Legislative Council

(Revised)

LC Paper No. CB(1) 1748/98-99
(These minutes have been seen
by the Administration)

Ref: CB1/PL/TP/1

LegCo Panel on Transport

Minutes of meeting held on Friday, 25 June 1999, at 10:30 am in Conference Room A of the Legislative Council Building

Members present :

Hon Mrs Miriam LAU Kin-yee, JP (Chairman)
Hon LAU Kong-wah (Deputy Chairman)
Ir Dr Hon Raymond HO Chung-tai, JP
Hon LEE Wing-tat
Hon LEE Kai-ming, JP
Hon CHAN Wing-chan
Hon LAU Chin-shek, JP
Hon Andrew CHENG Kar-foo
Hon TAM Yiu-chung, JP
Dr Hon TANG Siu-tong, JP

Member attending :

Hon Ambrose CHEUNG Wing-sum, JP

Members absent :

Hon Edward HO Sing-tin, JP
Hon Albert HO Chun-yan
Hon Mrs Selina CHOW LIANG Shuk-yee, JP
Hon CHAN Kam-lam
Hon Andrew WONG Wang-fat, JP
Hon FUNG Chi-kin

Public officers attending:

For Item IV

Transport Bureau

Mr Nicholas NG Wing-fui,
Secretary for Transport

Mr Kevin HO,
Deputy Secretary for Transport (1)

Mr Davey CHUNG,
Principal Assistant Secretary for Transport (4)

Transport Department

Mr Alan KAM,
Deputy Commissioner for Transport

For Item V

Transport Bureau

Mr Nicholas NG Wing-fui,
Secretary for Transport

Mr Kevin HO,
Deputy Secretary for Transport (1)

Mr Roy TANG,
Principal Assistant Secretary for Transport

For Item VI

Transport Bureau

Mr Nicholas NG Wing-fui,
Secretary for Transport

Mr Kevin HO,
Deputy Secretary for Transport (1)

Mr Davey CHUNG,
Principal Assistant Secretary for Transport (4)

Finance Bureau

Mr Martin GLASS,
Deputy Secretary for the Treasury

Highways Department

Mr C K MAK,
Principal Government Engineer

For Item VII

Transport Bureau

Mr Nicholas NG Wing-fui,
Secretary for Transport

Mr Kevin HO,
Deputy Secretary for Transport (1)

Transport Department

Mr Alan KAM,
Deputy Commissioner for Transport

For Item VIII

Transport Bureau

Mr Alex FONG,
Deputy Secretary for Transport (3)

Transport Department

Mr Alan KAM,
Deputy Commissioner for Transport

Mr Thomas THUMB,
Assistant Commissioner for Transport
Attendance by invitation:
For Item IV

MTR Corporation

Mr Andrew MCCUSKER,
Operations Engineering Design Manager

Mr Daniel LAI,
Head of Information Technology

Kowloon-Canton Railway Corporation

Mr K K LEE, Director,
East Rail

Mr Danny TANG,
General Manager, Information Technology Services

Creative Star Ltd

Mr Brian CHAMBERS,
General Manager

Mr Sammy KAM,
System Design Manager

For Item VI

Kowloon-Canton Railway Corporation

Mr James BLAKE,
Senior Director, Capital Projects

Mr K K LEE,
Director, East Rail

Mr Lawrence LI,
Director, Finance (Acting)
Clerk in attendance :
Ms LEUNG Siu-kum,
Chief Assistant Secretary (1)2
Staff in attendance :
Mr Andy LAU,
Senior Assistant Secretary (1)6
______________________________________________________________________

I Confirmation of minutes and matters arising

(LC Paper No. CB(1) 1563/98-99-Minutes of the meeting held on 23 April 1999
LC Paper No. CB(1) 1560/98-99-List of follow-up actions)

The minutes of the meeting on 23 April 1999 were confirmed.

2. Members noted the list of follow-up actions prepared by the Secretariat.

II Information papers issued since last meeting

(LC Paper No.CB(1)1449/98-99-Information paper provided by MTR Corporation on the outcome of the MTR Corporation's 1999 fare review
LC Paper No.CB(1)1561/98-99(01)-Information paper provided by the Administration on Discovery Bay Tunnel Link
LC Paper No.CB(1)1561/98-99(02)-A submission from a group of residents on ferry services provided by Hong Kong and Yaumati Ferry Co. Ltd.)

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

III Items for discussion at the next meeting
(LC Paper No. CB(1) 1559/98-99 - List of outstanding items for discussion)

4. Members agreed to discuss the following items at the next meeting on 28 July 1999 at 10:45 am:

  1. Transport network in Lantau;

  2. Ferry service of the Hong Kong and Yaumati Ferry Co. Ltd.; and

  3. Planning and design of roads and highways.
5. Members agreed to include the item "Traffic impact assessment of the proposed development of a cruise pier at North Point" in the list of outstanding items for discussion.

IV Progress of Y2K Compliance Exercises for the KCRC, MTRC and Octopus
(LC Paper No. CB(1) 1564/98-99(01) - Information paper provided by the Administration)

MTR Corporation (MTRC)

6. The Principal Assistant Secretary for Transport (4) (PAS(T)4) said that apart from the detailed reports from the KCRC, MTRC and Creative Star, the Administration also submitted to the Panel an update of the progress of Y2K compliance work by the transport operators. Overall the major transport operators would mostly complete the rectification work by end June and were actively preparing or testing their contingency plans to ensure there would not be any Y2K-induced service disruptions or significant delays. For individual computer or embedded systems which could not be rectified on time, they would not have any impact on the major transport services and neither would they have any implications on public safety.

7. The Operations Engineering Design Manager of MTRC briefed members that all operational critical systems in MTRC had been tested to ensure that they were Y2K ready. As further assurance of compliance, extended on-line Y2K testing of train service with dates set beyond year 2000 of operational systems had been in progress. Integrated testing of information technology and business information systems had also been arranged and would be completed later this month. Contingency planning and recovery procedures for operational control systems, information technology and business information systems, property and estates facilities systems were well advanced and would be completed in June 1999. A special Y2K control centre would be set up to co-ordinate internal departments and external partners for all Y2K critical dates. Regarding staff preparation, in-house training had been conducted to ensure that the staff concerned would be well familiarized with the procedures of contingency plans. Rehearsals of contingency plans would also be conducted in September 1999 and these plans would be updated in light of the changing situation in Hong Kong.

8. Dr Raymond HO pointed out that in view of the fact that 9 September 1999 was a high risk date for Y2K problem, arrangements should be made to advance the timing of rehearsals of contingency plans to test for the possible disruption of service on that day. The Operations Engineering Design Manager of MTRC advised that contingency plans and recovery procedures for different systems had already been tested. The rehearsals to be conducted in September 1999 were only an integrated testing for further assurance. He noted the members' suggestion and would re-consider the timing of the rehearsals.

Kowloon-Canton Railway Corporation (KCRC)

9. Dr Raymond HO enquired whether KCRC had conducted a separate risk assessment on the Y2K problem. The Director, East Rail of KCRC advised that the Y2K rectification work in KCRC had been completed and all systems were now Y2K compliant. On-line Y2K testing of train service with dates set beyond year 2000 of operational systems had been arranged and no irregularities were observed. The Corporation had also put in place contingency plans for the critical business processes in railway operation. Testing of contingency plans were being conducted. These plans would be updated in light of feedback from participants. As a further assurance, all train service would be suspended at the midnight on 31 December 1999 for one minute.

10. Noting that the East Rail Automatic Train Protection (ATP) System had been thoroughly tested for Y2K compliance with the aid of an external consultant, Dr TANG Siu-tong enquired whether similar assessment had been conducted in respect of the Light Rail system. The Director, East Rail of KCRC advised that the East Rail and the Light Rail were essentially two different systems and the latter did not require an ATP system for operation. He assured members that both systems had been thoroughly tested to ensure safe operation.

Creative Star

11. Members noted that subsequent to the breakdown of the Octopus ticketing system for Hongkong & Yaumati Ferry Co. Ltd. (HYF) on the first day of operation on 1 April 1999, the company had to revert to manual ticketing system. The Chairman expressed concern on the possible recurrence of the incident and enquired about the progress of the Y2K rectification work undertaken by HYF and the resulting impact on passengers in the event of Y2K-induced service failures. The General Manager of Creative Star Ltd advised that whilst the Octopus system was designed to be Y2K compliant, additional effort had been made to conduct Y2K compliance tests to ensure that all systems were actually free from Y2K-induced problems. However, in view of the numbers of systems involved, the tests had to be carried out in phases. He was confident that the Octopus ticketing system would be functioning properly. On the particular incident of 1 April 1999 quoted by the Chairman, he said that it had nothing to do with the Y2K problem. The system breakdown was due to the misuse of a corrupt file.

12. General Manager of Creative Star Ltd also advised that a contingency plan had been worked out to roll back the date of the system to a pre-selected last-good date. The related testing had been arranged and the result was considered satisfactory. The company would set up an emergency centre to co-ordinate the implementation of the contingency plan on the high risk day of 31 December 1999. Technical staff would be stand-by to look into the problems by means of remote access. Alternative ways of collecting fares would also be put in place to deal with the emergency situation.

13. The Secretary for Transport (S for T) also ensured members that in case the Octopus ticketing system were not functioning properly, contingency measures would be put in place by the respective service providers. One possible option was to waive the fees for travelling.

14. Notwithstanding the undertakings given by different service providers that their systems were already Y2K compliant and that contingency plans would be put in place to deal with emergencies, Mr CHENG Kar-foo asked if Government had devised a mechanism to monitor the progress of the related work conducted by the service providers. In response, the Deputy Secretary for Transport (1) (DS for T(1)) advised that Government was equally concerned about the matter and had maintained a close watch on the subject matter. Apart from receiving regular progress reports from the companies, the Administration also carried out inspections in these companies to validate the progress reports. Individual companies would be required to take follow-up actions when necessary. For example, even though the systems provided by the New World First Bus Company were reported to be Y2K compliant, the Administration had asked the company to carry out separate tests to achieve further assurance. The Deputy Commissioner for Transport added that Transport Department would activate their Emergency Transport Co-ordination Centre to monitor the overall traffic condition, and co-ordinate the implementation of contingency measures by individual operators, if necessary. The area traffic control centres were also equipped with close circuit television to monitor traffic situation.

15. Given the uncertainty of the scale of Y2K problem, Mr LAU Kong-wah called on the concerned parties to draw up comprehensive contingency plans to cope with the possible disruption of service and the resulting chaotic situation. After deliberation, members agreed to follow-up on the subject matter after the summer recess. Meanwhile, the Administration was requested to update members on the testing results and the details of the contingency plans.Admin

16. In response to the Chairman on the enquiry about the impact of Y2K problem on private vehicles, S for T advised that in case motorists had any doubt on whether their vehicles would be affected by Y2K-induced problems, they should approach the manufacturers direct. The Chairman however remarked that the Administration should launch publicity programmes to inform the public of the problem.

V Privatization of MTR Corporation (MTRC)

(LC Paper No.CB(1)1564/98-99(02)-Information paper provided by the Administration)

17. The Chairman drew members' attention to a submission from the Democratic Party which was tabled at the meeting.

18. DS for T (1) briefed members on the proposal to privatize a substantial minority shareholding of the MTRC through an Initial Public Offering. He said that MTRC in its present form of a statutory corporation was not an appropriate vehicle for private ownership. In order to do so, arrangement would be made to incorporate a new entity, called the MTR Corporation Limited (MTRCL), as a public limited company under the Companies Ordinance (Cap. 32). All the assets and liabilities of MTRC would be vested in the new body corporate by way of the Mass Transit Railway Bill. To facilitate listing, the existing share value of $100,000 per share would need to be split up and Government would need to comply with all listing requirements as imposed by the regulatory bodies. To enhance investors' confidence in MTRCL, the Administration considered that it was more appropriate to privatize MTRC on an "as-is" basis with its full business portfolio and undertakings and there would be no unbundling of assets for the purpose of listing.

Fare Regulation

19. Members expressed grave concern over future monitoring of fares upon privatization. DS for T (1) advised that over the years, MTRC conducted voluntary consultation with the LegCo Panel on Transport and the Transport Advisory Committee on fare increases and MTRC's average fare increase had all along been lower than the average increase in Consumer Price Index (A). Furthermore, the highly competitive environment in the public transport service sector also put a cap on prices. He said that competition would continue to provide a major incentive to MTRCL to keeping its fares at an acceptable level and maintaining a high standard of service, in terms of quantity and quality. As such, the Government considered that after privatization, MTRCL should continue to retain fare autonomy since it would enable MTRCL to obtain commercial loans at favourable rates, to invest in the development and maintenance of the railway system and to provide a reasonable return to shareholders.

20. Notwithstanding the above, the Government would consider including suitable provisions in the Mass Transit Railway Bill or the Operating Agreement signed between the Government and MTRCL requiring the latter to take into account the acceptability to the public gauged through voluntary consultation with the LegCo Panel on Transport and the Transport Advisory Committee when setting fares.

21. In respect of the scrutiny of fare increase, Mr LAU Kong-wah expressed disagreement to the Administration that the monitoring role played by the Legislative Council was solely for suppressing the fare.

22. Given that the internal rate of return (IRR) of MTRC only lied between 8% and 9% as opposed to 16% of the Western Harbour Crossing or even higher for other private companies, Mr LEE Wing-tat was worried that soon after privatization, there would be calls for a higher return by investors on their investment on the one hand, and public demand for lower fare on the other.

23. DS for T (1) replied that the return rate for different projects varied depending on the timing of investment. As for the gap between the IRR of MTRC and MTRCL, he said that the projected rate of return for MTRCL would be initially reflected in the share price upon the public offering. However, changes to the asset prices and share value subsequent to privatization would be possible.

24. Mr LEE Wing-tat expressed worries that upon privatization, subsidy from Government in the form of concessionary land premium would cease to exist. As a result, MTRCL would be required to acquire land in the open market, thereby leading to an upsurge in capital cost. Under these circumstances, if members objected the fare increase proposal from MTRCL, members would be blamed for delaying the expansion and improvement of railway networks. On the other hand, Government, being the majority shareholder of the company, might be forced to increase the fares of the railway networks after privatization so as to sustain or maximize the profit of the company and to upkeep the share price.

25. DS for T (1) said that it was the existing policy to grant property development rights at full market premium, where appropriate, on top of stations and depots. Such a policy would continue after privatization. Government would continue to play a major role in future development of railways and was prepared to fund the appropriate capital projects to support future developments of the railway as and when required. On the other hand, privatization would strengthen the market discipline in the running of the railway. MTRCL would be operated in accordance with prudent commercial principles and only viable projects yielding commercial return would be considered. As for pressure on fare increase, he said that the public transport sector was highly competitive. As such, MTRCL could not increase its fare without considering the acceptability of the general public.

26. On future development, DS for T (1) advised that privatization would underline the commercial practice and discipline of the MTRC for taking on new rail extensions on the basis of competition with other modes of public transport as well as reasonable commercial return.

27. Mr LAU Chin-shek pointed out that there was no reason why fare increase applications from MTRCL would be excluded from the vetting of the Government, as opposed to the prevailing practice of bus companies. He also expressed concern that small investors might object to the development of less profitable routes which would otherwise lead to substantial benefits to the general public. He cautioned that he would not accept the proposed arrangement for fare regulations as set out in the paper and called on the Administration to revise the proposal before making formal proposal to the Legislative Council.

28. DS for T (1) stressed that amongst all mass transport carriers, MTR generally charged the highest range of fares. Even if bus fares were adjusted upward, they were still cheaper than the fares of MTR. As such, it was unlikely that MTRCL would adjust its fare without considering the acceptability of the general public. As for future development, he said that the company would be operated in accordance with commercial principles. As such, the financial viability of any project would be carefully examined at the outset before a final decision was made.

29. Mr CHENG Kar-foo emphasized the need to strike a proper balance between the interests of MTRCL and the general public and suggested that formal hearing sessions should be conducted to gauge public views whenever a fare increase was proposed. DS for T (1) noted Mr CHENG's suggestion and re-iterated that the provisions in the Operating Agreement for MTRCL to set fares would include the need for MTRCL to take into account the acceptability to the public gauged through voluntary consultation with the LegCo Panel on Transport and the Transport Advisory Committee. Nevertheless, he undertook to consider further improvement in the public consultation mechanism on fare regulation.

30. In response to Mr CHENG Kar-foo's request, DS for T(1) undertook to provide information on experience of overseas countries on privatization of public transport, in particular, different privatization models and monitoring mechanism of fare determination.Admin

31. Members noted that apart from the Mass Transit Railway Bill, the Administration would also put forward the provisions of the Operating Agreement for members' information.

32. On members' suggestion of including a provision in the Mass Transit Railway Bill for MTRCL to consult the Panel and Transport Advisory Committee before setting fares rather than including such provision in the Operating Agreement, DS for T (1) said that both the Bill and the Operating Agreement were legal documents. However, if there was a strong sentiment for the Administration to include such a provision in the Bill, the Administration was willing to consider the suggestion.

Disclosure of information

33. Given that Government would remain as the majority shareholder of MTRCL and was also the regulatory body for railway operation, Mr LAU Kong-wah expressed concern about the possible conflict of interest in relation to the disclosure of information.

34. DS for T (1) clarified that provisions would be made in the Mass Transit Railway Bill or the Operating Agreement to require the company to provide all regulatory-related information to the Government. Such information would be disclosed to the public if considered necessary. For business sensitive information such as terms of borrowings, MTRCL should also disclose its information in accordance to the requirements for listed companies. The Government would not therefore be in a different position from any other shareholders in this respect.

35. In the absence of details on the proposal for the privatization of MTRC, Mr LEE Kai-ming expressed concern that this would affect the present development plan of MTRC. In response, DS for T (1) advised that Government maintained close liaison with MTRC. As such, the proposed privatization would not affect the development plan of MTRC in one way or another.

Staff

36. Mr LAU Chin-shek was very concerned about the future arrangement for staff upon privatization and asked if consultation with the staff side had been made. DS for T (1) said that the consultation was undertaken by MTRC and he had no details in hand. He, however, added that measures would be put in place to protect the interests of the existing employees of MTRC. In general, the terms of employment and years of services with MTRC would continue to be recognized by MTRCL.

37. Mr LEE Kai-ming pointed out that upon privatization, there would be a substantial change in terms of employment relationship. MTRC was presently a public body wholly-owned by the Government. But in future, the corporation would be changed to a limited company under the Companies Ordinance. Given the fundamental difference, there was a need to seek the consent of the staff side on the change of status in advance.

38. DS for T (1) said that the management of MTRC had discussed the subject matter with the staff side. In order to better protect the interest of existing staff, consideration was being given to including suitable provisions in the Mass Transit Railway Bill so that upon transfer, the terms and conditions of employment would remain unchanged and the years of services with MTRC would be recognized by MTRCL.

39. At members' request, the Administration undertook to ask MTRC to provide information on procedure of staff consultation exercise conducted by MTRC on privatization issue.Admin

Implementation Programme

40. On the detailed implementation programme, S for T advised that the Administration had not decided on the timing for the Initial Public Offering. However, for planning reasons, the 1999 Budget had assumed that the cash flow derived from this exercise would be available in the two financial years 2000-01 and 2001-02. The Administration was now working on the drafting of the Bill and the Operating Agreement in collaboration with MTRC. The Administration would introduce the Bill into the Council as early as possible. Subject to members' deliberation, it was hoped that the Bill could be passed by the Council by the end of 1999 so that the necessary preparatory work for listing could commence. As for the transitional arrangement for existing employees, he said that this was one of the primary concerns of both the Government and MTRC. Whilst preliminary discussion with the staff side had been arranged, concrete proposals had yet to be made in due course. In concluding, he said that the Administration had to recognize that MTRC now provided one of the best examples of running an efficient and profitable railway service in the world. The privatization exercise did not seek to alter the mode of operation of this successful enterprise. The Administration believed that the proposed legislative and regulatory framework would be effective in enabling the Government to monitor the MTR service as in the case of other public transport providers, and would ensure that MTR would continue to have a major role to play in providing the commuting public with safe, efficient and reliable services.

41. On the legislative timetable, Mr LEE Wing-tat pointed out that given that there was no precedence in the case of privatization of Government assets, members would need more than six months to examine the first proposal of this nature in a thorough manner. He commented that the legislative timetable as proposed by the Administration was unrealistic. He pointed out that a number of issues such as the determination mechanism of fare increase, the composition of the Board of Directors and their authority, the role of Government after privatization had yet to be discussed in detail.

42. Dr Raymond HO enquired whether the Administration had ever discussed with the major credit rating agencies on the proposed privatization of MTRC and whether the proposal would have any impact on future financing of the company. DS for T (1) said that the proposal should not have any negative impact on MTRCL in seeking funds in future.

43. As to whether MTRCL would be required to consult the Panel on its future financial plans such as borrowings or placement of new shares , DS for T (1) advised that being a listed company, MTRCL had to follow the rules of the regulatory bodies in conducting any investment or financing plans despite the fact that Government was the majority shareholder of the company. In terms of access to information regarding borrowings or placement of new shares, both Government and other small shareholders should have equal right to ask questions on these matters at shareholders' meetings.

44. Mr TAM Yiu-chung enquired about the composition of the Board of Directors of MTRCL. DS for T (1) replied that provisions would be made in the Bill to empower the Government to appoint additional directors to the Board of MTRCL for monitoring purpose.

45. Noting that the Bill would provide for financial penalties, suspension and revocation of the franchise in case of material breach of franchise terms by the franchisee, as in the case of other public transport franchises, the Chairman queried how this could be achieved, bearing in mind that the Government was the majority shareholders of MTRCL and also had the right to appoint directors to the Board of the company. DS for T (1) said that it was the Administration's intention to have a clear split between the roles of Government being a regulator and an investor at the same time. The relevant provisions were aimed to codify the regulatory powers of the Government. Given the immense implications of these provisions, the Administration would only exercise such power under the provisions as a last resort. The Chairman said that while she was not objecting to this provision, she requested the Administration to take a closer look on the issue to see how this could be achieved.

46. In view of the implication of the proposal, members considered it necessary for the Administration to consult the Panel again with concrete proposal before making formal legislative proposal to the Council. The Chairman added that according to past experience, the Administration would make submissions in the form of a draft bill with a view to tapping members' views before formally making the legislative proposal to the Council. DS for T (1) noted the Chairman's remark and replied that the Administration would take the matter forward, taking into account the legislative timetable and consult the Panel in due course.Admin

VI Financing of Ma On Shan Rail and Kowloon-Canton Railway Extension to Tsim Sha Tsui

47. Members noted that the Administration intended to seek approval of the Finance Committee at its meeting on 2 July 1999 for a commitment of $8.5 billion from the Capital Investment Fund to be injected as equity into the Kowloon-Canton Railway Corporation (KCRC) for undertaking the Ma On Shan to Tai Wai Rail Link (MOS Rail) and the KCR Extension from Hung Hom to Tsim Sha Tsui (TST Extension).

48. At the invitation of the Chairman, the Deputy Secretary for the Treasury briefed members on the salient points of the information paper tabled at the meeting.

(Post meeting note: The paper was subsequently circulated to members vide LC Paper No. CB(1) 1612/98-99 after the meeting).

49. Whilst supporting the proposal of a rail link to serve the Ma On Shan (MOS) areas, Mr LAU Kong-wah expressed dissatisfaction over the proposed alignment as it could not help to resolve the growing transport needs of residents in the areas and it was not cost effective. According to the information he gathered at public forums, residents would prefer not to take the MOS Rail to interchange onto the East Rail. Rather, they would take a direct bus service to the University Station for interchange. He was also dissatisfied that the Administration had not taken heed of members' views expressed at earlier meetings for extending the MOS Rail to urban Kowloon. In view of the circumstance, he urged the Administration to seriously reconsider extending the MOS Rail to the urban areas and to provide further information on the implementation timetable. Otherwise, he would have no choice but to object to the funding proposal of the project. He also queried the possibility of achieving the estimated internal rate of return of 8.4% for the project and requested the Administration to provide a copy of the full report of the KCRC's proposal on the MOS Rail and the TST Extension. Admin

50. In reply, the Senior Director, Capital Projects of KCRC said that in assessing the feasibility of the MOS Rail, the Corporation had conducted a comprehensive transport study and concluded that the railway project would be financially viable. Regarding the alignment of the railway, he said that passengers of MOS Rail could interchange at Tai Wai Station onto the East Rail for onward journeys to urban Kowloon. In order to facilitate passenger interchange between the East Rail and the MOS Rail, cross-platform interchange facilities would be provided at Tai Wai Station. Furthermore, most of the stations were within walking distance from the residential developments. Based on their assessment, time savings up to a maximum of 40 minutes could be achieved for passengers at MOS for journeys to Tsim Sha Tsui.

51. DS for T (1) said that whilst the Administration accepted in principle the need to consider extending the MOS Rail from Tai Wai to urban areas in the long run, they had not yet identified the most appropriate alignment and neither had they conducted the feasibility study of this link. Furthermore, the East Rail had sufficient capacity to meet passenger demand in the next ten years and there was no immediate need for building a rail extension from Tai Wai to urban Kowloon. With the various improvement measures being implemented for East Rail to enhance its carrying capacity, the East Rail would be able to handle the additional passenger loads from the MOS Rail until around 2011. Therefore, a two-stage development approach had been adopted for the MOS Rail, viz completing MOS Rail by 2004 as the first stage, and leaving the extension to urban Kowloon as the second stage to a later date. In this regard, Dr Raymond HO supported the Government's proposal in order to optimize the utilization of resources.

52. S for T added that as the East Rail would be able to handle the additional passenger loads from the MOS Rail until around 2011, it would not be appropriate to commence works extending the MOS Rail to urban areas at this stage as it would lead to wastage of resources and possibly a higher fare for passengers. He pointed out that in the next few years, the Government would be committing around $130 billion to five railway lines. Given the financial implication for extending the MOS Rail to urban Kowloon, it would be unfair to residents of those districts with a more pressing need for railway services if resources were allocated to MOS instead.

53. In response to Mr LAU Kong-wah's remark that MOS would be under-utilized as residents in MOS could also take the East Rail by making an interchange at University Station, DS for T (1) replied that with the growth of population in MOS, it was not appropriate to assume that the bus services bringing passengers from MOS to University Station would be adequate to meet the growing demand. But with MOS Rail, it could generate a carrying capacity of 20,000- 30,000 passengers per peak hour.

54. Mr CHENG Kar-foo pointed out that the Democratic Party would not support the funding proposal for the first stage construction of MOS Rail if the Administration did not undertake to carry out the planning work in respect of the second stage extension to urban Kowloon immediately after the funding approval of the first stage. He also pointed out that the Party was in support of the TST Extension and asked if the funding proposal of the MOS Rail and the TST Extension could be split into two papers for separate consideration by the Finance Committee. He was also concerned about the respective internal rates of return of the two projects.Admin

55. Regarding the proposal to separate TST Extension from MOS Rail, DS for T (1) said that the KCR Extension to Tsim Sha Tsui formed part and parcel of the MOS Rail and the patronage from these two rail lines had all along been combined for traffic assessment purpose. DS for T (1) undertook to provide further information on the respective internal rates of return of the two projects after the meeting. Admin

(Post meeting note : The requisite information was circulated to members vide LC Paper NO. CB(1) 1648/98-99 dated 30 June 1999)

56. Mr LEE Kai-ming indicated his support for extending the MOS rail to urban Kowloon. He expressed worries that the East Rail would not have sufficient capacity to absorb the demand generated from the MOS Rail, not to mention the extra demand from the Sheung Shui to Lok Ma Chau Spur Line (the Spur Line). He also remarked that the Administration could speed up the planning work in respect of the proposal to extend the MOS rail to urban Kowloon as was the case in the proposed construction of the Spur Line. It would save the need for using more than ten years for planning an extension project. He also commented that putting all the construction work within 2001-2003 was not a good arrangement.

57. DS for T (1) said that in general, at the time when the majority of passengers of the Spur Line was making a journey to the mainland, passengers of the MOS Rail would be travelling along the southbound network for journeys to urban Kowloon. As such, these two additional lines should not overload the East Rail to an unacceptable extent.

58. Regarding the time required for planning a new railway project, DS for T (1) said that it took about ten years to complete a railway project. The process included the preliminary design of railway, the identification of the most suitable alignment, the station design, the traffic impact and environmental impact studies, and the preparation of technical drawings. As to why the Spur Line could be commenced within a short period of time, he clarified that the proposal was part of West Rail (Phase II) and many preliminary design had already been conducted in the context of the West Rail study.

59. S for T added that upon receipt of the findings and recommendations of the second Railway Development Study, the Administration would need to examine these recommended alignments and options in detail, and if necessary evaluate individual projects in greater detail, before taking a decision on the priority and timetable of the next batch of railway projects. The proposal to include an extension to the urban areas as part of the MOS Rail scheme would delay the overall programme of the MOS Rail. With the constraint in other land-based transport services, it would be more desirable to have the MOS Rail (first stage) in place to meet the need of the projected demand.

60. Mr LAU Kong-wah pointed out that the projected population of 300,000 - 400,000 might be over-estimated. He asked about the implication of deferring the first stage of MOS Rail, pending completion of the detailed design of second stage so that works for both stages could be commenced at the same time.

61. DS for T (1) said that apart from MOS areas, residents on the eastern side of Shing Mun River also formed part of the catchment areas of the rail. The Chairman, however, remarked that residents on the eastern side of Shing Mun River might not be willing to travel on board the MOS Rail as they needed to take interchange at Tai Wai Station. Furthermore, other alternative modes of transport were also available to them.

62. In concluding, the Chairman reminded the Administration to take note of members' views and to provide the requisite information before the proposal was put to the Finance Committee for consideration at its meeting on 2 July 1999.

VII Policy issues on road planning
(LC Paper No. CB(1) 1564/98-99(03) - Information paper provided by the Administration)

63. In view of time constraint, the Chairman suggested and members agreed to defer this item to the next meeting and to combine the discussion with the subject on design of roads and highways.

VIII Proposed Amendments to Road Traffic (Traffic Control) Regulations
(LC Paper No. CB(1) 1564/98-99(04) - Information paper provided by the Administration)

64. Members raised no objection to the amendments to the Road Traffic (Traffic Control) Regulations as proposed by the Administration. The Chairman then enquired about the legislative timetable.

65. DS for T (3) said that subject to members' views, the Administration would proceed with the necessary legal drafting with a view to introducing the legislative proposal at the beginning of the next session.

66. The Chairman pointed out that the taxi trade had been informed in January this year that the proposed relaxation of kerbside activities could be implemented in three months' time. She therefore urged the Administration to advance the proposed legislative timetable. DS for T (3) replied that he would liaise with the Law Draftsman to see if he could accord priority in the present case. The Chairman further suggested that the Administration could gazette the proposal for implementation during the summer break of the Council, pending negative vetting of the Council at a later stage. DS for T (3) noted the Chairman's remark and undertook to examine ways to speed up the related work.

IX Any other business

(LC Paper No.CB(1)1564/98-99(05)-Draft Report of the Panel on Transport for submission to the Legislative Council)

67. Members endorsed the draft Report of the Panel on Transport for submission to the Legislative Council

68. There being no other business, the meeting ended at 1:05 pm.

Legislative Council Secretariat
28 July 1999