LEGISLATIVE COUNCIL ─ 26 March 2014 8967

OFFICIAL RECORD OF PROCEEDINGS

Wednesday, 26 March 2014

The Council met at Eleven o'clock

MEMBERS PRESENT:

THE PRESIDENT THE HONOURABLE JASPER TSANG YOK-SING, G.B.S., J.P.

THE HONOURABLE ALBERT HO CHUN-YAN

THE HONOURABLE LEE CHEUK-YAN

THE HONOURABLE JAMES TO KUN-SUN

THE HONOURABLE CHAN KAM-LAM, S.B.S., J.P.

THE HONOURABLE LEUNG YIU-CHUNG

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

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

THE HONOURABLE TAM YIU-CHUNG, G.B.S., J.P.

THE HONOURABLE ABRAHAM SHEK LAI-HIM, G.B.S., J.P.

THE HONOURABLE TOMMY CHEUNG YU-YAN, S.B.S., J.P.

THE HONOURABLE FREDERICK FUNG KIN-KEE, S.B.S., J.P.

THE HONOURABLE VINCENT FANG KANG, S.B.S., J.P.

8968 LEGISLATIVE COUNCIL ─ 26 March 2014

THE HONOURABLE WONG KWOK-HING, B.B.S., M.H.

PROF THE HONOURABLE JOSEPH LEE KOK-LONG, S.B.S., J.P., Ph.D., R.N.

THE HONOURABLE JEFFREY LAM KIN-FUNG, G.B.S., J.P.

THE HONOURABLE ANDREW LEUNG KWAN-YUEN, G.B.S., J.P.

THE HONOURABLE WONG TING-KWONG, S.B.S., J.P.

THE HONOURABLE RONNY TONG KA-WAH, S.C.

THE HONOURABLE CYD HO SAU-LAN

THE HONOURABLE STARRY LEE WAI-KING, J.P.

DR THE HONOURABLE LAM TAI-FAI, S.B.S., J.P.

THE HONOURABLE CHAN HAK-KAN, J.P.

THE HONOURABLE CHAN KIN-POR, B.B.S., J.P.

DR THE HONOURABLE PRISCILLA LEUNG MEI-FUN, S.B.S., J.P.

DR THE HONOURABLE LEUNG KA-LAU

THE HONOURABLE CHEUNG KWOK-CHE

THE HONOURABLE WONG KWOK-KIN, B.B.S.

THE HONOURABLE IP KWOK-HIM, G.B.S., J.P.

THE HONOURABLE MRS REGINA IP LAU SUK-YEE, G.B.S., J.P.

THE HONOURABLE PAUL TSE WAI-CHUN, J.P.

THE HONOURABLE ALAN LEONG KAH-KIT, S.C.

LEGISLATIVE COUNCIL ─ 26 March 2014 8969

THE HONOURABLE LEUNG KWOK-HUNG

THE HONOURABLE ALBERT CHAN WAI-YIP

THE HONOURABLE WONG YUK-MAN

THE HONOURABLE CLAUDIA MO

THE HONOURABLE MICHAEL TIEN PUK-SUN, B.B.S., J.P.

THE HONOURABLE JAMES TIEN PEI-CHUN, G.B.S., J.P.

THE HONOURABLE NG LEUNG-SING, S.B.S., J.P.

THE HONOURABLE STEVEN HO CHUN-YIN

THE HONOURABLE FRANKIE YICK CHI-MING

THE HONOURABLE WU CHI-WAI, M.H.

THE HONOURABLE YIU SI-WING

THE HONOURABLE GARY FAN KWOK-WAI

THE HONOURABLE MA FUNG-KWOK, S.B.S., J.P.

THE HONOURABLE CHARLES PETER MOK

THE HONOURABLE CHAN CHI-CHUEN

THE HONOURABLE CHAN HAN-PAN

DR THE HONOURABLE KENNETH CHAN KA-LOK

THE HONOURABLE CHAN YUEN-HAN, S.B.S., J.P.

THE HONOURABLE LEUNG CHE-CHEUNG, B.B.S., M.H., J.P.

8970 LEGISLATIVE COUNCIL ─ 26 March 2014

THE HONOURABLE ALICE MAK MEI-KUEN, J.P.

DR THE HONOURABLE KWOK KA-KI

THE HONOURABLE KWOK WAI-KEUNG

THE HONOURABLE DENNIS KWOK

THE HONOURABLE CHRISTOPHER CHEUNG WAH-FUNG, J.P.

DR THE HONOURABLE FERNANDO CHEUNG CHIU-HUNG

THE HONOURABLE SIN CHUNG-KAI, S.B.S., J.P.

DR THE HONOURABLE HELENA WONG PIK-WAN

THE HONOURABLE IP KIN-YUEN

DR THE HONOURABLE ELIZABETH QUAT, J.P.

THE HONOURABLE MARTIN LIAO CHEUNG-KONG, J.P.

THE HONOURABLE POON SIU-PING, B.B.S., M.H.

THE HONOURABLE TANG KA-PIU

DR THE HONOURABLE CHIANG LAI-WAN, J.P.

IR DR THE HONOURABLE LO WAI-KWOK, B.B.S., M.H., J.P.

THE HONOURABLE CHUNG KWOK-PAN

THE HONOURABLE CHRISTOPHER CHUNG SHU-KUN, B.B.S., M.H., J.P.

THE HONOURABLE TONY TSE WAI-CHUEN

LEGISLATIVE COUNCIL ─ 26 March 2014 8971

MEMBER ABSENT:

THE HONOURABLE KENNETH LEUNG

PUBLIC OFFICERS ATTENDING:

THE HONOURABLE RIMSKY YUEN KWOK-KEUNG, S.C., J.P. THE SECRETARY FOR JUSTICE

THE HONOURABLE TSANG TAK-SING, G.B.S., J.P. SECRETARY FOR HOME AFFAIRS

THE HONOURABLE MATTHEW CHEUNG KIN-CHUNG, G.B.S., J.P. SECRETARY FOR LABOUR AND WELFARE

PROF THE HONOURABLE K C CHAN, G.B.S., J.P. SECRETARY FOR FINANCIAL SERVICES AND THE TREASURY

THE HONOURABLE GREGORY SO KAM-LEUNG, G.B.S., J.P. SECRETARY FOR COMMERCE AND ECONOMIC DEVELOPMENT

THE HONOURABLE LAI TUNG-KWOK, S.B.S., I.D.S.M., J.P. SECRETARY FOR SECURITY

THE HONOURABLE EDDIE NG HAK-KIM, S.B.S., J.P. SECRETARY FOR EDUCATION

DR THE HONOURABLE KO WING-MAN, B.B.S., J.P. SECRETARY FOR FOOD AND HEALTH

THE HONOURABLE WONG KAM-SING, J.P. SECRETARY FOR THE ENVIRONMENT

THE HONOURABLE PAUL CHAN MO-PO, M.H., J.P. SECRETARY FOR DEVELOPMENT

MR KEVIN YEUNG YUN-HUNG, J.P. UNDER SECRETARY FOR EDUCATION

8972 LEGISLATIVE COUNCIL ─ 26 March 2014

CLERKS IN ATTENDANCE:

MR KENNETH CHEN WEI-ON, S.B.S., SECRETARY GENERAL

MRS JUSTINA LAM CHENG BO-LING, DEPUTY SECRETARY GENERAL

MR ANDY LAU KWOK-CHEONG, ASSISTANT SECRETARY GENERAL

MISS ODELIA LEUNG HING-YEE, ASSISTANT SECRETARY GENERAL

LEGISLATIVE COUNCIL ─ 26 March 2014 8973

TABLING OF PAPERS

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

Subsidiary Legislation/Instrument L.N. No.

Dutiable Commodities (Amendment) Regulation 2014 31/2014

Other Papers

No. 90 ─ Report of changes made to the approved Estimates of Expenditure during the third quarter of 2013-14 Public Finance Ordinance: Section 8

No. 91 ─ Self-financing Post-secondary Education Fund Financial statements for the year ended 31 August 2013

No. 92 ─ HKSAR Government Scholarship Fund Financial statements for the year ended 31 August 2013

No. 93 ─ Employees Retraining Board Annual Report 2012-13

Report No. 14/13-14 of the House Committee on Consideration of Subsidiary Legislation and Other Instruments

Report of the Bills Committee on Rural Representative Election Legislation (Amendment) Bill 2013

Report of the Bills Committee on Securities and Futures (Amendment) Bill 2013

Report of the Bills Committee on Loans (Amendment) Bill 2014

8974 LEGISLATIVE COUNCIL ─ 26 March 2014

ORAL ANSWERS TO QUESTIONS

PRESIDENT (in Cantonese): Questions. First question.

Provision of Land for Development of Cultural and Creative Industries

1. MR MA FUNG-KWOK (in Cantonese): President, the economic contribution of the cultural and creative industries (CCIs) in terms of percentage share in Gross Domestic Product increased from 3.8% in 2005 to 4.9% in 2012, and the employment in such industries as a percentage in the total employment during the same period increased from 5.1% to 5.5%. Some members of the industries have pointed out that although CCIs are emerging pillar industries of Hong Kong, the room for survival of such industries has been severely compressed and their development has been seriously constrained due to tight supply of land. In reply to my question in October last year, the Chief Executive indicated that the development of creative industries at the Lok Ma Chau Loop (the Loop) would be considered. Regarding the provision of land for the development of CCIs, will the Government inform this Council:

(1) of the current progress of the planning work for the Loop; how CCIs are expected to benefit from the development of such area; whether the authorities have conducted any assessment on the land required for the development of such industries; if so, how such demand for land will be met; if not, of the reasons for that;

(2) whether it has considered strengthening co-operation with the Mainland departments and, on the premise of comprehensive infrastructure, renting sites on the Mainland for establishing parks for emerging industries which will mainly be managed by the Hong Kong side, so as to take forward the development of CCIs of Hong Kong; and

(3) whether the Consultative Committee on Economic and Trade Co-operation between Hong Kong and the Mainland (the Committee) has, since its establishment in October last year, discussed how to foster the development of CCIs; if so, of the details; if not, the reasons for that; given that some members of the industries have proposed the construction of a film and television LEGISLATIVE COUNCIL ─ 26 March 2014 8975

city in Nansha, whether the Committee has discussed this proposal; if so, of the details; if not, the reasons for that?

SECRETARY FOR COMMERCE AND ECONOMIC DEVELOPMENT (in Cantonese): President, my reply to the questions raised by Mr MA Fung-kwok is as follows:

(1) and (2)

The Commerce and Economic Development Bureau is responsible for promoting the development of creative industries. Creative industries cover advertising, architecture, design, digital entertainment, film, music, publishing and printing, television, and so on. The Home Affairs Bureau supports the development of the art and culture in Hong Kong, covering performing arts, visual arts, literary arts and intangible cultural heritage.

Creative industries under the purview of the Commerce and Economic Development Bureau cover different sectors. The business nature and scale varies from one creative sector to another. Creative establishments are mostly small and medium enterprises or operated on a self-employed basis. With the exception of a small number of enterprises such as television stations, film studios, and so on, which require larger parcels of land, creative establishments are mainly scattered in commercial and industrial buildings in different districts. Hence, the demand of creative industries for office facilities and business premises has largely been reflected in Hong Kong's overall demand for commercial and industrial buildings. The Commerce and Economic Development Bureau has not conducted any specific assessment on the land required by creative industries.

To develop creative clusters, the Government and relevant organizations offer support to selected creative sectors by provision of office facilities and support services. Cyberport and InnoCentre lease working space to digital entertainment and design companies respectively. Incubation programmes for start-ups are also available in both creative clusters. In addition, the former Police Married Quarters on Hollywood Road (PMQ) revitalized with the 8976 LEGISLATIVE COUNCIL ─ 26 March 2014

Government's funding support will commence operation in the first half of this year, providing studios to some 100 establishments and persons engaged in creative industries.

As regards the development of the arts and culture, the Home Affairs Bureau promotes the development of cultural software through supporting the development of quality arts programmes, audience building, arts education, the grooming of arts talents and cultural exchange. The Home Affairs Bureau provides funding support to small, medium and major art groups and individual artists through direct subvention and grants provided through the Hong Kong Arts Development Council and under the Arts Capacity Development Funding Scheme. The Leisure and Cultural Services Department (LCSD) engages arts groups and artists in the programmes and exhibitions presented by the Department; and operates cultural facilities including performing venues, museums, centres of visual arts and public libraries, and so on. The Home Affairs Bureau also provides funding support to projects of providing arts space for arts groups and artists such as those implemented by the Jockey Club Creative Arts Centre and the Hong Kong Arts Development Council.

The Government takes into account the needs of creative industries when planning for the land uses of new development areas. The Loop mentioned by Mr MA Fung-kwok is a case in point. The final proposals of the Planning and Engineering Study on Development of the Loop (the Study) were promulgated in July 2013. According to the Recommended Outline Development Plan (RODP) of the Study, the Loop will be developed with higher education as the leading land use, complemented by high-tech research and development (R&D) and CCIs. The recommended land uses for the Loop have taken into consideration the advantage of its strategic location at the boundary district of Hong Kong and Shenzhen in attracting talents in knowledge, technology and creative industries; and through development of the Loop, to facilitate knowledge and technology exchange between the two cities. Under the RODP, about 8.6 hectares of land, providing a maximum gross floor area of 411 000 sq m, is earmarked for high-tech R&D and cultural and creative uses, in which interchange ability amongst the two uses is allowed in order to provide a flexible land use framework LEGISLATIVE COUNCIL ─ 26 March 2014 8977

to meet future market demand. The works ahead would include preparation of the statutory outline zoning plan and detailed engineering design of the advance works. We shall endeavour to commence as early as possible part of the advance works to facilitate site formation and building construction so that part of the facilities in the Loop can be put into early operation.

Moreover, Kowloon East is being transformed into another core business district to support Hong Kong's long-term economic development. The Development Bureau will capitalise on the transformation of Kowloon East and identify sites to support the development of arts, culture and creative industries. For example, the Development Bureau will convert the sites underneath the Kwun Tong Bypass for arts and cultural events and use by creative industries.

Hong Kong has a highly open market, quality business support services, well-established intellectual property regime, the rule of law and free flow of information, providing an ideal business platform for creative establishments. The Government is committed to fostering a favourable environment in Hong Kong for developing creative industries, and has no plan to establish parks on the Mainland for Hong Kong's creative industries.

(3) The responsibility of the Committee is to advise the Hong Kong Special Administrative Region Government on matters related to strengthening co-operation with the Mainland in trade, economic and other relevant areas. Topics to be discussed are determined by the Committee. Since its establishment, the Committee has not discussed how to promote the development of cultural and creative industries in Hong Kong or the construction of a film and television city in Nansha.

MR MA FUNG-KWOK (in Cantonese): President, the shortage of land resources in Hong Kong has imposed a lot of restrictions on the development of CCIs. Artists and arts groups lack space for creation or rehearsal and members of the film industry lack venues for preliminary and subsequent work. People 8978 LEGISLATIVE COUNCIL ─ 26 March 2014 who engage in costume making have relayed to me that they need a large workshop for producing movie prop and costume. However, the high rents of large workshops are not affordable to them. If this situation goes on, the preliminary and subsequent productions of the local film industry will have no more room for survival and there will be no successors.

The Administration has stated in the main reply that it has no plan to establish parks on the Mainland for Hong Kong's creative industries and this issue has not been discussed. In this connection, may I ask the Secretary if the Government has studied the co-operation between the two Governments in creating a CCI base in a place with convenient transport access to Hong Kong, in order to facilitate the industries' development?

SECRETARY FOR COMMERCE AND ECONOMIC DEVELOPMENT (in Cantonese): President, it is mentioned in my main reply that the Government has offered support in various aspects to the development of creative clusters. We have mainly provided office facilities and support services to selected creative sectors, and we have also offered incubation programmes for start-ups in creative clusters.

As a matter of fact, we have offered support to the sectors in various ways. Apart from establishing the $300 million CreateSmart Initiative (CSI), we have set up the Film Development Fund to support the development of the film industry in Hong Kong, and the Working Group on Manufacturing Industries, Innovative Technology, and Cultural and Creative Industries under the Economic Development Commission (EDC) will examine how to offer various support.

Mr MA Fung-kwok has just mentioned the co-operation between the two Governments. This is precisely the responsibility of the EDC to explore development opportunities in Nansha or other places like Hengqin. Both Governments are actively exploring room for co-operation in this regard.

Members certainly know that Hong Kong has limited land resources. We would be pleased to discuss how the creative industries in Hong Kong can be developed where possible, and how to make good use of the resources in the Mainland.

LEGISLATIVE COUNCIL ─ 26 March 2014 8979

MISS CHAN YUEN-HAN (in Cantonese): About Mr MA Fung-kwok's question, I have two questions …

PRESIDENT (in Cantonese): Please ask one question first.

MISS CHAN YUEN-HAN (in Cantonese): I will ask one question. The Secretary has just said that Kowloon East will be transformed into another core business district and space will be opened up under flyovers. I have made the relevant proposal in this respect, but the authorities have failed to establish connections with cultural and creative activities in Kwun Tong.

Recently, Prof YIP from The Hong Kong Polytechnic University carried out a large project on the use of flyovers to promote creativity in factory buildings and other places. A lot of creative work can be undertaken if the ground space or the space between factory buildings can be utilized. I have raised this point many times in this Council, and have proposed the same to the business community. According to them, if the Government has really formulated a policy, a win-win situation can be attained, as in the case of New York, that is, if factory owners are willing to allocate a certain percentage of area in factory buildings to the Government for the development of creative industries, the Government will give them a certain percentage of plot ratio in return. I think people are willing to do so.

My supplementary question is: the Secretary said that there was no plan but why has he not considered the views raised by many Honourable colleagues? While he has reacted positively to the proposal of opening up space under flyovers, why does he not link up the cultural districts already formed in the vicinity? In this way, the anger of young people being evicted by the Government due to district development can be alleviated. I would like to raise this question to the Secretary.

SECRETARY FOR COMMERCE AND ECONOMIC DEVELOPMENT (in Cantonese): I thank Miss CHAN Yuen-han for her supplementary question. In respect of regional development, I have also noticed that a lot of creative industry groups have been formed in Kowloon East, especially in Kwun Tong, and many 8980 LEGISLATIVE COUNCIL ─ 26 March 2014 of these groups have now moved into factories. In fact, in the course of the development of Kowloon East, the Development Bureau has attempted to support the development of CCIs in Hong Kong. For example, it has set aside some space in planning the Kai Tak Fantasy project in Kowloon East, so as to support the future development of CCIs, though the modes and scales of development have yet to be determined.

Miss CHAN has mentioned many times and she is very much concerned about the development of the former Tai Hom Village. According to the Revised Development Option of the Comprehensive Development Site in Diamond Hill submitted by the Planning Department to the Wong Tai Sin District Council in September last year, the Department proposed to use the land vacated from the public transport terminus on Sze Mei Street for the construction of buildings with a total floor area of 13 150 sq m, and some of the area will be earmarked for the creative industries. Therefore, in the course of planning, the Government has noted the demands of the creative industries and believes that Kowloon East is the right place.

PRESIDENT (in Cantonese): Has your supplementary question not been answered?

MISS CHAN YUEN-HAN (in Cantonese): The Secretary has just mentioned the Tai Hom Village and I have praised him for the Tai Hom Village development project, but I am now talking about Kwun Tong. How can the space on the ground of existing factory buildings in Kwun Tong be utilized? Development is feasible so long as the Government can set aside some space and link up the space under the flyovers. The Secretary has not answered this question but I would like to praise him for the Tai Hom Village development project. I hope the Secretary would answer my question about Kwun Tong.

PRESIDENT (in Cantonese): Secretary, please reply to the Member's question about factory buildings in Kwun Tong.

LEGISLATIVE COUNCIL ─ 26 March 2014 8981

SECRETARY FOR COMMERCE AND ECONOMIC DEVELOPMENT (in Cantonese): I have mentioned in my main reply that creative industries have extensive coverage. The space used by an individual group is no different from that for an office. In fact, we have already taken the creative industry groups into account in planning industrial and office developments.

Miss CHAN has just mentioned the space under flyovers, we can consider how to make better use of such space in future. We are making efforts in this area.

MR CHRISTOPHER CHUNG (in Cantonese): President, I would like to follow up on the Secretary's reply to parts (2) and (3) of Mr MA Fung-kwok's main question. I would like to tell the Secretary that cultural and arts and the creative industries have a relationship of upstream and downstream supply chain. At present, the Government mainly focuses on promoting the film industry in the development of CCIs, without providing any assistance to local arts groups, galleries, curators and individual artists. The Government has not provided any assistance to people who wish to go to the Mainland for holding exhibitions or staging performances. The crux of the problem lies in the fact that cultural and arts are under the purview of the Home Affairs Bureau while the development of the Mainland market and exploration of business opportunities are under the purview of the Commerce and Economic Development Bureau led by the Secretary.

My supplementary question is: Can the Secretary jointly explore with the Home Affairs Bureau on how they can provide assistance in developing the Mainland market in respect of other artistic activities other than films. Can LCSD officials be seconded to various Economic and Trade Offices under the Commerce and Economic Development Bureau to strengthen the co-operation with Mainland officials, examine the development of new markets and identify venues, and so on? I think his reply has a very limited coverage in these areas.

PRESIDENT (in Cantonese): Mr CHUNG, you have stated your supplementary question, please sit down.

8982 LEGISLATIVE COUNCIL ─ 26 March 2014

SECRETARY FOR COMMERCE AND ECONOMIC DEVELOPMENT (in Cantonese): Concerning the Member's supplementary question about the work of the Government, the Commerce and Economic Development Bureau has been co-operating with the Home Affairs Bureau, focusing on different areas in providing support for CCIs. I have also mentioned in my main reply that creative industries have wide coverage, which include film, design, digital entertainment, architecture, advertising, television, music, publishing, and so on.

Therefore, the Government has also addressed the needs of different creative industry groups. Our work is multi-pronged; for example, the Hong Kong Trade Development Council has led many designers in visiting different places for the promotion of their business and services.

As to whether we need to deploy staff to the Economic and Trade Offices to take up the responsibilities, I do not think there is such a need for the time being. We can help them develop the market through different existing channels.

MR CHRISTOPHER CHUNG (in Cantonese): The Secretary has not answered my supplementary question. Can the Secretary give another practical example to illustrate whether he can help arts groups or artists in Hong Kong carry out activities in the Mainland? If he cannot, people engaging in cultural performances are not supposed to accompany him in visiting Beijing and foreign places …

PRESIDENT (in Cantonese): Mr CHUNG, you are asking another question. Please sit down and press the button, and wait for your turn to ask the second supplementary question.

MR CHRISTOPHER CHUNG (in Cantonese): The Secretary should answer my supplementary question but he has not done so.

MR RONNY TONG (in Cantonese): Mr MA Fung-kwok mentioned in his main question the development of the Loop but the Secretary's main reply is very general and he has not provided any information. President, we may recall that, LEGISLATIVE COUNCIL ─ 26 March 2014 8983 during the Donald TSANG era, he strongly advocated the development of higher education industry in the Loop. He proposed the construction of more than one higher education institution or university in the Loop.

However, after Donald TSANG has stepped down, we have not heard the Government mention anything about the development of the Loop. President, can the Secretary confirm if there is still a plan for the development of higher education in the Loop? If there is, is the Government still planning to construct more than one university so as to make up for the serious shortage of university places in Hong Kong?

SECRETARY FOR COMMERCE AND ECONOMIC DEVELOPMENT (in Cantonese): President, I thank Mr TONG for his question. I have stated in my main reply that the development in the Loop will mainly focus on higher education and this plan remains unchanged. However, the question today is about the development of creative industries in the Loop. As I have said, the development of higher education in the Loop will be supplemented by the development of high-tech research and CCIs. As to whether there will be more than one higher education institution, I believe we do not have specific plans at this stage and the two sides can only have further discussions about the modes of development, implementation and management, operational arrangements and the sharing of expenses. Hence, the number of higher education institutions to be constructed has not yet been discussed.

MR RONNY TONG (in Cantonese): Donald TSANG made a very explicit and specific proposal at that time, why is the Secretary telling us that there are no specific answers? Have the authorities given up Donald TSANG's proposal?

PRESIDENT (in Cantonese): Mr TONG, the Secretary has already replied. If you are dissatisfied, please follow up on the matter through other channels.

MR CHARLES PETER MOK (in Cantonese): President, the Secretary has just mentioned that the development in the Loop will mainly focus on higher education, which will be supplemented by the development of high-tech research and CCIs. If we really want to help these industries, I think the scope of our 8984 LEGISLATIVE COUNCIL ─ 26 March 2014 assistance should not be limited to land use planning, and we should use this excellent opportunity to develop an intellectual city. Can the Secretary tell us if the development of an intellectual city will be included in the early stages of planning or at the initial stage, and create opportunities for local high-tech and creative technology sectors, and so on? If it will, how will the authorities take concerted actions with the industries?

SECRETARY FOR COMMERCE AND ECONOMIC DEVELOPMENT (in Cantonese): President, I have mentioned in reply to Mr Ronny TONG's supplementary question that the development of the Loop is a key project for Shenzhen-Hong Kong co-operation, and the two sides still have to continue to work out the details of the development. I have also mentioned that the discussion include the modes of development, implementation and management, operational arrangements, as well as sharing of expenses. Some issues have yet to be explored, such as whether these specific plans include an intellectual city and whether this is an important part of the development of the high and new-technology industry.

MR CHAN KAM-LAM (in Cantonese): President, we understand from the Secretary's main reply that the Government has given strong support to CCIs but I wonder if the Secretary has considered other measures, such as the space under the Kwun Tong Bypass in Kowloon East. These so-called existing creative enterprises may encounter problems such as relocation or siting, and they are paying exorbitant rents for the existing premises. How can the authorities solve the problems that they are facing? Has the Government considered such measures as providing rent allowance or assistance?

SECRETARY FOR COMMERCE AND ECONOMIC DEVELOPMENT (in Cantonese): President, as we have noticed, some members of the community opined that the Government should provide inexpensive land or offices to the creative industries, or provide them with rent concessions. But we think this is not a long-term approach to enhance the competitiveness of the creative industries. We believe the Government should be committed to enhancing the overall competitiveness of the creative industries, nurturing creative talent, assisting enterprises in developing new markets, and supporting the establishment of new companies. As I have just said in reply to a supplementary question, we LEGISLATIVE COUNCIL ─ 26 March 2014 8985 are developing towards a few areas; for example, we have established the CSI and we set up the Film Development Fund, and the Working Group on Manufacturing Industries, Innovative Technology, and Cultural and Creative Industries under the EDC would further discuss ways to specifically support and enhance the competitiveness of our creative industries.

PRESIDENT (in Cantonese): We have spent 23 minutes 30 seconds on this question. Second question.

Resolution of Disputes by Arbitration or Mediation

2. MR ALBERT CHAN (in Cantonese): President, some members of the public have pointed out that the Government, on the one hand, encourages the public to resolve disputes among them by arbitration or mediation but, on the other hand, resorts only to judicial proceedings in dealing with its disputes with the public (such as those on compensation for land resumption). Quite a number of members of the public cannot afford the high legal costs and hence have no choice but to accept the compensation proposals offered by the Government. Those members of the public have also pointed out that in Canada, an arbitration or mediation mechanism is in place for resolving disputes arising from land resumption by the Government, and they propose that the Hong Kong Government should follow the relevant practices. In this connection, will the Government inform this Council:

(1) of the reasons for not resolving by arbitration or mediation those disputes which involve land resumption by the Government;

(2) of the reasons for the Government taking different stances towards dispute resolution among members of the public and those between the Government and members of the public; and

(3) whether it will consider introducing an arbitration or mediation mechanism by way of a pilot scheme to deal with certain common disputes between members of the public and the Government; if it will, of the details; if not, the reasons for that?

8986 LEGISLATIVE COUNCIL ─ 26 March 2014

SECRETARY FOR JUSTICE (in Cantonese): President, my reply to the three parts of the question is as follows:

(1) Currently, the Government resumes private land for public purposes pursuant to the relevant laws of Hong Kong (including Lands Resumption Ordinance (Cap. 124), Roads (Works, Use and Compensation) Ordinance (Cap. 370), and so on). The relevant ordinances provide for payment of compensation for the private land so resumed or the interest so affected (commonly referred to as "statutory compensation"). The entitlements to compensation, the procedures involved, as well as the basis and principles of assessment of the compensation are set out in the relevant ordinances, while the authority for final determination of compensation under the ordinances rests with the Lands Tribunal. In addition, the Government has also put in place a system of ex gratia land compensation and allowances as an alternative to statutory compensation, with a view to minimizing as much as possible the hardship faced by former owners and other affected parties. The assessment methods and eligibility criteria of the ex gratia allowance are established with the approval of the Legislative Council Finance Committee. Based on past experience, the abovementioned ex gratia compensation and allowance system has been working well. On the one hand, it has addressed the reasonable needs of the affected parties, and on the other hand, it has reduced the need to submit claims for statutory compensation. If the relevant parties do not accept the ex gratia compensation offer made by the Government, they may make a claim for statutory compensation. Generally speaking, the Lands Department (LandsD) would negotiate with the former owners and other affected parties on matters related to the claims. The relevant parties may refer their claims to the Lands Tribunal for final determination of the amount of statutory compensation if agreement cannot be reached with the Government.

In other words, in assessing the amount of statutory compensation, the LandsD is obliged to follow the principles set out in the respective ordinances and the Court rulings made in relevant land resumption cases. Likewise, in assessing whether an individual is LEGISLATIVE COUNCIL ─ 26 March 2014 8987

entitled to the ex gratia allowances and in determining the actual amount of compensation, the LandsD cannot deviate from the set of established principles and methods regarding the eligibility and criteria for the ex gratia compensation and allowances. Under such circumstances, the scope of matters which can be submitted to arbitration or mediation is limited. For that reason, arbitration and mediation may not necessarily enhance the flexibility of the Government's handling of the disputed matters related to statutory compensation claims. Notwithstanding this, the LandsD could consider requests for handling statutory compensation claims by mediation if claimants so request, but the mediation process and the agreement to mediate cannot affect the Government's and the Lands Tribunal's exercising of authority provided for under the law.

(2) The Administration is always keen to promote the use of arbitration and mediation as a means of disputes resolution, and has encouraged bureaux and departments to use these means for resolution of disputes involving the Government in appropriate circumstances.

In relation to mediation, Practice Direction 31 on Mediation and Practice Direction 18.1 on the Personal Injuries List issued by the Judiciary provide that parties to legal proceedings have to consider engaging in mediation for settlement of the relevant disputes. These two Practice Directions are effective from January 2010 and April 2009 respectively, and apply to the Government. Therefore, in respect of the civil proceedings to which these Practice Directions are applicable, the Government will comply with the Practice Directions, and actively engage in mediation with a view to settling the disputes concerned in appropriate circumstances. To this end, the Department of Justice has enhanced training, and will continue to work closely with other bureaux and departments to organize mediation training courses which target at their specific needs.

In relation to arbitration, there are at present provisions under some Ordinances (including the Tung Chung Cable Car Ordinance (Cap. 577) and the Eastern Harbour Crossing Ordinance (Cap. 215), and so on) which provide that if disputes arise in respect of the matters as specified under the relevant Ordinances, the Government 8988 LEGISLATIVE COUNCIL ─ 26 March 2014

and the concerned parties shall use arbitration to resolve their disputes. In the past, there were cases in which disputes were referred to arbitration pursuant to the Ordinances.

In addition, the Government has in fact adopted mediation or arbitration as dispute resolution mechanism in other fields. For example, the standard clauses under public works contracts and consultancy agreements, and so on, entered into by the Government provide that the contracting parties may resolve disputes by mediation or arbitration.

(3) Although arbitration and mediation are two of the effective means of dispute resolution, they may not be applicable in all types of cases. In relation to some government cases (such as judicial review applications) which involve important legal disputes or significant public interest, it is necessary to seek public and authoritative determination by the Courts, so as to lay down legal precedents and guidance for the Government's reference in handling future cases of similar nature.

Nevertheless, depending on the needs, the Government will consider introducing scheme for mediation or arbitration in appropriate contexts. As mentioned in the 2014 Policy Address, in respect of lease modification applications submitted by private landowner, the Government will introduce a Pilot Scheme for Arbitration on Land Premium with a view to facilitating early agreement on land premium payable by way of arbitration so as to speed up land and housing supply. Further, the Steering Committee on Mediation, set up in late 2012, will monitor the implementation of the existing measures and consider new initiatives to promote and foster the development of mediation in Hong Kong.

MR ALBERT CHAN (in Cantonese): President, the Administration's reply has clearly highlighted that major consortia, businessmen and property developers can resort to arbitration or mediation while members of the public cannot.

It has been 14 years since the resumption of the Wah Kai Industrial Centre, but dozens of residents and landowners have yet to receive any compensation. LEGISLATIVE COUNCIL ─ 26 March 2014 8989

They have written to the LandsD to request for dispute resolution by way of arbitration or mediation, but was nonetheless rejected. Does the Government see the need to lower the costs of arbitration or mediation so as to provide an alternative dispute resolution mechanism for the parties concerned other than bringing the case to court? By denying member of the public or small operators of a mechanism to resolve disputes by way of arbitration or mediation, the Government has continued to threaten people with its strong legal team, and deter them from being involved in litigations with the Government with the exorbitant legal costs. As I have submitted a position paper to the Government four years ago, requesting it to resolve land disputes by arbitration or mediation, will the Government revisit the relevant proposal? Given that it is the Government's wish to turn Hong Kong into an arbitration or mediation centre, it has no reason to continue to threaten people with its legal power, while luring them to resolve commercial disputes under an arbitration or mediation mechanism …

PRESIDENT (in Cantonese): Mr CHAN, you are repeating your viewpoint. Please clearly raise your supplementary question and let the public officer reply.

MR ALBERT CHAN (in Cantonese): … will the Government revisit the proposal?

PRESIDENT (in Cantonese): Which official will reply? Secretary for Justice, please reply.

SECRETARY FOR JUSTICE (in Cantonese): Firstly, I must clarify that the Government absolutely does not have the wish or intention to threaten members of the public with its legal power. Secondly, when considering whether a dispute should be resolved by arbitration or mediation or resort to judicial proceedings, we will look at the nature of the controversy and the merit of each case. We will not pre-determine an approach (be it judicial proceeding, arbitration or mediation) for cases involving major consortia or members of the public.

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Also, I can clearly respond to Mr CHAN that the Government is promoting the use of arbitration and mediation, and consolidating Hong Kong's status as an international legal and dispute resolution services centre in the Asia Pacific region. We are fully aware of the advantages brought about by arbitration and mediation, and that is why the relevant policy has been put in place. One of the advantages of arbitration and mediation relative to the judicial proceedings is that it minimizes the time, resources and costs involved. We are therefore ready to use it when appropriate.

I must nonetheless point out that arbitration or mediation are different ways to resolve disputes. As to which approach to adopt depends on the circumstances. Regardless of how supportive a person is to arbitration or mediation, either a person from the legal sector or the person responsible for providing dispute resolution services, he will not say that arbitration or mediation is a cure-all solution. In that case, we will have to consider the relevant circumstances and the Task Force of the Steering Committee on Mediation will have to consider the kind of disputes to be dealt with by such scheme in the future.

I can tell Members that the Steering Committee on Mediation is examining the feasibility of using mediation to resolve disputes involving medical malpractices or water leakage of buildings. Therefore, we will continue to look into the matter.

MR ABRAHAM SHEK (in Cantonese): President, in the last paragraph of the main reply, the Secretary for Justice pointed out that disputes on land premium will be resolved by arbitration. May I ask the Government when the scheme will be introduced and the criteria of the scheme?

PRESIDENT (in Cantonese): Which official will reply? Secretary for Justice, please reply.

SECRETARY FOR JUSTICE (in Cantonese): President, at present, we plan to announce the relevant scheme in mid-2014. We are still working on the details and will consult the relevant sector upon completion, to be followed by a formal announcement.

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MR DENNIS KWOK (in Cantonese): President, in part (3) of the main reply, the Secretary for Justice highlighted the importance of judicial review and the important role played by judicial review in handling cases involving important legal disputes or significant public interest, as well as the need for the Courts to make public and authoritative determination. While we strongly welcome this, we also noticed that after judgments of important judicial review cases were handed down by the Courts, members of political parties, including Members of this Council, often spread fallacious rumours that the judicial review or proceedings have been abused.

In this connection, I hope that corresponding action will be taken by the Government. Also, may I ask if the Government will make further elucidation and step up civic education, so that people will understand the court proceedings for judicial review cases handled by the Legal Aid Department, and the criteria adopted by the Courts in considering such cases? Will the Government step up civic education to nurture a positive understanding and attitude towards the court proceedings for judicial review among Hong Kong people?

SECRETARY FOR JUSTICE (in Cantonese): President, I thank Mr KWOK for his question. Firstly, I can assure Members that the Government absolutely respects people's right in applying for judicial review. This is part of Hong Kong's legal system, and an essential one for upholding the rule of law.

In Mr KWOK's supplementary question, he mentioned that judgments of major judicial review cases handed down by the Courts often aroused extensive public discussions. In my opinion, if the discussions are healthy, there is nothing uncommon about it. Hong Kong is a pluralistic society and people may have different views on the same issue. This is indeed a manifestation of the freedom of speech. And yet, as many people have pointed out on various occasions, discussions on Court judgments should confine to the extent permitted by the law.

Regarding Mr KWOK's proposal to introduce civic education, we have all along been supportive and have explored ways to enhance people's knowledge of law and the rule of law. We will therefore continue with our work in this regard, which include enhancing people's knowledge about judicial review of civil cases.

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DR PRISCILLA LEUNG (in Cantonese): I think part (3) of the Secretary's main reply has sidetracked the discussion of the question. We should not discuss the judicial review to the neglect of the arbitration mechanism under discussion today.

Many middle-class people and members of the public face the same problem of not having money to bring their cases to court vis-a-vis their strong rivals. Therefore, since I first moved the relevant motion in 2009, I have all along wished that the arbitration issue would not be discussed independently. I am aware that the authorities are promoting dispute resolution by mediation, which has no binding effect. Only arbitration has binding effect and should therefore be used to resolve conflicts involving land, and owners' corporations (OCs) in particular.

I am very pleased to learn that the Secretary for Justice has, in his earlier reply, undertaken to consider resolving medical disputes by mediation. However, this is purely voluntary with no binding effect. Either party can still bring the case to court. Litigations may still arise even if the disputes are handled by the Lands Tribunal. The proposed Pilot Scheme for Arbitration on Land Premium has precisely limited the scope of the arbitration scheme. I certainly welcome the introduction of this pilot scheme, but can its scope be further expanded? I hope the Secretary for Justice will, in his reply today, undertake to look seriously into the matter. Regardless of whether a dispute is concerned with major livelihood issues involving OCs, medical malpractices or compulsory auction, they should be resolved by arbitration by all means.

PRESIDENT (in Cantonese): Which official will reply? Secretary for Justice, please reply.

SECRETARY FOR JUSTICE (in Cantonese): President, I thank Dr LEUNG for her question. As I have just said, whether arbitration is applicable depends on the merit of each case. Disputes involving OCs, as Dr LEUNG has said, could be further categorized. At this stage, we have not ruled out any possibility of resolving disputes by arbitration. If the parties concerned intend to resolve their dispute by arbitration, first of all, we will be supportive, and secondly, this is not prohibited by the existing law.

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Notwithstanding that, I do hope that Members will be able to differentiate arbitration, litigation and mediation. The difference lies in that arbitration and litigation involve a certain amount of solicitors' fees, whereas the cost of mediation is much lower. Therefore, if the only consideration is to minimize the legal costs incurred, Members should focus more on mediation.

MR TONY TSE (in Cantonese): President, according the Lands Resumption Ordinance (Cap. 124), if the Government and the affected parties (including former owners) fail to agree on the amount of compensation within a short period of time, the Government may make an advance payment to the affected parties. In this connection, may I ask the Government whether, under the existing policy, the advance payment made to the former owners is equivalent to the full amount of compensation so assessed, so as to help them ease the financial difficulties? If so, what are the criteria?

PRESIDENT (in Cantonese): Which official will reply? Secretary for Development, please reply.

SECRETARY FOR DEVELOPMENT (in Cantonese): President, I thank Mr Tony TSE for his question. Advance payment will be made according to the value of the relevant land so assessed by the LandsD. Nonetheless, in the case of land resumption, ex gratia compensation will also be granted where appropriate on top of the assessed value.

Ex gratia compensation will be granted when the party initiating the land resumption chooses not to make statutory compensation according to the law, but would resolve the dispute by making ex gratia compensation. Therefore, if an agreement cannot be reached, the advance payment will not include any ex gratia compensation but only the assessed value under statutory compensation.

MR JAMES TIEN (in Cantonese): President, I rarely see eye to eye with Mr Albert CHAN, but today I do share his view. In the main reply, the Government pointed out that the resumption of land from the public pursuant to Cap. 124 of the laws of Hong Kong often involves road or engineering projects, and ex gratia compensation is an alternative to statutory compensation. 8994 LEGISLATIVE COUNCIL ─ 26 March 2014

According to my observation, however, the amount of statutory compensation was often lower than the market price in the past years and this has upset many people. On the contrary, the Government has adopted another approach for property developers. Given that property developers are rich and powerful, thus if the asking prices of are $1 billion and $600 million, the two parties may then engage in a tug-of-war. This is because property developers can afford to wait as this is a small sum of money relative to the billions of dollars, and they can spend tens of thousands of dollars to employ lawyers. To the general public, however, not only will the payment be held up, the road concerned will also be resumed, which is so unfair.

President, I wish to raise a simple supplementary question. Noting that the Government has proposed to introduce the Pilot Scheme for Arbitration on Land Premium in the Policy Address, I opine that arbitration should not be confined to disputes with property developers involving billions of dollars. Why didn't the Government consider introducing a similar scheme for members of the public? By so doing, the Government can show the public that it will resort to arbitration regardless of whether the disputes involve members of the public or property developers. This is because people may find a compensation of only $100,000 too little, but will feel more comfortable if the amount is further increased to $120,000 and thus accept the offer.

PRESIDENT (in Cantonese): Which official will reply? Secretary for Development, please reply.

SECRETARY FOR DEVELOPMENT (in Cantonese): President, I thank Mr James TIEN for his supplementary question. As the Secretary for Justice has said earlier, the formulation of policies will definitely not vary with the affected parties, be they businessmen or members of the public, but will only focus on the applicability of the relevant policies and the requirements of the law. As mentioned in the main reply, legislation relating to the resumption of land has actually provided for the criteria for compensation, as well as the principles and methods involved. Furthermore, take the resumption of New Territories land as an example, ex gratia compensation will not only be granted to landowners, but also land occupiers. The applicability of the ex gratia compensation and the eligibility criteria of the relevant scheme must be approved by the Legislative Council before implementation.

LEGISLATIVE COUNCIL ─ 26 March 2014 8995

In other words, be it the statutory or ex gratia compensation, approval of the Legislative Council has been sought and has been provided in the law. Not only is the criteria pretty stringent, even the assessment methods have been provided for. This is why I said the scope of matters which can be submitted to mediation is pretty limited. This is the first point.

Secondly, I wish to make some elucidation. Regarding the ex gratia compensation proposed by the Government, past experiences showed that it has been accepted by a high percentage of the affected parties. Take the resumption of New Territories land as an example. Under the existing mechanism, New Territories land has been divided into four parts for the sake of compensation and the acceptance rate exceeds 95%. In the urban areas, land resumption cases are mostly related to urban renewal in the past. When the land resumed by the Urban Renewal Authority (URA) reaches a certain threshold, such that the project concerned can be carried out, the outstanding cases will be referred to the Government for follow up.

Actually, the compensation offered by the URA to the affected people is not bad. In many cases, over 80% of the affected parties accepted the offer and thus enabled the renewal projects to proceed. Outstanding cases accounted for about 20%, and might involve people holding firm stance. These cases will be referred to the LandsD for follow up, and among them, about 48% could be resolved. This is why we stated in the main reply that the existing system has been working well to a certain extent.

PRESIDENT (in Cantonese): Mr TIEN, has your supplementary question not been answered?

MR JAMES TIEN (in Cantonese): He has not answered my specific question about whether the Government would consider implementing the Pilot Scheme for Arbitration on Land Premium not only for property developers, but for members of the public as well. The Secretary has not answered this supplementary question.

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PRESIDENT (in Cantonese): As far as I understand, the Secretary has already answered, stressing that the existing system has been working well. Secretary, can you reply specifically if Mr TIEN's proposal will be adopted?

SECRETARY FOR DEVELOPMENT (in Cantonese): President, concerning the Pilot Scheme for Arbitration on Land Premium, regardless of whether the landowner is an individual or a company, he will be treated in the same way with no difference at all. So long as he is the landowner, he will receive the same treatment when he discuss with the LandsD on the conversion of land use.

PRESIDENT (in Cantonese): We have spent nearly 26 minutes on this question, which has far exceeded the time limit specified in the Rules of Procedure. Third question.

Manpower Planning for Teachers

3. MR IP KIN-YUEN (in Cantonese): President, quite a number of primary and secondary school teachers have relayed to me that due to an excessive number of teaching lessons and the need to cope with copious amounts of nonteaching work, they work excessively long hours and do not have adequate rest time. Such a situation not only affects teaching quality but also makes them unable to spare the time to take care of and provide counselling to individual students. These teachers opine that given the sound financial position of the Government at present and the ample supply of qualified teachers, the authorities should expeditiously implement measures to improve the class-teacher ratios of secondary and primary schools, and increase the number of permanent teaching posts in the teaching establishment, so as to relieve the problem of excessive workload of teachers. In this connection, will the Government inform this Council:

(1) of the criteria based on which the authorities set the existing class-teacher ratios of secondary and primary schools; whether they have assessed if such ratios need to be improved; if they have, of the assessment outcome and the improvement measures; if not, the reasons for that;

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(2) given that the incumbent Chief Executive undertook in his election manifesto that he would "suitably increase the number of teachers, thereby enabling teachers to devote more time to students and to their own professional development", whether the authorities have conducted studies or reviews on the expansion of the teaching establishment, as well as drawn up relevant measures and timetable; if they have, of the details; if not, the reasons for that; and

(3) as some members of the education sector have pointed out that at present, quite a number of young people aspiring to join the teaching profession can only be appointed on fixed-term contracts due to the lack of permanent teaching post vacancies, and there has been a persistent wastage of young teachers as they have not been provided with a stable working environment to give full play to their strength and expertise, whether the Education Bureau is concerned about such a situation and how the authorities will solve the succession problem of teaching manpower in future?

SECRETARY FOR EDUCATION (in Cantonese): President, my reply to the Member's main question is as follows:

(1) When formulating policies concerning school resources, including teacher manpower, the Education Bureau actively listens to the sector's views, and considers the actual needs and resource priority. We strive to create an enabling environment for quality education.

To take the implementation of the New Senior Secondary (NSS) Academic Structure as an example, after extensive consultation with the sector in 2004 and 2005, we decided to revise the class-teacher ratios in the 2009-2010 school year and further improved the ratio for senior secondary levels to two teachers per class starting from the 2012-2013 school year. Cash grants, such as the Senior Secondary Curriculum Support Grant and Diversity Learning Grant, are also disbursed on a recurrent basis to support schools and teachers.

Regarding primary schools, as a result of our consultation with the sector, we have provided schools with additional teaching posts in the permanent staff establishment since the 2006-2007 school year 8998 LEGISLATIVE COUNCIL ─ 26 March 2014

for the implementation of specialized teaching, hence increasing the class-teacher ratio of whole-day primary schools to 1.5 teachers per class. Posts of curriculum leaders were also created in the permanent staff establishment with effect from the 2007-2008 school year. All these were the results achieved through our consultation with the sector.

In reviewing the manpower resources of schools, we have to look beyond the class-teacher ratios and take a holistic view on the resources and other support measures available, including the provision of additional regular teachers under various education policies and various cash grants for employing additional teaching staff. Based on their situations and development needs, schools can deploy these cash grants for employing additional teachers and supporting staff on top of the teaching staff establishment or procuring services to reduce the workload of their teachers.

As in the past, we will review schools' manpower and needs in a timely manner. To help schools implement poverty alleviation and other learning support initiatives, it has been announced in the 2014 Policy Address that starting from the 2014-2015 school year, we will provide public sector primary schools with an additional recurrent grant equivalent to the salary of a Clerical Assistant to relieve the administrative workload of teachers. We will also provide the public sector schools operating senior secondary classes with an additional recurrent grant ― and I stress, recurrent grant ― equivalent to the salary of a Graduate Master/Mistress to strengthen life planning education. These targeted support measures are introduced having regard to the sector's views.

(2) A number of important initiatives implemented by the Education Bureau in recent years, for instance, the small class teaching in primary schools and reduction of the number of students allocated per Secondary One (S1) class, have had a direct impact on relieving teachers' workload. The average student-teacher ratios of public sector secondary and primary schools have been lowered from 18.0:1 and 18.4:1 respectively in the 2005-2006 school year to the estimated 13.8:1 and 14.2:1 respectively in the 2013-2014 school year, and this is a relatively superior standard at the international LEGISLATIVE COUNCIL ─ 26 March 2014 8999

level. Meanwhile, the unit costs for subsidized places in aided secondary and primary schools have increased by about 62% and 92% respectively, a growth from $33,340 and $24,640 in the 2005-2006 financial year to $54,170 and $47,320 in the 2013-2014 financial year. With continuously improving student-teacher ratios, teachers can devote more time to take care of students and pursue professional development. It is anticipated that student-teacher ratios will be lowered further when initiatives on small class teaching for primary schools and reduction of the number of students allocated per S1 class for secondary schools are gradually extended to classes in higher levels.

Furthermore, under the NSS curriculum, subjects are often taught in a flexible manner in subject groups. The average size of teaching groups for the majority of NSS subjects is maintained at 25 or below, which has significantly increased the opportunities for teachers to take care of individual students.

We will keep monitoring the schools' situation from time to time and improve the teacher manpower and resources according to actual needs as and when necessary. As committed at the meeting of the Panel on Education last June, I have conveyed the sector's concerns about teacher manpower to the Education Commission. The Commission has also discussed the issue at its meeting in February 2014 and will continue to follow-up the matter.

(3) The Education Bureau has been very concerned about the supply and demand of teachers. We will take into account the changes in student population in the coming 10 years and adjust the number of government-funded teacher education places, so as to maintain a balanced and stable supply and demand of teachers.

We have also been requesting schools to accord priority to employing teachers with teacher training. The data of recent years reveal that there are on average about 2 000 teachers leaving the profession each school year due to retirement, further studies or other personal reasons. The teaching vacancies thus arising are adequate for absorbing the newly graduated prospective teachers.

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In response to the transient decline in secondary school student population in the coming few years, the Education Bureau has implemented a basket of targeted relief measures in the 2013-2014 school year. These measures have effectively enabled the schools to retain teachers within the establishment, thus minimizing the competition between the surplus teachers and prospective teachers for teaching posts. Furthermore, with the anticipated gradual increase in primary school student population and the implementation of small class teaching in primary schools and the provision of additional resources by the Government in the next school year as announced in the Policy Address this year to strengthen the support for non-Chinese speaking students and life planning education and career guidance services, all these measures are conducive to the increase in the overall number of teaching posts for absorbing fresh graduates. As such, we anticipate that a normal turnover can be maintained in the teaching force as a whole in the coming few years.

In recent years, the number of young people joining the teaching profession has been steady, with nearly 90% of the newly joined teachers each year are at the average age of 29 or below, while 50% of these teachers are at the age of 25 or below. Besides, most of the serving teachers of primary schools belong to the 30 to 40 years old age group, whereas most secondary school teachers are evenly distributed in the various age groups from 25 to 45. As seen from these perspectives, there is no evidence showing a succession problem in the teaching force. As for work stability, about 90% of the secondary and primary school teachers are employed under the staff establishment. According to the information of the 2012-2013 school year, 60% of the teachers employed under the staff establishment for five years or less are at the age of 27 or below. Overall speaking, teaching has remained a relatively stable profession.

MR IP KIN-YUEN (in Cantonese): President, the Secretary spoke about having "extensive consultation with the sector", or words to that effect, five times in the main reply, but regrettably, the Education Bureau has never taken the initiative to consult the largest educational organization in Hong Kong, namely, the Hong LEGISLATIVE COUNCIL ─ 26 March 2014 9001

Kong Professional Teachers' Union. I do not know what the Secretary's standard of "extensive" is, and I find it deeply regrettable.

President, I raised this question on the teaching establishment today because, as I mentioned in the main question, the crux of all problems is how to ensure that the workload and the number of teaching lessons of teachers in Hong Kong can become more reasonable, so as to improve teaching quality.

We know that the workload of Hong Kong teachers is among the heaviest or the greatest around the world, with the number of teaching lessons per teacher almost as high as 30, while the corresponding number in Taiwan is 28, and just 12 in the Mainland. Under the circumstance, how come the Secretary has yet to conduct a review on the teaching establishment? Is he of the view that the serious problem of excessive workload of Hong Kong teachers can be improved merely by the implementation of some piecemeal measures?

President, my supplementary question is: Are there any statistics to show that the workload of Hong Kong teachers has already dropped to a reasonable level?

SECRETARY FOR EDUCATION (in Cantonese): Thanks to Mr IP for the question. Firstly, regarding the workload of teachers, we will consider the issue from several perspectives. As I mentioned in the main reply, we will provide grants to schools so that they can employ additional teachers. Moreover, other grants for specific purposes are also disbursed to help reduce the workload of teachers.

Secondly, we have reviewed the NSS curriculum. Taking into account the views of teachers and school headmasters, we have reduced, as far as possible, the number of electives taken by students, the amount of school-based assessment, and so on, in order to reduce the workload of teachers.

Thirdly, as I also mentioned just now, we have referred the questions relating to the overall workload of teachers to the Education Commission for thorough discussion formally, and representatives from various sectors will participate in the process fully.

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PRESIDENT (in Cantonese): Has your supplementary question not been answered?

MR IP KIN-YUEN (in Cantonese): In his reply just now, the Secretary merely repeated some of the measures he stated in the main reply, but …

PRESIDENT (in Cantonese): Please repeat the part of your question that you think the Secretary has not answered.

MR IP KIN-YUEN (in Cantonese): He has not replied the part as to whether any statistics is available to show that the workload of teachers has already dropped to a reasonable level?

SECRETARY FOR EDUCATION (in Cantonese): Thank you, Mr IP. I left out one point just now. Regarding the question of teaching lessons just mentioned by the Member, as I said in a discussion forum a few months ago, we have indeed conducted in-depth studies on the relevant data, especially the case of South Korea where teachers are required to take up 26 to 27 teaching lessons, but the duration of each lesson is about 40 or 35 minutes. In the case of other countries, the duration of each teaching lesson is 40 or 45 minutes. Hence, on comparison, there is a difference in the duration of teaching lessons.

In addition, the Member also mentioned the situation in the Mainland. Actually, teachers in the Mainland must spend a lot of time on teaching research, apart from taking up teaching lessons. But it is not the same in Hong Kong. Hence, we must discuss and consider the matter from a holistic point of view.

MR ABRAHAM SHEK (in Cantonese): President, having gone through the three parts of Mr IP's main question as well as the Secretary's main reply, I cannot say that the Secretary has actually answered Mr IP's question at all. In particular, Mr IP referred to the impact on teaching quality as a result of increasing workload, which is the crux of the problem. Secretary, when will you implement small class teaching so that teachers, especially contract teachers, will LEGISLATIVE COUNCIL ─ 26 March 2014 9003 no longer have to worry about their future, while people aspiring to joining the profession will not be deterred?

SECRETARY FOR EDUCATION (in Cantonese): Thanks to Mr Abraham SHEK for asking this supplementary question. With regard to small class teaching, we have already accumulated six years of experience. With implementation on a grade-by-grade basis, we will proceed to the final grade in primary schools. We will keep making reference to the relevant experience. With regard to secondary schools, President, as I also mentioned in the main reply, the mode of group teaching is adopted for secondary schools (particularly senior secondary schools). Let us picture this. If there are 25 students in each class in the senior secondary level, only 10-odd students will be left in each group when it comes to group teaching of individual subjects. As pointed out in many researches, this may pose some major problems. We must consider the matter from this perspective. As I mentioned in the main reply, the average size of teaching groups of NSS subjects is maintained at 25. This is a point of significance.

Besides, as Members will note from the current three-fold preservation policy as well as the reduction of the number of students allocated per Secondary One class, the entire establishment will have more energy with the preservation of surplus teachers, so that teachers can take up further studies and make other work arrangements. This can also help maintain the teaching establishment at a reasonable level.

DR HELENA WONG (in Cantonese): In recent years, many young people reflect the view while they are eager to join the teaching profession, it is very difficult to find teaching posts. It is clear from part (3) of the Secretary's main reply that the Administration has actually made no real effort to tackle this problem because the Secretary merely referred us to the various measures announced in the Policy Address, such as strengthening the support for non-Chinese speaking students, life planning education, and so on. But as these are only short-term measures, the schools dare not and cannot employ permanent teachers and hence, they can only employ contract teachers. Even though the new teachers may, as mentioned by the Secretary, be younger, they have no career prospects because it is uncertain as to whether their contracts would be renewed. Given the lack of protection, young people dare not join the teaching 9004 LEGISLATIVE COUNCIL ─ 26 March 2014 profession. For those who are willing to sacrifice and join the teaching profession notwithstanding the uncertainty, they are still worried about the lack of job protection …

PRESIDENT (in Cantonese): Dr WONG, please ask your supplementary question.

DR HELENA WONG (in Cantonese): President, may I ask the Secretary to tell us clearly that over the past five years, how many young graduates have been employed as permanent teachers? How many have become contract teachers? What are the specific figures?

SECRETARY FOR EDUCATION (in Cantonese): President, thanks to Dr WONG for asking this supplementary question. I would like to respond to two points. First, of the 50 000-odd teachers in Hong Kong, the annual wastage rate is about 5%, including those who leave the profession due to retirement or other reasons. As a result, as many as 2 000-odd vacancies would arise, while the annual cohort of prospective teachers joining the teaching profession will number around 1 000-odd. In this connection, as I mentioned in the main reply, there is adequate supply to meet the demand quantity-wise. But we must understand that new teachers may have to join the profession as contract teachers, given the difference between the demand of teachers in various subjects or due to personal preferences.

Second, as I mentioned just now, over 90% of teachers are under the permanent staff establishment. Once permanent teaching posts under the staff establishment arise, schools will employ additional teachers. This is actually a great improvement, and many schools have made improvement in this regard. A number of schools have converted contract teachers to permanent teachers. Evidently, this arrangement is constantly improving.

PRESIDENT (in Cantonese): Has your supplementary question not been answered?

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DR HELENA WONG (in Cantonese): The Secretary has yet to tell us clearly how many newly joined teachers were employed on contract basis.

PRESIDENT (in Cantonese): Secretary, can you provide the statistics as asked by the Member?

SECRETARY FOR EDUCATION (in Cantonese): Thank you, Dr WONG. Under the existing mechanism, we do not have such data. Nonetheless, I note from my discussion with the five educational institutions that in their view, 90% of the graduates managed to secure an employment, while others would depend on their own preference and arrangements. While we consider that the situation may not be ideal, we also understand that there is a process between the students' job-hunting and the schools' demand for teachers.

PRESIDENT (in Cantonese): The Member is enquiring about the ratio between permanent and contract teachers. Does the Government have this kind of data?

SECRETARY FOR EDUCATION (in Cantonese): President, as I mentioned just now, according to our statistics, over 90% of teachers are employed as permanent teachers. Insofar contract teachers are concerned, if I remember correctly, the ratio is about 5% to 6%. I will provide supplementary information on the relevant numbers in due course. (Appendix I)

PRESIDENT (in Cantonese): Will the Secretary please provide the figures after the meeting.

MISS CHAN YUEN-HAN (in Cantonese): This oral question today is about manpower planning for teachers. I have been a member of the management committee of several schools, and I note that there is much grievance on the part of teachers all along. When answering Mr IP's supplementary question just now, the Secretary sounded as if there was no problem at all, and he even cited the examples of the Mainland and South Korea. If that is the case, the Secretary 9006 LEGISLATIVE COUNCIL ─ 26 March 2014 actually has no idea about the teachers' grievances now. President, nowadays, teachers actually have a very heavy workload. Notwithstanding the Secretary's statement that various measures have been put in place, objectively speaking, teachers must work extremely long hours day in day out. I hope the Secretary can find time to work as a teacher for one week so as to get experience how they feel …

PRESIDENT (in Cantonese): Miss CHAN, please ask your supplementary question.

MISS CHAN YUEN-HAN (in Cantonese): … especially in a Direct Subsidy Scheme (DSS) school. What I am going to say is that …

PRESIDENT (in Cantonese): Please ask your supplementary question.

MISS CHAN YUEN-HAN (in Cantonese): Many teachers have asked me this question: Why is there such a big difference between the salaries of teachers having the same qualification? As I see it, the issue in question may involve the different remuneration package between Certificated Masters and Graduate Masters. Regarding the overall manpower planning for teachers, what will the Government do to deal squarely with the problems relating to the heavy workload of teachers, as well as the difference in their salaries? I would like to ask the Secretary what he will do to address the problems. From the Secretary's reply, I fail to see that the Government is facing the above problems squarely and adopting measures to resolve them accordingly.

PRESIDENT (in Cantonese): If you have already asked your supplementary question, please let the Secretary reply.

MISS CHAN YUEN-HAN (in Cantonese): Thank you.

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SECRETARY FOR EDUCATION (in Cantonese): Thank you, Miss CHAN. Regarding the heavy workload of teachers and the ways to handle their salary difference, firstly, there are indeed different arrangements, levels and requirements for some contract teachers or teaching assistants in primary and secondary schools. An overall mechanism is available in individual schools to handle these cases, which we consider to be acceptable.

Secondly, the workload of teachers is often related to their qualifications and work arrangements. For example, teachers in DSS schools may have a higher salary because they are more competitive, while Grant/Subsidized schools will generally operate according to the overall mechanism. Hence, there could be a difference between the salaries of teachers. Regarding the contract employees, they may have different salaries according to their work arrangements.

PRESIDENT (in Cantonese): Miss CHAN, has your supplementary question not been answered?

MISS CHAN YUEN-HAN (in Cantonese): I think he has not answered my question.

PRESIDENT (in Cantonese): Please repeat your supplementary question.

MISS CHAN YUEN-HAN (in Cantonese): My supplementary question is: Given the teachers' grievances about heavy workload and difference in salaries despite having the same qualification, what will the Secretary do to address such problems?

PRESIDENT (in Cantonese): Miss CHAN, the Secretary has already answered your question; just that you are still dissatisfied with the measures taken by the Government. Please follow up through other channels.

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MR FRANKIE YICK (in Cantonese): President, from the Secretary's reply, we note that in the past years, the Government has indeed increased the number of permanent teachers or the relevant grants substantially. But obviously, these measures are applicable across the board, and no additional resources have been granted to schools belonging to different bands. I have contacts with many Band 3 schools. Their difficulty lies with the substantial difference in learning ability of students, and relatively speaking, they have a larger number of students with special education needs. School headmasters and teachers of these schools earnestly hope that more resources can be provided by the Government so as to strengthen the care given to students.

President, I would like to ask the Government whether consideration can be given to providing different levels of grants to schools in the three allocation bands. For example, whether additional funding can be provided to Band 3 schools so that they can handle the existing difficulties?

SECRETARY FOR EDUCATION (in Cantonese): Thank you, Mr YICK. We agree that there is such a need, especially in respect of providing assistance to schools in different allocation bands to support students with poorer academic achievement. Under the existing mechanism, for example, grants and subsidies have been provided to public secondary schools to employ additional Graduate Masters to support students with poorer academic achievement.

PRESIDENT (in Cantonese): This Council has already spent over 22 minutes on this question. Fourth question.

Improvement to Legal Aid System

4. MR FRANKIE YICK (in Cantonese): President, in the past four years, among the top 10 solicitors in each year to whom the Legal Aid Department (LAD) assigned the most legal aid cases, the number of cases assigned to the solicitor on top of the list was higher than that to the solicitor ranked the 10th by roughly 80%. Given that the LAD generally assigns, according to the wishes of legally aided persons, the solicitors or counsel nominated by them to be their representatives, and legal aid cases are assigned mainly to a small number of lawyers at present, some members of the taxi and public light bus trades are LEGISLATIVE COUNCIL ─ 26 March 2014 9009 worried that the legal aid system is susceptible to abuse. For instance, law-breakers may engage in champerty and abet the injured in traffic accidents to exaggerate the degree of their injuries sustained in order to make fraudulent insurance claims. Due to the increase in the amount of compensation payout, insurance companies raise the insurance premiums for vehicles, resulting in an increase in the operating expenditure of the trades. In this connection, will the Government inform this Council:

(1) of the annual numbers of legal aid cases in which the LAD refused the assignment of the lawyers nominated by the aided persons, with a breakdown by reason for refusal; the average, the highest and the lowest amounts paid for the legal costs and other disbursements for unsuccessful legal aid cases, the average difference between the amount claimed and the amount of compensation awarded by the court in respect of the successful legal aid compensation claims, and the number of traffic accidents involving taxis and public light buses among such cases, in the past five years;

(2) whether the LAD reviewed in the past five years the existing legal aid system, including the practice of nomination of lawyers by aided persons, the causes for legal aid cases being assigned mainly to a small number of lawyers, and whether allowing aided persons to nominate lawyers will give rise to problems such as champerty; if it did, of the outcome, and the solutions for the problems concerned; if not, whether it will conduct such a review; whether it will study the formulation of a code governing aided persons' nomination of lawyers, so as to ensure that legal aid cases will not be assigned mainly to certain lawyers; and

(3) whether it will invite the Corruption Prevention Department of the Independent Commission Against Corruption (ICAC) to give advice on the existing procedure for assigning legal aid lawyers, so as to ensure that the procedure is fair and transparent; if it will, of the details; if not, the reasons for that?

SECRETARY FOR HOME AFFAIRS (in Cantonese): President, the Government's policy objective of legal aid is to ensure that no one with reasonable grounds for taking or defending a legal action is denied access to 9010 LEGISLATIVE COUNCIL ─ 26 March 2014 justice because of a lack of means. According to the Legal Aid Ordinance (LAO), legal aid will only be granted to applicants who pass both the merits test and the means test, and all legal aid applications are processed by LAD's legal aid counsel.

In assigning legal aid cases to lawyers, Section 13 of the LAO provides that where a legal aid certificate is granted, the Director of Legal Aid (the Director) may act for the aided person through legal aid counsel or assign any lawyers in private practice who are on the Legal Aid Panel (the Panel) selected by either the Director or the aided person. To this end, the LAD has devised a set of criteria on the assignment of legal aid cases which have been endorsed by the Legal Aid Services Council and uploaded onto the LAD's website. In assigning legal aid cases to lawyers on the Panel, the aided persons' interest is of paramount importance to the LAD.

When processing the nomination of lawyers, the LAD will base on the assignment criteria to determine whether the choice of lawyer is appropriate by assessing whether the nominated lawyer has attained the relevant seniority, experience and expertise required to take up the assignment. If the nominated lawyer is considered not appropriate on grounds such as having previous records of unsatisfactory performance in handling legal aided cases or currently handling an overwhelming number of legal aid cases, and so on, the LAD will discuss the choice of lawyer with the aided person. When necessary, the LAD will ask the aided person to select another Panel lawyer and assess whether the newly nominated lawyer is appropriate in taking up the case. As such, the lawyer eventually assigned to take up the case would be agreed to by both the aided person and the LAD.

As regards the three parts of Mr YICK's question, the answer is as follows:

(1) The LAD has not maintained statistics on the number of legal aid cases where the nomination of lawyer by an aided person was refused.

The costs incurred in cases (irrespective of whether the lawyer was nominated by the aided persons) closed in the past five years relating to traffic accidents, employees' compensation and general damages claims for personal injuries are set out in the Annex. Meanwhile, LEGISLATIVE COUNCIL ─ 26 March 2014 9011

all traffic accident cases, regardless of the types of vehicles involved, are classified under the traffic accident category. The LAD does not maintain separate statistics on traffic accident cases that involved only taxis or public light buses.

Regarding the amount of damages claimed for personal injuries and the judgment sum eventually awarded by the court, the amount claimed in individual cases would often be revised for various reasons in the course of the proceedings. As such, the LAD has not compared the amount of damages claimed and the judgment sum eventually awarded by the court for individual cases.

(2) Under the common law, maintenance and champerty are criminal offences, and are prohibited under the code of professional conduct of The Law Society of Hong Kong and the Hong Kong Bar Association. Notices are displayed at the LAD offices to remind the public of the risk of engaging recovery agents and of the prohibition of improper touting activities by law firms within the LAD premises. If a nominated lawyer is found to have engaged in any improper conduct, the LAD will impose appropriate sanctions on the lawyer concerned and refer the case to the Hong Kong Bar Association or The Law Society of Hong Kong for follow-up action.

To address the public concern on improper touting or champerty activities, the LAD has introduced a "Declaration System" for legal aid cases in September 2013 after consulting the Legal Aid Services Council and the two legal professional bodies. The system seeks to ensure that the aided person's choice of lawyer is not affected by the champerty or improper touting activities on the part of the lawyer concerned. A nominated lawyer who is unable to accept the above declaration condition will not be allowed to take up assignment to handle the case.

Meanwhile, the LAD also noted that there were Panel lawyers who had been assigned with a relatively larger number of cases. Such situations may not necessarily be related to improper touting or champerty activities. The LAD will consider enhancing liaison with the two legal professional bodies to combat improper touting, 9012 LEGISLATIVE COUNCIL ─ 26 March 2014

and imposing appropriate sanctions on law firms that have acted unreasonably or have not handled claims properly. The LAD also strives to enhance the transparency of the claims procedures and welcomes the provision of evidence and relevant information, such as copying LAD in the correspondences between the defendant or insurer and the aided person, so that the LAD may identify in a timely manner any improper conduct on the part of assigned lawyers, and so on. The Home Affairs Bureau and the Legal Aid Services Council will closely monitor the situation.

(3) A Departmental Monitoring Committee (DMC) chaired by the Director is established to evaluate the performance of assigned lawyers in handling legal aid cases and the number of legal aid cases assigned. In the past, a representative of the ICAC had attended DMC meetings as an observer.

To enhance the transparency and fairness in the assignments of lawyers, the LAD and ICAC have formed a Corruption Prevention Group to discuss issues relating to prevention of corruption and bribery. We understand that the Group has agreed to commence a review of the lawyer assignment procedures in the middle of this year. The Home Affairs Bureau will closely monitor the situation.

Furthermore, the LAD currently has in place a mechanism for making "representations" regarding legal aid cases. If anyone believes a person should not have been granted legal aid (for example, that the person has withheld essential information that affects the strength of the case), he/she can make a representation to LAD. If verified after LAD's investigation, the LAD will discharge the relevant aided person's legal aid certificate. If improper conduct on the part of lawyers is involved, the LAD will also take appropriate actions, including issuing advisory letters to the lawyers concerned, placing their names on the Record of Unsatisfactory Performance and Conduct, removing their names from the Legal Aid Panel, as well as referring the cases to the relevant legal professional bodies for follow-up actions.

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Annex

The amount of costs expended on cases relating to traffic accidents, employees' compensation and general damages claims (irrespective of whether there was a nomination of lawyers by the aided persons)

Total amount Highest Lowest Number Average amount of costs paid amount of amount of Year of cases of costs paid for for lost cases costs paid for costs paid for lost each case (HK$) (HK$) a case (HK$) a case (HK$) 2009 49 30,743,307.26 627,414.43 2,556,133.40 321.00* 2010 38 18,342,395.38 482,694.62 1,754,860.00 37,012.83 2011 40 29,593,718.41 739,842.96 6,790,560.29 10,500.00# 2012 44 22,998,951.28 522,703.44 2,175,601.81 25,598.00 2013 36 16,464,730.42 457,353.62 1,640,281.10 15,190.00

Notes:

* The proceedings were discontinued with no order as to costs, and common fund costs waived by the assigned solicitor.

# The proceedings were discontinued with no order as to costs.

MR FRANKIE YICK (in Cantonese): President, the Secretary mentioned in the main reply that the aim of legal aid is to provide legal support to people who cannot afford the high legal costs so that they can be treated fairly. But the problem is that some people would attempt to profit from legal aid by using public money to institute legal proceedings, in the hope of obtaining unreasonable compensations. There were such court judgments in the past. If such social malady is not stopped, the insurance premium of taxis and minibuses will rise significantly and their operators will raise fares. In the end, the general public will shoulder these costs. I am glad to hear in part (3) of the Secretary's main reply that the LAD and ICAC have formed a Corruption Prevention Group (CPG) which will commence a review in the middle of this year. I would like to ask whether the Secretary will consider inviting representatives of the relevant sectors, such as the insurance sector or even the legal sector to provide more information, so as to facilitate the authorities in handling this problem.

9014 LEGISLATIVE COUNCIL ─ 26 March 2014

SECRETARY FOR HOME AFFAIRS (in Cantonese): President, the aim of legal aid is to uphold justice. We have also noticed society's concern about the possible abuse of the legal aid system. On account of this, the LAD and the ICAC have formed a working group which will follow up specifically the problem concerning assigned lawyers starting from the middle of this year. I am aware that Mr YICK has invited representatives of the insurance industry and professional drivers of the transport trades to go to the Home Affairs Bureau to provide information and messages in this respect. The LAD has also received the cases forwarded or provided by them. It will look carefully into these cases to see if any improper conduct of lawyers has been involved.

As regards Mr YICK's question about whether the CPG formed by the ICAC and the LAD will invite representatives of the insurance industry or other relevant industries to present their views, I will relay this to the CPG and I believe that they will be pleased to hear about the actual cases.

MR CHAN KIN-POR (in Cantonese): At present, in cases relating to claims for damages for personal injuries or death, lawyers' fee on average accounts for 30% to 40%, or even as much as 60% of the total cost. It is obvious that there are problems with the compensation scheme. I have in hand two complaints lodged by the Taxi & P.L.B. Concern Group concerning the issue of legal aid. First, it was learned that some staff, I believe they are LAD staff, recommended to applicants and handed out name cards of law firms engaging in maintenance and champerty. Second, a taxi driver suffering minor injuries originally asked for some $300,000 as compensation; but after he was granted legal aid, he claimed for over $3 million. That was a very serious complaint. I would like to ask the Secretary if he would instruct the LAD to investigate into this case seriously to find out if that is truly the case. If so, it is really alarming.

SECRETARY FOR HOME AFFAIRS (in Cantonese): I had a meeting with the Director of Legal Aid and he was very pleased to receive information of any such cases. He would rigorously follow up and conduct investigation. The first case mentioned by Mr CHAN is indeed very serious, which is illegal. If LAD staff is suspected of colluding with parties in the private sector, we will definitely not condone such act as the justice of the entire legal aid system is implicated. We will certainly follow up rigorously.

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MR DENNIS KWOK (in Cantonese): President, the legal sector is highly concerned about the independence of the LAD and our position is very clear. In a report published in 2012, the Legal Aid Services Council opined that even if the LAD was not an independent statutory institute, the authorities should follow the practice before 2007 and put the LAD within the ambit of the Chief Secretary for Administration, to be directly supervised by the Chief Secretary. This proposal was put forward in 2012, when will the Home Affairs Bureau implement this proposal or does it intend to implement it?

SECRETARY FOR HOME AFFAIRS (in Cantonese): President, we have seriously considered the proposal put forward by the Legal Aid Services Council and we also accept the direction of putting the LAD under the supervision of the Chief Secretary for Administration's Office. We have communicated with the Legislative Council and we will submit an official report to the Panel on Administration of Justice and Legal Services in June or July this year.

MR RONNY TONG (in Cantonese): President, Mr Frankie YICK has raised a very serious question concerning the numbers of legal aid cases in which the LAD refused to grant the wishes of the aided persons in the assignment of lawyers, but the Secretary has not answered the question. The two reasons cited by the Secretary are both unacceptable. The first reason is the lawyer concerned may have a record of unsatisfactory performance. If a lawyer's record is unsatisfactory, his name should be removed from the Legal Aid Panel. Second, he said that the lawyer concerned may have been assigned an overwhelming number of cases. I would like to ask the Secretary what he meant by “an overwhelming number” and the criteria for determining that. Besides, should it be up to the lawyer to decide whether he has too many cases to handle? If the lawyer concerned is capable of handling the cases, I wonder why the LAD would consider or decide that the lawyer has too many cases on hand and should have others handle the cases for him. Will the Secretary explain clearly the reason for not granting the wishes of the applicants?

SECRETARY FOR HOME AFFAIRS (in Cantonese): President, both reasons cited are the criteria adopted by the LAD. Some lawyers' names may not have been removed from the Legal Aid Panel but their past performance may not have 9016 LEGISLATIVE COUNCIL ─ 26 March 2014 been very satisfactory and that is one of the considerations. Besides, if a lawyer takes up too many cases at a certain time, it will arouse the attention of the Director. We have certain indicators in our criteria. For example, in respect of ordinary civil cases, we do not consider it desirable that a solicitor should take up more than 45 cases a year and a barrister should handle no more than 25 a year. This decision is taken with regard to the applicants' interest. We also hope that in respect of the entire legal aid system, the cases will not be taken up by one or two law firms alone.

PRESIDENT (in Cantonese): Mr TONG, what is your point?

MR RONNY TONG (in Cantonese): The Secretary has not answered whether the authorities have consulted the lawyers if they are capable of handling the cases.

PRESIDENT (in Cantonese): The Secretary has explained the current approach adopted. If the Member does not agree, he should follow up on other occasions.

MR RONNY TONG (in Cantonese): I do not object to what he said but I just want him to answer whether he has consulted the lawyers …

PRESIDENT (in Cantonese): The Secretary has already answered.

DR PRISCILLA LEUNG (in Cantonese): President, legal aid is paid with public money; hence, inequality rather than want is the cause of trouble, whether from the perspective of the lawyer or members of the public.

Some lawyers have requested us to review why certain lawyers are assigned far more legal aid cases than others. This is a fact. The legal sector has also relayed to me its views. Therefore, as regards the Member proposing that there should be an equal distribution of cases, I think he has a point.

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Besides, it is the people that matters. At a meeting of the Panel on Administration of Justice and Legal Services, the Government brought up a case concerning the right of abode in Hong Kong which had incurred over $40 million in legal aid fees. This has aroused uproar among the public. Everyone wishes to be granted legal aid. In respect of the so-called types of cases, first, will the Government extend the coverage of the types of legal aided cases; second, will it set a cap for legal aid in some serious cases? If the lawyers' fees are like the "price of seafood" and lawyers can ask for $40 million to complete one lawsuit (right up to the Court of Final Appeal), there is little money left for other cases …

PRESIDENT (in Cantonese): Dr LEUNG, you have asked two supplementary questions.

DR PRISCILLA LEUNG (in Cantonese): I hope that the Secretary will answer one question: when allocating the resources, will the authorities set a cap on the amount of legal aid by the type of cases and whether the case will go all the way to the Court of Final Appeal?

SECRETARY FOR HOME AFFAIRS (in Cantonese): President, as Members are aware, one feature of the legal aid system in Hong Kong is that there is no limit for the expenses. Our goal is to enable justice to be done. If a case involves many experts and continues for a long time, incurring very high legal fee which exceeds our budget for the year, we will lodge an application to the Finance Committee of the Legislative Council for additional legal aid funds.

MR TAM YIU-CHUNG (in Cantonese): President, the Secretary provided some information in answering Mr Ronny TONG's question, that is, the target maximum number of civil cases to be taken up is 45 by solicitors and 25 for barristers.

I would like to ask the Secretary whether there is any information indicating the number of solicitors or barristers who handled more cases than the target limits in the past three years. If there were such cases, what were the reasons for permitting them to exceed the target limits?

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SECRETARY FOR HOME AFFAIRS (in Cantonese): President, Mr NG Leung-sing had asked such a question before and we had provided some information in our reply. There were indeed lawyers taking up more cases than the target limits and according to the explanation of the LAD, this was due to the consideration taken with regard to the aided person's interest. They will endeavour to follow the criteria and try not to exceed the target limits when assigning cases.

PRESIDENT (in Cantonese): This Council has spent 22 minutes on this question. Fifth question.

Impact of Surge of Mainland Visitors to Hong Kong

5. MR WONG YUK-MAN (in Cantonese): The Commerce and Economic Development Bureau completed the Assessment Report on Hong Kong's Capacity to Receive Tourists (the Report) in December last year. The areas covered by the Report include the handling capacity of boundary control points, receiving capacity of tourist attractions and the public transport system, supply of hotel rooms, economic effects of the "Individual Visit Scheme" (IVS), and its impact on the livelihood of the community, and so on. It is stated in the Conclusion of the Report that it is necessary to enhance the overall receiving capacity of the tourism industry of Hong Kong on various fronts. In this connection, will the Government inform this Council:

(1) whether it will set quantitative indicators of the upper or lower limits for the various aforesaid areas, so that when any relevant indicator for a certain area has been reached due to a rise in the number of visitors to Hong Kong, the Government will cease implementing policies which attract more visitors to Hong Kong; and

(2) as some scholars, after analysing the data contained in the Report, wrote articles in the newspapers pointing out that IVS merely jacked up the rents of retail shops, with no significant increase seen in the real incomes of positions such as salesman, cook and office manager, and so on, how the Government will improve such a situation?

LEGISLATIVE COUNCIL ─ 26 March 2014 9019

SECRETARY FOR COMMERCE AND ECONOMIC DEVELOPMENT (in Cantonese): President, tourism is an important pillar of Hong Kong's economy. The continuous growth in visitor arrivals has indeed brought challenges to Hong Kong. But it has also boosted economic growth and promoted employment at the same time. Taking 2013 as an example, visitor arrivals reached 54 million, generating a total spending of $340 billion. Tourism, which accounts for 4.7% of our Gross Domestic Product (GDP), has been driving the development of many other sectors, including retail, food and beverages, and transport. These sectors altogether employ over 250 000 people, including many jobs with relatively low skill requirements.

The HKSAR Government is well aware of public concerns about whether the continuous growth in visitor arrivals would affect the livelihood of the community. In September 2012, the Chief Executive announced that the relevant Mainland authorities would liaise and work closely with the HKSAR Government to ascertain the receiving capacity of Hong Kong before considering implementing multiple-entry Individual Visit Endorsements for non-permanent residents of Shenzhen, and arranging the orderly issuance of exit endorsements for non-permanent residents (that is, one-entry or two-entry endorsements) in six cities. The HKSAR Government also conducted a comprehensive assessment on Hong Kong's capacity to receive tourists. The areas taken into account include the handling capacity of boundary control points, capacity of tourism attractions, receiving capacity of hotels, carrying capacity of public transport network, impact on the livelihood of the community, and economic impact, and so on. The Report was completed at the end of last year.

It does not recommend setting a limit on visitor arrivals. However, it acknowledges that with the continuous growth in visitor arrivals, Hong Kong should increase the capacity to receive tourists on various fronts.

We understand that over-concentration of visitors would exert pressure on the community. Hence, we will continue to enhance our capacity to receive tourists on many fronts. First of all, we endeavour to increase the supply of hotel rooms, including actively identifying ways for the gradual release of the six sites facing Victoria Harbour within the "hotel belt" adjacent to the Kai Tak Cruise Terminal to the market starting from the end of next year. Also, the hotel project at the Murray Building site has been successfully tendered. Upon commissioning, this hotel, together with the Ocean Hotel in the Ocean Park and the third hotel in the Hong Kong Disneyland, will provide a total of over 1 500 9020 LEGISLATIVE COUNCIL ─ 26 March 2014 rooms. Second, on the tourist facilities, the Ocean Park Corporation will develop an all-weather indoor cum outdoor waterpark at Tai Shue Wan. It is expected to be completed in 2017. The Hong Kong Disneyland will also build a new themed area based on the "Iron Man Experience". The terminal building and the first berth of the Kai Tak Cruise Terminal came into operation last June. The second berth is planned to be commissioned this year.

Regarding the relatively long-term planning, we will actively plan for the development of the "Kai Tak Fantasy" and Lantau into two specialized tourism clusters to attract the high value-added visitor segments. "Kai Tak Fantasy" ― International Ideas Competition on Urban Planning and Design is now under way, and it is our target to turn the site into a spectacular world-class tourism, entertainment and leisure hub.

At the same time, we will strengthen promotion of tourism offerings in different districts, so as to offer more choices to visitors and to alleviate congestion at traditionally popular tourist areas. We also hope to broaden the overall economic benefits brought about by the tourism industry to all Hong Kong residents through encouraging visitors to explore, visit and spend in different districts.

The HKSAR Government will do our utmost to balance the impact of the tourism industry on Hong Kong's economy and the livelihood of our community. We also have to prepare for the future, so that Hong Kong will stand ready to provide pleasant experiences for tourists from all over the world regardless of the ups-and-downs of the economic cycle, and to ensure the healthy and sustainable development of the tourism industry as one of the pillars of Hong Kong's economy.

As pointed out in the Report, the IVS contributes positively towards the overall Hong Kong's economy. In 2012, the IVS visitors' spending directly generated $26.1 billion in value addedness (equal to 1.3% of GDP) and over 110 000 jobs (3.1% of total employment). Amongst the sectors directly benefited from the IVS, the IVS contributed the most to the retail sector in terms of value addedness, followed by the hotel sector. Also, in the course of their operations, these economic sectors generated demands for services of other sectors, which further contributed to the overall economy.

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In fact, members from different sectors also consider that the IVS helps drive overall economic development, as well as providing job opportunities to the grass-root workers. For example, benefiting from the IVS, the prosperous development of the hotel sector creates a continuous demand for relevant labour. Therefore, in recent years, the hotel sector has collaborated with recruitment websites from time to time to attract more talents to join the hotel sector by holding large-scale job fairs. In addition, representatives from the retail sector have pointed out that the IVS has boosted the Hong Kong's retail sector and the IVS visitors' spending has given rise to more than one-fold increase in our retail sales over the past 10 years. Meanwhile, the IVS also brings many business opportunities to the food and beverages sector. Industry representatives estimate that Mainland visitors contribute about $5 billion to our food and beverage sector every year.

As far as employees in related sectors are concerned, apart from creating employment, information suggests that the IVS also helps increase their real income. A recent survey found out that, among some 400 front-line employees in the retail sector, more than 70% of the respondents consider that the IVS is conducive to the companies' turnover and their own income. Among these, 38% of them see substantial benefits. The organization which conducted this survey also considers that the IVS has a positive impact on Hong Kong's economy and provided opportunities to grass-root workers for employment and pay increase.

The healthy development of tourism industry plays a critical role in promoting employment. We will continue to make greater efforts to enhance our capacity to receive tourists on various fronts so as to ensure the stable and orderly development of the tourism industry, and minimize the inconvenience of the increasing visitor arrivals caused to local residents. This was a balance between the impact of the tourism industry on Hong Kong's economy and livelihood of the community.

MR WONG YUK-MAN (in Cantonese): President, the Secretary has used seven minutes to read out his written reply, which can be found in online official documents. Basically he has not answered parts (1) and (2) of my main question. I would like to follow up with a supplementary question. He has listed the countless advantages brought about by the IVS or the expansion of visitor receiving capacity, but he has not mentioned at all any adverse effects 9022 LEGISLATIVE COUNCIL ─ 26 March 2014 resulted, which include soaring rents, escalating prices, environmental pollution, traffic congestion and Hong Kong-Mainland conflicts.

Despite the occurrence of "sing red", "fight black" and "anti-locust" protests every Sunday, the Secretary has not tried to adjust the IVS at all. President, the question in dispute now is whether Hong Kong should increase its receiving capacity or whether it should consider if it should continue receiving such a large number of tourists. He has not mentioned this in the Report. The relevant figures cited are just "false, big and empty" figures.

While local movements such as "sing red", "fight black" and "anti-locust" protests are now held every Sunday, the Secretary still insists on expanding the IVS or enhancing the capacity to receive Mainland visitors. May I ask the Secretary how he is going to solve the conflicts involved?

SECRETARY FOR COMMERCE AND ECONOMIC DEVELOPMENT (in Cantonese): I thank Mr WONG Yuk-man for his supplementary question. In fact, the recent incidents of harassing visitors have really harmed …

MR WONG YUK-MAN (in Cantonese): Those actions are not harassment, but just an expression of feelings by Hong Kong people in response to the traffic congestion, environmental pollution, soaring rents, escalating prices brought about by the IVS …

PRESIDENT (in Cantonese): Mr WONG, stop speaking. May I remind Members that no debate is allowed in the question session. Would Members please refrain from interrupting the Secretary in the course of his speech.

SECRETARY FOR COMMERCE AND ECONOMIC DEVELOPMENT (in Cantonese): President, the recent incidents have really damaged the reputation of Hong Kong as a leading tourist destination, affected the operation of shops in certain shopping areas, and interrupted public order of Hong Kong. Hong Kong is known for its hospitality and such incidents of harassment of tourists have really damaged the image of Hong Kong. As such, in promoting tourism, we must highlight our hospitality culture and continue to remind tourists on points to LEGISLATIVE COUNCIL ─ 26 March 2014 9023 note (including better understanding of the Hong Kong community) through the Internet and other publicity materials.

I have indicated on a number of occasions that when we stress how tourism has boosted the economic development of Hong Kong, we must also pay attention to its impact on people's livelihood. This is exactly why we have conducted the Assessment, which explores the ways to increase Hong Kong's capacity to receive tourists on various fronts. The Report has set out a lot of objective data and we think we have to tie in on various fronts. For example, it is true that our transport facilities are under pressure during rush hours but the Transport and Housing Bureau has already introduced various supporting measures to minimize the impact on the public.

MR WONG KWOK-KIN (in Cantonese): President, in the main reply, the Secretary has said that IVS has brought about economic benefits and job opportunities to Hong Kong. We do not have objection to this point. But the problem is that the main reply has just told one side of the story while the other side about the disturbances caused to the public is not mentioned. Just now Mr WONG Yuk-man raised the problems of rising rents and prices, as well as the homogeneity of shops and shopping centres in order to cater for the IVS. Moreover, public areas become very crowded and local people dare not visit some of the attraction spots such as the Ocean Park because these places are now overcrowded. These have indeed caused disturbances to the local community and people.

Of course we do not support the "anti-locust" campaign which is tantamount to setting fire on our own house. The Secretary now only talks about adjusting and increasing the capacity to receive tourists but I believe it takes some time before such measures can be implemented. May I ask the Secretary whether the Government will consider adopting some interim measures to alleviate the social annoyance? Such interim measures should include adjusting and balancing the number of IVS visitors, firstly by withdrawing the multiple-entry endorsements especially the "multiple-entry permits per day", followed by grouping the 49 Mainland cities issuing Individual Visit Endorsements into four groups and denying entry of one of the groups in every quarter of the year, thus truncating the number of IVS visitors by one fourth.

9024 LEGISLATIVE COUNCIL ─ 26 March 2014

SECRETARY FOR COMMERCE AND ECONOMIC DEVELOPMENT (in Cantonese): I thank Mr WONG Kwok-kin for his supplementary question. The Central Government and the SAR Government have been very concerned about the situation of Hong Kong in receiving tourists. To maintain stable and orderly development of the tourism industry, the Central Government has agreed to freeze the number of pilot cities for the IVS and the scope of the multiple-entry permit arrangement on a temporary basis. We may still remember that the Chief Executive, with the support of the Central Government, suspended the policy of multiple-entry Individual Visit Endorsements for non-permanent residents of Shenzhen in September 2012. What does this show? It shows that both the Central Government and the SAR Government are well aware of the needs of Hong Kong. They will also try to minimize the impact on tourists and people's livelihood in promoting the development of the tourism industry and will strike a balance between the two. Besides, the SAR Government has maintained close liaison with the Central Authorities to reflect the actual situation of Hong Kong while the Central Authorities will also provide support. We will continue to put in efforts in this regard.

PRESIDENT (in Cantonese): Has your supplementary question not been answered?

MR WONG KWOK-KIN (in Cantonese): The Secretary has not directly answered my question. Just now I have asked a very specific question: Will the Government consider introducing interim measures in the short run, that is, withdrawing the multiple-entry endorsements especially the "multiple-entry permits per day"?

SECRETARY FOR COMMERCE AND ECONOMIC DEVELOPMENT (in Cantonese): President, I have pointed out in the reply just now that we will continue to reflect to the Central Authorities the actual situation of Hong Kong while the Central Authorities will also continue to provide support. Just now Mr WONG asked what measures would be put in place in the short run to deal with the problem of overcrowded tourist spots. This involves the question of capacity I mentioned at the very beginning. We will enhance the receiving LEGISLATIVE COUNCIL ─ 26 March 2014 9025 capacity of tourism attractions and increase the supply of hotel rooms. At present Hong Kong has over 70 000 hotel rooms and in the coming three to four years, the number will increase by 18 000.

PRESIDENT (in Cantonese): Secretary, what Mr WONG asked is the interim measures to be put in place in the coming three to four years before those goals you mention are achieved.

SECRETARY FOR COMMERCE AND ECONOMIC DEVELOPMENT (in Cantonese): President, we will build new hotels in the coming three to four years. In addition, as I have replied Members on a number of occasions in the Council, we will introduce other diversion measures. We have also noted that recently individual political parties have proposed the development of shopping facilities near the border. In this regard, we will study the relevant planning in collaboration with other bureaux. From the perspective of promoting the tourism industry, we are certainly glad to see the fruition and hope that such facilities can be built as soon as possible.

MR VINCENT FANG (in Cantonese): President, our sector supports very much the Report published by the Government which points out that Hong Kong should not set an upper limit on visitor arrivals. We are in full support because no single country will set an upper limit on visitor arrivals. Nonetheless, the Report has cited that the present number of visitor arrivals has reached 54.3 million and will increase to 70 million by 2017. May I ask the Government whether it has ever made an analysis on visitor arrivals? Among them, how many are travelling on multiple-entry endorsements? How many are making day trips? How many of them make multiple-entries within one day? How many of them are making day trips to Hong Kong first, and then to Macao and return to Hong Kong again? I would like to check whether the Government has double counted the number of incoming visitors. Please do not scare people with the number of 70 million arrivals. Has the Government conducted an analysis on the figures?

9026 LEGISLATIVE COUNCIL ─ 26 March 2014

SECRETARY FOR COMMERCE AND ECONOMIC DEVELOPMENT (in Cantonese): I thank Mr FANG for asking the supplementary question. The figure of 70 million arrivals is only a forecast for 2017 and therefore I am unable to make a more detailed analysis at this stage. But for the year 2013, we do have the relevant figures such as how many visitors stayed overnight, how many did not, and among the overnight visitors, which region they are from, and so on. But as a lot of data are involved, I will provide the figures for 2013 in written form. (Appendix II)

MR JAMES TO (in Cantonese): President, the Secretary keeps talking about increasing tourism attractions, hotels, and so on. However, I just want to raise one point on the carrying capacity of the local public transport network. I hope the Secretary will understand that Hong Kong people may need to wait for four to five trains when they take the MTR. They are really on the verge of explosion. I am examining this problem from the perspective of security. May the Secretary also deal with the problem from the perspective of security? Will riots break out one day when Hong Kong people turn furious because they cannot ride on the overcrowded public transport? I hope the Secretary will consider our carrying capacity from this perspective. Even if tourists are diverted to different attractions and hotels, does it mean that they will not use our public transport at all?

SECRETARY FOR COMMERCE AND ECONOMIC DEVELOPMENT (in Cantonese): I thank Mr James TO for his supplementary question. Mr TO raises the question of security but there is absolutely no security problem in various public transport modes such as the MTR. However, data indeed show that the carrying capacity of our public transport, especially during the morning rush hours, has really reached 90% capacity or above. In particular, the section between Tai Wai and Kowloon Tong in the East Rail Line and the section between Yau Tong and Quarry Bay in the Tseung Kwan O Line are already saturated. I understand that when the carrying capacity is saturated, people may sometimes need to wait for a while before they can get on the train, thus causing inconvenience. As such, the Transport and Housing Bureau, in collaboration with the MTR Corporation Limited (MTRCL), has introduced a number of short and long-term improvement measures in the past such as increasing the train frequency. As a long-term measure, a new signal system will be installed. In the short run when the existing signal system is still in use, even if some of the LEGISLATIVE COUNCIL ─ 26 March 2014 9027 rail lines are not yet saturated, the MTRCL will also consider increasing the train frequency so as to minimize the inconvenience caused. However, I do not have in hand the information requested by Mr TO about the use of different transport modes by tourists.

PRESIDENT (in Cantonese): Has your supplementary question not been answered?

MR JAMES TO (in Cantonese): I was just asking whether the authorities have considered the possibility of an outbreak of riots as a result.

PRESIDENT (in Cantonese): Secretary, do you have anything to add?

SECRETARY FOR COMMERCE AND ECONOMIC DEVELOPMENT (in Cantonese): President, we have already made objective assessments on the carrying capacity of each transport mode in the Report.

MR POON SIU-PING (in Cantonese): President, just now in his main question, Mr WONG Yuk-man has mentioned that some scholars, after analysing the data contained in the Report, pointed out that IVS merely jacked up the rents of retail shops, with no significant increase seen in the real incomes of positions such as salesman, cook, and so on. Just now the Secretary said that tourism is an important pillar of Hong Kong's economy and employees in related sectors have also witnessed an increase in their real incomes. He has even cited a recent survey which found out that, among some 400 front-line employees in the retail sector, more than 70% of the respondents consider that the IVS is conducive to the companies' turnover and their own income. Information in fact shows us that between 2009 and 2013, rents per square foot for retail shops have increased by 46%. Among some 200 000 employees in the catering industry, half of them are paid at an hourly rate of only $37 and some 20 000 of them are even paid the minimum wage at $30 per hour. At the same time, many employees in the retail and catering industries work over 50 hours per week. The situation is somehow different from that described by the Secretary just now. In fact my question is 9028 LEGISLATIVE COUNCIL ─ 26 March 2014 mainly on how the Government can ensure that the grassroots can share the economic fruit brought about by tourism.

SECRETARY FOR COMMERCE AND ECONOMIC DEVELOPMENT (in Cantonese): President, the question involves the area of economic activities. In economics, when demand increases, price will make upward adjustment. As I have said in the main reply, tourism has boosted economic growth, considerably increased job opportunities, and stimulated demand for services in various aspects. Therefore, we have also pointed out objectively in the survey report that 70% of respondents consider that there is a positive impact on their income. For the impact of the IVS on the income of individual industries, I am afraid I do not have the relevant information in hand. But overall speaking, I believe the impact is positive.

PRESIDENT (in Cantonese): This Council has spent more than 23 minutes on this question. Last question seeking an oral reply.

Police's Handling of Requests for Assistance to Meetings of Committees of District Councils

6. MR JAMES TO (in Cantonese): President, the Working Group on Civic Education (Working Group) under the Central and Western District Council held a meeting on the 6th of this month to scrutinize funding applications for Basic Law promotional activities. At the beginning of the meeting, the Chairman of the Working Group refused to allow members of the public and journalists to observe the meeting. An argument then erupted between a District Council (DC) member present at the meeting and the Chairman about the arrangement. The journalists at the scene were evicted from the meeting venue by security guards afterwards, and that DC member was carried away from the conference room by police officers. In response to the above incident, the Chief Executive said that "the police have all along acted in accordance with the law", and the Commissioner of Police (CP) pointed out that the police had the responsibility of "ensuring the peace of society". However, some members of the public have raised concerns and queried whether the police have abused their power and intervened in the operation of DCs. In this connection, will the Government inform this Council:

LEGISLATIVE COUNCIL ─ 26 March 2014 9029

(1) of the number of police officers arriving at the scene on that day to handle the incident, and the handling methods proposed by them; whether the police officers at the scene received any request for carrying the DC member away from the conference room; whether they had sought the approval of their superior officers before taking that action; whether they had explained to the DC member the reasons for carrying him away; how they had carried him away; and why they did not allow him to return to the conference room;

(2) whether there was any serious act of violence at the scene when the argument erupted among members of the Working Group; if so, of the details; if not, as the Working Group was holding a meeting in the DC conference room at that time, of the legal basis for the police to carry the DC member away from the conference room and obstruct him from discharging his duty of attending meetings; the meaning of "acted in accordance with the law" and "peace of society" as referred to respectively by Chief Executive and CP; the legal basis for their aforesaid remarks; and

(3) whether it will review if the police have abused their power in the aforesaid incident; and of the measures in place to prevent the recurrence of similar incidents so as to safeguard DC members' right to attend meetings, and ensure that the operation of DCs is free from any unreasonable police intervention?

SECRETARY FOR SECURITY (in Cantonese): President, according to the laws of Hong Kong, the police have the duty and power, under section 10 of the Police Force Ordinance (Cap. 232), to take reasonable and appropriate measures to preserve the public peace, protect personal safety, prevent crimes and injury to property, and so on.

Upon receipt of requests for assistance from the public in case of unforeseen or emergency incidents, the police shall perform their statutory duties by immediately deploying officers to the scene to understand the situation, provide assistance or conduct investigations. After arriving at the scene, police officers shall take reasonable and appropriate actions in the light of the circumstances to preserve the public peace, protect personal safety and prevent injury to property. Unless otherwise specified in the law, the police are required 9030 LEGISLATIVE COUNCIL ─ 26 March 2014 to discharge their statutory duties at both public and private places. Actions shall be taken by the person-in-charge or security personnel at the scene to handle disorderly conduct at a private place. Only when the peace is breached or there is a threat to personal safety will police officers take reasonable and appropriate measures to intervene or provide assistance in a bid to ensure public peace and safety of the people at the scene.

My reply to Mr James TO's question is as follows:

(1) and (2)

Upon receipt of a request for assistance in the afternoon of 6 March 2014 about somebody creating a nuisance in a meeting room, the police deployed officers of a patrol sub-unit to the scene for rendering assistance. Despite repeated requests from the person-in-charge of the meeting and the security personnel, two persons at the location refused to leave and the deadlock extended into the early evening. One of the aforementioned persons struggled with the security personnel on a number of times while the latter attempted to remove the two persons from the meeting room. During the scuffle, a security guard fell on the ground. The person-in-charge asked the police officers at the scene to pay due regard to the situation and to give advice on the means to handle the incident. The police officers clearly explained to the person-in-charge that any disorderly conduct should be handled by the security personnel, and that the police would intervene in circumstances such as a breach of the peace was likely to occur or had occurred, or when harm was likely to be done to any person. The security personnel once again asked the person to leave the meeting room, but to no avail. In the process, there was again a struggle and, hence, confusion, during which a security officer fell on the ground. Having contemplated that the scenario became chaotic again, the police officers, with due consideration of the safety of all persons at the scene and after giving their advice to the person involved, assisted the security personnel to bring that person out of the meeting room, as a means to prevent further aggravation of the conflict and to safeguard any person from injury. The other person was removed by other security guards from the meeting room at the same time.

LEGISLATIVE COUNCIL ─ 26 March 2014 9031

During the incident, the police officers on the spot, while playing an assisting and mediating role, remained neutral in the course of discharging police duties of preserving the public peace and protecting personal safety pursuant to section 10 of the Police Force Ordinance. Their actions on that day were by no means an interference in the operation of any council.

As at 20 March 2014, two complaints have been received by the Complaints Against Police Office (CAPO) in respect of the incident. The CAPO is handling these cases in a fair and just manner according to the statutory mechanism of handling complaints against police.

(3) Management of DC venues are under the purview of respective District Offices. Where necessary, security guards may be arranged to assist in security matters like maintenance of order of the meeting and handling of possible disorder at the venue.

According to DCs' Standing Orders, the chairman of the respective meeting may issue warnings to a person attending or sitting in on a meeting whose behaviour may disrupt the orderly conduct of the meeting. The person may be ordered to leave the place of the meeting if the misbehaviour persists despite warnings; in such circumstances, the security personnel may, under the instruction of the chairman-in-charge of the meeting, escort the person concerned out of the meeting room.

As mentioned above, the police handle all reports in an impartial manner, irrespective of any individuals calling for help in case of an incident or any councils requesting for assistance. When a breach of the peace is likely to occur or has occurred, or when harm is likely to be done to any person, the police will intervene by taking reasonable and appropriate actions in light of the circumstances to preserve public order, protect personal safety and prevent injury to property.

I have to reiterate that the police officers handled the case on that day in accordance with the normal procedures upon receipt of a 9032 LEGISLATIVE COUNCIL ─ 26 March 2014

"request for police assistance". The actions taken were in no way or by no intention an intervention of the DC's operation. It was definite that there was no "abuse of power" on the part of the police.

MR JAMES TO (in Cantonese): President, as we all know, the majority of DC members are from the pro-establishment camp and some of them have also taken up the position of DC Chairman.

I would like to ask the Secretary: If a DC member from the minority camp only strived to present his arguments for demanding a meeting to be held in a more open and transparent manner, and he only made verbal presentation without resorting to any violence, but the Chairman of the DC could, after reporting to the police, order police officers to carry away anyone, have the police exercised any independent judgment and analysis in the incident? Should the DC member concerned have the legal right to stay in the meeting room to argue with the Chairman?

SECRETARY FOR SECURITY (in Cantonese): President, as I have said clearly in my main reply, after the request for assistance was received, police officers arrived at the scene and they waited a long time before taking any action. Of course, the person-in-charge of a meeting shall make decision with the powers conferred on him in relation to the conduct of meetings. In the incident, the person-in-charge repeatedly requested the security personnel to remove a person from the meeting room and the security personnel made a few attempts to do so. In the process, a scuffle occurred and someone fell to the ground. Subsequently, when the security personnel tried again to remove that person from the room, both of them fell to the ground. The police officers at the scene considered that if the struggle continued, someone would likely be injured. Therefore, under such circumstances, they assisted the security personnel to remove the person concerned. The work of the police ended at that point, and they had not interfered with the meeting in any way.

PRESIDENT (in Cantonese): Mr TO, has your supplementary question not been answered?

LEGISLATIVE COUNCIL ─ 26 March 2014 9033

MR JAMES TO (in Cantonese): My question was …

PRESIDENT (in Cantonese): Please repeat your supplementary question.

MR JAMES TO (in Cantonese): The removal of the DC member by the police is actually an intervention with the operation of the DC. The police should exercise their independent judgment and consider whether the DC member has the right to stay in the meeting room to continue with the discussion.

PRESIDENT (in Cantonese): Mr TO, you have expressed your views and the Secretary has given his reply. If you do not agree with him, you can follow up on another occasion.

MS EMILY LAU (in Cantonese): President, I would also like to follow up on this point because members of councils at all levels are very concerned about their right to participate in council meetings.

Now that the incident has happened, have the authorities reviewed whether police assistance is required when similar dispute arises in future to take action on a person … I understand that there were arguments at the time and the police eventually carried the DC member out of the meeting room. Have the authorities reviewed whether that was the best approach or whether there were other options, such as suspending the meeting to allow a discussion on various arguments first? Does the Secretary know whether the other person involved has reviewed the approach taken or does he insist that it is the correct approach and he will ask the police to arrest anyone concerned if similar situation arises in future?

SECRETARY FOR SECURITY (in Cantonese): President, the DCs shall surely operate in accordance with their Standing Orders. The power to be exercised by a DC Chairman is not a question to be dealt with by the Security Bureau. The role of the police is to arrive at a scene for co-ordination and mediation upon receiving a request for assistance.

9034 LEGISLATIVE COUNCIL ─ 26 March 2014

On that day, at least two Police Community Relations Officers were deployed to arrive at the scene. The whole incident lasted a few hours and the Police Community Relations Officers were there most of the time. When the person-in-charge of the meeting sought advice from police officers, they clearly replied that they would only take appropriate actions under the circumstances which I have mentioned in the main reply and they would not interfere with any decision made by the attendants of the meeting (including the person-in-charge of the meeting on that day). As regards how DC should handle similar cases in future, I believe the relevant DC should discuss and reach an agreement.

MS EMILY LAU (in Cantonese): In my supplementary question, I asked whether the authorities have conducted any review. I do not only refer to the Policy Bureau under the purview of the Secretary, but the Government as a whole and whether DCs have discussed the matter. If the Secretary cannot answer this question today, can he provide us with papers after the meeting to show that all the parties concerned have reviewed the matter and tell us how similar cases will be handled in future?

PRESIDENT (in Cantonese): Secretary, do you have anything to add?

SECRETARY FOR SECURITY (in Cantonese): President, the District Office concerned has submitted a written response on this incident to the Panel on Security. In paragraph 11, it is pointed out that "The District Council Affairs Working Group set up under the Central and Western District Council which deals primarily with the internal matters of the Central and Western District Council" ― that is the Working Group mentioned by some Members just now ― "will review the incident and the application of the relevant Standing Orders". I hope this can answer Ms Emily LAU's enquiry.

MR FREDERICK FUNG (in Cantonese): President, council members are representatives of the people and they are duty-bound to deliberate on council matters. We can therefore understand why the DC member insisted on staying in the meeting room and I think he should insist on doing so.

LEGISLATIVE COUNCIL ─ 26 March 2014 9035

I have noticed in particular what the Secretary said in the second paragraph of the main reply, and I quote, "Only when public peace is breached or there is a threat to personal safety will police officers take reasonable and appropriate measures". The Secretary continued in the next paragraph, "The security personnel once again asked the person" ― and I believe "the person" refers to the DC member ― "to leave the meeting room, but to no avail. In the process, there was again a struggle and, hence, confusion, during which a security officer fell on the ground". In other words, since someone fell on the ground, the police considered that there is a threat to personal safety. Is falling on the ground tantamount to threatening personal safety? That is my first point.

Second, did the police find out why someone fell on the ground? Did the security personnel fall down on his own, did he fall down while he was pushing someone, or did he fall down because someone pushed him? Was the DC member concerned responsible for the fall? If he was responsible, will the authorities take any other follow-up actions; if he was not responsible, why was he carried out of the meeting room?

SECRETARY FOR SECURITY (in Cantonese): There are two video clips on YouTube showing what happened on the day when police officers assisted the security personnel to bring the persons concerned out of the meeting room. I believe it would be better for Members to watch the clips than listening to my description of what I think happened on that day.

As I have said clearly in my main reply, the police have to follow certain established work procedures. When police officers consider that someone may be injured in a certain scenario, they have to carry out their statutory duties. The judgment of the police at the time was that during the scuffle between the two parties, someone might be injured, and hence they assisted the security personnel to remove the persons concerned from the meeting room. I believe Members can watch the video clips. According to my understanding, more than one person at the scene had video recorded the incident and they might have more detailed video clips. Members will be able to make appropriate judgments after watching the video clips.

9036 LEGISLATIVE COUNCIL ─ 26 March 2014

MR FREDERICK FUNG (in Cantonese): My supplementary question is: Who should be responsible for the fall of the security personnel, the security personnel himself or the DC member? The Secretary cannot shift the responsibility onto me by asking me to watch the video clips. May I ask the Secretary what conclusion has he drawn on the fall of the security personnel, whether he was pushed by someone or he fell down on his own, or there were some other reasons?

PRESIDENT (in Cantonese): Mr FUNG, your supplementary question is clear enough. Secretary, have you formed any judgment on who was responsible at the time?

SECRETARY FOR SECURITY (in Cantonese): I have watched the two video clips on YouTube, and I think when police officers saw what happened at the scene ― it does not matter who fell on the ground, the main point is that someone fell on the ground during the scuffle ― they formed the judgment that someone might be injured and so they rendered assistance. That was the reason why they had taken action.

PRESIDENT (in Cantonese): Mr FUNG, the Secretary has given his reply.

MR IP KWOK-HIM (in Cantonese): I am a DC member of the Central and Western District Council. As mentioned by the Secretary, there are very clear video clips on YouTube. Besides, according to the Secretary's reply, the security personnel had repeatedly asked the DC member to leave but to no avail. Eventually, the scenario became chaotic and the police had to assist in removing the DC member from the venue. I clearly know what happened and I endorse the approach adopted by the police. The meeting was scheduled for three hours and because of the incident, the proceedings were delayed and the meeting could not even commence after three hours. Can such a situation be tolerated in the Legislative Council? We can clearly see that …

PRESIDENT (in Cantonese): Please raise your supplementary question.

LEGISLATIVE COUNCIL ─ 26 March 2014 9037

MR IP KWOK-HIM (in Cantonese): My supplementary question is: When a DC Chairman exercised his power in accordance with Rule 15(2) of the Standing Orders ― I am not referring to the Rules of Procedures of the Legislative Council, but the Standing Orders of DCs ― but as a DC member refused to leave the venue, the meeting could not continue and a chaotic situation has arisen, if similar situation happens in future, will the police refuse to enforce the law owing to the political background of the DC member in question?

SECRETARY FOR SECURITY (in Cantonese): President, let me give a direct and simple answer to Mr IP's supplementary question. The police enforce the law in accordance with the powers conferred upon them and the duties vested in them by law. The police will not adopt different enforcement actions in the light of the background of the persons at the scene. In this incident, the police have absolutely not given any consideration to the political party to which the persons in question belong. The police’s final decision to assist the security personnel to remove the persons concerned from the venue was based on one and only reason, and that is, seeing that somebody had fallen on the ground when the two parties struggled again, they considered there someone might be injured. In fact, earlier, when the security personnel tried to remove the person concerned from the venue, a security guard fell on the ground and had to leave the meeting room and take a rest. Therefore, under the circumstances, the police were only carrying out their duties in accordance with the law and they had not taken any special action because the attendants of the meeting belonged to a certain political party.

MR STEVEN HO (in Cantonese): President, as I have not read the press report on the incident, I do not know how the Chinese characters of "Chi" and "Fung" in the name of the DC Member should be written. Perhaps the character of "瘋"(1)(fung1) has specially been chosen. Mr IP Kwok-him asked the Secretary just now whether the police will choose not to enforce the law by reason of the political background of the person concerned. Having watched the video clips a number of times, I cannot understand why the police only enforced the law after a few hours. I know that the Secretary has watched the video clips and I would like the Secretary to tell me why the police decided to wait so long before taking action?

(1) A homophonous word which means mad. 9038 LEGISLATIVE COUNCIL ─ 26 March 2014

SECRETARY FOR SECURITY (in Cantonese): When the police arrived at the scene, they first observed the situation. On the first occasion when a security personnel fell on the ground, he quickly got up with the assistance provided. When he was accompanied by police officers to leave the room, he said that he did not require further treatment or medical consultation. Hence, both parties continued to make exchanges. When evening fell, the incident had indeed lasted a long time, indicating that the police had all along remained neutral and they only provided assistance when they considered there was a risk of injury under the circumstances. At about 7 pm, the security personnel made another attempt to remove the person concerned from the venue, a struggle occurred and a person fell on the ground. Upon seeing that, the police considered that there was a greater risk of injury and so they offered assistance. I know that Mr HO has watched the video clips, but the versions on the Internet are relatively short. According to my understanding, some people have probably recorded the longer version and if that video clip can be obtained, Members can have a better understanding of the situation.

PRESIDENT (in Cantonese): This Council has spent more than 23 minutes 30 seconds on this question. Oral questions end here.

WRITTEN ANSWERS TO QUESTIONS

Employment of Persons with Disabilities

7. DR FERNANDO CHEUNG (in Chinese): President, as revealed by the "Special Topics Report No. 48: Persons with disabilities and chronic diseases" released by the Census and Statistics Department in August 2008, about 86.8% of the 347 900 persons with disabilities aged 15 and over were economically inactive, that is, only 13.2% were economically active. In addition, according to a survey report released by the Hong Kong Society for Rehabilitation in June 2013, the unemployment rate of the 1 020 adult respondents with disabilities and chronic diseases was 51.5%, whilst the median monthly personal income of the working respondents and the median monthly household income of the respondents overall were only $7,900 and $11,000 respectively. Some workers of the social welfare sector hold that the aforesaid figures show that persons with disabilities have encountered great difficulties in seeking jobs and their wages LEGISLATIVE COUNCIL ─ 26 March 2014 9039 are particularly low. Besides, quite a number of persons with disabilities consider that the mechanism for Productivity Assessment for Employees with Disabilities under the Statutory Minimum Wage Regime (the assessment mechanism), set up by the Government for protecting employees with disabilities, is ineffective. In this connection, will the Government inform this Council:

(1) of the number of persons undergoing the assessment each year since the assessment mechanism was implemented in 2011, and set out in Table 1 a breakdown by type of disabilities and the level of productivity which the employees with disabilities were assessed to have;

Table 1 Year 2011 2012 2013 Level of productivity (%) Level of productivity (%) Level of productivity (%) Type of 90- 70- 50- Below 90- 70- 50- Below 90- 70- 50- Below disabilities 100 100 100 99 89 69 50 99 89 69 50 99 89 69 50 Mobility restrictions Visual impairment Hearing impairment Speech impairment Mental illness/ emotional disorder Autism Specific learning difficulties Attention deficit/ hyperactivity disorder Intellectual disabilities Total

(2) whether it has any plan to conduct a comprehensive review of the assessment mechanism and consider granting subsidies, of amounts equivalent to the differences between the wages calculated on the basis of level of productivity and the statutory minimum wage, to employees with disabilities who have undergone the assessment; if it has, of the plans and the timetable for the work concerned; if not, the reasons for that;

(3) whether it knows the respective numbers of persons with disabilities employed in the past five years by each of the following 9040 LEGISLATIVE COUNCIL ─ 26 March 2014

publicly-funded organizations and statutory bodies, and set out breakdowns by type of disabilities in tables of the same format as Table 2: (i) Airport Authority Hong Kong, (ii) Auxiliary Medical Service, (iii) Civil Aid Service, (iv) Consumer Council, (v) Employees Retraining Board, (vi) Equal Opportunities Commission, (vii) Estate Agents Authority, (viii) Financial Reporting Council, (ix) Hong Kong Arts Development Council, (x) Hong Kong Housing Authority, (xi) Hong Kong Housing Society, (xii) Hong Kong Sports Institute Limited, (xiii) Hospital Authority, (xiv) MTR Corporation Limited, (xv) Mandatory Provident Fund Schemes Authority, (xvi) Office of the Privacy Commissioner for Personal Data, Hong Kong, (xvii) Securities and Futures Commission, (xviii) Hong Kong Examinations and Assessment Authority, (xix) Urban Renewal Authority, (xx) Vocational Training Council, and (xxi) West Kowloon Cultural District Authority;

Table 2 Name of organization/body: Type of disabilities 2009 2010 2011 2012 2013 Mobility restrictions Visual impairment Hearing impairment Speech impairment Mental illness/ emotional disorder Autism Specific learning difficulties Attention deficit/ hyperactivity disorder Intellectual disabilities Total

(4) whether it has any plan to require the organizations/bodies referred to in part (3) to employ more persons with disabilities; if it has, of the plans and the timetable for the work concerned; if not, the reasons for that; and

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(5) given the undertaking made by the incumbent Chief Executive in his election manifesto that measures to promote the employment of persons with disabilities, such as offering tax concessions to employers who employ persons with disabilities, would be explored, but no specific proposals were put forth in the Policy Addresses in the past two years, of the plan and the timetable for the work concerned?

SECRETARY FOR LABOUR AND WELFARE (in Chinese): President, my reply to the questions raised by Dr Fernando CHEUNG is as follows:

(1) According to the Minimum Wage Ordinance (Cap. 608), Statutory Minimum Wage applies to able-bodied employees and employees with disabilities alike. However, the Ordinance also allows employees with disabilities to choose to have their productivity assessed and be remunerated at not lower than a rate commensurate with their productivity. The annual number of productivity assessments completed since 2011, broken down by type of disabilities and assessed degree of productivity, is at Annex A.

(2) Since the implementation of the Minimum Wage Ordinance, the Labour Department (LD) has been closely monitoring the operation of the productivity assessment mechanism. The LD is now conducting a review of the mechanism which is expected to be completed in the first half of 2014. After the completion of the review, we will report the review outcome to and seek the views of the Legislative Council Panel on Manpower.

As for the suggestion to provide wage subsidy to employees with disabilities with their productivity assessed, it should be carefully examined as it will involve major policy considerations with far-reaching implications on public finance. We have no plan to implement this suggestion at present.

(3) The numbers of persons with disabilities employed in these 21 organizations are set out in Annex B.

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(4) and (5)

The policy objective of the Government in assisting persons with disabilities in attaining employment is to enhance their abilities, develop their talents and potential, and ensure that they have equal access to participation in productive and gainful employment in the open market. The Government itself will set an example and work with the private sector and non-governmental organizations to provide more employment opportunities for them. Since July 2012, this term of Government has already rolled out various new and enhanced initiatives to promote the employment of persons with disabilities.

Since June 2013, the Selective Placement Division of the LD has put in place enhanced measures under its "Work Orientation and Placement Scheme" (WOPS). An eligible employer who employs a person with disabilities with employment difficulties, and provides him/her with training, support and a mentor in the first two months of employment, is entitled to a maximum allowance of $5,500 during the period. Afterwards, the employer may continue to receive an allowance being offered under WOPS, which is equivalent to two thirds of the monthly salary of the employee (subject to a ceiling of $4,000 per month) for a maximum period of six months.

If the mentor appointed by the aforesaid employer has successfully assisted an employee with disabilities in retaining the employment after the first two months, the cash award granted to him/her will be extended from one month of $500 to two month, that is, a total of $1,000.

The Social Welfare Department (SWD) has also enhanced the "On the Job Training Programme for People with Disabilities" and the "Sunnyway ― On the Job Training Programme for Young People with Disabilities" since July 2013 by increasing the job attachment allowance and job trial wage subsidy under both schemes. The job attachment allowance has been raised from $1,250 to $2,000 per month, and the cap of job trial wage subsidy has been raised from $3,000 to $4,000 per month with the maximum subsidy period extended from three months to six months.

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The SWD has also implemented the "Support Programme for Employees with Disabilities" since June 2013 to provide subsidies to employers of persons with disabilities for procuring assistive devices and carrying out workplace modification works. This will help persons with disabilities secure open employment and enable employees with disabilities to work more efficiently. An employer may receive a maximum subsidy of $20,000 for each employee with disabilities.

In tandem, the Labour and Welfare Bureau, in collaboration with the Rehabilitation Advisory Committee, Hong Kong Council of Social Service and Hong Kong Joint Council for People with Disabilities, launched the "Talent-Wise Employment Charter and Inclusive Organizations Recognition Scheme" (the Scheme) in September 2013 to mobilize the Government, private sector, public and subvented bodies to make collective efforts to promote the employment of persons with disabilities through a host of sustainable measures commensurate with their modes of operation.

Measures to be implemented by participating organizations of the Scheme may include: employing persons with disabilities and formulating corporate policies and measures on employment of persons with disabilities; publishing periodically in corporate publications/publicity materials on the number of employees with disabilities and on measures or indicators pertaining to the employment of persons with disabilities; providing a barrier-free working environment and assistive devices for employees with disabilities; participating in various on-the-job training and support programmes for persons with disabilities; using products or services provided by rehabilitation social enterprises and suppliers employing persons with disabilities; building an inclusive workplace through assisting persons with disabilities in mastering job skills and adapting into the work environment; setting aside shops or stalls for social enterprises or self-employed persons with disabilities to operate their businesses, and so on. The participating organizations will be required to review the effectiveness of their measures, report progress to the Labour and Welfare Bureau annually and introduce additional measures as and when appropriate.

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We are mobilizing various sectors, including government subvented organizations and statutory bodies, to actively participate in the Scheme. At present, some 180 organizations have participated in the Scheme, including some of the organizations mentioned in part (3) of the question.

Apart from the above, the Special Needs Groups Task Force under the Commission on Poverty will continue to explore other feasible and effective measures to further promote the employment of persons with disabilities.

Annex A

Productivity assessments completed under the Minimum Wage Ordinance (Cap. 608)

Year 2011(1) 2012 2013 Degree of productivity (%) Degree of productivity (%) Degree of productivity (%) Type of disabilities 90- 70- 50- Below 90- 70- 50- Below 90- 70- 50- Below 100 100 100 99 89 69 50 99 89 69 50 99 89 69 50 Mobility restrictions 1 1 4 1 1 0 1 2 3 0 0 1 1 0 0 Visual impairment 0 0 3 0 0 0 0 0 1 0 0 0 0 0 0 Hearing impairment 0 4 4 0 1 0 2 3 0 0 0 0 2 0 0 Speech impairment 1 1 4 1 1 0 0 3 4 0 0 0 3 2 0 Mental illness/ 1 2 20 11 1 0 6 10 11 1 0 1 9 2 0 emotional disorder Autism 0 0 5 4 0 0 0 3 3 0 0 1 5 6 0 Specific learning 0 0 1 0 0 0 0 0 1 0 0 0 1 0 0 difficulties Attention deficit/ hyperactivity 0 0 1 1 0 0 0 1 0 0 0 0 1 0 0 disorder Intellectual 4 8 46 54 6 1 3 33 35 0 0 3 27 22 1 disabilities Visceral disability/ 1 0 5 3 1 0 0 0 3 0 0 0 0 0 0 chronic illness(2) Total number of 5 14 76 67 8 1 11 49 48 1 0 4 38 26 1 productivity (3) 170 assessments 110 assessments 69 assessments assessments

Notes:

(1) The Minimum Wage Ordinance has been implemented since 1 May 2011.

(2) A type of disabilities under the "Registration Card for People with Disabilities".

(3) As individual employees with disabilities have completed more than one productivity assessment, the figures refer to the number of assessments. Figures on the breakdown of the degree of productivity are rounded to the nearest integer. Employees with disabilities may have more than one type of disabilities. The sum of individual items of the type of disabilities thus exceeds the total number of productivity assessments. LEGISLATIVE COUNCIL ─ 26 March 2014 9045

Annex B

(1) Hong Kong International Airport Number of Employees with Disabilities Type of disabilities as at 31 December of the Year 2009 2010 2011 2012 2013 (i) Mobility restrictions 1 1 1 2 3 (ii) Visual impairment 1 1 1 1 1 (iii) Hearing impairment 0 0 0 0 0 (iv) Speech impairment 0 0 0 0 0 (v) Mental illness/ 0 0 0 0 0 emotional disorder (vi) Autism 0 0 0 0 0 (vii) Specific learning 0 0 0 0 0 difficulties (viii) Attention deficit/ 0 0 0 0 0 hyperactivity disorder (ix) Intellectual disabilities 0 0 0 0 0 Total 2 2 2 3 4

(2) Auxiliary Medical Service The Auxiliary Medical Service is an auxiliary emergency response team. There was no person with disabilities in its auxiliary members in the past five years.

(3) Civil Aid Service The Civil Aid Service is an auxiliary emergency response team. There was no person with disabilities in its auxiliary members in the past five years.

(4) The Consumer Council Number of Employees with Disabilities Type of disabilities as at 31 December of the Year 2009 2010 2011 2012 2013 (i) Mobility restrictions 1 1 1 1 1 (ii) Visual impairment 0 0 0 0 0 (iii) Hearing impairment 1 1 1 1 0 (iv) Speech impairment 0 0 0 0 0 (v) Mental illness/ 1 1 0 0 0 emotional disorder 9046 LEGISLATIVE COUNCIL ─ 26 March 2014

Number of Employees with Disabilities Type of disabilities as at 31 December of the Year 2009 2010 2011 2012 2013 (vi) Autism 0 0 0 0 0 (vii) Specific learning 0 0 0 0 0 difficulties (viii) Attention deficit/ 0 0 0 0 0 hyperactivity disorder (ix) Intellectual disabilities 0 0 0 0 0 Total 3 3 2 2 1

(5) Employees Retraining Board Number of Employees with Disabilities Type of disabilities as at 31 December of the Year 2009 2010 2011 2012 2013 (i) Mobility restrictions 0 0 0 0 0 (ii) Visual impairment 0 0 0 0 0 (iii) Hearing impairment 1 1 1 1 1 and speech impairment (iv) Mental illness/ 0 0 0 0 0 emotional disorder (v) Autism 0 0 0 0 0 (vi) Specific learning 0 0 0 0 0 difficulties (vii) Attention deficit/ 0 0 0 0 0 hyperactivity disorder (viii) Intellectual disabilities 0 0 0 0 0 Total 1 1 1 1 1

(6) Equal Opportunities Commission Number of Employees with Disabilities Type of disabilities as at 31 December of the Year 2009 2010 2011 2012 2013 (i) Mobility restrictions 2 2 3 4 3 (ii) Visual impairment 1 1 1 2 2 (iii) Hearing impairment 1 1 1 1 1 (iv) Speech impairment 0 0 0 0 0 (v) Mental illness/ 0 0 0 0 0 emotional disorder LEGISLATIVE COUNCIL ─ 26 March 2014 9047

Number of Employees with Disabilities Type of disabilities as at 31 December of the Year 2009 2010 2011 2012 2013 (vi) Autism 0 0 0 0 0 (vii) Specific learning 0 0 0 0 0 difficulties (viii) Attention deficit/ 0 0 0 0 0 hyperactivity disorder (ix) Intellectual disabilities 0 0 0 0 0 Total 4 4 5 7 6

(7) Estate Agents Authority Number of Employees with Disabilities Type of disabilities as at 31 December of the Year 2009 2010 2011 2012 2013 (i) Mobility restrictions 0 0 0 0 0 (ii) Visual impairment 0 0 0 0 0 (iii) Hearing impairment 1 1 1 1 1 (iv) Speech impairment 0 0 0 0 0 (v) Mental illness/ 0 0 0 0 2 emotional disorder (vi) Autism 0 0 0 0 0 (vii) Specific learning 0 0 0 0 0 difficulties (viii) Attention deficit/ 0 0 0 0 0 hyperactivity disorder (ix) Intellectual disabilities 0 0 0 0 0 Total 1 1 1 1 3

(8) Financial Reporting Council Number of Employees with Disabilities Type of disabilities as at 31 December of the Year 2009 2010 2011 2012 2013 (i) Mobility restrictions 0 0 0 0 0 (ii) Visual impairment 0 0 0 0 0 (iii) Hearing impairment 0 0 0 0 0 (iv) Speech impairment 0 0 0 0 0 9048 LEGISLATIVE COUNCIL ─ 26 March 2014

Number of Employees with Disabilities Type of disabilities as at 31 December of the Year 2009 2010 2011 2012 2013 (v) Mental illness/ 0 0 0 0 0 emotional disorder (vi) Autism 0 0 0 0 0 (vii) Specific learning 0 0 0 0 0 difficulties (viii) Attention deficit/ 0 0 0 0 0 hyperactivity disorder (ix) Intellectual disabilities 0 0 0 0 0 Total 0 0 0 0 0

(9) Hong Kong Arts Development Council Number of Employees with Disabilities Type of disabilities as at 31 December of the Year 2009 2010 2011 2012 2013 (i) Mobility restrictions 0 0 0 0 0 (ii) Visual impairment 0 0 0 0 0 (iii) Hearing impairment 0 0 0 0 0 (iv) Speech impairment 0 0 0 0 0 (v) Mental illness/ 0 0 0 0 0 emotional disorder (vi) Autism 0 0 0 0 0 (vii) Specific learning 0 0 0 0 0 difficulties (viii) Attention deficit/ 0 0 0 0 0 hyperactivity disorder (ix) Intellectual disabilities 0 0 0 0 0 Total 0 0 0 0 0

(10) Hong Kong Housing Authority Number of Employees with Disabilities Type of disabilities as at 31 December of the Year 2009 2010 2011 2012 2013 (i) Mobility restrictions 41 39 39 37 35 (ii) Visual impairment 168 167 170 169 166 (iii) Hearing impairment 17 16 17 19 20 LEGISLATIVE COUNCIL ─ 26 March 2014 9049

Number of Employees with Disabilities Type of disabilities as at 31 December of the Year 2009 2010 2011 2012 2013 (iv) Speech impairment 0 0 0 0 0 (v) Mental illness/ 9 8 8 8 8 emotional disorder (vi) Autism 0 0 0 0 0 (vii) Specific learning 0 0 0 0 0 difficulties (viii) Attention deficit/ 0 0 0 0 0 hyperactivity disorder (ix) Intellectual disabilities 0 0 0 0 0 Total 235 230 234 233 229

(11) Hong Kong Housing Society Number of Employees with Disabilities Type of disabilities as at 31 December of the Year 2009 2010 2011 2012 2013 (i) Mobility restrictions 2 2 2 2 2 (ii) Visual impairment 0 2 2 2 4 (iii) Hearing impairment 0 0 0 0 0 (iv) Speech impairment 0 0 0 0 0 (v) Mental illness/ 0 0 0 0 0 emotional disorder (vi) Autism 0 0 0 0 0 (vii) Specific learning 0 0 0 0 0 difficulties (viii) Attention deficit/ 0 0 0 0 0 hyperactivity disorder (ix) Intellectual disabilities 0 0 0 0 0 Total 2 4 4 4 6

(12) Hong Kong Sports Institute Limited Number of Employees with Disabilities Type of disabilities as at 31 December of the Year 2009 2010 2011 2012 2013 (i) Mobility restrictions 2 2 2 3 3 (ii) Visual impairment 0 0 0 0 0 9050 LEGISLATIVE COUNCIL ─ 26 March 2014

Number of Employees with Disabilities Type of disabilities as at 31 December of the Year 2009 2010 2011 2012 2013 (iii) Hearing impairment 0 0 0 0 0 (iv) Speech impairment 0 0 0 0 0 (v) Mental illness/ 0 0 0 0 0 emotional disorder (vi) Autism 0 0 0 0 0 (vii) Specific learning 0 0 0 0 0 difficulties (viii) Attention deficit/ 0 0 0 0 0 hyperactivity disorder (ix) Intellectual disabilities 0 0 0 0 0 Total 2 2 2 3 3

(13) Hospital Authority Number of Employees with Disabilities Type of disabilities as at 31 December of the Year 2009 2010 2011 2012 2013 (i) Mobility restrictions 1 098 1 161 1 170 1 290 1 371 (ii) Visual impairment 98 95 92 88 78 (iii) Hearing impairment 24 23 15 15 13 (iv) Speech impairment 3 3 3 3 3 (v) Mental illness/ 79 74 72 58 59 emotional disorder (vi) Autism 0 0 0 0 0 (vii) Specific learning 0 0 0 0 0 difficulties (viii) Attention deficit/ 0 0 0 0 0 hyperactivity disorder (ix) Intellectual 1 1 1 1 1 disabilities (x) Others: Visceral 93 92 77 71 70 disability Total 1 396 1 449 1 430 1 526 1 595

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(14) MTR Corporation Limited [Note: MTR Corporation Limited is a listed company, not a government subvented or statutory body.] Number of Employees with Disabilities Type of disabilities as at 31 December of the Year 2009 2010 2011 2012 2013 (i) Mobility restrictions 8 7 8 9 10 (ii) Visual impairment 33 37 48 58 70 (iii) Hearing impairment 97 96 98 84 83 (iv) Mental illness/ 37 40 47 48 60 emotional disorder Total 175 180 201 199 223

(15) Mandatory Provident Fund Schemes Authority Number of Employees with Disabilities Type of disabilities as at 31 December of the Year 2009 2010 2011 2012 2013 (i) Mobility restrictions 2 2 2 2 2 (ii) Visual impairment 0 0 0 0 0 (iii) Hearing impairment 0 0 0 0 0 (iv) Speech impairment 0 0 0 0 0 (v) Mental illness/ 0 0 0 0 0 emotional disorder (vi) Autism 0 0 0 0 0 (vii) Specific learning 0 0 0 0 0 difficulties (viii) Attention deficit/ 0 0 0 0 0 hyperactivity disorder (ix) Intellectual disabilities 0 0 0 0 0 Total 2 2 2 2 2

(16) Office of the Privacy Commissioner for Personal Data Number of Employees with Disabilities Type of disabilities as at 31 December of the Year 2009 2010 2011 2012 2013 (i) Mobility restrictions 0 0 0 0 0 (ii) Visual impairment 0 0 0 0 0 (iii) Hearing impairment 0 0 0 0 0 (iv) Speech impairment 0 0 0 0 0 9052 LEGISLATIVE COUNCIL ─ 26 March 2014

Number of Employees with Disabilities Type of disabilities as at 31 December of the Year 2009 2010 2011 2012 2013 (v) Mental illness/ 0 0 0 0 0 emotional disorder (vi) Autism 0 0 0 0 0 (vii) Specific learning 0 0 0 0 0 difficulties (viii) Attention deficit/ 0 0 0 0 0 hyperactivity disorder (ix) Intellectual disabilities 0 0 0 0 0 Total 0 0 0 0 0

(17) Securities and Futures Commission Number of Employees with Disabilities Type of disabilities as at 31 December of the Year 2009 2010 2011 2012 2013 (i) Mobility restrictions 0 0 0 0 0 (ii) Visual impairment 0 0 0 0 0 (iii) Hearing impairment 0 0 0 0 0 (iv) Speech impairment 0 0 0 0 0 (v) Mental illness/ 0 0 0 0 0 emotional disorder (vi) Autism 0 0 0 0 0 (vii) Specific learning 0 0 0 0 0 difficulties (viii) Attention deficit/ 0 0 0 0 0 hyperactivity disorder (ix) Intellectual disabilities 0 0 0 0 0 Total 0 0 0 0 0

(18) Hong Kong Examinations and Assessment Authority The Hong Kong Examination and Assessment Authority has not compiled statistics on its number of employees with disabilities, thus is unable to provide the relevant data.

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(19) Urban Renewal Authority Number of Employees with Disabilities Type of disabilities as at 31 December of the Year 2009 2010 2011 2012 2013 (i) Mobility restrictions 0 0 0 0 0 (ii) Visual impairment 0 0 0 0 0 (iii) Hearing impairment 0 0 0 0 0 (iv) Speech impairment 0 0 0 0 0 (v) Mental illness/ 0 0 0 0 0 emotional disorder (vi) Autism 0 0 0 0 0 (vii) Specific learning 0 0 0 0 0 difficulties (viii) Attention deficit/ 0 0 0 0 0 hyperactivity disorder (ix) Intellectual disabilities 0 0 0 0 0 (x) Others 0 0 0 2 2 Total 0 0 0 2 2

(20) Vocational Training Council Number of Employees with Disabilities Type of disabilities as at 31 December of the Year 2009 2010 2011 2012 2013 (i) Mobility restrictions 17 16 16 17 17 (ii) Visual impairment 7 7 7 7 7 (iii) Hearing impairment 9 8 9 7 7 (iv) Speech impairment 1 0 0 0 0 (v) Mental illness/ 0 0 0 0 0 emotional disorder (vi) Autism 0 0 0 0 0 (vii) Specific learning 0 0 0 0 0 difficulties (viii) Attention deficit/ 0 0 0 0 0 hyperactivity disorder (ix) Intellectual disabilities 1 1 1 1 1 Total 35 32 33 32 32

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(21) West Kowloon Cultural District Authority Number of Employees with Disabilities Type of disabilities as at 31 December of the Year 2009 2010 2011 2012 2013 (i) Mobility restrictions 0 0 1 1 1 (ii) Visual impairment 0 0 0 0 0 (iii) Hearing impairment 0 0 0 0 0 (iv) Speech impairment 0 0 0 0 0 (v) Mental illness/ 0 0 0 0 0 emotional disorder (vi) Autism 0 0 0 0 0 (vii) Specific learning 0 0 0 0 0 difficulties (viii) Attention deficit/ 0 0 0 0 0 hyperactivity disorder (ix) Intellectual disabilities 0 0 0 0 0 Total 0 0 1 1 1

Regulation of Industry of Collection and Recycling of Used Cooking Oil

8. MR TOMMY CHEUNG (in Chinese): President, in March last year, this Council passed a motion urging the Government to establish a tracing mechanism, regulate and monitor the operation of local recyclers of used cooking oil, as well as collect and regularly release the relevant information and statistics about the local collection of used cooking oil. In its progress report on the motion submitted to this Council in June last year, the Government pointed out that the establishment of such a tracing mechanism could only be implemented by legislation. In this connection, will the Government inform this Council:

(1) given that it has been one year since the aforesaid motion was passed, whether the Government now keeps a list and the number of used cooking oil recyclers; if so, of the details; if not, the reasons for that;

(2) whether it has compiled statistics on the quantity of locally collected used cooking oil and the percentage of such oil being recycled, in each of the past three years; if so, of the figures; if not, whether it has plans to collect such data on a regular basis;

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(3) whether it has compiled statistics on the quantities of used cooking oil imported and exported in each of the past three years; if so, of the figures; if not, whether it has plans to collect such data on a regular basis; and

(4) whether it has plans to establish a licensing system by legislation to regulate the industry of collection and recycling of used cooking oil, thereby ensuring that used cooking oil collected will, after recycling, be used only for purposes other than human consumption, and preventing used cooking oil from re-entering the food chain; if so, of the details; if not, the reasons for that?

SECRETARY FOR THE ENVIRONMENT (in Chinese): President,

(1) Used cooking oil is a recoverable and recyclable commodity with commercial value in the international market. Trading of used cooking oil is not subject to control under international conventions or local legislation. While the Government has not collected comprehensive information on used cooking oil recyclers, the Hong Kong Waste Reduction Website of the Environmental Protection Department (EPD) lists local recyclers engaged in used cooking oil recycling and registered with the EPD for inclusion in the list, for producers of used cooking oil (for example, food establishments, hotels and food factories) to make reference and contact.

(2) In late 2013, the Government commissioned the Hong Kong Productivity Council to conduct a consultancy study on, among other things, the current situation of used cooking oil recycling in Hong Kong. Preliminary findings indicate that an estimated 16 000 tonnes of used cooking oil are collected locally each year for recycling, of which about 11 000 tonnes are used in biodiesel production by local factories.

(3) According to the Hong Kong Merchandise Trade Statistics compiled by the Census and Statistics Department, the import and export figures of used cooking oil plus other commodities placed under the same item in the Standard International Trade Classification (including animal or vegetable fats chemically modified, inedible 9056 LEGISLATIVE COUNCIL ─ 26 March 2014

mixtures of animal and vegetable fats and preparation of different fractions thereof) from 2011 to 2013 are as follows:

Year 2011 2012 2013 Import 4 025 tonnes 2 969 tonnes 4 322 tonnes Local export 7 428 tonnes 11 292 tonnes 16 199 tonnes Re-export 3 359 tonnes 1 276 tonnes 1 596 tonnes

(4) The Government and the recycling trade are jointly studying the proposal of a voluntary certification scheme for recyclers, to encourage the establishment of specific standards of practice for the industry. Such a scheme would raise recyclers' operational standards as well as foster confidence and support among business operators, who would be able to check whether a recycler had been certified and choose accordingly.

On safeguarding the safety of cooking oil, the Centre for Food Safety of the Food and Environmental Hygiene Department (FEHD) has all along been monitoring the quality of cooking oil in Hong Kong through routine food surveillance to ensure that the products comply with the legal requirements and are fit for human consumption. In addition, food traders must obtain the relevant licence from the FEHD if they are to carry on the business of mixing or refining cooking oil. The FEHD has also put in place a regular inspection mechanism for premises which are engaged in bottling or canning cooking oil to monitor their hygiene condition.

Supply of Varicella Vaccines

9. MR ALBERT HO (in Chinese): President, it has been reported that the number of notified cases of varicella in Hong Kong has been on the high side in recent years, and due to a persistent shortage of varicella vaccines, quite a number of parents need to wait for a long time before they can arrange for their children to be vaccinated in private clinics. Meanwhile, the Department of Health (DH) has planned to include varicella vaccines in the Hong Kong Childhood Immunization Programme. In this connection, will the Government inform this Council:

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(1) whether it has contacted private clinics to understand the situation of shortage in supply of varicella vaccines; if it has, of the details; if not, the reasons for that;

(2) of the exact date on which the authorities will launch the varicella vaccination programme; what measures the authorities will take to ensure an adequate supply of vaccines at the commencement of the programme; and

(3) of the anticipated quantity of varicella vaccines to be purchased by the authorities in 2014-2015, and the amount of expenditure involved?

SECRETARY FOR FOOD AND HEALTH (in Chinese): President,

(1) There are five varicella vaccines currently registered in Hong Kong. Two of them are combined vaccines which also provide protection against measles, mumps and rubella; the other three are vaccines which prevent varicella (chickenpox) only. Of the three varicella-specific vaccines, one has ceased production worldwide and another experienced a temporary shortage of supply at an earlier juncture. Due to an increasing global demand for varicella vaccines in recent years while supply is limited, pharmaceutical manufacturers may not be able to meet the market demand in full on a timely basis.

The DH has been monitoring the supply of varicella vaccines and maintaining close communication with local suppliers and doctors' associations.

(2) The DH has decided to incorporate varicella vaccine into the Hong Kong Childhood Immunization Programme (HKCIP) upon the recommendation of the Scientific Committee on Vaccine Preventable Diseases under the Centre for Health Protection. It is now carrying out preparatory work. Implementation details of the programme will be announced within this year.

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The relevant suppliers of varicella vaccines have pledged to secure a sufficient supply of vaccines for Hong Kong. To ensure an adequate supply of varicella vaccine after it has been incorporated into the HKCIP, the DH will enter into a contract with the vaccine supplier and include the appropriate clauses and requirements therein.

(3) The DH has drawn reference to the number of registered newborns in determining the quantity of varicella vaccines to be procured. According to the number of births in 2013, an estimated provision of $9.2 million has been made for the procurement of varicella vaccines in 2014-2015.

Relocation of Stray Cattle

10. MR LEUNG CHE-CHEUNG (in Chinese): President, it has been reported that since November 2013, the Agriculture, Fisheries and Conservation Department (AFCD) has implemented a "Trap-Neuter-Relocation" pilot programme for stray cattle (pilot programme) to catch stray cattle dwelling in places such as Sai Kung and Lantau Island, and relocate them to other locations, with a view to controlling the stray cattle population in the long run. Some animal welfare groups have discovered that the health of some of the relocated stray cattle has deteriorated allegedly due to their inability to adapt to the new environment, and that some calves separated from their dams have lost a lot of weight abruptly and need to receive treatment. In this connection, will the Government inform this Council:

(1) of the objective, details and progress of the pilot programme, and the rationale for implementing the programme; whether it had made reference to professional opinions and overseas successful cases in formulating the programme; if it had, of the relevant information;

(2) whether the AFCD had conducted district consultation before it launched the pilot programme; if it had, of the relevant information; if not, the reasons for that;

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(3) of the respective numbers of female and male adult stray cattle and calves involved in the pilot programme; whether the AFCD has performed neutering surgeries on such cattle;

(4) as some animal welfare groups have pointed out that the relocation of stray cattle by the AFCD has caused the separation of calves from their dams, whether the authorities have looked into this situation; if they have, of the results;

(5) as it has been reported that some cattle have intruded into Ngong Ping Village to forage for food after the commencement of the pilot programme, whether it knows if similar incidents had happened before; and

(6) of the current health conditions of such cattle; as some animal welfare groups have pointed out that some stray cattle have developed health problems after being relocated, whether the AFCD will terminate the programme and move such cattle back to their original dwelling places; if it will, of the details; if not, the reasons for that?

SECRETARY FOR FOOD AND HEALTH (in Chinese): President, over the years, the issue of stray cattle has persistently been a matter of concern to the local community, particularly in the case of South Lantau and Sai Kung town. According to a territory-wide population survey on stray cattle conducted in 2012, there were around 1 200 stray cattle in the rural areas of Hong Kong. Since local stray cattle (including brown cattle and buffalo) are not wild animals, they fall outside the ambit of the Wild Animals Protection Ordinance (Cap. 170). Nor are they regarded in the international arena as endangered animals. That being the case, upon receipt of complaints of nuisance caused by stray cattle in the past, the AFCD used to act on them by deploying officers to conduct on-site inspection for catching and removing the stray cattle in accordance with the power conferred by the Pounds Ordinance (Cap. 168).

In recent years, the views we receive from different sectors of the community on how best stray cattle should be managed are becoming more diverse. Cattle welfare groups and the local communities affected hold different views over the issue. For instance, some conservation groups believe that stray 9060 LEGISLATIVE COUNCIL ─ 26 March 2014 cattle are ecologically significant and should be kept in their original dwelling places and wild areas. Animal welfare groups also consider stray cattle to be part of the community concerned and as such should be protected and allowed to live freely therein. However, some road users as well as residents and farmers being affected are of the view that stray cattle should be removed because they are causing obstruction to traffic, constitute a source of nuisance to environmental hygiene and the daily lives of residents, and may damage the crops at times.

To enhance the management of stray cattle, the AFCD formulated in late 2010 a long-term work plan with a view to striking a balance between minimizing the nuisance to the daily lives of residents and protecting the welfare of the cattle. Without compromising the welfare of the cattle, the AFCD is taking multi-pronged measures to control and reduce the number of stray cattle so as to minimize the nuisance caused to the community and the potential danger posed to road users and the cattle themselves.

My reply to the various parts of the question is as follows:

(1) The AFCD set up the dedicated Cattle Management Team in late 2011 to carry out a series of long-term management work on stray cattle. Under one of the management plans, the AFCD officers would actively capture stray cattle, have the cattle sterilized and ear-tagged for identification, and then relocate them to a more remote location in the same district (the "Capture-Sterilize-Relocate" (CSR) programme).

In implementing the CSR programme, the AFCD found that many cattle would find their way back to the town centre or roads of the same district in a matter of days or weeks after relocation, and become a source of nuisance to the residents and road users again. Some cattle have been captured repeatedly for four to five times after being sterilized and relocated. This shows that the current choice of relocation paths and sites might not be entirely effective in abating the nuisance caused by stray cattle to the residents or reducing the danger to road users and themselves.

Last autumn, the AFCD came to realize that the number of stray cattle in Sai Kung District was close to saturation. This, coupled with the increasing number of construction projects in the district, resulted in the availability of fewer dwelling places for cattle leading LEGISLATIVE COUNCIL ─ 26 March 2014 9061

to more cattle lingering on roads, significantly affecting the traffic. To reduce the traffic congestion caused by cattle and minimize the number of major traffic accidents involving them, the AFCD has made reference to the suggestion made in the study report by an ecological consultant and commenced a pilot scheme under the CSR programme in last November whereby some of the stray cattle repeatedly captured on roads are relocated to a farther away location in another district (cross-district relocation pilot scheme).

Under the CSR programme, some cattle are fitted with collars with global positioning system (GPS) devices to allow the AFCD to track their movements after relocation and study their movement patterns in unfamiliar areas. Besides, the AFCD officers conduct weekly on-site inspections of the places to which the cattle are relocated. Preliminary findings reveal that most of the relocated cattle are in good health. According to the follow-up investigations by the AFCD, most of the cattle under the cross-district relocation pilot scheme are still dwelling in the areas hitherto anticipated. The scheme also proved to be serving the purpose of easing the traffic congestion problem caused by stray cattle in the areas concerned. The AFCD will continue to monitor the situation and keep in view the effectiveness of the cross-district relocation pilot scheme.

(2) The AFCD has been engaging local communities, non-governmental organizations, district councils and rural committees, listening to their views and suggestions on issues related to the management of stray cattle. Upon its establishment in late 2011, the AFCD's Cattle Management Team proceeded right away to lay on the ground work for the CSR programme. At the joint meeting of the chairmen of various rural committees of the Islands District held on 3 July 2012, the AFCD briefed members on the progress of the CSR programme. The Department has subsequently discussed the matter with the parties concerned on different occasions. The AFCD will continue communicating with stakeholders and take their views into account.

(3) From late 2011 to February 2014, the AFCD has captured a total of 473 stray brown cattle (including those repeatedly captured) under the CSR programme. Since the launch of the cross-district relocation pilot scheme in November 2013, the AFCD has captured 46 young and adult cattle as well as four calves accompanying their 9062 LEGISLATIVE COUNCIL ─ 26 March 2014

mothers, including 26 female and 20 male young and adult cattle, three female calves and one male calf. Of these cattle, 29 were relocated from Sai Kung to Shek Pik Reservoir on Lantau, and 21 from South Lantau to Sai Kung High Island Reservoir. All the captured cattle have been sterilized and ear-tagged for easy identification.

(4) Prior to the relocation of any stray cattle, the AFCD will conduct surveillance and assessment to ensure that they forage properly and are in good health condition. As calves cannot forage on their own, the AFCD will not separate them from their mothers. The cattle involved in the cross-district relocation pilot scheme are those frequently found to have caused obstruction to traffic and have been wandering on roads.

(5) Based on their routine inspections, the AFCD officers noticed that some cattle under the cross-district relocation pilot scheme had visited the area around Ngong Ping. If cattle are found lingering near Ngong Ping Market, the AFCD officers would take appropriate actions to lead them away.

About 10 cattle are noted dwelling around Ngong Ping and the AFCD has previously received reports on cattle feeding in the Ngong Ping Market. In view of the situation, the AFCD has put up publicity banners and posters in the area to enhance public awareness of stray cattle and remind members of the public not to feed stray cattle so as to minimize the gathering of stray cattle in Ngong Ping. The AFCD will continue the CSR programme to tackle the issue of nuisances caused by stray cattle and to control their number.

(6) According to AFCD officers' weekly on-site inspections of the places to which the cattle are relocated, the cattle concerned are generally in good health. The AFCD will continue to closely monitor the situation. The AFCD plans to conduct a review of the cross-district relocation pilot scheme in six months' time (that is, around mid-2014) to evaluate the impact of the scheme on the community and the health conditions of the cattle, as well as the effectiveness of the scheme.

LEGISLATIVE COUNCIL ─ 26 March 2014 9063

Development and Regulation of Beauty Industry

11. PROF JOSEPH LEE (in Chinese): President, some representatives of the beauty industry have pointed out that they have all along endeavoured to promote the development of professionalism in the industry, including encouraging beauty practitioners to obtain internationally recognized professional qualifications through study and training, promoting and implementing a Qualifications Framework (QF) within the industry, as well as promoting the introduction of a professional licensing examination system. In addition, they have also expressed concern about the possibility that certain devices used for beauty purposes might be included in the authorities' plan of regulating medical devices through legislation. Regarding the issues relating to the development and regulation of the beauty industry, will the Government inform this Council:

(1) whether it will implement a standardized framework for recognizing qualifications for the beauty industry, so as to boost consumers' confidence in beauty services; if it will, of the details and the implementation timetable; if not, the reasons for that;

(2) whether it has completed the business impact assessment in relation to the regulation of medical devices; if it has, of the details; if not, the expected completion time of the assessment and the publication of the assessment report; of the latest development of introducing legislation to regulate medical devices; whether the authorities will put beauty devices and medical devices under the same regulatory framework; if they will, of the details; if not, the reasons for that, and whether beauty devices will be subject to regulation;

(3) whether the authorities will allocate resources to the beauty industry in order to provide proper training to practitioners performing beauty procedures, so as to ensure that they have adequate skills and experience to perform those procedures and operate high-risk devices; if they will, of the details; if not, the reasons for that; and

(4) whether it has compiled statistics on the person-times receiving beauty services in the past five years, as well as the annual economic contributions (in terms of value added) of the beauty industry and the percentage share of the industry in Hong Kong's gross domestic product of the same years?

9064 LEGISLATIVE COUNCIL ─ 26 March 2014

SECRETARY FOR FOOD AND HEALTH (in Chinese): President, the reply to the question raised by Prof Joseph LEE is as follows:

(1) According to the Education Bureau, the Beauty Industry Training Advisory Committee (Beauty ITAC) has been set up under the QF to assist the industry in implementing the QF and promote lifelong learning of its practitioners. The Beauty ITAC developed the first version of Specification of Competency Standards (SCS) in November 2010, which sets out the competency requirements and outcome standards of the industry at various QF levels and provides a foundation for the development of education and training programmes (including in-house training programmes) that meet the practical needs of the industry. The Beauty ITAC is contemplating the implementation of a Recognition of Prior Learning mechanism based on the SCS, the remit and coverage of which is subject to discussions and industry-wide consensus. The Education Bureau and the QF Secretariat will continue to assist the beauty industry in sustaining its development riding on the QF platform.

(2) and (3)

The Administration is considering introducing legislation to regulate medical devices so as to ensure that medical devices manufactured, sold or used in Hong Kong comply with the relevant requirements in terms of safety, performance and quality. In this connection, we propose to set up a medical device registration system. Devices used in beauty parlours that are classified as medical devices will be subject to regulation under the proposed legislation.

To prepare for the regulatory regime, the Government set up a voluntary Medical Device Administrative Control System in 2004. Subsequently, advice of the Legislative Council Panel on Health Services (HS Panel) on the proposed regulatory framework for medical devices was sought in November 2010. In making the regulatory proposal, factors such as findings of the regulatory impact assessment, views of stakeholders and the general public collected through consultations, discussions held by the Legislative Council in the past and experience gained from the operation of the Medical Device Administrative Control System had been taken into account. LEGISLATIVE COUNCIL ─ 26 March 2014 9065

In response to the recommendations of the Business Facilitation Advisory Committee, the Department of Health has commissioned a consultant company to conduct a business impact assessment of the regulatory proposal.

Meanwhile, in response to a serious medical incident that took place during the performance of a cosmetic procedure provided by a beauty parlour in 2012, the Working Group on Differentiation between Medical Procedures and Beauty Services (Working Group) under the Steering Committee on Review of the Regulation of Private Healthcare Facilities established by the Administration recommended that cosmetic procedures involving the use of medical devices, particularly those using energy-emitting devices, should be deliberated within the regulatory framework for medical devices. In this connection, the Administration plans to brief the Legislative Council HS Panel on how to implement the recommendations of the Working Group, when it reports the results of the business impact assessment.

(4) The Government has not compiled statistics on the person-times receiving beauty services, the economic contributions of the beauty industry and the percentage share of the industry in Hong Kong's gross domestic product.

Arrangements for Meetings of Committees and Working Groups Under District Councils

12. DR HELENA WONG (in Chinese): President, the Working Group on Civic Education under the Central and Western District Council (C&W DC) held a meeting on the 6th of this month to examine the allocation of $250,000 of public money for taking forward the publicity of the Basic Law and constitutional development. A member of the C&W DC told me that he intended to attend the meeting in order to discharge his duty of monitoring if public money was used appropriately, and his assistant and two journalists also intended to observe the meeting. According to the videos taken by the DC member and his assistant, the Chairman of the Working Group indicated at the beginning of the meeting that it was necessary to hold the meeting in camera and requested the journalists to leave, but the request was refused. The Chairman then moved a motion to 9066 LEGISLATIVE COUNCIL ─ 26 March 2014 oppose the presence of journalists, which was voted upon and passed by the Working Group. The journalists were then immediately evicted from the conference room by security guards, and the DC member was carried away from the conference room by several police officers. Regarding the arrangements for meetings of the committees or working groups under DCs, will the executive authorities inform this Council:

(1) which meetings of the committees or working groups allow the public to observe; and the arrangements for the media to cover and observe such meetings;

(2) of the criteria and procedures for determining whether a meeting needs to be held in camera; which meetings need to be held in camera;

(3) of the duties and responsibilities of the District Officers (DOs) of the district and the officials in attendance at closed meetings;

(4) whether DC members of the district who are not members of the committees or working groups concerned are allowed to sit in on the closed meetings of such committees or working groups; if so, whether the DC members in attendance are required to comply with certain requirements; if there are such requirements, of the details; if in-attendance is not allowed, the reasons for that;

(5) whether a mechanism is in place to handle various kinds of unforeseen incidents during meetings; if so, of the details; if not, the reasons for that; how the authorities assess if the chairmen of the meetings need to call police officers for help;

(6) whether the DC members attending a meeting are authorized to call police officers for help in case of any unforeseen incident during the meeting, and how the DC secretariat assesses the need to call police officers for help; and

(7) of (i) the meetings held in camera, (ii) the agenda items discussed at those meetings, (iii) the percentage of the number of closed meetings in the total number of meetings held, and (iv) the number of closed LEGISLATIVE COUNCIL ─ 26 March 2014 9067

meetings involving the vetting and approval of funding applications and the percentage of the number of such meetings in the total number of closed meetings held, broken down by DC district, since the beginning of the current DC term?

SECRETARY FOR HOME AFFAIRS (in Chinese): President, according to section 68 of the District Councils Ordinance (the Ordinance) (Cap. 547), a DC may make its own standing orders to regulate its operating procedure and that of its committees. All DCs shall conduct meetings according to the DC Standing Orders they have endorsed. The Government respects DCs' decisions made pursuant to the Ordinance.

The reply to the seven parts of the question is as follows:

(1) According to the DC Standing Orders of the 18 districts, unless the chairman of any committee after consulting the advice of committee members determines otherwise, any meeting of the committee shall be open to the public (including the media).

However, the DC Standing Orders do not stipulate the arrangements for the public to observe meetings of the working groups.

(2) In general, if a committee or working group needs to hold any closed-door meeting, its chairman will make a decision after consulting the advice of the members. The criteria for determining whether a meeting should be held behind closed doors shall be drawn up by the DCs/committees/working groups. Matters discussed in closed-door meetings of individual committees and working groups include, but not limited to, internal administration as well as sensitive information involving tenders and quotations, and so on.

(3) If the discussion items fall within the purview of the Home Affairs Department or individual government departments, the DO or representatives of relevant departments will attend the meeting to respond to members' questions. DOs or departmental representatives do not need to attend all meetings of working groups.

9068 LEGISLATIVE COUNCIL ─ 26 March 2014

(4) According to the DC Standing Orders of all the 18 districts, the committees or working groups may invite any person to attend their meetings where necessary. When a DC member sits in on such a committee or working group meeting, he/she shall abide by the relevant requirements of the DC Standing Orders.

(5) and (6)

According to the DC Standing Orders of all the 18 districts, if a person attending or sitting in on the meeting misbehaves in such a way as to disrupt the conduct of the meeting, the chairman may issue warnings to that person. The chairman may order the person to leave the place of the meeting if the person persists in his or her misbehaviour despite warnings. At the chairman's request, the DC Secretariat will take appropriate actions and may, where necessary, ask security guards to come to the place of the meeting to assist in maintaining order, in order to ensure that the meeting is to be conducted smoothly.

It is a DC member's personal decision to call for the assistance of police officers if he/she feels threatened or disturbed.

(7) According to the Secretariats, from the commencement of the current DC term (that is, from 1 January 2012) to 14 March 2014, closed-door meetings were conducted in three committees and 21 working groups of the 18 DCs. Items of discussion mainly involved issues of internal administration of respective DCs, tenders and quotations, and so on. There are no statistics on the percentage of closed-door meetings in the total number of meetings, or the number and percentage of closed-door meetings dealing with examination of funding applications in the total number of closed-door meetings.

Prevention of Collusion by Foreign Exchange Traders

13. MR DENNIS KWOK: President, it has been reported that in recent months, more than a dozen regulators across Europe, the United States and Asia have been either running their own inquiries or assisting investigations into allegations of foreign exchange (F/X) traders using electronic communication LEGISLATIVE COUNCIL ─ 26 March 2014 9069 platforms such as chatrooms to share client information and collude to manipulate daily currency benchmarks (for example, sharing information about overall trading books and individual client orders to match up their trades and align trading strategies). Internal investigations by some of the banks involved (many of which have businesses in Hong Kong) have also revealed such instances of illicit acts. In this connection, will the Government inform this Council whether it knows if the Hong Kong Monetary Authority (HKMA) and the Securities and Futures Commission (SFC):

(1) have carried out investigations to find out whether there have been similar instances of illicit acts by traders in the Hong Kong F/X market; if so, of the findings and, if such instances have been found, the follow-up actions taken (for example, instituting criminal prosecutions, and so on) by the HKMA and the SFC; if no investigation has been carried out, the reasons for that;

(2) have assessed whether the current relevant regulations are adequate to deter traders trading in the Hong Kong F/X market from engaging in similar illicit acts; if they have assessed, of the findings and, if the findings are in the negative, whether and when they will review the relevant regulations; and

(3) have assessed whether the investigations by overseas regulators have resulted in changes in the Hong Kong F/X market (for example, shrunken F/X trading activities, investors' diminished willingness to take risk, and so on); if so and the assessment outcome is in the affirmative, of the impacts of such changes on the Hong Kong F/X market and the follow-up actions taken by the HKMA and the SFC; if not, the reasons for that?

SECRETARY FOR FINANCIAL SERVICES AND THE TREASURY: President, the Administration has consulted the HKMA and the SFC in formulating the reply below, insofar as it concerns their enforcement and regulatory functions.

(1) The HKMA is investigating a number of authorized institutions in Hong Kong on F/X benchmark rigging matters, and has been in close contact with overseas bank supervisors in the process. The HKMA investigations are in progress.

9070 LEGISLATIVE COUNCIL ─ 26 March 2014

(2) The HKMA requires authorized institutions to maintain adequate systems of control to ensure that their staff engaged in treasury market activities, including the F/X market, observe relevant high standards of ethical behaviour as set out in the Code of Conduct and Practice issued by the Treasury Markets Association (the TMA Code).

The TMA Code sets out the standards of ethical behaviour and best practices applicable to treasury markets, including the F/X market, in Hong Kong. Generally, the TMA Code provides that TMA member institutions should conduct their business in an honest and fair manner, and safeguard the integrity of the market and that fraudulent, deceptive and manipulative practices should be strictly forbidden. Moreover, the TMA Code provides that such institutions should take all necessary measures to prevent fraud and other criminal activities and take reasonable steps to ensure the execution of client orders are on the best available terms. The TMA Code further provides that market participants should exercise utmost care in observing confidentiality and preserving client anonymity, and should not divulge any information relating to the deals transacted or being transacted.

(3) As we understand from the regulators, market feedback has not suggested any unusual change in the level of market activities in the Hong Kong F/X market as a result of the F/X benchmark investigations.

Protection of Public Order and Safety

14. DR LAM TAI-FAI (in Chinese): President, as an international metropolis, Hong Kong is often bustling with various mega sports events as well as cultural, tourism and commercial activities, while members of the public enjoy the rights of procession, assembly and demonstration. There are views that the Government should stay more vigilant on matters relating to public safety, and strengthen its counter-terrorism capability and its ability to handle major security incidents that might be caused by large-scale assemblies or processions (including the "Occupy Central" movement), with a view to safeguarding the LEGISLATIVE COUNCIL ─ 26 March 2014 9071 personal safety of members of the public and their properties, as well as maintaining social order. In this connection, will the Government inform this Council:

(1) of the criteria adopted by the authorities for determining the risk level of terrorist attacks for Hong Kong; the current risk level; whether they will re-assess the risk level of terrorist attacks for Hong Kong in light of the recent international situation; if they will, of the details; if not, the reasons for that;

(2) whether the authorities have regularly assessed if they have sufficient capability, manpower, experience and equipment to cope with potential terrorist attacks (such as bomb explosions or violent incidents at the Central Government Offices, the Hong Kong International Airport, the MTR or other public transport modes); if they have, of the details;

(3) of the number of drills on handling terrorist attacks and major public safety incidents conducted by the authorities in the past five years, the government departments involved, the number of participants and the effectiveness of such drills;

(4) whether there were intelligence exchanges between the police and the Mainland public security authorities in the past five years, so as to safeguard Hong Kong from terrorist attacks; if not, of the reasons for that;

(5) whether the police exchanged views with the People's Liberation Army Hong Kong Garrison in the past five years, on safeguarding Hong Kong's security and national security; if not, of the reasons for that;

(6) as it was reported that a Hong Kong deputy to the National People's Congress (NPC) had pointed out during a group discussion session at the 12th NPC that, in light of the terrorist attack that occurred recently in Kunming, it was necessary for Hong Kong to expeditiously enact legislation to implement Article 23 of the Basic Law (BL23) for the purpose of maintaining the sovereignty and 9072 LEGISLATIVE COUNCIL ─ 26 March 2014

public safety, of the latest stance of the authorities on this issue, and whether they will conduct public consultation in this regard; if they will, when they will do so; if not, of the reasons for that;

(7) of the respective numbers of public assemblies, demonstrations and public processions held in each of the past five years, the number of participants in such activities, the number of relevant complaints received, the number of cases of assaults on police officers related to these activities and the respective numbers of people arrested, convicted and injured (including police officers, participants of processions and passers-by);

(8) of the circumstances which the police, in the course of handling the activities mentioned in part (7), will take into account when deciding the police manpower required to be deployed and determining whether it is necessary to deploy off-duty police officers and police officers from other police districts; the respective numbers of police officers that can be deployed from various police districts;

(9) whether it has assessed the possibility of the trunk roads in Central being blocked for a prolonged period as a result of one of the actions of the "Occupy Central" movement; if the assessment outcome is that such a situation is very likely, of the expected scale of the action concerned (including the number of people participating in the demonstrations), the police manpower required to be deployed during the course of the action, and whether the police have already commenced the formulation of the corresponding security arrangements; whether the police have assessed if they have sufficient capability, manpower, experience and equipment to cope with the emergencies that may occur during the course of the action; if the assessment outcome is in the negative, of the reasons for that; and

(10) whether it has assessed the impact of the trunk roads in Central being blocked for a prolonged period on the economy, traffic, tourism, social order and public safety; if it has, of the details; if not, the reasons for that?

LEGISLATIVE COUNCIL ─ 26 March 2014 9073

SECRETARY FOR SECURITY (in Chinese): President, the HKSAR Government has always attached great importance to public safety, public order and safeguarding the life and property of citizens. Regarding the items raised in the question, the Administration's replies are as follows:

(1) The Hong Kong Police Force (the police) has put in place a well-established mechanism of assessing the terrorist threat against Hong Kong. The assessment takes into account a wide range of local, regional and international factors, including the currently available intelligence, recent incidents and the trend of international terrorist activities. The police has always maintained close liaison with the law-enforcement and intelligence agencies of other places, and have gathered intelligence through various channels for timely risk assessment. At present, the threat level of terrorist attacks against Hong Kong remains "moderate".

(2) Strengthening counter-terrorism efforts is one of the Operational Priorities 2014 of the Commissioner of Police. The police will continue to adopt preventive measures, including monitoring terrorist trends to ensure the police readiness, and providing security advice for and deploying counter-terrorist patrols at critical infrastructure and sensitive premises. Besides, the police will ensure preparedness by conducting regular training and multi-agency exercises to practise and enhance counter-terrorist contingency plans. To combat terrorism, the police will deploy counter-terrorist resources strategically to ensure a timely, effective and co-ordinated response.

(3) To enhance relevant agencies' capabilities in combating terrorism and coping with major incidents, relevant police formations conduct training, exchange and multi-agency exercises regularly. In the past five years, the police conducted a total of 142 counter-terrorism and major incident exercises, with participants from relevant government departments and stakeholders.

(4) and (5)

The police have maintained close communication and liaison with law-enforcement and intelligence agencies of other places (including 9074 LEGISLATIVE COUNCIL ─ 26 March 2014

Mainland agencies), and have gathered intelligence through various channels for timely risk assessment of the terrorist threat against Hong Kong. The police have also maintained communication with the Hong Kong Garrison of the Chinese's Liberation Army. They have been discharging their duties in accordance with the law respectively. The Hong Kong Police Force is a professional law-enforcement agency and will take decisive actions in accordance with the law to resume public order and safety in response to any acts which violate the laws, or jeopardize peace and public order. The details of the liaison between the police and the abovementioned agencies belong to sensitive information, and therefore should not be disclosed.

(6) The HKSAR is constitutionally obliged under BL23 to enact laws for national security. However, as the current priorities of the HKSAR Government are social and livelihood issues, we do not have any plans to enact laws in respect of BL23. In case any legislation in relation to BL23 is to be taken forward in the future, the HKSAR Government will fully consult the community for a broad-based consensus on the legislative proposals. Any legislative proposals to be drawn up have to be consistent with Basic Law provisions related to the protection of various rights and freedom, and relevant international conventions.

(7) The number of public order events organized in Hong Kong, the number of people prosecuted and convicted for assaulting police officers during public order events, and the number of reportable complaints in connection with public order events in the past five years (from 2009 to 2013) are listed below:

Number of People Number of Number of Prosecuted (Convicted) Reportable Year Public Order for Assaulting Police Complaints in Events Officers during Public connection with Order Events*# Public Order Events 2009 4 222 2 (0) 14 2010 5 656 4 (2) 13 2011 6 878 3 (3) 30 LEGISLATIVE COUNCIL ─ 26 March 2014 9075

Number of People Number of Number of Prosecuted (Convicted) Reportable Year Public Order for Assaulting Police Complaints in Events Officers during Public connection with Order Events*# Public Order Events 2012 7 529 2 (2) 30 2013 6 166 2 (2) 21

Notes:

Figures as at 7 March 2014.

* The figures denote the number of people prosecuted and convicted for assaulting police officers in the respective year when the public order event took place. The year of prosecution and conviction might not be the same as that in which the public order event took place.

# There is no breakdown of the number of people injured or arrested for involvement in offences during public order events.

(8) The police will conduct comprehensive risk assessments and examinations, taking into account the purpose, nature and number of participants of individual public order events as well as the strategies and experiences in handling similar events in the past, before deciding on the necessary manpower deployment and appropriate crowd management measures to ensure that such public order events can be conducted in a safe and orderly manner. The number of police officers available for deployment from various police districts belongs to operational information, and therefore could not be disclosed.

(9) and (10)

The Administration is very concerned about the "Occupy Central" initiated by some members of the community. We understand that there are concerns from quite a number of organizations and individuals over the impact of "Occupy Central" on the community, including disruption of social order, damage to the local economy and the business environment, and so on. We have to reiterate that when expressing their aspirations, participants of public meetings, demonstrations or processions should abide by the laws of Hong 9076 LEGISLATIVE COUNCIL ─ 26 March 2014

Kong and conduct such events in a peaceful and orderly manner. They should not engage in any behaviour to the detriment of public order or any act of violence. Any occupation of trunk roads in Central, collective paralysis of traffic, or blocking-up of public thoroughfares, and so on, will cause grave impact on public safety and public order, and even to the extent of jeopardizing provision of emergency services to the public, thereby threatening lives and property of the public.

The Hong Kong Police Force is a professional law-enforcement agency with extensive experiences and capabilities in handling large-scale public order events. Similar to their approach in handling other large-scale public order events, the police will conduct assessments on the so-called "Occupy Central" for formulating contingency plans and overall strategy. They will also flexibly deploy manpower in the light of the prevailing circumstances to ensure public safety, maintain public order and minimize the impact of the event on the public.

As at present, the police are keeping a close watch of the development. In organizing a public order event with the number of participants exceeding the limit prescribed in the law, a person should approach the police as early as possible for discussion of specific arrangements so that corresponding measures can be formulated and adopted, whereby facilitating the concerned activities to be conducted in a peaceful manner, minimizing the impact on members of the public and road users, and ensuring public order and public safety.

Employment Services for Autistic Persons

15. MR CHEUNG KWOK-CHE (in Chinese): President, according to the information of the Central Registry for Rehabilitation of the Labour and Welfare Bureau, the number of autistic persons has been increasing in the past 10-odd years. Some members of the public have relayed to me that the employment support received by autistic persons upon graduation is grossly inadequate, and the Selective Placement Division (SPD) of the Labour Department (LD) has LEGISLATIVE COUNCIL ─ 26 March 2014 9077 failed to provide them with suitable employment services. Besides, quite a number of employers lack the knowledge about autistic employees and how to manage these employees. In this connection, will the Government inform this Council:

(1) of the number of autistic adults in Hong Kong in each of the past three years, together with a breakdown by age group and education level;

(2) of the respective numbers of autistic persons who (i) took the courses provided by the Skills Centres of the Vocational Training Council (VTC), (ii) received the vocational rehabilitation services of the Social Welfare Department (SWD), and (iii) received employment support services of the LD, in each of the past three years;

(3) of the respective numbers of (i) job vacancies provided, (ii) autistic persons seeking employment, (iii) autistic persons who succeeded in securing employment, (iv) employers who recruited persons with disabilities, and (v) days on average for which autistic persons were employed, through the Work Orientation and Placement Scheme (WOPS) of the LD in each of the past three years;

(4) of the respective vocational training and related services currently provided by the relevant government departments and statutory organizations to (i) autistic persons and (ii) those without other disabilities; whether it will review the effectiveness of these services; and

(5) whether it will introduce new support services to assist autistic adults in securing employment; whether it will consider, by drawing reference from the relevant practices of the United Kingdom, formulating and issuing guidelines requesting front-line and management staff in public and private organizations to enhance their knowledge about autism and the support needed by autistic employees; if it will, of the details and implementation timetable; if not, the reasons for that?

9078 LEGISLATIVE COUNCIL ─ 26 March 2014

SECRETARY FOR LABOUR AND WELFARE (in Chinese): President, my reply to the questions raised by Mr CHEUNG Kwok-che is as follows:

(1) Based on the findings of the Survey on Persons with Disabilities and Chronic Diseases conducted by the Census and Statistics Department (C&SD) during 2006 and 2007, the estimated number of autistic persons was 3 800. Among them, 900 and 300 belonged to the age groups of 15 to 29 and 30 or above respectively. The C&SD has not kept a breakdown of the number of autistic persons by the age of 18, nor the education level attained as broken down by age. The C&SD is now conducting a new round of survey. The findings will be announced in the last quarter of 2014.

(2) and (3)

In the past three years, the SPD of the LD received 7 436, 9 369 and 9 616 job vacancies respectively. In the same period, 32, 65 and 86 autistic persons were registered for employment services in SPD; among them, there were 22, 67 and 84 placements respectively.

In the said period, there were respectively 300, 366 and 396 participating organizations which had employed job seekers with disabilities through the WOPS. Among the abovementioned placements, there were eight, 17 and 26 placements secured under WOPS.

The LD has not kept data on the employment period of autistic persons.

As for the VTC, there were respectively 51, 61 and 85 autistic persons enrolled to its three Shine Skills Centres in the past three academic years.

According to the data captured by the Central Referral System for Rehabilitation Services of the SWD, there were respectively 233, 258 and 285 autistic service users in Sheltered Workshops as at the end of the past three years. The SWD does not have comprehensive statistics on the number of autistics users in its other vocational rehabilitation services which may admit service users directly or by referral.

LEGISLATIVE COUNCIL ─ 26 March 2014 9079

(4) SPD of the LD provides personalized employment services to job seekers with disabilities (including those with autism) fit for open employment. Placement Officers of the LD provide job seekers with disabilities with employment counselling, conduct job matching and referrals, and provide follow-up service upon placement of the job seekers in employment.

As mentioned in parts (2) and (3) of the reply, the LD also implements WOPS which provides pre-employment training to persons with disabilities to enhance their employability, and encourages employers to provide job vacancies as well as coaching and support to job seekers with disabilities through the provision of an allowance, with a view to promoting employment of persons with disabilities. Since 1 June 2013, the allowance payable to employers under WOPS has been further increased. An eligible employer who employs persons with disabilities having employment difficulties is entitled to an allowance equivalent to the amount of actual salary paid to an employee with disabilities less $500 per month during the first two months of employment, subject to a ceiling of $5,500. After the first two months, the employer is entitled to an allowance equivalent to two thirds of the actual salary paid to the employee concerned, subject to a ceiling of $4,000 per month, and for a maximum payment period of six months.

The SWD also provides persons with disabilities (including autistic persons) with a range of day training and vocational rehabilitation services. These services include Integrated Vocational Training Centres, Sheltered Workshops, Supported Employment, Integrated Vocational Rehabilitation Services Centres, On the Job Training Programme for Persons with Disabilities and Sunnyway-On the Job Training Programme for Young Persons with Disabilities, and Day Activity Centres.

Furthermore, the Government, through subventing the Shine Skills Centres of the VTC, provides a range of market-driven vocational training courses and services to persons with disabilities (including those with autism) to enhance their employment prospects and prepare them for open employment. In addition to the provision of vocational training services, the Shine Skills Centres also provide trainees with counselling, independent living skills training and 9080 LEGISLATIVE COUNCIL ─ 26 March 2014

occupational therapy services, with a view to enhancing the trainees' behaviours. The Shine Skills Centres also assist trainees who have completed vocational training in job searching.

The Government will continue to monitor the service demand and outcome, and enhance relevant services and measures when appropriate, with a view to meeting the needs of service users.

(5) In 2014-2015, the LD will, through newsletters, newspaper supplements and videos, introduce to the public the successful cases of employment of persons with disabilities (including autistic persons) to enhance employers' understanding of the characteristics and working capabilities of autistic persons so as to enhance their employment opportunities. To enhance the understanding of SPD placement officers of the special needs of autistic persons so as to provide appropriate employment services to them, the LD will invite professionals with the relevant expertise to conduct workshops and briefings, and enhance exchanges with relevant parents' groups and non-governmental organizations.

In addition, the SWD is considering the implementation of a pilot programme to strengthen the support for autistic persons, which will include enhancing the social and employment adaptation skills of high-functioning autistic persons, with a view to facilitating their employment and integration into society. The programme is expected to be rolled out by end 2014 or early 2015.

Business Environment for SMEs and Promotion of Starting Businesses

16. DR ELIZABETH QUAT (in Chinese): President, some operators of small and medium enterprises (SMEs) have relayed to me that the business environment in Hong Kong is deteriorating but Government's support for SMEs is insufficient, resulting in quite a number of start-up SMEs being unable to carry on their businesses for more than five years. These people have also pointed out that Government's policies and measures for encouraging the starting of businesses have no merit worth mentioning. In this connection, will the Government inform this Council:

LEGISLATIVE COUNCIL ─ 26 March 2014 9081

(1) whether it has compiled statistics on the respective numbers of start-up companies, those established for five to 10 years and those established for over 10 years, in each of the past 10 years (with a breakdown by industry), as well as the respective percentages of SMEs and other enterprises in such numbers; if it has, of the detailed figures; if not, the reasons for that;

(2) whether it has compiled statistics on the reasons for closure of local companies in the past 10 years; if it has, of the major reasons for closure (with a breakdown by industry) and for each reason, the percentage of companies the closure of which was related to it; if not, the reasons for that;

(3) whether it has any policy and measure to improve the business environment for SMEs and help such companies sustain their businesses; if it does, set out in detail in a table the policies formulated and measures implemented for SMEs of different industries; if not, of the reasons for that; and

(4) whether it has examined the implementation of measures for encouraging the starting of businesses, targeting at people of different age groups (in particular those who have reached retirement age but are rich in experience and still able to work) and at different industries, so as to promote economic development; if it has, of a breakdown of the relevant measures by age group and industry; if not, the reasons for that?

SECRETARY FOR COMMERCE AND ECONOMIC DEVELOPMENT (in Chinese): President, my reply to the various parts of the question is as follows:

(1) According to the information provided by the Companies Registry, the numbers of local companies incorporated each year in the past 10 years are set out at Table 1. The relevant departments do not keep track of the number of years of incorporation of individual companies, and hence there are no breakdown figures on the industry and scale of companies by their years of incorporation.

9082 LEGISLATIVE COUNCIL ─ 26 March 2014

(2) According to the information provided by the Companies Registry, the numbers of companies dissolved (dissolution by de-registration(1), striking-off(2) or liquidation) each year in the past 10 years are set out at Table 2.

As there is no clear and uniform definition on "closure" of companies, it may not be appropriate to equate the afore-mentioned figures with the numbers of companies "closed". As such, the Companies Registry does not have the relevant statistics regarding the reasons for "closure" of companies, and so on.

(3) The Government attaches great importance to the development of SMEs. We review the various support measures from time to time in order to provide timely and adequate support to SMEs. In the light of the prevailing uncertain external economic environment, the Financial Secretary announced in the 2014-2015 Budget various measures to strengthen our support to SMEs in areas of financing, market expansion, brand building and productivity enhancement.

On financing, we have further extended the application of the special concessionary measures under the SME Financing Guarantee Scheme for one more year up to the end of February 2015. With the Government's continued provision of a total loan guarantee commitment of $100 billion, the Hong Kong Mortgage Corporation Limited (HKMC) will continue to provide 80% loan guarantees at concessionary fee rates so as to assist enterprises, including SMEs, in obtaining financing in the commercial lending market.

On market expansion, we will continue to implement the $1 billion Dedicated Fund on Branding, Upgrading and Domestic Sales to assist enterprises including SMEs in enhancing their competitiveness and facilitating their business development in the Mainland. In addition, the Hong Kong Trade Development Council will further expand its Design Gallery network in the Mainland to provide

(1) The applicant is not required to indicate the reason for de-registration in the application form.

(2) The Registrar of Companies may strike the name of a company off the Companies Register according to the Companies Ordinance where the Registrar has reasonable cause to believe that the company is not in operation or carrying on business. LEGISLATIVE COUNCIL ─ 26 March 2014 9083

platforms for Hong Kong enterprises, particularly SMEs, to showcase their products and build up greater awareness of Hong Kong brands in the Mainland. The Hong Kong Export Credit Insurance Corporation will continue to implement the "Small Business Policy" scheme for Hong Kong enterprises with an annual business turnover of less than $50 million, so as to provide exporters with more flexibility in taking out insurance cover.

The Government has also earmarked $50 million to support retailers on a matching fund basis for the use of IT and other technology solutions to increase productivity. The target of funding support is SMEs of the retail industry. On the other hand, the Office of the Government Chief Information Officer has earmarked $3 million to launch a Cloud Promotion Campaign in 2014-2015, which would comprise training and promotional activities, to encourage SMEs to adopt cloud computing services in enhancing their productivity.

For the creative industries, Create Hong Kong will continue to provide the trade and relevant bodies with funding support for organizing activities to support the development and promotion of creative clusters such as the Comix Home Base, PMQ, and so on, through the CreateSmart Initiative.

In addition, the Trade and Industry Department (TID) will continue to assist SMEs in obtaining financing, exploring markets and enhancing the overall competitiveness through its three existing SME funding schemes, namely the SME Loan Guarantee Scheme, the SME Export Marketing Fund and the SME Development Fund.

We will continue to closely monitor the changes in the economic situation and the needs of the trade and review our support measures for SMEs from time to time in order to provide them with timely and adequate support.

(4) On support for starting business, the HKMC will continue to implement the Microfinance Scheme launched in late June 2012 on a pilot basis for three years to assist persons who may wish to start their own business but cannot do so due to a lack of financial means 9084 LEGISLATIVE COUNCIL ─ 26 March 2014

or difficulties in obtaining loans from traditional finance sources. The maximum loan amounts of each "Micro Business Start-up Loan" and "Self-employment Loan" are $300,000 and $200,000 respectively. As at the end of February 2014, the HKMC has received over 220 applications and approved 116 applications, involving a total loan amount of about $30 million and benefiting people of different age groups.

The Support and Consultation Centre for SMEs (SUCCESS) of the TID provides free, reliable and practical information and consultation services for SMEs (including business start-ups). The Business Start-up Information Service of SUCCESS provides comprehensive information on starting a business in Hong Kong, such as information on required government licences and permits, guidelines on drafting business plan and budget analysis. SUCCESS also organizes seminars, workshops and other events to help SMEs (including business start-ups) broaden their business knowledge and enhance their entrepreneurial skills. In addition, SUCCESS also arranges SMEs (including business start-ups) to meet with experts from various sectors for professional consultation through its "Meet-the-Advisors" Business Advisory Service, providing SMEs with practical advice on resolving business problems. SUCCESS also implements a SME Mentorship Programme to provide an opportunity for SME owners who are at their early stage of business to learn from and be guided by accomplished entrepreneurs through one-on-one counselling on business skills.

In addition, the Incubation Programmes implemented by the Hong Kong Science and Technology Parks Corporation assist technology start-ups in their vulnerable inception stages through provision of subsidized office space, financial aid package and a wide range of support services. In addition, the Design Incubation Programme of the Hong Kong Design Centre offers funding support and support services to design start-ups, with a view to helping them meet the challenges during the early and critical stage of development.

LEGISLATIVE COUNCIL ─ 26 March 2014 9085

Table 1

Numbers of local companies incorporated each year in the past 10 years

Year Number of Local Companies Incorporated 2013 174 031 2012 150 165 2011 148 329 2010 139 530 2009 109 424 2008 98 645 2007 100 761 2006 81 974 2005 73 359 2004 65 558

Source of information: Companies Registry

Table 2

Numbers of companies dissolved (dissolution by de-registration, striking-off or liquidation) each year in the past 10 years

Year Number of Companies Dissolved 2013 56 021 2012 62 190 2011 55 959 2010 48 257 2009 48 186 2008 43 142 2007 37 828 2006 39 449 2005 42 573 2004 44 108

Source of information: Companies Registry

9086 LEGISLATIVE COUNCIL ─ 26 March 2014

Associate Members of Central Policy Unit

17. DR KENNETH CHAN (in Chinese): President, it has been reported that the pool of Associate Members of the Central Policy Unit (CPU) was reorganized early this month, with its membership size being increased from 23 in last year to 31. Besides, two former Associate Members were not reappointed. Regarding the appointment of Associate Members by the CPU, will the Government inform this Council:

(1) whether it has set a limit on the number of Associate Members; if so, of the details; if not, the process of and criteria for determining the number of Associate Members;

(2) of the tenure of Associate Members on each appointment and the restrictions on reappointments; the respective number of years for which each incumbent Associate Member has been appointed consecutively;

(3) of the criteria and procedures for determining the appointment and reappointment of a particular Associate Member; the information (including the names and reasons for resignation or not making reappointment) on those Associate Members who had resigned of their own accord, or had not been reappointed, since the establishment of the Government of the current term; and

(4) of the details of the honoraria or allowances for Associate Members at present; whether it will consider reviewing the mechanism for appointment of Associate Members and granting of allowances to them; if it will, of the details; if not, the reasons for that?

CHIEF SECRETARY FOR ADMINISTRATION (in Chinese): President, based on information provided by the CPU, my reply is as follows:

(1) The major function of the CPU is to provide advice on policy matters to the Chief Executive, the Chief Secretary for Administration and the Financial Secretary. For this purpose, the CPU has appointed members of the community from various sectors as Associate Members to participate in the consultation work of the LEGISLATIVE COUNCIL ─ 26 March 2014 9087

CPU as necessary. There is no limit set on the number of Associate Members.

(2) There are currently a total of 31 Associate Members of the CPU. They are appointed for a one-year tenure and may be reappointed for unlimited times upon completion of their tenure. Of the 31 incumbent Associate Members, 21 have just started to serve for the second year. For details, please refer to Annex 1.

(3) Subject to circumstances and operational needs, the CPU will appoint new Associate Members and decide whether the incumbents will be reappointed upon expiry of their tenure. Between February 2013 and February 2014, the CPU has appointed a total of 37 Associate Members. Of them, one resigned on personal reasons in 2013, and five others retired after completion of their tenure in February 2014. For details, please refer to Annex 2.

(4) A monthly honorarium of $2,000 is granted to each Associate Member. This amount has remained unchanged since its endorsement by the Finance Committee of the Legislative Council on 12 April 1989. The existing mechanisms for appointment of Associate Members and granting of allowances have been working effectively. The Administration will not consider reviewing the mechanisms at this stage.

Annex 1

Associate Members of the CPU (Appointed during February 2013 to February 2014)

Name Profession/Title 1. Mr CHAN Chi-yuen, Paul Founder, Walk in Hong Kong 1st year 2. Mr CHAN Kwong-ming, Chairman, Titan Works Limited 1st year Johnny 3. Dr CHAN Man-hung, Director, Public Policy Research 2nd year Thomas Institute and Head, China Business Centre, The Hong Kong Polytechnic University 9088 LEGISLATIVE COUNCIL ─ 26 March 2014

Name Profession/Title 4. Mr CHANG Ka-mun Managing Director, Fung Business 2nd year Intelligence Centre 5. Dr CHEUNG Kwok-wah Dean, School of Education and 2nd year Languages, The Open University of Hong Kong 6. Mr CHUA Hoi-wai Chief Executive, The Hong Kong 2nd year Council of Social Service 7. Mr FUNG Hau-chung, Executive Director and Head of 2nd year Andrew, JP Global Banking and Markets, Hang Seng Bank Ltd 8. Mr HUI Ching-yu, Senior Vice President, Mainland 1st year Christopher Development, Hong Kong Exchanges and Clearing Limited 9. Dr Hung Wai-man, Co-founder, Next Horizon Co. Ltd 2nd year Witman 10. Mr KWAN Ka-ming, Director of Research, Hong Kong 1st year Nicholas Trade Development Council 11. Mr LEE Luen-fai Director of Public Affairs, Sun Hung 2nd year Kai Properties Limited 12. Ms LEUNG Ka-man, Lecturer, Department of Physical 1st year Carman Education, Faculty of Social Sciences, Hong Kong Baptist University 13. Dr LI Pang-kwong, BBS, Associate Professor, Department of 2nd year JP Political Science and Director, Public Governance Programme, Lingnan University 14. Mr LI Wing-kuen, Philip Managing Director, China Chengxin 1st year (Asia Pacific) Credit Ratings Co Ltd 15. Mr LO Sui-sing, Thomas Chief Operating Officer, RoadShow 2nd year Holdings Ltd 16. Dr LUK Wai-ki, Elvis Senior Research Manager, New World 1st year Development Company Limited 17. Mr MA Kam-wah, Executive Director, Project Flame, 2nd year Timothy, JP City University of Hong Kong 18. Mr NG Wah-keung, Chief Executive Officer, Estate Agents 2nd year Augustine Authority 19. Mr NGAI Wah-sing, Founder and Chief Executive Officer, 2nd year Francis Social Ventures Hong Kong LEGISLATIVE COUNCIL ─ 26 March 2014 9089

Name Profession/Title 20. Mr POON Kai-tik Director, (Government & Community 2nd year Engagement), The Link Management Limited 21. Prof SO Wai-man, Dean, School of Business and 1st year Raymond, JP Professor of Finance, Hang Seng Management College 22. Mr TAM Wing-pong, Member, Central Committee and 2nd year SBS Executive Committee, New People's Party 23. Dr TIK Chi-yuen, SBS, Chief Executive, Evangelical Lutheran 2nd year JP Church Social Service ― Hong Kong 24. Mr TSE Kwok-leung Head of Policy and Economic 2nd year Research, Bank of China (Hong Kong) 25. Mr WONG Kwong-yiu Managing Director, Wheelock 2nd year Properties (HK) Limited 26. Mr WONG Pak-hong, Secretary General, Social Enterprise 1st year Vincent Summit 27. Mr WONG Yuen-fai, Retired Banker 2nd year SBS, JP 28. Mr YAU How-boa, Chief Executive, International Social 2nd year Stephen, SBS, MH, JP Service Hong Kong Branch 29. Prof YEP Kin-man, Ray Professor of Politics and Assistant 2nd year Head, Department of Public Policy, City University of Hong Kong 30. Ms YEUNG Kin-ha, Chief Executive, Hong Kong Young 1st year Yvonne Women's Christian Association 31. Prof Paul YIP Professor, Department of Social Work 2nd year and Social Administration, University of Hong Kong

Annex 2

Retired Associate Members of the CPU

Name Profession/Title Remarks 1. Dr CHEUNG Chor-yung Senior Teaching Fellow, Retired after Department of Public completion of the Policy, City University of tenure on 7/2/2014 Hong Kong 9090 LEGISLATIVE COUNCIL ─ 26 March 2014

Name Profession/Title Remarks 2. Dr CHOW Man-kong Policy Researcher Retired after completion of the tenure on 7/2/2014 3. Mr LAM Chiu-ying, SBS Adjunct Professor, Retired after Geography and Resource completion of the Management Department, tenure on 21/2/2014 The Chinese University of Hong Kong 4. Dr NG Hon, Victor Convocation Standing Retired after Committee Member, completion of the University of Hong Kong tenure on 7/2/2014 5. Mr TANG Wing-chun, Convenor, New Youth Retired after Cliff Forum completion of the tenure on 28/2/2014 6. Prof YEE Chun-chu, Special Adviser to the Resigned on personal Angelina President and Director of reasons on 20/8/2013 Leadership and Public before completion of Policy Executive the tenure Education Programs, The Hong Kong University of Science and Technology

Regulatory Regime for Mobile Television Services

18. MR CHARLES PETER MOK (in Chinese): President, the Hong Kong Mobile Television Network Limited (HKMTV) recently planned to change the transmission standard of its mobile television services from China Mobile Multimedia Broadcasting (CMMB) to Digital Terrestrial Multimedia Broadcasting (DTMB). It has been reported that the Office of the Communications Authority (OFCA) sent a letter to HKMTV on 11 March, pointing out that the consequence of the change would render HKMTV's mobile television service available for reception by an audience of more than 5 000 specified premises in Hong Kong, and the company, therefore, was required to have a domestic free television programme service licence (free TV licence) under the Broadcasting Ordinance (Cap. 562) (BO). In this connection, will the Government inform this Council:

LEGISLATIVE COUNCIL ─ 26 March 2014 9091

(1) whether a mobile television service provider is required to have a free TV licence if it provides mobile television service, received through mobile devices, to an audience of more than 5 000 specified premises; whether the existing legislation stipulates the upper limits on the number of viewers of mobile television services, as well as on the type and number of reception devices in the specified premises concerned; if so, of the details;

(2) whether a mobile television service provider is required to have a free TV licence when an audience of more than 5 000 specified premises receives mobile television service through mobile devices and transmits the programmes to large displays (including but not limited to television screens) for viewing; if so, of the details;

(3) whether the licensing requirements on mobile television services stipulate that the licensee must use CMMB to provide mobile television service; if so, of the details; whether it knows if HKMTV, during the period when it was owned by China Mobile Hong Kong Corporation Limited, provided mobile television service to an audience of more than 5 000 specified premises; if HKMTV did, whether the authorities have assessed if HKMTV had then violated the BO;

(4) whether it knows the justifications for OFCA stating that HKMTV must have a free TV licence before it may use DTMB to broadcast mobile television service; whether OFCA can set out clearly the transmission standards, other than CMMB, that HKMTV may use to provide mobile television service without a free TV licence; whether it has assessed if OFCA's remarks that HKMTV may not use DTMB to provide mobile television service have violated the authorities' technology-neutral principle; if it has, of the details; if not, the reasons for that;

(5) according to the Framework for Development of Broadcast-type Mobile Television Services in Hong Kong published by the Commerce and Economic Development Bureau in 2010, the authorities "adopt a market-led and technology-neutral approach by leaving the market to select the technical standards for broadcast-type mobile television services", and the Bureau also 9092 LEGISLATIVE COUNCIL ─ 26 March 2014

pointed out that "[r]egarding the regulation of mobile television programming, the content of mobile television, either local broadcast-type or streaming-type, should be subject to regulation by general laws but not the Broadcasting Ordinance. To enable self-regulation, the industry will be required to develop codes of practice on provision of mobile television services before service commencement. The codes should include, among others, the requirement of conditional access with a view to protecting public morals and children", whether the aforesaid stance of the authorities has been changed; if so, of the details and the reasons for that;

(6) whether it knows if the reason for OFCA sending the letter to HKMTV was that OFCA received a relevant complaint, or was taking regulatory actions under the BO, or was responding to the company's enquiries concerning transmission standards; whether OFCA has taken relevant legal actions after sending the letter; if OFCA has, of the details; and

(7) given that the authorities have indicated that they will conduct a review of the existing regulatory regime and amend the legislation in order to update and rationalize the Telecommunications Ordinance (Cap. 106) (TO) and the BO, of the specific timetable of the authorities for amending the relevant legislation?

SECRETARY FOR COMMERCE AND ECONOMIC DEVELOPMENT (in Chinese): President, in December 2008, the Government promulgated the "Framework for Development of Broadcast-type Mobile TV Services in Hong Kong" (the Policy Framework) after two rounds of public consultation conducted in 2007 and 2008 respectively. As mentioned in the relevant Legislative Council Brief, "mobile television (mobile TV) services" generally refers to "the provision of television programme services by wireless transmission of audio-visual content for reception by mobile phones or other portable devices." Paragraph 14 of the said Legislative Council Brief clearly states that "in relation to programming, the BO currently does not regulate television programme services for mobile reception (that is, reception on the move not related to any specified premises) in Hong Kong unless the services are not primarily targeting Hong Kong."

LEGISLATIVE COUNCIL ─ 26 March 2014 9093

In short, the Government's policy on "mobile TV services" has always been consistent with the legislation. Under the BO, domestic television programme services for reception by mobile devices not related to any specified premises are not required to obtain a licence. Such services include domestic "broadcast-type mobile TV services" transmitted via radio frequency spectrum for "reception on the move not related to any specified premises", and "streaming-type mobile TV services" provided over the platform of mobile network operators or the Internet.

Under the BO, any person who provides a domestic free television programme (free TV) service or a domestic pay television programme (pay TV) service without a licence commits an offence. As an independent regulator, the Communications Authority (CA) enforces relevant statutory requirements in accordance with the BO and its technical and factual judgment.

My reply to the various parts of the question is as follows:

(1) The BO has a clear definition of "free TV service". If any television programme service is intended or available for reception by an audience of more than 5 000 specified premises free of charge in Hong Kong and primarily targets Hong Kong, it will fall within the definition of a "free TV service" under the BO. In other words, under the laws and the Government's policy, a relevant licence under the BO would be required for any domestic mobile TV service which not only allows reception by mobile phones or other portable devices, but is also intended or available for reception by an audience of more than 5 000 specified premises free of charge in Hong Kong.

Under the TO, an operator of the network used to transmit mobile TV services via the assigned spectrum (that is, 678MHz ― 686MHz, "the Spectrum") is required to obtain a unified carrier licence. The unified carrier licence provides that the licensee can transmit mobile TV programmes via the Spectrum for mobile reception by the audience through portable devices. The licence does not prohibit signals of mobile TV services from covering indoor areas, nor impose any limitation on the size of the audience and number of portable devices receiving the services.

9094 LEGISLATIVE COUNCIL ─ 26 March 2014

(2) As to whether a domestic television programme service is related to the "specified premises" and hence requires a licence under the BO, it is a matter of the CA's technical and factual judgment. According to the CA, generally speaking, if a person living in the specified premises receives broadcast-type mobile TV services by a portable device, that person is not considered an audience of the specified premises under the BO.

(3) The unified carrier licence does not stipulate that the licensee must use CMMB standard to provide its service. The licensee is free to select a widely recognized technical standard for its broadcast-type mobile TV service. However, it is obligatory for the licensee to ensure that the service so provided compiles with all statutory and licensing requirements, including obtaining all necessary licences under the laws.

The former Telecommunications Authority issued a unified carrier licence in August 2010 to the successful bidder of the Spectrum (that is, China Mobile Hong Kong Corporation Limited (CMHKCL), which has now been renamed as HKMTV). As informed by the CA, according to its information, signals transmitted by CMMB standard adopted by the CMHKCL for broadcast-type mobile TV service are not intended or available for reception by the television sets in regular households. Therefore, the CA considered that there is no evidence to indicate the CMHKCL had provided any free TV services or pay TV services as defined under the BO. We have also noted that China Mobile Hong Kong Company Limited, the parent company of the CMHKCL before acquisition, expressly stated to the media recently that it had been aware of the licensing requirements on television services involving "specified premises" under the BO back at the time when it applied for providing the broadcast-type mobile TV service.

(4) The HKMTV plans to switch to DTMB, the same transmission standard of digital terrestrial television (DTT) currently adopted by the two free TV broadcasters, for the transmission of its broadcast-type mobile TV service. The CA considers that the consequence of adoption of this standard will most likely lead to a situation where the programme services will be available for reception by a number of audience of specified premises exceeding LEGISLATIVE COUNCIL ─ 26 March 2014 9095

the threshold necessary for obtaining a free TV or pay TV licence. In such case, the HKMTV is required to obtain the relevant licence under the BO prior to provision of its service.

Under the existing policy, there is no restriction on the technical standard to be used for the transmission of television services. Under the technology-neutral principle, service providers are free to adopt their own transmission means to deliver their television services, but they still have to make sure that their services comply with all the requirements under the laws and relevant licences. In this regard, the broadcast-type mobile TV service is no exception. While the market is free to choose any internationally-recognized technical standards, television service providers must observe all requirements under the law, including obtaining the necessary licences as legally required. We see no conflict between the technology-neutral principle and observing the law. If any service provider who, through adoption of a transmission standard, essentially provides both the broadcast-type mobile TV service and free TV or pay TV services at the same time, it must obtain a broadcasting licence under the BO in addition to a unified carrier licence under the TO. Meanwhile, we understand from the OFCA that there are currently different possible means or other transmission standards that allow a service provider to continue the provision of broadcast-type mobile TV service in accordance with the laws even without obtaining a free TV or pay TV licence under the BO.

(5) The policy on mobile TV services is forward-looking. As mentioned above, the technology-neutral principle is enshrined in the Policy Framework. There is no restriction on a mobile TV service provider in its choice of transmission standards for service delivery, subject to that the provider has to ensure that its service complies with all the requirements under the laws and relevant licences. Considering that the broadcast-type mobile TV service was then a nascent and relatively personalized service, the Government decided in 2008 not to amend to BO to cover the broadcast-type mobile TV service not involving "specified premises", thereby subjecting the content of such service to a light-handed approach. The aforesaid policy stance remains unchanged.

9096 LEGISLATIVE COUNCIL ─ 26 March 2014

(6) We understand that since the CMHKCL was acquired on 20 December last year, the OFCA has been in close contact with the Hong Kong Television Network Limited and the HKMTV. The OFCA was notified on 23 January 2014 that the HKMTV was prepared to change the transmission standard for the provision of its broadcast-type mobile TV service to DTMB standard, which is the same standard adopted by the two incumbent free TV licensees for the provision of DTT services. The OFCA considered that it would be most likely that the adoption of such a transmission standard would lead to a situation where the programme service signals of the HKMTV would be "available for reception by audience of specified premises", thus effectively making it a "free TV" or "pay TV" service (depending on whether the channels require payment of a subscription). In this connection, the OFCA held two meetings with the representatives from the HKMTV on 24 January 2014, and drew the HKMTV's attention at the meetings to the relevant requirements under the BO. Before that, the OFCA had not received any related complaint or enquiry from any other persons or organizations.

(7) We plan to brief the Legislative Council Panel on Information Technology and Broadcasting within this legislative year on the application for creation of two supernumerary directorate posts to conduct the legislative review, and will seek funding approval from the Finance Committee. Specific work relating to the legislative review will commence after the creation of the posts.

Education and Vocational Training for Inmates

19. MR LEUNG KWOK-HUNG (in Chinese): President, quite a number of inmates and their family members, discharged inmates and their employers, as well as social workers helping discharged inmates have complained to me that the Correctional Services Department (CSD) attaches no importance to the educational and vocational training needs of inmates, and has not provided inmates with sufficient tutorial classes, study rooms, vocational training programmes and related computer equipment in correctional institutions, as well as study time. They have also pointed out that while the Government has, through the media, continuously called for employers to offer rehabilitation LEGISLATIVE COUNCIL ─ 26 March 2014 9097 opportunities to discharged inmates, it has all along failed to proactively increase the employment opportunities for discharged inmates. For instance, even if discharged inmates had met the academic requirements and passed the related qualifying examinations of certain professions when they were in the correctional institutions, they will not be able to obtain practising qualifications owing to their criminal records. Moreover, their applications for government jobs and security personnel permits have also been rejected. In this connection, will the Government inform this Council:

(1) of the respective numbers of inmates who sat for the Hong Kong Certificate of Education Examination (HKCEE) (up to 2011), Hong Kong Advanced Level Examination (HKALE) (up to 2013) and Hong Kong Diploma of Secondary Education Examination (HKDSEE), and the respective numbers of those inmates who enrolled in the programmes offered by The Open University of Hong Kong (OUHK) and overseas universities, as well as the numbers of study rooms and teachers, in each correctional institution in each of the past five years (set out according to the table below);

Year

Number of persons who sat for/enrolled in Number Number Correctional Overseas of study of institution HKCEE HKALE HKDSEE OUHK universities rooms teachers Pik Uk Correctional Institution Lai King Correctional Institution Cape Collinson Correctional Institution Lai Sun Correctional Institution Hei Ling Chau Addiction Treatment Centre Hei Ling Chau Correctional Institution Lai Chi Kok Reception Centre Lai Chi Rehabilitation Centre Lo Wu Correctional Institution 9098 LEGISLATIVE COUNCIL ─ 26 March 2014

Number of persons who sat for/enrolled in Number Number Correctional Overseas of study of institution HKCEE HKALE HKDSEE OUHK universities rooms teachers Ma Hang Prison Nei Kwu Correctional Institution Pak Sha Wan Correctional Institution Pik Uk Prison Sha Tsui Correctional Institution Shek Pik Prison Siu Lam Psychiatric Centre Stanley Prison Tai Lam Centre for Women Tong Fuk Correctional Institution Tung Tau Correctional Institution Wai Lan Rehabilitation Centre Chi Lan Rehabilitation Centre Lai Hang Rehabilitation Centre Tai Lam Correctional Institution

(2) whether study rooms and tutorial classes for guiding inmates' studies are currently provided in each of those correctional institutions for young inmates aged between 14 and 20; if so, of the respective numbers of inmates who took half-day and whole-day tutorial classes last year in each of such institutions; if not, whether the Government will provide additional study rooms and tutorial classes to help the inmates prepare for examinations;

(3) whether study rooms and tutorial classes for guiding inmates' studies are currently provided in each of those correctional institutions for adult inmates aged 21 or above; if so, of the respective numbers of inmates who took half-day and whole-day tutorial classes last year LEGISLATIVE COUNCIL ─ 26 March 2014 9099

in each of such institutions; if not, whether the Government will provide additional study rooms and tutorial classes to help the inmates prepare for examinations; if it will, when this will be implemented;

(4) whether various correctional institutions currently provide training courses on Internet application to inmates and related computer equipment for use by them; if so, of the respective numbers of inmates who received such training and those who used such equipment in the past five years; whether it has assessed if the vocational training programmes and computer equipment currently provided in various correctional institutions have become outdated, and if the importance of the skills on Internet application to the discharged inmates' success in finding jobs has been underrated; if the assessment outcome is in the affirmative, when the Government will provide such additional training programmes and equipment;

(5) of the respective numbers of discharged inmates who were recruited by the Government with, and those without, the assistance of the Rehabilitation Unit (RU) of CSD, and the government departments which recruited them, in the past five years; if no discharged inmate was recruited, whether it has assessed if the civil service recruitment policy is consistent with the Government's appeal to employers for offering rehabilitation opportunities to discharged inmates;

(6) whether the existing civil service recruitment policy accords equal treatment to persons with and those without criminal records; if so, whether various government departments have plans to recruit discharged inmates through RU in the coming year, so as to take the lead;

(7) whether it will allow discharged inmates with criminal records to apply for security personnel permits, so as to facilitate them in taking up security work; if so, when this will be implemented; if not, of the reasons for that, and whether it has assessed if the Government is taking the lead in discriminating against discharged inmates;

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(8) whether the Government discussed with various professional bodies (for example, the Hong Kong Medical Association, the Hong Kong Institute of Certified Public Accountants, The Law Society of Hong Kong, the Hong Kong Bar Association and the Nursing Council of Hong Kong) in the past five years on making amendments to the legislation on the registration of various professions, so that persons with and those without criminal records will be accorded equal treatment; if it did, of the details; if not, whether it has assessed if the Government is condoning discrimination against discharged inmates undertaking professional work; and

(9) whether the Government will make amendments to the legislation on the registration of various professions in the coming year, so that persons with and those without criminal records will be accorded equal treatment; if so, when this will be taken forward; if not, of the reasons for that, and whether the Government has turned a blind eye to the employment needs of discharged inmates who studied diligently and are determined to live a new life?

SECRETARY FOR SECURITY (in Chinese): President, apart from the provision of a safe and humane environment for the detention of persons in custody, the CSD is committed to facilitating the re-integration of rehabilitated persons into the community through providing suitable rehabilitative services, including vocational training and education services provided in correctional institutions, and follow-up support and services to persons under statutory supervisions upon discharge.

On the vocational training side, CSD has been working with several training bodies such as the Employees Retraining Board, the Construction Industry Council and the Vocational Training Council, to provide eligible adult persons in custody with remaining sentences from three to 24 months with more than 30 full-time and part-time vocational courses for enrolment on a voluntary basis having regard to the local employment market situation. These courses cover the construction, engineering, business, food and beverage, retailing, tourism, beauty care and logistic sectors. Trainees are also arranged to sit for the relevant examinations to obtain recognized qualifications, thereby enhancing their employability and facilitating their smooth re-integration into society upon LEGISLATIVE COUNCIL ─ 26 March 2014 9101 discharge. Education and publicity campaigns of all kinds are also conducted by CSD to appeal for community support for offender rehabilitation.

The Administration's reply to the respective parts of the question is set out below:

(1) Figures of persons in custody who sat for the HKCEE, HKALE and HKDSEE, and figures of persons in custody who enrolled in the programmes offered by the OUHK and overseas universities in each of the past five years are at Annex 1. Figures of study rooms and teachers available in each correctional institution are at Annex 2.

(2) The CSD provides education to the majority of persons in custody under the age of 21(1) and offers half-day educational courses from junior secondary to senior secondary level and half-day vocational training courses, with qualified teachers and vocational trainers as instructors, to eligible young persons in custody at correctional institutions for young offenders.

In 2013, a total of 1 082 young persons in custody enrolled in the above courses. Tutorials for giving academic guidance are also provided by teachers in addition to regular classes when necessary. All correctional institutions for young offenders have classrooms for lessons and after-class study.

(3) According to the laws of Hong Kong, all convicted adult persons in custody are required to engage in work as arranged by CSD, unless they should be excused on medical grounds. The CSD encourages adult persons in custody to take various kinds of distance learning or self-learning courses after work for self-improvement. With the exception of Lai Chi Kok Reception Centre (LCKRC) which accommodates persons in custody who are on remand, classrooms are provided in all correctional institutions for adult persons in custody for their voluntary learning and study after work. In 2013, the adult persons in custody enrolled in academic programmes

(1) According to the laws of Hong Kong, CSD is to offer disciplinary/physical training and moral education to detainees of its detention centre. Young offenders receiving the second phase of training in rehabilitation centres may go out for work or schooling during daytime. 9102 LEGISLATIVE COUNCIL ─ 26 March 2014

offered by tertiary institutions such as the OUHK through CSD for over 900 times. The CSD also invited the tutors at OUHK to provide tutorials to persons in custody who had enrolled in OUHK's programmes.

(4) Persons in custody are not allowed to have access to the Internet due to security considerations. However, to strike a balance between rehabilitation and the maintenance of security in correctional institutions, the CSD has introduced basic Internet courses since early 2011 for adult persons in custody to learn the use of Internet in offline mode. Notwithstanding that most of the young persons in custody know how to go online on computers, institutions for young offenders include relevant introductory courses on Internet application in their computer curriculum. Simulating software is available for persons in custody to acquire basic Internet browser operation skills. Separately, computer rooms or multimedia learning centres are also available in all correctional institutions (except LCKRC). To facilitate persons in custody finding employment in office work upon discharge, computer equipment for classroom learning and self-study is installed with mainstream computer operating systems and office software. To strengthen multimedia teaching and computer application, the CSD has been making continuous efforts to enhance persons in custody's computer training by organizing various courses, such as word processing, graphic design, digital video editing, webpages and basic programming. Furthermore, the CSD plans to roll out new courses on multimedia production and programming in early 2015 for persons in custody to acquire computer application skills to prepare themselves for re-integration into the community.

(5) and (6)

Given that a vast majority of persons in custody are not subject to statutory supervision upon discharge, the CSD does not have specific details about their employment situation upon discharge. Also, the Administration does not have statistics on the number of discharged offenders appointed to the Civil Service.

LEGISLATIVE COUNCIL ─ 26 March 2014 9103

Appointments to the Civil Service are based on the principle of open and fair competition. In the course of recruitment, all candidates are assessed on the basis of relevant factors including their ability and performance, and having regard to the entry requirements and job requirements of the grade concerned. Generally speaking, an applicant will not be denied appointment merely because he has committed a criminal offence or is a discharged offender. Notwithstanding an applicant's criminal conviction record or his being a discharged offender, the recruiting department will fully take into account all relevant factors, including the ability and performance of the applicant, the nature and gravity of the offence which led to the conviction, its relevance to the duties of the post concerned, the job requirements of the post, and so on, with a view to ascertaining the applicant's overall suitability for appointment. Each case will be handled having regard to its individual circumstances.

(7) Security personnels are relied upon to discharge important functions of safeguarding lives and properties of others and to prevent or detect crime. The public generally expects security personnels to have good integrity and character.

The "Criteria for Issuing a Security Personnel Permit" specify that applicants for security personnel permits must be of good character having regard to their employment history, criminal records and other relevant factors. The Criteria also list out circumstances in which a permit will normally not be granted. Persons with criminal records, including those having served imprisonment sentences, could still be granted a permit if they meet the requirements and criteria for obtaining a permit. The current Criteria have struck a balance between providing reasonable rehabilitation opportunities for offenders and ensuring security personnel permit holders have good character.

(8) and (9)

Different professional bodies have varied requirements on the professionals under their regulations. It is considered that public education is the most effective and ultimate means to facilitate rehabilitated persons to re-integrate into the society. Therefore, the 9104 LEGISLATIVE COUNCIL ─ 26 March 2014

CSD will continue their ongoing publicity and education efforts on this front with a view to promoting smooth re-integration of rehabilitated persons and enhancing their employment opportunities.

Annex 1

Figures of persons in custody who sat for HKCEE, HKALE and HKDSEE and enrolled in the programmes offered by the OUHK and Overseas Universities

Persons in custody who enrolled Persons in custody who sat for in the programmes offered by Year Overseas HKCEE HKALE HKDSEE OUHK Universities 2009 87 2 116 0 Not 2010 86 2 136 0 applicable 2011 71 3 139 0 2012 Not 3 16 127 0 2013 applicable 0 21 181 3

Note:

The CSD does not have breakdown of the above figures by each correctional institution.

Annex 2

Figures of Classrooms(1) and Teachers Available in Correctional Institutions

Number of Number of Correctional Institutions Classrooms Teachers Institutions Pik Uk Correctional Institution 12 9 for young Lai King Correctional Institution 6 6 offenders Chi Lan Rehabilitation Centre Cape Collinson Correctional Institution 13 7 Lai Sun Correctional Institution 13 2 Lai Chi Rehabilitation Centre 8 3 Sha Tsui Correctional Institution 6 3 Nei Kwu Correctional Institution 5 1 Wai Lan Rehabilitation Centre(2) 2 0 Lai Hang Rehabilitation Centre(2) 2 0 LEGISLATIVE COUNCIL ─ 26 March 2014 9105

Number of Number of Correctional Institutions Classrooms Teachers Institutions Tong Fuk Correctional Institution 7 0 for adult Tung Tau Correctional Institution 4 0 offenders(3) Shek Pik Prison 2 1 Stanley Prison 14 1 Hei Ling Chau Addiction Treatment 5 0 Centre Hei Ling Chau Correctional Institution 3 0 Lo Wu Correctional Institution 10 0 Ma Hang Prison 2 0 Pak Sha Wan Correctional Institution 3 0 Pik Uk Prison 5 0 Siu Lam Psychiatric Centre 3 0 Tai Lam Centre for Women 4 0 Tai Lam Correctional Institution 5 0 Lai Chi Kok Reception Centre 0 0

Notes:

(1) The classrooms in correctional institutions (including computer rooms and/or multimedia rooms) can be used for education programmes, vocational training, tutorials and after-class study, and interest classes such as computer and language learning organized by non-governmental organizations and CSD's Rehabilitation Volunteer Group.

(2) Young offenders in Wai Lan Rehabilitation Centre and Lai Hang Rehabilitation Centre may go out for work or schooling during daytime.

(3) Adult persons in custody are required to engage in useful work in accordance with the laws unless they are excused from work on medical grounds. Despite there are no daytime education programmes for adult persons in custody in correctional institutions, the teachers and CSD officers under the RU could arrange and assist persons in custody to enrol in distance learning or self-learning courses after work.

Prices of Food Items Imported from the Mainland

20. MR FREDERICK FUNG (in Chinese): President, according to the latest information released by the National Bureau of Statistics of China, the consumer price index in February this year rose by 2% year-on-year, which hit a record low in 13 months. While food prices rose by 2.7%, the price of pork dropped 9106 LEGISLATIVE COUNCIL ─ 26 March 2014 drastically by 8.7%. In this connection, will the Government inform this Council:

(1) of the changes in the average import prices and retail prices in last year of various types of food items (including meats, vegetables and canned food, and so on) imported from the Mainland, and whether the changes in such prices were in tandem with the trend of the commodity prices on the Mainland; and

(2) for each month of last year in respect of fresh and chilled pork imported from the Mainland, of (i) the average wholesale, import and retail prices, as well as the changes in such prices, (ii) the differences between the retail prices, and (iii) whether the changes in retail prices were in tandem with those of wholesale prices; if they were not, of the reasons for that?

SECRETARY FOR FOOD AND HEALTH (in Chinese): President, it is the policy objective of the Government to maintain a stable supply of various foodstuffs and to ensure food safety. Food price has always been determined by the free market. The Government is responsible for enhancing market transparency and market efficiency to assist consumers in making appropriate choices.

My reply to the various parts of the question is as follows:

(1) Annex 1 sets out the average retail prices of local food items, import prices of related food items (if any) and the changes in such prices released by the Census and Statistics Department (C&SD) regularly.

Information on the trend of Mainland commodity prices is set out in Annex 2. The trend of import prices and retail prices of local food items is affected by various factors, including the purchase cost, other operational expenses such as transportation cost, wages of workers and rental, as well as the affordability of the public. As such, we cannot make a direct comparison between the trend of Mainland commodity prices and the changes in import prices and retail prices of similar local food items.

LEGISLATIVE COUNCIL ─ 26 March 2014 9107

(2) The wholesale prices of live pigs imported from the Mainland (that is, the prices of live pigs paid by live pig buyers to live pig import agents) and the retail prices of fresh pork (lean pork) between January and December 2013 are set out in the table in Annex 3. The wholesale price of live pigs is not equivalent to the wholesale price of fresh lean pork because the weight of a live pig includes not only the weight of pork, but also that of the head, bones, skin and offal. The auction price of live pigs is determined by competitive bidding. As a whole, the average wholesale price of live pigs between January and December 2013 fell by about 10%, while the average retail price of fresh lean pork over the same period dropped by about 7%.

As regards chilled pork, the Government relies mainly on information shown in the trade declarations about the quantity and value of chilled pork imported as the basis for deducing the import price. This is not equivalent to the wholesale price. The import and retail prices of chilled pork from January to December 2013 are set out in Annex 4. The quantity of chilled pork imported last year was rather volatile, averaging about 535 000 kg per month. The average import price tended to be higher when the import quantity was low. On the other hand, the price fell if and when the import quantity went up. The changes over time were also reflected in the import price of chilled pork from the Mainland. The average retail price of chilled lean pork over the same period ranged from around $33 to $34 per catty, representing an increase of about 2% to 4% for most of the time as compared with that of January 2013. It was about 4% higher in December 2013 as compared with that of January 2013.

Annex 5 shows the difference in the retail prices of fresh and chilled pork. It could be seen that the difference in prices remained relatively stable, with the price of a catty of chilled lean pork being generally about $3 to $8 lower than that of fresh lean pork.

We have previously sought advice from the trade (including live pig import agents, buyers and pork retailers) about the components underpinning the price of pork. According to them, in addition to the purchase cost, other operational expenses such as transportation 9108 LEGISLATIVE COUNCIL ─ 26 March 2014

cost, wages of workers and rental are relevant factors for determining the retail price of pork. When the wholesale price of live pigs or the import price of chilled pork rises, retailers may not necessarily be in the position to pass on the increase fully to the consumers since they would have to take into account other factors such as affordability. Likewise, when the wholesale price of live pigs or the import price of chilled pork goes down, retailers would have to consider other factors including the operational expenses, and therefore may not be in the position to reduce the retail price instantly. The same commercial considerations are applicable in other trades.

Annex 1

Average import prices and retail prices of individual food items and price changes in 2013

White rice As As As Average Average Average compared compared compared import price of retail price retail price with with with Month white rice* of long of short January January January (Mainland) grain# grain# 2013 2013 2013 ($/catty) ($/catty) ($/catty) (%) (%) (%) 1 4.5 - 6.5 - 7.2 - 2 4.1 -8.9 6.5 0.0 7.2 0.0 3 4.2 -6.7 6.6 1.5 7.3 1.4 4 4.1 -8.9 6.8 4.6 7.4 2.8 5 4.3 -4.4 6.6 1.5 7.5 4.2 6 4.4 -2.2 6.7 3.1 7.5 4.2 7 4.2 -6.7 6.5 0.0 7.5 4.2 8 4.3 -4.4 6.5 0.0 7.3 1.4 9 4.3 -4.4 6.5 0.0 7.3 1.4 10 4.3 -4.4 6.4 -1.5 7.3 1.4 11 4.5 0.0 6.5 0.0 7.4 2.8 12 4.5 0.0 6.6 1.5 7.4 2.8

LEGISLATIVE COUNCIL ─ 26 March 2014 9109

Beef Average As Average As Average As import price of compared retail compared retail compared chilled and with price of with price of with Month frozen beef* January beef, best January beef, belly January (Mainland) 2013 quality# 2013 flesh# 2013 ($/catty) (%) ($/catty) (%) ($/catty) (%) 1 25.4 - 93.5 - 77.8 - 2 34.7 36.6 94.2 0.7 78.0 0.3 3 33.3 31.1 93.9 0.4 78.1 0.4 4 30.2 18.9 94.0 0.5 78.6 1.0 5 24.3 -4.3 94.1 0.6 78.7 1.2 6 24.9 -2.0 94.1 0.6 79.0 1.5 7 36.2 42.5 94.2 0.7 79.7 2.4 8 38.7 52.4 94.2 0.7 79.9 2.7 9 - - 94.2 0.7 79.8 2.6 10 38.3 50.8 94.2 0.7 79.8 2.6 11 32.4 27.6 94.7 1.3 78.2 0.5 12 61.9 143.7 94.8 1.4 78.6 1.0

Live chicken Average import price As compared Average retail price As compared of live chicken(1)* with January of live chicken, top with January Month (Mainland) 2013 grade# 2013 ($/catty) (%) ($/catty) (%) 1 8.9 - 59.1 - 2 10.8 21.3 72.4 22.5 3 9.4 5.6 58.5 -1.0 4 7.9 -11.2 53.9 -8.8 5 7.8 -12.4 51.0 -13.7 6 8.6 -3.4 54.7 -7.4 7 7.9 -11.2 54.1 -8.5 8 7.5 -15.7 54.1 -8.5 9 9.5 6.7 60.4 2.2 10 9.4 5.6 57.7 -2.4 11 8.9 0.0 54.6 -7.6 12 9.0 1.1 54.2 -8.3

Note:

(1) Live chicken more than 185g in weight

9110 LEGISLATIVE COUNCIL ─ 26 March 2014

Chilled chicken Average import As compared with Average As compared with Month price* (Mainland) January 2013 retail price# January 2013 ($/catty) (%) ($/catty) (%) 1 7.9 - 24.8 - 2 8.3 5.1 25.6 3.2 3 8.2 3.8 24.8 0.0 4 11.1 40.5 24.2 -2.4 5 10.1 27.8 23.8 -4.0 6 9.8 24.1 24.3 -2.0 7 9.9 25.3 24.4 -1.6 8 10.0 26.6 23.9 -3.6 9 10.0 26.6 24.6 -0.8 10 10.0 26.6 24.7 -0.4 11 10.1 27.8 24.3 -2.0 12 10.2 29.1 24.3 -2.0

Golden thread** Average import As compared with Average As compared with Month price (Mainland) January 2013 retail price# January 2013 ($/catty) (%) ($/catty) (%) 1 - - 60.2 - 2 - - 63.4 5.3 3 - - 52.1 -13.5 4 - - 49.0 -18.6 5 - - 49.3 -18.1 6 - - 55.4 -8.0 7 - - 56.3 -6.5 8 - - 57.2 -5.0 9 - - 53.9 -10.5 10 - - 55.3 -8.1 11 - - 57.1 -5.1 12 - - 56.3 -6.5

Big eye** Average import As compared with Average As compared with Month price (Mainland) January 2013 retail price# January 2013 ($/catty) (%) ($/catty) (%) 1 - - 57.5 - 2 - - 59.9 4.2 LEGISLATIVE COUNCIL ─ 26 March 2014 9111

Average import As compared with Average As compared with Month price (Mainland) January 2013 retail price# January 2013 ($/catty) (%) ($/catty) (%) 3 - - 54.9 -4.5 4 - - 55.3 -3.8 5 - - 57.1 -0.7 6 - - 65.2 13.4 7 - - 65.6 14.1 8 - - 66.4 15.5 9 - - 62.8 9.2 10 - - 62.7 9.0 11 - - 61.8 7.5 12 - - 60.0 4.3

Garoupa Average import As compared with Average As compared with Month price* (Mainland) January 2013 retail price# January 2013 ($/catty) (%) ($/catty) (%) 1 - - 87.8 - 2 - - 94.1 7.2 3 - - 88.6 0.9 4 - - 84.8 -3.4 5 94.4 - 86.8 -1.1 6 - - 69.5 -20.8 7 96.8 - 70.5 -19.7 8 100.7 - 70.5 -19.7 9 99.8 - 70.5 -19.7 10 98.0 - 70.0 -20.3 11 96.8 - 75.9 -13.6 12 97.3 - 72.3 -17.7

Grass carp Average import As compared with Average As compared with Month price* (Mainland) January 2013 retail price# January 2013 ($/catty) (%) ($/catty) (%) 1 11.8 - 27.7 - 2 11.0 -6.8 28.2 1.8 3 10.9 -7.6 28.2 1.8 9112 LEGISLATIVE COUNCIL ─ 26 March 2014

Average import As compared with Average As compared with Month price* (Mainland) January 2013 retail price# January 2013 ($/catty) (%) ($/catty) (%) 4 10.9 -7.6 28.1 1.4 5 10.6 -10.2 28.0 1.1 6 10.3 -12.7 28.0 1.1 7 10.9 -7.6 28.0 1.1 8 9.9 -16.1 28.1 1.4 9 9.2 -22.0 28.0 1.1 10 10.2 -13.6 27.8 0.4 11 9.6 -18.6 28.1 1.4 12 9.9 -16.1 28.2 1.8

Big head Average import As compared with Average As compared with Month price* (Mainland) January 2013 retail price# January 2013 ($/catty) (%) ($/catty) (%) 1 13.7 - 23.8 - 2 13.5 -1.5 24.6 3.4 3 12.9 -5.8 24.7 3.8 4 13.1 -4.4 24.7 3.8 5 12.5 -8.8 24.8 4.2 6 13.8 0.7 24.8 4.2 7 15.2 10.9 24.8 4.2 8 15.4 12.4 24.8 4.2 9 15.6 13.9 24.9 4.6 10 15.8 15.3 24.7 3.8 11 15.1 10.2 25.3 6.3 12 15.7 14.6 25.2 5.9

White cabbage Average import As compared with Average As compared with Month price* (Mainland) January 2013 retail price# January 2013 ($/catty) (%) ($/catty) (%) 1 1.5 - 12.4 - 2 1.5 0.0 11.1 -10.5 3 1.6 6.7 11.4 -8.1 4 1.5 0.0 15.9 28.2 LEGISLATIVE COUNCIL ─ 26 March 2014 9113

Average import As compared with Average As compared with Month price* (Mainland) January 2013 retail price# January 2013 ($/catty) (%) ($/catty) (%) 5 1.5 0.0 13.3 7.3 6 1.6 6.7 11.8 -4.8 7 1.7 13.3 11.6 -6.5 8 1.7 13.3 12.4 0.0 9 1.7 13.3 13.7 10.5 10 1.8 20.0 11.5 -7.3 11 1.7 13.3 10.2 -17.7 12 1.8 20.0 11.1 -10.5

Flowering cabbage Average import As compared with Average As compared with Month price* (Mainland) January 2013 retail price# January 2013 ($/catty) (%) ($/catty) (%) 1 1.7 - 13.1 - 2 1.8 5.9 11.8 -9.9 3 1.7 0.0 11.1 -15.3 4 1.7 0.0 17.7 35.1 5 1.6 -5.9 12.5 -4.6 6 1.6 -5.9 12.0 -8.4 7 1.6 -5.9 12.4 -5.3 8 1.6 -5.9 13.1 0.0 9 1.6 -5.9 14.6 11.5 10 1.6 -5.9 11.9 -9.2 11 1.6 -5.9 10.6 -19.1 12 1.6 -5.9 11.5 -12.2

Tomato Average import As compared with Average As compared with Month price* (Mainland) January 2013 retail price# January 2013 ($/catty) (%) ($/catty) (%) 1 2.9 - 7.9 - 2 3.4 17.2 8.0 1.3 3 3.2 10.3 7.5 -5.1 4 3.6 24.1 8.6 8.9 5 3.2 10.3 8.8 11.4 9114 LEGISLATIVE COUNCIL ─ 26 March 2014

Average import As compared with Average As compared with Month price* (Mainland) January 2013 retail price# January 2013 ($/catty) (%) ($/catty) (%) 6 2.4 -17.2 8.4 6.3 7 1.4 -51.7 8.3 5.1 8 1.5 -48.3 8.5 7.6 9 1.6 -44.8 9.5 20.3 10 1.3 -55.2 10.5 32.9 11 1.5 -48.3 11.5 45.6 12 1.4 -51.7 9.9 25.3

Lettuce Average import As compared with Average As compared with Month price* (Mainland) January 2013 retail price# January 2013 ($/catty) (%) ($/catty) (%) 1 1.8 - 9.9 - 2 2.0 11.1 9.5 -4.0 3 1.9 5.6 8.6 -13.1 4 1.7 -5.6 11.9 20.2 5 2.0 11.1 11.3 14.1 6 1.8 0.0 10.5 6.1 7 1.8 0.0 10.2 3.0 8 1.9 5.6 11.1 12.1 9 1.7 -5.6 12.6 27.3 10 1.7 -5.6 11.3 14.1 11 1.9 5.6 11.0 11.1 12 1.6 -11.1 10.4 5.1

Hairy gourd Average import As compared with Average As compared with Month price* (Mainland) January 2013 retail price# January 2013 ($/catty) (%) ($/catty) (%) 1 1.0 - 10.3 - 2 1.0 0.0 10.0 -2.9 3 1.1 10.0 8.8 -14.6 4 1.1 10.0 12.2 18.4 5 1.2 20.0 10.4 1.0 6 1.1 10.0 8.0 -22.3 LEGISLATIVE COUNCIL ─ 26 March 2014 9115

Average import As compared with Average As compared with Month price* (Mainland) January 2013 retail price# January 2013 ($/catty) (%) ($/catty) (%) 7 1.4 40.0 7.2 -30.1 8 1.1 10.0 8.6 -16.5 9 1.0 0.0 13.7 33.0 10 1.1 10.0 9.4 -8.7 11 1.1 10.0 9.0 -12.6 12 1.1 10.0 14.0 35.9

Apple@ Average import As compared with Average As compared with Month price* (Mainland) January 2013 retail price# January 2013 ($/catty) (%) ($/each) (%) 1 4.0 - 3.6 - 2 4.0 0.0 3.8 5.6 3 4.0 0.0 3.7 2.8 4 4.2 5.0 3.5 -2.8 5 3.6 -10.0 3.5 -2.8 6 3.5 -12.5 3.6 0.0 7 3.1 -22.5 3.5 -2.8 8 3.0 -25.0 3.5 -2.8 9 3.0 -25.0 3.9 8.3 10 3.7 -7.5 3.8 5.6 11 3.5 -12.5 3.7 2.8 12 3.4 -15.0 3.6 0.0

Orange@ Average import As compared with Average As compared with Month price* (Mainland) January 2013 retail price# January 2013 ($/catty) (%) ($/each) (%) 1 1.9 - 3.9 - 2 1.9 0.0 4.0 2.6 3 2.0 5.3 4.0 2.6 4 2.0 5.3 4.0 2.6 5 1.9 0.0 4.0 2.6 6 1.9 0.0 4.1 5.1 7 1.9 0.0 4.3 10.3 9116 LEGISLATIVE COUNCIL ─ 26 March 2014

Average import As compared with Average As compared with Month price* (Mainland) January 2013 retail price# January 2013 ($/catty) (%) ($/each) (%) 8 1.9 0.0 4.0 2.6 9 1.9 0.0 4.0 2.6 10 1.9 0.0 4.1 5.1 11 2.0 5.3 4.2 7.7 12 2.0 5.3 4.4 12.8

Hen eggs Average import As compared with Average As compared with Month price* (Mainland) January 2013 retail price# January 2013 ($/each) (%) ($/each) (%) 1 0.6 - 1.5 - 2 0.6 0.0 1.5 0.0 3 0.5 -16.7 1.5 0.0 4 0.5 -16.7 1.5 0.0 5 0.6 0.0 1.5 0.0 6 0.5 -16.7 1.5 0.0 7 0.5 -16.7 1.6 6.7 8 0.6 0.0 1.6 6.7 9 0.6 0.0 1.6 6.7 10 0.5 -16.7 1.6 6.7 11 0.5 -16.7 1.6 6.7 12 0.5 -16.7 1.6 6.7

Sugar Average import As compared with Average As compared with Month price* (Mainland) January 2013 retail price# January 2013 ($/catty) (%) ($/catty) (%) 1 4.0 - 10.2 - 2 4.5 12.5 10.6 3.9 3 3.6 -10.0 10.2 0.0 4 4.2 5.0 10.5 2.9 5 4.6 15.0 10.7 4.9 6 3.6 -10.0 10.7 4.9 7 3.8 -5.0 10.7 4.9 8 3.8 -5.0 10.7 4.9 LEGISLATIVE COUNCIL ─ 26 March 2014 9117

Average import As compared with Average As compared with Month price* (Mainland) January 2013 retail price# January 2013 ($/catty) (%) ($/catty) (%) 9 3.7 -7.5 10.7 4.9 10 4.2 5.0 10.7 4.9 11 4.0 0.0 10.6 3.9 12 3.8 -5.0 10.6 3.9

Notes:

* Information is provided by the C&SD.

# The average retail prices are provided by the C&SD. The price information is published in its Hong Kong Monthly Digest of Statistics. In arriving at the average prices, the country of origin of the food items is not specified.

** C&SD does not have information on the import prices of these food items.

@ The average retail prices of apple and orange are presented as the price of each apple or orange while the average import prices are presented in catty.

Annex 2

National Consumer Prices in 2013 ― Food

Month Changes in price (%) (as compared with January 2013) 1 - 2 2.7 3 -0.3 4 0.1 5 -1.5 6 -1.5 7 -1.5 8 -0.3 9 1.2 10 0.8 11 0.6 12 1.2

Source: National Bureau of Statistics

9118 LEGISLATIVE COUNCIL ─ 26 March 2014

Annex 3

Average wholesale price of live pigs and average retail price of fresh pork as well as their differences in each month of 2013

Average Differences Average retail wholesale between average Average Average price of fresh price of live wholesale price of Live pigs wholesale retail price pork (lean pork) pigs as live pigs and Month supplied price of live of fresh pork as compared compared average retail (kg) pigs# (lean pork)* with January with January price of fresh pork ($/catty) ($/catty) 2013 2013 (lean pork) (%) (%) ($/catty) 1 14 291 980 15.7 - 41.1 - 25.4 2 11 657 986 13.8 -12.1 42.1 2.4 28.3 3 13 565 668 11.9 -24.2 40.9 -0.5 29.0 4 13 899 038 11.7 -25.5 40.6 -1.2 28.9 5 14 583 374 12.2 -22.3 40.3 -1.9 28.1 6 14 103 936 13.4 -14.6 40.0 -2.7 26.6 7 14 278 942 13.5 -14.0 40.2 -2.2 26.7 8 14 008 536 14.0 -10.8 39.4 -4.1 25.4 9 13 962 850 14.0 -10.8 39.3 -4.4 25.3 10 14 300 672 13.7 -12.7 39.5 -3.9 25.8 11 14 020 514 14.0 -10.8 38.3 -6.8 24.3 12 14 362 364 14.2 -9.6 38.3 -6.8 24.1

Notes:

* The average retail price of fresh lean pork is provided by the C&SD. The price information is published in its Hong Kong Monthly Digest of Statistics. In arriving at the average price, the country of origin of fresh lean pork is not specified.

# The wholesale price of live pigs is the price of live pigs paid by live pig buyers to live pig import agents. However, the wholesale price of live pigs is not equivalent to the wholesale price of fresh lean pork because the weight of a live pig includes not only the weight of pork, but also that of the head, bones, skin and offal. The average wholesale price of live pigs is provided by the Food and Environmental Hygiene Department.

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Annex 4

Average import prices of chilled pork from the Mainland and average retail prices of chilled pork as well as their differences in each month of 2013

Average Difference import price Average between Average of chilled retail price average Average import price Average Import pork of chilled import price import of chilled retail price quantity imported pork (lean of chilled price of pork of chilled Month of chilled from the pork) as pork and chilled imported pork (lean pork* Mainland as compared average pork* from the pork)*^ (kg) compared with January retail price ($/catty) Mainland*# ($/catty) with January 2013 of chilled ($/catty) 2013 (%) lean pork (%) ($/catty) 1 533 816 18.1 17.0 - 33.4 - 16.4 2 977 747 16.0 15.0 -11.8 34.1 2.1 19.1 3 592 572 16.4 14.7 -13.5 34.1 2.1 19.4 4 532 421 17.2 15.0 -11.8 34.5 3.3 19.5 5 305 595 24.4 21.3 25.3 34.5 3.3 13.2 6 260 745 24.2 21.0 23.5 33.0 -1.2 12.0 7 1 008 530 11.1 9.9 -41.8 34.3 2.7 24.4 8 164 294 19.7 13.2 -22.4 34.8 4.2 21.6 9 750 982 13.3 11.7 -31.2 34.7 3.9 23.0 10 523 486 16.4 14.1 -17.1 34.8 4.2 20.7 11 507 769 15.4 12.8 -24.7 34.6 3.6 21.8 12 264 089 27.7 22.7 33.5 34.6 3.6 11.9

Notes:

* Information is provided by the C&SD.

# The Government does not compile statistics on the wholesale price of chilled pork. We can only deduce the import price of chilled pork based on the information on the import quantities and value of chilled pork declared in the trade declarations. This is not equivalent to the wholesale price.

^ Chilled pork is available for sale only in supermarkets and a small number of licensed market stalls. In arriving at the average price, the country of origin of chilled pork is not specified. Chilled pork imported from the Mainland accounted for about 93% of the total import of chilled pork in terms of quantity.

9120 LEGISLATIVE COUNCIL ─ 26 March 2014

Annex 5

Differences in retail prices between fresh pork and chilled pork in each month of 2013

Average retail price of Average retail price of Difference Month fresh pork (lean pork) chilled pork (lean pork) ($/catty) ($/catty) ($/catty) 1 41.1 33.4 7.7 2 42.1 34.1 8.0 3 40.9 34.1 6.8 4 40.6 34.5 6.1 5 40.3 34.5 5.8 6 40.0 33.0 7.0 7 40.2 34.3 5.9 8 39.4 34.8 4.6 9 39.3 34.7 4.6 10 39.5 34.8 4.7 11 38.3 34.6 3.7 12 38.3 34.6 3.7

Report of Working Group on Long-Term Fiscal Planning

21. MR KENNETH LEUNG (in Chinese): President, the Government set up the Working Group on Long-Term Fiscal Planning (the Working Group) in June last year to explore ways to make more comprehensive planning for Hong Kong's public finances to cope with the ageing population and the Government's other long-term financial commitments. The Working Group has completed a fiscal sustainability appraisal on the public finances of Hong Kong and released its report on 3 March this year, explaining in detail the future challenges that Hong Kong will face in public finances and the relevant recommendations. In this connection, will the Government inform this Council:

(1) given that the Chief Executive indicated during the press conference on the 2014 Policy Address that he had confidence that the Government could afford the increased expenditure this year, and was determined to make good use of public money, but the Financial LEGISLATIVE COUNCIL ─ 26 March 2014 9121

Secretary pointed out in his speech on the Motion of Thanks on the Policy Address at the Council meeting of 12 February this year that the Government was obliged to uphold the principle of "keeping expenditure within the limits of revenue" to avoid the structural fiscal deficit caused when the rate of spending continued to expand beyond the growth in revenue, and there are views that the aforesaid remarks show that the respective principles adopted by Chief Executive and Financial Secretary in managing public finances are inconsistent, of the concepts and principles adopted by the Government in drawing up its budget;

(2) as the Working Group suggested in its report that public expenditure should be strictly contained at 20% of the gross domestic product (GDP) in future, of the Government's stance on the suggestion, and whether it will take on board the suggestion;

(3) as the Working Group pointed out in its report that the Government was increasingly reliant on direct tax revenue, and the contribution from indirect tax to the total government revenue had dropped, of the Government's counter-measures in this regard; whether the Government has plans to increase the contribution from indirect tax to the total government revenue; if so, of the details; if not, the reasons for that;

(4) as the Working Group suggested in its report that the cost recovery rates for various government services should be raised in order to strictly follow the principles of "cost recovery", "user pays" and "polluter pays", of the target cost recovery rates for various government services at present; the total number of paid services provided by the Government, and set out in the table below a breakdown by different cost recovery rates; and

Cost recovery rate Number of (against the price level in 2014-2015) government services 90% to 100% 80% to 89% 70% to 79% 60% to 69% 50% to 59% 9122 LEGISLATIVE COUNCIL ─ 26 March 2014

Cost recovery rate Number of (against the price level in 2014-2015) government services 40% to 49% 30% to 39% 20% to 29% 10% to 19% 0% to 9%

(5) of the following information (to be set out in table form) in relation to each of the government services with their cost recovery rates lower than 30%: (i) fee type, (ii) government department providing the service, (iii) date of last fee adjustment, (iv) current fee level, (v) cost recovery rate (against the price level in 2014-2015), and (vi) whether there are plans to adjust the fee level (if so, of the new fee levels proposed, the amount and extent of the increase, as well as the cost recovery rate after the implementation of the new fee level)?

SECRETARY FOR FINANCIAL SERVICES AND THE TREASURY (in Chinese): President,

(1) Fiscal prudence has been the guiding principle of the Government on the management of public finances. Article 107 of the Basic Law stipulates that the Hong Kong Special Administrative Region shall follow three principles in drawing up its budget: first, keeping the expenditure within the limits of revenues; second, striving to achieve a fiscal balance and avoid deficits; and third, keeping the budget commensurate with the growth rate of its GDP. In other words, the budget should not grow faster than the economy as a whole. We also adhere to the principles of pragmatism, commitment to society and sustainability in managing public finances. Following the principle of fiscal prudence, we adhere to keeping expenditure within the limits of revenues, and committing resources only where justified; when implementing new policies and measures, especially those involving long-term financial commitments, the Government will go through thorough deliberation and appropriate planning to ensure prudent use of public resources.

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(2) In respect of the recommendation from the Working Group that public expenditure should be controlled at or around 20% of the nominal GDP, the Government's position is as follows:

(i) The Government considers this a suitable level since it can help maintain Hong Kong's competitiveness and ensure that Government will not consume excessive social resources which may impede the development of the private sector.

(ii) More importantly, this is in line with the principle of keeping the expenditure within the limits of revenues in managing public finances. Although government revenue swings along with and in the same direction as fluctuations in the local and global economy, government revenue as a percentage of nominal GDP has seldom exceeded 20% (only seven times in the past 40 years). While government revenue exceeded 20% of GDP in recent years, but the excess was largely attributable to the increase in land revenue, which amounted to some 3% to 4% of GDP, as compared with the average of about 2% for the first 10 years after 1997-1998. Nevertheless, land revenue is not recurrent in nature. Government revenue was on average 18.6% of nominal GDP between 1997-1998 and 2012-2013, with the trough at 13.3% and the peak at 22.6%. This essentially reflects the inherent low tax regime in Hong Kong. Given this stipulated requirement in Article 108 of the Basic Law, it would be hard to expect major hikes in government revenue beyond 20%. If public expenditure were to consistently exceed 20%, we need to explore how to increase revenue to sustain such an expenditure level.

(iii) The 20% of GDP guideline on public expenditure is a target for managing public finances. It can be exceeded if necessary. For example, in the 2013-2014 Budget, public expenditure went beyond the 20% of GDP. The underlying principle is that, over time, expenditure growth should not exceed the growth of economy.

9124 LEGISLATIVE COUNCIL ─ 26 March 2014

(3) The Government concurs with the findings in the report of the Working Group. On broadening the revenue base, there is little room for major tax hikes (irrespective of direct tax or indirect tax), having regard to the competitiveness of Hong Kong and the impact on the community. In principle, the Government will not rule out any means to increase tax revenue. However, we also understand that any tax increase proposals will be controversial and may entail other policy considerations. It takes time for the community to engage in rational discussions with a view to forging a consensus on the matter.

(4) and (5)

Government services are generally charged in accordance with the "user pays" principle. The principle seeks to link the service fee levels with the service costs, so that service users will pay for the full costs of the services without requiring taxpayers to bear the burden of the service costs. This is a long-established fee charging principle and an important measure of fiscal discipline. If service fee levels are lower than service costs, individual service users will be subsidized by the general revenue, which is unfair to the general taxpayers.

From the practical perspective, the Government will set the level of subsidies to some services having regard to the policy requirements. For the subsidized services, the "user pays" principle seeks to link the service fee levels with the pre-set levels of cost subsidy, so that service users will pay for part of the service costs without requiring taxpayers to bear the burden of all the service costs.

At present, there are more than 4 000 fees and charges with their fee levels set according to the "user pays" principle. All Policy Bureaux and departments are reviewing their respective fees and charges. In reviewing the fees and charges, Policy Bureaux and departments will take into account factors including the specific circumstances of the services provided, public affordability and acceptability, and the views of Legislative Council Members before making proposals for fee revisions. All government departments will consult relevant stakeholders on their proposals for fee revisions to ensure compliance with the "user pays" principle.

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Illegal Structures on Private Land for Residential Purposes

22. MR WU CHI-WAI (in Chinese): President, it has been reported that in recent years, quite a number of people have, without authorization, illegally built residential structures on Government lands or private lands zoned for agricultural or open storage uses, or placed containers on these sites and converted them into container houses for residential use (hereinafter referred as "illegal housing"). Some local people have relayed to me that such cases have not been handled effectively due to the unclear delineation and shirking of responsibilities among the various law-enforcement departments (including the Lands Department (LandsD), Planning Department (PlanD) and Buildings Department (BD)) involved. It is learnt that the final outcome of handling of most of the cases was that the LandsD merely registered the removal orders as encumbrances in the relevant land ownership history at the Land Registry (commonly known as "imposing an encumbrance"). In this connection, will the Government inform this Council:

(1) of the respective numbers of complaints about illegal housing on private lands found to be substantiated by the LandsD, PlanD and BD in each of the past five years, together with the numbers of cases in which the persons involved were prosecuted and convicted as well as the details of such cases, and set out a breakdown by District Council district in tables of the same format as the following table;

Name of government department: LandsD/PlanD/BD Number and details of the District Number of cases in which the persons Council Year complaints found to involved were prosecuted district be substantiated and convicted … … … … … … … … … … … …

(2) of the number of removal orders issued by the BD under the Buildings Ordinance (Cap. 123) for illegal housing on private lands in the past five years; the respective numbers of such orders which were and which were not complied with upon expiry of the specified periods; the follow-up actions taken by the authorities against 9126 LEGISLATIVE COUNCIL ─ 26 March 2014

landowners or occupants who had not complied with the removal orders;

(3) of the number of occasions on which the LandsD imposed encumbrances against illegal housing on private lands in the past five years; whether the LandsD has reviewed the effectiveness of imposition of encumbrances, and referred such cases to the BD for follow-up; if it has, of the number of cases so referred each year;

(4) whether it has uncovered any case in the past five years about container houses built on Government lands and on lands granted on short-term tenancies by the Government; if it has, of the details;

(5) given that some container houses were erected on private agricultural lands held under Block Government Leases but the landowners concerned claimed that the containers were for storage and non-residential purposes so as to circumvent regulation, whether it has assessed the impact of the Court judgments of the two cases in the 1980s (namely Attorney General v Melhado Investment Ltd. [1983] HKLR 327 and Winfat Enterprise (HK) Co. Ltd. v Attorney General [1988] HKCU 261) on the regulation of private lands in the New Territories for agricultural use; if it has, of the details, and whether it will amend the relevant legislation; and

(6) whether the Development Bureau will, in collaboration with the government departments concerned, review the effectiveness of the relevant legislation in curbing the aforesaid illegal activities; if it will, of the details?

SECRETARY FOR DEVELOPMENT (in Chinese): President, under the current land administration policy, the LandsD takes land control action against unauthorized structures on Government land under the Land (Miscellaneous Provisions) Ordinance, Cap. 28, and takes lease enforcement action against structures (including containers converted to residential use) erected on private land which are in breach of the lease.

LEGISLATIVE COUNCIL ─ 26 March 2014 9127

Under the established squatter control policy, only structures which were covered and assigned survey numbers in the territory-wide Squatter Control Survey in 1982 (generally called "surveyed structures") are, subject to fulfillment of the promulgated criteria, tolerated until they cease to exist or are required to be cleared for development, environmental improvement or safety reasons.

The cases cited in the question mostly involve old scheduled agricultural lots in the New Territories which, according to the leases, do not permit erection of structures without prior approval. For the purpose of this reply, structures erected thereon, unless falling under the category of surveyed structures or erected with prior permission under the lease, are structures in breach of lease and are collectively referred to as "unauthorized structures on private agricultural land".

For this kind of unauthorized structures on private agricultural land, lease enforcement actions taken by the LandsD include issue of warning letters to lot owners; registration of the warning letters in respect of the private agricultural lot concerned at the Land Registry (generally called "imposing an encumbrance"), and consideration of exercising the right of re-entering the private agricultural land concerned under the Government Rights (Re-entry and Vesting Remedies) Ordinance, Cap. 126. In the past, the LandsD's enforcement actions generally halted at "imposing an encumbrance", with the right of re-entering the land reserved.

The LandsD has earlier reviewed the situation, and it considered "imposing an encumbrance" not a hard enough push factor for rectification of breaches when the concerned lot owners of agricultural land are not keen to assign the land. Furthermore, it is also important to nip the problem in the bud by taking speedy action against the structures when they are being erected. Upon review, the LandsD will step up enforcement actions by its existing authority under private lease (as private landlord) and/or under the existing legislation. Specifically:

(i) Once it has come to the LandsD's attention through stepped up patrol or receipt of complaints or referrals that an unauthorized structure is being erected on private agricultural land, a warning letter will be issued requiring the lot owner to stop the works and to demolish any uncompleted structures on site within one week. If the lot owner fails to comply, the LandsD will proceed with demolition under the Land (Miscellaneous Provisions) Ordinance with a view to demolishing such structures before completion of the works and 9128 LEGISLATIVE COUNCIL ─ 26 March 2014

occupation of the structures, while the relevant costs will be recovered from the lot owners. If the structures being erected are of larger dimensions (which normally means structures of area and height exceeding that of a New Territories Exempted House), the BD will take corresponding enforcement actions under its regulatory regime according to the established division of work among government departments;

(ii) For unauthorized structures on private agricultural land which have been completed and where the breach is not purged despite "imposing an encumbrance", the LandsD will, as a standard practice, proceed with re-entry of the private agricultural land, under the lease and the Government Rights (Re-entry and Vesting Remedies) Ordinance. After re-entry, the LandsD will give a reasonable time for occupants remaining on the lot (which has become Government land) to vacate themselves, and thereafter arrange demolition of the structures in accordance with the Land (Miscellaneous Provisions) Ordinance. In case the ex-owner of the private agricultural land seeks relief against re-entry under the Government Rights (Re-entry and Vesting Remedies) Ordinance, the Government may impose such conditions as it deems appropriate (for example, demolition of the unauthorized structure) if relief is granted. Depending on the caseload to be dealt with at any one time, individual District Lands Office may have to prioritize the cases. Factors to be considered in prioritization may include the scale and gravity of the breaches as well as the potential hazards to the environment and hygiene;

(iii) As an ancillary and supporting measure to enhance the effectiveness in identifying unauthorized building works (UBWs) in progress, new patrol routes will be plotted and frequency of air surveillance will be increased by the LandsD, focusing on areas prone to new cases; and

(iv) Where it is suspected that estate agents may have been involved in the sale or rental of unauthorized structures, including individual units therein, the LandsD will refer such cases to the Estate Agents Authority for follow-up action.

My reply to the various parts of the question is as follows:

(1) The number of substantiated cases of unauthorized structures on private agricultural land (including structures for residential and LEGISLATIVE COUNCIL ─ 26 March 2014 9129

non-residential uses) identified through complaints received by the LandsD in the past five years (2009 to 2013), broken down by District Lands Office, is at Annex 1. As there may be more than one complaint against one case of unauthorized structures on private agricultural land, the information is provided on a case basis. The LandsD does not maintain a breakdown of cases by District Council constituencies.

For the number of complaints received and confirmed by the PlanD as suspected unauthorized domestic use in structure under the Town Planning Ordinance (TPO) (Cap. 131) in the past five years (2009 to 2013), the breakdown by District Council constituencies is at Annex 2.

The statistics on the numbers of removal orders issued and prosecutions instigated for non-compliance with removal orders by the BD in the past five years (from 2009 to 2013) in relation to UBWs (including both domestic and non-domestic use) carried out on private land in the New Territories that do not involve buildings with occupation permits issued under the Buildings Ordinance, broken down by District Council constituencies, are at Annex 3.

(2) Upon receipt of complaints and reports about UBWs in New Territories, the BD will carry out investigation and, in accordance with the prevailing enforcement policy, take enforcement action against UBWs which constitute obvious hazard or imminent danger to life or property, UBWs in progress and newly built UBWs. Of the 1 550 removal orders associated with part (1) of the reply, 631 orders have been complied with.

Where an owner fails to comply with a removal order, the BD would issue a warning letter urging the owner to comply with the removal order voluntarily before instigation of prosecution by the BD. If the owner encounters genuine difficulties in arranging the works, the BD could, subject to the justifications of individual cases, grant extension of time for compliance with the removal order so as to allow more time for the owner to arrange demolition. If the owner fails to comply with the requirements of a removal order without reasonable excuse, the BD would consider instigating prosecution and engaging government contractor to carry out the necessary 9130 LEGISLATIVE COUNCIL ─ 26 March 2014

works in default of the owner. The BD would recover the costs of the works, including supervision charges and surcharges, from the owner.

(3) If it is established that the structures (including structures used for residential purpose) are erected on private agricultural land without prior approval under lease, the LandsD will take lease enforcement action by issuing a warning letter. If the breach is not purged by a prescribed deadline, the warning letter will be registered resulting in "an imposition of an encumbrance". In addition, the District Lands Offices will refer any established cases of unauthorized structures to the BD for consideration of follow-up action under the latter's purview. For cases involving "imposition of encumbrances" against unauthorized structures on private agricultural land by the LandsD in the past five years (2009 to 2013), please refer to Annex 4. Unauthorized structures may be used for residential or non-residential purpose, the LandsD does not have a breakdown of the number of unauthorized structures by users.

(4) Over the past five years (2009 to 2013), the LandsD received three cases concerning container structures erected on Government land for residential purpose, two in Yuen Long and one in Tsing Yi. District Lands Office/Yuen Long has taken land control actions and cleared the unauthorized structures in the two cases. For the remaining case in Tsing Yi, appropriate land control action will be taken by District Lands Office/Tsuen Wan and Kwai Tsing. In the past five years, the LandsD has not come across any case in which container structures for residential purpose are erected on land granted by way of short-term tenancy.

(5) Regarding regulation of container-converted residential units on private agricultural land held under block Government lease, such converted containers are generally considered by the LandsD as "structures", the unauthorized erection of which will constitute a breach of lease conditions. The LandsD will take appropriate lease enforcement actions against such cases having regard to the actual circumstances. Land leases are concluded between the Government in the capacity of a landlord and the land owner, and no legislation is involved.

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(6) As regards the arrangements on strengthening enforcement and regulatory work, please refer to the main reply above.

Annex 1

Substantiated cases of unauthorized structures on private agricultural land identified through complaints received by the LandsD in 2009 to 2013

Number of Substantiated Cases District Lands through Complaints Remarks Office 2009 2010 2011 2012 2013 Hong Kong East 0 0 0 0 0 Regarding the details Hong Kong of the prosecution and 0 0 0 0 0 West and South conviction cases, given Kowloon East 0 0 0 2 0 that land leases are Kowloon West 0 0 0 0 0 concluded between the Islands 3 4 4 14 4 Government in the North 65 56 144 109 127 capacity of a landlord Sai Kung 7 9 101 137 23 and the land owner and Sha Tin 3 4 5 9 7 land lease is not Tuen Mun 3 8 20 23 27 legislation, no Tai Po 18 30 0 23 83 indictment or Tsuen Wan and prosecution is 7 23 44 10 17 Kwai Tsing involved. Yuen Long 362 431 285 279 333

Annex 2

Complaints received and confirmed by the PlanD as suspected unauthorized domestic use in structure under the TPO in 2009 to 2013

Complaints received and confirmed as District suspected unauthorized domestic use Council Remarks in structure under TPO constituency(1) 2009 2010 2011 2012 2013 Regarding the details of the prosecution and North 0 0 1 0 0 conviction cases, since the relevant complaints involved suspected 9132 LEGISLATIVE COUNCIL ─ 26 March 2014

Complaints received and confirmed as District suspected unauthorized domestic use Council Remarks in structure under TPO constituency(1) 2009 2010 2011 2012 2013 illegal domestic structures, the PlanD had Yuen Long 0 0 1 3 1 referred these cases to the BD and/or the LandsD for follow-up action.

Note:

(1) For areas in other District Council constituencies, the PlanD had not received any relevant complaints.

Annex 3

Statistics on the cases received by the BD regarding UBWs carried out on private land in the New Territories from 2009 to 2013(1) (2) (3) (4)

District Council 2009 2010 2011 2012 2013 constituency Kwai Tsing Number of Removal Orders 0 3 1 4 5 Number of Prosecutions 0 0 0 0 1 North Number of Removal Orders 57 13 56 46 36 Number of Prosecutions 24 6 7 3 24 Islands Number of Removal Orders 4 0 7 4 19 Number of Prosecutions 0 0 0 0 7 Sai Kung Number of Removal Orders 181 24 37 63 57 Number of Prosecutions 5 33 3 3 14 Sha Tin Number of Removal Orders 10 24 22 15 11 Number of Prosecutions 2 13 5 6 14 Tai Po Number of Removal Orders 42 43 62 25 52 Number of Prosecutions 43 29 24 3 2 Tsuen Wan Number of Removal Orders 12 26 13 12 24 Number of Prosecutions 0 0 0 3 11 Tuen Mun Number of Removal Orders 10 24 10 27 49 Number of Prosecutions 10 3 7 3 6 LEGISLATIVE COUNCIL ─ 26 March 2014 9133

District Council 2009 2010 2011 2012 2013 constituency Yuen Long Number of Removal Orders 54 81 73 124 88 Number of Prosecutions 9 4 50 38 21

Notes:

(1) The BD has all along been enforcing the Buildings Ordinance (Cap. 123) and taking enforcement action against UBWs in accordance with the enforcement policy. As there is a lapse of time between issue of a removal order and instigation of prosecution, the prosecution cases instigated in a particular year may not necessarily be the cases with removal orders issued in the same year.

(2) The above cases do not involve buildings issued with occupation permit.

(3) It is envisaged that majority of UBWs mentioned in the question are in the New Territories districts. The BD provides the relevant statistics of the New Territories districts only.

(4) The total number of removal order issued by the BD from 2009 to 2013 is 1 550.

Annex 4

Cases with "imposition of encumbrance" against unauthorized structures on private agricultural land by the LandsD in 2009 to 2013

Year Number of Cases with "Imposition of Encumbrance"(1)(2) 2009 26 2010 160 2011 80 2012 281 2013 287

Notes:

(1) Progress of handling such cases varies, depending on circumstances of each individual case. The number of cases in which the LandsD proceeded with "imposition of encumbrance" in a given year may not necessarily be the number of the complaints received in that year.

(2) Regarding referral of cases of unauthorized domestic structures on private land with "imposition of encumbrance" to the BD, in case the LandsD identifies UBWs in violation of the Buildings Ordinance, the cases will generally be referred to the BD for follow-up as it deems necessary. In case there is also a breach of the conditions of the lease, the LandsD will take appropriate lease enforcement actions, including "imposition of encumbrance" as it is generally known, having regard to circumstances of the case. The LandsD does not maintain statistics on cases with "imposition of encumbrance" referred to the BD. 9134 LEGISLATIVE COUNCIL ─ 26 March 2014

BILLS

First Reading of Bills

PRESIDENT (in Cantonese): Bills: First Reading.

CONTRACTS (RIGHTS OF THIRD PARTIES) BILL

EMPLOYMENT (AMENDMENT) BILL 2014

PHARMACY AND POISONS (AMENDMENT) BILL 2014

CLERK (in Cantonese): Contracts (Rights of Third Parties) Bill Employment (Amendment) Bill 2014 Pharmacy and Poisons (Amendment) Bill 2014

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

Second Reading of Bills

PRESIDENT (in Cantonese): Bills: Second Reading.

CONTRACTS (RIGHTS OF THIRD PARTIES) BILL

SECRETARY FOR JUSTICE (in Cantonese): President, I move the Second Reading of the Contracts (Rights of Third Parties) Bill (the Bill).

The purpose of the Bill is to implement the recommendations of the report on Privity of Contract published by the Law Reform Commission of Hong Kong (LRC) in September 2005 so as to reform the common law doctrine of privity of contract.

Under the common law doctrine of privity, a person not a party to a contract (that is, a "third party") cannot acquire or enforce rights under the contract. This prevents effect from being given to the contracting parties' LEGISLATIVE COUNCIL ─ 26 March 2014 9135 intention to benefit a third party. This doctrine has long been criticized as contrary to the parties' intention to benefit a third party. In certain circumstances, the Court may even need recourse to devices such as agency or trust to allow a third party to enforce a right conferred on the third party. In some other cases, a third party may have to resort to separate contracts. This not only brings about inconvenience and complexity, but also extra cost.

The LRC has studied the relevant reforms conducted in various common law jurisdictions such as Australia, England and New Zealand and recommended that this aspect of the doctrine of privity, under which a third person cannot acquire or enforce rights under a contract, be reformed by way of legislation. Having carefully considered the LRC's recommendations and the views of the relevant stakeholders, the Administration introduces the Bill to implement LRC's recommendations.

The key features of the Bill can be outlined as follows:

The Bill provides that a third party, that is a person who is not a party to the contract, must be expressly identified in the contract by name, as a member of a class or as answering a particular description. Rights may also be conferred on a third party who is not in existence, for example, an unborn baby, when the contract is entered into.

The Bill provides for a two-limb test and the satisfaction of either limb will permit a third party to enforce the relevant term of the contract:

(1) a third party may enforce the contract if the contract contains an express term to that effect; or

(2) if a contract contains a term which purports to confer a benefit on a third party, that party may enforce that term unless on a proper construction of the contract, parties to the contract do not intend that the third party may do so.

Besides, parties to a contract can expressly exclude the application of this new statutory scheme in their contract.

In order to strike a balance between the protection of the freedom of contracting parties to vary the terms of a contract on the one hand, and the 9136 LEGISLATIVE COUNCIL ─ 26 March 2014 protection of the interests of a third party who may suffer as a result of the variation to the contract on the other, the Bill provides for the circumstances in which a third party's rights are "crystallized" such that the contracting parties may not rescind the contract or vary it in a way that affects the third party's rights.

Subject to the provisions of the Bill, a third party may enforce a term of the contract against the promisor of the contract. The Bill provides for defences, set-offs and counterclaims to be available to a promisor in proceedings brought by a third party and also protects a promisor against double liability.

(THE PRESIDENT'S DEPUTY, MR ANDREW LEUNG, took the Chair)

The Bill deals with two situations in relation to arbitration. The first situation is that if a third party's right to enforce a term of a contract is subject to an arbitration agreement, the third party must enforce the term by way of arbitration and be treated as a party to the arbitration agreement, unless on a proper construction of the contract, the third party is not intended to be so treated. The second situation is where a third party is given an enforceable procedural right under a contract, for example, by way of an express provision providing for arbitration of disputes where a promisor brings a non-contractual claim (such as tortious or statutory claim) in connection with a contract against a third party, then the third party may enforce the procedural right to submit the disputes to arbitration.

As to the scope of application, the new statutory scheme does not apply to contracts entered into before the commencement of the scheme so that existing rights, obligations or remedies of contracting parties and a third party will not be affected.

In addition, the Bill excludes two major types of contracts:

(1) The first type of contracts excluded is: contracts where a third party has no enforceable right under existing rules but there are sound policy reasons for maintaining that position (for example, the articles of a company having effect as a contract under the Companies Ordinance).

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(2) The second type of contracts excluded is: contracts where a third party already has an enforceable right under existing rules reflecting international conventions or where allowing third parties to claim a right of enforceability would contradict or prejudice the underlying policies of certain areas of law. For example, a bill of exchange, a contract for the carriage of goods by sea, and a covenant relating to land, including a deed of mutual covenant as defined in section 2 of the Building Management Ordinance.

The Administration has consulted the legal profession and other stakeholders on the Bill. The legal professional bodies did not raise any objection to the legislative proposal. The Administration has carefully considered various technical comments and drafting suggestions raised by the legal professional bodies and the academia, and has taken on board the suggestion of the Hong Kong Bar Association by excluding land covenants (including deeds of mutual covenant) from the new statutory scheme. The Legislative Council's Panel on Administration of Justice and Legal Services has also indicated its support to the policy objectives of the Bill.

Deputy President, as I mentioned at the beginning of this speech, the common law doctrine of privity has long been considered as giving rise to injustice or inconvenience on third parties' rights and not fully reflecting contracting parties' intention. Various common law jurisdictions including England have reformed the doctrine of privity by way of legislation. The Administration believes that the Bill would enhance Hong Kong's contractual law regime and align it with those of the other major common law jurisdictions.

With these remarks, I would like to appeal to Members to support the Bill.

DEPUTY PRESIDENT (in Cantonese): I now propose the question to you and that is: That the Contracts (Rights of Third Parties) Bill be read the Second time.

In accordance with the Rules of Procedure, the debate is now adjourned and the Bill is referred to the House Committee.

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EMPLOYMENT (AMENDMENT) BILL 2014

SECRETARY FOR LABOUR AND WELFARE (in Cantonese): Deputy President, I move the Second Reading of the Employment (Amendment) Bill 2014 (the Bill). The Bill seeks to provide for a three-day paid paternity leave (PL) for working fathers under the Employment Ordinance (the Ordinance).

The Government reviews labour legislation from time to time in the light of Hong Kong's social changes and economic developments, so as to strike a reasonable balance between the interests of employees and the affordability of employers, and advance with the times. We understand the increasing importance attached by the Hong Kong community to a father's responsibilities in the family, as well as the public's aspiration for male employees to take leave around the time of childbirth. In delivering his first policy address, the Chief Executive also said that it was the Government's hope that legislation for PL could be enacted as soon as possible.

The Labour Department (LD) has conducted a study on legislating for PL and consulted the Labour Advisory Board (LAB) accordingly. After thorough deliberations, the representatives of employees and employers in the LAB reached a consensus and supported legislating for three-day's PL with pay at a daily rate equivalent to four fifths of the employee's average daily wages. Subsequently, we consulted the Panel on Manpower of the Legislative Council (the Panel) in January 2013, and the Panel supported the proposal to legislate for PL.

Under the proposals of the Bill, a male employee who is the father of a newborn or a father-to-be will be entitled to PL if he is employed under a continuous contract and has given advance notice to his employer of his intention to take PL. If he has been employed for not less than 40 weeks and submitted the required documentary proof to his employer, he is entitled to paid PL.

The proposed duration of three days' statutory PL has taken into account the fact that the cost of PL benefits in the private sector is to be shouldered by employers of varying sizes. It is therefore of paramount importance that a reasonable balance is struck between the interests of employees and the affordability of employers. According to a survey on PL conducted by LD with member establishments of its 18 Human Resources Managers Clubs in 2012, the duration of PL provided by the respondent organizations on a voluntary basis was LEGISLATIVE COUNCIL ─ 26 March 2014 9139 three days on average. Moreover, among the above organizations offering PL on a voluntary basis, over 80% offered PL for less than three days, while some 40% provided one to two days of PL. Having regard to the prevailing practice of providing PL in the private sector and the consensus reached by the LAB, we propose to specify the requirement of a three-day statutory PL in the Ordinance.

Noting that both PL and maternity leave emanated from the same cause, and that the nature of PL was similar to that of maternity leave, the LAB also agreed that, where appropriate, the relevant requirements and details of PL should be aligned with those applicable to maternity leave under the Ordinance for the purpose of reasonableness and consistency with the existing law. On this basis, the Bill proposes that male employees may take PL at any time during the period from four weeks before the expected date of delivery of the child to 10 weeks from and inclusive of the actual date of delivery. The employee may take all three days of PL in one go or on discrete days. As an employer may need to obtain the birth certificate of a newborn in order to ascertain its relationship with the male employee, we propose that an employer may provide an employee with PL first and be allowed to grant PL pay to the employee after he has produced the relevant documentary proof.

Under the Bill, a working father of a newborn is only entitled to paid PL if his name is entered as the father of the child on the birth certificate, that is, the "legal father". As we see it, this approach is in line with the purpose of the statutory PL scheme having regard to the legal responsibilities of a legal father for a child. It is adopted also for its viability and practicability insofar as the employers and the employees are concerned.

In addition, under the Bill, a male employer who intends to take PL must notify his employer in advance. This is a practical requirement proposed to cater for the operational need of small and medium enterprises, as well as their potential limitation in making the necessary manpower deployment arrangements.

In making the statutory PL proposal, the Government has already fully considered various factors, including society's general demand for PL, the interests of employees and affordability of employers, as well as the prevailing practice of the private sector in providing PL on a voluntary basis, in order to ensure that a reasonable balance is struck between the interests of both parties.

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I hope that with Members' support, the Bill can be enacted as soon as possible to ensure the early implementation of this family-friendly employment policy.

Thank you, Deputy President.

DEPUTY PRESIDENT (in Cantonese): I now propose the question to you and that is: That the Employment (Amendment) Bill 2014 be read the Second time.

In accordance with the Rules of Procedure, the debate is now adjourned and the Bill is referred to the House Committee.

PHARMACY AND POISONS (AMENDMENT) BILL 2014

SECRETARY FOR FOOD AND HEALTH (in Cantonese): Deputy President, I move that the Pharmacy and Poisons (Amendment) Bill 2014 (the Bill) be read the Second time, so as to implement some of the recommendations put forward in the review report issued by the Review Committee on the Regulation of Pharmaceutical Products in Hong Kong (Review Committee) which require legislative amendments to the existing Ordinance. We have also taken this opportunity to update and clarify the relevant provisions under the Pharmacy and Poisons Ordinance (PPO) and its subsidiary legislation so that the regulatory regime for pharmaceutical products in Hong Kong will be more clear and consistent.

In the light of a number of incidents concerning pharmaceutical products in Hong Kong in early 2009, the Review Committee was set up in March 2009 to conduct a comprehensive review on the existing regime for the regulation of pharmaceutical products. After examining in detail the existing regulatory regime, the Review Committee considers that while the framework and the rationale behind the existing regime is sound and should continue to be adopted, the coverage and depth of the regulatory measures should be enhanced. In December 2009, the Review Committee issued a report and made a total of 75 recommendations. Departments and organizations concerned have implemented or are implementing a total of 59 recommendations that do not involve legislative amendments. The remaining 16 recommendations require amendments to be made to the existing PPO and its subsidiary legislation.

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To assess the impacts of the proposed legislative amendments to different sectors, we commissioned a consultant to conduct a Regulatory Impact Assessment (RIA). Having considered the RIA result and views expressed by the relevant stakeholders, we have decided to submit the Bill to implement most of the 16 recommendations that are conducive to enhancing the regulatory regime for pharmaceutical products without causing significant impact to the relevant parties. For the few recommendations that are not put into implementation, we will continue to monitor the situation and formulate appropriate implementing measures in due course.

The amendments proposed in the Bill regarding the existing regulatory framework and regime on pharmaceutical products involve various areas, which include enhancing the regulation of pharmaceutical dealers and registered pharmacists concerned, as well as enhancing pre-market control of pharmaceutical products. I will now highlight the amendments as follows.

On the general regulation, to align with the international practice, we propose to revise the definition of "pharmaceutical product" and "medicine" in the PPO in accordance with the definition adopted by the European Union in order to cover any substance or combination of substances presented as having properties for treating or preventing disease in human beings or animals. On the other hand, as recommended by the Review Committee, we propose to empower the Pharmacy and Poisons Board to issue corresponding codes of conduct and codes of practice in order to enhance monitoring for the conduct of the activities of manufacturers, importers, exporters, wholesalers and retailers.

On the manufacturers, one of the major changes is to introduce the Authorized Person (AP) registration system in the PPO, under which each licensed manufacturer is required to employ at least one AP to ensure the quality of the pharmaceutical products they manufacture. We will also tighten up the manufacturing of pharmaceutical products and expressly require that secondary packaging of pharmaceutical products should only be carried out by a licensed manufacturer in order to avoid drug incidents caused by wrong labelling or wrong content of carton boxes arising in the secondary packaging process.

On the wholesalers, we propose to impose licensing control on wholesalers of non-poisons by expanding the existing licensing regime on wholesalers of poisons to cover wholesalers of all pharmaceutical products (including both poisons and non-poisons). To align and streamline the licensing arrangements, 9142 LEGISLATIVE COUNCIL ─ 26 March 2014 the registration of importers and exporters of pharmaceutical products will be merged with the licensing of wholesalers. To facilitate the recall of pharmaceutical products if necessary, we also propose to expand the requirement regarding the wholesale transaction records of poisons listed in Part I of the Poisons List Regulations (PLR) to cover the wholesale transactions of all pharmaceutical products (including both poisons and non-poisons).

At the retail level, the Bill proposes to tighten up the regulation of the authorized sellers of poisons by expanding the requirement regarding the storage of poisons listed in the First Schedule to the Pharmacy and Poisons Regulations to cover all poisons listed in Part I of the PLR, so as to step up regulation on the retail of such poisons.

Other major amendments include the proposal to empower the Court to order recovery of all expenses incidental to the taking, examination and analyses of any sample of pharmaceutical products incurred by the Administration in respect of which the conviction is based from the defendant so as to increase the deterrent effect. In addition, we propose to streamline the legislative process for registration of pharmaceutical products so as to shorten the time frame for processing applications and registration of pharmaceutical products and poisons, thus allowing patients in need to benefit from the technological advancement in new medicine as early as possible. On the other hand, we propose to replace the text "Poison"(毒 藥) on the labelling of pharmaceutical products by "Prescription drug"(處方藥物) or "Drug under supervised sale"(監督售賣藥物) so as to avoid confusion that the pharmaceutical products might be harmful and unsuitable for use or consumption.

In considering the recommendations of the Review Committee and drafting the Bill, we have conducted extensive consultation. The recommendations of Review Committee's report were discussed at a plenary session in the Hong Kong Pharmacy Conference on 24 January 2010. During the RIA commissioned by the Government, the consultant had conducted a series of stakeholder consultations. Also, a public opinion survey was conducted by the University of Hong Kong to gauge the sentiments of the general public towards the proposed changes. In general, the public and the relevant stakeholders support the proposals to enhance the regulatory regime on pharmaceutical products.

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We briefed the Panel on Health Services of the Legislative Council on the proposed legislative amendments at its meeting held on 18 November 2013. The Panel also held a special meeting on 10 December 2013 to collect deputations' views and further discuss the proposed legislative amendments. The Panel expressed their support to our legislative amendments at the special meeting held on 10 February 2014.

Deputy President, I implore Members to support the Bill so as to perfect our regulatory regime on pharmaceutical products as early as possible and provide better safeguard to the public.

I so submit. Thank you, Deputy President.

DEPUTY PRESIDENT (in Cantonese): I now propose the question to you and that is: That the Pharmacy and Poisons (Amendment) Bill 2014 be read the Second time.

In accordance with the Rules of Procedure, the debate is now adjourned and the Bill is referred to the House Committee.

Resumption of Second Reading Debate on Bills

DEPUTY PRESIDENT (in Cantonese): We now resume the Second Reading debate on the Rural Representative Election Legislation (Amendment) Bill 2013.

RURAL REPRESENTATIVE ELECTION LEGISLATION (AMENDMENT) BILL 2013

Resumption of debate on Second Reading which was moved on 13 November 2013

DEPUTY PRESIDENT (in Cantonese): Mr IP Kwok-him, Chairman of the Bills Committee on the above Bill, will address the Council on the Committee's Report.

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MR IP KWOK-HIM (in Cantonese): Deputy President, in my capacity as Chairman of the Bills Committee on Rural Representative Election Legislation (Amendment) Bill 2013 (the Bills Committee), I now brief Members on the main issues deliberated by the Bills Committee.

The Rural Representative Election Legislation (Amendment) Bill 2013 (the Bill) mainly seeks to broaden the scope of the Village Representative Election Ordinance (VREO), the Electoral Affairs Commission Ordinance, the Elections (Corrupt and Illegal Conduct) Ordinance (ECICO) and their respective subsidiary legislation so that they would also regulate the elections of Kaifong Representatives (KFR) for Cheung Chau (CC) and Ping Chau (PC) to be held in or after 2015.

The Bills Committee has held a total of four meetings and met with 51 deputations and individuals at one of these meetings.

Members note that the proposed regulatory framework for KFR election is modelled on that for the elections of Resident Representative (RRs) for Existing Villages under the VREO, which would be renamed as the Rural Representative Election Ordinance, and a new definition of "Rural Area" has been added to cover both a Village Representative (VR) and a KFR, and "Rural Area" to cover an Existing Village, an Indigenous Village, a Composite Indigenous Village and a Market Town. The Administration has explained to members that the terms VRs, Indigenous Inhabitant Representatives (IIRs) and RRs will be retained in the VREO. The number of Indigenous Villages and Existing Villages, the number of IIR seats and RR seats as well as the election system, and so on, stipulated in the existing VREO will remain unchanged.

The Bills Committee has enquired the Administration if the areas of the two proposed Market Towns (that is the current CC and PC) overlap with any Indigenous Village or Composite Indigenous Village under the VREO. The Administration has replied that both CC and PC do not have Indigenous Village or Composite Indigenous Village as defined under the VREO.

However, deputations and individuals who attended the Bills Committee meeting to express views claimed that CC should be regarded as an "Indigenous Village" under the VREO and the inhabitants should be given the right to elect LEGISLATIVE COUNCIL ─ 26 March 2014 9145

VRs in accordance with the VREO. The Bills Committee has requested the Administration to clarify whether CC and PC were the only two market towns in existence in 1898 with KFR election.

The Administration has explained to the Bills Committee that according to the legislative intent of the VREO enacted in 2003, only Indigenous Villages and Composite Indigenous Villages already in existence in 1898 in the New Territories where VR system had already been in place in 1999 are included as Indigenous Villages under the VREO. CC and PC were market towns in 1898 and had never had any VR system.

The Administration advised that it has made reference to a number of records, including the List of Established Villages in the New Territories jointly compiled by the Government and the Heung Yee Kuk (HYK) in 1991, the Block Lease of land in the New Territories, the List of Recognized Villages under the New Territories Small House Policy and the existing Constitution of the CC Rural Committee (RC). No record indicated that CC has Indigenous Village or any VR system exclusively for indigenous inhabitants.

Some deputations and individuals used the Gazette Notice in 1899 as proof that CC was a village and had VRs. In response to the enquiry of the Bills Committee, the Administration explained that the Gazette Notice was published pursuant to the then Local Communities Ordinance. It aimed to divide the New Territories into districts and sub-districts to facilitate administration. That Ordinance and Gazette Notice were not related to the village representation system and the committee members of the sub-district listed therein were not VRs. That Ordinance was repealed in 1910 because it was found to have no practical effect.

The Bills Committee also notices that the Bills Committee on Village Representative Election Legislation (Miscellaneous Amendments) Bill 2009 (the 2009 Amendment Bill) had thorough deliberations on why CC had not been included in the VREO. In the light of the explanation given by the Administration and the deliberations of the Bills Committee on the 2009 Amendment Bill, the Bills Committee notes the different views of the Administration and some CC residents on whether there are indigenous villages on CC and different documents sought to be relied on by them.

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Regarding the proposed regulatory framework for KFR elections, the Administration has explained to the Bills Committee that in view of the similar functions between KFRs and RRs for Existing Villages to reflect the views of CC and PC residents on local affairs, it was proposed that the regulatory framework for KFR election should be modelled on that for RR elections for Existing Villages under the VREO. Members do not have any special views on this proposal.

Some members indicate their support for the proposal to retain the present "block vote" system for KFR elections, under which each elector may vote for a number of candidates not exceeding the number of KFRs to be returned at the election concerned (that is, a maximum of 39 for CC and 17 for PC). Nonetheless, some other members are concerned that the adoption of the "block vote" system for the KFR elections for CC and PC might lead to possible domination by some groups of candidates in the past KFR elections, and thus affected the chances of individual candidates to win the elections.

The Administration explained that the legislative intent is to bring the KFR elections under statutory regulation while respecting and retaining as far as possible the existing electoral arrangements that the residents are familiar with, including the eligibility requirements for electors, number of seats and voting system, and so on. The Administration has also consulted the CCRC and the PCRC on the legislative proposal and details of the electoral arrangements. In their view, the existing election system which has been in use for years should remain unchanged.

The Bills Committee requested the Administration to consult the CCRC and the PCRC again on whether the voting system should be changed. The Administration later informed the Bills Committee that the two RCs maintain their view that CC and PC should each be retained as a single constituency and continue to use the "block vote" system for voting in the KFR elections. There is no unfairness under the present electoral arrangements since electors have the rights to nominate, stand for elections and vote in a fair and free manner.

The Administration also advised that while electors can vote for a maximum of 39 (CC) or 17 (PC) candidates in the election, they have the right to vote for a smaller number of candidates or even one candidate. Under the current voting system, electors have the right to choose more than one candidates of their choice and therefore the voting system reflects more fully the wish of LEGISLATIVE COUNCIL ─ 26 March 2014 9147 electors in multiple voting, and the legitimacy and representativeness of the elected persons will be enhanced as they may obtain a higher number of votes.

Mr Albert HO said that, to avoid domination by one single group of candidates, he will propose a Committee stage amendment (CSA) to restrict the number of candidates that each elector may vote for at an election on CC or PC.

Clause 62 of the Bill proposes to amend section 2 of the Maximum Amount of Election Expenses (Village Representative Election) Regulation to stipulate that the maximum amount of election expenses that can be incurred by or on behalf of each candidate at an election for a Rural Area is $38,000 where there are more than 5 000 electors. Members have no strong view on the proposal. A member has nonetheless raised concern about the possible unfairness arising from the pooling of resources and the conduct of joint electioneering activities by candidates who have group affiliations.

The Administration explained that the maximum amount of election expenses for public elections is governed by the ECICO and its subsidiary legislation, and both the prevailing legislation and the Guidelines on Election-related Activities in respect of public elections issued by the Electoral Affairs Commission do not prohibit different candidates or groups of candidates from conducting joint electioneering activities (such as publishing joint election advertisements). The expenses incurred, however, shall be shared by the candidates on a pro rata basis according to their respective expenses and declared in the return of election expenses.

In response to the Bills Committee, the Administration agreed to propose a CSA to enhance the clarity in presentation of the relevant provisions and the consistency in wording.

Deputy President, now I am going to express the views of the Democratic Alliance for the Betterment and Progress of Hong Kong (DAB) on the Bill.

Deputy President, the DAB supports the Bill and the various CSAs to be proposed by the Government.

The close tie between the relevant election laws and me was developed 12 years ago. When the Government introduced two amendment bills to the VREO to this Council in 2002 and 2009 respectively for scrutiny, I was elected 9148 LEGISLATIVE COUNCIL ─ 26 March 2014 the Chairman of these two bills committees. This is the third time the Government proposed an amendment bill on the relevant elections, and I have therefore witnessed the changes and improvements of the VREO. Furthermore, the name of the bill has also changed from "Village Representative" to "Rural Representative" to reflect the scope of the election boundaries and areas under the VERO in a more comprehensive and accurate manner.

The amendments proposed in the Bill aims to broaden the scope of the existing VREO as well as the relevant election ordinances and subsidiary legislation, so that they would also regulate the elections of KFR for CC and PC to be held in or after 2015. Judging from the perspective of maintaining fair and just elections and safeguarding against corruption in elections, this rural representative election legislation is an important improvement. As the VREO can now better dovetail with social needs, we foresee that problems will arise if no amendment is made to the relevant laws, including the provision to prohibit imprisoned persons to vote. And yet, this is a significant change to the amended legislation. In this Chamber, we had spent long hours discussing and expressing views on the previous election laws, and changes have already been made. On the premise that, as in the case of the Chairmen and Vice-Chairmen of other RCs, the Chairmen and Vice-Chairmen of CCRC and PCRC are likewise members of the HYK, thus KFR elections for CC and PC should accordingly be regulated by the relevant election laws in the same manner. I am of the view that this legal point is reasonable and beyond doubt.

I would like to quote a Chinese saying, "the name is a misnomer". In fact, when an amendment bill was introduced in 2009, there had been disputes on the representation of CC and PC for them to be brought under statutory regulation. Should they elect VRs as Indigenous Villages or elect KFRs as Market Towns? How should we determine and decide? The DAB opines that we should rely on substantiated objective facts. Given that CC and PC have failed to produce sufficient evidence to prove that they fall into the scope of VR elections, they should otherwise be included into the election laws in the form of KFR election. I think this is the best approach where the interests of all parties are balanced. I can see from this Bill that efforts have been made in this regard.

Deputy President, different village clusters in the New Territories have their unique historical background and political mission, and they have traditional customs and lifestyles. What is more, their legitimate rights are protected by Article 40 of the Basic Law. The purpose of electing IIRs and non-IIRs as well LEGISLATIVE COUNCIL ─ 26 March 2014 9149 as KFRs in the villages of the New Territories is to facilitate effective management of village affairs, improve the environment of the villages and fight for the well-beings of the residents through these representatives. It can be said that the functions of these representatives is no different from District Council members or District Councils. It is only that they serve different district. Another focus of this Bill is whether the long-established "block vote" system should be retained as the electoral system for the KFR elections for CC and PC. Of course, Members present in this Chamber may have different interpretations of the term "block vote" system. When I was making a report on behalf of the Bills Committee, I have highlighted that the "block vote" system does not require the electors to cast all 37 votes when there are 37 candidates, or to vote for the maximum amount of candidates. This is not the case. Even if CC and PC have 39 and 17 candidates respectively, electors are not required to vote for the maximum number. Instead, they may vote for the candidate whom they trust and like. In other words, electors may cast one to 39 votes. The shortfall of votes will be regarded as invalidated votes, and votes exceeding … This is not the case. We can thus see from these disputes that some members or Members may not have a good grasp of the concept. We must, however, bear in mind that such "block vote" system enables the electors to vote for the candidates whom they trust.

The deliberation of the Bill certainly includes whether or not the "block vote" system should be retained. At the public hearing held by the Bills Committee to receive public views, the majority of residents who had expressed views supported the "block vote" system. CC and PC have long adopted the "block vote" system on the basis of one single constituency. The DAB thinks that Members should give due respect to this as local residents have particularly highlighted their wish to pass on to the next generation such long-established voting arrangement. If CC or PC is further divided into smaller constituencies for the sake of elections, I think this would be in stark contrast to the residents' views or public views expressed at the public hearing. Not only will this undermine the interests of the electors of the two places, but it has also departed from the sentiment of the villages.

Deputy President, since each place has its uniqueness, I am afraid that Mr Albert HO's proposal has far removed from the actual circumstances, which will change the voting system to restrict the number of candidates that each elector may vote for at an election on CC or PC to a number not exceeding a certain percentage of the number of KFR seats to be returned for the Market Town 9150 LEGISLATIVE COUNCIL ─ 26 March 2014 election concerned. What is more, since the voting system is an inherent voting culture of CC and PC, I believe no CC and PC resident would want to see any drastic changes made to it. Therefore, the DAB will not support Mr Albert HO's relevant CSA.

With these remarks, Deputy President, the DAB supports the Bill.

Thank you, Deputy President.

MR ALBERT HO (in Cantonese): Deputy President, when the Village Representative Election Ordinance (VREO) was enacted by the Government at the time, it only intended to include villages under the electoral system. Originally, there was only a system for the election of Village Representatives (VRs) by indigenous inhabitants (IIs). But subsequent to a judicial review case, it was ruled that non-IIs should not be excluded from village affairs, thus the law was amended to provide for the dual representation system.

However, neither the original VERO nor its subsequent amendments has included the elections for Cheung Chau (CC) and Ping Chau (PC) as they had never had any VR system. Instead, the so-called Kaifong Representative (KFR) elections had been conducted. The CC Rural Committees (RCs) will elect 39 KFRs whereas the PCRC will elect 17 KFRs.

As we all know, the VR system officially came into operation following its passage. A resident of CC asked, "What system is the KFR election for CC and PC? Why would the Home Affairs Department take part in and make electoral arrangements for the elections if they have not been brought under the Government's statutory regulation? How come the elected KFRs of CC and PC could elect from among themselves representatives to attend meetings of the CCRC and PCRC, and may subsequently be elected to the Heung Yee Kuk (HYK)? How can this be possible?"

Later, someone applied for a judicial review, probably in 2011, claiming that the Government had no right to make arrangement for such an election as this is not statue-based, and requested the Government to declare the election invalid. The then Secretary for Home Affairs intervened at that time, saying that legislation would be enacted immediately, and thus the judicial review halted.

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Today, the Government has introduced this Bill to this Council. The Bill is special in that it does not aim to bring the electoral system of CC and PC on a par with the existing VR system, but to specifically tailor made provisions for the KFR elections for these two places, with a view to consolidating or legitimizing the existing electoral arrangements. Even the original Ordinance will be renamed the Rural Representative Election Legislation Ordinance. Thus, if the Bill is passed today, KFR elections for CC and PC would be added to the VR elections being conducted in hundreds of other villages. I hope Members would understand the legislative background of this tailor-made bill.

Regarding this tailor-made legislative approach, the Government explained that this is attributable to the close linkage of the KFR elections in these two places with the RCs and HYK, which no longer exists in many other places. The Administration have even invented a new term "Market Town" for CC and PC, so as to distinguish them from other villages. Such linkage is not found in any other market towns as other places are all villages. Only CC and PC are market towns.

Therefore, the question facing us today is whether such policy should be accepted to allow the KFR elections for these only two market towns to maintain close linkage with the HYK. We all know that this will have constitutional consequences as the KFRs may elect from among themselves representatives to the HYK, which is now a functional constituency and may elect one Legislative Council Member and be officially represented on the District Council. Is this acceptable to us? This is the first question.

The second question is, many CC residents claimed to be IIs and considered "market town" a name forcefully set upon them by the Government. As a matter of fact, CC has been a fishing village since 1898. It has all along been represented by VRs, who have protected the rights of certain IIs and are still respected nowadays. These IIs mostly came from the reputed Wong Wai Tsak Tong (WWTT) of CC.

The history of WWTT began even earlier than 1898, which has long been granted the right to govern CC and indirectly manage all land on CC. As Members may be aware, a lot of "Government land" was subsequently granted to WWTT, which then granted it to other CC residents in the capacity of lessor. This is called "renewals".

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The descendants of WWTT have expressed their strong dissatisfaction to this Council, asking why the authorities have completely neglected this group of IIs who have existed in CC for more than a century when they proposed to bring the elections for CC and PC under statutory regulation. They have produced a lot of information to prove that the fishing village of CC already existed in 1898 and the most authoritative document is certainly the Gazette published in 1899. In the Gazette was a Notice published by the British Hong Kong Government pursuant to the then Local Communities Ordinance to divide the New Territories into districts, whereby CC was designated as a district and was clearly given the name "長洲村" (CC Village). This is the first powerful evidence.

Other evidences can also be found in old literature, such as the Gazetteer of Xin'an, which stated that both CC and PC were fishing villages. The third evidence that we considered very important is some identity cards, on which the words "村代表身份證" (VR cards) were clearly specified. If there was no village, why would there be VRs? According to the Government's interpretation, they should be called "representatives of market towns" or "KFRs" instead. Why were they referred as "VRs" in the documents issued to members of the CCRC then?

The abovementioned evidence is so conclusive to prove that CC is downright an Indigenous Village. Of course, there is still the fourth point which I guess many colleagues who are well-versed in New Territories affairs should be familiar with, and that is, IIs of CC were the first to be granted rating exemption and only they enjoy certain burial right. They nonetheless do not have the small house concessionary rights. The Government even pointed out that there was no mention of the name of the "village" in the Block Government Lease. Nonetheless, I am not going to talk about Block Government Lease for the time being.

While the Government has shed particular light on the non-existence of VR election after 1999, IIs of CC argued that the Government has been unco-operative and neglected their existence. The fact is, they had conducted certain elections on their own, such as the election of VRs and village heads. History can tell the circumstances leading to the incident. Dr LAU Wong-fat, who is present at the meeting, should have a clear picture of what has happened as we have yet to come to this world.

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It is learnt that in the 1950s and 1960s, the then District Officer in charge of CC affairs had a serious conflict with CC's local community led by WWTT and the two parties even cut off communication as a result. Subsequently, the British Hong Kong Government used masses to subdue masses and set up another organization, which later evolved into an association of KFRs. This organization had been put in a position against the WWTT, a family clan that found their root in CC long ago, and was later used to expel WWTT. As we all know, the authorities had even terminated the Block Crown Lease granted to WWTT in the 1990s.

With these questions in mind, I attended the public hearing of the Bills Committee and listened to their complaints at the Legislative Council. I had even met with them in private, read through the relevant literature and met with government officials. I found that the Government has model answers for these questions, for example, it argued that the "village" in the Local Communities Ordinance does not refer to "Indigenous Village". But its argument is not convincing at all as villages are villages. Does it mean that the word "village" does not mean "village"? Although the Government suggested that they are "Local Communities", this is its own explanation. After all, the best evidence is the relevant literature. How could the Administration still give such a reply? Therefore, in my opinion, it is impossible for the Government's reply to be the "final word".

It is reported that on 11 February 2014, Dr LAU Wong-fat, Chairman of HYK, signed and issued a letter to the Government, stating that "The HYK thinks the question of whether CC was an Indigenous Village in 1898 should merit further study by the Government". This alone shows that conclusion can hardly be drawn. If indigenous inhabitant group did exist and the existing kaifong association that deals with its affairs is not comprised of IIs, but mostly non-IIs (some people even said that there is no II at all), how can it deal with the matters relating to IIs? This is what upsets them most. How can the authorities use such a kaifong association comprising of non-IIs to deal with the matters relating to IIs?

Of course, they may resort to judicial review for this legal issue. But has the authorities showed any respect to the spirit of law when this Bill is introduced to this Council today? If Indigenous Village does exist, should the law be enacted in its present form? Or, should we at least put in place a mechanism to provide for the election of II Representatives?

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Despite that I have spoken for so long today, it does not mean that I support the system of II. Nor do I wish to see the implementation of the small house policy in CC. I utterly do not have such an intention. We must nonetheless respect the law. If Indigenous Village does exist in the New Territories, laws neglecting its existence should not be enacted, and this is precisely the argument that I have to put forward today. Although we do not support this Bill, we should not oppose it either because I understand that it is also necessary for other systems to be statue-based.

I therefore suggest the Democratic Party to abstain from voting today. For the relevant voting systems, we do not support the "block vote" system and I will speak again on this matter later on. I have proposed a Committee stage amendment to provide that an elector may note for a number of candidates not exceeding one third of the number of KFRs. If there are 39 seats, an elector may cast a maximum of 13 votes so as to ensure balanced participation. Prevention of domination is the explanation most commonly given by the Government because domination did prevail in the past. I will further elaborate on this when it comes to the Committee stage.

MR CHAN HAN-PAN (in Cantonese): Deputy President, the purpose of introducing the Rural Representative Election Legislation (Amendment) Bill 2013 (the Bill) into this Council is to provide a statue base for the Kaifong Representative (KFR) elections of the Rural Committees (RCs) of Cheung Chau (CC) and Ping Chau (PC), so that they can conduct statute-based elections, with a view to ensuring the fairness and openness of the elections. I therefore speak in support of the Bill.

At present, both the CCRC and PCRC have provided seats for KFRs, who are responsible for reflecting views of CC and PC residents on local affairs. At present, KFR election is conducted administratively, and there are 39 and 17 seats in CC and PC respectively. The Islands District Office is responsible for providing all logistical support for the elections, with the Islands District Officer (DO) serving as the Returning Officer. According to the Government, as KFR election is not statute-based, it faces a number of operational difficulties and inadequacies in conducting the election. For instance, claims and objections in relation to the register of electors can only be determined by the Islands DO, not by magistrates appointed by the Chief Justice as Revising Officers, as in the case of Village Representative (VR) election. All election complaints and petitions LEGISLATIVE COUNCIL ─ 26 March 2014 9155 are handled by the Islands DO, with no independent authority to review the relevant decision. Furthermore, in the absence of statutory control, it is impossible to make arrangements for persons under custody to register as electors, or to cast their votes in the election. Also, the Government has no statutory power to request other departments, such as the Housing Department, the Registration and Electoral Office and the Immigration Department, to furnish information on the electors so as to verify their eligibility and registration particulars.

The content of the Bill mainly aims to broaden the scope of the subsidiary legislation of the Village Representative Election Ordinance (VREO), the Electoral Affairs Commission Ordinance (Cap. 541), the Elections (Corrupt and Illegal Conduct) Ordinance (Cap. 554) so that they would also regulate the elections of KFRs for CC and PC to be held in or after 2015. I therefore agree with this legislative amendment, which will make the relevant elections fairer and more impartial. It is worthy of support.

The electoral arrangement of the KFR elections is also a major concern of the Bills Committee. At present, elections on CC and PC adopt the "block vote" system, under which each elector may choose one or more than one candidates, so long as the number does not exceed that of KFRs to be returned at the election concerned. In other words, each CC elector may vote for one or at most 39 candidates whereas each PC elector may vote for 17 candidates. There is no problem if he chooses one only. A member is concerned that the adoption of the "block vote" system might lead to possible domination by some groups, thereby affecting the chances of individual candidates to win the elections. Therefore, a member has once suggested that consideration should be given to dividing CC and PC into several constituencies, so as to avoid domination by one single group, or restrict the number of candidates that each elector may vote for at an election to a number not exceeding a certain percentage of the number of KFR seats.

Nonetheless, in my opinion, the KFR elections conducted by the CCRC and PCRC have been working well in the past, and go in tandem with the villages, thus no changes should be made. CC and PC have always been a single constituency and the "block vote" system has been adopted in the KFR elections. Given the small size of CC and PC, they are small communities where electors are familiar with one another, and they are also familiar with the candidates' vision, conduct and contributions to the community. Electors vote 9156 LEGISLATIVE COUNCIL ─ 26 March 2014 for candidates in recognition of their contributions and abilities. In fact, independent candidates stand an equal chance to be elected. While candidates may join as a group to campaign, electors may vote for individual candidates in the group according to their wishes. Suppose some candidates campaign as a group, but if an elector does not like the first two or last three candidates on the candidate list, he may vote for individual candidates in the group or choose to vote for one of the candidates within the group. Therefore, basically speaking, all electors should vote in accordance with their own free will and make objective assessment independently based on their knowledge of the candidates and their abilities.

Furthermore, CC and PC are integrated communities where the interests of the residents are interconnected and indivisible. As Members may be aware, there are only a few street blocks in CC. If we divide the streets into different constituencies such that one end of the street is managed by A and the other end managed by B, how can they do the job properly? If we divide CC and PC into several constituencies, the KFRs to be elected may only represent the interests of residents living on that particular part of the street, which will affect the overall development of CC and PC. For instance, given that the northern and southern parts of CC are sparsely populated, thus dividing CC into several constituencies for the sake of the CCRC election will undoubtedly give rise to "sectarianism", whereby each constituency will only mind their own business. In that case, I am afraid that even the CCRC cannot be the mediator. As a matter of fact, there is no unfairness under the present electoral arrangements since electors have the rights to nominate, stand for election and vote in a fair and free manner. And, given that the "block vote" system has all along been effective, there is no need to change it.

Lastly, some people suggested to rename the VREO as the "Village Representative and Rural Representative Election Ordinance", to the effect of safeguarding the election of VRs (the subject body of the Bill) on the one hand, and balancing and coping with the KFR elections being included on the other. The subject body of the original VREO is the 1 000-odd VRs of the villages in the New Territories. The proposed amendment has accordingly included the election of KFRs to facilitate the regulation of other representatives in the future, and thus the representatives have also been renamed as "rural representatives". This is why the Government suggested that the VREO should be renamed as the Rural Representative Election Ordinance.

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However, some people worry that the name may belittle the VRs' status as the subject body of the law. It is rare to see the subject body being removed from the provisions of an amendment bill. As a matter of fact, the VREO has operated for many years and has been working well with VRs returning year after year. Adding that the phrase "Village Representative and Rural Representative" will not create more ambiguities than the term "Rural Representative", but instead has greater clarity. This would save a lot of trouble to explain, for instance, the meaning of the terms. I therefore hope that the Government will rename the Bill as the "Village Representative and Rural Representative Election Bill" to manifest the status of VRs in the Bill.

All in all, I support the Government's Bill to introduce a statutory election procedure while retaining the original electoral arrangements, and I hope the Government would consider renaming the Bill as the "Village Representative and Rural Representative Election Bill".

Deputy President, I so submit.

MR MA FUNG-KWOK (in Cantonese): Deputy President, I speak in support of the amendments proposed by the authorities in the Rural Representative Election Legislation (Amendment) Bill 2013.

As pointed out by the Administration, since the previous Kaifong Representative (KFR) elections for Cheung Chau (CC) and Ping Chau (PC) are not statute-based, they were only conducted administratively and the authorities have thus faced a lot of difficulties in dealing with matters relating to these two elections. To improve the electoral arrangements of these two elections, it would be appropriate and reasonable to legitimize the elections concerned. The new legislation may also provide the elected representatives the statutory status to serve the community and kaifongs.

Deputy President, during the deliberation of the Bills Committee on Rural Representative Election Legislation (Amendment) Bill 2013 (the Bills Committee), stakeholders and members have expressed particular concern over two issues. Firstly, should CC and PC be divided into a number of constituencies to replace the existing one single constituency approach? Secondly, should the existing "block vote" system be replaced by other election systems, such as "one person, one vote"?

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Regarding the first point, I find it pretty difficult to implement. According to the information paper submitted by the Administration, there are currently around 8 600 and 3 100 electors of KFR for CC and PC, but only 2 505 and 1 745 electors voted in the last KFR election on CC and PC, and the voting rate were 29% and 57% respectively. Given the small number of electors and the low voting rate, mandatorily dividing those two elections into small constituencies would further reduce the number of electors. In that case, candidates would only need a small number of votes to be elected, which might give rise to the problem of low recognition.

Furthermore, as both CC and PC are independent islands, the problems and concerns of local residents are more or less the same. I fail to see any uniqueness or heterogeneity between these two islands which justifies further division into smaller constituencies. I am therefore inclined to support the existing single constituency approach.

The second concern, that is, replacing the "block vote" system by other election systems, may also cause the abovementioned problems. I therefore do see any justifiable grounds or reasons to change the existing single constituency approach or voting method which has been working very well.

Mr Albert HO has proposed a Committee stage amendment (CSA) to restrict the number of candidates that each elector may vote for at an election on CC or PC to a number not exceeding a certain percentage of the number of KFR seats to be returned for the election of the market towns concerned. While I appreciate Mr HO's intention to improve the voting system, I notice that many stakeholders have indicated their support to retain the existing arrangement during the deliberation of the Bills Committee, whereby electors may vote for up to 39 and 17 candidates in the KFR elections for CC and PC. Noting that the consultation outcome showed that people wish to maintain the status quo, I consider it necessary to respect the views of the stakeholders. Certainly, there are pros and cons to different electoral arrangements, they are therefore subject to further discussions.

On the premise of respecting majority views and considering the Government's intention to provide a statue base for the two elections through this legislative amendment, I will support the Administration's CSA.

I so submit. Thank you, Deputy President.

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

MR ALBERT CHAN (in Cantonese): Deputy President, it can be said that the discussion of this Bill today is to settle some historical problems, but it seems that the issue has become even more complicated. Not only has the Bill failed to elucidate or resolve certain problems, it has even given rise to new disputes and new problems. Deputy President, this can be traced back to the 1990s when the then Legislative Council in the British-Hong Kong era enacted a law to terminate the Block Crown Lease granted to Wong Wai Tsak Tong (WWTT), thereby changing its role as the owner or administrator of Crown Land. This has changed the entire Cheung Chau (CC) to a certain extent, especially its relations with the indigenous inhabitants (IIs) and land management. The then Legislative Council established a subcommittee with me as the Vice-Chairman and Mr TANG Siu-tong as the Chairman. Mr TAM Yiu-chung had also joined the subcommittee. Of the seven people who had participated in the deliberation, only two remain in this Council. WWTT of CC is directly and necessarily related to the election of Village Representatives (VRs) under discussion today. I will give a detailed explanation on this.

After listening to Members' views on the elections of Indigenous Inhabitants Representatives (IIRs) or Indigenous Villages (IVs), I find that certain concepts and logics have not been clarified. Defining "village" according to its literal meaning would greatly deviate from the spirit of the relevant laws or the election of IIRs. Basically, any organization established in the New Territories before 1898 with a pattern of communal living could be deemed an II organization to a certain extent, and is different from the market towns found in many other places, such as Tai Po Market. Market Town is a place where people bring their stuffs to sell in the morning and then leave when the stuffs are sold out, and it is not a permanent place for communal living. Therefore, in principle, it cannot be regarded as an IV or a place for communal living. However, in some cases, markets might become a place of living. If a market had evolved into a place of living before 1898 and elections had been conducted, it could be regarded as an IV.

A few years ago when this Council scrutinized another bill on VR election, I succeeded in striving for ― a slogan most commonly used by the Democratic Alliance for the Betterment and Progress of Hong Kong (DAB) ― Yuen Long Kau Hui to be recognized as an IV. Many people found this unbelievable. At 9160 LEGISLATIVE COUNCIL ─ 26 March 2014 that time, I negotiated with the Home Affairs Bureau in person and finally convinced many Members and the Government to officially recognize Yuen Long Kau Hui (an old but beautiful and unique market town next to Yuen Long West Rail Station) as one of the 100-odd IVs. The name of this IV is Yuen Long Kau Hui. The arguments of the opponents at that time were more or less the same as those who presently claim that CC is not a village.

In fact, there is no big difference between CC and Mui Wo. But unlike CC, Mui Wo has main streets and many villages. The villages are separated by lanes and each having its own rural organization and representative, which is indeed a formal organization of an IV. Thus, the argument that villages in between street blocks are not independent is complete nonsense and this is a common phenomenon throughout the New Territories. The place right behind a lane would probably belong to another rural organization. In places like Mui Wo, Yuen Long, Sheung Shui, Tai Po, Sha Tin, Pui O and Tai Wai, people may see another village across the street. Therefore, the argument that it is impossible for a place stretching beyond a certain boundary to be an independent organization actually contradicts with the actual situation.

Concerning CC, when the then Legislative Council enacted a legislation in 1995 to terminate the Block Crown Lease of WWTT, it should have done justice to the descendants of WWTT by recognizing WWTT or the prevailing organization as an II organization. WWTT covered various streets and by taking advantage of its influence, representative bodies had been set up in each area, governed by a Manager. Many II organizations were managed by Managers. Despite that WWTT covered various streets and had a number of Managers returned by elections, it used the name "tong" instead of "village". The people concerned settled there before 1898 and they had formal election bodies as well as legitimate Managers and authority. The authority was even greater than many II organizations. Given that territories had been granted to WWTT during the Qing Dynasty, it had a bigger say in land than other II organizations in the New Territories.

Although the descendants of WWTT had raised strong opposition when the relevant law was passed in 1990, they had not suggested the Government to recognize WWTT as an II organization subsequent to the termination of Block Crown Lease. It would be more reasonable and fair if the matter was dealt with at the same time. Unfortunately, descendants of WWTT had not put forward such a proposal because they opined that they were not only the genuine IIs of LEGISLATIVE COUNCIL ─ 26 March 2014 9161

CC, but also the landlords. The granting of territory during the Qing Dynasty had given WWTT a very special status, which was a historical problem. We should therefore take into consideration the relevant laws on rural representative elections and the purpose of the II organizations.

Whether IIs should enjoy privileges is a separate issue. The People Power opposes the privileges enjoyed by IIs and the small house policy. However, judging from the principles of the relevant legislation as well as the perspectives of fairness, justice, reasonableness and respect for history, CC should comprise of two groups of people. The Bill covers both II and non-II organizations, and I trust that the majority of members of the so-called CC Rural Committee (RC) are non-IIs, they are not descendants of inhabitants who had lived in CC before 1898. Thus, they cannot represent IIs.

In CC, the descendants of WWTT are definitely the descendants of IIs. Genealogy can confirm their existence and that they comply with the agreement entered between Heung Yee Kuk (HYK) and the Home Affairs Bureau concerning IIRs. One of the criteria provided in the agreement is that they should have legitimate elected representatives. Not only had the elected representatives existed before the relevant law was enacted by the then Legislative Council, evidences showed that electoral system had been put in place in early 1990s and 1898 for the election of WWTT representatives.

If we compare the organization and mode of operation of CC WWTT with many other organizations of IVs or representative organizations in the New Territories, the history of WWTT may be even longer and has a higher percentage of elected membership. At present, many so-called II groups have been relocated from one place to another, and the so-called IVs did not have any inhabitants before 1898. Even if it is not as early as 1898, some villages were only inhabited in the recent 30 to 40 years. Nonetheless, the ancestors of those inhabitants had settled in CC before 1898. Were they still not IIs? Today's Bill has, to a certain extent, failed to address some unfair and unjust historical problems, which is unfair to those genuine IIs. The People Power therefore opposes the Second Reading of the Bill.

Earlier, I have discussed the characteristics of WWTT and CC with Dr LAU Wong-fat. In fact, the HYK should expeditiously meet with the descendants of WWTT because we know clearly that before the Home Affairs Bureau would accept WWTT as a representative of IIs of CC, we must first 9162 LEGISLATIVE COUNCIL ─ 26 March 2014 convince the HYK. And yet, the problem has now become pretty complicated as it involves political issues. I trust that the majority of members of the so-called CCRC are not genuine IIs. While they claim to be rural representatives, they are actually antagonistic towards WWTT on political matters. Although they are not genuine descendants of IIs in CC, they have become the "overlord" or local tyrant after being elected as rural representatives of CC. Any attempt to resume the leading role of WWTT before the 1990s, to deprive CCRC members of their representative status or to lure them to give up such status is just a castle in the air. Worse still, most of them are confidants or allies of the DAB and are therefore backed up by the DAB, the largest political party in the Legislative Council. Dr LAM Tai-fai tried to keep a distance from me. I am very clear about my political positioning, and I should keep a distance from him.

Deputy President, with the backing of the DAB on political matters, this group of local leaders of CC has in return rendered full support to the DAB in elections. As such, the CCRC has always supported the DAB in all District Council or Legislative Council elections. This is indeed a transfer of political benefits and mutual harbouring. To secure such benefits, they have even turned a blind eye to history. Who can refute the history mentioned by me earlier? Literatures have sufficiently proved beyond doubt the II status of the descendants of WWTT. Although the word "village" was only found in some literatures, but not all, communal living was nonetheless a hard fact. I think under the protection of the DAB, it would be extremely difficult to do justice to the descendants of WWTT, but I still hope that other Members, especially non-DAB Members from the royalist camp, would respect the historical fact.

Of course, as I have said right at the beginning, we oppose the privilege enjoyed by the II organization. The fact is, we should not differentiate if a person is an II after the reunification in 1997. Thus, in order to be indiscriminate in treatment, respect history and the people concerned, we should oppose the Second Reading of this Bill. By voting down this Bill, we can force the Home Affairs Bureau to restart the discussion on this matter, as well as right a historical injustice and do justice to the genuine IIs in CC.

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

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MR LEUNG KWOK-HUNG (in Cantonese): Deputy President, I once met with the residents of Cheung Chau (CC) at the Complaints Division of the Legislative Council. This matter has nothing to do with me as I rarely go to CC.

First of all, regarding the interests of the Rural Committee (RC) or indigenous inhabitants (IIs), I have said time and again that the privileges concerned should be abolished. Of course, under the current political circumstances, the proposed abolition is like climbing a tree to get fish or borrowing a hair brush from a monk. Take a look at the small-circle election. No one would dare to alienate the "rural forces" as they have dominated the election.

The issue under discussion is a piece of legislation. Will laws passed by the Legislative Council subject to judicial review? That is possible, as in the case that I had filed a lawsuit against the President's power to cut off the filibuster. Today, I am speaking to prevent the recurrence of similar situation. If Members vote for the Bill later on and someone applies for a judicial review (I am not sure if this is possible), there is a chance that the Bill will be abolished. This is similar to the case in which Donald TSANG vowed to arbitrarily intercept communication and he said that his words were final. He put his words into practice. I then applied for a judicial review and eventually, the Government lost the case. Similarly, someone may apply for judicial review to abolish the Bill after Members voted for it.

My viewpoint is very simple. Since Secretary TSANG Tak-shing is not present … He has been very busy fixing the messy situation left behind by the Hong Kong Football Association, and I have also assisted in the recovery of outstanding wages … There he is. I want to tell him that I am helping out in the recovery of outstanding wages. Although $60 million has been spent on the Project Phoenix, it turns out to be a "project feeble cat". He is now fully occupied because as the Secretary, he has to meet many bigwigs and distribute benefits to them. What is the problem then? When government representatives and I are listening to his speech, we have a feeling that he has been trained to be so bureaucratic. He said that he does not care about us and his words are final. Similarly, in the case of the interpretation of Article 45 of the Basic Law, their words are final.

Local residents have produced a lot of evidence to show that CC was a village during the Hong Kong-British era. But then for no reason, this purported 9164 LEGISLATIVE COUNCIL ─ 26 March 2014 village was no longer recognized as a village and was not allowed to conduct election. I asked a government official, was it the case that since CC had not been recognized as a village and could no longer conduct any election of village representatives, it then become an evidence to counter prove that CC was not a village. In fact, the issue is easy to understand. After speaking for so long, the question of whether CC was a village in the Gazette published in 1898 has been open to argument.

I would like to ask a question: Should the Government adopt a friendly attitude or otherwise if it has similar conflict with a resident organization? Who should be responsible for the ambiguities created by the different policies introduced by various government authorities (such as District Office) under different Governors to govern the rural areas or villages? Should the person-in-charge or the Government be held responsible?

Mr Albert CHAN just now mentioned that, due to historical reasons, elections conducted by Wong Wai Tsak Tong (WWTT) are actually elections for village representatives. The question is whether or not the place is a village. The definition of village is very simple, and as mentioned by Mr Albert CHAN, CC is indeed a fishing village. I visit Mui Wo occasionally, but I fail to see any village at all. Only concrete village can be found. I have no idea what the name of the village is as I walk along the streets. Thus, the question is: Has the evidence released in 1898 proved that CC was a fishing village, that is, CC is by itself a village but not a market? Or, was it a market in the first place but had a couple of villages in the vicinity? Or, were there villages inside villages? After all, it can still be regarded as a village.

The Government is telling Members that it will not handle or follow up on the matter, which means that when there are disputes on whether CC was a village, the Government maintained that it was not. The residents nonetheless considered that the previous elections conducted were elections for village representatives from a legal perspective, and thus proved that II organizations did exist. This is the point. But the Government denied and required that the Bill be passed and sealed by the Legislative Council. I will definitely not seal for it, buddy, as the relevant issues cannot be dealt with by the Bill.

Simply speaking, political disputes and the sharing of interests are the necessary outcome of small-circle elections. The "Hulk" is right in saying that whoever is favourable to the Chief Executive returned by small-circle election LEGISLATIVE COUNCIL ─ 26 March 2014 9165 will be granted certain rights. It is simple enough and is indeed the crux of the issue.

Therefore, on this matter, I must first declare that I do not know anyone from WWTT. Thus, even if an organization comes to me and vows to be responsible for land transaction, I will not concur. The question thus lies in the legislation itself. There is no way that the grounds or legal justifications provided by WWTT or those IIs could be wrong.

Therefore, I have only one conclusion. I do not know any of them ― people might chide me when I visited CC, but there is nothing I can do because rural people do not like me ― so I have only one conclusion: I cannot support the amendment bill proposed by the Government. Also, I hope that it will pull back before it is too late, and discuss the issue with different stakeholders in CC or return the interests owed to people who claimed to be IIs. Not only are these people eligible to run in the elections for Village Representative as defined by the Government, the issue under discussion is also concerned with the principle of the RC being represented in Heung Yee Kuk, and that is, the principle of fairness.

I therefore only hope that other Members will pull back before it is too late, and vote down this amendment bill. This would force the Government to return to the negotiation table and discuss with the IIs of CC, people from WWTT or people who claim that their rights have been infringed. Why should I do so?

May I ask Members present at the meeting to consider one point. If the Government loses the case, it would mean that we have not been attentive in this Council and the legislation endorsed by us has subsequently been overturned by a judicial review. This is indeed a waste of time. What is more, I think the government representatives or assistants of the Secretary are too unreasonable, and have failed to state the reasons so far. What makes me think that the Government is undesirable? Because even if you raise 1 000 questions or 100 doubts, it will simply repeat its model answers without clear the doubts. Honestly speaking, I have heard "Let's talk" many times, as in the case of universal suffrage, but the Government is not going to listen and will only repeat what it intends to say. Such an attitude is undesirable. I therefore find it impossible to support the Government's amendment bill today. "Let's talk and achieve universal suffrage" is nothing but a lie, and the same for this case. So, I hope that colleagues will vote down this amendment bill.

Thank you, Deputy President.

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DR KENNETH CHAN (in Cantonese): Deputy President, apart from being a member of this Bills Committee, I am also the Deputy Chairman of the Panel on Home Affairs (the Panel). I have just checked through some records of the Panel and confirmed that a relevant paper was discussed by the Panel in July 2013. Why do I need to check through the records? Because even though I have lived to this age, I only came to know that there was a body called Wong Wai Tsak Tong (WWTT) in Hong Kong in the course of scrutinizing the Bill. At that time, they mobilized their full force and attended the meeting of the Panel. The President was also present at that meeting and received their views with other members. Many of them shared the last name of WONG, and they took turns to present their views. In this regard, I found it quite strange because when I reviewed the paper provided by the Government to the Panel in July 2013, nothing was mentioned about this incident back then, and there was nothing in the paper which indicated or suggested to Honourable colleagues that such a dispute had happened in the past or reminded us of the relevant background. Of course, I am just a novice in the Council, but more seasoned Members who are now present in the Chamber, such as Mr Albert CHAN, Mr Albert HO and Mr IP Kwok-him, should know about it.

At the meeting of the Panel, judging merely from the information provided by the Government, I thought that on the surface of it, the matter was quite simple, that is, currently, elections in two places, namely, Cheung Chau (CC) and Peng Chau (PC), are not covered under the scope of the Ordinance and hence, it is necessary to put in place the relevant arrangements, so that the elections concerned would no longer be dealt with through administrative means. Therefore, the general direction should be simple and straight-forward. It is also in line with the public's basic requirement for sound and proper elections, such as, verifying the identity of electors, verifying the qualification of candidates to stand for election, imposing a cap on election expenses, and so on. Furthermore, it would be necessary to ascertain the responsible department(s) in case problems are encountered during elections, especially when the problems concerned are legal problems, so that elections in PC and CC can be held in a fair, open and just manner.

On the surface of it, the proposal sounds fair enough. I just found it odd why the relevant work was not undertaken together with the earlier legislative amendments relating to the elections of village representatives. According to the Government, as time was needed for discussion and given the different conditions of the villages, more time was required to handle the cases of PC and LEGISLATIVE COUNCIL ─ 26 March 2014 9167

CC. The work has now been completed. It sounds as if a lot of work had been done by the Government. But I find it strange that today, so many Honourable colleagues have questioned whether there are indigenous inhabitants (IIs) in CC, and why their rights are not recognized by the Government, such that they have to approach the Legislative Council time and again, not only to attend the public hearing of the Bills Committee, but also seek help from individual Members (including me), and reiterate their queries to the Complaints Division of the Legislative Council?

Honestly, I believe they actually have no venue to redress their grievances. They consider that they have all along been rejected, and that they have been deprived of certain rights that they had enjoyed for a long time, and their status has never been duly recognized. Regarding the election method proposed under this Bill, they are worried that it would affect their follow-up actions in respect of their status and make it even harder for them to gain recognition. Hence, they lobbied us not to support the passage of the Bill because the relevant amendments would take away their opportunity to fight for their status as IIs.

Of course, as Members of the Legislative Council, we must receive views and handle complaints as far as possible, and meet with the Administration to discuss the issues concerned. But honestly, when it comes to issues of this kind, legal proceedings may be the final resort, and the problems can only be resolved by the Judiciary. All along, the Government has submitted many papers to Members, explaining why it would not consider recognizing those people from WWTT who claimed to be IIs in CC as IIs. But honestly, these papers only present the same argument over and over again without adequately addressing the relevant problems. On the other hand, these CC residents have repeatedly dug up many papers, trying to lobby Members of the Legislative Council to "stop and think".

In fact, my original understanding was that the Government wanted to formalize certain elections and put them under the statutory control and regulation, which was a simple enough matter. The only controversy was, as mentioned by Mr Albert HO, whether the election method of a "block vote" system or one similar to the proportional representation system should be adopted. As I see it, such discussion is very meaningful, and I will go back to this point later. But given the current unexpected turn of events, I think the Government should assume a great responsibility.

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As I recall, I had never received any such message when the matter was discussed by the Panel in July 2013, or even earlier when I was invited by government officials to discuss the paper or the relevant concerns in private. Did the Government omit such disputes intentionally or otherwise? Or is the Government of the view that as the only matter to be dealt with at present is the formalization of the election method, and hence such matters can be put aside? However, Deputy President, this is a wrong approach. The function of the Legislative Council is not to dance to the Government's tune. I believe the Government has no reason to be so ignorant or naïve, thinking that the public would not come to the Legislative Council to express their views and state their case, so as to gain Members' understanding and sympathy, and thereby support them in fighting for their perceived lawful rights, as well as demanding to have their identity recognized.

Therefore, I am enraged that the Government had, by accident or design, omitted these disputes, such that our discussion in the Panel was simply and directly focused on one single issue. Did the Government mislead the Legislative Council and the Panel intentionally? Had the relevant matter been discussed at that time, we might have more opportunity and space to jointly discuss the way forward or identify those parts of the Bill which might present certain hindrance and consider whether they could be unpegged or unbundled from the Bill and be dealt with separately. But even to date, the Government has not come up with any proposal that would allow the Bill to proceed and be enacted on the one hand, and address the disputes relating to WWTT or some CC residents who consider themselves to be IIs on the other.

Going back to the paper provided by the Government for the Panel meeting in July 2013, I note that it had mentioned about public consultation. In fact, all papers provided by the Government have a paragraph about how public consultation had been undertaken. According to the relevant paper, public consultation had been held. Nonetheless, with whom had the Government consulted? The answer was the incumbent Rural Committees (RCs) and Heung Yee Kuk (HYK). That is all. CC kaifongs who approached the Complaints Division of the Legislative Council and attended the public hearing considered that they were not or had not been consulted; they felt that their right to know had been deprived. They only came forward and spoke out at such a late stage because throughout the process, they were completely unaware of the matter. Can they be blamed? If representational bodies such as RCs or HYK had not LEGISLATIVE COUNCIL ─ 26 March 2014 9169 taken the initiative to approach these … As we know, people living in CC should know that the complaint or so-called grievances of these residents have not been dealt with all along. Hence, all of them have come to the Legislative Council to settle the score with the Government.

How was the consultation conducted by the Home Affairs Department (HAD)? From the information provided in the paper, it seems that the HAD had causally sought the views of some village elders, that is, leaders of the incumbent HYK or several RCs. Naturally, problems will arise from such a mode of public consultation. Nothing can remain unnoticed for long, right? Therefore, Deputy President, both the Legislative Council and the Panel find this matter very disturbing. As I see it, while the Bill itself has its merits, it must now proceed with great difficulty, given the turn of events to date.

Regarding the election system, we had also argued about this matter during the discussion on the Bill, and I am particularly concerned about the "block vote" system. Without the WWTT incident, I might consider the arrangement good enough. Why? Because if we make enquiries with the Government about elections held previously, it cannot provide any information at all, say, how much had been spent in holding an election, what election mode was adopted, how many groups were involved, who were the candidates, and so on. No information has been kept by the Government at all. From this perspective, it is of course much better to put the elections under regulation. However, problems would arise after the regulation is imposed, that is, will a collective mode of election be formed, such that independent candidates, candidates belonging to the minority group, or candidates with divergent views, as well as their supporters would be marginalized.

This is not a theoretical problem, but a practical one. An analysis of the election system will reveal that such problems have all along been created by this kind of "block vote" system. Initially, some village elders would deny the existence of such problems and claim that some independent candidates had won before. Yet, so far, there is only one such case. What about the other candidates? The village elders said that these candidates were quite independent, but how independent were they? If we asked further, we found that those candidates wore the same clothes during the election, so that electors could easily identify them. Given the large number of candidates, electors had difficulty in remembering the names of candidates. Hence, candidates wore the 9170 LEGISLATIVE COUNCIL ─ 26 March 2014 same clothes. That is exactly what we are worried about, Deputy President. We worry that this kind of "block vote" system would give rise to the situation of the big bullying the small.

At present, even if there are regulations and restrictions on the ceiling of election expense, there are still problems. For example, the maximum amount of election expenses per candidate is $20,000-odd, but if there are dozens of candidates, each with an upper limit of $20,000-odd, the total amount of election expenses would be over $1 million. Taken together, the sum can be that much. If I were to run in the election as an independent candidate, it would be tantamount to breaking an egg against a solid wall, and this is a problem that must be faced by all independent candidates. Of course, some Members would say that the election result is ultimately decided by electors. If an elector dislikes certain people in the group, he will give his vote to other candidates instead of voting for them. While that is certainly true, the basic fact will not be changed, that is, under the "block vote" system, candidates who organize themselves in groups can spend a lot of resources on their election campaign and they can easily defeat independent candidates or minority groups formed by one or two candidates.

During our discussion on this issue, members opined that the condition of the villages or the relevant factors should be taken into account. I also agreed to this view. In fact, to be honest, I have taken into consideration the condition of the villages when the matter was discussed by the Panel and the Bills Committee. In theory, if changes are made to the election system, the problems would vanish. But in my view, this is not the reality; the changes will not immediately bring about some miraculous or astonishing effects. I hope that a review would be conducted by the Government in due course. Notwithstanding the passage of this election method, we should carefully collect the evidence and statistics, so as to ascertain whether the implementation of the "block vote" system will actually give rise to the problem of our concern, that is, the monopolization of elections in CC and PC such that independent and minority-group candidates are marginalized due to the over-concentration of resources on some particular groups.

Of course, as the legislation has yet to be enacted, these are merely hypotheses. But with the legislation in place, together with the Government's statistics and studies on the details concerned, we will certainly have more convincing reasons to proceed with the reform of the election system in future. LEGISLATIVE COUNCIL ─ 26 March 2014 9171

But as a starting point today, I think we should consider Mr Albert HO's amendment seriously. Why? The reason is the same as the concern of WWTT residents I mentioned at the outset of my speech. We once asked them why they did not stand in the election. Since they considered that they were marginalized, why did they not stand in the election of kaifong representatives or join the RCs? According to them, they belonged to the minority faction, or they were the minorities in CC. In other words, they have resigned themselves to fate and considered that they do not have a chance to win at all, or they would definitely lose in the election. For them, the future "block vote" system is no different from the current system, and they can do nothing about it. In other words, they have a great sense of helplessness.

From the perspective of some officials, if they know WWTT, they might say that these people have all along been very overbearing, very wealthy or have a lot of resources, and they are not "innocent" at all. When we discuss this issue in this Council, we need not pay any attention as to whether they are "innocent", or whether they are wealthy, or whether they have a lot of resources, and so on. Those are irrelevant. The crux is the election system, that is, the counting of votes under "one person, one vote". In a certain place, if some people are always in the minority, it is impossible for them to be elected under the "block vote" system, so that they can eventually join the relevant committees or even HYK to make their voice heard.

Against this background, and given our recent ongoing study on and discussion about WWTT, or about whether these people have the rights as IIs in CC, Members should perhaps seriously re-consider what can be done by the Government to respond to their demand. Moreover, if the future election system should remain the same, they might feel even more marginalized. Hence, I hope Members will support Mr Albert HO's amendment. If there is support for his amendment such that the election system can be improved to protect or possibly protect the rights of WWTT or the independent and minority CC residents, I will consider giving my support to the Government's Bill.

I so submit.

DR KWOK KA-KI (in Cantonese): Deputy President, I speak in support of Mr Albert HO's Committee stage amendment (CSA).

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Not long ago, a group of Cheung Chau (CC) residents met and had a long discussion with Members at the Complaints Division of the Legislative Council, and I was one of the Duty Members. First of all, I must point out that Hong Kong has already reunited with China for many years, so I do not agree that those so-called indigenous inhabitants (IIs) still enjoy special status. What is more, the Government has undertaken to conduct a reform of the interests of those IIs, who have no public acceptance at all. Of course, this is not the occasion to discuss the issue, but LEUNG Chun-ying did undertake to review and change such twisted system during his election campaign. I think this undertaking is still valid. Two days ago … Sorry, it should be yesterday, LEUNG Chun-ying shamelessly said he felt good about the numerous policies that have been implemented. I wonder how he can have the face to say that he felt good about his policies. Not only has he refused to face the twisted system which has divided Hong Kong into IIs and non-IIs, but he has even approached some powerful persons by all means. I wonder how many disgraceful benefits have been involved. If he continues to do nothing, I think such disgraceful acts will become an irremovable stain.

At present, a group of persons who are not "insiders" … As Members may be aware, Wong Wai Tsak Tong (WWTT) is not considered an "insider". How will they run into luck? Even if the CSA proposed by Mr Albert HO luckily get passed, I still do not think there is any chance of winning. As we all know, in an organization or community that is full of under-the-table deals, how can a person lacking influence or power win an election? But why did these people still rise to fight, Deputy President? Because regardless of how twisted the system is, one can still find a bit of justice. All they strive for is a bit of justice. In other words, they hope that the Government will recognize their existence in history. As Members may be aware, in 1898 … From the numerous documents provided by them which span over a century, and the documents of the Government, we can see that WWTT was regarded as a village at that time. This is a historical fact written down in black and white, and is unchangeable. What upset the residents most is that the representatives of the Islands District Office and Home Affairs Bureau had completely ignored the views that they had clearly expressed during the meeting, and had not given them sufficient opportunity to make clear statement. As a result, the residents have to come to the Legislative Council again to beg for a meeting with government officials. They hoped that we could arrange a meeting for them. How come their relations with the Government and the Home Affairs Bureau, which are supposed to introduce reforms on behalf of the public, have come to such a state? This is bizarre. What is the purpose of proposing this Bill today? The Government originally aimed to make the LEGISLATIVE COUNCIL ─ 26 March 2014 9173 irrational system more rational by introducing some better approaches, but then something happened. A group of IIs of CC clearly indicated that they have lived in CC for more than a century, but their views and status are not respected. They have also clearly indicated they felt very disappointed and upset in this case.

I certainly have no idea of this, nor do I hope … The Government always advises members of the public not to arbitrarily challenge the Government by taking legal actions. I bet the Government would certainly say so. But I do understand that they were forced to do so to safeguard their rights. Who is the "initiator" then? If the Government enters into frank and sincere discussions with them in an objective manner, and addresses their concerns over the Bill, I think the situation would not have been this bad, which has prompted the residents to beg for a meeting with the Government in the last minute. Therefore, in my opinion, if the Government insists on pushing through such a reform, both sides will be losers. And, the discontent of the numerous IIs of CC will not in any way lessen. On the contrary, their dissatisfaction and discontent will continue to grow as a result of the Government's partiality. So, what good would this do?

As we all know, the "block vote" system is a weird system, which is also adopted by the nomination committee in the small-circle election of the Chief Executive. It is extremely unfair, uncivilized and undemocratic. Why would the "block vote" system be adopted? Why are people not allowed to vote on a one person, one vote basis to encourage competition and attract capable people to represent the voices of the general public and different communities?

Some people have put forward pretty special ideas, suggesting to bundle CC and Peng Chau (PC) together, given that both of them are islands. Following the same logic, should we also bundle Hong Kong Island altogether given that it is an island as well? The Lamma Island is also an island. Should we put Lamma Island, Hong Kong Island, CC and PC as well as other islands altogether simply because they are islands? Is this possible? If so, why should we bother to establish the district administration system? Why should we respect the unique characteristics of different communities? How can we put PC and CC together? I have no idea what kind of logic this is.

As a matter of fact, we do not accept such election which works only for the interests of IIs, and this is our fundamental position. Thus, the Government is duty-bound to put forward some ideas to reform such an unfair system (including the small house policy). Members must not forget that the issue 9174 LEGISLATIVE COUNCIL ─ 26 March 2014 under discussion is the granting of nearly 1 000 hectares of land to serve the extremely unfair small house policy. While the Government has highlighted the miserable condition of the people living in "sub-divided units" from time to time, it often stresses the importance of respecting the small house policy on the other.

(THE PRESIDENT resumed the Chair)

Today, the Government still has not abolished this twisted, irrational, unreasonable and outdated policy. Worse still, it has allowed such an unfair system to prevail despite its present attempt to improve the relevant election system, which has fanned greater resentment. Why did the Government do so? What is the purpose? Is this a move of the Government to pamper certain powerful people or political parties? WWTT, which has been "isolated", would not have approached the democratic camp for help if they have received care and assistance. Unfortunately, in this unfair Council where functional constituencies still exist, we are so sorry that we are the minority, which Mr Albert HO should also notice. Although we represent many public views, we cannot and dare not undertake to air their views (including their views on the CSA proposed by Mr Albert HO) in this Council. The fact is, we all know very well that regardless of how bad and unfair the government policies are, the pro-establishment camp will still defend the Government and stand on its back. This is the reality.

Nonetheless, the Government should not have acted in this way and the matter could be handled in a better or more decent way by taking on board different views, especially those of the minority disadvantaged groups. For the word "disadvantaged", it is not determined by the amount of wealth possessed. As Dr Kenneth CHAN has just said, WWTT is very rich. But is it wealthier than the "rural forces"? Is it wealthier than the aggregate wealth of all Heung Yee Kuk (HYK) members? No, their wealth is insignificant. Am I right? I am talking about the rural land interests which worth hundreds of millions of dollars. WWTT is therefore very insignificant in a relative sense. We are talking about land interests throughout the New Territories, which worth tens or hundreds of billions of dollars.

President, like other previous legislation or policies, the Bill proposed by the Government this time will also get passed, but I am sure that the relevant policy will only make those twisted systems even worse. Perhaps I should put it LEGISLATIVE COUNCIL ─ 26 March 2014 9175 this way, President, the Government might have helped members of the public to better understand these ridiculous things. They will find out that the Government has been protecting such a twisted system and ridiculously biased interests towards certain people.

This is good after all. I wonder if the Government will have itself "loaded" to resolve these decade-old historical problems in one go. If the problems remain unresolved, it would be difficult for Hong Kong to move on. Despite our bitter fight, members of the public still cannot enjoy peace of living when the Government obviously has plenty of land in hand. No improvement has been made so far. Requests for additional land has only prompted the Government to demolish buildings and do many things to destroy the environment. It has done so to avoid antagonizing the "tigers". Why would such "tigers" exist? If the Government has not protected them and given them special status, how could they emerge as "tigers" both in a constitutional and logical sense? The Government has condoned the existence and proliferation of such twisted systems, which have become so dominant that the Government will eventually suffer the bad consequences.

With these remarks, I support Mr Albert HO's CSA. Thank you, President.

MR ANDREW LEUNG (in Cantonese): President, the Rural Representative Election Legislation (Amendment) Bill 2013 (the Bill) mainly seeks to introduce statutory regulation of Kaifong Representative (KFR) elections for Cheung Chau (CC) and Peng Chau (PC) under the Village Representative Election Ordinance, the Electoral Affairs Commission Ordinance and the Elections (Corrupt and Illegal Conduct) Ordinance, such that the relevant elections to be held from 1 April next year onwards would be subject to the regulation of the Electoral Affairs Commission.

KFR seats existed in CC and PC since their establishment in 1950s to 1960s, and elections are held once every four years. Since KFR election is not statute-based, the Islands District Office has faced a number of operational difficulties in supporting the conduct of elections. Hence, the Business and Professionals Alliance for Hong Kong (BPA) considers the relevant amendments appropriate.

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With reference to the development and characteristics of the past rural representative elections, as well as the suggestions received by the BPA during the scrutiny of the provisions from a number of community persons on improving the existing electoral arrangements, I would like to take this opportunity to express our views on the Bill, so that future elections can better meet the needs of different electors.

First, I would like to discuss the voting arrangements. According to the information about the CC KFR election held on 14 November 2010, there were 8 579 registered electors in CC, which is more than most rural representative election constituencies. For example, the number of electors in CC is 2.8 times as much as that in PC which has 3 068 registered electors. Conversely, the turnout rate of CC was only 29.2%, which is obviously much lower than that of PC at 56.9%.

According to the views we received from resident representatives, it seems that the polling hours of rural representative elections are not convenient for the electors. Take for example the CC KFR election held in 2010, the polling was conducted from 9 am to 4 pm. At that time, many electors had already pointed out that the polling hours were too short, or even somewhat impractical, especially for those electors working in urban areas. Given such polling hours, they could not go to the polling stations to cast their votes before work, and if they opted to cast their votes after work, they might be too late. Such arrangement could be the reason of the low turnout rate.

Hence, I suggest that the Government should carefully consider adjusting the opening hours of the polling stations in the next election, taking all possible measures to facilitate and encourage electors to cast their votes. The Government may even make reference to the existing arrangements for the District Councils and Legislative Council elections and adopt the same polling hours from 7.30 am to 10.30 pm for rural representative elections, so as to allow sufficient time for electors to cast their votes and safeguard their right to vote.

Another point that I would like to raise is the KFR election system. For KFR elections for CC and PC, the "block vote" system has been adopted all along, that is, each elector may vote for a number of candidates at any one time. As the current system has been well-established, and its retention is also supported by Heung Yee Kuk, the BPA considers that we should respect this view and make no change to the system.

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According to Mr Albert HO's amendment on the number of KFRs that each elector may vote for at an election, if no more than five KFRs are to be returned at the election, each elector may only vote for one candidate, or if more than five KFRs are to be returned at the election, each elector may only vote for a number of candidates not exceeding one third of the number of KFRs to be returned.

As the existing voting arrangement which allows an elector to vote for a maximum of 39 candidates in KFR elections has been in use for years, the electors are familiar with its operation and it is well-established, the BPA considers that this tradition in the elections as well as the established right to vote enjoyed by the electors should not be changed hastily; or else, the BPA considers that if any revision is to be introduced to the relevant arrangement, prior and adequate consultation should be conducted by the Government.

President, on behalf of the BPA, I speak to support the resumption of Second Reading of the Bill.

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

(No Member indicated a wish to speak)

PRESIDENT (in Cantonese): If not, I now call upon the Secretary for Home Affairs to reply. The debate will come to a close after the Secretary has replied.

SECRETARY FOR HOME AFFAIRS (in Cantonese): President, first of all, I would like to thank Mr IP Kwok-him, Chairman of the Bills Committee, as well as members of the Bills Committee for their efforts which have facilitated the smooth completion of the scrutiny work. I also thank Members for supporting the resumption of the Second Reading debate on the Rural Representative Election Legislation (Amendment) Bill 2013 (the Bill) today, and I am grateful for the precious advice of Honourable Members who have just spoken.

The objective of the Bill is to regulate by statute the long-standing Kaifong Representative (KFR) elections in Cheung Chau (CC) and Peng Chau (PC).

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Since 2003, Village Representative (VR) election has been conducted in accordance with the Village Representative Election Ordinance (VREO) (Cap. 576) to elect two types of VRs, namely, Resident Representatives (RRs) and Indigenous Inhabitant Representatives (IIRs). So far, three village ordinary elections had been held under the supervision of the Electoral Affairs Commission (EAC) and subject to the Elections (Corrupt and Illegal Conduct) Ordinance.

CC and PC are market towns already in existence in 1989, and KFR elections had been held since the establishment of Rural Committees (RCs) in the 1950s and 1960s. KFRs and VRs are both members of RCs. Similar to RRs in VR elections, the function of KFRs is to reflect views on local affairs on behalf of CC and PC residents. However, KFR elections in CC and PC are not subject to statutory regulation. Hence, the Government has introduced the Bill to extend the application of the VREO as well as other legislation relating to VR elections to KFR elections.

Upon enactment of legislation, arrangements for KFR election will be modelled on those of RR election in terms of registration of electors, nomination of candidates, conduct of election, handling of election petitions, and so on. Moreover, claims and objections in relation to the register of electors, as well as election petitions will be handled respectively by magistrate and court independently. Illegal conduct at elections will be subject to the relevant subsidiary legislation under the EAC Ordinance, as well as the Elections (Corrupt and Illegal Conduct) Ordinance. Arrangements will also be made for electors in custody to cast their votes in accordance with law.

The objective of the Bill is to regulate the existing KFR elections. Meanwhile, in order to ensure a smooth process, we will retain as far as possible the original electoral arrangements that CC and PC residents are familiar with, including the eligibility requirements for electors, number of seats, voting system, and so on.

After amendment, VREO will be renamed as Rural Representative Election Ordinance, so as to cover the election of two types of RRs (that is, VRs and KFRs) to be returned by statutory elections in future. Regarding the point raised by Mr CHAN Han-pan in his speech as to whether the term "village representative" could be retained in the title of the Ordinance, we have considered LEGISLATIVE COUNCIL ─ 26 March 2014 9179 the suggestion in detail. In fact, the number of indigenous villages and existing villages, the number of IIR seats and RR seats as well as the election system, and so on, will remain unchanged; the terms VRs, IIRs and RRs will be retained in the legislation; and the functions and status of VRs will be unaffected. Besides, the Ordinance only covers the arrangements relating to various statutory RR elections and is not related to such rights as rates exemption, building small house and hillside burial.

As I pointed out in November last year when moving the Second Reading of the Bill, the proposal under the Bill is a consensus reached by the Government and Heung Yee Kuk (HYK) after a comprehensive review. Moreover, the proposal is supported by the EAC, Islands District Council, CC RC and PC RC. The Bills Committee also agreed to the various proposals under the Bill.

Regarding the voting system of KFR elections which was mentioned by some Members, the Government has already conducted a comprehensive review and consulted HYK, CC RC and PC RC accordingly. Given that the main objective of the Bill is to regulate by statute the long-established KFR elections in CC and PC, and the KFR election system is widely known and accepted by electors and candidates, we consider that the most appropriate arrangement is to retain the existing voting system of KFR elections.

As mentioned by Mr IP Kwok-him, in the course of its scrutiny, the Bills Committee had also discussed the matter as to whether CC should be included as an indigenous village under the Ordinance, and whether the number of IIR seats should be increased. Although this matter is unrelated to the regulation of KFR elections by statute and falls outside the scope of the Bill, we have also carefully considered the rationale concerned and explained the Government's stance to the Bills Committee. In fact, the relevant issues had been thoroughly discussed by the Bills Committee on Village Representative Election Legislation (Miscellaneous Amendments) Bill 2009. The Government's stance has been consistent all along, that is, there is no sufficient and convincing evidence showing that CC should be included as an indigenous village under the Ordinance.

According to the legislative intent of VREO enacted in 2003, only indigenous villages already in existence in 1898 in the New Territories where VR system had already been in place in 1999 when the last round of VR elections was held before the enactment of VREO are included as indigenous villages 9180 LEGISLATIVE COUNCIL ─ 26 March 2014 under the Ordinance. Insofar as CC is concerned, all along, there is no sufficient and convincing evidence showing that it is an indigenous village under the Ordinance, and CC has never had any VR election system.

As regards the Gazette Notice in 1899 claimed by some CC residents as proof that CC was a village and had VRs, it was actually published pursuant to the then Local Communities Ordinance aiming to divide the New Territories into districts and sub-districts to facilitate administration. That Ordinance and Gazette Notice were not related to the village representation system and the committee members of the sub-district listed therein were not VRs. That Ordinance was repealed in 1910 because it was found to have no practical effect.

We have made reference to the following records, which indicate that: (a) on the List of Established Villages in the New Territories compiled in collaboration with HYK in 1991, it was clearly shown that CC was a "Market Town" instead of a "Village"; (b) the Block Lease of land in the New Territories normally contains the names of villages alongside the names of landowners. However, the Block Lease of CC does not contain any village names; (c) CC is not included in the List of Recognized Villages under the New Territories Small House Policy; and (d) the existing Constitution of CC RC provides that the RC is made up of 39 KFRs, and there is no evidence showing that any VR election exclusively for indigenous inhabitants has been held in CC.

All in all, the query as to whether CC has been a village has no impact on the amendments proposed to the Ordinance today.

Separately, in the light of the Bills Committee's suggestions and support, I will move a number of technical amendments during the Committee stage to improve the clarity of the relevant provisions.

After the passage of the Bill, the Government will begin to make active preparations for the KFR elections to be held early next year, including the compilation of voter registers, the drafting of plans on the boundaries of the market towns, the identification of suitable polling stations, and so on.

We will also give serious consideration to the views expressed by Mr Andrew LEUNG about the polling hours in relation to the electoral arrangements.

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The Bill, if passed, can further improve the KFR elections.

With these remarks, President, I implore Members to support the passage of the Bill and the amendments that I am going to propose at the Committee stage. Thank you, President.

PRESIDENT (in Cantonese): I now put the question to you and that is: That the Rural Representative Election Legislation (Amendment) Bill 2013 be read the Second time. Will those in favour please raise their hands?

(Members raised their hands)

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

(Members raised their hands)

Mr Albert HO rose to claim a division.

PRESIDENT (in Cantonese): Mr Albert HO has claimed a division. The division bell will ring for five minutes.

PRESIDENT (in Cantonese): Will Members please proceed to vote.

PRESIDENT (in Cantonese): Will Members please check their votes. If there are no queries, voting shall now stop and the result will be displayed.

Mr CHAN Kam-lam, Dr LAU Wong-fat, Mr TAM Yiu-chung, Mr Tommy CHEUNG, Mr Frederick FUNG, Mr WONG Kwok-hing, Mr Jeffrey LAM, Mr Andrew LEUNG, Mr WONG Ting-kwong, Ms Starry LEE, Dr LAM Tai-fai, Mr CHAN Hak-kan, Mr CHAN Kin-por, Dr Priscilla LEUNG, Dr LEUNG Ka-lau, Mr WONG Kwok-kin, Mr IP Kwok-him, Mrs Regina IP, Mr Michael TIEN, Mr James TIEN, Mr NG Leung-sing, Mr Steven HO, Mr Frankie YICK, Mr MA 9182 LEGISLATIVE COUNCIL ─ 26 March 2014

Fung-kwok, Mr CHAN Han-pan, Miss CHAN Yuen-han, Mr LEUNG Che-cheung, Miss Alice MAK, Mr KWOK Wai-keung, Mr Christopher CHEUNG, Dr Elizabeth QUAT, Mr Martin LIAO, Mr POON Siu-ping, Mr TANG Ka-piu, Dr CHIANG Lai-wan, Ir Dr LO Wai-kwok, Mr CHUNG Kwok-pan, Mr Christopher CHUNG and Mr Tony TSE voted for the motion.

Mr Albert CHAN, Mr Gary FAN and Mr CHAN Chi-chuen voted against the motion.

Mr Albert HO, Mr LEE Cheuk-yan, Mr James TO, Mr LEUNG Yiu-chung, Ms Emily LAU, Mr Ronny TONG, Mr CHEUNG Kwok-che, Mr Alan LEONG, Ms Claudia MO, Mr WU Chi-wai, Mr Charles Peter MOK, Dr Kenneth CHAN, Dr KWOK Ka-ki, Dr Fernando CHEUNG, Mr SIN Chung-kai, Dr Helena WONG and Mr IP Kin-yuen abstained.

THE PRESIDENT, Mr Jasper TSANG, did not cast any vote.

THE PRESIDENT announced that there were 60 Members present, 39 were in favour of the motion, three against it and 17 abstained. Since the question was agreed by a majority of the Members present, he therefore declared that the motion was passed.

CLERK (in Cantonese): Rural Representative Election Legislation (Amendment) Bill 2013.

Council went into Committee.

Committee Stage

CHAIRMAN (in Cantonese): Committee stage. Council is now in committee.

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RURAL REPRESENTATIVE ELECTION LEGISLATION (AMENDMENT) BILL 2013

CHAIRMAN (in Cantonese): I now propose the question to you and that is: That the following clauses stand part of the Rural Representative Election Legislation (Amendment) Bill 2013.

CLERK (in Cantonese): Clauses 1 to 21, 23 to 26, 28 to 36, 38 to 46, 48, 50, 51, 56 to 61 and 63 to 79.

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

(No Member indicated a wish to speak)

CHAIRMAN (in Cantonese): I now put the question to you as stated. Will those in favour please raise their hands?

(Members raised their hands)

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

(No hands raised)

CHAIRMAN (in Cantonese): I think the question is agreed by a majority of the Members present. I declare the motion passed.

CLERK (in Cantonese): Clauses 22, 27, 47, 52, 55 and 62.

SECRETARY FOR HOME AFFAIRS (in Cantonese): Chairman, I move the amendments to the clauses read out just now, as set out in the paper circularized to Members.

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All these are minor textual amendments proposed in the light of the Bills Committee's suggestions, and they are supported by the Bills Committee. The objective of these amendments is to improve the clarity of the relevant provisions, and they will not affect the actual content of the provisions. I implore Members to support and pass the amendments.

Proposed amendments

Clause 22 (see Annex I)

Clause 27 (see Annex I)

Clause 47 (see Annex I)

Clause 52 (see Annex I)

Clause 55 (see Annex I)

Clause 62 (see Annex I)

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

(No Member indicated a wish to speak)

CHAIRMAN (in Cantonese): I now put the question to you and that is: That the amendments moved by the Secretary for Home Affairs be passed. Will those in favour please raise their hands?

(Members raised their hands)

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

(No hands raised)

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CHAIRMAN (in Cantonese): I think the question is agreed by a majority of the Members present. I declare the amendments passed.

CLERK (in Cantonese): Clauses 22, 27, 47, 52, 55 and 62 as amended.

CHAIRMAN (in Cantonese): I now put the question to you and that is: That clauses 22, 27, 47, 52, 55 and 62 as amended stand part of the Bill. Will those in favour please raise their hands?

(Members raised their hands)

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

(No hands raised)

CHAIRMAN (in Cantonese): I think the question is agreed by a majority of the Members present. I declare the motion passed.

CLERK (in Cantonese): Clauses 37, 49, 53 and 54.

CHAIRMAN (in Cantonese): Mr Albert HO has given notice to move the amendments to clauses 37, 49, 53 and 54.

MR ALBERT HO (in Cantonese): Chairman, I move the amendments to the clauses read out just now.

As I just said during the debate on the resumption of the Second Reading of the Bill, the "block vote" system is adopted for the existing Kaifong Representative (KFR) elections. Given that there are 39 seats in Cheung Chau (CC), each CC elector may vote for a maximum of 39 candidates, although he can, theoretically or legally, vote for less than 39 candidates. By the same 9186 LEGISLATIVE COUNCIL ─ 26 March 2014 token, as there are 17 seats in Peng Chau (PC), PC electors may vote for a maximum of 17 candidates.

Regarding this "block vote" system, we have a lot of experience, or perhaps I should say that we have a lot of painful experience. We note that the elections of the National People's Congress are also bundled, even though there is a requirement that each person must at least vote for a certain number of candidates. Besides, the same practice was also adopted by the previous Election Committee in nominating the Chief Executive candidates, and by the District Councils as well. Whenever the "block vote" system is adopted, a candidate will certainly enjoy a sweeping victory if he can get the majority vote. In my view, this system is not conducive to diverse participation, especially in the case of CC kaifong associations. Since such associations are responsible for handling kaifong matters, why do they prohibit independent persons who do not belong to any powerful organizations from speaking out? Is it necessary for each elector to cast all the 39 votes in the election as promoted by candidates belonging to certain organizations? It is true that electors may choose not to cast all their votes, but I was told by CC and PC residents who had stood for elections that as they were not supported by the local rural committees (RCs), they would invariably lose even though they actually obtained a fair number of votes. Even if one such candidate had won in the election, it was just an accident, or the parties concerned had reached a consensus to let that candidate win. As I see it, this system is absolutely not ideal.

As we know, under the "block vote" election system, firstly, incumbent leaders of RCs will definitely have an advantage as they are still in service; secondly, due to block voting, they can exert their existing influence. Take for example CC. The upper limit of election expenses for each candidate is $30,000-odd, if 39 persons take part in the election as a group, they will have a substantial amount of funds. How can individual or independent candidates compete with them?

During the scrutiny process, we have also discussed whether the constituency of CC should be divided up. The general view is against the proposal because CC is a single area and it will be difficult to divide it up. But the reality is that CC has already been divided into two constituencies in District Council elections. Hence, Honourable colleagues who oppose such a division are actually contradicting themselves. Another argument given is that such a LEGISLATIVE COUNCIL ─ 26 March 2014 9187 division would reduce the number of votes. In fact, there are quite a number of electors in both CC and PC, with some 8 000-odd electors in CC alone. If CC is divided into two or three constituencies, each constituency should still have a sizable number of electors. In fact, the main objective of my suggestion is not to divide up CC geographically, but to adopt a voting method similar to the proportional representation (PR) system, such that there are still multiple seats in each constituency, but the number of candidates that an elector may vote for will be limited. This is also the same practice currently adopted for Legislative Council elections. For example, even though five, six or nine seats are to be returned at an election, an elector may only vote for one candidate. By adopting this method, persons with a certain degree of representativeness in CC and PC would be allowed to join the RCs. I propose that an elector may only vote for a number of candidates not exceeding one third of the number of seats.

I am aware of the view taken by the Government as well as many Members of the pro-establishment camp. According to them, as the system has been in use for years, and not much dissenting views have been heard during the consultation ― because the RCs were consulted at that time ― the current system should be desirable. In fact, such view is laughable because persons consulted are exactly those who have benefitted under the current system, and they invariably get a sweeping victory. Given that this system is beneficial to them as they can be re-elected, do they have any motive to make changes? Will they genuinely consider the matter fairly and allow the minority with a certain degree of representativeness to join the RCs? Are they really so broad-minded? Honestly, I do not think so. Hence, the consultation is meaningless.

In fact, when we received views from the public, the villagers, the indigenous inhabitants (IIs) in particular, were furious because only the RCs had been consulted while local residents were totally neglected. The strangest thing is that CC has been the home of the Wong Wai Tsak Tong (WWTK) clan for over a century, yet there are no representatives in the RC to represent WWTK as they cannot win in the election. It is thus clear that this system is unbalanced.

Therefore, Chairman, I propose that a method similar to the PR system be adopted by limiting the number of candidates which each candidate may vote for. In other words, notwithstanding the multiple seats to be returned at an election, electors are only allowed to vote for a limited number of candidates in order to ensure that persons with a certain degree of representativeness can be elected as 9188 LEGISLATIVE COUNCIL ─ 26 March 2014

KFRs and sit on the CC or PC RCs. This is a fairer system. I honestly cannot think of any reason for opposing this proposal because the current system is not magnanimous at all. In reality, unfairness has resulted.

Here, I would like to point out clearly that if my amendments are negatived without reason, my fellow party members and I ― and I hope other Members of the pan-democratic camp will join us as well ― will vote against the Bill to signify our objection to the monopolistic "block vote" system.

I so submit.

Proposed amendments

Clause 37 (see Annex I)

Clause 49 (see Annex I)

Clause 53 (see Annex I)

Clause 54 (see Annex I)

CHAIRMAN (in Cantonese): Members may now proceed to a joint debate on the original clauses 37, 49, 53 and 54 and the amendments thereto.

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

MR LEUNG CHE-CHEUNG (in Cantonese): Chairman, the Rural Representative Election Legislation (Amendment) Bill 2013 has now entered the Committee stage, and the Council is now scrutinizing the amendments proposed by Mr Albert HO.

At present, there are only Kaifong Representative (KFR) seats in Cheung Chan (CC) and Peng Chau (PC), but like Village Representatives (VRs), KFRs are also members of the Rural Committees (RCs) Moreover, KFRs have the same functions as Resident Representatives (RRs) of VRs, namely, to reflect the views of CC and PC residents on local affairs. However, as KFRs are not LEGISLATIVE COUNCIL ─ 26 March 2014 9189 statue-based, in case there is any dispute or complaint, or if an election petition is made, the issues would have to be referred to the District Officer concerned for a decision. At the same time, the lack of a statutory basis has prevented the District Officer from exchanging information with other departments for the purpose of verifying the qualification of electors.

Actually, the Bill is not too complicated, with only a few salient points.

First, the term "VR elections" would be amended as "Rural Representative Election Ordinance", and KFR elections on CC and PC would be subject to the regulation of the Ordinance, which includes providing the definitions of KFR and Market Town, as well as specifying the functions and number of KFRs, the eligibility criteria of candidates and electors, the voting and counting arrangements, election expenses, and so on.

As the Bill seeks to regulate KFR elections on CC and PC and increase the transparency and fairness of KFR elections, which is beneficial to both the residents and the Government, I will support it.

From the public hearing held in the course of the Bills Committee's scrutiny on the Bill, I understand the views of some CC residents that the Bill has deprived CC of the status as an indigenous village, as well as their identity as indigenous inhabitants (IIs). Furthermore, they pointed out that the RC had not consulted the residents and community organizations on the Bill. In this connection, I have also made arrangements for the representatives of CC residents to meet with the officials of the Home Affairs Department, in order to strengthen communication.

Although the Government has stated time and again that according to the existing information, CC is not an indigenous village already in existence in 1898, and CC has never had any VR system …

CHAIRMAN (in Cantonese): Mr LEUNG, the speech you have made so far should have been delivered during the Second Reading debate on the Bill. The Committee is now having a joint debate on Clauses 37, 49, 53 and 54 of the Bill, as well as the amendments moved by Mr Albert HO.

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MR LEUNG CHE-CHEUNG (in Cantonese): Chairman, there is a direct relationship between the two, and I must therefore explain some of the reasons clearly. Perhaps let me simply point out that according to Mr Albert HO's amendments, insofar as Market Town elections on CC and PC are concerned, if no more than five KFRs are to be returned at an election, each elector may only vote for one candidate, and if more than five KFRs are to be returned at an election, each elector may only vote for a number of candidates not exceeding one third of the number of KFRs to be returned.

At present, there are 39 and 17 KFRs on CC and PC respectively. All along, CC and PC have been a single constituency and the "block vote" system, that is, the "multiple-seat, multiple-vote" system, has been in use. CC electors can vote for a maximum of 39 candidates, whereas PC electors can vote for 17 candidates. This election method has been in use for years, and it is in line with the principles of democracy and fairness for all purposes of the elections. The Bill's original intention is to regulate the KFR elections while retaining the number of seats and voting method. This is the same as the then election principles. Mr Albert HO's amendments would, on the one hand, affect the long-standing habits of electors, and on the other hand, give rise to a new problem, that is, a question in principle as to how the constituency should be drawn up again. Hence, I do not consider the amendments worth supporting.

I so submit. Thank you, Chairman.

MR IP KWOK-HIM (in Cantonese): Chairman, during the scrutiny process, the Bills Committee on Rural Representative Election Legislation (Amendment) Bill 2013 (the Bills Committee) has in fact discussed the relevant electoral system (that is, the election of 39 and 17 Kaifong Representatives (KFRs) respectively under the "block vote" system). Although the discussion is far from exhaustive, the relevant issues have already been clarified.

Just now, Mr Albert HO suggested the adoption of the practice of the National People's Congress (NPC) ― I am a Hong Kong deputy to the NPC ― and he described the so-called "block vote" system as the NPC's electoral system. I can say that this is definitely not the case, and this is not what actually happens. Under the NPC's electoral system, the number of candidates that each elector can vote for should neither be greater nor smaller than the number of seats. That is what is meant by the "block vote" system ― I do not know whether there are other names for this arrangement.

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Conversely, under the existing electoral system, so long as an elector considers any of the 39 or 17 candidates worthy of support ― regardless of whether he supports several candidates or one candidate ― he can make a choice and vote for them. Of course, an elector can only vote for a maximum of 39 or 17 candidates. That is the right that an elector can exercise, that is, he has the right to vote for any candidate he considers worth supporting. That is up to the elector to make his own decision.

Just now, Mr Albert HO also suggested that the existing electoral system would give rise to unfairness. As a matter of fact, no election can be perfect. In this regard, he cited examples about independent candidates not getting elected. As a matter of fact, he had already raised the same question during the scrutiny process of the Bills Committee. According to the relevant information provided by the Government at that time, in the 2010 election, three independent candidates had not conducted joint electioneering activities, and two of them were defeated (they obtained 154 and 54 votes respectively). The remaining independent candidate was elected with 653 votes. The said candidate had also attended the public hearing of the Bills Committee to express his views on this matter. He opined that the existing arrangement had not given rise to any unfairness and he told us in brief how he won the electors' endorsement. Hence, seemingly, the statement that "independent candidates cannot get elected under the existing electoral system" is not an accurate description because it is clearly proven from the above example that an independent candidate has actually won in the election.

Regarding the view that candidates who conduct joint electioneering activities would receive greater publicity, in the early days of the District Council elections, the first … Of course, there are different constituencies in District Council elections, but as far as I can recall, the first body to conduct joint electioneering activities should be the Hong Kong Affairs Society or some similar organizations. At that time, they joined force with other organizations and adopted the method of the so-called "horizontal alliance of several candidates". Nonetheless, this method was actually just an electioneering strategy, and I do not think they had gained a great advantage out of it. This would not be a problem so long as the candidates can maintain contacts with the electors in various ways.

During its scrutiny, the Bills Committee had not thoroughly discussed Mr Albert HO's amendment because it was just a preliminary view at that time. After the Bills Committee completed its scrutiny, Mr Albert HO also stated that 9192 LEGISLATIVE COUNCIL ─ 26 March 2014 he would consider the matter further. Eventually, he decided to propose an amendment. Under his current proposal, a "one-third" threshold is set. Why is the threshold not set at one half, one fifth or one seventh? How does he arrive at this ratio? It seems that the threshold is just set casually.

Moreover, will this proposal affect other people? For example, among the 39 candidates in a KFR election, an elector may actually find 38 candidates worthy of support. In that case, why should the elector's support for these candidates be deprived? As I see it, all these are questions that Members must study and consider carefully when contemplating whether or not to support Mr Albert HO's amendment.

Regarding the question of whether this arrangement is equivalent to the proportional representation (RP) system, I do not agree that this arrangement, which is similar to the RP system in form, is equivalent to the RP system.

Hence, the Democratic Alliance for the Betterment and Progress of Hong Kong opposes this casual amendment.

Thank you, Chairman.

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

DR LEUNG KA-LAU (in Cantonese): Although I have not followed up this matter, I think of something after hearing this suggestion made by Mr Albert HO because we have to deal with the arrangement relating to the "block vote" system in future. I also think of our representatives in the Medical Council of Hong Kong (the Medical Council). Seven seats of the Medical Council are returned by direct elections, and 12 000 doctors are eligible to vote. For example, if five candidates are competing for three seats, the "block vote" system is also adopted by the Medical Council. In other words, all the 12 000 doctors have the right to vote. If three seats are open for election, each doctor can vote for a maximum of three candidates, but he can choose to vote for less than three candidates. This arrangement is the same as the Government's present proposal, that is, the method you are dissatisfied with.

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Regarding the Medical Council's arrangement, the "block vote" system is actually unanimously supported by the 12 000 doctors, and it has been well-established over the years. Can the "block vote" system guarantee the election of connected persons each time? Would two or three specific candidates be elected with the support of the majority? The truth is that it would not, and we have a very even distribution.

What is the difference then? The difference lies in the fact that the 12 000 doctors have independent thinking. They are free from the control of other people. Nobody can control these 12 000 people, or the majority of them, which is some 6 000 or 7 000 doctors, to vote for the same three persons. Hence, with voters being capable of independent thinking, nobody can control the majority of them and the "block vote" system is actually in order. Suppose there are five candidates competing for three seats, each doctor will consider independently whom they should vote for. All doctors cast their votes independently.

Why does the Democratic Party say that they have painful experience with the elections of the District Councils and the National People's Congress (NPC)? Although I am not perfectly sure, I think that is because of the small size of the electorate of District Council and NPC elections, with only 1 200 or several hundred electors, and they are in fact not independent thinkers. Someone behind will pull the strings, controlling or influencing the voting preference of those several hundred or 1 000-odd electors, so that all votes are cast to the same group of connected persons. If you ask me to consider whether I should support Mr Albert HO's amendment, you must first tell me how do you assess the 8 000 electors in Cheung Chua (CC): can they think independently or will somebody exert great influence on them, say, 5 000 of the electors will be influenced and vote for the 39 candidates as instructed. You must tell me how would the 8 000 electors behave before I would consider whether this amendment is worth supporting or not. If the electors are capable of independent thinking, I think the "block vote" system is in order.

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

MR IP KWOK-HIM (in Cantonese): Chairman, just now, I forgot to respond to another point relating to the District Council elections.

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I never consider that the "block vote" system has been adopted for the District Council elections. Insofar as the District Council Functional Constituencies are concerned, take for example the District Council (One) Functional Constituency to which I belong, the "block vote" system has never been adopted. An electoral method called the "single transferrable voting system" was once adopted but it is not the same as the "block vote" system. Moreover, it has nothing to do with the existing system or the question under discussion now.

I would like to clarify these points. Thank you, Chairman.

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

SECRETARY FOR HOME AFFAIRS (in Cantonese): Chairman, I implore Members to oppose the amendments moved by Mr Albert HO.

The objective of Mr HO's amendments to Clauses 37, 49, 53 and 54 is to restrict the number of Kaifong Representatives (KFRs) that an elector may vote for in a KFR election. This proposal represents a change to the long-established voting system for KFR election and limits the number of candidates that an elector may now choose to vote for in the election.

As I mentioned during the resumption of Second Reading debate, the Bill intends to regulate by statute the long-standing KFR elections on Cheung Chau (CC) and Peng Chau (PC), while respecting and retaining as far as possible the existing electoral arrangements of the original KFR elections that electors and candidates are familiar with, including the present voting system.

All along, CC and PC KFR elections have been held according to the present voting system, that is, each elector may for a number of candidates not exceeding the number of KFRs to be returned at the election concerned. Over the years, the elections have been held smoothly. The voting system is also widely known and accepted by electors and candidates.

It is the consensus reached by the Administration and the Heung Yee Kuk, as well as the CC and PC Rural Committees (RCs) after prolonged discussion to regulate KFRs while retaining the original electoral system. HYK as well as CC and PC RCs have also written to the Bills Committee to express their support for LEGISLATIVE COUNCIL ─ 26 March 2014 9195 retaining the existing voting system. At the meeting of the Bills Committee held on 6 January 2014 to meet with deputations and the Administration, many members of the public stated support for the relevant proposal.

In fact, the voting system used in the present KFR election has also been adopted for other public elections, and electors have the rights to nominate, stand for elections and vote in a fair and free manner. The system is also in line with the "first past the post" principle, and independent candidates have an equal chance of being elected. Dr LEUNG Ka-lau also mentioned just now that this voting arrangement has been adopted in the medical sector. While electors can vote for a maximum of 39 or 17 candidates in the election, they have the right to vote for a smaller number of candidates or even one candidate. As electors have the right to choose more than one candidate of their choice, the voting system can therefore reflect more fully the wish of electors in multiple voting. Generally speaking, candidates with a higher degree of legitimacy will get elected through obtaining a higher number of votes.

In conclusion, the present electoral system has been long established, electors are familiar with it, and it is in line with the principle of democratic elections. On the contrary, Mr Albert HO's amendments would restrict and reduce the number of candidates that electors can vote for in KFR election originally. As pointed out by Mr IP Kwok-him, Mr Albert HO's amendments have not been thoroughly discussed by the Bills Committee, and the casual adoption of a certain ratio for the purpose of restriction only reflects his personal preference. If a system widely known and accepted by electors is changed as a result, I think it is undesirable. Hence, we consider that we should respect the wish of HYK, CC RC, PC RC as well as the rural communities to retain the voting arrangement of KFR election that has been in use for years.

I implore Members to oppose the amendments of Mr HO.

Thank you, Chairman.

MR ALBERT HO (in Cantonese): Chairman, the Secretary mentioned time and again that the system was "well-established", which is the best excuse for being conservative. Given that the arrangement has been adopted all along, why is there a need to change? But if any shortcoming, deficiency or unfairness is detected in relation to this standing practice, it should be changed. That is the first point.

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Second, as I have already pointed out just now, throughout the consultation period, the Government as a whole had in fact only consulted the Rural Committees (RCs), and residents in Cheung Chau (CC) had not been consulted. As a result, the Government failed to fully listen to the views of the community, in particular, the views of many people who were dissatisfied with the system.

Third, discussion has actually been held on my present proposal to restrict the number of votes cast by an elector. I had discussed in this Council whether it would be possible to set up different constituencies or restrict the number of votes, but such proposals were not accepted at all. Members of the pro-establishment kept saying that the present system should be retained to safeguard the vested interests, which is their only concern. What is the point of it? They criticized me for not bringing the amendments to the table for discussion, but would they consider these amendments? In fact, they have rejected the same in principle.

Regarding the cap at one third of the number of seats, I will also respond to the views just raised by Dr LEUNG Ka-lau in one go. Just now, the Secretary quoted Dr LEUNG Ka-lau's comment that this arrangement was also adopted by doctors. If the "block vote" system is adopted to elect members of an executive committee or some similar organizations, I can understand because the members would need to work together. In an executive committee or some similar organizations, members are required to perform specific duties and they must always work with team spirit in harmony. Hence, the "block vote" system is adopted to return all members of the entire cabinet. This happens frequently, and I can understand it.

However, the 39 seats of Kaifong Representatives (KFRs) under discussion now are representatives returned by voting of electors. Then these representatives would elect some other persons ― possibly with a certain kind of division of labour ― to become the executive members of KFRs. Hence, lest we forget, these 39 people are representatives of public opinion. Should representatives of public opinion be so unitary? If block voting is allowed, the result would become unitary because through the mobilization of existing organizations or existing influence and financial resources, group voting can bring about a biased result. Nearly all of them, say, 35, 36, 37 or 38 KFRs would be partial to one side. Sometimes, one or two candidates at most would get elected inadvertently, but this organization still fails to reflect the different voices in the community.

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Actually, what do I arrive at the one-third ratio? I note that residents in Peng Chau (PC) and CC can mainly be divided into three categories. First, one group is formed by the incumbent Heung Yee Kuk (HYK), with people belonging to the Democratic Alliance for the Betterment and Progress of Hong Kong, the Hong Kong Federation of Trade Unions and the pro-establishment camp. This is a powerful group, even comprising incumbent District Council members. It is clear that this is some kind of political force. The second group is formed by indigenous inhabitants (IIs) I mentioned just now who have lodged their complaint with the Legislative Council. I do not know the exact number of such residents, but they live on CC and own properties there. Both their predecessors and successors have been living on CC. The third group of residents are neither IIs nor members of the established force. They might be ordinary members of the public who have moved to live on CC from urban areas. As they have developed a sense of belonging on CC and are familiar with the local environment and happenings, they start to care about the community. Roughly, the residents can be divided into these three groups. Hence, that is my reason for setting the cap of votes at one third of the number of seats to be returned at the election. In fact, it is a good thing for the three groups to have their respective representatives, so that the committee can better reflect the voice of these people. There is the rationale behind my proposal.

Nonetheless, I believe that even though I have made this point clear, the pro-establishment camp will still show no interest in considering my proposal because their only concern is that the system has been "well-established". In their view, if the system has been in use for such a long time, and nobody seems to have any objection, it is just great. Hence, they can continue to enjoy a sweeping victory in the election and perpetuate their vested interests. I consider that as a matter of principle, this situation must be changed. Notwithstanding the lack of adequate votes, I must propose these amendments. If the amendments are negatived, I must put it in record, and we will oppose the Third Reading of the Bill.

CHAIRMAN (in Cantonese): I now put the question to you and that is: That the amendments moved by Mr Albert HO be passed. Will those in favour please raise their hands?

(Members raised their hands)

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

(Members raised their hands)

Mr Albert HO rose to claim a division.

CHAIRMAN (in Cantonese): Mr Albert HO has claimed a division. The division bell will ring for five minutes.

CHAIRMAN (in Cantonese): Will Members please proceed to vote.

CHAIRMAN (in Cantonese): Will Members please check their votes. If there are no queries, voting shall now stop and the result will be displayed.

Functional Constituencies:

Mr Albert HO, Mr James TO, Mr Frederick FUNG, Prof Joseph LEE, Mr CHEUNG Kwok-che, Mr Charles Peter MOK and Mr IP Kin-yuen voted for the amendments.

Dr LAU Wong-fat, Mr Tommy CHEUNG, Mr Jeffrey LAM, Mr Andrew LEUNG, Mr WONG Ting-kwong, Ms Starry LEE, Dr LAM Tai-fai, Mr IP Kwok-him, Mr NG Leung-sing, Mr Steven HO, Mr Frankie YICK, Mr MA Fung-kwok, Miss CHAN Yuen-han, Mr KWOK Wai-keung, Mr Christopher CHEUNG, Mr Martin LIAO, Mr TANG Ka-piu, Mr CHUNG Kwok-pan and Mr Tony TSE voted against the amendments.

Dr LEUNG Ka-lau abstained.

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Geographical Constituencies:

Mr LEE Cheuk-yan, Ms Emily LAU, Mr Ronny TONG, Ms Cyd HO, Mr Alan LEONG, Mr LEUNG Kwok-hung, Mr Albert CHAN, Ms Claudia MO, Mr WU Chi-wai, Mr Gary FAN, Mr CHAN Chi-chuen, Dr Kenneth CHAN, Dr KWOK Ka-ki, Dr Fernando CHEUNG, Mr SIN Chung-kai and Dr Helena WONG voted for the amendments.

Mr CHAN Kam-lam, Mr TAM Yiu-chung, Mr WONG Kwok-hing, Mr CHAN Hak-kan, Dr Priscilla LEUNG, Mr WONG Kwok-kin, Mrs Regina IP, Mr Michael TIEN, Mr James TIEN, Mr CHAN Han-pan, Mr LEUNG Che-cheung, Miss Alice MAK, Dr Elizabeth QUAT, Dr CHIANG Lai-wan and Mr Christopher CHUNG voted against the amendments.

THE CHAIRMAN, Mr Jasper TSANG, did not cast any vote.

THE CHAIRMAN announced that among the Members returned by functional constituencies, 27 were present, seven were in favour of the amendments, 19 against them and one abstained; while among the Members returned by geographical constituencies through direct elections, 32 were present, 16 were in favour of the amendments and 15 against them. Since the question was not agreed by a majority of each of the two groups of Members present, he therefore declared that the amendments were negatived.

CHAIRMAN (in Cantonese): I now put the question to you and that is: That clauses 37, 49, 53 and 54 stand part of the Bill. Will those in favour please raise their hands?

(Members raised their hands)

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

(No hands raised)

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CHAIRMAN (in Cantonese): I think the question is agreed by a majority of the Members present. I declare the motion passed.

CLERK (in Cantonese): Schedules 1 to 5.

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

(No Member indicated a wish to speak)

CHAIRMAN (in Cantonese): I now put the question to you and that is: That Schedules 1 to 5 stand part of the Bill. Will those in favour please raise their hands?

(Members raised their hands)

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

(No hands raised)

CHAIRMAN (in Cantonese): I think the question is agreed by a majority of the Members present. I declare the motion passed.

CHAIRMAN (in Cantonese): Council now resumes.

Council then resumed.

Third Reading of Bills

PRESIDENT (in Cantonese): Bill: Third Reading.

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RURAL REPRESENTATIVE ELECTION LEGISLATION (AMENDMENT) BILL 2013

SECRETARY FOR HOME AFFAIRS (in Cantonese): President, the

Rural Representative Election Legislation (Amendment) Bill 2013 has passed through Committee with amendments. I move that this Bill be read the Third time and do pass.

PRESIDENT (in Cantonese): I now propose the question to you and that is: That the Rural Representative Election Legislation (Amendment) Bill 2013 be read the Third time and do pass.

Does any Member wish to speak?

MR IP KWOK-HIM (in Cantonese): I will only make a brief speech. During the Second Reading debate, I heard many Members highlighting the numerous consequences brought about by this amendment Bill, for instance, the issue of Wong Wai Tsak Tong (WWTT) and that the indigenous inhabitants (IIs) would no longer be qualified as IIs under the election of village representatives.

According to my understanding, even if the Bill is passed, there would not be much change to the situation. If residents of Cheung Chau (CC) and Peng Chau (PC) are able to find new evidences to prove that the provisions comply with the requirements of the Government, they may achieve their end by resorting to judicial review. As we can see, other relevant laws enacted in the past have achieved the same end. I think this is all too clear in the previous deliberations, especially the deliberation of the Village Representative Election Ordinance. I therefore call on Members not to oppose or vote down this Bill on this ground as it merely aims to get the elections back on the right track. Thank you, President.

MR LEUNG KWOK-HUNG (in Cantonese): President, given that Mr IP Kwok-him has expressed his views, I would like to express my views. Simply put, as a Member, after listening to the views of the government representatives (including the Secretary's representative and the Secretary for Justice), I find that 9202 LEGISLATIVE COUNCIL ─ 26 March 2014 they are not substantiated and I will certainly oppose the Third Reading of the Rural Representative Election Legislation (Amendment) Bill 2013 (the Bill). According to Mr IP Kwok-him, any new evidence available could be incorporated into the Bill. While I get this point, I consider the evidence in hand sufficient. As in the case of universal suffrage, if we cannot make it in 2017, we may certainly strive to achieve it in 2020 or even 2022, which is a waste of time. Thus, we should aim to achieve it now.

I wish to ask Members of the Democratic Alliance for the Betterment and Progress of Hong Kong: After listening to the residents' explanation, do Members consider the evidences given sufficient? If so, why would Members vote for the Government's amendment instead of asking TSANG Tak-sing to compromise in view of the sufficient evidence? May I ask if Hong Kong, Cheung Chau or Peng Chau will submerge if TSANG Tak-sing accepts their evidence and makes changes accordingly? Why would this happen? This is administrative hegemony on the part of the Government. In spite of the doubts, the Government has refused to make any change, which is justified, simply because this Council has a voting machine. Today, I am going to call on Members to simply rise against this voting machine. Members have been accustomed to endorsing whatever motions proposed, regardless of whether they are right or wrong. May I ask TSANG Tak-sing to search his conscience? Even if the evidence provided is only 51% but not 100% justified, will an amendment bring about detrimental effects? To whom will this be detrimental? Who will suffer? It is now time…

PRESIDENT (in Cantonese): I must remind Members that, according to Rule 63 of the Rules of Procedure, debate on a motion for the Third Reading of a bill shall be confined to the contents of the bill. Members should bear this in mind.

MR LEUNG KWOK-HUNG (in Cantonese): I get it. I consider that the content of the Bill justifies my opposition. Also, I hope that other Members would not listen to Mr IP Kwok-him but vote down this Bill instead. Even if an amendment is voted down, the whole thing may start afresh, just like the forthcoming Budget debate. If the Budget is voted down, we need not start a filibuster. But are Members so bold to vote down this Bill?

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MR ALBERT HO (in Cantonese): Simply put, although the Government has undertaken to re-consider putting in place an election system for indigenous villages on CC and PC if new evidence is available  this is why I have abstained from voting during the Second Reading  the unfair election system and the fact that all our amendments have been voted down have prompted me to vote against the motion during the Third Reading of the Bill.

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

MR ALBERT CHAN (in Cantonese): President, it is indeed very ridiculous to discuss the sufficiency of evidence at this moment. Of course, Members may say that this phenomenon is sustained by the interests of the organizations to which they belong or support. In other words, the Bill must be passed for the sake of the interests of these organizations. While I appreciate this, it would be implausible to force the Bill through on the excuse of insufficient evidence. As I have said during the Second Reading debate  President, I am not going to repeat  I am sure that the descendants of Wong Wai Tsak Tong are indigenous inhabitants of Cheung Chau, and no Member (including the Government) would refute this claim. The availability of sufficient prima facie evidence, precedent cases and literatures have clearly showed that this is a fact, and confirmed that this is a hard fact.

If this is a hard fact but the Government has yet to include the genuine status of the indigenous inhabitants into the Bill, this would be regarded as a deficiency or omission. For this reason, the People Power has voted against the motion during the Second Reading. In fact, the pan-democratic camp should have voted against the motion during the Second Reading given that the Bill is deficient. They should not abstain from voting during the Second Reading in consideration of their amendments. But bygones are bygones. In view of the problems and deficiencies related to the Bill, I call on … Dr LAU Wong-fat should also vote against the motion during the Third Reading of the Bill. The Bill is not only a disrespect to the indigenous inhabitants, but also an omission.

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

(No Member indicated a wish to speak)

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PRESIDENT (in Cantonese): Secretary, do you wish to speak?

(Secretary for Home Affairs did not indicate a wish to speak)

PRESIDENT (in Cantonese): I now put the question to you and that is: That the Rural Representative Election Legislation (Amendment) Bill 2013 be read the Third time and do pass. Will those in favour please raise their hands?

(Members raised their hands)

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

(Members raised their hands)

Mr Albert CHAN rose to claim a division.

PRESIDENT (in Cantonese): Mr Albert CHAN has claimed a division. The division bell will ring for five minutes.

PRESIDENT (in Cantonese): Will Members please proceed to vote.

PRESIDENT (in Cantonese): Will Members please check their votes. If there are no queries, voting shall now stop.

(A Member shouted in his seat)

PRESIDENT (in Cantonese): Members should not shout in their seats. If there are queries, please raise hands.

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PRESIDENT (in Cantonese): Will Members please check their votes. If there are no queries, voting shall now stop and the result will be displayed.

Mr CHAN Kam-lam, Dr LAU Wong-fat, Mr TAM Yiu-chung, Mr Tommy CHEUNG, Mr WONG Kwok-hing, Mr Jeffrey LAM, Mr Andrew LEUNG, Mr WONG Ting-kwong, Ms Starry LEE, Dr LAM Tai-fai, Mr CHAN Hak-kan, Dr Priscilla LEUNG, Mr WONG Kwok-kin, Mr IP Kwok-him, Mrs Regina IP, Mr Michael TIEN, Mr James TIEN, Mr NG Leung-sing, Mr Steven HO, Mr Frankie YICK, Mr MA Fung-kwok, Mr CHAN Han-pan, Miss CHAN Yuen-han, Mr LEUNG Che-cheung, Miss Alice MAK, Mr Christopher CHEUNG, Dr Elizabeth QUAT, Mr Martin LIAO, Mr POON Siu-ping, Mr TANG Ka-piu, Dr CHIANG Lai-wan, Ir Dr LO Wai-kwok, Mr CHUNG Kwok-pan, Mr Christopher CHUNG and Mr Tony TSE voted for the motion.

Mr Albert HO, Mr James TO, Ms Emily LAU, Mr Frederick FUNG, Prof Joseph LEE, Ms Cyd HO, Mr CHEUNG Kwok-che, Mr Alan LEONG, Mr LEUNG Kwok-hung, Mr Albert CHAN, Ms Claudia MO, Mr WU Chi-wai, Mr Gary FAN, Mr Charles Peter MOK, Mr CHAN Chi-chuen, Dr Kenneth CHAN, Dr KWOK Ka-ki, Dr Fernando CHEUNG, Mr SIN Chung-kai, Dr Helena WONG and Mr IP Kin-yuen voted against the motion.

Mr WONG Yuk-man abstained.

THE PRESIDENT, Mr Jasper TSANG, did not cast any vote.

THE PRESIDENT announced that there were 58 Members present, 35 were in favour of the motion, 21 against it and one abstained. Since the question was agreed by a majority of the Members present, he therefore declared that the motion was passed.

CLERK (in Cantonese): Rural Representative Election Legislation (Amendment) Bill 2013.

9206 LEGISLATIVE COUNCIL ─ 26 March 2014

Resumption of Second Reading Debate on Bills

PRESIDENT (in Cantonese): We now resume the Second Reading debate on the Securities and Futures (Amendment) Bill 2013.

SECURITIES AND FUTURES (AMENDMENT) BILL 2013

Resumption of debate on Second Reading which was moved on 10 July 2013

PRESIDENT (in Cantonese): Mr CHAN Kam-lam, Chairman of the Bills Committee on the above Bill, will address the Council on the Committee's Report.

MR CHAN KAM-LAM (in Cantonese): President, in my capacity as Chairman of the Bills Committee on the Securities and Futures (Amendment) Bill 2013, I now report on the main deliberations of the Bills Committee to this Council.

The Securities and Futures (Amendment) Bill 2013 seeks to amend the Securities and Futures Ordinance (SFO) to provide for a regulatory framework for the over-the-counter (OTC) derivative market in Hong Kong and to incorporate other improvements for the regulation of the financial market.

The Bills Committee has held nine meetings to discuss the Bill with the Government and the Securities and Futures Commission (SFC) and has received views from deputations. It has received a total of 12 submissions. The Bills Committee supports the legislative proposal to provide for a regulatory regime for the OTC derivative market in Hong Kong which aims at reducing counterparty risk, improving overall transparency, protecting against market abuse, and enabling regulators to better assess, mitigate and manage systemic risk in the OTC derivative market. The Bills Committee also notes that deputations are supportive of the legislative proposal as the reform will strengthen Hong Kong's competitiveness as an international financial centre and enhance the stability and liquidity of the OTC derivative market. They have also made various suggestions to improve the operation of the regulatory framework.

The Bills Committee notes that the OTC derivative market will be jointly overseen and regulated by the Hong Kong Monetary Authority (HKMA) and the LEGISLATIVE COUNCIL ─ 26 March 2014 9207

SFC, with the HKMA regulating OTC derivative activities of authorized institutions and approved money brokers, and the SFC regulating such activities of licensed corporations and other prescribed persons. The broad regulatory framework for the OTC derivative market is set out in the Bill, with details prescribed in the rules. The SFC will make the rules with the consent of the HKMA and after consultation with the Financial Secretary. Such rules are subsidiary legislation subject to the negative vetting procedure of the Legislative Council. Given that the details of the regulatory regime and the requirements will be set out in subsidiary legislation, the Bills Committee and the deputations urge the Administration to prepare the detailed rules for consultation with the stakeholders as soon as possible. The Bills Committee also stresses the necessity for the HKMA and SFC to align the requirements of the regulatory regime with international standards and to reduce compliance burden on the industry.

The HKMA and SFC have stressed that they are mindful of the need to strike a balance between strengthening regulation and minimizing disruptions to the industry. They will continue to liaise with overseas regulatory bodies and engage the local financial services industry with a view to facilitating a smooth implementation of the regulatory regime. The HKMA and SFC have indicated that they are preparing the draft rules taking into account the relevant international standards and regulations of other major jurisdictions, and plan to conduct a public consultation on the matter in the first half of this year.

The new Part IIIA of the SFO sets out the mandatory reporting, clearing and trading obligations and requirements applicable to prescribed persons. The specific types of OTC derivative transactions to be subject to the mandatory obligations will be specified in the subsidiary legislation. Mandatory trading obligation will not be implemented at the outset pending further study of local market conditions.

As far as mandatory reporting is concerned, the Bills Committee notes that prescribed persons will be required to report reportable transactions to the trade repository developed by the HKMA (HK-TR) for the purpose of the mandatory reporting obligation. The Bills Committee has expressed concern about reporting on OTC derivative transactions to regulators of various jurisdictions which would increase compliance costs on the industry.

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The Government has indicated that the HK-TR will assist the HKMA and SFC to have effective and efficient access to OTC derivative transaction information to ensure their effective surveillance and monitoring work. The HK-TR has linkages with major global TRs so that prescribed persons can readily entrust global TRs to file reports to the HKMA on their behalf. The HKMA has been in close contact with reporting agents that are global TRs advising them the essential information and contributions required from them to support the applications.

The HK-TR is an electronic system for keeping information and records of OTC derivative transactions. The Bills Committee notes that, for the purpose of better certainty, the Administration will propose Committee stage amendments (CSAs) to add the new section 101KA of the SFO to provide for the power of the HKMA to charge the prescribed fees in this respect. The Administration has pointed out that the HKMA will charge the fees on a cost recovery basis and it plans to conduct a public consultation on the proposal in the first half of this year.

The Bills Committee notes that prescribed persons will be required to clear certain OTC derivative transactions through designated central counterparties (CCP). As the mandatory clearing obligation may be fulfilled either directly or indirectly, the Bill proposes to extend the coverage of the insolvency override protections so that they also apply to defaults of the recognized clearing house (RCH) itself, and those of the related agreements and arrangements between RCH members and their clients. In addition, any collateral, margin, or guarantee fund contributions deposited with a RCH is to be regarded as falling within the scope of "market collateral", and is thus covered by the insolvency override protections.

The Bills Committee has examined how the new section 40(2A) extends the insolvency override protections. The SFC has explained that by bringing such client clearing arrangements within the definition of "default rules", it will provide legal certainty that the positions and collateral of the client will not be included among the assets of the defaulting OTC client clearing service provider. Therefore, in case of default, the assets of the client will either be ported to another service provider or liquidated by the RCH and the balance be returned to the client. Under section 41 of the SFO, a RCH have to be approved by the SFC. Moreover, the relevant international standards require a CCP to ensure that even in the case of insolvency, there is a high degree of legal certainty as regards the enforceability of its rules. Therefore, the Bill will protect the assets of clients using indirect clearing services.

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To better clarify the extended coverage of the insolvency override protections, the Bills Committee notes that the Administration has taken on board the suggestions of the Hong Kong Exchanges and Clearing Limited (HKEx) on the technical drafting of clauses 57 to 60 and will move CSAs to the clauses with a view to clarifying the meaning of certain terms and improving the drafting of provisions. The Bills Committee supports the Administration's proposed CSAs in this respect.

The Bills Committee notes that there is no specific reference in the Bill to the record keeping requirement. In this regard, after observing the approaches taken by other major overseas jurisdictions, the Administration considers it apparently necessary to introduce a record keeping obligation on prescribed persons to supplement each of the mandatory reporting, clearing and trading obligations, so as to ensure that adequate records are maintained to evidence compliance with the mandatory obligations which will be accessible by the regulators to assist the latter in carrying out their regulatory functions. Details of the record keeping obligation will be provided in the subsidiary legislation. The Administration will move CSAs to add the new section 101DA and make related consequential amendments under clause 9 to this effect. The Administration has added that the regulators conducted soft consultation on the proposal with industry players including the Hong Kong Association of Banks early this year and they have raised no objection. The Bills Committee supports the proposed CSAs.

In response to market feedback, the Bills Committee notes that the Administration will move CSAs to the proposed new sections 101B, 101C and 101D which will provide that even if a transaction contravenes the mandatory reporting, clearing, trading and record keeping obligations, this should not affect the validity and enforceability of the transaction unless the parties to the transaction have expressly agreed otherwise. The Bills Committee understands that the amendment is included to avoid any doubt or uncertainty, and is consistent with the approach taken in other jurisdictions. The Bills Committee supports the proposed CSAs.

Apart from prescribed persons, the Bill also imposes regulations on systematically important participants (SIPs) because their positions and activities in the OTC derivative market are so large that they may cause potential systematic risks. The Bills Committee has expressed concern about how SIPs 9210 LEGISLATIVE COUNCIL ─ 26 March 2014 are to be identified and the information to be collected from and disclosed about them.

The Government has explained that after it has taken the views of the industry into account, it will adopt a quantitative approach (that is, the SIP thresholds) and market participants who reach the thresholds are required to notify the SFC. The proposal will facilitate understanding by market participants, enhance efficiency of the notification process and keep the calculation for the assessment simple. The Administration has pointed out that the information collected must be sufficient to ensure effective oversight. Public disclosure would be limited to the name of the SIP and the specific class of OTC derivative transactions in respect of which the notification level has been reached.

The Bills Committee has expressed concern about the impact of the new regulatory framework on regulated activities under the SFO and persons who serve as intermediaries in the OTC derivative market.

The Government has explained that the Bill amends Schedule 5 to the SFO to include two new RAs, namely a new Type 11 RA to cover the activities of OTC derivative products dealers and advisers, and a new Type 12 RA to cover the activities of persons providing client clearing services for OTC derivative transactions. The existing Type 9 RA (asset management) and Type 7 RA (providing ATS) will also be expanded to cover OTC derivative portfolios and transactions respectively. Furthermore, the Bill adds a new Schedule 11 to provide for transitional arrangements for the new and expanded RAs.

The Bills Committee is concerned about how the transitional arrangements can minimize disruption to the market. The Administration has advised that the purpose is to allow serving intermediaries in the OTC derivative market to continue their businesses for a limited period of time while their applications to be licensed or registered for the new or expanded RAs are being considered by the SFC. This would facilitate market players to ease into the new licensing regime with minimum disruption to their existing businesses, as well as facilitate the winding down process or the transfer process for corporations who may not wish to, or are not able to, apply for the new or expanded RAs. The Government has added that in response to the feedback from the public consultation, both the application and transitional periods have been lengthened to three months and six months respectively.

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The Bills Committee is concerned about the fees to be paid by the applicants. The SFC has responded that applicants are required to pay application fees upon submission of the applications, which may also be regarded as the annual fees for the first year from the deeming date. The annual fees, once collected, will not be refunded to the applicants if the applications are subsequently rejected. This is consistent with the current practice of regular licence applications. If the applications could not be determined by the SFC within one year from the deeming date, the applicants concerned will need to pay the annual fees for continuing to carry on the new or expanded RAs in the second year.

The Bills Committee notes that both the HKMA and SFC will be vested with the necessary investigatory and disciplinary powers to ensure that they can oversee and regulate activities in the OTC derivative market. The HKMA and SFC would also share with other regulators information relating to transactions regarding OTC derivative products.

The Bills Committee has expressed concern about the procedures of investigation of the SFC and HKMA and the rights and protections afforded to persons under investigation. The SFC has explained that persons under investigation or a person providing assistance to the investigation will be issued with a notice for production of records or documents which will include a list of records or documents the person is required to provide relevant to the investigation. The SFO also contains provisions to ensure investigations conducted by the SFC can be fairly conducted without prejudicing the legal rights and protection afforded to persons under investigation. These provisions include section 187 on inadmissibility of evidence against the person under investigation in criminal proceedings and section 380(4) on legal professional privilege.

With regard to the amended section 186 and the proposed new section 186A of the SFO, the Bills Committee has expressed concern about the factors which the SFC and HKMA will take into account in providing assistance to regulators outside Hong Kong in investigating activities in relation to OTC derivative products. The Government has advised that according to sections 186(3) and 186(4) and the proposed sections 186A(7) and 186A(8) of the SFO, the conditions which overseas regulators have to fulfil or the factors which the SFC or HKMA have to consider include the interests of the investing public or the public interest, or whether the assistance will enable or assist the recipient 9212 LEGISLATIVE COUNCIL ─ 26 March 2014 of the assistance to perform the recipient's functions, whether the overseas counterpart will pay the costs and expenses incurred, and is able and willing to give reciprocal assistance in response to a comparable request for assistance from Hong Kong.

The Bills Committee has requested the Administration to consider imposing a pre-condition for overseas regulators to provide reciprocal assistance before the SFC or HKMA gives the assistance. The Bills Committee has also urged the Administration to consider including the names of overseas regulators to whom assistance will be provided in the subsidiary legislation and subjecting such matters to the negative vetting procedure of the Legislative Council.

The Government has stressed that it is a common practice for international regulators to take into account reciprocity before giving assistance but it is not a common practice to make it a mandatory pre-condition. The Administration has pointed out that the SFC and HKMA have signed Memorandum of Understanding in accordance with their respective functions or have bilateral arrangements in relation to investigatory assistance with the relevant overseas authorities. The SFC and HKMA may also give investigatory assistance to an overseas requesting authority that has no agreement with them as long as all the requirements set out in section 186 and the proposed section 186A are fully satisfied. It usually takes time to enter into a formal agreement whereas it is desirable to be able to offer and receive investigatory assistance in a timely and efficient manner; hence, the Administration considers it important to retain this flexibility.

The HKMA may disclose information on OTC derivative activities to the SFC and overseas regulators, including information in the HK-TR. The Bills Committee has expressed concern about how privacy of parties involved in OTC derivative transactions can be protected.

The HKMA has pointed out that, given that mainly institutional players (for example, banks, licensed corporations and funds) are involved in OTC derivative transactions, information kept by TR would include data relating to individual OTC derivative transactions conducted by these institutions, such as the types and amount of derivative transactions, their economic terms, and the counterparties concerned, and so on. In addition, the Bills Committee notes that the HK-TR explicitly requires that no personal data should be reported. In compliance with the Personal Data (Privacy) Ordinance, the HK-TR will set out LEGISLATIVE COUNCIL ─ 26 March 2014 9213 its policies and practices with regard to personal data to be collected from the private individual in a personal information collection statement.

Some members of the Bills Committee have urged the Government to consider including the names of overseas authorities to which the HKMA will disclose information in the subsidiary legislation and subjecting such matters to the negative vetting procedure of the Legislative Council.

The Administration has explained that the purpose of publishing the names of overseas persons under section 381F(4) is to enhance transparency. Given that the international regulatory community is working together to ensure smooth and effective access to TR data, the Administration is of the view that subjecting the disclosure mechanism to the negative vetting procedure of the Legislative Council may create uncertainty and jeopardize the co-operative arrangement HKMA seeks from other jurisdictions. Moreover, HKMA is not aware that a similar requirement exists in other jurisdictions.

In view of the complexity of products the OTC derivative market, the Bills Committee has stressed the importance for the regulatory authorities to offer adequate protection for the investors concerned. Some members of the Bills Committee are also concerned about how the SFC regulates activities involving an advising act on OTC derivative products carried out by a person through the media.

The Government has pointed out that while mainly institutional investors are involved in OTC derivative transactions, if OTC derivative products are offered to retail investors, they will be governed by the investor protection regime under the SFO. The SFC added that journalists and public commentators who publish financial research and recommendations in the media are not required to be licensed by the SFC. However, they are still subject to market misconduct and criminal provisions in the SFO. Given that mainly institutional investors are involved in OTC derivative transactions, the SFC does not envisage that advising acts on OTC derivative products through the media targeting at the general investing public would be prevalent. The SFC assures the Bills Committee that it is under the SFC's ongoing initiatives to enhance investor education.

Another purpose of the Bill is to incorporate other improvements to the regulation of the financial market, including: (1) requiring electronic filing of notifications and reports on disclosure of interests in listed corporations to the 9214 LEGISLATIVE COUNCIL ─ 26 March 2014

Stock Exchange of Hong Kong; (2) enabling criminal courts to make disgorgement orders similar to the Market Misconduct Tribunal for the purpose of recouping illegal gains and loss avoided from committing market misconduct offences; and (3) enhancing the confiscation regime under the Organized and Serious Crimes Ordinance. The Bills Committee supports the amendments in order to enhance the timeliness of publication of potentially market sensitive information, strengthen the enforcement regime of the SFC regarding market misconduct offences and demonstrate the commitment of Hong Kong to fulfilling international obligations on anti-money laundering and counter-financing of terrorism.

The Bills Committee notes that the Government will move other CSAs to the Bill concerning matters relating to certain technical aspects as suggested by the market players and to improve the drafting of provisions. The Bills Committee supports the CSAs.

The Bills Committee will not propose any CSAs to the Bill and supports the resumption of the Second Reading debate on the Bill.

President, I shall express my personal opinions now.

Owing to the financial tsunami, regulatory authorities all over the world have strengthened their regulation on financial institutions and Hong Kong can, in no way, be an exception. The Bill seeks to provide for a regulatory framework for the OTC derivative market in Hong Kong and to incorporate other improvements for the regulation of the financial market, which are very important to Hong Kong as an international financial centre.

The Bill proposes that transactions of interest rate swaps and non-deliverable forwards denominated in Hong Kong dollar and Renminbi (RMB) shall be subject to mandatory reporting to the HK-TR and mandatory clearing through CCPs authorized by the SFC. In fact, mandatory reporting and clearing is one of the financial reform initiatives provided in the SFO after the financial tsunami.

The abovementioned requirements serve a number of purposes. First, the initiatives will assist in developing an appropriate and effective system in Hong Kong for fulfilling the obligations to the Group of Twenty Leaders and ensuring LEGISLATIVE COUNCIL ─ 26 March 2014 9215 that our financial regime is in line with the rest of the world, so as to maintain our status as an international financial centre.

Second, as the Bill makes it a mandatory requirement for licensed banks in Hong Kong to report on all OTC derivative transactions, the scope of regulation on automated trading services and asset management will be expanded. The initiative will not only enhance the stability of the banking system of Hong Kong, but also assist the banks in coping with unexpected external forces and help the financial regulators in monitoring block trade transactions so as to reduce risks.

At present, OTC transactions denominated in Hong Kong dollars are traded on a limited scale. According to market estimates, these transactions amount to less than $22.2 trillion which represents less than 5% of the market share in the world calculated on the basis of the notional value of interest rate derivatives transactions. The number of OTC transactions denominated in RMB, which is not fully convertible, would even be smaller. The provision of clearing of interest rate swaps denominated in Hong Kong dollars by the HKEx will hopefully encourage some major banks to make their transactions through Hong Kong as a CCP. Therefore, the initiative may attract new clients to the financial market of Hong Kong and help to develop new financial products.

As non-deliverable forwards denominated in RMB are a type of OTC derivative commonly traded by the banks of Hong Kong, we should pay attention to the future development in OTC derivative transactions denominated in RMB. As of the end of December 2013, the total amount of RMB deposits in Hong Kong has reached RMB860.5 billion yuan. The continuous increase in the types and numbers of products denominated in RMB has directly led to the appreciation of the Chinese yuan freely traded in Hong Kong, meaning there will be an increasing need for hedging through the OTC derivative market. As the HKEx will be the first clearing house in the world for clearing RMB OTC derivative transactions, it enjoys the advantage of an early bird. It is believed that the initiative will promote the development of clearing business of transactions denominated in RMB.

As the rules and details of the regulatory framework will be provided in the subsidiary legislation, the Democratic Alliance for the Betterment and Progress of Hong Kong (DAB) hopes that the Administration will prepare the rules and consult the stakeholders as soon as possible, so that clearer guidelines will be 9216 LEGISLATIVE COUNCIL ─ 26 March 2014 provided to the industry and the views of the industry will be taken into account to meet the operational needs of the market.

President, the DAB supports the Bill. I so submit.

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

(No Member indicated a wish to speak)

PRESIDENT (in Cantonese): If not, I will now call upon the Secretary for Financial Services and the Treasury to reply.

SECRETARY FOR FINANCIAL SERVICES AND THE TREASURY (in Cantonese): President, I would like to thank Mr CHAN Kam-lam, the Chairman, and other members of the Bills Committee, as well as the Clerk and the Legal Adviser to the Bills Committee for their efforts to bring forth the smooth completion of the scrutiny of the Securities and Futures (Amendment) Bill 2013 (the Bill). I also have to thank various groups of the trade which have expressed their support and views on providing for a regulatory framework for the over-the-counter (OTC) derivative market in Hong Kong.

After taking on board the relevant views and examining the provisions of the Bill, the Administration has submitted Committee stage amendments (CSAs) to the Bill to respond to market feedback, enhance the regulatory framework and give a greater degree of clarity to the provisions. I will move the CSAs in the Committee Stage.

Given that the global financial crisis at the end of 2008 revealed structural deficiencies in the OTC derivative market, the Group of Twenty (G20) Leaders committed themselves to reforming the OTC derivative market. Market players in all major markets have geared up for the reform. For example, the United States enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act on 21 July 2010 and the European Union (EU) adopted the European Market Infrastructure Regulation, which is a piece of legislation for the OTC derivative reform, in July 2012.

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The main object of the Bill is to provide for a regulatory framework for the OTC derivative market in Hong Kong for complying with international requirements. The Bill introduces mandatory reporting, clearing and trading obligations in line with the G20 commitments and introduces a record keeping obligation to facilitate compliance of the former obligations. The Bill also provides for the regulation of the necessary infrastructure and the regulation and oversight of key players in the OTC derivative market. The details will be set out in the rules, that is, the subsidiary legislation. The Hong Kong Monetary Authority (HKMA) and the Securities and Futures Commission (SFC) plan to conduct public consultation on the subsidiary legislation on the obligations of mandatory reporting and record keeping in the second quarter of this year.

The proposed regime will be jointly overseen and regulated by the HKMA and SFC. The HKMA will be responsible for regulating the OTC derivative activities of authorized institutions (which include banks, restricted licence banks and deposit-taking companies) and approved money brokers. The SFC will be responsible for regulating the OTC derivative activities of licensed corporations and other persons to be prescribed by subsidiary legislation.

The mandatory reporting, clearing and trading obligations introduced by the Bill will only be applicable to OTC derivative transactions to be prescribed by the subsidiary legislation. The initial idea is that certain types of interest rate swaps and non-deliverable forwards will be specified for regulation, as these are the major types of OTC derivative transactions conducted in Hong Kong and are capable of standardization. The subsidiary legislation will provide for proposed grace periods for the reporting and the clearing requirements, so as to allow affected market players to establish system connection and necessary documentation work. The proposed grace period for the reporting requirement will be up to six months to cover backloading.

Some deputations have submitted their views on cross-border transactions to the Bills Committee. As we have explained to the Bills Committee, we will endeavour to align our regulatory regime with international standards and those of the major markets while recognizing the local circumstances. We are also discussing equivalence assessment with the EU and co-operation arrangements on regulating OTC derivative activities with the United States. Meanwhile, we will put in place measures to facilitate compliance. The trade repository developed by the HKMA (HK-TR) has linkages with major global trade repositories (TRs), so that the industry can readily entrust global TRs to file reports to the HKMA on 9218 LEGISLATIVE COUNCIL ─ 26 March 2014 their behalf. Both local and overseas central counterparties (CCPs) may be designated as CCPs under the Bill. In fact, both parties to the transaction can choose any CCP authorized and designated by the SFC. As far as the local CCPs are concerned, the OTC Clearing Hong Kong Limited, established by the Hong Kong Exchanges and Clearing Limited, has also started to provide voluntary clearing services since November 2013.

The Bill will also regulate systemically important participants (SIPs). These participants, who may enter the scene as Hong Kong entities, are currently not regulated by the HKMA or SFC, but their positions and transactions in the OTC derivative market are so large that they may nevertheless raise concerns of potential systematic risks. The proposal is that if their derivative positions exceed certain thresholds specified in the subsidiary legislation, they should notify the SFC, so that the regulatory authorities of Hong Kong can oversee these SIPs and closely monitor their activities lest they jeopardize the financial system of Hong Kong.

The Bills Committee has examined the approach to be adopted in setting the thresholds for notification by SIPs. After taking into account the views of the industry, the SFC has decided to adopt a quantitative approach and will not take unquantifiable factors into consideration. The proposal will facilitate understanding by market participants and enhance efficiency of the notification process. The HKMA and SFC will consult the public on the notification rules to be adopted regarding SIPs.

The Bill will introduce two new types of regulated activities (RAs) of OTC derivative products. The new Type 11 RA covers the activities of OTC derivative products dealers and advisers and the new Type 12 RA covers the activities of persons providing client clearing services for OTC derivative transactions. The scope of Type 9 RA and Type 7 RA will also be expanded. The existing Type 9 RA (asset management) and Type 7 RA (providing automated trading services) will be expanded to cover OTC derivative portfolios and transactions respectively. The Bill will provide for transitional arrangements for the new and expanded RAs to allow serving intermediaries in the OTC derivative market to continue their businesses for a limited period of time.

The Bills Committee has considered measures to minimize the impact of the new RAs and expanded RAs on market participants. According to the views LEGISLATIVE COUNCIL ─ 26 March 2014 9219 received during the public consultation exercise conducted earlier, the Administration is aware that the public considers it necessary to set down a longer transitional period for these RAs. Therefore, the Bill has proposed to lengthen both the application and transitional periods to three months and six months respectively, so as to facilitate market players to ease into the new licensing regime with minimum disruption to their existing businesses. Furthermore, a person who submits an application to be licensed or approved for any of the new or expanded RAs during the application period and meets certain qualification criteria will be deemed to be licensed or approved for the relevant RAs until the SFC completes its vetting procedures. If the application regarding any new or expanded RAs is approved by the SFC, the person can continue to carry on the RAs.

To ensure that the HKMA and SFC have the relevant regulatory powers, the SFC's investigation and disciplinary powers will be extended to cover OTC derivative activities, and corresponding powers will be conferred upon the HKMA to regulate the compliance situation of authorized institutions and approved money brokers. In order to ensure a fair competition environment, the powers conferred upon the HKMA are in line with the SFC's investigation and disciplinary powers under the Securities and Futures Ordinance(SFO).

Part III of the SFO contains insolvency override protections which aim to prevent transactions cleared through a recognized clearing house (RCH) from being unravelled by the application of insolvency law in the event of a default by any of the RCH's members. These protections are crucial because of the potential domino effect that any such unravelling might otherwise have on other members of the RCH. Currently, these protections only apply to arrangements and agreements between the RCH and its members in respect of defaults of a RCH member.

The Bill amends Part III of the SFO to expand the application of the default rules for RCHs which will in turn extend the coverage of the insolvency override protections. The amendments seek to extend the coverage of the insolvency override protections so that they also apply in respect of defaults of the RCH itself and clearing arrangements for certain clients of OTC derivative transactions supported by the RCH. The amendments will ensure that if an OTC derivative client clearing participant defaults, its client's positions and collateral will not be used to repay creditors of the defaulting participant, but will either be ported to 9220 LEGISLATIVE COUNCIL ─ 26 March 2014 another clearing participant of the RCH who is willing to take them up according to the relevant arrangements, or else liquidated by the RCH and any remaining collateral returned to the client.

The Hong Kong Exchanges and Clearing Limited has submitted its views to the Bills Committee and subsequently proposed certain technical amendments to the Bill to the regulatory authorities. We have adopted its proposals and the CSAs concerned have been supported by the Bills Committee.

In addition, the Bill will introduce other technical improvements for the regulation of the financial market.

First, the Bill amends the SFO to require notifications and reports under Part XV "Disclosure of Interest" of the Ordinance to be filed electronically with a view to improving the timeliness of publication of potentially market sensitive Disclosure of Interests notices.

Second, in respect of market misconduct offences, the Bill amends the SFO so that the scope of disgorgement orders made by the criminal courts will cover the amount of any profit gained or loss avoided, which is similar to the existing fining power of the Market Misconduct Tribunal. The Bill also amends the Organized and Serious Crimes Ordinance to empower the criminal courts to make restraint, charging or confiscation orders for market misconduct offences, to freeze or seize and confiscate, among others, proceeds from, or instrumentalities used in, money laundering or predicate offences, so as to comply with the recommendations made by made by the Financial Action Task Force on Money Laundering.

To sum up, the Bill will enable Hong Kong to put in place an appropriate and effective regime to regulate the OTC derivative market which meets the G20 requirements and is in line with developments in other international financial centres.

President, the Bill and the CSAs moved by the Administration are supported by the Bills Committee and I urge Honourable Members to support them. Thank you, President.

LEGISLATIVE COUNCIL ─ 26 March 2014 9221

PRESIDENT (in Cantonese): I now put the question to you and that is: That the Securities and Futures (Amendment) Bill 2013 be read the Second time. Will those in favour please raise their hands?

(Members raised their hands)

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

(No hands raised)

PRESIDENT (in Cantonese): I think the question is agreed by a majority of the Members present. I declare the motion passed.

CLERK (in Cantonese): Securities and Futures (Amendment) Bill 2013.

Council went into Committee.

Committee Stage

CHAIRMAN (in Cantonese): Committee stage. Council is now in committee.

SECURITIES AND FUTURES (AMENDMENT) BILL 2013

CHAIRMAN (in Cantonese): I now propose the question to you and that is: That the following clauses stand part of the Securities and Futures (Amendment) Bill 2013.

CLERK (in Cantonese): Clauses 1 to 8, 10 to 13, 15, 16, 17, 19, 21 to 36, 38, 39, 41 to 51, 54, 56, 59 and 61 to 69.

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

(No Member indicated a wish to speak)

9222 LEGISLATIVE COUNCIL ─ 26 March 2014

CHAIRMAN (in Cantonese): I now put the question to you as stated. Will those in favour please raise their hands?

(Members raised their hands)

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

(No hands raised)

CHAIRMAN (in Cantonese): I think the question is agreed by a majority of the Members present. I declare the motion passed.

CLERK (in Cantonese): Clauses 9, 14, 18, 20, 37, 40, 52, 53, 55, 57, 58 and 60.

SECRETARY FOR FINANCIAL SERVICES AND THE TREASURY (in Cantonese): Chairman, I move that the clauses read out just now be amended as set out in the paper circularized to Members.

I move that clause 9 be amended. The main purpose of the Committee stage amendments (CSAs) is to introduce a record keeping obligation and to empower the Chief Executive in Council to make rules relating to fees for the trade repository developed by the Hong Kong Monetary Authority (HKMA).

The CSAs introduce a record keeping obligation to facilitate compliance of mandatory reporting, clearing and trading obligations. This will ensure that adequate records are maintained by prescribed persons to evidence compliance with the mandatory obligations which will be accessible by the regulators to assist the latter in carrying out their regulatory functions. As with other mandatory obligations, details of the record keeping obligation will be set out in the rules (that is, the subsidiary legislation). The regulatory authorities have conducted preliminary consultations with the industry players and are aware that they have no objections to the record keeping obligation in principle. The regulatory authorities plan to conduct public consultation on the rules of the record keeping obligation in the second quarter of this year.

LEGISLATIVE COUNCIL ─ 26 March 2014 9223

In addition, the CSAs provide that the Chief Executive in Council may, after consultation with the HKMA, make rules relating to fees for the trade repository developed by the HKMA. The HKMA plans to conduct consultation on the fees concerned in the second quarter of this year.

Furthermore, in response to market feedback, the CSAs have explicitly provided that breaches of mandatory obligations should not affect the validity of the transaction unless the parties to the transaction have expressly agreed otherwise. The approach is consistent with the practice of other jurisdictions, for example, the European Union, Australia and Singapore. The CSAs also better clarify the ambit of persons who may fall within the category of systematically important participants, the scope of their positions to be taken into account and the penalties for non-compliance with the notification obligation.

I move that clauses 53 and 55 of the Bill be amended to make the provisions relating to the new or expanded regulated activities (RAs) clearer and better understood, so as to avoid confusion or overlaps with existing RAs.

In addition, I move that clauses 52, 57, 58 and 60 be amended. The Hong Kong Exchanges and Clearing Limited has submitted its views on the Bill to the Bills Committee and subsequently proposed certain technical amendments to the regulatory authorities. The Administration has adopted the proposals, clarified the meanings of certain terms and improved the drafting of the provisions to better clarify the extended coverage of the insolvency override protections.

The other CSAs to clauses 14, 18, 20, 37 and 40 of the Bill are consequential amendments or amendments to make the provisions clearer and better understood.

The Bills Committee has agreed to the CSAs proposed by the Administration and I implore Members to support their passage. Thank you, Chairman.

Proposed amendments

Clause 9 (see Annex II)

Clause 14 (see Annex II)

9224 LEGISLATIVE COUNCIL ─ 26 March 2014

Clause 18 (see Annex II)

Clause 20 (see Annex II)

Clause 37 (see Annex II)

Clause 40 (see Annex II)

Clause 52 (see Annex II)

Clause 53 (see Annex II)

Clause 55 (see Annex II)

Clause 57 (see Annex II)

Clause 58 (see Annex II)

Clause 60 (see Annex II)

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

(No Member indicated a wish to speak)

CHAIRMAN (in Cantonese): I now put the question to you and that is: That the amendments moved by the Secretary for Financial Services and the Treasury be passed. Will those in favour please raise their hands?

(Members raised their hands)

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

(No hands raised)

CHAIRMAN (in Cantonese): I think the question is agreed by a majority of Members present. I declare the amendments passed.

LEGISLATIVE COUNCIL ─ 26 March 2014 9225

CLERK (in Cantonese): Clauses 9, 14, 18, 20, 37, 40, 52, 53, 55, 57, 58 and 60 as amended.

CHAIRMAN (in Cantonese): I now put the question to you and that is: That clauses 9, 14, 18, 20, 37, 40, 52, 53, 55, 57, 58 and 60 as amended stand part of the Bill. Will those in favour please raise their hands?

(Members raised their hands)

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

(No hands raised)

CHAIRMAN (in Cantonese): I think the question is agreed by a majority of Members present. I declare the motion passed.

CLERK (in Cantonese): New clause 58A To amend section 45 of the Ordinance (Proceedings of recognized clearing house take precedence over law of insolvency).

SECRETARY FOR FINANCIAL SERVICES AND THE TREASURY (in Cantonese): Chairman, I move that the new clause 58A, as set out in the paper circularized to Members, be read the Second time.

The Administration has adopted the proposals of the Hong Kong Exchanges and Clearing Limited to amend section 45 of the Securities and Futures Ordinance to expressly include reference to the provision of market collateral, so as to ensure that market collateral provided by way of an outright transfer rather than by way of a charge is also covered by the insolvency override protections. This is a technical amendment which seeks to enhance the insolvency override protections to ensure that market collateral provided by way of an outright transfer will not be used to repay creditors.

9226 LEGISLATIVE COUNCIL ─ 26 March 2014

The proposed new clause has been endorsed by the Bills Committee and I implore Members to support the motion. Thank you, Chairman.

CHAIRMAN (in Cantonese): I now propose the question to you and that is: That the new clause 58A be read the Second time.

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

(No Member indicated a wish to speak)

CHAIRMAN (in Cantonese): I now put the question to you as stated. Will those in favour please raise their hands?

(Members raised their hands)

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

(No hands raised)

CHAIRMAN (in Cantonese): I think the question is agreed by a majority of the Members present. I declare the motion passed.

CLERK (in Cantonese): New clause 58A.

SECRETARY FOR FINANCIAL SERVICES AND THE TREASURY (in Cantonese): Chairman, I move that new clause 58A be added to the Bill.

Proposed addition

New clause 58A (see Annex II)

LEGISLATIVE COUNCIL ─ 26 March 2014 9227

CHAIRMAN (in Cantonese): I now propose the question to you and that is: That new clause 58A be added to the Bill.

CHAIRMAN (in Cantonese): I now put the question to you as stated. Will those in favour please raise their hands?

(Members raised their hands)

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

(No hands raised)

CHAIRMAN (in Cantonese): I think the question is agreed by a majority of the Members present. I declare the motion passed.

CHAIRMAN (in Cantonese): Council now resumes.

Council then resumed.

Third Reading of Bills

PRESIDENT (in Cantonese): Bill: Third Reading.

SECURITIES AND FUTURES (AMENDMENT) BILL 2013

SECRETARY FOR FINANCIAL SERVICES AND THE TREASURY (in Cantonese): President, the

Securities and Futures (Amendment) Bill 2013 has passed through the Committee stage with amendments. I move that this Bill be read the Third time and do pass.

9228 LEGISLATIVE COUNCIL ─ 26 March 2014

PRESIDENT (in Cantonese): I now propose the question to you and that is: That the Securities and Futures (Amendment) Bill 2013 be read the Third time and do pass.

Does any Member wish to speak?

(No Member indicated a wish to speak)

PRESIDENT (in Cantonese): I now put the question to you as stated. Will those in favour please raise their hands?

(Members raised their hands)

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

(No hands raised)

PRESIDENT (in Cantonese): I think the question is agreed by a majority of the Members present. I declare the motion passed.

CLERK (in Cantonese): Securities and Futures (Amendment) Bill 2013.

Resumption of Second Reading Debate on Bills

PRESIDENT (in Cantonese): We now resume the Second Reading debate on the Loans (Amendment) Bill 2014.

LOANS (AMENDMENT) BILL 2014

Resumption of debate on Second Reading which was moved on 22 January 2014

PRESIDENT (in Cantonese): Mr Charles Peter MOK, member of the Bills Committee on the above Bill, will address the Council on the Committee's Report.

LEGISLATIVE COUNCIL ─ 26 March 2014 9229

MR CHARLES PETER MOK: President, I speak in place of Mr Kenneth LEUNG, the chairperson of the Bills Committee on Loans (Amendment) Bill 2014, who is on sick leave today. The purpose of the Bill is to amend the Loans Ordinance to accommodate the issuance of Islamic bonds, that is, sukuk, under the Government Bond Programme. The Bills Committee, of which I am also a member, has held one meeting with the Administration to discuss the Bill. It has also invited written views from the public but received no submissions.

The Bills Committee notes that allowing sukuk issuances under the Government Bond Programme will help diversify the financial products and services for the Hong Kong financial markets, further promote Islamic finance in Hong Kong through encouraging issuers to raise funds by issuing sukuk, and reinforce Hong Kong's status as a major international financial centre and an asset management centre. The Bills Committee supports the Bill in principle. I shall now turn to the major issues deliberated by the Bills Committee.

The Bills Committee has examined the need to amend the Loans Ordinance and studied how the proposed amendments operate in achieving the purpose of the Bill.

The Administration explains that as asset transactions involved in sukuk may not be regarded as a "borrowing" in the prevailing context of the Loans Ordinance, it is necessary to amend the Ordinance to encompass the situation in which the Government shall be regarded as "borrowing" moneys from the Special Purpose Vehicle set up to effect sukuk issuance. This will enable the funds so raised to be credited to the Bond Fund. It is also necessary to amend the Bond Fund Resolution to allow payments to be made out of the Bond Fund for meeting the coupon and redemption payments to holders of sukuk issued under the Government Bond Programme, as well as the expenses incurred in relation to the issuance of sukuk. Furthermore, the Bill also amends the Inland Revenue Ordinance to exempt coupon payments and disposal gains derived from the sukuk issued in connection with the Government Bond Programme to enjoy the same profits tax exemption as that currently applicable to those in relation to conventional bonds.

As issuance of sukuk under the Government Bond Programme may have implications on other types of bonds issued under the Programme and the local bond market, the Bills Committee has sought information on the Administration's 9230 LEGISLATIVE COUNCIL ─ 26 March 2014 considerations in launching sukuk under the Programme, the target investors and offering mechanism involved, as well as the management of sukuk proceeds.

Members of the Bills Committee note that the Administration will determine the timing and actual issuance size of sukuk under the Government Bond Programme with regard to the prevailing market conditions and needs. The preliminary thinking for the inaugural sukuk issuance may be in the size equivalent to around US$500 million or more. The Administration envisages that the investors of the inaugural sukuk issuance would be institutional investors as they are the major players in the global sukuk market. The Bills Committee further notes that depending on market interest and developments, the Administration may consider extending sukuk issuances under the Government Bond Programme to retail investors in the future.

As far as the offering mechanism is concerned, the Administration may engage financial institutions and legal advisers in arranging the deal through a Special Purpose Vehicle.

On the management of sukuk proceeds, the Administration advises that investment return for the Bond Fund is calculated based on the average annual rate of return of the Exchange Fund's investment portfolio over the past six years or the average annual yield of the three-year Exchange Fund Notes for the previous year, whichever is the higher.

The Bills Committee has expressed concern about the competitiveness of Hong Kong's sukuk platform vis-à-vis those of other jurisdictions in attracting international sukuk issuers and investors given that major Islamic financial centres, such as Malaysia, have well-developed sukuk markets, and that Hong Kong lacks ties with such Islamic communities.

In response, the Administration advises that the Inland Revenue and Stamp Duty Legislation (Alternative Bond Schemes) (Amendment) Ordinance 2013 passed by the Council in July last year has enhanced Hong Kong's competitiveness in the development of a sukuk market by providing a comparable taxation framework for some common types of sukuk vis-à-vis conventional bonds. Coupled with the core competency of Hong Kong financial market, Hong Kong is now on a better footing to promote Islamic finance through encouraging issuers to raise funds by issuing sukuk. The Administration LEGISLATIVE COUNCIL ─ 26 March 2014 9231 considers that sukuk issuance under the Government Bond Programme will signal to the markets that Hong Kong's legal, regulatory and taxation frameworks are well established to accommodate sukuk issuances. This will give further impetus to other potential sukuk issuers to raise funds in Hong Kong. An inaugural sukuk issuance originated by the Hong Kong Government, with an excellent credit rating of AAA, will draw attention and interest in the global market and attract a new group of investors from the Middle East and other parts of the world to Hong Kong's financial platform.

In view of increasing competition from other financial centres in developing the sukuk market and Islamic finance, the Bills Committee has stressed the need for the Administration to make concerted efforts with relevant parties to promote Hong Kong's sukuk platform, including increasing exchanges with other financial centres to foster co-operation and to keep abreast of latest developments in the global sukuk market. Moreover, members of the Bills Committee have urged the Administration to ensure a sufficient supply of professionals and market practitioners with expertise in sukuk issuance and Islamic finance which is vital to the development of the sukuk market and Islamic finance in Hong Kong.

The Administration has stressed that the strengths of Hong Kong's bond market, including sukuk market and the listing platform, are among the key features in the promotional work targeting international investors in recent years. The Administration has been collaborating with relevant parties, such as Hong Kong Economic and Trade Offices and the market, in promoting Hong Kong's sukuk platform overseas, and keeping a close contact with the industry to encourage them to issue sukuk in Hong Kong. The Administration assures the Bills Committee that it will continue to seize every possible opportunity to promote Hong Kong's bond market and its sukuk platform when meeting with institutional investors, issuers and asset managers.

On the promotion of market awareness of Islamic finance, the Administration has pointed out that the Hong Kong Monetary Authority (HKMA) has been in close collaboration with overseas central banks, international organizations and local industry bodies to offer training for market practitioners. Over the past few years, the HKMA has organized a series of Islamic finance seminars and workshops covering a wide range of topics. The Bills Committee notes that these activities have received enthusiastic market response and 9232 LEGISLATIVE COUNCIL ─ 26 March 2014 provided opportunities for Hong Kong market practitioners to interact with their overseas counterparts and exchange views on issues relating to Islamic finance and sukuk issuance.

Regarding co-operation with major Islamic financial markets, the Administration advises that the HKMA has been maintaining a close partnership with key Islamic financial markets, such as Malaysia and Dubai. Moreover, the Securities and Futures Commission has been working closely with its counterparts from major Islamic markets, including signing a Memorandum of Understanding with the Dubai Financial Services Authority in 2008 for mutual co-operation on capacity building and human capital development in Islamic finance, as well as the promotion and development of the Islamic capital market.

Given that sukuk have more complex structures than conventional bonds, the Bills Committee considers it important for the Administration will ensure a robust regulatory regime over sukuk issuers with a view to providing adequate protection for sukuk investors.

The Administration has assured the Bills Committee that, similar to other financial products, sukuk are subject to the prevailing regulatory regime in respect of product offering, marketing, disclosure, and intermediaries requirements in accordance with the relevant provisions in the Securities and Futures Ordinance and the Companies Ordinance. These include the requirement on sukuk issuers to seek authorization from the Securities and Futures Commission on the issuance of any advertisement, invitation or document, which is or contains an invitation to the public to enter into or offer to enter into an agreement to acquire the relevant sukuk products, unless and exemption applies. The Bills Committee notes that as institutional investors will be the target investors of sukuk issued under the Government Bond Programme, certain exemptions under the Securities and Futures Ordinance will apply.

Neither the Bills Committee nor the Administration will propose Committee stage amendments to the Bill. The Bills Committee supports resumption of the Second Reading debate on the Bill.

Thank you, President. The following are the views on the matters relating to the Bill, of which myself and Mr Kenneth LEUNG share, on the opportunities and the pressing need for promoting Hong Kong's bond market.

LEGISLATIVE COUNCIL ─ 26 March 2014 9233

Hong Kong is a leading international financial centre with a stock exchange which ranked among the top globally for funds raised from initial public offering from 2009 through 2011.

However, in order to stay competitive, Hong Kong needs to capitalize on other successful factors and take a holistic approach in promoting our financial platform. Developing the local bond market not only enriches the diversity of the financial products, but is also a key component which meets the intrinsic needs of institutional and retail investors.

The majority of local investors have very limited choices if they are looking for a long-term investment instrument with stable return. It is therefore not surprising to see the soaring property prices in recent years under a low-interest rate environment.

For those who cannot afford to buy properties, they probably have to invest in riskier and more turbulent markets, such as the equity market, foreign exchange and commodity or others, such as the victims of the Lehman Brothers incident, they would have tempted to invest in complicated structured products to earn a slightly higher yield than normal time deposits.

I also believe that a mature and liquid Hong Kong dollar bond market is crucial for stabilizing and sustaining investment returns for Hong Kong's retirement population.

A sizable Hong Kong dollar-denominated debt securities market can offer more options for MPF funds. Bonds issued by local reputable institutions, in particular, help provide employers and employees with relatively low-fee alternatives, and earn reasonably stable returns while enjoying the compound interest benefits. Of course, those with more aggressive risk appetite may always choose MPF funds with higher risks, higher returns and higher management fees, like stocks fund. The Government should encourage and facilitate the provision of a more risk-balanced choice of funds, and the rest will be market-driven.

Indeed, President, Hong Kong does not lack competitive advantages required for deepening and broadening the local fixed income market.

9234 LEGISLATIVE COUNCIL ─ 26 March 2014

We have a sophisticated business infrastructure and transparent regulatory environment. A triple A credit rating status (S&P long-term credit rating) which can minimize the cost of the Government, statutory bodies and government-owned corporations for fund raising through issuance of securities papers.

Unfortunately, the Government fails to perform its role in promoting Hong Kong dollar debt issuance. Based on statistics of the Financial Services and the Treasury Bureau, the Government, statutory bodies and government-owned corporations made in total 654 issuances, with a total amount of around $264.2 billion Hong Kong dollar debt securities between 2003 and 2012, or 13.2% of the total Hong Kong dollar debt securities issued in the same period, excluding Exchange Fund Bills and Notes (EFBNs) issued by the HKMA.

Compared with other international financial centres, Hong Kong is lagging behind in terms of scale of issuance. Perhaps one may say that our huge reserves justify the conservative position of the Government, but I am afraid this is somewhat myopic.

As Hong Kong Government is going to invest as much as $340 billion in mega projects, including a new airport runway, new development areas and reclamations in the coming years, it is high time for the Government to leverage this golden opportunity to speed up the development of Hong Kong dollar bond market as an alternative financing channel rather than to be over reliant on public revenues alone. This is particularly true when the Government is subject to a financial commitment to address the needs of the poor and our ageing population.

To achieve this, we need a number of positive actions:

(1) the active participation of the Government, statutory bodies and government-owned corporations in using the Hong Kong dollar bond instrument to raise funds for these mega projects where possible;

(2) expedite necessary enhancements on regulatory and infrastructural supports to improve market liquidity (for example, enforcement of underwriters' market making responsibilities, setting up of an electronic platform for online retail trading, provision of a central depository system for Hong Kong dollar bonds); and

LEGISLATIVE COUNCIL ─ 26 March 2014 9235

(3) promote investor awareness and demand through education programs.

Development of the sukuk market or RMB bond market should not be hindering the growth of the Hong Kong dollar bond market. Instead, we should head for diversity which will make the bond market as a whole fly in Hong Kong. Together, the different types of bonds will attract a critical mass of fixed income traders, buyers and issuers which will support the healthy growth of the instrument.

I would urge the Government to take up its pivotal role in accelerating the development of Hong Kong dollar debt market with a view to achieving a more diversified and resilient financial sector in Hong Kong. Thank you, President.

MS STARRY LEE (in Cantonese): President, I speak on behalf of the Democratic Alliance for the Betterment and Progress of Hong Kong (DAB) in support of the Loans (Amendment) Bill 2014 (Bill) to allow the issuance of sukuk under the Government Bond Programme (GBP) to promote further and sustainable development of Hong Kong's bond market.

The financial services industry is the main economic pillar of Hong Kong. In 2011, the direct contribution of the financial industry to Hong Kong's GDP is worth HK$307 billion, accounting for 16.1% of the GDP. It is the second major industry, next to the logistics and trading industries only. The financial industry is also the locomotive to drive Hong Kong's economy forward. In the decade between 2001 and 2011, it grew 7.1%, topping the growth rate of the entire economy.

That said, President, the development of Hong Kong as an international financial centre is not comprehensive enough. Taking advantage of the trend of Chinese enterprises seeking listing in Hong Kong, the stock market has excellent growth in the past few years while Hong Kong's development in the foreign exchange market, bond market and commodity trading has been slow as compared to that of Tokyo and Singapore. One obvious weakness caused by Hong Kong's imbalanced development in the financial industry is its relative weakness in coping with adversity. Once there is any sign of disturbance or trouble in the stocks market, Hong Kong's economic conditions may deteriorate sharply.

9236 LEGISLATIVE COUNCIL ─ 26 March 2014

Besides, before the foreign exchange, bond and commodity exchange markets reach a sufficiently large scale, Hong Kong is not fully equipped to take advantage of the rapid development in China. Early this year, Charles LI, the Chief Executive of the Hong Kong Exchanges and Clearing Limited, pointed out at the Asian Financial Forum that in the past 30 years, overseas funds have flowed into the Mainland through Hong Kong by way of trading, direct investments by foreign businessmen and offshore capital markets but now, on the contrary, the Mainland has large amounts of funds to go global and Hong Kong is not yet ready to facilitate it. He warned that if the Hong Kong market maintained its status quo instead of pursuing diversification, it would soon be marginalized.

The Financial Services Development Council (FSDC) has a similar view. According to the research report released by the FSDC in mid-November last year, Hong Kong's financial products and market need to be developed and diversified, and apart from bonds, foreign exchange and commodities, we also need to further the development in areas such as corporate treasury, real estate investment trust funds and risk management, so as to boost the overall competitiveness of the financial industry.

Therefore, to further consolidate Hong Kong's position as an international financial centre, the development of the bond market is a necessary step forward. Against this background, apart from supporting the Bill to allow the issuance of sukuk under GBP, the DAB also supported the enactment of the Inland Revenue and Stamp Duty Legislation (Alternative Bond Schemes) (Amendment) Ordinance 2013 on 10 July last year, which provided a comparable taxation framework for certain common types of sukuk vis-à-vis conventional bonds, with a view to clearing away the biggest impediment to the development of a sukuk market in Hong Kong.

President, the bond market in Hong Kong is still at a developing stage. According to the FSDC, the outstanding balance of the debt securities issued in Hong Kong amounts to US$261 billion but its liquidity is far inferior to the United States and Japan.

The development of the bond market in Hong Kong being less than satisfactory is mainly due to a number of constraints that discourage many companies from using bonds to raise funds. First of all, the Government's issuance is limited and for enterprises which wish to raise funds in Hong Kong LEGISLATIVE COUNCIL ─ 26 March 2014 9237 dollar, there is no reliable yield curve of Hong Kong dollar bonds for reference by the issuers. Coupled with the higher cost to convert the original currency to Hong Kong dollar, the business of issuing American dollar bonds for this purpose has been hindered. Moreover, the fact that market practitioners lack the professional knowledge about credit ratings and related issues is another setback for the investment activities within the district and by local companies.

There are even greater challenges concerning the investment in sukuk referred to in the Bill. First of all, major Islamic financial centres, such as Malaysia, have well-developed sukuk markets while Hong Kong lacks ties with the Islamic communities. That is why colleagues in this Council have repeatedly asked the Government to continue to work with other jurisdictions to promote Hong Kong as an important sukuk platform.

To further promote the development of Islamic finance in Hong Kong, the DAB agrees that we should take advantage of the bond programme as a development opportunity. At the same time, we also urge the Government to seize every chance to promote Hong Kong's sukuk platform to overseas countries, while keeping close contact with the industry and encouraging them to issue sukuk in Hong Kong.

Moreover, an adequate supply of talents is vital to the development of the sukuk market in Hong Kong. The Hong Kong Government should work closely with overseas institutions and local organizations of the industry to provide training for market practitioners. Coupled with the capitalization on its core strengths, including market infrastructures such as high transparency of our regulatory agents, a simple tax system with low tax rates, and the presence of international financial intermediaries, Hong Kong will have better conditions to encourage issuers to raise funds by issuing sukuk, thereby promoting the development of its Islamic finance business.

President, I see that the Secretary has made great efforts in promoting the diversification of the local financial market. I hope the Bureau will continue to make further effort to help the Hong Kong financial market make another stride forward in its diversification.

President, I so submit.

9238 LEGISLATIVE COUNCIL ─ 26 March 2014

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

(No Member indicated a wish to speak)

PRESIDENT (in Cantonese): If not, I now call upon the Secretary for Financial Services and the Treasury to reply.

SECRETARY FOR FINANCIAL SERVICES AND THE TREASURY (in Cantonese): President, first of all, I would like to thank Mr Kenneth LEUNG, the Chairman, and other members of the Bills Committee, the Secretariat of the Legislative Council and the legal adviser for the efforts they have made to enable the smooth completion of the scrutiny of the Loans (Amendment) Bill 2014 (Bill). I would also like to thank Members for their support for the resumption of the Second Reading of the Bill today.

The Bill mainly aims at amending the Loans Ordinance to allow the issuance of Islamic bonds (sukuk) under the Government Bond Programme (GBP).

The Government has all along endeavoured to increase the bond types available in the capital market in Hong Kong and broaden investors' base through the implementation of the GBP, so as to promote the further and sustainable development of the local bond market.

In mid-last year, the Legislative Council passed legislation to provide a comparable taxation framework for sukuk vis-à-vis conventional bonds to provide a fair tax environment, so as to enhance Hong Kong's competitiveness in the development of a sukuk market.

To maintain a stable development in this area, we consider that the Government can issue sukuk with regard to the prevailing market conditions and needs. In so doing, we can signal to the market that Hong Kong has a sound regulatory framework and tax regime to accommodate sukuk issuances, thereby giving further impetus to other potential sukuk issuers from the public or private sector, both local and international, to raise funds in Hong Kong.

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President, unlike traditional government bonds issued under the GBP, sukuk are structured in accordance with the principles of Islamic law and involved with special purpose vehicles and multiple asset transfers. Hence, we propose to amend the Loans Ordinance to regard the Government's issuance of sukuk as the action of "borrowing" moneys referred to in the Ordinance so as to allow the issuance of sukuk under the GBP.

We are studying with the Hong Kong Monetary Authority (HKMA) the relevant details for the formulation of a specific scheme for the implementation of the sukuk issuance, having regard to the prevailing market conditions after the enactment of the Bill. The preliminary thinking for the inaugural sukuk issuance under the GBP will target local and international institutional investors. We will also consider having sukuk structured on the basis of lease arrangement (Ijarah), a common product structure of sukuk.

Apart from providing an enabling environment for the development of Islamic finance, the Government, together with the relevant organizations, including the HKMA, the Securities and Futures Commission (SFC) and the Hong Kong Exchanges and Clearing Limited, has all along endeavoured to promote the market awareness and knowledge of Islamic finance. Also, by forging closer ties with key Islamic financial centres and encouraging product development, we also enhance the development of Islamic finance in Hong Kong. For example, the HKMA and Bank Negara Malaysia set up a private sector-led Joint Forum on Islamic Finance last year which aims to promote closer collaboration between the private sector in Hong Kong and Malaysia by offering a platform for market players in both places to discuss practical and pertinent issues in the area of Islamic finance. Besides, the SFC and the Securities Commission of Malaysia (SCM) signed the Declaration on Mutual Cooperation on Development of Islamic Capital Market and Islamic Collective Investment Schemes in 2009, providing the framework for mutual recognition of the SFC and SCM of Islamic collective investment schemes offered to the public.

As we pointed out at the meetings of the Bills Committee, in the Government and relevant organizations' promotional work targeting international investors in recent years, one of the key features has been the advantages and opportunities presented by Hong Kong as an international financial centre. In future, we will continue to take every possible opportunity to promote Hong Kong's bond market, including the sukuk platform, when meeting with institutional investors, issuers and asset managers.

9240 LEGISLATIVE COUNCIL ─ 26 March 2014

As pointed out in this year's Budget, the inaugural sukuk issuance under the GBP after the enactment of the Bill will provide an excellent opportunity for the Government to present to the international market the advantages of Hong Kong's Islamic financial platform, so as to give impetus to more issuers to raise funds through the Hong Kong financial market. Given the excellent credit rating of the Hong Kong Government, we envisage that the inaugural sukuk issuance originated by the Hong Kong Government in future will draw the attention of international and local investors and boost Hong Kong's popularity and status in the international Islamic financial market. We will continue to, in concert with the regulatory agencies, the overseas Economic and Trade Offices and other relevant organizations, vigorously present to international investors the advantages and opportunities present in Hong Kong as an international financial centre.

President, I hope that the Legislative Council will support the Bill to allow the issuance of sukuk under the GBP, thereby promoting the development of Islamic finance and reinforcing Hong Kong's status as a major international financial centre and asset management centre.

Thank you, President.

PRESIDENT (in Cantonese): I now put the question to you and that is: That the Loans (Amendment) Bill 2014 be read the Second time. Will those in favour please raise their hands?

(Members raised their hands)

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

(No hands raised)

PRESIDENT (in Cantonese): I think the question is agreed by a majority of the Members present. I declare the motion passed.

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CLERK (in Cantonese): Loans (Amendment) Bill 2014.

Council went into Committee.

Committee Stage

CHAIRMAN (in Cantonese): Committee stage. Council is now in Committee.

LOANS (AMENDMENT) BILL 2014

CHAIRMAN (in Cantonese): I now propose the question to you and that is: That the following clauses stand part of the Loans (Amendment) Bill 2014.

CLERK (in Cantonese): Clauses 1 to 9.

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

(No Member indicated a wish to speak)

CHAIRMAN (in Cantonese): I now put the question to you as stated. Will those in favour please raise their hands?

(Members raised their hands)

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

(No hands raised)

CHAIRMAN (in Cantonese): I think the question is agreed by a majority of the Members present. I declare the motion passed.

9242 LEGISLATIVE COUNCIL ─ 26 March 2014

CHAIRMAN (in Cantonese): Council now resumes.

Council then resumed.

Third Reading of Bills

PRESIDENT (in Cantonese): Bill: Third Reading.

LOANS (AMENDMENT) BILL 2014

SECRETARY FOR FINANCIAL SERVICES AND THE TREASURY (in Cantonese): President, the

Loans (Amendment) Bill 2014 has passed through the Committee stage without amendment. I move that this Bill be read the Third time and do pass.

PRESIDENT (in Cantonese): I now propose the question to you and that is: That the Loans (Amendment) Bill 2014 be read the Third time and do pass.

Does any Member wish to speak?

(No Member indicated a wish to speak)

PRESIDENT (in Cantonese): I now put the question to you as stated. Will those in favour please raise their hands?

(Members raised their hands)

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

(No hands raised)

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PRESIDENT (in Cantonese): I think the question is agreed by a majority of the Members present. I declare the motion passed.

CLERK (in Cantonese): Loans (Amendment) Bill 2014.

MOTIONS

PRESIDENT (in Cantonese): Motion. Proposed resolution under the Motor Vehicles (First Registration Tax) Ordinance.

Members who wish to speak on the motion will please press the "Request to speak" button.

I now call upon the Secretary for the Environment to speak and move the motion.

PROPOSED RESOLUTION UNDER THE MOTOR VEHICLES (FIRST REGISTRATION TAX) ORDINANCE

SECRETARY FOR THE ENVIRONMENT (in Cantonese): President, I move that the motion under my name, as printed on the Agenda, be passed.

Electric vehicles (EVs) have no tailpipe emissions. Replacing conventional vehicles with EVs can help improve roadside air quality and reduce greenhouse gas emissions. To promote the use of EVs, the Government has exempted them from first registration tax (FRT) since 1994. The exemption will expire at the end of this March.

President, to continue the promotion of EVs, I move the motion to extend the FRT exemption for EVs for another three years up to 31 March 2017.

Thank you, President.

9244 LEGISLATIVE COUNCIL ─ 26 March 2014

The Secretary for the Environment moved the following motion:

"RESOLVED that the Resolution made and passed by the Legislative Council on 14 May 1997 and published in the Gazette as Legal Notice No. 237 of 1997, as amended —

(a) by section 3 of the Revenue (No. 2) Ordinance 2000 (27 of 2000); (b) by the Resolution made and passed by the Legislative Council on 19 March 2003 and published in the Gazette as Legal Notice No. 77 of 2003; (c) by the Resolution made and passed by the Legislative Council on 8 March 2006 and published in the Gazette as Legal Notice No. 53 of 2006; and (d) by the Resolution made and passed by the Legislative Council on 18 March 2009 and published in the Gazette as Legal Notice No. 50 of 2009, be amended as set out in the Schedule.

Schedule

Amendment to Resolution of the Legislative Council

1. Resolution amended The Resolution ― Repeal "2014" Substitute "2017".

Explanatory Note

This Resolution extends the period of exemption for the first registration tax in respect of motor vehicles that are propelled solely by electric power and do not emit any exhaust gas. The extended period will expire on 31 March 2017."

PRESIDENT (in Cantonese): I now propose the question to you and that is: That the motion moved by the Secretary for the Environment be passed.

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PRESIDENT (in Cantonese): Dr Fernando CHEUNG has given notice to move an amendment to this motion. But he is not here at the moment. I now call upon Mr Christopher CHUNG, who has indicated his wish to speak, to speak first.

MR CHRISTOPHER CHUNG (in Cantonese): President, given that Hong Kong is crowded with people and vehicles, the promotion of electric vehicles (EVs) that do not emit any exhaust gas is our general direction. One of the main costs of a vehicle is the first registration tax (FRT). In my view, the exemption of the FRT by the Government provides the greatest economic incentive and has a positive impact on those who intend to buy a vehicle or replace their existing one.

While consumers may have various reasons for buying EVs, which may not necessarily be related to the promotion of environmental protection, it may still help to enhance public awareness in environmental protection with one more EV added on the road. It is nothing new for the Government to exempt the FRT as a means to promote environmental protection. Such exemption has been introduced since 1994 and in the 2009 Budget, the Government gave a one-off extension of such measure for five years until 31 March 2014. This shows that the FRT exemption is effective and sustainable.

I am concerned about the amendment proposed by a colleague, seeking to extend the measure to 2015 only so as to avoid abuse of the exemption which will in turn reduce the Government's tax revenue. As I have said before, the extension has already been reduced from five years to three years. I believe the Government has already paid regard to the situation when the amendment is made. Neither vehicle manufacturers nor consumers would like to see the Government changing its policies frequently. If the extension is substantially reduced from five years to one year, the effort of the Government in promoting the development of EVs will be queried and public confidence will be undermined. As such, an extension for three years is appropriate and can strike a balance between avoiding abuse and promoting environmental protection.

The FRT exemption is not exclusive for EVs. Hybrid vehicles including high-performance models have also been granted tax concessions before. If the treatment to high-performance EVs is different from high-performance hybrid 9246 LEGISLATIVE COUNCIL ─ 26 March 2014 vehicles, there will be double standards which are unfair to users of purely EVs. Therefore, from the perspective of environmental protection, it may not be the best approach to close the "front gate" at the very beginning when we promote the development of EVs.

On the other hand, drivers often suffer from traffic congestion on a number of road sections in Hong Kong and high-performance EVs are no exception. In this situation, driving a high-performance EV may somehow be different from driving an ordinary EV. For example, is the level of electric power the same during traffic congestion? This experience is worthy of reference so as to facilitate vehicle dealers to make improvement and produce the suitable EVs in the light of the actual situation of Hong Kong. This is conducive to the development of different markets and will reduce vehicle prices in the long run.

Moreover, the successful technological development of high-performance EVs will be conducive to the transfer of the technology onto other types of vehicles such as goods vehicles and public transportation. Take the development in aviation as an example. The present civil aviation is evolved from the military aircraft in the past. The successful development of civil aviation sets a good example for the development of EVs.

I concur with the Administration in saying that, "When the use of EVs has become popular and financial incentives are no longer necessary, the Administration will consider whether to discontinue or impose conditions on the exemption arrangement". However, I cannot see that the use of EVs will become popular in the short run. While the number of EVs has been multiplied from 74 as at end of 2010 to the present 592, the number may at most reach 1 000 to 2 000 even if it is further multiplied. Such number is insignificant when compared with the number of vehicles running on the road.

Certainly I hope that the number of EVs may break through within a short time. But we have to face the reality. The development of EVs requires a lot of support other than the FRT exemption and its path seems to be very long. In a few road tests conducted, a lot of problems have been identified in the supporting facilities for EVs. For example, there is parking space for EVs on the basement of the Legislative Council Complex but the usage rate is nearly zero. The power socket of the charger is blocked and it is impossible to plug in. The situation has improved immediately after it is reflected to the Secretariat. LEGISLATIVE COUNCIL ─ 26 March 2014 9247

Five sockets have been replaced subsequently. This proves that the FRT exemption is only the first step in the development of EVs. There are many other issues for the Government to handle.

Therefore, I oppose Dr Fernando CHEUNG's amendment and support the original motion.

I so submit. Thank you, President.

DR FERNANDO CHEUNG (in Cantonese): President, I move to amend the proposed resolution moved by the Secretary for the Environment. Before I explain the reason for proposing the amendment, I would like to report, in my capacity as Chairman of the Subcommittee on Proposed Resolution under section 5(4) of the Motor Vehicles (First Registration Tax) Ordinance (the Subcommittee), the deliberations of the Subcommittee.

Members in general support the measure of exempting the first registration tax (FRT) for buyers of electric vehicles (EVs) with a view to encouraging more drivers to switch to EVs, so as to achieve the purpose of improving roadside air quality. During the scrutiny of the proposed resolution, members have raised concerns on whether buyers of luxury sports EVs should be granted the FRT exemption. As the amount of FRT to be exempted for such luxury EV buyers will range from $460,000 to $670,000 per vehicle, we are doubtful whether public monies should be used to subsidize buyers of such sports cars. In response, the Administration has advised that as the use of EVs is in an initial stage and the choices of EVs on the market are limited, it may be premature to bar certain vehicles from enjoying the tax exemption.

Successful development of EV technology on high-performance cars such as sports cars will be conducive to the transfer of the technology onto other types of vehicles demanding high performance, for example, electric goods vehicles and taxis. The Administration has explained that the FRT exemption arrangement for EVs is a time-limited measure that will be reviewed regularly.

The Subcommittee has suggested that the Administration should report regularly to the Panel on Environmental Affairs the number and types of EVs registered with the Transport Department and whether luxury sports cars are 9248 LEGISLATIVE COUNCIL ─ 26 March 2014 included, so that Panel members will be able to monitor whether the FRT exemption arrangement is abused. The Subcommittee understands that any amendments to the proposed resolution can only be made to the expiry date of the FRT exemption, while it is not possible to add any conditions to the FRT exemption. As such, the Subcommittee has proposed that, when the Administration finds it necessary to impose conditions to the FRT exemption in future, it should introduce a bill to amend the Ordinance.

The Subcommittee also notes that currently electric bicycles are not allowed for use on the roads due to safety consideration. Members have indicated that this does not seem to be in line with the policy of promoting the use of green mode of transportation. The Subcommittee has suggested that the issue be followed up jointly by the Panel on Transport and the Panel on Environmental Affairs, so as to explore the possible measures that can allow the use of electric bicycles on the roads as a mode of transportation and at the same time ensure safety to road users.

The Subcommittee has also pointed out that there will be more and more waste batteries if EVs are widely adopted in future. If no stringent regulation is imposed on the disposal of such batteries, it will cause serious damage to the environment. The Administration should pay attention to this problem.

The Subcommittee is generally in support of the proposed resolution to be moved by the Secretary for the Environment and will not propose any amendment. However, personally I do not agree with the extension of the exemption for three years. As such, I move that the expiry date of the exemption be advanced from 31 March 2017 to 31 March 2015. President, my intention in proposing such amendment is to allow the Government to review in the coming year whether the tax exemption can really serve its purpose. Then a new legislation should be enacted based on the findings of the review. We should consider whether such exemption should be extended or whether some additional conditions should be imposed, including restricting certain vehicles from enjoying the exemption, or progressively reducing the ratio of exemption instead of maintaining the full FRT exemption.

President, I believe the intent of the current legislation is to encourage the use of EVs by granting the FRT exemption. Such legislation has been introduced for more than a decade since 1994 but the development of EVs in the LEGISLATIVE COUNCIL ─ 26 March 2014 9249 past decade is in fact relatively slow. At present, information from the Government indicates that the number of EVs in use is only around 600, among which some 100 are government vehicles while around 500 are private vehicles. To my understanding, government vehicles are all private cars. Therefore, how many drivers have been convinced to switch to EVs in the past decade? I am doubtful about the effectiveness.

If exemption is still provided, will it produce significant effect on environmental protection? Just now Mr Christopher CHUNG said that with so many vehicles (500 000 private cars) in Hong Kong at present, to what extent can a few hundred EVs help in improving roadside air quality. Of course it is possible that one day all motor vehicles will become EVs. But the question is how much public money has to be spent on the promotion and whether this can serve the purpose in reality.

We note that some vehicle manufacturers specializing in luxury or sports cars have opened up the Hong Kong market over the past few years. Among these 300 or 400 EVs, how many are sports cars? I have no idea. But a car magazine Automomo reported on 15 February 2013 that over 50 EVs named Tesla had been sold to Hong Kong so far. Up to date, how many such vehicles are in use in Hong Kong? I have no idea. The BMW, which regards itself as a luxury car brand, has put on sale BMW i3. Tesla is a success in the United States. I have no intention to target at any vehicle manufacturers.

In fact, I encourage these manufacturers to continue their scientific research to enhance their technology so that more EVs will be produced. I am no expert and I do not know whether the overall environment will really be improved if we all switch to EVs. While roadside air quality may be improved, power plants will continue to release harmful substances. Then the result is just the same. Moreover, as the batteries contain noxious substances, their disposal is a very important issue. The whole change will have impacts on our roads and many charging points for EVs may have to be built. I am not sure about its overall cost-effectiveness in environmental protection. Nonetheless, we believe that this is the general direction.

President, here comes the biggest problem. I find that sports EVs have become a popular hit. According to some online information such as the Tesla website, the amount of FRT to be exempted for the three new sports EV models 9250 LEGISLATIVE COUNCIL ─ 26 March 2014 for beginners is $463,350 per vehicle; for the high-performance model, the amount exempted is $673,570. This is the information obtained from the website of vehicle manufacturers. Should public monies be so spent?

According to some online reports last year, Tesla has already received more than 300 orders with deposits paid. This is the figure a year ago. If all these orders are confirmed, assuming that the amount of FRT exemption per vehicle is around $500,000, the tax revenue forgone for these 300 vehicles will be $150 million.

Government papers reveal that the total amount of FRT exempted for the past five years is around $130 million. However, if the FRT exemption is to be extended and these 300 orders are confirmed, we will forgo a revenue of $150 million in one go. Is environmental protection promoted when we grant an exemption of $150 million to subsidize the buyers of these 300 sports cars? Or are we careless to have created a loophole in promoting environmental protection? Do some people really need to buy these cars or they just treat it as buying a toy? I have no idea. But if each vehicle can be granted an FRT exemption of some hundred thousand dollars, they may simply buy one for fun. Will this really promote environmental protection?

(THE PRESIDENT'S DEPUTY, MR ANDREW LEUNG, took the Chair)

Frankly speaking, is a vehicle or a private car a luxury in Hong Kong? I have to declare that I have owned a car for many years. However, a car is a necessity to me because I have to pick up my daughter who is wheelchair-bound. Therefore, a vehicle is highly useful and necessary to me.

In this regard, I have never been granted any tax exemption. While drivers with disabilities are granted tax and parking concessions, I have never been benefited. There is almost no concession for carers of persons with disabilities. Yet I do not care about this. Private cars are basically a luxury to Hong Kong people. As our roads are already congested with too many vehicles, should we still provide tax savings of several hundred thousand dollars as incentives to encourage people to buy a sports car for fun?

LEGISLATIVE COUNCIL ─ 26 March 2014 9251

Some people ask me whether I hate rich people, saying that rich people love cars and they will buy cars anyway; as Tesla is more environmentally friendly, it will be better if they choose to buy a Tesla rather than a Ferrari. Excuse me. A Ferrari costs $3 million to $4 million. With the FRT exemption, the basic price for a Tesla is only some $500,000. According to the listed price announced recently in February, a beginner model costs $580,000. This will bring great savings. A rich man who originally does not need to buy a Tesla may buy one just for fun if there is tax concession. Does this promote environmental protection? I think it is just achieving the opposite result.

There is one more loophole. Strangely enough, the listed price in the Mainland is higher than that in Hong Kong and it is reported that the difference is Renminbi (RMB) 280,000 yuan. Why is this the case? Is it because we have provided tax concessions while the Mainland has not? Or is there a discrepancy? I have no idea. But it is so reported on a Mainland website. Under this circumstance, rich people in the Mainland, being attracted by the difference of RMB 280,000 yuan for a beginner model or even RMB 300,000 yuan to RMB 400,000 yuan for a higher model, may set up a company in Hong Kong, buy a vehicle under the name of the company and apply for both Mainland and Hong Kong licences. This will really help him save a lot.

Can the exemption really help in promoting environmental protection? To what extent has the exemption encouraged rich people to buy a sports EV for personal entertainment, rather than achieving the purpose of environmental protection? Therefore, I implore Members to support my amendment.

Thank you, Deputy President.

Dr Fernando CHEUNG moved the following amendment:

"RESOLVED that the motion to be moved by the Secretary for the Environment under section 5(4) of the Motor Vehicles (First Registration Tax) Ordinance (Cap. 330) at the Legislative Council meeting of 26 March 2014 be amended in the Schedule by deleting "2017" and substituting "2015"."

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DEPUTY PRESIDENT (in Cantonese): I now propose the question to you and that is: That the amendment, moved by Dr Fernando CHEUNG to the Secretary for the Environment's motion, be passed.

MR FRANKIE YICK (in Cantonese): Deputy President, whenever we talk about the subject of air pollution in this Council, I will always quote the Hedley Environmental Index published by the School of Public Health, University of Hong Kong. According to the Index, the economic loss incurred to Hong Kong by air pollution amounted to $3.3 billion in 2012 while the intangible economic loss amounted to as high as $36.3 billion. Moreover, there were 3 000 premature deaths due to air pollution. These figures show that air pollution does not only affect public health, but also incurs high social costs, thus warning us the imminent need to improve Hong Kong's air quality.

Unlike petrol vehicles which will emit pollutants during combustion, electric vehicles (EVs) are propelled by electric power. With environmental protection as a main goal, countries in Europe and the America, as well as Japan and Mainland China have been introducing policies to encourage the use of zero emission EVs. Therefore, for the sake of improving roadside air quality in Hong Kong, the Liberal Party supports the Administration's proposal of extending the exemption of the first registration tax (FRT) for three years until 31 March 2017 so as to provide economic incentives for drivers to switch to EVs, thus promoting the wider use of EVs.

Despite the introduction of the FRT exemption since 1994, the number of EVs has only risen slowly over the past 20 years. In the 2009-2010 Policy Address, the then Chief Executive stated that he would make Hong Kong the second in Asia, after Japan, where EVs were most widely used. Consequently the Steering Committee on the Promotion of Electric Vehicles chaired by the Financial Secretary was set up. However, the usage rate of EVs remains low.

The reasons why the use of EVs is not popular in Hong Kong include: the higher price of EVs compared with conventional vehicles, the shorter endurance and insufficient charging facilities. As such, even with the FRT exemption plus other measures, such as 100% profits tax deduction for capital expenditure on purchase of EVs for the first year, the number of registered EVs is only some 500 at present, among which nearly one quarter is owned by the Government.

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As indicated by some vehicle dealers, while EVs have zero emission, the general public may still find them unacceptable because prices are high due to small production scale. Even though the FRT exemption is granted for EVs, members of the public, who do support environmental protection, may not choose to buy EVs after careful consideration because there are insufficient supporting infrastructures for EVs in Hong Kong.

Compared with other vehicles, EVs can save fuel and are therefore ideal for high-usage (high mileage) vehicles. As such, the taxi industry takes the initiative to introduce electric taxis for trial. However, as currently there are different systems for EVs, electric taxis are unable to use the existing charging points but have to look for other places for installation of the charging facilities. With the lack of a charging network, the trial for electric taxis has made slow progress. What delights us is that in the Policy Address announced early this year, the Chief Executive indicated that, in support of the taxi industry to promote the electric taxis trial scheme, suppliers of electric taxis will be allowed to install quick chargers at car parks managed by the Transport Department. I believe this will help enhance the existing charging network and expedite the progress of the electric taxi trial.

Whether the use of EVs can subsequently become a trend depends on the sufficiency of charging facilities and whether the selling price will go down in response to market demand in future. Currently, it only takes a few minutes for motor vehicles to fuel up at gas stations. But to fully charge an EV, it takes eight to 10 hours at normal charging points (known as "slow chargers") while it also takes at least two hours for quick chargers. Even if the most advanced quick charging system is used to recharge 80% of the power for an EV, it still takes about 15 minutes. But as higher voltage and larger electric current are needed, the existing charging points and ancillary facilities for power supply may not support such a large number of quick charging points.

Undeniably, the SAR Government has stepped up its effort in promoting the use of EVs in recent years. Upon the installation of 1 000 slow chargers, the Government is planning to add 100 medium chargers in various districts, thus extending the charging network to all the 18 districts in Hong Kong. However, the Government may consider adding more charging points in possible places, such as transport interchanges with low usage, so as to make recharging more convenient, thus encouraging the public and enterprises to switch to EVs.

9254 LEGISLATIVE COUNCIL ─ 26 March 2014

During the deliberation of the Subcommittee, members have pointed out that a vehicle manufacturer, in promoting its products, has highlighted that the FRT exemption for EVs will bring tax savings of $400,000 to $600,000 so as to attract potential buyers to buy a particular brand of EV. It is said that over 300 orders have been received. Putting aside the model and price of the EVs, if dealers can really receive 300 orders for EVs simply because of the FRT exemption, this is not something bad. At least it proves that the FRT exemption can encourage the public to buy EVs and there will be 300 less motor vehicles on roads that pollute the environment. This is exactly the objective of the policy.

As prices of EVs range from $580,000 to $760,000, members have queried whether such luxury EVs should be granted the FRT exemption because tax revenue of tens of millions of dollars will be forgone as a result. However, due to the relatively small production scale of EVs worldwide and the limited choices of EVs on the market, the price of EVs is generally still much higher than that of conventional vehicles. Even for electric light goods vehicles, buses and minibuses, the prices are also high. Therefore, it is difficult to decide whether a vehicle is luxury based on the price and it is inappropriate to use the price as an index for granting the FRT exemption. In other cities and countries around the world where the use of EVs is promoted, the Government does not just provide charging facilities, but also provide subsidies or tax concessions for purchase of EVs, so as to encourage the public to use EVs.

Given that the proposed FRT exemption aims at promoting the use of EVs, it is really not necessary to consider the class of EVs. As long as an EV can meet the statutory emission standard, it should be granted the FRT exemption. As the use of EVs in Hong Kong is still in an initial stage, if restrictions are imposed on the exemption, the purchase of EVs will be discouraged and the effectiveness of promoting the use of EVs through tax concessions will be undermined. It is true that more tax revenue will be received if people switch to buy fuel vehicles. However, this is not conducive to improving roadside air quality, but will just increase the overall social cost.

Nonetheless, we are more concerned about the possible disposal of waste batteries of EVs in landfills because EV batteries have to be replaced every several years and the cost of recycling the waste batteries is high. Waste batteries generate more pollution than the emissions of petrol vehicles. If the batteries are not properly disposed of, they will cause serious environmental LEGISLATIVE COUNCIL ─ 26 March 2014 9255 pollution. Therefore, the Administration should implement a comprehensive recycling policy on the disposal of EV waste batteries.

Regarding the amendment proposed by Dr Fernando CHEUNG to shorten the extension from three years to one year, I am worried that such an amendment will give a wrong message to the public that the Government no longer supports the promotion of EVs and will give less support to increasing EV infrastructure in future. This will discourage people from purchasing of EVs and vehicle dealers will also introduce less new EV models. Subsequently there will be even less EV choices on the market, thus further hindering the development of EVs. Moreover, it takes time for a vehicle to be delivered to Hong Kong after an order has been made. For Japanese and European vehicles, it normally takes about four to six months while a made-to-order vehicle needs as long as one year. As such, if the exemption is only extended for one year, there may not be enough time to encourage the public to buy EVs unless there is stock in Hong Kong. But normally there is limited stock for such vehicles with low sales volume.

I understand that Dr Fernando CHEUNG's amendment serves to give the Government one year to propose the way to restrict the FRT exemption for EVs. Against the above reasons, however, the Liberal Party opines that Dr Fernando CHEUNG's amendment will seriously hinder the Government's policy of improving roadside air quality by promoting the use of EVs. As such, the Liberal Party cannot support the amendment.

Deputy President, I so submit.

DEPUTY PRESIDENT (in Cantonese): This Council will now proceed to a joint debate on the motion and the amendment.

MR WU CHI-WAI (in Cantonese): Deputy President, we certainly support the principle of encouraging the use of electric vehicles (EVs) through the exemption of the first registration tax (FRT), as well as the general policy of promoting the wider use of vehicles propelled by clean energy. The Democratic Party is in support of the amendment proposed by Dr Fernando CHEUNG. But we look at the matter from a different perspective. The reason for Dr Fernando CHEUNG to propose the amendment is to query whether the FRT exemption for EVs should be applicable to luxury or expensive EVs. However, we consider the issue from 9256 LEGISLATIVE COUNCIL ─ 26 March 2014 another perspective. In our view, the Government should immediately review, within a limited period of time, the problems encountered regarding the implementation of the policy objectives.

During the deliberation by the Subcommittee on Proposed Resolution under section 5(4) of the Motor Vehicles (First Registration Tax) Ordinance (the Subcommittee), I have queried why the use of electric bicycles is not allowed on the roads of Hong Kong. Electric bicycles, as a green mode of transportation, can meet the target of zero carbon emission advocated by the Secretary. Strangely enough, however, the Transport Department considers electric bicycles as motorcycles which require registration and a licence before they are allowed to run on roads. In fact, it does not matter if a licence is required. But how does the Government explain this? The Government has advised that in considering whether electric bicycles should be allowed to run on roads, road safety is the prime concern. I have heard some strange explanations: the speed of electric bicycles is too high for cycle tracks but too low for roads; the conclusion is electric bicycles are not suitable for use on roads or cycle tracks. In other words, a mode of transportation that obviously meets the policy objective is unfortunately not allowed for use in the road system.

In its reply to a question of the Council on 8 May last year, the Transport and Housing Bureau has used the same logic, and I quote "Currently, there is no legislation against the import of electric bicycles into Hong Kong. The clearance formalities and requirements of such vehicles are no different from those of general imports. However, electric bicycles to be used on roads of Hong Kong have to be registered with and licensed by the Transport Department or else their use would be illegal and offenders are subject to prosecution … Bicycles equipped with electric motors are not normally designed to the same safety and performance standards as conventional motor cycles. They are normally not considered roadworthy and would not be registered and licensed. They are also not suitable for use on cycle tracks with other bicycles due to their speed, weight and different method of control. Therefore, the Government currently has no plan to allow the use of electric bicycles on roads of Hong Kong." (End of quote)

While electric bicycles can be imported, they will not be licensed. Is this a kind of prohibition in disguise? After an electric bicycle has been imported, as pointed out by Fernando, it can only become a toy placed in the garden, but cannot be used as a mode of transportation. What is the reasoning and logic? LEGISLATIVE COUNCIL ─ 26 March 2014 9257

How can this tally with the policy intention of the Government for introducing the FRT exemption, with a view to promoting the wider use of clean energy vehicles on roads?

Oddly still, at the meeting of the Panel on Environmental Affairs held on Monday, the Under Secretary, Ms Christine LOH, advised that the Transport Department prohibits the use of electric bicycles on roads out of road safety consideration. The approach adopted by the Transport Department is like "trimming the toes to suit the shoes". If the Transport Department says that the two-wheeled electric bicycles are not allowed to run on roads for their speed is too slow, may I ask whether it has been legally stipulated that four-wheeled vehicles cannot run too slowly on roads, or whether there is a statutory minimum speed for vehicles? Is it an offence for a vehicle to run slowly? If not, it implies that the Transport Department is just using safety concern as a protective shield to bar the use of electric bicycles in order to save the troubles.

What I mean is that if the Government really had the intention to promote the use of electric bicycles, various policy initiatives would have been implemented. Why does the Government not do so? The Government can stipulate that electric bicycles are not allowed to run on highways, but can run on inner roads and two-lane roads, or they can be used for intra-district transport or feeder transport. In fact, electric bicycle can be very efficient.

We often say that the promotion of EVs in Hong Kong is unsatisfactory, as only 500 EVs are in use after so many years. The use of electric bicycles can greatly improve the situation and, mostly importantly, they can meet the clean air objective set by the Secretary. As such, although I hold a different view on the amendment proposed by Fernando, both of us share the same view that the exemption should be extended for one year only. This can force the Government to review the whole exemption policy, as well as the operation and use of EVs in Hong Kong. At the same time, the Government will be impelled to conduct a study on how to formulate a multi-level policy and adjust our road network in the light of different vehicle models that may come to existence. The ultimate goal is to make EVs a mode of transport that is widely accepted and used in the community. This can also respond to the speech given by Mr Frankie YICK just now. In fact I attach much importance to this matter because we are aware that vehicles propelled by diesel and petrol have caused air pollution that greatly affects the health of every person in Hong Kong. We have to pay the cost of over $40 billion as a result. That is a significant issue, not something 9258 LEGISLATIVE COUNCIL ─ 26 March 2014 trivial. Is the Government determined to promote this? Therefore, I support Fernando's proposal of extending the exemption for one year only. Afterwards, the Secretary should discuss with this Council on the exemption again.

On the other hand, I have to reiterate that bicycles, like other vehicles, are in fact subject to road traffic regulations. Under this principle, as advised by the Transport Department, road users may ride a bicycle on roads even if the speed is as low as 5 km or 10 km per hour. Why are electric bicycles with low speed being excluded and not allowed to become a mode of transport? I do not understand why the two have to be dealt with separately with double standards. What is even more unreasonable is that the Government has never considered bicycles as a mode of transport but just for leisure purpose. As a result, there is a ridiculous phenomenon where electric bicycles, propelled by batteries, are not allowed to be used on cycle tracks despite the Government's promotion of an environmentally friendly transport policy and its effort in building cycle tracks. If speed is used as the index, the Secretary or the staff of the Transport Department should take note that bicycles on cycle tracks can also run very fast. A bicycle going down a slightly slanting cycle track may run as fast as 15 km to 20 km per hour. A person with better physical strength can cycle at a speed of 25 km per hour without difficulty. How can such policy of the Transport Department convince people that our society really encourages the use of low-carbon emission transport mode through different measures and policies? All we can see is that the Government is promoting the bicycle-friendly policy on the one hand, but on the other hand, it imposes various restrictions on cyclists and prohibits the use of electric bicycles on the excuse of road safety. Is this reasonable?

Secretary, you are tasked with an important responsibility of caring for our health. But how can I give you the power to fight with the Transport and Housing Bureau? I believe one of the means is to support Fernando's proposal of extending the exemption for one year, so that you may then come back and discuss with us again.

As a cyclist, I hope the Government trusts that every cyclist is able to judge and decide for himself whether it is suitable for him to ride on roads. In my view, the same criteria may be used in regulating the use of electric bicycles on roads. But it is inappropriate to use safety concern as a pretext for excluding this clean energy transport mode. This is inconsistent with the Government's policy and legislative intent.

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In promoting green transport, I think the Administration should not just promote four-wheeled vehicles because two-wheeled vehicles also play an important role in improving air pollution. I also hope that the Secretary will not just consider the views expressed during the deliberation of the Subcommittee, but will also pay heed to the opinions put forward by Members in the Chamber today. As such, we support Dr Fernando CHEUNG's amendment.

I so submit. Thank you, Deputy President.

MR SIN CHUNG-KAI (in Cantonese): Deputy President, Mr WU Chi-wai has, on behalf of the Democratic Party, explained some of the reasons for supporting Dr Fernando CHEUNG's amendment. While I also support the justifications of Dr Fernando CHEUNG, I still have some other ideas which I would like to share here.

First of all, I support the use of electric vehicles (EVs) and green vehicles. But why do I support extending the exemption of the first registration tax (FRT) for one year instead of three years? It is simply because I hope the Government will report to the Legislative Council after one year. At least in this one year … Just now the figures cited by Frankie are already very clear. I also hope that in introducing the FRT exemption, the Secretary can communicate with the Secretary for Transport and Housing. To my understanding, the FRT is in fact a progressive tax which means all vehicles registered for the first time will be charged an ad valorem tax on a progressive scale at N% (as high as 110%) of the retail price. Simply put, the percentage of the FRT for luxury vehicles (may be 110%) is much higher than that of inexpensive vehicles (may be 60% or 70%).

In fact, the Secretary may consider exempting the FRT on a regressive scale in future. What do I mean by granting the FRT exemption on a regressive scale? We understand that for some people, private car is a mode of transport. Some people, just like Fernando, have such needs, though owing a private car is a luxury in Hong Kong. The Government exempts the FRT as a kind of incentive for environmental protection. What kind of vehicles is environmentally friendly? It is the EVs. Alright, no matter people drive a luxury EV or an ordinary EV, the vehicle itself is environmentally friendly. Why do I think that the exemption should only be extended for one year? It is because I hope that the Government can examine without delay whether it is possible to adopt a regressive scale in exempting the FRT.

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The Government may set a certain price tag, say vehicles costing $200,000, $300,000 or some $100,000 can get a full FRT exemption. Then come the more expensive vehicles … the amount to be exempted for luxury sports EVs may be reduced, and at a certain price level, no more FRT exemption will be granted because it has gone beyond the bottom line of the environmental protection policy. What is the bottom line? The Government may adopt the price of inexpensive vehicles (at some $200,000) owned by ordinary people as the benchmark for a full FRT exemption. For vehicles costing $400,000 or $500,000 just like the one of Dr KWOK, should they be granted full exemption? I hope the Secretary will levy the FRT on a progressive scale but exempt the FRT on a regressive scale.

In some situations, the Government may grant 100% exemption. In my view, for vehicles such as buses, taxis or commercial fleets, there is no problem for granting full FRT exemption. It is totally uncontroversial to grant full FRT exemption to buses, green or red public light buses and taxis. For government vehicles, it does not matter because this is a kind of taking money out of the left pocket and putting it into the right pocket.

The only controversy is private cars used by the general public. Just now Mr WU Chi-wai has already queried why electric bicycles are excluded. So I am not going to repeat. I just hope that the Secretary can understand why I support Dr Fernando CHEUNG's amendment. I hope the Secretary will introduce a regressive FRT exemption in one year's time. Certainly I know that even though I support Dr Fernando CHEUNG's amendment, it may not be passed because the Secretary definitely opposes it.

However, I hope that in opposing Dr Fernando CHEUNG's amendment, the Secretary will also discuss with the Secretary for Transport and Housing to see if it is possible to adopt the regressive scale. As for the percentage of the regressive exemption, we certainly need to observe the market situation and the prices of vehicles before devising a formula. Such a regressive exemption policy should take into account the long-term development. Nowadays the use of EVs is not yet the mainstream, but we hope it will become the mainstream one day. By then, when all vehicles are EVs, the Government may cease the FRT exemption. But before this happens, should the Government introduce the concept of progressive FRT exemption? I hope that the Secretary, even if he succeeds in opposing Fernando's amendment, will follow up the subject and examine whether progressive FRT exemption, which can strike a balance LEGISLATIVE COUNCIL ─ 26 March 2014 9261 between environmental protection and maintaining tax revenue for the Government, should be introduced.

I so submit. I hope the Secretary will consider the idea I put forward.

MR CHARLES PETER MOK (in Cantonese): Deputy President, I am not a member of the Subcommittee but I would like to express some views. First of all, I support the extension of the exemption for three years. I declare that I am now driving a hybrid vehicle. I will not buy a new car simply for the sake of buying, and when I need to buy a new car, I am determined to switch to an electric vehicle (EV), irrespective of whether there is any concession. As a consumer, if exemption is granted, it will certainly provide greater incentive. I am not sure if I will buy a new car within three years, but any way, I may as well make a declaration first.

Of course, some people think that the most environmentally friendly measure is not to use any private cars. I also agree with this. However, as mentioned by Dr Fernando CHEUNG just now, some people have a genuine need to drive a car due to many different reasons. In fact, Members have mentioned in their speeches just now that the use of EVs has not yet become the mainstream in view of the current low usage rate and limited number of EVs. As to the query raised by Dr Fernando CHEUNG today about the possible abuse of the exemption, I am of the view that it should not be regarded as an abuse if the EVs are indeed more environmentally friendly. In implementing a measure at the very beginning, we must step up efforts instead of stressing on avoiding abuse.

I understand the idea of Dr Fernando CHEUNG who opines that the exemption is like subsidizing rich people with public monies to buy some luxury toys. However, I do not subscribe to this concept for a few reasons. Firstly, I think there should not be a differentiation between the rich and the poor in terms of environmental protection. Moreover, the objective fact is that the new EV models now on sale in the market are indeed more expensive in terms of technology and production. The selling price of EVs is indeed higher as the production scale is rather small and the development in its technology has been slow in the recent 10 years or so. This is inevitable in the market and we cannot stop vehicle dealers from putting expensive vehicles on the market first. As a result, the general price of EVs is relatively higher.

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Just now Mr SIN Chung-kai has proposed the practice of regressive exemption. In my view, the concept is feasible but I do not think that an EV can be purchased at some $200,000 in the few years to come. Therefore, the implementation of such measure is not quite meaningful. Finally, we go back to the question of chicken and egg. Some luxury vehicles have to be put onto the market first in order to achieve a fiscal balance and encourage pioneers. On the other hand, objectively speaking, it is true that only people with more resources will consider buying expensive vehicles. We may collectively call them rich people, but they are in fact not necessarily very rich. It is true that only those with more resources can consider buying EVs because such vehicles are more expensive.

In my opinion, in view of the many problems in Hong Kong, particularly the environmental issues under the purview of the Secretary, if we do not take a step forward but stay put, nothing can be achieved. It is said that at present some 300 high-performance luxury EVs have been ordered. The figure is insignificant when compared with the total number of vehicles in Hong Kong, but in view that there are only 500 to 600 EVs in the territory at present, 300 is not a small figure. Therefore, I think this can prove that the policy is effective. Will it be better off if there is no subsidy and no such 300-odd orders?

I agree that it is important to maintain stability in our legislation. In particular, as the acceptability of EVs is low throughout the world, it is necessary to step up efforts in providing the public with more incentives. This is something good. If we say that granting exemption to luxury EVs is unfair, then the whole policy is in fact unfair because there are many people who do not have a vehicle. In Hong Kong, people who do not have private cars certainly outnumber those who have a car. Based on this idea, we should not simply say that the policy is favourable to buyers of luxury EVs. EVs are more expensive only because they are propelled by electric power. Their price is higher despite their small size. Can those buying inexpensive vehicles be regarded as the higher class? Therefore, we may also say that the policy is unfair because many people do not have cars. As such, I cannot quite accept such justifications.

Deputy President, I would like to raise another point. A fortnight ago, I visited some large technology companies in the Silicon Valley and found that these companies have put in a lot of efforts to promote the use of EVs, be it company vehicles or the vehicles of their staff. They will reserve the best parking spaces for EVs and provide charging facilities. Some companies are LEGISLATIVE COUNCIL ─ 26 March 2014 9263 exploring the development of automated vehicles which are all EVs. Why do they develop automated vehicles? It is because once the development is successful, people do not need to buy private cars. They may just wave their hands or use the Apps installed in the mobile phone, then their EVs will automatically come in front of them. After boarding onto the vehicle, people just need to say out their destination and the vehicle will automatically drive them there. They can handle their own business inside the vehicle, and the fully automated system can carry them to their destination.

I think we should not overlook these future developments. If EVs cannot be brought into wider use through various policies in different countries or regions including Hong Kong, we will not be able to share the fruit of such technological developments. With such automated vehicles, we will no longer care about who owns the vehicle, but simply treat it as a taxi. Even if such technology can reach its mature development, I am afraid Hong Kong will not have a share if EVs are not brought into wider use throughout the world. We can just return to the era of petrol vehicles. Why should we have all the worries?

Therefore, in my view, the Government should discuss with different sectors to see if there are more ways to promote the use of EVs. I am also worried that if the period of the exemption is shortened, it may convey a wrong message.

Deputy President, I so submit. Thank you.

DR KWOK KA-KI (in Cantonese): Deputy President, I speak in support of Dr Fernando CHEUNG's amendment.

Just now when a number of colleagues talked about electric vehicles (EVs), they all think that EVs are perfect and preferable. However, I would like to cite the opinions of two scholars, Professor WONG Kam-fai, Associate Dean of the Faculty of Engineering of The Chinese University of Hong Kong, and Professor CHAU Kwok-tong from the Department of Electrical and Electronic Department of the University of Hong Kong. They have respectively pointed out in different interviews and articles that according to the ecology research report of the Norwegian Technical University, EVs are not as environmentally friendly as it is claimed.

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We all think that EVs are better because they are propelled by electric power instead of petrol. But we have to think carefully about the source of the electric power. If the electric power is generated by coal combustion or nuclear energy, is the result just the same? In fact the overall emissions on earth as a whole will not be different simply because vehicles are propelled by electric power. While vehicle emissions in Causeway Bay and Central may be reduced, the source of emissions actually shifts to the power plants on Lamma Island. The overall level is just the same. Why is this point so significant? If the Government creates a false impression by telling people that it is trying to achieve environmental protection through the promotion of EVs, I think we are definitely being misled. To address the problem of emission, we must first deal with the power plants which, as we all know, generate considerable pollutants and are currently the largest source of pollution. Hence, the Government is creating a false impression by convincing people that the use of EVs will help promote environmental protection. Residents on Lamma Island or people who go there to relax will only inhale exhaust gas. The pollutants will be blown along with the wind to other areas. After all, we are now living in village earth.

Regarding the batteries, how will they be disposed of? As we may know, in the initial stage, EV batteries had a lifespan of three years, and it seems that the lifespan has now been extended to five years. But we must bear in mind that a lot of noxious materials such as nickel, copper, aluminum and so on, are used in the production of vehicle batteries which will lead to more acid rain and smog. Moreover, if these batteries have a shorter lifespan and have to be recycled or dismantled after completing their mission, the process will also create pollution. Therefore, the SAR Government is creating a false impression that the use of EVs can reduce emissions. I do not hope to give out such a wrong message.

In Norway, a measurement called Global Warming Potential (GWP) is used which indicates that the level of GWP generated by EVs is two times the level generated by conventional diesel or petrol vehicles. That means the greenhouse gas effect brought about by EVs on global warming is bigger than petrol vehicles. Certainly such complicated scientific problems should best be explained by experts. But I believe we can understand some simple explanations. As we may know, electric power is generated in power plants. Some power will leak out during the transmission and there will be further leakage during the transmission to the chargers. After charging, electric power LEGISLATIVE COUNCIL ─ 26 March 2014 9265 in the batteries will also leak out. In fact, there is leakage throughout the whole process. If we have the experience of charging batteries, we will know that batteries not in use will leak out electric power. The same applies to EVs.

As such, while we agree that reducing emissions is necessary, we should not regard EVs as "magic pills". We should understand that EVs are just substitutes that make us feel better. They are used to cover up our shame or to show others that we have made efforts and have succeeded in reducing emissions. It is alright if the Government treats EVs as a form of publicity. But how much cost is involved? The amount of first registration tax (FRT) forgone is $600,000 … $60 million … and the total amount for 300 vehicles is some $100 million which is not a small sum. If some $100 million is used to encourage recyclers and food waste treatment dealers, a lot of work can be accomplished. Therefore, the amendment of Dr Fernando CHEUNG is reasonable.

The Government is now doing some kind of cheap publicity. Why is it cheap? It seems that no money has been paid, but actually a tax revenue of some $100 million is forgone. Just like the case of the environmental levy on plastic bags, can the Secretary achieve some positive effects with these tax revenues? If he can make some achievements, there is no reason why we will not support him. If he cannot, this is really bad. I also hope the Government will convey a positive message to the public, so that they will understand that every task done by the Government now or every energy-related policy formulated is indeed justified. Nevertheless, we should not simply adopt a superficial view and conclude that EVs are definitely the best. This is actually not the fact. In this regard, I must thank the scholars for their information.

Moreover, one of the viewpoints of Dr Fernando CHEUNG is that he proposes the amendment to shorten the exemption period so as to allow the SAR Government more time to conduct a review. I hope the Secretary will take this opportunity to think about this: I guess people who spend $1 million to buy a car do not only own one car but a few cars, which are regarded as toys. To these people, they just buy one more car as a toy. Some of them may already have a McLaren and a Ferrari. It makes no harm adding one Tesla ― I have even mentioned the name ― which is manufactured in California. This is tantamount to subsidizing people to buy toys because both the Secretary and we are well aware that these vehicles are not a means of transportation for ordinary people. 9266 LEGISLATIVE COUNCIL ─ 26 March 2014

I definitely cannot afford to spend $1 million on a toy. But to our surprise, the Secretary indicates that the SAR Government will provide tax concessions to this great toy because it helps promote environmental protection. This is a very bad message, even worse than doing nothing. Why?

In the long run, I agree that the Government should introduce some policies, including encouraging more frequent use of clean energy by the mass transit systems. These are positive measures. However, the use of private cars and the pollution caused to the environment should definitely be reduced as well. For cars propelled by batteries, petrol or diesel, the question does not lie in the frequency of usage but in the purchase or otherwise. The authorities should not create a false impression or encourage people to drive EVs more frequently, as there is zero emission. In fact, there are emissions from the power plants at Ap Lei Chau and Castle Peak rather than from car owners near their homes. This is surely undesirable. Why? EVs running in Repulse Bay will not cause pollution to the South District but residents in Tuen Mun will suffer from the pollutants generated by the power plants. The more people drive, the more exhaust gas will be emitted in Tuen Mun and my electorates will suffer. Some people are elated when they buy cars from time to time, and our Government is encouraging more people to emit more exhaust gas.

Some policies appear to be good. I dare not say they are sugar coated poison because they are not very bad, but just a bit poisonous. However, why should we convey a wrong message to the public? The Secretary is a learned person. I think the Government should seek truth from facts and review every policy based on scientific evidence. Someone asks if it is possible to set a ceiling on the tax concession. I agree, as it is very obvious that as an incentive … Just now a colleague also suggests to differentiate by the types of vehicles. This can be a direction to be considered. The purpose is not to reduce the emission of greenhouse gas as perceived by many people, but to reduce air pollution in urban districts ― commercial districts. This can only benefit areas such as Causeway Bay, Central and Mong Kok. But the fact is the power plants will continue to emit pollutants.

It is justifiable to use vehicles belonging to the mass transit system such as buses and minibuses because they are modes of transport indispensable to the public. However, we do not encourage more private cars to run on roads. The Secretary must state clearly with his colleague, Prof Anthony CHEUNG. He said that the Government is now conducting a long-term planning and study to LEGISLATIVE COUNCIL ─ 26 March 2014 9267 explore how to reduce the overall car use in Hong Kong or reduce air pollution caused by various mode of transport. This is surely a positive message. But surely this is not to be achieved by encouraging people to buy EVs, let alone luxury EVs that cost over $1 million. This is not the intent of the Government. The tax concession is in fact not wisely granted. Deputy President, definitely the money is not wisely spent because I believe these fashionable people will buy cars no matter there is tax concession or not. To those who can spend $1 million to buy a toy, some hundred thousand dollars do not mean anything to them. Why does the Government make much ado about nothing? Just let these people pay the tax since they can well afford to pay. Since they can afford to pay, the Government might just as well pocket the money.

However, if we say there is no problem for the mass transit systems … As we may know, the Government may sometimes put up a show. For example, Donald TSANG might occasionally drive an EV to show us that he was very environmentally friendly. Yet, he never bothered about regulating the emissions from power plants. He never cared about the most important matter but just thought that the use of EVs would solve all the problems. I am sorry. I believe people are not so stupid now and they would not be so easily deceived by such simple tricks.

Of course, subsequently the amendment of Dr Fernando CHEUNG may not be passed while the Government's resolution will probably be bulldozed through. Secretary, please consider carefully the problems that I have raised. You may as well implement all these policies, but at the end you have to hand in your report card. What we want to achieve is a reduction in the overall emission rather than reduction in certain locations or by certain people. We want to reduce the overall pollutants and emissions in Hong Kong and minimize the impact of greenhouse gas on earth. Even if one day we use the China Southern Power Grid, we should not be delighted, thinking that our environment is clean because we do not see pollution in Hong Kong. Indeed it is the residents in Guangdong Province who suffer. I do not hope that residents in Guangdong Province have to inhale more and more exhaust gas because more and more people are driving in Hong Kong.

With these remarks, I support Dr Fernando CHEUNG's amendment. Thank you, Deputy President.

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MR LEE CHEUK-YAN (in Cantonese): Deputy President, Dr Fernando CHEUNG proposes an amendment on behalf of the Labour Party. I think the reason is clear. After all we would like to ask the Secretary just one question: Do you want to pay $150 million to subsidize 300 people to buy their toys? Is it worth for us to pay a cost of $150 million? During the discussion at the Panel on Environmental Affairs two days ago, we proposed the idea of green transport fund. I remember that the colleagues of the Secretary ― staff in the Environment Bureau ― indicated during the discussion that at present, it was most important to convey the message of supporting electric vehicles (EVs). We must point out clearly that the Labour Party does not oppose the promotion of EVs, we support EVs. However, when there is inconsistency between the Government's environmental protection policy and tax revenue policy, and such inconsistency is as huge as $150 million, I have to ask the Secretary whether it is worth the money. Mind you, the amount is $150 million.

Just now I discussed with some other people the possibility of introducing food waste composters. At present there is a fridge-sized model that can fit in every housing estate. This model can treat 5 tonnes of food waste, which will then be turned into water, chemical fertilizers, air, and subsequently no waste is left. I asked about the price and it is learned that a model of such size costs about $110,000 while the one for domestic use costs around $3,000. I am now talking about the one being installed in housing estates instead of placing at homes. If the Secretary is willing to allocate $150 million, how many housing estates can be subsidized to install the food waste composter? If one composter costs $100,000, then 1 500 housing estates will receive the subsidy. People who have studied economics will know what opportunity cost is. The question is, if the Government spends $150 million on subsidizing rich people to buy 300 toys, it cannot spend this sum of money for better causes. This is definitely not worth the money.

Therefore, while I support environmental protection and EVs, I do not think that the Administration should support the purchase of such expensive vehicles. We have read a report which compares the listed prices of Tesla in Hong Kong and the Mainland. In Hong Kong, the price for a beginner model is only HK$580,000 (that is, around Renminbi (RMB) 450,000 yuan), which is RMB 280,000 yuan cheaper when compared with the Mainland listed price at RMB 734,000 yuan. That means buying the same model in Mainland will cost RMB 280,000 yuan more.

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In fact, the Labour Party does not prefer the approach proposed today, that is, extending the exemption of the first registration tax (FRT) for only one year. What I prefer most is amending the Government's motion by setting a ceiling whereby vehicles at a certain price or above are not eligible for the FRT exemption. This is what I would like to do most but we are not able to do so. If we are allowed to make such an amendment, Dr Fernando CHEUNG will definitely do so. But as we all know, such an amendment is not possible, and the only alternative is to give the Government one more year to conduct a study and revert to the Legislative Council afterwards. That is why we propose to extend the exemption for one year. What we would like to do most is to get back the tax revenues for the Treasury which, based on conservative estimate, amounts to $150 million. If the vehicle manufacturers continue their promotion, the number of orders may increase from the present 300 to 400 or 500 vehicles. The more vehicles are ordered, the more tax revenues are forgone.

I think the Secretary should make a balance between the two. It is extreme and unreasonable not to give due consideration to tax revenues at all. The promotion of EVs should be limited to those used by the general public. If EVs that are affordable to the general public are promoted, the market will be bigger because more people can afford them. However, the Government is promoting sports cars instead, which are only affordable to rich people. If the Government is to promote the wider use of EVs among Hong Kong people, it should not promote those sports cars that only rich people can afford. As such, I think we should get back to the starting point, that is, to promote environmental protection on the one hand and give due consideration to tax revenues on the other hand.

I know that the Secretary has raised another point, that is, the transfer of technology, and he hopes to encourage more research and development on such sports cars. Frankly speaking, the Secretary's encouragement is minimal. Even if there are 300 or 400 EVs in Hong Kong, our market is still very small when compared with the worldwide market. I think the manufacturers' focus is not on the Hong Kong market, but the large markets in the world. Therefore, transfer of technology is not a justification. Then the only justification is to promote the use of EVs. But as I said just now, it should be limited. We should not pay unlimited cost for promoting some EVs that are only affordable to a few people. This is completely meaningless. Therefore, for those Members who vote against Dr Fernando CHEUNG's amendment today, they do often win but actually they 9270 LEGISLATIVE COUNCIL ─ 26 March 2014 make the Government lose some $100 million. The loss may even be bigger than this amount.

Deputy President, thank you.

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

MR LEUNG YIU-CHUNG (in Cantonese): Deputy President, I support the amendment of Dr Fernando CHEUNG. In fact I understand that Dr Fernando CHEUNG does not expect his amendment to be passed because, as we all know, the Government surely has the game in its hands when this concept was introduced; otherwise it would not propose the motion. I believe that the amendment proposed by Fernando … certainly I hope that the Government's motion will not be passed. But it is just a by-product. The most important is to allow a discussion on the issue of electric vehicles (EVs) through this platform. As Mr LEE Cheuk-yan has said just now, we do not want the Government to subsidize some people with a large sum for buying luxury cars as their toys. Apart from this point, I would like to stress that we should make use of this platform to discuss another viewpoint raised by Dr KWOK Ka-ki, that is, are EVs really as environmentally friendly as claimed by the Government? This is the most important question. With the publicity and promotion by the Government, many people have the impression that EVs are green vehicles. We now even call them green vehicles instead of EVs. This is where the biggest problem lies.

Dr KWOK Ka-ki has indicated clearly that EVs appear to be impressive because they do not emit suspended particulates. The absence of smoke and noise gives us the impression that they are perfect green vehicles. However, they have two major drawbacks. Firstly, the electric power used by EVs is in fact not environmentally friendly during combustion; secondly, the disposal of waste EV batteries is not environmentally friendly either. But the Government has not explained clearly to the public these two problems. As such, regarding Fernando's proposal of extending the exemption for one year, I would like to add one point onto it: the Government is requested to review its publicity and educational efforts within this one year. The Administration should tell people what positive effects the so-called green vehicles will bring about, as well as the adverse effects thus caused. It should not mislead people by telling only one side of the story. Those who do not plan to buy a car may subsequently buy a LEGISLATIVE COUNCIL ─ 26 March 2014 9271 green car, thinking that they are being environmentally friendly. This is actually not good to do so. As what Dr KWOK Ka-ki has said, we should make more use of the mass transit systems to reduce pollution, including air and noise pollution, caused by various modes of transport, as well as the damage done to nature during power generation. In my opinion, it is most important for the Government to devise strategies to step up publicity and education. As such, we should take the opportunity to raise questions through this platform. We also hope that the Government will not simply give the wrong message to the public. This is very important.

Just now Mr LEE Cheuk-yan suggested that the Administration may consider using the $150 million to install food waste composters, assist in recycling or for other purposes. The sum of $150 million can indeed be used to accomplish a lot of tasks. Our discussion today is not on how to make use of the sum of $150 million. The most important question is that the Government should seriously consider how to carry out its promotion from the perspective of environmental protection, so that consumers will not be misled by wrong messages when they consume. Only then is our debate valuable and meaningful. We certainly hope to shorten the exemption period. We also hope that rich people who can afford the products will not abuse the exemption, thus causing damage and pollution to our environment.

Lastly, I hope the Government will consider the issue from different perspectives instead of simply appealing to people to use green vehicles. The various side effects caused by green vehicles should also be listed out from different perspectives.

(THE PRESIDENT resumed the Chair)

President, I so submit.

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

(No Member indicated a wish to speak)

9272 LEGISLATIVE COUNCIL ─ 26 March 2014

PRESIDENT (in Cantonese): Secretary for the Environment, you may now speak on Dr Fernando CHEUNG's amendment.

SECRETARY FOR THE ENVIRONMENT (in Cantonese): President, regarding the proposed resolution under Section 5(4) of the Motor Vehicles (First Registration Tax) Ordinance (Cap. 330), I thank Dr Fernando CHEUNG, Chairman of the Subcommittee on the proposed resolution, as well as other members and staff of the Legislative Council Secretariat, for completing the scrutiny on 5 March this year. I also thank the Members who have put forward their views on the promotion of electric vehicles (EVs) as well as air quality just now. May I reiterate that in general the Government has a comprehensive strategy on air quality. A Clean Air Plan for Hong Kong was also introduced last year which had set out specific goals, timetables and priorities.

Our discussion today is mainly on the exemption of the first registration tax (FRT) for EVs. We understand that the technology on EVs is still under development and drivers are still building their confidence in the use of EVs. Coupled with the high cost of research and development for EVs and the small production scale, the price of EVs is much higher than that of conventional vehicles. Therefore, the extension of the FRT exemption for another three years will provide a major economic incentive for using EVs.

Regarding Dr Fernando CHEUNG's proposal of extending the exemption for only one year until March 2015, we are worried that this will give EV manufacturers the wrong impression that the SAR Government has lessened its support to the promotion of EVs. Moreover, in practice, it takes time for introducing new car models. If the exemption is extended for only one year, car dealers will lose their incentive to import new models and will be discouraged to introduce EVs into Hong Kong. In conclusion, we consider it appropriate to extend the FRT exemption for EVs by three years.

Upon the expiry of the three-year exemption period, we will consider carefully, based on the development and market situation of EVs then, whether it is necessary to continue the exemption arrangement and other issues, so as to ensure effective implementation of policies and effective use of public monies.

Regarding other publicity measures for the use of EVs, just now Members have mentioned the promotion carried out by the Government. Apart from the FRT exemption for EVs, the Government has put in place a series of measures to LEGISLATIVE COUNCIL ─ 26 March 2014 9273 promote the use of EVs. These measures include the Pilot Green Transport Fund to encourage transport operators to test out green innovative transport technologies (including EVs). As at the end of February this year, subsidy has been approved for the purchase of 72 EVs, including electric goods vehicles, taxis, coaches, and light buses, for use in Hong Kong.

Secondly, close liaison with EV manufacturers from around the world will be maintained to encourage them to introduce more EVs into Hong Kong. As at the end of February, a total of 26 EV models from seven countries have been approved by the Transport Department for use in Hong Kong.

Thirdly, the Electrical and Mechanical Services Department has established a dedicated team and a hotline to help EV owners or buyers to set up EV chargers at strata-titled car parks. Besides, guidelines have been issued on the arrangement for installing charging facilities and technical requirements.

Regarding the charging network, some Members are concerned about the charging facilities. At present more than 500 standard charging facilities are installed in 18 public car parks managed by the Transport Department and the Government Property Agency, and some 500 charging facilities are installed in shopping malls by the private sector. In addition, 10 quick chargers are installed in various districts which can be found within an average distance of about 20 km.

As proposed in this year's Policy Address, a pilot scheme to enable suppliers of electric taxis to install quick chargers at car parks administered by the Transport Department will be launched to promote the development of electric taxis. A total of 100 medium chargers will also be provided in various districts within this year to shorten the charging time for EVs. We will keep an eye on the growth in the overall number of EVs and consider the need to expand the charging facilities in a timely manner.

In conclusion, tackling roadside air pollution is our priority because it has a direct impact on the health of the general public. The wider use of EVs will help enhance roadside air quality of Hong Kong. I hope Members will support the extension of the FRT exemption for EVs by three years.

Thank you, President.

9274 LEGISLATIVE COUNCIL ─ 26 March 2014

PRESIDENT (in Cantonese): I now put the question to you and that is: That the amendment, moved by Dr Fernando CHEUNG to the Secretary for the Environment's motion, be passed. Will those in favour please raise their hands?

(Members raised their hands)

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

(Members raised their hands)

Dr Fernando CHEUNG rose to claim a division.

PRESIDENT (in Cantonese): Dr Fernando CHEUNG has claimed a division. The division bell will ring for five minutes.

PRESIDENT (in Cantonese): Will Members please proceed to vote.

PRESIDENT (in Cantonese): Will Members please check their votes. If there are no queries, voting shall now stop and the result will be displayed.

Functional Constituencies:

Mr Albert HO, Mr James TO, Mr CHEUNG Kwok-che and Mr IP Kin-yuen voted for the amendment.

Mr Abraham SHEK, Mr Frederick FUNG, Prof Joseph LEE, Mr Andrew LEUNG, Mr WONG Ting-kwong, Ms Starry LEE, Dr LAM Tai-fai, Mr CHAN Kin-por, Mr IP Kwok-him, Mr Steven HO, Mr Frankie YICK, Mr YIU Si-wing, Mr MA Fung-kwok, Mr Charles Peter MOK, Mr Christopher CHEUNG, Mr Martin LIAO, Mr TANG Ka-piu, Ir Dr LO Wai-kwok, Mr CHUNG Kwok-pan and Mr Tony TSE voted against the amendment.

Mr POON Siu-ping abstained.

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Geographical Constituencies:

Mr LEE Cheuk-yan, Mr LEUNG Yiu-chung, Ms Emily LAU, Mr Ronny TONG, Ms Cyd HO, Mr Albert CHAN, Ms Claudia MO, Mr WU Chi-wai, Mr Gary FAN, Mr CHAN Chi-chuen, Dr KWOK Ka-ki, Dr Fernando CHEUNG, Mr SIN Chung-kai and Dr Helena WONG voted for the amendment.

Mr CHAN Kam-lam, Mr TAM Yiu-chung, Mr WONG Kwok-hing, Dr Priscilla LEUNG, Mr James TIEN, Mr CHAN Han-pan, Mr LEUNG Che-cheung, Miss Alice MAK, Dr Elizabeth QUAT and Mr Christopher CHUNG voted against the amendment.

THE PRESIDENT, Mr Jasper TSANG, did not cast any vote.

THE PRESIDENT announced that among the Members returned by functional constituencies, 25 were present, four were in favour of the amendment, 20 against it and one abstained; while among the Members returned by geographical constituencies through direct elections, 25 were present, 14 were in favour of the amendment and 10 against it. Since the question was not agreed by a majority of each of the two groups of Members present, he therefore declared that the amendment was negatived.

MR ANDREW LEUNG (in Cantonese): President, I move that in the event of further divisions being claimed in respect of the motion under the Motor Vehicles (First Registration Tax) Ordinance, this Council do proceed to each of such divisions immediately after the division bell has been rung for one minute.

PRESIDENT (in Cantonese): I now propose the question to you and that is: That the motion moved by Mr Andrew LEUNG be passed.

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

(No Member indicated a wish to speak)

9276 LEGISLATIVE COUNCIL ─ 26 March 2014

PRESIDENT (in Cantonese): I now put the question to you as stated. Will those in favour please raise their hands?

(Members raised their hands)

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

(No hands raised)

PRESIDENT (in Cantonese): I think the question is agreed by a majority respectively of each of the two groups of Members, that is, those returned by functional constituencies and those returned by geographical constituencies through direct elections, who are present. I declare the motion passed.

I order that in the event of further divisions being claimed in respect of the motion under the Motor Vehicles (First Registration Tax) Ordinance, this Council do proceed to each of such divisions immediately after the division bell has been rung for one minute.

PRESIDENT (in Cantonese): I now call upon the Secretary for the Environment to reply.

(The Secretary for the Environment indicated that he did not need to reply)

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

(Members raised their hands)

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

(Members raised their hands)

Dr Fernando CHEUNG rose to claim a division.

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PRESIDENT (in Cantonese): Dr Fernando CHEUNG has claimed a division. The division bell will ring for one minute.

PRESIDENT (in Cantonese): Will Members please proceed to vote.

PRESIDENT (in Cantonese): Will Members please check their votes. If there are no queries, voting shall now stop and the result will be displayed.

Mr Albert HO, Mr James TO, Mr CHAN Kam-lam, Ms Emily LAU, Mr TAM Yiu-chung, Mr Abraham SHEK, Mr Frederick FUNG, Mr Vincent FANG, Mr WONG Kwok-hing, Prof Joseph LEE, Mr Andrew LEUNG, Mr WONG Ting-kwong, Ms Starry LEE, Dr LAM Tai-fai, Mr CHAN Kin-por, Dr Priscilla LEUNG, Mr IP Kwok-him, Mr James TIEN, Mr Steven HO, Mr Frankie YICK, Mr WU Chi-wai, Mr YIU Si-wing, Mr MA Fung-kwok, Mr Charles Peter MOK, Mr CHAN Han-pan, Mr LEUNG Che-cheung, Miss Alice MAK, Mr Christopher CHEUNG, Mr SIN Chung-kai, Dr Helena WONG, Mr IP Kin-yuen, Dr Elizabeth QUAT, Mr Martin LIAO, Mr POON Siu-ping, Mr TANG Ka-piu, Ir Dr LO Wai-kwok, Mr CHUNG Kwok-pan, Mr Christopher CHUNG and Mr Tony TSE voted for the motion.

Mr LEE Cheuk-yan, Mr LEUNG Yiu-chung, Ms Cyd HO, Mr CHEUNG Kwok-che, Mr Albert CHAN, Ms Claudia MO, Mr Gary FAN, Mr CHAN Chi-chuen, Dr KWOK Ka-ki and Dr Fernando CHEUNG voted against the motion.

THE PRESIDENT, Mr Jasper TSANG, did not cast any vote.

THE PRESIDENT announced that there were 50 Members present, 39 were in favour of the motion and 10 against it. Since the question was agreed by a majority of the Members present, he therefore declared that the motion was passed.

9278 LEGISLATIVE COUNCIL ─ 26 March 2014

MEMBERS' MOTIONS

PRESIDENT (in Cantonese): Three Members' motions.

First Member's motion: Proposed resolution under the Interpretation and General Clauses Ordinance to extend the period for amending the Resolution of the Board of Directors of the Po Leung Kuk, which was laid on the table of this Council on 26 February 2014.

I now call upon Mr MA Fung-kwok to speak and move the motion.

PROPOSED RESOLUTION UNDER SECTION 34(4) OF THE INTERPRETATION AND GENERAL CLAUSES ORDINANCE

MR MA FUNG-KWOK (in Cantonese): President, in my capacity as Chairman of the Subcommittee on subsidiary legislation, I move the motion under my name as printed on the Agenda.

At the House Committee meeting on 28 February 2014, Members decided to form a Subcommittee to scrutinize the Resolution of the Board of Directors of the Po Leung Kuk, which was laid on the table of this Council on 26 February 2014. Members agreed that I should move a motion to extend the scrutiny period of this subsidiary legislation to the meeting of this Council on 16 April 2014, so as to allow sufficient time for scrutiny of the subsidiary legislation by the Subcommittee.

President, I urge Members to support the motion. Thank you, President.

Mr MA Fung-kwok moved the following motion:

"RESOLVED that in relation to the Resolution of the Board of Directors of the Po Leung Kuk, published in the Gazette as Legal Notice No. 24 of 2014, and laid on the table of the Legislative Council on 26 February 2014, the period for amending subsidiary legislation referred to in section 34(2) of the Interpretation and General Clauses Ordinance (Cap. 1) be extended under section 34(4) of that Ordinance to the meeting of 16 April 2014."

LEGISLATIVE COUNCIL ─ 26 March 2014 9279

PRESIDENT (in Cantonese): I now propose the question to you and that is: That the motion moved by Mr MA Fung-kwok be passed.

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

(No Member indicated a wish to speak)

PRESIDENT (in Cantonese): I now put the question to you as stated. Will those in favour please raise their hands?

(Members raised their hands)

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

(No hands raised)

PRESIDENT (in Cantonese): I think the question is agreed by a majority respectively of each of the two groups of Members, that is, those returned by functional constituencies and those returned by geographical constituencies through direct elections, who are present. I declare the motion passed.

PRESIDENT (in Cantonese): The second and the third Members' motions are motion debates with no legislative effect. I have accepted the recommendations of the House Committee: that is, movers of the motions each may speak, including making a reply, for up to 15 minutes, and have another five minutes to speak on the amendments; movers of the amendments each may speak for up to 10 minutes; and other Members each may speak for up to seven minutes. I am obliged to direct any Member speaking in excess of the specified time to discontinue.

9280 LEGISLATIVE COUNCIL ─ 26 March 2014

PRESIDENT (in Cantonese): Second Member's motion: Properly dealing with problems arising from cross-boundary students.

Members who wish to speak in the motion debate will please press the "Request to speak" button.

I now call upon Mr TAM Yiu-chung to speak and move the motion.

PROPERLY DEALING WITH PROBLEMS ARISING FROM CROSS-BOUNDARY STUDENTS

MR TAM YIU-CHUNG (in Cantonese): President, I move that the motion, as printed on the Agenda, be passed. At present, the number of cross-boundary students passing through various immigration control points every day has surged from less than 4 000 in the 2002-2003 school year to 16 000 in the 2012-2013 school year; an increase of more than fourfold in 10 years. According to the data from the Census and Statistics Department, due to the continuous increase in the birth rate of "doubly non-permanent resident (DNR) babies" since 2006, the number of cross-boundary students attending school in Hong Kong in the following few years will continue to rise, and the peak may appear in the 2017-2018 school year. If projections are made on the basis of such data, the number of cross-boundary students may reach 25 000 to 30 000.

The large number of cross-boundary students attending school in Hong Kong will undoubtedly exert enormous pressure on school places, in particular primary school places, in areas near various immigration control points, such as the North District, Yuen Long and Tai Po. This would affect the opportunities for local students to be admitted to school of their preferred choice. Therefore, the dissatisfaction of local residents is understandable.

However, we have to understand, although cross-boundary students are mostly DNR students (that is, students born in Hong Kong but both their parents are not Hong Kong permanent residents), there are also "singly non-permanent resident (SNR) students" whose fathers or mothers are Hong Kong permanent residents, as well as Hong Kong children whose parents are Hong Kong permanent residents yet they live in the Mainland due to their parents' employment or other reasons.

LEGISLATIVE COUNCIL ─ 26 March 2014 9281

Under the existing laws, DNR children, SNR children and children of Hong Kong-citizens living in the Mainland are permanent residents of Hong Kong and they have the right to receive education in Hong Kong. The SAR Government is obliged to provide them with education services.

For DNR students, after the implementation of a "zero quota" for DNRs last year, it is expected that the number of cross-boundary students will drop significantly in the 2018-2019 school year. But since there will still be cross-boundary students, the SAR Government still needs to deal with and address the problems.

To tackle the problem of a surge in cross-boundary students, the SAR Government proposed last year to designate a school net exclusively for cross-boundary students and signed a co-operation agreement with the Shenzhen Bureau of Education, allowing private schools for Hong Kong-citizen children in Shenzhen to admit DNR students. The relevant policy measures may help relieve the pressure of shortage of school places in the North District and Yuen Long, but it may not be able to fundamentally solve the problems caused by cross-boundary students.

First of all, the major objective of designating a school net exclusively for cross-boundary students is to divert cross-boundary students to eight different school nets and divert cross-boundary students from School Net 80 in Sheung Shui and School Net 81 in Fan Ling with shortage of school places to School Net 72 in Tin Shui Wai with more school places, thereby alleviating the pressure on the North District (School Net 80 in Sheung Shui and School Net 81 in Fan Ling) which is currently taking up 62% of cross-boundary students.

However, these cross-boundary students do not have residence address in Hong Kong and their parents will choose school nets near various immigration control points in the vicinity of their residence. We will only know if the diversion is effective when the results of the central allocation are known in June at the earliest.

Even if the school net exclusively for cross-boundary students can serve the purpose of diverting cross-boundary students, the problems of students having to shuttle between two places and spend a lot of time travelling to and from schools, thereby affecting their physical and mental development and personal safety still remain unsolved.

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According to the report published by the Hong Kong Federation of Youth Groups (HKFYG) last month on the learning and development needs of cross-boundary students shuttling between two places, 68% of cross-boundary students spend more than two hours a day on their journey, and nearly 50% of cross-boundary students consider that the long journey made them feel physically and mentally exhausted.

Though the Government has co-operated with the Shenzhen Bureau of Education to allow DNR students to attend private schools and classes exclusively for Hong Kong-citizen children, and allow Primary Six graduates of such schools and classes to participate in the Hong Kong Secondary School Allocation System, these private schools and classes exclusively for Hong Kong-citizen children charge very high tuition fees, amounting to more than RMB 20,000 yuan each year, which are not affordable to many ordinary parents of Hong Kong-citizen students. As these Hong Kong-citizen children do not have accounts in Shenzhen, their parents need to provide five sets of documents such as the birth permits issued by family planning agency before their children are eligible for admission to local public schools. It is difficult for parents of Hong Kong-citizen students to provide such documents.

It is also stated in the report published by the HKFYG that since the private schools and classes exclusively for Hong Kong-citizen children are not monitored by the Education Bureau in Hong Kong, the Bureau cannot visit such schools for teaching quality assessment or evaluation. The teaching quality of these schools cannot be guaranteed and it is doubtful if they are attractive to well-off parents of Hong Kong-citizen children who can afford the school fees.

In view of this, the Democratic Alliance for the Betterment and Progress of Hong Kong (DAB) thinks that the Education Bureau of the SAR Government, the Shenzhen Bureau of Education and the Ministry of Education of the State Council should adopt a new way of thinking and tackle the problem at its roots to meet the demands of Hong Kong-citizen students for receiving compulsory education in the Mainland, so as to relieve and alleviate the problems of cross-boundary students attending school in Hong Kong.

During the two sessions held this year, the DAB proposed that, under the educational co-operation framework between the two places, a joint study should be conducted on the feasibility of establishing SAR Government subsidized schools in Shenzhen to provide Hong Kong-style education. In other words, the LEGISLATIVE COUNCIL ─ 26 March 2014 9283

SAR Government would, based on the approach of subsidizing government and aided schools in Hong Kong, establish schools in the Mainland or buy school places to provide Hong Kong-style education using Hong Kong teaching materials and school curriculum, thereby providing an alternative channel for Hong Kong-citizen students to receive compulsory education.

The establishment of SAR Government subsidized schools in the Mainland to provide Hong Kong-style education should have certain appeal, and many Hong Kong-citizen students will be attracted to enrol. This can avoid a large number of Hong Kong-citizen students living in the Mainland travelling across the boundary to attend school in Hong Kong, and relieve the pressure of inadequate school places in areas such as the North District and Yuen Long. These young students need not make long journeys to school every day, and they would not be physically and mentally exhausted as in the case of cross-boundary students.

Although at present, the problem of surplus teachers in primary schools in Hong Kong is not as serious as in the past few years, some retired primary school teachers, principals and school sponsoring bodies want to set up schools in the Mainland to provide education for Hong Kong-citizen students. Relatively speaking, this can give Hong Kong teachers another way out. Evidently, establishing SAR Government subsidized Hong Kong-style schools in Shenzhen can attain a multi-win situation, in which local children and their parents, Hong Kong-citizen students and their parents, as well as teachers will all be winners.

I understand there are views that the establishment of SAR Government subsidized Hong Kong-style schools in Shenzhen may violate the principle of non-portability of welfare benefits, and cannot immediately help to resolve the existing problems. Some are also worried that should the number of Hong Kong-citizen students decline, the stable development of schools offering Hong Kong-style compulsory education may be affected.

Nevertheless, the DAB believes that since the SAR Government has already formulated the Guangdong Scheme and the Bought Place Scheme for buying places in elderly care homes in the Mainland to provide welfare services to Hong Kong people living in the Mainland, can we use the same idea and consider providing education services to Hong Kong-citizen students, so as to reduce the impacts on the North District and Yuen Long?

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Although the number of DNR students will decrease significantly after the 2018-2019 school year, there are still Hong Kong-citizen students living in the Mainland whose parents are Hong Kong residents, as well as SNR students living in the Mainland whose mothers or fathers are Hong Kong residents. With increasingly frequent exchanges between Hong Kong and the Mainland, more and more Hong Kong people will be working in the Mainland and there will be more marriages between people in both places. The number of Hong Kong-citizen students will increase and there is a need for them to receive Hong Kong-style compulsory education in the Mainland.

Furthermore, the SAR Government can adopt more flexible subsidy measures such as buying places from private schools exclusively for Hong Kong-citizen children in Shenzhen and requiring these private schools to be monitored by the Education Bureau in Hong Kong, and to receive regular teaching quality accreditation or assessment. These short- and medium-term measures can be implemented.

In the long run, the SAR Government can co-operate with the Shenzhen Bureau of Education to allow Hong Kong school sponsoring bodies to operate schools in Shenzhen, with Hong Kong-style teachers teaching Hong Kong-style curriculum. The SAR Government will provide subsidy to eligible Hong Kong-citizen students. The school is allowed to admit non-Hong Kong-citizen students at cost, which I believe will have a competitive edge.

In addition, I would like to point out, before the Chief Executive took office or when he has just taken office, he has repeatedly stressed on various occasions that though more than 300 000 Hong Kong people are now working in the Mainland, there is no school in the Mainland operated by the SAR Government for Hong Kong-citizen students, so as to reduce the education expenses of Hong Kong people working and living in the Mainland. For this reason, he will strive for establishing schools exclusively for Hong Kong-citizen students in key Mainland cities, subsidized by the SAR Government. As the first step in implementing the Chief Executive's commitments, should the SAR Government subsidize the establishment of a Hong Kong-style school in Shenzhen?

Finally, I wish to stress that all cross-boundary students, be they DNR children, SNR children or children of Hong Kong families living in the Mainland, are members of the Hong Kong community and important human resources of LEGISLATIVE COUNCIL ─ 26 March 2014 9285 our society in the future. Therefore, the SAR Government has the responsibility to deal with the problems stemming from cross-boundary students. The DAB thinks that the SAR Government must set up an inter-departmental task force to commence collation and evaluation of data and information in a systematic and continuous manner, including the problems arising from cross-boundary students, such as the impacts on the demand and supply of kindergarten, primary and secondary school places in Hong Kong, as well as the impacts of cross-boundary students on human resource development in Hong Kong, so as to make more effective and comprehensive supporting strategies.

The DAB also thinks that the SAR Government should make proper immigration and transportation support for cross-boundary students, enhance the services and support for cross-boundary students and their families, with a view to assisting cross-boundary students in integrating into our society.

President, I so submit.

Mr TAM Yiu-chung moved the following motion: (Translation)

"That the continuously increasing number of cross-boundary students in recent years has given rise to quite a number of problems; a large number of cross-boundary students pouring into the districts near various immigration control points for attending school lead to keen competition for school places in New Territories districts, thereby affecting local students' opportunities for admission to school in the vicinity of their residence and increasing the pressure on various land immigration control points; furthermore, cross-boundary students need to shuttle between two places and leave early and return late on school days, rendering them physically and mentally exhausted and posing danger to their personal safety, and long coach journeys also affect their studies in school; in this connection, this Council urges the Government to:

(1) set up an inter-departmental task force to study the problems arising from cross-boundary students, including the demand for and supply of kindergarten places as well as primary and secondary school places in Hong Kong, and the impacts of cross-boundary students on the development of manpower resources in Hong Kong, so as to formulate more effective and comprehensive support strategies;

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(2) having regard to cross-boundary students' demand for school places, expeditiously make good planning for kindergarten places as well as primary and secondary school places in various districts, and while increasing the number of places in the school net exclusively for cross-boundary primary students, also ensure local students' opportunities for admission to school in the vicinity of their residence, so as to avoid affecting local students' opportunities for attending school;

(3) having regard to the actual situation of families with Hong Kong-citizen children living in the Mainland, pursue with Mainland authorities the opportunities for providing compulsory education to Hong Kong-citizen children, specifically the conduct of studies in conjunction with Mainland authorities under the educational co-operation framework between two places on establishing Hong Kong-style schools in Shenzhen and setting up more schools and classes exclusively for Hong Kong-citizen children, so as to alleviate the education demand of Hong Kong-citizen children in Hong Kong;

(4) commence collation and evaluation of data and information in a systematic and continuous manner, including the population characteristics of families with cross-boundary students and the intentions of cross-boundary students to study and work in Hong Kong in the future, so as to make more comprehensive and accurate planning for manpower resources;

(5) enhance the services and support for cross-boundary students and their families, and increase the opportunities for cross-boundary students to participate in and experience community activities in Hong Kong; and

(6) perfect the immigration arrangements and transportation support for cross-boundary students, so that they can cross the boundary safely for attending school."

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PRESIDENT (in Cantonese): I now propose the question to you and that is: That the motion moved by Mr TAM Yiu-chung be passed.

PRESIDENT (in Cantonese): Six Members wish to move amendments to this motion. This Council will now proceed to a joint debate on the motion and the six amendments.

I will first call upon Mr IP Kin-yuen to speak, to be followed by Mr James TIEN, Mr Michael TIEN, Mr TANG Ka-piu, Mr Gary FAN and Dr Helena WONG respectively; but they may not move amendments at this stage.

MR IP KIN-YUEN (in Cantonese): President, first of all, I would like to thank Mr TAM Yiu-chung for proposing this motion, giving us an opportunity to rationally discuss in this Council how to properly deal with the problems arising from cross-boundary students.

The phenomenon of cross-boundary students is rare in the world. Every day, thousands and even tens of thousands of young children or adolescents cross the boundary to attend school and return home on the same day. To properly deal with this extremely rare educational phenomenon, we must have extraordinary competence and planning capabilities. We cannot underestimate how difficult this problem is.

To proactively face up to the problem, the Government must handle this special case with special methods. This is a special case that has to be handled by a special team. They must fully grasp the characteristics of cross-boundary students and make appropriate planning for their future development, and at the same time, meet the education needs of both local and cross-boundary students, as well as tackle other problems arising from cross-boundary students. However, as we have noticed, the Government just makes routine planning and plans only one step ahead. It seems that the Government "knows not what tomorrow may bring?"

To properly handle the problem of cross-boundary students, we must first grasp the characteristics of cross-boundary students. Cross-boundary students are not of a single nature and there are at least three types of such students. As Mr TAM Yiu-chung has just said, first, there are "doubly non-permanent resident 9288 LEGISLATIVE COUNCIL ─ 26 March 2014

(DNR) children"; second, "singly non-permanent resident (SNR) children"; and third, children living in Shenzhen whose parents are Hong Kong residents. These three types of students have something in common, that is, they may all become cross-boundary students. Yet, there is a significant difference among them. SNR children and children living in Shenzhen whose parents are Hong Kong residents have deep roots in and connections with Hong Kong, and 6 000 to 10 000 such babies are born each year. This is a relatively stable group which has a strong tendency to attend schools in Hong Kong.

As regards DNR children, some of them are from Guangdong while others are from other provinces. The number of such children fluctuates greatly. During the peak period of 2011-2012, the number of DNR babies exceeded 30 000 and nearly reached 40 000, almost as many as the number of local babies born during the period. However, the number dropped to almost zero in 2013.

As such, DNR children have created two major difficulties in education planning. First, there are strong fluctuations in their number, with sharp increases and decreases. Second, there are a lot of uncertainties. For instance, it is difficult to grasp the number of DNR children who may come to Hong Kong and when they will come. We are uncertain about all those data and everything depends on the parents' decisions. Even if we make reference to the data of the past few years, there are still uncertainties as the situation may change from year to year. Even so, given the large number of DNR children involved, if the Government does not make projections, we may be caught unprepared and may not be able to cope with the situation.

I believe the Government's performance in handling the problems is obvious to all. I would like to point out two major problems. First, the Government has failed to grasp the basic data. As I have just mentioned, DNR children, SNR children and children living in Shenzhen whose parents are Hong Kong residents belong to three different categories. For the sake of making appropriate planning, the Government must clearly grasp the number of children in each category, estimate the proportion of these children who will come to Hong Kong, project the future tendency and calculate the total number of school places required.

To our regret, even though Legislative Council Members have repeatedly asked the Government for the number of DNR children, SNR children and children living in Shenzhen whose parents are Hong Kong residents among LEGISLATIVE COUNCIL ─ 26 March 2014 9289 cross-boundary students, the Government told us that it did not have such data. How then can we know the proportion of these children among cross-boundary students? If the Government does not know the proportion, how can it have any idea of the future tendency? Thus, the Government has failed in this respect.

Second, plans should be made in advance. We should know what the situation will be in a few years or even after an extended period of time. Even if the projections is not very accurate, rough analysis or estimation is still necessary because the Government has to base on these data to determine whether schools will be constructed or whether other measures will be implemented. However, the present situation is that the Government only knows this year the enrolment situation of kindergartens or Primary One of next year. Parents are thus at a loss. Owing to the lack of a three-year plan, parents and schools do not know what to do.

Since the Government has not made long-term planning, it is uncertain as to whether schools should be constructed. Consequently, it can only use the existing school places to cater for the needs of an increasing number of cross-boundary students. If the Government does not make any projection and the number of cross-boundary students exceeds our handling capacity, the problems arisen will be very serious indeed.

We should understand that the problem of cross-boundary students can be addressed from three aspects. The first aspect is "upstream handling". As explained by Mr TAM Yiu-chung just now, "upstream handling" means solving the problem in Shenzhen. This can avoid the transportation problems faced by students crossing the boundary every day for attending school in Hong Kong. Moreover, as there are bottlenecks in people flow at immigration control points and the carrying capacity of various modes of transport, if we can solve this problem in Shenzhen, the daily pressure on the immigration control points can be relieved.

As the progress in this respect has been very slow, I think the Government must make greater efforts. It should hold discussions with the Shenzhen authorities or the Central Government. Measures such as encouraging school sponsoring bodies in Hong Kong to operate schools in Shenzhen or establishing special schools or classes exclusively for Hong Kong-citizen children should be considered. These measures can help alleviate the problem of cross-boundary students. A timely implementation of similar measures can alleviate the 9290 LEGISLATIVE COUNCIL ─ 26 March 2014 problems at an earlier stage; otherwise, the problems cannot be solved completely. Even if we start constructing schools now, the construction takes a long time to complete. Hence, "upstream handling" of the problem is the first step.

Second, the provision of adequate school places in the "downstream". The Government has failed to properly address the matter in the past few years. Initially, all cross-boundary students are concentrated in the North District ― though this was not the intention of the Government ― hence exerting great pressure on the North District. This year, the Government has prepared a Choice of Schools List for Central Allocation for cross-boundary students, the schools in the list cover almost the entire territory and not just the North District.

Can this measure properly deal with the needs of local students and cross-boundary students? Should the Government allow cross-boundary students to attend schools in the vicinity of residence? As they already have to cross the boundary for attending schools, if they have to travel to Wong Tai Sin or Aberdeen, this will impose great burden on them. How can reasonable arrangements be made for cross-boundary students? How can local students continue to receive quality education? How can we ensure that "small-class teaching" will not become "large-class teaching"? It is rather difficult to properly handle these problems. Yet, the Government must think that through. I think the Government has so far failed to give local and cross-boundary students a satisfactory answer.

Between "upstream" and "downstream" lies "midstream", which involves bottleneck problems, such as the capacity of the immigration control points, the carrying capacity and fares of various modes of transport. These are serious problems as well.

In the face of a gradual increase in the number of cross-boundary students, I must give a serious warning here. The Government has been saying that the problem of cross-boundary students will only continue for a few years and it is a transitional problem. Yet, we have to understand that the peak years of birth of SNR and DNR children are in 2011 and 2012. These children will enter kindergartens and primary schools five to six years later. These children, together with cross-boundary students who are in existence a few years ago, may exceed 40 000. If more than 40 000 cross-boundary students cross the boundary at the immigration control points every day, can our immigration control points LEGISLATIVE COUNCIL ─ 26 March 2014 9291 cope with the work? Are there enough school buses for these students? How about the school bus fares? As some tourist coaches are now used as school buses for carrying cross-boundary students, will the tourism industry be impacted? Regarding all these questions, the Government must make appropriate planning and arrangements.

I hope the Education Bureau will not disappoint us any further. (The buzzer sounded) … I so submit.

MR JAMES TIEN (in Cantonese): President, this motion is about the problem of cross-boundary students, which is caused by the unsatisfactory handling of the issue of "doubly non-permanent resident (DNR) children" by the last-term Government. In this connection, the current-term Government should be praised. After Chief Executive LEUNG Chun-ying has assumed office, he immediately solved the problem of DNR babies born in Hong Kong. We can at least foresee that this problem will be solved five to six years later. But for the moment, 200 000-odd children are involved. In particular, the number of DNR children reached 33 000 and 36 000 in 2010 and 2011 respectively. These children will enter Primary One in the 2016-2017 school year, which is the peak period mentioned by Mr IP Kin-yuen. Therefore, we strongly support Mr TAM Yiu-chung's motion.

Frankly speaking, I am not too familiar with the education issue. If I were not a directly elected Legislative Council Member representing New Territories East, I would not have known that there are so many problems in the North District, and I might just support this motion without proposing an amendment. Even though only 60% of cross-boundary students, just 17 000 students, have come to Hong Kong, the number will change year after year. Fortunately, there is currently no DNR baby born in Hong Kong, and hence we will not have any six-year-old DNR children six years later.

It is a difficult task for the Government. If we establish more schools in Hong Kong, we have to employ more teachers and build school premises, but what should we do if there are no students six years later? How are we going to deal with this rather special problem? Should Hong Kong cater for the needs of these students within these few years? The original motion and Mr IP's amendment have mentioned the problems that will arise. First, the problem of a 9292 LEGISLATIVE COUNCIL ─ 26 March 2014 large number of primary students crossing the boundary every morning for attending school in Hong Kong. Recently, a television station has interviewed some students. They said that they wake up at 5 am because they have to arrive in Hong Kong at about 7 am. For people at our age, our grandchildren are almost as old as these cross-boundary students. It is saddening for us to see that these children are tired out, having to shuttle between the two places every day. They commute daily to schools in Hong Kong simply because they wish to receive better education and have a better future. On the other hand, owing to the serious shortage of school places in the North District, parents complain that DNR children have snatched all the school places, causing disharmony between China and Hong Kong. Students living in the North District have to attend schools in Tuen Mun and Yuen Long. While parents in Hong Kong are certainly dissatisfied, Mainland students attending school in Hong Kong also have a hard time.

In addition to according priority to Hong Kong-citizen students, we must consider how to deal with the situation when a large number of DNR children come to Hong Kong to attend school in the next few years. The Liberal Party supports Mr TAM Yiu-chung's motion. Mr TAM had moved some motions at the meetings of the National Committee of the Chinese People's Political Consultative Conference (CPPCC) and the Liberal Party had also moved some similar motions. We are of the view that Hong Kong people can establish schools in the Mainland (that is, Shenzhen), so that parents may think that the education received by their children in Shenzhen will dovetail with the Hong Kong curriculum, and hence they need not force their children to attend school in Hong Kong. We consider this proposal feasible. Therefore, we support all the proposals in Mr TAM's original motion.

The Mainland Government gave us a very positive response at that time, saying that co-operation between the two governments was possible. We have particularly noticed that at least two primary schools in Shenzhen have started admitting DNR students. Can similar schools be established in addition to those two schools? We all understand that it is not easy to handle this problem because six years later, there will be no more DNR students. If a school is established in Shenzhen to admit a certain number of students each year, it will have admission problem in future. Since no more DNR babies are now born in Hong Kong, there will be no DNR students to enrol in Primary One six years later. It is also not easy for the Mainland to tackle this problem. Our only LEGISLATIVE COUNCIL ─ 26 March 2014 9293 hope is that since there are more people living in Shenzhen than in Hong Kong, more babies will be born in Shenzhen each year; and hence, even if there are no more DNR students, children born in Shenzhen can attend these schools as many people still think highly of the education system of Hong Kong. If primary schools for DNR students are established, and when DNR students reach the age for secondary school, should such primary schools be retained? We can only hope that children born in the Mainland will attend these schools.

In my amendment, I have only added one paragraph because we have noticed that there is a slight surplus of teachers in Hong Kong due to school closures and we wonder if these teachers can consider teaching in the Mainland. It is not easy to encourage teachers to teach in the Mainland in view of higher transport and accommodation expenses, as well as other additional expenses incurred. There are also problems with the provident fund accounts. Can teachers maintain their provident fund accounts when they teach in the Mainland? Will these accounts be closed? If the Government does something in respect of livelihood, transport expenses and provident fund accounts, I believe Hong Kong teachers will be encouraged to teach in the Mainland.

President, why do we consider that this point is vital? At present, Mainland schools and parents think that Hong Kong teachers can, no matter they teach in English or Cantonese, help students familiarize with Hong Kong. As we have noticed, many Mainland parents arrange their children to study in Hong Kong simply because they have a good impression of the campus life in Hong Kong. If school sponsoring bodies operate schools in the Mainland and some of the teachers are qualified teachers in Hong Kong, I believe Mainland parents will have greater confidence in these teachers and the curriculum, and they would consider enrolling their children in these schools. These schools may be set up by school sponsoring bodies in Shenzhen or school sponsoring bodies in Hong Kong and so long as the curriculum can dovetail with those in Hong Kong and some teachers are from Hong Kong, parents may think that there is not much difference than attending schools in Hong Kong. They may even think that their children can attend Secondary One in Hong Kong after they have completed Primary Six in Shenzhen. Is there any dovetailing arrangement? Parents will feel more relieved if there is such an arrangement. In the next few years, especially in the 2016-2017 school year, we estimate that the number of DNR children will reach 30 000. I agree that not all these DNR children will attend school in Hong Kong, but if 60% to 70% of them will attend school in Hong 9294 LEGISLATIVE COUNCIL ─ 26 March 2014

Kong, it means that 10 000 to 20 000 DNR students will cross the boundary for attending school every day. There are serious problems in respect of immigration, transportation and school places in the North District. Hence, we hope the Government would take these issues into consideration.

We also understand that this issue cannot be handled by the SAR Government alone, it must communicate with the Mainland Government. At least, Mr TAM, the Liberal Party and the CPPCC think that Mainland officials have positive attitudes towards this issue. Hence, I think this issue can possibly be resolved.

With these remarks, President, I support Mr TAM Yiu-chung's motion.

MR MICHAEL TIEN (in Cantonese): President, I propose an amendment today simply because I hope to find the right remedy.

The number of cross-boundary students is increasing year after year. We know that the number of individual travellers has increased by 20% each year and we also know that, starting from the 2010-2011 school year, the number of cross-boundary students has also increased by 20% each year. There are 16 000 cross-boundary students in the 2012-2013 school year, and 40% of them (6 700 students) are cross-boundary primary students.

These students really have a hard time. They wake up at 5 am every day and spend two to three hours on their journey to school, always fearing that they will be late. Has the Education Bureau show any understanding for them? Honourable colleagues are discussing ways to help these cross-boundary students and I strongly support helping them. Last year, I moved a motion at the National People's Congress about setting up a Hong Kong Government subsidized primary school in Shenzhen exclusively for Hong Kong-citizen students in the Mainland.

The Central Government responded positively to my motion, saying that a feasibility study would be conducted. It also stated in black and white that the Guangdong provincial authorities were urged to discuss the details with the Education Bureau in Hong Kong. According to my understanding, the proposal is pending because the Government is worried that the number of "doubly non-permanent resident" (DNR) children may drastically drop a few years later, LEGISLATIVE COUNCIL ─ 26 March 2014 9295 as Mr James TIEN has just said, and by then, the school may not have sufficient students. Another concern of the Government is that even if such schools are established, will students still prefer crossing the boundary for attending school in Hong Kong to attending such schools?

About the former concern, I would like to share some figures. According to the Shenzhen authorities, there are 30 000 children born in Hong Kong and now live in Shenzhen, and among them, 17 000 attend school in Hong Kong while the rest attend school in Shenzhen. The authorities estimate that there will be 50 000 children of Hong Kong-citizens living in Shenzhen by 2018. I think the Secretary can rest assured that there are certainly students who would attend these schools. If these schools have a shortage of students, it is only because of their inferior quality.

In proposing a policy, one must be practical but not too idealistic. We must understand what the parents want before we can respond practically to their needs. President, I have recently conducted an in-depth survey and have interviewed many parents of cross-boundary students to find out what they need.

Simply put, Mainland parents have confidence in Hong Kong education because of our outstanding curriculum, teachers and atmosphere. They want to enrol their children in a school exclusively for Hong Kong-citizen students, so that their children can receive quality Hong Kong education and need not be fatigued by long travelling hours. Their requirements of a good school are not too demanding. On teachers, parents hope that teachers of the Hong Kong-style school are qualified teachers in Hong Kong; on curriculum, parents want Hong Kong-style curriculum, that is, all subjects including Chinese, English, Mathematics and General Studies learnt by Hong Kong students will be taught in the Hong Kong-style school. Parents are very much concerned about teaching quality and they hope that the Hong Kong-style school in the Mainland can be directly monitored and assessed by the Education Bureau in Hong Kong. If their children can be admitted to a good school, they will naturally have higher chances to be enrolled in famous secondary schools and universities in Hong Kong in future.

I asked them, since they liked Hong Kong-style education so much, why did they not enrol their children in one of the seven private schools or classes for Hong Kong-citizen children. They replied that they would not or could not do so. Let me first talk about the first case. Many parents who have chosen 9296 LEGISLATIVE COUNCIL ─ 26 March 2014 private schools for Hong Kong-citizen children actually wish that their children can study in international schools rather than subsidized secondary schools in Hong Kong in future. For those parents who really want their children to attend schools in Hong Kong, they are not satisfied with these private schools. They want "Made in Hong Kong" curriculum which can dovetail with famous subsidized secondary schools in Hong Kong, but not international schools.

At present, classes for Hong Kong-citizen children in the Mainland are taught by Mainland teachers. Though such classes claim to adopt Hong Kong curriculum, for some subjects such as General Studies, the contents are actually related to the Mainland instead of Hong Kong. Since such classes are not really taught by Hong Kong teachers in Hong Kong-style mode, parents would not consider enrolling their children in such "non-Hong Kong-style" schools.

Another group of parents could not enrol their children in private schools for Hong Kong-citizen children because the tuition fees were too high, ranging from a few thousand dollars to several ten thousand dollars. How can these schools be compared to subsidized schools in Hong Kong? Parents can hardly afford.

Since parents do not have confidence in private schools, it will be useless even if there is an increase in the number of classes for Hong Kong-citizen children. Therefore, when I mentioned the proposal to establish schools in the Mainland, subsidized by the SAR Government, they were delighted and rendered strong support.

Thus, I suggest that the Government should conduct a needs assessment as soon as possible and consider establishing Hong Kong-style schools in the Mainland, subsidized by the SAR Government. What are the conditions? The operation of the schools should be directly monitored by the Education Bureau; teaching should be conducted by qualified Hong Kong teachers and the curriculum should be drawn up with reference to the syllabus stipulated by the Education Bureau. The General Studies subject of Hong Kong primary schools cover the operation of the SAR Government and the Legislative Council, the Hong Kong-style schools in the Mainland should follow suit. As parents attach the utmost importance to teaching quality, the Hong Kong-style schools must undergo a series of comprehensive assessments such as inspections, internal and external assessments.

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For general supervision and operation, Hong Kong-style schools in the Mainland should comply with the provisions of the Education Ordinance and the Education Regulations on school administration, teachers, school manager registration, school safety, tuition fees, teacher qualifications, and so on.

Such kind of Hong Kong-style school is desired by parents in the Mainland. While parents can afford the tuition fees and have confidence in the curriculum, students can also adapt to Hong Kong teaching modes at an earlier stage. They will be better equipped for the public examinations and further studies in Hong Kong in future.

Parents would do everything for their children. As the saying goes, "it takes a village to nurture a child". Similarly, why do we not move the schools to the Mainland to accommodate the needs of these children, but instead ask them to commute each day to Hong Kong for our convenience sake?

Most of the Mainland parents interviewed are now living in Shenzhen but some of them are now living in Shanghai and various Mainland provinces and cities. They told me that they would move to Shenzhen to facilitate their children attending school in Hong Kong. In ancient time, Mencius's mother moved home three times for better education for her son. Today, Mainland parents are similarly moving home for the sake of their children's future. They just want their children to enrol in Hong Kong-style school for Hong Kong-citizen children. I hope the Education Bureau would prescribe the right remedy, bear educational responsibilities and respond to the genuine needs of these parents.

Members who have expressed their views on the motion today are concerned about the needs of cross-boundary students. I propose an amendment to respond more appropriately to the demands of parents and students. I hope Members would support my amendment.

President, I so submit.

MR TANG KA-PIU (in Cantonese): President, the subject of the motion concerns cross-boundary students, but there are in fact different types of cross-boundary students.

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Certainly, many people say that the large number of "doubly non-permanent resident (DNR) students" is caused by the policy blunder of the Government, but some cases of cross-boundary students are actually quite sad. Some parents of these students used to live in Tung Chung, they got married and have children. However, owing to the high property prices in Hong Kong, they have to move to Shenzhen. Some people moved to Shenzhen because their wives are waiting for One-way permit and certainly, there are Hong Kong families who live in Shenzhen or the Pearl River Delta region because they work there. Therefore, as pointed out by Mr Michael TIEN, these people have different plans. Some hope that their children can study in international schools or elite subsidized schools in Hong Kong, while others plan to live in Hong Kong after they have been allocated public rental housing units and then their children can attend school in a different district.

The problem is, when the Legislative Council discusses such issues, there are often criticisms about the Education Bureau's failure to make correct projections of where the cross-boundary students will live and receive their education in future. There are even criticisms that the Education Bureau has apparently not conducted any ongoing study and that the Government has turned a blind eye to the problem. Of course, some organizations such as the International Social Service have told the media that the number of cross-boundary students may reach the range of 65 000 to 80 000 in 2017 or 2018. Is the estimate correct? As the information is provided by an incumbent service provider, I hope the Education Bureau can respond to the estimate.

My amendment to the motion consists of two main points. First, the transport expenses of cross-boundary students are very high. Of course, we do not know the financial status of some DNR families, but certainly there are families with a singly non-permanent resident parent waiting for One-way permit, and some of these families are on the waiting list for public rental housing, hence they have to pay high transport expenses for sending their children to schools in Hong Kong. Second, I have listened to the views of some social services providers on this matter. I believe where there is a demand, there is a supply of services. With a rapidly increasing number of cross-boundary students, their demand for services will also soar. Has the Government responded to their needs? Development of learning abilities is certainly important for cross-boundary students, but their psychological well-being, the development of social skills and their adjustment to the social culture of Hong Kong are even more important.

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In relation to transport expenses, the Hong Kong Federation of Youth Groups conducted a survey on 710 cross-boundary students in Primary Four to Secondary Three and found that 85% of them would like to continue their studies in Hong Kong; 70% hope to work in Hong Kong in future and 68% spend two to five hours shuttling between two places every day. The range of two to five hours seems a bit wide, but the majority of these students spend two to 3.5 hours and 10% of the students spend four hours or more on travelling. The survey also found that 47% of the students did not want to study in schools for Hong Kong-citizen students in Shenzhen. This is exactly the problem raised by Mr TIEN, what are the reasons for their reluctance? Is it because the standards of the schools are worrying or are there other reasons? These are the questions the Education Bureau has to examine. I think the relevant data are important. If the number of cross-boundary students in future is known, more specific policies can be formulated and decision can be made on whether there is a need for establishing Hong Kong-style schools in Shenzhen.

The problems of long travelling time and high transport expenses faced by cross-boundary students are understandable. At present, there are 5 200 student service vehicles registered with the Transport Department of Hong Kong, including 3 468 non-franchised public buses with student service endorsement, 68 school private buses and 1 722 school private light buses. Of course, I cannot be sure how many of these vehicles will remain in operation after the implementation of the Government's policy on phasing out of certain diesel commercial vehicles. Given that vehicles have to obtain licences and permits issued by both places in order to provide cross-boundary services, such services are monopolized by a few service providers, and as long journeys are involved, transport fares for cross-boundary students are very high.

We have learnt from the press that nanny buses charge RMB 1,050 to 1,250 yuan per month. If a student boards a bus at Futian, the fares can be as high as RMB 1,650 yuan. Nowadays, the school nets of cross-boundary students may have extended to cover not only the North District and Tai Po, but also Tung Chung and Wong Tai Sin. As such, the first question is how these bus services are to be provided. Even if services are available, their charges will surely be higher than those stated above. Furthermore, the buses may not drop students off at the places where they live in the Mainland. In some cases, students have to travel to a pick-up point to board the bus. All these issues have to be considered by the families concerned. As transport expenses are a heavy burden for these families, I hope that the SAR Government can think of ways to 9300 LEGISLATIVE COUNCIL ─ 26 March 2014 resolve the problem, particularly for the grass-roots and sandwiched class families which have no other choice.

Besides, some school bus companies in Shenzhen will provide cross-boundary transport services as "a sideline business". Simply put, these buses will first make various trips to send Shenzhen students to local schools and then cross the boundary, the travel time for cross-boundary students is thus further increased. Does such a practice comply with the relevant policies or service pledge of the bus companies? I hope the Education Bureau and the Transport Department can monitor the situation more closely. Certainly, my prime concern is still the burden of transport expenses.

Moreover, there is the problem of provision of social services. Some groups have told me that cross-boundary students often cannot join extra-curricular activities, after-school tuition classes or social activities because their parents prefer them to return home earlier. That is understandable, but it seems that there is a lack of resources or support to encourage social service providers to assist these cross-boundary students in this respect. These students can return home early after school during the week, but how can extra-curricular activities or non-academic services for whole-person development of a similar standard be provided to these students? At present, certain groups are using their own resources to provide these services and some of them may have received a small amount of subsidies from the Home Affairs Department or the Education Bureau, but there is no standard practice to handle the matter.

Furthermore, some family service centres or youth service providers in the North District have pointed out that parents of cross-boundary students have sought help from them in handling the emotional problems of their children, but they do not know in what status these children should receive the services. These children are certainly Hong Kong residents, but they also live in Shenzhen. How should the question be handled? Besides, if the mothers of these children have emotional problems arising from exhaustion from frequent cross-boundary trips and keen competition in getting school places, which institutions should handle their problems as they are not Hong Kong residents?

The concept of "where there is a need, there is a supply of services" has been upheld in the social services sector all along. However, while cross-boundary students and their families have increasing need for services, it seems that under the existing resources of the Social Welfare Department and the LEGISLATIVE COUNCIL ─ 26 March 2014 9301

Education Bureau, they have neither specific resources nor services to provide effective assistance. Therefore, I hope that the Education Bureau and the Social Welfare Department can conduct a special high-level working meeting on this subject with social service providers which are concerned about cross-boundary students and their families, including service providers in the North District, so that arrangements on resource allocation, work approaches and division of work can be worked out.

Finally, I urge the SAR Government to conduct a longitudinal study to find out the positive and negative impacts of prolonged cross-boundary living and learning on the development and growth of cross-boundary students as such cases are expected to be on the increase. I hope the Government will allocate resources in conducting such an academic study, so as to formulate more effective strategies to cope with the needs of the new population which is expected to reach 200 000 in future.

Thank you.

MR GARY FAN (in Cantonese): President, "doubly non-permanent resident (DNR) pregnant women" gatecrashing into Hong Kong for delivery in recent years has produced far-reaching impacts on Hong Kong. The influx of a large number of DNR cross-boundary students has led to a shortage of school places in the New Territories. I have received many requests for help from schools. They pointed out that the increase in the number of cross-boundary students has resulted in keen competition for school places and a tight supply of nanny bus services. The cross-boundary and cross-district students not only have to take long journeys to and from school, they also have to sacrifice their time for play and rest. The situation is most undesirable to the development of both local and cross-boundary students.

When the consultation document on population policy was released, Mrs Carrie LAM, the Chief Secretary for Administration, said that up till 2013, a total of 200 000 DNR babies were born in Hong Kong. However, she also said that as the growth in demand for education was only of a short-term nature, flexible measures would suffice to meet the demand. When the Standing Committee of the National People's Congress (NPC) and Chinese People's Political Consultative Conference (CPPCC) met this month, Mr ZHANG 9302 LEGISLATIVE COUNCIL ─ 26 March 2014

Dejiang, Chairman of the NPC also described the problems created by DNRs as "a single hair from nine bulls". He said that tourists from the Mainland have brought "nine bulls" of positive effects to promote the development of Hong Kong, while problems such as DNR pregnant women giving birth in Hong Kong have created only "a single hair"; hence, there is no reason to reject the "nine bulls" because of "a single hair". Obviously, problems created by DNRs have been treated lightly all along.

President, the Neo Democrats considers that problems created by the Government's failure in handling the issue of DNR cross-boundary students are definitely not just "a single hair", and these problems can affect the environment for the development of the next generation of Hong Kong. The Government has all along claimed that it does not know how many of the 200 000 DNR children would study in Hong Kong, and thus it has not made more specific planning on the allocation of school places in Hong Kong. However, after the Shenzhen Municipal Government has announced that schools in Shenzhen will not accept DNR children, it is now justified for the SAR Government to formulate strategies to cater for the situation of all DNR children coming to Hong Kong to attend school. That will involve assessing whether there will be a sufficient supply of kindergarten places as well as primary and secondary school places in Hong Kong to meet the needs.

President, in October last year, I proposed the motion on "Putting Hong Kong people first" on behalf of the Neo Democrats which urged the Government to adhere to the need to "put Hong Kong people first" in formulating policies. We proposed that the Education Bureau should require kindergartens to admit local students residing in their districts first, and then allocate the projected surplus Primary One places in various school nets in Hong Kong to a "37th school net" for DNR cross-boundary students to choose, so as to avoid the need for local Primary One students to attend school in other districts. At that time, some Members from the pro-establishment camp criticized me for not paying attention to the facts, and they considered that my motion would aggravate China-Hong Kong conflicts. As Members from the pro-establishment camp rose in opposition to my motion, it could not be passed in the end. As a result, the proposals of ensuring local kindergarten students' opportunities for admission to schools in their home districts and establishing a "37th school net" have not been attached with due importance by the Government.

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A month or so after the motion was negatived, the problem of fighting for kindergarten places in the North District arose again and such problem emerged later in Yuen Long, with hundreds of parents queuing up overnight outside kindergartens in the cold winter for application forms. According to the Report on Primary One Admission 2013 released by the Education Bureau early this year, the results of admission to schools near the various land immigration control points indicated a substantial drop in the percentage of students allocated to schools of their first three choices. The respective percentages in Tuen Mun East and Yuen Long East are 68% and 55% which represented a drop of more than 10% in each of the districts. The percentage in Tai Po, which is a popular choice of cross-boundary students, has dropped by 8% to 69%. One fourth of the students in Sheung Shui have not been allocated to schools of their first 10 choices and have to attend schools of other school nets in other districts. The situation is even worse than that of Kowloon Tong which is a district with many elite schools. These facts have shown that Mr Eddie NG, Secretary for Education, has failed to perform his duties. He lacks foresight and is incompetent in dealing with the problem of shortage of school places.

President, earlier, the Education Bureau announced that according to its estimate, nearly 4 000 cross-boundary students would be coming to Hong Kong to study in the 2014-2015 school year and it proposed to designate a school net exclusively for them. However, it is surprising to note that two third of the 3 000 school places in the designated school net will come from Tuen Mun and Yuen Long which already suffer from a tight supply of school places. It is possible that four out of 10 Primary One students in these two school nets will be cross-boundary students in the new school year. We consider that such a measure cannot resolve the problem of tight supply of Primary One places at all. The Government's pledge of ensuring one kindergarten place for every student and an adequate supply of application forms are just stopgap measures. Furthermore, the Government has shirked the responsibilities onto schools and parents without considering the pressure of competing for school places faced by parents and students.

President, the Neo Democrats considers that a multi-pronged approach should be adopted to effectively address the various problems arising from cross-boundary students. It is necessary for the Government to require kindergartens to admit local students residing in their districts first under the principle of "putting Hong Kong people first". In addition, the projected surplus Primary One places in various school nets in Hong Kong should be allocated to a 9304 LEGISLATIVE COUNCIL ─ 26 March 2014

"37th school net" exclusively for DNR students, so that the burden of taking in the influx of cross-boundary students can be shared out by schools across the territory. Besides, the Government should carefully examine the proposal of establishing Hong Kong-style schools in Shenzhen with the Mainland authorities. According to the results of a survey conducted by the Hong Kong Federation of Youth Groups published in February this year, nearly 47% of the cross-boundary students interviewed indicated that they did not want to study in classes for Hong Kong-citizen children offered by schools in Shenzhen. The students and parents interviewed expressed concern about the varied qualifications of Mainland teachers and other problems, such as students not being able to attend extra-curricular activities in Hong Kong.

The reasons why most DNR parents take the trouble of letting their children travel long distance across the boundary to study in Hong Kong are simple enough. They consider the education system in Hong Kong better than that in the Mainland. Besides, familiarizing their children with the teaching mode in Hong Kong would be beneficial for them to pursue university studies in Hong Kong or overseas in the future. Therefore, if it is planned to establish Hong Kong-style government schools and subsidized schools in Shenzhen, it is necessary to recruit Hong Kong teachers to ensure teaching quality. As teachers of government schools and subsidized schools in Hong Kong are on public payroll, they cannot teach outside Hong Kong according to the current rules. Moreover, if benefits such as transport and living allowances are provided to teachers teaching in the Mainland, problems such as receiving benefits outside Hong Kong would arise. Therefore, the Government has to sort out the relevant legal issues and policy directives so as to resolve the problems adequately.

President, yesterday was the second anniversary on which LEUNG Chun-ying was elected Chief Executive and he said complacently that he had made good progress in implementing his political platform. But apparently, instead of tackling the DNR problem at its roots over the last two years, LEUNG Chun-ying has only repeatedly said that he introduced the zero quota measure for DNR pregnant women to deal with the problems. However, this administrative measure to restrict the entry of DNR pregnant women has obviously not resolved the DNR problem at its root. In the Government's written reply to my question in February this year, it was clearly showed that the situation has not improved since the implementation of the measure to restrict the number of non-local pregnant women to deliver in Hong Kong. According to the figures published LEGISLATIVE COUNCIL ─ 26 March 2014 9305 by the Hospital Authority early this month, in the first two months of 2014, 51 DNR pregnant women sought emergency hospital admissions through Accident and Emergency Departments shortly before labour, and in the whole year of 2013, the total number of DNR pregnant women who managed to gatecrashing into Hong Kong for delivery was as high as 248. President, the current situation is that such an incident is happening every 36 hours. In other words, a DNR pregnant woman is delivering in Hong Kong every 1.5 days and that shows that the Government's policy has not resolved the problem at its root.

Therefore, the Neo Democrats urges the Government once again to amend Article 24 of the Basic Law to abolish the provision that DNR babies shall have the right of abode in Hong Kong, so that problems arising from the continual rise in the number of cross-boundary students can be effectively resolved.

President, I so submit.

DR HELENA WONG (in Cantonese): In view that the influx of cross-boundary students have taken up many school places in the North District and local parents have to scramble for school places, the Education Bureau has designated a school net exclusively for cross-boundary students this year. Parents of cross-boundary students have to choose to enrol their children in schools under this school net, which covers eight school nets in four districts, namely, Tuen Mun, Yuen Long, North District and Tai Po. The Education Bureau requires all schools in these districts to provide two places in each of their classes, totalling over 2 800 places. Apart from these four districts, six primary schools in Wong Tai Sin, Ma On Shan, and Tung Chung have volunteered to join this school net, providing 350 places in total. A total of 3 177 places in the whole school net are made available for cross-boundary students to apply. But this arrangement does not seem to be able to solve the problems involving local students' admission to school in the vicinity of their residence, cross-boundary students' increasing demand for school places, as well as the many challenges faced by schools in the years to come.

The amendment I propose today focuses on two points based on the original motion. I thank Mr TAM Yiu-chung for proposing this motion to arouse people's attention to this problem.

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There are two main points in my amendment. First, whether the small-class teaching policy in primary schools will gradually revert back to big-class teaching; and second, I consider there is need to increase school places in the North District and I suggest reinstating village schools as an interim measure.

Let me first discuss the problem of "small classes turning to big classes". The Education Bureau asked schools to take in more students and the 2 800 odd places have been squeezed out. How can such school places be squeezed out? The approach is to put two more students in each class. We have strived hard for the implementation of the small-class teaching in primary schools for many years and this is the fifth year since the policy has been launched. We also hope that this policy will gradually be introduced to secondary schools. But now with the ever increasing number of cross-boundary students, the Education Bureau requires schools to take in two more students in each class; will this deal a blow to the small-class teaching policy that has been implemented for a few years?

After two students are added to a class, teachers have to take care of two more students, which will inevitably have some impact. Worse still, we are most worried that the Education Bureau will not stop after requiring the class size to be expanded from 25 to 27. A few years later, when the number of students reaches the peak, we believe that the Education Bureau will, since it has once required schools to expand the class size, require schools to add a few more students to a class again. The simplest way is to ask students to sit closer together, so they can accommodate more students in a class. We are afraid that the class size will increase from 25 to 27, then from 27 to 30, and then from 30 to 35. The cramming of students in a classroom seems to be the easiest way to solve the problem of school place shortage, but it surely violates the present small-class teaching principle. I hope the Secretary will look squarely into this problem and avoid hastily adding more school places in this way or whenever there are insufficient school places. We must persist in implementing small-class teaching and avoid reversing this policy.

Besides, many school principals complain about the dire situation. At present, some schools have to admit many cross-boundary students. For example, as some schools in Tuen Mun have surplus school places, they have to admit many cross-boundary students under the school net designated exclusively for cross-boundary students. After the fall of the North District, parents in Tuen Mun are very worried that their district will be the next to fall. Schools in Tuen LEGISLATIVE COUNCIL ─ 26 March 2014 9307

Mun and Yuen Long have to increase 70 Primary One classes in the next school year. Three primary schools in Yuen Long will have to almost double their Primary One classes from five to nine. This will disrupt the balance of the class structure of the school. For example, the original structure was to have four Primary One, four Primary Two and four Primary Three classes, but suddenly, in the next school year, it has to open nine Primary One classes but the number of Primary Two classes will remain to be four. We call this "big belly syndrome". The balance is lost, and that will create many problems with regard to the operation of the school.

Of course, in dealing with the problem, surplus classrooms may still be available in the first year, and the school can increase the number of Primary One classes from five to nine. But next year, when no more surplus classrooms will be available, this measure will not work anymore. How are we going to handle the problem? There are also other problems, such as should additional teachers be employed? After the peak period, do we have to dismiss the teachers? This is a tricky issue. We do not want to have teachers at our disposal, but since this problem has already emerged, schools have to address this complicated and tricky problem.

Regarding the school net exclusively for cross-boundary students, it covers four districts and eight school nets over the entire New Territories and even including the Outlying Islands. Under this allocation mechanism, the Education Bureau does not allow the allocation of school places in accordance with the residence of cross-boundary students or the immigration control point at which they enter Hong Kong. Under the random allocation mechanism, we are also worried that some young cross-boundary students will be allocated to a school far away from the immigration control point at which they cross the border. It is possible that children crossing the boundary at Lo Wu may be allocated to schools in the New Territories West, or children crossing the boundary at Lok Ma allocated to schools in the New Territories East. It is also possible that some children may be allocated to schools in even more remote districts like Wong Tai Sin, Ma On Shan and Tung Chung which have volunteered to admit cross-boundary students. That will greatly increase the travelling time of students to and from school and they will be fatigued by such a long journey.

I, together with some friends of the Democratic Party, once visited the Lo Wu and Lok Ma Chau Control Points to observe how cross-boundary students go to school and return home after school. These children were very young, some 9308 LEGISLATIVE COUNCIL ─ 26 March 2014 of them even had runny nose and were crying when they crossed the boundary. If these children are allocated school places at random without giving due regard to where they cross the boundary, I wonder if this constitutes child abuse. Therefore, I wish to explain the reason why the Democratic Party will vote against Mr Gary FAN's amendment. We oppose it mainly because Mr Gary FAN proposes to open all the 30-odd school nets over the territory and grouping all schools that have surplus places into a school net exclusively for cross-boundary students, which will create an even worse situation as children may be allocated places in a remote school. We do not bear to see this happen and thus we cannot support his amendment even though we agree to some parts of it.

Concerning the reinstatement of village schools, actually the best way to solve the school place shortage problem is to increase the number of school places at places having the greatest demand. In our view, even if there is a designated school net for cross-boundary students, the acute shortage of school places in the North District cannot be completely alleviated. It has been reported that after the announcement of the designated school net, some DNR parents living in the Mainland have already asked their relatives in Hong Kong to be the guardians of their children, so that they can have a residential address in Sheung Shui and have a better chance of securing a Primary One place in schools in the North District.

As the Democratic Party has visited the districts to understand the situation, we suggest that the Government should seriously consider reinstating some village schools that have been deserted and operating them in the mode of branch campuses of government primary schools. As an interim measure, this can increase the number of school places and alleviate the acute shortfall of school places in the North District. I hope that Members will support his amendment.

My amendment mainly focuses on the aforementioned points. With these remarks, I ask Members to support my amendment.

UNDER SECRETARY FOR EDUCATION (in Cantonese): President, first of all, I would like to thank Mr TAM Yiu-chung for moving the motion today, and six other Members for proposing amendments to the original motion.

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As pointed out by Mr TAM Yiu-chung just now, both cross-boundary students and local students are Hong Kong residents and they are entitled to receiving education in Hong Kong. Hence, there is no question of "putting Hong Kong people first" as suggested by Mr FAN. The number of cross-boundary students has been rising substantially over the past few years. However, with the Government's strictly implementation of the "zero" delivery quota for "doubly non-permanent resident pregnant women" starting from 2013, it is expected that the number of cross-boundary students will gradually decrease a few years later. Therefore, as many Members have just mentioned, the influx of cross-boundary students is just transitional by nature. We should handle the problem with flexible strategies.

We are greatly concerned about the different problems faced by and brought about by cross-boundary students, which include the impact on local education, boundary-crossing arrangements, transportation, and so on. Admission arrangement has been one of the prime concerns. There are a number of factors affecting whether Hong Kong-citizen students living in Shenzhen will come to Hong Kong for education, such as the distribution of their residence in Shenzhen and the preference of their parents. Therefore, it is difficult to accurately foresee the number of cross-boundary students, making the planning of local school place supply a more challenging task. Notwithstanding that, we could still manage to provide sufficient school places for cross-boundary students in the past few years.

The recent increase of cross-boundary students did cause a tight supply of Primary One school places in the North District. The Education Bureau has thus announced that from the 2014-2015 school year onwards, applicants residing in the Mainland are provided with an additional "Choice of Schools List for Central Allocation" for selection. This is by nature an exclusive school net for cross-boundary students. Through diversion, it is hoped that the problem of tight supply of Primary One school places in the North District can be alleviated, and schools in the North District can still implement small-class teaching this year. The revised arrangement meets the needs of local students while ensuring that applicants residing in the Mainland are allocated Primary One school places in public primary schools.

Regarding Secondary One school places, the provision of public secondary school places is planned on a territory-wide basis. It has been a long established 9310 LEGISLATIVE COUNCIL ─ 26 March 2014 practice of making netting arrangements when there is a shortage of school places in any particular district. As for kindergartens, the Education Bureau will ask kindergarten operators to optimize campus space to provide more classrooms or use existing vacant classrooms. It will also encourage school sponsoring bodies to expand existing kindergartens or establish new kindergartens in districts with demand for such places, in order to increase the number of school places required.

Both the Hong Kong and Shenzhen authorities are concerned about the demand for education service by Hong Kong-citizen children living in Shenzhen, and both parties have been working together in handling the problem. Since 2008, the Education Bureau and Shenzhen Municipal Education Bureau have jointly implemented the scheme of setting up special classes for Hong Kong children in Shenzhen, so as to take forward the "dual-track system". Under this system, eligible Primary Six students can join the Hong Kong Secondary School Places Allocation System and pursue their studies in secondary schools in Hong Kong, apart from staying in the Mainland for further studies. In the 2013 Hong Kong-Shenzhen Co-operation Meeting, the "co-operation agreement on operating classes for Hong Kong students in Shenzhen schools" was signed between the two places, thereby opening the scope for admission to the scheme of classes for Hong Kong children to "doubly non-permanent resident children".

Apart from the abovementioned measures in respect of education, the Government also provides cross-boundary students with counselling, consultation, referral services as well as activities encouraging social responsibilities and potential development through the Integrated Family Service Centres, Integrated Children and Youth Services Centres and social welfare organizations.

The Government is also very concerned about the education of cross-boundary students, and is willing to listen to Members' views so as to improve our work. I will further make a consolidated response after listening to Members' speeches. President, I so submit.

MISS ALICE MAK (in Cantonese): President, the number of cross-boundary students has been on the increase in recent years, from 3 800 odd in 2004-2005 to over 16 000 in 2012-2013, at a staggering increase rate of 330%. At present, there are over 30 000 Hong Kong-citizen children living in Shenzhen and we LEGISLATIVE COUNCIL ─ 26 March 2014 9311 cannot rule out that among them, apart from the some 16 000 children who have already come to attend school in Hong Kong, the remaining 14 000-odd children may come to study in Hong Kong.

Last year, the fact that kindergarten places in the North District were unable to meet the demand of local and cross-boundary children had attracted wide concern in society. Many a time, various sectors in society are more concerned about the impact of cross-boundary students on the Northeast New Territories and Tai Po, while little is mentioned about their impact on Yuen Long and Tuen Mun. Actually, in January this year, parents in the areas of Tuen Mun and Yuen Long told us that 1 000 persons were scrambling for one application form of a kindergarten. We should not forget that the Shenzhen Bay Port and the Lok Ma Chau Spur Line Control Point are both located in the New Territories West. They are connected to major control points such as Shenzhen and Shekou and many cross-boundary children come to Hong Kong through these two points.

Let us look at some statistics. In 2011-2012, the number of cross-boundary kindergarten students crossing the border at Shenzhen Bay Port and Lok Ma Chau Spur Line Control Point was 1 567 and 2 090 respectively, while 1 575 crossed the border at Lo Wu Control Point. In respect of cross-boundary primary students, the number of students crossing the border at Shenzhen Bay Port, Lok Ma Chau Spur Line Control Point and Lo Wu Control Point to attend school were 466, 1 923 and 1 962 respectively. All these figures reflect that the number of cross-boundary children going to schools in the New Territories West is similar to those going to schools in the Northeast New Territories.

According to some Legislative Council papers, the number of cross-boundary students going to kindergartens in Yuen Long increased from 56 to 1 647 between 2008-2009 and 2012-2013, an annual growth of over 100%. In 2012-2013 alone, the number of cross-boundary kindergarten students increased over 54%.

In the Tuen Mun District, the number of cross-boundary kindergarten students between 2008-2009 and 2012-2013 also jumped from 94 to 1 265; and the number of cross-boundary kindergarten students between 2008-2009 and 2010-2011 also recorded an annual growth of over 100%.

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According to kindergartens in Yuen Long and Tuen Mun, in 2013, the enrolment applications they received had increased 60% over 2012. From the data released by the Education Bureau earlier, there were a total of 3 400 cross-boundary kindergarten (K1) students in Hong Kong and over half of them went to schools in Yuen Long and Tuen Mun.

Therefore, when we discuss about designating a school net exclusively for cross-boundary students to alleviate the shortfall of school places in the North District, we can see that among the 3 000 school places provided by other school nets, most of them come from Tuen Mun, that is 1 200; and 1 150 places are from Yuen Long. We can envisage that a growing number of children will cross the border at Shenzhen Bay Port and Lok Ma Chau Spur Line Control Point to go to school in Yuen Long and Tuen Mun. I bring up these figures to draw the attention of the Government and the public to the fact that the problem of cross-boundary school children not only affects the residents in the Northeast New Territories but also those in the New Territories West. The setting up of a school net exclusively for cross-boundary students may not be able to resolve the problem concerning the cross-boundary students currently faced by the New Territories West and Northeast New Territories.

In the face of the prevailing problem, it seems that the Government still fails to grasp the correct figures to project the growth of the number of cross-boundary students in future, as well as what we need to do to cope with the situation. In recent years, we are only concerned about how many people queue up to get the application forms for kindergarten places and how many people strive for a chance to get an interview in the kindergartens. We should not forget, however, these kindergarten students will soon enter the primary school and then secondary school. How can the education system and school places in Hong Kong cope with the situation and satisfy the needs of these cross-boundary students at various stages of their education as they grow up?

I wish to point out that we welcome the proposal in the original motion concerning the establishment of Hong Kong-style schools for Hong Kong-citizen children in the Mainland, so that those children can choose to live and study in the Mainland. But this concept was put forward over a decade ago. I have met a retired secondary school headmaster who especially went to open a school in Guangzhou for Hong Kong-citizen children but his efforts failed. The reason was that when Mainland residents chose the school to enrol their children, one of LEGISLATIVE COUNCIL ─ 26 March 2014 9313 their important considerations was whether the teachers of the school for Hong Kong-citizen children were from Hong Kong.

If the Government wishes to encourage people to open schools for Hong Kong-citizen children in the Mainland, so that cross-boundary students can choose to attend school in the Mainland without having to make long journeys to attend school in Hong Kong, it has to make corresponding arrangements and negotiate with the local authorities, so as to give confidence to Mainland parents in respect of teacher quality, education system and curriculum design. As such, they would not arrange their children to make long journeys to attend school in Hong Kong. In fact, we are not so stone-hearted as not feel pity for those small children who have to get up early in the morning, carry their school bags to go through the control points every day. Therefore, finding a feasible solution to the problem concerning the cross-boundary students will not only help to resolve an important social issue, but also a serious problem affecting the development of these children. I hope that the Government will formulate a policy that will adopt various corresponding measures in order to solve the problem.

MR RONNY TONG (in Cantonese): President, the problem of cross-boundary students has highlighted the hard fact that the SAR Government lacks vision, planning and capability. More importantly, it has not formulated a set of practicable population policy. Or strictly speaking, not only has the Government failed to formulate practicable population policy, it has even adopted a wrong population policy by misjudging the situation

President, did the problem of cross-boundary students come out of thin air? Absolutely not. Abundant data is available for the SAR Government to project the existence and development of this problem. President, according to the information from the Census and Statistics Department, the growth rate of Hong Kong-born "doubly non-permanent resident (DNR) children" stood at 100% from 2000 to 2002 and in 2004. The number of births of DNR children has also remained at more than 10 000 every two years even after the Government imposed a charge on non-local pregnant women giving birth in Hong Kong in 2005. Thus, to the SAR Government, the alarm has in fact sounded long ago.

President, cross-boundary students' demand for school places from kindergarten to secondary levels has been more than 1 000 per year since 2006-2007. Such an increase should fully justify the SAR Government's 9314 LEGISLATIVE COUNCIL ─ 26 March 2014 attention to the problem. However, President, it so happened that the report on population policy which the last-term Government was about to release also proposed to import our Mainland compatriots due to labour shortage in Hong Kong. This means that the view towards population policy at that time indeed runs counter to the difficulties that we are experiencing at the moment.

What more paradoxical is that, when Hong Kong recorded a low birth rate with a small number of children in mid-2000, kindergartens and primary schools were the first victims. The Government closed down schools on the one hand, and required kindergartens and primary schools in the North District and Yuen Long to regularly organize education expos in the Mainland on the other to attract children of Shenzhen residents to cross the boundary and study in Hong Kong. President, it is so unacceptable and sarcastic for us to say that there are currently too many cross-boundary students.

President, the above problems highlighted the fact that the SAR Government has never made any comprehensive projection. Worse still, it has adopted an evasive attitude, thinking that it would be best to drive these people to the northern part of the border and leave them unattended.

President, I notice that a lot of suggestions have been made by a number of our Honourable colleagues. I dare not describe their suggestions as specious, but it would be difficult for them to receive immediate endorsement. President, one of the suggestions is to solve the problem by building kindergartens and primary schools in Shenzhen. President, I find these views too straight-forward because money and convenience are not the concern of Shenzhen parents who intend to send their children to study in Hong Kong. Rather, they expect their children to receive Hong Kong-style education here. Therefore, instead of relocating our schools to Shenzhen, we might as well copy the entire education system to Shenzhen.

Of course, a number of our Honourable colleagues have mentioned the legal problems that may arise. For example, teachers of government schools may not be able to teach in Shenzhen, whereas private school teachers must enter into contracts that are enforceable under the laws of Hong Kong, which will in turn give rise to problems relating to taxation and Mandatory Provident Fund. The situation will thus become very complicated. As I have said earlier, the most important of all is that it fails to address the basic needs of Shenzhen parents to send their children to study in Hong Kong.

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President, I also notice that Mr Gary FAN proposed to amend the Basic Law by removing Article 24. President, first of all, it cannot address the current problem of the provision of ancillary support to cross-boundary students even if Article 24 of the Basic Law is removed. But more importantly, looking around the world, very few places would refuse to grant the right of abode to babies even though their parents do not have the right of abode. Many countries have not adopted such an approach.

President, what is the reason for that? Because such an approach is extremely discriminatory. Why only certain babies born in Hong Kong would be given the right of abode but not others? Even if it is prescribed in the law that the right of abode will not be granted, but does it comply with the basic human rights or the basic provisions against discrimination? President, this is also a matter of principle that should not be overlooked, and it shows whether or not Hong Kong is a sympathetic place that respects basic human rights. Therefore, I think the amendment to Article 24 of the Basic Law is neither a solution nor feasible approach.

President, this is a matter of mentality after all. We should not regard these people as burden. President, so long as the children are born in Hong Kong, they are Hong Kong residents from the legal and constitutional perspectives, and are therefore entitled to receive education and welfare benefits as well as enjoy transport facilities. Hong Kong is a well-off society, and these people are also Chinese and our compatriots. Why can't we provide the appropriate support and face up to this challenge? What is more, the technical issue under discussion concerning the imposition of restrictions on non-local pregnant women giving birth in Hong Kong may not appear again, we should therefore pay our best efforts to help these children, who are victims of some historical problems, to receive education in Hong Kong by all means.

Thank you, President.

MR LEUNG CHE-CHEUNG (in Cantonese): President, first of all, thanks to Mr TAM Yiu-chung for proposing the motion on "Properly dealing with problems arising from cross-boundary students".

All along, this problem has been plaguing the districts in the neighbourhood of Shenzhen, including the North District, Yuen Long and Tuen 9316 LEGISLATIVE COUNCIL ─ 26 March 2014

Mun. From 2001 to mid-2013, a total of 200 000 "doubly non-permanent resident (DNR) babies" and 90 000 "singly non-permanent resident babies" were born in Hong Kong. Although the Chief Executive, Mr LEUNG Chun-ying, implemented the policy of "zero" delivery quota for DNR pregnant women in 2013, thereby reducing the number of Mainland women giving birth in Hong Kong from 30 000 to 3 000, some 300 000 children have become Hong Kong permanent residents over the past decade or so. This is an irreversible fact from a legal basis perspective. When these children come to Hong Kong to receive free education as part of their welfare entitlement as a citizen, the Government must adopt policies and measures in support accordingly.

Over the past few years, the education sector as well as parents in the North District have been lamenting about the problem caused by cross-boundary students. How serious is the problem actually? The answer can be clearly seen from the statistics. In 2008-2009, 5 700 cross-boundary kindergarten (KG), primary and secondary students attended schools in the North District, and the number subsequently rose to 10 000 in 2012-2013. When schools in the territory except the North District are facing closure or reduction of class size, schools in the North District must increase the number as well as the size of classes in order to accommodate these children. Moreover, teachers are facing additional pressures in taking care of the students. Local students not allocated with a school place in the North District are forced to attend schools in other districts, while school bus operators flock to provide service for cross-boundary students. Given the immense difficulty faced by local students in securing a school place in the district, aggrieved parents are complaining bitterly.

Yuen Long is the second most hard-hit district in terms of the problems caused by cross-boundary students. Over the past few years, problems arising from cross-boundary students have been worsening in the Yuen Long District. Given its proximity to the Shenzhen Bay and Lok Ma Chau border control points, the Yuen Long District is an excellent choice for cross-boundary students geographically. To ease the problems caused by cross-boundary students in the North District, the Government has organized seminars in the Mainland and made available a school net exclusively for cross-boundary students, so as to divert them to other districts. As a result, the number of cross-boundary students attending schools in the Yuen Long District has been increasing, rather than declining.

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President, in recent years, the population in Yuen Long has increased rapidly with the completion of several new public and private residential projects in the district. As I have pointed out on a number of occasions, the carrying capacities of both West Rail and Light Rail have become saturated, while the Yuen Long Main Road is so seriously congested with both vehicular and pedestrian traffic that the situation there is even worse than Nathan Road. Coupled with the problem of cross-boundary students, the Yuen Long District may fare even worse than the North District if there is no proper planning. I think the public as well as the Government can still recall vividly that in recent months, there were cases where parents in the Yuen Long District had started queuing up overnight at KGs for application forms. Recently, I learnt from some parents that they had submitted applications to five KGs. But when the admission results were announced, their children were not even admitted to one single KG. As a result, these parents of local students were at a loss as to what they could do.

Regarding the problem of cross-boundary students, Chairman of the Yuen Long Kindergarten Heads Association indicated that while the Education Bureau had asked them to make available an unlimited supply of application forms online, the schools indeed lacked adequate manpower and resources to cope with the situation. Interview arrangements aside, the processing of application forms alone would involve a substantial amount of workload. In respect of primary schools, the Education Bureau has also made available a school net exclusively for cross-boundary students under the Primary One Admission (POA) System in 2014, including the Yuen Long East and Tin Shui Wai school nets, and a total of 1 150 primary places for cross-boundary students are involved. As a result of the provision of POA school net exclusively for cross-boundary students, some schools without experience in teaching cross-boundary students may have admitted quite a significant number of such students next year. Each school will have two to four classes of cross-boundary students. As pointed out by the Yuen Long District Primary School Heads Association, there are many similarities between the teaching of cross-boundary students and ethnic minority students given their poorer performance in learning, language and adaption. However, schools with ethnic minority students can receive additional resources from the Government. But with the establishment of a school net exclusively for cross-boundary students by the Government, the relevant schools must now admit a large number of cross-boundary students, yet no additional resources has been provided. This would create a lot of difficulties for the schools as they must allocate extra manpower, time and resources on cross-boundary students. 9318 LEGISLATIVE COUNCIL ─ 26 March 2014

Just to cite a few actual examples: schools have to make IDD calls when contacting the parents; schools must also ensure the safety of students while commuting on school buses; and special arrangements would have to be made for teachers to visit the home of cross-boundary students.

The Education Bureau often evades the problems currently faced by the schools by saying that the number of cross-boundary students will decrease in several years' time. But I would like to point out that notwithstanding the Chief Executive's initiative to stop DNR pregnant women from giving birth in Hong Kong in 2013, we must still brace the impact caused by cross-boundary students coming to Hong Kong in the next five to 10 years. We therefore hope that the Government can give due regard to the problems in Yuen Long District, as well as the difficulties encountered by the schools in the admission of cross-boundary students, and provide them with more support accordingly.

President, I so submit.

MR CHEUNG KWOK-CHE (in Cantonese): President, the problem of cross-boundary students is by nature different from the conflicts between the Mainland and Hong Kong arising from the Individual Visit Scheme. This is because the rights enjoyed by cross-boundary students are underpinned by the Court's judgment in the CHONG Fung-yuen case in 2001. The status of these children as a Hong Kong permanent resident (HKPR) is recognized by law. By virtue of their HKPR status, they clearly have the right of abode in Hong Kong and are free from entry/exit restrictions. We must solemnly uphold Hong Kong's values in respect of democracy, the rule of law, fairness and justice, and our discussion should be confined within this framework.

During an earlier meeting to examine the Budget proposals, I made some enquiries with the Education Bureau with regard to the situation of cross-boundary students. According to the statistics, the number of cross-boundary students using various land boundary control points over the past three school years has increased from 9 899 in 2011 to 16 356 in 2013, representing an increase of 65% in three years. For instance, in the North District, the ratio of cross-boundary students to kindergarten places has increased from 27.8% in 2011 to 37.1% in 2013. In respect of primary schools, the ratio has increased from 21.1% in 2011 to 25.7% in 2013. In general, there is a growth of about 10% per annum, and it is clear that the problem has been LEGISLATIVE COUNCIL ─ 26 March 2014 9319 worsening. As revealed by the Education Bureau in November last year, in 2013, about 3 900 cross-boundary students applied for Primary One discretionary places for the 2014 school year, yet only 900-odd Primary One places were made available under the new measure to designate a school net exclusively for cross-boundary students in 2013. In other words, there is a shortfall of 2 000 places. As we can see from media reports as well as parent discussion forums on the Internet, parents in the North District would start queuing up at kindergarten and primary schools for application forms days ago. For some schools with only 200-odd places available, more than 2 000 application forms had been distributed.

Many measures have been proposed by Honourable colleagues in both the original motion and the amendments, which are all worthy of further discussion. Yet, I would like to draw Members' attention to the way forward of these cross-boundary families. First of all, these families are facing the predicament of "having no return". As we know, 80% of the "doubly non-permanent resident (DNR) parents" strived to have their children born and raised in Hong Kong primarily because they hold that Hong Kong's education system is better than the Mainland's. However, with various problems in transportation, education, housing, child care, safety, costs and adaptation arising from issues such as insufficient school places, intensifying conflicts between the Mainland and Hong Kong and high living costs, some parents start having the idea of going back to live in the Mainland with their children.

But basically this is not feasible because according to the laws in China, citizens can only choose between the right of abode in Hong Kong and a "hukou" (that is, a household registration) under the Household Registration System. In other words, they cannot have dual citizenship. DNR children must first renounce their HKPR status before they can have a "hukou" in the Mainland. However, according to the Immigration Ordinance of Hong Kong, the principle pertaining to the right of abode is that the right, once acquired, is for life. In other words, there is no provision under the current laws of Hong Kong for a HKPR to give up his permanent resident status. One alternative is for these children to apply for settlement in the Mainland as Hong Kong and Macao compatriots. Although such applications are permitted under the laws and regulations in the Mainland and successful applicants can be registered as permanent residents, the provision is primarily intended for people from rural villages and small towns, as well as elders without care and support elsewhere. Hence, the cross-boundary families are stuck in Hong Kong and desperate for 9320 LEGISLATIVE COUNCIL ─ 26 March 2014 assistance. I call on the Government to make timely preparations and hold early discussions with the relevant Mainland authorities, so as to provide assistance to these families.

As a matter of fact, these children would basically get up at around 5 am, gather at the control points at 6 am, and then go to school by school buses after immigration clearance at 7 am. After school, they would return to Shenzhen at around 4 pm or 5 pm to attend tutorial classes and do their homework. At night, they would go to bed at around 9 pm for they must get up at 5 am the next morning. This is their life pattern day in day out. Safety concerns aside, such daily commuting between the two places is invariably time and energy-consuming, as well as tiring for these children. In addition, while cross-boundary students are Hong Kong people nominally, they spend most of their time in Hong Kong at schools, and they would go back to Shenzhen at once after school. Naturally, they would also stay in Shenzhen for rest during weekends and holidays. As such, they only have limited understanding and experience in Hong Kong, with little personal feeling and knowledge about our history, culture, lifestyle, social values, as well as the rights and responsibilities of being a Hong Kong citizen. Ultimately, what good will it do to the children themselves, their families or even Hong Kong? Therefore, apart from providing them with a way out, I also request the Government to expeditiously implement various measures to facilitate their settlement in Hong Kong.

Lastly, I would like to say a few words about the suggestion made by some Members to establish regulated hostels for cross-boundary students in the North District. As a social worker, I have great reservation about this proposal because primary school children have the greatest need for parental care. Also, time spent with parents during the early years of childhood is the golden era of a child's growth. At least, insofar as these families are concerned, it is a case of doing more harm than good, if not putting the cart before the horse, if the children are made to leave their parents and live a communal life prematurely … (The buzzer sounded)

PRESIDENT (in Cantonese): Mr CHEUNG, your speaking time is up.

MR CHEUNG KWOK-CHE (in Cantonese): Thank you, President.

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MR MA FUNG-KWOK (in Cantonese): President, the population policy adopted by the last-term Government was confusing and extensive, and has provided convenience for Mainland pregnant women to come to give birth in Hong Kong. However, no serious thoughts have been given to the provision of supporting facilities, the formulation of comprehensive plans or the need to dovetail with local needs. As a result, chaotic situations emerged. This has embittered not only parents looking for school places, but also those cross-boundary students who are of tender age.

Statistics showed that the number of cross-boundary students has been increasing and there were almost 20 000 cross-boundary students from Shenzhen last year. It is expected that the total number of Hong Kong-citizen students living in Shenzhen will exceed 50 000 by 2018, and how many of them will study in Hong Kong is still an unknown. But there is one thing that we can be sure of. If the authorities continue to plan only one step ahead without developing practicable solutions, problems arising from cross-boundary students, including demand for school places at kindergarten, primary and secondary levels as well as supporting transport facilities, will deteriorate and create greater chaos and social conflicts.

This year, the authorities has introduced an exclusive school net for cross-boundary students in respect of the Central Allocation exercise under the Primary One Admission System by incorporating surplus school places in districts far from the boundary, such as Wong Tai Sin, Ma On Shan and Tung Chung, into this exclusive school net. However, will this proposal receive the endorsement and support of the stakeholders? This seems unlikely. For parents of local students, the new proposal will affect their children's chance to enter schools of their choice. For parents of cross-boundary students, it is unlikely for them to allow their children to travel long distance from Shenzhen to schools day after day. For the cross-boundary students, it is a torture for them to make tiring journeys at such a tender age. Therefore, instead of asking the Education Bureau to grasp sufficient school places from all 18 districts throughout the territory disregarding the feasibility, the stakeholders are demanding a solution that can genuinely cater for the needs of different parties and address the problem at root.

I opine that a more feasible approach is, by adhering to the principle of "vicinity in admission", to establish Hong Kong-style schools and classes for Hong Kong children in the Mainland, thereby encouraging Hong Kong-citizen 9322 LEGISLATIVE COUNCIL ─ 26 March 2014 students to remain in the Mainland for education and alleviating the demand for local school places. Although a number of schools and classes for Hong Kong children have been established, the scale is not large with only limited school places. And, numerous operational problems have arisen.

Firstly, information from the Education Bureau shows that, in the 2014-2015 academic year, the total number of places provided by schools for Hong Kong children and classes for Hong Kong-citizen students is just 1 600, which falls far below the number of Hong Kong-citizen students in the Mainland. Secondly, although the Mainland teachers in these schools teach with Hong Kong textbooks, they are actually not familiar with the situation and culture of Hong Kong and will have particular difficulty in teaching certain subjects. In addition, some parents consider teachers' qualifications of these schools varied and would rather send their children to attend schooling in Hong Kong crossing the boundary. What is more, some schools for Hong Kong children charge high fees of up to $20,000 a year, which may not be affordable to some parents.

These problems require better co-ordination of and improvements by the education departments of Hong Kong and the Mainland. In fact, Hong Kong-citizen students living in the Mainland are entitled to local welfare benefits, including 12-year free education, because of their citizenship status. Therefore, the Government may explore the applicability of portable welfare benefits to education, and establish government-subsidized Hong Kong-style schools in Shenzhen to provide free education for these Hong Kong-citizen students. In addition, the governments of both places should also examine how the legal and financial problems arising from local teachers teaching in Mainland schools can be resolved, so that they can teach in schools and classes for Hong Kong children and Hong Kong-citizen students, or provide specific and adaptive training for Mainland teachers so as to boost parents' confidence in teachers' qualifications, with a view to attracting students to continue schooling in Shenzhen and reducing the demand for local school places by these students.

President, in the short run, the authorities should consider the feasibility of various transitional measures, such as increasing the size of each class and each level to help alleviate the problem, providing additional resources and support to the schools concerned, and working with the school sponsoring bodies to examine the use of vacant school premises in the vicinity. Meanwhile, the authorities should also perfect the immigration arrangements and transportation support for LEGISLATIVE COUNCIL ─ 26 March 2014 9323 students to ensure that they shuttle between the two places in a safe and convenient way.

Lastly, I would like to make a brief response to the amendment proposed by Mr Gary FAN. Regarding Mr FAN's proposal to allocate the projected surplus Primary One places in various school nets in Hong Kong to a new school net for "doubly non-permanent resident (DNR) cross-boundary students", so as to avoid the need for local primary students to attend schools crossing the districts, I cannot agree with it. First of all, as DNR students are also Hong Kong residents, they are entitled to receive education in Hong Kong and should enjoy fair and reasonable treatment as well. Furthermore, this proposal implies that students have to travel from Shenzhen to any school with available places in Hong Kong regardless of their location. This has indeed neglected the needs and safety of the students. According to my understanding, DNR children acquire the right of abode in Hong Kong pursuant to the judgment on the CHONG Fung-yuen case handed down by the Court, and should have nothing to do with the Basic Law. I therefore consider it wrong to amend the Basic Law, which does not help solving the problem. Due to the above two reasons, I find it difficult to support Mr FAN's amendment.

With these remarks, President, I support the original motion and the other amendments.

MR LEUNG YIU-CHUNG (in Cantonese): President, what Under Secretary Kevin YEUNG has just said makes me worried. In his speech, he agrees with some Members that after stopping "doubly non-permanent resident pregnant women" from giving birth in Hong Kong in 2013, it is believed that the number of cross-boundary students will gradually decrease in the future. He also holds that although the demand for school places from cross-boundary students has been increasing over the past few years, the problem can be resolved by increasing the number of classrooms and school places in districts with keen school place demand and re-allocating school places from the surrounding districts. He therefore believes that the issue of cross-boundary students can be solved in the future. His remark makes me feel pretty worried.

I am anxious about the Government's under-estimation of the problem of population growth. In fact, the problem of cross-boundary students is not as 9324 LEGISLATIVE COUNCIL ─ 26 March 2014 simple as Mainland students coming to Hong Kong for education. Population in Hong Kong also increases at the same time, which will in turn increase the demand for school places. I hope he will attach more importance to the issue.

In 2011-2012, population in Hong Kong increased by more than 90 000, thereby inducing a substantial demand for school places. Given that the Government has been incessantly closing schools and reducing school places, can it still cope with the society's demand for school places? I doubt it.

Moreover, we all know that over the past few years, more Hong Kong people are residing in the Mainland but working in Hong Kong, and the number has reached as high as hundreds of thousands. Their children therefore also live in the Mainland and have to attend schools in Hong Kong crossing the boundary. This is indeed one type of cross-boundary students. While this has become more prevalent, marriages between Mainlanders and Hong Kong residents are also increasingly common with frequent exchanges between the two places. As these couples cannot settle in Hong Kong immediately after marriage, they may give birth to their children in the Mainland and subsequently send them to attend schools in Hong Kong. This has also become increasingly common. Thus, in addition to the issue of "doubly non-permanent resident children", all these will bring an increase to the number of cross-boundary students. And yet, it seems to me that the Government thought the problem has been resolved and there is nothing to worry about.

I think the Government has taken the matter too lightly. Population growth in Hong Kong will increase the demand for school places, and coupled with marriages between Mainlanders and Hong Kong residents, the demand for school places has been further pushed up. But the Government thought that the issue of cross-boundary students can be resolved both now and in the future. I therefore consider the Government's mindset incomprehensive.

During a casual chat with the Under Secretary a few months ago, I told him a real life example. A number of parents from my constituency, Kwai Fong, relayed to me that they cannot find school places for their children who are going to attend kindergartens next year. There is shortfall of school places even in Kwai Fong, which is far from the Northwest and Northeast New Territories. Then what makes the authorities think that the measures implemented have satisfactorily resolved the problem? I do have grave concern about this.

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On the other hand, Members may notice another phenomenon, and that is, some cross-boundary students are attending schools in Tung Chung but not Fan Ling, Sheung Shui, Tuen Mun or Yuen Long. I used to be an educator. Can Members imagine how these students can have the physical and mental strength to study after such tiring journeys? Is this an ideal condition for study? The Government must think twice about this, and should not just focus on the problem of insufficient school places. Whether or not the students have enough time to rest, study and do homework should also be considered.

The Government also suggested the reallocation of school places from the surrounding districts. Does the so-called "surrounding districts" mean "vicinity"? How does the Government intend to save the need for these cross-boundary students to make tiring journeys? Will it turn a blind eye to this problem? President, I think the Government should not take the problem too lightly. Cross-boundary students are also students and we should attach importance to their learning environment as well.

Today, a number of colleagues have made different suggestions, but they have neglected one point which I hope the Government would take into consideration. I have approached many parents, especially the single parents. Why are they so determined to send their children to Hong Kong to study? Because their children are Hong Kong residents and cannot receive education in the Mainland. The tuition fees would be very high if their children study in the Mainland. In fact, they are very eager to send their children to schools in the Mainland (such as Shenzhen or other places), but unfortunately, they cannot afford to do so. I hope the Government can think about how this problem can be resolved so that their children can study in Mainland schools without paying high fees. This is the most effective way to solve the problem of cross-boundary students, saving their need to attend schools crossing the boundary.

I also hope the Government can find a solution to the problem relating to the resident status of these children, which has been a headache to many parents. Since these children do not have Mainland household registration, they cannot study in the Mainland. The parents hope that the SAR Government can negotiate with the Mainland Government to enable these children to receive education in the Mainland without charging tuition fees payable by Hong Kong people, so that they can afford to study in the Mainland.

9326 LEGISLATIVE COUNCIL ─ 26 March 2014

President, lastly, let me sincerely tell the Under Secretary one thing. As an educator, we should not just focus on whether students have an opportunity to receive education, but more importantly, we should provide a suitable environment for them to study. What does "a suitable environment" mean? That is an environment which allows reasonable time for rest and study. These are issues to be considered. I hope the Under Secretary would pay attention to them.

President, I so submit.

MR IP KWOK-HIM (in Cantonese): President, every morning at around 6 am, we can see groups of students in uniform with name badges hanging on their chest and escorted by nannies and teachers at various immigration control points including Lo Wu and Fu Tian. These cross-boundary students cross the boundary to attend school in Hong Kong. The fact that parents of these cross-boundary students let their young children make long journeys from Shenzhen across the boundary to attend schools in Hong Kong is related to the issue of confidence, as in the case of Mainland people rushing to Hong Kong to buy powdered formula. These parents think that the education system in Hong Kong is better than that in the Mainland, and hence, though their children are fatigued by the long journey, they still arrange them to cross the boundary every day to attend school in Hong Kong. Another reason is that, as Mr LEUNG Yiu-chung has just said, these children are born in Hong Kong and they are not on the household register. If they attend school in the Mainland, they cannot enjoy free education and they can only attend private schools in the Mainland; but the tuition fees are very high which are beyond the affordability of many parents. This is why we see tens of thousands of students crossing the boundary every day to attend school in Hong Kong, and they will return to Shenzhen in the afternoon.

We know that the Government of the two places have recently discussed issues related to cross-boundary Hong Kong-citizen students, and they have decided to expand the existing special schools and classes for Hong Kong-citizen children. After my visit to Shenzhen and contacts with the relevant education authorities, I learnt that, with efforts made in both places, the special schools and classes for Hong Kong-citizen children can dovetail with Hong Kong in respect of school curriculum, and these students can participate in the central allocation of school places in Hong Kong. Nevertheless, another problem is that the number of special schools and classes for Hong Kong-citizen children is too few LEGISLATIVE COUNCIL ─ 26 March 2014 9327 in number, and many teachers are from the Mainland who are not very familiar with the situation in Hong Kong. Therefore, these students may feel out of place when they settle down in Hong Kong in future. The community is very much concerned about the problems of Hong Kong-citizen students crossing the boundary for attending school in Hong Kong.

I understand that the Hong Kong Federation of Education Workers visited Shenzhen last week upon the invitation of the Shenzhen Bureau of Education to discuss the teacher qualifications of the special schools and classes for Hong Kong-citizen children as I have just mentioned. The Shenzhen authorities hoped that Hong Kong teachers would take up the teaching posts in Shenzhen. However, as Hong Kong teachers are paid from the public coffers, they can only teach in Hong Kong, and some legal and financial issues need to be resolved if they are to teach across the boundary. We can also explore if Hong Kong can assist in the training of Mainland teachers and arrange for teachers in Shenzhen to receive training in Hong Kong, though there are problems concerning time and resources.

A very realistic question is whether Hong Kong schools can be established in Shenzhen or whether some Hong Kong-style schools can be established in Shenzhen by Hong Kong voluntary bodies, so that Hong Kong-citizen children can attend school in Shenzhen. This point is worth exploring. This might be unimaginable in the past. As I have just said, teachers who are paid from the public coffers have to work in Hong Kong. However, as the concept of portability of welfare benefits has now been raised, we should be more broad-minded and give proactive consideration to this idea. If suitable sites can be identified in the Mainland for the establishment of Hong Kong-style schools, Hong Kong-citizen students no longer need to make long journeys in the morning and afternoon.

Furthermore, we clearly know that these Hong Kong-citizen students are permanent residents of Hong Kong and they have the rights to enjoy education welfare in Hong Kong. In this regard, I very much hope that the authorities can be open-minded in solving the problem of cross-boundary students, and before solving the problem, I earnestly hope that the authorities would pay attention to (The buzzer sounded) … the safety of students crossing the boundary.

Thank you, President.

9328 LEGISLATIVE COUNCIL ─ 26 March 2014

SUSPENSION OF MEETING

PRESIDENT (in Cantonese): The meeting is now suspended until 2.30 pm tomorrow.

Suspended accordingly at nine minutes to Ten o'clock.

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Annex I

Amendments moved by the Secretary for Home Affairs

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NEGATIVED

NEGATIVED

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NEGATIVED

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NEGATIVED

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Annex II

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Appendix I

WRITTEN ANSWER

Written answer by the Secretary for Education to Dr Helena WONG's supplementary question to Question 3

As regards the number of young graduates who were employed as teachers over the past five years, the information is provided below for Members' reference.

Employment situation of graduates of teacher education institutions (TEIs) as teachers

In planning the number of government-funded teacher training places at the TEIs, the Education Bureau has always taken into account the changes in student population in the coming 10 years, so as to maintain a balanced and stable supply and demand of teachers. In recent years, the number of prospective teachers completing full-time Bachelor of Education and Postgraduate Diploma in Education programmes was about 1 000 per year. On the other hand, there were on average about 2 000 teachers in public sector schools leaving the profession each school year due to retirement, further studies or other personal reasons. The teaching posts thus vacated were mainly filled by newly-joined teachers or teachers rejoining the profession. Overall speaking, there are adequate teaching posts to absorb the fresh TEI graduates each year. According to the information revealed by the TEIs, the employment situation of their graduates has been satisfactory in recent years. For instance, the employment rate of the graduates of the Hong Kong Institute of Education (the largest local TEI) was over 90% in the past few years.

The Education Bureau does not collect data from the TEIs on the employment of their graduates as teachers. The only information that we have is the number of newly-joined teachers of public sector schools. We believe that most of them are TEI graduates. The relevant data is set out below for your reference. A2 LEGISLATIVE COUNCIL ─ 26 March 2014

WRITTEN ANSWER — Continued

No. of newly-joined teachers School years Regular teachers Contract teachers Total 2009-2010 340 910 1 250 2010-2011 290 910 1 200 2011-2012# 510 1 290 1 800 2012-2013 240 730 970 2013-2014 350 770 1 120

Note:

# The 2011-2012 school year is a double-cohort year.

The following two points should be noted when making reference to the above data:

(1) The above data only indicates the employment situation of newly-joined teachers in public sector schools. In fact, while some TEI graduates were employed as teachers by public sector schools, quite a number of them were employed as teachers by Direct Subsidy Scheme schools or private schools. Moreover, some chose to join other education-related professions, such as serving as tutors in education institutions or tutorial centres, or even taking up jobs in other professions or industries. And some others have chosen to further their studies.

(2) Although most of the young teachers in public sector schools were employed on contract terms, it would be easier for them to secure employment or be employed as regular teachers after gaining considerable teaching experience and enhancing their professional capability. At present, about 90% of the primary and secondary school teachers are employed under the teaching establishment. According to the information of the 2012-2013 school year, 60% of the teachers employed as regular teachers for five years or less are at the age of 27 or below.

In sum, over the past five years, there has been a steady number of young people joining the teaching profession. Notwithstanding that they may only be employed as contract teachers initially, they will be appointed as regular teachers under the permanent establishment over time. To young people, teaching is still a relatively stable profession. LEGISLATIVE COUNCIL ─ 26 March 2014 A3

Appendix II

WRITTEN ANSWER

Written answer by the Secretary for Commerce and Economic Development to Mr Vincent FANG's supplementary question to Question 5

As regards impact of surge of Mainland visitors to Hong Kong, the breakdown of visitor arrivals in 2013 is set out as follows for Members' reference.

Visitor Arrivals in 2013

According to the information provided by the Hong Kong Tourism Board, the overnight and same-day visitor arrivals in 2013 by major market segments (that is, Mainland China, short-haul market and long-haul market) are set out in the table below:

Visitor Arrivals Mainland China 40 745 277 Same-day visitors 23 655 768 Visitors under the Individual Visit Scheme (IVS) 6 697 355 (excluding visitors with multi-entry endorsements) Visitors with multi-entry endorsements 11 114 776 Non-IVS visitors 5 843 637 Overnight visitors 17 089 509 Visitors under the IVS 8 615 975 (excluding visitors with multi-entry endorsements) Visitors with multi-entry endorsements 1 036 761 Non-IVS visitors 7 436 773 Short-haul Markets (excluding Mainland China) 8 916 865 Same-day visitors 3 660 468 Overnight visitors 5 256 397 Long-haul Markets 4 636 662 Same-day visitors 1 321 496 Overnight visitors 3 315 166 Total Visitor Arrivals 54 298 804