LC Paper No. FC189/98-99
(These minutes have been
seen by the Administration)

Ref : CB1/F/1/2

Finance Committee of the Legislative Council

Minutes of the 19th meeting
held at the Legislative Council Chamber
on Friday, 11 June 1999, at 2:30 pm

Members present :

Hon CHAN Kam-lam (Deputy Chairman)
Hon Kenneth TING Woo-shou, JP
Hon James TIEN Pei-chun, JP
Hon David CHU Yu-lin
Hon Cyd HO Sau-lan
Hon Edward HO Sing-tin, JP
Hon Albert HO Chun-yan
Hon Michael HO Mun-ka
Dr Hon Raymond HO Chung-tai, JP
Hon LEE Wing-tat
Hon Martin LEE Chu-ming, SC, JP
Hon Eric LI Ka-cheung, JP
Hon LEE Kai-ming, JP
Hon Fred LI Wah-ming
Dr Hon LUI Ming-wah, JP
Hon NG Leung-sing
Prof Hon NG Ching-fai
Hon Mrs Selina CHOW LIANG Shuk-yee, JP
Hon MA Fung-kwok
Hon James TO Kun-sun
Hon CHEUNG Man-kwong
Hon HUI Cheung-ching
Hon Christine LOH
Hon CHAN Kwok-keung
Hon CHAN Yuen-han
Hon CHAN Wing-chan
Dr Hon LEONG Che-hung, JP
Hon Gary CHENG Kai-nam
Hon SIN Chung-kai
Hon Andrew WONG Wang-fat, JP
Dr Hon Philip WONG Yu-hong
Hon WONG Yung-kan
Hon Jasper TSANG Yok-sing, JP
Hon Howard YOUNG, JP
Dr Hon YEUNG Sum
Hon YEUNG Yiu-chung
Hon LAU Kong-wah
Hon Mrs Miriam LAU Kin-yee, JP
Hon Ambrose LAU Hon-chuen, JP
Hon CHOY So-yuk
Hon Andrew CHENG Kar-foo
Hon Timothy FOK Tsun-ting, JP
Hon LAW Chi-kwong, JP
Hon TAM Yiu-chung, JP
Hon FUNG Chi-kin
Dr Hon TANG Siu-tong, JP

Members absent :

Hon Ronald ARCULLI, JP (Chairman)
Hon HO Sai-chu, JP
Hon LEE Cheuk-yan
Dr Hon David LI Kwok-po, JP
Hon Margaret NG
Hon Ambrose CHEUNG Wing-sum, JP
Hon Bernard CHAN
Hon Mrs Sophie LEUNG LAU Yau-fun, JP
Hon LEUNG Yiu-chung
Hon LAU Chin-shek, JP
Hon LAU Wong-fat, GBS, JP
Hon Emily LAU Wai-hing, JP

Public officers attending :

Miss Denise YUE, JP
Secretary for the Treasury

Mrs Carrie LAM, JP
Deputy Secretary for the Treasury

Principal Executive Officer (General), Finance Bureau

Principal Assistant Secretary for Works

Deputy Director (Geotechnical), Civil Engineering Department

Assistant Director (Geotechnical)/Development, Civil Engineering Department

Principal Environmental Protection Officer of Environmental Protection Department

Mr Esmond LEE
Principal Assistant Secretary for Planning, Environment and Lands

Assistant Director of Housing

Principal Assistant Secretary for Economic Services

Mr Michael LEUNG
Assistant Director of Electrical and Mechanical Services

Project Manager, Electrical and Mechanical Services Department

Deputy Director of Marine

Mrs Alice CHEUNG
Principal Assistant Secretary for the Civil Service

Deputy Director of Urban Services

Assistant Director of Urban Services

Secretary, Urban Services

Chief Executive Officer of Urban Services Department

Clerk in attendance :

Ms Pauline NG
Assistant Secretary General 1

Staff in attendance :

Miss Polly YEUNG
Chief Assistant Secretary (1)3

Ms Sarah YUEN
Senior Assistant Secretary (1)4

As Mr Ronald ARCULLI, Chairman of the Finance Committee (FC) was not in Hong Kong, Mr CHAN Kam-lam, Deputy Chairman, chaired this meeting.

Item No. 1 - FCR(1999-2000)16


2. The Committee approved the proposal.

Item No. 2 - FCR(1999-2000)17


3. The Committee approved the proposal.

Item No. 3 - FCR(1999-2000)18

‥ Subhead 700 General other non-recurrent
Monitoring of two new uncontaminated mud disposal sites at the seafloors south of Tsing Yi and north of Lantau

4. Noting that there had been funding requests in the past few years in connection with mud disposal sites, Mr Howard YOUNG sought further clarification on the available capacity of existing sites. In reply, the Deputy Director (Geotechnical), Civil Engineering Department (DD(G)) pointed out that the present proposal pertained to the disposal of uncontaminated mud, as opposed to the disposal of contaminated mud which required capping. He advised that the two existing sites south of Cheung Chau and east of Ninepins, which catered for the disposal of uncontaminated mud from all public works projects, had a remaining capacity of only 20 million cubic metres while according to the forecast of the Civil Engineering Department (CED), the yearly uncontaminated mud disposal requirement would be above 30 million cubic metres in the next five years. There was thus an urgent need for new sites.

5. On whether the disposal of uncontaminated mud at the two new sites south of Tsing Yi and north of Lantau would give rise to the need to pay compensation to affected fishermen, DD(G) confirmed that the two sites were not situated in fisheries zones but were on the seaway. The need for compensation would not therefore arise. He further advised that both the Environmental Impact Assessment studies and the CED's full scale disposal trial conducted at the two sites had concluded that there should be no adverse impact on the marine ecology and fisheries in the region. He pointed out upon FC's approval of the proposed commitment, a monitoring scheme would be put in place whereby suitable preventive measures could be implemented, if found necessary, to avoid any adverse impact which might eventually lead to compensation.

6. The Committee approved the proposal.

Item No. 4 - FCR(1999-2000)19
‥ Subhead 221 Clearance of Government land - ex-gratia allowances
Ex-gratia allowances for slipways arising from clearances

7. Mr TAM Yiu-chung stated that he supported in principle the grant of ex-gratia allowances (EGAs) in respect of slipways affected by clearances. However, noting the submission from 14 affected shipyards objecting, inter alia, to the ratio of 1:1 in respect of the length of the portion of the slipways above and below the low water mark which would form the basis for calculating EGAs, Mr TAM questioned the appropriateness of adopting the 1:1 ratio and pending consultation with the 14 affected shipyards on the proposal, he suggested that the Administration should withdraw the proposal and re-submit it as early as practicable, preferably at the next meeting.

8. Mrs Miriam LAU was of the view that it was inequitable to apply the ratio of 1:1 in respect of all affected slipways. Instead, the length of the underwater portion as indicated in the plan of the slipway, if one was available, or the actual measured length, should be adopted in determining the ratio. She also queried the absence of consultation with the industry on the proposed 1:1 ratio.

9. In response, the Principal Assistant Secretary for Planning, Environment and Lands (PAS/PEL) said that the Marine Department (MD) had been consulted on the proposed ratio of 1:1. MD had advised that the ratio between the length of the above-water and underwater portions of a slipway during a low tide situation was generally about 1:1 and that this ratio was a reasonable basis for calculating the relevant EGAs. Regarding the ratio of 1:1.7 as highlighted in the submission, PAS/PEL pointed out that this was the ratio in respect of one slipway but according to the plans previously submitted to the Building Authority, the above-water portions in respect of three of the affected slipways were greater than their respective underwater portions. The Administration therefore considered that applying the 1:1 ratio across the board was fair and simple to administer as underwater measurement for individual slipways would not be needed. PAS/PEL said that the Administration had not specifically consulted the 14 affected shipyards on the proposed ratio of 1:1 as the Administration was considering the overall policy which should apply to all such undertakings. He added that as far as he knew, the 14 affected shipyards had sent a letter to all Hon Members on 9 June 1999 indicating their support for the Government's proposal but had subsequently changed their position.

10. On the rate of EGAs, PAS/PEL confirmed that since the rate was first introduced in 1982, it had been adjusted annually to the current rate at $740 per square metre. The Deputy Secretary for the Treasury (DS/Tsy) supplemented that when FC considered the payment of EGAs in respect of covered areas, open working areas and slipways in 1982, the relatively high construction cost of slipways had been taken into account and although slipways were open working areas, the rate of EGAs was set at half the rate for covered working areas whereas the rate of allowance payable for other open areas was only one-sixth the rate for covered working areas.

11. Mrs Miriam LAU considered that paragraph 3 of the discussion paper was misleading as the basis for calculating EGAs was only one of the objections raised by the shipyard operators affected by the clearance in North Tsing Yi. She reiterated that a number of key issues remained unresolved. These included the operators' request for site formation of the relocation site and a lower level of premium. In response, PAS/PEL pointed out that the Administration was prepared to make further concessions such as agreeing to include the underwater portion of slipways in calculating EGAs and accepting the payment of premium by instalments.

12. Mrs Miriam LAU urged the Administration to give serious consideration to the difficulties faced by the affected shipyards. In this connection, Mrs Selina CHOW considered that the Administration should withdraw the present proposal and undertake further consultation with the industry without delay.

13. Miss CHAN Yuen-han referred to the clearance of shipyards to be carried out in North Tsing Yi and pointed out that the Administration had not taken any effective action. She confirmed in reply to the Chairman that she supported some members' suggestion to defer decision on the present proposal.

14. Mr LEE Wing-tat objected to deferring decision on the present proposal. He stressed that the Kwai Tsing Provisional District Board had, for the past ten years, urged the Administration to clear the shipyards in question. Whilst he had no objection to the payment of EGAs by the Government to the affected shipyards, he pointed out that the site in question was only granted on short-term tenancy and that the Government had made exceptional arrangement to grant another site for a 15-year tenancy. He urged the Administration to implement without delay the decision of the Executive Council made in January 1997 to clear the shipyards in North Tsing Yi. He was gravely concerned about the Administration's failure to carry out the clearance exercise promptly.

15. Mr SIN Chung-kai shared Mr LEE's concerns and reiterated the strong demand of the Kwai Tsing Provisional District Board and residents in North Tsing Yi for early clearance for the shipyards in question.

16. In this connection, DS/Tsy recapitulated that the present proposal was not to seek FC's approval in respect of the clearance of shipyards in North Tsing Yi, but on the proposed basis for calculating EGAs which, if implemented, would hopefully remove one of the impediments to the clearance exercise. In reply to the Chairman, DS/Tsy confirmed that since members had expressed divergent views on whether the item should be withdrawn, the Administration would not withdraw the item as suggested by some members.

17. Mrs Miriam LAU stated that she had to vote against the proposal as she considered the proposed 1:1 ratio unfair, not because she disagreed with the need to take account of the underwater portion of slipways in calculating EGAs.

18. The Chairman put the item to vote. 13 members voted for the proposal, 20 members voted against and 1 member abstained:

Miss Cyd HO Sau-lan Mr Michael HO Mun-ka
Dr Raymond HO Chung-tai Mr LEE Wing-tat
Mr Martin LEE Chu-ming Mr Fred LI Wah-ming
Mr CHEUNG Man-kwong Mr SIN Chung-kai
Mr Andrew WONG Wang-fat Dr YEUNG Sum
Mr Andrew CHENG Kar-foo Mr SZETO Wah
Mr LAW Chi-kwong
(13 members)

Mr Kenneth TING Woo-shou Mr James TIEN Pei-chun
Mr Edward HO Sing-tin Dr LUI Ming-wah
Mrs Selina CHOW LIANG Shuk-yee Mr HUI Cheung-ching
Mr CHAN Kwok-keung Miss CHAN Yuen-han
Mr CHAN Wing-chan Mr Gary CHENG Kai-nam
Mr WONG Yung-kan Mr Jasper TSANG Yok-sing
Mr Howard YOUNG Mr YEUNG Yiu-chung
Mr LAU Kong-wah Mrs Miriam LAU Kin-yee
Mr Ambrose LAU Hon-chuen Miss CHOY So-yuk
Mr TAM Yiu-chung Dr TANG Siu-tong
(20 members)

Mr LEE Kai-ming
(1 member)

19. The Committee rejected the proposal.

20. In response to the request of Mrs Miriam LAU, Mr TAM Yiu-chung and Miss CHOY So-yuk, the Chairman urged the Administration to re-submit its proposal as soon as practicable. Admin.

Item No. 5 - FCR(1999-2000)20

Marine Department
‥ New Subhead "Replacement of Vessel Traffic Services System"

21. On the capacity of the new vessel traffic services (VTS) system, Miss Cyd HO asked whether it would be able to cope with the additional traffic if a second cruise pier as recommended by the Hong Kong Tourist Association was to be built in Hong Kong. In reply, the Deputy Director of Marine (DD of M) advised that according to a study conducted in 1995, it was forecast that by year 2011, a total of some 399 206 vessels including ocean going, river trade vessels and ferries etc. would enter Hong Kong and the number of entries and departures per day would be in the order of some 2 200. The existing VTS system would be inadequate to cope with this demand as it could only monitor 200 moving objects and 200 buoys. The new VTS system could monitor 2 000 moving objects and its capacity could be expanded to monitor 4 000 moving objects.

22. In response to Mrs Miriam LAU's queries on the recurrent cost of the new VTS system, the Assistant Director of Electrical and Mechanical Services (AD/EMS) clarified that the cost for "contract services" referred to the cost involved in contracting out the technical services to the Cable & Wireless (Hong Kong) Ltd. The "maintenance" costs referred to the expenditure for maintenance of building services, power generators and other support facilities at remote sites provided by the Electrical and Mechanical Services Trading Fund (EMSTF). He undertook to provide supplementary information on the subject, in particular the services referred to in paragraph 18 of the paper. Regarding the substantial increase in the payment of the maintenance contract for the VTS Information Sub-system, AD/EMS advised that the increase was due to the large number of computer systems required in the new VTS system. Admin.

23. As regards the impact of the new VTS system on fees and charges, Mrs Miriam LAU expressed grave concerns about the Administration's indication that upon full implementation of the new system in 2003-04, an increase of about 4% for the port and light dues and passenger embarkation fees would be entailed. She reiterated that she had lobbied very hard to lower the passenger embarkation fees from $25 to $18 and would object to raising the fees again.

24. On the Administration's plan to recover the full cost of the new VTS system over its 15-year span in accordance with the "user pays" principle, Mr James TIEN commented that the Administration might be too optimistic in predicting a growth of 7.5% in ocean-going vessel traffic in the next five years and was concerned that fewer users would mean each user would have to pay higher fees.

25. In response, DD of M pointed out that an annual expenditure of some $17 million would be incurred during the 15-year serviceable lifespan of the new VTS system. The percentage increase was an indicative figure only and the Administration would consult the industry before implementing any fee increase. In this connection, DS/Tsy confirmed that the capital cost outlay of the new VTS system was based on its depreciation on a linear basis over the 15-year period.

26. Mr HUI Cheung-ching was concerned that the possible increase of 4% in port and light dues would deter ships from using the port of Hong Kong, and might not be compatible in spirit with the Financial Secretary's earlier announcement to lower the merchant shipping registration and related fees.

27. In response, DD of M clarified that the registration and related fees in question would only apply to ships flying the Hong Kong flag while the port and light dues were applicable to all vessels entering Hong Kong waters. He nevertheless assured members that Hong Kong's current level of port and light dues was among the lowest in the world. DD of M reiterated in reply to Mr HUI that it would not be possible to quantify the 4% increase in monetary value as the figure was indicative only.

28. In this connection, the Secretary for the Treasury (S for Tsy) referred to the Financial Secretary's remark in the 1999-2000 Budget Speech that the Administration would consult the relevant parties on the feasibility of introducing a departure tax which could address the present inequity of the passenger embarkation fees which were only payable by passengers departing by sea for the Mainland and Macau but not payable by those departing on ocean-going vessels.

29. Mrs Miriam LAU considered that as the full cost of the existing VTS system would be recovered and reinvested, the additional costs, both capital and recurrent, incurred by the replacement/upgrading project should not be fully borne by the users. She reiterated her request that the Administration should try its best not to increase fees and charges despite implementation of the improved system. Admin.

30. Noting that management of the present replacement/upgrading project would be undertaken by the EMSTF, Mr Edward HO questioned why the project was not open for tender as he understood that the EMSTF would cease to be the sole provider of electrical and mechanical services for Government projects with effect from August 1999.

31. In response, DD of M explained that the existing VTS system had been planned by the Electrical and Mechanical Services Department in 1984 and there was no other company in Hong Kong with comparable expertise and experience in managing the system although the Hong Kong Telecom had some maintenance experience. DD of M further pointed out that MD did not have the necessary expertise to prepare tender specifications and the project management fee charged by EMSTF were considered reasonable. DD of M and DS/Tsy further confirmed that MD would untie from the use of EMSTF services from August 2001 onwards.

32. In this connection, S for Tsy supplemented that EMSTF would cease to be the sole provider by phases over a three-year period starting from August 1999. Individual Government departments could either use the service of EMSTF, or invite tender for its projects according to the department's needs. EMSTF could also bid for Government tenders along with other contractors.

33. Regarding Mr Edward HO's concern about the incentive, if any, for Government departments to discontinue the use of EMSTF's services and conduct open tendering, S for Tsy said that individual Controlling Officers would be given greater discretion to procure the required service at a lower cost through competition from different providers. The savings thus achieved might be used to meet certain targets under the Enhanced Productivity Programme.

34. In response to members' concerns about the future viability and competitiveness of EMSTF in view of changes in the overall economic conditions and within the civil service, S for Tsy said that the proposal to set up the EMSTF and related arrangements had been examined at the relevant Legislative Council Panels. Mr HO nevertheless suggested and members agreed that the future operation of EMSTF should be further examined at the relevant Panel(s). xx

35. As regards Dr Raymond HO's enquiry about the feasibility of selling the existing VTS system to other less busy ports where its capacity was adequate, DD of M pointed out that the existing system would not be replaced in its entirety. The radars, for example, would not be replaced. The bulk of the replaced equipment would be computers which had been in use for over ten years and doubtfully had any resale value. DD of M added that surplus equipment had to be disposed of in accordance with the relevant procedures issued by the Government Supplies Department.

36. The Committee approved the proposal.

Item No. 6 - FCR(1999-2000)21

‥ Subhead 015 Public and judicial service pension benefits and compensation

37. Noting that 97 staff affected by the closure of Cheung Sha Wan Abattoir (CSWA) who preferred to continue employment in the civil service could not be successfully redeployed, Mr CHAN Wing-chan enquired about the feasibility of redeploying these staff to work in the future Sheung Shui Slaughterhouse (SSSH).

38. In response, the Secretary, Urban Services (Secy, US) pointed out that the SSSH was a commercial organisation and had its own staff employment plans. He said that the Urban Services Department (USD) had requested the operator of the SSSH to consider employing the butchery staff as far as possible. He understood that the operator had interviewed some of the staff but a decision on employing any of them in the SSSH had not been made. Secy, US also confirmed in reply to Mr CHAN that upon the closure of the CSWA, there would not be any abattoir under the operation of the Provisional Urban Council (PUC).

39. In reply to Mr Fred LI, Secy, US advised that the 250 non-abattoir grades staff were not eligible for retirement on abolition of office terms upon the closure of the CSWA because their ranks would still exist in USD and they would be deployed to fill vacancies in their ranks within the department. As for the 13 Workmen I (Abattoir), the department was not able to absorb them because there was already a surplus of Workmen I in the department as a result of a staffing review of the department's Indoor Games Halls. Other departments had been approached but to no avail.

40. Mr CHEUNG Man-kwong was concerned about the additional expenditure incurred by the continued operation of the CSWA in case of malfunctioning of the waste water treatment facilities at SSSH. He queried that the Architectural Services Department should work to ensure that all facilities were ready upon commissioning of the SSSH in October 1999, instead of having to retain the staff of CSWA for three more months until 31 December 1999 to cater for contingencies.

41. In response, the Deputy Director of Urban Services (DD of US) said that the 1% to 2% risk of the failure of the waste water treatment facilities at SSSH was not a basic design fault, but a feature of the effluent system. As the system in question was a biological system, its proper functioning depended on the successful growth of the micro-organisms to treat the effluent from the SSSH. Hence, if the conditions were not 100% perfect, the micro-organisms would not breed and the system would be affected. To ensure a stable and hygienic fresh meat supply, the PUC had therefore agreed to the Government's request to continue operation of CSWA up to the end of December 1999 if necessary.

42. In this connection, DS/Tsy confirmed that should any additional commitment be required as a result of the continued operation of CSWA, the Administration had agreed that the PUC could reflect such costs in the context of its estimated financial position due to rates concessions. For the avoidance of doubt, DS/Tsy pointed out that the present proposal was not about the commissioning of SSSH, but to seek members' approval to grant an ex-gratia award to the affected abattoir grades staff upon compulsory retirement. Members noted that on top of the lump-sum payment of six months' final salary, the staff would also be paid an additional two months' salary for every ten years of service and a pro-rata amount for shorter periods, on par with the redundancy package available to affected abattoir staff upon closure of the Kennedy Town Abattoir under the Phase I privatization programme. She added that information on the contingency arrangements had been included in the discussion paper for the purpose of informing members about the possible service termination and retirement dates of the affected staff which might not necessarily tie in with the closure of CSWA.

43. In reply to Mr Fred LI's enquiry about the additional ex-gratia award payable in case CSWA had to continue operation for three months after 2 October 1999, Secy, US advised that the amount would increase from an estimated $40.09 million to about $40.27 million. DS/Tsy further confirmed that the PUC had budgeted for the increase, as well as the possible additional costs associated with the CSWA's continued operation. Arrangements would be made to seek the necessary funding from FC in case the PUC could not meet such additional commitment from its own resources.

44. The Committee approved the proposal.

45. The Committee was adjourned at 4:05 pm.

Legislative Council Secretariat
August 1999