate, tendering specifications and conditions should include technology transfer requirements so that our professionals have a chance to develop their knowledge and experience base, and use them to get future work in Hong Kong, on the Mainland and internationally.

2. Whenever possible, divide large projects into smaller parts so that local contractors and consultants have a better chance. The situation now is that local companies are often only able to subcontract from large international companies.

3. Fully consider the value of local knowledge and experience when awarding contracts.

4. Form a committee to look into ways to ensure local professionals and businesses have a fair chance in competing for government contracts and monitor the progress of these efforts on an on-going basis.

The government officials will probably say that Hong Kong, as a member of the World Trade Organization, cannot give any preference to local companies when awarding contracts. I understand that the solution is not to discriminate against foreign companies, but we must do everything possible to help our local professionals to improve their competitiveness. This is what Dr Raymond HO's motion and my amendment are all about.

Madam President, I beg to move.

Mr David CHU moved the following amendment:

"To add "and public bodies (including the two railway corporations)" after "this Council urges that the Government"; to delete "scope of" and substitute with "tender evaluation specifications and selecting the consultancy, construction and procurement tenders for"; to delete "tender specifications and employment provisions,"; to delete "accord priority to providing" and substitute with "provide"; and to add "; and if the projects require the engagement of foreign companies possessing specialized technology, then consideration must be given to the arrangements for technology transfer; this Council also urges the Government to set up a commission to formulate new specifications for tender selection, so as to put into effect the above principles and monitor their effective implementation, thereby ensuring fair competition among the people of Hong Kong" after "local expertise and workers"."

THE PRESIDENT'S DEPUTY, DR LEONG CHE-HUNG, took the Chair.

DEPUTY PRESIDENT (in Cantonese): I now propose the question to you and that is: That the amendment moved by Mr David CHU be made to Dr Raymond HO's motion. Does any Member wish to speak? Mr LAU Chin-shek.

MR LAU CHIN-SHEK (in Cantonese): Mr Deputy, Hong Kong's unemployment rate again has reached an all-time high, with nearly 150 000 people losing their rice bowls. The employment situation is not going to show any signs of improvement in the foreseeable future. It can be said that society is now seized with panic!

Although accelerating the progress of infrastructural projects may not necessarily bring benefits to "wage earners" of every sector, it is still a good solution to the problem of unemployment. However, the Government's plans for accelerating infrastructural projects in my view are not sweeping enough. For example, with regard to massive transport infrastructure items, such as the plans for East Kowloon line and North Hong Kong Island line proposed by the Mass Transit Railway Corporation (MTRC) last year, there has been no positive response from the Government. I believe that by accelerating the extension of mass transit systems many jobs can be created. For instance, the MTR East Kowloon line can employ over 10 000 workers. The long-term economic development of Hong Kong will benefit from an improved transport network too.

Priority in employment for local workers or local engineering talents in infrastructural projects naturally is an essential measure to address the problem of unemployment. Otherwise, no matter how many jobs are created, there can be no effective relief to local workers' unemployment hardship. However, if the principle of priority in employment for local workers or local engineering talents in infrastructural projects is not accompanied by concrete measures, it is not going to be of much use. I think that in order to ensure that local "wage earners" can really enjoy priority in employment, the Government has must scrap the scheme for importation of labour. Over the last 10 years or so, that is to say, ever since the implementation of the policy on importation of labour, the Government has again and again stressed that priority in employment for local workers is government policy. But what is the outcome? What is it in reality? In the end, local workers still have their rice bowls snatched from them!

In late 1995, there were several incidents related to the exploitation of imported workers working on airport projects. The then Legislative Council Panel on Human Resources convened hearings pursuant to Legislative Council (Powers and Privileges) Ordinance, discovering several loopholes inherent in the system of imported labour. So when we seek to accelerate infrastructural projects, and demand safeguards for priority in employment for local workers or engineering personnel of infrastructural projects, we must stop importing foreign labour.

Our worry is that after accelerating the infrastructural projects, developers will again harp on the old tone that both "local workers and local engineering talents" are "not enough", and demand that foreign labour be imported. So I ask the Administration to get well prepared for the assessment of labour demand, and make preparations to organize training as soon as possible in a situation where demand is stronger than supply. In order to attract local workers and engineering talents, training should be stepped up. If workers are to be attracted in particular, then training allowance ought to be increased. For instance, in the recent case of tunnel works training, trainees could each receive some $10,000 in allowance while on training. So ultimately some 500 people applied for 16 training openings, which reflects the point that so long as there are reasonable allowances, workers are willing to undergo training for new jobs.

I reiterate that only by totally scrapping the scheme for importation of labour can local workers' right to employment be safeguarded. The labour sector has come to a consensus, demanding the abolition of the supplementary labour scheme. So workers' representatives on the Labour Advisory Board should "closely guard the pass", and stop considering applications for quotas of imported labour so as to force the Government to scrap the whole scheme for importation of labour.

Mr Deputy, I so submit. Thank you.

DEPUTY PRESIDENT (in Cantonese): Mr Edward HO.

MR EDWARD HO (in Cantonese): Mr Deputy, it seems that, by coincidence, whenever I speak, you serve as the Deputy President. (Laughter) On 8 July 1998, when there was a debate on Mr LEUNG Yiu-chung's motion on unemployment, you also served as the Deputy President when I spoke. In fact when I spoke on the motion that day, I already put forward several concrete suggestions for issues that are to be discussed today. As I did talk about what Dr Raymond HO has just talked about, I do not want to repeat my words. When I asked the Secretary for Works a little earlier, he said he also had glanced through my speech. I will give him a copy later on. There are several dozen copies of my speech in the press room. I hope that members of the press will release it as my viewpoints did not get released the last time.

I would like to highlight a few points. What I said last time is, more or less, similar to what Dr Raymond HO said today, for examples, points on project scope and projects suitable for participation by the professionals and building sector of Hong Kong. On the other hand, I am also of the view that local contractors and professionals ought to have more opportunities to take part in contract matters. Here I am aiming at a point that is a little different from that of Dr Raymond HO. He wants the Government to specify a ratio for locals to be taken in (he perhaps will elaborate on this later). But I do not think this is what we definitely want to see. Being a professional, I sometimes also think that it is not bad to have foreign professionals' contributions. Some of their designs are very innovative. However, I think we still ought to endorse the point that local professionals and local workers have local experience and are able to make real contributions. We are not making a rigid demand that the Government should set a ratio for locals. The point is that local professionals and local building industry do have contributions, and are able to bring relevant project items to completion more smoothly. So with regard to emphasis, there is a little difference.

To the society of Hong Kong, protectionism is not necessarily a bad thing because, as pointed out by Dr Raymond HO just now, we have invested heavily in the training of professionals. However, we cannot use protectionism as our starting point. Local professionals do have contributions. Why does the Government not hire them more? This is our starting point. Let me quote two examples. The rooftop structure of the new wing of the Hong Kong Convention and Exhibition Centre, though the completion of which was delayed by assembling in Manila, did not make us lose face on the day when the reunification ceremony was held (the said project was mainly designed and managed by a local professional firm). Another infrastructural project (the identity of which I must not make known as it is now under investigation by an independent inquiry) was entirely designed and managed by a foreign company. When the Government announced the hiring of that company, the said company said that it would carry out the construction in conjunction with two local architect firms. In reality, however, the two Hong Kong firms did not participate and were used merely as "make-believe" at that time.

When I spoke last time, I mentioned the issue concerning the so-called "dragons from abroad". Dr Raymond HO mentioned that, too. On winning the contract of a project, a foreign company probably will let the design be done by grand masters. Other details, however, will be entrusted to others hired locally or in nearby places. So we must stress that local professionals do possess the abilities to participate. To gain technology transfer, they must be given opportunities to participate. They will be able to do the same job when they come to work on the next project. I, therefore, hope that with regard to tender specifications, the Government, in assessing tenders, should put greater emphasis on the possession of local experience, local expertise, and abilities of local workers. This is very important.

Public works items are bankrolled by public funds. So they have to be handled in ways that are most cost effective and most efficient. I think nobody will object to this. Sometimes it is necessary to invite tenderers worldwide, which, however, does not negate what I have just suggested. That is to say, if Hong Kong people, Hong Kong expertise, and members of Hong Kong's building industry can have more participation, then projects in fact can achieve better efficiency, be less expensive, and progress toward completion more smoothly.

I support Dr Raymond HO's motion as well as Mr David CHU's amendment, because the amendment has incorporated the point that the Government should review tender specifications, a standpoint shared by the Liberal Party. Thank you, Mr Deputy.

DEPUTY PRESIDENT (in Cantonese): Mr CHAN Kam-lam.

MR CHAN KAM-LAM (in Cantonese): Mr Deputy, Hong Kong has been building the Mass Transit Railway (MTR) since the mid-1970s. Later there came the Kowloon-Canton Railway (KCR) electrification program and the project for the Airport Railway. By now, the West Rail, the construction of which is about to start, is the fourth railway in Hong Kong. We ought to have already accumulated a lot of experience in design, construction and operation, and should even be in a position to contract for railway projects of other places. It is, however, a pity that the amount of technology transferred to us from foreign companies still falls far behind that of Singapore and Taiwan. When the Government or public corporations like the Mass Transit Railway Corporation (MTRC) and Kowloon-Canton Railway Corporation (KCRC) have to award consultancy contracts or project contracts, foreign consultant firms usually became first choices. Justification offered by the Government or senior members of those corporations was simply that we were short of talents in this field. Though such reasons sound like a matter of course, they were far from being convincing. The sole explanation is that the Government has no confidence in our own engineering professionals, thinking that the moon abroad is the roundest and ignoring the point that "local ginger" has the strongest hottest bite.

Mr Deputy, in mid-1996, the KCRC revealed that several consultancy contracts had been awarded without going through public tendering procedures; and among them were contracts valuing over $10 million awarded to the same United States consultant firm. The incident drew extensive attention from members of the public and ex-Legislative Council Members. At that time we did also ask the KCRC management for a detailed explanation. However, the explanation from the senior level of KCRC was indeed hardly acceptable. Though the incident ultimately ended without ending, it revealed the grave inadequacy of the government and public supervision on the KCRC, and the heavy reliance of the Corporation on foreign consultant firms; even the top level was mainly led by foreign consultant firms.

Up to this year, in awarding design and consultancy contracts, the KCRC has let some of them go to local firms, but foreign-capital companies still dominate. Mr YEUNG Kai-yin, the KCRC President, repeatedly stressed that we did not have expertise in that field, and it was, therefore, necessary to look for it from outside. In a situation where unemployment rate for local construction workers reaches 39.5%, yet he merely put to contractors the superficial request that local workers be given priority in employment, thus in fact still turning on the green light for them to hire imported workers.

In fact, what arouses greatest resentment among members of the local engineering profession is the point that the KCRC, one of our largest public corporations, on the one hand claims that priority is being given to local professionals and technical workers in recruitment, yet in reality their so-called local workers are just persons with the permanent right of abode in Hong Kong. We do not have the slightest intention to discriminate against foreigners; nor are we saying that their skills are definitely worse than those of local workers. However, we know that because of the policy of the colonial Government over the years, many foreign engineers in Hong Kong have all along been given the leading roles, and become Hong Kong permanent residents after years of service in Hong Kong. If the Government and public corporations still use that as criteria for recruitment, it can be said that Hong Kong engineers can never emerge from below.

Early this year, the KCRC announced the appointment of a foreign engineer to the post of Chief Supervisor of West Rail at a salary of $3 million per annum. Furthermore, most of the senior staff under him are foreigners. On an important infrastructural project like the West Rail, local engineers are still not given attention. It is no wonder that great resentment resounded among members of the profession.

Mr Deputy, apart from the KCRC, public corporations, like the Airport Authority, in the past also biased in favour of foreign engineers. Late last month, the KCRC made it known that construction contracts for architectural projects with a value of $30 billion will be divided into 12 parts for tendering. The Democratic Alliance for the Betterment of Hong Kong (DAB) thinks that the move merits support because at least local contractors will not lose the chance to bid on account of insufficient financial resources.

However, the DAB holds the view that for the long term, to make sure that contractors give local expertise and labour priority in employment, when the Hong Kong Special Administrative Region (SAR) Government and public corporations launch infrastructural projects in future, they must bring in a practicable mechanism to ensure that local companies, engineers and technical experts do have priority in recruitment.

Mr Deputy, in the past we did bring up similar issues with government officials, but the Government usually just stressed the need not to violate the open tendering system of the World Trade Organization (WTO). However, Singapore, a nation also belonging to the WTO, still gives local contractors priority in bidding for government projects. So there is really no justification for the Government to use a practice of the WTO as an excuse for not protecting local consultant firms and contractors in gaining local project items. In this way, they can build up a local professional engineering fleet; the heavy infrastructural investment can thus really play the role of stimulating the economy.

The DAB thinks that it is now time for the Government to review the existing tendering mechanism so that local expertise can gain local engineering contracts in fair competition.

With these remarks, Mr Deputy, I support the motion.

DEPUTY PRESIDENT(in Cantonese): Mr Ambrose LAU.

MR AMBROSE LAU (in Cantonese): Mr Deputy, with regard to the way to ensure participation by local companies and provide local professionals and workers with more job opportunities while accelerating the implementation of infrastructural projects, the first thing that has got to be done is to change the present situation, in which foreign-capital companies monopolize the contracts for consultancy, construction and procurement in connection with infrastructural projects.

Mr Deputy, according to the customary practice of the Government and public corporations in selecting the successful bidders, apart from placing emphasis on the bidding prices, weight is also given to the point as to whether or not the bidding companies' tenders meet the requirements. Superficially, there is nothing wrong with this, but in fact it provide conditions for foreign-capital companies to monopolize most of the contracts.

As we all know, most of the master plans of Hong Kong's major infrastructural projects, for instance, the new airport projects, were designed by foreign-capital companies, especially British-capital companies. Tendering documents were also mainly designed by British-capital consultant firms. For instance, of the 178 consultancy contracts for the new airport, British-capital companies or companies with British-capital partners took up 128 items, which represent 72% of the total. As the projects were mainly designed by British-capital companies, and tenders were also designed by British-capital consultant firms, it can be understood that tendering British-capital companies or international companies with close ties with them could draw up plans more to their advantage when bidding for the contracts when compared with other companies.

So local companies, unlike British-capital companies or international companies, cannot easily win contracts. As a result, all along infrastructural projects in Hong Kong have never been made participation-friendly to local companies.

Mr Deputy, there is another noteworthy phenomenon. Judging from previous infrastructural projects, such as projects of the new airport, British capital, apart from monopolizing most of the consultancy contracts, did not monopolize construction contracts. For example, with regard to the total value of all the project contracts of the new airport, the shares taken up by Japanese companies, Hong Kong companies and British companies came first, second and third respectively. However, on the other hand, the design contract of the Airport Terminal and the project contract of the Tsing Ma Bridge, items among the 10 major core projects of the airport, were won by British-capital companies or companies of predominantly British capital fetching top prices. Furthermore, since the Government and public corporations have all along been using the pretext of supervisory convenience, project items awarded were rather colossal. Foreign-capital companies successful in the bidding were allowed to divide projects into smaller ones when they were unable to do the whole programme themselves, thus, first of all, resulting in the fact that Hong Kong companies could only get some "bare bone" project contracts, or just working hard at low level without being able to join the higher level to learn project management skills. Secondly, besides "directing" Hong Kong companies, foreign-capital companies could also pick their bites, thereby reaping huge profits.

With foreign-capital companies drawing up project designs and tenders, naturally little consideration will be given to ensuring participation by local companies or providing more job opportunities to local professionals and workers. As a result of this, local companies are in a disadvantageous position in dealing with big projects, and, on top of this, local companies and local professionals are denied the chance for fair competition. In this aspect, the situation of monopoly by foreign-capital companies will become even more serious.

Mr Deputy, Hong Kong is a free port always advocating free and fair competition between Hong Kong capital and capital from other nations. Today's motion does not mean applying protectionism to local companies; nor does it mean rejecting participation by foreign-capital companies. It just seeks to ensure the chance for fair competition for local companies. The difference between monopoly and fair competition lies in the fact that with monopoly, there will be no substitution and competition regarding the various labour supplies for infrastructural projects. This is pernicious to the perfection of resource deployment. With fair competition, companies of different capital sources will have the incentive to improve the operation, lower the cost and raise labour productivity, and reasonable project prices and good project quality can thus be assured too. The harms of monopoly can be seen by everybody in the paralysis of cargo transport at the new airport.

The Hong Kong Progressive Alliance (HKPA) therefore opines that local professionals and consultant firms should, first of all, be considered for invitation to take part in planning and designing the works projects and drawing up tenders so as to safeguard the interests of local companies, expertise and workers. In the second place, in selecting tenders of relevant projects, the Government and public corporations should, as far as possible, divide the projects into small lots so as to ensure participation by local companies.

Mr Deputy, at a time when Hong Kong is having an economic downturn and high unemployment rate, the Government's intention in accelerating the implementation of infrastructural projects is to give local professionals and workers more job opportunities. However, if the Government adheres to its old practice, then it will only do service to the financially strong and influential foreign-capital companies and multi-national companies. The Government should set up a committee as soon as possible to draw up new selection specifications for tenders so as to ensure that accelerated major infrastructural projects can create more job opportunities for local professionals and workers.

Mr Deputy, I so submit.

DEPUTY PRESIDENT (in Cantonese): Mr Jasper TSANG.

MR JASPER TSANG (in Cantonese): Mr Deputy, the motion now under debate is on how to ensure job opportunities for our engineering talents and workers in infrastructural projects. In early June, the Government put forward 12 measures to solve the unemployment problem. Among them is the creation of more jobs through accelerated implementation of public works. The Democratic Alliance for the Betterment of Hong Kong (DAB) all along has also asked the Government to make it possible for every infrastructural project to be really able to create job opportunities for Hong Kong expertise and workers. So while these items of works progress, our particular concern lies in whether or not the Government is really able to take effective measures to ensure employment for local engineering personnel and workers so that Hong Kong people can really benefit from government measures intended to relieve people's hardship.

We can all see that our society is in grave economic straits. The Government has again and again told the people to be psychologically prepared for an unknown period of bitterness. We also regularly call on the people to ride out the storm with the Government and make every effort to revitalize the economy as soon as possible. However, we cannot just watch the unemployment rate going up incessantly without doing anything, and let common people's quality of living go downhill continuously. The unemployment rate just released has hit the all-time high of 4.5%, a figure that makes people shiver.

The premise of this motion is that the Government should accelerate the implementation of infrastructural projects to create more job opportunities so as to relieve the unemployment situation in the territory. This point has always been advocated by the DAB. We are of the view that one of the most effective ways to solve the unemployment problem is for the Government to launch as soon as possible the various major infrastructural projects, including all the railway projects and road projects, such as the Ma On Shan/Tai Wai line and Central Kowloon Route; speeding up the development of northwest New Territories and northern Lantau; and acceleration of the reclamation projects of Kowloon Bay and Green Island. Jobs to be created by the implementation of these infrastructural projects will definitely far outnumber the jobs to be made available by the minor maintenance works, public works programme and environmental improvement projects promised by the Government. However, if the Government does not at the same time take necessary measures to ensure that local people enjoy priority in respect of jobs created by those projects, then all these efforts will be denied the important function of relieving people's hardship!

The DAB's stance on this issue is very clear. As early as the middle of last year, when the Government considered giving the construction industry special quota for importation of labour, we already brought up the point that the Government must ensure priority in employment for local workers. Much earlier on we also proposed that the Government, in implementing major infrastructural projects, should strictly require contractors to give local workers priority in employment, and put in place effective safeguards to prevent the "pushing down of price" by contractors in a bid to cut workers' wages and lower their terms of employment.

Mr Deputy, we believe that so long as there are needs and opportunities, Hong Kong itself definitely can adequately provide the expertise and labour required by infrastructural projects. It is especially so because of the indisputable high unemployment rate in the construction industry currently. According to an employment survey on construction workers conducted by the Hong Kong Construction Industry Employees' General Union, by the end of last February the unemployment rate of construction workers soared up to 39.5 percentage points! The survey was launched last October and the unemployment rate was only 23.5% in late November. That is to say, in as short as five months, construction workers' unemployment rate went up by over 15 percentage points. In such circumstances, we are even more convinced that Hong Kong does have enough expertise and labour to meet the demands of the major infrastructural projects and public works to be launched. The only question is whether or not the Government has the determination to ensure that local technical personnel and workers do enjoy priority in employment so as to really solve the unemployment problem.

With these remarks, Mr Deputy, I support the motion.

DEPUTY PRESIDENT (in Cantonese): Mr James TO.

MR JAMES TO (in Cantonese): Mr Deputy, when discussing this topic, we do not have big difference in principle. We all want to convince the Government. I expect that the Government definitely is going to give several replies to make Honourable Members see that the so-called complexity of the issue is far greater than we have perceived. I also want to bring up a few points for discussion with the Government.

First, the Government surely will say that we have to maintain top efficiency and competitiveness. I think it is necessary to trace the core of the problem. That is to say, we must examine objectively whether or not large foreign-capital professional firms account for the majority. Of course, the Government might say that if we make a statistical count, the situation might be different if those companies registered in Hong Kong are included. Though those companies use Hong Kong as their place of registration, we want to know who their shareholders behind the scene are. For a "shell" company to register in Hong Kong, the fee is $2. It is very easy to get registered as an engineering consultant firm. I therefore hope that the Government can be more pragmatic on statistical figures.

It is an objective fact that foreign-capital companies or companies whose behind-the-scene shareholders are foreign-capital companies are in the majority in Hong Kong. We might want to know whether or not their expertise is obviously higher, and whether or not they have particularly large capital. In fact, when we talk about fair competition, we should make the starting point fair, too. At the same time, I want the Government to take into consideration the point that with regard to some foreign-capital companies' sizes and the risks taken by them, such as engineering undertaking and banking facilities, local companies are probably no match for them. But the key is whether or not the Government has the determination to go ahead. Besides, it is believed that after rectifying the unfairness in the system, local companies may be able to grow up gradually and gain strength. If local companies are not given the opportunities, then, as pointed out by many Honourable Members, they can only remain as sub-contractors or sub sub-contractors forever, which is going to affect local workers directly.

We can consider local companies and local workers in two separate perspectives. Generally speaking, we can ensure priority in employment for local workers (apart from the issue of imported labour just mentioned by Mr LAU Chin-shek). If we do not overcome the structural problems, local companies just cannot compete for major contracts, and those that could compete are just the few big foreign-capital companies. When they contract out after winning the contracts, local companies can only compete tensely as sub-contractors, sub-sub-contractors or even sub-sub-sub-contractors. With small capitals, local companies can only compete at lower level while local workers are hired by local companies serving as sub-sub-contractors or sub-sub-sub-contractors. Because of tense competition, prices go down, directly affecting the workers. I am not saying that foreign-capital companies are "exploiters" as they have played an important role in Hong Kong history, and borne some financial risks. However, if the Government does not rectify the unfairness through policies, and step by step prepare local companies, the situation will probably remain the same even after a period of time.

As for some other issues, I call upon Honourable colleagues to speak with caution after careful consideration. For example, we often make mention of foreigners and foreign engineers. Please bear in mind that many foreigners have already developed roots in Hong Kong whilst local engineers do migrate. After spending seven years in Hong Kong, foreigners can in fact acquire the right of abode and become permanent residents. After all, local talents have to be trained by us. We believe that most of them will remain in Hong Kong. For Hong Kong, they have a sense of belonging, they also live and spend money here. This is very important to Hong Kong. Furthermore, when we talk about "priority" for local companies, we have to be careful too. What we want is fair participation by local companies. Be sure not to give rise to the misunderstanding that our policy is discriminatory.

Mr Ambrose LAU just mentioned the point that the drawing up of tender specifications has always been custom-made by foreign-capital consultant companies. We totally agree with that observation. If we do not quash such a long-standing phenomenon and still depend on foreign-capital companies for drawing up tender specifications, then they, having done stage one, will take charge of stage two and stage three. So under certain circumstances, our government departments should spend more efforts on drawing up designs from the outset so that we need not entirely depend on other people right from stage one. Otherwise, it will become very difficult to rectify the situation in the future. It is because as long as the design is done with objective standards, the conclusion will be the same.

In the long run, I hope that the Government, in considering this problem, can realize that most of the Honourable Members are not being belligerent or ultra-nationalist. The fact remains there is indeed unfairness. I hope that the Government can address the problem squarely.

DEPUTY PRESIDENT (in Cantonese): Mr Gary CHENG.

MR GARY CHENG (in Cantonese): Mr Deputy, the attitude of the Democratic Alliance for the Betterment of Hong Kong (DAB) on today's motion is that, firstly, in drawing up the scope of the relevant project contracts, the Government should fully consider opinions of members of the industry and understand the problems facing local companies and workers. According to a pledge made by the Government, the production of housing units in the next 10 years will not be fewer than 85 000. In the next five years, major infrastructural projects will be launched one after another. According to a Study Report on Manpower Requirement of the Construction Industry from 1997-2002 released by the Education and Manpower Bureau, the forecast requirement for construction site workers will jump from about 88 000 in 1997-98 to about 110 000 in 2000-01. At present, the scope of project contracts awarded by the Government are quite big, with funds involved amounting to hundreds of million dollars. According to members of the industry, usually only strong local companies or foreign enterprises take part in the bidding for those project contracts. The tender selection criteria of the Housing Authority (HA) are gradually falling into line with the scope of government projects. Take HA projects as examples. The term of the contract is very long. Items involved in one single contract are numerous, sometimes running into hundreds. Funds involved are also quite enormous. According to new requirements, the successful bidder, in order to get selected, has to make a lot of payments in advance to pay for labour and materials so as to show strength. Because of these requirements, medium- or small-sized companies cannot but stay away. So major projects are favourable to big enterprises or foreign enterprises in both number and scope. It is hard for local medium- or small-sized companies to compete.

Though we believe that in carrying out project contracts, stronger companies have fewer risks, those projects still require the assistance of sub-contractors or sub-sub-contractors. Companies further down the hierarchy of sub-contracting often have to offer higher prices to contract for the projects. As a result, the quality of products has to be adjusted according to prices. Because of this, it is hard to ensure project quality and sub-contractors will also try their very best to import workers so as to cut operational cost. So to ensure active participation by local companies, the Government should consider dividing infrastructural projects intended for implementation into smaller items so as to let local medium- and small-sized companies have the opportunities to take part in the bidding. With the participation of these companies, additional differential cost resulted from multi-level sub-contracting can be reduced. On top of this, local workers' job opportunities can be greatly increased.

As just pointed out by me, some major projects, such as the MTR, are usually done by foreign companies or served by foreign consultants. Only a small number of local technical personnel can participate. As a result, it is getting harder and harder for local companies to compete with foreign companies in terms of experience and technology. The views just expressed by Mr David CHU are shared by the DAB. That is to say, when it is necessary to hire foreign enterprises with specialized technology for certain project items, arrangement for technology transfer must be taken into account. Therefore the Government should actively encourage local companies to enter into co-operation with foreign enterprises to take part in infrastructural projects as joint ventures so as to improve the competitiveness of local companies in the course of this.

Major infrastructural projects to be implemented in Hong Kong are of considerable significance to Hong Kong with regard to overall development, people's livelihood and attractiveness to foreign investors. At a time when there is a strong demand for infrastructural project personnel, the industry still has high unemployment rate. It worries us as to how the Government is going to effectively safeguard local workers' employment opportunities in terms of job choices and mechanism. The DAB, therefore, urges that the Government in implementing infrastructural projects should bring in effective mechanism to make contractors let local expertise and workers enjoy priority in employment and undertake not to lower the terms of employment of local workers, especially low-tech workers.

With regard to ensuring participation by local companies and expertise, the DAB shares the views of Dr Raymond HO's motion today as well as those of Mr David CHU's amendment. In his amendment, however, Mr David CHU deleted the point of according to local workers priority in job opportunities. On this, the DAB has reservations. The DAB again stresses that the Government should take local workers' priority in employment as the premise and put an end to the importation of labour. By so doing, people's livelihood can be safeguarded and, furthermore, people's confidence in the SAR Government can also be strengthened. The DAB therefore supports the original motion of Dr Raymond HO.

I so submit. Thank you, Mr Deputy.

DEPUTY PRESIDENT (in Cantonese): Mr Ronald ARCULLI.

MR RONALD ARCULLI: The motion debate tonight is very timely, because I think a lot of us, in fact all of us, in Hong Kong, are concerned with the state of the economy and the unemployment rate. So, in terms of improving both, I think it is right for us to ask the Government and public corporations to actually increase or speed up their public works programme. I am, therefore, quite encouraged to hear from most colleagues tonight that the workers and professionals in the construction industry shall see eye to eye on most points.

But there are, of course, matters that really need to be reviewed and I would name just a few. One would be the workability and fairness of the public works penalty points system to which local contractors are subjected to that. I doubt very much whether first-time foreign contractors coming to Hong Kong are subjected to that system, particularly if you talk about the pre-qualification system where performance, local performance or non-performance in some cases, could be held against a particular contractor. If, for instance, the foreign contractor has a poor track record in his own home country, it is not always easy to actually get the details of that. So, I think that clearly requires a review.

The second point that may require review, in terms of the quantity of work that is undertaken by the construction industry and thus the professionals and workers are involved, is the very stringent period of time whereby they have to work. Right now, Mr Deputy, they are not allowed to work outside the period from 7 am to 7 pm. This could mean that if you are in the building industry, you might not be able to start work simply because a job that your colleagues ought to finish in front of you has been delayed. There might be a case to slightly extend the working hours during weekdays from 7 am to, perhaps, 9 pm without disturbing members of the community.

Another issue that I would like to talk about is the size of the contract. I know that the Secretary for Works has tried to package contracts in smaller parcels so that professionals and contractors alike have the best possible chance of winning a contract, but I think there is still room for improvement. He could, for instance, look at parcelling them into $5 million to $15 million contracts, or $50 million to $500 million contracts for medium-sized contractors or professional firms. And in fact, this is the Honourable David CHU's second point.

Ancillary to that, there is also the issue of payment. I know that some public organizations, for example, the Works Bureau, are trying to expedite interim payments and final payments. This will help both the industry and the professionals concerned.

On the issue of technology transfer, I totally agree with the comments that have been made tonight. Some Members have used the new airport as an example. I hope that it is not the type of technology transfer we want for Hong Kong, as seen in the sort of initial mess that we have. But I think in the long term, technology transfer is important and is crucial to Hong Kong being able, for instance, to expand our horizon beyond our geographical boundaries into the Mainland. I remember when the airport project came about, I was very upset that there was no technology transfer requirement or encouragement from the then Government.

On the issue of importation of labour, I know this Council is divided into two extreme views. What I could not quite understand was what the Honourable Gary CHENG has said, that "Hong Kong workers have top priority. Stop importation of labour." Now, as far as the Liberal Party and the Construction Association are concerned, we always say that Hong Kong workers must be given first priority. But we also say that where there are bottlenecks, where it would affect the quantity of work undertaken and the quantity of work that we are asking the Government and other public corporations to undertake, we would have to ease the restrictions on importation of labour in order to ensure that Hong Kong workers are in fact fully employed. On this point, I hope that my colleagues here will see it with a little latitude.

It is all very interesting that we are talking about all the difficulties in public works and so forth. One simple solution, of course, can be the establishment of a construction industry authority which will oversee construction issues and address the concerns of the industry both from the contractors' point of view and from the workers' point of view. I suspect that the Government is probably reluctant to do that, but I would nonetheless ask my colleagues here to support this idea. Because if there is a construction industry authority, a lot of the problems that we are talking about here this evening can in fact be dealt with at that level, and it is in fact a bigger body than the commission that Mr David CHU has mentioned in regard to tender selection.

Thank you very much.

DEPUTY PRESIDENT (in Cantonese): Mr LEUNG Yiu-chung.

MR LEUNG YIU-CHUNG (in Cantonese): Mr Deputy, part of the theme of today's motion is to ask the Government to accelerate, as much as possible, the implementation of infrastructural projects to create more job opportunities. By coincidence, this proposal in fact is similar in contents to the motion brought up by me two weeks ago. The reason why I brought up this viewpoint then was because I noticed that Hong Kong's unemployment rate was worsening and it was difficult for Hong Kong's economic situation to improve unless we expanded the projects and accelerate their implementation. We all know that Hong Kong's economy can no longer be supported by the manufacturing industry. To a very large extent, it relies on the service industry. If we do not accelerate the implementation of infrastructural projects to create more jobs so as to get the workers hired and increase consumption, then it is very hard to revive our consumer economy. Nor will it pull other trades into creating more jobs. So on such a premise, I fully support the theme of today's motion, namely, it is hoped that the Government can accelerate as much as possible the implementation of infrastructural projects so as to create more jobs.

However, the problem is with the other part, namely, the much-talked-about issue as to who are to do those projects. Quite a few colleagues have just mentioned the point. We put great emphasis on the question of quality, especially for major projects. With no choice, it is necessary to hire outside companies and workers to maintain quality. As for technology, I do not know the actual situation. Other colleagues might speak further on this point. Is the level of our talents really not up to the required standard? Let us make a great concession here. What if it is not up to standard? If the present practice remains so indefinitely, only foreign companies being allowed to work on big projects and local companies not being given a position or chance to participate, there is no way for the technological level of local companies to go up. As a result, there will be a vicious circle, a situation similar to that of our present-day industry. Because of the shrinkage of our industries, nobody carried out research on industrial technology. When we want to improve industrial technology now, we can find no talents in that field. The problem can never be resolved in such a vicious circle.

I think we cannot just address the existing phenomenon and pay no notice to the situation in the long run. In the past, we often said that things were only for short terms because the Administration was colonial; it merely "treated the head when there was headache and attended to the leg when there was pain in the leg." Now we are under the SAR Government, with Hong Kong being ruled by Hong Kong people. So it is hoped that things that we do are not short-sighted. We ought to be forward looking. Therefore we have to see how we are to train up local talents so as to improve their technology level. This is most important. If we embed something in contract projects to gear up the technology level, then we can have new hope. I hope the Administration will put in more efforts here.

In addition, there is a highly controversial issue on imported labour. Many people say that we have to let local workers have priority in employment, but the problem is that we ultimately still have to hire some workers from outside. The reason is that in the past we usually found that we just could not recruit enough workers. If our policy allows hiring workers from outside, then it is difficult for local workers to have priority in employment because employers often want to hire workers from outside. Many policies and conditions have thus been created, rendering it very difficult for local workers to take part in those jobs. In reality, many employers do like to import labour. In 1995-97, when I was a Member of the previous Legislative Council, I joined a select committee to follow up on the issue of importation of labour. At that time I noticed that imported workers are indeed "better" than local workers in many respects. For instance, they work overtime when so asked by their employers without having to be given additional pay. Wonderful! I once received a complaint case, in which an imported worker had to work non-stop for 72 hours. Believe it or not. You might ask: did not he need any sleep? The fact is that he could only sleep briefly. In the case of local workers, given the situation at that time, they probably would not have agreed to do so. Of course, they might agree now because they cannot find employment. They will have to work no matter how tough it is. In such circumstances, those sub-sub-contractors or some other contractors will find imported workers very "handy".

Even though there are laws protecting the rights and interests of imported workers, our study reveals that loopholes inherent in those laws abound. Under such a system, no matter how we try to plug the loopholes, it is not possible to effectively protect imported workers from "ultra exploitation". So ever since then I have been firmly adhering to the view that so long as the policy on importation of labour exists, then "local workers are miserable whilst imported workers are even more miserable". As a matter of fact, Honourable colleagues may press the Secretary for figures, which can then tell you that the rates of injuries and deaths of imported workers at construction sites are very high. Most likely, one of the reasons for this is that they are not familiar with local working conditions. That they overwork is probably another reason as they are required to work long hours. So I think the point that we ought to hire local workers is not merely directed at the employment issue. In fact if we cannot protect imported workers from "ultra exploitation" under this system, we still should not depend solely on imported workers. If the situation continues, local workers' employment situation can only get worse whilst the protection for imported workers or the problem of injuries and deaths suffered by imported workers just reported by me also cannot improve significantly.

The wording of Mr David CHU's amendment deletes the concept of according to local workers priority in employment, which, I think, cannot bring any benefit to the economic climate and employment situation of Hong Kong. I therefore cannot support his amendment. Thank you, Mr Deputy.

DEPUTY PRESIDENT (in Cantonese): Mr Andrew CHENG.

MR ANDREW CHENG (in Cantonese): Mr Deputy, Hong Kong's unemployment rate for the second quarter of 1998 already reached 4.5%, with the jobless totalling some 144 000. The Government accelerates the implementation of infrastructural projects to create job opportunities just because we are in the midst of this economic downturn. We therefore should keep a watch on the manpower involved in the projects, and exercise strict monitoring and control to see if they really let local workers and professionals have priority in employment. To ensure the accomplishment of the goal of helping local employees get employed, the Democratic Party offers the following three main suggestions:

1. Reform the structure of the construction industry, abolish the contractor system

For years the Democratic Party has advocated reforming the hiring system of the construction industry so as to do long-term manpower planning for the construction industry. The essence is to abolish the contractor system of the construction industry as soon as possible. To say that it is more difficult for the Government to do so with reference to private housing projects, then the current major infrastructural projects will be a good lead to make an attempt on abolishing the contractor system. The Democratic Party urges the Government to ask companies taking up those projects to set aside, on an experimental basis, a certain ratio of the project workers for changing over to direct hiring on a monthly-paid term contract basis. This group of monthly-paid term contract workers can ensure a stable labour demand in the market while those infrastructural projects are under construction. On the other hand, this will also guarantee a sure supply of labour and project progress during the same period.

We understand that the Government might run into layers of resistance during the reform. Some of the resistance might come from local workers as they have got accustomed to the contractor system over the decades. However, we must understand that the Government has to keep the balance between project quality and pressure as well as resistance from contractors. What we ask for is good project quality. Let us take a look at the buildings constructed over the last decade or so, both public and private. Further back, 26 blocks of public housing were declared dangerous buildings. More recently, On Ning Garden at Junk Bay and Kam Fung Court at Ma On Shan have shown signs of becoming dangerous buildings. As pointed out by many colleagues, such incidents might be due to the fact that some contractors, adjusting quality according to prices, did not exercise sufficient supervision on construction quality. I therefore call upon the Government to come up with political determination to make a resolute attempt at reforming the existing contractor system so as to create a new culture for the construction industry in the future.

2. Severely punish employers employing illegally imported workers

With regard to one of the 12 suggestions put forward by the Government's ad hoc group on employment to create jobs and solve unemployment, namely, stepping up measures to crack down on those employing illegal employees, the Democratic Party is surely prepared to give endorsement. The Democratic Party also urges the departments concerned to amend the Immigration Ordinance as soon as possible to toughen sentencing and raise fines so as to deter those who breach the law.

Furthermore, the Democratic Party also suggests that, in addition to severely punishing the employers concerned, the departments concerned should follow the example of the Housing Department in setting up a licence suspension system to punish those engineering companies found to have hired illegal workers by suspending their licenses. Participating companies found to have breached the law should be disqualified for bidding for a period of time so as to warn those copycats.

3. Make early preparation for an objective and accurate assessment on manpower needs so as to plan training courses to help local workers get employment

The Democratic Party requests that, for the several major infrastructural projects to be launched, the Government should conduct an objective and accurate assessment on manpower needs, and make specific manpower planning with reference to the unemployment rate which has been going up quarter after quarter. With regard to a Study Report on Construction Industry Manpower Requirements from 1997-2002 released by the Education and Manpower Bureau last December, the Democratic Party is deeply impressed. Much to our regret, the assessment in the report, apart from being exaggerating, has in fact given us the impression that the Government is turning on the green light for employers and paving the way for them to import workers. The study report ought to have a stricter and more scientific basis for assessment in respect of manpower forecast. Mr Deputy, only with an accurate manpower assessment can the relevant government departments co-operate closely with the Vocational Training Council to hook up training with employment so as to ensure that trainees can make use of their acquired skills, make the construction industry more attractive to newcomers, and let local workers have more jobs.

Mr Deputy, I so submit.

THE PRESIDENT resumed the Chair.

PRESIDENT (in Cantonese): Miss CHAN Yuen-han.

MISS CHAN YUEN-HAN (in Cantonese): Madam President, with economy now down and the unemployment situation worsening, the Government responds to the demands of the whole Hong Kong society, agreeing to accelerate the implementation of infrastructural projects. The Federation of Trade Unions (FTU) welcomes this.

However, with regard to the question of how to accelerate the implementation of infrastructural projects, I hope that the Government can fix its point of direction. To propose accelerating the implementation of infrastructural projects at a time when the whole society is engulfed by economic difficulty can stimulate the economy and create employment opportunities. This is the point of direction toward which we are working. It is hoped that the Government, after clearly fixing the point of direction, can so orientate our forthcoming infrastructural projects. I think the relevant government officials ought to understand even more clearly the direction. This is especially true of the Secretary for Works. The reason is that he once said that to accelerate the implementation of infrastructural projects, it was absolutely necessary to import workers. I do not know whether or not he has changed his mind by now. I hope that he will give his response later.

With a clear point of direction, we need a plan and an approach. The FTU fully agrees with Dr Raymond HO's comment that consideration should be given to the question of how to let local expertise and workers have priority in employment. To achieve this, the Government has got to make preparation in advance, for example, stating on the tender submission that the successful tendering contractor should let local workers have preferential consideration for appointment, irrespective of the kind of capital they have. I think it is necessary to get all these done in advance. According to my recent observation, various political bodies and labour organizations have invariably put forward this request. As the acceleration of the implementation of infrastructural projects is intended to solve the current economic difficulty, stimulate the economy and address the employment issue, the Government has a duty to have the requirement ensuring priority in employment for local workers and professionals clearly specified on tender submissions. Members of the labour sector surely think that only local workers should be employed. However, the accomplishment of this depends on the Government's preparation in advance.

Apart from this, there is another problem. With the implementation of so many infrastructural projects, the whole society has to get ready resource-wise. An example was in 1989 when the Government decided to launch the new airport project. At that time, the FTU put forward a series of suggestions, asking the Government whether or not it had made preparation in respect of social resources. Included were the questions of manpower resources preparation and the issue on complimentary facilities. In fact, we can make full forecast on the whole project, foretelling the kind of labour required at each different stage. For instance, at the initial stage of site formation, some odd-job workers and site workers are needed; as the project progresses, workers with some special skills will probably be needed; after that, decoration workers and electricians will be needed. For all these, forecasts and preparatory arrangements can be made.

When the FTU made mention of preparations to be made in respect of resources at the time when the Government decided to build the new airport, apparently the Government's attitude was "We say what we have to say and they do what they have to do". In the end, the Government had to import a lot of workers, even formulating a labour importation scheme exclusively for the airport. What was the result? As we all know, the former Legislative Council once set up a select committee to examine a bunch of labour disputes arising from airport projects. In the end, we discovered that many tendering companies or contractors that hired imported workers hired them because their wages were low. Why did those companies have chances to do so? That was because the Government did not make enough preparation in advance. As just stated by Mr Ronald ARCULLI, there naturally will be a clamour for imported workers when the projects reach a certain stage and yet no workers can be recruited. Dr Raymond HO shares our views. I think the Government should make preparation resource-wise. This includes preparation in respect of manpower resources. With so many of our major infrastructural projects already implemented, our government officials ought to have sufficient experience to make good preparation.

I think it is now more important that the FTU has an even clearer view with the many infrastructural projects to be implemented. At present, infrastructural projects are being launched ahead of schedule. The purpose is very clear, namely, to stimulate the economy, safeguard local workers' employment, and ensure that local professionals have adequate employment opportunities and training in technology while the projects are in progress. As the purpose is so clear, I hope the Secretary for Works will let us know clearly later whether or not preparations have been made resource-wise before launching the projects ahead of schedule. It includes of course manpower resource preparation. Has the Government already done so? I do not want to see history repeat itself.

Madam President, when the former Legislative Council discussed airport projects, we foresaw the point that those projects had a great demand for electricians in nine months. At that time, we, sitting on the Legislative Council Panel on Manpower, brought this to the attention of the Government, opining that it was necessary to arrange training in advance. We later discovered that training, employment and airport projects all went their own ways. There was totally no link among the three. So it really worries me that if the Government makes no preparation in advance, even though the infrastructural projects that we now place so much hope on get accelerated, the benevolent hope that there could be stimulus to both economy and employment might still come to nothing. To achieve our goal, the entire Government and all the officials must face up to the situation.

Madam President, in face of these problems, the FTU is going to give the plan full support. In fact, Members of the Council also support the plan. We call upon government officials to make every effort to carry it out, including aspects like tender submissions and technology transfer, so that the Government can more easily accomplish what society wants to accomplish.

To the original motion of Dr Raymond HO, Members from the FTU give full support. As for the amendment of Mr David CHU, I endorse most of its contents. However, he deletes from the original motion a most important point, namely, the point on according priority in employment to local expertise and workers. Though Mr CHU has repeatedly explained to me that he is not thinking in that way, we cannot support his amendment because of our principle.

Madam President, with these remarks, I support the original motion.

PRESIDENT (in Cantonese): Mr NG Leung-sing.

MR NG LEUNG-SING (in Cantonese): Madam President, we are very pleased to learn that the Government is going to accelerate the implementation of infrastructural projects with a plan to put in a huge sum amounting to $235 billions in the next five years. As the original intention is to stimulate the economy and employment, the Government ought to study specific ways to launch the relevant project items so as to bring maximum benefit to local engineering companies, professionals and workers by providing business and job opportunities. We should learn from the experience and lessons from the new airport and its core programme projects so as to bring real benefits to the local engineering and labour sectors. Only with that can public resources be used "in the proper way".

The Government has indicated that Hong Kong is a place where fair competition counts, and under the Government Procurement Agreement (the Agreement) of the World Trade Organization (WTO), foreign companies should not be unfairly treated in the award of project contracts. This shows that in fact the Government appears to be quite helpless in assisting local companies and employees.

In fact, with some study, many measures can be found to ensure that local companies do get opportunities to win project contracts, and at the same time safeguard the employment opportunities of local engineering professionals and workers. The question is whether or not the Government is going to give active consideration, on the one hand listening to views expressed by members of the profession, and on the other taking the initiative to do some study. Among some of the suggestions put forward by members of the engineering profession is the one seeking to require that to be awarded a project contract, the successful tendering company must hire a certain ratio of local professionals. This is a very common employment protection measure. It will not constitute anything unfair to foreign companies; nor will it breach the spirit of the Agreement of the WTO. Let me quote another example. Project items should be, as far as possible, divided into smaller lots for contracting out provided that this does not jeopardise the end products, a view just expressed by Mr ARCULLI. In this way, conditions will be made more favourable for local companies to take part in the bidding, while observing fair competition. With regard to tender selection criteria, it should be specified that the successful tendering company should have a certain understanding of some other aspects of the Hong Kong environment, such as commerce, living, or even language and culture. This is not too demanding. The reason is that the designer or consultant firm taking up the contract is working for Hong Kong people, not for other people. It is going to be very difficult for them to build projects suitable for the Hong Kong Special Administrative Region if they know nothing about the cultural conditions of Hong Kong. Toilets in the Terminal of the new airport offer a simple example. Their design has come under criticism, clearly showing that those foreign experts really lacked the required common knowledge of local conditions.

On the other hand, we should of course adhere to the principle of fair competition. However, it is precisely because of that principle that it is even more necessary for the Government to review the existing method of awarding contracts to see if local companies and professionals are really being treated unfairly. For example, when a consultant firm of a certain country draws up a consultancy proposal, are the specifications made particular favourable to designer companies of that country? Or are the plans of the designer company of a certain country particularly favourable to architectural firms of that country? Will there be a situation in which Hong Kong pay to solve foreigners' employment problems? If such problems are with us, then how can we talk about fair competition? Many problems crop up upon the completion of the new airport. Yet members of the profession often report that local engineering professionals taking part in the relevant project items have been treated unfairly. I want the Government to face up to the situation, and comprehensively review the existing vetting system so as to materialize the principle of fairness. This is not only beneficial to the professions concerned, but can also bring benefit to the overall economic development of Hong Kong.

With these remarks, Madam President, I support the original motion and the amendment.

PRESIDENT (in Cantonese): Mr LEE Wing-tat.

MR LEE WING-TAT (in Cantonese): Madam President, I am representing the Democratic Party to speak on the "promotion of technology transfer". Given the various major infrastructural projects done in Hong Kong in the past, such as railways and core programme items of the new airport, local companies ought to have rich experience to take up Hong Kong's infrastructural projects. But the existing situation is just to the opposite. So far, Hong Kong still relies a lot on the construction technology of foreign companies. This is especially true of major infrastructural projects and the management of infrastructural projects. We question why local companies, with decades of experience in engineering, have been so slow with the improvement of construction technology. Does it involve the problem of technology transfer?

To bring in technology and experience of foreign companies, the Government used to be less strict with the supervision on foreign companies, resulting in many problems in respect of calls for tenders and engineering technology. In 1996, there was the incident concerning the consultancy contract for the West Rail (WR). At that time, the KCRC, without going through the process of inviting open tenders, awarded to the same company several consultancy contracts of the WR, depriving local companies of the opportunity to take part in the bidding. Following many discussions by the then Legislative Council, the KCRC admitted that it had made a mistake.

More recent examples are the issue concerning the pillars for the foundations of 15 sites, including the northern Hong Kong site of the Airport Railway, and the north-western extension of the Airport Terminal Building. These examples reveal a phenomenon in Hong Kong in connection with infrastructural projects in the past: major infrastructural projects relied too much on the technology and experience of foreign-capital companies, especially with regard to engineering management and consultancy. Because of such reliance, Hong Kong has not exercised adequate supervision on foreign-capital companies, both in respect of technology and management. Many of these major foreign infrastructural technological firms are headed mainly by foreigners. Local companies might have co-operated with those companies but merely worked on front-line jobs, not being able to gain from major infrastructural projects the experience of managing major infrastructural projects. Thus local companies' knowledge in this field has not grown. This is of great concern to us.

In fact, for some projects involving advanced technology, Hong Kong contractors have to hire foreign specialist technologists as they do not have the necessary technology to take them up. To this we do not necessarily object. However, upon the completion of those projects, such professionals will leave, also taking away study reports on the projects as well as other relevant materials, and not leaving them to local engineering personnel for future reference. So local contractors do not have the opportunity to gain advanced technology and experience. Therefore, even though Hong Kong have had quite a few major infrastructural projects over the years, all these years the Government has neglected the issue of technology transfer. As a result, even though local companies have been able to progress slowly in technology over the years, they still lag behind organizations like Bechtel, which manage projects of value running into tens of billion dollars. No company in Hong Kong can claim such ability. Why is it that no company in Hong Kong dare make such claim even though several decades have gone by?

Therefore, the Democratic Party has come to the view that to improve local contractors' construction technology and competitiveness, we should consider bringing in the criterion for technology transfer when screening contractors. This point should be taken into account during the pre-qualification process. I understand that some major projects already have such a qualifying factor. The question, however, is the weight attached to it. Does every project have that? Furthermore, in order to train up local professionals, foreign companies, apart from having to hire local workers and expertise as far as possible, might also consider entering into co-operation with local contractors during the construction period, and invite local scholars and relevant researchers to take part so that the latter can have the opportunity to take in and learn the special technology and experience of foreign companies in a practical setting. Upon the completion of an infrastructural project, the contractor should leave to universities and other research centres all the engineering study reports and other relevant materials for future consultation and study by concerned local people. The Government should put emphasis on the issue of technology transfer, and improve local contractors' competitiveness.

In addition, the Democratic Party urges the Government to encourage local small- and medium-sized companies to send technical personnel abroad for training and research so as to learn advanced foreign technology. Upon their return to Hong Kong, technology learned by them can then be applied here, which is going to be of much help in improving local construction technology and competitiveness. It is hoped that funding from the Government can encourage local companies to conduct more researches or have researches conducted in conjunction with local universities or research centres so as to improve local contractors' technology base.

Madam President, I have a wish: I wish that local companies, such as those handling the airport and railways now, can take part in the bidding in a few years' time when Hong Kong again launches major infrastructural projects, and win the contracts through fair competition. Then major projects will no longer be monopolized by foreign companies, a situation different from what we are now experiencing simply because local companies lack technology and management knowledge. We do not have to worry that we cannot measure up to it so long as we continuously make progress and improve.

Thank you, Madam President.

PRESIDENT (in Cantonese): Prof NG Ching-fai.

Prof NG Ching-fai (in Cantonese): Madam President, on 12 March this year when the Provisional Legislative Council was debating the annual Budget, I pointed out in my speech that the absurd situation in which the rate of unemployment kept soaring while the new airport project was in full swing should not be allowed to happen again. In the next 10 years, the Government will be spending some $200 billion to implement the various infrastructural projects. In this connection, the local companies, professionals and workers should have every reason to be given the priority in participation. Besides, this new rose garden project which involves an enormous amount of investment should aim at a three-fold target: firstly, to further improve the standard of living and business environment in Hong Kong; secondly, to create more employment opportunities; and thirdly, to train up more and offer promotion opportunities to personnel engaging in the fields of management or technology.

I am raising this point again today not to impress others how far-sighted I have been. In fact, what I have said just now is something which a lot of people understand. Perhaps it was not the right time when I first raised those points, I did not receive any response except for the explanation made by government officials. I have been told that Hong Kong is a metrolpolitian city, and according to the regulations laid down by the World Trade Organization, all large-scale projects must invite tenders without any discrimination. As such, the Government of the Special Administrative Region (SAR), though very sympathetic with the cause, could not lay down new rules or amend the existing rules to enable local companies to enjoy any preference in the tender selection exercise.

For these reasons, Madam President, I should like to first thank Dr Raymond HO and Mr David CHU, as the motion and amendment they have moved would give us the chance to debate the issue openly. I think the motion and amendment they have moved today are very timely, as the new airport at Chek Lap Kok which was once referred to as our rose garden project has now created much trouble as well as exposed the long existing problems that we have in Hong Kong. The new airport has finally led the public to query if it is in the public interest as a whole for any major public work projects to be monopolized by or undertaken in a largely monopolizing manner by a large-scale company. Is it time for us to review if the heritage we have inherited from the former Government are 100% perfect? The motion and amendment moved by Dr HO and Mr CHU are indeed a very important policy review.

Madam President, the engineering sector has been pointing out over the past years that local companies have all along been at a disadvantageous position in terms of the chance to compete for the contracts of or to take part in the infrastructural projects implemented in Hong Kong. It is because the tender specifications laid down by the Government, though seem fair enough superficially, are in reality biased towards those large-scale foreign companies with substantial financial power and international experience. In fact, a number of Honourable colleagues have already expounded on this point. As such, I am in support of conducting a review on the whole matter and setting up an ad hoc group or commission to formulate a new set of selection criteria. I particularly hope that senior government officials could adjust the policy direction in both their minds and their hearts. They should give more thoughts to the issue of whether the locals have been unfairly treated in any way. They should find out what the real meaning of "discrimination" is and who has really been discriminated against. My own interpretation of the term "discrimination" is that in a case where both companies A and B could meet the tender specifications, and A is a foreign company with comparatively better quality as a whole than B, which is a local company, if company A was eventually not awarded the contract simply because it was a foreign company, then it is fair to say that company A has been discriminated against. However, if the tender specifications have set out clearly that preferences will be given to tenderers who are willing to offer technology transfer or provide more employment opportunities for local professionals and workers, this would by no means be discriminatory so long as those additional requirements have been clearly set out in a transparent manner beforehand. In this way, companies all over the world could compete for the contracts, both white cats and black cats could have the chance to catch the mice then.

Madam President, the SAR Government will be spending $235 billion in the next five years to speed up the implementation of the infrastructural projects, thereby stimulating the economy of Hong Kong and alleviating the pressure brought about by the soaring rate of unemployment. I hope that this time more employment opportunities would be created for the local professionals and workers. We do not want to have lip service any more. For these reasons, it is my hope that this motion could be passed, and that this Council would take follow-up actions to urge the Government to implement the various suggestions. In addition, I would also like to stress that apart from safeguarding the economic interests of the local companies and their employees, ensuring equal chances for the local people of Hong Kong to participate in major infrastructural projects would also help create an environment that could attract and train up quality personnel. Should there be any special projects in the future, such as the construction of large bridges, if the local companies are still not experienced enough to undertake the projects themselves, opportunities must be created for them to take part in such projects, and thereby acquire the necessary experience that would enable them to take up large-scale projects in the years to come. Besides, I should also like to point out that as a number of tertiary education institutions have been developed and places opened over the past 10 years, many infrastructural professionals have therefore been produced. It would be utterly absurd if the various infrastructural projects within Hong Kong could not create employment opportunities for the local personnel. What is more, the precious resources of the community would be wasted while the public interests as a whole would be jeopardized.

For these reasons, Madam President, I so submit and support the motion moved by Dr Raymond HO or the motion to be amended by Mr David CHU.

PRESIDENT (in Cantonese): Does any other Member wish to speak?

(No Member indicated a wish to speak)

PRESIDENT (in Cantonese): I now invite Dr Raymond Ho to speak on Mr David CHU's amendment. Dr Raymond Ho, you have up to five minutes to speak.

Dr Raymond Ho (in Cantonese): Madam President, I am glad that 15 Honourable Members have spoken on my motion today. As a matter of fact, our discussion has been on the way how we are going to spend a sum of $235 billion in five years, which is about $50 billion a year. This is indeed an enormous sum.

I agree very much that many of the views raised by Honourable Members are highly important. Let me take the issue of orientation as one example. I have all along been asking about the objective of implementing so many large-scale projects which cost a tremendous amount of resources. Well, the objective is to create more employment opportunities as well as to make arrangements for technology transfer, and these objectives are not very difficult to achieve indeed. Let me exemplify. As referred to by Mr Edward HO, we are not asking the Government to lay down the percentage of local professionals and workers that must be employed; what we would like the companies to do is to indicate in their tenders the number of local professionals they are going to hire, and for the contractors, the number of local workers. The rating system is fair enough. The more local employees, the better the result of technology transfer, and hence the better the rating received. This is by no means protectionism, nor any infringement on the Agreement on Government Procurement (the Agreement) of the World Trade Organization which the Government has signed. I could say very definitely that we are only holding fast to the principle of "fair competition and equal opportunities for all". We certainly do not wish to advocate protectionism, nor do we wish to discriminate against foreign companies. The Singaporean Government has also signed the Agreement, yet it could still make it; so why could the Hong Kong Government not do the same?

In the speeches they made just now, the 15 Honourable Members have stated very clearly that all of us have but one common objective, one common demand, and one common wish. We do not need to set up any commissions or structures. In fact, I had prepared to point this out in the speech I made earlier on, but was unable to do so due to the lack of time. As a long-term measure, I wish the Government would consider setting up an infrastructure bureau to co-ordinate policies concerning the manpower supply and resources allocation for infrastructural projects, as well as to stabilize the production volume of new buildings. The Government should take this point into consideration when making long-term planning. However, the first and foremost task we have in hand is to give the local people, professionals and workers alike, priority in employment. I feel so sorry and regret that despite the repeated efforts I had made at the meetings of the Airport Consultative Committee to call for priority in employment for locals, the Government has given a deaf year to me and thus led us into this poor situation. The Government will soon be implementing a large number of projects, and I am sure the number of new projects to be implemented by the three public corporations would be comparable to that of the Government; as such, I hope that the Government would take into account the points raised by Members in this Chamber today and exert pressure on the three public corporations to make them adopt the same policies.

As regards the amendment moved by Mr David CHU, I believe this is a friendly amendment of his. Yet much to our regrets, he has proposed to delete the words that should not be deleted and add in words that should not be added. In my opinion, the forming of any commission is just a duplication of effort. Indeed, we have too many commissions already, as the selection of tenders is also done by a commission. The most important point is the composition of the commissions. However, there would certainly be a problem of clash of interest if any construction companies or other companies are appointed to the commission; and since it is very difficult to appoint the suitable independents to the office, the commission is doomed to fall through. It is a very important and indispensable condition that priority in employment be given to local professionals and workers; as such, I urge Honourable colleagues to oppose the amendment moved by Mr David CHU and support my motion. Thank you.

PRESIDENT (in Cantonese): Secretary for Works.

SECRETARY FOR WORKS (in Cantonese): Madam President, after over two hours of debate, I am glad that I can finally express my views. I hope that after Members have heard my speech, their doubts will be dispelled.

The procurement arrangements made by the Government in respect of public works and related services conform to two main policy principles: to achieve the highest economic efficiency and ensure fair and open competition. Although several Members have said that the Government always uses the World Trade Organization (WTO) as a pretext, I should perhaps talk about this organization briefly.

Starting from 19 June 1997, we have to abide by the regulations of the Agreement on Government Procurement (the Agreement) of the WTO in terms of procurement. With regard to construction projects, the Agreement applies to tenders for construction services exceeding approximately $55 million, but excludes consultancy contracts.

By laying down the principles for the Agreement, the WTO tries to provide an environment for fair competition, so that suppliers of different background will receive equal treatment. Therefore, we must ensure that all suppliers providing materials and services to the Government can engage in fair competition. The Government will abide by these regulations and the principles of transparency, non-discrimination and not giving preferential treatment to any country. It will also pay attention to the local situation and ensure that local companies will not be disadvantaged by these regulations.

The purpose of this motion is to ask the Government to protect "local companies" and "local expertise". However, it is not easy to define "local companies" and "local expertise". Therefore, I very much agree with what the Honourable James TO said. Many contractors and consultancy firms might be overseas companies many years ago. However, after establishing themselves in Hong Kong decades ago and participating in the development of Hong Kong, these companies deserve in many respects to be called "local companies". Most of the employees of these companies are "local" people. As a matter of fact, they are also mostly managed and run by "local" people.

As for ensuring "that local companies can take part" in infrastructural projects, our policy already stipulates that locals and non-locals should be given equal opportunities. However, if we lay down rigid rules that contracts must be awarded to local companies, it would contravene the above principle and such arrangements might not achieve the highest economic efficiency. We have to ensure that competition opportunities remain open and fair. Notwithstanding this, the majority of projects in government contracts are in fact undertaken by local companies. I believe that most of these companies can maintain their strength and competitive edge and continue to participate in tendering for new projects in the future works programmes of the Government. Moreover, in evaluating individual tenders, the Government also places much emphasis on whether the bidders have local experience.

Works contracts

At present, about 80% of contractors on the Government's List of Approved Contractors for Public Works are local contractors. According to the figures of works contracts awarded, in the three years between 1995-96 and 1997-98, a large number of contracts was awarded to local contractors. During these few years, 341 out of 405 public works contracts were awarded to local contractors, accounting for 84% of the total number of contracts, excluding 11% of the contracts which were awarded to companies having their holding companies on the Mainland (or simply known as mainland companies). Another nine contracts were awarded to joint ventures with local contractors.

Up to the end of June 1998, about 90% of contracts of works under construction were undertaken by local contractors. These contracts are valued at about $36 billion, accounting for 75% of the total value of contracts. About half of the remaining contracts were awarded to mainland companies.

Local contractors will continue to have many opportunities to participate in future infrastructural projects and public works. We expect that by the end of 1999, out of about 400 contracts, approximately 160 public works contracts each with a construction cost under $20 million and 60 contracts with a construction cost between $20 and $50 million will be awarded to contractors in Groups A and B of the List of Approved Contractors respectively. These contracts are not regulated by the Agreement of the WTO, and contractors in Group C may not bid for these projects. Madam President, perhaps I could explain a little bit. The so-called Groups A, B and C are generally differentiated according to the cost of projects. In general, engineering companies in Group A may not bid for works contracts of over $20 million, while contractors in Group B may not bid for contracts of over $50 million. There are no restrictions for contractors in Group C. All contractors in Groups A and B are companies based locally and their owners are Hong Kong people. For the same period, about 180 contracts with a construction cost of over $50 million will be awarded to contractors in Group C, which include overseas and mainland companies.

Many people may have the misconception that most projects are awarded to overseas contractors. However, Members will know the real situation by looking at the statistics. In the three years between 1995 and 1997, there were 90 building contracts of Groups A and B and all of them were awarded to local contractors. Of the 112 building contracts of Group C, 83 were awarded to local contractors and 24 were awarded to mainland contractors. Only five were awarded to other overseas contractors. Besides, all 106 civil engineering contracts of Groups A and B were awarded to local contractors. Of the 99 civil engineering contracts of Group C, 64 were awarded to local contractors, 19 to mainland contractors, and the remaining 16 to other overseas contractors. In short, of the 202 building contracts, only five were awarded to overseas companies other than mainland companies. Similarly, of the 205 civil engineering contracts, only 16 were awarded to foreign contractors.

In recent years, some local contractors are also capable of undertaking large-scale infrastructural projects. These contractors have formed joint ventures with overseas companies to enhance their capability to bid for the relevant projects. Members talked about the Airport Projects and the Airport Core Programme Projects just now. Actually, many of the Airport Core Programme Projects were jointly undertaken by local and foreign companies. Recent examples of success include the large-scale Ting Kau Bridge project and the Hung Hom Bypass still under construction. These are projects with the participation of local companies. Through co-operation with international companies, local contractors can absorb their experience and management skills.

Consultancy contracts

Although large project consultancy firms in Hong Kong are mostly from the overseas, the majority of these firms, except one or two, have operated in Hong Kong for more than 20 years. The present situation is much different from the early years. Most of the chairmen or managing directors of these firms are local engineers, while the majority of their board members and expertise are engineers who have received their education and professional training locally. I believe that with the exception of one or two firms, the technical and general staff are mostly local people. This is even more evident with building consultancy firms. Of the 35 companies on the list of building consultancy firms of the Architectural Services Department, only eight were not established locally and several of them have a long history in Hong Kong.

Members should know that it is not easy to set up a large-scale consultancy firm. It takes much time and manpower to accumulate sufficient human resources, experience and information in order to undertake large-scale engineering projects. We also often notice that it is very difficult for small-scale "local" consultancy firms to compete with large-scale consultancy firms. When we select the consultancy firms for technically simpler small-scale projects, we will ask the relevant works department to consider only small-scale local consultancy firms with less than five professional staff.

Of the 239 consultancy jobs related to projects contracted out between 1995 and 1997, 163 were contracted out to companies with more than half of their expertise being locals, accounting for 77% of the jobs. Between 1995 and 1997, 44 building consultancy jobs were contracted out, 30 of them to local companies, accounting for approximately 68% of the jobs. All other contracts were awarded to companies which had been established in Hong Kong for more than five years. It is believed that most staff employed by these companies are local people.

In terms of employment, as far as I know, engineering graduates in Hong Kong in recent years have not had much difficulty in finding employment. At present, the Hong Kong Institute of Engineers has some 13 000 members, most of them locals working as engineers in Hong Kong. Some people say that many senior posts are occupied by foreigners. This might be true in the past. However, in many organizations in the public and private sectors, more and more senior posts are now occupied by local engineers. With regard to the question of employing local workers, I have no intention to discuss in detail the various questions of the importation of labour. However, I must reiterate that the Government's policy is that employers must give priority to local workers when there are vacancies in the labour market. Employers will only be allowed to import labour if they really cannot find suitable workers to fill the vacancies locally. The Government has always encouraged project contractors and consultants to give priority to local workers when recruiting staff. However, it might not be very wise of us to lay down a compulsory ratio. Once there is a ratio, it would mean that some labour might be imported. The average government works contract already stipulates that as a general rule, all labour should be recruited locally as far as possible. With regard to consultancy jobs, the employment provisions also require consultants to employ local people as resident site staff as far as possible.

We will continue to pay close attention to the supply and demand of labour in the construction industry. We will strive to speed up the infrastructural projects in order to increase employment opportunities. Since several projects might be under construction at the same time, we will also keep close watch on whether there is a shortage of labour for special skills and trades. With regard to this question, I very much agree with Miss CHAN Yuen-han and we will pay special attention to the scheduling of the projects to avoid these problems.

Providing training and trade tests, in order to ensure an adequate supply of local workers

To ensure regular work for local construction workers, we have to provide adequate and good-quality training and retraining programmes. Together with the construction industry, employees' organizations and training institutes, the Government is trying to enhance training and retraining to ensure that there will be enough local workers to carry out the infrastructural and development projects. The Construction Industry Training Authority (CITA) has increased the number of trainee places by 30% compared with last year. In order to cope with the demand for labour for special trades, workers must undergo in-service training and learn how to operate heavy machinery. Just now Mr LAU Chin-shek also mentioned that the CITA and contractors had jointly organized a Special Trades CITA/Contractor Co-operative Training Scheme at the end of May. The purpose of this scheme is to train new human resources for new special trades which are indispensable for infrastructural projects (especially civil engineering projects), such as tunnel boring machine operation and dredging operation. In addition to subsidies to employers, trainees also receive an allowance.

Apart from providing adequate training and retraining programmes, we also provide trade tests for construction workers in construction and electrical engineering, as well as various certification tests for construction plant operators. Introducing trade tests and certification tests is an important measure to ensure that new entrants to the profession can find work and that workers now working will stay in the industry.

Projects of the railway corporations

With regard to the projects of the railway corporations, the tender and contract management procedures of the Kowloon-Canton Railway (KCR) and the Mass Transit Railway (MTR) conform to the regulations of the Agreement. Since they also fall within the scope of the WTO Agreement, suppliers of any background should be able to participate in fair and open competition.

As far as I know, in evaluating tenders, the two railway corporations place great emphasis on whether the supplier has local experience and the ability to manage local workers. Actually, many overseas bidders form joint ventures with local companies to enhance their competitiveness in the bidding. Of the 28 contracts of the early phase of the West Rail project awarded, 19 were awarded to local companies or joint ventures with the participation of local companies.

Technology transfer

I know that Members are very much concerned about the question of technology transfer. We know very well that technology transfer can advance the development of the construction industry in Hong Kong. Technology transfer in the construction industry is a slower process. When local expertise and workers participate in large-scale infrastructural projects, even if the relevant projects are carried out by overseas companies, their participation will gradually result in technology transfer. Actually, in recent years, more and more project partners and engineers of consultancy projects and project managers of building contracts are local engineers. A typical example of technology transfer is the Ting Kau Bridge project. This project was carried out and managed by government staff. The project owed its success to the fact that these staff had participated in the projects of the Tsing Ma Bridge and the Kap Shui Mun Bridge and had absorbed the relevant experience.

Some Member mentioned just now that technology transfer might one day be applied to projects in the Mainland. Actually, technology transfer is already taking place. Perhaps Members are not aware of this. The data needed for the construction of the Humen Bridge in the Mainland were supplied by us.

There are many practical difficulties involved in specifying technology transfer in the terms of contracts or making it a condition of tender. Therefore, it can only be considered on an individual basis. It is not at all easy to clearly define and stipulate how technology transfer should be effected and which technology should be transferred. One cannot say that it is impossible, but it is not easy. However, if the opportunity arises, we will consider it.

An example of co-operation for the sake of technology transfer is the monitoring of wind force and structure for the Tsing Ma Bridge. The University of Hong Kong, the Hong Kong Polytechnic University, the University of Science and Technology and Qing Hua University are now co-operating with a specialist company in carrying out this work. From the work, these four universities can obtain the relevant expertise and gather experience.

With regard to some contracts completed recently, one of the conditions for tender was the transfer of technology to local employees. The consultancy agreements to provide project management supporting services for projects such as Route 3 and the North Lantau Highway are examples of such contracts.

Setting up a commission to formulate new specifications for tender selection

Madam President, we do not have much objection to the spirit of Dr Raymond HO's motion. Honourable Members, the above information shows that at this stage, the Government has made adequate arrangements and provided opportunities so that local people can participate in Hong Kong's infrastructural projects, and that priority is accorded to providing more employment opportunities to local expertise and workers. We do not think there is a need to set up a commission now to formulate new specifications for tender selection. The existing terms and conditions of tender have not created any barrier for local companies and affected their bidding. As I have already pointed out, the existing terms of works contracts and employment conditions stipulate that the companies should employ local people in recruiting workers and resident site staff as far as possible. Besides, we have announced that in formulating tender specifications, one must formulate more or less objective terms based on the ability and performance required, so as to avoid preferential treatment of certain types of companies and ensure that local companies have equal opportunities to compete. Our existing procurement mechanism is extremely open and transparent. In any case, members of the construction industry hold regular meetings and they can reflect their problems there.

In order to monitor the state and development of the construction industry, the Works Bureau talks to and consults members of the construction industry regularly through various committees and other unofficial channels. These committees include the Building Contractors Committee and the Consulting Engineers' Committee, which examine matters relating to construction and civil engineering, and matters relating to the appointment of project consultancy firms and related consultancy firms respectively. An even more representative committee is the Construction Advisory Board, which was formed to review the various problems of the construction industry and to give advice to the Government. Apart from a few appointed members from the industry, contractors and consultants, there are also representatives from the relevant professional organizations, public bodies, the CITA, the Vocational Training Council, the Real Estate Developers' Association of Hong Kong and government departments. The views expressed by its members on the problems of the industry as well as the issues discussed in this debate may be discussed in the above committee. If there is any progress on the follow-up action taken after discussion, we will report to the above committee. Members of the construction industry can also reflect any major issues through representatives on the Construction Advisory Board to the Government so that it can examine them. Thank you, Madam President.

PRESIDENT (in Cantonese): I now put the question to you and that is: That the amendment moved by the Mr David CHU be made to Dr Raymond HO's motion. Will those in favour please raise their hands?

(Members raised their hands)

PRESIDENT (in Cantonese): Those against please raise their hands.

(Members raised their hands)

Dr Raymond HO rose to claim a division.

PRESIDENT (in Cantonese): Dr Raymond HO has claimed a division. The division bell will ring for three minutes.

PRESIDENT (in Cantonese): Members please register their presence by pressing the top button and then proceed to vote.

PRESIDENT (in Cantonese): Before I announce that voting shall stop, are there any queries? If not, voting shall now stop.

PRESIDENT (in Cantonese): The result will now be displayed.

Functional Constituencies:

Mr Edward HO, Mr Michael HO, Mrs Selina CHOW, Mr CHEUNG Man-kwong, Mr HUI cheung-ching, Mr SIN Chung-kai, Mr Howard YOUNG, Mrs Miriam LAU, Dr TANG Siu-tong and Mr LAW Chi-kwong voted for the amendment.

Dr Raymond HO, Mr Eric LI, Mr LEE Kai-ming, Dr LUI Ming-wah, Mr Ambrose CHEUNG, Mr CHAN Kwok-keung, Mr Bernard CHAN, Mr CHAN Wing-chan and Mr WONG Yung-kan voted against the amendment.

Geographical Constituencies and Election Committee:

Mr Albert HO, Mr LEE Wing-tat, Mr Martin LEE, Mr Fred LI, Mr James TO, Miss Christine LOH, Mr LEUNG Yiu-chung, Dr YEUNG Sum, Mr Andrew CHENG, Mr SZETO Wah, Mr David CHU, Mr HO Sai-chu, Mr NG Leung-sing, Prof NG Ching-fai, Mr MA Fung-kwok and Mr Ambrose LAU voted for the amendment.

Miss Cyd HO, Mr LEE Cheuk-yan, Miss CHAN Yuen-han, Mr Gary CHENG, Mr LAU Chin-shek, Mr LAU Kong-wah, Miss Emily LAU, Mr TAM Yiu-chung, Mr CHAN Kam-lam and Mr YEUNG Yiu-chung voted against the amendment.

THE PRESIDENT, Mrs Rita FAN, did not cast any vote.

THE PRESIDENT announced that among Members returned by functional constituencies, 19 were present, 10 were in favour of the amendment and nine against it; while among Members returned by geographical constituencies through direct elections and by the Election Committee, 27 were present, 16 were in favour of the amendment and 10 against it. Since the question was agreed by a majority vote of each of the two groups of Members present, she therefore declared that the amendment was carried.

PRESIDENT (in Cantonese): Dr Raymond HO, you may now reply and you still have 14 seconds.

DR RAYMOND HO (in Cantonese): Madam President, I am pleased to see the conduct of such a wonderful debate today. As I pointed out before, a local company is defined as one with 50% or more of its shares held in Hong Kong. The point is that in the case of many consultancy firms, a good part of their shares are not held in Hong Kong, or it may even be that all their shares are not held in Hong Kong. Besides, I also hope that public sector organizations can follow the example of the Government and take on local professionals as far as possible. In case they cannot do this, they should be required to submit CSR181 to certify that their overseas recruitment is warranted by their failure to recruit the staff required in Hong Kong.

PRESIDENT (in Cantonese): I now put the question to you and that is: That the motion moved by Dr Raymond HO, as amended by Mr David CHU, be passed. Will those in favour please raise their hands?

(Members raised their hands)

PRESIDENT (in Cantonese): Those against please raise their hands.

(No hands raised)

PRESIDENT (in Cantonese): I think the question is agreed by a majority respectively from each of the two groups of Members, that is, those returned by functional constituencies and those returned by geographical constituencies through direct elections and by the Election Committee, who are present. I declare the amended motion passed.

PRESIDENT (in Cantonese): Second motion: Restructuring Hong Kong's economy. Miss CHAN Yuen-han.

RESTRUCTURING HONG KONG'S ECONOMY

MISS CHAN YUEN-HAN (in Cantonese): Madam President, I move the motion as set out on the Agenda.

Today I move the motion entitled "Restructuring Hong Kong's Economy" because the economy of Hong Kong is beset with both internal and external problems. The external problems are associated with the onslaught of the Asian financial turmoil which has put the economy of Hong Kong in a shambles. The internal problems come with the imbalance of the local economic structure and the bursting of the bubble economy. Company closures, layoffs, wage cutbacks, and slashing of benefits are daily occurrence. In the face of this situation, many people have recently put forward proposals and the Government has also formulated many specific measures to deal with the problem. But I think these are only interim measures. To get out of this predicament, I think there ought to be medium and long-term policies to go with these short-term measures. Government officials should work on the restructuring of the Hong Kong economy, using a long-term perspective and applying innovative concepts. Development strategies should be adjusted so that there can be a new way out for the Hong Kong economy.

The Government should bear the blame for Hong Kong's economic downturn. It is because the territory has been enjoying a history of continued success in the past and insisted on a conservative policy of "non-intervention" which resulted in Hong Kong missing a number of chances of development during the 1970s and 1980s.

Hong Kong has undergone two major occasions of economic restructuring in the past. The first time was in the 1950s during the early days of China's liberation. The influx of people from the Mainland brought capital, human resources, machinery and expertise into the territory and laid the foundation of industrial development. At that time advanced countries in the West were having a technological reform and an adjustment of their industrial structure. The market for labour-intensive products made available as a result provided a chance for Hong Kong to develop its labour-intensive industries.

The second time was in the mid-1980s when China intensified its open door policy and this greatly accelerated the relocation of Hong Kong industries to the Mainland. At that time the Government did not provide any assistance to local industries to upgrade and transform and just left them to wither and waste away. This present division of retail and manufacturing locations which has been described as "shop in front of workshop" has enhanced Hong Kong's position as a service centre. Tertiary industries made enormous strides in the 1980s, and with the encouragement from the Government, Hong Kong became a financial, property, tourist and business service centre.

The above two occasions of economic restructuring can be described as a result of chance and external factors. But the Government has been indulging in its past achievements and under the so-called policy of "active non-intervention", only infrastructure facilities and other general services are provided.

With the change of the times as well as the economic environment, the "active non-intervention" policy which was regarded as effective in the past has led to the gradual loss of many economic edges which the territory used to possess. For example, with the upgrading and modernization of industries in the Mainland and the continued relocation of Hong Kong industries northwards, the "shop in front of a workshop" production pattern in the two places started to change. With new economic edges not yet developed, the local economy is entering into a period of recession under the influence of outside economic factors. Wage earners and employers alike are suffering from the grave consequences of an economic downturn.

If we say that Hong Kong owes its success in the past to sheer luck, then is the present downturn a punishment from the gods? If we look at our neighbours such as Taiwan for example, we can see that Taiwan, having developed its computer industry, has made huge investments in the semi-conductor integrated circuit industry, and so hi-tech industries have become the mainstream of the Taiwanese economy and Taiwanese products have found themselves a place in the global market. Hong Kong clearly lags behind when it comes to hi-tech industries and our former edges are also gone. What is even more worrying is that, with the improvement of infrastructure and management of ports in the Mainland, our position as an entrepot is also being threatened. If there is complete communication between China and Taiwan, and if further reforms are made in China's financial system, what kind of leading edge can we still hope to possess? Our former role of being a bridge between East and West will vanish forever. If our Government is still complacent about the status quo, it will only accelerate the territory's decline.

What Hong Kong needs is a diversified economy, one which is not heavily dependent upon finance, real estate, insurance and such like trades, but one which has also a substantial proportion of industries as a basis. Therefore, the Government should carry out a restructuring of the economy, lend support to the industries, develop hi-tech and high value-added industries, and to implement an economic policy with an emphasis on providing employment opportunities. This is where our future lies. I would like to point out here that the Government has to make a lot of efforts to achieve these goals, because we are very much behind other countries in these aspects. For example, in many western countries, investments in scientific research take up about 2.5% to 3% of their GNP, while similar investments take up about 2% of the GNP of the other "little dragons" in Asia. And what about Hong Kong? Our expenses in this area are only 0.4%, incommensurate with our economic power. Since we have already owned a good basis and environment for tertiary industries, if we can have a reasonable proportion of secondary industries, such as increasing it to about 10% of our GDP in the short term or 15% to 20% in the medium-to-long term, then not only can employment opportunities be increased, but a mutual development or complementary effect between the secondary and tertiary industries can be facilitated.

Moreover, we can also see that China has excellent resources in scientific research and it has a large number of scientists. It is only because of the lack of a mechanism which can effectively combine science and technology that only about 20% of the fruits of scientific research can be put into application. Science and technology only contributes to about 30% of the country's economic growth. If Hong Kong can make the fullest use of its leading edges and transform the fruits of China's scientific research into commercial products and put on the market, this will greatly help Hong Kong's development in the hi-tech and high value-added industries.

In our move towards the hi-tech and high value-added industries, the Government has to deal with the problem of a number of low-skilled and poorly-educated workers and it should be concerned about their employment prospects. According to statistics, the portion of people engaging in manufacturing industries in the working population dropped from 46% at the beginning of the 1980s to the present 12%. A lot of people from this group of displaced workers are only at their 30s or 40s and they number quite a few dozen thousand. How are we going to help them? How are we going to use this human resource and turn it into active service for our economic development?

We should first consider helping some traditional capital-intensive industries such as the ship-repairing industry. The reason is that the ship-repairing industry is needed by the shipping industry and the latter is vital to our harbour. How are we going to help the ship-repairing industry? This is something we have to think about. The industry is one of those traditional capital-intensive industries which employ a large number of workers. If we can be successful, we can maintain Hong Kong's position as a major shipping centre of the world while at the same time provide employment to workers. Besides, we should keep a number of those labour-intensive industries. The Government should offer assistance to those small and medium sized enterprises in the printing, fashion, souvenir and design industries which are competitive and possess a market share. These industries can take up a large number of skilled workers and so the Government should give them some help. For example, the Government can consider offering these workers jobs instead of welfare, that is, the Government should give financial assistance to those industries which are not making a lot of profits but can take up a lot of workers. This will be more in the interest of the whole society than letting these industries die off and the Government has to give unemployment assistance to the displaced workers. In addition, community and personal services should be expanded to cope with increasing social demand, especially in the area of social services for the elderly, child care and youth services. This is a method which can meet the needs of society as well as offering chances of employment.

Madam President, after two or three decades of economic growth, the former days of glory are gone. If we still indulge in our glorious past and cease to stand up to the present challenges, and if in the face of adversity we simply sit here and do nothing but put the blame on others, this is certainly not a constructive attitude to take and will not solve problems.

We sincerely hope that people from all walks of life, especially officials of the Hong Kong Special Administrative Region (SAR) Government, will have the proactive spirit, mentality and vision to formulate medium-to-long-term strategies for economic development, so that there will be new developments in the economy and employment situation of Hong Kong.

Madam President, I so submit.

Miss CHAN Yuen-han moved the following motion:

"That, in view of the undue emphasis laid in recent years on the financial and real estate businesses in Hong Kong's economy, at the expense of its industrial development, resulting in a change in the local economic structure, the loss of its past diversified characteristic, as well as unprecedented employment difficulties faced by local employees, this Council urges the Government to restructure Hong Kong's economy and modify its development strategies, so as to create employment opportunities."

PRESIDENT( in Cantonese): I now propose the question to you and that is: That, in view of the undue emphasis laid in recent years on the financial and real estate businesses in Hong Kong's economy, at the expense of its industrial development, resulting in a change in the local economic structure, the loss of its past diversified characteristic, as well as unprecedented employment difficulties faced by local employees, this Council urges the Government to restructure Hong Kong's economy and modify its development strategies, so as to create employment opportunities.

Members have been informed by circular on 17 July that Miss Christine LOH and Mr SIN Chung-kai have separately given notice to move amendments to this motion. Their amendments have been printed on the Agenda. In accordance with the Rules of Procedure, the motion and the two amendments will now be debated together in a joint debate.

In accordance with Rule 34(5) of the Rules of Procedure, I will call upon Miss Christine LOH to speak first, to be followed by Mr SIN Chung-kai; but no amendments are to be moved at this stage. Members may express their views on the motion and the amendments. Miss Christine LOH.

MISS CHRISTINE LOH: Madam President, this is the fourth debate on the economy we have had in three weeks' time. Let me first explain why I am seeking an amendment to the Honourable Miss CHAN Yuen-han's motion.

Firstly, I want to emphasize that our key economic problem right now is the general loss of business confidence.

Secondly, I am concerned that the wording of Miss CHAN Yuen-han's motion is unduly negative towards two of Hong Kong's main businesses, namely, finance and property.

Thirdly, in considering how Hong Kong's economy might be restructured, if we are unfairly prejudiced against financial services and property development, I fear that we might not have a sufficiently clear head to consider the best options forward.

Lastly, I want to emphasize in my amendment that both the public and private sectors have important roles to play in reviving business confidence. Let us not just rely or depend on the Administration to do everything. Miss CHAN Yuen-han's motion has a touch too much of central guidance to my liking.

Business Confidence

Madam President, business confidence is low for a variety of reasons, some externally caused, but some are of our own doing.

One of the external reasons is, of course, the Asian financial turmoil. What is now clear is the frightening reality that international capital movements could generate crisis, harming the weak as well as the strong. Hong Kong caught the Asian flu even though our market and regulatory framework are basically sound. Despite our competitive advantage in the region, market sentiments are down on Asia as a whole. What Hong Kong must do is to distinguish itself from its neighbours.

A second reason is that foreign investors view our linked exchange rate to the US dollar as a weakness rather than as a strength. Our currency is attacked because people do not believe we can hold the peg in the longer term. The result is high interest rates, making life difficult for all businesses dependant on credit, and individuals who are servicing mortgages. The longer we take to revive business confidence, the more the currency is likely to be tested.

Real Estate Sector

A third reason, I am afraid, is self-created. Both the Colonial and the Special Administration Region Governments pursued land policies that were poorly thought out and badly implemented. For example, while the current Administration was right to increase land supply last year, it forgot to phase out the anti-speculation measures. The Chief Executive also had the bright idea to get people to buy property in a tight monetary environment via the sale of public housing at steeply subsidized prices. This and other measures made people uncertain about just what land and housing policy the Administration is pursuing.

Recently, the Administration finally seems to have realized that it has to restore faith in the asset markets of Hong Kong, otherwise, people will simply not invest and spend, thereby further squeezing life out of a slowing economy.

It is easy to knock the real estate sector. It is easy to say that our economy should become less dependant on property. The reality is that this sector has averaged 25% of Gross Domestic Product since 1980. The real estate and construction share of total stock market capitalization is estimated to be around 45%. Over 35% of bank lending is to support real estate and construction. Some 33% of government revenue comes from them, and some 35% of public expenditure is spent on infrastructure and public housing. We cannot change things overnight. I urge the Administration to review its land and housing policy with the understanding that real estate is a deeply entrenched and intricate component of the Hong Kong social and economic fabric. Any changes need careful consideration and public consultation, otherwise, the fabric could disintegrate to nobody's benefit.

Finance

As for finance, it is easy to blame speculators, but in reality, this sector provides the essential components of facilitating capital and entrepreneurship. In the wake of the regional crisis, there is a tremendous opportunity for Hong Kong to consolidate and build upon its comparative advantage in Asia as a regional and international financial centre. Hong Kong can be a capital-raising centre of China, and if Hong Kong is to develop its own as well as China's industries, and to invest in technology, then it needs more sophisticated financial services, not less.

While Miss CHAN Yuen-han does not seem to think Hong Kong can be a financial centre of China in the long term because China is reforming her financial sector, I wonder why she believes that Hong Kong can be a high technology centre of China. I ask Miss CHAN Yuen-han to look at our comparative advantages in finance services. I certainly agree with her, however, that we can develop many other services, but there is no need to downgrade financial services in our longer-term thinking.

Articulate Long-term Plans

Finally, Madam President, this is the time for the public and private sectors to help revitalize our economy. The public knows that the various government rescue packages do provide some sort of short-term help, but people need to hear how each sector of business can make advances for the future. They know that only this can help provide employment opportunities in the long run.

The public and private sectors can join together to organize a series of workshops in the coming months, at the end of which, various sectors can provide a list of positive steps each of which can take to become more productive, efficient and competitive. Showing confidence in the ability of Hong Kong to improve will help revive general business confidence. Where there are monopolistic practices, the Administration must adjust its policy to encourage competition. Where the Administration has gone wrong, such as with the management of the peg, its housing policy and the new airport, an open admission of fault, together with corrective steps, will also help revive confidence.

Lastly, I appreciate the Honourable SIN Chung-kai's amendment. He has listed some positive areas for development, but that is hardly an exhaustive list and it would be impossible for this Council in any motion debate to make the most comprehensive list possible to revive Hong Kong's economy. I agree with much of what is in Mr SIN Chung-kai's list, however. I do believe it is our job as political leaders to push for clarification of public policies, where it is necessary. At this time, more than anything else, we too can help revive business confidence.

PRESIDENT (in Cantonese): Mr SIN Chung-kai.

Mr SIN Chung-kai (in Cantonese): Madam President, last week I moved an amendment to the Honourable Miss CHOY So-yuk's motion which claimed that the Government had disregarded the service industry. This week, the Honourable Miss CHAN Yuen-han blames the Government for disregarding the industrial sector. As I have referred to in my speech last week, the Government has claimed that there had been others who blamed the Government for disregarding the industrial sector. As a matter of fact, issues regarding the industrial sector have been discussed in this Chamber for many times throughout the years; as such, the motion on "restructuring Hong Kong's economy" moved by Miss CHAN Yuen-han has in fact overlooked the various debates conducted by the former legislative Council over the past years.

I should like to speak in response to the question raised by the Honourable Miss Christine LOH as to why I had proposed so many measures. In formulating these proposed measures, we have made reference to past proposals which have been discussed in certain forums and won the support of the Democratic Party. However, if our discussion still remain at that previous stage, it will carry us to nowhere and drag our feet behind events in Hong Kong. I agree with Miss Christine LOH that people have lost their confidence in doing business, and that the Government should do something to restore their confidence.

Madam President, I would like to explain as follows the reason why I have sought to move an amendment to the motion. Yet I must stress that we are urging the Government to help the industrial sector develop towards high technology and high value-added, but that does not mean that we are asking the Government to directly subsidize or support any particular industry. I would concentrate on three areas, namely, technology transfer, reasonable land prices and institutions. The rest of the proposed measures would be dealt with by my colleagues, the Honourable CHEUNG Man-kwong and Albert HO.

Technology Transfer

I should like to begin with technology transfer. In the past dozen years or so, the size of our manufacturing industry has not been reduced but expanded, but one important point is that our manufacturers have expanded their business operations from Hong Kong to the Mainland. In regard to the value of production, the total value of exports has in fact been always on the increase; yet in the midst of the economic restructuring, workers in Hong Kong may not be able to share these fruits. However, this is an objective fact that we must respect. Our manufacturers must change their mode of production from original equipment manufacturing (OEM) to original design manufacturing (ODM), and then further develop into the building of quality brandnames. However, all these development must involve the application of advanced technologies. But where could we get those necessary advanced technologies? Well, it is our believe that the Government should lend the manufacturing industry a helping hand. In this connection, the Government has set up two institutions, namely, the Industrial Technology Centre (ITC) and the Hong Kong Productivity Council (HKPC). The ITC has been a source of complaints. I could recall that the Honourable James TIEN has also criticized the ITC before. Let me cite his words: "The Industrial Technology Centre is but a sophisticated rent collector." I remember he has said those words two years ago. I have paid a visit to the ITC two weeks ago. Now that the property market has slackened, if the ITC continues to rely solely on rent collecting for support, the problem would further develop as times go by. Another institution is the HKPC. The HKPC has done a lot of work, but to what extent is its work helpful to the industrial sector? It has recently set up the Product Innovation Institute, but our concern is: How far could those technical support succeed in helping the manufacturers develop new products?

Just now Miss CHAN Yuen-han has referred to the experience of Taiwan. Mr CHEUNG Man-kwong and I have recently visited Taiwan. Taiwan has an Industrial technology Research Institute which spends 14 billion new Taiwan dollars a year on research work. About 7 billion new Taiwan dollars are direct subsidies from the Taiwanese Government. This is by no means a small sum, as it would amount to more than HK$2 billion. Does that mean our Government has to spend the same amount of money to support the industrial sector? Miss CHAN Yuen-han has also mentioned that in many other countries, the amount of government expenditure on technological research would amount to 2.5% of the relevant country's GNP. I should like to speak in response to this point as well. What does that 2.5% mean to us? Let us say the GDP of Hong Kong is $1,600 billion, we would have to invest $40 billion in that respect. As the Government has about $240 billion for expenditure each financial year, that would mean it has to spend one sixth of its expenditure on technological research. Is it really what we want? Since this would have an important impact on the economic structure of Hong Kong as a whole, we should take every factor into consideration very carefully. As such, there are certain efforts which we would lend our support to, but the implementation of some others would be risky. The purpose of our raising so many specific proposals is to set out clearly the kinds of work that we think the Government should and should not do. I hope honourable Members would be convinced in this way, and that they could reach a consensus regarding the things which the Government should do. Yet should the Government be spending all the resources as "subsidy" or "assistance"? If the Government is to spend $40 billion on technological research, perhaps the local economy could be revived as a result of the research efforts. However, we should be very careful in setting out our scope.

Industrial Land

In Hong Kong, the Government could in fact exert its influence directly to two aspects, namely, human resources and land resources. In regard to land resources, I think the Government should be more prudent, as it has already made available resources such as the industrial estate and so on. The industrial estate is one way to provide the industrial sector with land resources at reasonable prices, thereby relieving the sector from the need to compete with other sectors for land supply.

Recently, the Government has decided to build a science park, which is another way to facilitate the development of technological innovation. In this connection, however, the Government should focus on making real innovation. In my opinion, the Government should exercise more determination to make good use of the edges that hong Kong has, instead of copying indiscriminately the experience of other countries. I suggest the Government should announce its policy concerning the science park as soon as possible, in particular how it is going to use the science park to attract new technologies, as well as to attract foreign and mainland institutions to come to Hong Kong to conduct their research work.

Review of Institutions

Last but not least, Madam President, I would like to speak on some of the government institutions. The Government has set up a lot of organizations, including the Commission on Innovation and Technology referred to by Mr TUNG Chee-hwa, the Productivity Council under the Industry Department, the Industrial Technology Centre, the Industry and Technology Development Council and so on. So we can see that the Government has indeed spent quite a large amount of money in this respect. However, the problem is that the Government should have reviewed the scope of work as well as terms of reference of these organizations, so as to help formulate a more far-sighted point of view. I suppose the Secretary for Trade and Industry would be telling us the many efforts that the Government has made, yet it is the effectiveness of those efforts that Members of this Council are interested in, and this is the crux of the matter. We do not have much time left. In the last couple of years, both the Government and the community have made a number of report in this respect, one of such is prepared by the Massachusetts Institute of Technology (MIT). The MIT Report merits our reference. As a matter of fact, many government officials have also read this report, so I am not going to repeat its content at length. I will only refer to it very briefly. On the other hand, the industrial sector has also raised quite a number of views, in particular, views regarding the direction of development the Government has been holding fast to. As pointed out by the MIT Report, the Government has always resort to hiring many consultants, thereby enabling these consultants to accumulate some experience through the many researches they have conducted for the Government with government fund. Should the Government not accumulate some experience itself? Despite the handsome amount of money it has spent, the government would always claim that it does not have the manpower resources to undertake the necessary work. I think this is one important point which the Government should take into consideration when formulating the relevant development strategies.

Honourable colleagues, the issues I have mentioned just now include the land use planned by the Government, how the Government is going to make use of its land policy to attract some high technology or advanced technology to come to hong Kong. I have also talked about technology transfer and the structure of institutions. The Government has set up a large number of industrial organizations, I think it is time for the Government to review the effectiveness of these organizations. The most important reason why I urge Honourable colleagues to support my amendment is that I have propsed a number of specific scopes of work to which I think the Government should endeavour. In our opinion, any work exceeding those proposed scopes would pose hazards to the development concerned; however, if the Government confined its tasks to narrower scopes, we would query the Government if it really wish to put in any efforts at all. I hereby urge Honourable colleagues to lend me their support. My colleagues from the Democratic Party would be speaking on the other aspects later. Thank you, Madam President.

PRESIDENT (in Cantonese): Mr NG Leung-sing.

MR NG LEUNG-SING (in Cantonese): Madam President, the impact of the Asian financial turmoil on the Hong Kong economy has clearly exposed the weaknesses and inadequacies of the economic structure and the industrial policy of the territory. Hence, a task on hand for the Government is to conduct a comprehensive and in-depth review of the industrial policy of Hong Kong and to formulate a long-term and clearly defined way forward for the manufacturing sector.

Last week, this Council discussed the service industry in Hong Kong. The industry is able to thrive under the active non-intervention policy of the Government because it benefits from the mechanism of free market competition. It also owes its success to a large extent to the excellent geographical set-up of Hong Kong which is in itself a natural endowment, and also to the advantages brought by the opening up and reform of the Chinese economy. But the manufacturing industry lacks guidance and management and it is difficult to transform into a high value-added hi-tech mode. So it has to rely on government support in terms of policies and funding. The experience of other emerging industrial territories and countries in Asia, such as Taiwan, Singapore and South Korea, also confirms this point.

Hong Kong on the contrary, has a different story. The massive relocation of traditional manufacturing industries northwards in recent years in the wake of an upsurge of costs has left behind a vacuum which is not promptly filled by hi-tech and high value-added industries. This has led to a very low occupancy rate in the industrial buildings and a great reduction in the number of certain positions in the manufacturing industry. The upset of the balance between service and manufacturing industries has sown the seeds of potential disruption in the development of the Hong Kong economy.

The technology-based industries in Hong Kong remain at their infancy, far from being fully developed. They are therefore in particular need of government support. The immediate effects of a fund on industry and technology development set up by the Government may not be seen so easily. The fund should be able to provide timely and effective assistance to enterprises by giving the right amount of funding and the vetting of applications must be done expeditiously. Besides, the Government should actively provide guidance to the industry and help the enterprises expand their scale of production and market share in other countries.

Moreover, the Government should proactively formulate practical and feasible methods, making use of the competitive edge of the territory in capital, information and market. It should use Hong Kong as a production base and try to take in scientists from the Mainland together with their inventions. The Government can also consider setting up more channels to facilitate the flow of private capital to finance a technology-based manufacturing industry. But the current stock market in Hong Kong has witnessed great fluctuations; this is especially true of the non-blue-chip stocks which are highly risky. The effect of using the second board market as a means to finance technological enterprises may not be so marked, given the present market and investment climate. The matter has to be looked into carefully by the Government.

Madam President, basically I agree with the original motion and part of the amendment. But after I have seen the amendment with lists out the seven "prescribed actions" to be performed, I cannot help but feel that this is far too specific for a motion which is not legally binding. Therefore, I have reservations for it. I so submit. Thank you, Madam President.

PRESIDENT (in Cantonese): Mr HUI Cheung-ching.

MR HUI CHEUNG-CHING (in Cantonese): Madam President, in the past decade or so, while the costs of operating industrial enterprises in Hong Kong increased and profits dwindled, there were abundant and steady supply of cheap labour and low-priced factory lands in China. Most of the industrial enterprises in Hong Kong therefore started to relocate there. The Asian financial turmoil last October dealt a severe blow to the financial, property and tourist sectors in Hong Kong. People began to feel that Hong Kong ought to have more trades which are stable and can offer a steady and substantial employment opportunities. In fact, only industries can meet these requirements.

Therefore, I would like to add the following points on the restructuring of our economy, the adjustment of development strategies and the creation of more employment opportunities:

(1) Special efforts should be made to boost the export business so that Hong Kong can become one of the most important harbours of the world. The Government, the Trade Development Council and the Export Credit Insurance Corporation should join hands to find more markets and clients for Hong Kong.

(2) Assistance should be given to existing industries to help them comply with new legislation in environmental protection and labour, improve facilities, upgrade technology, and solve problems in finding workers and/or other problems that may arise.

(3) As operating costs are very high in Hong Kong, so I think that the Government can make use of some objective factors and conduct a study to find out what items can meet the requirement of the World Trade Organization which permits the processing of principal parts in Hong Kong. This will allow the products concerned to obtain a Hong Kong certificate of origin. Then factory owners will be encouraged to set up their production lines in Hong Kong and make use of the quota for Hong Kong and the relevant tariff concessions. Exports and job opportunities for workers will thus be increased.

(4) Industries which can offer a lot of employment must be able to withstand competitions in the global market. But unfortunately, wages for white-collar and blue-collar workers in Hong Kong are about eight to 10 times higher than those of their counterparts in the Mainland. Fees for ports and transportation costs are also higher than those charged in the Mainland. The Government must address these issues seriously. It should set up a special department to research into the ways and means to reduce business costs. It should also train value-for-money professionals. Only by so doing can the industrial and commercial sectors anchor and prosper in Hong Kong.

I would like to urge the Government here that in formulating relevant strategies, consideration must be given to factors such as wages in Hong Kong, the actual supply of workers and land supply. Efforts must be made to reduce the operation costs and to provide a business-friendly environment. There must not be too many complicated and harsh laws so that efficiency can be enhanced without doubling the efforts made.

I so submit. Thank you, Madam President.

PRESIDENT (in Cantonese): Mr Bernard CHAN.

MR BERNARD CHAN: Madam President, enhancing the economy is now on everybody's mind. We are told that the ailing economy would last for some more time before we can see any sign of rebound. This is exceptionally difficult for those who were used to a buoyant economy in the past decades when setbacks were only brief and light. Honestly speaking, what we have to adjust with the downfall is not only our financial strategy, but also a shift to a buoyant personality. As the situation turns to a survival game, we shall see ourselves much better ─ without inflating our power or privilege.

Our colleagues have so far tried to sort out the solutions to our difficulties and put their ideas to the motion and amendments before us. Although I agree with most of their underlying principles, I find the lengthy suggestions too specific for a simple "aye" or "no" answer. As a member of the financial industry, I would like to focus my discussion on the setting up of the second board stock exchange market as suggested by the Honourable SIN Chung-kai.

A second board market will facilitate better flow of money and create more room for small and medium-sized companies. I totally agree with this argument. But when we zoom closer to the situation we are facing, we will soon find out how insufficient the capital we have right now and how limited our capacity is for regulating a newborn market.

The daily turnover of the stock exchange has plunged from some $12 billion to an alarming $3 billion recently. Of the 600 listed companies, less than 50 of them remain active in the bearish market. As a considerable amount of capital has been tied up with the stock market, mostly with inactive companies, investors are somehow short of funds for additional investments.

Secondly, the confidence of investors is exceptionally fragile in the meantime. Our stock exchange regulator's recent warning over misconduct in the market has caused great alarm. Some smaller companies badly hit by financial difficulties are under surveillance against alleged market manipulation. I envisage that the problem will become more serious as the economy goes further down. Only if we are fully ready for a new market with proper regulation can we go straight to the uncharted ocean. We should never tie our fate with sheer chances. I am afraid our investors are too vulnerable for some more blows if the second board market are found to be too risky.

As regards the Honourable Miss CHAN Yuen-han's motion, although I agree that some sort of diversification is needed for our economy, I am afraid I cannot say that the recent emphasis on financial business is wrongly placed. I also regret that Mr SIN Chung-kai has put too much detail in his amendment, which requires further study.

Madam President, I shall support the Honourable Miss Christine LOH's amendment. Thank you.

PRESIDENT (in Cantonese): Mr TAM Yiu-chung.

MR TAM YIU-CHUNG (in Cantonese): Madam President, the recent locally produced movie "The Storm Riders" smashed the box office records and queues are often seen in front of cinemas showing that movie. The movie indeed took the slackened local movie industry by a storm. The movie industry has been a traditional industry of Hong Kong. The success of the movie "The Storm Riders" illustrates the fact that if a traditional advantage is given full play, coupled with high value-added computer technology, one can still work wonders at a time of economic downturn. I have no intention of making any publicity for the movie, but its success does give us some inspirations and make us ponder on the question of restructuring Hong Kong's economy.

The rapid decline of the Hong Kong manufacturing industry in the past decade or so is mainly due to the policy of active non-intervention practised by the Government for such a long time. In the absence of encouragement and support lent to the industries, together with the high land price policy, the production costs of manufacturing industries soared. There was also no support for scientific research. The investors relocated their manufacturing enterprises after carefully considering their interests. They did not make any proper investments and developments on new technology. With the encouragement from the Government, the investors inclined to invest in finance and property, where they could expect to make a quick return. This state of affairs gradually tilted the balance of the economic structure of Hong Kong. The portion of the manufacturing industry in the local GDP dropped all the way from 24% in 1984 to about 10% at present. Without the support of industries, the economic base becomes increasingly fragile and vulnerable. This has not only worsened the problem of displaced workers looking for jobs in other sectors but has also made the overall economic structure unsound.

This state of affairs has prompted us to address an urgent question: Do we need local industries? Since last year's financial turmoil, the Hong Kong economy has been plagued with increasing numbers of negative reports. The retail and catering industries are the hardest hit areas. Having witnessed this, I believe our answer to the above question will certainly be in the affirmative. In his policy address last year, the Hong Kong Special Administrative Region (SAR) Chief Executive Mr TUNG Chee-hwa mentioned initiatives for "A Better Business Environment" in which measures will be implemented to promote the services sector and the tourist industry, provide better support for the manufacturing industry, and stimulate the growth of new technology industries. This kind of comprehensive industrial policy is expected to restore a balance in the economic structure.

The SAR Government plans to set up a Services Support Fund and a Credit Guarantee Scheme to help small and medium sized enterprises and the services sector to improve their business environment. On the other hand, the Government has also set up an Applied Research Fund. It has plans to develop a Science Park, build a second industrial technology centre, and plan a fourth industrial estate. The Chief Executive's Commission on Innovation and Technology has been set up to support the development of new industries and help existing industries upgrade their technology. Apart from these measures, the SAR Government should also commit itself to the preservation of the survival abilities of traditional industries, for example, to study how to increase the added value of the products. This will facilitate the products of traditional industries to move from poor quality to better quality. The Government should assist factory owners to build up a sales network through product design, and to conduct promotional activities in order to maintain the market position and competitiveness of the products in the market. Recently, some factories in Tsuen Wan with a long history were forced to close down due to factory site problems. These include shrimp paste factories, breweries, bar-fixing factories and so on. These small factories were in fact still competitive. If only the Government could lend some help, such as helping them solve the site problem, improve the sewage facilities, raise the safety of the working environment and expand the sales network and so on, they could have continued to survive and workers would not have lost their jobs.

Madam President, restructuring the economy is a long and difficult task. But if we are focused on our direction, and if we are committed to doing our best, I believe one day the economy will see the light at the end of the tunnel, and we shall truly ride out the storm.

With these remarks, I support the motion moved by the Honourable Miss CHAN Yuen-han.

PRESIDENT (in Cantonese): Mr LEE Cheuk-yan.

MR LEE CHEUK-YAN (in Cantonese): Madam President, we are now living in a Hong Kong ravaged by the financial turmoil which has not only pushed up its unemployment rate but also greatly devalued its people's property and assets. But has it ever crossed our mind that we may thank the financial turmoil eventually? The financial turmoil has one effect at least: it has poured ice water down our heads. With so many speculative activities running out of hand in Hong Kong, this financial turmoil is just like pouring ice water down our heads. Although the bubble economy is already burst, if all sectors of society, the Government, the businessmen and the workers can really learn from this painful experience, it is not too late now to turn our wheel. But then, must we turn the wheel? The fundamental question is: Do we admit that we cannot depend on the factors that have brought about our past success? Do we admit the weaknesses of our economy? If we do, I feel that we still have hope.

What are our weak points? The first one is that somewhere down the line, our enterprising spirit has been replaced by the speculative spirit. All of a sudden, everyone, no matter the very rich or the not so rich, participates in the speculation games, and finally they all lose to the biggest speculator. The speculative spirit is short-sighted and short-lived, coveting a moment's pleasure while the enterprising spirit is long-sighted and not coveting a moment's pleasure. Where has our enterprising spirit gone? I am not saying that this spirit has all disappeared from Hong Kong but what is the overall atmosphere? Has the speculative spirit dominated the atmosphere of the whole community and does everyone only care about the short-term benefits but neglect the long-term interests?

The second weak point is do we only go after cheap labour? It is like a shark chasing the scent of blood. But now we may not be able to keep on chasing any longer. In the past, we have been able to find plenty of cheap labour available in the Pearl River Delta since China launched the open door policy. But the labour in the Pearl River Delta may not be cheap enough now and we have to go further inland for even cheaper supply. Do we follow and go further inland? Will Hong Kong be able to maintain its position as the management centre of the industries of the Mainland? Can we keep chasing it forever? There is a big question mark.

The third weak point is the education system of Hong Kong. Has the education system spoon-fed and produced one duck after another, moulding all with the same mould? Has our education system stifled the innovative and creative spirit of our next generation so that they have all lost their dreams? In the end, among the graduates who leave the university, there are more and more MBAs but fewer and fewer technological talents. Can we succeed in this way?

Considering the fourth weak point, we have to turn back to our Government. In the Government, are there only helmsmen for the leisure boats but none for the ships in the torrents? Is it the case that our Government lacks foresight and only talks about the stable foundation but is unprepared for any sudden changes in the peace time? The Government really has to ponder this.

It is now the time to change. If we can learn from this experience and begin steering to a new direction, the economy of Hong Kong will surely continue to prosper. The question is whether we can switch from being over-reliant on the financial and property businesses to developing a more balanced and diversified economy.

Today I read an article in the Hong Kong Economic Journal written by Mr HO Wah-chun in which there is a sentence that I think is very important and can bring Hong Kong to its senses. He writes, "To make the industry prosper, we must, to a large extent, destroy the real estate industry." The wording he uses is as follows, "The 85 000 housing units is an effective prescription; it will make the original developers unable to make any profit or raise their risks to the same level as that of the industry. Hence, the capital will naturally flow out of property development and some of it will flow into the industry. This is to start from the export and pull progress." Do we really resort to this? That is, is it only when the property business is destroyed will capital flow to the industries? I hope that everyone will start thinking about this question in this time of change in Hong Kong. We hope that the Government will make a greater effort to implement the industrial policy and to establish an industry and technology bureau to carry the industry forward. The Government should also allocate more resources for development and research, and provide relevant tax concessions for private enterprises. Look at the fact that Hong Kong spends only 0.1% of its GDP on scientific research, development and studies in this respect, as compared to the 2% spent by other Asia countries such as Taiwan and Singapore, and we will see that we are indeed lagging far behind.

I also hope that the second board market can be set up as soon as possible so that the finance problem faced by industries in Hong Kong can be resolved. We have discussed the economic policies at the Legislative Council meetings for several consecutive weeks. I believe that Members are also very concerned about our economic development. I hope that Members will consider the issue again and see if we really need to establish a special committee to hold dialogues with the Financial Secretary. I believe that Members also wish to see the Financial Secretary more often and therefore I hope that everyone will work together to push this idea forward. Thank you, Madam President.

PRESIDENT (in Cantonese): Mr CHEUNG Man-kwong.

MR CHEUNG MAN-KWONG (in Cantonese): Madam President, the Asian financial turmoil has burst the bubble economy of Hong Kong and brought to the financial, property and service businesses difficulties that have never been experienced before. Over the past year, the property market in Hong Kong has suffered a loss of close to $3,000 billion in value. Hong Kong has seen a negative economic growth for two consecutive quarters and our unemployment rate has reached 4.5%, a record high since the beginning of the 1990s, thus plunging Hong Kong into a new economic recession. An economic recession is of course a bad thing but it also makes us come to our senses to reflect upon the deficiencies of Hong Kong's economy, reset its position and look for new ways of survival. If we can draw lessons from this painful experience, a bad thing may ultimately turn out to be a blessing.

The Democratic Party does not hold anything against the financial, real estate and service businesses. We still consider them an important pillar of the economy of Hong Kong but not the only pillar. The Asian financial turmoil has taught us that Hong Kong has been over-reliant on the financial, real estate and service businesses and so has to face the periodic financial turmoil that deals one blow after another to it and that in effect destabilizes its economy. Therefore, Hong Kong has to diversify its economy so that it will have a broader space for survival and when an economic recession strikes, it will not meet with a blanket failure.

The Hong Kong Special Administrative Region Government now advocates that Hong Kong should develop high technology and high value-added industries. But what is high technology to Hong Kong? Hong Kong of course lacks the foundation of the most sophisticated technologies like the United States or Japan, and its economy can hardly be compared to those which are subsidized by the state and developed through the application of high technology such as Taiwan and Singapore. Therefore, Hong Kong must look for its own mechanism for research and for the introduction of high technology in order to promote the development of its innovative industries. At present, we consider that the local university system is the most suitable medium to promote technological research so that it can marry its scientific research with the local innovative industries to open up a diversified survival space for the economy of Hong Kong.

Madam President, the biggest obstacle facing the promotion of innovative industries through scientific research by the universities is the funding system of the University Grants Committee (UGC). The funding of universities, especially the funding provided for research, depends solely on whether the research result can be published in international academic publications, rather than whether the research result can help the application and innovation of, and add value to the industries of Hong Kong. In my opinion, the UGC must change its policy on funding. Other than education and research papers, it should also allocate money to universities to encourage them to tie their research in with the technological development of innovative industries. Further, universities should set up industrial research centres to provide forward-looking strategies and support for the innovative industries in Hong Kong. In this respect, we may make reference to the experience of Taiwan but, of course, not copy it indiscriminately. For example, the Industrial Technology Research Institute of Taiwan, which plays an important role in, at least, the research on applied technologies, provides a strong support force to the industries in Taiwan. Thanks to it, Taiwan has not suffered too serious a setback in the financial turmoil.

Madam President, new technology does not necessarily have to be the most sophisticated, but once a new technology is married to the traditional industries in Hong Kong, such as the watch and toy industries, it can add value to and create new prospects for them. The key lies in creativity and transformation. Bicycle manufacturing was once a flourishing industry in Taiwan but it has also gone into difficulties. Nevertheless, with the help from the Industrial Technology Research Institute, it has overcome certain technological obstacles and successfully transformed into the manufacturing of mountain bicycles, creating a whole new perspective for the bicycle industry and adding value to it. Why can our traditional industries not become innovative and value-added industries with the help of a little scientific research, some new packaging and some creativity?

Madam President, high added value is the aspiration of every industrialist. Many a time, what it takes to add a higher value to the industry is not necessarily the most advanced technology. Take the Chinese tea as an example. To put the tea leaves in tea-bags does not require high technology, but that can bring great convenience to the making of Chinese tea and expand its market. Even for a tea bag, there is also room for adding value to it. Members may still recall that the early tea bags had a small piece of string stapled to it. It required a lot of work and the small string could easily come off. Recently, someone has invented the use of heat to attach the string to the tea bag which is simple and practical. Once it is patented, it becomes a continuously value-adding product and everybody likes to use it. Hong Kong people are smart. Creativity is our specially. What a small tea bag enlightens us is the new direction for our industrial development which is merits our deep consideration.

Actually, the soft industries of Hong Kong, such as movie, television, pop music, information technology, electronic toys, electronic watches, computer software, and even the hard industries such as the large scale works of cutting into mountains and reclaiming land from the sea, constructing buildings, infra-structure construction, and even our skill of repairing slopes have all reached international standards which can be exported and become our base for earning foreign exchange. As long as we have well-conceived laws to protect the intellectual property, with the promotion of the Government and industrialists, our industry can continue to make breakthroughs, get rid of the out-dated and bring forth the new, lay the foundation of a diversified economy for Hong Kong and venture into a new era.

Madam President, I so submit.

PRESIDENT (in Cantonese): Mr WONG Yung-kan.

MR WONG YUNG-KAN (in Cantonese): Madam President, the fishing and agricultural industries have made great contributions to the economy and people's livelihood in the past. But with the economic transformation, Hong Kong has become overly dependent on the financial and real estate businesses. As a result, not only the industrial development has been neglected, the development of fishing and agriculture has also been subject to tremendous restrictions. Although fishing and agriculture are the primary industries of Hong Kong, the Government has all along considered them as something dispensable. It does not give direct subsidies to the industries or attempt to protect those in the industry from the free operation of market forces. Although the Government has provided the fishing and agricultural industries with a variety of infrastructural and technical support services, they still fall short of the actual need. The reason is that the Government lacks a long-term policy on fisheries and agriculture, other than a piecemeal and short-sighted one.

According to the 1997 statistics, the people of Hong Kong consumed 950 tonnes of rice, 1 330 tonnes of vegetables, 6 700 pigs, 170 heads of cattle, 240 tonnes of poultry, 470 tonnes of fish and 1 900 tonnes of fruit each day. 35% of these foods are imported from the Mainland but local farms also supply 13% of the vegetables, 19% live poultry, 19% live pigs, 12% freshwater fish and 69% live and fresh marine fish for the daily consumption of the local people, which production value totals at over $3 billion. It shows that the local fishing and agricultural industries still have a certain degree of productivity, playing an essential part to stabilize the supply of non-staple food to the local people.

Some would think that since most of the non-staple food supplied to Hong Kong comes from the Mainland and abroad, Hong Kong has no need to retain the fishing and agricultural industries. But has it ever crossed our minds that because of the open door economic policy in China, many of the people from the rural areas flock to the cities to look for work, and as a result, the supply of non-staple food from China may be reduced or some problems may arise which will affect the food supply to Hong Kong? Besides, is it a good thing after all for Hong Kong to be overly reliant on the import of fishery and agricultural products from abroad? Therefore, Hong Kong should get prepared for the rainy days and assist the local fishing and agricultural industries before it is too late so as to ensure a steady supply of quality non-staple food to Hong Kong.

Regrettably, the Hong Kong Government has not only given no assistance to the fishing and agricultural industries but to an extent stifled their development. For instance, the Livestock Waste Control Scheme launched in mid-1986 which requires all livestock farms to install a specific waste disposal system has greatly reduced the number of farms from between 9 000 and 10 000 at the peak to no more than 1 000 now. The reason for this is that the Government has set too high a standard for the discharge of effluent, making it very hard for farmers to grasp the technology and bear the costs. In the end, they are driven out of business.

Moreover, since the early 1970s, to acquire land for the need of development, the Government has carried out many large-scale dredging for marine fill and land reclamation works which severely damage the seabed, dealing a serious blow to in-shore fishing and polluting fish culture areas. The incident of the Shap Long fish culture zone in 1996 has revealed the difference between the Government's and the fishermen's standards of measuring water pollution. The public filling area in Pak Shek Kok set up recently has seriously damaged the only natural fish breeding-ground in Tolo Harbour. However, when the Government hands out special subsidies for fishermen claims, it does not distinguish dredging and land reclamation, and thus the fishermen are unable to receive a reasonable compensation to develop their own fishing business.

Although the fishing and agricultural industries seem to be on the decline, they still have room for development, especially at this time when we emphasize on high technology. Looking at Taiwan and other countries, we can see that they attach much importance to the fishing and agricultural industries. If the Hong Kong Special Administrative Region Government can provide resources to help farmers develop high technology produce and give assistance to improve the marine resources and fishing industry, there will certainly be a future for the fisheries and agricultural industries and it will give them a chance to survive. Whenever there is an economic downturn in Hong Kong, those people who used to engage in fisheries and agriculture will go back to their former occupations. As far as I know, just between January and July this year, over 70 people who used to work in these two industries enrolled in the various courses provided by the fishing and agricultural associations. Here, I urge the Government, while restructuring the economy of Hong Kong, not to forget the primary industry ─ the age-old fishing and agricultural industries.

The Democratic Alliance for the Betterment of Hong Kong does not support Miss Christine LOH's amendment because it goes against the spirit of Miss CHAN Yuen-han's motion. Miss CHAN's motion is directional while Miss LOH's amendment lacks a direction but only reiterates the need to consult the public.

With these remarks, Madam President, I support Miss CHAN Yuen-han's motion and object to the two amendments. Thank you, Madam President.

PRESIDENT (in Cantonese): Mr Kenneth TING.

MR KENNETH TING (in Cantonese): Madam President, I think that what we need to do now is to pool the strength of everyone together to boost the confidence of Hong Kong people. After listening to Miss Christine LOH's views, I feel that there is a need for reconsideration as she suggests the Government reconsider the economic policy of Hong Kong in her amendment. We have asked the relevant Hong Kong government officials what the present economic policies of Hong Kong are. According to them, all the economic policies of Hong Kong are included in the Basic Law already, which can be summed up as the policy of positive non-intervention. If we do not practise the positive non-intervention policy, do we adopt the policy of planned economy then? I think that a planned economy will not work in Hong Kong, neither does it work in many places in the world and therefore no one would practise the planned economy. Since it does not work, we cannot allow our economy to go in that direction and so I do not agree to Miss LOH's suggestion. Thank you, Madam President.

PRESIDENT (in Cantonese): Mr Albert HO.

MR ALBERT HO (in Cantonese): Madam President, I am speaking in support of Mr SIN Chung-kai's amendment.

First of all, I would like to talk about the Government's role in encouraging enterprises to upgrade their technology. Hong Kong has always been renowned for its low tax system. Comparing with our competitors in the region such as Taiwan, South Korea and Singapore, our 16% profits tax is by no means high. However, our competitors usually offer many different kinds of tax concessions to enterprises. For example, Singapore offers an 8% depreciation for computers, automated machinery and robots and also a tax holiday for some enterprises. The science parks in Taiwan also offer a five-year tax concession to attract high technology (hi-tech) industries. In the United States, which is a firm believer of free economy, the government also plays an active role in encouraging enterprises to upgrade their technology. A report on the technological policy published by Harvard University of the United States in April 1997 points out that one of the principles is to ensure that the role of the American government is to encourage the enterprises to invest in technological advancement rather than to replace the enterprises. In the United States, private enterprises are the main drive of scientific research and their expenditure on scientific research represents three quarters of the nation's total expenditure on it. Therefore, it is the American government's responsibility to encourage enterprises to invest in scientific research, including giving them direct funding. The principles of funding pointed out in the report also merits our reference. The funding of scientific research runs technological and commercial risks. The return from the former may likely benefit the whole industry and should therefore be borne by the government, but the commercial risks should be borne by the enterprises themselves. Other than direct funding, the report also suggests other measures such as using tax concessions, formulating legislation on intellectual property and fair competition, and encouraging the industry to set up a standard. Therefore, the Democratic Party suggests the Government offer a double tax concession for the enterprises' expenditure on scientific research and training in order to encourage them to invest in scientific research and provide on-the-job training for their employees.

Secondly, I would like to talk about the channels for finance. Hong Kong is different from other places mainly in the way that it does not have an industrial bank or starter fund, so factory owners have to depend on the bank as their main financing source. However, it is already a relatively high risk to develop hi-tech industries so it is not easy for those industrialists to obtain loans from the bank. In early 1988, the industry already pointed out the need for establishing the second board to allow enterprisers to raise funds by listing on the second board. Besides, the second board will also attract the establishment of starter loans schemes in Hong Kong as it helps the starter loans schemes to recover their investments. After providing capital to an enterprise, the company that owns this starter loans scheme may list the enterprise on the second board after a certain period of time and make a profit by selling the stocks of this enterprise that it holds. Now 10 years has passed, the Stock Exchange is still talking about consulting the public on the establishment of the second board. This is in fact another proof that the Hong Kong Government is very hesitant about the development of industries. The construction of the science park has also been dragging on for years and is yet to commence. But on the other hand, Taiwan has already completed its second science park. Many regions have attracted most top companies of the time such as the world-renowned and familiar software names like Microsoft or Netscape through the second board, and our neighbouring countries like Japan and Singapore have all set up the second board, what then is Hong Kong waiting for? Today, 27 groups concerned about the industrial development in Hong Kong are urging the Government to consider setting up the second board market to assist the industry to resolve their financing problems and establish new technological industries. The Hong Kong Special Administrative Region Government is still very hesitant over this. We think that in the long run, the Government's hesitance will only stifle the advancement of the local industries and also hamper Hong Kong's industrial restructuring, that is, the transformation from the so-called labour-intensive industry in the past to the high added-value and technology-intensive industry.

Lastly, I would like to talk more about the question regarding whether Hong Kong has fully utilized the human resources in the present academic sector, especially the universities, as mentioned by Mr CHEUNG Man-kwong. In fact, the various institutions of our universities, no matter they are the theoretical science, applied science, construction engineering, urban planning and so on, have little direct connection, whether with respect to scientific or technological research, with the industrial and commercial enterprises, contractors or professional sectors. We think that the Government must absorb the scientific research talents from the universities and colleges as much as possible. Take for an example; very often the Government has to employ independent consultants to study the feasibility of some works projects and when their reports are compiled and sent back to the Government, I am really worried whether there are enough talents in the Government to carefully consider these reports and then make the right judgment. Therefore, very often the Government has to employ another indepednent consultant to offer a second opinion. In view of this, why do we not use more of our experts in the univeristies? We have reasons to believe that the technological experts and talents in our universities can give practical help to Hong Kong in the absorption of new technologies through the transfer of technological know-how. I hope that the Government will consider this respect very carefully.

With these remarks, I support Mr SIN Chung-kai's amendment. Thank you, Madam President.

PRESIDENT (in Cantonese): Mr CHAN Kwok-keung.

MR CHAN KWOK-KEUNG (in Cantonese): Madam President,

The Restructuring of the Hong Kong Economy

Hong Kong was initially a small fishing port, but with the massive influx of capital and labour in the 1960s and 1970s, it was subsequently transformed into a leading manufacturing centre in Southeast Asia. At that time, all our industries and trades flourished, and our services industries also became increasingly prosperous, thanks to our improving economy. However, Hong Kong is also affected by a unique China factor. Since the mid-70s, when the Mainland launched its policy of reform and opening, local industrialists have been shifting their production lines to the Mainland one after another, thus bringing about a rapid restructuring of our economy. Then, just about 20 years later, in the 1990s, Hong Kong was once again transformed ─ this time into an international financial centre. The Hong Kong economy has since been so restructured that it is now inclined heavily towards the services industries, with finances and property investments as its major economic activities. It can thus be seen that the structure of our economy has in fact undergone several major changes in just a matter of two decades.

A shrinking manufacturing sector, coupled with a services sector which carries an increasing weight in our economy, has led to an "industrial vacuum". And, the biggest resultant problem is that of unemployment. Industries in the tertiary sector such as financial investments and services industries are often unable to absorb manpower released from the manufacturing sector.

As early as the early 1990s, the industrial and commercial sector already expressed concern over the drastic decrease in the weight of the manufacturing sector in our economy, saying that this would adversely affect our employment opportunities and potentials for economic growth. Academics, too, actively talked about this. However, the government has never attached any importance to these views, and the community at large has also treated the "industrial vacuum" lightly.

The unemployment rate shot up to 3.9% in 1995, but in 1996 and 1997, the buoyant property and stock markets energized the services sector, including the catering and retail industries, and absorbed some of the workers displaced by the manufacturing sector. The problem of unemployment subsided temporarily and our GDP experienced a 5% growth in each of those two years.

However, Hong Kong is a place which lacks any natural resources. Our real economic growth depends entirely on our ability to secure foreign exchange, and we can only do so by exporting goods, services and our intellectual expertise. By engaging in stocks and property speculation, the Hong Kong people are simply trying to gain profits from one another, with money passing among themselves. This kind of "economic growth", not being generated by any production activities, has not brought any real foreign exchange income for Hong Kong, and, gradually, a bubble economy emerges.

Academics have long pointed out that an economy like that of Hong Kong which is not supported by any manufacturing industries is vulnerable to the impacts of external factors. In 1997, following the Asian financial turmoil, the bubble finally burst, and the problem of unemployment resurfaced. We experienced negative economic growth in the first two quarters of this year, and this shows that an economy which is not backed up by any manufacturing industries is very fragile.

The experience of other places

Hong Kong is not the only place beleaguered by the problem of an "industrial vacuum". Many countries have also had similar experience. It can be said that this is actually an inevitable stage in the economic development of a place. Different countries and places, however, have adopted different measures and attitudes to tackle the problem of economic restructuring, and the results are different.

The United States, for example, has also been facing the problem of an "industrial vacuum". However, the United States has tried to tackle this problem by continuing to develop innovative technologies. As a result, its information industry alone has already created numerous businesses and employment opportunities for its people. What is more, the United States has even exported its technologies and intellectual properties to other places. In the past three years, the information industry made up 27% of the GNP of the United States. Since the real productivity and foreign exchange creation ability of its tertiary sector is very strong, the United States has not only managed to avoid the emergence of a bubble economy, but has also managed to maintain a high economic growth, with low unemployment and inflation.

Another way to deal with the problem of an "industrial vacuum" is to make sure that manufacturing industries will always occupy a fixed proportion in the GNP. In Singapore, for example, the proportion is fixed at around 20% of the GNP. In 1997, manufacturing industries accounted for 22.7% of the GNP of Singapore. Therefore, though Singapore is also affected by the Asian financial turmoil and its economy has experienced a decrease of 2% when compared with the fourth quarter of 1997, there is still a 5.6% growth this year. Singapore has clearly fared much better than Hong Kong, which has recorded a negative economic growth this year.

No policy in this respect in Hong Kong so far

Under the broad principle of non-intervention, Hong Kong has done absolutely nothing in this respect. Hong Kong has not made any positive attempts to develop hi-tech and high value-added industries, nor has it laid down any fixed proportion for manufacturing industries in the economy. It has simply watched the decline of the manufacturing sector with folded arms. The contribution of the manufacturing sector to our GDP has dropped from 24% in 1980 to 7% in 1996. Over the past year or so, speculative activities in the financial and property sectors died down significantly following the Asian financial turmoil. This has directly affected the services sector; various businesses and trades have tried to cope by resorting to reduced budgets, layoffs and even moving their operations out of Hong Kong. Unemployment resulting from an "industry vacuum" again surfaced. The unemployment rate announced on Monday is 4.5%, the highest in many years.

Conclusion

In the long run, Hong Kong must draw up a policy on economic restructuring. Overseas experience tells us that there has to be a proper balance between the manufacturing and service sectors. While we stabilize our economy, we need to create job opportunities for people with different skills, so that they can make good use of their abilities and contribute to the Hong Kong economy.

With these remarks, Madam President, I support the Honourable Miss CHAN Yuen-han's motion.

PRESIDENT (in Cantonese): Mrs Sophie LEUNG.

MRS SOPHIE LEUNG (in Cantonese): Madam President, I would like to make a few remarks on to Mr SIN Chung-kai's amendment.

When I looked at Mr SIN's amendment, I felt a compulsion to further amend it. However, upon closer scrutiny, I noticed that he had provided us with seven detailed and special items. I felt that if other Members or I add further items to his list, it will become very long, so I finally decided to respond verbally to his amendment.

Mr SIN's proposals are indeed unique proposals and I agree to most of them. However, it must be noted that most of these seven items are related to technology. If I remember correctly, the Commission on Innovation and Technology led by Prof TIAN Chang-lin will be looking into these problems one by one, and solutions will be offered. The Liberal Party is of the view that if our intention is really to examine the whole economic structure of Hong Kong, we should not focus only on one particular industry, nor should we just pick out some salient problems and then devote all our efforts to solving them, for this is a short-sighted approach. We must not forget that with the advent of the 21st century, we are now already having a first taste of a global economy. The changes before us are bound to be more rapid and more complicated. Our experience in the current financial turmoil is already bitter enough, but what are we are going to do if we were hit by yet another financial crisis with even more split-second rapidity in the future? We should really employ another approach with much broader perspectives. That way, we will be able to identify the problems now plaguing our economy, and we will also be able to find out how best we can cope with the existing difficulties and the future challenges.

Just now Mr SIN referred to the volume of "MADE BY HONG KONG" compiled by the MIT. Well, I really have to thank him for reminding me of this. Many of my Liberal Party have colleagues also contributed to the compilation of this volume, because in their capacity as leading industrialists in Hong Kong, they gave some valuable suggestions to the MIT professors concerned. What our commerce and industries are now is precisely the problem of "industrial re-engineering". I suppose this should be interpreted as "industrial re-structuring", a process which involves the following: ways of gaining greater acceptance for our goods in the international market; ways of increasing our market share and ways of fostering a respect for professional business management in addition to a mutual respect between employers and employees. These are the factors essential to the enhancement of our productivity, and we need to deal with them seriously.

After holding discussions with my Liberal Party colleagues, I have come to the conclusion that we need to deal with our current problems in two ways. Firstly, we need to understand the strength of all our existing industries, especially those which can generate foreign exchange earnings for us; we should not seek only to maintain the strength of our industries, but should also enable them to move along the path of high-value added industries. Secondly, we need to see how we can create an environment friendly to the development of new industries, including hi-tech ones. These approaches are also what Prof TIAN Chang-lin has been advocating for a long time.

In order to achieve these two objectives, we need to look at a few factors. First, we need to look at our human resources. For example, how can we equip the Hong Kong people with diversified skills, so that they can meet the diversified challenges of the global economy in the 21st century? Once the people are equipped with diversified skills, they will have wider employment opportunities, and they will not have to suffer as they do now. Diversified skills will also prevent our society from having to deal with a large unemployment army when there is a new round of economic restructuring in the future. As for how we can enhance our innovativeness and maintain or enhance the enterprising spirit that has always been our pride, it requires a high degree of commitment and individual perseverance.

Second, in view of the current trends of Hong Kong, we have to consider whether we can still maintain our leading position. Specifically, we have to find out how competitive we are when compared with others, and we must maintain a low inflation rate. We must not forget that we have been tortured by high inflation for a long time already. Though the rate of increase is only single digit, it is still pretty high.

Third, we must find out how we can take advantage of our favourable geographical location to develop new directions for expansion. So far, no colleague has discussed this issue. Hong Kong is an island economy and we cannot totally rely on ourselves. We must remember that we are now talking about a global economy. Two years ago, the United States formed the North America Free Trade Agreement (NAFTA). We think that the establishment of the NAFTA is actually part of a series of protectionist measures. However, with the establishment of this organization, the United States has reaped a lot of benefits, because it is able to take advantage of the cheap labour from its neighbours and expand its sales network. I believe that in the near future, we will be hearing a lot about the establishment of a border industrial zone, where the resources in the Pearl River Delta area or even the whole Guangdong Province can be utilized to supplement our existing resources in the process of exploring a new direction for the development of Hong Kong industries. Another point which we should discuss is the establishment of an industrial development board. If we really take our industries seriously, we have to consider whether we should set up such a board to co-ordinate our studies on the development on all fronts. I would leave this for further discussions.

With these remarks, Madam President, I oppose the amendment of Mr SIN.

PRESIDENT (in Cantonese): Mr LEUNG Yiu-chung.

MR LEUNG YIU-CHUNG (in Cantonese): Madam President, the subject of today's debate is "Restructuring Hong Kong's economy". Miss Christine LOH has proposed an amendment saying that since business confidence has been shaken due to the state of Hong Kong's economy. She is of the view that the most pressing task for the Government is to reconsider its economic policy taking account of more public views, and to facilitate local manufacturing activities and so on. Actually for quite some time in the past, different sectors of the community and people from all walks of life have submitted their views to the Government. Recently, several of our Honourable colleagues have met with the Financial Secretary, and many of them said that they represent industries. Moreover, the industrial sector has also made a lot of submissions to the Financial Secretary. But they do not know whether the Financial Secretary has read the submissions or whether he will accept the proposals. I think the SAR Government has solicited a lot of views through various channels but the main issue is how many of those views have been taken into consideration. Therefore, I think our most pressing task at the moment is not to solicit more views. Having said that, then what is our most pressing task? I think the most important issue is whether Hong Kong can learn from the problems of our economy in the past.

Many Members just said that we are now experiencing a bubble economy, but it is a pity that even after the financial turmoil, the Government has not admitted that. Government officials have only said that we have been rather unfortunate. Under such circumstances, if we cannot face the problems of our economy in the past, how would we be able to solve the current problems? Whatever we say would be to no avail. So, I think we must reflect on what happened in the past before we can map out our future.

I recalled that in the 1970s, the Hong Kong Government said industrial diversification should be encouraged. In fact, at that time, the Government did really encourage diversification in our industries, but unfortunately, only empty words of encouragement were spoken and no concrete actions had been taken. Then, what has this kind of encouragement achieved? The result is many industries have shrunk. Furthermore, as a result of capital transfer (which means industrial development activities are easily attracted to places where less capital is required for conducting those activities), the manufacturing activities of Hong Kong were shifted to the Mainland in the 1980s. So, today when we consider our future and how our economy can be restructured, we need to consider whether the Government accepts that it did not have a definite economic policy, particularly a definite industrial policy in the past, and the absence of such a policy has resulted in what we have to suffer today.

Let us take a look at the Basic Law, Article 109 provides that the SAR Government shall provide an appropriate economic and legal environment for the maintenance of the status of Hong Kong as a financial centre. This Article clearly spelt out the status of Hong Kong as a financial centre, but not many references were made to other sectors, in particular, to the development of the industrial sector. Though Article 119 provides that the SAR Government shall formulate appropriate policies to promote and co-ordinate the development of various trades and manufacturing industries, little emphasis has been placed on the manufacturing industry as compared to the status of Hong Kong as a financial centre. So, this reflects on the way how the Government looks at industrial development, and the manufacturing industry is only treated as just one of the various trades. If we are to talk about restructuring Hong Kong's economy today, our emphasis should be on whether we will review our past conditions and not just simply say that we have to listen to more public views.

Miss Christine LOH said business confidence has been shattered. Now on what basis was such confidence built in the past? Many people have criticized the role of the Government. If the Government failed to define a clear role for itself, then how could other people have confidence in Hong Kong? If the Government has not actively encouraged other people to do certain things, then how much assistance will be given to us if we carry out such activities on our own? This should be the most important consideration. The Government has been telling us that the Hong Kong Productivity Council is providing assistance for the industries of Hong Kong. But lacking a very important role in the Government structure, how much assistance can these organizations really provide? Industrialists should know that the assistance given is very limited. Therefore, if we talk about restructuring Hong Kong's economy, we have to face up to certain realities, and that is, whether we should only attach importance to Hong Kong's status as a financial centre at the expense of other sectors, or whether we should strike a proper balance, or enhance the development of high technology. Without a clear orientation, how can we embark on our work? I hope that the officials can tell us later in what direction should we go in the future. We can do nothing without a clear direction.

Madam President, Mr SIN Chung-kai has put forward a number of proposals and many of the items he has proposed are very important and they all provided us with directions for the future. I hope the Government will take heed of Mr SIN's proposals. Many of my colleagues mentioned that industrial banks or industrial funds should be established to offer assistance to industrial development. I hope the Government will consider this suggestion. Madam President, I so submit.

PRESIDENT (in Cantonese): Mr CHAN Wing-chan.

MR CHAN WING-CHAN (in Cantonese): Madam President, in recent years, the financial and the real estate sectors have played an over-weighted role in the Hong Kong economy while manufacturing industry was neglected and a time bomb was planted for quite some time. The Asian financial turmoil has only expedited the explosion of this bomb. Time and again, the Hong Kong Federation of Trade Unions (FTU) has urged the Government, in particular the former Government, to defuse the bomb before it is too late. Therefore, we are not only urging the Government to restructure Hong Kong's economy and revise its development policy, but we also advocate the formulation of an employment orientated economic policy. The FTU is of the opinion that the Government should accord priority to employment, create more job opportunities and protect the employment rights of workers.

In the 1970s, the manufacturing industry of Hong Kong was very prosperous with 60% of the workforce employed in this sector. In the 1980s, the Mainland embarked on its economic reform and the Hong Kong Government adopted a high land price policy, thereby causing the manufacturing industry to move northwards. The number of workers in the manufacturing industry dropped from 920 000 in 1986 to 340 000 in 1996. The restructuring of Hong Kong's economy has caused the employment situation to deteriorate, and even though workers may be luckily enough to keep their jobs, their wages have ever since been falling.

Today, our unemployment rate is as high as 4.5% and the number of unemployed workers is many as 144 000, with the highest unemployment rate in the catering, retail and the construction businesses. In the first quarter of this year, individual sectors like catering and hotel, retail, wholesale as well as finance and property all suffered a decline in business as a result of the economic slowdown; real wages also experienced a negative growth and the wages of the workers were lowered by more than 10% or 20%, resulting in a drastic deterioration in the quality of life and mounting social resentments. As a result of the high unemployment rate and a difficult livelihood, there are signs showing that family disputes and suicide cases are on the increase. I would like to give the employers a piece of advice, for those whose businesses and organizations still remain profitable in particular, please do not take advantage of the difficult and chaotic situation created by the Asian financial turmoil to lay off their workers on a large scale and to cut their wages and benefits.

Madam President, the FTU and myself have recently received a lot of complaints on the various unreasonable treatments to workers, including layoffs, cuts in wages and benefits and so on. Apart from bearing their sufferings in silence, there is nothing much the workers can do under the present circumstances, and in order to retain their jobs, they could only submit to humiliation. The FTU is very much concerned about such complaints.

Madam President, if we let the manufacturing industry to fend for itself, this would only make the unemployment problem even worse. Consumption shrinkage has affected the businesses of the catering, retail, taxi and other services, and this has created a vicious circle. Therefore, a weak manufacturing industry will not only affect its survival, but will also lead to vicious chain effects on other trades.

Let us learn from the experience of Singapore: Singapore has maintained a proportion of its manufacturing industries at more than 25% of its GNP. Although the situation and condition of Hong Kong are different from Singapore, we still need to maintain a certain proportion of the manufacturing industry in our economy. The FTU is of the opinion that Hong Kong must restructure its economy. Apart from developing the financial services industry and the high technology industry, the Government should also assist our manufacturing industry which have a market, though not enjoying a high profit, and strengthen our non-profit-making social services industry. The SAR Government should also take the initiative to open discussions with the Central Government on opening up the inland market and securing inbound sales rights, so as to create a better investment environment and boost the attractiveness of Hong Kong products.

If Hong Kong is not enterprising enough and if Hong Kong does not carry out a reform in order to improve its competitiveness, I believe that our economy will be lagging behind other cities of the Mainland in less than a decade. I hope that this will not happen and that the SAR Government will give careful thoughts to this matter. Three major factors are affecting the development of Hong Kong. Apart from its internal factors, there are also the factor of Sino-Hong Kong relationship and the international environment. While other places are deeply hurt by the financial turmoil, Hong Kong has also not been spared. Nevertheless, factors like our internal economic structure and its development as well as cross-boundary economic co-operation are in our control. Having learned a lesson from our past bitter experience, the first and foremost task of the Government is to restructure the economy of Hong Kong.

With these remarks, Madam President, I support the Honourable Miss CHAN Yuen-han's original motion.

PRESIDENT (in Cantonese): Mr James TIEN.

MR JAMES TIEN (in Cantonese): Madam President, on behalf of the Liberal Party, I would like to make a few comments on Miss CHAN Yuen-han's original motion.

Miss CHAN's original motion said that there is a loss of the past diversified characteristic of Hong Kong and a large number of workers were unemployed as a result of the undue emphasis laid on the financial and real estate businesses in Hong Kong's economy, at the expense of its industrial development. Madam President, it is really true that undue emphasis has been laid on the financial and real estate businesses at the expense of its industrial development or is it the other way round? All these years, those in the industrial sector would say that the workers in the wig and plastic industries of the 1960s had left those industries because there were no more demand for those products, and if even these products were produced, there will be no markets, therefore these industries will naturally be phased out. In the 1970s, the textile, electronics and toys industries prospered. That was at a time when the wages of the workers in those industries and the land prices of Hong Kong were much lower. Overseas buyers will not "act in good faith" simply because we have a problem, such as there is a rise in our production costs. They still remain unscrupulous buyers who will not buy from us if the prices of our products are not low enough. What difference will it be to the buyer whether the same piece of ready-made clothing is manufactured in Thailand or China? The employers will not have any business and they will not be able to employ workers if overseas buyers stop buying from us.

Many of my colleagues mentioned that the relocation of our industries to the north of the boundary can mainly be attributed to the high land prices in Hong Kong. Madam President, as I am only going to speak on the original motion today, I will now cite a specific example in the one industry which I am most familiar with. Generally speaking, if we are to manufacture 30 000 shirts, then we may need a factory space of 10 000 sq ft. Using the present rate of factory premises rental at $3 to $4 per sq ft as the basis of calculation, we may have to pay $30,000 to $40,000 per month for a factory premise with an area of 10 000 sq ft. With a space of 10 000 sq ft, we can employ 100 workers and 20 executive and managerial staff to manufacture 30 000 shirts. So, we have to pay $500, 000 to $600, 000 in wages to 100 workers at an average salary of $5,000 to $6,000 per month, and $300,000 in wages to the 20 executive staff at an average salary of $15,000 per month, and we have a total cost of $900,000 for wages. As regards the costs of raw materials, water and electricity charges and other overheads, if the fabrics are imported from Italy, then it will be at about $1.8 million. Out of a production cost of $2.7 million, $1.8 million are spent on Italian high quality fabrics, raw materials, zippers and trademarks, $900,000 on wages and $40,000 on rentals. As such, can we say that the rental cost of $40,000 is a strong incentive for our industries to move to the north of the border? Instead of citing China as an example, I am going to talk about Thailand. If we operate a factory of the same scale in Thailand, the raw material costs will be the same, that is, at $1.8 million, but the rental for a factory premises with an area of 10 000 sq ft will not be as high as $400,000 and we may be able to rent a factory premise of the same size for a rental of as low as about $10,000-odd. As for the wages of the 100 workers, it will be $4,500 bahts per month for each worker. Given the present rate of exchange, it will be around HK$800, and that will be a total of $80,000 per month for 100 workers. Let us say that the salary of an executive staff is $15,000 bahts, and that is $3,000 Hong Kong dollars, then it will be a total of $140,000 in terms of salary for all executive staff. According to the above figures, our total production costs will be $1.9 million, with $1.8 million on raw materials, $10,000 on rental and $140,000 on wages. As compared with the production cost in Hong Kong, there is a difference of about $700,000. On the other hand, someone may say that the wages for Italian workers is twice that for Hong Kong workers at $15,000, and the total costs of wages for 100 Italian workers is more than HK$2 million. But why is it that they still receive orders for their products? In this respect, to a certain extent, I agree with Mr TAM Yiu-chung when he cited the example of the movies "Storm Riders". From the time of the early martial arts films starring Mr Bruce LEE to the time of the film "Dragon Inn" and to "Storm Riders" of today, a lot of innovative ideas have been introduced into the movie industry, and this has been made possible because the bosses of the movie industry are willing to invest, the executive staff are talented and the workers conscientious. Why do we fail to manufacture ready-made clothings which can be compared to those of Italy? Why is that Italian shirts can be priced at $400 to $500 each, while those of Hong Kong have to be priced at $100 and that of Thailand at $60? At present, our industries are in a dilemma because we are unable to produce goods of a high quality and too proud to manufacture goods of a low quality. Miss CHAN Yuen-han moved a motion to urge the Government to restructure Hong Kong's economy, but since we never did have an economic structure, how can we restructure it?

The policy of the Government has been very simple all along. At a low tax rate of 16% or 17%, our industries has to conduct their own researches, whereas in countries which have a high tax rate, the situation is different with all the researches being undertaken by the Government. However, judging from the existing framework of our economy, how can we recover the markets we have lost if we do not adjust the wages of our workers? I think in the motion of Miss CHAN Yuen-han, she is referring to the workers who are currently employed in the manufacturing industry, and those who had been employed in the manufacturing industry before joining the service industry and eventually being laid-off. I do not think she is talking about our engineering students and our younger generation who will graduate from the Hong Kong University of Science and Technology. I absolutely agree that their future will be brighter than those who are currently working in the industrial sector.

If the Commission on Innovation and Technology led by Prof TIEN Chang-lin is able to do a good job, then 20 or 30 years down the road, I am absolutely confident that our younger generation will be able to join the ranks of the hi-tech industries. However, at present, how can the existing old industries be developed into high value-added industries? Some Members have also pointed out that this is a key issue. To achieve this goal, I think that there should be co-operation among three parties, namely, employers who should be capable of and dedicated to reaching the high value-added target; administrative personnel (including factory managers and managers) who can only play an effective role by learning more about these technologies; and finally workers who can increase their productivity by mastering new manufacturing skills, and an increase in productivity will be very much the same as adjusting the wages of workers. I very much agree to what Mr TAM Yiu-chung said earlier about our electronics, plastic and manufacturing industries must learn from the movie industry, otherwise, we will never be able to develop our industries any further. Madam President, for the above reasons, I object to Miss CHAN Yuen-han's motion. Thank you, Madam President.

PRESIDENT (in Cantonese): Dr LUI Ming-wah.

DR LUI MING-WAH (in Cantonese): Madam President, the non-intervention policy of the Government has created a very favourable business environment for Hong Kong in the past two or three decades. As a result, the economy of Hong Kong has prospered and the people of Hong Kong have been able to enjoy a prosperous life. However, this state of free development has gradually brought fundamental changes to the economic structure of Hong Kong. At the end of the 1970s, the industrial sector accounted for about 24% of our GDP with a workforce of about 900 000-odd, and that was about 30% of the total workforce in Hong Kong. Now our industries are only taking up 7% of our GDP with just about 300 000 workers which is about less than 10% of our whole workforce. Recently, the economic activities of Hong Kong were mainly focused on real estate activities, financial services and service industries. The weakness of our economy, having placed too much emphasis on the services industries and the property market has become more apparent after the Southeast Asian financial turmoil. Therefore, I support Miss CHAN Yuen-han's motion on "Restructuring Hong Kong's economy". Madam President, I am not saying that the previous policy of the Government was wrong. I only want to point out that the environment of Hong Kong has changed and the non-intervention policy is already outdated.

In order to restructure Hong Kong's economy, I am not asking the Government to put industrial developments before service and property industries. I only hope that the Government could come up with a long-term economic development policy and offer our industries more substantive support; and the rest could be left to the industries themselves. Only an industry-based economy could survive the test of time and create more job opportunities which will then give the service industry service targets. By exporting our industrial products, we will be able to earn foreign currencies and the people of Hong Kong will have the money to buy properties. This is clearly reflected through the development of our property market in the past decade. We all know that the revival of our industries will be beneficial to the community of Hong Kong as a whole and everyone in Hong Kong will gain from a prosperous economy. Therefore, the restructuring of Hong Kong's economy is a most pressing task which brooks no delay.

As regards the direction and specific policies on developing our economy such as those related to human resources, technology transfer, science park, tax concessions and so on, these are practical issues which can only be overseen and carried out through the establishment of an industry and technology bureau which has administrative powers. Otherwise, the consultant reports and recommendations will only be something which we have read, the Government has heard and finally being shelved.

Madam President, I so submit.

PRESIDENT (in Cantonese): Miss CHOY So-yuk.

MISS CHOY SO-YUK (in Cantonese): Madam President, the operations of the new airport were paralyzed some time ago, and Hong Kong suffered enormous losses. While the unemployment rate announced the day before yesterday soared to 4.5%, it is generally reckoned that the growth rate of the second quarter will again be negative. These signs of economic recession show that Hong Kong's economy is entering a period of adjustment. In the last decade or so, Hong Kong has laid undue emphasis on real estates and financial businesses and a bubble economy was developed. To prevent the recurrence of the bubble economy in the future, Hong Kong has to move in the direction of hi-tech and high value-added industries so as to diversify our economic development. I believe that this is actually the consensus of the community, and the question remains is how this can be done.

In the past, the British Hong Kong Government practised the so-called "non-intervention policy" which gave it a legitimate excuse to refuse granting assistance for the development of our hi-tech and innovative industries. But times have changed and Hong Kong is no longer "a borrowed time and a borrowed place". I think that the Hong Kong Special Administrative Region (SAR) Government has to change its attitude and endeavour to develop the territory's hi-tech and innovative industries. One of the Government's jobs is to send its bureau secretaries and officials overseas to act as super salesmen for Hong Kong and visit manufacturers and investors. In recent years, in order to seek assistance and promote their own businesses, many developing countries and regions have actively sent their government officials overseas to visit renowned manufacturers and scientific research institutions. This practice does not only facilitate direct communication with foreign companies and enhance the understanding of their needs, but also strengthens these companies' confidence in making investments. One of the outstanding examples of success is the Prime Minister of Malaysia, Mr MAHATHIR, who paid a personal visit to Mr Bill GATES, the CEO of the Microsoft Corporation, twice in the United States, to convince Microsoft to invest on developing computer business in Malaysia. It is said that Mr GATES was deeply moved and thus successfully attracted Microsoft to invest in Malaysia. Another example is Taiwan. The officers of the Science Park of Taiwan visited different countries to attract investors. The rapid development of the computer industry in Taiwan has much to do with its Government's promotional tactics. The SAR Government should draw on the experience of Taiwan and send senior public officers to visit overseas scientific research institutions. After all, hi-tech and innovative industries cannot be developed behind closed doors. Direct contacts with the investors have to be made.

Apart from strengthening its overseas promotion campaign, the Government also has to formulate long-term policies, as soon as possible, to attract both local and foreign investors to invest in hi-tech and innovative industries in Hong Kong. The Commission on Innovation and Technology set up by the Chief Executive has only held a few meetings in the year after its inception and, disappointingly, most of the proposals and plans put forward by the Commission have not been implemented. I think that the Government has to make amends before it is too late, first of all, by injecting more resources into education development and scientific research, as well as offering preferential treatment on rent, tax and land premium for industries. The Government should attract scientific researchers from overseas to Hong Kong on the one hand, and grant assistance to local manufacturers and investors who are engaged in hi-tech and innovative industries on the other. At the same time, we should fully utilize the rich resources of the Mainland to backup our industries. With the support of the Mainland's workforce, especially the high productivity in the Pearl River Delta, our Government only has to imbue this massive working population with knowledge of high technology, I believe that the competitiveness and market value of Hong Kong products could definitely be greatly enhanced. What is most important is that the Government should only award contracts for developing hi-tech and innovative industries to local companies and cease to contract out such work to foreign consultancy firms, otherwise it can never help local hi-tech and innovative industries develop.

Lastly, I would like to remind people that Hong Kong's own strengths should not be overlooked when it develops hi-tech and innovative industries in full swing. What are Hong Kong's strengths? It is in the service industries. Presently 90% of Hong Kong's economy is built upon the service industries. No matter whether you agree or not, the service industries will still play the most important role in Hong Kong's economy. If our strengths in this aspect are neglected, especially at economic hard times such as the present, our poor economic condition will only worsen.

After the financial turmoil, our economy continued to be maintained at a high level and many of our industries have become less competitive. While the development of hi-tech and innovative industries will undoubtedly help to enhance Hong Kong's competitiveness, the service industry which is a cornerstone of Hong Kong's economy should not be overlooked either. Only if the work in these two areas is done well can the problem of unemployment be solved, and the troubles of Hong Kong be over.

Madam President, I so submit.

PRESIDENT (in Cantonese): Does any other Member wish to speak?

(No Member indicated a wish to speak)

PRESIDENT (in Cantonese): I now invite Miss CHAN Yuen-han to speak on the two amendments to her motion. Miss CHAN, you have up to five minutes to speak.

MISS CHAN YUEN-HAN (in Cantonese): Madam President, first of all I would like to thank Miss Christine LOH for her amendment. Her amendment, if passed, would retain only 16 words out of my original motion. Miss LOH's amendment and my motion basically refer to two different issues, there should not, therefore, be any contradiction. The only contradiction lies in that she still encourages speculation. I would also like to thank Mr SIN Chung-kai for his amendment, albeit I find that his amendment seems to lack any tolerance as far as economic restructuring is concerned. Mr SIN thinks that the issue has been repeatedly debated. I would like to ask Mr SIN this question: In regard to the issue of retirement protection for the elderly, we have debated the old age pension scheme time and again, does that mean we do not need to raise the issue again? I did try to lend my support to Mr SIN's amendment as I went through the seven points in it, but when I finished reading the seventh point I could not help but think there might be the eighth, the ninth or the tenth point. I agree with what Mrs Sophie LEUNG said─I very seldom agree with her, but this time is an exception─which is that we could elaborate on this point further still. For example, we could mention the economic ties between Hong Kong and China, the Technology Development Council, assistance to small and medium sized enterprises and so on. Still the list may go on. So I cannot support the amendment, but I should thank Mr SIN for it.

I also need to thank you, Madam President. As I said just now, Miss LOH's amendment basically refers to issues other than what I intended to say while Mr SIN's refers to micro instead of macro issues of economic restructuring. However, I should still thank you, Madam President, for allowing them to move their amendments.

I would like to talk about the difficult position in which Hong Kong finds itself. I should first thank the 20 colleagues who have spoken on my motion. The issue has become a matter of general concern in Hong Kong and everyone across the community is concerned about the economic problem Hong Kong is now facing. That concern is reflected in this Council. Earlier, as we spoke about how we could employ short-term measures to help Hong Kong out of its economic downturn, we also talked about economic restructuring and the formulation of medium-to-long-term measures to develop the economy. Many Members have put forward a lot of ideas. All these served to show that colleagues in this Council and the community are concerned about economic issues. I think the 20 Members who spoke just now were trying to express their ideas from various angles, be they my supporters or not. For instance, Miss LOH talked about restoring the confidence of investors. In regard to the restoration of confidence, I would like to expand the scope to cover all of us in Hong Kong. It is very important for us to restore the confidence of each and every one in the community, albeit it is not the thrust of my motion today. Again, in the seven proposals mentioned by Mr SIN, I agree with some of them but not others, in particular those specific ideas which I think should require further discussions. Despite my agreement or otherwise the fact remains that everyone is trying to face up to the problems and look actively for ways to help Hong Kong. That also brings out the questions deep in the hearts of the people of Hong Kong. What has happened to Hong Kong? Why has there been a twist after more than a decade or two of prosperity? It has been nine months since Hong Kong was drawn into the recession and we still fail to see any light at the end of the tunnel. When can we recover? In May or June this year, someone asked me of my views of the Hong Kong economy, I said optimistically then that we could recover by the beginning of the year 2000. However, if I am asked the same question again, I would, having considered the series of events which have since taken place, pessimistically say that we might need to wait until the end of 2000 to make a turn for the better. Apart from external factors, we also need to consider internal factors. In the circumstances, do we need to reflect on what have happened so far? I think we need to discuss the matter from a wider perspective.

Today, in addition to responding to the two Honourable colleagues who have proposed the amendments, I want to thank those Members who have spoken for their contribution in the debate. I was glad they spoke. Many Members have the same aspirations. They wanted the Government to do something about the situation, to find out what has happened to Hong Kong, to tackle our economic problems from new angles, as well as to restore the confidence of the people of Hong Kong. Thank you, Madam President.

PRESIDENT (in Cantonese): Secretary for Trade and Industry.

SECRETARY FOR TRADE AND INDUSTRY (in Cantonese): Madam President, although it is very late already and I may have nightmares tonight after listening to such a long debate, I am still very grateful to the more than 20 Honourable Members who spoke and offered valuable comments to the Government. Just as all Members do, the Government is extremely concerned with the present economic problems. We have always assumed a proactive attitude in the face of these problems and we have been endeavouring to turn a new page in the economic development of Hong Kong as soon as possible. I would like to make use of the following time to respond all at the same time to the Honourable Miss CHAN Yuen-han's motion, the Honourable Miss Christine LOH's and the Honourable SIN Chung-kai's amendments as well as the opinions advanced by other Members.

The restructuring of economy

First of all, I would like to respond to the important issue of the restructuring of our economy. In the past 20 years, Hong Kong's economy has experienced great changes under market forces. Labour-intensive and low value-added industries were relocated to other regions where lands were more plentiful and labour costs cheaper. Hong Kong's advantage has been gradually shifted to high value-added and knowledge-based economic activities.

The above-mentioned restructuring of the economy was particularly prominent in the last decade. While service industry accounted for 69% of the GDP in 1986, it kept on growing and reached 84% in 1996. At the same time, the proportion taken up by the service industry workforce in the total working population rose from 55% to 79%. On the other hand, the proportion taken up by the manufacturing industry fell sharply in both the GDP and the working population, from 23% and 35% respectively in 1986 to 7% and 11% respectively in 1996.

We can clearly see that the development of the service industry has taken up a more and more important position in the course of the restructuring of the Hong Kong economy. In terms of GDP, we have an average annual growth rate of 16%. While finance, insurance, real estate and commercial services have undoubtedly grown rapidly, other service industries such as export, transportation, warehousing, communication, personal and community services have also experienced a substantial growth. These service industries which are closely linked with the manufacturing industry have an average annual growth rate of 15% to 17%, showing that the development of service industries is not only confined to finance and real estate, but is developing in a diversified manner.

Employment

The Government naturally understands that while the restructuring of the economy creates employment opportunities, it also brings about challenges. In the face of such challenges, the Government has been trying its best to respond. I have to point out that, with regard to the creation of employment opportunities, different industries and the private sector all play important roles. The major responsibility of the Government is to maintain a business-friendly environment in which investors in different industries can give play to their potential and thus create more employment opportunities. As for alleviating the unemployment problem, the Government's first and foremost task is to assist the unemployed to obtain employment again, and to help them learn the skills required so that they can maintain their competitiveness in the labour market and find new jobs or stay in jobs. With this goal in mind, since the beginning of this year, the Government has implemented a series of measures to enhance the provision of information on job vacancies to the unemployed, provide more effective employment services, strengthen vocational training and reinforce employee retraining programmes.

In order to motivate different trades to help alleviate the unemployment problem, the Government has recently established an ad hoc group on employment chaired by the Financial Secretary which will draw on collective wisdom and study effective ways to solve the problems in a pragmatic manner. The ad hoc group has already held two meetings and announced a series of measures to further tackle the problem of unemployment. These measures include speeding up the recruitment of civil servants, advancing the implementation of large-scale infrastructure projects, as well as enhancing the liaison between the Labour Department/Employee Retraining Board and employers. Details of the measures have already been extensively reported on, so I do not wish to go over them here.

In brief, through liasing with companies and people of different trades, the Government will actively seek and explore more employment opportunities for the unemployed, and will try its best to help them grasp these opportunities to fill the relevant vacancies, find new jobs or stay employed. The Government will spare no effort in this regard and also hopes that all members of the community will lend their full co-operation.

The industrial development policy of the Government

Now I would like to respond to the question concerning the industrial policy of the Government. "Reviving the industry" has been a phrase often mentioned by people in recent years, and I have also talked about the Government's industrial policy on different occasions. In a nutshell, the Government's industrial policy is to, without violating market principles, actively provide a good business environment and appropriate support to the business community, encourage technological developments and help different trades advance in the direction of high value-added industries, so as to ensure that the business community of Hong Kong can maintain a competitive edge in the international arena.

1. Business-friendly environment

First of all, the Government has all along been endeavoring in various areas to create and maintain a business-friendly environment. Hong Kong is a corruption-free society governed by the rule of law. While we have a free market system which Hong Kong people take pride in and is highly regarded by the international community, we also have sound infrastructures. These advantages helped to bring about the outstanding success of Hong Kong in the past, and will gain an edge for our future economic development.

Besides, the low tax rate and simple taxation system of Hong Kong have also made great contribution to maintaining the competitiveness of Hong Kong's business community. In consideration of the long-term interests of Hong Kong's economy, the Government has already implemented in the fiscal year of 1998-99 a series of new measures proposed in the Profits Tax Review so as to enhance the competitiveness of Hong Kong's taxation system and business environment. Several of these measures are particularly related to scientific research. For example, we have exlarged the scope of tax deductible items in the expenditure on scientific research to include the expenditure on market study, feasibility study and other studies concerning commerce, industry and management science. This measure will further encourage the local business community to add value to their products and to increase productivity. Another example is that, in order to further encourage investments in high-grade production equipment and modern business systems, we offer 100% immediate tax write-off for new expenses on computer hardware and software if they are bought by enterprises for internal use.

I hope Members will notice that the above-mentioned tax concessions for expenditure on scientific research are not only made to meet the need of a certain industry, but to encourage different trades to add value to their products and services and to enhance their productivity. While this impartial spirit and principle tie in with the Government's industrial policy, they are also in line with the free market principle practised in Hong Kong.

Other than tax concessions, the support for human resources is another important element which helps to create a favourable environment for investment in Hong Kong. The Government has all along been injecting huge resources into the training of management and technical personnel. In the year 1998-99 for example, the Government's investment in education will amount to as high as $43 billion, accounting for 20.1% of Hong Kong's total public expenditure of the year. The aim of such an enormous investment is to make the local human resources meet the requirement of society and economic development. At present, the eight universities funded by the University Grants Committee provide the labour market with a new force of about 30 000 graduates with university education each year. Moreover, the two technical colleges, seven technical institutes and 24 industrial training centres operating under the Vocational Training Council offer a full range of full-time and part-time courses and have already trained a lot of technical personnel. On the other hand, the Government has already allocated over $100 million for its new technology training scheme in order to raise the technical standard of local workers.

With regard to the strengthening of financing channels, the Chief Executive stated clearly in his policy address last year that the Hong Kong Special Administrative Region (SAR) Government highly supports the Stock Exchange of Hong Kong (SEHK) in making a feasibility study of developing a second board market so as to help the financing of medium enterprises. After more than a year of study and analysis, the SEHK issued a consultation paper in May this year to gather opinions from the public and people in the trade. The consultation period will expire by the end of July and the Financial Services Bureau will pay close attention to the findings of the consultation. The Bureau will also stay in close contact with the SEHK and the Securities and Futures Commission about the feasibility study on the second board market.

Furthermore, to attract overseas funds to continue investing in Hong Kong, the Government will try its best to maintain Hong Kong's status as a regional and international financial centre. We will also continue to support and encourage the market to launch new financial products and services, improve the efficiency of operation in the market, and acitvely develop the local bonds market so as to provide more financing channels for entreprises.

All in all, we will not only preserve the well-established business-friendly environment in Hong Kong, but will unceasingly seek to make innovative changes in order to maintain our competitive edge, strengthen the foundation and create opportunities for future development in our business community.

2. Support for industry

Apart from providing a business-friendly environment, the Government also lends different kinds of direct support to industrial investors.

Take industrial land as an example. The Hong Kong Industrial Estates Corporation (HKIEC) has been playing an important role in the provision of industrial land. At present, the HKIEC has three industrial estates and provides a total of 214 hectares of land to meet the needs of those industries which cannot be accommodated in multi-storey industrial buildings. Charging only the cost of land development, these industrial estates provide the suitable industries with lands for operation. In order to provide more appropriate lands for the local industrial sector, the HKIEC is now actively preparing for the development of the fourth industrial estate.

Many Members mentioned the importance of encouraging local industries to enhance their technological standards and their ability to add value. In fact, to assist local industries to develop in this direction, the Government has been sparing no effort in the implementation of various subsidy programmes.

(i) First of all, in order to encourage more technological development and applied researches in the local business community, the Government set up the Applied Research and Development Fund (the Fund) in 1993 to provide the private sector with loans and equity injection for technological development and product innovation projects. The Fund has an operating capital of about $750 million at present, and it has offered subsidies to 24 projects since its inception, with the financial undertaking involved amounting to $94 million. We will hand over the management of the Fund to private venture fund companies so as to enhance its overall efficiency. At the same time, with the participation of such venture funds by different trades, the capital market's interest in investing in technology projects may be aroused.

(ii) Secondly, we have also set up the Industrial Support Fund to provide subsidies to design for industrial and technolgical development projects in Hong Kong, including those about developing new technology and promoting design for industrial products. Since 1994, the Industrial Support Fund has offered assistance to 344 projects and the financial undertaking involved amounts to $1.23 billion. Many research results of these projects have already been successfully applied in the relevant industries, for example, the development of electrotyping process in the jewellery industry and drug transmission technique in the pharmaceutical industry, the creation of new products and the provision of design and technical support to the telecommunications industry, and so on.

(iii) Furthermore, we have also launched an assistance scheme for patent application. The scheme was introduced in April 1998 and aims at encouraging local companies and people to engage in product innovation and invention. The Government will provide assistance in the application for patenting the inventions. According to the scheme, all inventions may apply for assistance.

Other than the above assistance schemes, through the Hong Kong Productivity Council and the Hong Kong Industrial Technology Centre, the Government also helps local industries improve and put new technologies into application, encourages technology transfer, and assists the setting up of new technology-based companies. Stimulated by the Science Park which is due to open in late 2001, more local companies with advanced technology will be set up and more overseas technology-based companies will be attracted to develop their businesses in Hong Kong. The conglomerating and efficiency-building effects of the Science Park are expected to encourage innovation and help upgrade the technology level of Hong Kong's industry.

3. Foster links between the industry and the academic circles

The Government understands that, apart from giving direct support to industrial development, it should also make good use of the resources of different sectors, especially the academic circles, so as to push our industrial and technological developments forward. It is one of the important tasks of the Government to create opportunities of exchanges and co-operation for the academic circles and the industrial sector. For example, many researches of the projects subsidized by the Applied Research and Development Fund rely on the technical support of the local academic circles. Up to now, among the 24 projects subsidized by the Fund, 10 involve the participation of researchers from local universities.

We are also trying our best to make the Industrial Support Fund tie in more with the needs of the industrial sector. For example, we have made a stipulation to require that an applicant company should have already established a partnership with or obtained sporsorship from the industrial sector before it submits its project proposal. This new stipulation will not only help build a closer relationship between universities and the industrial sector, but will also ensure that the projects subsidized by the Industrial Support Fund are more in line with the actual needs of the industrial sector.

4. The formulation and implementation of Hong Kong's industrial policy

A lot of Members have also expressed their views on the formulation and implementation of Hong Kong's industrial policy at present. The industrial policy of Hong Kong is formulated by the Trade and Industry Bureau, whereas various support measures are implemented with the help of the Industry Department, government-subvented industrial support organizations and univerisities. In order to ensure that our policies are based on extensive public views, the Government has also set up the Industrial and Technology Development Council, the members of which include businessmen, representatives from major industrial and trade organizations, as well as academics and government officers who will offer their views to the Government on industrial and technological development policies.

Furthermore, the Chief Executive has also set up the Commission on Innovation and Technology (CIT) of which the members include academics, representatives of the business community and government officers. The CIT will advise the Government as to how commercial application of scientific research results can be promoted and how these results and scientists of the Mainland can serve Hong Kong. In order to achieve these goals, it will also advance proposals to the Government on the necessary measures and structural arrangements. Just now a Member said that the CIT has only held a couple of meetings after its inception, but this is not the case indeed. In fact, in order to ensure that the CIT would be led by the most appropriate person, we did not appoint its chairman until the end of March this year, and the CIT has been operating in full swing ever since. Although its chairman, Prof TIEN Chang-lin, lives in the United States, the CIT has already held four meetings in the mere four months after its establishment. While various important issues have been studied and discussed in these meetings, the fifth meeting will be convened next week. Besides, different activities open to outside audience, such as seminars and round-table conferences, were organized before and after each meeting. Both the business community as well as the academic circles participated actively in such functions. From time to time, the CIT also arranges visits to relevant academic and industrial organizations for exchange of opinions.

From this we can see that the CIT has been working to a very tight schedule ever since it was set up. At the time of its establishment, we had stated clearly that it would take the CIT 12 to 18 months to complete the task. However, now the CIT will submit its first report to the Chief Executive in October this year, and it is expected to make concrete recommendations on the topics of study concerned. I am glad to see that the CIT is working enthusiastically on the prescribed schedule. We look forward to the Committee's recommendations which may increase our flexibility in responding to the needs and changes of society and the market when we study the issues of industrial and technological support structures, as well as our efficiency in providing support to the development of industrial technology in Hong Kong. Just now a Member questioned in particular the effectiveness of the various industrial support organizations. I would like to point out here that the CIT will study the roles played by these existing industrial support organizations and the effectiveness of the various assistance funds. The CIT will review whether adjustment has to be made in these organizations in order to further improve the overall industrial support structure and enhance their cost-effectiveness.

Conclusion

In conclusion, I wish to reiterate that the restructuring and overall development of Hong Kong's economy have all along been led by the private sector and propelled by free market. Under the principle of free market economy, the Government's role is only to minimize its interference and maximize its support to the business community. This system has served us well and should not be changed arbitrarily. Otherwise, social resources can never be utilized fully and economic benefits will be reduced, thus weakening the overall competitiveness and undermining the long-term economic interests of Hong Kong. In the recent Asian financial turmoil, certain economic systems which have been adopting a government-led policy with their industrial developments directly subsidized by the Governemnt suffer much more badly than Hong Kong. This is something we should take as an object lesson.

To put a diversified economy into genuine practice, the Government should play the role of providing an excellent business-friendly environment and appropriate support. As to which industries should be developed and how the service and manufacturing industries should be proportioned, these are issues to be decided by the market itself. The Government should not recklessly interfere and destroy the operation of the free market. Our real goal is to develop a high value-added, productive and competitive economic system so as to maintain substainable growth and a healthy development of the Hong Kong economy, create more employment opportunities for different trades and industries and always improve our quality of life.

It is true that the restructuring of Hong Kong's economy and the impacts brought about by the Asian-Pacific financial turmoil have greatly influenced the employment, investment and even the whole society of Hong Kong. However, the restructuring of the Hong Kong economy is something which cannot be accomplished overnight. In face of the present problems, while we must tackle them cool-headedly, we must also have vision and keep our confidence and will to work for the future of Hong Kong.

Madam President, just now many Members have spoken and made a lot of comments. I am afraid I may not be able to finish my speech next morning if I have to answer them one by one. So I do not intend to do so. However, I would like to respond briefly to the three motion and amendments proposers. With regard to Miss CHAN Yuen-han's speech, I share Miss Christine LOH's sentiment that Miss CHAN is really too pessimistic. She has talked about many things and they all have the flavour of a planned economy. As for the amendments of Miss Christine LOH and Mr SIN Chung-kai, although I do not completely agree to all the contents of their amendments, I feel that the economic philosophy put forward in their speeches is very close to that of the Government and we share a lot of common views both in logic and in theory. I particularly find Mr SIN Chung-kai's speech admirable and exceptional. I am very happy to see that the Democratic Party has at last found a Member who knows economy to act as their spokesman on economy, industry and trade. Hope has finally dawned on the Democratic Party. (Laughter) As for the Liberal Party, I agree even more with them because their speeches all were delivered from the perspective of the business community. Of course I cannot support all the proposals, but I think that their speeches all show sound judgment. In fact, many fine points listed by Mr SIN Chung-kai are currently under the study of the CIT led by Prof TIEN Chang-lin. The CIT will soon come up with recommendations which will be submitted to the Chief Executive to see whether they will be adopted.

I find from Members' speeches that pessimistic sentiments and views prevail in our society. People may be confused when they themselves are caught in the situation. Therefore, let me share with you a China News Service dispatch from Hong Kong on 24 June ─ I may have been behind the times as I did not see the dispatch until today. It reads: the Hong Kong International Chamber of Commerce and the Better Hong Kong Foundation announced on 24 June the result of a survey of the international business community in Hong Kong. Members of the Hong Kong International Chamber of Commerce include 23 chambers of commerce from different countries in Europe, Asia, North America, South America and Australia. A total of 3 800 questionnaires were distributed and about 1 000 were returned. According to the result of the survey, 91% of the interviewees believe that their businesses in Hong Kong will experience positive returns in the coming three years. Although the survey was conducted between March and early June this year during the Asian financial turmoil, most of the companies interviewed looked at their businesses from a long-term perspective. They think that since the fundamental factors of Hong Kong's success, such as a stable foreign exchange rate, can still be maintained, and on top of that, Hong Kong is supported by the China market, foreign investors should still have confidence in the future of Hong Kong although the external factors remain uncertain for the time being. Some companies even make use of the opportunity of falling property prices and rents to expand their businesses in Hong Kong, and recently we still see renowned international corporations coming to set up their offices in Hong Kong. The result of the survey also shows that, other than the companies' general optimism about their performance in the territory, 80% of the interviewees believe that Hong Kong's business environment will continue to be positive in the coming three years, whereas 70% of the companies state that they would make Hong Kong their Asian-Pacific regional headquarters, among which 88% intend to maintain this situation in the coming three years. Besides, 32% of the companies interviewed plan to expand their scale of operation in Hong Kong, while 54% intend to maintain their status quo. These are all overseas companies genuinely investing in Hong Kong with capital, they are basically very confident in the future of Hong Kong. They also point out that Hong Kong is blessed with four major advantages: firstly, geographically Hong Kong is strategically located as it is backed up by an enormous market in the Mainland; secondly, Hong Kong has stable and sound systems: an independent judiciary, free communications, stable financial conditions and exchange rates, a productive workforce, and so on; thirdly, Hong Kong's economic system is open and well-organized in the Asian-Pacific Region; fourthly, an efficient and corruption-free Civil Service. With these fundamental advantages, Hong Kong is able to maintain a good business environment.

Madam President, economic policy is the most basic policy in Hong Kong; it has been upheld in the past decades and is to be upheld in the coming years. The fundamental principle of our economic policy is to maintain a free and open market which is market-oriented. Business decisions are made by businessmen instead of the Government, neither will the Government subsidize the business community directly. Is this economic policy not to be changed? While the basic policy should be kept unchanged, if necessary, adjustments within the scope of the basic economic policy can be made according to circumstances. Such examples abounded in the past and there are some at present, but it will be too time-consuming for me to exhaust the list. Moreover, the CIT led by Prof TIEN Chang-lin will put forward recommendations to adjust the scope of the present basic economic policy, therefore it is not something rigid. Madam President, I think that a good government with wisdom and vision must be one that has confidence in its most basic policy. I think as key government officials of the SAR Government, we have to keep calm and resposed in times of adversity and danger and uphold what is right relentlessly. We should all be unrepentant diehards of our most basic economic policy. Thank you, Madam President.

PRESIDENT (in Cantonese): I now call upon Miss Christine LOH to move her amendment to the motion. Miss Christine LOH.

MISS CHRISTINE LOH: Madam President, I move that the Honourable Miss CHAN Yuen-han's motion be amended, as set out on the Agenda.

Miss Christine LOH moved the following amendment:

"To delete "the" from "That, in view of the" and substitute with "business confidence having been shaken"; to delete "undue emphasis laid in recent years on the financial and real estate businesses"; to delete "at the expense of its industrial development, resulting in a change in the local economic structure, the loss of its past diversified characteristic, as well as unprecedented employment difficulties faced by local employees,"; and to delete "urges the Government to restructure Hong Kong's economy and modify its development strategies, so as to" and substitute with "is of the view that the main issues are for the Government to reconsider its economic policy after listening to more public views, and to facilitate local production; and for the public and private sectors to co-operate to revitalize confidence as a whole so as to revive investments, enable the creation of wealth and"."

PRESIDENT (in Cantonese): I now propose the question to you and that is: That the amendment moved by Miss Christine LOH be made to Miss CHAN yuen-han's motion.

I now put the question to you as stated. Will those in favour please raise their hands?

(Members raised their hands)

PRESIDENT (in Cantonese): Those against please raise their hands.

(Members raised their hands)

Mr CHAN Kam-lam rose to claim a division.

PRESIDENT (in Cantonese): Mr CHAN Kam-lam has claimed a division. The division bell will ring for three minutes.

PRESIDENT (in Cantonese): Members please first press the "Present" button.

PRESIDENT (in Cantonese): Before I declare the voting shall stop, Members may wish to check their votes. If there are no queries, the result will now be displayed.

Functional Constituencies:

Mr Michael HO, Dr Raymond HO, Mr Eric LI, Mr LEE Kai-ming, Mr CHEUNG Man-kwong, Mr Bernard CHAN, Dr LEONG Che-hung, Mr SIN Chung-kai and Mr LAW Chi-kwong voted for the amendment.

Mr Kenneth TING, Mr James TIEN, Dr LUI Ming-wah, Mr Ambrose CHEUNG, Mr CHAN Kwok-keung, Mr CHAN Wing-chan, Mrs Sophie LEUNG, Mr WONG Yung-kan, Mr Howard YOUNG and Mrs Miriam LAU voted against the amendment.

Mr HUI Cheung-ching and Dr TANG Siu-tong abstained.

Geographical Constituencies and Election Committee:

Miss Cyd HO, Mr Albert HO, Mr LEE Wing-tat, Mr LEE Cheuk-yan, Mr Martin LEE, Mr Fred LI, Mr James TO, Miss Christine LOH, Mr Andrew WONG, Dr YEUNG Sum, Miss Emily LAU, Mr Andrew CHENG, Mr SZETO Wah and Mr NG Leung-sing voted for the amendment.

Miss CHAN Yuen-han, Mr LEUNG Yiu-chung, Mr Gary CHENG, Mr Jasper TSANG, Mr LAU Kong-wah, Mr TAM Yiu-chung, Mr HO Sai-chu, Mr CHAN Kam-lam and Mr YEUNG Yiu-chung voted against the amendment.

Mr David CHU, Prof NG Ching-fai, Mr MA Fung-kwok, Mr Ambrose LAU and Miss CHOY So-yuk abstained.

THE PRESIDENT, Mrs Rita FAN, did not cast any vote.

THE PRESIDENT announced that among Members returned by functional constituencies, 21 were present, nine were in favour of the amendment, 10 against it and two abstained; while among Members returned by geographical constituencies through direct elections and by the Election Committee, 29 were present, 14 were in favour of the amendment, nine against it and five abstained. Since the question was not agreed by a majority vote of each of the two groups of Members present, she therefore declared that the amendment was negatived.

PRESIDENT (in Cantonese): Mr SIN Chung-kai, you may now move your amendment.

MR SIN CHUNG-KAI (in Cantonese): Madam President, I move that the Honourable Miss CHAN Yuen-han's motion be amended as set out on the Agenda.

Mr SIN Chung-kai moved the following amendment:

"To delete "under emphasis laid in recent years on the financial and real estate businesses in Hong Kong's economy, at the expense of its industrial development, resulting in a change in the local economic strucutre, the loss of its past diversified characteristic, as well as unprecedented employment difficulties faced by local employees" and substitute with "fact that Hong Kong's bubble economy has burst"; to add "Special Administrative Region" after "this Council urges the"; to add ", on the basis of the two major principles that the development direction of any industry should be led by the industry itself and driven by market forces and that conditions favourable to technological development should be created," after "Government"; to delete "restructure" and substitute with "adopt the following measures in order to modify"; to delete "economy" from "Hong Kong's economy" and substitute with "economic structure"; to delete "modify its" from "and modify its development strategies"; to add "enhance the diversified characteristic of the conomy and" after "so as to"; to add "more" after "create"; and to add": (a) to study the feasibility of setting up a centre for technology transfer or formulating measures for technology transfer, so as to facilitate the application of advanced technology in the industrial sector for design, production and the establishment of quality brands; (b) to grant tax concessions for scientific and technological researches, so as to encourage enterprises to conduct such activities and procure advanced equipment; (c) to strengthen liaison between enterprises and the academic circles, such as offering rewards, relaxing secondment restrictions, thereby encouraging co-operation between university teaching staff and the business sector in conducting technological researches and development; (d) to groom high caliber management personnel as well as technical staff with comprehensive knowledge; (e) to set up the second board market or enhance financing channels, so as to assist various trades to overcome difficulties in financing, and establish a technologically innovative manufacturing industry; (f) to provide land at reasonable prices, in order to encourage the development of technologically innovative industry; and (g) to conduct a comprehensive review of the existing policy-making and administrative powers of industrial organizations" after "employment opportunities"."

PRESIDENT (in Cantonese): I now propose the question to you and that is: That the amendment moved by Mr SIN Chung-kai be made to Miss CHAN Yuen-han's motion.

I now put the question to you as stated. Will those in favour please raise their hands?

(Members raised their hands)

PRESIDENT (in Cantonese): Those against please raise their hands.

(Members raised their hands)

Mr CHAN Kam-lam rose to claim a division.

PRESIDENT (in Cantonese): Mr CHAN Kam-lam has claimed a division. The division bell will ring for three minutes.

PRESIDENT (in Cantonese): Mr Andrew WONG.

MR ANDREW WONG (in Cantonese): I should like to seek a ruling from the President as I do not like the idea of an abstention.

PRESIDENT (in Cantonese): Will you say that again.

MR ANDREW WONG (in Cantonese): I do not like the idea of abstaining from voting. I would like to press the "Present" button only.

PRESIDENT (in Cantonese): Yes, you may do that.

MR ANDREW WONG (in Cantonese): I want to show that I do not like this vote.

PRESIDENT (in Cantonese): Pressing the "Present" button only shows that you did not vote.

MR ANDREW WONG (in Cantonese): I want to show that I do not like this vote but I do not intend to take this opportunity to raise any points here as it is certainly against the rules. I only mean to say I do not like the vote. I am leaving.

PRESIDENT (in Cantonese): I have ruled that you may press the "Present" button without voting. Please sit down.

MR ANDREW WONG (in Cantonese): Is there a difference between pressing the "Present" button and remaining sented but not pressing the "Present" button? I would like to know hear your views, Madam President.

PRESIDENT (in Cantonese): There is a difference.

MR ANDREW WONG (in Cantonese): Does the difference lie in that I may state my opinion first, that is, I do not like to vote on this matter?

PRESIDENT (in Cantonese): Mr WONG, please sit down. Would Members please press the "Present" button and then proceed to vote.

PRESIDENT (in Cantonese): Before I declare the voting shall stop, would Members please check their votes. If there are no queries, I declare voting shall now stop.

PRESIDENT (in Cantonese): If there are no queries, the result will now be displayed.

Functional Constituencies:

Mr Michael HO, Mr LEE Kai-ming, Mr CHEUNG Man-kwong, Mr SIN Chung-kai and Mr LAW Chi-kwong voted for the amendment.

Mr Kenneth TING, Mr James TIEN, Mr Eric LI, Dr LUI Ming-wah, Mr Ambrose CHEUNG, Mr CHAN Kwok-keung, Mr Bernard CHAN, Mr CHAN Wing-chan, Dr LEONG Che-hung, Mrs Sophie LEUNG, Mr WONG Yung-kan, Mr Howard YOUNG and Mrs Miriam LAU voted against the amendment.

Dr Raymond HO, Mr HUI Cheung-ching and Dr TANG Siu-tong abstained.

Geographical Constituencies and Election Committee:

Miss Cyd HO, Mr Albert HO, Mr LEE Wing-tat, Mr LEE Cheuk-yan, Mr Martin LEE, Mr Fred LI, Mr James TO, Miss Christine LOH, Mr LEUNG Yiu-chung, Dr YEUNG Sum, Miss Emily LAU, Mr Andrew CHENG, Mr SZETO Wah and Mr MA Fung-kwok voted for the amendment.

Miss CHAN Yuen-han, Mr Gary CHENG, Mr Jasper TSANG, Mr LAU Kong-wah, Mr TAM Yiu-chung, Mr HO Sai-chu, Mr NG Leung-sing, Mr CHAN Kam-lam and Mr YEUNG Yiu-chung voted against the amendment.

Mr David CHU, Prof NG Ching-fai, Mr Ambrose LAU and Miss CHOY So-yuk abstained.

　

THE PRESIDENT, Mrs Rita FAN, and Mr Andrew WONG did not cast any vote.

THE PRESIDENT announced that among Members returned by functional constituencies, 21 were present, five were in favour of the amendment, 13 against it and three abstained; while among Members returned by geographical constituencies through direct elections and by the Election Committee, 29 were present, 14 were in favour of the amendment, nine against it and four abstained. Since the question was not agreed by a majority vote of each of the two groups of Members present, she therefore declared that the amendment was negatived.

PRESIDENT (in Cantonese): Miss CHAN Yuen-han, you may now reply and you have up to four minutes 49 seconds.

MISS CHAN YUEN-HAN (in Cantonese): Madam President, it is now almost 12 midnight. I am glad there are still 50 colleagues in this Chamber. First, let me respond to the phrase used by the Secretary, which is the phrase "unrepentant diehards". It is this stubborness that caused the downturn of the Hong Kong economy. I mean to say to the Secretary that if he continues to be an "unrepentant diehard" then even when the economy recovers, I will still worry that the unemployment rate will remain at 3%. I am not conjuring up the figure but as a result of the change in the economic structure of Hong Kong, a number of people have not been able to enter the labour market. This is a fact. I hope the Secretary does not remain stubborn any more. I hope the Secretary may look at our present problems with a more forward-looking manner and from a wider perspective. Why are we still unable to rebound after nine months? This scenario is something we have never come across in the last 20 years or so. Our Government should not brush aside our present plight by saying it will remain a bunch of "unrepentant diehards". Will Hong Kong return to its former position by the Government acting like an "unrepentant diehard"? I do not think so. Luckily, we have a lot of infrastructure projects to complete. Luckily, there are still resources to the tune of several hundred billion dollars. Luckily, there are still people who continue to have faith in Hong Kong and are willing to stay. If the Government continues to be an "unrepentant diehard" I am truly worried Hong Kong will gradually lose its edge and other favourable conditions it has today. This is the response I have for the Secretary. As regards the Secretary using the term "planned economy" to describe my suggestion, I am very disappointed. Before I came today I spoke with several commercial organizations and tried to understand the position of the small and medium sized enterprises and factories. They asked why the Government failed to incubate the idea of giving help to them over the past years. The Secretary said the Government did not want to interfere. The fact is: more often than not the Government interferes in the Hong Kong economy with an invisible hand. It interferes in matters with which it is familiar. For matters it is not familiar with, it backs off on the pretext that it does not want a planned economy. I am not at all comfortable with this.

Madam President, I would also like to respond to the Honourable James TIEN's speech. He was contradicting himself in his story. He spoke about wages in Thailand and in Hong Kong. He also cited Italy as an example. He said Hong Kong could model its economy on Italy. Why did he say that? As he spoke I looked at him and found he had not been drunk. But I think he made such a suggestion because his mind was set on one thing. He was hoping the economic restructuring was not a revamp of the the economic structure but an adjustment for wages. I think that was what he really cared about. In the retail trade with which Mr TIEN is familiar, a newly-recruited salesperson could earn $7,000 or so in 1989 but $4,000 or so now. It is therefore not right to say wages in Hong Kong are high or not reasonable. As representatives from the labour sector, we should be fair at a time when Hong Kong is experiencing a difficult time in its economy. We need to find out ways to help Hong Kong preserve its features, strengths and competitive edge. In the past 10 years or more, the Hong Kong Federation of Trade Unions, which is our organization, and friends from the business sector, including Dr the Honourable LUI Ming-wah sitting in front joined hands in urging the Government to help small and medium sized enterprises and industries. This attitude is the right one to adopt in finding solutions. This attitude is beneficial to Hong Kong. Indeed there are bound to be conflicts or differences in opinions among Members who are either representatives for the businesses or representatives for labour. But when we talk about restructuring Hong Kong's economy, I very much hope the Liberal Party, representing the business sector, may give its support to the reasonable way we treat economic restructuring. Thank you, Madam President.

MR JAMES TIEN (in Cantonese): Madam President, the Honourable Miss CHAN Yuen-han has made some remarks about me and my speech. Could I have your permission to make an elucidation.

PRESIDENT (in Cantonese): Yes, you may elucidate.

MR JAMES TIEN (in Cantonese): I wish to elucidate that my remarks referred to the industrial sector, not the retail industry which the Honourable Miss CHAN Yuen-han referred to. I have not had any alcoholic drinks today. The one who might has already left. If we are talking about the retail industry in Hong Kong, of course there is only local competition. It is up to employers to decide whether to raise or decrease the wages for their staff. But when it comes to export, the goods have to find willing buyers. I was talking about the export trade, not industries for export or local retail business. Thank you, Madam President.

PRESIDENT (in Cantonese): Miss CHAN Yuen-han, do you want to elucidate your speech?

MISS CHAN YUEN-HAN (in Cantonese): I do not really understand what the Honourable James TIEN has said in his speech. My interpretation of his whole idea is that he was for a continuous lowering of wages in Hong Kong. Such is the crux of my response to Mr TIEN's speech. Moreover, I did not say he was drunk; I just said I took a look at him to see if he was drunk. I knew he was not.

SECRETARY FOR TRADE AND INDUSTRY (in Cantonese): May I speak again?

PRESIDENT (in Cantonese): In accordance with the Rules of Procedure, in the course of a meeting, the part about elucidation in the Rules of Procedure is also applicable to public officers except certain parts otherwise stated in the Rules of Procedure. Secretary for Trade and Industry, you may elucidate if you think that a certain part of your speech has been misunderstood.

SECRETARY FOR TRADE AND INDUSTRY (in Cantonese): In fact, just now I did not explain in detail why Hong Kong faces such dire straits today, so Miss CHAN Yuen-han has misunderstood me. As I find her response to my speech quite unfair, I would like to elucidate. If I am to explain clearly why Hong Kong encounters such difficulties today, I can go on for a whole double round of the clock. But the reasons behind are indeed not those put forth by Miss CHAN.

PRESIDENT (in Cantonese): Secretary, you can only elucidate the part in your speech which has been misunderstood, but you cannot introduce any new matter. You may exchange your views on the matter with Miss CHAN Yuen-han outside the Chamber.

I now put the question to you and that is: That the motion moved by Miss CHAN Yuen-han, as set out on the Agenda, be passed. Will those in favour please raise their hands?

(Members raised their hands)

PRESIDENT (in Cantonese): Those against please raise their hands.

(Members raised their hands)

Miss CHAN Yuen-han rose to claim a division.

PRESIDENT (in Cantonese): Miss CHAN Yuen-han has claimed a division. The division bell will ring for three minutes.

PRESIDENT (in Cantonese): Will Members please register their presence by pressing the "Present" button and then proceed to vote.

PRESIDENT (in Cantonese): Before I declare voting shall stop, Members may wish to check their votes. If there are no queries, voting shall now stop.

PRESIDENT (in Cantonese): The result will now be displayed.

Functional Constituencies:

Mr LEE Kai-ming, Dr LUI Ming-wah, Mr Ambrose CHEUNG, Mr HUI Cheung-ching, Mr CHAN Kwok-keung, Mr CHAN Wing-chan, Mr WONG Yung-kan and Dr TANG Siu-tong voted for the motion.

Mr Kenneth TING, Mr James TIEN, Mr Bernard CHAN, Mrs Sohpie LEUNG, Mr Howard YOUNG and Mrs Miriam LAU voted against the motion.

Mr Michael HO, Dr Raymond HO, Mr Eric LI, Mr CHEUNG Man-kwong, Dr LEONG Che-hung, Mr SIN Chung-kai and Mr LAW Chi-kwong abstained.

Geographical Constituencies and Election Committee:

Miss Cyd HO, Mr LEE Cheuk-yan, Miss CHAN Yuen-han, Mr LEUNG Yiu-chung, Mr Gary CHENG, Mr Jasper TSANG, Mr LAU Kong-wah, Miss Emily LAU, Mr TAM Yiu-chung, Mr David CHU, Prof NG Ching-fai, Mr MA Fung-kwok, Mr CHAN Kam-lam, Mr Ambrose LAU and Miss CHOY So-yuk voted for the motion.

Miss Christine LOH, Mr HO Sai-chu and Mr YEUNG Yiu-chung voted against the motion.

Mr Albert HO, Mr LEE Wing-tat, Mr Martin LEE, Mr Fred LI, Mr James TO, Dr YEUNG Sum, Mr Andrew CHENG, Mr SZETO Wah and Mr NG Leung-sing abstained.

THE PRESIDENT, Mrs Rita FAN, did not cast any vote.

THE PRESIDENT announced that among Members returned by functional constituencies, 21 were present, eight were in favour of the motion, six against it and seven abstained; while among Members returned by geographical constituencies through direct elections and by the Election Committee, 28 were present, 15 were in favour of the motion, three against it and nine abstained. Since the question was not agreed by a majority vote of each of the two groups of Members present, she therefore declared that the motion was negatived.

NEXT MEETING

PRESIDENT (in Cantonese): In accordance with the Rules of Procedure, I now adjourn the Council until 2.30 pm on Wednesday, 29 July 1998.

Adjourned accordingly at three minutes to Midnight.

　

Annex I

WRITTEN ANSWER

Translation of written answer by the Secretary for Information, Technology and Broadcasting to Mrs Selina CHOW's supplementary question to Question 1

In the past three years (that is, from 1995-97), among the cases contravening the provisions on the dissemination of indecent articles, the maximum fine imposed by the court was $80,000. As for cases of disseminating obscene articles, the maximum fine was $50,000.

　

Annex II

WRITTEN ANSWER

Translation of written answer by the Secretary for Trade and Industry to Mrs Selina CHOW's supplementary question to Question 2

The Credit Guarantee Scheme was set up on 3 June 1998. As at 22 July, a total of 12 applications have been received. Among them, eight have been approved and the average processing time required is three working days. All of them have been completed within the target time.