1 HONG KONG LEGISLATIVE COUNCIL -- 20 May 1992 1 HONG KONG LEGISLATIVE COUNCIL -- 20 May 1992 HONG KONG LEGISLATIVE COUNCIL -- 20 May 1992 1 HONG KONG LEGISLATIVE COUNCIL -- 20 May 1992 1
OFFICIAL RECORD OF PROCEEDINGS
Wednesday, 20 May 1992
The Council met at half-past Two o'clock
PRESENT
THE DEPUTY PRESIDENT
THE HONOURABLE JOHN JOSEPH SWAINE, C.B.E., Q.C., J.P.
THE CHIEF SECRETARY
THE HONOURABLE SIR DAVID ROBERT FORD, K.B.E., L.V.O., J.P.
THE FINANCIAL SECRETARY
THE HONOURABLE NATHANIEL WILLIAM HAMISH MACLEOD, C.B.E., J.P.
THE ATTORNEY GENERAL
THE HONOURABLE JEREMY FELL MATHEWS, C.M.G., J.P. THE HONOURABLE ALLEN LEE PENG-FEI, C.B.E., J.P. THE HONOURABLE MRS SELINA CHOW LIANG SHUK-YEE, O.B.E., J.P. THE HONOURABLE MRS RITA FAN HSU LAI-TAI, O.B.E., J.P. THE HONOURABLE HUI YIN-FAT, O.B.E., J.P.
THE HONOURABLE DAVID LI KWOK-PO, O.B.E., J.P.
THE HONOURABLE NGAI SHIU-KIT, O.B.E., J.P. THE HONOURABLE PANG CHUN-HOI, M.B.E.
THE HONOURABLE SZETO WAH
THE HONOURABLE TAM YIU-CHUNG
THE HONOURABLE ANDREW WONG WANG-FAT, O.B.E., J.P. THE HONOURABLE LAU WONG-FAT, O.B.E., J.P.
THE HONOURABLE EDWARD HO SING-TIN, O.B.E., J.P. THE HONOURABLE RONALD JOSEPH ARCULLI, J.P.
THE HONOURABLE MARTIN GILBERT BARROW, O.B.E., J.P. THE HONOURABLE MRS PEGGY LAM, M.B.E., J.P.
THE HONOURABLE MRS MIRIAM LAU KIN-YEE, J.P. THE HONOURABLE LAU WAH-SUM, O.B.E., J.P.
THE HONOURABLE JAMES DAVID McGREGOR, O.B.E., I.S.O., J.P. THE HONOURABLE MRS ELSIE TU, C.B.E.
THE HONOURABLE PETER WONG HONG-YUEN, J.P.
THE HONOURABLE ALBERT CHAN WAI-YIP
PROF THE HONOURABLE EDWARD CHEN KWAN-YIU
THE HONOURABLE VINCENT CHENG HOI-CHUEN
THE HONOURABLE MOSES CHENG MO-CHI
THE HONOURABLE MARVIN CHEUNG KIN-TUNG, J.P. THE HONOURABLE CHEUNG MAN-KWONG
THE HONOURABLE CHIM PUI-CHUNG
REV THE HONOURABLE FUNG CHI-WOOD
THE HONOURABLE FREDERICK FUNG KIN-KEE THE HONOURABLE TIMOTHY HA WING-HO, M.B.E., J.P. DR THE HONOURABLE HUANG CHEN-YA
THE HONOURABLE SIMON IP SIK-ON, J.P.
DR THE HONOURABLE LAM KUI-CHUN
DR THE HONOURABLE CONRAD LAM KUI-SHING THE HONOURABLE LAU CHIN-SHEK
THE HONOURABLE LEE WING-TAT
THE HONOURABLE GILBERT LEUNG KAM-HO
THE HONOURABLE ERIC LI KA-CHEUNG, J.P. THE HONOURABLE FRED LI WAH-MING
PROF THE HONOURABLE FELICE LIEH MAK, O.B.E., J.P. THE HONOURALBE MAN SAI-CHEONG
THE HONOURABLE STEVEN POON KWOK-LIM
THE HONOURABLE HENRY TANG YING-YEN, J.P. THE HONOURABLE TIK CHI-YUEN
THE HONOURABLE JAMES TO KUN-SUN
DR THE HONOURABLE SAMUEL WONG PING-WAI, M.B.E., J.P. DR THE HONOURABLE PHILIP WONG YU-HONG
THE HONOURABLE HOWARD YOUNG
THE HONOURABLE ZACHARY WONG WAI-YIN
ABSENT
THE HONOURABLE STEPHEN CHEONG KAM-CHUEN, C.B.E., J.P. THE HONOURABLE MARTIN LEE CHU-MING, Q.C., J.P. DR THE HONOURABLE LEONG CHE-HUNG
THE HONOURABLE MICHAEL HO MUN-KA
THE HONOURABLE MISS EMILY LAU WAI-HING
THE HONOURABLE NG MING-YUM
DR THE HONOURABLE YEUNG SUM
IN ATTENDANCE
MR DAVID ALAN CHALLONER NENDICK, C.B.E., J.P. SECRETARY FOR MONETARY AFFAIRS
MR JOHN CHAN CHO-CHAK, L.V.O., O.B.E., J.P. SECRETARY FOR EDUCATION AND MANPOWER
MR CHAU TAK-HAY, J.P.
SECRETARY FOR TRADE AND INDUSTRY
MR RONALD JAMES BLAKE
SECRETARY FOR WORKS
MR MICHAEL SZE CHO-CHEUNG, I.S.O., J.P. SECRETARY FOR CONSTITUTIONAL AFFAIRS
MR ANTHONY GORDON EASON, J.P.
SECRETARY FOR PLANNING, ENVIRONMENT AND LANDS
DR LEE SHIU-HUNG, I.S.O., J.P.
SECRETARY FOR HEALTH AND WELFARE
MR IAN ROBERT STRACHAN, J.P.
SECRETARY FOR SECURITY
THE CLERK TO THE LEGISLATIVE COUNCIL MR LAW KAM-SANG
Papers
The following papers were laid on the table pursuant to Standing Order 14(2): Subject
Subsidiary Legislation L.N. No. Subsidiary Legislation L.N. No.
Import and Export (Strategic Commodities) Import and Export (Strategic Commodities)
(Amendment) Regulation 1992...................................... 148/92
Public Order Curfew (Variation) (No. 2)
Order
1992................................................................. 152/92 1992................................................................. 152/92
Smoking (Public Health) (Notices) (Amendment) Smoking (Public Health) (Notices) (Amendment)
Order
1992................................................................. 153/92 1992................................................................. 153/92
Cremation and Gardens of Remembrance (Regional
Council) (Amendment) Bylaw 1992............................... 154/92 Council) (Amendment) Bylaw 1992............................... 154/92
Exhumation (Fees) (Regional Council) Bylaw........................ Exhumation (Fees) (Regional Council) Bylaw........................ ....................... 155/92
Public Cemeteries (Regional Council)
(Amendment) Bylaw 1992............................................ 156/92
Waste Disposal (Chemical Waste) (General)
Regulation (L.N. 20 of 1992) (Application of
Parts II, VII and VIII) Notice 1992............................... Parts II, VII and VIII) Notice 1992............................... 157/92
Specification of Public Offices............................................. 158/92
Sessional Paper 1991-92
No. 76 -- No. 76 -- Revisions of the 1991-92 Estimates approved Revisions of the 1991-92 Estimates approved
by the Urban Council during the fourth quarter of by the Urban Council during the fourth quarter of
the 1991-92 Financial Year
Oral answers to questions
Water catchment areas
1. MR HOWARD YOUNG asked: In view of the stable water supply to Hong Kong from C 1. MR HOWARD YOUNG asked: In view of the stable water supply to Hong Kong from China, will the Government inform this Council whether it will review the policy on water catchment areas and whether it will lift the existing restrictions on developments within the water catchment areas?
SECRETARY FOR WORKS: Mr Deputy President, it is the Government's policy to maintain the existing water catchment areas for the territory as they provide the gathering grounds for an important and valuable source of our water supply. One-third of our supply is from the natural yield from these areas. It would be unwise to rely solely on the supply from China, which is extracted from a single river source and is provided through a delivery system over a long distance. Furthermore any loss of water from our gathering grounds in Hong Kong would have to be made good by buying more water
from China.
Whilst restrictions on catchment areas must be imposed so as to ensure a high Whilst restrictions on catchment areas must be imposed so as to ensure a high quality of water from the catchment areas, a flexible approach is nevertheless adopted so as to maximize the utilization of land territory-wide. Let me illustrate how we control the use; such controls will of course vary depending on circumstances.
Generally, any existing use of catchment areas is largely maintained. The restriction is more strict on crown land than on leased land. More stringent control is imposed if a proposed development is nearer to the point of water collection or a reservoir. Lesser restrictions apply to community-wide development, such as recreational facilities. Where development is permitted, very stringent criteria are imposed to ensure no pollution of the water run-off within the catchment area.
In line with the world trend to preserve valuable sources of water, it is not the intention of the Government to lift restrictions on existing catchment areas in Hong Kong. I hope that I have been able to assure you, however, that the restrictions are imposed in a manner that nevertheless does result in fair and reasonable division between water catchment and other uses.
MR HOWARD YOUNG: Mr Deputy President, although the Secretary has replied that stringent criteria are used to prevent pollution within water catchment areas, is the Government aware that there have been complaints that some of these areas may actually become pollution creating areas in that not being well maintained as they are they tend to have rubbish and other refuse caught up there?
SECRETARY FOR WORKS: Mr Deputy President, the monitoring of water quality in the catchment areas is undertaken if there are gathering points which are subject to undesirable flows of contaminated water; these are temporarily closed. However, in conjunction with the Environmental Protection Department the long-term action is to ensure that the quality of water into the gathering points is at an acceptable high level, and if any gathering points are temporarily closed, it is our intention that they will be reopened in the future after any contaminating material has been dealt with.
MR LAU WONG-FAT (in Cantonese): Mr Deputy President, as there are stringent controls over developments in catchment areas, local residents cannot construct their houses as permitted under the Small House Policy. Is the Administration concerned about the predicaments of these people and what measures have been taken to help improve their living conditions and meet the housing needs arising from population growth?
SECRETARY FOR WORKS: Mr Deputy President, as I have said, the restrictions are applied in a flexible manner and particularly where existing land use is involved. Particular problems are brought to the attention of my Water Supplies Department staff who, in conjunction with the other government officials concerned, will address each and every problem as it is brought to their attention. And if there is opportunity for flexibility then this will be applied.
MR GILBERT LEUNG (in Cantonese): Mr Deputy President, the Community and New Territories Affairs Panel visited the catchment area in Lam Tsuen valley yesterday and found that some gathering points had fallen into disuse since 1983, and that the streams flowing through it were severely contaminated. Could the Administration inform this Council whether it will consider the closure of Lam Tsuen catchment area?
SECRETARY FOR WORKS: Mr Deputy President, I think that there are some three major intakes within this particular location. Two of these gathering points have certainly been closed on a temporary basis. However, it is, as I stated, our intention in the future to reopen these gathering points and in the meantime a third gathering point is serving to catch quite valuable water from the area in question.
MRS PEGGY LAM (in Cantonese): Mr Deputy President, some of the catchment areas have been temporarily closed, but such "temporary" closure can be as long as a decade. Could the Administration advise this Council how it will define the term "temporary" and how many years will be considered "temporary"?
SECRETARY FOR WORKS: Our basic objective, Mr Deputy President, is to maintain our present catchment areas. "Temporary" can be defined as: for as long as it is necessary to ensure that any contaminants in the gathering of water from the area
concerned can be brought under control and that the water quality can again be restored to a satisfactory condition.
MR TIK CHI-YUEN (in Cantonese): Mr Deputy President, as Hong Kong depends mainly on China for water supply, there will be a lesser role played by the catchment areas in the supply of water. Although the Administration has no plan to close all the catchment areas, will a review be conducted as to the extent of the catchment areas and the stringent criteria imposed, so as to minimize the adverse effects on the livelihood of residents?
SECRETARY FOR WORKS: I believe, Mr Deputy President, that I have stressed that flexibility is applied in our management of the controls over catchment areas. Basically, we wish to retain the total area of catchment; and within that control, the various types of use are carefully considered before a decision is made which may allow use in a particular area.
MRS SELINA CHOW: Mr Deputy President, with reference to the visit that some of us made yesterday to Lam Tsuen and Tai Hang Tsuen, we were told by the Water Supplies Department representative there that the two temporarily closed intake points since 1983 would be permanently closed quite soon. Could the Secretary please clarify how he can reconcile what he has informed this Council just now, that is to say, there is the likelihood that these intake points would be reopened, and the information supplied to Members yesterday that they will be closed permanently quite soon?
SECRETARY FOR WORKS: Mr Deputy President, I am aware that this area has been under detailed scrutiny. It is, as I said, our general policy to reopen all gathering points on an "as and when" basis. There are three catchment points within this particular area; two of them have been closed, and the third remains open. If there is any ambiguity in the replies that I have given today, I will be happy to supply further information. (Annex I)
DR CONRAD LAM (in Cantonese): Mr Deputy President, the Secretary has mentioned in the second paragraph of his reply that where development is permitted, very stringent criteria are imposed to ensure no pollution of the water run-off within the catchment area. Can the Secretary inform this Council how stringent the criteria are, and whether prosecutions have been taken out for contamination of water run-off in
catchment area?
SECRETARY FOR WORKS: Mr Deputy President, basically, the criteria require the design of the development to be such that any run-off from the development itself is piped in a manner which ensures that there will be no loss of water from the piped system until it is clear of the catchment area. I cannot give any examples to the second part of the question, Mr Deputy President, but I will search our records and provide that information. (Annex II)
MRS RITA FAN: Mr Deputy President, in answer to a supplementary question the Secretary has said that intake points are temporarily closed and in the meantime improvements will be made to the water quality in order that the intake points can be reopened. During our visit to Lam Tsuen yesterday, we found that the two intake points in Tai Hang were temporarily closed and all we could see was that they were, in effect, being closed by leaves, sand and all other natural material, and we could not see any
evidence of work being done to try to improve the water quality or the intake points themselves. Can the Secretary please look into this and perhaps provide me with a written reply as to what work has been done by the Water Supplies Department in these areas to improve the water quality of these temporarily closed intake points?
SECRETARY FOR WORKS: I will certainly undertake, Mr Deputy President, to provide a further written response. (Annex III) I would say that the fabri-dam in question is part of the control measures which are used to allow any contaminated water to be quickly discharged from the area, and this will be part of the answer.
Dangerous slopes
2. DR HUANG CHEN-YA asked 2. DR HUANG CHEN-YA asked DR HUANG CHEN-YA asked (in Cantonese): In view of the recent landslip in Baguio (in Cantonese): In view of the recent landslip in Baguio Villa, will the Government inform this Council:
(a) of the number of dangerous slopes in the territory at the moment and their (a) of the number of dangerous slopes in the territory at the moment and their distribution by district;
(b) what mechanism is in place to monitor (b) what mechanism is in place to monitor what mechanism is in place to monitor the safety of these slopes; the safety of these slopes;
(c) of the number of dangerous slopes on which preventive works were carried out (c) of the number of dangerous slopes on which preventive works were carried out in 1991-92 and the expenditure involved; and
(d) of the amount of provision allocated for preventive works on dangerous sl (d) of the amount of provision allocated for preventive works on dangerous slopes in this financial year and the expected number of such slopes involved?
SECRETARY FOR WORKS: Mr Deputy President,
(a) Slope is only classified as dangerous when it poses an immediate and obvious (a) Slope is only classified as dangerous when it poses an immediate and obvious threat to public safety, in which case immediate steps are taken to deal with the problem and remove the danger. For other slopes it is only after a detailed geotechnical stability investigation that we know whether or not a slope is liable to become dangerous during extreme rainstorms.
A long-term programme of geotechnical stability investigations has been in A long-term programme of geotechnical stability investigations has been in progress during the past 16 years. This programme deals on a risk priority basis with the 10 000 or so slopes or items that have been catalogued. So far 4 300 of these items have been investigated, of which 880 have required preventive works. Works have been completed on 750 of these. Of the remaining 130, on which preventive works are in hand or will commence shortly, 35% are located in the New Territories, 10% in Kowloon and 55% on Hong Kong Island.
(b) Government (b) Government Government departments responsible for the maintenance of a slope are adv departments responsible for the maintenance of a slope are advised by the Geotechnical Engineering Office (GEO) if the slope requires works. These works are then designed by it at office and constructed under their supervision, under the Landslip Preventive Measures Programme. If any slope is of immediate and obvious danger it is injected immediately into the programme and monitored closely until works have been completed and the slope stabilized. Emergency measures will be implemented if necessary to safeguard life prior to completion.
For privately owned slopes identified as requiring preventive works a statutory order is served on to the owners under the Buildings Ordinance. This
requires that an appointed Authorized Person be responsible for monitoring the stability of the slope and giving warning of impending danger until preventive works are completed. A copy of the statutory order is posted at the site to inform occupants of the situation.
(c) During the 1991-92 financial year, landslip preven (c) During the 1991-92 financial year, landslip preven During the 1991-92 financial year, landslip preventive measures were tive measures were completed at 34 government slopes and retaining walls, and works commenced at 21 others. Expenditure on the Landslip Preventive Measures Programme was HK$62 million. During the year preventive measures were completed for 22 private slopes.
(d) Finally, in the financial year 1992-93, landslip preventive works will be (d) Finally, in the financial year 1992-93, landslip preventive works will be in progress on a total of 52 government slopes and retaining walls. The expenditure is expected to be $66 million. It is anticipated that preventive measures will be completed for 20 private slopes.
DR HUANG CHEN-YA (in Cantonese): Mr Deputy President, are the slopes at Baguio Villa and Kennedy Road included in the Catalogue of Slopes? The Administration has so far investigated only about 40% of the slopes. In 1982 and 1985, the Administration spent $80 million and $75 million respectively on landslip preventive works, but the
expenditure for this purpose was slashed in 1991-92 and 1992-93; what is the reason? Is it because of the expenditure of the airport projects? In view of the recent landslips, will the Administration consider increasing the expenditure in this regard?
DEPUTY PRESIDENT: Dr HUANG, you have a number of questions in that one long question. Would you ask them one at a time by starting with one question, please? I shall have to rule on the others because we have some 12 people wanting to ask supplementaries. So, the first question first, please.
DR HUANG CHEN-YA (in Cantonese): Mr Deputy President, the Administration spent $80 million and $75 million in 1982 and 1985 respectively on landslip preventive works. The expenditure for this purpose has been slashed in recent years; what is the reason? Is it because of the expenditure in the airport projects?
SECRETARY FOR WORKS: Mr Deputy President, the Landslip Preventive Measures Programme was focused initially on those slopes which had a higher priority in terms of stability risk. I am glad to say that those higher risk slopes have been dealt with, as was evidenced from the last severe rainstorm when all of the slopes that had been included in that programme remained satisfactory. The ongoing programme is one which requires quite detailed investigation at the slopes in question by means of site investigation drillings. It requires quite detailed evaluation of those results before any
programme of works can be put in place for the slopes in question. This programme is ongoing; it is controlled by the Geotechnical Engineering Office, and the rate of expenditure is one which is set by their own programme. Any difference in expenditure which has been referred to is not related to airport expenditure because the Landslip Preventive Measures Programme is allowed to proceed as an item in its own right.
DEPUTY PRESIDENT: I will have to call on other Members, Dr HUANG, since there are so many waiting to ask supplementaries. And I shall take them in the order of Members who have asked the least number of questions up to now because I do not think we can get everyone satisfied.
MR STEVEN POON (in Cantonese): Mr Deputy President, the residents at Baguio Villa were caught off guard at the time of the landslip. Can the Administration inform this Council whether there is any plan to educate the public on how to respond in case of a landslip so as to ensure as far as possible the safety of their lives and properties? If yes, when can such a plan be announced? If not, why not?
SECRETARY FOR WORKS: Mr Deputy President, I have already announced that the detailed report would take one month to be completed. We are on track to achieve that date; as and when the report is completed, we will then examine ways in which the relevant information can be announced.
MR EDWARD HO: Mr Deputy President, according to the Secretary's reply, 4 300 of the 10 000 slopes catalogued have been investigated. Will the Secretary please inform this Council whether any of the remaining 5 700 slopes are dangerous? And how can an opinion be formed if they have not been investigated?
SECRETARY FOR WORKS: Mr Deputy President, in drawing up this initial catalogue of man-made slopes, the actual slopes were scrutinized through a consultancy at the time. Each of the entries into the catalogue in relation to slopes contains certain basic information which can be obtained by visual inspection. On the basis of that initial visual inspection, the risk priority was established and the programme entries for the particularly high risk slopes were made. Of the remaining slopes, as I have indicated, they are all within a much lower risk priority and will be dealt with as part of the Long Term Measures Programme. But I would emphasize that the
investigation of each and every case does take time. However, I can assure Members that those slopes are all in a lower risk priority and if there was any evidence of an unstable condition emerging, then it would be dealt with immediately.
MR HENRY TANG: Mr Deputy President, in his main reply the Secretary says that the privately owned slopes are the responsibility of the owners who are to carry out the preventive works once the Geotechnical Engineering Office identifies the slope as being dangerous. Will the Government inform this Council, in the case of privately owned slopes, if it is the Geotechnical Engineering Office or the owners who are responsible for regularly inspecting the slopes to ensure the integrity or safety of the completed remedial works? I hope the Secretary's reply will be more
comprehensive than his earlier reply to Mr POON's question.
SECRETARY FOR WORKS: The Geotechnical Control Office are responsible, Mr Deputy President, for monitoring the proposals put forward by the Authorized Person appointed on behalf of the owner to design the measures which will be applied to the slopes in question. The carrying out of those works will be monitored by that Authorized Person in accordance with his obligations under the Buildings Ordinance. When those works have been completed, so far as is engineeringly possible, the stability of the slopes will have been secured. There may be such items as ground anchors which require regular monitoring, in which case the monitoring arrangements would be included in the design package approved by the GCO. But the slopes in question are the responsibility, in the long term, of the owner in question.
MR CHEUNG MAN-KWONG (in Cantonese): Mr Deputy President, about 2 000 squatters
are reported to be living on dangerous slopes. Can the Administration release the information on dangerous slopes and give priority to the rehousing of these squatters in order to ensure the safety of their lives?
SECRETARY FOR WORKS: Mr Deputy President, most of the steep slopes on which squatters live have been the subject of separate geotechnical studies and they are not included in the catalogue of slopes. These studies indicated that some 64 000 squatters were originally living on terrain which was regarded as especially vulnerable to landslips during intense rainfall. We now estimate that there are fewer than 2 000 remaining on these vulnerable slopes. All of these people will be rehoused by early 1994. In the meantime, at the commencement of a year, squatters on these slopes are informed by way of leaflets that they are living on a terrain which could become potentially dangerous during a heavy rainstorm. These warnings are repeated by way of radio announcements in the event of rainstorm warnings becoming necessary, and arrangements are made for such squatters to be rehoused temporarily during the immediate period of any rainfall emergency. Squatters are also encouraged to report immediately any evidence that they may see of slope instability, such as the dislodgement of material. If such reports are received they are investigated immediately by officers of the Geotechnical Engineering Office and appropriate action is taken.
MR FREDERICK FUNG (in Cantonese): Mr Deputy President, there are 2 000 squatters now living on dangerous slopes. Has the Administration considered taking some contingency measures, such as rehousing them in public housing estates or temporary housing areas during the rainy season this year?
SECRETARY FOR WORKS: Mr Deputy President, as I stated, the Housing Department does have a rehousing programme in place and I am informed that all squatters living on dangerous slopes will be rehoused by early 1994 at the latest. As I said, in the meantime, if there was any indication of more immediate danger then this would be taken up with the Housing Authority and appropriate action could be taken.
DR SAMUEL WONG: Mr Deputy President, will the Secretary for Works inform this Council how many privately owned slopes have so far been identified by the GCO as unstable for which statutory orders have been issued, and whether there is a time limit by
which preventive works must be completed?
SECRETARY FOR WORKS: I do not have with me a total figure, Mr Deputy President, but I will provide that for Dr WONG. (Annex IV) In the meantime, I can say that the period of time which is needed varies according to the extent of the work which has to be undertaken. The issuance of a statutory order is processed as quickly as the information becomes available and attention is paid by the Geotechnical Engineering Office to ensure that the proposals from the Authorized Person are expedited through the checking procedure.
MR ALBERT CHAN (in Cantonese): Mr Deputy President, the Secretary has said that there are only 2 000 squatters living on dangerous slopes. I am doubtful about the validity of this figure. There are in total 280 000 people now living in squatter areas most of which are situated on slopes and the officials of the Geotechnical Engineering Office have mentioned several times the danger of living on such slopes. Can the Administration inform this Council whether it will have an overall plan for the early resettlement of all the squatters currently living on such slopes?
SECRETARY FOR WORKS: Mr Deputy President, there are fewer than 2 000 squatters on especially vulnerable slopes. There are squatters on slopes which are not considered vulnerable and which are much flatter and therefore there is less risk to squatters on those slopes. The programme for especially vulnerable slopes is to complete
rehousing by early 1994.
Housemen in public hospitals
3. MR ANDREW WONG asked: Will the Government info 3. MR ANDREW WONG asked: Will the Government info MR ANDREW WONG asked: Will the Government inform this Council: rm this Council: (a) of the working hours of housemen in public hospitals; and (a) of the working hours of housemen in public hospitals; and
(b) whether they are required to work overtime; if so, what the amount of ove (b) whether they are required to work overtime; if so, what the amount of overtime is on average and to what extent it affects the standard of service provided to the patients?
SECRETARY FOR HEALTH AND WELFARE: Mr Deputy President, housemen refer to medical graduates who work as interns in approved hospitals. The internship period lasting for 12 months is necessary to provide practical training for these graduates before they become eligible for full registration under the Medical Registration Ordinance. Such training is regarded as a continuation of education for interns who are
supervised by the medical schools of the two universities during this period.
The work schedule of interns is drawn up by their heads of departments taking The work schedule of interns is drawn up by their heads of departments taking into account the operational requirements and training needs. Apart from scheduled duties within office hours such as outpatient clinics and ward rounds, they are also required to be on-call in the hospital to cater for the needs of patients.
Accommodation is provided to them for this purpose but the frequency of such on call duties will vary between individual hospitals and different specialties within each hospital according to their activity level and case mix.
It is difficult to apply the concept of overtime on interns given the need to provide them with good exposure and practical experience. In discharging their duties, interns are supervised by the Duty Medical Officer, Senior Medical Officer or Consultant in-charge to ensure that the standard of service provided to patients is maintained at all times.
MR ANDREW WONG: Mr Deputy President, I understand housemen or interns are often required to work for more than 30 hours consecutively. Will the Secretary for Health and Welfare confirm that these very long hours, though they are not considered to be overtime, have neither affected the state of health and mind of the housemen nor affected the standard of their service to patients?
SECRETARY FOR HEALTH AND WELFARE: Mr Deputy President, I am aware that some interns have to work for long hours per week but this is essential for their training and registration requirements. The scope of duties and working hours of interns in Hong Kong are in line with those currently practised in the United Kingdom and other
advanced countries. Such interns are supervised by the Duty Medical Officer, Senior Medical Officer and Consultant-in-Charge, and if necessary, advice and assistance can be obtained by the interns from their supervisors.
MR CHEUNG MAN-KWONG (in Cantonese): Mr Deputy President, from the reply of the Secretary just now, I think a very important question raised by Mr Andrew WONG has not been answered and that is whether overtime work has affected the standard of service of housemen and put them under stress. If that is the case, can the workload of housemen be reduced and redistributed to other medical and nursing staff?
SECRETARY FOR HEALTH AND WELFARE: Mr Deputy President, as I have mentioned, there are senior staff who will provide advice and assistance to the house officers if and when necessary. There is no adverse effect on the standard of service which is maintained satisfactorily at all times. In addition, there are also improvements within the hospital environment to assist the house officers. For instance, in recognition of the workload of interns the manning ratio of clinical units has been improved over the years to provide them with adequate supervision and guidance; new grades, like ward stewards, have also been introduced to relieve nursing and other medical staff from non-clinical duties, thus allowing them to concentrate on the provision of supporting services to interns and other doctors. Furthermore, the Hospital Authority has formulated plans to provide improvements in the hospitals by installing additional facilities for patients and visitors, eliminating camp beds and relieving the congestion environment in wards. All these will help to give a better working environment for interns, and also help in the overall maintenance of standard of service for the patients.
DR CONRAD LAM (in Cantonese): Mr Deputy President, I remember that I had no leave entitlement when I was an intern. May I know how many days of leave an intern can get in a year at present? And if an intern should find himself not physically fit to cope with the work demand, how can he get his leave according to current practice?
SECRETARY FOR HEALTH AND WELFARE: Mr Deputy President, my own experience is the same as Dr Conrad LAM's; during my intern days I also had no leave myself. The present arrangement has improved and all interns are eligible for 12 days of leave for every six-month period, or six days of leave for every three-month period. In addition, if they need further assistance and if they cannot cope with the situation, I am sure that the heads of clinical units will exercise their discretion in the light of the requirements for training and operational needs.
MR JAMES TO (in Cantonese): Mr Deputy President, the idea of overtime mentioned in the third paragraph of the main reply does not apply to interns because of the very wide scope of work they are exposed to. Given that a person's energy is limited, does the reply mean that the specified duties together with all the on-call duties that an intern is expected to do are tantamount to work duties of 24 hours a day?
SECRETARY FOR HEALTH AND WELFARE: Mr Deputy President, in some cases it is positive that interns have to work long hours, sometimes stretching over 30 hours. But I have to emphasize that the long working hours are a tradition of the training for physicians to provide them with opportunities to gain practical experience through observation of patients over time. In performing their duties, interns will develop a close relationship with their patients and have a sense of responsibility to them that does not start and stop at any scheduled time.
PROF FELICE LIEH MAK: Mr Deputy President, as a doctor's work, in real life, entails long hours and the ability to withstand stress, will the Secretary please confirm that during the internship period this is also one aspect of the training, that is, testing the doctor's ability to work long hours and to withstand stress?
SECRETARY FOR HEALTH AND WELFARE: Mr Deputy President, as I have mentioned in my main reply and in the supplementary answers, the performance of interns during this internship period is really a test of their experience and also to provide them with ample opportunity to have good exposure in terms of training experiences, and also to ensure that they have the opportunity to be exposed to all the opportunities to acquire the necessary skills through practical training. Furthermore, the two universities also exercise their supervisory role through the heads of departments who are responsible for drawing up the working schedules of interns. And in case there is any need for further advice, the universities, through their Director of Post-Graduate Studies, will also provide the necessary counselling advice.
MR MAN SAI-CHEONG (in Cantonese): Mr Deputy President, as many doctors in the public sector have gone into private practice or emigrated overseas in recent years, the workload of housemen in public hospitals has become extremely heavy. Will such situation affect their morale? And in the meantime are there any signs that those doctors who have emigrated will return and join the government and other hospitals,
thereby improving the working conditions of housemen?
SECRETARY FOR HEALTH AND WELFARE: Mr Deputy President, there is no evidence that because of the movement of doctors out of public hospitals interns have to shoulder heavier amounts of work. On the other hand, as I have mentioned earlier on, because of the improvements in the manning ratio of clinical units this staffing situation has improved a lot over the past years and has been a great help to the interns as far as the need for advice and guidance is concerned.
MR PETER WONG: Mr Deputy President, I find it hardly credible that a doctor has to work for 30 continuous hours to prove himself. Would the Secretary accept that this is more a case of bad management than a test of stamina?
SECRETARY FOR HEALTH AND WELFARE: Mr Deputy President, as I have mentioned, the frequency of being on-call and the duration of working varies between hospitals and within the same hospital between different specialties. And furthermore, it is not solely the interns who have to shoulder all the duties; they are also assisted by other interns and Senior Medical Officers and Consultants-in-Charge. So the amount of the work schedule allocated to an intern is really up to the head of the clinical department who will take into account the need for training and also for service.
MR ANDREW WONG: Mr Deputy President, the Secretary for Health and Welfare said in his main reply that interns discharging their duties are supervised by the Duty Medical Officer, the Senior Medical Officer or the Consultant-in-Charge. Will and can the good Secretary confirm that interns are never left alone to treat patients, not even in the wee morning hours of say 3 am or 4 am?
SECRETARY FOR HEALTH AND WELFARE: Mr Deputy President, as I have mentioned, the interns work as a team in the clinical unit. They are given assistance and advice by the Duty Medical Officer, Senior Medical Officer and also the Consultant-in-Charge. In addition, they also have the opportunity to consult their senior staff in case they need further advice; so in that connection I can confirm this is the arrangement in the hospitals.
Advisory committees
4. MR TIK CHI-YUEN asked (in Cantonese): Will the Government inform this Council 4. MR TIK CHI-YUEN asked (in Cantonese): Will the Government inform this Council of the following:
(a) the policy upon which the composition of various advisory committees is (a) the policy upon which the composition of various advisory committees is determined at present;
(b) the factors governing the appointment of individual members to various (b) the factors governing the appointment of individual members to various advisory committees; and
(c) whether there is a policy to appoint Legislative Council Members, especially (c) whether there is a policy to appoint Legislative Council Members, especially those returned by election, to join various advisory committees?
SECRETARY FOR CONSTITUTIONAL AFFAIRS: Mr Deputy President, the function of advisory committees is to tender advice to the Government in accordance with their terms of reference. There are, at present, over 400 advisory committees. In general, the Government's aim is to ensure that the composition of these committees, and their membership are such as to provide, in each case, the best and the most comprehensive advice to the Government in their areas of concern. This may mean, in some cases, that membership are drawn from a broad spectrum of the community, while in others membership are drawn from particular sectors with the relevant expertise.
There is no universally applicable policy of appointing Legislative Council Members to advisory committees, but I must also stress that membership of this Council is not, of course, a bar to appointment to advisory committees. In short, Mr Deputy President, the Government believes in the best man and woman for the job.
MR TIK CHI-YUEN (in Cantonese): Mr Deputy President, the work of most of the advisory boards and committees, for example the Health and Medical Development Advisory Committee, is related to the livelihood of the people. There is a great need for these advisory boards and committees to take the public's views into account. Could the Administration inform this Council how many of those appointed to advisory bodies are representing the views of the public?
DEPUTY PRESIDENT: Secretary for Constitutional Affairs, did you get the question?
SECRETARY FOR CONSTITUTIONAL AFFAIRS: I will attempt to do my best, Mr Deputy President. As I said in my main reply, the Government, in appointing members to advisory boards and committees, will have due regard to the terms of reference and functions of the board or committee concerned. In this connection it will definitely take into account the desirability of appointing people who have been elected in one form or another to various forums.
MR WONG WAI-YIN (in Cantonese): Mr Deputy President, I learnt that some people had refused to be appointed by the Government because as members of advisory boards or committees, they are subject to the confidentiality rules. In this respect, the Government might have lost some professionals or those in the trade. Given that our system of government is becoming more and more open and democratic, will the
Administration consider reviewing the confidentiality requirement and thereby increasing the transparency of our system of government?
SECRETARY FOR CONSTITUTIONAL AFFAIRS: Mr Deputy President, my understanding is that the requirement for confidentiality is an important consideration for some boards and committees so as to facilitate the exchange of ideas and for the formulation of sound policies. This, I am afraid, is a requirement even in the most democratic and open societies. This does not mean that such matters need to remain confidential forever but there is a time and place for the release of such information. So I am afraid, Mr Deputy President, I cannot give a positive answer to that question.
MR CHEUNG MAN-KWONG (in Cantonese): Mr Deputy President, I would like to follow up the question on confidentiality raised by Mr WONG Wai-yin. Could I ask whether confidentiality refers to the confidentiality of the consultative documents or that of members' discussions? If the documents need to be kept confidential, will this be a block to the views of the public on issues of community concern?
SECRETARY FOR CONSTITUTIONAL AFFAIRS: Mr Deputy President, this is a difficult question to give a generalized answer to. The documents themselves, as they are
marked confidential, must be confidential. But as to discussions of the matters concerned, one could envisage a situation where one could have a discussion on a particular matter without referring to or relating it to the fact that it is under consideration or discussion in a particular forum.
MR FRED LI (in Cantonese): Mr Deputy President, given that many members of advisory boards or committees are appointed in their personal capacity, but they are in fact members of many other organizations. If a member is appointed to an advisory board or committee in his personal capacity and the consultation process needs to be kept confidential, but at the same time the Administration expects him to solicit the views of the public and the organization to which he belongs, how will the Administration resolve the conflict?
SECRETARY FOR CONSTITUTIONAL AFFAIRS: Mr Deputy President, if a particular person is appointed to a particular committee in his personal capacity, then I think that will remain the case; we do not require or demand that he reflect the views of the association or committee he might belong to.
MR HOWARD YOUNG: Mr Deputy President, has the Secretary for Constitutional Affairs worked out mathematically that if, by some stretch of the imagination, all the so-called best men and women for the job and those who can reflect public opinion were confined to the elected Members of this Council, then that would average each elected Member joining 10.25 committees and therefore would have little time to do anything else?
SECRETARY FOR CONSTITUTIONAL AFFAIRS: Mr Deputy President, that is an interesting statistic which I have not worked out myself. But I am glad to share with Members the Government's record on the appointment of elected Members to boards and committees. Since September 1991 we have appointed or reappointed 14 elected Legislative Council Members to various boards and committees, and currently 9 boards/committees are chaired by elected Members.
MR LEE WING-TAT (in Cantonese): Mr Deputy President, appointing members to advisory
boards or committees is the responsibility of the Hong Kong Government or the future SAR Government. But I understand that in drawing up the list of appointed members to the Airport Consultative Committee, the Hong Kong Government has discussed it with the Chinese authorities. Will the Administration inform this Council whether it is necessary to consult the Chinese side when it appoints members to advisory boards or committees? If not, will the Administration give such an assurance?
SECRETARY FOR CONSTITUTIONAL AFFAIRS: Mr Deputy President, Members are of course aware of the background to the Airport Consultative Committee and the system of appointment to it; the requirement for consultation is laid down in the Airport Memorandum of Understanding. As to the second part of the question, Mr Deputy President, it is a hypothetical one and I do not wish to give an answer.
REV FUNG CHI-WOOD (in Cantonese): Mr Deputy President, will the Administration provide this Council with an up-to-date breakdown of the number of Legislative Council Members appointed to various advisory bodies who have been elected by functional constituency or direct election or appointed by the Government, and also the number of Members who have been appointed to more than one advisory bodies?
SECRETARY FOR CONSTITUTIONAL AFFAIRS: Mr Deputy President, that is a very detailed question on statistics and I undertake to supply them after this meeting. (Annex V)
Pollution-reducing measures for West Kowloon Reclamation project
5. MR FREDERICK FUNG asked (in Cantonese): To ensure that while the West Kowloon 5. MR FREDERICK FUNG asked (in Cantonese): To ensure that while the West Kowloon Reclamation project is in progress, the residents in the vicinity would not be unduly affected by air pollution, noise pollution, and water pollution, will the Government inform this Council:
(a) what special conditions have been laid down in the tender and contract (a) what special conditions have been laid down in the tender and contract documents requiring the contractors to carry out the necessary measures in reducing pollution; and
(b) what special monitoring measures the Government will take? (b) what special monitoring measures the Government will take?
SECRETARY FOR PLANNING, ENVIRONMENT AND LANDS: Mr Deputy President, the works contracts for the West Kowloon Reclamation will contain conditions requiring the supervising engineer to minimize pollution by employing trained staff using equipment and methods agreed before work commences for the purpose. Conditions will also be included to minimize water and noise pollution, suppress dust, and ensure environmentally acceptable methods are used for disposing of wastes. If pollution is detected, the engineer may be required to stop the work until it is abated.
By September this year a consultant will be employed in a new West Kowloon environmental project office to monitor the measures taken to minimize air, water and noise pollution in relation to the construction projects in West Kowloon. The consultant will report to the Environmental Protection Department and will be responsible for investigating any pollution problems that arise, recommending remedial action and liaising with the project engineers to implement such action.
MR FREDERICK FUNG (in Cantonese): Mr Deputy President, given that there will only be one consultant in the West Kowloon environmental project office, could the Secretary inform this Council whether there will be an overall plan and sufficient manpower to monitor the project so as to ensure that contractors will really abide by the conditions laid down in the contracts? If yes, will the Administration inform me in writing of such a plan and its staff establishment?
SECRETARY FOR PLANNING, ENVIRONMENT AND LANDS: Mr Deputy President, responsibility for supervising the various contracts, as I have said, rests with the supervising engineers, and the supervising engineers are answerable to the project offices of the various works departments who control the contracts. The supervising engineers therefore have comprehensive conditions which must be complied with in relation to their contracts. The environmental monitoring which will be done by the consultant and a small staff working for him is a back-up to the permanent arrangements within the contracts to prevent environmental pollution. I will provide Mr FUNG with more details on the constitution of the Environmental Consultants Team in writing. (Annex VI)
MR STEVEN POON (in Cantonese): Mr Deputy President, in view of the large number of
residents living around West Kowloon district, will the Administration inform this Council how it will ensure that vehicles going to and from the works sites will not give rise to traffic congestion as well as noise and dust pollution?
SECRETARY FOR PLANNING, ENVIRONMENT AND LANDS: Mr Deputy President, environmental impact assessments have been conducted for all the West Kowloon construction projects and, as part of these assessments, it has been found that dust pollution and noise pollution will be controlled and will not be such a serious problem to residents. As far as dust is concerned, there are the normal requirements for protecting loads as they move to and from reclamation and through urban areas and these controls will be exercised. It is also, I think, relevant to mention that a good deal of the
transportation of materials to and from the reclamation areas of West Kowloon will be done by marine vessels rather than by road transport.
MR JAMES TO (in Cantonese): Mr Deputy President, in his main reply, the Secretary has given the impression that some works may have to stop if pollution is detected. Will the Administration consider adopting more practical measures, for instance, specifying in the works contract that the contractor will be subject to a fixed fine or certain charges be deducted from the contract fees if he fails to observe, for a number of times, the anti-pollution requirements in the contract and that the
Administration reserves the right to terminate any contract if non-compliance should exceed a certain number of times?
SECRETARY FOR PLANNING, ENVIRONMENT AND LANDS: Mr Deputy President, all the emphasis in these works is on preventing pollution. The power to stop work is not expected to be invoked except in the most extreme of cases, and therefore the suggestion of putting into place complex contractual arrangements to provide for fines, should environmental problems cause delays, is not necessary.
REV FUNG CHI-WOOD (in Cantonese): Mr Deputy President, will the Administration inform this Council whether water quality will deteriorate or improve as a result of this project, and of the measures that are included in the project to alleviate water pollution?
SECRETARY FOR PLANNING, ENVIRONMENT AND LANDS: Mr Deputy President, the simple answer is that conditions will deteriorate slightly before they improve, but when they improve they will improve considerably. The northern part of the works areas, which involve at the moment untreated sewage flowing into the harbour, will be connected to the North West Kowloon Sewage Treatment Scheme which is due to be commissioned in August this year, so that the problems in that particular part of the reclamation will start to be ameliorated as the rest of this year and the following years progress. In the southern areas the connections of sewage outfalls to this same system will
be done progressively as the reclamations proceed, so that by the time the reclamations are completed, there will be connections to this scheme in relation to the whole of the West Kowloon Reclamation and the conditions in the harbour will be improved considerably.
MR MAN SAI-CHEONG (in Cantonese): Mr Deputy President, regarding the West Kowloon Reclamation project, will priority be given to the works programme or the anti pollution arrangements if conflict arises between the two? Will there be a conflict in the role played by the Secretary who is responsible for environmental protection on the one hand and implementation of works projects on the other?
SECRETARY FOR PLANNING, ENVIRONMENT AND LANDS: Mr Deputy President, there will be no conflicts. The works have to be completed on certain programmes; the measures which have been put in place to deal with pollution are such as to make the prevention of pollution a priority. The possibility of pollution arising which may require works to stop and cause delays is therefore regarded as an extreme situation. And any delays that would be incurred would be expected to be short and therefore would not cause undue delay in the overall programme.
Public safety measures against violent crime
6. MRS SELINA CHOW asked: In view of the dramatic increase in violent crime, 6. MRS SELINA CHOW asked: In view of the dramatic increase in violent crime, particularly cases of robbery in which machine guns and hand grenades have been used, will the Government inform this Council what steps have been taken to protect public safety and enlist public support when such crimes occur?
SECRETARY FOR SECURITY: Mr Deputy President, despite recent high-profile cases of armed robberies in which genuine firearms and pistol-like objects have been used, the actual number of such robberies has decreased steadily during the first quarter of 1992. There were 61 in January, 32 in April. I am not at all complacent, but I would wish to put violent crime into that perspective.
We will continue to take measures on a number of fronts to protect public safety We will continue to take measures on a number of fronts to protect public safety and enlist public support to combat violent crimes. These include maintaining close liaison and communication with China since some, but by no means all, such crime has a cross-border dimension; we have increased police patrols in high risk areas; we are improving police equipment; and we also encourage the community to support our efforts to counter crime.
Over the years, we have built up close co-operation and liaison with the Chinese authorities through Interpol. The Hong Kong police and mainland public security officials work closely together through regular cross-border liaison, visits and, on occasions, co-ordinated operations. The Commissioner of Police has recently been in China to discuss cross-border crime, including firearm offences. During this visit, it was agreed that liaison between the two sides should be stepped up through a Chinese police liaison officer being stationed in Hong Kong. Communications
between the Hong Kong police and Chinese counterparts in Guangdong and Shenzhen are being strengthened to co-ordinate action in serious cases. Such measures should help to ensure a better flow of information on the movement of criminals and of firearms across the border.
Better liaison with China is being reinforced by resolute and effective action Better liaison with China is being reinforced by resolute and effective action by the police within Hong Kong. This includes more high-profile patrols in areas prone to armed robberies such as goldsmith and jewellery shops. Swift police action has also resulted in the arrests of several persons connected with recent armed
robberies. To ensure that that equipment continues to meet present-day police needs, the police have recently undertaken a comprehensive review of their provision of arms and ammunition. A number of improvements have been suggested, including more effective ammunition and revolvers, speed-loading equipment and a new style of holster. The Administration is considering these proposals as a matter of urgency.
The police continue to need the assistance and co-operation of the public in the fight against crime. We must all be willing to take time to report crime and then,
if necessary, give evidence in court. We underline this message in all our anti-crime publicity. To this end, for instance, the police have held meetings with various taxi associations to enlist their assistance, as taxi drivers are often able to provide information on the whereabouts of criminals in the event of crime. District Fight Crime Committees also provide many useful proposals on ways to combat crime and help to disseminate the fight crime message to residents in local communities.
MRS SELINA CHOW: Mr Deputy President, with reference to the second paragraph of the reply, what measures are being taken to encourage the community to support the Government's efforts to counter crime; and specifically what improvements will be made to reporting procedures to positively facilitate citizens to come forward?
SECRETARY FOR SECURITY: Mr Deputy President, encouraging the public to assist the police in the fight against crime and, in particular, making it easy for the public to report crime in police stations is a matter which is constantly under review by the Fight Crime Committee. We have made a number of major improvements over the years in the Fight Crime Committee: we have made it easier for people to fill out forms when they are reporting specific crimes, we are trying to make report rooms themselves in police stations more user-friendly, and we are doing all that is possible to ensure that the public is put to the least possible inconvenience when reporting crime, whilst on the other hand ensuring that the full facts of each case are reported to the police for investigation.
MR SIMON IP: Mr Deputy President, I would describe the recent incidents involving the use of firearms -- AK47s and grenades -- as urban warfare. The question which I would like to ask the Government -- a question which has been asked before but I do not believe a satisfactory answer has been given -- relates to the Gurkhas. We have several thousand Gurkhas in Hong Kong who will be leaving Hong Kong for their native Nepal, probably to unemployment. They are a well known disciplined force, very well trained for combat, very well disciplined and very loyal and dedicated. Could I ask whether there is any consideration being given to engaging these men, once they return to Nepal, to come back to Hong Kong? I understand that about a quarter of them actually can speak Cantonese, but even those who cannot speak
Cantonese should be able to form some kind of combat force to deal with the situation we have at the moment.
SECRETARY FOR SECURITY: Mr Deputy President, we have been looking actively at the possibility of employing some Gurkhas who are being made redundant. This is actually something that the Secretary for Education and Manpower has been looking at in the context of the importation of labour scheme.
MRS MIRIAM LAU: Mr Deputy President, in relation to crimes involving machine guns and grenades where the public's own safety is at stake, can the Secretary inform this Council how the public can assist and co-operate with the police in combating this type of crime, and how the Administration intends to go about educating the public as to how such assistance or co-operation should be rendered by the public?
SECRETARY FOR SECURITY: Mr Deputy President, when there is violent crime on the streets involving AK47s and hand grenades, clearly it is not in the public interest for the public themselves to get involved at all; this is a matter for the police force. We are actually reviewing at present not only the arms and ammunition of the police force but the sort of protective equipment which the police require to deal with things such as AK47s and hand grenades specifically, and we are looking at proposals currently from the Commissioner of Police on the need for specific, better protective equipment for the police force itself.
MRS PEGGY LAM (in Cantonese): Mr Deputy President, the Secretary mentioned in the fourth paragraph of his reply that there had been arrests of several persons connected with the recent armed robberies. Could the Secretary inform this Council of the number of criminals arrested, and of the number of armed robberies that have been detected since this January?
SECRETARY FOR SECURITY: Mr Deputy President, thus far this year, that is in the first four months of 1992, eight persons have been arrested for robberies involving genuine firearms, and 27 persons have been arrested for robberies with pistol-like objects. In addition to that, following the shoot-out incident in Lee Tak Street in Tai Kok Tsui on 24 April, eight persons have been arrested; three have been charged with robbery, three with attempted murder, and two with handling stolen goods. I
understand from the police that further arrests are expected in this and other high-profile cases recently. As to the number of cases where arrests have been made
in 1992, I do not have those figures, Mr Deputy President, and I shall provide a written answer. (Annex VII)
MRS RITA FAN: Mr Deputy President, in view of the much more frequent use of firearms, including grenades, and the threat they pose to the police force and to members of the public, what measures has the Government taken to train police officers and to educate the public in order to reduce risk and enhance public safety as far as
possible?
SECRETARY FOR SECURITY: Mr Deputy President, the training of the police to deal with this different type of violent crime is ongoing within the force at present. The police, as I have said earlier, are requesting additional equipment; they have adopted new operational measures, especially for their specialist forces who deal with these types of violent crime, forces who are specially trained. These forces have
continued to undergo ongoing tactical training on how to deal with these types of violent crime, particularly involving hand grenades. As for the public, it is not, as I said earlier in answer to a question, something that the Government wants the public to be involved in. The public have got to let the police arrest these people and bring them to justice.
MR MARTIN BARROW: Mr Deputy President, in the fourth paragraph of his answer the Secretary has mentioned the police's recent successes in making arrests. Would he advise if more could be done to publicize these successes in both Hong Kong and Southern China as this should have a helpful deterrent effect, as well as being good for police morale?
SECRETARY FOR SECURITY: Mr Deputy President, I will take up this suggestion from Mr BARROW with the Police Public Relations Bureau.
Written answers to questions
Value for money studies
7. MR LAU CHIN-SHEK asked: Will the Government inform this Council of the follow 7. MR LAU CHIN-SHEK asked: Will the Government inform this Council of the following:
(a) the number of "value for money" studies conducted by the Gov (a) the number of "value for money" studies conducted by the Gov the number of "value for money" studies conducted by the Government over the ernment over the past three years;
(b) the Government departments involved and the subjects of the studies; and (b) the Government departments involved and the subjects of the studies; and
(c) whether improvement measures have been adopted in respect of staffing and (c) whether improvement measures have been adopted in respect of staffing and operational requirements following the findings of these studies, and if so, what these measures are?
SECRETARY FOR THE TREASURY: Mr Deputy President, the Government has conducted 48 value for money studies in the last three years. The government departments involved and the subject of the studies are set out in the Annex.
All the studies have recommended improvement measures in terms of staffing and/or operational procedures. Some examples of the measures introduced are:
- improved productivity and the introduction of a new accounting framework - improved productivity and the introduction of a new accounting framework (Operating Services Account) for Electrical & Mechanical Services Department workshops
- major organizational changes to Registrar General's Department - major organizational changes to Registrar General's Department
- the introduction of modern office technology in Information Services - the introduction of modern office technology in Information Services Department leading to improved productivity and savings in staff
- improvement to methods and procedures for street-cleansing in both Urban - improvement to methods and procedures for street-cleansing in both Urban Services Department and Regional Services Department and proposals to contract out street-cleansing leading to significant increase in productivity
- simplifying handling procedures and relaxing review cycles for a variety of mplifying handling procedures and relaxing review cycles for a variety of social security allowances enabling revision of manning standards and merging of smaller field units
- modification of inspection frequencies, computerization of factory records - modification of inspection frequencies, computerization of factory records for better inspection scheduling and controls in the Women & Young Persons Division of Labour Department
- introduction of modern office equipment to improve productivity in typing - introduction of modern office equipment to improve productivity in typing pools
- introduction of a central telephone enquiry system in CNTA to ena - introduction of a central telephone enquiry system in CNTA to ena introduction of a central telephone enquiry system in CNTA to enable better ble better service to the public
- rationalization of activities in Public Enquiry Service Centres to enable - rationalization of activities in Public Enquiry Service Centres to enable the closing of some underutilized Public Enquiry Service Centres
Over 2 900 posts have been saved as a result of the studies.
Annex
Departments Subjects Departments Subjects
Correctional Services Manpower Review of Escort Unit Correctional Services Manpower Review of Escort Unit
Department
Manpower Review of Medium-security
Institutions
Manpower Review of Minimum-security
Institutions
Manpower Review of Centre Institutions
Review of Correctional Services Industries
Manpower Review of Maximum-security
Institutions
Education and Manpower Review of Roles & Responsibilities Education and Manpower Review of Roles & Responsibilities Branch of Schools Education Branch of Schools Education
Electrical & Mechanical Top-down Management Study Electrical & Mechanical Top-down Management Study
Services Department
Review of Workshops
Highways Department Review of Provision of Direct Labour Highways Department Review of Provision of Direct Labour Review of Provision of Direct Labour Force Immigration Department Top-down Management Study Immigration Department Top-down Management Study
Information Services Review of Information Services Information Services Review of Information Services Department Department Department Department
Registrar General's Top-down Management Study Registrar General's Top-down Management Study
Department
Review of the Microfilm Search System in
Company Registry
Security Branch Review of the Triad Renunciation Scheme Security Branch Review of the Triad Renunciation Scheme
Water Supplies Top-down Management Study Water Supplies Top-down Management Study
Department
Review of Customer Services
Buildings & Lands Management (Consultancy) Study of Buildings & Lands Management (Consultancy) Study of Department Survey and Mapping Office Department Survey and Mapping Office
Departments Subjects Departments Subjects
Census and Statistics Top-down Management Study Census and Statistics Top-down Management Study
Department
Environmental Protection Top-down Management Study Environmental Protection Top-down Management Study Department
Legal Aid Department Review of Costin Legal Aid Department Review of Costin Review of Costing Information and g Information and Evaluation of Cost-effectiveness of
Legal Aid System
Post Office Automation of Postal Counter Services Post Office Automation of Postal Counter Services
Regional Services Value for money Studies on: Regional Services Value for money Studies on: Department
Cleansing
Nurseries
Minor Works Teams
Revision of Refuse Collection
Vehicle Routes Based on Revised
Time Standards
Manning Scale for Libraries
Supporting Staff
Litter Picking at Roadside Amenity
Plots and Planters
Dual-bin Collection Operations
Horticultural Maintenance
Cleansing Service in Indoor
Recreation Centre Recreation Centre
Street Cleansing -- Phases I & II
Animal Carcase Service
Transport & Stage Setting Services
Desludging Services for Vietnamese
Detention Centres
Housing Department Value for money Studies on: Housing Department Value for money Studies on:
Delegation of Office Rent
Collection Duties Collection Duties
Squatter Control Duties
Staffing Requirement for the
Implementation of the Double Rent
Policy
Departments Subjects Departments Subjects
Urban Services Value for money Studies on: Urban Services Value for money Studies on: Department
Passive Amenities
Combining Park-keeping Duties with
Gardening Services Gardening Services
Contracting out of Cleansing
Services of Parks and Playgrounds
Contracting out of Street Cleansing
Recreation and Sports Officer Grade
Manning Ratio for Health
Inspectorate in the District
Hygiene Sections
City & New Territories Top City & New Territories Top-down Management Study -down Management Study Administration
Review of Public Enquiry Service
Centres (PESC) and Follow Up Study
Review of Works Teams
Civil Service Branch Review of Staff Housing Section Civil Service Branch Review of Staff Housing Section Labour Department Review of Mines Division Labour Department Review of Mines Division
Review of Women & Young Persons Review of Women & Young Persons
Division
Review of Employment Services
Division
Review of Employees' Compensation
Division
Review of the Distribution of
Branch Offices
Finance Branch Review of Typing, Messengerial & Finance Branch Review of Typing, Messengerial & Photocopying Services
Review of Secretarial Service in FB Review of Secretarial Service in FB
Inland Revenue Top-down Management Study Inland Revenue Top-down Management Study
Department
Departments Subjects Departments Subjects
Hospital Services Review of Manpower Provision for Hospital Services Review of Manpower Provision for Department/Department Pharmacist & Dispenser Grade in Department/Department Pharmacist & Dispenser Grade in of Health Hospitals and Clinics of Health Hospitals and Clinics
Automation of Revenue Collection in Automation of Revenue Collection in
Clinics
Floating Clinics
Public General Outpatient
Department Pilot Study
Social Welfare Review of Social Security Field Social Welfare Review of Social Security Field Department Units (3 phases) Department Units (3 phases)
Review of Group Work Units
Service-wide Asset Register (AR) & Asset Service-wide Asset Register (AR) & Asset
Replacement Programme (ARP) Replacement Programme (ARP)
Review of Community Related
Facilities (CRF's)
Director of Administration Review of the Hansard Production Director of Administration Review of the Hansard Production Process for Councils Division
Survey on Pilot Networking P C and
Fax Machine in CGO (FAXNET)
Recreation and Culture Review of Voluntary Agency Camps Recreation and Culture Review of Voluntary Agency Camps
Branch
Housing Society development plans
8. MR LAU CHIN-SHEK asked: Will the Government inform this Council whether there 8. MR LAU CHIN-SHEK asked: Will the Government inform this Council whether there are plans to allocate funds to the Housing Society for development purpose in the 1992-93 Financial Year? If so, what are the details of the development plans and their financial arrangements?
SECRETARY FOR PLANNING, ENVIRONMENT AND LANDS: Mr Deputy President, the Hong Kong Housing Society's rental and flats-for-sale projects are funded from its own resources. It is open to the Society to apply to the Government for low-interest loans from the Development Loan Fund for its rural public housing and urban improvement projects however. The Administration understands that the Housing Society has no plans to apply for funds during 1992-93.
Airport bus routes
9. MR HOWARD YOUNG asked: As there are no airport bus routes between Kai Tak Air 9. MR HOWARD YOUNG asked: As there are no airport bus routes between Kai Tak Airport and West Kowloon at present, will the Government inform this Council whether it will consider inviting interested parties to operate one or more new airport bus routes to cover this area in view of the increase in the number of hotels in the Mong Kok and Yau Ma Tei areas?
SECRETARY FOR TRANSPORT: Mr Deputy President, an airport bus service (Airbus Route A4) for Mong Kok was introduced by KMB in January 1990. The service was later extended to the China Ferry Terminal. However, utilization had remained low. Due to sustained financial loss, the service was cancelled in May 1991 following consultations with the Yau-Tsim District Board.
During the Lunar New Year holidays this year, KMB tested a new service (Airbus
Route A8) from Kai Tak to the MTR Prince Edward Station. Only 15% of the available capacity was taken up. Its utilization rate suggests that the market in West Kowloon for an airport bus service would remain weak in the short to medium term.
Eleven hotels opened in Mong Kok and Yau Ma Tei over the past three years. Ten of them have their own transport services to Kai Tak. There are therefore no plans at this stage to invite interested parties to operate an airport bus service for West Kowloon.
Nevertheless, we will continue to take full account of growing hotel accommodation in Mong Kok and Yau Ma Tei and keep the demand for an airport bus service under review.
Overseas domestic workers
10. MRS ELSIE TU asked: In relation to overseas domestic workers applying for 10. MRS ELSIE TU asked: In relation to overseas domestic workers applying for extension of stay to seek redress from employers, would the Government inform this Council of the following:
(a) whether the usual exte (a) whether the usual exte whether the usual extension is for three to seven days, renewable for very nsion is for three to seven days, renewable for very short periods at a charge of $115 each time;
(b) whether action through the Labour Department/Tribunal, and where necessary (b) whether action through the Labour Department/Tribunal, and where necessary the Courts, takes from three months to one year or more;
(c) whether such wo (c) whether such wo whether such workers are prohibited from working for their living during the rkers are prohibited from working for their living during the waiting period and usually have to depend upon friends or relatives;
(d) whether the workers can sign a new contract before the case has been judged, (d) whether the workers can sign a new contract before the case has been judged, and if not, why not;
(e) whether the Gov (e) whether the Gov whether the Government has evidence that most workers fail to pursue their ernment has evidence that most workers fail to pursue their cases because of the above disincentives; and
(f) whether the Government has examined the above treatment of workers to ensure (f) whether the Government has examined the above treatment of workers to ensure consistency with the Bill of Rights?
SECRETARY FOR EDUCATION AND MANPOWER: Mr Deputy President, the answers to Mrs TU's questions, in the order in which they are asked, are as follows:
(a) Foreign domestic helpers whose contracts have been terminated prematurely (a) Foreign domestic helpers whose contracts have been terminated prematurely are normally permitted to remain in Hong Kong for a period of two weeks so as to settle their affairs and make arrangements to leave Hong Kong. However, if foreign domestic helpers have a genuine reason for needing to remain in Hong Kong beyond the two weeks permitted, for example, if they have been unfairly treated and are seeking redress, they may apply for an extension of stay in order to pursue a claim against their former employers. The current period of extension currently ranges from five to 17 weeks depending on the circumstances of individual cases. A standard fee of $115 is charged for each extension.
(b) Conciliation meetings arranged by the Labour Department normally take place (b) Conciliation meetings arranged by the Labour Department normally take place within four weeks of the receipt of a request from a foreign domestic helper. If the dispute is subsequently brought to the Labour Tribunal, the waiting time for the hearing could be up to four months.
(c) Since foreign domestic helpers are admitted for employment with specific (c) Since foreign domestic helpers are admitted for employment with specific employers under specific contracts, they are not normally allowed to work for new employers during this waiting period.
(d) Foreign domestic helpers are allowed to change employment only in excepti (d) Foreign domestic helpers are allowed to change employment only in exceptional circumstances, for example, where a foreign domestic helper has been unfairly treated or where an employer is unable to continue with the contract because of financial difficulties, emigration, transfer abroad or death. The Immigration Department
considers the circumstances of each case to see whether there are strong humanitarian or compassionate grounds to justify exceptional treatment.
(e) In ou (e) In our experience, aggrieved foreign domestic helpers have been willing to r experience, aggrieved foreign domestic helpers have been willing to pursue their cases. In 1991, Labour Department dealt with 908 such cases, of which two-thirds were settled after conciliation.
(f) The Government has examined the implications of the (f) The Government has examined the implications of the The Government has examined the implications of the Bill of Rights in this Bill of Rights in this context. Section 11 of the Bill of Rights Ordinance provides that as regards persons not having the right to enter and remain in Hong Kong, the Ordinance does not affect any immigration legislation governing entry into, stay in and departure from Hong Kong, or the application of any such legislation.
Plot ratio of GIC land
11. MR ERIC LI asked: Will the Government inform this Council: 11. MR ERIC LI asked: Will the Government inform this Council:
(a) what criteria have been adopted in determining the plot ratio of (a) what criteria have been adopted in determining the plot ratio of Government/Institution/Community (GIC) land;
(b) why the plot ratio of GIC land has been set at a level lower than that of (b) why the plot ratio of GIC land has been set at a level lower than that of the land granted for industrial, commercial or residential use; and
(c) in view of the current practice that the total area of land to be granted (c) in view of the current practice that the total area of land to be granted every year is subject to discussion and approval by the Sino-British Land Commission, and given the extremely high opportunity costs of land for commercial and residential uses at present, whether consideration has been given to improving the plot ratio of GIC land to achieve optimization of land use?
SECRETARY FOR PLANNING, ENVIRONMENT AND LANDS: Mr Deputy President, GIC facilities are normally designed to meet the requirements of the end-user. The intensity to which GIC sites are developed is generally determined therefore in accordance with a schedule of accommodation related to their use and planning standards and guidelines.
For example, the site requirements of a school are different from those of a government office building, or a polyclinic, or a divisional police station and so on.
Plot ratio is thus not a determining factor in deciding how and to what intensity GIC sites should be developed. Nor is it appropriate to compare the development intensity of GIC sites with that of industrial, commercial or residential sites by reference to plot ratios.
Nevertheless, the Administration recognizes the need to optimize land use. To this end, the use of GIC sites is kept under review to take account of changing circumstances and the requirements of end-users; where sites are found to be under-utilized, steps will be taken to optimize their use, if necessary, by redevelopment.
Land use optimization is also assisted by including GIC uses within comprehensive development schemes or revised use projects on GIC sites where this is acceptable
both to the users and the Town Planning Board.
Government-employed consultancies
12. MISS EMILY LAU asked: In view of the growing concern of Legislative Councillors 12. MISS EMILY LAU asked: In view of the growing concern of Legislative Councillors over Government's tendency to employ consultants on projects big or small, will the Administration inform this Council of:
(a) the criteria for determining when consultants are to be employed; (a) the criteria for determining when consultants are to be employed; (b) the mechanism for vetting departments' applications to hire consultants; (b) the mechanism for vetting departments' applications to hire consultants;
(c) the number of consultancies t (c) the number of consultancies t the number of consultancies that have been commissioned in the past two y hat have been commissioned in the past two years and their cost?
SECRETARY FOR WORKS: Mr Deputy President, the criteria used for determining the need for consultants to be employed are firstly, whether there are qualified staff with the requisite skills available to undertake the work in the Civil Service and if not, whether the length of the assignment justifies the Government recruiting or training staff. The criteria recognize the need to keep in-house resources fully occupied and to maintain a reasonable level of technical experience and expertise within the Government. Officers responsible for the approval of expenditure and appointment of consultants are aware of the need to strictly observe the above criteria.
If a Director considers it necessary to employ consultants for a particular t If a Director considers it necessary to employ consultants for a particular task, he is required to make a written submission to the Secretary for the Treasury to justify his case. Approval will only be given if the Director can demonstrate in his submission that:
(a) there is a clear nee (a) there is a clear nee there is a clear need to employ a consultant having taken into account d to employ a consultant having taken into account in-house resources and the nature of the task itself;
(b) the proposal has the support of the relevant policy branch; and (b) the proposal has the support of the relevant policy branch; and (c) no other government department has the resources to undertake such work. (c) no other government department has the resources to undertake such work.
The selection and appointment of consultants for individual projects are subject to the approval of the Secretary for the Treasury who is advised by the Central Consultants Selection Board (CCSB) for general consultancy studies. Authority to approve the selection and appointment of engineering and architectural consultants has been delegated to the Engineering and Associated Consultants Selection Board (EACSB) and the Architectural and Associated Consultants Selection Board (AACSB) respectively.
The number of consultancies commissioned in the last two years (since April 1 The number of consultancies commissioned in the last two years (since April 1990) and their costs are as follows:
Cost
No HK$ M No HK$ M
General Consultancies (CCSB) : General Consultancies (CCSB) : 43 269
Engineering & Associated Consultancies : Engineering & Associated Consultancies : 131 2,155
(EACSB)
Architectural & Associated : Architectural & Associated : 28 114
Consultancies (AACSB)
Total : Total : 202 2,538
Operation waiting time for an eye disease
13. MR HENRY TANG asked: Will the Government inform this Council how long, on ave 13. MR HENRY TANG asked: Will the Government inform this Council how long, on average, a member of the public has to wait before he can receive an operation in a public clinic/hospital for an eye disease, for example a cataract, and whether there are plans to shorten the waiting time?
SECRETARY FOR HEALTH AND WELFARE: Mr Deputy President, the waiting time for ophthalmological operations will vary depending on the nature and severity of the disease involved. While ocular emergencies are normally handled by the Accident and Emergency Department of public hospitals, urgent referrals are also accepted by the Argyle Street Ophthalmic Centre, Tang Chi Ngong Eye Clinic and Prince of Wales
Hospital. In all cases, surgery is arranged almost without waiting or within days/weeks depending on the degree of urgency involved.
Patients with non-urgent cases such as cataract are placed on the waiting list for surgery. The waiting time ranges from between four and six months (at the South Kwai Chung Clinic, East Kowloon Polyclinic and Tuen Mun Hospital) to between 16 and 18 months (at the Argyle Street Ophthalmic Centre, Tang Chi Ngong Eye Clinic and Prince of Wales Hospital). Patients are given the information on waiting time and may
request for an early appointment at another hospital or clinic. Regular follow up consultations are provided to these patients to detect any deterioration of their conditions and to provide priority arrangements where appropriate.
In the long term, Hospital Authority is planning to integrate its existing services with the Department of Ophthalmology in Prince of Wales Hospital to provide a network of three tertiary referral centres and eight secondary referral centres. This will lead to better service co-ordination and help to reduce the waiting time for eye surgeries.
CFC refrigerants
14. DR SAMUEL WONG asked: In the light of the amendment to the Montreal Protocol on 14. DR SAMUEL WONG asked: In the light of the amendment to the Montreal Protocol on controls of chlorofluorocarbons (CFCs), will the Government inform this Council whether it will consider replacing or modifying the air-conditioning/refrigeration plants in government buildings still using CFC refrigerants, and if so, what would be the estimated cost involved?
SECRETARY FOR WORKS: Mr Deputy President, Chlorofluorocarbons (CFCs) commonly used as refrigerants in airconditioning plants are regarded as ozone depleting as well as contributing to global greenhouse warming.
Since the enactment of the Ozone Layer Protection Ordinance in 1989, measures Since the enactment of the Ozone Layer Protection Ordinance in 1989, measures have been taken to minimize the risk of CFC escaping to the atmosphere including the use of re-cycling ancillary equipment. Plants operating with refrigerants other than CFC have been installed. These include the HCFC centrifugal chillers at the Kai Tak Airport and the Wanchai Tower III, and the Lithium Bromide Absorption Chiller at Queen Mary Hospital. The HCFCs have a significantly lower ozone depletion
and global warming potential. In the absorption system, water is used as a refrigerant which is of course CFC-free.
In the longer term, consideration has been given to replacing all existing installations by (i) HCFC-22 and (ii) absorption chillers. A capital expenditure of about $500 million and an additional energy cost of $30 million per annum are required if option (i) is to be pursued. The corresponding capital cost and additional energy cost per year are $920 million and $490 million for option (ii). A two-year re-fitting programme is expected for either option. Additional plant room space will invariably be required, which may not permit the replacement or modification of the plants in all cases.
The most economic alternative would be the adoption of a direct substitute to the refrigerant in the existing plant with only limited alteration to the plant themselves. Research and development in this field is being pursued by scientists worldwide and it is expected that the outcome would be available in about a year's time. The Government is keeping close watch on such developments. Squatter clearance programme
15. DR CONRAD LAM asked: In relation to the squatter occupancy survey carried out 15. DR CONRAD LAM asked: In relation to the squatter occupancy survey carried out in 1984-85 and the Government's plan to clear all squatter huts built on Crown lands in the urban area by mid-1990's, will the Government inform this Council:
(a) what progress has so far been made in clearing these squatter huts; (a) what progress has so far been made in clearing these squatter huts; (b) what clearance operations have been planned for the next three years; and (b) what clearance operations have been planned for the next three years; and (c) when the whole squatter clearance program (c) when the whole squatter clearance program when the whole squatter clearance programme is expected to complete? me is expected to complete?
SECRETARY FOR PLANNING, ENVIRONMENT AND LANDS: Mr Deputy President, the clearance of squatter huts on government land in the urban area since 1984 has reduced the squatter population from 183 000 to 56 000. Under a four-year programme from 1992-93 to 1995-96 an average of 14 500 urban squatters will be cleared each year. The aim is thus to complete the clearance of all squatter areas in the urban area by the mid-1990s.
Private schools operation
16. MRS PEGGY LAM asked: Wil 16. MRS PEGGY LAM asked: Wil MRS PEGGY LAM asked: Will the Government inform this Council what measures are l the Government inform this Council what measures are in place to monitor the operation of private schools so as to protect the rights and interests of their students; and when operational problems arise in those schools, what measures will be taken to protect the students so that their studies will not be affected?
SECRETARY FOR EDUCATION AND MANPOWER: Mr Deputy President, the Education Ordinance and the Education Regulations impose a range of legal obligations on operators of schools, including private independent schools, so as to ensure that:
(a) school premises are structurally safe and meet acceptable standards of fire (a) school premises are structurally safe and meet acceptable standards of fire safety, health and sanitation;
(b) each school is managed by a Management Committee, the prime responsibility (b) each school is managed by a Management Committee, the prime responsibility of which is to ensure that the school is managed properly and that the education of pupils is promoted in a proper manner;
(c) no person shall teach in a school unless he is a registered or permitted (c) no person shall teach in a school unless he is a registered or permitted teacher;
(d) the syllabuses, timetables and time allocation tables are (d) the syllabuses, timetables and time allocation tables are the syllabuses, timetables and time allocation tables are subject to appr subject to approval by the Director of Education;
(e) only the approved inclusive fees published in the Gazette and any additional (e) only the approved inclusive fees published in the Gazette and any additional fees which have had the prior approval of the Director of Education are charged by schools; and
(f) proper accounts are k (f) proper accounts are k proper accounts are kept by schools and made available for inspection by the ept by schools and made available for inspection by the Director of Education and any inspector of schools.
A legal framework therefore exists to protect the interests of students of private schools. Operating within this framework, District Education Officers of the Education Department inspect schools regularly to ensure that the legal requirements are met, while subject inspectors of the Advisory Inspectorate vet the syllabuses and time-tabling arrangements of new courses and, if necessary, advise on the suitability and adequacy of teaching facilities and equipment.
Circulars are also issued to private schools from time to time to advise them on various matters concerning the operation of schools.
If an operational problem arises in a private school or a complaint is received If an operational problem arises in a private school or a complaint is received about its operations, District Education Officers will investigate, advise or take follow-up action as appropriate. Where closure of a school is involved, the Education Department will assist the students to find suitable places in other schools as far as possible. In particular, local students who are within the age of compulsory education and who are pursuing a normal primary or junior secondary curriculum in a school which is being closed will be offered places in a school or schools in the public sector.
Use of Chinese in court
17. MR JAMES TO asked: Will the Government inform this Council: 17. MR JAMES TO asked: Will the Government inform this Council: (a) of the policy on the use of the Chinese Language for trials in courts; and (a) of the policy on the use of the Chinese Language for trials in courts; and
(b) how the Chinese language is being used for tr (b) how the Chinese language is being used for tr how the Chinese language is being used for trials in courts at various le ials in courts at various levels and the number of cases heard in the Chinese language each year in these courts during the past two years?
CHIEF SECRETARY: Mr Deputy President,
(a) The policy is to move towards greater use of Chinese in the courts. T (a) The policy is to move towards greater use of Chinese in the courts. T The policy is to move towards greater use of Chinese in the courts. The legal he legal framework for this is now in place in the lower courts, that is, magistrates' courts and tribunals, and the Chief Justice encourages Chinese speaking magistrates to conduct trials in Chinese. In the higher courts, because of the greater complexity of the legal language used there, English continues to be the language in which the proceedings are conducted. Interpretation is provided in all cases when it is needed.
(b) The Chinese language is used to different extents in courts at different (b) The Chinese language is used to different extents in courts at different levels. Almost all the trials conducted by Special Magistrates are conducted in Chinese. These trials are for minor offences such as hawking and littering and they form a very large proportion of all cases dealt with by the courts. The vast majority
of cases dealt with in the Small Claims Tribunal and the Labour Tribunal are also conducted in Chinese. Cases dealt with by Permanent Magistrates may be conducted in Chinese or English, or partly in Chinese and partly in English, depending on the choice of the Magistrate and Counsel. However, no statistics are kept. As regards the language used in proceedings in higher courts, as indicated earlier, because of the greater complexity of the legal language used, English continues to be the
language in which the proceedings are conducted in the District and Supreme Court. Nevertheless, section 5(3) of the Official Language Ordinance provides that any party or witness in any proceedings in any court may use either English or Chinese or any other language as the court may permit.
Squatter areas facilities
18. DR CONRAD LAM asked: In view of the recent outbreaks of fire in the Diamond Hill 18. DR CONRAD LAM asked: In view of the recent outbreaks of fire in the Diamond Hill squatter area, will the Government inform this Council what measures will be taken to ensure that residents in squatter areas already scheduled for clearance will not be vulnerable to accidents such as fire hazards and flooding due to the inadequate provision or poor maintenance of basic facilities?
SECRETARY FOR PLANNING, ENVIRONMENT AND LANDS: Mr Deputy President, a programme to improve conditions in squatter areas by providing basic services and safety facilities was introduced in 1983. The programme included fire prevention education, the provision of firebreaks and drainage facilities, the installation of fire mains and hydrants in strategic locations, and the clearance of squatter dwellings most vulnerable to landslips. The programme covered 99 squatter areas at a total capital cost of $182 million and was completed in 1990.
The services and facilities provided through this programme have been effective The services and facilities provided through this programme have been effective in reducing fires, serious landslips and flooding in squatter areas. A follow up programme of regular inspection, maintenance and repair has been put in place by the Housing Authority to ensure their continued effectiveness until the squatter areas are cleared.
Kindergarten teacher training
19. MR NG MING-YUM asked: Will the Government inform this Council: 19. MR NG MING-YUM asked: Will the Government inform this Council:
(a) how many kindergarten teachers were trained in each of the past three years; (a) how many kindergarten teachers were trained in each of the past three years; and what were the annual demand for and supply of these training places during the same period;
(b) whether the Government has received any complaints during the past three (b) whether the Government has received any complaints during the past three years from trained kindergarten teachers concerning difficulties in finding jobs or in obtaining the normative salary recommended by the Government; and if so, what kind of assistance has been given to the complainants; and
(c) how many kindergarten teachers are expected to be given training in each of (c) how many kindergarten teachers are expected to be given training in each of the next five years; and what measures Government will take to encourage heads of kindergartens to release their teachers for training and to employ more trained kindergarten teachers?
SECRETARY FOR EDUCATION AND MANPOWER: Mr Deputy President, the answers to Mr NG's questions are as follows:
(a) The number of kindergar (a) The number of kindergar The number of kindergarten teachers trained in each of the past three years ten teachers trained in each of the past three years was:
1988-89 1989-90 1988-89 1989-90 1989-90 1990-91 1990-91
Qualified Kindergarten 227 Qualified Kindergarten 227 224 226
Teachers (QKT)
Qualified Assistant 484 Qualified Assistant 484 274 358
Kindergarten Teachers
(QAKT)
----- ----- ----- ----- -----
711 498 711 498 584
=== === === === ===
The annual demand and supply of training places for the same period (that is, the actual intake and capacity of the training courses in the relevant years) were:
1988-89 1989-90 1988-89 1989-90 1989-90 1990-91 1990-91
QKT QAKT QKT QAKT QKT QAKT QKT QAKT
Actual intake 240 Actual intake 240 518 237 289 280 379
Capacity 240 Capacity 240 720 240 720 300 720
(b) The Education Department has not received any complaints from trained (b) The Education Department has not received any complaints from trained kindergarten teachers concerning difficulties in finding jobs or in obtaining the normative salaries during the past three years.
(c) The number of kindergarten teachers expected to receive training in courses (c) The number of kindergarten teachers expected to receive training in courses provided by the Government in each of the next five years is 960. The Hong Kong Polytechnic also runs a certificate course in pre-primary education which has an annual intake of about 130.
Measures specifically aimed at encouraging heads of kindergartens to release their teachers for training include offering a variety of modes of attendance and training times to suit different circumstances. The Education Department also provides indirect encouragement by allowing kindergarten operators to increase fees to cover the increased staff costs. A new Kindergarten Fee Remission Scheme was introduced in 1990-91 to assist needy parents so that they would not be deterred by the increased fees from sending their children to kindergartens. The Scheme was enhanced in the 1991-92 school year.
The Education Commission is considering further means of encouraging the move towards a better qualified kindergarten teaching force and is expected to make recommendations in the context of its fifth report to be released shortly.
First Reading of Bills
EMPLOYEES' COMPENSATION (AMENDMENT) BILL 1992
EMPLOYEES' COMPENSATION (AMENDMENT) (NO. 2) BILL 1992
SOCIETIES (AMENDMENT) BILL 1992
Bills read the First time and ordered to be set down for Second Reading pursuant to Standing Order 41(3).
Second Reading of Bills
EMPLOYEES' COMPENSATION (AMENDMENT) BILL 1992
THE SECRETARY FOR EDUCATION AND MANPOWER moved the Second Reading of: "A Bill to amend the Employees' Compensation Ordinance."
He said: Mr Deputy President, I move that the Employees' Compensation (Amendment) Bill 1992 be read a Second time.
This Bill expands the application of the Employees' Compensation Ordinance to This Bill expands the application of the Employees' Compensation Ordinance to benefit more employees and dependants of employees killed in work accidents. It also revises the levels of penalty under the principal Ordinance and introduces minor amendments to facilitate the effective administration of the existing employees' compensation system.
The first purpose of the Bill is to expand the definitions of "employee" and "dependants" under the Ordinance. Clause 2 of the Bill extends the Ordinance's coverage to part-time domestic helpers who are currently excluded from the protection of the principal Ordinance and who, as a result, can only seek redress by claiming damages at common law if they are injured in the course of their work. In view of the increasing popularity of employing part-time domestic helpers, we propose to bring them within the ambit of the Ordinance.
Clause 3 of the Bill introduces the concept of prospective dependency into the definition of "dependants". The current definition of "dependants" is confined to dependency at the time of the employee's death. With the proposed amendment, "dependants" will include children of an employee born after his death and retiring parents and grandparents who are likely to be dependent on the earnings of the
deceased.
The second purpose of the Bill is to revise the levels of penalty for various The second purpose of the Bill is to revise the levels of penalty for various offences under the principal Ordinance so that offences of similar gravity will carry the same maximum penalty. This is done by clauses 4, 6, 9 to 11, 13, 14 and 16 to 18 of the Bill. The realignment is necessary because the prosecutable offences were brought in at different times by various amendment Ordinances which set different maximum penalties. After this revision, the maximum fines would be set uniformly at $5,000, $10,000 and $20,000, depending on the severity of the offences. The maximum fine of $50,000 would be retained for the most serious offences of failing to secure insurance cover or to produce an insurance policy for inspection. Existing penalties which involve custodial sentences will not be affected by the amendment Bill.
The third purpose of the Bill is to introduce improvements to the procedures for determining the amount of compensation. Under clause 7, the Commissioner for Labour will be empowered to cancel his assessment of compensation on review and refer the injured employee for assessment by an Assessment Board. At present, the injured employee has to seek the Court's intervention to re-assess his compensation. Clause 7 also defines "date of issue" in a Certificate of Compensation Assessment issued by the Commissioner for Labour or a Certificate of Assessment of incapacity issued by an Assessment Board. It clarifies the time limits within which an employer must effect compensation payment to his employee or enter into an agreement of compensation with him.
By clause 8, an Ordinary Assessment Board will be vested with the additional function of assessing the overall period of absence from duty necessary as a result of the injury. This will make it easy for the Commissioner to assess the compensation payable for the days absent from work.
Other clauses of the Bill introduce minor amendments to the principal Ordinance which are considered necessary in the light of experience.
Clause 5 of the Bill removes the limit of deduction of advance payment from the Clause 5 of the Bill removes the limit of deduction of advance payment from the amount of compensation that the Court or the Commissioner for Labour may order. This will leave it free to an employer to increase the amount of advance payment in deserving cases and deduct it from the final compensation afterwards.
Clause 12 extends the application of the Ordinance to an employee injured while Clause 12 extends the application of the Ordinance to an employee injured while
working for a foreign employer outside Hong Kong, if that foreign employer voluntarily submits his case to the jurisdiction of the Hong Kong Court. If the concerned parties choose to rely on this new provision, they can avoid having the case adjudicated in the Court of the place of injury, which may be unfamiliar to the employee or even to the employer.
Finally, clause 15 provides that compensation payable under the Ordinance to a legally aided person is subject to the first charge provision in the Legal Aid Ordinance. This is in line with the arrangement for payment of contribution to the Director of Legal Aid in other personal injury claims.
Mr Deputy President, the proposed amendments represent further improvements to Mr Deputy President, the proposed amendments represent further improvements to the employees' compensation system and should be welcomed by employers and employees alike. The Bill has the support of the Labour Advisory Board.
Mr Deputy President, I move that the debate on this motion be now adjourned. Mr Deputy President, I move that the debate on this motion be now adjourned. Question on the adjournment proposed, put and agreed to.
EMPLOYEES' COMPENSATION (AMENDMENT) (NO. 2) BILL 1992
THE SECRETARY FOR EDUCATION AND MANPOWER moved the Second Reading of: "A Bill to amend the Employees' Compensation Ordinance."
He said: Mr Deputy President, I move that the Employees' Compensation (Amendment) (No. 2) Bill 1992 be read a Second time.
Each year the Labour Department deals with a large number of claims for employees' compensation arising from occupational accidents. To ascertain the nature and extent of injury sustained by an employee, the Labour Department operates a two tier system of medical clearance and assessment. Medical staff of the Department interview every injured employee in the first instance. Where the injury is considered likely to result in permanent incapacity, they refer the injured employee for assessment by a statutory Assessment Board.
Experience shows that this system of medical clearance and assessment is useful in cases involving injury of a more serious nature. For minor cases involving only a few days' sick leave, assessment by an Assessment Board is obviously not necessary. It is therefore a waste of time and money to require the employees in such cases to take leave for medical clearance at the Labour Department and require their employers to pay them wages for the absence from duty.
The Bill provides for new procedures as an alternative to employers and employees in cases of minor injury involving absence from duty of not more than seven days. Under these new procedures, an employer may agree with his employee on the amount of compensation to be paid without the need for medical clearance at the Labour
Department.
The kind of agreement contemplated is of a very simple and straight-forward nature and may take either a written or verbal form. To safeguard the interest of the employee, the Bill requires the employer to report the accident and also the amount of compensation agreed with the employee to the Commissioner for Labour within 14 days after the accident. The Commissioner will see to it that the compensation agreed does not fall short of the provisions of the Ordinance. If necessary, the Commissioner may cancel the agreement and substitute his assessment instead.
Should the employer and the employee fail to reach an agreement under the new Should the employer and the employee fail to reach an agreement under the new procedures, the compensation claim can still be processed in the old manner. The Commissioner will then assess the compensation payable and issue a certificate of his assessment. Alternatively, the employee may take his case to Court for
adjudication.
Thus, the new procedures do not deprive employees of existing channels of redress, but offer the added advantage of a speedier mechanism for settlement of minor injury claims. Besides, the employee does not have to be absent from work for medical clearance purpose. The employer will also be able to claim reimbursement of compensation paid from his insurer sooner, without having to wait for the Commissioner for Labour's assessment.
To give effect to the proposed new procedures for compensation by agreement, it
is necessary to amend the notice of accident in Form 2, as well as Form 2A contained in the schedule to the Employees' Compensation Regulations. The Executive Council has considered the matter on 5 May 1992 and has accepted the proposed alteration in principle.
The new procedures for settlement of minor injury cases will greatly enhance the cost-effectiveness of the present system. The proposal has the support of the Labour Advisory Board and the insurance industry is agreeable to it.
Mr Deputy President, I move that the debate on this motion be now adjourned. Question on the adjournment proposed, put and agreed to.
SOCIETIES (AMENDMENT) BILL 1992
THE SECRETARY FOR SECURITY moved the Second Reading of: "A Bill to amend the Societies Ordinance."
He said: Mr Deputy President, I move that the Societies (Amendment) Bill 1992 be read a Second time. The Bill seeks to replace the societies registration system provided for in the Ordinance by a notification system.
As in any civilized society we wish to preserve the right of individuals to freedom of association. But we also need to protect our citizens from criminal, and in particular triad activities and to acknowledge the Government's responsibilities for security, public safety and public order as permitted under Article 18 of the Bill of Rights Ordinance. Thus we propose to retain limited regulation of bodies and associations.
The Bill requires all societies and associations which are not otherwise appr The Bill requires all societies and associations which are not otherwise approved or regulated to notify the Commissioner of Police of their establishment not later than 14 days after formation. Failure to notify will be an offence. Societies which do not comply with the notification requirement will not, however, be regarded as unlawful automatically. We are confident that this arrangement will be compatible with the Bill of Rights Ordinance.
The present Ordinance empowers the Commissioner of Police to refuse to register
a society on a number of specified grounds, including where a society is connected with an overseas political organization. The Bill proposes to substitute this by a provision whereby the Secretary for Security may prohibit the operation of a society if he considers it necessary in the interests of security, public safety and public order. This requirement is necessary to deal with criminal and other undesirable societies whose operations are prejudicial to the well-being of Hong Kong. It is, for example, established policy that we do not want Hong Kong to be used by outsiders for their political battles against China. At the same time, we would like to
reaffirm that Hong Kong people have freedom of speech and that as long as they remain within the law, we cannot and will not take action against them. These policies will remain unchanged.
The Bill also seeks to amend certain presumptions in the existing Ordinance regarding existence, membership, and management of societies by restricting their application to unlawful societies only. We believe this would be consistent with the Bill of Rights Ordinance and yet enable the police to continue with their effective fight against triads.
The Bill proposes to update fines for various triad-related offences. There are suggestions that the imprisonment penalties of such offences should likewise be reviewed to ensure that they continue to be good deterrents. We see merit in this and will be proposing amendments to this effect at the Committee stage.
Mr Deputy President, I move that the debate on this motion be now adjourned. Mr Deputy President, I move that the debate on this motion be now adjourned. Question on the adjournment proposed, put and agreed to.
FIRE SERVICES (AMENDMENT) BILL 1992
Resumption of debate on Second Reading which was moved on 6 May 1992. Question on the Second Reading of the Bill proposed, put and agreed to. Bill read the Second time.
Bill committed to a Committee of the whole Council pursuant to Standing Order 43(1).
BUILDINGS (AMENDMENT) BILL 1992
Resumption of debate on Second Reading which was moved on 8 April 1992. Question on the Second Reading of the Bill proposed, put and agreed to. Bill read the Second time.
Bill committed to a Committee of the whole Council pursuant to Standing Order 43(1).
AERIAL ROPEWAYS (SAFETY) (AMENDMENT) BILL 1992
Resumption of debate on Second Reading which was moved on 6 May 1992. Question on the Second Reading of the Bill proposed, put and agreed to. Bill read the Second time.
Bill committed to a Committee of the whole Council pursuant to Standing Order 43(1).
Committee stage of Bills
Council went into Committee.
FIRE SERVICES (AMENDMENT) BILL 1992
Clauses 1 to 3 were agreed to.
BUILDINGS (AMENDMENT) BILL 1992
Clauses 1 to 12 were agreed to.
AERIAL ROPEWAYS (SAFETY) (AMENDMENT) BILL 1992
Clauses 1 and 2 were agreed to.
Council then resumed.
Third Reading of Bills
THE ATTORNEY GENERAL reported that the
FIRE SERVICES (AMENDMENT) BILL 1992
BUILDINGS (AMENDMENT) BILL 1992 and
AERIAL ROPEWAYS (SAFETY) (AMENDMENT) BILL 1992
had passed through Committee without amendment. He moved the Third Reading of the Bills.
Question on the Third Reading of the Bills proposed, put and agreed to. Bills read the Third time and passed.
Member's motions
DEPUTY PRESIDENT: We have two Member's motions for debate on the Order Paper. In accordance with recent practice, Members have, I understand, agreed to place a voluntary limit upon the length of speeches.
DEPOSIT PROTECTION SCHEME
PROF EDWARD CHEN moved the following motion:
"That this Council urges the Administration to consider seriously the introduction of a deposit protection scheme (DPS), taking into consideration the costs and benefits of DPS for depositors and banks of all sizes, and the wider implications for the
economy and society at large in the event of bank failures."
PROF EDWARD CHEN: Mr Deputy President, before I speak to the motion, allow me to declare my interests as a director of First Pacific Banchares Holdings which owns the First Pacific Bank, and as Chairman of the Consumer Council which made a representation to the Government, soon after the BCCHK debacle, to urge it to consult the public on the introduction of a deposit protection scheme (DPS) in Hong Kong.
My main purpose, Mr Deputy President, in moving today's motion is not to urge the Government to introduce or not to introduce a DPS in Hong Kong. I trust the Government will be able to use its good judgement to come to a right decision after hearing the various views presented to it. But, for the Government to do so, it must be presented with fair and balanced views from all interested parties, and views which take into consideration the wider interests of the economy and society as a whole. This is what I hope today's motion debate will be able to achieve.
So far, views on a DPS for Hong Kong have mainly been expressed by banks, So far, views on a DPS for Hong Kong have mainly been expressed by banks, especially the big ones, opposing the introduction of such a scheme. Most depositors or consumers do not understand the costs and benefits of DPS for them. My speech today will therefore focus on counteracting those fallible arguments which oppose a DPS, and on the standpoints of the depositors. I shall leave it to my colleagues to speak on the negative aspects of DPS.
First, a DPS does not aim at preventing bank failures which is solely a job of the government banking regulator. DPS is never considered as a substitute, wholly or partially, for prudent supervision of banks by the Government. But, a DPS can prevent bank runs caused by groundless rumours. A confidence crisis can be avoided if the small depositors do not rush to the bank immediately when a rumour breaks out. It is estimated that about 90% of deposit accounts in most banks in Hong Kong have balances not exceeding $100,000. A DPS can also prevent a bank failure from being contagious. Without a DPS, a bank failure will cause multiple bank runs and failures, thus threatening the stability of the whole banking system. When a single bank fails, most banks will proceed to hold excess reserves in order to protect themselves. This precautionary measure will, in turn, lead to a multiple deposit contraction. The net result is the failure of more banks. The United States bank panic in the Great Depression in the 1930s was a case in point.
We must also consider the benefits to the economy and society at large if We must also consider the benefits to the economy and society at large if
unwarranted bank runs and failures are avoided by a DPS. Bank failures undermine the stability of the whole financial system, cause social unrest because of the agitation of depositors, interrupt business activities, and prompt capital flight.
Second, it is a fallacy to argue that under a DPS large banks subsidize small banks. Obviously, large banks will also benefit from a greater overall financial stability under a DPS. But more importantly, the suggestion that large banks are "too big to fail" has been proved erroneous. In 1974, the largest private bank in West Germany failed. In 1984, the eighth largest bank in the United States had to be bailed out twice in one week. Locally, in 1965, the Hong Kong and Shanghai Bank encountered panic deposit withdrawal. Last year, two large banks, the Standard
Chartered and Citibank were subject to heavy deposit withdrawal because of groundless rumours. In 1965, the Hang Seng Bank, which was then already one of the leading local banks, suffered from a bank run due to groundless rumours, resulting in it being taken over by the Hong Kong and Shanghai Bank. Had there been a DPS, some local banks would not have lost their independence. In real life, all banks, whether large or small, are in the same boat whenever panic deposit withdrawal arises.
One would then ask why large banks in Hong Kong should so strongly oppose a DPS. The answer lies in the existing Exchange Fund Ordinance and the nature of the highly overconcentrated, imperfectly competitive banking industry in Hong Kong. I shall return to this subject matter when I deal with consumer interests.
Thirdly, a strong argument against a DPS is the supposed "moral hazard" problem, that is, that a DPS will encourage banks and depositors to take more risks. It is said that with the protection provided by the DPS, depositors would tend to choose a bank which offers the highest interest rate regardless of security. In turn, banks would be more likely to enter into high risk business in order to sustain high interest rates.
I consider the suggested association between risk-taking and DPS illogical. In banks, risks are taken in line with managerial decisions. The degree of risks taken by banks is also related to the level of supervision imposed by the government. A DPS is not an instrument to replace effective bank supervision. A DPS will not
prevent the failure of a badly-run bank, much the same as an accident insurance will not forestall accidents. It is difficult to see how a DPS could provide an incentive for a bank to alter its risk-taking behaviour for a given pattern of rate of return. If a bank chooses new portfolios, it must be because the expected profits will be
higher for a given risk. A DPS is designed to protect depositors' monies and not banks' assets. Banks which go into liquidation will not stand to benefit from any DPS.
One flaw in the "moral hazard" argument is the assumption that depositors are able to assess the soundness of a bank. But, in reality, without full disclosure of information and/or appropriate expertise, most depositors are unable to make a reliable assessment of the management, as well as the solvency, of a bank. In Hong Kong, banks are typically insufficiently transparent. For example inner reserves are not made public. Under these circumstances, market monitoring, caveat emptor, and market discipline just do not work towards safeguarding the interests of
depositors, especially the small ones.
The failures of a series of financial institutions, especially the Savings and The failures of a series of financial institutions, especially the Savings and Loans in the United States in the 1980s are often linked to the introduction of the DPS by way of the "moral hazard" problem. This association is misleading, and subject to methodological flaws. Association is not causation. The DPS was set up in the United States in 1933. From 1933 to about 1980, the scheme worked well and bank failures were greatly reduced. Some studies have convincingly concluded that the United States banking crisis in the 1980s was largely due to factors arising from deregulation in the banking sector during that time, which resulted in misregulation, rather than to the operation of a DPS in that country. We must note that the DPS has successfully operated to keep bank runs and failures at a low level in many
countries, developed and developing. DPS is not an innovation, but has proven experience of workability for a long time in many parts of the world.
Mr Deputy President, I have counteracted the major arguments which banks have put forth to oppose a DPS for Hong Kong, but, while the views of the banks should be considered, the voice of the depositors or consumers must heavily weight the Government's decision whether or not to establish a DPS. This is because, in the end, it is the depositors who will solely or largely bear the cost of a DPS, as the banks will shift the premium to the depositors.
The depositors should realize that their benefits, in fact, go beyond the protection of their deposits in the event of bank failures. An immediate benefit can be derived by depositors from increased competition in the banking industry under a DPS, especially in the case of Hong Kong where the banking industry is highly concentrated with two large banking groups taking up well over 50% of Hong Kong's
total deposits. At present, the very large banks in Hong Kong are enjoying a distinct competitive advantage not necessarily due to the soundness of their management or quality of service provided. Under the existing Exchange Fund Ordinance, the Exchange Fund can only be used for the stabilization of the Hong Kong dollar exchange rate. This means that only in the failure of a large bank will the Exchange Fund likely be used to rescue the troubled bank. In the past, the Government very often also rescued smaller banks. But after the BCCHK incident, the Government cannot be expected to rescue a bank unless it is very large. Discrimination in handling bank failures has resulted and will result to a greater extent than before in unfair competition in the banking industry. With no DPS, people will surely prefer large banks to small ones irrespective of their soundness, the quality of services provided and the amount and number of charges imposed on them. This restricted competition is unhealthy, unfair to the sound and well-managed smaller banks, and, above all, against consumers' interests. We must remember that small banks are granted licences to operate in Hong Kong and are supervised in the same way as the big ones. They have the right to enjoy fair competition which we all cherish and try to uphold in our economy.
To compound the problem, Hong Kong does not have a central bank to act as a lender of last resort and help well-run small banks by providing credit lines to relieve their temporary liquidity problems. The leading banks operate on a commercial basis and have no obligation to take on such role.
The establishment of a DPS will help to improve this situation by enhancing the confidence of depositors in smaller banks and subsequently increasing the competitive efficiency of the banking system, weakening the "artificial" market advantages of big banks over the smaller ones. Increased competition will bring about better quality service and lower charges to consumers. Banks will then have to compete on price and non-price variables. Big banks can no longer take for granted that consumers will go to them irrespective of how they treat them. This explains why big banks are opposing the establishment of a DPS in Hong Kong, just like the large banks in the United States did before the introduction of a DPS in 1933.
The depositors must, of course, weigh the benefits against the costs. In the Government's consultation paper, the calculation arrives at a figure of $91 to $380 a year for a 100% protection of a $100,000-deposit, depending on whether the costs will be borne by all depositors or only those depositors who will benefit from the scheme. I think the banks should impose at least a part of the premium on the
depositors who do not directly benefit from the protection, but who would indirectly benefit from greater financial stability, better services and lower charges. It is up to the depositors to judge whether the benefits, that is, protection plus better services and lower charges, is worth the levy.
With regard to a workable DPS for Hong Kong, I would just make some very brief With regard to a workable DPS for Hong Kong, I would just make some very brief remarks.
First, it must be statutory and mandatory. A voluntary DPS would be impractical. If all large banks chose not to join the scheme, the contributions from the remaining small banks would not be able to support an adequate protection fund. Moreover, in a voluntary DPS, the effect of "adverse selection" will arise -- banks which join the DPS will be viewed by the public as weaker banks.
Second, the Government must take an active role in running the DPS, and act as Second, the Government must take an active role in running the DPS, and act as the guarantor. This will ensure lower administrative costs and greater public confidence. The Government's participation can be justified by the significant social benefits of a DPS for the economy and society at large. Should the DPS funds be inadequate for reimbursing the eligible depositors in a single bank failure, a credit line could be offered by the Exchange Fund to cover the shortfall. The Exchange Fund would be recompensed by the DPS levy in due course.
Third, the DPS should cover local currencies with at least 90% protection up to a ceiling of say $250,000 in all licensed banks of Hong Kong. Deposits of foreign currencies in local banks should also be included, though they could be subject to a lower level of protection. If the Government decides to go for a DPS, it should work out a package which will give rise to a reasonable premium for adequate
protection.
Mr Deputy President, with these words, I move the motion.
Question on the motion proposed.
DEPUTY PRESIDENT: Twenty Members have notified their intention to speak. In view of the agreement for voluntary restraint, this means that each Member has an average time of five minutes for his or her speech.
MR HUI YIN-FAT (in Cantonese): Mr Deputy President, I am neither a financial expert nor someone with profound knowledge of the operation of the banking sector. For this reason, I find myself in a better position to echo the sentiment of the general public on the establishment of a deposit protection scheme (DPS) in the capacity of a small depositor.
First of all, I would like to express my regret at hearing the standpoints and grounds against establishing a DPS as expressed by the Hong Kong Association of Banks the other day. The Association's objection is merely made on the basis of a survey conducted in the banking sector without consulting the depositors. In view of such a dubious act, the public has reasons to suspect whether the banking sector is willing to assist the Government in establishing a widely practised system adopted by many advanced countries all over the world such as, among others, the United States and the United Kingdom. "Nothing is perfectly sound and we should play safe anyway," as the Chinese saying goes. Even for sound banking systems it is necessary to insure themselves against occasional risks, let alone Hong Kong which is going through a sensitive stage.
Objection held by the Hong Kong Association of Banks is mainly based on three points. I would like to address them one by one.
On the first point, it states that "the establishment of a DPS cannot avoid bank runs or failures." Unlike Prof CHEN, I am not a director of any bank nor a committee member of the Consumer Council. However, I think that, logically speaking, a DPS is to safeguard the interests of the depositors, not to guarantee that banks will have no problems. Bank runs or failures are due to inefficient business policy and management of the banks themselves. They have nothing to do with the decisions of the depositors or the presence, or absence, of a DPS. On the contrary, under the DPS, the so-called "domino effect" causing bank runs as a result of an isolated bank failure will be minimized. The BCCHK incident last year led to a series of bank runs. This demonstrated that depositors were vulnerable to rumours when their interests were not safeguarded. And not even those well-run banks could be left unscathed. In fact, according to experiences of foreign countries, such kind of insurance scheme can best shore up depositors' confidence during financial crises.
Secondly, it is claimed that "the scheme cannot provide complete protection to the depositors whereas taxpayers and depositors have to pay additional charges." I
think that what "complete protection" means is whether depositors are willing to pay a higher premium in exchange for a greater degree of deposit protection. According to initial calculation, an annual premium of $300 or so could enjoy a 100% protection of a $100,000 deposit. I am sure that the average depositor can afford this amount of premium, bearing in mind that apart from an insurance scheme and the Government's supervision of the banking sector, there is no safer way to protect their hard-earned savings.
Thirdly, the Association is of the view that "choosing a bank is the Thirdly, the Association is of the view that "choosing a bank is the responsibility of the depositors themselves." I think that this is merely an excuse to shirk responsibility and is very unfair to the depositors. The problem is that information on banking operations is at the moment largely classified as confidential. How many people can acquire sufficient information on each bank before making a wise choice? Furthermore, the way the Administration dealt with the BCCHK incident and its ability to cope with contingency has completely shaken the public confidence in this respect. Without any protection, the public has no alternative but to call for the establishment of a DPS. In response, the banking sector not only shows no support, but tries to evade responsibility. It is really disappointing.
I am of the opinion that the establishment of a DPS will enhance the competitiveness among small-sized banks, thus providing a wider choice for the depositors. Fair competition will lead to improvement in the end and be advantageous to the banking system as a whole.
Mr Deputy President, under the influence of the 1997 jitters, it is a prevailing tendency for the public to strive for the best protection and to have their lives and properties together with their families' well insured. Besides, the lesson the depositors and the whole banking system drew from the BCCHK incident has convinced me that the establishment of a DPS is the trend of the times and it gears to the need for actual development under special circumstances. The DPS actually has three
advantages, namely, stabilizing the financial market, encouraging the banking sector to enhance their competitiveness and upholding justice. This scheme is also a basic element which ensures that Hong Kong will remain an international financial hub beyond 1997 and into the next century. Even if it does not care for the interests of the depositors, the banking industry should make long-term commitment for the sake of our reputation and image as an international financial hub rather than becoming the greatest obstacle to the establishment of a DPS.
Mr Deputy President, with these remarks, I support the motion.
MR DAVID LI: Mr Deputy President, in the face of depositor unease following the closure and liquidation of the Bank of Credit and Commerce Hong Kong, the concept of a deposit protection scheme has been resurrected as a palliative to provide depositors peace of mind and thus to enhance confidence in the banking system.
But while their intentions are good, advocates of such a scheme have largely But while their intentions are good, advocates of such a scheme have largely ignored or dismissed off-hand the many complex issues involved. This is both wrong and dangerous. These issues are important and go to the root of whether such a scheme is needed or appropriate for Hong Kong. These issues include:
First, the significant cost of such a scheme to the Government, banks and depositors;
Second, the negative effect such a scheme would have on the behaviour of depositors and bank management;
Third, the negative effect it would have on Hong Kong's competitiveness as a financial centre; and
Fourth, the dangerous precedent such a move would set for government intervention in the marketplace.
Moreover, advocates of deposit protection have avoided addressing one key question which arises from the Administration's Consultation Paper: Is a deposit protection scheme feasible without government financial backing? This one vital parameter -- set by the Administration -- severely limits the ability of such a scheme to achieve its stated goals.
Would such a scheme guarantee full or prompt compensation of depositors? The Would such a scheme guarantee full or prompt compensation of depositors? The answer is: No. According to Administration estimates, the industry would be able to support a deposit protection fund which would cover the failure of one small to medium-sized bank.
Would such a limited scheme enhance the stability of the banking system? Would it quell spill-over panic during a bank crisis? Again, the answer is: No. Even if the needs of small depositors in one troubled bank were fully and promptly met, the draining of deposit protection fund resources below the level needed to safeguard
depositors in other banks could, in and of itself, spark general panic.
Perhaps in an attempt to cast this bleak picture in a better light, advocates of deposit protection have tried to shift the focus of the debate away from this central issue to the alleged wider positive implications of such a scheme.
But to argue that the establishment of a deposit protection scheme would promote greater competition among banks and would thereby result in better customer service and lower charges is a total fallacy.
This line of reasoning suggests that because Hong Kong does not have a deposit protection scheme, some banks are currently at a competitive disadvantage. This alleged disadvantage stems from depositors' concerns that certain banks are less stable than others, or are less committed to the depositors' interests or to Hong Kong.
But convincing potential depositors of an individual institution's commitment to their interests -- to protecting their funds -- is perhaps the most fundamental challenge of banking. First and foremost -- before the quality, terms and rates of customer service -- stability and commitment comprise the very basis of competition among banks.
To ask the Government to establish a deposit protection scheme on these grounds To ask the Government to establish a deposit protection scheme on these grounds is tantamount to requesting that the "playing field" be tilted in favour of banks which are unwilling to take the time and effort to prove to depositors that their institution is prudently managed, financially strong and firmly committed to Hong Kong.
Hong Kong must recognize that if public confidence in individual banks or in the industry as a whole has been shaken, there are no quick fixes. Stability and confidence cannot be imposed from above. Other markets have tried this and have failed miserably.
Stability and confidence must be built from the bottom up -- from individual banks' stability and commitment to their depositors, which in aggregate become industry-wide stability and commitment.
True protection of depositors' money can only come from prudent bank management and vigilant regulation. Similarly, true stability in the territory's banking
industry can only come from depositors' faith in bank management and regulation.
By creating the illusion of security, a deposit protection scheme would work By creating the illusion of security, a deposit protection scheme would work against efforts to build this faith. It would weaken -- rather than strengthen -- the stability of the banking system, and would thereby put the future of our economy at risk.
With these remarks, Mr Deputy President, I respectfully oppose the motion. With these remarks, Mr Deputy President, I respectfully oppose the motion.
MR TAM YIU-CHUNG (in Cantonese): Mr Deputy President, it is difficult to forget the collapse of the Bank of Credit and Commerce Hong Kong last year together with its subsequent liquidation which has been a traumatic experience to the general public of Hong Kong. The sight of those BCCHK depositors who had sustained heavy loss
squealing and yelling aroused sadness and sympathy. Small depositors are undeniably the most seriously hurt in collapses of banks, because they deposit in banks all their money that they saved bit by bit for provision against contingency and old age. So when a bank collapses, they will sustain enormous loss both in financial and
psychological terms. Although Hong Kong has a relatively sound banking system, it is deplorable that tragedies like the BCCHK incident still cannot be avoided. It is therefore necessary for Hong Kong to set up a mechanism for the protection of the interests of bank depositors.
The establishment of a deposit protection scheme for protecting the interests The establishment of a deposit protection scheme for protecting the interests of small depositors is a good idea. However, quite a number of problems will arise when implementing such a scheme. The implementation of a deposit protection scheme for the protection of all small depositors in Hong Kong will necessitate compulsory contributions from all the banks which will pass on such a burden to the depositors. But the problem is that the great majority of Hong Kong's retail deposits are with the two large banking corporations which operate on a more conservative basis.
Regarding the collapse of their banks as an impossible event, the depositors of these banks will not be willing to indirectly shoulder most of the contributions to support the depositors of the medium to smaller banks. In effect, to the depositors of most of the large banking corporations, the implementation of a compulsory deposit
protection scheme may not bring any substantial benefits; it may even be detrimental to their interests. Moreover, if problems really arise in the large banking corporations, then even the deposit protection scheme cannot safeguard the interests of so many small depositors nor can it stablize Hong Kong's financial system. I am
therefore doubtful of the effectiveness of a deposit protection scheme.
Nevertheless, if unfortunate events like the liquidation of the BCCHK are to be avoided, the Administration must review and make every effort to improve the current monitoring system of banks. I hope that the Administration will not shift the responsibility of protecting depositors' interests to banks and depositors by implementing a deposit protection scheme.
I think the Administration should do something to allay fears and protect the interests of small depositors. In the paper issued in February this year on deposit protection scheme, the Administration revealed that "it is considering a scheme that will give prior protection to small depositors in the event of the collapses of banks." I hope that the Administration can announce the details of this scheme as soon as possible. I suggest that the Administration should amend the relevant laws to the effect that small depositors will have priority in obtaining compensation in the event of liquidation of banks.
Mr Deputy President, these are my remarks. Mr Deputy President, these are my remarks.
MR RONALD ARCULLI: Mr Deputy President, the motion before the Council today calling on the Administration to seriously consider the introduction of a deposit protection scheme appears to be pretty innocuous although it may not be so if one simply listened to the speech of Prof the Honourable Edward CHEN. Indeed several of my CRC colleagues are most concerned that the public will be misled into the belief that a workable scheme will be introduced and for this reason they feel they are unable to support the motion. The very label "deposit protection scheme" that has been used
immediately leads us into the belief that we either obtain or will be given protection under such a scheme, which is not necessarily the case. It is, however, timely that the subject is debated today as the consultation paper issued by the Monetary Affairs Branch calls for views to be expressed before 31 May this year.
We at the Co-operative Resources Centre believe that contributions to today's debate can also be made by highlighting some of the limitations referred to in the consultation paper so that members of the public clearly understand that there are limitations in any scheme. These limitations include:
(1) it is neither possible nor practicab (1) it is neither possible nor practicab it is neither possible nor practicable for any scheme to give depositors full le for any scheme to give depositors full
protection and by this I mean that in case a bank fails all depositors can get all money deposited plus the interest back;
(2) however limited any protection may be, a depositor will have to pay for such (2) however limited any protection may be, a depositor will have to pay for such protection and indeed will also have to pay for the protection given to depositors of a failed bank;
(3) any scheme cannot prevent bank failures; indeed it has been argued that any (3) any scheme cannot prevent bank failures; indeed it has been argued that any scheme may encourage banks to be less vigilant in assessing the risks they take on; and
(4) a scheme will not prevent bank runs because it will take time to process c (4) a scheme will not prevent bank runs because it will take time to process claims under any such scheme.
Mr Deputy President, I could go on to some fine technical arguments but in view of the time available I had best be as brief as possible. I will leave it to my more knowledgeable CRC colleagues to deal with some of the more important issues in greater detail and with much more persuasiveness.
The second point that we would comment on is that the discussion on the subject of a deposit protection scheme is rather emotive. It is not easy to say that it is an absolute necessity or that it is wholly useless. What we need to do is to approach the matter as dispassionately as possible. We must weigh up the pros and cons of the various possibilities, assess whether there are alternatives, examine closely the success or otherwise of schemes in other countries and ultimately consider what would happen if the scheme we choose to introduce in Hong Kong did not give depositors the protection it offered.
Mr Deputy President, it is this last point that has caused us a lot of anxiety. The magnitude of the problem can be summarized by referring to total deposits in Hong Kong. I believe total deposits in banks belonging to the Hong Kong Association of Banks to be in the order of HK$300 billion whilst total Hong Kong dollar deposits is in the order of HK$490 billion. It is obvious that protection cannot be offered in full in respect of such deposits. At this point one immediately has to settle for limited protection. The question is where do you draw the line. Let us say we set the limit at HK$50,000, that is, the scheme will guarantee all deposits up to that amount with refinements that any one person's protection is limited to that amount irrespective of how many bank accounts he may have in one or more banks. Given that
the fund to which depositors can have recourse cannot be created overnight, what happens if a bank fails during the accumulation of the fund? More importantly what happens when the fund accumulated is insufficient? Do we then have recourse to the public purse or do we create a contingency funding programme so that it becomes
unlimited liability to banks up to the amount required? Will this have a disastrous effect on our banking system? Mr Deputy President, there are no easy solutions, and for those of us who may gloss over these very real difficulties under the altruistic belief that we are giving members of the public protection or even upholding our economic success or creating competition amongst banks, we at the CRC believe that the public deserves to be given the plain hard facts one of which is that the heaviest burden of any protection scheme will rest on their shoulders. We have just had an extremely unpleasant occurrence in the form of the failure of BCCHK. Let us examine this matter as objectively as possible and let none of the emotive feelings we may have about BCCHK cloud the real issues. We at the CRC believe that the Administration should do so with an open mind and for this reason and subject to my comments we are prepared to support this approach and therefore the motion.
MRS PEGGY LAM (in Cantonese): Mr Deputy President, Hong Kong is an international financial centre which is world-famous for its large number of banks offering convenient and efficient services. However, the BCCHK incident last year and the bank runs triggered off by it demonstrated that there were loopholes in our banking system and imperfections in our bank management. There is serious inadequacy in the protection of small depositors' interests which leaves much to be desired.
Hong Kong people are well-known for being diligent and saving is a common virtue. Small depositors, nine out of ten, are members of the general public. They save on clothing and food and deposit their hard-earned monthly income with banks primarily because they have faith in the Government's licensing and monitoring system on banks. The average people may lack independent analytical ability to assess the security and financial status of banks. Once a bank fails, the small depositors will suffer the most.
In fact, the small depositors' interests must be adequately safeguarded in the special social environment of Hong Kong. As we all know, social welfare is totally inadequate and social security non-existent. If small depositors cannot recover their savings due to bank failure, their situation will be very miserable. Therefore, sufficient protection accorded to the small depositors will enhance the stability,
harmony and prosperity of society as a whole.
Deposit interest rates have been on the low side for a long time and are far behind the rate of inflation. If small depositors' interests continue to be neglected, it will deal a further blow on people's confidence and dampen their interest in placing deposits with banks. It can be predicted that most of the savings will flow out of banks into the "speculation market" in pursuit of a higher return. Some will even keep their savings at home or carry them on their person. In this way, the lending ability of banks will be undermined to a large extent, hindering the long-term
development of our economy. Furthermore, law and order in Hong Kong may further deteriorate -- the targets of robbery may shift from goldsmith shops and mahjong schools to individuals and residential flats!
In short, in view of our special political, economical and social climate, small depositors' interests should be given sufficient and full protection. Otherwise, placing deposits with banks will become a high risk-taking activity. It will thus be meaningless to talk of confidence, stability or prosperity.
A DPS is actually not the most effective or the only option to safeguard the interests of small depositors. According to the major options presented in the Governments' consultation paper, only the first $100,000 will enjoy 75% or 100% protection. Other Hong Kong dollar deposits and deposits in foreign currencies which account for over half of the local deposits will not be covered.
Mr Deputy President, I think that a healthy banking structure and an efficient banking supervision system are the best protection for depositors. Therefore, the most urgent task of the Administration is to strengthen the existing supervision system and try to plug the loopholes. The BCCHK incident reflects that Hong Kong's bank licensing system is not stringent enough. If we take a look at our neighbour Singapore, we can see that the interests of Singapore citizens are protected because the Government refused to grant a licence to the Bank of Credit and Commerce. The authority concerned should review the requirements for the licensing of banks, paying particular attention to the security and reliability of the head office of the
applying bank.
Furthermore, the recent suggestion by the Government to revise the format of Furthermore, the recent suggestion by the Government to revise the format of liquidity returns by banks, to revamp the elaborate procedure of processing data and to strengthen auditor's supervision over the internal control system of banks can
be regarded as effective measures.
The final protection provided to depositors is that they will not lose all their savings once a bank fails. Therefore, the Government should seriously consider amending the existing law on liquidation so that small depositors with deposit balances of under $100,000 can have priority in getting back their deposits in full if a bank fails. Furthermore, the procedures specified in the existing legislation should be simplified. Under existing legislation, it takes too long for the depositors to get back their money. They have to wait for the court to grant an order for the sale of the assets of the banks.
On the other hand, in order to protect the depositors, the Hong Kong Association of Banks should follow the example of the Consumer Council in educating the depositors and providing necessary information by setting up an information centre. The centre will be set up to provide information on banks to the public, answer enquiries from depositors and receive complaints. The banking industry should also organize more talks and courses and set up a hotline to answer depositors' enquiries.
Finally, I think that if Hong Kong is to maintain its prosperity and stability, depositors' interests must be protected. The Government has the responsibility to give serious thought to providing and implementing a sound scheme of deposit protection.
Mr Deputy President, with these remarks, I support the motion.
MR JIMMY McGREGOR: Mr Deputy President, I must firstly declare an interest as the vice chairman of the Hong Kong Chinese Bank.
This is the kind of bank in Hong Kong which many Councillors today will no doubt say should have the support of a deposit protection scheme. I have not asked the board of the Hong Kong Chinese Bank to express an opinion. The bank has been in business for 37 years, is highly conservative in nature, caters for several thousand local clients, maintains a strong deposit base, and does its best to conform to the very strict regulatory regime of the Banking Commissioner. The bank also, as it happens, follows sound and prudent banking principles and procedures.
Some of my colleagues may be surprised to hear me say that I do not believe this
small to medium bank should welcome a deposit protection scheme. The reasons are the same as those set out by experts in my constituency, the Hong Kong General Chamber of Commerce, in their submission to the Government. I am indebted to them for their advice to me and for confirming my own views.
Deposit protection or insurance schemes exist fairly widely around the world, Deposit protection or insurance schemes exist fairly widely around the world, both on a compulsory and a voluntary basis. Mostly, they have not been tested. In the one country where they have been severely tested, the United States, the scheme failed dismally with huge losses. A deposit protection scheme in Hong Kong could lead depositors to discount the risks associated with bank deposits and put their money into banks which otherwise they might not have favoured. The banks themselves could become more risk orientated knowing that they had an insurance lifeline behind them.
It should be noted that there is nothing to stop any bank in Hong Kong, or a group of like-minded banks, from introducing a deposit protection insurance scheme. The cost, however, is likely to be prohibitive and that is why, in fact, they do not do it.
Any government-regulated or supervised deposit protection scheme would also be expensive. Eventually, depositors, clients and in some circumstances even the Government would have to pay for the cost of the scheme.
The only real protection for bank deposits lies in sound banking practice, the maintenance of high prudential standards, and the application of effective regulation supervision by the Banking Commissioner.
During the last 20 years the quality and depth of banking supervision in Hong During the last 20 years the quality and depth of banking supervision in Hong Kong by the regulatory authorities has continued to improve. During this time we have had banking crises and some banks have been in deep trouble. Over the whole course, however, the system, the standards and the regulations have all become more
sophisticated and more efficient. The BCC affair in fact suggested to me that Hong Kong's regulatory supervision is at least as efficient as that being applied in other countries and probably more sensitive and responsive than most.
The Hong Kong Banking Industry at the present time meets all international standards. Indeed, our banking industry is home to very many foreign banks from international financial centres around the world. The industry as a whole in Hong
Kong enjoys international confidence and support.
I must therefore speak against the motion. I do not believe that the Government should waste its time considering the establishment of a compulsory deposit protection scheme which will not protect all depositors, which could be prohibitively expensive, and which may paradoxically suggest to depositors and investors that the Hong Kong regulatory system for banking cannot function effectively.
I understand that the Hong Kong Association of Banks may have some other ideas about limited protection for small depositors in the event of a failure of a bank. I hope any such ideas can be set out for detailed consideration by the industry and the Government, but it does not sound very feasible to me.
Mr Deputy President, I do not support the motion. Mr Deputy President, I do not support the motion.
MR PETER WONG: Mr Deputy President, first I would like to declare my interest as auditor of various banks, holder of publicly listed bank shares and also have a few deposits with banks.
Members of the accountancy functional constituency generally disapprove of Members of the accountancy functional constituency generally disapprove of deposit protection schemes (DPS) as now proposed because they are considered to be inequitable and impracticable.
The charging of a premium in return for protection which only benefits a small group of depositors is the fundamental flaw of those schemes. They violate the principle of "user pays", since ultimately the taxpayers have to bear the cost of propping up those banks which are vulnerable. The idea of depositors of some banks getting higher interest rates and the same protection is just not acceptable.
Last year, of the 165 local banks, 27 (or 16%) had deposit bases of over $10 billion each. Since the size of the proposed DPS fund is estimated to be set at $10.8 billion, so it will be inadequate to fully meet potential claims. The larger banks resent subsidizing the smaller banks to compete with them; after all, Hong Kong's banking sector has all along been operating under a free market economy. Although a
risk-rated premium is obviously most equitable, it has been considered impracticable since the rating would not only involve technical difficulties but would also show up clearly the standing of the lesser banks. More importantly, why should bank
deposits as one form of investment get more protection than others such as stocks and real estate? Therefore, the strong sense of inequitable treatment entertained by the depositors and the larger banks will be a major obstacle to overcome in any attempt to formulate a DPS with a sound philosophical basis.
The argument that a DPS can reduce the risks of unnecessary bank runs and int The argument that a DPS can reduce the risks of unnecessary bank runs and introduce an element of stability into our banking system is also unsound. In any event, a DPS could not fully recompense depositors for a really large bank failure. While the scheme can neither prevent bank collapses nor address systemic problems, there is also a limit as to the responsibilities the regulatory body can assume. The
depositor must accept that there is an element of risk, however remote, in that his entire life savings is being put on the line when he places his money in a bank. On the contrary, I am personally convinced that a DPS carries with it the so-called "moral hazard" since the scheme may cause bankers and depositors alike to become less careful with their investment decisions which will not be made any more prudent by the level of scrutiny imposed by the Government. At the end of the day, it is the taxpayer who will have to bear the rescue of any of our banks. Further, the concept of
insurance has yet to be popularly understood and accepted before compulsory DPS can start in a free market economy.
My basic objection lies with the questionable need for a DPS in any well run and carefully monitored banking system. Since 1985, fundamental changes in ownership and management control of our banks have been initiated as a result of a new system of supervision. I must say that apart from a few isolated cases -- and regrettably the latest BCCI case is one of them -- depositors in Hong Kong have not suffered any loss of money kept in our banks. Thus, to add an ancillary safety valve to the
existing prudential supervision is like baking a cake that nobody will eat. From the accountancy profession's point of view, the setting up of a DPS in Hong Kong at this point in time is superfluous and unjustifiable.
Cost-conscious accountants also believe that the high administrative costs of a DPS do not justify its formation. The costs will have to be borne by the depositors and the banks whose competitive potentials will thus be affected. More importantly, in the case that no bankruptcy occurs, the scheme will accumulate a huge sum of money which will immediately create management and investment headaches. It may
necessitate the moving of capital investments offshore which, in order to get the returns needed, will have significant effects on our monetary system.
Mr Deputy President, the DPS proposal stems from an overreaction towards the
recent BCCI incident. There is in fact no real or reasoned public demand for a scheme whose value to our strong banking system is unproven. In the mind of the pragmatic Hong Kong depositors, who readily take investment risks into their stride, a DPS cannot meet their basic expectations. On top of these considerations is the
fundamental question of "who will pay for the scheme". As the Legislative Council representative of the accountancy functional constituency, I say a very clear "No" to DPS for Hong Kong.
MR VINCENT CHENG: Mr Deputy President, I find myself in a rather embarrassing situation because I do not know whether I have any interest to declare in the Council. Unlike Mr McGREGOR and Professor CHEN, I am not a director of a bank, but I am an executive of a big bank and hence one of the 75 000 people trying to make a living by working for a financial institution.
My comments on the DPS will, I promise, be relatively brief, but before I come to them, I would ask Members to bear in mind two general propositions. First, deposit insurance is an emotive issue and we should be wary of emotional responses in the wake of the BCCHK collapse. That may seem a harsh and unsympathetic view but I
genuinely believe that this issue is important enough to place it above gesture politics and quick fixes. Secondly, we should all understand that this debate is not about moral high ground set against vested interests. The objectives of both pro and anti DPS advocates are the same -- they all wish to see an environment in which individual depositors have confidence in and access to a healthy, secure and competitive market for retail banking services. This debate is about means -- and not ends. Not banks against depositors, not small banks versus big banks, as Professor CHEN has suggested. Indeed, many small banks do not see DPS as a viable solution, with only two exceptions, including First Pacific Bank. Therefore there is a common agenda.
The idea of protecting small depositors is commendable. We all support it; after all we are all depositors and bank customers. But deposit insurance is not an effective way of protecting depositors, particularly in the case of Hong Kong.
Perhaps we should first draw on the experience of the United States which is the first country to set up deposit insurance. Under the current United States Federal
Deposit Insurance System all banks and savings and loans institutions pay the same insurance premium on deposits, regardless of the riskiness of the business in which they are engaged. Uniform premiums for all banks encourage risky lending practices, leading to high loan losses. Any insurance programme without risk-based premiums is bound to become insolvent, and the United States Deposit Insurance System is no exception. The costs to the healthy banks, savings and loans institutions and
taxpayers have been enormous; for example, the combined cost of bailing out depositors in failed banks and savings and loans institutions is currently estimated to be around $250 billion to $500 billion, and this figure, which has been revised upward many times, does not include the interest expense on the debt the United States Government has issued to fund the bail-out.
Ironically, President Franklin ROOSEVELT who signed the bill creating deposit insurance said on 7 March 1933 in the New York Times:
"I am opposed to the federal guarantee of bank deposits. What right have we to tax the American people to insure bank deals more than to tax them to insure transactions of any other businesses."
A day later, in his first presidential news conference he observed:
"The general underlying thought behind the use of the word "guarantee" with respect to bad bank deposits is that:
(1) You will guarantee bad banks as well as good banks. (1) You will guarantee bad banks as well as good banks.
(2) The minute the Government starts to do that the Government runs into a (2) The minute the Government starts to do that the Government runs into a probable loss. We do not wish to make the United States Government liable for the mistakes and errors of individual banks.
(3) You put a premium on unsound banking in the future." (3) You put a premium on unsound banking in the future."
Unfortunately, history has validated ROOSEVELT's misgivings. Even more unfortunately, some of us in this Council want Hong Kong to go down the same slippery slope.
The so-called DPS as outlined in the Government's consultative paper does not offer any real protection to depositors. First, foreign currency deposits will not be covered. With more than half of Hong Kong's deposits based in foreign currency,
what is the use of a scheme which provides such limited coverage? Second, DPS will not prevent bank runs. Indeed, banks do not fail because of bank runs -- BCCHK is a good example; banks fail because of poor management and fraud, not rumours and bank runs. Third, the scheme does not offer protection to all depositors on an equal basis because the scheme would not be sufficient to cover large banks. Depositors of larger banks would be offered less protection compared with depositors of small banks, even though they would be paying the same premium. If depositors of the larger banks, which are community banks serving the majority of Hong Kong's low income earners, are not fully protected, what is the use of such a scheme? Why should they be forced to participate?
The proponents of this scheme perhaps think such a scheme would benefit the man in the street and therefore would score political "brownie-points" by supporting it. They are wrong. On the contrary, this scheme only aims at protecting a handful of small "niche" banks whose customers are the relatively small, sophisticated middle class segment of the population. Indeed, those who are more financially astute need less protection by the Government.
In Hong Kong there are more than 160 banks. Of these, only 29 are locally incorporated. More than 10 are owned by the People's Republic of China. And some of the remaining banks are too large to be covered by the scheme in the Government's consultative paper. If these banks are excluded the scheme would only be applicable to a handful of small banks. Now is it really worth the hassle of creating another layer of bureaucracy in the banking system, with all the adverse ramifications in terms of administrative costs, market distortions, and at the expense of the depositors themselves? The answer is very clear: there are many fallacies in the arguments for deposit insurance. There have been suggestions that DPS would increase competition because small banks would be able to attract more deposits. This is simply not true. Depositors, when they deposit their money in a bank, are not just looking for security of their deposits; they will look for a range of services, convenience, courtesy of staff and the associated services, and so on. Furthermore, it is wrong to assume that banks can expand their balance sheet indefinitely. Banks are constrained by capital adequacy requirements. A DPS will not increase their attraction or their ability to attract deposits. Rather than trying to hide behind an ill-conceived scheme, these banks should compete on quality of service, and gain consumer trust and confidence through good management.
It is said that DPS would prevent a flight to quality by depositors who may s It is said that DPS would prevent a flight to quality by depositors who may shift