LEGISLATIVE COUNCIL ─ 23 May 2013 12245

OFFICIAL RECORD OF PROCEEDINGS

Thursday, 23 May 2013

The Council continued to meet at Nine 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 JAMES TO KUN-SUN

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

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, S.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 WONG KWOK-HING, M.H.

DR THE HONOURABLE JOSEPH LEE KOK-LONG, S.B.S., J.P.

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. 12246 LEGISLATIVE COUNCIL ─ 23 May 2013

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, 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.

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. LEGISLATIVE COUNCIL ─ 23 May 2013 12247

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 KENNETH LEUNG

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

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. 12248 LEGISLATIVE COUNCIL ─ 23 May 2013

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

MEMBERS ABSENT:

THE HONOURABLE LEE CHEUK-YAN

THE HONOURABLE LEUNG YIU-CHUNG

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

THE HONOURABLE STEVEN HO CHUN-YIN

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

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

PUBLIC OFFICERS ATTENDING:

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

DR THE HONOURABLE KO WING-MAN, B.B.S., J.P. SECRETARY FOR FOOD AND HEALTH LEGISLATIVE COUNCIL ─ 23 May 2013 12249

CLERKS IN ATTENDANCE:

MR ANDY LAU KWOK-CHEONG, ASSISTANT SECRETARY GENERAL

MISS FLORA TAI YIN-PING, ASSISTANT SECRETARY GENERAL

MISS ODELIA LEUNG HING-YEE, ASSISTANT SECRETARY GENERAL

MRS PERCY MA, ASSISTANT SECRETARY GENERAL

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MEMBERS' MOTIONS

PRESIDENT (in Cantonese): Members' motions. Two motions with no legislative effect. I have accepted the recommendations of the House Committee: that is, the movers of motions each may speak, including reply, for up to 15 minutes; movers of the first and second motions have another five minutes to speak on the amendments; the movers of amendments to a motion each may speak for up to 10 minutes; the mover of amendment to amendment may speak for up to seven 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.

First Member's motion: Drug Formulary and drugs subsidy system. Members who wish to speak in the motion debate will please press the "Request to speak" button.

I now call upon Miss Alice MAK to speak and move the motion.

(Originally scheduled to be dealt with at the last Council meeting)

DRUG FORMULARY AND DRUGS SUBSIDY SYSTEM

MISS ALICE MAK (in Cantonese): President, I move that the motion, as printed on the Agenda, be passed.

President, the Drug Formulary (the Formulary) is a subject mentioned by the Chief Executive and the Financial Secretary respectively in this year's Policy Address and Budget ― a sign that the authorities are also aware of the existing problems with the Formulary. The Hospital Authority (HA) has implemented the Formulary system since July 2005 with the good intention of standardizing its policies on procurement and use of drugs to ensure equitable access to prescription drugs by patients. At present, there are about 1 300 drugs in the Formulary, of which 75% are General Drugs and 25% are Special Drugs. General Drugs are available for general use by doctors of public hospitals and clinics, while Special Drugs have to be used under specified clinical conditions with authorization by relevant specialist doctors. These drugs are provided to patients at a standard charge of $10 per drug item.

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We agree that after the implementation of the Formulary system, the introduction of new drugs by the HA has become more systematic and objective, and the use of drugs in different hospitals has been standardized, which is beneficial to patients to a certain extent. For instance, in the past, some drugs might be available in some hospital clusters and not in others, but after the implementation of the Formulary, all hospital clusters can supposedly prescribe the drugs included in the Formulary to patients. Nonetheless, we find that after the implementation of the Formulary, there are still patients suffering delays in treatment due to their inability to afford better drugs, having to sell their properties in order to purchase drugs, or relying on lower-quality drugs to extend their lives. This reflects the existence of many inadequacies in the existing system which cannot provide people with the most suitable protection.

At present, the HA has two committees responsible for work in relation to the Formulary, namely, the Drug Advisory Committee (DAC) which is tasked with appraising new drugs for inclusion in the Formulary, and the Drug Utilization Review Committee which is responsible for reviewing the existing drugs in the Formulary periodically. The DAC comprising doctors, clinical pharmacologists and pharmacists, appraises new drugs every three months. But the DAC's composition has all along been criticized as under-representation for there is no member to represent other stakeholders, such as patients' organizations, giving rise to the feeling that the views and rights of patients have not been duly considered.

Apart from its composition, the DAC has also been criticized for failing to disclose in detail the process and contents of discussions at its meetings. Only the agenda, review outcome and drug references list for each meeting are available in the HA's website. Members of the public only know which drugs have been appraised and what is the final outcome as the discussion process has not been disclosed, for example, what factors have been considered by the members in making their decisions, whether their rationale is justified, whether assessment has been made from the patients' perspective? There is no way we can find out the answers to these questions, which is why the DAC has been criticized for operating in a black box.

Although a consultation mechanism with patient groups on the Formulary has been established by the HA since 2009, this so-called mechanism in fact only entails holding an annual consultation meeting to inform patients of the latest 12252 LEGISLATIVE COUNCIL ─ 23 May 2013 developments of the Formulary and the Samaritan Fund, and solicit their views. The entire process is about relaying all the decisions made by the HA to the patients, and then seeking their views. What kind of consultation is that? We opine that the HA should reform the DAC to at least include representatives of stakeholders like patients' organizations, so that they can truly participate in the discussion and decision-making process, instead of the HA consulting patients as a formality after making all the decisions.

Moreover, the authorities should make public the records of meetings of the DAC, so that people know clearly the standards and rationale adopted by members in making their decisions, which helps increase the transparency of the entire decision-making process. Let me give a simple example. At present, many drugs, especially those proven to be of significant efficacy but are expensive, can only be included in the category of Self-financed Items (SFIs) with safety net, causing doubts and concerns of many patients as to whether cost-effectiveness is the most important factor considered by the DAC. If the DAC wants to avoid giving the public the impression that its only concern is money, it would be useful to make public the contents of discussion at its meetings, and invite more stakeholders to participate in the meetings, so as to present a fairer and more equitable picture of the committee's work. Hence, we hope the HA can timely consider reviewing and restructuring the DAC.

Apart from the above problems relating to the DAC's composition and transparency, I must also ask whether resources have been allocated correspondingly so that the Formulary can serve a genuine purpose. Since the implementation of the Formulary system, we can often hear calls for expanding the Formulary, and the Government has responded positively to these calls in recent years. For instance, this year's Policy Address has proposed to include more drugs in the Formulary and expand its application. Notwithstanding the inclusion of more drugs in the Formulary, if the authorities have not allocated additional resources correspondingly such that hospitals have no funds to buy the drugs or doctors must prescribe drugs with constraints, patients would still be unable to use the new drugs due to the fundamental problem of resources.

During the past five years, drugs expenditure only accounted for 8% to 10% of the overall expenditure of the HA. For example, the HA's overall expenditure in 2012-2013 was $44.57 billion, but drugs expenditure only accounted for $4.73 billion, or 10.6% of its overall expenditure. But on the LEGISLATIVE COUNCIL ─ 23 May 2013 12253 contrary, staff expenditure amounted to $31.92 billion, or 71.6% of its overall expenditure. The authorities often stress that the Formulary system is also implemented in many advanced countries ― this is a point we agree with. But the authorities have not mentioned that the percentage of drugs expenditure in these countries is higher than that in Hong Kong. According to the data of the Organization for Economic Co-operation and Development, drugs expenditure as a share of total healthcare expenditure in the United Kingdom and India are 11.8% and 14.7% respectively. But the corresponding figure in Hong Kong has long been maintained at about 10%, which is apparently on the low side. There is indeed room for increase.

Besides increasing resource provisions, it is also very important to ensure that the funding is genuinely used on drugs items. In the past, we sometimes received complaints about certain drugs in the Formulary being available in hospital cluster A, but not in hospital cluster B. The Secretary may be surprised to hear such complaints because after the implementation of the Formulary system, drugs in the Formulary should have been made available to patients in both hospital clusters A and B. It turned out that in some hospital clusters with relatively limited resources, the provision of drugs must compete with other expenditure items within the budgeting constraints such that drugs expenditure had been reduced. We consider that the HA should take out drugs expenditure from its overall expenditure estimates and allocate it to the various hospital clusters as an independent fund, so as to ensure that the funding is used solely on drugs under this mode of "dedicated-funds-for-dedicated uses", without any impact from the overall expenditure of the hospital clusters.

Notwithstanding the provision of different categories of drugs in the Formulary including General Drugs, Special Drugs and SFIs with safety net for subsidizing patients' expenditure on drugs, so that they would not be deprived of suitable medical care due to financial difficulties, the Government is in fact telling the people that it will definitely provide assistance when they are absolutely penniless. President, why do I choose this subject matter of expanding the Formulary as my maiden motion in the Legislative Council? That is because I have come across cases which made me feel how utterly helpless and incapable Members of the Legislative Council can be at times, for we can do nothing to help the patients so long as the Formulary system remains unchanged.

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In the first case, an elderly member of our trade union has unfortunately been diagnosed with brain cancer, requiring treatment with target therapy drugs which cost about $120,000 per course. Such expenditure has exerted enormous financial pressures on him as well as his family members. My colleagues have tried to apply for him subsidies through the safety net coverage. But as he and his wife have some meagre savings after he has worked for most of his life, he could not pass the means test. Eventually, our trade union has to raise funds for him. But the small sum we managed to raise is just enough to tide him through the basic difficulty. In fact, having worked for most of their lives, the couple just manage to save up $200,000-odd which is not only their "funeral fund", but also their savings for mortgage repayment and education expenses for their only daughter. Must the Government wait until the couple have exhausted even their "funeral fund" and sold their flat, while their daughter must apply for government loan because she cannot afford to pay the tuition fees before providing them with subsidies to help them buy the drugs?

I feel even more helpless about the second case involving a young woman from a middle-class family who lives with her parents. She is younger than me, unmarried and single. As the mortgage of the flat in which she and her parents live had been paid off, she should be living a good life. But unfortunately, she is diagnosed with lymph cancer, almost at a terminal stage. She requires treatment with expensive drugs, but as she lives with her family and her parents have a "funeral fund", she could not pass the means test, which is household-based, and did not get any subsidies. Not bearing to see her daughter suffer, the parents are willing to take out a loan by mortgaging their flat in order to pay for her medical bills and drugs. But this young daughter has declined her parents' kind offer. Thinking that she may not live long given her cancer, she cannot bear to leave her parents suffer after she died. Eventually, this case came to my attention. What can I do? I can only help her apply for public rental housing (PRH) on her own. Given her special health reasons, she was quickly allocated with a PRH unit. But how come a sick person like her who needs to be taken care of by her parents must live separately from them?

Another case involves the drug Glivec which we are familiar with. In this case, a single mother living with her son was diagnosed with chronic leukemia and requires treatment with Glivec. After she got this disease, she wanted to be self-reliant and had not applied for Government subvention. All along, she has relied on the subsidies provided by the Samaritan Fund for purchasing the drug. LEGISLATIVE COUNCIL ─ 23 May 2013 12255

With the drug, she can work and lead a normal life. But just when her son graduated from university and she was expecting some improvement in livelihood, she was no longer eligible for the subsidies for drug purchase because her family could not pass the means test. Hence, she can only rely on her son's income to buy the drug. Not only is there no improvement to her livelihood, she even feels that she has become her son's burden.

From the above cases, I clearly see that the existing Formulary has caused suffering to patients. Hence, I hope the Government can conduct a review in this regard. As little speaking time is left, I must move on to another suggestion about relieving the tax burden of patients. The expenses arising from drug purchase and taking care of sick family members have imposed a heavy financial burden on many middle-class families. Hence, we hope that the Government can make reference to Taiwan's policy of providing tax relief in respect of medical and medication expenses, as well as childbirth expenses. We hope the Government can provide tax relief in this regard, so as to alleviate the financial burden of taxpayers arising from drug purchase and medical treatment.

To date, the Formulary system has been implemented for almost eight years. I note from my data research that the suggestions I made in my motion are exactly the same as those stated in a review report jointly submitted by 17 patients' organizations to the HA in 2006, that is, one year after the implementation of the Formulary. In other words, the same problems still exist and remain unsolved, regardless of whether the Formulary has been implemented for one year or eight years. Hence, I very much hope that the Government can allocate additional resources to assist patients in various aspects from the system. If the system as a whole is ineffectual, we would rather abolish the Formulary altogether.

I so submit. Thank you, President.

Miss Alice MAK moved the following motion: (Translation)

"That the Hospital Authority ('HA') has implemented the Drug Formulary ('the Formulary') system since July 2005 to standardize its policies on procurement and use of drugs; at present, HA's annual drugs expenditure only accounts for around 10% of its overall expenditure, and the responsibilities of including new drugs in the Formulary and reviewing 12256 LEGISLATIVE COUNCIL ─ 23 May 2013

the Formulary rest with HA's Drug Advisory Committee and Drug Utilization Review Committee respectively; yet, the lack of transparency in the relevant work and low participation of other stakeholders have led people to question that the Formulary does not put patients' rights and interests first, resulting in patients having to purchase at their own expense drugs which are of significant efficacy but expensive; although the Government has put in place safety net systems such as the Samaritan Fund, etc., situations of patients suffering delays in treatment due to their inability to afford better but expensive drugs, having to sell their properties in order to purchase drugs, or relying on lower-quality drugs to extend their lives still arise, etc., reflecting the existence of many loopholes and inadequacies in the existing system; in this connection, this Council urges the Government to review the existing drugs policies and perfect the relevant mechanism, so as to provide assistance for more people in need; the relevant measures should include:

(1) to reform HA's Drug Advisory Committee and Drug Utilization Review Committee, include more representatives of stakeholders (including representatives of patients' organizations) and make public the records of meetings of those Committees, so as to increase the transparency of the process of formulating and reviewing the Formulary;

(2) when updating the Formulary, to correspondingly devote adequate resources to ensure that medical practitioners can prescribe the most suitable drugs according to patients' medical conditions;

(3) to take out HA's drugs expenditure from its overall expenditure estimates and allocate it to the various hospital clusters as an independent fund, so as to ensure that the funding is fully used for drugs expenditure and not used for other expenditure items;

(4) to expand the Formulary to include more drugs which are of significant efficacy but expensive as General Drugs and Special Drugs, so that more patients can use such drugs at standard fees and charges;

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(5) to increase the expenditure estimates on drugs, and when considering whether to include certain drugs in the Formulary and the relevant categories, reduce the weighting of costs and prices and adopt efficacy and patient safety as the overriding principle, so that patients will not be forced to take lower-quality drugs due to the lack of financial means;

(6) to include more drugs in the subsidy coverage of the Samaritan Fund, and further relax the assessment criteria of the financial test of the Samaritan Fund by using the income and asset of individual applicants instead of households as the basis;

(7) to provide tax relief, so as to alleviate the financial burden of patients or their family members arising from the purchase of drugs at their own expense; and

(8) to consider abolishing the Formulary system in the long run."

PRESIDENT (in Cantonese): I now propose the question to you and that is: That the motion moved by Miss Alice MAK be passed.

Five Members wish to move amendments to this motion. This Council will now proceed to a joint debate on the motion and the five amendments.

I will first call upon Dr LEUNG Ka-lau to speak, to be followed by Dr Joseph LEE, Mr CHAN Han-pan, Mr Albert HO and Dr Fernando CHEUNG respectively; but they may not move amendments at this stage.

DR LEUNG KA-LAU (in Cantonese): President, I have analysed the criticisms on the Drug Formulary (the Formulary) of the Hospital Authority (HA), and identified three major shortcomings in the system, namely, first, drugs expenditure as a share of total public healthcare expenditure is not high enough; second, the HA lacks an objective method to assess the "cost-effectiveness" of drugs; third, the threshold adopted by the HA's Samaritan Fund (the Fund) for providing subsidies on drugs purchase is too high. I will explain these points one by one.

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First, drugs expenditure as a share of total public healthcare expenditure is not high enough. Just now, Miss Alice MAK also pointed out that at present, drugs expenditure only accounts for 10.5% in the HA's overall expenditure, while staff expenditure accounts for 71.6%. I am sure the Secretary will say that healthcare services is a labour intensive industry; but no matter how labour intensive it is, we cannot possibly allocate all resources to manpower, not to mention that I have no idea in what areas the HA has allocated the other resources because there are still 20% of resources left other than drugs and staff. Where have they gone?

We can look around globally and consider what should be the suitable level of drugs expenditure. In fact, it varies from country to country because the situation in each country is different. Some countries may have relatively more manpower, while others may be particularly affluent. Of the 34 member countries of the Organization for Economic Co-operation and Development just mentioned by Miss Alice MAK, the expenditure on drugs is the lowest in Norway (5.1%) ― it is in fact very strange that the share of drugs expenditure is lower in the relatively affluent countries because they are affluent; the share of drugs expenditure is the highest in Greece (32.5%) ― the share of drugs expenditure turns out to be greater in the relatively poor countries. What is the average percentage of these 34 countries? It is 14.4%.

Hence, in my amendment, I suggest that Hong Kong should strike a balance by setting the target at 15%. In respect of service provision, besides manpower, medication is equally essential; by the same token, it is improper to have medication without manpower. Hence, on balance, I suggest that the target should be set at 15% because as such, all self-financed drugs in the current Formulary of the HA could be reclassified as subsidized drugs. By increasing the share from 10.5% to 15%, drugs expenditure will be increased by over 40%, which can adequately solve the problem.

The second shortcoming of the Formulary is the absence of an objective method to assess the "cost-effectiveness" of drugs. Let us picture this: no matter the share of drugs expenditure is 10% or increased to 15%, there is a cap after all; but if an expensive drug at a cost of $500,000 can extend a patient's survival rate by one month, say, from 10 months to 11 months, should we use this drug?

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The use of drugs also involves the competition for resources. For example, one drug can reduce the pain of rheumatoid arthritis patients, while another can treat cancer patients and extend their average survival rate from 12 months to 18 months. If the budget allows, both drugs should be provided to the patients in question. However, there are hundreds of illnesses, and hundreds of new drugs. If we can only afford seven out of 10 similar drugs, what should be done? Perhaps the HA could appoint Miss Alice MAK as Chairman of the relevant drugs committee so that she can make the decision. How would she decide? Ultimately, there should be an objective method for making decision.

Talking about "cost-effectiveness", Members may have some negative feelings about the term because the HA has always used "cost-effectiveness" as an excuse to reject the inclusion of expensive drugs into the Formulary. Let me tell Members a secret: the several committees under the HA in fact rarely conduct any "cost-effectiveness" assessment on drugs, or perhaps even the members do not know not how to conduct an assessment. If they do not know about it, how can the meeting proceedings be made public? Then how do the members make the decision now? Basically, it depends on how much funding is involved, which member in the committee is more bossy or vocal, and how many patients would be affected by the relevant drugs. If it is a very expensive drug that is used by only several tens of patients, it may be approved. But if it is a cheaper drug that is probably used by nearly 1 000 patients, it will be rejected for the members consider it unaffordable.

Internationally, how is a formal "cost-effectiveness" assessment on drugs conducted? Generally speaking, the effectiveness of a drug means its efficacy in the most direct sense, for example, the survival rate of cancer drugs. But if we are considering two different types of drugs ― one to reduce the pain of rheumatoid arthritis patients, and the other to treat cancer patients ― how should a comparison be drawn? It is like comparing oranges to apples. One method for assessing effectiveness is by evaluating the quality of life of patients. How to evaluate the quality of life? A questionnaire survey would be conducted to see how well the patients have been sleeping, how painful they are, how affected they are in their daily activities, and so on. As different diseases have different impacts on the quality of life of patients, the benefits of different drugs for treating different diseases can be compared by evaluating the quality of life of different groups of patients.

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According to the standard adopted by the World Health Organization (WHO), the score on the quality of life, if considered in parallel with its validity period, will produce an indicator called "quality life years". According to the standard adopted by WHO, if the value of "quality life years" as expressed in monetary terms is less than three times the local per capita income, it is cost-effective. In Hong Kong's situation, if the value of "quality life years" of a drug is less than $430,000, the drug can be considered as cost-effective. Hence, no matter what change is made to the system, we need an objective standard to assess how funds should be allocated when resources are insufficient.

Third, the threshold adopted by the HA's Fund for providing subsidies on drugs purchase is too high. Just now, Miss MAK has already pointed out how unfair it is to calculate the income of all family members of a patient in the same household, particularly for elderly patients who live with their children. As the incomes of their children are also calculated, the elders concerned would often doubt whether they should live separately from their children.

Moreover, I want to talk about several points. As a matter of fact, the Formulary arrangement is extremely unfair to middle-class people given their significant contribution in terms of tax payment. As the provision of public healthcare services should be guided by the principle that the same service be provided to all people no matter they are rich or poor, there is no reason why middle-class people without affordability should have to pay more when they go to public hospitals for treatment since they have already paid their taxes, while the poor can get subsidies through the Fund.

Second, many public healthcare services are actually very expensive. For example, the cost of each liver transplant operation ― a surgery we are familiar with ― can be as high as $500,000-odd, or even $1 million. When these services are provided by public hospitals, the patient pays a fixed amount of $100 per day which includes the cost of all medication. Then why is Glivec ― the drug just mentioned by Miss MAK ― which incurs an annual cost of $200,000 not included in the Formulary? Why are some drugs included in the Formulary but not others?

Third, Members may not know there is a principle underlying the Formulary and the Fund, that is, if a drug is efficacious but very expensive, it will be covered under the safety net supported by the Fund. But I can tell Members LEGISLATIVE COUNCIL ─ 23 May 2013 12261 that there is such a highly efficacious but extremely expensive drug for treating Mucopolysaccharidoses ― it is an extremely expensive drug which costs a patient $4 million each year. The authorities have included this drug as a special drug so that patients need not make any co-payment. Why is that so? Had this drug been covered under the safety net supported by the Fund, even if a patient has assets worth $20 million, given the present arrangement of patients making co-payment capped at 20% of their disposable financial resources, his entire saving will be exhausted by this drug in five years' time even though he has assets worth $20 million. Hence, as a policy, the system of the Formulary and the Fund is basically unfair to the middle class, and this policy has not been applied consistently.

I suggest that only income and not assets should be included in the calculation because generally speaking, a person's wealth should be commensurate with his income; otherwise, it would be a case for investigation by the Independent Commission Against Corruption. I suggest that when a patient's drugs expenditure exceeds 10% of his own income or his household income, the shortfall in the drugs fees should be paid by the Fund. Why do I suggest the cap at 10%? I suggest the 10% cap because in many countries with a compulsory healthcare insurance system, the relevant contribution rate is about 8% to 10%.

Thank you, President.

DR JOSEPH LEE (in Cantonese): President, we started discussing the Drug Formulary (the Formulary) in 2004 when I joined the Legislative Council. Miss Alice MAK and Dr LEUNG Ka-lau already mentioned that the objective of the Formulary is to standardize the utilization of drugs in various hospital clusters, and these drugs include standard drugs, self-financed drugs and drugs used by senior doctors. Some said that the Formulary was formulated for controlling cost, others said that the aim was to standardize the use of drugs in various hospital clusters.

One point has essentially not been discussed in today's topic. The Secretary should be familiar with the issue. He might have taken part in developing the Formulary in the past, but he had not followed up the issue because he later left the Hospital Authority (HA). Why do I say that the 12262 LEGISLATIVE COUNCIL ─ 23 May 2013

Secretary should have a deep understanding now? That is because the twin-track healthcare system which he mentioned just now has been vividly put into practice, and why do I make such comment?

Our healthcare system currently comprises the public and private healthcare sectors, and the HA Formulary well demonstrated the twin-track system. As Dr LEUNG Ka-lau has just said, under the public healthcare system, all citizens, rich or poor, are provided with the same services and the same criteria are adopted, and all citizens will be given the same drug at the same charge under the Formulary. For example, a person paying $10 will be given a certain type of drug.

If a patient in more serious or special conditions is treated by a senior doctor, some Special Drugs in the Formulary will be prescribed to patients. However, if a patient does not like the drugs prescribed by a doctor and if he knows, after seeking other medical advice, that there are better drugs, he can purchase them at his own expense.

That is the twin-track healthcare system under the Formulary, which is essentially related to the positioning of the Formulary. Why has the current Formulary aroused so many controversies? Apart from technical arrangements, the Committee's lack of transparency and lack of criteria ― I shall discuss these issues shortly ― the Formulary has aroused so many controversies because of the twin-track system. According to the Government, no patients will not be deprived of medical treatment because of insufficient financial means; but if the patients want to receive better treatment, they have to pay out of their own pocket. However, the Government is unwilling to admit this stance.

If the Secretary can now boldly announce that the authorities have decided on the positioning and a twin-track system will be implemented, that is, under the concept of the Formulary, patients can purchase better drugs if they have sufficient financial means, but if they cannot afford to do so, it does not matter, for they will be given basic drugs, then it would make things easier for us, the medical professionals. Dr LEUNG should also understand very well that we are professionally trained to provide patients with the best treatment. Nevertheless, if we work in the HA, we can only prescribe standard drugs to patients under the system. If we wish to prescribe better drugs, we can only suggest to the patients that they can purchase these drugs elsewhere at their own expense. LEGISLATIVE COUNCIL ─ 23 May 2013 12263

Alternatively, they can, as mentioned by Dr LEUNG, consult private doctors who would prescribe the best drugs to them.

This is the positioning issue under the twin-track system. If the positioning issue is not properly handled, many controversies will constantly arise. As some Members have just commented, what assessment criteria will be adopted even if a committee has been set up? Nobody knows the answer and the fact is that the committee lacks transparency, it does not have records of meetings and there is no representative from patients' organizations.

Someone from a patient's organization has said to me, "Joe, how come we have no information? We are only informed of the results after confirmation has been made; how can we know what they are doing? The authorities should not assume that we have no knowledge. There is a saying that people who have been sick for a long time can become a doctor. As I am frequently on medication, I understand my conditions very well. I hope you could tell them which drugs are effective for my conditions."

My elderly parents have high blood pressure problems, and they have some unfavourable experiences in respect of the Formulary. A doctor changed the medication of my mother, and after taking the new drug, her legs were severely swollen, and she went to the accident and emergency department (A&E department). I asked her to consult a private doctor but she was unwilling to do so because of the high charges. She eventually queued up at a public hospital. Yet, the doctor told her that nothing could be done because of the change of medication. The doctor did not know that I understood to a certain extent the operation of the Formulary. The HA has explicitly stated that for patients who have all along been taking certain drugs, we should not change their medication. The new drugs will only be prescribed to new patients.

After all, the matter boils down to the issue of money, as Dr LEUNG Ka-lau has just said. My consultant doctor told me, "Keep an eye on the accounts, change of medication can save a lot of money". In fact, tens of millions of dollars may be saved, but the amount is negligible when compared with the $44.4 billion funding for the HA.

To save money, my mother had been prescribed with other drugs, and as a result, her legs were swollen. Originally, she took yellow tablets, now she takes 12264 LEGISLATIVE COUNCIL ─ 23 May 2013 pink tablets. When my mother asked me why her legs were swollen, I could only say that nothing could be done because of the change of medication. She was unwilling to consult a private doctor as suggested by me. The hospital has not followed up such cases because the positioning of the Formulary was unclear and there were problems concerning the implementation. Doctors at a lower level change the medication of patients and those at the upper level do not know what has actually happened. Some practitioners have asked why it takes two to three years to include certain drugs in the Formulary, and by the time the drugs are included in the Formulary, they may already be outdated because new drugs have been introduced to the market. No problems will arise even if the hospital uses the old drugs. Take the case of my mother as an example. As her legs were swollen, she sought consultation at the A&E department. She waited three hours for a 15-minute consultation by a doctor, and a chest X-ray was taken to see if there was an accumulation of fluids in her lungs because swollen legs might reflect an accumulation of fluids in lungs. A lot of healthcare resources were used. Would the situation be better if the case was handled more appropriately?

President, the issues mentioned above seem to be unrelated, but problems concerning technical arrangements are due to the current inaccurate positioning of healthcare services.

The criteria issue raised by an Honourable colleague is highly controversial. Allow me to digress a little. Regarding nursing manpower, our requested ratio was 1:6, but the Government had turned down our request. It does not matter. As Dr LEUNG has also stated, I am not sure if the committee under the HA Board has followed certain criteria when meetings are held. As I have checked, in addition to the World Health Organization's concept of "quality life years", there is also an international standard called "health technology assessment". A large-scale international seminar will be held in Korea next month to assess this standard, which will be used as the means and tools for assessing whether healthcare technologies, including drugs and treatments, are appropriate.

In what ways should these technologies be regarded as appropriate? According to the information available, in a narrow sense, "health technology assessment" is related the safety, effectiveness and efficiency of drugs. The HA also has a set of criteria but nobody knows the criteria adopted by the HA. Why is the commonly known standard of "health technology assessment" not adopted? LEGISLATIVE COUNCIL ─ 23 May 2013 12265

In a broad sense, this tool of "health technology assessment" allows the public and the Government to get to know how much money can be saved in the long run, whether the appropriation has been suitably used and the beneficial effects to patients. The formulation of this policy will safeguard patients and the Government because the professionals will know very well the criteria for the administration of drugs. Nonetheless, the Government and the HA have so far declined to adopt this tool which complies with international standard. They just work behind closed doors, leading to more controversies.

Is it necessary to establish the Samaritan Fund (the Fund)? If the Secretary had at an early stage announced the twin-track healthcare system, that is, the authorities will only provide standard drugs and patients can purchase better drugs at their own expense if they have the money, there will not be so many controversies over the Fund. It may be possible to relax the system to provide some subsidies to middle-class families and also provide another kind of subsidies to families on Comprehensive Social Security Assistance Scheme, so as to ensure that the drugs concerned can be used. Why do I point out that the drugs concerned can be used? It is simply because under this tool of "health technology assessment", people know when they should use certain drugs. Hence, the controversy mentioned by Dr LEUNG Ka-lau would not emerge. That is, if a certain drug, though expensive, will only be required by 12 patients, the authorities will include it in the Formulary; whereas for another drug which is relatively cheaper but will be required by 4 000 patients, the authorities will not include it in the Formulary. The above scenario will not arise because we have accepted certain criteria which will be followed by all people.

Of course, a consultation has to be conducted even if there is such a tool and a committee has been set up. It may not be necessary to invite Miss Alice MAK to chair the committee, but apart from professionals, different stakeholders should be invited to join the committee. These stakeholders may include the representatives of patients' organizations or pharmaceutical companies. An independent committee should assess whether the medication policy of the HA is appropriate, using the "health technology assessment" I have just mentioned as a tool for assessment. In this way, the assessment will be open and transparent and everybody is aware of the medication policy.

Lastly, I want to point out that even if all these issues have been resolved, the problem will remain outstanding, because after all, it involves resources. Is 12266 LEGISLATIVE COUNCIL ─ 23 May 2013 the Government's appropriation to the HA sufficient? It will never be sufficient. From our professional perspective, we should prescribe the best drugs to patients, but things may still go wrong even if the best drugs have been prescribed. The Government should set the standard so that the patients who pay certain amount of money may use 5% or 10% of these drugs, as Miss Alice MAK has said, dedicated-funds-for-dedicated uses, the money should be used to purchase the drugs recommended under the "health technology assessment". People will also understand that, under this system, a patient who pays certain amount of money, say $10 or $100, can only get drugs of certain standards. If they need better drugs, they have to purchase them elsewhere at their own expense. As such, there would be fewer controversies in the community.

Unfortunately, the Government has not given such instruction to the HA. Even if the HA wishes to do so, the order from above may not be transmitted to the lower level, such that different clusters will have different approaches. Regardless of whether they intend to save money or for other purposes, people have to face unnecessary trouble, and they cannot have "quality life years" as mentioned by Dr LEUNG Ka-lau. I hope this debate would help the Secretary to reflect on himself, so that he can make better efforts in respect of positioning and implementation.

Thank you, President.

MR CHAN HAN-PAN (in Cantonese): President, because of the recent filibuster, I often left home early and went home late. I sometimes watched the old Cantonese movie before I went to bed, and I noticed that the drug policy of the public healthcare sector was not standardized in the past, and it seemed that only the rich could afford to pay for the medication. Therefore, the Government has implemented the Drug Formulary (the Formulary) since 2005, with a view to ensuring equitable access by patients to cost-effective drugs of proven safety and efficacy by standardizing the drug policy and drug utilization in the Hospital Authority (HA). Regrettably, many patients still complain to me that they have to pay a high price for drugs. People who are chronically ill are even more worried because apart from fighting against serious illnesses, they also worry whether they have enough money for expensive drugs and whether they will become burden to other family members. Who can understand their physical and mental sufferings? Everyone wants to stay healthy, but if the drugs only LEGISLATIVE COUNCIL ─ 23 May 2013 12267 enable the patients to live longer, but have no quality of life, the Administration should address this problem seriously.

When I prepared my speech on this motion, I typed the words "Drug Formulary" in my computer to search for the relevant information. There are more than 1 000 information items on the Legislative Council website, and the focal points are about the handling and subsidization of self-financed drugs with safety net. As the name implies, "self-financed drugs" refer to drugs that patients need to purchase at their own expense. As defined by the HA, these drugs should meet two conditions: first, the drugs have been proven to have significant efficacy; second, if these drugs are classified as standard drugs of the HA, it would impose very heavy financial burden on the HA. This is also the most important point of contention in the community.

The Formulary implemented by the HA in 2005 included 1 300 drugs. In 2009, the HA separated the drugs expenditure from the expenditures on medical supplies and equipment and became an independent expenditure item. As other Members have just said, the drugs expenditure only accounts for about 10% of the overall expenditure, how then can the basic healthcare needs of the public be satisfied? Is it reasonable to shift the heavy burden on drugs expenditure onto patients? Can they afford the drugs expenditure? This issue should be pondered over by members of the community.

Although I cannot assert that more expensive drugs are more effective, it is an indisputable fact that the effectiveness of drugs is connected with their prices. When I discuss the definition of self-financed drugs just now, I have stated that significant efficacy should be the prime factor and prices are less important. If the drugs are too expensive, they may not be included as standard drugs.

At present, the Drug Advisory Committee (DAC), empowered to assess drugs, is low in transparency and has an excessive concentration of power. The DAC is also extremely mysterious. Apart from the fact that the Chairman of the DAC is Dr Allen CHEUNG, as announced on the HA's website, the information on other members is mysterious. The Formulary is revised and announced at irregular intervals and the information disclosed is incomprehensive. As drugs may involve huge benefits, the Government is worried that excessively high transparency will give rise to issues concerning the declaration of interests by members; however, given the excessively low transparency, how can the public 12268 LEGISLATIVE COUNCIL ─ 23 May 2013 monitor and have confidence in the DAC? It is also stated in the HA's document that the DAC will consult patients' organizations when necessary. Patients' organizations have reflected their views but I am not sure if the DAC would just listen to these views and maintain their attitude.

Let me given an example. Some time ago, I had exchanges with the Alliance for Patients' Mutual Help Organizations. The Alliance is formed by a number of Patients' Mutual Help Organizations, including the mutual help organizations of patients suffering from mental illness, cancer and heart disease. The Alliance regularly submits its views to the DAC but no response has been received. President, we must not forget that while scientific evidence of drugs is important, the patients are the real users and experts. I sincerely hope that, on the premise of declaration of interests, the authorities should enhance the transparency of the DAC as far as possible, including the course of discussion and the representativeness of members, so as to boost the public's confidence in the Formulary, and include more drugs with efficacy as standard drugs.

Another issue derived from the Formulary is the high costs of drugs. President, I believe nobody wants to get sick, but if a person unfortunately becomes ill, especially chronically ill, he badly needs drugs for treatment. As I have just mentioned, the present Formulary system lacks transparency, and quite a number of drugs with efficacy are self-financed, such as target therapy drugs for cancer patients. Even though the patients may apply to the Samaritan Fund for subsidies, the application procedures are complicated and there are lots of barriers. They and their family members have to undergo assets tests and other tests. Many patients tortured by serious illnesses are already in great pain, but they still have to bear the blow of not earning any income and not being able to support their families. The patients also fear that they may become a burden to their families; thus, they will suffer immense psychological trauma. More importantly, many target therapy drugs for cancer patients cost $80,000 to $100,000. Unlike general drugs for cold and influenza which can have treatment effect after taking one to two tablets, cancer patients need to receive repeated treatments, having to spend astronomical amounts on drugs. Even middle-class families may become poor. These drugs can only prolong the patients' lives, but deny them of quality of life, and hence the Government must attach importance to the difficulties of the patients. Hence, in my amendment, I emphasize that the HA's drug subsidy system should suit methods to the situation and give priority to the inclusion of drugs proven to be of significant efficacy but LEGISLATIVE COUNCIL ─ 23 May 2013 12269 extremely expensive as the HA's general subsidized drugs. The HA should also continue to include more drugs to benefit more patients.

President, lastly, on behalf of the DAB, I would like to express some views on the original motion and the amendments. The motion of Miss Alice MAK mainly wishes to perfect the HA's existing Formulary system, so that patients do not need to sell their flats for the sake of purchasing drugs to prolong their lives. This is consistent with the DAB's demands. Nevertheless, Miss Alice MAK proposes to abolish the Formulary system. Are there any advantages to the patients? In-depth study and consideration by the authorities and the public are required. We will abstain from voting on Dr Joseph LEE's amendment. Though item (6) of Dr LEUNG Ka-lau's amendment contains a novel proposal of optimizing the Samaritan Fund which will benefit patients, he boldly and decisively deletes from item (5) the measure to "adopt efficacy and patient safety as the overriding principle to efficacy and patient safety paramount principle", which is contrary to the principle of safeguarding the patients' interests; thus, we will oppose his amendment. As Mr Albert HO and Dr Fernando CHEUNG's amendments advocate expanding the scope of subsidized drugs and responding to the patients' demands, we will support these amendments.

I so submit, President.

MR ALBERT HO (in Cantonese): President, the Drug Formulary (the Formulary) system has been implemented for almost eight years, and it is time for a review. Ever since 2005, the framework of this system has remained the same, and there has been little change with its operational direction. The only change so far is that, with the Government's injection of $10 billion into the Samaritan Fund (the Fund) last year, the healthcare safety net has been expanded. Besides, the Community Care Fund now subsidizes patients of the Hospital Authority (HA) to use specified cancer drugs which have not yet been brought into the Fund safety net. This is an additional subsidy to the original safety net.

Eight years ago, the authorities introduced the Formulary in the light that the prescription policies varied among different clusters and hospitals under the HA. Because of these differences, patients of different hospitals received different prescription drugs. Also, there were different practices as to whether 12270 LEGISLATIVE COUNCIL ─ 23 May 2013 patients should contribute to the drug costs. In order to standardize the drug procurement criteria and the drug costs, the Democratic Party supported the introduction of the Formulary to protect patients' health by minimizing the differences. However, at that time, we also made a list of suggestions. Today, when we review this list, we find many of our suggestions have not yet been implemented.

Our first suggestion was that, for drugs which are clinically proven to be of benefits, albeit expensive, they should be fully subsidized by the HA without requiring a means test if they are confirmed by specialists upon assessment to be essential for patients under specific clinical conditions.

Secondly, as the formulation and the review of the Standard Drug Formulary do not only concern the HA and its medical staff but also the patients and the public, the authorities should ensure sufficient public participation in the decision-making process.

Up to date, these two suggestions are still unfulfilled. We will continue to fight for their full implementation.

Before discussing our first suggestion mentioned above, we must have knowledge about the four drug categories in the present Formulary. As some colleagues may not know much about them, I will spend some time repeating these four categories.

The first category is General Drugs. These drugs constitute over 70% of drugs in the Formulary and are provided within standard fees and charges. Most of the patients are taking drugs in this category.

The second category is Special Drugs. If patients suffer side-effects from taking General Drugs or are in need of better drugs, Special Drugs will be prescribed with specific specialist authorization and provided within standard fees and charges.

The third category is Self-financed Items (SFIs) with safety net. These SFIs are paid by the Fund for needy patients.

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The fourth category is SFIs without safety net. Drugs like slimming pills and Viagra fall within this category.

The suggestions of the Democratic Party mainly concern drugs in the second category. Yet, our suggestions are also relevant to drugs in the third category, which, according to the Formulary, are drugs proven to be efficacious. However, even if these drugs are indispensable to patients, the patients must pay for them out of their own pocket as they are too expensive to subsidize. This situation is not only unfair to patients but has also caused them great distress.

I remember that, years ago, there were a group of Thalassemia patients and their parents coming to the Legislative Council for a few times to lodge complaints. Those patients needed to have injection in their stomach every night, but the injections would lead to iron overload. In order to get rid of the excess iron, they had to take drugs which had many side-effects. The treatment made them live in great pain. At that time, there was a new drug which could free them from the pain of having injection in their stomach every night. Yet, that drug was very expensive. As far as I remember, it cost as much as $20,000 to $30,000 a month for every patient. I knew the parents of one of the patients. As they had a family income of $70,000 to $80,000, I asked them why their son was still receiving the old treatment when they should be able to afford the drug cost of $20,000 to $30,000. The mother burst into tears and said, "Yes, we can afford to pay $20,000 or $30,000 now. However, once my son has started to take the new drug, he cannot go back to the old treatment as it will be like falling from heaven to hell. But who can guarantee we will always have the same income and will never lose our jobs? If anyone of us is out of work, we will be in great trouble. The drug cost will possibly take up half of our family expenses. By then, can I be so hard-hearted and let him have the injection again? Therefore, I can just let him live in this pain. However, I will raise my voice in the Legislative Council, hoping that the Government will include this drug in the category of Special Drugs." Thanks to the efforts of many of our colleagues, we later succeeded in realizing their wish.

I believe there are lots of similar examples, and the Government really needs to review the Formulary. Just now, Dr LEUNG Ka-lau has told us how the Drug Advisory Committee (DAC) of the HA operates. According to Dr LEUNG, there are no criteria for the compliance of the DAC. It all depends on whether there is any senior doctor recommending a particular drug out of his/her 12272 LEGISLATIVE COUNCIL ─ 23 May 2013 own will or after being lobbied. Is that true? Is that how the DAC operates? No one knows. Therefore, the Democratic Party holds that there must be more public participation. The DAC and the Drug Utilization Review Committee must be reformed by inviting participation from different sectors, such as patients' organizations, academics and representatives of the healthcare sector. I think it is crucial to have their participation.

Moreover, the authorities should organize public hearings periodically to listen to stakeholders and experts before updating the Formulary. This is very important. Besides, the authorities should consider making these committees independent of the HA so that they can become decision-making bodies with real public participation.

In my view, as long as the transparency and public participation can be increased, public supervision will naturally be strengthened. By doing so, the committees will become more efficient and continue to make improvements by taking on board public views. They will then gain greater public recognition and higher credibility. Therefore, I support reforming these committees.

Of course, a lot of issues will have to be discussed. For example, an open debate should be conducted on the issue of cost-effectiveness and the concept of "quality life years", as mentioned by Dr LEUNG Ka-lau, and I think this will be conducive to the public.

Some Members have suggested abolishing the Formulary, to which I disagree as no one can yet think of a better system to replace the Formulary. However, I support increasing the percentage of drug expenditure to keep pace with the average percentage of drug expenditure of developed countries. Besides, we should reform and improve the mode of subsidy of the Fund.

I so submit and propose the amendment.

SECRETARY FOR FOOD AND HEALTH (in Cantonese): President, first of all, I would like to thank Miss Alice MAK for her motion on "Drug Formulary and drugs subsidy system", and Dr LEUNG Ka-lau, Dr Joseph LEE, Mr CHAN Han-pan, Mr Albert HO and Dr Fernando CHEUNG for their amendments.

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In this speech, I will give a brief account on the Hospital Authority Drug Formulary (the Formulary) and the drugs subsidy system. After listening to Members' speeches, I will give my response in the concluding speech.

The World Health Organization (WHO) has been actively promoting the concept of "essential medicines", which means the selection of drugs should meet the general healthcare priorities of the community. The relevant authorities should give due consideration to the disease prevalence, available evidence on efficacy and safety, and comparative cost-effectiveness. The WHO recommends health authorities around the world to establish their own mechanism for a systematic selection of drugs to promote the availability, accessibility, quality and rational use of medicines which are affordable to local governments.

In keeping with international developments, the Hospital Authority (HA) has implemented the Formulary since July 2005 with a view to ensuring equitable access by patients to cost-effective drugs of proven safety and efficacy by standardizing the drug policy and drug utilization in the HA.

At present, there are around 1 300 drugs in the Formulary. As just stated by a Member, these drugs are divided into four categories, namely: Category one, General Drugs; Category two, Special Drugs; Category three, Self-financed Items (SFIs) with the safety net of the Samaritan Fund (the Fund); and Category four, SFIs without safety net. General Drugs are drugs available for general use while Special Drugs are used under specific clinical conditions with specialist authorization.

Since the introduction of the Formulary, over 90% of drugs in the Formulary fall within the first two categories. In other words, the HA provides patients with most of the drugs in the Formulary at standard fees and charges which are highly subsidized by the Government.

In fact, the Government has given great financial support to the local healthcare system to provide the general public with affordable healthcare services. In recent years, there has been a sharp increase in the HA's expenditure on drugs prescribed under heavily-subsidized services. In the past five years, such expenditure surged by over 50% from $2.4 billion in 2008-2009 to $3.75 billion in 2012-2013. As for the HA's expenditure on drug procurement, it had also recorded an annual increase of more than 10%.

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In the same period, the Government provided the HA with over $700 million in phases, in addition to the recurrent subvention for the Formulary, to include 12 new drugs as Special Drugs in the Formulary and expand the clinical applications of 29 therapeutic groups of drugs.

For this financial year, the Financial Secretary has announced in the Budget passed earlier that we shall allocate an additional $44 million to include in the Formulary two chemotherapeutic drugs for cancer treatment and expand the application of two special drugs for patients with advanced Parkinson's disease and cancer.

As for drugs in Category three of the Formulary, that is, SFIs with the safety net of the Fund, they are generally drugs which are proven to be of significant benefits but extremely expensive for the HA to provide as part of its standard services. Patients who meet the specified clinical conditions and passed the means test of the Fund may be granted with a full or partial drug subsidy. Currently, the Fund covers a total of 19 drugs.

Regarding drug subsidies, the number of cases supported by the Fund increased from 803 in 2008-2009 to 1 745 in 2012-2013. In the same period, the amount of subsidies granted by the Fund was up from $73 million to $242 million per year.

The Government makes grants to the Fund from time to time for it to meet the surge of expenditure. In the last financial year, the Government provided an additional grant of $10 billion to sustain the operation of the Fund for about 10 years. These grants do not only provide a degree of certainty to the operation of the Fund, but also allow the HA to relax the financial assessment criteria of the Fund to benefit more patients in need.

Moreover, the HA has further relaxed the financial assessment criteria of the Fund for SFIs since 1 September 2012 by introducing a "disposal capital deduction". It has also simplified the tiers of patients' contribution ratio and reduced the maximum contribution level of patients to 20% of their annual disposable financial resources.

Lastly, I would like to outline the review mechanism of the Formulary. The HA has an established mechanism in place for experts to make regular LEGISLATIVE COUNCIL ─ 23 May 2013 12275 assessment on new drugs, as well as reviewing the Formulary and drugs with the Fund safety net. They will continue to develop the Formulary by referring to a set of core values, including evidence-based medical practice, rational use of public resources, targeted subsidy and opportunity cost considerations. The review is based on scientific and clinical evidence in assessing the efficacy, safety and cost-effectiveness of drugs. The experts will also consider technology advances in treatment options, actual experience in the use of drugs, and the views of professionals and patients groups.

The coverage of the Formulary and the Fund has been expanding over the years. In July 2005, when the Formulary was first introduced, the Fund only covered four drugs. However, as at March 2013, 18 SFIs without safety net were repositioned as SFIs with the Fund safety net, and seven SFIs with the Fund safety net were repositioned as Special Drugs provided within the standard fees and charges. The review of the Formulary is stringent, and the established mechanism adopted for years is proved to be effective. We will continue to listen to the opinions and suggestions of patients groups and review the coverage of the Formulary and the Fund to benefit more patients.

President, I so submit. I will make a general response after listening to the views of Members on the motion and the amendments.

Thank you, President.

DR PRISCILLA LEUNG (in Cantonese): President, it is miserable to get sick, not to mention being chronically ill. If a member of a family is chronically ill, all family members, old and young, will be unhappy. It is a fact that we all know. Therefore, if our healthcare system can help them ease their hardship, it will definitely be a benevolent policy.

Year after year, when I speak on the Budget, I keep asking the Government to include more expensive drugs in the Drug Formulary (the Formulary). For the patients and their family members, they will spend all they have so long as there is a chance of survival, no matter how slim the chance is. Just now, a number of colleagues who are familiar with the healthcare system have made a lot of comments about the Formulary. I think I can only give my views on the Formulary from the perspective of users or the general public.

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There are now 1 300 standard drugs in the Formulary of the Hospital Authority (HA), among them, 78% are General Drugs, and 22% are Special Drugs which can only be used with specialist authorization. This point has already been mentioned by a number of Members. Currently, the annual expenditure on drugs is around $3 billion, accounting for 10% of the overall annual expenditure of the HA. Among various drugs, people are most concerned about target therapy drugs for cancer and specific drugs for hereditary diseases and dementia because many of them are not yet covered by the Formulary.

We often hear cases about patients in the public healthcare system fall outside the safety net when they have to take some particular drugs. This is because the drugs prescribed are self-financed items and have to be paid by the patients at their own expense. Unfortunately, those drugs are often expensive. Their prices may range from some $10,000 to several tens of thousand dollars. Sometimes, the drug cost may even be over $100,000. Recently, I chatted with some people who, I believe, have grievances against this system. One of them is a retired professor aged above 70. When he was at work, he was covered by medical insurance. Therefore, he could afford to consult private doctors. However, after he retired, he is no longer covered by the insurance and hence has to seek consultation at public hospitals. He has to wait for a very long time to see a doctor at public hospitals. He also has to wait for a long time just to get insulin to treat his diabetes. Therefore, he is forced to spend his limited pension on healthcare services.

Also, we should note that drugs for hypertension, which are mentioned by Dr Joseph LEE just now, and even drugs for mental patients are very often not covered by the safety net. In this situation, who will be affected? They are the group of people, the same group of people mentioned in our previous discussion on legal aid, who are miserably squeezed in the middle. When they apply for drug subsidies, they have to go through the means test of the Samaritan Fund (the Fund). In our view, the total value of disposable capital set for this means test is outdated because a singleton and a four-person family can only have a deductible allowance of $212,000 and $436,000 respectively. In today's Hong Kong, this sum of money can easily be exhausted, particularly when the patient is a retiree. He may not even be able to leave himself with some "funeral fund". As patients are likely to have more disposable capital than allowed, they can hardly obtain drug subsidies for self-financed items in the Formulary.

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Even if a patient has successfully applied for a subsidy, he is required to share part of the drug cost when he has a specified amount of disposable financial resources. If his disposable financial resources range between $180,000 and $280,000, the contribution ratio is as high as 20%. It means he has to pay $56,000 for his drugs. If his disposable financial resources exceed $480,000, his required contribution will amount to $100,000. If the patient has a job, he may consider it worthwhile to pay for better health. For those who are covered by insurance, they will even be willing to spend on private healthcare services for better quality treatment. However, for people who have retired, or who have been seriously or chronically ill and have no income from work, they cannot afford to pay several thousand dollars for drugs. As many patients are the breadwinners in their families, they are not willing to spend money on drugs. It is not that they really cannot afford to pay for the drugs, but after considering the pros and cons, they would rather wait for death.

I really feel sad for them because they have paid taxes in Hong Kong for their entire life. However, when they are most in need of help, has our existing healthcare safety net give them a helping hand? Although the Secretary has said that lots of additional resources were allocated to the Fund last September, in my view, the input of resources is still far from sufficient.

We have all along been proposing to the Government that input in healthcare resources is in a way like making long-term investment. For example, as the Government has a surplus, and the provision for healthcare services is close to $45 billion …… in my opinion, the Government should not just provide a recurrent provision, it should also earmark $10 billion for public healthcare every year in its Budget like saving up money, regardless of whether these monies will later be spent on drugs or staffing. With these allocations, which operate like long-term savings, the Government will be able to maintain its healthcare services even if it suddenly has to spend a substantial amount on comprehensive retirement protection in the future. Therefore, it should accumulate these savings bit by bit.

President, we greatly support Miss Alice MAK's suggestions in today's motion, such as relaxing the assessment criteria of the financial test and providing tax concessions. As for Mr Albert HO's suggestion on making the drug utilization review mechanism independent of the HA, at this stage, we have, after discussion, reservation about it as we worry it will cause redundancy. However, 12278 LEGISLATIVE COUNCIL ─ 23 May 2013

I think the HA should review and improve the management of the Formulary. Besides, we are open to the options in resources allocation. We support any increase in the allocation of resources for the Formulary and the public healthcare services as a whole, irrespective of whether the increase is 10% or 15%.

President, I so submit.

MR CHEUNG KWOK-CHE (in Cantonese): President, earlier, a friend of mine, who is a social worker, had unfortunately contracted cancer. She told me a story: one day, she went to the Clinical Oncology Department of Queen Mary Hospital to attend a follow-up consultation. When the doctor was examining her, she heard a patient and the patient's family discussing the patient's condition with the doctor in the next room. The doctor told them that the patient needed to take self-financed drugs for six months, which would cost about $30,000 a month, and the patient's condition would probably improve. After the doctor mentioned this price, the next room fell into dead silence. My fellow social worker told me, "Even I, who have been a social worker for years, will find it hard to afford a treatment which costs $180,000. How will the grassroots ever be able to afford the cost?"

It is announced in this year's Budget that starting from this year, the Hospital Authority (HA) will be provided with additional funding of $44 million, part of which will be used to include in the Drug Formulary (the Formulary) two chemotherapeutic drugs for treating respectively squamous cell carcinoma of head and neck and malignant pleural mesothelioma. Hence, patients need not buy these drugs at their own expense, and about 65 patients will be benefited. Coupled with the expansion of the clinical application of two drugs used for treating Parkinson's disease and various types of cancer, a total of 2 200 people will be benefited. President, this is all the injection made by the Government this year to lessen patients' expenditure on drugs. Last year, the Government's surplus reached $66.7 billion, and the Budget has arbitrarily injected tens of billions of dollars into a number of funds, but the injection into the Formulary is only $44 million. What can this amount of money do? The Hong Kong Mucopolysaccharidoses and Rare Genetic Diseases Mutual Aid Group alone has pointed out that there are about 38 patients in the mutual aid group, whose drug expenses amount to some $700 million a year. The mutual aid group has remarked that if the Government sets up a $2 billion seed fund for this disease, it LEGISLATIVE COUNCIL ─ 23 May 2013 12279 will be sufficient to cover their needs. At present, regarding the financial assistance for these drugs, the Government entirely relies on the Samaritan Fund (the Fund). Last year, given the social pressure, the Government injected $10 billion into the Fund, but during the course of helping patients to make their applications, my colleagues found that either the hurdles were unreasonable in number, or it was very difficult for the patients to obtain approval for using the expensive new drugs, which resulted in delay in treatment.

In March this year, the Food and Health Bureau stated in public that there was a rising tendency in the number of cancer relapse cases and deaths. For example, in 2010, the number of cancer relapse cases was more than 26 000, while the number of deaths reached 13 000. I am concerned about how many cases among these rising figures were related to the fact that the patients were unable to receive effective medicinal treatment. In fact, as pointed out in a clinical research report of the Faculty of Medicine of The Chinese University of Hong Kong last month, the efficacy of an oral target therapy drug for lung cancer is one to two times higher than that of chemotherapy. Moreover, patients may take the drug on their own and do not need to go to hospitals or clinics to undergo chemotherapy. The professor in charge has clearly said that he hopes the Government can include this new drug in the Formulary as soon as possible because, as this new drug costs $50,000 to $60,000 a month, ordinary families can hardly afford it. The Hong Kong Anti-Cancer Society also has a case where a patient was diagnosed with terminal colorectal cancer. After he underwent a surgery and chemotherapy, the result was not satisfactory. Eventually, after the patient received a subsidized target therapy treatment, his condition gradually improved.

President, I need to reiterate my criticism that the Policy Address and Budget of this year address social problems through the establishment of funds. They did not tackle problems with policies. Instead, they have turned all the problems into money issues, "treating the head when the head aches and treating the foot when the foot hurts". However, the provision of only $44 million in the Budget to tackle the problems of the Formulary represents a complete lack of sincerity.

I also remember that at a meeting of the Panel on Health Services early last year on the financial assistance provided to patients who needed to buy drugs at their own expense, the government document did not only mention the Community Care Fund, it even counted in community pharmacies or charitable 12280 LEGISLATIVE COUNCIL ─ 23 May 2013 funds operated by non-governmental organizations (NGOs), adding that more NGOs were welcomed to explore and introduce different schemes to provide needy patients with subsidies to buy the drugs they needed. Actually it was only because the Government had turned a blind eye and neglected the patients' predicament that NGOs in Hong Kong had deployed their tight funding for the provision of services or raised money to support these helpless patients. Yet the Government, on the contrary, took them as its own contingency measures. This was totally irresponsible.

As we could see, the current Formulary is unable to meet the patients' needs. The reason for this is, apart from the inaction of the Government which keeps control over social service expenditure, patients have no access to mechanisms which formulate policies. I concur with Dr Fernando CHEUNG's suggestion that the Administration should revise the composition of the HA's Drug Advisory Committee and Drug Utilization Review Committee by including representatives of organizations formed by patients or patients' family members.

President, I request the Government to put in more resources to subsidize patients in purchasing expensive drugs, set a ceiling on the proportion of medical expenditure to income for the Fund, whereby any medical fee in excess of the ceiling will be fully subsidized by the Fund, and provide tax relief to these patients' families.

President, I so submit.

MR FRANKIE YICK (in Cantonese): President, apart from being tortured by their illnesses, the chronically ill have to shoulder tremendous expenses on drugs and healthcare, thus living a hard life. Hence, not only should the Administration provide quality healthcare services to improve patients' condition, it also needs to put in place a suitable subsidy scheme so that patients in need can receive financial assistance for the purchase of drugs. A sound subsidy scheme is equally important to all strata in society, including the middle class and the grassroots. For this reason, the Liberal Party has urged the Government for years to appropriately increase the healthcare expenditure, including injection into the Samaritan Fund (the Fund) and expansion of the types of drugs in the Drug Formulary (the Formulary), so as to help more patients.

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Starting from 1 September last year, the Government has relaxed the financial assessment criteria of the Fund. The drug costs which patients have to contribute will not exceed 20% of their annual disposable financial resources. The reduction of this contribution ratio from the original 30% to 20% is generally welcomed, but we will welcome it even more if, where financially viable, the ratio can be further lowered.

The Liberal Party is of the view that in vetting the patients' applications to the Fund, the Government should consider further relaxing the application threshold on a case-by-case basis, so as to benefit more patients in need. However, we do not concur with the proposal in the original motion and amendments to use the income and asset of individual applicants as the basis, which will replace the current long-standing practice of using households as the basis. The reason is that the practice of using households as the basis for applications to the Fund aims to encourage mutual support among family members. The same principle also applies to the Comprehensive Social Security Assistance, legal aid and education allowance schemes. We find it inappropriate to recklessly change the existing mechanism now.

The Liberal Party has all along supported expansion of the Formulary. In the Budget of the last-term Government, Financial Secretary Mr John TSANG had announced injection of $10 billion into the Fund to enhance the subsidies for the chronically ill to purchase drugs, as well as increase the types of subsidized drugs. In this year's Budget, the Financial Secretary has further announced the plan to provide $44 million ― of course, just now some Honourable colleagues regarded the amount insufficient ― to include two chemotherapeutic drugs in the Formulary. The Secretary has made a briefing on that earlier. These measures will benefit about 2 200 patients.

Despite this, we consider that the Administration still has certain room for improvement in respect of its support for the chronically ill and cancer patients because cancer has become more and more common, but the healthcare and drug expenses have remained costly. A lot of people in the middle class have to sell their properties or assets in order to meet the expenses, so it will be even harder for the grassroots to cope with such expenses. Hence, the Liberal Party supports the expansion of the Formulary to enable more patients to take drugs with greater efficacy to enhance the treatment result, and alleviate their financial burden so that they would not spend all their money on purchasing drugs.

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Besides, on the cost-effectiveness of drugs, we are of the view that the Hospital Authority (HA) should not regard economic cost as the sole consideration because if patients use drugs which are expensive but more effective, the community's healthcare cost for them will be reduced. In the long run, this will be beneficial to the community at large. Therefore, we hope the Government will further address this issue.

The original motion proposes to abolish the Formulary system in the long run. The system commenced in 2005, and in the past eight years, we found its operation generally normal. Of course, any system will have room for improvement. We do not support its abolition at the present stage. Instead, it should be our prime objective to perfect the system.

President, lastly, I would like to talk about the proposal in the motion to reform the HA's Drug Advisory Committee and Drug Utilization Review Committee and include more representatives of patients' organizations so as to increase the transparency. In our opinion, to make objective assessment on the efficacy of drugs, committee members need to have professional knowledge of pharmacy and medicine. The existing consultation mechanism has taken into account the views of patients' organizations, and we consider that the mechanism has been effective. Of course, this morning we have heard criticisms and suggestions made by a number of Members. We are of the view that if, after thorough examination, the Bureau finds it necessary to make improvement, such good advice should be taken accordingly. We adopt an open attitude in this regard.

Besides, the Liberal Party has reservations about the proposal to make public the records of the committees' meetings. The reason is that the HA has already uploaded the decisions made by the Drug Advisory Committee in assessing applications of new drugs, together with the references used in assessing such applications, onto the HA's website. The Drug Advisory Committee will also publish the outcomes of each quarterly meeting, setting out the names of all the drugs which are approved to be included in the Formulary, those which are pending approval, or those which are rejected, with justifications for rejecting the drugs. For this reason, we do not find it necessary to make public the records of the committees' meetings, so as to avoid posing unnecessary pressure to the committee members and ensure that approval of drugs will be conducted in an impartial and objective manner. Just now we also heard LEGISLATIVE COUNCIL ─ 23 May 2013 12283

Members propose some new mechanisms which we think the Bureau should consider.

Regarding the original motion and the various amendments, since they each contain something we support and oppose, the Liberal Party will abstain from voting.

President, I so submit.

MISS CHAN YUEN-HAN (in Cantonese): President, when Miss Alice MAK discussed with us and said that she wished to propose this motion, we had talked about the following question: each year, each Member has only one opportunity to propose a motion for discussion, so how should we select the topic? In the end, we fully agreed to bring up this topic. The reason was that during Members' contact with the public, they often came across those situations mentioned by the Honourable colleagues just now. That is, members of the public have expressed their grievances that when they are ill, very often they are subject to medicinal, financial and different familial constraints and hence their course of treatment is riddled with difficulties.

President, I have been engaged in the work of the Council for a very long time. Eight years ago, when the Government said it would introduce the Drug Formulary (Formulary), I objected. What was the reason? It was because apart from education, healthcare was the service from which all Hong Kong people should benefit without having to go through any means test. The purpose in introducing the Formulary was to limit the drugs to be used by the public. We and some community groups objected to such arrangement at that time. Nevertheless, the Formulary has already been in operation for eight years. Members may think that after all, it is "better than nothing". Having discussed with Miss Alice MAK for quite a while, I also consider that it is "better than nothing". My view is that nowadays, the Formulary has become a double-edged sword. Many organizations and doctors opine that it is "better than nothing". With the Formulary, at least there is a basis and control. When a doctor wants to use a drug, at least the hospital will know where to get the drug. Moreover, as this system applies to all the seven clusters under the Hospital Authority (HA), such an approach can be regarded as relatively fair. It is also difficult for me to object to the information obtained by Miss Alice MAK from her research. 12284 LEGISLATIVE COUNCIL ─ 23 May 2013

Despite this, it does not mean that the many problems of the current Formulary do not exist.

The present problem is, today's predicament is resulted from the objections raised by community groups and I against the Formulary back then. I think both sides of the story are true. Some people who are taking drugs covered by the Formulary have requested not to abolish the Formulary, but if it is not abolished, the situation mentioned by other Honourable colleagues today will arise, that is, patients with severe illness will have to buy expensive drugs at their own expense. We have met with many different groups, and we feel rather uncomfortable with their situation. With regard to the plight faced by the mentally ill, cancer patients or people with blood problems, sometimes we are quite helpless, particularly when most Thalassaemia patients are children. When faced with a vast number of cases, we feel rather helpless. In one of the top 10 wealthiest places in the world, why do patients have to face such a situation, Dr KO?

Besides, as I have said many times before, this is my personal experience, which is also the experience shared by many people. A drug with fewer side effects was surprisingly not included in the Formulary. The reason was that its price was high. The drug which I was talking about was aspirin. On one occasion, I do not know why, I happened to go to a public hospital to seek consultation. I seldom use the resources of public hospitals, but on that occasion when I happened to go there, the doctor asked me to take stomach antacids, and I requested to take aspirin. In the past, when I suffered from high blood pressure, my doctor only asked me to take aspirin for six months to relieve the strain on the blood vessels, and that would do, so there was no need to take any antacid. When the doctor asked me to take antacids, I told him there was no such need. However, too bad, I really got a stomach ache later. Later, I consulted my friends and family members who knew about medicine. They told me that since this drug was cheaper, its efficacy was poorer, but I will not elaborate on their explanations here.

The same situation also applies to drugs for breast cancer. I know it because it is my personal experience. If patients take the cheaper drugs prescribed by the Government, the chance of relapse may be bigger; if they take drugs which are more expensive, the chance of relapse will be smaller. Sometimes when a patient came to me, I would say to her, "Take my drug box LEGISLATIVE COUNCIL ─ 23 May 2013 12285 and show it to the doctor and see if he can prescribe this drug." I would like to point out that these are real cases. None of the patients have any say as to which drugs can be included in the Formulary. As the population ages, an increasing number of strange and unusual illnesses will emerge, yet the HA has included only 10% of the drugs in the Formulary. This is actually like cooking without rice, barring patients from getting their drugs.

Besides, there is another situation. Many people say that if patients cannot afford the drugs, they can simply apply for subsidies under the Samaritan Fund. I would like to tell Members that they may not get the subsidy since income of the whole family will be counted in. Then what should be done? As I have said from time to time, this is similar to the cases of "well-off tenants" in public housing. Earnings of children have been calculated as income of their elderly parents, though actually they have not given that much money to their parents, but their parents would end up being "well-off tenants". What should be done? In the end, these children were forced to leave the public housing. The present situation is that when parents fall ill, they cannot ask their children to move away so that they will be eligible for treatment. I wish to point out that this is another problem to which we cannot turn a blind eye.

Besides, some people said to me, "Miss CHAN, I have painstakingly saved some money. Apart from medical treatment, I still have to support my living." It is most important to have three things in the twilight years of our lives, namely, a roof over the head, a certain degree of financial strength and some money for medical consultations. Now, however, as long as people have some money, they will not be eligible to get any subsidy. How ridiculous that is! I really feel angry if these problems are neglected any longer. So I said, okay, Miss Alice MAK, use this precious opportunity of proposing a motion, which you may have only once a year, to bring up this topic. Some people may wonder why we propose a motion debate on the Formulary. Let me tell you, this affects many Hong Kong people. To a greater or lesser extent, even all the 7 million people in the territory may be affected. Let me stress over and over again, this is a double-edged sword. If you take it, there will be such and such problems; if you do not take it, there will be other problems. I think the Government has to look at the issue squarely. If it still does not work, the Government may as well give it up completely and only adopt such approaches which are helpful to patients. Of course, you will say, no way, our medical fees are so low, how will it be feasible? Dr KO, I concur with what you have said. Compared with other 12286 LEGISLATIVE COUNCIL ─ 23 May 2013 advanced countries, our medical fees are the lowest. Compared with the neighbouring countries, our fees are close to those of Singapore, but when compared with South Korea and Japan, our fees are lower. Frankly speaking, even when compared with China, our fees seem to be relatively low. Hence, we are unable to afford the overall healthcare expenditure. The Government must give due consideration.

President, I support our fellow colleague.

MR KWOK WAI-KEUNG (in Cantonese): President, if given the choice, nobody wants to get sick. We do not want to get sick, although birth, old age, sickness and death are inevitable stages that everyone has to go through, we still hope that in case we get sick, it is nothing serious because minor illness is a blessing. But if unfortunately, it is one of the illnesses just mentioned by Honourable colleagues such as cancer, Parkinson's disease, or special illnesses like squamous cell carcinoma of head and neck or malignant pleural mesothelioma, we all want to get cured. Should the patient be our family member, I think we would try our best to provide him with the best medication, and we want to help no matter how expensive the medication is. But if we encounter difficulties in the course of helping, can the Government understand our situation, and what support can it provide?

Today, I would like to express some of my views on the mechanism of the Samaritan Fund (the Fund). The Fund only covers 19 self-financed drugs. But in fact, only a handful of patients, or less than 5% of the total number of patients using self-financed drugs, can successfully apply for subsidies through the Fund each year. Calculated on the basis that some 47 000 patients were using self-financed drugs in 2012, Members can see how small the number really is if it is just 5%. What is the reason behind the small number of applicants or successful applicants? Is it because all patients are very wealthy? I think Members would know that it is definitely not the case. On the contrary, the actual cause is the excessively high threshold adopted by the scheme under this mechanism.

Regarding the Fund, I would like to raise two questions. The first question lies with the unrealistic eligibility criteria for application. First of all, total household income is used to calculate the applicant's disposal financial resources, with only a very small amount of allowable deductions. For example, LEGISLATIVE COUNCIL ─ 23 May 2013 12287 the amount of allowable deductions for a three-member household is just $12,000-odd. Of course, I doubt very much if $12,000-odd is the amount of monthly or yearly allowable deductions? If it is a yearly figure, the amount of allowable deductions is indeed terribly small, considering that even the basic allowance under salaries tax is as much as $100,000 per person. Why then only $12,000-odd of allowable deductions is provided for the entire three-member household?

In addition, a more reasonable deductible allowance on assets is provided. The deductible allowances for one-person and three-person households are $200,000-odd and $370,000 respectively. But frankly speaking, many people have assets worth $100,000 or $80,000, in particular, middle-class people who would make investments or buy stocks, or they are home owners themselves, or they would invest in properties or hold other assets. If everything is included in the calculation, the middle class could soon become the proletariat, as just mentioned by Honourable colleagues, because patients receiving subsidies have to make a 20% contribution towards drug expenses. If unfortunately, a patient needs to use very expensive drugs and his treatment lasts for five years, all his assets could be exhausted after five years.

Moreover, there is another situation which has also been mentioned by Honourable Members. Patients with serious chronic illnesses have the greatest need for family care because it is likely that they can no longer work or take care of themselves. But if family members live with the patient for the sake of taking care of him, all their assets would be calculated, and the patient would feel sad because he thinks that his family members do not only have to take care of him, but also have to sell all their assets for his treatment. No matter whether the drug is meant to provide just pain relief or a complete cure eventually, the patient would still feel very depressed as he has to rely on other people for care, and also deplete all their savings. Is that what the Government wants to see?

As I just said, it is very difficult to apply to the Fund for subsidies. Hence, many patients have to rely on lower-quality drugs which reduce the treatment effect, prolong the course of treatment, or produce greater side-effects. This would impact the life of patients directly, which absolutely contradicts the Government's intention of helping patients resume a normal life after medication.

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Furthermore, regarding the criteria of clinical assessment, I would like to give an example concerning the disease of multiple sclerosis. The relapse rate of multiple sclerosis can be reduced by interferon treatment, but at a cost of nearly $10,000 per month. Although patients suffering from multiple sclerosis patients can apply for subsidies from the Fund, they must first pass a so-called walking test of 100 m before their applications can proceed to the next stage of means-testing. However, if the patients do not take interferons, their condition would deteriorate rapidly with worsening dysarthria, or they may become wheelchair-bound immediately.

In addition, with regard to the second question about the criteria of drug prescription, there are basically no guiding principles at all. I do not know whether what was mentioned by Dr LEUNG Ka-lau just now is true or not, that is, many doctors would assess the "quality life years" of patients, or the extent of their recovery, before subsidies can be approved. That is also a criticism against the Fund, and I hope the amount of subsidies provided through the Fund can be (The buzzer sounded) …… increased further.

PRESIDENT (in Cantonese): Mr KWOK, your speaking time is up.

MR KWOK WAI-KEUNG (in Cantonese): Thank you, President.

MR WONG KWOK-HING (in Cantonese): President, I speak in support of Miss Alice MAK's motion. I hope that this motion on Drug Formulary (Formulary), proposed by Miss Alice MAK on behalf of the Hong Kong Federation of Trade Unions, would be supported by all Members with or without political affiliations.

President, I have been very attentive to the speech made by Mr Albert HO earlier, but unfortunately he is not present at the moment. In the amendment, Mr HO has deleted item (7) of Miss Alice MAK's original motion, that is, "to provide tax relief, so as to alleviate the financial burden of patients or their family members arising from the purchase of drugs at their own expense". I am very puzzled why the Democratic Party would delete item (7) of Miss Alice MAK's original motion for it does not only reflect patients' needs, but also the strong LEGISLATIVE COUNCIL ─ 23 May 2013 12289 aspiration of Hong Kong's middle class. I have listened very attentively to the examples cited by Mr HO. He said that a Thalassaemia patient spends $20,000 to $30,000 on drugs each month but receives no financial assistance at all. This is precisely the strong aspiration of the middle class. And yet, in Mr HO's earlier speech, he has not explained why the relevant proposal should be deleted. I wonder if his comrades from the Democratic Party would offer help by explaining why he deleted the relevant proposal in Miss Alice MAK's original motion, which is pretty weird. If the Democratic Party wants to help the middle class, it should not delete Miss Alice MAK's proposal but should support the proposed instead. But so far, I have not heard of any explanation.

In fact, Miss MAK's motion does not only aim to help the grassroots, but also to request for tax relief for the middle class and needy patients. Noting that none of the existing mechanism can help them, thus forcing them to purchase the drugs out of their own pocket, it is only reasonable for the Government to provide assistance by way of taxation. Should the Government exert greater effort in this regard? I hope that Dr KO will fight for us.

Dr LEUNG Ka-lau has made a very good point and he did speak for his profession. After all, the truth is that the Government does not have enough money. However, it does not mean that it can wield its axe at the patients' life-saving drugs. Instead, additional resources should be secured from the Financial Secretary. If the Hospital Authority finds the annual provision of $30 billion to $40 billion insufficient, can it request additional resources from the Financial Secretary? In fact, given the substantial annual surplus of the Government, an increase in the expenditure on drugs from 10% to 15%, as Dr LEUNG Ka-lau has suggested earlier, would only incur an additional cost of $2.35 billion a year but could add up to a total of $7.05 billion. In that case, there will be no need to implement the Formulary. As Dr LEUNG has said, the percentage of expenses on drugs for the 34 member countries of the Organization for Economic Co-operation and Development is 14% to 15% on average, the level at which the relevant problem can be resolved and also save the trouble of maintaining the Formulary. This explains why Miss MAK proposed "to consider abolishing the Formulary system in the long run". The Formulary was implemented in response to the imposition of restrictions on the Government's drugs expenditure. Given that the size of the "cake" is limited, new drugs of better efficacy will naturally be more expensive. The inability to increase drugs expenditure has prompted the Government to develop the Formulary to impose 12290 LEGISLATIVE COUNCIL ─ 23 May 2013 various restrictions. President, I hope the Government would understand that human life is the most precious asset, I therefore do not see the need to impose the relevant restrictions.

Apart from Miss MAK's proposal for the Government to provide tax relief for people purchasing self-financed drugs, should the Government also consider providing tax relief for people who have taken out medical insurance from a long-term and proactive perspective? I hope that Secretary Dr KO Wing-man will also fight for us as this is fundamental. As a matter of fact, many middle-class people have come to realize that public hospitals may not be able to cater for their needs. Thus, they would take out medical insurance on their own so long as they can afford it. And yet, no tax relief has been provided in this regard. Should the Government actively consider about this?

Lastly, I would like the use the remaining one minute or so to respond to the speech made by Mr CHAN Han-pan earlier. Although Mr CHAN has proposed an amendment, he indicated that he would abstain from voting on Miss MAK's original motion, which makes me feel very puzzled. I tried to figure out the difference between Miss MAK's original motion and Mr CHAN's amendment, but I fail to see any difference at all. While Miss MAK proposed to "consider abolishing the Formulary system in the long run", Mr CHAN deleted the word "consider" and replaced it with "expeditiously and comprehensively review the Formulary system, give priority to the inclusion of drugs proven to be of significant efficacy but extremely expensive as HA's general subsidized drugs to benefit more patients, and study the feasibility of". After meticulous comparison, I still fail to see the difference between the two proposals. How does Mr CHAN's proposal to "study the feasibility of abolishing the Formulary system in the long run" differ from Miss MAK's proposal to "consider abolishing the Formulary system in the long run"? Why would he abstain from voting on Miss MAK's original motion? I find this pretty weird.

I therefore call on Members from the Democratic Alliance for the Betterment and Progress of Hong Kong to change their stance and support Miss Alice MAK's motion to avoid becoming a laughing stock. I really cannot tell the difference between the two proposals, yet he vowed to abstain from voting on Miss MAK's original motion. It sounds a joke to me. We will, however, abstain from voting on the amendment proposed by Mr Albert HO of the Democratic Party for reasons that I have just explained.

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

(No Member indicated a wish to speak)

PRESIDENT (in Cantonese): Miss Alice MAK, you may now speak on the various amendments. The speaking time limit is five minutes.

MISS ALICE MAK (in Cantonese): First of all, I am very grateful to the Members who have spoken. Perhaps it is too early now, not many Members have spoken. I am also very grateful to Members who have proposed amendments. Originally, there were five of them, but we only have four today. I will focus on giving responses to Members' amendments.

Firstly, it is Dr LEUNG Ka-lau's amendment. As Mr WONG Kwok-hing has said earlier, Dr LEUNG is a member of the trade and is very professional. His speech has enhanced our understanding. In item (6) of his amendment, he proposed to allow applicants to choose "individual" or "household" as the assessment basis. We consider this an improvement of my original motion as the dual-track approach would enable patients to choose the declaration arrangement that best suits them, therefore I will support Dr LEUNG Ka-lau's amendment.

As the amendments proposed by Dr Joseph LEE and Mr CHAN Han-pan have included some reasonable requests to enrich my original motion, I will support them as well. Mr CHAN Han-pan indicated that he would abstain from voting on my original motion, but as Mr WONG Kwok-hing has said, we cannot figure out the difference between "consider" and "study the feasibility of" abolishing the Formulary system in the long run. We feel puzzled. Anyway, it does not matter if he insists to abstain from voting. We will still uphold our spirit and principle and support his amendment. We certainly hope that he will pull back from the brink and consider changing his stance after careful consideration of our wordings. In order to work together for the interests of the patients, the Democratic Alliance for the Betterment and Progress of Hong Kong should support the original motion proposed by the Hong Kong Federation of Trade Unions.

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Regarding Mr Albert HO's amendment, as I have said, we have no idea why he deleted the proposal on tax relief. Noting that expensive drugs have imposed a heavy financial burden on the middle class, I have given special consideration to the views expressed by patients' organizations in the original motion. The example cited by me earlier is a good illustration of the situation. A single mother ceased to receive financial assistance after her son graduated, and from then on, her son has to foot the drug bill. He told me, "I do not mind buying drugs for my mother, but how come I am not granted any allowance though I have paid tax?" Even if Mr Albert HO does not listen to me, I hope that he would listen to this patient's son. After all, this is not a special case and as I said earlier, similar cases can be found in Taiwan. I hope that Mr Albert HO would consider supporting my motion.

Originally, Dr Fernando CHEUNG has also proposed an amendment, but he is absent today and thus unable to propose it. We have no objection to his amendment except that he proposed to delete "to consider abolishing the Formulary system in the long run" towards the end of his amendment. Hence, we cannot support it. Both Miss CHAN Yuen-han and Mr WONG Kwok-hing mentioned earlier that the Formulary was developed because of an uneven distribution of resources. Should the resource input for drugs be reliable and sufficient, there are absolutely no reasons to develop the Formulary. What is more, the proposed abolition seeks to convey a message that if the Government fails to implement the abovementioned proposals, the Formulary should better be abolished. The last thing we wish to see is the Formulary being turned into a disservice out of good intentions. Supposedly the Formulary is implemented to facilitate the utilization of resources and help doctors and patients, but it turns out that doctors have been accused of not prescribing certain drugs while the patients failed to get the desirable drugs. We hope that a review could be conducted by the Government. If no improvement can be made to the Formulary after the review, or all efforts are futile as Mr Frankie YICK has described, we would rather abolish the Formulary altogether. Our ultimate goal is to safeguard the interests of patients and ensure that they receive the best treatment. We do not want to see doctors being placed in a difficult position or often accused by patients for not prescribing certain drugs. We observe that unreasonable disputes have often arisen between patients and doctors in hospitals, which we consider unnecessary.

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Therefore, I call on Members of the DAB again to support the original motion proposed by the FTU. Thank you, President.

DR FERNANDO CHEUNG (in Cantonese): Sorry, this morning, I have to handle a case where a girl student of Chun Tok School was indecently assaulted by a teacher, so I did not manage to come back to propose my amendment. I understand that time is running short, President, would you allow me to speak now?

PRESIDENT (in Cantonese): Dr Fernando CHEUNG, please speak.

DR FERNANDO CHEUNG (in Cantonese): Sorry, I have just returned.

PRESIDENT (in Cantonese): It is okay. Please take your time.

DR FERNANDO CHEUNG (in Cantonese): I just heard Miss Alice MAK's speech on the Drug Formulary (the Formulary). We do have very strong views about the development of the Formulary for it has brought disastrous consequences and many patients have been deprived of medical treatment because they have no money.

I have dealt with many cases over the past few years, including some involving rare diseases such as Mucopolysaccharidoses, Pompe disease and Gaucher's Disease, and the relevant drugs are really very expensive. When the Government formulated the Formulary, it grouped the drugs into different categories. Initially, drugs with proven efficacy but at very high costs were categorized as self-financed items (SFIs), whereas those with marginal benefits but at high costs were excluded from the Formulary. This has undoubtedly deprived many patients of medical treatment because they have no money.

I understand Miss Alice MAK's concern and her ultimate objective is to abolish the Formulary system. I propose to delete this proposal because I am 12294 LEGISLATIVE COUNCIL ─ 23 May 2013 aware that the purpose of the Formulary is to standardize the use and charge of drugs within the entire public healthcare system.

In the past, the use of drugs in the seven hospital clusters varied with doctors and the charges also varied greatly. This has created unfairness. What is more, the World Health Organization has recommended all countries to develop standardized rules on the use of drugs for their public healthcare system, which we called the Formulary. Thus, the development of the Formulary itself does not have any problem. The use of drugs or the categorization of drugs for inclusion in the public healthcare system or as SFIs also does not have any problem. The only problem is that the Government is too stingy and has excluded many drugs with proven efficacy from the Formulary. This is the cause of the present predicament.

After repeated struggles and protests of many patients, the situation has slightly improved. Improvements have also been made by the Community Care Fund. And yet, I want to explain why the retention of the Formulary is considered essential and its abolition is no way a solution.

Although we agree to standardize the use of drugs, it does not mean that the Government could arbitrarily remove any drugs with proven efficacy but at relatively higher costs from the Formulary and categorize them as SFIs. Nor could the government argue on the pretext that a safety net of the Samaritan Fund has been put in place, because the applicants are required to meet the asset requirements and many other conditions. For example, there is a disease called multiple sclerosis where the body itself will, in the absence of an interferon, attack a certain organ. This interferon is very expensive, but the Government has not included it in the Formulary. Although patients may apply for financial assistance from the Samaritan Fund, they are required to go through an asset test and meet other collateral conditions, which include walking 100 m unassisted. And yet, many patients are unable to walk on their own given their medical conditions, and may have to rely on crutches or even wheelchair. However, financial assistance will be denied because of this.

In the international world, the other countries do not adopt such practice. They will only assess the disability or clinical conditions of the patients, and will not assess if they should be given the medication. Regrettably, we make our assessment based on cost-effectiveness, that is, when patients have reached a certain clinical condition, they will not be given the medication.

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Even for drugs included in the Formulary, such as those for rare diseases like Mucopolysaccharidoses, similar cases can be found. A patient will not be prescribed with the drugs when he reaches a certain age. For example, two brothers who suffer from the Pompe disease, one is my student studying in The Hong Kong Polytechnic University, are feeling very desperate. Although after our long-standing struggle, they are prescribed with the drugs in the end, the Government stated that their case would be subject to an annual review and permission to get the drugs may not be obtained time and again. Therefore, both of them are living in fear, not knowing whether the drugs would be prescribed to them in the future. Their life will be at stake without the drugs. There is another pair of brothers aged about forty who suffer from Mucopolysaccharidoses, and they are likewise not prescribed with the drugs because of their age.

President, the Formulary does not only affect a small group of people, but a large population. I have searched the Apple Daily. Why would I choose the Apple Daily? Because both the Apple Daily and the Oriental Daily have set up charity funds to help people in predicament. We notice that simply in May alone, there were many cases where people were denied medical treatment because they have no money. On 14 May, the Apple Daily reported three elderly people suffering from macular degeneration, and they all have no money to buy the drugs they need. Apple Daily Charitable Fund has helped 17 elderly people who cannot afford to purchase drugs so far in 2013, and among them are "Uncle Chi" of over 80 years old, "Uncle CHOI" of over 60 years old and "Auntie LEE" at the age of 73. "Uncle CHOI" is a park cleaner earning a monthly income of $7,000. He can hardly afford to pay for the medical expenses because each treatment costs tens of thousands of dollars. Elderly patients suffering from macular degeneration may lose their eyesight. On 12 May, it was reported that the cancer cells of Janice, who suffers terminal lung adenocarcinoma, had spread. She was advised by the doctor to take target therapy drugs which cost some $50,000 a month. Janice and her husband are in their mid-thirties and have a two-year-old son. As evident from these cases, the patients have accepted the reporter's interviews and have their photos printed on newspapers merely to save their lives. They have to beg for donations from Hong Kong's philanthropists. The Apple Daily Charitable Fund has granted money for all these cases.

On 10 May, it was reported that "Sister Hoi", a patient of breast cancer, has to foot an enormous bill of self-financed drugs. Having been divorced, she is living in a sub-divided unit alone with a full-time job. She contracted breast cancer and has to receive radiotherapy. It is estimated that the medical cost will 12296 LEGISLATIVE COUNCIL ─ 23 May 2013 exceed $100,000, and again the target therapy drugs cost some $30,000 a month. The Apple Daily Charitable Fund had already granted her some $30,000 to pay for the first treatment, and it is hoped that the balance can be settled with donations from philanthropists. On 7 May, it was reported that a 38-year-old man "Ah Hung" contracted liver cancer two years ago. He has a newborn daughter and a three-year-old son, and the family is living in a sub-divided unit of 100 sq ft. Unable to foot the drug bill, he has secured a subsidy of $150,000 from the Community Care Fund. However, financial assistance has ceased after his operation. The doctor advised him to take target therapy drugs, so the Apple Daily Charitable Fund granted him $26,000 to receive the first treatment. The balance of some $30,000 will have to be settled by donations from philanthropists. On 4 May, it was reported that a 65-year-old grandfather, though contracted colorectal cancer, wished to raise up his grandchildren and he needed some $20,000 to purchase target therapy drugs. The Apple Daily Charitable Fund again granted him a sum of money and appealed to philanthropists for donations. The case reported on 28 April is about a six-year-old girl "Ki Ki", who suffers from Pompe disease and has to receive enzyme injection in order to survive. I have referred Mr and Mrs CHUNG's case to the Secretary in person about two months ago, hoping that he would follow up. Mr NG Pak-yan, owner of Yan Kee Fish Shop located in Kweilin Street, Sham Shui Po, spent more than $50,000 to buy a two-meter long garoupa, which was subsequently sold to three philanthropists at $68,000 for release. Mr NG then generously donated the $68,000 to "Ki Ki" for footing the medical bill.

President, as we can see, a large number of cases can be found in newspapers within just half a month. Nonetheless, this is only the tip of an iceberg. President, can you imagine the number of patients who have refused to make public appearance and beg for help?(The buzzer sounded) ……

SECRETARY FOR FOOD AND HEALTH (in Cantonese): President, first of all, I would like to thank Members for their valuable opinions on the motion and its amendments. Now, I am going to respond to the major issues raised by various Members.

The first issue is about whether there is a need to set up the Drug Formulary (the Formulary) system. In Hong Kong, public healthcare services are heavily subsidized by the Government and hence affordable to the general public. We also strive to ensure that no one will be deprived of appropriate medical treatment for lack of means. However, as stated by a number of LEGISLATIVE COUNCIL ─ 23 May 2013 12297

Members (including Miss Alice MAK, Mr CHAN Han-pan, Dr Priscilla LEUNG and Miss CHAN Yuen-han), drugs are very expensive these days, in particular, new drugs such as target therapy drugs for cancer treatment. Each treatment cycle may cost hundreds of thousands of dollars.

Just now, some Members (including Mr Albert HO, Dr Fernando CHEUNG and Mr Frankie YICK) have remarked that the main purpose of introducing the Formulary is to address issues relevant to new health technologies and expensive healthcare services, including drug provision. These are issues that every country has to face. Therefore, we should have a Standard Drug Formulary to address these issues. In many places, there is a term called "postal allocation", which means patients in need of the same drugs for the same disease may receive different treatments simply because they live in different areas and go to different hospitals. It is a common problem in overseas healthcare systems which are supported by the public sector. The healthcare system of the United Kingdom is a case in point. That is why they have to set up special bodies like the National Institute for Health and Care Excellence (NICE), an independent body, to assess the use of new drugs and new health technologies.

Therefore, the Hospital Authority (HA) has implemented the Formulary since July 2005 with a view to ensuring equitable access by patients to cost-effective drugs of proven safety and efficacy by standardizing the drug policy and drug utilization in the HA. When the Formulary was first introduced, many Members pointed out that it was of foremost importance to set up a review mechanism and work out measures such as how the review would be carried out and who would be responsible for the review.

The motion and its amendments suggest that the HA should further expand the Formulary, improve the review mechanism of the Formulary, invite more stakeholders to join the review process and enhance the transparency in including new drugs in the Formulary. I agree to this principle. As stated in my opening speech, the HA has an effective mechanism in place to asses, on a regular basis, new drugs and review the drug lists in the Formulary. The HA's Drug Advisory Committee (DAC) is actually part of the mechanism. The DAC, comprising doctors, clinical pharmacologists and pharmacists, will systematically assess new drugs every three months. As for the formation of the DAC, I will talk about it later.

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Firstly, regarding the review criteria, a number of Members have just given their views. Some suggested that we should adopt highly objective criteria such as quality-adjusted life-year (QALY). Some pointed out that the existing mechanism was dominated by those who were more outspoken or money was the sole factor for consideration. However, I do not share this view as I had worked in the DAC before. Regarding the proposed use of highly objective criteria like QALY, there are also many comments that if QALY is adopted, the mechanism would become inflexible, as all assessment would be made on the basis of certain formula, allowing no room for value judgment. This rigid mechanism has been criticized by experts in many countries.

There are Members suggesting the adoption of the Health Technology Assessment. It seems to be a more practicable suggestion as it allows other factors to be considered. However, no matter what criteria are adopted, this mechanism always has to rely on experts to make decision after discussing all relevant factors. Hence, I have to tell you all, the experts in the DAC are under great pressure. Not long ago, when I was still working in the HA, I had to invite experts to join the DAC. These experts, on the one hand, considered it an honour that they could contribute their professional knowledge in the DAC; but on the other hand, they were afraid of the great pressure they had to face in meeting different aspirations raised by different parties. Hence, I will later talk about how we try to exclude people with vested interests from this mechanism.

As I have just stated, under this mechanism, systematic drug assessments are made every three months. Also, the drugs to be assessed in the next three months will be announced to the public. Both the DAC and the Drug Utilization Review Committee (DURC) are supported by expert panels which give specialist views to facilitate drug assessments. The review process follows an evidence-based approach and adopts specific evaluation criteria. The committees and expert panels have considered the principles of efficacy, safety and cost-effectiveness and taken into account various factors, including international recommendations. Here, I have to highlight that the healthcare system of Hong Kong is relatively small. In comparison, the population of the United Kingdom is eight times that of Hong Kong. It is hence feasible for the United Kingdom to set up an independent mechanism. However, in the case of Hong Kong, I think it is right for some Members to say that it is impracticable to make these committees independent of the HA as it will cause redundancy. Our existing mechanism is flexible and supported by experts like pharmacists. Right LEGISLATIVE COUNCIL ─ 23 May 2013 12299 now, a number of pharmacists are designated to review all international scientific literatures on new drugs and drugs of the same type, and make comparison. We will also learn from similar organizations or mechanisms in other countries, such as the NICE in the United Kingdom, which has been mentioned previously, and the Pharmaceutical Benefits Scheme in Australia. If they have conducted similar assessments, we may make reference to their recommendations and considerations. Our experts in Hong Kong will consider all relevant factors, including the recommendations of other countries and the justifications behind, changes in technology, pharmacological class, disease state, patient compliance, quality of life, actual experience in the use of drugs, comparison with available alternatives, and so on.

Here, I must also point out that, for some new drugs that are put to the market, we may not have similar drugs of the same drug type before. While some diseases might be incurable in the past, they can now be treated by new drugs. However, these types of drugs are small in number. Most of the new drugs belong to those drug types under which there are many other similar drugs. Some people may consider old drugs less efficacious than new ones. This view is sometimes right, but not always right. Comparing drugs of the same type is the most difficult task for the expert panels. If the drugs have similar efficacy, the factor of cost-effectiveness will have to be taken into consideration.

Some Members have stated the importance to make the review of the Formulary transparent and allow more parents to get involved. The Government agrees to this view. As a matter of fact, in order to enhance the transparency of including new drugs in the Formulary and improve the communication with patients' organizations, the HA has uploaded the membership list of the DAC, the drug lists discussed at meetings, the review outcome of applications for including new drugs in the Formulary, and the reference literature for making the assessments to its intranet and the Internet.

Now, I have to go back to an issue which I have just mentioned. While members like Miss Alice MAK and Mr CHAN Han-pan have shown concern about transparency, some others have said that they do not want the structure to be redundant. As I have pointed out, individual experts in the DAC are indeed working under great pressure. If we include stakeholders like representatives of pharmaceutical companies and patients in this mechanism, the experts will have to face even greater pressure. Also, if relevant discussions are to be disclosed, 12300 LEGISLATIVE COUNCIL ─ 23 May 2013 the experts may be reluctant to give their views. Therefore, we have put in place a sound declaration system. If any of our experts have received funding from pharmaceutical companies for the research and development of drugs or have joined relevant drug researches, they must declare their interests. Regarding the proposed inclusion of patient representatives in the committees, Members have given a lot of examples to justify this suggestion. I have no doubt that all those are real examples as many patients are actually living in great distress. However, if experts have to listen to the sad stories of patients in the committees, how can they give rational views and recommendations? It is a great problem. Therefore, I hope Members would understand why we have to keep the mechanism as it is.

The HA has all along tried to keep in contract with patients' organizations to make up for the inadequacies of having no direct participation of patients in the mechanism. The HA will actively listen to the views of patients on the Formulary. To further increase transparency and patient participation, the HA set up a formal consultation mechanism in 2009 to consult patients' organizations about the Formulary and the Fund every year. In such consultation, the HA will not just inform patients' organizations of the latest development of the Formulary and the Samaritan Fund (the Fund), but will also listen to their major concerns and opinions. After consultation, the patients' organizations will be invited to make submissions. The HA will then relay their views and suggestions to the relevant committees for consideration and follow up. In order to further enhance patient participation, the HA set up a new platform in 2011 for the Chief Executive of the HA to meet with patient representatives periodically and listen to their views on patient services. This platform gives an additional channel for the HA to communicate with patients on issues related to the Formulary.

In respect of the Fund, I am not going to talk about its history here. As a matter of fact, the healthcare system of every country has to face new technologies and new drugs all the time. However, as just stated, new drugs are very expensive. Owing to financial limitation, I think no Government will provide new drugs to all people, or automatically include all new drugs as standard drugs for free provision without first conducting any consultation. Every government or healthcare system has to go through a difficult process to decide the priority for including new drugs in the Formulary. Just now, a number of Members have said that we should fight for more resources; and I can clearly tell them that the HA and the Food and Health Bureau are actually doing LEGISLATIVE COUNCIL ─ 23 May 2013 12301 so. The Financial Secretary has already provided us with additional resources as far as practicable upon our request. However, regarding the resources for drug provision, if we do not set a means test for granting subsidies like what we do under the Fund right now, all patients will then receive subsidized drugs. The resources allocation, instead of being a one-off provision, will change to an annual expenditure of recurrent nature. There is a big difference between the two.

In fact, the Government had already provided an additional grant of $10 billion in the last financial year to sustain the operation of the Fund for about 10 years. This grant allows the HA to relax the financial assessment criteria of the Fund to benefit more patients. Regarding the assessment criteria, a number of Members have expressed their concerns. Miss Alice MAK and some other Members have asked why we have to consider the assets owned by patients and their families. Generally speaking, we will not consider how much savings our patients have in providing ordinary healthcare services. We will simply provide them with in-patient services at a daily rate of $100 (all inclusive), drugs at a cost of $10 per item, and out-patient services at tens of dollars per attendance. We will consider patients' savings only when the services required involve a substantial amount of money of a one-off or occasional basis. If we only consider their monthly income but not their savings, no matter how loose our criteria are, for patients who have a monthly income but without any savings, their monthly saving may exceed the limit. To these patients, a financial assessment which solely based on monthly income will put them in trouble as they may have to borrow money to pay for the drug costs in case they have no savings. Also, the assessment on savings is meant to protect patients' savings and avoid the circumstances where patients have to spend all their savings on drug costs in one go, as described by some Members just now.

Some Members have remarked that even if patients only have to spend 20% to 30% of their savings on each treatment, they will eventually exhaust all their savings in a few years. However, this situation is not likely to happen because the HA has relaxed the financial assessment criteria of the Fund for Self-Financed Items (SFIs) since 1 September 2012. We have introduced a new allowance called "deductible allowance" in the assessment of "annual disposable financial resources (ADFR)". In assessing the ADFR, we will consider the number of household members of a patient and deduct the deductible allowance from his disposable capital. After deduction, we will know how much 12302 LEGISLATIVE COUNCIL ─ 23 May 2013 disposable financial resources he has. Then, another mechanism will come into play to protect him. The maximum patient's contribution ratio, which used to be 30% of the ADFR, has been reduced to 20% as we accepted the suggestion of some Members. This ratio will be adjusted every year. For patients who have to spend 20% of their savings on drug cost every year, they will not exhaust their savings in five years. On the contrary, this mechanism is a way to protect patients by helping them maintain 80% of their savings at all times.

A number of Members, including Miss Alice MAK, has just criticized that the financial assessment of the Fund should not be conducted on a household basis. However, the current practice is indeed consistent with the practices of other publicly-funded safety nets, such as the Comprehensive Social Security Assistance. As a family is the basic unit of society, we encourage mutual support in family. Therefore, I have reservation about the suggestion that the financial assessment should be individual-based. Of course, in the long run, we should enhance, monitor and improve this financial assessment and expand the Fund's coverage. In future, we will continue to ensure a proper allocation of the Fund and the HA will review the Fund's coverage to see if the financial assessment can be further enhanced.

Next, I will speak on the drugs expenditure of the public healthcare system. During the debate, a number of Members have stated that the HA should increase its drug expenditure to ensure sufficient financial resources for drug provision and the provision of suitable drugs to patients. Some Members have also pointed out that while Hong Kong supports its existing healthcare system by putting in resources equivalent to 5.2% of its Gross Domestic Product (GDP), this percentage is indeed lower than that of many other countries. As we all know, Hong Kong has a low tax regime which is protected by the Basic Law. With this regime in place, we have spent 5.2% of our GDP, which accounts for almost 17% of the Government's overall recurrent expenditure, to provide healthcare services under the existing system. We should take note of this background before having further discussion.

First of all, I would like to respond to Members' views and suggestions on the drugs expenditure of the public healthcare system. Every year, clusters and hospitals under the HA will, in light of the HA's strategic planning and service development needs, draw up annual plans to specify the strategies, major initiatives and service targets to meet district demands. In this respect, we LEGISLATIVE COUNCIL ─ 23 May 2013 12303 should understand that when hospitals draw up their annual plans for submission to the HA, they will consider their key service areas in the next year. In particular, they will set a priority for the areas to be improved, and provision of drugs will certainly be on the list. In addition to provision of drugs, they may want to improve many other areas. All these areas are indeed competing for the same resources, that is, the new resources provided by the Financial Secretary. Therefore, the HA will provide a block allocation to various hospital clusters, which may flexibly deploy the funding, including the expenditure on drugs, having regard to actual service demands.

In recent years, there is actually a surge in the drugs expenditure of the HA. In the past five years, this expenditure increased from $2.4 billion in 2008-2009 to $3.75 billion in 2012-2013, representing an increase of more than 50%. The HA's expenditure on drugs procurement has also increased at an annual rate of over 10%, up from $2.79 billion in 2008-2009 to $4.73 billion in 2012-2013. As drugs and other clinical treatments are equally important, and the provision of drugs is only part of the overall public healthcare services, the HA will consider the overall situation and all relevant factors to make the best allocation of its funding.

Some Members have asked the HA to ensure that patients would get suitable drugs. At present, there are more than 1 300 standard drugs in the Formulary. All of them are included in the Formulary after going through the aforesaid careful and objective process in which scientific evidence was considered. Meanwhile, drugs which have become obsolete or are no longer required will be removed from the Formulary. Therefore, responding to Members' question as to whether we will remove some of the new drugs from the Formulary, I will say that we will not do so because every drug has to go through a stringent assessment process before it is included in the Formulary. This point is real. Also, the clinical indications of individual Special Drugs may be modified as appropriate. On this point, our concern is not on the drugs themselves but how the drugs can be applied to different patients. Even if the patients have got the same disease, the application of drugs may be different, depending on the severity of disease. I hope Members would understand this point.

Just now, Members have cited some examples in which the HA had once provided very expensive drugs to certain patients but later considered the drugs 12304 LEGISLATIVE COUNCIL ─ 23 May 2013 unsuitable. In fact, I have received such cases from time to time, and I will always check with the HA. However, we should note that the HA's specialists would prescribe medication based on their patients' conditions, including the clinical conditions. While some patients may have the same disease, the severity of disease may differ. The specialists must hence consider if it is suitable to use a particular drug. If their patients have used that drug before, they will have to consider if the drug is efficacious to the patients concerned. When I have received these cases, I will ask the specialists for the actual circumstances. Sometimes, when the patients have taken an expensive drug for one or two years, the specialists may think the drug is no longer efficacious to them. However, I understand that the patients, as well as the Members who strive for their rights, would want the HA to continue to provide the expensive drugs. In the community, some kind-hearted people may subsidize patients to get expensive drugs, wishing that it can bring them some hopes. It embodies the spirit of mutual support in society. Nevertheless, I hope Members can understand that resources are spent on a particular patient, they cannot be used for other more useful purposes. When the specialists have to make this decision, it is a difficult decision. If they really think that the drug is no longer efficacious to the patients, there is no reason for them to prescribe that drug again.

In the original motion, Miss Alice MAK has suggested that the Government should provide tax relief to patients or their family members when they have to buy drugs at their own expense. This suggestion is greatly supported by Mr WONG Kwok-hing. In our view, any change in the tax regime will involve a number of Policy Bureaux and departments, and have profound impacts on the healthcare system, healthcare financing and economic environment of Hong Kong. Therefore, these changes must be carefully considered and widely discussed by the public. Meanwhile, some Members, including Mr WONG Kwok-hing, have suggested that the provision of tax relief should fall under a larger issue, that is, the healthcare reform which will affect healthcare financing and the balance between private and public sectors. We have already made it clear that we will actively study this suggestion, including the provision of tax relief to attract middle-class people to take out private health insurance on their own initiative when we later introduce a voluntary private health insurance. We will actively consider this suggestion, but I have reservation about simply introducing tax relief for drug purchase.

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In conclusion, as stated in my opening speech, the World Health Organization (WHO) has all along been promoting the concept of "essential medicines". It is a concept built on fairness as the WHO hopes that everybody in the world can have access to general drugs which are proven to be of benefits, instead of having some drugs available only in certain hospital but not in others. In my view, it is necessary to draw up a standard Formulary and implement the Formulary in an effective manner. Between July 2005 (when the Formulary was first introduced) and 31 March 2013, the HA has included more than 110 new drugs in the Formulary, including 14 General Drugs and 59 Special Drugs which are provided within standard fees and charges and are proven to be of benefits. In recent years, the HA has also kept expanding the coverage of the Fund safety net to benefit more patients. Ever since the implementation of the Formulary, the HA has put 18 new SFIs under coverage of the Fund in phases and expand the clinical applications of 12 drugs. Meanwhile, the HA has repositioned seven SFIs with the Fund safety net and 21 SFIs without safety net as Special Drugs in the Formulary. These drugs are now provided to patients who meet the specified clinical conditions at standard fees and charges. In addition, as at March this year, nine other cancer drugs were subsidized by the Community Care Fund Medical Assistance Programme.

The Formulary is a cornerstone in the drug use of public healthcare sector. As health technologies continue to develop fast, the Formulary will require constant updates, as expected by Members, to include new standard drugs, remove obsolete drugs which are no longer required, and reposition SFIs as General Drugs or Special Drugs after assessment. This constant review is a way to absorb new health technologies. It does not only enable our drug use policy to keep abreast of international standard but also effectively ensure the introduction of new drugs to our public healthcare system. The Government and the HA will continue to optimize the use of limited public resources in a fair and effective manner to provide healthcare services to more patients. They will also keep improving the subsidy schemes to help patients in need meet their drug costs on SFIs. In short, I believe this mechanism is necessary and must not be abolished. However, as I have just stated, we should always take note of the new factors so as to improve this mechanism. I fully agree with Members that it is important to improve this mechanism and enhance its transparency. However, I hope Members, after listening to my explanation, will note that continuous effort has been made to enhance the transparency. Meanwhile, I have 12306 LEGISLATIVE COUNCIL ─ 23 May 2013 reservation about certain suggestions, including the one to bring in interest groups to the mechanism.

Lastly, I am pleased to be here today as the views given by Members in this discussion are very mature, focused and constructive. I hope Members will continue to give us their support in this aspect. President, I so submit.

PRESIDENT (in Cantonese): After I had called upon the Secretary for Food and Health to speak for the second time just now, I noted that Mr LEUNG Kwok-hung requested to speak. Members, the Rules of Procedure does not provide that Members are not allowed to speak after the Secretary has spoken, but as we know, during a motion debate, we have a standard practice which has been in operation for a long time. That is, I would first call upon Members who propose the motion and the respective amendments to speak. After that, I would ask the official to explain the public policy relating to the topic. Only then would I let other Members speak. After all the Members who wish to speak have spoken and no other Members indicate a wish to speak, I would call upon the Member who proposes the motion to respond to the amendments and then ask the official to respond to the views raised by Members during the debate.

This arrangement is requested by Members having regard to their past experience because Members hope that the official present can first explain the government policy clearly at the start of the debate, so that Members can make their points accordingly in their speeches. After Members have expressed their views, they also wish to hear the official's reply in order to find out if the Administration accepts or concurs with the aspirations raised by Members. This has been our usual practice.

Before the meeting, Dr Fernando CHEUNG had informed me that as he had some other important business to deal with this morning, he might be late. Given that Dr Fernando CHEUNG has proposed an amendment to this motion, and since he could hurry back in time to attend the meeting, I should let him speak and explain his amendment. I have noted that the Secretary has spent half an hour to put forward many viewpoints and respond to Members' opinions. As the Secretary's viewpoints may not be supported by each and every Member, a number of Members may wish to express their views on the Secretary's response. If I let Mr LEUNG Kwok-hung speak at the present stage, I will have to allow LEGISLATIVE COUNCIL ─ 23 May 2013 12307 other Members to speak as well. That is tantamount to scrapping the whole routine, destroying the practice which we have accepted and followed all along. Hence, Mr LEUNG, I cannot let you speak at this stage.

It is known that the Member who proposes the motion will have a longer speaking time, and that he or she may reply after the official has spoken. However, I have noticed that in the recent debates, a number of Members who proposed the motions had almost used up their speaking time in their first speech and were thus unable to make their final reply. That is also the case for Miss Alice MAK, who has proposed this motion. She has less than a minute left for her reply, and I believe she may not be able to respond to the Secretary's views. I suggest that Members who propose motions in the future should consider reserving some time for their final reply.

I will now call upon Members who have proposed amendments to move their amendments.

PRESIDENT (in Cantonese): I first call upon Dr LEUNG Ka-lau to move his amendment.

DR LEUNG KA-LAU (in Cantonese): President, I move that Miss Alice MAK's motion be amended.

Dr LEUNG Ka-lau moved the following amendment: (Translation)

"To add ", in view of patients' growing demand for expensive drugs," after "That"; to delete ", and" after "expenditure estimates on drugs" and substitute with "to around 15% of HA's overall expenditure, and use a scientific and objective method to measure cost-effectiveness"; to delete ", reduce the weighting of costs and prices and adopt efficacy and patient safety as the overriding principle, so that patients will not be forced to take lower-quality drugs due to the lack of financial means" after "relevant categories"; to delete "further relax" after "coverage of the Samaritan Fund, and" and substitute with "revise"; and to delete "financial test of the Samaritan Fund by using the income and asset of individual applicants instead of households as the basis" after "criteria of the" and 12308 LEGISLATIVE COUNCIL ─ 23 May 2013

substitute with "relevant financial test and its subsidy approach, allowing applicants to choose 'individual' or 'household' as the assessment basis; when a patient's drugs expenditure exceeds 10% of the patient's income, the shortfall in the drugs fees would be paid by the Fund, so that the patient will not be forced to take lower-quality drugs due to the lack of financial means"."

PRESIDENT (in Cantonese): I now propose the question to you and that is: That the amendment, moved by Dr LEUNG Ka-lau to Miss Alice MAK's motion, be passed.

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.

(Members raised their hands)

Mr James TIEN rose to claim a division.

PRESIDENT (in Cantonese): Mr James TIEN 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.

LEGISLATIVE COUNCIL ─ 23 May 2013 12309

Functional Constituencies:

Dr LAU Wong-fat, Mr Abraham SHEK, Dr Joseph LEE, Mr Jeffrey LAM, Mr Andrew LEUNG, Dr LAM Tai-fai, Mr CHAN Kin-por, Dr LEUNG Ka-lau, Mr CHEUNG Kwok-che, Mr NG Leung-sing, Mr MA Fung-kwok, Mr Charles Peter MOK, Miss CHAN Yuen-han, Mr KWOK Wai-keung, Mr Dennis KWOK, Mr Christopher CHEUNG, Mr Martin LIAO, Mr POON Siu-ping, Mr TANG Ka-piu, Ir Dr LO Wai-kwok and Mr Tony TSE voted for the amendment.

Mr WONG Ting-kwong, Ms Starry LEE and Mr IP Kwok-him voted against the amendment.

Mr Albert HO, Mr James TO, Mr Tommy CHEUNG, Mr Frankie YICK, Mr YIU Si-wing and Mr IP Kin-yuen abstained.

Geographical Constituencies:

Mr WONG Kwok-hing, Mr Ronny TONG, Ms Cyd HO, Dr Priscilla LEUNG, Mrs Regina IP, Mr Albert CHAN, Mr WONG Yuk-man, Ms Claudia MO, Mr Michael TIEN, Mr CHAN Chi-chuen, Dr Kenneth CHAN, Miss Alice MAK and Dr Fernando CHEUNG voted for the amendment.

Mr CHAN Kam-lam, Mr TAM Yiu-chung, Mr CHAN Han-pan, Dr Elizabeth QUAT, Dr CHIANG Lai-wan and Mr Christopher CHUNG voted against the amendment.

Mr James TIEN and Dr Helena WONG abstained.

THE PRESIDENT, Mr Jasper TSANG, did not cast any vote.

12310 LEGISLATIVE COUNCIL ─ 23 May 2013

THE PRESIDENT announced that among the Members returned by functional constituencies, 30 were present, 21 were in favour of the amendment, three against it and six abstained; while among the Members returned by geographical constituencies through direct elections, 22 were present, 13 were in favour of the amendment, six against it and two abstained. Since the question was agreed by a majority of each of the two groups of Members present, he therefore declared that the amendment was passed.

MR ANDREW LEUNG (in Cantonese): President, I move that in the event of further divisions being claimed in respect of the motion on "Drug Formulary and drugs subsidy system" or any amendment thereto, 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)

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 LEGISLATIVE COUNCIL ─ 23 May 2013 12311 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 on "Drug Formulary and drugs subsidy system" or any amendment thereto, this Council do proceed to each of such divisions immediately after the division bell has been rung for one minute.

PRESIDENT (in Cantonese): Members have already been informed, as Dr LEUNG Ka-lau's amendment has been passed, Mr CHAN Han-pan and Mr Albert HO have withdrawn their amendments.

PRESIDENT (in Cantonese): Dr Joseph LEE, as Dr LEUNG Ka-lau's amendment has been passed, you may now move your revised amendment.

DR JOSEPH LEE (in Cantonese): President, I move that Miss Alice MAK's motion as amended by Dr LEUNG Ka-lau be further amended by my revised amendment.

Dr Joseph LEE moved the following further amendment to the motion as amended by Dr LEUNG Ka-lau: (Translation)

"To delete "and" after "purchase of drugs at their own expense;"; and to add "; and (9) when assessing new drugs, to introduce objective and standardized assessment tools to assess the safety, efficacy, cost-effectiveness, etc. of new drugs with objective criteria for determining whether to include the new drugs in the Formulary, and to enhance transparency" immediately before the full stop."

PRESIDENT (in Cantonese): I now propose the question to you and that is: That the amendment, moved by Dr Joseph LEE to Miss Alice MAK's motion, as amended by Dr LEUNG Ka-lau, be passed.

12312 LEGISLATIVE COUNCIL ─ 23 May 2013

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)

Mr James TIEN rose to claim a division.

PRESIDENT (in Cantonese): Mr James TIEN has claimed a division. The division bell will ring for one minute.

PRESIDENT (in Cantonese): Will Members please proceed to vote.

(Ms Claudia MO stood up)

PRESIDENT (in Cantonese): Ms Claudia MO, what is your point?

MS CLAUDIA MO (in Cantonese): I pressed the button to vote but it was not working. Oddly, even the light is off.

PRESIDENT (in Cantonese): Please tell me your voting intention.

MS CLAUDIA MO (in Cantonese): I vote for the amendment.

PRESIDENT (in Cantonese): Will Members please check their votes. If there are no queries, voting shall now stop and the result will be displayed.

LEGISLATIVE COUNCIL ─ 23 May 2013 12313

Functional Constituencies:

Dr LAU Wong-fat, Mr Abraham SHEK, Dr Joseph LEE, Mr Jeffrey LAM, Mr Andrew LEUNG, Dr LAM Tai-fai, Mr CHAN Kin-por, Dr LEUNG Ka-lau, Mr CHEUNG Kwok-che, Mr NG Leung-sing, Mr MA Fung-kwok, Mr Charles Peter MOK, Miss CHAN Yuen-han, Mr KWOK Wai-keung, Mr Dennis KWOK, Mr Christopher CHEUNG, Mr Martin LIAO, Mr POON Siu-ping, Mr TANG Ka-piu, Ir Dr LO Wai-kwok and Mr Tony TSE voted for the amendment.

Mr Albert HO, Mr James TO, Mr Tommy CHEUNG, Mr WONG Ting-kwong, Ms Starry LEE, Mr IP Kwok-him, Mr Frankie YICK, Mr YIU Si-wing and Mr IP Kin-yuen abstained.

Geographical Constituencies:

Mr WONG Kwok-hing, Mr Ronny TONG, Ms Cyd HO, Dr Priscilla LEUNG, Mrs Regina IP, Mr Albert CHAN, Mr WONG Yuk-man, Ms Claudia MO, Mr Michael TIEN, Mr CHAN Chi-chuen, Dr Kenneth CHAN, Miss Alice MAK and Dr Fernando CHEUNG voted for the amendment.

Mr CHAN Kam-lam, Mr TAM Yiu-chung, Mr James TIEN, Mr CHAN Han-pan, Dr Helena WONG, Dr Elizabeth QUAT, Dr CHIANG Lai-wan and Mr Christopher CHUNG abstained.

THE PRESIDENT, Mr Jasper TSANG, did not cast any vote.

THE PRESIDENT announced that among the Members returned by functional constituencies, 30 were present, 21 were in favour of the amendment and nine abstained; while among the Members returned by geographical constituencies through direct elections, 22 were present, 13 were in favour of the amendment and eight abstained. Since the question was agreed by a majority of each of the two groups of Members present, he therefore declared that the amendment was passed.

12314 LEGISLATIVE COUNCIL ─ 23 May 2013

PRESIDENT (in Cantonese): Dr Fernando CHEUNG, as Dr LEUNG Ka-lau and Dr Joseph LEE's amendments have been passed, you may now move your revised amendment.

DR FERNANDO CHEUNG (in Cantonese): President, I move that Miss Alice MAK's motion, as amended by Dr LEUNG Ka-lau and Dr Joseph LEE, be further amended by my revised amendment.

Dr Fernando CHEUNG moved the following further amendment to the motion as amended by Dr LEUNG Ka-lau and Dr Joseph LEE: (Translation)

"To add "; and (10) where the drugs needed by patients fall outside the Formulary, to put in place a discretionary mechanism for medical practitioners to exercise their professional judgment to provide such patients with the drugs concerned” immediately before the full stop."

PRESIDENT (in Cantonese): I now propose the question to you and that is: That Dr Fernando CHEUNG's amendment to Miss Alice MAK's motion as amended by Dr LEUNG Ka-lau and Dr Joseph LEE be passed.

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)

Mr James TIEN rose to claim a division.

LEGISLATIVE COUNCIL ─ 23 May 2013 12315

PRESIDENT (in Cantonese): Mr James TIEN 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 stop now and the result will be displayed.

Functional Constituencies:

Mr Albert HO, Mr James TO, Mr LAU Wong-fat, Mr Abraham SHEK, Dr Joseph LEE, Mr Jeffrey LAM, Mr Andrew LEUNG, Dr LAM Tai-fai, Mr CHAN Kin-por, Dr LEUNG Ka-lau, Mr CHEUNG Kwok-che, Mr Charles Peter MOK, Mr Dennis KWOK, Mr Christopher CHEUNG, Mr IP Kin-yuen, Mr POON Siu-ping, Ir Dr LO Wai-kwok and Mr Tony TSE voted for the amendment.

Mr Tommy CHEUNG, Mr WONG Ting-kwong, Ms Starry LEE, Mr IP Kwok-him, Mr NG Leung-sing, Mr Frankie YICK, Mr YIU Si-wing, Mr MA Fung-kwok, Miss CHAN Yuen-han, Mr KWOK Wai-keung, Mr Martin LIAO and Mr TANG Ka-piu abstained.

Geographical Constituencies:

Mr Ronny TONG, Ms Cyd HO, Dr Priscilla LEUNG, Mr Albert CHAN, Mr WONG Yuk-man, Ms Claudia MO, Mr Michael TIEN, Mr CHAN Chi-chuen, Dr Kenneth CHAN, Dr Fernando CHEUNG and Dr Helena WONG voted for the amendment.

Mr CHAN Kam-lam, Mr TAM Yiu-chung, Mr WONG Kwok-hing, Mrs Regina IP, Mr James TIEN, Mr CHAN Han-pan, Miss Alice MAK, Dr Elizabeth QUAT, Dr CHIANG Lai-wan and Mr Christopher CHUNG abstained.

12316 LEGISLATIVE COUNCIL ─ 23 May 2013

THE PRESIDENT, Mr Jasper TSANG, did not cast any vote.

THE PRESIDENT announced that among the Members returned by functional constituencies, 30 were present, 18 were in favour of the amendment and 12 abstained; while among the Members returned by geographical constituencies through direct elections, 22 were present, 11 were in favour of the amendment and 10 abstained. 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.

PRESIDENT (in Cantonese): Miss Alice MAK, you may now reply and you have 45 seconds.

MISS ALICE MAK (in Cantonese): President, very simple, in these 45 seconds, I just want to say that while the Secretary highlighted in his reply the pain and pressure endured by the experts and doctors when deciding on the drugs to be included in the Drug Formulary, and given that a doctor is always kind at heart, I hope Dr KO and the Hospital Authority would also consider the pain and pressure experienced by the patients and their families. Their pain and pressure would not be lesser than those endured by the doctors when deciding on the drugs to be included in the Drug Formulary. Therefore, I hope that the Secretary can be more understanding to them. If you think the doctors are painful, the patients and their families are even more painful. It is hoped that in the review of the Drug Formulary, the difficulties encountered by the patients will truly be considered. Thank you, President.

PRESIDENT (in Cantonese): I now put the question to you and that is: That the motion moved by Miss Alice MAK, as amended by Dr LEUNG Ka-lau and Dr Joseph LEE, be passed.

PRESIDENT (in Cantonese): Will those in favour please raise their hands?

(Members raised their hands)

LEGISLATIVE COUNCIL ─ 23 May 2013 12317

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

(No hands raised)

Miss Alice MAK rose to claim a division.

PRESIDENT (in Cantonese): Miss Alice MAK 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 stop now and the result will be displayed.

Functional Constituencies:

Mr LAU Wong-fat, Mr Abraham SHEK, Dr Joseph LEE, Mr Jeffrey LAM, Mr Andrew LEUNG, Dr LAM Tai-fai, Mr CHAN Kin-por, Dr LEUNG Ka-lau, Mr NG Leung-sing, Mr MA Fung-kwok, Mr Charles Peter MOK, Miss CHAN Yuen-han, Mr KWOK Wai-keung, Mr Dennis KWOK, Mr Christopher CHEUNG, Mr Martin LIAO, Mr POON Siu-ping, Mr TANG Ka-piu, Ir Dr LO Wai-kwok and Mr Tony TSE voted for the amendment.

Mr Albert HO, Mr James TO, Mr Tommy CHEUNG, Mr WONG Ting-kwong, Ms Starry LEE, Mr CHEUNG Kwok-che, Mr IP Kwok-him, Mr Frankie YICK, Mr YIU Si-wing and Mr IP Kin-yuen abstained.

Geographical Constituencies:

Mr WONG Kwok-hing, Dr Priscilla LEUNG, Mrs Regina IP, Mr Albert CHAN, Mr WONG Yuk-man, Ms Claudia MO, Mr Michael TIEN, Mr CHAN Chi-chuen, Dr Kenneth CHAN and Miss Alice MAK voted for the amendment.

12318 LEGISLATIVE COUNCIL ─ 23 May 2013

Mr CHAN Kam-lam, Mr TAM Yiu-chung, Ms Cyd HO, Mr James TIEN, Mr CHAN Han-pan, Dr Fernando CHEUNG, Dr Helena WONG, Dr Elizabeth QUAT, Dr CHIANG Lai-wan and Mr Christopher CHUNG abstained.

THE PRESIDENT, Mr Jasper TSANG, did not cast any vote.

THE PRESIDENT announced that among the Members returned by functional constituencies, 30 were present, 20 were in favour of the motion as amended and 10 abstained; while among the Members returned by geographical constituencies through direct elections, 21 were present, 10 were in favour of the motion as amended and 10 abstained. Since the question was not agreed by a majority of each of the two groups of Members present, he therefore declared that the motion as amended was negatived.

PRESIDENT (in Cantonese): Second Member's motion: Maintaining a business-friendly environment in Hong Kong.

Members who wish to speak in the motion debate will please press the "Request to speak" button.

I now call upon Mr Jeffrey LAM to speak and move the motion.

(Dr Elizabeth QUAT raised her hand in indication)

PRESIDENT (in Cantonese): Dr Elizabeth QUAT, what is your point?

DR ELIZABETH QUAT (in Cantonese): President, I have been pressing the "Request to speak" button earlier on, but only the green light for "Speak" is on, and the button has no response.

PRESIDENT (in Cantonese): Are you requesting to speak in this motion debate?

LEGISLATIVE COUNCIL ─ 23 May 2013 12319

DR ELIZABETH QUAT (in Cantonese): Yes.

PRESIDENT (in Cantonese): The computer has already recorded your request.

MAINTAINING A BUSINESS-FRIENDLY ENVIRONMENT IN HONG KONG

MR JEFFREY LAM (in Cantonese): President, I move that the motion, as printed on the Agenda, be passed.

President, there is this saying that "learning is like sailing against the current, either you keep forging ahead or you keep falling behind". It applies not only to the pursuit of studies, where one failing to make advancement will fall behind, and it is also an apt description of the competitiveness of Hong Kong. In seeking to maintain its status as an international financial and business centre, if Hong Kong fails to enhance its competitiveness and sustainability in development now, other countries or regions will soon catch up with Hong Kong.

Recently, ZHANG Dejiang, Chairman of the National People's Congress responsible for Hong Kong and Macao affairs, met with the deputation of the Business and Professionals Alliance for Hong Kong in Beijing. During the meeting, ZHANG stated clearly that certain competitive edges of Hong Kong were dwindling, and the various sectors in Hong Kong had to remain highly vigilant and think over the issue seriously. He also reminded us that the next three years would be crucial and Hong Kong must capitalize on the opportunities. Recently, the Chairman of the Chinese People's Political Consultative Conference, YU Zhengsheng, has also reminded the business sector to get prepared for upgrading and restructuring, lest they will lose their competitiveness.

In fact, two years into the National 12th Five-Year Plan, we only have three more years. The economic development of the country in the next three years will be rapid and crucial. But if Hong Kong fails to grasp this once-in-a-lifetime opportunity, the opportunity lost will never be found again.

Let us look at the prevailing global economy. In the United States, the economic recovery is slow. In Europe, though the debt crisis has eased for the time being, it has sent the local economy into recession. In Japan, efforts have been made to stimulate the economy through Yen depreciation, yet the 12320 LEGISLATIVE COUNCIL ─ 23 May 2013 effectiveness of the measure is under observation. In the coming year, economies all over the world will be fraught with uncertainties. The whole world will have to face wars in "currency", "trade" and "geopolitics", and Hong Kong, as an export-oriented economy, naturally will be affected in some measure.

In my view, in the face of the prevailing global environment, we should on the one hand maintain the stability of government policies, and introduce some new policies on business-friendly environment on the other, so as to enhance the competitiveness of Hong Kong.

President, when it comes to the business environment, the business sector and small and medium enterprises (SMEs) have many concerns. I would like to focus on the discussion of three issues here. First, it is the problem of high rents. Although it is stated in the report published by Cushman and Wakefield that London of Britain has surpassed Hong Kong in terms of ranking as the city with the most expensive office rental, Hong Kong's office rents are the second most expensive in the world and the most expensive in the Asian region.

The exorbitant office rents precisely reflect the demand of the business sector for commercial sites. Members from the business sector, particularly SMEs, have reflected to me that rising rental has made business operation increasingly difficult. According to the data of the Census and Statistics Department, office rental is one of the key factors considered by many multi-national companies in deciding whether or not to set up offices in Hong Kong.

To alleviate the rental pressure, the Government must utilize resources in a more effective manner. I propose that the Government should remove more government departments from business hubs and relocate government offices to different locations, so that Grade A office space can be released for commercial use. Moreover, the development of new commercial districts is very important. Regarding the development of Kowloon East, there have been lots of thunder but no rain. The Government must speed up the pace of development, and it should revitalize or redevelop existing factory buildings to increase the supply of office floor area.

As I raised some time ago, I hope the Government will vigorously examine the possibility of developing underground space to alleviate the shortage of land. Taking an overview of many places around the world, including Paris, Finland, LEGISLATIVE COUNCIL ─ 23 May 2013 12321

Japan, Singapore and Qianhai in Shenzhen, proactive efforts have been made to develop underground space for the construction of underground vehicle depots, coliseums and underground streets, and so on. However, Hong Kong seems to be relatively conservative in planning underground development. Since such planning takes time for studies, planning and preparation, even if we intend to do so now, it will be quite some time before the planning can be implemented.

President, in fact, the development of underground space may be an option for Hong Kong to alleviate the problem of land shortage. At present, certain large-scale development projects have not yet commenced, which include the West Kowloon Cultural District and the Kai Tak Development, as well as the future North East New Territories Development and the Lantau Development now under planning. We should be flexible in adjusting the planning of these projects and examining the development of underground space and construction of underground shopping arcades or commercial cities.

I think it is now time we further explored Hong Kong's potential in developing urban underground space, so that this policy concept will be included in our town planning and development. Certainly, the most important task is to identify more sites as soon as possible.

Second, it is the difficulties faced by SMEs in operation. At present, there are about 300 000 SMEs in Hong Kong, accounting for about 98% of all enterprises and employing about 50% of the workforce in the private sector. Hence, be it for the promotion of the economy of Hong Kong or for safeguarding the means of living of tens of thousands of households, the Government's support to SMEs is crucially important. However, in recent years, conventional SMEs have been afflicted by the violent fluctuation of the global economy. Some owners of SMEs describe their situation as being confronted by three huge mountains, including expensive rents, high salary and rising prices of raw materials. In recent years, they have been in a state of "taking the beating lying down", and they do not know how much longer they can put up with it.

The Financial Secretary has responded in the budget to some of the aspirations voiced by the sector, such as waiving the business registration fees, offering one-off profits tax reduction, and extending the concessionary measures under the SME Financing Guarantee Scheme. However, these measures are inadequate to SMEs struggling for survival in operation. I think the SAR 12322 LEGISLATIVE COUNCIL ─ 23 May 2013

Government should now introduce more business-friendly measures as a booster for the SMEs.

In my view, the Government should offer tax concessions to certain small-scale companies. At the same time, the Government should help enterprises develop their own brands and strive for upgrading and restructuring.

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

When it comes to brand development, many Hong Kong companies desire to break into the Mainland market. It is mentioned in the budget that the Government will continue to make use of the $1 billion BUD Fund to assist Hong Kong enterprises in upgrading and restructuring. I think the broad direction is correct, yet the Government should increase the capital amount, streamline the application procedures and increase the flexibility in vetting under the Fund. The Government should also step up its support for large enterprises in conducting research and development (R&D), including the provision of tax rebate to enterprises conducting R&D.

Moreover, it is not easy for many SMEs to carry on business in the Mainland, let alone development of their own brands which requires the input of tremendous manpower and financial resources. Therefore, I hope that in addition to the dedicated fund, the SAR Government will consider formulating policies with Mainland authorities under the framework of CEPA to assist SMEs in conducting domestic sales.

I will now come to the third concern, that is, talents training. The long-term competitiveness of a region is determined by the quality of its manpower, particularly in the domain of modern services. Moreover, if we are to develop a knowledge-based economy, talents will be of an overwhelming importance.

However, Hong Kong now faces the problem of talent shortage on various fronts, where the development needs of the economy and society cannot be met. In fact, in the face of economic restructuring, the financial sector and certain professional support services will account for an increasing share of the economy, whereas these sectors, like banking, accounting, legal services and information LEGISLATIVE COUNCIL ─ 23 May 2013 12323 technology, all require support of staff who have attained a high level of educational qualification. Therefore, the authorities should increase subsidized university places focusing on certain high-skilled and high-value-added programmes, for this will not only train more professional talents and offer opportunities for upward mobility, but also support the restructuring of Hong Kong economy.

I think Hong Kong should reinforce the training of talents for various sectors on the one hand and attract outstanding talents to Hong Kong on the other hand. However, according to the figures of the Immigration Department, since the introduction of the Admission of Talents Scheme in 2006, most of the talents attracted to Hong Kong carry the finance and accounting background, followed by those from the information technology sector. Yet for the badly needed talents in the world, talents in the R&D sector, there are only a few of them. We often talk about encouraging R&D and promoting upgrading and restructuring, yet talents in R&D are relatively small in number in our talents pool. If Hong Kong does not have adequate resources or lacks the training regime, we have to provide incentives sound enough to attract these talents to work and live in Hong Kong.

Many cities neighbouring Hong Kong have made all-out efforts to attract talents by all means, so as to enhance the competitiveness of their population structure. Singapore is a case in point. Any talent intending to seek development in Singapore may apply for seven visas, enough for the talent to bring along his or her whole family, including parents, spouse and children, to migrate to Singapore. Singapore has also set the target of raising the percentage of non-local university students to 20% in 2015, and non-local students will be granted a one-year working visa upon graduation to give them sufficient time to find jobs.

I think it is time for the SAR Government to review the Admission of Talents Scheme. It needs to not only streamline the application procedures, but also formulate measures that can attract talents in various sectors to come to Hong Kong.

At the same time, we should encourage young people to join various trades, thus injecting new impetus into SMEs. Actually, many enterprises in Hong Kong are prepared to offer internship opportunities to young people, particularly during their studies. If the Government hopes to mobilize more young people to 12324 LEGISLATIVE COUNCIL ─ 23 May 2013 join such trades, the business and industrial sector is more than willing to offer the platform to provide internship opportunities for young people.

Deputy President, I so submit.

Mr Jeffrey LAM moved the following motion: (Translation)

"That, given the slow recovery of the global economy, this Council urges the Government to adopt proactive policy measures to maintain a business-friendly environment in Hong Kong and devote more resources to assist small and medium enterprises."

DEPUTY PRESIDENT (in Cantonese): I now propose the question to you and that is: That the motion moved by Mr Jeffrey LAM be passed.

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 TANG Ka-piu to speak, to be followed by Mr Michael TIEN, Mr IP Kin-yuen, Mr WU Chi-wai, Mr YIU Si-wing and Mr Charles Peter MOK respectively; but they may not move the amendments at this stage.

MR TANG KA-PIU (in Cantonese): Deputy President, the subject of this motion is "Maintaining a business-friendly environment in Hong Kong". Smooth operation in business will definitely be conducive to employment and beneficial to wage earners. This is our view. Hence, the Hong Kong Federation of Trade Unions (FTU) is concerned about the motion proposed by Mr Jeffrey LAM today and we look forward to the realization of this aspiration. The content of Mr Jeffrey LAM's motion may be concise, yet it has brought forth the salient point on the need of support from the Government in terms of policy measures. In other words, Members from the business sector who are concerned about business development do not support the non-intervention policy adopted by the Government in the past, and conversely request the authorities to make proactive efforts to formulate policies and provide resources to improve the economy of Hong Kong. The FTU agrees with this. Since the Government has a large amount of resources, it should formulate supporting policies to promote the LEGISLATIVE COUNCIL ─ 23 May 2013 12325 economy, or even follow the practices of South Korea and Singapore, to enhance Hong Kong's competitiveness in the international market.

Certainly, our focus is on promoting development conducive to the economy through improvement of the working environment, and absorbing and training talents, which we consider is mutually beneficial to employers and employees. A number of Members have cited Singapore as an example and made the analogy of "A Tale of Two Cities" on Hong Kong and Singapore. The first Chief Executive, Mr TUNG Chee-hwa, often said that Singapore was our competitor. Ten years have passed, how is the economy of the two cities doing? I am a Member from the labour sector, so I will not only focus on the Gross Domestic Product (GDP). Yet, in terms of GDP, the GDP per capita of Singapore has reached HK$30,000 but that of Hong Kong remains around HKD$20,000-odd. After 10 years, the economic development of Singapore has fared better than that of Hong Kong.

Has Singapore gained these economic achievements at the sacrifice or deprivation of labour protection? The answer is in the negative. In Singapore, legislation on standard working hours has been put in place, stipulating the standard hours worked at eight hours a day and 44 hours a week, with the hours of overtime work capped at 72 hours a month and statutory overtime pay stipulated at a rate of 1.5 times. Certainly, an exemption mechanism has been put in place there, under which employees earning a monthly salary of HK$27,250 are exempted.

In the Southeast Asian region, the development of Singapore and South Korea are said to be satisfactory, which is the envy of Hong Kong. Nonetheless, these two countries have not forgone the due protection for wage earners, and they instead pursue economic development from a different perspective. If the labour environment is satisfactory and the reward for work is decent, will wage earners develop a stronger sense of belonging to their companies, thereby prompting them to make more contribution and stimulating their creativity? This is enlightening. Particularly as Mr Jeffrey LAM mentioned earlier the need to upgrade and restructure the economy, where we should not hold on to low-end industries nor rely on low pricing as a means of competition. Indeed, a good working environment is essential to economic development.

Let us look at the situation in European countries. Greeks are often commented for living to enjoy life, who do not need to work but enjoy a lot of 12326 LEGISLATIVE COUNCIL ─ 23 May 2013 benefits, and this is considered a cause of the breakdown of their economy. Yet there is one interesting point. According to the report of the Government on standard working hours, employees in Greece are working on average 2 017 hours per annum and they only have 14 days of annual leave. What are the average working hours of employees in Germany, which so far has been regarded as the powerful engine of Europe? Germans work 1 408 hours per annum on average and they have 40 days of annual leave. Members know at heart the performance of the economy of Germany and that of Greece. In other words, will economic development be affected by measures implemented by the Government, which are seemingly benefiting wage earners only? It seems that there is no direct relationship between the two.

Hence, we do not oppose the motion. We support the Government coping with the global economic situation and capitalizing on the opportunities of co-operation between China and Hong Kong to promote better economic development in Hong Kong. However, we should not fall into the fallacy that increasing labour benefit will affect the business environment or undermine economic development. We think they do not necessarily have a causal relationship. Eighty percent of experts in human resources agree that an increase in the number of days of leave will enhance the working performance and sense of belonging of employees. In 2008, it was pointed out in a study conducted by academics in Hong Kong that an increase of one day's leave in each quarter would bring about an estimated per capita private consumption of $213, which would bring forth 0.34% growth in GDP. When we look at the past few years, apart from the year stricken by the financial tsunami, Hong Kong has maintained growth in the economy. However, for this year, only a 1.5% growth was recorded, where the growth in private consumption was slightly, or even obviously, less desirable than the growth in public and infrastructure expenditure. Therefore, providing additional leave to wage earners will not only allow them to enjoy life after work, but it will also be conducive to economic development.

On the other hand, as I mentioned in my amendment, apart from talents training, the authorities should consider how best to tap the latent labour force. In the First Quarter Economic Report 2013, the Government has written a feature article on the latent labour force. It is said that the present potential workforce amounts to 780 000. It includes three types of people: the first type is people of middle to old age, between 50 and 64 years of age, who will soon retire or are unemployed. The second type is carers aged between 30 and 50, who are LEGISLATIVE COUNCIL ─ 23 May 2013 12327 mainly housewives. The third type is people aged between 15 and 29 at the stage of "three-waiting" or "three-nos", who are "NEET" or young people not in employment, education or training, and there are 30 000-odd of them. In this connection, my amendment takes one step further to include South Asians and persons with disabilities. I hope the Government will give more consideration to this and formulate corresponding measures. Since individual trades and industries claim they are facing a labour shortage, will the authorities identify ways to attract these people to join the labour market and enhance their skills?

In the past, the Government's work on assisting persons with employment difficulties was less than effective and somehow problematic. In respect of the budget that has just been passed, we have made enquiries with the authorities about the respective numbers of cases of ethnic minorities seeking assistance from and getting employment through the placement centres of the Labour Department. It is noted that in 2010, there were 1 234 persons seeking assistance and 105 of them were eventually given jobs; in 2011, only 901 persons sought assistance and 72 of them got jobs ― the desire to find a job might have weakened; and in 2012, 981 persons sought assistance and 61 got jobs. What is wrong? Why are they excluded from the economy? Is it not a waste of manpower? I hope the Government will examine and clearly define the economic situation in Hong Kong. Yesterday, I chatted with the owner of a medium-scale local airline, and he said that he did not lack the funds for manpower, but it was difficult to employ staff and there was a shortage of talents. Should the Government not consider identifying ways to include these people who cannot enter the labour market easily due to employment difficulties or cultural concerns?

I also mention the concern of transport expenses in my amendment. I put emphasis on this point for I come from Tung Chung and also because I am concerned about the development of the airport. I know that the ranking of the airport has dropped to the fourth position this year, fallen behind Singapore, South Korea and the Netherlands. Many enterprises have complained about difficulties in staff recruitment. The FTU concludes that it is due to the following reasons: the long distance of travel, expensive transport fares and the need to work shifts. These concerns are all related to long working hours. Transport fares in Hong Kong are expensive. If Tung Chung residents return home after midnight, they have to take the all-night buses at $40 per trip. There is no reason that workers have to bear this expense. Therefore, to strive for further development of the economy, the Government needs not only to consider 12328 LEGISLATIVE COUNCIL ─ 23 May 2013 providing direct support to the business sector but also supporting measures for workers, rewards for work and attraction of talents, and so on.

I so submit. Thank you, Deputy President.

MR MICHAEL TIEN (in Cantonese): Deputy President, my speech is different from the one given by Mr TANG Ka-piu just now. I will look at the future of Hong Kong from another perspective in my following speech. These two speeches from both of us merit deep thoughts.

Deputy President, discussions on the business environment have rarely been rational in recent years. Such discussions are either overwhelmed by populist criticisms against unscrupulous businessmen or charged with anti-business sentiments claimed to be instigated by hegemony, and some have been carried to the extreme that all businessmen were cunning and oblivious to their social responsibilities.

Why do we have to examine ways to establish a business-friendly environment? Let me tell you all. It is because the population of Hong Kong will age rapidly in the future and our welfare expenditure will multiply. Therefore, if we fail to maintain relatively high economic growth, we will run into a deficit sooner or later, and Hong Kong will be trapped in a quagmire with no way out.

In 2012, elderly persons aged over 65 accounted for 15% of the population, and the ratio of wage earners to elderly persons is about five to one. Thirty years later, the ratio will be two to one, which means every two wage earners will have to support one elderly person. In 2013-2014, the welfare expenditure is around $60 billion, which accounts for 20% of the recurrent expenditure, and the expenditure on elderly care will multiply drastically in the future. I have raised these figures many times, and I hope Members will take them seriously.

On the premise of the fiscal principle of keeping expenditure within the limits of revenues, and given the inevitable significant increases in these expenditures, how can we increase revenue? The simplest way is to increase tax, but in Hong Kong where public opinions override everything, is it a feasible option to be considered?

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Most developed regions in the world levy a sales tax. However, in Hong Kong, sales tax can in no way be imposed. There is no way to impose the simplest sales tax, let alone other taxes like capital gains tax. Tax increases will definitely arouse opposition from all strata of society, and there will hardly be any progress. Besides, an increase in tax may scare away foreign investors, which will greatly tarnish the long-established reputation of Hong Kong in providing a favourable business environment through its simple tax regime. For these reasons, Hong Kong can only maintain its simple and low tax regime. In that case, what can be done?

In view of the increasing expenditure and impossibility of increasing taxes, Deputy President, we are left with the only option of "making a bigger pie". In other words, we have to keep on exploring new business opportunities. In that case, who holds the key to the future of Hong Kong? The one sitting in this Chamber: The Secretary for Commerce and Economic Development. Secretary Gregory SO, you really have an important mission. Since we have to keep on exploring new business opportunities to "make the pie bigger", the prerequisite is to maintain a business-friendly environment, which is the only way out for Hong Kong's survival in the future.

My amendment to the motion on "Maintaining a business-friendly environment in Hong Kong" has highlighted the importance of small and medium enterprises (SMEs). The prosperous development of SMEs is a health indicator of the business environment in Hong Kong. In brief, if SMEs can survive, it implies the fish in the pool is in abundance, and all sectors can survive in their own ways.

I would like to share two cases on SMEs to illustrate how SMEs have blended creativity with Hong Kong's unique culture to develop new business opportunities, businesses which overseas enterprises cannot do and large enterprises do not want to do. This has become a unique survival strategy of SMEs.

The first example is the well-known website on dinning, OpenRice, set up by Ray CHUNG in 1999. He is a Hong Kong resident born and brought up in Hong Kong. He knows the "gluttonous" culture in Hong Kong and has thus set up a website for restaurant searching. The website provides information and commentaries on a lot of food establishments, helping many people to find the right place for meals. At present, they provide information on 21 000 food 12330 LEGISLATIVE COUNCIL ─ 23 May 2013 establishments, whereas the number of times users visiting the sites has reached 4.7 million.

The second example is the Apps on ordering Hong Kong-style cafes take-away. Sino Dynamic is a local software development company, which has recently been granted the Best SME ICT Grand Award. What is the business of this company? It develops take-away food ordering programme for mobile phones. The Apps was introduced six months ago. Users are connected to 57 restaurants, gaining full access to the menus and prices of these restaurants, and they can choose to pick up the food themselves or order a delivery. The founder of the Apps, Alex KONG, says that since many people do not have the time to order food, the lunch time of wage earners is short and the phones of restaurants cannot be put through, so his business is very good.

Many overseas consultants have pointed out that SMEs are companies with the greatest creativity. As indicated by the above examples, SMEs are good at identifying new demands arising from the change of habits of consumers, and they can at the same time explore new markets. Therefore, I strongly believe that all economies are capable of exploring new demands continuously. Deputy President, I mean to say that only by exploring new demands can an economy grow perpetually.

Since large enterprises are enjoying economies of scale, while some may be enjoying monopolization, as well as rental income generated from the possession of land and premises, they are not eager to explore new demands. Yet what are the difficulties faced by SMEs today? Many people say that high rents and rising cost of goods are to blame. Deputy President, I do not fully agree with this remark.

Let me cite a real case to illustrate my point. The office of my enterprise is located in an industrial-cum-office building in Kwai Chung, which is a 10-minute walk from the MTR station. The latest rent is $10 per square foot, and the rent for a unit of 1 500 sq ft is $10,000-odd. In the two successful examples mentioned by me earlier, rents and cost of goods are irrelevant, whereas the key is manpower cost.

Since SMEs have to explore new demands, it is a brain-challenging industry which relies heavily on talents, and thus they attach great importance to the relationship between employers and employees. When it comes to the LEGISLATIVE COUNCIL ─ 23 May 2013 12331 relationship between employers and employees, hot topics on conflicts between employers and employees immediately pop up in my mind, which are minimum wage and standard working hours. Society at large, including me, supports the concept of minimum wage, for it is considered that it will attract more people to join the labour force. However, at present, there is a strange phenomenon that many SMEs cannot find enough staff. Since young people notice that security guards can get an hourly pay of $35 by simply sitting at the guard post and doing nothing, they do not want to take up jobs that eat up their brain juice. The arrangement has indirectly pushed up the wage of other trades which can hardly find anyone to take up jobs despite offering an hourly pay of $30 to $40. The serious ripple effect is out of the expectation of the Government. The difficulty faced by SMEs in employing staff has obviously come to surface, and we can read the relevant reports in newspapers.

As for standard working hours, the creative industry which I have been talking about will obviously encounter problems. How should hours worked be defined? If a programme developer suddenly thinks of an idea during the holidays and starts working on the idea immediately, should those hours be counted as hours worked? If exemption is granted to certain work types, sectors or posts, as in the case overseas where many jobs are exempted, what is the point of implementing the policy after all? Members proposing the prescription of standard working hours should think about this carefully. Indeed, the most important task now is to regulate working hours rather than imposing standardization, is it not?

When it comes to subjects involving employees' interest, the labour side will by all means strive for better terms in order to demonstrate to workers their importance. Therefore, more often than not, the terms demanded by them are far higher than what the workers consider they need and deserve. If it is allowed to run its course, SMEs will eventually be forced out of business. I can foretell that if the development of SMEs cannot be sustained, Hong Kong will definitely encounter problems in maintaining its sustained economic growth in the future. Hence, I hope the labour sector will take my speech today as reference. Whenever they put forth a demand, they should be more understanding towards SMEs. They should not think that their demands will only impact larger consortia. In fact, large consortia will remain intact despite their demands, for minimum wage bear no relevance to large consortia. As for standard working hours, large consortia may not be concerned about it, either. Yet SMEs will encounter great difficulties in coping with all these demands.

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Apart from minimum wage and standard working hours mentioned earlier, many more subjects involving the relationship between employers and employees will be raised in the future, such as paid leave and right to collective bargaining now under heated discussion ― which has caused the collapse of many economies in Europe. In the future, if SMEs with more than 20 employees are required to engage trade union representatives to carry out collective bargaining, employers will have to spend a lot of time bargaining on issues relating to relationship between employers and employees and employee's welfare, but they will be left with no time to do brainstorming to stimulate creativity. In this connection, I hope Members from the labour sector will think before they speak.

Deputy President, I so submit.

MR IP KIN-YUEN (in Cantonese): Deputy President, I have proposed this amendment mainly to show support for the motion entitled "Maintaining a business-friendly environment in Hong Kong". But I also wish to remind Members of one point and that is, in a business-friendly environment, apart from cost and competitiveness, there is also a crucial element that we must not forget. That is, behind the overall economic growth there is a very important locomotive. This locomotive is certainly our human resources, and there is also the question of whether our quality human resources can progress with the times and do so effectively.

This question has been thoroughly discussed in this Council whether in the budget debate or other sessions. So, I do not think I need to go into every detail here. But I wish to point out here that our education system has many problems in nurturing talents to serve the economy. I would like to give a general account of these problems.

I wish to highlight three points that we should do in future in respect of education. First, education should nurture diversified talents to cope with our diversified economy, and diversification in this sense should cover both the levels and types of talents. Second, what we need is quality, high quality. It is because as our population ages, the size of the workforce will actually be shrinking and so, quality will be the key to success. Third, we must have local talents who are more competitive, for we cannot solely rely on importation. The nurturing of local talents is crucial. Therefore, diversification, high quality and the nurturing of local talents are pivotal to the development of education in future.

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In respect of diversification, I would like to give Members a general picture of the current situation of education. Our higher education mainly aims to nurture high-level academic talents. Through examinations at the Secondary level, primary and secondary students are selected for university education. This Diploma of Secondary Education is primarily intended to serve the purpose of further education. It dictates the teaching approach in primary and secondary schools over all. In other words, our education basically aims to nurture students for university education, rather than training them for employment. It covers the vast majority of primary and secondary students in Hong Kong but we have only less than 10% of the students receiving vocational education during their senior secondary schooling. Compared to the Mainland, Taiwan or other countries worldwide, we can see a very big difference. It means that most of our students in their senior secondary schooling are still studying purely for university education, whereas in other places, about half of their students are already studying for employment purposes. This is a major difference.

About a decade ago I worked with some scholars from eight countries in a project initiated by the Pennsylvania State University of the United States. This study was mainly about senior secondary and university education in various countries. In fact, the scholars from most of the countries were greatly shocked by the unitary education system of Hong Kong and questioned why Hong Kong students would spend so much time studying purely for admission to universities. And this kind of university education means studying for academic purposes. It is correct to study for academic purposes but this suits only some people while other people may not necessarily do so. We also visited Germany and Switzerland to study their education systems, and we considered that Germany and Switzerland have made excellent achievements in vocational education, for they can help many students find their own meaning of learning in the process of learning. The students know that they can practise what they have learnt and this enables them to attain their goals, develop themselves, and find the meaning of living. This is indeed very important. This is a kind of high-quality vocational education, which is a lot different from the prevocational education in Hong Kong a few decades ago. Under the past prevocational education system, students were already divided into different streams during junior secondary schooling for them to receive the so-called labour-intensive training of very low levels. But now, what we have to think about is high-level vocational education. Hong Kong actually has a lot of room for development in this respect.

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The German and Swiss systems have indeed gained recognition from more and more people in the world, including OBAMA, President of the United States, who openly mentioned this point in his most recent State of the Union address. I think we may not have to copy their systems as it requires very good co-operation among the business community, the government and the academia in order for these systems to be implemented. We may not have these conditions but is it possible to explore them in certain aspects? Must we make it the only objective for all students to pursue university education? Must they all study arts, history, philosophy, physics or chemistry? Can they learn the culture through practice on the one hand while taking up internship on the other, so as to realize the meaning of learning? This is a very important point and a breakthrough that needs to be made in order to achieve diversification. If this could be done, we could prevent the situation where many senior secondary students have to "accompany the princes in studying" because they are made to sit in an examination which is meant for the "champions". This is the first point concerning diversification.

(THE PRESIDENT resumed the Chair)

The second point is quality. I believe Members in this Chamber know only too well that it is imperative to upgrade the quality of education in order for quality talents to be nurtured to cope with future challenges, and this includes whether kindergartens, primary and secondary schools and teachers' training can keep pace with the development. In respect of small class teaching or the student-teacher ratio in primary and secondary schools, we all know that Hong Kong compares far less favourably with the neighbouring regions. We basically want our teachers to keep on teaching by using a factory-like, low-cost approach and then train students to achieve good results through drilling. However, we can see that the education reform being implemented now does not aim at this. What we must do now is to develop in our students the ability to think and analyse, so that they know the way to learn. They not only need to learn knowledge, but also need to know the ways to learn more knowledge in the future, in order to face the future. So, in view of the situation, the overall commitment of the Government is crucial. We should enhance the overall quality of education in primary and secondary schools as well as kindergartens and even in higher education.

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Another key point is localization. Can local students become talents? We have surprisingly found that only a very small number of local students can study in research-based postgraduate programmes, as local students account for only some 20%. It means that most students cannot receive the most elite part of our education in Hong Kong which now turns out to benefiting foreign students, including Mainland students. When our students cannot study in these postgraduate programmes, it would ultimately affect only Hong Kong itself. Have we seriously reviewed the entire system to find out how we can encourage more local students to study in postgraduate programmes? How can we enable more Hong Kong students to access the postgraduate education system through scholarships, the overall admission system and promoting more local research efforts? This is, in fact, very important.

Lastly, I would like to point out that public education is indeed very important. Our past success is attributed to an equal and fair platform for all students to take part in competition. However, this platform has become more and more distorted while featuring an ever widening wealth gap. As a result, our education has turned farther and farther away from the overall population. What we need is high quality, diversification and a fair platform for localization.

I so submit.

MR WU CHI-WAI (in Cantonese): President, the topic of this motion today is "Maintaining a business-friendly environment in Hong Kong". To maintain a business-friendly environment in Hong Kong, the provision of additional resources to support small and medium enterprises (SMEs) is definitely the correct orientation. The reason is that local SMEs have employed a huge workforce and if SMEs cannot achieve robust development, there would be less competition in the market and this would affect the public and the working class in their way forward.

The economy of Hong Kong is comprised of two significant elements, namely, trade and logistics. The development of Container Terminal 10 in an effort to maintain the competitiveness of container terminals and their ability to cope with the container throughput by increasing competition is a very important step to take. As a matter of fact, over the past few years, the world ranking of the local container industry has fallen from the first to the fourth recently, while Shenzhen has already surpassed Hong Kong. The alarm has been sounded.

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After the alarm has been sounded, what strategy does the Government have in place? A continued decline of the container industry will considerably shake and affect society as a whole, especially the grass-roots people who rely on the logistics industry to make ends meet. Particularly, when there has yet been robust development of other high knowledge-based jobs that society is hankering after, coupled with the fact that low-skilled workers cannot cope with the ravaging currents of restructuring, a stagnant container industry will bring forth very great impacts.

The Government is currently conducting the Study on the Strategic Development Plan for Hong Kong Port 2030 to update port cargo growth forecasts and explore how to make better use of the existing port facilities to support future development. The Study is scheduled for completion in the first half of this year. What insights will this Study offer for the development of container terminals? The answer has yet been known. In the reality that time waits for no man, our wait has already caused the rankings of the local logistics and container industries to fall continuously to the extent that we are already surpassed by Shenzhen now.

The Democratic Party has since 2004 expressed support for the development of Container Terminal 10. We consider it a way to enhance the competitive edge of the local shipping and logistics industries, thereby facilitating competition among container terminals while reducing the cost of SMEs engaging in import and export businesses. I hope that the Government can commence work expeditiously and will not stall on the relevant studies. Subject to the Environmental Impact Assessment, it is a more reasonable choice to develop the terminal on Lantau.

From the recent incident of dock workers, we can see that if the old modus operandi is followed without taking steps to enhance competitiveness, the operation of container terminals would ultimately be affected as a result of the weakening of their competitiveness, which would take toll on the overall competitiveness of Hong Kong.

The shipping industry of Hong Kong is another issue of great importance to us. The import and export trade has all along been a pillar industry of Hong Kong. Import and export trade alone has generated economic benefits amounting to $336.9 billion for Hong Kong, accounting for about one fifth of the LEGISLATIVE COUNCIL ─ 23 May 2013 12337

Gross Domestic Product. SMEs constitute a major component of the import and export trade and employ over 500 000 workers, or 13.9% of the total workforce.

Following the continuous opening of the economy of China, there have been increasingly frequent trade activities between China and other countries, and as China has continuously signed new aviation agreements with other countries, the routes between other countries and China have been increasing considerably. If Hong Kong still fails to reasonably open up the fifth freedom traffic rights to increase the number of flights between Hong Kong and other cities, and if it still fails to enhance the flexibility of the arrangements for business travellers and for the cargo logistics industry in order to reduce freight cost, the competitiveness of the air freight industry will be undermined. Certainly, all these will involve the major issue of whether a third runway can be developed expeditiously. In spite of this, I think it is necessary for the Government to consider this issue from the overall perspective of a shipping hub. Apart from developing hardware support for the third runway, it is also necessary to draw up specific strategies in respect of the arrangements for air traffic rights, with a view to assuring the position of Hong Kong as an aviation hub.

I would also like to talk about the enforcement of the Competition Ordinance. While the Competition Ordinance is already enacted by this Council and the Competition Commission (the Commission) has been established, I wish to point out that the Competition Ordinance grants exemption to most statutory bodies and also to agreements and conduct made on public policy grounds, while stipulating that no consideration or study should be made on whether competition in society is jeopardized by policies.

Since the Competition Ordinance has been put into practice, the Government should expeditiously conduct a review to examine whether the Commission can be provided with adequate resources, so that apart from handling complaints, the Commission can also look into whether competition in society is affected by any government policy. It will be conducive to creating a business-friendly environment and facilitating competition in various trades and industries if the Commission is empowered to review the relevant policies with the objective of ensuring fair competition.

Let me cite free television licence as an example, so that Members can understand the existing problems. As we all know, the Government has proactively made plans to issue new free television licences, just as it proactively 12338 LEGISLATIVE COUNCIL ─ 23 May 2013 took actions to address monopolization of the telecommunications industry before. However, many trades and industries are facing unfair competition in their respective markets, or it may be the policies of the Government that render them affected.

An example is the policy adopted by the Government some years ago to promote liquefied petroleum gas (LPG) taxis. The Government's original intention was to promote environmental protection, but the market of LPG taxis has been monopolized by individual makes. Why? Perhaps it is because the Government did not consider the factor of competition in its planning. Nowadays, although the environmental efficiency of LPG taxis or vehicles can meet standards comparable to those of EURO V or EURO VI diesel vehicles, the Government still has not revised its policy. Naturally, the Government's failure to make comprehensive consideration in formulating the policy has resulted in less competition between market operators or in the industry and also higher operational costs incurred by operators. Besides, the Government suggested that tenders be invited for the installation of catalytic converters for LPG public light buses. While this was suggested for the fine-sounding reason of enabling vehicle owners to identify reliable automobile companies, this arrangement has nevertheless led to monopolization.

Lastly, I would like to draw the Government's attention to the point that it should make the utmost effort to help promote the external sales of local brand names and technologies. Hong Kong has many successful brand names and as the quality of Mainland products is open to question, there are actually huge business opportunities for them. Does the Government have the determination and courage to promote the sales of Hong Kong brand names in the Mainland and even international markets? This is something that no SME is capable of doing on its own. Government policies are required to help them develop a relationship with the Mainland authorities ― which is the so-called "G2G" ― or promote their sales in the world market.

I hope that the Government will not think that it can just "fold up" and be happy after the signing of CEPA. On the contrary, it should proactively promote Hong Kong brand names (The buzzer sounded) ……

PRESIDENT (in Cantonese): Mr WU, time is up.

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MR WU CHI-WAI (in Cantonese): …… Thank you, President.

MR YIU SI-WING (in Cantonese): President, the business environment of Hong Kong has all along maintained a leading position in international ranking. According to the report on "Doing Business 2013" published by the World Bank in October last year, Hong Kong ranked the second globally in terms of the ease of doing business. Our ranking has risen three places from the fifth in 2007. While Hong Kong is ranked among the top and an influential financial centre in the world, we mainly rely on the service industry. In the event that we are hit by a downturn in the external economy, we would face greater volatility than other neighbouring places. In order for Hong Kong to maintain its economic vibrancy and take forward economic development, the Government needs to be more vigilant and take precautions before the storm strikes.

The motion proposed by Mr Jeffrey LAM is most essential and timely. As we all know, small and medium enterprises (SMEs) have played a vitally important role in the economic structure of Hong Kong. They have made significant contribution to economic development and upgrading of our competitiveness in the market. The Government must not neglect this force.

Tourism is one of the four major pillars of the Hong Kong economy. This tiny place of Hong Kong has as many as nearly 1 700 travel agencies, ranking the fourth among all provinces country-wide. Over 80% of these travel agencies are SMEs. To give Members a better understanding of the problems concerning the Government's support for the SMEs, I will try to make an analysis and put forward proposals from the angle of the tourism industry.

First, the Government should subsidize SMEs, so as to motivate them to make use of information technology (IT). As I have just said, a vast majority of the local travel agencies are SMEs, with many of them carrying a staff of two to three employees. For a long period of time, most of them have grown accustomed to handling their internal operation, finances and personnel matters manually, and not many of them can effectively apply IT in managing their companies, thus resulting in high costs and low efficiency, and this is a very common phenomenon in the industry. The reason is that it costs around $200,000 to purchase the most basic kind of software suitable for the business of travel agencies. The cost is even more expensive if a professional company is commissioned to write computer programs specifically for their use. Coupled 12340 LEGISLATIVE COUNCIL ─ 23 May 2013 with the annual maintenance fees, the costs involved are generally beyond the affordability of travel agencies.

In modern society, office computerization has already become a trend and it enables industries to avail themselves to the basic tools of competition. It is necessary for the Government to channel resources to this end and draw up support policies in the light of the actual situation. I propose that the Government should consider making provisions to set up a fund for the tourism industry to facilitate the centralized development of software suitable for application in small and medium travel agencies and provide suitable subsidies for the annual expenditure on system upgrading and maintenance.

Second, I propose that the Government should increase its expenditure on subsidizing the training of industry practitioners, so as to raise the professional standards of the industry. The Government implemented the Small and Medium Enterprises Training Fund from 2002 to 2005. It provided subsidies up to 70% of the actual expenditure incurred by an enterprise for each successful application and benefited about 33 700 employees of SMEs.

In recent years, the Government has promoted IT application among employees of SMEs through the Office of the Government Chief Information Officer by providing training to various trades and industries, but training is confined to specific industries each year and the programmes are time-limited. For example, the IT training programme for the travel industry in 2008-2009 could only benefit employees of 266 small and medium travel agencies. The programme ended in August 2010, and there has been no serious review of its effectiveness, nor has any plan or arrangement been made for ongoing initiatives. That the programme produced less distinguished results is mainly due to the Government's poor arrangements and inadequate publicity. As a result, most enterprises missed the opportunity to take part in the programme and could not benefit from it. For enterprises which did participate in the training programme, their IT application has not seen any enhancement owing to a lack of continuous support. The programme has thus turned out to be more of a mere formality.

President, under the current arrangements, enterprises can apply for subsidies only under the Continuing Education Fund and the Skill Upgrading Scheme of the Employees Retraining Board (ERB). As both schemes target individuals in providing subsidies for training, employers cannot make use of the funds to encourage their employees to take courses relating to the business of the LEGISLATIVE COUNCIL ─ 23 May 2013 12341 company and so, it is difficult to directly help the upgrading of the company's business.

The Employees Retraining Fund of the ERB currently has a balance of $2 billion. The Government plans to make a further injection of $15 billion into the Fund, but as the ERB's estimated expenditure for this financial year is only $1 billion, it will have a considerable amount of disposable fund in future. For this reason, I propose that the Government should restore the Small and Medium Enterprises Training Fund and also the IT training programme targeting the travel industry while making improvements to the programme, in order to directly benefit trades and industries which are given priorities by the Government in its support policy.

Third, I propose that the Government should organize external promotional activities jointly with the industries and appropriately subsidize such activities. In 2009, the Government established the $300 million CreateSmart Initiative to support the creative industries. Subsidies have been provided for a number of exhibitions. Sponsorship covers the air tickets, hotel accomodation and booth fees of exhibitors. For example, in the SmartHK held in Hangzhou in 2012, the booth fees alone cost $7,000 and after the grant of subsidies, the total amount of air tickets, hotel accommodation and booth fees payable by an exhibitor was reduced from $12,500 to $4,960. This approach of subsidization is worthy reference for other trades and industries. When government departments can directly take the lead to organize promotional activities, the promotion cost incurred by the SMEs can be reduced and the overall image of the Government also improved.

President, in comparison, government support is obviously inadequate for the tourism industry. Every year, the Hong Kong Tourism Board (HKTB) organizes tours for the industry to participate in exhibitions or conduct site visits overseas but the subsidies provided are very limited. For example, for the tourism exhibition to be held in Barcelona, Spain, in October this year, an exhibitor who signs in for the exhibition through the HKTB is required to pay HK$55,000 for the booth and registration fees. Such expensive fees are no doubt banning the entry of most SMEs to these exhibitions. Compared with the neighbouring Macao, an exhibitor who will take part in the same exhibition is only charged MOP 2,000 for the booth fee by the Macau Government Tourist Office and the employees of the exhibitors are also given an allowance. I hope that the Government can learn from the experiences of other places, seriously review the forms of sponsorship for different trades and industries and formulate 12342 LEGISLATIVE COUNCIL ─ 23 May 2013 anew support policies in the interest of the SMEs.

Fourth, I propose that the Government should reduce or waive the licence fees of the relevant enterprises in trades and industries with operating difficulties. In May 2009, the Government rolled out a number of enhanced relief measures which included a one-year licence fee waiver for travel agencies, guesthouses, restaurants, hawkers, tour coaches, and so on, at a cost of $670 million. The Securities and Futures Commission also waived the licence fees for two years starting from 1 April 2012, benefiting about 40 000 intermediaries.

President, the tourism industry has faced fierce competition in recent years. In order to increase profits, hotels, airlines and other product suppliers have gradually reduced their reliance on travel agencies through various channels, including online marketing. For most of the small and medium travel agencies in Hong Kong, as their main business is to make bookings for hotel rooms and air tickets for clients, their operation has become increasingly difficult as their gross profit is often as low as 3%, and many of them face a shrinkage of business and even closure.

At present, apart from the annual business registration fee, local travel agencies also have to pay for the travel agents licence fee at $5,820 and the membership fee of the Travel Industry Council of Hong Kong at $1,000 plus an additional $600 for each branch office. If the Government can waive the registration fee for travel agencies for one year, the estimated loss of revenue to the Government will be some $9 million only. This will not greatly affect government revenue but will create a stimulus effect for small and medium travel agencies with operating difficulties. I hope that the Government will actively consider reducing or waiving the licence fees appropriately for trades and industries with operating difficulties (including the tourism industry), in order to demonstrate the Government's readiness to ride out the hard times with us.

In the coming few years, the Hong Kong economy will still face uncertainties, while SMEs will bear pressure of varying degrees. I hope that the Government, while addressing the livelihood issues, will also pay attention to the commercial viability and development of enterprises, with a view to maintaining Hong Kong's competitiveness in the international market.

President, I so submit.

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MR CHARLES PETER MOK (in Cantonese): President, first of all, I thank Mr Jeffrey LAM for proposing this motion today. I also thank Mr YIU Si-wing for suggesting ways to subsidize the application of information technology (IT) in small and medium enterprises (SMEs). I fully agree with his views.

Hong Kong indeed lacks overall and long-term measures, thus making it impossible for Hong Kong's edges to come into full play. The Government's policies are prescribing wrong solutions to problems, which has sometimes led to a mismatch of resources. As a result, various trades and industries cannot see their future clearly. I believe people in many trades and industries have deep feelings about this, including members of the IT industry and even practitioners in the tourism industry particularly mentioned by Mr YIU earlier on.

President, with regard to the new drive to economic development, the objectives of development and relevant policy areas in Hong Kong, I have always summed them up into four aspects, namely, image, market, capital and talents. These four aspects, in which there is room for improvement in the policies, are like the four legs of a table as each leg is indispensable and the legs must not be uneven in height. They must be balanced, or else the table will slant or topple, and we would not be able to develop quality employment steadily on it.

First, let me start with market policies. As we all know, the Government is one of the biggest service users in the market and government policies have a significant bearing on the market. Every year, the Government will indeed put a large number of projects to tender, allowing participation from suppliers. This is a good opportunity for enterprises to accumulate experience and expand their business. Particularly as the Government is the target of service, the scale and scope of the service involved are relatively large and so, this will positively facilitate the development of SMEs.

Unfortunately, the Government's IT procurement policy has all along adopted the guiding principle that "the lowest bidder wins" to the neglect of the costs incurred by the industry in providing quality services. This will preclude the successful bidder or the government project from achieving the most positive results. Moreover, the Government requires the successful bidder to pay a huge amount of performance bonds in respect of some projects. This has aggravated the burden on the SMEs in competition while reducing their interest in submitting tenders as well as their chance of success.

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I know the Government will say that the evaluation criteria currently adopted for many projects have, in fact, included a quality weighting and that sometimes, the price to quality weighting is already in a ratio of 7:3 or 6:4. However, the devil is in the details. Many members of our industry have told us that the scores of quality given by the Government are either A, A+ or A- for everyone, which actually makes no difference because government officials base their decision entirely on past government projects and at the end of the day, the price is still the decisive factor. President, does this not show that the Government is deceiving itself as well as other people in this system?

Therefore, point (1) of my amendment calls on the Government to improve the guiding principle that "the lowest bidder wins" by, for instance, encouraging innovation in its procurement policy and studying the inclusion of the assessment elements of giving priority to local research and original applications, in order to increase the opportunities for SMEs to be awarded contracts and enhance their competitiveness. As for the performance bonds, the Government should reduce the amount, so as to pare down the cost incurred by bidders, thereby increasing their chances of being awarded contracts.

Point (2) of the amendment relates to the market. Cloud computing has been developing rapidly in Hong Kong. More and more people are engaged in data development and their research results will bring a lot of benefits to Hong Kong. In this connection, I propose that the Government should facilitate the opening up of more government data by government departments and encourage developers to make use of such data at liberty and free of charge. After obtaining these open government data, the developers can develop more mobile and other Internet applications useful to peoples' living and social-economic activities and also to the benefit of the public and the economy. This will facilitate the development of more new products to provide assistance to the public in their daily life and work and hence enhance their work efficiency in all aspects.

Last weekend, at a place called the Good Lab in Cheung Sha Wan, about 100 developers shared with each other their experiences in the development of self-initiated open data projects. The discussions spanned the whole weekend and fortunately, several colleagues from the Office of the Government Chief Information Officer also participated in it. Some of the projects include applications on the map of cycle tracks in Hong Kong, map of light and noise pollution in Hong Kong, map of food poisoning, and so on. The project which I LEGISLATIVE COUNCIL ─ 23 May 2013 12345 think can most closely keep tabs on government policies is an application on the map of recyclable waste collection points. It is because the Environmental Bureau published the Blueprint for Sustainable Use of Resources just this week, and the objective is precisely to formulate such policies as the goal of the disposal quantity of municipal solid waste. It is good to see that before the Government has yet taken any action, public wisdom has made a headstart by creating these applications.

President, some time ago I read the current issue of The Economist in the Ante-Chamber. An article in it pointed out that United States President OBAMA had ordered the Federal Government to make available all government data to the public entirely for free in machine readable formats unless privacy, confidentiality or national security is involved. It means that the data are made available to the public not in a stack of papers for them to copy the data by themselves, but they can access the data simply by switching on the computer. This can stimulate innovative ideas or creativity among the public. According to that article, the European governments estimated that the opening up of government data can generate productivity amounting to €140 billion per annum. In view of this, it is indeed imperative for the Government to open up its hidden data more expeditiously and more vigorously.

President, point (3) of the amendment concerns capital. SMEs, particularly business starters in the creative industry, do require the support of capital in order to develop their business, especially during their initial years of operation. I remember that at the final stage of the Budget debate on the day before yesterday, Mr James TIEN said that the most profitable industry is the technology industry but he opined that Hong Kong does not have the ability to develop such products as Facebook. This, I do not agree. I wonder if Members have noticed a series of special features entitled "科網有錢途" (Dot-com business, the path to riches) published in a local newspaper over the last few days. It is about the story of "9gag", a local humour website in Hong Kong. I wonder how many colleagues in this Chamber have heard of or browsed the work of "9gag". It is actually started by a few local youngsters who grew up in public housing estates in Hong Kong. With creativity and hard work, they ventured out of Hong Kong in pursuit of their goal. They came back to Hong Kong after a year's learning in Silicon Valley of the United States and then obtained an investment of over $20 million from first-line VCs (venture capital firms) in Silicon Valley of the United States. Now, this company of these several young people has a market value exceeding $100 million.

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The achievements made by "9gag" are absolutely not undeserved. In the last three months, the number of its visitors ranked the 402nd in the world. Is this a low ranking? Certainly not, and it is very high instead. It is even several thousand places higher than the world's largest group buying website Groupon and the websites of some major television operators in Hong Kong. It has a monthly average of over 60 million visitors and over 1 billion pageviews. Apart from "9gag", I do know that there are other examples of successful local companies.

On point (3) of the amendment, I hope that the Government can provide more opportunities of investment in venture capital funds. Besides, in order to encourage the development of local "Angel Funds" and venture capital funds, we can model on the practice adopted by the United States in the 1970s of allowing retirement funds to make investments in risk funds, thereby stimulating the development of the entire industry and providing local companies with more choices of early-stage investment.

Point (4) of the amendment concerns talents. As also suggested by Mr YIU Si-wing earlier on, I urge the Government to inject capital into and reactivate the Small and Medium Enterprises Training Fund, in order to encourage the training of more talents by SMEs.

President, I hope that Members can support these four points proposed by me in the amendment. Thank you.

SECRETARY FOR COMMERCE AND ECONOMIC DEVELOPMENT (in Cantonese): President, I am very grateful to Mr Jeffrey LAM for proposing this motion to express his concern about the business environment in Hong Kong and the supporting measures for small and medium enterprises (SMEs) in view of the slow recovery of the global economy.

As we enter the second quarter of 2013, the external economic environment remains uncertain. The economic growth in European countries and the United States has slowed down and the debt crisis takes time to resolve, whereas measures of financial stringency adopted by the countries have dragged down the economic growth of their local economy as well as global trade. Hong Kong as an export-oriented economy will inevitably be affected, and SMEs of a limited scale will be the first to bear the brunt.

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Mr Jeffrey LAM and Mr YIU Si-wing have both mentioned the difficulties faced by SMEs in operation. In fact, SMEs constitute an overwhelming majority of all enterprises in the territory, and they have employed over 1.2 million employees, accounting for 48% of the total number of employees in the private sector. They definitely have profound influence on the economic development of Hong Kong. The Government has all along attached great importance to the healthy development of SMEs and offered assistance to SMEs on various fronts with a view to enhancing their competitiveness. We provide all kinds of support to these enterprises through various government departments and quasi-government organizations, such as the Hong Kong Trade Development Council and the Hong Kong Productivity Council, including the implementation of subsidy schemes mentioned by many Members in their speeches earlier, and the provision of the latest market information, infrastructure and technical support, and so on.

Measures are often adjusted in response to the economic condition, so as to provide customized support to enterprises. In the face of persistently weak export markets and a challenging external economy, this year, particular attention has been accorded to the needs of local SMEs by assisting them in financing and exploring new markets. Just as Mr Michael TIEN said earlier, we have been assisting them to explore business opportunities to "make the pie bigger".

In respect of financing, with the guarantee commitment of $100 billion provided by the Government, the Hong Kong Mortgage Corporation Limited has extended the application period for the Special Concessionary Measures under the SME Financing Guarantee Scheme for one year to end of February 2014. Under the arrangement, enterprises will continue be offered loan guarantee ratio of 80% at a concessionary guarantee fee, so as to help enterprises to secure loans in the commercial loan market. The loans obtained by enterprises can be used as operating fund to support the business operation of enterprises, including staff training and R&D projects.

To assist enterprises to develop new export market, we propose to increase the cumulative amount of the grant for each SME under the SME Export Marketing Fund of the Trade and Industry Department from $150,000 to $200,000, subject to the meeting of relevant additional conditions. Over 4 800 SMEs having reached the maximum cumulative amount of grant will benefit immediately from the arrangement. The proposal will be submitted to the Finance Committee tomorrow, that is, 24 May, for approval, and it is expected to 12348 LEGISLATIVE COUNCIL ─ 23 May 2013 be implemented in June 2013. Moreover, from 1 March this year, the Hong Kong Export Credit Insurance Corporation has introduced a "Small Business Policy" scheme for Hong Kong enterprises with an annual business turnover of less than $50 million, whereas policyholders under the scheme will enjoy waiver of the annual policy fee and premium discount.

We believe these measures will provide effective support to SMEs in the midst of the uncertain external economic environment. We will continue to keep watch on changes in the external economy and market, and then examine our measures to address the needs of enterprises.

As for the business environment, Hong Kong is one of the most attractive places for doing business in the world. According to the report titled "Doing Business 2013" published by The World Bank in October 2012, Hong Kong is in the second place in the ranking on the ease of doing business. The sound judicial system, freedom of information and comprehensive infrastructure in Hong Kong are conducive to the development of the industrial and business sector and maintaining Hong Kong's competitiveness in the international arena. In addition to reinforcing the support for SMEs, the Government has all along made vigorous efforts to promote the establishment of business-friendliness environment, which include removing trivial and complicated rules, replacing obsolete, unnecessary or complicated regulation, enhancing the efficiency, transparency and degree of business-friendliness of regulation, and lowering the cost of compliance of the business sector, so as to provide a business-friendly environment to enterprises continuously.

We definitely understand that the sustainable development of Hong Kong economy cannot rely solely on a desirable business environment. Issues on employees training, employees' welfare, infrastructure and education policy, as mentioned by various Members in their amendments earlier, are crucially important to the enhancement of Hong Kong's competiveness in the long term.

President, I will continue to listen attentively to the views expressed by Members on the motion, and I will give a detailed response later on. Thank you, President.

MR WONG TING-KWONG (in Cantonese): President, the motion moved by Mr Jeffrey LAM today on the business environment is a frequently visited issue. LEGISLATIVE COUNCIL ─ 23 May 2013 12349

An excellent business environment has all along been Hong Kong's edge but we find that currently, this edge is being gradually undermined. There are two reasons for it, that is, external problems and domestic troubles.

On external problems, in recent years, financial crises have arisen time and again, thus dragging the global economy into serious troubles. So far, the recovery has been slow. In an overview of the major economies around the world, the unemployment rate in the Euro zone has exceeded 12% and the GDP growth in the United States, standing at a little more than 2%, has also been worse than expected, so there is still a long way to go before full recovery can be achieved. Even the economic locomotive, China, has seen a GDP growth of only 7.7% in the first quarter of this year, so the target of keeping the growth rate at 8% has not yet been attained. It can thus be seen that the road to global economic recovery is still quite bumpy.

Various external problems have destabilized the external environment and of course, it is not possible for this small externally-oriented economy called Hong Kong to stay unaffected. A shadow has been cast on exports and investments and at present, the GDP can only grow at a low rate and doing business has become increasingly difficult.

As regards "domestic troubles", in recent years, inflation has surged but the biggest problem lies in soaring rents. The various costs of doing business are rising rapidly. The introduction of the legislation on competition and minimum wage in recent years, well-intentioned measures though they are, has great impact on the business environment and many companies have to do their level best just to barely cope with various significant changes. What is even more worrying is that in recent years, labour relations have become increasingly antagonistic. Certainly, employees have a great deal of grievances but bosses also have a lot of worries that make them lose appetite and sleepless. In the end, staff morale is dented and companies cannot make any profit, thus making it difficult for employees to make a living and leading to a lose-lose situation. Sympathy has completely vanished in labour relations and the attitude has changed to a cruel and merciless one of "I couldn't care less if you live or die".

All these external problems and domestic troubles have all led to the deterioration of Hong Kong's business environment, so it is now increasingly difficult to do business. Small and medium enterprises (SMEs), which are small and weak, are faring even worse.

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I understand that in the face of external problems, Hong Kong, being a very small place, does not have the power to turn the macro environment around and the most that we can do is to pay close attention to the development of the situation and make the best out of it, so as to reduce the damage. However, in the face of domestic troubles, there are many things that we can do because to a large extent, the problems are of our own making.

The principal reason for soaring rents is the serious shortage of commercial sites. The Government is preoccupied with only solving the housing problem but I must say that it is also necessary to pay attention to the needs of business operation and formulate a sound land policy, so that there can be a stable supply of commercial sites in Hong Kong to ensure that rents would not soar out of control. Only in this way can there be a healthy business environment in Hong Kong. At the same time, although land policy is the fundamental solution to the problem, no matter how astute this tactic is, often, a distant solution cannot solve a pressing problem, so it will take three, five or seven years before this problem can be solved, yet the serious problems and threats before us cannot be eased immediately. Therefore, apart from the land policy, with regard to soaring rents, the Government should also find ways to ease the burden of SMEs, for example, by tackling this issue through taxation and the introduction of appropriate tax concessions having regard to the sound finance of the Government. At the same time, it is necessary to introduce arrangements that facilitate financing, so as to ease the pressure borne by SMEs in the capital chain.

In addition, when the Government introduces policy measures, it should also carefully consider their effects on SMEs. Consortia have great financial strength as well as a large team of lawyers, so be it the legislation on competition or that on a minimum wage, they can naturally take measures in response to the changes in circumstances and do so with skill and ease. However, this is different in the case of SMEs. They already have many problems to cope with and any further unfavourable measures imposed on them can easily become the last straw that breaks the camel's back, so the Government must be extremely cautious. Now, after introducing the laws on competition and minimum wage, the Government is studying the introduction of standard working hours. Although we should strike an appropriate balance between work and life, the Government must also take account of various considerations, understand the actual situation and forge a broad-based consensus on how standard working hours should actually be implemented, so as to avoid curtailing the scope of survival of SMEs.

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President, an excellent business environment has all along been an edge in which Hong Kong takes pride. For decades, employers and employees have joined hands in their endeavours to create one miracle after another and to build Hong Kong into a world-renowned metropolis. Today, for various reasons, this edge is beginning to be shaken, so we must wake up in time and consolidate the favourable business environment of Hong Kong.

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

MR CHEUNG KWOK-CHE (in Cantonese): President, the leader of the former Soviet Union, Mikhail GORBACHEV, once said something very meaningful. He said, to this effect, "The world is our common home and we share the same destiny. If a region is only concerned about prosperity for itself while there is hunger everywhere in the world around it, such regional prosperity is actually impossible.". President, with this transcendental vision of his time, GORBACHEV ended the Cold War lasting nearly half a century and made this historical feat, thus becoming a great figure of the 20th century. Of course, what he said then referred to the prevailing global situation at that time and he was calling on all countries to care about one another. Is this kind of vision not something that people in high offices in Hong Kong nowadays should have?

Mr Jeffrey LAM's motion proposes that "given the slow recovery of the global economy, this Council urges the Government to adopt proactive policy measures to maintain a business-friendly environment in Hong Kong.". In fact, such description in the motion is specious. The recovery of the global economy may indeed be somewhat slow, but according to the Standard Chartered Hong Kong SME Leading Business Index for the first quarter of 2013 published by the Hong Kong Productivity Council in January this year, the Overall Index for Hong Kong has risen for the second consecutive quarter, standing at 49.5, a rise of 3.2 points from the previous quarter. Of the five Sub-Indices, the Sales Amount Sub-Index has exceeded the 50 mark, registering 50.7 and up five points from the last quarter. This figure reflects the fact that generally speaking, the confidence of SMEs in Hong Kong in the sales volume of this quarter was on the rise. In addition, both "investment" and "staff number" have maintained positive growth for the third consecutive quarter, with "investment" standing at 54.9 points and "staff number" at 51.9 points. This reflects the fact that SMEs in Hong Kong have the desire to increase their investment in this quarter, including increasing production capacity, raw material inventory, as well as setting up new offices, 12352 LEGISLATIVE COUNCIL ─ 23 May 2013 factories and retail stores, and they have a positive attitude towards staff recruitment.

When the survey for the second quarter of 2013 was published last month, the Overall Index also stood at 48 points. Although it fell by one point compared with the first quarter, it was still close to the no-change mark of 50 points, reflecting the fact that SMEs expect the business environment to remain stable in this quarter. It can thus be seen that for some time in the immediate past, the business environment in Hong Kong has been quite good and that no major problem is expected for some time in the future.

It seems that Mr Jeffrey LAM and the business sector represented by him are still not satisfied and want the benefits of the business sector to remain singularly outstanding and always take the lead. In order to elaborate on this, let me borrow the words of GORBACHEV, "Hong Kong is our common home and we share the same destiny. If the business sector is only concerned about prosperity for itself when the general public around it remains poor, helpless and displaced, prosperity for it is impossible.". We must understand that all sectors in Hong Kong form a single entity, so "when one prospers, all prosper; when one fails, all fail.".

For more than a month, the industrial action taken by the dock workers has won the support of all members of the Hong Kong public and the small sums of donation have added up to more than $8 million in total. This is unprecedented in Hong Kong history. This incident tells us very clearly that the public are very dissatisfied with the environment in which consortia in Hong Kong run their businesses. Be it white-collar workers or blue-collar workers, they have become the groups collectively victimized by consortia and monopolistic companies. In this incident of strike of dock workers, it can be seen clearly that Mr Gerry YIM, as the representative of employers, was very resentful towards the vocation of labour unions to organize workers to campaign for their rights. Such an attitude has totally exposed the arrogance of Hong Kong consortia born of their huge wealth and exploitation of workers through the sheer might of their capital. Although they all wear smart suits nowadays, their behaviour makes them living coal mine owners wielding whips in the 18th century. They have fully betrayed their backwardness and ignorance of modern commercial societies. As a result, not only have they brought public relations disasters to their companies, they have also become a laughing stock in the international community.

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In fact, whether or not the labour unions in a society are well-developed and whether or not workers have any say have become an important facet of the business environment of many countries or regional. Nowadays, in European and American societies, the emphasis is on the so-called "socialization of capitalism", for example, by having more ordinary citizens pool their capital together to operate individual enterprises or co-operative societies, with employee participation in the management of enterprises and enterprises attaching importance to occupational welfare and safety, while the Government strives to make improvements in social security, welfare policies, and so on.

As regards SMEs in Hong Kong, I have all along favoured strengthening the support for them because they form an important part of the market. However, I have to stress that in the long run, the commitment of more resources alone will not help their business environment. What SMEs need the most nowadays is actually fair competition, so that the absurd situation of small shops seeing their supply of instant noodles cut off by their suppliers because they sell each package several 10 cents cheaper would not occur again. Therefore, it is only by upholding fair competition in the market that it can be ensured that the risk of small shops of being forced out of the market by big capital in the long run would not arise, and this is also an important measure to stabilize and develop the Hong Kong economy.

President, I so submit.

DR LAM TAI-FAI (in Cantonese): President, Mr Jeffrey LAM is a Member of the Executive Council and also a successful and experienced entrepreneur who represents the business sector. Today, he has moved this motion that reads, "…… this Council urges the Government to adopt proactive policy measures to maintain a business-friendly environment in Hong Kong and devote more resources to assist small and medium enterprises.". As far as I know, Mr LAM has noticed that the present business environment for small and medium enterprises (SMEs) in Hong Kong is very bad and there is a host of unfavourable factors. I also believe that Mr LAM has perceived that existing government policies on SMEs are neither proactive nor effective. It is for this reason that he has moved such an important motion today. Therefore, before coming to my speech proper, I wish to voice my support for the original motion.

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I shall talk about how bad the existing business environment is later on. However, should such a poor business environment continue to deteriorate, or if the Government just sits on the sideline and acts slowly, I believe SMEs, apart from finding business difficult and development and expansion impossible, would even face closure. In that event, a tide of layoffs would be triggered, thus making many workers lose their jobs. In turn, society as a whole would be full of grievances and become unharmonious and many issues of people's livelihood would surface one after another. The hope of the Central Government for a prosperous and stable Hong Kong, with its residents living in peace and working with contentment, would just become a fond hope.

Mr CHEUNG Kwok-che has just left the Chamber. In the incident of dock workers going on strike mentioned by him, labour unions intervened, the Government was unable to handle the incident and SMEs were very worried. Why? Because SMEs, in the face of the prevailing business environment, apart from being worried about economic problems, are also worried about how they should handle strikes in the future. The bosses of SMEs are very concerned about whether or not, should strikes occur in the future and the Government is unable to resolve them, workers would stage protests outside their homes. What they are worried about is not just whether or not their business operation can continue but their personal safety. This being so, would a business environment like this put off SMEs? Ever since this Government took office, the Secretary has made more frequent contacts with SMEs and there is now greater understanding. I hope the Secretary can explore this aspect together with SMEs to allay their worries, so that they can do business in Hong Kong with peace of mind.

Mr WONG Ting-kwong hit the nail on the head just now when he pointed out that the business environment for SMEs was beset by external problems and domestic troubles. The external problem is the slowdown of the global economy, with no recovery in sight. Hong Kong is a small, open and free economy, so of course, it has taken the brunt of the slowdown and there was no hope of evading it. Of course, SMEs do not have the ability to counter external economic problems, so they have to rely on effective counter-measures from the Government.

On domestic troubles, what Mr WONG Ting-kwong said just now could not be truer. He pointed out the problem of persistently soaring rents. Rent accounts for a very large proportion of the operating cost of SMEs and when LEGISLATIVE COUNCIL ─ 23 May 2013 12355 landlords find that the business of SMEs is good, they would raise the rents. No matter how good the business of SMEs is, they still cannot cope with the rental cost. In addition, the prices of raw materials have also risen because of problems like inflation, the peg between Hong Kong dollar and US dollar, the strong Renminbi and the lack of natural resources in Hong Kong. On the whole, the operating cost of SMEs has risen. However, the Government has failed to do a proper job in gate-keeping. For example, the increases in the electricity tariffs of the two power companies have imposed a heavy burden on the electricity expenses of SMEs but the Government has not done a proper job in gate-keeping.

Just now, Mr WONG Ting-kwong also mentioned the issue of wages. At present, a minimum wage is implemented and it has been adjusted recently. What will follow next is standard working hours. It is already difficult for SMEs to digest the minimum wage. If standard working hours are also introduced, I believe it will surely make the burden borne by SMEs even more onerous. In this regard, I hope that when the Government carries out public consultation, it must listen extensively and in depth to the views of both employees and employers, so as to avoid causing impacts on the sustained competitiveness of SMEs.

SMEs account for 98% of all the companies in Hong Kong and they employ over 1 million people. If SMEs close down because they cannot survive, Hong Kong's overall competitiveness and business environment would crumble. Therefore, I hope that when the Government conducts a review or consultation on labour policies (including the minimum wage, right to collective bargaining and standard working hours), it must bear in mind the sustained competitiveness of SMEs.

The market is volatile. Challenges, opportunities and difficulties may surface at any time, and they can also disappear at any time. This being the case, the Government must formulate focused and timely policies in response to the volatile market. I believe that the Government still lacks any initiative now. I understand that the reason for the Government's repeated encouragement to SMEs, in particular, SMEs in the industrial sector, to pursue domestic sales and develop their own brand names on the Mainland, so that they can upgrade and restructure, is that the Mainland market is huge and Hong Kong companies also possess inherent advantages to get a share of the pie. However, ever since becoming a Member, I have said a number of times that to achieve the target of 12356 LEGISLATIVE COUNCIL ─ 23 May 2013 upgrading and restructuring through domestic sales, the prerequisite is willingness on the part of the Government to remove the stumbling block, that is, to amend section 39E of the Inland Revenue Ordinance. I believe that if the Government only provides a rice cooker but not the power, that is, the Government only verbally encourages companies to step up the publicity on their brands and upgrade and restructure but does not provide any policy support, in the end, the good intention of the Government would come to nothing.

Therefore, I hope the Government can seriously consider reviewing section 39E of the Inland Revenue Ordinance and amend it, as well as putting in place complementary policies to enable SMEs to gain entry into the huge Mainland market. It is only in this way that SMEs can still have a slim chance of survival and a glimmer of hope.

President, I so submit.

DR ELIZABETH QUAT (in Cantonese): President, in view of the uncertainty in global economic development and the low-growth external environment, as the Financial Secretary said in the budget, 2013 will be a year full of challenges. I agree that the Government should take proactive measures to maintain a favourable business environment, in particular, to assist in the development of small and medium enterprises (SMEs).

Just now, the Secretary also said that SMEs are pivotal to Hong Kong. I believe that the biggest problems facing SMEs in Hong Kong are "small market, high rent, difficulty in recruitment and even greater difficulty in starting businesses". To support SMEs in their development, it is necessary to administer the right cure to the problems and provide comprehensive support.

The size of the market in Hong Kong is small and the scope for development is limited. The limited scale of the Hong Kong economy is difficult to attract the attention of international investors. However, Hong Kong is located in the middle of Asia and also a leading city of China. The markets in Asia and China are now the focus of global attention and strategically important in any commercial battle, so enterprises in Hong Kong should be prepared to seize the opportunities early.

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Sadly, except a small number of successful examples, most SMEs can only look but not touch anything. Therefore, the Government's plan to increase the number of Hong Kong Economic and Trade Offices in the Mainland to assist Hong Kong companies in developing the Mainland market, in particular, in the markets in second and third tier cities has my full support. However, I hope the Government will not overlook the development potential of other emerging markets in Asia but will strengthen its support for local SMEs in developing these markets at the earliest opportunity.

President, the rents in Hong Kong are among the highest in the world and this has stifled the room of survival of countless SMEs, thus forcing many small shops with special characteristics to fold and many entrepreneurs to give up their dreams.

Some time ago, in the Soho district in Central, one could find a small western restaurant the boss of which was a Hong Kong young man who had learnt his culinary skills in the United Kingdom, then returned to live in Hong Kong. Since his culinary skills were outstanding and he cooked and ran his business with devotion, his business became quite successful in two years. Unfortunately, the landlord of the shop, on seeing that his business was good, demanded that the rent be doubled when the tenancy of the shop was due for renewal, so this young man could only wind up his business with great reluctance. Moreover, he decided to pack up, return to the United Kingdom and start anew. May I ask why this entrepreneur with such high aspirations and great abilities who had returned to Hong Kong had to eventually give up developing his career in Hong Kong? This is really a loss for Hong Kong.

In the face of this dilemma, the Government must adopt a multi-pronged approach as soon as possible to provide more offices and shops. It is only by increasing supply that there can be any chance for rents to come down, thus reducing the costs of business operation.

In addition, the Government must also formulate policies and consider how best SMEs can be assisted in sustaining their operation. The DAB proposes that the Government should consider enhancing the financing functions of the Hong Kong Mortgage Corporation Limited, introduce more long-term financing arrangements designed for SMEs and at the same time, provide appropriate government guarantee, so that SMEs can carry out better planning for their long-term development, including acquiring premises for their operation, and so 12358 LEGISLATIVE COUNCIL ─ 23 May 2013 on. The Government can also provide one-stop support to SMEs and strengthen its co-ordination of the support services provided by various organizations and government departments, so as to assist in the development of SMEs in such areas as financing, manpower resources, product R&D, upgrading of techniques, application of information technology and market development.

President, nowadays, every company in Hong Kong is complaining about difficulties in recruitment and instances of job mismatch can be found everywhere. Moreover, youth unemployment is a major social problem. On the one hand, the managements of many companies complain that generally speaking, young people nowadays lack initiative, their attitudes towards work and people are poor and that no matter how much pay companies are prepared to offer, they cannot find any outstanding employees; and on the other hand, with the shift of the market focus to the Mainland, many companies have also moved their headquarters to the Mainland and as a result, the number of senior posts in Hong Kong is also shrinking, so middle-level staff members have lost opportunities of advancement, thus affecting young people's opportunities of upward mobility. Many young people have told us that they consider themselves to lack abilities, that they cannot apply what they have learnt to real life and that many jobs do not give them any prospect or hope, so they lack the interest and motivation to do them, yet there are no opportunities to start their own business either.

Therefore, the DAB believes that the Government has to introduce measures to lower the cost of starting businesses, for example, by co-operating with the financial sector in designing small-amount loans for entrepreneurs who have financial needs but have difficulty borrowing from conventional banks, to provide tax credit or various tax concessions to venture capital or business angel funds, and so on. The Government should also review the laws, rules and administrative measures that are unfavourable to the business environment, streamline the licensing regime, improve the mode of management and remove barriers, with a view to helping SMEs and entrepreneurs. In addition, greater efforts should be made to promote Hong Kong's strengths overseas in order to attract more overseas enterprises and talents to come to Hong Kong for development, strengthen the support for R&D and innovative technology, develop new areas of economic growth and establish a stable business environment, so as to increase the opportunities of upward mobility in society.

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President, talents are the lifeblood of Hong Kong. It is most imperative to start with the education system and change the present goals and methods in teaching and learning, so that children and young people can have greater scope and freedom and the next generation can be trained to be bold and innovative from a young age. In this way, young people can discover their preferences and creativity, as well as understanding that so long as they are diligent and enterprising, give play to their spirit of adventure and are not afraid of difficulties and setbacks, they also have the opportunity to succeed and make contribution to society. So long as Hong Kong has quality people and can deal with the situation of "small market, high rents, difficulty in recruitment and even greater difficulty in starting businesses" to create a favourable business environment, Hong Kong will still have a future and there will still be hope.

I so submit. Thank you, President.

MR CHRISTOPHER CHEUNG (in Cantonese): President, insofar as a favourable business environment is concerned, I believe Members will not forget the strike staged by dock workers earlier on that lasted as many as 40 days. Although we are all glad that this labour dispute ended peacefully, how great a price have we paid for this labour movement that was so politicized? Has Hong Kong's position as a logistics hub been undermined? I believe everyone must have answers in their minds. For this reason, many commentaries have pointed out that there are no winners but only losers in this labour dispute.

I wish to point out that employers and employees actually share a common lot and they are not necessarily antagonistic or diametrically opposed to one another. Without bosses to make investments, workers would have no jobs and without workers' devotion to their work, bosses would not be successful either. Therefore, a favourable business environment can benefit both workers and investors, thus bringing about a win-win situation.

In the face of challenges from all quarters, the business environment in Hong Kong is only a shadow of its former self and one can say that it is beset by domestic troubles and external problems. Such places as Qianhai in nearby Shenzhen or the other three dragons in Asia, and even Japan, which has remained in the doldrums for a long time, are all poised for a fight, striving to attract overseas investors or revitalizing their economies, and many of them are posing direct or indirect competition to Hong Kong.

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To SMEs with limited resources, it can be said that the pressure of business operation nowadays has never been so great. This is because apart from facing competition in the external market, internally, they have to bear the brunt of a host of impacts, such as the increases in rents, wages and prices of raw materials, as well as problems in cash flow. Coupled with the continual rise in the exchange rate of Renminbi, the business environment of export-oriented SMEs has been dealt one blow after another. Since competition is keen, they dare not raise the prices of their export products too readily and can only bear the risk in exchange rates on their own, so their net profits have been eroded and there is no knowing for how long they can survive.

For this reason, the Business and Professionals Alliance for Hong Kong does not agree with the introduction of standard working hours in addition to a minimum wage, for fear that a single measure may have far-reaching implications on the overall situation and that there is more to lose than to gain and as a result, another blow will be dealt to the already fragile business environment.

In fact, recently, a number of surveys or economic indices relating to SMEs all point out that the business environment for SMEs or the business environment as a whole is fraught with difficulties. Earlier on, a public opinion survey of the University of Hong Kong interviewed 510 employers of SMEs and the outcome shows that at present, the two major challenges in business operation are "rising operational cost" and "shrinking business", with 54% of the respondents picking both.

Another index relating to SMEs published by the Hong Kong Productivity Council also indicates that the Overall Index is 48.5, a slight fall of 1% compared with the last quarter and this is the fourth consecutive quarter that it has remained below the no-change mark of 50. Under this index, the two Sub-Indices of "Profit Margin" and "Global Economic Growth" were both below 50, with the former falling by as much as 3.4 to 42.2. This indicates that SMEs generally take a dim view of their profit margin in the second quarter.

Earlier on, the Hong Kong and Shanghai Banking Corporation Limited announced that the Purchasing Managers' Index for Hong Kong had fallen to 49.9 in April, a fall of 0.6 month on month, thus putting an end to the rising trend in the past six months. It is below the boom-and-bust divide of 50, indicating that economic growth in the private sector in Hong Kong has stagnated.

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For this reason, I support the Government's efforts to improve the business environment, in particular, in removing barriers. This is because many members of the public consider that although the Financial Secretary has proposed in the budget a number of relief measures for SMEs, for example, to provide a total guarantee commitment of $100 billion to SMEs, continue to make use of the $1 billion Dedicated Fund on Branding, Upgrading and Domestics Sales to assist Hong Kong enterprises in upgrading and restructuring, developing brands and promoting domestic sales, and increase the cumulative amount of grant for SMEs under the SME Export Marketing Fund to $200,000, and so on, these measures, while being not undesirable, are subject to complicated and indirect application procedures.

Take the securities sector with which I am familiar as an example. It would not be far-fetched to compare its situation to the ice age. This is because although the stock market has grown buoyant recently, the trading volume has not risen in tandem, and coupled with the lack of improvement in the trend of cut-throat competition in the market, many members of the industry working in small securities companies have told me that the situation nowadays is far more difficult than that in the past, so they hope that there can be improvements in the income of brokers.

What we lack is not government funding, but the development of new business opportunities and the easing of excessively stringent regulation.

Thank you, President.

MR CHAN KIN-POR (in Cantonese): President, whenever there is a discussion on the business environment of Hong Kong, I am worried. At present, it seems Hong Kong is doing well but in fact, its competitiveness is declining all the time. Most worrying of all, many people still refuse to come to their senses. Often, when the Government puts forward proposals on economic development or a business-friendly environment, various grounds are cited to oppose them strongly or to try to cause delays. The Government is subject to constant criticisms, so naturally, it adopts the mentality of "do less, err less", citing the excuse of "big market, small government", and simply maintains the status quo. In the end, it does not think about how to seek progress. Consequently, Hong Kong is still living off its past gains nowadays.

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When it comes to the business environment, it is inevitable for us to compare ourselves with our rival, Singapore. Singapore has been ranked first in the Doing Business report of the World Bank for seven years in a row. Its achievement is wholly attributable to the fact that the Government there is proactive and positive. Not only has it introduced long-term policies, it also has economic creativity, in particular, adopting the policy of being "business-friendly". Not only are the departments in charge of financial and economic affairs responsible for attracting businesses, all senior officials in all departments also take part in promotional efforts together, so as to provide assistance to investors on all fronts. I once heard a friend in the business sector say that when the senior officials of Singapore come across investors, they just look downright "enamoured" and one can tell this just from their attitude. Therefore, it is by no means coincidence that Singapore has been ranked first in terms of business environment for seven years in a row. In contrast, although Hong Kong is ranked second and manages to maintain its superficial prosperity, to a large extent, it is dependent on the assistance of the Mainland and whenever it runs into trouble, it can only rely on rescue by the State. I believe what merits emulation by the Hong Kong Government the most is the policy of being business-friendly.

It can be said that Singapore extends a hearty welcome to investors, in contrast to the bureaucratic attitude towards investors still held by Hong Kong. Take for example the insurance and financial industry, with which I am familiar, since the financial tsunami, the Government has continually introduced new regulations to strengthen the control of financial products and services but this has reached the extent of an overkill. Often, in order to avoid trouble, the Government prefers to adopt a excessively harsh approach on everything and as a result, the scope of development for the financial industry in Hong Kong has been curtailed. The financial sector has conveyed to me the view that in Singapore, while it only takes a month or so for comparable financial products to be granted approval for launch in the market, in Hong Kong, it is necessary to wait for the greater part of a year to little avail. This is not just an isolated incident, rather, it is the usual practice. The regulation in Singapore compares favourably with that in Hong Kong, so why are they so efficient while we are so slow? Now, some investors, having found Hong Kong too troublesome, have given up launching their products in Hong Kong. Should this continue, Hong Kong would be practically handing over its business to its rival. I believe that if we wish to LEGISLATIVE COUNCIL ─ 23 May 2013 12363 maintain a favourable business environment, it is necessary to rectify the bad habit of over-regulation.

Another factor leading to the deterioration of the business environment in Hong Kong is the high costs of business operation in Hong Kong, in particular, the problem of high rents. Be it SMEs or multi-nationals, they all suffer greatly from this problem. Recently, many traditional shops with special characteristics were forced to close down because of the doubling of rents. At the same time, some multi-nationals have also given up coming to Hong Kong to make investments because of the exorbitant rents here. In fact, it can be said that the high rents of shops and offices are fatal to the business environment in Hong Kong. If this problem cannot be resolved, it is inevitable that the business environment will deteriorate incessantly. In this regard, it is true that the Government is looking for ways of improvement, including developing the commercial areas in Kowloon East and stepping up the search for sites for commercial purposes. It is hoped that we will be able to see the results of the Government's efforts after some time.

In addition, I wish to point out that the air pollution problem and the insufficient number of international school places are also dealing blows to the business environment in Hong Kong. The problem of air pollution has dampened the desire of international talents and investors to come to Hong Kong and the inadequacy of international school places also affects investors. I once heard some friends relay the view that some international talents were unwilling to work or make investments in Hong Kong because of the difficulty in arranging for schooling for their children in Hong Kong. In fact, to some extent, these problems affect their desire to make investments, so they must be dealt with seriously.

In recent years, I have proposed a number of times the development of a headquarters economy in Hong Kong, that is, to offer concessions to overseas businesses, so as to attract them to set up regional headquarters in Hong Kong but all along, the Government has shown little interest. However, given the signs of Hong Kong's competitiveness declining, it is now high time we reviewed and adjusted the overall direction of Hong Kong's development. Therefore, I hope the Government can reconsider the proposal of a headquarters economy. If a large amount of foreign capital can be attracted to Hong Kong, I believe it will 12364 LEGISLATIVE COUNCIL ─ 23 May 2013 help the development of the Hong Kong economy and benefit the local labour market and SMEs direct. In that case, society has everything to gain but nothing to lose.

I so submit.

MR RONNY TONG (in Cantonese): President, despite the misery suffered by colleagues due to the filibusters staged by some other Members in this Council over the year, I have got a chance of enjoying myself amid the adverse circumstances ― enjoying the free breakfast provided by you, President. You might probably ask what was so special about the breakfast. President, you do not have any idea for you did not have it. There were twisted doughnut rice roll, ox tongue crisp, and "Sampan Congee", which are not easy to come by nowadays. Even if you have the money to spend, you might need to make a trip of more than an hour before you can find them.

President, what is the point I am trying to make? I mean similar food with authentic Hong Kong characteristics are on the verge of extinction. Has the taste of Hong Kong changed to a preference for pizza and spaghetti? Not really. There are still some places where the twisted doughnut rice roll I mentioned just now, sticky rice, and ox offal noodles are served, and they are in keen demand, too. Even though customers have to wait in long queues for a taste of such delicacies, the number of places where they are served is dwindling.

The latest examples include Lee Yuen Congee Noodles behind the department store, SOGO, and Ho Hung Kee on Sharp Street East. The number of these congee and noodles shops is dwindling, why? It is attributed to the formation of a vicious circle. As these shops prosper and attract more and more customers, their landlords will be keener to raise rents. In other words, the more successful the businesses, the greater chance of closure they face. Why would Hong Kong come to this pass? The heart-warming belief that "we are in the same boat under the Lion Rock" has disappeared. Instead, we can only see the Mainlanders' passion for shopping. Neighbourhood shops, which are on the verge of extinction, are gradually replaced by large enterprises and brand-name shops. Behind this facade of prosperity, many Hong Kong people, including me, are still longing to see some familiar shops and eateries where we can find the local delicacies we miss very much.

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President, not only small businesses but also small and medium enterprises (SMEs) cannot stay afloat. I am a self-proclaimed SME operator because I am a proprietor. Do you know the annual rent for a lawyer's office? My office can be described as forward-looking for having signed a six-year tenancy agreement. Nevertheless, its rental value has to be reassessed from the third year onwards, and the latest rent increase was 120%. President, while I receive a monthly remuneration of $70,000 from the Legislative Council, I have to pay a monthly rent of $110,000 in addition to my secretary's salary and expenses on hiring other staff. Hence, sometimes I really have to beg your forgiveness for my taking up one or two major litigations every year. Otherwise, I would have to wind up my office or resign.

President, you might think that it does not matter because of the exorbitant fees charged by me. This is indeed the crux of the problem. It is right to say that the fees charged by me are exorbitant, but do you think the large enterprises commissioning my service will pay me out of their own pockets? Certainly not. They will pass the fees onto the enterprises downstream, which will in turn pass the fees onto the enterprises or retailers further downstream. Will these enterprises or retailers pay out of their own pockets? The answer is again "no". The fees will ultimately be passed onto consumers or end-users. These people will approach me and say, "Sorry, boss, the salary you pay me cannot keep me going because it is not even enough to buy me a bowl of ox offal noodles. So, please, I want a pay rise."

This explains why this is a vicious circle. When my staff demand a pay rise ranging from 7% to 10%, and the rent increase has reached 120%, there is nothing I can do but charge more for my service. However, I cannot fight legal battles 365 days a year. President, how can this vicious circle be broken? The Secretary, who used to be a lawyer, should fully understand these difficulties. Although he knows very well that it is a vicious circle, he just sits with his arms folded.

President, over the past few years, the SAR Government has launched nine or 10 measures to curb rising property prices, including twice amending legislation and twice revising the stamp duty. However, it remained silent when being asked why it had failed to do something about the commercial property market. Is it harbouring the real estate developers or afraid of something? The spiralling prices in the residential market have only partly contributed to our loss of competitiveness. Exorbitant costs are actually caused by exorbitant rents, 12366 LEGISLATIVE COUNCIL ─ 23 May 2013 which will in turn push up salaries. When people's pay rises, various prices will increase accordingly.

Therefore, there is no way for Hong Kong's competitiveness to be improved if the Government does not face squarely the problem caused by the daily rent increases or the annual multi-fold rent increases in the commercial market. If Hong Kong's competitiveness cannot be raised, all enterprises of the economy, including SMEs, will face similar problems. Certainly, except for foreign-funded or Renminbi enterprises, all Hong Kong people will suffer.

Having said that, President, I only hope to remind the Secretary not to ignore the problem caused by the commercial property market, or to put it in finer terms, the problem faced by SMEs. I hope the Secretary can advise the Chief Executive that prompt measures must be taken to curb the trend of spiralling commercial rents. Thank you, President.

MR KENNETH LEUNG (in Cantonese): President, whenever we talk about the competitiveness of Hong Kong, we will cite the rankings announced by a number of institutions around the world every now and then, with the Heritage Foundation's Index of Economic Freedom being the most frequently quoted. In 2013, Hong Kong scored 89.3 out of 100. Given the average global score of 59.6, this score is extremely high. Hong Kong has also been rated as the world's freest economy for 19 years in a row. In addition, Hong Kong is among the top in some other surveys. For instance, in a report on global competitiveness published by the World Economic Forum, Hong Kong took the ninth place, just behind Singapore, out of the 144 economies around the world.

Nevertheless, in terms of the rankings published by the World Economic Forum, Hong Kong actually lags far behind other countries in seven major areas. They include, first, innovation; second, business sophistication; third, quality of scientific research institutions; and fourth, availability of scientists and engineers. Furthermore, Hong Kong is ranked at the bottom in two major areas, namely inadequately educated workforce and effectiveness of anti-monopoly policy. I will discuss the factors leading to these exceedingly low rankings again in other debates to be held later on.

In some of the debates conducted earlier on Hong Kong's economic development, I mentioned two key factors affecting economic development, LEGISLATIVE COUNCIL ─ 23 May 2013 12367 namely talent and land, which have also been mentioned by other colleagues in their speeches. Today, however, I intend to explore this issue from a new perspective and tangent. Summing up several international study reports, we can note that Hong Kong actually possesses some traditional advantages, or satisfies business-friendly conditions, including a transparent and simple tax regime; sound infrastructure, such as transport and telecommunications equipment; free flow of capital and information; the rule of law system; clean government; and a market leveraging on the Mainland. All of these are the edges enjoyed by Hong Kong both before and after the reunification over the years. Nevertheless, President, as already pointed out by many colleagues, these advantages tend to be superficial, and serious problems and hidden worries have already emerged.

Next, I will expound on the aforesaid traditional advantages or business-friendly factors seriatim. Insofar as its tax regime is concerned, Hong Kong, which has all along adopted a simple tax regime, is one of the few jurisdictions in the world where the "territorial source" principle is applied. However, we are facing a challenge in terms of taxation, and that is, quite a number of countries have started adopting a more open and transparent tax information exchange framework. In terms of the taxation system, there is an actual need for Hong Kong to bring itself on a par with other countries, keep abreast of the times, and converge with the international community, for this is the only way to prevent Hong Kong's financial businesses, tax laws, and so on, from being marginalized. Although many people advocate that Hong Kong must seek integration, I think that if Hong Kong is to cater to the trend of integration, it must move towards globalization and integration with the trend of international communities and systems.

The second point I wish to raise concerns the most fundamental and core value, that is, the rule of law. By the principle of the rule of law, it means that the law is the highest and overriding rule in society. It must be observed by everyone, including the governing body and the people enacting and enforcing laws. All in all, what does the rule of law means? I would like to quote Prof Benny TAI's interpretation of the rule of law at four levels, namely existence of law, regulation by law, and limitation from law. In other words, it is hoped to, in addition to the ruler, set up a system provided for by the law to restrain the executive organ led by the ruler. As for the fourth level of the rule of law, namely justice through law, its requirement is that law itself should embrace the value of practicising justice. In fact, the matters and events that occurred in 12368 LEGISLATIVE COUNCIL ─ 23 May 2013

Hong Kong recently have undermined the foundation of our rule of law. For instance, in a number of incidents suspected of involving political prosecutions, the delay by the police and the Department of Justice in prosecuting protestors have aroused doubts among the people about the legitimacy of the arrest of protestors by the police, as well as concerns about whether the Government is exploiting these prosecutions to create white terror in order to restrain freedom of speech and the people's right of assembly.

Hong Kong's third major traditional advantage is its clean system, which I think needs no further elaboration by me. However, the gold-lacquered brand of the Independent Commission Against Corruption (ICAC), which has a history of 39 years, has been tarnished by the bribery scandal erupted recently in the ICAC, in which its former Commissioner, Timothy TONG, is involved. This incident has also aroused doubts among the people about whether this standard of cleanliness, which has been followed by Hong Kong society, the business sector and the Government over many years, will thus be shaken or even destroyed.

Many colleagues hold the view that political and economic developments must be in conflicts. I must explain that there should be no distinction between economic development and political matters in society, because no line should be drawn between economics and politics. While economics emphasizes how to distribute limited resources, politics is about how to distribute limited powers as well as exploring ways to exercise checks and balances. Perhaps I have made it a bit too difficult. Let me cite a simple example to illustrate my point. When I began studying economics, I was told by my professor to read the books written by three economists, namely KEYNES, FRIEDMAN and MARX. Such being the case, how can economics be separated from politics? Indeed, a fair and democratic system is a prerequisite for the establishment of a stable business-friendly environment.

President, I so submit.

MR TONY TSE (in Cantonese): President, in the City Competitiveness Blue Book released by the Chinese Academy of Social Sciences the other day, Hong Kong was ranked the most competitive city in China for 11 years in a row, with Shenzhen and Shanghai taking the second and third places respectively. However, it is pointed out in the report that Hong Kong's competitive edge is slowing down due to its economy's great reliance on the financial and real estate LEGISLATIVE COUNCIL ─ 23 May 2013 12369 sectors, and its shortage of land and housing supply, which has in turn led to exorbitant rents, high property prices, signs of virtualization and bubbling of the economy, and spiralling operating costs borne by small and medium enterprises (SMEs). Given its lack of heavy and technology industries, the complementarity between Hong Kong and the Pearl River Delta (PRD) has become extremely fragile. Moreover, due to the deepening of the reform and opening up of the Mainland, its services industry will replace that of Hong Kong. President, this report has sounded an alarm to remind Hong Kong of the need to upgrade its own competitiveness. Besides developing diversified industries and strengthening Hong Kong as a platform for Mainland enterprises to "go global", improving Hong Kong's business environment and assisting SMEs are crucial, too.

When it comes to a business-friendly environment, quite a number of enterprises in Hong Kong actually started to engage in Mainland business a long time ago. For these enterprises, their business environment already extended well beyond Hong Kong to the Mainland a long time ago, too. Given that China is an emerging economy, the development of the Mainland consumer market has already taken off, with Guangdong Province and the PRD being the largest regional domestic sales markets. The National 12th Five-Year Plan has also, for the first time, proposed supporting the development of Hong Kong into a regional distribution centre. Such being the case, coupled with Hong Kong's close proximity to the Mainland, the SAR Government should properly seize this opportunity of enjoying a "first-mover" advantage to provide comprehensive policy support in assisting Hong Kong enterprises in using the markets in Guangdong Province and the PRD as a starting point to further develop Mainland markets for Hong Kong commodities and services.

In fact, many Hong Kong consumer goods and service brands command great recognition in the Mainland. Over the years, however, these brands have encountered numerous problems and hurdles in entering the Mainland markets. The Hong Kong Economic and Trade Offices (HKETOs) set up on the Mainland are not too helpful to Hong Kong businesses in establishing a sales network for their commodities on the Mainland. Hence, there is a need for the SAR Government to fully review and strengthen the roles and functions of the HKETOs on the Mainland, with a view to providing Hong Kong enterprises with appropriate support, especially assisting them in establishing Hong Kong brands and a nationwide sales network.

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In addition, under the framework of the Mainland/Hong Kong Closer Economic Partnership Arrangement (CEPA), some professional qualifications were already granted recognition on the Mainland years ago. As regards the question of how to "make a bigger pie" to allow more professionals to set up firms to provide professional services on the Mainland, the role played by the Government in this respect is actually crucial. Insofar as its policy and initiatives are concerned, however, its complementary efforts are evidently inadequate.

President, if the Government is to provide enterprises with a business-friendly policy, inter-bureau and interdepartmental participation and complementary efforts are required before optimal efficiency can be achieved. For instance, in order to promote the local community culture, the participation of the Hong Kong Tourism Board and the Home Affairs Bureau alone is inadequate, because the involvement and complementary efforts of bureaux and departments related to planning, ancillary transport facilities and economic development are also required before the most business-friendly environment can be provided for the creation of more business opportunities.

In addition, if the Government can proactively implement a "local professions first" policy and avoid being affected by the brand-name effect in major development projects and the tendency of pursuing "star" professional consultancy services, a healthier and more competitive business environment can be fostered for the professions in Hong Kong, especially SMEs.

President, it is the hope of many people that more and better benefits can be provided for the people. In the face of this request, the Government's financial burden is expected to increase. It is simply impossible for the Government to continue relying on its fiscal surplus alone. We must therefore step up our efforts in promoting Hong Kong's economic development and creating more resources, or else we will sooner or later use up all we have. President, there are actually a lot of problems Hong Kong has to address. I hope different sectors of the community and people holding different political views can act in the overall interest of Hong Kong, minimize disputes and work harmoniously to drive forward the development of Hong Kong economy and improve the well-being of the people.

President, I so submit.

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MR MARTIN LIAO (in Cantonese): President, I would like to thank Mr Jeffrey LAM for proposing the motion on "Maintaining a business-friendly environment in Hong Kong" to give us an opportunity to debate this timely and important question. Exorbitant rents and diminishing competitive edges have a negative impact on maintaining a business-friendly environment in Hong Kong. As I have already discussed the problems brought about by rents and competitive edges on previous occasions, I will not repeat them here. Today, I wish to discuss the rise of welfarism in Hong Kong and its significant impact on Hong Kong's business environment.

President, welfarism has all along been a concern to quite many economists. It has also been the underlying notion and the way forward of the hot political topics in recent years, ranging from minimum wage, enactment of legislation on standard working hours, right to collective bargaining to universal retirement protection. Hence, welfarism is not a distant notion in Hong Kong's capitalist economy.

In the wake of the Second World War, welfarism as a political belief began to gain popularity in some western countries, with their governments bearing full commitment in the provision of such public services as education, hygiene, healthcare, social and retirement protection, and so on. Nevertheless, steep duties had to be levied before these governments could maintain a social system offering better welfare. In general, however, the treasury would be emptied in the end. Worse still, this would be accompanied by a rising influence of labour unions, a crippled economy, shrinking private enterprises, and the business environment being hit. I believe more senior Members in the Chamber should recall the United Kingdom in the 1970s as a classic example.

President, when I was studying in the United Kingdom in the 1970s, welfarism was in full swing in the country. Since the adoption of welfarism by ATTLEE of the Labour Party to actively intervene in the economy to create employment and nationalize such major industries as banking, public transport, power supply and automobile production, welfarism had become indispensable to the ruling party, be it the Labour Party or the Conservative Party. Things like this, however, were not free lunches. British society was made to pay a heavy price, for better welfare had to be maintained by steep duties. At that time, all people, be they taxi drivers or garbage workers, had to pay tax, and the tax rate could reach 83%. Such welfare policies had seriously undermined the work incentive of workers. Even clinic nurses refused to answer telephone calls. 12372 LEGISLATIVE COUNCIL ─ 23 May 2013

Why? Because it was outside their scope of duties to receive telephone calls. Not only did quite a number of households live on social security, but there was a gradual decline in industries which were originally on the rise. Coupled with the plunge of productivity and competitiveness, the entire country completely lost its vitality. Moreover, there were outbreaks of industrial actions across the country, serious stagflation and unemployment, thus inducing a collapsed economy. It was only when Mrs Margaret THATCHER of the Conservative Party ascended to power and took bold steps to reform, slashed public expenditure and tax rates, encouraged competition and investments in the community, rationalized labour unions and industrial actions, and gradually privatized state enterprises that the British economy managed to move forward again.

Indeed, we can learn from the abundant examples of welfarism proved harmful to the economy. The latest examples can be found in countries being hit by the Euro debt crisis, such as Greece, Ireland, Cyprus, and so on. In recent years, even some old Scandinavian welfare states, such as Sweden, have turned back. From January 2013 onwards, enterprises in Sweden have for the first time in 20 years seen their profit tax rate lowered from 26.3% to 22%. In order to revive the economy, other major welfare states have also scrambled to study various options of reforming their welfare systems. For people who are concerned about the competitiveness of Hong Kong economy, is too much welfarism is as bad as too little welfarism? Should we not act with prudence? Or should we follow the path of return taken by others?

President, not only had I experienced and been benefited from welfarism, but I had also been offered a lot of free milk. I had never paid a single cent in tuition fee during the three years when I was an undergraduate. My expenses for each school term were even covered by the government. So long as I received the minimum amount, there was no need for me to undergo any income tests. However, I have also witnessed the harms brought about by welfarism. After weighing the pros and cons, I disapprove of welfarism. I believe social justice is a prerequisite for a civilized society. Although society is duty-bound to help people in need, a line should actually be drawn between social justice and welfarism, and the two should not be mixed up. I do not believe capitalism and social justice are mutually exclusive and cannot co-exist.

Should Hong Kong take to the path of welfarism? This important question will not only bring dynastic changes to Hong Kong's socio-economic system, but also affect our business environment direct, which will in turn have a LEGISLATIVE COUNCIL ─ 23 May 2013 12373 bearing on the well-being of the 7 million people in Hong Kong, as well as the future of our next generation. If Hong Kong is to take to this path, will Hong Kong people be prepared to pay tax twice as much as they are paying now? Will wage earners who are currently not required to pay tax be prepared to fall into the tax net? If Hong Kong is to follow this path, society as a whole must conduct extensive and open debates on this major premise, weigh the pros and cons, and seek a consensus. There is no way for us to secretly launch welfarism in a piecemeal manner to make Hong Kong people unknowingly fall into welfarism after having a fond dream. Moreover, consideration should also be given to the provisions in the Basic Law concerning the capitalist system. Even if we disregard such considerations, Hong Kong people should still be given ample opportunities to discuss this question. Irrespective of Hong Kong society reaching a consensus to decide to turn to the path of welfarism or disregard the direction of welfarism, it cannot put the blame on others in future.

President, I so submit.

MR JAMES TIEN (in Cantonese): President, the Liberal Party supports the motion "Maintaining a business-friendly environment in Hong Kong" proposed by Mr Jeffrey LAM today. What constitutes the "business sector" in Hong Kong? It can broadly be divided into two categories, with consortia and large enterprises falling into the same category. In Hong Kong, the real estate sector, power companies, bus companies and supermarket chains are predominately operated by consortia. I think the rate of return must be good to make them continue to make investments. Certainly, we hope that these consortia can have confidence in Hong Kong and continue to make investments here. In this connection, the Government's policy will have an impact on them. In addition to their investments, how SMEs can continue to operate in Hong Kong is also Mr Jeffrey LAM's main argument, which is supported by us, too.

In fact, SMEs are now facing difficulties on many fronts. Just now, Mr Jeffrey LAM already mentioned that rents in Hong Kong, used to be the highest, are now ranked second in the world. Without a doubt, the Government's policy must take into account housing problems and the housing problem of the grassroots. If all plots of land are used for the construction of public rental housing or Home Ownership Scheme flats, however, no land will be available for use by commercial offices, hotels or shopping arcades. Members should know that SMEs in the retailing or catering sector must operate their business in 12374 LEGISLATIVE COUNCIL ─ 23 May 2013 shopping arcades. How can they continue with their operation should the rents of shopping arcades get higher and higher? How can the SMEs renting offices or import and export companies continue with their operation should the rents of offices continue to rise? From the perspective of developers, large real estate developers who can collect rent ought to have no problems, but how can the overall operation of SMEs be addressed?

Another conflict lies in labour problems. In the opinion of the Liberal Party, given that the service industries have now become the mainstay in Hong Kong, the implementation of standard working hours might not work in Hong Kong as in other countries where manufacturing industries constitute the mainstay. On the contrary, the Liberal Party holds that both employers and employees should forge agreement over contractual working hours. For instance, in entering into employment agreements, some workers may opt for long working hours and hence higher wages. It should also be specified that some of the tasks performed will be given overtime compensation, while some will not. Given Hong Kong's free economy, this has been a feasible solution. If there are rigid rules requiring the prescription of standard working hours to restrict the working hours of workers and ways to make overtime compensation or the amount of compensation, flexibility will on the contrary be reduced. Certainly, the Government may exempt certain trades and industries, but if we follow the example of Korea in exempting 20-odd trades and industries, which account for about 40% of all of its trades and industries, this piece of legislation will not be very useful at all.

Regarding the question raised by Mr Martin LIAO just now as to whether capitalism and welfarism would definitely have a direct bearing on the business environment, I am afraid I do not see eye to eye with him. The situation described by him just now was exactly like that in the 1970s when I had just returned to Hong Kong to open a factory and do business with my father. But in Hong Kong nowadays, the Government has, in addition to its abundant fiscal revenue, more than $2,000 billion in fiscal reserves. Hence, the Government should not be regarded as populist for caring for the disadvantaged or introducing welfarism. I do not mean that every person should be given $10,000, but the Government should do better in caring for the disadvantaged and providing a better safety net, so that society can become more harmonious. This will in turn be conducive to the business environment. Practicising welfarism does not mean that it is impossible to promote capitalism in Hong Kong.

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Given that Hong Kong has abundant fiscal reserves, there is definitely no need to raise profits tax and salaries tax in order to get the job done better. Now the Government invariably records a surplus in its annual recurrent revenue, not to mention the $100 billion earned as a result of the investments made with the Exchange Fund and fiscal reserves. Hence, the situation in Hong Kong nowadays is different from that in overseas countries. There is simply no need for us to spend any money on national defence and diplomacy, so how can we compare Hong Kong with Greece or other European countries where welfarism has led to excessive depletion of the public coffers? There is a difference between providing a proper safety net and promoting welfarism. In my opinion, Hong Kong should be able to create a non-welfarist model which can improve the business environment while caring for the disadvantaged.

President, regarding the improvement of the business environment, I would like to point out that Members representing the labour side, be they from the pan-democratic or pro-establishment camp, oppose the importation of professionals and foreign labour. However, the present unemployment rate of 3.3% already reflects that many vacancies, especially elementary jobs, are left unfilled. Even Mr Frankie YICK who represents the transport sector has indicated that many bus drivers are already in their 50s or 60s, and there are really no successors. How many young people are willing to work as bus drivers? Similarly, food establishments face the same situation. Many trades and industries face the problem of manpower shortage, so what can they do? Some Members have suggested that we learn from Singapore, where standard working hours are implemented and labour is also imported. How many bus drivers in Singapore come from the Mainland? How many cleaning workers there are Malaysian? When we see the strengths of overseas countries, we might complain why they have such advantages while we have none. However, we must understand that they have to make complementary efforts on many fronts in order to succeed. I do not think it is appropriate for us to follow their examples in a piecemeal manner. Hong Kong should find its own ways to deal with our problems.

Generally speaking, in order to improve the business environment of SMEs, the rent problem caused by inadequate manpower and land must be addressed. Therefore, the Government must pay proper attention to these two issues. Certainly, SMEs will be affected by certain laws, such as the laws involving the provision of loans for SMEs and bank guarantees. Recently, we have seen the business of SMEs worsening. Despite their abundant funds, banks 12376 LEGISLATIVE COUNCIL ─ 23 May 2013 will merely provide loans to property developers because it is easier for companies with bricks and mortar to obtain loans. Banks have been very cautious about providing loans to SMEs with uncertain prospects and even facing uncertainties in business operation in the following year, whether they are carrying on import and export business or local business. Therefore, the Government should make some efforts in the financial aspect, though it is outside the policy ambit of Secretary Gregory SO. But, generally speaking, we consider it extremely crucial for Hong Kong to continue to improve its business environment, especially for SMEs.

Thank you, President.

DR KWOK KA-KI (in Cantonese): President, neither do I know much about economics, nor am I capable of making eloquent speeches, like friends in the business sector, about the plights of business operation. However, President, I visited a place called Belvedere Garden yesterday. Some shop tenants of the Belvedere Garden Shopping Arcade are small and medium enterprises (SMEs) as mentioned by Mr Jeffrey LAM just now. Recently, around 70 stall operators engaging in various businesses, such as light refreshment, cooked food, retailing, beauty care, make-up, hairdressing, and so on, have formed themselves into a coalition. I think they are all constituents of friends in the business sector. The biggest problem faced by them is a very strange contract produced by the principal landlord recently. Their original tenancy agreements are supposed to expire by the end of next year, but through "subcontracting" by their principal landlords, namely the Cheung Kong (Holdings) Limited and Hutchison Whampoa Limited, the ultimate sub-contractor is also their own man, they were told to leave by October this year. Despite the fact that some shop tenants have been carrying on business there for 30 years, there is no room for discussion except that they must leave. It is rumoured among the kaifongs and stall operators that the Cheung Kong (Holdings) Limited has the intention of relocating a supermarket from another shopping arcade to the Belvedere Garden Shopping Arcade, so that the former can increase rents after refurbishment.

President, these stalls are really SMEs. Many of them are operated by a couple of family members, who have been abiding by the law and behaving themselves for decades in operating some small businesses. Do they have any room for survival? Certainly no. Many Members have spoken here for their landlords, including the Cheung Kong (Holdings) Limited and Hutchison LEGISLATIVE COUNCIL ─ 23 May 2013 12377

Whampoa Limited, saying there are no problem with these large law-abiding consortia. President, I am going to tell you how the tenancy agreements were signed. The term of tenancy is usually one year or two. Certainly, one-year rent has to be paid in full should the tenant leave in less than a year. The tenancy agreement signed with the Cheung Kong (Holdings) Limited and Hutchison Whampoa Limited is very interesting: If a tenant leaves one day earlier, he has to pay two years' rent until August in the second year. If a tenant is requested by the landlord to leave, he has to do so within a month without receiving any compensation. It is really amazing that such tenancy agreements could have been signed! Are these tenants the only ones bullied by real estate developers? Certainly not. Is the Belvedere Garden Shopping Arcade the only problematic shopping arcade? Certainly not. President, the Secretary is still here ― he can certainly say that he has nothing to do with this matter ― I wish to add that The Link REIT is also making persistent efforts in driving out its tenants. Whenever major renovations are to be carried out, it will definitely come up with ways to evict many small shop operators, including increasing rents, though it is considered just a trivial matter. The tenants will even be asked to discuss with The Link REIT on the amount of money they are prepared to spend on refurbishment in the coming two years, such as whether they will be willing to spend $700,000 on refurbishing a shop measuring 1 000 sq ft to 2 000 sq ft. If they cannot meet the requirements, their tenancy agreements will not be renewed. Owing to a wrong policy made by the Government, the shopping arcade, which was originally relied upon by the largest number of poor people for their living, has become yet another victim of real estate hegemony.

We often say that there should be more vitality and business opportunities in Hong Kong, but where can such opportunities be found? No joking please. Our rents are among the highest in the world. We often say that we envy such places as Singapore, Taiwan and Japan, where we can really find SMEs and small shops which can enable the operators to make a living. It can be said that, in addition to roadside shops and shopping arcades, such SMEs and small shops have also disappeared completely in Hong Kong. I know many people who are really SME operators in Kwun Tong, Chai Wan, and so on. However, they are now at the end of their rope due to the rampant speculation on factory buildings, which has pushed up the rents of factories by many folds in Chai Wan, East Kowloon and the Kai Tak Development Area. Some of them have simply winded up their business because they cannot afford to pay the rents. What sort of business environment is it?

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I very much agree with the comment made by a Member from the business sector that the Government is sitting on its laurels. What has the Government done to curb the crazy rent increases of commercial buildings? Regarding the remark made just now by Mr James TIEN that it would be better for more shopping arcades to be built, I think it depends on who the landlord is. Should it be one of the several major real estate developers, do you think the rents charged will be low? No way. The rents charged will still be very high. Those who cannot afford the rents will have to leave. Do you think they will be allowed to operate roadside stalls? No. Only brand-name shops, such as those selling luxury watches sought after by the rich Mainlanders, can survive. However, they are mega multi-national enterprises, not SMEs. Hence, will Members please make it clear what they mean in discussing this question today.

Just now, Mr Martin LIAO talked about welfarism. "Welfarism" is a very handy term, for there must be some people in every corner of the world using this term to attack others, "Please stop talking about welfare, for Hong Kong has literally been taken into a deeper abyss because of you". Let us examine these figures: The ratio between its public expenditure and Gross National Product is 22.2% in Hong Kong, 36% in the United States, 39.4 % in Canada, 44.1% in the United Kingdom, and 37.3% in Japan. Is Japan a welfarist state? Our Gini Coefficient is now standing at 0.537, but we are not fighting for any sort of welfare. If welfarism is practicised in Hong Kong, we will not have to fight so hard here. What we ask for is just a little bit of equality, justice, and harmony. Mr James TIEN has made it very clear that disharmonious labour relations will not do employers anything good. For instance, the daily strike staged by the dock workers working for the Cheung Kong (Holdings) Limited will cause destruction to both sides in the end. On the contrary, the minimum wage, maximum working hours and more reasonable retirement protection demanded by us will drive Hong Kong economy forward.

I so submit. Thank you, President.

DR KENNETH CHAN (in Cantonese): President, I have an overwhelming sense of familiarity, or déjà vu in French. What does it mean? Turning the clock back a bit further to a couple of months ago (it should be 20 March), Mr Martin LIAO proposed a motion debate here on how to upgrade Hong Kong's high value-added industries. I remember Secretary Gregory SO was present at the LEGISLATIVE COUNCIL ─ 23 May 2013 12379 meeting, and we debated and discussed how to pursue development with "a vision, a direction, a policy and support" for these industries.

I remember that I asked ― perhaps it was a question to myself, for I did not get any answer ― how to promote the development of some very special industries, because I found a very clear definition by the Government lacking. When the Government was designing the North East New Territories development project, it said that such places as Kwu Tung North would be developed as special industrial zones. As to how special they will be, what plan the Government actually has, the estimated number of job opportunities, the actual operation and implementation, they all look like a blank or blurred image. Coming back to Mr Martin LIAO's motion of "Promoting Hong Kong's economic restructuring", some people already commented on the day following the motion debate that industrial and economic restructuring could not be empty talk on paper.

Now closer to home to yesterday when Mr Andrew LEUNG put an oral question to the responsible Secretary, Mr Gregory SO, in this very Chamber. The question asked was about what new policy the Government would formulate to consolidate Hong Kong's advantages to sustain the development of industries and what the Government would do to support Hong Kong's commercial and industrial sectors and professional services in creating new advantages. I was very serious in examining the reply prepared by the Secretary to see what "new" initiatives the Government would introduce. However, I only saw many repetitions of the word "continue", such as "continue to support SMEs", "continue to provide support for the cultural and creative industries", "extended the application period for the Special Concessionary Measures under the SME Financing Guarantee Scheme", "continue to make use of the $1 billion dedicated fund set up last June to assist Hong Kong enterprises in upgrading and restructuring, developing brands and promoting domestic sales in the Mainland", "continue to strive for more open trade conditions for the services industry in Hong Kong (including professional services) with the Mainland and overseas countries", and so on. Even though the question was about the availability of "new" policies, we could see from the reply that there should be none. Actually, the Secretary could have simply said "not yet" or "no" in his reply. Of course, government officials must be very serious in repeating the Government's existing and continued policies, as well as policies that would see enhanced enforcement.

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Why did I say that I have an overwhelming sense of familiarity? It is because Members from the commercial and industrial sectors have kept repeating these questions and putting forward their demands and, likewise, our Bureau Directors have kept repeating the efforts being made. Where does the problem lie? Being a third party, I am neither an economist nor a businessman. My work focuses merely on studying public policies and reviewing their results and effectiveness. I am really baffled by the government official's performance.

Both Mr Andrew LEUNG, the Member who raised the question yesterday, and Mr LIAO, who spoke just now, are members of the Economic Development Commission (EDC) set up by the SAR Government, that is, LEUNG Chun-ying, and the EDC is tasked with conducting high-level, cross-departmental and cross-sectoral studies. Our Chief Executive is fond of chanting such slogans as "appropriately proactive", "expanding the depth and width", "developing emerging industries with potential for growth", and so on. But the question remains: Should we focus on slogans or policies?

Hence, I would like to remind colleagues that this issue is very serious. Whenever discussions are held here, we must be careful not to create more hurdles and trouble for ourselves. Instead, we should focus on compelling the Government to deliver results. This is why I hope Mr LIAO does not mind. Whenever welfarism is discussed here, we fully understand that we can go on and on discussing and debating the definition of welfarism and its economic pros and cons from the ideological, policy and conceptual perspectives. While there might be nothing wrong with such discussions on the pros and cons of minimum wage and standard working hours, but insofar as today's question is concerned, Secretary Gregory SO should be asked whether he can show us any homework. The Secretary is not new to his post. The one who is new to his post is his aide, Dr Bernard CHAN. However, he might be even more knowledgeable because he engages in high technology, life sciences, and R&D of drugs, right? It is reported that he has set up a company in Science Park, and it might still be there. Given his practical experience, strong R&D background, and his ability to complement the development and restructuring of Hong Kong's high technology industries, he might even find it easier to take up the ropes, better understand the crux of the problem and, hence, be better able to make suggestions for Hong Kong.

I have always found the organization of our Government very interesting ― although some of our colleagues would attend the EDC to express LEGISLATIVE COUNCIL ─ 23 May 2013 12381 their views and make suggestions, when Secretary Gregory SO appeared before this Council to answer questions about land, he would say that he had nothing to do with land, which should be handled by Secretary Paul CHAN. When he was confronted with questions about dock workers and labour relations, he would say that he was not in the position to answer the questions because they were within the ambit of Secretary Matthew CHEUNG.

I earnestly hope, and I still do, the Secretary can, with the support of the talents in his Policy Bureau, eventually come up with some new ideas when facing the repeated and familiar questions and enquiries from Legislative Council Members, rather than repeating the same answers given the day before with only some slight amendments, additions or deletions. I hope the authorities can really come up with some new measures and ideas to demonstrate to us a vision, direction and procedure for the implementation of economic policies, with a view to truly achieving the purpose of "creating new job opportunities by baking a bigger cake", as LEUNG Chun-ying has frequently said, and assist the development of Hong Kong economy. This is precisely the answer I am expecting.

I so submit. Thank you, President.

MR WONG YUK-MAN (in Cantonese): President, the topic for the debate today is "Maintaining a business-friendly environment in Hong Kong". I am not going to discuss the topic in line with the mindset of the business sector and those so-called representatives of the small and medium enterprises (SMEs). Originally, I have prepared a draft speech to look at the question of SMEs from a number of perspectives. When we talk about the business environment, we would focus on the SMEs and why they face such predicaments. About this theme, actually we have to ask a question and that is, just who are responsible for the collapse of the SMEs in Hong Kong. I will arrive at a conclusion on this later. Very often we would approach this question from a number of perspectives, such as costs, business environment, government policies, and so on. There would not be anything other than these. I have listened to the views put forward by Members from the commercial and industrial sectors and the functional constituencies, and I am convinced that nothing can be done about them. Even if Gregory SO is a superman, he cannot fix the problem. With respect to the objective environment overall, the policy of high land premium alone kills the SMEs. Right? Then certain public utilities such as power 12382 LEGISLATIVE COUNCIL ─ 23 May 2013 companies are doing their best to reap profits for the giant consortia at the expense of SMEs. The case is the same with water charges. Now Mr James TIEN and Mr Tommy CHEUNG are in attendance ― when the sewage charges and trade effluent surcharge are borne by just one trade, how can companies carry on their business? There is nothing they can do.

Then there is a political issue and that is, just what do functional constituencies represent. In this Council, those representatives of the business sector and the industrial sector, who in fact do they represent? And there are sectors like catering, retail and import and export, and so on. They represent a large number of SMEs. Why are they concerned about deterioration of the business environment of the SMEs or about the predicament and dire straits faced by SMEs? Mr TIEN, there is no law yet enacted on standard working hours now and the issue is just being discussed …… This is like the situation with the minimum wage debate, we had discussed it for many years. And even when the law on minimum wage was enacted, people still quarrelled over it all the time. But what has happened now? And we Members have to beg all the time just to raise the minimum wage by two dollars from $28 an hour to $30 an hour. Actually, we do not want to accept it, but there is nothing else we can do. But those people from the commercial and industrial sectors are already screaming and moaning, and they have even asked Members to calculate their costs.

Mr Michael TIEN has left the Chamber. Although we are very familiar with the content of his speech, his remarks are really unacceptable to us. Now his elder brother is here. Suppose his elder brother is in the real estate business and his company which is called something 2000 wants to rent a shop premises, do you think his elder brother will lease the shop to him at a cheaper price? Will Mr James TIEN charge him the rent at market rate? The premises could have been leased to a jewellery shop such as Chow Tai Fook and collect rentals at $500,000 a month. Will he lease the premises at $200,000 to his younger brother? These are simple questions. But it is none of their business whether these problems can be solved or not because they cannot think of a solution themselves. These are problems which the officials should try to solve.

The real estate hegemony and the monopoly caused by the marriage of zaibatsu politics with the economy serve to stifle the development of SMEs. This is not a complicated problem. Why do people have to shift the blame to minimum wage, standard working hours and welfarism? Just to what extent can Hong Kong be called a welfare society? How much do welfare expenses in LEGISLATIVE COUNCIL ─ 23 May 2013 12383

Hong Kong take up as a share of our GDP? What is it like when this share is compared with advanced countries? Recently our Subcommittee on Poverty says that a study tour should be made this summer to look at the problem of poverty alleviation and the destination of the tour is Sweden and Finland. It really beats me why Members would wish to go to Sweden and Finland to study poverty alleviation. When Members go to Sweden and Finland to study poverty alleviation, it will easily give people an impression that Members actually want to go on a tour to the Scandinavia.

Buddy, the tax rate there is 60% plus and there is government care and attention from cradle to grave. How can there be any poverty problem there? So I told Mr Frederick FUNG, Chairman of the Subcommittee, right on that day that I would very much want to go but morally, I cannot really convince myself. Can Members find some really poor places and study the problem of poverty alleviation there? Those Scandinavian countries are really welfare states, like the utopia which Confucius talked about some 2 000 years ago. Right? They are countries where the widowed, lonely and disabled are all taken care of. This ideal state of life is realized in the four Scandinavian countries and also in Iceland.

Let me tell you that this is not what Hong Kong wants. We would just want things to be fairer and that resources can be distributed more reasonably, instead of only benefiting the zaibatsus and real estate developers. Mr Abraham SHEK, please do not stare at me. What we are pursuing is just that government policies can be fairer, and that is all. But Secretary SO, please do not think that there is fairness when laws on fair transactions and competition are enacted. Now the objective environment is bad enough. Originally, I have written some arguments in my draft speech, but since I found the speeches made by many Honourable colleagues so unacceptable, I decided to leave them out. I know that Members may argue and quarrel in the Chamber, but things will be over and done with when the meeting ends. And this is not the first day when such things happen. Right? It is like each Member is blowing to a trumpet of his own and at his own key. There will never be any unison or chorus. When Members speak from their own position, they may all sound very reasonable, but actually it is not.

What we are after is fairness. And this fairness is not the kind found in socialism because it is impossible. In Hong Kong we have a Labour Party, but can we call it socialist? We have the FTU, but is it socialist? Socialism in 12384 LEGISLATIVE COUNCIL ─ 23 May 2013 these organizations is fragmented and dismembered, and they are weak and incompetent. What is their use? For the Government, it cannot do anything to makes things fair, not even maintaining a fair business environment. What we say in our speeches may sound cliché, and that is the question of rents. They will not want to talk about rents, nor show any support for rent control. But no sooner after this they will embrace the SMEs and say that they are really in a miserable state. Will Dr LAM Tai-fai lend his support to rent control? He will not, will he? I say I demand rent control. But he says he will not support my idea, claiming that Hong Kong is a free economy. Then the discussion cannot continue. At last, we can only pray that the Government will hear the voice of its conscience or when Hong Kong is really dying, that is, when we will all be out of work, that change will take place. Or when there are riots on the streets and the Government is powerless to do anything, then there might be change.

MR WONG KWOK-HING (in Cantonese): President, before coming to my speech proper, Mr Martin LIAO talked about welfarism in Hong Kong just now. I very much respect Mr LIAO and we are good friends. However, since he mentioned welfarism in Hong Kong, I think I have to respond to that.

Mr LIAO, Hong Kong is not a welfare society, far from it. There is still a very long way for Hong Kong to become a welfare society. In the 1970s the British Hong Kong colonial government summed up its experience and lessons learnt in governing Hong Kong and introduced some measures aimed at pacifying the people and also making certain improvements. Those were welfare measures and improvements made to the system. The kind of welfare system set up was actually some kind of a safety net meant to help people who had the least means to help themselves. That was all. Then continued improvements were made on this basis. After the founding of the SAR, people from all sectors across society have been urging the Government to strive for long-term development in various welfare policies and in the welfare system.

The legislation on minimum wage is only the beginning. As for legislation on standard working hours, now the Government has barely started to study the issue. The Mandatory Provident Fund (MPF) System which has been in place for 10 years is still fraught with problems. The most serious one is that all the wage earners in Hong Kong are very unhappy about the offsetting arrangement between MPF benefits and the severance and long service payments. And we cannot expect anything like a universal and full-scale retirement LEGISLATIVE COUNCIL ─ 23 May 2013 12385 protection system either. This is not yet in existence. As for the existing CSSA system, the Government has been stating repeatedly that it is only a safety net meant to help the disadvantaged groups who have the least means to help themselves.

As for the SMEs in Hong Kong, they face a very difficult business environment. Many Members have criticized earlier on that Hong Kong is affected by such problems as high premium and high rents, whereas many monopolistic utilities and companies have made the business operation of SMEs difficult. President, I would like to talk about some shops which we used to know very well and we often patronize, that is, shops like groceries, rice shops, provision stores, Hong Kong-style cafes, roadside cooked food stalls, stationeries, incense and paper offerings shops, hardware stores, and so on. All these shops are dwindling in number. Members who try to buy some daily necessities from these shops will find that many of these shops have disappeared. As we can see, many shopping malls have come under the control of monopolistic operators. An example is The Link which controls almost all the major shopping malls of the Housing Department. This creates exploitation and the problem of intermediate exploitation is also very serious.

I therefore think that the Government should endeavour to help Hong Kong achieve long-term economic development, thus enabling more people to start a business or get a job. For many years the FTU has been calling on and urging the Government to develop an economic policy which is employment-led. About this development of an employment-led economic policy, how much has the Government heeded us? And how much has it taken on board? We do not see much of that. So what is wrong? We can find the following problems.

First is the division of labour among the departments. The result of the division of labour is that departments become compartmentalized and will just mind their own business. Consequently, contradictory policies may be introduced. For example, Secretary SO may be discussing certain problems with us today and he has to make a response later. For the hawkers, they are managed by the Food and Health Bureau. But when there is no air-conditioning in the markets, this is not the business of the Food and Health Bureau. Does this problem not show that there are no interdepartmental studies on these problems? Or for example, on the question of developing Chinese medicine, the Chief Executive, LEUNG Chun-ying, has said that he wants to develop Chinese medicine. But when it comes to manufacturing Chinese medicine, insofar as the 12386 LEGISLATIVE COUNCIL ─ 23 May 2013

GMP system in force is concerned, many factory owners and investors say in this Council that no assistance is provided by the Government. They also say that there are no resources, talents and tax concessions. It is like there is nothing in everything. But it seems to have nothing to do with Secretary SO. How can government departments be so compartmentalized?

We have said that in those new development areas, there are no markets and no street economy. These belong to the ambit of the Development Bureau and that is none of Secretary SO's business. We have pointed out that the housing estates have not provided any of these ancillary facilities to the tenants. This seems to be the business of the Transport and Housing Bureau and none of his business. This kind of compartmentalization among government departments and contradictions in policies have led to many problems. Moreover, the Government has invested its capital overseas. But why does it not consider attracting more capital, creating more jobs and making use of foreign technology to set up factories here? Again this seems to have nothing to do with Secretary SO.

Therefore, if the problems of compartmentalization, balkanization and contradiction of policies are not solved, it will be hard to implement an economic policy which is employment-led. Lastly ― I have only got 30 seconds, no, just some 20 seconds left ― I hope that Secretary SO can speak on the question of how the inventors in Hong Kong can be assisted in his response later on. I hope he can talk about original grant patents and whether this system is under his purview. I also hope that in the next few years, he can impress us with some good performance (The buzzer sounded) …… Thank you, President.

MR ALAN LEONG (in Cantonese): President, Mr Jeffrey LAM proposes that the Government has to do something to improve the business environment in Hong Kong. I do not think anyone will oppose such a motion. But the question is how the business environment can become better. Recently, I have read a number of articles written by Prof Richard WONG of the University of Hong Kong. President, if you have not read these articles, I would strongly recommend them to you. In a series of his articles on the political economy of Hong Kong and China, he makes an analysis of the cause of the present predicament in Hong Kong, that is, the economy seems to be making no progress and the business environment simply worsens. According to Prof WONG, this is because during the colonial times in the past, the imbalance found between the LEGISLATIVE COUNCIL ─ 23 May 2013 12387 agenda on economic policies and the agenda on social policies could be sorted out by the Governor who could make political adjustments and deployments flexibly. But the current situation is unlike that, where the imbalance cannot be averted.

Of course, I cannot give an account of the analysis made by Prof WONG as well as the arguments presented by him in such a short time as seven minutes. But I understand that what I can say in seven minutes is that he has hit the nail on its head insofar as the problem is concerned. We often say that there are deep-rooted conflicts in Hong Kong. Where do these conflicts come from? It is because part of the problems we face now are big and objective ones, and they come from outside. The other part comes from inside, that is, as a result of changes in the circumstances. President, for example, now we are closely linked with the Mainland whose economy is already open and is heading towards market economy. This is a relationship that cannot be decoupled. And on top of that, we have to face the impact of globalization on Hong Kong.

President, our demographic structure is changing. According to the Census and Statistics Department, come 2030, the ageing of our population will reach its peak. We have to deal with the problem of children born of "single and doubly non-permanent resident pregnant women". Our political demands are also changing. Now Hong Kong is reunited with China, no longer a colony. The people of Hong Kong hope that after they have got rid of their status as second-class citizens, they can be the masters of their own house. All these are major internal and external changes. But it seems that we are at our wits' end in coping with these changes. What we can see is that our political system cannot give sufficient political recognition to the Government, the Chief Executive and his team of top officials. This prevents them from putting forth proposals boldly and with a vision to solve the three problems which I have just mentioned.

In addition, as society continues to divide, this leads to the weakening of political powers and the recognition for them. The Chief Executive cancelled a meeting of the Executive Council because he was afraid of reporters pestering him with questions about Mr Barry CHEUNG and the Hong Kong Mercantile Exchange. In the face of demonstrations by university students who only wanted to hand him a letter, he forgot that when he was running for the election, he said that he would take a note pad, a pencil and a stool and go into the masses. President, if you say that this political system will never change its method of returning a Chief Executive, I fail to see how we can deal with the imbalance 12388 LEGISLATIVE COUNCIL ─ 23 May 2013 between the agenda of economic policies and the agenda of social policies which Prof Richard WONG has talked about. And we cannot hope that the present Chief Executive ― given the way in which he was returned ― can cope with the problems like the colonial times when the Governor could say a few words or make some flexible deployments.

Those in business can feel the bad consequences because they are personally involved and they can sense the pain and trauma. This applies, of course, to the surge in rents mentioned just now. President, if only Members of this Council can propose some motions in order to gain more trust ― such that we can propose some motions with charging effect, for example, a motion on reform of the tax regime ― we do not have to talk about regulating minimum wage or reasonable working hours, and so on, right from the beginning. These issues emerge because we have been forced to bring them up. But they have no charging effect. But actually, their impact on the business environment in Hong Kong ……Would it be better if you can allow us to discuss whether a progressive profits tax regime should be introduced, or making adjustments like introducing some new taxes and making changes to the tax bands and allowances?

So President, I will have to say again that if we wish to see a better business environment in Hong Kong and everyone can be happier, we have to reform our electoral system. As for me, I will not apologize for talking about issues that have been discussed so many times that they have become dull and hackneyed. I so submit.

MS CYD HO (in Cantonese): President, I support the original motion of Mr Jeffrey LAM, for the wording of the motion is straightforward and the principle and direction is acceptable. Small and medium enterprises (SMEs) constitute over 90% of the enterprises in Hong Kong. It is entirely acceptable to help them to carry on their business, so that they may gradually develop into larger enterprises and create more job opportunities. However, I must respond to Mr Martin LIAO's earlier argument which simplifies the support to SMEs as capitalism versus welfarism.

First, I have to thank Mr James TIEN. Though Mr James TIEN had already come into contact face to face with many workers when he was affiliated to the business sector, he is now really different after the baptism of direct election. He is now conscious of the plight of the public, and he understands the LEGISLATIVE COUNCIL ─ 23 May 2013 12389 many problems faced by residents of public rental housing, particularly those in New Territories East. I believe the policies introduced by the British Hong Kong Government in a gradual manner since the 1970s were business-friendly. The implementation of long-term public rental housing policy, provision of free education and improvement in medical and health care services had lowered the daily expenses to be borne by the public in those areas. Since the basic and daily needs of the grassroots had been met under those systems, they had not demanded more wages from their employers, which had thereby kept wages at a lower level. This naturally leads to the discussion on this fundamental question. Should these daily expenses be met by individuals or society, and whether it is the responsibility of individuals or society to provide education and lift these families out of poverty? In fact, be it the past arrangement adopted by the British Hong Kong Government or the current practice of the SAR Government, and areas where improvement is needed, they all seek to bring different people of different economic background to more or less the same starting line. However, in terms of education, students are again being set farther apart at the starting line.

The prevailing situation in Hong Kong is quite a long way from welfarism. All along, the authorities have only provided a most rudimentary safety net, which is feebly supported by the authorities' remarks that no one will be deprived of access to suitable medical care or education because of financial factors. However, it takes a long wait for one to enjoy equal education or suitable medical care. Therefore, the existing welfare system in Hong Kong is utterly inadequate.

Mr LIAO mentioned earlier the several European countries we dubbed as "PIGS", including Portugal, Spain and Greece. These countries are said to have run into great economic troubles due to the practice of welfarism. However, we have to look at the full picture, for the "collapse" of economy of these countries also involved other factors. Corruption in these countries has jeopardized the regulation of banks and the financial system, whereas excessive and bad loans taken out have triggered the "collapse". These are the problems besetting these countries, being some of the causes of the serious economic crisis. In contrast are the four countries of Scandinavia which have also adopted a heavily subsidized welfare system. Why have not the economies of these countries collapsed? Because a system for monitoring the government and a relatively good system for monitoring the monetary system have been put in place in these countries. The systems prevent people with blind faith in the market from causing fluctuations in the financial markets, and preclude financial predators 12390 LEGISLATIVE COUNCIL ─ 23 May 2013 from striping retirees of their savings in pension. Therefore, when we talk about the "economic collapse" of certain countries, we should thoroughly examine the political system adopted in the country concerned.

Actually, Hong Kong's concern is not about the rise of capitalism but the rise of "real estate-ism". The prevailing conflict in Hong Kong is not one between capitalism and welfarism, but one between "real estate-ism" and fundamental rights of employees. Let us look at the economic development of the world in the past. At the agricultural stage, agricultural activities relied on the abundant supply of land. At the industrial development stage, the demand for land was smaller. At the development stage of the service sector, the demand for land was even smaller. As for consumption or cultural economic activities in future, the demand for land will decrease further in comparison with the demand for production. However, due to the limited supply of land, we notice that landowners and landlords have become the ultimate beneficiaries during the restructuring of the economy. Certainly, when it comes to the several factors for production, including capital, machinery, skills and manpower, we notice that despite the availability of all these factors, the lack of land will render it impossible for any particular business to carry on. Moreover, being a landlord, it is unnecessary to have wisdom or to keep abreast of the times, for a landlord need only hold on to the land in order to enjoy the fruits of other capitalists, entrepreneurs and labour. Let me cite one example to illustrate this point. A business of Mr Vincent FANG ― TOPPY ― has been running well all along, but he has to move the shop upstairs. In fact, many noodle shops and porridge shops in local districts are paying monthly rents amounting to $600,000. What is the contribution of landlords other than buying the site at an earlier time?

Therefore, I hope Members will not put this subject in a simplified perspective. For the priority task in maintaining a business-friendly environment is to deal with the high property price, and then red tape. I hope the Secretary for Financial Services and the Treasury will change the mindset of adopting a fully market-led approach. More innovative concepts and some good measures should be introduced to assist the green industry and new SMEs engaged in other innovative undertakings and to enable them to join the trade.

IR DR LO WAI-KWOK (in Cantonese): President, I would like to express my approval of and support for the motion on "Maintaining a business-friendly environment in Hong Kong" proposed by Mr Jeffrey LAM. Against the LEGISLATIVE COUNCIL ─ 23 May 2013 12391 macroscopic background of globalization of economy, the business environment in Hong Kong is closely linked to the economic condition worldwide, thus the sluggish recovery of the economies in the United States, Europe and Japan will inevitably affect Hong Kong.

Since Hong Kong was open for trade, its unique geographical and political conditions had enabled its economy to prosper continuously and work a miracle. However, in recent years, in tandem with the rapid development of neighbouring economies, the competitive edges of Hong Kong have started to dwindle. At present, the prime task of Hong Kong is to promote economic development. If we fail to spawn new competitive edges, like a boat sailing against the currents, we will be swept downstream if we fail to forge ahead. Economic development is the only way to "make the pie bigger", which is the prerequisite for improving people's livelihood. Improving the local business environment is naturally the starting point for promoting economic development. In my view, the SAR Government may adopt proactive policies and measures in a focused manner in two aspects in order to improve the business environment of Hong Kong.

First, the SAR Government should promptly roll out suitable public policies and inject resources according to the characteristics of various sectors to assist small and medium enterprises (SMEs). President, maintaining a business-friendly environment conducive to the development of SMEs is one of the major focuses of economic development of Hong Kong. The reason is self-explanatory. According to the relevant figures, there are about 300 000 SMEs in Hong Kong, accounting for 98% of the total number of enterprises in the territory, and they have employed over 1.2 million workers, which accounts for around 50% of the total number of employees in the private sector. As such, SMEs are playing an extremely important role in promoting the economic development of Hong Kong and supporting the employment market. However, given the many potential uncertainties in the external global economy on the one hand and the competitive advantages often enjoyed by large enterprises with strong financial strength on the other, local SMEs have to rise up to external and internal challenges and cope with the many difficulties in operation.

In recent years, the SAR Government has adopted some relief measures catering for the needs of SMEs. It has launched some support schemes, such as loan guarantee and the provision of export credit, and so on. In June 2012, the authorities introduced the $1 billion BUD Fund to assist Hong Kong enterprises in developing brands, upgrading and restructuring and expanding the domestic 12392 LEGISLATIVE COUNCIL ─ 23 May 2013 sales market. All of these have helped SMEs in some measure. Yet compared with the aspirations of the trade, the SAR Government may have to adopt more tailor-made measures yet. The Government must improve the existing procurement policies and tendering mechanism to help SMEs to meet the entry requirement and accumulate experience. Regarding the procurement policy and the tendering mechanism, the engineering sector and the technology sector have reflected to me repeatedly their discontent with the existing mechanisms. I have conveyed the aspirations of the sectors at different times through different channels, including writing to the SAR Government and the Chief Executive. For instance, the tender for government works projects should be suitably parceled out. As for the procurement policy of the Government, it should suitably give encouragement to local R&D. In fact, the Government may draw reference from the experience of other regions, including members of the WTO, in taking the lead to use products developed from local R&D, or even state clearly that a certain proportion of locally developed technology should be used, so that SMEs can avail themselves to the local market as the testing ground.

On the other hand, the authorities should vigorously capitalize on the early and pilot implementation policy adopted in Guangdong under CEPA, assisting the trade to push local technological products and service into the market of Guangdong Province. It is true that many local SMEs possess the talents and techniques for innovative technology, but they are disadvantaged vis-à-vis large multinational enterprises in terms of their scale of operation and business performance. However, the abovementioned measures will enable local SMEs to meet the entry requirement. They can thus participate in the procurement and tendering projects of the Government, thereby accumulating experience and performance for their companies, which in turn will reinforce their competitiveness and enable them to develop and grow gradually. These measures will provide the domestic works sector, technology professionals and the industrial sector with more opportunities to participate and display their strengths.

Moreover, the Government should encourage and subsidize SMEs in the use of information technology, and promote the use of techniques like cloud computing and mobile Internet to enhance their competiveness in digital economy and promote industrial innovation.

Another aspect is the enhancement of diversified education and training, thereby consolidating the competitive edge of local talents. Hong Kong people LEGISLATIVE COUNCIL ─ 23 May 2013 12393 have all along been proud of our quality talents. Over the years, they have played an extremely important role in the development of the local economy. In order to bring about diversified economic development in Hong Kong, upgrade the pillar industries, promote new industries and revitalize the conventional industries, the authorities should make early projection and planning on manpower supply in various trades and industries, and invest more resources in training the next generation to take over the helm. Education and training should chart a diversified course of development. On the one hand, the academic level of undergraduate and postgraduate students of various universities should be upgraded, and more scholarships should be provided to subsidize local graduates with outstanding performance to further their studies overseas, so as to nurture professional talents in different fields. On the other hand, professional education and vocational training should also be enhanced. The authorities should make vigorous efforts to provide various kinds of pre-employment training and in-service training, and offer various recognized qualifications for members of society of different ages and levels.

Moreover, the authorities should co-operate with various professional associations in encouraging young practitioners in the trade to pursue continuing education, thereby enhancing the professional level of the relevant trades. The SAR Government should complement the implementation of the Qualifications Framework covering various trades by improving the articulation arrangement of various courses. Such improvement will enhance the competitiveness of local talents, promote the upward mobility of young people and enable local employees to put their learning into practice and share the fruits of economic development, thus ensuring a relatively adequate supply of manpower to benefit a multitude of sectors.

Today, the Secretary for Commerce and Economic Development, Mr Gregory SO, is in the Chamber. I would like to ask the SAR Government whether it will consider setting up a Technology and Communications Bureau within its term. If not, will it promptly consider establishing the post of Under Secretary under the Commerce and Economic Development Bureau to take charge of the development of innovative technology?

President, I so submit.

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MR FRANKIE YICK (in Cantonese): President, according to the report on business environment 2013 published by The World Bank, the business environment in Hong Kong still ranks the second in the world. But in reality, the business environment and competitiveness of Hong Kong have become far less desirable than before. ZHANG Dejiang, Chairman of the National People's Congress, made an open remark recently that Hong Kong was now experiencing difficulties in restructuring its economy and losing some of the competitive edges it enjoyed previously. Moreover, it is pointed out in a recent report that Hong Kong's status as the container port with the world's third largest throughput will be taken over by Shenzhen within this year. This should be attributed to the recent strikes. In fact, Shenzhen had already overtaken Hong Kong in April. This prompts worries about the development prospects of Hong Kong.

Today, the competitive edge of Hong Kong is diminishing and the business environment is less desirable. In the final analysis, the SAR Government should be responsible for this. In view of the rapid development of regions in the vicinity, the Government remains indecisive, and despite the decisions made, it takes no action but pays lip service. It has been talking about the six priority industries and the four pillar industries for a long time, but no policy has so far been introduced to support the development of these industries. The incumbent Chief Executive has attached obviously greater importance to the development of the shipping and logistic industries than the former Government. In his maiden policy address announced early this year, he stated the desire to reinforce the maritime service cluster and develop high value-added maritime services, but so far, no specific policies have been introduced. The Working Group on Transportation under the newly established Economic Development Commission will formulate relevant policies only after the completion of the reports of the Consultancy Study on Enhancing Hong Kong's Position as an International Maritime Centre, and the Study on the Strategic Development Plan for Hong Kong Port 2030, which are expected for the middle of this year. In other words, we will be marking time in the short term. My concern is whether new policies will be introduced to support the development of the shipping and logistics industries. If the Government confines itself to the mindset of the past, I can hardly be optimistic about the future development.

The operating cost in Hong Kong has always been higher than that in neighbouring regions, and this has undermined the competitiveness of the shipping and logistics industries in Hong Kong. As the Central Authorities have stated in the National 12th Five-Year Plan its clear support for Hong Kong to LEGISLATIVE COUNCIL ─ 23 May 2013 12395 develop into a high-value goods inventory management and regional distribution centre, it is rightly a new path for the development of the logistics industry of Hong Kong. We should grasp this opportunity and waste no more time. The authorities should introduce policies on logistics development as soon as possible, or else, we will continue to be marginalized as we lag behind in development. There is no guarantee that our status as an international freight centre, which was achieved with years of hard work, will not dwindle.

Singapore has for seven years in a row topped the list of the best place for doing business. Yet, in recent years, it has been making vigorous efforts to introduce various policies tilted towards the development of the shipping industry, such as tax concessions. Moreover, the authorities have even set up a dedicated department to assist enterprises intent on opening offices in Singapore to launch their business, striving to attract more large enterprises relating to the shipping industry to set anchor, so as to "make the pie bigger". In stark contrast, the support of the SAR Government for the industries is obviously less than proactive and vigorous.

One of the examples is the request made by the shipping and logistics industries to the Government over the years for the provision of additional permanent sites for the development of the logistics industry. In the Policy Address of 2009, the authorities said that permanent sites of 29 hectares in total would be provided for the development of a logistics cluster. However, the progress in introducing the sites has been slow, fallen far short of the development demand of the industry. As demand has outstripped the supply, land prices and rents have been pushed up constantly, putting the trade under the pressure of high operating costs today. In view of the persistently high land price, rent and operating costs, overseas enterprises have reservations about entering and stationing in Hong Kong.

To solve the problem of high land price and high rental, we think the authorities should launch more permanent sites for the development of the logistics industry as soon as possible. As in the case of the 1960s and 1970s in Hong Kong, where government factory buildings were built to support industrial development, the authorities should consider funding the construction of warehouses as infrastructure to support the development of the industries and then renting these warehouses to SMEs in the logistics industries at reasonable rates, which will expand their room of survival.

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The minimum wage has induced chain effects and a ripple effect on wages up the ladder, causing the actual wage cost of enterprises to rise continuously. If the authorities are to prescribe standard working hours later, it will deal another blow to the business environment as a whole. In recent years, the unemployment rate stands at some 3%, which is indeed full employment. However, apart from the logistics industry, many other industries are also facing the problem of manpower shortage currently. To ensure that an adequate source of manpower is available to all sectors to support their development, we consider that the authorities should increase the resources for the training of talents, alleviate the problem of manpower mismatch and examine options to increase labour supply.

In the face of the intense global competition, the SAR Government should make proactive efforts to create new advantages for Hong Kong, enhance our competitiveness and provide a business-friendly environment to promote investment, so as to foster the sustainable development of Hong Kong economy.

President, I so submit.

MR CHUNG KWOK-PAN (in Cantonese): President, today, globalization has made competition increasingly intense. In the international business environment, it is comparable to sailing a boat against the currents, and one failing to forge ahead will be swept downstream. For this reason, in order of maintain a business-friendly environment and the competitiveness of Hong Kong, we should maintain our established advantages on the one hand and keep creating new bright spots for development on the other.

In Hong Kong, the concept of free economy has always been upheld. Some time ago, Hong Kong was ranked by the Heritage Foundation as the world's freest economy for the 19th consecutive year. Many Hong Kong people still think that Hong Kong possesses a strong economic edge and we need not fear the impact of any crisis in future. However, there are signs that Hong Kong's advantages are weakening. Worse still, in recent years, the Government has from time to time launched some policies and measures that undermine the economic freedom in Hong Kong.

In the past few decades, the SAR Government has raised the issue of economic restructuring a number of times. It has been emphasizing the need for LEGISLATIVE COUNCIL ─ 23 May 2013 12397

Hong Kong to develop new industries, to expand the overall scale of economy and to promote the comprehensive development of society, and so on. These proposals were very impressive, but after so many years of talk, we are still marking time, making no progress. New industries have not been developed, worse still, conventional industries are going downhill.

In view of the handsome surplus placed in the coffers every year, the Government has more than enough resources to do more in long-term planning for society as a whole. But the latest budget is disappointing. The Government has not only failed to make long-term planning for economic development, but it has introduced instead quite a number of administrative measures adversely affecting the business environment of Hong Kong in recent years. The imposition of the Special Stamp Duty on property transactions, as well as the "infant formula restriction order" introduced recently in a hasty manner, are slowly eroding the economic freedom of Hong Kong.

Take the "infant formula restriction order" as an example. The Government has failed to deal with the crux of the problem by rationalizing the supply chain. Conversely, it has arbitrarily restricted the public from bringing lawful goods out of Hong Kong. The arrangement has not only violated the proven spirit of free trade in Hong Kong, but has de facto dissuaded visitors from coming to Hong Kong. The order is comparable to adopting a close-door policy, tarnishing Hong Kong's reputation as a free port and shopping paradise. Moreover, it has triggered conflicts between Hong Kong and the Mainland and jeopardized the harmony in society. Free trade has all along been a feature which Hong Kong is proud of, and this has won Hong Kong the reputation of the world's freest economy. However, the "infant formula restriction order" has obviously damaged Hong Kong's reputation as a "free port" and intensified the conflicts between Hong Kong and the Mainland.

In fact, Mainland shoppers should be regarded as great business opportunities to Hong Kong. Yet the SAR Government has not treasured the opportunity to rationalize the supply chain, so that it can capitalize on the business opportunities to bring Hong Kong's advantage of free trade into full play. On the contrary, the authorities hastily imposed the restriction. On the surface, the "infant formula restriction order" has restored the supply of infant formula to normal for some time, but infant formula, which used to be common goods, has suddenly been made a controlled export goods. For this reason, the market is left with no opportunity to create an import and export trade business 12398 LEGISLATIVE COUNCIL ─ 23 May 2013 focusing on Mainland demand through the self-regulation of demand and supply. Besides, a date for lifting the "infant formula restriction order" has not been set. The fossilized practice, as well as the authorities' practice of putting the cart before the horse in policy formulation, is on full display.

Furthermore, the business environment for SMEs is getting tough. SMEs are facing the problems of high wages, high rental, high material price and labour shortage. The shortage of labour in particular is haunting all trades and industries, undermining the economic development and competitiveness of Hong Kong. SMEs face difficulties in financing in particular. It may not necessarily be that the banking sector is unwilling to provide loans to SMEs, but more often than not, special circumstances override, say new measures are introduced by the Hong Kong Monetary Authority in succession, and banks are bound to change their loan policy frequently. Therefore, we propose that the Government should adopt measures to reinforce its support and assistance for the development of SMEs. These include the following measures.

It should make vigorous efforts to promote Hong Kong brands. The authorities should step up its support for brands made in Hong Kong in terms of policy, marketing and tax concessions. These include reinforcing the co-ordination among departments and public organizations now providing support to Hong Kong brands, design and product R&D, and improving the approval mechanism for provision of subsidies for R&D by enterprises, facilitating the application for assistance by enterprises and promoting industrial diversification.

The authorities should enhance the subsidy schemes for SMEs. To assist SMEs in promoting their business, such as participating in exhibitions, the authorities should further increase the amount of grant and the cumulative amount for the grants under the SME Export Marketing Fund to $300,000, and relax the restriction to allow the grant to be used for local promotion activities.

The authorities should also enhance its effort in expanding business opportunities. The Government should reinforce the role of the offices of the SAR Government overseas in business affairs as soon as possible. It should be more proactive in assisting Hong Kong businesses to expand their business and develop business opportunities in the Mainland, and in other countries and regions. These include adopting the "Government to Government" approach in promoting business development, and assisting tens of thousands of Hong Kong LEGISLATIVE COUNCIL ─ 23 May 2013 12399

SMEs in Guangdong, which are facing drastic increases in cost, to relocate their operation to regions with lower costs, say setting up a Hong Kong industrial park in Myanmar.

The authorities should help SMEs in financing by negotiating with banks, and lowering the interest rate and extending the repayment period under the SME Financing Guarantee Scheme. Moreover, it should enhance its communication with banks and SMEs, assisting enterprises to understand the loan approval criteria adopted by banks. In the light of the economic development in future, it should conduct assessments and regular reviews on the need and effectiveness of the implementation of guarantee schemes.

The SME Training Fund should be reactivated. When the Fund was introduced back then, it was very popular, for it enabled SMEs with inadequate resources to train employees effectively and enhance their competitiveness. The Government should consider reactivating the Fund.

Thank you, President. I so submit.

MR ANDREW LEUNG (in Cantonese): President, Hong Kong is the most popular city in the world and ever since the inception of Hong Kong as a port, it has relied on its open economic policy to attract overseas capital and talents. In the past two or three decades, Hong Kong has become the door for European and American businesses to enter the Mainland, but with the further opening up of the Mainland and the rapid development of our neighbouring cities, the original strengths of Hong Kong are being weakened.

Last month, when the Business and Professionals Alliance for Hong Kong paid a visit to the Chairman of the National People's Congress Standing Committee, ZHANG Dejiang, who is in charge of Hong Kong affairs, the latter called on us to seize the next three years, which is a critical period, to make greater efforts and do a good job on the economy, so as to improve the living of the people. Hong Kong must further examine all business-related frameworks and legislation and seize the opportunity of extending the "pilot and early implementation" scheme from Guangdong to the nine provinces in the Pan-Pearl River Delta Region to do its utmost to attract more enterprises and capital outside Hong Kong to make use of Hong Kong as a platform. The Government cannot 12400 LEGISLATIVE COUNCIL ─ 23 May 2013 just talk about vision but refuses to implement policies that can hit the ground and run.

In the past few years, we have told officials a number of times in the Chamber that Hong Kong has to make good use of its unique advantage of being able to leverage on the Mainland and practising the "one country, two systems" principle, together with its well-developed legal system and long-established position as an international commercial and financial centre, to build a platform that would facilitate Mainland enterprises in going global and foreign capital in entering China. In recent years, Hong Kong has become an important platform for financing for Mainland capital. In the future, we have to make greater efforts to seize the opportunities arising from the take-off of the Mainland economy, promote Hong Kong as a base for carrying out work relating to R&D, patents and production using high technology, so as to enable the scope of production of Hong Kong's manufacturing industry to radiate to more places. Similarly, since the Mainland has been actively conducting research on new technology in recent years, the testing and certification industry in Hong Kong can also assist it in carrying out testing and certification, so as to help the relevant products leave the Mainland and enter the international market.

President, I have many friends in the industrial sector who began to actively develop the economic and trade relationships between Hong Kong and ASEAN countries many years ago. In recent years, ASEAN countries have seen strong economic growth and the large number of young people in their populations also provides a large source of manpower and great spending power. The further consolidation of the China-ASEAN Free Trade Area has catapulted the ASEAN to become the third biggest trading partner of China, but some difficulties and challenges in the relationship between China and the ASEAN remain.

Historically, there are close relationships between Hong Kong and the Southeast Asian region and many overseas Chinese have settled in Hong Kong, making use of Hong Kong as a trading intermediary, thus making Hong Kong one of the major choices in fund raising and trading for residents and companies in Southeast Asia. Hong Kong's economic framework, in particular, its strengths in such production services as finance, law and accountancy have made the Hong Kong economy highly complementary to that of ASEAN countries. I believe that ASEAN countries are also happy to use Hong Kong as a platform for corporate financing, trading and making external investments.

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In addition, through the service industry of Hong Kong, the Mainland can also expand its scope of business and speed up investments by Mainland companies in ASEAN countries. To this end, the authorities should initiate the participation of Hong Kong in the negotiations relating to the China-ASEAN Free Trade Area and government officials should take the lead in organizing visits to enhance their understanding of the business sector in these countries, and to promote Hong Kong as a platform for Mainland enterprises, for example, by establishing companies registered in Hong Kong, so as to increase their investments in ASEAN countries. We should also enable more Hong Kong students to understand the systems, customs, languages, and so on, of Southeast Asia, so as to train manpower well-versed in the Southeast Asian region. Lastly, we can also consider putting in place facilitation arrangements in respect of the issuance of visas to further streamline the process of issuing visas to the citizens of ASEAN members, with a view to eventually extending visa-free treatment to them.

President, good labour relationships is one of the factors determining the success or otherwise of a business. In recent years, amendments to labour legislation and new labour legislation have been continually introduced in Hong Kong. We do not oppose providing protection to employees, but some of the laws have failed to take into account actual business operation and employers' difficulties, so much so that they pose potential problems to our business environment.

President, Australia is one of the countries in the world with the best protection for workers but its Government also began to make new adjustments from 2005 onwards. In December of that year, the Parliament of Australia passed the Work Choices Act 2005 to amend the original Work Relations Act 1996, so as to change the Government-led mode which had all along been adopted by beginning to emphasize negotiations and the resolution of differences by employees and employers within companies by all means, instead of frequently referring them to the official Australian Industrial Relations Commission. Employees are also allowed to enter into Australian Workplace Agreements with their employers on their own, so as to change the traditional centralized labour relationship adjustment system of the past into a decentralized mode, that is, to allow employees and employers autonomy in holding discussions, so that the entire labour relationship can be made simpler and more flexible.

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In the past, we often stressed that the labour relation in Hong Kong enjoyed great flexibility, so the business sector could tide over difficult times safely but ever since the introduction of minimum wage, the extent and frequency of adjustments to the wage level give one the impression that politics has overridden everything else. In the future, we still have to adjust the level of the minimum wage, but I hope that we can return to the situation in which the future wage level can be determined by objective factors.

Standard working hours is an even more complicated issue than minimum wage and it affects each and every wage earner in Hong Kong, so we should not act with undue haste. Instances of working for long hours over prolonged periods of time may be found in some industries because of the nature of their work. Some people in the industries concerned hold that legislation should not be enacted across the board because of a small number of instances, as statutory standard working hours will make companies lose their flexibility further. Whether or not there is a need to enact such legislation must be discussed and dealt with very cautiously.

Just now, Mr TANG Ka-piu also mentioned the situation in Singapore. He praised Singapore for its numerous desirable policies but he does not know, or he deliberately avoided mentioning the fact that Singapore is the place importing the largest number of workers.

With these remarks, President, I support Mr Jeffrey LAM's motion.

MR LEUNG KWOK-HUNG (in Cantonese): President, is the business environment in Hong Kong good or bad? Of course, it is good. If you look at all the economic figures, the revenues of our Government are on the increase and among them, that from tax has surpassed that from land sales. That is to say, the business operation of companies is profitable, otherwise, they need not pay any tax. Tax revenue is so substantial that the Government has to offer tax rebates. When it comes to the business environment, on the whole, the growth of our GDP is quite good. Why do some people still say that the business environment is not good? I do not know what they are talking about but perhaps they mean that apart from several industries that are faring particularly well, the other industries are subjected to pressure. What kind of industries are they? It all boils down to a couple of industries, that is, industries that can be monopolized, and it is as simple as that. Some of them are industries run by the Government through LEGISLATIVE COUNCIL ─ 23 May 2013 12403 legislation and statutory organizations, for example, the Airport Authority and the Hong Kong Trade Development Council. All the relevant businesses are monopolized by them.

The second type is the so-called real estate hegemony created by bankers and real estate developers by joining forces. To be more precise, they should actually be called financial hegemony because even the developers have to ask financial moguls to provide financing and run their businesses together. Moreover, real estate has been securitized, and even everything has been securitized and capitalized, so that the financial oligopoly can be sure about getting a share of the pie.

If we say that the business environment is not good, what actually are we talking about? In fact, this is very simple. Our tax regime ― it was really well-said today that although KO Wing-man knew full well some drugs are useful, he still refused to save people's lives ― since the President would not allow me to comment on this, there is nothing I can do, so I can only spend two minutes talking about this a little ― they know full well that the Drug Formulary can save lives but they still refuse to do anything, saying that there is no money. KO Wing-man was really candid. He said that since we have to maintain a low tax regime, even though our healthcare expenditure accounted for a small proportion of our GDP, it accounted for quite a large proportion of the budget, that is, rich people refuse to make contributions. If we want to avert such a situation, and if we want to see improvements in the business environment, so that the so-called SMEs can survive, it is really necessary to approach this matter from the angle of the financial and real estate industries or domains vulnerable to monopolization, including the oligopolies created by the Government, such as the MTRCL, the Urban Renewal Authority (URA), and so on. Otherwise, what else can we say? We are not doing enough in education but we talk about talents; and when it comes to education and manpower resources, up to now, only 19% of school-age students can receive university education that is fully funded by the Education Bureau, so how possibly can we compare with Singapore? Your investment in education is so little and you still want to talk about our industries not being able to develop. This is really laughable.

President, let me cite a very simple example. At present, the Mainland authorities are conducting a thorough investigation into the Ministry of Railways but all the people in the pro-establishment camp said that if the Express Rail Link (XRL) was not built, that would spell doom for us and now, the XRL project is 12404 LEGISLATIVE COUNCIL ─ 23 May 2013 delayed and the "co-location of immigration and customs clearance" cannot be achieved. LIU Zhijun was arrested and the Ministry of Railways has been reorganized, so what are our existing difficulties now? President, we often mention Singapore. Had Singapore asked Indonesia and Malaysia before it does everything, it would have shut up shop long ago. As we want to play a part in the National 12th Five-Year Plan, so when meeting ZHANG De-jiang, we wanted to ask him a little about this and Mr Jeffrey LAM was really "the first one to have sensed the onset of a trend". He talked immediately about Southeast Asia, so he is surely "the duck that knows first when the river becomes warm in spring". ZHANG Dejiang told him that the Americans are returning to Asia, so we have to counter them a little, so Hong Kong may do well to do something to counter the return of the Americans to Asia by retaking the market. First, Hong Kong has to entertain rich people from the Mainland, those people who have become extremely rich under the one-party dictatorship of the Communist Party of China (CPC). They have so much money that they want to come to Hong Kong and get a share of the pie in the financial markets. Moreover, they want an increasingly great share and first of all, we have to facilitate their endeavours; second, it is also necessary to enable the rich people in Hong Kong to get a share of the pie and this is what the CPC on the Mainland means by deep-rooted conflicts and also what LEUNG Chun-ying means by deep-rooted conflicts. At present, reconciling these two types of conflicts alone has resulted in "corpses scattered over half of the ground", with Timothy TONG and the Chairman of the URA, Barry CHEUNG, among them. Barry CHEUNG really makes us envy him because he can borrow money at any time.

At present, the problem of SMEs lies in the excessively high rent of land and the fact that properties are too expensive. Their problem also lies in not having land, but our land is being used for speculation. The problem of our SMEs lies in the fact that people have not honoured their promises, that no one offers them any mortgage, nor is there anyone to search for markets, yet the Government does not assist them, leaving the rich to earn all the money. This is the problem. Now, it even wants to shift the responsibility to us, saying it is because we increased the minimum wage that business operation is so difficult. Buddy, just no kidding. May I ask Honourable Members if they really think that it is high wages that make your operation impossible, or is it high rents that make it impossible, or is it monopolization that makes it impossible for small businesses to have control over themselves?

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Therefore, I think that you people, in talking about the business environment, are just dwelling on one point, that is, those rich people, in particular, those rich people on the Mainland and those rich people in Hong Kong cannot get equal shares of the booty, so they are making their respective claims and both want to get that piece of the pie, and they both want to use our hard-earned money to make a bigger pie, so as to get a bigger share of it. Therefore, President, filibustering is actually better because even filibustering can bring us $50 billion.

MR ALBERT HO (in Cantonese): President, many Honourable colleagues are very concerned about the remarks made by the Vice Premier of the State Council, ZHANG Dejiang, when he gave a reminder to a delegation to the Mainland. He said that the deep-rooted conflicts in Hong Kong's economic development were gradually surfacing and that Hong Kong's competitive strengths were weakening, so this should arouse great alarm among various sectors in Hong Kong. In fact, ZHANG Dejiang is not the first state leader to talk about deep-rooted conflicts and Members will recall that the former Premier, WEN Jiabao, also talked about this issue. We all know that both of them are leaders of the CPC and that many members of the CPC are very sensitive to the word "conflict". Many of its party members are even very well-versed in a well-known piece of works by Chairman MAO Zedong called On Contradiction.

What does "conflict" mean? What is the nature of these conflicts? These two leaders did not give any elaboration, so they are open to our interpretation. For now, I will not talk about what I understand to be the conflicts but I call on Members to look at what phenomenon the conflicts have given rise to. The general situation of the economic development thus far has given rise to a very disquieting phenomenon: Although capital concentration is a common phenomenon in a capitalist economic system, the present situation is that capital is over-concentrated in the hands of some consortia, thus leading to market monopolization. The sectors monopolized by consortia are involved in real estate, finance and public utilities, and such a situation is even more marked in the real estate hegemony.

Not only do large real estate developers control the residential market, they even control shopping arcades and offices, thus leading to hardships in a multitude of sectors and the soaring prices of a host of goods. Even worse, in recent years, large consortia in the real estate sector are moving in the direction of 12406 LEGISLATIVE COUNCIL ─ 23 May 2013 cross-sector control and through their control of the shops in shopping arcades, they monopolize other sectors. For many years, Members can see that the catering industry and supermarkets have been monopolized by consortia, thus making it impossible for many retail businesses to gain any foothold. The Belvedere Garden mentioned by Dr KWOK Ka-ki just now is a case in point. At present, the consortia concerned wants to embark on an all-out buy-out of the shopping arcade and market there, then change the mode of operation to that adopted by The Link REIT. Moreover, it would only rent the shops to large chain stores or superstores, thus making it difficult for small businesses to survive. Such sectors as transport and telecommunications are also monopolized and this is all too evident. Unfortunately, the Competition Ordinance and the entire regulatory regime in Hong Kong cannot provide adequate checks and balances to prevent this kind of cross-sector monopolization from expanding further and controlling economic activities overall. We find this situation a cause for concern.

Second, just now, many Honourable colleagues have also pointed out that Hong Kong's strength lies in its free and open economy in which capital can flow freely, talents can enter and leave freely and information can also flow freely. Freedom is very important to economic development. It is only in free places that talents will converge and various innovative and advanced products can be created, since creativity is closely related to people's thinking. Unfortunately, it turns out that the Government is unwilling to make significant investments in education, particularly in higher education. In addition, the authorities are also very miserly in funding technological research. Funding technological research is actually a cross-sector concession. At least, this is so in respect of tax concessions. However, the Government's existing policy is still extremely entrenched and conservative, which is very puzzling indeed.

Apart from grooming talents through the education system, a free city must also cherish the values of its people. Therefore, the humanities and arts and cultural education are all very important. However, Hong Kong has stymied all education on the humanities, yet we do not think it can claim any success in grooming talents in technology or commerce either. Often, Hong Kong appears to have fallen behind many advanced countries and even its language education is an abysmal failure. What has the Government done? As a world city, the English and Chinese of Hong Kong people cannot pass muster. Why are we like this? The whole education system is falling apart and this is no exaggeration because officials have neither any will nor any ability, and they also lack ideas or LEGISLATIVE COUNCIL ─ 23 May 2013 12407 vision, so we find this most lamentable. Senior officials would at least send their children to Direct Subsidy Scheme (DSS) Schools and those who do not trust DSS Schools would send their children to international schools or even overseas for schooling.

The credibility of Hong Kong is very important, so the Government should provide greater support to the food industry as well as such creative industries as the design, film, animation and toy industries. However, I cannot see the Government take any measures in this regard. I agree with the proposal of giving priority to local development put forward by an Honourable colleague just now, and we must not be content with "being planned" and integrated. We have to enter the world stage and converge with the forefronts of development in the world. This is an important direction. We attach great importance to social justice and the reasonable distribution of resources. Only in this way can labour relations be rationalized. President, to ensure social justice and reasonable distribution of resources, we have to establish a good system of governance and there must be a popularly-elected and accountable Government. The Chief Executive should not be returned by a small circle and only a popularly-elected Chief Executive can have public mandate and manifest his honing, sense of belonging, commitment and vision. Therefore, first of all, we have to iron out the problems in the system before the deep-rooted conflicts can be resolved.

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

MR TOMMY CHEUNG (in Cantonese): President, actually, I had no intention of speaking today. However, while I was sitting here listening to Honourable colleagues' speeches, I heard an Honourable colleague ask why we were always dwelling on the same points. This indeed rings very true. This is also why you would find that I have fallen asleep sometimes, because as soon as I see an Honourable colleague rise to speak, I already know what is going to say. Of course, when I rise to speak, Honourable colleagues also know what I am going to say. Therefore, even if you all leave the Chamber, I would not mind, or you can take a nap like me to rest and build up strength.

President, just now, I heard Mr WONG Yuk-man talk about Mr James TIEN and Mr Michael TIEN. This reminded me of the fact that this is the fourth time I am elected a Legislative Council Member. In the last three terms, Mr 12408 LEGISLATIVE COUNCIL ─ 23 May 2013

WONG Yuk-man and his wife were my supporters. Although he does not support functional constituencies, he thought that since they were in existence and I had been doing quite a good job as a Member, he supported me. Unfortunately, when I was elected for the third time, his wife was no longer engaged in this industry. I will not talk on her behalf about the reasons for this but it is true that when she wound up her business, as a matter of coincidence, the minimum wage had just been introduced for a short time.

An Honourable colleague also talked about high rents and high wages just now. Mr LEUNG Kwok-hung is not in the Chamber now. I have to repeat that insofar as the catering industry is concerned, of course, the expenses in wages are certainly higher than the rent: 30% of the turnover is used to pay wages, and 10% to 12% to pay rent. In that case, can Members tell me which is more costly? Of course, everything is just as costly and I hope that after I have poured out my grievances, there is still time for me to make some general comments and talk about what course of action we should take.

When it comes to the minimum wage, Mr WONG Yuk-man said again just now that since the increase was just $2, he would not accept it. After hearing his comment, I find it necessary to rise and speak. President, the minimum wage has been increased from $28 to $30, that is, an increase of 7%. Sometimes, I can also see why civil servants said that it was not at all right for their pay to be raised by just a little more than 2%, because even the minimum wage has been raised by 7%.

Perhaps many things are just minor issues but the ripple effect caused by them must not be overlooked and the minimum wage is a case in point. When I talked about this back then, everyone said that I was fooling people and scaremongering, asking what this talk of ripple effect was about. Now, we can all see and the clearest of all is that it is not possible to hire a dish-washing worker even though $32 or $33 is offered. Consequently, all bosses and managers have to do dish-washing. What I find the most ironical is that this time around, while I was conducting my election campaign, everyone told me to go into kitchens. I thought that maybe the cook was the boss or licensee but little did I expect that all the people were sitting on the floor washing dishes. I did not know if I should stand or squat to talk with them. Therefore, all these policies actually have an effect on us. Just now, an Honourable colleague also said that since standard working hours would not be implemented in the near future, what do we have to be afraid of? In fact, any reference to it already LEGISLATIVE COUNCIL ─ 23 May 2013 12409 scares us because coping with the minimum wage is already difficult but now, there is also the talk about implementing standard working hours, so we really dare not imagine what the future bodes.

Since we are talking about the catering industry, I also wish to talk about the labour issue as well. Now, employers have been forced to let employees take several days of paternity leave and next, bosses will be forced to give them additional paid leave. It is also proposed that such leave be extended to 17 days. Each time I met Secretary Matthew CHEUNG, he would say that the rate of increase was very small and that only a very small amount of money was involved. However, when all these sums are added up, they represent a very large amount of money.

President, let me talk about the difficulties of the catering industry. I cannot recall if that was 2002 or 2003. We were running alfresco cafeterias in Sai Kung and Stanley on a trial basis and after gaining some success, we began to run them but it was after more than 10 months that licences could be obtained. Members all know for how long restaurants can be operated. By 2012, the number of approved applications stood at 17 and the number withdrawn stood at 68. Why? Because an application has to clear many hurdles, including those of the Food and Environmental Hygiene Department, Hong Kong Police, Home Affairs Department, Transport Department, Housing Department and the Fire Services Department. Moreover, it is also necessary to consult the owners' corporations of a number of buildings and should they express any misgivings or doubts or are worried about incidents, everything will have to be halted immediately.

Just now, Members talked about rents. In fact, I have also proposed that the Government apply bold thinking by providing additional commercial venues, be they shopping arcades, markets or bazaars, at some suitable locations for the operation of small businesses, but the Government has not done so.

President, what the Honourable colleagues returned by geographical constituencies like to criticize the most is the Liquor Licensing Board (LLB). Some Honourable colleagues said just now that the bar operated by Mr Vincent FANG can be moved upstairs but the licensing conditions of the LLB have become increasingly stringent, so even upstairs bars are being driven into a dead end. Recently, there was a case in which the LLB still refused to issue a licence 12410 LEGISLATIVE COUNCIL ─ 23 May 2013 despite the absence of objection from the police and an appeal was lodged not long ago. In the face of such a situation, what can be done?

Today, the Secretary for Environment is not present. The Environment Bureau ― each time, it always targets me. I became acquainted with Yuk-man in 1994 or 1995. At that time, over 80% of the trade effluent surcharge was paid by us, so how can this be justified? Now, it is said that a levy has to be imposed on bottles and later, food waste will also follow suit and all these levies will be imposed on us. President, at present, water, electricity and gas bills eat up 10% of the overall revenue in the catering industry, so increasingly, they are no longer simple matters. It is even worse with regard to employees' compensation insurance. The policy requires us to take them out but we cannot. Even if we can, we have to pay premiums that are many times higher. We know that the police have established a team to investigate insurance scams and although there are only a few cases, the investigations did not yield any outcome. Of course, perhaps our sector has to bear some responsibility, too.

When it comes to high food prices, the high prices of chickens is the making of the former Secretary for Food and Health, Dr York CHOW. At present, transport costs are high and the exchange rate of Hong Kong dollar against Renminbi is low, but we still have to buy and import goods from the Mainland, so how possibly can they not be expensive?

President, there are only some 20 seconds left in my speaking time. Since I have to set an example, I have no choice but to continue to operate my business but I fully support the industry in having such great courage to continue with its operation. Workers cannot be hired in Hong Kong, but the only thing that the Government has done is to have misgivings and refrain from importing workers. Given the high rents, high wages and high cost of food, how can business be operated?

President, I so submit.

DR HELENA WONG (in Cantonese): First of all, I would like to respond to the amendment proposed by Mr Michael TIEN. In terms of the wording of the motion, the Democratic Party considers Mr Michael TIEN's amendment acceptable because it urges the Government to "ensure employees not only LEGISLATIVE COUNCIL ─ 23 May 2013 12411 having reasonable protection for their rights and interests but also fully recognizing the impacts of various labour policies and measures (such as reviewing the minimum wage level and conducting studies on the regulation of working hours and the right to collective bargaining, and so on) on the business environment of small and medium enterprises (SMEs), in an endeavour to achieving mutual understanding and a win-win situation for both sides, with Hong Kong's economy being also developed in a consistently rapid way". We consider the motion acceptable according to our understanding of its wording. But regrettably, from what I heard Mr Michael TIEN say in his speech earlier on, I found that he appeared to have backed off a bit as he was somewhat inclined to questioning standard working hours, minimum wage, the right to collective bargaining, and so on. The Democratic Party certainly hopes that Mr TIEN can seriously try to understand the positive effects of these policies on the economic development of Hong Kong, especially in achieving a win-win situation for employers and employees.

Today, I have heard a lot of discourse on promoting economic development and maintaining a business-friendly environment in Hong Kong. Many Members mentioned that the biggest difficulty faced by SMEs is the high rental, which has substantially increased their operating cost. Besides, some Members mentioned the issue of labour rights. We do support the views of Mr IP Kin-yuen who considered it necessary to invest in the training of talents and education, in order to enhance the quality of the workforce as a whole and facilitate sustainable economic development to the benefit of the Hong Kong economy. However, I wish to discuss this issue from the angle of women.

If we neglect the need to provide training to women and increase the participation of the female workforce in Hong Kong, it would be very difficult for us to expect further development of the Hong Kong economy. Increasing women's economic participation can facilitate the development of the economy more rapidly and in a more equitable manner and create more business opportunities. Besides, the competitiveness of enterprises and Hong Kong economy as a whole can be strengthened by developing creative thinking in women and utilizing Hong Kong's manpower resources more effectively. For these reasons, we should enable more women to participate in economic activities. This will be conducive to promoting economic development and prosperity in Hong Kong and also a very important investment to make for the future of Hong Kong.

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Women's participation in various economic aspects, including their participation in policymaking and governance, will bring a lot of benefits to the sustainable development of the economy. President, when we look at the statistics on the labour force participation rate in Hong Kong, we will see that there is still a gap of nearly 20% in the labour force participation rate between woman and men. The labour force participation rate of women gradually increased from 45.6% in 1998 to 48.4% in 2010, but the labour force participation rate of men increased to 68.6% in 2010. If we also take into account the age of women, we will find that there is not a significant gap between both genders in their labour force participation rates after their graduation from university. Then, when does the gap begin to widen?

Broadly speaking, we can see that the number of working women gradually declines after they reach the age of 30. I believe Members will all understand that this is because some women stop working after they get married. Nowadays, the marriage age of both men and women has risen continuously. This has certainly led to the problem of women giving births later and later in age. When people get married in their 20s or 30s and have children a year or two later, women will then face a great problem and that is, they must choose whether to work or to take care of their family. In Hong Kong, we do not see that the Government has very seriously addressed the internal struggles that women are undergoing. Why do women have to choose between work and family? Can they cope with both?

Many middle-class families in Hong Kong do not have family members to look after their children for them and so, they have to hire foreign domestic helpers to take care of their children or elderly members of the family. However, many grass-roots women may not have the means to hire foreign domestic helpers. Who can help share these women's responsibilities of looking after their family members or children, so that they can go out to work and join the labour force and contribute their talents? I very much hope that while the Government and Members are concerned about the future of the economy or keep paying attention to whether or not they can hire enough workers, they can consider afresh how best to increase the labour force participation rate of women, particularly having regard to the right to work of women who are in their childbearing age or who have got children. I hope that the policy on child care services can be comprehensively reviewed, and in respect of the family-friendly policy, I hope that the industrial and commercial sectors as well as the employers can make flexible arrangements, so that their employees, be they men or women, LEGISLATIVE COUNCIL ─ 23 May 2013 12413 do not have to worry about their family when they are at work. In this connection, is it possible to allow flexibility in the working hours of employees?

We understand that we will soon have another opportunity to further debate the issue of a family-friendly policy. Today, I very much wish to point out that while efforts are made to take forward economic development, we must not neglect the fact that many women are willing to join the employment market. Can we provide training to them and help them cope with their pressure in taking care of their children and family members, so that they can strike a balance between work and family?

Thank you, President.

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

MR ABRAHAM SHEK (in Cantonese): President, I speak in support of the motion proposed by Mr Jeffrey LAM today. But there is one point that I do not quite understand. From one angle, we may think that the existing business environment needs to be maintained, right? But if we look at it from another angle, we may also ask: If the existing business environment should be maintained, with regard to the many conflicts in society, such as the deep-rooted conflicts, conflicts in relation to the wealth gap, conflicts in relation to housing, conflicts in relation to small and medium enterprises or the SMEs, and so on, will these conflicts be reduced? From the angle of resolving conflicts, it seems that the existing business environment should not be maintained. But from another angle, we have noticed that over the past six years, our fiscal surplus has kept on increasing, and we will then ask: Does it show that the existing business environment and policies are basically correct? This leads to the third question. The third question is: Are we just sitting on our laurels? In other words, is it only because of the policies left behind by the Hong Kong-British era that we can have such an abundant reserve? A number of Members have made some very good points earlier on. Take Mr Albert HO's views as an example. Apart from his criticisms of the real estate developers, I actually share his views in other aspects. On the education front, for instance, the policy officials seem to be lacking sincerity in their work. If officials are not sincere in their work, the desired results will not be achieved no matter how good a policy is, not to 12414 LEGISLATIVE COUNCIL ─ 23 May 2013 mention the fact that some of the policies are indeed very bad. I will review these problems from the several angles that I have just stated.

There are two problems. Many Members (especially Members on the opposite side) have said that all the problems would be resolved after universal suffrage is implemented and that all the problems would be resolved after the real estate developers are eliminated. May I ask if universal suffrage can solve all the problems? We will be able to tell in 2017 whether or not these problems can be resolved. In fact, the problems may become even bigger at that time. But can these problems be resolved when there is no property developer? I would like colleagues to review the part of history in 1967 or in the wake of the financial turmoil in 1997. After the financial turmoil in 1997, how many people were made to face a depreciation of all their assets as a result of the bad policy of "85 000 flats"? The unemployment rate back then was as high as 18%. Why? Because there was no transfer of wealth and nobody was making investments in Hong Kong. The people were jobless and government policies were unable to take forward economic development. This precisely shows that government policies are the source of the biggest problem. Why is Hong Kong facing so many problems now? Unlike some Members have said, it is not because Hong Kong has turned into a welfare society that Hong Kong is going downhill. Welfarism is not going to take place in Hong Kong because Hong Kong is a capitalist society. A capitalist society upholds only one word, which is "capital", President. Our concern is how to attract the inflow of capital in order for wealth to be created in Hong Kong and then flow on continuously for us to build more public housing units, shorten the waiting time for hospital services, provide an ideal living environment for the elderly and ensure that ordinary citizens who unfortunately fall into the safety net can still be allocated public housing units. All these are examples of how wealth can be transferred through the systems of Hong Kong to various strata in society.

After the reunification, we have faced a lot of problems, and as Mr Albert HO said, education has been one of these problems. Mr IP has also said that the education policy is changing all the time and lacks focus and as a result, many members of the education sector do not know how they should teach. It is particularly noteworthy that it takes time for the education system to train talents. This is why we see today that as we do not have the relevant talents, we are facing the problem that even though there are job vacancies, they are not filled by suitable candidates. Or I should put it this way: It is not the case that we do not have talents, just that we do not have enough talents. Let me cite a simple LEGISLATIVE COUNCIL ─ 23 May 2013 12415 example. Many graduates who have obtained an undergraduate degree in law under the current education system cannot become a lawyer because they are rejected by the PCLL programmes in universities. These students have spent several hundred thousand dollars and while talents have been trained, the Government nevertheless reduced its subsidy for PCLL places, whereas the universities are glad to help guard the gate for the legal profession by barring the entry of new blood into the profession. Is this fair? Is this education system satisfactory? No.

In respect of the real estate sector, many people have pointed their accusing fingers at real estate developers because it is easiest to stand up and chide them. But please do not be so naïve. President, how can real estate developers have the ability to monopolize land? Real estate developers have to buy land from the Government, whereas the Government upholds the high land price policy from its own angle. When the Government sells land at high premiums, the price of "flour" will be high and the price of "bread" will naturally rise. I have explained this point for many times. Why do you not criticize the Government's policies but keep on accusing real estate developers of creating social conflicts and class struggles? Will this do any good to Hong Kong? The answer is in the negative. You must review the situation from an overall perspective and see the facts clearly. The biggest problem actually lies in the high land price policy of the Government. Take the recent situation as an example. Has the Government sold land at less expensive prices and set restrictions on the land premium in the sale of land? This makes me think of the Home Ownership Scheme (HOS). Even in the case of HOS flats, the selling prices set out by the Government are still as high as over $6,000 per square foot. President, what kind of policy is this?

Moreover, the Government has not implemented a sunshine policy at all in respect of land or other areas. It can implement a policy today but roll out an opposite one tomorrow. This is risk policy, so to speak. In the past, people who came to Hong Kong for investment could leave out "government risk" in their consideration, which means the risk that comes from changes in government policies. This is why many foreigners came to Hong Kong for investment. But now, government policies are changing from day to day, making it impossible for people to evaluate the risk. President, there is something very wrong about this Government. President, the biggest problem is that the Government has no sincerity, no fortitude and no ability to create new horizons for Hong Kong.

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

MR PAUL TSE (in Cantonese): President, I will not take real estate developers to task. President, earlier on I heard many colleagues express different views from various angles and in the light of the situation in various industries. Some of the views are very good but some are clichés that we have long understood, and it is actually a waste of time to raise them here. They include strengthening education or ameliorating various problems in relation to education. In fact, we have long been aware of these problems.

Having said that, I would like to talk about one of these angles. During the British-Hong Kong era, Hong Kong had all along upheld the policy of positive non-intervention which was a policy of "small government". After 1997, due to the transfer of sovereignty, or probably because some of those in the new Government had a greater impetus to do more ― But in any case, the point that I wish to make is: Even though we may not be able to achieve new breakthroughs and even though we are unable to actively provide support to certain industries, businesses or various industries, just as Singapore or certain countries do, at least we must not damage the original foundation and the relatively fair mechanism too hastily, too radically and wantonly.

President, Mr Abraham SHEK presented the views of the real estate sector just now, and he has made some very good points. Certainly, we are all affected by an unreasonable hike in property prices and land prices. Unlike Mr Ronny TONG who charges expensive fees and can therefore cope with a rent increase by taking up one or two cases, we can only make a meagre profit from handling cases one by one and providing services at packaged fees.

But anyway, some policies introduced by the Government recently have indeed dealt a heavy blow to many industries out of the blue. Even though we may not be too happy to see some major real estate developers reaping exorbitant profits and we may even think that they do not deserve our sympathy (I am sorry, but this should not be taken as criticism), we must understand that real estate developers are indeed affected. Not only developers but also the real estate agency sector which acts as the middleman as well as the related sectors and even the law firms or the renovation industry are all affected. This will lead to a series of problems. Therefore, even if no breakthrough is achieved, such as the Government not being able to identify a new direction for the four major pillars LEGISLATIVE COUNCIL ─ 23 May 2013 12417 and the six priority industries or the Government failing to deliver or only making empty talk as it is unable to do what it truly wishes to do, at least the Government must not roll out policies so quickly and rashly, prescribing solutions in a frivolous manner.

It is certainly a good thing for "first-hand residential properties" to be brought under regulation. But the problem is that many reforms have been introduced in tandem, including the Special Stamp Duty, thus making it difficult for many industries to cope with these measures. This is done not only to the real estate sector, for it also involves other long proven principles which we do not dare to compromise easily, such as the rule of imposing no export restriction. The rule of imposing no export restriction has all along been a cornerstone of the success of Hong Kong but now, it has been put out of our minds because of a temporary run on infant formula. All these are advantages that Hong Kong has accumulated over the years and they are crucial to Hong Kong. Thanks to these established advantages of ours, we were fortunate enough to command strong support from foreign investors over the years because they thought that Hong Kong had a stable business environment. However, we have made no progress in recent years and worse still, we have kept on ruining our established advantages in different ways. For this reason, many people and even foreign investors have started to feel worried, not knowing what Hong Kong is doing now.

President, there is another problem which can be noted particularly with the current-term Government. As the Government wishes to expeditiously address the problems besetting it, including the shortage of land, shortage of public housing, grievances of the people, and so on, its policies and administration have often aroused doubts about whether the Government has changed the rules of the game much too rashly. We must understand that any reform should not be implemented too hastily, or else we may as well start a revolution or force the landlords to "kneel on broken glass". Certainly, we totally disapprove of overly radical words and deeds, but the problem is that so long as we have such overly radical mindset, it is still possible to indirectly lead to incessant unrest and restless reactions in society and cause psychological impact and pressure to the public. When it comes to the business environment, a stable environment is the most basic condition. If there is not even a stable environment, nothing would need to be done and no measure would be necessary. I do not know how other colleagues feel, but as a citizen who has lived in Hong Kong for many years, I 12418 LEGISLATIVE COUNCIL ─ 23 May 2013 feel that Hong Kong has become more and more unsuitable for living and more and more agitated while being overwhelmed by an increasing sense of uneasiness.

It is more pathetic that some people have advocated the Occupy Central movement recently. Many people think that the Occupy Central movement will last only a couple of days and will not bring about serious consequences except some effects on the economy. But let us not forget that discussions on this movement alone have already shattered the stability of Hong Kong at large, causing anxieties among members of the community psychologically and mentally. If these discussions continue, and assuming the movement will eventually come into being, the pressure and impact to be produced as well as the conflicts continuously fanned and precipitated by the people would be dealing the most deadly blow to the business environment in Hong Kong.

Real estate hegemony may not finish off Hong Kong; the high land price policy may not finish off Hong Kong; and the ups and downs on various fronts may not finish off Hong Kong. But if we lose the most basic sense of stability psychologically and feel that there is no way for Hong Kong society to move forward, and when our participation cannot produce positive effects and we feel that whatever we do seems to be useless, such sense of helplessness and anger, and this feeling of powerlessness despite an eagerness to get things done will result in continued deterioration of the business environment in Hong Kong. This deterioration would not only take toll on the people of Hong Kong. Even foreign investors would be looking at Hong Kong and asking what exactly Hong Kong is doing. Thank you, President.

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

(No Member indicated a wish to speak)

PRESIDENT (in Cantonese): Mr Jeffrey LAM, you may now speak on the amendments. The time limit is five minutes.

MR JEFFREY LAM (in Cantonese): President, first of all, I thank the six Members for proposing amendments to my motion. They have put forward some very good proposals. I agree to some of them but take exception to some LEGISLATIVE COUNCIL ─ 23 May 2013 12419 others. That said, I think the Government should take some of the views seriously, but as for the more controversial views which are not quite consistent with the spirit of my original motion, I have reservations about them.

First, I would like to talk about Mr TANG Ka-piu's amendment. He mentioned the need to make good use of the local labour force and avoid labour importation. I agree that it is important to ensure the employment of local workers, and I hope that Hong Kong people can have good employment opportunities, so as to meet the demand for jobs among local workers. However, let us look back on the last two years when the unemployment rate remained on the low side in Hong Kong. This is exactly because the industrial and commercial sectors, especially the small and medium enterprises (SMEs), have provided sufficient job opportunities for Hong Kong people. We can see that there is still a great shortage of workers in the construction, catering and nursing sectors. What should we do to address the shortage of manpower in these sectors? Regarding the practitioners in these sectors, it is not the case that they can take up a job any time and know what to do right away, for they need to undergo training. We understand that many enterprises provide training to their employees but despite the provision of training, these industries are still experiencing a shortage of manpower. Therefore, on the premise of not affecting the employment of local workers, I think the Government should expeditiously consider importing a suitable number of foreign workers to help address the shortage of workers faced by the SMEs and this will also be conducive to the development of the Hong Kong economy.

The setting of standard working hours is particularly an issue of concern to the industrial and commercial sectors, especially the SMEs, and has remained highly controversial so far. They generally hold the view that this policy will affect the business environment in Hong Kong. Before a consensus is reached in society and the study yield results, we will not support this policy.

As regards Mr Michael TIEN's amendment which urges the Government to mitigate the labour relations and strike a balance between the interests of employers and employees by all means, is it possible for the Government to accomplish it? I agree with Mr TIEN's view that this is easier said than done and it is quite a tall task. As in the dock workers' strike recently, the Government's role is rather embarrassing, in that it cannot please both sides. I think the Government should learn a lesson and must not listen to the side with a louder voice when handling similar cases in future.

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Besides, Mr WU Chi-wai proposed in his amendment the lifting of the exemption of statutory bodies from the Competition Ordinance. I have reservations about this. It is because during the deliberations on the Competition Bill, the granting of exemption to certain statutory bodies was a consensus reached by us after repeated discussions and consultation for a long period of time. Before the Competition Ordinance is fully brought into effect, I think it may not be appropriate to make any amendment to the existing provisions of the Ordinance.

The amendments of Mr IP Kin-yuen, Mr YIU Si-wing and Mr Charles Peter MOK have put forward focused and feasible proposals in respect of the training of talents, application of information technology, publicity and promotional activities, the development of markets and the use of resources. I think these proposals are desirable and merit support. I hope that the Government, after listening to these views, will implement the good proposals by all means. I also hope that the representatives of various professions and industries will put forward more opinions and provide more platforms for exchange of views, so that the useful proposals can be applied to the daily operation of the SMEs. I think this will be conducive to the commercial viability and operation of the SMEs and also to the economic development of Hong Kong.

President, I so submit.

SECRETARY FOR COMMERCE AND ECONOMIC DEVELOPMENT (in Cantonese): President, I am grateful to the 34 Members for their valuable views today. As the contents of Members' speeches are rich and the scope of issues is very broad, please allow me to take up some of Members' time to respond to the key issues raised by Members in the debate.

Before coming to the response, I would like to talk about my feelings after listening to this four-and-a-half hour debate. As pointed out by Mr Jeffrey LAM, the suggestions and views of Members who have spoken today are most controversial. While listening to the speeches by Members on the motion "Maintaining a business-friendly environment in Hong Kong", I got the feeling that different stakeholders were pointing an accusing finger at each other and putting the blame on others. They have lots of opinions on the business sector, labour policy or the real estate sector. Certainly, some Members' views were LEGISLATIVE COUNCIL ─ 23 May 2013 12421 directed at the Government. They pointed an accusing finger at government policies that need improvement or those blind spots. We humbly accept Members' advice and are prepared to listen to their valuable comments. Some Members criticized that there is inadequacy in the work of the Government. For example, Dr Kenneth CHAN, when he spoke earlier, looked at me and asked whether I could put forth some new policies as I had explained the government policies in my reply to Mr Andrew LEUNG's question yesterday. I believe Dr CHAN will understand that the Government cannot propose a set of new policies today after formulating another set the day before without careful consideration. We will not do so to gratify Dr CHAN's wish to hear new policies.

As the Secretary for Commerce and Economic Development, I certainly will not say that this is others' problem. My finger is always pointing at myself because this is my unshirkable responsibility. Today's topic is: to urge the Government to adopt proactive policy measures to maintain a business-friendly environment in Hong Kong. Members can see that the Government certainly has the responsibility in this regard. In my opinion, we should promote a business-friendly environment in Hong Kong, not only maintaining it.

President, I will not point an accusing finger at others. Today, I wish to point out one thing: I hope Members will put their hands out and join hands together instead of raising one finger. We should adopt such an attitude towards not only this issue. Rather, all sectors, including all stakeholders I mentioned just now, should join hands and co-operate with each other in respect of all debate issues so that we can shoulder common responsibility for the long-term interests of Hong Kong and work together in the same direction for creating a business-friendly environment.

President, please let me respond to various policies involved in today's subject.

First, on assisting small and medium enterprises (SMEs), as I mentioned in the opening speech, the Government attaches great importance to the development of SMEs and has been committed to providing comprehensive support for SMEs in order to enhance their competitiveness.

On promoting Hong Kong brands in overseas countries, Mr Tony TSE and other Members have suggested that our support for enterprises and the industry 12422 LEGISLATIVE COUNCIL ─ 23 May 2013 should be enhanced. In this connection, the SAR Government has all along provided such services through the Hong Kong Trade Development Council (HKTDC) for Hong Kong enterprises, especially SMEs, including exhibitions, trade fairs and business matching activities, in order to support exchanges and co-operation between Hong Kong businesses and Mainland and overseas enterprises.

To assist Hong Kong enterprises in capturing the enormous opportunities arising from the National 12th Five-Year Plan, we will continue to implement the dedicated fund of $1 billion launched at the end of June 2012 in order to provide funding support for Hong Kong enterprises and non-profit-distributing organizations such as trade associations to assist the enterprises in developing brands, upgrading and restructuring operations, or promoting domestic sales in the Mainland so as to enhance their competitiveness and boost their business development in the Mainland. Apart from the dedicated fund, non-profit-distributing organizations can also apply for funding support from the SME Development Fund administered by the Trade and Industry Department (TID) in order to launch projects, including organizing marketing activities, for enhancing the competitiveness of the industry as a whole or individual sectors.

The HKTDC will gradually set up more Design Galleries in more Mainland cities including Qingdao and Chengdu. In addition, "shops-in-shop" inside department stores on the Mainland will be set up to provide sales platforms for Hong Kong enterprises, particularly SMEs, so as to test the market and build up brand awareness.

In addition, our offices in the Mainland will continue to collaborate with trade associations and other organizations to organize "Hong Kong Week" promotional events in the Mainland in order to promote Hong Kong products and services, with a view to assisting Hong Kong businesses in exploring the domestic sales market. The Hong Kong Economic and Trade Office in Guangdong organized the Xiamen Fujian Hong Kong Week 2013 in Xiamen jointly with the local government and several industrial and commercial organizations at the end of April to early May. All events were well received.

In respect of providing support to SMEs in making use of information technology, Mr YIU Si-wing and Ir Dr LO Wai-kwok are very concerned about the support policy for the application of information technology by SMEs. We fully agree that the effective use of information and communications technology LEGISLATIVE COUNCIL ─ 23 May 2013 12423 by SMEs can greatly enhance their operational efficiency and competitiveness, and help the continuous expansion of their business, thereby promoting the development of the information and communications technology industry and Hong Kong's economic growth. Therefore, from 2004 onwards, the Government has gradually set aside around $19 million to support 16 industries and launch 22 Sector-specific Programme (SSP) and IT Training Programme for SMEs in order to promote information and communications technology application among SMEs, so as to enhance their operational efficiency. So far, we have successfully accomplished 21 projects, benefiting about 17 000 SMEs' personnel. It is expected that the remaining projects will be completed in early 2014.

We have also earmarked $3 million in 2013-2014 for a new round of SSP to sponsor local non-profit-making organizations to develop software applications or websites for individual sectors. Just now, Mr YIU Si-wing also indicated his interest in this aspect. Our intention is to enhance the operational efficiency and business opportunities of SMEs. We are working with the Hong Kong Productivity Council to explore ways to assist SMEs in the adoption of cloud computing services in order to enhance their operational efficiency, productivity and customer services.

Regarding the training of talents in SMEs, the SME Development Fund administered by the TID may provide funding for projects which can effectively enhance the competitiveness of SMEs, including a variety of training courses. In addition, the Government has also implemented various measures relating to the training of human resources which can help enhance the professional skills and competitiveness of the workforce, including SMEs' employees. For example, the Vocational Training Council has launched the apprenticeship scheme and trainees scheme. The trainees scheme, which is geared mainly towards the service industries, will provide systematic and longer-term in-service training to young people who have been employed by relevant industries. By adopting a market-driven and employment-oriented approach, the Employees Retraining Board offers a diversified range of training courses covering various sectors for all eligible employees in Hong Kong aged 15 or above and with educational attainment of sub-degree or below.

Just now, a Member mentioned that we should support technological entrepreneurship companies. In this connection, we have, through the Small Entrepreneur Research Assistance Programme under the Innovation and 12424 LEGISLATIVE COUNCIL ─ 23 May 2013

Technology Fund, provided funding support for technology entrepreneurs. The matching grants capped at $6 million aim at assisting them in carrying out research and development (R&D) of innovative technology. As of the end of March 2013, more than 360 projects have been approved, providing a funding of $410 million. In addition, the Hong Kong Science and Technology Parks Corporation in early 2010 took the lead to set up the Hong Kong Business Angel Network Limited, which would serve as a bridge between the R&D teams and investors. As of the end of December 2012, more than 10 R&D teams have benefitted, involving funding of more than $60 million from angel investment funds.

Government procurement is based on the principles of fair and open competition, value for money, transparency and public accountability. In the evaluation of tenders, bureaux and departments will consider not only the bid price or adopt the practice of "the lowest bidder wins", as Mr Charles Peter MOK said earlier. Rather, the tender will also be assessed on the basis of the specifications and terms set out in the tender document and whether the bidder has the ability to perform the contract.

The existing procurement system of the Government affords sufficient flexibility for bureaux/departments to make corresponding procurement arrangements for achieving their policy objectives. For example, in order to encourage SMEs to bid for the Government's information technology projects, the Government has provided more information about the projects to the market and where feasible, as suggested by Ir Dr LO Wai-kwok, large-scale projects will be divided into several small programmes to facilitate SMEs' participation. Furthermore, the requirement of performance bonds will be lowered or waived to alleviate the financial burden of SMEs.

In fact, some information technology companies which were previously SMEs have developed into sizable enterprises after having actively participated in Government information technology projects.

When mentioning licence fees, Mr YIU Si-wing proposed that licence fees should be reduced. In fact, the departments concerned will review the procedures on a regular basis, and lower or control as far as possible the cost of licensing services by introducing measures that can enhance efficiency. Any savings from the service costs through efficiency enhancement will be reflected in the fee adjustment proposals.

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Regarding the rents of commercial units, a total of 11 Members have expressed their views in this regard. I understand that both Members and enterprises are very concerned about the problem of rising rents. In fact, despite the unstable external economic environment, the Hong Kong economy has managed to maintain positive growth in the past few years. Coupled with the buoyant tourism industry, the demand for office and retail space remains strong.

To meet the long-term economic development of Hong Kong, the Government will strive to increase the supply of commercial land. The Financial Secretary in his budget has outlined a series of measures, including the Land Sale Programme for the current financial year which will provide nine commercial/business sites and one hotel site, amounting to a total of 330 000 square metres of gross floor area. The Government will endeavour to increase the commercial land in various districts for the further development of different economic activities.

From the macro perspective, we will continue to maintain Hong Kong's business-friendly environment to facilitate its thriving business sector and enhance its international competitiveness.

On facilitating business operation, the Government will continue to work closely with the business sector and other stakeholders, and join efforts with the Business Facilitation Advisory Committee and its Task Forces to examine ways to optimize the regulation of the business environment and implement relevant measures and related programmes, such as "Be the Smart Regulator" Programme, to improve the efficiency, transparency of business licensing services and facilitation of business operation, with a view to further improving Hong Kong's business licensing process and environment as a whole.

In respect of competition law, the Legislative Council passed the Competition Ordinance in June 2012. The purpose of enacting the Ordinance is to regulate possible anti-competitive behaviour in various industries, and promote sustainable and fair competition, enhance efficiency of market economy and promote free trade in order to achieve a win-win situation for the business sector and consumers.

The Competition Ordinance will be implemented in phases. The Government, the Judiciary and the Competition Commission (the Commission) are making proper preparations for the implementation of various parts of the 12426 LEGISLATIVE COUNCIL ─ 23 May 2013

Ordinance. The major prohibitions will come into effect only after the completion of the relevant preparatory work. The public and the business sector can gain some understanding of the new legislation during the period and make necessary adjustments.

The Commission, as an independent statutory body established under the Competition Ordinance, will play an important role in the implementation of the Ordinance. In addition to investigating anti-competitive behaviour and enforcement of provisions of the Ordinance, the Commission may also advise the Government on competition issues inside and outside Hong Kong as well as conducting market research on matters affecting competition in the market of Hong Kong. Mr WU Chi-wai mentioned issues relating to resources. To ensure that the Commission has sufficient resources for its operation, the authorities have earmarked $82 million in 2013-2014 for the establishment and operation of the Commission.

As regards the exemption of statutory bodies from the Ordinance, the Government has pointed out time and again that the arrangement is intended to ensure that essential public services provided by statutory bodies or implementation of public policies will not be hindered due to the enactment of the Ordinance. Although the statutory bodies are exempted from the regulation of the Ordinance, they are subject to the principle of competition therein.

The Government believes that the enactment of the Ordinance is beneficial to the long-term development of Hong Kong economy as a whole and will play a positive role in maintaining the business-friendly environment of Hong Kong.

Regarding the free flow of information, I heard just now the advice of Mr Charles Peter MOK on opening up data. We understand that the free flow of information can inject impetus into our economic development. Thus, the Government has actively allowed free access to public sector information in recent years. The Data.One portal, which was launched in 2011, allows free download and utilization of public sector information, including the real-time traffic data, weather information, and so on, by the public. The public can access such information freely and free of charge.

For the convenience of the public, we are actively and gradually opening up new datasets to facilitate various sectors in the community in developing more innovative products and services by utilizing these data. To promote the wider LEGISLATIVE COUNCIL ─ 23 May 2013 12427 use of public sector information by society, the Office of the Government Chief Information Officer organized training courses and a mobile applications contest more than a year ago. The response was overwhelming. It is now organizing another round of seminars and competitions to promote information technology start-ups and development of products by tertiary students making use of public sector information.

The sustainable development of Hong Kong must be complemented by various factors. Members have mentioned proposals on infrastructure, education and labour policy to which I would like to make a comprehensive response here.

Turning to the Container Terminal 10, the port plays an important role in our freight, economy and employment. The SAR Government's policy objective is to provide port facilities and related infrastructure in a timely manner so as to maintain the competitiveness of our port.

The authorities are now conducting preliminary feasibility studies on the development of Container Terminal 10 at Southwest Tsing Yi and the Study on the Strategic Development Plan for Hong Kong Port 2030. Both of these studies are expected to be completed within the next couple of months. In the light of the study results, the global and local economic conditions, the performance of the port industry, as well as the views of stakeholders, the authorities will decide whether it is necessary to construct the Container Terminal 10 and the mode of operation if it is constructed.

On the development of air services, the Government has been actively seeking to expand bilateral air services arrangements between Hong Kong and our aviation partners in order to create sustainable growth and development opportunities for the aviation industry.

We have signed aviation agreements with 61 aviation partners and fully liberalized the bilateral third and fourth traffic rights with 25 aviation partners, allowing the aviation industry to increase passenger and cargo services at any time in response to the market needs. We have also exchanged the fifth traffic rights with our aviation partners in a fair and equitable manner for the overall interest of Hong Kong.

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We will continue to engage in negotiations and reviews of traffic rights with our aviation partners in a timely manner. On the principle of mutual benefit, we will expand bilateral aviation capacity to meet the air service needs of the aviation industry, passengers, air freight industry and other members of the community.

The Government launched the Work Incentive Transport Subsidy (WITS) Scheme in October 2011 with a view to relieving the burden of travelling expenses on low-income workers in travelling to and from work, including those who have to work across districts, and encouraging them to stay in employment. The Government has also deliberately completed the mid-term review of the WITS Scheme ahead of schedule. As the enhancement measures have taken effect from the claim month of January, applicants may choose to apply for the subsidy on an individual or household basis (commonly known as the dual-track approach), while the income and asset limits have also been relaxed. These measures have enhanced the flexibility and openness of the WITS Scheme so that more grass-roots workers can benefit and the burden of travelling expenses can be alleviated. In doing so, it will encourage them to seek employment or stay in employment

I know that Members are very concerned about the minimum wage. At present, the lower limit of wages for the statutory minimum wage rate is set with the purpose of preventing excessively low wages, while ensuring that this will not do serious damage to the flexibility of our labour market, economic development and competitiveness, and preventing any significant adverse effects on the employment opportunities of vulnerable workers. In reviewing the statutory minimum wage level, the Minimum Wage Commission has fully considered and balanced various factors, including assessing the impact of the statutory minimum wage on SMEs. The statutory minimum hourly rate has increased from $28 to $30 with effect from 1 May this year. The Government will continue to monitor the operation of the statutory minimum wage, including the impact on the business environment of SMEs.

I have also noted the views of many Members on the working hours policy. On the working hours policy, the Government will carefully consider the long-term interests of Hong Kong as a whole. On the premise of striking a reasonable balance between the interests of employers and employees, the Government will improve employees' rights and benefits in a progressive manner. On the issue of working hours policy, the Chief Executive appointed the Standard LEGISLATIVE COUNCIL ─ 23 May 2013 12429

Working Hours Committee in April this year, comprising representatives of employers, employees, academia, the community and the Government. The Committee held its first meeting on 7 May. We believe this Committee, as a platform, will help promote informed and in-depth discussions on this complex subject in society so as to forge a consensus and determine the way forward.

Quite a number of Members have also expressed concerns about manpower, talents and training in their speeches earlier. On the supply of human resources, we must have adequate and suitable human resources to ensure the long-term development of Hong Kong economy. To this end, the Government will compile projections on Hong Kong labour force on a regular basis with a view to providing information on the long-term labour supply in Hong Kong. It will also conduct manpower projections from time to time in order to project Hong Kong's medium-term human resources supply and demand from the macro perspective.

By referring to the projections on Hong Kong's labour force and human resources, as well as other data of the relevant industries, the bureaux and departments concerned may consider whether it is necessary to conduct further studies on the manpower supply of industries under their portfolios so as to examine and devise appropriate measures to meet the industries' development needs. Under the leadership of the Commerce and Economic Development Bureau, the Task Force on Manpower Development of the Retail Industry is conducting a view of the industry's human resources situation.

Many Members have also mentioned that the resource input into education should be enhanced. The Government has all along invested heavily in education to nurture talents and promote social mobility so that Hong Kong can achieve sustained development. According to the Education Bureau, the total government funding for education in 2013-2014 is $76.9 billion, of which the recurrent expenditure amounts to $63 billion, which is more than one fifth of the recurrent government expenditure. Education is also the biggest expenditure area amongst various policy areas.

To provide 15-year free education in practical terms and better quality of kindergarten education is one of the current-term Government's priorities. The Education Bureau has set up an ad hoc committee to review matters related to free kindergarten education and make feasible and practical recommendations. The committee held its first meeting on 24 April. Several working groups will 12430 LEGISLATIVE COUNCIL ─ 23 May 2013 be established under the committee to explore and study in depth specified issues of concern before reporting the findings to the committee.

In enhancing vocational education and training, we offer vocational education and training courses in addition to traditional academic programmes for young people who aspire to joining various trades and industries so that they can acquire a solid foundation.

The Government launched the Qualifications Framework in 2008 to establish an accessible articulation pathway and diversified progression pathways for learners with a view to promoting lifelong learning and enhancing the quality of the local workforce.

We will increase first-year-first-degree places of University Grants Committee (UGC)-funded programmes to 15 000 for each cohort from the 2012-2013 academic year onwards, and senior year degree programme places will be doubled progressively to 8 000 per year. Taking into account the development of the self-financing post-secondary sector, we anticipate that in the next two years, more than one third of the school-age young people will have the opportunities to take degree programmes; together with sub-degree programme places, around 70% of the young people will be taking tertiary education programmes.

In accordance with the existing policy, UGC-funded institutions may admit non-local students to their taught postgraduate programmes up to 20% of the approved UGC-funded student number targets for these programmes. This 20% comprises up to 4% within the UGC-funded number and up to 16% outside the UGC-funded number. As non-local students are primarily admitted through over-enrolment beyond the approved student number targets, they would not constitute direct competition with the local students.

Regarding research programmes, the UGC-funded institutions admit students to their research postgraduate programmes on a merit basis, taking into account students' academic results and research capability, but not their places of origin.

Finally, I would like to briefly respond to Mr WONG Kwok-hing's question about our work relating to the "original grant patent". To introduce the LEGISLATIVE COUNCIL ─ 23 May 2013 12431

"original grant patent" is the general direction of our work. We will actively promote it.

Ir Dr LO Wai-kwok has also enquired whether there is any plan for government reorganization and the setting up of a technology bureau. In response, I would like to say briefly that we really need the support of Members and the Legislative Council in this regard.

President, I am glad to hear Members' views on how the Government can provide support to SMEs and maintain a business-friendly environment. I will convey the specific suggestions made by Members in the debate to the relevant bureaux for consideration. We will continue to listen to all sectors' opinions, and implement measures in a timely manner so as to provide the industry with appropriate support.

I so submit. Thank you, President.

PRESIDENT (in Cantonese): Mr TANG Ka-piu, you may now move your amendment to the motion.

MR TANG KA-PIU (in Cantonese): President, I move that Mr Jeffrey LAM's motion be amended.

Mr TANG Ka-piu moved the following amendment: (Translation)

"To delete "given" after "That," and substitute with "under the broad environment of economic globalization,"; to add "has certain impacts on Hong Kong's economy, and the unemployment rate in Hong Kong has started to rebound; in this connection" after "the global economy"; to add "and make good use of local human resources" after "policy measures"; and to delete "and" after "Hong Kong" and substitute with "; the relevant measures should include: (1) to review the supply of manpower resources in various industries, and devote resources to training the relevant talents, enable local workers to play to their strengths and use what they have learnt and avoid labour importation, and encourage enterprises to employ disadvantaged people (e.g. South Asians, the middle-aged and persons 12432 LEGISLATIVE COUNCIL ─ 23 May 2013

with disabilities), so as to make good use of the local labour force, enabling local employees to share the fruits of economic development and employers to have adequate labour supply, thus creating a win-win situation for employers and workers; (2) to improve the working conditions and environment, e.g. setting standard working hours and standardizing the number of statutory holidays and public holidays, so as to assist enterprises in retaining talents through upgrading the quality of work life for employees; (3) to study the alleviation of the burden of transport expenses on workers working across districts, so that enterprises can recruit sufficient manpower more easily; (4) to reduce rental costs for enterprises, and alleviate their business difficulties; and (5) to"."

PRESIDENT (in Cantonese): I now propose the question to you and that is: That the amendment moved by Mr TANG Ka-piu to Mr Jeffrey LAM's motion, be passed.

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.

(Members raised their hands)

Mr Jeffrey LAM rose to claim a division.

PRESIDENT (in Cantonese): Mr Jeffrey LAM has claimed a division. The division bell will ring for five minutes.

PRESIDENT (in Cantonese): Will Members please proceed to vote.

LEGISLATIVE COUNCIL ─ 23 May 2013 12433

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 Frederick FUNG, Dr Joseph LEE, Dr LEUNG Ka-lau, Mr IP Kwok-him, Mr KWOK Wai-keung, Mr Dennis KWOK, Mr IP Kin-yuen, Mr POON Siu-ping and Mr TANG Ka-piu voted for the amendment.

Mr Abraham SHEK, Mr Tommy CHEUNG, Mr Jeffrey LAM, Mr Andrew LEUNG, Mr NG Leung-sing, Mr Frankie YICK, Mr YIU Si-wing, Mr Martin LIAO, Ir Dr LO Wai-kwok and Mr CHUNG Kwok-pan voted against the amendment.

Mr CHAN Kin-por, Mr MA Fung-kwok, Mr Charles Peter MOK, Mr Kenneth LEUNG and Mr Tony TSE abstained.

Geographical Constituencies:

Mr CHAN Kam-lam, Ms Emily LAU, Mr WONG Kwok-hing, Mr Ronny TONG, Ms Cyd HO, Mr CHAN Hak-kan, Mr WONG Kwok-kin, Mr Alan LEONG, Mr Albert CHAN, Mr WONG Yuk-man, Ms Claudia MO, Mr WU Chi-wai, Mr Gary FAN, Mr CHAN Chi-chuen, Dr Kenneth CHAN, Dr KWOK Ka-ki, Dr Fernando CHEUNG and Dr Helena WONG voted for the amendment.

Dr Priscilla LEUNG, Mrs Regina IP, Mr LEUNG Kwok-hung, Mr Michael TIEN and Mr James TIEN voted against the amendment.

Mr Paul TSE abstained.

THE PRESIDENT, Mr Jasper TSANG, did not cast any vote.

12434 LEGISLATIVE COUNCIL ─ 23 May 2013

THE PRESIDENT announced that among the Members returned by functional constituencies, 26 were present, 11 were in favour of the amendment, 10 against it and five abstained; while among the Members returned by geographical constituencies through direct elections, 25 were present, 18 were in favour of the amendment, five against it and one abstained. 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 on "Maintaining a business-friendly environment in Hong Kong" or any amendments thereto, 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)

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 LEGISLATIVE COUNCIL ─ 23 May 2013 12435 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 on "Maintaining a business-friendly environment in Hong Kong" or any amendments thereto, this Council do proceed to each of such divisions immediately after the division bell has been rung for one minute.

PRESIDENT (in Cantonese): Mr Michael TIEN, you may move your amendment.

MR MICHAEL TIEN (in Cantonese): President, I move that Mr Jeffrey LAM's motion be amended.

Mr Michael TIEN moved the following amendment: (Translation)

"To delete "given" after "That," and substitute with "with"; to add "and rapid ageing of Hong Kong's population, the welfare spending is bound to increase significantly, and Hong Kong must vigorously expedite its economic development to 'make a bigger cake', the prerequisite of which is to maintain a business-friendly environment for small and medium enterprises ('SMEs'); in this connection" after "the global economy"; to delete "adopt" after "the Government to" and substitute with ", apart from adopting"; to delete "to maintain a business-friendly environment in Hong Kong and devote" after "policy measures" and substitute with "and devoting"; and to delete "small and medium enterprises" immediately before the full stop and substitute with "SMEs, make strenuous efforts to mitigate the increasingly tense labour relations in Hong Kong in recent years, and ensure employees not only having reasonable protection for their rights and interests but also fully recognizing the impacts of various labour policies and measures (e.g. reviewing the minimum wage level and conducting studies on the regulation of working hours and the right to collective bargaining, etc.) on the business environment of SMEs, in an endeavor to achieving mutual understanding and a win-win situation for both sides, with Hong Kong's economy being also developed in a consistently rapid way"."

12436 LEGISLATIVE COUNCIL ─ 23 May 2013

PRESIDENT (in Cantonese): I now propose the question to you and that is: That the amendment, moved by Mr Michael TIEN to Mr Jeffrey LAM's motion, be passed.

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.

(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 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.

Functional Constituencies:

Mr Albert HO, Mr James TO, Mr Abraham SHEK, Mr Tommy CHEUNG, Mr Frederick FUNG, Dr Joseph LEE, Mr Jeffrey LAM, Mr Andrew LEUNG, Mr WONG Ting-kwong, Mr CHAN Kin-por, Dr LEUNG Ka-lau, Mr IP Kwok-him, Mr NG Leung-sing, Mr Frankie YICK, Mr YIU Si-wing, Mr MA Fung-kwok, Mr Charles Peter MOK, Mr Kenneth LEUNG, Mr Dennis KWOK, Mr IP Kin-yuen, LEGISLATIVE COUNCIL ─ 23 May 2013 12437

Mr Martin LIAO, Ir Dr LO Wai-kwok, Mr CHUNG Kwok-pan and Mr Tony TSE voted for the amendment.

Mr KWOK Wai-keung and Mr TANG Ka-piu voted against the amendment.

Mr POON Siu-ping abstained.

Geographical Constituencies:

Mr CHAN Kam-lam, Ms Emily LAU, Mr Ronny TONG, Mr CHAN Hak-kan, Dr Priscilla LEUNG, Mrs Regina IP, Mr Paul TSE, Mr Alan LEONG, Ms Claudia MO, Mr Michael TIEN, Mr James TIEN, Mr WU Chi-wai, Mr Gary FAN, Dr Kenneth CHAN, Dr KWOK Ka-ki and Dr Helena WONG voted for the amendment.

Mr WONG Kwok-hing, Ms Cyd HO, Mr WONG Kwok-kin, Mr LEUNG Kwok-hung, Mr Albert CHAN, Mr WONG Yuk-man, Mr CHAN Chi-chuen and Dr Fernando CHEUNG 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, 27 were present, 24 were in favour of the amendment, two against it and one abstained; while among the Members returned by geographical constituencies through direct elections, 25 were present, 16 were in favour of the amendment and eight against it. Since the question was agreed by a majority of each of the two groups of Members present, he therefore declared that the amendment was passed.

PRESIDENT (in Cantonese): Mr IP Kin-yuen, as Mr Michael TIEN's amendment has been passed, you may now move your revised amendment.

12438 LEGISLATIVE COUNCIL ─ 23 May 2013

MR IP KIN-YUEN (in Cantonese): President, I move that Mr Jeffrey LAM's motion, as amended by Mr Michael TIEN, be further amended by my revised amendment.

Mr IP Kin-yuen moved the following further amendment to the motion as amended by Mr Michael TIEN: (Translation)

"To add "; this Council also urges the Government to devote resources to enhance educational and manpower training, implement 15-year free education and small-class teaching in secondary schools, strengthen vocational education and training, and increase the numbers of publicly-funded sub-degree programme places, publicly-funded bachelor's degree programme places and local students admitted to postgraduate programmes in graduate schools of universities, so as to nurture local talents to provide manpower resources for the sustainable development of pillar industries and the diversified development of the economy" immediately before the full stop."

PRESIDENT (in Cantonese): I now propose the question to you and that is: That Mr IP Kin-yuen's amendment to Mr Jeffrey LAM's motion as amended by Mr Michael TIEN, be passed.

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 that the question is agreed by a majority respectively of each of the two groups of Members, that is, those returned respectively by functional constituencies and those returned by geographical LEGISLATIVE COUNCIL ─ 23 May 2013 12439 constituencies through direct elections, who are present. I declare the amendment passed.

PRESIDENT (in Cantonese): Mr WU Chi-wai, as the amendments by Mr Michael TIEN and Mr IP Kin-yuen have been passed respectively, you may now move your revised amendment.

MR WU CHI-WAI (in Cantonese): President, I move that the motion, as amended by Mr TANG Ka-piu and Mr IP Kin-yuen, be further amended by my revised amendment ……

PRESIDENT (in Cantonese): The motion has been amended by Mr Michael TIEN and Mr IP Kin-yuen.

MR WU CHI-WAI (in Cantonese): President, I move that Mr Jeffrey LAM's motion, as amended by Mr Michael TIEN and Mr IP Kin-yuen, be further amended by my revised amendment.

Mr WU Chi-wai moved the following further amendment to the motion as amended by Mr Michael TIEN and Mr IP Kin-yuen: (Translation)

"To add "; this Council also urges the Government: (1) to construct Container Terminal 10, and pass it to a new operator to undertake the operation, so as to increase the competition among container terminals for lowering terminal handling charges; (2) to fully open up the fifth freedom traffic rights on a reciprocal basis, enabling more overseas flights to carry passengers and freight in Hong Kong, so as to lower transport fees; (3) to expeditiously implement the Competition Ordinance, lift the exemptions for statutory bodies from the Competition Ordinance, and provide adequate resources to the Competition Commission; regularly review the Competition Ordinance, and study whether the Competition Commission should be empowered to examine if any public policy has directly or indirectly created market monopoly, and when an enterprise is found to have taken a large proportion of market shares, to advise the Government 12440 LEGISLATIVE COUNCIL ─ 23 May 2013

on measures for preventing market monopoly, so as to maintain the competition environment of the Hong Kong market, curb monopoly by large consortia, and improve small business operators' room for survival; and (4) to assist in promoting the overseas sale of local brands and technologies" immediately before the full stop."

PRESIDENT (in Cantonese): I now propose the question to you and that is: That Mr WU Chi-wai's amendment to Mr Jeffrey LAM's motion as amended by Mr Michael TIEN and Mr IP Kin-yuen, be passed.

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.

(Members raised their hands)

Mr Jeffrey LAM rose to claim a division.

PRESIDENT (in Cantonese): Mr Jeffrey LAM 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.

LEGISLATIVE COUNCIL ─ 23 May 2013 12441

Functional Constituencies:

Mr Albert HO, Mr James TO, Mr Frederick FUNG, Dr Joseph LEE, Dr LEUNG Ka-lau, Mr Charles Peter MOK, Mr Dennis KWOK, Mr IP Kin-yuen and Mr POON Siu-ping voted for the amendment.

Mr Abraham SHEK, Mr Tommy CHEUNG, Mr Jeffrey LAM, Mr Andrew LEUNG, Mr WONG Ting-kwong, Mr CHAN Kin-por, Mr IP Kwok-him, Mr NG Leung-sing, Mr Frankie YICK, Mr YIU Si-wing, Ir Dr LO Wai-kwok, Mr CHUNG Kwok-pan and Mr Tony TSE voted against the amendment.

Mr MA Fung-kwok, Mr Kenneth LEUNG, Mr KWOK Wai-keung, Mr Martin LIAO and Mr TANG Ka-piu abstained.

Geographical Constituencies:

Ms Emily LAU, Mr Ronny TONG, Ms Cyd HO, Mr Alan LEONG, Mr LEUNG Kwok-hung, Mr WONG Yuk-man, Ms Claudia MO, Mr WU Chi-wai, Mr Gary FAN, Dr Kenneth CHAN, Dr KWOK Ka-ki, Dr Fernando CHEUNG and Dr Helena WONG voted for the amendment.

Mr CHAN Kam-lam, Mr CHAN Hak-kan, Dr Priscilla LEUNG, Mrs Regina IP, Mr Michael TIEN and Mr James TIEN voted against the amendment.

Mr WONG Kwok-hing, Mr WONG Kwok-kin, Mr Paul TSE, Mr Albert CHAN and Mr CHAN Chi-chuen abstained.

THE PRESIDENT, Mr Jasper TSANG, did not cast any vote.

THE PRESIDENT announced that among the Members returned by functional constituencies, 27 were present, nine were in favour of the amendment, 13 against it and five abstained; while among the Members returned by geographical 12442 LEGISLATIVE COUNCIL ─ 23 May 2013 constituencies through direct elections, 25 were present, 13 were in favour of the amendment, six against it and five abstained. 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.

PRESIDENT (in Cantonese): Mr YIU Si-wing, as the amendments by Mr Michael TIEN and Mr IP Kin-yuen have been passed, you may now move your revised amendment.

MR YIU SI-WING (in Cantonese): President, I move that Mr Jeffrey LAM's motion, as amended by Mr Michael TIEN and Mr IP Kin-yuen, be further amended by my revised amendment.

Mr YIU Si-wing moved the following further amendment to the motion as amended by Mr Michael TIEN and Mr IP Kin-yuen: (Translation)

"To add "; this Council also urges the Government: (1) to subsidize small and medium enterprises, so as to motivate the relevant enterprises to make use of information technology; (2) to increase the expenditure on subsidizing the training of practitioners in industries, so as to raise the professional standards of industries; (3) to regularly co-ordinate industries of the same kind to jointly organize external promotional activities, and appropriately subsidize such activities; and (4) to reduce or waive the licence fees for the relevant enterprises of industries with operating difficulties" immediately before the full stop."

PRESIDENT (in Cantonese): I now propose the question to you and that is: That Mr YIU Si-wing's amendment to Mr Jeffrey LAM's motion as amended by Mr Michael TIEN and Mr IP Kin-yuen, be passed.

PRESIDENT (in Cantonese): I now put the question to you as stated. Will those in favour please raise their hands?

(Members raised their hands)

LEGISLATIVE COUNCIL ─ 23 May 2013 12443

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 amendment passed.

PRESIDENT (in Cantonese): Mr Charles Peter MOK, as the amendments by Mr Michael TIEN, Mr IP Kin-yuen and Mr YIU Si-wing have been passed, you may now move your revised amendment.

MR CHARLES PETER MOK (in Cantonese): President, I move that Mr Jeffrey LAM's motion, as amended by Mr Michael TIEN, Mr IP Kin-yuen and Mr YIU Si-wing, be further amended by my revised amendment.

Mr Charles Peter MOK moved the following further amendment to the motion as amended by Mr Michael TIEN, Mr IP Kin-yuen and Mr YIU Si-wing: (Translation)

"To add "; (5) to review and reform the Government's information technology procurement policy, reform the guiding principle that 'the lowest bidder wins' and the requirement for huge amounts of performance bonds, which have all along been criticized by the industry, strengthen the assessment elements of 'local research, original applications' to encourage innovation in its procurement policy, and increase the opportunities for small and medium enterprises to participate in the bidding for the Government's information technology contracts, so as to accumulate more capital and experience for expansion of their enterprise scale; (6) to open up more Government data and, putting the public interest first, encourage developers to make use of such data at liberty and free of charge, so as to promote the development of more mobile and internet applications conducive to people's livelihood and social-economic activities, so as to foster innovative applications by small and medium enterprises, enhance work efficiency, and create room for developers to identify business 12444 LEGISLATIVE COUNCIL ─ 23 May 2013

opportunities; (7) through policy support and venture capital funds involving Government investments, to encourage the development of local 'Angel Funds' and venture capital activities, so as to provide local start-up companies with more effective early-stage seed funding; and (8) to inject capital into and re-activate the Small and Medium Enterprises Training Fund, so that small and medium enterprises may have sufficient resources for training staff and enhancing competitiveness" immediately before the full stop."

PRESIDENT (in Cantonese): I now propose the question to you and that is: That Mr Charles Peter MOK's amendment to Mr Jeffrey LAM's motion as amended by Mr Michael TIEN, Mr IP Kin-yuen and Mr YIU Si-wing, be passed.

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 amendment passed.

PRESIDENT (in Cantonese): Mr Jeffrey LAM, you may now reply and you still have two minutes 45 seconds.

MR JEFFREY LAM (in Cantonese): President, we can see that various trades and industries in Hong Kong are facing enormous challenges and our competitive edge is on the wane. A few days ago, we saw the latest research report LEGISLATIVE COUNCIL ─ 23 May 2013 12445 published by the Chinese Academy of Social Sciences. Although Hong Kong was elected as one of the most competitive cities in China for the 11th year in a row, the pace of development of our competitive edge has slowed down significantly. Being a highly externally-oriented economy, Hong Kong will naturally be affected in the face of the uncertain international economic and financial environment in recent years. The Government should adopt a new mindset and implement proactive policy measures.

Today, I thank those 33 Honourable colleagues who have spoken on my motion. Some of their views are most valuable, to which I agree and accept. But there are some views which I disagree and we can have further communication. However, there are some opinions which are incomprehensible to me. For instance, Mr CHEUNG Kwok-che felt that the business sector is not gratified. He queried why a better business environment should be created in view of our good economy. What is wrong if our business environment is further improved and more employment opportunities are created? Should it be considered desirable if our business dwindles with a decreasing number of new recruits? Perhaps I should discuss the subject with him in the future granting the opportunity.

Many economic analysts and authoritative research reports have indicated that the economic environment of Hong Kong in the future is still worrying. If we do not improve our business environment, it is tantamount to giving away our development opportunities to our competitors in a plate. By then, I think it will be undesirable to society as a whole, including both employers and employees. Given that our society is less harmonious than before, we, as responsible Members, should not over-generalize some phenomena as it may incite wounded emotions. In fact, the Government, enterprises and wage earners are in the same boat when braving the economic storm because enterprises provide tax revenue for the Government and employment opportunities for the wage earners, while the Government provides a business-friendly environment and stable policies which can assist enterprises and mitigate the impact of the uncertain external environment on Hong Kong. The Government and the business sector should strengthen their communication and dialogue. As a common saying goes, "listen to both sides and you will be enlightened, heed only one side and you will be benighted". Our SMEs and the business and professional sectors are pragmatic and enterprising. Our way of expression may be different from others' as we will not take to the streets to voice our aspirations. Nevertheless, 12446 LEGISLATIVE COUNCIL ─ 23 May 2013 we are most willing to continue communicating with everybody. Thank you, President.

PRESIDENT (in Cantonese): I now put the question to you and that is: That the motion moved by Mr Jeffrey LAM, as amended by Mr Michael TIEN, Mr IP Kin-yuen, Mr YIU Si-wing and Mr Charles Peter MOK, be passed.

PRESIDENT (in Cantonese): 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 as amended passed.

NEXT MEETING

PRESIDENT (in Cantonese): I now adjourn the Council until 11 am on Wednesday, 29 May 2013.

Adjourned accordingly at five minutes past Five o'clock.